Download Bond Prospectus of Limited Liability Company

INVESTING IN VIA SMS GROUP'S BONDS IS ASSOCIATED WITH
SEVERAL RISKS (see Section 4). UPON SUBMITTING
APPLICATION FOR THE ACQUISITION OF BONDS, THE
INVESTOR CERTIFIES HAVING READ THE SECTION
REGARDING RISKS AND THE PROSPECTUS.
Riga, 18 May 2016
Bond Prospectus of Limited Liability Company “VIA SMS
group”
(Reg. No. 40003901472)
Financial Instruments:
Unsecured debt securities
ISIN Code:
LV0000802064
Number of Financial Instruments:
6,300
Toral Nominal Value:
EUR 6,300,000.00
Coupon Rate:
12.5%
Maturity Date:
25 May 2019
SIA “VIA SMS group” Bond Prospectus
Content
1.
DEFINITIONS AND ABBREVIATIONS ................................................................................... 3
2.
RESPONSIBLE PERSONS .......................................................................................................... 4
3.
SUMMARY .................................................................................................................................... 5
4.
RISK FACTORS .......................................................................................................................... 10
5.
INFORMATION ABOUT FINANCIAL INSTRUMENTS ..................................................... 15
6.
PROCEDURE FOR APPLYING FOR A WAIVER ................................................................ 20
7.
INCLUSION IN THE MARKET AND TRADE CONDITIONS ............................................ 22
8.
ADDITIONAL INFORMATION ............................................................................................... 23
9.
TAXES IN LATVIA .................................................................................................................... 24
10. ISSUER ......................................................................................................................................... 26
11. DESCRIPTION OF ENTREPRENEURIAL ACTIVITY ........................................................ 28
12. IMPORTANT CONTRACTS ..................................................................................................... 50
13. LEGAL PROCEEDINGS AND ARBITRATION .................................................................... 50
14. DOCUMENTS AVAILABLE TO THE PUBLIC AND PUBLICATION OF
INFORMATION .......................................................................................................................... 51
15. FINANCIAL INFORMATION ABOUT ISSUER’S ASSETS AND LIABILITIES,
FINANCIAL SITUATION, PROFIT AND LOSS .................................................................... 52
16. ANNEXES .................................................................................................................................... 55
2
SIA “VIA SMS group” Bond Prospectus
1.
Definitions and Abbreviations
Bank or Organiser of Issue
:
Baltikums Bank AS (legal address – Smilšu iela 6, Riga,
LV-1050, Latvia)
Bond
:
A debt security issued by the Issuer in accordance with
the Terms of Issue
Bondholder
:
A person who owns one or several Bonds
Business Day
:
A day which is not a holiday or festive day of the
Republic of Latvia and on which LCD and TARGET2
systems are open for carrying out transactions
Coupon
:
Interest payment for the Bonds
Custodian
:
A credit institution or an association of investment
brokers, which has received a FCMC licence or is entitled
to carry out transactions and store securities in accordance
with the regulatory enactments of its country of
registration
EU
:
European Union
EUR
:
Official currency of the European Economic and
Monetary Union Member States, including Latvia
Existing Bond
:
Bonds under ISIN LV0000801496 which are Issued by
the Issuer and regulated by Terms of Issue of 11 August
2014
Existing Bondholder
:
A person who owns one or several Existing Bonds (ISIN
LV0000801496)
FCMC
:
Financial and Capital Market Commission
Group
:
The Issuer and its subsidiaries, together forming a
consolidation group
Investor
:
An individual who expresses plans to acquire one or
several Bonds
Issuer or VIA SMS Group
:
LCD
Nasdaq Riga
SIA “VIA SMS group” (legal address- 13.janvāra iela
13, LV-1050, Riga, Latvia)
AS
“Latvijas Centrālais depozitārijs” (legal address:
:
Vaļņu iela 1, Riga, LV-1050, Latvia)
: Nasdaq Riga, AS (legal address: Vaļņu iela 1, Riga, LV1050, Latvia)
Nominal value
:
Nominal Value of One Bond;
ORICGS
:
Official Obligatory Information Centralised Storage
System (https://csri.investinfo.lv/eri/)
Prospectus
:
This document, on the basis of which the Bonds are
included in the regulated market
Regulatory enactments or
legislation
:
Regulatory enactments applied in the Republic of
Latvia, including Nasdaq Riga and LCD regulations
RoL
:
Republic of Latvia
Terms of Issue
:
A document, pursuant to which the issue of Bonds is
carried out (ISIN LV0000802064)
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SIA “VIA SMS group” Bond Prospectus
2.
Responsible Persons
We, Members of the Board of SIA “VIA SMS group”, Eduards Lapkovskis and
Deniss Šerstjukovs, hereby confirm that we have taken all reasonable care to ensure
that such is the case, the information contained in this Prospectus is, to the best of our
knowledge, in accordance with the facts and contains no omission likely to affect its
import.
_____________________
Eduards Lapkovskis
_____________________
Deniss Šerstjukovs
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SIA “VIA SMS group” Bond Prospectus
3.
Summary
Part A Introduction and Warnings
Respective element of
the summary and/or
the disclosure
requirement
A.1
Warning to the
Investors
Information



This summary should be read as an introduction to the Prospectus.
Any decision to invest in the Bonds should be based on consideration of the
Prospectus as a whole by the Investor.
Where a claim relating to the information contained in the Prospectus is
brought before a court, the plaintiff Investor might, under the national
legislation of the Member States, have to bear the costs of translating the
Prospectus before the legal proceedings are initiated. Civil liability attaches
only to those persons who have tabled the summary including any translation
thereof, but only if the summary is misleading, inaccurate or inconsistent when
read together with the other parts of the Prospectus or it does not provide,
when read together with the other parts of the Prospectus, key information in
order to aid Investors when considering whether to invest in the Bonds.
Part B Issuer and any Guarantor
B.1
B.2
B.3
B.4a
B.4b
B.5
The legal and
commercial
name of the
Issuer
The domicile and
legal form of the
Issuer,
the
legislation under
which the Issuer
operates and its
country
of
incorporation
Description of,
and key factors
relating to, the
nature of the
Issuer's current
operations and its
principal
activities
The
most
significant recent
trends affecting
the Issuer and the
industries
in
which it operates
Information on
any
known
trends affecting
the Issuer and the
industries
in
which it operates
The
Issuer’s
participation in a
group
of
companies
Limited Liability Company “VIA SMS group”
Legal name of the Issuer: Limited Liability Company “VIA SMS group”.
Legal form of the Issuer: Limited Liability Company, legal status – legal person.
Registration date and place: The Issuer has been registered in the Commercial Register
of the Republic of Latvia since 12 October 2009.
Registration Number: 40003901472
Legal address: 13.janvāra iela 3, LV-1050, Riga, Latvia.
The company’s country of foundation is the Republic of Latvia.
The main legislative acts under which the Issuer operates:
 The Civil Law and Commercial Law of the Republic of Latvia.
The Issuer's main activities are holding management, including attracting funds for its
subsidiaries, whose main activity is the issue and recovery of unsecured loans in Latvia
and other EU Member States.
As at the day of signing the Prospectus, there is no information on any detected trends
that might have significant negative effect on operations of the Issuer or the lending
sector.
As at the day of signing the Prospectus, there is no information on any identified known
trends that might have significant negative effect on operations of the Issuer or the
lending sector.
The Issuer is not part of a group.
5
SIA “VIA SMS group” Bond Prospectus
B.6
Issuer's
shareholders
Structure of the Issuer's shareholders as at 30 March 2016:
Number of
shares
Name, Surname/Title
% of the total
amount
SIA “Financial Investment” ( Reg.No. 40103584744,
Audēju iela 14-9, Riga, Latvia)
1,422
Deniss Šerstjukovs
1,422
50%
2,844
100%
Total:
50%
The Nominal Value of one share is EUR 1.00.
The Issuer's member of the Board Deniss Šerstjukovs owns 60% of SIA “Financial
investment” shares, while the remaining 40% of shares are owned by Andris Riekstiņš,
citizen of Latvia.
At the moment of signing the Prospectus, the Issuer has no information at its disposal
regarding any agreements, the fulfilment of which might cause changes in the Issuer’s
control.
B.7
Selected
historical
key
financial
information
The Issuer and Group's audited balance sheet as of 31.12.2015 and 31.12.2014, EUR.
Group
31.12.2015
Issuer
31.12.2014
31.12.2015
31.12.2014
Long-term investments
Fixed assets
Intangible investments
Long-term investment in
leased fixed-assets
Participation in the capital
of the subsidiary and
associated companies
66,072
53,951
-
-
413,009
472,666
-
-
52,765
17,230
-
-
-
-
1,633,206
1,536,206
Loans and receivables
76,828
-
76,828
-
Deferred tax
68,273
58,831
-
-
676,947
602,678
1,710,034
1,536,206
10,568,256
8,026,587
6,315,781
5,401,023
1,005,000
-
1,005,000
-
752,700
1,104,368
468,532
977,165
Current assets
Loans and receivables
Securities
Other receivables
Next period costs
41,065
35,856
58
2,268
542,868
538,418
68,119
100,959
12,909,889
9,705,229
7,857,490
6,481,415
13,586,836
10,307,907
9,567,524
8,017,621
Fixed capital
Foreign currency
revaluation reserve
803,000
803,000
803,000
803,000
44,050
77,752
-
-
Revaluation reserve
Retained profit /
(Accumulated losses)
344,261
454,261
-
-
Cash and its equivalents
TOTAL ASSETS
Equity
392,011
(1,127,209)
150,296
(707,528)
1,583,322
207,804
953,296
95,472
4,000,000
Long-term liabilities
Bonds
Borrowings
-
4,000,000
-
570,582
-
570,582
-
570,582
4,000,000
570,582
4,000,000
Short-term obligations
Bonds
6,390,720
50,556
6,390,720
50,556
Borrowings
2,211,866
4,209,425
1,624,000
3,867,875
Payables to suppliers
1,793,194
1,123,815
6,032
-
Other creditors
184,402
122,907
1,037
3,718
CIT liabilities
245,448
51,726
-
-
Accrued obligations
277,583
250,065
21,857
-
6
SIA “VIA SMS group” Bond Prospectus
Next period income
329,708
291,609
-
Credit limit of bank
11
-
-
-
11,432,932
6,100,103
8,043,646
3,922,149
Total liabilities
12,003,514
10,100,103
8,614,228
7,922,149
TOTAL LIABILITIES
13,586,836
10,307,907
9,567,524
8,017,621
The audited Profit and Loss Statement of the Issuer and the Group for 2015 and 2014
Group
2015
Issuer
2014
2015
2014
Net turnover
13,574,417
11,534,906
850,116
953,805
Operating costs
(2,461,977)
(3,457,813)
(848,460)
(1,066,950)
Provision for impairment
(4,202,236)
(3,316,361)
-
-
6,910,204
4,760,732
1,656
(113,145)
(1,807,518)
(1,233,438)
-
-
5,102,686
3,527,294
1,656
(113,145)
(2,494,087)
(1,418,911)
(61,727)
(128,901)
(610,298)
(705,890)
(7,434)
(56,430)
97,054
453,045
925,329
1,635,095
2,095,355
1,855,538
857,824
1,336,619
(576,135)
(267,509)
-
(2,275)
1,519,220
1,588,029
857,824
1,334,344
Gross profit/ (loss)
Sales costs (marketing)
Operating profit/ (loss)
Administrative costs
Other expenses of economic
activity
Other income of economic
activity
Profit or loss before taxes
Taxes
Financial year net profit /
(loss)
The Issuer's Balance Sheet and Profit and Loss Statement have been taken from the
audited Financial Statements for 2014 and 2015.
As of the publication of the last audited Financial Statement, the financial situation or
performance of the Issuer has not worsened. The Issuer is unaware of
any factors, claims, obligations, or events which would negatively affect the financial
situation or performance of the Issuer in future.
B.8
B.9
B.10
B.11
B.12
B.13
B.14
Selected
pro
forma financial
information
A profit forecast
or estimate
Objections in the
financial
information
of
the audit report
Issuer's equity
Forecasts
regarding
the
Issuer
Events particular
to the Issuer
which are to a
material extent
relevant to the
evaluation of the
Issuer’s solvency
Dependence
upon
other
entities
within
Financial indicators
31.12.2015, EUR
31.12.2014, EUR
Net turnover
Profit before interest, taxes, and amortisation
(EBITDA)
Profit
850,116
1,641,198
953,805
2,357,048
857,824
1,334,344
Total assets
9,567,524
8,017,621
There has not been made a profit forecast or estimate.
The reports on the audit of the financial statement for 2015 contained no objections.
As at 31 December 2014 the amount of the Issuer's equity reached EUR 95,472. As at
31 December 2015 the amount of the Issuer's equity reached EUR 953,296.
There has been no material adverse change in the prospects of the Issuer since the date
of its last published audited Financial Statements.
There is no information of any recent events particular to the Issuer which are to a
material extent relevant to the evaluation of the Issuer’s solvency.
Not applicable because the Issuer is not part of a group.
7
SIA “VIA SMS group” Bond Prospectus
the group
The
Issuer's
principal
activities
B.16 Control over the
Issuer
B.17 Credit ratings
B.18 – B.50
B.15
The Issuer's main activities are holding management, including attracting funds for its
subsidiaries, whose main activity is the issue and recovery of unsecured loans in Latvia
and other EU Member States.
100% of the Issuer's shares directly and indirectly belong to the Issuer's shareholder
Deniss Šerstjukovs.
Currently there are no credit ratings assigned to the Issuer and the issued Bonds.
Not applicable.
Part C Securities
C.1
Type and the
class
of
the
securities, ISIN
C.2
Currency of the
Bonds
C.3 – C.4
C.5
Restrictions on
the
free
transferability of
the Bonds
C.6 – C.7
C.8, Rights
arising
C.9
from the Bonds
C.10
C.11
C.12
Interest payment
of
securities
based on derived
financial
instruments
Admission
to
trading on a
regulated market
or other facility
The
minimum
denomination of
an issue
C.13 – C.22
Bonds are debt securities of the holder with no collateral or alienation restrictions. LCD
has registered the issue of Bonds and assigned it an international securities
identification number (ISIN LV0000801363), as well as carries out the accounting of
issued Bonds.
EUR
Not applicable.
Bonds are dematerialised securities of the holder with no alienation restrictions.
Not applicable.
Bondholders have the right to receive Coupon and Principal Amount payments pursuant
to the procedure provided for in the Prospectus.
Coupon (interest) rate is 12.5% (twelve point five per cent) a year. Interest payments
start from 25 May 2016 and are made once every quarter. The maturity date of the
Bonds are 25 May 2019, the principal amount is paid in a single installment at maturity.
If the Issuer acquires the Bonds in the secondary market and takes decision on the early
redemption of Bonds, the Issuer shall notify Bondholders at least 10 (ten) Business
Days prior to the redemption date of Bonds, by publishing the relevant information in
the Nasdaq Riga information system.
Within the framework of the issue of Bonds it is not provided for, yet at the same time
there are no restrictions set for Bondholders’ right to create and/or authorise an
organisation/person that represents the legal interests of all Bondholders or part thereof.
Not applicable.
The Issuer plans to apply for admission all the Issued Bonds to trading on the regulated
market operated by NASDAQ Riga.
The Nominal Value of each Bond is – EUR 1,000 (one thousand euros).
As at the moment of submission of the Prospectus to FCMC, 1,662 (one thousand six
hundred sixty-two) Bonds were issued as at 18 May 2016. The Issuer has the right to
issue additional 4,638 (four thousand six hundred thirty-eight) Bonds by 25 August
2016.
Not applicable.
Part D Risks
D.1,
D.2
The key risks
that are specific
to the Issuer
When making an investment in Bonds, the Bondholder undertakes certain financial
risks. These risks are related to the financial situation of the lessee, as well as the
situation of the market of Bonds and securities both in Latvia and abroad. The Issuer
carries out its activity, taking into account well-considered risk management aimed at
restricting the undertaking of risks in all main areas of activity.
The Issuer's activity is related to the following risks: macroeconomics risk, loan
recovery risk, technological risk, IT risk, competition risk, refinancing risk, legal risk
and operational risk.
D.3
The
key
risks
When investing in Bonds, investors undertake the following risks related to debt
8
SIA “VIA SMS group” Bond Prospectus
that are specific
to the Bonds
D.4 – D.6
securities: 1) there may be no possibility of selling Bonds in the secondary market; 2)
up to the moment of repayment of the issue, the price in the secondary market may be
lower than the Nominal Value of Bonds; 3) regulatory enactments, which regulate tax
rates and tax payment procedure and which may negatively affect the profitability of
Bonds, may change.
Not applicable.
Part E Offer
E.1 – E.2a
E.2b Reasons for the
offer and use of
proceeds
E.3
E.4
E.7
Terms
and
conditions of the
offer
Conflicting
interests
E.5 – E.6
Expenses
charged to the
Investor
Not applicable.
The issue of Bonds is carried out so that the Issuer would be able to re-finance the
existing loans from investors under more favourable financing conditions, to improve
the cash flow and liquidity, as well as to attract additional capital for the financing of
the Company’s loan portfolio and increase the awareness in the regulated capital market
and among institutional investors.
Not applicable.
Baltikums Bank AS (Organiser) organises the issue of Bonds, and may conduct other
transactions with the Issuer.
Not applicable.
The Investor shall bear all the expenses related with the purchase and custody of Bonds
in accordance with the price-list of the credit institution or the provider of investment
management services used for settlements and custody of Bonds. The Issuer has no
obligation to compensate to the Investor the incurred expenses.
Additional expenses may arise due to tax obligations of the residence state of the
Investor. The Issuer will withhold tax payments from the Coupon payments in
accordance with the terms of the Prospectus.
9
SIA “VIA SMS group” Bond Prospectus
4.
Risk Factors
4.1. Important note
The risks indicated in this section may reduce the Issuer’s ability to fulfil its
obligations and cause its insolvency in the worst-case scenario. Bondholders have to
take
into
account that Bonds are not secured by pledge and third parties have not guaranteed for
Bonds and Coupon payments related thereto. This section may not feature all the
potential risks which may affect the Issuer.
4.2. Changes to regulatory enactments
The Issuer operates in Latvia, as well as through subsidiaries in other European Union
countries. The Issuer's largest asset is the customer loan portfolio, issued in
compliance with the relevant national laws. If existing laws and regulations are
amended or such laws and regulations are adopted as to limit the Issuer's ability to
continue the issuance of short-term loans to individuals and recover them, the Issuer's
ability to pay can be significantly reduced. The overview of the regulatory enactments
is presented in section 11.11 of the Prospectus.
4.3. Macroeconomics
The Group operates in several EU member states. The economic situation in Latvia
and in other countries, where the Issuer carries out its entrepreneurial activity, is
assessed as stable. Macroeconomic indicators, such as unemployment, inflation and
personal income, and the credit ratings of international rating agencies indicate a
positive economic development. Poland is an exception, where the Group has been
operating since 2011, and whose credit rating of long-term liabilities in foreign
currency in the beginning of 2016 were downgraded by the international rating
agency “Standard and Poor’s” by one notch to “BBB+” on the grounds of the
country's political instability.
If the economy experiences a rapid decline, it can adversely affect customers' ability
to duly repay loans to the Issuer's subsidiary companies, which, in turn, may reduce
their ability to meet obligations against the Issuer, and consequently the Issuer may
not be able to meet its obligations against Bondholders.
The Group's income is generated in five countries, and there is a relatively low chance
that the negative macroeconomic processes will affect all of them simultaneously.
4.4. Loan recovery risk
The Company issues loans, and the process of issuing loans takes 15 minutes.
Consequently, the loan application review process takes an even shorter period of
time, posing a risk of insufficient assessment of the client's solvency and the inability
to verify information provided by the client in such a short time. There is a relatively
high probability that a loan will not be repaid in due time or in full.
Since loans to customers are unsecured, the Group's companies are able to direct debt
recovery only against the borrower, which can prolong the loan recovery process.
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SIA “VIA SMS group” Bond Prospectus
At the Group's level a credit policy, as well as lending and recovery procedures have
been approved to standardize internal processes and reduce the share of overdue
loans. The Group has been operating since 2009 and uses the accumulated experience,
commencing its activity in new markets.
4.5. Technological risk
The Issuer's operating environment is very dynamic, since it is based on the
information technology innovations of the latest generation, which provide rapid data
exchange and ensure instant communication with the customer, providing customers
with high-quality service. Considering the dynamics required for the Company to be
able to work productively, constant technological improvements are necessary,
otherwise the Company may face the risk of losing its position in the market, failing
to keep up with the competitors' speed of technological development.
4.6. IT risk
The IT system of the Issuer's group was developed by the Issuer itself, and it contains
customer applications, issued and repaid loans, as well as procedures for recovering
overdue loans and other data, and it allows to quickly prepare reports needed in the
daily decision-making. Any errors or interruptions in the Issuer's IT system may
restrict or delay the processing of customers' applications, assessing of customers'
credit history and issuance of loans, consequently such IT system risk may prolong
the processing time of client applications, reduce the Issuer's income and result in
additional costs.
4.7. Failing to obtain a license / license non-renewal risk
There are countries, where the Issuer's companies are required to obtain a license to
operate there in accordance with procedures provided for by the law from the
supervisory authorities of the short-term loan sector. This type of license is required in
Sweden (maintained annually). Every year there is a risk that the issued licence may
not be renewed or its renewal may be delayed until a specific condition of the
supervisory authority is met, which means that the company's business activity may
be terminated or suspended for a certain period of time. On 1 January 2016
amendments to the Consumer Rights Protection Act came into force in Latvia,
providing that a special permit (license) shall be issued for an indefinite period of
time, whereas a special permit (license) for the provision of consumer credit services
issued until 31 December 2015 shall be valid until expiry date thereof. SIA “VIA
SMS” license is valid until 31 October 2016.
Non-renewal of a license will no limit the Group's right to recover issued loans.
4.8. Competition risk
In Latvia, Czech Republic, Sweden, Spain and Poland online short-term loans are
issued by a number of companies, whose business model is similar to the activity of
the Issuer's subsidiaries. Client application processing technology enables the Issuer
to grant a loan within 15 minutes, and such speed is provided by virtually all major
players. The competitiveness of the Issuer's subsidiaries is largely dependant on
advertising campaigns and marketing strategies, which ensure a more qualitative
attraction of borrowers.
11
SIA “VIA SMS group” Bond Prospectus
At the Group's level the Issuer is implementing uniform standards for customer
service to promote customer loyalty and the desire to use the Group's services for their
borrowing needs. However, it should be taken into account that the competitors might
have access to greater or cheaper financial resources that allow them to offer lending
services at lower fees (interest).
The Issuer's management has extensive experience in the fields of information
technology, management and finance, which generally allows to quickly spot market
trends, evaluate them and take decisions on operational measures in order to avoid
losing the Issuer's market share.
4.9. Refinancing risk
Bonds account for a large share of the Issuer's liabilities. The maturity date of the
Bonds is 25 May 2019, thus the Issuer faces a great refinancing risk upon maturity.
The Issuer's management searches for investors in different countries to reduce
dependency on a single source of funding, but there is no guarantee that until the
maturity of Bonds the share of Bonds will be significantly reduced in the liabilities
structure of the Issuer.
4.10. Dependency on managing employees
In future, the Issuer's duties will be affected by its ability to attract, preserve, and
motivate highly qualified and experienced personnel. Competition for staff with the
relevant skills and experience in Latvia and elsewhere in the EU is large enough;
however, part of the key personnel are also shareholders who are interested in the
long-term growth of the Issuer.
4.11. Owners
The Issuer's owners - one natural and one legal person - together control 100% of the
company's shares. Due to such composition of owners, the shareholders can
significantly affect the performance of the Company in all matters requiring their
decision. Should a situation arise, which is not stipulated in the Prospectus and where
the owners' interests differ from the Bondholders' interests, the Bondholders' interests
may no be taken into account, since shareholders are entitled to make decisions
contrary to the interests of the Bondholders.
4.12. Operational risks
Operational risk is a possibility of experiencing losses due to insufficient or
unsuccessful inner processes, personnel management, systems, or external
circumstances. As at 2015, the number of the Issuer's employees reached 89,
therefore, thorough personnel selection is carried out, accurate description of job
duties are compiled, division of duties is coordinated, constant investments are made
within the IT system, and the shareholders get directly involved in the management of
the company, which allows the Issuer to reduce operational risks.
4.13. Legal proceedings and other claims
The Group may be adversely affected by contractual claims, complaints and legal
proceedings arising from relationships with partners, customers, competitors or
12
SIA “VIA SMS group” Bond Prospectus
regulatory authorities, as well as negative publicity such proceedings might cause.
Any such legal proceedings, complaints, contractual claims or negative publicity may
materially affect the operational activities, financial situation and business results of
the Issuer and the Group's companies.
4.14. Cyber security risk
The Issuer and Group's business involves the storage and transmission of consumers'
propriety information, and security breaches could lead to exposure to a risk of loss or
misuse of this information, legal proceedings, and potential liability. Although the
Group allocates a lot of resources to improve the system and processes, designed for
the protection of computer systems, software and networks, there is a risk that these
safeguards may not be able to ensure complete security of customers' personal
information.
4.15. Risks related to Bonds
4.15.1. Liquidity risk
Despite that Bonds are planned to be included in the Nasdaq Riga listing of debt
securities, neither the Issuer, nor any other person guarantees the minimum liquidity
of Bonds. Bondholders should take into account that there may be difficulties in
selling Bonds in the secondary market.
4.2.15 Price risk
Bonds will be repaid for their Nominal Value, yet the price in the secondary market
may change substantially. Neither the Issuer, nor any other person undertakes to
maintain a certain price level of Bonds.
4.15.3. Risk of change of terms
According to Section 6 of the Prospectus, the Issuer may offer the Bondholders to
amend the properties of Bonds, including but not limited to, reduction or deferral of
Coupon or Nominal Value payments, and other terms. The amendments shall be
considered approved if Bondholders, which own at least 51% of the issued Bonds,
have voted for supporting the amendments.
There may be situations where the initial conditions of the Prospectus may be
supplemented with less favourable conditions, if the Bondholders owning 51% of the
bonds approve these amendments.
4.15.4. Tax risk
Tax rates and tax payment procedure applicable at the moment of purchase of Bonds
to the tax residents, non-residents of Latvia, and residents of other countries may
change. The Issuer will not compensate for the increase in taxes to Bondholders,
therefore Bondholders may receive smaller payments related to Bonds.
4.15.5. Funds recovery risk
13
SIA “VIA SMS group” Bond Prospectus
Bonds are equivalent to other unsecured loans of the Issuer. In case of the Issuer's
insolvency, Bondholders have the same right to receive their investment as other
creditors of the relevant group in accordance with applicable regulatory enactments.
There are no contracts or other transaction documents which would subject the claims
of the Bondholders to other unsecured obligations of the Issuer. The Issuer is not
prohibited from pledging assets in favour of other creditors.
4.15.6. Bond exchange risk
Existing Bondholders have the right to exchange Existing Bonds under ISIN
LV0000801496 against new bonds. Although the exchange is voluntary, it involves
additional risks, due to which the Bondholder may face conditions that are different
from the issue of Existing Bonds under ISIN LV0000801496. To decide on the
exchange of Bonds, the Bondholder shall read the Prospectus and Terms of Issue.
14
SIA “VIA SMS group” Bond Prospectus
5.
Information about Financial Instruments
5.1. Use of funds
The issue of the Bonds is carried out so that the Issuer would be able to:



refinance existing loans,
improve cash flow and liquidity, as well as
increase
awareness
in
the
regulated
among institutional investors.
capital
market
and
At the moment of registration of the Issue Prospectus, the Issuer has re-financed
existing Bonds in the total amount of EUR 1,662,000 (one million six hundred sixtytwo thousand euros zero cents).
5.2. Basic information
The Issuer's Bonds are bearer debt securities of the holder, in which its debt
obligations are determined. Any persons, whose account of financial instruments has
Bonds, is entitled to receive Coupons and Nominal Value payment at maturity.
At the moment of submission of the Prospectus to the FCMC, 1,662 (one thousand six
hundred sixty-two) Bonds with the Nominal Value of EUR 1,000.00 (one thousand
euros zero cents) and the total amount of EUR 1,662,000.00 (one million six hundred
sixty-two thousand euros zero cents) were issued as at 18 May 2016.
ISIN (International Securities Identification Number) of the issue of the Bonds
assigned by LCD is LV0000802064.
5.3.Regulatory enactments
The issue of the Bonds is carried out in accordance with the Commercial Law,
Financial Instruments Market Law and LCD regulations, and other applicable
regulatory enactments of the RoL.
All disputes related to the Bonds will be resolved at courts of the RoL in accordance
with regulatory enactments of the RoL. The Issuer has signed the Prospectus in
Latvian and any translations of the Prospectus in another language are unofficial and
performed solely for the convenience of the investors. In case of dispute settlement,
the interpretation of Prospectus norms in Latvian has priority over translations in
other languages.
5.4. Form and accounting of financial instruments
Bonds are holder's bearer debt securities in dematerialised form. The issue is
registered by LCD, which shall carry out the accounting of the total number of issued
Bonds remaining deposited in the accounts of LCD participants.
5.5. Currency of the issue of financial instruments
The currency of Bonds is euro.
15
SIA “VIA SMS group” Bond Prospectus
5.6. Collateral for Bonds
Bonds are unsecured and equivalent to other unsecured loans of the Issuer. In case of
the Issuer's insolvency, Bondholders have the same right to receive their investment
as other creditors of the relevant group in accordance with applicable regulatory
enactments. There are no contracts or other transaction documents which would
subject the claims of Bondholders to other unsecured obligations of the Issuer.
Bondholders shall keep in mind that the Issuer is not prohibited to pledge its assets in
favour of other creditors, therefore, in case of liquidation of the Issuer, the
Bondholders' claims may not be satisfied in full.
5.7. Rights and obligations related to financial instruments
Every Bondholder has the right to receive Coupon and Nominal Value payments
pursuant to the procedure laid down in Section 5.8 “Payment conditions of Coupon
interest” and 5.9. “Repayment of Notes” of the Prospectus, as well as to use other
rights determined in the Prospectus and legislative acts of the RoL.
5.8. Payment conditions of Coupon interest
The annual rate of Bond Coupon is 12.5% (twelve and five tenths per cent) and it is
fixed up to the maturity of Bonds. Coupon payments are made once a month on the
25th of the month. The first Coupon payment was made on 25 May 2016, the last one
will be made on 25 May 2019. The calculation date of the Coupon is the 5th (fifth)
Business Day prior to the Coupon payment day. The list of Bondholders will be
determined by the end of the Coupon calculation date.
The Issuer pays the Coupon through the intermediary of LCD and in accordance with
applicable LCD regulations which regulate the procedure for paying income from
debt securities. LCD regulations applicable on the day of preparation of the
Prospectus are LCD regulations No. 8 “On Payment of Dividends, Interest, Principal
Amount, and Other Income”.
If the Coupon payment date is a holiday or a festive day, the Issuer will make the
relevant Coupon payment on the Business Day preceding the holiday or festive day.
However, if the nearest Business Day after the holiday or festive day falls in the next
month, redemption payment will be made on the Business Day preceding the holiday.
The amount of Coupon payments will be calculated in the following way:
CPN = F * C / 12, where
CPN – the amount of Coupon payment in Euro per Bond;
F – Nominal Value of one Bond;
C – annual interest rate of the Coupon.
If the Issuer has failed to make Coupon payment in accordance with the deadlines
specified in the Prospectus, Bondholders have the right to submit claims regarding the
16
SIA “VIA SMS group” Bond Prospectus
payment of the Coupon not earlier than after 5 (five) Business Days following the
payment date of the relevant Coupon.
The authority performing the calculation is not required to calculate the Coupon
payment, since the annual rate of the Coupon for the relevant period is fixed in
advance.
5.9. Repayment of Bonds
The Nominal Value of one Bond is EUR 1,000.00 (one thousand euro zero cents),
which the Issuer will repay in one principal installment at maturity of Bonds on 25
May 2019. Bondholders will receive EUR 1,000.00 (one thousand euro zero cents)
per each Bond. The calculation date of the principal amount is the last Business Day
before the last redemption date of Bonds.
The Issuer will pay the principal amount in accordance with LCD intermediary and
applicable LCD regulations. LCD regulations applicable on the day of preparation of
the Prospectus are LCD regulations No. 8 “On Payment of Dividends, Interest,
Principal Amount, and Other Income”.
If the Bond payment date is a holiday or a festive day, the Issuer will make the
relevant Bond payment on the Business Day preceding the holiday or festive day.
However, if the nearest Business Day after the holiday or festive day falls in the next
month, redemption payment will be made on the Business Day preceding the holiday.
If the Issuer has failed to make the principal amount payment in accordance with the
deadlines specified in the Prospectus, Bondholders have the right to submit claims
regarding the repayment of the principal amount not earlier than after 5 (five)
Business Days following the payment date of the principal amount.
5.10. Early redemption (call option)
The Issuer has no right to make and the Bondholders have no right to call for early
redemptiont, except for the following cases:





The Issuer has failed to make a Coupon payment in full for more than 5 (five)
Business Days following the planned payment date;
The Issuer has failed to make a Nominal Value payment in full for more than
5 (five) Business Days following the planned payment date;
Insolvency proceedings have been initiated against the Issuer and an
administrator has been appointed;
The Issuer has submitted an application for liquidation in the relevant state
authorities in Latvia.
The issuer has violated the conditions of Section 5.16 “ Restrictions” of the
Prospectus
The Bondholder can submit a written notification to the Issuer regarding that the
immediate repayment deadline has set in for the Bonds owned by the relevant
Bondholder, at any time after any of the above-mentioned cases have occurred (and as
long as the Insolvency Case exists). The Issuer has to pay the Nominal Value of
17
SIA “VIA SMS group” Bond Prospectus
Bonds along with the accrued Coupon within 5 (five) Business Days after the receipt
of the notification.
The Issuer has the right to repurchase Bonds in the secondary market directly from
the Bondholders, agreeing on the number, price, payment date and form of payment
of the Bonds to be repurchased.
The Issuer shall keep the repurchased Bonds in its financial instruments account and
is entitled to redeem or sell them to investors. If the Issuer takes decision on the early
redemption of Bonds, the Issuer shall notify Bondholders at least 10 (ten) Business
Days prior to the redemption date of Bonds, by publishing the relevant information
in the Nasdaq Riga information system and in ORICGS or directly to the
Bondholders if Bonds are not listed in the regulated market.
5.11. Contractual penalty
If the Issuer has failed to pay Bondholders the amounts payable thereto in relation to
Bonds on the relevant payment date, the Issuer shall have to pay a contractual penalty
upon the request of any Bondholder to all the Bondholders from the date (without
including it), when the deadline has set in, to (including) the actual payment date in
the amount of 0.01% (zero point zero one per cent) per day from the relevant
outstanding amount.
5.12. Calculation of profitability and accrued interest
Coupon starts to accrue from 25 February 2016. When calculating the accured
Coupon, it is assumed that a year consists of 360 days and a month consists of 30 days
(Day Count Convention – “European 30/360”). The accrued Coupon (interest)
between the Coupon payment days is calculated according to the following formula:
AI = F x C / 360 x D, where
AI – accrued Coupon (interest);
F – Nominal Value of Bonds;
C – annual interest rate of the Coupon.
D – number of days from the beginning of Coupon accrual period according to the
360 days a year/30 days a month convention.
5.13. Representation of Bondholders
Within the framework of the issue, it is not planned, yet not prohibited to create an
organisation of authorised persons which would represent Bondholders. In case of the
Issuer’s insolvency, every Bondholder has the right to represent its interests at the
shareholders meetings, as well as Bondholders will have the same rights to receive
their investments as other creditors in the relevant group of claims.
18
SIA “VIA SMS group” Bond Prospectus
5.14. The Issuer’s decisions on the issue of Bonds
The shareholders meeting of the Issuer on 19 February 2016 took a decision (Minutes
No. 2016/01) to issue debt securities (Bonds). Based on this decision, the Board of the
Issuer, by the decision of 24 March 2016 (Minutes No. 2016/02), decided to express
an offer of Bonds and approve the Terms of Issue. By the Board's decision of 18 May
2016 (Minutes No. 2016/05), the Board decided to approve the Prospectus and
include Bonds in the regulated market.
5.15. Restrictions on the free transferability of Bonds
There are no restrictions in relation to the alienation of Bonds in the secondary
market.
5.16. Restrictions
From the date of issue of Bonds to the date of repayment thereof, the Issuer shall
undertake the following:




Not to pay dividends;
To maintain Net Debt / EBITDA (total liabilities minus Bonds, which the
Issuer keeps in its financial instruments account, and minus cash profit before
interest payments, tax payments, depreciation and amortisation calculation)
indicators so as not to exceed 3 to 1;
To maintain Net Debt / Equity (total liabilities minus Bonds, which the Issuer
keeps in its financial instruments account, and minus cash against equity)
indicators so as not to exceed 6 to 1;
Not to repay before the date of maturity any other loans of the Issuer under
any contracts in force at the moment of signing of the terms of the issue and
which are concluded after the date of signing of the Terms of Issue. The
process of receipt of consent must be organised in accordance with the
conditions of Section 6 of the Prospectus.
19
SIA “VIA SMS group” Bond Prospectus
6.
Procedure for Applying for a Waiver
The Issuer has the right to amend sections 5, 6, 7 and 14 of the Prospectus only with
the consent of the Bondholders received in accordance with the procedure prescribed
by this section. Similarly, the Issuer has the right to ask for a permit for activities
referred to in section 5.6 “Restrictions”.
The amendment of the Prospectus may include the amendment of any condition,
which is not restricted by such properties of Bonds as currency, Coupon rate, Coupon
calculation method, Coupon and Nominal Value payments, inclusion of Bonds for
trade in other regulated markets, repayment deadline of Bonds, and other conditions,
unless they contradict regulatory enactments in force in Latvia.
The Issuer can apply for the waiver itself or through the intermediary of an authorised
person (“Agent”). To apply for the waiver, the Issuer or Issuer's Agent shall notify
that through Nasdaq Riga information system and ORICGS, specifying at least the
following information:
 description of the offered changes;
 justification of the description of offered changes;
 date on which the list of Bondholders entitled to give permit (vote) will be
fixed;
 period within which the Bondholder can support or reject the offered
exemption;
 indications in relation to the support or rejection of the waiver and procedure
for filling in the voting questionnaire;
 notification that the Bondholder who is willing to grant the waiver offered by
the Issuer has to notify the Issuer and Issuer’s Agent within the period referred
to in the application, which is certified by a postal seal or signature on receipt,
and if the Bondholder fails to notify the Issuer or Issuer’s Agent of the
confirmation to grant the waiver within the period determined in the
application, it will be deemed that the Bondholder has not granted its consent
to the waiver;
 contact information of the Issuer and/or Issuer’s Agent, which must be used
for notifications (phone for inquiries, address for sending filled-in and signed
questionnaires, and list of addresses of representations and/or branches of the
Issuer and/or Issuer’s Agent, where Bondholders can submit the questionnaire
in person);
 other information.
The Issuer requests the list of Bondholders from LCD at the date which is the 5th
(fifth) Business Day following the publication of a notification in Nasdaq Riga
information system. The period within which Bondholders must take decision and
reply on the support or rejection of the waiver for the Issuer cannot be less than 10
(ten) calendar days from the day when the application has been published in Nasdaq
Riga information system.
Bondholders must submit signed questionnaires with the decision to the Issuer or
Issuer’s Agent by the date determined in the application for the waiver, in person, by
courier or registered mail (postmarked). Waiver or permission is considered to be
20
SIA “VIA SMS group” Bond Prospectus
granted, if Bondholders, which own at least 51% of the remaining Bonds, have voted
for supporting the waiver or permission.
The Issuer or Issuer’s Agent must count the votes received and notify Bondholders of
the voting results within 1 (one) business day following the end of the period for
submission of questionnaires, by publishing the relevant notification in Nasdaq Riga
information system and ORICGS.
Amendments approved by Bondholders come into force no earlier than on the next
Business Day of publication thereof.
If the approved amendments apply to the properties of Bonds and/or Coupon
calculation method, or Coupon or Nominal Value payment procedure, the Issuer shall
inform LCD about the relevant amendments immediately after the entry into force of
amendments.
21
SIA “VIA SMS group” Bond Prospectus
7.
Inclusion in the Market and Trade Conditions
The regulated market maker is Nasdaq Riga, the legal and actual address of which is
Vaļņu iela 1, Riga, LV-1050, Latvia. NASDAQ Riga phone +371 67212431, fax
+371 67229411, e-mail: [email protected]. Official website for general information –
www.nasdaqomxbaltic.com.
The Issuer will submit all the documents necessary to include Bonds on Nasdaq Riga
Baltic Bond List after the registration of the Prospectus with the FCMC. The trade of
Bonds will not be commenced before the day on which Nasdaq Riga board will take
decision on the commencement of Bond quotation in the regulated market.
Nasdaq Riga Baltic Bond List will include all the Bonds which have been sold within
the framework of the initial offer of Bonds before the registration of the Prospectus
with the FCMC. Other Bonds will be included in the regulated market on the same
day as the settlements with the relevant Bonds.
The Issuer has not entered into any contract on the maintenance of Bond liquidity in
the secondary market with any person.
22
SIA “VIA SMS group” Bond Prospectus
8.
Additional Information
8.1. Councillors related to the issue
The Issuer has used the services of Baltikums Bank, AS in the preparation of the
Bond Prospectus.
8.2. Independent verification of information included in the description of securities
The information included in the description of securities has not been verified by
auditors.
8.3. Statements or reports of persons included in the description of securities
The description of securities includes no statement or report of a person who is
considered to be an expert.
8.4. Credit ratings
No credit ratings have been assigned to the Issuer.
23
SIA “VIA SMS group” Bond Prospectus
9.
Taxes in Latvia
9.1. Notification
The general overview included in this section cannot be considered to be a legal or tax
consultation. This section contains no exhaustive and full information on all the taxes
which apply to the investment in Bonds. Tax rates and tax payment conditions may
change over time from the issue of Bonds up to their repayment. Potential Investors
are recommended to consult with their councillors on tax matters in relation to their
particular case and RoL or foreign tax regulatory enactments, the subjects of which
may be Bondholders.
9.2. Definitions of residents and non-residents
For the purposes of tax calculation, a natural person shall be considered to be a RoL
resident, if the declared place of residence of this person is the RoL and this person is
staying in the RoL for 183 days or more within any 12 month period, which starts or
ends in the taxation year, or this person is a citizen of the RoL, who is hired abroad by
the RoL government. If a natural person does not comply with the aforementioned
requirements, it shall be considered to be a non-resident for the purposes of tax
calculation.
Any legal person is considered to be a resident for the purposes of tax calculation, if it
is or has to be founded and registered in the RoL in accordance with RoL regulatory
enactments. Other legal persons are considered to be non-residents for the purposes of
tax calculation.
Table 1 - Income tax applied to Bonds issued by a legal entity (other than a credit
institution) registered in Latvia as at 01.01.2016.
Legal
status of
income
recipient
Publicly traded bonds
Tax
rate for interest
(Coupon)
Conditions
Tax rate
for
capital
increase
personal income tax in the amount of 10% from interest (coupon)
income in Latvia is withheld and transferred to the budget by the
Issuer of the Bonds, if registered in Latvia.
Resident natural
person
Resident legal
person
1
10%
not taxable 2
10% 1
not taxable 2
Capital increase from bond sales are considered equivalent to
interest income and are subject to 10% tax rate. Tax calculation
and payment for capital increase in Latvia is carried out by the
beneficiary of the income by completing Annual Income Return,
if the bond sales transaction resulted in a profit. If no profit is
generated from the bond sales transaction, income tax is not
calculated/paid.
Tax calculation and payment for interest (coupon) income and
capital increase from sales of Bonds is carried out by the
beneficiary of income by submitting Corporate Income Tax
Return for the tax year.
2
Interest (coupon) income and capital increase from Bonds,
issued in public circulation in the EU or EEA, are not subject to
corporate income tax.
24
SIA “VIA SMS group” Bond Prospectus
4
Nonresident natural
person
Interest (Coupon) income and capital increase from bonds,
which have been issued in public circulation in the EU or EEA,
are not subject to personal income tax, except when the
beneficiary of income is a non-resident, registered in a low-tax or
tax-free country or territory established by the regulations of the
Cabinet of Ministers of the Republic of Latvia (the so-called
"black list").
not taxable 4, 5, 6
not taxable 4,
6
5
The Issuer of the Bonds withholds 15% tax on interest (Coupon)
payments, if they are made to a natural person - non-resident, who
is registered in a low-tax or tax-free country or territory included
in the "black list".
6
A natural person - non-resident, who receives interest (Coupon)
income or capital increase from the sale of Bonds, may be obliged
to calculate and pay tax in the country of residence in accordance
with the tax rate specified in the respective country and may be
higher than that applied in Latvia.
7
Interest (Coupon) income and capital increase from sale of
bonds, received by a company-non-resident, are not subject to
corporate income tax, except when the beneficiary of income is a
non-resident,who is registered in a low-tax or tax-free country or
territory included in the "black list".
8
Nonresident legal
person
not taxable 7, 8, 9
not taxable
9
7,
In Latvia the Issuer of the Bonds withholds 15% tax on interest
(Coupon) payments, if they are made to a company - nonresident, who is registered in a low-tax or tax-free country or
territory included in the "black list".
9
A company - non-resident, who receives interest (Coupon)
income or capital increase from the sale of Bonds, may be obliged
to calculate and pay tax in the country of residence in accordance
with the tax rate specified in the respective country and may be
higher than that applied in Latvia.
Source: Regulatory enactments of the RoL
The Issuer is responsible for tax payments pursuant to the procedure and in the
amount determined in regulatory enactments.
25
SIA “VIA SMS group” Bond Prospectus
10. Issuer
10.1. Information about the Issuer
The name of the company is SIA “VIA SMS group”.
The Issuer was registered in the Commercial Register of the RoL on 23.02.2007 under
the uniform registration number 40003901472. The period of existence of the Issuer is
not limited.
The legal and actual address of the Issuer is 13. Janvāra iela 3, LV-1050, Riga, Latvia.
Legal form of the Issuer: Limited Liability Company, legal status – legal person. The
company’s country of foundation is the Republic of Latvia.
The Issuer carries out its activity in accordance with the Commercial Law, Civil Law
and other applicable laws and regulations of the RoL. The Issuer's subsidiary SIA
“VIA SMS” is regulated by Cabinet Regulation No. 245 of 29 March 2011,
“Regulations Regarding the Procedures by Which a Special Permit (Licence) for the
Provision of Consumer Credit Services Shall Be Issued, Re-Registered, Suspended
and Cancelled and the State Fee for the Issue and Re-Registration of a Special Permit
(Licence) Shall Be Paid, as well as the Requirements for a Capital Company for the
Receipt of a Special Permit (Licence)”; The Issuer's subsidiaries abroad are governed
by the relevant national laws and regulations. The Group's companies have obtained
the necessary licenses for consumer lending.
The issue of Bonds and their circulation in the secondary market is regulated by the
Financial Instrument Market Law, AS “Nasdaq Riga” and AS “Latvijas Centrālais
depozitārijs” regulations.
10.2. Latest important events
The most important events in the history of the Issuer since 2012.
Table 2 – SIA “VIA SMS group” important events
Year
Events
2012.

The number of the Group's customers exceeds 300,000;
2013.



The number of the Group's customers exceeds 500,000;
The Group concludes 2013 with a net profit of EUR 702 thousand;
Termination of the Group's business activity in the UK and the sale
of claim resulting from unprofitable business in the UK due to the
large amount of bad debtors;
Finnish subsidiary's liquidation due to the limitation of interest
rates in Finland;
Redemption of the Swedish company's shares from the co-investor,
as a result of which VIA SMS Group owns 100% shares and the
Swedish subsidiary is 100% funded by VIA SMS Group;
Development of the Intelligent Scoring (Customer Evaluation)
Model, which has been successfully introduced in Poland;



26
SIA “VIA SMS group” Bond Prospectus


2014.






2015.



Consolidated accounts in accordance with SGS (IFRS) standards is
drawn-up for the very first time;
A common methodology for the calculation of provisions for bad
debtors is carried out in accordance with the requirements of IFRS.
A new company – limited partnership EEIG VIA SMS R&D
Services – is established to take over all support services (IT,
financial, marketing, strategy, legal) provided by VIA SMS Group.
VIA SMS Group continues to provide only the (financial) activities
of a lender/borrower and is the holder of the subsidiary shares;
The implementation of the Intelligent Scoring Model in Sweden,
Czech Republic, Latvia, Lithuania and Spain;
A single Transferta pricing policy for all companies of the Group is
developed and implemented;
The Spanish subsidiary VIA SMS MINICREDIT S.L., of which
SIA VIA SMS Group owned 35% shares, is sold to Spanish coinvestors SIA SP Capital Group;
At the end of 2014 a new subsidiary - VIACONTO MINICREDIT
S.L. - in Spain is established, of which SIA VIA SMS Group owns
100% shares;
SIA VIA SMS lists its Bonds in the Nasdaq Riga listing of debt
securities.
In April economic activity in the newly established Spanish
subsidiary VIACONTO MINICREDIT S.L. is commenced;
A decision to completely terminate economic activity in the
Lithuanian market is adopted, resulting in the sale of the complete
VIA SMS LT UAB loan portfolio at the end of 2015;
A single Tranferta pricing policy is developed and implemented for
all companies of the Group on the basis of capital raised form the
issue of Bonds.
10.3. Investments
The last audited financial statement of the Issuer is for the period ended 31 December
2015. As of that date, the Issuer has not made any significant investments and the
Issuer’s management has not undertaken any obligations for the investments planned
in future.
27
SIA “VIA SMS group” Bond Prospectus
11. Description of Entrepreneurial Activity
11.1. The Group
SIA “VIA SMS group” together with another 7 companies in Latvia and abroad form
a group of commercial companies, which are essentially engaged in consumer credit
advertising, issuance, administration and recovery of overdue loans. VIA SMS Group
subsidiaries offer quick and convenient short-term and long-term loans on good terms.
Loans are granted without collateral or any other security, and they are issued within
15 minutes.
The Group's strategy is to remotely provide financial services to individuals, allowing
to quickly meet everyday needs. The Group's objective is to operate only in such
countries where its business model is allowed and there are no significant obstacles to
a successful operation in the long term.
The Group's structure is as follows:


SIA “VIA SMS group” is the Group's parent company, which is based on the
activities of the holding company, which provides the Group's companies with
funds;
o SIA “VIA SMS” (Latvia) provides lending services, the Issuer owns
100% of shares;
o “VIA SMS LT” UAB (Lithuania) provides lending services, the Issuer
owns 100% of shares;
o “VIA SMS” s.r.o. (Czech Republic) provides lending services, the
Issuer owns 100% of shares;
o “VIA SMS PL” Sp.z.o.o. (Poland) provides lending services, the Issuer
owns 100% of shares;
o “ViaConto” Sweden AB (Sweden) provides lending services, the
Issuer owns 100% of shares;
o “VIAConto Minicredit” S.L. (Spain) provides lending services, the
Issuer owns 100% of shares;
EEIG “VIA SMS R&D Services” is a limited partnership established in 2014
with the aim to provide the entire Group with customer management system
(CRM) administration, marketing, tax, management, legal, debt recovery and
similar services. SIA “VIA SMS group” owns 94 shares of this company,
whereas the subsidiaries of Latvia, Lithuania, Poland, Czech Republic, Sweden
and Spain own 1 share each.
11.2. Description of the Group's companies
11.2.1. SIA “VIA SMS group” (Latvia)
VIA SMS Group is a holding company and provides the entire Group with the
following services and financial resources:



decides on business start-ups in new countries or termination of any of the
existing ones;
presents the Group companies to potential investors;
attracts financial resources from shareholders or third parties;
28
SIA “VIA SMS group” Bond Prospectus

manages liquidity at the Group's level.
VIA SMS Group oversees the operation of the subsidiaries with the help of an IT
system, which combines all the data associated with lending. In addition, every
subsidiary prepares and submits to the Board of VIA SMS Group the following
reports: profit and loss report, report on the dynamics of the portfolio, lending report,
operational activities report and marketing report.
In 2015 the company worked with a turnover of EUR 850,116 and had a profit of
EUR 857,824.
11.2.2. SIA “VIA SMS” (Latvia)
SIA “VIA SMS” started its activity in 2009 as the first company of VIA SMS Group.
In the Latvian market SIA “VIA SMS” was one of the first companies to start its
activity in a business area which then was still rather uncommon. The Company
continuously worked on various marketing strategies and within a short period of time
the number of registered customers started to grow rapidly.
The objective of SIA “VIA SMS” from the very beginning was high quality customer
service. All customer service operations of SIA “VIA SMS” are carried out only via
an IT service system established by VIA SMS Group, which is considered one of the
main keys to success in business development. Thanks to an active and efficient
marketing strategy, that has resulted in an increased reputation of SIA “VIA SMS”, in
2013 VIA SMS managed to cross the threshold of 100,000 registered customers,
which in Latvia is a very significant market share.
SIA “VIA SMS” has been operating since 2009 and has gained a solid third place in
the Latvian market. During its operation, SIA “VIA SMS” has become a well
recognized service provider in Latvia, whose reputation states that SIA "VIA SMS"
offers quality and convenience with the highest level of customer service.
The goal of SIA “VIA SMS” is to gradually increase its loan portfolio, as well as
continuous improvement of the credit portfolio quality, which means that the
Company shall decrease the number of overdue loans as much as possible, but
maximize the number of active clients, who pay commission fees for loan
rescheduling. Also, the aim of SIA “VIA SMS” is to offer loyal customers a line of
credit, which is linked to a credit card with which the customer can pay for purchases
or withdraw cash from an ATM.
SIA “VIA SMS” operates as an independent company, in which decisions are taken
by its CEO. SIA “VIA SMS” decides on the Company's credit policy, amount of
marketing expenditure, increase and reduction of various cost items of the Company.
The organizational structure of SIA “VIA SMS” includes the Customer Service
Department, Debt Recovery Department, Legal Department and Accounting
Department.
SIA “VIA SMS” has received a special permit (license) No. NK-2013-031 to carry
out consumer lending services in the Republic of Latvia, which is valid until 31
October 2016.
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SIA “VIA SMS group” Bond Prospectus
11.2.3. “VIA SMS LT” UAB (Lithuania)
In the summer of 2013 amendments to the non-bank lending sector legislation came
into force, the number of customers and loans issued by “VIA SMS LT” UAB
decreased substantially, and, consequently, by the end of 2013 it was decided that a
gradual recovery of the loan portfolio shall be carried out and new loans shall be
issued in a very limited amount. As a result, in two years, e.g. from December 2013 to
December 2015, more than EUR 1.6 million have been recovered, which fully cover
the net loan portfolio as of 31 December 2013 in the amount of EUR 697,396 and
provided an additional amount of operating surplus of more than EUR 0.9 million to
cover administration expenses of the portfolio.
In December 2015 the remaining loan portfolio of “VIA SMS LT” UAB EUR
125,481 was sold and economic activities in Lithuania were terminated.
In 2016 in the Lithuania's subsidiary 2 employees will continue to work to assist “VIA
SMS LT” UAB in the liquidation process.
“VIA SMS LT” UAB operates as an individual company where decisions are made
by the CEO of “VIA SMS LT” UAB.
The organizational structure of “VIA SMS LT” UAB consists of the Board, CEO and
Debt Recovery Department.
11.2.4. “VIA SMS” s.r.o. (Czech Republic)
“VIA SMS” s.r.o. has been operating in Czech Republic since the beginning of 2011
as the third of VIA SMS Group's subsidiary companies. From the first day of business
“VIA SMS” s.r.o. began to actively and purposefully conquer its market position.
Different types of marketing campaigns were rapidly expanded in Czech Republic,
ensuring a swift influx of customers in a short period of time.
Due to its high quality customer service that provides client application processing
and loan issuance within 15 minutes, as well as favourable terms of the loan, VIA
SMS quickly gained recognition among customers.
“VIA SMS” is able to provide instant loan application processing, thanks to the IT
service system set up by VIA SMS Group.
“VIA SMS” s.r.o. has gained a strong position in the Czech market and has become a
well-recognized brand whose reputation states that “VIA SMS” s.r.o. offers quality
and convenience with the highest level of service.
“VIA SMS” s.r.o. operates as an individual company where decisions are made by the
CEO of “VIA SMS”. “VIA SMS” s.r.o. decides on the Company's credit policy,
amount of marketing expenditure, increase and reduction of various cost items of the
Company.
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SIA “VIA SMS group” Bond Prospectus
The organizational structure of “VIA SMS” s.r.o. consists of a Manager, COB,
Accounting, Customer Service and DEbt Recovery Departments.
11.2.5. “VIA SMS PL” Sp.z.o.o. (Poland)
“VIA SMS PL” Sp.z.o.o. has been operating since 2011 as the fourth of VIA SMS
Group's subsidiary companies. From the first day of business “VIA SMS PL”
Sp.z.o.o. began to actively and purposefully conquer its market position. Different
types of marketing campaigns were rapidly expanded in Poland, and, since Poland's
market is very large, these campaigns ensured a swift influx of customers in a short
period of time.
Due to its high quality customer service that provides client application processing
and loan issuance within 15 minutes, as well as favourable terms of the loan, “VIA
SMS PL” Sp.z.o.o. quickly gained recognition among customers. “VIA SMS PL”
Sp.z.o.o. is able to provide instant loan application processing, thanks to the IT
service system set up by VIA SMS Group.
“VIA SMS PL” Sp.z.o.o. has been operating since 2011 and has gained a stable
position in Poland's market. “VIA SMS PL” Sp.z.o.o. has become a well-recognized
brand whose reputation states that “VIA SMS PL” Sp.z.o.o. offers quality and
convenience with the highest level of service. VIA SMS constantly organizes new
marketing campaigns to remind their customers of itself, as well as to present itself to
potential customers.
Given the size of the Polish market, “VIA SMS PL” Sp.z.o.o. strategy, when
evaluating loan requests, is based on a regional principle. Thanks to the analysis
carried out by “VIA SMS PL” Sp.z.o.o. in 2011 in order to develop a strategy under
which the company will operate in the Polish market, a significant difference emerged
in creditors' payment discipline, depending on the region where the borrower lives.
The Polish strategy is based on this principle, which the company developed during
the early days of its activities, and it is considered to be very successful.
In 2014 the Polish subsidiary “VIA SMS PL” Sp.z.o.o. took over the leading position
from SIA “VIA SMS LV” as the biggest company of the Group with respect to the
amount of loan portfolio.
“VIA SMS PL” Sp.z.o.o. operates as an individual company where decisions are
made by the CEO of “VIA SMS PL” Sp.z.o.o. “VIA SMS PL” Sp.z.o.o. decides on
the Company's credit policy, amount of marketing expenditure, increase and reduction
of various cost items of the Company.
The organizational structure of “VIA SMS PL” Sp.z.o.o. consists of the Board,
Accounting, Marketing, Customer Service and Debt Recovery Departments.
11.2.6. “ViaConto” Sweden AB (Sweden)
“ViaConto” Sweden AB has been operating since 2011 as the fifth of VIA SMS
Group's subsidiary companies. “ViaConto” Sweden AB operates under the name VIA
CONTO. From the first day of business “ViaConto” Sweden AB began to actively
and purposefully conquer its market position. Different types of marketing campaigns
31
SIA “VIA SMS group” Bond Prospectus
were rapidly expanded in Sweden, ensuring a swift influx of customers in a short
period of time.
Due to its high quality customer service that provides client application processing
and loan issuance within 15 minutes, as well as favourable terms of the loan,
“ViaConto” Sweden AB quickly gained recognition among customers. “ViaConto”
Sweden AB is able to provide instant loan application processing, thanks to the IT
service system set up by VIA SMS Group.
“ViaConto” Sweden AB constantly organizes new marketing campaigns to remind
their customers of itself, as well as to present itself to potential customers.
“ViaConto” Sweden AB operates as an independent company, where decisions are
taken by the CEO of “ViaConto” Sweden AB. The organizational structure of
“ViaConto” Sweden AB includes the Board (2 members), Chief Executive Officer,
Chief Accountant, Customer Service Department, Debt Recovery Department.
11.2.7. “VIACONTO Minicredit” S.L. (Spain)
“VIACONTO Minicredit” S.L. has been operating in Spain since the spring of 2015
as the sixth of VIA SMS Group's subsidiary companies. “VIACONTO Minicredit”
S.L. operates under the name VIACONTO MINICREDIT. From the first day of
business “VIACONTO Minicredit” S.L. began to actively and purposefully conquer
its market position. Since VIA SMS Group already has gained experience in
operating in Spain, this market is well-known and its conquest strategy is moderate,
associated with controllable and manageable credit risk.
Like other VIA SMS Group's subsidiary companies, also “VIACONTO Minicredit”
S.L. provides high quality customer service, customer application processing and loan
issuance within 15 minutes. “VIACONTO Minicredit” S.L. is able to provide instant
loan application processing, thanks to the IT service system set up by VIA SMS
Group.
“VIACONTO Minicredit” S.L. has been operating in Spain since the spring of 2009,
and is on its way to gain a strong position in the Spanish market.
“VIACONTO Minicredit” S.L. operates as an individual company, whose decisions
are taken by its CEO. The organizational structure of “VIA SMS Minicredit” S.L.
includes the Director, Board (2 members), Administrative, Customer Service and
Debt Recovery departments.
11.3. Services
The Group offers two types of loans to its customers-natural persons – short-term
loans (7 to 30 days), which in Latvia are offered under the title “Aizdevums līdz
algai”, and long-terms loans (from 3 to 12 months), which are offered to Latvian
customers under the name “Naudas kredīts”. In 2016 a new service shall be
introduced - line of credit, which is linked to a credit card. Loans are issued only in
the country's official currency. Loan terms and amounts are adapted to each country's
customer ability to pay, demand, level of competition and regulatory enactments. By
filling in an on-line application, the customer can choose any amount without
32
SIA “VIA SMS group” Bond Prospectus
decimals and a maturity within set limits, allowing the customer to borrow only the
amount that is needed.
Latvia. Since December 2009 short-term loans (7 to 30 days) from EUR 50 to 700 are
issued per customer. Since September 2011 long-term loans with a maturity of 3 to 12
months and from EUR 500 to 1,500 are also offered.
The first loan of up to EUR 200 is issued without applying a lending fee. For repeated
loans a lending fee from 8.8% per month or 105% per year is applied. The loan
repayment period can be extended for seven, fourteen or thirty days, applying a fee
for the extension of the loan repayment period, which depends on the loan amount.
In Latvia a long-term loan is also available. Loan interest is from 3.94% to 7.5% per
month or 47.28% to 90% per year. The loan repayment period can be extended for
thirty days, applying a fee for the extension of the loan repayment period, which
depends on the loan amount.
Lithuania. In Lithuania, lending activities were commenced in September 2010 with
short-term loans (5 to 30 days in the amount of LTL 100 to 1,500); however, the
issuance of this type of loan was terminated in June 2013 and since then customers in
Lithuania are offered only long-term loans with a maturity of 1 to 24 months in the
amount of LTL 250 to 5,000. Since 2016 no type of lending activities take place in
Lithuania.
Czech Republic. The Company started its activities in Czech Republic in January
2011, and offers only short-term loans from 1 to 30 days in the amount from CZK 100
to 15,000.
The first loan of up to CZK 6,000 is issued without applying a lending fee. For
repeated loans a lending fee with RPSN rate of 1270% is applied. The loan repayment
period can be extended for seven, fourteen or thirty days, applying a fee for the
extension of the loan repayment period, which depends on the loan amount.
Poland. Since April 2011 natural persons of Poland are offered only short-term loans
from 1 to 30 days. Amounts range from PLN 100 to 3,000.
The first loan of up to ZL 1,000 is issued without applying a lending fee. For repeated
loans a lending fee with RRSO rate of 850% to 940% is applied. The loan repayment
period can be extended for seven, fourteen or thirty days, applying a fee for the
extension of the loan repayment period, which depends on the loan amount.
Sweden. The Group started to issue loans in Sweden in October 2011. Short-term
loans from 1 to 30 days in the amount of SEK 1,000 to 3,000 are available. Since
November 2013 long-term loans from 2 to 3 months in the amount of SEK 3,000 to
10,000 are offered to customers.
The first loan of up to SEK 1,000 is issued without applying a lending fee. For
repeated loans a lending fee with a rate of 448% to 1,308% is applied. The loan
repayment period can be extended for seven, fourteen or thirty days, applying a fee
for the extension of the loan repayment period, which depends on the loan amount.
33
SIA “VIA SMS group” Bond Prospectus
Spain. Since April 2015 the Group's subsidiary issues short-term loans with a maturity
of 7 to 30 days, and the amounts available to customers range from EUR 50 to 600.
Long-term loans are not available.
In Spain the first loan is not free of charge, while for repeated loans a lending fee with
a rate of 3,752% to 4,114% is applied. The loan repayment period can be extended for
seven, fourteen or thirty days, applying a fee for the extension of the loan repayment
period, which depends on the loan amount.
Table 3 - Commission Fees of Short-Term Loans
Countr
y
According to the tariffs
Commission for
Monthly
30 days (local
commission fee,
currency)
%
Amoun
t
Currenc
y
LV*
100
EUR
30
8.8
8.80%
LV
350
EUR
30
30.8
8.80%
LT*
100
EUR
30
-
-
LT
350
EUR
30
-
-
CZ*
2,500
CZK
30
600
24.00%
CZ
12,000
CZK
30
2,880
24.00%
400
PLN
30
93
23.25%
PL
2,000
PLN
30
412
20.60%
SE*
1,000
SEK
30
250
25.00%
SE
3,000
SEK
30
450
15.00%
EU*
100
EUR
30
35
35.00%
EU
600
EUR
30
210
35.00%
PL*
*-~ 100
Due
Date
EUR
Table 4 - Extension Fees of Short-Term Loans
Actual
Count
ry
Amoun
t
Currenc
y
According to the tariffs
Estimated
Extension
for 30 days
(local
currency)
Extension
fee %
Extension
fee (%)
7 days
Extension
fee (%)
14 days
Extension
fee (%)
30 days
Extension
fee (%)
Average
LV*
100
EUR
8.80
8.80%
3.50%
6.30%
9.10%
6.30%
LV
350
EUR
30.8
8.80%
7.00%
11.00%
16.67%
6.30%
LT*
100
EUR
-
-
-
-
-
-
LT
350
EUR
-
-
-
-
-
-
2,500
CZK
627
25.08%
11.68%
15.76%
25.08%
17.51%
CZ*
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SIA “VIA SMS group” Bond Prospectus
CZ
12,000
CZK
2,357
19.64%
7.82%
11.42%
19.64%
12.96%
400
PLN
86
21.50%
9.50%
13.50%
21.50%
14.83%
PL
2,000
PLN
427
21.35%
9.50%
13.50%
21.50%
14.83%
SE*
1,000
SEK
190
19.00%
8.80%
11.90%
19.00%
13.23%
SE
3,000
SEK
787
13.12%
4.63%
7.22%
13.12%
8.32%
EU*
100
EUR
26
26.00%
9.00%
13.00%
26.00%
16.00%
EU
600
EUR
156
26.00%
9.00%
13.00%
26.00%
16.00%
PL*
Table 5 - Commission Fees of Long-Term Loans
Coun
try
According to the tariffs
Commission for
Monthly commission
30 days (local
fee, %
currency)
Amount
Curren
cy
500
EUR
3
77
5.13%
LV*
1,000
EUR
6
278
4.63%
LV
1,500
EUR
12
827
4.59%
LT
500
EUR
3
-
-
LT*
1,000
EUR
6
-
-
LT
1,500
EUR
12
-
-
SE
3,000
SEK
1
450
15.00%
SE
6,000
SEK
2
1,425
11.88%
SE*
9,000
SEK
3
2,399
8.89%
LV
Due
Date
*-~ 1000 EUR
11.4. Marketing
The Group's companies are actively promoting lending services to their country of
registration. The Group's marketing policy is to actively reach out to that share of the
population, who is most likely to become potential customers.
Advertising is carried out on the Internet, where the Company's brand appears among
the search results, and elsewhere, with the aim to interest people into visiting the
Company's website. Advertising via Internet is carried out using Google's paid
services and local affiliate services.
Additional advertising is done on television, radio and outdoors.
35
SIA “VIA SMS group” Bond Prospectus
The Group's companies constantly organize new marketing campaigns to remind their
customers of itself, as well as to present itself to potential customers. The Group's
future goal is not to try and become the leader of the market, but to do everything
possible to preserve the already acquired stable position in the top five. To make this
happen, the Company is constantly working on improvements in technology,
customer service speed, new and hitherto unseen product introductions, and, through
special effort, maintain an excellent level of customer service quality.
SIA “VIA SMS” has taken a solid third place in a market saturated with heavy
competition. This shows a correct choice of strategy, which has ensured SIA “VIA
SMS” with regular customers, who continue to embrace services provided by VIA
SMS Latvia, which, in turn, points to the constant quality the company has been able
to offer to its customers for the seventh year. Similarly, SIA “VIA SMS” has been
implementing the correct marketing strategy, as it has ensured a steady flow of new
clients throughout the Company's operation.
In 2011 SIA “VIA SMS” in Latvia and “VIA SMS LT” UAB in Lithuania created an
advertising campaign, in the framework of which customers were able to win a
variety of prizes, as well as the main prize at the end of the campaign - passenger cars
“Peugeot 208” and “Renault Megane”. Such valuable prizes had not been offered in
the short-term loan sector before, therefore, during the campaign, a lot of new clients
signed up to SIA “VIA SMS” and “VIA SMS LT” UAB, also existing customers
actively fulfilled the conditions to participate in the car raffle. To take part in the
raffle, clients had to borrow and repay a specified number of loans in a minimum
amount; furthermore, the loan had to be repaid in a timely manner. It was observed
that during the campaign not only did the demand for SIA “VIA SMS” and “VIA
SMS LT” UAB services increase, but also the quality of the loan portfolio improved
significantly, since it promoted loan repayment discipline.
The main factor that enables the company to work efficiently and generate profit is
the operating environment. Despite the fact that the legislature is trying to limit the
activity of the short-term loan issuing businesses, the operating environment is
suitable for this kind of business in all countries, where VIA SMS Group's companies
operate. Operating and using funds efficiently, VIA SMS Group's subsidiaries are
able to generate profit from their activities.
To profit in a consumer lending sector saturated with competition, it is important to
constantly remind customers or potential customers of oneself, which the Company
ensures by continuous marketing activities. Similarly, the Company strives to ensure
impeccable service and product quality, offers competitive prices and takes care of the
Company's image and reputation, as the economic activity of the Company directly
depends on the visibility of its brand in society.
VIA SMS Group's subsidiary in Latvia, together with its strongest competitors, has
actively participated in the establishment and development of operation of the
Alternative Financial Service Providers Association of Latvia (Latvijas Alternatīvo
Finanšu Pakalpojumu Asociācija), to enhance its public image and reputation in the
eyes of consumers.
The short-term lending market experiences seasonality, e.g. during winter months
demand for loans increases substantially. This can be explained by several factors, of
which the most significant is the heating season, during which the monthly expenses
36
SIA “VIA SMS group” Bond Prospectus
of the population increase dramatically. During summer months different types of
seasonal work are available, therefore it is possible for people to gain more income,
thus the demand for loans decreases. Also, in summer a large proportion of the
population will reduce spending on food, because people can wholly or partially
subsist on self-grown produce.
VIA SMS Group also sponsors the following sports:



Cycling (Latvian Cycling Federation);
Judo (Vsevolod Zelenij judo school);
Motorcycling (Latvian Motorcycling Federation).
The Group has registered the brands and colour combinations of VIA SMS and VIA
CONTO in the relevant registers.
11.5. Costumers
SIA "VIA SMS Group” customers are individuals aged 20 to 70. Since the beginning
of operation of the Group's first company in Latvia in 2009, the number of registered
customers has grown rapidly.
Table 6 - the number of the Group's registered clients over the years
Year
2009
2010
2011
2012
2013
2014
2015
Number of registered customers
167
21,316
125,981
326,850
530,220
606,012
745,508
The number of costumers in less explored markets, such as Poland and Spain with a
population of around 40 million, continues to grow. Similarly, the number of clients
in smaller markets, like Latvia, Czech Republic and Sweden, is constantly increasing.
For the daily analysis of data, including evaluation of the results of marketing
activities, the management of the Group's subsidiaries has access to information
regarding clients' age, education, income, living area, which allows to assess and
forecast the potential return of each group of customers, taking into account historical
data of loan repayment discipline.
11.6. Description of the loan portfolio
The Group's loan portfolio has been evolving since 2009. Considering the short-term
nature of many loans (e.g. 7 or 14 days), loans are issued repeatedly. With increasing
market saturation or changes in customer demand, in each country the Group's
companies adapt loan terms, amount, rates and other conditions, and can also decide
on the termination of provision of a certain product, if it is unable to provide sufficient
profitability.
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SIA “VIA SMS group” Bond Prospectus
Table 7 - Number and amount of loans issued over the years
Year loan was issued
Issued loans, pcs.
2009
2010
2011
2012
2013
2014
2015
Issued loans, EUR
33
16,752
113,844
239,829
266,435
227,964
232,303
4,155
2,104,941
17,060,316
38,874,387
45,838,534
44,335,864
54,370,390
So far the Group has issued the most number of loans in Latvia and Poland. This can
be explained by the fact that Latvia was the first country where the Group started its
activities, and Poland is the largest market where the Group currently operates.
Table 8 - Number and amount of loans issued per country since 2009 as at
31.12.2015
Country
Issued loans, pcs.
Latvia
Poland
Lithuania
Czech Republic
Sweden
Spain
Issued loans, EUR
431,708
380,324
72,235
98,099
80,211
4,064
74,046,191
66,383,531
12,129,814
17,590,310
24,637,608
982,764
Table 9 - the Group's loan portfolio by country as at 31.12.2013.-31.12.2015.,
EUR
Country
Latvia
Lithuania
Czech Republic
Poland
Sweden
Spain
Total:
31.12.2015
31.12.2014
2,962,852
300,990
2,279,212
3,356,690
2,648,705
11,548,449
3,474,100
2,272,218
5,526,197
2,643,855
699,951
14,616,320
31.12.2013
3,115,698
1,133,717
1,734,371
2,914,663
2,388,863
2,289,693
13,577,005
Most of the issued loans are up to EUR 100 or its equivalent in the official currency of
the respective country, which complies with the Group's strategy to issue small loans.
Table 10 - Breakdown of issued loans by contract amount as at 31.12.2015
Amount of loans, EUR
Issued loans, group, pcs.
100
200
393,535
362,177
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SIA “VIA SMS group” Bond Prospectus
300
400
500
1,000
2,000
182,532
58,103
55,872
14,100
322
11.7. Procedure for issuing loans
The Group's companies has a uniform credit policy and procedure for the issuance of
loans. The customer can apply for a loan (“Aizdevums līdz algai” or “Naudas
kredīts”) only online or via SMS, if an online application has been completed prior to
the event.
The client must provide personal data, information on marital status and income, as
well as information on other liabilities. In case of “Naudas kredīts” the client must
provide information regarding total family income and expenditure. Before receiving
the first loan the client must transfer EUR 0.01 from his/her bank account, thus
confirming their identity. In addition to identification, INSTANTOR service is
utilized to verify the identity of the client, as the client uses a bank code calculator or
code card for authorisation. When clients are identified through INSTANTOR, the
Group's companies gain access to the client's bank account statement for the last 6
months.
Upon receiving the client's request for loan, a Service Specialist assesses the quality
of the received data, including the client's age, IP address from which the application
was filled, as well as the e-mail address. If the Service Specialist has any doubt
regarding the veracity or compliance with the credit policy of the provided data, the
loan is denied.
After the initial check the Service Specialist conducts an in-depth analysis, which
consists of several stages, allowing to assess the client's ability to repay the loan and
payments related thereto. The Service Specialist pays special attention to evaluate the
client's income and expenditure and whether there are enough funds left after the
client has met his/her obligations. If there is non-compliance with the company-set
maximum loan payment share against the client's income, the loan is denied. The
client's credit history is also checked against third-party databases.
Upon verification of the client's financial data and a positive outcome, the loan is
transferred to the client's bank account.
Usually the time between the receipt of the client's application and the transferring of
the money to the client's bank account is 15 minutes.
11.8. Loan Repayment Procedure
The client is able to repay the loan prematurely at any time without any additional
fees or interest payments.
One day before and on the date of repayment of the loan a text message is sent to the
client with a reminder and information on the option to extend the repayment date for
a period not exceeding the original term. If the client chooses to extend the term, a
39
SIA “VIA SMS group” Bond Prospectus
commission fee shall be paid in accordance with the current price list. It is possible to
extend the repayment term of one loan not more than twice; however, before the
second case of extension a Service Specialist contacts the client and finds out the
reasons for the extension, as well as assesses the probability of repayment of the loan.
If in doubt of the client's ability to repay the loan, the Service Specialist offers the
client a repayment schedule, where the total amount is divided into several
instalments.
11.9. Procedure for Recovering Loans
In situations where clients have started to delay repayment of the loan, the Group's
company that issued the loan initiates active communication with the client. The client
is initially reminded to meet his/her obligations by phone the next day after the
maturity of the loan, after another day - via a text message and e-mail, and so on a
number of times until 22 days have passed from the maturity of the loan. The first
stage of the reminder procedure ends with a registered letter to the client with a
warning of recovery of the loan through a collection agency. If, during the following
27 days, the client still has not met his/her obligations or agreed to a repayment
schedule (if the Company has offered one), the case is handed over to a collection
agency.
For each day of delay a penalty is calculated, and for each letter of warning - a
commission fee. All communication with the client is registered in the Company's IT
system.
Table 11 - the Group's gross loan portfolio by number of delayed days as at
31.12.2014.-31.12.2015., EUR
As at 31.12.2015
Current
Late payments without
impairment
With impairment
Restructured
As at 31.12.2014
Current
Late payments without
impairment
Days
overdue
<=0
“Aizdevums līdz
algai”, EUR
7,163,214
Installment
loans, EUR
849,657
1-30
1,043,527
215,781
31-60
61-90
90+
Total:
559,217
467,523
2,732,132
631,202
12,596,819
Loans and receivables:
Unearned commission:
Impairment provisions:
Net loan portfolio:
Days
overdue
<=0
1-30
40
123,798
67,081
753,282
9,824
2,019,423
14,616,242
(284,138)
(3,763,848)
10,568,256
“Aizdevums līdz
algai”, EUR
5,640,446
Installment
loans, EUR
1,097,345
713,269
94,663
SIA “VIA SMS group” Bond Prospectus
With impairment
Restructured
31-60
370,989
81,357
61-90
151,989
90+
2,710,763
315,772
Total:
9,903,228
Loans and receivables:
Unearned commission:
Impairment provisions:
Net loan portfolio:
53,589
306,855
11,142
1,645,221
11,548,449
(231,723)
(3,311,320)
8,005,406
In 2014 and 2015 the Group established EUR 3,311,320 and EUR 3,763,848 of
provisions for doubtful debts in accordance with the Group's accounting policies.
During 2014 provisions for doubtful debts decreased, since Poland introduced
portfolio insurance (CDS – credit default swap), due to which most of the bad
receivables were sold at nominal value and written off the portfolio in accordance
with the terms and conditions of the CDS. As a result, the provisions were replaced by
insurance premium, which is paid for portfolio insurance through the CDS
transaction.
SIA “VIA SMS” performs continuous credit policy monitoring. Due to careful
monitoring, SIA “VIA SMS” is able to operatively and dully make changes in its
credit policy, which has ensured a good quality of the loan portfolio of SIA “VIA
SMS” with a lower number of accounts receivables and a greater number of active
clients.
11.10. Competitors
The short-term lending industry is a relatively new sector in the field of financial
activity, and it is considered to be very modern, with respect to the dynamics of the
technological age in people's everyday lives. The clients are able to receive a loan
anywhere, anytime, since it requires only sending a text message or filling out an
online application. Within a few years the industry has conquered a significant market
share, to some extent - from the banking sector, the structure of which today is more
conservative and bureaucratic, thus banks are incapable of providing the customer
service speed needed to become a short-term loan issuer.
The biggest advantages of the Company's short-term and long-term loans are their
speed and convenience. Registration for a loan takes place electronically 24 hours a
day and, when the loan request has been submitted, the client receives the requested
amount in his/her bank account within 15 minutes.
Despite the fact that the online lending industry is regarded as a new and previously
non-existent industry, it has experienced a very rapid spread throughout the EU
territory. This certainly has an impact on the market, where corrections are brought by
the large saturation of competitors, as well as national legislators who implement
different laws and regulations, monitor and limit the activity of creditors with the help
of various conditions.
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SIA “VIA SMS group” Bond Prospectus
In the last five years the short-term market has experienced a large increase of market
participants. This large competition saturation has led to a very rapid dumping,
resulting in a situation, where, in order to sell the product and obtain or retain a strong
position in the market, it is necessary to engage in interest-free lending to attract
consumers.
To carry out short-term lending activities, some countries require special licenses, and
a minimum amount of share equity is set, which greatly exceeds minimum amounts of
equity set for other companies operating in other types of business sectors. Similarly,
amendments are made to national civil laws to limit, control and supervise the activity
of the short-term lending companies.
Due to the rapid development of the short-term lending industry, it can be seen that
the overall knowledge of the sector increases, which prohibits businesses from
attracting customers with simple slogans about interest-free loans. To attract clients,
participants of the short-term loan market implement very aggressive and expensive
marketing campaigns under which customers are offered a variety of desirable things,
including payment for registration on the website, a chance to visit public events
specially organised for the customers, and other bonuses to attract clients.
When the level of wealth of people of a specific area increases, the demand for shortterm loans decreases, which leads to the conclusion that a short-term loan is a product,
which is targeted at people with lower levels of income, as well as a product which
experiences the greatest demand during economic downturn.
VIA SMS Group is a Latvian-based company, and it was Latvia where the first of the
VIA SMS Group's subsidiaries commenced its operation. The Group's biggest rival in
Latvia is AS “4Finance”, which has conquered the biggest share of the Latvian shortterm loan market with its brands “SMS Credit” and “Vivus”. AS “4Finance” can
successfully operate in the market, because it was the first undertaking in Latvia to
start short-term lending, and, since the beginning of activity, AS “4Finance” has been
constantly attracting new customers and retaining the trust of existing customers by
providing high-quality customer service, maintaining a very aggressive marketing
strategy and establishing one of the leading brands in Latvia.
Just as in Latvia, also in the Lithuanian and Polish markets the strongest competitor of
VIA SMS Group is AS “4Finance” companies, namely, in Lithuania the Lithuanian
branch of “SMS Credit” and in Poland - the Polish subsidiary of “VIVUS”. The
business strategy and operating model of AS “4Finance” is equivalent to the one AS
“4Finance” applies in the Latvian market. In Poland, companies “Ekspreskasa” and
“SMS Kredyt”, the pioneers of short-term lending in the Polish market, are also
operating very successfully and steady.
In Czech Republic major VIA SMS competitors are Pujckomat, Ferratum,
Moneynow, Rychlapujcka24, which were steady players in the Czech market before
the opening of the VIA SMS Czech subsidiary. The competitors actively use social
networks for advertising campaigns and online branding.
In Sweden the biggest VIA SMS subsidiary's rivals are Risicum Capital AB and
Ferratum Sweden AB. Ferratum AB is the Swedish branch of an international
organization, whereas Risicum Capital AB is a Swedish company, which has
successfully gained a stable position in the Swedish short-term lending market. Both
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SIA “VIA SMS group” Bond Prospectus
companies carry out continuous advertising on the Internet – both by placing a variety
of banners and carrying out an extensive amount of Google indexing.
Since VIA SMS Group's subsidiaries are not the first players in the market, but hold a
strong and steady position among the leaders as the third - fifth player in the market,
VIA SMS Group's subsidiaries have no prevailing effect on the pricing structure and
profitability.
11.11. Legal Framework of the Sector
The Issuer's management regularly monitors the changes in the laws and regulations
in each of the Group's countries of operation, and, if necessary, adjusts the loan
conditions, including the procedure of issuance and recovery, advertising and other
aspects, so that the Group's operation would comply with the legal requirements. In
2016 legislative changes in Latvia and Poland shall enter into force.
11.11.1. General Information
On 23 April 2008 Directive 2008/48/EC of the European Parliament and of the
Council on credit agreements for consumers and repealing Council Directive
87/102/EEC (hereinafter referred to as the Directive) was issued and approved,
introducing a new and economically more suitable framework for consumer lending.
Consequently, all European Union Member States, including Latvia, Lithuania,
Poland, Czech Republic, Sweden and Spain – shall provide the implementation of the
requirements of the Directive into national laws and regulations, and shall act in
accordance with the Directive. The Directive shall not apply to credit agreements
involving amounts less than EUR 200 or more than EUR 75 000.
In general, according to the above Directive, the same advertising restrictions apply to
all countries of the Group's activity, the same requirements regarding pre-contractual
information, the obligation to assess the creditworthiness of the consumer, established
consumer right of withdrawal, and listed information to be included in credit
agreements. With respect to the European Union's requirements regarding processing
of personal data, non-bank creditors in all countries mentioned hereinafter shall meet
the requirements regarding processing of personal data.
a) Advertisement restriction
When advertising credits, full financial information shall be indicated, without being
misleading. Any advertising concerning credit agreements which indicates an interest
rate or any figures relating to the cost of the credit to the consumer shall include, inter
alia, the following:
o the borrowing rate;
o the total amount of credit;
o the annual percentage rate of charge (Member States may decide that the
annual percentage rate of charge need not be provided).
b) Pre-contractual information
In good time before the consumer is bound by any credit agreement or offer, the
creditor and, where applicable, the credit intermediary shall, on the basis of the credit
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SIA “VIA SMS group” Bond Prospectus
terms and conditions offered by the creditor and, if applicable, the preferences
expressed and information supplied by the consumer, provide the consumer with the
information needed to compare different offers in order to take an informed decision
on whether to conclude a credit agreement.
c) Obligation to assess the creditworthiness of the consumer
Prior to entering into a consumer credit contract, the creditor shall evaluate the
consumer’s creditworthiness on the basis of sufficient information obtained from the
consumer and, where necessary, on the basis of data from the databases established
for processing of personal data.
d) Right of withdrawal
The consumer shall have a period of 14 calendar days in which to withdraw from the
credit agreement without giving any reason, paying any penalty, interest or
compensation for losses.
e) Information to be included in credit agreements
In order to enable the consumer to know his rights and obligations under the credit
agreement, it should contain all necessary information in a clear and concise manner.
This information inter alia should include:





the type of credit;
the duration of the credit agreement;
the total amount of credit and the conditions governing the drawdown;
the amount, number and frequency of payments to be made by the consumer;
the annual percentage rate of charge and the total amount payable by the
consumer, calculated at the time the credit agreement is concluded, etc.
Regardless of the common regulations to be implemented in the national legislation
under the EU Directive, each Member State has the right to impose additional
provisions, provided that they comply with the Directive.
11.11.2. Information on the Legal Framework in Some Countries
Latvia - Consumer lending in Latvia is governed by Consumer Rights Protection Act
and Cabinet Regulations No. 1219 of 28 December 2010 “On Consumer Lending”.
For non-bank lending companies to do their business in Latvia, they must obtain a
special permit (license) from the Consumer Rights Protection Centre, which is the
supervisory body of non-bank creditors.
To obtain the licence, the creditors must meet certain criteria, for example, they must
have a registered personal data processing or a personal data protection expert,
developed internal procedures for consumer lending service provision, which govern
the issuance and monitoring of loans, developed consumer complaint handling
procedures and the order in which the consumer's ability to repay the loan will be
assessed. The license fee is EUR 71,140. Re-registration thereof for non-bank
creditors costs EUR 14,225 annually.
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SIA “VIA SMS group” Bond Prospectus
In November 2013 the Cabinet of Ministers of the Republic of Latvia prepared a draft
law on amendments to the Consumer Rights Protection Act. The amendments to the
Act included the condition that the consumer lending contract costs should be
proportionate and the interest rate applied to the lending contract shall not exceed
100%.
On 28 May 2015 the Saeima adopted in the third reading amendments to the
Consumer Rights Protection Act, which entered into force on 1 January 2016. These
amendments set a limit of the total amount of loans issued to consumers. The
restrictions are mainly related to the applicable maximum rates per day to issued
loans, depending on the term of the loan agreement, determining that the rate for the
first 7 days may not exceed 0.55% per day, for the next 7 days - 0.25% per day and
the remaining 14 days the rate may not exceed 0.2% per day of the issued loan
amount. If the term of the loan exceeds 30 days, the maximum rate is 0.25% per day
from the first day the loan was issued.
In addition to the aforementioned rate limits, a penalty limit has been introduced,
which means, that the interest for late payment may not exceed 36% per annum above
the applied loan rate per annum.
Also, amendments to the Act prohibit the conclusion of a loan agreement in the period
from 23:00 to 7:00, and includes the provision that the repayment of the loan of a loan
agreement, entered into using remote means of communication for a period longer
than 1 month, shall be made in installments proportional to the duration of the
contract and interest and principal amount not less than once a month.
These changes will have a certain impact on the operation of SIA “VIA SMS”,
although it will still be profitable and capable of earning. To minimize the effects of
the legislative changes, starting from 2016 a greater emphasis is placed on long-term
loans, and a new product shall be implemented - a line of credit, which will allow the
customers to borrow money for a longer period at a lower interest rate and a lower
monthly payment.
Poland - on 18 December 2011 the Consumer Credit Act (Ustawa z dnia 12 maja
2011 r. o kredycie konsumenckim) governing non-bank creditors in Poland, came into
force.
Non-bank creditors in Poland are not required to obtain a licence, but since 2015 they
are required to register with a common credit institution register. Also, these
companies are required to register with the personal Data Protection Register. The
supervisory body in Poland is the Competition and Consumer Protection Office.
In 2015 the Polish parliament adopted legislative amendments to the Consumer Credit
Act, which will enter into force on 11 March 2016. The adopted amendments to the
Act include the breakdown of the interest payment and non-interest payment into
installments, determining that the maximum interest rate per annum shall not exceed
8.5%, whereas the non-interest rate per annum shall be calculated as 25% per loan,
regardless of the term plus 30% per annum from the principal amount of loan.
These changes will have a certain impact on the operation of “VIA SMS PL” Z.o.o.,
although it will still be profitable and capable of earning. These legislative changes
will have a negative impact on the extension of the loan term, but a positive impact on
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SIA “VIA SMS group” Bond Prospectus
loans with a term of up to 1 month, where, in accordance with the amendments, the
maximum rate is higher than that applied thus far. To minimize the negative impact of
loan extension, a long-term loan product shall be implemented in Poland with a term
of 4 months, which will replace the need to extend. Overall, legislative changes in
Poland will have an immaterial impact on the Group's operating results.
Czech Republic - The Consumer lending sector is governed by Consumer Credit Act
No. 43-2013, which came into force on 25 February 2013 (Zákon č. 43/2013 Sb. Novela zákona o spotřebitelském úvěru (zákona č. 145/2010 Sb.)). This Act stipulates
that a lending body shall make sure the consumer is capable of repaying the loan. If
this is not carried out, the loan agreement will be deemed null and void.
The Act also determines the maximum amount of the administrative penalty for noncompliance with the Consumer Credit Act – CZK 20,000,000. It also establishes a
prohibition for creditors to use phone numbers with a premium rate the caller is
charged when calling. Non-bank creditors in Czech Republic are not required to
obtain a special license.
Lithuania - On 1 July 2013 Consumer Credit Act No. XI-1684 (Lietuvos Respublikos
Vartojimo kredito įstatymą, XI-1684) came into force, in its current version
stipulating that annual interest rates for loans shall not exceed 200% and the limit for
penalty is 0.05% per day of delay.
Lithuanian non-bank creditors are not required to obtain a special license for doing
business, however, these companies must register with the Lithuanian Central Bank
Creditors' register. Also, non-bank creditors are required to provide information on a
regular basis to the Lithuanian Central Bank and the Department of Statistics,
Consumer Protection Office, Data Protection Centre and the Financial Intelligence
Agency upon request.
With respect to the above-mentioned legislative changes, the Group decided to leave
the Lithuanian market, and since 2016 it does not issue loans there.
Spain - the issuance of loans to consumers in Spain is governed by Consumer Credit
Act No. 16/2011 (Ley 16/2011, de 24 de junio, de contratos de crédito al consumo),
which entered into force on 24 June 2011 and was issued with the aim to incorporate
the requirements of the Directive regarding loan advertising, consumer awareness etc.
into the national legislation.
Non-bank creditors in Spain are not required to obtain a special license, however, they
must register with the Personal Data Protection Register.
Sweden - As of 1 July 2014, the consumer lending sector in Sweden is governed by
Consumer Credit Act No. 2014:275 (Lag (2014:275) om viss verksamhet med
konsumentkrediter). The supervisory bodies in Sweden are the Consumer Protection
Agency (Konsumentverket) and the Financial Inspection (Finansinspektionen), which
monitor the compliance of the creditor with the Consumer Credit Act, verify the
compliance of the management and the shareholders, as well as determine the actual
beneficiaries.
The Consumer Credit Act stipulates that during the period from 1 July 2014 to 1
January 2015 non-bank creditors in Sweden shall obtain a licence from the Financial
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SIA “VIA SMS group” Bond Prospectus
Inspection. This Act also states that non-bank creditors are prohibited from granting
additional premiums to employees for attracting new customers and issuing loans.
The new Act also provides for penalties for failure to comply with the Consumer
Credit Act.
11.12. Management of the Issuer
The management of the Issuer and the Group consists of the following team:

Eduards Lapkovskis, born in 1980
2003-2004 – studied in the Information Systems Management programme of
the Faculty of Economics and Management of the University of Latvia
(Master's degree, not completed)
1998-2003 - studied in the International Business Management programme of
the Faculty of Economics and Management of the University of Latvia,
obtained a Bachelor's degree.
Since 2010 is the Chief Operational Officer (COO) and member of the Board
of VIA SMS Group. Eduards Lapkovskis lead the Group's start-ups in
Lithuania, Czech Republic, Poland and Sweden. On a daily basis is
responsible for the operational performance of the Issuer's parent and
subsidiary companies.
Eduards Lapkovskis previously worked for group companies of Aizkraukles
Banka (2009-2010) and Parex Banka (2003-2008) in CIS countries.

Deniss Šerstjukovs, born in 1980
1998-2002 - Obtained a Bachelor's degree in the Faculty of Economics and
Management of the University College of Economics and Culture.
Since 2012 is the Director of Business Development (DBD) and member of
the Board. Deniss Šerstjukovs has led the development of a number of new
products and lines of business. He is responsible for the day-to-day
management of the Issuer's parent and subsidiary companies, attraction of
financial and strategic investors and other strategy-related issues of the
Company.
Deniss Šerstjukovs previously worked in the Financial Department of Riga
City Council as Deputy Director (2009-2012), as well as the Chairman of Red
Holding (2005-2009), member of the Board of Coffee Nation (2202-2005) and
in the IT Department of Parex Banka as an Economist (1999-2002).

Jānis Urtāns, born in 1977
1996-2000 – obtained a Bachelor's degree in the Accounting and Finance
Programme of the Economics Faculty of the University of Agriculture of the
Republic of Latvia
2001-2003 – obtained a Master's Degree in the International Economics and
Management Programme of the University of Latvia
Since 2013 studies in the Master's Programme of Law and Finances of the
Riga Graduate School of Law
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SIA “VIA SMS group” Bond Prospectus
Since 2016 works as the Chief Financial Officer (CFO) of VIA SMS Group.
His day-to-day responsibilities include management of the financial flows of
the Issuer's parent and subsidiary companies, development and control of the
budget, preparation of reports to the Management and tax optimization. In
addition, he organises cooperation with investors and the issue of bonds,
participates in risk management, as well as the development of internal
procedures and indicators.
Jānis Urtāns previously worked in various positions for Ektornet Management
Latvia, Valsts nekustamie īpašumi, Hansabanka, Ministry of Economics and
Ernst & Young.
11.13. Employees
At the end of 2015 89 employees worked in the Group. A uniform personnel policy
has been implemented within the Group, based on a very thoughtful personnel
selection. Most of the Group's employees are with prior experience in the financial
field, as well as in customer service. Each employee hired to work for a crediting
company of the Group is required to undergo an intensive training course for one
month, during which the employee gets acquainted with the operation of the IT
service software, customer service standards, legal knowledge necessary for daily
activities, and other types of knowledge and skills to ensure that recruits have been
prepared in accordance with the implemented customer service standards.
A large share of the success the Company has achieved during its operation can be
attributed to a carefully selected team, which ensures the highest level of customer
service, always promotes new ideas for the Company's development and
improvement, also, through a variety of team-building activities, the team is always
motivated to work and be loyal towards the Company, helping to raise the everyday
quality of work.
11.14. IT systems
VIA SMS Group can pride itself on a unique, developed and advanced IT service
system, which the Company has created from scratch, adapting its functioning so that
it would perfectly meet the needs of all the subsidiaries to perform its activities and
reach its goals. The IT service system allows the Company to work with its clients
with maximum efficiency, output and speed. Since the IT service system is built on
the principle to perform processes automatically, employees of VIA SMS Group's
subsidiaries handle the day-to-day monitoring of processes rather than manual
execution thereof, which allows to provide customers with the service faster, more
efficiently and with better quality. The IT service system of VIA SMS Group is being
constantly improved and therefore the client is provided with high quality services.
The Group's IT system lists clients' applications, issued and repaid loans, as well as
the procedure of recovery of overdue loans, and other data. The IT system allows to
quickly prepare reports necessary to assist the management in daily decision-making.
11.15. Development plans
The future goal of VIA SMS Group is to do everything possible to maintain a stable
position among the strongest companies in the short-term loan market, as well as to
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SIA “VIA SMS group” Bond Prospectus
ensure the popularity of the brand and take care of excellent reputation. To make this
happen, the Company is constantly working on improvements in technology,
customer service speed, new and hitherto unseen product introductions, and, through
special effort, maintain an excellent level of customer service quality.
The goal of VIA SMS Group is to gradually increase its loan portfolio, as well as
continuous improvement of the credit portfolio quality, which means that the
Company shall decrease the number of overdue loans as much as possible, but
maximize the number of active clients, who pay commission fees for loan
rescheduling.
11.16. Conflicts of interest and activity of members of administration and supervision
bodies outside the Issuer
The Issuer's management bodies are the Shareholders' meeting and the Board. The
address of all members of the Board is 13. Janvāra iela 3, LV-1050, Riga, Latvia.
The Issuer's Board consists of two members - Eduards Lapkovskis and Deniss
Šerstjukovs.
The Issuer shall be represented only together.
Issuer’s members of the Council take different positions in other business companies,
yet they do not have significant influence on the Issuer.
The persons referred to in this section may have conflicts of interests against the
Issuer, its creditors, and its represented interests as participants or other duties. In
order to eliminate possible conflicts of interests and reduce the consequences of these
conflicts, the Issuer complies with all the restrictions provided for by the regulatory
enactments of the RoL in relation to transactions with shareholders, members of the
Council and the Board.
11.17. Shareholders and other business companies thereof
The Issuer's shareholders is one commercial company registered in Latvia and one
natural person.
Table 12 – SIA “VIA SMS group” list of shareholders
Number of
shares
Name, Surname/Title
SIA “Financial Investment”, Reg.No.
40103584744, Audēju iela 14-9, Riga, Latvia
Deniss Šerstjukovs
Total:
% of the total
amount
1,422
50%
1,422
2,844
50%
100%
The Issuer's member of the Board Deniss Šerstjukovs owns 60% of SIA “Financial
investment” shares, while the remaining 40% of shares are owned by Andris
Riekstiņš, citizen of Latvia.
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SIA “VIA SMS group” Bond Prospectus
The Issuer is not aware of any agreements, the fulfilment of which may lead to
changes in its ownership structure.
The Issuer’s owners have made investments in other business companies. The Issuer’s
relationships with related persons are disclosed in its financial statements. Business
companies of the owners have no significant influence on the Issuer.
11.18. Management practice
The Issuer complies with the company management principles in force in Latvia and
internationally accepted practice in relation to corporate management. In order to
ensure that cooperation partners and clients understand their work and to promote
confidence in their long-term economic potential, the Issuer pays great attention to
ensuring the transparency of business, personnel training, improving the quality of
services, and provision of high-quality services.
The Issuer operates in compliance with the requirements of the public and always
endeavours to achieve the best results in its work. The Issuer has established an audit
committee. The committee consists of the following persons:


Andris Riekstiņš
Normunds Vigulis
The Issuer plans to continue improving its management practice in accordance with
Nasdaq Riga Corporate Management Principles and recommendations, as well as
internationally accepted practice.
11.19. Information about tendencies
The Issuer has no information at its disposal regarding the tendencies, insecurity
factors, claims, obligations, or events, except for those referred to in the Prospectus,
which may significantly affect Issuer’s perspectives in the current financial year.
11.20. Profit forecasts
The Issuer’s management does not want to include profit forecasts or profit
assessment in the Prospectus.
12. Important Contracts
The Issuer and the Group's companies have not entered into any contracts which
might affect their ability to fulfil their obligations to Bondholders in relation to the
securities to be issued.
13. Legal Proceedings and Arbitration
In accordance with the information available to the Issuer’s management at the
moment of signing the Prospectus, no state interventions, legal proceedings or
arbitration processes, which may significantly affect or have significantly affected the
financial situation or profitability of the Issuer, are taking place.
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SIA “VIA SMS group” Bond Prospectus
14. Documents Available to the Public and Publication of Information
All interested persons have a possibility of getting acquainted with the following
documents:
Issuer’s registration document and articles of association;
Issuer’s financial statements for previous years, starting from the financial
statement for 2012/2013;
 Terms of Issue;
 Prospectus


at the Issuer’s office at 13.janvāra iela 3, LV-1050, Riga, Latvia, or requesting an
electronic copy by e-mail [email protected].
Up to the maturity of the Bonds, the Issuer shall publish all the information required
by regulatory enactments, including Nasdaq Riga regulations. After the inclusion of
the Bonds on the list of stock exchange, the Issuer will publish all the information in
the Nasdaq Riga information system and ORICGS.
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SIA “VIA SMS group” Bond Prospectus
15. Financial Information about Issuer’s Assets and Liabilities, Financial
Situation, Profit and Loss
The information included in this section of the Prospectus has been obtained from the
financial statements for 2015, which have been audited and approved at the meeting
of the Board and prepared in accordance with International Financial Statement
Standards (IFSS).
15.1. Auditors
The last audited financial statement of the Issuer is for the period ended 31 December
2015. The verification of the said statement was carried out by SIA “Deloitte Audits
Latvia” (Grēdu iela 4A, Riga, LV-1019, Latvia, Licence No. 43), responsible auditor
is Elīna Sedliņa (certificate No. 179).
The full financial statement of the Issuer for 2014 and 2015 with an audit report is
available in the annex of the Prospectus.
Auditors have not verified the information included in the Prospectus.
15.2. Consolidated and separate profit or loss statement
The Issuer's consolidated and separate profit or loss statement have been taken from
the audited financial statements for 2015.
Table 13 - SIA “VIA SMS group” profit and loss statement for 2014 and 2015,
EUR
Group
Net Turnover
Operating costs
Provision for impairment
Gross profit/ (loss)
Sales costs (marketing)
Operating profit/ (loss)
Administrative costs
Other expenses of economic activity
Other income of economic activity
Profit or loss before taxes
Taxes
Financial year net profit / (loss)
2015
13,574,417
2,461,977
4,202,236
6,910,204
1,807,518
5,102,686
(2,494,087)
(610,298)
97,054
2,095,355
(576,135)
1,519,220
52
Issuer
2014
11,534,906
(3,457,813)
(3,316,361)
4,760,732
(1,233,438)
3,527,294
(1,418,911)
(705,890)
453,045
1,855,538
(267,509)
1,588,029
2015
850,116
(848,460)
1,656
1,656
(61,727)
(7,434)
925,329
857,824
857,824
2014
953,805
(1,066,950)
(113,145)
(113,145)
(128,901)
(56,430)
1,635,095
1,336,619
(2,275)
1,334,344
SIA “VIA SMS group” Bond Prospectus
15.3. Consolidated and separate balance sheet
Table 14 - SIA "VIA SMS group" balance sheet for 2014 and 2015, EUR
Group
31.12.2015
31.12.2014
Long-term investments
Fixed assets
Intangible investments
Long-term investment in leased
fixed-assets
Participation in the capital of the
subsidiary and associated companies
Loans and receivables
Deferred tax
Current assets
Loans and receivables
Securities
Other receivables
Next period costs
Cash and its equivalents
TOTAL ASSETS
Equity
Fixed capital
Foreign currency revaluation reserve
Revaluation reserve
Retained profit / (Accumulated
losses)
Long-term liabilities
Bonds
Borrowings
Short-term obligations
Bonds
Borrowings
Payables to suppliers
Other creditors
CIT liabilities
Accrued obligations
Next period income
Credit limit of bank
Total liabilities
TOTAL LIABILITIES
Issuer
31.12.2015
31.12.2014
66,072
413,009
53,951
472,666
-
-
52,765
17,230
-
-
76,828
68,273
676,947
58,831
602,678
1,633,206
76,828
1,710,034
1,536,206
1,536,206
10,568,256
1,005,000
752,700
41,065
542,868
12,909,889
13,586,836
8,026,587
1,104,368
35,856
538,418
9,705,229
10,307,907
6,315,781
1,005,000
468,532
58
68,119
7,857,490
9,567,524
5,401,023
977,165
2,268
100,959
6,481,415
8,017,621
803,000
44,050
344,261
803,000
77,752
454,261
803,000
-
803,000
-
392,011
1,583,322
(1,127,209)
207,804
150,296
953,296
(707,528)
95,472
570,582
570,582
4,000,000
4,000,000
570,582
570,582
4,000,000
4,000,000
6,390,720
2,211,866
1,793,194
184,402
245,448
277,583
329,708
11
11,432,932
12,003,514
13,586,836
50,556
4,209,425
1,123,815
122,907
51,726
250,065
291,609
6,100,103
10,100,103
10,307,907
6,390,720
1,624,000
6,032
1,037
21,857
8,043,646
8,614,228
9,567,524
50,556
3,867,875
3,718
3,922,149
7,922,149
8,017,621
VIA SMS Group's financial structure consists of equity and borrowed capital. Most of
the capital is borrowed capital, which VIA SMS Group receives from venture
capitalists, taking into account the nature of the business, which is regarded as highrisk.
53
SIA “VIA SMS group” Bond Prospectus
15.4. Explanations of financial statements
Explanations, annexes, and an auditor report regarding Issuer’s financial statements
can be found in the annex of the Prospectus.
54
SIA “VIA SMS group” Bond Prospectus
16. Annexes
Annex A – SIA “VIA SMS group” audited financial statement for 2015
Annex B – SIA “VIA SMS group” audited financial statement for 2014
55