Moscow Exchange MICEX RTS : MOEX Strategy 2028 webcast transcript

MOSCOW EXCHANGE

Moscow Exchange Group Strategy 2028 Webinar

28 September 2023

Speakers:

• Anton Terentiev, Head of Investor Relations
• Artem Zheleznov, Head of Strategy
• Mikhail Panfilov, CFO

Participants asking questions:

• Olga Naidenova, Sinara Bank
• Svetlana Aslanova, Arowana Capital
• Elena Tsareva, BCS
• Mikhail Ganelin, Aton
• Anatoly Poluboyarinov, Smartlab
• Dmitry Bagrov, PFL Advisors
• Evgeny Kipnis, Alfa Bank
• Fedor Naumov, PFL Advisors

Investor Relations contacts - Anton Terentiev, Head of Investor Relations

Tel: [phone] - Email: [e-mail]

	MOEX| Moscow Exchange Group Strategy 2023 Webinar| 28 September 2023
Anton Terentiev - Head of Investor	we introduced access to corporate and
Relations	government bonds.

Good afternoon everyone, and welcome to Moscow Exchange's conference call on the new 2028 strategy and the updated dividend policy. Today we have on the call our Head of Strategy, Artem Zheleznov, and CFO, Mikhail Panfilov. We will start with the presentation followed by a Q&A session. Artem will talk about the delivery on the previous strategy, the background of the new strategy, key areas of development and strategic initiatives as well as the goals we have set to achieve. Mikhail will comment on financial targets and the dividend policy. The slides are in Russian but we will conduct the call in two languages providing simultaneous translation into English. Please ask your questions in both Russian and English.

By now, you must have received our press release outlining the key elements of the new strategy and dividend policy, which are both available on our website in the Investor Relations section. Artem, please go ahead.

Artem Zheleznov - Head of Strategy

Thank you, Anton. Good afternoon, dear colleagues. Let us jump into the presentation.

Slide 2. The history of the Moscow Exchange - the history of continuous success. We are adopting the fourth strategy in the company's public history after the IPO in 2013. The first strategy was adopted in 2012 with a horizon until 2015. Its main objective was to achieve product and infrastructure parity with the best international peers and analogues. As a part of the strategy, we launched trading of Eurobonds and grain, switched the settlement period for shares to T+2 and for OFZs (government bonds) to T+1. It is worth noting that a lot of work was also carried out with Euroclear and Clearstream, as a result of which

In 2015, the Group adopted its next strategy with a focus on setting up a unified trading and clearing infrastructure on the Russian market. From 2016 to 2019, we managed to launch repos with a general collateral pool, provide corporations with access to the foreign exchange market and to deposits with the central counterparty, set up a unified collateral pool in NCC, introduce the first green bonds, and also launch some indicators, for example,

RUSFAR.

In line with our strategy adopted in 2019, we evolved our business model beyond the classical exchange activities, while maintaining access to international infrastructure - both for foreigners to the Russian market and for Russian citizens to foreign assets. To achieve our strategic goal, we launched a Finuslugi marketplace, began trading in foreign stocks and also carbon units on the Moscow Exchange, expanded the trading session for foreign exchange, derivatives and stock market, added bonds and other instruments in the yuan.

Slide 3. Strategy 2024 actually proved to be impossible due to the new geopolitical environment, but the revenue and financial targets were achieved. The provisions of the Strategy related to the Moscow Exchange's status as an international access point largely lost their relevance in 2022 due to the changed situation and also became unachievable. However, in terms of financial performance, the Moscow Exchange achieved significant fulfillment of its goals and targets set in Strategy 2024.

The slide shows the main factors of our growth according to Strategy 2024. In accordance with our Strategy goals, they were supposed to drive our CAGR up to 10% in the F&C income. We predicted approximately the same

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CAGR across three pillars: macro and organic growth, growth in terms of deepening the market, and growth in terms of projects of the "More Than Exchange" pillar.

In reality, we managed to achieve better results in terms of macro and organic growth as well as in terms of "deepening the market" pillar due to favorable macroeconomic environment and efforts of the Moscow Exchange Group management.

As part of the More Than Exchange pillar, we were able to help corporations get all the tools to manage assets and liabilities on our OTC platforms. For example, the NTPro foreign currency platform and the Moex Treasury platform. We also managed to help individuals make effective decisions about their finances in the trusted environment of the Finuslugi marketplace. However, in this direction, growth turned out to be more modest than planned in the Strategy due to the conservative approach to the development of new projects amidst the changes in the external environment.

Slide 4. The new financial market landscape requires the approval of a new strategy. Due to significant changes in the financial market landscape, the Supervisory Board of the Moscow Exchange decided to update the Group's strategy. The key changes that effected this decision are outlined on this slide.

The share of non-residents in free float is frozen. The available free float is about 10% of the market capitalisation and the main owners of the free float are Russian individuals and local institutional investors. The share of foreign investors in trading fell to almost zero and in public offerings and deals basically to zero. We have seen the dominance of retail investors in the stock and derivatives markets, with their share reaching some 70% of trading volumes, a record over recent years. There was a change in the currency structure of the

MOEX| Moscow Exchange Group Strategy 2023 Webinar| 28 September 2023

Russian economy, with a shift towards the currencies of different jurisdictions. We are also observing a sharp increase in interest towards the yuan, with the trading in the yuan increasing tenfold. The concentration of the

largest professional participants and institutional players has increased significantly due to changes in the market. We also observe the decline in the shareholder activism, analytical coverage, and corporate disclosure levels. It is very important for a well- functioning financial market to fill this gap.

Slide 5 shows the local and global trends underlying the new strategy. We have divided the main trends into three main categories: macroeconomic trends, global industrial trends, and local trends in the Russian financial market. Among the macroeconomic trends, the obvious ones are the deglobalization, the increased corporate and sovereign debt, the closure of quantitative easing programmes, and the growth of Asian economies. As for the

trends affecting international market infrastructures, we observe a race of artificial intelligence, DeFi, expansion through M&A, and a rise of ESG investments. The main trends in the Russian financial market were noted on the previous slide.

Slide 6. We believe that the understanding of the needs of each client group is the key to success in our new strategy. We are changing our strategic vision and now aim to be not only a leading financial infrastructure provider, but also become the point of access to the financial market for the final customer. Therefore, the list of our client segments, which previously included professional market participants and corporations, is now expanded to include individuals.

For individuals, we are working to meet their needs in financial products and services and will expand our product capabilities by providing them with our platform services. For corporations, we will offer a broad range of

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capital market access tools, from classical platform-based tools to new ones designed for medium and small-sized corporations. For professional market participants, we are deepening the product line to meet the needs of their clients and developing a set of financial services, while also working to increase the

customer satisfaction level among professionals.

Slide 7. To achieve the new goals, we will be developing three business directions, while not forgetting the enablers. This is a very important slide showing key priorities of our new strategy.

In the new strategy, we set six priorities, three business directions and three enablers of future achievements. In terms of business directions, our first priority is developing capital markets. We will expand the list of instruments, including ESG ones, and work towards increasing their liquidity. The second priority is engaging and attracting the final customer to the market. To do this, we will continue developing our platform solutions, for example, the Finuslugi and digital assets platforms, build terminals, including those based on AI tools. The third priority is

maintaining international access and

preserving links with international infrastructure providers, while also introducing their instruments on the Moscow Exchange.

Enablers are projects and initiatives that will allow us to achieve business goals set in the new strategy. We aim to succeed across all business areas listed on this slide by transforming our corporate culture and processes, promoting a culture of investment in Russia and utilizing the most advanced technologies and solutions in our day-to-day activity.

The next slides demonstrates the targets among key business directions. Within each business direction, we set ambitious goals

MOEX| Moscow Exchange Group Strategy 2023 Webinar| 28 September 2023

which are displayed on the screen. We anticipate active development of the stock market deals, both in terms of public issuances and on the OTC platform. We also plan for significant growth in the bond market on the Moscow Exchange. We believe that double- digit count in the number of deals is achievable subject to favourable macroeconomic environment. Within the international access business direction, we will establish links, conduct cross-listing of instruments, attract foreign investors and assist in the redomiciliation of foreign public joint-stock companies to the Russian financial market. On the Finuslugi marketplace and in terminal services, we will actively expand our client base and develop a product line of digital financial assets.

Slide 9 shows new realities, the new strategy and new goals for the next years. In the 2024 Strategy, the goal was to achieve a 10% CAGR in our F&C income, and we were able to reach it even earlier than planned. In the new strategy, we set a more ambitious goal for ourselves - to achieve significant growth of the Group's capitalization, which, we believe, is attainable with a net profit of RUB 65 billion or more on the forecast horizon. Our goal does not cancel previously targeted revenue growth objectives; on the contrary, it complements them with benchmarks for net profit levels and dividend levels, which ultimately is the goal of our shareholders. We believe that this is the right goal for the MOEX, as the exchange largely grows from the development of capital markets and, obviously, market capitalisations. To achieve this goal, we will invest in initiatives with high growth potential.

Slide 10 shows the key ambition of our new strategy, which is to go beyond the infrastructural role. To do this we will continue to retain the role of the market development driver but also seek to become a source of financial products for the final customer. We will also increase penetration in the corporate

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segment through platform solutions. Ultimately, we should transform into a shop window where you can explore, compose, and implement a long-term financial plan in just a few clicks.

Now I will pass the floor over to our CFO Mikhail, who will talk about our financials and dividend policy. Thank you.

Mikhail Panfilov - CFO

Good afternoon, everyone. As part of our new strategy, we introduce an updated dividend policy, under which we set a minimum payout level of 50% of IFRS net profit. We have tested our financial model against a variety of scenarios and got convinced that the payout of 50% is viable and doable. At the same time, the target payout ratio is 100% of the free cash flow that is left after meeting both organic and non-organic development goals as well as the requirements of regulations and internal policies. We plan to pay out dividends on an annual basis, yet we might consider more frequent payments in the future. However, we are not working on this option today.

Slide 12. Our ultimate ambition is to grow our market cap on the back of fundamentals, i.e. strong financial performance. If our multiples return to historical averages, we believe we can reach a market cap of RUB 700 billion and above. This is the level we internally see as a BHAG. To achieve this, we need to grow fast enough, as well as maintain efficiency and profitability indicators such as ROE and CIR at the levels defined in the strategy. Our aspirations rest on the financial model. We forecast a net profit level of RUB 65 billion and above, driven by the fee income CAGR of above 13%. The cost to fee income ratio will be in the range of 50% to 55%. ROE will surpass the cost of capital, staying at 18%+ on the strategic horizon. Therefore, we will be able to provide our shareholders with

MOEX| Moscow Exchange Group Strategy 2023 Webinar| 28 September 2023

attractive returns and achieve our target market cap level.

This concludes our overview of the new strategy and dividend policy. We are now ready to take your questions.

Operator

Our first question comes from Olga Naidenova, Sinara Bank.

Olga Naidenova - Sinara Bank

My first question is related to your target ROE level of at least 18%. What kind of interest rates and revenue structure do you forecast for the strategic period? What is your target here? I would also appreciate a few more details on your commission growth target of a CAGR of 13%. Is the base year 2022 or year 2023? My final question is on the minimal capital requirements for your regulated entities. Could you disclose what the current level is and what kind of growth rates you are expecting there?

Artem Zheleznov - Head of Strategy

Olga, thank you for your questions. On the interest rates: we are following the projections and forecasts of the Central Bank of Russia. You should refer to the recent press releases of the Bank of Russia's Board of Directors, which disclose their forecasts. As for the structure of our F&C income, we apply different growth rates for different markets because we have pretty diversified revenue streams across all of them. The sum of all of them corresponds to CAGR of 13%. Regarding your second question, the 13% CAGR is applied to the 2022 fee and commission income because these are the most recent full- year IFRS numbers. I am passing the floor over to Anton now.

Anton Terentiev - Head of Investor Relations

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