U.S.$ 100,000, % Loan Participation Notes due Bank Finance and Credit Ltd.

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1 Level: 19 From: 19 Monday, November 13, :10 pm mac Intro : 3312 Intro BANK FINANCE and CREDIT LTD. U.S.$ 100,000, % Loan Participation Notes due 2010 issued by Finance & Credit Ukraine B.V. on a limited recourse basis for the purpose of funding a loan by VTB Bank Europe plc to Bank Finance and Credit Ltd. (established and registered in Ukraine) Issue Price: 100 per cent. Finance & Credit Ukraine B.V. (the Issuer ) is issuing an aggregate principal amount of U.S.$100,000, per cent. Loan Participation Notes due 2010 (the Notes ) for the sole purpose of funding a 100 per cent. participation by the Issuer (the Sub- Participation ) in a loan (the Loan ) to Bank Finance and Credit Ltd. (the Bank ) by VTB Bank Europe plc (the Lender ) pursuant to a sub-participation agreement dated 16 November 2006 (the Sub-Participation Agreement ) between the Issuer and the Lender. Pursuant to a loan agreement dated 16 November 2006 (the Loan Agreement ) between the Lender and the Bank, as borrower, the Lender will use the proceeds of the Sub-Participation for the sole purpose of financing the Loan. The Issuer will charge, by way of first fixed charge as security for its payment obligations in respect of the Notes, its rights and interests as participant under the Sub-Participation Agreement, and the Lender will charge, by way of first fixed charge as security for its obligations in respect of the Sub-Participation Agreement, its rights and interests as Lender under the Loan Agreement, to Deutsche Trustee Company Limited, as trustee (the Trustee ), for the benefit of the holders of the Notes (the Noteholders ) and the Issuer and the Lender will assign their respective administrative rights under the Sub-Participation Agreement and the Loan Agreement to the Trustee, all as more fully described under Description of the Transaction. In each case where amounts of principal, interest and additional amounts (if any) are stated to be payable in respect of the Notes, the obligation of the Issuer to make any such payment shall constitute an obligation only to account to the Noteholders, on each date upon which such amounts of principal, interest and additional amounts (if any) are due in respect of the Notes, for an amount equivalent to all principal, interest and additional amounts (if any) actually received by or for the account of the Issuer pursuant to the Sub- Participation Agreement, excluding however, any amounts paid in respect of Reserved Rights (as defined in the Trust Deed). The Issuer will have no other financial obligations under the Notes. Accordingly, Noteholders will be deemed to have accepted and agreed that they will be relying solely and exclusively on the credit and financial standing of the Bank in respect of the financial servicing of the Notes. Save as otherwise expressly provided in this Prospectus and in the Trust Deed, no proprietary or other direct interest in the Issuer s rights under or in respect of the Sub-Participation Agreement or the Sub-Participation or in the Lender s rights under or in respect of the Loan Agreement or the Loan exists for the benefit of the Noteholders. Subject to the terms of the Trust Deed, no Noteholder will have any entitlement to enforce any of the provisions in the Loan Agreement or the Sub-Participation Agreement or have direct recourse to the Bank except through action by the Trustee under the Security Interests as defined in the Terms and Conditions of the Notes. AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE RISK FACTORS. Application has been made to the Irish Financial Services Regulatory Authority (the IFSRA ), as competent authority in Ireland for the purposes of Directive 2003/71/EC (the Prospectus Directive ), for this prospectus to be approved. This prospectus constitutes a prospectus for the purposes of the Prospectus Directive (the Prospectus ). Application has been made to the Irish Stock Exchange Limited (the Irish Stock Exchange ) for the Notes to be admitted to the Official List of the Irish Stock Exchange and to trading on its regulated market. The Notes will be issued in registered form in denominations of U.S.$150,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes will be represented by a global registered note certificate (the Global Note Certificate ) registered in the name of BT Globenet Nominees Limited as nominee for, and deposited with, a common depositary for Euroclear Bank S.A./N.V. as operator of the Euroclear System ( Euroclear ) and Clearstream Banking, société anonyme ( Clearstream, Luxembourg ) on or about 24 November Individual note certificates ( Individual Note Certificates ) evidencing holdings of Notes will only be available in certain limited circumstances described under Summary of Provisions Relating to the Notes in Global Form. The Notes, the Sub-Participation and the Loan have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the Securities Act ). The Notes are being offered outside the United States in offshore transactions in reliance on Regulation S under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. 3B.4.5 3B.4.1 3A.4.1(a) 3B B.5.1 Deutsche Bank VTB UBS Investment Bank The date of this Prospectus is 16 November 2006

2 Level: 19 From: 19 Monday, November 13, :10 pm mac Intro : 3312 Intro The statistical information and other data contained in the Appendix to this Prospectus entitled Ukraine: The Banking Sector has been extracted from publicly available data (such as information contained on official websites and in publications of governmental agencies of Ukraine, including the National Bank of Ukraine (the NBU ), and from other government or mass media sources) and, as far as each of the Issuer and the Bank is aware and is able to ascertain, no facts have been omitted that would render the reproduced information inaccurate or misleading. Each of the Issuer and the Bank accepts responsibility for accurately extracting and reproducing such data but accepts no further responsibility in respect of such information, including the accuracy of such information. No person is authorised to provide any information or to make any representation not contained in this Prospectus. Any such representation or information should not be relied upon as having been authorised by the Bank, the Issuer, the Lender, the Trustee or any of the managers named under Subscription and Sale (the Managers ). 3A.9.2 3A B.7.4 3C.4.1 Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve an adverse change, in the condition (financial or otherwise) of the Bank or the Issuer since the date of this Prospectus. No representation or warranty, express or implied, is made by the Managers as to the accuracy or completeness of the information set forth in this Prospectus, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation, whether as to the past or the future. None of the Managers assumes any responsibility for the accuracy or completeness of the information set forth in this Prospectus. Each person contemplating making an investment in the Notes must make its own investigation and analysis of the creditworthiness of the Bank, the Issuer and the Lender and its own determination of the suitability of any such investment, with particular reference to its own investment objectives and experience, and any other factors which may be relevant to it in connection with such investment. Neither the Issuer nor the Bank intend to provide any post-issuance information. 3C.4.1 None of the Bank, the Issuer, the Lender, the Managers or any of their respective representatives is making any representation to any offeree or purchaser of the Notes regarding the legality of an investment by such offeree or purchaser under appropriate legal investment or similar laws. Each investor should consult with his own advisers as to the legal, tax, business, financial and related aspects of a purchase of the Notes. The distribution of this Prospectus and the offering, sale and delivery of Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Managers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on distribution of this Prospectus and other offering material relating to the Notes, see Subscription and Sale. In connection with this issue Deutsche Bank AG, London Branch (the Stabilising Manager ) or any person acting on behalf of the Stabilising Manager may over-allot Notes (provided that the aggregate principal amount of Notes allotted does not exceed 105 per cent. of the aggregate principal amount of the 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. However, there is no assurance that the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after 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 of the Notes and 60 days after the date of the allotment of the Notes. 2

3 Level: 19 From: 19 Monday, November 13, :10 pm mac Intro : 3312 Intro RESPONSIBILITY STATEMENT The Issuer and the Bank accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Issuer and the Bank (which have taken all reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information A.1.2 3B.1.1 3B.1.2 3

4 Level: 19 From: 19 Monday, November 13, :10 pm mac Intro : 3312 Intro FORWARD LOOKING STATEMENTS Some statements in this Prospectus may be deemed to be forward-looking statements. Forward-looking statements include statements concerning the Bank s plans, objectives, goals, strategies and future operations and performance and the assumptions underlying these forward-looking statements. When used in this document, the words anticipates, estimates, expects, believes, intends, plans, aims, seeks, may, will, should and any similar expressions generally identify forward-looking statements. These forward-looking statements are contained in Summary, Risk Factors, Business and other sections of this document. The Bank has based these forward-looking statements on the current views of the Bank s management with respect to future events and financial performance. These views reflect the best judgement of the Bank s management but involve uncertainties and are subject to certain risks, the materialisation of which could cause actual results to differ materially from those predicted in the Bank s forward-looking statements and from past results, performance or achievements. Although the Bank believes that the expectations, estimates and projections reflected in the Bank s forward-looking statements are reasonable, if one or more of the risks or uncertainties materialise, including those which the Bank has identified in this Prospectus, or if any of the Bank s underlying assumptions prove to be incomplete or inaccurate, the Bank s actual results of operations may vary from those expected, estimated or projected. These forward-looking statements speak only as at the date of this Prospectus. Without prejudice to any requirements under applicable laws and regulations, each of the Bank and the Issuer expressly disclaims any obligation or undertaking to disseminate after the date of this Prospectus any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations thereof or any change in events, conditions or circumstances on which any such forward-looking statement is based. 4

5 Level: 19 From: 19 Monday, November 13, :10 pm mac Intro : 3312 Intro ENFORCEABILITY OF JUDGMENTS Courts in Ukraine will not recognise and/or enforce any judgment obtained in a court established in a country other than Ukraine unless such enforcement is envisaged by an international treaty to which Ukraine is a party or by an ad hoc arrangement providing for the enforcement of judgments on a reciprocal basis that is in effect between such country and Ukraine, and then only in accordance with such ad hoc arrangements or the terms of such treaty. There is no such treaty in effect between Ukraine and the United Kingdom. Ukraine is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Consequently, a foreign arbitral award obtained in a state which is party to that convention should be recognised and enforced by a Ukrainian court (under the terms of the convention). Since the Loan Agreement contains a provision allowing for arbitration of disputes, respective arbitral awards may be enforced in Ukraine under the provisions of the New York Convention. 5

6 Level: 19 From: 19 Monday, November 13, :10 pm mac Intro : 3312 Intro TABLE OF CONTENTS FORWARD LOOKING STATEMENTS... 4 ENFORCEABILITY OF JUDGMENTS... 5 PRESENTATION OF FINANCIAL INFORMATION... 7 SUMMARY... 9 THE OFFERING SUMMARY FINANCIAL INFORMATION AND STATISTICAL DATA DESCRIPTION OF THE TRANSACTION RISK FACTORS USE OF PROCEEDS EXCHANGE RATES CAPITALISATION BUSINESS RISK MANAGEMENT SELECTED STATISTICAL AND OTHER INFORMATION MANAGEMENT PARTICIPANTS RELATED PARTY TRANSACTIONS EMPLOYEES THE ISSUER THE LENDER THE LOAN AGREEMENT TERMS AND CONDITIONS OF THE NOTES SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM SUBSCRIPTION AND SALE TAXATION GENERAL INFORMATION INDEX TO FINANCIAL STATEMENTS APPENDIX UKRAINE: THE BANKING SECTOR... A-1 6

7 Level: 19 From: 19 Monday, November 13, :10 pm mac Intro : 3312 Intro PRESENTATION OF FINANCIAL INFORMATION Financial Information The financial information of the Bank set forth in this Prospectus, has, unless otherwise indicated, been derived from its reviewed unaudited balance sheet, income statement and cash flow statement as at and for the six months ended 30 June 2006 (the Interim Financial Statements ) and from its audited balance sheet, income statement and cash flow statement as at and for the year ended 31 December 2005 (the 2005 Financial Statements ) and from its audited balance sheet, statement of operations, cash flow statement and statement of changes in shareholders equity as at and for the year ended 31 December 2004 (the 2004 Financial Statements and, together with the Interim Financial Statements and the 2005 Financial Statements, the Financial Statements ), prepared in accordance with International Financial Reporting Standards ( IFRS ). The Financial Statements have been audited by the Bank s independent auditors, CJSC KPMG Audit or KPMG-Ukraine Ltd. (collectively, KPMG ), registered audit firm, located at 11 Mykhailivska St., Kyiv, Ukraine, in accordance with International Standards on Auditing. KPMG is registered with the Audit Chamber of Ukraine. The Ukrainian hryvnia has been selected as the functional and presentation currency for the Financial Statements. Restatement of Prior Period Financial Information The Bank adopted the revised versions of IFRS that were effective for accounting periods beginning on 1 January In preparing the Interim Financial Statements and the 2005 Financial Statements, the Bank s management ( Management ) adjusted comparative figures for 2004 to conform to changes in the presentation of the Interim Financial Statements and the 2005 Financial Statements as required by the amended IFRS. In particular, contributions by participants, other capital contributions and accumulated deficit have been presented as net assets attributable to participants in the Interim Financial Statements and the 2005 Financial Statements in order to comply with the revised International Accounting Standard 32, Financial Instruments: Disclosure and Presentation ( IAS 32 ) and comparative financial information as at 31 December 2004 is restated accordingly. In addition, upon application of the revised IAS 39, Financial Instruments: Recognition and Measurement ( IAS 39 ) as at 1 January 2005, Management designated financial assets previously classified as securities available-for-sale as financial assets at fair value through profit and loss. In previous periods, gains and losses arising from a change in the fair value of available-for-sale securities were recognised in net profit, and as a result, the designation of such assets as financial assets at fair value through profit and loss did not require the restatement of comparative financial results. See note 2 (Basis of preparation) and note 3 (Significant accounting policies) to the Interim Financial Statements and the 2005 Financial Statements. Prior to 2001, Ukraine was considered to be hyperinflationary, as defined by IAS 29, Financial Reporting in Hyperinflationary Economies ( IAS 29 ). Therefore, the Financial Statements have been restated in accordance with IAS 29 by indexing the historical balances by changes in the general price index up to 31 December Currency In this Prospectus, all references to hryvnia and UAH are to the lawful currency for the time being of Ukraine, all references to Russian Roubles and RUR are to the lawful currency for the time being of the Russian Federation, all references to dollars, U.S. dollars, USD and U.S.$ are to the lawful currency for the time being of the United States of America, all references to euros, EUR and are 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, as amended, and all references to are to the lawful currency for the time being of the United Kingdom. 7

8 Level: 19 From: 19 Monday, November 13, :10 pm mac Intro : 3312 Intro Translations of amounts from hryvnia to dollars are solely for the convenience of the reader and are made at various exchange rates. No representation is made that the hryvnia or dollar amounts referred to herein could have been converted into dollars or hryvnia, as the case may be, at any particular exchange rate or at all. The NBU s hryvnia/dollar exchange rate as reported on 30 June 2006 was UAH 5.05 to the dollar. The NBU s hryvnia/dollar exchange rate as reported on 26 October 2006 was UAH 5.05 to the dollar. Rounding Some numerical figures included in this Prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that preceded them. 8

9 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 01 : 3312 Section 01 SUMMARY This summary may not contain all of the information that may be important to prospective purchasers of the Notes. This entire Prospectus, including the more detailed information regarding the Bank s business and the Financial Statements included elsewhere in this Prospectus, should be read as a whole. Investing in the Notes involves risks. The information set forth under Risk Factors should be carefully considered. Certain statements in this Prospectus are forward-looking statements that also involve risks and uncertainties as described under Forward Looking Statements. THE BANK Overview The Bank was established on 8 June 1990 as the Ukrainian Commercial Bank for Business Cooperation and was registered by the State Bank of the USSR on 19 June It was re-registered by the National Bank of Ukraine (the NBU ) under Ukrainian law on 30 October 1991 as Commercial Bank Business Cooperation Bank under registration number 63. In 1995, the Bank was re-registered for an unlimited period as Commercial Bank Finance and Credit, Limited Liability Company. The Bank s full legal name in English is Bank Finance and Credit Limited. Since 1995, the Bank expanded the range of its banking products and services and diversified its customer base. The Bank is now one of the ten leading Ukrainian banks in terms of assets, loan portfolio, retail deposits and banking outlets. As at 30 June 2006, the Bank had total assets of UAH 5.3 billion and net assets attributable to participants of UAH million. For the six months ended 30 June 2006, the Bank generated operating income of UAH million and net profits of UAH 19.3 million. Principal Banking Areas The Bank focuses its primary banking operations on three main areas: (i) corporate banking, (ii) retail banking and (iii) interbank and banknote banking (incorporating treasury, dealing, cash handling, cash transfers, precious metals and foreign exchange operations). These three areas account for the major part of the Bank s revenues. The Bank also has an investment banking department, but currently, investment banking does not account for a significant part of the Bank s business or revenue; however, the Bank s custody team, which forms part of its investment banking department, was ranked seventh among Ukranian custodians by the Ukranian Professional Association of Registrars and Depository Institutions as at 1 July Corporate banking is the Bank s largest business area by revenue. Corporate banking includes lending, SME lending, IBRD financing, deposit taking, corporate bank card services, letter of credit lending and guarantees, bills of exchange, cash management and transfer services, depositary services and other corporate banking services, including international payments and foreign exchange. The Bank s revenue from corporate banking for the six months ended 30 June 2006 amounted to UAH million, which represented 51 per cent. of its total revenue for that period. Gross loans to corporate customers and deposits along with current accounts from corporate customers accounted for 59.4 per cent. and 26.8 per cent. of the Bank s total assets and liabilities, respectively, as at 30 June Interbank and banknote banking in aggregate comprise the Bank s second largest business area by revenue. Interbank banking includes treasury, dealing and clearing services and servicing correspondent accounts. Banknote banking includes operations with precious metals, currency exchange, banknote trading, private money transfers and cash handling. Interbank and banknote banking accounted in aggregate for 25 per cent. of the Bank s revenue for the six months ended 30 June 2006 (with interbank banking accounting for 21 per cent and banknote banking for 4 per cent. of revenue for the period). Retail banking currently comprises the Bank s third largest business area. Retail banking includes consumer lending, deposit taking, cash settlement transactions, bank cards and other retail banking services. Retail banking accounted for 16 per cent. of the Bank s revenue for the six months ended 30 June Gross loans to retail customers and deposits including customers current accounts from retail customers accounted for 17.5 per cent. and 44.3 per cent. of the Bank s total assets and liabilities, respectively, as at 30 June Retail banking has been the Bank s fastest growing business area since 2004, having increased as a 9

10 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 01 : 3312 Section 01 proportion of total revenue from eleven per cent. for 2004, 12 per cent. for 2005 and 16.3 per cent. for the six months ended 30 June 2006 (note that this figure for 2006 is extracted from the Bank s statutory accounts for that period). Management expect that the relative share of retail banking as a proportion of its overall business will continue to increase during the remainder of 2006 and in Strategy The Bank s overall strategic goals are to enhance the quality of its services and product range, strengthen existing and develop new business areas, reduce its costs and increase its market share for its principal banking services through regional and segmented expansion, expand its retail banking business and branch network, enhance its internal management systems, improve staff training and qualifications, improve its operating systems and technology and enhance the transparency of its inter-bank procedures and management and make them fully compliant with international standards. Credit Ratings Currently, the Bank is rated by Moody s Investors Service, Inc. ( Moody s ), which has issued the following credit ratings: Foreign currency long-term deposit rating.. B2 Foreign currency short-term deposit rating NP Outlook... Stable Financial strength... E+ The Notes, on issue, will be assigned a B2 rating by Moody s. 3B.7.5 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. Recent Developments In June 2006, the Bank entered into a syndicated loan facility as arranged by Moscow Narodny Bank Limited (now known as VTB Bank Europe plc), Raiffeisen Zentralbank Österreich Aktiengesellschaft, Standard Bank plc and JSC Vneshtorgbank. The facility size was increased from U.S.$20 million to U.S.$35 million as a result of oversubscriptions during syndication. Borrowings under the facility are to meet existing and future funding commitments of the Bank to its customers. The scheduled maturity date for borrowings under the facility is 25 June 2007 but may be extended at the option of the Bank for a period of one year. Interest on borrowings under the facility is payable at a rate of 2.95 per cent. per annum above US dollar LIBOR. The facility is unsecured. In August 2006, the Bank was approved to participate in the Commodity Credit Corporation Credits Guarantee Program (GSM-102) of the U.S. Department of Agriculture, by which the Bank s qualifying loans to its customers will benefit from guarantee coverage from the U.S. Department of Agriculture subject to an aggregate limit of U.S.$8 million. That month, the Bank was also approved for a similar programme operated by Export Development Canada with an aggregate limit of U.S.$5 million. In August 2006, the Bank created its own international money transfer system (known as Union Urgent Transfer System) based on AVERS and expanded its cash transfer services to Central Asia and the Caucasus. On 4 September 2006, the Bank was ranked first among 23 banks by Expert (a Ukrainian business magazine) for its mortgage loan products. On 11 October 2006 the Bank concluded a framework agreement with Landesbank Berlin for the provision of trade finance facilities, pursuant to which trade financing facilities may from time to time be agreed for the benefit of the Bank. On 28 February 2006, the Bank reached agreement with the Ukrainian State Mortgage Association for the provision of funding for the Bank s mortgage lending operations. The Association, a Ukrainian state agency, 10

11 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 01 : 3312 Section 01 offers relatively low cost funding to Ukrainian mortgage lenders. Management believes that the provision of such funding will help improve the profitability of this business area. Net assets attributable to participants have increased since 30 June 2006 as a result of further contributions by the participants. On 21 August 2006, the General Meeting approved a decision to increase contributions by participants by UAH 100 million. This increase in contributions was registered with the NBU on 25 September As a result, as at 1 October 2006, the nominal amount of the Bank s contributions by participants was UAH 519 million. As at 1 July 2006 the Bank had 290 ATMs and 1,825 POS-terminals in sales outlets throughout the Ukraine. At the end of 2005, Kostyantyn Valentnovych Zhevago, the ultimate owner of 96 per cent. of the participatory interests in the Bank, announced his intention to dispose of up to 25.1 per cent. of the ownership of the Bank and, prior to such disposal, to transform the Bank from a limited liability company to an open joint stock company. The effect of the Bank being transformed into an open joint stock company would be to replace the existing capital base of the Bank, of non-transferable participatory interests, with transferable shares. Management s current plans, as agreed with Mr Zhevago, call for the process for transforming the Bank into an open joint stock company to commence at the end of 2006 and be concluded approximately six months thereafter. See Participants for further details of the procedure for and effect of the Bank becoming an open joint stock company. 11

12 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 01 : 3312 Section 01 THE OFFERING The Offer: Issuer of the Notes and Participant under the Sub-Participation Agreement: Lender under the Loan Agreement and Grantor under the Sub- Participation Agreement: Bank, as Borrower under the Loan Agreement: Trustee: Registrar and Transfer Agent: Principal Paying Agent: Paying Agent: Issue Price: U.S.$ 100,000, per cent. Loan Participation Notes due Finance & Credit Ukraine B.V. VTB Bank Europe plc Bank Finance and Credit Ltd., with its registered office and business headquarters at 60 Artema Street, Kyiv 04050, Ukraine. Deutsche Trustee Company Limited. Deutsche Bank Luxembourg S.A. Deutsche Bank AG, London Branch. Deutsche International Corporate Services (Ireland) Limited. 100 per cent. of the principal amount of the Notes. 3A.5.2 3B.4.1 3B.4.5 3C.3.2 3B B.5.2 3C.3.8(c) 3B.5.2 Issue Date: 24 November Maturity Date: 25 January B B.4.9 Use of Proceeds: Interest: Limited Recourse: Form: The Issuer will use the proceeds of the issue of the Notes for the sole purpose of funding the Sub-Participation granted by the Lender to the Issuer. The Lender will use the proceeds from the Sub-Participation for the sole purpose of financing the Loan made by the Lender to the Bank. The proceeds from the Loan will be used by the Bank to fund loans to corporate and/or individual customers and for general corporate purposes. See Use of Proceeds. The Notes will bear interest from 24 November 2006 at a rate of per cent. per annum payable semi-annually in arrear in equal instalments on 25 January and 25 July in each year commencing on 25 July The Notes will constitute the obligation of the Issuer to apply an amount equal to the proceeds from the issue of the Notes solely for the purpose of funding the Sub-Participation pursuant to the terms of the Sub-Participation Agreement. The Issuer will only account to the holders of the Notes for all amounts equivalent to those (if any) received from the Lender under the Sub- Participation Agreement less amounts in respect of the Reserved Rights (as defined in the Trust Deed) and other amounts referred to in the Sub-Participation Agreement. The Notes will be issued in registered form in denominations of U.S.$150,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes will be represented by a Global Note Certificate registered in the name of BT Globenet Nominees 3B.4.8 3B.4.2 3B.4.6 3C.2.2(c) 3C.3.4(f) 3C.3.4(g) 3B.4.4 3C

13 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 01 : 3312 Section 01 Limited as nominee for, and deposited with, a common depositary for Euroclear and Clearstream, Luxembourg on or about 24 November Individual Note Certificates evidencing holdings of Notes will be available only in certain limited circumstances specified in the Global Note Certificate. Negative Pledge and Other Covenants: Issuer s Covenant: Change of Control: Events of Default/Relevant Events: Withholding Tax or Increased Costs; Gross-up: Clause 14 of the Loan Agreement contains a negative pledge in relation to the creation of Security Interests (other than Permitted Security Interests) (each as defined in the Loan Agreement) by the Bank. The Loan Agreement also contains covenants limiting corporate restructuring and disposals by the Bank, transactions between the Bank and its Affiliates (as defined in the Loan Agreement) and the making of distributions by the Bank and its subsidiaries as well as a covenant by the Bank to comply with the capital adequacy requirements of the NBU. As long as any of the Notes remains outstanding, the Issuer will not, without the prior written consent of the Trustee, agree to any amendments to or any modification or waiver of, or authorise any breach or proposed breach of, the terms of the Loan Agreement, except as otherwise expressly provided in the Trust Deed or the Loan Agreement. Upon a Change of Control (as defined in the Loan Agreement) the Issuer will make an offer to purchase all or any part of the Notes at a price per Note equal to 100 per cent. of the principal amount thereof, plus accrued and unpaid interest thereon and additional amounts, if any, up to the date of repurchase. In such case, the Borrower is required to prepay the Loan in an amount sufficient to provide the funds to enable the Issuer to repurchase the Notes. In the case of an Event of Default (as defined in the Loan Agreement) or a Relevant Event (as defined in the Terms and Conditions of the Notes), the Trustee may, subject as provided in the Trust Deed, (1) require the Lender to declare all amounts payable under the Loan Agreement by the Bank to be due and payable (in the case of an Event of Default) or (2) enforce the applicable security created in the Trust Deed in favour of the Noteholders (in the case of a Relevant Event). Upon repayment of the Loan following an Event of Default, the Notes will be redeemed or repaid at the principal amount thereof, together with interest accrued to the date fixed for redemption and any additional amounts due, and thereupon shall cease to be outstanding. In the event that any payments to be made by the Bank under the Loan Agreement become subject to any withholding tax imposed by Ukraine or any taxing authorities thereof, or certain other circumstances result in the Lender incurring increased cost associated with the Loan or the Sub-Participation, the Bank will (save in certain circumstances and subject to the enforceability of such provisions) be required to pay any additional amount necessary to compensate the Lender for the tax withheld or the increased cost to the Lender. See The Loan Agreement. 13

14 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 01 : 3312 Section 01 Early Redemption: The Loan may be prepaid at its principal amount, together with accrued interest, at the option of the Bank (a) upon the Bank being required to pay additional amounts on account of the Bank, the Lender or the Issuer being required to deduct or withhold any taxes of The Netherlands, the United Kingdom or Ukraine from payments to be made by them in respect of the Notes or under the Loan Agreement or under the Sub- Participation Agreement, (b) upon the Bank being required to pay additional amounts following an Issuer Relevant Event or Lender Relevant Event (both as defined in Terms and Conditions of the Notes Enforcement ) or (c) upon the Bank being required to pay additional amounts on account of certain increased costs incurred by the Lender pursuant to the Loan Agreement. Admission to Listing: Selling Restrictions: The Lender may require the Loan to be prepaid in whole (but not in part) if it becomes unlawful for the Loan, the Sub- Participation or the Notes to remain outstanding, as set out in the Loan Agreement. Upon a prepayment of the Loan and the Sub-Participation in accordance with the terms of the Loan Agreement and the Sub- Participation Agreement, and subject to the receipt of the relevant funds by the Issuer, the principal amount of all outstanding Notes will be prepaid by the Issuer, together with accrued interest. See Terms and Conditions of the Notes Redemption and Purchase. Application will be made for the Notes to be admitted to the Official List of the Irish Stock Exchange and to trading on its regulated market. The Notes have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States. The Notes may be sold in other jurisdictions only in compliance with applicable laws and regulations. The Notes have not been registered in Ukraine and may not be offered or sold in Ukraine without prior registration in Ukraine. The offer and sale of the Notes may also be restricted in other jurisdictions. See Subscription and Sale. 3B.5.1 Governing Law: The Notes, the Loan Agreement, the Sub-Participation Agreement and the Trust Deed will be governed by English law. 3B.4.3 Risk Factors: Security Codes: An investment in the Notes involves a high degree of risk. See Risk Factors. ISIN: XS Common code: B

15 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 02 : 3312 Section 02 SUMMARY FINANCIAL INFORMATION AND STATISTICAL DATA The summary financial information set forth below has been extracted without material adjustment from, and should be read in conjunction with, the Bank s Financial Statements as at and for the six months ended 30 June 2006 and as at and for the years ended 31 December 2005 and 2004 prepared in accordance with IFRS, and the notes thereto, included elsewhere in this Prospectus. The results of the Bank for the six months ended 30 June 2006 may not be indicative of the results for the full year ending The Ukrainian hryvnia has been selected as the functional and presentation currency for the Financial Statements Six months ended 30 June 33 Year ended 31 December (restated) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (U.S.$ 000) 1 (UAH 000) (U.S.$ 000) 1 (UAH 000) (UAH 000) INCOME STATEMENT DATA Interest income... 59, ,538 74, , ,195 Interest expense... (40,210) (203,061) (56,913) (291,661) (181,403) Net interest income... 19,302 97,477 17,646 90,431 75,792 Fee and commission income... 10,194 51,479 15,759 80,758 44,287 Fee and commission expense... (1,039) (5,247) (1,874) (9,602) (7,083) Net fee and commission income... 9,155 46,232 13,885 71,156 37,204 Gains less losses from dealing in foreign currencies... 2,849 14,385 5,588 28,635 24,008 Gains less losses from dealing in financial assets... 3,274 16,532 6,350 32,542 9,064 Other income and expenses, net , ,884 8,058 Operating income... 35, ,692 43, , ,126 Salaries and employee benefits... (9,738) (49,179) (12,964) (66,436) (45,527) General administrative expenses... (10,500) (53,022) (14,108) (72,298) (55,077) Depreciation and amortization... (2,126) (10,736) (3,106) (15,918) (9,675) Impairment loss... (7,482) (37,785) (6,326) (32,419) (14,709) Operating expenses... 29,846 (150,722) (36,504) (187,071) (124,988) Profit (loss) before tax... 5,341 26,970 7,333 37,577 29,138 Income tax expense... (1,528) (7,716) (2,173) (11,137) (8,462) Net profit... 3,813 aaaas 19,254 aaaas 5,160 aaaas 26,440 aaaas 20,676 aaaas Notes: 1 Convenience Translation. See Presentation of Financial Information Currency. 15

16 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 02 : 3312 Section June 1 31 December (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (U.S.$ 000) 1 (UAH 000) (U.S.$ 000) 1 (UAH 000) (UAH 000) BALANCE SHEET DATA Cash... 26, ,451 16,395 82,795 62,436 Balances with the National Bank of Ukraine... 34, ,022 63, ,361 81,308 Due from banks , ,578 77, , ,643 Amounts receivable under reverse repurchase agreements... 14,730 74,384 25, ,107 Financial assets at fair value through profit and loss/securities available-for-sale , ,901 24, ,281 13,552 Loans and advances to customers ,554 3,911, ,409 3,082,567 1,644,130 Property, equipment and intangible assets 20, ,660 16,501 83,328 65,021 Other assets... 20, ,826 9,754 49,257 25,783 Total assets... 1,049,964 aaaas 5,302,319 aaaas 844,557 aaaas 4,265,012 aaaas 2,209,873 aaaas Due to banks , ,034 91, , ,130 Customers current accounts... 96, ,949 90, , ,327 Deposits from customers ,491 3,279, ,445 2,693,896 1,228,128 Certificates of deposit... Promissory notes issued... 2,912 14,704 2,615 13,205 10,964 Deferred tax liability... 5,682 28,696 4,175 21,085 10,051 Other liabilities... 24, ,549 14,603 73,750 52,282 Subordinated loan... 14,709 74,279 15,881 80,200 85,000 Net assets attributable to participants , ,179 91, , ,991 Total liabilities... 1,049,964 aaaas 5,302,319 aaaas 844,557 aaaas 4,265,012 aaaas 2,209,873 aaaas Notes: 1 Convenience Translation. See Presentation of Financial Information Currency. 2 Upon application of the revised IAS 39 as of 1 January 2005, the Bank designated financial assets previously classified as securities available-for-sale as financial assets at fair value through profit and loss. See Presentation of Financial Information. 3 Contributions by participants, other capital contributions and retained earnings attributable to the participants have been presented as net assets attributable to participants in the Interim Financial Statements in order to comply with the revised IAS 32 and comparative financial information as of 31 December 2004 is restated accordingly. See Presentation of Financial Information. 16

17 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 02 : 3312 Section 02 STATISTICAL DATA Bank Performance Ratios Six months ended 30 Year ended June 31 December (per cent.) Net interest margin Net non-interest income to operating income Cost to income ratio Return on average assets Return on average net asset attributable to participants Balance Sheet Ratios 7 Customer loans to customer deposits Customer loans to total assets Shareholders net assets attributable to participants to total assets Tier 1 capital adequacy ratio Total capital adequacy ratio Asset Quality Ratios 7 Overdue customer loans to total loans (gross) Provisions to total customer loans (gross) Provisions to overdue loans Provision charge to total customer loans (gross) Notes: 1 Bank performance ratios for the six months ended 30 June 2006 are annualised where necessary. 2 Net interest margin was calculated as net interest income divided by average interest earning assets before provision for loan impairment. 3 Net non-interest income to operating income was calculated as net non-interest income (i.e., net fee and commission income, gains less losses arising from trading securities, gains less losses arising from investments available-for-sale, gains less losses arising from trading in foreign currencies, foreign exchange translation losses net of gains, gains less losses on origination of assets and liabilities at rates below market, other operating income) divided by operating income. 4 Cost to income ratio was calculated as operating expenses divided by operating income before provision for loan impairment. 5 Return on average assets was calculated as net profit for the period divided by the simple average of total assets at the beginning and at the end of the period. 6 Return on average net assets attributable to participants was calculated as net profit for the period divided by simple average of total net assets attributable to participants at the beginning and at the end of the period. 7 At period end. 8 Customer loans and deposits included related accrued interest income and expenses. 9 As at 30 June 2006, the Bank had overdue loans of UAH million while the total provision for loan impairment was UAH million as of that date. See Risk Management Problem Loan Recovery for details of provisions for loan impairment. 10 Provision charge to total customer loans was calculated as provision charge for the period divided by gross customer loans at the end of the period. 17

18 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 02 : 3312 Section 02 DESCRIPTION OF THE TRANSACTION 3C.3.1 The following summary contains basic information about the Notes, the Sub-Participation and the Loan and should be read in conjunction with, and is qualified in its entirety by, the information set forth under Terms and Conditions of the Notes and The Loan Agreement appearing elsewhere in this Prospectus. Principal and Interest The Issuer Sub-Participation The Lender Principal and Interest on the Notes Proceeds of the Notes Loan Principal and Interest Noteholders The Bank The transaction will be structured as a loan to the Bank by the Lender (the Loan ). The Issuer will issue the Notes which will be limited recourse loan participation notes issued for the sole purpose of financing a funded 100 per cent. participation by the Issuer in the Sub-Participation. The Lender will use the proceeds of the Sub-Participation for the sole purpose of financing the Loan. The Notes will be constituted by, be subject to, and have the benefit of, a trust deed to be entered into by the Issuer, the Lender and the Trustee (the Trust Deed ). The obligations of the Issuer to make payments under the Notes shall constitute an obligation only to pay to the Noteholders an amount equal to, and in the same currency as, sums of principal, interest and/or additional amounts (if any) actually received by or for the account of the Issuer pursuant to the Sub-Participation Agreement. As provided in the Trust Deed, the Issuer will charge in favour of the Trustee for the benefit of the Noteholders as security for its payment obligations in respect of the Notes (a) its rights to principal, interest and additional amounts (if any) as the participant under the Sub-Participation Agreement, (b) its right to receive all sums payable by the Lender under any claim, award or judgment relating to the Sub-Participation Agreement and (c) amounts received pursuant to the Sub-Participation Agreement in an account with the Principal Paying Agent, in the name of the Issuer, together with the debt represented thereby (the Issuer Account and, together with the Lender Account (as defined below), the Accounts ). The Issuer will assign certain administrative rights under the Sub-Participation Agreement to the Trustee. The Lender s obligation to make payments under the Sub-Participation will be deemed to be satisfied to the extent that payments are made to the Issuer Account by the Lender in amounts equal to and in the same currency as those actually received into the Lender Account by the Lender from the Bank pursuant to the Loan Agreement other than amounts received in respect of Reserved Rights and other amounts referred to in the Sub-Participation Agreement. 3C.3.4(a) 3C.3.4(c) 3C.2.1 3C.2.2(c) 3C.3.8(b) In addition, as provided in the Trust Deed, the Lender will charge in favour of the Trustee for the benefit of the Noteholders as security for its payment obligations in respect of the Sub-Participation (a) its rights to principal, interest and additional amounts (if any) as Lender under the Loan Agreement, (b) its right to receive all sums payable by the Bank under any claim, award or judgment relating to the Loan Agreement and (c) amounts received pursuant to the Loan Agreement in an account with the Principal Paying Agent in the name of the Lender, together with the debt represented thereby (the Lender Account ), in each case other than certain amounts in respect of certain Reserved Rights (as defined in the Trust Deed) and other amounts referred to in the Sub-Participation Agreement. The Lender will assign certain administrative rights under the Loan Agreement to the Trustee. The Bank will be obliged to make payments under the Loan to the Lender in accordance with the terms of the Loan Agreement to the Lender Account. 18

19 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 02 : 3312 Section 02 Each of the Lender and the Issuer will covenant not to agree to any amendments to or any modification or waiver of, or authorise any breach or potential breach of, the terms of the Loan Agreement or the Sub- Participation Agreement unless the Trustee has given its prior written consent (except, in the case of the Lender, in relation to the Reserved Rights). Neither the Lender nor the Issuer (save as expressly provided in the Trust Deed, the Loan Agreement and the Sub-Participation Agreement or with the consent of the Trustee) shall pledge, charge or otherwise deal with the Loan, the Sub-Participation or the Note Security (as defined in the Terms and Conditions of the Notes) or any right or benefit either present or future arising under or in respect of the Loan Agreement, the Sub-Participation Agreement or the Accounts or any part thereof or any interest therein or purport to do so. Any amendments, modifications, waivers or authorisations made with the Trustee s consent shall be notified to the Noteholders in accordance with the Terms and Conditions of the Notes and will be binding on the Noteholders. 3C.2.1 The relevant security under the Trust Deed will become enforceable upon the occurrence of a Relevant Event, as the case may be, as further described in the Trust Deed and the Terms and Conditions of the Notes. Payments in respect of the Notes will be made without any deduction or withholding for or on account of taxes of The Netherlands, the United Kingdom or Ukraine except as required by law. In that event, the Issuer will be required to pay additional amounts to the Noteholders in accordance with the Terms and Conditions of the Notes, but only to the extent that it receives corresponding amounts under the Sub-Participation Agreement and the Lender receives corresponding amounts under the Loan Agreement. The Loan Agreement will provide for the Bank to pay such corresponding amounts in these circumstances. Payments under the Sub-Participation Agreement will be made without any deduction or withholding for or on account of taxes, except as required by law. In that event, the Lender will be required to pay additional amounts to the Issuer in accordance with the terms of the Sub-Participation Agreement, but only to the extent that it receives corresponding amounts under the Loan Agreement. The Loan Agreement will provide for the Bank to pay such corresponding amounts in these circumstances. In addition, payments under the Loan Agreement will be made without any deduction or withholding for or on account of Ukrainian taxes, except as required by law, in which event the Bank will be obliged to increase the amounts payable under the Loan Agreement (save in certain circumstances). In certain circumstances, the Loan may be prepaid at its principal amount, together with accrued interest, at the option of the Bank upon the Bank being required to increase the amount payable or to pay additional amounts on account of taxes in The Netherlands, Ukraine or the United Kingdom pursuant to the Loan Agreement or the Sub-Participation Agreement or the Notes or being required to pay additional amounts on account of certain costs incurred by the Lender. The Lender may (in its own discretion) require the Loan to be prepaid if it becomes unlawful for the Loan, the Sub-Participation or the Notes to remain outstanding, as set out in the Loan Agreement. In each case (to the extent that the Lender has actually received the relevant funds from the Bank and the Issuer has in turn actually received the relevant funds from the Lender), the relevant Notes (or in the case of a prepayment for tax reasons or illegality, all outstanding Notes) will be prepaid by the Issuer together with accrued interest. 19

20 Level: 19 From: 19 Monday, November 13, :10 pm mac Section 02 : 3312 Section 02 RISK FACTORS Investment in the Notes involves a high degree of risk. Potential investors should carefully review this entire Prospectus and in particular should consider all the risks inherent in making such an investment, including the risk factors set forth below, before making a decision to invest. The materialisation of these risks, individually or together, could have a material adverse effect on the Bank s business, operations and financial condition and/or the trading price of the Notes. 3A.3.1 3A.3.1 3B.2 Prospective investors should note that the risks described below are not the only risks the Bank faces. They are the risks the Bank considers material. There may be additional risks that the Bank currently considers immaterial or of which it is currently unaware, and any of these risks could have similar effects to the risks described below. Risks Relating to Ukraine General Since independence in 1991, Ukraine has undergone a substantial political transformation from a constituent republic of the former Soviet Union to an independent sovereign democracy. In parallel with this transformation, Ukraine is slowly changing from a centrally planned economy to a market economy. In particular, Ukraine s achievements in market-oriented reforms have recently been recognised by the European Union, which granted Ukraine market economy status at the end of 2005, followed by the U.S., which also granted Ukraine such status in February Although some progress has been made since independence in reforming Ukraine s economy and its political and judicial systems, to some extent Ukraine still lacks the necessary legal infrastructure and regulatory framework that is essential to support market institutions, the effective transition to a market economy and broad-based social and economic reforms. Set forth below is a brief description of some of the risks incurred by investing in Ukraine, although the list is not an exhaustive one. Risks Associated with Emerging Markets Investors in emerging markets such as Ukraine should be aware that these markets are subject to greater risks than more developed markets, including in some cases significant political, economic and legal risks. Investors should also note that emerging economies such as Ukraine s are subject to rapid change and that the information set out in this Prospectus may become outdated relatively quickly. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved, and investors are urged to consult with their own legal and financial advisors before making an investment in the Notes. Official Statistics Official statistics and other data published by Ukrainian state authorities may not be as complete or reliable as those of more developed countries. Official statistics and other data may also be produced on different bases than those used in more developed countries. The Bank has not independently verified such official statistics and other data, and any discussion of matters relating to Ukraine in this Prospectus is, therefore, subject to uncertainty due to questions regarding the completeness or reliability of such information. Specifically, investors should be aware that certain statistical information and other data contained in this Prospectus have been extracted from official governmental sources in Ukraine and were not prepared in connection with the preparation of this Prospectus. The Bank only accepts responsibility for the correct extraction and reproduction of such information. 20