REPUBLIC OF LITHUANIA

REPUBLIC OF LITHUANIA Official translation REPUBLIC OF LITHUANIA LAW ON PENSION FUNDS June 3 1999, No VIII-1212 Vilnius CHAPTER I Article 1. Purpose of the Law 1. This law shall provide the legal basis for establishing a system of supplementary voluntary pension schemes (supplementary voluntary social insurance) and increasing the income level of persons participating in this system upon retirement. 2. The Law shall set forth the procedure for the development and implementation of pension schemes, the conditions and procedure of issuance and withdrawal of authorisations for the activities of pension funds, the specific character of the activities of these funds, their reorganisation and liquidation, and the basic principles of state regulation of supplementary voluntary pension schemes. 3. This Law shall not regulate relations arising on the basis of insurance activities related to provision of pensions for the population, with the exception of relations referred to in Article 26. The activities of enterprises engaged in annuity insurance and relations resulting from these activities shall be regulated by the Law on Insurance. 4. The relations relating to supplementary voluntary pension schemes shall be regulated by other laws and legal acts of the Republic of Lithuania to the extent that they do not contravene this Law. Article 2. Definitions 1. Activities of pension funds means financial and economic activity aimed at providing supplementary retirement income by accumulating monetary funds under pension agreements in the pension accounts opened for participants of the schemes at the pension fund and by investing or reinvesting said funds into a diversified investment portfolio as well as paying pension benefits to the pension scheme participants on terms and conditions set forth in this Law and the pension scheme. 2. A pension fund means a company established and operating in accordance with the procedure laid down by the Company Law and this Law. 3. A pension scheme means a set of legal and organisational measures defining terms and conditions of the payment of pension contributions and benefits, the strategy of investment of the assets of the pension fund as well as other rights and duties of the pension scheme participants and the pension fund. 4. A participant of the pension scheme means a person with whom or for whose benefit a pension agreement is made and in whose name a personal pension account is opened at the pension fund. 5. A pension contributor means a participant of a pension scheme, his employer or any third person who pays pension contributions or their portion. 6. A pension account means a personal account of a participant of the pension scheme opened at the pension fund under a pension agreement, in which the pension contributions and the investment earnings allocated to him are accumulated. 7.A pension annuity means a periodic pension benefit paid to the pension scheme participant for life, with the full risk of its payment borne by the payer of the annuity, i.e. an insurance agency effecting life insurance. 8.A depository - as defined in the Law on Investment Companies. 9. A diversified investment portfolio means an investment portfolio meeting the following requirements: 1) not more than 5% of the assets has been invested in securities of a single issuer or a single item of property, with the exception of cases referred to in subparagraphs 5 and 6 of this paragraph; 2) not more than 10% of voting shares of a single issuer has been acquired; 3) not more than 10% of non-voting shares of a single issuer has been acquired; 4) not more than 30% of debt securities of a single issuer has been acquired, with the exception of cases referred to in subparagraph 5 of this paragraph; 5) not more than 30% of the assets has been invested in securities of the same issue, issued or guaranteed by the central or local government, and the investment portfolio consists of securities of at least six different issues issued and guaranteed by the central or local government; 6) not more than 10% of the assets has been invested in the securities of a single issuer, the aggregate sum of such investments is not in excess of 40% of the total value of the assets. 10. The management enterprise means an enterprise to which the management of the pension fund assets and/or pension scheme assets has been assigned under the asset management agreement. 11. Public managers means members of the supervisory board and the board of the enterprise, manager of the administration and his deputies, and the chief financier (accountant). 12.Persons connected with the pension fund’s management enterprise means: 1) persons controlled by the management enterprise or controlling it; 2) managers of the management enterprise; 3) where the legal person is the controlled or controlling person - managers of the legal person 13. Persons connected with the Pension Fund Depository means: 1) persons controlled by the Depository or controlling it; 2) managers of the Depository; 3) where the legal person is the controlled or controlling person - managers of the legal person 14. The controlling person means a natural or legal person who, 1) being a shareholder (a member shareholder or a member), has more than one-third of the total number of votes or, under the agreement with the other shareholders (member shareholders, members) controls more than one-third of the total number of votes; 2) is entitled to select (appoint) the majority of the members of the Supervisory Council (the Board) or head of the administration; 3) actually controls decisions made by the legal person. 15. Persons connected with the pension fund means: 1) persons holding more than 10% of the shares of the pension fund; 2) enterprises or other organisations more than 10% of the shares whereof is owned by the pension fund; 3) public managers of the pension fund and enterprises and organisations connected with it. 16. An employer means all types of enterprises, offices and organisations, where labour relations with their employees are regulated under an employment agreement. 17. The investment portfolio means the collection of investments held. 18. Own assets of the pension fund means the investment portfolio acquired by investing own capital in the manner prescribed by this Law, and own funds. 19. Pension assets means the sum total of assets of the pension schemes. 20. Assets of the pension scheme means the assets acquired in exchange for the pension contributions (including the temporarily non-invested portion of said funds) and income (expenses) from investments received from these assets (funds). 21. Income (expenses) from the asset investments means the sum of the income (expenses) received from the assets of the pension scheme and the income (expenses) received due to the change in the value of these assets. 22. A block of securities means one-tenth or a larger portion of the same class of securities of one issuer. CHAPTER II FOUNDING OF A PENSION FUND AND ITS Activities Article 3. A Pension Fund 1. A pension fund shall be an economic entity of limited liability, engaged in the activities of a pension fund and liable for its obligations only to the extent of its own assets. A pension fund shall not be liable for state obligations, and the state shall not be liable for the obligations of the fund, with the exception of cases when the state itself assumes such obligations. 2. The words “pension fund” or its abbreviated form “PF” may only be used in the name of a company established as a pension fund in the manner prescribed by the Company Law and this Law and engaged in the activities of a pension fund. The name of the pension fund must comply with the requirements of the regulations on the names of enterprises, offices and organisations approved by the Government. 3. The provisions of the Company Law shall apply to pension funds unless this Law provides otherwise. Article 4. Founding of a Pension Fund 1. A pension fund shall be founded only in a closed manner. 2. A pension fund may not be founded for a limited period of time. 3. The expenses of founding of a pension fund shall be covered from the additional contributions by the founders of the pension fund. 4. In addition to other requirements set forth in Article 7 of the Company Law, the following shall be specified in the regulations of the pension fund: 1) the procedure of participation in the pension fund’s schemes, withdrawal from the scheme and moving to other schemes; 2) the procedure of suspension of participation in the pension fund’s schemes; 3) funds and reserves of the pension fund, and the procedure of their formation and use; 4) the procedure of covering of the pension assets management costs; 5) the procedure of approval, change and termination of pension schemes; 6) the procedure of election of an auditor and formation of internal control bodies; 7) the procedure of providing financial statements on the execution of the pension schemes to the participants of the pension schemes, employers, and any third persons who pay contributions for the benefit of the participants of a pension scheme and who have signed pension agreements; 8) the procedure of notification by the pension fund of the participants of the pension schemes, employers, and any third persons who have signed pension agreements; 9) the procedure of calculation and distribution under pension schemes of the investment return from the assets of the pension schemes. 5. The regulations of the pension fund must set forth that the asset management agreement with the asset management enterprise be approved by a general shareholders meeting. 6. The regulations may lay down other provisions that do not contradict this Law and other laws. 7. The regulations, their amendments and supplements shall come into effect subject to the agreement by the Securities Commission and registration in accordance with the procedure set forth in legal acts. 8. A pension fund may establish its branches in the manner specified in the fund’s regulations subject to the consent by the Securities Commission 9. Pension agreements shall be signed, pension accounts opened and the accumulation of pension contributions shall start subject to an authorisation to engage in its activities and registration with the Securities Commission in the manner determined by the Commission of an appropriate pension scheme after approval by the Ministry of Social Security and Labour. Article 5. Authorisation to Engage in the Activities of a Pension Fund 1. It shall be prohibited to engage in the activities of a pension fund without an authorisation issued by the Securities Commission. An authorisation for engaging in the activities of a pension fund may be granted to a newly established fund or to a functioning company the general shareholders meeting whereof has resolved to engage in the activities of a pension fund. 2. In order to receive the authorisation, a company shall submit to the Securities Commission an application which shall contain the following: 1) the name of the company, its registered office and the enterprise code; 2) the registered authorised capital and own capital; 3) the information about financial and professional readiness to engage in the activities of a pension fund (names, addresses, telephone numbers, etc., of the persons holding qualification certificates recognised by the Securities Commission) if the management of the pension fund’s assets is not transferred to a management enterprise. 3. The following documents shall be attached to the application for the authorisation: 1) the founding documents (the founding agreement, the minutes of the statutory meeting, the certificate of the registration of the pension fund’s name); 2) the regulations; 3) financial statements of the previous and current year with the report of an independent auditor; 4) documents certifying that the company’s shareholders have the capital necessary for the activities of a pension fund; 5) agreement with the management enterprise (where the assets are transferred to it for management) and the depository; 6) data about the owners of the pension fund, specifying their names, addresses, the portion of capital and votes held, their participation in the capital of other enterprises and the portion of capital held therein. Where the owner of the pension fund is a legal entity, the data about the persons in charge of it; 7) data about the chosen depository; 8) data about the chosen management enterprise (where the pension fund transfers to it management of its investment); 9) the business plan for three coming years; 10) the pension scheme agreed upon with the Ministry of Social Security and Labour in accordance with the procedure established by it; 11) other documents set forth in the rules of the Securities Commission. The Securities Commission shall have the right to request additional documents and information necessary for granting of an authorisation. 4. The certificate and the documents attesting the payment for the shares of the pension fund which is being founded, shall be submitted to the Securities Commission not later than seven working days before the date of deliberation concerning granting of an authorisation. 5. The decision on granting an authorisation must be made by the Securities Commission within three months since the date of filing of the documents stipulated in paragraphs 2 and 3 of this Article. Where the Securities Commission requests additional documents or information, the period of 3 months shall be calculated from the date when the supplementary documents and information are filed. Refusal to grant an authorisation must be motivated in writing and may be appealed against in the court. 6. The Securities Commission may refuse to grant an authorisation to engage in the activities of a pension fund if: 1) not all the documents specified in paragraphs 2 and 3 of this Article have been filed; 2) the documents filed for obtaining an authorisation do not comply with the requirements set forth in this or other laws; 3) incorrect or misleading information has been provided in the documents filed for obtaining an authorisation; 4) the pension scheme has not been agreed with the Ministry of Social Security and Labour; 5) not all the shares of the pension fund have been paid up or the founders have acquired only a portion of the shares of the first issue; 6) the reputation of the founders of the pension fund (if the founder is a legal entity, the managers of the entity or the persons in charge of

1. it)or the shareholders holding at least 10% of the shares is not above suspicion (there is evidence of their dishonesty or frequent breach of the financial discipline, sanctions have been imposed on them for abuse of their official position or administrative penalties have been imposed for breaches of law, putting at risk property, breaches of law in the sphere of finances or privatisation of state-owned property, for violations of laws regulating the securities market, or who have previous convictions for premeditated offences); 7) own and/or authorised capital of the company intending to engage in the activities of a pension fund does not comply with the requirements set forth in Article 27 of this Law. 7. The Securities Commission may restrict the activities of a pension fund, if: 1) the detected violations may have a negative effect upon the financial status of the fund or the interests of the pension scheme participants; 2) the pension fund manages the register of the participants and contributors of the pension schemes, financial accounting negligently or fraudulently, and improperly draws up the financial statements; 3) the pension fund signs pension agreements, opens pension accounts and/or starts accumulating pension contributions under a pension scheme which is not registered with the Securities Commission; 4) own and/or the authorised capital of the pension fund or of the management enterprise to which the pension assets have been transferred does not comply with the requirements established by the Securities Commission; 5) the pension fund does not meet the requirements of this Law or legal acts adopted on the basis of this Law, or the provisions of other legal acts referred to in this Law. 8. The Securities Commission, for the reasons stipulated in paragraph 7 of this Article, may restrict the activities of the pension fund for a period of maximum three months. During this period the Securities Commission shall make a decision on cancellation of the restrictions of the pension fund’s activities or on withdrawal of the authorisation. The resolution on imposing restrictions on the activities must specify the reasons of the restrictions and the time limit for elimination of the violations. 9. The Securities Commission shall have the right to appoint an administrator to supervise the activities of the pension fund during the period when its activities are under restriction. The rights and obligations of the administrator shall be determined by the Securities Commission. Upon appointment of the administrator, the managers of the pension fund (management enterprise) must obtain his approval of every decision related to the activities of the pension fund stipulated in the resolution of the Securities Commission on restriction of the activities. 10. The Securities Commission must revoke the authorisation, if the pension fund is being liquidated. It may also revoke the authorisation if at least one of the following is true: 1) the pension fund is being reorganised; 2) the authorisation was obtained having knowingly provided misleading or false information, forged documents or concealed the facts which could have prevented granting of the authorisation; 3) the pension fund did not start its activities within one year after obtaining the authorisation; 4) the pension fund fails to ensure the safety of funds entrusted to it, or is incapable of fulfilling its obligations to the participants of the pension schemes; 5) the pension fund negligently or fraudulently manages accounting, improperly draws up financial statements; 6) the pension fund fails, within a specified time limit, to eliminate shortcomings due to which the activities of the pension fund were restricted; 7) the pension fund does not comply with the requirements stipulated in this Law, other laws directly referred to in this Law, or regulations adopted on the basis of these Laws. 11. Prior to making a decision to restrict the activities of the pension fund or to withdraw the authorisation, the Securities Commission must inform the pension fund and provide a possibility for the pension fund to provide an explanation. 12. The pension fund shall have the right to hire an independent auditor to audit the activities of the fund if the Securities Commission establishes that there are grounds for the withdrawal of the authorisation referred to in paragraphs 4 and 5 of Article 10 of this Law. The report of the independent auditor must be submitted to the Securities Commission within two months from the date of the request to carry out the audit, unless the Commission establishes some other time limit. The question regarding withdrawal of the authorisation may be discussed without the report of the independent auditor, if the pension fund failed to submit the report to the Securities Commission within the set period of time, or refused to carry out an independent audit, or failed to provide any information that an independent audit will be carried out. Article 6. Specific Features of the Pension Fund’s Activities 1. The following risk management ratios shall be established for the pension funds: 1) capital adequacy; 2) liquidity; 3) the maximum open position in a foreign currency. 2. The ratios, methods of their calculation, and frequency of reporting about meeting the set ratios shall be determined by the Securities Commission. 3. The pension fund shall not engage in any other activities except those related to the activities of a pension fund. 4. The pension fund shall be prohibited from: 1) extending loans, providing a guarantee or security for the liabilities of any person; 2) taking out loans, except short-term, (up to one year maturity) to maintain liquidity the amount of which may not be not in excess of 10 per cent of the pension fund’s own capital; 3) pledging securities or other assets held, with the exception referred to in subparagraph 2 of this paragraph, when repayment of the short term loan is warranted by pledge of securities or other assets belonging to the pension fund; 4) acquiring and possessing securities or other assets, which could cause violation of the requirements for the diversified investment portfolio, except when a new fund is being established which is exempt from the diversification requirements for 6 months from the date of receiving the authorisation for the activities of a pension fund; 5) participating in organisations where the members have unlimited liability for the obligations of the organisation; 6) being a founder of enterprises; 7) issuing bonds; 8) taking upon itself obligations that are not related to the activities of a pension fund; 9) acquiring precious metals or certificates of precious metals. Article 7. The Management Enterprise of a Pension Fund 1. A pension fund may manage the assets of a pension scheme as well as its own assets itself (provided it meets the requirements stipulated in paragraph 1 of Article 36) or it may transfer management of the assets to a single management enterprise, which shall: 1) have an appropriate authorisation issued by the Securities Commission. The procedure and terms and conditions for granting and withdrawal of such authorisations shall be determined by the Securities Commission; 2) meet the minimum own and/or authorised capital requirements determined by the Securities Commission; 2. The provisions of the Law on Investment Companies shall apply to the management enterprise of a pension fund, unless this Law provides otherwise. 3. The management enterprise must submit to the Securities Commission periodic financial statements, its capital account and a report about the activities as stipulated in the rules adopted by the Commission. Article 8. Re-organisation of a Pension Fund 1. An approval from the Securities Commission must be obtained for the reorganisation of a pension fund. 2. The provisions of the Company Law shall apply to the reorganisation of the pension fund, provided they do not contravene this Law. 3. The reorganisation project of a pension fund must specify, in addition to other information stipulated in the Company Law, the number of pension schemes and their participants, provide data about the pension schemes and their assets, own assets of the pension fund, the management enterprise, the depository, terms and conditions of taking over and transferring the pension fund’s obligations, property and non-property rights of the participants of the pension schemes after the reorganisation, the time limit for acquiring these rights and assuming the obligations. The reorganisation project must be approved by the general meeting of shareholders of every single pension fund undergoing re-organisation, the Securities Commission, and the Ministry of Social Security and Labour. 4. Every pension fund must announce about the reorganisation following the procedures established by the Securities Commission. 5. Pension funds which intend to continue functioning after the reorganisation, must obtain a new authorisation from the Securities Commission as stipulated in Article 5. In the event of failure to obtain an authorisation by at least one of the pension funds that intends to function after the reorganisation, the resolution of the general shareholders’ meeting about the reorganisation of the pension fund shall be regarded as invalid. 6. Information about the course and the terms of reorganisation must be provided upon request to every shareholder of a pension fund, participants of a pension scheme, contributors, the Securities Commission, and the Ministry of Social Security and Labour. 7. The pension fund undergoing reorganisation, subject to consent of the Securities Commission, may transfer a pension scheme (schemes) and corresponding pension agreements to another pension fund, provided the receiving pension fund does not change their terms and conditions and takes over all the liabilities to the participants of a pension scheme. 8. If a participant of a pension scheme, within 6 months from the date of granting an authorisation to the pension fund undergoing reorganisation by the Securities Commission, expresses a wish to move to another pension scheme because of the fund’s reorganisation, the transfer of this participant to another pension scheme must be performed free of charge. Article 9. Liquidation of a Pension Fund 1. A pension fund shall be liquidated in accordance with the procedure set forth in this Law and the Company Law. 2. A pension fund may be liquidated: 1) by the decision of the general shareholders’ meeting, provided it is approved by the Securities Commission; 2) by the decision of the Securities Commission when the authorisation to engage in the activities of a pension fund is withdrawn in accordance with the procedure set forth in this Law; 3) when the procedure of bankruptcy is effected by a court ruling. 3. A pension fund may be liquidated by the decision of the general shareholders’ meeting only if it has transferred all the assets of the pension schemes and all the pension agreements to another pension fund in the manner prescribed by the Securities Commission. The pension fund which takes over the pension agreements may not make the terms and conditions of pension schemes less favourable for the scheme participants and must take over all the liabilities to these participants. 4. Within 3 days following the decision of the general shareholders’ meeting to liquidate a pension fund, this must be communicated in writing to the Securities Commission and the Register manager, together with the information about the appointed liquidator. The Securities Commission shall have the right to change the liquidator mentioned above. 5. Upon making a decision to liquidate a pension fund, the Securities Commission shall appoint its liquidator. The liquidator shall notify the Register manager about the decision to liquidate a pension fund and communicate particulars about himself in the manner prescribed by the Register of Enterprises. 6. Each pension fund must announce its liquidation in the manner prescribed by the Securities Commission. The information about the course and terms of the liquidation must be provided, upon request, to every participant of a pension fund, a shareholder, a contributor, the Securities Commission and the Ministry of Social Security and Labour. 7. Where a pension fund is being liquidated by the decision of the Securities Commission, the liquidator shall organise the transfer of the pension scheme assets and pension agreements of the participants of these schemes to another pension fund. After the transfer of all liabilities under pension schemes of the pension fund undergoing liquidation to another pension fund (funds), the remaining assets must be sold on the Stock Exchange or by auction under the rules of the Securities Commission and, following the settlement with creditors, may be distributed among the shareholders of the pension fund under liquidation in proportion to the number of shares held by them. 8. The assets of pension schemes may not be used to meet the claims of the creditors or the shareholders of the pension fund under liquidation. 9. The liquidation report audited by an independent auditor shall be submitted by the liquidator to the Securities Commission. 10. The transfer of the assets of the pension schemes shall be effected in accordance with the provisions of paragraphs 7 and 8 of Article 8. Article 10. The Bankruptcy Procedure of a Pension Fund 1. The procedure of initiation of a bankruptcy case, its judicial investigation and liquidation or reorganisation due to the bankruptcy procedure shall be conducted pursuant to the Enterprise Bankruptcy Law, to the extent it does not contradict the provisions of this Law. 2. A bankruptcy case of a pension fund shall be adjudicated only before a court. The pension fund’s bankruptcy case shall be instituted by the court on the basis of the declaration of the Securities Commission about the insolvency of the pension fund. 3. In the course of the judicial procedure of a pension fund’s bankruptcy case the creditors’ meetings shall not be called. The creditors’ interests shall be represented by the committee formed in the manner prescribed by the Securities Commission. The committee shall be composed of the representatives of the pension schemes participants, other creditors and representatives of the Securities Commission. 4. All the transactions of the pension fund shall be suspended from the day of instituting the bankruptcy case, except those which are necessary to ensure the performance of the administrator and those which are stipulated in paragraph 5 of this Article. All pension contributions to pension accounts and benefit payments from the accounts shall also be suspended. The estimate of expenditures needed to ensure the performance of the administrator shall be approved and revised by the court on the recommendation of the administrator. 5. The administrator appointed by the court shall organise the transfer of the pension schemes (along with the assets, pension agreements and pension accounts of the pension schemes) to another pension fund (funds). Own assets of the pension fund shall be used to cover the liabilities assumed by the pension fund before the date of instituting the bankruptcy procedure and those which arose from the date of instituting the bankruptcy procedure until the transfer of pension accounts to another pension fund (in proportion to every pension scheme being transferred). The administrator shall have the right to transfer the assets of pension schemes and liabilities under pension agreements and pension schemes to another pension fund without the consent of a participant of a pension scheme, provided the receiving pension fund does not change the terms and conditions of the agreement, and assumes all the liabilities to the pension scheme participants. In this case, if, within 6 months after his transfer to a pension scheme of another pension fund, a participant of a pension scheme expresses a wish to join yet another pension scheme, he must be transferred to this pension scheme free of charge. 6. Following the court’s decision to liquidate the pension fund, the pension agreements which were not transferred to another pension fund prior to the decision on the liquidation, shall be declared terminated by the court decision, provided the scheme participant did not terminate this agreement before such a decision was made. 7. The liquidator shall, within the period set forth by the court, make a list of creditors and determine the scope of their claims on the day of making the decision on the liquidation of the fund. The data about the claims of the pension scheme participants, upon consultation with each of them, shall be approved by the committee referred to in paragraph 3 of this Article. 8. The claims of the pension scheme participants to return to them the assets of the pension fund owned by them and to pay them the outstanding investment income of the pension scheme due to them in accordance with the obligations of the pension fund, must be satisfied before starting to satisfy the claims of the fund’s creditors. 9. The sequence for satisfaction of the claims of the pension fund’s creditors shall be as follows: 1) priority shall be given to satisfaction of the claims of the employees of the pension fund related to employment relations, claims to damages for mutilation or other health impairment, or loss of life; 2) second in sequence shall be payment of court and administration expenses and claims the grounds for which arose only after the date of making the decision to liquidate the fund; 3) third in sequence shall be the satisfaction of all other claims of the creditors; 4) the claims of all subsequent creditors shall be satisfied only after full satisfaction of the claims of the preceding sequence. When the funds are insufficient to fully satisfy all of the claims of one sequence, said claims shall be satisfied in proportion to the amount due to each creditor. 10. In the event of bankruptcy of a pension fund, its creditors shall have no right to levy execution against the assets of the pension fund. Article 11. Associations of Pension Funds Pension funds shall be have the right to unite into associations in the manner prescribed by law. Chapter III Management of the Pension Funds Article 12. Management of a Pension Fund 1. In addition to the restrictions set forth in the Constitution of the Republic of Lithuania and other laws, the auditor, members of the Supervisory Council and the Board of another pension fund, persons related to the depository or the management enterprise of the pension fund, as well as persons with previous convictions for crimes committed against property, finance and the economic order may not become members of the Supervisory Council and the Board of the pension fund. 2. The Securities Commission shall have the right to obligate the Board (the Supervisory Council if the Board is not formed) of the pension fund to convene an extraordinary general meeting of shareholders. Article 13. Liability of the Members of the Pension Fund’s Administrative Bodies 1. Members of the pension fund’s Supervisory Council, the Board, the head of the administration and other employees of the administration, who through their decisions, acts or omissions violate law, regulations of the pension fund, the pension schemes or their duty to act in the best interests of the pension scheme participants must compensate the pension fund for the loss incurred when paying the damages to the participants of pension schemes. The liability of the members of the Supervisory Board and the Board shall be joint and several. The member, who votes against such a decision, shall be released from the duty to compensate the loss to the pension fund, if his dissent is recorded in the minutes of the meeting. The member who is absent from the meeting shall not be held liable if he, within seven days after he became aware or should have become aware of said decision, files his dissent in writing to the chairman of the meeting. Article 14. Control of the Activities 1. At the end of a business year, an independent firm of auditors must audit financial accounts and statements of the pension fund. 2. In accordance with the procedure set forth in the regulations, the pension fund may form commissions to control the activities of the pension fund. 3. The terms and conditions of the pension fund’s agreement with the firm of auditors must be agreed with the Securities Commission. Terms and conditions of the agreement that were not agreed with the Securities Commission shall be invalid. 4. The audit of the pension fund shall be carried out on the basis of the legal acts regulating audit and the work of auditors, and the terms and conditions of the agreement between the pension fund and the auditor. 5. The pension fund must submit to the auditor the documents requested by him. 6. The auditor’s report must contain his opinion about the financial capacity of the pension fund to meet the liabilities stipulated in the pension agreements, it must also specify all the violations of this Law and other legal acts regulating activities of pension funds. CHAPTER IV Pension Schemes and their Participants Article 15. Pension Scheme 1. Activities of pension funds shall be based on pension schemes. 2. A pension scheme (schemes) shall be approved and changed by the Board (the Supervisory Council if the Board is not formed) of the pension fund following the procedure set forth in the regulations. The scheme (schemes) shall be agreed with the Ministry of Social Security and Labour and registered with the Securities Commission in the manner prescribed by it. 3. The pension scheme shall include the following: 1) the name of the pension fund and its registered office; 2) the name of the pension scheme; 3) the terms and conditions and the procedure for joining, withdrawal or expulsion from the pension scheme; 4) the rights and obligations of the pension scheme participants; 5) the ways and procedure of payment of pension contributions; 6) the ways of payment of pension benefits and opportunities of their choice, the retirement age at which the person is entitled to an additional pension; 7) the procedure for annuity acquisitions; 8) the investment strategy of a pension scheme (the procedure for investment of pension assets and investment choices); 9) the procedure of accumulation and distribution of the pension scheme assets; 10) the procedure of deductions from the pension fund’s investment return and its crediting to pension accounts; 11) the forms and procedure of reporting about the performance of the pension scheme and statements of pension accounts to the pension schemes participants; 12) the terms and conditions and the procedure of concluding pension agreements and termination thereof; 13) the procedure of moving to another pension scheme and the period during which the pension fund must transfer the funds from the pension account to the pension account in another pension fund indicated by the pension scheme participant. This period may not be longer than 3 months; 14) the procedure of changing a pension scheme; 15) the procedure of termination of a pension scheme; 16) the procedure of establishing the rate of return of a pension scheme; 17) the procedure of establishing the remuneration due to the management enterprise of the pension fund if the management of the assets of the fund is entrusted to it. 4. Pension schemes may also have other provisions which are in conformity with this Law and the requirements established by the Ministry of Social Security and Labour and the Securities Commission. 5. The pension fund must provide a possibility for all persons to familiarise themselves with the registered pension schemes and their revisions. 6. The pension fund must inform in writing every pension scheme participant, contributors, the Ministry of Social Security and Labour and the Securities Commission about revisions of a pension scheme at least 30 days before the revisions come into effect. The pension schemes and their revisions shall become effective within 30 days from the date of their registration with the Securities Commission. Article 16. Pension Agreement 1. A pension agreement shall mean an agreement between a pension fund and a contributor (contributors), on the basis of which the pension fund takes upon itself an obligation to the pension scheme participants under a specific pension scheme, while the contributor takes upon itself an obligation to pay pension contributions. Before concluding the agreement, all the persons for whose benefit the agreement is being concluded, must be informed about the pension scheme the members of which they are going to become after the pension agreement comes into effect. The pension scheme shall be a part of the pension agreement. 2. A pension agreement with the pension fund shall be concluded by a contributor (a participant of the pension scheme, his employer or any other person acting for the benefit of a pension scheme participant). 3. A pension agreement concluded by the employer or any other person for the benefit of a pension scheme participant may be individual, concluded between the pension fund and a contributor for the benefit of one scheme participant; and a group agreement, concluded by a contributor for the benefit of more than one pension scheme participant. The employer shall have the right to conclude a pension agreement for the benefit of his employees. A group pension agreement may be a supplement to a collective agreement. 4. Where the obligation to pay pension contributions is assumed by the employer, an employee shall have the right to name the pension fund with which the employer must conclude a pension agreement for the employee’s benefit, unless the collective employment agreement provides otherwise. 5. A pension agreement must provide for an opportunity to terminate the pension agreement at any time upon the request of the pension scheme participant. Other terms and conditions of the pension agreement shall be determined by the Securities Commission after agreement with the Ministry of Social Security and Labour. The terms and conditions of a pension agreement contradicting the requirements set forth by the Securities Commission and the Ministry of Social Security and Labour shall be invalid. 6. The pension fund shall have no right to unilaterally terminate the pension agreement without the consent of the participant, except in cases provided for in this Law. 7. The pension fund shall keep registers of all the contributors who have concluded pension agreements, also of all the participants for the benefit of whom such agreements have been concluded, and of all the participants who receive benefits. The procedure of keeping a register shall be established by the Securities Commission. 8. Upon concluding a pension agreement, the pension fund shall open a personal pension account for each participant of the pension scheme. Article 17. A Participant of the Pension Scheme A person may become a participant of a pension scheme upon concluding a pension agreement in accordance with the procedure set forth by this Law. Article 18. Rights of a Pension Scheme Participant 1. A pension scheme participant shall have the right to: 1) receive benefits as provided for in this Law, the regulations of the pension fund, the pension scheme and the pension agreement; 2) receive a share (crediting it to the pension account) of the investment returns of the pension scheme assets received under a specific pension scheme in proportion to the amount of funds held in the pension account; 3) receive information about the performance of the pension fund, its financial and economic status, its assets and financial obligations, the funds held in his personal pension account and the income added to it from the investment returns; 4) with an advance notice in writing, to change the amount of contributions, the arrangement of making payments and their frequency; and temporarily suspend payment of pension contributions; 5) bequeath the funds held in the pension account; 6) other rights provided by law, the pension scheme and the pension agreement. Article 19. Duties of the Pension Scheme Participant 1. A pension scheme participant must: 1) comply with the provisions of the pension scheme and the pension agreement; 2) not communicate confidential information received from the pension fund. 2. If a pension scheme participant is in breach of his duties, he may be expelled from the pension scheme following the procedure set forth in the regulations of the pension fund. Article 20. Withdrawal of a Pension Scheme Participant from the Pension Scheme and Termination of Participation in the Pension Scheme 1. Participation in a pension scheme shall terminate when the pension fund discharges its obligations to the pension scheme participant, when the participant withdraws from the pension scheme, joins another pension scheme or dies, or when the pension scheme is discontinued. 2. Termination of the pension agreement made for the benefit of a pension scheme participant, without moving to another pension scheme, or expulsion of the participant from the pension scheme shall be deemed to be a withdrawal of the pension fund participant from the pension scheme. 3. When withdrawing from the pension scheme, its participant must receive the funds held in the personal pension account, after deducting from them the income from investment return added to the account during the last 3 years, or 5 percent from the sum that is being withdrawn, whichever amount is larger. Funds resulting from the above deductions shall be added to the assets of the pension scheme. 4. When a participant of a pension scheme withdraws from the pension scheme, the pension fund must, within three months from the date of receipt of the participant’s written application to withdraw from the scheme or from the day of making a decision to expel the participant from the pension scheme, pay to him the amount accrued in his account, without applying the requirements set forth in Articles 24 and 25 of this Law. 5. The pension fund, its shareholders, and the pension scheme contributors shall be prohibited from restricting, directly or indirectly, the right of a participant to withdraw from the scheme, or to deduct from him a part of the pension assets accumulated for his benefit bigger than that provided for in this Law. Article 21. Transfer of A Pension Scheme participant to Another Pension Scheme 1. Termination of the pension agreement and concluding a new pension agreement under another pension scheme with the same or a different pension fund shall be considered a transfer of a participant of the pension scheme to another pension scheme. 2. Transfer of a participant from one to another pension scheme must be executed in accordance with the terms and conditions provided in the pension scheme. A participant of a pension scheme shall have the right to transfer to another pension scheme free of charge at least once during a business year. 3. The pension fund, a participant whereof expresses a wish to transfer to another pension scheme, the shareholders of the pension fund or a contributor shall be prohibited from restricting, directly or indirectly, the right of a pension scheme participant to transfer from one pension scheme to another. 4. The pension fund from which a participant of a pension scheme transfers to another pension fund, must submit to the receiving fund the following documents: 1) copies of the pension scheme and the pension agreement concluded with the participant of the pension fund or any third person for the benefit of the pension scheme participant as well as copies of all the revisions of these documents; 2) a statement about contributions paid for the benefit of the participant of a pension scheme; 3) a statement about the amounts paid out to the participant of the pension scheme; 4) the share of the assets of a pension scheme belonging to the participant on the day of filing a written application about his transfer to another pension scheme. Article 22. Termination of a Pension Scheme 1. A pension scheme may be terminated by the decision of the Board of the pension fund (the Supervisory Council if the Board is not formed) or the ruling of the court. 2. A pension scheme may be terminated by the decision of the pension fund’s Board (the Supervisory Council if the Board is not formed) for at least one of the following reasons: 1) the pension fund has discharged all the obligations to all the participants of a particular pension scheme; 2) the participants of this pension scheme are transferring to another pension scheme and/or withdraw from this pension scheme; 3) the pension fund is being liquidated or reorganised; 4) in other cases provided for in the pension scheme. 3. The pension fund may terminate a pension scheme without the agreement of the participants of the pension scheme only when it has transferred all the assets of the pension scheme and its obligations under pension agreements to another pension fund in accordance with the procedures determined by the Securities Commission. In this case the pension fund accepting the obligations may not make less favourable terms and conditions of the pension scheme and shall take over all the liabilities to the participants of the pension scheme. 4. If a participant of the pension scheme, within 6 months from the date of the decision to terminate the pension scheme, expresses a wish to transfer to a pension scheme of another pension fund due to the termination of the pension scheme, the transfer of the participant to another pension scheme must be effected free of charge. 5. The participants of the pension scheme, its contributors, the Ministry of Social Security and Labour and the Securities Commission must be notified about the decision to terminate a pension scheme within 5 days from the date of making the decision CHAPTER V PENSION Contributions and Benefits Article 23. Pension Contributions 1. Pension contributions shall be paid only in cash. 2. Employers may pay contributions or a portion of them for the benefit of their employees. 3. A contributor, who , at the same time, is also a pension scheme participant, shall not be held liable by way of his property for the violation of the procedure of payment of pension contributions. Liability of other contributors shall be established in the employment agreement, collective agreement or other agreement under which any third party assumes an obligation to pay pension contributions for the benefit of a participant of a pension fund. 4. Termination of the payment of contributions or other payment violations may not be a cause for the termination of the pension agreement or for the restriction of the property right of the pension scheme’s participants to the assets of the pension scheme. 5. It shall be prohibited to pay pension contributions and receive pension benefits at the same time, in the name of the same pension scheme participant. 6. Where pension contributions are paid not by a participant of a pension scheme, such contributions shall become the property of the pension scheme participant from the moment of their payment to the pension account. 7. If a contributor, who is not a participant of the pension scheme, fails to pay the agreed contributions on time, the pension fund must notify in writing the pension scheme participant within 7 days from the day of the first violation. 8. Under the pension agreement signed by the employer, an employee shall pay pension contributions only voluntarily. 9. The employer shall have no right to transfer on the employee the obligation to pay the contributions agreed in the pension agreement. Article 24. Pension Benefits 1. The right to pension benefits shall be acquired by a participant of a pension scheme upon reaching the retirement age stipulated in the pension scheme, which may not be shortened by more than 5 years than the retirement age determined for receiving a state social insurance retirement pension, with the exception of cases provided for by the Government. 2. A participant of the pension scheme who is recognised a disabled person of the 1st or 2nd invalidity category by the State Medical and Social Experts Commission, shall acquire the right to pension benefits from the day of establishing his invalidity. 3. A participant of a pension scheme shall have the right to postpone the payment of pension benefits. For this purpose, the pension scheme participant must file with the pension fund an application in writing not later than 3 months before reaching the retirement age as set forth in the pension agreement. A participant of the pension scheme shall have the right to revoke at any time the postponement of the payment of pension benefits in writing. In this case payment of pension benefits must start not later than 2 months after the day of filing the application in writing to revoke payment of benefits. 4. Payment of pension benefits must start within 3 months from the day of submitting to the pension fund the pension scheme documents evidencing the right of a participant of the pension scheme to pension benefits. The list of said documents shall be subject to the approval by the Ministry of Social Security and Labour. . 5. No other payments may be made from the pension account except those set forth in this Law. Article 25. Ways of Payment of Pension Benefits 1. Depending on the choice of a pension scheme participant, pension benefits may be paid in the following ways: 1) as a lump sum benefit, not exceeding the maximum amount stipulated in paragraph 2 of this Article; 2) by paying the amount held in the pension account in portions periodically at least once every 3 months; 3) by purchasing a pension annuity from a life insurance enterprise. 2. The maximum amount of the lump sum benefit paid from the pension account shall be set at the level necessary to ensure that the amount remaining in the pension account after the payment is sufficient for the pension scheme participant to buy from a life insurance enterprise an annuity equal to the state social insurance basic pension. The said amount shall be established by the State Insurance Supervision Agency under the Ministry of Finance pursuant to its rules and shall be reported to the Ministry of Social Security and Labour. 3. If the amount in the pension account is paid in portions, it may not exceed the maximum sum calculated by dividing this amount by the average future life expectancy of the pension scheme participant. The average future life expectancy shall be calculated by the Department of Statistics under the Government of Lithuania every year and reported to the Ministry of Social Security and Labour. The maximum amount of a portion shall be calculated for a pension scheme participant on the annual basis. 4. If a participant of the pension scheme is entitled to a pension from the budget of state social insurance fund or a pension from the state budget, the restrictions on the amount of pension benefits stipulated in paragraphs 2 and 3 of this Article shall not apply. 5. A participant of the pension scheme shall choose the way of payment of pension benefits not later than 3 months prior to the start of the payment of benefits. 6. A participant of the pension scheme, who receives pension benefits in accordance with the procedure set out in subparagraph 2 of paragraph 1 of this Article, may change the way or procedure of the payment of benefits, or suspend the payment of benefits with a prior 2 months notice to the pension fund. The payment of pension benefits shall be resumed within 2 months from the date of filing a written application by the beneficiary to resume the payment of pension benefits. Article 26. Pension Annuities 1. Depending on the choice of a pension scheme participant, a pension annuity shall be purchased from a life insurance company for the funds accumulated in his pension account. The pension fund shall act as an intermediary for the pension scheme participant to acquire a pension annuity. 2. A pension annuity shall be acquired upon singing an insurance agreement by the pension scheme participant with the payer of the pension annuity. Only a life insurance company may be the payer of a pension annuity. 3. Activities of the payers of pension annuities shall be supervised by the State Insurance Supervision Agency under the Ministry of Finance in accordance with the procedure approved by law. 4. The procedure of mediation by pension funds in acquiring pension annuities shall be established by the Securities Commission together with the State Insurance Supervision Agency under the Ministry of Finance. CHAPTER VI Finances of A Pension Fund Article 27. Own Capital 1. Composition of own capital of a pension fund is established by the Company Law. 2. Neither own nor authorised capital of a pension fund may be less than LTL 4 million. 3. A pension fund must form a guarantee reserve in the manner set forth in Article 31 of this Law. 4. Own capital must be invested in a diversified investment portfolio subject to the same requirements as those for the pension assets as set forth Articles 2 and 35 of this Law. 5. If after the close of a business year, the investment return of the pension fund is insufficient to discharge the liabilities under pension schemes, own capital of the pension fund shall be used to maintain the level of return stipulated in the scheme. Article 28. Authorised Capital 1. The authorised capital of the pension fund shall be comprised of the capital set forth in the regulations of the fund, fully paid up and registered according to the procedure established by law. Only fully paid authorised capital shall be registered. 2. Property contributions may not make up more than 20 per cent of the authorised capital of the pension fund. Only real estate necessary for direct operation of a pension fund may form a property contribution. 3. The authorised capital may not be paid up by cash funds reserved for securing the discharge of liabilities to third persons. 4. A pension fund shall have no right to reduce its authorised capital, except reduction because of the incurred losses. Article 29. Loan Capital A pension fund may not have a loan capital other than short-term loans to maintain liquidity. Restrictions for the amount of these loans are set forth in the subparagraph 2, paragraph 4 of Article 6. Article 30. The Income and Costs of a Pension Fund 1. The investment return on the assets of a pension scheme, after deductions in accordance with the requirements stipulated in this Law, shall be recognised as the income of a pension fund from the assets of a pension scheme. 2. In addition to other costs, the costs of formation of the pension fund guarantee reserve shall be recognised as the costs of the pension fund. Article 31. The Guarantee Reserve of the Pension Fund 1. The guarantee reserve of the pension fund shall be formed from the return on the investments of the pension fund’s assets, after deductions to the participants of the pension schemes in accordance with the liabilities assumed under the pension schemes. The minimum amount of this reserve and the procedure of its formation shall be set forth by the Securities Commission. 2. The guarantee reserve may be used only to meet the liabilities assumed under the pension schemes. 3. Profit of the pension fund may not be distributed in the form of dividends and bonuses if, following the resolution of the general meeting of shareholders, the capital adequacy ratio, the minimum own capital and the amount of the guarantee reserve become smaller than the amounts established by the Securities Commission. Article 32. Assets of a Pension Scheme 1. The assets of every pension scheme, including income (costs) from investments, shall be entered in the records separately from own assets of the pension fund. 2. Income from the investment of the pension scheme assets which is due to pension scheme participants under an appropriate pension scheme and which may not be less than the established minimum return level of a pension scheme shall be annually credited by the pension fund to the personal pension accounts of the participants of a pension scheme. The minimum return level of each pension scheme shall be approved by the Board of the pension fund when drawing up a pension scheme, and may not be reduced. 3. No less than 80 per cent of the income from investment of the assets of a pension scheme must be credited to the personal pension accounts of the pension scheme participants after deductions to meet the obligations to the participants under pension schemes and deductions to the guarantee reserve of the pension fund. Article 33. Pension Accounts 1. A pension fund must open for every participant of a pension scheme a personal pension account in which pension contributions and income from investment of the assets of pension schemes calculated as due to a participant of a pension scheme in the manner specified by the regulations of the pension fund shall be accumulated. Information about the pension accounts shall be confidential. 2. The procedure of accounting of the amounts accumulated in the pension accounts of the participants of pension schemes shall be established by the Securities Commission. Article 34. Property Right to the Assets of a Pension Scheme 1. Assets of a pension scheme shall be owned by the participants of a pension scheme. After the death of a participant, the assets of a pension scheme held in his pension account shall be inherited under law. 2. The pension fund or the management enterprise shall not be held liable for the obligations to third persons by way of the assets of a pension scheme. The assets of a pension scheme managed by the pension fund and/or the management enterprise may not be used to satisfy the claims of creditors of the pension fund and/or he management enterprise, and shall be returned to the owners in accordance with the procedures set forth in this Law. 3. The pension fund shall be liable by way of its own assets for the obligations to the pension scheme participants under pension schemes. CHAPTER VII Investment, Reinvestment, Management and Custody of Pension Assets Article 35. Investment of Pension Assets 1. Assets of every pension scheme shall be invested or reinvested into a diversified investment portfolio comprising securities, real estate, deposits of commercial banks and deposit certificates issued by banks. 2. Securities in which investments may be made shall be as follows: 1) securities issued or guaranteed by the Government (a municipal institution) of the Republic of Lithuania; 2) securities included in the Official Trading List of the Stock Exchange of the Republic of Lithuania; 3) securities which are being newly issued, where the conditions of their issuance provide for the commitment of the issuer to submit a request about their inclusion in the Official Trading List and there are guarantees that securities which are being issued will be included in the List within one year following the issue; 4) securities recognised as liquid by the Securities Commission. 3. The Securities Commission may impose restrictions upon investment of pension assets in the deposits of commercial banks, and investment in the securities specified in part 2 of this Article. 4. It shall be prohibited to invest pension assets in: 1) securities issued by pension funds; 2) securities issued by the management enterprise with which the pension fund has concluded an assets management agreement; 3) securities issued by enterprises or other organisations related to the management enterprise; 4) derivative financial instruments, with the exception of cases when derivative financial instruments recognised by the Securities Commission are used for risk management. 5. The total amount of investments in securities issued by the persons related to the pension fund (controlling
2. it)may not exceed 25 per cent of the total value of the assets of a pension scheme. 6. Funds of the participants of a pension scheme must be invested on the basis of the investment strategy stipulated in the agreement between the pension scheme and the management enterprise. 7. Not more than 20 per cent of the assets of a pension scheme may be invested in real estate. 8. A pension fund shall be prohibited from using derivative financial instruments for speculative purposes or use derivative financial instruments not recognised by the Securities Commission. A pension fund shall have the right to use derivative financial instruments only where its regulations and a pension scheme specify what derivative instruments the pension fund intends to use and for what purposes. Each derivative financial instrument must be based on a concrete investment transaction (investment position). Such a transaction and a derivative financial instrument used for the management of its risk must be indicated in the reports of the pension fund. Article 36. Management of Pension Assets 1. At least two managers or members of the administration of a pension fund, which does not transfer management of pension assets to the management enterprise, must have a certificate of qualifications recognised by the Securities Commission. The Securities Commission must be notified about changes of the employees holding certificates within five days. 2. The pension assets management agreement must contain provisions stipulated in Chapter 3 of the Law on Investment Companies. The assets management agreement must be approved by the shareholders’ meeting of the pension fund. The agreement may be rescinded pursuant to a decision of the Supervisory Council (the Board) of the fund. The management enterprise may not be changed without the consent of the Securities Commission 3. The management enterprise shall be responsible for recovery of damages incurred by the pension fund or participants of a pension scheme through the fault of the management enterprise. The rescission of the asset management agreement does not release the management enterprise from payment of damages to the pension fund or the participants of a pension scheme. Article 37. Duty to Transfer Pension Assets for Safekeeping by the Depository 1. The assets of a pension scheme (cash and securities) must be kept by the pension fund in a depository of their choice. The depository shall act under the provisions of Chapter 4 of the Law on Investment Companies, unless this Law provides otherwise. The Securities Commission may set additional requirements for the depository in which pension assets are kept. A pension fund or the management enterprise may not act as a depository. A depository where pension assets are kept may not be a shareholder of the pension fund or its management enterprise. 2. An agreement with the depository shall be approved by the pension fund’s Supervisory Council or the Board, where the Supervisory Council is not formed. A pension fund may not have more than one depository of securities or cash. 3. The depository shall make separate entries in the accounts of the assets of each pension scheme. 4. The depository must conclude an agreement with the pension fund in which the procedure of payment for its services and their fees is set forth. 5. When an independent audit of the pension fund is being carried out, the depository must furnish all the necessary information related to the accounts of the assets kept by it, as well as copies of documents held that are related to the management of assets and that are needed for audit of the pension fund. 6. The depository shall exercise control over compliance of operations with securities conducted by the pension fund or the management enterprise (where management of the pension fund assets is transferred to
3. it)with the requirements set forth in this Law, the regulations of the pension fund and the pension schemes. 7. Following procedures established by laws, the depository shall be held liable for compensation of loss or damage caused by it to the participants of pension schemes. The depository shall not be held liable for the obligations assumed by the pension fund to the participants of pension schemes. CHAPTER VIII Protection of Interests of PartTICIPANTS OF Pension Schemes Article 38. Duty to Act in the Interests of the Participants of Pension Schemes 1. The pension fund, its management enterprise and the depository must act in the interests of the participants of pension schemes, organise their activities pursuant to legislation in force, regulations of the pension fund and other legal acts; they must also ensure that their activities do not violate property rights and interests of the pension fund’s shareholders and the participants of a pension scheme. The pension fund, its management enterprise and the depository may not arrange any deal which could violate the rights and legal interests of the pension fund’s shareholders and participants of its pension schemes. 2. Persons related to the pension fund, its management enterprise and the depository shall be subject to the same prohibitions as stipulated in the Law on Investment Companies. 3. The Board, the Supervisory Council of the pension fund, its administration, the management enterprise and the depository shall be held fully liable for the damage caused to the pension fund by its failure to perform the duties set forth in paragraph 1 of this Article. 4. Upon ascertaining that the manager of a pension fund arranged a deal from which he or persons related to him gained benefit at the expense of the participants of the pension fund or participants of its schemes, or caused damage to them by unlawful actions, the pension fund’s shareholders and participants of the pension schemes shall be entitled to claim in court that the manager transfers to the pension fund the rights and duties arising from said deal or compensates the damage caused by this deal. 5. If the pension fund, when investing pension assets, violates the requirements of a diversified investment portfolio related to the pre-emptive right stipulated by laws and other legal acts to acquire securities which are being newly issued, or for reasons not depending on it, the pension fund must sell, within three months, the portion of securities, the acquisition whereof resulted in the violation of the requirements of a diversified investments portfolio. 6. A person who works with the pension fund or is the manager of the pension fund shall have no right to work with the depository or the management enterprise of this pension fund, neither shall he have the right to be the manager of the depository or the management enterprise of this pension fund. 7. A person who works with the pension fund depository or who is its manager shall have no right to work with or be the manager of the management enterprise of the pension fund, the assets whereof are in safekeeping with the depository. 8. Persons related to the pension fund may not be managers of the depository where the securities and cash funds of the pension fund are in safekeeping. Article 39. Accounting and Financial Statements 1. Procedures of financial accounting and financial statements of own assets of the pension fund and pension schemes shall be determined by the Ministry of Finance. 2. The management enterprise and the depository with which pension fund has concluded the assets management and safekeeping agreements must furnish to the pension fund all the documents necessary for conducting financial accounting. The list of such documents and procedures of submitting them shall be determined by the Securities Commission. 3. The pension fund shall conduct a separate accounting of each pension scheme. 4. The management enterprise and the depository must separate from their own assets the assets of each pension scheme and own assets of the pension fund, and identify the assets of each pension scheme given to them for management or safekeeping. 5. Within 4 months following the end of a business year, the pension fund must file with the Securities Commission and announce publicly the financial accounts audited by an independent auditor. Annual statements of the pension fund must contain the opinion of an independent auditor about reliability of accounting of the pension fund and its compliance with the established regulations. At the request of the Securities Commission the auditors must submit to it a full auditors’ report and a commentary on the financial statements of the pensions fund. 6. Management enterprises and depositories must submit to the Securities Commission reports the content; form and procedure of filing whereof shall be determined by the Securities Commission. Article 40. Informing Participants of the Pension Scheme 1. The pension fund must publish and file with the Securities Commission reports about its activities and financial status: 1) reports of each business year, - within 4 months from the end of a business year; 2) reports about the first six months of a business year, - within 2 months from the end of the six month period. 2. The annual report must include an independent auditor’s report together with the financial statement. 3. Requirements with regard to the content of reports, the ways and procedure of publication shall be determined by the Securities Commission. 4. Pursuant to the procedure set forth in the pension scheme, at least once every year, the pension fund must report in writing every pension scheme participant about the balance in his pension account, also inform him about the amendments in the legal acts related to the activities of pension funds, changes in management enterprises and depositories that were made after the last report, as well as about the results of the audit. 5. Copies of the annual and six-month reports must be made available to the pension scheme participants upon request. The fee charged for copies may not exceed the expenses for making them. Article 41. State Supervision of the Activities of Pension Funds 1. State supervision of the activities of pension funds shall be carried out by the Securities Commission. In the course of implementation of this Law, the Securities Commission shall have the right to adopt legal acts within its competence. 2. When granting authorisations for the activities of pension funds and exercising supervision of their activities, the Securities Commission shall perform the following functions: 1) prepare, approve, revise and recognise as invalid the rules regulating granting and withdrawal of authorisations for pension funds, management enterprises and depositories, also the establishment, restructuring, activities, reorganisation and liquidation of pension funds; 2) draw up, approve, revise and recognise as invalid the format of reports to the participants of pension schemes, also establish procedures of submitting and publication of said documents; 3) provide official explanations and recommendations on the issues relating to the activities of pension fund; 4) grant and withdraw authorisations for the activities of pension funds and their management enterprises, and limit the activities of these economic entities; 5) monitor, analyse, inspect and supervise in any other way the activities of pension funds and pension fund management bodies; 6) establish the rules for managing the pension accounts; 7) apply the sanctions stipulated in the Administrative Code of the Republic of Lithuania to the heads of pension funds, management enterprises, depositories and auditors of said enterprises for violations of this Law and other legal acts; 8) apply sanctions provided for in this and other laws to the persons who violate this law, the rules and instructions approved by the Securities Commission; 9) organise and conduct inspections of the management enterprises and depositories; 10) perform other functions established by this Law. 3. During an inspection, the employees of the Securities Commission shall have the right: 1) to receive explanations from the persons involved in the violations under investigation; 2) to remove temporarily (for up to 30 days) documents of the pension funds, their management enterprises and depositories undergoing inspection that may be used as evidence of violations, and leave a reasoned decision for removing the documents, and a list of documents that have been removed; 3) to request to have copies made of the accounting documents, agreements and other documents which are considered by the Securities Commission as important for investigation; 4) upon producing their employment ID card and reasoned decision of the Securities Commission or its chairman, freely enter the premises of the pension funds, their management enterprises, and depositories, inspect the books, documents and other information sources needed for the inspection; 5) upon producing a reasoned decision of the Securities Commission or its chairman, to receive the data, certificates and copies of the documents about financial operations related to the matter under investigation. 4. The Securities Commission shall have the right to lodge a complaint in the court against persons who obstruct the Securities Commission in exercise of its rights specified in paragraph 3 of this Article which are essential for the investigation of violations of law. These cases shall be heard by the District Court of Vilnius. Upon receipt of the application of the Securities Commission, the court must consider it within 24 hours and make a ruling obligating the person to perform the actions required by the Commission or to refrain from actions obstructing the conduct of the investigation, or to reject the application of the Securities Commission. The Securities Commission shall not be charged the stamp duty for filing an application. Where the term set for hearing the case expires on holidays or days-off, the term shall be counted from the first working day following the holidays or days-off. Upon receiving the application, its copy shall not be sent to the respondent, and the request by the court to file an answer shall not be made. The applicant shall be served a notice about the hearing of the case. This notice may also be given verbally. Participation of the parties to the case, third persons, their representatives and other interested persons in the hearing shall not be obligatory, and summons to them shall not be sent. The ruling made by the District Court of Vilnius shall not be subject to appeal and shall come into effect from the moment it is made. 5. Instructions of the Securities Commission to the pension funds, management enterprises, depositories or their managers regarding elimination of violations of laws and other legal acts shall be binding. 6. Employees of the Securities Commission must ensure confidentiality of all the commercial secrets which come to their knowledge when performing their duties. The employees shall be held liable under law for using the obtained information not for the intended purpose or for other unlawful actions. 7. The Ministry of Social Security and Labour shall monitor compliance of pension schemes with the requirements stipulated in this Law, control payment of benefits, protection of the rights of the participants of pension schemes when revising the schemes, supervise compliance of the pension agreements with collective agreements and employment contracts. 8. Supervisory institutions provided for in this Law may request that their orders be carried out, and shall have the right to inspect, control or carry out investigation in order to ascertain that the pension funds, management enterprises or depositories comply with this Law and other legal acts and regulations related to it. 9. The Securities Commission shall have the right, following the procedure laid down in the Law on Legal Protection of Personal Data, to obtain data about the persons who are or intend to become managers of pension funds, management enterprises or depositories, in order to ascertain that these persons are of good reputation and that they are eligible to hold such positions. 10. Pension funds may lodge a complaint in the court against the decisions of the supervisory institutions stipulated in this Law. CHAPTER IX Liability for Violations of the Law Article 42. Consequences of Violating the Law 1. Economic entities which violate this Law must: 1) carry out the orders of the Securities Commission to desist from actions, restore the previous situation, terminate or change agreements, and carry out other obligations; 2) compensate the damage; 3) carry out decisions and resolutions of the Securities Commission relating to the imposition of sanctions. 2. The Securities Commission shall have the right impose fines: 1) on economic entities operating as pension funds without the authorisation stipulated in paragraph 1 of Article 5 - in the amount of up to a double sum of the illegally gained income; 2) on economic entities operating as pension fund management enterprises without the authorisation stipulated in paragraph 1 of Article 7- in the amount of up to a double sum of the illegally gained income; 3) on pension funds which conclude pension agreements under pension schemes not registered with the Securities Commission - in the amount of up to 100, 000 Litas. 3. Application of the fines stipulated in paragraph 2 of this Article in respect of economic entities shall not release the heads said entities from civil, administrative and criminal liability prescribed by law. 4. Decisions of the Securities Commission on the imposition of administrative fines may be appealed against in the court following procedures set forth in law. Decisions of the Securities Commission on the imposition of fines stipulated in paragraph 2 of this Article may be appealed against in the court within one month. An appeal shall not suspend the implementation of the orders or resolutions of the Securities Commission to eliminate violations of the laws or other legal acts, unless the court orders otherwise. 5. Fines shall be paid into the budget within one moth from the date of receipt of the resolution on its imposition of a upon a pension fund, a management enterprise, a depository or their heads. 6. Where an economic entity fails to pay the imposed fine within the period stipulated in the paragraph 5 of this Article and fails to submit to the Securities Commission the ruling of the court on suspension or rescission of the resolution on the imposition of fine, the fine shall be recovered from the income of the economic entity without suit. 7. Within one month from the date of receipt of the resolution of the Securities Commission, economic entities may apply to the court requesting rescission or revision of said resolution. 8. The appeal to the court shall not suspend implementation of the orders and resolutions of the Securities Commission, unless the court orders otherwise. Article 43. Final Provisions 1. This Law shall come into force on January 1, 2000. I promulgate this law passed by the Seimas of the Republic of Lithuania. PRESIDENT OF THE REPUBLIC VALDAS ADAMKUS