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Annual Report 2021

Plain-text annual report

Enabling trusted and intuitive access to financial opportunities Plus500 Ltd. Annual Report 2021 WELCOME Plus500 delivered an excellent operational and financial performance in 2021 and we made significant progress with our strategic roadmap to develop our position as a leading global multi-asset fintech group. Given the strong positive momentum delivered by the Group in recent years, the Board continues to expect that Plus500 will deliver sustainable growth over the medium to long-term. David Zruia, Chief Executive Officer Read more in the CEO’s Q&A on pages 7 – 11 Plus500 Ltd. (“Plus500”, the “Company” or, together with its subsidiaries, the “Group”) is a global multi-asset fintech group operating proprietary technology-based trading platforms. 2021 headlines An outstanding year of positive operational and financial momentum: – Excellent performance across all key metrics, including consistently strong levels of Customer Income1; – Significant milestone of over 22 million registered customers achieved on Plus500’s platforms; – Major opportunity to leverage this latent customer base, through new retention, activation and monetisation activities and technology-based initiatives, including new premium account offering; – Continued high customer engagement, driven by Plus500’s market-leading technology-based offering and brand recognition; and – Robust financial position further strengthened, with substantial improvement in cash balance. Excellent progress in developing Plus500’s strategic position as a global multi-asset fintech group: – Significant progress made, in line with strategic plans to broaden Plus500’s product range from its single product focus, helping to diversify the Group’s revenue streams and geographic footprint; – The Group’s first ever acquisitions made to establish Plus500’s position in the high growth markets of futures and options on futures, to be developed through continued investment in technology integration and a multi-dimensional market- ing approach; – Successful launch of a proprietary share dealing platform, ‘Plus500 Invest’, with further roll-out in FY 2022; and – On-going organic investments in marketing technologies, technology innovation and product development, supported by the established R&D centres in Israel. Further strategic developments achieved in Q1 2022: – New regulatory licence granted in Estonia, which will further support the Group’s business across European markets in its core product offering, complementing the Group’s existing portfolio of regulatory licences globally; and – Completed acquisition of a Type 1 regulated firm in Japan, expanding the Group’s geographic footprint and representing a major growth opportunity within the substantial retail trading market in Japan. Further improvements on governance, regulation, social responsibility and risk management matters: – New Independent Non-Executive Directors appointed, including Prof. Jacob A. Frenkel as Chair, expanding the range of experience of the Board of Directors of the Company (“the Board”) and further diversifying its composition, as well as enabling greater access to new growth markets, in particular the US; – Consistent focus on sustainability initiatives, including donations to local com- munity projects and on-going emphasis on customer care and protection; and – Targeted hedging strategy initiated to minimise market risk. Attractive returns continue to be delivered to shareholders, including dividends and share buybacks to the amount of $200.2m related to FY 2021: – Dividend payments in respect of FY 2021 of $120.0m ($1.1916 per share), comprising: – Final dividend of $37.8m ($0.3777 per share); – Special dividend of $22.2m ($0.2218 per share); and – Interim dividend of $60.0m ($0.5921 per share). – Share buyback programmes in respect of FY 2021 of $80.2m, including $67.6m in H2 2021, comprising: – New programme to purchase up to $55.0m of the Company’s shares, which includes a final buyback of $25.2m and a special buyback of $29.8m; and – A programme of $12.6m was announced in August 2021 in respect of H1 2021, with an additional programme of $12.6m, announced in October 2021, as part of the FY 2021 final programme. s Contents Strategic report Group at a Glance Chair’s Statement Q&A with the Chief Executive Officer Our Technology Our Purpose, Strategy and Key Differentiators Our Strategy in Action Our Business Model Key Performance Indicators Key Stakeholder Relationships Our ESG (Environmental, Social, Governance) Approach Financial and Business Review Group Tax Policy Risk Management Framework Going Concern and Viability Statement 2 4 7 14 20 22 24 26 28 30 38 40 41 46 Governance 48 Governance at a Glance 50 Chair's Introduction to Governance UK Corporate Governance Code Compliance Statement 51 52 Board of Directors 54 Governance Report 59 Shareholder Engagement 60 Report of the Nomination Committee 64 Report of the Audit Committee 69 Report of the Regulatory & Risk Committee 71 Report of the ESG Committee 74 Report of the Remuneration Committee 81 Directors' Remuneration Report 89 Directors' Report 91 Corporate Law 92 Directors' Responsibility Statement Financial Statements Independent Report of the Auditors Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements 94 98 99 100 101 102 Further information Advisors Inside back cover 1 Customer Income – Revenue from CFD Customer Income (customer spreads and overnight charges) and Non-CFD Customer Income (commissions from the Group’s futures and options on futures operation and from ‘Plus500 Invest’, the Group’s share dealing platform) 2 EBITDA – Earnings before interest, taxes, depreciation and amortisation 3 New Customers – Customers depositing for the first time 4 Active Customers – Customers who made at least one real money trade during the period 5 ARPU – Average Revenue Per User 6 AUAC – Average User Acquisition Cost 1 2021 Financial highlights Revenue $718.7m EBITDA Margin % 54% EBITDA2 $387.1m Cash balance at year end $749.5m 2021 Operational highlights New Customers3 196,336 ARPU5 $1,764 Active Customers4 407,374 AUAC6 $877 Plus500 Ltd. 2021 Annual Report Group at a Glance A GLOBAL MULTI-ASSET FINTECH GROUP Our purpose Enabling trusted and intuitive access to financial opportunities. Across financial instruments Through broad product range. Across countries Through global scale with localised services. Across devices Through best-in-class technology. Read more on pages 20 – 21 Our strategy Strengthening our position as a multi-asset fintech group over time by expanding our core product offering in new and existing markets, launching new trading and financial products and deepening our engagement with customers. Read more about our strategy on pages 22 – 23 Our values Technology driven Our state-of-the-art proprietary technology enables our product leadership and agility. Strive for excellence We do not compromise on the quality of our products or on the talent of our people. Customer-centric approach Our customers are at the centre of every decision we make, to ensure we deliver best-in-class service. Committed to operating sustainably and responsibly We are focused on carrying out a range of ESG initiatives to deliver tangible value for our stakeholders. Read more in our ESG report on pages 30 – 37 Plus500 is a global multi-asset fin- tech group operating proprietary technology-based trading platforms. Plus500 offers customers a range of trading products, including Contracts for Difference (“CFDs”) and share dealing, as well as futures and op- tions on futures. Plus500 has a pre- mium listing on the Main Market of the London Stock Exchange (symbol: PLUS) and is a constituent of the FTSE 250 index. 50+ Countries where Plus500 trading platforms are available 450+ Employees at Plus500 globally 22+ million Registered customers on Plus500 platforms globally since inception 2 Plus500 Ltd. 2021 Annual ReportOur global position Chicago Tallinn London Sofia Limassol Haifa (HQ) Tel-Aviv Tokyo Global operations conducted from our local offices worldwide Victoria Singapore Plus500 licences The Group retains operating licences and is regulated in the United Kingdom, Australia, Cyprus, Israel, New Zealand, South Africa, Singapore, the Seychelles, the United States, Estonia and Japan¹ Sydney Our competitive advantages and differentiators Our technology Our track record Our leadership, people and culture Our agile business model Powers our products, operations and marketing Strong financial performance since IPO in 2013 Technological expertise embedded across the business Ensuring a customer- centric approach + Proprietary, wholly owned, managed and operated by Plus500 + Drives our customer-centric approach + Significant investment in R&D to drive continued innovation + Supports our continued compliance with regulatory standards + 25.7% revenue CAGR2 + Flexible cost base with average annual EBITDA margin of c.57% + Strong balance sheet, highly cash generative and debt-free + Approximately $1.4 billion returned to shareholders in dividends and share buybacks + Highly skilled leadership team with long-standing experience in technology and financial services + Strong track record in attracting and retaining the best technology talent in Israel, the “start-up nation” + Entrepreneurial, high performance culture, with customers at the centre + Unique edge in attracting and retaining customers through multiple channels + Proven business model serving customers globally for over a decade + Strong brand and reputation + Continued focus on customer care and protection + Drives attractive ROI3 1. Estonia and Japan obtained during Q1 2022. 2. CAGR – Compound Annual Growth Rate. 3. ROI – Return on Investment. 3 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual Report Chair’s Statement DELIVERING STAKEHOLDER VALUE I look forward to continuing to lead our Board, as we ensure Plus500 delivers further value for our stake- holders in the future. Prof. Jacob A. Frenkel, Chair In my first statement as Chair of the Board of Directors of the Company (the “Board”), I would like to express my sincerest gratitude to our shareholders for approving my appointment at the Company’s AGM on 4 May 2021. It is a huge honour to be Chair of the Board of Plus500 at such an exciting time for the Group. Led by our talented management team, supported by our highly skilled people worldwide and driven by our market-leading proprietary technology, Plus500 is very well placed to access a range of growth opportunities to further diversify our business going forward. Having been Chair for almost a year, it is clear that we also have a strong and diverse Board, which functions very effectively and col- laboratively. I look forward to continuing to lead our Board, as we ensure the business delivers further value for our stakeholders in the future. An outstanding performance in FY 2021, with significant strategic progress made FY 2021 was another year of major operational, financial and strategic success for Plus500, building on our long track record of performance since the Company’s IPO in 2013. Since the IPO year, Plus500 has delivered revenue CAGR1 of 25.7%, resilient EBITDA margins averaging 57% and generated cash from operations of approximately $2.4 billion. The Group delivered continued operational momentum in FY 2021, which translated into another outstanding financial performance across all metrics, well ahead of pre-pandemic levels. Total revenue for the year was $718.7m, which drove EBITDA to the level of $387.1m. The Group’s balance sheet position remained very robust, with a cash bal- ance at the end of FY 2021 of $749.5m. FY 2021 was a ground-breaking year for Plus500 from a strategic perspective, with excellent progress made in developing our position as a global multi-asset fintech group. We made significant headway in diversifying our product portfolio and geographic footprint during the year, with the Group making its first ever acquisitions. 1. CAGR – Compound Annual Growth Rate. Revenue $718.7m 2021 2020 $718.7m $872.5m 2019 $354.5m Total shareholder returns of approx. $1.4bn delivered since IPO, in dividends and share buybacks 2021 2020 2019 $200.2m $278.3m $151.7m Read more in our Financial and Business Review on pages 38 – 40 4 Plus500 Ltd. 2021 Annual ReportOur investment case Our purpose is supported by a robust investment case State-of-the-art technological platforms Strong global marketing technol- ogy capabilities Market-leading core product of- fering with potential expansion into new regions and products Supportive market environment with long-term structural growth Long-standing, high value and di- verse customer base Robust financial profile with long term track record of growth These acquisitions immediately expanded our geographic footprint and product offering in the significantly growing, but under-penetrated, US retail trading market in futures and options on futures. In addition, our product range was further expanded during the year with the launch of a new share dealing platform, ‘Plus500 Invest’, which was developed in-house. More details on this excellent strategic progress are included in the CEO Q&A on the following pages. In addition, our portfolio of operating licences was further expanded with the addition of a new licence in Estonia, granted by the Estonian Financial Supervision Authority in February 2022. This new licence will further support our business across European markets in our core product offering and is supported by the establishment of a new local regulated subsidiary. In March 2022, following a lengthy assessment of the market opportunity in Japan, the Company completed an acqui- sition of a local firm regulated by Japan’s Financial Services Agency. This represents a major growth opportunity for Plus500, through an immediate presence in the substantial retail trading market in Japan. Our portfolio of licences is an increasingly valuable asset for the Group, given its scarcity and the growing complexity of obtaining new licences. As a result of our strategic progress and operational performance in FY 2021, supported by a clear and rigorous plan to further invest in the future growth of our business, the Group has entered FY 2022 in an excellent position. The growth outlook for Plus500 The Board continues to expect that Plus500 will deliver sustainable growth from all of the Group’s product offerings over the medium term. This expectation is supported by the Group’s significant operational and financial momentum over recent years, which validates our clear and comprehensive strategic roadmap. Future growth will be enabled by on-going investment in developing our position as a global multi- asset fintech group, in particular through further organic investments in technology, marketing and people, by actively targeting additional acquisitions and activating potential strategic partnerships. The positive momentum achieved by Plus500 in recent years has continued to date in FY 2022, driven by the on-going underlying strength of Customer Income. Consequently, the Board remains confident about Plus500’s prospects for FY 2022. Continued focus on Corporate Governance and engagement with the investment community The Board remains focused on its key priorities in Corporate Govern- ance, supported by our on-going engagement with shareholders and potential investors, analysts and shareholder advisory bodies. There were a number of Independent Non-Executive Director appoint- ments to the Board during the year, as well as my own appointment as Chair, namely Ms. Tami Gottlieb and Ms. Sigalia Heifetz, both of whom have already added great value to the Board. Also, in Q1 2022, Prof. Varda Liberman was appointed as an additional Independent Non-Executive Director. These appointments have broadened the range of the Board’s experi- ence and expertise and further diversified its gender composition, ensuring that the representation of women on the Board is ahead of the 33% target set by the Hampton-Alexander Review on gender equal- ity in leadership positions. 1. CAGR – Compound Annual Growth Rate. 5 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportChair’s Statement continued Furthermore, all of our Board members have built long-term, global relationship networks, which will potentially be leveraged by Plus500, to help gain greater access to new growth markets, in particular the US. We continue to place major focus on engaging with key stakeholders within the global investment community. I met with our major sharehold- ers during the year, while our Executive Management maintained regular dialogue with shareholders and potential investors throughout FY 2021, to ensure investors were kept up-to-date with our strategic progress and operational performance. In addition, these meetings were used to gather investors’ helpful perspectives and insights on our business, on our sector and on the overall outlook for global capital markets. We will continue to engage with the investment community going forward, by further enhancing and expanding the range, reach and focus of our investor contact programme, through additional com- munication channels and platforms. Ensuring an optimised organisational culture remains crucial Having met many of our people within the business since joining the Board, I have been extremely impressed by their energy, dedication, expertise and skill sets. This is particularly notable, given the challenges that have been faced by our people in their daily lives and working envi- ronment, as a result of the COVID-19 pandemic over the last two years. Our head office is in Israel, a major global hub for technology and innovation, where there is a skilled and educated workforce which is highly trained in all elements of technological developments. Plus500 has fostered an entrepreneurial and high-performance organ- isational culture, designed to drive employee attraction and retention, that reflects Israel’s technology-based environment. We aim to continue to replicate this cultural mindset in each of our global operating sub- sidiaries, as we have done historically. The Board continues to monitor and review the Group’s culture, values and performance primarily through regular discussions with our Exec- utive Directors, senior management and their teams. This engagement is driven by Steve Baldwin, an Independent Non-Executive Directors, in his role as a workforce engagement representative on the Board. This helps to provide a channel through which our employees worldwide can share their views and concerns directly to the Board, to help inform the Board’s approach to supporting on-going improvements in our organisational culture and values. On that note, I would like to take this opportunity, on behalf of the Board, to thank all of our people for their continued commitment and focus, as we continue to do all we can to maintain their personal development, health and well-being. Regulatory compliance remains a cornerstone of the Group’s approach The Group maintains a highly robust, customer-centric approach to compliance, supported by our expertise in the applicable global regulatory standards and our long-standing relationships with the regulators in the markets and industries in which we operate. We support measures introduced by regulators, with a view to ensuring better care and protec- tion for all customers. Global regulatory alignment has continued in the industries in which we operate, with recent regulatory changes being mirrored across various territories. The most recent regulatory changes in the CFD industry were implemented by the Australian Securities & Investment Commission in March 2021. The Group is supportive of, and compliant with, these changes, which are expected to enhance the CFD trading landscape and provide additional protection for customers. The impact of these regulatory changes on Plus500’s operational and financial performance is in line with our initial expectations. With an established global regulatory network, managed by our regulated subsidiaries and overseen centrally, Plus500 remains well positioned for potential future changes to the regulatory environment across the markets in which we operate. The Board continues to ensure shareholders are rewarded with an appropriate level of returns The Board continues to assess the availability of excess capital going forward, to ensure that an optimal balance is maintained between shareholder returns, investments in future growth and in driving busi- ness continuity, as we ensure that appropriate levels of available capital are maintained for required regulatory purposes and other factors. In current market conditions, and given the Group’s strategic position and growth prospects, the Board believes that the appropriate level of required capital is approximately $450m. For FY 2021, total returns to shareholders amounted to $200.2m. This includes dividend payments of $120.0m, including an interim dividend of $60.0m, a final dividend of $37.8m and a special dividend of $22.2m. Total returns for the year also include share buyback programmes of $80.2m, including two programmes of $12.6m each announced in August and October 2021, as well as a new programme to purchase up to $55.0m of the Company’s shares. The new programme includes a final buyback of $25.2m and a special buyback programme of $29.8m. The special dividend and special buyback programme are directly related to the benefits of the change in tax rate following the Company’s accreditation as a Preferred Technological Enterprise by the Israeli Tax Authority in FY 2020. Earlier in FY 2022, this accreditation was suc- cessfully extended up to and including FY 2026, which is a significant achievement, bringing additional value for the Group and our sharehold- ers in the years to come. Overall, since our IPO, and including shareholder returns related to FY 2021, the Company has returned approximately $1.4 billion to shareholders. Prof. Jacob A. Frenkel Chair of the Board 22 March 2022 6 Plus500 Ltd. 2021 Annual ReportQ&A with the Chief Executive Officer TECHNOLOGY DRIVEN PERFORMANCE Our performance in 2021 was primarily driven by our technology and our people. David Zruia, Chief Executive Officer Q Can you sum up your key highlights of FY 2021? Q What were the fundamental drivers of this performance? A FY 2021 was a very busy and positive year for everyone at Plus500. The hard work and dedication of our people during the year ensured that we delivered on all fronts – operationally, finan- cially and strategically. There were a number of highlights for the Group during the year. Firstly, we executed the Group’s first ever acquisitions, which con- tributed to the diversification and extension of our offering into the futures and options on futures market. Another highlight was the launch of our new proprietary share dealing platform, ‘Plus500 Invest’, which was fully built in-house. We also developed and introduced a range of new customer reten- tion, activation and monetisation technologies across our platforms, to ensure continued engagement with our customers over time. We made strong progress in further developing our approach in the areas of Environment, Social and Governance (“ESG”), with a view to increasing the Group’s resilience over the long term. This has been supported by more detailed disclosure on ESG, as outlined on pages 30 – 37 in this report, which we hope provides investors with a clear understanding of our key priorities in these areas. Finally, of course, a major highlight was our overall operational and financial performance, which was consistently strong throughout the year. A As with previous years, our performance in FY 2021 was driven by two major elements – our technology and our people. Every element of our technology is fully and seamlessly integrated and inter-connected across our operations, systems architecture, product and marketing capabilities. This enables Plus500 to respond with agility to customer requirements, fast-emerging market develop- ments and regulatory changes. It has taken us many years to develop this technology, with constant upgrades, continued innovation and the introduction of a range of new features, new services and new capabilities over the last decade. In FY 2021, we continued to invest in our technology infrastructure, to drive growth and scalability. As a result, Plus500 is now a highly developed business, with a long track record of innovation, and a market-leading technological capa- bility. Our technology is operated by highly skilled engineers and develop- ers. Across our organisation, in areas such as marketing, operations and R&D, we have a base of talented people, which was further strengthened in FY 2021 through a major recruitment drive in a number of departments. We aim to continue to develop our people and harness their talent by maintaining and further developing a working environment which empowers on-going improvements in employee development, through training, learning and career progression. This culture has helped to drive employee attraction and retention and has ultimately led to enhancements in the capability of the Group’s technology. We are also dedicated to the well-being of our people and we aim to con- tinue to provide them with optimal working conditions to support a healthy, safe and balanced working environment, particularly throughout the challenging period of the COVID-19 pandemic. 7 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportQ&A with the Chief Executive Officer continued Q Can you remind us of Plus500’s purpose and strategy? Q How are you planning to expand your core product offering and what are your future plans on this front? A Our purpose is to enable trusted and intuitive access to financial opportunities for our customers, across a wide range of financial instruments, geographies and devices. This is being driven by our continued progress as a global multi- asset fintech group, supported by organic investments and targeted acquisitions. In the future, we may also look for potential partner- ships in order to achieve our strategic ambitions. The rationale for this purpose and strategy is that, by expanding our product range from our historic single-product focus, we can meet more of our customers’ needs, diversify our revenue base, broaden our geographic footprint and drive higher customer reten- tion. This will be achieved by successfully delivering against our strategic roadmap of: – Expanding our core product offering in new and existing markets; – Launching new trading and financial products; and – Deepening engagement with customers. A Our core product, CFDs, remains an attractive offering for cus- tomers around the world, enabling trading on leverage and access to market liquidity, while being protected by high levels of customer- focused regulation. Our product offering is fully aligned with regu- latory requirements in the countries in which we operate, ensuring customer protection through elements like our free unlimited demo account and negative balance protection. With our offering, cus- tomers have the comfort that they are trading on attractive com- mercial terms and they can access everything they need through one multi-channel solution. With a long track record in innovating our CFD platform, we offer customers a choice of over 2,500 finan- cial instruments across a wide range of asset classes, countries and languages. We continued to add more instruments, features and analysis tools to our core product offering during FY 2021, to help further deepen customer engagement. Future growth of our core product offering will be driven by further expansion of our reach and footprint in new markets, continued enhancement of our technological capabilities and the launch of new instruments to enhance our offering. With substantial untapped customer demand potentially available outside of our current geographic footprint, we will continue to target new potential markets to launch our core product offering, through obtaining operating licences in those markets, either organically or via acquisitions. As evidence of this, in February 2022, we obtained a new licence in Estonia to further support our business across Europe in our core product offering. In March 2022, we made our first acquisition in Japan, which also represents our first footprint in this new market and will allow us to offer our services locally. I am very excited about the opportunities in the substantial Japanese market and I am confident that we will be able to maximise those opportunities over the medium to long-term. Current target markets include various countries in the Americas, Asia and the Middle East, with new regulated markets in which we do not currently operate, and where there is huge growth potential, being a particular focus. We’re expanding our core product offering in new and existing markets Expanding 8 Plus500 Ltd. 2021 Annual ReportQ Can you talk about progress on, and future plans for, how you are launching new trading and financial products? A I was particularly pleased with our progress in this area in FY 2021, as it enabled us to strengthen our position as a multi-asset fintech group. There were two major milestones for Plus500 in this area. Firstly, we executed our first ever acquisitions – Cunningham Commodities LLC., a regulated Futures Commission Merchant, and Cunningham Trading Systems LLC., a technology trading platform provider, which established our position in the futures and options on futures market. Through these transactions, we immediately expanded our geo- graphic footprint and product offering in the significantly growing, but under-penetrated, retail trading market in futures and options on futures. In line with our strategic roadmap, the integration of these acquisi- tions is well underway, with a number of R&D recruitments during FY 2021 specifically focused on leveraging Plus500’s best-in-class technology to optimise the acquired businesses. Ultimately, this will help to deliver market access to the millions of potential cus- tomers looking for new trading opportunities. We believe that this represents a major strategic opportunity for Plus500, as we look to expand in this significant market, which is being driven by sub- stantial management focus and continued investment in technol- ogy and people. There were record derivatives volumes traded in 2021 and crypto currency continued to move into the mainstream within the industry, with, for example, the launch of Ether, Micro- Ether and Micro-Bitcoin Futures by the CME in 2021. Supported by a clear regulatory framework, Plus500 has a real opportunity to be a technology disruptor in this market, where the competitive environment is fragmented, the utilisation of technol- ogy is relatively limited and the range of asset classes for custom- ers to access is becoming increasingly broad and accessible. We’ve expanded our geographic footprint and product offering in the significantly growing, but under-penetrated, US retail trading market in futures and options on futures. The second major milestone for us on new products during the year was the successful launch of our new share dealing platform, ‘Plus500 Invest’, in over 15 countries across Europe. At the start of FY 2022, it is available through a Web app and a mobile app on both Android and iOS. The platform, which was developed in-house by Plus500, includes a wide range of around 1,500 financial instru- ments comprising of the world’s most popular equities, with a high quality, user-friendly and intuitive customer experience. ‘Plus500 Invest’ will be rolled out in additional target markets in FY 2022, with new equities and ETFs to be added to the product offering, helping to drive our expanded product range and geographic footprint. 9 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportQ&A with the Chief Executive Officer continued Q Can you discuss your progress on, and future plans for, how you are deepening customer engagement? Q Can you talk about Plus500’s operational performance in FY 2021? A During FY 2021, we laid out our plans to incrementally invest approximately $50m in our R&D capability between FY 2021 and FY 2023. During FY 2021, we initiated a major re-organisation of our R&D department, including the establishment of a new R&D centre in Tel-Aviv, and this investment will support the on-going recruitment of talented engineers, programmers, web designers and product managers at our R&D centres in Israel. In addition, this investment will continue, alongside our investment in market- ing technologies, to support innovation and product development, as well as driving major customer-focused initiatives around reten- tion, monetisation and activation. During FY 2021, we have placed an increased emphasis and invest- ment on developing new retention and monetisation technologies. These include tailored and multi-channel customer notification strategies to drive retention, conversion and build trust with cus- tomers. We have also launched a new premium account for customers, which offers benefits such as professional trading webinars, weekly analysis emails and additional tools. We also make sure customers have sight of important news and market events, which can present them with compelling trading opportunities. With a base of over 22 million registered customers, to which such initiatives are being targeted, we have a significant opportunity to utilise this investment. This will be achieved by re-activating the users who are not current Active Customers, through monetisation initiatives, as well as targeting users who have never been Active Customers. A I am really proud of our operational performance in FY 2021, particularly on the back of a record year in FY 2020, which was driven by our investment in marketing technologies to drive cus- tomer engagement. Our strong performance during the year was well ahead of pre- pandemic levels and driven by our on-going success in customer retention, monetisation and activation. This ensured that we main- tained continued high customer engagement, including a high level of Active Customers, on our platforms. This was fundamentally achieved as a result of the scalability of our business and our robust systems architecture, which enables our platforms to handle tens of millions of transactions every year. In 2021, for example, we seamlessly and efficiently managed over 57 million customer trades on our platforms, with consistent ser- vice delivery maintained for our customers, despite many significant waves of demand which ramped up at very short notice. We on-boarded a total of 196,336 New Customers in FY 2021 and our base of Active Customers was 407,374. Both of these metrics were well ahead of pre-pandemic levels. The heightened level of New Customers on-boarded in the prior year drove Customer Churn1 in FY 2021 to 51.4%. To illustrate the long-term value creation being delivered by our business model, around $493m of revenue in the years 2016 to 2021, has been delivered from customers who reg- istered in 2016, following marketing investment of $125m in that year. This represents a 294% return on initial marketing investment, demonstrating the long-term revenue potential being driven by Plus500’s technology and operating model. Customer loyalty remained strong, with 79% of our FY 2021 rev- enues derived from customers trading on the platforms for more than a year, 35% for more than three years and 16% for more than five years. This high level of customer loyalty gives us great confidence that our customers are using our platforms on a sustainable, long-term basis, and is the consequence of our continuous investment in our product offering, our consistently innovative mindset and our on- going customer-centric approach. With these factors in mind, we see significant long-term potential from the 2021 customer cohort going forward. Client deposits, another key measure of customer loyalty, remained high in FY 2021 at $2.1 billion, further highlighting the continued high level of confidence that customers have in Plus500. 1 Customer Churn: [(Active Customers (T) + New Customers (T+1)) – Active Customers (T+1)]/ Active Customers (T). 10 Plus500 Ltd. 2021 Annual ReportThe high quality, commitment and focus of our talented people ensures that Plus500 remains extremely well positioned for sustainable growth Q Finally, what are your thoughts on the future for Plus500? A I am very excited about the future of our business, particularly following our outstanding performance in recent years and the great progress we have made against our strategic roadmap to develop our position as a global multi-asset fintech group. We are now very well placed to access a number of major growth opportunities, driven by our market-leading proprietary technol- ogy platforms, with an increasingly diversified and actively expanding product portfolio and geographic footprint. What makes me most optimistic about our future is the high quality, commitment and focus of our talented people in each of our global locations. I am very grateful to all of them for their excellent efforts and dedication in ensuring that Plus500 remains extremely well positioned for sustainable growth in the future. David Zruia Chief Executive Officer 22 March 2022 11 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual Report“We achieved a major milestone in reaching a total of over 22 million registered customers, since Plus500’s inception, on our platforms across our global operations. “This achievement reflects our market-leading offering and has been driven by continued investment in marketing technologies and platform development. This substantial latent registered customer base repre- sents a major opportunity for Plus500 through continued customer retention, activation and monetisation initiatives. “Ultimately, this will enable us to achieve further growth in our Active Customer base, thereby increasing revenue and EBITDA over time.” David Zruia, Chief Executive Officer 22+ MILLION REGISTERED CUSTOMERS Plus500 Ltd. 2021 Annual Report 12 Plus500 Ltd. 2021 Annual Report 13 GovernanceFinancial statementsStrategic reportMARKET- LEADING PROPRIETARY TECHNOLOGY Plus500’s market-leading proprietary technology ena- bles it to respond with agility to customer requirements, fast-emerging market developments and regulatory changes. The Group’s technology is fully integrated and inter-connected across its operations, systems archi- tecture, product and marketing capabilities. Read more in Our Technology on pages 16 – 19 14 Plus500 Ltd. 2021 Annual Report83%Over 83% of the Group’s CFD-related revenue is generated through mobile or tablet devices 15 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual Report*For illustrative purposesOur Technology PLUS500’S PROPRIETARY TECHNOLOGY Our proprietary technology stack supports our customers in every step of their journey with us: 1 2 Marketing Operations 3 Product Marketing technology Verification On-boarding On-going product usage Product upgrades and improvements Further products added Customer care Payment processing 1 Marketing 2 Operations 3 Product Our marketing technology efficiently posi- tions our online marketing campaigns at an attractive return-on-investment. The marketing technology includes artificial intelligence characteristics and its optimi- sation process is made thanks to its big data capabilities. Once a customer has decided indepen- dently to open an account on our platforms, the operational element of our technology is initiated. At that point, customers go through a strin- gent, rigorous verification and on-boarding process, in accordance with the applicable regulation, supported by 24/7 localised customer care and a best-in-class payment processing service, utilising a range of pos- sible payment methods for our customers. This is all achieved “behind the scenes”, ensuring the customer experience remains efficient and seamless. Once on-boarded, the next stage of the customer journey is the on-going product experience, including a range of educa- tional and training tools, which is being continuously updated and upgraded, through new features, new analysis tools, new products and new financial instru- ments. All of these dynamics ensure that we can drive customer retention and value over time. Agile Our market-leading technology enables us to respond with agility to customer requirements 16 Plus500 Ltd. 2021 Annual ReportSupported by a robust systems infrastructure: Robust system architecture CRM platform Cyber security Risk management Anti-fraud management In-house, tailored technological solutions, equivalent to market-leading SaaS and platform offerings Systems infrastructure This customer journey is supported and secured by a robust systems infrastructure, with a powerful CRM platform, cyber secu- rity and anti-fraud protection features and a robust risk management framework. These elements are a crucial part of our wholly owned and managed technology platform. Also, it is important to note that we have scalable and reliable system archi- tecture and platforms capabilities which cater for our customers’ trading activities. 17 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportOur Technology continued Plus500 technology developments during FY 2021 There were a number of important developments made during the year across each element of Plus500’s proprietary technol- ogy stack. Marketing Plus500 continues to invest in targeted and efficient marketing technology initiatives, including big data and artificial intelligence (AI) technologies, as well as data analytics. Plus500 continued to invest in these initiatives during FY 2021, to drive customer acquisition, activation, retention and long-term monetisation. In particular, the Group now has a base of over 22 million registered customers, to which such initiatives are being targeted, with the aim of activating and re-activating the customers who are not current Active Customers. Such initiatives included multiple customer notification strategies and a new premium account for customers, including features such as professional trading webinars, weekly analysis emails and additional tools. Through such initiatives, the Group’s unique and wholly-owned marketing technology remains a fundamental driver to the pros- pects and performance of the Group, driving customer retention and cohort value over the long-term. Operations The Group’s technology powers its operations, with a consistent focus on cutting-edge customer service, customer on-boarding, payment processing and fraud management. During FY 2021, the operations team implemented additional technologies to enable new payment methods and developed additional tools to support product launches and further improvements in cus- tomer service. These actions helped to improve customer engagement, drive internal efficiency, support the Group’s focus on people excellence and provided an on-going operational platform for future growth. Product During FY 2021, Plus500 expanded its range of proprietary trad- ing solutions into new markets, new platforms and new products. ‘Plus500 Invest’ is now available as a fully mobile-compatible iOS, Web App and Android product, with a user interface consistent with the existing trading experience on Plus500’s core product offering, and a wide range of financial instruments for customers to trade. This ensures that ‘Plus500 Invest’ has an appropriate and attrac- tive pricing structure, with advanced charting and analysis tools. Systems architecture The Company continued to invest in its systems architecture during the year, to support customer requirements. The imple- mentation of Google Cloud Services provides further flexibility, security and scale to the platform, additional server capacity and redundancy, as well as enhanced data analysis, data pro- cessing and business intelligence capabilities. The strength of the Company’s IT infrastructure has ensured that the core platform has consistently delivered the capacity to support significant volumes, including the multiple volume spikes which have rapidly, and sometimes instantly, arisen on demand in recent years. A multi-layered and multi-channel marketing approach, driven by Plus500 technologies Paid search Media partners Organic search Content marketing PR, brand, sponsorships Performance marketing, supported by major global technology partners, such as Google Partnerships with leading financial websites and portals Alongside paid search campaigns Technology- driven educational, training and news updates Brand recognition through targeted PR campaigns and leading sports sponsorships DRIVEN BY OUR SOPHISTICATED PROPRIETARY MARKETING TECHNOLOGIES Artificial Intelligence (AI) Big data Data analytics 18 Plus500 Ltd. 2021 Annual Report 10m+ Plus500 app installs on Google Play6 Key market trends in FY 2021 and Plus500’s market position Market volatility across global markets reduced during FY 2021, compared to the prior year, but remained relatively high, compared to pre-pandemic levels. This ensured continued trading oppor- tunities for customers, evidenced by the level of usage on Plus500’s CFD platform, with over 57 million customer trades being executed in FY 2021. Continued automation and digitalisation across the global trad- ing industry drove further accessibility to, and popularity of, online channels by customers. To illustrate this, over 83% of the Group’s CFD-related revenue being generated from mobile or tablet devices with over 79% of CFD-related customer trades taking place on mobile or tablet devices in FY 2021. These factors supported a continued expansion in size of the addressable global trading market, across geographies, product types and asset classes. In this market environment, Plus500, supported by its techno- logical capabilities and its committed and skilled workforce, remained well positioned to support its customers. This is high- lighted by the Group maintaining its market-leading positions in key strategic markets, including Germany1 and Spain2, its rank- ing as the fastest-growing trading platform in the UK3, and as the most chosen CFD platform for its Mobile App in Australia4 and in Singapore5. In addition, the Plus500 app has now achieved over 10 million installs on Google Play6 and achieved a “Top 100 finance apps” ranking in 36 countries on Google Play and in 35 countries on the Apple Store7. 1. By total number of customer relationships. Investment Trends 2021 Germany Leverage Trading Report. 2. By total number of customer relationships. Investment Trends 2021 Spain Leverage Trading Report. Regulatory scrutiny continued, ensuring on-going customer protection and creating barriers to entry for smaller, non-com- pliant new operators. This ensured a highly compliant and high quality service was delivered for customers across the industry as a whole. 3. Year on year active trader numbers. Investment Trends 2021 UK Leverage Trading Report. Investment Trends 2021 Australia Leverage Trading Report. Investment Trends 2021 Singapore Leverage Trading Report. 4. 5. 6. Google Play as at 2 February 2022. 7. App Annie as at 20 December 2021. 19 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportOur Purpose, Strategy and Key Differentiators DELIVERING ON OUR PURPOSE Our purpose is to enable trusted and intuitive access to financial opportunities for our customers, across a wide range of financial instruments, countries and devices. This strengthens our position as a global multi-asset fintech group and is supported by four key differentiators: 1 2 Our powerful proprietary technology Our long track record Our proprietary technology remains our fundamental competitive advantage, enabling Plus500 to respond with agility to customer requirements, fast-emerging market developments and regulatory changes. It has taken many years to develop this technology, enabling Plus500 to build a long track record of innovation and a market-leading technological capability. We have built a long track record of financial perfor- mance, with over 25% CAGR in revenue since the IPO year, and an average EBITDA margin of approximately 57% in that time. We have remained debt free since the business was established and have continued to be highly cash generative since that time. Plus500 trading platforms available in Shareholder returns of 50+ countries $1.4 billion since IPO in 2013 Read more on pages 16 – 19 Read more on pages 38 – 40 20 Plus500 Ltd. 2021 Annual ReportOur strategic roadmap These differentiators ensure that Plus500 is well positioned to continue diversifying its revenue streams, product range and geographic footprint, based on our strategic roadmap of: – Expanding our core product offering in new and existing markets; To access these opportunities, the Group will continue to invest in future growth, through further organic investments and by actively targeting additional acquisitions, as well as by activat- ing potential strategic partnerships, to strengthen our position as a global multi-asset fintech group. – Launching new trading and financial products; and – Deepening engagement with customers. 3 4 Our leadership, people and culture Our agile business model Our operating track record and technology development are testament to the quality of our people. We have fostered a high-performance organisational culture, reflecting Israel’s technology-based and innovative envi- ronment. This has been led by a highly skilled manage- ment team, with specialist expertise and experience in technology. Our agile, customer-centric business model, with its unique edge in attracting and retaining customers through multiple channels, strong brand and reputation, and continued focus on customer care and protection, has ensured that we have consistently driven an attrac- tive Return on Investment (“ROI”) over time and will continue to do so. Plus500 people 450+ at the end of FY 2021 Registered customers on the platforms globally, since Plus500’s inception 22+ million Read more on pages 30 – 33 Read more on pages 24 – 25 21 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportOur Strategy in Action DELIVERING ON OUR STRATEGY LAUNCHING NEW PRODUCTS Acquisitions of Cunningham and CTS During FY 2021, Plus500 executed the US acquisitions of Cunningham Commodities LLC. (“Cunningham”), a regulated Futures Commission Merchant, and Cun- ningham Trading Systems LLC. (“CTS”), a technology trading platform provider, which established the Group’s position in the futures and options on futures markets. Through these transactions, Plus500 immediately expanded its geographic footprint and product offering in the significantly growing, but under-penetrated, retail trading market in futures and options on futures. The integration of these acquisitions is underway, in line with our strategic roadmap, with a number of R&D recruitments during FY 2021 specifically focused on leveraging Plus500’s best-in-class technology to opti- mise the acquired businesses. Ultimately, this will help to deliver market access to the millions of potential customers looking for new trading opportunities and ideas. Plus500 aims to be a technology disruptor in this mar- ket, where the competitive environment is fragmented, the utilisation of technology platforms is relatively lim- ited and the range of asset classes for customers to access is becoming increasingly broad and accessible. Consequently, by applying Plus500’s best-in-class tech- nology and expertise, the Group is confident that it will be able to offer accessible futures and options on futures products to a mass retail audience, thereby delivering on a major market opportunity. 22 Plus500 Ltd. 2021 Annual ReportWe believe that the global futures market is a major strategic opportunity for Plus500, as we look to expand in this significant potential market, which is being driven by substantial management focus and continued investment in technology and people. David Zruia, Chief Executive Officer 23 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportOur Business Model AN AGILE, CUSTOMER- CENTRIC BUSINESS Resources and relationships How we create and maximise value Responding to market trends… Market environment: volatility drives opportunities for customers to trade Continued growth in popularity of trading: size of the addressable market continues to grow Further automation across the industry: greater accessibility to digital channels by customers On-going regulatory scrutiny: ensures continued customer protection With a clear purpose and strategy… Our purpose is to enable trusted and intuitive access to finan- cial opportunities for our customers, across a wide range of financial instruments, countries and devices, to drive our con- tinued progress as a global multi-asset fintech group. Underpinned by… Comprehensive risk management Proprietary risk management that incorporates real-time functionality risk management systems and trading threshold triggers to reduce risk Sound governance The Plus500 Board is comprised of a diversified and highly experienced group of individuals with extensive knowledge across a number of disciplines, in particular financial services and technology Our robust and scalable business model cre- ates value for our stakeholders Financial position The Group has built a strong financial track record, maintaining a debt-free balance sheet since inception, with a lean and flexible cost structure. Read more on page 38 Regulators Continued compliance with appropriate global regulatory standards. Read more on page 28 People Our people are crucial in the on-going optimi- sation and management of the Group’s tech- nology platforms and its ability to attract and retain customers. Read more on pages 30 – 33 Technology Plus500 operates its robust and agile trading platforms which are based on its proprietary technology. Read more on page 16 Marketing Partnerships Plus500 has marketing partnerships and sponsorship agreements to support its efforts in attracting customers and driving brand awareness in strategic markets. Read more on page 29 24 Plus500 Ltd. 2021 Annual ReportValue created in FY 2021 How we share value EBITDA $387.1m Shareholders and investors The Group has delivered attractive returns through ordinary and special dividends as well as ordinary and special share buybacks. Total returns in dividends and share buybacks since IPO in 2013 amount to approximately $1.4 billion Basic earnings per share $3.06 Operating cash conversion1 99% Regulators The Group engages with regulators to ensure the integrity of the industry remains robust, contributing to round table discussions within the industry and holding regular dialogue with global and regional regulators People Plus500 offers rewarding and interesting careers, with oppor- tunities for our people to achieve long term development and career progression Shareholder returns $200.2m Customers Customers enjoy highly rated, robust and scalable, user- friendly trading platforms, which are tailored for mobile usage. Intuitive navigation and consistency minimises the learning curve between devices and improves user experience Customer deposits $2.1bn Marketing partners The cooperation of the Company with its marketing partners provides all parties with economic value and synergy 1. Operating cash conversion: Cash generated from operations / EBITDA. 25 Plus500 Ltd. 2021 Annual ReportGovernanceFinancial statementsStrategic reportKey Performance Indicators MEASURING OUR PERFORMANCE Our Key Performance Indicators (“KPIs”) can be used to bench- mark the Group’s performance and our ability to drive returns on investment over time. Financial KPIs REVENUE EBITDA Revenue $718.7m in FY 2021 EBITDA $387.1m in FY 2021 2021 2020 2019 $718.7m $872.5m 2021 2020 $387.1m $515.9m $354.5m 2019 $192.3m What it is The Group’s revenue is the income it generates through Customer Income and Customer Trading Performance.1 Why we measure it Revenue is a measure of the Group’s ability to maxim- ise the strength of its technology, representing the total income generated from customer transactions in the relevant financial period. What it is EBITDA is defined as earnings before interest, tax, depreciation and amortisation. Why we measure it EBITDA is a measure of the Group’s profitability and can be used to directly compare the Group’s profitabil- ity to that of other companies and other sectors. Read more on pages 38 – 40 Read more on pages 38 – 40 26 1 Customer Trading Performance – gains/losses on customers’ trading positions Plus500 Ltd. 2021 Annual ReportNon-financial KPIs ARPU AUAC 2021 2020 2019 $1,764 $2,009 $1,775 What it is ARPU is calculated by dividing the revenue by the num- ber of Active Customers in the relevant period. Why we measure it This measure helps to provide an understanding of the average revenue we are generating on a customer-by- customer basis. This helps us to identify and optimise our customer acquisition strategies to deliver an attrac- tive return-on-investment over time. 2021 2020 2019 $877 $750 $1,046 What it is AUAC shows the average cost of attracting a new cus- tomer and is calculated by dividing our total marketing expenses by the number of New Customers in the relevant period. Why we measure it AUAC is a reflection of the marketing cost of recruiting new customers in the relevant period. ACTIVE CUSTOMERS NEW CUSTOMERS 2021 2020 2019 407,374 434,296 2021 2020 196,336 294,728 199,720 2019 91,388 What it is Active Customers are customers who made at least one trade using real money (rather than trading through a demo account) on the trading platform in the relevant period. Why we measure it This measure reflects the level of customer activity on the trading platform during the relevant period. It is an indicator of how successful the Group is in attracting and retaining customers, with a view to delivering sus- tainable revenue and profits. What it is New Customers are customers who have deposited real money into their trading account for the first time. Why we measure it This metric tracks the number of new customers the Group attracts on a year-on-year basis. This helps us to understand the success of our technological capa- bilities and effectiveness of marketing initiatives. 27 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportKey Stakeholder Relationships ENGAGING WITH OUR STAKEHOLDERS The Group aims to develop long-lasting and valuable relationships with its key stakeholders through open and consistent engagement and communication, with a view to ensuring their perspectives and concerns are clearly understood by the Board and fully incorporated into the Board’s discussions and decision-making. Customers People Regulators Why we engage Regulatory oversight is an integral part of the Group’s business, as its regulated subsidiaries retain operating licences and are supervised by various regulators around the world, to ensure that we are offering our service within the appropriate regulatory rules and guidelines. Regula- tory compliance procedures are con- stantly reviewed and enhanced, with a culture of compliance embedded within the business, including open and con- structive communications with relevant regulatory bodies. How we engage The Group communicates with regulators on an on-going, constructive and open basis and we participate in a number of regulators’ co-ordination groups. In addi- tion, we contribute to public consultations issued by regulators on relevant industry matters. Key focus areas – Continued monitoring of and compli- ance with appropriate laws, global regulatory standards and industry best practices; – Rapid implementation of regulatory changes, driven by our proprietary tech- nology; and – On-going communication with, and sup- port of, regulators in current and poten- tial future regulatory jurisdictions. Why we engage We aim to ensure that Plus500 continues to provide a consistent, best-in-class ser- vice to our customers and that we con- tinue to listen to our customers about their requirements and interests. This approach helps Plus500 to retain existing customers and attract new customers. In addition, we aim to ensure our cus- tomer care and protection is maintained, through educational tools and risk man- agement features. How we engage We engage with customers through an omni-channel customer-centric approach. We provide 24/7 customer support, which is available in multiple languages across a number of channels. We also provide customers with a range of educational and training tools to sup- port them with their trading activities. CFD customers are able to use our free demo account on an unlimited basis, through which they can try our service in a risk-free environment. In addition, we conduct customer surveys to better understand their views on Plus500’s service, so that we can con- tinue to innovate and develop our product, based on customer feedback. Key focus areas – Consistent level of service delivery; – Continued 24/7 customer service avail- ability; – Further expansion of range of educa- tional and training tools; – Provision of negative balance protection and other embedded risk management features, to ensure customer care and protection is maintained; and – On-going customer surveys to ensure we remain cognisant of customer requirements. Why we engage Organisational culture and employee well- being are critical in ensuring that our service is delivered to customers, through the on-going development of our technol- ogy by our people, on a consistent, long- term basis. With this in mind, the Group regards its talented and committed peo- ple as its key asset to enable its technol- ogy. How we engage The Group undertakes regular evaluation processes for our people and provides competitive reward packages to attract and retain high quality people. We encour- age our people to participate in training, learning and development, and make them aware of possible career progres- sion opportunities within the Group. We provide our people with a dynamic work environment, with high quality office facilities, including a number of new offices opened during the year, and the opportunity to engage in a number of social activities and community engage- ment programmes. In addition, we sup- ported our people to work remotely throughout the COVID-19 pandemic. One of our Non-Executive Directors, Steve Baldwin, is the workforce engagement representative on the Board to provide a channel through which our people can raise their views directly to the Board, informing the Board’s approach to sup- porting improvements in organisational culture. Key focus areas – Consistent internal communication on developments within the Group and across our industry; – Continued opportunities for training, learning, development and career pro- gression; and – Continued communication of people matters to the Board. 28 Plus500 Ltd. 2021 Annual ReportCommunities Investors Why we engage Engagement with local communities is crucial from social welfare and sustain- ability perspectives and, with this in mind, the Group continues to support its local communities. How we engage The Group participates in a number of projects to support and assist local com- munities and charities. These include on-going monetary contributions and the provision of resources and equipment to a number of charities, non-profit organisa- tions, community centres and disadvan- taged families in local communities. The Group also maintains strategic part- nerships and alliances with community partners, including our on-going collabo- ration with top tier academic institutions, for example the Technion – Israel Institute of Technology, through which we par- ticipate in several innovation and entre- preneurship initiatives. Why we engage Plus500 aims to provide fair, balanced and understandable information to inves- tors and shareholders, to ensure their continued support of the Company. Main- taining a close connection to its share- holders through clear and transparent dialogue continues to be a major focus for the Group. The Company continues to seek ways in which to enhance its relationship with investors. How we engage An open dialogue with investors is achieved through meetings, results pres- entations, conference attendance and group meetings, such as the Annual Gen- eral Meeting. In addition, the Company produces a variety of investor-focused material, including annual reports, news published on the Regulatory News Service and investor presentations. These are available on a recently refreshed and updated dedicated Investor Relations website. Key focus areas – Continued financial donations; – On-going supply and provision of resources and equipment; Key focus areas – On-going transparent dialogue with investors; – Open lines of communication for share- – Further employee engagement in local holders; community projects; and – Continued focus on strategic partner- ships with top tier academic institutions. – Regular collection of investor feedback and dissemination to the Board; and – Executive management participation in investor-focused events and activities. Marketing partners Why we engage Plus500 works with various marketing partners, including sports sponsorship partners, who support the Group with various activities. How we engage We build strong partnerships with market- ing partners through an open dialogue to ensure we can develop long-term valu- able relationships. Our relationships with our marketing part- ners include the on-going review and monitoring of their performance levels, to ensure that the Group is achieving qual- ity and value from its partnerships. Ulti- mately, this helps to build mutually beneficial relationships with our market- ing partners. Key focus areas – On-going dialogue with our marketing partners; – Continued fair treatment of marketing partners in our dealings with them; and – Consistent focus on innovation and new initiatives to help deliver enhanced value from marketing partnerships. Connected We create an open dialogue with our stakeholders to ensure their perspectives and concerns are clearly understood. 29 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportOur ESG Approach ENVIRONMENTAL, SOCIAL AND GOVERNANCE The Group’s approach to ESG is aligned to its purpose of enabling trusted and in- tuitive access to financial opportunities, supported by on-going engagement with its customers and also with shareholders and potential investors, analysts, share- holder advisory bodies, ESG ratings agencies, employees and other stakeholders. Introduction The Board established an ESG Committee in FY 2020 to oversee and support the Group’s approach in this area, and this Committee’s report for FY 2021, presented by its Chair, Daniel King, can be found on pages 71 – 73 of this Annual Report. The Committee is supported by an ESG working group, comprising of the Company Secretary and Head of Investor Relations, with on-going input from a specialist ESG consul- tancy. The Group remains committed to operating responsibly and sustain- ably in all aspects of its business, carrying out a range of ESG initiatives to deliver tangible value for our stakeholders. The Group’s core ESG values are: – Creating long-term value for our stakeholders; – Putting our customers first by leading the industry in which we oper- ate in and by delivering innovative and high quality products; – Maintaining a dynamic and creative work environment for our people around the world, which promotes diversity and equal opportunity, protects human rights and eliminates discrimination; and – Minimising any impact of the Group’s operations on the environment. In FY 2021, the ESG Committee commissioned a materiality assess- ment to identify the key ESG priorities and risk factors for the Group, based on a series of detailed interviews with a number of key internal and external stakeholders. The objective of this assessment was to help establish a framework for the Group’s future approach in key ESG areas and, ultimately, to increase the Group’s resilience over the long term. This assessment identified several ESG priority areas for Plus500. These areas were: customer care and protection, organisational culture, cyber security, systems infrastructure and leadership and governance. This year’s ESG report covers the Group’s progress in each of these areas in FY 2021, as well as other important related priority areas. In addition, this report includes new information and data about the Group’s approach to the potential environmental impact of its opera- tions and incorporating the Group’s initial reporting in relation to the Task Force on Climate-related Financial Disclosures (TCFD). Plus500 continues to take steps to mitigate the risks associated with each of these priority areas, supported by on-going engagement with key stakeholders. The Key Stakeholder Relationships and Risk Manage- ment Framework sections on pages 28 – 29 and 41 – 45 of this Annual Report outline how the Group is mitigating these risks in more detail. Leadership and governance It is crucial for Plus500 to remain in compliance with applicable govern- ance requirements, in particular ensuring the appropriate Board com- position and diversity (including gender diversity), and maintaining a remuneration policy for directors and executives which is aligned to long-term shareholder interests. In addition, the Board is cognisant that it must continue to attract and retain high quality Board membership and Executive Management leadership, to ensure the Group continues to deliver a consistently strong operational performance and achieve its strategic objectives. More details on the Board’s approach to governance, covering each of these priority areas, can be found in the Governance section of this Annual Report, on pages 54 – 58, with biographies of each Board member on pages 52 – 53. Customer care and protection Customer care and protection, in particular ensuring customers remain protected from, and well informed of, the risks of trading, remains a critical priority for the Group, in line with regulatory requirements in this area. This is not only a specific risk to Plus500, but also across the entire industry. Measures such as negative balance protection and maintenance mar- gin protection on the Group’s CFD trading platform remain crucial in ensuring customers are well protected, having been embedded in Plus500’s technology since its inception. In addition, a free demo account is available on an unlimited basis for CFD platform customers, while sophisticated risk management tools are provided free of charge for customers to manage leveraged expo- sure, including measures such as stop losses. In FY 2021, the Group continued to develop its range of educational and training tools and features on its platforms, to help inform custom- ers of the inherent potential risks involved in trading, as well as ensur- ing risk warnings are prominent on its platforms and marketing materials. The Group continues to ensure compliance with global regulatory standards in this area and remains well positioned for any potential future regulatory changes. This is supported by the Group’s established global regulatory network, which is managed by its regulated subsidi- aries and overseen centrally on an on-going basis. 30 Plus500 Ltd. 2021 Annual ReportOrganisational culture Organisational culture, with a focus on employee health, safety, well-being, welfare and development, is another important priority for the Group to drive long-term business resilience. The Group aims to continue attracting and retaining high quality talent, which ultimately ensures the delivery of a consistent level of high quality products and services for customers. Employee development The Group’s head office is in Israel, a major global hub for technol- ogy and innovation, where there is a skilled and educated workforce which is highly trained in all elements of technological development. Plus500 has fostered an entrepreneurial and high-performance organisational culture that reflects Israel’s technology-based envi- ronment. The Group aims to replicate this cultural mindset in each of its global operating subsidiaries, as has been the case historically. This has created a working environment which empowers on-going improvements in employee development, through training, learning and career progression. This includes Group-subsidised training programmes for employees to enhance their understanding of a number of commercial areas, including technology and marketing. The Group also runs a programme which involves a series of expert lectures for employees to broaden their knowledge outside of their day-to-day roles. Furthermore, the Group carries out regular performance evaluation programmes for all employees to help continue their development and meet their career aspirations at Plus500. The Group is committed to fair wages for all employees and ena- bles them to participate in its success through competitive reward packages, alongside share-related benefits that are linked to the financial and operational performance of Plus500. Employee health, safety and well-being The Group is particularly dedicated to the health, safety and well- being of its people and aims to continue to provide them with optimal working conditions to support a healthy, safe and balanced working environment, particularly throughout the challenging period of the COVID-19 pandemic. During that time, the Group embraced a hybrid working model, enabling flexible working, as well as provid- ing employees with on-going access to COVID-19 test kits and sanitary equipment. In addition, the Group provided on-going guidance on well-being issues and flexibility around childcare and family support, with employees at the Group’s headquarters and certain subsidiaries continuing to be offered annual health and medical checks at a local hospital. 31 Plus500 Ltd. 2021 Annual ReportGovernanceFinancial statementsStrategic reportOur ESG Approach continued Employees at the Group’s headquarters are encouraged to make use of Plus500’s office facilities, resources and events, including organised social activities, lectures, access to a private gym, yoga and wellness classes, team retreats, a varied library, a fully equipped kitchen, meal vouchers and other benefits. Furthermore, to help drive even greater employee satisfaction, the Group provides gifts and merchandise to employees at its headquarters to celebrate such events as public holidays and employees’ birthdays and weddings. The Group also holds an annual employee event in Israel with various departments arranging regular “family days” and team events across its global operations. The Group’s approach to equal opportunity, protecting human rights and employee diversity Plus500 is committed to maintaining high ethical standards and pro- tecting human rights across its operations and supply chain. The Company’s Human Rights and Modern Slavery Statement pursuant to Section 54 of the UK Modern Slavery Act 2015, can be found on the Company’s website. In FY 2021, the Group continued to monitor and track potential human rights and modern slavery issues, as part of its overall compliance risk management programme. It was found that there were no incidences of modern slavery or human rights abuses across the Group’s operations. The Group is committed to equal opportunity in employment and to creating, managing, valuing and promoting diversity and eliminating discrimination in its workforce. The Group maintains an Equality, Diver- sity and Inclusion Policy with respect to candidate selection processes, hiring, promotion, compensation, training and assignment of respon- sibilities, termination or any other aspect of the employment relation- ship. The Group is also committed to equality and fairness to all and does not provide less favourable facilities or treatment on the grounds of age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, ethnic origin, colour, nationality, national origin, religion or belief, or gender and gender orientation, social back- ground, political opinion, sensitive medical conditions or trade union membership. To this end, Plus500’s people come from diverse backgrounds and the Group ensures that all employees, both prospective and current, are given access to equal opportunities. All employees, whether they are part-time, full-time or temporary, will be treated fairly and with respect. The Group is committed to: – Creating an environment in which individual differences and the con- tributions of all team members are recognised and valued; – Creating a working environment that promotes dignity and respect for every person; – Not tolerating any form of intimidation, bullying or harassment, and disciplining those that breach the policy; – Ensuring availability of training, development and progression oppor- tunities for all of our people; – Promoting equality in the workplace; – Encouraging anyone who feels they have been subject to discrimina- tion to raise their concerns and to take those concerns seriously; – Regularly reviewing employment practices and procedures so that fairness is maintained at all times; and – Encouraging our people to treat everyone with dignity and respect. The Equality, Diversity and Inclusion Policy is monitored and reviewed annually by the Board, with the assistance of the Nomination Commit- tee and the ESG Committee to ensure that equality and diversity is continually promoted in the workplace. The Group’s organisational culture and mindset has helped to drive employee attraction and retention and has ultimately led to the Group’s innovation and technological excellence. Responsible Plus500 remains committed to operating responsibly and sustainably in all aspects of its business, to help deliver tangible value for our stakeholders 32 Plus500 Ltd. 2021 Annual ReportGENDER EQUALITY: ALL EMPLOYEES (%) 213 (46%) 248 (54%) Female Male More information on the Board’s Equality, Diversity and Inclusion Policy can be found on page 62 of this Annual Report. This policy can also be found on the Company’s website Read more on pages 60 – 63 Gender equality The Group is committed to the progression of its talented women, with female representation across the Group remaining relatively strong. Plus500’s gender diversity statistics as at 31 December 2021 were as follows: FEMALE MALE TOTAL Board 3 (38%) 5 (62%) Senior management 12 (39%) 19 (61%) All Employees 213 (46%) 248 (54%) 8 31 461 Senior management in the table above includes executive management and the first layer of management below. During FY 2021, gender diversity at Board level was improved further through the appointments of Sigalia Heifetz as an Independent Non-Executive Director and Tami Gottlieb as an Independent Non-Executive Director and External Direc- tor. Also, as announced in March 2022, Prof. Varda Liberman was appointed as an Independent Non-Executive Director. Consequently, as at the date of this Annual Report, female representa- tion on the Board comprised 44% (four female Directors out of nine Directors). Furthermore, following the tenure of Daniel King finishing in June 2022, as outlined in more detail on page 50 of the Governance section of this Annual Report, female representation on the Board will increase to 50% (four female Directors out of eight Board members). These appointments not only continue to diversify the Board’s gender composition, but also further expand the range of the Board’s expertise, knowledge and experience. Plus500 believes that diversity across the Board and the Group is an important element in maintaining com- petitive advantage and effective governance, as well as mitigating the risk of a “group think” culture. 33 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportOur ESG Approach continued The Company continued to invest in its systems architecture during FY 2021, to support customer requirements. The implementation of Google Cloud Services provides further flexibility, security and scale to the platforms, additional server capacity and redundancy, as well as enhanced data analysis, data processing and business intelligence capabilities. This supports the Company’s main data centres, which host its trading platforms and major network equipment. The strength of the Company’s IT infrastructure has ensured that the core platform has consistently delivered the capacity to support sig- nificant volumes, including the multiple volume spikes which have rapidly, and sometimes instantly, arisen on demand in recent years. Anti-bribery and corruption As a company listed in the UK, Plus500 is subject to the UK Bribery Act 2010 and, as an Israeli-incorporated company, it is also subject to anti-bribery and anti-corruption regulation under applicable Israeli law. Plus500 operates a zero tolerance approach to bribery and corruption. The Company’s Anti-Bribery Policy ensures it conducts all business in an honest and ethical manner whilst acting professionally and fairly with integrity in business dealings and relationships. This policy applies to all our people, at all levels and grades, as well as consultants, contractors, trainees, seconded staff, homeworkers, casual workers and agency staff, volunteers, interns, agents, sponsors, or any other person associated with us, or any subsidiaries or their employees, wherever located. This policy covers: – Bribes; – Gifts, hospitality and expenses; – Facilitation payments; – Third party suppliers or agents; – Client entertainment and benefits; – Lobbying expenditures; – Political contributions; and – Charitable contributions. The prevention, detection and reporting of bribery and other forms of corruption are the responsibility of all employees of the Group. All individuals are required to avoid any activity that might lead to, or sug- gest, a breach of this policy and to raise any concern, should they have any, in this regard to the Company Secretary, who shall keep these concerns strictly confidential. Internal control systems and procedures are subject to regular audits to provide assurance that they are effec- tive in countering bribery and corruption. Training on the Anti-Bribery Policy forms part of the introduction process for all of the Group’s new recruits. All of the Group’s employees receive regular, relevant training on how to implement and adhere to all aspects of the policy and are asked to formally confirm compliance with the policy on an annual basis. Information and data security Ensuring that the Group’s technology remains highly secure and immune from breaches of privacy, particularly around personal information and data, is another key priority area. Information and data security is managed through a dedicated and specialist cyber security team, based at the Group’s headquarters and reporting to the Group’s Chief Operating Officer, with ultimate oversight from the Audit Committee of the Board. The Group’s IT infrastructure production environment is hosted by a third party supplier, which is certified under ISO/IEC 27001, ISO 14001, ISO 18001 and ISO 9001 compliance certifications. The cyber security team manages a range of regular training pro- grammes and activities to all Group personnel (including the Board) to ensure consistent and robust management of cyber security risk and to minimise any external threats to the Group’s platforms, systems and data. As a result of these initiatives, there were no significant security or data breaches across the Group’s platforms during FY 2021. Systems infrastructure Maintaining a robust systems infrastructure, with embedded risk man- agement features and in-built redundancy, remains crucial to ensure that Plus500 customers receive a consistent level of service. This is supported by continued investment by the Group in the development of its technology. 34 Plus500 Ltd. 2021 Annual ReportThis Anti-Bribery Policy and its implementation is reviewed on a regu- lar basis, and annually at Board level, to ensure that Plus500 conducts all of its business in an honest and ethical manner. Plus500 prohibits donations, whether in cash or kind, in support of any political parties or candidates. In addition, to avoid criminal offence and to protect the Company’s reputation, it is important that the Com- pany does not become involved with third party criminal activities. To this end, the Company continues to ensure that it does not receive funds relating to criminal activities which could be associated with money laundering (the activity of taking the proceeds of criminal activ- ity, and disguising the origin, identity and destination of this illicit money through a series of transactions). Community engagement The Group encourages its people to get involved and contribute to their local communities. Workforce social initiatives are supported by Plus500’s Donations Committee comprised of workforce volunteers, which oversees the planning and performance of relevant activities, with meetings occurring on a quarterly basis. During FY 2021, supervised by the Group’s Donations Committee, the Group donated approximately $80,000 to various community projects and Non-Profit organisations in Israel, including a youth support pro- gramme and a number of education support and enrichment pro- grammes for deprived and vulnerable children in local communities. In addition, the Group donated IT equipment to various charities and local community initiatives. Plus500 maintains strategic partnerships and alliances with commu- nity partners, such as the on-going collaboration with top tier academic institutions like the Technion – Israel Institute of Technology, participat- ing in innovation and entrepreneurship initiatives. The Group aims to carry out new employee-volunteer community ini- tiatives in the local community going forward, many of which were put on hold during the COVID-19 pandemic. Impact on the environment As a technology-based business, Plus500 does not carry out any industrial activity, is not involved in anything which would emit envi- ronmentally harmful substances and has a relatively low environmen- tal impact. However, the Group is committed to managing its environmental impact, which results from the energy usage relating to the maintenance of the Group’s IT infrastructure and the operation of its network of offices around the world. Consequently, the Group aims to ensure that it conducts appropriate and necessary actions to mini- mise the impact of its infrastructure and operations on the environment, with commitments to: – Protect the environment; – Reduce waste as well as water, energy, and resource use; – Monitor the Group’s environmental performance; and – Provide environmental training for employees. 35 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportOur ESG Approach continued Emissions reporting, targets and approach to emissions reduction Supported by a number of initiatives being carried out by the Group to deliver on these commitments, and thereby addressing Plus500’s potential impact on climate change, the Group has set a target of being carbon negative and net zero for Scope 1 and Scope 2 emissions by 2030 or earlier. The tables below outline the Group’s energy and emissions output over the last two years, particularly in relation to Scope 2 emissions, which have been calculated using a location-based calculation method based on the Greenhouse Gas Protocol (the Group does not emit any Scope 1 emissions, given the nature of its business): The two factors within the Group’s business with the most significant potential environmental impact, in relation to emissions, are: – The maintenance of Plus500’s technology infrastructure, in particular the management of the various data centres and servers that are owned or leased by the Group around the world; and – The Group’s global office network. In FY 2021, electricity consumption and expenditure increased due to less remote working compared to the prior year, certain subsidiaries moving to larger offices to accommodate growth and the additions of Cunningham and CTS in the US, which were acquired in July 2021, and a new office in Tel Aviv. The Group’s commitment to become carbon negative and net zero for Scope 1 and Scope 2 emissions by 2030 will be supported by a number of activities. In particular, the Group regularly looks for opportunities to improve the efficiency and performance of its servers and third party data centres, including upgrading their hardware and software on a regular basis. In addition, the Group will continue to investigate oppor- tunities to manage and operate more services through Google Cloud and other remote platforms, thereby optimising the utilisation of ter- restrial infrastructure and reducing electricity usage. Energy efficiency has been optimised in recent years as a result of a greater level of flexible working, compared to pre-pandemic levels, and through the utilisation of video-conferencing facilities which has reduced the requirement for employee travel. The Group is investigating ways to measure its Scope 3 emissions and, when finalised, the Group will report on these Scope 3 emissions, including them in future disclosure and, potentially, incorporating them into the Group’s emissions targets. The Company is also taking steps to diversify its investments within the sustainability eco-system. For example, during FY 2021, Plus500 worked with a key relationship bank to re-classify a portion of its fixed bank deposits as “Green Deposits”, which the bank uses to invest in areas such as energy-efficiency activities and renewable energy projects. The Group has adopted an Environmental Policy, which can be found on the Company’s website. Recommendations of the Task Force on Climate-related Financial Disclosures The Group recognises the significance of climate change for all busi- nesses and therefore welcomes and supports the recommendations of the TCFD for more consistent disclosure on climate-related financial risk disclosures by companies. During FY 2021, the Group carried out a gap analysis and peer group analysis, to review, amongst other elements, the Group’s current climate- related disclosure and to better understand best practice reporting on TCFD and climate-related disclosures across the UK-listed peer group and US-listed fintech space. The Group will continue to be consistent with, and in compliance with, TCFD recommendations in its disclosures. Supported by the analyses carried out in FY 2021, Plus500’s progress against the TCFD recommendations is provided on the following page, together with our future plans. Total Group energy consumption (kWh) 39,706 535,670 575,376 21,539 418,973 440,512 GLOBAL (EXCL. UK) UK FY21 GROUP TOTAL GLOBAL (EXCL. UK) UK FY20 GROUP TOTAL Total Scope 1 (tCO2e) Total Scope 2 (tCO2e) Total tCO2e Intensity measure (Group turnover $’m) GHG Emissions Intensity ratio (per Group turnover $’m) GLOBAL (EXCL .UK) 0 227.5 227.5 UK 0 7.6 7.6 FY21 GROUP TOTAL 0 235.1 235.1 718.7 0.33 GLOBAL (EXCL .UK) 0 182.8 182.8 UK 0 4.1 4.1 FY20 GROUP TOTAL 0 186.9 186.9 872.5 0.21 36 Plus500 Ltd. 2021 Annual Report Governance Current approach: – The Board oversees all aspects of ESG, including climate-related risks and opportunities for the Group; – The Board has established an ESG Committee, chaired by Daniel King, (see page 72 for details of the composition of the Commit- tee) to monitor on progress against the Group’s ESG approach and priority areas, and to externally report these elements, includ- ing climate-related risks and opportunities. The ESG Committee receives input from executive management and is supported by the Group’s ESG working group, which comprises the Company Secretary and Head of Investor Relations, with on-going input from a specialist ESG consultancy; – The ESG Committee reviews ESG-related risks, including climate- Future plans: – The Group will continue assessing how climate-related risks and opportunities impact both the business and its purpose of enabling trusted and intuitive access to financial opportunities, as well as its strategic and operational approach to delivering on this purpose; – The Group will continue to identify climate-related risks through regular risk management processes, overseen by the ESG Com- mittee; – In FY 2022, the ESG Committee is aiming to conduct an initial scenario analysis of the impact of climate change on the Group’s purpose, strategy and future operational performance; and – The Group will continue to be committed to minimising the impact of its operations on the environment by adopting responsible environmental practices. related risks; – The ESG Committee provides regular updates to the Board on all of these elements; – The ESG Committee met four times during FY 2021 and regu- larly reported back to the Board during the year; and – The external reporting of Scope 1 and Scope 2 emissions target is now part of the Group’s annual reporting. Future plans: – On-going review and monitoring of the implementation of the Group’s approach to ESG, including any potential climate-related impact, by the ESG Committee and executive management; and – Continued review of the Group’s ESG reporting and disclosure, including any updates to the Group’s environmental targets, by the ESG Committee, in line with best practice and the latest regulations. Strategy Current approach: – In delivering on the Group’s purpose to enable trusted and intuitive access to financial opportunities, Plus500 is committed to man- aging its environmental impact, which results from the energy usage relating to the maintenance of the Group’s IT infrastructure and the operation of its network of offices around the world; and – The Group aims to ensure that it conducts appropriate and neces- sary actions to minimise the impact of its infrastructure and operations on the environment, including upgrading hardware to improve efficiency and performance. During the year, the Com- pany worked with a key financial institution to re-classify a portion of its fixed short-term bank deposits as “Green Deposits”, which the financial institution uses to invest in areas such as energy- efficiency activities and renewable energy projects. Risk management Current approach: – The ESG Committee receives reports on ESG risks identified through the Group’s risk management process. The ESG Com- mittee determines the nature and potential impact of climate- related risks and opportunities facing the Group in achieving its purpose and strategic objectives; – The ESG Committee advises the Board on current and future strategies regarding climate-related risks and opportunities; and – The ESG working group was established during FY 2021 to support the ESG Committee in monitoring and reviewing ESG risks and opportunities. Future plans: – The ESG Committee will continue to identify, assess, manage and prioritise climate-related risks and opportunities. Metrics and targets Current approach: – The Group has disclosed its Scope 1 and 2 emissions data, as outlined on page 36, and will continue to do so on an annual basis; – Plus500 has set a target of being carbon negative and net zero in its Scope 1 and 2 emissions by 2030 or earlier; and – Progress against these targets will be disclosed on an annual basis. Future plans: – The Group is investigating ways to collect, collate and report on its Scope 3 emissions; – Once finalised, the Group will report its Scope 3 emissions going forward, thereby expanding its disclosure in this area; and – The Group is committed to regularly reviewing its climate-related metrics, targets and progress against these targets and will update its disclosure as and when appropriate. The Group has reported above on the most relevant and appropri- ate elements of TCFD for Plus500. Going forward, the Group will continue to assess its climate-related risks, priorities and oppor- tunities, to ensure that its reporting in relation to TCFD recom- mendations continues to be consistent, and in compliance, with these recommendations, and will evolve and develop over time. 37 Plus500 Ltd. 2021 Annual ReportGovernanceFinancial statementsStrategic reportFinancial and Business Review WELL POSITIONED FOR GROWTH With solid financial foundations, Plus500 is well positioned to deliver on its strategic growth ambitions, through both organic investments and acquisitions. Elad Even-Chen, Chief Financial Officer The Group’s operational performance in FY 2021 translated into another outstanding financial performance across all metrics during the year, ahead of the Group’s pre-pandemic performance in FY 2019, highlight- ing Plus500’s resilient technology and sustainable business model. Revenue and EBITDA The Group generated total revenue of $718.7m in FY 2021 (FY 2020: $872.5m, FY 2019: $354.5m). Customer Income, a key measure of the Group’s underlying performance, was consistently strong throughout FY 2021 at $702.8m (FY 2020: $997.5m, FY 2019: $382.4m). Customer Trading Performance was $15.9m during FY 2021 (FY 2020: $(125.0m), FY 2019: $(27.9m)). The Company continues to expect that the contribution from Customer Trading Performance will be broadly neutral over time. Supported by the Group’s lean and flexible cost base, EBITDA for FY 2021 was $387.1m (FY 2020: $515.9m, FY 2019: $192.3m). EBITDA margin remained strong during FY 2021 at 54% (FY 2020: 59%, FY 2019: 54%). Cost base Costs remained well controlled and 72% of the Group’s costs were variable (FY 2020: 80%, FY 2019: 71%), with the Group maintaining a flexible cost base. The Group’s variable costs remain positively correlated to enhanced performance and higher volumes, including marketing investment and payment processing expenses. Marketing technological investment was $172.1m during FY 2021 (FY 2020: $221.1m, FY 2019: $95.6m). This investment will continue to be made to ensure that the Group is able to capture opportunities to drive future anticipated attractive Return on Investment (“ROI”). Revenue $718.7m (FY 2020: $872.5m) EBITDA $387.1m (FY 2020: $515.9m) Net profit $310.6m (FY 2020: $500.1m) Operating Cash Conversion 99% (FY 2020: 106%) 38 Plus500 Ltd. 2021 Annual ReportTotal SG&A expenses were $334.1m during FY 2021 (FY 2020: $358.9m, FY 2019: $164.4m), the major elements of which were the marketing investment outlined above, processing costs of $40.8m (FY 2020: $53.0m, FY 2019: $15.8m) and payroll and related expenses of $33.0m (FY 2020: $26.0m, FY 2019: $22.6m). AUAC was $877 in FY 2021 (FY 2020: $750, FY 2019: $1,046), with on-going investment being made in strategic markets to attract high value customers. Given the strength of the Group’s marketing technol- ogy and Plus500’s long track record of delivering high returns on mar- keting investment, the current investment cycle is expected to continue delivering an attractive ROI. The Group continues to expect that AUAC will rise steadily over time, as the Group’s customer profile continues to shift to higher value customers and as the Group invests in attracting customers to the new trading products in its portfolio and targeting customers in stra- tegic geographies. Net financial income Net financial income (expense) amounted to $1.8m in FY 2021 (FY 2020: $9.7m, FY 2019: $(0.8m)), predominantly due to foreign exchange and translation differences, in addition to interest received related to fixed deposits and tax rebates. A substantial proportion of the Group’s cash is held in US dollars in order to provide a natural hedge, thereby reduc- ing the impact of currency movements on financial expenses. Corporate Tax As well as being driven by the Group’s operational performance, net profit and earnings per share were also supported by a reduction in the cor- porate tax rate to 12% for Plus500 Ltd., from the full corporate tax rate of 23% previously. This was due to the Company receiving approval from the Israeli Tax Authority (ITA) recognising the Company as a “Preferred Technological Enterprise” (PTE). In addition, the withholding tax rate applicable for dividends in FY 2021 was reduced from 25% to 20%. On 18 January 2022, the Company announced that this accreditation had been successfully extended for FY 2022, FY 2023, FY 2024, FY 2025 and FY 2026, with Plus500 Ltd.’s corporate tax rate for each of these financial years, to be reduced from 23% to 12%, and the withholding tax rate applicable for dividends to be reduced from 25% to 20%, sub- ject to the Company complying with the conditions of the Law for the Encouragement of Capital Investments. Net profit and earnings per share Net profit in FY 2021 was $310.6m (FY 2020: $500.1m, FY 2019: $151.7m) and basic earnings per share was $3.06 (FY 2020: $4.71, FY 2019: $1.35). Balance sheet and cash generation As at the end of FY 2021, total assets were $822.8m (FY 2020: $620.2m, FY 2019: $316.9m) with equity of $661.3m representing approximately 80% of the balance sheet. The Group remains highly cash generative, supported by the relatively low levels of capital expenditure as a result of its automation and technological capabilities, with cash generated from operations during the year of $383.0m (FY 2020: $546.6m, FY 2019: $170.1m) and 99% operating cash conversion achieved (FY 2020: 106%, FY 2019: 88%). During FY 2021, the Company completed several share buyback pro- grammes totalling $64.9m. In addition, $144.9m in dividends were declared and paid to shareholders during the year as interim, final and special dividends. The Group remains debt-free, as it has been since its inception, with cash balances and cash equivalents at the end of FY 2021 of $749.5m (FY 2020: $593.9m, FY 2019: $292.9m). Presentation of currencies 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 balance sheet date. Business development The Group made excellent progress, from a business development perspective, during the year in pursuing a range of potential growth opportunities. Major achievements included the due diligence, nego- tiations and completion of the Cunningham and CTS acquisitions in the US, as well as obtaining a new regulatory licence in Estonia, granted on 7 February 2022, supported by the establishment of a new local subsidiary. In March 2022, following a lengthy assessment of the market oppor- tunity in Japan, the Company completed an acquisition of a local firm regulated by Japan’s Financial Services Agency as a Type 1 Financial Instruments Business Operator. This represents a major growth oppor- tunity for Plus500, through an immediate presence in the substantial retail trading market in Japan. In addition, the business development team made great progress in furthering a number of other growth initiatives, including advancing the Group’s position with a number of potential other regulatory licence applications and acquisition targets. The team continues to explore a range of opportunities to support the Group in its growth ambitions, including investigating potential new products and market opportuni- ties. Shareholder returns The Company’s shareholder return policy is to return at least 50% of net profits to shareholders through dividends and share buyback pro- grammes, with at least 50% of this distribution being made by way of dividends. For FY 2021 and in previous years, this shareholder return policy has been based on a 23% corporate tax rate, for both interim and final dividends. In addition, the Board has considered paying spe- cial dividends and executing special share buyback programmes at year end. The Board will review the basis of this policy for future shareholder returns, in light of the successful extension of Plus500 Ltd.’s status as a PTE, as outlined above, and the consequent reduction in its corporate tax rate from 23% to 12% for each financial year up to and including FY 2026, subject to the Company complying with the conditions of the Law for the Encouragement of Capital Investments. 39 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportFinancial and Business Review continued The Board has declared on 15 February 2022 a total distribution of $115.0m in relation to FY 2021, which comprises a distribution of final and special dividends and new share buyback programmes, including a special buyback programme. This makes a total dividend for the year of $120.0m, representing $1.1916 per share (total dividend for FY 2020: $1.7823 per share). The total dividend includes a final dividend for FY 2021 of $37.8m, representing $0.3777 per share (final dividend FY 2020: $0.5422 per share), a special dividend for FY 2021 of $22.2m, representing $0.2218 per share (special dividend FY 2020: $0.2870 per share) and an interim dividend of $60.0m. The interim dividend was distributed to shareholders in November 2021 and the final and special dividends had an ex-dividend date of 24 February 2022, with a record date of 25 February 2022, and a payment date of 11 July 2022. During FY 2021, the Company executed its existing share buyback programmes, with 3,406,211 ordinary shares purchased during the year, amounting to a total of $64.9m, at an average share price of £13.9, including $22.4m in H2 2021. In addition, the Board initiated a new share buyback programme in FY 2022 to acquire up to $55.0m of the Company’s shares. This includes a new share buyback programme of $25.2m and a special share buy- back programme of $29.8m. The purpose of the new programmes is to further emphasise the Board’s confidence in the prospects of Plus500 and reflects the robust financial position of the Group, as highlighted by the Group’s operational and financial performance in FY 2021. The special dividend and the special share buyback programme are directly related to the benefits of the change in tax rate from the Israeli statutory rate of 23% to 12%, following the Company’s successful extension of its PTE accreditation. Elad Even-Chen Chief Financial Officer 22 March 2022 40 Group Tax Policy The Group actively seeks to comply with both the spirit and the letter of all relevant taxation laws and regulations where it operates, and it is committed to a transparent and open approach to reporting on tax. The Group’s policy is to file all tax returns on time, and to pay tax as it falls due. The Group has a low risk tolerance for uncertain tax positions in the jurisdictions in which it operates and does not under- take any aggressive or unreasonable tax planning schemes for the purpose of tax avoidance, and broadly aim to align tax payments to revenue generation. The Group does not knowingly help others avoid their tax obligations. During FY 2020, Plus500 Ltd. became one of the first com- panies to receive approval from both the Israeli Tax Author- ity and the Israeli Innovation Authority under the new tax regime in Israel, recognising the Company as a “Preferred Technological Enterprise” and as “an enterprise which pro- motes innovation”. Consequently, the Plus500 Ltd. Corporate Tax rate for the financial years 2017, 2018 and 2019 was reduced from 24%, 23% and 23% in each respective year to 12% in each of these years. This updated Corporate Tax rate of 12% was also applicable for FY 2020 and FY 2021 and the Withholding Tax rate applicable for dividends was reduced from 25% to 20% for both financial years. On 18 January 2022, the Company announced that this accreditation had been successfully extended for FY 2022, FY 2023, FY 2024, FY 2025 and FY 2026, with Plus500 Ltd.’s Corporate Tax rate for each of these financial years, to be reduced from 23% to 12%, and the Withholding Tax rate applicable for dividends to be reduced from 25% to 20%, subject to the Company complying with the conditions of the Law for the Encouragement of Capital Investments. All intra-group transactions are required to be priced on an arm’s length basis in accordance with the Group’s internal transfer pricing policies which reflect internationally accepted transfer pricing standards and local tax laws, approved by leading international accounting firms as well. Taxation is a regular agenda item for the Audit Committee, which meets at least four times a year, and reports to the Board. Tax compliance risks are managed through the Group’s Governance Framework, overseen by its Audit Committee, and supported by the Chief Financial Officer. Plus500 Ltd. 2021 Annual ReportRisk Management Framework A RIGOROUS RISK FRAMEWORK Assessing and managing our risks The Group maintains a robust, customer-centric approach to the man- agement and control of risks, which is fully embedded within the Group’s technology and its day-to-day operating procedures. Furthermore, the Group has a comprehensive risk mitigation plan, which helps to control exposures and provide robust solutions. These proce- dures comprise a range of measures including corporate policies, operating rules, systematic reporting, external audits, internal audits, self-assessment and continuous monitoring by the Regulatory & Risk Committee, the Board and executive management. Risk governance framework The financial, market and regulatory environments in which Plus500 operates inherently expose it to a number of strategic, financial, oper- ational and ESG-related risks. The Group recognises the importance of understanding and managing these risks and has determined levels of risk that it believes are efficient. Policies and procedures have been developed within a robust risk management framework that attempts to minimise various risks, including market risk. To this end, the Group aims to ensure its risk exposures are aligned with its risk appetite across its product portfolio. This is supported by real-time monitoring technology which is embedded in the Group’s platforms. The Group is currently investigating and testing a more holistic, automated hedging capability and will provide information on this approach, if and when it is implemented. This overall approach aligns the Group’s interests with its customers, with a particular focus on customer protection and customer experi- ence, helping to deliver a more stable revenue stream over time, given the consequently lower level of top line volatility. As evidence of this, Group revenue represents around 98% of Customer Income that has been generated since Plus500’s IPO in 2013. The Group continues to expect that revenue contribution from Customer Trading Performance will be broadly neutral over time. Plus500 has a low customer concentration and therefore does not rely on trading activity from a small number of very large customers – the largest customer in FY 2021 contributed less than 1% of total Group revenue. Plus500 monitors trading levels and exposure limits (for example by customer, instrument and asset class), and credit risk is limited by having all customers accounts pre-funded. The Group also offers negative balance protection and a margin close-out policy to all of its CFD customers on a global basis. Governance The role of the Board The Board is ultimately responsible for the risk strategy, having devel- oped a Risk Governance Framework, which is regularly reviewed and assessed by the Board, particularly with regards to current and emerg- ing risks. The Board believes the robust, technology-driven risk management systems of the Group are a key competitive strength and an important factor in its revenue generation. The implementation of the risk strategy is delegated to management under the more detailed supervision of the Regulatory & Risk Committee. The role of the Regulatory & Risk Committee The Regulatory & Risk Committee receives updates from management on risk, compliance and regulatory issues and reviews the related internal systems. The Regulatory & Risk Committee is responsible for reviewing relation- ships with the regulatory authorities and reviewing the adequacy and quality of the Group’s systems and procedures for compliance with regulatory requirements where the Group is regulated and in other jurisdictions where the Group has a significant market presence. The Regulatory & Risk Committee also has responsibility for reviewing the Group’s most significant risks to the achievement of strategic objec- tives and reviewing the Group’s risk policy. Lines of defence Within the Risk Governance Framework, three lines of defence are created through: – Front-line risk management processes – Regulatory compliance – Independent assurance provided by internal audit First line of defence The first line of defence consists of front-line risk management pro- cesses operated by management within the day-to-day trading activi- ties of the Group’s business. There are three elements to the management of day-to-day trading risk: a. Financial Risk Limitation Policies The Group has developed proprietary risk management systems that incorporate various real-time financial risk limits. b. Trading Limits i. Customer limits Monetary limits are placed on a customer’s: (a) Exposure to any single instrument; (b) Aggregate open positions as a whole; and (c) Aggregate deposit amounts. Customer limits are determined with reference to, amongst other things, a customer’s credit score, trading history, location and other due diligence results. 41 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportRisk Management Framework continued ii. Group limits Monetary limits are also placed on the Group’s exposure to indi- vidual instruments. These limits are set according to, amongst other things, the asset class, the size, the liquidity and the beta (volatility) of the underlying instrument. In each case, when these limits are reached on the CFD trading platform, it automatically ceases to accept trades from the relevant individual or on the underlying instrument until such time as exposure levels fall below the relevant threshold(s) or such threshold(s) are reviewed and amended. c. Hedging To further manage risk, the Group has a hedging approach in place, including targeted hedging in certain circumstances. This approach would, in extremis, mitigate exposure of the Group as a whole beyond certain thresholds. Second line of defence A strong compliance function is in place in all of the Group’s regulated subsidiaries. The Board continues to develop the Group’s compliance policies in line with each of the regulatory environments in which the Group’s offering is available. Third line of defence The third line of defence, independent assurance, is provided by inter- nal audit. The role of the internal auditor is to examine, among other things, the Company’s compliance with applicable law and orderly business proce- dures. In accordance with the Israeli Companies Law 5759-1999 (the “Companies Law”), the internal auditor is appointed by the Board on the recommendation of the Audit Committee, which also oversees the inter- nal auditor’s work plan, monitors its activities and assesses its perfor- mance. Pursuant to the Companies Law, 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 external auditor or its representative. In January 2022, following receipt of recommendation from the Audit Committee, the Board appointed E&Y as the Company’s new internal auditor, replacing Brightman Almagor Zohar & Co. (Deloitte Israel), a member firm of Deloitte Touche Tohmatsu Limited, which was the Company’s internal auditor in FY 2021. Compliance with applicable regulations is also provided by local advi- sors in the main territories that the Group operates in, and advice on the regulatory regime is considered when planning new licence applica- tions or sourcing acquisitions. 42 Internal controls The Board has overall responsibility for the Group’s systems of internal control and for monitoring their effectiveness. Although no system of internal control can provide absolute assurance against material mis- statement or loss, the Group’s systems are designed to provide the Board with reasonable assurance that issues are identified on a timely basis and dealt with appropriately. The Group’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 outside of the ordinary course of business by the Board; – The detailed budgeting and monitoring of costs incurred in the devel- opment of new products; – A review of day-to-day management controls and test of operating effectiveness of key controls; – An annual review of the internal controls system; – A regular review of risk limits, with a view to conducting targeted hedg- ing to reduce market risk, as and when appropriate; – The reporting to, and review by, the Board on changes in legislation, regulatory requirements and practices within the sector, accounting and regulatory and legal developments pertinent to the Group; and – The appointment of experienced and suitably qualified staff to take responsibility for key business functions to ensure maintenance of high standards of performance. Risk assessment and review The Board confirms that it has completed a robust assessment of the Company’s principal and emerging risks. The Board continues to assess emerging risks but has not identified any emerging risks that were not already captured as principal risks through the Group’s comprehensive risk assessment process, carried out in FY 2019, in accordance with Provision 28 of the UK Corporate Governance Code 2018 (the “Code”). This process will again be carried out in FY 2022. Principal risks are considered those that would threaten its business model, future per- formance, solvency or liquidity. These are outlined below and further details of financial risks and their management are set out in note 25 to the Consolidated Financial Statements. The comprehensive risk assessment process identified certain risks which were narrowed down into major risks monitored by the executive management and the Regulatory & Risk Committee, then further con- solidated into nine principal risks closely monitored by the Board. The annual and on-going elements of the Group’s risk management pro- cesses are controlled by an established risk identification, assessment and monitoring process. Throughout FY 2021 and up to the date of this report, the Board has reviewed the effectiveness of the Group’s internal controls system. As a result of this review, the Board considers that the measures that have been or are planned to be implemented, complement the Group’s risk management framework and are appropriate to the Group’s circum- stances, covering all controls, including financial and operational con- trols and compliance with applicable laws and regulations. Plus500 Ltd. 2021 Annual ReportRISK DESCRIPTION MANAGEMENT AND MITIGATION BUSINESS AND STRATEGIC RISKS Legal and jurisdictional risk Regulatory risk The risk that changes in the legal and regulatory frame- works in which the Group currently operates could adversely affect its performance Regulatory changes could result in the product offering becoming less profitable, restrictions on the product marketing, or a ban on the product offering in one or more of the countries in which the Group operates Customer care and protection risk The risk that a lack of customer care and protection could negatively impact customer welfare, particularly in rela- tion to compliance with regulations on these issues FINANCIAL RISKS Business risk The risk of a commercially adverse impact on the busi- ness resulting from: – The Group’s strategic decision-making failing to seize business opportunities or react to changes in the mar- ket. This risk may result in damage or loss, financial or otherwise, to the Group as a whole – The risk that a third-party organisation on which the Group relies significantly will inadequately provide or fail to deliver its outsourced activities or contractual obligations to the standard required – Diversification of jurisdictions in which the Group offers its services – On-going monitoring of legal and regulatory developments and taking actions to remain in compliance – On-going monitoring of market and regulatory sentiment, developments and advice from compliance functions on actual and possible changes and taking remedial action – Maintaining an open and robust dialogue with regulators – Continuing to make efforts and investment to diversify the Group’s product portfolio and broaden its geographic footprint – Continued efforts to educate and inform customers of the potential risks involved in trading, through required risk disclosures, educational features and by offering an unlimited and free demo account – Negative balance protection has an on-going feature of the Plus500 CFD platform since inception. This guarantees that maximum losses of all customers are limited to the amount of their deposits. – Other risk management features, including margin close- out policy, are also embedded with Plus500’s technology – Assessment of potential customers prior to and during the completion of the on-boarding process – Robust governance, challenge and oversight – Managing the Group in line with the agreed strategy, policies and risk appetite and periodic reviews of such assumptions compared to developments in the markets, business and regulation – Developing redundancies for material services provided by third parties by having secondary providers and alert systems, as well as automated processes to operate redundancies – Due diligence performed on service providers – Service level agreements in place and regular monitoring of performance – Input from best-in-class advisors involved in decision- making process of strategic developments and initiatives 43 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportRisk Management Framework continued RISK DESCRIPTION MANAGEMENT AND MITIGATION FINANCIAL RISKS CONTINUED Market risk The risk of exposure to the market. Market risk is mainly comprised of the following main factors: – Price movements – Foreign currency exposures Credit risk The risk of clients or counterparties failing to fulfil con- tractual obligations and/or settlements resulting in finan- cial loss, specifically: Client credit risk: Leveraged trading can result in client trading losses exceeding available funds in their account (mainly due to sharp market movements); such losses are absorbed by the Group (negative balance protection has always been offered to all the Group’s CFD customers, in all markets and across all underlying assets) Institutional credit risk: The risk that financial counterparties will not meet their obligations, risking both client and Group assets Liquidity risk The risk that there is insufficient available liquidity to meet the financial liabilities of the Group The Group manages market risk by steering/balancing natural hedge and the Group risk tolerance. Market risk is mitigated by: – The Group’s proprietary technology platforms which enable real time position monitoring and alerts to help the Group to constantly manage market exposure and adjust its controls – Defining daily/weekly/monthly Group market risk limits for each financial market or instrument – If predetermined limits are exceeded, the Group takes appropriate actions to reduce exposure – Targeted hedging is conducted on a limited basis, as appropriate Client Credit Risk: The Group has a “no-credit” policy in which customers can only fund their accounts from their own resources, with all accounts being pre-funded. Customers can set a wide range of loss risk mitigation tools such as alerts and stops features Institutional Credit Risk: The Group engages only with prominent, high ranked and well-established financial institutions for the holding of its own assets and in order to meet its regulatory obligations to safeguard client money in segregated accounts. The Group periodically reviews its engagements with such finan- cial institutions to make sure they continue to operate within the applicable standards and also diversify the Group’s assets across those financial institutions to reduce risk The Group utilises liquidity forecasts to identify potential risks. These forecasts incorporate the impact of all liquidity regula- tions in force in each jurisdiction and other hindrances to the free movement of liquidity around the Group. Key issues affecting the Group’s liquidity are discussed with the Board 44 Plus500 Ltd. 2021 Annual ReportRISK DESCRIPTION MANAGEMENT AND MITIGATION OPERATIONAL RISKS Operational risk The risk of enduring losses resulting from inadequate or failed internal processes due to people, failed technology deployment, adoption and innovation, external events (such as natural disasters, major utilities or infrastructure failure etc.) or the inability to attract and maintain com- petent staff which the Group requires for operational purposes Information and data security risk – The risk of loss of technology services caused by net- work disruption and loss of systems, data, and failure to restore services of a third party in a timely manner resulting in the Group’s inability to offer its services – The risk of loss or misuse of individuals’ personal information provided to the Group – Business and regulatory sign-off of processes and pro- cedures to ensure business efficiency and regulatory compliance – Invest in system development to improve process auto- mation – Monitoring, quality checks and robust analysis of perfor- mance to identify errors, inefficiencies, underlying causes and mitigation plans – Centralised operations – to enable rapid implementation of business innovation, adjustments to business and regulatory changes, monitoring and maintaining high standards and cost-efficient structure – Centralised technical operations, to ensure Group-wide monitoring, issue handling and analysis – Unified IT strategy focused on performance and growth – Continuous development efforts towards operational risk framework to ensure risk recognition and timely control – Recruitment of highly competent employees and devel- oped employee retention programmes, with enhanced staff training and oversight – Additional support through Google Cloud services, provid- ing further flexibility, security and scale to our platforms – The Group has a clear business continuity plan, ensuring quick recovery and cover for both IT and operational aspects (connectivity, Distributed DoS Attacks, unrespon- siveness of server etc., as well as external events have an emergency plan and contacts in place) – Operate multi-layered delivery, security and mitigation solution – Continuous investment in increased functionality, scal- ability, capacity and responsiveness of systems to monitor, react and prevent cyber attacks – Continuous real-time monitoring of incoming and outgo- ing network activity – Constant monitoring of systems performance and con- trols – Selective software design methodologies and testing regimes – A robust Group IT policy sets out strategic, stability, security and performance standards as well as backup processes to enable service availability in the event of failures – Privacy as culture – creating awareness among employ- ees of privacy-related matters including proper use of personal information, protection of such information and loss prevention – Dedicated cyber security training for all global employ- ees and the Board – Robust privacy oriented compliance program to ensure compliance with applicable data privacy regulations 45 GovernanceFinancial statementsStrategic reportPlus500 Ltd. 2021 Annual ReportGoing Concern and Viability Statement GOING CONCERN AND VIABILITY STATEMENT Going Concern Having given due consideration to the nature of the Group’s business, the Group’s budget, liquidity resources and cash flow forecasts for the period of three years ending 31 December 2024, taking into account the Group’s anticipated investment commitments and working capital requirements, the Board considers that the Company and the Group as a whole are going concern and the consolidated financial statements are prepared on that basis. This treatment reflects the reasonable expectation that the Group has adequate resources to continue in business for over a period of at least twelve months from the date of approval of the Consolidated Financial Statements and the consideration of the various risks set out on pages 43 – 45 and the financial risks described in note 25 to the Consolidated Financial Statements. Viability Statement In accordance with Provision 31 of the Code, the Board has considered the Group’s current financial position and future prospects, its strategy, risk appetite and the potential impact of the principal risks and how these are managed and has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year assessment ending 31 December 2024. The Directors confirm that they have performed a robust assessment of the principal risks facing the Group as detailed on pages 43 – 45 including those that will threaten its business model, future performance and liquidity. In reaching this conclusion, both the prospects and viability consid- erations have been assessed: Prospects – The Group’s current financial position is outlined in the Strategic Report. – The Group’s business model: despite regulatory changes in a number of jurisdictions, the core of the current strategy remains in place and continues to demonstrate sufficient cash generation to support oper- ations. In addition, we believe the Group will continue to be viable beyond the three years as mentioned above, in accordance with our business model. – Assessment of prospects and assumptions: conservative expectations of future business prospects through delivery of the Group strategy as presented to the Board through the budget approval process. The annual budget approval process consists of a detailed bottom-up process with a twelve month outlook which involves input from all relevant functional and regional heads. The process includes a collec- tion of resource assumptions required to deliver the Group strategy and associated revenue impacts with consideration of key risks. This is used in conjunction with external assumptions such as a region-by- region review of the regulatory environment and incorporation of any anticipated regulatory changes as outlined in the Strategic Report, to revenue modelling, market volatility, interest rates and industry growth which materially impact the business. The budget is used to set targets across the Group. The budgeting process also covers liquidity and capital planning and, in addition to the granular budget, a three-year outlook is prepared using assumptions on industry growth, the effects of regulatory changes, revenue growth from strategic initiatives and cost growth required to support initiatives. The budget was reviewed by the Board in October 2021 and in December 2021 and received final approval in December 2021. – On-going review and monitoring of risks: these are outlined in the Group’s principal risks and uncertainties on pages 43 – 45 of this report and are monitored monthly by management, with review and challenge from the Regulatory & Risk Committee. Based on the various scenarios tested, the Company has sufficient liquidity and headroom to operate its business. Viability Scenario stress testing of available liquidity and capital adequacy are central to understanding the Group’s viability. This testing replicates adverse market conditions and regulatory change, and is therefore considered in the Group’s Individual Capital Adequacy Assessment Process and Individual Liquidity Adequacy Assessment documents, which are shared with our regulators on request. The results of the scenario stress testing showed that, due to the robust nature of the business, the Group would be able to withstand these scenarios, both in isolation and combined scenarios, over the financial planning period by taking management actions that have been identified. The Board has considered that three years is an appropriate period over which to provide a viability statement as this is the longest period over which the Board reviews the success of strategic opportunities. This timeline is also aligned with the period over which internal stress testing occurs. The Board has no reason to believe that the Group will not be viable over a longer period, but given the uncertainty involved, in particu- lar of regulatory changes, the Board believes this period presents the readers of the Annual Report with a reasonable degree of confidence. The Group also monitors performance against predefined budget expectations and risk indicators, along with strategic progress updates, allowing management action to be taken where required, including the assessment of new opportunities. 46 Plus500 Ltd. 2021 Annual ReportGOVERNANCE Contents Governance at a Glance 48 Chair's Introduction to Governance 50 UK Corporate Governance Code Compliance Statement Board of Directors Governance Report Shareholder Engagement Report of the Nomination Committee Report of the Audit Committee Report of the Regulatory & Risk Committee Report of the ESG Committee Report of the Remuneration Committee Directors’ Remuneration Report Directors’ Report Corporate Law 51 52 54 59 60 64 69 71 74 81 89 91 Directors' Responsibility Statement 92 47 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsGovernance at a Glance Governance in numbers 9 Board members as of the date of this Annual Report 2 Shareholders’ meetings in FY 2021 44% Female Board members as of the date of this Annual Report 6 Board committees 4 Board training sessions in FY 2021 Key activities of the Board in 2021 + Strategic discussion and approval of the acquisitions of Cunningham and CTS in line with the Company’s strategy to expand the Group’s geographic footprint and product offering. + Review and approval of on-going trading updates and results announcements. + Conduction of an internal effectiveness evaluation of the Board and its committees. + Monitoring and reviewing the Group’s culture, values and performance, also through the workforce engage- ment representative on the Board. Read more about key activities of the Board on page 54 48 BOARD GENDER DIVERSITY as of the date of this Annual Report 4 5 Female Male BOARD INDEPENDENCE as of the date of this Annual Report 2 7 Independent Directors Non-independent Directors BOARD ATTENDANCE The Board met on twelve occasions in 2021 to review, formulate and approve the Group’s strategy, budgets and corporate actions and to oversee the Group’s progress towards its goals. The Board also holds regular conference calls to update the members on operational and other busi- ness matters. Plus500 Ltd. 2021 Annual ReportBOARD TENURE as of the date of this Annual Report 1 2 6 0–3 years 3–6 years 6+ years BOARD CHANGES Three Board members stepped down in 2021 (one Execu- tive Director and two Independent Non-Executive Directors). Four Board members were appointed in 2021 and Q1 2022 (all Independent Non-Executive Directors). Induction of newly appointed Directors Newly appointed Directors are made aware of their responsibilities through the Company Secretary. The Company has accordingly implemented an internal induction plan for newly appointed Direc- tors in which it provides the Directors with training sessions via internal meetings, presentations and conversations with Company advisors and senior management in order to enable greater aware- ness and understanding of the Company’s business and the legal and business environment in which it operates. Nomination Committee Report page 60 Read more on page 56 BOARD SKILLS AND EXPERIENCE (Number of Board members with the relevant skills and experience) Audit and risk management Finance, banking, financial services and fund management Capital raising, mergers, acquisitions, investment and transactions Marketing Compliance & Regulation Shareholder relations Digital technology Innovation ESG Enterprise Risk management 8 7 7 7 4 4 5 5 6 6 49 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsChair’s Introduction to Governance Plus500 remains focused on its key priorities in governance and sustainability, supported by on-going engagement with key stakeholders within the investment community. Executive Director and was re-elected at the AGM held on 4 May 2021. Furthermore, as approved at our 2021 Extraordinary General Meeting (“EGM”) held on 16 March 2021, Ms. Tami Gottlieb was appointed as a Non-Executive Director and External Director. These appointments further diversify the composition of the Board and have broadened the Board’s breadth of experience and knowledge. Also, as announced on 18 March 2022, Prof. Varda Liberman has been appointed as an Independent Non-Executive Director. Prof. Liberman is an international renowned expert in the field of decision- making and behavioural economics. In this capacity, she provides con- sulting and workshops in key elements of managerial decision-making and risk management to senior management of organisations across a range of sectors, including healthcare, banking, investment and technol- ogy. She is the Rector of Reichman University (IDC Herzliya) in Israel, and one of its founders and leaders. She is a professor at the business school, a visiting researcher at Stanford University, and the author of several books and many scientific articles. During the years, she served as a Director on several publicly traded corporate boards based in Israel, including Tamir Fishman trust funds Ltd, and she currently serves as an External Director at Cellcom Israel Ltd. I would like to take this opportunity to welcome Varda to our Board, and I am certain that this appointment will further expand the skills set on the Board. I would also like to take the opportunity to thank the two Board members who stepped down during 2021. Firstly, following my appointment as a Non-Executive Director (“NED”) and Chair of the Board at our 2021 AGM held on 4 May 2021, Ms. Penny Judd stepped down, having been a NED since 2016 and Chair since 2017. I would like to thank Penny for her contribution in leading a con- tinued improvement in the Company’s governance approach and prac- tices and I know that her guidance, support and advice were very much appreciated by our other Board members during her tenure. Our long serving Senior Independent Non-Executive Director (“SID”) and External Director, Charles Fairbairn also stepped down at our 2021 AGM. So, I would also like to thank Charles for his contribution to the develop- ment of Plus500 since the IPO in 2013, as well as for his wise counsel and guidance during that time. As previously announced, Ms. Anne Grim serves as our SID, replacing Charles as of 4 May 2021. Also, in June 2022 our long serving Independent Non-Executive Director and External Director, Daniel King, will end his maximum nine-year term under the provisions of the Companies Law. Daniel is currently the Chair of both our Remuneration and ESG Committees. Daniel has been with Plus500 since the IPO and his expertise working with technology businesses, many of whom are based in Israel, has been invaluable in helping to navigate the Board and the business through Dear shareholder In my first year as Chair of Plus500, I have taken the opportunity to review and assess all aspects of our business, including our corporate govern- ance and approach, as well as our activities in the area of sustainability. I am pleased to say that I have found the Company’s governance frame- work to be extremely robust, supported by a Board which is well balanced and diverse, with a strong breadth and depth of knowledge and expertise. In addition, management continues to place significant emphasis and focus on ESG matters, particularly around protecting and caring for our customers and people. With this background in mind, I would like to take this opportunity to give you an overview of the work of the Board during 2021. Corporate govern- ance remained a key focus area for the Board during the year, and this year we have managed to diversify the composition of the Board sig- nificantly, in line with the Code and the recommendations of the Hamp- ton-Alexander Review on gender equality in leadership positions. In 2021, we continued to dedicate considerable time evaluating the work of our Board and its committees, and undertook a review of the effective- ness of the Board. The evaluation process was facilitated internally by our Company Secretary and myself with the assistance of our external advisors and included questionnaires which were completed by each Board member. A detailed report on the results was presented to the Board in December 2021 and next steps for 2022 were agreed in relation to the Board and its Committees. In parallel, we have continued to imple- ment the feedback and insights derived from our 2020 internal Board evaluation. During 2019 we undertook an independent third party review by Genius Boards Limited (“Genius Boards”). This was a valuable exercise which resulted in a number of important recommendations which were implemented during the course of 2020 and 2021, together with having the internal reviews in 2020 and 2021. The Board intends to undertake its next independent third party review during 2022, in accordance with the recommendation specified in Provision 21 of the Code that FTSE 350 companies shall consider having such an external evaluation once every three years. The feedback and findings of this independent review shall be presented in our FY 2022 Annual Report. As also noted, we were seeking to appoint additional Non-Executive Directors to complement the Board’s existing skill set and to further diversify its composition. I am delighted that as announced on 4 Febru- ary 2021, Ms. Sigalia Heifetz was appointed as an Independent Non- 50 Plus500 Ltd. 2021 Annual Reportvarious challenges and to help optimise the many opportunities that have arisen during his tenure. In addition, his leadership, contribution and commitment as Chair of the Remuneration and ESG Committees has been extremely appreciated. We wish Daniel all the best. As announced on 18 March 2022, Anne Grim shall replace Daniel King as the Chair of the Remuneration Committee and Steve Baldwin shall replace Daniel King as the Chair of the ESG Committee. Also, Anne Grim (being an External Director) shall replace Daniel as the third member of the Nomination Committee alongside Steve Baldwin and myself, and an additional member shall be appointed as the third member of the ESG Committee, alongside Steve Baldwin and Anne Grim. Executive remuneration remains a significant area of focus for investors with holdings in companies listed in the UK. We consulted with external consultants in previous years in order to align remuneration with share- holders’ expectations. Consequently, in the period ahead of our 2021 AGM, the Remuneration Committee engaged extensively with shareholder bodies and key shareholders and with the support of an external advisor, the Group’s Remuneration Policy was restructured, as further detailed in the Remuneration Committee Report. I am pleased that at our 2021 AGM, shareholders approved the new Remuneration Policy for Directors and Executives for a three-year term. During 2021, I met with a number of our major shareholders to introduce myself as the new Chair of the Board and to ask for feedback on the Company’s approach to governance, its strategic priorities and its oper- ational and financial performance. Shareholder engagement is extremely important and I will continue to meet regularly with key investors, as will the rest of the Board members, to ensure we represent investors’ interests. The Nomination Committee, chaired by Steve Baldwin, continues to review the skills that we need while always considering diversity and the need for independent thinking and challenge. The Committee will also continue to review the size of the Board to confirm that it is appropriate with a good mix of skills, experience and knowledge and the ability to maintain appropriate oversight of the executive team and provide constructive challenge and support. During 2021, significant effort by the Nomination Committee ensured a further diversification of the composition of the Board, with the appointments of two female Non-Executive Directors, as mentioned earlier. These efforts have continued in 2022, with the recent appointment of an additional female Non-Executive Director. Our oversight of the significant risks including regulatory, financial and technology challenges facing the Group continues. The Regulatory & Risk Committee, led by its new chair, Sigalia Heifetz, reviews these risks and receives assurance from management and the Group’s advisors as to how they are understood and mitigated to the level of risk acceptable to the Board. The Audit Committee, led by its new Chair, Tami Gottlieb, continues its work overseeing the internal controls of the business, the internal audit plan and its implementation and approvals of certain transactions as required under the Companies Law. It also works closely with our exter- nal auditors and oversees the production of the Consolidated Financial Statements. Also, in 2021 we have continued to develop and strengthen our ESG Committee which was established at the end of 2020, to assess the Group’s impacts and interactions with ESG aspects. Chaired by Daniel King, the ESG Committee was supported by external advisors and con- ducted an ESG materiality assessment, according to which the Group has already begun to develop its ESG roadmap for the coming years. UK Corporate Governance Code Compliance Statement As a Main Market listed company, following its admission to the Main Market of the London Stock Exchange, and with respect to 2021, Plus500 is required to comply with the principles and provisions of the UK Corporate Governance Code 2018 (the “Code”) (a copy of which can be found on the website of the Financial Reporting Council: www.frc. org.uk), or otherwise explain its reasons for non-compliance. The following statement is therefore made in respect of the year ended 31 December 2021 in compliance with this requirement. The following sections of this report explain how the principles of the Code were applied and provide cross-references to other sections of the report and/or the Company’s website (www.plus500.com) where more de- tailed descriptions are available. For the financial year ended 31 December 2021, the Company has complied with the provisions of the Code, other than in respect of the directors’ re-election mechanism (Provision 18 of the Code) and in rela- tion to pay ratios and pay gaps (Provision 41 of the Code). While the Code recommends the submission of all directors for re-election an- nually, as a company registered in Israel, it is subject to mandatory corporate governance requirements under the Companies Law, which require that the Company must always have at least two External Direc- tors who meet certain statutory requirements of independence. The Company’s External Directors are Daniel King (until June 2022), Anne Grim and Tami Gottlieb. The External Directors must meet certain statutory requirements of independence and, as prescribed by the mandatory requirements of the Companies Law, must be elected for three-year terms and not annually as the Code recommends. Plus500 is not required to compile gender pay gaps and pay ratios under the Companies Law whereas companies incorporated in the United Kingdom are required to do so under UK legislation. Also, the Committee has developed a new Environmental Policy, sup- ported by an extensive gap analysis, to help us to become aligned with the Task Force on Climate-Related Financial Disclosures (“TCFD”) recom- mendations as detailed in our ESG report and in the Report of the ESG Committee. The following Governance Report describes the activities of the Board and its committees during 2021 in more detail. The Board has operated very efficiently during 2021, despite the impact of the pandemic which has meant that all Board meetings were held as hybrid sessions (which is a mixture of in-person and virtual attendance). The Board held a number of meetings during the year to assess the Group’s strategy and its progress against this strategy, as well as review- ing key operational elements of the business. The Board remains very supportive of executive management in developing the Group’s strategic position as a global multi-asset fintech group, through a clear focus on organic investments and acquisitions. This strategy is key to the Group’s future success and has continued to drive the diversification of the Group’s revenue streams, product range and geographic footprint. This is evident by the progress made in 2021, with the US acquisitions and the introduction of our new share dealing platform, ‘Plus500 Invest’. Finally, and importantly, I would like to say some words of deep gratitude, both personally and on behalf of the Board, to all of our management and talented employees across our offices worldwide, for their hard work, dedication and fantastic contribution to the Group’s culture, performance and achievements during the year, especially in the context of a chal- lenging pandemic-driven environment. I look forward to reporting on the Board’s further progress in next year’s Annual Report. Prof. Jacob A. Frenkel Chair of the Board 51 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsBoard of Directors As at the date of this Annual Report The role of the Board The Board is responsible to shareholders for effective direction and control of the Company and to promote the long-term suc- cess of the Company, and determining the Group’s strategy, vision and culture. In order to lead the development of the strat- egy of the Company and the progress of financial performance, the Board is provided with timely and comprehensive informa- tion that enables it to effectively review and monitor the perfor- mance of the Company and to ensure it is in line with its objectives for achieving its strategic goals. PROF. JACOB A. FRENKEL ELAD EVEN-CHEN Chair Group Chief Financial Officer and Director Tenure: 10 months (Appointed May 2021) Tenure: 6 years (Appointed June 2016) Prof. Jacob A. Frenkel is a Non-Executive Director and Chair of the Board of Directors. Elad Even-Chen is the Chief Financial Officer of the Group and Vice President of Business Development. Prof. Frenkel is a renowned global economist and illustrious business leader, with significant experience developed over many years of leadership. He is cur- rently Chair of the Cabinet of Economic Experts of the Minister of Finance of the State of Israel, Chair of the Board of Trustees of the Group of Thirty (G-30), and Chair of BrainStorm Cell Therapeutics Inc., a NASDAQ- listed biotechnology company. Prof. Frenkel served as Chairman of JPMorgan Chase International (2009-2020), Chairman and CEO of the G-30 (2001-2011), Vice Chairman of American Inter- national Group, Inc. (2004-2009) and, Chairman of Merrill Lynch International (2000-2004). He also served as Chairman of the Board of Governors of Tel Aviv University (2013-2021). Prior to this he served two terms as the Governor of the Bank of Israel (1991-2000), as the Economic Counsel- lor and Director of Research at the International Mon- etary Fund (1987-1991) having previously been a Chaired Professor of Economics at the University of Chicago. He is a Laureate of the Israel Prize in Economics and is a recipient of several Honorary Doctoral Degrees and other decorations and awards. He holds a range of fellowships and advisory positions. He is a Honor- ary Member of the American Academy of Arts and Sciences, a Fellow of the Econometric Society, a Fellow of the International Economic Association, a Senior Advisor of Temasek International Advisors, a member of the Competitive Markets Advisory Council of the CME Group and a member of the G20 High Level Inde- pendent Panel on Financing of the Global Commons for Pandemic Preparedness and Response. Prof. Frenkel holds a BA in economics and political science from the Hebrew University of Jerusalem, and an M.A. and Ph.D. in economics from the University of Chicago. DAVID ZRUIA Chief Executive Officer and Director Tenure: 2 years (Appointed April 2020) David Zruia is the Chief Executive Officer. David joined the Group in 2010 as a senior manager in the marketing department. In that role, David was instrumental in establishing the Group’s marketing capabilities and in building awareness of, and recogni- tion for, the Plus500 brand in key markets around the world. He was appointed as the Group COO in 2013 and led the establishment and management of the operational division of the Group, including KYC pro- cesses, payment processing, back office, customer service and risk management. David holds a B.Sc. in Industrial Engineering and Man- agement from the Technion – Israel Institute of Tech- nology. Elad joined the Group in 2011 and his responsibilities cover a broad range of finance, business, corporate and strategic functions. Elad is also responsible for Plus500’s strategic busi- ness development projects, including targeting and executing acquisitions. He has therefore played a key role in driving the Group’s strategic and financial per- formance and its business expansion in recent years, into new markets and new product areas. Elad has an extensive corporate finance, legal and regulatory background. Over the last 11 years he has held a number of positions within the Group also acting as the Company Secretary, Head of Risk and Head of IR. Elad is a certified accountant in Israel and, prior to joining the Group, he was a senior associate at KPMG. Elad holds a BA in Accounting and Economics from Tel-Aviv University, an LL.B Degree from the College of Management and an MBA (specialising in Financial Management) from Tel-Aviv University. ANNE GRIM Senior Independent Non-Executive Director and External Director Tenure: 1.5 years (Appointed September 2020) Anne Grim is a Non-Executive Director and the Senior Independent Director. Upon Daniel King’s tenure finishing in June 2022, Anne will chair the Remuneration Committee. Anne is an experienced executive turned advisor, con- sultant and Board Director with more than 30 years in senior financial services leadership roles at Barclays, Wells Fargo, American Express, Mastercard and most recently (and formerly) as Chief Customer Officer at Fidelity International. Her expertise is in customer experience, strategic planning and execution, technol- ogy innovation and business transformation. Anne was an independent non-executive Board mem- ber for RateSetter (up until 31 December 2021 when RateSetter was acquired by Metro Bank PLC) and is currently an independent non-executive Board mem- ber for Insight Investment, Metro Bank PLC and Open- work Holdings Ltd. Anne is also an Advisor to the Investment Association’s FinTech Engine and a Trustee on the UK board of Opportunity International. Anne holds a Bachelor’s degree in Mathematics and Computer Science and a Master’s of Business Admin- istration in Strategic Management and Finance, both from the University of Illinois. PROF. JACOB A. FRENKEL DAVID ZRUIA (Chair) ELAD EVEN-CHEN ANNE GRIM 52 Plus500 Ltd. 2021 Annual ReportCommittee membership Key:  Nomination  Audit  Regulatory & Risk  Remuneration  ESG  Disclosure N (Chair) STEVE BALDWIN A (Chair) R TAMI GOTTLIEB N A R (Chair) E (Chair) DANIEL KING (Chair) R SIGALIA HEIFETZ A PROF. VARDA LIBERMAN Changes to the Board during 2021 (and until the date of this Annual Report) + Gal Haber stepped down from the Board on 4 January 2021. + Sigalia Heifetz joined the Board on 4 February 2021. + Tami Gottlieb joined the Board on 16 March 2021. + Jacob A. Frenkel joined the Board on 4 May 2021. + Penny Judd stepped down from the Board on 4 May 2021. + Charles Fairbairn stepped down from the Board on 4 May 2021. + Varda Liberman joined the Board on 18 March 2022. Government working for the Department of Investment and Trade (DIT) as Head of High Growth & Emerging Markets. Daniel was previously Managing Partner of Blue Leaf Capital, a private boutique venture capital and advi- sory services company based in London and has held managing director roles with Compete Inc, MySuper- market.co.uk, and Experian Hitwise, overseeing its EMEA operations and was a key member of staff that led to the eventual acquisition of Hitwise by Experian in June 2007. Daniel holds a Bachelor’s Degree (hons) in Finance and Accounting from Manchester University. SIGALIA HEIFETZ Independent Non-Executive Director Tenure: 1 year (Appointed February 2021) Sigalia Heifetz is a Non-Executive Director and Chair of the Regulatory & Risk Committee. Sigalia holds non-executive directorships at a number of leading Israel-based corporations across a range of sectors and industries, including Nesher Israel Cement Enterprises Ltd, Clal Biotechnology Industries Ltd, RHI Magnesita N.V, Maman Cargo Terminals and Handling Ltd, Tamar Petroleum Ltd, Mashav Initiating & Develop- ment Ltd and Vesta Investment & Management. She also previously held Non-Executive positions at Bet Shemesh Engines Ltd and Hadera Paper, prior to which she was an audit partner at accountancy firm BDO. Sigalia holds a Bachelor’s Degree in Accounting and Economics from Tel Aviv University and an Executive MBA from INSEAD and Tsinghua University. PROF. VARDA LIBERMAN Independent Non-Executive Director Tenure: Appointed March 2022 Prof. Varda Liberman is a Non-Executive Director. Prof. Liberman is an international renowned expert in the field of decision-making and behavioural econom- ics. In this capacity, she provides consulting and work- shops in key elements of managerial decision-making and risk management to senior managements of organisations across a range of sectors, including healthcare, banking, investment, technology, the judi- cial system and the Israeli Defence Forces. Prof. Liberman is the Rector of Reichman University (IDC Herzliya) in Israel, and one of its founders and leaders. She is a professor at the business school, a visiting researcher at Stanford University, and the author of several books and many scientific articles. Over the years, she has held a variety of managerial positions at the Reichman University, among them, heading the mathematics and statistics studies, lead- ing the decision-making area in the business school, and founding and heading the MBA programme in Healthcare Innovation. Prof. Liberman holds a B.Sc. in Mathematics and Sta- tistics, an M.Sc. in Mathematics and a Ph.D. in Math- ematics, all from Tel Aviv University. STEVE BALDWIN Independent Non-Executive Director Tenure: 5 years (Appointed June 2017) Steve Baldwin is a Non-Executive Director and Chair of the Nomination Committee. Upon Daniel King’s tenure finishing in June 2022, Steve will also chair the ESG Committee. Steve is currently the Chair of TruFin Plc and is also a Non-Executive Director of The Edinburgh Investment Trust Plc. Steve has an extensive corporate finance background and held the position of Head of Euro- pean Equity Capital Markets and Corporate Broking at Macquarie Capital until 2015 when he decided to pursue a non-executive career. Prior to joining Mac- quarie Capital, Steve was a Corporate Finance Director at JP Morgan Cazenove for ten years and previously a Vice President of Corporate Finance at UBS. Steve qualified as a Chartered Accountant at Coopers & Lybrand after graduating with a BA in Zoology from St Catherine’s College, Oxford University. TAMI GOTTLIEB Independent Non-Executive Director and External Director Tenure: 1 year (Appointed March 2021) Tami Gottlieb is a Non-Executive Director and Chair of the Audit Committee. Tami has a long track record in the financial services industry in Israel and is currently an External Director at Bank Leumi Le’Israel Ltd. – one of Israel’s two largest commercial banks, where she is the Chair of the Audit and Financial Reports Committees and a member of the Remuneration and Business & Credit & Strategy Committees, having previously been on the Technol- ogy Committee and on the Risk Management Commit- tee. Tami Gottlieb is also a Chair at Shefayim Holdings Corporation, an External Director at Extell Limited and a Director at Emilia Development. She is also a founder and Managing Director of Harvest Capital Markets Ltd, a wealth management and corporate finance boutique. Tami holds a Bachelor’s Degree in International Relations from the Hebrew University of Jerusalem and a Master’s Degree in Economics from Indiana University. DANIEL KING Independent Non-Executive Director and External Director Tenure: 9 years (Appointed June 2013) Daniel King is a Non-Executive Director and Chair of the Remuneration and ESG Committees (until June 2022). Daniel has spent the last two decades in executive and senior management roles within technology corporates as well as start-ups as an operator, advisor and inves- tor with a focus on Fintech, eCommerce technology, Big Data, BI, Analytics, SaaS platforms, and Market- places for both B2B and B2C. He has extensive knowl- edge in investing, fundraising, and scaling high-growth companies including international expansion. Daniel is currently a Venture Partner with Seedcamp, one of Europe’s largest Venture Capital firms for early stage funding. He is also Chair of StitcherAds a plat- form for social commerce. Previously, he was President & COO for Profitero, a SaaS provider of online insights and e-commerce intelligence for retailers and brands and prior to that was a specialist consultant to the UK 53 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statements Governance Report The Board The Board maintains full control and direction over appropriate strate- gic, financial, organisational and compliance issues. The Company’s organisational structure has clearly defined lines of authority, respon- sibility and accountability, which are 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 Group and the online financial trading industry as a whole, along with associated financial and regulatory risks. At least annually, and on other occasions as necessary, the Company’s senior executives are invited to attend meetings of the Board in order to present and discuss various matters relating to their functions and areas of responsibilities. Board activities during the year The Board agrees at the end of each year the annual calendar and forward meeting agenda for the following year, and additionally meets at such other times as required. The matters accepted by the Board for consid- eration at Board meetings are business strategy, operational highlights and current trading, quarterly forecasts, budget and financial performance, governance, organisational culture and risk & regulation, as further detailed at the schedule of matters specifically reserved for decision by the full Board members, which can be found on the Company’s website: www.plus500.com. 54 Board Activity in 2021 Strategy Business, operational highlights and current trading Quarterly forecasts and budget Financial performance People, governance, risk and regulation Whistleblowing Culture and values – A comprehensive strategy discussion was held in December 2020, with support from a well-known glob- al strategic advisory firm, at which a new vision and strategy was discussed and agreed, in the context of a detailed discussion about the competitive environment and potential growth opportunities for the Group. – During 2021 the Board discussed actions to deliver on the strategy for the coming years, as set out on pages 20 – 21. – The Board held strategic discussion, and approved the acquisitions of Cunningham and CTS in line with the Company’s strategy to evolve into a multi-asset fintech group and expand the Group’s geographic footprint. The Board received monthly updates including CEO reviews, financial performance updates, business develop- ment updates and risk and regulatory compliance reports. Updates were provided and discussed on a monthly and quarterly basis. Discussions on the 2022 budget were held in October 2021 and in December 2021 and it received final approval in December 2021. The Board reviewed and approved the on-going trading updates and results announcements. The Board consid- ered and approved dividend distributions and share buy- backs, the Consolidated Financial Statements and the Annual Report. The Board received updates and conducted discussions about regulatory developments and emerging risks. It also received training and briefings on regulatory changes and updates, in addition to on-going updates on compliance matters. The Board reviewed and approved the Group’s Whistle- blowing Policy, as it does on an annual basis, and received an update by the Whistleblowing Supervisor that no com- plaints were received in 2021. The Board continued to monitor and review the Group’s culture, values and performance primarily through regular discussions with the Executive Directors, senior manag- ment and their teams. In addition, Steve Baldwin, in his role as the workforce engagement representative on the Board held round table sessions with employees from various departments of the Company, as well as with certain employees of the Group’s subsidiaries. Shareholder returns The Board declared the payment of dividends and adopt- ed share buyback programmes during the year, in line with the Group’s shareholder returns policy. Other – An internal effectiveness evaluation of the Board and its committees has been conducted; – Review of monthly reporting decks on Risk and Compli- ance; – Receiving on-going updates from Board committees’ chairs; – Board trainings on various topics, including: ESG, Cyber security, the UK Market Abuse Regulation, Israeli & UK Corporate Law; – Annual review and approval of Human Rights and Mod- ern Slavery Statement; and – Annual review and approval of Company’s policies and procedures. Plus500 Ltd. 2021 Annual ReportBoard committees The Board has appointed six principal committees to which certain aspects of the Board’s work are delegated, in order to assist the Board in carrying out its responsibilities and as required under the Companies Law. Each committee has adopted its own terms of reference, approved by the Board, and establishes an annual plan. The full terms of refer- ence of the Board’s committees are available on the Company’s website. The Chair of each committee provides regular updates to the Board on the matters discussed at the committee’s meetings and provides the committee’s recommendations to the Board when required. A brief description of the main roles of each of the Board’s committees is set out below. Remuneration Committee The Remuneration Committee has been delegated responsibil- ity for determining, within the agreed terms of reference and in accordance with the Companies Law, the Group’s policy on the remuneration packages of the Company’s Chief Executive Officer and Chief Financial Officer, the Chair and other Non-Executive Directors, the Company Secretary and other senior executives and the Company’s remuneration policy. The Committee’s respon- sibilities, main activities and priorities for the next reporting cycle are set out on pages 74 – 80. Nomination Committee Disclosure Committee The Nomination Committee has been delegated responsibility for the oversight of appointments to the Board and the senior management team. The Committee’s responsibilities, main activities and priorities for the next reporting cycle are set out on pages 60 – 63. Audit Committee The Audit Committee has been delegated responsibility for ensur- ing the financial performance of the Group is properly reported on and reviewed and the monitoring of the external auditor, the internal auditor and oversight of internal controls. The Commit- tee’s responsibilities, main activities and priorities for the next reporting cycle are set out on pages 64 – 68. Regulatory & Risk Committee The Regulatory & Risk Committee has been delegated respon- sibility for the monitoring and oversight of risk management and mitigation and the approval of risk appetite. The Committee’s responsibilities, main activities and priorities for the next report- ing cycle are set out on pages 69 – 70. Environmental, Social and Governance Committee The ESG Committee has been delegated responsibility for con- sidering the adequacy of the Group’s ESG policies and processes. The Committee’s responsibilities, main activities and priorities for the next reporting cycle are set out on pages 71 – 73. The Disclosure Committee assists the Board in fulfilling its obli- gation to make timely and accurate disclosure of all information that is required to be disclosed to meet legal and regulatory requirements and obligations under the UK Market Abuse Reg- ulations and the Disclosure Guidance and Transparency Rules of the FCA, including the requirement for the Company to estab- lish and maintain adequate procedures, systems and controls to enable it to comply with these obligations. Whenever neces- sary, the Committee meets to discuss the content of announce- ments proposed to be released to the London Stock Exchange and approve their content, where relevant. Operation of the Board The Board is responsible for the effective direction and control of the Group. The Board is also responsible for the overall strategy and finan- cial performance of the Group and has a formal schedule of matters reserved for its approval. The schedule of matters covers key strategic, financial and operational matters including: – Approval of the Group’s strategic aims and objectives; – Approval of the annual operating and capital expenditure budgets of the Group, and any material changes to them; – Changes to the Group’s capital structure, management and control structure; – Contracts which are material strategically or by reason of size, entered into by the Company or any subsidiary in the ordinary course of business; and – Recommended appointments to the Board. The Company Secretary, Hila Barak, is responsible for ensuring that the Company complies with the statutory and regulatory requirements and maintains high standards of corporate governance. She supports and works closely with the Chair of the Board, the Senior Independent Director, the Chief Executive Officer and the Board committee chairs in setting agendas for meetings of the Board and its committees and supports the transfer of timely and accurate information flow from and to the Board and the management of the Company. Hila Barak is a certified lawyer in Israel since 2012 and joined Plus500 after years of experience in corporate and securities law, being an associate with one of the leading law firms in Israel. Hila holds an LL.B, BA in Social science and an Executive MBA, all from the University of Haifa. All Directors have access to the advice and services of the Company Secretary, who 55 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statements Governance Report continued is responsible to the Board for ensuring that Board procedures are complied with. Both the appointment and removal of the Company Secretary is a matter for the Board as a whole. Board effectiveness The Board holds its meetings in accordance with its scheduled calen- dar. Each Board meeting is preceded by a clear agenda and any relevant information is provided to the Directors in advance of the meeting. The Board met on twelve occasions in 2021 to review, formulate and approve the Group’s strategy, budgets and corporate actions and to oversee the Group’s progress towards its goals. The Board also holds regular conference calls to update the members on operational and other business matters. A summary of the key activities of the Board in 2021 is set out on page 54. Where Directors have concerns, which cannot be resolved, about the running of the Company or a proposed action, they may request that their concerns are recorded in the Board minutes. An agreed procedure exists for Directors in the furtherance of their duties to take independ- ent professional advice. Induction of newly appointed Directors Newly appointed Directors are made aware of their responsibilities through the Company Secretary. The Company has accordingly imple- mented an internal induction plan for newly appointed Directors in which it provides the Directors with training sessions via internal meet- ings, presentations and conversations which are conducted by Company advisors (such as legal advisors), the senior management and other relevant persons in order to enable greater awareness and understand- ing of the Company’s business and the legal and business environment in which it operates. Moreover, the induction plan includes provision of various documents and reports, such as constitutional documents, organisational chart and Group structure, previous Board minutes, Group’s policies as well as PR and IR materials. Chair of the Board The Chair of the Board, Prof. Jacob A. Frenkel, is responsible for lead- ing the Board and ensuring its effectiveness, by setting the relevant agenda and providing sufficient time for constructive discussions in which the Board has the ability to challenge the discussed items. The Chair is responsible for creating the open and engaging atmosphere that enables the healthy and constructive discussions of the Board. The Chair is also responsible for ensuring effective communication between Executives, Non-Executive Directors, shareholders and between other major stakeholders and the Board. Chief Executive Officer The Chief Executive Officer, David Zruia, acts as the main point of com- munication between the Board and management and is responsible for the day-to-day running of the business and implementation of strategy. Chief Financial Officer The Chief Financial Officer, Elad Even-Chen, is responsible for covering a broad range of finance, business, corporate and strategic functions, such as monitoring the operational and financial results, overseeing liquidity management and managing the financial reporting of the Group. Non-Executive Directors Collectively, the Non-Executive Directors bring a valuable range of expertise in assisting the Company to achieve its strategic goals. The effectiveness of the Board benefits from the following skills, expertise and experience offered by the current members of the Board: financial services, finance and accounting, governance and regulatory, research and development, ESG, risk and regulation, technology and other finan- cial expertise. Senior Independent Director The Senior Independent Director, Anne Grim, acts as a sounding board for the Chair, providing him with support in the delivery of his objectives and leading the evaluation of the Chair on behalf of the other Directors. The Senior Independent Director may also take responsibility for an orderly succession process for the Chair, working closely with the Nomination Committee. The Senior Independent Director also serves on several Board committees and is available to shareholders if they have concerns that contact through the normal channels of Chair, Chief Executive or other Executive Directors has failed to resolve or for which such contact is inappropriate. Board composition As of the date of this Annual Report, the Board comprises two Execu- tive Directors (who constitute 22% of the Board): David Zruia and Elad Even-Chen, and seven Non-Executive Directors (who constitute 78% of the Board): Prof. Jacob A. Frenkel (Chair of the Board), Anne Grim (Senior Non-Executive Director), Daniel King, Steve Baldwin, Sigalia Heifetz, Tami Gottlieb and Prof. Varda Liberman. Prof. Frenkel was independent on appointment, in accordance with the requirements of the Code. As a Senior Independent Director, Anne Grim is available to meet with shareholders if they have concerns which are not being addressed through the usual channels of the Chair, the Chief Executive Officer or the Chief Financial Officer. 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 Daniel King, Anne Grim and Tami Gottlieb. Under the Companies Law the term of office of an External Director is three years, which can be extended for two additional three-year terms. External Directors are elected by shareholders subject to a special majority and may be removed from office only in limited cases. Mr. King’s nine years tenure ends in June 2022, after which the Board will have two External Directors – Anne Grim and Tami Gottlieb and will therefore, be fully aligned with the provisions of the Companies Law. In addition to the above, 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 Direc- tor serving as the chair of the Audit Committee and Remuneration Committee), and a majority of the members of each of the Audit and Remuneration Committees must comply with the Director independ- ence requirements. 56 Plus500 Ltd. 2021 Annual ReportBoard composition and attendance in FY 2021 Chair of the Board Prof. Jacob A. Frenkel1 Executive Directors David Zruia Elad Even-Chen Senior Independent Non-Executive, External Director Anne Grim Independent Non-Executive, External Director Daniel King Tami Gottlieb2 Independent Non-Executive Director Steve Baldwin Sigalia Heifetz3 Past Directors Gal Haber4 Penny Judd5 Charles Fairbairn6 SCHEDULED MEETINGS ELIGIBLE TO ATTEND SCHEDULED MEETINGS ATTENDED 6 12 12 12 12 10 12 11 0 6 6 6 (100%) 12 (100%) 12 (100%) 12 (100%) 12 (100%) 9 (90%)7 12 (100%) 11 (100%) 0 6 (100%) 6 (100%) 1. Prof. Jacob A. Frenkel was appointed on 4 May 2021. 2. Tami Gottlieb was appointed on 16 March 2021. 3. Sigalia Heifetz was appointed on 4 February 2021. 4. Gal Haber stepped down from the Board on 4 January 2021, prior to any scheduled meeting of the Board. 5. Penny Judd stepped down from the Board at the 2021 AGM held on 4 May. 6. Charles Fairbairn stepped down from the Board at the 2021 AGM held on 4 May. 7. Tami Gottlieb was unable to attend one Board meeting due to illness. General note: Prof. Varda Liberman was appointed as a Board member in March 2022, thus she is not included in the Board’s attendance table in FY 2021. Election of Directors Following recommendations from the Nomination Committee and a review by the Chair of the Board, the Board considers that all Directors continue to be effective, remain committed to their roles and have sufficient time available to perform their duties. Information with respect to Directors’ re-election will be set out in the 2022 Notice of AGM. Independence of Non-Executive Directors and time commitment Each of the Non-Executive Directors is considered to be independent of management and is considered by the Board to be free from any busi- ness or other relationships that could compromise their independence. Their role is to effectively advise and challenge management, and to monitor management’s success in delivering the strategy agreed by the Board. The Chair and the Non-Executive Directors held discussions and met during the year, without the Executive Directors’ presence, in order to review and monitor management performance. Also during the year, the Non-Executive Directors, led by the Senior Independent Director, met without the Chair’s presence, in order to, among others, evaluate his performance. As of FY 2022, such discussions are intended to be sched- uled at least twice a year. Each Director is aware of the need to allocate sufficient time to the Company in order to fulfil their responsibilities and is notified of all scheduled Board and Board Committee meetings. None of the Non- Executive Directors hold any directorships in any FTSE 100 company. Conflicts of interest The Company has procedures for the disclosure and review of any conflicts of interest, or potential conflicts of interest, which the Directors may have. The Board members are asked to disclose any conflicts of interest at each scheduled Board meeting. Each Director is aware of their responsibility to avoid conflicts of interest and to disclose any conflict or potential conflict of interest to the Board. 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 shall not attend that meeting (unless the chair of the Board, the Audit Com- mittee or the Remuneration Committee, as the case may be, determines that such person’s presence at the meeting is required for presentation of the relevant transaction) or vote on that matter, unless a majority of the respective forum has a personal interest in the matter as well. If a majority of the Board has a personal interest in the transaction, then shareholders’ approval 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 this year. 57 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsGovernance Report continued Board evaluation Provision 21 of the Code recommends that FTSE 350 companies consider having an external evaluation once every three years. The previous externally facilitated Board evaluation was carried out in 2019 with the feedback report presented by Genius Boards. Board training and development On a regular basis, all Board members are given updates on changes and developments in the business and the environment in which the Group operates, in order to further develop the understanding and awareness of the Board. The evaluation covered attending several Board meetings and Com- mittee meetings, interviewing the Board, the Company Secretary and several executives and relevant advisors to the Company. The Company Secretary and the legal advisors provide updates to the Board on any relevant legislative and regulatory corporate governance- related changes on an on-going basis. The Company expects to have its next externally facilitated Board evaluation in 2022. During the year, the Board also conducted an internal Board effective- ness evaluation, led by the Chair and the Company Secretary with the support of the Company’s external advisors. The Board members were requested to complete questionnaires and to evaluate the performance of the Board and its committees during 2021, as well as the performance of the Chair and their own performance as Board members. The ques- tionnaires were developed by the Chair and the Company Secretary, taking into consideration the findings of the 2020 internal evaluation and also the Financial Reporting Council’s Guidance on Board Effective- ness, and were circulated to all Board members and each Committee member for completion. The Company Secretary discussed the feedback received from the completed questionnaires with the Chair, the Senior Independent Direc- tor and each committee chair. A final report on the feedback, comments and suggestions received was circulated to the Board and its Commit- tees, and was presented by the Company Secretary and discussed by the Board at its meeting held in December 2021. The findings determined, among other things, that the Board has made good progress from FY 2020 in relation to: – Remuneration matters, including an approval of a new Remuneration Policy for Directors and Executives; – Time management at the Board and Committee meetings; – Process for attracting and selecting new Directors; – Board composition – gender and fields of experience and expertise; – Progressing well in the ESG journey; – Management information is freely available to the relevant parties, with better content and format of the management reports contained in the Board packs; – Good regulatory, risk and business knowledge on the Board; and – Timeliness of succession planning. Opportunities for improved effectiveness were also identified, and the Board, supported by the Company Secretary, will apply themselves delivering the agreed actions arising from the internal review in 2022. During the year the Directors attended training on various areas includ- ing ESG, cyber security, the UK Market Abuse Regulation and Israeli & UK Corporate Law. Ensuring that the Annual Report is fair, balanced and understand- able In relation to the Annual Report and the Consolidated Financial State- ments for the year ended 31 December 2021, the Board, in conjunction with the Audit Committee have sought to ensure that the Annual Report is fair, balanced and understandable. The Board considers that, taken as a whole, the Annual Report is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy. The Company encourages the engagement of both institutional and private investors. During 2021, in light of COVID-19 restrictions and related public health guidance by various governments, the majority of investor meetings were conducted by the Company through virtual channels, including conference calls and video conferences. The Chief Executive Officer, David Zruia, and Chief Financial Officer, Elad Even- Chen met regularly with institutional investors, particularly with regard to the issuance of half and full year results. They were accompanied at these meetings by the Company’s Head of Investor Relations, who manages Plus500’s relationships and communications with the invest- ment community. The Chair of the Board also met regularly with key investors during the year. Communication with private individuals is maintained through the Annual General Meeting and any Extraordinary General Meeting, the Company’s annual and interim reports and the scheduled, or otherwise required, trading updates. The Chair of the Audit, Remuneration, Nom- ination, Regulatory & Risk and ESG Committees are 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 on its website (www.plus500.com), which includes copies of the Company’s regulatory news, financial statements, investor pres- entations and other reports. Regular updates are provided to the Board on meetings with sharehold- ers and analysts, as well as on brokers’ opinions. Non-Executive Direc- tors are available to meet major shareholders, as required. Investors are also encouraged to contact the Company’s Head of Investor Rela- tions at: ir@Plus500.com. 58 Plus500 Ltd. 2021 Annual ReportShareholder Engagement Major interests in shares As at 21 March 2022, being the latest practicable date before the approval of this report, the Company is aware of the following persons who, directly or indirectly, were interested in 3% or more of the Com- pany’s capital or voting rights: FUND MANAGER Odey Asset Management Schroder Investment Management The Vanguard Group, Inc BlackRock Inc NUMBER OF SHARES 9,057,360 5,289,085 4,419,730 4,273,471 % 9.09 5.31 4.44 4.29 2022 Annual General Meeting Given many of the Company’s Board members are based in international locations, and with travel restrictions remaining in place in certain geographies, in order to facilitate an effective participation by the shareholders from various jurisdictions, the Company’s 2022 Annual General Meeting will be held as a hybrid meeting. Going forward, sub- ject to future changes to travel restrictions, it is expected that the Company’s AGMs will be held on a physical or hybrid basis. Details of all resolutions to be proposed at the 2022 Annual General Meeting will be included in the Notice of the 2022 Annual General Meeting to be circulated by the Company to all shareholders in due course. 2021 Annual General Meeting The 2021 Annual General Meeting was held on 4 May 2021 as a virtual meeting, due to the UK government restrictions following the COVID-19 pandemic. All resolutions proposed at the 2021 AGM were duly passed by share- holders by means of a poll vote. Following consultations made with shareholders ahead of the 2021 AGM, the Remuneration Committee excluded special, one-off bonuses in future Executive Remuneration plans in the Company’s new Remu- neration Policy. A resolution to approve the new Remuneration Policy was approved by over 94% of shareholders’ votes at the AGM. The Board noted that two resolutions passed at the 2021 AGM had more than 20% of votes cast against them. These resolutions related to an advisory vote on the Directors’ Remuneration Report and a tax- related bonus payment regarding the Company obtaining a highly beneficial approval from the Israeli Tax Authority and the Israel Innova- tion Authority as a Preferred Technological Enterprise. Since the AGM results, the Board have engaged with various shareholder advisory bodies and a number of shareholders, taking into account their feedback. The Board always takes the outcome of shareholders’ votes seriously and, going forward, will continue its engagement and dialogue with shareholders and their representatives and will continue to consider related shareholders’ feedback, with a view to implementing the feed- back, as appropriate. 59 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsReport of the Nomination Committee “With several significant appointments made in 2021, including of Prof. Jacob A. Frenkel as the Board’s new Chair, substantial progress was made in ex- panding the range of the Board’s ex- pertise and further diversifying its composition.” Steve Baldwin, Chair of the Nomination Committee Dear shareholder As the Chair of the Nomination Committee, I am pleased to have this opportunity to give you an overview of the work of the Committee during 2021. The Board is committed to evaluating and reviewing the structure, size and composition of the Board on a continual basis, including the bal- ance of skills, knowledge, experience and diversity (including gender diversity) of the Board while factoring in the Company’s strategy, risk appetite and future development. During the year, the Committee undertook a review of the broader composition of the Board, and identified a need to add further Independ- ent Non-Executive Directors to increase the Board‘s talent diversity. Subsequently, an external headhunter, True Europe LLP (“True Search”) was engaged to support the process and to identify potential candidates with the required skills, experience and diversity credentials. The Committee engaged the services of True Search and candidate briefs were compiled and lists of appropriate candidates for each brief were drawn up with input from the Board and its advisors. Other than in respect of recruitment services, True Search has no other connection with the Company or any of its Directors. I am pleased that in 2021 we welcomed to the Board two female Direc- tors, Ms. Sigalia Heifetz, who was appointed in February 2021 as an Independent Non-Executive Director (and was re-elected at our 2021 AGM), and Ms. Tami Gottlieb, whose nomination for appointment as an Independent Non-Executive Director and External Director was approved by our shareholders at our 2021 EGM held in March 2021. Tami was also appointed as the Chair of the Audit Committee following the departure of Charles Fairbairn. Also, during 2021 the Committee led the search for a new Chair of the Board to succeed Penny Judd, who served as a Non-Executive Director since 2016 and as our Chair since 2017. True Search was engaged again to support the process and to identify potential candidates with the required skills, background experience and expertise. After a thor- ough and transparent process, Prof. Jacob A. Frenkel was identified as the best suited candidate and I am pleased that his appointment was approved by the Company’s shareholders at our 2021 AGM held on 4 May 2021, with excellent support from 99.83% of those voting. The Committee also identified a need to add an additional Independent Non-Executive Director in 2022 to increase the Board‘s talent diversity and was also mindful that Daniel King, our long serving Independent Non-Executive Director and External Director had served since the Company’s IPO in 2013 and would not be eligible under the Companies Law for re-election in 2022. Following a further search process, and as announced on 18 March 2022, Prof. Varda Liberman was appointed as an Independent Non-Executive Director. The new Board members have gone through an extensive induction process, as further described on page 56 above. The Board is committed to diversity of gender, ethnicity, background, nationality and professional experience and these were the key pillars of the searches. Hence, I am delighted that our Board composition was significantly diversified during FY 2021 by the addition of three Inde- pendent Non-Executive Directors – Ms. Sigalia Heifetz, Ms. Tami Got- tlieb and Prof. Jacob A. Frenkel, as the Chair of the Board, and also very recently with the appointment of Prof. Varda Liberman as an additional Independent Non-Executive Director. 60 Plus500 Ltd. 2021 Annual ReportCommittee composition The Nomination Committee comprises Steve Baldwin, Daniel King and Prof. Jacob A. Frenkel, and is chaired by Steve Baldwin. The Code recommends that a majority of the members of a nomination committee should be Independent Non-Executive Directors. The Board considers Steve Baldwin, Daniel King and Jacob Frenkel to be independent for the purposes of the Code. Upon Daniel King’s tenure finishing in June 2022, Anne Grim, the Senior Independent Director and External Director, shall replace Daniel King as a member of the Nomination Committee. Details of the skills and experience of the Committee members are set out on pages 52 – 53 of this Annual Report. Details of individual attendance at meetings are set out in the Committee attendance table below. Committee attendance (in FY 2021) Steve Baldwin (Chair) Daniel King Prof. Jacob A. Frenkel1 Past members Gal Haber2 Charles Fairbairn3 SCHEDULED MEETINGS ELIGIBLE TO ATTEND 3 3 2 0 0 SCHEDULED MEETINGS ATTENDED 3 (100%) 3 (100%) 2 (100%) 0 0 1. Prof. Jacob A. Frenkel was appointed as a member of the Committee on 12 May 2021. 2. Gal Haber stepped down from the Committee (and from the Board) on 4 January 2021, prior to any scheduled meeting of the Committee. 3. Charles Fairbairn stepped down from the Committee on 3 February 2021, prior to any scheduled meeting of the Committee. These appointments have increased the gender diversity on the Board, and have ensured that the Company increases its talent diversity, in line with the Code and the recommendations of the Hampton-Alexan- der Review on gender equality in leadership positions. Following these additional appointments, I am pleased to report that, as of the date of this Annual Report, the Board comprises 44% female Directors (four female Directors out of nine Directors). Also, following Daniel King’s tenure finishing in June 2022, the Board will comprise 50% female Directors (four female Directors out of eight Directors). I would like to thank Daniel for all his help during his time on the Com- mittee. During the year, the Committee recommended to the Board that a new Senior Independent Director be appointed to replace Charles Fairbairn who was stepping down as the Senior Independent Director at the 2021 AGM held in May 2021. The Committee took into consideration the recommendations of the final Hampton-Alexander Report published in February 2021, which recommended that as a matter of best practice companies should have a woman in at least one of the four roles of Chair, CEO, SID and CFO. I am pleased that Ms. Anne Grim was appointed as our new SID, as of May 2021. Further details of Anne’s qualifications can be found on page 52. According to the evaluation carried out by the Board, all Non-Executive Directors are considered to be independent in character and judgement and no cross-directorships exist between any of the Directors. Due to the enhanced role of the Nomination Committee set out in the Code, we are continuing to develop our programme of activity accord- ingly. Throughout 2021, the Nomination Committee dedicated time to review and discuss succession planning across the business, in order to ensure, among other things, that there is a good pipeline of female successors to many of the senior management roles throughout the business. The Committee will continue this year to ensure that there is a strong talent pipeline with the necessary set of skills and expertise, whilst considering female representation and other diversity pillars as part of this process. I look forward to reporting on the Nomination Committee’s further progress in the next year’s Annual Report. Steve Baldwin Chair of the Nomination Committee 22 March 2022 61 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statements Report of the Nomination Committee continued Committee responsibilities and activities The Nomination Committee has responsibility for reviewing the struc- ture, size and composition (including the skills, knowledge and experi- ence) of the Board, considering succession planning and ensuring diversity at Board-level. The other key governance mandates pursuant to the written terms of reference of the Nomination Committee (which are available on the Company’s website) are as follows: – To oversee succession planning for Directors and other senior execu- tives, taking into account the challenges and opportunities facing the Company; – To identify, and nominate for the approval of the Board, candidates to fill Board vacancies (including External Directors' vacancies); – To make recommendations concerning the continuation in office of any Director at any time, including the suspension or termination of service; and – To prepare a description of the role and capabilities required for a particular appointment. The Nomination Committee meets not less than twice a year and at such other times as required. The Nomination Committee takes into account the challenges and opportunities the Group is facing and which skills and expertise are therefore needed on the Board and its Commit- tees in the future, whilst remaining committed to diversity of gender, ethnicity, background, nationality and professional experience and developing a talent pipeline reflective of this diversity. A summary of the major activities and decisions of the Committee in 2021 is set out below: Board composition & Time commit- ment – Re-election of Directors; – Review of core skills and experience of the Board and the independence of the Non-Executive Directors; – Review of membership of committees; – Appointment of three Independent Non-Executive Direc- tors (including a new Chair of the Board); – Appointment of a new Senior Independent Director; – Appointment of new Chairs of the Audit Committee and the Regulatory & Risk Committee; and – Review of time commitment of the Non-Executive Direc- tors. Succession planning – Review tenure of the Directors; – Review of the Company’s written succession plan; and – Foster the development of talented employees through- out the business. Diversity 2021 internal Committee evaluation – Review and amend the Equality, Diversity and Inclusion Policy, in line with the Code and the 33% target for female board representation set out in the Hampton-Alexander Review; and – Review of Board diversity on the Board, and signifi- cantly increased the female representation on the Board. – Discussion and assessment of the 2020 and 2021 internal Nomination Committee evaluation findings. Governance – Review of the Committee’s terms of reference in light of the Code and the Companies Law; and – Review of 2021 Nomination Committee Report which is included within this Annual Report. Following the activities of the Committee in 2021, the Committee is confident that each Director brings a unique set of skills and experience which enables the Board to be reflective of a diverse and varying range of perspectives and opinions and enables the Company to achieve its strategy and targets going forward. The Committee believes that each Director’s contribution is important to the Company’s long-term sustainable success. Priorities for FY 2022 In the coming year the Committee will continue to focus on key themes such as diversity and succession planning and ensuring a diverse tal- ent pipeline throughout the Group. Equality, Diversity and Inclusion The Board’s policy on equality, diversity and inclusion commits to: – Ensuring the selection and appointment process for employees and Directors includes a diverse range of candidates; – Ensuring that no unlawful discrimination occurs at any stage in the selection process on the grounds of age, disability, gender reassign- ment, marriage and civil partnership, maternity, pregnancy, race, religion or belief, gender or sexual orientation, ethnicity, country of origin, nationality and cultural background; – Disclosing statistics on gender diversity in this Annual Report (page 33); and – Reviewing the policy from time to time and continuing to disclose the policy in the Annual Report. The Board has taken significant steps to increase gender diversity. All Board appointments are made objectively based on an individual’s skills and expertise and consistent with the Company’s Equality, Diversity and Inclusion Policy. Board Equality, Diversity and Inclusion Policy OBJECTIVES PROGRESS UPDATE Ensuring the selection and appoint- ment process for employees and Directors includes a diverse range of candidates Ensuring that no unlawful discrimi- nation occurs at any stage in the selection process on the grounds of age, disability, gender reassign- ment, marriage and civil partnership, maternity, pregnancy, race, religion or belief, gender or sexual orienta- tion, ethnicity, country of origin, nationality and cultural background Improve gender diversity at Board and senior management level Review Board equality, diversity & inclusion policy Review employees’ recruitment proce- dure which includes, among others, a non-discriminatory selection process, allowing the recruitment of a diverse workforce. Review employees’ recruitment proce- dures which include non-discriminato- ry selection process, at all stages of the selection process. One female Non-Executive Director was appointed in September 2020 and two additional female Non-Executive Direc- tors were appointed in Q1 2021, follow- ing the engagement with True Search. Also, an additional female Non-Execu- tive Director was appointed in March 2022. The Committee has reviewed and approved the updated Board’s equality, diversity & inclusion policy, a copy of which is available on the Company’s website. 62 Plus500 Ltd. 2021 Annual ReportRelevant skills and experience on the Board JACOB A. FRENKEL DAVID ZRUIA ELAD EVEN-CHEN DANIEL KING STEVE BALDWIN ANNE GRIM NED SIGALIA HEIFETZ TAMI GOTTLIEB VARDA LIBERMAN NED NED NED NED Audit and risk management NED ED Finance, banking, financial services and fund manage- ment Capital raising, mergers, acquisitions, investment and transactions Marketing Compliance & Regulation Shareholder relations Digital technology Innovation ESG NED NED NED NED NED ED ED ED ED ED ED Enterprise Risk management NED ED Executive Director NED Non-Executive Director ED ED ED ED ED ED ED ED Succession planning The Committee has spent time in 2021 considering the important matter of succession planning across the business and reviewed the written Succession Planning Procedure. In order to ensure minimal business disruption in the event of any unexpected senior management or Board departures, the Committee is committed to continue develop- ing plans for identifying appropriate successors in the short, medium and long-term, whilst also having regard to the importance of diversity throughout the Group. Due to the size of the Group, it is not always possible to identify inter- nal successors for all roles throughout the business. Nevertheless, the Committee has reviewed plans for the succession of senior manage- ment roles throughout the business and has identified appropriate candidates as potential successors (both immediate successors and long-term successors). NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED NED 63 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsReport of the Audit Committee “The Audit Committee performs a key role in the Group’s governance frame- work, in assessing internal controls across the Group and ensuring the in- tegrity of the Group’s financial results.” Tami Gottlieb, Chair of the Audit Committee Dear shareholder I am honoured to have been appointed as the new chair of the Audit Committee of the Board in May 2021. The Committee functions very efficiently, supported by a number of consistent and professional processes that form the basis of the Committee’s monitoring and review framework. I would like to thank Charles Fairbairn, my predecessor, for his efforts in establishing this solid foundation on which to manage the Committee. With that in mind, I am pleased to take this opportunity to give you an overview of the work of the Committee during 2021. The Audit Com- mittee performs a key role in the Group’s governance framework, in assessing internal controls across the Group and ensuring the integrity of the Group’s financial results. Committee responsibilities and activities The Audit Committee is responsible for ensuring that the financial performance of the Group is properly reported on and reviewed. The other key governance mandates pursuant to the written terms of refer- ence of the Audit Committee (which are available on the Company’s website) are as follows: – To monitor the integrity of the Consolidated Financial Statements of the Group (including annual and interim accounts and results announce- ments); – To monitor the adequacy and effectiveness of the Company’s internal financial controls and internal control and risk management systems; – To advise on the appointment of the Company’s external auditor and on their remuneration; and – To monitor and review the effectiveness of the Company’s internal Priorities for the Audit Committee during the year included financial reporting and the associated assurance of these reports. audit function. With the assistance of Deloitte, our internal auditor during FY 2021, we reviewed and monitored a multi-year internal audit plan which we will continue to review and update over time. In January 2022, we concluded that given the increase in the scope of business of the Group and the diversification of its portfolio and geographical scope, it would be in our interest to replace Deloitte as our internal auditor. As a result, and after due process, we appointed E&Y as our new internal auditors, as of FY 2022. The Committee also reviewed a list of non-audit services provided this year by the Company’s external auditor and approved its audit plan for 2022. I look forward to reporting on the Audit Committee’s progress going forward, in next year’s Annual Report. In addition, under the Companies Law, the Audit Committee is required to monitor deficiencies in the business management of the Company, including by consulting with the internal auditor and independent accountants, to review, classify and approve related party transactions and extraordinary transactions, to review the internal auditor’s audit plan, to oversee the performance of the Company’s internal auditor and the internal control functions and to establish and monitor whistle- blower procedures. The Audit Committee meets not less than four times a year at appropri- ate intervals in the financial reporting and audit cycle and otherwise as required. The Audit Committee met on six occasions during 2021. The internal and external auditors have the right to attend meetings. The relevant Executive Directors, the Company’s legal advisors and other persons may, by invitation from the Chair of the Audit Committee, attend meetings. At least twice per year, the Audit Committee meets privately with the external auditor to discuss issues relating to the Company’s management and as required under the Companies Law. Tami Gottlieb Chair of the Audit Committee 22 March 2022 64 Plus500 Ltd. 2021 Annual Report A summary of the major activities and decisions of the Committee in 2021 is set out below: Financial performance review Internal audit review Review of the financial performance and review of the Consolidated Financial Statements of the Group twice a year. Review assessments of the control environment via inter- nal audit reports, and monitor progress on implementing internal audit recommendations. External audit review Review progress on implementing external audit recom- mendations. Monitor and review the effectiveness and independence of the external audit function. Risk control 2021 internal Committee evaluation Assist the Board in the monitoring of the Group’s internal controls and risk management systems and their effective- ness. Discussion and assessment of the 2020 and 2021 inter- nal Audit Committee evaluation findings. Governance – Review of the Committee’s terms of reference in light of the Code and the Companies Law. – Review of 2021 Audit Committee Report which is included within this Annual Report. Significant accounting and financial judgements in 2021 The Committee considered a number of significant accounting and financial judgements and estimates, which were discussed with the external auditors in the planning stage of the audit, and received the external auditor’s confirmation that no additional matters have arisen and require the Committee’s attention. The significant judgements considered were: revenue recognition, uncertain tax positions, the control environment, compliance with laws and regulations and appropriateness of the going concern basis of the Consolidated Financial Statements and the level of cash required within the business to satisfy both external regulators and the Group’s market risk management. External auditor It is the responsibility of the Audit Committee to keep under review the scope and effectiveness of the external auditor. This includes recom- mending the appointment of the external auditor to the Board and reviewing the scope of the audit, approving the audit fee and, on an annual basis, satisfying itself that the auditor is independent. The external auditor is engaged to express an opinion on the Consolidated Financial Statements. The external auditor conducts the audit accord- ing to the audit plan which include different audit procedures like con- firmations, testing samples and discussing with management the reporting of operational results and the financial status of the Group, to the extent necessary to express their audit opinion. Committee composition The Code recommends that an audit committee should include at least three members who are Independent Non-Executive Directors, and that at least one member should have recent and relevant financial experience. The Companies Law requires that an audit committee consist of at least three Directors qualified to serve as members of an audit committee under the Compa- nies Law, including all External Directors, and must be comprised of a majority of Directors meeting certain independence criteria of the Companies Law. The Chair of the audit committee must be an External Director. The Audit Committee is chaired by Tami Gottlieb (as of May 2021) who succeeded Charles Fairbairn, and its other members are Daniel King (until his tenure finishing in June 2022), Steve Baldwin, Anne Grim and Prof. Varda Liberman (appointed as of March 2022). All of the members are therefore independent Non-Executive Directors under the Code and meet the criteria for independence under the Companies Law. Tami Gottlieb, Daniel King and Anne Grim are considered External Directors under the Companies Law. The Board considers that Tami Gottlieb has recent and relevant financial experience in accordance with the requirements of the Code. All of the Committee members have relevant Diversified Financial Services experience. Details of the skills and experience of the Committee members are set out on pages 52 – 53. Details of individual attendance at meetings are set out in the Commit- tee attendance table below. Committee attendance (in FY 2021) Tami Gottlieb (Chair)1 Daniel King Steve Baldwin Anne Grim Past members Charles Fairbairn2 SCHEDULED MEETINGS ELIGIBLE TO ATTEND SCHEDULED MEETINGS ATTENDED 5 6 6 6 3 4 (80%)3 6 (100%) 6 (100%) 6 (100%) 3 (100%) 1. Tami Gottlieb was appointed as a member of the Committee on 16 March 2021 and serves as the Chair of the Committee as of 4 May 2021. 2. Charles Fairbairn (previous Chair of the Committee) stepped down from the Committee and the Board on 4 May 2021. 3. Tami Gottlieb was unable to attend one Committee meeting due to illness. General note: Prof. Varda Liberman was appointed as a member of the Com- mittee in March 2022, thus she is not included in the Committee’s attendance table in FY 2021. 65 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statements Report of the Audit Committee continued Performance and effectiveness of the external auditor Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited, was appointed as the Company’s external audi- tor in 2013 and has been retained since then to perform audit and audit-related work on the Company and other local offices of Pricewa- terhouseCoopers perform audit and audit-related work on the majority of the Company's subsidiaries. The Committee assesses the auditor’s independence and effectiveness at least on an annual basis, through closed sessions and enquiries by the Committee members. The Audit Committee monitors the nature and extent of non-audit work undertaken by the auditors. Given the non-audit work undertaken by the external auditor and the Committee’s oversight of its work, the Commit- tee is satisfied that the independence and objectivity of the external auditor was adequately safeguarded throughout 2021. Nevertheless, the external auditor’s independence and objectivity is kept under review and is a standing item on the agenda for the Audit Committee. In addition, the Audit Committee periodically monitors the cost of non- audit work undertaken by the external auditor. The Audit Committee considers that it is in a position to take action if at any time it believes there is a risk of the auditor’s independence and objectivity being undermined through the award of this task. Having assessed the external auditor’s effectiveness and independence during 2021, the Audit Committee concluded that the auditor has dem- onstrated professional scepticism and judgement and that the audit process as a whole has been conducted robustly and that the team selected to undertake the audit has done so thoroughly and profession- ally. The Audit Committee reviewed the re-appointment of the external auditor and recommended to the Board that the external auditor be proposed for re-election at the upcoming Annual General Meeting. Audit tender process The Committee remains satisfied with the external audit process and is currently not planning to undertake a formal tender process until the financial period ended 31 December 2023. In FY 2022, the external audit engagement partner will be rotated. Non-audit services The Company maintains a Non-Audit Services Policy in order to ensure that the provision of non-audit services do not impair the external audi- tor’s independence or objectivity. During 2021, Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited, and other local offices of PricewaterhouseCoopers, provided non-audit services, such as tax assessments and advice and regulatory reporting requirements, which totalled $1.0m (including assurance related services of $0.3m). The assurance related services include mainly local regulatory reporting requirements for the regulated subsidiaries which are linked directly with the external auditors’ services. In addition, part of the non- audit services in the amount of $0.7m are related to tax assessments which are provided by the external auditor according to common practice in specific territories. The non-audit services fee constitutes 62.5% of the fees payable to the external auditor in 2021. Overview of the non-audit services policy Under the policy, all services provided by the external auditor (other than the audit itself) are regarded as non-audit services. The policy draws a distinction between permitted services (which could be provided subject to conditions set by the Committee) and prohibited services. The type of non-audit services deemed to be permitted include assur- ance work on non-financial data, tax services including tax advisory, and reporting best practice. The Committee has provided pre-approval which allows management to appoint the external auditor to conduct permitted non-audit services if they fall below a set fee level. The Committee reviews the pre-approval limit on an annual basis and it is currently set at $50,000. Any non-audit service provided by the external auditor is reported to the Board. In the event that the provision of non-audit services would exceed $50,000, the Committee would request Board approval. 66 Plus500 Ltd. 2021 Annual ReportKEY FINANCIAL REPORTING AND SIGNIFICANT FINANCIAL JUDGEMENTS HOW THE ISSUE WAS ADDRESSED BY THE AUDIT COMMITTEE Revenue recognition The recognition of revenue is a key matter to be reviewed, monitored and tested Uncertain tax positions The Audit Committee is responsible for the adequacy of the uncertain tax positions Review and assess- ment of the control environment Review and assessment of compliance with laws and regulations Review and assess- ment of appropriate- ness of the going concern basis of the Financial Statements and long-term viability Review and assess- ment of the level of cash required within the business to satisfy both external regula- tors and the Group’s attitude to market risk The Audit Committee has the ultimate responsibility for the supervision of the control environment. A key role of the Com- mittee is to provide oversight and reas- surance to the Board with regard to the integrity of the Company’s financial report- ing, internal control policies and proce- dures for the identification, assessment and reporting of risk A key risk to the business is the fact that the Group’s business is subject to various laws and regulations in different jurisdic- tions according to its activity Going concern and viability are key matters for the operations of the Group The Group requires a level of cash to ensure that it can operate its trading plat- forms and maintain sufficient cash in its regulated entities to satisfy regulatory and operational needs – The Audit Committee held meetings, among others, with the operation, R&D and risk teams to verify compliance of revenue recognition from all related aspects such as: IT general controls, access to programs and supporting data, program changes and computer operations for the platform and for the ERP system. – The Audit Committee discussed this matter with the external auditor at the planning and conclusion phases of the audit. – The Audit Committee concluded the revenue recognition process is appropriate and controls are effective and are appropriately disclosed in the Financial Statements. – The Audit Committee held meetings, among others, with management and tax advi- sors to assist in assessing the technical aspect of the Group’s tax positions, includ- ing understanding the correspondence with the different tax authorities and reviewing other third parties’ advice obtained by management. – The Audit committee discussed this matter with the external auditor through the process of the audit, and received periodical updates during the year. – The Audit Committee concluded that the provision for uncertain tax positions is reasonable. – The Audit Committee reviewed the internal audit reports produced in the year, dis- cussed key findings with management and reviewed the implementation of all internal audit report recommendations brought forward from previous years, in addition the Committee reviewed key audit risk topics in assessing the internal audit reports produced for 2021. – The Audit Committee concluded the internal controls are effective. No significant internal control failings were identified during the year. Where any gaps were identi- fied, processes were put in place to address them and these are continually monitored. – The Committee, in conjunction with the work of the Regulatory & Risk Committee, reviewed regulatory reports prepared by the Risk & Compliance teams, to ensure compliance with local regulations in the areas the Group operates in. – The Committee considers the grid of audits and regulatory assessments and reviews their findings. The relevant aspects of such assessments to the Committees’ work are discussed and assessed by the Committee. – Based on discussions with management and discussions held in the Regulatory & Risk Committee, the Audit Committee came to the conclusion that the Group is compliant with the required regulations. – The Audit Committee has reviewed the assessment setting out the key assumptions related to the nature of the Group’s business, budget reports and cash flow forecasts for the period of three years ending 31 December 2024, taking into account the Group’s anticipated investment commitments and working capital requirements. – These reports detailed the impact of outcomes of stress tests after applying multiple scenarios to determine how the Group is able to cope with deterioration in liquidity profile or capital position. – The Audit Committee agreed to recommend the Going Concern and Viability State- ment to the Board for approval. – The Audit Committee reviews on an on-going basis the level of cash required from a regulatory, operationally and risk perspective. – The Audit Committee concluded that the cash amounts held are sufficient for all the above-mentioned perspectives. 67 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsReport of the Audit Committee continued Fair, balanced and understandable The Audit Committee undertakes a duty to consider whether the 2021 Annual Report and Consolidated Financial Statements taken as a whole, are fair, balanced and understandable, while final determination lies within the responsibilities of the Board. The Audit Committee, on behalf of the whole Board, also assesses whether there is enough information in the Annual Report and Consolidated Financial Statements necessary for shareholders to evaluate the financial position, performance, governance, business model and strategy of the Group. The process The Committee reviews the Consolidated Financial Statements and recommends to the Board of Directors to approve the Con- solidated Financial Statements. During the drafting process of the 2021 Annual Report and Consolidated Financial Statements, the Committee is given the opportunity to comment and provide feedback on the drafts. The Committee also considers whether the content provided in the report has illustrated the whole picture for the year. The Committee then evaluates whether the report is consistent throughout, with a clear layout and linkage to the different front and back sections, and whether it is presented in a logical man- ner to the shareholders. Conclusion Following the review, it was the Committee’s opinion that the 2021 Annual Report and Consolidated Financial Statements are representative of the year and, taken as a whole, present a fair, balanced and understandable overview and provides the infor- mation necessary for shareholders to assess the financial posi- tion, governance, performance, business model and strategy of the Group. Internal auditor Pursuant to the Companies Law, the Board must appoint an internal auditor recommended by the Audit Committee. An internal auditor may not be: – a person who holds more than 5% of the Company’s outstanding shares or voting rights; – a person who has the power to appoint a Director or the Chief Execu- tive Officer of the Company; – an officer or Director of the Company; or – a member of the Company’s independent accounting firm, or anyone on its behalf. The role of the internal auditor is to examine, among other things, the Company’s compliance with applicable laws and orderly business procedures. The Audit Committee is required to oversee the activities and to assess the performance of the internal auditor, as well as to review the internal auditor’s work plan, and the Committee has done so in FY 2021. The Committee concluded that the internal audit func- tion was an effective provider of assurance over the Company’s risks and controls and appropriate resources were available as required. Brightman Almagor Zohar & Co. (Deloitte Israel), a member firm of Deloitte Touche Tohmatsu Limited, served as the Company’s internal auditor in FY 2021. In January 2022, the Company agreed with Deloitte that they will step down as internal auditors of the Company. Following receipt of a rec- ommendation from the Audit Committee, the Board has appointed E&Y as the Company's new internal auditors as of FY 2022. Whistleblowing policy The Group operates a Whistleblowing Policy which encourages all individuals within the Group (including employees, partners, consult- ants, contractors, suppliers, customers and other third parties) to feel confident to voice concerns internally in a responsible, anonymous, confidential and effective manner when they discover information which they believe shows serious malpractice or impropriety, and to question and act upon those concerns. It provides a method of properly addressing bona fide concerns of such individuals, while offering whistle- blowers protection from victimisation, harassment or disciplinary proceedings. Such an anonymous reporting can be undertaken in local languages. The Audit Committee reports to the Board on the effective- ness of the Group’s whistleblowing mechanism and on any matter that arises as a result of it. The current Whistleblowing Policy supervisor is Daniel King. No whistleblowing complaints were received in 2021. Upon Daniel King’s tenure finishing in June 2022, Steve Baldwin shall replace Daniel and serve as the new Whistleblowing Supervisor. 68 Plus500 Ltd. 2021 Annual ReportReport of the Regulatory & Risk Committee “With a global regulatory network al- ready well established, the Group re- mains well positioned for potential fu- ture changes to the regulatory environment across the markets in which it operates.” Sigalia Heifetz, Chair of the Regulatory & Risk Committee Dear shareholder I am privileged to have been appointed as Chair of the Regulatory & Risk Committee and I would like to thank Penny Judd, as my predeces- sor, for her dedication and focus on ensuring that the Committee has a clear framework from which to operate. Regulatory compliance and risk management underpin the integrity of our business model and continued delivery of our strategy. The Regu- latory & Risk Committee receives regular reports on both compliance and risk and challenges the performance in these areas. It also receives AML reports, internal audit reports relating to the Group’s regulated entities, and other reports on specific areas where more detailed test- ing or investigation is felt appropriate. These are described more fully in the following report. In addition, the Board undertook a robust assessment of the principal risks facing the Group and updated its internal risk matrix accordingly. We have also monitored new areas of regulatory compliance such as emerging risks and developments in securities markets regulation. The Committee and the Board have received reports on the implemen- tation of preparation for the ASIC product intervention order, which came into force in March 2021, with respect to retail customers in Australia, setting leverage restrictions, similar to ESMA levels, to all Plus500AU operations (ASIC, FMA, FSCA). Also, the Committee and the Board have received reports in relation to the potential Brexit sce- narios and reports relating to the new trading products launched by the Group in 2021 – share dealing through ‘Plus500 Invest’ and futures and options on futures. Following this, the Committee received comfort that the applicable measures have been considered and effectively implemented. The Group’s portfolio of licences is an increasingly valuable asset, given its scarcity and the growing complexity of obtaining new licences. I am pleased that during Q1 2022 this portfolio of operating licences was further strengthened. The licence granted in Estonia in February 2022 will further support the Group’s business across European markets in its core product offering, and the acquisition of a Type 1 regulated firm in Japan, com- pleted in March 2022, represents a major growth opportunity for the Group, through an immediate presence in the substantial retail trading market in Japan. Our priorities for the coming year will be to continue to monitor regula- tory changes and to seek to continue to enhance the risk assessment and monitoring within the business in the face of changing regulatory and market conditions, including the continued impact of the COVID-19 pandemic. More specifically, we will continue to assess, and seek to enhance, our approach to risk management, which is based on ensuring our risk exposures are aligned with our risk appetite across the product port- folio. From a regulatory and compliance perspective, with a global regulatory network already well established, the Group remains well positioned for potential future changes to the regulatory environment across the markets in which it operates. I look forward to reporting on the Regulatory & Risk Committee’s further progress in next year’s Annual Report. Sigalia Heifetz Chair of the Regulatory & Risk Committee 22 March 2022 69 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statements Report of the Regulatory & Risk Committee continued Committee composition The Regulatory & Risk Committee is chaired by Sigalia Heifetz (appointed as a member in February 2021 and as the Chair in May 2021), succeeding Penny Judd. The other members are Elad Even-Chen, Tami Gottlieb (appointed in March 2021), Prof. Jacob A. Frenkel (appointed in May 2021) and Prof. Varda Liber- man (appointed in March 2022). According to the Committee’s terms of reference (which are available on the Company’s web- site) the Committee shall comprise at least three members, and the activities of the Committee should involve participation by the Chair of the Audit Committee. The Chief Financial Officer should be a committee member. Tami Gottlieb, Chair of the Audit Committee is also a member of the Regulatory & Risk Committee, as well as Elad Even-Chen, the Group’s Chief Finan- cial Officer. Details of individual attendance at meetings is set out in the Committee attendance table below. Committee attendance (in FY 2021) Sigalia Heifetz (Chair)1 Elad Even-Chen Tami Gottlieb2 Prof. Jacob A. Frenkel³ Past members Penny Judd4 Charles Fairbairn5 SCHEDULED MEETINGS ELIGIBLE TO ATTEND SCHEDULED MEETINGS ATTENDED 3 3 2 2 1 0 2 (67%)6 3 (100%) 2 (100%) 2 (100%) 1 (100%) 0 1. Sigalia Heifetz was appointed as a member of the Committee on 4 Febru- ary 2021 and serves as the Chair of the Committee as of 4 May 2021. 2. Tami Gottlieb was appointed as a member of the Committee on 24 March 2021. 3. Prof. Jacob A. Frenkel was appointed as a member of the Committee on 12 May 2021. 4. Penny Judd (previous Chair of the Committee) stepped down from the Committee on 4 May 2021. 5. Charles Fairbairn stepped down from the Committee on 3 February 2021, prior to any scheduled meeting of the Committee. 6. Sigalia Heifetz was unable to attend one Committee meeting due to illness. General note: Prof. Varda Liberman was appointed as a member of the Com- mittee in March 2022, thus she is not included in the Committee’s attendance table in FY 2021. Committee responsibilities and activities The Regulatory & Risk Committee meets not less than three times a year and otherwise as required. The Regulatory & Risk Committee receives monthly updates from management on risk, compliance, AML and regu- latory issues and reviews the related internal reports. The Regulatory & Risk Committee has responsibility for providing oversight with respect to current and potential future risk exposures of the Group and for oversee- ing and monitoring the Group’s compliance with applicable laws, regula- tions and orders as required. Its activities include reviewing relationships with regulatory authorities such as the Financial Conduct Authority (FCA) in the UK, the Australian Securities and Investments Commission (ASIC) in Australia, the Cyprus Securities and Exchange Commission (CySEC) in Cyprus, the Israel Securities Authority (ISA) in Israel, the Financial Markets Authority (FMA) in New Zealand, the Financial Sector Conduct Authority (FSCA) in South Africa, the Monetary Authority of Singapore (MAS) in Singapore, the Financial Services Authority (FSA) in the Sey- chelles, Commodities Futures Trading Commission (CFTC) and National Futures Association (NFA) in the US, the Estonian Financial Supervision Authority (EFSA) in Estonia, the Financial Services Agency (FSA) in Japan and other regulatory authorities, as appropriate, in jurisdictions where the Group has a significant operation. The Committee is also responsible for reviewing risk assessment programmes and internal controls. The Regulatory & Risk Committee is responsible for reviewing the Group’s most significant risks to the achievement of strategic objectives and any emerging risks, reviewing the Group’s Risk Management Policy, ensuring that the Company’s Board ethics are being adhered to. The other key governance mandates, pursuant to the written terms of reference of the Regulatory & Risk Committee, are as follows: – To review the Group’s capability to identify and manage new risk types; – To review the most significant risks to the achievement of strategic objectives; – To review incident reports to monitor incidents and remedial activity; and – To consider and approve the remit of the risk management function and ensure that it has adequate resources and appropriate access to informa- tion to enable it to perform its function effectively and in accordance with the relevant professional standards. A summary of the major activities and decisions of the Committee in 2021 is set out below. Regulatory & Compliance review – Periodic regulatory, compliance and AML reports review. – Periodic AML reports (on the Group’s regulated entities) review. – Oversee the implementation of new regulatory requirements. – Monitor and assess the Group’s relationships with regulatory authorities. Licence application review Risk review and assessment 2021 internal Committee evaluation Governance – Review licence applications submitted during the period. – Review periodic risk reports, including VaR reports. – Review risk assessment programmes and internal risk man- agement controls. – Review emerging and principal risks for the period. – Review and assess current approach to hedging as well as possible options for future approach in this area. – Discussion and assessment of the 2020 and 2021 internal Regulatory & Risk Committee evaluation findings. – Review of the Committee’s terms of reference. – Review of 2021 Regulatory & Risk Committee Report which is included within this Annual Report. 70 Plus500 Ltd. 2021 Annual Report Report of the ESG Committee “The Company supports the recommendations published by the Financial Stability Board’s Task Force on Climate-Related Financial Dis- closures and during 2021, the Committee worked with a specialist ESG consultant, which conducted a rigorous gap analysis and assessment of the Group’s ESG reporting and disclosure.” Daniel King, Chair of the ESG Committee Dear shareholder ESG has become a critical element of organisational culture, operations, reporting and disclosure and is now a highly prevalent theme across global capital markets. This has been driven by growing public pressure, increasing regulator engagement and investors integrating ESG into their investment analysis. The assessment identified several ESG priority areas for Plus500 – namely, customer care and protection, organisational culture, cyber security, systems infrastructure and leadership and governance. Our commercial and operational approach and progress during 2021 in each of the areas can be found elsewhere in this Annual Report, in particular in the ESG section on pages 30 – 37. In this dynamic and complex environment, ESG issues can have a direct impact on a company’s competitive advantage and operational perfor- mance. Furthermore, investors are seeking more understanding and detail about how companies are managed in this regard. In this context, and with increasing reporting and disclosure require- ments for companies in this area, the Board established its ESG Com- mittee in 2020, primarily to regularly review and assess the Group’s ESG activities and align them with industry and market best practice. With this in mind, the Committee, the Board and the Group remain committed to developing Plus500’s ESG strategy, and will continue to broaden its disclosure on ESG in order to ensure key stakeholders have a clear and comprehensive understanding of the Group’s activities in these areas. As the Chair of the ESG Committee, I am pleased to provide an overview of the work carried out by the ESG Committee in 2021, as well as its objectives and priorities. As a starting point, the Committee initiated a Materiality Assessment, which was carried out at the beginning of 2021, to identify key ESG priorities and risk factors and to establish a framework for the Group’s future approach in these areas and, ultimately, to increase the Group’s resilience over the long-term. The framework for this assessment was based on internationally accepted standards and frameworks such as the Sustainability Account- ing Standards Board (SASB) and the Global Reporting Initiative (GRI), and was driven by the findings and insights from interviews with a number of key individuals from the Board, the executive team and several major shareholders. With the assessment laying the foundations of the Group’s approach in this area, the Committee made strong progress during the year to develop our position in ESG, in particular by refreshing our reporting and disclosure, in line with the latest regulatory and disclosure require- ments, as exemplified in various sections of this Annual Report. The Company supports the recommendations published by the Finan- cial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) and during 2021, the Committee worked with a specialist ESG consultant, which conducted a rigorous gap analysis and assessment of the Group’s ESG reporting and disclosure, against its UK-listed peer group and a range of US-listed fintech groups. This assessment has helped to provide a foundation for the Group’s on-going approach to ESG reporting and disclosure going forward. More specifically, conclusions from this assessment have helped to inform the Group’s initial reporting and disclosure against the TCFD recommendations, which includes the reporting of our Scope 1 and Scope 2 emissions data, for the first time. This information, including the Group’s future plans to continue to align itself to the TCFD recom- mendations, is outlined in the ESG section on pages 36 – 37 of this Annual Report. Also, during the year, the Committee and the Board developed an Environmental Policy, which is available on the Company’s website. As a technology-based business, Plus500 does not carry out any industrial activity and is not involved in anything which would emit environmen- tally harmful substances but has made various commitments, includ- ing, to protect the environment, to reduce waste as well as water, energy, and resource use and to monitor the Group’s environmental performance. The Committee reviewed the Donations & Volunteering Procedure and received a report from the Company’s Donations Committee detailing the type and amounts of donations made during 2020-2021 (both 71 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsReport of the ESG Committee continued monetary and in kind donations), the profile of charitable and non-profit organisations which received the donations and future charitable ini- tiatives. Having served as an Independent Non-Executive Director and External Director since the Company’s IPO in 2013, I will end my third and final three-year term under the provisions of the Companies Law pertaining to the term of an External Director, in June 2022. Therefore, as I am not eligible under the Companies Law for re-election this year, I will be stepping down from the Board and all related Board Committees. So, in my final ESG Committee report, I would like to say that it has been a privilege to have Chaired this Committee since it was established. It is crucial that the Board ensures Plus500’s approach to the relevant elements of ESG continues to develop and are clearly understood by the investment community. To this end, I wish Steve Baldwin the best of luck as my successor as Chair of the ESG Committee, and I am sure he will provide dynamic leadership in such a vital area for the Group. Daniel King Chair of the ESG Committee 22 March 2022 Committee composition The ESG Committee is chaired by Daniel King. The other mem- bers are Steve Baldwin and Anne Grim. According to the Com- mittee’s written terms of reference (which are available on the Company’s website) the Committee shall comprise at least three members, a majority of the members of the Committee should be Independent Non-Executive Directors and at least one mem- ber shall be an External Director. All of the Committee members are Independent Non-Executive Directors and Anne Grim and Daniel King are also considered as External Directors. As of June 2022, Steve Baldwin will Chair the ESG Committee and an additional member will be appointed to the Committee, alongside Steve Baldwin and Anne Grim. Details of individual attendance at meetings is set out in the Committee attendance table below. Committee attendance (in FY 2021) Daniel King (Chair) Steve Baldwin Anne Grim SCHEDULED MEETINGS ELIGIBLE TO ATTEND 4 4 4 SCHEDULED MEETINGS ATTENDED 4 (100%) 4 (100%) 4 (100%) 72 Plus500 Ltd. 2021 Annual Report Committee responsibilities and activities The overall responsibilities of the ESG Committee are to assess the following pillars: – Environmental: the Group’s impact on the natural environment and its adaptation to climate change including greenhouse gas emissions, energy consumption, generation and use of renewable energy, biodi- versity and habitat, impact on water resources and the status of water bodies, pollution, resources efficiency, the reduction and management of waste, and the environmental impact of the Group’s supply chain; – Social: the Group’s interactions with employees, commercial counter- parties, stakeholders and the communities in which it operates and the role of the Group in society, workplace policies (for example, employee relations and engagement, diversity, non-discrimination and equality of treatment, health and safety and well-being), ethical procure- ment, any social or community projects undertaken by the Group and social aspects of the supply chain, community and stakeholder engage- ment or partnerships; and – Governance: the ethical conduct of the Group’s business including its business ethics policies, code of conduct and counterparty due dili- gence. The other key governance mandates, pursuant to the written terms of reference of the ESG Committee, are as follows: – To ensure that sufficient focus and resource is given to implementing, monitoring and management; – To consider the adequacy of the Group’s ESG policies and processes by reviewing reports prepared by management on: – review of any key learnings from internal or external reviews and investigations of any marketing, advertising campaigns and pro- motional activities which have had a significant negative impact on the brand or image of the Group; – diversity in the workplace; – security and health and safety in respect of the Group’s employees and premises; – charitable donations and pro bono programmes; and – the Company’s impact on the environment. A summary of the major activities and decisions of the Committee in 2021 is set out below: Reports and Policies review – Periodic review of ESG reports. – Review of succession planning (from a gender diver- Adoption of an Environmental Policy Donations and Charitable initiatives review Materiality Assessment Gap Analysis 2021 internal Committee evaluation Governance sity perspective). – Review of Donations & Volunteering Procedure. – Adoption of a new Policy – Environmental Policy. – Review type and amounts of donations made during 2020-2021 (both monetary and in-kind donations), pro- file of charitable and/or non-profit organisations which received the donations and future charitable initiatives. – Review of, and feedback on, detailed materiality assess- ment. – Discussion and agreement on key priority areas emanat- ing from this assessment, including an approach on future reporting and disclosure in each of these areas. – Working with a specialist ESG consultant to conduct gap analysis of the Group’s ESG reporting and disclosure, compared to our UK-listed peer groups and US-listed fintech groups. – Discussed and agreed approach for Group’s ESG report- ing and disclosure, based on the findings of this analy- sis. – This included discussion on the rationale of initial report- ing of the Group’s Scope 1 and Scope 2 emissions data (which is included on page 36 of this Annual Report). – Discussion and assessment of the 2020 and 2021 internal ESG Committee evaluation findings. – Review of the Committee’s terms of reference. – Review of 2021 ESG Report which is included within this Annual Report. – Review of 2021 ESG Committee Report which is includ- ed within this Annual Report. 73 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsReport of the Remuneration Committee “The newly approved remuneration pol- icy for FY 2021-FY 2023 provides some far-reaching changes from the previous policy to ensure that we are making significant strides to align to a UK norm.” Daniel King, Chair of the Remuneration Committee The Committee understands that historically shareholders have had concerns about Executive Directors pay and it has therefore undertaken a thorough and comprehensive review of the remuneration policy and operation concluded in Q1 2021 with the support of external advisors Korn Ferry with a clear understanding of market practice and investor expectations. This has been followed with a period of consultation with a substantial number of our shareholders and shareholder advisory bodies. Feedback from investors has been positive overall noting the substantial changes made. Investors have also understood that there is a small number of matters that are not fully aligned with UK investor expectations and that the Committee will look to review these matters again over the policy period and at the latest at the next policy renewal in 2024. The Committee refined certain aspects of its original propos- als and is grateful for investor feedback on these matters. The newly approved remuneration policy for FY 2021, FY 2022 and FY 2023 provides some far-reaching changes from the previous policy to ensure that we are making significant strides to align to a UK norm. The Committee is however cognisant of distinct sector and market dynamics in Israel where Plus500 is headquartered, the competition over talent in the Israeli market place and in the sector as a whole (this competition intensified in 2021 which saw a large amount of Israeli tech companies IPO in the international markets and an ever intensify- ing competition for talents within the sector in Israel). I would also like to emphasise that the changes proposed have a significant impact on the way in which the current Executive Directors are paid. The Com- mittee will therefore continue its journey over future policy reviews, keeping the approach and the structure of the Executive Directors’ packages under review but it very much hopes that investors will continue to be supportive of the substantial progress that has been made in moving towards a UK norm at this time. As part of our remuneration policy review, we have considered our remuneration reporting. Our 2021 Remuneration Report provides clearer and more transparent disclosures more closely aligned to UK practice. We will continue to evolve this reporting to provide additional disclosures in future years so as to make our disclosure more aligned to UK best practice and the UK Directors’ Remuneration Reporting Regulations. Dear shareholder As the Chair of the Remuneration Committee, and on behalf of the Board, I am pleased to present the Remuneration Committee Report for the year ended 31 December 2021. Plus500 is a corporate entity registered in Israel and is therefore not legally required to comply with the requirements applicable to a UK incorporated listed company. The Directors’ Remuneration Report, which will be put to shareholders’ vote (as an advisory vote) at the 2022 AGM, has been prepared with a view of the standards for a UK listed company, while making required adjustments in order to conform with the requirements under the Israeli law and market practices in Israel. To this end, our Directors’ Remuneration Report provides a short over- view of the new Directors’ Remuneration Policy which was approved by shareholders at the 2021 AGM held on 4 May 2021, with an excellent support of over 94% of the votes and the Annual Report on Remu- neration that sets out the remuneration paid in respect of performance in 2021. Going forward, shareholders’ approval will be sought for our Remu- neration Policy once every three years or earlier if a change to policy is required, as was sought in 2021 for the years 2021, 2022 and 2023. Shareholders will be aware that as an Israeli company we are required to obtain shareholder approval to the remuneration packages for our Executive Directors. If changes are made to the annual remuneration packages, shareholders’ approval will be sought. 74 Plus500 Ltd. 2021 Annual ReportRationale for proposed increase in remuneration of Chair of the Board The rationale for the Remuneration Committee’s proposed increased in the remuneration of Prof. Frenkel as Chair of the Board is set out below. Firstly, the Remuneration Committee has taken into account Prof. Frenkel’s more than 40 years of experience in global economics and in leading and advising major multi-national financial organisations and high-profile public sector institutions. In particular, he has significant, long-standing experience in the US financial, futures and capital markets, with a long track record of engaging with regulators and major govern- ment agencies and institutions in the US and around the world. His detailed biography can be found on page 52. Secondly, the Group is already benefiting from leveraging his substan- tial and established global relationship network. With this in mind, and given his significant leadership and contribution to Board meetings already in evidence over the last ten months, Prof. Frenkel is proving to be a significant asset to the Company in crafting its strategic objectives and advancing the development of its opera- tions. Some of the progress achieved by Plus500 in FY 2021 and in Q1 2022 would not have occurred without the leadership, guidance and contact network of Prof. Frenkel, in particular the Group’s significant progress made in the US futures and options on futures market during the year. The Remuneration Committee therefore believes that the proposed increase in Prof. Frenkel’s remuneration is appropriate for the level of value that he is providing, and will continue to provide, for the Group and its shareholders. Next steps The proposed increase in remuneration of the Non-Executive Directors of the Board, including those of Prof. Frenkel as an Independent Non- Executive Director and Chair of the Board, will be put to a shareholder vote at the Company’s 2022 AGM. Concluding remarks The Committee and I would like to thank our investors who had been supportive and approved our new remuneration policy. I am grateful for the engagement, feedback and support we have received from our shareholders as we have finalised these new remuneration arrangements. The Committee and the Board noted that two of the resolutions which were passed at the 2021 AGM had more than 20% of votes cast against them. These resolutions related to an advisory vote on the Directors’ Remuneration Report and a tax-related bonus payment regarding the Company obtaining a highly beneficial approval from the Israeli Tax Authority and the Israel Innovation Authority as a Preferred Techno- logical Enterprise. Business performance 2021 was another year of major operational, financial and strategic success for Plus500, building on its long-term track record of performance since the IPO in 2013. The Group delivered further positive momentum during the year, driven by another very strong year of customer acquisi- tion and retention, which ensured that Plus500’s operational and finan- cial performance was well ahead of pre-pandemic levels. While we have had to deal with the continued impact of COVID-19 in terms of managing our business, we have not been affected in the same way as many other businesses. The Company has not received any government support and none of the employees have been fur- loughed but have retained their normal remuneration arrangements with payment of bonuses in the usual way reflecting business perfor- mance for 2021. 2021 operation of policy Following a year of outstanding performance, the annual bonus targets were met in full with bonus payable to David Zruia of $1,590,000 and Elad Even-Chen of $1,590,000. Under the new policy, Share Appreciation Rights will no longer be awarded to the Executive Directors. Full details of the remuneration payable for 2021 performance and performance against targets is set out in the Annual Report on Remu- neration. The Committee is comfortable that the remuneration paid for 2021 is aligned to the strong performance in the year and investor returns. Proposed increase in fees for Chair and Non-Executive Directors Given the long-standing experience, high calibre and value creation being delivered by the Chair of the Board and its Non-Executive Direc- tors, the Remuneration Committee proposes to increase the remu- neration of the Chair of the Board and the remuneration of each of the Board’s Non-Executive Directors. Further details of these proposed changes can be found in the Notice of the 2022 Annual General Meeting, to be circulated by the Company to all shareholders in due course. Rationale for proposed increase in remuneration of Non-Executive Directors During FY 2021 and Q1 2022, the Group has significantly expanded its international operations, making an initial entry in the US for the first time, through two acquisitions, and by establishing a new operation in Europe through a new licence in Estonia and in Asia, through an acqui- sition in Japan. In addition, the Group is expected to establish further new operations in additional geographies over the next 12 months and into the future. With the expanded, and expanding, global operations of the Group, additional time, availability and attention is required of the Non-Exec- utive Directors. The Remuneration Committee therefore believes the remuneration increase being proposed is commensurate with the increased attention and time required of the Non-Executive Directors, to take account of an expanded and more globally diversified business. In addition, this proposed level of remuneration is appropriate and in line with US Non-Executive remuneration, which is relevant as several of the Board’s Non-Executive Directors are either based in the US or spend a significant amount of time there. 75 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsReport of the Remuneration Committee continued As mentioned in our 2020 Remuneration Committee Report, our Remu- neration Committee and Board resolved that payment of this one time bonus was advisable and in the interest of the Company on the basis of assessing the real value of this project while understanding that this particular project is not typically part of the on-going duties of a CFO. The Board is in no doubt that the Preferred Technological Enterprise status would not have been secured were it not for Elad Even-Chen’s enormous and unrelenting commitment to achieving it. The fact that these approvals for the years 2017, 2018, 2019, 2020 and 2021 were secured during the height of the COVID-19 pandemic when face to face meetings and discussions were not possible is all the more impressive. Following consultations made with shareholders ahead of our 2021 AGM, the Remuneration Committee excluded special, one-off bonuses in future Executive Remuneration plans in the Company’s updated Remu- neration Policy. A resolution to approve the updated Remuneration Policy was approved by over 94% of shareholders’ votes at the 2021 AGM. The Board always takes the outcome of shareholder votes seriously and, going forward, will continue its engagement and dialogue with shareholders and their representatives and will continue to consider related shareholder feedback, with a view to implementing this feedback, as appropriate. Lastly, given this will be my final report as Chair of the Remuneration Committee, I would like to say that it has been an honour to serve the Board, the Company and our shareholders in this important role over the last years. In that time, the Board’s approach to Remuneration has remained clear, rigorous and aligned with market practice. So, I hope to have left the Committee, and its practices and processes, in good shape for my successor, Anne Grim, to continue its positive work, for which I wish her the best of luck. Since the 2021 AGM results, the Board engaged with various shareholder advisory bodies and a number of shareholders, taking into account their feedback. Daniel King Chair of the Remuneration Committee 22 March 2022 76 Plus500 Ltd. 2021 Annual ReportAnnual report on remuneration 2021 This section of the Annual Report describes the implementation of the Terms of Reference, Israeli law requirements and the provisions of the Code. Committee responsibilities and activities The Remuneration Committee meets not less than twice a year and at such other times as required. The Remuneration Com- mittee has responsibility for determining, within the agreed terms of reference, the Companies Law provisions and subject to the remuneration policy of the Group, the Group’s policy on the remuneration packages of the Company’s Chief Executive Officer, Chief Financial Officer, the Chair of the Board and the other Non-Executive Directors, the Company Secretary and other senior executives determined by the Committee. The other key governance mandates of the Committee pursuant to the Companies Law and the written terms of reference of the Remuneration Committee are as follows: – Reviewing the remuneration policy and approving a Remu- neration Policy at least once in every three years; – Approving and recommending to the Board and, where appli- cable, the shareholders, the total individual remuneration pack- age of the Chair of the Board, each Executive and Non-Executive Director, the Chief Executive Officer, Chief Finan- cial Officer and other office holders (including bonuses, incen- tive payments and share options or other share awards); – In determining remuneration policies for the Company’s senior management and/or individual remuneration packages of each Executive Director, the Chair of the Board and other designated senior executives, the Remuneration Committee is required to give regard to the relevant legal and regulatory requirements, the provisions of the Companies Law, the provisions and recom- mendations of the Code and associated guidance; – Approving and determining the targets for any performance- related pay schemes; and – Reviewing the design of all share incentive plans for approval by the Board and (if required or deemed appropriate) the share- holders. The Committee approved its new terms of reference in 2021 (which are available on the Company’s website). Committee composition The Code recommends a remuneration committee to consist of at least three members and that all of its members be Non- Executive Directors, independent in character and judgement and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgement. The Companies Law requires a remuneration committee to con- sist of at least three members, and all of the External Directors must be members of the committee (one of which to be appointed as the chair) and constitute the majority thereof. The remaining members must be Directors who qualify to serve as members of the Audit Committee as defined in the Companies Law and whose compensation is in accordance with the compensation require- ments applicable to the External Directors. The Chair of the Remu- neration Committee must be an External Director. The Remuneration Committee comprises four independent Non-Executive Directors: Daniel King, Anne Grim, Sigalia Heifetz and Tami Gottlieb and is chaired by Daniel King. Sigalia Heifetz and Tami Gottlieb joined the Committee on 4 February 2021 and 16 March 2021, respectively. Daniel King, Anne Grim and Tami Gottlieb are considered External Directors under the Com- panies Law. Upon Daniel King’s end of tenure in June 2022, Anne Grim, who qualifies to serve as the Chair of the Remuneration Committee under the Companies Law (being an External Direc- tor) and under the Code (having served on the Committee for more than twelve months), will chair the Remuneration Com- mittee. Details of the skills and experience of the Remuneration Committee members can be found on pages 52 – 53. Committee attendance (in FY 2021) REMUNERATION COMMITTEE Daniel King (Chair) Anne Grim Sigalia Heifetz1 Tami Gottlieb2 Past members Steve Baldwin3 Charles Fairbairn4 SCHEDULED MEETINGS ELIGIBLE TO ATTEND SCHEDULED MEETINGS ATTENDED 3 3 3 3 1 0 3 (100%) 3 (100%) 3 (100%) 2 (67%)5 1 (100%) 0 1. Sigalia Heifetz was appointed as a member of the Committee on 4 February 2021. 2. Tami Gottlieb was appointed as a member of the Committee on 16 March 2021. 3. Steve Baldwin stepped down from the Committee on 12 May 2021, follow- ing the Board’s decision that the Remuneration Committee comprise up to four members, to ensure an appropriate balance of Board members on each Board Committee. 4. Charles Fairbairn stepped down from the Committee on 3 February 2021, prior to any scheduled meeting of the Committee. 5. Tami Gottlieb was unable to attend one Committee meeting due to illness. 77 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsReport of the Remuneration Committee continued A summary of the major activities and decisions of the Committee in 2021 is set out below: Salary/base service fees Bonus Long Term Incentive Plans (“LTIPs”)/ Restricted Share Units (“RSUs”) 2021 internal Committee evaluation Governance – Executive Directors’ remuneration review. – Review and approval of Non-Executive Directors’ fees and recommendations to our shareholders and obtain- ing a benchmark from a leading consultant on this issue. – Review and approval of Chair’s fees and recommenda- tions to our shareholders. – Review of senior management fees. – Review of the performance of the Chief Executive Officer and the Executive Directors compared to the targets set and approval of annual bonus awards for 2021 based on performance targets. – Review of Executive Directors’ 2021 LTIP and RSU plans (including addition of KPIs). – Review of updated clawback and malus provisions. – Discussion and assessment of the 2020 and 2021 internal Remuneration Committee evaluation findings. – Review of corporate governance and determining appro- priate levels of disclosure for the 2021 Directors’ Remu- neration Report. – Review of 2021 AGM season remuneration report results, and investor and shareholder advisory bodies’ views on remuneration. – Review of the Committee’s terms of reference in light of the Code and the Companies Law. – Review of 2021 Remuneration Committee Report which is included within this Annual Report. – Review of 2021 Directors’ Remuneration Report which is included within this Annual Report. Other – Review of remuneration consultant costs and appoint- ment. – Review of workforce remuneration policies and com- parison of such policies with senior management policies. – Review talent pipeline and its remuneration. The Company Secretary ensures that the Remuneration Committee fulfils its duties under the Companies Law and its terms of reference and provides regular updates to the Remuneration Committee on rel- evant regulatory developments in the UK, information on Israeli market trends and compensation structures on a broader Group level. Remuneration policy Pursuant to the Companies Law, all public Israeli companies, including companies whose shares are only publicly traded outside of Israel, such as the Company, are required to adopt a written remuneration policy for their Directors and Executives, which addresses certain items prescribed by the Companies Law. The adoption, amendment and restatement of the policy is to be recommended by the Remuneration Committee and approved by the Board and the Company’s shareholders. As mentioned above, the Committee has undertaken a thorough and comprehensive review of the remuneration policy and operation, con- cluded in Q1 2021 with the support of external advisors Korn Ferry. Following the review, the Committee and the Board resolved to bring an amended Remuneration Policy for the approval of the Company’s shareholders at its 2021 AGM. In developing the new Remuneration Policy, the Remuneration Com- mittee consulted with major shareholders (covering over 50% of the issued share capital) for their views on the proposals and also engaged with shareholder advisory bodies. Based on the independent advice received from Korn Ferry, as well as the feedback received from the major shareholders and the shareholder advisory bodies. Following this process, our new Remuneration Policy was approved by sharehold- ers at the 2021 AGM on 4 May 2021. The new remuneration policy and operation of policy for the years 2021, 2022 and 2023, provides some far-reaching changes from the previous policy and operation to ensure that we are making significant strides to align to a UK norm. The Committee is however cognisant of distinct sector and market dynamics in Israel where Plus500 is headquartered, the competition over talent in the Israeli marketplace and in the sector as a whole. It would also like to emphasise that the changes made to the policy have a significant impact on the way in which the current Executive Directors are paid. The Committee will therefore continue its journey over future policy reviews, keeping the approach and the struc- ture of the Executive Directors’ packages under review but very much hopes that investors will be supportive of the substantial progress that has been made in moving towards a UK norm at this time. Amongst other matters, the new Remuneration Policy for Executive Directors provides for the: – Reduction of incentive quantum and rebalancing from short-term to long-term incentives; – Changes to the annual bonus structure which includes a reduction of the maximum bonus opportunity and moving the entire deferred bonus element into shares; – Removal from the policy of the ability to pay discretionary bonuses; and – Changes to the long-term incentive structure which includes removal of the Share Appreciation Rights long-term incentive which pays out 100% in cash, replacing this with performance shares. 78 Plus500 Ltd. 2021 Annual ReportStakeholder engagement Employees The Board regularly communicates with and receives feedback from the Group’s employees through a variety of channels. Steve Baldwin, as the designated Non-Executive Director dedicated to workforce engagement, meets on a yearly basis with the Group’s workforce and at such meetings employees have the opportunity to share their views, including on executive and employee remuneration. In addition, employees can contact Steve Baldwin directly via email on matters they wish to discuss with him or with the Board. Steve Baldwin also regularly communicates with the senior management who have connections with other stakeholders of the Company, such as custom- ers and suppliers. Steve reports any key messages deriving from such conversations to the Board and ensures that such messages are con- sidered as part of the Board’s decision-making process. The Company is not obliged to comply with Section 172 of the UK Companies Act 2006. Plus500 holds regular employee workshops and briefings on a variety of topics and conducts round table discussions with its employ- ees worldwide. The Company seeks to consider and act on employee feedback and is committed to ensuring that its remuneration structures are supported by its employees. The Company is also continually working to develop best practice in line with the Code and is considering whether additional channels of employee communication are required in order to better develop employee engagement and foster stronger connections with its workforce. Shareholders The Chair of the Board and the Chair of the Remuneration Committee are in regular communication with shareholders of the Company on a variety of matters and are grateful for shareholders’ engagement and feedback. As mentioned in the Remuneration Committee Chair’s Statement and the section above on our remuneration policy, in developing the new Policy, the Committee consulted with major shareholders (covering over 50% of the issued share capital) for their views on the proposals and also engaged with other shareholder advisory bodies. Feedback from investors has been positive overall noting the substantial changes made. Investors have also understood that there is a small number of matters that are not fully aligned with UK investor expectations and that the Committee will look to review again these matters over the policy period and at the latest at the next policy renewal due in FY 2024. Following initial feedback, the Committee refined certain aspects of its original proposals and is grateful for investor feedback on these matters. Following this shareholders’ engagement, the Remuneration Commit- tee excluded special, one-off bonuses in future Executive Remuneration plans in the Company’s Remuneration Policy. A resolution for this updated Remuneration Policy was approved by over 94% of sharehold- ers’ votes cast at the 2021 AGM. The Board always takes the outcome of shareholder votes seriously and, going forward, will continue its engagement and dialogue with shareholders and their representatives and will continue to consider related shareholder feedback, with a view to implementing this feedback, as appropriate. Approach to recruitment and remuneration of Executive Directors Plus500 believes that strong, effective leadership is fundamental to its continued growth and success in the future. This requires the ability to attract, retain, reward and motivate highly-skilled Executive Directors, with the competencies needed to excel in a rapidly changing market- place and to continually motivate their employees. When setting remuneration packages for new Executive Directors, pay will be set in line with the remuneration policy of the Company. Several factors will be considered, including: the geography in which the role competes or is recruited from; the candidate’s experience and skills; the remuneration levels of other Executive Directors and colleagues in peer companies in Israel and in the international market; market stand- ards and norms in the UK and the international markets. If necessary, Executive Directors may be provided with contributions towards relocation expenses, housing, school fees etc., but for no more than necessary. Non-Executive Directors Non-Executive Directors are appointed for a one-year term and are subject to re-election at each AGM. Notwithstanding, External Directors are appointed by shareholders for a three-year term and are subject to re-election by shareholders at an EGM or AGM every three years. The term of office can be terminated by the Non-Executive Director with two months’ written notice, or by the Company with immediate effect if the Non-Executive Director is not re-elected or is otherwise removed from office in accordance with the Articles. Notwithstanding, External Directors’ service may be terminated by the Company only in such circumstances and manner provided under the Companies Law. Upon termination no additional payments are due. According to the Companies Law, the appointment of External Directors is for a period of three years from the date of appointment by the Company’s shareholders (which may be extended for two more three- year terms). 79 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsReport of the Remuneration Committee continued The table below details the date and period of appointment of each Non-Executive Director NAME POSITION DATE OF APPOINTMENT TO THE BOARD OF DIRECTORS DATE OF RE-APPOINTMENT TO THE BOARD OF DIRECTORS PERIOD OF APPOINTMENT Prof. Jacob A. Frenkel Independent Non-Executive Director and Chair May 2021 Senior Independent Non-Executive Director and External Director September 2020 Anne Grim Daniel King Independent Non-Executive Director and External Director Steve Baldwin Independent Non-Executive Director Sigalia Heifetz Independent Non-Executive Director Tami Gottlieb Independent Non-Executive Director and External Director Prof. Varda Liberman Independent Non-Executive Director June 2013 June 2017 February 2021 March 2021 March 2022 N/A N/A June 2019 May 2021 May 2021 N/A 1 year 3 years 3 years 1 year 1 year 3 years N/A until the 2022 AGM The table below details the date and period of appointment of each Executive Director presiding NAME David Zruia POSITION Executive Director Elad Even-Chen Executive Director DATE OF APPOINTMENT TO THE BOARD OF DIRECTORS DATE OF RE-APPOINTMENT TO THE BOARD OF DIRECTORS April 2020 June 2016 May 2021 May 2021 PERIOD OF APPOINTMENT 1 year 1 year 80 Plus500 Ltd. 2021 Annual ReportDirectors’ Remuneration Report Annual report on remuneration 2021 Introduction This report sets out information about the remuneration of the Directors, including the Chief Executive Officer and the Chief Financial Officer of the Company, for the year ended 31 December 2021. Audited information – Directors’ remuneration – 1 January 2021 to 31 December 2021 Single figure of remuneration The detailed emoluments received by the Executive and Non-Executive Directors during the year ended 31 December 2021 are detailed below. The information provided in the section and accompanying notes has been audited by Kesselman & Kesselman, a member firm of Pricewater- houseCoopers International Limited. SALARY/BASE SERVICE FEES7 OTHER EXPENSES8 TOTAL FIXED PAY ANNUAL BONUS LTIPs/RSUs SHARE APPRECIATION RIGHTS TOTAL VARIABLE PAY TOTAL (US$000) 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Executive Directors David Zruia Elad Even-Chen Non-Executive Directors 636 636 319 498 220 142 87 – Jacob A. Frenkel1 (Chair) 4729 N/A Anne Grim2 Daniel King Steve Baldwin Tami Gottlieb3 Sigalia Heifetz4 Past Non-Executive Directors Penny Judd5 Charles Fairbairn6 100 103 103 84 98 36 88 88 N/A N/A 71 57 194 153 – – – – – – – – – – – – – – – – 856 778 472 100 103 103 84 98 N/A 36 88 88 N/A N/A 71 57 194 153 406 1,590 1,015 – 498 1,590 1,972 265 – – – – – – – – – – – – – – – – – – – – 752 964 1,590 1,767 2,446 2,173 1,855 2,936 2,633 3,434 – – – – – – – – – – – – – – – – – – – – – – – – 472 100 103 103 84 98 N/A 36 88 88 N/A N/A 71 57 194 153 – – – – – – – – – – – – – – – – – – – – – – – – 1. Prof. Jacob A. Frenkel was appointed as a Non-Executive Director and Chair of the Board at the 2021 AGM held on 4 May 2021. 2. Anne Grim was appointed as a Non-Executive Director and External Director on 16 September 2020. 3. Tami Gottlieb was appointed as a Non-Executive Director and External Director on 16 March 2021. 4. Sigalia Heifetz was appointed as a Non-Executive Director on 4 February 2021. 5. Penny Judd stepped down from the Board at the 2021 AGM held on 4 May 2021. 6. Charles Fairbairn stepped down from the Board at the 2021 AGM held on 4 May 2021. 7. The remuneration terms comprised of a salary for David Zruia and service contract fees for Elad Even-Chen (the “base service fees”). 8. Includes social and other contractual related expenses. 9. An amount of ILS 345,000 was paid by allotment of ordinary shares of the Company. General notes: (a) Prof. Varda Liberman was appointed as a Board member in March 2022, thus she is not included in the above table which relates to FY 2021. (b) No Restricted Share Units (“RSUs”) awards had performance periods ending in the financial years ended on 31 December 2021 and 2020. (c) In line with the UK reporting regulations, LTIP awards shall be reported in the year that the performance period ends with the value of the award on grant date. No LTIP awards presented accordingly in the financial year ended on 31 December 2020. 81 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statements Directors’ Remuneration Report continued Executive Director’s service contract Elad Even-Chen, an Executive Director, provides his consulting services to the Company pursuant to a service contract. The terms of his service contract are summarised below. Elad Even-Chen – Chief Financial Officer The consulting services of Elad Even-Chen are provided to the Company through Elad Even-Chen Consulting Services Ltd., pursuant to the service contract entered into by the parties. Elad Even-Chen Consulting Services Ltd. is also entitled to participate in a bonus, legacy SAR entitle- ments, LTIP schemes and other contractual related expenses on terms decided by the Remuneration Committee for specific projects provided by the consultant. Commentary on the single figure table Base salary, base service fees and social and other contractual related expenses David Zruia’s base salary in 2021 was ILS 2,060,000 as approved by the AGM on 4 May 2021. Elad Even-Chen’s base service fees in 2021 was ILS 2,060,000 as approved by the AGM on 4 May 2021. Annual Bonus The 2021 annual bonus for the Executive Directors was determined based on the achievement of the performance measures and targets set out below: FINANCIAL METRICS EPS 40% WEIGHTING OBJECTIVES PERFORMANCE Actual basic EPS for FY 2021 is $3.06 ACHIEVEMENT (% OF MAXIMUM) 100% Revenue 20% Actual Revenue for FY 2021 is $718.7m 100% Achievement of an EPS growth rate. Target EPS threshold of $1.98. Minimum threshold is 15% lower EPS from the target threshold EPS and the maximum payout is made for reaching a 15% increase from the target threshold, calculated on a linear basis. Achievement of revenue growth rate. Target revenue threshold of $438.7m. Minimum threshold is 15% lower revenue from the target threshold revenue and the maximum payout is made for reaching a 15% increase from the target threshold, calculated on a linear basis. Total 60% 100% The Committee carefully assessed performance against objectives set for the annual bonus and noting exceptionally strong performance against all of the objectives set, determined full achievement of the objectives. The details of some of the specific targets and performance against them are not disclosed as the Board believes they are commercially sensi- tive. They will remain market sensitive because they are an integral part of our on-going business operations. The Remuneration Committee has provided as much information as it is able, given the nature of the objectives, so that investors can be com- fortable that the Remuneration Committee has used a thorough approach in setting the objectives and targets and measuring the outcome. 82 Plus500 Ltd. 2021 Annual ReportNON-FINANCIAL METRICS WEIGHTING OBJECTIVES Operational 40% Total 40% Achievement of operational targets comprise three elements: Customers and Systems, Operations and Risk & Regulation PERFORMANCE Parameters achieved for 2021 ACHIEVEMENT (% OF MAXIMUM) 100% 100% Based on the performance described above the Committee agreed the following 2021 bonus awards based on 100% of the maximum opportunity. 2021 bonus awards (US$000) David Zruia Elad Even-Chen CASH BONUS 1,060 1,060 BONUS ALLOCATED IN SHARES 530 530 TOTAL ANNUAL BONUS 1,590 1,590 MAXIMUM OPPORTUNITY AS PERCENTAGE OF ANNUAL SALARY/BASE SERVICE FEES* 250% 250% * Percentage calculation based on annual employment/contractual agreements in ILS. An amount equal to 33.33% of the Annual Bonus achieved was paid by way of allotment of ordinary shares of the Company on 31 December 2021. The number of ordinary shares allotted on the payment date were calculated based on the ordinary share price at 1 January 2021, as adjusted for dividends. Share Appreciation Rights (“SARs”) SARs are a deferred cash settled award subject to providing continued service or employment over long-term periods and tied to the long-term performance of the Company’s ordinary shares. As of FY 2021 and FY 2022 there are no new SARs entitlements for Executive Directors. In respect of FY 2020 SARs granted on 31 December 2019, the remuneration package to David Zruia included SARs granted in the amount of $634,737 (ILS 2,200,000) in December 2019 and will be vested after three years in December 2022. The remuneration package to Elad Even-Chen included SARs granted in the amount of $721,293 (ILS 2,500,000) in December 2019 and will be vested after three years in December 2022. 83 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsDirectors’ Remuneration Report continued 2021 LTIP/RSUs Awards Scheme interests awarded during the year ending 31 December 2021 Executive Directors were granted Long Term Incentive Plan (“LTIP”) and Restricted Share Units (“RSUs”) Grants in respect of 2021 which will vest after three years to the extent performance targets and KPIs have been achieved, as summarised in the table below. PERFORMANCE MEASURE WEIGHTING THRESHOLD (25% OF MAX) TARGETS Relative TSR vs bespoke group Relative TSR vs FTSE 250 EPS Strategic Operational 20% 10% 30% 20% 20% Median Median Subject to achieving EPS target, as set by the Board Subject to achieving strategic objectives, as set by the Board and related to growth through M&A, new products and new markets Subject to achieving operational objectives, as set by the Board and related to customer growth and people objectives The details for the LTIPs and RSUs awards granted to each Executive Director are shown below. MAXIMUM (100% OF MAX) Median plus 10% p.a. Upper Quartile David Zruia Elad Even-Chen GRANT DATE 1 January 2021 1 January 2021 NUMBER OF SHARES GRANTED FACE VALUE OF THE AWARD (USD) MAXIMUM OPPORTUNITY AS PERCENTAGE OF ANNUAL SALARY/BASE VESTING DATE SERVICE FEES1 80,856 80,856 1,597,791 31 December 2023 1,597,791 31 December 2023 250% 250% 1. Percentage calculation based on annual amounts of the contractual agreements in ILS. General notes: (a) Face value of the award and the number of shares granted on grant date are calculated with reference to share price on 1 January 2021 of 1,450 GBP pence and FX rate USD/ILS of 3.223. (b) David Zruia’s award is structured as RSUs, in accordance with the provisions of the Capital Gain route under Section 102 of the Israeli Tax Ordinance. The ordinary shares allotted on the vesting date, which are subject to a lock-up period, shall be subject to a two-year lock-up beginning on the vesting date. On the vesting date the Company shall allot to the employee or service contractor, ordinary shares, subject to the service condition and achiev- ing specific KPIs as described in the table above for each grant. The number of ordinary shares allotted on the vesting date shall be calculated based on the ordinary share price at grant date as specified in the table above for each plan, as adjusted for dividends. An amount equal to the applicable tax liability connected to the LTIPs, RSUs and annual bonus deferred in shares plans shall be added by way of gross-up and be paid in cash to fund the tax liability. The allotted ordinary shares will be transferred out of the treasury shares of the Company. The 2019 LTIP Grant was subject to service condition and was not subject to any additional KPIs or conditions. The 2019 LTIP Grant was vested on 31 December 2021 and the Company issued 19,111 of its treasury shares. Payments to past Directors and payments for Loss of Office Non-Executive Directors Penny Judd and Charles Fairbairn both stepped down from the Board at the 2021 AGM held on 4 May 2021. They were not entitled to and subsequently did not receive any payment for Loss of Office. All amounts paid are set out in the Single figure of remuneration table. 84 Plus500 Ltd. 2021 Annual ReportFurther information on 2021 remuneration Directors’ shareholdings and share plan interests Summary of Directors’ shareholdings and share plan interests as at 31 December 20211. OUTSTANDING SCHEME INTERESTS AS AT 31/12/2021 BENEFICIAL OWNERSHIP IN SHARES SUBJECT TO PERFORMANCE CONDITIONS WITHOUT PERFORMANCE CONDITIONS AS AT 1 JANUARY 2021 AS AT 31 DECEMBER 20212 100,726 119,430 – 27,324 – – – – – – – – – – – – – – – – 17,000 54,100 N/A5 – 27,169 – N/A6 N/A7 25,691 55,000 46,031 184,075 5,424 – 30,993 – – – 25,6918 55,0009 SHAREHOLDING REQUIREMENT (% OF SALARY/BASE SERVICE FEES) CURRENT SHAREHOLDING AS AT 31/12/2021 (% OF SALARY/BASE SERVICE FEES) 200% 200% 128% 511% – – – – – – – – – – – – – – – – Executive Directors David Zruia Elad Even-Chen3 Non-Executive Directors Jacob A. Frenkel Anne Grim Daniel King Steve Baldwin Tami Gottlieb Sigalia Heifetz Past Non-Executive Directors Penny Judd4 Charles Fairbairn As of 31 December 2021, none of the presiding Board members held more than 0.18% in the Company’s issued share capital. 1. Save as disclosed above, none of the Directors has any interest in the share capital of the Company or of any of its subsidiaries nor persons connected to the Directors (within the meaning of s.252 of the Companies Act) have any such interest, whether beneficial or non-beneficial. 2. As at 31 December 2021 and up to the date of this Annual Report. 3. The shares are registered in the name of Elad Even-Chen Consulting Services Ltd. or Elad Even-Chen. 4. The shares are registered in the name of Penny Judd’s spouse, Julian Judd. 5. Prof. Jacob A. Frenkel was appointed as a Director on 4 May 2021. 6. Tami Gottlieb was appointed as a Director on 16 March 2021. 7. Sigalia Heifetz was appointed as a Director on 4 February 2021. 8. Penny Judd shareholding as at date when stepped down from the Board, 4 May 2021. 9. Charles Fairbairn shareholding as at date when stepped down from the Board, 4 May 2021. 10. Gal Haber shareholding as at date when stepped down from the Board, 4 January 2021. General notes: (a) Prof. Varda Liberman was appointed as a Board member in March 2022, thus she is not included in the above table which relates to FY 2021. Also, as of the date of this Annual Report she does not hold any beneficial ownership in shares. (b) Outstanding scheme interest as at 31 December 2021 include 2020 and 2021 LTIP/RSU awards that have not vested, and vested deferred bonus for 2019 and 2020. (c) Beneficial ownership in shares include all share plan interests together with any holdings of ordinary shares. (d) Current shareholding as at 31 December 2021 as a % of salary/base service fees were calculated based on share price as at 31 December 2021 of and FX GBP/ILS as of that date. (e) There have not been any changes in Directors’ beneficial ownership in shares of the Company between 31 December 2021 and the date of this Annual Report. (f) Gal Haber held 2,069,769 shares as at the date when steeped down from the Board, 4 January 2021. 85 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsDirectors’ Remuneration Report continued Performance graph and table Plus500 was admitted to the Alternative Investment Market of the London Stock Exchange on 24 July 2013. Following a period of sustained growth, the Company applied for Admission to the Main Market which became effective on 26 June 2018. The chart below shows the TSR performance of £100 invested in Plus500 at IPO vs performance of the FTSE All Share index. As part of the Company’s continued commitment to strengthen corporate governance, the reporting of Directors’ remuneration in 2021 is being aligned to a greater extent with the regulations applicable to a UK incorporated company. This disclosure will be built up over the coming years in line with these requirements. TSR performance of £100 invested in Plus500 at IPO vs performance of the FTSE All Share index £3,000 £2,500 £2,000 £1,500 £1,000 £500 £0 Plus500 FTSE AllShare index 31 Dec 2012 31 Dec 2013 31 Dec 2014 31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018 31 Dec 2019 31 Dec 2020 31 Dec 2021 CEO single figure total remuneration ($000s) Annual bonus achieved for 2021 (as % of maximum opportunity) 2021 2,446 100% Relative importance of the spend on pay The following table sets out the change in dividends and overall spend on pay in the years ended 31 December 2021 and 2020. US$ IN MILLIONS Total gross employee and other related expenses pay Dividends Share buybacks * Includes the increase of the Group number of employees and service contractors. 2020 50.8 141.6 88.8 2021 58.9 144.9 64.9 PERCENTAGE CHANGE 16%* 2% (27%) Non-Executive Directors’ letters of appointment On their initial appointment, each of the Non-Executive Directors (who are not External Directors) signed a letter of appointment with the Company, for an initial period commencing upon the date of their appointment by the Board and ending on the date of the next AGM (and with respect to External Directors – ending on the date which is three years from the date of their appointment). The letters of appointment of Prof. Jacob A. Frenkel, Steve Baldwin, Sigalia Heifetz and Prof. Varda Liberman as Non-Executive Directors require them to retire and be subject to re-election at each Annual General Meeting in accordance with Provision 18 of the Code. The letters have been drafted such that renewed appointment will not necessitate a new letter of appointment. The appointments of Prof. Jacob A. Frenkel, Steve Baldwin, Sigalia Heifetz and Prof. Varda Liberman can be terminated by the Non-Executive Director with two months’ written notice, or by the Company with immediate effect if the Non-Executive Director is not re-elected or is otherwise removed from office in accordance with the Articles. 86 Plus500 Ltd. 2021 Annual ReportAs required under, and subject to the Companies Law, the appointments of Daniel King, Anne Grim and Tami Gottlieb as External Directors are for a period of three years from the date of appointment (which may be extended for two more three-year terms). Daniel King was re-elected for a third and final three-year term effective from the 2019 AGM held in June 2019. Consequently, his nine-year term will end in June 2022. Anne Grim was elected for her first three-year term effective from the 2020 AGM held in September 2020. Tami Gottlieb was elected for her first three-year term effective from the 2021 Extraordinary General Meeting held in March 2021. Tami Gottlieb is currently an External Director of Bank Leumi Le’Israel Ltd., an External Director of Extell Limited and a Non-Executive Director of Emilia Development (O.F.G) Ltd. Prof. Varda Liberman is currently an External Director of Cellcom Israel Ltd. and Aquarius Engines (A.M) Ltd. Non-Executive Director fees The current annual fees for our presiding Non-Executive Directors are as follows: Each Non-Executive Director is expected to commit to a minimum of 24 days per year in fulfilling their duties as a Director of the Company. NAME Jacob A. Frenkel ROLE Chair Other than the External Directors, there are no existing or proposed service contracts or consultancy agreements between any of the Directors and the Company which cannot be terminated by the Company within 12 months without payment of compensation. Copies of the letters of appointment of the Chair and the other Non- Executive Directors of the Company are available for inspection at the Company’s registered office during normal business hours. The Chair and Non-Executive Directors do not participate in any long- term incentive or annual bonus schemes, nor do they accrue any pension entitlement. The Chair’s current remuneration is as detailed in the 2021 AGM Notice as published on 25 March 2021. Further details with respect to the decision of our Remuneration Committee and Board to increase the remuneration of both cash and shares paid to our Chair, subject to shareholders approval, are included in the Notice of the 2022 Annual General Meeting to be circulated by the Company to all share- holders in due course. In addition, there are more stringent regulations around the exact roles of Non-Executive Directors. The Audit and Remuneration Committees’ Chair must be External Directors who once appointed serve for three years (which may be extended for two more three-year terms) but are then restricted from becoming the Chair of the Board or holding any paid role at the Company for two years after they leave the Board. External board appointments Where Board approval is given for an Executive Director to accept an outside non-executive directorship, the individual is entitled to retain any fees received. The Board assesses and confirms that such appoint- ment will not have any material impact on the performance of the Director, and will not affect the Director’s commitments and duties as a Director of the Company. Below are the details of external Board memberships of the Company’s NEDs, in publicly listed companies, as of the date of this Annual Report: Steve Baldwin is currently Chair of TruFin Plc and a Non-Executive Director of The Edinburgh Investment Trust Plc. Prof. Jacob A. Frenkel is currently the Chair of BrainStorm Cell Thera- peutics Inc., a NASDAQ publicly listed biotechnology company. Anne Grim is currently a Non-Executive Director of Metro Bank Plc and Insight Investment Management (subsidiary of Bank of New York Mel- lon, a NYSE publicly listed company). Sigalia Heifetz is currently a Non-Executive Director of RHI Magnesita N.V, Clal Biotechnology Industries Ltd, Maman - Cargo Terminals and Handling Ltd. and Tamar Petroleum Ltd. Anne Grim Daniel King Steve Baldwin Tami Gottlieb Sigalia Heifetz NED & SID, External Director NED, External Director NED NED, External Director NED FEE £350,000 £75,000 £75,000 £75,000 £75,000 £75,000 For further details with respect to the structure of the remuneration paid to our Chair please refer to our 2021 AGM Notice published on 25 March 2021. Further details with respect to the decisions of our Remuneration Committee and Board to increase the fees paid to our presiding Non- Executive Directors (and to approve the same fees to our newly appointed Director, Prof. Varda Liberman) and to increase the fees paid to our Chair, all subject to shareholders approval, are included in the Notice of the 2022 Annual General Meeting to be circulated by the Company to all shareholders in due course. External advisors From 17 November 2020 and during Q1 2021, and in respect of the 2020 Annual Report and 2021 Remuneration Policy, the Remuneration Committee received independent advice from Korn Ferry LLC on the Remuneration Policy review and market practice. Korn Ferry is a signa- tory to the Remuneration Consultants’ Code of Conduct and has con- firmed to the Committee that it adheres in all aspects to the terms of the Code. The Remuneration Committee is satisfied that the advice provided by Korn Ferry LLC in relation to remuneration matters is objec- tive and independent. In February 2022, the Committee appointed Ernst & Young Global Limited (EY) as an independent advisor to carry out a detailed bench- marking exercise in relation to the proposed increase in the remunera- tion of Prof. Jacob A. Frenkel as an Independent Non-Executive Director and Chair of the Board, to be voted on at the Company’s 2022 AGM. The Remuneration Committee is satisfied that the advice provided by EY in relation to this remuneration matter is objective and independ- ent. 87 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsDirectors’ Remuneration Report continued Statement of voting on remuneration at 2021 meetings The table below shows votes cast by proxy at the EGM held on 16 March 2021 and the AGM held on 4 May 2021 in respect of the Directors’ remuneration. AGM RESOLUTIONS Renew Remuneration Policy Approve fees to Jacob Frenkel Approve remuneration terms for David Zruia Approve remuneration terms for Elad Even-Chen Approve a tax bonus payment to Elad Even-Chen FOR % VOTES CAST AGAINST % VOTES CAST VOTE WITHHELD 53,681,868 57,154,752 48,829,840 55,226,737 31,678,733 94.46 99.97 85.42 96.61 55.24 59.17 3,150,107 14,603 8,336,335 1,939,438 25,670,302 23,413,830 5.54 0.03 14.58 3.39 44.76 40.83 337,200 – 3,000 3,000 – 4,267 Advisory vote – Approve the Directors’ Remuneration Report 33,930,938 EGM RESOLUTIONS Approve fees to Tami Gottlieb Approve increase in fees to Anne Grim Approve fees to Sigalia Heifetz FOR % VOTES CAST AGAINST % VOTES CAST VOTE WITHHELD 53,565,509 53,565,509 53,565,509 99.98 99.98 99.98 8,071 8,071 8,071 0.02 0.02 0.02 11,967 11,967 11,967 Most highly remunerated executives in 2021 The table below shows the remuneration of the Company’s five most highly compensated executives in 2021 (including two Executive Directors): NAME Elad Even-Chen David Zruia Ari Shotland Nir Zatz Alon Cohen Naznin 2021 FEES ($) 2,633,136 2,445,808 1,856,978 1,558,037 1,169,652 Implementation of policy in 2022 2022 Executive Directors’ remuneration In Q1 2021 the Remuneration Committee has continued its efforts to modify the remuneration arrangements of the Executive Directors to bet- ter align executive compensation with UK governance standards followed by Main Market-listed companies and move further towards a struc- ture in line with investor expectations and developments in best practice. The remuneration for Executive Directors for FY 2022 remained the same as it was in FY 2021. The Company’s new remuneration policy was approved by the shareholders for the years FY 2021, FY 2022 and FY 2023 at the 2021 AGM and received over 94% approval. This report has been approved by the Board of Directors of Plus500 Limited. Signed on behalf of the Board Daniel King Chair of the Remuneration Committee 22 March 2022 88 Plus500 Ltd. 2021 Annual ReportDirectors’ Report The Directors of Plus500 present their report for the year ended 31 December 2021. The Directors believe that the requisite components of this report are set out elsewhere in this Annual Report and/or on the Company’s website (www.plus500.com). The table below sets out where the necessary disclosure can be found. Directors Results and dividends Articles of Association Share Capital Directors that have served during the year and summaries of the current Directors’ key skills and experience are set out on pages 52 – 53 and on page 63. Results for the year ended 31 December 2021 are set out in the financial and business review on pages 38 – 40 and the Consolidated Statement of Comprehensive Income on page 98. Information regarding the final and special divi- dends can be found in the financial review on page 40. Dividend payments made during the year ended 31 December 2021 can be found in the notes to the Consolidated Financial Statements on page 115. The Company’s full Articles of Association can be found on the Company’s website. https://cdn.plus500.com/media/Investors/ConstitutionalDocuments/ArticlesOfAssociation.pdf Any amendments made to the Articles of Association may be made by a special resolution of shareholders. Details of the Company’s share capital are set out in note 22 to the Consolidated Financial Statements on page 118. At the close of business on 21 March 2022, the Company had 99,598,282 ordinary shares in issue, and an additional 15,290,095 ordinary shares are held in treasury by the Company. Authority to purchase own shares The Company has authority to purchase its own shares and a further authority will be sought at the upcoming Annual General Meeting. Directors’ interests Details of the Directors’ beneficial interests are set out in the Directors’ Remuneration Report on page 85. Directors’ indemnities The Company has given indemnities to each of the Directors in respect of any liability arising against them in connec- tion with the Company’s (and any associated company’s) activities in the conduct of their duties. These indemnities are subject to the conditions set out in their indemnification agreements and remain in place at the date of this report. Directors’ and Officers’ Liability Insurance Directors’ and Officers’ Liability Insurance cover is in place at the date of this report. Cover is reviewed annually and the last renewal was carried out in October 2021. Major interests in shares Notifiable major shares interests of which the Company has been made aware are set out on page 59. Political contributions The Company did not make any donations to political organisations during the year. Equality, Diversity & Inclusion policy In December 2021 the Company reapproved and published on its website its policy on equality & diversity. https://cdn.plus500.com/media/Investors/CorporateGovernance/EqualityDiversityAndInclusionPolicy.pdf Financial risk Details of the Company’s policies on financial risk management and the Company’s exposure to market price risk, credit risk, liquidity risk and cash flow risk are out-lined in note 25 to the Consolidated Financial Statements. Research and Development Details about the Company’s future developments can be found in the Strategic Report on pages 7 – 11. Auditors A resolution to reappoint Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited as external auditors will be proposed at the 2022 Annual General Meeting. Post balance sheet events There have been no post balance sheet events. Audit information Each of the Directors at the date of the approval of this report confirms that: – so far as he/she is aware, there is no relevant audit information of which the Company’s auditors are unaware; and – he/she has taken all the reasonable steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of the information. 89 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsDirectors’ Report continued Listing Rule 9.8.4R disclosures The table below sets out where disclosures required in compliance with Listing Rule 9.8.4R are located. Interest capitalised and tax relief Publication of unaudited financial information Details of long-term incentive schemes Waiver of emoluments by a Director Waiver of future emoluments by a Director Non pre-emptive issues of equity for cash Non pre-emptive issues of equity for cash by major subsidiary undertakings Parent company participation in a placing by a listed subsidiary Contracts of significance Provision of services by a controlling shareholder Agreements with controlling shareholders Shareholder waivers of dividends Shareholder waivers of future dividends The Directors’ Report has been approved by the Board of Directors of Plus500 Ltd. Signed on behalf of the Board Elad Even-Chen Chief Financial Officer 22 March 2022 n/a n/a Page 81 to 86 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 90 Plus500 Ltd. 2021 Annual ReportCorporate 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 (the “Takeover Code”) will not apply to the Company. It shall be noted that the Company has incor- porated 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, pursuant to the Companies Law, for purposes of the share- holder 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% or more of the shares or the right to appoint 25% 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. Shares in one of the merging companies held by the other merging company or certain of its affiliates are disen- franchised 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, under certain circumstances, the provisions of the Com- panies 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% of the shares voted on the matter, as well as 75% of each class of creditors. In addition to shareholder approval, court approval of the transaction is required. 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 shall become a holder of 25% or more of the voting rights in the company. This rule does not apply if there is already another holder of at least 25% 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 special tender offer if, as a result of the acquisition, the purchaser could become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company. In addition, under the Companies Law, the entry by two or more share- holders into a shareholders’ agreement, where such shareholders’ agreement will result in such shareholders holding in concert shares in a company in an amount exceeding the thresholds set out above, may also be subject to the requirement to publish a special tender offer. A special tender offer must be extended to all shareholders of a company but the offeror is not required to purchase shares representing more than 5% 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 at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and 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 Com- panies Law) and will have no rights whatsoever for so long as they are held by the acquirer. 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% 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% 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 purchaser acquires more than 98% 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% or 98%, as applicable, of the company’s shares or class of shares, the purchaser may not own more than 90% 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 refer to compliance with Rules 4, 5, 6 and 8 of the UK City Code on Takeovers. 91 Plus500 Ltd. 2021 Annual ReportStrategic ReportGovernanceFinancial statementsDirectors’ Responsibility Statement The Directors are responsible for preparing the Annual Report and the Consolidated Financial Statements in accordance with applicable law and regulations. The Companies Law requires the Directors to prepare Consolidated Financial Statements for each financial year. Under that law, the directors have elected to prepare the Consolidated Financial Statements in accordance with International Financial Reporting Stand- ards as issued by the IASB (“IFRS”). The directors must not approve the Consolidated Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Comprehensive Income of the Group for that period. The Directors considered the information provided in the Annual Report and how it assists the Company’s shareholders in understanding the Group’s position, performance business model and strategy. In preparing these Consolidated Financial Statements, the Directors are required to: – Present fairly the financial position, financial performance and cash flows of the Group; – Present information, including accounting policies, in a manner that provides relevant, reliable, consistent and understandable information; – Make judgements and accounting estimates that are reasonable; – State whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the Consolidated Finan- cial 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 Group’s financial position and financial performance; – Prepare the Consolidated Financial Statements on the going concern basis unless it is inappropriate to presume the Group will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Consolidated Financial Statements comply with applicable law. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps in the prevention and detection of fraud and other irregularities. Each of the Directors confirms that, to the best of each person’s knowl- edge and belief: – The Group’s Consolidated Financial Statements, which have been prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit of the Group; – The Directors’ Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces. The Directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group’s position, performance, business model and strategy. The Directors are also responsible for preparing the Directors’ Report, Strategic Report, Corporate Governance Report and the Directors’ Remuneration Report. This report has been approved by the Board. Signed on behalf of the Board David Zruia Chief Executive Officer 22 March 2022 92 Plus500 Ltd. 2021 Annual Report FINANCIAL STATEMENTS In this section Independent Report of the Auditors 94 – 97 Consolidated Financial Statements in US Dollars ($) Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 98 99 100 101 Notes to the Consolidated Financial Statements 102 – 125 93 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernanceFor illustrative purposesIndependent Report of the Auditors Independent Report of the Auditors To the shareholders of Plus500 Ltd. Report on the audit of the consolidated financial statements Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Plus500 Ltd. (the “Company”) and its subsidiaries (the “Group”) as at 31 December 2021 and its consolidated results of operations and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board. What we have audited The Group’s consolidated financial statements comprise: – The consolidated statement of financial position as at 31 December 2021; Basis for opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants Independence including Standards issued by the International Ethics Standards Board for Accountants (“IESBA Code”). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. International – The consolidated statement of comprehensive income for the year Key audit matters then ended; – The consolidated statement of changes in equity for the year then ended; – The consolidated statement of cash flows for the year then ended; and – The notes to the consolidated financial statements, which include a summary of significant accounting policies and other explanatory information. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Kesselman & Kesselman, PwC Israel, 146 Derech Menachem Begin St. Tel-Aviv 6492103, P.O. Box 7187 Tel-Aviv 6107120 Telephone: +972 -3- 7954555, Fax: +972 -3- 7954556, www.pwc.com/il 9494 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report95 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance95 Plus500 Ltd. 2021 Annual Report Kesselman & Kesselman, PwC Israel, 146 Derech Menachem Begin St. Tel-Aviv 6492103, P.O. Box 7187 Tel-Aviv 6107120 Telephone: +972 -3- 7954555, Fax: +972 -3- 7954556, www.pwc.com/il KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER REVENUE RECOGNITION The Group has developed and operates an online and mobile trading platform for trading Contracts for Difference (“CFDs”). Trading income represents Customer Income, which mainly includes revenue from CFD Customer Income (customer spreads and overnight charges), and Customer Trading Performance, which includes gains/losses on customers’ trading positions, arising on client trading activity. In respect of trading income generated from CFD, the Group has developed and operates an online and mobile trading platform for trading CFDs. The computation of the revenue is carried out automatically by using its own developed platform which is an internal IT system (the “Platform”). The revenue is calculated based on several parameters. Part of the parameters that feed into that calculation are received from external quotation suppliers and others depend on internally developed program code within the Platform. The revenue depends on a combination of the effective operation and accuracy of controls over, and access rights to, the Platform. Our audit predominantly focused on the Group's control environment, including the IT environment. We tested key controls over the revenue process, from the acceptance of a new customer, through the trading activity to the revenue that is recorded in the Company’s general ledger. We tested the operating effectiveness of IT general controls, including: access to programmes and supporting data, program changes and computer operations for the Platform and for the ERP system. In addition, we tested program development controls over the ERP system. We also tested, through a combination of controls and substantive testing techniques, the following: – Profit/loss calculations in respect of closed positions; – Calculation of the fair value adjustment of year-end positions held by clients and the calculation of the “open positions” report produced by the Platform; – Appropriate use of feeds the Group receives from its data suppliers to confirm the integrity of the feeds used to calculate the open/close position; and – Controls associated with cash reconciliations and reconciliations with external counterparties throughout the year including client deposits/withdrawals. We agreed cash amounts of client deposits to external third-party evidence at the year-end by receiving independent confirmations from banks and other third-party providers. In addition, we tested the interface between the data of client money as presented in the Platform to the general ledger to ensure completeness and accuracy. Finally, to address the risk that fraudulent adjustments or transactions had been entered into the trading Platform, we read client activity reports and read a sample of client complaints. No material issues noted. UNCERTAIN TAX PROVISIONS As discussed in Note 3 and Note 10 to the consolidated financial statements, the Group operates in a multinational tax environment and is subject to tax laws, regulations and transfer pricing guidelines for intercompany transactions across several tax jurisdictions. Furthermore, the Company’s tax years for 2020 and 2021 were not assessed by the Israeli tax authorities. The subsidiaries of the Group have not yet been subject to tax assessments since their inception. The Group recognises tax provisions from uncertain tax positions when there is more likely than not a likelihood that the tax position will be sustained upon examination by the taxation authorities based on the technical merits of the position. Auditing management's estimate of amounts related to tax provisions involves auditor judgement and challenging management because management’s estimates are complex, judgemental and based on interpretations of tax laws, regulations and legal rulings. Among the audit procedures we performed, we involved our tax specialists to assist us in assessing the technical merits of the Group’s tax positions. This included assessing the Group’s correspondence with the relevant tax authorities and evaluating income tax opinions or other third-party advice obtained by the Group. In addition, we evaluated the appropriateness of the Group’s accounting for its tax positions. We analysed the Group’s assumptions and data used to determine the amount of tax provision and tested the accuracy of the calculations. We also evaluated whether the Group’s disclosures complied with the accounting framework. No material issues noted. Independent Report of the Auditors continued Independent Report of the Auditors continued Other information The Directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related Financial Disclosures recommendations. The other information comprises all of the information in the Annual Report (but does not include the consolidated financial statements and our auditor’s report thereon). (TCFD) Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Based on the responsibilities described above and our work undertaken in the course of the audit, we have also agreed to report on certain matters as described below in accordance with the Listing Rules of the United Kingdom Financial Conduct Authority (FCA) as if the Company were a UK incorporated premium listed entity. Corporate governance statement Under the UK Corporate Governance Code 2018, we have reviewed the Directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code, which the Listing Rules of the Financial Conduct Authority specify for review by auditors of premium listed companies. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Other information section of this report. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement, included within the Statement on Corporate Governance is materially consistent with the financial statements and our knowledge obtained during the audit: – The Directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks; – The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated; The Directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; – The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate; – The Directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions; – The Directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the Company’s position, performance, business model and strategy; – The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and – The section of the Annual Report describing the work of the audit committee. Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. Kesselman & Kesselman, PwC Israel, 146 Derech Menachem Begin St. Tel-Aviv 6492103, P.O. Box 7187 Tel-Aviv 6107120 Telephone: +972 -3- 7954555, Fax: +972 -3- 7954556, www.pwc.com/il 9696 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report97 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance97 Plus500 Ltd. 2021 Annual Report Kesselman & Kesselman, PwC Israel, 146 Derech Menachem Begin St. Tel-Aviv 6492103, P.O. Box 7187 Tel-Aviv 6107120 Telephone: +972 -3- 7954555, Fax: +972 -3- 7954556, www.pwc.com/il As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: – Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; – Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control; – Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; – Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern; – Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation; and – Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Maya Ben Shmuel. Tel Aviv, Israel Kesselman & Kesselman Certified Public Accountants (lsr.) A member firm of PricewaterhouseCoopers International Limited Maya Ben Shmuel Partner Tel Aviv, Israel 22 March 2022 Consolidated Statement of Comprehensive Consolidated Statement of Comprehensive Income Income US dollars in millions Trading income Selling and marketing expenses Administrative and general expenses Operating profit Financial income Financial expenses Financial income, net Profit before income tax Income tax expense Profit and comprehensive income for the year Basic earnings per share (In US dollars) Diluted earnings per share (In US dollars) The accompanying notes are an integral part of the financial statements. Year ended 31 December Note 4 5 6 10 11 11 2021 718.7 279.8 54.3 384.6 10.4 8.6 1.8 386.4 75.8 310.6 3.06 3.05 2020 872.5 315.4 43.5 513.6 16.6 6.9 9.7 523.3 23.2 500.1 4.71 4.71 9898 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report Consolidated Statement of Financial Position 99 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance99Consolidated Statement of Financial Position Plus500 Ltd. 2021 Annual Report As of 31 December US dollars in millions Note 2021 2020 Assets Non-current assets Property, plant and equipment 15 2.6 2.5 Goodwill and other intangible assets, net 23 28.0 – Right of use assets 20 5.6 6.0 Long-term other receivables 4.4 1.7 Total non-current assets 40.6 10.2 Current assets Income tax receivable – 6.1 Other receivables and others 14 32.7 10.0 Cash and cash equivalents 16 749.5 593.9 Total current assets 782.2 610.0 TOTAL ASSETS 822.8 620.2 Liabilities Non-current liabilities Lease liabilities (net of current maturities) 20 4.2 5.3 Share based compensation 9 0.3 1.8 Total non-current liabilities 4.5 7.1 Current liabilities Share based compensation 9 7.3 7.4 Income tax payable 89.9 2.2 Other payables 17 41.7 22.8 Service suppliers 18 15.5 22.5 Current maturities of lease liabilities 20 2.0 1.6 Trade payables – due to clients 19 0.6 1.0 Total current liabilities 157.0 57.5 TOTAL LIABILITIES 161.5 64.6 Equity Ordinary shares 22 0.3 0.3 Share premium 22.2 22.2 Cost of Company’s shares held by the Company 12 (207.5) (145.7) Retained earnings 846.3 678.8 Total equity 661.3 555.6 TOTAL EQUITY AND LIABILITIES 822.8 620.2 David Zruia Chief Executive Officer Elad Even-Chen Group Chief Financial Officer Prof. Jacob A. Frenkel Non-Executive Director and Chairman Date of approval of the consolidated financial statements by the Company’s Board of Directors: 22 March 2022. The accompanying notes are an integral part of the financial statements. Registered Company number (Israel): 514142140 Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity US dollars in millions Balance at 1 January 2020 Changes during the year ended 31 December 2020 Profit and comprehensive income for the year Share based compensation Transactions with shareholders: Dividend Issue of treasury shares to settle equity share based compensations Acquisition of treasury shares Balance at 31 December 2020 Changes during the year ended 31 December 2021 Profit and comprehensive income for the year Share based compensation Transactions with shareholders: Dividend Issue of treasury shares to settle equity share based compensations Acquisition of treasury shares Balance at 31 December 2021 The accompanying notes are an integral part of the financial statements. Ordinary shares Share premium Cost of Company’s shares held by the Company Retained earnings 0.3 22.2 (57.0) 318.6 Total 284.1 – – – – – – – – – – – – 500.1 500.1 1.8 1.8 – 0.1 (88.8) (141.6) (141.6) (0.1) – – (88.8) 0.3 22.2 (145.7) 678.8 555.6 – – – – – – – – – – – – 310.6 310.6 4.9 4.9 – 3.1 (64.9) (144.9) (144.9) (3.1) – – (64.9) 0.3 22.2 (207.5) 846.3 661.3 100100 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report Consolidated Statement of Cash Flows 101 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance101Consolidated Statement of Cash Flows Plus500 Ltd. 2021 Annual Report Year ended 31 December US dollars in millions 2021 2020 Operating activities: Cash generated from operations (see Note 26) 383.0 546.6 Income tax received (paid), net 16.3 (23.1) Interest received, net 6.2 5.2 Net cash flows provided by operating activities 405.5 528.7 Investing activities: Acquisition of subsidiaries, net of cash acquired (see Note 23) (32.5) – Purchase of property, plant and equipment (0.8) (0.3) Net cash flows used in investing activities (33.3) (0.3) Financing activities: Dividend paid to equity holders of the Company (144.9) (141.6) Payment of principal in respect of lease liabilities (2.0) (1.8) Acquisition of treasury shares (64.9) (88.8) Net cash flows used in financing activities (211.8) (232.2) Increase in cash and cash equivalents 160.4 296.2 Balance of cash and cash equivalents at beginning of the year 593.9 292.9 Gains (losses) from effects of exchange rate changes on cash and cash equivalents (4.8) 4.8 Balance of cash and cash equivalents at end of the year 749.5 593.9 The accompanying notes are an integral part of the financial statements. Notes to the Consolidated Financial Notes to the Consolidated Financial Statements Statements Note 1 – General information Information on activities Plus500 Ltd. (the “Company”) and its subsidiaries (the “Group”) is a global multi-asset fintech group operating proprietary technology- based trading platforms. Plus500 offers customers a range of trading products, including Contracts for Difference (“CFDs”) and share dealing, as well as futures and options on futures. The Company has developed and operates an online and mobile trading platform within the CFD sector, enabling its international customer base of individual customers to trade CFDs on over 2,500 underlying financial instruments internationally. Additionally, the Company has developed and operates a share dealing trading platform. The Group’s offering is available internationally with main market presence in the UK, Australia, the US, the European Economic Area (“EEA”) and the Middle East and has customers located in more than 50 countries worldwide. The Group operates through operating subsidiaries regulated by the Financial Conduct Authority (“FCA”) in the UK, the Australian Securities and Investments Commission (“ASIC”) in Australia, the Cyprus Securities and Exchange Commission (“CySEC”) in Cyprus, the Israel Securities Authority (“ISA”) in Israel, the Financial Markets Authority (“FMA”) in New Zealand, the Financial Sector Conduct Authority (“FSCA”) in South Africa, the Monetary Authority of Singapore (“MAS”) in Singapore, the Financial Services Authority (“FSA”) in the Seychelles, the Commodities Futures Trading Commission (“CFTC”) in the US, the Estonian Financial Supervision Authority (“EFSA”) in Estonia (as of February 2022) and the Financial Services Agency (“FSA”) in Japan (as of March 2022). The Company also has a subsidiary in Bulgaria which provides operational services to the Group. The Company has been listed since 2013. Since 2018, Plus500 Ltd. has been a FTSE 250 listed entity, following the Company’s shares being admitted to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange Main Market for listed securities. The address of the Company’s principal offices is Building 25, Matam, Haifa 3190500, Israel. Note 2 – Summary of significant accounting policies a. Basis of accounting and accounting policies The Group’s consolidated financial information as of 31 December 2021 and 2020 and for each of the two years in the period ended on 31 December 2021 are in compliance with International Financial Reporting Standards that consist of standards and interpretations issued by the International Accounting Standard Board (“IFRSs”). 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 in respect of revaluation convention subject to adjustments of financial assets at fair value through profit or loss presented at fair value. b. Going concern The Group has considerable financial resources, a broad range of financial instruments, and a substantial active customer base which is diversified geographically worldwide. As a consequence, the Board of Directors of the Company (the “Board”) believes that the Group is well placed to manage its business risks in the context of the current economic outlook. Accordingly, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Board therefore continues to adopt the going concern basis in preparing these consolidated financial statements. c. Principles of consolidation The Company, from an accounting perspective, 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. 2) 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. Earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of the Company’s ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume exercise of all potential dilutive ordinary shares. The instruments that are potentially dilutive ordinary shares are equity instruments granted to employees and service contractors (see Note 9). A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding equity instruments. The number of ordinary shares calculated as above is compared with the number of ordinary shares that would have been issued assuming the exercise of the equity instruments (see also Note 11). e. 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 three operating sectors: CFD trading; share dealing; and futures and options on futures. In the year 2021 the Group presents its operation as one operating segment. 102102 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report103 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance103 Plus500 Ltd. 2021 Annual Report Note 2 – Summary of significant accounting policies continued f. 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 (the “functional currency”). The consolidated financial statements are presented in US 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 (“foreign currency”) are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Gains and losses arising from changes in exchange rates are presented in the consolidated statement of comprehensive income among “financial income (expenses)”. g. Trading income Trading income represents Customer Income, which includes revenue from CFD Customer Income (customer spreads and overnight charges), Non-CFD Customer Income (commissions from the Group’s futures and options on futures operation and from the Group’s share dealing platform) and Customer Trading Performance, which includes gains/losses on customers’ trading positions, arising on client trading activity, primarily in CFDs on shares, indices, ETFs, options, commodities, cryptocurrencies and foreign exchange. Open client positions are carried at fair value and gains and losses arising on this valuation are recognised as trading income, as well as gains and losses realised on positions that have closed. h. Share based compensation 1) Cash settled The Group operates a cash settled share based compensation plan, under which it receives services from employees and service contractors as consideration for Share Appreciation Rights (“SARs”). The fair value of the employees and service contractors received in exchange for the grant of the rights are recognised as an expense in the consolidated statement of comprehensive income. At the end of each reporting period, the Group evaluates the SARs based on their fair value as prorated over the period and the change in the prorated fair value is recognised in the consolidated statement of comprehensive income. 2) Equity settled The Group operates equity-settled share based compensation plans, under which it receives services from employees and service contractors as consideration for ordinary shares and Restricted Share Units (“RSUs”). The fair value of the services received by employees and service contractors in exchange for the grant of ordinary shares or RSUs are recognised as an expense in the consolidated statement of comprehensive income. The fair value of equity settled share based compensation arrangements granted to employees and service contractors is recognised as employee benefit expenses and other related expenses applicable for the service contractors, with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the equity instruments granted: – including any market performance conditions (e.g. the Company's share price); – excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and continuing to be employed or rendering services to the entity over a specified time period); and – including the impact of any non-vesting conditions (e.g. the requirement for employees and service contractors to hold shares for a specific period of time). The total expenses are recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the Group revises its estimates of the number of ordinary shares and RSUs that are expected to vest based on the non-market performance vesting and service conditions. The impact of the revision to original estimates, if any, in the consolidated statement of comprehensive income, is recognised with a corresponding adjustment to equity. i. Treasury shares Treasury shares are ordinary shares of the Company held by the Company and presented as a reduction of equity, at the consideration paid, including any incremental attributable costs, net of tax. Treasury shares do not have a right to receive dividends or to vote. The Board approves share buyback programmes. The share buyback programmes are funded from the Company’s net cash balances. The ordinary shares are being purchased at fair value (see Note 12). j. Current income tax Tax is recognised in the consolidated statement of comprehensive income. 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 and its 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 and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The Group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty. Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 2 – Summary of significant accounting policies continued k. Deferred income tax Deferred income tax is recognised, 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 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 realised or the deferred income tax liability is settled. The Group recognises 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 assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. l. Property, plant and equipment The cost of a property, plant and equipment item is recognised as an asset 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. 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: m. Financial instruments 1) Classification The Group classifies measurement categories according to IFRS 9: financial assets its in the following – Those to be measured subsequently at fair value through profit and loss, and – Those to be measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will be recorded in the consolidated statement of comprehensive income. Financial assets are classified as current if they are expected to mature within 12 months after the end of the reporting period, otherwise, they are classified as non-current. 2) Recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade date, the date on which the Group commits to purchase or sell the assets. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. 3) Measurement At initial recognition, the Group measures a financial asset at its fair value and in the case of a financial asset not at fair value through profit or loss (“FVTPL”), plus transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in the consolidated statement of comprehensive income. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Details on how the fair value of financial instruments is determined are disclosed in Note 25. Computers and office equipment Leasehold improvements 10 n. Cash and cash equivalents Percentage of annual depreciation 6–33 Leasehold improvements are depreciated by the straight-line method over the terms of the lease (including reasonably assured options periods), or the estimated useful life (10 years) of the improvements, whichever is shorter. The asset’s residual value, 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. Cash and cash equivalents include cash on hand, short-term bank deposits and other highly liquid short-term investments, the original maturity of which does not exceed three months. All of the regulated subsidiaries hold money on behalf of their clients in accordance with the client money rules required by the relevant regulatory framework. Such monies are classified as “segregated in accordance with the regulatory requirements. client funds” Segregated client funds comprise 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 Group assets in the consolidated statement of financial position. 104104 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report 105 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance105 Plus500 Ltd. 2021 Annual Report Note 2 – Summary of significant accounting policies continued o. Dividends Dividend distribution is recognised as a liability in the consolidated statement of financial position in the period which the dividends are approved by the Board. p. 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 obligations once the contributions have been paid. The contributions are recognised as employee benefit expense commensurate with receipt from employees of the service in respect of which they are entitled for the contributions. The Group recognises an accrual and an expense for bonuses for senior management based on formulae that take into consideration specific financial and non-financial measures and for other employees based on management decision. q. Service suppliers Service suppliers are obligations to pay for services that have been acquired in the ordinary course of business from suppliers. Service suppliers are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Service suppliers are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. r. 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, 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. “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 reported in the consolidated statement of financial position and classified as current liabilities as the demand is due within one year or less. s. IFRS 16 – “Leases” The Group’s leases include real estate lease agreements. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group reassesses whether a contract is, or contains, a lease only if the terms and conditions of the contract are changed. At the commencement date, the Group measures the lease liability at the present value of the lease payments that are not paid at that date, including, inter alia, the exercise price of the exercise options if the Group is reasonably certain to exercise that option. Simultaneously, the Group recognises a right of use asset in the amount of the lease liability. The lease term is the non-cancellable period for which the Group has the right to use an underlying asset, together with both the periods covered by an option to extend the lease if the Group is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Group is reasonably certain to exercise that option. After the commencement date, the Group measures the right of use asset applying the cost model, less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability. Assets are depreciated by the straight-line method over the estimated useful lives of the right of use assets or the lease period, whichever is shorter. The depreciation periods for the real estate leases by the Group is between one to five years. Under IFRS 16 all leases are recognised as a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Payments associated with short-term leases of real estate and all leases of low-value assets are recognised on a straight-line basis as an expense in the consolidated statement of comprehensive income. Short-term leases are leases with a lease term of 12 months or less without an exercise option. t. Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises: – fair values of the assets transferred; and – liabilities incurred to the former owners of the acquired business. Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued v. Impairment of assets Goodwill and intangible assets that have an indefinite useful life, are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed impairment at the end of each for possible reversal of the reporting period. Note 3 – Significant accounting estimates Considering uncertain tax positions The assessment of amounts of current and deferred taxes requires the Group’s management to take into consideration uncertainties that its tax position will be accepted and of incurring any additional tax expenses. This assessment is based on estimates and assumptions based on interpretation of tax laws and regulations, and the Group’s past experience. It is possible that new information will become known in future periods that will cause the final tax outcome to be different from the amounts that were initially recorded. Such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. See also Note 2j and Note 10. Note 2 – Summary of significant accounting policies continued t. Business combinations continued Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. Over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in the consolidated statement of comprehensive income as a bargain purchase. u. Intangible assets 1) Goodwill Goodwill represents the surplus of the consideration that has been transferred for the acquisition of a subsidiary company, over the net amount of the identifiable assets and liabilities that have been acquired as at the time of the acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes. 2) Licence Licence acquired in a business combination is recognised at fair value at the acquisition date. It has an indefinite useful life, is not subject to amortisation and is tested annually for impairment. 3) Customer relationships and technology Customer relationships and technology acquired in a business combination are recognised at fair value at the acquisition date. They have a definite useful life of five years and are subsequently carried at cost less accumulated amortisation and impairment losses. 106106 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report 107 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance107 Plus500 Ltd. 2021 Annual Report Note 4 – Trading income The trading income attributed to geographical areas according to the location of the customer is as follows: Year ended 31 December US dollars in millions 2021 2020 European Economic Area (“EEA”) 329.0 365.3 United Kingdom 88.9 109.9 Australia 61.6 112.0 Rest of the World 239.2 285.3 718.7 872.5 Note 5 – Selling and marketing expenses Year ended 31 December US dollars in millions 2021 2020 Payroll and related expenses 21.4 18.0 Variable bonuses 8.8 4.8 Share based compensation 4.0 6.6 Commissions to media buying 20.7 16.9 Advertising and technology costs 151.4 204.2 Commissions to processing companies 40.8 53.0 Server and data feeds commissions 11.7 8.4 Other 21.0 3.5 279.8 315.4 Note 6 – Administrative and general expenses Year ended 31 December US dollars in millions 2021 2020 Payroll and related expenses 11.6 8.0 Variable bonuses 5.4 6.8 Share based compensation 7.7 6.6 Professional and regulatory fees 18.5 14.6 Depreciation and amortisation 2.5 2.3 Other 8.6 5.2 54.3 43.5 Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 7 – Operating expenses The presentation below reflects the breakdown of operating expenses by nature of expense: US dollars in millions Employee benefits and other related expenses IT and technology costs Commissions to processing companies Advertising, marketing and commissions to media buying Professional and regulatory fees Depreciation and amortisation Other Year ended 31 December 2021 58.9 38.2 40.8 145.6 18.5 2.5 29.6 334.1 2020 50.8 55.3 53.0 174.2 14.6 2.3 8.7 358.9 In the years ended 31 December 2021 and 2020, IT and technology costs together with additional allocated other technological related costs were $58.4 million and $70.3 million, respectively. Note 8 – Auditors’ remuneration US dollars in millions Audit of Plus500 Ltd.’s consolidated financial statements Audit of Plus500 Ltd.’s subsidiaries Total audit fees Other assurance related services Tax compliance services Total non-audit fees Total fees Note 9 – Share based compensation a. Cash settled share based compensation programmes 1) Background Year ended 31 December 2021 2020 0.3 0.3 0.6 0.3 0.7 1.0 1.6 0.2 0.3 0.5 0.1 0.2 0.3 0.8 The Group grants Share Appreciation Rights to selected employees and service contractors (the “Grant”). The rights are settled in cash at the end of the period of two or three years following the Grant date for those who remain employed or continue to render services as service contractors by the Group. The rights represent the total Grant amounts divided by the average closing price of the ordinary shares of the Company on the Main Market over the course of the 60 trading days immediately preceding the dates of the Grant (the “Share Price on Grant Date”). As of the end of each period, the fair value of the rights is calculated by the total Grant amounts on grant date, multiplied by the average closing price of the ordinary shares of the Company on the Main Market over the course of the 60 trading days immediately preceding the end of each period (or the payout date) including dividends paid between the grant date and the end of each period (or the vesting date) divided by the Share Price on Grant Date, as prorated over the period. 108108 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report 109 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance109 Plus500 Ltd. 2021 Annual Report Note 9 – Share based compensation continued 2) The following table specifies the dates of grants and the grant rights as of each date Grant date Vesting date Share price (GBP)*Number of rights granted*Number of employees 31 December 2019 31 December 2021 797.85 3,503 105 31 December 2019 31 December 2022 797.85 2,925 5 12 February 2020 12 February 2022 855.46 40 2 31 August 2020 31 August 2022 1,303.93 97 6 30 December 2020 30 December 2022 1,507.08 2,342 127 30 December 2020 30 December 2023 1,507.08 647 3 28 February 2021 28 February 2023 1,411.13 13 1 31 August 2021 31 August 2023 1,404.43 14 1 31 December 2021 31 December 2023 1,320.98 1,136 55 *Share price in GBP pence on grant date. 3) Cash settled share based compensation liability As at 31 December US dollars in millions 2021 2020 Current liability 7.3 7.4 Non-current liability 0.3 1.8 7.6 9.2 4) Cash settled share based compensation expenses Year ended 31 December US dollars in millions 2021 2020 Selling and marketing expenses 4.0 6.6 Administrative and general expenses 2.8 5.1 6.8 11.7 5) Cash settled share based compensation – number of rights outstanding Number of rights 2021 2020 Opening balance as at 1 January 8,768 10,210 Rights granted 1,163 3,126 Rights vested (3,208) (3,668) Rights forfeited (1,051) (900) Closing balance as at 31 December 5,672 8,768 During 2021 and 2020, 3,208 and 3,668 rights were vested in total amount of $6.9 million and $8.6 million, respectively. The average vesting price based on GBP pence per granted right was approximately $2,160 and $2,351, respectively. Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 9 – Share based compensation continued b. Equity settled share based compensation programmes Background The Group grants long-term incentive plans (“LTIPs”) to selected employees located outside of Israel and service contractors (the “LTIP Grants”). The Group grants Restricted Stock Units (“RSUs”) to selected employees located in Israel (the “RSUs Grants”). In respect of certain projects, the Group grants bonuses with a partial deferred element settled in ordinary shares of the Company to selected service contractors and employees (the “Deferred Bonuses”). During 2021 and 2020, the Group recognised $4.9 million and $1.5 million, respectively, as expenses in respect of the equity share based compensation plans and Deferred Bonuses in the consolidated statement of comprehensive income as administrative and general expenses. In 2020, an amount of $0.3 million was booked to retained earnings. As of 31 December 2021 and 2020, retained earnings include an amount of $3.5 million and $1.7 million, respectively, in respect of the equity share based compensation and Deferred Bonuses plans. 1) LTIP Grants The following table specifies the dates of LTIP Grants and the number of ordinary shares as of each date, as granted for employees and service contractors. Grant date 1 January 2019 1 January 2020 1 January 2021 *Share price in GBP pence on grant date. Vesting date 31 December 2021 31 December 2022 31 December 2023 Share price (GBP)* Number of ordinary shares granted on grant date Number of employees and service contractors 1,370 886 1,450 15,259 75,627 122,496 1 7 7 The 2019 LTIP Grant was subject to service condition and was not subject to any additional KPIs or conditions. The 2019 LTIP Grant was vested on 31 December 2021 and the Company issued 19,111 of its treasury shares. The 2020 LTIP Grant is subject to service condition and additional KPIs as follows: KPI TSR % 40% DESCRIPTION TYPE OF CONDITION Subject to achieving the three-year FTSE 250 TSR target and calculated on a linear basis, with 30% payable upon achievement of median TSR for FTSE 250 and 100% payable upon achievement of upper quartile TSR for FTSE 250 Market EPS 40% Subject to achieving the three-year compounded annual EPS growth rate and calculated on a linear basis, with 30% payable upon achievement of 5% compounded annual EPS growth rate and 100% payable upon achievement of 12% compounded annual EPS growth rate Performance HR 20% Subject to achieving HR criteria related to churn and growth of specific departments Performance 110110 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report 111 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance111 Plus500 Ltd. 2021 Annual Report Note 9 – Share based compensation continued b. Equity settled share based compensation programmes continued The 2021 LTIP Grant is subject to service condition and additional KPIs as follows: KPI % DESCRIPTION TYPE OF CONDITION TSR 20% Subject to achieving the three-year TSR target and calculated on a linear basis, with 25% payable upon achievement of median TSR for bespoke group and 100% payable upon achievement of median TSR for bespoke group plus 10% per annum Market TSR 10% Subject to achieving the three-year TSR target and calculated on a linear basis, with 25% payable upon achievement of median TSR for FTSE 250 and 100% payable upon achievement of upper quartile TSR for FTSE 250 Market EPS 30% Subject to achieving EPS target, as set by the Board Performance Strategic 20% Subject to achieving strategic objectives, as set by the Board and related to growth through M&A, new products and new markets Performance Operational 20% Subject to achieving operational objectives, as set by the Board and related to customer growth and people objectives Performance The final number of ordinary shares to be allotted on the vesting date will be determined according to the share price at the grant date of 1 January 2021 and 2020, less the accumulated amount of dividends paid in cash during the vesting period. The fair value at grant date of the LTIP Grants is measured according to the value of the grant amount and expensed over the vesting period with a corresponding increase in equity, taking into account the best available estimate of the number of shares expected to vest under the service and performance conditions. On the vesting date the Company shall allot to the employee or service contractor, ordinary shares, subject to the service condition and achieving specific KPIs as described in the table above for each grant. The number of ordinary shares allotted on the vesting date shall be calculated based on the ordinary share price at grant date as specified in the table above for each grant, as adjusted for dividends. The allotted ordinary shares will be transferred out of the treasury shares of the Company. The ordinary shares allotted on the vesting date, which are subject to a lock-up period, shall be subject to a two-year lock-up beginning on the vesting date. 2) RSU Grants The following table specifies the dates of RSU Grants and the number of units as of each date. Grant date Vesting date Share price (GBP)*Number of RSUs granted Number of employees 1 January 2020 31 December 2022 886 116,045 8 1 January 2021 31 December 2023 1,450 160,926 8 *Share price in GBP pence on grant date. Each RSU represents the right to receive one ordinary share, par value of NIS 0.01 per share, subject to the terms and conditions of the grant as approved by the Board of Directors and in accordance with the provisions of the Capital Gain route under Section 102 of the Israeli Tax Ordinance and regulations (the “102 Capital gain Route”). Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 9 – Share based compensation continued b. Equity settled share based compensation programmes continued In respect of the RSUs granted on 1 January 2020, the employees are entitled to the RSUs upon completing a three-year service period in addition to KPIs as follows: KPI TSR % 40% DESCRIPTION TYPE OF CONDITION Subject to achieving the three-year FTSE 250 TSR target and calculated on a linear basis, with 30% payable upon achievement of median TSR for FTSE 250 and 100% payable upon achievement of upper quartile TSR for FTSE 250 Market EPS 40% Subject to achieving the three-year compounded annual EPS growth rate and calculated on a linear basis, with 30% payable upon achievement of 5% compounded annual EPS growth rate and 100% payable upon achievement of 12% compounded annual EPS growth rate Performance HR 20% Subject to achieving HR criteria related to churn and growth of specific departments Performance In respect of the RSUs granted on 1 January 2021, the employees are entitled to the RSUs upon completing a three-year service period in addition to KPIs as follows: KPI TSR % DESCRIPTION TYPE OF CONDITION 20% Subject to achieving the three-year TSR target and calculated on a linear basis, with 25% payable upon achievement of median TSR for bespoke group and 100% payable upon achievement of median TSR for bespoke group plus 10% per annum Market TSR 10% Subject to achieving the three-year TSR target and calculated on a linear basis, with 25% payable upon achievement of median TSR for FTSE 250 and 100% payable upon achievement of upper quartile TSR for FTSE 250 Market EPS 30% Subject to achieving EPS target, as set by the Board Strategic 20% Subject to achieving strategic objectives, as set by the Board and related to growth through M&A, new products and new markets Performance Performance Operational 20% Subject to achieving operational objectives, as set by the Board and related to customer growth and people objectives Performance During 2021, 19,870 and 12,560 RSUs were forfeited in respect of the 2020 and 2021 grants, respectively. On the vesting date, the employees shall be entitled to a cash payment equal to the aggregate dividends paid in cash to shareholders that were payable in each grant vesting period with respect to the number of issued shares that were actually allotted to the employees on the vesting date with respect to the RSUs. The allotted ordinary shares will be transferred out of the treasury shares of the Company. On the vesting date, the shares will be transferred to a trustee by the Company. The ordinary shares allotted on the vesting date, which are subject to a lock-up period, shall be subject to a two-year lock-up beginning on the vesting date. 3) Deferred Bonus grants The following table specifies the dates of Deferred Bonuses grants and the number of shares as of each grant date. The employees and service providers are entitled to the Deferred Bonuses upon completing a service period of one year and subject to achieving additional KPIs. The 2019 and 2020 Deferred Bonuses shall be paid in three equal instalments beginning on 31 December of the year after the vesting date, by way of allotment of ordinary shares of the Company. The number of ordinary shares allotted on any deferred payment date shall be calculated based on the ordinary share price on grant date, as adjusted for dividends. The 2021 Deferred Bonuses shall be paid in one instalment on 31 December of the bonus year, by way of allotment of ordinary shares of the Company. The number of ordinary shares allotted on the deferred payment date shall be calculated based on the ordinary share price on grant date, as adjusted for dividends. 112112 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report113 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance113 Plus500 Ltd. 2021 Annual Report Note 9 – Share based compensation continued b. Equity settled share based compensation programmes continued Grant date Vesting date Share price (GBP)*Number of ordinary shares on grant date Number of employees and service contractors 1 January 2019 31 December 2019 1,370 13,834 2 1 January 2020 31 December 2020 886 56,298 2 1 January 2021 31 December 2021 1,450 53,904 2 *Share price in GBP pence on grant date. On 31 December 2021 and 2020, the Company issued 5,780 and 5,280 of its treasury shares, in accordance with the Deferred Bonuses plan of 2019. On 31 December 2021, the Company issued 24,434 of its treasury shares, in accordance with the Deferred Bonuses plan of 2020. On 31 December 2021, the Company issued 58,062 of its treasury shares, in accordance with the Deferred Bonuses plan of 2021. The Company recognised the value of the issued shares on 31 December 2021 according to the fair value measured for each plan on 1 January 2019, 1 January 2020 and 1 January 2021, respectively. Note 10 – Income tax expense Law for the Encouragement of Capital Investments, 5719-1959 The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the “Investment Law”, provides certain incentives for capital investments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law). New tax benefits under the 2017 Amendment that became effective on 1 January 2017 (“2017 Amendment”) The 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on 29 December 2016, and is effective as of 1 January 2017. The 2017 Amendment provides new tax benefits, as described below, and is in addition to the other existing tax beneficial programmes under the Investment Law. The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a Preferred Technological Enterprise (“PTE”) and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as Preferred Technology Income, as defined in the Investment Law. Dividends distributed by a PTE, paid out of Preferred Technology Income, are generally subject to withholding tax at source at the rate of 20% or such lower rate as may be provided in an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority (“ITA”) allowing for a reduced tax rate). a. Company taxation in Israel The full corporate tax rate in Israel for the years 2021 and 2020 is 23%. Under the 2017 Amendment, provided the conditions stipulated therein are met, technological income derived by Preferred Companies from “Preferred Technological Enterprise” (as defined in the 2017 Amendment), would be subject to reduced corporate tax rates of 12%. A Preferred Company distributing dividends from technological income derived from its PTE would subject the recipient to a 20% tax (or lower, if so provided under an applicable tax treaty). In May 2019, the Company obtained a tax ruling from the ITA and subject to the Company complying with the conditions stipulated by the tax ruling, which the Company met, and the Investment Law, the Company is considered as a PTE. At the beginning of July 2020, the Company received an approval from the Israeli Innovation Authority (“IIA”) that together with the tax ruling received from the ITA in May 2019, recognises the Company as a PTE for the years 2017, 2018 and 2019. Accordingly, the applicable tax rate for the preferred technological income of a PTE for these years was 12%. The Company is also considered as PTE for the years 2020 and 2021. As a result, the Company’s corporate tax rate for the years 2021 and 2020 is 12%. In January 2022, the Company’s status as a PTE, as accredited by the ITA under the tax regime in Israel, has been extended for the years 2022, 2023, 2024, 2025 and 2026. Consequently, the Company’s corporate tax rate for each of these years will be reduced from 23% to 12% and the withholding tax rate applicable for dividends will be reduced from 25% to 20%, subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate (see Note 27). In July 2020, the Company received approximately $47.0 million rebates (including interest) reflecting the reduced tax rate for FY 2018. In January 2021, the Company received approximately $30.0 million rebates (including interest) reflecting the reduced tax rate for FY 2017 and in August 2021, the Company received approximately $37.2 million in tax rebates (including interest) reflecting the reduced tax rate for FY 2019. Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 10 – Income tax expense continued b. Tax assessments The Company has final tax assessments up to the year 2019. The assessments of amounts of current and deferred taxes require the Group’s management to take into consideration uncertainties that its tax position will be accepted and of incurring any additional tax expenses. This assessment is based on estimates and assumptions based on interpretation of tax laws and regulations, and the Group’s past experience. It is possible that new information will become known in future periods that will cause the final tax outcome to be different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the periods in which such determination is made. c. Corporate taxation in subsidiaries Subsidiary UK CY AU Principal tax rate 2021 19% 12.5% 30% 2020 Tax regulation 19% Tax laws in United Kingdom 12.5% Tax laws in Cyprus 30% Tax laws in Australia Other Group subsidiaries do not have significant taxable income and the overall effect of the income of those subsidiaries on the Group’s tax expenses is immaterial. d. Deferred income taxes The deferred income taxes relate mainly to payroll and related expenses of the share based compensation plans (see Note 9). The deferred tax assets were computed in 2021 and 2020 at tax rates of 23% and 12%, respectively. e. Taxes on income included in the consolidated income statement for the reported years US dollars in millions Current taxes: Current taxes in respect of current year’s profits Tax income in respect of previous years Deferred income taxes: Change of deferred tax assets (see d above) Taxes on income expenses f. Reconciliation of the theoretical tax expense Year ended 31 December 2021 2020 77.6 0.5 78.1 (2.3) 75.8 78.7 (55.1) 23.6 (0.4) 23.2 Following is a reconciliation of the theoretical tax expense, assuming all income is taxed at the regular corporate tax rate applicable to a company in Israel (Note 10a above) and the actual tax expense: US dollars in millions Income before taxes on income, as reported in the consolidated income statement Theoretical tax expense in respect of this year’s income – at 23% Less tax benefits arising from preferred technological income in respect of the current year Decrease in taxes resulting from different tax rates applicable to foreign subsidiaries Impact of change in tax rates on deferred tax balances and temporary differences Decrease in taxes in respect of currency differences and expenses not deductible for tax purposes Tax income in relation to previous years Taxes on income for the reported period Year ended 31 December 2021 386.4 88.9 (4.3) (0.8) (2.8) (5.7) 0.5 75.8 2020 523.3 120.4 (33.8) (0.5) 0.3 (8.1) (55.1) 23.2 114114 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report 115 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance115 Plus500 Ltd. 2021 Annual Report Note 11 – 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. 31 December 2021 2020 Profit attributable to equity holders of the Company (US dollars in millions) 310.6 500.1 Weighted average number of ordinary shares in issue*: Basic 101,456,641 106,086,540 Dilutive effect of equity share based compensation 529,601 212,352 Diluted 101,986,242 106,298,892 Basic earnings per share (in US dollars) 3.06 4.71 Diluted earnings per share (in US dollars) 3.05 4.71 *After weighting the effect of the share buyback programmes. See Note 12. Note 12 – Cost of Company’s shares held by the Company The Board of Directors approves share buyback programmes. The share buyback programmes are funded from the Company’s net cash balances. Year ended 31 December Number of ordinary shares purchased Aggregate purchase amount (US $ in millions) Average price of shares purchased 2020 5,584,528 88.8 £12.66 2021 3,406,211 64.9 £13.90 During the years ended 31 December 2021 and 2020, the Company issued 179,537 and 5,280 of its treasury shares, respectively, in accordance with the various share based equity settled compensation grants (see Note 9). During the period starting 1 January 2022 and up to 21 March 2022, as the latest practicable date before the signing date of the consolidated financial statements (see Note 27), the Company purchased an additional 626,498 ordinary shares (or 0.5%) in the capital of the Company for an aggregate purchase amount of $12.0 million pursuant to these share buyback programmes. The ordinary shares were bought back at an average price of £14.25. Note 13 – Dividends The amounts of dividends and the amounts of dividends per share for the years 2021 and 2020 declared and distributed by the Company’s Board of Directors are as follows: Date of declaration Amount of dividend US $ in millions* Amount of dividend per share US $ Date of payment to shareholders 12 February 2020 40.6 0.3767 13 July 2020 11 August 2020 101.0 0.9531 11 November 2020 17 February 2021 84.9 0.8292 12 July 2021 17 August 2021 60.0 0.5921 11 November 2021 On 15 February 2022, the Company declared a final dividend and a special dividend in the amounts of $37.8 million and $22.2 million, respectively (see Note 27). * Between the dividend announcement date and the record date of the dividend, the number of issued and outstanding ordinary shares of the Company decreased as a result of the repurchase by the Company of ordinary shares during such period and the classification of such repurchased ordinary shares as treasury shares that are not entitled to dividends. However, this did not affect the dividend per share as announced on the dividend announcement date. Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 14 – Other receivables and others US dollars in millions Securities Prepaid expenses Other As of 31 December 2021 18.2 5.2 9.3 32.7 2020 – 6.6 3.4 10.0 As of 31 December 2021 and 2020, the total amount of prepaid expenses includes prepaid expenses related to the Company’s sponsorship agreements (see Note 21). As of 31 December 2021, the fair value amount of the securities was $18.2 million. 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. Note 15 – Property, plant and equipment Composition of assets, grouped by major classifications and changes therein in 2021 is as follows: US dollars in millions Cost Balance at beginning of year Additions Balance at end of year Accumulated depreciation Balance at beginning of year Additions Balance at end of year Depreciated balance as of 31 December 2021 Depreciated balance as of 31 December 2020 Note 16 – Cash and cash equivalents Cash and cash equivalents by currency of denomination: US dollars in millions USD EUR GBP AUD ILS Other Gross cash and cash equivalents Less: segregated client funds Own cash and cash equivalents 116116 Plus500 Ltd. 2021 Annual Report Computers and office equipment Leasehold improvements Other Total 2.0 0.6 2.6 1.6 0.2 1.8 0.8 0.4 3.8 0.2 4.0 1.9 0.4 2.3 1.7 1.9 0.3 - 0.3 0.1 0.1 0.2 0.1 0.2 2021 728.0 181.2 68.1 54.0 20.8 47.4 1,099.5 (350.0) 749.5 6.1 0.8 6.9 3.6 0.7 4.3 2.6 2.5 As of 31 December 2020 543.3 250.7 91.2 90.0 18.1 69.5 1,062.8 (468.9) 593.9 Plus500 Ltd. 2021 Annual Report 117 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance117 Plus500 Ltd. 2021 Annual Report Note 17 – Other payables As of 31 December US dollars in millions 2021 2020 Payroll and related expenses 24.6 19.0 Accrued expenses 16.4 3.6 Other 0.7 0.2 41.7 22.8 The financial liabilities included among other payables are for relatively short periods. Therefore, their fair values approximate or are identical to their carrying amounts. Note 18 – Service suppliers Service suppliers are comprised mainly of amounts due to advertising service suppliers, their fair values approximate or are identical to their carrying amounts. Note 19 – Trade payables – due to clients As of 31 December US dollars in millions 2021 2020 Customers’ deposits, net* 350.6 469.9 Segregated client funds (350.0) (468.9) 0.6 1.0 * Customers’ deposits, net are comprised of the following: Customers’ deposits 428.3 507.2 Less – financial derivative open positions: Gross amount of assets (130.4) (123.8) Gross amount of liabilities 52.7 86.5 350.6 469.9 *The total amount of ‘Trade payables – due to clients’ includes bonuses to clients. Note 20 – Leases The Group has real estate lease agreements. a) Right of use assets: Real estate leases US dollars in millions At 1 January 2020 5.3 Additions 2.4 Amortisation (1.7) At 31 December 2020 6.0 Additions 2.7 Disposals (0.6) Modification (0.7) Amortisation (1.8) At 31 December 2021 5.6 Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 20 – Leases continued b) Lease liabilities: Real estate leases At 1 January 2020 Additions Interest expense Lease payments Exchange differences At 31 December 2020 Additions Disposals Interest expense Lease payments Modification Exchange differences At 31 December 2021 US dollars in millions 5.7 2.4 0.2 (1.8) 0.4 6.9 2.7 (0.7) 0.2 (2.0) (0.9) – 6.2 Note 21 – Commitments a. The Company and Club Atlético de Madrid, S.A.D. (“Atlético Madrid”) entered into a sponsorship agreement on 3 October 2017 under which the Company is entitled to advertise and promote itself as the main sponsor of Atlético Madrid for the 2018/19, 2019/20 and 2020/21 seasons. On 24 April 2020 the Company and Atlético Madrid signed an extension of the agreement for the season 2021/22. b. The Company and Club BSC Young Boys Betriebs AG (“BSC Young Boys”) entered into a sponsorship agreement on 2 June 2020 under which the Company is entitled to advertise and promote itself as the main sponsor of BSC Young Boys for the 2020/21, 2021/22 and 2022/23 seasons. c. The Company and Club Legia Waeszawa S.A (“Legia”) entered into a sponsorship agreement on 9 August 2020 under which the Company is entitled to advertise and promote itself as the main sponsor of Legia for the 2020/21, 2021/22 and 2022/23 seasons. d. The Company and Club Atalanta Bergamasca Calcio SPA (“Atalanta”) entered into a sponsorship agreement on 18 August 2020 under which the Company is entitled to advertise and promote itself as the main sponsor of Atalanta for the 2020/21, 2021/22 and 2022/23 seasons. Note 22 – Share capital Composed of ordinary shares of NIS 0.01 par value, as follows: Authorised Issued and fully paid Less treasury shares* Outstanding shares Number of ordinary shares as of 31 December 2021 2020 300,000,000 300,000,000 114,888,377 114,888,377 (14,663,597) (11,436,923) 100,224,780 103,451,454 *Number of accumulated ordinary shares that were purchased by the Company as part of the share buyback programmes, less issue of treasury shares. 118118 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report 119 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance119 Plus500 Ltd. 2021 Annual Report Note 23 – Goodwill and other intangible assets, net On 19 July 2021, Plus500US Inc., a wholly owned subsidiary of the Company, completed the acquisition of all of the membership interests of Cunningham Commodities LLC. (“Cunningham”), a regulated Futures Commission Merchant (“FCM”), and Cunningham Trading Systems LLC. (“CTS”), a technology trading platform provider, operating in the futures and options on futures market (together, the “Acquisition”). The Acquisition consideration was funded from the Company’s existing cash balances and was paid on completion. Due to the timing of the transaction closing date, the fair values assigned to assets acquired and liabilities assumed are preliminary, based on management’s estimates and assumptions and may be subject to change as additional information is received. The Company expects to finalise the valuation as soon as practicable, but not later than one year from the Acquisition date. According with the purchase price allocation, Goodwill and other intangible assets, net, comprises of: Licence of $24.2 million, Customer relationships of $1.9 million, Technology of $0.2 million and Goodwill of $1.7 million. The assets and liabilities recognised as a result of the Acquisition are as follows: US dollars in millions Cash 0.5 Other receivables 6.0 Long-term other receivables 0.4 Service suppliers (0.3) Other payables (1.6) Goodwill and other intangible assets, net 28.0 Net assets acquired 33.0 From the Acquisition date and up to 31 December 2021, the acquired business contributed approximately 1% out of the total Group revenues for the year ended on 31 December 2021. No impairment was recorded as of 31 December 2021. Note 24 – Related parties and key management a. Key management personnel definition: The Directors and other members of management are classified as Persons Discharging Management Responsibility (“PDMR”) in accordance with IAS 24 and the Market Abuse Regulation. The Directors’ Remuneration Report discusses all the benefits and share based compensations earned during the year and the preceding year by the Directors. b. Company’s liability in respect of related parties and key management services (part of Other payables): As at 31 December US dollars in millions 2021 2020 Related party and key management liability 11.6 13.6 c. Expenses to related parties and key management: Year ended 31 December US dollars in millions 2021 2020 Payroll and related expenses and service fees (Selling and marketing expenses) 6.6 7.1 Payroll and related expenses and service fees (Administrative and general expenses) 10.0 13.5 Non-executive Directors fees (Administrative and general expenses) 1.1 0.6 The average number of key management personnel during the year was 21 (FY 2020: 23). Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 25 – Financial risk management The Group operates in the fields of CFDs and share dealing, as well as futures and options on futures. In the field of CFDs, the Group engages only with individual clients and offers CFDs referenced to shares, indices, commodities, options, ETFs, cryptocurrencies and foreign exchange. In the field of share dealing, the Group engages only with individual clients and offers a wide range of financial instruments comprised of the world’s most popular equities, listed on major exchanges worldwide. In the field of futures and options on futures, the Group engages through a subsidiary in the US which is an FCM that clears and executes futures contracts and options on futures contracts for customers. The Group’s 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 minimise 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 utilises market position limits for operational efficiency. Not all net client exposures are hedged and the Group may have a substantial net position in any of the financial markets in which it offers products. In 2021, the Group implemented targeted hedging, with a view to reducing market risk. This focused approach continues to be deployed in certain circumstances going forward, as and when appropriate. 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. 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 being offered in a smaller size and partially could be 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. 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 risk. The Group has market price risk as a result of its CFDs trading activities on shares, indices, commodities, options, ETFs, cryptocurrencies and foreign exchange, 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 department and management for each financial instrument, and also for groups of financial instruments where it is considered that their price movements are likely to be positively correlated. The exposures are being reviewed by the Risk & Regulatory Committee. Daily profit on closed positions: US dollars in millions Highest profit Highest loss Average 120120 Plus500 Ltd. 2021 Annual Report 2021 16.0 (3.9) 1.9 2020 76.9 (20.9) 2.4 Plus500 Ltd. 2021 Annual Report 121 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance121 Plus500 Ltd. 2021 Annual Report Note 25 – Financial risk management continued a. Market risk continued 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. If the US dollar had strengthened by 1% in respect of balances denominated in other currencies, with all other variables unchanged, the exposure on income after taxes in respect of those balances would be a gain (loss) of: As of 31 December US dollars in millions 2021 2020 EUR (0.1) (0.5) AUD (0.1) (0.9) GBP (0.1) 0.1 ILS (1.0) – The exposure in respect of balances denominated in other currencies is immaterial. b. Credit risk The Group operates a real-time mark-to-market trading platform with customers’ profits and losses being credited and debited automatically to their accounts. Under the Group's policy, customers cannot owe the Group funds when losing more than they have in their accounts, all customer accounts are pre-funded. Client credit risk – 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, customer credit risk can arise where there are significant, sudden movements in the market (e.g. 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, customers’ positions are liquidated (margin call). Institutional credit risk – The risk that financial counterparties will not meet their obligation, risking both client and the Group’s assets. The carrying amount of the Group’s financial assets 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 2021 and 2020, counterparties holding the Group’s cash and cash equivalents, credit cards, client funds and deposits, have credit ratings as follows: Credit rating* 2021 2020 AA+ to AA- 21% 27% A+ to A- 73% 46% BBB+ to B+ 2% 25% Remaining counterparties 4% 2% * The financial institutions were rated by the same third party. Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 25 – Financial risk management continued b. Credit risk continued As of 31 December 2021 the amounts held by the remaining counterparties are held in several banks worldwide. The balance in each of those banks does not exceed 2% (2020: 1%) of total cash and cash equivalents, credit cards, client funds and deposits. The Group’s largest credit exposure to any single bank as of 31 December 2021 was $240.1 million or 22% of the exposure to all banks (2020: $217.1 million or 20%). 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. 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-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. 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. 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 to service suppliers is generally up to two months. e. Capital management 1) Plus500UK The UK Subsidiary is regulated by the FCA. The UK Subsidiary manages its capital resources on the basis of regulatory capital requirements (“Pillar 1”) and its own assessment of capital required to support all material risks throughout the business (“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 at 31 December 2021 and 2020, the UK Subsidiary had £43.9 million and £41.8 million, 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) Plus500CY The CY Subsidiary is regulated by CySEC. The CY Subsidiary manages its capital resources on the basis of regulatory capital requirements (“Pillar 1”) and its own assessment of capital required to support all material risks throughout the business (“Pillar 2”). The CY Subsidiary manages its regulatory capital through an Internal Capital Adequacy and Risk Assessment Process (“ICARA”) in accordance with guidelines and rules implemented by 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 2021 and 2020, the regulatory capital of the CY Subsidiary was €90.4 million and €71.7 million, respectively, which is in excess of both its regulatory capital requirement (Pillar 1) and the internally measured capital requirement (Pillar 2). As of the 26 of June 2021, the capital adequacy and overall risk management requirements that applied to the Company, under the Capital Requirements Regulation & Directive (“CRR & CRDIV”) prudential framework, have been replaced by amended prudential rules. The Internal Capital Adequacy Assessment Process (“ICAAP”) were replaced by ICARA. As at 31 December 2021 and 2020, Pillar 1 Capital Adequacy ratio was 174.1% and 111.8% respectively. 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. 122122 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report 123 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance123 Plus500 Ltd. 2021 Annual Report Note 25 – Financial risk management continued e. Capital Management continued 3) Plus500AU The AU Subsidiary is regulated by ASIC, FMA and FSCA. 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 and FMA and Capital Liquidity assessment in accordance with rules and guidelines implemented by FSCA. As at 31 December 2021 and 2020, the AU Subsidiary held NTA of AUD 38.2 million and AUD 33.2 million, respectively, of regulatory capital, which is in excess of its NTA requirements from ASIC, FMA and FSCA. 4) Plus500SG The SG Subsidiary is regulated by MAS. The SG 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 SG Subsidiary manages its capital in accordance with rules and guidelines implemented by MAS. As at 31 December 2021 and 2020, the SG Subsidiary held regulated capital of SGD 8.3 million and SGD 7.8 million, respectively, of regulatory capital, which is in excess of its MAS requirements. 5) Plus500IL The IL Subsidiary is regulated by the 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 capital in accordance with rules and guidelines implemented by ISA. As at 31 December 2021 and 2020, the IL Subsidiary held regulated capital of $11.2 million and $10.2 million, respectively, of regulatory capital, which is in excess of its ISA requirements. 6) Plus500SEY The SEY Subsidiary is regulated by the FSA. The SEY 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 SEY Subsidiary manages its capital in accordance with rules and guidelines implemented by FSA. 7) Cunningham Commodities Cunningham Commodities is a Futures Commission Merchant (“FCM”) and is registered with CFTC and a member of the NFA. As at 31 December 2021, the Cunningham Commodities Subsidiary had adjusted net capital of $22.0 million, which is in excess of CFTC Regulation 1.17 and the minimum capital requirements of the CME Group Inc. f. Other business risks The Group’s business is subject to various laws and regulations in different countries according to its activity and other countries from where the Company operates. Any regulatory actions, tax or legal challenges against the Group for non-compliance with any regulatory or legal requirement could result in significant fines, penalties, or other enforcement actions, increased costs of doing business through adverse judgement or settlement, reputational harm, the diversion of significant amounts of management time and operational resources, and could require changes in compliance requirements or limits on the Group’s ability to expand its product offerings, or otherwise harm or have a material adverse effect on the Group’s business. g. Fair value estimation Financial derivative open positions (offset from, or presented with, deposits from clients within “Trade payable – due to clients”) (see also Note 19) 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 markets 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 maximise 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. Notes to the Consolidated Financial Notes to the Consolidated Financial Statements continued Statements continued Note 25 – Financial risk management continued g. Fair value estimation continued Specific valuation techniques used to value financial instruments are based on quoted market prices at the consolidated statement of financial position date and an additional predetermined amount (trading spread). Note 26 – Cash generated from operations US dollars in millions Cash generated from operating activities Net income for the year Adjustments required to reflect the cash flows from operating activities: Depreciation and amortisation Amortisation of right of use assets Lease modification Liability for share based compensation Settlement of share based compensation Equity share based compensation Taxes on income Interest expenses in respect of leases Exchange differences in respect of leases Interest income Foreign exchange losses (gains) on operating activities Operating changes in working capital: Decrease (increase) in other receivables and others Increase (decrease) in trade payables due to clients Increase (decrease) in other payables Increase (decrease) in service suppliers Cash generated from operating activities Year ended 31 December 2021 2020 310.6 500.1 0.7 1.8 (0.2) 6.8 (8.4) 4.9 75.8 0.2 – (6.2) 4.3 79.7 (16.9) (0.4) 17.3 (7.3) (7.3) 383.0 0.6 1.7 – 11.7 (5.2) 1.8 23.2 0.2 0.4 (5.2) (8.3) 20.9 1.9 0.8 10.4 12.5 25.6 546.6 124124 Plus500 Ltd. 2021 Annual Report Plus500 Ltd. 2021 Annual Report 125 Plus500 Ltd. 2021 Annual ReportStrategic ReportFinancial statementsGovernance125 Plus500 Ltd. 2021 Annual Report Note 27 – Subsequent events In January 2022, the Company’s status as a Preferred Technological Enterprise (“PTE”), as accredited by the ITA under the tax regime in Israel, has been extended for the years 2022, 2023, 2024, 2025 and 2026 (see Note 10). In February 2022, the Group obtained an operating licence in Estonia, granted by the Estonian Financial Supervision Authority (“EFSA”). On 15 February 2022, the Company declared a final dividend in an amount of $37.8 million ($0.3777 per share). The dividend record date is 25 February 2022 and it will be paid to the shareholders on 11 July 2022. On 15 February 2022, the Company declared a special dividend in an amount of $22.2 million ($0.2218 per share). The dividend record date is 25 February 2022 and it will be paid to the shareholders on 11 July 2022. On 15 February 2022, the Company declared the adoption of a share buyback programme to buy back an amount of up to $55.0 million of the Company’s ordinary shares, comprised of a regular new share buyback programme in the amount of $25.2 million and a special share buyback programme in the amount of $29.8 million. In March 2022, the Company completed the acquisition of 100% of the issued and outstanding share capital of EZ Invest Securities Co., Ltd., a Type 1 Financial Instruments Business Operator regulated by the Financial Services Agency in Japan. This acquisition was funded from the Company’s existing cash balances, with a non-significant consideration amount. Further information Advisors Sponsor and Broker Liberum Capital Limited Ropemaker Place 25 Ropemaker Street London EC2Y 9LY, UK Independent Auditors Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited 146 Derech Menachem Begin Street Tel Aviv 6492103, Israel Financial PR MHP Communications 60 Great Portland Street London W1W 7RT, UK Legal Advisor (Israel) Herzog, Fox & Neeman Herzog Tower 6 Yitzhak Sadeh Street Tel Aviv 6777504, Israel Legal Advisor (United Kingdom) Bryan Cave Leighton Paisner LLP Governor’s House 5 Laurence Pountney Hill London EC4R 0BR, UK Depositary Link Market Services Trustees Limited Central Square 29 Wellington Street Leeds LS1 4DL, UK Registrar Link Market Services Limited Central Square 29 Wellington Street Leeds LS1 4DL, UK Stay up to date The latest Plus500 news, share price, financial documents and more can be found on our investor site: Plus500.com Plus500.com 

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