PUBLIC LIMITED LIABILITY COMPANY BANK SNORAS BASIC PROSPECTUS

Transcription

1 PUBLIC LIMITED LIABILITY COMPANY BANK SNORAS BASIC PROSPECTUS THIS BASIC PROSPECTUS IS AN UPDATED VERSION OF THE BASIC PROSPECTUS AS OF 31 JANUARY 2008, APPROVED BY THE SECURITIES COMMISSION OF THE REPUBLIC OF LITHUANIA, WHICH, TOGETHER WITH THE DESCRIPTION OF FINAL TERMS AND CONDITIONS ( THE FINAL TERMS AND CONDITIONS ) AND OTHER DOCUMENTS (ALREADY PUBLISHED OR TO BE PUBLISHED SEPARATELY) INCLUDED BY REFERENCE, FORMS AN INTEGRAL PART OF THE PROSPECTUS FOR THE SECURITIES ISSUED OR TO BE ISSUED BY THE ISSUER ( THE PROSPECTUS ). THE INFORMATION CONTAINED IN THE PROSPECTUS MAY BE STATED IN THE ANNEXES IN THE UPDATED VERSION ACCORDING TO THE PROVISIONS OF ARTICLES OF RESOLUTION BY THE SECURITIES COMMISSION No. 1K-21 of 15 JULY 2005 AND ARTICLE 16 OF DIRECTIVE OF THE EUROPEAN PARLIAMENT AND THE COUNCIL No. 2003/71/TB. ALL THE DOCUMENTS ARE AVAILABLE AT THE FINANCIAL BROKERAGE DEPARTMENT OF AB BANK SNORAS AT THE ADDRESS A.VIVULSKIO G. 7, VILNIUS, FROM 8.00 TILL ON MONDAYS THURSDAYS AND FROM 8.00 TILL ON FRIDAYS AND AT BRANCH OFFICES OF THE BANK AS WELL AS ON CONTACT PHONE No.: (8-5) , (8-5) PRIOR TO ADOPTING A DECISION TO PURCHASE THE SECURITIES OFFERED BY THE ISSUER, POTENTIAL INVESTORS SHOULD FAMILIARISE THEMSELVES WITH ALL THE DOCUMENTS FORMING THE PROSPECTUS. CIVIL LIABILITY FOR THE INFORMATION PRESENTED IN THE PROSPECTUS LIES WITH THE PERSONS THAT HAVE PREPARED THE PROSPECTUS, HOWEVER, ONLY TO THE EXTENT TO WHICH THE INFORMATION IS MISLEADING, UNTRUE OR CONTRADICTORY COMPARED TO OTHER PARTS OF THE PROSPECTUS. SHOULD AN INVESTOR FILE A CLAIM TO COURT CONCERNING ANY INFORMATION CONTAINED IN THE PROSPECTUS, THE CLAIMANT MAY HAVE TO PAY THE COSTS OF TRANSLATION OF THE PROSPECTUS PRIOR TO THE START OF JUDICIAL PROCEEDINGS IN ACCORDANCE WITH THE NATIONAL LEGISLATION OF THE EU MEMBER STATES. VILNIUS, JANUARY

2 TABLE OF CONTENT PERSONS RESPONSIBLE FOR THE INFORMATION CONTAINED IN THE BASIC PROSPECTUS...3 I. SUMMARY INFORMATION ON THE ISSUER MAIN INFORMATION ON THE OFFER RISKS MEETING THE REQUIREMENTS LIMITING THE RISKS OF THE BANK AND THE GROUP AUDITORS OF THE FINANCIAL STATEMENTS CONTAINED IN THE PROSPECTUS MAIN FINANCIAL INFORMATION PROFILE OF THE MAIN MARKET MANAGEMENT OF THE BANK INFORMATION ON MAJORITY SHAREHOLDERS FINANCIAL INFORMATION TERMS AND CONDITIONS FOR THE BOND OFFERING SECONDARY TRADING IN BONDS PROCEDURE FOR ESTABLISHING THE FINAL TERMS AND CONDITIONS

3 PERSONS RESPONSIBLE FOR THE INFORMATION CONTAINED IN THE BASIC PROSPECTUS By signing this Basic Prospectus, Raimondas Baranauskas, President of AB Bank Snoras, and Zita Selenkovien, Chief Accountant of AB Bank Snoras, confirm that, to the best of their knowledge, the information contained therein is true and there are no omissions that could affect its meaning and that they have taken all reasonable measures for this purpose. By signing this Basic Prospectus Vladimir Streckij, Director of the Financial Brokerage Department of AB Bank Snoras, confirms that it contains all the information presented to the Department by management and employees of the Bank and that he is responsible for the proper presentation of such information. Raimondas Baranauskas President, Chairman of the Board Zita Selenkovien Chief Accountant, Director of Financial Accounting Unit Vladimir Streckij Director of Financial Brokerage Department 3

4 I. SUMMARY This summary presents the basic information on the Issuer and the securities issued. More detailed information on the Issuer, its operations, financial position and other matters is contained in Sections II and III of this Basic Prospectus, i. e. in the Statement of Securities and the Registration Certificate as well as in the financial information on AB Bank Snoras for 2006 and The above-mentioned documents form an integral part of the Basic Prospectus. The final terms and conditions of the contemplated securities emission have not been included in the Basic Prospectus and will be set out in the form of separate documents prior to each public offering. All the documents are available at the Financial Brokerage Department of AB Bank Snoras (A. Vivulskio St. 7, Vilnius) and at the branch offices of the Bank (the addresses provided in Sub-Clause 2.20 of this Basic Prospectus) as well as on In this Basic Prospectus, AB Bank Snoras is also referred to as the Bank or the Issuer. AB Bank Snoras and its subsidiaries are also collectively referred to as the Group INFORMATION ON THE ISSUER Legal name of the Issuer: Commercial name of the Issuer: Registration date and place: AB Bank Snoras AB Bank Snoras Corporate ID: Register No.: AB Incorporation date: 17 March 1992 Term of business activities: Registered office address: Legal form: Governing law: Country of incorporation: 17 March 1992, Bank of Lithuania unlimited A.Vivulskio St. 7, LT Vilnius public company Law of the Republic of Lithuania Republic of Lithuania Telephone No.: (8~5) , (8~5) Fax No.: (8~5) , (8~5) Website: Authorised capital: LTL 253,354,240, registered on 18 August 2007 Credit rating (Standard & Poor s): BB(-) long-term liabilities; B(-) short-term liabilities, stable prospects 4

5 1.2. MAIN INFORMATION ON THE OFFER Description of programme: According to the programme, one or more issues of medium-term (1 to 5 years) fixed interest rate bonds, variable interest rate bonds, zero-coupon bonds, linked bonds or any combination of these types of bonds may be put into public trading. All the bonds will be nonsubordinated, non-secured and non-convertible bonds. The programme will be in effect during 12 months from the date of its approval by the Securities Commission of the Republic of Lithuania. Scope of programme: Securities issued: Par value per unit: Issue currency: Issue price: Purchase fee: Method of offering: Offering period: Markets for offering: Offerer: Intended use of funds: 1.3. RISKS LTL 300,000,000 (or another currency equivalent) Medium-term (1 to 5 years) non-equity securities The par value of the securities of each issue will be determined in the Final Terms and Conditions. The securities will be issued in Litas, Euro or other currencies. The currency of the securities of each issue will be determined in the Final Terms and Conditions. The issue price for the securities of each issue will be determined in the Final Terms and Conditions. Not applicable, unless the Final Terms and Conditions specify otherwise. Public offering RISKS RELATED TO INVESTING IN BONDS The offering period for each issue will be specified in the Final Terms and Conditions. The bond issues will be offered in the Republic of Lithuania. The Issuer may enter into agreements with other persons which will act as offerers; in such a case such persons will be specified in the Final Terms and Conditions for each issue. Funds received from the issues under this programme will be used in the core activities of the Issuer, i. e. for the financing of the Issuer s loan portfolio. Depending on the market demand the funds will be used for the financing of loans for corporate clients and private clients as well as for the development of other banking activities. Market risk. Investors purchasing bonds issued under the Programme are exposed to risk of changes in the market prices for the bonds. Where the opportunity for early repurchase by the Issuer is provided for in the Final Terms and Conditions for a bond issue, investors face a risk that the bond yield in case of redemption of the issue will be lower than it could be if the bonds are held until the final redemption term. The redemption price for the linked bonds is linked to the financial instrument stock exchange indices, security price, commodity price or fund unit price or a basket of such indices and/or prices. During the term of the bonds, the value of the financial instrument may be subjected to strong fluctuations and investors have to assume the risk of losing gain on the instrument value due to unfavourable fluctuations, i. e. only the par value is recovered at redemption, or even of losing part of the investment if the bonds were purchased at the price higher than the par value and/or the bond purchase fee was paid. Interest rate risk. By purchasing fixed-yield bonds, investors assume the risk of interest rate fluctuations, due to which the bond price on the secondary market may either rise or fall. The market price for non-equity 5

6 securities decreases with the increase in market interest rates and vice versa. The interest rate risk is not relevant to those owners of bonds who hold them until redemption date. Inflation risk. Investors purchasing the bonds issued under the Programme are exposed to risk that the bond price may fall as inflation rates increase. Currency risk. Investors face a risk that in case of unfavourable changes in currency exchange rates the yield on securities may be reduced. Liquidity risk. As liquidity of the bonds linked to a financial instrument is limited and there are no intermediaries in the market that would undertake to ensure bond liquidity in a secondary market under any market conditions, investors purchasing the bonds assume the securities liquidity risk, i. e. investors may incur losses when selling the bonds in a secondary market or face a situation where selling of the bonds will be impossible or only a limited number of bonds can be sold as the securities sale opportunities depend on the demand in the secondary market. Risk of lower Issuer s credit rating. Investors purchasing bonds issued under the Programme are exposed to the risk that, in case of deterioration of the Issuer s financial position and/or lowering of the Issuer s credit rating, the demand for the Issuer s non-equity securities may become weaker, resulting in a lower price for such securities. Settlement risk. Investors purchasing the bonds issued under the Programme are exposed to risk that the Bank may fail to pay to the investors under the set terms and conditions, i. e. may delay in the fulfilment of its financial obligations. Tax and legal risk. In case of amendments to legal acts governing non-equity securities or changes in the state tax policies, attractiveness of the bonds to all the investors or individual investor groups may change. Therefore, the liquidity and/or price for the non-equity securities issued under the Programme may be reduced. Risk related to securities listing. The Final Terms and Conditions for certain bond issues under the Programme may state the Issuer s intention to trade in the issued securities in a regulated market. By purchasing the Issuer s securities in the primary market, investors face a risk that the Issuer s application for trading in a regulated market is rejected for technical or other reasons. In such a case, the securities liquidity may be considerably reduced. Furthermore, in such a case certain investor groups (e. g. pension funds) would be forced to sell the securities acquired in a primary market due to statutory restrictions, which could lower the price for the securities. Issue cancellation risk. Issues of bonds linked to a financial instrument may be subject to cancellation if the total issue price is lower than the price set in the Final Terms and Conditions or if the Issuer is not in a position, due to market changes that have taken place during the offering, to set the minimum investment rate as published in the Final Terms and Conditions. Contingency risk. Should one or more unforeseen events as defined in item of this Basic Prospectus occur, the Issuer may change the financial instrument, the methodology for the calculation thereof and the valuation days set therefore. As a result of such changes the investor may lose the premium in full or in part despite the Issuer s efforts to maintain the bond yield conditions prevailing prior to the events. Risk of changes in the calculation method for the financial instrument. Where the agency which publishes and/or calculates the price for the financial instrument to be used for the calculation/determination of any payments to investors changes the calculation method or the financial instrument itself and publishes such change prior to the date of next publication and/or calculation of the financial instrument, but not later than within three business days from the date of the last publication and/or calculation of the financial instrument, the Bank will have the right to recalculate any amounts payable to the investors taking account of and to the extent required by such change in good faith and in accordance with the applicable legal acts, in the interests of the investors and based on lawful acts by the counterparty to the hedging transaction, fair calculations and other internationally recognised practice. Premium risk. For linked bonds, if the value of the financial instrument to which the bond yield is linked remains the same or is reduced, the premium payable as of the bond redemption date is equal to 0 (zero). In such a case, only the par value of the bond will be paid to the investor on the redemption date, i. e. the investor faces the risk to lose the purchase fee, if any, and any funds that have been additionally invested, if the bonds 6

7 have been purchased at a risk premium. The investors must note that the risk premium is only intended for the increase in the investment rate and is not included in the redemption price RISKS RELATED TO THE BANK S OPERATIONS Credit risk is the risk of loss due to the failure of the Bank s clients and counterparties to fulfil their financial obligations to the Bank. Credit risk is the most important risk. It is managed by carrying out a detailed risk analysis prior to extending credits, by conducting monitoring thereafter, by analysing and exercising control over concentration risk, and by establishing the limits restricting the credit risk and monitoring compliance therewith. Management of credit risk is also implemented by requiring that the borrower gives a security and letters of guarantee and/or surety from natural/legal persons. In 2007 the Bank has successfully met the set target for credit risk concentration in a sector, i. e. the value of the portfolio did not exceed 15% in any sector, which has considerably reduced the exposure to this kind of credit risk. The maximum loan amount per borrower has increased during 2007 by LTL 21,176,000 in the Group and by LTL 22,128,000 in the Ban, which means that the exposure to credit risk in case of default has increased. Liquidity risk is the risk that the Bank will not manage to raise sufficient funds to fulfil its obligations related to the payment of deposit funds and financial instruments when due. For the liquidity risk management purposes the Bank conducts daily monitoring of the future expected cash flows from clients and banking activities, which forms part of the assets and liabilities management process. The Board of the Bank sets the limits for a proportion of funds for a minimum term so that the Bank has sufficient funds for deposit payments as well as the minimum level of interbank and other debt liabilities which would be covered by funds in case if the requirements for the Bank s liabilities increase. As of 31 December 2007 the Bank s largest liability to a single client was USD 500 million (LTL million), while as of 31 December 2006 such liability amounted to USD 50 million (LTL 132 million). Financial market risk is the risk of loss due to unfavourable changes in the financial market (changes in interest rates, currency exchange rates, prices for equity securities etc.). Interest rate risk is most important in this context. This is the risk of fluctuations of market interest rates that affects both financial position and cash flows of the Group and the Bank. These fluctuations can increase interest margins, however, it can also decrease due to unexpected changes, giving rise to losses. The Board of the Bank sets the limits defining the level of the interest rate deviations in case of revaluation of financial instruments which may become necessary. The Issuer s foreign currency exchange risk is related to the exchange rate fluctuations that affect both financial position and cash flows of the Group and the Bank. In 2007 the market risk of the Group and the Bank has been grouped as trading risk and non-trading risk, therefore, the risk arising from the disparity between currency assets and liabilities has been reduced. Operational risk is the risk of direct or indirect losses due to inappropriate or non-functioning internal processes, systems, technologies, actions by employees or external factors. Legal risk forms part of the operational risk i. e. the risk that losses will be incurred as a result of the Bank s current or previous rights arising from contracts, agreements, judicial proceedings or failure to comply with the laws. The Group and the Bank have an operational risk management system in place. It was updated and improved in 2007 according to the Basel II provisions and best practices. To ensure effectiveness, comprehensiveness and control of information on events related to the operational risk, the Group and the Bank have implemented a special information tool based on the functioning of the designated electronic mailbox. Interest rate risk. The Bank is exposed to the interest rate risk due to constant fluctuations of market interest rates, which influences both financial position and cash flows. Interest margins may either decrease or increase 7

8 as a result of such fluctuations and may even become a reason for losses when the changes are unexpected. The Board of the Bank sets the limits for acceptable interest rate differences. The limits are reviewed on a daily basis. For the interest rate risk management purposes, the interest rate gap report is used; it enables the measurement of the sensitivity of the Bank s net interest income to changes in interest rates. In 2007 the Bank introduced the methodology for internal funds reallocation which facilitates managing the general interest rate risk. Currency risk. The Bank is exposed to currency risk due to constant fluctuations of foreign currency exchange rates, which affects both financial position and cash flows. The Board of the Bank sets the overall and individual open positions in foreign currencies and the currency purchase limits for night and day transactions. The limits are reviewed on a daily basis. Both the Group and the Bank have significant open positions in US dollars and Russian roubles, therefore, it is possible that the profit/loss and equity of the Group and the Bank will be affected by exchange rate fluctuations. Technical/technological risks are related to the obsolescence of the means of operation, standardisation issues etc. This risk produces indirect effects: modern banking technologies require expenditure for the acquisition and renovation of the bank s buildings, equipment and other assets. Such costs reduce profits earned by the bank. Strong competition. AB Bank Snoras faces strong domestic competition. In Lithuania, the services analogous or similar to the Issuer s services are provided by 9 other commercial banks, 2 branch offices of foreign banks, 3 divisions of foreign banks, the Central Credit Union and 67 credit unions; 151 banks of the EU operate in Lithuania without establishing a branch office. The number of players in the banking market may increase in the future. After Lithuania joined the EU, entry of new commercial banks operating in the EU has become much easier and it is probable that the banks will make use of this opportunity. Both current and future competitors might take actions to gain the largest market share possible by lowering service prices and by offering advanced commercial banking services through the use of wide international networks, wider lending opportunities and modern technologies. There are no guarantees that the Issuer will be able to compete successfully, while the reduced demand for its services may have a significant negative impact upon the Bank s business, financial position, operating results and the capacity to settle up with creditors. Dependence upon management. The Issuer s capacity to implement and maintain a growth strategy is mainly determined by the experience and knowledge of its management. There are no guarantees, however, that all the key employees will remain in the Bank in the future. Loss of key employees or the Bank s inability to hire new employees with relevant knowledge and experience may produce a negative effect upon the Bank s prospects and financial position. Rapid growth risk. The Bank is developing rapidly and intends to grow further. Therefore, its operations may become more complicated and management and resource problems may arise. Ensuring operational efficiency in the period of rapid growth will require considerable management resources and improvement of procedures and operations. If the Issuer has no sufficient resources to secure the planned growth rate, this can negatively affect the Issuer s operations and ability to pay for securities. Risk related to asset mortgage/pledge and value of such assets. The Issuer is exposed to risk that the value of the assets given as security for loans is determined incorrectly and does not reflect the asset s realisable value, i. e. the maximum amount that the Issuer could get from the sale of the asset. Also, valuation of certain pledged/mortgaged assets may be outdated and not reflect the fair value. In some cases, an asset pledged/mortgaged several years ago may be no longer in demand and, therefore, have no value as a security. As part of the loans is secured by real estate, certain market changes may result in the reduction in the value of property. Any reduction in the value of the property given to the bank as security may influence the measures of precaution against the loan loss applied by the Bank, while the inability to recover the loans may affect the Bank s financial result. 8

9 As of 31 December 2007, the fair value of the property held as security for individually-assessed loans is LTL 75,151,000 at the Group and LTL 18,710,000 at the Bank (2006: LTL 38,309,000 and LTL 29,856,000 respectively). Type of security: real estate. Claims to the Bank. Up until now no significant claims have been instituted against the Issuer, however, this does not guarantee that in the future it will not be involved in prolonged and costly judicial proceedings. Some claims may be so significant that the Bank s inability to defend itself against them and the obligation to settle the claims may produce a considerable impact upon the Bank s financial position and disrupt its operations. Nawar International Trading & Agency Co., an Egyptian company, is claiming USD 5 million in court against the Bank under a letter of guarantee allegedly issued by the Bank. The letter of guarantee is forged and the claimant has not submitted any original copies of documents. Judicial proceedings have been instituted on the basis of forgery. In the opinion of the attorneys-at-law defending the Bank s interests, on the basis of the law principle ex injuria jus non oritur (no legal benefit can be derived from an illegal act), the court should pass a judgment in favour of the Bank MEETING THE REQUIREMENTS LIMITING THE RISKS OF THE BANK AND THE GROUP 1 The bank s capital adequacy ratio is the measure of the amount of a bank's capital expressed as a percentage of its risk weighted credit exposures. The Bank of Lithuania has established by its resolution that this ratio is at least 8% for the banks operating in the Republic of Lithuania. Capital adequacy ratio (%) Bank Group The bank s liquidity ratio is the ratio between the bank s liquid assets and its current liabilities. By resolution of the Bank of Lithuania, this ratio must be at least 30% for the Lithuanian banks. Liquidity ratio (%) Bank Group Not applicable The resolution of the Bank of Lithuania establishes that the overall open position in foreign currencies may account for not more than 25% of the bank s capital, while the individual open position in any currency for not more than 15% of the bank s capital. Overall open position in foreign currencies (%) Bank Group Maximum loan per borrower requirement. The maximum loan amount per borrower includes the total value of loans, guaranties, sureties and liabilities made/provided by the bank in Litas and foreign currencies (25% of the bank s capital at maximum). The amount of loans made by the bank to the controlling company and subsidiaries of the controlling company and the bank itself, where the Bank of Lithuania exercises supervision over the entire financial group on a consolidated basis, may not exceed 75% of the Bank s capital per borrower. Where the Bank of Lithuania does not exercise such supervision, the total loan amount for the entities referred to above may not exceed 20% of the bank s capital. 1 The Group consists of the Bank and its subsidiaries. Subsidiaries included in the consolidation in 2006: UAB Snoro Lizingas, UAB Vilniaus Kapitalo Vystymo Projektai, UAB Snoro Turto Valdymas, UAB Snoro Fondo Valdymas, UAB Snoro Investicijų Valdymas, A/S Latvija Krājbanka and Conversbank (UK) Limited; in 2007: UAB Snoro Lizingas, UAB Vilniaus Kapitalo Vystymo Projektai, UAB Snoro Turto Valdymas, UAB Snoro Fondo Valdymas, UAB Snoro Investicijų Valdymas and A/S Latvija Krājbanka. 2 The bank group supervision on consolidated basis is governed by resolution of the Bank of Lithuania No. 153 of 7 December It does not contain a requirement to submit liquidity reports. 9

10 Maximum loan amount per borrower (%) Lending limit, of capital lent Bank Group Major loan requirement. By resolution of the Bank of Lithuania adopted on 18 May 2000, the total amount of major loans made by the bank may not exceed 800% of the bank s capital. Major loans requirement (%) Bank Group AUDITORS OF THE FINANCIAL STATEMENTS CONTAINED IN THE PROSPECTUS Audit period Name of auditor Audit firm Address 2007 Jonas Akelis UAB Ernst & Young Baltic Subačiaus St. 7, LT-01008, Vilnius 2006 Jonas Akelis Ramūnas Bartašius UAB Ernst & Young Baltic Subačiaus St. 7, LT-01008, Vilnius 1.6. MAIN FINANCIAL INFORMATION Key financial indicators of the Bank and the Group 1 Key financial indicators 3 for the past two financial years and the first half-year and 9 months of 2007: Bank Bank Bank Group Equity, LTL Return on assets ROA, % Return on equity ROE, % Amount of bank capital per share, LTL Earnings per share, LTL Securities listed on stock exchanges Ordinary and preference registered shares and bonds of the Bank are traded on stock exchanges. Shares of the Bank listed on the secondary trading list: 233,354,240 ordinary registered shares of LTL 1 par value and 2,000,000 preference registered shares of LTL 10 par value; total par value of the shares listed on the secondary list amounts to LTL 253,354,240. Bonds of the Bank the total par value of which is EUR 175,000,000 are listed on the non-equity securities list of the London Stock Exchange; total par value of listed non-equity securities in Litas is LTL 604,240, Amount of issued capital and information on capital structure by share class Amount of issued capital and information on capital structure by share class: 3 ROA = (profit/assets)x100 %; ROE = (profit/capital)x100 %; EPS= (profit dividend on preference shares) / number of ordinary shares As of 18 January 2007, the par value per ordinary registered share was reduced from LTL 10 to LTL 1. 10

11 a) issued and fully paid: ordinary registered preference registered (there are no not-fully-paid-for shares); b) par value per share: ordinary registered - LTL 1 preference registered - LTL Banking products and services for private and corporate clients The Bank and its subsidiaries offer the following to private clients: bank accounts in Litas and foreign currencies, savings deposits in Litas and foreign currencies, fixed-term deposits in Litas and foreign currencies, money lending services (including mortgage loans): credits to legal persons, housing loans, consumer loans, financial guarantees and sureties, domestic and international payments, cash management services, international Visa, Visa Electron, Eurocard/MASTERCARD and Maestro payment cards, local Snoras payment cards, accepting and making cheques, foreign currency exchange, cash operations, custody services, securities accounting and financial brokerage services, individual automated and mechanical safes, leasing products, factoring and real estate services PROFILE OF THE MAIN MARKET Republic of Lithuania is the main market for AB Bank Snoras, while the key client segments include Lithuanian natural and legal persons and non-residents. AB Bank Snoras has a branch office in Estonia and representative offices in Belgium, Czech Republic, Latvia, the Ukraine and Belarus. The Bank holds the controlling block of shares in Latvijas Krajbanka, which is the oldest bank in Latvia with the largest network Market position of the Bank According to the audited financial statements as of 1 January 2008, the assets of AB Bank Snoras amounted to LTL 5.75 billion and have increased by LTL 1.54 billion during the year, i. e. by 36.6%. The Bank is the third bank in Lithuania according to the amount of deposits attracted and the fourth according to the amount of capital and asset management. Loans made to clients amount to LTL 2.65 billion. During the year the loan portfolio increased by LTL 1.1 billion (70.6%). As of 1 January 2008, the Bank was the fifth bank in Lithuania according to profit earned in The Bank s profit for 2007 amounted to LTL 71.7 m. The shareholders equity of the Bank was LTL m as of 1 January 2008 (increased by 67.6% during the year). AB Bank Snoras has the largest client service network in Lithuania, with 248 bank divisions, 10 regional branches, 5 branch units, and 233 savings units as of 1 January MANAGEMENT OF THE BANK Members of supervisory and management bodies Supervisory Council of the Bank: Board of the Bank: Chairman: Vladimir Antonov Chairman: Raimondas Baranauskas Members: Alexander Antonov Members: Naglis Stancikas Dmitry Yakovlev Romasis Vaitekūnas Maxim Safonov Modestas Keliauskas Oleg Sukhorukov Žoržas Šarafanovičius Andrei Vernikov Aušra Ižičkien Michael D Chartres OBE FCA Gitanas Kancerevyčius The term of office of the Supervisory Council expires on 11 June The term of office of the Board expires on 5 June

12 1.9. INFORMATION ON MAJORITY SHAREHOLDERS Shareholders holding, by the ownership right, more than 5% of the Bank s authorised capital as of 31 December 2007: No of shares held Share of votes held,% Shareholder and share class by ownership co-owned by ownership co-owned right right VLADIMIR ANTONOV, ORS ,65 93,75 RAIMONDAS BARANAUSKAS, ORS ,10 93,75 RAIMONDAS BARANAUSKAS, OPS FINANCIAL INFORMATION The Bank prepares its financial statements in accordance with the International Financial Reporting Standards. The financial statements for 2006 and 2007 have been audited in accordance with the International Auditing Standards. The Bank s and Group s 1 key financial indicators 4 for the past two financial years: Bank Group Bank Group Interest income, LTL Service and commission income, LTL Other income, LTL Net profit, LTL Assets total, LTL Liabilities total, LTL Equity capital, LTL TERMS AND CONDITIONS FOR THE BOND OFFERING Terms and conditions for the bond offering: This Basic Prospectus has been prepared for the issue of medium-term (1 to 5 years) fixed interest rate bonds, variable interest rate bonds, zero-coupon bonds, linked bonds or any combination of these types of bonds (one or more issues). The offering of the bond issues will take place in Lithuania. The public offering will take place in the period specified in the Final Terms and Conditions. Where the bonds are held up to the redemption date, redemption at the value not lower than the par value, denominated in the issue currency, is guaranteed. The currency of the issues will be Litas, Euro or another currency. The issue currency will be established in the Final Terms and Conditions fore ach issue. The maximum nominal amount of securities to be issued will be specified in the Final Terms and Conditions and will not be exceeded. The par value of securities of each issue will be established in the Final Terms and Conditions. The bonds will be non-secured bonds. The person that will act in the capacity of the trustee of the bond holders will be specified in the Final Terms and Conditions. The Issuer may appoint an external calculation agent and a payment intermediary, which will be specified in the Final Terms and Conditions. No ratings will be assigned to the issues under this Programme. 4 ROA = (profit/assets)x100 % ROE = (profit/capital)x100 % EPS = (profit dividend on preference shares) / number of ordinary shares 12

13 The Issuer may apply to the regulated market operator for the listing of the securities issued, taking account of the market requirements, issue size and listing costs, which will be specified in the Final Terms and Conditions. The linked bonds may be subjected to early redemption on the initiative of the Issuer in case of occurrence of certain events specified in the Final Terms and Conditions Bond types and yield Bonds of the following types may be issued under the Programme: Fixed interest rate bonds, with the fixed-rate interest set based on the capital and finance market conditions paid to the holders. The following formula will be used for the calculation of days unless the Final Terms and Conditions state otherwise: Act/Act (actual number of days in a month and a year) Variable interest rate bonds, with the variable-rate interest paid to the holders. The interest rates will depend on the basic interest rates in interbank markets of the eurozone or the specified country increased by a fixed margin. The following formula will be used for the calculation of days unless the Final Terms and Conditions state otherwise: Act/Act (actual number of days in a month and a year) Zero-coupon bonds to be issued at the price lower than the par value and to be redeemed at par value. No coupon is payable for such bonds. The following formula will be used for the calculation of days unless the Final Terms and Conditions state otherwise: Act/360 (actual number of days in a month and 360 days in a year) Linked bonds, with the redemption price depending upon changes in the financial instrument and investment rate, where: financial instrument is a securities index or a commodities index or an index basket; or a price for the securities, commodities or fund unit price or a basket of such unit prices to which the bond yield is linked; investment rate is a coefficient showing what share of the gain on the financial instrument is retained by the investor. The bond yield depends upon the purchase price, redemption price, term, interest rate, change in the financial instrument value, investment rate, purchase fee (if any) and other factors, which, if any, will be specified in the Final Terms and Conditions Bond offering period and agreement concluding procedures The offering of the Issuer s bond issues will take place upon approval of this updated Basic Prospectus by the Securities Commission of the Republic of Lithuania and upon publishing of specific Final Terms and Conditions for each bond issue. The length of the Programme is 12 months from the date of approval of the Basic Prospectus, i. e. 31 January The offer to purchase non-equity securities will remain valid throughput the offering period specified in the Final Terms and Conditions. The subscription for the bonds will take place throughout the offering period without restrictions and the bonds will be allotted according to the priority of time principle according to the time when the Bond Subscription Agreement is concluded. No separate allotment plan will be drawn up. The Bond Subscription Agreement will be concluded with the investor wishing to purchase bonds. Such agreements will be concluded in the offices of the Financial Brokerage Department of AB Bank Snoras and all branches and savings units of the Bank. The relevant addresses are specified in Clause 2.20 of this Basic Prospectus. The offering period will be specified in the Final Terms and Conditions for each bond issue. The addresses and opening times of the branches and saving units of the Bank are provided on AB Bank Snoras website Bond issue, payment and redemption The bonds will be issued at par value or at a value higher/lower than the par value. The price for the securities for any specific issue will be set in the Final Terms and Conditions for the issue. No purchase fee will apply unless the Final Terms and Conditions will state otherwise. Upon signature of the Bond Subscription Agreement 13

14 the investor must pay for the bonds subscribed for by 4 p. m. on the date as of which the bonds have been subscribed for. All the bond issues held until the set redemption term will be redeemed by a lumpsum payment of the par value (except for linked bonds). The linked bonds will be redeemed at redemption price (par value increased by the premium), which may not be lower than the par value in any case. All interest accrued on the issues will be paid on interest payment dates set in the Final Terms and Conditions. No tax at income source is payable by natural persons and Lithuanian legal persons. Interest income earned from the bonds by foreign legal persons will be taxed at 10% income tax at source. The tax will be deducted, declared and paid to the state budget of the Republic of Lithuania by the Issuer. Funds received from the issues under this Programme will be used in the core activities of the Issuer, i. e. for the financing of the Issuer s loan portfolio. Depending on the market demand the funds will be used for the financing of loans for corporate clients and private clients as well as for the development of other banking activities SECONDARY TRADING IN BONDS The Issuer may apply to the regulated market operator for the listing of the securities issued, taking account of the market requirements, issue size and listing costs, which will be specified in the Final Terms and Conditions. There are no entities having firmly committed themselves to act in the capacity of secondary market intermediaries and to secure liquidity by price offers PROCEDURE FOR ESTABLISHING THE FINAL TERMS AND CONDITIONS The Final Terms and Conditions will be established on the Issuer s initiative taking account of the Issuer s financial needs and situation in the capital markets. The format of the Final Terms and Conditions is provided under item of this Basic Prospectus. The Final Terms and Conditions will be published at AB Bank Snoras website 14