Transparency and communication:

Latvia`s experience

Prepared for Debt Management Facility Stakeholders’ Forum June 3-4, 2015

Manila, Philippines

Inese Sudare Deputy Director

Financial Resources Department

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Territory: 64,569 sq. km

Population: 2 million

Capital: Riga

Currency: Euro

Borders: Estonia, Lithuania, Russia, Belarus

Main facts:

1918 – proclamation of the Republic of Latvia

1991 - Latvia Regains Independence

1991 - Becomes a Member of the UN

2004 - Entry into EU

2004 - Admitted to NATO

2014 - Latvia joins Eurozone/ EMU

2015 - Latvia’s Presidency of EU Council

June, 2015

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Short Overview Of Latvia - a Country In The Baltic Region of Northern Europe

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S&P

Fitch

Moodys

R&I

LATVIA

Sovereign rating development

Jelgava

Rezekne

Valmiera

Daugavpils

RIGA

Investor Relation Activities Are Integrated In The Treasury Debt Management Function

3 June, 2015

Treasury - institution subordinated to the Ministry of Finance with following functions:

Source: The Treasury

Borrowing management

Debt portfolio management

Communication with investors, banks, rating agencies and IFI

Issuance and monitoring of state guarantees

Government debt management activities includes:

Law on Budget and Financial Management

Annual State Budget Law

Regulations of the Treasury

Internal Regulation for the Treasury Authorisation

Central Governmental Debt Management Strategy

Cash Management Strategy

Medium Term Funding plan

Communication strategy

Main legal documents for the Treasury: Investor relations are performed

mainly by International Cooperation department

(3 persons for IR)

Medium Term Framework Document Provides Guidance for Main Objectives and Tasks in Debt Management

4 June, 2015

Latvian Government Debt Management Strategy Objective:

to ensure availability of financial resources at the lowest possible costs, limiting financial risks and taking into account the development of the

Latvian economy and integration of the domestic financial market into the common financial market of the Eurozone

Central Government Borrowing

Management

Central Government Debt

Portfolio Management

Ensure continuous

borrowing opportunities in the international

and domestic financial markets on optimal

terms and conditions

Optimising debt servicing costs

over the long term while

hedging financial risks

Regular (monthly) monitoring of the implementation

Annual reports to the Minister of Finance

Strategic Approach In Organizing Sovereign Borrowing

5 June, 2015

FLEXIBILITY IN BORROWING ACTIVITIES

With regards to timing, currency

and tenors

INVESTOR BASE DIVERSIFICATION

maintain regular communication with the investor community;

consistency and transparency to markets

TAKE ADVANTAGE OF THE

DOMESTIC MARKET POTENTIAL

Investment instruments available for domestic investors; Primary dealers system

MAINTAIN AND BROADEN THE

LIST OF COUNTERPARTIES

Treasury has necessary

counterparties to conclude financial transactions

Principles and tasks

in borrowing management defined in the Debt

Management Strategy

Medium Term Funding Plan

Annual Communication Action Plan

interest rate forecasts different scenarios

and instruments to cover financing needs

activities, responsibilities and expected results

Diversification of investor base is achieved throughout issuances

6 January, 2015

Investors by geography of bond issues in international capital markets

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200

400

600

800

1 000

1 200

m.E

UR

Non-residents Residents

Investor base by residence of the securities issued in domestic market

7 January, 2015

Approach in communication may vary depending of investor/counterparty segment

Segment

Information

Channel

Banking society

Investors community

Retail investors

Rating Agencies

Websites

Phone, email contacts, regular c-calls

Bilateral meetings

Bloomberg

STATISTICS WEEKLY UPDATES BUDGET EXECUTiON, BORROWING PLANS ANALITICAL REPORTS, PUBLICATIONS

Websites

Email

One-to-one or group meetings

Bloomberg

Specific website

TV, press

Handouts

Websites

Bilateral meetings

Phone and email contacts, conference calls per request

PRESENTATION (ON MACRO, FISCAL, FINANCIAL AND POLITICAL SITUATION)

MACRO, FISCAL, FINANCIAL AND POLITICAL SITUATION

FINANCIAL CONDITIONS AND LEGAL ASPECTS OF RETAILPRODUCT

PROCEDURE FOR INVESTING

Accrual accounting in compliance with International Public Sector Accounting Standards(IPSAS)*

* Except for tax revenues

Communication with the investor community across different regions and countries

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Purpose:

Credit update / non-deal related meetings

Deal related Road show

Investors:

Previous Current Potential

Investor meetings held in 2011-2014

Boston

New York

San Francisco

Los Angeles

UK (London)

Germany (Frankfurt, Munich)

France (Paris)

Austria (Vienna)

Netherlands (Amsterdam, Hague)

Italy (Milan)

Switzerland ( Zurich, Basel, Bern, Geneva)

Singapore

Tokyo

Hong Kong

June, 2015

Year Investor meeting in

different regions

Total number of investors

met during 2011-2014 is

more than 200

2011 Europe, USA, Asia

2012 Europe, USA, Asia

2013 Europe

2014 Europe

Regularity in Communication Activities Is Maintained Throughout a Year

9 June, 2015

Treasury publications:

1. Weekly updates

2. Monthly updates of investor presentation

3. Quarterly debt management bulleting

4. Annual report on debt management

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Consistency In Being Transparent Starting From Policy Planning To Individual Transaction

Disclosed in publicly available fiscal policy framework documents

Borrowing strategy in medium term

Results of auctions / syndicate transactions

• Announcement after each transaction • Market Review published within a day • Bloomberg

Calendar for auctions in domestic market

• Quarterly plans discussed with Primary Dealers • Monthly calendar publicly available • Announcement few days prior the auction • Bloomberg

Legal base/auction technics, procedures

Regulations and auction technics/procedures publicly available

List of Primary dealers published

Official reports and reviews

• Monthly • Quarterly • Annual

June, 2015

* Availability in websites of the Treasury, Ministry of Finance , Stock Exchange, as well as Bloomberg

How To Measure The Value Of Investor Relations: Treasury experience

11 June, 2015

Achievement of set targets (strategy, plans)

Hit ratio (meeting in deal and non deal Road shows vs demand and allocation)

Tracking the changes in investor base

Number or addressees in mailing list

Comments/feedback (from counterparties banks, primary dealers, investors)

Conclusions

12 January, 2015

Benefits of IR for Issuer

• IR helps to reach strategic goals

• Regular communication and transparency increases investors trust

• Raises investors interest in investing in government debt securities

• Facilities lower debt servicing costs in long term

• Investment into investor relations may pay off in «hard times»

Benefits of IR for Investor

• Improves awareness of the country

• Helps to distinguish the issuer among peer countries

• More accurate sovereign credit risks assessment

• Supports analysis and decision making process about further investments

Key elements: Openness, Transparency and Consistency

THANK YOU !

For more information, visit Treasury website

www.kase.gov.lv

13 June, 2015