bonds Investor presentation December 2017 Disclaimer This - - PowerPoint PPT Presentation

Admiral Markets AS Public offering of subordinated bonds

Investor presentation

December 2017

Disclaimer

This presentation has been prepared in connection with the public offering and listing of the subordinated bonds of Admiral Markets AS. The presentation in not the prospectus and does not include all information relevant for a potential about the bonds and the issuer. The Prospectus for the public offering and listing of the bonds has been registered by the Estonian Financial Supervision Authority under the number 4.3-4.2/3060 and can be found on the webpage of Admiral Markets AS (www.admiral.ee)*. This presentation should be read in conjunction with the prospectus. Any decision to invest in the Bonds should be based on consideration of the prospectus as a whole by the Investor. Nothing in this document shall be treated as a representation or warranty as to the profitability of the investments into the Company. Nothing contained herein is, or may be relied upon as, a promise, representation or guarantee as to the future performance or policies of the Company or as to any other circumstances that may or may not occur in the future. Nothing in this document constitutes an offer or invitation by or on behalf of the Company to invest into the Company. By receiving this document, you accept and acknowledge that no special relationship of trust or duty whatsoever exists that would require updating the information herein and confirm that you are not relying upon any such special relationship of trust or duty (including but not limited to under Article 1048 of the Estonian Law of Obligations Act, in Estonian: Võlaõigusseadus). Neither this document nor any information contained herein shallbe treated as legal, financial or tax advice of any kind. Nothing in this document shall be construed as the giving of investment advice by the Company or any other person. You should take independent advice from qualified professional advisors before making investment decision(s). An investment in the bonds is a subject to a number of risks that should be considered before making an investment decision. The information provided in this presentation does not provide a complete overview of the issuer’s business, the terms and conditions of the bonds, or the risks specific to the bonds and the issuer. Always refer to the prospectus before making any investment decision.

*Webpage www.admiral.ee directs to the public offering homepage

2

Admiral Markets AS (hereinafter also “the Issuer”), a part of the international online brokerage group Admiral Markets Group AS (“Admiral Markets”), is announcing a public bond offering. Admiral Markets, established and headquartered in Tallinn, Estonia has expanded its reach to become a truly global

• company. Its subsidiaries, investment firms, serve clients in 90+ countries.

Admiral Markets offers its customers online trading in Forex and other financial markets with currency pairs and a wide range of derivatives (mostly contracts for difference, CFDs). The Issuer is licensed by the Estonian Financial Supervision Authority to provide cross border brokerage services as an investment firm in the 28 Member States of the EU, and in three EEA countries: Iceland, Norway and Liechtenstein. There are three other regulated investment firms in Admiral Markets Group: in the UK, Cyprus and Australia. Investors are offered 10 year unsecured subordinated bonds with a coupon rate of 8% The proceeds of the offering will be used to strengthen the regulative capital of the Issuer to support its fast growth. The Issuer is applying for the bonds to be listed on the Nasdaq Baltic Bond List

Executive summary

Bond offering

3

For a full overview about the Issuer and the Issue, please refer to the offering prospectus: www.admiral.ee

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Definitions

Contract for difference (CFD) – a tradable derivative contract under which gains or losses of the parties are settled through cash payments rather than by the delivery of physical goods or securities. CFD agreements offer investors the possibility to trade with high leverage. CFDs can be used for both long and short positions. Investment firm – a company whose permanent activity is the provision of investment services or the performance of investment activities

• n a professional basis. Investment firms are under the supervision of financial supervision authorities in many countries (including EU

countries). Investment firms usually have higher capital requirements than regular legal entities. Liquidity provider – a market participant acting as both the buyer and seller of a particular security to profit on the bid-ask spread. In derivative markets the liquidity providers have an important risk management role as they allow the market participants to hedge their (excess) open positions.

Table of contents

Admiral Markets 6

The Issuer 17 Financial Performance 24 Bond Issue 29 Contact 32

Admiral Markets is a group of companies offering online trading in Forex and

• ther financial markets with currency pairs and derivatives on precious

metals, stocks, commodities, indices and cryptocurrencies. Our strong dedication to state-of-the-art software and quality assurance means that our clients receive the best, most transparent trading experience.

6

Markets

Physical presence in 16 countries, serving customers from 90+ countries

Active trading accounts

24,000 active trading accounts, which have executed at least one trade in last 12 months

Employees

200 motivated professionals, 119 of which are working at the Issuer, Admiral Markets AS, as of 30.06.2017

Net income from trading

Almost 23 M EUR of net income from trading in 2016 while Admiral Markets AS, the Issuer, made nearly 18 M EUR

Admiral Markets at a glance 24,000 90+ 200 23 M EUR

Source: Audited annual reports for the financial year 2016 and unaudited interim reports for the six months up to 30.06.2017 of the Issuer and Admiral Markets Group AS

7

8

Why Admiral Markets?

Having a physical presence in its most important markets enables Admiral Markets to get to know its clients personally, understand them better and offer them a better service.

Global presence

Admiral Markets enables trading with the local and the best-known instruments in each of its main

• markets. Deposits to trading accounts can be made in most national currencies. Multiple trading accounts

in different currencies are allowed to protect client’s capital from currency fluctuations.

Flexible trading accounts

Admiral Markets helps its customers to make thoughtful and intelligent trading decisions by publishing books and offering educational programmes (seminars, live webinars, videos), designed to teach trading skills and explain the financial markets.

Education and analytics

Admiral Markets’ servers are located at LD4 Equinix Datacenter, UK, right next to all major liquidity providers, ensuring the best execution and the lowest latency. It also offers the most reliable and popular trading platform, MetaTrader 5.

Security and software

Country offices with local experts in all key markets. Local knowledge, support, seminars and many other elements allow a closer personal relationship with customers. Support via phone and live chat in more than 20 languages.

Local support

9

Awards

Instruments

56 currency pairs, including pairs with numerous exotic currencies e.g. South African Rand, New Zealand Dollar 8 CFDs on commodities, including 5 metals - gold (USD and AUD), silver, platinum, palladium (all in USD) and 3 energies - Brent, WTI

• il, natural gas (all in USD)

CFDs on stock indices - 16 stock indices and 2 index futures CFDs on stocks - 64 stocks from NYSE (29), Nasdaq (9), Euronext (11), Xetra (12), BME (3) Stocks – 65 stocks from USA & Europe CFDs on bond futures - 2 bond indices (Bund ,10Yr T-Note) CFDs on 5 cryptocurrency pairs with fiat currencies - Bitcoin, Ethereum, Ripple, Litecoin and Bitcoin Cash

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Trading platforms

Admiral Markets is an online trading provider, i.e. all customer transactions, including trading and money transfers, are served through online channels. It has developed a two-layer service channel for the customers – The Trader’s Room platform for account and money management and (2) Meta Trader for online trading.

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A popular online trading platform, developed by MetaQuotes Software, a long term ally of Admiral Markets. Admiral Markets contributes to the development of the platform by testing the platform and can therefore offer new versions to customers long before they arrive to market. An app used by clients to register, open accounts, manage deposits and withdrawals, amend personal information and submit documents for the identification of clients. Also includes a billing system and single log-on service to all the services offered by Admiral Markets.

Meta Trader 4 MT4

Web Trader

MT5

Supreme Edition

MT5

Mobile

Meta Trader 5 MT4

Supreme Edition

Trader’s Room

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Major markets

Europe Other markets

EU License by EFSA (EE) - No 4.1 - 1/46

Licensee: Admiral Markets AS Services: (1) Reception and transmission of orders related to securities; (2) Execution of orders related to securities in the name

• f or for the account of the client;

(3) dealing in securities on own account. Ancillary services: (1) safekeeping and administration of securities for a client; (2) Grant of a credit to an investor to conduct securities transactions; (3) foreign exchange services connected with the provision of investment services; (4) provision of recommendations

• n investment and financial analysis or other general

recommendations; (5) other investment and ancillary services in connection with derivative instruments. Markets: 28 Member States of the European Union, 3 EEA countries (Iceland, Norway and Liechtenstein). 13

Licenses and regulation

EU License by FCA (UK) - 595450

Licensee: Admiral Markets UK Ltd. Services: (1) Arranging (bringing about) deals in investments; (2) Arranging safeguarding and administration of assets; (3) Dealing in investments as agent; (4) Dealing in investments as principal; (5) Making arrangements with a view to transactions in investments. Limitations: Admiral Markets UK Ltd is unable to hold financial instruments for own account unless it meets certain conditions. Markets: 28 Member States of the European Union, 3 EEA countries (Iceland, Norway and Liechtenstein). Other: Financial Services Compensation Scheme (FSCS) for up to £85,000 under the Financial Conduct Authority Client Asset (CASS) rules.

The slide presents a short summary of the terms of the licenses. For detailed overview please refer to the homepage of the financial supervisory authority that has issued the license.

Australian License by ASIC - No 410681

Licensee: Admiral Markets Pty Ltd. Services: (a) Provision of financial advice for deposit and payment products, derivatives and foreign exchange contracts; (2) Issuing, applying for, acquiring, varying or disposing of a financial product in respect of derivatives; and foreign exchange contracts; and applying for, acquiring, varying or disposing of a financial product on behalf

• f another person to retail and wholesale clients

Markets: Australia and Asia 14

Licenses and regulation

Cyprus License by CySEC - No 201/13

Licensee: Admiral Markets Cyprus Ltd. Services: (1) Reception and transmission of orders in relation to

• ne or more financial instruments, (2) Execution of orders on behalf
• f clients, (3) Portfolio management

Ancillary services: (1) Safekeeping and administration of financial instruments, including custodianship and related services (2) Foreign exchange services where these are connected to the provision of investment services Markets: 28 Member States of the European Union, 3 EEA countries (Iceland, Norway and Liechtenstein) Other: Membership in Investor Compensation Fund, which secures any claims of covered clients against members of the fund

The slide presents a short summary of the terms of the licenses. For detailed overview please refer to the homepage of the financial supervisory authority that has issued the license.

Germany 15% Poland 9% Czech Republic 8% Estonia 7% Bulgaria 7% Romania 7% Lithuania 7% Spain 7% Latvia 5% Hungary 4% United Kingdom 4% Other markets 20%

Distribution of active trading accounts

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Customers*

292 5,025 13,306 19,328 21,681 24,503 28,767 24,486 24,109 2009 2010 2011 2012 2013 2014 2015 2016 H1-2017

Active trading accounts

Size of minimum deposit raised

*Active accounts represent accounts where at least one trade was made in the last 12 months; data as of 30.06.2017

Admiral Markets 6

The Issuer 17

Financial Performance 24 Bond Issue 29 Contact 32

17

Legal structure of Admiral Markets

Admiral Markets AS, the Issuer, is a subsidiary of Admiral Markets Group AS, the parent company of a multinational group

• perating under the trademark «Admiral Markets». Admiral Markets Group AS is a holding company with no operations of its own.

Admiral Markets Group AS AMTS Solutions OÜ Branches in Branches in Representative

• ffice in RU

Investment service providers The Issuer Intra-group service provider 100% 100% 100% 100% 100% 100% 62% 100% Runa Systems CP Admiral Markets Chile SPA Admiral Markets Pty Ltd. Admiral Markets UK Ltd. Admiral Markets AS BCNEX OÜ Admiral Markets Cyprus Ltd. Representative

• ffice

The Issuer’s role in the Admiral Markets group

The Admiral Markets group is highly integrated - each group member fulfils its specific role and is interdependent of other members. The Issuer has the central role within the group as the sole liquidity provider to other group companies and responsibility for all back and middle-office functions. In addition, the Issuer is itself one of the leading investment service providers in Estonia.

Admiral Markets AS Admiral Markets UK Admiral Markets Chile Admiral Markets Australia Admiral Markets Cyprus Intra group service co-s External liquidity providers 18

serves external customers, 0-10% of all group customers Licence to provide investment services unconsolidated total assets and equity (intra-group balances not eliminated, M EUR), 30.06.2017 securities transactions intra-group services incl. risk management, IT, business development, HR, finance, legal no of employees , 30.06.2017

Admiral Markets Group AS

• | - |

1 | A 6.0 | E 4.0 serves external customers, 10-40% of all group customers A, E serves external customers, 40+% of all group customers | | 6 | A 2.2 | E 1.6

• | - |

14 | A 0.4 | E 0.3 | - | 4 | A 0.2 | E 0.1 | | 3 | A 0.3 | E 0.3 | | 53 | A 4.0 | E 1.7 | | 119 | A 25.0 | E 23.6

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Business model and sources of income

Net profit from trading (EUR 24,852,520 in 2016) – market value changes of tradeable derivatives and other financial assets, including income from A-book trades and B-book trades A-book trades are sent directly to external liquidity providers and the Issuer makes its income from the spread. The Issuer does not take market risk. B-book trades are the clients’ orders that the Issuer keeps internally, i.e. the Issuer takes an open position which is partially hedged internally with the opposite open positions from other clients’ orders. Income from B-book trades involves the whole spread (the spread is not shared with external liquidity providers) and gains from favourable movements of securities prices. Commission fee income (EUR 653,267) – the consideration received for mediation of services. Interest income (EUR 70,567) – interest charged for loans to other Admiral Markets Group companies, interest from bonds held as the liquidity reserve and other financial assets Other income (EUR 163,433) – revenue from the sale of goods (e.g. educational books) and intra-group services etc.

Source: audited annual report for the 2016 financial year

Sergei Bogatenkov, CEO

Joined Admiral Markets in 2014. 10+ years in consulting, banking and asset management at Swedbank, Versobank, EY and Bank of Estonia Master’s degree from Tallinn University of Technology, executive training at Leipzig Graduate School of Management (HHL)

Dmitri Lauš

Co-founder of Admiral Markets. Expert in financial technology, has played integral role in technological development of Admiral Markets. Bachelor’s degree from Estonian Business School

Dmitry Kuravkin

With Admiral Markets since 2017. 10+ years of experience in finance law (incl. litigations) in legal and compliance positions at Swedbank and Pocopay. Master’s degree from Tallinn University

The Management Board of the Issuer

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Alexander Tsikhilov

Founder of Admiral Markets. Has been involved in several entrepreneurial projects, including an internet service provider. PhD in Business Administration from Swiss Business School

Anatolii Mikhalchenko

Joined Admiral Markets in 2004 as IB

• manager. A member of the Supervisory

Board since 2011. Graduate of ITMO University in Saint- Petersburg

Anton Tikhomirov

Joined Admiral Markets during a merger with a Russian brokerage company. Develops Admiral Markets’ business in Spain and Latin America. Has been in the industry since 1999

Aleksandr Ljubovski

Joined Admiral Markets in March 2010. Currently head of risk and compliance. Degree in Logistics, Materials and Supply Chain Management from TTK University

The Supervisory Board of the Issuer

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Miti Derives from carrying assets and liabilities sensitive to foreign exchange rates, as well as currency pairs and derivatives on shares, precious metals, indices, cryptocurrencies and commodities in its trading portfolio. Mitigation: risk limits, the excess risk is hedged with external liquidity providers. Potential loss if its counterparties do not meet their obligations to the Issuer. Affects cash held with third parties, loans granted and receivables. Mitigation: the credit risk of client trading portfolios is mainly managed through leveraging derivatives and collateral rates. Cash is held in a diverse range of highly rated credit institutions. Loss from mismanagement, fraud, unprofessional practices, human errors and IT systems Mitigation: use of risk controls, assessment and monitoring tools. Inability to meet its obligations as a result of a mismatch of liquidity of assets and liabilities Mitigation: monitoring of payables and receivables of different periods of time on a daily basis. 22

Key risks

Market Risk Credit risk Operational risk Liquidity risk

Admiral Markets 6 The Issuer 17

Financial Performance 24

Bond Issue 29 Contact 32

9,052 13,484 14,051 13,197 16,485 17,953 9,003 5000 10000 15000 20000 2011 2012 2013 2014 2015 2016 H1-2017

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Admiral Markets AS: financial highlights

4,294 5,391 3,586 2,219

• 2,517

5,888 2,186

• 4000
• 2000

2000 4000 6000 8000

2011 2012 2013 2014 2015 2016 H1-2017

*On 15 January 2015, the Swiss National Bank announced that it would terminate its exchange rate ceiling for francs that had been in place for 3 years. The decision created unprecedented volatility in the foreign exchange market and led to almost instant loss of highly leveraged Swiss franc investments betting on the franc's weakening. The event triggered realisation of credit risk for the Issuer as some of its liquidity providers were unable to meet their obligations to the Issuer. The Management Board of the Issuer recognised EUR 9.9 M of receivables as doubtful in 2015. Without this one-off expense, the operations of the Issuer were profitable in 2015. After the event, the Issuer modified its risk management policy to avoid similar losses in the future.

Net profit from trading Profit (loss) for the accounting period*

1,000 EUR 1,000 EUR Source: Audited annual reports of the Issuer (2011-2016), unaudited interim report of the Issuer for the six months up to 30.06.2017

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Admiral Markets AS: financial highlights

1,000 EUR Source: Audited annual reports of the Issuer (2011-2016), unaudited interim report of the Issuer for the six months up to 30.06.2017 26% 36% 20% 10%

• 12%

26% 50% 38% 22% 12%

• 14%

29%

• 20%
• 10%

0% 10% 20% 30% 40% 50% 60% 2011 2012 2013 2014 2015 2016

Efficiency

ROA ROE 8,648 14,036 17,622 19,841 17,324 22,752 23,613 8,034 781 3,287 2,049 3,090 1,371 1,433

5000 10000 15000 20000 25000 30000 2011 2012 2013 2014 2015 2016 H1-2017

Owners’ equity and liabilities

Equity Liabilities

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Admiral Markets AS: Balance sheet

(1,000 EUR) 31.12.2014 31.12.2015 31.12.2016 30.06.2016 30.06.2017 Cash and equivalents 17,798 15,585 18,018 15,323 19,080 Financial assets at fair value through profit and loss 236 98 2,422 1,848 939 Short term loans, receivables and prepayments 2,522 3,651 2,823 3,643 4,187 Total current assets 20,556 19,334 23,263 20,814 24,206 Total non-current assets 1,333 1,081 860 997 839 TOTAL ASSETS 21,889 20,414 24,123 21,811 25,046 Financial liabilities at fair value through profit or loss 248 122 52 119 142 Payables and prepayments 1,345 2,741 1,075 1,185 1,047 Provisions 456 227 244 763 244 Total liabilities 2,049 3,090 1,371 2,066 1,433 Share capital 2,586 2,586 2,586 2,586 2,586 Statutory reserve capital 259 259 259 259 259 Retained earnings 16,997 14,480 19,908 16,900 20,769 Total owners’ equity 19,841 17,324 22,752 19,744 23,613 TOTAL LIABILITIES AND OWNERS’ EQUITY 21,889 20,414 24,123 21,811 25,046

The annual reports for the financial years 2014 and 2015 have been audited by Ernst & Young Baltic AS and the annual reports for 2016 by PricewaterhouseCoopers AS. Interim reports for the six months up to 30.06.2016 and 30.06.2017 are unaudited. The financial statements of 2015 have been corrected retrospectively in the annual report for 2016 and this presentation presents the corrected amounts.

(1,000 EUR) 2014 2015 2016 H1-2016 H1-2017 Net profit from trading of financial assets at fair value through profit

• r loss with clients and liquidity providers

15,486 20,572 24,853 11,772 13,322 Commission fee income 24 474 653 227 42 Commissions and brokerage fee expense

• 1,619
• 3,776
• 7,325
• 2,917
• 4,334

Other trading activity related expenses

• 694
• 785
• 228
• 133
• 28

Net income from trading 13,197 16,485 17,953 8,949 9,003 Other income 160 247 163 56 197 Other financial income and expenses 214 166 445

• 188
• 464

Personnel expenses

• 2,881
• 2,986
• 4,484
• 2,333
• 2,589

Operating expenses

• 8,195
• 16,131
• 7,751
• 3,705
• 3,522

Depreciation of fixed assets

• 263
• 281
• 308
• 155
• 107

Profit (loss) before income tax 2,232

• 2,500

6,018 2,624 2,517 Income tax

• 13
• 17
• 130
• 43
• 331

Profit (loss) for the accounting period 2,219

• 2,517

5,888 2,580 2,186

Admiral Markets AS: Income statement

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The annual reports for the financial years 2014 and 2015 have been audited by Ernst & Young Baltic AS and the annual reports for 2016 by PricewaterhouseCoopers AS. Interim reports for the six months up to 30.06.2016 and 30.06.2017 are unaudited. The financial statements of 2015 have been corrected retrospectively in the annual report for 2016 and this presentation presents the corrected amounts.

Admiral Markets 5 The Issuer 16 Financial Performance 22

Bond Issue 27

Contact 32

Use of proceeds

The Issuer seeks to continue its fast growth, resulting in the need of additional capital buffers to balance the increased volumes, meet its internal and regulatory capital requirements and ensure the long-term sustainability of the business. The proceeds from the Issue will be used to boost the regulative capital base of the Issuer as follows: a) Tier 1 capital: EUR 21,287,596 (as at 30.06.2017) b) Tier 2 capital (proceeds of the issue): EUR 5,000,000 c) Total regulatory capital base: EUR 26,287,596

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Securities Unsecured subordinated bonds Issuer Admiral Markets AS Arranger Admiral Markets AS Legal advisor Advokaadibüroo TGS Baltic AS Maturity date 28.12.2027 Issue size Up to EUR 5,000,000 ISIN code EE3300111251

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Terms of Admiral Markets subordinated bonds

Nominal value of the bond EUR 100 Issue date 28.12.2017 Interest rate 8% p.a. 30E/360 Interest payment Semi-annual 28.06 and 28.12 every year Offering Public offering in Estonia, Latvia and Lithuania Listing The Issuer applies for listing at Nasdaq Baltic Bond List Subscription period 08.12.2017 10:00 to 19.12.2017 17:00

Key risks specific to the bonds

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Bond investors are not entitled to any ownership, voting, dividends or any other rights which would be represented with equity securities

Credit Risk Liquidity risk Price risk No ownership risk

The Bonds are subordinated to all unsubordinated claims, i.e. in case of liquidation or bankruptcy, the claims arising from the bonds are to be satisfied only after full satisfaction of all unsubordinated claims Possible loss of assets or a decrease in profitability by the Issuer due to amendments in legal acts of the countries in which the Issuer conducts its business activities A change to tax assessment and withholding procedures applicable to the tax residents and non-residents of Estonia may affect the value of the interest income

Subordination risk Legislation risk Tax risk

During the initial offering, the bonds are offered at nominal value. In the secondary market the price of the bonds may increase or decrease due to market situation

• r events related to the Issuer

The Issuer is applying for the bonds to be listed on the Nasdaq Tallinn Bond List. However, this does not guarantee admission to trading or liquidity in the secondary market The Issuer may fail to meet its obligations arising from the bonds in a duly and timely manner The Bonds may be redeemed prematurely on the initiative

• f the Issuer, if any event provided for in Article 78 (4) of

Regulation (EU) No. 575/2013 occurs and the EFSA authorises such early redemption.

Early redemption risk

Contact

• Mr. Sergei Bogatenkov

Address: Ahtri 6, 10151, Tallinn, 10151 E-mail: sergei.bogatenkov@admiralmarkets.com Telephone: +372 6 309 300 Webpage: www.admiral.ee