Obligation Alliandra N.V. 4.875% ( XS0558238043 ) en EUR

Alliandra N.V.

100 % ⇌

Pays-bas

XS0558238043 ( en EUR )

4.875% par an ( paiement annuel )

Perpétuelle

Prospectus brochure de l'obligation Alliander N.V XS0558238043 en EUR 4.875%, échéance Perpétuelle

24/06/2026 ( Dans 47 jours )

Alliander N.V. est une société néerlandaise d'infrastructure énergétique gérant le réseau de distribution d'électricité et de gaz naturel dans une grande partie des Pays-Bas.

L'Obligation émise par Alliandra N.V. ( Pays-bas ) , en EUR, avec le code ISIN XS0558238043, paye un coupon de 4.875% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le Perpétuelle

Prospectus dated 9 November 2010
Alliander N.V.
(incorporated with limited liability in The Netherlands with its statutory seat in Arnhem)
500,000,000 Fixed-to-Floating Rate Perpetual Capital Securities
______________________________________
Issue Price 99.495 per cent.
______________________________________
The 500,000,000 Fixed-to-Floating Rate Perpetual Capital Securities (the "Securities") will be issued by Alliander N.V. (the "Issuer" or
"Alliander", formerly known as n.v. Nuon). Interest is payable subject to and in accordance with the Terms and Conditions of the Securities. From
(and including) 11 November 2010 until (but excluding) 11 November 2015 the Securities will bear interest at a rate of 4.875 per cent. per annum,
payable annually in arrear on 24 June of each year, starting on 24 June 2011 in respect of a short first coupon and on 11 November 2015. Thereafter,
unless previously redeemed, the Securities, from (and including) 11 November 2015 to (but excluding) 11 November 2020 will bear interest at a rate
per annum which shall be 2.90 per cent. above the 5 year Swap Rate determined two Business Days prior to the beginning of the Second Fixed Rate
Period (as defined in the Terms and Conditions of the Securities), payable annually in arrear on 24 June in each year and on 11 November 2020, and
from (and including) 11 November 2020 to but excluding the date on which they are redeemed will bear interest at the Euro Interbank offered rate for
one year Euro deposits, plus a margin of 3.90 per cent., payable annually in arrear on 24 June in each year. Payments on the Securities will be made
without deduction for or on account of taxes of The Netherlands to the extent described under "Terms and Conditions of the Securities -- Taxation".
The Issuer may at its discretion elect to defer any payment of interest on the Securities (subject to limited exceptions), see "Terms and Conditions of
the Securities -- Deferral of Interest". Any amounts so deferred shall constitute Arrears of Interest (as defined in the Terms and Conditions of the
Securities). Arrears of Interest shall bear interest. The Issuer may pay outstanding Arrears of Interest, in whole or in part, at any time (as described in
the Terms and Conditions of the Securities). The Issuer shall pay any outstanding Arrears of Interest, in whole but not in part, on the first to occur of
the following dates: (i) the Coupon Payment Date immediately following a Mandatory Payment Event (as defined in the Terms and Conditions of the
Securities); (ii) the date on which the Securities are redeemed (in whole, but not in part) in accordance with Condition 3 (Winding-up), Condition 6(b)
(Optional Redemption by the Issuer), Condition 6(c) (Redemption for Taxation Reasons), Condition 6(d) (Redemption for Accounting Reasons) or
Condition 6(e) (Redemption for Rating Reasons) or Condition 6(f) (Redemption following exercise of Clean-up Call), all as described in "Terms and
Conditions of the Securities".
The Securities are perpetual securities in respect of which there is no fixed redemption date, see "Terms and Conditions of the Securities --
Redemption and Purchase". The Securities will become due and payable in the event of a winding-up of the Issuer, see "Terms and Conditions of the
Securities -- Winding-up". The Securities may be redeemed at the option of the Issuer, including, without limitation, upon the occurrence of a
Withholding Tax Event, a Tax Deduction Event, an Accounting Event, a Rating Event (each as defined in the Terms and Conditions of the Securities)
and following exercise by the Issuer of a call option following the purchase by the Issuer of 80 per cent. or more of the Securities (the "Clean-up
Call"). See "Terms and Conditions of the Securities -- Redemption and Purchase", which also includes the terms applicable to such redemption
including the basis for calculating the redemption amounts payable.
The Securities will constitute subordinated obligations of the Issuer as described in "Terms and Conditions of the Securities -- Status and
Subordination" and "Terms and Conditions of the Securities -- Winding-up".
Application has been made to The Netherlands Authority for the Financial Markets (the "AFM") in its capacity as competent authority under the
Dutch Financial Supervision Act (Wet op het financieel toezicht) relating to prospectuses for securities, for the approval of this Prospectus for the
purposes of Directive 2003/71/EC (the "Prospectus Directive"). Application has also been made to Euronext Amsterdam N.V. for the Securities to
be listed on Euronext Amsterdam by NYSE Euronext ("Euronext Amsterdam"). References in this Prospectus to the Securities being "listed" (and
all related references) shall mean that the Securities have been listed and admitted to trading on Euronext Amsterdam. Euronext Amsterdam is a
regulated market for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments.
The Securities will initially be represented by a Temporary Global Security, without interest coupons attached, which will be deposited with a
common depositary on behalf of the Clearstream Banking, société anonyme ("Clearstream, Luxembourg") and Euroclear Bank SA/NV
("Euroclear") on or about 11 November 2010. The Temporary Global Security will be exchangeable for interests in a Permanent Global Security,
without interest coupons attached, on or after a date which is expected to be 21 December 2010, upon certification as to non-U.S. beneficial
ownership. The Permanent Global Security will be exchangeable for definitive Securities in bearer form in the denominations of 50,000 and integral
multiples of 1,000 in excess thereof in the limited circumstances set out in it. No definitive Securities will be issued with a denomination above
99,000, see "Summary of Provisions relating to the Securities while in Global Form".
The Securities have been rated BBB+ by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies Inc ("Standard & Poor's")
and A3 by Moody's Investors Service, Inc. ("Moody's"). A 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.
Prospective investors should have regard to the factors described under the section headed "Risk Factors" in this Prospectus.
Structuring Advisors
Morgan Stanley
Citi
Joint Lead Managers
Citi
Morgan Stanley
Rabobank International

This Prospectus comprises a prospectus for the purposes of Article 5.4 of the Prospectus Directive.
The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the
knowledge and belief of the Issuer (which has taken all reasonable care to ensure that such is the case), the
information contained in this Prospectus is in accordance with the facts and does not omit anything likely to
affect the import of such information.
This Prospectus is to be read in conjunction with all the documents which are incorporated herein by
reference (see "Documents Incorporated by Reference").
This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer or the Managers
(as defined in "Subscription and Sale" below) to subscribe or purchase, any of the Securities. The
distribution of this Prospectus and the offering of the Securities in certain jurisdictions may be restricted by
law. Persons into whose possession this Prospectus comes are required by the Issuer and the Managers to
inform themselves about and to observe any such restrictions.
For a description of further restrictions on offers and sales of Securities and distribution of this Prospectus,
see "Subscription and Sale" below.
No person is authorised to give any information or to make any representation not contained in this
Prospectus and any information or representation not so contained must not be relied upon as having been
authorised by or on behalf of the Issuer or the Managers. The delivery of this Prospectus shall not, under any
circumstances, create any implication that there has been no change in the affairs of the Issuer since the date
hereof or that there has been no adverse change in the financial position of the Issuer since the date hereof or
that the information contained in it or any other information supplied in connection with the Securities is
correct as of any time subsequent to the date on which it is supplied or, if different, the date indicated in the
document containing the same.
Neither the Joint Lead Managers nor any of their respective affiliates have authorised the whole or any part
of this Prospectus or have independently verified the information contained herein. Accordingly, no
representation, warranty or undertaking, express or implied, is made and no responsibility or liability is
accepted by the Joint Lead Managers or any of their respective affiliates as to the accuracy or completeness
of the information contained or incorporated in this Prospectus or any other information provided by the
Issuer in connection with the offering of the Securities. No Joint Lead Manager or any of their respective
affiliates accepts any liability in relation to the information contained or incorporated by reference in this
Prospectus or any other information provided by the Issuer in connection with the offering of the Securities
or their distribution.
The Securities have not been and will not be registered under the U.S. Securities Act of 1933 (the
"Securities Act") and are subject to U.S. tax law requirements. Subject to certain exceptions, Securities may
not be offered, sold or delivered within the United States or to U.S. persons.
References to "euro", "EUR" and "" refer to the lawful currency introduced at the start of the third stage of
European economic and monetary union pursuant to the Treaty establishing the European Community as
amended by the Treaty on European Union.
Words and expressions defined in Condition 19 of the Terms and Conditions of the Securities shall have the
same meanings ascribed to them in Condition 19 when used in other parts of this Prospectus.
In connection with the issue of the Securities, Citigroup Global Markets Limited (the "Stabilising
Manager") (or any person acting on behalf of any Stabilising Manager) may over-allot Securities or effect
transactions with a view to supporting the market price of the Securities at a level higher than that which
might otherwise prevail. However, there is no assurance that the Stabilising Manager (or any person acting
2

on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin
on or after the date on which adequate public disclosure of the terms of the offer of the Securities is made
and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue
date of the Securities and 60 days after the date of the allotment of the Securities. Any stabilisation action or
over-allotment must be conducted by the Stabilising Manager (or any person acting on behalf of the
Stabilising Manager) in accordance with all applicable laws and rules.
3

Table of Contents
Page
Risk Factors .................................................................................................................................................5
Overview.................................................................................................................................................... 13
Documents Incorporated by Reference........................................................................................................ 17
Terms and Conditions of the Securities ....................................................................................................... 18
Summary of Provisions relating to the Securities while in Global Form ...................................................... 40
Business Description of Issuer .................................................................................................................... 42
Use of Proceeds.......................................................................................................................................... 54
Taxation in The Netherlands....................................................................................................................... 55
Subscription and Sale ................................................................................................................................. 59
General Information ................................................................................................................................... 60
4

Risk Factors
The Issuer believes that the following factors may affect its ability to fulfil its obligations under the
Securities. All of these factors are contingencies which may or may not occur and the Issuer is not in a
position to express a view on the likelihood of any such contingency occurring.
Factors which the Issuer believes may be material for the purpose of assessing the market risks associated
with the Securities are also described below.
The Issuer believes that the factors described below represent the risks inherent in investing in the
Securities, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with
the Securities may occur for other reasons which may not be considered significant risks by the Issuer based
on information currently available to it or which it may not currently be able to anticipate. Prospective
investors should also read the detailed information set out elsewhere in this Prospectus and reach their own
views prior to making any investment decision.
Factors that may affect the Issuer's ability to fulfil its obligations under or in connection with the
Securities.
Risks related to Cross Border Lease Agreements
In the period 1998 to 2000, various energy companies in the Netherlands, including Alliander, entered into
cross-border leases ("CBLs") for networks. These concern complex financial transactions with long
durations which have been structured in such a way that the amounts placed on deposit and invested in
securities (including interest received) at the start of the contracts are generally sufficient to meet the future
payment obligations (lease instalments and amounts payable upon the possible exercise of the purchase
option). The most important risk in respect of CBLs consists of an early termination of the transaction as a
result of the occurrence of certain events of default or loss as laid down in the documentation, where
Alliander is liable to pay the termination value. This risk is proactively monitored, partly through a CBL-
committee that is chaired by the Chief Financial Officer. A clear policy for the CBLs has been formulated
and is actively adhered to. This policy is aimed at the further mitigation of the risks.
At the end of 2009 the maximum `strip risk' (the portion of the `termination value' the possible
compensation payable to the American counterparty in the event of early termination of the relevant
transaction which cannot be settled from the deposits and investments held for this purpose) for all
transactions together amounted to USD 691 million (2008: USD 603 million). To cover the equity strip risk
(the portion of the strip risk that involves the equity investments by US investors which cannot be settled by
the investments held for this purpose), amounting to USD 518 million at the end of 2009 (2008: USD 378
million), Alliander has provided the investors involved with security in the form of letters of credit for an
amount of USD 312 million (2008: USD 349 million) in various transactions. The number and size of the
letters of credit to be issued depend partly on Alliander's credit rating. In the context of some of the letter of
credit facilities, a pledge has been established in favour of the banks concerned on the cash deposits held at
those banks for a total of USD 42 million at the end of 2009 (2008: USD 79 million).
Impact of Dutch regulatory framework on revenue, profits and financial position of the Issuer
The revenue, profits, and financial position of the Issuer could be affected by the regulatory framework in
two different ways:
The regulated activities of the Issuer depend on licences, authorisations, exemptions and/or dispensations in
order to operate its business. These licenses, authorisations, exemptions and/or dispensations may be subject
5

to withdrawal, amendment and/or additional conditions being imposed on the regulated activities of the
Issuer which could affect the revenue, profits and financial position of the Issuer.
The Issuer's income depends on dividends received from its subsidiaries. The Issuer's largest subsidiary,
Liander N.V. ("Liander"), derives its revenues to a large extent from regulated activities. These revenues
depend on governmental regulations and European legislation, which implies that the Issuer's net income is
sensitive to regulatory amendments.
The impact of the Dutch regulatory framework in its current form on the income of the Issuer can be
illustrated by the fact that in 2009, 85% of the Issuer's consolidated revenues were generated by regulated
activities.
The revenue of Liander is subject to ex ante regulation by the Energy Chamber of the Dutch Competition
authority (the "Energy Chamber"). Therefore the regulatory framework has a substantial effect on the
dividend income of the Issuer.
The impact of the regulatory framework on the revenue of Liander can be described as follows. Liander's
revenue is dependent on a series of regulatory decisions of the Energy Chamber, notably the Regulation
Method Decision (the "Method Decision"), the Efficiency Discount Decision, the Accounting Volume
Decision, the annual tariff decisions and decisions in respect of one-off tariff increases to cover the costs of
significant investments. As a consequence Liander's overall financial position is sensitive to regulatory
decisions based on estimated data (such as inflation), false assumptions, defective research, efficiency and
productivity goals which are too stringent or a failure to acknowledge costs which Liander cannot avoid
incurring. The following paragraphs expand on some specific aspects of this risk, which are particularly
relevant for the position of the Issuer.
Liander's level of permitted revenue includes a component based on the weighted average costs of capital
("WACC"). The variables used to calculate the WACC are the cost of equity, the cost of debt, the relative
percentages of debt and equity in the capital structure and the corporate tax rate. The cost of equity
represents the expected return on investment for the shareholders. The Issuer is the sole shareholder of
Liander. The cost of debt represents the expected cost of debt for a company with an "A" credit rating. As is
the case for almost all other cost factors the Energy Chamber bases the WACC on data which precede the
regulation period for which the WACC is determined. Thus, the WACC may insufficiently reflect the costs
of capital which Liander will effectively incur during the relevant regulation period, negatively impacting its
profitability. For the current tariff regulation period (ending 31 December 2010), the cost of equity was set at
7.3% and the cost of debt at 4.8%. In addition, Liander's actual capitalisation may differ from the 60/40
debt/equity ratio assumed in the Method Decision, which could also negatively impact Liander's
profitability. Finally, the actual corporate tax rate may deviate from the corporate tax rate assumed in the
Method Decision, which could negatively impact Liander's profitability.
Part or all of the investments made by Liander (directly or indirectly) may not deemed to be efficient and
consequently not allowed to be included in the Regulatory Asset Base ("RAB"). The RAB represents the
value of part of Liander's assets, based on assets permitted to be included in such assets base by the Energy
Chamber and calculated using the permitted depreciation methods set by the Energy Chamber. Liander will
not be compensated for the cost of the capital related to (the part of) the investment not included in the RAB.
Practically, this means that the WACC is not applied to (part of) that investment. In addition, not allowing an
investment to be included in the RAB means that depreciation of (part of) that investment is not
acknowledged as costs that Liander is allowed to recover through its tariffs
Political risk
The uncertainties related to the political decision-making about such issues as the restructuring and upscaling
of the network companies and the introduction of the smart meter influence the company's development.
6

Commodity price risk
Market price risk related to the procurement of electricity can have an impact on the financial results of
Alliander.The need to procure electricity stems from the fact that grid operators have to replace electricity
that is lost in the distribution of electricity. In general, these grid losses are estimated from the discrepancy
between energy produced (as reported by power plants) and energy sold to end customers. The annual
average grid losses are estimated at 1.5TWh.
Available labour capacity for strategic staff planning
In view of its ageing workforce, Alliander needs to have company-wide insight into the expected overall
staffing developments and requirements for the medium term. Natural attrition of staff is likely to lead to a
net departure of technical and engineering staff in the coming years.
Moreover, given the number of externally hired full-time employees (FTEs) in the past years mainly in
connection with the implementation of projects there is the risk of Alliander becoming too dependent on
external hiring of technical and engineering staff. This gives rise to the specific risk that the knowledge that
these hired employees have acquired in essential and specific areas of expertise is lost upon their departure.
This is however a sector-wide issue and not specific to Alliander only.
Risks related to the Securities generally
The Securities may not be a suitable investment for all investors
Each potential investor in the Securities must determine the suitability of that investment in light of its own
circumstances. In particular, each potential investor should:
(i)
have sufficient knowledge and experience to make a meaningful evaluation of the Issuer and the
Securities, the merits and risks of investing in the Securities and the information contained in this
Prospectus or any applicable supplement to this Prospectus;
(ii)
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Securities and the impact such investment will
have on its overall investment portfolio;
(iii)
have sufficient financial resources and liquidity to bear all of the risks of an investment in the
Securities;
(iv)
understand thoroughly the terms of the Securities and be familiar with the behaviour of any relevant
indices and the financial markets in which they participate; and
(v)
be 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 its investment and its ability to bear the
applicable risks.
The Securities are complex financial instruments. Sophisticated institutional investors generally purchase
complex financial instruments as part of a wider financial structure rather than as stand-alone investments.
These investors purchase complex financial instruments as a way to reduce risk or enhance yield with an
understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not
invest in the Securities unless it has the expertise (either alone or with a financial adviser) to evaluate how
the Securities will perform under changing conditions, the resulting effects on the value of the Securities and
the impact this investment will have on the potential investor's overall investment portfolio.
7

There is no active trading market for the Securities
The Securities are new securities which may not be widely distributed and for which there is currently no
active trading market. If the Securities are traded after their initial issuance, they may trade at a discount to
their initial offering price, depending upon prevailing interest rates, the market for similar securities, general
economic conditions and the financial condition of the Issuer. Although application has been made for the
Securities to be admitted to listing and trading on Euronext Amsterdam by NYSE Euronext, a regulated
market of Euronext Amsterdam N.V., there is no assurance that such application will be accepted or that an
active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of
any trading market for the Securities. Lack of liquidity may have an adverse effect on the market value of the
Securities.
Legal investment considerations may restrict certain investments
The investment activities of certain investors are subject to legal investment laws and regulations, or review
or regulation by certain authorities. Each potential investor should consult its legal advisers to determine
whether and to what extent (1) the Securities are legal investments for it, (2) the Securities can be used as
collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any
Securities. Financial institutions should consult their legal advisors or the appropriate regulators to determine
the appropriate treatment of the Securities under any applicable risk-based capital or similar rules.
The Securities are perpetual securities and need not be redeemed by the Issuer
The Securities are undated securities with no specified maturity date and the holders of the Securities have
no right to call for their redemption. Accordingly there is uncertainty as to when (if ever) an investor in the
Securities will receive repayment of the principal amount of the Securities.
The Securities could be redeemed at any time upon a Withholding Tax Event, A Tax Deduction Event, an
Accounting Event or a Rating Event or following the exercise by the Issuer of the Clean-up Call, or on
the First Call Date or on the Step-up Date, and on any Coupon Payment Date falling after the Step-up
Date
The Securities may be redeemed, in whole but not in part, at the option of the Issuer at any time upon the
giving of notice at (a) their Early Redemption Amount, if such redemption occurs before (but excluding) the
Step-up Date or (b) at their principal amount, if such redemption occurs after (or on) the Step-up Date
(together with accrued but unpaid interest and all Arrears of Interest and Additional Amounts, if any) in the
event that (1) the Issuer would be obliged to increase the amounts payable in respect of any payment due on
the Securities due to any withholding or deduction for or on account of any present or future taxes by or on
behalf of The Netherlands (a Withholding Tax Event), or (2) the payment of interest under Securities were
but are or will no longer be tax deductible by the Issuer for the purposes of Dutch corporate income tax
purposes (a Tax Deduction Event), or (3) the Issuer has received an opinion from a recognised independent
auditor that the Securities will no longer or may no longer be classified as "equity" in the consolidated
accounts of the Group prepared in accordance with International Financial Reporting Standards as adopted
by the European Union (an Accounting Event), or (4) following the exercise by the Issuer of the Clean-up
Call.
The Securities may also be redeemed, in whole but not in part, at the option of the Issuer at any time upon
the giving of notice at (a) 101 per cent. of their principal amount, if such redemption occurs before (but
excluding) the Step-up Date or (b) at their principal amount, if such redemption occurs after (or on) the Step-
up Date (together with, in each case, accrued but unpaid interest and all Arrears of Interest and Additional
Amounts, if any) in the event that the Issuer has received confirmation from one or more rating agencies
which has assigned a sponsored rating to the Issuer that the Securities will no longer be eligible for the same
or higher category of equity credit (as defined by such rating agency) as attributed to the Securities at the
Issue Date (a Rating Event).
8

In addition, the Securities may be redeemed, in whole but not in part, at the option of the Issuer at any time
upon the giving of notice at their principal amount (together with accrued but unpaid interest and all Arrears
of Interest and Additional Amounts, if any) on the First Call Date, the Step-up Date and on any Coupon
Payment Date falling after the Step-up Date. See "Terms and Conditions of the Securities - Redemption and
Purchase".
An optional redemption feature is likely to limit the market value of the Securities. During any period when
the Issuer may elect to redeem the Securities, the market value of the Securities generally will not rise
substantially above the price at which they can be redeemed. This also may be true prior to any redemption
period.
An investor may not be able to reinvest the proceeds of the redemption of the Securities in a comparable
security at a rate of return similar to that of the Securities. Potential investors should consider reinvestment
risk in light of other investments available at that time.
The Issuer has the option to defer any payment of interest on the Securities
The Issuer has the option to defer any payment of interest on the Securities indefinitely as provided in
Condition 4(a) (Deferral of Payments). Any such deferral shall not constitute a default by the Issuer for any
purpose. Any interest in respect of the Securities not paid shall, so long as the same remains unpaid,
constitute "Arrears of Interest".
Any Arrears of Interest may be paid in whole or in part at any time, and in any event, will automatically
remain due and become payable under certain conditions as provided for in Condition 4(b) (Compulsory
Payments).
Any deferral of interest payments will likely have an adverse effect on the market price of the Securities. In
addition, as a result of the interest deferral provision of the Securities, the market price of the Securities may
be more volatile than the market prices of other debt securities on which original issue discount or interest
accrual is not subject to such deferrals, and may be more sensitive generally to adverse changes in the
Issuer's financial condition.
The Securities will be unsecured and subordinated
If the Issuer is declared insolvent and a winding-up is initiated, it will be required to pay the holders of prior-
ranking debt and meet its obligations to all its other creditors (including unsecured creditors but excluding
any obligations in respect of subordinated debt which ranks lower than or equally with the Securities) in full
before it can make any payments on the Securities. If this occurs, the Issuer may not have enough assets
remaining after these payments to pay amounts due and payable under the Securities.
The Securities will be deeply unsecured and subordinated obligations and the most junior instrument in the
capital of the Issuer, other than ordinary shares. The Issuer may be able to incur significant additional
secured or unsecured unsubordinated indebtedness and/or prior-ranking subordinated indebtedness. If the
Issuer becomes insolvent or is liquidated, or if payment under any secured or unsecured unsubordinated
and/or prior-ranking subordinated debt obligations is accelerated, the Issuer's secured or unsecured
unsubordinated or, as the case may be, prior-ranking subordinated lenders would be entitled to exercise the
remedies available to a secured or unsecured unsubordinated and/or prior-ranking subordinated lender before
the Holders. As a result, the Securities are subordinated to any secured or unsecured unsubordinated
indebtedness and/or prior-ranking subordinated indebtedness that the Issuer may incur in the future, and the
holders of the Securities may recover rateably less than the lenders of the Issuer's secured or unsecured
unsubordinated debt and/or prior-ranking subordinated debt in the event of the Issuer's bankruptcy or
liquidation.
9

Unsubordinated liabilities of the Issuer may also arise from events that are not reflected on the balance sheet
of the Issuer, including, without limitation, insurance or reinsurance contracts, derivative contracts, the
issuance of guarantees or the incurrence of other contingent liabilities on an unsubordinated basis. Claims
made under such guarantees or such other contingent liabilities will become unsubordinated liabilities of the
Issuer that in a winding-up or insolvency proceeding of the Issuer will need to be paid in full before the
obligations under the Securities may be satisfied.
No limitation on issuing senior or pari passu securities
There is no restriction in the documentation entered into in connection with the issue of the Securities by the
Issuer on the amount of securities or other liabilities which the Issuer may issue or incur and which rank
senior to, or pari passu with, the Securities. The issue of any such securities or the incurrence of any such
other liabilities may reduce the amount (if any) recoverable by Holders and Couponholders on a winding-up
or administration of the Issuer and/or may increase the likelihood of a deferral of Coupon Payments under
the Securities.
Restricted remedy for non-payment when due
In accordance with the Conditions, the sole remedy against the Issuer available to any Holder or
Couponholder for recovery of amounts which have become due and payable in respect of the Securities will
be the institution of proceedings for the winding-up of the Issuer and/or proving in such winding-up or
administration of the Issuer, or the institution of such proceedings against the Issuer as it may think fit to
enforce any term or condition binding on the Issuer under the Agency Agreement or the Securities. However,
such proceedings cannot oblige the Issuer to pay any sum or sums, in cash or otherwise, sooner than the
same would otherwise have been payable by it under the Conditions. The Securities cannot cross default
based on non-payment on other securities, except where such non-payment on other securities itself results in
the winding-up of the Issuer. The Holders of the Securities have limited ability to influence the outcome of
an insolvency or liquidation or restructuring outside an insolvency or liquidation.
The Securities have a Floating Coupon Rate after the Step-up Date
The Securities will bear interest at a floating rate from and including the Step-up Date. This floating rate
comprises (i) a reference rate and (ii) a margin to be added to such base rate. There will be a periodic
adjustment of the reference rate (every twelve months) which itself will change in accordance with general
market conditions. Accordingly, the market value of the Securities may be volatile if changes, particularly
long-term changes, to market interest rates evidenced by the relevant reference rate can only be reflected in
the interest rate of these Securities upon the next periodic adjustment of the relevant reference rate.
The Issuer's option to redeem the Securities as from the day following the First Call Date and prior to
12 November 2035 is subject to compliance by the Issuer with the terms of the Replacement Capital
Covenant
At or about the time of the issuance of the Securities, the Issuer will enter into a replacement capital
covenant for the benefit of Holders, from time to time, of designated series of long-term indebtedness of the
Issuer (see paragraph 7 of "General Information"). The Replacement Capital Covenant provides that, subject
to certain exceptions, neither the Issuer nor any member of the Group may repay, redeem or repurchase any
of the Securities between the day following the First Call Date and the termination of the Replacement
Capital Covenant (on 12 November 2035, or earlier if certain conditions are met), unless a certain amount of
a certain class of qualifying financing instruments replaces the Securities that are so repaid, redeemed or
repurchased.
It is possible that circumstances could arise in which it would be in the interests of both the Issuer and the
Holders that the Securities be redeemed by the Issuer, but the Issuer is restricted from doing so because it
cannot obtain proceeds from the issue or sale of such qualifying financing instruments as designated in the
10