Trust Responsibility Innovation Annual Report | 2019 Main Events of 2019 MOEX AT FINOPOLIS Moscow Exchange presented a demo of Marketplace, which allows customers to buy financial products remotely MOSCOW EXCHANGE FORUMS The Exchange held investment conferences in major global financial centers – Moscow, New York, London and Shanghai MOEX PLATFORM UP AND RUNNING ON KASE | MOSCOW EXCHANGE The Kazakhstan Stock Exchange transferred equity trading to MOEX’s trading and clearing platform with a central counterparty GREEN BONDS The Exchange launched the Sustainability Sector to finance environmental TINKOFF BANK GDRs and social projects The Exchange launched trading in Tinkoff Bank securities MOSCOW EXCHANGE AT SPIEF 2019 FIRST STRUCTURED The Exchange was a partner BONDS of the business section of the St. Petersburg Russian-law structured bonds International Economic were placed on MOEX Forum (SPIEF) for the first time ANNUAL REPORT 2019 | CLEARING MEMBERSHIP WITH SHANGHAI GOLD EXCHANGE Clearing member status will allow Moscow Exchange to establish a trading and clearing link to Shanghai Gold Exchange 2024 STRATEGY MOEX adopted a new corporate strategy covering the period through 2024. The main aim of the strategy is to achieve a balance between infrastructure reliability and growth MOEX RANKED AMONG WORLD’S BEST EMPLOYERS MOEX was included in the Forbes Global 500 list of best employers worldwide for the third year in a row ETFs ON MOEX At the end of 2019, | MOSCOW EXCHANGE eight companies had introduced 35 exchange-traded funds tracking benchmarks of eight countries on MOEX RINGING THE BELL FOR GENDER EQUALITY For the second year, MOEX participated in the global initiative Ring the Bell for Gender Equality 1,000,000 INDIVIDUAL INVESTMENT ACCOUNTS ON MOEX As of August, private investors had opened million Individual Investment Accounts (IIA). MOEX and NAUFOR awarded journalists for the best article on investing via IIAs MOU WITH CHINA FOREIGN EXCHANGE TRADE SYSTEM (CFETS) Collaboration between MOEX and CFETS will boost liquidity in the RMB/RUB currency pair on the two trading platforms BEST PRIVATE INVESTOR 2019 The Best Private Investor competition highlights opportunities available to retail investors interested in trading on the stock market. In 2019, nearly 7,000 private investors participated in the contest ANNUAL REPORT 2019 | ENDORSEMENT This report has been preliminary approved by the Moscow Exchange Supervisory Board on 27 March 2020 (Minutes No. 22) Annual Report 2019 Contents 2 Introduction 85 Corporate 2 Moscow Exchange in brief Governance 4 Business model 86 Corporate governance system 6 Statement from the Chairman 119 Internal control system of the Supervisory Board 120 Risk management 8 Statement from the Chief 126 Information for investors Executive Officer Strategic Consolidated 11 Report 133 Financial 12 Industry overview Statements 17 Mission and corporate values 18 Results of Strategy 2015–2020 20 2024 Group strategy 22 Key projects 2019 Performance Appendices 27 Review 199 201 Information on major transactions 28 Financial results review and related-party transactions 32 Moscow Exchange’s markets 202 Organizational chart of Moscow Exchange 50 Post-trade services 204 Supply chain management 56 Information products 205 Business ethics and anti-corruption 59 Client services 207 ESG components 60 Information technologies 210 Compliance with the Russian 63 Growth outlook for 2020 Corporate Governance Code Human resources 68 245 Compliance with Moscow Exchange 73 Moscow Exchange and the community Corporate Governance Code 81 Environmental impact 252 Disclaimer 253 Contacts 253 Scope of the report 253 Compliance 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 2019, the company’s market capitalization was RUB 245.53 billion, and the free float was 62.8%. 2 | MOSCOW EXCHANGE INTRODUCTION STRATEGIC REPORT PERFORMANCE REVIEW CORPORATE GOVERNANCE CONSOLIDATED FINANCIAL STATEMENTS APPENDICES Moscow Exchange Group structure MOSCOW EXCHANGE 99.997% 100% National Settlement CCP NCC Depository 55.56% 100% National Mercantile MOEX Information Exchange Security LLC 9.52% 100% 100% Limited Liability Company Moscow Exchange MICEX – Finance International Ltd 100% MOEX Innovations LLC ANNUAL REPORT 2019 | 3 Business model CLIENTS MARKETS MARKET DATA EQUITY & BOND ► Russian and foreign shares MARKET ► Sovereign bonds (OFZ) ► Bank of Russia bonds 2019 40.7 ► Regional and corporate bonds Trading ► Sovereign and corporate Eurobonds Volumes, 201 40.7 ► Mutual funds and Russian-law ETFs RUB trln ► Exchange-traded funds (ETFs) 2017 35.4 ► Depository receipts 201 23.9 29,300 ► Mortgage participation certificates Legal entities 2015 20.6 DERIVATIVES Futures and options on: MARKET ► Indices (MOEX Russia Index, RTS Index, RVI) Trading 2019 82.4 ► Russian and foreign shares ► OFZ and sovereign Eurobonds Volumes, 201 89.3 ► Currency pairs RUB trln ► Interest rates 2017 84.5 ► Oil and sugar 201 115.3 ► Metals (gold, silver, platinum, palladium, copper, aluminum, zinc, nickel) 1,778 2015 93.7 Professional brokerage companies FX MARKET ► USD – RUB ► TRY – RUB ► EUR – RUB ► USD – TRY ► CNY – RUB ► BYN – RUB Trading 2019 308.3 ► USD – CNY ► KZT – RUB Volumes, 201 348.4 ► HKD – RUB ► USD – KZT RUB trln ► GBP – RUB ► EUR – USD 2017 347.7 ► GBP – USD ► JPY – RUB ► CHF – RUB ► USD – JPY 201 330.0 CLIENT SERVICES ► USD – CHF 2015 310.8 MONEY ► Repo with the CCP 3.9 MARKET ► GCC repo ► mln Inter-dealer repo 2019 346.3 ► Direct repo with the CBR Trading Retail investors ► Repo with collateral management system Volumes, 201 364.2 ► Deposit operations with the CCP RUB trln ► Deposit and credit operations 2017 377.1 201 333.9 2015 213.8 COMMODITIES ► Gold MARKET ► Silver ► Wheat Trading 2019 85.8 Volumes, 201 152.3 RUB bln 2017 127.6 201 137.4 2015 116.6 4 | MOSCOW EXCHANGE INTRODUCTION STRATEGIC REPORT PERFORMANCE REVIEW CORPORATE GOVERNANCE CONSOLIDATED FINANCIAL STATEMENTS APPENDICES OPERATING Advantages of cycle-protected business model. Fee & commission income: INCOME Trading 2019 40.7 Equity Market Bond Market 2019 2019 Volumes, 201 40.7 RUB trln ▲ 17.2% ▲17.4% 2017 35.4 2018 2018 ▲ 20.0% ▲ 9.6% 201 23.9 2017 2017 26,181.4 ▲1.3% ▲ 33.7% 2015 20.6 RUB mln Fee & commission income Trading 2019 82.4 2019 Volumes, 201 89.3 RUB trln ▲23.0% 2017 84.5 2018 ▲15.3% 201 115.3 2017 ▼2.0% 2015 93.7 16,713.0 RUB mln Interest income Trading 2019 308.3 2019 Volumes, 201 348.4 RUB trln ▼11.1% 2017 347.7 2018 ▲ 4.3% 201 330.0 2017 ▼11.9% 2015 310.8 335.1 RUB mln Trading 2019 346.3 Other operating income 2019 Volumes, 201 364.2 RUB trln ▲ 9.2% 2017 377.1 2018 ▲ 13.1% 201 333.9 2017 2015 213.8 ▲16.8% Post-trading Services 43,229.5 ► RUB mln Trading 2019 85.8 Clearing (NCC) Depository ► Depository and and settlement Total Volumes, 201 152.3 settlement services RUB bln services (NSD) 2017 127.6 2019 ▲15.4% 201 137.4 2018 2015 116.6 ▲8.3% 2017 ▲17.4% ANNUAL REPORT 2019 | 5 Statement from the Chairman of the Supervisory Board DEAR SHAREHOLDERS, I am pleased to present to you the report of the Supervisory Board on Moscow Exchange Group’s achievements across priority areas in 2019. Last year was a year of significant change and important innovations at Moscow Exchange. The company successfully delivered on the key priorities set by the Supervisory Board, including: maintaining uninterrupted availability and reliability of MOEX’s services, development of the risk management system, automation of business processes, attracting retail investors and growing fee and commission income while also optimizing costs. Fee and commission income increased by 11% in 2019. The number of retail investors registered on the Exchange doubled during the year. Current expenses grew slower than fee and commission income, and were in line with guidance. In 2019, the Exchange completed delivery against its 2015–2020 strategy ahead of schedule. The most important project rolled out under this strategy was the Unified Collateral Pool, which allows market participants to create a single trading and clearing account with unified collateral requirements, settlement netting Oleg Viyugin and cross-margining across all markets. Other key elements of the Russian financial market infrastructure were modernized Chairman in line with international standards: listing and corporate governance of the Supervisory Board rules were reformed, and sponsored market access (SMA) was introduced on the equities, foreign exchange and derivatives markets. The Exchange expanded its product line with the launch of repo transactions with general collateral certificates (which became the fastest growing segment of the Money Market for a short time) and exchange-traded mutual funds, a product that quickly became popular with retail investors.