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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011<br />
MONTENEGRO STOCK EXCHANGE<br />
Continuous development of our market is<br />
the basis of the future of the MSE, a future<br />
in which the MSE strongly believes.<br />
Dejana Suskavcevic, MA<br />
CEO<br />
Actual events that marked the previous year<br />
such as the global financial crisis, showed that<br />
the strongest economy, at first developed and<br />
stable market can be unpredictable and directly<br />
affected by unforeseeable repercussions that<br />
are progressive, breakneck speed reflect on all<br />
branches of the economy including the<br />
securities market. The key to success of any<br />
activity, in our case, recovery of financial<br />
markets lies in the synergy of all stakeholders<br />
who participate in it, and synchronized activities<br />
restore confidence of domestic and foreign<br />
investors. Continued implementation and further<br />
development of legislation pursuant EU and<br />
developed markets through further tax relief and<br />
benefits for participants in the financial markets,<br />
particularly in the area of fund groups (pension<br />
and investment funds), the constant promotion<br />
of the domestic market as the individual<br />
performances, and within region will choose<br />
back investors. The period of stagnation stock<br />
activity should certainly be used in the further<br />
implementation and construction of corporate<br />
culture within the company and market<br />
introduction of new materials, derivatives and<br />
short-term securities, which will be the first and<br />
crucial step in the return of foreign investors in<br />
our market. The period of recovery is not, and<br />
will not be easy and fast, but according to<br />
earlier experience, a proven, that after each rain,<br />
the sun again in sight. From this crisis should<br />
draw lessons not to repeat mistakes, and take<br />
as long as possible with a positive balance. The<br />
market will always exist, traders also, long-term<br />
or short-term securities, futures options, swaps,<br />
market and other material.<br />
Montenegro Stock Exchange will continue to be<br />
a locomotive for further development of the<br />
Montenegrian securities market, its promoter,<br />
and active participant of international<br />
integration.<br />
HISTORY AND DEVELOPMENT<br />
The MSE was set up in June 1993 pursuant to<br />
the Act on Money and Capital Markets (1989).<br />
The first founding members were the four<br />
Montenegrin banks: Montenegrobanka a.d.<br />
Podgorica, Pljevaljska banka a.d. Pljevlja,<br />
Beranska banka a.d. Berane, Hipotekarna banka<br />
a.d. Podgorica, and the Republic of<br />
Montenegro, i.e. Montenegrin Agency for<br />
Economic Restructuring and Foreign<br />
Investments.<br />
During the constitutional meeting held on<br />
7 July 1997, the MSE harmonized its operations<br />
with the Exchange through the exchange<br />
operations and exchange intermediaries Act.<br />
Another three banks and two insurance<br />
companies joined the founding–members of the<br />
Exchange: Podgoriaka banka a.d. Podgorica,<br />
Jugobanka a.d. Podgorica, Niksicka banka a.d.<br />
Niksic, Lovcen osiguranje a.d. Podgorica and<br />
Swiss osiguranje a.d. Podgorica.<br />
In order to increase its capital share, the MSE<br />
issued additional shares, upon the approval of<br />
the Federal Commission for Securities and<br />
Financial Markets. The shares were subscribed<br />
and paid for by several Yugoslav banks, as well<br />
as the Federal Government.<br />
In order to comply with The Law on Securities of<br />
the Republic of Montenegro, the MSE issued a<br />
third issue of shares. The importance of this<br />
issue which was sold successfully with 100%<br />
subscription was instrumental in the further<br />
development of the capital market of<br />
Montenegro because with the sale of this issue<br />
10 new shareholders emerged as owners of the<br />
MSE from banking sector, insurance companies<br />
and private companies from all spheres of<br />
economy. As of today, the MSE has 23<br />
shareholders. The MSE moved to its new<br />
premises in the new business district of the city.<br />
FUTURE OUTLOOK<br />
Montenegro Stock Exchange Has Big Plans<br />
for the Year Ahead...<br />
It aims to raise the level of market liquidity and to<br />
implement a new information system project,<br />
funded by the government of Luxemburg. This is<br />
expected to start soon. The project management<br />
has been entrusted to the Luxemburg stock<br />
exchange, while the technical implementation will<br />
be carried out in cooperation with the Belgrade<br />
Stock Exchange. The system has been designed<br />
in accordance with world standards and<br />
functions in all areas in accordance with MIFID,<br />
which is of crucial importance to Montenegro as<br />
future member of the European Union. Apart<br />
from the implementation of the new system, it is<br />
of vital importance for Montenegro to have the<br />
Luxemburg stock exchange as its partner.<br />
This is just one in a series of projects that have<br />
been planned to take place through this<br />
cooperation. This year’s plan also envisages<br />
the development of a new index in cooperation<br />
with the Vienna stock exchange, with which<br />
Montenegroberza has already worked<br />
successfully over a long period of time. This<br />
index will be calculated and published at the<br />
Vienna stock exchange and will consequently<br />
directly expose companies in the index to<br />
monitoring by world investors.<br />
In addition to this, it has been planned that at<br />
least one Montenegrin company should appear<br />
in the index that includes <strong>FEAS</strong> countries, and<br />
which will be calculated and published by the<br />
world known index provider Dow Jones. It is also<br />
intended to enrich the market with new material,<br />
i.e. derivative securities, which will expand the<br />
range of products on offer and will refresh the<br />
market. Implementation of the project is planned<br />
to take place with cooperation from European<br />
agencies that are specialized in this segment of<br />
the market.The first foreign listing in the market<br />
will also be worked on through the IPO process.<br />
The Montenegroberza web site will be enriched<br />
by increasing the quality of its reporting in terms<br />
of data necessary for performing the analyses of<br />
investments, particularly in risk management.<br />
Some educational activities are also planned in<br />
order to enrich knowledge regarding the<br />
importance of corporate governance, and to<br />
increase the number of companies that accept<br />
the Corporate Governance Codex in<br />
Montenegro. The corporate governance sector<br />
is of vital importance in joint stock companies<br />
and it is directly related to the stock exchange<br />
market as it directly contributes to the protection<br />
of shareholders' interests. Code of Corporate<br />
Governance for Montenegro was formed in May<br />
2009, as a result of cooperation between the<br />
Montenegrin Stock Exchange and International<br />
Finance Corporation (IFC).<br />
Testing of a Scorecard methodology in<br />
Montenegro<br />
In cooperation of Montenegroberza and<br />
International Financial Corporation (IFC) within<br />
the project "Promotion of Corporate the testing<br />
of a Scorecard methodology was carried out in<br />
six companies. Montenegroberza supported<br />
Governance in Montenegro” and recommended<br />
this kind of testing to the listed compaies in<br />
Montenegro. The code was accepted by five<br />
listed companies, and not all of them tested the<br />
actual level of application of standards. Six listed<br />
companies agreed to test the actual level of<br />
corporate governance: Plantaze JSC, Zeljeznicka<br />
infrastruktura JSC, Zeljeznicki prevoz JSC,<br />
Montecargo JSC, Pobjeda JSC and Zetatrans<br />
JSC. IFC provided consultations for those<br />
companies free of charge through in-house<br />
workshops. Testing of scorecard methodology<br />
gave some results and highlighted some<br />
problems regarding the actual situation of<br />
Corporate Governance in Montenegrin<br />
companies. Scorecard show that the most<br />
problematic areas were: supervision and control,<br />
transparency, and Board of Directors (election of<br />
members).<br />
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