FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005

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1 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25

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3 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TABLE OF CONTENTS Federation of Euro-Asian Stock Exchanges 3 Takasbank 1 Computershare Markets Technology 12 Dow Jones Indexes and STOXX Ltd. 14 TurkDEX 18 DenizBank Financial Services Group 2 Tata Consulting Services 24 World Federation of Exchanges 26 Tayburn Kurumsal 28 Is Investment 3 Stock Exchange Profiles Abu Dhabi Securities Market 32 Amman Stock Exchange 36 Armenian Stock Exchange 4 Baku Interbank Currency Exchange 44 Baku Stock Exchange 48 Banja Luka Stock Exchange 5 Belgrade Stock Exchange 54 Bucharest Stock Exchange 58 Bulgarian Stock Exchange 62 Cairo and Alexandria Stock Exchanges 66 Georgian Stock Exchange 7 Istanbul Stock Exchange 74 Takasbank 78 Karachi Stock Exchange 79 Central Depository Company of Pakistan Limited 83 Kazakhstan Stock Exchange 84 Kyrgyz Stock Exchange 88 Lahore Stock Exchange 92 Macedonian Stock Exchange 94 Moldovan Stock Exchange 98 Mongolian Stock Exchange 12 Muscat Securities Market 16 Palestine Securities Exchange 11 Sarajevo Stock Exchange 114 State Commodity & Raw Materials Exchange of Turkmenistan 116 Tehran Stock Exchange 12 Tirana Stock Exchange 124 Toshkent Republican Stock Exchange 128 Ukrainian Stock Exchange 132 Zagreb Stock Exchange 136 Member List 141 FEDERATION OF EURO-ASIAN STOCK EXCHANGES (FEAS) I.M.K.B Building, Emirgan Istanbul, Turkey Tel: (9 212) Fax: (9 212) secretariat@feas.org Web address: Contacts: Mr. Aril Seren, Secretary General Mrs. Susan Gogus, Assistant Secretary General Ms. Sibel Yilmaz, Assistant Secretary General The Federation of Euro-Asian Stock Exchanges Semi Annual Report May 25 is published by the Federation of Euro-Asian Stock Exchanges. All editorial material was collated and edited by the Federation of Euro- Asian Stock Exchanges. The design, production and distribution was coordinated by the Federation of Euro-Asian Stock Exchanges. Designed by: Tayburn Kurumsal Although every care has been taken to ensure the accuracy of the information contained within the publication, the Secretariat cannot be held liable for any inaccuracies, errors or omissions, nor held liable for any actions taken on the basis of the information provided herein. The Federation of Euro-Asian Stock Exchanges PAGE 1

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5 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 FEDERATION OF EURO-ASIAN STOCK EXCHANGES Osman Birsen President of FEAS & Chairman and CEO of the Istanbul Stock Exchange As our markets continue to step up to the challenges of the global arena, the greater importance will be to turn our focus toward our vision for the future and to participate in the regional development over the next 5-1 years. We are very proud and excited to announce that this year FEAS will produce two Semi Annual Reports in May and October, respectively. The aim of transitioning from an annual to semi annual publication is two-fold. First, through providing two publications rather than just one, the market performances of FEAS members will be reflected in a more recent and detailed fashion. Second, the environments (both political and economic) within which those markets operate are brought to the attention of the readers more timely and concisely. The FEAS region entered 24 with a growing hope for continued growth in world economies. No one anticipated the continued strength of our markets, becoming more experienced and more transparent every year. The outstanding performance in 24 is evidenced in the consolidated regional statistics on the adjoining pages, as well as the individual statistics of each of our members, in the member profile section. The Federation, as a globally recognized regional institution, is growing and maturing together with its members towards its goals. Founded 1 years ago by 12 regional exchanges, FEAS has welcomed four new members, bringing the total number of members to 28: Abu Dhabi Securities Market, Banja Luka Stock Exchange, Belgrade Stock Exchange and Sarajevo Stock Exchange. FEAS also looks forward to the possibility of accepting the application of the Bahrain Stock Exchange and Montenegro Stock Exchange as the 29th and 3th members in 25. Further, during the 12th Executive Committee Meeting, held in Istanbul, Turkey on December, it was decided that the proposals by 6 members for their affiliate Central Depositories to become FEAS Affiliate Members would be voted by circular resolution. Based on the circular resolution, 6 new affiliate members were admitted to FEAS: Central Securities Depository AD Skopje, Macedonia Central Depository Company of Pakistan Limited Central Depository of Armenia SRO ISE Settlement and Custody Bank Inc., Takasbank, Turkey Securities Depository Center of Jordan Tehran Stock Exchange Services Company, Iran As we approach our eleventh year of operation, most of you are well aware of our accomplishments to date; of those that were particularly noteworthy are the implementation of the FEAS Data Center (FDC) to standardize and promote cross market statistics, the movement toward cross border trading utilizing the common trading platform model from the SECI project, and the further harmonization of rules and regulations in the FEAS Rule Book through adoption of the 28 OECD/FEAS developed guidelines, best practices manual for stock exchanges in transition economies. Other specific achievements promoted the growth of stock exchange operators through extensive training programs, such as the joint OECD SME development project and international associations with organizations such as the World Bank. However, as our markets continue to step up to the challenges of the global arena, the greater importance will be to turn our focus toward our vision for the future and to participate in the regional development over the next 5-1 years. Our continued commitment to our 5-year strategic plan is designed to achieve the objectives specified within the mission of the Federation and to attain a greater role in the competitive global market environment. Our focus over the next 5 years will concentrate in the area of promoting corporate governance, facilitating timely disclosure, achieving effective dissemination of information, attaining regional convergence in listing requirements, settlement, trading rules and software, creating greater awareness and visibility for the region s stocks and investment opportunities, promoting the listing of investment grade companies in the region s markets and creating linkages among the region s intermediaries, data providers, settlement and custody institutions and stock exchanges while encouraging cooperation among securities commissions. Please see the Philosophy section of our Semi Annual Report to obtain the complete set of objectives for the Federation. The individual future outlook of our markets, as contained in the member profile pages, shows that there continues to be work toward the challenges of member markets in providing competitive and viable financing options to both the government and private sectors, while enhancing operations through technology and expanding services to market participants. The main effort continues to focus on the areas of increased transparency through expense in infrastructure and developing regulations to promote stronger corporate governance. It is with great pleasure that we welcome our newest members and we look forward to their contributions to our organization. I would like to take a moment to extend my heartfelt thanks to our Contributors: Takasbank, Computershare, Tata Consulting Services, Dow Jones Indexes and STOXX Ltd., Garanti Securities, TurkDEX, Is Investment, DenizBank FSG, the World Federation of Exchanges, and Tayburn Kurumsal (also the publisher of this report). We hope that you will take a moment to visit our contributor section in the FEAS website at and read their articles in the following pages. In closing, I want to recognize the efforts of all our members in achieving our regional objectives through their commitment and to the Secretariat for its success in maintaining our cohesive organization. As we approach our 11th year anniversary, our formula for achievement will be applied toward our development for the future. PAGE 3

6 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 FEDERATION OF EURO-ASIAN STOCK EXCHANGES HISTORY The Federation of Euro-Asian Stock Exchanges (FEAS) was established on 16 May 1995 with 12 founding members and has grown to 28 members and 6 affiliate members in 25 countries. Membership in the Federation is open to emerging stock exchanges in Europe and Asia and Affiliate Membership is open to the Clearing and Settlement Depositories of Member Stock Exchanges. Until May, 27 the position of President and Vice President will be held by the Istanbul and Zagreb Stock Exchanges, respectively. The Governing Body of FEAS is the General Assembly, comprised of all 28 members plus 6 affiliate members, which meets once annually in a member country. The Executive Committee, made up of 12 members, is responsible for the development of Federation policies, making major administrative decisions, as mandated by the General Assembly, approving the content and scope of tasks assigned to the Working Committee, and making recommendations to the General Assembly. PHILOSOPHY MISSION STATEMENT The mission of FEAS is to create fair, efficient and transparent market environments, with little or no barriers to trade, between the FEAS members and their operating regions. Harmonization of rules and regulations and adoption of new technology, for trading and settlement, by member securities markets, will facilitate the objectives of FEAS by promoting the development of the member markets and providing cross border trading opportunities for securities issued within FEAS member countries. 5-YEAR STRATEGIC PLAN In accordance with the Mission Statement, the 5-year strategic objectives systematically approach compliance within the long-term mission of the Federation and will be the key focus over the next 5 years. Objective I: Promote corporate governance in listed companies as indicated in the joint FEAS/OECD Best Practices for the Development of Stock Exchanges in Transition Economies guide. Facilitate timely disclosure of material events and achieve effective dissemination of information. Objective II: Achieve convergence among FEAS members in: listing requirements, the settlement cycle, and trading rules and software. Objective III: Promote mechanisms for reliable, transparent and continuous trading and settlement. Objective IV: Create greater awareness and visibility for the region s stocks and investment opportunities. Objective V: Help promote the listing in home markets of investment grade companies in the region s markets. Objective VI: Help create linkages among the region s: intermediaries, data providers, settlement and custody institutions, stock exchanges; while encouraging cooperation among securities commissions. Objective VII: Promote and encourage research and training for FEAS members and their personnel. REGIONAL DEVELOPMENT Regional development highlights the 24 achievements and provides a summary of continuing programs into 25, as well as the strategic objectives over the next 5 years. BILATERAL INITIATIVES PROGRAM The Federation initiated in 22 and fully funded a Bilateral Initiatives Program to facilitate, on a bilateral basis, the exchange of personnel of one FEAS member with another for the purpose of trading information and experience on a specific topic(s) of interest to both exchanges. Almost all Federation members have now participated in this project, which will continue during 25. WORKING COMMITTEE During the President s meeting held in Muscat, Oman in May of 24, the participants of the President s Meeting unanimously declared that FEAS would be operating more efficiently with its new structure; the General Assembly and the Executive Board as the decision making bodies, the single Working Committee and the Secretary General as the Executive bodies and the Task Forces as bodies of preparatory work towards attaining the objectives of the Federation. The proposals were all were adopted for recommendation to the General Assembly. The General Assembly in turn, ratified the new structure during the General Assembly Meeting held in September 24 in Zagreb, Croatia. In the joint Executive Committee held in Istanbul, Turkey in December of 24, Amman Stock Exchange was elected as the Chair of the Working Committee. At the same meeting, members recognized the importance of appointing a leader for each task force that would continue lead and facilitate the Task Force to achieve the objectives set out for it by the Executive Committee. CONTACT INFORMATION Contact Name Mr. Aril Seren, Secretary General secretariat@feas.org Website FEAS region PAGE 4

7 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 FEDERATION OF EURO-ASIAN STOCK EXCHANGES Task Forces As a result of combining the Working Committees, 12 Task Forces were formed to carry out the mandates of the Executive Committee with the approval of the General Assembly. Due to the fact that some Task Forces completed the tasks assigned to them, only the remaining active Task Forces are listed below. Task Force 41 Semi Annual Report (25 Completion) The Yearbook has been changed from an annual report to a semi annual report that will include two pages per country in order to highlight the economic and political developments in each member s respective country. In addition the members pages have been redesigned to include only the most recent and up to date information. It was agreed upon that the first publication would be printed in the April/May time frame and the second publication would be available in electronic format in the September/October time frame. Task Force 42 Post General Assembly & Post Working Committee IT Training (Led by FEAS Secretariat) After the General Assembly Meeting in Zagreb, Croatia, presentations were made by two of the FEAS Sponsors Computershare and Hewlett Packard. For the IT Conference that will be hosted by the Bulgarian Stock Exchange; presentations by FEAS Members, Consultancies and IT Vendors will be made. Some of the vendors that will be presenting include: Computershare, OMX Technology, Options Industry Council, Symex Economics, and Tata Consultancy Services. Task Force 44 Media (Led by Muscat Securities Market) It has been recommended for approval by the General Assembly that a group of FEAS instructors or program materials could be sent to the stock exchanges to increase the proliferation of Media related information and training materials. Media conferences will be held in Istanbul, Turkey and Muscat, Oman during 25. Task Force 46 Regional Indices (Led by Tehran Stock Exchange) FEAS members have decided to create an index of FEAS members, a regional index. It is planned that this index will at first be noninvestable, but may at a later date be transitioned to an investable index. Additional funding and resources have been allocated to this task force based on the importance given to it by members. Task Force 411 Market Principle (Led by Istanbul Stock Exchange) In conjunction with the World Federation of Exchange s effort to update their market principles, FEAS members are working to contribute ideas and information to this end. Task Force 412 Corporate Governance (Led by Karachi Stock Exchange) All members in the FEAS region place a strong emphasis on Corporate Governance. For this reason a task force was created to provide a vehicle for informing all member stock exchanges of international regulations and practices regarding corporate governance. Further, Karachi Stock Exchange has volunteered to fund their country s corporate governance expert to travel anywhere necessary to disseminate all relevant information about corporate governance that it has. The Bucharest Stock Exchange will also host a conference on Corporate Governance in June of Mandates: Publication and Distribution of the Semi Annual Report in April/May and September/October; Hold an IT Conference hosted by the Bulgarian Stock Exchange; Hold a Media Conference hosted by the Muscat Securities Market; Create a Regional Index for FEAS; Hold a Corporate Governance Conference to be hosted by the Bucharest Stock Exchange; Work with the WFE to update Market Principles; Completion of the ongoing revenue analysis from 1999 through 24; and Distribution, tabulation and reporting on the results of the World Federation Trading Survey with comparative results. FDC & SPECIAL PROJECTS FEAS DATA CENTER (FDC) A full system test was completed as of 1 September 23 and the FDC began implementation with the Macedonian SE in September 23. The system went live on September 15th. Implementation of all members will take a phased approach beginning with 25% of FEAS members implemented by the 1st quarter 24: Amman, Bulgarian, Istanbul, Lahore, Macedonian and Zagreb Stock Exchanges. In 4th quarter of 24, Belgrade Stock Exchange implemented the FDC and in 25 Amman Stock Exchange plans to implement the FDC. The FDC includes market statistics, company data, ratios, stock price information, exchange rates and sector data contained in 14 predefined reports. To access the FEAS Data Center (FDC) go to: reports/countrylist.asp or go to and click on the FEAS Members drop-down menu. OECD/ISE PRIVATE SECTOR DEVELOPMENT (PSD) The Federation, in conjunction with both the ISE and the OECD, has jointly designed and implemented a program entitled Private Sector Development - a comprehensive three-year program dealing with the development of Small to Medium Enterprises (SMEs), while enhancing the attractiveness of the FEAS region through the development of best practices for stock exchanges in transition economies. SME Development: Regional work as the follow-up of the meeting entitled Business Incubation, Finance and Growth in Emerging Markets of 22 was conducted. Emphasis was given to the development of financing models and methods for SME s in Turkey, which can be successfully applied to the FEAS region. The project was finalized in a meeting held in the spring of 24. Best Practices: This project deals with strategies to promote the role of stock exchanges in the ongoing financing needs of member markets. A set of best practices for the development of stock exchanges was prepared and distributed in 21. A total of 28 best practices were set forth as a basic set of legal and market guidelines, which cover key regulatory and institutional issues. A selfassessment workshop on FEAS member implementation of the best practices on clearing, settlement custody, and registration was held on 5-6 February 23 in Almaty, Kazakhstan. The working group made a thorough evaluation of the assessment methodologies developed by international assessment organizations in order to come up with a self-assessment method that targets priorities applicable to the FEAS region. It was decided that a draft questionnaire for selfevaluation would be sent out to FEAS members for their views. In 24 the OECD was asked to prepare a follow-up document which can be used by FEAS members for self evaluation of Best Practices Compliance. The results of this survey will be published in the self-evaluation report in 25. SECI MODEL SECI is a UN project, the Southeast European Cooperative Initiative, which targets cooperation among securities markets of Southern Europe, most of which are FEAS members. The project is taken up by two groups of securities markets, that is, the stock exchanges and the regulators. The SECI project is expected to be the foundation of the FEAS common trading platform. The initial stage of the SECI project is the groundwork prepared by the Athens and Istanbul Stock Exchanges. A MoU was signed between regulatory bodies of the Turkish and Greek capital markets in 21, and working groups from both exchanges examined issues regarding technical links, regulatory environment, and trading and settlement procedures. Once all stages of cooperation and linkages are implemented between Athens and Istanbul, the other exchanges of the region will be invited to join the existing set up. As a side product of SECI, another initiative for creating a common stock index of Greek, Turkish and Israeli blue chips exists. The three most important exchanges of South East Europe-South East Mediterranean held a trilateral meeting for the first time with the objective of discussing ways to promote cooperation. The Federation continues to work toward a common trading platform within the region and the SECI organization, which will pave the way for organizational and structural efforts in this area. As noted above FEAS members have agreed on creating a regional index, cross border trading is also being explored by several member exchanges as a test for further implementation across all FEAS members. PAGE 5

8 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 FEDERATION OF EURO-ASIAN STOCK EXCHANGES THE ORGANIZATION WORKING COMMITTEE MEETINGS 1-11 MAY 24 MUSCAT, OMAN The first working committee meetings of 24 were held in Muscat, Oman on 1-11 May, 24 at the invitation of the Muscat Securities Market. All three Working Committees focused on issues mandated by the General Assembly in 23 and the Secretariat prepared a report to participants. JOINT WORKING COMMITTEE AND EXECUTIVE COMMITTEE MEETINGS DECEMBER 24 ISTANBUL, TURKEY The second combined working committee meeting of 24 was held in Istanbul, Turkey on December, 24 at the invitation of the Istanbul Stock Exchange. The combined Working Committees focused on issues mandated by the General Assembly in 23 and the Secretariat prepared a report to participants. During this meeting, Amman Stock Exchange was elected as the new head of the Working Committee. In addition, the President of FEAS, Mr. Osman Birsen, initiated a circular resolution in order to allow members to vote on the applications of 6 affiliate members. Based on the circular resolution, 6 new affiliate members were admitted to FEAS: Central Securities Depository AD Skopje, Macedonia Central Depository Company of Pakistan Limited Central Depository of Armenia SRO ISE Settlement and Custody Bank Inc., Takasbank, Turkey Securities Depository Center of Jordan Tehran Stock exchange Services Company, Iran 1TH ANNUAL GENERAL ASSEMBLY/EXECUTIVE COMMITTEE MEETINGS 16-18TH SEPTEMBER 24 ZAGREB, CROATIA The 1th Annual General Assembly of FEAS was held in Zagreb, Croatia on September 17th at the invitation of the Zagreb Stock Exchange. In addition the 1th Executive Committee meeting and a Joint Working Committee meeting were held prior to the General Assembly on September 17th. The meeting was opened by the Croatian Assistant Minister of Finance, Mr. Ante Zigman who spoke of Croatia s positive feedback on its application for membership into the European Union (EU) and how Croatia s program of economic growth and stability, reforms and institutional strengths could be an example to other countries applying to the EU in difficult economic times. Main decisions and topics of discussion included: acceptance of the following new members - Abu Dhabi Securities Market - Banja Luka Stock Exchange - Belgrade Stock Exchange - Sarajevo Stock Exchange applications; amendment of the FEAS Charter to allow for affiliate members; adoption of the proposed 25 mandates for the Working Committee; extension of the FEAS bilateral exchange program between members; adoption of the 25 budget, audited statements and 24 year-end forecast; review of the 24 accomplishments including the status of special projects with the OECD, the SECI and the Trading Survey and Revenue and Expense Analysis; and adoption of the dues restructuring for 25, among other topics. Elections: President and Vice President of FEAS The General Assembly elected the President and Vice President of FEAS for a two-year term ending May 27 as follows: The President will remain the Istanbul Stock Exchange, The Vice President is the Zagreb Stock Exchange. PUBLICATIONS & INFORMATION FEAS Library: The Library can be accessed through the Publications drop down menu on the main page at or through this link The FEAS Library is open to experts and organizations with financial market related material. If you would like to make a submission to the FEAS Library, please send your electronic files and links to the FEAS secretariat at secretariat@feas.org. FEAS Semi Annual Report: This publication of semi-annual activities of the Federation and its members began in 19 and is now available electronically on the website: ok&top=pubs FEAS Website: The new FEAS website was launched on 31 July 22 and can be found at The new site now contains a more concentrated emphasis on FEAS member data with profile pages (including statistics, holidays, market policies and practices and direct links to their sites), Excel downloads for all statistical data and cross member comparisons on policies, practices and statistical data, and a News Center with headlines from member markets. Newsletter: A monthly publication which includes general secretariat news, statistical stock, bond and other volume comparisons on monthly, yearto-date and prior period bases, in addition to market cap, currency, number of companies traded and index statistics. Quarterly supplemental publications include quarterly statistical analysis, press releases of FEAS members and headlines of FEAS activities. Archived copies of the newsletter can be found on our website: tter&top=pubs. SUBSCRIBE To subscribe for the electronic version of FEAS publications, please go to and click on subscribe. Subscriptions include monthly notifications of statistics and newsletter updates, as well as advance notice of FEAS events and activities. CONTRIBUTORS Please visit our Contributors sites. Contributors can be seen on the FEAS website at: 24 Contributors to FEAS are: Computershare Markets Technology: Tata Consulting Services: Dow Jones Indexes and STOXX Ltd. Garanti Securities Takasbank: Is Investment: DenizBank FSG: TurkDEX: Tayburn Kurumsal: FEAS REGION OUTLOOK Gokce Kabatepe, Managing Director Corporate Finance Raymond James Securities - Turkey With the inclusion of the first-wave of European Union (EU) accession countries from the Eastern European region to the EU, expectations are continually increasing for the amount of FDI to be attracted by the region. Coming privatizations in many of the countries of the region should be the main drivers behind the increasing levels of Foreign Direct Investment (FDI) into the region. The involvement of international investors is highly encouraged in the still-ongoing privatization programs of these countries and the participation of the private sector in large infrastructure projects is still substantially important. Among the countries in the region, Turkey especially is showing extraordinary recovery in the aftermath of its own 21 crisis. This recovery reached peak levels in 24 and the economic stability reached such levels that the IMF has named Turkey a country on a way to become a tiger economy. Furthermore, the fact that the EU accession talks will begin in October 25 has been a major booster for the Turkish economy. The Middle East region, on the other hand, is still driving up export earnings continually with the help of firm oil prices. The rise in oil prices is also helping to offset the rise in import demand in the region. PAGE 6

9 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 FEDERATION OF EURO-ASIAN STOCK EXCHANGES Aril Seren Secretary General of FEAS and Senior Vice Chairman of the Istanbul Stock Exchange With the increase in membership with 4 new members, the FEAS region continues to grow in both depth and breadth. The FEAS Region is now represented by 28 members in 25 countries. 24 REGIONAL PERFORMANCE: With the increase in membership with 4 new members, the FEAS region continues to grow in both depth and breadth. The FEAS Region is represented by 28 members in 25 countries. Since 2 FEAS member markets have continued to reorganize their traded companies which in turn, decreased the total number of companies traded by 18.8% to a regional total of 7,892, yet market capitalization has reached its highest level of US$ 37 billion with a remarkable increase from US$ 138 billion in 2 or by 121%.* The 5-year statistical comparison shows that markets are providing better listings with greater transparency, and that market forces continue to push toward share quality versus post-privatization quantity. It is nice to see that the negative impact of global events which took place in 21 is gradually diminishing with an extensive boost since 21 for stock, bond and other volumes at 16.1%, 689.1% and 75.5%, respectively. This shows that the traded company consolidations have in fact improved liquidity and generated investor interest, while providing indicators that growth is being sustained in the region. In 24, allocation of traded instruments remains almost same as compared to 23, except that bonds turnover increased by 3% and ranked second whereas stocks turnover decreased by 3% and ranked third which was exactly the opposite in the previous year (23). The largest growth in turnover volume is again bonds for the third straight year, representing a gain of over US$ 143 billion as compared to 23; however, as the 5-year statistical comparison shows, other trading volume continues to have the greatest US$ value at over US$ 1,1 billion; an increase of 54.6% as compared to 23. Other volume is represented by such instruments as derivatives, t-bills, currency, repo/reverse repo, etc. In addition, the improvement in the value of FEAS markets can be seen through the positive results in the adjusted annualized return on member indices. Within the year-end closing value of 18 FEAS member indices, adjusted on an annual basis for currency fluctuations, only two posted net losses, while one member exceeded 17% for the year. *For individual member statistics, please go to the Member Profile sections in the following pages. 25 CALENDAR FEBRUARY FEAS/BULGARIAN SE IT CONFERENCE SOFIA, BULGARIA MAY WORKING COMMITTEE AND 13TH EXECUTIVE COMMITTEE MEETINGS TBILISI, GEORGIA 24 JUNE FEAS/BUCHAREST SE CORPORATE GOVERNANCE SEMINAR BUCHAREST, ROMANIA SEPTEMBER 14TH EXECUTIVE COMMITTEE MEETING AND 11TH ANNUAL GENERAL ASSEMBLY TEHRAN, IRAN OCTOBER FEAS/BAKU SE FURTHERING OF REGIONAL COOPERATION BAKU, AZERBAIJAN DECEMBER FEAS/MUSCAT SM MEDIA CONFERENCE MUSCAT, OMAN FEAS REGION 24-MARKET CAP. VS MONTHLY STOCK VOLUME (US$ Millions) 35, 3, 3, 25, 25, 2, 2, 15, 15, 1, 1, 5, 5, J F M A M J J A S O N D FEAS REGION 24-MONTHLY VOLUME (US$ Millions) 12, 1, 8, 6, 4, 2, J F M A M J J A S O N D FEAS REGION 5-YEAR VOLUME COMPARISON (US$ Millions) 1,2, 1,, 8, 6, 4, 2, Market Cap. Monthly Stock Volume Stocks Bonds Other Stocks Bonds Other PAGE 7

10 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 FEDERATION OF EURO-ASIAN STOCK EXCHANGES OFFICIAL 24 STATISTICS STOCKS BONDS OTHER Average Average Average Average Average Average Total Daily Total Daily Total Daily Total Daily Total Daily Total Daily Market Volume Volume Volume Volume Volume Volume Volume Volume Volume Volume Volume Volume Capitalization (US$ Millions) (US$ Millions) (# Millions) (# Millions) (US$ Millions) (US$ Millions) (# Millions) (# Millions) (US$ Millions) (US$ Millions) (# Millions) (# Millions) (US$ Millions) Jan-4 Feb-4 Mar-4 Apr-4 May-4 Jun-4 July-4 Aug-4 Sep-4 Oct-4 Nov-4 Dec-4 TOTAL 27,89.5 1,39.9 6,23, , ,9.84 1, , , , , , , ,48, , , , , , , , , , ,276, , , , , , , , , ,427. 5,645, , , , , , , , , ,718, , , , , , , , , ,734, , ,3.14 1, , , , , , ,18, , , , , , , , , ,986, , , , , , , , , , ,574, , ,4.32 1, , ,374. 4, , , ,17.8 6,115, , , , , ,46.7 4, , , , ,31, , , , , , , , , , ,769, , , , , ,42.8 4, , , , ,744, , , , , ,12, , , STATISTICAL COMPARISON 2-24 STATISTICS 24 % CHANGE OVER # companies traded 9,718 7,6 7,298 8,375 7, Market capitalization (US$ millions) 138, , , , , Total volume (US$ millions-stocks) 239, , , , , Total volume (# shares millions-stocks) 11,141, ,5, ,11, ,229, ,744, Average daily volume (US$ millions-stocks) , Average daily volume (# shares millions-stocks) 45, , ,3.5 24, , Total volume (US$ millions-bonds) 263, , , , , Total volume (# millions-bonds) , , , , ,69.1 Average daily volume (US$ millions-bonds) 1, , Average daily volume (# millions-bonds) , ,833.9 Total volume (US$ millions-other) 887, , , , ,12, Total volume (# millions-other) ,.7 1, , , ,624.4 Average daily volume (US$ millions-other) 3, ,53.4 1, , , Average daily volume (# millions-other) , , bond and other volume history not provided by all FEAS members. FEAS REGION VOLUME BY TYPE Stocks Bonds Other Stocks Bonds Other 16% 19% 19% 16% 65% 65% NUMBER OF COMPANIES TRADED VS MARKET CAP. (US$ Millions) 35, 3, 25, 2, 15, 1, PAGE 8 Market Cap 5, Companies Traded , 9, 8, 7, 6, 5, 4, 3, 2, 1, 24-ADJUSTED ANNUALIZED RETURN ON INDEX BIFX/Sarajevo BET/Romania CASE 3/Egypt ADSM/Abu Dhabi Kazakhstan ASE/Amman Al Quds/Palestine BSE/Bulgaria CROBEX/Zagreb ISE 1/Istanbul KSE 1/Karachi B.I./Macedonia GP/Muscat LSE 25/Lahore TEPIX/Tehran KSE Index/Kyrgyz TRSE/Uzbekistan Top-2/Mongolia * Belgrade SE launched new index Belexfm in May 24. Historical data is not avaliable.

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12 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TAKASBANK Emin Catana President and CEO We believe the Turkish Capital Market will be supported by new markets and financial products and market dynamics will produce better conditions for investors. INTRODUCTION Takasbank (ISE Settlement and Custody Bank Inc) is incorporated as a non-deposit taking banking institution and is authorized by the Capital Markets Board of Turkey to function as: the Central Securities Depository of Turkey, the Clearing and Settlement Institution for ISE markets, the Clearing House for the Turkish Derivatives Exchange, the National Numbering Agency of Turkey, the Custodian for the Mutual Funds and Pension Funds incorporated in Turkey. Takasbank is owned by the Istanbul Stock Exchange (ISE) (26%) and by the members of the ISE (2 banks and 7 brokerage houses with 4% and 34% stake in the share capital, respectively). Participants of Takasbank are the members of the Istanbul Stock Exchange, the institutional investors and the issuers. Equity investors holdings are recorded in the subaccounts of the participants. Services provided by Takasbank includes the execution of corporate actions, safekeeping of physical securities, custody and transfers of securities in book-entry form, web based monitoring service for investor sub-accounts, central clearing and settlement for the organized market (based on multilateral netting), real time gross DvP member to member settlement, settlement and custody for foreign securities, cash settlement and transfer facilities (domestic and crossborder), Takasbank Money Market, securities lending and borrowing, cash credits, allocation of ISIN for securities issued in Turkey. Takasbank is an active member of international organizations such as Association of National Numbering Agencies (ANNA), International Securities Services Association (ISSA) and is also member and user of the Society for Worldwide Interbank Telecommunications (SWIFT). On February 4th, 25, the Turkish Derivatives Exchange (TurkDEX) commenced its operations with a variety of contracts including commodities and financial futures. Takasbank is appointed and authorized as the Clearing House for TurkDEX. Thus, Takasbank has become the clearing and settlement center for all transactions in spot/derivatives markets of the organized markets in Turkey. CLEARING HOUSE FUNCTIONS Takasbank acts as a buyer to every seller and a seller to every buyer in each trade executed at TurkDEX. In accordance with the regulations, Takasbank guarantees the derivatives market liquidity and safety with the deposited margins and the Guarantee Fund resources. The important issue here is the limited guarantee (not full). Thus, Takasbank is the guarantor for TurkDEX trades with a limited liability. This liability is underlined in the 78-79th article of TurkDEX regulations. Takasbank main functions regarding with the derivatives market and the Clearing House Operations are as follows: Approval of clearing members. Central counterparty for TurkDEX trades. Limited guarantee with margins and Guarantee Fund. Determination of collateral types and operational procedures. Keeping position and collateral data on either member or account basis. Marks to market daily. Monitoring collaterals and composition check. Settlement of daily profit/loss. Announcement and monitoring of margin calls (if any) Application of default process (if any) Liquidation of collaterals in case of default. Position/collateral transfers between accounts. Corporate actions of collaterals deposited as margin. Management of Guarantee Fund. Interest payment for cash margins and Guarantee Fund cash part. Training of clearing members. CLEARING CONDITIONS FOR DERIVATIVES Open positions marked to market daily following the announcement of settlement price by the exchange. Session hours for TurkDEX are 1-12 am, 1-3 pm (there is a 1 hour lunch break for traders). Settlement price for each contract is calculated and announced as of 3:15 pm. Takasbank starts the settlement by deducting losses from each account. If there is any deficiency in the cash margins (if total collateral value in hand is below maintenance margin level or minus cash value existed) it should be paid in cash as a margin call. Profits are added directly to each account s cash margins. Deadline for derivatives daily settlement is 4:3 pm on the same trading day (T+). In order to open a new position in the market there should be enough collateral deposited into that account. Daily settlement is finalized by cash payment only. All transactions are executed and settled on account basis. CLEARING MEMBERSHIP REQUIREMENTS There are two types of membership; the first one is the general clearing membership, the second one is the direct clearing membership. At the beginning, all trading members are authorized to clear their own trades, which means that all exchange members become direct clearing members. After receiving the brokerage certificates for derivatives from the Capital Market Board, an applicant member should become a trading member. Then, the member delivers those certificates to the Clearing House and applies to become a clearing member. There are some additional requirements to become a clearing member such as capital/financial requirements, personnel, operational and hardware requirements. The clearing member and the Clearing House sign in a written contract that underlines the both sides liabilities. Clearing members should PAGE 1

13 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 participate in the Guarantee Fund of derivatives, when their application is approved by the Clearing House. Termination of the clearing membership is bound by ending the trading membership or by the decision of the TurkDEX/Clearing House or at the member s own discretion. ACCOUNT STRUCTURE & SURVEILLANCE Account segregation is the main principle in the derivatives market. Both trading and clearing transactions related with the TurkDEX products are based on client account numbers. There are four different account types. The first one is a portfolio account used for the member s own transactions. The customer account is used for client positions. The market maker account and global account are the remaining accounts and they are not in use at the moment. We can define the global account as an omnibus account, while the market maker account is used only by the authorized market makers of a single or multiple futures contracts. Account opening is done by the clearing member by using Takasbank Derivatives System (TDS). Members should match their own account number with the owner s Takasbank registry number during the opening process or in seven days. By this way the Clearing House can monitor the client s overall open position risk even if the client uses more than one broker. Detailed ID references such as identity card or passport copies must be delivered to the Clearing House immediately, if there is no Takasbank registry number. ELIGIBLE COLLATERALS & VALUATION Takasbank mainly accepts two different types of collateral but they are similar to each other. The first one is accepted as an initial margin against an open position. Initial margins should include minimum 3% cash in order to buy/sell in the derivatives market. Non-cash collaterals may be in the form of bonds and bills, US$ or EUR, equities (ISE-3 index shares), mutual funds and ETF s. They are also subject to haircut by their liquidities. Because of the minimum cash requirement of 3%, non-cash composition may be at maximum 7%, and equities in collaterals cannot exceed 5% of total non-cash. This means that a maximum of 35% of the total collateral requirement might be in equities. Furthermore, the Clearing House manages the concentration risk by applying 5 different equities conditions. Thus, a maximum of 7% of the total collateral requirement might be from one single equity. The Guarantee Fund is the second type of collateral and accepts all of the non-cash types except equities. Members may also deliver Banks acceptance as a non-cash collateral for Guarantee Fund. Collaterals are subject to valuation at the end of day process of TDS. Bonds and bills are valued with ISE calculated prices, equities are valued with 2nd sessions weighted average prices, FX collaterals valued with the daily announced parity of Central Bank of Turkey and mutual funds valued with the unit price announced by their founders at the end of each business day. GUARANTEE FUND CONTRIBUTIONS The Guarantee Fund is aimed for the default probability of members and designed to share the members risk with the surety of each other. Members Guarantee Fund liabilities are determined by the TurkDEX, while the management is realized by the Clearing House. At the beginning, each clearing member should participate with 2, (New Turkish Lira) TRY to the fund. Contribution is mandatory in order to be approved as a clearing member. This amount is valid until the pre-announced tranches. Tranches are defined as a market value of the total open position of a clearing member. If the total position value exceeds the pre-defined tranches, that member should redeposit collaterals to the fund. Margin call (if any) and tranches calculations are calculated daily by the Clearing House. FUTURE PROJECTS Currently derivatives settlement at the maturity of a contract is based on cash settlement. There are 4 main products: stock index futures, currency futures, interest rate futures and commodity futures. Especially commodity futures require some physical settlement in many countries. In the future, Takasbank may settle some of the futures contracts physically. More and more options contracts are the complementary products of derivative markets and in future it is expected that options on equities are very possible contracts. If we consider only the first month s performance of 25, the total open position reached to 9,314 (approximately US$ 15 million) as of April 13, 25. Daily volume is around US$ 2 million and there are 46 trading/clearing members with 1,3 accounts in total. We believe the Turkish Capital Market will be supported by new markets and financial products and market dynamics will produce better conditions for investors. CONTACT INFORMATION Contact Name Mr. Osman Gunsel Topbas gtopbas@takasbank.com.tr Website PAGE 11

14 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 COMPUTERSHARE MARKETS TECHNOLOGY Peter Brew Director, Business Development FEAS members have the great advantage of being able to study the development of derivative markets in other countries and learn from that experience and benefit from the maturing of technology. DERIVING THE FUTURE Although the FEAS five year strategic plan is wisely focused upon harmonization of rules, cooperation, and promotion of the region s exchanges, in this article I invite you to think about another aspect, namely the development of derivatives markets for your exchange. Perhaps this is something you are already considering, perhaps not. Regardless, I suggest that derivatives will play a role in your markets sometime in the future and I hope this article will encourage you to think through the issues. FEAS members have the great advantage of being able to study the development of derivative markets in other countries and learn from that experience and benefit from the maturing of technology. Firstly I want to show you that there are real benefits in introducing a futures market: your economy should function more smoothly, efficiently and effectively. Then I will discuss some of the issues that you need to consider in preparing for a derivatives market, such as the how you develop the contracts, what trading technology to use, clearing and settlement issues and market surveillance. Much of what I write comes from Computershare s long experience with the FEAS countries. Our role in helping to develop derivatives markets in the region goes back more than ten years. We first installed a futures trading system for currencies for the Moscow Interbank Currency Exchange (MICEX) in 1994, and in 1996 they took delivery of the SMARTS surveillance system. We have subsequently installed futures and options trading systems in Kazakhstan in 1996, Istanbul in 1999 and Budapest in 2. The same software will operate the new derivatives market in Turkey, TurkDEX which began operation just this year. Elsewhere in Europe we have implemented systems for interest rate swaps for Icap plc, the world s largest inter-dealer broker, and a warrant trading system the SWX Swiss Exchanges in 25. Computershare continues to provide advice and the most advanced software systems to the region and I would be happy to hear from you if this article interests you. History of derivatives trading Although futures trading can be traced back a long way, financial futures have a surprisingly recent history. The many anecdotes about the development of derivatives range from agricultural markets in China 6 years ago, to 17th century Japanese rice markets, and even King Philip II of Spain who arguably used futures on gold and silver arriving from Latin America to finance his European wars. But for our purposes the history of derivative trading can be neatly divided between the years before and after the demise of the gold-standard for currencies in 11. Before 11 derivatives were nearly entirely about agricultural products. In 12 the first currency futures were introduced. The growth of these financial futures has been exponential ever since. Another milestone occurred in the USA only in1982 when options on agricultural products and the idea of cash settlement instead of physical delivery were authorised for the first time. This innovation enabled the development of a range of new types of contracts for which physical settlement would have been impossible (such as index futures). In this decade we have even seen the development of weather derivatives and most recently futures on economic announcements such as indexes of inflation. In order to understand why there has been such growth, we need to understand the role that derivatives play in an economy. The role of derivatives First let s consider some common derivatives that are used by businesses. Then we ll look at the benefit to the economy as a whole. Fundamentally businesses use derivatives to hedge (or reduce) the risk of prices changing. Here are some typical examples: A farmer wants to guarantee the price he will receive for his produce before he buys the seeds or food for his animals. If he waits until he has grown the produce before selling it (as has traditionally been done), there is a risk that the price might be so low that he ends up selling his produce for much less than it cost him to produce. So instead he enters into a futures contract on the commodity he is producing to fix the price before buying this seed or animal food. A small manufacturing company receives a large order for their products from another country and the client wants to pay in his currency. The company will then need to convert it to their own currency in order to pay their staff but they won t receive money for twelve months and they are worried that the currency may be devalued before then. So they enter into a currency futures contract to agree the conversion rate. In other words, they set the price now of the other currency in the company s own currency. A construction company is being asked to price the development of a new apartment block in the city and needs to give the developer a fixed price. They know that in six months time they ll need to buy a certain amount of steel for the building. If they give a price to the developer now and then when they buy the steel six months later they find the price has gone up, the construction company may find that it cannot complete the building since their costs exceed the income they will receive from the developer, which would be catastrophic for everyone. So instead they buy a steel futures contract to fix the price of the steel they will want to buy, now. A company considering investing in a new product line knows that it will need to borrow some money from the bank in the future in order to develop the product. It estimates the market for the new product and the costs for producing it including the cost of the interest on the loan to the bank. However if interest rates rise then it may not be cost effective to develop the new product. So they enter into several futures contracts to sell the governments treasury bills at six month intervals to fix the price of their interest payments now. If interest rates go up then they have pre-sold their treasury bills for above market rates and use the profit to pay their extra interest on their own loan. A pension fund has made some good returns on the local stock market but does not yet want to take the profits into cash because it will forgo dividends. But the fund is worried that the stocks may fall in value. So they enter into a futures contract to sell the index in six months time to fix the value of their profit now. Through these examples we see that futures contracts encourage investment by businesses, by providing a level of certainty about future prices. In the case of the farmer or the construction company the future price of the commodity is determined and fixed for them. For the manufacturing company the future price of the client s currency is fixed, for the company considering developing a new product the future price of money (interest rates) is fixed, and for the pension fund the future price of stocks is fixed. If you read the article by Takasbank in this FEAS year book you will see that it is precisely these four futures products that operate in Turkey. If we now generalize from the examples, we can understand the three fundamental purposes of derivative markets. The first is to allow businesses to reduce risk and give it to people who want to take on risk the speculators. The second is to facilitate operating capital short term loans for immediate purchases. For example the farmer will find it easier to get a loan from a bank to buy his seed based on the guaranteed price he has agreed in the future contract. Thirdly derivatives provide information to decision makers about future events by discovering the future price based on an examination of all possible information available today. It seems clear then that an economy with a derivatives market will be more efficient because capital can be applied with less risk of loss. The economy will also function more smoothly because prices are less prone to wild fluctuations. PAGE 12

15 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 We might add that from an exchanges perspective, a derivatives market provides additional revenue from new products and if as a result, stock prices are smoothed, this should encourage increased investment in the stock market too. It s probably also true that some over-thecounter (OTC) trading of derivatives is already happening in your country or at least by businesses in your country on another country s market. Standardizing these contracts and bringing them on to the exchange can save costs for the businesses in your economy, and bring liquidity to the futures market, which will reduce risk for all participants, since liquidity enables someone to enter and exit a market at a fair price. Implementation issues A Getting Started guide for an exchange starting your own futures market is of course overly simplistic. However here are some of the more important things to consider which I will discuss in turn: Contract development; Trading System; Clearing and Settlement; Margins, performance bonds and guarantee funds; Surveillance. The first step of course is to identify the needs of your market and develop futures contracts for these needs. The four basic futures contracts described in the article by Takasbank in this semi annual report is a good place to start but there is a wealth of information freely available on the internet concerning contracts used around the world. Reproducing a contract used in another country or developing a contract to be used throughout FEAS should be considered. The fungibility (interchangeability) of such contracts will increase liquidity, lower costs and ease understanding by foreign investors. The software technology used for trading is of course an important consideration. Ideally derivatives and cash instruments should be traded in the same system. The advantages of doing this include: avoiding the duplication of maintenance costs, hardware and operations staff to have two separate systems; the ability to simultaneously manage the derivative and underlying cash market (e.g. adding users, executing corporate actions, suspending trading, surveillance); Traders have a single screen for trading all markets and a single API to which to connect their systems, reducing their costs; and Investors have the ability to trade a derivative and underlying simultaneously without legging risk. Computershare s X-stream trading system can do precisely these things. X-stream can trade equities, futures, swaps, options, warrants, ETFs, foreign exchange, and multileg strategy orders all on a single system. In addition X-streams flexibility enables you to change contract specifications or introduce new products as soon as your analysis indicates that they are necessary. As a proven system in use all over the world, X-stream contains the latest functions and up-to-date know how on derivative markets giving you confidence for the future. Perhaps the most important issue is establishing the clearing and settlement system (CSD) which gives the financial security that supports the market. Some aspects of clearing and settlement are more complex than cash markets. For example the fact that settlement risk exists every day until contract expiry. As a consequence funds must be transferred between counterparties every day until expiry. These transfers are variously known as margin calls or performance bonds and the clearing house must decide what levels of bonds are required when the contracts are marked to market (valued), and what forms of collateral can be used to fulfill the obligations (cash, bonds etc). One advantage of using the same clearing house for cash and derivatives markets is enabling what is called cross margining. This is where a broker s obligations in cash and derivative markets can be offset against each other. This reduces the amount of collateral that a broker requires to have locked up in guarantee funds and so makes transactions cheaper for the market. Computershare s Equator system is the ideal choice for a CSD. The internationally recognized SWIFT standard messaging for connectivity to banking payment systems and a direct connection to the trading system (such as X-stream) are critically important when you make a decision about a choice of CSD system. Registry functions and full Delivery versus Payment (DvP are fundamental to a fully functioning CSD like Equator). Market surveillance is the last area I want to consider. Surveillance here means monitoring market abuse by traders to ensure a fair and efficient futures market (I am not referring to the monitoring of risk positions within the CSD). A fair market is one where all participants face a transparent set of trading rules which are effectively enforced. The SMARTS Surveillance System that Computershare supplies, enables an exchange to promote this goal by providing the ability to monitor and investigate all trading in real-time. Using superior data management facilities, SMARTS builds an understanding of the normal market behavior so that alert algorithms can be created to identify abnormal behavior. These help detect market behavior which may have an adverse effect on market integrity and thus, a rapid response from surveillance departments is easily achieved. A particularly new area of research is to monitor trading behavior across cash markets and derivative markets. For example monitoring the spot market and the futures market for a commodity, or trading in stocks in the benchmark index and the futures product on the index. SMARTS is the only product in the world capable of doing this. Summary I hope that this article contains some food for thought. Derivative markets and in particular futures markets have a great deal to offer an exchange and the businesses and the economy you serve. Their primary purpose is to allow businesses to reduce risk and give them the confidence to invest but the net result is an economy that is more efficient and that functions more smoothly. Once you have decided that you want to begin a futures market and considered issues like the contracts you want to deliver and the regulations and mechanisms for your market, Computershare has the knowledge and the technology for clearing, settlement, surveillance and trading that will solve your technical needs. Technology and know-how that will ensure your success - today and tomorrow. ABOUT COMPUTERSHARE MARKETS TECHNOLOGY Computershare Markets Technology provides the most advanced and innovative solutions for exchanges, clearing & settlement houses and surveillance organizations who want to ensure they are the leaders of tomorrow. Our advanced financial markets systems are flexible, scalable and use the latest, proven and open technology to ensure reliability, performance and accessibility. Our vision is to enable markets and exchanges to swiftly realize the efficiencies, enhanced accuracy and added functionality achievable through process automation and technological efficiency. Computershare s products power more than 4 of the world s national financial markets and central market surveillance and regulation organizations in more than 3 countries, more than any other software provider. Major exchanges operating the systems include the SWX Swiss Exchange, Istanbul Stock Exchange, Moscow Interbank Currency Exchange, New Zealand Exchange, and the world s largest inter-dealer broker, ICAP plc. Established in 1992 and headquartered in Sydney, Australia, Computershare Markets Technology has offices in Sydney, London, New York, Chicago, Calgary, Zurich and Dubai. For more information, visit: CONTACT INFORMATION Contact Name Mr. Peter Brew marketstechnology@computershare.com Website PAGE 13

16 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 DOW JONES INDEXES AND STOXX LTD. Over the past several years the information flow has improved substantially in both quantity and quality. Lars Hamich Managing Director WHAT LIES BENEATH THE ESSENTIALS OF INDEX PRODUCTION INTRODUCTION TO DOW JONES INDEXES AND STOXX LTD. Dow Jones Indexes and STOXX Ltd. operate as a globally integrated index provider. Together, they develop, maintain, distribute and market a comprehensive global family of rules-driven and free-float weighted indexes. The Dow Jones Indexes and Dow Jones STOXX index family include a full range of blue-chip and benchmark indexes, including the Dow Jones Industrial Average, the Dow Jones EURO STOXX 5, the Dow Jones Global Titans 5 Index and the Dow Jones STOXX Global 18. The Dow Jones and Dow Jones STOXX blue-chip indexes are unique as they are maintained at the global, regional, country and sector levels; no other index provider offers so many slices of the blue-chip universe. At the benchmark level, Dow Jones Indexes and STOXX Ltd. provide global, regional and country indexes as well as size, sector and style subindexes. The broadest of these are the Total Market Indexes, which represent 95% of the free-float market capitalization of the covered markets, including all developed markets and the most relevant emerging markets. In addition to that Dow Jones Indexes calculate a range of specialty indexes such as the Dow Jones AIG Commodity index and the Dow Jones Islamic Market Indexes. The latter were created for people who wish to invest according to Islamic investment guidelines. The indexes track Shari`ah compliant stocks from around the world, providing Islamic investors with comprehensive tools based on a truly global investing perspective. Certain businesses are incompatible with Shari`ah Law. Thus, stocks of companies in these businesses are not considered suitable for Islamic investing. Incompatible lines of business include alcohol, pork-related products, conventional financial services (banking, insurance, etc.) and entertainment (hotels, casinos/gambling, cinema, pornography, music, etc.) Shari`ah scholars also do not advise investments in tobacco manufacturers or defense and weapons companies. Special care is taken to ensure that all securities selected for the Dow Jones Islamic Market Indexes are acceptable under Shari`ah Law. To this end, a Shari`ah Board of Islamic scholars has been created to counsel Dow Jones Indexes on matters relating to the Shari`ah compliance of the indexes' eligible components. The Dow Jones and Dow Jones STOXX indexes are licensed to companies around the world as underlying for investment products. The market has chosen Dow Jones STOXX indexes as the standard for European equity index derivatives. The Dow Jones EURO STOXX 5 underlies the largest equity index derivative in Europe and the second largest globally. Recently, Dow Jones Indexes has licensed the Dow Jones Turkey Titans 2 index to the Turkey based asset management company Finansportfoy to create the first exchange- traded fund in the Turkish financial market place. STOXX Ltd. is a joint venture of Deutsche Borse AG, Dow Jones & Company and SWX Swiss Exchange. Launched in 1998, in advance of the European Monetary Union, the introduction of the Euro and the creation of the Eurozone, the Dow Jones STOXX Indexes became Europe s leading equity indexes in a fast and impressive success story. Dow Jones Indexes is part of Dow Jones & Company, which publishes the world s most vital business and financial news and information. In addition to Dow Jones Indexes, Dow Jones & Company (NYSE: DJ; dowjones.com) publishes The Wall Street Journal and its international and online editions, Barron's and the Far Eastern Economic Review, Dow Jones Newswires and the Ottaway group of community newspapers. Dow Jones is co-owner with Reuters Group of Factiva, with Hearst of SmartMoney and with NBC Universal of the CNBC television operations in Asia and Europe. Dow Jones also provides news content to CNBC and radio stations in the United States. THE PRODUCTION PROCESS Basically, an index is regarded as a number that tells something about the current state of a market for stocks, bonds or some other instrument, be it foreign or domestic. For those that have invested in an index fund, the change in that number from day to day closely represents the movements of their portfolio. Not many think much about what it takes to produce that number, and the few that do usually regard the process as a bit murky no matter how clearly stated the index methodology may be. Like an iceberg, the visible part of an index misleads even informed viewers about the immensity and the importance of work that lies beneath the surface. The index provider faces a forever of daily monitoring, research and auditing to keep all its indexes before investors eyes. If an index provider does not do this job well, its index numbers sooner or later will be wrong, which probably will cost investors some money beyond what the market itself may inflict, and in turn, investors will stop using indexes from that provider. This is not a business model the index provider wants to follow. To illustrate the process, we focus on two groups known as Index Support and Production. Every index provider, though, faces similar issues and challenges, which demand enormous investments of resources to handle. The support group is responsible for researching and recording all changes to the components of a stock universe from which hundreds, if not thousands, of indexes have PAGE 14

17 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 been derived. The group also notifies licensees of these changes in great detail. There are two main types of changes: ongoing and periodic. Ongoing changes are typically corporate actions. Throughout the quarter, researchers scan news articles for mention of index components. This corporate actions team monitors 5, companies around the world and devotes a significant portion of every morning to ferreting out events affecting component companies. There aren t any data vendors offering all the needed information, so this group shoulders the responsibility. The corporate actions team is looking for mergers, acquisitions, spin-offs, bankruptcies, delistings, stock dividends, stock splits and cash dividends. Stock splits are among the best known of corporate actions. They tend to be fairly straightforward and are virtually guaranteed to take place on their pre-announced date. Mergers and acquisitions are another story entirely. From the time a merger or takeover is announced, researchers collect every document released on the topic and regularly call the companies involved to check on the status of the deal and as many details as they can dig out. Regulatory approval must be received before the deal can go through, and some industries, such as utilities, have their own regulatory agencies that must approve the mergers. Differing rules in foreign countries regarding mergers can also complicate the monitoring. Getting this information isn t always easy. Hostile takeovers in particular seem to bring out some people s stonewalling instincts. And many times, poor communication can be the source of difficulties. In emerging markets, information can be hard to find, and language barriers can throw up additional hurdles. At other times, the timing of a deal s completion can be elusive. A merger might be delayed for months while approval is sought from various quarters. Once that approval is received, the merger can go through in as little as 2 minutes. In addition to hard-to-find information and complicated corporate actions, bad data from outside sources is an occasional fact of life. Information is gathered from a variety of sources and verifying each piece of data with at least two sources is the rule. Nonetheless, over the past several years the information flow has improved substantially in both quantity and quality. This change could be chalked up to the spread of English in the business world and the rise of the Internet. Several years ago, for instance, the Kuala Lumpur exchange was still using a chalkboard to record the prices of its stocks. Today it has a first-rate website that provides more information than similar sites maintained by some stock exchanges in developed markets. At Dow Jones Indexes and STOXX Limited, customers are alerted to ongoing changes via daily reports that are sent out by the index support team, which is also in charge, not surprisingly, of customer service. The reports list upcoming changes to index components for the next two weeks, including ratings of how likely each corporate action is to take place. Each corporate action or merger/acquisition is given a 3-, 5-, 75- or 1-percent probability rating. Periodic changes also are made to indexes. Most indexes are reviewed quarterly or annually, meaning new components are selected and shares outstanding are updated. Dow Jones adjusts a company s shares immediately if it amounts to 1% or more of the market capitalization; smaller adjustments are accounted for during the next review. The reviews are implemented at the end of each calendar quarter, but the review process kicks off in the second month of the quarter. A review basically begins by taking a snapshot of the index components as they exist on a specified date and comparing it to the previous quarter s snapshot to spot what has changed. Deletions, name changes and initial public offerings must be identified. The changes that index support people have researched, tracked and documented then must be incorporated into the indexes being calculated in real-time or at the end of each day. The job of implementing changes falls to the production group. Production also implements routine changes such as stock symbols, identification numbers such as ISINs and switches in primary exchange listings. Production is as close as it gets to the index fairy because it s the main distribution hub for all indexes created and marketed by Dow Jones Indexes. The Dow Jones STOXX indexes are calculated in Zurich and distributed through the Deutsche Borse in Frankfurt. CONTACT INFORMATION Contact Name Mr. Lars Hamich pr-indexes@dowjones.com Website marketing@stoxx.com PAGE 15

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20 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TurkDEX (TURKISH DERIVATIVES EXCHANGE) Hamdi Bagci CEO The primary objective of TurkDEX is to become a global risk management center by providing derivatives tailored to meet the needs of traders, hedgers and investors. THE NEW ERA IN TURKISH FINANCIAL MARKETS... A MODERN MARKET ECONOMY Turkey has been changing rapidly. Over the last three years Turkey has grown by 25% and decades of high inflation have ended. The European Union (EU) accession process has accelerated economic and legal reforms. With its sound financial system and legal infrastructure compatible with the best of international standards, Turkey is a modern market economy. Turkey has vibrant a financial market. The average daily trading volume of stocks and bonds listed on the Istanbul Stock Exchange was TRY 6,99 million in 24. During that period average daily volume of spot currency trading was US$ 2,26 million. The free movement of capital and favorable legal environment encourages domestic and international participation in Turkish financial markets. Well over half of the stock market's capitalization is held by international investors. A NEW DERIVATIVES EXCHANGE Derivatives are the instruments that have been employed for many years to facilitate transfer of risk, price discovery, and enhance liquidity by offering detailed public information. Since the mid-198s the number of derivatives exchanges operating in both industrial and emerging-market economies has increased substantially. The derivatives market recently experienced tremendous economic growth and the will of integration into international markets motivated the establishment of a derivatives exchange in Turkey. As a result, Turkish Derivatives Exchange (TurkDEX) started operations by listing derivatives contracts on February 4, 25. TurkDEX is a self-governing, Capital Markets Board of Turkey regulated, joint stock corporation. It is headquartered in Izmir, by the Aegean Sea, which is the third biggest city in Turkey. The primary objective of TurkDEX is to become a global risk management center by providing derivatives tailored to meet the needs of traders, hedgers and investors. Elements of the microstructure of TurkDEX such as the trading mechanism, the clearing arrangements, the regulatory structure, and the derivatives products to be traded, were designed to offer a fully integrated financial service both in national and international markets. TurkDEX uses an electronic-based trading system which is more attractive to businesses and investors thanks to its improved access, reduced cost, and greater transparency. By using an e-trading system, TurkDEX will be able to draw business from traders around the world. The trading system guarantees maximum accessibility and provides instant order entry and matching, in addition to equal access for all participants to satisfy their needs and expectations. TurkDEX's system operates on Wide Area Network (WAN) topology consisting of permanent data lines between TurkDEX and its members, providing them with the capability to trade remotely. TurkDEX offers investors the ability to leverage the capital they invest by buying securities on margin. In other words, investors have the opportunity to buy / sell a contract with a proportional deposit, socalled margin which is relatively lower than the contract value. In addition, spread margining, which lowers the margin rates in case of having long and short positions at the same contract with different maturity simultaneously, is available. PRODUCTS To a large extent, the success of a derivatives exchange depends on the choice of products to be traded. The main categories of products preferred as underlying asset of derivatives are commodities, interest rates, currencies, individual stocks, and stock indexes. TurkDEX carefully designed its products according to market needs. To date, seven futures contracts are traded at TurkDEX. These contracts are: Index Futures - ISE 3 Stock Index Futures Interest Rate Futures - 91 Day T-Bill Futures Day T-Bill Futures Currency Futures - TRY / US$ Futures - RY / EURO Futures Commodity Futures - Cotton Futures - Wheat Futures The derivative instruments traded on TurkDEX will increase the utilization capacity of the financial service sector by enabling brokerage houses and banks to offer new investment and hedging instruments. The systemic risk in the financial system will be lessened by allowing corporations to shift the burdens of price risk to other parties. As an innovator and customer oriented exchange, TurkDEX will design and launch new futures and options contracts as well, in order to become the financial product superstore of Turkey. CLEARINGHOUSE The clearinghouse of TurkDEX is Takasbank, recognized by the UK SFA as an "Approved Depository" & an "Approved Bank" and complies with the "Eligible Foreign Custodian" definition of the SEC as well. Takasbank is the central clearinghouse of Turkey since it executes the settlement and clearing of the transactions in Istanbul Stock Exchange (ISE). Takasbank marks-to-market all open positions daily to determine the necessary margins. TurkDEX also has a guarantee fund to safeguard against any non-fulfillment of obligations of members to the clearinghouse arising from exchange contract transactions. PAGE 18

21 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MEMBERS One of the greatest assets of TurkDEX is its members. TurkDEX currently has 48 members, consisting of the largest securities dealers and banks of Turkey (see the table). All trading members of TurkDEX are clearing members as well, since they meet the required financial adequacy standards and other qualifications specified by the exchange. They can trade both for their own account and for their clients' accounts. TURKDEX: FACTS AND FIGURES Within its first months of operation, TurkDEX has witnessed remarkable growth in open positions as there has been strong investor demand in Turkey. TurkDEX has recorded a trading volume exceeding TRY 1 million (US$ 73 million) with more than 1, open positions in a three month period. The trading volume is growing steadily as more investors are introduced with TurkDEX products. In order to educate market participants TurkDEX continuously organizes training programs in co-operation with the Association of Securities Dealers and Banks of Turkey. Many Turkish universities are also providing courses on derivatives. As a result, a sufficient number of market professionals were trained in a short period of time. TurkDEX's aim to accelerate the growth of the Turkish financial industry as a whole marks the start of a new era by constructing the missing part of it. THE LIST OF THE MEMBERS Acar Investment & Securities Inc. Ak Investment & Securities Inc. Akbank Inc. Alternatif Investment & Securities Inc. Ata Investment & Securities Inc. Ata Online Investment & Securities Inc. Bender Investment & Securities Inc. Delta Investment & Securities Inc. Deniz Bank Inc. Deniz Investment & Securities Inc. Deutsche Bank Inc. Dis Investment & Securities Inc. Eczacibasi Investment & Securities Inc. Egemen Investment & Securities Inc. Ekinciler Investment & Securities Inc. Ekspres Investment & Securities Inc. Evgin Investment & Securities Inc. Finans Investment & Securities Inc. Finansbank Inc. Form Investment & Securities Inc. - Garanti Bank Inc. Gedik Investment & Securities Inc. GFC General Finance Securities Inc. Hak Investment & Securities Inc. HC Istanbul Investment & Securities Inc. Hedef Investment & Securities Inc. HSBC Bank Inc. Info Investment & Securities Inc. Is Investment & Securities Inc. Kocbank Inc. Nurol Investment & Securities Inc. Oyak Investment & Securities Inc. Oyakbank Inc. Oncu Investment & Securities Inc. Prim Investment & Securities Inc. Raymond James Investment & Securities Inc. Sanko Investment & Securities Inc. Standard Investment & Securities Inc. Seker Investment & Securities Inc. Tacirler Investment & Securities Inc. Taksim Investment & Securities Inc. Taris Investment & Securities Inc. TEB Investment & Securities Inc. Turkish Foreign Trade Bank Inc. Turkish Industrial Development Bank Inc. Vakif Investment & Securities Inc. Yapi Kredi Investment & Securities Inc. Yatirim Finansman Investment & Securities Inc. For an updated list please visit CONTACT INFORMATION Contact Name Mr. Hamdi Bagci turkdex@turkdex.org.tr Website PAGE 19

22 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 DENIZBANK FINANCIAL SERVICES GROUP Hakan Ates President and CEO DenizBank became one of the foremost names in the Turkish banking industry, earning a well-deserved reputation for excellent service. THE RHYTHM OF OUR BUSINESS DENIZBANK FINANCIAL SERVICES GROUP Following many years of success, DenizBank became one of the foremost names in the Turkish banking industry, earning a welldeserved reputation for excellent service. The DenizBank Financial Services Group consists; Banking DenizBank DenizBank AG DenizBank Moscow EuroDeniz Off-Shore Bank Investment Banking and Brokerage DenizYatirim Securities EkspresInvest TarisSecurities Deniz Investment Trust Deniz Portfolio Management Leasing and Factoring DenizLeasing DenizFactoring IT Services Intertech FROM DENIZBANK TO THE DFS GROUP DenizBank became one of the foremost names in the Turkish banking industry, earning a well-deserved reputation for excellent service. After DenizBank was acquired by Zorlu Holding in September 19, a revitalization program was initiated that encompassed the hiring of new personnel and opening branches under the new corporate identity. This was achieved under the guidelines of a five-year strategic plan where all targets were successfully met. Expansion was supported by the acquisition of a number of branch offices from SDIFcontrolled banks, as well as several financial companies including Tarisbank, which merged into DenizBank by the end of 22. Additionally, DenizBank established and/or acquired financial companies that included banks in Austria, Russia and the Turkish Republic of Northern Cyprus in addition to factoring, leasing, investment and brokerage companies to complement its existing banking products and services. In addition to DenizBank, the DFS Group has ten domestic and three international financial subsidiaries, a financial services branch in Dortmund, Germany, as well as an overseas banking unit in Bahrain and in the Turkish Republic of Northern Cyprus. They are: DenizYatirim Securities, EkspresInvest, Deniz Investment Trust, Deniz Portfolio Management, TarisSecurities, DenizLeasing, DenizFactoring and Intertech on the domestic side and DenizBank AG, DenizBank Moscow and EuroDeniz Off- Shore Bank Ltd. on the international side. With major operations, financial control and accounting functions centralized, the DFS Group has successfully transformed DenizBank's branch offices into marketing centers thereby optimizing the number of employees and improving operational efficiency. The DFS Group possesses a service network that reaches all segments of the society throughout Turkey. It also has a solid standing in the Internet environment which provides customers, both individual and corporate, with the facility to conduct financial transactions remotely from anywhere in the world. With adherence to the highest ethical business practices and corporate governance principles, the DFS Group has created sustainable, multi-faceted relationships with corporate and retail clients focusing on small and medium-size establishments, exporters, private companies and individuals. The DFS Group also has some niche markets such as ship finance, tourism, agricultural lending, foreign construction projects and medicare. DenizBank and its financial institutions have adopted the best practices in corporate governance and international business. Consequently, the DFS Group is ready to comply with EU norms and already has operations in a number of EU countries, through DenizBank AG, its subsidiary based in Vienna, Austria. The Group also has a subsidiary in Russia, another important trading partner for Turkey, rendering all complementary services to DenizBank, Istanbul. DenizBank's IPO was a landmark event in Turkey's capital markets, which had been lackluster for some time. ZORLU HOLDING The history of Zorlu Holding goes back to the early 195s when it was established as a home-based producer of textiles. It later grew into a dynamic group of industrial companies, globally recognized for high quality. Zorlu Holding is now one of the largest and most extensive industrial conglomerates in Turkey. With a total of 65 companies, Zorlu Holding has 15 large-scale industrial concerns operating in the international arena and three energy plants providing employment for 27, people. Currently, Zorlu Holding concentrates on four major business areas: Home textiles and polyester yarn Electronics, consumer durables and information technology Financial services Energy production Having steadily grown in the area of home textiles during the 198s, the TAC brand of the Zorlu Holding Textiles Group has become the leading brand in the Turkish home textiles industry. In 1994, the Holding acquired Vestel Electronics and in 1996 began operations in the energy sector through Zorlu Energy. The Holding further increased the number of companies under its management as it ventured into the financial services sector in 19 with the acquisition of DenizBank. DENIZBANK AT A GLANCE Following another year of favorable results, the total consolidated assets of DenizBank reached US$ 6,31 million at the end of 24, an increase of 26% over the 23 figure which was US$ 4,82 million. By the end of the year, the Bank's net worth stood at US$ 667 million, recording an increase of 42% over US$ 471 million posted in 23. The capital adequacy ratio of DenizBank was as high as 17.8%, with its free capital ratio, one of the best in the Turkish banking system at 7%. DenizBank currently has 199 branches nationwide in addition to an Internet Branch and a Call Center. PAGE 2

23 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 CORPORATE BUSINESS DenizBank continued corporate marketing activities and initiated a new marketing approach specifically designed to focus on the needs of customers in different segments. In 24, following restructuring, the Bank's corporate business was divided into three segments to allow for specialization and diversification of products and services catering to their specific needs. These segments include: Corporate Banking serving companies with annual turnover of more than US$ 25 million; Commercial Banking serving companies with annual turnover of between US$ 2 million and US$ 25 million and; Small Business Banking serving companies with less than US$ 2 million annual turnover. Corporate Banking: Following segmentation and redefining target customers in the corporate banking segment, approximately 1,35 large-scale companies were retained in the portfolio; the smaller ones that remained were transferred to the commercial banking portfolio. Specialized corporate banking services were initiated at six branches and three new corporate branches were opened. Commercial Banking: The Commercial Banking Group serves their customers out of eight regional directorates and 126 branch offices across the country. With a staff of 26 sales and marketing specialists, the Bank allocates considerable funds for commercial segment customers. SME Banking: Thanks to efficient workflow and the scorecard, a typical SME credit application is approved within 48 hours. The SME Credit Group started operations evaluating only 5-6 credit applications a day but this number increased to 6 daily in the following three months. As a pioneer in the SME segment in Turkey, DenizBank aims at further diversifying its loan book into small and medium-size companies as it develops additional products and services able to cater to the business needs of this segment. RETAIL BANKING Retail Marketing: To achieve maximum customer satisfaction and optimize on operational costs, a number of new consumer products were launched during 24, some of them for the first time in Turkey. These products include: Alo-Kredi; a type of a consumer loan granted on the phone without requiring the borrower to visit a DenizBank branch and without a third-party's guarantee Express limit, an additional installment loan facility on credit cards, that can be utilized for durable good purchases at member merchants via POS terminals A 4-month grace period for consumer loans Special credit terms for the employees of certain institutions like the Central Bank, Turkish Industrialists and Businessmen Association member companies and The Scientific and Technical Research Council of Turkey (Tübitak) A number of cross-selling campaigns were organized for existing DenizBank customers: mutual fund investors, direct deposit customers, employees of companies receiving their salaries through DenizBank and credit cardholders without overdue problems A number of campaigns, like additional installments, cash rebates, customized reward and postponed payment were organized in order to increase the turnover of DenizBank credit cards DenizBank started issuing the Bonus Visa Card in addition to the Bonus Master Card Repo, T-bills trading and mutual fund transactions were added to ATMs' functions Credit Cards: DenizBank credit card applications are processed through the online real-time workflow system, which serves to increase the pace of operations and approvals. All applications are processed through a scorecard-based approval system which facilitates limit allocations and performance monitoring. Always aiming at delivering the best available service to cardholders, DenizBank is continuously improving its technological infrastructure and enhancing its card processing systems. The market share (by volume) is 3.22% by year-end 24. Bonus Card: Bonus Card is the first multibranded chip based credit card in Turkey, offering both installments and rebate rewards. There are 35, partner merchants taking place in the Bonus program which offer installments and cash rebates to Bonus cardholders. Direct Sales: Direct Sales consists of; Consumer Loans Overdraft Facility Bill Payment Orders Mutual Funds Insurance Services Life and non-life insurance products Alternative Distribution Channels: Through DenizBank's alternative distribution channels customers may access a large number of services without the need to visit a branch office. In addition to routine banking transactions, these services also include investment products which DenizBank customers can utilize through the Internet Branch, ATMs, Kiosks and the Contact Center. Through these channels they can buy and sell mutual funds, government bonds and Treasury bills. Customers can also change foreign currency and buy prepaid GSM cards through alternative distribution channels. Additionally, debit card applications can be made through all four of these channels. In 24, DenizBank pioneered an other first in Turkish banking. In addition to applications through branches and the website, customers can now apply and register online for Internet banking services by simply calling the Contact Center. In an effort to promote the use of alternative distribution channels, customers are given DenizYildizi (SeaStar) Contact Center and Kiosks, in proportion to their usage of the channel. SeaStar entitles the customer to certain privileges or benefits in their relationship with the Internet Branch: In operation since 1999, DenizBank's Internet has capabilities for modular transactions and information search facilities. Through this innovative medium, the Bank's customers can conduct all banking and investment transactions online. These transactions include making utility payments and money transfers, placing direct debit orders via credit cards, merging of accounts, enabling the upgrading, canceling and resizing of stock orders, as well as communicating with Contact Center personnel. CONTACT INFORMATION DenizBank Contact Center info@denizbank.com Website PAGE 21

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26 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TATA CONSULTING SERVICES TCS provides highly scaleable, flexible and reliable technology solutions for the financial markets. S. Ramadorai CEO and Managing Director ABOUT TCS TATA Consultancy Services Limited (TCS), a part of the TATA group, is one of the world's leading global information technology (IT) consulting, services and business process outsourcing organizations. The largest software and services company in Asia, TCS was also the first Indian IT services organization to cross the billion dollar mark in annual revenues. The company employs over 4, associates at about 15 branches across 33 countries. It services more than 1, global clients, including eight of the top ten US companies, in diverse industries such as banking and financial services, insurance, manufacturing, telecommunications, retail and transportation. The pioneer of the flexible global delivery model for IT services, TCS offers a comprehensive range of technologydriven business solutions to its clients. The company s unmatched ability to deliver high quality services and solutions has made it the world s first organization to achieve an Enterprise wide Maturity Level 5 on both CMMI and P-CMM. EXPERIENCE IN FINANCIAL SERVICES Over the years, global financial markets have created liquidity and opportunities, and, at the same time, have become increasingly complex, competitive and volatile. Driven by the quantum leaps in technology, these markets are rapidly moving towards borderless business. The emergence of a truly global economy, and deregulation have created the need for a new generation of capital market solutions that operate in real time with absolute reliability, and support trading, clearing, and settlement through all time zones on correct value dates. With the growing volume in trade, various strategies are being implemented to reduce the related risks. Many markets are shortening the settlement cycles. TCS recognises the fact that the dynamic financial environment will require innovative services conceived and delivered, quickly and cost efficiently. To cope with the challenges posed by the rapidly changing business and technology environments, TCS is continuously developing new result oriented strategies and creative solutions for the banking and financial services industries. Besides providing specialized software solutions to customers around the globe, TCS has also designed solutions for these industries based on rich experience acquired both in matured and emerging markets. TCS has developed solutions for different business areas within the financial services and securities industry, spanning international banks, stock exchanges, clearing, matching and settlement organisations, depositories, custodial services, brokerage firms, mutual funds, rating agencies, financial institutions and asset management companies. This has given TCS formidable domain expertise in the Security Industry Value Chain. Based on this global experience, TCS has developed the following products to cater to the dynamic market needs: Trading solution TradeX Clearing and Settlement solution eclearsettle Brokerage solution eibs TradeX The changing landscape of the securities industry has increasingly entailed an integration of trading systems with new age technology. There is a definitive need to introduce a genre of new solutions that operate in real time with flawless reliability. To achieve improvements in business performance and sustained operational efficiencies for the digital market places of tomorrow, TCS has developed a futuristic stock exchange trading solution TradeX. TradeX offers an integrated, configurable and highly scalable trading system framework for multiple instruments like equities, debt, derivatives, commodities, forex, mutual fund, and ETFs. It is a component based product, and can be tailored to meet client specific requirements. TradeX provides an open system architecture facilitating product implementation on the latest software and hardware. It provides a framework for implementation of the core components and the add-ons through a layered architecture. This provides for technical configurability, and a high level of scalability. The TradeX Edge TradeX is an integrated rule-based application engineered for flexibility, convenience and ease of maintenance. Substantial reduction in time to launch new trading segments and markets through parameterization Faster anytime-anywhere-anyhow access to real time information for all the users through multiple access channels Integrated risk management system with multi-level security validations Integrated margining and optimizing of investor capital State of the art technology product, complying with international standards like FIX, ISO, GICS, ANSI 9.19 and X 59, and facilitating interoperability User friendly product with interactive GUIs, alerts, and reports The TradeX Advantage The digital marketplaces of tomorrow will redefine the business paradigm. TradeX has been developed keeping in mind the changes in the securities landscape, to give an exchange the winning edge in this new age of technology. Integrated Trading Platform: A common infrastructure and front end to support trading and exposures display across multiple segments along with an integrated RMS Configurability for quick launch of new trading segments and markets using rule based configuration Parameterized approach for easy maintenance of existing markets and segments Cross border trading simplifies trading on various partner exchanges 24x7 availability architecture enables round the clock querying and trading on partner exchanges Multi-currency trading supports trading in foreign stocks in their local and foreign currencies Trade negotiation chat facilities for structured negotiation with multiple counterparties Multiple access channels increases reach to all the end users Open system API based approach enables external entities to communicate with TradeX Scalability and flexibility for up-gradation to a higher configuration High reliability and recovery from the point of failure without any data loss Caters to the stringent security requirements of the business eclearsettletm TCS s eclearsettletm is a comprehensive product for clearing and settlement for the equities, fixed income and derivatives segments. eclearsettletm offers end-to-end solutions for Central Security Depositories, Clearing Organizations, Registrars and Central Banks worldwide. It is based on TCS s expertise in international clearing and settlement markets across Europe, North America, Middle East and South Africa. eclearsettletm comprises of various components namely: Common Library Depository Services Clearing and Settlement for Equities and Fixed Income Instruments Clearing and Settlement for Derivatives Risk Management Registrar Services These components can be implemented independently or as an integrated system for an organisation based on the services it provides. eclearsettletm supports a range of global securities across different market PAGE 24

27 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 segments - equity, fixed income and derivatives. The various categories of participants include Stock Exchanges, Investors, Clearing Members, Brokers, Registrars, Custodians and Banks. eclearsettletm supports links to multiple exchanges and the needs of the over the counter market and also enables real time links to payment systems as well as other systems such as Information Vendors and Overseas Clearing Corporations. The eclearsettletm Edge Product suite encompassing Clearing, Settlement, and Depository functions Compliance with international standards and practices such as G3, IOSCO recommendations relating to Security Numbering, Messaging Standards, Settlement Models, Security Lending and Borrowing, and participation of indirect participants Adopting international best practices in standards implementation such as ISO 1522 and XML Multi Region / Market capability State-of-the-art technology protecting from obsolescence and costs of technology upgradation Cost effective solution providing short time to market and quick customization Proven delivery track record backed by domain expertise and competencies and experience working with major clearing and settlement organizations world wide Large pool of domain and technology experts and skills The eclearsettletm Advantage Global range of securities Multi-entity, multi-market segment (spot, odd lot, cash) and multi-currency capability Combination of settlement models (gross trade by trade, netting) and payment methods Central counter party services Settlement cycle (Rolling T+n, account period) Integrated risk and collateral management Interfaces to third party margining solutions Compliance with international standards and best practices Real-time interfaces with exchanges, market places, payment systems and participants Component based design using OOAD, UML providing easy maintainability, scalability and high performance Scalable, extensible solution Multiple delivery channels -Message based solution-swift and XML -Support for GPRS/WAP, IVR, Notes / Exchange and SMS Browser-based interface Integrated Reporting component -Flexible and customizable report layouts using Crystal -Reports in PDF, RTF and HTML formats -Automated despatch using e-ibs TM As stock markets in the world move towards deregulation and shorter settlement cycles, the long-term success of brokerage firms will increasingly depend on the enhanced operational efficiencies of their software systems. Systems, which offer seamless operations to cater to industry-wide standards and possess with them a high degree of flexibility and extendibility are required. TCS e-ibs TM is specifically designed for international brokerage institutions operating in a global environment. TCS e-ibs TM is a futuristic state-of-the-art solution, which has been designed with the objective of catering to the front, middle and back office complexities of a brokerage firm in a multimarket, multi-instrument and multi-currency environment. The e-ibs TM suite is completely integrated across all its various components, viz. MATRIX, THEOREM, and PRECISION. Each component can be deployed to suit individual requirements. This is a rule-based solution and offers a great deal of flexibility in handling varied operational intricacies. MATRIX is a multi-market, multi-instrument, and multi-currency trading system for Equity and Derivatives for both institutional and retail investors through offline and online interface channels. Salient Features Intelligent Order Routing and Management based on workflow Advanced Trading Strategies Module with online graphical pay-off profiling SPAN interface Arbitrage, Basket trading, and Portfolio management Option calculator Online Interface with banks and depositories Robust and scalable solution Real-time maintenance of portfolios and orders Integrated news, streaming and market data Highly secure and reliable Internet trading platform Standard message based interface with third party trading systems Extensive queries and reports on order / trade status and market information THEOREM is a comprehensive and centralized rule-based risk management system, which integrates the front office and the back office. Salient Features Order -based risk management with online position monitoring An integrated view of positions across front office and back office Rule based system allowing the user the flexibility to define the business rules Centralized risk management across various instruments and markets Parameterized and comprehensive risk profiles Prudent risk management with balance between leverage and conservatism Real-time user defined limits and alerts Automated deactivation and suspension of entities Interface with CME s PC SPAN and MORE (TCS Proprietary risk library) engine Password protected access levels Comprehensive audit trails Automated figuration and exception monitoring Multiple collateral types with real time valuation PRECISION is a comprehensive clearing and settlement solution, which caters to the diverse requirements of brokerage firms. Salient Features Multi-market, multi-instrument, and multi-currency Flexible configuration Automated trade confirmation and position adjustment Rule based market and instrument driven settlement scheduling Rule based configurable brokerage schemes Effective position management with configurable netting options Exceptions handling like Buy-in and Sellouts Comprehensive funds and securities settlement Multiple collateral types with real-time valuation Margin computation based on VaR, SPAN Extensive and configurable MIS reports Near real-time securities and funds accounting Multiple Access channels; Web, , Fax, IVR and SMS Regulatory reporting Standard messaging compliant Multi-layered role-based access - Maker checker and audit trail facility CONTACT INFORMATION Contact Name Mr. Jagdish Bhandari jagdish.bhandari@tcs.com Website PAGE 25

28 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 WORLD FEDERATION OF EXCHANGES Thomas Krantz Secretary General As a social responsibility, and as an essential part of further business development, exchange managers come forward as leaders in public debates on capital markets, and to correct inaccuracies in the discussions about regulated bourses. THE SIGNIFICANCE OF THE EXCHANGE INDUSTRY At the Heart of the World Economy Since the end of the 198s, regulated securities and derivatives exchanges have come to play a major new role in international finance. That role is qualitatively different from anything seen since World War II. Quantitatively, the markets operated by exchanges have grown to a scale unimagined before, positioning them at the heart of the world economy. This remains true despite current macroeconomic difficulties covering large parts of the world. The active confrontation of buy and sell orders on a public market determines corporate asset values in a manner that is fair and visible to all. Exchanges have made this business growth possible, and the size of their industry has changed their position within the international economy. They have done this by: aligning their corporate strategies with the business potential adapting the rules for trading access and listing of securities training their staff and investing in infrastructure boosting the commerce of finance with new telecom and computer technologies providing stimulus for trading and improved risk management through derivatives markets supporting pension and retirement savings schemes participating in the reorientation of finance from bank loans into securities promoting the increase in cross-border investment and trading This expansion in the work of regulated exchanges coincided with a trend in the late 199s leading many bourses to switch from a business structure based on broker cooperatives with member broker/bank ownership to for-profit limited companies with outside owners. For most of the Federation s members, business objectives changed with this new governance form. The heightened commercial feel of this industry also affected those exchanges maintaining their mutual legal form, and they have proven themselves to be successful competitors. The dynamism of these businesses is one reason for the qualitative difference in the role of exchanges in this century: the markets could not have grown in scale to the extent they did, even considering the current downturn, if their operations were not of high quality, and recognized as being the most efficient venue for listing and trading of securities and standardized derivative instruments. Exchanges are visibly identified with the commercial spirit of the times. Exchanges symbolize market capitalism. The level of their activities gives an instant short-hand summary of entire nations socioeconomic health. It is natural that these enterprises be managed as dynamic businesses in their own right, enabling them to meet the commercial demands of the markets. The Transformed Position of Exchanges In December 199, the World Federation of Exchanges (formerly FIBV) counted 38 members. The total market capitalization of equities listed on these bourses was US$ 9,4 billion, and the value of share trading for the year hit US$ 6,211 billion. By June 23, the Federation had grown to 56 members. Total market capitalization had risen to US$ 25,481 billion, after reaching a high point in March 2 of US$ 36,286 billion. The value of share trading during 22 fell back to US$ 33,453 billion, compared to the previous year s US$ 41,225 billion, and on an annualized basis stood at US$ 3,748 billion in June 23. While the business environment is difficult, the charts show that the long-term growth trend of increasing public reliance on capital market financing remains intact. Like the underlying growth in the economies themselves, this upward trend remains subject to fluctuation. This long-term trend translated into: growth in equity market capitalization over the period of 171% growth in trading volumes of 395% acceleration in the annual turnover velocity of shares from 66% to 121%, doubling the liquidity provided on regulated exchanges. Enhanced business profitability, privatizations, IPOs, indexes and derivative products, and cross-border trading fed this transformation. The exchanges were key actors which adapted, invested, participated and enabled this to take place. The Scale of Regulated Exchanges By all measures, the health of an exchange is vital to a market economy. As a percentage of gross domestic product, the value of equity market capitalization of Federation member exchanges varied from a low of 9% to a high of 313% at the end of 21, the last year for which the IMF s GDP statistics have been provided. The global average market capitalization for equities on members exchanges was 73% of GDP in 21. Moreover, these assets include most of the world s most highly prized companies. At the end of 1991, 25,98 foreign and domestic companies were listed on member exchanges. Ten years later, at the end of 22, this number had grown to 38,333. The world s corporations favor this source of funding, and economic theory and practice confirm the efficiency of this form of capital financing. In 1999, companies and governments raised new capital on Federation member exchanges amounting to US$ 754 billion, and this increased to US$ 896 billion in 2 under market conditions that were becoming less favorable. The figures for fresh capital raised have dropped steeply since, to US$ 342 billion in 21 and US$ 262 billion in 22. But these amounts remain very significant economically. Economic reliance on exchanges is one of the key changes in finance over the last decade. Public policy makers, corporations, and the saving public have come to appreciate the importance of these figures as the historical trend remains striking. Moreover, in many parts of the world, exchange index movements have come to be integrated into the rhythm of daily life, every few minutes on the radio, at regular intervals on television, and constantly on the Internet. The capital markets have given rise to considerable expansion of the specialized printed press, too. The names of broad equity market indices are commonly recognized as being of social importance. When the market moves more than a few percent up or down, it is big national news. When exchange trading is interrupted for whatever reason, that too is major news. Clearly, a different kind of financial business has emerged on the scene. No other actor has such an affect on the public mind, and that, too, is meaningful. This heightened reliance on public capital markets has been taking place in many countries around the world, involving by far the greater part of the world s economic life. Exchanges centrality to social wealth creation is established. Corporate treasurers need to factor in their ability to tap this source of cash by issuing securities, just as finance ministers try to balance national budgets with their privatizations of state-owned businesses. Public awareness of the need to invest has prompted great individual interest in equities and related exchange-traded products, too. A further benefit has been the broadening of share ownership, and with it the loosening of market forces for better corporate governance practices. Exchanges Establish Fair Rules for Efficient Markets Exchanges have a distinct, market-neutral identity within the financial services sector. They are not insurance companies, investment firms, banks, or brokerages. They operate regulated securities and derivative markets. These markets establish asset values through efficient price discovery, enabling the public to know how much companies are worth according to the latest news and economic outlook. Putting together rules, know-how and technology for transparent trading of assets worth three quarters of one year of the world s GDP is quite a responsibility; to meet that challenge is to assist in building prosperity. Regulated securities exchanges provide PAGE 26

29 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 solutions by creating greater efficiencies across the public capital markets value chain, and diffusing ever more complex and better quality financial information to support the work of all actors. This essay now moves on to state some of the business questions exchange operators face. A financial market is highly sensitive to its environment; operating an exchange is a proportionately complex business. Regulation helps make the markets more efficient, but much also depends on human talent and judgment, just as is the case elsewhere in the financial services industry. Governments are profoundly involved in matters of public savings, as are the corporate issuers of securities and the investors themselves; together with them, operators of exchanges must often fine tune rules to keep this business model right. Today, the scope of this business underscores the dual, simultaneous national and international challenge that the functioning of these markets represents. For fair and transparent price discovery to occur, the business of exchanges precedes the instant of trade order execution and extends well beyond. Even if by law or custom the exchanges in every country do not operate these diverse activities directly, their involvement in them is extensive. The bundle of related businesses is what builds a coherent, secure market. The entire value chain must function smoothly, including: writing the rules for market activity admitting intermediaries (banks or brokers) to act on the central market assuring the ability in-house to follow intermediaries positions, and so establish enforcement of market rules admitting securities to listing assuring on-going disclosure of corporate information setting up adequate IT and communications systems facilities diffusing of market information to a wide public trading assuring prompt and final clearing and settlement of orders providing for securities registry, transfer agent, and depositary activities In addition to equities, Federation members conduct nearly all of the world s on-exchange trading of government and corporate bonds, derivative instruments, investment funds, exchange-traded funds (ETFs), warrants, and convertible bonds. Also in this commercial environment, exchanges are extending further into after-trading services in search of good returns in related business fields. The Business of Running Exchanges Whether a for-profit company or a cooperative, exchanges must serve their customers and earn money to ensure business growth. This means: improving staff operations and competency rewriting rules as know-how, technology, products and opportunities gradually modify the market and create new challenges scaling up IT and telecommunications systems connecting markets to ever more players enhancing surveillance and control functions. Actors, instruments, and types of securities are growing in complexity, and trading in them interacts more intensely, often across borders. improving the information disclosed on companies and market data leading improvements in how corporations are governed addressing strong national and cross-border competition investing reserves strategically assuring a good return on capital organizing programs for educating users of the exchange business A growing number of exchanges have introduced the shares of their companies on the markets they operate, emphasizing at the same time the for-profit and public nature of this industry. With this mix of questions in mind, it is notable that technologies and efficiencies at exchanges have enabled them to lower unit costs throughout the 199s and afterwards. Up until the end of 22, total revenue growth was strong over this period at 3%, and notably lower than the 395% increase in annual trading volumes. The benefits of scale and technology were passed on to customers in lower charges to clients. Challenges for Exchange Managers There is a public good in operating an exchange, and managers certainly recognize the importance of this. Bourses are not the only segment of financial services to have this distinction. However huge the markets relative to the economy, in the end, exchanges are about running regulated businesses. On balance, one cannot have regulation without a prosperous business environment, and one cannot have a prosperous exchange without clear rules and respect for them. Intangibles matter to exchanges: their marketneutral position, and the value of their reputation for fairness and transparency in the conduct of trading. Managers do their utmost to enhance the quality of these assets, for they are commercial elements central in running the business. The question is sometimes implied that the quality aspects of the business, the assurance of regulatory services, is not entirely compatible with a for-profit environment. Yet all businesses must assume costs of quality for goods and services, whatever the industry. In many jurisdictions exchanges are subject to particular questioning on this point, while the economic scale of this industry, and the market statistics, demonstrate that market mechanisms are functioning properly. Volume growth and reduced bid-ask spreads underscore the operating efficiency of exchanges. The size of the exchange industry is small compared to the economic function of the markets. Including consolidated companies, Federation members at the end of 22 employed people, and operated off a total capital base of US$ 13.4 billion. The corporate size of exchanges is also small compared to banks, insurance companies, institutional brokerages and other investment firms. Each has key financial functions to fulfill, including in the capital markets. But given the complex work of exchanges and their centrality to economic life, their relative size often means that these managers are not sufficiently heard in public financial policy debates. The public agenda may be too keyed to issues of banking and insurance; but for successful macroeconomic management, the figures in this paper demonstrate the need for greater focus on regulated exchanges. Their success cannot be taken for granted, and the experience of bourse managers must be drawn upon and used as a key tool in devising public policies. Exchanges need independence and freedom to operate within the rules of the regulatory environment. There can be unintended consequences of too much regulation that will impede the market function. The goal to pursue, the hard balance to find, will involve unleashing the full benefit of an exchange within the set rules of the local jurisdiction, remembering that there will never be a situation of zero risk for investors or issuers, and that governments should not be aiming for that objective. That simply is not what financial markets are about, and even to imply that would give a poor sense of this business. In trying to take business off the bourse, many other financial actors criticize the central role exchanges fulfill. Some commentators underplay the competitive pressures Federation members feel as enterprises. In acting in this way, they harm to price discovery on central markets, undermining a mechanism that clearly provides a social good. Also, in some jurisdictions experimentation with market structure has led to sharp falls in trading, notable widening in bid-ask spreads, or higher costs to final clients all of these being sure signs that the market has become less efficient. Exchange managers must be involved in regulatory planning, so that adaptation to changing commercial conditions in finance is taken into account. The investing public and listed enterprises must not be disadvantaged. As a social responsibility, and as an essential part of further business development, exchange managers come forward as leaders in public debates on capital markets, and to correct inaccuracies in the discussions about regulated bourses. Most recently, they have been strengthening rules and helping to have legislation enacted that will hold corporate leaders to higher standards. Exchange enforcement of market rules has been reinforced, too. Together these measures will renew and enhance the confidence needed between public listed enterprises and investors. CONTACT INFORMATION Contact Name Mr. Thomas Krantz secretariat@world-exchanges.org Website PAGE 27

30 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TAYBURN KURUMSAL Ediz Usman Partner & Client Relations Director Understanding its customers and providing them with high-quality and value oriented service underlie Tayburn's fundamental business approach. THE THREE FUNDAMENTAL ASPECTS OF CORPORATE COMMUNICATION Just as competition is becoming the keynote of every sector in today's business world, the ability to institutionalize has become one of the most important factors that enables a company to survive. The economic upheavals of the recent past and the increasingly tougher competition in every sector have made it absolutely clear that institutionalization is essential if a company is to endure, achieve stability, and grow strong in the international arena. In such an environment, there are three fundamental aspects of corporate communication to which attention must be given: Branding, Reporting, and Marketing. In their efforts to institutionalize themselves, companies need to manage their branding process effectively; to communicate their corporate line, vision, mission, and financial strength in the best way possible; and to employ new and creative marketing techniques. It is at this point that Tayburn Kurumsal and Tayburn Tasarim come into the picture as business partners that highly experienced in corporate communication for their clients. TAYBURN GROUP With a quarter of a century of experience in international as well as European markets, Tayburn is the biggest advertising agency in Scotland and the tenth biggest in the United Kingdom. It has been eleven years since we began blending Tayburn's know-how with our own knowledge of the local market and putting them to work in the service of clients. For more than a decade we have developed and offered productive, high-quality, and creative solutions for some of Turkey's leading companies in the areas of annual reports, branding, design, new media, advertising, and marketing. Thanks to our expert team, to the knowledge and experience acquired on our own and through Tayburn, to our customer focus, and to our innovative and creative approach to service, we are today Turkey's most soughtafter service provider in the corporate communication segment. Our service area as Tayburn Kurumsal and Tayburn Tasarim is not limited to Turkey. Because of our world-class know-how and quality of service, we are also called upon by clients operating in Europe and in neighboring countries. Our own technological infrastructure makes it easy for us to provide such clients with fast, comprehensive service too. Tayburn is also continuously developing itself and keeping pace with change. Its goal is to be a source of inspiration on all corporate communication issues by making the best possible use of the opportunities provided by technology and offering service at the highest international standards. Taking this as its point of departure, Tayburn also serves clients effectively and comprehensively on all the new electronic platforms that technology is constantly making available such as custom-designing websites according to their needs and preparing web-based reports, applications, and other electronic products. VALUE ORIENTED Everything that is done at Tayburn is for the customer. Understanding its customers and providing them with high-quality and value oriented service underlie Tayburn's fundamental business approach. Our business is not limited to classical advertising services: we offer high addedvalue products and services that are informed by our careful and thorough understanding of each customer's unique corporate communication requirements. Nourished by our innovative spirit, our approach to business also serves as our guide as we give shape to our services in the future. Each member of our team performs his job with a passion for success. And so long as this passion for success remains fresh and enduring in our team Tayburn will continue to expand its satisfied customer base and achieve its corporate objectives. Creative and integrated corporate communication solutions Since 1994, Tayburn Kurumsal and Tayburn Tasarim have been providing its corporate customers with the expertise, originality and proven experience that they require for the development and execution of whatever creative communication solutions they may be in need of. The integrated and creative corporate communication products and services that we offer you fall under the following main headings: Reporting Developing and producing printed and electronic products aimed at enabling companies to communicate clearly and effectively with all their stakeholders (shareholders, employees, suppliers, customers) Annual reports and interim reports Environment and human resources reports Electronic annual reports Web reports Branding Corporate and consumer brand creation, development, standardization and protection Logo design Full-service corporate identity creation and development Brand launching and relaunching Corporate identity products Consultation services Marketing Developing, producing, and executing all the advertising, promotional, and corporate communication products and services that corporate customers may need anywhere in their product-service-customer cycles Campaigns Corporate publicity films Advertising films Advertisements (national/international) Web-based solutions Brochures, publicity kits, calendars and date books Copy-writing and editorial services in English, French, German, Italian, Russian, Spanish, Turkish. (Other languages available on request.) CONTACT INFORMATION Contact Name Mr. Ediz Usman info@tayburnkurumsal.com Website PAGE 28

31 inspiring solutions stanbul Edinburgh London Süleyman Seba Cad. Ac su Sok. 1/15 Maçka stanbul Turkey Telephone Fax Web site

32 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 IS INVESTMENT Ilhami Koc General Maneger Is Investment has all the means and tools to become the foremost player in the capital markets - not only in Turkey but also internationally. We believe the infancy stage of the capital markets in Turkey is coming to an end. When compared to emerging capital markets in close geographical proximity to Turkey, we can see that Turkey has come a long way toward establishing a well-functioning, transparent and safe market for domestic as well as for international investors. Turkey, which has been placed amongst emerging countries category for a long time, is at last starting to be accepted as a country that has been experiencing a serious transformation process on the way of European Union (EU) membership in the last years. This positive transformation has two fundamental reasons; first one being that EU organization will become a benchmark for Turkey in the near future and the second one is declining inflation in the last 3 years. Is Investment was established in 1996 as a subsidiary of Is Bank, its main shareholder with 92% share, which has always held a distinctive position in capital markets. Is Bank has accomplished many firsts for the establishment and development of the Turkish capital markets; it has the highest number of investors, manages the largest investor portfolios and has handled the majority of public offerings. Besides traditional brokerage activities, Is Investment has diversified financial services like corporate finance activities, investment advisory and international capital market activities. Is Investment's Corporate Finance Department offers a wide range of services including initial and secondary public offerings of public and private companies, public offerings of various debt instruments, consultation services for mergers & acquisitions, private equity, venture capital projects and strategic planning and restructuring. While the Turkish domestic fixed income market has been an investment paradise for years due to the high public borrowing requirement, in the recent years improving macro fundamentals has nourished the Turkish equity market into the strongest and most liquid market of the region. We expect Turkish markets to attain a deeper dimension in terms of client profile as pension funds grow and asset management services are expanded to a wider range of clients. Its large local investor network aside, Is Investment is constantly looking to broaden its existing client base in Europe and United States (US) while concentrating recently on developing a network in Middle East and Middle Asia as well. We have all the means and tools to become the foremost player in the capital markets - not only in Turkey but also internationally - creating a benchmark to be followed by other investment banks and brokerage houses specifically in Middle East and the Commonwealth of Independent States (CIS). Our rep-office in Kazakhstan is the first step in our quest for attainment of this goal. Is Investment's International Capital Markets Division, with its experienced staff, is the only brokerage house in Turkey that is a member of the International Securities Markets Association. Is Investment is Turkey's premier investment bank in international capital markets, holding the largest transaction volume in the primary and secondary markets. In 24 alone, Is Investment has had a volume of over 1 billion US$ in the primary markets. Of this amount, about 6 million US$ were in Turkish Treasury issuances and the remaining 4 million US$ in other emerging markets, with a majority in Russian and Kazakh credits. Is Investment has also been granted comanager ships on two of Turkish Treasury's Eurobond issuances (9.5% notes due 214 and 7.375% notes due 225 with US$ 1.25 billion and US$ 2. billion issue sizes respectively,) and on two corporate Eurobond issuances, those of Petrol Ofisi in Turkey (9.75% notes due 29 for US$ 175 million) and Intergas Central Asia in Kazakhstan (6.875% notes due 211 for US$ 25 million.) In total, Is Investment's participations in 24 reached 27 issuances with an aggregate size of US$ 17. billion, 7 of which were in Turkish credits and 2 in other Emerging Markets. To cite some examples to its participations: Gazprom, Sistema, Mega Phone, Russian Standard Bank, Vimplecom and Alrosa in Russia; Halyk Bank, TengizChevron Oil, ATF Bank, Nur Bank, Center Credit in Kazakhstan; and Cosan in Brazil. As for the secondary markets, Is Investment has had a combined transaction volume of more than US$ 3. billon in both 23 and 24. Of this amount, about 9% of transactions were in fixed income, while the rest were in world equity markets. However, with a greater appetite for risk and a diversification of assets, the share of equity transactions appear to be on the rise as the investor spectrum widens and the market-awareness of clients improves. International equity markets are among investment instruments considered to be of greatest risk, even more so lately with the recent weakness in US markets. In the equity markets, where daily fluctuations tend to be high, practices such as closely monitoring the stocks, instantaneously updating investors of any nature of developments, and following markets from pre-hours till the very late afterhours, gain importance and priority, as they make the greatest of difference for marketsavvy clients. Owing to its wide network of international trading houses, Is Investment is informed on all developments instantly and can transact on the spot with its electronic trading platforms and foreign correspondent network. Our investors may call us anytime during the European and US international stock markets' trading hours to receive information on these markets and may transact instantly on the phone. Our commission rates for international equities and fixed income securities are very competitive among its peer-group companies. CONTACT INFORMATION For International Markets Contact Name Ms. Meltem Citci mcitci@isyatirim.com.tr Mr. Ilkay Dalkilic idalkilic@isyatirim.com.tr For Turkish Markets Contact Name Ms. Caglan Yazici cyazici@isyatirim.com.tr For Almaty/Kazakhstan Rep. Office Contact Name Mr. Cengiz Macun cmacun@isyatirim.com.tr Website PAGE 3

33 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 STOCK EXCHANGE PROFILES Abu Dhabi Securities Market 32 UAE Economy 34 Amman Stock Exchange 36 Jordan Economy 38 Armenian Stock Exchange 4 Armenian Economy 42 Baku Interbank Currency Exchange 44 Azerbaijan Economy 46 Baku Stock Exchange 48 Banja Luka Stock Exchange 5 Bosnia and Herzegovina Economy 52 Belgrade Stock Exchange 54 Serbia and Montenegro Economy 56 Bucharest Stock Exchange 58 Romanian Economy 6 Bulgarian Stock Exchange 62 Bulgarian Economy 64 Cairo and Alexandria Stock Exchanges 66 Egyptian Economy 68 Georgian Stock Exchange 7 Georgian Economy 72 Istanbul Stock Exchange 74 Turkish Economy 76 Takasbank 78 Karachi Stock Exchange 79 Pakistan Economy 81 Central Depository Company of Pakistan Limited 83 Kazakhstan Stock Exchange 84 Kazakhstan Economy 86 Kyrgyz Stock Exchange 88 Kyrgyz Economy 9 Lahore Stock Exchange 92 Macedonian Stock Exchange 94 Macedonian Economy 96 Moldovan Stock Exchange 98 Moldovan Economy 1 Mongolian Stock Exchange 12 Mongolian Economy 14 Muscat Securities Market 16 Oman Economy 18 Palestine Securities Exchange 11 Palestine Economy 112 Sarajevo Stock Exchange 114 State Commodity & Raw Materials Exchange of Turkmenistan 116 Turkmenistan Economy 117 Tehran Stock Exchange 12 Iran Economy 122 Tirana Stock Exchange 124 Albanian Economy 126 Toshkent Republican Stock Exchange 128 Uzbekistan Economy 13 Ukrainian Stock Exchange 132 Ukrainian Economy 134 Zagreb Stock Exchange 136 Croatian Economy 14 PAGE 31

34 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ABU DHABI SECURITIES MARKET Hamad Abdulla Al Shamsi General Manager The Abu Dhabi Securities Market (ADSM) showed remarkable growth during 24 as compared to 23, continuing the rapid growth experienced since its inception in 2. The trading value increased to US$ 4.5 billion (AED 16.4 billion) in 24, an increase of 343% when compared to 23 s trading volume of US$ 1. billion (AED 3.7 billion). The number of trades in 24 increased by 996 and as a result gave a total of 83,3 trades. The turnover ratio was 2% of the total subscribed shares with 6% of the total shares available in the market. Moreover, the daily average trading value in 24 increased to US$ 15. million (AED 55 million) from US$ 3.8 million (AED 14 million) in 23. The daily average number of shares traded also rose to approximately 3.3 million shares from 9 thousand shares in 23. The market capitalization of companies listed at ADSM as at the end of 24 was US$ 48.1 billion (AED billion), which represented 55% of the United Arab Emirates (UAE) GDP. During 24, the share prices of 32 companies rose (out of a total of 34 companies traded on ADSM); while share prices of 2 companies fell. The market capitalization of companies listed at ADSM as at the end of 24 was US$ 48.1 billion (AED billion), which represented 55% of the United Arab Emirates (UAE) GDP. The Market index rose by 1,314 points, an increase of 74.8% and closed at The 74.8% increase in the index represented only the capital gain. By adding the distributed dividends during 24 the increase was approximately 8%. HISTORY AND DEVELOPMENT Securities trading in the United Arab Emirates dates back to the early 196s when public shareholding companies began to come into existence in the country. It was generally a generic and haphazard era where the securities market had been created and operated by the mediation of brokerage firms. Moreover, securities trading in such an ill-ordered environment had created flaws and imbalances in the market, and particularly in the absence of a proper mechanism to conclusively determining the value of securities, supervision and control of brokerage firms as well as a lack of transparency and disclosure by the companies whose shares constitute a part of the market trading business. This tremulous situation has had an adverse impact in establishing a biased and unfair policy for evaluating securities fairly, and subsequently resulted in severe fluctuations in the market. In view of this chaos, the shares value had been at times overstated which led to heavy consequences and losses on the part of investors. Having taken the above facts into consideration as the issue of regulating the securities market is, undoubtedly, of significant importance with view to its crucial role in the domestic economy. Plans have been set up for organizing this market to ensure the integrity and smoothness of trading in securities and establish investors protection. The aforementioned items must, of course be subject to the power of supply and demand in compliance with the principle of information transparency and disclosure with respect to the companies engaged in the business of securities trading. Within this framework, intensive efforts exerted with the promulgation of Law No. (4) of 2 concerning the establishment of the UAE Securities & Commodities Authority and subsequently the establishment of the Securities Market. FUTURE OUTLOOK In 25, the ADSM plans to: increase activities to support growth in listings, turnover and liquidity through: encouragement of listing for family companies and foreign companies; increased system capacity to cope with growing market volumes; enhanced IT processes and information distribution; implementation of remote trading for brokers. enhance market standards in: corporate governance; capital adequacy and surveillance of brokers; broker education and qualification; automate market surveillance; enhance Registry and CSD services; further bond market initiatives; link trading with Muscat Securities Market; implement a new marketing and communications program; and strengthened laws, regulations and rules through: commercial and capital market law. securities regulation. ADSM rules for listing, brokers and trading. PAGE 32

35 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ABU DHABI SECURITIES MARKET OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec-4 1, TOTAL 2, Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 4, ,266.4 Aug-4 4, ,298.2 Sep-4 41, ,354.7 Oct-4 41, ,326.9 Nov-4 49, ,699.6 Dec-4 55, ,7.9 1,4 1,2 1, ,5 3, 2,5 2, 1,5 1, 5 6, 5, 4, 3, 2, 1, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Khalid Khalfan Al-Suwaidi suwaidik@adsm.co.ae Website PAGE 33

36 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ABU DHABI SECURITIES MARKET ECONOMIC AND POLITICAL DEVELOPMENTS Economic and Political Environment: Its most affluent and powerful emirate, Abu Dhabi, largely directs the development and diversification of prosperous United Arab Emirates (UAE), one of the more diversified and open market economies of the Middle East. Enormous hydrocarbon reserves, including almost 1% of known global oil deposits (.8 billion barrels in 24), and the world's fifth largest gas reserves (212 trillion cubic feet in 24), following Russia, Iran, Qatar and Saudi Arabia), are the basis of the federation's wealth. However one emirate, Abu Dhabi, possesses nearly 95% of all hydrocarbon deposits with Dubai and Sharjah holding the majority of the remainder. While continual federal budget deficits might retard major development projects in other nations, the estimated US$ 35 billion foreign asset position of Abu Dhabi's provides a large, independent income stream equivalent to approximately 6% of the federation's annual GDP. Having experienced the adverse impact of low oil prices on a number of occasions, most recently in 1998, the UAE is aggressively diversifying the economy into trade, tourism, and heavily subsidized agriculture and high technology industries. The federal government has invested heavily in aluminum production, tourism, aviation, reexport commerce, and telecommunications and the non-oil components of the economy in 23 accounted for more than two-thirds of GDP and in excess of 3% of exports. Government emphasis on education, modern technological infrastructure, a business-friendly climate, and comparatively more freedom than other Gulf States has maintained the Emirates' status as one of the most dynamic economies in the region. Economic Performance: Due to high oil prices, GDP grew 7% in 23, up from only 1.9% in 22, when oil prices were depressed. In a testament to the strength of the UAE diversification program, non-oil GDP grew a whopping 5%, due to a number of projects in construction, upstream gas, and downstream oil services. Inflation, as measured by the consumer price index (CPI) increased slightly to 2.8% from 2.3% due to higher oil prices. The fiscal balance recorded a large surplus of 13.7% in 23, up from 1.8% in 22. Structural reforms are moving along at a rapid clip. Dubai extended foreign ownership of land and properties to certain real estate developments and also launched several new duty free zones. Abu Dhabi is moving ahead to privatize its water and electricity sectors by 26. The current account balance has been in constant surplus in recent years and continuing strength in the oil prices should keep the current account in healthy surplus for years to come. In 23, this surplus reached US$ 12.1 billion, or about 15.1% of GDP. Trade has played a major role in the UAE's economic growth and the free trade zones of Dubai and Sharjah have been large contributors. Both the trade balance and current account have registered healthy surpluses throughout the 199s. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Abu Dhabi Chamber of Commerce and Industry Central Bank of UAE Ministry of Finance and Industry Ministry of Planning Ministry of Economy and Commerce UAE GDP, CPI AND INVESTMENT (Annual Change in %) Real GDP (at factor cost) Hydrocarbon Nonhydrocarbon Consumer price index Investment (in percent of GDP) * IMF 24 Article IV Consultation with UAE PAGE 34

37 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ABU DHABI SECURITIES MARKET UAE GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services UAE MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (dirhams-billions) Money Supply M2 (dirhams-billions) Growth Rate M1 9.5% 8.9% 12.6% 15.8% 19.2% Growth Rate M2 4.2% 115.% 15.3% 23.2% 11.% Interest Rates deposit rate 4.8% 4.6% E 4.4% E 4.% E 7.74% E lending rate 7.9% 7.5% E 7.5% E 7.5% E 14.5% E Foreign Exchange Reserves (US$ millions) 9,77 1,675 13,523 14,146 15,219 Exchange Rate Period Average (dirhams/us$) Annual % Growth E: Estimate * Economic Overview, Country Watch Incorporated, 25 UAE EXPORTS, IMPORTS AND TRADE BALANCE (US$ Millions) Exports Of which: Crude oil Imports, f.o.b Current account balance In percent of GDP Central bank reserves In months of imports of goods and services Total external debt In percent of GDP * IMF 24 Article IV Consultation with UAE PAGE 35

38 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 AMMAN STOCK EXCHANGE Jalil Tarif Executive Manager ASE's market value went up by 67.7% to reach US$ 18.4 billion or 185% of the GDP, which indicates the important role the ASE plays in the national economy. For the second consecutive year the ASE performance was outstanding in 24. Performance indicators reached their all-time high since the establishment of the securities market in 18. In December 24, the ASE price index reached 4254 points, a record high, and closed at 4246 points at the end of 24, up by 62.4% compared to its 23 closing. Trading volume doubled to reach US$ 5.4 billion and the ASE's market value went up by 67.7% to reach US$ 18.4 billion or 185% of the GDP, which indicates the important role the ASE plays in the national economy. As a recognized sign for the increasing confidence in the ASE, Wilshire Associates issued a revised report including a list of emerging markets that have an attractive investment climate in securities markets. Jordan ranked 1th among the 27 most attractive emerging stock markets, jumping two steps a head of Jordan s rank in 23. The improvement in Jordan s ranking can be attributed to regulatory, legislative and technical developments that have been implemented over the last year. This report was prepared for one of the largest USbased pension funds, The California Public Employees Retirement System (CalPERS). Also in 24, the ASE issued new Listing Directives in which the trading of public shareholding company shares are divided into two markets, according to shareholders equity, free float, profitability, number of shareholders, liquidity and disclosure criteria. By these directives, companies listed at the first market must provide the ASE with quarterly reports. Also the ASE has amended it s internal By-Laws which introduced a set of amendments to the organizational structure and departments of the ASE. As a result, a new Surveillance and Inspection Department was created. Further, these new Trading Directives include a number of ethical rules that brokerage firms must abide by in their relations with their clients. As part of the ASE s efforts to strengthen ties of cooperation with international market institutions, the ASE has been accepted as an Affiliate member of the World Federation of Exchanges (WFE), this decision was taken in recognition of the progress that has been made in the business development of the ASE, and its efforts to deepen its local significance and presence in the Jordanian economy. The ASE has also been elected as chairman of the Working Committee of the Federation of Euro-Asian Stock Exchanges (FEAS). In 24, the ASE was the main sponsor of the Annual Conference of the International Organization of Securities Commissions (IOSCO) that was held in Amman May 24. The ASE also hosted a conference on the Greek experience in the capital market development, this conference came as a result of the Cooperation Agreement that was signed between the ASE and the Thessaloniki Stock Exchange Center in October 22. To develop its data dissemination policy, the ASE has launched a new website The new site contains many new advantages and information such as, on-line market depth and the company guide, in addition to a number of added features of interest to investors. HISTORY AND DEVELOPMENT The Amman Stock Exchange (ASE) was established in March 1999 as a non-profit, private institution with administrative and financial autonomy. It is authorized to function as an exchange for the trading of securities. The Exchange is governed by a seven-member board of directors. An executive manager oversees day-to-day responsibilities and reports to the board. The ASE membership is comprised of Jordan s 3 brokerage firms. The history of securities trading in Jordan traces its origins back to the 193s. In 16, the Amman Financial Market was established to create a regulated trading market. More recently, as part of Jordan s move to upgrade its capital market, a new Securities Law was enacted in 19 separating the supervisory and legislative roles from those of exchange operations. As a result, the Jordan Securities Commission (JSC) was created at the same time as the ASE and the Securities Depository Center (SDC) were established. The JSC supervises the issuance of and trading in securities and monitors and regulates the market. The SDC oversees clearing and settlement and maintains ownership records. To provide a transparent and efficient market, the ASE implemented internationally recognized directives regarding market divisions and listing criteria. It also adopted procedures for improving regulatory effectiveness. On 26 March 2 the ASE launched an automated order-driven Electronic Trading System. The new system is in compliance with international standards and takes into account the G-3 recommendations. This system also offers brokers immediate access to stock prices and orders and enables members to trade remotely. FUTURE OUTLOOK During 25 the ASE will: apply for a full membership in the World Federation of Exchanges (WFE); upgrade the technical infrastructure; namely; the electronic trading system to the AtosEuronext V8, the Wide Area Network (WAN) to accommodate projects in the fields of surveillance systems and automating communication with brokers, issuers and the disaster recovery site; implement new sectoral distribution, which will be consistent with international standards; improve information dissemination by introducing new retail products; introduce and publish a new price index, which is a free float weighted index that was tested during 23 and 24; and redesign all publications and bulletins, while concentrating on the monthly statistical bulletin and the companies guide. PAGE 36

39 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 AMMAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL 3, Bonds July Aug Sep Oct Nov Dec TOTAL Other July Aug Sep Oct Nov Dec TOTAL.... Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 12, ,915.7 Aug-4 12, ,92. Sep-4 13,59.9 3,68. Oct-4 15,28. 3,436. Nov-4 17, ,16. Dec-4 18, , July Aug Sep Oct Nov Dec 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Sami Hattab info@ase.com.jo Website PAGE 37

40 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 AMMAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Economic and Political Environment: King Abdullah II upon ascending to the throne following his father's death in 1999, has provided re-energized economic leadership. King Abdullah, II bin Al-Hussein has proven to be a steadfast proponent of an invigorated program of economic reforms that includes privatization, structural and procedural changes that attract foreign investment and enable foreign debt restructuring and reduction. He also believes that efforts should be continued to build a modern Jordan that provides its men and women with opportunities for a decent life and ensures that the gains of development are distributed equally among the people. King Abdullah belongs to a new generation of Western-educated Arab leaders. The king's political agenda has been focused on economic revival, greater political openness, social justice and equality, in order to clearly place Jordan actively on the regional and international map. While keeping the warm ties with the West nurtured by his father, he has succeeded in improving ties with Syria and the Palestinians and cementing links with Saudi Arabia and Kuwait. Economic Performance: The real GDP growth by end of the year 24 was 7.5% compared to 3.3% for 23. The pickup was due to a huge jump in exports as external demand grew, especially from the United States. In fact, in the year 24, exports to the U.S. grew by 54%. Jordan conducts its monetary policy with a fixed peg to the U.S. dollar and believes that its trade performance indicates that policy still provides for good international competitiveness of its exports. In the past few years, it has also resulted in virtual stability in the price level with inflation as measured by both the GDP deflator and the CPI registering 1% increases or less and, at times, slight deflation. Meanwhile, CPI inflation in 24 was 3.3%, up from 2.3% in 23. As for the fiscal policy performance, re-estimated figures indicate an increase of 14.5% in domestic revenues in 24 as compared to the year 23, and a rise of 7.% in public expenditure, putting the fiscal deficit at US$ 392 million, or 3.6% of the GDP. Jordan's main export commodities are phosphates, fertilizers, potash, agricultural products and textiles. Its main imports include crude oil, machinery, transport equipment, food, live animals and manufactured goods. In 24, exports (exports and re-exports) grew by 28.2%, and imports increased by 41.5%. Foreign direct investment (FDI) has been increased steadily in recent years. In the first three quarters of the year 24 it reached US$ 48 million compared to US$ 376 million in 23. Jordan's gross international reserves have been rising steadily over the past several years, and in 24, these reserves stood at more than US$ 4.8, equivalent to the value of seven months' merchandise imports. Privatization has moved along quite well. The centerpiece of the program was the sale of a large minority ownership (along with management control) in Jordan Telecom to France Telecom. The government also sold half of its holdings in the Arab Potash Company in mid-october 23 and a majority of its stakes in its electricity companies in the first half of 24. Furthermore, a new gas pipeline between Egypt and Jordan has been completed by the private sector, and is expected to be extended to Lebanon, Syria, and Turkey. Even the post office has been put out to foreign management. Several public enterprises are being restructured in 24 to be privatized in the year 25. The flow of privatization related funds is earmarked for debt reduction and for funding of development programs under the Plan for Social and Economic Transformation. Key Information Contacts Jordan Securities Commission Securities Depository Center Jordan Investment Board Jordan Country Information Central Bank of Jordan (CBJ) National Information Center ECONOMIC RATIOS Jordan Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 38

41 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 AMMAN STOCK EXCHANGE JORDAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services JORDAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (dinars-billions) Money Supply M2 (dinars-billions) Growth Rate M1 14.% 4.6% 9.3% 26.% 9.3% Growth Rate M2 1.% 5.8% 7.% 12.4% 11.7% Interest Rates deposit rate 6.5% 5.% 4.5% 2.5% 3.75% lending rate 11.38% 1.45% 9.85% 8.92% 7.59% Foreign Exchange Reserves (US$ millions) 2, , , , ,824.3 Exchange Rate Period Average (dinars/us$) Annual % Growth..... * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 6, 5 4 4, 3 2 2, * World Bank reports PAGE 39

42 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ARMENIAN STOCK EXCHANGE Yermonya Vardevanyan Chairwoman During 24, Armex witnessed a remarkable 118% increase in the value of exchange trading to nearly US$ 1.6 million, while at the same time, the number of securities traded went up by over 77%. The year 24 witnessed a remarkable 118% increase in the value of exchange trading to nearly US$ 1.6 million, while at the same time, the number of securities traded went up by over 77%. Securities issued by 11 listed companies were traded showing a 25% increase over 23. At year-end, the number of listed companies stood at 196, with 2 new companies listed on the stock exchange during 24. Still, the number of companies which delisted was rather high too, this is primarily attributable to the ongoing changes in the corporate ownership structure. Despite the fact that only equities continued to be traded on Armenian Stock Exchange (Armex) floor, an important agreement was reached with the Government on launching exchange trade in long- and middle-term Government bonds in April 25. In this respect, amendments to the existing trading, clearing and settlement procedures, as well as trading system modifications were required. All of these above mentioned changes are now near completion. Throughout 24, Armex carried on with its efforts to provide market participants and the general public with accurate, timely and complete information regarding the activities of the Armenian securities market, as always, striving to keep Armex as transparent as possible. Exchange trading statistics and information on the most recent developments and events was at all times accessible both through the Armex official website ( and local media. Further steps were initiated to enhance cooperation in the region: of significant importance was the Memorandum of Understanding signed with the Georgian Stock Exchange in December 24, which aims to promote information exchange and consolidate efforts in investor awareness and education. In 25 Armex will endeavor to build on its prior achievements while fostering those positive trends that may be crucial to the ultimate success of the Armenian capital market. HISTORY AND DEVELOPMENT Armenian Stock Exchange (Armex) is the successor of the Association of Securities Market Participants, which was established in Armenia in 19. In December 2, it was renamed to the Armenian Stock Exchange, and on the 13th of February, 21, it was officially registered by the Securities Commission of the Republic of Armenia as a self-regulatory organization pursuant to the Law of the Republic of Armenia On Securities Market Regulation. Armex is the only stock exchange registered in Armenia. As a voluntary association of broker (dealer) companies and a selfregulatory organization, Armex approves rules and regulations covering a variety of activities, including listing, trading, information disclosure, as well as rules of professional ethics. The self-regulation principle provides each member company with equal rights to participate in the management of the stock exchange. The supreme management body of Armex is the General Meeting of Members, which elects the Observers Board. The latter elects the Chairman and appoints the Chief Executive Officer of the Exchange. Armex is subject to regulation by the state. The Securities Commission of the Republic of Armenia is the competent state authority to regulate the activities of the capital market, including the stock exchange, in Armenia. This is carried out through approving legislative acts and other regulatory documents, which are compiled with reporting requirements. At present the Armenian Stock Exchange is focused on improving operations, as well as trading procedures and regulations to foster a fair and transparent securities market and toward complying with worldwide industry standards. FUTURE OUTLOOK In 25, Armex plans to: launch trading in government bonds; facilitate launch of trading in securities on a non-covered basis; implement exchange trading in foreign exchange; introduce the Armex index with publication on a regular basis; establish Armex Training Center to conduct educational seminars for trade participants, broker/dealer community, reporting companies and general public; develop and introduce capital adequacy requirements for exchange member companies; and Continue improving regulations and practices towards compliance with WFE and IOSCO recommendations. PAGE 4

43 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ARMENIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME (US$ Millions) MONTHLY MARKET CAPITALIZATION (US$ Millions) July n/a Aug n/a Sep n/a Oct n/a Nov n/a Dec n/a July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Armen Melikyan amelikyan@armex.am Website PAGE 41

44 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ARMENIAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Considering that, Armenia was part of the former Soviet Union; it has made great strides in privatizing and restructuring its economy. Agriculture, which accounts for 4% of GDP and 31.5% of employment, was thoroughly privatized in the early 199s; industrial entities began to be divested in the mid-199s, in a process that is ongoing. Inflation (measured by GDP Price Deflator) declined significantly after 1995, reaching single digits by During 22 and 23, Armenia's export sector expanded at an impressive clip, along with increases in capital investment and income, as a result of fiscal belt-tightening, policy reforms, and a subdued but stable currency. In the elections of 23, Kochariam won another term in office after two rounds of voting. President Kochariam's nationalist party (called the Republican Party of Armenia) won 31 seats and the plurality of the parliament. The parliamentary elections coincided with a referendum authorizing significant and substantive changes to Armenia's constitution; however the proposed constitutional changes failed to achieve popular support. In August 23, Armenia abolished the death penalty and the sentences of 42 prisoners on death row were commuted to life imprisonment instead. Meanwhile, bilateral relations between Armenia and Azerbaijan continued to be strained. Economic Performance: Robust and rapid economic expansion continued in 24 with real GDP growth of 1.1%, in line with growth of 13.9% in 23. Capital investment in construction, increase in agricultural gross output, expansion of service sector, as well as exports of metals and diamonds drove GDP growth. Inflation (as measured by the GDP deflator) increased to 6.4% in 23 from 2.6% in 22 due mostly to a rise in prices of staple goods. However, year 24 saw significant reduction in inflation rate to 2%. In 24, Armenian Dram, the official currency of the Republic of Armenia, revaluated against US Dollar by impressive 14.16%. Fiscal policy remained tight in 23. The fiscal deficit remained the same in 23 at 2.2%, reflecting no change from 22. Key Information Contacts Securities Commission of the Republic of Armenia Central Depository of Armenia ECONOMIC RATIOS Armenia Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 42

45 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ARMENIAN STOCK EXCHANGE ARMENIA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services ARMENIA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (dram-billions) Money Supply M2 (dram-billions) Growth Rate M1 19.6% -.9% 36.7% 8.3% 49.2% Growth Rate M2 36.7% 14.% 38.6% 4.3% 34.% Interest Rates deposit rate 47.% 55.1% 24.4% 19.9% 14.8% lending rate 48.5% 38.9% 31.6% 26.7% 21.1% Foreign Exchange Reserves (US$ millions) Exchange Rate Period Average (dram/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 1, , * World Bank reports PAGE 43

46 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BAKU INTERBANK CURRENCY EXCHANGE Farhad Amirbayov General Manager We are planning to offer the market this year a spectrum of tools, created on the basis of currency SWAP, which will help banks to operate in short-term liquidity in various currencies and currency positions. During the past year Baku Interbank Currency Exchange (BBVB) stopped using on floor auctions because of changed conditions in the market. Further, after the installation of new software allowing BBVB to offer an electronic system for trading to all banks, we were then able to not only give the results of bargains, but also to support a screen interface of BEST (BBVB Electronic Trading System) in our native language. When speaking in reference to the development of the currency market in Azerbaijan, it is necessary to take into account the steady turnover growth of the interbank market and exchange segment. Growth of the currency market is not an event in and of its own; it is directly connected with the development of foreign trade. The major factors which influence such increases are the reduction of commissions, development of information technologies, introduction of new tools and reliability of calculation systems. BEST has sufficient technological potential for further development so as to attract participants, including non-residents in addition to increasing the number of tools to be used in conjunction with BEST and also to increase overall volume. We are planning to offer the market this year a spectrum of tools, created on the basis of currency SWAP, which will help banks to operate in short-term liquidity in various currencies and currency positions. HISTORY AND DEVELOPMENT The Central Bank of Azerbaijan and the four largest state banks of the Azerbaijan Republic founded the Baku Interbank Currency Exchange (Baki Banklarasi Valyuta Birjasi - BBVB) on 26 July This year marks a decade since the beginning of activity in the financial market. Ever since the onset of the activities of this central financial institution, the BBVB has become an innovative symbol of economic reforms for the business public of Azerbaijan. Using advanced information technology and experiencing success in the creation of universal trading platforms, the BBVB, by volume of trade and number of financial tools, has become the biggest exchange in the Caucasian region. FUTURE OUTLOOK The purposes of the BBVB are to: set up regular exchange trading to carry out currency operations; determine the market exchange rate of the Azerbaijan currency (manat) to foreign currencies; create a mechanism for inter-state settlements; maintain management and information services for currency operations; settle transactions made at the BBVB both in national and foreign currencies; organize and carry out exchange trading and auctions with interbank credits; and conduct exchange trading with futures. PAGE 44

47 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BAKU INTERBANK CURRENCY EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July Aug Sep Oct Nov Dec TOTAL Market Capitalization US$ Millions Index MONTHLY OTHER VOLUME (US$ Millions) 5 YEAR OTHER VOLUME (US$ Millions) July-4 n/a n/a Aug-4 n/a n/a Sep-4 n/a n/a Oct-4 n/a n/a Nov-4 n/a n/a Dec-4 n/a n/a ,2 1, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Vugar Israfilov info@bbvb.org Website PAGE 45

48 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BAKU INTERBANK CURRENCY EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Baku, Azerbaijan's capital and largest city emerged more than 1 years ago as one of the earliest centers of the international petroleum industry. At the beginning of the 21st century, oil and gas activity remains the engine of the Azerbaijani economy. Indeed, oil exports accounted for 9% of all exports in 22. It appears that oil development in the Azeri sector of the Caspian will fuel economic development and income growth for many years to come, especially after official sanctioning of the Baku-Tbilisi- Ceyhan (BTC) pipeline, which will pump Azeri oil through Georgia and Turkey to the Mediterranean terminal at Ceyhan, Turkey, and related projects, which will inject an estimated US$ 8 billion in investment over the next few years. In August 23, the parliament of Azerbaijan elected President Aliyev's son, Ilhan Aliyev, as the prime minister. The measure was viewed as an attempt to secure a peaceful political transition, in the event that the ailing president were to become incapacitated. President Aliyev was scheduled to run for a third term in the presidential polls in October 23, but withdrew from the election contest due to health concerns. His supporters transferred their efforts to his son, the new Prime Minister Ilham Aliyev. The younger Aliyev went on to win the election in a landslide victory. In December 23, Heydar Aliyev died in a United States hospital at the age of 8. He was undergoing treatment for heart and kidney problems. In 24, bilateral relations with Armenia constituted one of the main issues facing Azerbaijan's political landscape. The new Azerbaijani president expressed his hope that the Organization for Security and Cooperation in Europe (OSCE) would continue in its effort in forging a resolution to the conflict in Nagornyy Karabakh. On the domestic front, President Aliyev has expressed confidence in the economic growth of Azerbaijan in the next few years, as well as the strengthening of democracy and the improvement of human development concerns. In these regards, he said, "Our assuredness stems from the considerable investments in Azerbaijan, the development of democratic reforms, and the implementation of social programs to improve people's quality of life." Economic Performance: Foreign direct investment in the petroleum sector boosted GDP growth to 11.2% in 23 compared to 1.6% in 22. Consumer price inflation has been restrained in recent years, declining slightly to 2.2% in 23 from 2.8% in 22. Fiscally speaking, Azerbaijan's deficit increased in 23, to nearly 2%, compared to.5% in 22, but this was primarily due to infrastructure-related expenditures and an increase in pension wages. Agricultural work still occupies some 4% of the Azeri workforce, and the unemployment rate has remained low (at 1.4% in 23). Although oil revenues represent a large portion of Azerbaijan s economy, they have made inroads into this problem, with non-oil economy growing significantly in Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts National Bank State Committee for Securities Ministry of Finance National Depository Center International Bank of Azerbaijan National Bank of Azerbaijan State Committee for Securities Ministry of Finance Ministry of Economic Development ECONOMIC RATIOS Azerbaijan Lower-middle-income group Trade GROWTH OF INVESTMENT AND GDP 9 GDI GDP 6 Domestic savings Investment Indebtedness * World Bank reports PAGE 46

49 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BAKU INTERBANK CURRENCY EXCHANGE AZERBAIJAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services AZERBAIJAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (manats-billions) 1,183 1,39 1,57 1,693 1,967 Money Supply M2 (manats-billions) 1,846 2,216 3,843 3,439 3,939 Growth Rate M1-22.4% 17.5% 12.9% 7.9% 16.2% Growth Rate M2-15.2% 2.1% 73.4% -1.5% 14.5% Interest Rates deposit rate 14.% 1.% 1.% 1.% 7.% lending rate 14.1% 19.5% 19.7% 19.7% 17.4% Foreign Exchange Reserves (US$ millions) Exchange Rate Period Average (manats/us$) 3,869 4,12 4,474 4,657 4,861 Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 3, 2, 1, * World Bank reports PAGE 47

50 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BAKU STOCK EXCHANGE Anar Akhundov President 24 was marked by several important events in capital market of Azerbaijan such as, in January 24 the first placement of corporate bonds took place at Baku Stock Exchange (BSE) and was followed by a number of other issues. Amendments made to the Civil Code caused significant growth of IPOs in the stock market as Decree of the National Bank of Azerbaijan for all private banks to increase the authorized capital to a certain limit by the end of 24 has assisted the BSE to increase the volume of the stock market significantly. As the result total volume of corporate bonds issues made up In 24 BSE took first steps to increase public awareness, through the issue of information bulletins on regular basis, these bulletins are disseminated among companies involved in different financial sectors. US$ 14.5 million and IPOs represented US$ 2.6 million. In comparison with 23 turnover of stock market increased 6.5 times and reached US$ 21.7 million in 24. Another important event was the launch of the Notes of the National Bank - in September 24, National Bank of Azerbaijan executed the first placement of Notes and determined the interest rate at the level of 4.6%. In 24 BSE took first steps to increase public awareness, through the issue of information bulletins on regular basis, these bulletins are disseminated among companies involved in different financial sectors. HISTORY AND DEVELOPMENT The establishment of a stock exchange was a necessary step in the creation of a modern stock market in Azerbaijan. Due to its geopolitical location Azerbaijan is an important regional center of business activity. In this respect the availability of a stable and developed securities market plays a substantial role in the raising of investors' confidence in the economy of Azerbaijan and the region. The shareholders of the BSE are leading Azeri and foreign banks and investment companies. The share of one shareholder in the capital of BSE is equal to US$ 61,25. The supreme decision-making authority of the BSE is the General Shareholders Meeting. The trading floor of the BSE is equipped with 3 computerized trading stations, 18 of which belong to the shareholders of the Exchange. The other 12 are available for new members. Legal bodies (banks, investment funds, broker firms) involved in professional activities in the securities market with special license from the State Committee for Securities under the auspices of the President of the Azerbaijan Republic can become members of the BSE. FUTURE OUTLOOK In 25 BSE plans to increase number of securities market participants, by involving more investors and issuers. One of the most important tasks of the BSE is to make the capital market accessible at different levels of investment and to strengthen the role of the BSE as a financial source of the Azerbaijan economy. In 25 internal regulations will be reviewed and developed and listing requirements will be divided into different levels in order to make them more flexible. KEY INITIATIVES FOR 25 Corporate securities market Development of multi-stage listing requirements Improvement of commission fees flexibility Introduce of new financial instruments Membership Increase the number of members Stimulation of market-makers institution Investors Organization of a conference for international investors Organization of trainings for local investors Public Relations Establishment of contacts with new markets Participation in WFE (World Federation of Exchanges) Publication of an analytical review of the securities market in Azerbaijan Trading system Customization of the present trading system Development of a depositary system PAGE 48

51 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BAKU STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL Other July Aug Sep Oct Nov Dec TOTAL Market Capitalization US$ Millions Index VOLUME BY TYPE Stocks Bonds Other MONTHLY STOCK VOLUME (US$ Millions) July-4 n/a n/a Aug-4 n/a n/a Sep-4 n/a n/a Oct-4 n/a n/a Nov-4 n/a n/a Dec-4 n/a n/a 4% 26% % 4 2 July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Jamil Azimov j.azimov@bse.az Website * Please refer to page 46 for the Azerbaijan country report. PAGE 49

52 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BANJA LUKA STOCK EXCHANGE Milan Bozic CEO 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. 24 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 5% in comparison with 23. During 86 trading days in 24 there were over 8, transactions concluded, which is 3% more than in 23. 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$ million on December 31st, 23 to US$ 1.3 billion on December 31st, 24. More than 6% of the above mentioned amount is related to the official market. During 24, two BLSE indices were created. The Stock Exchange Index of The Republic of Srpska (BIRS), which includes 1 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 2%. The Privatization Investment Funds Index (FIRS) includes 13 shares of Privatization Investment Funds (PIFs). FIRS increased from September 1st to December 31st, 24 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 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 24 was participation in the privatization of more than 6 state owned companies. Finally, the BLSE became a full member of FEAS in November 24. 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. 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 2 as the highest authority and supervisory body in the capital market of the Republic of Srpska. In the beginning of 21 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 21, 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 21, 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. On 5 March 22, 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 22, involving six Members that traded 2 listed securities. In September 22, 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 23, 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 24, the Stock Exchange Index of Republic of Srpska (BIRS) was established as the first index in the Republic of Srpska. FUTURE OUTLOOK In 25 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. PAGE 5

53 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BANJA LUKA STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July Aug Sep Oct Nov-4 1, Dec-4 1, ,2 1, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Nebojsa Vukovic blberza@blic.net Website PAGE 51

54 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BANJA LUKA STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Bosnia and Herzegovina (BiH) is comprised of two distinct entities The Republic of Srpska (RS), which accounts for one-third of the population and contains mostly Serbs, and the Federation of Bosnia and Herzegovina (Federation), which accounts for the other two-thirds of the population and consists mostly of Muslims and Croats. Both entities enjoy significant autonomy, with their own police, army, and tax and customs systems. There is also a tiny Northern district controlled by both entities called Brcko, which has its own tax laws. BiH s economy is well-diversified. Services account for nearly three-fifths of GDP, industry nearly a quarter and agriculture just under one-fifth. The relative share of agriculture is twice as high in the RS as in the more urbanized Bosnia and Herzegovina Federation. A lot of progress has been made at reducing ethnic tensions and rebuilding basic infrastructure and that provides a basis for future growth. Real GDP has been buoyant since the mid-199s with the economy recovering from its low war-era base. In October 22, Bosnia was scheduled to hold its fourth presidential election within the strictures of the tripartite system, which had been established under the Dayton Accords. The members of the presidency at the time included Beriz Belkic (Muslim/Bosniak), who became chairman on Feb. 14, 22; Jozo Krizanovic (Croat); and Zivko Radisic (Serb). The October 22 elections involved 52 parties and over 7, candidates and marked a historic turning point because they were run by the Bosnian authorities and not the international apparatus resulting from the Dayton Accords. Economic Performance: The country's monetary policy has been prudent and effective. After adoption in 19 of a currency board arrangement linking the convertible mark (KM) to the Deutsche mark (now to the Euro), with controls on money supply growth and a tightly managed foreign exchange trading band, inflation rates have largely stabilized in the lower single-digits. Average inflation for the entire country was.3% in 22 and even lower in 23. The consolidated fiscal deficit was reduced from 2.2% of GDP in 22 to a small surplus of.4% in 23 due to responsible spending by both entities. In 1998, the government subscribed to an IMF-financed economic reform program, aimed at reconfiguring the inefficient fiscal structure and sharply reducing direct state participation in productive sectors. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Republic of Srpska Securities Commission Central Registry of Securities Government of Republic of Srpska Central Bank of BiH Tax Administration of Republic of Srpska ECONOMIC RATIOS Bosnia & Herzegovina Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 52

55 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BANJA LUKA STOCK EXCHANGE BOSNIA AND HERZEGOVINA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services BOSNIA HERZEGOVINA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (KM's-billions) Money Supply M2 (KM's-billions) Growth Rate M1 11.9% 199.4% 28.1% 89.7% 13.% Growth Rate M2 22.% 27.5% 11.3% 9.% 9.4% Interest Rates deposit rate 51.9% 9.1% 14.7% 16.5% 4.5% lending rate 73.5% 24.3% 3.5% 25.% 12.7% Foreign Exchange Reserves (US$ millions) ,221 1,321 Exchange Rate Period Average (KM's/US$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 4, , -1 2, 1, * World Bank reports PAGE 53

56 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BELGRADE STOCK EXCHANGE Gordana Dostanic Managing Director During 24 many fundamental investment laws were adopted, which set a legal foundation for the transitional changes and market economy in progress. During 24 many fundamental investment laws were adopted, which set a legal foundation for the transitional changes and market economy in progress. It is expected that the aforementioned legislative activities will have a strong influence on the economic flows in the year to come. 24 has also seen a deceleration in the privatization process, as well as a decrease in industrial growth and exports, which brought with it slower growth of employment rates and higher inflation than projected. These circumstances made a less than favorable environment for the development of the Belgrade Stock Exchange (BSE), and have left their mark on the otherwise dynamic development of the only financial market in Serbia. New relationships, new organizational principles and new terminology brought into Serbia by the market transition process have found a fertile ground and rooted deeply in everyday business and life. Even though the citizens in Serbia usually do not have substantial savings, they are becoming more interested in the movements on the Stock Exchange and are moving their savings from banks to investing it in the capital market. Other factors that have influenced the growth and development of the financial market in the past year were new legislation concerning investment funds, changes in insurance legislation and the dispersion of ownership rights through the privatization process. Even though turnover was lower in 24, in comparison to 23, the activities on the Belgrade SE were very dynamic. This resulted in greater independence of the Stock Exchange and the development of new technologies, which in turn helped educational and informational activities. There are still big developments to come on the Belgrade Stock Exchange. HISTORY AND DEVELOPMENT The BSE was first founded on November 21st 1894, but the first transactions were conducted in January The last transactions on the BSE were carried out in April The Exchange continued to exist formally until 1953, but at that time there were no trading activities. The BSE was reestablished in 1989 as Yugoslav Capital Market, in the accordance with the Capital and Money Market Law. The name was changed back to Belgrade Stock Exchange in The most important events in recent history were: September 22 trade in Republic of Serbia foreign currency savings bonds started; March 23 Introduction of continuous trading method for Republic of Serbia bonds; September 23 The celebration of 11 years from founding of Belgrade Stock Exchange started with the exhibition in Nis; October 23 testing of the system for remote trading started. During 24 many landmark events occurred. On March 2nd, after a long period of testing, the system for remote trading became operational. In July all equities listed on the BSE started daily trading. At that time, there were 19 companies listed on the BSE. On the 18th of October 4 companies transferred to a continuous trading system, which was, until then, used only for government bonds of the Republic of Serbia. By the end of the year, three more companies have changed their trading system from daily to continuous trading. On the 16th and 17th of November The Third International BSE Conference was held, as a culmination of the celebration of 11th anniversary of BSE. On the 13th of December, after six months of testing, BELEX fm, the free market index, was published for the first time. FUTURE OUTLOOK In 25, BSE will: continue development of the BELEX client application s functionality and start of project for automating the control function in the BELEX trading platform; define requests for redesign of the BELEX trading platform in whole; develop the listing function, especially concerning enlistment on the A and B lists; monitor the BSE Rules and their application, in order to eliminate possible problems and improve securities liquidity; motivate the most successful companies to enlist on the A and B lists and explore the possibilities for introducing new securities and other instruments on the market; perform liquidity analysis for certain securities and programs for increasing their liquidity; develop reporting capabilities through various types of reporting: web presentation, data vending, publications, and cooperation with the media; create and implement the BSE Academy program; maintain and enhance the communication with the BSE Members, and activities in presenting the Exchange to the general public in Serbia and abroad; develop of Human Resources; and take an active part in the international meetings organized by FEAS, FESE or similar international organizations and organize one or more international or regional meetings, with the goal of promoting international cooperation. PAGE 54

57 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BELGRADE STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL Other* July Aug Sep Oct Nov Dec TOTAL * other # volume figures are not available at this time. Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 2, Aug-4 2, Sep-4 2, Oct-4 2, ,72.2 Nov-4 2, ,137.8 Dec-4 3,28.6 1, ,2 1, ,5 3, 2,5 2, 1,5 1, 5 July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Ms. Svetlana Cerovic svetlana.cerovic@belex.co.yu Website PAGE 55

58 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BELGRADE STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Serbia and Montenegro, the two republics still left in the old Yugoslav federation, had agreed in March 22 to scrap remnants of the ex-communist state and to create a new, looser union of Serbia and Montenegro. The European Union (EU)-brokered deal was intended to prevent further changes to Balkan borders by settling Montenegrin demands for independence. 1 The ruling minority coalition in Serbia, which is lead by the Democratic Party of Serbia (DSS) and also includes the G17 Plus and the Serbian Renewal Movement-New Serbia (SPO-NS) alliance, remains under pressure. The reformist Democratic Party (DS) and the extreme nationalist Serbian Radical Party (SRS), both of which are in opposition, continue to top the opinion polls. The Serbian authorities have tightened fiscal policy since mid-24 in order to contain inflationary pressures, and are likely to run a smaller central government deficit than the US$ 534 million envisaged in the revised 24 budget. The 25 budget approved by parliament on November 2th envisages a further reduction in the annual budget deficit equivalent to 1.4% of projected GDP. The National Bank of Serbia has also tightened monetary condition in recent weeks. Economic Performance: The IMF s decision on December 15th, 24, to release another set of financing has provided further evidence that the outside world regards economic policy in Serbia and Montenegro as broadly on track, following the debt-rescheduling agreement earlier in 24 between Serbia and the London Club of commercial creditors. Industrial production in Serbia and Montenegro rose by 7.2% year on year in the first nine months of 24, on the back of a strong recovery in manufacturing. GDP growth in Serbia and Montenegro at 6.5% in 24 and it is estimated that Serbia and Montenegro s current-account deficit forecast will fall slightly as a percentage of GDP in as the trade gap rises more slowly Econ 2 Facts and Figures from Serbia and Montenegro Outlook, EIU ViewsWire. New York: Jan 28, 25. Key Information Contacts National Bank of Serbia Securities and Exchange Commission Central Securities Depository and Clearing House Ministry of Economy ECONOMIC RATIOS Serbia and Montenegro Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 56

59 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BELGRADE STOCK EXCHANGE SERBIA AND MONTENEGRO MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply (M1) (dinars-millions) 27,26 58,233 93,815 99, ,179 Money Supply (M2) (dinars-millions) 32,8 68,98 11,9 124, ,613 Foreign Currency Reserves of National Bank of Serbia (NBS) (US$ millions) 524 1,169 2,28 3,55 4,244 Average Money Market Interest Rates n/a Average Interest rate on NBS Securities N/A Discount Rate of NBS Value of US$ against Dinar Real GDP Growth Investment (% of GDP) Gross Domestic Savings (%of GDP) Exports of Goods and Services (US$ millions) Imports of Goods and Services (US$ millions) Current Account Balance (US$ millions) ,383-1,96-2,492 GNI per Capita (US$, Atlas method) 1,22 1,25 1,4 1,9 2,53 Real Annual Growth Rates (%, calculated from 1998 prices) Gross domestic product at market prices Gross domestic income Balance of Payments Exports 2,547 2,743 3,241 4,69 5,623 Imports 4,4 5,16 6,857 8,675 11,463 Resource balance -1,457-2,417-3,616-4,66-5,84 Net current transfers 1,119 1,915 2,344 2,895 3,745 Current account balance ,383-1,96-2,492 * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 8, , -2 4, , * World Bank reports PAGE 57

60 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BUCHAREST STOCK EXCHANGE Stere Farmache General Manager & CEO The total market capitalization of the BSE in 24 increased three times to reach almost US$ 12 billion. The market capitalization currently represents 17% of Romania s GDP. Following the positive economic climate Central Eastern European (CEE) emerging markets registered in the last years, 24 was the fifth year in a row when Romania s GDP continued to grow (8.1% year-on-year basis) and inflation continued to decrease. The inflation rate dropped below 1% for the first time since 1989 to 9.3%. Further, the fall in saving interest rates and the decrease in the yield rate for Government bonds issued in 24, as well as the volatility of foreign currencies contributed to an increase in the number of investors and capital driven toward the Bucharest Stock Exchange (BSE). The total market capitalization of the BSE in 24 increased three times to reach almost US$ 12 billion compared to US$ 3.7 billion at the end of 23. The market capitalization currently represents 17% of Romania s GDP. Furthermore, all three indices computed by the BSE posted significant increases; reaching all time highs in 24. On the last trading day of 24 all indices recorded values two times higher than those of the last trading day of 23. Thus, the BET index stood at 11% above the value on the last trading day of 23. The BET-C index posted an annual growth rate of 14%, while BET-FI recorded an annual growth rate of 115%. The daily average turnover also increased from US$ 1.3 million in 23 to over US$ 3.3 million in 24 and the turnover for 24 of US$ million increased by more than 161% as compared to 23 (US$ million). 24 also brought 3 new issuers to the BSE, representing banking, energy and textiles businesses. In addition, several listed companies raised capital through the BSE totaling US$ 16.3 million. It was the first time that one company initiated an IPO in the amount of US$ 3 million. With the support of the Romanian Government, a multi-annual program A Strong Market was launched to develop the capital market and to consolidate the financial market for a successful integration of Romania to the European Union (EU) in 27. Thus, seven large state-owned companies are planned to be listed on the BSE during the coming two years, and are expected to contribute to a higher liquidity and to increase in the market capitalization by 2%. In December 24, the BSE and Wiener Borse AG (WBAG) signed a Memorandum of Understanding, which establishes the basis of a co-operation between the two institutions. HISTORY AND DEVELOPMENT Trading in equities in Romania dates back to 1882, a year after the legal framework was passed. The market was very slim and from the beginning official trading was soon substituted by off-exchange trading. However, with the exception of the two world wars and the economic depression, the market grew to significant levels reaching, in terms of listed securities, 56 shares (banks, oil, mining, industrial, insurance and transportation companies) and 77 fixed income securities, in The peak was reached in 1938 but after the end of the Second World War, in 1948, the stock market was left without any public companies due to the nationalization of the entire economy. For almost fifty years Romania did not have one of the most vital institutions of a modern economy. The adoption in 1994, by the Parliament of Romania, of the Securities and Exchanges Act made the reconstruction of a modern capital market possible. Based upon the provisions of this Act, the main institutions of the Romanian capital market: the National Securities Commission, the BSE, brokerage companies, and the National Association of the Securities Dealers have been set up. The BSE was re-established in April 1995, by a decree of the National Securities Commission (NSC) at the request of 24 brokerage houses the founding members to trade on the BSE. A new law on securities was approved by the Parliament in 22. The BSE is a self-financing and selfregulating institution of public interest, operating on corporate principles. Trading is performed on the BSE in a dematerialized environment: Exchange operations have been conducted exclusively through the electronic systems since the reestablishment of the Exchange. FUTURE OUTLOOK In 24, Romania's Stock Exchange has been one of the best performers in the region. According to our estimations, the upward trend will continue accelerate during the next years before the Romania s integration in the EU and the market capitalization of the BSE will exceed 2% of the GDP in 25. The BSE plans for 25 are to: allow new types of intermediaries to enter the market (according to the provisions of the new Romanian Capital Market Act), such as commercial banks and other credit institutions, including investment firms from member and non-member EU countries; transform the BSE into a joint stock company; introduce new instruments provided for by the new legislation, such as financial derivatives; launch indexes for economic sectors that are represented on the stock market; and finalize preparation for the implementation of a new trading system for shares: ARENA. ARENA is a trading system developed inhouse, which is now used only for supporting the bond market. PAGE 58

61 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BUCHAREST STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct , Nov , Dec , TOTAL , Bonds July Aug Sep Oct Nov Dec TOTAL Other July Aug Sep Oct Nov Dec TOTAL.... Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 6, Aug-4 5, Sep-4 6, Oct-4 6, Nov-4 8, ,27.5 Dec-4 11, , ,2 1, , 1, 8, 6, 4 4 4, 2 2 2, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Ms. Adriana Tanasoiu Adriana.Tanasoiu@bvb.ro Website PAGE 59

62 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BUCHAREST STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Romania's transitional economy has achieved marginal progress during the last decade. Large portions of Romania are suitable for agriculture with some regions endowed with the highly fertile chernozem soil, which is so prevalent in neighboring Ukraine. Agricultural privatization has proceeded with 75% of the sector transferred from the state by Although, periodic drought and inadequate capital investment have threatened Romania's historic agricultural self-sufficiency. Minerals, forestry and fishery are also significant contributors to economic output. Romania's capable, low cost work force and tourism potential hold promise for the future. Foreign direct investment, which has historically originated predominately from EU nations, has totaled US$ 7 billion over the last decade, cumulatively about 15% of current GDP. In July 23, President Iliescu visited President Vladimir Putin in Russia. The trip was made for the purpose of signing a mutual friendship treaty. Earlier, in May 23, Romania and Russia reached an agreement, which mutually recognized national sovereignty and their respective borders. Efforts were also made to resolve a dispute over the annexation of the country now known as Moldova by the former Soviet Union in Economic Performance: On the back of improving macroeconomic stability and buoyant economic growth, S&P s recently revised its outlook on Romania s sovereign credit ratings from stable to positive and consequently placed the country into investment grade level. The outlook change is based on the strong commitment of the new centrist Government to step up economic, institutional and structural reforms, expected to strengthen country s perspectives to join EU in 27. The unemployment rate has continued on a declining path throughout the 24 year, after having reached a maximum in February and March (7.8%). Since then, the rate has continuously decreased, with the exception of November when it slightly increased by.1% month over month basis. 24 inflation dropped for the first time below 1% to 9.3% year-over-year basis in December 24, marginally exceeding the 9% initial target. An important contribution to the drop in last year inflation came also from - National Bank of Romania, which maintained a restrictive monetary policy up to June, thus avoiding a surplus of cash in the economy. Tax collection improvement has reduced the January - November fiscal deficit to.2% of GDP, in spite of the electoral year. Announced as one of the main priorities of the new Cabinet formed by a coalition of four reformist centre-right parties headed by the new Prim-Minister, fiscal code has been amended to allow the introduction of the flat income tax of 16% as of January 1st 25. Starting from the same date, the tax on corporate profit has also been lowered to 16% from 25%. According to preliminary estimates, in 24 current account deficit widened to 6.2% of GDP (as against 5.8% in 23) on the back of imports inflated by higher consumption and ROL appreciation. FDI financed 7% of the gap in line with 23 s coverage. 24 FDI expectations point to US$ 4.7 billion, 8% above the established US$ 2.6 billion target, suggesting a 6.2% share of GDP (as against 2.7% one year earlier). Such a strong hike in FDI s share is mainly due to the EBRD and IFC s payments totaling US$ 222 million for 25% stake of Romanian Commercial Bank as well as OMV s US$ 871 million paid for 33.34% stake in SNP Petrom. 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts National Securities Commission Ministry of Public Finance National Bank of Romania ECONOMIC RATIOS Romania Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 6

63 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BUCHAREST STOCK EXCHANGE ROMANIA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services ROMANIA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (lei-billions) 21,115 28,431 44,32 61,63 83, Money Supply M2 (lei-billions) 92,53 134, ,6 27, ,715 Growth Rate M1 17.7% 34.7% 55.9% 39.% 36.2% Growth Rate M2 48.9% 44.9% 38.% 46.2% 38.2% Interest Rates deposit rate 37.9% 35.% 35.% 35.% 29.% lending rate 64.% 74.2% 51.9% 42.2% 27.% Foreign Exchange Reserves (US$ millions) 2,867 2,687 3,922 5,442 7,211 Exchange Rate Period Average (lei/us$) 8,876 15,333 21,79 29,61 33,55 Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 25, 2, 15, 1, 5, * World Bank reports PAGE 61

64 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BULGARIAN STOCK EXCHANGE George Draychev CEO We are seeing a positive impact from the government s commitment to develop the capital market and to use this market as a public and transparent mechanism for privatization. 24 has definitely been a good year for the Bulgarian Stock Exchange (BSE) and for the capital market as a whole. If we take into consideration the SOFIX (the official index of the BSE-Sofia), 24 has seen a very good performance. Starting at 454 points at the beginning of last year it reached over 625 points at year s end. Market capitalization has grown significantly, reaching US$ 2 billion at the end of 24, comprising 8% of GDP. Currently there are 331 companies listed or admitted for trading on the Bulgarian Stock Exchange, 31 of which are on the Official Market and 3 on the Unofficial Market. The positive development of the stock market is the result of the overall stabilization of the Bulgarian economy. We are seeing a positive impact from the government s commitment to develop the capital market and to use this market as a public and transparent mechanism for privatization. The Exchange is currently working on enhancing the existing information disclosure framework. The BSE-Sofia, the Central Depository and the Financial Supervision Commission have established a joint project for the development of an integrated electronic system for disclosure of information called EXTRI. This new system will enable issuers to disclose information simultaneously to the country s three main securities institutions - BSE-Sofia, the Depository and the Commission. The system will accommodate the processing of both file transfers and paper documents for disclosure of price-sensitive and other information required by the market. As a web-based system, each EXTRI user will be registered and submitted documents will have to be signed via electronic signature. The official launch of the system is scheduled for 25 and a number of positive effects are anticipated as a result of its implementation. Steps will be taken to stimulate market liquidity and increase the attractiveness of the markets on the BSE-Sofia. The main objective is to attract more companies for listings and more issuers to the stock exchange. The BSE intends to broaden the spectrum of financial instruments traded on the exchange. This includes the establishment of a derivatives (futures & options) market. Recently a new index was introduced the BG 4. The reason for the introduction of the BG 4 is to give an alternative measure of overall market performance with a broader base and different method of calculation. The launching of the new index is considered to be part of the long-term plans to introduce index-based derivatives in the market. HISTORY AND DEVELOPMENT The first Stock Exchange Act was adopted in 1 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 19, the present Bulgarian Stock Exchange-Sofia was established. In accordance with the requirements of the new law, a Securities & Stock Exchange Commission was set up. On 9 October 19 the Commission officially licensed the BSE-Sofia. The first trading session on the regulated market took place on 21 October 19. By the end of 1999 there were 32 companies listed on the Official Market and about 1, companies admitted for trading on the Free (OTC) Market as a result of the mass privatization program. On 6 December 21 the Commission officially licensed the BSE- Sofia 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 European Union. The Securities & Stock Exchange Commission was first renamed the National Securities Commission, but in March 23 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 In 25 the Bulgarian Stock Exchange (BSE) will continue to improve the operational efficiency of its trading system, market surveillance and disclosure framework. The BSE, the Central Depository and the Financial Supervision Commission will launch an integrated electronic system for disclosure of information called EXTRI. This new system will enable issuers to disclose simultaneously to the three securities institutions in Bulgaria. As a webbased system, each EXTRI user will be registered and submitted documents will have to be signed via electronic signature. Thus we will have a standardized reporting system which will also facilitate data processing. We expect the amount of current paperwork to be reduced by at least 9%. At the beginning of 25 the BSE will introduce its new index BG 4. The idea behind the new index is to give an alternative measure of overall market performance with a broader and different method of calculation. PAGE 62

65 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BULGARIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL Other July Aug Sep Oct Nov Dec TOTAL Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 1, Aug-4 2, Sep-4 2, Oct-4 2, Nov-4 2, Dec-4 2, , 2,5 2, 1,5 1, 5 July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Panteley Karassimeonov bse@bse-sofia.bg Website PAGE 63

66 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BULGARIAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Bulgaria s monetary and fiscal policy, macroeconomic and political stability, functioning free-market economy, privatized financial sector, favorable tax rates, flexible labor laws and competitive wage rates all have contributed to a quantifiable and qualitatively improved business climate. Bulgaria s membership in NATO and the forthcoming EU accession on January 1st, 27 give additional guarantees to potential investors. The combination of high-growth, low inflation, stable currency, low interest rate, price and wage stability, low tax rates, low budget deficit makes Bulgaria very competitive in Central and Eastern Europe. Bulgaria owes its progress to sound monetary and fiscal policies in effect since 19. A currency board, a fixed exchange rate and conservative fiscal policy have led to steady economic growth and a declining government deficit, creating a business climate conductive to private investments. One of Bulgaria s success stories has been its stable currency. The Bulgarian lev has been pegged to the Euro since 19, obviously, with a zero fluctuation in terms of exchange rates. Parliamentary elections will be held in June 25. Whatever the outcome of these elections the next Bulgarian government has to follow the road-map to EU membership. Economic Performance: Key Economic Indicators: Real GDP growth was 4.9% in 22 and 4.3% in 23 and expected to be 5.6% in 24. Inflation declined steadily over the last years reaching 2.3% in 23; Registered unemployment went down to 13.6% in 23 (4% lower than the previous year), which is the lowest level in 5 years; Estimations for 24 are 12% unemployment rate; After having declined continuously over 4 years to reach 4.7% in 22, the current account deficit has increased to 8.5% of GDP in 23. In 24 the deficit was 6,9% of GDP; The catching-up in terms of GDP per capita, however has been very slow remaining at only 29% of the EU-25 average in 23 (just a 3% increase from 19); and Public debt has continued falling from above 1% of GDP in 19 to 46% of GDP at the end of 23. For 24 the figure is 44%. In its 24 Regular Report, the European Commission reiterated its recognition of Bulgaria as being a functioning market economy (first recognized as market economy in 22). Furthermore, the 24 report concludes that Bulgaria should be able to cope with competitive pressure and market forces within the Union. The Commission s Regular Report also mentions Bulgaria s further good progress in structural reforms over the last years. This holds in particular for the increasing role of the private sector through privatization and the reduction of state aid, the positive development of the banking sector and some improvements in the regulatory environment. Key Information Contacts Financial Supervision Commission Central Securities Depository Bulgarian National Bank Ministry of Finance Ministry of Economy and Commerce ECONOMIC RATIOS Bulgaria Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Trade 4 2 Domestic savings Investment Indebtedness * World Bank reports PAGE 64

67 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 BULGARIAN STOCK EXCHANGE BULGARIA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services BULGARIA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (levas-billions) 2,96 3,3 3,98 4,88 5,54 Money Supply M2 (levas-billions) 6,39 7,22 9,55 12, 14, Growth Rate M1 21.7% 11.5% 2.4% 22.8% 13.5% Growth Rate M2 11.9% 13.% 32.2% 26.7% 12.2% Interest Rates deposit rate 5.1% 4.5% 4.6% 4.7% 3.3% lending rate 13.3% 12.8% 11.5% 11.1% 9.4% Foreign Exchange Reserves (US$ millions) 2,685 2,892 3,155 3,291 4,47 Exchange Rate Period Average (levas/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI , EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 1, 8, 6, 4, 2, * World Bank reports PAGE 65

68 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 CAIRO & ALEXANDRIA STOCK EXCHANGES Mohamed Abdel Salam Chairman We, at CASE, are planning to introduce new market instruments like margin trading, and short selling since it represents a positive step towards the introduction of derivatives into the market. The Egyptian market has made its way through the economic and financial liberalization and reform process that began in the last decade. The market continues to develop and each year adds more instruments and mechanisms to support transactions, enhance efficiency, and protect market participants. Locally, 23/24 witnessed the appointment of a reformminded Cabinet in June that has been earnestly working to remove obstacles to investment, starting with customs and tax reforms and in parallel promoting an investment-friendly reputation and overcoming investment obstacles in Egypt by recognizing the strong potentials in the Egyptian market for local and foreign investors. The year 23/24 witnessed the undertaking of major projects at Cairo and Alexandria Stock Exchanges (CASE), including bringing information technology to bear in connecting the trading system in the stock exchange, the Capital Market Authority and Misr for Clearing Settlement and Depositary. The past year also witnessed launching of the Primary Dealers System for bonds in October 24, and the 13 banks acting as Primary Dealers have covered the three issues of treasury bonds amounting to US$ 156 million in a step forward to support the bond market, increase the number of efficient financial tools in the market, and strengthen the role of securitization in supporting the real estate market. We, at CASE, are planning to introduce new market instruments like margin trading, and short selling since it represents a positive step towards the introduction of derivatives into the market. Internationally, the government took steps toward developing an international Financial service Center in Egypt. This support begins with putting in place the necessary legislation and regulatory environment up-front to providing the necessary resources to develop the center on an on-going basis. In addition, concerning efforts pursued to attract other foreign investors, we are introducing the concept of corporate governance through one of its requirements of disclosure and transparency through enhancing the relationship between CASE and the other regional institutions. We, at CASE, are working on all fronts when it comes to attracting foreign investments. Some programs in particular will be used to attract investors. For example, the unified Arab Stock Exchange, which will be located in the Egyptian smart village. Based on the development needed, we can capitalize on our historical, geographical, cultural, and market knowledge to take the lead regionally. In opening our gates we are targeting bringing back the capital and investments to the region by putting together the Arab blue chip stocks to be traded in one place, strengthening the flow of capital and creating better investment opportunities for domestic and foreign investors, and enhancing the flow of information and transparency through the regional stock markets. In addition to encouraging more investment in Egypt, CASE will continue its efforts for enhancing investor education, pledging to maintain a market that is fair and trustworthy. HISTORY AND DEVELOPMENT The Egyptian Stock Exchange is comprised of two exchanges: the CASE, and is governed by the same board of directors that share the same trading, clearing and settlement systems. The Alexandria Stock Exchange was officially established in 1888 followed by Cairo in 193. The two Exchanges were very active in the 194s, when the Egyptian Stock Exchange ranked fifth in the world. Nevertheless, the central planning and socialist policies adopted in the mid-195s led to the demise of activity on the Exchanges, which remained dormant throughout the period between 1961 and In 199, the Egyptian government started an economic reform and restructuring program. The move toward a free-market economy has been remarkably swift and the process of deregulation and privatization has stimulated stock market activity. In mid- 19, the Exchange started its modernization plan that included an overhaul of its trading system, listing and membership rules, OTC trading and investor education. CASE aims to be one of the core financial centers in the Middle East North Africa (MENA) region, through the adoption of leading-edge technology, commitment to continuous improvement in its rules and regulations, the products and services it offers, and alliances forged with international markets. CASE is striving to strengthen its competitive position by embracing a strong customer orientation, offering timely and secure services to investors, members and market participants as well as promoting the confidence and understanding of investors of its operations. In short, fairness, efficiency and transparency constitute our ongoing vision and ultimate objectives. FUTURE OUTLOOK CASE s vision for 25 is to become the main gateway for investment in the MENA Region while operating with the utmost fairness, efficiency and transparency. In this respect, CASE has set a three year plan. For 25 CASE plans to: link CASE trading system with the clearing company (Misr Clearing Settlement and Depository MCSD) in a step towards having a straight through processing environment; develop the Surveillance department according to international standards; support and develop the infrastructure of the Pan Arab Stock Exchange; re-locate the Exchange to the Smart Village, being the major component of the regional financial center; apply Corporate governance principles within the Exchange; introduce new products such as (margin trading and short selling 1st Quarter 25), (the Exchange Traded Funds 26 ) and (the derivatives 27), to increase market liquidity and turnover; and implement e-gov within the Exchange. PAGE 66

69 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 CAIRO & ALEXANDRIA STOCK EXCHANGES OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL 2, Bonds July Aug Sep Oct Nov Dec TOTAL Other July Aug Sep Oct Nov Dec TOTAL Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 29, ,577.3 Aug-4 31, ,752.5 Sep-4 33, ,89.8 Oct-4 34, ,296.1 Nov-4 36,42.9 2,362. Dec-4 37, , , 2,5 2, 1,5 1, 5 4, 35, 3, 25, 2, 15, 1, 5, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Khaled Abdel Rahman karahman@egyptse.com Website PAGE 67

70 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 CAIRO & ALEXANDRIA STOCK EXCHANGES ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Strengthening macroeconomic indicators in recent years provided grounds for optimism that the reform process has paved the way for a period of more rapid modernization and solid economic growth. Economic reforms have come within the past decade under President Hosni Mubarak. Key elements of the reform program are: structural adjustment financing through the IMF-World Bank, strong policy action to curb fiscal deficits and inflation, tax and policy changes, including large-scale privatization of state industries, opening the economy to private (including foreign) investment, and pursuit of funding from a flexible range of sources to expedite needed development. A combination of bilateral and private moneyvariously channeled as loans, grants, and incentivized investment-has been committed to numerous infrastructure projects. Egypt's sectoral diversification is impressive. Agriculture still accounts for about 17% of GDP. The principal export crops are cotton and winter vegetables. A substantial industrial sector has benefited from synergy between investment from Persian Gulf oilproducing countries and Egypt's own abundant labor. Egypt is the Arab world's dominant manufacturer of raw and fabricated metals, vehicles, and pharmaceuticals. The near and medium-term industrial outlook appears favorable. A new government was appointed in July 24, headed by Dr. Ahmed Nazif, with a clear goal to revive the economy. To that end, the new government has formulated a package of structural and financial reforms. These include: a streamline in tariff brackets to only six brackets (down from a previous 27) and an overhaul of customs procedures with a reduction in tariff rates from 14.6% to 9.1%, a newly proposed income tax law, where rate of income tax will be slashed to 2% down from a previous 4%. The corporate tax will be reduced and unified at 2%, the revival and the speeding up of the privatization program, the government presented a medium-term financial sector restructure program covering banking and non-banking sectors with the aim to improve efficiency and reduce costs. In December 24, Egypt signed the Qualified Industrial Zone Protocol (QIZ), which is expected to have sustained impacts on export growth and trade efficiency as well as stimulate foreign investment in Egypt. On 19 December 24, Fitch Credit Rating revised their outlook of Egypt long term currency rating of BBB from negative to stable. Economic Performance: Egypt's recent economic indicators reflect robust signs of an upturn in the Egyptian Economy. 23/4 real growth recorded 4.4% up from 3.2% in the previous year. The economic recovery was helped by the stability in currency prices, the growth in exports of goods and services as well as the increased confidence in the new Cabinet. Preliminary estimates during the first quarter of FY 24/25 projects an annualized rate of 4.8% and maybe surpassing the 5% at the end of the year. The FY 23/4 current account revealed a large surplus of US$ 3.7 billion compared to US$ 1.9 billion in the previous year. This was mainly attributed to the success in non-oil exports promotion (with exports of good and services growing by 6%) and a surge in tourism revenues. Foreign Reserves reached a five year high of US$ 16.6 billion at the end of January 25, which covers almost 1 months of imports. Last, but not the least, the Egyptian pound has strengthened 7% vis a vis the US Dollar, coming on the back of a strong current account surplus and the launch of the US$ Interbank market which resulted in increased availability of foreign exchange. On the other hand, Egypt's foreign debt position remains strong and sustainable. Despite an increase in Egypt s foreign debt to US$ 29.5 billion in the first quarter of 25, it remains quite safe as it stands at less than 4% of the country s GDP. Debt to GDP stands at less than 4% of GDP. Key Information Contacts Central Bank of Egypt Capital Market Authority Misr Settlement, Clearance and Depository Ministry of Finance Ministry of Investment ECONOMIC RATIOS Egypt Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Trade Domestic savings Investment Indebtedness * World Bank reports PAGE 68

71 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 CAIRO & ALEXANDRIA STOCK EXCHANGES EGYPT GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services EGYPT MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (pounds-billions) Money Supply M2 (pounds-billions) Growth Rate M1 2.3%.8% 5.3% 7.9% 13.% Growth Rate M2 1.8% 5.7% 11.6% 13.2% 12.6% Interest Rates deposit rate 12.% 12.% 12.% 11.% 1.% lending rate 13.% 13.% 13.2% 13.3% 13.8% Foreign Exchange Reserves (US$ millions) 18,124 14,484 13,118 12,926 13,242 Exchange Rate Period Average (pounds/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 18, , 1 6, * World Bank reports PAGE 69

72 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 GEORGIAN STOCK EXCHANGE George Loladze Chairman of the Supervisory Board It is our strong belief that the principles of transparency and disclosure underlying the operation and development strategy of the GSE, are the unquestionable guaranty of our success. The year 24 was a landmark one for the Georgian Stock Exchange (GSE), due to the unprecedented increase of the basic trade figures compared with previous years, reflecting the overall revitalization of the economy in the wake of the Rose Revolution of 23. As to the future, the Georgian capital market has an opportunity to intensify its development through the recently resumed privatization process. GSE has rich experience in organizing privatization auctions, as well as, in providing the necessary legislative and IT support. Undoubtedly, through sustainable conducting of privatization the Georgian capital market will continue on its path of sound growth and development. Progress of the capital market, in many respects, depends on the soundness of corporate governance in Georgia. Thus, good corporate governance is one of the top priorities on our agenda. In 23, the GSE established a corporate governance training program for corporate representatives, legal professionals and the mass media. The leading professionals of the National Securities Commission of Georgia, the GSE, Central Securities Depository, and other capital market institutions prepared and distributed the Corporate Governance Manual. In parallel, we have initiated the establishment of the Georgian Corporate Directors Association and the development of the National Corporate Governance Code on this basis. It is our strong belief that the principles of transparency and disclosure underlying the operation and development strategy of the GSE, are the unquestionable guaranty of our success. The GSE will continue promoting the policy to encompass all different sectors of the Georgian capital market, and we will gladly cooperate with all actors, who strive for the economic development of Georgia. HISTORY AND DEVELOPMENT Equity securities first appeared in Georgia in 1991 after the declaration of independence that signaled the beginning of marketoriented reforms. A vast majority of the newly established joint-stock companies were owned by a rather small number of private shareholders and trading in these shares was relatively inactive. With the launching of the Mass Privatization Program in 1994, approximately 1,3 state-owned enterprises were organized as joint-stock companies, creating about half a million individual private shareholders. However, during a five-year period ( ), the lack of an appropriate legal framework and organized market infrastructure seriously impeded the secondary trading of these shares and any over-the-counter market activity was nearly nonexistent. The GSE was founded in 1999 by a group of Georgian securities market professionals, leading banks, investment and insurance companies. Today it is the only organized securities market in Georgia. Designed and established with the assistance of the United States Agency for International Development (USAID) and operating within the legal framework of corporate and securities laws drafted with the assistance of American and German experts, the GSE can assert that it is designed and operated to comply with global best practices and offers an attractive investment environment to foreign investors. To promote the concept of self-regulation, the GSE membership adopted new rules. After approval of these rules by the National Securities Commission of Georgia, the GSE was officially recognized as a self-regulatory organization (SRO) and received a stock exchange license in January 2. The GSE utilizes an automated trading facility. Thousands of securities can be traded by its members from the workstations at the GSE floor or remotely from their offices. The GSE adopted the platform employed by the Russian trading system (RTS) in Moscow. However, RTS - as an excellent informational-communication system - was significantly modified to ensure those requirements outlined under the GSE trading rules reflected the peculiarities of Georgian securities market. Official trading at the GSE began in March 2. The number of companies admitted for trading at the GSE trading system increased gradually and by the end of 24 reached 277. Practically all of these companies are former state owned and operated companies transformed into jointstock companies and then privatized. The growing but still low trade volumes reflect the nascent stage of the Georgian capital market and the level of development of the Georgian economy. In 22, as a result of active cooperation with the National Securities Commission and the Ministry of State Property Management, the Special Privatization Auctions commenced at the GSE. In 23 the GSE started trading government securities. 24, was a landmark year for the GSE, due to the unprecedented increase in basic trading figures compared with previous years, reflecting the overall revitalization of the economy in the wake of the Rose Revolution of 23. FUTURE OUTLOOK In 25 the GSE plans to: make important changes in its trading system and trading rules so as to increase the efficiency of the Treasury Bills trading on the stock exchange; intensify the trading process. In particular, the trading sessions will be conducted on daily basis and an additional trading session will be introduced during the trading day; increase the efficiency of trading and increase the liquidity of the market; introduce partially guaranteed trading of securities; remove the Day-trading restriction on the GSE; and launch a new web-site for the GSE, which along with traditional statistics will provide a corporate reports database for the companies who are admitted to the trading system. In addition, the creation and publication of a company database will allow companies to publish their annual, semi-annual and current reports which is required by law and thus improve disclosure standards and corporate transparency. PAGE 7

73 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 GEORGIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME (US$ Millions) MONTHLY MARKET CAPITALIZATION (US$ Millions) July n/a Aug n/a Sep n/a Oct-4 2. n/a Nov n/a Dec n/a July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mrs. Eka Katamadze info@gse.ge Website PAGE 71

74 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 GEORGIAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Following the Soviet Union's dissolution, Georgia has faced a problematic and disruptive political and economic transition during which the public sector workforce was cut by almost half. Given this very difficult transition experience in the early years after independence, and uncertain prospects for regional economic and political stability, the turnaround in the Georgian economy after 1994 was remarkable. Despite a shock to the economy from widespread power outages in the first quarter, GDP growth for all of 21 accelerated to 4.5%. One of the major factors accounting for slower growth in the past several years has been drought that has a significant effect in view of agriculture's 3% contribution to Georgian GDP. Georgia is to be on a major new energy corridor from the Caspian Sea to the Black Sea-the Baku-Ceyhan Pipeline from Azerbaijan to the Turkish Mediterranean port of Ceyhan, which began construction in the summer of 22. It is already a key transit way for 'early oil' from Azerbaijan via the Baku-Supsa Pipeline that terminates at Georgia's Black Sea port of Supsa and commenced deliveries in Over the next several years, investment activities associated with 135 miles of the Baku- Ceyhan line will spur economic activity in Georgia (and temporarily higher current account deficits). The country should benefit from its emerging role as a key transit point for huge flows of Caspian oil that are projected to move west over the next decade. In November 23, opposition forces stormed the Georgian parliament and took over its control. President Eduard Shevardnadze declared a state of emergency but soon resigned from office. On Nov. 26, 23, Mikhail Saakashvili announced his participation in the presidential election and went on to win the presidency in 24. Economic Performance: GDP rose by and 4.5 and 5.4% in 22 and 21, respectively, despite power supply disruptions early in the year. Ending of the drought brought a sharp rebound in agricultural output that helped lift the growth rate. Services industries, especially transport, were also quite strong in 21. Inflation, at 3.4% in 21, was the lowest since independence. Tough anti-corruption legislation has already proved fruitful in driving the shadow economy down to 3% of GDP in 23. Georgia's current account has been in persistent deficit in recent years. The current account deficit is smaller than the trade deficit because Georgia has surpluses in services (including net factor income payments) and in unilateral transfers (including non-loan foreign aid grants). In the capital and financial account, the transactions are dominated by official aid loans and by foreign direct investment, much of which has been, and will be in the next several years, associated with new oil pipeline construction. Over the past four years, Georgia has attracted as much as US$ 22 million in FDI (in 1998 when the Baku-Supsa pipeline was being built) and as little as US$ 62 million in 1999 in the aftermath of the Russian financial crisis. In 21, the net inflow of FDI totaled US$ 1 million, but that is expected to more than double by 24 when the Baku-Ceyhan pipeline investment will be peaking. Perhaps the most significant development in the region is the U.S.-backed $2.9 billion Baku- Tbilisi- Ceyhan (BTC) oil pipeline that originates in Baku, passes through the Republic of Georgia, and terminates at Ceyhan, Turkey. This will greatly accelerate energy sector growth going forward. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Ministry of Finance of Georgia National Securities Commission of Georgia National Bank of Georgia Georgian Central Securities Depository Georgian Securities Industry Association ECONOMIC RATIOS Georgia Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 72

75 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 GEORGIAN STOCK EXCHANGE GEORGIA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services GEORGIA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (lari-billions) Money Supply M2 (lari-billions) Growth Rate M1-1.% 1.% 33.7% 7.% 14.9% Growth Rate M2-1.1% 21.1% 39.4% 18.5% 17.9% Interest Rates deposit rate 17.% 14.6% 1.2% 7.8% 9.8% lending rate 46.% 33.4% 32.8% 27.3% 31.8% Foreign Exchange Reserves (US$ millions) Exchange Rate Period Average (lari/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 1, , * World Bank reports PAGE 73

76 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ISTANBUL STOCK EXCHANGE Osman Birsen Chairman and CEO In 24, a very significant development for Turkey was the determination of a date for starting the membership negotiations with the European Union. The Turkish economy continued to strengthen in 24, following the consecutive crises in 2 and 21. The inflation rate fell to below 1 percent for the first time after thirty years. A very significant development for Turkey was the determination of a date for starting the membership negotiations with the European Union. The Istanbul Stock Exchange enjoyed the good news in the Turkish economy. The ISE main index, National-1, appreciated by 38% in US Dollar terms. Among world markets, the ISE was the 9th highest yielding market in 24. The ISE Equity Market average daily trading volume increased by 46% to reach US$ 593 million in 24. The ISE stands at 22nd rank among world stock markets in terms of trading volume at yearend. Market capitalization also registered an increase of 42%, reaching US$ 98 billion. The ISE Bonds & Bills Market average daily trading volume, on the other hand, increased by 59% in US Dollar terms and reached US$ million, ranking 6th among world markets in terms of bond trading volume. HISTORY AND DEVELOPMENT In 1981, the Capital Market Law was enacted and one year later, the Capital Markets Board was established. In October 1983, the Parliament approved the Regulations for the Establishment and Functions of Securities Exchanges, which paved the way for the establishment of the Istanbul Stock Exchange (ISE), formally inaugurated on 26 December Currently, there are three markets operating at the ISE: the stock market, the bonds and bills market and the international market. The ISE provides a fair and transparent environment for trading of a wide variety of securities, namely, stocks, exchange traded funds, government bonds, Treasury bills, money market instruments (repo/reverse repo), corporate bonds and foreign securities as well as foreign exchange futures contracts. As of end of 24, 99 out of 11 members have been provided with remote access to the stock market trading systems. At the end of 24, the number of orders sent by members via Ex-API (Express Application Programming Interface) terminals reached 77% of all orders, with the number growing steadily. Trading on the bonds and bills market is already carried out remotely. The ISE currently owns 23.95% of the ISE Settlement and Custody Bank (Takasbank), 3% of the Central Registry Agency and 18% of the Turkish Derivatives Exchange (TurkDEX). On the international level, the ISE has participations in the Kyrgyz and Baku Stock Exchanges with stakes of 24.51% and 5.55%, respectively. As the chairing Exchange of the Federation of Euro-Asian Stock Exchanges (FEAS) and the project leader of the Southeast European Cooperation Initiative (SECI), the ISE leads many projects, one of which is to establish a linkage among the securities markets in the region via an electronic network of intermediaries of these exchanges. Additionally, the Enterprise Development and Finance Project conducted jointly by ISE and OECD, is expected to be completed in 25. Also, Istanbul, Athens and Tel Aviv Stock Exchanges have continued their efforts to encourage their members to establish an electronic member-to-member order routing platform among the three stock exchanges. A regional index covering the three markets and the promotion for the establishment of regional funds are also planned in 25. Local CSDs also have continued their cooperation to facilitate cross border settlement and clearing. FUTURE OUTLOOK The ISE has been included in the privatization program. Work toward demutualization and privatization of the ISE in coordination with the Capital Markets Board (CMB) is on-going. As of January 1, 25, the New Turkish Lira (YTL) will be the new currency unit of Turkey. The Turkish Lira will be converted to New Turkish Lira as TL 1,, = YTL 1. The smallest unit (the 1th part of one New Lira) will be New Turkish kurus (Yeni kurus - Ykr). TL banknotes and coins will be withdrawn as of January 1, 26. Within the context of the introduction of YTL (ISO Code:TRY), information as regards to major changes to take place on the ISE markets is available on ISE s website ( The Derivatives Market of the ISE, where currency futures contracts were traded will be closed on January 28, 25. As of the same date, the Turkish Derivatives Exchange Inc. (TurkDEX) which was established in Izmir, will start to operate. The ISE has participated in the paid-in capital of TurkDEX by 18%. The website of TurkDEX is Efforts toward software development under the Central Surveillance Project jointly carried out by the CMB and the Istanbul Stock Exchange continued in 24 and work towards creating a new software system which will allow real time surveillance to be carried out electronically and more efficiently, is scheduled to be finished in 25. The Disclosure Automation Project which will enable the companies to directly disclose information using internet technologies and digital certificates, is planned to be completed in early 25. PAGE 74

77 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ISTANBUL STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-4 9, ,99, ,786. Aug-4 8, ,8, ,93.4 Sep-4 16, ,566, ,398.5 Oct-4 12, ,15, ,273. Nov-4 12, ,32, ,13.5 Dec-4 14, ,763, ,82.1 TOTAL 73, ,816, ,793.9 Bonds July-4 21, Aug-4 19, Sep-4 22, , Oct-4 21, , Nov-4 21, , Dec-4 29, , TOTAL 136, , Other July-4 88,61.2 4, Aug-4 93, , Sep-4 98, , Oct-4 81,72.1 4, Nov-4 12,446. 5, Dec-4 111, , TOTAL 575,7.3 4, Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 69, Aug-4 7, Sep-4 77, Oct-4 84, Nov-4 84, Dec-4 98,73.5 1, , 16, 14, 12, 1, 8, 6, 4, 2, July Aug Sep Oct Nov Dec 1,2 1, , 9, 8, 7, 6, 5, 4, 3, 2, 1, July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Eren Kiliclioglu dis@imkb.gov.tr Website PAGE 75

78 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ISTANBUL STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Turkey s serious steps towards economic reforms and a one party majority in the Parliament after the 22 general elections brought political and economic stability. The government implemented a three-year economic program successfully between and showed its willingness to continue structural reforms with a new threeyear stand-by agreement with the IMF for the years As a result of the political stability and adherence to economic and political reforms, Turkey has recorded strong economic growth for three consecutive years in a row and exhibited an increase in exports by nearly doubling figures during the program while bringing down the inflation to a historic low of 9.3% at the end of 24. Finally, due to strong economic and political performance during this three years time, Turkey has been granted a date to open negotiations for full membership at the European Union (EU) Summit on the 17th of December 24 further, the road to full membership is expected to give a boost to the Turkish economy in the coming years. Turkey has seen the positive outcomes of its devotion to an economic program which included the implementation of structural reforms and tight fiscal and monetary policies for three years ending 24. Turkey s growth rate reached 7.9% in 22, 5.8% in 23 and accelerated to 8.7% during the first three-quarters of 24. Economic growth was accompanied by a decrease in inflation to single digits and record highs in exports as well as a recovery in domestic demand and a strengthening of the Turkish Lira. As a result of economic stability, the government decided to introduce the new currency New Turkish Lira (TRY) as of January 1, 25. The Turkish Lira previously in circulation is converted to New Turkish Lira as TL 1,, = TRY 1. Also, a new three-year stand-by agreement with the IMF covering the years will ensure the continuance of sound macroeconomic policies, structural reforms, tight fiscal and monetary policies as well as easing the public sector debt dynamics. The consequence of the 16-17th of December 24 the EU Leaders Summit was to open negotiations aimed at full membership of Turkey to EU and Turkey is expected to start accession negotiations in October 25. Negotiations are expected to take nearly a decade; however, the process of negotiations will help sustain economic and political stability through the roadmap drawn by the EU. EU membership anchor is expected to increase the inflow of foreign portfolio and direct investments to Turkey. Economic Performance: Due to Turkey s success in the implementation of tight fiscal and monetary policies, inflation rate in 24 was below the year-end target as in the two previous years. A year-to-year CPI rate for 24 announced by the State Institute of Statistics was 9.3%, compared to the official 12% target. As a result of strict monetary policy and strong fiscal performance, the Central Bank s overnight interest rates declined to 18% at the end of 24, from 26% at the end of 23. Meanwhile, exports increased by 32.9% to US$ 62.8 billion and imports increased by 4.1% to US$.2 billion in 24 as compared to 23. In 24, the ISE-National 1 Index, the main stock market index on the Istanbul Stock Exchange (ISE) increased by 34.1% in TRY terms and by 38.2% in US$ terms as compared to the values at the end of 23. The main stock market indicator, the ISE National-1 Index increased to a level of 24,2 in TRY (US$ 19,655) at the end of 24 from 18,625 (US$ 14,66) at the end of 23. The stock market yearly total traded value increased by 42.1% in TRY to TRY 28.4 billion and by 47.5% in US$ to US$ billion in 24 compared to 23. The market capitalization of 2 ISE traded companies increased to a level of TRY billion (US$ 98.1 billion) at the end of 24 from TRY 96.1 billion (US$ 69. billion) at the end of 23. The turnover in public debt securities, transacted on the Outright Purchases and Sales Market, increased to TRY billion (US$ billion) in 24 from TRY billion (US$ billion) in 23. The Repo/Reverse Repo Market turnover increased to a level of TRY 1,551.4 billion (US$ 1,9.5 billion) in 24 from TRY 1,4.5 billion (US$ 71.5 billion) in 23. Key Information Contacts Capital Markets Board of Turkey The Association of Capital Market Intermediary Institutions of Turkey ISE Settlement and Custody Bank Inc. (Takasbank) Central Registry Agency Inc. of Turkey The Turkish Derivatives Exchange (TurkDEX) ECONOMIC RATIOS Turkey Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 76

79 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ISTANBUL STOCK EXCHANGE TURKEY GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services TURKEY MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (Yeni Turkish Lira (TRY)-billions) E Money Supply M2 (TRY-billions) E Growth Rate M1 63.1% 93.6% 57.3% 46.3% 52.5% E Growth Rate M2 89.7% 1.3% 4.5% 86.2% 54.5% E Interest Rates deposit rate 67.% 6.% 6.% 6.% 55.% lending rate 8.1% 78.4% 47.2% 74.7% 5.5% Foreign Exchange Reserves (US$ millions) 19,489 23,346 22,488 18,879 27,69 Exchange Rate Period Average (TRY/US$) Annual % Growth E: Estimate * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 7, 6, 5, 4, 3, 2, 1, * World Bank reports PAGE 77

80 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TAKASBANK ISE SETTLEMENT AND CUSTODY BANK INC. AFFILIATE MEMBER Emin Catana President and CEO I believe the inclusion of Central Securities Depositories (CSD) and Clearing & Settlement Institutions will complement all the hard work that the Stock Exchanges have endeavored to accomplish for the sake of our markets. Takasbank is honored to be an Affiliate Member of the Federation of Euro-Asian Stock Exchanges. First of all, I would like to thank the FEAS Membership for their initiative to embrace Central Securities Depositories (CSDs) and Clearing & Settlement Institutions as Affiliate Members. Functional Titles of the Affiliate Member Central Securities Depository of Turkey, Clearing and Settlement Institution for ISE markets, Clearing House for the Turkish Derivatives Exchange, National Numbering Agency of Turkey, Custodian for the Mutual Funds and Pension Funds incorporated in Turkey. Services Provided Execution of corporate actions, Safekeeping of physical securities, Custody and transfers of securities in book-entry form, Web based monitoring service for the investor sub-accounts, Central clearing and settlement for the organized market (based on multilateral netting), Real time gross DvP member to member settlement, Settlement and custody for foreign securities, Cash settlement and transfer facilities I believe, this new initiative will bring enriched expertise and knowledge into FEAS, in the areas of clearing, settlement and custody, which are vital components of organized securities markets. The inclusion of CSDs and Clearing & Settlement Institutions should also be expected to complement all the hard work that the member exchanges have endeavored to accomplish, since the inception of this organization and for the sake of FEAS markets. (domestic and cross-border), Takasbank Money Market, Securities Lending and Borrowing, Cash Credits, Allocation of ISIN for securities issued in Turkey. Type of Commercial Entity Private sector for-profit company (non-deposit taking banking institution) Ownership Istanbul Stock Exchange (ISE): 26% Banks (2): 4% Brokerage Houses (7): 34% Board of Directors (11 members) Istanbul Stock Exchange: 4 Capital Markets Board: 1 Banks: 3 Brokerage Houses: 2 and the President and CEO of Takasbank Regulated by Capital Markets Board Banking Regulation and Supervision Board Central Bank of Turkey. I am pleased to say that Takasbank will be excited and ready to share the experience and knowledge it has accumulated in Turkey and in the international markets for a relatively long period of time, with its peers at FEAS. Last but not the least, I would like to thank the President of FEAS, the Secretariat and all members for their trust and friendship in accepting us as an affiliate member to the FEAS family. Form of Securities Physical, bearer, immobilized. Form of Settlement Book-entry. Settlement Period Equities: T+2 Bonds and Bills: T+ Does the CSD act as a central counter party? Yes (However, settlement is not fully guaranteed. Default procedure is applied.) Size of Guarantee Fund (as of March 25) ISE Equities Market: US$ 24.1 million ISE Bonds and Bills Market: US$ 37.6 million Memberships to International Organizations: Association of National Numbering Agency (ANNA), International Securities Services Association (ISSA), Society for Worldwide Interbank Telecommunications (SWIFT). CONTACT INFORMATION Contact Name Mr. Osman Gunsel Topbas gtopbas@takasbank.com.tr Website PAGE 78

81 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KARACHI STOCK EXCHANGE Muhammad Yasin Lakhani Chairman The KSE has taken a number of measures to increase investor s confidence by making the Exchange more transparent and introducing modern technology in order make the market truly modern and efficient. The Karachi Stock Exchange (KSE) has achieved another milestone as the KSE 1 Index crossed the level of 6 points and closed at points on December 31, 24 and the market capitalization increased from US$ 16.6 billion to US$ 29. billion. The record-breaking performance of the KSE during the last five years is attributed to the positive and consistent policies of the government and a number of measures implemented by the Exchange including stringent risk management. The consistent policies and measures adopted by the Exchange was instrumental in the Exchange being declared as The Best Performing Market of the World for the year 22 by international magazine Business Week and a US newspaper USA Today. The KSE has taken a number of measures to increase investor s confidence by making the Exchange more transparent and introducing modern technology in order to convert the market into a truly modern and efficient one. In this regard Internet based trading has started from December 6, 24. Margin Financing has also been introduced from October 8, 24 and phasing out of existing COT companies would be completed by June 3, 25. In addition, corporate governance is now the part of KSE s listing regulation. Transparency has been enhanced with the implication of quality audits, quarterly financial reports and timely dividend payouts. Out of 23 offerings in year 24, three were of state owned entities whose shares were allotted under government's privatization program and the government offloaded additional shares of SSGC and PIA whereas PPL's shares were offered for the first time to the market participants. The PPL offering received a record 755, applications for its 15% public offering. HISTORY AND DEVELOPMENT The KSE has been declared as the Best Performing Stock Market of The World For the year 22, as declared by the international magazine Business Week. Similarly the US newspaper, USA Today, termed Karachi Stock Exchange as one of the best performing bourses in the world. As of December 31, 24, 661 companies were listed with the market capitalization of US$ 29. billion having listed capital of US$ 6.8 billion. The KSE 1 Index reached 6,218.4 on December 31, 24. The KSE came into existence on 18 September It was later converted and registered as a company limited by guarantee on 1 March Although as many as 9 members were licensed at that time, only half a dozen were active as brokers. Initially, only five companies were listed with a paid-up capital of Rs 37 million (US$.62 million). In 1991 the secondary market was opened to foreign investors on an equal basis with local participants. This measure, along with a policy of privatization, has resulted in rapid growth of the market since Privatization has been adopted as a philosophy, and activities that were previously reserved for the public sector have now been opened to the private sector. The change is most marked in the financial sector where a number of commercial banks, investment banks, discount institutions, leasing companies, life insurance companies, Modarabas and mutual funds have been created by private initiatives. The regulatory agency is the Securities & Exchange Commission of Pakistan (SECP), formed on 1 January 1999 by dissolving the Corporate Law Authority that was established in The SECP administers the compliance of the Companies Ordinance, 1984, the Securities and Exchange Ordinance, 1969, the laws governing Modarabas, leasing companies, NBFIs and other corporate laws, and is run by five commissioners under the chairman. The Asian Development Bank s Capital Market Restructuring Plan envisages the conversion of the CLA into the SECP as an autonomous regulatory authority. The new system provides autonomy to the SECP, and at the same time an accountability mechanism through the establishment of the Securities and Exchange Policy Board. All policy decisions are made by the Board on recommendation of the SECP, which is also empowered to take suo moto action and is answerable to the Parliament. FUTURE OUTLOOK The coming period is expected to be very challenging and the KSE is contemplating the initiation of further projects and initiatives to ensure that the KSE should remain one of the premier growing stock exchanges of the world. The future goals are as follows: listing of companies on the OTC counter to pave way for the smaller companies to raise financing through the stock exchange; introduction of new derivative products including Index Futures; introduction of cross border listings; introduction of new indices, which are more market reflective & representative; increase in the free float by bringing more companies to the KSE and also to encourage the already listed companies to increase their capital and / or to make their shares available in the market; educate the investors and guide and train the brokers and their staff; publish guides on investment in equity in local languages; promote quality research and to encourage careers in this important area; strengthen the existing monitoring of compliance with the code of Corporate Governance by listed companies; strengthen the Market Monitoring and Surveillance Department; and consolidation of the existing Exchange Rules & Regulations in a single Rule Book. 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82 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KARACHI STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-4 5, , Aug-4 3, , Sep-4 3, , Oct-4 4, , Nov-4 3, , Dec-4 1, , TOTAL 32, , Bonds July Aug Sep Oct Nov Dec TOTAL Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 24, ,289.9 Aug-4 24,63.7 5,346.2 Sep-4 25, ,217.7 Oct-4 24, ,332.2 Nov-4 26,33.9 5,567.8 Dec-4 28, , , 1, 8, 6, 4, 2, 7, 6, 5, 4, 3, 2, 1, 3, 25, 2, 15, 1, 5, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Mohammed Yacoob Memon gm@kse.com.pk Website PAGE 8

83 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KARACHI STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Although agriculture is declining as a percentage of total output, this sector remains the primary economic activity in Pakistan. Cotton, wheat, rice and sugarcane are the primary crops, which benefit from an extensive irrigation system. The annual cotton crop is of particular importance as it provides the input to the textile and garment industry, which is the nation's dominant export industry. Pakistan is attempting to increase its information technology sector, but only 3% of the populace has telephones at home. Having achieved a degree of selfsufficiency in the armaments sector, Pakistan is now promoting arms sales as a means of generating more diversified export revenue. In June 24, President Pervez Musharraf accepted the resignation of Prime Minister Mir Zafarullah Khan Jamali,. Jamali nominated Chaudhry Shujaat Hussain, the president of the ruling Pakistan Muslim League, as his interim prime minister. For his part, Prime Minister Chaudhry Shujaat Hussain said that former Finance Minister Shaukat Aziz would be the next prime minister following elections in the National Assembly. Shaukat Aziz went on to be sworn in as prime minister. In July, he escaped unhurt from an apparent assassination attempt. In September 24, the peace process between India and Pakistan appeared to be making some much lauded progress. India's Prime Minister Manmohan Singh and Pakistan's Pervez Musharraf met in New York on the sidelines of the opening of the United Nations General Assembly. Reports say the talks went well with both leaders voicing a desire to continue working together. Economic Performance: Economic activity rebounded in 22 and 23 as GDP grew at 4.4% and 5.5%, respectively, after having slowed in 21. The Pakistani economy was firing on all cylinders, and growth was led by a doubling of net remittances from abroad due to favorable external conditions, and sharp increase in demand for Pakistani exports. Internal consumption was boosted as well, as favorable consumer financing led to a rise in the internal consumption and production of autos and electronics. Gross capital formation picked up as well, to 15.5% of GDP in 23 from 14.7% in 22, due to investment induced by privatization and deregulation in the oil and gas, communications, and financial sectors. This growth led to expanded activity in the nation s cement industry, and helped spur modernization efforts in the textile industry. The current account deficit, which exceeded 6% of GDP in was reduced to 1.3% of GDP in 2 owing to the strength of textile exports. It then swung into surplus in 21 despite steeply falling exports imports declined as well and overseas remittances surged as the war on terrorism cracked down on 'underground' systems of repatriating Pakistani workers' earnings without using the banking system. As both exports and imports shot up by 19.6% and 2.1%, respectively, in 23 due to a more favorable external environment, the current account surplus moderated to 5.2% of GDP from 6.3% in 22. Pakistan typically runs a deficit of US$ 1-2 billion in its merchandise trade account and a deficit on international services of about US$ 3 billion, but it has also typically received large amounts in remittances from Pakistanis working abroad, many in the oil fields of the Middle East. These repatriated earnings have made a significant contribution to the current account over the years. The movement of such remittances through the banking system rather than through informal payment channels is a major factor in the improvement in Pakistan's current account balance. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Government of Pakistan Ministry of Finance Privatization Commission State Bank of Pakistan Security and Exchange Commission of Pakistan ECONOMIC RATIOS Pakistan Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 81

84 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KARACHI STOCK EXCHANGE PAKISTAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services PAKISTAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (rupes-billions) ,118 Money Supply M2 (rupes-billions) 1,263 1,317 1,477 1,65 1,928 Growth Rate M1 4.6% 8.6% 1.1% 1.2% 15.9% Growth Rate M2 7.9% 4.3% 12.1% 11.7% 16.8% Interest Rates deposit rate 16.5% 13.% 13.% 1.% 7.5% lending rate 1.8% 9.% 8.6% 8.5% 5.5% Foreign Exchange Reserves (US$ millions) 1,28 1,511 1,513 3,64 8,78 Exchange Rate Period Average (rupes/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 12, 6 4 8, , * World Bank reports PAGE 82

85 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 CDC CENTRAL DEPOSITORY COMPANY OF PAKISTAN LIMITED AFFILIATE MEMBER M. Hanif Jakhura CEO Since commencement of its operations in 19, The Central Depository Company of Pakistan Limited (CDC) has achieved an indispensable position in the capital market of Pakistan by providing concrete benefits to its clients in terms of efficiency, security, reliability and cost effectiveness. The government of Pakistan s aggressive privatization policy deployed through The Central Depository Company of Pakistan Limited (CDC) has achieved an indispensable position in the capital market of Pakistan by providing concrete benefits to its clients in terms of efficiency, security, reliability and cost effectiveness. exchanges, capital reforms undertaken by the Securities and Exchange Commission of Pakistan and the continued reliable services of the CDC have resulted in the market boom with a record increase in the Karachi Stock Exchange (KSE) index by almost 56.5% since June 24 and the market capitalization has surged to US$ billion as of February 28, 25. ROLE OF THE DEPOSITORY The Central Depository Company of Pakistan Limited (CDC) is the country s sole depository for equities, corporate debt and bonds. It provides settlement and depository services to all three stock exchanges of the country (Karachi, Lahore and Islamabad), financial institutions and qualified private investors. The CDC was incorporated on January 21, 1993 as a public limited company and began live operations on September 3, 19. The Company was established under the Central Depositories Act in 19 with the scope to manage and operate the Central Depository System (CDS), an electronic book-entry system. The Company is sponsored by all the three stock exchanges of Pakistan as well as national and multinational institutions. The CDC is regulated by the Securities and Exchange Commission of Pakistan. It is market practice to use CDS for custody and compulsory to use it for settlement of securities live on CDS. The Company also manages the operations of the National Clearing and Settlement System (NCSS) on behalf of the National Clearing Company Pakistan Limited (NCCPL). The CDC started providing Investor Account Services (IAS) to retail investors, both individual and corporate in The CDC has also started Trustee and Custodial Services for closed-end and open-end mutual funds in the year 22. Participation Criteria Participants/Account Holders Members of stock exchanges, banks, DFIs, corporate bodies and qualified private investors are eligible to become participant/account holder of CDC. Eligible Pledgee Financing institutions may join CDC as eligible pledge. Issuers All issuers of listed securities must join CDC in the capacity of an Issuer. Size of Guarantee Fund CDC does not operate a guarantee fund. Does the CSD act as a central counter party? No Memberships in other International Organizations Association of National Numbering Agency (ANNA), International Securities Services Association (ISSA), Asia-Pacific Central Securities Depositories Group (ACG) Legal Status Public Limited Company (Unlisted) Type of Commercial Entity For-profit company Regulated by Securities and Exchange Commission of Pakistan CONTACT INFORMATION Contact Name Mr. Aftab Ahmed Diwan diwan@cyber.net.pk Website PAGE 83

86 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KAZAKHSTAN STOCK EXCHANGE Azamat Joldasbekov President The development of the market was foremost characterized by the growth of trade volumes. The KASE turnover reached an equivalent of US$ 58 billion. In the year of 24 the organized securities market of Kazakhstan continued to develop in the same manner of previous years. The development of the market was foremost characterized by the growth of trade volumes. The Kazakhstan Stock Exchange (KASE) turnover reached an equivalent of US$ 58 billion. Significant changes have occurred during 24: the advanced version of our electronic trading system was successfully launched in January, 25; according to the Government's decision the primary T-bill market was to be relocated to the KASE since the beginning of 25; as a result, the year of 24 was used by us to fulfill all necessary legal and technical preparations for such cordial change; and foreign securities started to be traded on the KASE: T-bills (Russia) and corporate securities shares of PetroKazakhstan Inc (Canada). In order to meet the more complicated requirements of market regulation, we created 2 new sub-divisions: the Supervision department and the Monitoring subdepartment under the Listing department. Our main tasks for 25 are to: modify the Listing rules; re-fresh the KASE basic legal framework; modernize our main information technologies; and launch a completely new version of the KASE web-site. HISTORY AND DEVELOPMENT KASE (previously the Kazakhstan Interbank Currency and Stock Exchange) was founded on 17 November 1993 as a closed-end jointstock company, on the basis of an earlier established Center of Interbank Currency Transactions (Currency Exchange) of the State National Bank. The main stimulus to create KASE was the introduction of the national currency, the Kazakhstan tenge, on 15 November Starting in November 1995, KASE began trading state T-bills. In November 1996, it received its securities trading license from the National Securities Commission (NSC). As a result of a proposal tendered by the government in December 1996, KASE was chosen as a model exchange to trade securities of the largest enterprises of Kazakhstan. In September 19, a closed joint-stock company, the Almaty Financial Instruments Exchange, separated from KASE. Two exchanges resulted from the adoption, in March 19, of the law On Securities Market with the provision that a stock exchange could only operate in securities. However, on 1 April 1999, a merger took place between KASE and the Almaty Financial Instruments Exchange (AFINEX), thus making KASE the only organized market in Kazakhstan. In 21 KASE became a shareholder of the Kyrgyz Stock Exchange. The most important event of 23 year was the passage of two new laws that determine legal infrastructure of the stock market the law "On joint stock companies" and the law "On securities market" that substituted the laws of previous years. In October, 23 KASE with its new subsidiary company "etrade.kz" LLP launched the "etrade.kz" project. The purpose of the project was the organization of an internet-trading system to carry out the operations with the financial instrument at KASE. At the beginning of 24 the KASE will change organization-legal structure from a "closed joint stock company" to a "joint stock company" as a result of the newly implemented changes in the aforementioned law, On joint stock companies. FUTURE OUTLOOK By the resolution of Kazakhstan government a program was approved on securities market development for the years Within the framework of this program, in 25, the Exchange will revise listing rules, in order to bring them into conformity with the new legislation and include changes concerning the dividing of the two official categories of the exchange's trading list into subcategories. The plans of KASE for 25 include: adding requirements for listing companies concerning requiring the presentation of information about using corporate governance norms; organizing an initial offering of government bonds (T-bonds) on the stock exchange; creating a reserve center, which could be used as a reserve trade platform in case of emergency. For realizing this task it's planned to found a subsidiary company, whose competence will comprise the reserve copying and storing of information of the trade organizer and central depository; developing and launching new indexes of the stock market; re-designing and launching an updated version of the KASEs website with improved navigation and some new features; and adding the participation of unit investment funds on the stock exchange. PAGE 84

87 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KAZAKHSTAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL , Bonds July-4 2, , Aug-4 2, , Sep-4 2, , Oct-4 2, , Nov-4 2, , Dec-4 2, , TOTAL 13, , Other July n/a n/a Aug-4 1, n/a n/a Sep n/a n/a Oct n/a n/a Nov n/a n/a Dec-4 1, n/a n/a TOTAL 5, n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 3, Aug-4 3, Sep-4 3, Oct-4 3, Nov-4 3, Dec-4 3, July Aug Sep Oct Nov Dec , 3,5 3, 2,5 2, 1,5 1, 5 July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Babenov Bolat bolat@kase.kz Website PAGE 85

88 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KAZAKHSTAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Kazakhstan's relatively progressive Central Asian transitional economy is gathering momentum as its massive oil potential materializes and multiple export alternatives develop. The East Kashagan oilfield with recoverable reserves of more than seven billion barrels is the largest oil discovery in more than 4 years. Diverse mineral reserves, including tungsten, lead, silver, barite and zinc, and agricultural production augment the country's hydrocarbon wealth. The non-oil economy has also grown at an average 8% clip from Land ownership rights were clarified in early 21 with the passage of legislation permitting private ownership for the first time in Kazakhstan. Recently 2,5 collectives have been converted into over 9, individual farms. Education, healthcare, pension, tax and government budgetary reform have all progressed significantly in the last two years. In April 1995, Nazarbayev's tenure as president was extended until Dec. 1, 2, by a national referendum. More than 95% of those who went to the polls voted in favor of extending Nazarbayev's term. More than 91% of the potential electorate participated in the poll. Under pressure from parliament, however, Nazarbayev agreed to stand for reelection in January 1999, and was reelected, winning nearly 8% of the votes cast. As he was elected for a seven-year term, the next presidential election is expected in 26. President Nursultan Nazarbayev has been - and continues to be - Kazakhstan's central political figure and primary foreign and domestic policy-maker. Economic Performance: GDP growth rocketed along at 9.5% in 22, following a very strong 13.5% growth rate in 2. Growth is estimated at 1.6% in the first quarter of 23. The petroleum sector is the driving growth factor, with increasing revenues welcoming foreign investment. The inflation rate remained inline at 6.5% in 22, but inched upward to 7% in the beginning of 23. The unemployment rate declined to 9.5% in 22 from 1.5% in 21, continuing a welcome downward trend. The fiscal balance remained in surplus in 22, the equivalent of 1.6% of GDP from a deficit of 2.9% in 21. Kazakhstan has made excellent progress in staunching expenditures and raising tax revenue, not only from oil production, which depends upon prices, but also from VAT reform. As oil prices recovered slightly in 22 and imports of consumer and capital goods slowed, the trade deficit recovered slightly, pushing the current account deficit for the year to under 2% GDP from 3.6% 21. Not surprisingly, Kazakhstan runs deficits on both its services and net factor income accounts within the current account of the balance of payments. Payments to foreign oil companies pursuant to production sharing agreements and joint ventures are reflected in these accounts, and given the very large inflows of foreign investment made already in the oil sector, the returns on those investments will quite likely keep the services and income accounts in deficit for years into the future. Foreign direct investment, concentrated in the oil and gas sector, has averaged over US$ 2 billion since 2. Kazakhstan retired its outstanding IMF obligation of US$ 385 million ahead of schedule and reduced public external debt to 14% GDP in 22. Foreign currency reserves reached more than US$ 3 billion by year-end 22, up from US$ 2 billion in 21. This trend continued into the first quarter of 23 with US$ 4 billion in reserves. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Financial Institutions' Association of Kazakhstan National Bank of Kazakhstan Ministry of Finance of the Republic of Kazakhstan Central Securities Depository Kazakhstan Agency for Financial Market and Financial Organizations Regulation And Supervision ECONOMIC RATIOS Kazakhstan Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 86

89 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KAZAKHSTAN STOCK EXCHANGE KAZAKHSTAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services KAZAKHSTAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (tenges-billions) Money Supply M2 (tenges-billions) Growth Rate M1-21.3% 73.4% 14.7% 14.3% 41.5% Growth Rate M2-14.1% 84.4% 45.% 4.2% 3.% Interest Rates deposit rate 23.6% 15.6% 6.6% 5.3% 5.5% E lending rate 25.% 18.% 14.% 9.% 7.5% Foreign Exchange Reserves (US$ millions) 1,461 1,479 1,594 1,9 2,551 Exchange Rate Period Average (tenges/us$) Annual % Growth E: Estimate * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 14, 12, 1, 8, 6, 4, 2, * World Bank reports PAGE 87

90 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KYRGYZ STOCK EXCHANGE Andrey Zalepo Acting President In 24 trading volume of the Kyrgyz Stock Exchange (KSE) were increased 4.3 times in comparison with 23, and the total quantity of the transactions increased 23%. In 24 trading volume of the Kyrgyz Stock Exchange (KSE) were increased 4.3 times in comparison with 23, and the total quantity of the transactions increased 23%. The index of tenders in KSE in 24 represents the best index of tenders in KSE s history. HISTORY AND DEVELOPMENT The KSE was founded in The official opening and the first trade in stocks took place in May 1995, while a privatization process was in full swing in our country. At the initial stage of its existence and up until 2, the KSE had functioned as a non-profit organization with a total membership of 16. In May 2 the KSE was transformed into a joint-stock company; simultaneously we acquired one of the largest shareholders and a reliable partner in the Istanbul Stock Exchange, which has actively assisted us in improving our activities. In 21 the Kazakhstan Stock Exchange became a shareholder allowing the KSE to significantly increase its technical software potential. At present the KSE is a closed-type non-profit joint-stock company with 17 shareholders. FUTURE OUTLOOK Priorities for the KSE in 25 are: launching of new indices for energy and financial companies; introduction of a cryptographic information defense system to be used in the process of trading; implementation of new forms and methods of information disclosure to secure transparent operation of listed companies; and formation of services on the state securities market. A significant contribution has been made by the US Agency on International Development (USAID) for the sake of our continued development. Thanks to the USAID, the KSE has obtained powerful financial support that has allowed our Exchange to become independent. PAGE 88

91 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KYRGYZ STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Mahmud Usuphanov mahmud@kse.kg Website PAGE 89

92 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KYRGYZ STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Although small and mountainous, Kyrgyzstan has potential for economic development. The country has steadfastly followed the prescribed Western reform template, but with modest success. Like many CIS nations, Kyrgyzstan experienced a steep decline in industrial production by the mid-199s as the Soviet-era infrastructure and technology were not competitive in world markets. With the existing industrial sector in decline, the government elected to emphasize the agricultural sector, which performed especially well in , for near term growth. Kyrgyzstan also possesses significant amounts of mineral wealth including gold, mercury and uranium. While lacking major hydrocarbon deposits, Kyrgyzstan does have considerable hydroelectric power generation potential, much of it undeveloped, and exports electricity from its existing facilities. In 1994, new legislation was instituted that abolished the existing legislature, and replaced it with a smaller bicameral body. Elections for positions within the new legislature were held in At the end of 1995, a new presidential election was called; Akayev won a commanding victory and was effectively re-elected. In 1996, the elimination of certain cabinet positions and a reshuffle of posts were decreed. In recent years, Akayev's vision has been to make Kyrgyzstan the "Switzerland" of Central Asia. To this end, governmental transition has continued. New changes in government were announced by Akayev in April 1998, cutting the number of deputy prime ministers from three to one, disbanding one ministry, reforming another to a state agency, and reshuffling the principal officials. Economic Performance: The Kumtor gold mine, which has propped up the economy since the middle of the last decade, recently had its reserve estimate substantially downgraded to a remaining economic life of less than 1 years, forcing Kyrgyzstan to look into other sources of growth for the future. In 22, a landslide at the mine lowered production significantly, while bad weather led to lower hydroelectric energy production, causing a decline in GDP growth of.5% for the year. This was down from 5.3% growth in 21. However, growth outside of mining and energy registered 3.5% for the year, and growth in 1Q 23 was 4.7%, led by 15% growth in the nonmining sectors of energy and manufacturing, especially food processing, construction materials, and paper. To prepare the economy for the transition into non-mining endeavors, and to cull new sources of revenues to combat continuing deficits of 1-12% of GDP, the government is shoring up the tax base with several new tax measures including an extension of the VAT. Strong demand for the currency kept the 12-month rate of inflation low relative to its regional trade partners, at 4.1% in May 23. This reflected an increase from 2.3% at year-end 22, as food prices grew. The current account deficit narrowed to 2.6% of GDP in 22 from 3.3% despite a weaker trade balance in 21 as higher gold prices offset declines in gold and energy exports for the year. Kyrgyzstan has been successful, however, in petitioning a number of its bilateral creditors for debt re-scheduling. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts National Bank of the Kyrgyz Republic Ministry of Finance State Commission on Securities Market 4.Ministry of Foreign Trade and Industry of the Kyrgyz Republic ECONOMIC RATIOS Kyrgyzstan Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 9

93 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 KYRGYZ STOCK EXCHANGE KYRGYZSTAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services KYRGYZSTAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (som-billions) Money Supply M2 (som-billions) Growth Rate M1 2.9% 31.% 9.6% 2.7% 38.1% Growth Rate M2 17.5% 33.7% 11.7% 11.3% 33.9% Interest Rates deposit rate 54.% 51.6% 32.8% 1.7% 6.8% lending rate 73.4% 6.9% 51.9% 37.3% 24.8% Foreign Exchange Reserves (US$ millions) Exchange Rate Period Average (som/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports * World Bank reports PAGE 91

94 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 LAHORE STOCK EXCHANGE Hamid M. Imtiazi Managing Director and CEO Low interest rates, excess liquidity along with vigorous structural reforms gave a boost to the investment activities at the LSE in 24. Pakistan s capital market showed spectacular performance during the year 24, as a result of favourable macroeconomic environment along with the support of regulatory reforms implemented by the Securities and Exchange Commission of Pakistan. The fundamentals of the economy remained conducive for capital formation. Low interest rates, excess liquidity along with vigorous structural reforms gave a boost to the investment activities. During the year 24, LSE-25 Index gained points or 2.1% over December 31, 23 to finish at points on December 31, 24. Market capitalization increased to US$ 28.2 billion as on December 31, 24, showing a 72.8% increase over December 31, 23. In the regular market, the average daily turnover of shares was 8. million shares in the year 24. The government policy of privatization has been very successful in attracting smaller investors for broad-basing the share ownership in the country. During the year, the government off-loaded some of its shares in major public sector organizations like Oil & Gas Development Company Ltd., Pakistan Petroleum Ltd., Sui Southern Gas Company Ltd. and Pakistan International Airlines through the stock exchanges and has further plans to off-load its shares in Kot Addu Power Company, State Life Insurance Corporation, United Bank Ltd. and Pakistan Steel Mills in the near future. As part of second generation capital market reforms being pursued by the Securities & Exchange Commission of Pakistan, demutualization and the possibility of integration of the three stock exchanges of Pakistan is being seriously considered by the members of the exchanges and we hope that during the year 25 a decision will be taken in the best interest of capital markets of the country. In the year 24, the Lahore Stock Exchange (LSE) introduced System Audit Regulations by which the system audit of the LSE Members has been made compulsory. This would ensure that the LSE Members comply with the laws regulating the trading in the securities market. Furthermore, a Surveillance Department has also been established at the Exchange with the primary objective of monitoring the market activity with a view to ensure its integrity. The LSE has also, successfully developed and implemented the automated trading system (Ultra Trade). Our IT Department has now developed a comprehensive internet trading software branded as Broker Net for the stockbrokers who want to extend their business over the internet using their own infrastructure. The LSE s major objectives remain to provide investors with efficient and transparent trading, safe and secure settlement and accurate and timely information dissemination. The LSE is also increasing its geographical outreach by establishing branches in other cities of the province. The first such branch office has become operational in Faisalabad in November 24 while second such office is being planned in Sialkot in 25. HISTORY AND DEVELOPMENT The LSE was incorporated in Lahore, the provincial capital of Punjab, Pakistan, under the Securities and Exchange Ordinance in 1969, as a company limited by guarantee. LSE caters to the needs of entrepreneurs for raising capital and provides investment opportunities to institutional investors and the general public. The activities of the Exchange have increased in all areas since inception. LSE introduced screen-based electronic trading in 1996 and became the first fully automated Stock Exchange of Pakistan. LSE has become a key institution in the financial sector of Pakistan and has a membership of 152 brokerage houses. As of December 31, 24, there were 527 listed companies, having a listed capital of US$ 6.4 billion with a market capitalization of approximately US$ 28.2 billion. LSE acts as a frontline regulator of the market under the apex regulator, the Securities & Exchange Commission of Pakistan. LSE has made large investments in technology & automation to keep pace with globalization of securities trading. The Exchange is fully committed to providing a transparent, efficient, fair and investor friendly environment for the benefit of investors and issuers. The goal is to bring LSE up to international standards in operational, technical, regulatory and quality management areas and to ensure that not only domestic but also foreign investors are attracted to the Exchange. FUTURE OUTLOOK In 25 Lahore Stock Exchange plans to: continue with its strategy of increasing its geographical outreach through the use of information technology in order to attract higher trading volumes. LSE has already successfully opened its first branch office at Faisalabad and the second branch will be opened at Silakot, very soon. Similar Offices at Multan and Gujranwala are also being contemplated; phase-out of Carry-Over Trading and its replacement with Margin-Trading; frame a strategy for the demutualization and integration of the three stock exchanges of Pakistan in the interest of the Exchange and capital markets of the country; enhance trading in the derivative market and introduce new products; replace existing exposure monitoring system with Value at Risk Margin System in line with global practices; re-design LSE official website and to disseminate the stock alerts over the mobile phones of investors; establish a centralized call centre for IT support to traders; market BrokerNet-Broker hosted Internet Stock Trading Solution; promote and market the indigenously developed trading software i.e. Ultra Trade and related systems to other stock exchanges; implement a regular timetable for the Broker System Audit, in order to build investors confidence; strengthen the surveillance function of the Exchange; and enhance investor education activities. PAGE 92

95 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 LAHORE STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-4 1, , Aug Sep Oct , Nov Dec-4 1, , TOTAL 6, , Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 24, ,731. Aug-4 24, ,72. Sep-4 24, ,685.6 Oct-4 23, ,642.1 Nov-4 25,458. 2,746.3 Dec-4 28, ,9.6 1,6 1,4 1,2 1, , 2,5 2, 1,5 1, 5 3, 25, 2, 15, 1, 5, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Amir Raza Khan amir@lahorestock.com Website * Please refer to page 81 for the Pakistan country report. PAGE 93

96 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MACEDONIAN STOCK EXCHANGE Dr. Evgeni Zografski CEO The stable inflation rate (around 2% per annum) and a fixed foreign exchange rate has provided the right environment for sustainable economic growth for the next few years. 24 was a successful year for the Macedonian Stock Exchange (MSE). Total turnover rose more than 1.% compared with 23 although trading in equities and bonds was higher than 23 (equities 13.5% and bonds 14.4% higher). The stable inflation rate (around 2% per annum) and a fixed foreign exchange rate to the Euro created further financial and fiscal stabilization which has provided the right environment for sustainable economic growth for the next few years. The main features of the MSE operations in 24 are as follows: 68 listed companies with market capitalization of around US$ 413 million (EUR 33.5 million) (7.2% of GDP),showing increase of 14% compared with 23; significantly higher volume of trading in listed government bonds (turnover of four government bonds was 14.4% higher than 23); 87 residual government shares with the turnover of US$ 8.5 million (EUR 6.4 million); and MBI index increased 14.7% reaching level of 1,352. The international cooperation of the MSE with the other stock exchanges in the region (Athens Stock Exchange, Thessalonica Stock Exchange, Belgrade Stock Exchange, Zagreb Stock Exchange and Bulgarian Stock Exchange) was also intensified in 24. HISTORY AND DEVELOPMENT The MSE was founded on September 13, 1995 and commenced trading on March 28, 1996, as a central marketplace for trading in securities and the first organized stock exchange in the history of the Republic of Macedonia. The MSE was founded as a not-for-profit joint stock company. According to the legislation that was in force in 1996 only eligible founders of the MSE were banks and other financial institutions (saving houses and insurance companies) MSE had initially 19 members: 13 banks, 3 saving houses and 3 insurance companies. Since 19, according to the new Law on Issuance and Trading in Securities, MSE members could only have been legal entities which sole activity is trading in securities (brokerage houses). Due to these changes the number of MSE members decreased to 7. The new Securities Law from 2 introduced again the possibility of banks being MSE members (starting from 22). All MSE members must be licensed for trading in securities by the Macedonian Security and Exchange Commission. Only brokers, authorized by the MSE members may trade in securities at MSE (in Macedonia there are 253 brokers). MSE currently has 14 members - 8 brokerage houses and 6 banks. Starting from June 2, 21 (with the new amendments of the Securities Law), MSE started to operate on a for-profit basis. MSE shareholders may be any legal and private domestic or foreign entity. Shareholdings per entity is limited up to 1% of the MSE outstanding shares. Currently MSE has 2 share holders (8 brokerage houses, 8 banks, 1 insurance company and 3 private investors). At their meeting on 25 December 23, Shareholders issued 1% of outstanding shares to the Athens Stock Exchange. FUTURE OUTLOOK After the expiration of the mandatory listing (as of end of 24) the number of listed companies at the MSE is likely to be decreased (from around 7 to 6 companies); The level of disclosure and corporate governance are planned to be strengthened simultaneously with the revising of the MSE Listing Rules and the development of the MSE Code of Corporate Governance (with technical assistance of the USAID Corporate Governance and Company Law Project and the Dutch Ministry of Finance); Dissemination of the data related with the listed companies is planned to be reorganized by introducing a software application (internet based) that will be used by the issuers for their public disclosure purposes; The participation of the foreign portfolio investors on the Macedonian securities market should increase due to the better transparency achieved during the mandatory listing period and favorable financial ratios of some of the Macedonian companies compared with their peers in the region; After obtaining the first credit rating from S&P in July 24 (BB with positive outlook), the Macedonian Government announced that it will start with the issuance of new government bonds in 25. Two newly founded private pension funds within the mandatory second pillar of the reformed pension system in the Republic of Macedonia will start their operations in the second half of 25, creating the first institutional investors on the market. The amounts collected from the pension fund s members in one part should be invested at the secondary securities market, especially in debt instrument traded at the MSE; Pension reforms will contribute to the development of one of the missing elements of the Macedonian securities market setting up the custody operations with major Macedonian banks. MSE will initiate introduction of new products on the market a project of the securitization of the bank s and interenterprise s claims; MSE will consider changes in its trading system in order to boost trading in some of the illiquid stocks modifying its current call market system for these securities with the aim of increasing the size and transparency of its public order book; and MSE should continue its international cooperation arrangements finishing the private offering of its shares to Hellenic Exchanges Holding SA (1% of MSE shares), maintaining already established informational network SEM-ON.NET (with exchanges from Ljubljana, Varazdin, Sarajevo, Banja Luka, Belgrade and Podgorica) and becoming a corresponding member of FESE. PAGE 94

97 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MACEDONIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL Other July Aug Sep Oct Nov Dec TOTAL Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) MONTHLY MARKET CAPITALIZATION (US$ Millions) July ,195.8 Aug ,225.2 Sep-4 1,85.2 1,278.9 Oct ,287. Nov ,329. Dec , July Aug Sep Oct Nov Dec 1,4 1,2 1, July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Milco Kupev mse@mse.com.mk Website PAGE 95

98 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MACEDONIAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: The Former Yugoslav Republic of Macedonia (FYROM) is a small, mountainous Balkan country with a population of just over two million. In 1991, it declared its sovereignty from Yugoslavia, and has since experienced mixed success in liberalizing its economy. The industrial sector comprises about 18% of GDP and employs about one-third of those holding jobs in the formal economy. The largest components of industrial production are metals, chemicals and food and beverage processing. Most industry was state-owned prior to 1991, but a considerable amount of it has been privatized. The country is moving to a market economic system. On February 26, 24, Macedonian President Boris Trajkovski was killed when his plane crashed in mountainous terrain in southern Bosnia and Herzegovina. A special election was held in April to vote on a new president. Branko Crvenkovski claimed victory over three other rivals and was inaugurated as the new president. In his inaugural speech President Crvenkovksi reiterated his commitment to Macedonian entry into the EU and NATO. In March 24, FYROM submitted its application to join the European Union. Meanwhile, former Interior Minister Hari Kostov was approved in June 24 by parliament as the new Macedonian head of government and prime minister. Economic Performance: Real GDP growth increased to 3.1% in 23 from.9% in 22 due to individual consumption and the reopening of a major steel exporter. Despite FYROM's many structural issues, they have successfully lowered inflation from levels of hyperinflation to approximately 1% in 23, by sticking to a de facto exchange rate peg with the Euro. Furthermore, prudent fiscal management reduced the government debt to around 4% from high levels in the 199s, and curtailed the deficit to 1.4% of GDP, after letting it slip to 3.5% in 22. In March 24, FYROM submitted a formal application for candidacy of accession into the European Union (EU), fiscal, monetary, and structural actions will be tailored toward this goal. The current account deficit strengthened in 23, to 6.3% from 8.5% in 22, due primarily to public tightening of the belt with regard to capital expenditures. Foreign direct investment has generally been low, only financing 25% of the deficit in 23. The current account deficit is driven by a large deficit on merchandise trade, and by service transactions with the rest of the world that result in net payments to foreigners. Macedonia's current account deficit, unlike many poorer transitioning country's, is not financed primarily by loans from multilateral agencies like the World Bank, European Development Bank and IMF. Rather, portfolio investment, associated with privatization activities, has financed the largest portion of the current account gap. Accordingly, the country added to its holding of international reserves during the last few years, and as of year-end 23, reserves stood in excess of US$ 9 million, or four months of import coverage. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Central Securities Depository Macedonian Privatization Agency Securities Exchange Commission National Bank of Republic of Macedonia Ministry of Finance ECONOMIC RATIOS Macedonia Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 96

99 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MACEDONIAN STOCK EXCHANGE MACEDONIA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services MACEDONIA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (denars-billions) Money Supply M2 (denars-billions) Growth Rate M1 9.1% 32.4% 13.1% -5.1% 148.2% Growth Rate M2 13.% 32.% 21.4% 32.1% 14.6% Interest Rates deposit rate 8.9% 8.9% 7.9% 1.7% 1.7% lending rate 21.% 2.5% 18.9% 19.4% 18.4% Foreign Exchange Reserves (US$ millions) Exchange Rate Period Average (denars/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 2, , -2 1,5 1, * World Bank reports PAGE

100 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MOLDOVAN STOCK EXCHANGE Dr. Corneliu Dodu President With the country's goal to become integrated into the European Union as well as a globally recognized developed stock market, foreign policy has become the priority. The securities market is an integral part of the overall financial market and its activity reflects the state of affairs of the Republic. With the country's goal to become integrated into the European Union as well as a globally recognized developed stock market, foreign policy has become the priority. As mentioned before the main priority for the Moldovan Stock Exchange (MSE) is foreign policy as Moldova is striving for integration into the European Union. Therefore development has been aimed at creating a civilized and developed securities market with the perspective of integrating into the world market capital through gradual transition. A major objective for the coming year is to continue the reorganization of investment funds. One way to achieve this goal is through the establishment of holdings. The volume of transactions registered in 24 was US$ 54 million compared to US$ 34.5 million in 23. In 24, transactions in 254 trading sessions with trading in 5.1 million stocks belonging to 387 joint-stock companies were achieved. The transaction of the year was the public offering of the stocks of the meat factory "Carmez", which brought to the market a tender offer of 92.5 on a volume of US$ 1.5 million or 7% of total market volume. Also in 24, a series of restrictions were implemented in the legislature. These restrictions changed not only settlement of transactions, but also their structure. Buying and selling transactions amounted to 68% of total volume, SWAP transactions were 1%, REPO transactions were 4% of the total volume, tender - 15% of total volume auctions - 1% and auctions with equal share holdings - 11% of total volume. The number of registered companies as of 31 December was 176, including 24 listed companies. HISTORY AND DEVELOPMENT In December 1994, the MSE, a closed company, was established under the law on Securities Circulation and Stock Exchanges. Originally, 34 securities market professionals participated in trading. The first transactions were held on 26 June1995, which is considered the date of the founding of the MSE. Due to the assistance of the USAID, the Exchange is equipped with advanced technology for stock auctions. In 1998 the MSE established the National Securities Depository (NSD), a non-commercial jointstock company. At the initial stage of the MSE's development, the authorized capital adequacy standards were set as an authorized capital of US$ 18,3 (238, lei). In 1998 capital adequacy increased from US$ 29,6 (392, lei) and is now US$ 37,879 (5, lei). The equity capital sufficiency norms of US$ 75,758 (1. mil lei), and guaranty fund adequacy norms of 3% of the authorized capital as set by the legislation are currently in practice. In April 2, the MSE received the status of a self-regulating non-commercial organization. At the beginning of 22, the National Commission introduced the CNVM- 32 index. The world famous index, Dow Jones, serves as a basis for the calculation of the CNVM-32. The Dow Jones index is worked out in real time using the results of the New York Stock Exchange auctions. In June 23, the MSE celebrated its eighth anniversary. During the period of its development, the MSE underwent a difficult evolution. But thorough changes have taken place, which have had a great influence on the activities of all participants of the stock market, including the Exchange itself. FUTURE OUTLOOK Below are the MSE s plans for 25: improve technologies to high-speed networks that will increase capacity; introduce a module for electronic settlement with banks; trade in public securities and introduce derivative products; and introduce a remote broker system, which is currently underway. PAGE 98

101 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MOLDOVAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July Aug Sep Oct Nov Dec TOTAL.... Market Capitalization * US$ Millions Index MONTHLY STOCK VOLUME (US$ Millions) 5-YEAR STOCK VOLUME (US$ Millions) July n/a Aug-4. n/a Sep-4. n/a Oct-4. n/a Nov-4. n/a Dec n/a * MSE restating its market cap. The calculation for Aug-Nov was not available July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mrs. Silvia Haidarli silvia@moldse.md Website PAGE 99

102 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MOLDOVAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Food processing comprises a significant portion of light industry with vegetable preservation, sugar refining, cigarette production and winemaking as major activities. Endowed with virtually no indigenous hydrocarbons and small reserves of coal, Moldova is highly dependent on neighboring Russia, Romania and the Ukraine for energy and a significant part of the country's external indebtedness is to Russia's Gasprom for natural gas. The Moldovan economy was in decline throughout the 199s, sometimes precipitously such as in 1994 when drought destroyed virtually the entire grape harvest causing GDP to decline 31%. The Russian financial crisis of 1998 hit Moldova particularly hard as exports withered, the lei depreciated nearly 5% and inflation, which had moderated in recent years, increased as world energy prices escalated sharply from The economy contracted by 6.5% in 1998 and 3.4% in Despite both a severe drought and destructive freezing conditions near the end of the year which ruined crops and caused widespread damage to power and telecommunications infrastructure, Moldova reported real GDP growth of 2% for 2. The eastern European nation's parliament elected Communist Party leader Vladimir Voronin as the new president on April 4, 21. The result was widely expected after Moldova's communists swept to power in general elections in February. Voronin, 59, a former baker and police general, captured 71 of the 89 votes cast by members of parliament. "I call on all the parties in parliament and outside to reconcile and take the country out of the crisis, " Voronin said after the vote. He said his priority was to reach a settlement with eastern Moldova's Slavic separatists, who broke away in 1992 after a war that claimed 1,5 lives. Voronin also pledged to continue relations with the World Bank and the International Monetary Fund. He promised to have good relations with neighboring Ukraine and Romania. Economic Performance: After GDP growth of 2.1% for 2, a sharp recovery ensued. GDP growth registered 6.1% in 21 and around 7% in 22, due to better weather and the improving economy in Russia. The National Bank of Moldova tightened monetary policy and brought inflation down to single digit rates in mid-22. In 2, export growth as measured in US dollars was virtually zero as further lei depreciation and falling export commodity prices affected the value of exports, but imports revived and the current account expanded again to US$ 135 million, equivalent to more than 1% of GDP. Despite rapid growth in 21, exports recovered as the currency stabilized and Russia recovered, causing the current account deficit to fall to 7.4% GDP, about US$ 119 million. The typical pattern in Moldova's current account in recent years has been a significant deficit in merchandise trade and a somewhat smaller deficit on trade in international services, combined with a steady inflow of remittances from Moldovans working outside the country and a paradoxical surplus on net factor income payments (which is not expected of a country with an external debt load equivalent to 9% of GDP). 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts National Securities Commission of Moldova National Securities Depository dodon@moldse.md Department of Privatization ECONOMIC RATIOS Moldova Lower-middle-income group Trade GROWTH OF INVESTMENT AND GDP 2 1 GDI GDP Domestic savings Investment Indebtedness * World Bank reports PAGE 1

103 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MOLDOVAN STOCK EXCHANGE MOLDOVA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services MOLDOVA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (lei-billions) Money Supply M2 (lei-billions) Growth Rate M1-18.% 38.9% 36.7% 23.6% 42.4% Growth Rate M2-8.3% 42.9% 41.7% 35.8% 38.6% Interest Rates deposit rate 3.5% 28.5% 22.2% 14.2% 5.9% lending rate 3.8% 35.5% 33.8% 28.7% 23.5% Foreign Exchange Reserves (US$ millions) Exchange Rate Period Average (lei/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 1, ,2 1, * World Bank reports PAGE 11

104 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MONGOLIAN STOCK EXCHANGE In 25 our efforts will focus on creating a favorable legal environment for the Mongolian Stock Exchange. Rentson Sodkhun Chairman and CEO In 24 Mongolian Stock Exchange s (MSE) main objectives were to improve the efficiency of the stock trading, especially to increase the volume of bond trading, attract investors and build confidence among investors, improve the quality of stock market research and its advocacy, increase public confidence and the surveillance of securities. As a result, some progress was achieved in 24; including the expansion of the company bond market, some of which trade in foreign currency and the establishment of a new underwriting entity, which is to provide professional services to the stock market. Nevertheless, it is necessary to note that due to macroeconomic situations there has been no significant improvement on investment through the stock market, this lack in improvement has been especially influenced by the current Mongolian market economy. The stagnant situation of the Mongolian stock market where as sustainable development persists in the banking sector shows a lack of appropriate state policy in its coordination. Furthermore, flexible and accurate policy to support relationship between the monetary and the fiscal policies and development of its legal environment are in demand. In 25 our efforts will focus on creating a favorable legal environment for the MSE. We are planning to submit amendments to related laws with an aim to improve the investment environment and the stock exchange activities. A close link between the MSE, security issuers and investors as an important part of our policy will be pursued along with actions to expand the company bond market. Increasing transparency and efficiency of service provided by the MSE are also priority areas. Finally, we are planning to introduce a new type of bond at the MSE, such as a mortgage bond. HISTORY AND DEVELOPMENT During the transitional period from a central planned economy to a market economy in Mongolia, many social and economic changes were made, such as the establishment of new relations, new entities, new productions and services. Two of those changes were the founding of the MSE on 18 January 1991 by government resolution and the initiation of the privatization process. According to the privatization policy adopted by the government in , 96.1 million shares valued at tugrugs 8.2 billion (US$ 7. million) of 475 state-owned entities were traded by the MSE. The Securities and Exchange Law was passed in 1994 and the Corporate Law in 1995 resulting in the establishment of the secondary market. Twenty-nine broker firms, operated and financed by the MSE, were privatized. New statutes of the MSE were adopted by the government resolution of With the start of secondary market activity, shares of more than tugrugs 38 billion (US$ 32.5 million) were traded during Since the inception of government bond trading in 2, and corporate bond trading in 21, to date government bonds valued at tugrugs 15.4 billion (US$ 9.2 million), and corporate bonds valued at tugrugs 6.9 billion (US$ 6. million) have been traded. The new Securities and Exchange Law, adopted by Parliament in December 22, declared the MSE to be a business entity, allowing it to carry out legal business services. According to the government resolution, the MSE was reorganized as a profit-making, state-owned shareholding company. FUTURE OUTLOOK In 25 the MSE plans to: develop a government and corporate bond market, increase the bond market size and issue bonds in foreign currency; prepare for privatization in the stock exchange; develop an information disclosure system so as to disseminate information through mass media TV, radio and newspapers in a fair and proper way. improve public confidence and continue training programs for market participants and peoples; and activate the Government support on security tax policies and laws for security issuer and investors. PAGE 12

105 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MONGOLIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Ganbat Battulga battulga@mse.mn Website PAGE 13

106 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MONGOLIAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: In the second half of the 199s, privatization of the larger enterprises began to accelerate and many of these were sold for cash to foreign investors. In 1998 and 1999, more than 5 large companies were sold and hundreds more small companies were organized from state-owned assets and sold off. But, in the run-up to the parliamentary elections of 2, support for the reforms, which implied substantial disruption of traditional labor employment patterns, ran down. By then, the world economy was slowing and the appetite of foreign investors for assets in countries like Mongolia was decreasing. Accordingly, only nine large enterprises were sold in 2 and just one in 21. Some of the best assets were still in the process of being sold off in 22. Mongolia s privatization program has successfully progressed through 24, and the private sector now accounts for 85% of the economy. Agriculture Bank and, Mongol Daatgal, Mongolia s largest insurance company were privatized in 23. NIC, an oil company, was also privatized early in 24. In June 23, shortly after assuming his new political role, Chinese President Hu Jintao arrived in the Mongolian capital of Ulan Bator for talks with the Mongolian government. The trip was aimed at reaffirming the close bilateral relationship between Mongolia and China. A year later in June 24, in parliamentary elections in Mongolia, early results suggested that the main contest would be between the ruling MPRP and the Motherland Democratic Coalition (MDC). In August 24, Tsakhia Elbegdorj was appointed to the post of prime minister by the country's Great Hural. Born in 1963, Elbegdorj was a member of parliament and the vice parliamentary speaker from 1996 to 2, and served briefly as prime minister before this appointment in 24. Although Elbegdorj was aligned with the MDC, he was expected to form a coalition government with the MPRP. Economic Performance: GDP grew 5% in 23, up from 3.9% growth in 22, due to a 4.5% increase in agricultural output and a buoyant services sector. Agriculture, recording the first rise in output since 1999, as weather conditions improved after several extremely harsh winters. Growth in crops was very strong, while livestock and animal husbandry increased slightly. Fiscally speaking, the deficit narrowed to 3.6% of GDP from 5.6% in 22, after the government implemented the Public Sector Management and Financial Law, which streamlined cash management and bolstered spending accountability. Foreign funding typically covers about 7% of the deficit. Total external debt stood at US$ 1.1 billion at year-end 23, or 91% of GDP. Merchandise exports rose 14.5% as compared to a 3.9% decline in 22 due to higher demand for commodities such as gold, copper, and cashmere. Imports also rose by 14%, leading to a widened trade deficit. However, due to a strengthening of the balance of payments surplus resulting from foreign remittances of around US$ 78 million in 23, and FDI inflows increasing 94% due to gold prospecting, the current account deficit narrowed to 14.7% of GDP from 16% (not including grants). Aid grants from multilateral agencies allowed Mongolia to build its international reserves to more than US$ 24 million by year-end 23. Aid grants also play a significant role in reducing the current account deficit from what it would be solely on the basis of private current transactions. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Parliament of Mongolia Ministry of Finance The Central Bank of Mongolia Mongolian Chamber of Commerce & Industry National Statistical Office of Mongolia ECONOMIC RATIOS Mongolia Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 14

107 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MONGOLIAN STOCK EXCHANGE MONGOLIA MACROECONOMIC ACTIVITY GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services MONGOLIA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (togrogs-billions) Money Supply M2 (togrogs-billions) Growth Rate M1 8.5% 39.% 13.9% 19.4% 2.2% Growth Rate M2-1.7% 31.6% 17.6% 27.9% 42.% Interest Rates deposit rate 23.3% 11.4% 8.7% 8.6% 9.9% lending rate 46.8% 39.3% 32.8% 3.2% 28.4% Foreign Exchange Reserves (US$ millions) 94 E 136 E 179 E 26 E 35 E Exchange Rate Period Average (togrogs/us$) ,22. 1,77. 1,98. 1,11. Annual % Growth E: Estimate * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports * World Bank reports PAGE 15

108 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MUSCAT SECURITIES MARKET Ahmed Saleh Al-Marhoon Director General We believe that exchanges that adhere to good governance, greater transparency and greater accountability, are able to foster investors` confidence as well as creating attractive investment environment. We are consciously working on developing and operating an efficient and transparent securities market to the best standard expected by our local and foreign investors. We believe that exchanges that adhere to good governance, greater transparency and greater accountability, are able to foster investors` confidence as well as creating attractive investment environment. We at Muscat Securities Market (MSM), however, have devised a comprehensive road map that enables us to build capacity and promote sustainable capital market development strategy specifically aimed at improving access to the regional and international capital markets. In view of the above, MSM recently revised its legislation with respect to listing, trading and clearance and settlement regulations to enable MSM to cater for our market demand. One of our eminent projects is to replace the MSM existing trading system with Aots- Euronext Trading System that is used by some western and other emerging stock markets. We expect that the new trading system will be implemented at the end of 25 and will, inevitably, enhance the capability of MSM and make it the first exchange in the GCC countries that uses this advanced trading system. We are in the process of upgrading MSM website to improve the navigation, content and overall value of the website for users. HISTORY AND DEVELOPMENT The Muscat Securities Market (MSM) was established by Royal Decree issued on 21 June 1988 to regulate and control the Omani securities market and to participate, effectively, with other organizations for the setting up of the infrastructure of the Sultanate s financial sector. After ten years of continuous growth there was a need for a better functioning of the market. The MSM has been restructured by two Royal Decrees (8/98) and (82/98). Royal Decree (8/98) dated 9 November 1998, which promulgated the new Capital Market Law, provides for the establishment of two separate entities: an exchange the Muscat Securities Market (MSM) where all listed securities will be traded, and the Capital Market Authority (CMA) the regulatory body. The exchange is a governmental entity, financially and administratively independent from the regulatory body but subject to its supervision. Thus the securities industry in Oman is well established to enhance investors confidence by developing and improving all the processes pertaining to the stock market. There are recent amendments to the Capital Market Law and its executive regulation, which aim at enhancing the efficiency and transparency as well as securing the integrity of the market. The recent enactment of the code of corporate governance and other rules and regulations, during the current year, has a clear effect on the investors confidence on the market and is positively reflected in the market index movement. FUTURE OUTLOOK In 25 MSM plans to: develop policies and strategies to provide both domestic and foreign investors with reasonably reliable savings and investment opportunities; revise the legislations of the market with regard to the listing, trading and clearance and settlement mechanisms. In order to ensure a sustainable stock market development strategy, aimed at improving access to the regional and international capital markets, we are in the process of implementing a comprehensive Growth- Plan; replace the existing MSM trading system with Aots Euronext Trading System, which is in place in some of the Western and other Emerging Stock Markets; and make the information dissemination more efficient, we are also in the process of upgrading the MSM website. PAGE 16

109 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MUSCAT SECURITIES MARKET OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL Other July Aug Sep Oct Nov Dec TOTAL Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 9, ,44.5 Aug-4 9,79.3 3,414.3 Sep-4 8, ,492.8 Oct-4 9,64.6 3,444.9 Nov-4 9,42.8 3,37.2 Dec-4 9, , July Aug Sep Oct Nov Dec 3,5 3, 2,5 2, 1,5 1, 5 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Talal H. Al Nasseb talal21@msm.gov.om Website PAGE 17

110 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MUSCAT SECURITIES MARKET ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Oman has been launching a massive drive to build the basic infrastructure facilities and improve living standards of its citizens since 1. The key economic indicators such as Gross National Product (GNP); Gross Domestic Product (GDP); per capita income; money supply (M3); trade balance and foreign currency reserves indicated remarkable growth in 24. The policy response of Oman to the changing international and domestic economic conditions is marked by its clearcut willingness to adjust and remain flexible. Oman's fiscal position has been showing considerable growth since the 1s. The nation has witnessed noticeable economic achievements in 24 that are reflected in its modern physical infrastructure. Considerable progress in basic health and education systems and the improvement in standard of living have been commendable. Economic Performance: According to provisional estimates, the domestic economy registered a record 12.5% growth in 24 as against 6.9% recorded in 23. A sharp increase in oil prices brought windfall profits for Oman in 24. Oman crude realized an average price of US$ 33.9 a barrel last year compared with the budgeted price of US$ 21. a barrel, an increase of US$ 12.9 a barrel. The government had increased public expenditure by another US$ 784 million during the year, resulting in a higher deficit of US$ 2.1 billion as against the budgeted deficit of US$ 1.3 billion. Though the oil revenues were estimated at US$ 4.3 billion, it grew by a whopping US$ 3.3 billion to US$ 7.6 billion. Thus the total actual revenues rose by nearly 43% to US$ 1.9 billion as against the estimated US$ 7.6 billion. Oil revenues contributed more than 69.5% of total income in 24. From the additional revenues of US$ 3.3 billion, the total exposure is US$ 2.5 billion, comprising budgeted deficit of US$ 1.3 billion, additional allocations of US$ 784 million and payment of foreign debts of US$ 539 million. The remaining surplus amount is expected to be reserved as additional resources for the government. The actual public expenditures in 24 were US$ 9.6 billion. The increased revenues indicate that the government s estimates of US$ 7.6 billion revenues were conservative and prudent, based on conservative oil price forecast of US$ 21. per barrel. The record revenues achieved in 24 will help government continue its ongoing economic reform programs and other development initiatives. Oman s external debt position comfortably stands at US$ 3.4 billion as against staggering debts of many other countries in the region. The excess of planned aggregate expenditure of US$ 9.6 billion over budgeted revenue receipts of US$ 8. billion leaves a deficit of US$ 1.4 billion for 25. The deficit represents 17% of total revenues and 6% of GDP. The 25 current expenditure of US$ 7.2 billion accounts for 75% of total expenditures, with investment spending (US$ 2.3 billion) and support to private sector (US$ million) taking the remaining 25%. The oil price estimated for 25 budget at US$ 23 a barrel also seems lower than the expected actual realization. Key Information Contacts Ministry of National Economy Capital Market Authority Oman Chamber of Commerce and Industry Financial Corporation National Bank of Oman OMAN MACROECONOMIC ACTIVITY TRADE BALANCE (GOODS & SERVICES), NATIONAL INCOME PRODUCTS ACCOUNT (US$ Millions) Exports 5,7 7,638 11,743 11,423 11,767 E Imports 6,848 5,81 6,159 6,988 7,199 E Trade Balance -1,51 1,828 5,584 4,434 4,568 E * Economic Overview, Country Watch Incorporated, 25 PAGE 18

111 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 MUSCAT SECURITIES MARKET OMAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services OMAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (rials-billions) Money Supply M2 (rials-billions) Growth Rate M1-8.% 1.1% 7.5% 27.7% 1.% Growth Rate M2 4.8% 6.4% 6.% 9.2% 5.2% Interest Rates deposit rate 8.5% 8.1% 7.6% 4.5% 2.9% lending rate 1.1% 1.3% 1.1% 9.2% 8.6% Foreign Exchange Reserves (US$ millions) 1,64 2,768 2,38 2,365 3,173 Exchange Rate Period Average (rials/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 OMAN MACROECONOMIC ACTIVITY BALANCE OF PAYMENTS (US$ Billions) Current Account Balance E Goods and Services ,384 E Net Investment Income E Net Current Transfers ,352 E Capital and Financial Account E Net Errors and Omissions E Overall Balance E Official Reserves Stock Current Account (% of GDP).% -2.7% -1.6% 17.2% 11.6% -2.7% E * Economic Overview, Country Watch Incorporated, 25 PAGE 19

112 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 PALESTINE SECURITIES EXCHANGE Dr. Rami Himdallah Chairman PSE has celebrated two important anniversaries in 24. The first is the tenth year of establishment and the second is the first trading session (18th of February 19). I am pleased to put in front of you the outstanding results that Palestine Securities Exchange (PSE) achieved during 24. PSE was able to achieve its best results ever since its incorporation in 19. These results cover many areas: trading volume, market capitalization, number of executed transactions, and the number of trading sessions. Al- Quds Index has also increased to a new all time high. Accordingly, PSE has managed to recover its losses that it had incurred during the past several years of the Al Aqsa Intifada. Meanwhile, PSE has celebrated two important anniversaries in 24. The first is the tenth year of establishment and the second is the first trading session (18th of February 19). The astonishing results that PSE achieved can be attributed to many interrelated factors. First: The listed companies achieved very good financial results for the year ended 23. Second: The relative political stability that has been witnessed during 24 has contributed towards regaining confidence in the Palestine economy and the investment process in general. Third: PSE has implemented a new marketing strategy that aims towards increasing the public awareness and confidence in Palestine Stock Exchanges and the listed companies. Fourth: The year 24 has witnessed the listing of two new companies, Palestine Electric Company and Birzeit Pharmaceutical Company. Palestine Electric Company, which is the largest listed company in terms of the number of shareholders, started trading in May 24. Fifth: PSE has extended the trading hours to two hours instead of one hour. PSE also takes measures that aim to increase that liquidity of the market. Sixth: The performance of the member companies (Brokerage firms) has improved which has been reflected of the array of services they offer to their clients and the quality of those services. Finally, PSE has performed a number of institutional trades during the year. The above-mentioned performance has been supplemented by other activities that have long term implications and that aim to putting PSE on the world financial markets map. PSE has signed a memorandum of Understanding with the Arab Monetary Fund. Quarterly bilingual brochures, newsletters, and periodicals are published by PSE. In order to cope with new developments, PSE has initiated a modernized set of rules and procedures that will be put in place in the near future. Further trading information is recently disseminated across local T.V stations, Jawwal s mobile services and the website of the exchange has been redesigned. HISTORY AND DEVELOPMENT As early as 1995, a number of pioneers in the Palestinian private sector realized the importance of creating a well-regulated market for securities. Their ideas materialized into an agreement signed with the Palestinian National Authority (PNA) on November 7, 1996 to operate the PSE as a private shareholding company. On February 18, 19, PSE conducted its first trading session as the first fully automated and electronic Arab stock exchange. Despite its modest beginning, the exchange maintained continued growth in terms of listed companies, number of sessions and trading volumes. From only a few companies listed in early 19, the number of listed companies rose to 24 in 24 and is expected to grow further after the promulgation of a number of laws including the securities law by the PNA. There are six brokerage firms that are members of the PSE, with branch offices in most Palestinian cities. It is worth noting that, in 1999, the PSE was ranked the first among Arab stock markets in terms of its index gain. The "Al-Quds" Index grew by some 53%. In the first three quarters of the following year, the Index enjoyed a similar growth rate. The difficult times in Palestine during the fourth quarter of that year, however, adversely altered expectations. Times that followed were even more difficult, yet PSE managed to survive and, sparing no effort, remained determined to conduct the business of providing services to its members and listed companies, thus reinforcing the market's status and experience as well as boosting investor's confidence in it. Although the existing setup is capable of trading several financial instruments, only equities are currently traded at PSE, with ongoing plans to trade other securities in the future. FUTURE OUTLOOK The excellent results of 24 have contributed significantly on the future outlook of the next year, 25. As 24 is considered a recovery year for the PSE, the goals, ambitions, targets, and expectations of 25 are greater than ever before. The PSE looks forward to accomplishing successes in 25 in the following areas: listing a number of shareholding companies; replacing the existing PSE regulations, rules, and procedures with upgraded ones compatible with the new related laws; updating the trading and CDS Software systems as well as hardware systems; attracting more investors to invest in an improving investing environment; enhancing Investor Education to increase the public awareness in the securities sector with some focus on the young generation; expanding the data dissemination process, and developing its mechanism; participating in exchange visits and experience with foreign bourses and related institutions and participating in different events; holding more specialized training courses in the securities sector; developing a disclosure system, and encouraging sound corporate governance; and promoting the brokerage firms to expand business geographically to cover all potential investment centers. PAGE 11

113 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 PALESTINE SECURITIES EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July Aug Sep-4 1, Oct-4 1, Nov-4 1, Dec-4 1, ,2 1, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Dr. Hasan Yassin yassin@p-s-e.com Website PAGE 111

114 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 PALESTINE SECURITIES EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: In 23, the Palestinian economy stabilized after two years of sharp contraction. The World Bank estimates that per capita Gross Domestic Product increased about 1% in 23. The stabilization occurred against a backdrop of a modest decline in violence. Moreover, there were fewer curfews (the most extreme form of closure) and the Government of Israel s transfer of previously withheld tax revenues produced a shortacting fiscal stimulus. Former Palestinian Prime Minister Mahmoud Abbas, the candidate of the ruling Fatah faction, won the January 25 poll to replace the late Palestinian leader Yasser Arafat. Mr. Abbas, also known as Abu Mazen, had already succeeded Yasser Arafat as leader of the Palestinian Liberation Organisation (PLO), having been Mr. Arafat's deputy since Many analysts regard Mahmoud Abbas as a moderate. He has condemned the armed Palestinian uprising and favors the resumption of negotiations with Israel. But he faces the key challenge of persuading armed groups to stop their campaign of anti-israeli attacks. Mahmoud Abbas was born in 1935 in Safed, a town in present-day northern Israel. He cofounded Fatah - the main political grouping within the PLO - with Yasser Arafat in the late 195s. Mr. Abbas established contacts with left-wing Israelis in the 1s, and was the main Palestinian architect of the 1993 Oslo accords, which led to the foundation of the Palestinian Authority. 1 Economic Performance: Precipitated by several one-off factors, the World Bank estimates that Palestinian Gross Domestic Product (GDP) grew by 6% in real terms in 23. Positive growth in 23 is a significant improvement, compared with the two previous years during when the economy shrank by more than 25%. Several factors underlie the stabilization of the Palestinian economy in 23. Fewer curfews and reduced violence in the period, which followed the launch of the Road Map in April 23, enabled a catch-up in private sector activity and household spending. The resumption of revenue transfers and a modest rebound of the Israeli economy also helped. However, the resumption of growth has delivered only marginal improvements in per capita incomes. The PA s fiscal situation eased somewhat in 23, but remained difficult. The PA s fiscal situation has been severely constrained by the intifada. Fiscal revenues increased in 23 due to improved tax collection, the resumption of withheld revenue transfers and macroeconomic stabilization. Clearance revenues amounted to US$ 442 million in 23 compared with US$ 15 million in 22. The GoI also rebated a total of US$ 294 million in previously withheld clearance revenues to the PA; these revenues allowed the PA to pay off some of its arrears to suppliers which had accumulated during 22. These revenues also boosted private sector liquidity. Revenues also got a boost from reform of the Petroleum Commission. The commission has operated under the direct control of the Ministry of Finance since July BBC News Online, s/83257.stm 2 World Bank Report on Palestine, October 24 Key Information Contacts Ministry of Finance Ministry of National Economy Palestinian Central Bureau of Statistics Palestine Media Center The Palestinian Legislative Council ECONOMIC RATIOS Palestine Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 112

115 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 PALESTINE SECURITIES EXCHANGE PALESTINE MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Real Growth Gross domestic product Private consumption Public consumption Investment Exports Imports Real GDP, cumulated decline since Real GDP per Capita, cumulated decline since Net Factor Income, NIS (US$ millions) 3,121 2,733 1,611 1,579 1,894 Net Current Transfers, NIS (US$ millions) 1,547 2,349 3,896 5,25 6,479 Population (million) Exchange Rate (NIS:US$) GNI per Capita, US$ 1,739 1,62 1,21 1,41 Consumer Price Inflation * World Bank Staff Calculated & PCBS GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 3, , , * World Bank reports PAGE 113

116 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 SARAJEVO STOCK EXCHANGE Almir Begic President and CEO Today after three years of operations the SASE s continuous development of an efficient capital market that offers security to investors, we can proudly say in some market segments we are the leader in the region. In year 22 when the Sarajevo Stock Exchange (SASE) started operating no one thought we could make it. Today after three years of operations and the SASE s continuous development of an efficient capital market that offers security to investors, we can proudly say in some market segments we are the leader in the region. During the past year the SASE has accomplished exceptional results. Four new brokerage houses were accepted for membership and the total number of the SASE members is now 17. The Official Market was created and 11 Privatization Investment Funds were listed there. The implementation of continuous trading, under the name of Multi Fixing Trading Schedule (MFTS), was introduced in the first quarter of 24 for most liquid securities. All these factors together with the increasing of the trading days from two to four and enabling investors to monitor trading in real time over the Internet contributed to the SASE s market capitalization increase of almost 4% while Bosnian Investment Funds Index (BIFX) grew over 15% during the same period. The SASE is not achieving this growth alone. The reforms that the Council of Ministers is implementing; reconstruction of the business environment under the initiative of the Office of the High Representative, activities of the Capital Markets Council under the coordination of the Central Bank of Bosnia and Herzegovina, and continuous cooperation with all capital market participants is of crucial importance for development of stable securities markets. With combined and coordinated efforts, the SASE is contributing to further development of the capital market and of Bosnia and Herzegovina as a whole. HISTORY AND DEVELOPMENT The Sarajevo Stock Exchange (SASE) was founded in September of 21 by eight brokerage houses and commenced trading on April 12 of 22. The SASE is a central marketplace for securities trading in the Federation of Bosnia and Herzegovina. The SASE is a joint-stock company which, originally had eight founding members. According to the Securities Law, the SASE members can only be legal entities i.e. brokerage houses with headquarters in the Federation of Bosnia and Herzegovina whose sole activity is trading in securities. The SASE currently has 17 members, whose headquarters are spread around the Federation of Bosnia and Herzegovina, the majority being in the capital, Sarajevo. All members of SASE must be licensed for trading in securities by the Securities Commission of the Federation of Bosnia and Herzegovina. Only those brokers authorized by the SASE members, who have passed a broker s exam, which tests their expertise in dealing in securities, are allowed to trade. The Securities Commission defines the manner and conditions for taking the exam and for revoking the license. A broker is required to hold a valid license issued by the Commission. Trading on the SASE is performed electronically through an order driven electronic trading system BTS (Stock Exchange System). BTS is a computer assisted information and trading system, which enables remote entry, modification, halt and removal of orders, automated matching of orders and concluding trades, supervision of orders and trades, as well as survey of information on trading and on listed securities. In 23 SASE joined the Stock Exchange Monitor, which is an informational platform of the Stock Exchanges in South Eastern Europe. At the moment, there are 8 participating exchanges, which operate markets with more than 2,19 securities and more than 17 brokerage houses. At the beginning of 24, trading at the SASE Official Market started and all 11 Privatization Investment Funds were listed there. The Official Market is a higher level market where only securities that meet special conditions and are approved by the Securities Commission and SASE s addition board can be listed there. Also in 24, after two years of trading with only call auction trading system, continuous trading has been introduced at the SASE under the name Multi Fixing Trading Schedule (MFTS). Only the most liquid securities on the SASE have been transferred to MFTS. In conclusion, after only two years of operations market capitalization of SASE has reached over US$ 2.6 billion. FUTURE OUTLOOK The SASE finished 24 with excellent results. This trend is expected to continue in 25 together with grater market efficiency and better market transparency. SASE s vision for 25 is as follows: introduction of first Investment Funds together with transformation of all Privatization Investment Funds into Investment Funds; issue government securities by the Bosnian Central Bank which will activate trading platform for bonds on SASE; list additional companies currently under privatization process; enact new legislation by the Parliament enabling Net Settlement which will permit day trading ; create a portal to allow investors easier access to annual statements and other financial data of all companies listed on the SASE; commence negotiation with companies and offer them listing privileges under the SASE Official Market; and create the SASE s Top 15 Companies Index. PAGE 114

117 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 SARAJEVO STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 1, ,64. Aug-4 2,18.7 3,556. Sep-4 2,32.7 3,717. Oct-4 2, ,139. Nov-4 2, ,265. Dec-4 2,69.8 3, , 3,5 3, 2,5 2, 1,5 1, 5 3, 2,5 2, 1,5 1, 5 July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Goran Kahvedzic goran.kahvedzic@sase.ba Website * Please refer to page 52 for the Bosnia and Herzegovina country report. PAGE 115

118 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 STATE COMMODITY & RAW MATERIALS EXCHANGE OF TURKMENISTAN The exchange is one of the most important domestic economic institutions to date and acts as the main body for import and export operations in the country as well as a government regulator. HISTORY AND DEVELOPMENT The State Commodity and Raw Materials Exchange of Turkmenistan (SC&RME) was created by decree of the President of Turkmenistan - Saparmurat Turkmenbashi - in The Exchange is one of the most important domestic economic institutions to date and acts as the main body for import and export operations in the country as well as a governmental regulator. There are many indicators of activity regarding the Exchange. During 23, 813 export contracts for the sum of US$ million were registered. These figures are indicative of the favorable political and economic situation in Turkmenistan, its rich natural resources, and of utmost importance, the reliability and stability of state organizational structures to attract business from all over the world. The State Commodity and Raw Materials Exchange of Turkmenistan has relationships with more than 21 countries. Businesspeople from Turkey, Moldova, China, Russia, the USA, Germany, Great Britain, the UAE and the Ukraine among others, buy oil products, liquefied gas, cotton fiber, stockinet, cotton yarn, handmade Turkmen carpets, hides and knitwear from Turkmenistan. An information and analytical system was created for the SC&RME to enable direct operational control of contract execution as well as for information retrieval. The InfoBase database will be developed to allow the retrieval of world quotations on significant commodities in real time and to facilitate potential marketing outlets for domestic commodity production. FUTURE OUTLOOK The following plans are currently underway: further development of external economic links with foreign trade companies; streamlining the uses of PR companies and the services they provide in terms of mass media disclosure; expansion of external contacts with international and regional organizations; simplification of the contract registration procedure; and increasing the level of skill and experience of Exchange staff through interactions between organizations. CONTACT INFORMATION Contact Name Mr. Murad Muradov muradovma@exchange.gov.tm Website PAGE 116

119 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 STATE COMMODITY & RAW MATERIALS EXCHANGE OF TURKMENISTAN ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Turkmenistan, continues to formulate ambitious national development projects, the funding of which will largely be determined by the country's ability to monetize its worldclass natural gas reserves of some 1 trillion cubic feet (2.9 trillion cubic meters) with more likely still to be found. With the completion of the Korpezhe-Kurt Kui pipeline to Iran, the first gas pipeline from Central Asia not to cross Russia, gas exports are not totally dependent on Russia and Ukraine. But, the vast majority of Turkmenistan's gas production, about 8%, still moves through Russian pipelines. Turkmenistan possesses considerable natural resources despite the fact that the Kara Kum Desert covers 8% of the country. Exploitation of gas reserves (the fourth largest in the world) has been severely impaired by Turkmenistan's inability to access Western markets for its gas. Turkmenistan has a wide range of other industrial minerals including the world's third largest sulfur deposit. While less than 5% of Turkmenistan is utilized for agricultural production, cotton is a major export crop and the sector employs nearly half of the work force. Turkmenistan's agricultural sector has the productive potential to export a variety of products. As such, the government is currently promoting the textile and food processing industries and has initiated a number of transportation infrastructure projects. The private sector is estimated to contribute approximately 3% to the annual GDP. Recent robust economic growth suggests that Turkmenistan will likely delay any further privatization among the larger state-owned enterprises (SOEs) and the financial sector. After independence in 1991, Saparmurat Niyazov, head of the Communist Party of Turkmenistan since 1985, and president since October 199 when the post was created, was elected president of the new country in a direct election on June 21, Running unchallenged, he was elected with a reported 99.5% of the vote. In a Jan. 15, 1994 referendum, a reported 99.99% of the electorate voted to extend Niyazov's term in office, which had been set expire in 19, until the year 22. This measure was undertaken in response to a motion by the leaders of the DPT that he be appointed "president for life." President Saparmurat Niyazov announced on Feb. 16, 21, his intention to hold presidential elections in 21, although he was named Turkmenistan's president for life two years ago. Economic Performance: In an effort to combat a number of consecutive years of hyperinflation, the government in restrained budget deficits, tightened credit and eased currency controls in accordance with IMF recommendations. Inflation (as measured by the GDP deflator) was reduced from over 1,% to under approximately 35% by 1998 and then declined further to 9.1% by yearend 23. Fiscal deficits have been quite small since the resumption of normal production of natural gas; the deficit in 23 is estimated to have been just.9% of GDP, basically in line with numbers posted for the last few years. The 23 current account recorded a surplus of 1.3% of GDP, unchanged from 22, due to strong growth in natural gas production. With continued growth in this sector, Turkmenistan anticipates more robust merchandise trade and current account surpluses in coming years. The government reported, FDI of US$ 51 million during the first four months of 2. Production sharing contracts with international oil and gas production companies are the vehicle by which the government hopes to boost the current low level of foreign investment. 1 1 Economic and Political Overview, County Watch Incorporated, 25 ECONOMIC RATIOS Turkmenistan Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 117

120 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 STATE COMMODITY & RAW MATERIALS EXCHANGE OF TURKMENISTAN TURKMENISTAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services TURKMENISTAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (manat-billions) 1,14 1,491 2,322 E 2,616 E 3,125 E Money Supply M2 (manat-billions) 1,214 1,588 2,477 E 2,79 E 3,333 E Growth Rate M1 4.9% 3.8% 55.7% E 12.7% E 19.5% E Growth Rate M2 4.5% 3.8% 55.9% E 12.6% E 19.5% E Interest Rates deposit rate 3.% 24.% E 3.% E 3.% E 9.12% E lending rate 29.% 29.5% 9.1% E 9.1% E 2.8% E Foreign Exchange Reserves (US$ millions) 1,324 1,382 1,459 1,55 1,448 Exchange Rate Period Average (manat/us$) 5,2 5,2 5,2 5,2 5,2 Annual % Growth E E: Estimate GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 3,5 3, 2,5 2, 1,5 1, * World Bank reports PAGE 118

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122 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TEHRAN STOCK EXCHANGE Dr. Hussein Abdoh Tabrizi Secretary General This year, the average total return of investment on TSE listed stocks exceeded 33%, which in comparison to an inflation rate of 15% shows a high real rate of investment return in Iran's economy. 24 at the Tehran Stock Exchange (TSE) was a year of enthusiasm on all dimensions. The trading volume witnessed a remarkable growth: Market capitalization was US$ 47. billion, an increase of 36.6% in comparison to the previous year. This year, the average total return of investment on TSE listed stocks exceeded 33%, which in comparison to an inflation rate of 15% shows a high real rate of investment return in Iran's economy. Also, the total turnover to the TSE, compared with the previous year figures, reached US$ 13.3 billion, an increase of 157%. The TSE expects to perform a series of development plans for market administration, regionalization, the introduction of new financial instruments, reinforcement of stockbroker regulations (in collaboration with the World Bank), and to continue the establishment of regional floors in major cities. The main elements of the rise in capital market interest among citizens in recent years can be attributed to: The higher rate of return in comparison to traditional investment in other assets, Transference of government assets through IPOs to TSE's investors (allocated shares for privatization in 25 will increase to US$ 3 billion as compared to US$ 2 billion in 24), and Greater opportunities in other aspects of the capital market as compared to the saturated money market opportunities. In March 25, a new foreign portfolio investment regulation to facilitate a gradual approach to the repatriation of both principle and dividends of foreign investors is to be enacted. Initially it will be offered to institutional investors with limits on the percentage of foreign ownership. Parallel to electronic expansion is a program to give Iranian investors further access to the capital market. Currently, there are regional trading floors in 1 provinces, with trading floors at other provinces planned for operation for 25. The TSE plans to add more trading floors in Tehran as well. The TSE is also planning to develop a common trading platform with Iran's neighboring countries as well as FEAS members. The TSE Services Company (TSESC) has been approved for FEAS Affiliate Membership. TSESC has recently initiated application for membership to the International Organization of Securities Commissions (IOSCO). Future plans also include the offering of new financial instruments of the TSE; such as derivatives, exchange traded mutual funds, and Real Estate Investment Trusts (REITS). There is also a plan for cross-listing of TSE s listed companies at the regional and European Exchanges. Finally, TSE is in the final stage of implementing its new software. This is one of the most sophisticated software which comprehensively support all facets of Exchange s products and activities such as securities, futures, options and derivatives, and also clearing and settlement. HISTORY AND DEVELOPMENT Having a well organized stock market to speed up the process of industrialization of the country goes back to the 193s when Bank Melli Iran studied market possibilities. The outbreak of World War Two and subsequent economic and political events delayed the establishment of the TSE until The TSE opened in April Initially, only government bonds and certain state-backed certificates were traded. During the 1s, increasing global oil prices boosted the capital demand for stocks. In 19, after the Islamic revolution, operation of the TSE was closed down. This period of closure ended in 1989 and since then, the TSE has continuously expanded. By the end of 24, 411 companies owned by approximately 3 million investors were listed on the TSE. FUTURE OUTLOOK Foreign investor laws/regulations include a new Foreign Portfolio Investment regulation to be enacted by the end of March 25. This is a gradual approach with respect to the repatriation of both principal and dividends by foreign investors. It will be initially offered to institutional investors, and there will be limits on the percentage of ownership by foreigners. There have been numerous efforts for the geographical expansion of the exchange. There are now regional trading floors in 1 provinces that are fully operational. The trading floors at other provinces will be operational in 25. There are also plans for expansion to more trading floors in Tehran. The TSE also intends to develop a mutual trading platform with the Istanbul Stock Exchange, Muscat Securities Market and some other members of FEAS to further regionalize the Exchange. ISE and TSE members will cooperate. The TSE intends to play more active role among FEAS member countries; actively participate in the Working Committee and Task Forces. Our Services company, TSE Services Company (TSESC) a wholly-owned subsidiary of the TSE which has been newly accepted as Affiliate Member in FEAS, has applied for membership to the International Organization of Securities Commissions (IOSCO). There are plans to offer new financial instruments including derivatives, exchange traded mutual funds and Real Estate Investment Trusts (REITs). There is also a plan for cross-listing of TSE s listed companies at the regional and European Exchanges. Finally, TSE is in the final stage of implementing its new software. This is one of the most sophisticated software suites which comprehensively supports all facets of Exchange s products and activities such as securities, futures, options and derivatives, and also clearing and settlement. PAGE 12

123 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TEHRAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July , Aug Sep Oct , Nov-4 1, , Dec-4 1, , TOTAL 6, , Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 43, ,635.1 Aug-4 42, ,31.1 Sep-4 45, ,662.8 Oct-4 43, ,169.5 Nov-4 47, ,87.5 Dec-4 46, , ,6 1,4 1,2 1, , 12, 1, 8, 6, 4, 2, 5, 4, 3, 2, 1, July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Karim Karimi int.dept@tse.ir Website PAGE 121

124 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TEHRAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Iran's economy is characterized by a large measure of central planning and state ownership of petroleum and other large enterprises alongside village agriculture and small-scale private trading and service ventures. President Mohammed Khatami has continued to follow the market reform plans of former President Ali Akbar Hashemi- Rafsanjani and has indicated he will pursue diversification of Iran's oil-reliant economy. The president remains popular among the electorate. Iran possesses truly enormous reserves of oil and natural gas: proven oil reserves are billion barrels or about 1% of the world's total and more than 8 trillion cubic feet of natural gas, second only to Russia's colossal gas resources. Iran, like many petroleum-rich countries, relies very heavily on oil export revenues: 8% of total export revenues are from petroleum and some 5% of government revenue is generated from that industry. Development of the nation's gas reserves has been primarily to meet internal needs in view of the difficulty in arranging for export of the gas either to its neighbors or to more distant markets. Economic growth has taken place in the agricultural sector, which makes up about 2% of GDP. The establishment of largescale irrigation projects has helped expansion of the production of export-based items such as pistachios, flowers and dates. Nevertheless, the agricultural sector remains vulnerable to the weather and periodic drought is still a threat to much of the country's arable land. In terms of GDP, the largest sector in Iran is the services sector, which contributes 45% of GDP. In 24, 5.57% of the electorate participated in elections. President Mohammed Khatami s term is due to end in June 25. President Khatami is seen as a reformist and during his tenure has tried to bring about market economy reforms. Economic Performance: Iran's real GDP grew by 5.9% in 23, compared to 7.2% growth in 22, due to strong oil prices and added contributions from the non-oil sectors in light of the recent global uptick. Inflation (as measured by the GDP deflator) was 16.6% in 23, down from a very high 29.8% in 22 that was the result of a rapid depreciation of the currency. Fiscally speaking, the deficit was brought down in 23 to.2% of GDP from -2.4% of GDP due to higher revenues from oil and spending restraint. The deficit is set to decline even further by year-end 24 due to record-high oil prices. External debt remained low at US$ 11.9 billion, or 8.7% of GDP. The current account surplus narrowed in 23 to.5% of GDP, from 3.1% in 22, despite rapid export growth attributable to a reemergence of consumer demand for imported goods. The recent dramatic run-up in oil prices will certainly fuel an expansion in the current account surplus in 24. Net transfer payments from abroad are also economically meaningful: in 23 they totaled US$ 1.23 billion, mostly from remittances of Iranians working abroad. The capital and financial account recorded a healthy surplus in 23 of 3% of GDP, up from 2.1% in 22, due to strong oil and gas related FDI inflows. FDI was US$ 1.7 billion in 23, up from US$ 1.2 billion in 22. Foreign reserves increased as well, to US$ 24.5 billion in 23, or over six months of import coverage. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts TSE Services Company Central Bank of the Islamic Republic of Iran Iranian Chamber of Commerce, Industries and Mines (ICCIM) Organization for Investment, Economic & Technical Assistance (OIETAI) a division of the Ministry of Finance ECONOMIC RATIOS Iran Lower-middle-income group Trade GROWTH OF INVESTMENT AND GDP 3 GDI GDP 2 Domestic savings Investment Indebtedness * World Bank reports PAGE 122

125 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TEHRAN STOCK EXCHANGE IRAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services IRAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (rials-billions) 67,444 81,952 12,17 125, ,471 Money Supply M2 (rials-billions) 141, , ,54 269, ,493 Growth Rate M1 22.7% 21.5% 24.7% 23.% 29.3% Growth Rate M2 2.4% 21.5% 22.4% 27.6% 27.5% Interest Rates deposit rate 8.% 8.% 8.% 8.% 8.% E lending rate 18.5% 18.5% 18.5% 18.5% 18.5% E Foreign Exchange Reserves (US$ millions) 3,7 5,8 12,6 13,8 13,158 Exchange Rate Period Average (rials/us$) 8,1 8,135 7,99 7,924 7,8 Annual % Growth E: Estimate * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 35, 3, 25, 2, 15, 1, 5, * World Bank reports PAGE 123

126 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TIRANA STOCK EXCHANGE Dr. Elvin Meka General Manager During 24, Tirana Stock Exchange (TSE) emerged, as a well-regulated institution, capable of ensuring reasonable levels of protection for various groups of interest, which may consider and choose to use the securities market as an investment or financing alternative. The most important event for 24 was the TSE s development of a securities market strategy, drafted by TSE s staff and based upon the development plan for the securities market in Albania, prepared by GMA Capital Markets Ltd. By being aware of the special role, the securities market plays within the financial system, we aimed, since TSE s inception, to obtain quality foreign assistance to draw up this baseline document for the development and functioning of the entire securities industry in Albania. We are proud to declare TSE as the first institution, within Albanian financial system, to possess a detailed development strategy since its The most important event for 24 was the TSE s development of a securities market strategy, drafted by TSE s staff and based upon the development plan for the securities market in Albania, prepared by GMA Capital Markets Ltd. commencement. On the other hand, we managed to offer to the political factor a complete, formal and integral document, with clear strategic alternatives, which will serve as a key transforming mechanism of different endeavors into tangible results and contributions, regarding the country s rapid economic growth, financial & economic reforms. It should be noted that this plan is fully integrated with the government program for financial transparency and reduction of the informal economy. We have already deepened cooperation and relations with the business community. Business listing interest has just begun to leave the empirical phase and is turning to a real one, mainly driven by the imperative needs for substantial fresh funds out of traditional banking channels, consolidation of market positions, and required respective reforms within the framework of free trade agreements. Following this interest, the TSE, in close cooperation with the Chamber of Commerce, organized several promotional & training seminars and workshops, aimed at unfurling the capital market as a financing alternative. On the other hand, we continued to attract membership interest within the TSE, by adding a new member for 24, thus establishing grounds for a complete institutional framework of securities market with relevant participants. To close, I want to thank all private and government entities, academic circles, general public and media for their kind understanding, support, encouragement in our persisting attempts toward creating the securities market in Albania and believe that, during 25, we will accomplish our main objective of transforming TSE in a real securities market. HISTORY AND DEVELOPMENT The Securities Act was approved by the Parliament on 1 March 1996, paving the way for the establishment of the Albanian Securities Commission (ASC) on 16 April and the Tirana TSE on 2 May Once the law was approved, the necessary rules and regulations of the ASC and the TSE were prepared and adopted. The TSE opened officially on 2 May 1996, as the first exchange in Albania a financial history. The TSE was originally established as a department of the Bank of Albania with the goal of spinning off as a separate institution after a transition period of several years. At the beginning, trading sessions were held every Monday and Thursday. By October 19, the sessions were increased to every business day, and 3- and 6-month maturity T-bills were added to the existing instruments traded. Primary auctions for T-bills were conducted by the TSE until 1 August The major change in the legal framework of the TSE was the approval by the Parliament of some revisions to the actual Securities Law, which came into force in March 21. Under these new changes, the Ministry of Finance took all practical steps to develop and institutionalize the capital market in Albania during 22. In this way, the TSE was finally established for the first time, in March 22, as an independent institution (joint-stock company), with the sole owner the Ministry of Finance. The TSE obtained its full license on 1 July 23, thus becoming the first licensed securities market in Albania. During 23, for the first time in its short history of development, the TSE admitted four full members. FUTURE OUTLOOK The main priorities and objectives of the TSE for 25 are as follows: Cooperation with respective government structures in reference to implementing the new Tirana Stock Exchange & Securities Market Development Strategy, including partial privatization of strategic and nonstrategic state owned enterprises through initial public offering; Cooperation and assistance of domestic businesses in order to prepare the first initial public offering; Preparation of the facilities for possible primary auctions of short term Government securities within the TSE; Continued public education & information campaigning to promote both the TSE & capital market, as well as to attract domestic business at TSE listing, by making them aware of advantages the securities market may offer them; and Improvement of information technology, at the TSE including the implementation of the Electronic Trading System for securities. PAGE 124

127 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TIRANA STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index 5-YEAR CURRENCY EXCHANGE (US$ Millions) July-4 n/a n/a Aug-4 n/a n/a Sep-4 n/a n/a Oct-4 n/a n/a Nov-4 n/a n/a Dec-4 n/a n/a CONTACT INFORMATION Contact Name Ms. Enkela Idrizi eidrizi@tse.com.al Website PAGE 125

128 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TIRANA STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Economic expansion resumed after a period of contraction prior to 1998, with annual GDP growth of at least 7% from 1998 through 21. Albania has been cooperating with the IMF to restructure its economy as a condition for receiving both adjustment and poverty reduction financing. Among the results to date: the public sector workforce has been trimmed from more than 9, in 199 to slightly over 2,, and broad money supply growth has been more than halved since Containment of fiscal deficits has improved as stepped-up tax collection efforts produced a marked improvement in government revenue in 23. As monetization of fiscal deficits have been reduced, inflation has also dramatically decreased. The official unemployment rate in 23 was about 16%. In August 22, the ruling Socialists made the decision to combine the functions of the party chairmanship and the party premiership in parliament (since the Socialists were in control of the government, this meant that the head of the party in parliament would also be the head of the government). With this decision made, Fatos Nano, once again, became the new prime minister. In early 23, Albania commenced the initial discussions with the European Union in regard to the Stabilization and Association Agreement. These talks were regarded as the first step toward eventual accession in the European Union. In the late 199s until 21, Albania showed steady expansion of gross domestic product (GDP). Although flooding problems that plagued parts of Europe in 22 may have slowed growth rates, the developments on the economic front were encouraging. Economic Performance: Economic growth increased to approximately 6% in 23, up from 4.7% growth in 22. Whereas droughts, floods, and frequent blackouts hindered growth in 22, 23 saw improvements in the power infrastructure, which spurred higher exports and sales in the industrial sector. Tax receipts also improved in 23, by 1%. Improving revenue mobilization has become a top priority for Albania. Under the most recent IMF Poverty Reduction and Growth Facility, plans for a more effective tax administration include shrinking the large informal economy making the tax collection system more consistent and equitable. Inflation has consistently remained below 3.5% since December 22, allowing policy makers the ability to gradually reduce interest rates to around 7% by years end. The overall deficit (excluding grants) declined to between 5 and 6% of GDP in 23, from 6.3% of GDP in 22 due to stepped-up tax collection efforts and constrained public spending. This movement reduced total public debt to approximately 61% of GDP. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Bank of Albania Ministry of Finance Albanian Institute of Statistics Albanian Securities Commission Ministry of Economy Chamber of Commerce and Industry ECONOMIC RATIOS Albania Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Trade Domestic savings Investment Indebtedness * World Bank reports PAGE 126

129 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TIRANA STOCK EXCHANGE ALBANIA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services ALBANIA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (leks-billions) Money Supply M2 (leks-billions) Growth Rate M1-8.7% 23.% 2.4% 15.3% 6.7% Growth Rate M2 2.6% 22.3% 12.% 19.9% 5.9% Interest Rates deposit rate 23.4% 18.% 1.8% 7.% 8.5% lending rate 27.5% 21.6% 22.1% 19.7% 15.3% Foreign Exchange Reserves (US$ millions) Exchange Rate Period Average (leks/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 1,6 1, * World Bank reports PAGE 127

130 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TOSHKENT REPUBLICAN STOCK EXCHANGE Bakhtiyor Radjabov Chairman For the first time the trading activity during 24, in the in the secondary market has exceeded 5% of the total activity in the primary market. As a result of all of the hard work of the staff of the Toshkent Republican Stock Exchange (TRSE) in 24, TRSE has achieved certain positive results. In 24, 4465 transactions with the shares of 959 joint-stock companies and 2 transactions with corporate bonds have been carried out on the trading platforms of the TRSE. Shares of the privatized enterprises accounted for 32.5% of the total volume in dollars for the year; Shares of other joint-stock companies accounted 12.4%; Shares in the secondary market accounted for 54.8% and Shares representing hard currency accounted for US$ 1.8 million. In comparison with the corresponding period of 23, the trading volume of shares has increased 1.2 times, while the trading volume of shares for hard currency has increased 1.3 times. Most importantly, during the last financial year, structural changes have occurred in exchange trades. For the first time the trading activity in the secondary market has exceeded 5% of the total activity in the primary market. We expect that the development of the secondary market will continue in 25. Currently, there are securities of 7 companies in circulation in the secondary market, which should considerably increase the share of securities in the secondary market. In 25 TRSE plans to increase the volume of securities. Most importantly, we will carry out technical modernization of the system of electronic exchange trades: 1. Perfection of the technology of exchange trades: First, TRSE will create of a platform for the secondary circulation of shares in the secondary market, working on technology based on simple auction. Second, TRSE will create a special platform on fulfillment of transactions. 2. Modernization by updating the equipment: TRSE will complete modernization of equipment in all branches and in the exchange itself. 3. Modernization of trading system of TRSE: TRSE will translate into a new technological platform for the whole trading system of the Stock Exchange and create a uniform database. Further TRSE will endeavor to open facilities for regional broker offices to access the trading system from distance and implement maintenance of a closed network of data transmission for all regional branches. HISTORY AND DEVELOPMENT A stock department was established in 1991, which became a pioneer of Uzbekistan s securities market, and was eventually transformed in 1994 into the Toshkent Republican Stock Exchange (TRSE) - a closed joint-stock company. The TRSE became an open joint-stock company in Establishment of the TRSE was closely connected to its market performance and a policy of establishing public joint-stock companies on the basis of privatized government enterprises. Currently, the TRSE has 37 shareholders. Throughout its development, the TRSE completed a complex infrastructure, a central office in Tashkent, and branches and brokerage offices in all regions nationwide. In 1994, 12 brokerage offices were members of the Exchange and as of 31 December 22, this number had increased to 86. On 1 February 1998, a listing procedure was introduced. On 1 September 1998, shares of the first listed company began trading on the TRSE. A specialized trading platform, for the purpose of selling shares of privatized enterprises to foreign investors for hard currency, was launched on 1 January In 21, work on Exchange information and electronic trading systems continued. The website started operations in 21, and today the TRSE continues work on a transition to modern web-technology trading. In addition, there is a new system that allows investors to receive "video-listing" through the internet and consequently make an informed decision prior to visiting the place. A video-listing of more than 2 enterprises has been prepared and advertised through the internet. The Exchange has developed weekly ratings of its activities by regions and industries on such parameters as attraction of investors, stock popularity, confidence among the population and volume of investments. This has enabled investors to have an actual picture of equity market dynamics in Uzbekistan. Founded nine years ago as Uzbekistan s first stock exchange, the TRSE is actively taking part, always keeping in mind its major role, in the development of the Uzbek capital market. FUTURE OUTLOOK The priority directions of the development of the TRSE in 25 will become the opening of three additional trade sections: 1. Section on transactions for additional issued shares; 2. Section on transactions for shares of unlisted companies; 3. Section on transactions for TURNIP (the deals with inverse contract). Additionally, our Stock Exchange is planning to change the software system and bring it to standards in accordance with Rules of the Stock Exchange, as well as prepare new, more complex software, in particular: development of the module on conclusion of turnip-deals, based on technology of continual double auction; modernization of software system, based on technologies of the simple auction; and full modernization of software system of the TRSE with transition on new technical platform. PAGE 128

131 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TOSHKENT REPUBLICAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL.... Other July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Hamid Nasriddinov nasriddinov@uzse.com Website PAGE 129

132 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TOSHKENT REPUBLICAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Uzbekistan is one of the more prosperous of the Central Asian transitional economies. A wealth of mineral, energy, and agricultural resources, coupled with one of Central Asia's largest populations, provide the ingredients for a burgeoning economy. The agrarian sector is the backbone of the Uzbek economy, making up 3% of Uzbekistan's GDP in 21 and 3.6% in 22. Uzbekistan is one of the world's largest cotton producers and exporters and produces a significant amount of gold and natural gas. The country has more than tripled its liquid hydrocarbon production since independence. President Karimov has moved, slowly, to liberalize the depressed economy. Despite the possibility of social unrest if reforms lead to temporary lower living standards and unemployment, he promised to extend privatization, assist small businesses, and free the Uzbek currency in order to win IMF approval. Economic Performance: GDP grew 4.2% in 22, sparked by industrial production growth of 8.5% and agricultural production growth of 6.1% due to a good harvest. The monthly inflation rate went down to 1.6% in 22 from 1.9% in 21. The national budget was executed with a deficit of.8% of GDP, beating the 2% benchmark approved by parliament. The deficit was financed mainly by receipts from privatization and from Central Bank loans. The impending privatization of Uzbek s gas utilities will speed up the creation of a market environment in the gas sector. This should inject some much-needed FDI into the economy. 1 1 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Ministry of Finance National Bank of Uzbekistan State Central Securities Depository Portal of the State Authority ECONOMIC RATIOS Uzbekistan Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 13

133 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 TOSHKENT REPUBLICAN STOCK EXCHANGE UZBEKISTAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services UZBEKISTAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (sum-billions) E 159 E 192 E Money Supply M2 (sum-billions) E 199 E 241 E Growth Rate M1 22.6% 8.8% 32.6% E 2.2% E 21.2% E Growth Rate M2 2.8% 8.2% 31.5% E 2.2% E 21.2% E Interest Rates deposit rate 21.% 17.% 18.% E 24.% E 3.% E lending rate 33.% 32.3% 28.% E 24.% E 3.% E Foreign Exchange Reserves (US$ millions) 1,15 1, ,12 1,257 Exchange Rate Period Average (sum/us$) Annual % Growth E 1 E E: Estimate * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 4,5 4, 3,5 3, 2,5 2, 1,5 1, * World Bank reports PAGE 131

134 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 UKRAINIAN STOCK EXCHANGE Valentin Oskolsky Chairman of the Board It is our belief that the chosen strategy of the USE will gradually result in the creation of a transparent, liquid, investment opportunity attractive to both national and foreign investors in the capital markets. 24 can be characterized as a successful year for the Ukrainian Stock Exchange (USE) because of the increase of securities traders activity. The annual stock exchange turnover increased 72 times in comparison to 23. The main reason for this leap was the initial public offering of options and its entrance in the secondary market. In 24 the number of options issuers has increased and, of course, bids growth resulted from asks growth. In 24 good progress was made from the legislation stand point. Starting from the 1st of January 24 the Civil and Economic Codes became valid which is expected to encourage market activity. The USE continues to work at technical trading improvements. Electronic trading was tested during 24. The USE also continued with arrangements to implement electronic documentation turnover and electronic digital signature according to Ukrainian legislation. One of the main problems of the Ukrainian market is the absence of a real secondary market. Throughout the existence of the market the main trading sector was the privatization market. Trading of state-owned shares was successfully performed through the USE, but we believe that our efforts on creating a free-float market in Ukraine will soon be realized. The USE as a co-founder of the Kiev Slavonic University continued its work with students, through the Securities Chair. Starting from 22 there has been a Student Stock Exchange at USE. Every student has an opportunity to become an exchange specialist and then a broker. Through gaining theoretical and practical knowledge, accumulating experience, students realize the importance of capital markets and can make their choice of future professions based on real exposure. It is our belief that the chosen strategy will gradually result in the creation of a transparent, liquid, investment opportunity attractive to both national and foreign investors in the capital markets. HISTORY AND DEVELOPMENT The USE is a pioneer in the capital market of Ukraine, created according to Law On Securities and the Stock Exchange, and registered by decision of the Cabinet of Ministers on 29 October The USE is a closed joint-stock company with an authorized capital divided into 288 ordinary nominal shares belonging to legal entities. In 19, according to the Law On State Regulation of Securities Market in Ukraine, the Securities and Stock Market State Commission re-registered the USE. Since June 1998 the USE has been a selfregulated organization. There are 122 registered brokerage companies as USE members as of 1 January 25. The USE has 3 branches in the largest Ukrainian regions. In 1993, the USE became a pioneer of money privatization and implemented the exchange mechanism of price creation. The USE is a member of the Coordinating Council for the functioning of securities markets charged by the President of Ukraine. It s also a member of the Consulting & Experts Council in the SSMSC, the Ukrainian Chamber of Commerce and Industry, the Academy of Economic Science and the Academy of Engineering Science of Ukraine, the Board of Ukrainian Council on Economic Education and the Ukrainian Community Intelligence of the Nation. Chairman of the Board of USE Mr. Valentin Oskolsky is also President of Union of Economists of Ukraine and President of Article Numbering Association of Ukraine. The USE has created many educational programs in association with the Slavonic University. The official publication, Hermes, can be found in the daily newspaper Ukraine Business. FUTURE OUTLOOK Plans for the USE in 25 include: putting into operation the System of Electronic Trading (SELT at USE); expansion through SELT on the basis of secondary securities turnover and trading the internal state loan bonds; creation of the conditions and basis for formation and development for a derivatives market; implementation of a derivative market section in SELT USE; participation of the USE in the privatization processes planned to be implementated by the State Privatization Program and the Law of Ukraine On State Budget of Ukraine for 25 ; improvement of technologies for trading State-owned shares of privatized companies; promotion for the attraction of direct national and foreign investments to develop strategically important industry companies during the process of its privatization; development of electronic documentation turnover and electronic digital signature according to new Ukrainian legislation; development of Exchange information areas, expansion of publishing, scientific, methodical and educational activities in order to prepare specialists for national capital market; and strengthening of international cooperation with foreign stock exchanges and international financial organizations.. 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135 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 UKRAINIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July-4 n/a n/a n/a n/a Aug-4 n/a n/a n/a n/a Sep-4 n/a n/a n/a n/a Oct-4 n/a n/a n/a n/a Nov-4 n/a n/a n/a n/a Dec-4 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July Aug Sep Oct Nov Dec TOTAL Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME (US$ Millions) MONTHLY MARKET CAPITALIZATION (US$ Millions) July n/a Aug n/a Sep n/a Oct n/a Nov n/a Dec n/a July Aug Sep Oct Nov Dec July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mrs. Hanna Yatsyuk Hanna.Yatsyuk@ukrse.kiev.ua Website PAGE 133

136 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 UKRAINIAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Among the Commonwealth of Independent States (CIS), the Ukraine, with its abundant industrial and agricultural resource base, was generally considered the leading candidate for rapid transition to a market economy. The Ukrainian industrial complex, centered in the mineral rich southeastern region, provided a wide range of valuable raw materials and finished products to the other republics of the former U.S.S.R. Likewise, the historic ability of Ukraine's rich soil to supply large quantities of diverse agricultural products within the region was widely expected to be an engine of growth and development in the market economy transition. Similar to other transitional CIS countries, an informal economy has evolved in the Ukraine, which is estimated to now generate approximately 5% of total (but unreported) gross domestic product. Privatization of large enterprises has moved slowly, but the amount of privatization proceeds in total has been rising. In 2, for example, sales of state-owned enterprises generated proceeds equivalent to about 1.3% of GDP, more than double that amount received the previous year. Viktor Yushchenko was sworn in as president after winning a rerun of the troubled 24 election. He described the outcome as a "great national victory" and promised to take Ukraine along the road of European integration. Mr. Yushchenko is an economist and banker by training. He served as prime minister under Leonid Kuchma between 1999 and 21 when he was credited with steering through successful economic reforms. Mr. Yushchenko is regarded as a pro- Western liberal reformer. He promises to build a country in which there is freedom, democracy and rule of law. He also pledges that alleged corruption by the outgoing authorities and several high-profile crimes will be investigated. 1 Economic Performance: In 23, Ukraine's steel exports were gobbled up by China, while capital investment in Russia garnered a need for Ukrainian machinery. This export boom spurred investment and construction in Ukraine, that when coupled with an expansion in access to consumer credit, drove real GDP growth of 9.3% in 23, up from 5.2% in 22. The inflation rate (as measured by the GDP deflator) increased to 9.1% in 23 from inflation of only 2.9% in 22 due to skyrocketing food prices related to a poor harvest. The fiscal balance in 23 rested at a small deficit of.2% of GDP compared to a deficit of.4% of GDP in 22 relatively small, but still reflecting inefficient tax administration. Prospects for continued growth looks good if the government can continue to maintain macroeconomic stability. Wage levels in the Ukraine, though rising fast now, are still about one half those in Russia and less than one quarter of those typical of the countries that entered the European Union in May 24. Exports grew 25% in 23, resulting in a current account surplus of 5.9% of GDP. In the financial and capital account, foreign direct investment (FDI) is flowing in, partly in response to privatization efforts. In 23 FDI jumped to US$ 1.4 billion. Accordingly, the Ukraine's overall balance of payments has swung into surplus and the NBU has been accumulating foreign currency reserves as a result. The level of those reserves as of yearend 23 was nearly US$ 6.7 billion, up significantly from the severely depleted level of the crisis year BBC News Online, stm, January 25 2 Economic and Political Overview, County Watch Incorporated, 25 Key Information Contacts Securities and Stock Market State Commission Ministry of Finance State Property Fund of Ukraine State Committee of Financial Monitoring State Commission for Regulation of Financial Services Markets in Ukraine ECONOMIC RATIOS Ukraine Lower-middle-income group GROWTH OF INVESTMENT AND GDP GDI GDP Domestic savings Trade Investment Indebtedness * World Bank reports PAGE 134

137 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 UKRAINIAN STOCK EXCHANGE UKRAINE GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture Industry Services UKRAINE MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES Money Supply M1 (hyrvnias-billions) Money Supply M2 (hyrvnias-billions) Growth Rate M1 14.8% 36.4% 47.1% 43.1% 35.2% Growth Rate M2 24.% 4.6% 44.5% 43.% 42.3% Interest Rates deposit rate 6.% 45.% 27.% 12.5% 7.% lending rate 54.5% 55.% 41.5% 32.3% 25.4% Foreign Exchange Reserves (US$ millions) 761 1,46 1,353 2,955 4,241 Exchange Rate Period Average (hyrvnias/us$) Annual % Growth * Economic Overview, Country Watch Incorporated, 25 GROWTH OF EXPORTS AND IMPORTS INFLATION Exports Imports GDP deflator CPI EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP Exports Imports 25, 2, 15, 1, 5, * World Bank reports PAGE 135

138 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ZAGREB STOCK EXCHANGE The ZSE, measured by market size (market capitalization) is one of the leading non- European Union markets in the region. Marinko Papuga General Manager The year 24 was extremely successful for the Zagreb Stock Exchange (ZSE). Turnover in equities rose 75%, the number of new shares listed in the Official Market doubled and market capitalization is up 66.3%. Value of new corporate bond issues listed exceeds US$ 52.5 million (HRK 2.8 billion). Four new government bonds issues together with previously listed issues created a US$ 3.5 million (HRK 19.6 billion) large government debt market on the ZSE. The number of transactions increased 47%, and last but not least the official equity index CROBEX hit a record high of more than twenty times its starting value in 24, and finally set at new 3% higher level. All of these statistics combined with increased retail investor s interest for equities is a solid platform for further capital market development. The ZSE, measured by market size (market capitalization) is one of the leading non-european Union markets in the region. In year 25 we will focus our efforts on further improvement on technology side, introduction of a new financial instruments and continuous care for market transparency and efficiency. HISTORY AND DEVELOPMENT The ZSE was incorporated in 1991 as a joint-stock company with 25 commercial banks and insurance companies. Today, the ZSE has 46 shareholders and 38 members. Prerequisites for ZSE membership include: compliance with the Securities Law, licensing with CROSEC and acceptance of the ZSE rules. A seat on the ZSE currently costs approximately US$ 13,. Members are required to comply with the rules and regulations of the ZSE and must register at least one licensed broker. In 24 there were many new developments on the Zagreb Stock Exchange. The number of bonds listed almost doubled as compared to 23 and for the first time two new municipal bond issues City of Koprivnica and City of Zadar were listed on the Zagreb Stock Exchange. In 24 four new (additional) government bond issues were listed on the ZSE, thus creating a US$ 3.5 million (HRK 19.6 billion) large government debt market. Four new corporate bond issues were listed on the ZSE. The total amount of new corporate bonds issues issued by the largest Croatian companies PLIVA, Agrokor, Podravka & Atlantic exceeds US$.5 million (HRK 2.8 billion) (total corporate bonds market capitalization is US$.9 million (HRK 4.7 billion)). Turnover in shares rose 75%. In 24, the official equity index CROBEX s value increased twenty times to set a new all time high level. FUTURE OUTLOOK In 25 ZSE plans to: focus efforts on further improvement in technology introduce new financial instruments continue care for market transparency and efficiency PAGE 136

139 FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 25 ZAGREB STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July Aug Sep Oct Nov Dec TOTAL Bonds July Aug Sep Oct Nov Dec TOTAL 2, , Other July Aug Sep Oct Nov Dec TOTAL Market Capitalization US$ Millions Index MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ Millions) July-4 6,73. 1,187.6 Aug-4 7,12.4 1,226.7 Sep-4 8,161. 1,388.2 Oct-4 9,18.6 1,45.5 Nov-4 1, ,6.7 Dec-4 1, , July Aug Sep Oct Nov Dec 1,8 1,6 1,4 1,2 1, , 1, 8, 6, 4, 2, July Aug Sep Oct Nov Dec CONTACT INFORMATION Contact Name Mr. Zeljko Kardum zeljko.kardum@zse.hr Website PAGE 137