Moscow Exchange announces results for the second quarter of 2017

Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for Q2 2017.

KEY FINANCIAL HIGHLIGHTS FOR Q2 2017

• Fee and commission income increased by 4.2% YoY as strong performance of the Fixed Income Market (up 23.1% YoY), Money Market (up 8.8% YoY) and Depository and Settlement Services (up 12.4%) supported total fees.
• Interest income was up 3.4% QoQ but down 20.1% YoY in line with funds available for investment.
• Net profit was up 6.0% QoQ on the back of growth in fee and commission income and interest income but down 17.3% YoY.
• EBITDA margin improved compared to the two previous quarters, coming in at 74.7%.

KEY CORPORATE HIGHLIGHTS FOR Q2 2017

• MOEX opened up the FX Market for direct trading by Russian corporates. Nine large companies have signed up to date.
• Clients of China"s top four financial information vendors – Great Wisdom, Wind, East Money and Emoney – began receiving MOEX real-time market data. Distribution of market data is part of an agreement between MOEX and Shanghai Stock Exchange (SSE).
• The Supervisory Board recommended paying dividends for H1 2017, the first interim dividend for the company.

EVENTS OCCURRING AFTER THE REPORTING PERIOD

• MOEX announced plans to create a subsidiary that will focus on developing innovative projects and working with fintech startups with potential investments of up to RUB 1.2 bln over the next four years.
• A new segment of the Equity and Bond Market, Growth Sector, was launched to attract SMEs to raise capital via the exchange.
• MOEX opened up its Money Market for corporates, enabling them to place deposits directly with the central counterparty at REPO market rates. Eleven Russian corporates have used the service to date.
• The number of Individual Investments Accounts held by private investors reached 240,000 as of 8 August 2017, as compared to 191,000 at the beginning of the year.

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

"We are pleased to note growth of our fee and commission income, representing the strongest result ever in the second quarter. This was primarily driven by record fee and commission income from the Fixed Income Market and the Money Market. We see that improvements to the infrastructure of our markets as well as new services and instruments are in demand by market participants. The success of these markets is also an indication of growing activity of domestic investors and issuers. An important step forward was the granting of Russian corporates direct access to the FX Market and Money Market, and we expect these new participants will bring additional liquidity to our markets. Our strategic priorities for the second half of the year are to deliver new products and services, expand the number of market participants and attract retail investors."

Evgeniya Abrukina, Deputy Chief Financial Officer of Moscow Exchange, said:

"Despite continued relatively low market volatility, we managed to maintain growth in fee and commission income. The increase of fees from the Fixed Income Market (+23.1% YoY), Money Market (+8.8% YoY) and Depository and Settlement Services (+12.4% YoY) offset weaker performance of Equities (-8.8% YoY), the FX Market (-6.4% YoY) and Derivatives (-4.2% YoY). Cumulative interest income was up compared to the first quarter 2017 on the back of effective liquidity management, notwithstanding somewhat lower client balances and the continued trend of interest rate moderation. Rigorous control of administrative expenses helped to mitigate the expected increase in D&A and IT maintenance components and retain our best-in-class EBITDA margin, which came in at 74.7%."

FINANCIAL HIGHLIGHTS

ANALYSIS OF Q2 2017 FINANCIALS

Total operating income. Operating income amounted to RUB 9.82 bln, down 9.1% YoY. Fee and commission income increased by 4.2% YoY and reached RUB 5.08 bln. Higher fees were driven by strong performance of the Fixed Income Market (+23.1% YoY), Money Market (+8.8% YoY) and Depository and Settlement Services (+12.4% YoY). Net interest and other finance income totalled RUB 4.74 bln, which represents a decrease of 20.1% YoY on the back of declining RUB interest rates and lower client balances.

Fee and Commission Income

Securities (Equities & Fixed Income) Market. Fees and commissions from the Equities Market decreased by 8.8% YoY and amounted to RUB 385.1 mln. Equities trading volumes were lower by 4.1% YoY at RUB 2.34 trln. The total capitalization of the Equities Market was RUB 32.80 trln (USD 554.26 bln) as of 30 June 2017.

Fee and commission income from the Fixed Income Market increased by 23.1% YoY to RUB 502.1 mln as primary market volumes continued to grow. Placements of government bonds grew by 77.5% YoY to RUB 463.37 bln. Placements of corporate bonds (excluding overnight bonds) grew by 37.6% YoY. Secondary trading volumes on the Fixed Income Market increased by 9.3% YoY.

Listing and other service fees grew by 1.4% YoY and reached RUB 115.2 mln, reflecting solid performance of the primary segment of the Fixed Income Market.

FX Market. FX Market fees and commissions totalled RUB 964.8 mln, down 6.4% YoY, despite total trading volumes on the FX Market increasing by 13.5%. Spot FX trading volumes declined by 21.2%, while the swap and forward segment showed growth of 29.4%, consistent with sustained demand for liquidity management solutions.

Money Market. Fee and commission income of the Money Market increased by 8.8% YoY to RUB 1.25 bln. Trading volumes of the Money Market increased by 26.2% YoY, reaching RUB 90.72 trln. Repo with the central counterparty (up 52.5% YoY) posted the highest growth of all repo trading segments and contributed 64.7% of total Money Market trading volumes.

Derivatives Market. Derivatives Market fees and commissions totalled RUB 481.1 mln, down 4.2% YoY. Trading volumes declined by 25.5% YoY, primarily due to less active trading in FX and index futures amid muted volatility. At the same time, trading volumes of commodity futures increased by 9.3% YoY and options volumes increased by 38.5% YoY with most options growth coming from index options.

Depository and Settlement Services. Fee and commission income from depository and settlement services increased by 12.4% YoY and amounted to RUB 1.00 bln. Assets held on deposit at the National Settlement Depository equaled RUB 35.46 trln as of 30 June 2017, an increase of 10.1% YoY, and averaged RUB 35.09 trln in Q2 2017.

Other fee and commission income. Other fees and commissions rose by 6.0% and reached RUB 374.9 mln. Sales of software and technical services grew by 5.3% YoY to RUB 164.6 mln. Information services contributed RUB 191.1 mln of fee income, which rose by 4.0% YoY.

Interest & other finance income. Net interest and other finance income totaled RUB 4.74 bln, down 20.1% on the back of a decline in RUB interest rates and lower client balances. However, the usual interest income was supported by arbitrage transactions exploiting the disparity between interbank and FX swap market rates. A sustained rally in the fixed income market spurred by a visible reduction of the key rate allowed the Exchange to generate profit on P&L as well. Total funds available for investment averaged RUB 801.49 bln in Q2 2017 (Q2 2016: RUB 1.00 trln).

Expenses. Operating expenses increased by 12.7% YoY to RUB 3.21 bln. Administrative and other expenses were RUB 1.74 bln, rising by 13.8% YoY, mainly driven by depreciation of fixed and intangible assets and IT expenses which together increased 36.3% YoY to RUB 0.99 bln, while other administrative expenses decreased by 6.9% YoY to RUB 0.74 bln. Personnel expenses grew by 11.3% to RUB 1.48 bln.

Cash and cash equivalents. Moscow Exchange's cash position[1] at the end of Q2 2017 totalled RUB 75.81 bln. The Exchange had no debt as of 30 June 2017.

Capital expenditures amounted to RUB 488.1 mln.

Moscow Exchange's consolidated IFRS financial statements for Q2 2017 are available on the Investor Relations section of the company's web site.

The Q2 2017 IFRS Financial Results webcast is scheduled for August 9th at 5pm (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).

Disclaimers

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" the negative of such terms or other similar expressions. The Company wishes to caution you that these statements are only predictions and that actual events or results may differ materially. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.

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