Responsibility Trust Innovation Annual Report | 2020 THE PRESENT REPORT WAS APPROVED BY THE GENERAL MEETING OF SHAREHOLDERS OF THE MOSCOW EXCHANGE ON APRIL 28, 2021 (MINUTES NO 62) Annual Report 2020 Table of Contents Moscow Exchange in brief 3 Corporate governance 59 Business model 4 Corporate governance system 60 Statement from the Chairman Risk management 91 of the Supervisory Board 5 Information for investors 98 Statement from the Chief Executive Officer 7 Appendices 104 Strategic report 9 Information on major transactions Main trends in the development and interested-party transactions 105 of the sector 10 Key performance indicators 106 Mission and corporate values 15 Organisational chart of Moscow Exchange 107 Priority areas of Moscow Exchange 16 Supply chain management 108 Key projects in 2020 17 Report on Moscow Exchange Compliance with the Principles and Recommendations of the Corporate Governance Code 109 Report on the Adherence to the Moscow Performance review 19 Exchange Corporate Governance Code 141 Contacts 150 Financial results review 20 Consolidated Financial Statements 151 Market performance 24 Post-trade services 36 Information products 39 Client services 42 Information Technologies 43 Growth outlook for 2021 45 Compliance 49 Human resources 50 Moscow Exchange and the community 53 Environmental impact 57 Moscow Exchange in brief Moscow Exchange Group manages Russia’s main trading platform for equities, bonds, derivatives, currencies, money market instruments and commodities. The Group is comprised of: ► PJSC Moscow Exchange MICEX-RTS, which operates the Equity & Bond Market, Money Market, Derivatives Market as well as FX Market and Precious Metals Market; ► NCO CJSC National Settlement Depository (NSD), the central securities depository; ► JSC Non-Banking Credit Institution – Central Counterparty National Clearing Center (CCP NCC, or NCC); ► JSC National Mercantile Exchange (NAMEX), which operates the Commodities Market; ► MOEX Innovations, which develops innovative technologies and works with fintech start-ups. Moscow Exchange holds majority stakes in all key subsidiaries, including a 100% stake in NCC, a 99.997% stake in the NSD and a 65.08% stake in the NAMEX. Moscow Exchange was formed in December 2011 from a merger of Russia’s two main exchange groups: MICEX Group, the oldest domestic exchange and operator of the leading equity, bond, foreign exchange and money markets in Russia; and RTS Group, which operated Russia’s leading derivatives market. This combination created a vertically integrated exchange for trading of all major asset classes. In February 2013, Moscow Exchange completed an initial public offering on its own platform (ticker: MOEX). As of 31 December 2020, the company’s market capitalization was RUB 363 billion, and the free float was 63%. TABLE OF CONTENTS MOSCOW EXCHANGE IN BRIEF STRATEGIC REPORT PERFORMANCE REVIEW CORPORATE GOVERNANCE APPENDICES Business model CLIENTS MARKETS MARKET DATA OPERATING Fee & commission income: EQUITY & BOND ► Russian and foreign shares INCOME ► Sovereign bonds (OFZ) MARKET Equity Market Bond Market ► Bank of Russia bonds 2020 4 ► Regional and corporate bonds Trading 2020 2020 ► Sovereign and corporate Eurobonds Volumes, ▲86.7% ▲15.3% ► 2019 40 Mutual funds and Russian-law ETFs RUB trln 2019 2019 ► Exchange-traded funds (ETFs) ▲17.2% ▲17.4% ► Depository receipts 2018 2018 ► Mortgage participation certificates 2018 40 44,800 ▲20.0% ▲9.6% 34,268.2 Legal entities RUB mln DERIVATIVES Futures and options on: Fee & commission income MARKET ► Indices (MOEX Russia Index, RTS Index, RVI) 2020 12 ► Russian and foreign shares Trading ► OFZ and sovereign Eurobonds 2020 ► Currency pairs Volumes, ▲38.1% 2019 824 ► Interest rates (RUSFAR, RUONIA) RUB trln 2019 ► Oil and gas ▲23.0% ► Precious and industrial metals 2018 2018 8 1,4 6 0 ► Wheat and sugar ▲15.3% 14,158.7 Professional RUB mln brokerage companies ► ► FX MARKET USD— RUB USD — CHF Interest income ► ► EUR— RUB JPY — RUB 2020 20 ► EUR— USD ► USD — JPY Trading 2020 ► CNY— RUB ► TRY — RUB Volumes, ▲20.5% ► USD — CNY ► USD — TRY RUB trln 2019 08 ► HKD — RUB ► BYN — RUB 2019 ► GBP — RUB ► KZT — RUB ▼11.1% ► GBP — USD ► USD — KZT 2018 2018 484 CLIENT SERVICES ► CHF — RUB ▲4.3% 164.1 MONEY ► Repo with the CCP RUB mln 8.8 ► GCC repo MARKET 428 ► Inter-dealer repo 2020 mln Trading Other operating income ► Direct repo with the CBR 2020 Retail investors ► Repo with collateral management system Volumes, ▲23.4% ► Deposit operations with the CCP RUB trln 2019 4 2019 ► Deposit and credit operations ▲9.2% 2018 42 2018 ▲13.1% COMMODITIES ► Gold Post-trading Services ► Silver 48,591.0 MARKET 2020 80 ► ► RUB mln Wheat Trading Clearing (NCC) Depository and ► Depository and settlement Total Volumes, settlement services RUB bln 2019 88 services (NSD) 2020 ▲24.8% 12 2018 2019 ▲15.4% 2018 ▲8.3% MOSCOW EXCHANGE | ANNUAL REPORT 2020 4 TABLE OF CONTENTS MOSCOW EXCHANGE IN BRIEF STRATEGIC REPORT PERFORMANCE REVIEW CORPORATE GOVERNANCE APPENDICES Statement from the Chairman of the Supervisory Board Dear shareholders, I am pleased to present you with the 2020 report granted by the regulator. As a result, dividends were paid of the Supervisory Board of Moscow Exchange. to shareholders on the usual pre-pandemic date. The past year will be remembered for a pandemic that The Annual General Meeting of the Shareholders will also brought significant changes to the business and social be held digitally in 2021. More than 190,000 individual lives of people and companies around the world. Like Exchange shareholders will be able to use the E-voting many companies, Moscow Exchange had to move all of its system developed by the National Settlement Depository, operations to a remote format and significantly modify a non-banking credit institution within the Moscow internal processes as quickly as possible. This action Exchange Group, to vote at the meeting. was taken to protect employees’ health and to ensure, as much as feasibly possible, business continuity during Moscow Exchange reported strong operational and financial the quarantine period when the virus was most prevalent. results for 2020. A massive inflow of private investors, This most challenging work was accomplished without a boosted IPO market, the expansion of trading hours compromising the interests and business of the Exchange’s and the launch of new products and services all led to record clients, and the ideas used to redesign internal processes trading volumes and the highest ever level of fee income. were extended to consider how we can incorporate digital technologies when managing the group’s business The successful financial performance allowed in the future. the Supervisory Board to recommend that the Annual General Meeting increase dividends by almost 20% The Annual General Meeting of Shareholders held compared to the previous year. The share of profits that in April 2020 was convened on the planned date, Moscow Exchange allocates to the payment of dividends as expected. Given the restrictive measures related is one of the highest among Russian public companies, to the pandemic, the meeting was held digitally for the first which indicates the high quality of the Company’s time and Company shareholders were able to listen corporate governance. to management presentations online and ask questions via a special web conference. On the recommendation During the reporting year, in addition to the Company’s of the Supervisory Board, the Annual General Meeting usual business issues, the development of the range decided not to make use of the dividend deferral of products and services, conducting asset MOSCOW EXCHANGE | ANNUAL REPORT 2020 5 TABLE OF CONTENTS MOSCOW EXCHANGE IN BRIEF STRATEGIC REPORT PERFORMANCE REVIEW CORPORATE GOVERNANCE APPENDICES transactions and the improvement of the incentive this opportunity to express my gratitude to Andrey for his system for the Company’s Executive Board members, enormous contribution to the development of the Company the Supervisory Board reviewed and approved and his active involvement in the work of the Exchange’s a number of important strategic documents designed Supervisory Board. to develop a modern corporate culture and improve the quality of the Company’s risk management. Moscow Environmental, social and governance (ESG) criteria Exchange Group’s Internal Audit Strategy was adopted play an increasingly important role in investor decision and a profound change in the Company’s compliance culture making in global capital markets. Moscow Exchange was supported. Moscow Exchange Group’s Information is working hard to build a dialogue between investors, Security Development Strategy for 2021–2024, Moscow issuers and regulators to facilitate responsible investment. Exchange Group’s Risk Management System Development The Exchange established the Sustainable Development Strategy through 2024 and Moscow Exchange’s Information Sector to support green and social bonds. In cooperation Technology Development Strategy were all approved. Under with RSPP, sustainability indices are calculated on a daily the guidance of the Supervisory Board, a Memorandum basis and exchange-traded mutual funds have been formed of Understanding was developed between the NBCO based on these indices. In 2020, the Exchange issued its Central Counterparty National Clearing Centre (JSC) first sustainability development report and, in 2021, plans and Moscow Exchange, which aims to improve the quality to publish a Best Practices Guideline for Responsible Finance of operational risk