BULGARIAN CAPITAL MARKET AND THE ROLE OF BULGARIAN STOCK EXCHANGE 7 th INTERBALKAN FORUM OF BANKING ASSOCIATIONS Sofia, May 4 th Ivan Takev, BSE-Sofia

Regulatory environment Harmonization with EU directives has been completed Financial Supervision Commission guarantor for market stability BSE Rules & Regulations in line with new developments Corporate governance principles are widely implemented New investment vehicles were introduced (pension funds, insurance companies, mutual funds, REITs)

Steady market growth / / Market capitalization of the BSE reached EUR 9 billion (35% of GDP)

Steady market growth / / SOFIX increased by 1 300% in the last 5 years

Steady market growth /2001 – 2007/ Average daily turnover doubled over the last two years

Listed Companies Number of companies traded: on the Official Market – 17 ; on the Unofficial Market – 339 Market Cap-EUR 2,8 billion ; Market Cap-EUR 7 billion New listings in 2006 : New listings in 2007( April) -Shares- 18 -Shares-SPVs 6 (REITs &Securitization of Receivables) -Shares-Public Comp. 11 -IPO 7 -IPO 2 -Bonds 10 - Mutual Funds 19 -Bonds 28 Capital increases 48 Capital increases 13

Investment oportunities Capital increase through issue of shares IPOs Bond issues REITs - driving force is the boom in the real-estate sector Mutual funds – getting to be more and more popular Municipal bond issues – long-term investment, decentralization accelerates this process Venture capital and equity funds – preparing for the big leap Segment for small and mid-size companies – for financing risky, innovative projects

Corporate Governance A code In force since January 2007 Incorporates the best practices and standards, incl.OECD principles Mandatory for companies listed on the Official Market A National Corporate Governance Code will be adopted soon

But there are problems to tackle… Market is still quite small Low free-float and low liquidity Limited number of IPOs Limited offer of products Privatization is at its end – few remaining potential candidates Lack of a derivatives market

Looking ahead BSE designed an action plan to attract new listings, to enhance liquidity and to introduce new services Implementing new technologies will be the major task in 2007 Launching of a derivatives market is the next big step Finding a good partner remains our strategic goal

Consolidation process Harmonized listing procedures One set of rules Common trading platform Cross-membership Single point of liquidity Efficient clearing & settlement process

The preferred model would… Preserve the national identity and specificity Abide to local regulations Introduce know-how and technological innovations Contribute to the growth of the local market Give direct access to foreign markets

Conclusion Regional co-operation is necessary Consolidation of the markets makes them more visible and competitive MiFID will put an additional strain on stock market operators ECNs will compete with exchanges New challenges will call for new strategies

Thank you for your attention