1 TABLE OF CONTENTS Welcome to the Baltic market 4 Stability & growth - the Baltic premium play 5 Highest standards show a sustainable path 9 Latest developments at NASDAQ OMX Baltic 12 An in-depth look at NASDAQ OMX Baltic 14 Baltic aggregate market statistics 28 New instruments on NASDAQ OMX Baltic 30 The Baltic economies 32 Overview of taxation in the Baltic countries 36 Company profiles 41 NASDAQ OMX Baltic Main List 66 NASDAQ OMX Baltic Secondary List TOP 30 68 Baltic Fund List 70 Baltic Bond List 72 NASDAQ OMX Baltic members 73 Market data vendors 74 Contacts 76 2 STABILITY & GROWTH - THE BALTIC PREMIUM PLAY Mike Collier / Editor / Baltic Features Andrus Alber Daiga Auziņa-Melalksne Arminta Saladžienė Henrik Elfving Investors’ view of the Baltic market Chairman of the NASDAQ OMX Chairman of the NASDAQ OMX Chairman of the NASDAQ OMX NASDAQ OMX Vice President, While the Baltic market’s relatively small size is in one sense a weakness, “The growth outlook Tallinn Management Board Riga Management Board Vilnius Management Board Baltic & Armenian markets it may also have helped see the region through the global economic crisis is lower but more in relatively good shape, underpinned by its state-of-the art technologi- sustainable now and cal infrastructure. After all, it’s worth remembering that the three Baltic the sentiment more markets were among the strongest in Eastern Europe in 2010 with the balanced, which we trend likely to continue thanks in part to a considerable base effect. In- think is a positive dustries in sectors that are experiencing major problems in other regions - environment for long such as banking - have been performing well as credit impairments in the term investors.” WELCOME TO THE BALTIC MARKET region have declined. Marcus Svedberg, “The Baltic markets give exposure to fast growing economies within East Capital Welcome to the 2011 guide to the NASDAQ OMX Baltic Securities Market. We hope that - as with previ- the EU framework, which implies that you get the emerging market ex- ous editions - with its wealth of facts and figures it will become a firm favorite on your bookshelf or citement with developed market rules and regulations,” says Marcus work desk, and the first thing you reach for when pondering a new investment. Svedberg, chief economist with Sweden’s East Capital, which has been investing in the Baltics since 1998 via a Baltic Fund which includes Though clear challenges remain in the global financial system, so do opportunities for the well- stakes in some of the region most prominent companies including Pieno informed investor, which is why the NASDAQ OMX Baltic exchanges are working hard to continually Žvaigždės, Grindeks and Tallink. improve their information flows and open up a region that is now being acknowledged worldwide as a place where flexible and prudent money-management can make a real difference: witness Estonia’s “The Baltic markets have seen a revival in terms of sentiment. They successful Eurozone entry, Latvia as an example of effective austerity, and Lithuania’s clever use of were first hailed as growth tigers, then dismissed as basket-cases for the markets to fund its own way back to economic recovery. devaluation and recession, before coming back after having implemented impressive consolidation. The growth outlook is lower but more sustain- Perhaps most remarkably, all of that has been happening at a time when – according to some com- able now and the sentiment more balanced, which we think is a positive mentators – the markets aren’t interested in taking a long term view. The Baltic experience suggests environment for long term investors,” says Svedberg. otherwise and that now the primary question is when to invest rather than where to invest. “The infrastructure is generally good or even very good. The fact that With growth and funding appetites showing some signs of reviving and the possibility of IPOs and the three markets are integrated in the NASDAQ OMX system ensures a other major corporate action just over the horizon, it has never been more important to have cutting- modern exchange platform. There is also a well developed network of edge infrastructure at your disposal. The successful introduction of the NASDAQ OMX INET trading analysts, brokers and banks in the region,” he adds, while admitting that system has ushered in the arrival of algorithmic trading and the even more complex high-frequency volumes may not be huge. trading on the Baltic markets, a trend that looks likely to become much more widespread. Technical innovation, along with the introduction of the euro as a common trading and settlement currency, combined with our provision of trading education at all levels and advocacy of the highest corporate standards, demonstrates NASDAQ OMX Baltic’s commitment to improving local equity cul- ture and making the Baltic region more accessible. We are reaching out to an ever-increasing pool of worldwide investors, and we hope you too will be part of the future. 4 INVESTORs’ vIEW OF THE BALTIC MARKET 5 Another long-time Baltic market participant, Ivars Bergmanis, head of “Perhaps it hasn’t been a headline story but when you look at the editorials institutional markets at Estonia’s LHV Pank, acknowledges the strength and analysis in publications like the Financial Times and The Economist of the systems underpinning every trade, but is keen to point out that it you do get references to the Baltic experience and how they managed the is not a core reason why an investor is prepared to put their money into crisis in a mature way. One way or another that has been noticed by inves- the market. Indeed the fact that Bergmanis launched LHV’s institutional tors, along with the fact that they are back on the growth path right now. equities operation as recently as September 2010 gives a tacit vote of That definitely will play out positively in the future: the cool-headed, Nordic confidence in the region’s investment outlook. type approach to solving problems in the Baltics,” says Daubaras. Ivars Bergmanis, “It’s a positive thing that it has strong infrastructure but in the end it’s While all three investors agree that the impressive Baltic tale of recovery Marcus Svedberg, head of insitutional not the decisive factor. Ultimately people invest to get a return on their to growth following huge drops in GDP has gained some attention among Chief Economist at markets at Estonia‘s investment,” Bergmanis says. overseas investors, they are equally in agreement that policymakers East Capital LVH Pank from government downwards will need to play their part by making a The Baltics will deserve the “emerging market” tag for the foreseeable fu- new selection of tempting plays available. The good news is that with “If there is anywhere Indeed the fact that ture, he believes, even if they do share certain core characteristics with large chunks of the economies still in state hands and pressure building in Europe we can Bergmanis launched the markets of Western Europe and Scandinavia. “They are still an emerg- among the public for greater transparency and oversight at boardroom expect changes to be LHV’s institutional ing market and will be for a long time to come - let’s say the next decade,” level, the formula seems to be in place for some IPOs and other forms of implemented, it is in equities operation as Bergmanis says. free float. the Baltics.“ recently as September 2010 gives a tacit vote The good news is that means good growth and liquidity levels that may not “We need a little bit more of everything: IPOs, liquidity, growth, and struc- of confidence in the be high but are of high quality. tural reforms,” says East Capital’s Svedberg. “If there is anywhere in region’s investment Europe we can expect changes to be implemented, it is in the Baltics. But outlook. Interestingly, according to Darius Daubaras head of equity capital mar- we also need to have realistic expectations; these are small frontier mar- kets for Russia and CIS, Central and Eastern Europe with BNP Paribas, the kets that remain dependent on the core of Europe in terms of sentiment need of the Baltic countries to innovate could be the key to their future but also capital flows.” growth prospects. That means not just playing “catch up” with Western Europe in terms of consumption, GDP per capita and infrastructure but LHV’s Bergmanis is unequivocal: “One decent issue is enough. We’re talk- actually developing brand new niches in high-tech industries. ing micrometers in an international sense but it has to be a 50-100m euro transaction to get any attention. Privatization comes down to political “Given that the economies are not very well endowed with natural re- will. If it’s a private entity - and also in the public sector as well - you sources the innovation-type aspect is one area investors would be look- need to have some close matching of price expectations from the inves- ing at in the future. Time will tell because there are a number of other fac- tors and the selling party or parties - basically, realistic expectations tors that will need to play into it such as the presence of venture capital between sellers and buyers.” “When you look at the and certain educational reforms that will need to be aligned with it,” says editorials and analysis Daubaras. Lithuanian telecoms giant TEO LT provides perhaps the best example in publications like of the shape of things to come. It has gradually transformed itself from the Financial Times “Estonia has shown the way to the Baltics as it is now one of the most a state-run behemoth to a nimble, forward-thinking listed company and The Economist disciplined of the Eurozone economies.