Investments

MiFID (Markets in Financial Instruments Directive) is an EU directive taking effect on 1 November 2007. The aim is to ensure uniform rules for trading in financial instruments. The rules are based on principles of higher investor protection, increased transparency and a single regulatory regime across the EU member states, and, therefore, they support an improved single market for financial services. The directive affects financial institutions' trading in financial instruments, including advisory services and product development, as well as securities brokerage and asset management and is seen as a small-scale reform of stock exchanges.

Danske Bank A/S Lithuania Branch has sent letters about MiFID to clients. The main messages have been:

• The MiFID rules follow in the wake of the Danske Bank A/S Lithuania Branch rules for best global practice in the investment area, which the Bank has applied in recent years, both in connection with our product development and provision of advisory services to customers.
• MiFID introduces increased documentation requirements to make it clear what has been agreed between the Bank and the customer and to avoid ambiguity.
• Fees and charges will not be affected by MiFID. This means that the amount of costs which were spent to prepare and realize MiFID will be funded out of the Bank's profits.

The EU rules divide clients who use investment services into three categories:
(1) retail clients;
(2) professional clients;
(3) eligible counterparties.

The requirements for investor protection and documentation of advice differ for the three categories.

• Retail clients have the highest level of protection, and most of our clients, including all personal clients and by far the majority of our small and medium-sized business clients, belong to this category.
• Professional clients have a lower level of protection because they are often very large businesses that regularly trade in financial instruments and foreign currency products.
• Eligible counterparties are typically banks, insurance companies and pension funds, and, generally, the rules on investor protection do not apply to these clients.

We have changed a number of our terms and conditions as a consequence of the new EU rules. We have also drawn up an order execution policy applying to all our clients when they buy or sell financial instruments and foreign currency products through Danske Bankas. This policy describes the steps we take to achieve the best possible result for you.

The new rules require that the clients would accept the new order execution policy of Danske Bankas, so the clients need to give the consent for Bank in order for further using of Danske Bankas's investment services. As from 1 November 2007, the clients will do this automatically when you trade through Danske Bankas.

Your trading range is Danske Bankas's made assessment of your knowledge of and trading experience in financial instruments – including your knowledge of the risks attached to such instruments. If you want to trade outside your trading range, we recommend that you contact Danske Bankas before you trade.

Danske Bankas has already determined your trading range, we have done so on the basis of the trades that you have made through our Bank during the past two years. If you do not accept this assessment, you are welcome to contact us. If your knowledge of financial instruments changes – for example, because you obtain advice and information from us – your trading range can, of course, be changed.

If you are a new client and your trading range has not yet been determined, we recommend that you contact your adviser the first time you decide to trade after the new rules have come into force.

The services that we provide to you depend on what you need.

• If you need a personal recommendation (an advice) on a specific financial instrument, the new rules require that we identify your investment profile, which will include information about your trading range, financial situation, investment knowledge and experience. The aim is to ensure that our recommendation matches your requirements. As a result, you must have an investment profile before we can give you a personal recommendation.
• If you want to buy or sell a specific financial instrument (without a personal recommendation), changes will be few. You can trade through our online banking facilities or have orders executed through one of our branches. Also, changes will be negligible if you need general information about investment products, risks, market conditions and the like.

Your investment profile is an important tool for your investment decisions. Your profile will include information about:

• Your trading range;
• Your financial situation;
• The objective of your investment – is it for pension or saving purposes?
• Your time horizon – do you need the funds in 1, 5 or 25 years?
• The amount of risk that you are willing to take.

There may be situations where everything does not go strictly by the book, and where the Bank will be criticised for its handling of the MiFID rules and its advisory services. In general, in such situations, the spokes person will inform about the extent of the MiFID project, the background to the specific issue, and what it is doing to solve it and prevent that it recurs.

All the new Danske Bankas's clients, who want to get the investment services, from 1 November 2007 have to confirm with Bank the new agreements of providing the investment services. The older client's accounts of securities will be no more in force from the new agreement's date.

All the Danske Bankas's clients have to change their agreements with Bank till 31 December 2007. The clients need to visit the Bank. If the clients will not do this till given date Danske Bankas will not provide for them any investment services. The agreement can be changed in every Danske Bankas's branch. The best way to do this is to make an arrangement with Bank's employee by this phone number: 1636.

The directive of Europe Parliament and Council 2004/39/EB and the directive of Commission 2006/73/EB (MiFID directives) are enforced in Republic of Lithuania by:

• the Law on Securities (2007, No. 17-626)
• the Law on Markets in Financial Instruments (2007, No. 17-627)
• various rules and procedures regulating the activity of financial brokerage and confirmed by the Lithuanian Securities Commission.