Bonds

Bonds are debenture securities which obligate the borrower pay back the lender borrowed funds and pay interest in a specific amount of time.
In other words bonds are debenture securities where there issuer (in this case the government) obligates that they pay off the bond holder by the due date. Bond expiration date is on the 31st of May every year from 2004 to 2016.
Bonds consist of:
  • bond certificates and
  • interest coupons.
The advantage of trading bonds is their tax benefits.
In other words, you as an owner of bonds of old foreign currency savings are exempted from tax obligations.
In the case that you were an old foreign currency saver, but still have not received bond certificates, you must contact the bank so they can release your Certificate of ownership of bonds in your name. If you had old foreign currency savings account that is in the process of liquidation-Belgrade bank, Beobank, Investbank or Jugobank, you must contact the National savings bank and they will release a bond certificate.
And also in the scenario that you had an old foreign currency savings account in Dafiment bank or Jugoskandiku, please contact your National savings bank and they will release a bond certificate.

Bond types
Bonds can be identified by many different criteria’s (according to the issuer, payment method, method of securing payment, due date and etc.)
In countries with developed financial markets there is a domination of long-term bonds compared to short-term bonds. In these countries the expiration date on long-term bonds is 10-30 years and for medium term notes from 5-10 years. On the domestic financial securities market short-term bonds dominate the long term bonds, which is characteristic for underdeveloped markets and the hesitation of investors.
The most complete bond classification would be the one that classifies by the following:
  • registered bond,
  • bearer bond,
  • foreign currency bond,
  • guaranteed bonds,
  • collateral mortgage bond,
  • zero-coupon bond,
  • nonrecurring bond,
  • floating debenture,
  • indexed bond,
  • participating bonds,
  • convertible bond,
  • callable bonds,
  • put bonds.
Procedure of selling bonds
In order to sell your bonds through a broker you must fulfill the following requirements of standard procedures:
1. The bond certificate must be picked up at your bank. This certificate is already certified by the bank so you have no need to get it certified.
2. At a Central securities depository and clearing house member, you must open a dedicated dinar account in order to sell bonds. In order to be aware of which bank is a member and what that means, please contact Intercity Broker AD Belgrade. In case you have not decided which bank to go with, Intercity offers the ability of opening a free of charge dedicated foreign currency account for selling bonds in banks that we are affiliated with and who are of course members of the Central securities depository and clearing house.
3. When arriving at "Intercity broker" JSC, Belgrade please bring the following documentations:
o Id card (original),
o Bond ownership certificate and
o Foreign currency bank account Contract used for selling bonds along with your bank card.
4. At "Intercity broker" JSC, Belgrade you will sign a «Brokerage Contract for the purpose of selling/purchasing old foreign currency bonds».
5. At the "Intercity broker" JSC, Belgrade location you will give an order or orders (depending on how many years you are planning to sell) for selling bonds. You then decide by what price and how many bonds you wish to sell:
The price is absolutely your final choice. You have two possibilities of price choice:
1. «Market price»- this price identifies the price set up for trading. With bonds a price may fluctuate +/-10% from the price achieved at previous trading day.
The price advantage: The advantage of realization in other words bonds are realized before sale through «market » price, then after this process bonds are realized through «limit» price.
Disadvantage of this price: The disadvantage of this price is the fact that selling can be realized through a price lower than 10% that was achieved at closing of previous day trading.
2. «Limit price»- an order given through «limit» price and by the price «no lower than» implies that bonds may be sold by a price that is identical or higher from the price specified in the order.
The price advantage: The advantage of this price is that it protects its bond owners from selling at a price lower than the one given in the order.
Disadvantage of this price: The first disadvantage is that the order will be given through «limit» price at trading and await all given sell orders through «market» price, therefore the possibility that there is not enough demand for the order to be realized. The second disadvantage is that the order may maintain unrealized in case the price given in the order is not achieved. If the client stipulates a price «no lower than 45, 60», but during trading you achieve a maximum price of «45, 59» this order will remain unrealized.
Choose the amount on your own. You are not obligated to sell the total amount of your certificate. Bonds may be partially sold.
6. "Intercity broker" JSC, Belgrade after filling out paperwork and endorsing orders for sell, you will receive two copies (for each year, in other words depending on how many prices you submit throughout the year. For every price change you will receive two copies) and one copy is your proof.
7. "Intercity broker" JSC, Belgrade based on your data of your Contract and of given and signed order for sale in the Central Registers database you will open a securities trading account.
8. You will bring your copy of the Contract and order to the bank that gave you the bond certificate. The bank completes the transfer of bonds from your ownership account to your trading account with Intercity broker JSC, Belgrade. This is done in order to reserve bonds before trading.
9. After completion of all stated steps "Intercity broker" JSC, Belgrade will contact you via telephone that the bank has completed the transfer from your ownership account to your trading account, which "Intercity broker" JSC, Belgrade will verify in your name.
10. If the transfer is actually completed, "Intercity broker" JSC, Belgrade will submit your orders to the Belgrade Stock Exchange for sale.

After trading your expenses as the owner are:
  • "Intercity broker" JSC, Belgrade commissions in compliance with the tariff regulations,
  • The Central securities depository and clearing house provisions in compliance with tariffs of the Central securities depository and clearing house,
  • The Belgrade Stock Exchanges commission in compliance with the tariffs of the Belgrade Stock Exchange,
  • The bank fees at your bank used in selling bonds.
For the first 3 expenses you also have an additional expense of profit tax.
If you are unable to personally come to the office location, you may authorize an individual to come in your place and act on your behalf. In this case you must contact "Intercity broker" JSC, Belgrade.

Bond purchasing process
In order to purchase bonds through a broker you must follow the standard procedures stated below:
standardized procedure:
1. You open a foreign currency account with a member bank used for purchasing bonds. You will deposit funds into this account securing purchasing bonds
2. In the bank that is an actual member of the Central securities depository and clearing house you must open a dedicated foreign currency account for purchasing bonds and deposit funds in the account in order to make purchases. You must require the bank to certify the bank statement. In case you have not yet chosen a bank as of yet "Intercity broker" JSC Belgrade will offer you the possibility to open a free of charge account and that is a member bank of the Central securities depository and clearing house.
3. after completion of these steps you must come directly to "Intercity broker" JSC, Belgrade and bring with you the following:
1. Contract for opening a dedicated foreign currency account for purchasing bonds,
2. a bank card for this specific account,
3. an original identification card and
4. certified bank statement

At "Intercity broker" JSC, Belgrade you will sign a «Brokerage agreement for purchasing or selling old foreign currency savings bonds».
4. After this process you will submit an order or orders for purchasing bonds. You then decide the price you wish to buy bonds for.
5. "Intercity broker" JSC, Belgrade will after filling out and signing orders for purchasing will print two copies and one will be taken home with you as proof.
6. "Intercity broker" JSC, Belgrade based on your data, Contract and given and signed orders for purchasing will open in the Central Register a securities ownership account. This ownership account is used following trading while instantaneously transferring monetary resources to the sellers account.
7. After that "Intercity broker" JSC, Belgrade submit orders on the Belgrade Stock Exchange.
8. The expenses you are obligated to pay as the buyer are:
o "Intercity broker" JSC, Belgrade commission,
o Central securities depository and clearing house commission
o Belgrade Stock Exchange commission and
o Bank fees from your dedicated foreign currency account for selling bonds.

For the first 3 expenses you also have an additional expense of profit tax.

Bond trading
You may search this location 208.109.161.51/ser/berza/obveznice.php
What can I do with a bond certificate?
When you possess a bond certificate you can achieve the following possibilities:
1. You may save your bonds until their expiration date, in this case 31.05 to 2016, you will receive a nominal amount, in other words the amount written on the certificate
Advantages –you will receive the total exact amount stated in the bond certificate,
Disadvantage- you must wait for the expiration date and carry the risk the government does not have the funds to pay you out.
2. Must pay profit taxes, property tax and income tax on bonds.
3. Bonds may be used before the expiration date and can be used to purchase shares. In this case the whole process will be taken care of through "Intercity broker" JSC, Belgrade,
4. Bonds may before their expiration date be purchased by companies through the privatization agency,
5. Bonds may be sold before their expirations through an authorized broker or at a bank. This segment is the most interesting to bond owners, which we will explain in detail. Your bonds can be sold through:
o The Belgrade Stock Exchange- in this case, bonds will be sold through an authorized broker and a member of the Belgrade stock exchange and "Intercity broker" JSC Belgrade fulfills all these requirements.

Advantage-
the achievement of better prices compared to the over the counter market because the price is formed based on comparing total offer and demands on the Exchange.
Disadvantage- based on the price written on the order, you might not sell all of your bonds in one day.

o Over the counter market (OTC) - in this case your bonds may be sold through a broker or through a bank.
Advantages:
  • You can sell your bonds instantly. In case the bank sells your bonds you will receive your money instantaneously, most cases in dinars. In case the broker sells your bonds, you will receive your funds the following day but in EUR in your dedicated foreign currency account used for selling bonds,
  • the risk that the government may not have enough funds to pay out the bond certificate is no longer of your concern once the bond certificate is sold,
  • the risk that the bond certificate price declines is no longer of your concern the risk is transferred to the new owner
Disadvantage: - the price by which you have sold the bond is discounted or lowered compared to the amount stipulated on the bond certificate and which you would receive if you would wait until the expiration of the certificate