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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011 MONTENEGRO STOCK EXCHANGE Continuous development of our market is the basis of the future of the MSE, a future in which the MSE strongly believes. Dejana Suskavcevic, MA CEO Actual events that marked the previous year such as the global financial crisis, showed that the strongest economy, at first developed and stable market can be unpredictable and directly affected by unforeseeable repercussions that are progressive, breakneck speed reflect on all branches of the economy including the securities market. The key to success of any activity, in our case, recovery of financial markets lies in the synergy of all stakeholders who participate in it, and synchronized activities restore confidence of domestic and foreign investors. Continued implementation and further development of legislation pursuant EU and developed markets through further tax relief and benefits for participants in the financial markets, particularly in the area of fund groups (pension and investment funds), the constant promotion of the domestic market as the individual performances, and within region will choose back investors. The period of stagnation stock activity should certainly be used in the further implementation and construction of corporate culture within the company and market introduction of new materials, derivatives and short-term securities, which will be the first and crucial step in the return of foreign investors in our market. The period of recovery is not, and will not be easy and fast, but according to earlier experience, a proven, that after each rain, the sun again in sight. From this crisis should draw lessons not to repeat mistakes, and take as long as possible with a positive balance. The market will always exist, traders also, long-term or short-term securities, futures options, swaps, market and other material. Montenegro Stock Exchange will continue to be a locomotive for further development of the Montenegrian securities market, its promoter, and active participant of international integration. HISTORY AND DEVELOPMENT The MSE was set up in June 1993 pursuant to the Act on Money and Capital Markets (1989). The first founding members were the four Montenegrin banks: Montenegrobanka a.d. Podgorica, Pljevaljska banka a.d. Pljevlja, Beranska banka a.d. Berane, Hipotekarna banka a.d. Podgorica, and the Republic of Montenegro, i.e. Montenegrin Agency for Economic Restructuring and Foreign Investments. During the constitutional meeting held on 7 July 1997, the MSE harmonized its operations with the Exchange through the exchange operations and exchange intermediaries Act. Another three banks and two insurance companies joined the founding–members of the Exchange: Podgoriaka banka a.d. Podgorica, Jugobanka a.d. Podgorica, Niksicka banka a.d. Niksic, Lovcen osiguranje a.d. Podgorica and Swiss osiguranje a.d. Podgorica. In order to increase its capital share, the MSE issued additional shares, upon the approval of the Federal Commission for Securities and Financial Markets. The shares were subscribed and paid for by several Yugoslav banks, as well as the Federal Government. In order to comply with The Law on Securities of the Republic of Montenegro, the MSE issued a third issue of shares. The importance of this issue which was sold successfully with 100% subscription was instrumental in the further development of the capital market of Montenegro because with the sale of this issue 10 new shareholders emerged as owners of the MSE from banking sector, insurance companies and private companies from all spheres of economy. As of today, the MSE has 23 shareholders. The MSE moved to its new premises in the new business district of the city. FUTURE OUTLOOK Montenegro Stock Exchange Has Big Plans for the Year Ahead... It aims to raise the level of market liquidity and to implement a new information system project, funded by the government of Luxemburg. This is expected to start soon. The project management has been entrusted to the Luxemburg stock exchange, while the technical implementation will be carried out in cooperation with the Belgrade Stock Exchange. The system has been designed in accordance with world standards and functions in all areas in accordance with MIFID, which is of crucial importance to Montenegro as future member of the European Union. Apart from the implementation of the new system, it is of vital importance for Montenegro to have the Luxemburg stock exchange as its partner. This is just one in a series of projects that have been planned to take place through this cooperation. This year’s plan also envisages the development of a new index in cooperation with the Vienna stock exchange, with which Montenegroberza has already worked successfully over a long period of time. This index will be calculated and published at the Vienna stock exchange and will consequently directly expose companies in the index to monitoring by world investors. In addition to this, it has been planned that at least one Montenegrin company should appear in the index that includes <strong>FEAS</strong> countries, and which will be calculated and published by the world known index provider Dow Jones. It is also intended to enrich the market with new material, i.e. derivative securities, which will expand the range of products on offer and will refresh the market. Implementation of the project is planned to take place with cooperation from European agencies that are specialized in this segment of the market.The first foreign listing in the market will also be worked on through the IPO process. The Montenegroberza web site will be enriched by increasing the quality of its reporting in terms of data necessary for performing the analyses of investments, particularly in risk management. Some educational activities are also planned in order to enrich knowledge regarding the importance of corporate governance, and to increase the number of companies that accept the Corporate Governance Codex in Montenegro. The corporate governance sector is of vital importance in joint stock companies and it is directly related to the stock exchange market as it directly contributes to the protection of shareholders' interests. Code of Corporate Governance for Montenegro was formed in May 2009, as a result of cooperation between the Montenegrin Stock Exchange and International Finance Corporation (IFC). Testing of a Scorecard methodology in Montenegro In cooperation of Montenegroberza and International Financial Corporation (IFC) within the project "Promotion of Corporate the testing of a Scorecard methodology was carried out in six companies. Montenegroberza supported Governance in Montenegro” and recommended this kind of testing to the listed compaies in Montenegro. The code was accepted by five listed companies, and not all of them tested the actual level of application of standards. Six listed companies agreed to test the actual level of corporate governance: Plantaze JSC, Zeljeznicka infrastruktura JSC, Zeljeznicki prevoz JSC, Montecargo JSC, Pobjeda JSC and Zetatrans JSC. IFC provided consultations for those companies free of charge through in-house workshops. Testing of scorecard methodology gave some results and highlighted some problems regarding the actual situation of Corporate Governance in Montenegrin companies. Scorecard show that the most problematic areas were: supervision and control, transparency, and Board of Directors (election of members). PAGE 96
FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011 MONTENEGRO STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ millions # Shares millions Total Volume Average Daily Volume Total Volume Average Daily Volume Stocks Jul-10 1.96 0.10 29.92 1.57 Aug-10 2.35 0.11 4.43 0.20 Sep-10 3.61 0.16 17.69 0.80 Oct-10 3.12 0.15 18.52 0.88 Nov-10 1.30 0.06 6.55 0.30 Dec-10 4.69 0.20 40.59 1.76 TOTAL 17.04 0.13 117.71 0.92 Bonds Jul-10 0.35 0.02 0.56 0.03 Aug-10 0.54 0.02 0.95 0.04 Sep-10 0.77 0.03 1.37 0.06 Oct-10 0.88 0.04 1.53 0.07 Nov-10 0.53 0.02 0.92 0.04 Dec-10 0.67 0.03 1.14 0.05 TOTAL 3.74 0.03 6.47 0.05 Other Jul-10 0.00 0.00 0.00 0.00 Aug-10 0.00 0.00 0.00 0.00 Sep-10 0.00 0.00 0.00 0.00 Oct-10 0.00 0.00 0.00 0.00 Nov-10 0.00 0.00 0.00 0.00 Dec-10 0.00 0.00 0.00 0.00 TOTAL 0.00 0.00 0.00 0.00 Market Capitalization (US$ millions) Index MONTHLY STOCK VOLUME VS INDEX (US$ millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ millions) Jul-10 3,323.30 500.45 Aug-10 3,360.86 487.33 Sep-10 3,670.57 484.42 Oct-10 3,649.50 472.22 Nov-10 3,522.37 483.95 Dec-10 3,604.15 523.69 CONTACT INFORMATION 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 600 4,000 500 3,500 3,000 400 2,500 300 2,000 200 1,500 1,000 100 500 0 0 Jul Aug Sep Oct Nov Dec Jul Aug Sep Oct Nov Dec Contact Name Mr. Nedeljko Suskavcevic E-mail mberza@cg.yu Website www.montenegroberza.com PAGE 97
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