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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 BULGARIAN STOCK EXCHANGE Bistra Ilkova CEO In the first half of 2006 the market capitalization of the BSE rose to EUR 5 billion, accounting for 21 % of Bulgaria’s GDP. The Bulgarian Stock Exchange performed well in the first half of 2006. The turnover reached EUR 600 million, which is a 30% increase compared to the same period of 2005. The market capitalization of the BSE rose to EUR 5 billion, accounting for 21 % of Bulgaria’s GDP. Both our indices–SOFIX and BF 40–held their upward trend and set new records. All market participants are happy with these developments and hope that the dynamic will be preserved in the next 6 months. We expect new listings and this will be a major task for us in the coming months–to attract good-performing private companies to the Exchange. This is part of our Action Plan that focuses on our preparation for the country’s forthcoming entry into the EU (January 1st, 2007). In the second half of the year we will continue to work on several major projects. Our experts just completed the work on the new Corporate Governance Code, which will come into effect in the third quarter of 2006 and will be mandatory for all companies listed on the Official market of the BSE. We hope to be able to finish by the end of the year the work on the electronic system EXTREE for the dissemination of information. It will give the opportunity to all issuers to disseminate financial reports, corporate news, ad hoc information through electronic means and using an electronic signature and send it simultaneously to the BSE, the Financial Supervision Commission and the Central Depository. Our aim is also to continue to develop our international relations and contacts to individual exchanges or alliances of exchanges. We are in the process of deliberating on the future of the BSE and the role it can play in a pan-European environment. We also give great importance to our membership in <strong>FEAS</strong>, because it gives us the possibility to acquire important knowledge and exchange views with our partners. HISTORY AND DEVELOPMENT The first Stock Exchange Act was adopted in 1907 and regulated the structure and operations of stock and commodities exchanges. The Securities, Stock Exchanges & Investment Intermediaries Act was adopted in July 1995, which led to a process of stock exchange consolidation. In July 1997, the present BSE was established. In accordance with the requirements of the new law, a Securities & Stock Exchange Commission was set up. On 9 October 1997 the Commission officially licensed the BSE. The first trading session on the regulated market took place on 21 October 1997. By the end of 1999 there were 32 companies listed on the Official Market and about 1,000 companies admitted for trading on the Free (OTC) Market as a result of the mass privatization program. On December 6, 2001 the Commission officially licensed the BSE to organize an Unofficial Market, which replaced the Free Market and set clear rules for regulation of all companies traded on the Exchange. In December 1999 a new Public Offering of Securities Act was adopted by the Parliament. The law is aimed at providing protection for investors and creating prerequisites for the development of a transparent capital market in Bulgaria with criteria similar to those of the EU. The Securities & Stock Exchange Commission was first renamed the National Securities Commission, but in March 2003 it was replaced by a new supervisory body– the Financial Supervision Commission (FSC). More than just a name change, the move pulled together the regulation of a number of financial (non-banking) sectors under one body. The regulatory changes during the year directly improved conditions for investors and issuers, as well as underlined the government’s commitment to encourage wider overall development of the capital markets. FUTURE OUTLOOK After having registered good results for a fourth consecutive year, the BSE plans to continue its dynamic development in 2006. Among the technological innovations that will be implemented at the beginning of next year is the new electronic information disclosure system X3. Through this system the issuers will disseminate all the relevant company and price sensitive information continuously and simultaneously to the BSE, the Financial Supervision Commission and the Central Depository, using the electronic signature. At this stage of the development of the Bulgarian capital market it is becoming more and more important to have new listings, attract a larger number of small and institutional investors, as well as increase liquidity. The Marketing Strategy for 2006 and onwards, which was approved by the Board of Directors, will be a useful instrument in pursuing this goal. In view of the EU accession of Bulgaria in 2007 many private firms show interest in becoming publicly listed companies and in having a better exposure in the pan-European environment. The BSE will also follow closely the process of integration, the mergers and alliances between stock exchanges in Europe. The debate on the different models of cooperation will continue and the final decision will take into consideration the interest of all participants on the Bulgarian capital market. PAGE 64
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 BULGARIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ millions # Shares millions Total Volume Average Daily Volume Total Volume Average Daily Volume Stocks Jan-06 110.6 5.0 16.4 0.75 Feb-06 52.8 2.6 13.1 0.66 Mar-06 83.5 3.8 16.4 0.74 Apr-06 154.8 8.1 58.9 3.1 May-06 243.3 11.6 47.7 2.3 Jun-06 115.6 5.3 25.7 1.2 TOTAL 760.5 6.1 178.2 1.4 Bonds Jan-06 30.0 1.4 0.04 0.002 Feb-06 14.8 0.74 0.01 0.0007 Mar-06 8.7 0.39 0.009 0.0004 Apr-06 13.3 0.70 0.01 0.0006 May-06 8.2 0.39 0.009 0.0004 Jun-06 25.7 1.2 0.03 0.001 TOTAL 100.7 0.79 0.11 0.0009 Other Jan-06 4.7 0.22 12.8 0.58 Feb-06 26.7 1.3 27.5 1.4 Mar-06 5.8 0.26 16.6 0.76 Apr-06 8.9 0.47 29.1 1.5 May-06 5.7 0.27 20.6 1.0 Jun-06 9.5 0.43 39.1 1.8 TOTAL 61.4 0.50 145.8 1.2 Market Capitalization (US$ millions) Index MONTHLY STOCK VOLUME VS INDEX (US$ millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ millions) Jan-06 5,463.0 866.2 Feb-06 5,450.4 875.5 Mar-06 5,597.7 869.9 Apr-06 6,138.8 886.6 May-06 6,461.4 867.1 Jun-06 6,355.4 888.3 CONTACT INFORMATION 250 200 150 100 50 0 900 7,000 800 6,000 700 600 5,000 500 4,000 400 3,000 300 200 2,000 100 1,000 0 0 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Contact Name Mr. Panteley Karassimeonov E-mail bse@bse-sofia.bg Website www.bse-sofia.bg PAGE 65
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