Tel Aviv Stock Exchange Ltd. — Earnings Release 2020

Aug 11, 2020

THE TEL-AVIV STOCK EXCHANGE LTD. REPORTED SECOND QUARTER 2020 RESULTS

August 11, 2020 (Tel Aviv) -Tel Aviv Stock Exchange Ltd (TASE:TASE) today announced its financial results for the second quarter ended June 30, 2020.¹

1. General

1.1 TASE's Results, Business and Corporate Highlights for the Second Quarter and the first half of 2020

Results:

• TASE revenues amounted to NIS 73.5 million in the second quarter of 2020, an increase of 17% compared to the corresponding quarter last year, mainly as a result of higher trading volumes primarily attributable to implications of the coronavirus outbreak.
• Adjusted EBITDA increased in the second quarter of 2020 to NIS 21.0 million, compared to NIS 16.6 million in the corresponding quarter last year, an increase of 26%.
• Financing income increased in the second quarter of 2020 to NIS 3.5 million, compared to financing income of NIS 2.3 million in the corresponding quarter last year, an increase of 53%.
• Adjusted net profit amounted to NIS 10.4 million in the second quarter of 2020, compared to NIS 5.5 million adjusted net profit in the corresponding quarter last year, an increase of 89%.

BUSINESS HIGHLIGHTS

• The daily average trading volume of equity amounted to approximately NIS 1.9 billion, compared to NIS 1.3 billion in the second quarter last year, an increase of 49%.
• The daily average trading volume of bonds amounted to approximately NIS 4.4 billion in the second quarter of 2020, compared to NIS 3.4 billion in the second quarter last year, an increase of 29%.
• The daily average trading volume of derivatives amounted to 172.7 thousand units a day in the second quarter of 2020, compared to 144.6 thousand units in the second quarter of 2019, an increase of 19%.

¹ The Board of Directors of TASE today approved the Condensed Consolidated Financial Statement as of June 30, 2020. The consolidated financial statements of the Company were prepared in accordance with IFRS GAAP. This is an English translation of parts of the information included in the approved financial statements. In the event of any discrepancy between the original Hebrew and the translation to English, the Hebrew version alone will prevail. The consolidated financial statements in the English Version will be published on the website by the end of August.

CORPORATE HIGHLIGHTS

• Since the end of April 2020, Israeli Government bonds are included in the WGBI Indexes. The Company believes that Israel's joining of this index will increase the demand for Israeli Government bonds by foreign investors.
• On May, 2020, the Israel Securities Authority approved the expansion of the "TACT-Institutional" platform, restricted trading platform for institutional investors/qualified customers to include certain securities of corporations and partnerships that are primarily engaged in research and development, investment in real estate property overseas and the provision of financing solutions to businesses, including within the framework of government financial aid programs.

In July 2020, the Israel Securities Authority published a plenum resolution, which sets out conditions for the recognition of certain foreign corporations as "Qualified investors", within the definition of this term in the First Addendum to the Securities Law. These conditions are mostly based on criteria that are generally accepted in the United States and the European Union for recognizing an institutional/sophisticated investor to which securities may be offered without requiring the publication of a prospectus or listing in such countries. This resolution is also conducive to certainty concerning the qualification of such foreign investors to participate in trading on the "TACT-Institutional" platform.

• Central Lending Pool Central Blockchain Securities Lending Pool to the date of the report, a successful test-run of the system was completed, and the Company announced its intention to launch this service in November 2020.
• The Company is preparing to launch the sale, via API, of data products to individuals, companies, and data vendors.
• Clearing Services for Non-Listed Securities of Private Limited Partnerships in July 2020, the Company informed TASE members that it intends to launch a service for the listing and clearing of investment units in partnerships that constitute private investment funds and alternative investment products, including the creation and redemption of such units. As part of this service, investors in such entities will be able to purchase and sell their units through TASE-CH and, within the investment period, their investment will be presented to them as part of their total securities portfolio with the TASE member. The purpose of this notification was to allow TASE members to make adjustments to their systems as necessary for the provision of this service to their clients. A test-run of the service has not yet been scheduled and the service is not expected to be launched in 2020.
• On May, 2020, new rules of membership were approved for Stock Exchange members acting solely on their own account (nostro).
• To ensure the continuous operation of TASE systems, including the trading and clearing systems, TASE created a safe work environment for its employees, alongside the implementation of remote work procedures.

The trading and clearing systems of TASE operated optimally, thereby facilitating reliable and stable trading, at record turnovers boosted by the coronavirus outbreak.

1.2 MATERIAL EVENTS THAT OCCURRED IN THE REPORTING PERIOD AND THEREAFTER

• On April 16, 2020, a dividend of NIS 8,770 thousand (representing NIS 0.0877 per ordinary share) was paid to the Company's shareholders of record as of April 1, 2020.
• Claim Against the Ministry of Finance Concerning Listing Fees On May 5, 2020, the Company filed a monetary claim by summary procedure with the Tel Aviv District Court against the State of Israel, the Ministry of Finance - Accountant General, in an amount of approximately NIS 20.13 million (including VAT). The cause of the claim is default in payment of the listing fees payable by virtue of TASE Rules in respect of government bonds that had been issued in the period from May 2013 to March 2020 (inclusive) within the framework of the Ministry of Finance's lending pool.

To remove any doubts, it is hereby clarified that, to date, the Company has not recognized in its financial statements income from the listing fees covered in the claim.

• Labor Dispute at TASE Declared by the New General Federation of Labor in Israel On July 16, 2020, the New General Federation of Labor announced the cancellation of the labor dispute that was declared on September 17, 2018, this in view of the agreements in principle reached between TASE and TASE's employees committee. On the same date, the National Labor Tribunal ruled that, in view of the cancellation of the labor dispute by the Labor Federation and TASE's employees committee, as aforesaid, and considering the problematic points found in the verdict of the Regional Labor Tribunal from December 1, 2019, the verdict was overturned and, consequently, the appeal of the verdict has become redundant and was withdrawn, this at the recommendation of the Tribunal and at the consent of the parties.
• On July 26, 2020, a special collective agreement (hereafter: "the special agreement") was signed between the Company, on the one hand, and the New General Federation of Labor ("Histadrut") and TASE's employees committee, on the other hand.

The special agreement provides, inter alia, for the distribution of annual bonuses to employees of the Company for the years 2017-2019. With the signing of the special agreement, the related labor dispute, too, has come to an end (pursuant to the cancellation of another labor dispute, as set above).

It should be noted that, considering the provisions that have been included in the financial statements of the Company to date, the special agreement is not expected to have an effect on the financial results of the Company. Nevertheless, a negative cash flow from operating activities is expected in the third quarter of 2020, as a result of payments to employees pursuant to the special agreement.

1.3 Seasonality

The Company's revenues from trading and clearing are affected, among other things, by the number of trading and clearing days. In 2020, there were 57 trading days in the second quarter, compared to 60 in the corresponding quarter last year – a 5% decrease in the number of trading days is affected by when exactly the Jewish Holidays. In the first six months of 2020, there were 120 trading days, compared to 123 trading days in the corresponding period last year – a 2.4% decrease.

2. Presented below is information relating to the results for the second quarter of 2020 (NIS, in thousands)

Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019 Statement of Profit or Loss

	Quarter ended		Difference
	30.06.2020	30.06.2019	Amount	%
Revenue from services	73,547	62,910	10,637	17%
Costs	63,908	60,951	2,957	5%
Profit before financing income, net	9,639	1,959	7,680	392%
Financing income	3,505	2,286	1,219	53%
Taxes on income	3,114	1,739	1,375	79%
Net profit	10,030	2,506	7,524	300%
%	13.6%	4.0%

Adjusted net profit and adjusted EBITDA data²

	Quarter ended		Difference
Adjusted EBITDA for the quarter:	30.06.2020	30.06.2019	Amount	%
Profit before financing income, net	9,639	1,959	7,680
Share-based payment expenses	370	3,088	(2,638)
Depreciation and capital losses	10,968	11,678	(710)
Adjusted EBITDA for the quarter	20,977	16,645	4,332	26%
%	29%	26%
Adjusted net profit for the quarter:
net profit	10,030	2,506	7,524
Share-based payment expenses	370	3,008	(2,638)
Adjusted net profit	10,400	5,514	4,886	89%
%	14.1%	8.8%

² Adjusted data for the profit and EBITDA (operating profit before interest, tax, depreciation and amortization): These data are based on the data in the Company's financial statements for the reported periods, after eliminating the effects of certain events and factors, as explained above, that are not typical of the Company's operating activities. It is hereby clarified that the data presented above are not presented in accordance with generally accepted accounting principles and do not reflect the Company's cash flows from operating activities or its operating profits and net profit and, accordingly, do not constitute a substitute to the data in the Company's financial statements regarding the operating profit and/or the net profit. Nevertheless, in the Company's opinion, these data enable a better comparison to be made of the Company's performance in the reported periods.

The revenue in the second quarter of 2020 – below is the composition of the quarter's revenue, compared to the corresponding quarter last year:

	Quarter ended % Change
	30.06.2020	% of the Company's total revenues	30.06.2019	% of the Company's total revenues
Revenue from services:	32,187	44%	25,915	41%	24%
	The increase was due mainly to the higher trading volumes on TASE following the coronavirus outbreak. The higher trading volumes in shares accounted for close to 17% of the increase in total revenue from trading and clearing services, while the increased trading volumes in corporate bonds contributed close to 5%, the higher trading volumes in government bonds and derivatives accounted, each, for a 3% increase in total revenue from trading and clearing, and a 1% increase was due to increased creations/redemptions in mutual funds. It should be noted that this was partially offset by a 5% reduction in total revenue from trading and clearing services compared to the second quarter of 2019, this as a result of the smaller number of trading days in the second quarter of 2020.
Listing fees and levies	14,765	20%	13,478	22%	10%
	The increase is due mainly to the increase in revenue recognition in respect of listing fees, which contributed 5% to the increase in revenue from listing fees and levies. Another increase resulted from the charging of new annual fees introduced in 2019 and 2020 (an increase of 2% in revenue from listing fees and levies) and from an increase in existing fees, which accounted for 2% of the increase in revenue from listing fees and levies.
Clearing House services	14,127	19%	12,878	20%	10%
	The increase is due to an increase in Clearing House services to members, primarily following the coronavirus outbreak (an increase of close to 6% in total revenue from Clearing House services), and from new Clearing House services to companies (an increase of close to 3% in total revenue from Clearing House services).
Distribution of data and	12,183	17%	9,670	15%	26%
connectivity services	The data distribution activity reflects the implementation of the information usage model initiated in early 2019. An increase in revenue from private and business customers contributed 9% and 6%, respectively, to the increase in total revenue from distribution of data and connectivity services. Additionally, TASE started charging business customers for data previously distributed free of charge, this accounting for 4% of the increase in total revenue from distribution of data and connectivity services (of which half relates to services provided in prior years). Furthermore, the launch of the colocation and BSO activities in 2019 contributed 5% to the increase in revenue from distribution of data and connectivity services.
Other revenue	285	0%	969	2%	)71%(
		Most of the decrease derives from the shutting down of the Conference Center activities in March 2020 as a result of the coronavirus outbreak.
Total Revenue from services	73,547	100%	62,910	100%	17%

• The costs in the second quarter of 2020, less the effect of share-based payments expenses, totaled approximately NIS 63.5 million, compared to costs of approximately NIS 57.9 million in the corresponding quarter last year, an increase of close to 9.7% between the quarters. The increase in costs was due mainly to the increase in marketing expenses (6.1% of total costs) as a result of the timing of marketing campaign launches in the quarters, and to the increase in employee benefits expenses (4.3% of total costs) as a result of salary updates and variable remuneration that is affected by the increase in the profit for the period.
• Financing income in the second quarter of 2020 totaled approximately NIS 3.5 million, compared to financing income of approximately NIS 2.3 million in the corresponding quarter last year, an increase of 53%. The increase was due mainly to a change in the yields on the Group's investments in marketable securities' portfolios comprising Israeli Government bonds, from 1.15% in the corresponding quarter last year to 1.9% this quarter.
• The net profit in the second quarter of 2020 totaled approximately NIS 10 million, compared to approximately NIS 2.5 million in the corresponding quarter last year, an increase of 300%. The increase in profit was due to higher revenues from services, primarily trading and clearing services, and was partly offset by the increase in expenses, as described above.
• The adjusted EBITDA in the second quarter of 2020 totaled approximately NIS 21 million, compared to approximately NIS 16.6 million in the corresponding quarter last year, an increase of close to 26% between the quarters. The increase is due to higher revenue from services, and was partly offset by an increase in costs, primarily marketing costs and employee benefits costs.
• The adjusted net profit in the second quarter of 2020 totaled approximately NIS 10.4 million, compared to approximately NIS 5.5 million in the corresponding quarter last year, an increase of close to 89% between the quarters. The increase is due mainly to higher revenue from services, and was partly offset by an increase in costs, primarily marketing costs, employee benefits costs and taxes.

Six months ended June 30, 2020 Compared with Six months ended June 30, 2019

Presented below is condensed information relating to the results for the six-month period ended June 30, 2020 (NIS, in thousands):

Condensed Statement of Profit or Loss

	Six months ended		Difference
	30.06.2020	30.06.2019	Amount	%
Revenue from services	154,754	127,537	27,217	21%
Costs	127,528	122,687	4,841	4%
Profit before financing income, net	27,226	4,850	22,376	461%
Financing income (expenses)	(902)	6,306	)7,208(	)114%(
Taxes on income	6,064	3,233	2,831	88%
Net profit	20,260	7,923	12,337	156%
%	13.1%	6.2%

Adjusted net profit and adjusted EBITDA data³

	Six months ended		Difference
	30.06.2020	30.06.2019	Amount	%
Adjusted EBITDA for the period:
Profit before financing income, net	27,226	4,850	22,376
Share-based payments expenses	784	3,008	(2,224)
Depreciation and capital losses	21,857	22,978	(1,121)
Adjusted EBITDA for the period	49,867	30,836	19,031	62%
%	32%	24%
Adjusted net profit for the period:
Net profit	20,260	7,923	12,337
Share-based payments expenses	784	3,008	(2,224)
Adjusted net profit	21,044	10,931	10,113	93%
%	13.6%	8.6%

³ Adjusted data for the profit and EBITDA (operating profit before interest, tax, depreciation and amortization): These data are based on the data in the Company's financial statements for the reported periods, after eliminating the effects of certain events and factors, as explained above, that are not typical of the Company's operating activities.

It is hereby clarified that the data presented above are not presented in accordance with generally accepted accounting principles and do not reflect the Company's cash flows from operating activities or its operating profits and net profit and, accordingly do not constitute a substitute to the data in the Company's financial statements regarding the operating profit and/or the net profit. Nevertheless, in the Company's opinion, these data enable a better comparison to be made of the Company's performance in the reported periods.

The revenue in the six months ended June 30, 2020 below is the composition of the period's revenue, compared to the corresponding period last year:

	Six months ended				Difference
	30.06.2020	% of the Company's total revenues	30.06.2019	% of the Company's total revenues	% Change
Revenue from services:	71,867	47%	52,468	41%	37%
Trading and clearing commissions	The increase primarily reflects the higher trading volumes on TASE following the coronavirus outbreak. The higher trading volumes in shares accounted for close to 20% of the increase in total revenue from trading and clearing services, while the increased trading volumes in corporate bonds and creations/redemptions in mutual funds accounted, each, for a 5% increase, the higher trading volumes in government bonds and derivatives accounted, each, for a 4% increase, and a 1% increase was due to increased trading volumes in T-bills. It should be noted that this was partially offset by a 2.4% reduction in total revenue from trading and clearing services compared to the first half of 2019, as a result of the smaller number of trading days in the first half of 2020.
Listing fees and levies	29,742	19%	26,961	21%	10%
	fees and levies.			The increase is due to the increase in the recognition of revenue from listing fees, which contributed 5% to the increase in revenue from listing fees and levies. Another increase resulted from the charging of new annual fees introduced in 2019 and 2020 (an increase of 3% in revenue from listing fees and levies) and from an increase in existing fees, which accounted for 2% of the increase in revenue from listing
Clearing House services	28,495	18%	25,229	20%	13%
	The increase is due to an increase in Clearing House services to members, primarily following the coronavirus outbreak (an increase of close to 9% in total revenue from Clearing House services), and from new Clearing House services to companies (an increase of close to 3% in total revenue from Clearing House services).
Distribution of data and	23,798	15%	21,309	17%	12%
connectivity services	The data distribution activity reflects the implementation of the information usage model initiated in early 2019. An increase in revenue from private customers contributed 4% to the increase in total revenue from distribution of data and connectivity services. Additionally, TASE started charging business customers for data previously distributed free of charge, this accounting for 3% of the increase in total revenue from distribution of data and connectivity services (of which half relates to services provided in prior years). Furthermore, the launch of the colocation and BSO activities in 2019 contributed 4% to the increase in revenue from distribution of data and connectivity services.
Other revenue	852	1%	1,570	1%	)46%(
	Most of the decrease derives from the shutting down of the Conference Center activities in March 2020 as a result of the coronavirus outbreak.
Total Revenue from services	154,754	100%	127,537	100%	21%

• Expenses in the period, less the effect of share-based payments expenses, totaled approximately NIS 126.7 million, compared to expenses of approximately NIS 119.7 million in the corresponding period last year, an increase of 5.8% between the periods. The increase in costs was due mainly to the increase in employee benefits expenses (4.5% of total costs) as a result of salary updates and variable remuneration that is affected by the increase in the profit in the first half of 2020.
• Financing expenses totaled NIS 0.9 million, compared to financing income of NIS 6.3 million in the corresponding period last year. The decrease is due mainly to the negative yields of 0.25% in the period, compared to positive yields of 3.3% in the corresponding period last year.
• Net profit for the period amounted to NIS 20.3 million, compared to NIS 7.9 million in the corresponding period last year, an increase of 156%. The increase in profit was due mainly to higher revenues from services, primarily trading and clearing services, and was partly offset, mainly by the transition to financing expenses, as described above.
• The adjusted EBITDA for the first half of the year totaled approximately NIS 49.9 million, compared to approximately NIS 30.8 million in the corresponding period last year, an increase of 62% between the periods. The increase is due to higher revenue from services, and was partly offset by an increase in costs, primarily employee benefits costs.
• The adjusted net profit for the first half of the year totaled approximately NIS 21 million, compared to approximately NIS 10.9 million in the corresponding period last year, an increase of 93% between the periods. The increase is due mainly to higher revenue from services, and was partly offset, primarily by the transition to financing expenses and the higher costs, as described above.

Presented below is information relating to the financial position as of June 30, 2020 (NIS, in thousands):

	As of		Difference
	30.06.2020	30.06.2019	Amount	%
Cash and cash equivalents and short-term financial assets	343,255	308,892	34,363	11%
Other current assets	24,697	20,362	4,335	21%
Property and equipment and intangible assets	451,082	457,543	(6,461)	(1%)
Other non-current assets	16,361	18,363	(2,002)	(11%)
Total assets (*)	835,395	805,160	30,235	4%
Current liabilities	101,380	81,876	19,504	24%
Non-current liabilities	117,552	124,577	(7,025)	(6%)
Total liabilities (*)	218,932	206,453	12,479	6%
Total equity	616,463	598,707	17,756	3%
Ratio of equity to total assets	73.8%	74.4%
Surplus equity over regulatory requirements in NIS millions	292	282	10	4%
Surplus liquidity over regulatory requirements in NIS millions	144	132	12	9%

• (*) The total assets and liabilities as of June 30, 2020 and December 31, 2019, include a balance of assets/liabilities in respect of open derivative positions amounting to NIS 462.4 million and NIS 351.7 million, respectively, which for reasons of convenience in analyzing the financial position have been offset against each other in this report.
• The total assets as of June 30, 2020 amounted to NIS 835.4 million, a 4% increase compared to December 31, 2019. Most of the increase is due to an increase in cash from operating activities.
• The total liabilities as of June 30, 2020 amounted to NIS 218.9 million, a 6% increase compared to December 31, 2019. Most of the increase is due to annual fees collected in advance and to an increase in short-term liability for employees, which were partly offset by a decrease in the actuarial liability for long-term employee benefits due to an increase in the discount rate.
• The total equity as of June 30, 2020 amounted to NIS 616.5 million, a 3% increase compared to December 31, 2019. Most of the increase is due to the profit of NIS 20.3 million for the first half of the year, which was partly offset by a dividend distribution of NIS 8.8 million.

Presented below are cash flows for the three months ended June 30, 2020 (NIS, in millions):

Item		Data for the three months ended June 30		Explanations of the Company for the inter-quarter change
		2020	2019
Net cash from	Adjusted EBITDA	21.0	16.6	The increase in adjusted EBITDA is due mainly to an increase in revenue from services, primarily trading and clearing services, and was partly offset by an increase in expenses, due to the mostly fixed structure of expenses.
	Changes in working capital	2.3	0.3	The increase in working capital is due to the timing of payments and receipts between the quarters, primarily with respect to employee benefits and other receivables.
operating activities	Financing and tax	(2.3)	1.5	The decrease stems mainly from tax payments in the quarter, compared to tax receipts in the corresponding quarter.
Total		21.0	18.4	Cash flows from operating activities grew by close to 14% between the quarters.
Net cash for investing activities	Investments in property and equipment and in intangible assets and capitalized payroll costs	(9.0)	(7.7)	The increase in investments is due to the timing of implementation of the Group's investment work plans in the quarters.
	Acquisition of financial assets, net	(3.5)	(29.6)	In the second quarter of 2019, approximately NIS 27 million was deposited into the managed portfolios.
	Total	(12.5)	(37.3)
Net cash for financing activities	Lease payments	(2.5)	(2.5)
	Dividend payment	(8.8)	-	Dividend payment of approximately NIS 8.8 million (for additional information, see section 1.2)
	Total	(11.3)	(2.5)
	Total decrease in cash and cash equivalents	(2.8)	(21.4)

Presented below are cash flows for the six months ended June 30, 2020 (NIS, in millions):

Item		Data for the six months ended June 30,		Explanations of the Company for the inter-half-year change
		2020	2019
	Adjusted EBITDA	49.9	30.8	The increase in adjusted EBITDA is due mainly to an increase in revenue from services, primarily trading and clearing services, and was partly offset by an increase in expenses, due to the mostly fixed structure of expenses.
Net cash from	Changes in working capital	19.0	6.5	The increase in working capital is due to the timing of payments and receipts between the periods, primarily with respect to employee benefits and other receivables.
operating activities	Financing and tax	(1.3)	5.8	The decrease stems mainly from tax payments in the period, compared to tax receipts in the corresponding period and a reduction in interest received.
	Total	67.6	43.1	Cash flows from operating activities grew by close to 57% between the periods.
Net cash for investing activities	Investments in property and equipment and in intangible assets and capitalized payroll costs	(17.1)	(17.9)
	Acquisition of financial assets, net	(2.0)	(29.5)	In the first half of 2019, approximately NIS 27 million was deposited into the managed portfolios.
	Total	(19.1)	(47.4)
Net cash for financing activities	Lease payments	(5.0)	(4.8)
	Dividend payment	(8.8)	-	Dividend payment of approximately NIS 8.8 million (for additional information, see section 1.2)
	Total	(13.8)	(4.8)
in cash and cash equivalents	Total increase (decrease)	34.7	(9.1)

3. Events at the reporting date and thereafter

3.1 Outbreak of the coronavirus

Pursuant to the stated in note 26 to the Annual Financial Statements concerning the outbreak of the coronavirus, to the date of approval of the financial statements, the short-term significant negative effects of the coronavirus on the operating results of the Company cannot be estimated, as the Company is not directly affected by the prices of the securities, but rather by the trading and clearing turnovers of securities and derivatives. The Company has an operational and technological solution in place that facilitates the operation of TASE and the Clearing Houses with a significantly lower number of employees that are required to be present at the sites of the Company for the operation of the core trading and clearing systems. It should be noted that the restrictions imposed in Israel thus far by virtue of the Emergency Regulations do not categorically prohibit the opening of workplaces, but rather stipulate various limitations that are primarily designed to reduce the number of employees in the workplaces and to encourage remote work, in both the public and the private sectors. At any rate, even the broadest application of the Regulations exempts a number of employers, including those operating in the capital market, such as the Company (alongside banks, Stock Exchange members, fund managers, rating firms and more).

In the second quarter of 2020, a recovery of government bond prices resulted in the recognition of a profit of NIS 3.8 million on the Company's securities portfolio in profit or loss, under financing income. This income offset most of the loss on the portfolios (NIS 4.4 million) that was recorded in the first quarter of 2020.

Moreover, the perseverance and exacerbation of this unprecedented global crisis could also adversely affect business and economic operations in Israel and worldwide, including the volumes of the investment and trading in securities, in a manner and to an extent that, at this stage, cannot be estimated and quantified by the Company. Nevertheless, it is not unreasonable to assume that the current uncertainty will lead to reduced volumes of activity in the primary market (both equity and debt) that will in turn entail a decline in revenues from examination and listing fees with respect to new securities. Furthermore, it is likely that an ongoing erosion in the prices of listed securities could impact the revenues of the Group from custodial services, to some extent, as these are derived from the value of the securities held, and if price levels are not corrected by the end of the year, this could adversely impact the volume of fees from companies in 2021, which are derived from the value of the securities listed as of December 2020. Additionally, persisting uncertainty, in general, and in the capital market, in particular, could defer the Company's launching of new products or services until the smoke clears. Finally, it should be noted that in the aftermath of the crisis recovery will be gradual. At this stage and in the absence of clear criteria for the implementation and continuity of the "exit strategy" that has been declared by the Israeli Government, the volumes of trading and capital-raising in the recovery period cannot be estimated, more so as these depend, among others, on the volatility of the markets and the pace at which the public returns to invest, directly or indirectly, in securities that are listed on TASE.

The difficulties of making such an assessment are demonstrated by events in recent weeks, where the significant increase in morbidity rates following the lifting of most restrictions led the Government to suspend the opening of the market and reinstated certain restrictions, which shortly thereafter were changed or postponed. A similar scenario of a rise in morbidity rates and the reinstatement of restrictions on activities and businesses was witnessed in multiple countries. Such events emphasize the obstacles to assessing the duration of the crisis and/or the rate of recovery therefrom.

In view of the aforesaid and since, to the date of approval of the financial statements, the potential effects of the coronavirus crisis on the main income channels of the Company (trading and clearing commissions, custodial services etc.) stem primarily from the macro implications of the crisis on the local and the global economy, the Company is unable to quantify the extent of possible reduction in its income (and, as stated above, to the date of approval of the financial statements, such effects are not evident, with the exception of the more marginal revenue channels, such as rental of space and holding of events).

3.2 During the second quarter, the Company launched media campaigns (on the Web, social networks, in printed press and in commercial broadcasting channels). The cost of such campaigns amounted to NIS 2.7 million. The Company plans to continue the marketing and distribution of its services at a similar scope in the second half of 2020.

4. Information relating to the results for the second quarter of 2020 (NIS, in thousands) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (NIS, in thousands)

	June 30,		December 31,
	2020	2019	2019
Assets
Current assets
Cash and cash equivalents	138,658	44,953	103,928
Financial assets at fair value through profit or loss	204,597	217,209	204,964
Trade receivables	11,822	12,615	13,776
Other receivables	12,875	15,370	6,373
Current tax assets	-	207	213
	367,952	290,354	329,254
Assets derived from clearing operations with respect to open
derivative positions	462,406	910,186	351,742
Total current assets	830,358	1,200,540	680,996
Non-current assets
Cash restricted as to use	542	540	541
Other long-term receivables	2,866	3,702	3,761
Property and equipment, net	335,104	(*) 347,348	345,176
Intangible assets, net	115,978	107,954	112,367
Deferred tax assets	12,953	11,956	14,061
Total non-current assets	467,443	471,500	475,906
Total assets	1,297,801	1,672,040	1,156,902

(*) Reclassification

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (NIS, in thousands)

	June 30,	December 31,
	2020	2019	2019
Liabilities and Equity
Current liabilities
Trade payables	10,857	9,353	15,376
Short-term liabilities for employee benefits	40,069	28,471	33,121
Other payables	3,146	3,293	3,301
Current maturities of lease liabilities	7,334	9,595	9,728
Current tax liabilities	4,598	2,012	970
Deferred income from listing fees and levies	35,376	32,818	19,380
	101,380	85,542	81,876
Liabilities derived from clearing operations with respect to open derivative positions	462,406	910,186	351,742
Total current liabilities	563,786	995,728	433,618
Non-current liabilities
Non-current liabilities for employee benefits	32,012	26,158	37,565
Lease liabilities	10,585	11,471	12,553
Deferred income from listing fees and levies	74,413	71,786	73,918
Other liabilities	542	540	541
Total non-current liabilities	117,552	109,955	124,577
Equity
Remeasurement of net defined benefit liability	(11,423)	(8,798)	(16,905)
Share-based payments reserve	32,022	30,388	31,238
Other capital reserves	43,079	13,107	43,079
Retained earnings	552,785	531,660	541,295
Total equity	616,463	566,357	598,707
Total liabilities and equity	1,297,801	1,672,040	1,156,902

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

(NIS, in thousands)

	Six months ended June 30,		Three months ended June 30,		Year ended December 31,
	2020	2019	2020	2019	2019
Revenue from services:
Trading and clearing commissions	71,867	52,468	32,187	25,915	107,000
Listing fees and levies	29,742	)*( 26,961	14,765	)*( 13,478	54,678
Clearing House services	28,495	25,229	14,127	12,878	52,331
Distribution of data and connectivity services	23,798	)*( 21,309	12,183	)*( 9,670	42,419
Other revenue	852	)*( 1,570	285	)*( 969	3,573
Total revenue from services	154,754	127,537	73,547	62,910	260,001
Cost of revenue:
Employee benefits expenses	70,959	65,587	34,568	32,051	132,973
Share-based payments expenses	784	3,008	370	3,008	3,858
Computer and communications expenses	13,138	11,351	6,850	5,615	23,819
Property taxes and building maintenance expenses	5,411	6,099	2,277	3,076	12,602
General and administrative expenses	4,580	4,178	2,205	2,431	9,122
Marketing expenses	5,411	4,170	3,981	434	7,858
Fee to the Israel Securities Authority	5,388	5,316	2,689	2,658	10,680
Depreciation and amortization	21,839	21,705	10,968	11,099	43,571
Other expenses	18	1,273	-	579	1,358
Total costs	127,528	122,687	63,908	60,951	245,841
Profit before financing income, net	27,226	4,850	9,639	1,959	14,160
Financing income	(458)	6,738	3,785	2,472	9,975
Financing expenses	444	432	280	186	1,006
Total financing income (expenses), net	(902)	6,306	3,505	2,286	8,969
Profit before taxes on income	26,324	11,156	13,144	4,245	23,129
Taxes on income	6,064	3,233	3,114	1,739	5,571
Profit for the period	20,260	7,923	10,030	2,506	17,558
Basic earnings per share (NIS)	0.203	0.079	0.100	0.025	0.176
Diluted earnings per share (NIS)	0.198	0.079	0.097	0.025	0.174

(*) Reclassification

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (NIS in thousands)

	Six months ended June 30, 2020
	Share-based payments reserve	Remeasurement of net defined benefit liability	Other capital reserves	Retained earnings	Total
Balance at January 1, 2020	31,238	(16,905)	43,079	541,295	598,707
Profit for the period	-	-	-	20,260	20,260
Other comprehensive income for the period	-	5,482	-	-	5,482
Total comprehensive income for the period	-	5,482	-	20,260	25,742
Dividend paid	-	-	-	(8,770)	(8,770)
Share-based payment	784	-	-	-	784
Balance at June 30, 2020	32,022	(11,423)	43,079	552,785	616,463

	Three months ended June 30, 2020
	Share-based payments reserve	Remeasurement of net defined benefit liability	Other capital reserves	Retained earnings	Total
Balance at April 1, 2020	31,652	(9,015)	43,079	542,755	608,471
Profit for the period	-	-	-	10,030	10,030
Other comprehensive loss for the period	-	(2,408)	-	-	(2,408)
Total comprehensive income (loss) for the period	-	(2,408)	-	10,030	7,622
Share-based payment	370	-	-	-	370
Balance at June 30, 2020	32,022	(11,423)	43,079	552,785	616,463

CONSOLIDATED STATEMENTS OF CASH FLOWS (NIS, in thousands)

	Six months ended June 30,		Three months ended June 30,		Year ended December 31,
	2020	2019	2020	2019	2019
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period	20,260	7,923	10,030	2,506	17,558
Share-based payments expenses	784	3,008	370	3,008	3,858
Tax expenses recognized in profit or loss	6,064	3,233	3,114	1,739	5,571
Net financing expenses (income) recognized in profit or loss	902	(6,306)	)3,505(	)2,286(	(8,969)
Depreciation and amortization	21,839	21,705	10,968	11,099	43,571
Loss from disposal of property and equipment and intangible assets	18	1,273	-	579	1,358
	49,867	30,836	20,977	16,645	62,947
Changes in asset and liability items:
Decrease (increase) in trade receivables and other receivables	(3,636)	(9,733)	3,235	2,207	(607)
Decrease (increase) in receivables with respect to open derivative positions	(110,664)	(14,785)	114,436	21,988	543,659
Increase (decrease) in trade payables and other payables	(2,394)	(1,359)	)1,019(	)646(	1,176
Increase (decrease) in deferred income from listing fees and levies	16,491	16,990	)3,904(	)256(	5,726
Increase (decrease) in payables with respect to open derivative positions	110,664	14,785	)114,436(	)21,988(	(543,659)
Increase (decrease) in employee benefits related	8,514	555	3,962	)1,011(	6,083
liabilities	68,842	37,289	23,251	16,939	75,325
Interest received	1,914	3,305	55	329	6,110
Interest paid	(395)	(416)	(280)	(257)	(637)
Tax receipts (payments) - operating activities,net	(2,826)	2,908	(2,113)	1,434	332
	(1,307)	5,797	(2,338)	1,506	5,805
Net cash provided by operating activities	67,535	43,086	20,913	18,445	81,130

CONSOLIDATED STATEMENTS OF CASH FLOWS (NIS, in thousands, cont'd)

	Six months ended June 30,		Three months ended June 30,	Year ended December 31,
	2020	2019	2020	2019	2019
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment	(4,650)	(4,131)	(1,583)	(1,739)	(6,416)
Proceeds from the disposal of property and equipment	-	2	-	2	192
Acquisitions of intangible assets	(4,403)	(5,269)	(2,967)	(2,073)	(11,850)
Payments with respect to costs capitalized to property and equipment and to intangible assets	(8,010)	(8,548)	(4,400)	(3,850)	(15,838)
Acquisition of financial assets at fair value through profit or loss, net	(2,031)	(29,473)	(3,495)	(29,603)	(17,032)
Net cash used in investing activities	(19,094)	(47,419)	(12,445)	(37,263)	(50,944)
CASH FLOW FROM FINANCING ACTIVITIES:
Lease payments	(4,992)	(4,829)	(2,490)	(2,480)	(9,739)
Dividend payment	(8,770)	-	(8,770)	-	-
Company's share in the first-time listing of the shares	-	-	-	-	15,600
Receipts from shareholders within the framework of implementing the ownership restructuring, net	-	-	-	-	13,782
Net cash provided by (used in) financing activities	(13,762)	(4,829)	(11,260)	(2,480)	19,643
Net increase (decrease) in cash and cash equivalents	34,679	(9,162)	(2,792)	(21,298)	49,829
Cash and cash equivalents, beginning of the period	103,928	54,363	141,491	66,358	54,363
Effect of changes in exchange rates on cash balances held in foreign currency	51	(248)	(41)	(107)	(264)
Cash and cash equivalents, end of the period	138,658	44,953	138,658	44,953	103,928
APPENDIX A – NON-CASH ACTIVITIES:
Acquisition of property and equipment and intangible assets, under short-term credit	2,040	867	2,040	867	4,320
Increase in right-of-use assets and lease liabilities	613	-	97	-	5,372
Increase (decrease) in receivables for lease and lease liabilities	17	-	(79)	-	2,256

Quarterly statements of profit or loss for 2019 and for the second quarter of 2020 (NIS, in thousands)

Item	Jan Mar 2019	Apr Jun 2019	Jul Sep 2019	Oct Dec 2019	Jan Mar 2020	Apr Jun 2020	2019
Number of trading days	63	60	62	59	63	57	244
Trading and clearing commissions	26,553	25,915	28,193	26,339	39,680	32,187	107,000
Listing fees and levies	13,483	13,478	13,508	14,209	14,977	14,765	54,678
Clearing House services	12,351	12,878	12,918	14,184	14,368	14,127	52,331
Distribution of data and connectivity services	11,639	9,670	10,422	10,688	11,615	12,183	42,419
Other revenue	601	969	1,007	996	567	285	3,573
Total revenue from services	64,627	62,910	66,048	66,416	81,207	73,547	260,001
Employee benefits expenses, net	33,536	32,051	33,088	34,298	36,391	34,568	132,973
Share-based payments expenses	-	3,008	432	418	414	370	3,858
Computer and communications expenses	5,736	5,615	6,320	6,148	6,288	6,850	23,819
Property taxes and building maintenance expenses	3,023	3,076	3,075	3,428	3,134	2,277	12,602
General and administrative expenses	1,747	2,431	2,153	2,791	2,375	2,205	9,122
Marketing expenses	3,736	434	1,746	1,942	1,430	3,981	7,858
Fee to the Israel Securities Authority	2,658	2,658	2,658	2,706	2,699	2,689	10,680
Depreciation and amortization expenses	10,606	11,099	10,809	11,057	10,871	10,968	43,571
Other expenses	694	579	6	79	18	-	1,358
Total costs of revenue	61,736	60,951	60,287	62,867	63,620	63,908	245,841
Profit before financing income, net	2,891	1,959	5,761	3,549	17,587	9,639	14,160
Financing income	4,266	2,472	3,286	)49(	)4,243(	3,785	9,975
Financing expenses	246	186	221	353	164	280	1,006
Total financing income (expenses), net	4,020	2,286	3,065	)402(	)4,407(	3,505	8,969
Profit before taxes on income	6,911	4,245	8,826	3,147	13,180	13,144	23,129
Taxes on income	1,494	1,739	2,021	317	2,950	3,114	5,571
Net profit	5,417	2,506	6,805	2,830	10,230	10,030	17,558

ABOUT TASE

The Company, including by means of the companies consolidated in its financial statements (collectively, "the Group"), is engaged in securities trading and securities clearing .

Within this framework, the Group is engaged in setting rules regarding the TASE companies, rules for listing securities on TASE (including the obligations that apply to companies whose securities are listed) and rules regarding trading on TASE. The Group operates trading systems and provides clearing services for both listed and non-listed securities. In addition, the Group operates a derivatives clearing house that writes derivatives that are traded on TASE, clears them and serves as a central counterparty for transactions in them. The Group provides central counterparty (CCP) services for transactions in securities and derivatives that are executed on TASE and also provides central securities depository (CSD) services. The Group engages in calculating security indices, in authorizing the use of indices for the creation of financial instruments that track the indices, and in distributing TASE trading data. In addition, since January 2018, the Group has been operating a nominee company, as defined in the Securities Law (securities traded on TASE are registered in the nominee company's name). The Company reports one business segment in its consolidated financial statements – trading and clearing of transactions in securities.

CONTACTS

Yehuda van der Walde		Orna Goren
EVP, CFO		Head of Communications and Public Relations Unit
Email:	cfo@tase.co.il	Email:	ir.tase@tase.co.il
Tel:	+972-76-8160442	Tel:	+972-76-8160405

Appendix – Transactional Metrics

	Six months Ended June 31,		Quarter Ended June 31,	Year Ended December 31,
	2020	2019	2020	2019	2019
Number of trading days	120	123	57	60	244
SHARES
Shares (ex. ETFs)	680	767	680	767	820
ETFs on share indices	50	64	50	64	64
Market value (in NIS billions)	730	831	730	831	884
Shares (ex. ETFs)	1,578	993	1,484	1,056	1,081
ETFs on share indices	467	211	401	206	219
Average daily turnover (in NIS millions)	2,045	1,204	1,885	1,262	1,300
Average commissions	0.01040%	0.01036%	0.01086%	0.01026%	0.01022%
Revenue (in NIS thousands)	25,517	15,346	11,668	7,770	32,434
BONDS
Government bonds -Unlinked	341	295	341	295	316
Government bonds -Linked	225	211	225	211	216
Corporate bonds	372	402	372	402	411
Bonds (ex. ETFs)	938	908	938	908	943
ETFs on bond indices	27	28	27	28	29
Market value (in NIS billions)	965	936	965	936	972
Government bonds - Unlinked ADV (in NIS millions)	2,313	1,685	2,116	1,593	1,722
Government bonds - Linked ADV (in NIS millions)	1,204	911	1,091	952	897
Corporate bonds ADV excluding ETFs (in NIS millions)	1,056	796	1,071	786	798
ETFs on bond indices	172	86	160	78	95
Average daily turnover (in NIS millions)	4,745	3,478	4,438	3,409	3,512
Government bonds Unlinked - Average commissions	0.00185%	0.00193%	0.00183%	0.00188%	0.00192%
Government bonds Linked - Average commissions	0.00295%	0.00293%	0.00313%	0.00293%	0.00291%
Corporate bonds - Average commissions	0.00689%	0.00698%	0.00679%	0.00708%	0.00694%
Government bonds (in NIS thousands)	5,142	3,999	2,210	1,798	8,052
Government bonds (in NIS thousands)	4,263	3,279	1,949	1,676	6,367
Corporate bonds (in NIS thousands)	10,153	7,569	4,766	3,671	15,116
Other (MTS) (in NIS thousands)	75	99	33	38	187
Revenue (in NIS thousands)	19,633	14,946	8,958	7,183	29,722

Appendix -Transactional Metrics (Cont'd)

	Six months Ended June 31,		Quarter Ended June 31,	Year Ended December 31,
	2020	2019	2020	2019	2019
TREASURY BILLS
Market value (in NIS billions)	93	117	93	117	120
Treasury bills ADV (in NIS millions)	795	390	667	341	413
Average commissions	0.00186%	0.00286%	0.00184%	0.00305%	0.00256%
Revenue (in NIS thousands)	1,779	1,370	699	623	2,581
MUTUAL FUNDS
Market value (in NIS billions)	215	238	215	238	259
Average daily value of creation / redemptions (in NIS millions)	1296	879	864	821	883
Average commissions	0.00891%	0.01085%	0.01166%	0.01164%	0.01100%
Revenue (in NIS thousands)	13,848	11,739	5,743	5,732	23,716
DERIVATIVES
Options on indices	116.1	97.0	111.3	101.2	96.6
Derivatives on FX	58.2	40.2	57.7	40.2	45.4
Derivatives on single shares	3.2	2.4	3.7	3.2	3.1
Total derivative contracts (in '000 units)	177.5	139.6	172.7	144.6	145.1
Options on indices - Average commissions	0.580	0.580	0.580	0.580	0.580
Derivatives on FX -Average commissions	0.360	0.360	0.360	0.360	0.360
Derivatives on single shares Average commissions	1.000	1.000	1.000	1.000	1.000
Revenue (in NIS thousands)	11,090	9,067	5,119	4,607	18,546
Total revenue from Trading and clearing commissions	71,867	52,468	32,186	25,915	106,999

Appendix – Non-Transactional Metrics

	Six months Ended June 31,		Quarter Ended June 31,	Year Ended December 31,
	2020	2019	2020	2019	2019
CLEARING HOUSE SERVICES
Market value of assets (in NIS billions)	2,363	2,478	2,363	2,478	2,639
Avg. commissions on custodian fees	0.00108%	0.00105%	0.001111%	0.00105%	0.00105%
Revenue from: (in NIS thousands)
Custodian fees	13,068	12,873	6,397	6,503	26,534
Clearing House services for members / company events	13,048	10,032	6,534	5,362	21,160
Other	2,379	2,324	1,196	1,013	4,637
Total revenue from Clearing House services	28,495	25,229	14,127	12,878	52,331

Appendix – Non-Transactional Metrics (Cont'd)

	Six months Ended June 31,		Quarter Ended June 31,		Year Ended December 31,
	2020	2019	2020	2019	2019
LISTING FEES AND LEVIES
Weighted avg. number of companies / funds
Companies	529	539	529	539	541
Mutual funds and ETFs	2,151	2,089	2,154	2,088	2,132
Avg. revenue from levies (in NIS thousands)
Companies	10.5	9.5	5.2	4.7	18.9
Mutual funds	3.9	3.7	1.9	1.8	7.2
Revenue from annual levies from: (in NIS thousands)
Companies	5,532	5,139	2,766	2,543	10,198
Mutual funds & ETFs	8,355	7,670	4,002	3,821	15,339
Nominee Company	1,501	1,118	750	549	2,530
Total Revenue from annual levies from: (in NIS thousands)	15,388	13,927	7,518	6,913	28,067
Issuance volume and swap transactions (in NIS millions)
Shares and Corporate bonds	41,720	38,402	21,885	21,852	91,415
Government bonds	64,173	43,080	45,621	21,034	86,115
Short term T-bills	44,948	59,814	16,986	35,887	131,684
Number of issuances
Tel Aviv public offerings	44	30	21	18	60
New offerings	6	4	4	3	7
New dual-listed companies	2	1	1	1	3
Issuance volume and funding
IPOs (in NIS millions)	1,000	2,192	563	2,140	3,206
New offerings (in NIS millions)	-	1,498	-	1,498	1,728
Corporate bonds Number of issuances (total)	70	71	37	41	160
Corporate bonds Number of issuances (new)	-	2	-	2	4
Average revenue from examination and listing fees
Shares and bonds	0.0218%	0.0255%	0.0234%	0.0285%	0.0229%
Government bonds	0.0036%	0.0035%	0.0036%	0.0035%	0.0035%

Appendix – Non-Transactional Metrics (Cont'd)

	Six months Ended June 31,		Quarter Ended June 31,		Year Ended December 31,
	2020	2019	2020	2019	2019
LISTING FEES AND LEVIES
Revenue from examination and listing fees (in NIS thousands)
Examination fees	3,161	2,930	1,682	1,456	5,416
Listing of shares & bonds	9,114	9,783	5,128	6,238	20,958
Listing of government bonds	2,318	1,502	1,643	730	3,045
Listing of T-bills	315	419	119	251	922
Annual levies and handling fees from member	53	189	53	107	1,208
Other	170	231	72	119	746
Effect of IFRS on Listing Fees	(777)	(2,020)	(1,450)	(2,336)	(5,684)
Total Revenue from examination and listing fees	14,354	13,034	7,246	6,565	26,611
Total revenue from Listing fees and levies	29,742	26,961	14,765	13,478	54,677

	Six months Ended June 31,		Quarter Ended June 31,		Year Ended December 31,
	2020	2019	2020	2019	2019
DISTRIBUTION OF DATA AND CONNECTIVITY SERVICES:
Average number of data terminals
Domestic business clients	7,630	7,478	7,652	6,679	7,189
Domestic private clients	8,532	7,638	9,298	10,610	6,489
Overseas	4,446	4,867	4,598	4,721	4,886
Quote generator	275	246	279	242	245
Revenue from data terminals and data (in NIS thousands)
Domestic business clients	8,285	8,076	4,153	3,607	15,528
Domestic private clients	1,792	1,604	977	1,114	2,726
Overseas	2,775	3,167	1,429	1,525	6,270
Quote generator	813	733	413	322	1,430
Usage based	4,120	2,664	2,438	901	5,793
Indices and data	1,639	1,665	625	570	3,019
connectivity services	4,374	3,400	2,148	1,631	7,654
Total revenue from Distribution of data and connectivity services	23,798	21,309	12,183	9,670	42,419

Presented below are details regarding the velocity of trading in Israel in the reported period:

Turnover Velocity

	Six months Ended June 31,		% change	Quarter Ended		% change	Year Ended Decembe r 31,
	2020	2019		2020	2019		2019
Turnover Speed
Shares (1)	59.0%	35.7%	65.3%	58.4%	34.8%	67.8%	35.2%
Corporate bonds (1)(2)	74.5%	55.8%	33.5%	75.3%	54.7%	37.7%	54.9%
Government bonds Unlinked (3)	159.8%	127.9%	24.9%	136.8%	121.2%	12.9%	128.4%
Government bonds Linked (4)	103.7%	84.1%	23.3%	92.9%	85.1%	9.2%	79.8%
Treasury bills	124.2%	61.5%	102.0%	102.3%	58.8%	74.0%	61.3%

(1) Turnover velocity includes the ETFs / ETFs traded.

(2) Turnover velocity does not include the corporate bonds traded on TACT-institutional.

(3) Including fixed-rate NIS bonds ("Sahar") and short-term government bonds.

(4) Including index-linked bonds, and variable-rate NIS bonds ("Gilon").