Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros, S.A.

Transcription

1 Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros, S.A. Translation of a report originally issued in Spanish based on our work performed in accordance with generally accepted auditing standards in Spain and consolidated financial statements originally issued in Spanish and prepared in accordance with generally accepted accounting principles in Spain (see Note 20). In the event of a discrepancy, the Spanish-language version prevails.

2 2006 Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. (BME) ART DIRECTION AND PRODUCTION: Corporate Communication BME PRINTED BY: Gráficas Summa, S.A. DEPÓSITO LEGAL: AS

3 SUMMARY chapter01 chapter02 chapter03 chapter04 chapter05 chapter06 chapter07 chapter08 chapter09 chapter10 FINANCIAL HIGHLIGHTS LETTER FROM THE CHAIRMAN THE MARKET IN BME BUSINESS AREAS THE BME GROUP CORPORATE AND MANAGEMENT INFORMATION OWNERSHIP STRUCTURE OF THE COMPANY CHANGES IN SHAREHOLDER STRUCTURE IN GOVERNANCE AND MANAGEMENT BODIES GENERAL SHAREHOLDERS' MEETING BOARD OF DIRECTORS REGULATIONS INTERNAL CODE OF CONDUCT ARTICLES OF ASSOCIATION AGENDA FOR THE GENERAL SHAREHOLDERS MEETING ANNUAL ACCOUNTS AND MANAGEMENT REPORT AUDITORS REPORT CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MANAGEMENT REPORT CONTACTS CORPORATE INDENTIFICATION DATA. OTHER INFORMATION FOR SHAREHOLDERS

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5 chapter01 FINANCIAL HIGHLIGHTS 01

6 chapter01 Financial Highlights BME FINANCIAL HIGHLIGHTS /2004 % CONSOLIDATED INCOME STATEMENT (THOUSAND EUROS) Operating Revenue 175, , ,744 17% Operating Expenses 86,827 86,092 86,748 1% EBITDA 88, , ,996 30% Gross profit 89, , ,805 35% Net profit 58,552 69,203 94,061 36% 6 Key indicators (Euros) Earnings per share (EPS) % Total dividends 32,442 87, , % Ordinary dividends 32,442 37,794 51,734 37% Dividend per share (total) % Dividend per share (ordinary) % Payout Ratio 55% 55% 55% 0% Number of employees* % Revenue per employee (average) % EBITDA/operating revenues 51% 57% 63% 11% ROE 11% 14% 28% 86% * Only includes 50% personnel of Infobolsa (Deutsche Borse owns 50%) FLOWS. Markets with the highest growth I Millions of euros Shares traded (SIBE) Corporate debt traded (AIAF) FLOWS. Markets with the highest growth II Ibex 35 Futures traded (million contracts) Warrants traded (billion euros) BALANCES. Markets with the highest growth. Millions of euros Equity market cap Outstanding balance of corporate debt 1,000, , , , , , ,

7 01 EQUITIES Shares MARKETS OPERATED BY BME Main activity data Effective trading volume (SIBE) (million euros) 494, , ,209 Average daily volume (million euros) 1,977 2,537 3,326 Number of trades (million) Market cap (million euros) 547, , ,311 Annual return on IBEX 35 (%) DERIVATIVES Futures (contracts traded, million) On IBEX On equities Options (contracts traded, million) On IBEX On equities Warrants (number traded, million) 1,610 1,827 2,143 7 FIXED INCOME Corporate debt (AIAF) Effective trading volume (million euros) 380, , ,285 Outstanding balance (at 31 Dec) (million euros) 197, , ,417 Public Debt Effective trading volume (million euros)* 2,246,360 2,136,700 2,337,891 Outstanding balance (at 31 Dec) (million euros) 309, , ,917 Fixed-income securities (**) Effective trading volume (million euros) 74,764 82,803 93,666 (*) Simple spot trades (**) Electronic fixed-income market and regional government debt

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9 chapter02 LETTER FROM THE CHAIRMAN BME has a solid and harmonised corporate model that ensures the company s soundness and its success in the future. There are still many variables in the industry that have yet to be clarified, but BME has succeeded in building a stable and well defined model that brings together all the areas and activities of market operators, with a differentiated and diversified product range and efficient operations. 02

10 chapter02 Letter from the Chairman Dear shareholders: It is a pleasure to present to you the Financial Statements and Management Report for 2005 and to summarise what was truly an excellent year for Bolsas y Mercados Españoles (BME). The markets in which BME operates closed the year on an outstanding note. The Stock market and the public and corporate debt and derivatives markets together advanced at a positive pace in a complex economic environment that was marked by inflation expectations generated by rising oil prices and tighter monetary policy. The robustness of the international economy in general, and of the Spanish economy in particular, the solid results of listed companies and the strong liquidity prevailing in the financial system were the key features of 2005, a year in which the vitality and attractiveness of Spanish markets for a broad spectrum of investors and strategies were clearly demonstrated. 10 In 2005 trading on the Spanish stock market amounted to billion euros and, for the second consecutive year, growth surpassed 30%. It was also a positive year for the corporate debt market, which has become a benchmark in private sector financing, having contributed billion euros, up 22% on The Spanish derivatives market regained vitality in 2005, with growth in all key indicators, and the trading volumes of clearing and settlement systems also rose. Against this backdrop, and at a momentous juncture for the company, BME's results in 2005 were excellent. Its net profit was million euros, 35.9% more than in While these eloquent figures speak for themselves, we are also aware that BME's activities affect millions of investors. With our trading, settlement and information systems, investors can be confident that their orders are executed securely and transparently. This infuses maximum responsibility in BME's activities and clearly shapes its business approach in today's competitive environment. For this reason, in the new framework of securities exchanges, the financial solvency and responsible management of economic resources of companies such as BME are of paramount importance and fully guarantee that the economic and social purposes for which they were designed are met. BME is a large company that provides the critical mass necessary for Spain to compete internationally and respond to the needs of Spanish companies in a global environment that abounds in opportunities. Spanish companies have embarked on a path of unprecedented expansion in the world's developed markets as efficient and prestigious multinationals thanks to the facility of access to capital markets that provide the financing for enormously ambitious initiatives. Strong companies make a country stronger and therein lies the importance of

11 02 BME, since it manages the markets that respond to the needs of these companies and is itself a solid company capable of competing in its natural sphere of activity, namely international markets, as it is not by chance that over 60% of its clients are foreigners. As you know, in 2005 preparations began for the company's market flotation. We have been working hard over the last few months on arranging a complicated and sensitive operation. Last year BME also acquired a corporate centre equipped with cutting-edge technology to assist our team in raising the quality of the services that it provides to the market. For BME this investment marks a decisive step towards its full development, in line with the major stock exchanges worldwide. It is an important strategic initiative in our corporate management and will facilitate the integration of our different teams, cut costs, enhance the development of common services, consolidate our business culture and help us work together. 11 From the organisational standpoint, BME has made significant progress in the development of common technological infrastructures, which allow interconnection between existing networks of different companies and markets and, at the same time, enrich communications between all the group's divisions and professional staff. Similarly, accounting and financial data have been integrated in a single platform, making the group's financial management system more homogeneous and, at the same time, improving the quality of the financial information presented to senior management, the Board of Directors, shareholders, supervisory bodies and other interested parties. As regards our human resources policy, a particularly notable development was the design and launch of a comprehensive BME training plan that is now running at full steam. In 2005 BME also carried out a series of initiatives that open up new business prospects for the group and provide good opportunities for the investors, members and clients of its various markets. BME has a solid and harmonised corporate model that ensures the company's soundness and its success in the future. There are still many variables in the industry that have yet to be clarified, but BME has succeeded in building a stable and well defined model that brings together all the areas and activities of market operators, with a differentiated and diversified product and efficient operations. I would like to convey to you my conviction that today we are stronger and more capable than ever and are equipped with sufficient technological, financial and human means to respond to the growing competitiveness that we face in the international market, where we test our competitive mettle every day. Antonio J. Zoido

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13 chapter03 THE MARKET ENVIRONMENT IN was a truly outstanding year for the markets in which BME operates. The Spanish stock, debt (public and corporate) and derivatives markets all advanced at a brilliant pace in a complex economic environment that was marked, on the one hand, by inflation expectations generated by rising oil prices and, on the other, by upward trends in US and European monetary policies. 03

14 chapter03 The market environment in In 2005, for the third year in a row, the performance of Spanish securities markets was in many respects truly outstanding. The Spanish stock, debt (public and corporate) and derivatives markets all advanced at a brilliant pace in a complex economic environment that was marked, on the one hand, by inflation expectations generated by rising oil prices and, on the other, by upward trends in US and European monetary policies. The buoyancy of the international economy in general, and of the Spanish economy in particular, the solid results and balance sheets of listed companies and the strong liquidity of the international financial system were the keynotes of a year that demonstrated the vitality and attractiveness of Spanish markets for a broad spectrum of investors and strategies. The year 2005 also abounded in legislative innovations that have enhanced the competitive opportunities and operational guarantees of participants in the Spanish financial industry. THE INTERNATIONAL ECONOMIC PANORAMA As in recent years, in 2005 the economic setting of Spanish securities markets was characterised by good news on the domestic side and by few signs of recovery in the activity of euro-zone economies, whose growth rates still fall short of their potential. Broadly speaking, the international economy was essentially marked by the tensions produced by the steady escalation of oil prices, financial stability (with interest rates moving slightly upwards) and economic growth in all regions of the world, albeit at a somewhat slower rate than the 5.1% recorded in 2004 (the highest in three decades). The projections of the International Monetary Fund (IMF) point towards world GDP growth of around 4.3% in 2005 and By region, this expansion is very positively 70,0 OIL PRICES IN 2004 AND 2005 $ per barrel Brent 65,0 60,0 55,0 50,0 45,0 40,0 35,0 30,0 25,0 JAN-04 FEB-04 MAR-04 APR-04 MAY-04 JUN-04 JUL-04 AUG-04 SEP-04 OCT-04 NOV-04 DEC-04 JAN-05 FEB-05 MAR-05 APR-05 MAY-05 JUN-05 JUL-05 AUG-05 SEP-05 OCT-05 NOV-05 DEC-05 JAN-06 FEB-06 MAR-06

15 03 MACROECONOMIC FORECASTS (OECD) WORLD TRADE (%) 7,3 9,1 9,2 Other GDP (%) China 4,2 3,5 3,7 Spain 3,4 3,2 3,3 Russia 11,3 10,7 10,0 Germany 1,1 1,8 1,7 Brazil 5,5 4,7 4,5 France 1,6 2,1 2,2 CURRENT ACCOUNT BALANCE (% GDP) Italy 0,2 1,1 1,5 Spain -7,7-8,9-9,8 Euro Zone 1,4 2,1 2,2 Euro Zone -0,2-0,2-0,1 UK 1,7 2,4 2,0 US -6,5-6,7-7,0 US 3,6 3,5 3,3 Japan 3,4 3,9 4,7 Japan 2,4 2,0 2,0 OECD -1,8-2,0-2,0 OECD 2,7 2,9 2,9 Other Other China 7,8 8,9 8,3 China 9,3 9,4 9,5 Russia 12,3 9,2 5,5 Russia 6,1 5,7 5,3 Brazil 1,6 0,7 0,3 Brazil 3,2 3,7 3,9 BUDGET DEFICIT (% GDP) UNEMPLOYMENT RATE (% active population) Spain 0,3 0,3 0,2 Spain 9,1 8,7 8,7 Euro Zone -2,2-2,1-2,0 Euro Zone 8,7 8,4 8,1 US -3,6-4,2-3,9 US 5,1 4,8 4,7 Japan -6,3-6,1-6,4 Japan 4,4 3,9 3,5 OECD -3,1-3,3-3,2 OECD 6,5 6,3 6,0 Other INFLATION (%) China -0,7-0,9-1,1 Spain 3,4 3,0 2,8 Russia 7,3 4,0 2,5 Euro Zone 1,8 1,7 1,9 Brazil -3,7-2,7-1,5 US 2,7 2,5 2,3 SHORT-TERM INTEREST RATES (%) (1) Japan -1,1-0,1 0,6 Euro Zone 2,2 2,2 2,9 OECD 2,1 1,9 1,9 US 3,5 4,8 4,9 (1).- 3-month eurodollar deposit rate for US and 3-month interbank rate for Europe. Source: OECD Economic Outlook November weighted by the ongoing strength of the US economy and of the Asian countries that recently entered the group of advanced economies (including China and India) and is negatively weighted by the sluggish economic recovery in Europe. Though global economic growth has tapered off in the last few quarters, future prospects look positive on several important counts. The first and foremost factor is the globalisation of trade and international finance, which to a large extent explains the system s capacity to deal in a stable way with global shocks such as the twofold increase in the price of oil over the past 24 months. Thanks to the intense process of economic globalization in recent years, we have seen the emergence of new economies capable of driving the growth and offsetting the savings deficit of the more developed zones and, in short, making a positive contribution to international financial stability by assuming the risks inherent to imbalances and inefficiencies in the allocation of resources. The second factor is the staying power of the US economy as the driver of world economic growth. In 2005, US GDP grew by nearly 3.6% although, admittedly, growth

16 03 7,0 6,5 6,0 US AND GERMAN 10Y BOND YIELDS ( ) 10-Year Yield (US) 10-Year Yield (DE) 5,5 5,0 4,5 4,0 3,5 3,0 H H H H H H H H H H H H weakened in the last quarter of the year, hovering at a mere 1.1%, two points lower than forecast. Here the most striking feature is the moderate impact on these economic figures produced by the notable tightening of the monetary environment over the past 24 months: reference interest rates have risen from 1% at the end of 2003 to somewhat more than 4.5% at present, with signs of further gradual increases in the months ahead. And, while the US economy has managed to digest a rise of over 3 points in its reference interest rate in a short time, possibly even more outstanding is the vigour with which the international economic and financial system has absorbed, with no major turbulence, the record-high price of oil induced by unprecedented demand. World inflation has risen slightly but in general in the main industrial countries, inflation expectations are well anchored and wage increases have been moderate. However, the absence of any direct effects of price escalation on activity does not mean that there will be no second-round effects derived from higher-than-expected tensions in prevailing monetary conditions, and this is the main cautionary factor to be borne in mind when evaluating current estimates of economic growth. For the moment, the ECB has begun a gradual process of raising rates from 2.5% in December to an announced figure of around 3.5% by the end of The US current-account deficit, representing nearly 6% of GDP, shows a worrisome shortfall in domestic savings since this foreign debt is largely sustained by the savings surplus in Asia, a situation that could change if the region s exchange rates (particularly China s) become more flexible, as has been insistently demanded for the good of the competitive conditions of world trade. The situation could be gradually corrected if the US government were to set in motion a serious and stringent fiscal consolidation plan, which would require significant cuts in public spending and tax policies that pass part of the tax burden borne by savings to consumer units. The reduction of the US budget deficit, representing around 3.7% of GDP, has now become an urgent need. A further challenge in the advancement of the foundations of world economic growth is Europe s incorporation in this process. While the euro s integration has advanced at a reasonable rate, the European economic model seems incapable of quickening the pace of efforts to overcome the serious rigidities that afflict it. The prospects in the euro zone, albeit somewhat better, are not good enough to raise Europe to its full potential: projections signal 1.3% annual growth this year and less than 2% next year, thanks to the better growth forecasts for the foreign sector and German investment, but there is still no good news from the standpoint of expectations of a recovery in domestic consumption. The euro-zone economy faces the difficult challenge of drastically transforming its demographic map, marked by the ageing of its population and strong migration pressu-

17 03 re, and burdened by insufficiently flexible economic structures in its labour markets, which make it very hard to achieve the productivity gains required by globalisation and strong international competition. The reform of this market, as well further liberalisation of other products and services, is a priority task in strongly deficit-running settings, which will have to be guided back to the path envisaged in the EC Stability and Growth Pact. At present, since most of the major euro-zone countries run budget deficits of over 3% of GDP, public spending can hardly provide an incentive for basic deficiencies to be covered by private initiative. THE SPANISH ECONOMY Spain shares with its fellow European countries the declared need to ease the rigidities in its labour market and products and services markets. For years this urgent need has been evidenced in the difficulty of narrowing Spain s inflation gap vis-à-vis the European average by more than one point (3.7% yoy versus the harmonised rate of 2.2% to December 2005) and is most glaringly reflected in the deficiencies of the export sector, which coupled with the robustness of imports have crystallised in a very high trade deficit that is largely responsible for pushing the current-account deficit to nearly 7% of GDP. By contrast, on the positive side, in 2005 Spain again recorded an outstanding year from the standpoint of activity. Its macroeconomic growth figures stand out among euro-zone countries as a whole, with GDP growth of around 3.5% in 2005, i.e. somewhat more than two points higher than the forecast for the euro-zone. Indeed, contrary to the prevailing weakness of aggregate demand, labour markets and public accounts in Europe, Spain is more strongly equipped to ensure that it can incorporate, albeit with a certain delay, these strong points in its productivity and competitive ratios. In 2005 domestic demand gained considerable momentum, with over 5% growth in both consumption and investment. On the consumption side, household spending on consumer goods remained as robust as in previous years and exceeded disposable income, suggesting that favourable monetary conditions and an increase in wealth derived from the value of assets were the main factors at play. In turn, spending on capital goods rose notably throughout MACROECONOMIC OUTLOOK Data from 2006 National Budget GDP AND AGGREGATES (% real change) Expenditure on final national consumption 4,8 4,1 3,9 Household final consumption expenditure (a) 4,4 3,7 3,6 General government final consumption expenditure 6,0 5,3 4,6 Gross capital formation 4,8 6,7 5,0 Gross fixed capital formation 4,9 6,8 5,1 Capital goods and other products 4,0 8,2 7,0 Construction 5,5 5,7 3,8 Change in stocks (contrib. to GDP growth) 0,0 0,0 0,0 Domestic demand 4,8 4,8 4,2 Export of goods and services 3,3 1,2 3,2 Import of goods and services 9,3 6,6 6,2 Net trade (contribution to GDP growth) -1,8-1,7-1,1 GDP 3,1 3,3 3,3 GDP current prices: billions of euros 837,3 896,7 956,3 % yoy 7,3 7,1 6,6 PRICES AND COSTS (% yoy) GDP deflator 4,1 3,7 3,2 GDP deflator in household final monetary cons. expen. 3,4 3,3 3,0 Per head wages (unit cost) 3,3 3,0 3,0 Total workforce 2,6 2,7 2,6 Wage and salary earners 2,7 2,7 2,7 Output per head 0,5 0,6 0,7 Unit labour costs 2,8 2,4 2,3 Unemployment Rate (% active population) 11,0 9,8 9,5 (a).- Includes NPISH (Non-profit institutions serving households). the year, with growth rates even surpassing 10% yoy and, though growth is now somewhat more moderate, there is every sign that the expected increase in demand, favourable financing conditions and good performance of corporate profits are contributing to this surge in investment. In addition, with growth rates of around 6%, not only has construction not lost vitality, but it actually continues to enjoy a boom that is now reaching record longevity. As a result, domestic demand is likely to contribute around 6 points to GDP growth in The very dynamics of the Spanish economy s domestic activity and its competitive deficit together explain the imbalance between the performance of imports and exports: in the fourth quarter of 2005 imports grew by 10.2% yoy while exports rose by a mere 3.8%. This gap translates into a negative contribution of around 2 points to GDP growth by the foreign sector in Notably, the expansive performance of GDP has been accompanied by a significant capacity to generate jobs. 17

18 03 IBEX 35 INDEX IN Base /12/2004. Daily data Ibex-35 with dividends Ibex /01/05 24/01/05 14/02/05 07/03/05 28/03/05 18/04/05 09/05/05 30/05/05 20/06/05 11/07/05 01/08/05 22/08/05 12/09/05 03/10/05 24/10/05 14/11/05 05/12/05 26/12/05 18 This variable increased by 3.2% in 2005 and has held constant in recent years, which to a large extent explains the improvement in the unemployment rate from a level of nearly 190% of the EU average in 1995 to a rate that is now slightly lower than the euro-zone average: 8.4%, versus 8.5% last December. Lastly, vis-à-vis Europe, the Spanish economy has a notable distinguishing factor that redounds very positively in non-residents confidence in Spanish markets. Here we refer to the state of Spain s public accounts. Budgetary discipline and the expected fiscal surplus of 0.4% of GDP in 2005 have consolidated the Spanish economy s opportunities to confront the future with the necessary cushion for implementing efficient policies to generate demand and credible structural reforms to improve the workings of goods and services markets, promote competitive gains and maintain the growth of jobs and job creation as required under the Lisbon agenda. COMPANIES AND THE PERFORMANCE OF MARKETS 2005 marked the third consecutive year of recovery on the world s leading stock exchanges, in which European markets stood out in particular. The main indicator of the Spanish stock exchange, the IBEX 35 index, rose by 18.20% and the overall return for shareholders was 21.98%, as measured by the IBEX 35 index with dividends, reflecting the greater importance of shareholder remuneration and representing additional return of nearly 4%. The main factor in the success of the Spanish market is undoubtedly the good performance of Spanish companies. Stock market indices are a reflection of listed companies and a barometer of a country s economy. The market recognises good corporate management and companies commitment to transparency, efficiency and the pursuit of returns and value for shareholders. Companies are devoting increasingly more time and resources to corporate responsibility and attention to shareholders. Spanish companies are playing a leading role in international corporate movements and, most of the time, the Spanish stock exchange provides the best mechanism for financing acquisitions abroad. Santander s acquisition of Abbey, the entry of Colonial and Metrovacesa into the French market, Ferrovial s expansion in the US and the UK and Telefónica s purchase of Ceski and O2 are but a few examples of the stock market s importance as a support for the business strategies deployed by Spain s multinationals. The good performance of listed companies is reflected both in the excellent figures of their results, which grew at

19 03 ANNUAL PROFIT GROWTH OF LISTED COMPANIES DIVIDENDS AND OTHER PAYMENTS BY LISTED COMPANIES Million euros Gross, millions of euros % 23.3% Sep a rate of 23% to the third quarter of 2005, and in the high remuneration to shareholders in the form of dividends and other returns on equity, which increased by 34.9%. The attractiveness of their business, the recurrent strength of their statements of income and their sound balance sheet structure ensure solid market support in the future was also a particularly active year for companies in the area of expansion, M&A and takeover bids. Specifically, 13 takeovers valued at close to 7 billion euros were authorised, and in early 2006 three transactions proposed at the end of 2005 were approved, while two other major transactions are pending approval. The year also saw a number of major international expansion operations involving listed companies. As a result of the good trends in 2005, the Spanish stock market consolidated its privileged leadership position in total returns (including gross dividends), the highest in the last decade among the major international markets, according to data released by Morgan Stanley Capital International. The annual cumulative return obtained by the Spanish stock market in the last 10 years stands at 16.40%, versus 9.1% in the US, 12.5% in Italy, 12.2% in France, 7.4% in the UK and 1.3% in Japan. World debt markets ended a complicated year for the management of fixed income, characterised by a widening in the long-term interest rate spreads of the major economic zones and by bouts of volatility. In the second half of the year, the differential between 10-year rates in the US and Germany held at one point, unprecedented since But, as already noted, 2005 was again a brilliant year for BME's corporate debt market, which has become a benchmark for the private-sector financing of the Spanish economy. In 2005 as a whole, private debt issues contributed net financing of 134 billion euros, 22% more than in INVESTOR TRENDS AND PROFILES In this positive setting, investors feel comfortable and are more confident than they were just a few years ago. At the end of June, the financial wealth of Spanish households stood at 1.44 trillion euros, 10% more than in the same month in A large part of this wealth is invested in the stock market. This figure is significant as it implies that private individuals have not remained on the sidelines of the stock market s gains. Two figures bear witness to their high participation rate: the number of trades rose by an annual rate of 25.66% in 2005 and the average trading volume increased from 46,824 euros in 2004 to nearly 50,000 euros in These figures show that Spanish households are increasingly diversifying their capital. 60% of household savings are invested in products such as shares, fixed income 19

20 NET FUND RAISING ON AIAF MARKET FOR CORPORATE DEBT Millions of euros investment institutions as a whole ended the year with a record figure of 18.1 million participants. REGULATORY FRAMEWORK and mutual and pension funds. The remaining 40% is held in traditional deposit accounts or in cash. Shares account for 25% of household savings. In June, the volume of money held in listed shares by Spanish households was close to the record levels reached in Fortunately, the good performance of securities markets is helping to offset Spanish families indebtedness and their net household wealth stood at billion euros in the second quarter, up 3% on the same period in Non-resident investors are still the largest owners of shares in listed Spanish companies with 35% of the market value at the close of 2004, a figure which has varied very little during the past 10 years, reflecting the attractiveness of the Spanish market. This figure is also 5 percentage points higher than the European average in 2003, according to the latest study published by the Federation of European Stock Exchanges, which includes the ownership structure of listed shares in Europe as a whole. The general profile of investors in Spain by product is rounded off by their indirect participation in the markets managed by BME via collective investment instruments. In this sector, 2005 was a good year for mutual funds and collective investment in general. In addition to a new record in net worth, amounting to billion euros at year-end, and growth of over 10%, the sector enjoys new regulations that broaden its opportunities for activity and the range of products available to investors. Pension funds also grew by more than 25% in Collective From the regulatory standpoint, the business environment in which BME operates saw the arrival of a new stage in the advance towards European financial integration and the introduction of a large number of national regulations, some of which are a partial or total transposition of European directives. The publication in March of the European Commission s Green Paper on financial services policy for 2005 to 2010 recently crystallised in a White Book that formally establishes the overall objectives in financial services policy for the next five years. In this document, the European Commission recognises the significant advance made within the framework of the Financial Services Action Plan (FSAP). However, it underscores the need to make the most of the European financial industry s potential for growth and job creation. The document opens up a new stage in the articulation of a true single financial market for Europe in which the writing of new EU regulations is superseded by efforts to ensure that the vast volume of regulations produced between 1998 and 2004 materialises in actual benefits for industry and consumers in this sector. To this end, the Commission's priority for the next five years is to monitor closely the consolidation of the progress made and guarantee the firm implementation and application of existing regulations. Among the directives approved in 2005, the one most relevant to the industry and markets in which BME carries out its activity is the markets in financial instruments directive (MiFID). This directive (2004/39/EC of the European Parliament), for which the period of transposition has been extended to 2007, is very broad in content and articles but some aspects are particularly relevant to the future make-up of the activities of participants in Europe s financial and securities markets. Specifically, the MiFID sets down new rules to be applied to investment services firms and credit institutions in matters of organisational requirements, management of conflicts of interest, protection of investors and the right to the free provision of services and establishment. It also sets regulations for personalised financial assessment as an investment service and establishes the principle of free