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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2007BANJA LUKA STOCK EXCHANGEMilan BozicCEOAs a result of improvement of the financialdisclosure, the participations of foreigninstitutional investors have significantlyincreased, which indicates theinternationalization of the BLSE market.2004 was a year of significant improvement inthe Banja Luka Stock Exchange (BLSE) marketperformance. The BLSE obtained an importantrole in the transitional processes in Bosnia andHerzegovina. The most important results arerelated to an increase in turnover, whichamounted to US$ 65.3 million, showing anincrease of 50% in comparison with 2003.During 86 trading days in 2004 there were over80,000 transactions concluded, which is 300%more than in 2003. Significant progress wasalso made in regard to the structure ofturnover. More than 45% of total turnover wasachieved on the official market, which is aconsequence of admitting to this marketsegment 3 companies and 13 PrivatizationInvestment Funds (PIFs). Total marketcapitalization also increased from US$ 522.7million on 31 December 2003 to US$ 1.3billion on 31 December 2004. More than 60%of the above mentioned amount is related tothe official market.During 2004, two BLSE indices were created.The Stock Exchange Index of The Republic ofSrpska (BIRS), which includes 10 companieswith the largest market capitalization, indicatedan increase of 15% for an 8 month period.Total return on BIRS for this period was over20%. The Privatization Investment Funds Index(FIRS) includes 13 shares of PrivatizationInvestment Funds (PIFs). FIRS increased from1 September to 31 December 2004 by 85%.Positive growth indicates increasing investor’sinterest and confidence in the BLSE, which islargely due to the BLSE’s promotional andeducational activities.As a result of improvement of the financialdisclosure requirements (financial statementsfor PIFs are disclosed on a monthly basis), theparticipation of foreign institutional investorshas significantly increased, which indicates theinternationalization of the BLSE market. We areespecially proud of the increasing number ofsmall local investors, which indicates thesuccess of the BLSE in educational activities.This has not been an easy task, bearing inmind that almost all citizens had a reason notto believe in new things such as investing incapital markets, because of the frozen savingaccounts issue.An important result during 2004 wasparticipation in the privatization of more than60 state owned companies. Finally, the BLSEbecame a full member of FEAS in November2004.Note: Please note that there is a differencebetween BLSE reported numbers in themessage from the CEO and the FEAS statisticsbased on auction for state owned capital andblock transactions reported to BLSE which arenot included in the FEAS statistics.HISTORY AND DEVELOPMENT15 July 1998 The adoption of the Law onSecurities provided the necessary legalframework to establish the capital market of theRepublic of Srpska.04 May 2000 The National Assembly of theRepublic of Srpska appointed the first membersof Republic of Srpska Securities Commission.26 February 2001 Established Central Registryof Securities.09 May 2001 Eight banks and one companytrading in securities signed the Contract thatestablished the BLSE.09 August 2001 Republic of Srpska SecuritiesCommission issued working permit to the BLSE.29 November 2001 The first equity from theprivatization program was registered in theCentral Registry of Securities (CRHOV).05 March 2002 Signed contract on transfer oflicense between the Directorate for Privatizationand the BLSE that provided BLSE with electronictrading system (BTS) developed by the LjubljanaStock Exchange (LJSE).14 March 2002 The first BLSE trading sessiontook place, involving six members that traded 20listed securities.12 November 2002 The BLSE purchased 7% ofstocks of the Central Registry of Securities.12 September 2002 The law on takeover cameinto force.30 September 2002 The BLSE and the LJSEsigned memorandum on cooperation andexchange of information.10 December 2002 A contract on regionalcooperation in field of education and financialmarkets was signed at the Belgrade StockExchange.24 January 2003 The first session of the ListingCommission took place and stocks of 13Privatization Investment Funds admitted to theofficial market of the BLSE.11 February 2003 The first transactionsconcluded with shares of PIFs.24 April 2003 Shares of Telekom Srpske a.d.Banja Luka and Banjaluka pivara a.d. BanjaLuka were listed on the free market of the BLSE.30 April 2003 Bobar Bank a.d. Bijeljina became10th member of the BLSE.20 August 2003 The first auction for stateowned capital took a place on the BLSE.23 September 2003 Shares of Rafinerija uljaa.d. Modrica were listed on the official market ofthe BLSE as the first company listed on officialmarket in BiH.30 October 2003 The BLSE presented Internetportal www.sem-on.net (project of exchange ofinformation between seven Exchanges from theregion).01 June 2004 The BLSE established BIRS,consisted of 9 companies and 2 banks.07 June 2004 First bond in BiH (Slateks Slatina)listed on the market of the BLSE.01 August 2004 The FIRS was introduced.FIRS included shares of 13 PIFs from Republicof Srpska.17 September 2004 On the 10th GeneralMeeting of the FEAS held in Novigrad, Croatia,the BLSE was accepted in full membership ofFEAS.30 May 2005 Shareholders Assembly of theStock Exchange appointed new Managing andnew Supervisory Board.03 October 2005 Continuous Trading Methodintroduced for shares listed on the officialmarket of the BLSE.16 November 2005 Third regular revision ofboth indexes was made and structure of theindexes did not changed28 December 2005 Listing of ElektroprenosBanja Luka shares on the Free Market–the endof process of listing shares from the PowerUtility System of the Republic of Srpska.29 December 2005 On the BLSE recorded anew highest value on the amount of BAM at60,532,673.20 March 2006 Introduction of continoustrading in shares from the Free Market whichfulfill the liqidity criteria17 May 2006 First International Conference ofthe BLSE was held.FUTURE OUTLOOKIn 2006 the BLSE plans to:• initialize creation of national corporategovernance standards;• introduce new market instruments such aslong term governments bonds issued on thebasis of the frozen savings;• install a new web information portal, which willenable investors to access a large scope ofdata, such as the macroeconomic situation inBosnia and Herzegovina, trading information,financial statements and ownership structure ofthe listed;• encourage listing of successful localcompanies on the official market;• continue with educational and promotionalactivities; and• further develop methods of continuoustrading with listed securities.PAGE 48