Obligation Morgan Stanley Global PLC 4.35% ( XS0886781334 ) en USD

Morgan Stanley Global PLC

100 % ⇌

Royaume-Uni

XS0886781334 ( en USD )

4.35% par an ( paiement semestriel )

20/06/2016 - Obligation échue

Prospectus brochure de l'obligation Morgan Stanley International PLC XS0886781334 en USD 4.35%, échue

200 000 USD

70 000 000 USD

Morgan Stanley International PLC est une filiale britannique de Morgan Stanley, offrant une gamme de services financiers aux clients institutionnels et privés, incluant la banque d'investissement, la gestion d'actifs et les services de courtage.

L'obligation Morgan Stanley International PLC (XS0886781334), émise au Royaume-Uni en USD pour un montant total de 70 000 000 USD avec un taux d'intérêt de 4,35%, échéant le 20/06/2016 et remboursable par tranches minimales de 200 000 USD avec une fréquence de paiement semestrielle, a atteint sa maturité et a été intégralement remboursée à 100% de sa valeur nominale.

PROSPECTUS
27 FEBRUARY 2013
PROGRAM FOR THE ISSUANCE OF
NOTES, SERIES A AND B, WARRANTS AND CERTIFICATES
Issue of
USD 70,000,000 First-to-Default Credit-Linked Notes linked to JSC Gazprom, Joint Stock
Company Russian Railways and JSC VTB Bank due 2016 (the "Notes")
Series 6220 issued by Morgan Stanley & Co. International plc
This Prospectus (the "Prospectus") in respect of the issue by Morgan Stanley & Co. International
plc (the "Issuer") of the Notes pursuant to the Program for the Issuance of Notes, Series A and B,
Warrants and Certificates of Morgan Stanley and certain affiliates dated 27 February 2013 (the
"Program").
Application has been made to the Commission de Surveillance du Secteur Financier (the "CSSF")
in its capacity as competent authority under the Luxembourg Act dated 10 July 2005 (the
"Prospectus Act 2005") on prospectuses for securities which implements Directive 2003/71/EC (the
"Prospectus Directive") to approve this Prospectus for the purposes of the Prospectus Directive.
The CSSF assumes no responsibility as to the economic and financial soundness of the Notes or the
quality or solvency of the Issuer in accordance with Article 7(7) of the Prospectus Act 2005.
Application will be made to the Luxembourg Stock Exchange for the admission to trading on the
Luxembourg Stock Exchange's Regulated Market and the listing on the Official List of the
Luxembourg Stock Exchange of the Notes.
The Luxembourg Stock Exchange's regulated market is a regulated market for the purposes of the
Markets in Financial Instruments Directive (Directive 2004/39/EC).
The Notes are, inter alia, credit-linked on a first-to-default basis and provide exposure to the
Reference Entities in the Reference Portfolio, which means that the effect of any credit related
losses under the Notes following the first Credit Event will be borne by the Noteholder, as further
described under "Risk Factors" below. Unless previously redeemed or purchased and cancelled,
each Note will be redeemed at the Final Redemption Amount on the Maturity Date. Subject to the
occurrence of the First Event Determination Date, an Early Redemption Date or an earlier
purchase and cancellation by the Issuer, the Final Redemption Amount in respect of the Notes will
be the par value of the Notes payable on the Maturity Date. Upon the occurrence of the Credit
Event Trigger (and save where the Notes are redeemed early in accordance with their terms or
purchased and cancelled), the Notes may be redeemed by Delivery of Deliverable Obligations on or
prior to the Physical Settlement Date, save in the limited circumstances set out herein in which case
cash settlement with respect to some or all of the Notes may apply, which may be prior to, on or
after the Scheduled Maturity Date. The Notes are subject to early redemption for tax reasons or
upon the occurrence of an event of default, in which case the Issuer will redeem the Notes at the
Early Redemption Amount.
Subject to the above and an Interest Suspension Period, each Note will pay Fixed Coupon Amounts
on each Interest Payment Date during the life of the Notes until the earliest of (a) the Interest
Payment Date immediately preceding the First Event Determination Date (or if no such Interest
Payment Date has occurred, the Interest Commencement Date); (b) the Scheduled Maturity Date;
and (c) the Early Redemption Date.
Payments made by the Issuer, in respect of any Notes will be made without withholding or
deduction for, or on account of, any present or future tax, assessment or governmental charge (the
"Taxes") imposed or levied by or on behalf of the United States or the United Kingdom, or any
representative political subdivision thereof or any authority or agency therein or thereof having
power to tax, unless the withholding or deduction of those Taxes is required by law.
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See "Risk Factors" on pages 7 to 14 for a discussion of certain factors that should be considered in
connection with an investment in the Notes.
MORGAN STANLEY
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This Prospectus constitutes a prospectus for the purposes of Article 5.3 of the Prospectus Directive.
The Issuer (the "Responsible Person") accepts responsibility for the information contained in this
Prospectus and 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 documents which are incorporated herein by
reference (see "Documents Incorporated by Reference" below). This Prospectus shall be read and
construed on the basis that such documents are incorporated in, and form part of, this Prospectus.
The Dealer has not 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 Dealer 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 Notes or their distribution. The Dealer does not accept 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 Notes or their distribution.
The only persons authorised to use this Prospectus in connection with an offer of Notes are the
Issuer and the Dealer.
No person is or has been authorised by the Issuer to give any information or to make any
representation not contained in or not consistent with this Prospectus or any other information
supplied in connection with the Notes and, if given or made, such information or representation
must not be relied upon as having been authorised by the Issuer or the Dealer.
Neither this Prospectus nor any other information supplied in connection with the Notes (i) is
intended to provide the basis of any credit or other evaluation, or (ii) should be considered as a
recommendation by the Issuer or the Dealer that any recipient of this Prospectus or any other
information supplied in connection with the Notes should purchase any Notes. Each investor
contemplating purchasing Notes should make its own independent investigation of the financial
condition and affairs, and its own appraisal of the creditworthiness, of the Issuer. Neither this
Prospectus nor any other information supplied in connection with the Notes constitutes an offer or
invitation by or on behalf of the Issuer or the Dealer to any person to subscribe for or to purchase
any Notes.
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Notes shall in any
circumstances imply that the information contained herein concerning the Issuer is correct at any
time subsequent to the date hereof or that any other information supplied in connection with the
Notes is correct as of any time subsequent to the date indicated in the document containing the
same. The Dealer expressly does not undertake to review the financial condition or affairs of the
Issuer during the life of the Notes or to advise any investor in the Notes of any information coming
to its attention.
This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Notes in
any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such
jurisdiction. The distribution of this Prospectus and the offer or sale of Notes may be restricted by
law in certain jurisdictions. The Issuer and the Dealer do not represent that this Prospectus may be
lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable
registration or other requirements in any such jurisdiction, or pursuant to an exemption available
thereunder, or assume any responsibility for facilitating any such distribution or offering. In
particular, no action has been taken by the Issuer or the Dealer which is intended to permit a
public offering of any Notes in any jurisdiction where action for that purpose is required.
Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Prospectus nor
any advertisement or other offering material may be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with any applicable laws and regulations.
Persons into whose possession this Prospectus or any Notes may come must inform themselves
about, and observe, any such restrictions on the distribution of this Prospectus and the offering and
sale of Notes. In particular, there are restrictions on the distribution of this Prospectus and the
offer or sale of Notes in the United States, the European Economic Area and Russia (see
"Subscription and Sale" on pages 369 to 378 of the Base Prospectus (as defined below)).
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This Prospectus has been prepared on the basis that any offer of Notes in any Member State of the
European Economic Area which has implemented the Prospectus Directive (each, a "Relevant
Member State") will be made pursuant to an exemption under the Prospectus Directive, as
implemented in that Relevant Member State, from the requirement to publish a prospectus for
offers of the Notes. Accordingly any person making or intending to make an offer of the Notes may
only do so in circumstances in which no obligation arises for the Issuer or the Dealer to publish a
prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant
to Article 16 of the Prospectus Directive, in each case, in relation to such offer.
Neither the Issuer nor any Dealer has authorised, nor do they authorise, the making of, any offer of
Notes in any other circumstances.
Except as disclosed in "Recent Events" on page 35 of the Registration Document dated 7 June 2012
and in the Base Prospectus Supplement dated 25 June 2012, there has been no significant change in
the financial or trading position of the Issuer since 31 December 2011 and no material adverse
change in the financial position or prospects of the Issuer since 31 December 2011.
Except as disclosed in "Legal Proceedings" on pages 43 to 54 of the Registration Document dated 7
June 2012, the Issuer is not nor has been involved in any governmental, legal or arbitration
proceedings (including any such proceedings which are pending or threatened of which the Issuer is
aware) during the 12 months preceding the date of this Prospectus which may have or has had in
the recent past significant effects on its financial position or profitability.
THE NOTES ARE NOT BANK DEPOSITS AND ARE NOT INSURED BY THE U.S. FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY,
NOR ARE THEY OBLIGATIONS OF, OR GUARANTEED BY, A BANK.
THE NOTES DESCRIBED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE IN THE UNITED
STATES, AND ARE SUBJECT TO U.S. TAX LAW REQUIREMENTS. THE NOTES
DESCRIBED HEREIN MAY NOT BE OFFERED, SOLD OR DELIVERED AT ANY TIME,
DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES OR TO OR FOR THE
ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN EITHER REGULATION S
UNDER THE SECURITIES ACT OR THE UNITED STATES INTERNAL REVENUE CODE OF
1986, AS AMENDED). SEE "SUBSCRIPTION AND SALE" AND "NO OWNERSHIP BY U.S.
PERSONS" IN THE BASE PROSPECTUS DATED 7 JUNE 2012. IN PURCHASING THE
NOTES, PURCHASERS WILL BE DEEMED TO REPRESENT AND WARRANT THAT THEY
ARE NEITHER LOCATED IN THE UNITED STATES NOR A U.S. PERSON AND THAT THEY
ARE NOT PURCHASING FOR, OR FOR THE ACCOUNT OR BENEFIT OF, ANY SUCH
PERSON. THE NOTES ARE NOT RATED.
THE DEALER HAS REPRESENTED, WARRANTED AND AGREED THAT IT HAS NOT
OFFERED OR SOLD OR OTHERWISE TRANSFERRED AND WILL NOT OFFER OR SELL
OR OTHERWISE TRANSFER AS PART OF THEIR INITIAL DISTRIBUTION OR AT ANY
TIME THEREAFTER ANY NOTE TO OR FOR THE BENEFIT OF ANY PERSONS
(INCLUDING LEGAL ENTITIES) RESIDENT, INCORPORATED, ESTABLISHED OR
HAVING THEIR USUAL RESIDENCE IN THE RUSSIAN FEDERATION OR TO ANY
PERSON LOCATED WITHIN THE TERRITORY OF THE RUSSIAN FEDERATION UNLESS
AND TO THE EXTENT OTHERWISE PERMITTED UNDER RUSSIAN LAW.
INFORMATION SET FORTH IN THIS PROSPECTUS IS NOT AN OFFER, OR AN
INVITATION TO MAKE OFFERS, TO SELL, EXCHANGE OR OTHERWISE TRANSFER,
THE NOTES IN THE RUSSIAN FEDERATION OR TO OR FOR THE BENEFIT OF ANY
RUSSIAN PERSON OR ENTITY. THE NOTES MAY NOT BE SOLD OR OFFERED TO OR
FOR THE BENEFIT OF ANY PERSON (INCLUDING LEGAL ENTITIES) THAT ARE
RESIDENT, INCORPORATED, ESTABLISHED OR HAVING THEIR USUAL RESIDENCE IN
THE RUSSIAN FEDERATION OR TO ANY PERSON LOCATED WITHIN THE TERRITORY
OF THE RUSSIAN FEDERATION UNLESS AND TO THE EXTENT OTHERWISE
PERMITTED UNDER RUSSIAN LAW; IT BEING UNDERSTOOD AND AGREED THAT THE
DEALER MAY DISTRIBUTE THIS PROSPECTUS TO QUALIFIED INVESTORS (AS
DEFINED UNDER RUSSIAN LAW) IN THE RUSSIAN FEDERATION IN A MANNER THAT
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DOES NOT CONSTITUTE AN ADVERTISEMENT (AS DEFINED IN RUSSIAN LAW) OF
NOTES AND MAY SELL NOTES TO RUSSIAN QUALIFIED INVESTORS IN A MANNER
THAT DOES NOT CONSTITUTE "PLACEMENT" OR "PUBLIC CIRCULATION" OF THE
NOTES IN THE RUSSIAN FEDERATION (AS DEFINED IN RUSSIAN LAW). SINCE
NEITHER THE ISSUANCE OF THE NOTES NOR A RUSSIAN SECURITIES PROSPECTUS
IN RESPECT OF THE NOTES HAS BEEN REGISTERED, OR IS INTENDED TO BE
REGISTERED, WITH THE FEDERAL SERVICE FOR FINANCIAL MARKETS OF THE
RUSSIAN FEDERATION, THE NOTES ARE NOT ELIGIBLE FOR INITIAL OFFERING OR
PUBLIC CIRCULATION IN THE RUSSIAN FEDERATION.
Terms used herein shall be deemed to be defined as such for the purposes of the Terms and
Conditions of the English Law Notes set forth in the Base Prospectus dated 7 June 2012 and the
supplemental Base Prospectus dated 25 June 2012, which together constitute a base prospectus (the
"Base Prospectus"). Full information on the Issuer and the offer of the Notes is only available on
the basis of the combination of this Prospectus and the Base Prospectus. Copies of the Base
Prospectus are available from the offices of Morgan Stanley & Co. International plc at 25 Cabot
Square, Canary Wharf, London, E14 4QA, United Kingdom.
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TABLE OF CONTENTS
Clause
Page
RISK FACTORS................................................................................................................................................7
DOCUMENTS INCORPORATED BY REFERENCE...................................................................................15
CROSS REFERENCE LIST ............................................................................................................................16
SELECTED FINANCIAL INFORMATION...................................................................................................19
TERMS AND CONDITIONS OF THE NOTES.............................................................................................20
SCHEDULE 1 SPECIAL CONDITIONS.....................................................................................................28
SCHEDULE 2 GENERAL DEFINITIONS..................................................................................................35
SCHEDULE 3 CREDIT EVENT DEFINITIONS........................................................................................41
SCHEDULE 4 PHYSICAL SETTLEMENT PROVISIONS .......................................................................46
SCHEDULE 5 VALUATION AND CASH SETTLEMENT PROVISIONS ...............................................49
OTHER INFORMATION................................................................................................................................52
MANAGEMENT OF MORGAN STANLEY & CO. INTERNATIONAL PLC............................................53
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RISK FACTORS
This section, the "Risk Factors Relating to the Program Securities" on pages 6 to 20 of the Base
Prospectus and the "Risk Factors" on pages 5 to 18 of the Registration Document set out factors
that may affect the Issuer's ability to fulfil its obligations under the Notes and/or are material for
the purpose of assessing the market risks associated with investing in the Notes.
Information Concerning Investment Risk
Overview
Noteholders and prospective purchasers of Notes should ensure that they understand the nature of the
Notes and the extent of their exposure to risk and that they consider the suitability of the Notes as an
investment in the light of their own circumstances and financial condition. In deciding whether or not to
purchase Notes, Noteholders and prospective purchasers should form their own views of the merits of an
investment linked to the credit risk of the Reference Entities (which when referred to in this Prospectus
shall be deemed to include Successors thereof) including the first-to-default risk of such Reference
Entities comprising the Reference Portfolio, based upon such investigations and not in reliance on any
information given in this document. Noteholders and prospective purchasers of Notes should determine
whether an investment in the Notes is appropriate in their particular circumstances and should consult
with their legal, regulatory, tax, business, investments, financial and accounting advisers to determine the
consequences of an investment in the Notes and to arrive at their own evaluation of the investment.
The Notes will not have the benefit of a rating. Any existing rating assigned to the Issuer will not apply to
these Notes.
Given the highly specialised nature of these Notes, the Issuer and Morgan Stanley & Co. International plc
as the Dealer consider that they are only suitable for highly sophisticated investors who are willing to take
considerable risks, who are able to determine for themselves the risk of an investment linked to the credit
risk of the Reference Entities including the first-to-default risk of such Reference Entities comprising the
Reference Portfolio. Consequently, if you are not an investor who falls within the description above you
should not consider purchasing these Notes without taking detailed advice from a specialised professional
adviser.
Prospective investors will be required to acknowledge or will be deemed to have acknowledged that they
understand the risks and potential consequences associated with purchases of the Notes and that they have
made such independent appraisal of the Reference Entities and the economic circumstances of each
Reference Entity as they think appropriate, and have consulted with their own legal, regulatory, tax,
business, investments, financial and accounting advisors to the extent they believe is appropriate to assist
them in understanding and evaluating the risks involved and the consequences of purchasing the Notes.
Prospective investors are urged to review the Base Prospectus as supplemented by this Prospectus for a
full detailed description of the Notes and in particular the risk factors associated with the Notes.
Investments in the Notes involve a number of risks and there can be no assurance that the full (or any)
amount invested in the Notes will be returned. This section highlights a limited number of those risks,
but is not and does not purport to be a complete list of the risks inherent in an investment in the Notes.
Risks relating to Credit-Linked Notes
Payment Risk. The payments of the Final Redemption Amount and the amount payable in respect of
early redemption of the Notes following the occurrence of a Credit Event are linked (amongst other things)
to the performance and creditworthiness of the Reference Entities including the first-to-default risk of
such Reference Entities comprising the Reference Portfolio. The occurrence of the First Event
Determination Date will result in the Notes being redeemed by Delivery of Deliverable Obligations
and/or, in the limited circumstances described herein, payment of the Cash Settlement Redemption
Amount (see also "Physical settlement and fallback to cash settlement"). The value of the Deliverable
Obligations Delivered and/or the Cash Settlement Redemption Amount may be zero. The deliverables
and/or amount payable on early redemption of the Notes may also take into account factors including,
without limitation, the reasonable costs to the Issuer or its affiliates of unwinding or re-establishing any
related hedging arrangements, prevailing interest rates, currency exchange rates and credit spreads. Only
sophisticated investors who are experienced in financial matters, familiar with credit-linked instruments
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(including the Notes, the Reference Obligations, the Deliverable Obligations and the Undeliverable
Obligations upon which payments and/or deliveries in respect of the Notes are dependent) and who can
bear any losses associated therewith should consider purchasing the Notes.
Exposure to the Reference Portfolio. Prospective investors who consider purchasing the Notes should
understand the credit-linked nature of the Notes, in particular the risks associated with each Reference
Entity in the Reference Portfolio. The Notes are linked to the credit of the Reference Portfolio on a "first-
to-default" basis. Payments and/or deliveries under the Notes are dependent upon, among other things,
the credit performance of each Reference Entity and the First Event Determination Date that occurs in the
Reference Portfolio. Noteholders should be aware that in the case of a Credit Event occurring in respect
of a Reference Entity, the Noteholders are exposed to full loss of principal and interest. The "first-to-
default" nature of the risk, however, means that the Noteholder is not exposed to any subsequent Event
Determination Date in respect of any other Reference Entity except in cases where there is more than one
Successor to a Reference Entity and hence, potentially more than one Reference Portfolio (see also
"Successor Reference Entities").
Volatility. The Notes are complex financial instruments and are linked to the credit of the Reference
Entities including the first-to-default risk of such Reference Entities comprising the Reference Portfolio.
Therefore changes in the market value of the Notes could be greater than the change in the market value
of any obligations issued by the underlying Reference Entities, and the market value of the Notes is
subject to credit, liquidity and interest rate risk. The market value of the Notes (whether indicative or
actionable) will vary over time and may be significantly less than the Aggregate Nominal Amount of the
Notes (or even zero) in certain circumstances.
Extension of Maturity. The Scheduled Maturity Date of the Notes is 20 June 2016. Prospective investors
should note, however, that the Notes will be redeemed on the Maturity Date, which may be later. No
interest will be payable on the Notes from and including the Scheduled Maturity Date to the Maturity
Date, subject to "Interest Suspension" as described below. The Determination Agent may deliver a notice
to the Issuer and the Fiscal Agent on any date up to and including the Scheduled Maturity Date if it
determines in good faith that it is likely that the Maturity Date will take place after the Scheduled
Maturity Date.
Moreover, if there is more than one Successor to a Reference Entity due to the occurrence of a Succession
Event resulting in multiple Reference Portfolios (see also "Successor Reference Entities") and there exists
a Potential Credit Event or an Unsettled Credit Event, in respect of a Reference Entity in a Reference
Portfolio, the Notes corresponding to such Reference Portfolio will not redeem on the Scheduled Maturity
Date; rather such Notes will redeem on the Maturity Date to the extent described herein. However, the
Notes corresponding to each Reference Portfolio for which there exists no Potential Credit Event or no
Unsettled Credit Event in respect of all Reference Entities in each such Reference Portfolio, shall be
redeemed on the Scheduled Maturity Date.
Interest. Prospective investors should note that the first Interest Period will commence from and
including the Issue Date and no interest will accrue on the Notes with effect from the earliest to occur of:
(a) the Scheduled Maturity Date, (b) the Early Redemption Date, and (c) the Interest Payment Date
immediately preceding the First Event Determination Date (if any such First Event Determination Date
occurs). If an Extension Notice has been delivered, the Notes will cease to bear interest for the period
from and including the Scheduled Maturity Date to and including the Extended Maturity Date (subject to
"Interest Suspension" as described below). Prospective investors should note that notwithstanding the
above if any First Event Determination Date occurs on or prior to the first Interest Payment Date, no
interest will accrue or be payable on the Notes.
Interest Suspension. Prospective investors should note that interest will not be paid during an Interest
Suspension Period. There may therefore be significant periods during which no interest will be payable.
Prospective investors should also note that unless it transpires that no Event Determination Date has
occurred, interest will not accrue during an Interest Suspension Period. Although interest will be deemed
to accrue during an Interest Suspension Period where it later transpires that no Event Determination Date
has occurred, prospective investors should be aware that no additional interest will accrue as a result of
the delay in receiving such interest.
Credit Event Risk. The Notes are linked to the credit of the Reference Entities in the Reference Portfolio
on a "first-to-default" basis (see also "Successor Reference Entities"). Payments and/or deliveries under
the Notes are dependent upon, among other things, the credit performance of each Reference Entity and
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the occurrence of the First Event Determination Date that occurs in respect of a Reference Entity in the
Reference Portfolio. If a Credit Event occurs, the Noteholders may receive obligations with a value of
zero and/or the Cash Settlement Redemption Amount may be zero, thereby exposing them to full loss of
principal and interest.
The "first to default" nature of the risk, however, means that the Noteholder is not exposed to any
subsequent Event Determination Date in respect of any other Reference Entity except in cases where
there is more than one Successor to a Reference Entity and hence, potentially more than one Reference
Portfolio (as described below).
The terms of the Notes provide that investors will be exposed to the credit risk in respect of each
Reference Entity in the Reference Portfolio from a date prior to the issue of the Notes. Investors should
note in particular that a Credit Event occurring prior to the Trade Date may result in a Credit Event
Trigger since a look-back period of 60 calendar days applies prior to the Credit Event Resolution Request
Date. This means that investors are exposed to Credit Events that occurred significantly earlier than the
issuance of the Notes.
Not all of the Credit Events require an actual default with respect to a Reference Entity's obligations.
Thus Noteholders could bear losses based on deterioration in the credit of a Reference Entity short of a
default. Also, not all Credit Events are triggered by events which are easily ascertainable and disputes
can and have arisen as to whether a specific event with respect to an entity or its corresponding obligation
did or did not constitute a Credit Event. Under the terms of the Notes, the Credit Derivatives
Determinations Committee, the Issuer's or the Determination Agent's determination whether a Credit
Event has or has not occurred will be binding on the Issuer and the Noteholders, and may be different
from the view of the Noteholders or other financial institutions, rating agencies or commentators. In the
event of any inconsistency between the determination of (i) the Issuer and/or the Determination Agent
and (ii) the Credit Derivatives Determinations Committee, the determination by the Credit Derivatives
Determinations Committee shall prevail, and corresponding changes to the Notes may apply retroactively.
In addition, the creditworthiness and/or performance of each Reference Entity may be dependent upon
economic, political, financial and social events locally and globally. There can be no assurance that such
factors will not adversely affect a Reference Entity's creditworthiness and/or performance and, in turn, the
value of the Notes. The Notes do not represent a claim against any Reference Entity and, in the event of
any loss, Noteholders will have no recourse under the Notes to any Reference Entity.
Successor Reference Entities. Pursuant to the Credit Derivatives Definitions, a Reference Entity may be
subject to replacement by one or more Successors. If there is more than one Successor to a Reference
Entity, the Noteholders will be subject to the "first-to-default" credit risk of multiple Reference Portfolios,
each portfolio consisting of one such Successor and all other Reference Entities not the subject of the
Succession Event. If a First Event Determination Date occurs with respect to one such Successor, the
Noteholders will still be subject to the credit risk of the other Successors and the other Reference Entities
comprising each remaining Reference Portfolio. Prospective investors should note that, in relation to
each Successor, a Credit Event Notice may be delivered in respect of a Credit Event that occurred with
respect to a Successor or the relevant Obligations to which it succeeded if the relevant Succession Event
giving such rise to such Successor occurred on or after the Succession Event Backstop Date, which may
be 90 calendar days prior to the Succession Event Resolution Request Date (if any). In addition,
prospective investors should note that following a Succession Event, the Determination Agent has broad
discretion to make adjustments to the terms and conditions of the Notes without obtaining Noteholder
consent.
Risks relating to Credit Derivatives Definitions and Credit Derivatives Determinations Committees. The
terms and conditions of the Notes incorporate the definitions and provisions of the 2003 Credit
Derivatives Definitions, as amended by, inter alia, the Additional Provisions for LPN Reference Entities
and the July 2009 Supplement and as further amended herein. Accordingly, only investors who are
familiar with, and fully understand the definitions and provisions of the Credit Derivatives Definitions
and have access to the relevant Credit Derivatives Definitions should consider purchasing the Notes
issued hereunder. Prospective investors should be aware that investing in the Notes may not be equivalent
to selling credit protection in respect of the Reference Entities comprising the Reference Portfolio by way
of a market standard credit default swap transaction that incorporates the Credit Derivatives Definitions.
In particular, prospective investors should also understand that the Notes amend the Credit Derivatives
Definitions in certain significant ways and so they should not expect the same result under both the Notes
and the Credit Derivatives Definitions.
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Prospective investors should be aware that, as provided for in the Credit Derivatives Definitions, many of
the decisions relating to the terms of the Notes may be determined by the Credit Derivatives
Determinations Committee. Prospective investors should be familiar with the rules and the manner in
which the Credit Derivatives Determinations Committee is constituted and Resolves matters. By
purchasing the Notes, investors shall be deemed to agree (a) that no DC Party and no legal counsel or
other third-party professional hired by a DC Party in connection with such DC Party's performance of its
respective duties under the relevant rules and the Credit Derivatives Auction Settlement Terms, shall be
liable, whether for negligence or otherwise, except in the case of fraud or wilful misconduct and (b) to
waive any such claim, whether for negligence or otherwise, except as aforesaid.
Prospective investors should note that, if the Credit Derivatives Definitions are amended (whether by way
of a protocol published by the International Swaps and Derivatives Association, Inc. ("ISDA"), or
otherwise) in such a way that would have retrospective effect on Customary Credit Derivative
Transactions, the Determination Agent will make amendments to the terms of the Notes that it determines
in good faith are necessary.
Conflicting Interests. Prospective investors should also note that the Issuer, or an affiliate, is a voting
member on each Credit Derivatives Determinations Committee and is a party to transactions that
incorporate the July 2009 Supplement. It may take actions that influence the decisions of the Credit
Derivatives Determinations Committee. Such actions may be adverse to the interests of the Noteholders
while benefiting the Issuer or its affiliates. In taking any action relating to the Credit Derivatives
Determinations Committee or performing any duty under the Rules, the Issuer or its affiliate has no
obligation to consider the interests of the Noteholders and may act regardless of any conflict of interest
due to its responsibilities under the Notes.
Prospective investors should also be aware the Credit Derivatives Determinations Committee will be able
to make a broad range of determinations in accordance with the Rules that may be relevant to the Notes
and materially affect the Noteholders. The Credit Derivatives Determinations Committee will be able to
make determinations without action or knowledge by the Noteholders.
In the exercise of its discretion, the Determination Agent may act in its own interests (in any capacity)
and does not owe any fiduciary duties to the Issuer or Noteholders.
Prospective investors should also note that whilst the Determination Agent will make certain decisions in
accordance with the terms and conditions of the Notes, these decisions may subsequently be modified by
a determination of the Credit Derivatives Determinations Committee resulting in retroactive amendments
to the Notes.
Timing of settlement. The Issuer or Determination Agent may exercise the Issuer's right of settlement at
any time following the occurrence of a Credit Event even if the Credit Event is not continuing at the time
such right is exercised, subject to the provisions of the Credit Derivatives Definitions and the decisions of
the Credit Derivatives Determinations Committee.
Additionally the valuation and settlement procedures may be tolled and suspended in certain
circumstances outside of the control of the Issuer such as due to the occurrence of a Settlement
Suspension whereby, following the occurrence of an Event Determination Date if, prior to any Delivery
Date or Pricing Date, ISDA publicly announces that (i) the conditions to convening a Credit Derivatives
Determinations Committee in order to determine whether or not a Credit Event has occurred with respect
to such Reference Entity are satisfied in accordance with the Rules, or (ii) an Auction will be held in
respect of such Reference Entity, the redemption of the Notes will toll and remain suspended until after
such time as ISDA publicly announces that (x) the relevant Credit Derivatives Determinations Committee
has Resolved the matters being considered at the Credit Derivatives Determinations Committee or
Resolved not to determine such matters or (y) the relevant Auction Final Price has been determined, as
applicable, as further described herein. During such suspension period, no interest will accrue on the
Notes and the Determination Agent will not be obliged to, nor will it be entitled to, take any action in
connection with the settlement of the Notes (see also "Extension of Maturity").
Noteholders will have no right to remedy, waive or rescind the Credit Event or take any action to mitigate
the ultimate loss which may be imposed upon them by virtue of their interest in the Notes and will bear
the risk of any change in the value of obligations of the Affected Reference Entity between the date of the
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