Bond BNG Bank NV 2.656% ( XS0488102509 ) in EUR

BNG Bank NV

100 % ⇌

Netherlands

XS0488102509 ( in EUR )

2.656% per year ( payment 1 time a year)

26/02/2025 - Bond has expired

Prospectus brochure of the bond BNG Bank N.V XS0488102509 in EUR 2.656%, expired

BNG Bank N.V. is a Dutch bank specializing in providing financial services to the public sector, including governments, municipalities, and other public institutions.

The Bond issued by BNG Bank NV ( Netherlands ) , in EUR, with the ISIN code XS0488102509, pays a coupon of 2.656% per year.
The coupons are paid 1 time per year and the Bond maturity is 26/02/2025

BASE PROSPECTUS
N.V. Bank Nederlandse Gemeenten
(Incorporated in The Netherlands with limited liability and having its statutory domicile in The Hague)
Euro 80,000,000,000
Debt issuance programme
N.V. Bank Nederlandse Gemeenten (the "Issuer" or "BNG") may from time to time offer bearer debt instruments (the
"Notes") pursuant to a programme of issuance established on 7 December 1993 (as amended) (the "Programme"). The
sum of the aggregate principal amount of Notes outstanding at any time under the Programme will not exceed
Euro 80,000,000,000 (or its equivalent in other currencies). The Programme amount may be increased from time to time
subject to the preparation of a supplemental Base Prospectus which shall be subject to the prior approval of The Netherlands
Authority for the Financial Markets (`Stichting Autoriteit Financiële Markten', the "AFM").
The Programme has been rated AAA by Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies
Inc., AAA by Fitch Ratings Limited and Aaa by Moody's Investors Service Limited. Tranches of Notes issued under the
Programme may be rated or unrated. Where a tranche of Notes is rated, such rating will not necessarily be the same as the
ratings assigned to the Programme. A security rating is not a recommendation to buy, sell or hold securities and may be
subject to suspension, reduction or withdrawal at any time by the assigning rating agency.
In respect of each Series (as defined below), unless otherwise specified in the Final Terms, the Issuer will deposit each
global note which is not intended to be issued in a new global note ("NGN") form (a "Classic Global Note" or "CGN"), as
specified in the relevant final terms, with a depositary or a common depositary for Euroclear Bank SA/NV ("Euroclear")
and Clearstream Banking société anonyme, Luxembourg ("Clearstream, Luxembourg") and/or any other relevant clearing
system and each global note which is intended to be issued in NGN form, as specified in the relevant final terms, with a
common safekeeper for Euroclear and/or Clearstream, Luxembourg.
This Base Prospectus has been approved by the AFM, which is The Netherlands competent authority for the purpose of
Directive 2003/71/EC (the "Prospectus Directive") and relevant implementing measures in The Netherlands, as a base
prospectus issued in compliance with the Prospectus Directive, Commission Regulation EC No. 809/2004 (the "Prospectus
Regulation") and relevant implementing measures in The Netherlands for the purpose of giving information with regard to
the issue of Notes under the Programme during the period of twelve months after the date hereof. Application may be made
for Notes issued under the Programme to be listed on Euronext Amsterdam by NYSE Euronext, the regulated market of
Euronext Amsterdam N.V. ("Euronext Amsterdam").
The AFM has been requested by the Issuer to provide the Luxembourg Commission de Surveillance du Secteur Financier
(the "CSSF") with a certificate of approval attesting that the Base Prospectus has been drawn up in accordance with the
Prospectus Directive and the Prospectus Regulation so that the Notes issued under the Programme may be listed on the
regulated market of the Luxembourg Stock Exchange. Application may be made for Notes issued under the Programme to
be admitted to trading on the regulated market of the Luxembourg Stock Exchange.
The AFM may be further requested by the Issuer to provide other competent authorities in the European Economic Area
with a certificate of approval attesting that the Base Prospectus has been drawn up in accordance with the Prospectus
Directive and the Prospectus Regulation so that application may be made for Notes issued under the Programme to be
admitted to trading on other regulated markets. The Programme also permits Notes to be issued on the basis that they will
not be admitted to listing, trading and/or quotation by any listing authority, stock exchange and/or quotation system or to be
admitted to listing, trading and/or quotation by such other or further listing authorities, stock exchanges (including the SIX
Swiss Exchange) and/or quotation systems as may be agreed with the Issuer.
The Notes have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be
offered, sold or delivered within the United States, or to or for the account or benefit of U.S. persons (as defined in
Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. The Notes will be issued in bearer form only and are subject to United States
tax law requirements.
This Base Prospectus must be read and construed together with any amendments or supplements hereto and with any
documents incorporated by reference herein (which can be found on the website of the Issuer, http://www.bng.com), and in
relation to any Tranche (as defined herein) of Notes, this Base Prospectus should be read and construed together with the
relevant Final Terms.
Arranger
UBS Investment Bank
Principal Dealers
Bank Nederlandse Gemeenten
Barclays Capital
BNP PARIBAS
Citi
BofA Merrill Lynch
Credit Suisse
Commerzbank Corporates & Markets
Goldman Sachs International
Deutsche Bank
J.P. Morgan
ING Wholesale Banking
Mizuho International plc
Nomura International
Rabobank International
RBC Capital Markets
The Royal Bank of Scotland
TD Securities
UBS Investment Bank
The date of this Base Prospectus is 29 July 2009 and it replaces the Base Prospectus dated 24 July 2008.

Table of Contents
Page
Summary of the Base Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Important Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Documents Incorporated by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
Key Features of the Programme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
Terms and Conditions of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40
Form of Final Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
N.V. Bank Nederlandse Gemeenten . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57
Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67
Extract of the Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79
2

Summary of the Base Prospectus
This summary must be read as an introduction to this Base Prospectus and any decision to invest in the Notes
should be based on a consideration of the Base Prospectus as a whole, including any amendment and
supplement thereto and the documents incorporated by reference. Following the implementation of the relevant
provisions of the Prospectus Directive in each relevant Member State of the European Economic Area, civil
liability attaches to the Issuer, being the person who has tabled the summary, and applied for its notification,
but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the
Base Prospectus. Where a claim relating to the information contained in this Base Prospectus is brought before
a court, the plaintiff investor might, under the national legislation of the relevant Member States, have to bear
the costs of translating the Base Prospectus before the legal proceedings are initiated.
The Issuer
N.V. Bank Nederlandse Gemeenten was incorporated as a naamloze vennootschap (a public company with
limited liability) under the laws of the Netherlands on 23 December 1914. The Issuer is authorised by the
Dutch Central Bank (`De Nederlandsche Bank N.V.' or "DNB") to pursue the business of a bank in The
Netherlands and is consequently supervised by the Dutch Central Bank. In addition the Issuer is supervised by
The Netherlands Authority for the Financial Markets (`Stichting Autoriteit Financiële Markten') for the
purpose of market conduct supervision.
Shareholders of the Issuer
Half of the Issuer's share capital is held by the State of The Netherlands. The other half is mainly held by
municipalities (`gemeenten') and furthermore by eleven of the total of twelve provinces (`provincies') as well
as one water board (`waterschap'), all located in The Netherlands. Only the State of The Netherlands,
provinces, municipalities, water boards and other public bodies may be shareholders of the Issuer.
Business overview
The Issuer is a specialised bank for local, regional and functional authorities and government affiliated
organisations that are involved in public utilities, public housing, public health, welfare, culture, education and
recreation. The main business activities of the Issuer include the granting of credit to its statutory
counterparties, transfer of payments and the processing of flows between the central government and public
entities.
The executive board
The executive board of the Issuer consists of the president C. van Eykelenburg and the members
J.J.A. Leenaars and J.C. Reichardt. The supervisory board of the Issuer currently consists of ten members, who
are listed in the section "N.V. Bank Nederlandse Gemeenten".
Funding of the Issuer
The Issuer's need for funding generally varies between EUR 11 to 13 billion equivalent per annum. For raising
funds on the international capital markets the Issuer established this Programme of EUR 80 billion and in
addition several other funding programmes. The Issuer can raise funds under the above mentioned programmes
as well as on a stand-alone basis. The notes issued under these programmes are mainly issued in Euros,
US Dollars, Swiss Francs, Canadian Dollars and British Pounds.
Financial information relating to the Issuer
The Issuer's balance sheet and profit and loss account both as of 31 December 2008 are disclosed in this Base
Prospectus. The financial information included herein is compared with the financial information included in
the balance sheet and profit and loss account both as of 31 December 2007. The financial statements of the
Issuer disclosed in this Base Prospectus have been audited for the two financial years preceding the date of this
Base Prospectus by Ernst & Young Accountants. The Issuer's capitalisation amounts to EUR 87,745,000,000 as
per 31 December 2008. The indebtedness of the Issuer as per 31 December 2008 amounts to
EUR 89,051,000,000.
3

Summary of the Base Prospectus
Selected Financial Data 2008-20041
In millions of euros
2008
2007
2006
2005
2004
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101,365
92,602
90,098
91,671
88,586
Loans and Advances2 . . . . . . . . . . . . . . . . . . . . . . . . . . .
75,699
66,037
64,994
64,166
62,836
of which Granted to or guaranteed by
Public Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,782
60,219
60,059
58,287
56,407
Equity 3, 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,979
2,053
2,576
3,145
2,592
of which Unrealized Revaluation . . . . . . . . . . . . . . . .
(29)
104
220
354
Equity per share (in euros) 4, 5 . . . . . . . . . . . . . . . . . . . .
36.06
35.00
42.31
50.09
46.55
Equity as a % of Total Assets 4, 5. . . . . . . . . . . . . . . . . . .
2.0%
2.1%
2.6%
3.0%
2.9%
BIS-Ratio Tier 1 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18%
18%
24%
32%
26%
BIS-Ratio 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20%
20%
26%
33%
27%
Profit before Tax 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
182
238
255
276
301
Net Profit 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158
195
199
311
Profit per Share (in euros) . . . . . . . . . . . . . . . . . . . . . . .
2.84
3.50
3.57
5.58
5.40
Dividend (in Cash) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79
97
99
134
129
Dividend as a % of Consolidated Net Profit . . . . . . . . .
50%
50%
50%
43%
43%
Dividend per Share (in euros) . . . . . . . . . . . . . . . . . . . .
1.42
1.75
1.78
2.40
2.32
Additional Payment (in euros) . . . . . . . . . . . . . . . . . . . .
500
500
Additional Payment per Share (in euros) . . . . . . . . . . . .
8.98
8.98
Employees (in FTEs) at Year-End . . . . . . . . . . . . . . . . .
280
278
381
409
439
- of which Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .
51
52
42
38
34
1
From 2005 onwards, the selected financial data are based on the International Financial Reporting Standards as agreed
upon within the European Union. The figures up to 2005 are based on Dutch gaap.
Consequently, the figures from 2005 onwards are not entirely comparable with earlier years.
2
EUR 4,569 million of the increase in the balance sheet item Loans and Advances in 2008 was due to reclassification of the
balance sheet item Financial Assets Available for Sale.
3
Beginning in 2005, Equity includes an unrealized revaluation reserve due to the adoption of IFRS.
4
In December 2007 and December 2006, an additional payment of EUR 500 million was made to shareholders (EUR 8.98 per
share). The payment was charged to the reserves.
5
Excluding the revaluation reserve.
6
BNG became liable to pay corporation tax effective January 1, 2005.
7
The Net Profit in 2005 is higher than the profit before tax as a consequence of the incorporation of the first fiscal valuation
for corporation tax. This is a one-off adjustment.
Essential characteristics of the Notes and the Programme
The Issuer may, subject to compliance with all relevant laws, regulations and directives, from time to time issue
Notes under the Programme denominated in any currency (including euro) agreed between the Issuer and the
relevant dealer. The aggregate principal amount of the Notes outstanding will not at any time exceed EUR 80
billion, subject to any duly authorised increase. The aggregate principal amount, any interest rate or interest
calculation, the issue price and any other terms and conditions not contained herein with respect to each series
of Notes will be established at the time of issuance and set forth in the applicable final terms. The Notes may be
offered for sale only outside the United States to non-U.S. persons in reliance on and in accordance with
Regulation S and in accordance with all applicable laws and regulations.
Application may be made for the Notes issued under the Programme to be admitted to trading on the regulated
market of the Luxembourg Stock Exchange and Euronext Amsterdam, as the case may be. However, Notes
may also be issued under the Programme on an unlisted basis, or admitted to listing, trading and/or quotations
as may be agreed between the Issuer and the relevant dealer. The final terms applicable to a series of Notes will
specify whether or not such series of Notes have been admitted to trading on the regulated market of the
Luxembourg Stock Exchange and Euronext Amsterdam, as the case may be.
4

Summary of the Base Prospectus
At each issue of Notes under the Programme the Issuer will deliver a temporary global Note representing the
Notes, which temporary global Note will be exchangeable for either interests in a permanent global Note or
Notes in definitive bearer form. The Notes under the Programme will constitute direct and unsecured
obligations of the Issuer and rank pari passu without any preference among themselves and with all other
present and future unsecured and unsubordinated obligations of the Issuer and will have the benefit of a
negative pledge and the events of default set out in the "Terms and Conditions of the Notes". Notes may be
redeemable at their Final Redemption Amount as may be specified in the Final Terms. Early redemption will be
permitted for taxations reasons as set out in the section "Terms and Conditions of the Notes" but will
otherwise be permitted only to the extent set out in the Final Terms.
Risk Factors
Investing in Notes issued under the Programme involves certain risks. The risk factors that may affect the
ability of the Issuer to fulfil its obligations under the Notes are set out under "Risk Factors" on page 6 below
and include:
·
factors which may affect the Issuer's ability to fulfil its obligations under the Notes such as liquidity risk,
market risk, operational risk, ICT risk, integrity risk, outsourcing risk and credit risk;
·
general risks related to the market generally such as liquidity risk, exchange rate risk, interest rate risk
and credit rating risks;
·
risks affecting an investor's ability to make an informed assessment of the risks associated with Notes
issued under the Programme such as lack of sufficient knowledge and experience to make a meaningful
evaluation of the Notes and the merits of investing in them; and
·
risks related to the structure of certain Notes issued under the Programme (including but not limited to
Index Linked Notes, Inflation Linked Notes, Fund Linked Notes and Dual Currency Notes) which can
only be meaningfully evaluated by an investor having sufficient expertise.
Supplemental information
For so long as any Notes are outstanding, copies and, where appropriate, English translations of the following
documents may be inspected to the extent available at the website of the Issuer (http://www.bng.com) or
alternatively during normal business hours at the specified office of the Paying Agent in Breda, London and
Luxembourg, and be obtained free of charge: (a) the deed of incorporation and the Articles of Association
(`statuten') of the Issuer; (b) the Issuing and Paying Agency Agreement; (c) the audited financial statements for
the preceding financial year and the latest audited financial statements and unaudited semi-annual financial
statements of the Issuer; (d) a copy of this Base Prospectus and any further prospectus or prospectus
supplement prepared by the Issuer for the purpose of updating or amending any information contained herein
or therein; and (e) each final terms in relation to listed issues of Notes.
5

Risk Factors
Prospective investors should read the entire Base Prospectus.
The Issuer believes that the factors described below represent the principal risks inherent in investing in Notes
issued under the Programme, but the inability of the Issuer to pay interest, principal or other amounts on or in
connection with any Notes may occur for other reasons. The risks described below are not the only risks the
Issuer faces. Additional risks and uncertainties not presently known to the Issuer or that it currently believes to
be immaterial could also have a material impact on its business operations. Prospective investors should also
read the detailed information set out elsewhere in this Base Prospectus and reach their own views prior to
making any investment decision.
Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this
Base Prospectus have the same meanings in this section, unless otherwise stated. Prospective investors should
consider, among other things, the following.
Factors that may affect the Issuer's ability to fulfil its obligations under the Bonds
The risks specific to the situation of BNG that are material for taking investment decisions and that may affect
BNG's ability to fulfil its obligations under the Bonds are described in this risk factor. BNG pursues a prudent
risk policy, and risk management and control are important elements of its business operations. In accordance
with the risk classification outlined by the Dutch Central Bank, the material risks of BNG are:
·
equity risk, the risk arising from movement in market prices leading to a decrease of the value of equity,
which equity underlies transactions in which BNG is involved;
·
liquidity risk, the possibility that the bank will be unable at any given moment to meet its payment
obligations without incurring unacceptable losses;
·
market risk, the risk that the value of a portfolio falls due to changes in market prices;
·
operational risk, the risk defined in the Basel II under 'as the risk of losses resulting from inadequate or
failing processes and systems, staff errors or external events';
·
information and communications technology ("ICT") risk, the existing or future threat to equity and
results arising from inadequate IT strategy and policy, shortcomings in the applied technologies or
incorrect use of the information processing systems;
·
integrity risk, the impairment of BNG's reputation, as well as the existing or future threat to the
institutions equity and results due to inadequate compliance with internal and external laws and
regulations;
·
outsourcing risk, the existing or future threat to equity and results arising from inadequate performance
by companies to which work has been outsourced; and
·
credit risk, the risk that a client or counterparty will default on its contractual obligations or suffer a
decline in creditworthiness.
With respect to BNG's exposure to credit risk the following is noted. The vast majority of the loans and
advances are extended to public authorities or are directly or indirectly government-guaranteed. BNG only
accepts financial institutions with high creditworthiness as counterparties. The types of risks referred to above
and the manner in which BNG aims to manage these risks are explained in the Risk Section on pages 59-71 of
the Annual Report 2008, as incorporated by reference and part of this Prospectus.
Risks related to the market generally
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk,
interest rate risk and credit risk:
Liquidity risks
Notes may have no established trading market when issued, and one may never develop. If a market does
develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices
that will provide them with a yield comparable to similar investments that have a developed secondary market.
This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are
designed for specific investment objectives or strategies or have been structured to meet the investment
requirements of limited categories of investors. These types of Notes will generally have a more limited
secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely
adverse effect on the market value of Notes.
6

Risk Factors
Exchange rate risks and exchange controls
The Issuer will pay principal and interest on the Notes in the currency specified in the applicable Final Terms
(the "Specified Currency"). This presents certain risks relating to currency conversions if an investor's
financial activities are denominated principally in a currency or currency unit (the "Investor's Currency")
other than the Specified Currency. These include the risk that exchange rates may change significantly
(including changes due to devaluation of the Specified Currency or revaluation of the Investor's Currency) and
the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange
controls. An appreciation in the value of the Investor's Currency relative to the Specified Currency would
decrease (i) the Investor's Currency-equivalent yield on the Notes, (ii) the Investor's Currency-equivalent value
of the principal payable on the Notes and (iii) the Investor's Currency-equivalent market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls that
could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal
than expected, or no interest or principal.
Interest rate risks
Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may
adversely affect the value of the Fixed Rate Notes.
Credit Rating Risks
Credit or corporate ratings may not reflect all risks. One or more independent rating agencies may assign
ratings to the Notes and/or the Issuer. The ratings may not reflect the potential impact of all risks related to
structure, market, additional factors discussed in this paragraph, and other factors that may affect the value of
the Notes or the standing of the Issuer. A credit rating and/or a corporate rating is not a recommendation to buy,
sell or hold securities and may be revised or withdrawn by the rating agency at any time.
Factors which might affect an investor's ability to make an informed assessment of
the risks associated with Notes issued under the Programme
Each potential investor in the Notes must be able to make an informed assessment of the Notes, based upon full
knowledge and understanding of the facts and risks. Each potential investor must determine the suitability of
that investment in light of its own circumstances. The following factors might affect a potential investor's
ability to appreciate the risk factors outlined below, placing such potential investor at a greater risk of receiving
a lesser return on his investment:
(i)
if such an investor does not have sufficient knowledge and experience to make a meaningful evaluation
of the Notes and the merits of investing in the Notes in light of the risk factors outlined below;
(ii)
if such an investor does not have access to, and knowledge of, appropriate analytical tools to evaluate, in
the context of his particular financial situation, the significance of these risk factors and the impact the
Notes will have on his overall investment portfolio;
(iii) if such an investor does not have sufficient financial resources and liquidity to bear all of the risks of an
investment in the Notes, including where the currency for principal or interest payments is different from
the potential Investor's Currency (as defined herein);
(iv)
if such an investor does not understand thoroughly the terms of the Notes and is not familiar with the
behaviour of any relevant indices in the financial markets (including the risks associated thereof) as such
investor is more vulnerable from any fluctuations in the financial markets generally; and
(v)
if such an investor is not able to evaluate (either alone or with the help of a financial adviser) possible
scenarios for economic, interest rate and other factors that may affect his investment and his ability to
bear the applicable risks.
Risks related to the structure of a particular issue of Notes
A wide range of Notes may be issued under the Programme. A number of these Notes may have features which
contain particular risks for potential investors. Set out below is a description of the most common of such
features.
Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase
complex financial instruments as stand-alone investments but as a way to reduce risk or enhance yield with an
7

Risk Factors
understood, measured and appropriate addition of risk to their overall portfolios. A potential investor should not
invest in Notes which are complex financial instruments unless it has the expertise (either alone or with a
financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on
the value of the Notes and the impact this investment will have on the potential investor's overall investment
portfolio.
Notes subject to optional redemption by the Issuer
An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer
may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price
at which they can be redeemed. This also may be true prior to any redemption period.
The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the
Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an
effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at
a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments
available at that time.
Index Linked Notes, Inflation Linked Notes, Fund Linked Notes and Dual Currency Notes
The Issuer may issue Notes with principal or interest determined by reference to an index or formula, to
changes in the prices of securities or commodities, to movements in currency exchange rates or other factors
(each, a "Relevant Factor"). In addition, the Issuer may issue Notes with principal or interest payable in one
or more currencies which may be different from the currency in which the Notes are denominated. Prospective
investors should be aware that:
(i)
the market price of such Notes may be very volatile;
(ii)
they may receive no interest;
(iii) payment of principal or interest may occur at a different time or in a different currency than expected;
(iv) depending on their original principal and on the type of Notes, they may lose all or a substantial portion
of their principal;
(v) a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in
interest rates, currencies or other indices;
(vi) if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some
other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable is likely
to be magnified; and
(vii) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average
level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the
greater the effect on yield.
Fund Linked Notes
The Issuer may issue Notes with principal or interest determined by reference to the performance of an
underlying investment fund. Potential investors in Fund Linked Notes should understand that:
(i)
there are market risks associated with an actual investment in the underlying investment fund, and though
the Notes do not create an actual interest in the underlying investment fund, the return on the Notes
generally involves the same associated risks as an actual investment in the underlying investment fund.
Potential investors in Fund Linked Notes should understand that the Issuer has not purported and does
not purport to be a source of information concerning the market risks associated with the underlying fund
or fund interests;
(ii) third parties, not related to the Issuer, may subscribe for and redeem underlying fund interests. These
investments may affect the performance and volatility of the fund's net asset value. In turn, this could
affect, from time to time, the return on the Notes;
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Risk Factors
(iii) the Issuer may invest in the underlying investment fund for its own account, and the Issuer may exercise
its discretion in respect of matters concerning its holding of fund interests as it sees fit, without regard to
the interests of any investor in the Notes;
(iv) any performance of the underlying investment fund necessary for the Notes to yield a specific return is
not assured. Potential investors in the Notes should understand that the performance of the underlying
investment fund may, depending on the terms of the Notes, strongly affect the value of payments on the
Notes and the Issuer has no control over the underlying investment fund or the performance of such fund;
(v) the value of units in the underlying investment fund and the income from it may fluctuate significantly.
The Issuer has not provided (save as provided herein) and will not provide during the term of the Notes
prospective purchasers of the Notes with any information or advice with respect to the performance of an
underlying investment fund. The Issuer may have acquired, or during the term of the Notes may acquire,
non-public information with respect to an underlying investment fund, which will not be provided to the
Noteholders. The Issuer makes no representation or warranty about, or guarantee of, the performance of
an underlying investment fund. Past performance of an underlying fund cannot be considered a guide to
future performance;
(vi) the investment funds may follow a wide range of investment strategies, and invest in assets in a number
of different countries and denominated in a number of different currencies. The returns to the Noteholders
may, therefore, be materially affected by, among other things, market trends, exchange rate fluctuations
and political and economic developments in the relevant countries. This may lead to substantial volatility
in the net asset value of the funds;
(vii) the investment funds may have investment strategies and guidelines that are very broad. They may also
be free to engage in additional or alternative strategies without reference to any other person;
(viii) the investment funds may often rely on a few individuals to determine their investment strategies and to
make investment decisions. The loss of such individuals could jeopardise the performance of the funds;
(ix) the investment funds may be engaged in a high level of trading with commensurately high brokerage and
transaction costs, as well as costs associated with leverage, such as interest payments and margin
maintenance. Such costs will adversely affect the net asset value of the funds;
(x)
the investment funds will be exposed to credit risks against brokers and other counterparties with which
they deal in implementing their investment strategies;
(xi) where underlying investment funds invest in unlisted shares and certain other assets, risks associated with
reduced liquidity and lack of objective valuations will arise. Moreover, the underlying investment funds
may invest in emerging markets. This involves risks attributable to nationalisations, expropriation or
taxation, currency devaluation, foreign exchange control, political, social or diplomatic instability or
governmental restrictions. The capital markets in such countries have substantially less volume, and are
generally less liquid and more volatile, than those in more developed markets. Disclosure and regulatory
requirements could be less stringent than in other markets, with a low level of monitoring and limited and
uneven enforcement of existing regulations;
(xii) certain of the underlying funds may have no or a limited operating history, with no proven track record in
achieving their stated investment objectives; and
(xiii) the underlying investment funds, or some of them, may be wholly unregulated investment vehicles and
may trade in futures, options, forward exchange contracts and other derivative instruments, which may
represent significant investment risks. In addition, underlying investment funds may acquire leveraged
trading positions, including through the use of borrowing, and may engage in short selling. As a result of
leverage, relatively small price movements may result in substantial losses or gains and an underlying
investment fund itself may be subject to fees and charges on its investments which shall be borne by such
fund and incorporated in the value of interests in it.
Notes issued at a substantial discount or premium
The market values of securities issued at a substantial discount or premium from their principal amount tend to
fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing
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Risk Factors
securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared
to conventional interest-bearing securities with comparable maturities.
Risks related to Notes generally
Modification and waiver
The Terms and Conditions of the Notes contain provisions for calling meetings of Noteholders to consider
matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders
including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a
manner contrary to the majority.
Tax consequences of holding the Notes
Any potential investor should consult its own independent tax adviser for more information about the tax
consequences of acquiring, owning and disposing of Notes in its particular circumstances, which could follow
from, amongst others, the EU Savings Directive. See "Taxation".
Notes held in global form
The Notes will initially be held by a common depositary on behalf of Euroclear and/or Clearstream,
Luxembourg or by Euroclear Nederland, in each case in the form of a global Note which will be exchangeable
for definitive Notes in limited circumstances as more fully described in the section headed "Form of the
Notes" below. For as long as any Notes are represented by a global Note held by a common depositary in the
case of a CGN, or a common safekeeper in the case of an NGN, on behalf of Euroclear and/or Clearstream,
Luxembourg, payments of principal, interest (if any) and any other amounts on a global Note will be made
through Euroclear and/or Clearstream, Luxembourg (as the case may be) against presentation or surrender (as
the case may be) of the relevant global Note and, in the case of a Temporary Global Note, certification as to
non-U.S. beneficial ownership. The bearer of the relevant global Note, being the common depositary for
Euroclear and/or Clearstream, Luxembourg or Euroclear Nederland, shall be treated by the Issuer and any
Paying Agent as the sole holder of the relevant Notes represented by such global Note with respect to the
payment of principal, interest (if any) and any other amounts payable in respect of the Notes.
In relation to any issue of Notes which have a denomination of 50,000 (in such case defined as the minimum
"Specified Denomination") plus a higher integral multiple of another smaller amount, it is possible that the
Notes may be traded in amounts in excess of 50,000 (or its equivalent) that are not integral multiples of
50,000 (or its equivalent). In such a case a Noteholder who, as a result of trading such amounts, holds a
principal amount of less than the minimum Specified Denomination (a "Stub Amount") may not receive a
definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a
principal amount of Notes such that its holding amounts to a Specified Denomination. As long as the Stub
Amount is held in the relevant clearing system, the Noteholder will be unable to transfer this Stub Amount.
Notes which are represented by a global Note will be transferable only in accordance with the rules and
procedures for the time being of Euroclear and/or Clearstream, Luxembourg or Euroclear Nederland, as the
case may be.
Nominee Arrangements
Where, in the case of an issue of Notes a nominee service provider is used by an investor to hold the relevant
Notes or such investor holds interests in any Series of Notes through accounts with a clearing system (such as
Euroclear, Clearstream, Luxembourg or Euroclear Nederland), such investor will receive payments in respect
of principal, interest, (if any) or any other amounts due, as applicable, solely on the basis of the arrangements
entered into by the investor with the relevant nominee service provider or clearing system, as the case may be.
Furthermore, such investor must rely on the relevant nominee service provider or clearing system to distribute
all payments attributable to the relevant Notes which are received from the Issuer. Accordingly, such an
investor will be exposed to the credit risk of, and default risk in respect of, the relevant nominee service
provider or clearing system, as well as the Issuer.
For the purposes of (a) distributing any notices to Noteholders, and (b) recognising Noteholders for the
purposes of attending and/or voting at any meetings of Noteholders, the Issuer will recognise as Noteholders
only those persons who are at any time shown as accountholders in the records of Euroclear and/or
Clearstream, Luxembourg or Euroclear Nederland as persons holding a principal amount of the relevant Series
of Notes. Accordingly, an investor must rely upon the nominee service provider which is the accountholder
with the relevant clearing system through which the investor made arrangements to invest in the Notes (and, if
10