Moscow Exchange announces 1Q 2014 results

Moscow Exchange (MOEX) today announces its financial results for the first quarter (1Q) 2014 according to International Financial Reporting Standards (IFRS). Strong earnings growth was driven by fees and commissions generated by increased trading volumes across markets, particularly the Equity and FX Markets, as well as growth in the depository and settlement businesses.

KEY 1Q14 OPERATING AND FINANCIAL HIGHLIGHTS

• Total trading volume across all markets increased 43.69% YoY to RUB 120.468 trn.
• Total operating income rose 18.0% YoY to RUB 6.51 bln.
• EBITDA grew 14.6% YoY to RUB 4.43 bln; the EBITDA margin was 68.0% versus 70.0% in 1Q13.
• Net profit increased 23.72% YoY to RUB 3.17 bln; earnings per share (EPS) increased 23.8% YoY to RUB 1.45.

KEY CORPORATE HIGHLIGHTS

• Moscow Exchange completed the buyback and subsequently retired quasi-treasury shares from its MICEX Finance subsidiary. This increased existing shareholders' proportional ownership of the company"s equity and their return on capital (ROC), as well as strengthened corporate governance by preventing voting with these shares.
• Moscow Exchange sold its stake in electronic state procurement platform MICEX IT. This move was in line with the strategy of optimising the group"s structure through the disposal of non-core assets.
• Moscow Exchange hosted the 2014 Moscow Exchange Forum, one of the largest annual conference of the Russian financial markets community, which brought together more than 1,000 participants.
• International central securities depositories Euroclear and Clearstream launched settlement of Russian corporate bonds via their direct links to the Russian CSD, the National Settlement Depository (NSD), a Moscow Exchange subsidiary.
• Moscow Exchange and Korea Exchange signed a memorandum on cooperation in the field of financial markets.
• Trading began in an ETF on the MSCI China index.
• The start of publication of indicative swap rates increased the relevance and transparency of FX market data.

EVENTS OCURRING AFTER THE END OF 1Q 2014

• The new Exchange Council was formed. The Council is Moscow Exchange"s consultative and advisory body, which makes strategic proposals to develop the Exchange"s infrastructure and the Russian financial market.
• The Supervisory Board recommended a dividend of 46.83% of FY2013 IFRS net profit, or RUB 2.38 per share.
• The risk management systems of the FX and precious metals markets were unified.

Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, said:

"After an outstanding 2013, which was marked by a number of major transformational reforms, Moscow Exchange started 2014 with strong growth of operating and financial results. A volatility spike led to higher trading volumes across most of our markets – Equities, FX, Money Market and Derivatives, which showed significant growth during the first quarter.

"The quarter also saw the first serious market stress-test of our upgraded infrastructure, and I"m pleased to say that we successfully passed through a period of market turbulence. Our risk-management systems worked well, with the Central Counterparty functioning in the T+2 settlement regime, and we have continued to serve our customers by providing uninterrupted access to trading of different asset classes."

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

 "I"m pleased with the financial performance of Moscow Exchange in the first quarter. Fees and commission and other income showed another quarter of double digit annual growth, hitting a record quarterly number. Our EBITDA margin remained at a healthy level of 68%, while EPS grew by 24% YoY to RUB 1.45. We continued to implement our strategy and were focused on optimizing Group structure following the merger. We sold 100% of our electronic procurement platform (MICEX-IT) as it was a non-core asset, while increasing our stake in NAMEX, the commodities exchange trading grain, to a controlling interest."

FINANCIAL HIGHLIGHTS

ANALYSIS OF 1Q14 FINANCIALS

Total Operating Income. Operating income increased 18.0% YoY to RUB 6.51 bln. Revenue growth for the quarter was driven by higher fees and commissions across all markets excluding fixed income, as well as an increase in income from depository & settlement services. The sale of MICEX-IT, the operator of an electronic marketplace, also contributed to strong operating income growth.

Securities (Equity & Bond) Market. Fee & commission income from the Equity Market grew by 28% YoY to RUB 451.8 mln as equities trading volumes increased 35.3% YoY to RUB 2.7 trn. The Equity Market"s total capitalisation was RUB 23.309 trn (US$ 663.35 bln) as of 31 March 2014. Fee & commission income from the Bond Market declined 33.9% YoY to RUB 216.2 mln as trading volumes declined 30.5% YoY to RUB 2.7 trn. Listing and other services fees declined 17.3% to RUB 35.1 mln.

Foreign Exchange Market. Fee & commission income from the FX Market increased 64.2% YoY to
RUB 799.5 mln, while trading volumes rose 95.4% YoY to RUB 53.8 trn. Spot trading volumes grew 60.8% YoY, while swap trading volumes outperformed with 121.6% YoY growth, driven by continued solid demand from customers for liquidity-management products.

Money Market. Fee & commission income from the Money Market increased 16.4% YoY to
RUB 579.8 mln. Total trading volumes, including repo transactions and the credit & deposit market, increased 20.3% YoY to RUB 46.7 trn. The Central Bank of Russia continued to use the exchange"s   infrastructure to inject liquidity into the banking system, leading to 29% YoY growth of Repo transactions with the CBR, while Repo with the Central Counterparty remained in great demand, posting 58x YoY growth.

Derivatives Market. Fee & commission income from the Derivatives Market increased 20.7% YoY to RUB 433.7 mln. While trading volumes increased 25.6% YoY to RUB 14.5 trn (340.3 mln contracts), open interest rose 27.5% YoY to 12.32 mln contracts at the end of 1Q14. Fees and commissions growth was mainly driven by increased volatility and robust activity on spot markets over the quarter. Derivatives on FX grew by 72% YoY and comprised 43% of total trading volume on the Derivatives Market, while derivatives on indices comprised a further 49%.

Depository and Settlement Services. Fee & commission income from depository and settlement services increased 39.4% YoY to RUB 733.7 mln. The volume of assets in deposits at the NSD increased to RUB 22.3 trn as of the end of 1Q14, from RUB 21.76 trn as of the end of 2013, and averaged RUB 21.9 trn for 1Q14.

Net Interest & Other Finance Income. Net interest & other finance income was almost unchanged YoY, with a slight decline of 1% YoY and totalled RUB 2.6 bln. Funds available for investment averaged RUB 441.54 bln in 1Q14. Net interest & other finance income accounted for 40.0% of the Exchange"s operating income, down from 47.8% in 1Q 2013.

Cash Position. The Exchange"s cash position totaled RUB 48.1 bln as of 31 March 2014. The Exchange had no outstanding debt as of the end of 1Q14.

Expenses. Operating expenses were up 24.1% YoY in 1Q14 to RUB 2.56 bln. Staff costs remained the major cost item, up 29.9% YoY, driven mainly by a low-base effect as a result of the introduction of a new methodology for bonus accruals. Some bonuses for FY2014 were accrued in 1Q 2014, while similar expenses for the full year 2013 started to be reflected in financials in the second half of the previous year. Other operating expenses increased by 18.4% YoY, mainly driven by the impairment of intangible assets related to the Ukrainian business. Excluding this item, administrative expenses were almost unchanged thanks to cost savings advertising and marketing costs and professional services.

Capital expenditures were RUB 68.6 mln in 1Q14, of which RUB 40.5 mln was spent on software.

The complete version of Moscow Exchange"s consolidated interim condensed financial statements for the first quarter 2014 is available at the Investor Relations section of the Moscow Exchange website.

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NOTES TO EDITORS

About Moscow Exchange

Moscow Exchange Group manages the sole multifunctional exchange platform in Russia for equities, bonds, derivative instruments, currencies, money market instruments and commodities. The Group includes the central depository (National Settlement Depository), and a clearing centre (National Clearing Centre), performing the functions of central counterparty on the markets, which allows Moscow Exchange to render the full spectrum of trading and post-trading services to its clients.

Moscow Exchange ranks among the world"s top 20 exchanges by total capitalization of securities traded, and also among the 10 largest exchange platforms by bonds and derivatives trading. Securities of 722 issuers are admitted to trading on the equities market of Moscow Exchange, including securities of the largest Russian companies by market capitalization.

Moscow Exchange was formed in December 2011 as a result of a merger between Russia"s two main exchange groups - MICEX Group, the oldest domestic exchange and operator of the leading securities, foreign exchange and money market platform in Russia; and 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, which was reorganized into an open joint stock company (OJSC) and was named Moscow Exchange. Moscow Exchange held the initial public offering of its shares on 15 February 2013 (ticker MOEX).

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