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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005 BANJA LUKA STOCK EXCHANGE Milan Bozic CEO 2004 was a year of significant improvement in the Banja Luka Stock Exchange (BLSE) market performance. BLSE obtained an important role in the transitional processes in Bosnia and Herzegovina. The most important results are related to an increase in turnover, which amounted to US$ 65.3 million, showing an increase of 50% in comparison with 2003. During 86 trading days in 2004 there were over 80,000 transactions concluded, which is 300% more than in 2003. Significant progress was also made in regard to the structure of turnover. More than 45% of total turnover was achieved on the official market, which is a consequence of admitting to this market segment 3 companies and 13 Privatization Investment Funds (PIFs). Total market capitalization also increased from US$ 522.7 million on December 31st, 2003 to US$ 1.3 billion on December 31st, 2004. More than 60% of the above mentioned amount is related to the official market. HISTORY AND DEVELOPMENT The adoption of The Law on Securities in 1998 provided the necessary legal framework to establish the capital market of the Republic of Srpska and the Stock Exchange. The National Assembly of the Republic of Srpska appointed the first members of Republic of Srpska Securities Commission in 2000 as the highest authority and supervisory body in the capital market of the Republic of Srpska. In the beginning of 2001 the Central Registry of Securities was established in accordance with the Law on Central Registry, which started with the registration of securities from the privatization process as the first market material. All of these events have created the necessary environment for the establishment of the Stock Exchange. On 9 May 2001, eight Banks and one company trading in securities signed the Contract that established the BLSE as the first Stock Exchange in the Bosnia and Herzegovina. In August 2001, the Republic of Srpska Securities Commission issued a working permit to the Banja Luka Stock Exchange, which operates as non-profit, self-regulatory, private organization. PAGE 54 As a result of improvement of the financial disclosure, the participations of foreign institutional investors have significantly increased, which indicates the internationalization of the BLSE market. During 2004, two BLSE indices were created. The Stock Exchange Index of The Republic of Srpska (BIRS), which includes 10 companies with the largest market capitalization, indicated an increase of 15% for an 8 month period. Total return on BIRS for this period was over 20%. The Privatization Investment Funds Index (FIRS) includes 13 shares of Privatization Investment Funds (PIFs). FIRS increased from September 1st to December 31st, 2004 by 85%. Positive growth indicates increasing investor’s interest and confidence in the BLSE, which is largely due to the BLSE’s promotional and educational activities. As a result of improvement of the financial disclosure requirements (Financial statements for Privatization Investment Funds are disclosed on a monthly basis), the participation of foreign institutional investors has significantly increased, which indicates On 5 March 2002, a contract for the transfer of license between the Directorate for Privatization and the BLSE was signed that provided the BLSE with an electronic trading system (BTS) developed by the Ljubljana Stock Exchange. The first Banja Luka Stock Exchange trading session took place on 14 March 2002, involving six Members that traded 20 listed securities. In September 2002, the Law on Takeover came into force and thus further improved the position of small shareholders and the quality of corporate governance in the Republic of Srpska. On 21 January 2003, the first session of The Listing Commission took place and stocks of 13 Privatization Investment Funds were admitted to the official market of the BLSE. On May 2004, the Stock Exchange Index of Republic of Srpska (BIRS) was established as the first index in the Republic of Srpska. the internationalization of BLSE market. We are especially proud of the increasing number of small local investors, which indicates the success of the BLSE in educational activities. This has not been an easy task, bearing in mind that almost all citizens had a reason not to believe in new things such as investing in capital markets, because of the frozen saving accounts issue. An important result during 2004 was participation in the privatization of more than 60 state owned companies. Finally, the BLSE became a full member of FEAS in November 2004. Note: Please note that there is a difference between BLSE reported numbers in the message from the CEO and the FEAS statistics based on auction for state owned capital and block transactions reported to BLSE which are not included in the FEAS statistics. FUTURE OUTLOOK In 2005 the BLSE plans to: • install a new web information portal, which will enable investors to access a large scope of data, such as the macroeconomic situation in Bosnia and Herzegovina, trading information, financial statements and ownership structure of the listed; • encourage new listing of successful local companies; • continue with educational and promotional activities; • initialize creation of national corporate governance standards; • introduce new market instrument such as long term governments bonds issued on the basis of the frozen savings; and • initiate continual trading with securities listed on the official market.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005 BANJA LUKA STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks Jan-05 3.9 0.56 11.0 1.6 Feb-05 7.8 0.65 16.1 1.3 Mar-05 9.4 0.63 22.8 1.5 Apr-05 3.9 0.30 76.7 5.9 May-05 5.1 0.30 17.5 1.0 Jun-05 4.1 0.25 17.5 1.1 TOTAL 34.2 0.45 161.7 2.1 Bonds Jan-05 n/a n/a n/a n/a Feb-05 n/a n/a n/a n/a Mar-05 n/a n/a n/a n/a Apr-05 n/a n/a n/a n/a May-05 n/a n/a n/a n/a Jun-05 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other Jan-05 n/a n/a n/a n/a Feb-05 n/a n/a n/a n/a Mar-05 n/a n/a n/a n/a Apr-05 n/a n/a n/a n/a May-05 n/a n/a n/a n/a Jun-05 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index Jan-05 1,254.6 864.8 Feb-05 1,247.5 929.8 Mar-05 1,242.4 973.5 Apr-05 1,126.2 841.5 May-05 1,128.0 793.6 Jun-05 1,032.4 705.3 CONTACT INFORMATION MONTHLY STOCK VOLUME VS INDEX (US$ Millions) 10 9 8 7 6 5 4 3 2 1 0 Stocks Index Contact Name Mr. Nebojsa Vukovic E-mail blberza@blic.net Website www.blberza.com MONTHLY MARKET CAPITALIZATION (US$ Millions) 1000 1,400 900 800 1,200 700 1,000 600 500 400 800 600 300 400 200 100 200 0 0 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun PAGE 55
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