IMPORTANT NOTICE NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE U.S.

Transcription

1 IMPORTANT NOTICE NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE U.S. IMPORTANT: You must read the following before continuing. The following applies to the Offering Circular following this page (the Offering Circular ) and you are therefore advised to read this carefully before reading, accessing or making any other use of the Offering Circular. In accessing the Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF CAPITAL SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE CAPITAL SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OF THE U.S. OR OTHER JURISDICTION AND THE CAPITAL SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE FOLLOWING OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. PERSON OR TO ANY U.S. ADDRESS, ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of the Representation: In order to be eligible to view this Offering Circular or make an investment decision with respect to the securities investors must not be a U.S. Person (within the meaning of Regulation S under the Securities Act). This Offering Circular is being sent at your request and by accepting the and accessing this Offering Circular, you shall be deemed to have represented to us that you are not a U.S. Person, the electronic mail address that you have given to us and to which this has been delivered is not located in the U.S., its territories and possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands), and that you consent to delivery of such Offering Circular by electronic transmission. You are reminded that this Offering Circular has been delivered to you on the basis that you are a person into whose possession this Offering Circular may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver this Offering Circular to any other person. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Issuer in such jurisdiction. Under no circumstances shall this Offering Circular constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdication in which such offer, solicitation or sale would be unlawful. Recipients of this Offering Circular who intend to subscribe for or purchase the securities are reminded that any subscription or purchase may only be made on the basis of the information contained in the final offering circular. This Offering Circular may only be communicated to persons in the United Kingdom in circumstances where section 21(1) of the Financial Services and Markets Act 2000 does not apply to the Issuer. This Offering Circular has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of Dresdner Bank AG London Branch or Gild Financial Advisory Services AS, any person who controls Dresdner Bank AG London Branch or Gild Financial Advisory Services AS, any director, officer, employee or agent of Dresdner Bank AG London Branch or Gild Financial Advisory Services AS or any affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Offering Circular distributed to you in electronic format and the hard copy version available to you on request from Dresdner Bank AG London Branch or Gild Financial Advisory Services AS.

2 OFFERING CIRCULAR AB BANKAS SNORAS (incorporated with limited liability in the Republic of Lithuania under registration code ) C175,000, per cent. Notes due 2010 Issue price: 100 per cent. The A175,000, per cent. Notes due 2010 (the Notes) are issued by AB Bankas SNORAS (the Issuer). Interest will be payable in arrear on 21 May of each year (each an Interest Payment Date). Interest will accrue from and including 21 May 2007 to but excluding 21 May 2010 and will be at a rate of 7.00 per cent. per annum as further described under Conditions of the Notes Interest. The Issuer may redeem the Notes at par at any time in the event of certain tax changes. The Notes mature on 21 May See Conditions of the Notes Redemption and Purchase. Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 (the UK Listing Authority) for the Notes to be admitted to the Official List of the UK Listing Authority and to the London Stock Exchange plc (the London Stock Exchange) for the Notes to be admitted to trading on the London Stock Exchange s Gilt Edged and Fixed Interest Market. The London Stock Exchange s Gilt Edged and Fixed Interest Market is a regulated market for the purposes of Directive 93/22/EEC. The Notes will be rated BB- by Fitch Ratings Ltd and BB- by Standard & Poor s Rating Services, a division of The McGraw Hill Companies Inc. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation. An investment in the Notes involves certain risks. For a discussion of these risks see Risk Factors. The Notes will initially be represented by a temporary global note (the Temporary Global Note), without interest coupons, which will be deposited on or about 21 May 2007 (the Closing Date which shall also be the Issue Date) with a common depositary for Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg). Interests in the Temporary Global Note will be exchangeable for interests in a permanent global note (the Permanent Global Note and, together with the Temporary Global Note, the Global Notes), without interest coupons, on or after 2 July 2007 (the Exchange Date), upon certification as to non-u.s. beneficial ownership. Interests in the Permanent Global Note will be exchangeable for definitive Notes only in certain limited circumstances see Summary of Provisions relating to the Notes while represented by the Global Notes. Definitive Notes, if issued, will be issued in bearer form in the denomination of A50,000 and integral multiples of A1,000 in excess thereof up to and including A99,000. No Notes in definitive form will be issued with a denomination above A99,000. Lead Manager Dresdner Kleinwort Co-Manager Gild Bankers The date of this Offering Circular is 17 May 2007.

3 This Offering Circular comprises a prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the Prospectus Directive). The Issuer accepts responsibility for the information contained in this Offering Circular. To the best of the knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the information contained in this Offering Circular is in accordance with the facts and does not omit anything likely to affect the import of such information. The information contained in the section of this Offering Circular entitled Description of the Issuer on pages 25, 28, 30 and 31 has been extracted from the Bank of Lithuania s Statistics and the Association of Lithuanian Banks Statistics. The Issuer confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from information published by those bodies, no facts have been omitted which would render the reproduced information inaccurate or misleading. This Offering Circular is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (as described in Documents Incorporated by Reference) and shall be read and construed on the basis that such documents are incorporated into and form part of this Offering Circular. The Managers (as defined under Subscription and Sale below) have not independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Managers as to the accuracy or completeness of the information contained or incorporated in this Offering Circular or any other information provided by the Issuer in connection with the Notes. The Managers donot accept any liability in relation to the information contained or incorporated by reference in this Offering Circular or any other information provided by the Issuer in connection with the Notes. No person is or has been authorised by the Issuer to give any information or to make any representation not contained in or consistent with this Offering Circular or any other information supplied by it in connection with the Notes and, if given or made, such information or representation must be relied upon as having been authorised by the Issuer or the Managers. Neither this Offering Circular nor any other information supplied in connection with the Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer or the Managers that any recipient of this Offering Circular or any other information supplied in connection with the Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer. Neither this Offering Circular nor any other information supplied in connection with the issue of the Notes constitutes an offer or invitation by or on behalf of the Issuer or the Managers to any person to subscribe for or to purchase any Notes. Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Notes is correct as of any time subsequent to the date indicated in the document containing the same. The Managers expressly do not undertake to review the financial condition or the affairs of the Issuer during the life of the Notes or to advise any investor in the Notes of any information coming to their attention. Investors should review, inter alia, the most recently published documents incorporated by reference into this Offering Circular when deciding whether or not to purchase any Notes. The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) and are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to U.S. persons, as set out more fully in Subscription and Sale below. IN CONNECTION WITH THE ISSUE OF THE NOTES, DRESDNER BANK AG LONDON BRANCH OR ANY PERSON ACTING ON BEHALF OF DRESDNER BANK AG LONDON BRANCH MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL AFTER THE CLOSING DATE. HOWEVER THERE IS NO ASSURANCE THAT DRESDNER BANK AG LONDON BRANCH (OR PERSONS ACTING ON BEHALF OF DRESDNER BANK AG LONDON BRANCH) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER 2

4 THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE RELEVANT STABILISING MANAGER(S) (OR PERSON(S) ACTING ON BEHALF OF ANY STABILISING MANAGER(S)) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES. All references in this document to euro, EUR and C refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community (signed in Rome on 25 March 1957), as amended, to Litas, LTL,orLt refer to the currency of the Republic of Lithuania and to LVL refer to the currency of the Republic of Latvia. 3

5 CONTENTS FORWARD LOOKING STATEMENTS... 5 SUPPLEMENTARY OFFERING CIRCULAR... 6 RISK FACTORS... 7 CONDITIONS OF THE NOTES SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE REPRESENTED BY THE GLOBAL NOTES USE OF PROCEEDS DESCRIPTION OF THE ISSUER DESCRIPTION OF THE LITHUANIAN BANKING MARKET TAXATION SUBSCRIPTION AND SALE GENERAL INFORMATION FINANCIAL STATEMENTS OF THE ISSUER... F-1 Page 4

6 FORWARD LOOKING STATEMENTS This Offering Circular includes statements that are, or may be deemend to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, intends, may, will, or should or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include, but are not limited to, the following: statements regarding the Issuer s intentions, beliefs or current expectations concerning, amongst other things, the Issuer s results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which the Issuer operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of the Issuer s operations, financial condition and liquidity, and the development of the countries and the industries in which the Issuer operates may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. In addition, even if the results of operations, financial condition and liquidity, and the development of the countries and the industries in which the Issuer operates, are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from the Issuer s expectations are contained in cautionary statements in this document and include, among others, the following:. the Issuer s ability to develop and expand its business;. the Issuer s ability to expand into new markets;. changes in overall economic conditions in Lithuania;. volatility in the world s securities markets;. Capital spending and financial resources; and. the Issuer s anticipated future revenues. These and other factors are discussed in more detail under Risk Factors and Description of the Issuer. Many of these factors are beyond the Issuer s control. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this document as anticipated, believed, estimated or expected. Except to the extent required by laws and regulations, the Issuer does not intend, and does not assume any obligation, to update any industry information forward-looking statements set out in this Offering Circular. 5

7 SUPPLEMENTARY OFFERING CIRCULAR Following the publication of this Offering Circular a supplement may be prepared by the Issuer and approved by the UK Listing Authority in accordance with Article 16 of the Prospectus Directive. Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Offering Circular or in a document which is incorporated by reference in this Offering Circular. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Offering Circular. The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Offering Circular which is capable of affecting the assessment of any Notes, prepare a supplement to this Offering Circular or publish a new Offering Circular for use in connection with any subsequent issue of Notes. 6

8 RISK FACTORS The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are also described below. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons and the Issuer does not represent that the statements below regarding the risks of holding any Notes are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision. Factors that may affect the Issuer s ability to fulfil its obligations under the Notes General Risks related to the Banking Business carried on by the Snoras Group Exposure to Lithuanian and Latvian Economic Risk Since as at 31 December per cent. of the loans made by the Issuer and its subsidiaries (together, the Snoras Group) were to Lithuanian and Latvian borrowers, a general economic downturn or instability in certain sectors of the Lithuanian or Latvian or regional economy could have an adverse effect on the Snoras Group s financial condition and results of operations. Competition The competition that most significantly affects the Snoras Group is that which is faced by the Issuer in Lithuania as 65.4 per cent. of its income originates from Lithuanian customers and approximately 28.6 per cent. of its assets are in Lithuania. The Issuer is subject to competition in Lithuania from both domestic and foreign banks. As at 1 January 2007, there were a total of 10 commercial banks and two branches of foreign banks operating in Lithuania according to the Bank of Lithuania. There is significant concentration as the five largest banks in terms of assets, SEB Vilniaus bankas AB, Bankas Hansabankas AB, DnB Nord Lietuva bankas AB, AB Sampo bankas and the Issuer, together account for more than 74 per cent. of the total banking sector s assets. The Issuer faces its strongest competition from the other four large banks, which are all foreign-owned. Foreign-owned institutions may, through their shareholders, have significantly greater resources and access to cheaper funding than the Issuer. These banks may also be able to leverage the international experience of their shareholders and may therefore prove more attractive to the larger domestic corporate customers and foreign companies operating in Lithuania. To this extent, the Issuer may be at a competitive disadvantage, particularly in relation to corporate customers, and its results of operations may be adversely affected by this competition. Capital Adequacy The Basel Committee on Banking Regulation and Supervisory Practises (the Basel Committee) has set international standards for capital adequacy for banks. The minimum capital adequacy ratio recommended by the 1988 Basel Committee guidelines is 8 per cent. The Snoras Group s capital adequacy ratio under the Basel Committee guidelines was 8.95 per cent. and 9.6 per cent. as at 31 December 2006 and 2005, respectively, and the Issuer s capital adequacy ratio under the same guidelines was per cent. and 9.79 per cent. as at 31 December 2006 and 2005, respectively. The Bank of Lithuania, as the banking regulator, requires Lithuanian commercial banks to maintain a capital adequacy ratio based on financial statements prepared in accordance with International Financial Reporting Standards (IFRS) at 8 per cent. of risk-weighted assets. In view of the Issuer s rapid expansion over the last two years, both geographically and in terms of new customers and loans extended, the Issuer has agreed with the Central Bank of Lithuania to strengthen its capital base and capital adequacy ratio by issuing preference shares to be included in its Tier 1 capital and by maintaining a capital adequacy ratio at a level of at least 10 per cent. The Issuer s capital adequacy ratio as of 31 December 2006 was per cent. compared to 9.79 per cent. as of 31 December As such, as at 31 December 2006, the capital adequacy level maintained by the Snoras Group and the Issuer exceeds the minimum requirements set out by the Bank of Lithuania and the Basel Committee. 7

9 However, if the level of the Snoras Group s portfolio of loans to customers continues to grow significantly and the Issuer fails to generate sufficient level of profits to ensure consistent growth in equity through retained earnings, the Issuer may need to raise new capital to maintain the capital adequacy ratios set by the Bank of Lithuania. Any failure by the Issuer and the Snoras Group to maintain certain capital adequacy ratios could lead to the imposition of sanctions by the Bank of Lithuania, which could have an adverse effect on the Snoras Group s results of operations and financial condition. Liquidity Risks The Snoras Group, like other commercial banks in Lithuania and elsewhere, is exposed to maturity mismatches between its assets and liabilities, which could lead to lack of liquidity at certain times. Although the Snoras Group believes that its level of access to domestic and international interbank markets and its liquidity risk management policy, which includes maintaining liquidity reserves sufficient to meet the Snoras Group s liquidity needs for a certain period, allow and will continue to allow the Snoras Group to meet its short-term and long-term liquidity needs, any maturity mismatches between the Snoras Group s assets and liabilities (including by reason of the withdrawal of large deposits) may have an adverse effect on its financial condition and results of operations. See Description of the Issuer Treasury and Brokerage. Interest Rate Risks The Snoras Group is exposed to risks resulting from mismatches between the interest rates on its interest bearing liabilities and interest-earning assets. While the Snoras Group monitors its interest rate sensitivity by analysing the composition of its assets and liabilities and off-balance sheet financial instruments, any significant and unanticipated interest rate movements may have a material adverse effect on the business, financial condition, results of operations and prospects of the Snoras Group. See Description of the Issuer Treasury and Brokerage. Foreign Currency Risk The Snoras Group is exposed to the effects of fluctuations in foreign currency exchange rates on its financial position and cash flows. Although the Snoras Group is subject to limits on its open currency positions pursuant to Bank of Lithuania regulations and the Snoras Group s internal policies, future changes in currency exchange rates and the volatility of the LTL may adversely affect the Snoras Group s foreign currency positions. Although the Snoras Group uses a number of currency hedging arrangements, no assurances can be given that such hedging arrangements will be available or sufficient for the Snoras Group s future operations reflecting the under-developed nature of the currency hedging market in Lithuania when compared with more mature markets. Risks specific to the Issuer Dependence on Key Personnel The Snoras Group s success in growing its business will depend, in part, on its ability to continue to attract, retain and motivate qualified and skilled personnel. The Snoras Group relies on its senior management for the implementation of its strategy and operation of its day-to-day activities. As competition for skilled personnel, especially on the senior management level, is intense, the Snoras Group seeks to further develop its remuneration levels and to take other measures to attract and motivate skilled personnel. If the Snoras Group is unable to retain key members of its senior management and cannot hire new qualified personnel in a timely manner, its business and results of operations could be adversely affected. Competition in Lithuania for personnel with relevant expertise is intense due to a disproportionately low number of available qualified and/or experienced individuals compared to demand. The Snoras Group s failure to manage successfully its personnel needs could adversely affect the Snoras Group s business and results of operations. Proprietary Trading The Snoras Group engages in various trading activities on its own account. The amount of fixed income trading and available-for sale securities held by the Snoras Group as at 31 December 2006 was LTL 1,282 million, comprising approximately LTL 208 million of Lithuanian government bonds, LTL 916 million of EU sovereign bonds and LTL 112 million of US dollar denominated corporate bonds. Proprietary trading involves risk. Although the Snoras Group principally undertakes proprietary trading activities with a view to hedging its liquidity risk in relation to its loan portfolio, future proprietary trading 8

10 results may be significantly affected by market conditions and could result in losses, which could have an adverse affect on the Snoras Group s financial condition and results of operations. International Operations Certain existing investments of the Snoras Group are in markets which may be susceptible to adverse developments. Any international expansion, particularly into markets that remain in the relatively early stages of development and which are more susceptible to fiscal and economic crises, may expose the Snoras Group to additional risks. Loan Portfolio Growth The Snoras Group s net loans and advances have increased rapidly in recent years, most recently growing by 36 per cent. in 2006 to LTL 2,538 million as at 31 December The significant increase in the loan portfolio size in recent years has increased the Snoras Group s credit exposure. In addition, the Snoras Group s strategy of further diversifying its customer base, including through increased lending to medium and small corporate clients and retail customers, may also increase the credit risk exposure in the Snoras Group s loan portfolio. Failure to manage growth and development successfully and to maintain the quality of its assets could have an adverse effect on the Snoras Group s financial condition and results of operations. Concentration of Lending Base As at 31 December 2006, the Snoras Group s 20 major non-bank borrowers accounted for LTL 604 million, or 24 per cent. of the Snoras Group s total loan portfolio (gross), compared to LTL 443 million, or per cent. as at 31 December Any default by one or more of these borrowers could have an adverse effect on the Snoras Group s financial condition and results of operations. Ownership concentration/change of control The Issuer s principal shareholders are two individuals Mr. Vladimir Antonov, who holds per cent. of the Issuer s share capital, and Mr. Raimondas Baranauskas (current President of Snoras Bank), who holds 25.1 per cent. of the Issuer s share capital. By virtue of such shareholding, Mr. Vladimir Antonov has the ability to influence the Issuer s business significantly through his ability to control actions which require shareholder approval. If circumstances were to arise where Mr. Vladimir Antonov s interests conflict with the interests of the Noteholders, Noteholders could be disadvantaged by any such conflict, as Mr. Vladimir Antonov could take actions contrary to the Noteholders interests.. Deposits The majority of the Snoras Group s deposit customers are resident in Lithuania or Latvia. As at 31 December 2006, the Snoras Group held LTL 4,722 million in deposits from customers which were reported and recorded as resident in Lithuania or Latvia, or 77 per cent. of total deposits. If a change in circumstances occurs, including changes relating to law or economic policy of either Lithuania or Latvia or other relevant countries from where the deposits are made, this may encourage such customers to withdraw their funds from the Snoras Group. If such withdrawals were to occur within a relatively short period of time, it could cause liquidity difficulties for the Snoras Group together with the loss of a significant source of funding, which could have a material adverse effect on the Snoras Group s financial condition and results of operations. Transactions with Related Parties As at 31 December 2006, loans and advances by the Snoras Group to related parties totalled LTL 1.1 million, or 0.04 per cent. of the Snoras Group s total gross loan portfolio. As at 31 December 2006 the Snoras Group held deposits amounting to LTL 0.5 million from related parties or 0.01 per cent. of total deposits held by the Snoras Group. On 27 July 2006 the Bank of Lithuania gave permission to the Issuer to include in its Tier II capital a subordinated loan of EUR 20 million (equivalent to LTL 69.1 million) received from Vladimir Antonov, the main shareholder of the Issuer. This loan has a term of 15 years. 9

11 Risk Management Systems Risk management systems describe the risks of measurement and monitoring of the Snoras Group s exposure to liquidity, interest rate, foreign exchange and other market risks and how the Snoras Group is tackling the problem, if any. Management of these risks also requires substantial resources. Although the Snoras Group believes that it has policies and procedures in place to measure, monitor and manage liquidity and market risks, maturity mismatches or any significant volatility in interest rate movements, exchange rates or commodity market prices could have a material adverse effect on the business, financial condition, results of operations, foreign currency positions and prospects of the Snoras Group. Factors which are material for the purpose of assessing the market risks associated with the Notes The Notes may not be a suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) (ii) (iii) (iv) (v) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement; have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor s currency; understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Risks related to the structure of the Notes During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to the first date on which the Notes may be redeemed. The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time. Risks related to Notes generally Set out below is a brief description of certain risks relating to the Notes generally: Modification The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. EU Savings Directive Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries) unless during such period those countries elect otherwise. A number of other non-eu 10

12 countries and territories including Switzerland have agreed to adopt similar measures (a withholding system in the case of Switzerland). If, following implementation of this Directive, a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. If a withholding tax is imposed on payment made by a Paying Agent following implementation of this Directive, the Issuer will be required to maintain a Paying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Directive. Change of law The conditions of the Notes are based on English law in effect as at the date of this Offering Circular. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Offering Circular. Trading in the clearing systems The denomination of the Notes is A50,000 plus integral multiples of A1,000 in excess thereof. Therefore, it is possible that the Notes may be traded in amounts in excess of A50,000 that are not integral multiples of A50,000. In such a case a Noteholder, who, as a result of trading such amounts, holds a principal amount of less than A50,000 will not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that it holds an amount equal to one or more denominations. Risks related to the market generally Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk: The secondary market generally The Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. Exchange rate risks and exchange controls The Issuer will pay principal and interest on the Notes in euro. This presents certain risks relating to currency conversions if an investor s financial activities are denominated principally in a currency or currency unit (the Investor s Currency) other than euro. These include the risk that exchange rates may significantly change (including changes due to devaluation of euro or revaluation of the Investor s Currency) and the risk that authorities with jurisdiction over the Investor s Currency may impose or modify exchange controls. An appreciation in the value of the Investor s Currency relative to euro would decrease (1) the Investor s Currency-equivalent yield on the Notes, (2) the Investor s Currencyequivalent value of the principal payable on the Notes and (3) the Investor s Currency-equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal. Interest rate risks Investment in fixed rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Notes. Credit ratings may not reflect all risks One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time. Any adverse change in an applicable credit rating could adversely affect the trading price for the Notes. 11

13 Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules. 12

14 CONDITIONS OF THE NOTES The following is the text of the Conditions of the Notes which (subject to modification) will be endorsed on each Note in definitive form: The A175,000, per cent. Notes due 2010 (the Notes, which expression shall in these Conditions, unless the context otherwise requires, include any further notes issued pursuant to Condition 13 and forming a single series with the Notes of AB Bankas Snoras (the Issuer) are issued subject to and with the benefit of an Agency Agreement dated 21 May 2007 (such agreement as amended and/or supplemented and/or restated from time to time, the Agency Agreement) made between the Issuer, Citibank, N.A. as fiscal agent and principal paying agent (the Fiscal Agent) and any other initial paying agents named in the Agency Agreement (together with the Fiscal Agent, the Paying Agents). The statements in these Conditions include summaries of, and are subject to, the detailed provisions of and definitions in the Agency Agreement. Copies of the Agency Agreement are available for inspection during normal business hours by the holders of the Notes (the Noteholders) and the holders of the interest coupons appertaining to the Notes (the Couponholders and the Coupons respectively) at the specified office of each of the Paying Agents. The Noteholders and the Couponholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement applicable to them. References in these Conditions to the Fiscal Agent and the Paying Agents shall include any successor appointed under the Agency Agreement. 1. FORM, DENOMINATION AND TITLE 1.1 Form and Denomination The Notes are in bearer form, serially numbered, in the denomination of A50,000 and integral multiples of A1,000 in excess thereof up to and including A99,000 each with Coupons attached on issue. No Notes in definitive form will be issued with a denomination above A99, Title Title to the Notes and to the Coupons will pass by delivery. 1.3 Holder Absolute Owner The Issuer and any Paying Agent may (to the fullest extent permitted by applicable laws) deem and treat the bearer of any Note or Coupon as the absolute owner for all purposes (whether or not the Note or Coupon shall be overdue and notwithstanding any notice of ownership or writing on the Note or Coupon or any notice of previous loss or theft of the Note or Coupon). 2 STATUS The Notes and the Coupons are direct, unconditional and (subject to the provisions of Condition 3.1) unsecured obligations of the Issuer and (subject as provided above) rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors rights. 3. NEGATIVE PLEDGE 3.1 Negative Pledge So long as any of the Notes remains outstanding the Issuer will not, and will procure that none of its Subsidiaries shall, create or have outstanding any mortgage, charge, lien, pledge or other security interest (each a Security Interest), other than a Permitted Security Interest, upon, or with respect to, any of its present or future business, undertaking, assets or revenues (including any uncalled capital) to secure any Indebtedness or any Guarantee of Indebtedness, unless the Issuer, in the case of the creation of a Security Interest, before or at the same time and, in any other case, promptly, takes any and all action necessary to ensure that: (a) all amounts payable by it under the Notes and the Coupons are secured by the Security Interest equally and rateably with the relevant Indebtedness; or (b) such other Security Interest or other arrangement (whether or not it includes the giving of a Security Interest) is provided as is approved by an Extraordinary Resolution (which is defined in the Agency Agreement as a resolution duly passed by a majority of not less than three fourths of the votes cast) of the Noteholders. 13

15 3.2 Interpretation For the purposes of these Conditions: (a) Guarantee means, in relation to any Indebtedness of any Person, any obligation of another Person to pay such Indebtedness including (without limitation): (i) any obligation to purchase such Indebtedness; (ii) any obligation to lend money, to purchase or subscribe shares or other securities or to purchase assets or services in order to provide funds for the payment of such Indebtedness; (b) (c) (iii) (iv) any indemnity against the consequences of a default in the payment of such Indebtedness; and any other agreement to be responsible for such Indebtedness; Indebtedness means any indebtedness of any Person for money borrowed or raised including (without limitation) any indebtedness for or in respect of: (i) amounts raised by acceptance under any acceptance credit facility; (ii) amounts raised under any note purchase facility; (iii) the amount of any liability in respect of leases or hire purchase contracts which would, in accordance with applicable law and generally accepted accounting principles, be treated as finance or capital leases; (iv) (v) the amount of any liability in respect of any purchase price for assets or services the payment of which is deferred for a period in excess of 60 days; and amounts raised under any other transaction (including, without limitation, any forward sale or purchase agreement) having the commercial effect of a borrowing; Permitted Security Interest means: (i) (ii) (iii) (iv) (v) any Security Interest in existence on the issue date of the Notes to the extent that it secures Indebtedness outstanding on such date; any Security Interest arising by operation of law and in the ordinary course of business of the Issuer or any of its Subsidiaries which does not (either alone or together with any one or more other such Security Interests) materially impair the operation of such business; any Security Interest arising pursuant to any agreement (or other applicable terms and conditions) which is standard or customary in the relevant market and in the ordinary course of its banking business (and not for the purpose of raising credit or funds for the operation of the Issuer or any Subsidiary other than on a short-term basis as part of the Issuer s or such Subsidiary s liquidity management activities), in connection with (x) contracts entered into substantially simultaneously for sales and purchases at market prices of commodities (including currency) or securities, (y) the establishment of margin deposits and similar collateral in connection with any derivative or other trading transaction or (z) proprietary trading activities generally; any Security Interest granted upon or with regard to any property acquired after the issue date of the Notes by the Issuer or any Subsidiary to secure the purchase price of such property or to secure Indebtedness incurred solely for the purpose of financing the acquisition of such property and transactional expenses related to such acquisition (other than a Security Interest created in contemplation of such acquisition), provided that the maximum amount of Indebtedness thereafter secured by such Security Interest does not exceed the purchase price of such property (including transactional expenses) or the Indebtedness incurred solely for the purpose of financing the acquisition of such property; any Security Interest created by a Subsidiary to secure amounts owing to the Issuer from that Subsidiary; 14

16 (vi) any Security Interest created by a company which is acquired by the Issuer or any Subsidiary after the date of issue of the Notes provided that such Security Interest was created prior to the date of acquisition; and (vii) any Security Interest existing over any property at the time of the acquisition of such property by the Issuer or any Subsidiary; (d) (e) Person means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality; and Subsidiary means, in relation to the Issuer, any company (i) in which the Issuer holds a majority of the voting rights or (ii) of which the Issuer is a member and has the right to appoint or remove a majority of the board of directors or (iii) of which the Issuer is a member and controls a majority of the voting rights, and includes any company which is a Subsidiary of a Subsidiary of the Issuer. 4. INTEREST 4.1 Interest Rate and Interest Payment Dates The Notes bear interest from and including 21 May 2007 at the rate of 7.00 per cent. per annum, payable annually in arrear on 21 May in each year (each an Interest Payment Date). The first payment (for the period from and including 21 May 2007 to but excluding 21 May 2008 shall be made on 21 May 2008). Interest in respect of any Note shall be calculated per A1,000 in principal amount of the Notes (the Calculation Amount). The amount of interest payable per Calculation Amount on any Interest Payment Date (other than interest in respect of a period of less than a full year) shall be A Interest Accrual Each Note will cease to bear interest from and including its due date for redemption unless, upon due presentation, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of payment. In such event, interest will continue to accrue until whichever is the earlier of: (a) (b) the date on which all amounts due in respect of such Note have been paid; and five days after the date on which the full amount of the moneys payable in respect of such Notes has been received by the Fiscal Agent and notice to that effect has been given to the Noteholders in accordance with Condition Calculation of Broken Interest When interest is required to be calculated in respect of a period of less than a full year, it shall be calculated on the basis of (a) the actual number of days in the period from and including the date from which interest begins to accrue (the Accrual Date) to but excluding the date on which it falls due divided by (b) the actual number of days from and including the Accrual Date to but excluding the next following Interest Payment Date. 5. PAYMENTS 5.1 Payments in respect of Notes Payments of principal and interest in respect of each Note will be made against presentation and surrender (or, in the case of part payment only, endorsement) of the Note, except that payments of interest due on an Interest Payment Date will be made against presentation and surrender (or, in the case of part payment only, endorsement) of the relevant Coupon, in each case at the specified office outside the United States of any of the Paying Agents. 5.2 Method of Payment Payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by euro cheque. 15