DISCLAIMER This PDF is an exact copy of the Annual Report and Accounts of London Stock Exchange Group plc as provided to shareholders. The audit report is set out on page 100. The maintenance and integrity of the London Stock Exchange Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. WorldReginfo - b9713b92-58ef-4a41-beb7-1ad0bf40ad00 A global markets infrastructure business Annual Report 31 December 2017 WorldReginfo - b9713b92-58ef-4a41-beb7-1ad0bf40ad00 Who we are London Stock Exchange Group is a global markets infrastructure business. We provide valuable services for a wide range of customers, focusing on Intellectual Property, Risk and Balance Sheet Management and Capital Formation. The Group plays a vital economic and social role in enabling companies to access funds for growth and development. Our vision To be the most trusted expert in global financial markets. Our purpose We provide international access to capital. We help customers to optimise their capital resources and inform their investment decisions. We promote trusted and transparent environments and services for investment. We do this so that businesses and economies can thrive. Further information on London Stock Exchange Group can be found at: www.lseg.com London Stock Exchange Group plc 10 Paternoster Square London EC4M 7LS Telephone:+44 (0)20 7797 1000 Registered in England and Wales No. 5369106 WorldReginfo - b9713b92-58ef-4a41-beb7-1ad0bf40ad00 Contents STRATEGIC REPORT An overview of our business, our strategy, and the markets and regulatory environment in which we operate, including statements from our Chairman and Chief Executive. Followed by more detail on each of our divisions, our performance, how we consider our wider responsibilities and the principal risks that could affect our business. Sign-off for the Strategic Report is provided in the Directors’ Report on page 98. Highlights 2 Chairman’s statement 4 Chief Executive’s statement 6 What we do – our business model 8 Overview of Group activities 10 Market trends and our response 12 Strategy in action 16 Executive management team 18 Segmental review 19 Information Services 20 Post Trade Services – LCH 23 Post Trade Services – CC&G and Monte Titoli 26 Capital Markets 28 Technology Services 32 Our wider responsibility 34 Financial review 36 Risk management oversight 42 Principal risks and uncertainties 46 GOVERNANCE An introduction to our Board of Directors, our approach to corporate governance, the reports of committees to the Board and how we reward performance, along with other statutory and regulatory information. Board of Directors 54 Corporate governance 56 Complying with the provisions of the Code 62 Report of the Nomination Committee 64 Report of the Audit Committee 65 Report of the Risk Committee 70 Directors’ Remuneration Report 72 Directors’ Report 95 Statement of Directors’ responsibilities 99 Independent Auditor’s Report to the members of London Stock Exchange Group plc 100 GROUP FINANCIAL STATEMENTS Detailed financial information setting out our performance for the reported 12 month period and financial position at year end. Consolidated income statement 109 Consolidated statement of comprehensive income 110 Balance sheets 111 Cash flow statements 112 Statements of changes in equity 113 Notes to the financial statements 115 SHAREHOLDER INFORMATION A glossary of terms used in this report and other information for shareholders. Glossary 162 Overview of regulatory landscape 166 Financial calendar 168 Investor Relations 169 London Stock Exchange Group Annual Report December 2017 1 WorldReginfo - b9713b92-58ef-4a41-beb7-1ad0bf40ad00 Highlights The figures in the graphs below are for the Group on a continuing basis, so exclude businesses classified as discontinued during the periods shown. Total income Adjusted operating profit* £ m £ m Total income increased by 18% to 1,955 812 1,657 686 1,419 585 £1,955m 545 1,213 1,292 515 Mar Dec Dec Dec Dec Mar Dec Dec Dec Dec 2014 2014** 2015 2016 2017 2014 2014** 2015 2016 2017 Operating profit Adjusted basic earnings £ m per share (pence)* AEPS increased by 19% to 626 148.7 124.7 p 103.4 148.7 404 427 98.6 100.5 353 337 Mar Dec Dec Dec Dec Mar Dec Dec Dec Dec 2014 2014** 2015 2016 2017 2014 2014** 2015 2016 2017 Basic earnings per share (pence) Dividends per share (pence) Dividend per share increased by 19% to 153.6 51.6 43.2 p 36.0 51.6 28.4 74.8 27.2 63.0 63.8 22.5 54.4 Mar Dec Dec Dec Dec Mar Mar 9m Dec Dec Dec Dec 2014 2014** 2015 2016 2017 2013 2014 2014 2015 2016 2017 The Group changed its financial reporting reference date in 2014, hence the graphs show full 12 month figures on either a March or December year-end basis. 12 months to 31 December 2017 12 months to 31 December 2016 Continuing Year ended 31 December Continuing Discontinued Total Continuing Discontinued Total Total Variance Variance Total income £1,955m – £1,955m £1,657m £391m £2,048m (5%) 18% Adjusted operating profit* £812m – £812m £686m £27m £713m 14% 18% Operating profit £626m (£23)m £603m £427m £103m £530m 14% 47% Adjusted profit before tax* £750m – £750m £623m £28m £651m 15% 20% Profit before tax £564m (£23)m £541m £364m £104m £468m 16% 55% Basic earnings per share 153.6p (7.2)p 146.4p 63.8p (20.3)p 43.5p 237% 141% Adjusted basic earnings per share* 148.7p – 148.7p 124.7p 5.0p 129.7p 15% 19% * London Stock Exchange Group uses non-GAAP performance measures as key financial indicators as the Board believes these better reflect the underlying performance of the business. As in previous years, adjusted operating profit, adjusted profit before tax and adjusted earnings per share all exclude amortisation and impairment of purchased intangibles assets and goodwill and non-underlying items ** December 2014 numbers are unaudited 2 London Stock Exchange Group Annual Report December 2017 WorldReginfo - b9713b92-58ef-4a41-beb7-1ad0bf40ad00 Strategic Report Highlights Group Total Income by segment FURTHER INFORMATION £ m More detailed information on the performance 5 6 of our business segments can be found on pages 19–33. 12 months to 4 31 Dec 2017 1. Information Services 736 NEED HELP? 1 2. Post Trade Services LCH 562 Like any industry, global financial markets infrastructure has its own unique language. 3. Post Trade Services For that reason, we have included a glossary CC&G and Monte Titoli 151 on pages 162–165. 4. Capital Markets 391 3 5. Technology Services 91 6. Other 24 1,955 2 The Group continues to execute on its Post Trade Services – CC&G and Monte Titoli Technology Services strategy, delivering best-in-class capabilities, – Income for the year increased by 3% to £151 – Technology revenues increased by 3% to £91 driving global growth and developing our million in sterling terms but decreased by 4% million (2016: £88 million) and was unchanged partnership approach. Key headlines are on a constant currency basis on an organic constant currency basis provided below: – Net Treasury Income decreased by 3% to £42 – LSEG Technology was launched; a re-branding million in sterling terms and by 9% in constant and re-engineering of our technology businesses. Information Services currency terms We introduced a new Leadership Team, created – Revenues for the year increased by 24% to £736 a more nimble and product-driven delivery million (2016: £595 million), and up 13% on an – Contracts cleared by CC&G down 16% to capability, and improved our collaboration with organic constant currency basis driven by strong 108.3 million innovation teams, all with the aim of better growth in FTSE Russell – CC&G signed contracts to provide CCP hosted serving existing and new customers – FTSE Russell revenue for the year increased by 33% solutions to CCP.A Austria. Casablanca Stock – LSEG Business Services Limited, our shared to £546 million (2016: £409 million) and up 15% on Exchange has also selected CC&G for a CCP services company, has broadened into services an organic constant currency basis development project in 2018 for corporate functions – LSEG acquired The Yield Book and Citi Fixed Income Capital Markets Indices for total cash consideration of US$679 – Revenues increased by 6% to £391 million (2016: Note: Organic growth is calculated in respect of businesses million (£525 million) £368 million) and up 3% on an organic constant owned for at least 12 months in either period and so excludes ISPS, Mergent, Russell IM, Swapmatch and The Yield Book. currency basis – LSEG completed the acquisition of Mergent for total The Group’s principal foreign exchange revenue exposure arises from translating our European based Euro and US based USD consideration of US$147 million (£119 million) – Primary Markets saw 194 new companies admitted reporting businesses into Sterling. to our markets (2016: 134) of which 80 joined AIM Post Trade Services – LCH (2016: 64); total money raised across our equity – LCH’s income for 2017 was £562 million, up 26% markets was up 73% at £44.2 billion and increased by 21% on a constant currency basis – In Secondary Markets, UK cash equity average daily – SwapClear cleared US$874 trillion notional, up 31%, value traded increased by 4%; average daily with client trades cleared up by 29% to 1.2 million number of equity trades in Italy decreased by 6%; and compression up by 59% to US$609 trillion and, average daily value traded overall on Turquoise – ForexClear non-deliverable forwards clearing decreased 28%.