Partners for Financial Stability

1. Partners for Financial Stability Capital Markets Trends for SEE and Eurasia 2005- 2010 February 2012

4. Response Feedback Responded (12) Albania Armenia Bosnia and Herzegovina Croatia Lithuania Macedonia Moldova Serbia Latvia Montenegro Georgia Estonia Did not respond (8) Azerbaijan Belarus Czech Republic Poland Romania Russia Ukraine Kosovo * Partial Response (4) Bulgaria Hungary Slovakia Slovenia *(no capital market)

5. Response Feedback

7. The Survey Requested Time Series Data on: • Number of: • Brokerage Firms • Fund Management Companies • Closed-End Investment Funds • Open-End Investment Funds • Public Companies • Details on Securities Offerings

8. The Survey Requested Time Series Data on: • Financial Results for the Infrastructure Entities (Exchanges and Depositories) • Financial Results and Market Share Data for: • Brokerage Firms • Fund Management Companies

9. Requested Detail on Offerings: • Public Offering or Private Placement • Type of Issuer • Type of Security Sold • Amount of Securities Registered or Notified (in currency) • Amount of Securities Sold (in currency) • Number of Purchasers • Lead Underwriter

10. Requested Data on Infrastructure Entities • Function (Exchange or Depository) • Time Series Financial Results for: • Revenues • Net Income • Assets • Shareholder’s Equity • Time Series for Numberof Shareholders

11. Requested Data for Investment Funds • Form (corporate or contractual) • System of Sales and Redemption • Open-End • Closed-End • Interval • Level of Assets under Management • Number of Investors

12. Requested Data for Brokerage Firms • Time Series Data for: • Number of Transactions by the Firm • Total Number of Transactions on the Market • Revenues • Net Income • Assets • Shareholder’s Equity • Number of Shareholders

13. Requested Data for Fund Management Companies • Time Series Data for: • Assets under Management • Total Industry Assets under Management • Revenues • Net Income • FMC Assets • Shareholder’s Equity • Number of Shareholders

14. Results of the Survey Characteristics of Offerings: There have been far more private placement transactions than public offerings. The amount of capital raised under the private placement approach has also predominated. For SEE, the number of transactions and amount of capital raised has decreased approximately 50% in the wake of the global financial crisis.

15. Results of the Survey Characteristics of Offerings (continued): Croatia and the Baltic countries each experienced one year of sharp surge in offerings, but not in the same year. The data for the Eurasia markets do not support current conclusions but instead must be developed further.

16. Number of Private Placements Number of Public Offerings

17. Total Value of Private Placements (in Euro) Total Value of Public Offerings (in Euro)

20. Results of the Survey Number of Public Companies: A “public company” (or “reporting company”) is usually defined in terms of the number of shareholders and the company’s capital. There are no uniform trends among the countries reporting data for numbers of public companies. Cases where the number of public companies increased appear to correlate to the use of the public offering mechanism (Serbia and Bosnia).

21. Results of the Survey Number of Public Companies (continued): A relatively constant number of public companies should correlate to the predominant use of the private placement mechanism (which results in fewer purchasers/shareholders). Some of the marked downward trends may be the result of companies that were previously privatized buying out (or squeezing out) the minority shareholders.

23. Results of the Survey Trading Market Activity: Trading volumes have fallen off significantly in the wake of the global financial crisis. The trend is clear for both CEE and SEE markets. Market capitalizations, which are a function in part of prices, have also fallen off. This trend is also parallel for CEE and SEE.

28. Preliminary Results of the Survey Trading Markets Activity (continued): Market Capitalizations in SEE are much stronger relative to GDP than for Eurasia. The low market penetration cannot be attributed to large GDPs, as the trend is true for Armenia and Moldova as well as Ukraine. The lack of data prevents complete trend analysis for this aspect.

31. Preliminary Results of the Survey Trading Markets Activity (continued): Similarly, equity trading volumes to GDP are much stronger for SEE than for Eurasia, reflecting their relatively better developed markets. Within Eurasia trading volume penetration to the economy is uniformly negligible.

34. Preliminary Results of the Survey Number of Brokerage Firms: In general, the number of brokerage firms has decreased approximately 25% after peaking 2007 – 2008. This appears due to lower activity levels following the global financial crisis. Also it appears some countries were/are “over-brokered” given the size of their markets and economies.

35. EURASIA

36. Preliminary Results of the Survey Status of the Investment Fund Industry: For SEE, corporate form funds are much more prevalent than open-end funds. Investment funds within Eurasia are almost non-existent. Use of open-end versus closed-end funds is almost equally balanced in Croatia and the Baltic countries.

37. Preliminary Results of the Survey Status of the Investment Fund Industry (continued): The level of assets within investment funds appears to have recovered from the outflows resulting from the global financial crisis. This applies for both closed-end and open-end funds. Bosnia and Serbia use a fund form described as “other”; this bears closer investigation.

39. Preliminary Results of the Survey Status of the Investment Fund Industry (continued): There is a downward trend in the number of Fund Management Companies, although the data is lacking for several countries. This is in contrast to the slow rebound in the level of investment fund assets since 2008. This is in line with the decrease in the number of brokerage firms butperhaps signals a transition in the markets’ focus from trading to asset management.

41. Preliminary Results of the Survey Financial Health of the Infrastructure Institutions: The exchanges have witnessed a fall-off in revenue since peaking in 2007. This correlates to the decrease in trading volumes. Other forms of revenue, such as listing fees and membership fees appear to be providing a floor for income. But overall net incomes are at almost break-even levels.

44. Preliminary Results of the Survey Financial Health of the Infrastructure Institutions (continued): The depositories appear to be weathering the low trading volumes better than the exchanges. This may be due to their fee structure which is geared to assets under custodianship and non-trade transfer revenues. But, again, overall net incomes are very low.

47. Next Steps for the Survey Return to respondents for completion of data; Refine the survey results and conclusions; Identify common trends and conditions in these markets; Use the data to guide types of development interventions and regional cooperation initiatives.