C O MME N T S O N P E R F O R M A N C E 2Q18

Transcription

1 QUARTERLY FINANCIAL STATEMENTS 2 nd Quarter of 2018

2 C O MME N T S O N P E R F O R M A N C E 2Q18 Dear Shareholders, B3 S.A. Brasil, Bolsa, Balcão ( B3 or Company ) hereby submits for your consideration the Management s Discussion & Analysis regarding the activities performed in the second quarter of 2018 (2Q18). OPERATIONAL PERFORMANCE Financial and Commodities Derivatives (BM&F segment) 1 The average daily volume on the BM&F segment reached an historical quarterly record of 4.4 million contracts in 2Q18, up by 37.1% compared to 2Q17. All product categories showed higher volumes in the period and the highlights were Interest rate in BRL contracts, which rose by 26.1%, primarily reflecting changes in the perception about interest rates in Brazil, and Stock indices contracts, which rose by 128.8%, driven by the performance of individual investors and High Frequency Traders ( HFTs ). Average Daily Volume (thousands of contracts) Contracts 2Q18 2Q17 2Q18/2Q17 2Q18/1Q18 1Q18 (%) (%) Interest rates in BRL 2, , % 2, % FX rates % % Stock indices % % Interest rates in USD % % Commodities % % TOTAL 4, , % 3, % Average revenue per contract (RPC) remained nearly stable in comparison to 2Q17. The appreciation of the US dollar against the Real, which had a positive impact on the RPC of FX rates and Interest rates in USD contracts, was offset by the greater participation of HFTs and day trade operations, especially in Mini contracts where the prices charged are lower than those of other transactions. Average RPC (R$) Contracts 2Q18 2Q17 2Q18/2Q17 2Q18/1Q18 1Q18 (%) (%) Interest rates in BRL % % FX rates % % Stock indices % % Interest rates in USD % % Commodities % % TOTAL % % Regarding participation of investors in the volume traded, foreign investors were still the most representative group in this segment, accounting for 38.7% of the total in 2Q18. It is worth pointing out the growth in the share of individual investors, rising to 20.4% in 2Q18 from 14.1% in 2Q17, due primarily to operations involving Mini contracts. Evolution of ADV by Investor Category (%) Equities and Equity Derivatives (Bovespa segment) 1 The volume of Mini contracts is weighted in the respective standard contracts, impacting both the volumes and the RPC of these groups of contracts. 2

3 C O MME N T S O N P E R F O R M A N C E 2Q18 The average daily trading value of Bovespa segment reached an historical quarterly record of R$12.5 billion in 2Q18. In May, daily average was R$14.2 billion, the highest average daily trading value in a single month in the Company s history. In comparison with 2Q17, there was an increase of 47.3%, reflecting both the appreciation of the shares and the greater turnover velocity 2. Average Daily Traded Value (R$ million) Market 2Q18 2Q17 2Q18/2Q17 2Q18/1Q18 1Q18 (%) (%) Stocks and equity derivatives 12, , % 11, % Cash market 12, , % 10, % Derivatives % % Options market (stocks / indices) % % Forward market % % Fixed income and other cash-market % % TOTAL 12, , % 11, % The average market capitalization 3 increased by 26.7% over the same quarter of the previous year, reaching a daily average of R$3.3 trillion in 2Q18. Likewise, the turnover velocity also increased and reached 89.0% in 2Q18 against 77.0% in 2Q17. Average Market Capitalization (R$ trillions) and Turnover Velocity (%) Trading and post-trading margins reached bps in 2Q18 against bps in 2Q17. This drop is explained (i) by the greater share of institutional investors and day trades with lower margins; and (ii) by the smaller share of equity derivatives, whose margins are greater. Additionally, in every month of the quarter the average daily trading exceeded R$9 billion, specially in May, which showed an average daily volume exceeding R$13 billion, resulting in marginal discounts to the market, in accordance with B3 s tariff policy for the equities market 4. Regarding the participation in the value traded by investors group, foreigners continued to dominate the segment, reflecting the reduction to 50,2% in 2Q18 from 51.0% in 2Q17. Despite that, local institutional investors boosted their presence to 28.3% in 2Q18 from 27.0% in 2Q17. Evolution of ADTV by Investor Category (R$ billions) Securities (Cetip UTVM segment) In 2Q18, the value of new registration amounted to R$5.0 trillion, 24.2% above the same quarter of the previous year. Fixed income instruments grew 16.9% over 2Q17, driven mainly by bank certificates of deposit (CDBs), which rose by 32.8% in the same comparative period. The value of new registrations of OTC derivatives and structured transactions, in turn, posted growth of 32.1% over 2Q17, with higher volume in all instruments (swaps, forwards and others). 2 Turnover velocity is the result of dividing the volume traded in the cash market during the period, annualized, by the average market capitalization for the same period. 3 Market capitalization is the product of multiplying the number of shares issued by listed companies by their respective market prices 4 According to the existing tariff table, marginal discounts are granted to the entire market as a whole whenever the average daily trading for the month reaches the threshold of R$9 billion, R$11 billion and R$13 billion. 3

4 C O MME N T S O N P E R F O R M A N C E 2Q18 Average Registration Value by Instruments (R$ trillions) The average registration price of fixed income instruments decreased by 3.5% in relation to 2Q17, reflecting the change in the mix of products and the migration of costumers to lower price ranges, according to the progressive table of discounts by volume. The average price charged for OTC derivatives and structured transactions also decreased 16.6% over 2Q17, bearing in mind that the increase in average prices of swap and forwards was more than offset by the drop in the average price of other derivatives/structured transactions. Average Registration Prices (basis points - bps) 2Q18 2Q17 2Q18/2Q17 2Q18/1Q18 1Q18 (%) (%) Average price fixed income % % Average price OTC derivatives/ structured notes (COE) % % The stock of registered assets, on which maintenance fees are applied, reached R$7.0 trillion, up by 12.3% over 2Q17, reflecting the growth of 14.0% in the volume of fixed income instruments, and 8.9% of OTC derivatives and structured transactions. Average Maintenance Volume by Instrument (R$ trillions) Average Maintenance Fee (basis points - bps) 2Q18 2Q17 2Q18/2Q17 2Q18/1Q18 1Q18 (%) (%) Average price fixed income % % Average price OTC derivatives/ structured notes (COE) % % End users (R$) % % The average number of clients that pay monthly utilization fees remained practically stable in relation to 2Q17. Regarding the total number of transactions, the growth of 9.1% over 2Q17 is basically the result of the greater use of CDBs as a funding instrument by banks and the greater number of business days. The 27.2% reduction in the average price in comparison to 2Q17 was influenced by discounts based on volumes, especially in CDBs. 4

5 C O MME N T S O N P E R F O R M A N C E 2Q18 Finally, the number of TEDs (electronic cash transfers) processed during 2Q18 was 23.7% higher than in 2Q17. The average price, in turn, decreased by 9.4% due to higher volumes, since discounts are applied in accordance with volume ranges. 2Q18 2Q17 2Q18/2Q17 (%) 1Q18 2Q18/1Q18 (%) Monthly Utilization Average number of clients 12,350 12, % 12, % Average price (R$) 1,991 1, % 2, % Transactions Total number of transactions 99,340 91, % 90, % Average price (R$) % % Interbank Payment Chamber (CIP) Processed electronic cash transfers (EFT) 156, , % 145, % Average price (R$) % % Liens and Loans (Cetip Liens and Loans segment) The volume of liens registered in the Sistema Nacional de Gravames ( SNG ) was positively impacted by 8.8% growth in the number of vehicles financed in 2Q18 when compared to 2Q17. This increase is explained by the growth of 2.7% in the total number of vehicles sold combined with greater credit penetration, which went to 30.0% in 2Q18 from 28.3% of total vehicles sold in 2Q17. As for the Contracts System, the number of contracts registered dropped by 8.0% over 2Q17. This performance is explained by the interruption of the service in the state of Minas Gerais as of Sept 17, an event that directly affected B3 s market share, which fell to 63.0% in 2Q18 from 74.6% in 2Q17. 2Q18 2Q17 2Q18/2Q17 (%) 1Q18 2Q18/1Q18 (%) SNG Number of vehicles sold (millions) 5 4,416 4, % 4, % New % % Used 3,522 3, % 3, % Number of vehicles financed (millions) 1,324 1, % 1, % New % % Used % % % Vehicles financed / vehicles sold 30.0% 28.3% 170 bps 32.4% -240 bps Contracts Systems Contracts added (millions) % % % Contracts added / vehicles financed 63.0% 74.6% bps 66.7% -370 bps ECONOMIC AND FINANCIAL PERFORMANCE Revenues Total revenue: reached R$1,386.2 million in 2Q18, up by 28.4% against 2Q17, reflecting growth in all segment as explained below: BM&F segment: amounted to R$395.1 million (28.5% of total), 38.6% greater than in 2Q17, reflecting higher volume of contracts traded in the period. It is important to remember that B3 is exposed to the impact of foreign exchange variation on its US dollarlinked revenue 6 (trading and post-trading of FX rates and Interest rates in USD contracts). Bovespa segment: reached R$399.4 million (28.8% of total), up by 47.7% in comparison to 2Q17. Revenue from volumes traded (trading and post-trading) amounted to R$391.0 million, 47.5% higher than the same period of the previous year, reflecting the increase of 47.3% in the average daily trading value. 5 Source: FENABRAVE. 6 In Mar/18, B3 ceased hedging US$ revenues. 5

6 C O MME N T S O N P E R F O R M A N C E 2Q18 Cetip Securities segment: reached R$302.2 million in 2Q18 (21.8% of the total), an increase of 8.8% over 2Q17. The highlight was a 16.9% increase in registration revenue, which were driven by the increase in activity involving OTC derivatives and the issuance of bank funding instruments. Cetip Liens and Loans segment: totaled R$125.1 million in 2Q18 (9.0% of total), 19.9% greater than in 2Q17. The increase of 17.3% in SNG (Liens) revenues reflects the 8.8% rise in the number of vehicles financed, as well as certain adjustments to our pricing schedules. The increase of 27.7% in revenue from the Contracts System reflects the implementation of the new business model for this service in the states of São Paulo, as from 1Q18, and Santa Catarina, as from 2Q18. Under the new model adopted in the states of São Paulo and Santa Catarina, B3 transmits, on behalf of its clients (financial institutions), detailed information about loans to an accredited registering company (Registering Company), which, in turn, registers the contracts with the local traffic department (Department of Motor Vehicles, DMV). In the previous model, B3 transmitted the information directly to the DMV, which executed the registration of the loan. Under this new model, B3 now bundles in the price charged by B3 from financial institutions both the fees related to its own services and the fees related to services provided by the Registering Company. This had a positive impact on the revenues reported under the Contracts System. On the other hand, the amount related to the services rendered by the Registering Company is booked as an expense by B3 (thirdparty services), and thus while revenues went up, so did expenses. These changes are fully reflected on the 2Q18 results. B3 worked with its clients and partners to adjust the various aspects of the economics of this business, such as revisiting some of our pricing schedules for the SNG; and yet there was a negative impact for Company. Under this new model, for each contract transmitted, the Company will retain R$ , net of the cost of the services provided by the Registering Company, the sharing of revenues with other partners, and taxes on revenue. If other states migrate to the same model adopted in São Paulo and Santa Catarina over the next quarter, B3 s revenues and expenses will be impacted again 8. Other revenues: other revenues reached R$164.2 million (11.8% of the total) in 2Q18, up by 16.2% over the same period of the previous year. The main highlights were: Securities lending: totaled R$27.9 million (2.0% of the total), a rise of 21.8% over 2Q17, reflecting higher financial volume of outstanding positions due to the appreciation of the Market Cap. Depository, custody and back-office: totaled R$61.0 million (4.4% of the total), up by 10.4% over 2Q17, mainly reflecting the increase of 17.0% in revenues from Tesouro Direto, which reached R$27.5 million in 2Q18. Furthermore, it is worth pointing out the all-time high reached in the number of individual accounts with the depository at the end of 2Q18, amounting to thousand, with a positive impact on this revenue item. Trading access (Brokers): amounted to R$11.5 million (0.8% of the total), a rise of 31.8% in relation to the same period of the previous year, primarily reflecting the new pricing policy that came into effect in the second half of Market data: revenues from market data reached R$29.8 million (2.2% of total), 9.9% higher than 2Q17, mainly explained by the depreciation of the Brazilian real versus the US dollar, since more than 62% of this revenue is denominated in US Dollar. Others: totaled R$10.5 million (0.8% of the total), up by 183.3% over the previous year, mainly due to the reversal of provisions for legal disputes that totaled R$7.6 million in 2Q18. Net revenues: net revenues increased by 28.8% in relation to 2Q17, reaching R$1,250.5 million in 2Q18. Expenses Total expenses reached R$531.6 million in 2Q18, a drop of 20.9% over the same period of the previous year. Personnel and charges: totaled R$163.8 million in 2Q18, down by 1.0% in relation to 2Q17. The effects of the adjustment of approximately 3.0% under the annual collective bargaining agreement to Company s salary base as from Aug 17 were fully offset by the reduction in provisioned expenses referring to the long-term, share-based incentive plan resulting from the decline in the B3SA3 share price in the quarter 9. Third-party services: totaled R$ 52.9 million in 2Q18, up by 85.6% over 2Q17, due to higher revenue-linked expenses, which totaled R$46.8 million (vs. R$22.3 million in 2Q17). As explained above, with the implementation of the new business model 7 Gross income per loan before other operating expenses and income tax. 8 In the 12-month period between Jul/17 and Jun/18, the state of São Paulo accounted for 44% of the total contracts transmitted by B3 and 30% of the total vehicles financed in Brazil, while the state of Santa Catarina accounted for 10.3% of the total contracts transmitted (B3 does not offer the contracts transmission service in some states of Brazil). 9 The provisions for social and labor law charges applicable to personnel expenses involving the share-based long-term incentive plan are restated in line with the price of the B3SA3 shares. 6

7 C O MME N T S O N P E R F O R M A N C E 2Q18 in the Contracts System in the states of São Paulo and Santa Catarina, B3 now recognizes as an expense the amount incurred with the services provided by the Registering Company. Related to the combination with Cetip: totaled R$15.0 million in 2Q18, consisting primarily of expenses involving advisors and consultants, as well as extraordinary personnel expenses. Other expenses: amounted to R$4.0 million (positive) in 2Q18. Within this expense group, provisions are the most relevant item, and consist primarily of adjustment of provisions for legal disputes, in which part of the amount of the cause is updated according to the market price of the B3SA3 shares 10 and with a positive effect of around R$32.4 million in 2Q18 (against a negative effect of around R$3.2 million) due to the depreciation of market price of the B3SA3 shares. Financial Result Financial result was negative by R$57.2 million in 2Q18. Financial income totaled R$100.5 million, a drop of 55.5% over 2Q17, explained primarily by lower interest rates. Financial expenses, in turn, amounted to R$157.7 million, down by 44.5% in the period, mainly explained by the reduction in total indebtedness (maturity of a R$500 million debenture in Sep 17) and lower interest rates. It is worth pointing out that this comparison was affected by non-recurring financial expenses recognized in 2Q17: (i) accrual of interest rate (CDI rate) on the portion of cash owed to the former shareholders of Cetip (R$76.9 million) and (ii) provision for interest and fines (R$42.0 million) related to the adhesion of the Company to the Special Tax Regularization Program (PERT). In addition, it is important to note that the financial result was also negatively impacted by the exchange rate variation on offshore loans and on the Company s overseas investment totaling R$83.5 million in 2Q18. Such impact has been offset by the income and social contribution taxes line item (hedge structure). The table below isolates both impacts: on the financial income and on the income and social contribution taxes: Effect of the hedge on the result (R$ millions) 2Q18 2Q17 2Q18/2Q17 (%) 1Q18 2Q18/1Q18 (%) Net Financial Income (57.2) (58.4) -2.1% (22.5) 154.1% (+/-) Effects of the hedge on net financial income % % adjusted net financial income (excluding the effects of the hedge) 26.3 (36.4) % (20.0) % Income before income tax % % (+/-) Effects of the hedge on net financial income % % Income before tax on adjusted income (excluding the effects of the hedge) % % Income and social contribution taxes 63.1 (77.8) % (172.9) % (+/-) Effects of the hedge on income and social contribution taxes (83.5) (21.9) 280.5% (2.5) % Adjusted income and social contribution taxes (excluding the effects of the hedge) (20.3) (99.7) -79.6% (175.3) -88.4% Income tax and social contribution Income tax and social contribution was positive by R$63.1 million in 2Q18. Current tax amounted to R$25.0 million (positive) due primarily to the reversal of the fiscal profit of 1Q18 and includes R$3.0 million in taxes with an impact on cash. Deferred income and social contribution taxes of R$38.1 million (positive), with no cash impact, consist of temporary differences from the tax amortization of goodwill amounting to R$119.6 million in 1Q18. It is worth emphasizing that the base used for calculating the tax owed by the Company in the quarter took into account distributions of interest on own capital totaling R$652.0 million. In addition, the income and social contribution taxes line was also affected by the hedge structure, as mentioned in financial result above. Net Income Net income attributed to the shareholders of B3 reached R$724.4 million, up by 343.6% against 2Q17, reflecting higher revenues, the synergy impact of expenses and the positive impact of income tax in the quarter. Adjustments to Net Income 10 The number of shares equivalent to the amounts under discussion is 5,186,739 B3SA3 shares. The closing price of the B3SA3 was R$26.69 at the end of Mar/18, versus R$20.45 at the end of Jun/18, a drop of 23.4%. 7

8 C O MME N T S O N P E R F O R M A N C E 2Q18 (In thousand of Brazilian Reals, unless otherwise indicated) 2Q18 2Q17 Note: amounts net of taxes, calculated at a rate of 34% applied to the deductible portion. Excluding the non-recurring items mentioned above, net income would have reached R$857.9 million 11 in 2Q18, an increase of 80.3%, affected primarily by revenue growth and lower non-recurring expenses. Furthermore, if adjusted for the tax benefits from the goodwill amortization related to the merger with Cetip, net income would have totaled R$977.5 million. MAIN ITEMS OF THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2018 Assets, Liabilities and Shareholders Equity Accounts The company ended Jun 18 with total assets of R$38.0 billion. The main highlights were in the lines cash and cash equivalents (short and long-term assets), which totaled R$6.7 billion, excluding R$1.7 billion in cash collateral pledged by participants to the Company s clearinghouses. The Goodwill line, that includes the goodwill generated in the transactions of BM&F and Bovespa and the BM&FBOVESPA and Cetip, amounted to R$22.3 billion in the 2T18. With regards to liabilities, at the end of 2T18, B3 gross debt outstanding was R$5.9 billion (composed by 74.3% of long term and 25.7% of short term debt). It is important to highlight that debt denominated in US dollar (39.0% of gross debt in the 2T18) is fully hedged against currency volatility through derivatives instruments, therefore, all variation on debt issued abroad is offset by changes in the financial instruments for hedge. Shareholders equity at the end of Jun 18 amounted to R$ 24.8 billion, composed mainly by R$18.4 billion in capital reserves and R$3.2 billion in capital stock. OTHER FINANCIAL INFORMATION Investments In 2Q18, investments amounted to R$28.2 million, referring primarily to the development and upgrading of technology systems. Thus, in the first semester of 2018, investments amounted to R$ 69.1 million. Distribution of earnings On April 13 and June 22, 2018, the Board of Directors approved the payment of interest on capital of R$200.0 million and R$452.0 million, respectively. These were paid on May 8 and July 10, 2018, based on the register of shareholders of April 23 and June 22, Sustainability and private social investment B3 has completed its 2018 Greenhouse Gas (GHG) emissions inventory referring to The Company s total GHG emissions for 2017 was 4,789.87tCO2e, which were offset in the second half-year of 2018 according to the practice adopted since In 2016, B3 emitted and offset 4, tco2e using the CDM Clean Development Mechanism project. EXTERNAL AUDIT 2Q18/2Q17 (%) The Company engaged Ernst & Young Auditores Independentes to provide external auditing services for its 2018 financial statements. The policy for engaging external audit services for the Company and its subsidiaries is based on internationally accepted principles, which preserve the independence of work of this nature, and include the following practices: (i) the auditor may not perform executive or management functions in the Company or its subsidiaries; (ii) the auditor may not perform operational activities in the Company or its subsidiaries that might compromise the efficacy of the audit work; and (iii) the auditor 1Q18 2Q18/1T18 (%) Net income (attributable to shareholders) 724, , % 314, % (+) Expenses related to the combination with Cetip 9,871 95, % 9, % (+) Amortization of intangibles from combination with Cetip 123, , , % (+) Taxes Refinancing (REFIS/PERT) - 87, Recurring net income 857, , % 448, % (+) Deferred Tax (goodwill from Bovespa combination) - 133, % - 0.0% (+) Deferred Tax (goodwill from Cetip combination) 119,629-0% 119, % Recurring net income adjusted by goodwill tax benefit 977, , % 567, % 11 The objective of B3 in presenting the recurring net income metric is to facilitate the comparison between periods and, consequently, the evaluation of the Company s performance, highlighting non-recurring items not directly related to the normal course of its business. 8

9 C O MME N T S O N P E R F O R M A N C E 2Q18 must remain impartial, avoiding any conflicts of interest or loss of independence, and must be objective in his opinions and pronouncements on the financial statements. In 2Q18, no services were provided by the independent auditors and related parties other than those involving external auditing. 9

10 Quarterly Information (ITR) B3 S.A. - Brasil, Bolsa, Balcão with Independent Auditor s Report

11 Quarterly Information Contents Independent auditor s report on quarterly information... 1 Financial statements Balance sheet... 3 Statement of income... 5 Statement of comprehensive income... 7 Statement of changes in equity... 9 Statement of cash flow Statement of value added Notes to quarterly information... 13

12 São Paulo Corporate Towers Av. Presidente Juscelino Kubitschek, 1909 Vila Nova Conceição São Paulo SP - Brasil Phone: ey.com.br A free translation from Portuguese into English of Independent Auditor s Report on quarterly information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). Independent auditor s report on quarterly information The Board of Directors and Shareholders B3 S.A. - Brasil, Bolsa, Balcão São Paulo, Brazil We have reviewed the accompanying individual and consolidated interim financial information of B3 S.A. - Brasil, Bolsa, Balcão ( Company ), contained in the Quarterly Information Form (ITR) for the threemonth period ended, which comprises the balance sheet as at and the related statements of income and of comprehensive income for the three and six-month periods then ended and of changes in equity and of cash flows for the six-month period then ended, including explanatory information. Management is responsible for the preparation of the individual and consolidated interim financial information in accordance with Accounting Pronouncement CPC 21 (R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of this financial information in accordance with the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity, and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Uma empresa-membro da Ernst & Young Global Limited

13 Conclusion on the individual and consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to the preparation of Quarterly Information (ITR), and presented consistently with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Other matters Statements of value added We have also reviewed the individual and consolidated Statements of Value Added (SVA) for the sixmonth period ended, prepared under the responsibility of Company management, the presentation of which in the interim financial information is required by the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information (ITR), and as supplementary information under the IFRS, whereby no SVA presentation is required. These statements have been subject to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that they were not prepared, in all material respects, consistently with the overall interim financial information. São Paulo, August 9, ERNST & YOUNG Auditores Independentes S.S. CRC-2SP034519/O-6 Gregory Gobetti Accountant CRC-1PR039144/O-8

14 A free translation from Portuguese into English of individual and consolidated quarterly information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). B3 S.A. - Brasil, Bolsa, Balcão Balance sheet and December 31, 2017 (In thousands of reais) B3 Consolidated Note 06/30/ /31/ /30/ /31/2017 Assets Current assets 7,560,889 7,119,974 8,221,642 6,506,030 Cash and cash equivalents 4(a) 381, , , ,140 Financial investments and marketable securities 4(b) 6,449,423 5,560,397 7,050,786 4,926,832 Derivative financial instruments 4(c) 25,417 9,381 25,417 9,381 Accounts receivable 5 294, , , ,441 Other receivables 6 28,678 54,513 63,447 51,516 Taxes recoverable and prepaid 19(d) 341, , , ,081 Prepaid expenses 39,732 40,617 40,217 40,639 Noncurrent assets 31,181,018 31,089,504 29,743,729 31,073,849 Long-term receivables 1,511,997 1,278,297 1,603,514 2,563,595 Financial investments and marketable securities 4(b) 860, , ,329 2,197,268 Derivative financial instruments 4(c) 288,024 6, ,024 6,200 Judicial deposits 14(h) 352, , , ,955 Other receivables ,200 Prepaid expenses 10,820 10,972 10,820 10,972 Investments 1,576,352 1,348,498 45,482 44,962 Interest held in subsidiaries 7(a) 1,576,352 1,348,498 18,642 17,363 Investment properties 7(b) ,840 27,599 Property and equipment 8 585, , , ,669 Intangible assets 9 27,507,641 27,891,621 27,507,908 27,891,623 Goodwill 22,338,799 22,338,876 22,338,799 22,338,876 Software and projects 5,013,164 5,363,067 5,013,429 5,363,067 Contractual relations 39,487 44,439 39,487 44,439 Trademark 116, , , ,241 Total assets 38,741,907 38,209,478 37,965,371 37,579,879 See accompanying notes. 3

15 Balance sheet and December 31, 2017 (In thousands of reais) B3 Consolidated Note 06/30/ /31/ /30/ /31/2017 Liabilities and equity Current liabilities 4,456,961 5,060,928 4,865,633 5,451,858 Collateral for transactions 17 1,739,564 2,171,449 1,739,564 2,171,449 Earnings and rights on securities in custody 10 63,745 63,127 63,745 63,127 Suppliers 114, , , ,846 Salaries and social charges 229, , , ,950 Provision for taxes and contributions payable , , , ,823 Income tax and social contribution - 41,670 18,860 60,827 Interest payable on debt issued abroad 12(a) 69,559 59,531 69,559 59,531 Loans 12 67,956 58,774 8,357 43,232 Debentures 12(c) 1,512,619 1,513,167 1,512,619 1,513,167 Derivative financial instruments 4(c) 4,951 18,032 4,951 18,032 Dividends and interest on equity payable 396, , , ,063 Other liabilities 13 77, , , ,718 Revenues to be allocated 56,837 38,093 56,837 38,093 Noncurrent liabilities 9,533,388 8,848,856 8,337,075 7,818,007 Debt issued abroad 12(a) 2,311,492 2,012,331 2,311,492 2,012,331 Loans 12 1,792,911 1,554, , ,998 Debentures 12(c) 1,498,809 1,497,434 1,498,809 1,497,434 Derivative financial instruments 4(c) - 3,313-3,313 Deferred income tax and social contribution 19(a) 3,203,710 3,081,020 3,204,369 3,081,088 Provisions for tax, civil, labor and other contingencies 14(e) 652, , , ,365 Other liabilities 13 30,494 27,086 30,494 27,086 Revenues to be allocated 43,057 39,392 43,057 39,392 Equity 15 24,751,558 24,299,694 24,762,663 24,310,014 Capital and reserves attributable shareholders of B3 Capital 3,198,655 3,198,655 3,198,655 3,198,655 Capital reserve 18,385,286 18,399,366 18,385,286 18,399,366 Revaluation reserves 18,725 19,018 18,725 19,018 Income reserves 2,870,412 2,870,412 2,870,412 2,870,412 Treasury shares (169,298) (221,759) (169,298) (221,759) Other comprehensive income 60,327 34,002 60,327 34,002 Retained earnings 387, ,451-24,751,558 24,299,694 24,751,558 24,299,694 Non-controlling interests ,105 10,320 Total liabilities and equity 38,741,907 38,209,478 37,965,371 37,579,879 See accompanying notes. 4

16 Statement of income Quarters and periods ended and 2017 Note 2Q B Accumulated Accumulated Balance 2Q Balance Revenues 20 1,226,218 2,320, ,799 1,200,367 Expenses (523,612) (1,117,935) (355,607) (614,668) General and administrative Personnel and charges (160,009) (336,136) (104,316) (213,529) Data processing (45,274) (89,819) (35,866) (71,776) Depreciation and amortization 8 and 9 (236,858) (472,521) (23,687) (48,865) Third-party services (51,887) (97,621) (9,009) (16,312) Maintenance in general (4,614) (9,605) (3,517) (6,796) Communications (1,109) (2,848) (1,280) (2,476) Promotion and publicity (7,328) (11,355) (2,062) (5,054) Taxes and charges (2,826) (4,372) (1,788) (3,076) Board and committee members compensation (4,042) (7,683) (3,880) (6,544) Related to combination with CETIP 21 (14,956) (30,013) (144,752) (190,184) Sundry expenses 22 5,291 (55,962) (25,450) (50,056) Impairment of assets (65,508) Equity pickup 7(a) 194, ,498 (16,907) (8,450) Financial result 23 (248,283) (290,411) (45,435) 111,651 Financial income 94, , , ,050 Financial expenses (342,683) (501,538) (243,451) (483,399) Income before income taxes 649,148 1,130, , ,392 Income tax and social contribution 19(c) 75,287 (90,977) (32,535) (179,525) Current 36,815 18,599 (13,166) (52,629) Deferred 38,472 (109,576) (19,369) (126,896) Net income for the period 724,435 1,039, , ,867 Attributable to: Shareholders of B3 724,435 1,039, , ,867 See accompanying notes. 5

17 Statement of income Quarters and periods ended and 2017 Note 2Q Consolidated Accumulated Accumulated Balance 2Q Balance Revenues 20 1,250,524 2,362, ,903 1,579,236 Expenses (531,563) (1,134,384) (671,745) (942,202) General and administrative Personnel and charges (163,783) (344,048) (165,462) (280,743) Data processing (45,824) (90,970) (43,328) (80,490) Depreciation and amortization 7(b), 8 and 9 (237,238) (473,287) (231,032) (257,431) Third-party services (52,930) (99,640) (28,526) (36,206) Maintenance in general (5,198) (10,813) (6,092) (9,950) Communications (1,125) (2,884) (2,462) (3,724) Promotion and publicity (7,330) (11,415) (4,980) (8,082) Taxes and charges (3,171) (5,139) (2,208) (3,936) Board and committee members compensation (4,042) (7,683) (4,115) (6,825) Related to combination with CETIP 21 (14,956) (30,013) (145,327) (190,759) Sundry expenses 22 4,034 (58,492) (38,213) (64,056) Impairment of assets (65,508) Equity pickup 7(a) 274 1, Financial result 23 (57,160) (79,659) (58,373) 99,757 Financial income 100, , , ,140 Financial expenses (157,688) (299,435) (284,148) (526,383) Income before income taxes 662,075 1,149, , ,776 Income tax and social contribution 19(c) 63,132 (109,739) (77,787) (227,625) Current 25, (39,627) (83,123) Deferred 38,130 (110,167) (38,160) (144,502) Net income for the period 725,207 1,039, , ,151 Attributable to: Shareholders of B3 724,435 1,039, , ,867 Non-controlling interests Earnings per share attributable to shareholders of B3 (in R$ per share) 15(g) Basic earnings per share Diluted earnings per share See accompanying notes. 6

18 Statement of comprehensive income Quarters and periods ended and 2017 (In thousands of reais) Note 2Q B Accumulated Accumulated Balance 2Q Balance Net income for the period 724,435 1,039, , ,867 Other comprehensive income to be reclassified to P&L for the year in subsequent periods 32,513 36,253 (3,445) 12,030 Translation adjustments Exchange rate variation on investment in foreign subsidiary 7(a) Exchange rate variation on financial assets, net of taxes 16,997 26,294 8,763 13,456 17,732 27,179 8,915 13,545 Cash flow hedges 4(c) Cash flow hedging instruments value, net of taxes 23,920 19,365 (7,250) (6,013) Cash flow hedging instruments value - firm commitment, net of taxes 4,427 6,103 1,012 1,791 Transfer to P&L and non-financial asset, net of taxes (1,194) (1,270) (318) (348) Transfer to P&L of cash flow hedging instrument value, net of taxes (7,426) (11,590) (4,083) (7,098) 19,727 12,608 (10,639) (11,668) Financial instruments measured at fair value through comprehensive income Market to market of equity instruments, net of taxes - - (1,120) 10,735 Market to market of other financial assets, net of taxes (4,937) (3,511) - - (4,937) (3,511) (1,120) 10,735 Comprehensive income (loss) of subsidiary Comprehensive income (loss) of subsidiary 7(a) (9) (23) (601) (582) (9) (23) (601) (582) Other comprehensive income not reclassified to P&L for the year in subsequent periods Market to market of equity instruments, net of taxes (7,908) (9,928) - - (7,908) (9,928) - - Total comprehensive income for the period 749,040 1,065, , ,897 Attributable to: 749,040 1,065, , ,897 Shareholders of B3 749,040 1,065, , ,897 See accompanying notes. 7

19 Statement of comprehensive income Quarters and periods ended and 2017 (In thousands of reais) Note 2Q Consolidated Accumulated Accumulated Balance 2Q Balance Net income for the period 725,207 1,039, , ,151 Other comprehensive income to be reclassified to P&L for the year in subsequent periods 32,513 36,253 (3,445) 12,030 Translation adjustments Exchange rate variation on investment in foreign subsidiary 7(a) Exchange rate variation on financial assets, net of taxes 16,997 26,294 8,763 13,456 17,732 27,179 8,915 13,545 Cash flow hedge 4(c) Cash flow hedging instruments value, net of taxes 23,920 19,365 (7,250) (6,013) Cash flow hedging instruments value - firm commitment, net of taxes 4,427 6,103 1,012 1,791 Transfer to P&L and non-financial asset, net of taxes (1,194) (1,270) (318) (348) Transfer to P&L of cash flow hedging instrument value, net of taxes (7,426) (11,590) (4,083) (7,098) 19,727 12,608 (10,639) (11,668) Financial instruments measured at fair value through comprehensive income Market to market of equity instruments, net of taxes - - (1,120) 10,735 Market to market of other financial assets, net of taxes (4,937) (3,511) - - (4,937) (3,511) (1,120) 10,735 Comprehensive income (loss) of subsidiary Comprehensive income (loss) of subsidiary 7(a) (9) (23) (601) (582) (9) (23) (601) (582) Other comprehensive income not reclassified to P&L for the year in subsequent periods Market to market of equity instruments, net of taxes (7,908) (9,928) - - (7,908) (9,928) - - Total comprehensive income for the period 749,812 1,066, , ,181 Attributable to: 749,812 1,066, , ,181 Shareholders of B3 749,040 1,065, , ,897 Non-controlling interests See accompanying notes. 8

20 Statement of changes in equity Period ended (In thousands of reais) Note Capital Capital reserve Revaluation reserve (Note 15(c)) Attributable to shareholders of B3 Income reserves (Note 15(e)) Legal reserve Statutory reserve Treasury shares (Note 15(b)) Other comprehensive income Retained earnings Total Noncontrolling shareholders Total equity Balances at December 31, ,198,655 18,399,366 19,018 3,453 2,866,959 (221,759) 34,002-24,299,694 10,320 24,310,014 Translation adjustments ,179-27,179-27,179 Cash flow hedge ,608-12,608-12,608 Financial instruments measured at fair value through comprehensive income (3,511) - (3,511) - (3,511) Comprehensive income (loss) of subsidiary 7(a) (23) - (23) - (23) Market to Market of equity instruments, net of taxes (9,928) (9,928) - (9,928) Total comprehensive income ,325-26,325-26,325 Realization of revaluation reserve - subsidiaries - - (293) Transfer of treasury shares - stock grant plan 18(a) - (52,095) , Recognition of stock option plan - (6) Recognition of stock grant plan 18(a) - 38, ,021-38,021 Net income for the period 15(f) ,039,158 1,039, ,039,943 Allocations of profit: Interest on Equity (652,000) (652,000) - (652,000) Balances at 3,198,655 18,385,286 18,725 3,453 2,866,959 (169,298) 60, ,451 24,751,558 11,105 24,762,663 See accompanying notes. 9

21 Statement of changes in equity Period ended June 30, 2017 (In thousands of reais) Attributable to shareholders of B3 Income reserves (Note 15(e)) Revaluation Treasury Other Non- Capital reserves Legal Statutory shares comprehensive Retained controlling Total Note Capital reserve (Note 15(c)) reserve reserves (Note 15(b)) income earnings Total interests equity Balances at December 31, ,540,239 14,327,523 19,603 3,453 2,494,375 (306,022) (12,701) - 19,066,470 9,915 19,076,385 Translation adjustments ,545-13,545-13,545 Cash flow hedge (11,668) - (11,668) - (11,668) Financial instruments measured at fair value through comprehensive income ,735-10,735-10,735 Comprehensive income of subsidiary (582) - (582) - (582) Total comprehensive income ,030-12,030-12,030 Capital increase 15(a) 658,416 4,065, ,724,080-4,724,080 Realization of revaluation reserves - subsidiaries - - (293) Transfer of treasury shares stock grant plan 18(a) - (79,838) , Disposal of treasury shares exercise of stock options 18(b) - (6) Recognition of stock option plan Recognition of stock grant plan 18(a) - 59, ,964-59,964 Net income for the period , , ,151 Allocations of profit: Interest on Equity (140,276) (140,276) - (140,276) Balances at June 30, ,198,655 18,373,394 19,310 3,453 2,494,375 (225,818) (671) 303,884 24,166,582 10,199 24,176,781 See accompanying notes. 10

22 Statement of cash flow Periods ended and 2017 (In thousands of reais) Cash flow from operating activities Note Accumulated 2018 B3 Accumulated 2017 Accumulated 2018 Consolidated Accumulated 2017 Net income for the period 1,039, ,867 1,039, ,151 Adjustments for: Depreciation/amortization 7 (b), 8 and 9 472,521 48, , ,431 Impairment of assets - 65,508-65,508 Deferred income tax and social contribution 109, , , ,502 Equity pick-up 7(a) (217,498) 8,450 (1,279) (493) Stock option and stock grant plan expenses 18(a) 38,021 60,051 38,021 60,051 Interest expenses , , , Provision for tax, civil and labor contingencies 14(e) 23,097 24,829 15,873 33,942 Allowance for doubtful accounts 3, , Derivative financial instruments swap (269,864) 57,255 (269,864) 57,255 Exchange rate variation - Hedge 12(a) 335,254 30, ,254 30,049 Exchange rate variation - fundraising 253, , Marked-to-market of fundraising 12(a) (36,768) 4,443 (36,768) 4,443 Marked-to-market of NDF (2,023) 9,517 (2,023) 9,517 Judicial deposits (6,659) (5,130) (6,669) (5,162) Other (259) (5,748) Adjusted Net Income 1,960,049 1,124,084 2,048,675 1,385,498 Variation in financial investments, marketable securities and collateral for transactions (983,825) 8,838,426 (1,027,163) 8,965,796 Effect of exchange rate variation on cash flow hedge 7,322 (8,570) 7,322 (8,570) Variation in taxes to be offset and recoverable 141,017 (215,698) 140,287 (203,731) Variation in accounts receivable (24,270) (9,679) (23,314) (2,380) Variation in other receivables 20,531 (33,848) (11,931) (38,154) Variation in prepaid expenses 1,037 11, ,710 Variation in judicial deposits 282 (6,480) 282 (10,239) Variation in earnings and rights on securities in custody , ,034 Variation in suppliers (18,622) (13,044) (18,613) (75,764) Variation in provisions for taxes and contributions payable (3,503) (56,170) (4,762) (68,649) Variation in income tax and social contribution (41,670) 43,908 (41,967) 45,615 Variation in salaries and social charges (37,703) 29,160 (38,342) (223,476) Variation in other liabilities (24,121) (8,251,543) 39,864 (8,334,511) Variation in revenues to be allocated 22,409 14,120 22,409 14,939 Variation in provision for tax, civil, and labor contingencies 14(e) (4,440) (432) (4,593) 1,108 Variation in post-retirement health care benefits - 1,201-1,201 Net cash from (used in) operating activities 1,015,111 1,482,138 1,089,346 1,477,427 Cash flow from investing activities Cash receipt from disposal of property and equipment , Payment for purchase of property and equipment 8 (45,271) (71,234) (45,294) (71,332) Dividends received 5, Settlement of derivative financial instrument NDF (31,246) (513,743) (31,246) (513,743) Subsidiriary Capital Increase 7(a) (9,494) (7,910) - (7,910) Purchase of software and projects (58,031) (60,034) (58,296) (66.509) Cash effect - acquisition of subsidiary ,829 Net cash from (used in) investing activities (137,995) (652,547) (132,092) (655,020) Cash flow from financing activities Disposal of treasury shares - stock options exercised Interest paid (211,147) (402,971) (289,476) (405,940) Payment of dividends and interest on equity (719,998) (456,625) (719,998) (457,721) Net cash used in financing activities (930,785) (859,236) (1,009,114) (863,301) Net increase (decrease) in cash and cash equivalents (53,669) (29,645) (51,860) (40,894) Balance of cash and cash equivalents at beginning of period 4(a) 152, , , ,169 Balance of cash and cash equivalents at end of period 4(a) 99, , , ,275 See accompanying notes. 11

23 Statement of value added Periods ended and 2017 (In thousands of reais) Notes Accumulated 2018 B3 Accumulated 2017 Accumulated 2018 Consolidated Accumulated Revenues 20 2,576,985 1,338,510 2,620,737 1,755,707 Trading, clearance and settlement system 2,277,128 1,078,619 2,294,641 1,472,409 Other revenues 299, , , , Goods and services acquired from third parties 297, , , ,775 Expenses (a) 297, , , ,267 Impairment of assets - 65,508-65, Gross value added (1-2) 2,279, ,348 2,316,510 1,296, Retentions 472,521 48, , ,431 Depreciation and amortization 7(b), 8 and 9 472,521 48, , , Net value added produced by the Company (3-4) 1,807, ,483 1,843,223 1,039, Value added received in transfer 428, , , ,633 Equity pickup 7(a) 217,498 (8,450) 1, Financial income , , , , Total value added to be distributed (5+6) 2,235,866 1,468,083 2,064,278 1,666, Distribution of value added 2,235,866 1,468,083 2,064,278 1,666,134 Personnel and charges 336, , , ,743 Board and committee members compensation 7,683 6,544 7,683 6,825 Taxes, charges and contributions (b) Federal 308, , , ,974 Municipal 42,761 20,455 43,654 21,058 Financial expenses , , , ,383 Interest on equity and dividends 15(f) 652, , , ,276 Retained net income for the period 387, , , ,875 (a) Expenses (excludes personnel, board and committee members compensation, depreciation, taxes and charges). (b) Includes: taxes and charges, Contribution Taxes on Gross Revenue for Social Integration Program (PIS) and for Social Security Financing (COFINS), Service Tax (ISS), current and deferred income tax and social contribution (IRPJ and CSLL). See accompanying notes. 12

24 Notes to quarterly information 1. Operations B3 S.A. - Brasil, Bolsa, Balcão ( B3 ) is a publicly-traded corporation headquartered in the city of São Paulo. On March 29, 2017, B3 concluded the business combination and became the controlling shareholder of CETIP S.A. - Mercados Organizados ( CETIP ) and, from that date onwards, results were consolidated. The services of registration, central depository, trading and settlement of assets and securities, in addition to rendering of information electronic delivery services for the registration of financing agreements and recording of encumbrances by transit agencies, are now provided by B3 due to the merger occurred on July 3, 2017, when the results generated became part of the individual result of B3. 2. Preparation and presentation of quarterly information This quarterly information was approved by the Board of Directors of B3 on August 09, The quarterly information was prepared and is presented in accordance with accounting practices adopted in Brazil. In addition, the quarterly information contains the minimum disclosure requirements prescribed by CPC 21 (R1) - Interim Financial Reporting, as well as other information considered relevant. This information does not include all requirements for annual financial statements and, therefore, should be read in conjunction with the individual and consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and accounting practices adopted in Brazil, issued by Brazil s Financial Accounting Standards Board - FASB ( CPC ), and approved by the Brazilian Securities and Exchange Commission (CVM), for the year ended December 31, Accordingly, this quarterly information at was not subject to full reporting, by reason of redundancy in relation to information already presented in the annual financial statements, and as provided for in the CVM/SNC/SEP Circular Memorandum No. 003/2011. The preparation of quarterly information requires the use of certain critical accounting estimates and also the exercise of judgment by management in the process of applying the accounting policies of B3. No changes have been recorded in assumptions and judgments by B3 management in using such estimates for preparing this quarterly information, in relation to those applied in the financial statements at December 31, 2017, as disclosed on March 1, All significant information used by management in managing B3 is evidenced in these quarterly information according to Accounting Guidance OCPC

25 Notes to quarterly information -- continued 2. Preparation and presentation of quarterly information Continued a) Consolidated quarterly information The consolidated quarterly information includes the balances of B3 and its subsidiaries, as well as special purpose entities comprising investment funds, as follows: % - Ownership Interest Direct subsidiaries and controlled entities: 06/30/ /31/2017 Banco B3 S.A. (Previously Banco BM&FBOVESPA de liquidação e custódia S.A) Bolsa de Valores do Rio de Janeiro BVRJ ( BVRJ ) BM&F (USA) Inc BM&FBOVESPA (UK) Ltd BM&FBOVESPA BRV LLC B3 Inova USA LLC CETIP Info Tecnologia S.A CETIP Lux S.à.r.l Exclusive investment funds: BB Pau Brasil Fundo de Investimento Renda Fixa Bradesco Fundo de Investimento Renda Fixa Longo Prazo Eucalipto Imbuia FI Renda Fixa Referenciado DI b) Individual quarterly information In the individual quarterly information (B3), subsidiaries are recorded using the equity method. The same adjustments are made to both individual and consolidated quarterly information so as to reach the same P&L and equity attributable to shareholders of the parent company. c) Functional currency The individual and consolidated quarterly information was prepared and are presented in Brazilian reais, which is the functional currency of B3. 14

26 3. Summary of significant accounting practices The accounting practices and calculation methods used in the preparation of this quarterly information are the same adopted in preparing the financial statements for the year ended December 31, 2017, except for the items described below: a) Revenue recognition First-time Adoption of CPC 47/IFRS 15 First-time revenue from contracts with customers B3 first-time adopted CPC 47/IFRS 15 - Revenue from Contracts with Customers, effective for annual periods beginning on or after January 1, 2018, which replaces CPC 30 (R1)/IAS 18 - Revenue, and establishes the principles for measurement, recognition and disclosure of revenues. The adoption of CPC 47/IFRS 15 did not change the recognition of B3 s revenues, accordingly no adequacy was required. Revenues comprise the fair value of the consideration received or receivable for the rendering of services in the ordinary course of B3 activities. Revenues from the rendering of services, from trading and settlement systems, as well as from recording of assets derivatives and financing agreements (SC - Contract System) are recognized upon completion of the transactions, under the accrual method of accounting. The amounts received as annual fees, as in the cases of listing of securities and certain contracts for sale of market information, revenue from the inclusion of financial restrictions (SNG - Sistema Nacional de Gravames), permanent assets and of monthly use are recognized proportionally in P&L in relation to the service provision term. b) Financial instruments First-time adoption of CPC 48/IFRS 9 Financial Instruments B3 first-time adopted CPC 48/IFRS 9 - Financial Instruments, effective for annual periods beginning on or after January 1, 2018, which replaces CPC 38/IAS 39 - Financial Instruments that was effective until the year ended December 31, Under the scope of CPC 48/IFRS 9, B3 decided not to restate comparative information for 2017, therefore, the information corresponding to financial instruments is not comparable with the information presented for It is B3 s policy to continue to apply hedge accounting in accordance with CPC 38/IAS 39 and the Company assesses if results generated through the tests performed are within the 80% to 125% effectiveness range. The measurement categories previously adopted by CPC 38/IAS 39 (fair value through profit or loss (FVTPL)), held to maturity (HTM), loans and receivables (LR) and available for sale (AFS) have been 15

27 3. Summary of significant accounting practices -- Continued b) Financial instruments (Continued) replaced by Amortized Cost (AC), Fair value through profit or loss (FVTPL) and Fair value through other comprehensive income (FVTOCI). Estimated losses (impairment) As a result of adoption of CPC 48/IFRS 9, B3 changed the methodology for calculating estimated losses (Note 5). Since the customers portfolio is mostly realized within 90 days and, therefore, has no significant financing component, B3 applied the simplified approach methodology for calculating estimated losses, as permitted by that standard, which is based on an analysis of expected losses. (i) Classification and measurement B3 initially classifies its financial assets and liabilities according to its business model and contractual flows. IFRS 9 Transition The impacts arising from the first-time adoption of CPC 48/IFRS 9 on quarterly information, on account of B3 s business model, is presented below. CPC 38 / IAS 39-01/01/2018 Reclassification CPC 38 / IAS 39-01/01/2018 Category (*) B3 Consolidated B3 Consolidated Category (*) B3 Consolidated Financial assets Financial investment fund FVTPL 5,044,871 1,977, FVTPL 5,044,871 1,977,745 Federal government securities (Exclusive investment funds) FVTPL 1,091,519 2,541,011 (1,091,378) (1,091,378) FVTPL 141 1,449,633 Repurchase agreements FVTPL - 2,168, FVTPL - 2,168,547 Other investments FVTPL 14,050 15, FVTPL 14,050 15,413 Federal government securities AFS - 96,733 - (96,733) Shares AFS 324, ,651 (324,651) (324,651) Federal government securities ,091,378 1,188,111 FVTOCI 1,091,378 1,188,111 Shares , ,651 FVTOCI 324, ,651 Derivative financial instruments (hedge) FVTPL 15,581 15, FVTPL 15,581 15,581 Accounts receivable (1) Receivables 273, , AC 273, ,441 Related parties Receivables 1, AC 1, ,766,133 7,418,454 Total assets 6,766,133 7,418, Financial liabilities Interest payable on debt issued abroad AC 59,531 59, AC 59,531 59,531 Loans AC 1,612, , AC 1,612, ,230 Debentures AC 3,010,601 3,010, AC 3,010,601 3,010,601 Collateral for transactions FVTPL 2,171,449 2,171, FVTPL 2,171,449 2,171,449 Supplies AC 133, , AC 133, ,846 Related parties AC AC Debt issued abroad (hedge) FVTPL 2,012,331 2,012, FVTPL 2,012,331 2,012,331 Derivative financial instruments (hedge) FVTPL 21,345 21, FVTPL 21,345 21,345 Total liabilities 9,021,785 7,961, ,021,785 7,961,724 (1) The impact of the remeasurement of expected loss on accounts receivable in accordance with CPC 48/IFRS 9 was an increase of R$1,

28 3. Summary of significant accounting practices -- Continued b) Financial instruments (Continued) (i) Classification and measurement -- continued IFRS 9 Transition -- continued (*) Legend: FVTPL - Fair value through P&L FVTOCI Fair value through other comprehensive income AC - Amortized cost AFS - Available for sale Financial investment funds remained classified as measured at fair value through profit or loss. Federal government securities that were classified as measured at fair value through profit or loss were mostly reclassified to measured at fair value through other comprehensive income. The effect of this reclassification in this six-month period was R$3,511 (income), net of taxes, which is now recorded in equity and no longer in P&L. There was no category reclassification for the other financial assets and liabilities. Except for the case of expected loss on accounts receivable, there was no remeasurement of financial instruments upon adoption of CPC 48/IFRS 9. Cash and cash equivalents B3 considers that the balances of cash and cash equivalents for cash flow statement purposes comprise cash in kind and bank deposits. Amortized cost Financial assets measured at amortized cost are nonderivative financial assets that are designated by the entity in this category, for which the purpose of the business model adopted is to maintain the assets to receive contractual cash flows on specific dates (principal and interest). Nonderivative financial liabilities are classified at amortized cost, except when such classification does not result in more adequate information. This category includes: Receivables B3 receivables mostly comprise trade accounts receivable. They are initially recorded at transaction cost and subsequently at amortized cost, using the effective interest rate method less any impairment loss. Loans and debentures Loans and debentures are initially recognized at fair value, net of transaction costs incurred, and are subsequently stated at amortized cost. Any difference between the funds raised (net of transaction 17

29 3. Summary of significant accounting practices -- Continued b) Financial instruments (Continued) costs) and the amount repayable is recognized in the income statement over the period of the loans, using the effective interest rate method. Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through other comprehensive income are nonderivative financial assets that are designated by the entity in this category, where the purpose of the business model adopted is to receive contractual cash flows on specific dates (principal and interest) and, in case of disposal. Interest is calculated using the effective interest rate method and is recognized in the income statement as financial result. The amount referring the change in fair value is recorded in comprehensive income, net of taxes, matched against P&L upon its settlement or impairment loss, except for equity instruments. The option to designate equity instruments as measured at fair value through other comprehensive income is irrevocable. The amount referring the change in fair value recorded in comprehensive income will no longer be transferred to P&L upon its settlement. The amounts received are recognized in P&L. Financial assets measured at fair value through profit or loss Financial assets measured at fair value through profit or loss are financial assets not classified in the categories above due to the business model adopted, or assets designated by the entity upon initial recognition. Gains or losses arising from the changes in fair value of financial instruments are recorded in the income statement under Financial result for the period in which they occur. This category Includes: Collaterals for transactions These comprises amounts received from market members as collateral for default or insolvency. Amounts received in cash are recorded as liabilities and other collaterals are managed off-balance sheet. Both types of collateral received are not subject to interest or any other charges. (ii) Derivative financial instruments B3 uses derivative financial instruments to hedge its assets and liabilities against market risks, especially those related to foreign currencies. Derivative financial instruments designated in hedging transactions are initially recognized at fair value on the date in which the derivative agreement is entered into, being subsequently revaluated also at fair value. Derivatives are recorded as financial assets when the financial instrument fair value is positive, and as financial liabilities when fair value is negative. 18

30 3. Summary of significant accounting practices -- Continued b) Financial instruments -- Continued (ii) Derivative financial instruments (Continued) Any gains or losses from changes in fair value of derivatives over the fiscal year are recorded directly in P&L, except for the effective portion of the cash flow hedge, which is recognized directly in equity under other comprehensive income, and subsequently reclassified to P&L when the hedge item affects P&L. (iii) Hedge accounting Upon entering a hedging transaction, B3 prepares formal documentation containing: (i) hedge objective; (ii) hedge type; (iii) nature of hedged risk; (iv) identification of hedged item; (v) identification of hedging instrument; (iv) assessment of the correlation between hedge and hedged item (retrospective effectiveness test); and (vii) prospective effectiveness assessment. Fair value hedge Any gain or loss from changes in the fair value of derivative instruments designated as hedging instruments, as well as hedged assets or liabilities (hedged item) are recognized in financial result. Cash flow hedge Any gain or loss in the hedging instrument related to the effective hedge portion is recognized under equity, in Other comprehensive income, net of tax effects. Consequently, the exchange rate variation in hedging instruments, previously recognized in financial result prior to its recognition as a hedging instrument, accumulates in equity and is transferred to P&L for the same period and the same account group under which the hedged transaction is recognized. When the hedged transaction implies recognition of a nonfinancial asset, gains and losses recognized in equity are transferred and included in the initial measurement of the asset cost. The non-effective portion of the hedge is immediately recognized in P&L. Hedge effectiveness analysis B3 adopts the dollar offset method for retrospective effectiveness test, which takes into consideration the ratio at fair value or present value of accumulated gains or losses in the hedging instrument with gains or losses on hedged item for hedged risk. The approaches used for analyses consist of the hypothetical derivative approach and benchmark rate approach for retrospective tests and sensitivity analysis approach for prospective tests. 19

31 4. Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments a) Cash and cash equivalents B3 Consolidated Description 06/30/ /31/ /30/ /31/2017 Cash and banks deposits in local currency 24,580 35, ,724 Bank checking account in foreign currency 74, , , ,596 Cash and cash equivalents 99, , , ,320 Bank deposits in foreign currency - Thirdparty funds (1) 282, , , ,820 Total cash and cash equivalents 381, , , ,140 (1) As of refers to the restricted resources of third parties linked to the full settlement of derivative transactions (Clearing BM&FBOVESPA) and exchange transactions (Clearing Exchange) and at December 31, 2017 referred to the full settlement of foreign of exchange transactions (Clearing Exchange) Cash and cash equivalents are held with top-tier financial institutions in Brazil or abroad. Deposits in foreign currency are primarily in US dollars and euros. 20

32 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued b) Financial investments and marketable securities The breakdown of financial investments and marketable securities by category, nature and maturity is as follows: Description No maturity Within 3 months Above 3 months and up to 12 months Above 12 months and up to 5 years B3 Over 5 years 06/30/ /31/2017 Financial assets measured at fair value through profit or loss Financial investment fund (1) 5,765, ,765,240 5,044,871 Federal government securities Financial Treasury Bills (LFT) ,379 National Treasury Bills (LTN) ,889 National Treasury Notes (NTN) ,251 Other investments (3) 15, ,860 14,050 5,781, ,781,196 6,150,440 Financial assets available for sale Shares - Minority interest (5) , ,651 Financial assets measured at fair value through other comprehensive income Federal government securities Financial Treasury Bills (LFT) - 102,339 79, , , ,948 - National Treasury Bills (LTN) ,763 7, ,606 - National Treasury Notes (NTN) , ,577 - Shares- Minority interest (5) 349, , , , , , ,882 1,528,572 - Total financial investments and marketable securities 6,130, , , , ,882 7,309,768 6,475,091 Current 6,449,423 5,560,397 Noncurrent 860, ,694 21

33 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued b) Financial investments and marketable securities Continued Description No maturity Within 3 months Above 3 months and up to 12 months Above 12 months and up to 5 years Consolidated Over 5 years 06/30/ /31/2017 Financial assets measured at fair value through profit or loss Financial investment fund (1) 1,961, ,961,924 1,977,745 Repurchase agreements - 2,566,334 18, ,585,106 2,168,547 Federal government securities Financial Treasury Bills (LFT) - 231, ,902 1,042, ,450 1,804,646 2,264,871 National Treasury Bills (LTN) ,889 National Treasury Notes (NTN) ,251 Other investments (3) 17, ,406 15,413 1,979,330 2,797, ,674 1,042, ,450 6,369,082 6,702,716 Financial assets available for sale Federal government securities Financial Treasury Bills (LFT) ,653 National Treasury Bills (LTN) National Treasury Notes (NTN) Shares - Minority interest (5) , ,384 Financial assets measured at fair value through other comprehensive income Federal government securities Financial Treasury Bills (LFT) - 110,002 91, , , ,240 - National Treasury Bills (LTN) ,763 7, ,606 - National Treasury Notes (NTN) , ,625 - Other investments (3) 10, ,121 - Shares- Minority interest (5) 349, , , , , , ,054 1,633,033 - Total financial investments and marketable securities 2,338,892 2,907, ,401 1,840, ,504 8,002,115 7,124,100 Current 7,050,786 4,926,832 Noncurrent 951,329 2,197,268 22

34 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued b) Financial investments and marketable securities Continued (1) These refer to investments in financial investment funds, whose portfolios mainly comprise investments in federal government securities and government-bond-backed repurchase agreements that have the CDI (Interbank Deposit Certificate rate) as their profitability benchmark. The consolidated balances of exclusive investment funds are presented according to the nature and maturity of the portfolio, however they will be presented in noncurrent assets. The net assets of the investment funds included in the consolidation process of the quarterly information are: (i) BB Pau Brasil FI Renda Fixa, administered by BB Gestão de Recursos DTVM S.A. - R$973,841 (R$938,343 at December 31, 2017); (ii) Bradesco FI Renda Fixa Longo Prazo Eucalipto, administered by Banco Bradesco S.A. - R$2,534,054 (R$1,833,811 at December 31,2017); and (iii) Imbuia FI Renda Fixa Referenciado DI, administered by J. Safra Serviços de Administração Fiduciária Ltda. - R$305,750 (R$297,110 at December 31, 2017). The amount allocated to investments in non-exclusive investment funds totals R$1,951,595 (R$1,975,607 at December 31, 2017). (2) Issued by top-tier banks and backed by government securities. (3) These refer mainly to investments in gold and investments of the foreign subsidiary (4) Non-exclusive investment funds are on amount: (i) Bradesco Empresas FICFI Referenciado DI Federal, administered by Banco Bradesco S.A. - R$14,248 (R$21,279 at December 31, 2017); (ii) Araucária Renda Fixa FI, administered by Itaú Unibanco S.A. - R$372,950 (R$363,241 at December 31, 2017); (iii) Santander Fundo de Investimento Cedro Renda Fixa, administered by Banco Santander (Brasil) S.A. - R$828,854 (R$935,491 at December 31, 2017); (iv) Jacarandá Renda Fixa, administered by Votorantim Asset Management DTVM Ltda. - R$123,264 (R$51,248 at December 31, 2017); and (v) FI Liquidez Câmara BM&FBOVESPA, administered by Banco S.A. - R$622,608 (R$606,486 at December 31, 2017). (5) These refer to shares of Bolsa de Comercio de Santiago in the amount of R$88,710 (R$80,730 at December 31, 2017); Bolsa Mexicana de Valores - R$157,354 (R$136,962 at December 31, 2017); Bolsa de Valores de Colombia - R$55,050 (R$52,892 at December 31, 2017); and Bolsa de Valores de Lima - R$48,327 (R$54,059 at December 31, 2017) acquired by B3 within its strategy to explore opportunities of partnerships with other stock exchanges. The government securities are held under the custody of the Special System for Settlement and Custody (SELIC); the investment fund shares are held under the custody of their respective administrators; local shares are held under the custody of B3 s Clearinghouse; the shares of Bolsa de Comercio de Santiago, Bolsa Mexicana de Valores, Bolsa de Valores de Lima and Bolsa de Valores de Colombia are held under the custody of BTG Pactual Chile, Mexico, Peru and Colombia, respectively. Management periodically monitors the outstanding positions and possible risks of impairment of financial assets. Considering the nature of these assets, B3 has no significant impairment history. The carrying amount of financial assets is reduced directly for impairment impacting P&L for the period. Subsequent recoveries of amounts previously written off are recognized in P&L for the period. 23

35 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued c) Derivative financial instruments Fair value hierarchy Financial assets and liabilities measured at fair value of B3 are recognized at quoted prices (unadjusted) in active market (Level 1), except for derivative financial instruments together with the principal of the debt issued abroad due to hedge accounting, which are classified under Level 2. Trade accounts receivable and payable approximate their book value given their short-term maturities, and the fair values of related parties is equal to their book values. Derivative financial instruments Risk factor - currency B3 takes out derivative financial instruments with the exclusive objective to hedge against the risk of exchange rate fluctuations. B3 s exposure to exchange rate risk derives from amounts such as principal of foreign debt and its half-yearly interest, investments in foreign stock exchanges and investment in its foreign subsidiaries. Management adopts a foreign exchange risk management policy associated with these positions, the main objective of which is not to allow significant impacts on P&L arising from fluctuations in exchange rates. B3 adopts hedge accounting for these financial instruments. Investment in foreign subsidiary B3 Consolidated Assets Investment in foreign subsidiary 1,274,736 - Total assets 1,274,736 - Liabilities Intercompany loans and loan taken out by subsidiary CETIP Lux (1,843,690) (580,389) Total liabilities (1,843,690) (580,389) Net currency exposure (568,954) (580,389) In view of the fact that, under the terms of tax legislation, gains or losses arising from the exchange rate variation on investments should not be taken into account in the income and social contribution tax base, a mismatch between long and short positions in foreign currency is required, so that the after-tax P&L is not exposed to exchange rate variation (post-tax hedge). 24

36 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued c) Derivative financial instruments -- Continued Fair value hedge At, the swap consolidated amounts measured at fair value are the following: Financial instruments Assets/ Liabilities Reference value Maturity of transaction Average interest Curve value B3 and Consolidated Fair value Book adjustment balance Swap Forward swap (1) Assets US$ 350, ,590 (39,134) 201,456 Liabilities R$ 1,108,940 07/16/ % of CDI (73,756) - (73,756) 166,834 (39,134) 127,700 Assets US$ 262, ,384 (6,346) 133,038 Liabilities R$ 870,836 07/16/2020 CDI of -3.36% (5,975) - (5,975) 133,409 (6,346) 127, ,243 (45,480) 254,763 (1) In March 2018, B3 took out from top-tier financial institutions swap operations to promote the rollover of the hedge relating to the principal of the Senior Unsecured Notes. In this period, hedge had no significant element of inefficiency. 25

37 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued c) Derivative financial instruments Continued Cash flow hedge Fair value B3 and Consolidated Gain/(loss) for the year Hedged item Hedging instrument Reference value Referenc e value R$ Maturity of transaction Assets Liabilities Nonfinancial assets Operating expenses Financial income (expenses) Equity Interest installments - foreign debt (1) NDF USD 19,800 61,643 07/16/ , ,787 (267) 12, ,787 (267) Interest installments Assets USD 19, % - foreign debt (1) Swap Liabilities BRL 61,261 of CDI 01/16/ , (776) 7,158 12, (776) 7,158 Interest installments Assets USD 19, % - foreign debt (1) Swap Liabilities BRL 61,190 of CDI 07/16/ , (1,244) 7,158 12, (1,244) 7,158 Interest installments Assets USD 19, % - foreign debt (1) Swap Liabilities BRL 65,722 of CDI 01/16/ , ,952 10, ,952 Interest installments Assets USD 19, % - foreign debt (1) Swap Liabilities BRL 65,756 of CDI 07/16/ , ,952 10, ,952 Bolsa Mexicana de Valores shares (1) NDF MXN 660, ,344 09/05/ (4,194) (2,767) - (4,194) (2,767) Bolsa de Comercio de Santiago shares (1) NDF CLP 14,300,000 84,613 09/05/ (757) (500) - (757) (500) Firm commitment (3) Cash in foreign EUR 2,742 12,346 currency USD 14,837 57, , , , ,833 58,678 (4,951) 1, ,849 29,519 In this period, hedge had no significant element of inefficiency. 26

38 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued c) Derivative financial instruments -- Continued (1) In September 2017, B3 took out from mostly top-tier financial institutions a Non-Deliverable Forward (NDF) and two swap transactions, in order to hedge the investment the installment of half-yearly interest of Senior Unsecured Notes (Note 12), from currency risk. In March 2018, new swap transactions were taken out to hedge half-yearly interest maturing in (2) In January 2018, B3 recorded a new hedge, allocating part of its cash in foreign currency to hedge the currency risk of certain firm commitments assumed in foreign currencies (cash flow hedge). The cash flows subject to coverage refer to payments to be incurred up to December 31, 2018, regardless of whether the contract terms exceed that date. In June, 2018, B3 took out from mostly top-tier financial institutions a non-deliverable Forward (NDF) in order to hedge the investment in the shares o/pf Bolsa Mexicana de Valores and shares of Santiago Stock Exchange from exchange rate variation. The method to determine the fair value, used by B3, consist in determining the future amount based on the conditions of transactions taken out, and then the present value based on current market curves, as disclosed by B3. At, B3 has hedging transactions for approximately 82% of the Mexican peso position referring to the Mexican Stock Exchange shares and approximately 95% of the Chilean peso position referring to the Santiago Stock Exchange shares. d) Financial instruments and risk management Financial risk management and financial investment policy B3 s policy is for highly liquid financial investments, whose performance is substantially tied to the SELIC/CDI rate, resulting in a significant proportion of federal government securities in its portfolio, purchased directly, via repurchase agreements backed by government securities and also through exclusive and non-exclusive funds. Mostly financial investment have daily liquidity in line with B3 s business needs. 27

39 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued d) Financial instruments and risk management -- Continued Financial risk management and financial investment policy- continued The Company carries out transactions with derivative instruments solely and exclusively for equity hedge purposes. Acquisition or disposal of strategic investments, such as in shares of Latin America Stock Exchanges, are assessed individually and realized only in accordance with the strategic planning approved by the Board of Directors. In addition, B3 has a Corporate Risk Management Policy, whose purpose is to establish principles, guidelines and responsibilities to be observed in the risk management process of B3, so as to allow identification, assessment, treatment, monitoring and communication of operational, technological, market, liquidity, credit, image and socio-environmental risks. The Risk and Financial Committees assess market, liquidity, credit and systemic risks of the markets managed by B3, with a strategic and structural focus. Sensitivity analysis The table below presents the consolidated net exposure of all financial instruments (assets and liabilities) by market risk factors. At, significant market risk is represented by the fall in the floating interest rate (CDI/SELIC). Exposure to Risk Factors (Consolidated) 06/30/ /31/2017 Risk factor Risk Percentage Amount Percentage Amount Floating interest rate Decrease in SELIC rate 55.99% 4,760, % 4,382,694 Floating interest rate CDI increase 28.35% 2,410, % 2,830,103 Foreign exchange - USD Higher currency 6.40% 544, % 468,385 Share price Lower price 4.11% 349, % 322,370 Fixed interest rate Higher fixed rate 1.70% 144, % 139,924 Inflation Lower inflation rate 1.58% 134, % 136,296 Foreign exchange - COP Lower currency 0.65% 55, % 52,893 Foreign exchange - PEN Lower currency 0.57% 48, % 54,060 Foreign exchange - MXN Lower currency 0.30% 25, % 26,016 Gold Lower gold price 0.18% 15, % 13,608 Foreign exchange - EUR Lower currency 0.09% 7, % 2,898 Foreign exchange - CLP Lower currency 0.05% 3, % 3,767 Foreign exchange - GBP Lower currency 0.03% 2, % 2,473 28

40 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments -- Continued d) Financial instruments and risk management -- Continued Sensitivity analysis Continued The ownership structure at Latin America Stock Exchanges is subject to two risk factors simultaneously: currency and share price. Share price risk This risk arises from the possibility of fluctuations in the prices of the shares in Latin America Stock Exchanges, which B3 holds in its portfolio and that may affect the amounts involved. The table below shows a sensitivity analysis on possible impacts from a variation of 25% and 50% on the probable scenario for share price, for the next three months, obtained from Bloomberg. Risk factor -50% -25% Impact Probable scenario +25% +50% Bolsa de Comercio de Santiago shares in BRL (44,310) (22,110) 90 22,290 44,490 Share price in CLP 1,502 2,252 3,003 3,754 4,505 Bolsa Mexicana de Valores shares in BRL (77,119) (37,001) 3,117 43,235 83,352 Share price in MXN Bolsa de Valores da Colombia shares in BRL (27,976) (14,439) (902) 12,635 26,172 Share price in COP 5,548 8,321 11,095 13,869 16,643 Bolsa de Valores de Lima shares in BRL (23,961) (11,779) ,587 24,770 Share price in PEN The possible impacts shown by the sensitivity analysis would affect equity, net of taxes. Interest rate risk This risk arises from the possibility of B3 incur losses due to fluctuations in interest rates, affecting its assets and liabilities, resulting in effects on its Financial result. Floating-rate position As a financial investment policy and considering the need for immediate liquidity with the least possible impact from interest rate fluctuations, B3 maintains its financial assets and liabilities substantially indexed to floating interest rates. The table below shows a sensitivity analysis on possible impacts on assets and liabilities of a variation of 25% and 50% on the probable scenario for the CDI and Selic rate for the next three months, obtained from Bloomberg. 29

41 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments Continued d) Financial instruments and risk management -- Continued Sensitivity analysis Continued Floating-rate position - Continued Impact Probable Risk factor -50% -25% scenario +25% +50% CDI (19,774) (29,486) (39,086) (48,576) (57,960) CDI rate 3.26% 4.88% 6.51% 8.14% 9.77% SELIC 38,759 57,796 76,612 95, ,607 SELIC rate 3.26% 4.89% 6.52% 8.15% 9.77% Fixed-rate position B3 has net exposure applied in fixed rates in a small part of its financial investments and securities. However, in terms of percentage, their effects on the portfolio are not considered material. Currency risk Currency risk refers to variations in foreign exchange rates that may cause unexpected losses to B3. In addition to the amounts payable and receivable in foreign currencies, including interest payments on the senior unsecured notes in the next six-month period, B3 has own funds abroad, and also shareholding interest in Latin America Stock Exchanges. The table below shows a sensitivity analysis on possible impacts on assets and liabilities of a variation of 25% and 50% on the probable scenario for currency risk for the next three months, obtained from Bloomberg. 30

42 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments Continued d) Financial instruments and risk management -- Continued Sensitivity analysis Continued Currency risk- Continued Impact Risk factor -50% -25% Probable scenario +25% +50% USD (271,228) (134,746) 1, , ,700 Exchange rate USD/BRL MXN (13,008) (6,575) (142) 6,291 12,724 Exchange rate MXN/BRL COP (27,379) (13,544) ,127 27,963 Exchange rate COP/BRL PEN (23,945) (11,754) ,627 24,818 Exchange rate PEN/BRL The possible impacts shown by the sensitivity analysis would substantially affect equity, net of taxes. In view of the net amounts of other currencies, their impacts are not deemed material. Liquidity risk Liquidity risk arises from the cash need related to the obligations assumed and as a form of management, and B3 constantly evaluates its cash flows, thus ensuring liquidity to fulfill all its obligations. The following table shows the main liability financial instruments of B3 by maturity (undiscounted cash flows): 31

43 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments Continued d) Financial instruments and risk management -- Continued Sensitivity analysis -- Continued Liquidity risk- Continued No maturity Within 1 year From 1 to 2 years Between 2 and 5 years Above 5 years Collaterals for transactions 1,739, Debt issued abroad - 152, ,690 2,436,094 - Swap (1) - 11,408 14,882 48,363 - NDFs (2) - 7, Debentures - 1,647,662 1,550, Loan in dollars - 15, , ,889 - FINEP loan - 4,736 4,380 7,573 6,622 (1) For the adjustment calculation, CDI curve was used from up to the swap settlement date, the dollar at the closing of month (PTAX) was also used, rate disclosed by the Central Bank of Brazil. (2) NDFs take into consideration the amount to be settled in 2018 on contracted transactions. For calculating the adjustment, the sales rates of the respective currencies were disclosed by the Central Bank of Brazil on the last business day of the month. Credit risk The main credit risk of B3 arises from its financial investments. As a way of managing this risk, B3 has a financial investment policy that focuses mainly on investments in Brazilian federal government securities. Currently approximately 99% of financial investments is in connection with federal government securities with ratings set by Standard & Poor's and Moody's of BB- and Ba2, respectively, for long-term issues in local currency. The counterparties of Swaps and NDFs taken out as hedging transactions are substantially top-tier banks. Capital management B3 s objectives in managing its capital are to safeguard its ability to continue as a going concern in order to provide return for its shareholders and for other stakeholders, as well as to maintain an optimal target capital structure to reduce the cost of capital. In order to maintain or adjust its capital structure, B3 may revise its practices for payment of dividends, return capital to shareholders, raise loans and issue marketable securities in the financial and capital markets, among others. In addition, as described in Note 17, B3 is subject to capital regulatory requirement and must keep a safeguard and risk management structure exclusive for a proper settlement of transactions carried out and/or recorded in its systems. 32

44 4 Cash and cash equivalents, financial investments, marketable securities and derivative financial instruments Continued d) Financial instruments and risk management -- Continued Capital management -- Continued At, the consolidated position of loans, financing and debentures added to the guarantees in operations and earnings and rights on securities under custody are R$913,269 lower when compared with the consolidated position of cash and cash equivalents and financial investments. Consolidated 06/30/ /31/2017 Cash and cash equivalents/financial investments 8,398,133 7,835,240 Loans and financing, debentures and derivative financial instruments (5,681,555) (5,640,457) Collateral for transactions (1,739,564) (2,171,449) Earnings and rights on securities under custody (63,745) (63,127) 913,269 (39,793) 5. Trade accounts receivable Breakdown of accounts receivable is as follows: B3 Consolidated Description 06/30/ /31/ /30/ /31/2017 Fees 110, , , ,970 Trust and custodian fees 112, , , ,122 Vendors- Signal broadcasting 27,405 19,188 28,812 21,491 Database management 30,676 25,210 30,676 25,210 Data processing 5,084 4,772 5,084 4,772 Annual fees Other accounts receivable 13,300 10,808 13,996 11,366 Subtotal 300, , , ,773 Estimated losses on accounts receivable (6,081) (2,332) (6,081) (2,332) Total 294, , , ,441 33

45 5. Trade accounts receivable -- Continued The amounts presented above are primarily denominated in Brazilian reais and approximately 90% falls due within 90 days. At, the amounts overdue above 90 days totaled R$2,983 (R$2,086 at December 31, 2017) at B3 and in the consolidated. The effect on the period ended, as a result of the adoption of CPC 48/IFRS 9, was an increase of R$884 compared with the methodology used prior to the adoption of this new practice. The new methodology used by B3 is the simplified approach, in accordance with CPC 48/IFRS 9 and is based on an analysis of expected losses, as stated in Note 3(b). Changes in estimated losses on accounts receivable: B3 and Consolidated Balance at December 31, ,332 Additions 5,468 Reversals (1,719) Balance at 6, Other receivables Other receivables comprise the following: B3 Consolidated 06/30/ /31/ /30/ /31/2017 Current Foreign exchange transactions (1) - 34,519 33,990 35,643 Advances to employees 17,067 2,914 17,092 2,940 Properties for sale 4,256 4,546 4,256 4,546 Taxes - deferred revenue 3,742 3,418 3,742 3,418 Interest on equity receivable - Bank - 5, Receivables from related parties 1,457 1, Other 2,156 2,212 4,127 4,637 Total 28,678 54,513 63,447 51,516 Noncurrent Brokers in court-ordered liquidation ,200 Total ,200 (1) The balance of foreign exchange transactions referred substantially to the transaction contracted to pay interest on foreign loan in D+1. 34

46 7. Investments a) Investments in subsidiaries and associates Investments in subsidiaries and associates comprise the following: Subsidiaries/Associates Companies Equity Total shares Adjusted P&L % - Interest held Investment at 06/30/2018 Investment at 12/31/2017 Equity pickup in 2018 Equity pickup in 2017 Subsidiaries Banco B3 S.A 91,760 24,000 3, ,760 88,524 3,259 5,823 Bolsa de Valores do Rio de Janeiro - BVRJ 85, , ,991 68,759 5,232 1,895 BM&F (USA) Inc. (1) 661 1,000 (819) ,273 (819) (25) BM&FBOVESPA (UK) Ltd. 2,185 1, ,185 1, CETIP S.A. - Mercados Organizados (16,442) B3 Inova USA LLC 10, , CETIP Info Tecnologia S.A. 104, , ,235 89,607 14,628 - CETIP Lux S.à.r.l. 1,274, , ,274,736 1,081, ,389 - Associates RTM 49,163 2,020,000 6, ,642 17,363 1, Total 1,576,352 1,348, ,498 (7,957) (1) BM&F Inc. (USA) is in the process of closing its operations. Customers and brokers in the USA and Canada will be covered by the office in São Paulo. BM&FBOVESPA BRV LLC stated no balance in the period. Associates B3 holds 20% interest in associate RTM, which is a private communication network created especially for the financial sector, connecting approximately 500 institutions and 25 information and service providers in a single operational environment. RTM manages data, voice and image services and develops specific solutions for users in the financial sector. According to the business combination, an increase was identified in the fair value of the investment in associate RTM in the amount of R$8,

47 7. Investments -- Continued a) Investments in subsidiaries and associates -- Continued Summary of key financial information of subsidiaries and associates at : Description Banco B3 S.A. Subsidiaries Bolsa de Valores BM&F do Rio de Janeiro (USA) - BVRJ Inc. BM&FBOVESPA (UK) Ltd. B3 Inova USA LLC CETIP Info Tecnologia S.A. CETIP Lux S.à.r.l. Associate RTM Assets 572,164 94, ,688 10, ,569 1,871,485 58,973 Liabilities 480,404 9, , ,749 9,925 Revenues 15,538 10, ,338-17,523-43,561 Changes in Investments: Investments Banco B3 S.A. Subsidiaries Bolsa de Valores do Rio de Janeiro BVRJ BM&F (USA) Inc. BM&FBOVESPA (UK) Ltd. B3 Inova USA LLC CETIP Info Tecnologia S.A. Associate CETIP Lux S.à.r.l. RTM Total Balances at December 31, ,524 68,759 1,273 1, ,607 1,081,347 17,363 1,348,498 Equity pickup 3,259 5,232 (819) , ,389 1, ,498 Exchange rate variation Comprehensive income (loss) of (23) (23) subsidiary Capital Increase , ,494 Balances at 91,760 73, ,185 10, ,235 1,274,736 18,642 1,576,352 b) Investment properties This category comprises properties owned by subsidiary Bolsa de Valores do Rio de Janeiro (BVRJ) for rent, which are carried at cost and depreciated at the rate of 4% p.a. There were no additions or write-offs for the period, and depreciation totaled R$759 (R$759 at June 30, 2017). Rental income from these properties for the period ended amounted to R$2,966 (R$3,240 at June 30, 2017). At, cost less accumulated depreciation of this property amounted to R$26,840 (R$27,599 at December 31, 2017) and fair value estimated by management amounted to R$115,127, calculated considering the average square-meter price for sale of commercial properties in the city of Rio de Janeiro, as disclosed in FIPEZAP table. B3 has no restrictions as to the sale of its investment properties. 36

48 8. Property and equipment Changes Buildings Furniture and fixtures Computer devices and equipment Facilities Other Construction in progress B3 Total Balances at December 31, ,757 21, ,524 29,648 26,705 10, ,088 Additions ,293 1, ,142 45,271 Write-offs - (145) (362) - (236) - (743) Reclassification (Note 9) - - 2, ,010 Depreciation (2,794) (1,899) (24,369) (2,377) (1,159) - (32,598) Balances at 291,299 20, ,096 28,341 25,472 11, ,028 At Cost 432,558 58, ,462 75,161 71,075 11,765 1,210,746 Accumulated depreciation (141,259) (38,670) (353,366) (46,820) (45,603) - (625,718) Net book balance 291,299 20, ,096 28,341 25,472 11, ,028 Annual average depreciation rates 1.1% 9.6% 13.1% 7.5% 7.3% Changes Buildings Furniture and fixtures Computer devices and equipment Facilities Other Construction in progress Consolidated Total Balances at December 31, ,757 21, ,524 29,680 29,254 10, ,669 Additions ,306 1, ,142 45,294 Write-offs - (145) (375) - (1,023) - (1,543) Reclassification (Note 9) - - 2, ,010 Depreciation (2,794) (1,899) (24,369) (2,384) (1,159) - (32,605) Balances at 291,299 20, ,096 28,366 27,244 11, ,825 At Cost 432,558 58, ,568 76,211 72,847 11,765 1,213,674 Accumulated depreciation (141,259) (38,670) (353,472) (47,845) (45,603) - (626,849) Net book balance 291,299 20, ,096 28,366 27,244 11, ,825 Annual average depreciation rates 1.1% 9.6% 13.1% 7.5% 7.3% 37

49 8. Property and equipment -- Continued In the period, B3 absorbed as part of the project development cost the amount of R$99 (R$4,423 at June 30, 2017) related to the depreciation of equipment used in developing these projects. B3 s properties with a carrying amount of approximately R$91,677 (R$92,769 at December 31, 2017) are pledged as collateral in lawsuits. B3 is not allowed to assign these assets as collateral for other lawsuits or sell them. 9. Intangible assets Bovespa Holding goodwill Goodwill from acquisition of Bovespa Holding in 2008, based on the expected future profitability and supported by an economic and financial valuation report of the investment amounted to R$16,064,309. At December 31, 2015, the test supported by the valuation report at that time prepared by independent experts indicated impairment of Bovespa Holding in the amount of R$1,662,681 and, as a result, the carrying amount of goodwill was reduced to R$14,401,628. At, management reviewed significant variables of future cash flow projections of the cash-generating unit Bovespa Holding and adherence to the results achieved up to the reporting date and identified no need to adjust the goodwill. CETIP goodwill The goodwill generated on the acquisition of CETIP in March 2017, in the amount of R$7,937,171 is based on the expected future profitability and on the Purchase Price Allocation (PPA) report. At, management reviewed significant variables of future cash flow projections of the cash-generating units TVM and FIN and adherence to the results achieved up to the reporting date and identified no need to adjust the goodwill. 38

50 9. Intangible assets -- Continued Software and projects Changes Cost of software development internally generated Software internally generated projects completed Software B3 Contractual relations Trademarks Total Balances at December 31, ,635 5,198,304 75,128 44, ,239 5,552,745 Additions 55, , ,498 Write-offs - (219) - (16) - (235) Transfers (45,186) 5,197 39, Reclassification (Note 8) - (2,010) - (2,010) Amortization - (392,291) (13,849) (4,936) (29,048) (440,124) Other - (32) (32) Balances at 100,093 4,809, ,780 39, ,191 5,168,842 At Cost 100,093 6,072, ,240 54, ,131 6,947,510 Accumulated amortization - (1,263,534) (426,460) (14,734) (73,940) (1,778,668) Net book balance 100,093 4,809, ,780 39, ,191 5,168,842 Annual average amortization rates 13.0% 12.3% 18.2% 30.6% 39

51 9. Intangible assets -- Continued Software and projects Continued Changes Cost of software development internally generated Software internally generated projects completed Software Contractual relations Trademarks Consolidated Total Balances at December 31, ,635 5,198,304 75,128 44, ,241 5,552,747 Additions 55, , ,763 Write-offs - (219) - (16) - (235) Transfers (45,186) 5,197 39, Reclassification (Note 8) - (2,010) (2,010) Amortization - (392,291) (13,849) (4,936) (29,048) (440,124) Other - (32) (32) Balances at 100,358 4,809, ,780 39, ,193 5,169,109 At Cost 100,358 6,072, ,240 54, ,133 6,947,777 Accumulated amortization - (1,263,534) (426,460) (14,734) (73,940) (1,778,668) Net book balance 100,358 4,809, ,780 39, ,193 5,169,109 Annual average amortization rates 13.0% 12.3% 18.2% 30.6% In period, B3 absorbed as part of the project development cost the amount of R$102 (R$1,910 at June 30, 2017) related to the amortization of software used in developing these projects. 10. Earnings and rights on securities in custody These comprise dividends and interest on equity received from listed companies, which will be transferred to the custody agents and by them to their customers, who are the owners of the listed companies shares. 40

52 11. Provision for taxes and contributions payable B3 Consolidated Description 06/30/ /31/ /30/ /31/2017 Taxes and contribution withheld at source payable 75,685 89,266 77,533 92,263 PIS and Cofins payable 40,737 32,268 41,008 32,624 ISS payable 7,453 5,844 7,520 5,936 Total 123, , , , Debt issued abroad, loans and debentures B3 Consolidated 06/30/ /31/ /30/ /31/2017 Current Interest payable on debt issued abroad (a) 69,559 59,531 69,559 59,531 Bank loans (b) (i) - 34,527 4,987 40,075 Loans with subsidiaries (b) (ii) 64,586 21, Other loans (b) 3,370 3,157 3,370 3,157 Debentures (c) 1,512,619 1,513,167 1,512,619 1,513,167 1,650,134 1,631,472 1,590,535 1,615,930 Noncurrent Debt issued abroad (a) 2,311,492 2,012,331 2,311,492 2,012,331 Bank loans (b) (i) , ,652 Loans with subsidiaries (b) (ii) 1,779,104 1,538, Other loans (b) 13,807 15,346 13,807 15,346 Debentures (c) 1,498,809 1,497,434 1,498,809 1,497,434 5,603,212 5,063,787 4,399,510 4,018,763 Total indebtedness 7,253,346 6,695,259 5,990,045 5,634,693 a) Debt issued abroad With the adoption of the fair value hedge accounting in March 2016 (Note 4 (c)), the principal amount of debt securities issued abroad in 2010 are now measured at fair value. The restated loan balance at amounts to R$2,381,051 (R$2,071,862 at December 31, 2017), which includes the amount of R$69,559 (R$59,531 at December 31, 2017) referring to half-yearly interest incurred until the reporting date. This transaction will mature on July 16,

53 12. Debt issued abroad, loans and debentures -- Continued a) Debt issued abroad -- Continued Changes in debt issued abroad and hedges effects are as follows: B3 and Consolidated Current Noncurrent Total Debt abroad at 12/31/ ,531 2,012,331 2,071,862 Exchange rate variation - fair value hedge - 335, ,254 Exchange rate variation - cash flow hedge 4,632-4,632 Interest paid (63,384) - (63,384) Interest payable 68,780-68,780 Fundraising cost amortization Foreign debt at amortized cost 69,559 2,348,260 2,417,819 Fair value adjustment - fair value hedge - (36,768) (36,768) Debt abroad at 06/30/ ,559 2,311,492 2,381,051 The market value of securities, considering principal and interest, amounts to R$2,407,015 at June 30, 2018 (R$2,126,672 at December 31, 2017), which is obtained from Bloomberg. b) Loans i) Subsidiary s bank loans CETIP Lux I In order to increase liquidity, CETIP Lux took out a bank loan in 2014 in the amount of US$100,000, which is guaranteed by the Company s personal security. The loan had a term of 4 years, with amortization of principal in the amount of US$50,000 in August 2017 and amortization of the remaining balance in August The loan interest rate is 2.57% p.a. and interest is repaid on a quarterly basis. In August 2017, CETIP Lux opted for rescheduling the maturity of the loan in the amount of US$100,000, being the new maturity date on August 2020, with repayment of interest on a quarterly basis and interest rate of approximately 3.6% p.a. 42

54 12. Debt issued abroad, loans and debentures -- Continued b) Loans Continued i) Subsidiary s bank loans-- Continued The loan agreement establishes that CETIP Lux must maintain a certain minimum equity over the agreement term and, if the Company fails to comply with this clause, the maturity of loan may be accelerated. The clause has been complied with in the period. CETIP Lux II In 2016 CETIP Lux took out a bank loan in the amount of US$50,000, which has the Company s personal guarantee. This loan has a term of 3 years, with amortization of principal in September The loan interest rate is of approximately 5.5% p.a. and interest is repaid on a half-yearly basis. The loan agreements establish certain conditions that, if CETIP Lux fails to comply, the maturity of loans may be accelerated. The clause has been complied with in the period. At, the balance of principal plus interest on loans totals R$580,389 (R$499,200 at December 31, 2017). ii) Loans with subsidiarie - CETIP Lux Loan agreements have a weighted average term of approximately 3 years with amortization of principal in September 2019 and December 2020, in the amounts of US$404,800 and US$56,610, respectively. The weighted average interest rate on loans is of approximately 4.50% p.a. and interest is repaid every six months or at the maturity of principal, depending on the agreement. At, the balance of principal plus interest on loans totals R$1,843,690 (R$1,559,766 at December 31, 2017). c) Issue of debentures Contractual rate Quantity Unit par value in R$ Total issue First issue (single series) % DI 3,000,000 1, ,000,000 The debentures yield conventional interest equivalent to % of the DI Rate with amortization of principal in equal installments in the 24 th and 36 th months, and half-yearly payment of interest on the 1 st day of June and December each year, with the first payment on June 1, 2017 and the last on January 1,

55 12. Debt issued abroad, loans and debentures -- Continued c) Issue of debentures -- Continued At, the balance of principal plus interest, less costs incurred in the issue of de bentures, amounts to R$3,011,428 (R$3,010,601 at December 31, 2017). The market value of securities, considering principal and interest, amounts to R$3,015,415 at June 30, 2018 (R$3,015,990 at December 31, 2017), which is obtained from trustee. 13. Other obligations Current B3 Consolidated 06/30/ /31/ /30/ /31/2017 Repurchase agreements (1) , ,021 Demand deposits (2) , ,554 Foreign Exchange Transaction ,572 1,150 Amounts to be transferred - Direct Treasury 20,788 31,558 20,788 31,558 Payables CME 20,256-20,256 - Interest and fine - enrollment with PERT - 29,421-29,421 Amounts to be refunded - 11,382-11,382 Advance received from sale of property 7,500 7,500 7,500 7,500 Redemption of shares to be settled 5,123 5,123 5,123 5,123 Custody agents 4,119 3,472 4,119 3,472 Market Arbitration chamber 3,231 2,844 3,231 2,844 Amounts transferred referring to market incentives cash 1,706 2,647 1,706 2,647 Payables to related parties Other 14,609 10,749 16,165 11,657 Total 77, , , ,718 Noncurrent Payables CME 30,494 27,086 30,494 27,086 Total 30,494 27,086 30,494 27,086 (1) These refer to open market funding made by Banco B3, comprising repurchase agreements maturing on July 2, 2018 (January 2, 2018 for 2017) and backed by Financial Treasury Bills (LFT) and National Treasury Bills (LTN). (2) These refer to demand deposits held by legal entities at Banco B3 with the sole purpose of settlement of clearing operations held within B3 and the Special System for Settlement and Custody (SELIC), pursuant to BACEN Circular Letter No of July 21,

56 14. Provisions for tax, civil and labor contingencies, contingent assets and liabilities, judicial deposits and other provisions a) Contingent assets B3 has no contingent assets recognized in its balance sheet and, at present, no lawsuits which are expected to give rise to significant future gains. b) Provisions for tax, civil, and labor contingencies B3 and its subsidiaries are defendants in a number of legal and administrative proceedings involving labor, tax and civil matters arising in the ordinary course of business. The legal and administrative proceedings are classified by their likelihood of loss (probable, possible or remote), based on the assessment by B3 s legal department and external legal advisors, using parameters such as previous legal decisions and the history of loss in similar cases. The proceedings assessed as probable loss are mostly comprised as follows: Labor claims mostly relate to claims filed by former employees of B3 and employees of outsourced service providers, on account of alleged noncompliance with labor legislation; Civil proceedings mainly relate to aspects of civil liability of B3 and its subsidiaries, as well as to the cancellation of (i) units of interest of former members of the then Associação CETIP; and (ii) securities of former member of the then Associação BM&F. Tax proceedings for which provisions were set up mostly relate to PIS and COFINS levied on (i) B3 revenues and (ii) receipt of interest on equity. c) Legal obligations These are represented by three groups of lawsuits in which B3 and its subsidiaries claim (i) nonlevy of additional social security contribution on payroll and payments to self-employed professionals; (ii) the unconstitutionality of the broadened COFINS tax base by reference to Law No. 9718; and (iii) non-levy of ISS on the activity of permanence, registration of securities and other services. d) Other provisions B3 has contracts that provide for the payment of attorneys success fees arising from tax and civil proceedings, in which B3 figures as defendant. Within its best estimates, B3 determined and provisioned the amounts for which it understands that there is likelihood of future disbursement, related to attorneys success fees from proceedings whose likelihood of loss is assessed as possible and remote. 45

57 14. Provisions for tax, civil and labor contingencies, contingent assets and liabilities, judicial deposits and other provisions Continued e) Changes in balances Changes in provisions for contingencies and legal obligations are broken down as follows: Civil Labor Legal obligations Tax Other provisions Balances at December 31, ,161 32, ,040 23,600 52, ,258 Provisions 80 2,919 3,720-1,370 8,089 Provision expenditure - (2,053) (159) - (2,228) (4,440) Reversal of provisions - (830) (4,521) - - (5,351) Reassessment of risks (12,069) (11,981) Monetary restatement 16,668 1,495 4, ,315 32,340 Balances at 377,840 34, ,581 23,961 61, ,915 B3 Total Civil Labor Legal obligations Tax Other provisions Consolidated Balances at December 31, ,748 32, ,060 23,837 58, ,365 Provisions 80 2,929 3,737-1,370 8,116 Provision expenditure - (2,053) (159) - (2,381) (4,593) Reversal of provisions (7,922) (830) (4,521) - - (13,273) Reassessment of risks (12,069) (11,981) Monetary restatement 17,003 1,495 4, ,645 33,011 Balances at 377,840 34, ,621 24,201 67, ,645 Total Considering the characteristics of the provisions, the timing of the cash disbursements, if any, cannot be predicted. f) Possible losses The proceedings assessed as possible loss are so classified as a result of uncertainties surrounding their outcome. They are legal or administrative proceedings for which case law has not yet been established or which still depend on check and analysis of the facts, or even involve specific aspects that reduce the likelihood of loss. B3 and its subsidiaries are parties to tax, civil and labor lawsuits involving risks of loss classified by management as possible, based on the assessment of B3 s legal department and external legal advisors, for which no provision has been recorded. These proceedings comprise mainly the following: 46

58 14. Provisions for tax, civil and labor contingencies, contingent assets and liabilities, judicial deposits and other provisions Continued f) Possible losses -- Continued Labor claims mostly relate to claims filed by former employees of B3 and of outsourced service providers, on account of alleged noncompliance with labor legislation. At, lawsuits classified as possible loss amount to R$39,835 in B3 (R$52,811 at December 31, 2017) and R$39,890 in the Consolidated (R$52,811 at December 31, 2017); Civil proceedings mainly relate to aspects of civil liability for losses and damages, as well as cancellation of units of interest of former members of the then CETIP. The amount involved in civil proceedings classified as possible losses at totals R$93,089 in B3 and in the Consolidated (R$118,125 at December 31, 2017 in B3 and in the Consolidated). Almost all the amount considered for derives from three lawsuits involving B3, as successor due to merger of CETIP, which, in its turn, was the successor of Associação CETIP. The challenge concerns the allegedly irregular cancellation of units of interest of former members. The total amount involved in the tax proceedings assessed as possible loss amounts to R$459,445 in B3 (R$441,212 at December 31, 2017) and R$459,788 in the Consolidated (R$441,553 at December 31, 2017). The main tax proceedings of B3 and its subsidiaries refer to the following matters: (i) Classification of the former BM&F e Bovespa, in the period prior to the demutualization, as taxpayers of the Contribution Tax on Gross Revenue for Social Security Financing ( COFINS ), which is the subject matter of two declaratory judgment actions pleading the declaration that the plaintiffs have no tax obligations owed to the federal tax authorities and seeking non-levy of COFINS on revenue arising from the exercise of the activities for which they were established, the revenue of which does not fall under the concept of billing. The amount involved in the aforementioned proceedings at totals R$67,788 (R$66,860 at December 31, 2017). (ii) Collection of Withholding Income Tax ( IRRF ), referring to calendar year 2008, arising from the Brazilian IRS s understanding that B3 is responsible for withholding and payment of IRRF on alleged capital gain by non-resident investors of Bovespa Holding S.A., resulting from merger of shares of said company by B3. On February 26, 2018, CARF handed down a decision denying the appeal filed by B3. After conclusion of the procedures with CARF, the Company will take the discussion to the Judiciary. The amount involved in the related administrative proceeding at totals R$220,460 (R$216,705 at December 31, 2017). (iii) alleged levy of social security contributions on options granted based on the BM&F S.A. Stock Option Plans assumed by B3 S.A. and of B3 S.A. itself exercised by the Plans beneficiaries in 2011 and The Brazilian IRS inquiries are based on the understanding that stock options granted to employees represent salary in nature, since they correspond to a consideration for services rendered. At, the amount involved in this administrative proceeding is (i) R$96,409 (R$94,424 at December 31, 2017), related to social security contributions allegedly due, assessed as possible chance of loss. 47

59 14. Provisions for tax, civil and labor contingencies, contingent assets and liabilities, judicial deposits and other provisions -- Continued g) Remote losses Between 2010 and 2017, B3 received three tax assessment notices from the Brazilian Internal Revenue Service (RFB), challenging the amortization, for tax purposes, of goodwill arising from the merger of Bovespa Holding S.A. shares into B3 in May B3 considers that the risk of loss associated with these tax proceedings is remote. The amounts involved in each tax proceeding are broken down as follows: Amounts referring to administrative proceedings Period of tax amortization challenged 06/30/ /31/ and 2009 (1) 1,278,191 1,255, and 2011 (2) 2,567,068 2,514, and 2013 (3) 3,149,935 3,070,930 Total 6,995,194 6,841,679 (1) B3 filed an appeal with the Judiciary through an action for annulment on April 23, 2018, in relation to the notice served on November 29, On June 12, 2018, the preliminary injunction granted suspended the collectibility of the tax credit. (2) On June 22, 2017, CARF handed down a decision granting the Voluntary Appeal filed by B3. Currently, B3 is awaiting the judgment by CSRF of the Special Appeal filed by the National Treasury. (3) In October 2017, the Company filed a related administrative protest, for which an unfavorable decision was handed down by the Brazilian IRS Judgment Office (DRJ), upholding the notice. The Company was notified of such decision on August 3, 2018 and is currently awaiting the term to file a voluntary appeal with CARF. 48

60 14. Provisions for tax, civil and labor contingencies, contingent assets and liabilities, judicial deposits and other provisions -- Continued g) Possible losses -- Continued B3 is a defendant in 3 (three) class actions and 2 (two) public civil actions, filed against the then Bolsa de Mercadorias & Futuros - BM&F ( BM&F ), in order to determine alleged Treasury losses arising from transactions performed by the Central Bank of Brazil in January 1999 in the dollar futures market. In March 2012, the referred to proceedings were judged by the trial court and deemed valid, convicting most of the defendants, among them, the then BM&F. The convictions totaled R$ 7,005 million, of which, according to one of the decisions handed down, the gains that the Central Bank of Brazil obtained due to the non-use of international reserves, in the amount of up to R$5,431 million, may be deducted. B3 was also ordered to pay a civil penalty in the amount of R$1,418 million. The figures were measured in January 1999 and should be adjusted for Monetary restatement, plus interest and burden of defeat. However, in June 2017, the Federal Regional Court decided favorably to the appeals to adjudicate the merits which were lodged by the Company, overturning the decisions and thus excluding the responsibility for refunding any losses inflicted on the Treasury. The Company currently awaits assessment of the admissibility of the special appeals presented by Public Prosecution Office. B3 believes that these actions are fully groundless and will not recognize in its quarterly information any provision for such lawsuits as the risk of loss is remote. h) Judicial deposits B3 Consolidated Description 06/30/ /31/ /30/ /31/2017 Legal obligations 245, , , ,796 Tax 88,770 87,113 89,153 87,489 Labor 11,737 11,152 11,887 11,300 Civil 6,505 6,370 6,505 6,370 Total 352, , , ,955 Of the total judicial deposits of B3, the following are highlighted: (i) R$62,597 (R$61,631 at December 31, 2017) referring to proceedings challenging the classification of the exchanges as subject to the payment of COFINS, which are assessed as possible loss by B3, as described in item f above; and (ii) R$15,209 (R$14,970 at December 31, 2017) referring to proceedings challenging PIS and COFINS on interest on equity received. Of the total deposits relating to legal obligations, R$78,602 (R$79,533 at December 31, 2017) relates to the proceedings in which B3 claims non-levy of additional social security contribution on payroll and payments to self-employed professionals, and challenges the legality of FAP (an index applied to calculate the occupational accident insurance owed by employers). Due to the existence of judicial deposits related to tax proceedings classified as possible losses, the total tax contingencies and legal obligations are less than the total deposits related to tax claims. 49

61 15. Equity a) Capital B3 s fully subscribed and paid-up capital totals R$3,198,655, comprising 2,059,138,490 (2,059,138,490 at December 31, 2017) registered common shares with voting rights and no par value, of which 2,043,885,810 common shares are outstanding at (2,039,159,430 at December 31, 2017). At the Board of Director s Meeting held on March 28, 2017, the issue of 244,138,490 common registered shares, with no par value was approved, through capital increase, as a result of the business combination with CETIP, in the total amount of R$4,620,077, of which R$658,416 were allocated to the capital and R$3,961,661 allocated to capital reserve, changing B3 capital to R$3,198,655. B3 is authorized to increase its capital up to the limit of 2,500,000,000 common shares, through a resolution of the Board of Directors, without any amendment to its Articles of Incorporation. b) Treasury shares Changes in treasury shares for the period are as follows: c) Revaluation reserves Revaluation reserves were established as a result of the revaluation of works of art in B3 and of the properties of subsidiary BVRJ in 2007, based on independent experts appraisal reports. d) Capital reserve Quantity Amount Balances at December 31, ,979, ,759 Shares sold Stock option plans and stock grant plan (4,726,380) (52,461) Balances at 15,252, ,298 Average cost of treasury shares (R$ per share) Market value of treasury shares 311,917 This refers substantially to amounts originated in the merger of Bovespa Holding shares in 2008, and other corporate events allowed by the Brazilian Corporation Law, such as (i) capital increase through merger, (ii) redemption, repayment or purchase of shares, and (iii) events associated with the stock option and stock grant plans. 50

62 15. Equity -- Continued e) Income reserves i) Legal reserve Legal reserve is annually set up with allocation of 5% of net income for the year, capped at 20% of capital. The legal reserve aims at ensuring integrity of capital and may only be used to absorb losses and increase capital. The legal reserve is not required to be set up considering that its amount plus the capital reserves exceeds 30% of the Company capital. ii) Statutory reserves Represent funds and safeguard mechanisms required for the activities of B3, in order to ensure the proper settlement and reimbursement of losses arising from the intermediation of transactions carried out in its trading sessions and/or registered in any of its trading, registration, clearing and settlement systems, and from custody services. Pursuant to the Articles of Incorporation, the Board of Directors may, when the amount of the statutory reserve is sufficient to meet the purposes for which it was originally established, propose that part of the reserve be distributed to the shareholders of the Company. f) Dividends and interest on equity As provided for in the Articles of Incorporation, shareholders are entitled to mandatory minimum dividends of 25% of net income for the year, adjusted under Brazilian Corporation Law. The interests on equity approved in relation to P&L for the period are as follows: Description Date of approval Date of payment Gross per share Total gross (R$) amount Interest on equity 04/13/ /08/ ,000 Interest on equity 06/22/ /10/ ,000 Total proposed/approved for the period of

63 15. Equity -- Continued g) Earnings per share Consolidated Basic Q Accumulated Balance 2Q Accumulated Balance Numerator Net income available to shareholders of B3 724,435 1,039, , ,867 Denominator Weighted average number of outstanding shares 2,040,155,960 2,043,101,125 2,038,007,420 1,979,041,589 Basic earnings per share (in R$) Consolidated Diluted Q Accumulated Balance 2Q Accumulated Balance Numerator Net income available to shareholders of B3 724,435 1,039, , ,867 Denominator Weighted average number of outstanding shares adjusted by effects of stock options and stock grant plans 2,051,013,508 2,053,963,108 2,047,933,367 1,989,002,291 Diluted earnings per share (in R$)

64 16. Transactions with related parties a) Transactions and balances with related parties Assets / (liabilities) Revenue / (expenses) Description 06/30/ /31/2017 2Q Accumulated 2Q Accumulated Banco B3 S.A (1) Accounts receivable 1,046 1, Interest on equity receivable - 5, Accounts payable (179) (162) Recovery of expenses - - 3,285 6,553 3,073 6,338 Income from fees Expenses from fees - - (534) (1,038) - - BM&F (USA) Inc. (1) Accounts payable (79) (68) Sundry expenses - - (415) (586) (379) (633) BM&FBOVESPA (UK) Ltd. (1) Sundry expenses - - (983) (1,216) (816) (1,196) BM&FBOVESPA Supervisão de Mercados Accounts receivable Accounts payable (210) (283) Donation and Contribution - - (895) (2,739) (1,056) (1,932) Recovery of expenses , ,510 CETIP S.A. - Mercados Organizados Revenue from anual fees Expenses with custody (371) (382) Interest on equity ,800 27,800 Cetip Lux (1) Accounts payable (1,843,690) (1,559,766) Interest on loans - - (25,752) (42,292) - - Exchange rate variation - loans - - (245,470) (252,760) - - Other related parties Accounts receivable Accounts payable (3) (106) Recovery of expenses , Donation - - (13) (43) (466) (481) Expenses with courses (137) - (1,460) Sundry expenses - - (763) (1,523) (215) (810) (1) Subsidiaries included in the consolidation process. 53

65 16. Transactions with related parties -- Continued a) Transactions and balances with related parties -- Continued B3 follows a policy on transactions with related parties, approved by the Board of Directors, which aims to establish rules to ensure that all decisions involving related-party transactions and other situations of potential conflict of interest are taken to the interests of B3 and its shareholders. The BM&FBOVESPA Supervisão de Mercados - BSM (BSM) is a not-for-profit civil association engaged in the analysis, supervision and inspection of transactions and activities of the companies of Trading Members and Regulators that perform clearing and settlement activities and/or custody services that operate in the stock exchange market and in the organized over-the-counter market managed by B3. In addition to these attributions, BSM incorporated the self-regulatory activities of the marketable securities organized markets. B3 has entered into an agreement with BSM for the transfer and recovery of costs, which establishes the reimbursement to B3 of expenses incurred for resources and infrastructure made available to BSM to assist in the performance of its supervision activities. Such costs are determined on a monthly basis using the methodology specified in the agreement entered into by and between the parties and also include the activities related to the Mecanismo de Ressarcimento de Prejuízos (Loss Recovery Mechanism), as this mechanism is administered by BSM. B3 makes transfers in order to supplement financing for the activities of BSM and regular transfers of fines for failure to settle debts and deliver assets by BSM, as set out in Circular Letter No. 044/2013 of B3. Sundry expenses with other related parties consist mainly of lawyer s services provided by law firm Barbosa Mussnich Aragão - Advogados (BMA) in the operation with Bussiness combination with CETIP. Management understands that BMA office is a related party, as one of its member is also a member of the Board of Directors of B3. The hiring occurred within the criteria established by the policy of related parties and other situations involving conflicts of interest of B3. b) Key management personnel compensation At, key management personnel include directors and statutory officers. By December 31, 2017, key management personnel included Directors, Statutory Directors, Audit Officer, Corporate Risk Officer, Officer of Banco B3 and Human Resources Officer. 54

66 16. Transactions with related parties -- Continued b) Key management personnel compensation Continued Benefits to managing officers 2Q Accumulated Accumulated Balance 2Q Balance Managing officers Short-term benefits (salaries, profit sharing etc.) 7,858 15,730 6,802 14,676 Share-based compensation (1) 6,930 25,073 13,946 22,656 Severance pay benefits (2) ,101 97,942 Board of Directors Short-term benefits (salaries, profit sharing etc.) 3,308 6,427 3,110 5,172 Share-based compensation (1) 968 1, ,226 (1) This refers to expenses computed in the period relating to share-based compensation, increased by labor and social security charges, and stock options of key management personnel. These expenses were recognized according to the criteria described in Note 18. (2) This referred to severance pay benefits to key management personnel (anticipation of Stock Grant plan) mainly due to the business combination. 55

67 17. Collateral for transactions Operating as a central counterparty and guarantor in the markets, B3 manages three clearinghouses considered systemically important by the Central Bank of Brazil: BM&FBOVESPA, Foreign Exchange and Assets Clearinghouses. The operations in the B3 markets are secured by margin deposits in cash, government and corporate securities, letters of guarantee and shares among others. The guarantees received in cash, in the amount of R$1,739,564 (R$2,171,449 at December 31, 2017), are recorded as a liability under Collateral for transactions and collaterals, in the amount of R$289,236,226 (R$242,381,623 at December 31, 2017), are recorded in memorandum accounts. At, total collaterals deposited by members amounts to R$290,975,790 (R$244,553,072 at December 31, 2017), as follows: a) Collaterals deposited by members BM&FBOVESPA Clearinghouse 06/30/ /31/2017 Foreign Exchange BM&FBOVESPA Foreign Exchange Clearinghouse Clearinghouse Clearinghouse Federal government securities 242,316,586 6,114, ,726,685 5,985,708 Shares 31,851,778-33,862,500 - International securities (1) 5,358,341-3,565,980 - Letters of guarantee 2,344,927-1,917,890 - Cash amounts deposited 1,700, ,625, ,820 Bank Deposit Certificates(CDBs) 1,156,108-1,251,981 - Gold 20,390-16,303 - Other 73,358-54,776 - Total 284,822,294 6,153, ,021,544 6,531,528 (1) American and German government securities as well as ADRs (American Depositary Receipts). b) Other safeguard mechanisms Minimum non-operating guarantee (GMNO): The GMNO deposit is an access requirement for full negotiation participants (PNP) and Settlement participants to the clearinghouse of B3 and the required values are defined in the B3 access manual. Minimum Non-operating Collateral is broken down as follows: 56

68 17. Collateral for transactions -- Continued b) Other safeguard mechanisms -- Continued Breakdown 06/30/ /31/2017 Federal government securities - 60,807 Share Investment Fund (FILCB) 824, ,856 Amounts deposited 824, ,663 Amounts required of members 772, ,000 Amount in excess of the minimum required 52,077 40,663 Fundo de Liquidação (Settlement Fund): funds in the FLI are used by the clearinghouse of B3 to cover any losses arising from default by one or more clearing members (MC), after there are no more guarantees deposited by members under the responsibility of the MCs in default. In addition to the contribution of the MCs to the FLI, there is also the contribution of B3, which is a portion of its equity, allocated to the fund. These contributions are allocated to the Investment Fund BM&FBOVESPA Clearinghouse Liquidity (FILCB), which is formally constituted as an investment fund, under the provisions of the applicable legislation, administered, managed and guarded by Banco B3. FLI s position is as follows: Settlement Funds Clearing BM&FBOVESPA Foreign exchange clearing Special Equity -Clearinghouse and custody 06/30/2018 Clearing of assets Federal government securities - 210, Federal government securities of B3-121, Share investment fund (FILCB) of B3 622, Share investment fund (FILCB) 702, Cash amounts deposited Amounts deposited 1,325, , Amounts required from participants 663, , Amounts required from B3 600, , Value in excess of the minimum required 62,201 93, Special Equity (1) 154,354 74,721 76,510 52,536 Operating Fund (2) ,000 57

69 17. Collateral for transactions -- Continued b) Other safeguard mechanisms -- Continued Settlement Funds Clearing BM&FBOVESPA Foreign exchange clearing Special Equity -Clearinghouse and custody 12/31/2017 Clearing of assets Federal government securities 19, , Share investment fund (FILCB) 1,276, Cash amounts deposited Amounts deposited 1,295, , Amounts required from participants 678, , Amounts required from B3 600, , Value in excess of the minimum required 17, , Special Equity (1) 149,543 72,387 73,495 50,898 Operating Fund (2) ,000 (1) Patrimônio Especial (Special equity), in compliance with the provisions of article 5 of Law of march 27, 2001 and article 19 of bacen circular No of August 31, B3 maintain in federal government securities. (2) Fundo Operacional da Clearing de Ativos (Operationg Fund), intended to hold funds of B3 to cover losses arising from members operational or administrative failures 18. Employee benefits a) Stock Grant - long-term incentive B3 recognized expenses related to Stock Option Plan grants in the amount of R$38,021 for the sixmonth period (R$59,964 at June 30, 2017) and R$19,098 for the quarter (R$34,842 in 2017), matched against capital reserves in equity, based on the fair value of the share at the grant date of the plans. B3 also recognized charges as personnel expenses in the amount of R$21,128 for the six-month period (R$32,002 at June 30, 2017) and R$1,457 for the quarter (R$ 12,119 in 2017), calculated based on the fair value of the share at. B3 will record the expenses relating to the Stock Grant Program which were granted for replacement of unvested options of the Stock Option Plan, for the same fair value of options previously granted, in accordance with CPC 10 (R1)/IFRS 2. 58

70 B3 S.A. - Brasil, Bolsa, Balcão 18. Employee benefits -- Continued a) Stock Grant - long-term incentive -- Continued (1) The number of outstanding shares at is 2,043,885,