Moscow Exchange announces results for the full year 2013

Moscow Exchange (MOEX) today announces its financial results under International Financial Reporting Standards for the year ended 31 December 2013. Higher volumes on the FX, Bond and Money Markets as well as increased interest income resulted in strong growth in revenues and net income.

KEY OPERATING AND FINANCIAL HIGHLIGHTS FOR 2013

• Total trading volume across all markets increased 22% YoY to RUB 449.4 trn.
• Revenues increased 14% YoY to RUB 24.61 bln.
• EBITDA increased 20% YoY to RUB 16.40 bln; the EBITDA margin was 66.6% vs. 63.7% in 2012.
• Net income increased 41% YoY to RUB 11.58 bln; earnings per share increased to RUB 5.23 from RUB 3.86.

KEY CORPORATE HIGHLIGHTS FOR 2013

• Moscow Exchange successfully completed an IPO on its own trading platform raising RUB 15 bln.
• Migration to T+2 settlement for equities was completed on 2 September, a major reform for the Russian financial market.
• Six major global banks began offering Direct Market Access (DMA) to securities trading on Moscow Exchange.
• Euroclear and Clearstream opened nominee accounts with the National Settlement Depository (NSD), a Moscow Exchange subsidiary, and began providing settlement services for OFZs transactions. This generated a significant increase in trading volumes in these instruments.
• NSD has completed the mass consolidation of assets from registers to the central securities depository (CSD) for safekeeping.
• The Central Counterparty (CCP) became fully operational. Repo with the CCP has emerged as a very popular instrument.
• Moscow Exchange started central clearing of OTC derivatives and launched precious metals trading. New calendar spreads were introduced for futures on the RTS Index, OFZs, USD/RUB, Brent, gold, and the six most liquid stocks.
• Strong additions were made to the management team with over 20 new key managers joining the Exchange.
• The trading platforms for Equities & Bonds, Derivatives, FX and Money Markets were centralized at a single technology venue, the new state-of-the-art M1 data centre.

Mr. Alexander Afanasiev, Chief Executive Officer of the Moscow Exchange, commented:

"The past year was a remarkable one for Moscow Exchange and for the development of the Russian financial market. We completed our IPO in the beginning of 2013, showcasing the fact that high quality Russian issuers can raise significant capital in local shares on Moscow Exchange.  

"We have delivered on our commitments made during the IPO last year to build a high-growth and cycle-resilient business. As promised, we implemented a number of major reforms that have had a significantly positive impact on the Russian market: the central securities depositary and central counterparty became fully functional, we moved to T+2 settlement on our equity market, and we opened the market for international central securities depositories. Trading on Moscow Exchange is now at least as convenient as on the world"s most established exchanges. These market infrastructure reforms yielded very positive results for Moscow Exchange: we grew volumes and delivered very strong financial results in 2013.

"Looking beyond the end of the reporting period at the start of 2014 we have seen high volatility on the Russian market, with stock indexes declining. At the same time, our trading volumes across most of our markets – equities, FX, money market, and derivatives – have posted significant growth during the first months of the new year.

"In 2014 we will continue to focus on attracting more flows by making our platform even more convenient to trade on, and by attracting new issuers. We also continue to promote high corporate governance standards, and aim to set the benchmark for all Russian companies in this area."

Mr. Evgeny Fetisov, Chief Financial Officer of the Moscow Exchange, said:

"I am pleased to report that in 2013 we delivered exceptional financial results in addition to the successful implementation of infrastructure reforms and other important initiatives.

"Earnings per share grew 36% YoY to RUB 5.23 supported by strict cost controls and solid operating income growth. We saw double-digit growth in fees and commissions on the Money Market (+26% YoY), FX Market (+20% YoY), Derivatives Market (+25% YoY), as well as depositary and settlement services (+21% YoY). We also continued to manage expenses effectively: operating expenses grew by just 5% YoY, mainly driven by higher spending on market makers and professional services.

"Although new services and projects that Moscow Exchange launched in 2013 required some new senior hires, personnel expenses remained flat for the year.  

"A strong performance in the fourth quarter also contributed to the outstanding results for 2013. In Q4, the EBITDA margin remained strong at 61.4%, thanks to healthy interest income growth of 25% YoY combined with fee and commission income rising 12% YoY, while operating expenses increased just 3.4% YoY. This drove net profit up by 60% YoY."

FINANCIAL HIGHLIGHTS

ANALYSIS OF FULL YEAR 2013 FINANCIALS

Total Revenues. Revenues were up 14% YoY to RUB 24.61 bln. Revenue growth for the year was driven by growth in derivatives fees and commissions, higher revenues on FX, Bond and Money Markets as well as increased interest income.

Securities (Equities & Bond) Market. Fee & commission income from the Equities Market decreased 23% YoY to RUB 1.40 bln. Total trading volume in 2013 was RUB 8.71 trn, down 25% YoY. The equity market"s total capitalisation was RUB 25.3 trn (US$ 770.7 bln) by year-end 2013. For most of the year investor interest in the Russian equity market remained muted. However, in Q4 2013 equities trading volumes started to recover (+14% YoY in Q4), following the switch to the T+2 settlement cycle in September 2013.

Fee & commission income from the Bond Market increased 29% YoY to RUB 1.38 bln. Total trading volume in 2013 was RUB 15.3 trn, up 23% YoY.

Listing and other services fees increased 21.7% to RUB 218.02 mln.

Foreign Exchange Market. Fee & commission income from the FX market increased 20% YoY to
RUB 2.41 bln. Trading volumes on the FX market totaled RUB 156.0 trn, up 33% YoY. Spot trading volumes were down 6.9% YoY (due to low exchange rate volatility), while swap trading volumes increased significantly, growing by 78.1% YoY on the back of high demand for liquidity-management products. Improved services and new products were among key drivers of growth, combined with a  further increase in trading activity by Russian and international clients.

Money Market. Fee & commission income from the money market increased by 26% YoY to RUB 2.53 bln. Total trading volume on the Money Market including repo transactions and deposit and credit market amounted to RUB 220.7 trn (with the repo volume reaching RUB 207.7 trn), an increase of 24% YoY. Over the year, the liquidity situation in the Russian banking sector remained tight, which led to increased Repo transactions from both market players and the Central Bank of Russia, which implemented monetary policy and provided liquidity to the financial system via the Exchange. Repo with CCP achieved impressive growth, and became a flagship product of Moscow Exchange"s Money Market.

Derivatives Market. Fee & commission income from the Derivatives Market increased 25% YoY to RUB 1.57 bln. The trading volume increased 7% YoY and amounted to 1.13 bln contracts (totaling RUB 48.6 trn). Open interest reached RUB 389.9 bln by year-end 2013, a 44% YoY increase. This growth is attributable to new players entering the market, general growth of interest in the Russian options market as well as increased volatility of FX contracts.

Depositary and Settlement Services. Fee & commission income from depositary and settlement services increased 21% to RUB 2.32 bln. The volume of assets in deposits at the NSD increased to RUB 21.76 trn as of the end of 2013 from RUB 12.05 trn as of the end of 2012, and averaged RUB 18.06 trn for 2013.

Other Revenues. Other revenues decreased by 10% YoY to RUB 1.18 bln. The biggest contributors to this line are revenues from the sale of IT services (RUB 496.15 mln, down 6% YoY) and revenues from the sale of market data (RUB 301.29 mln, down 25%).

Interest & Other Finance Income. Interest & other finance income increased 17% YoY to
RUB 11.75 bln due to an increase in funds available for investments (RUB 384.46 bln as of year-end 2013, up 34% YoY) and a favorable interest rate environment.

Cash and Cash Equivalents. The Moscow Exchange"s cash position[1] at year-end 2013 totaled RUB 44.74 bln. The Exchange had no debt as of 31 December 2013.

Expenses. Operating expenses in 2013 increased 5% YoY to RUB 9.86 bln, driven mainly by growth in administrative expenses. Significant savings came from lower spending on rent and office maintenance (RUB 381.70 mln, down 22% YoY) and advertising and marketing costs (RUB 257.03 mln, down 6% YoY). Personnel expenses remained flat in 2013.

Capital expenditures for the FY 2013 totaled RUB 1.04bln, of which RUB 581 mln was spent on software purchases and development.

A complete version of the Moscow Exchange consolidated IFRS financial statements for the year ended 31 December 2013 is available on the Investor Relations section of the company"s web site.

NOTES TO EDITORS

About Moscow Exchange

OJSC Moscow Exchange MICEX-RTS ("MOEX") operates Russia"s largest public trading markets for equity, bond, derivative, foreign exchange and money market products, as well as Russia"s Central Securities Depository (CSD) and the country"s largest clearing service provider, National Clearing Centre. In 2013, it ranked among the world"s top-20 exchanges for equity trading by market capitalization and among the top-10 for bond trading by trading volume and for exchange-traded derivatives by number of contracts traded. Moscow Exchange has 723 issuers listed on its securities plaform, including many of Russia"s largest companies.

Moscow Exchange was formed in December 2011 as a result of a merger between Russia"s two main exchange groups. The merger brought together MICEX Group, the oldest domestic exchange and operator of the leading securities, foreign exchange and money market platform in Russia, and the RTS Group, at the time the operator of Russia"s leading derivatives market. This combination created a vertically integrated public trading market across most major asset classes. Following the merger the company became an open joint stock company (OJSC) and was named Moscow Exchange. Moscow Exchange completed an initial public offering of its shares on 15 February 2013.

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