Guide to Baltic Market 2004-2005 EFFICIENT SECURITIES TRANSACTIONS Baltic Market Overview 2004-2005 Foreword 4 Apranga 40 Rokiškio Sūris 62 I-List companies 82 Joint Baltic market 7 Baltika 42 SAF Tehnika 64 List of members 84 Baltic macroeconomic overview 30 Eesti Telekom 44 Snaigė 66 Contacts 86 Taxation 35 Ekranas 46 Starman 68 Harju Elekter 48 Tallinna Kaubamaja 70 Latvijas Gāze 50 Tallinna Vesi 72 Latvijas kuģniecība 52 Utenos trikotažas 74 Lietuvos Telekomas 54 Ventspils nafta 76 Merko Ehitus 56 Vilniaus baldai 78 Norma 58 Vilniaus Vingis 80 Pieno Žvaigždės 60 2 GUIDE TO BALTIC MARKET 3 Dear reader, You are holding a fresh copy of an overview of the Baltic securities market. So what have we done thus far to make trading in the Baltics easier for our This marks the second time that the Tallinn, Riga and Vilnius stock exchanges customers? There are many milestones in our history, one of them is the join efforts to guide our readers through the Estonian, Latvian and Lithuanian migration of Vilnius to the SAXESSTM trading system in the spring of 2005, securities markets. which enabled all members of the Baltic and Nordic exchanges to trade in the same system, and our investors therefore have access to eight different markets The idea of integrating the three Baltic markets to provide a “one-stop-shop” for through one access point. The common blue-chip index BALTIX serves as a investors was born more than six years ago through a letter of intent signed by the benchmark indicator for the Baltic markets. Our rules are harmonized with Baltic exchanges. This was a natural step for us to take since most of the investors those of NOREX and in line with EU legislation. We established the delivery- see the three countries as a single investment area. Today, the Estonian, Latvian versus-payment settlement links between the Estonian, Latvian and Lithuanian and Lithuanian stock exchanges are closer to this goal than ever, forming a joint depositories to facilitate cross-border trading. The Baltic securities trading value offering to the customers - an offering, which reaches beyond the Baltic area information is published jointly at http://market.ee.omxgroup.com/. Finally, the and into the Nordic region through OMX our parent company and the leading introduction of MSCI’s Global Industry Classification Standard in mid-2005 has Nordic-Baltic securities market operator. meant that the companies listed on the Baltic exchanges can now be compared more easily with their global peers. Kaidi Oone Daiga Auziņa-Melalksne Dalia Jasulaitytė Chairman of the Tallinn Stock Exchange Management Board Chairman of the Riga Stock Exchange Management Board Chairman of the Vilnius Stock Exchange Management Board OMX Exchanges OMX Exchanges OMX Exchanges 4 GUIDE TO BALTIC MARKET FOREWORD 5 Joint Baltic market Less than a year after the introduction of the joint Baltic market concept, we now HISTORICAL HIGHLIGHTS have several members who actively trade pan-Baltic. The settlement links are among the busiest in the CEE and Nordic region. After regaining of independence in the beginning of the 1990s, Lithuania was the first of the three Baltic states to establish a national stock exchange and launch The economies of the Baltic region are among the fastest developing in the world. electronic securities trading in 1993. Latvia followed in 1995 and Estonia in 1996. In 2004, the GDP growth rates of Estonia, Latvia, and Lithuania were 7.8%, 8.5%, 6.7%, respectively. This remarkable development is also reflected on the stock In 2000, the Tallinn Stock Exchange acquired 100 percent of the Estonian Central markets: the BALTIX index is up 29% since the beginning of 2005. Sustainable Securities Depository (CSD). economics provide excellent opportunities for companies to raise new capital, and during the first half of 2005 the Baltic markets witnessed successful IPOs In April 2001, the Helsinki Stock Exchange (HEX) bought a majority stake in the of two Estonian companies Starman and Tallinna Vesi. We believe that more Tallinn Stock Exchange, and in February 2002, the two exchanges moved to the IPOs will follow this year, which will give a further boost to the Baltic securities same trading system. 2002 was also the year when the Helsinki Stock Exchange market. acquired a majority stake in the Riga Stock Exchange and the Latvian CSD. The next steps on our roadmap to the single market are further harmonization In 2003, the HEX Group merged with OM, the Swedish stock exchange operator of the markets, with particular focus on clearing and settlement, and the and technology provider, creating a new group named OMX. In May 2004, OMX introduction of the euro currency. The latter is scheduled to take place in the acquired a majority stake in the Vilnius Stock Exchange and a 40 percent stake in beginning of 2007 in Estonia and Lithuania and in 2008 in Latvia. The full the Lithuanian CSD. integration of the organization is also a priority on the management agenda. In April 2004, the exchanges in Helsinki, Tallinn and Riga joined the Nordic- We hope that our “Guide to Baltic Market” will help you find your way on our Baltic stock exchange alliance NOREX, and in September 2004 the exchange securities markets and provide a valuable insight to our companies. You can members began trading in the common Nordic-Baltic SAXESS trading system find useful background information in the macro-economic overview, which is and adopted the NOREX Member Rules. Delivery-versus-payment (DVP) links provided by SEB group banks in the Baltics. Details on the Baltic taxation system for settlement of stock exchange trades were established between the Estonian are delivered by Roschier Raidla. CSD and Latvian CSD in addition to previous free-of-payment (FOP) link. Vilnius Stock Exchange and Lithuanian CSD followed in May 2005 at what We wish you pleasant reading and see you in the Baltic market! time the Baltic exchanges also introduced the joint Baltic market concept, facilitating common securities lists, common trading rules and practices, and DVP settlement links between the depositories to facilitate stock exchange transactions. In February 2005, the Copenhagen Stock Exchange joined the OMX group. 6 GUIDE TO BALTIC MARKET JOINT BALTIC MARKET 7 OMX ownership in Baltic exchanges OMX Joint Baltic Market – our offering to customers Ownership Tallinn Stock Exchange 62% OMX consists of two divisions: OMX Exchanges The core idea of the joint Baltic market is to minimize to the extent Estonian CSD 100% owned by TSE and OMX Technology. Baltic Markets, a unit of possible the differences between the three Baltic markets in order to Riga Stock Exchange 93% the OMX Exchanges division, comprise the stock facilitate cross-border trading and attract more investments to the region. Latvian Central Depository 100% owned by RSE exchanges in Tallinn, Riga and Vilnius and the This includes sharing the same trading system and harmonizing rules and Vilnius Stock Exchange 93% central securities depositories in Estonia and Latvia. market practices, all with the aim of reducing the costs of cross-border Central Securities Depository of Lithuania trading in the Baltic region. 32% owned by OMX, 8% owned by VSE OMX AB is listed on the stock exchanges in Stockholm, Helsinki and Copenhagen. Advantages of the joint Baltic market: THE NOREX ALLIANCE 1. Easy cross-membership 2. Efficient cross-border trading and settlement NOREX is the strategic alliance between the Nordic and Baltic stock exchanges. - Common trading system SAXESS The NOREX Alliance is unique by being the first stock exchange alliance to - A single access point to eight local markets implement a common equity trading system and harmonized trading and - Harmonized market practices and rules membership rules and requirements. - Delivery-versus-payment (DVP) links between the Baltic central securities depositories to facilitate stock exchange transactions The alliance is founded on cooperation between independent exchanges and is - Free-of-payment (FOP) links between the Baltic central securities based on the following principles: depositories • cross membership 3. One market information source • single point of liquidity - Joint securities lists • common trading system - Common index BALTIX and harmonized local indices • common rules for listing, membership and trading - Joint market information website – www.market.ee.omxgroup.com - Joint market data to vendors The Alliance currently consists of OMX Exchanges (Copenhagen Stock Exchange, Stockholm Stock Exchange, Helsinki Stock Exchange, Riga Stock Exchange, With the inclusion of all the Baltic states in the European Union since Tallinn Stock Exchange and Vilnius Stock Exchange), Oslo Børs and the Iceland 2004, the regulatory framework has been brought fully in line with EU Stock Exchange. legislation. More information about the NOREX Alliance is available at www.norex.com 8 GUIDE TO BALTIC MARKET JOINT BALTIC MARKET 9 Easy cross-membership MEMBERSHIP TERMS AND CONDITIONS To be eligible for membership on the Baltic exchanges, a company must be authorized to carry out securities operations and be under adequate supervision by a competent authority in the company’s home country. A prospective member must have tied-up reserves equivalent to not less than EUR 730,000*, a suitable business organization, requisite risk management routines, secure technical systems, and must otherwise be deemed suitable to participate in trading. In addition, at least two employees in the company must be authorized as exchange traders in order to trade via the electronic SAXESS trading system. To The applicant, if licensed and/or operating in any of the be authorized as an exchange trader, the employee must have at least six months EU member states, must notify the financial supervisory Membership fees experience in securities trading with a member firm, as well as documented authorities (FSA) in its home country of its intention to start knowledge of market legislation, economics, financial markets and financial trading on the Baltic exchanges.