Moscow Exchange announces results for the full year 2016

Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for the year ended 31 December 2016. The Exchange delivered solid financial results driven by record fees and commission income from its Derivatives, Fixed Income and Money Markets.

KEY FINANCIAL HIGHLIGHTS FOR 2016

• Operating income declined 5.3% YoY to RUB 43.57 bln
• Fee and commission income grew by 11.3% YoY to RUB 19.80 bln
• EBITDA contracted by 8.0% YoY to RUB 33.60 bln; the EBITDA margin was 77.1% vs. 79.4% in 2015
• Operating expenses grew by 8.8% YoY to RUB 12.26 bln
• Net income declined 9.6% YoY to RUB 25.18 bln; basic earnings per share were RUB 11.22

KEY CORPORATE HIGHLIGHTS OF 2016

• MOEX remained the main platform for Russian issuers to raise capital via public markets, with seven equity offerings (including two IPOs), 12 government bond issues and 337 corporate and other bond issues.
• The Exchange significantly expanded its product offering by launching trading in new instruments across all of its markets: new FX futures, a new FX pair, new ETFs, the first overnight corporate bonds, futures on the RUONIA rate, as well as general collateral certificates (GCCs).
• MOEX delivered on its strategy to attract domestic retail investors, with approximately 106,000 individual investment accounts opened during 2016 (bringing the total to 208,701 as of 1 March 2017); a new on-line educational platform for private investors was successfully launched.
• MOEX has established itself as a leader in the Russian fintech space as it tests blockchain technology for financial markets and supports fintech start-ups.
• MOEX simplified its corporate structure by legally merging several entities, thus reducing costs and streamlining customer relations.
• The Exchange completed the main phase of the listing reform aimed at strengthening corporate governance at listed Russian companies and providing better protection of the rights of individual and institutional investors.

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

"It was a good year for the company as we successfully delivered on our strategy to expand the product offering, grow the domestic investor base and attract more international investors to our markets. We are also pleased to see rising demand for capital by companies resulting in significant growth in new bond and equity issuance. This creates new opportunities for investors and generates additional trading volumes. Lower interest rates as expected led to the normalization of interest income. At the same time, we are very satisfied with the strong growth of fee and commission income, the core source of income for an exchange. In the new year we are continuing to invest into development of new products, services and technologies as well as attracting more investors to our markets. Strengthening corporate governance at Russian companies remains high on our agenda as the key element to boosting transparency and the attractiveness of the Russian market as a whole."

Evgeny Fetisov, Chief Financial Officer of Moscow Exchange, said:

"We delivered a strong finish to a successful 2016, despite lower market volatility than a year ago. In 2016, we continued to see substantial volume growth across most trading markets, with the greatest contributions to increased fee and commission income coming from the Money Market (+24.8% YoY), Derivatives Market (+39.5% YoY) and Fixed Income Market (+25.4% YoY). This resulted in a new record year for fees and commissions. Interest income declined (-15.6% YoY) in line with expectations of normalization on the back of lower interest rates and lower client balances in RUB.

"Cost control remains one of the key priorities for the business. Cost growth was 8.8% YoY, mostly driven by capital expenditures, as we switched to Dataspace1 as the main data centre and increased our IT footprint to ensure reliability of core systems. This led to higher depreciation and amortisation numbers as well as higher IT maintenance costs. Reduced spending on third-party professional services and rent of property delivered cost savings. The EBITDA margin remained one of the best-in-class globally at 77.1%."

FINANCIAL HIGHLIGHTS

Total operating income. Operating income in 2016 totalled RUB 43.57 bln, down 5.3% YoY. Fee and commission income increased from RUB 17.78 bln to RUB 19.80 bln (+11.3% YoY). The growth of fees and commissions, driven by strong performance of the Money Market (+24.8% YoY), Derivatives Market (+39.5% YoY) and Fixed Income Market (+25.4% YoY), partially offset the decline of interest and other finance income that was the result of lower interest rates and normalization of client balances.

Fee and Commission Income

Securities (Equities & Fixed Income) Market. Fees and commissions from the Equities Market amounted to RUB 1.59 bln in 2016 (down 3.2% YoY, 2015: RUB 1.64 bln). Equities trading volumes amounted to RUB 9.28 trln, down 1.3% YoY. The total capitalization of the Equities Market reached RUB 37.82 trln (USD 635.95 bln) as of 31 December 2016, up 31.5% YoY. Fees and commissions from the Fixed Income Market increased by 25.4% YoY and reached RUB 1.48 bln thanks to strong primary issuance. Government bond placements grew by 69.9% YoY, while corporate bond placements nearly doubled (+98.3% YoY), reaching a record of RUB 3.90 trln. Overnight corporate bonds, a product launched in October 2016, contributed RUB 1.4 trln to total corporate bond primary issuance. Bond trading volumes on the secondary market were RUB 9.59 trln, up 12.4% YoY driven by growth in government bond secondary trading. Fees from listing and other services decreased by 8.0% YoY to RUB 415.3 mln.

FX Market. Fee and commission income from the FX Market remained flat at RUB 4.34 bln versus RUB 4.34 bln in 2015 (+0.4% YoY), despite lower FX volatility. Trading volumes reached RUB 329.95 trln (up 6.2% YoY). Trading volumes in the swap segment grew by 7.4%, reflecting continued demand for FX liquidity management solutions, while spot trading volumes increased by 3.7% YoY.

Money Market. Fee and commission income from the Money Market increased by 24.8% YoY to RUB 4.84 bln. Total trading volumes on the Money Market, including repo transactions and the deposit and credit market, increased by 56.2% YoY and reached RUB 333.88 trln. On-exchange repo volumes posted growth of 63.7% YoY mainly driven by repo with CCP, which grew by 164.1% YoY and contributed 52.8% of total Money Market trading volumes in 2016 versus 31.2% in 2015.

Derivatives Market. Fees and commissions from the Derivatives Market in 2016 amounted to RUB 2.05 bln, up 39.5% YoY. Derivatives trading volumes grew by 23.0% YoY in RUB terms (18.4% YoY in contract terms) and reached RUB 115.27 trln. Open interest at the end of 2016 was RUB 639.99 bln, up 8.3% YoY. Futures on commodities were the fastest-growing product, with trading volumes up by 247.6% YoY, and contributed 13.2% of total derivatives volumes in 2016. Among other rapidly growing products were options (+66.0% YoY) and futures on indices (+28.8% YoY). In October 2016 a new Derivatives Market tariff structure came into force that harmonized the fee structure across all MOEX markets and simplified fees for derivatives.

Depository and Settlement Services. Fee & commission income from depository and settlement services grew by 2.9% to RUB 3.56 bln. Assets on deposit held at the National Settlement Depository increased to RUB 36.41 trln as of 31 December 2016 (+14.9% YoY), and averaged RUB 33.11 trln in 2016.

Other fee and commission income. Other fees and commissions increased by 10.3% YoY to RUB 1.51 bln. Sales of software and technical services grew by 20.8% YoY and contributed RUB 636.3 mln of fee income. Sales of market data and information services grew by 9.2% to RUB 751.8 mln.

Interest & other finance income. Interest and other finance income declined 15.6% YoY to RUB 23.70 bln due to lower interest rates in Russia and funds available for investments (daily average of RUB 904.9 bln in 2016 compared to RUB 1.15 trln in 2015).

Expenses. Operating expenses grew by 8.8% YoY to RUB 12.26 bln in 2016, slightly above the Russian inflation rate. Administrative and other expenses grew by 15.0% YoY to RUB 6.3 bln, mostly due to growth in depreciation of property and equipment as well as maintenance of equipment & intangible assets. Personnel expenses grew by 2.8% YoY to RUB 5.95 bln.

Cash and cash equivalents. Moscow Exchange's cash position[1] at year-end 2016 amounted to RUB 85.31 bln. The Exchange had no debt as of 31 December 2016.

Capital expenditures amounted to RUB 3.56 bln, of which RUB 3.24 bln was spent on equipment and software purchases and development.

Moscow Exchange"s consolidated IFRS financial statements for FY 2016 are available on the Investor Relations section of the company's web site.

FY 2016 and 4Q 2016 IFRS Financial Results webcast is scheduled for March 2nd at 6 p.m. (Moscow Time).

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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 securities 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 offer its clients the full spectrum of trading and post-trading services.

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 named Moscow Exchange. Moscow Exchange held the initial public offering of its shares on 15 February 2013 (ticker MOEX).

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