Regulatory Filings • Nov 24, 2013
Regulatory Filings
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UNITED UTILITIES WATER PLC
(incorporated with limited liability in England)
This Offering Circular supersedes any previous Offering Circulars issued in respect of the Programme. Any Notes (as defined below) issued under the Programme on or after the date of this Offering Circular are issued subject to the provisions described herein. This does not affect any Notes already in issue.
Under the Programme, United Utilities PLC ("UU") and United Utilities Water PLC ("UUW") (each an "Issuer" and together the "Issuers") may from time to time issue notes (the "Notes") denominated in any currency agreed between the relevant Issuer and the relevant Dealer (as defined below).
The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed EUR 7,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described herein.
The Notes may be issued on a continuing basis to one or more of the Dealers specified under "General Description of the Programme" and any additional Dealer appointed under the Programme from time to time by the Issuers (each a "Dealer" and together the "Dealers"), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the "relevant Dealer" shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to purchase such Notes.
An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see "Risk Factors" on page 11.
Application has been made to the Financial Conduct Authority in its capacity as competent authority (the "UK Listing Authority" or "UKLA") for Notes issued under the Programme during the period of 12 months from the date of this Offering Circular to be admitted to the official list of the UK Listing Authority (the "Official List") and to the London Stock Exchange plc (the "London Stock Exchange") for such Notes to be admitted to trading on the London Stock Exchange's Regulated Market.
References in this Offering Circular to Notes being "listed" (and all related references) shall mean that such Notes have been admitted to trading on the London Stock Exchange's Regulated Market and have been admitted to the Official List. The London Stock Exchange's Regulated Market is a regulated market for the purposes of the Markets in Financial Instruments Directive (2004/39/EC) (the "Markets in Financial Instruments Directive"). Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and any other terms and conditions not contained herein which are applicable to each Tranche (as defined under "Terms and Conditions of the Notes") of Notes will be set out in the applicable Final Terms (the "Final Terms") which, with respect to Notes to be listed will be delivered to the UK Listing Authority and to the London Stock Exchange.
Notes issued under the Programme may be rated or unrated. Where an issue of Notes is rated, its rating will be disclosed in the Final Terms. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, change or withdrawal at any time by the assigning rating organisation.
UU and UUW have each received corporate credit ratings. For discussion of these see "Information on United Utilities Group Plc – Group capital structure target credit rating for UUW and credit ratings for UU and UUW". Standard & Poor's Credit Market Services Europe Limited ("S&P") is established in the European Union and is registered under Regulation (EC) No. 1060/2009 (the "CRA Regulation"). Moody's Investors Service Ltd ("Moody's") is established in the European Union and is registered under the CRA Regulation.
The relevant Issuer and the Trustee (as defined below) may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event and, if appropriate, a supplemental Offering Circular or a new Offering Circular will be published.
Dealers
Barclays Deutsche Bank Goldman Sachs International J.P. Morgan Cazenove Mitsubishi UFJ Securities Mizuho Securities
RBC Capital Markets The Royal Bank of Scotland
The date of this Offering Circular is 21 November 2013.
Each of the Issuers (together, the "Responsible Persons") accepts responsibility for the information contained in this Offering Circular and the Final Terms for each Tranche of Notes issued under the Programme. To the best of the knowledge and belief of the Issuers (each having taken all reasonable care to ensure that such is the case) the information contained in this Offering Circular is in accordance with the facts and does not omit anything likely to affect the import of such information.
This Offering Circular is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see "Documents Incorporated by Reference" below). This Offering Circular shall, save as specified herein, be read and construed on the basis that such documents are so incorporated and form part of this Offering Circular.
Neither the Dealers nor the Trustee 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 Dealers or the Trustee as to the accuracy or completeness of the information contained or incorporated in this Offering Circular or any other information provided by the Issuers in connection with the Programme. Neither the Dealers nor the Trustee accept any liability in relation to the information contained or incorporated by reference in this Offering Circular or any other information provided by any Issuer in connection with the Programme.
No person is or has been authorised by the Issuers to give any information or to make any representation not contained in or not consistent with this Offering Circular or any other information supplied in connection with the Programme or the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuers, any of the Dealers or the Trustee.
Neither this Offering Circular nor any other information supplied in connection with the Programme or any Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation by the Issuers, any of the Dealers or the Trustee that any recipient of this Offering Circular or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the relevant Issuer. Neither this Offering Circular nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuers, any of the Dealers or the Trustee to any person to subscribe for or to purchase any Notes.
Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning the Issuers is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Dealers and the Trustee expressly do not undertake to review the financial condition or affairs of the Issuers during the life of the Programme or to advise any investor in the Notes of any information coming to their attention. Investors should review, inter alia, the most recently published documents incorporated by reference into this Offering Circular when deciding whether or not to purchase any Notes.
This Offering Circular 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 Offering Circular and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuers, the Dealers and the Trustee do not represent that this Offering Circular 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 Issuers, the Dealers or the Trustee which would permit a public offering of any Notes outside the UK or distribution of this Offering Circular in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular 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 Offering Circular or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer and sale of Notes in the United States, the European Economic Area (including the United Kingdom and Germany) and Japan (see "Subscription and Sale" below).
In making an investment decision, investors must rely on their own examination of the relevant Issuer and the terms of the Notes being offered, including the merits and risks involved. The Notes have not been approved or disapproved by the United States Securities and Exchange Commission or any other securities commission or other regulatory authority in the United States, nor have the foregoing authorities approved this Offering Circular or confirmed the accuracy or determined the adequacy of the information contained in this Offering Circular. Any representation to the contrary is unlawful.
None of the Dealers, the Issuers and the Trustee makes any representation to any investor in the Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes should be able to bear the economic risk of an investment in the Notes for an indefinite period of time.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended, (the "Securities Act") and are subject to U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons. Furthermore, the RPI Linked Notes do not constitute, and have not been marketed as, contracts of sale of a commodity for future delivery (or options thereon) subject to the United States Commodity Exchange Act (the "CEA"), as amended, and trading in the RPI Linked Notes has not been approved by the United States Commodity Futures Trading Commission (the "CFTC") under the CEA, and no U.S. person may at any time trade or maintain a position in the RPI Linked Notes (see "Subscription and Sale").
All references in this Offering Circular to "U.S. dollars", "U.S.\$" and "\$" refer to United States dollars, to "Sterling" and "£" refer to pounds sterling and to "euro" "EUR" and "€" refer to the 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.
In this Offering Circular and except where the context otherwise requires, references to "United Utilities", "UUG" or the "Group" are to United Utilities Group PLC, either alone or together with its consolidated subsidiaries, as the context requires. References to "UU" are to United Utilities PLC, either alone or together with its consolidated subsidiaries, as the context requires. UU is a wholly-owned subsidiary of UUG. References to "UUW" are to United Utilities Water PLC which is a wholly-owned subsidiary of UUG.
In connection with the issue of any Tranche of Notes, one or more relevant Dealers (the "Stabilising Manager(s)") (or persons acting on behalf of any Stabilising Manager(s)) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or persons acting on behalf of a 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 relevant Tranche of Notes 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 relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over- allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules.
| General Description of the Programme 6 |
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|---|---|
| Risk Factors11 | |
| Documents Incorporated by Reference 18 |
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| Form of the Notes21 | |
| Form of Final Terms24 | |
| Terms and Conditions of the Notes33 | |
| Use of Proceeds70 | |
| Information on United Utilities Group PLC71 | |
| Description of the Issuers73 | |
| United Utilities Water PLC73 | |
| United Utilities PLC81 | |
| Material Contracts83 | |
| Taxation84 | |
| Subscription and Sale 86 |
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| General Information 89 |
The following overview does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Offering Circular and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Final Terms and any decision to invest in any Notes should be based on a consideration of this Offering Circular as a whole, including the documents incorporated by reference.
This overview constitutes a general description of the Programme for the purposes of Article 22.5(3) of Commission Regulation (EC) No 809/2004 implementing the Prospectus Directive (the "Prospectus Regulation").
Words and expressions defined in "Form of the Notes" and "Terms and Conditions of the Notes" below shall have the same meanings in this overview.
| Issuers: | United Utilities PLC United Utilities Water PLC |
|---|---|
| Risk Factors: | There are certain factors that may affect each Issuer's ability to fulfil its obligations under Notes issued under the Programme. These are set out under "Risk Factors" beginning on page 11 hereof. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme. These are set out under "Risk Factors" and include the fact that the Notes may not be a suitable investment for all investors, certain risks relating to the structure of particular Series of Notes and certain market risks. |
| Description: | Euro Medium Term Note Programme |
| Trustee: | The Law Debenture Trust Corporation p.l.c. |
| Arranger: | Deutsche Bank AG, London Branch |
| Dealers: | Barclays Bank PLC Deutsche Bank AG, London Branch Goldman Sachs International J.P. Morgan Securities plc Mitsubishi UFJ Securities International plc Mizuho International plc RBC Europe Limited The Royal Bank of Scotland plc UniCredit Bank AG and any other Dealers appointed in accordance with the Programme Agreement. |
| Certain Restrictions: | Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to |
| time (see "Subscription and Sale") including the following restrictions applicable at the date of this Offering Circular. |
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| Notes having a maturity of less than one year | |
| Notes having a maturity of less than one year will constitute deposits for the purposes of the prohibition on accepting deposits contained in Section 19 of the Financial Services and Markets Act 2000 unless they are issued to a limited class of professional investors and have a denomination of at least £100,000 or its equivalent (see "Subscription and Sale"). |
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| Issuing and Principal Paying Agent: | Citibank, N.A., London Branch. |
| Programme Size: | Up to EUR 7,000,000,000 in nominal amount (or its equivalent in other currencies calculated as described in the Programme Agreement) outstanding at any time. The Issuers may increase the amount of the Programme in accordance with the terms of the Programme Agreement. |
| Distribution: | Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis. |
| Currencies: | Subject to any applicable legal or regulatory restrictions, any currency agreed between the relevant Issuer and the relevant Dealer. |
| Redenomination: | The applicable Final Terms may provide that certain Notes may be redenominated in euro. The relevant provisions applicable to any such redenomination are contained in Condition 4. |
| Maturities: | Such maturities as may be agreed between the relevant Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Issuer or the relevant Specified Currency. |
| Issue Price: | The price and amount of Notes to be issued under the Programme will be determined by the relevant Issuer and each relevant Dealer at the time of issue in accordance with prevailing market conditions. |
| Form of Notes: | The Notes will be issued in bearer form and may be issued in New Global Note ("NGN") form as described in "Form of the Notes". |
| So long as any Notes are represented by a Temporary Global Note and/or a Permanent Global Note and the relevant clearing systems so permit, the Notes shall be tradeable only in principal amounts of at least the Specified Denomination and integral multiples of such other amount as shown in the |
applicable Final Terms.
Fixed Rate Notes: Fixed interest will be payable on such date or dates as may be agreed between the relevant Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the relevant Issuer and the relevant Dealer.
Floating Rate Notes: Floating Rate Notes will bear interest at a rate determined:
The margin (if any) relating to such floating rate will be agreed between the relevant Issuer and the relevant Dealer for each Series of Floating Rate Notes.
Floating Rate Notes may also have a maximum interest rate, a minimum interest rate or both.
Interest on Floating Rate Notes in respect of each Interest Period, as agreed prior to issue by the Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed between the Issuer and the relevant Dealer.
RPI Linked Notes: Payments of principal and interest in respect of RPI Linked Notes will be calculated by reference to the UK Retail Prices Index ("RPI") (for all items) published by the Office for National Statistics (January 1987 = 100) or any comparable index which may replace RPI.
Zero Coupon Notes: Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest.
Redemption: The applicable Final Terms will indicate either that the Notes cannot be redeemed prior to their stated maturity (other than for taxation reasons or following an Event of Default) or that such Notes will be redeemable at the option of the relevant Issuer and/or the Noteholders upon giving the relevant period of notice specified in the Terms and Conditions (or such other notice period as is specified in the applicable Final Terms) to the Noteholders or the relevant Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed
| between the relevant Issuer and the relevant Dealer. | |
|---|---|
| Notes having a maturity of less than one year may be subject to restrictions on their denomination and distribution (see "Certain Restrictions: Notes having a maturity of less than one year" above). |
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| Denomination of Notes: | Notes will be issued in such denominations as may be agreed between the relevant Issuer and the relevant Dealer save that the minimum denomination of each Note will be such as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency (see "Certain Restrictions - Notes having a maturity of less than one year" above), and save that the minimum denomination of each Note admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which require the publication of a prospectus under the Prospectus Directive will be EUR 100,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency). |
| Taxation: | All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed within the United Kingdom, subject as provided in Condition 9. In the event that any such deduction is made, the relevant Issuer will, save in certain limited circumstances provided in Condition 9, be required to pay additional amounts to cover the amounts so deducted. |
| Negative Pledge: | The terms of the Notes will contain a negative pledge provision as further described in Condition 3. |
| Cross Default: | The terms of the Notes will contain a cross default provision as further described in Condition 11. |
| Status of the Notes: | The Notes will constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 3) unsecured obligations of the relevant Issuer and will rank pari passu among themselves and (subject as aforesaid and save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the relevant Issuer, from time to time outstanding. |
| Rating: | Notes issued under the Programme may be rated or unrated. Where an issue of Notes is rated, its rating will be disclosed in the applicable Final Terms and will not necessarily be the same as the rating assigned to the Programme. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, change or withdrawal at any time by the assigning rating agency. |
| Listing: | Application has been made for Notes issued under the Programme to be listed on the London Stock Exchange. |
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| Governing Law: | The Notes and any non-contractual obligations arising out of or in connection therewith will be governed by, and construed in accordance with, English law. |
| Selling Restrictions: | There are restrictions on the offer, sale and transfer of the Notes in the United States, the European Economic Area (including the United Kingdom and Germany), and Japan and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes (see "Subscription and Sale"). |
| Representation of Noteholders: | Trustee. |
The Issuers believe that the following factors may affect their ability to fulfil their respective obligations under the Notes issued under the Programme. Most of these factors are contingencies which may or may not occur and the Issuers are not in a position to express a view on the likelihood of any such contingency occurring. In addition, risk factors which are specific to the Notes are also described below.
The Issuers believe that the factors described below represent the principal risks inherent in investing in the Notes issued under the Programme, but the inability of the Issuers to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons and the Issuers do not represent that the statements below regarding the risks of holding any Notes are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision.
Capitalised terms used herein shall have the same meaning as given to them in the Terms and Conditions of the Notes unless otherwise stated.
The Government's White Paper (Water for Life) highlighted key policy priorities for the water industry. A Water Bill was published on 27 June 2013 and incorporates changes to legislation that would be required to enable many of the changes set out in the White Paper. These include measures to introduce competition and the removal of barriers to entry. The scale and impact of retail and upstream competition will depend on what ultimately becomes legislation. As a result, there is significant uncertainty about the potential impacts; however, these could include: increased costs, reduced income and reduced confidence in the RCV mechanism leading to a rise in future costs of borrowing.
In July 2013, Ofwat published the methodology setting out the key principles it intends to follow in the 2014 price review. The principal decision to date is that Ofwat will set two binding retail price controls (one for household and one for non-household) and two binding wholesale controls (one for water and one for wastewater). Other decisions include: household/non-contestable retail cost recovery based on an average cost to serve; the introduction of a new 'Totex' menu approach to assessing cost assumptions; the use of revenue caps and a different approach to sharing the benefits of outperformance between shareholders and customers. These areas contribute to a wider risk of failing to achieve a successful Final Determination following Ofwat's price control review which could result in loss of income and profit, significant cost recovery shortfall, a reduction in allowed expenditure (both capital and operating expenditure) and the ability to outperform. There will also be additional costs for preparing for and administrating separate price controls for retail and wholesale.
The group is subject to various UK and international laws and regulations associated with water and wastewater service, health and safety, the environment, property/land management and the general running of a company. If the group fails to comply, or becomes involved in third party proceedings including civil actions by third parties for infringement of rights or nuisance, it could face a range of outcomes. These include financial penalties (of up to 10 per cent of relevant regulated turnover), the imposition of an enforcement order requiring additional capital/operating expenditure, or compensation following litigation. In more extreme circumstances, impacts could ultimately include the revocation of the licence to operate or the appointment of a special administrator.
The UK Government has lost a case in the Court of Justice of the European Union relating to the Government's approach to enforcement of the Urban Waste Water Treatment Directive (the 'Whitburn' case). The Directive relates to wastewater discharges and, if this case leads to a change in the law or enforcement of it, the group's capital investment programme and associated funding requirements could change.
In February 2009, United Utilities International Limited (UUIL) was served with notice of a multiparty 'class action' in Argentina related to the issuance and payment default of a US\$230 million bond by Inversora Eléctrica de Buenos Aires S.A. (IEBA), an Argentine project company set up to purchase one of the Argentine electricity distribution networks which was privatised in 1997. UUIL had a 45 per cent shareholding in IEBA which it sold in 2005. The claim is for a non-quantified amount of unspecified damages and purports to be pursued on behalf of unidentified consumer bondholders in IEBA. UUIL has filed a defence to the action and will vigorously resist the proceedings given the robust defences that UUIL has been advised that it has on procedural and substantive grounds.
In March 2010, Manchester Ship Canal Company (MSCC) issued proceedings seeking, amongst other relief, damages alleging trespass against United Utilities Water PLC (UUW) in respect of UUW's discharges of water and treated effluent into the canal. UUW filed a Defence and Counterclaim in support of its believed entitlement to make discharges into the canal without charge and await MSCC's response. Although UUW won a 'summary judgment' application against MSCC in January 2012 on a significant element of the claim, MSCC subsequently appealed to the Court of Appeal who dismissed UUW's summary judgment. UUW was then granted permission to appeal to the Supreme Court, the hearing is expected to be in May 2014.
The group participates in a number of pension arrangements. Estimates of the amount and timing of future funding for these schemes are based on various actuarial assumptions and other factors including, among other things, the actual and projected market performance of the scheme assets, future long-term bond yields, average life expectancies and relevant legal requirements. The impact of these assumptions and other factors may require the group to make additional contributions to these pension schemes which, to the extent they are not recoverable under the regulatory price determination process, could materially adversely affect the group's financial position.
The group participates in treasury activities including the depositing of cash and holding of derivatives and foreign exchange instruments. Although the group does not consider there to be an imminent exposure, a potential loss of deposits, financial assets or hedge due to bank failure, error or delay in receiving funds from a bank or sequestration could impact cash flow, the ability to meet debt obligations, credit rating and cost of borrowing.
Failure to deliver good customer service can be caused by failures in supply and quality requirements (see below) and also the effectiveness of communication and response. The Service Incentive Mechanism (SIM), introduced by Ofwat for the 2010-15 period, replacing the Overall Performance Assessment (OPA), compares companies' performance in terms of the number of 'unwanted' contacts received from customers and how well a company then deals with those contacts. Depending on UUW's relative performance under SIM it could receive a revenue penalty (up to 1 per cent of turnover in 2010-15) or reward (up to 0.5 per cent of turnover in 2010-15) when price limits are next reset in 2014.
The service the group provides is predominantly in the North West of England where the level of socioeconomic deprivation is much higher than in any other region, leading to, amongst other things, an increased risk of bad debt. The law prohibits the disconnection of a water supply from certain premises including domestic dwellings as a method of enforcing payment.
The group controls and operates water and wastewater networks and maintains the associated assets with the objective of providing a continuous service. Physical, environmental, technological or human factors, either within or outside the company's control, could result in impacts ranging from a decline in performance to interruptions and environmental impact. Ofwat could make financial adjustments at the next price review if corrective actions do not restore service to the required reference levels for each of their serviceability measures and could go on to force additional operating or capital expenditure if performance were to continue to decline. Additionally, depending on the nature and extent of an operational service incident, UUW could be fined for breaches of statutory obligations, be held liable to third parties or be required to provide an alternative water supply of equivalent quality, at additional cost.
The group's core business requires significant capital expenditure, particularly in relation to new and replacement plant and equipment for water and wastewater networks and treatment facilities.
Delivery of capital investment programmes could be affected by a number of factors including adverse legacy effects of earlier capital investments (such as increased maintenance, repair, reinstatement or renewal costs) or amounts budgeted in prior capital investment programmes proving insufficient to meet the actual amount required. This may affect the ability to meet regulatory and other environmental performance standards.
A secure and reliable supply of safe, clean drinking water is critical for our way of life. There are several events, either within or outside the group's control that could put at risk this key requirement. These include inadequate supply and demand prediction, leakage performance issues, operational or asset failures, changes to abstraction licences, low rainfall or malicious acts. Depending on the nature and extent of these circumstances, the impact to the group may include: failure to meet the security of supply index or quality standards with associated regulatory penalties, increased frequency of hosepipe bans and drought permits and additional operational activity and cost. In extreme and remote circumstances, impacts may include unavoidable water resource shortfalls or an impact on public health.
UUW's core activity involves the building, control and operation of water and wastewater networks and the maintenance of the associated assets with the objective of providing a continuous service. This includes major construction work and operations above and below ground and includes the use of vehicles, equipment and chemicals subject to a variety of physical and environmental factors/conditions. In exceptional and remote circumstances, such as the failure of an asset, an element of a network or supporting systems, plant or equipment, the impact could be significantly greater than operational service failures set out in other risks in this section. These could range from environmental impact, economic and social disruption to loss of life. Such consequences may arise due to a number of circumstances either within or outside the group's control e.g. human error, an individual's malicious intervention or unavoidable resource shortfalls.
Whilst the group seeks to ensure that it has appropriate processes and preventative controls in place, there can be no certainty that such measures will be effective in preventing or, when necessary, managing largescale incidents to the satisfaction of its customers, regulators, Government and the wider stakeholder community. The group could be fined for breaches of statutory obligations or be held liable to third parties or be required to provide an alternative water supply of equivalent quality, which could increase costs.
There is currently an elevated political and public focus on the cost to households of bills, especially in relation to certain utilities including the regulated water industry. The Secretary of State for Environment, Food and Rural Affairs has recently written to industry CEOs supporting the work being done by Ofwat and the industry to ensure a fair deal for customers and stressing the need to keep bills for customers as low as possible, while ensuring that low-cost investment in the sector continues. It is unclear whether the broader political and public focus on utilities will ultimately impact Government policy, legislation or regulatory outcomes affecting the sector.
With respect to an investment in Notes indexed to one or more interest rates, currencies or other indices or formulas, significant risks exist that are not associated with a conventional fixed rate or floating rate debt security. Such risks include fluctuation of the particular indices or formulas and the possibility that an investor will receive a lower amount of principal, premium or interest and at different times than expected. The Issuers have no control over a number of matters, including economic, financial and political events that are important in determining the existence, magnitude and longevity of such risks and their results. In addition, if an index or formula used to determine any amounts payable in respect of the Notes contains a multiplier or leverage factor, the effect of any change in such index or formula will be magnified. In recent years, values of certain indices and formulas have been volatile and volatility in those and other indices and formulas may be expected in the future. However, past experience is not necessarily indicative of what may occur in the future.
Each Issuer may issue RPI Linked Notes where interest and redemption amounts will be adjusted by reference to movements in RPI during a reference period.
A decrease in RPI over the reference period will reduce the interest or redemption amounts payable in respect of such Notes. In a deflationary environment, (i) the annual interest received may be lower than the rate of interest specified in the applicable Final Terms and (ii) the amount to be repaid upon redemption of the Notes would be reduced to less than the nominal amount of the Notes (unless the applicable Final Terms specifies a minimum redemption amount which is equal to or higher than the nominal amount of the Notes). As a consequence, investors may lose the value of their entire investment or part of it. The historical experience of RPI should not be viewed as an indication of future performance of RPI during the term of any RPI Linked Notes. Accordingly, each potential investor should consult its own financial and legal advisers about the risk entailed by an investment in any RPI Linked Notes and the suitability of such Notes in light of its particular circumstances.
Moreover, the methodology used by the Office for National Statistics ("ONS") for calculating RPI may change over time which may affect the actual RPI figure. Consequently, the amount of interest payable on each interest payment date and/or the amount to be repaid upon redemption of RPI Linked Notes may increase, or decrease, as a result of such a change to the RPI figure.
If the Index ceases to be published or where there is a fundamental change in the rules governing the Index, adjustments to such Index may be made, or a substitute index may be agreed. If an adjustment to the Index
cannot be made or any substitute for the Index found then, in specified circumstances, the Issuer may redeem the Notes early. See Conditions 6.5 and 8.3 for further detail.
The application of Conditions 6.5 and 8.3 may have a positive or negative impact on the amount of interest payable on each interest payment date and/or the amount to be repaid upon, or the timing of, any redemption of RPI Linked Notes.
Because UU is an intermediate holding company, its rights to participate in the assets of any subsidiary if it is liquidated will be subject to the prior claims of its subsidiary's creditors, except to the extent that UU may be a creditor with recognised claims ranking ahead of or pari passu with such prior claims against the subsidiary. UU's ability to make payments on debt obligations and pay certain operating expenses may be dependent on the receipt of dividends from its subsidiaries. Certain of UU's subsidiaries have regulatory restrictions that can limit the payment of dividends.
There is no restriction on the amount of securities which each Issuer may issue which rank pari passu with the Notes being offered hereby. The issue of any such securities may reduce the amount recoverable by holders of the Notes in the event that the Issuer is wound up or becomes insolvent or may increase the likelihood of a deferral of payments under the Notes.
In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that the Notes may be traded in amounts that are not integral multiples of such minimum Specified Denominations (as defined in the Final Terms). 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 in his account with the relevant clearing system at the relevant time will 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 it holds an amount equal to one or more Specified Denominations.
If such Notes in definitive form are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
If the applicable Terms and Conditions specify that the Notes are redeemable at the option of each Issuer, or are otherwise subject to mandatory redemption, the Issuer may (in the case of optional redemption) or must (in the case of mandatory redemption) choose to redeem such Notes at times when prevailing interest rates may be relatively low. Accordingly, an investor generally may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the Notes.
The Issuers cannot assure a trading market for the Notes will ever develop or be maintained. If a market does develop, it may not be very liquid. Many factors independent of the creditworthiness of each Issuer affect the trading market. These factors include:
In addition, certain Notes have a more limited trading market and experience more price volatility because they were designed for specific investment objectives or strategies. There may be a limited number of buyers when an investor decides to sell such Notes. This may affect the price an investor receives for such Notes or the ability of an investor to sell such Notes at all. An investor should not purchase Notes unless such an investor understands and can bear these investment risks.
In the event that amounts due under the Notes are subject to U.K. withholding tax, the Issuers may not be obliged to pay additional amounts in relation thereto if Noteholders fall within certain exceptions to the obligation to pay such additional amounts. In addition, the Issuers may, in certain circumstances, redeem the Notes (as described in Condition 8.2 of the Notes). The applicability of any U.K. withholding tax under current law is discussed under "Taxation - Withholding Tax".
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.
The Terms and Conditions of the Notes also provide that the Trustee may, without the consent of Noteholders and without regard to the interests of particular Noteholders, agree to (i) any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of Notes or (ii) determine without the consent of the Noteholders that any Event of Default or Potential Event of Default shall not be treated as such or (iii) the substitution of another company as principal debtor under any Notes, in the circumstances described in Condition 19 of the Terms and Conditions of the Notes.
Under EC Council Directive 2003/48/EC on the taxation of savings income (the "Savings Directive"), Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories have adopted similar measures. In April 2013, the Luxembourg Government announced its intention to abolish the withholding system with
effect from 1 January 2015, in favour of automatic information exchange under the Savings Directive. The Savings Directive does not preclude Member States from levying other types of withholding tax.
The European Commission has proposed certain amendments to the Savings Directive which may, if implemented, amend or broaden the scope of the requirements described above.
If a payment were to be made or collected through a Member State which operates a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the relevant Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. Pursuant to Condition 13(d), so long as such a jurisdiction exists, the Issuer is required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to any law implementing or complying with, or introduced in order to confirm to, the Savings Directive.
The Terms and Conditions of the Notes are based on English law in effect as at the date of this Offering Circular. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Offering Circular and any such change could materially adversely impact the value of any Notes affected by it.
One or more independent credit rating agencies may assign credit ratings to the relevant Issuers or the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised, suspended or withdrawn by the rating agency at any time.
In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in the European Union ("EU") and registered under the CRA Regulation (and such registration has not been withdrawn or suspended), subject to transitional provisions that apply in certain circumstances whilst the registration application is pending. Such general restriction will also apply in the case of credit ratings issued by non-EU credit rating agencies, unless the relevant credit ratings are endorsed by an EU-registered credit rating agency or the relevant non-EU rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawn or suspended). The list of registered and certified rating agencies published by the European Securities and Markets Authority ("ESMA") on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the publication of the updated ESMA list. Certain information with respect to the credit rating agencies and ratings is set out on the cover of this Offering Circular. Where a Tranche of Notes is rated, such rating will be specified in the relevant Final Terms and will not necessarily be the same as the rating of the Programme.
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 (i) Notes are legal investments for it, (ii) Notes can be used as collateral for various types of borrowing and (iii) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar risks.
The following documents which have previously been published or are published simultaneously with this Offering Circular and have been filed with the Financial Conduct Authority shall be incorporated in, and form part of, this Offering Circular:
(a) the sections of the annual reports for 2012 and 2013 (consisting of the auditor's report and statutory annual financial statements for each of the financial years ended 31 March 2012 and 31 March 2013 of each of the Issuers) set out at the following pages; and
Annual Financial Statements 2013
independent auditors' report Page 40 profit and loss account Page 41 balance sheet Page 43 cash flow statement Page 44 notes to the financial statements Pages 45-78 Annual Financial Statements 2012 independent auditors' report Page 42 profit and loss account Page 43 balance sheet Page 45 cash flow statement Page 46 notes to the financial statements Pages 47-80 United Utilities PLC Annual Financial Statements 2013 independent auditors' report Page 16-17 consolidated income statement Page 18 consolidated and company statements of financial position Page 20 consolidated and company cash flow statement Page 23 accounting policies Page 24-34 notes to the financial statements Pages 35-80
| | independent auditors' report | Pages 38-39 |
|---|---|---|
| | consolidated income statement | Page 40 |
| | consolidated and company statements of financial position |
Page 42 |
| | consolidated and company cash flow statement |
Page 45 |
| | accounting policies | Pages 46-56 |
| | notes to the financial statements | Pages 57-103 |
(b) the Terms and Conditions of the Notes contained in each of the following Offering Circulars:
Any other information incorporated by reference that is not included in the cross-referenced lists above are considered to be additional information to be disclosed to investors rather than information required by the relevant Annexes of the Prospectus Regulation.
Following the publication of this Offering Circular, a supplement may be prepared by the Issuers and approved by the UK Listing Authority in accordance with Article 16 of the Prospectus Directive. Any statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Offering Circular or in a document which is incorporated by reference in this Offering Circular. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Offering Circular.
Copies of documents incorporated by reference in this Offering Circular can be obtained from the registered offices of each Issuer and from the specified offices of the Paying Agents for the time being in London and have been made available at http://www.londonstockexchange.com/exchange/news/market-news/marketnews-home.html.
Only the information in the parts of the documents specified above is incorporated into and forms part of this document. Information in other parts of the documents is either covered elsewhere in the document or is not relevant for the investor.
Any documents themselves incorporated by reference in the documents incorporated by reference in this Offering Circular shall not form part of this Offering Circular for the purposes of the Prospectus Directive.
The Issuers will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Offering Circular which is capable of affecting the assessment of any Notes, prepare a supplement to this Offering Circular or publish a new Offering Circular for use in connection with any subsequent issue of Notes.
The Notes of each Series will be in bearer form, with or without interest coupons ("Coupons") attached.
Each Tranche of Notes will be in bearer form and will be initially issued in the form of a temporary global note (a "Temporary Global Note") or, if so specified in the applicable Final Terms, a permanent global note (a "Permanent Global Note") which, in either case, will:
Where the Global Notes issued in respect of any Tranche are in NGN form, the ICSDs will be notified whether or not such Global Notes are intended to be held in a manner which would allow Eurosystem eligibility. Any indication that the Global Notes are to be so held does not necessarily mean that the Notes of the relevant Tranche will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any times during their life as such recognition depends upon satisfaction of the Eurosystem eligibility criteria. The Common Safekeeper for NGNs will either be Euroclear or Clearstream, Luxembourg or another entity approved by Euroclear and Clearstream, Luxembourg.
Whilst any Note is represented by a Temporary Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made (against presentation of the Temporary Global Note if the Temporary Global Note is not intended to be issued in NGN form) only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in such Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Principal Paying Agent.
On and after the date (the "Exchange Date") which, in respect of each Tranche in respect of which a Temporary Global Note is issued, is 40 days after the Temporary Global Note is issued, interests in such Temporary Global Note will be exchangeable (free of charge) upon a request as described therein either for (i) interests in a Permanent Global Note of the same Series or (ii) for definitive Notes of the same Series with, where applicable, Coupons and talons attached (as indicated in the applicable Final Terms and subject, in the case of definitive Notes, to such notice period as is specified in the applicable Final Terms) in each case against certification of beneficial ownership as described above unless such certification has already been given. The holder of a Temporary Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless upon due certification exchange of the Temporary Global Note for an interest in a Permanent Global Note or for definitive Notes is improperly withheld or refused.
Payments of principal, interest (if any) or any other amounts on a Permanent Global Note will be made through Euroclear and/or Clearstream, Luxembourg (against presentation or surrender (as the case may be) of the Permanent Global Note if the Permanent Global Note is not intended to be in NGN form) without any requirement for certification. The applicable Final Terms will specify that a Permanent Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Notes with, where applicable, Coupons and talons attached only upon the occurrence of an Exchange Event. For these purposes, "Exchange Event"
means that (i) an Event of Default (as defined in Condition 11) has occurred and is continuing, (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no alternative clearing system satisfactory to the Trustee is available or (iii) the relevant Issuer has or will become obliged to pay additional amounts as provided for or referred to in Condition 9 which would not be required were the Notes represented by the Permanent Global Note in definitive form. The relevant Issuer will promptly give notice to the Noteholders in accordance with Condition 15 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Note) or the Trustee may give notice to the Principal Paying Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iii) above, the relevant Issuer may also give notice to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later than 60 days after the date of receipt of the first relevant notice by the Principal Paying Agent.
If the Global Note may be exchanged for definitive Notes in circumstances other than upon the occurrence of an Exchange Event, only one Specified Denomination can be specified (or all Specified Denominations must be an integral multiple of the lowest Specified Denomination). The clearing systems will not accept the Notes for clearing if the "€100,000 plus integral multiples of €1,000" construct is used unless exchange of the Global Note for definitive Notes is limited to the occurrence of an Exchange Event.
In the case of each Tranche of Notes, the relevant Final Terms will specify whether U.S. Treas. Reg. § 1.163-5(c)(2)(i)(C) ("TEFRA C") or U.S. Treas. Reg. § 1.163-5(c)(2)(i)(D) ("TEFRA D") is applicable in relation to the Notes, or if the Notes have an original maturity of one year or less, that TEFRA is not applicable. The following legend will appear on all Notes which have an original maturity of more than one year and on all Coupons relating to such Notes, unless the relevant Final Terms specify that TEFRA C applies:
"ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE."
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 or Clearstream, Luxembourg, as the case may be.
Pursuant to the Agency Agreement (as defined under "Terms and Conditions of the Notes") the Principal Paying Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes at a point after the Issue Date of the further Tranche, the Notes of such further Tranche shall be assigned a common code and ISIN which are different from the common code and ISIN assigned to Notes of any other Tranche of the same Series until such time as the Tranches are consolidated and form a single Series, which shall not be prior to the expiry of the distribution compliance period applicable to the Notes of such Tranche.
For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear and/or Clearstream, Luxembourg each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the relevant Issuer and their agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Global Note shall be treated by the relevant Issuer and its agents as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly.
Noteholders who hold the Notes in the relevant clearing system in amounts that are not integral multiples of a Specified Denomination may need to purchase or sell on or before the relevant Exchange Date, a principal amount of Notes such that their holding is an integral multiple of a Specified Denomination.
Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any successor operator and/or successor clearing system and/or any additional or alternative clearing system specified in the applicable Final Terms.
Any reference herein to the Common Depositary shall, whenever the context so permits, be deemed to include references to any successor common depositary or any additional or alternative common depositary as is approved by the relevant Issuer, the Principal Paying Agent and the Trustee.
[Date]
[Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Offering Circular dated 21 November 2013 [and the supplement[s] to it dated [date] [and [date]] which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive (the "Offering Circular"). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Offering Circular. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circular. The Offering Circular has been published on the website of the Regulatory News Service operated by the London Stock Exchange at http://www.londonstockexchange.com/news/market-news/rns/rns.htm.]
[Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the "Conditions") set forth in the Offering Circular dated [original date] which are incorporated by reference in the Offering Circular dated [current date]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Offering Circular dated [current date] [and the supplement[s] to it dated [date] [and [date]] which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive (the "Offering Circular"), including the Conditions incorporated by reference in the Offering Circular. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circular. The Offering Circular has been published on the website of the Regulatory News Service operated by the London Stock Exchange at http://www.londonstockexchange.com /news/market-news/rns/rns.htm.]
| 1. | Issuer: | [United Utilities PLC/United Utilities Water PLC] | ||||||
|---|---|---|---|---|---|---|---|---|
| 2. | (a) | Series Number: | [ | ] | ||||
| (b) | Tranche Number: | [ | ] | |||||
| (c) | Date on which the Notes will be consolidated and form a single Series: |
with [ | The Notes will be consolidated and form a single Series ] on [the Issue Date/exchange of the Temporary Global Note for interests in the Permanent Global Note, as referred to in paragraph [24] below, which is expected to occur on or about [ ]][Not Applicable] |
|||||
| 3. | Specified Currency or Currencies: | [ | ] | |||||
| 4. | Aggregate Nominal Amount: | |||||||
| (a) | Series: | [ | ] |
| (b) | Tranche: | [ | ] | ||
|---|---|---|---|---|---|
| 5. | Issue Price: | ] per cent. of the Aggregate Nominal Amount [plus[ ] days'] accrued interest from (and including) [ ] to (but excluding) [ ] (if applicable)] |
|||
| 6. | (a) | Specified Denominations: | ] [EUR [100,000] and integral multiples of EUR [1,000] in excess thereof up to and including EUR [199,000]. No Notes in definitive form will be issued with a denomination above EUR [199,000].] |
||
| (b) | Calculation Amount: | [ | ] | ||
| 7. | (a) | Issue Date: | [ | ] | |
| (b) | Interest Commencement Date: |
[[ | ]/Issue Date/Not Applicable] | ||
| 8. | Maturity Date: | [Fixed rate - specify date/Floating rate - Interest Payment Date falling in or nearest to [ ]] |
|||
| 9. | Interest Basis: | [[ ] per cent. Fixed Rate] [ ] [+/-] [ ] per cent. Floating Rate] [Zero Coupon] [RPI Linked Interest] (see paragraph [15/16/17/18]) below) |
|||
| 10. | Redemption/Payment Basis: | [Subject | to any purchase and cancellation or early redemption, the Notes will be redeemed on the Maturity Date at [[98][99][100][101][102] per cent. of their nominal amount]][Par][RPI Linked Redemption] |
||
| 11. | Change of Interest Basis: | [For | the period from (and including) the Interest Commencement Date, up to (but excluding) [ ] paragraph [15/16] applies and for the period from (and including) [ ], up to (but excluding) the Maturity Date paragraph [15/16] applies] [Not Applicable] |
||
| 12. | Put/Call Options: | [Not Applicable] [Investor Put] [Issuer Call] [(see paragraph [19/20/21] below) |
|||
| 13. | (a) | Status of the Notes: | Senior, unsecured | ||
| (b) | Date [Board] approval for issuance obtained: |
[ | ] | ||
| 14. | Method of Distribution | [Syndicated/Non-syndicated] | |||
| PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE |
| 15. Fixed Rate Note Provisions |
[Applicable/Not Applicable] |
|---|---|
| ----------------------------------- | ----------------------------- |
| (a) | Rate[(s)] of Interest: | [ ] per cent. per annum payable [annually/semi annually/quarterly] in arrear on each Interest Payment Date |
|
|---|---|---|---|
| (b) | Interest Payment Date(s): | [ ] in each year up to and including the Maturity Date |
|
| (c) | Fixed Coupon Amount(s): | [ ] per Calculation Amount |
|
| (d) | Broken Amount(s): | [[ ] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [ ]/Not Applicable] |
|
| (e) | Day Count Fraction: | [Actual/Actual (ICMA)] [30/360] | |
| (f) | Determination Date(s): | [[ ] in each year][Not Applicable] |
|
| 16. | Floating Rate Note Provisions | [Applicable/Not Applicable] | |
| (a) | Specified Period(s)/Specified Interest Payment Dates: |
[ ] |
|
| (b) | First Interest Payment Date: | [ ] |
|
| (c) | Business Day Convention: | [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/ Preceding Business Day Convention] |
|
| (d) | Additional Business Centre(s): |
[ ] |
|
| (e) | Manner in which the Rate of Interest and Interest Amount are to be determined: |
[Screen Rate Determination/ISDA Determination] | |
| (f) | Party responsible for calculating the Rate of Interest and Interest Amount (if not the Principal Paying Agent): |
[ ] |
|
| (g) | Screen Rate Determination: | ||
| Reference Rate, Relevant Time and Relevant Financial |
Reference Rate: [ ] month [LIBOR/AUD-BBR BBSW/CAD-BA CDOR/HIBOR/TIBOR/PRIBOR/EURIBOR] |
||
| Centre: | Relevant Time: [ ] in the Relevant Financial Centre |
||
| Relevant Financial Centre: [London/Brussels/Sydney/Toronto/Hong Kong/Tokyo/Prague] |
|||
| Interest Determination Date(s): |
[Second London business day prior to the start of each Interest Period] [First day of each Interest Period] [Second day on which the TARGET2 System is open prior |
| to the start of each Interest Period] [Second Tokyo business day prior to the start of each Interest Period] [Second Prague business day prior to the start of each Interest Period] [[ ] days prior to the start of each Interest Period] |
||||||
|---|---|---|---|---|---|---|
| | Relevant Screen Page: |
[ | ] | |||
| (h) | ISDA Determination: | |||||
| | Floating Rate Option: |
[ | ] | |||
| | Designated Maturity: | [ | ] | |||
| | Reset Date: | [ | ] | |||
| (i) | Linear Interpolation: | [Not Applicable/Applicable – the Rate of Interest for [the/each] [long/short][first/last] Interest Period shall be calculated using Linear Interpolation (specify for each short or long interest period)] |
||||
| (j) | Margin(s): | [+/-] [ | ] per cent. per annum | |||
| (k) | Minimum Rate of Interest: | [ | ] per cent. per annum | |||
| (l) | Maximum Rate of Interest: | [ | ] per cent. per annum | |||
| (m) | Day Count Fraction: | [Actual/Actual (ISDA)][Actual/Actual] [Actual/365 (Fixed)] [Actual/365 (Sterling)] [Actual/360] [30/360][360/360][Bond Basis] [30E/360][Eurobond basis] [30E/360 (ISDA)] |
||||
| 17. | Zero Coupon Note Provisions | [Applicable/Not Applicable] | ||||
| (a) | Accrual Yield: | [ | ] per cent. per annum | |||
| (b) | Reference Price: | [ | ] | |||
| (c) | Day Amounts: |
Count Fraction in relation to Early Redemption |
[30/360] | [Actual/360] [Actual/365] |
||
| 18. | RPI Linked Note Provisions | [Applicable – Conditions 5 and 6 apply/Not Applicable] |
||||
| (a) | Rate of Interest: | [ | ] per cent. per annum multiplied by the Index Ratio (in accordance with Condition 5.3) |
|||
| (b) | Name and address of Calculation Agent: |
[ | ] |
| (c) | Specified Period(s)/Specified Interest Payment Dates: |
[ ] |
|||||
|---|---|---|---|---|---|---|---|
| (d) | Business Day Convention: | [Not Applicable/Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/ Preceding Business Day Convention] |
|||||
| (e) | Additional Business Centre(s): |
[ ] [Not Applicable] |
|||||
| (f) | Day Count Fraction: | [Actual/Actual (ICMA)] [30/360 (as set out in Condition 5.2(d))] [Actual/Actual (ISDA)] [Actual/Actual] [Actual/365 (Fixed)] [Actual/360] [30/360 (as set out in Condition 5.2(d))] [360/360][Bond Basis] [30E/360][Eurobond basis] [30E/360 (ISDA)] [RPI Day Count Fraction] |
|||||
| (g) | Base Index Figure: | [ ] |
|||||
| (h) | Index Figure applicable to: | [[3/8] month lag applies] | |||||
| (i) | Reference Gilt: | [[ ]per cent. Index-Linked Treasury Stock due [ ]] |
|||||
| (j) | Minimum Rate of Interest: | [ ] per cent. per annum |
|||||
| (k) | Maximum Rate of Interest: | [ ] per cent. per annum |
| 19. | Notice periods for Condition 8.2 | Minimum period: [ ] days Maximum period: [ ] days |
||||
|---|---|---|---|---|---|---|
| 20. | Issuer Call: | [Applicable/Not Applicable] | ||||
| (a) | Date(s): | Optional Redemption Optional Redemption |
] | |||
| (b) | Amount: | ] per Calculation Amount | ||||
| (i) | Minimum Optional Redemption Amount: |
[[ | ] per Calculation Amount/Not Applicable] | |||
| (ii) | Maximum Optional Redemption Amount: |
[[ | ] per Calculation Amount/Not Applicable] |
| (c) | If redeemable in part: | ||||
|---|---|---|---|---|---|
| (i) | Minimum Redemption Amount: |
[ | ] | ||
| (ii) | Maximum Redemption Amount: |
[ | ] | ||
| (d) | Notice periods: | Minimum period: [ ] days Maximum period: [ ] days |
|||
| 21. | Investor Put: | [Applicable/Not Applicable] | |||
| (a) | Date(s): | Optional Redemption | [ | ] | |
| (b) | Amount: | Optional Redemption | [ | ] per Calculation Amount | |
| (i) | Minimum Optional Redemption Amount: |
[[ | ] per Calculation Amount/Not Applicable] | ||
| (ii) | Maximum Optional Redemption Amount: |
[[ | ] per Calculation Amount/Not Applicable] | ||
| (c) | Notice periods: | Minimum period: [ ] days Maximum period: [ ] days |
|||
| 22. | Final Redemption Amount: | [ | ] per Calculation Amount | ||
| (i) | Minimum Final Redemption Amount: |
[[ | ] per Calculation Amount/Not Applicable] | ||
| (ii) | Maximum Final Redemption Amount: |
[[ | ] per Calculation Amount/Not Applicable] | ||
| 23. | Early Redemption Amount payable on redemption for taxation reasons, indexation reasons or on event of |
[ | ] per Calculation Amount |
default:
| 24. | Form of Notes: | [Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes only upon an Exchange Event.] [Temporary Global Note exchangeable for Definitive Notes on and after the Exchange Date.] |
|||
|---|---|---|---|---|---|
| [Permanent Global Note exchangeable for Definitive Notes only upon an Exchange Event] |
|||||
| 25. | New Global Notes: | [Yes/No] | |||
| 26. | Additional Financial Centre(s): | [Not Applicable/[ ]] |
|||
| 27. | Talons for future Coupons to be attached to Definitive Notes: |
[Yes/No] | |||
| 28. | Redenomination applicable: | Redenomination [not] applicable | |||
| DISTRIBUTION | |||||
| 29. | (a) | If syndicated, names of Managers: |
[Not Applicable/[ ]] |
||
| (b) | Date of [Subscription] Agreement: |
[Not Applicable/[ ]] |
|||
| 30. | If non-syndicated, name of relevant Manager: |
[ ] |
|||
| 31. | Whether TEFRA D or TEFRA C rules applicable or TEFRA rules not applicable: |
[TEFRA D/TEFRA C/TEFRA not applicable] |
These Final Terms comprise the final terms required to list and have admitted to trading the issue of Notes described herein pursuant to the EUR 7,000,000,000 Euro Medium Term Note Programme established by United Utilities PLC and United Utilities Water PLC.
[ ] has been extracted from [ ]. The Issuer confirms that such information has been accurately reproduced and that, so far as it is aware and is able to ascertain from information published by [ ], no facts have been omitted which would render the reproduced information inaccurate or misleading.]
Signed on behalf of the Issuer:
By: ..........................................................
[Duly authorised]
Ratings: [Not Applicable]/[[The Notes to be issued [[have been]/[are expected to be]] rated]/[The following ratings reflect ratings assigned to Notes of this type issued under the Programme generally]:
[Save for any fees payable to [the] [[ ][("Managers")]/Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer. The [Managers/Dealers] and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform other services for, the Issuers and their affiliates in the ordinary course of business]
| Indication of yield: | [ | ] | ||
|---|---|---|---|---|
| 5. | YIELD | |||
| (c) | [Estimated total expenses: | [ | ]]] | |
| (b) | [Estimated net proceeds: | [ | ]] | |
| (a) | [Reasons for the offer | [ | ] |
The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.
Details of historic [LIBOR/EURIBOR/TIBOR/PRIBOR/HIBOR/AUD-BBR-BBSW/CAD-BA-CDOR] rates can be obtained from [Reuters].
| (a) | ISIN Code: | [ ] |
|---|---|---|
| (b) | Common Code: | [ ] |
| (c) | Any clearing system(s) other than Euroclear and Clearstream, Luxembourg and the relevant identification number(s): |
[Not Applicable/[ ]] |
| (d) | Delivery: | Delivery [against/free of] payment |
| (e) | Names and addresses of additional Paying Agent(s) (if any): |
[ ] |
The following are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the relevant Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Final Terms in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to "Form of the Notes" for a description of the content of Final Terms which will include the definitions of certain terms used in the following Terms and Conditions and/or will specify which of such terms are to apply in relation to the relevant Notes.
This Note is one of a Series (as defined below) of Notes issued by United Utilities PLC ("UU") or United Utilities Water PLC ("UUW") (each an "Issuer" and, together, the "Issuers") constituted by an Amended and Restated Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the "Trust Deed") dated 21 November 2013 made between the Issuers and The Law Debenture Trust Corporation p.l.c. (the "Trustee", which expression shall include any successor as trustee).
References herein to the "Notes" shall be references to the Notes of this Series and shall mean:
References herein to the "relevant Issuer" shall be to the Issuer of the Notes named as such in the applicable Final Terms (as defined below).
The Notes and the Coupons (as defined below) have the benefit of an Amended and Restated Agency Agreement (such Agency Agreement, as amended and/or supplemented and/or restated from time to time, the "Agency Agreement") dated 21 November 2013 and made between the Issuers, Citibank, N.A., London Branch as issuing and principal paying agent and agent bank (the "Principal Paying Agent", which expression shall include any successor principal paying agent), the other paying agents named therein (together with the Principal Paying Agent, the "Paying Agents", which expression shall include any additional or successor paying agents) and the Trustee.
The Final Terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached to or endorsed on this Note which supplements these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Terms and Conditions, replace or modify these Terms and Conditions for the purposes of this Note. References to the "applicable Final Terms" are, unless otherwise stated, to Part A of the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note.
The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive) to the extent implemented in the relevant Member State of the European Economic Area and includes any relevant implementing measure in the relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.
Interest bearing definitive Notes have interest coupons ("Coupons") and, in the case of Notes which, when issued in definitive form, have more than 27 interest payments remaining, talons for further Coupons ("Talons") attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Global Notes do not have Coupons or Talons attached on issue.
The Trustee acts for the benefit of the holders for the time being of the Notes (the "Noteholders", which expression shall, in relation to any Notes represented by a Global Note, be construed as provided below) and the holders of the Coupons (the "Couponholders", which expression shall, unless the context otherwise requires, include the holders of the Talons), in accordance with the provisions of the Trust Deed.
As used herein, "Tranche" means Notes which are identical in all respects (including as to listing and admission to trading) and "Series" means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing and admission to trading) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices.
Copies of the Trust Deed, the Agency Agreement and the applicable Final Terms are available for inspection during normal business hours at the registered office for the time being of the Trustee (being at 21 November 2013 at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the specified office of each of the Paying Agents. If the Notes are to be admitted to trading on the regulated market of the London Stock Exchange the applicable Final Terms will be published on the website of the London Stock Exchange through a regulatory information service. If this Note is not to be admitted to trading on the regulated market of the London Stock Exchange, the applicable Final Terms will only be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence satisfactory to the Issuer and the Trustee or, as the case may be, the relevant Paying Agent as to its holding of such Notes and identity. The Noteholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Trust Deed, the Agency Agreement and the applicable Final Terms which are applicable to them. The statements in these Terms and Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed and the Agency Agreement.
Words and expressions defined in the Trust Deed or the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the Agency Agreement, the Trust Deed will prevail and, in the event of inconsistency between the Agency Agreement or the Trust Deed and the applicable Final Terms, the applicable Final Terms will prevail.
The Notes are in bearer form and, in the case of definitive Notes, serially numbered, in the currency (the "Specified Currency") and the denominations (the "Specified Denomination(s)") specified in the applicable Final Terms. Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination.
This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note or an RPI Linked Note, or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Final Terms.
Definitive Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in these Terms and Conditions are not applicable.
Subject as set out below, title to the Notes and Coupons will pass by delivery. The relevant Issuer, any Paying Agent and the Trustee will (except as otherwise required by law) deem and treat the bearer of any Note or Coupon as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph.
For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank S.A./N.V. ("Euroclear") and/or Clearstream Banking, société anonyme ("Clearstream, Luxembourg"), each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the relevant Issuer, the Paying Agents and the Trustee as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Global Note shall be treated by the relevant Issuer, any Paying Agent and the Trustee as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly.
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 Clearstream, Luxembourg, as the case may be. References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any successor operator and/or successor clearing system and/or any additional or alternative clearing system specified in Part B of the applicable Final Terms.
The Notes and any relative Coupons are direct, unconditional, unsubordinated and (subject to the provisions of Condition 3) unsecured obligations of the relevant Issuer and rank pari passu among themselves and (subject as aforesaid and save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding.
So long as any of the Notes remains outstanding (as defined in the Trust Deed) the relevant Issuer will not create or permit to subsist any mortgage, charge, pledge, lien or other form of security interest upon the whole or any part of its undertaking, revenues or assets, present or future, to secure payment of any present or future Relevant Indebtedness (as defined below) of the relevant Issuer or any Subsidiary thereof (as defined in the Trust Deed) or to secure any guarantee or indemnity in respect thereof, without at the same time according to the Notes to the satisfaction of the Trustee, the same security as is created or subsisting to secure any such Relevant Indebtedness, guarantee or indemnity, or such other security as the Trustee shall in its absolute discretion deem not materially less beneficial to the interests of the Noteholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders.
"Relevant Indebtedness" means any present or future indebtedness (whether being principal, premium or interest) for borrowed money (other than indebtedness for borrowed money with an initial maturity falling 20 years or more after the Issue Date of the First Tranche of the Notes and having a maximum principal amount outstanding at any time not exceeding the greater of £250,000,000 and 20 per cent. of Adjusted Capital and Reserves (as defined in Condition 11) or indebtedness for borrowed money which has a stated maturity not exceeding one year) which is in the form of, or represented or evidenced by, bonds, notes, debentures, debenture stock, loan stock or
other securities, whether issued for cash or in whole or in part for a consideration other than cash and which, with the agreement of the relevant Issuer, are quoted, listed, dealt in or traded on a stock exchange or over the counter or other recognised securities market (whether or not distributed by way of private placement).
Where redenomination is specified in the applicable Final Terms as being applicable, the relevant Issuer may, without the consent of the Trustee, the Noteholders and the Couponholders, on giving prior notice to the Trustee, the Principal Paying Agent, Euroclear and Clearstream, Luxembourg and at least 30 days' prior notice to the Noteholders in accordance with Condition 15, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be redenominated in euro.
The election will have effect as follows:
(d) if definitive Notes have been issued prior to the Redenomination Date, all unmatured Coupons denominated in the Specified Currency (whether or not attached to the Notes) will become void with effect from the date on which the relevant Issuer gives notice (the "Exchange Notice") that replacement euro-denominated Notes and Coupons are available for exchange (provided that such Notes and/or Coupons are so available) and no payments will be made in respect of them. The payment obligations contained in any Notes so issued will also become void on that date although those Notes will continue to constitute valid exchange obligations of the relevant Issuer. New euro-denominated Notes and Coupons will be issued in exchange for Notes and Coupons denominated in the Specified Currency in such manner as the Trustee and the Principal Paying Agent may specify and as shall be notified to the Noteholders in the Exchange Notice. No Exchange Notice may be given less than 15 days prior to any date for payment of principal or interest on the Notes;
(e) after the Redenomination Date, all payments in respect of the Notes and the Coupons, other than payments of interest in respect of periods commencing before the Redenomination Date, will be made solely in euro as though references in the Notes to the Specified Currency were to euro. Payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque;
and, in each case, multiplying such sum by the applicable Day Count Fraction (as defined in Condition 5.1), and rounding the resultant figure to the nearest sub-unit (as defined in Condition 5.1) of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with the applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form comprises more than one Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding;
(g) if the Notes are Floating Rate Notes the applicable Final Terms specifies any relevant changes to the provisions relating to interest.
In these Terms and Conditions, the following expressions have the following meanings:
"Established Rate" means the rate for the conversion of the Specified Currency (including compliance with rules relating to roundings in accordance with applicable European Community regulations) into euro established by the Council of the European Union pursuant to Article 123 of the Treaty;
"euro" means the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty;
"Redenomination Date" means (in the case of interest bearing Notes) any date for payment of interest under the Notes or (in the case of Zero Coupon Notes) any date, in each case specified by the relevant Issuer in the notice given to the Noteholders pursuant to paragraph 4.1 above and which falls on or after the date on which the country of the Specified Currency first participates in the third stage of European economic and monetary union or otherwise participates in European economic and monetary union in a manner with similar effect to such third stage; and
"Treaty" means the Treaty establishing the European Community, as amended.
Each Fixed Rate Note bears interest on its outstanding nominal amount from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest payable in arrear on the Interest Payment Date(s) in each year and on the Maturity Date if that does not fall on an Interest Payment Date.
If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified.
As used in the Conditions, "Fixed Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.
Except in the case of Notes in definitive form where a Fixed Coupon Amount or Broken Amount, is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the Rate of Interest to:
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form comprises more than one Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding.
"Day Count Fraction" means, in respect of the calculation of an amount of interest in accordance with this Condition 5.1
(i) in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the "Accrual Period") is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or
(ii) in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:
"Determination Period" means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest. Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and
"sub-unit" means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, means one cent.
Each Floating Rate Note bears interest on its outstanding nominal amount from (and including) the Interest Commencement Date and such interest will be payable in arrear on either:
Such interest will be payable in respect of each Interest Period. In these Terms and Conditions, Interest Period means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date).
If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:
In this Condition, "Business Day" means a day which is both:
The Rate of Interest payable from time to time in respect of Floating Rate Notes will be determined in the manner specified in the applicable Final Terms.
Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes of this sub-paragraph (i), "ISDA Rate" for an Interest Period means a rate equal to the Floating Rate that would be determined by the Principal Paying Agent under an interest rate swap transaction if the Principal Paying Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, each as amended and updated as at the Issue Date of the first Tranche of the Notes and as published by the International Swaps and Derivatives Association, Inc. (the "ISDA Definitions") and under which:
For the purposes of this sub-paragraph (i), (i) "Floating Rate", "Calculation Agent", "Floating Rate Option", "Designated Maturity" and "Reset Date" have the meanings given to those terms in the ISDA Definitions; and (ii) "Euro-zone" means the region comprised of Member States of the European Union that adopt or have adopted the single currency in accordance with the Treaty.
Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:
(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page (or such replacement page on that service which displays the information) as at the Relevant Time in the Relevant Financial Centre on the Interest Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Principal Paying Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Principal Paying Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.
For the purposes of these Conditions:
"Interest Determination Date" shall mean the date specified as such in the Final Terms or if none is so specified:
(iii) if the Reference Rate is the Euro-zone interbank offered rate ("EURIBOR"), the second day on which the TARGET2 System is open prior to the start of each Interest Period;
(iv) if the Reference Rate is the Tokyo interbank offered rate ("TIBOR"), the second Tokyo business day prior to the start of each Interest Period;
"Reference Rate" shall mean (i) LIBOR; (ii) EURIBOR; (iii) TIBOR; (vi) HIBOR; (v) PRIBOR; (vi) CAD-BA-CDOR; or (vii) AUD-BBR-BBSW, in each case for the relevant period, as specified in the applicable Final Terms.
"Relevant Financial Centre" shall mean (i) London, in the case of determination of LIBOR; (ii) Brussels, in the case of a determination of EURIBOR; (iii) Tokyo, in the case of a determination of TIBOR; (iv) Hong Kong, in the case of a determination of HIBOR; (v) Prague, in the case of a determination of PRIBOR; (vi) Toronto, in the case of a determination of CAD-BA-CDOR; or (vii) Sydney, in the case of determination of AUD-BBR-BBSW.
"Relevant Time" shall mean the time specified in the Final Terms or if none is specified: (i) in the case of LIBOR, 11.00 a.m.; (ii) in the case of EURIBOR, 11.00 a.m.; (iii) in the case of TIBOR, 11.00 a.m.; (vi) in the case of HIBOR, 11.00 a.m.; (v) in the case of PRIBOR, 11.00 a.m.; (vi) in the case of CAD-BA-CDOR, 10.00 a.m.; or (vii) in the case of AUD-BBR-BBSW, 10.10 a.m., in each case in the Relevant Financial Centre.
The Agency Agreement contains provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (A) above, no such offered quotation appears or, in the case of (B) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph.
If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.
If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.
The Principal Paying Agent will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period.
The Principal Paying Agent will calculate the amount of interest (the "Interest Amount") payable on the Floating Rate Notes in respect of each Specified Denomination for the relevant Interest Period. Each Interest Amount shall be calculated by applying the Rate of Interest to:
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note in definitive form comprises more than one Calculation Amount, the Interest Amount payable in respect of such Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding.
Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 5.2:
Day Count Fraction =
$$
\frac{[360 \times (Y_2 - Y_1)] + [30 \times (M_2 - M_1)] + (D_2 - D_1)}{360}
$$
where:
"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls:
"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;
(f) if "30E/360" or "Eurobond Basis" is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction =
$$
\frac{[360 \times (Y_2 - Y_1)] + [30 \times (M_2 - M_1)] + (D_2 - D_1)}{360}
$$
where:
"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls:
"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D2 will be 30;
(g) if "30E/360 (ISDA)" is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction =
$$
\frac{[360 \times (Y_2 - Y_1)] + [30 \times (M_2 - M_1)] + (D_2 - D_1)}{360}
$$
where:
"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls:
"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31 and in which case D2 will be 30.
"sub-unit" means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, means one cent.
Where Linear Interpolation is specified as applicable in respect of an Interest Period in the applicable Final Terms, the Rate of Interest for such Interest Period shall be calculated by the Principal Paying Agent by straight line linear interpolation by reference to two rates based on the relevant Reference Rate (where Screen Rate Determination is specified as applicable in the Final Terms) or the relevant Floating Rate Option (where ISDA Determination is specified as applicable in the Final Terms), one of which shall be determined as if the Designated Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Period and the other of which shall be determined as if the Designated Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Period provided however that if there is no rate available for a period of time next shorter, or, as the case may be, next longer, then the Principal Paying Agent shall determine such rate at such time and by reference to such sources as it determines appropriate.
"Designated Maturity" means, in relation to Screen Rate Determination, the period of time designated in the Reference Rate.
The Principal Paying Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the relevant Issuer and any stock exchange or other relevant authority on which the relevant Floating Rate Notes are for the time being listed or by which they have been admitted to listing and notice thereof to be published in accordance with Condition 15 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will promptly be notified to each stock exchange or other relevant authority on which the relevant Floating Rate Notes are for the time being listed or by which they have been admitted to listing and to the Noteholders in accordance with Condition 15. For the purposes of this paragraph, the expression "London Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London.
If for any reason at any relevant time the Principal Paying Agent defaults in its obligation to determine the Rate of Interest or in its obligation to calculate any Interest Amount in accordance with sub-paragraph (b)(i) or (ii) above as the case may be, and in each case (d) above, the Trustee shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition, but subject always to any Minimum Rate of Interest or Maximum Rate of Interest specified in the applicable Final Terms), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Trustee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Principal Paying Agent.
All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 5.2, whether by the Principal Paying Agent or the Trustee, shall (in the absence of wilful default, bad faith or manifest error) be binding on the relevant Issuer, the Trustee, the Principal Paying Agent, the other Paying Agents and all Noteholders and Couponholders and (in the absence as aforesaid) no liability to the relevant Issuer, the Noteholders or the Couponholders shall attach to the Principal Paying Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.
This Condition 5.3 applies to RPI Linked Notes only.
Each RPI Linked Note bears interest on its outstanding nominal amount (in the case of RPI Linked Notes represented by a Global Note) or the Calculation Amount (in the case of RPI Linked Notes in definitive form) from (and including) the Interest Commencement Date at the rate per annum equal to the Rate of Interest, and such interest will be payable in arrear on either:
Such interest will be payable in respect of each Interest Period.
If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:
(A) in any case where Specified Periods are specified in accordance with Condition 5.3(a)(ii) above, the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (B) below shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (1) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (2) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding Interest Payment Date occurred; or
In this Condition, "Business Day" means a day which is both:
The Rate of Interest payable from time to time in respect of RPI Linked Notes will be the product of the rate per annum specified in the applicable Final Terms and the Index Ratio (as determined in accordance with Condition 6.1) rounded to six decimal places upwards (0.0000005 being rounded upwards).
If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.
If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.
The Calculation Agent will, at or as soon as practicable after each time at which the Rate of Interest is capable of being determined, determine the applicable Rate of Interest and notify the Principal Paying Agent as soon as practicable after determining the same.
The amount of interest payable on each RPI Linked Note for any Interest Period (the "Interest Amount") will be calculated by the Calculation Agent by applying the Rate of Interest to:
and, in each case, multiplying such product by the Day Count Fraction specified in the applicable Final Terms and:
and rounding the resulting figure to the nearest sub-unit of the relevant Specified Currency (half of any such sub-unit being rounded upwards or otherwise in accordance with the applicable market convention).
Where the Specified Denomination of an RPI Linked Note in definitive form is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding.
The Principal Paying Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the relevant Issuer, the Trustee, the other Paying Agents and any stock exchange, or other relevant authority, on which the relevant RPI Linked Notes are for the time being listed, or by which they have been admitted to listing, and notice thereof to be published in accordance with Condition 15 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange, or other relevant listing authority, on which the relevant RPI Linked Notes are for the time being listed, or by which they have been admitted to listing, and to the Noteholders in accordance with Condition 15. For the purpose of this paragraph, the expression "London Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London.
If for any reason the Calculation Agent at any time after the Issue Date defaults in its obligation to determine or calculate:
the Trustee shall determine or calculate the same in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition 5.3 and to the provisions of Condition 6) and in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Calculation Agent (and, where practicable, in accordance with this Condition).
All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 5.3, whether by the Calculation Agent, the Principal Paying Agent or the Trustee, shall (in the absence of wilful default, bad faith or manifest error) be binding on the relevant Issuer, the Calculation Agent, the Principal Paying Agent, the Trustee, the other Paying Agents and all Noteholders and Couponholders and (in the absence of the aforesaid) no liability to the relevant Issuer, the Noteholders or the Couponholders shall attach to the Calculation Agent, the Principal Paying Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.
Each RPI Linked Note (or, in the case of the redemption of part only of an RPI Linked Note, that part only of such RPI Linked Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue as provided in the Trust Deed.
This Condition 6 is applicable only if the applicable Final Terms specifies the Notes as RPI Linked Notes.
In these Conditions:
"Base Index Figure" means (subject to Condition 6.3) the base index figure as specified in the relevant Final Terms;
"Calculation Date" means any date when an Interest Amount or principal amount, as the case may be, falls due;
"Expert" means a gilt-edged market maker, an independent investment bank or other expert in London appointed by the Issuer;
"Index" or "Index Figure" means, subject as provided in Conditions 6.3, 6.5 and 8.3, the UK Retail Price Index ("RPI") (for all items) published by the Office for National Statistics (January 1987 = 100) as published by HM Government.
Any reference to the "Index Figure applicable" to a particular Calculation Date shall, subject as provided in Conditions 6.3, 6.5 and 8.3, and if "3 months lag" is specified in the applicable Final Terms, be calculated in accordance with the following formula:
$$
RPI_{m-3} + \frac{(Day\ of\ Calculation\ Date-1)}{(Day\sin\ month\ of\ Calculation\ Date)} \times (RPI_{m-2} - RPI_{m-3})
$$
and rounded to five decimal places (0.000005 being rounded upwards) and where:
"RPIm-3" means the Index Figure for the first day of the month that is three months prior to the month in which the payment falls due; and
"RPIm-2" means the Index Figure for the first day of the month that is two months prior to the month in which the payment falls due;
Any reference to the "Index Figure applicable" to a particular Calculation Date shall, subject as provided in Conditions 6.3, 6.5 and 8.3, and if "8 months lag" is specified in the applicable Final Terms, means the Index Figure for the first day of the month that is eight months prior to the month in which the payment falls due;
"Index Ratio" applicable to any Calculation Date means the Index Figure applicable to such month or date divided by the Base Index Figure and rounded to five decimal places (0.000005 being rounded upwards); and
"Reference Gilt" means the Treasury Stock specified in the applicable Final Terms (or, if such stock is not in existence, such other index-linked stock issued by or on behalf of HM Government as the Issuer, on the advice of the Expert, may consider to be the most appropriate references government stock for the RPI Linked Notes.
The Final Redemption Amount, the Early Redemption Amount and the Optional Redemption Amount in respect of the RPI Linked Notes shall be the nominal amount of the RPI Linked Notes multiplied by the Index Ratio applicable to the date on which the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount (as the case may be) becomes payable, provided that:
Redemption Amount, Early Redemption Amount and/or Optional Redemption Amount (as applicable) shall be, respectively, the Maximum Final Redemption Amount, Maximum Early Redemption Amount or Maximum Optional Redemption Amount (as applicable) so specified in the applicable Final Terms; and
(c) the Calculation Agent will calculate the Final Redemption Amount, Early Redemption Amount and Optional Redemption Amount (as the case may be) as soon as reasonably practicable after each time such amount is capable of being determined and will notify the Principal Paying Agent thereof as soon as practicable after calculating the same. The Principal Paying Agent will as soon as practicable thereafter notify the Issuer and any stock exchange on which the Notes are for the time being listed thereof and cause notice thereof to be published in accordance with Condition 15.
Where the provisions of Condition 6.3(b) apply, the Issuer shall deliver to the Principal Paying Agent and Calculation Agent a certificate, acting on the sole advice of the Expert, as to the Index Figure applicable to the date for payment which shall be conclusive and binding. If a substitute index is published as specified in Condition 6.3(b)(i) above, a determination made based on that Index shall be final and no further payment by way of adjustment shall be made, notwithstanding that the Index Figure applicable to the date for payment may subsequently be published.
If no substitute index is so published and the index relating to the date for payment is subsequently published then:
If the Index ceases to be published or any changes are made to it which, in the opinion of the Expert, constitute a fundamental change in the rules governing the Index and the change would, in the opinion of the Expert, be detrimental to the interests of the Issuer or the Noteholders and if, within 30 days after its appointment (or such longer period as the Trustee may in its sole discretion agree), the Expert recommends for the purposes of the RPI Linked Notes one or more adjustments to the Index or substitute index (with or without adjustments), then provided that such adjustments or substitute index (as the case may be) are not materially detrimental (in the opinion of the Expert) either to the interests of the Issuer or the interests of the Noteholders, as compared to the interests of the Issuer and the Noteholders (as the case may be) as they would have been had the Index continued to be published or such fundamental change in the rules governing the Index had not been made, the Index shall be adjusted as so recommended or (as the case may be) shall be replaced by the substitute index so recommended (as so adjusted, if so recommended) and references in these Conditions to the Index shall be construed accordingly and the Issuer shall notify the Noteholders of the adjustments to the Index or the introduction of the substitute index (with or without adjustments) in accordance with Condition 15.
If any payment in respect of the RPI Linked Notes is due to be made after the cessation or changes referred to in the preceding paragraph but before any such adjustment to, or replacement of, the Index takes effect, the Issuer shall (if the Index Figure applicable (or deemed applicable) to the date of payment is not available in accordance with the provisions of Condition 6.1) make a provisional payment on the basis that the Index Figure applicable to the date for payment is the Index last published. In that event or in the event of any payment on the RPI Linked Notes having been made on the basis of an index deemed applicable under Condition 6.3(b)(i) above (also referred to below as a "provisional payment") the Expert subsequently determines that the relevant circumstances fall within this Condition 6.5, then:
(a) except in the case of a payment on redemption of the RPI Linked Notes, if the sum which would have been payable if such adjustments or such substitute index had been in effect on the due date for such provisional payment is greater or less than the amount of such provisional payment, the interest payable on the RPI Linked Notes on the Interest Payment Date next succeeding the date on which the Issuer and the Trustee receive such recommendation shall be increased or reduced to reflect the amount by which such provisional payment of interest fell short or, (as the case may be) exceeded, the interest
which would have been payable on the Notes if such adjustments or such substituted index had been in effect on that date; or
(b) in the case of a payment of principal or interest on redemption of the Notes, no subsequent adjustment to amounts paid will be made.
The Trustee shall be entitled to assume that no cessation of or change to the Index has occurred until informed otherwise by the Issuer and it will not be responsible for identifying or appointing an Expert. The Trustee may rely absolutely on any determination made or advice given by the Expert without need for further investigation.
Subject as provided below:
Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 9.
Payments of principal in respect of definitive Notes will (subject as provided below) be made in the manner provided in paragraph 7.1 above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of definitive Notes, and payments of interest in respect of definitive Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia and its possessions)).
Fixed Rate Notes in definitive form (other than RPI Linked Notes) and save as provided in Condition 5.4) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 9) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 10) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter.
Upon any Fixed Rate Note in definitive form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.
Upon the date on which any Floating Rate Note or RPI Linked Note in definitive form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof.
If the due date for redemption of any definitive Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Note.
Payments of principal and interest (if any) in respect of Notes represented by any Global Note will (subject as provided below) be made in the manner specified above in relation to definitive Notes and otherwise in the manner specified in the relevant Global Note against presentation or surrender, as the case may be, of such Global Note at the specified office of any Paying Agent outside the United States. A record of each payment made against presentation or surrender of any Global Note, distinguishing between any payment of principal and any payment of interest, will be made on such Global Note by the Paying Agent to which it was presented or in the records of Euroclear and Clearstream, Luxembourg, as applicable.
The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the relevant Issuer will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear and Clearstream, Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear and Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the relevant Issuer to, or to the order of, the holder of such Global Note.
Notwithstanding the provisions of paragraph 7.1 above, if any amount of principal and/or interest in respect of Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if:
If the date for payment of any amount in respect of any Note or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, "Payment Day" means any day which (subject to Condition 10) is:
Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable:
Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 9.
Unless previously redeemed or purchased and in each case cancelled as specified below, each Note (including each RPI Linked Note) will be redeemed by the relevant Issuer at its Final Redemption Amount specified in the applicable Final Terms (subject, in the case of RPI Linked Notes, to adjustment in accordance with Condition 6.2) in the relevant Specified Currency on the Maturity Date in the applicable Final Terms.
Subject to Condition 8.6, the Notes may be redeemed at the option of the relevant Issuer in whole, but not in part, at any time (if the Note is neither a Floating Rate Note nor an RPI Linked Note) or on any Interest Payment Date (if the Note is either a Floating Rate Note or an RPI Linked Note), on giving not less than the minimum period and not more than the maximum period of notice specified in applicable Final Terms (in the event that such periods are not so specified, the minimum period will be not less than 30 days and the maximum period will be not more than 60 days) to the Trustee and the Principal Paying Agent and, in accordance with Condition 15, the Noteholders (which notice shall be irrevocable), if the relevant Issuer satisfies the Trustee immediately before the giving of the notice referred to above that on the occasion of the next payment due under the Notes, the relevant Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 9 as a result of any change in, or amendment to, the laws or regulations of the United Kingdom or any political subdivision of, or any authority in, or of, the United Kingdom having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the Issue Date of the first Tranche of the Notes provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the relevant Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due.
Prior to the publication of any notice of redemption pursuant to this Condition, the relevant Issuer shall deliver to the Trustee a certificate signed by two Directors of the relevant Issuer stating that the relevant Issuer is entitled to effect such redemption and setting forth a statement of the change or amendment (as referred to above) which has occurred (irrespective of whether such change or amendment is then effective) describing the facts leading thereto and accompanied by an opinion in a form satisfactory to the Trustee of independent legal advisers of recognised standing to the effect that such change or amendment has occurred (irrespective of whether such change or amendment is then effective) and the relevant Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment. The Trustee shall be entitled to accept such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent set out above, in which event they shall be conclusive and binding on the Noteholders and the Couponholders.
Notes redeemed pursuant to this Condition 8.2 will be redeemed at their Early Redemption Amount referred to in paragraph 8.6 below together (if appropriate) with interest accrued to (but excluding) the date of redemption.
In the case of RPI Linked Notes, if:
(a) the Index ceases to be published or any changes are made to it which, in the opinion of an Expert, constitute a fundamental change in the rules governing the Index and the change would, in the opinion of the Expert, be detrimental to the interests of the Noteholders and if the Expert fails within 30 days after its appointment (or such longer period as the Trustee may in its sole discretion agree), or states to the Issuer and the Trustee that it is unable to recommend for the purposes of the Notes any adjustments to the Index or any substitute index (with or without adjustments), as described in Condition 6.5, the Issuer shall, within 14 days of the expiry of such period or (as the case may be) after the date of such statement, give notice (which shall be irrevocable and shall state the date fixed for redemption which shall not be more than 15 days after the date on which the notice is given) to redeem the Notes then outstanding, at a price equal to their nominal amount multiplied by the Index Ratio applicable to the date on which the date fixed for redemption falls, together with accrued interest; or
(b) the Index ceases to be published or any changes are made to it which, in the opinion of an Expert, constitute a fundamental change in the rules governing the Index and the change would, in the opinion of the Expert, be detrimental to the interests of the Issuer and if the Expert fails within 30 days after its appointment (or such longer period as the Trustee may in its sole discretion agree), or states to the Issuer and the Trustee that it is unable to recommend for the purposes of the Notes any adjustments to the Index or any substitute index (with or without adjustments), as described in Condition 6.5, the Issuer may at its option, within 14 days of the expiry of such period or (as the case may be) after the date of such statement, give notice (which shall be irrevocable and shall state the date fixed for redemption which shall not be more than 15 days after the date on which the notice is given) to redeem the Notes then outstanding, at a price equal to their nominal amount multiplied by the Index Ratio applicable to the date on which the date fixed for redemption falls, together with accrued interest.
If Issuer Call is specified as being applicable in the applicable Final Terms, the relevant Issuer may, having given not less than the minimum period nor more than the maximum period of notice specified in applicable Final Terms (in the event that such periods are not so specified, the minimum period will be not less than 30 days and the maximum period will be not more than 90 days) to the Noteholders in accordance with Condition 16; (which notice shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be specified in the applicable Final Terms.
In the case of a partial redemption of Notes, the Notes to be redeemed ("Redeemed Notes") will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes and in accordance with the rules of Euroclear and/or Clearstream, Luxembourg, (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion). In the case of Redeemed Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption (such date of selection being hereinafter called the "Selection Date"). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 15 not less than 15 days prior to the date fixed for redemption. The aggregate nominal amount of Redeemed Notes represented by definitive Notes shall bear the same proportion to the aggregate nominal amount of all Redeemed Notes as the aggregate nominal amount of definitive Notes outstanding bears to the aggregate nominal amount of the Notes outstanding, in each case on the Selection Date, provided that, if necessary, appropriate adjustments shall be made to such nominal amounts to ensure that each represents an integral multiple of the Specified Denomination. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant to this Condition 8.4 and notice to that effect shall be given by the relevant Issuer to the Noteholders in accordance with Condition 15 at least five days prior to the Selection Date.
If Investor Put is specified as being applicable in the applicable Final Terms, upon the holder of any Note giving to the relevant Issuer in accordance with Condition 15 not less than the minimum period nor more than the maximum period of notice specified in the applicable Final Terms (in the event that such periods are not so specified, the minimum period will be not less than 30 days and the maximum period will be not more than 90 days), the relevant Issuer will, upon the expiry of such notice, redeem in whole (but not in part), such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date.
If this Note is in definitive form, to exercise the right to require redemption of this Note the holder of this Note must deliver such Note at the specified office of any Paying Agent at any time during normal business hours of such Paying Agent falling within the notice period, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a "Put Notice") and in which the holder must specify a bank account (or, if payment is required to be made by cheque, an address) to which payment is to be made under this Condition.
For the purpose of Condition 8.2 and 8.4 and Condition 11, the Notes will be redeemed at their Early Redemption Amount calculated as follows:
Where such calculation is to be made for a period which is not a whole number of years, it shall be made (1) in the case of a Zero Coupon Note other than a Zero Coupon Note payable in euro, on the basis of a 360-day year consisting of 12 months of 30 days each and (2) in the case of a Zero Coupon Note payable in euro, on the basis of the actual number of days elapsed divided by 365 (or, if any of the days elapsed falls in a leap year, the sum of (x) the number of those days falling in a leap year divided by 366 and (y) the number of those days falling in a non-leap year divided by 365).
(d) In the case of RPI Linked Notes, at the outstanding nominal amount thereof, subject to adjustment in accordance with Condition 6.2.
The relevant Issuer or any Subsidiary (as defined in the Trust Deed) of the relevant Issuer may at any time purchase Notes (provided that, in the case of definitive Notes, all unmatured Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. If purchases are made by tender, tenders must be available to all Noteholders alike. Such Notes may be held, reissued, resold or, at the option of the relevant Issuer surrendered to any Paying Agent for cancellation.
All Notes which are redeemed will forthwith be cancelled (together with all unmatured Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and Notes purchased and cancelled pursuant to paragraph 8.7 above (together with all unmatured Coupons and Talons cancelled therewith) shall be forwarded to the Principal Paying Agent and cannot be reissued or resold.
If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to paragraph 8.1, 8.2, 8.4 or 8.5 above or upon its becoming due and repayable as provided in Condition 11 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in paragraph 8.6(c) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and repayable were replaced by references to the date which is the earlier of:
All payments of principal and interest in respect of the Notes and Coupons by the relevant Issuer will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by or on behalf of the United Kingdom or any political subdivision or any authority thereof or therein having power to tax unless such withholding or deduction is required by law. In such event, the relevant Issuer will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes or Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes or Coupons, as the case may be, in the absence of such withholding or deduction; except that no such additional amounts shall be payable with respect to any Note or Coupon:
income or any law implementing or complying with, or introduced in order to conform to such Directive; or
As used herein, the "Relevant Date" means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Trustee or the Principal Paying Agent on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 15.
The Notes and Coupons will become void unless presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 9) therefor.
There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 7.2 or any Talon which would be void pursuant to Condition 7.2.
any indebtedness for moneys borrowed of any person given by the relevant Issuer or any Material Subsidiary where the relevant indebtedness for moneys borrowed when aggregated with all other indebtedness for moneys borrowed in respect of which one or more other events referred to in this paragraph (c) shall have occurred exceeds whichever is the greater of £30,000,000 (or the equivalent in other currencies as determined by the Trustee) and two per cent. of the Adjusted Capital and Reserves:
except, in any such case, where there is a bona fide dispute as to payment; or
Noteholders provided that in no event shall the relevant Issuer or any Material Subsidiary be deemed to have ceased to carry on the whole or substantially the whole of its business solely by reason of any forced divestiture imposed by any government or regulatory body or by reason of the loss of the Appointment.
For the purposes of this Condition:
"Accounts" means, to the extent an Issuer has Subsidiary Undertakings, a consolidation of the annual statutory accounts of the relevant Issuer (except that, in the case of UUW, such accounts shall be unconsolidated for such time as UUW has no Subsidiary Undertakings) and (in each case) its Subsidiary Undertakings as prepared by the relevant Issuer, and audited and reported upon by the Auditors in accordance with the historical cost convention method as modified, if applicable, by the exception of, amongst other things, the revaluation of financial instruments and otherwise in accordance with United Kingdom generally accepted accounting practices and principles (with the exception of United Utilities PLC, which reports under International Financial Reporting Standards);
"Adjusted Capital and Reserves" means at any time a sum equal to the aggregate of:
all based on the consolidated balance sheet of the relevant Issuer (except in the case of UUW, a nonconsolidated balance sheet for such time as UUW has no Subsidiary Undertakings) and its Subsidiary Undertakings as contained in the then latest Accounts but after:
an interest which causes an undertaking to cease to be a Subsidiary Undertaking) since the date of such balance sheet;
and so that no amount shall be included or excluded more than once in the same calculation;
The Trust Deed provides that, if there is a material change in generally accepted United Kingdom accounting practices or principles as adopted and applied in the Accounts, the relevant Issuer will, at the request of the Trustee, after consultation with the relevant Issuer, restate the Accounts in accordance with generally accepted United Kingdom accounting practices and/or principles applied in respect of the Accounts for the year ended 31 March, 1998, and procure the Auditors to audit the said accounts, and the Adjusted Capital and Reserves shall be calculated accordingly.
The certificate of the Auditors as to the amount of the Adjusted Capital and Reserves at any time shall, in the absence of manifest error, be conclusive and binding on all parties.
"Appointment" means the Instrument of Appointment dated 24 August, 1989 under Sections 11 and 14 of the Water Act 1989 (as varied from time to time) appointing United Utilities Water PLC as a water undertaker and sewerage undertaker;
"Auditors" means the auditors for the time being of the relevant Issuer or, in the event of their being unable or unwilling to carry out any action requested of them pursuant to the Trust Deed, such other firm of chartered accountants as the Trustee may in writing nominate or approve for the purpose;
"Excluded Subsidiary" means any Subsidiary of the relevant Issuer (i) which is a single purpose company whose principal assets and business are constituted by the ownership, acquisition, development and/or operation of an asset, (ii) none of whose liabilities in respect of the financing of such ownership, acquisition, development and/or operation of an asset is subject to any recourse whatsoever to any member of the Group other than an Excluded Subsidiary, and (iii) which has been designated as such by the relevant Issuer by written notice to the Trustee; provided that the relevant Issuer may give written notice to the Trustee at any time that any Excluded Subsidiary is no longer an Excluded Subsidiary, whereupon it shall cease to be an Excluded Subsidiary;
"Group" means the relevant Issuer and its Subsidiaries and "member of the Group" shall be construed accordingly;
"indebtedness for moneys borrowed" means any present or future indebtedness (being principal, premium or interest) for or in respect of (a) all moneys borrowed, (b) liabilities under or in respect of any acceptance or acceptance credit and (c) all notes, bonds, debentures, debenture stock, loan stock or other securities offered, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash which is not for the time being owned by the relevant Issuer or any of its Subsidiary Undertakings and which does not amount to Project Finance Indebtedness;
"Material Subsidiary" means any Subsidiary of the relevant Issuer (not being an Excluded Subsidiary) (i) whose gross revenues earned from outside the Group or whose gross assets (in each case consolidated in respect of a Subsidiary which itself has Subsidiaries, and in each case attributable to the relevant Issuer all as shown in the latest audited accounts (consolidated or, as the case may be, unconsolidated) of such Subsidiary represent 20 per cent. or more of the consolidated gross revenues or, as the case may be, consolidated gross assets (in each case attributable to the shareholders of its ultimate parent) of the relevant Issuer and in each case their respective Subsidiary Undertakings (other than Excluded Subsidiaries) all as shown in the latest Accounts; or (ii) to which is transferred all or substantially all of the business, undertaking or assets of a Subsidiary which immediately prior to such transfer is a Material Subsidiary, whereupon the transferor Subsidiary shall immediately cease to be a Material Subsidiary and the transferee Subsidiary shall immediately become a Material Subsidiary under this sub-paragraph (ii) but shall cease to be a Material Subsidiary upon publication of its next audited accounts unless it would then be a Material Subsidiary under (i) above. A report by the Auditors (whether or not addressed to the Trustee) that in their opinion a Subsidiary is or is not or was or was not at any particular time a Material Subsidiary shall, in the absence of manifest error, be conclusive and binding on all parties;
"Project Finance Indebtedness" means any indebtedness for moneys borrowed to finance the ownership, acquisition, development and/or operation of an asset (whether or not an asset of a member of the Group):
(i) recourse for amounts limited to the cash flow or net cash flow (other than historic cash flow or historic net cash flow) from such asset; and/or
(ii) recourse for the purpose only of enabling amounts to be claimed in respect of such indebtedness for moneys borrowed in an enforcement of any encumbrance given by such borrower over such asset or the income, cash flow or other proceeds deriving therefrom (or given by any shareholder or the like in the borrower over its shares or the like in the capital of the borrower) to secure such indebtedness for moneys borrowed, provided that (1) the extent of such recourse to such borrower is limited solely to the amount of any recoveries made on any such enforcement, and (2) such person or persons is/are not entitled, by virtue of any right or claim arising out of or in connection with such indebtedness for moneys borrowed, to commence proceedings for the winding up or dissolution of the borrower or to appoint or procure the appointment of any receiver, trustee or similar person or officer in respect of the borrower or any of its assets (save for the assets the subject of such encumbrance); and/or
"Subsidiary" means a subsidiary within the meaning of Section 1159 of the Companies Act 2006; and
"Subsidiary Undertaking" has the meaning ascribed thereto in Section 1162 of the Companies Act 2006 (but, in relation to each Issuer shall exclude any Subsidiary Undertaking whose accounts are not included in the then latest Accounts, or (in the case of a Subsidiary Undertaking which has first become a Subsidiary Undertaking of a member of the Group since the date as at which such Accounts were prepared) would not have been so included or consolidated if it had become so on or before that date).
The Trustee shall not be bound to take any proceedings or any other action in relation to the Trust Deed, the Notes or the Coupons unless it shall have been so directed by an Extraordinary Resolution or so requested in writing by the holders of at least one-quarter in aggregate amount of the Notes then outstanding and in either case then only if it shall be indemnified to its satisfaction against all liabilities which it may incur by so doing.
No Noteholder or Couponholder shall be entitled to proceed directly against the relevant Issuer unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure is continuing.
Should any Note, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Principal Paying Agent upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes, Coupons or Talons must be surrendered before replacements will be issued.
The names of the initial Paying Agents and their initial specified offices are set out below. If any additional Paying Agents are appointed in connection with any Series, the names of such Paying Agents will be specified in Part B of the applicable Final Terms.
The relevant Issuer is entitled to vary or terminate the appointment of any Paying Agent and/or appoint additional or other Paying Agents and/or approve any change in the specified office through which any Paying Agent acts, provided that:
In acting under the Agency Agreement, the Paying Agents act solely as agents of the relevant Issuer and, in certain circumstances specified therein, of the Trustee and do not assume any obligation to, or relationship of trust with, any Noteholders or Couponholders.
On and after the Fixed Interest Date or the Interest Payment Date, as appropriate, on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 10.
All notices regarding the Notes will be deemed to be validly given if published in a leading English language daily newspaper of general circulation in London. It is expected that such publication will be made in the Financial Times in London. The relevant Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange or any other relevant authority on which the Notes are for the time being listed or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers. If publication as provided above is not practicable, notice will be given in such other manner, and will be deemed to have been given on such date, as the Trustee may approve.
Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg for communication by them to the holders of the Notes and, in addition, for so long as any Notes are listed on a stock exchange or admitted to trading by any other relevant authority and the rules of that stock exchange or other relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by that stock exchange or other relevant authority. Any such notice shall be deemed to have been given to the holders of the Notes on the seventh day after the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg.
Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Principal Paying Agent. Whilst any of the Notes is represented by a Global Note, such notice may be given by any holder of a Note to the Principal Paying Agent through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the Principal Paying Agent and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.
The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Coupons or any of the provisions of the Trust Deed. Such a meeting may be convened by the relevant Issuer or the Trustee and shall be convened by the relevant Issuer at the request of Noteholders holding not less than five per cent. in nominal amount of the Notes for the time being outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing a clear majority in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes, the Coupons or the Trust Deed (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate or amount of interest payable in respect of the Notes or altering the currency of payment of the Notes or the Coupons), the quorum shall be one or more persons holding or representing not less than twothirds in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing not less than one-third in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders, or as a resolution in writing signed by or on behalf of all the Noteholders, shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Couponholders.
The Trustee may agree, without the consent of the Noteholders or Couponholders, to:
The Trustee may also agree, without the consent of the Noteholders or Couponholders, to the waiver or authorisation of any breach or proposed breach of any of these Terms and Conditions or any of the provisions of the Trust Deed or determine, without any such consent as aforesaid, that any Event
of Default or Potential Event of Default (as defined in the Trust Deed) shall not be treated as such, which in any such case is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders.
In connection with the exercise by it of any of its trusts, powers, authorities or discretions (including, but without limitation, any modification, waiver, authorisation or determination), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to individual Noteholders or Couponholders (whatever their number) and, in particular, but without limitation, shall not have regard to the consequences of such exercise for individual Noteholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory and the Trustee shall not be entitled to require, nor shall any Noteholder or Couponholder be entitled to claim, from the relevant Issuer or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders or Couponholders except, in the case of the relevant Issuer to the extent provided for in Condition 9 and/or any undertaking given in addition to, or in substitution for, Condition 9 pursuant to the Trust Deed.
Any such modification shall be binding on the Noteholders and the Couponholders and, unless the Trustee otherwise agrees, any such modification shall be notified to the Noteholders in accordance with Condition 15 as soon as practicable thereafter.
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified to its satisfaction.
The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (i) to enter into business transactions with the relevant Issuer and to act as trustee for the holders of any other securities issued by, or relating to, the relevant Issuer; (ii) to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences for, the Noteholders or Couponholders, and (iii) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith.
The relevant Issuer is at liberty from time to time without the consent of the Noteholders or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single Series with the outstanding Notes. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of Notes of other Series in certain circumstances where the Trustee so decides.
The Trustee may agree, without the consent of the Noteholders or the Couponholders, to the substitution at any time or times:
(a) of any Subsidiary of UU in place of UU as principal debtor, subject to the irrevocable and unconditional guarantee of UU; or
(b) of any Subsidiary of UUW in place of UUW as principal debtor, subject to the irrevocable and unconditional guarantee of UUW.
Any such substitution shall also be subject to the relevant provisions of the Trust Deed, including a provision to the effect that the Trustee shall have received confirmation in writing from each rating agency which, at the request of the relevant Issuer, shall have assigned a credit rating to the Notes that such substitution by itself and the circumstances pertaining to the substitution will not result in a downgrading of the then current credit rating assigned to the Notes by such rating agency.
The Trust Deed, the Notes and the Coupons and any non-contractual obligations arising out of or in connection therewith are governed by, and construed in accordance with, English law.
No person shall have any right to enforce any term or condition of this Note under the Contracts (Rights of Third Parties) Act 1999 but this does not affect any right or remedy of any person which exists or is available apart from that Act.
The net proceeds from each issue of Notes will be applied by the relevant Issuer for its general corporate purposes. If, in respect of any particular issue, there is a particular identified use of proceeds, this will be stated in the applicable Final Terms.
UUG is the ultimate parent company of the Issuers, UU and UUW. For the avoidance of doubt, UUG is neither an issuer nor a guarantor under the Programme.
UUG was incorporated and registered in England and Wales on 8 April 2008 under the Companies Act 1985 as a private company limited by shares under the name United Utilities Newco Limited with registered number 06559020. It was re-registered as a public company and changed its name to United Utilities Group PLC on 28 April 2008. Its registered office is at Haweswater House, Lingley Mere Business Park, Lingley Green Avenue, Great Sankey, Warrington WA5 3LP. UUG is a holding company and has not traded since incorporation.
On 29 November 2007, the board of directors of UU announced its intention to return approximately £1.5 billion to shareholders. The return of capital comprised the net equity proceeds of approximately £1,050 million from the sale of United Utilities Electricity Limited and a further £450 million from the Group's preexisting resources in order to create a more efficient capital structure.
The return of capital was implemented on 28 July 2008 by introducing UUG as the holding company of UU through a High Court of England and Wales (the "High Court") approved scheme of arrangement under section 899 of the Companies Act 2006, the issue of ordinary shares and B shares and the subsequent reduction of capital of UUG under section 135 of the Companies Act 1985. Following the implementation of the scheme, UUG owned no material assets other than the share capital of UU.
The directors of UUG and their functions within UUG are as follows:
| Name | Function |
|---|---|
| Dr John McAdam | Non-executive chairman, chairman of the nomination committee (and non executive director and chairman of UUW) |
| Steve Mogford | Chief executive officer (and director of both UUW and UU) |
| Russ Houlden | Chief financial officer (and director of both UUW and UU) |
| Dr Catherine Bell | Independent non-executive director, chairman of the corporate responsibility committee (and non-executive director of UUW) |
| Mark Clare | Independent non-executive director (and non-executive director of UUW) |
| Brian May | Independent non-executive director (and non-executive director of UUW) |
| Nick Salmon | Senior independent non-executive director (and non-executive director of UUW) |
| Sara Weller | Independent non-executive director, chairman of the remuneration committee (and non-executive director of UUW) |
There is no existing or potential conflict of interest between the directors' duties to UUG and/or their private interests or other duties.
The business address of each of the directors is UUG's registered office which is Haweswater House, Lingley Mere Business Park, Lingley Green Avenue, Great Sankey, Warrington WA5 3LP.
UUG is the holding company that owns UU and which ultimately owns the regulated water and wastewater company, UUW, as a wholly owned subsidiary. Through UUW, the Group owns and manages the licensed water and wastewater network in the North West of England serving approximately 3.2 million homes and businesses. The ordinary shares of UUG are listed on the London Stock Exchange and are traded in the USA in the form of American Depository Receipts, which trade on an over the counter basis under the symbol UUGRY. With a market capitalisation of £4.71 billion (as at 30 September 2013), UUG is the UK's largest listed water and wastewater business.
Following a review of the Group's capital structure in 2007, the UU board announced that it would be targeting an A3 Moody's credit rating for UUW which the board believed best mirrored Ofwat's assumptions for the 2005-10 regulatory period and was an appropriate investment grade rating to allow the Group to raise finance to fund its substantial capital investment programmes.
The raising of debt finance remains important given the likely scale of investment that is still required in the water and wastewater industry to replace and refurbish ageing infrastructure, address flooding risk and climate change and deliver further statutory environmental obligations and customer priorities.
Following the 2009 water price review, the Group's board announced that it would continue to target an A3 Moody's credit rating for UUW, which it believes best mirrors Ofwat's assumptions for the 2010-2015 regulatory period and remains appropriate to maintain efficient access to debt capital markets.
As at 21 November 2013, Moody's corporate credit ratings for UUW and UU are A3/P-2 and Baa1/P-2 respectively. Standard and Poor's corporate credit ratings for UUW and UU are BBB+/A-2 and BBB-/A-3 respectively.
Standard and Poor's Credit Market Services Europe Ltd is established in the European Union and is registered under the CRA Regulation.
Moody's Investors Service Ltd is established in the European Union and is registered under the CRA Regulation.
UUW is a public limited company registered in England and Wales, providing water and wastewater services in North West England. The company was incorporated on 1 April 1989 under the Companies Act 1985 (as North West Water Limited) with registered number 02366678.
The directors of UUW and their functions within UUW are as follows:
| Name | Function |
|---|---|
| Dr John McAdam | Independent non-executive director and chairman (and non-executive chairman of |
| UUG) | |
| Steve Mogford | Chief executive officer (and director of both UUG and UU) |
| Russ Houlden | Chief financial officer (and director of both UUG and UU) |
| Steven Fraser | Director |
| Dr Catherine Bell | Independent non-executive director (and non-executive director of UUG) |
| Mark Clare | Independent non-executive director (and non-executive director of UUG) |
| Brian May | Independent non-executive director (and non-executive director of UUG) |
| Nick Salmon | Independent non-executive director (and non-executive director of UUG) |
| Sara Weller | Independent non-executive director (and non-executive director of UUG) |
There is no existing or potential conflict of interest between the directors' duties to UUW and/or their private interests or other duties.
The business address of each of the directors is UUW's registered office which is Haweswater House, Lingley Mere Business Park, Lingley Green Avenue, Great Sankey, Warrington WA5 3LP.
UUW is a wholly owned subsidiary of United Utilities North West Limited which, in turn, is a wholly owned subsidiary of UU. The ultimate parent company of UUW is UUG.
UUW owns, operates and manages the licensed, regulated water and wastewater network assets in North West England.
Note: The circumference of the Earth is approximately 40,000 kilometres
UUW has around £86 billion (at gross current replacement value) of assets serving its customers in North West England. It would be uneconomic for competitors to replicate the network assets owned by UUW with the inevitable consequence that UUW is an asset owning monopoly and as such is subject to price regulation.
UUW removes and treats wastewater from, and treats and distributes almost 1,750 million litres of water a day to, approximately 3.2 million homes and businesses.
Water is collected from catchment land and other sources and stored in reservoirs before being treated and then delivered via a network of pipes to homes and industry. A large proportion of the water supplied flows freely by gravity and does not need to be pumped, reducing energy consumption and the carbon impact on the environment.
Wastewater is collected using a network of sewers and treated before being returned safely to the environment. A by-product of the treatment of wastewater is sewage sludge, which is treated further to produce an end product suitable for safe disposal while providing renewable energy generation.
UUW's activities are:
UUW prepares for approval by its regulators an asset management programme ("AMP") covering a five year period which seeks to achieve the higher standards required by EU directives as implemented by the UK government (the "Government"). The five programmes since privatisation required, or are estimated to require, capital investments of:
| AMP 1 | 5 years to 31 March 1995 | £1.8 billion |
|---|---|---|
| AMP 2 | 5 years to 31 March 2000 | £2.5 billion |
| AMP 3 | 5 years to 31 March 2005 | £3.0 billion |
| AMP 4 | 5 years to 31 March 2010 | £3.0 billion |
| AMP 5 | 5 years to 31 March 2015 | £3.6 billion |
The Water Service Regulation Authority ("Ofwat") takes account of these investment programmes when setting price limits, as described below under "Price control". The regulator's primary duties include a requirement that regulated water and sewerage companies are able to finance their functions.
UUW's regulatory capital investment (including infrastructure renewals expenditure) for the year to 31 March 2013 was over £787 million, consistent with UUW's planned investment programme over the 2010-15 period.
In England and Wales almost all water and sewerage services are supplied by ten Water and Sewerage Companies ("WaSCs") and nine Water Only Companies ("WOCs").
Appointments ("licences") were originally granted to each of the WaSCs and WOCs by the Secretary of State for the Environment or for Wales in 1989. These licences continue in force for an indefinite period, subject to potential termination rights as set out below. UUW holds WaSC licences for areas of North West England which comprise approximately 3.2 million homes and businesses.
The statutory basis for the regulation of the activities of licensees is now the Water Industry Act 1991, as amended in particular by the Water Act 2003. The fundamental statutory duty of a licensee in respect of its water business is to develop and maintain an efficient and economical system of water supply within its supply area. Similarly, WaSCs are subject to an overriding duty to provide, maintain, improve and extend a system of public sewers so as to ensure that its supply area is effectually drained and to make provision for emptying those sewers when necessary and effectually dealing with the contents.
Regulation pursuant to these licences is currently the responsibility of Ofwat. The independent Consumer Council for Water (the "Council") represents the interests of the customers of appointed water and sewerage undertakers.
Ofwat is controlled by a board which consists of the chairman, a chief executive, and a number of other directors, most of whom are non-executive directors. Appointments to the Ofwat board are made by the Secretary of State for Environment, Food and Rural Affairs in consultation with the Welsh Assembly Government.
Ofwat must comply with its statutory duties as primarily laid out in the Water Industry Act 1991, as amended by the Water Act 2003. It may receive guidance from the Government in relation to its contribution to social and environmental policies, and is obliged to have regard to any such guidance in exercising its statutory functions. It also receives views from the Government on matters such as the approach to price controls. However, Ofwat is not subject to direction about what its judgements should be and acts independently of the Government.
Ofwat must exercise its powers and duties in the manner that it considers is best calculated to:
Ofwat also has secondary duties which include an obligation to contribute to the achievement of sustainable development. It also has duties in exercising its powers to have regard to the effect on the environment, and to the desirability of preserving any rights of recreational access.
In addition to the Water Industry Act 1991, Ofwat also exercises powers under competition legislation, most significantly the Competition Act 1998, the Enterprise Act 2002 and under Articles 101 and 102 of the Treaty on the Functioning of the European Union.
UUW's licence is subject to a range of conditions including (amongst other things):
Licence conditions can be modified by Ofwat, either with the licensee's agreement or following reference to the Competition Commission for a decision on public interest grounds. Licence modifications can also result, in certain circumstances, from a merger or market investigation reference to the Competition Commission.
Whilst the water and wastewater industry structure in England and Wales chiefly comprises the regulated WaSCs and WOCs undertakers covering their respected appointed service areas, there are two main forms of direct competition: (i) new appointments or variations and (ii) water supply licensing.
A new appointment or variation is made when an existing undertaker is replaced as the supplier of water and/or wastewater services for a defined area, primarily new developments. Instances of new appointments or variations have been relatively rare, with less than 50 granted across the industry since privatisation in 1989.
Water supply competition was opened up in December 2005, when very large non-household customers (those with an annual consumption of at least 50 megalitres of water a year at each site) were allowed to choose their water supplier. A water undertaker is obliged to allow a licensed water supplier to use its network for this purpose, subject to payment of charges (in accordance with the economic cost of using such infrastructure – the so called "costs principle") and certain other conditions and rights of refusal.
In December 2011, this market was opened up further, with the threshold being reduced to five megalitres a year in England. To date very few customers have switched supplier in England and Wales.
The UK Government's Water Bill was presented to Parliament on 27 June 2013, for its first reading. The Water Bill proposes to give powers so that the water supply threshold will be reduced further to zero for nonhousehold customers and also be expanded to include sewerage as well as water services, with a target date for market opening of 2017. This will effectively open up retail competition for all business customers. The UK Government has not expressed any intention to expand competition to include household customers.
United Utilities has been building its capability to ensure it is in a strong position as the competitive business retail market evolves and is very active in this expanding market. In 2012, UUG obtained licences to operate in Scotland, where retail competition for all non-household customers was opened in 2008 and is now the second largest water retailer in Scotland based on the percentage of combined water and wastewater volumes, following a number of customer wins. UUG has a strong pipeline of further opportunities and is looking forward to competing outside of its region as the market opens in England.
The Water Bill also proposes a number of measures designed to facilitate the future introduction of potential competition in selective upstream activities, such as the input of raw water into a water company's network, bulk water supply and the disposal of sludge. The Water Bill also provides for a number of other changes to market and regulatory arrangements to be introduced. The Water Bill will be subject to further scrutiny as it progresses through the parliamentary process.
Under the existing regulatory regime, Ofwat regulates water and wastewater charges by capping the average increase in charges that a company can impose in any year. Ofwat conducts a periodic review and sets price caps every five years.
The price cap is set by reference to inflation as measured by the RPI in the UK plus an adjustment factor known as 'K', which is specific to each company and which can vary for each year of the review period. The size of a company's K factor (which can be positive, negative or zero) reflects the scale of its capital investment programme, its operating cost, its cost of capital and its operational and environmental obligations, taking into account the scope for it to improve efficiency.
'Price cap' regulation as operated in the UK is performance based. Companies are incentivised to be efficient, both in terms of their operating costs and in the implementation of their capital expenditure programme. The benefit of any efficiency savings achieved through effective management is retained by the companies for a period of five years, after which time the benefit is passed to customers via the subsequent price setting process. The current price review period runs from 2010-2015. During this time, the cost of any under-performance due to poor management is borne by the companies.
In the 2009 price review conducted in advance of the current price review period, Ofwat proposed a new Capex Incentive Scheme under which companies bear the cost of under-performance for five years, giving symmetry with treatment of efficiency savings. OPA scores (which incentivised companies to provide high quality customer service) from the period 2004-2008 were taken into consideration when setting the overall 2010-2015 price cap; licensees that were found to have provided low levels of customer service were
penalised by means of an adjustment to the K factor. Additionally, a company found not to have met the requirements of the guaranteed standards scheme was required to make a specified payment to affected customers.
For the 2010-15 period, Ofwat introduced the "Service Incentive Mechanism" ("SIM") a new comparative incentive mechanism to reward or penalise water companies' service performance, replacing the OPA. The SIM compares companies' performance in terms of the quality of service that is delivered to customers. The SIM comprises both a quantitative measure of complaints and unwanted contacts, and a qualitative measure, based on survey evidence, that looks at how satisfied customers are with the quality of service that they receive. The SIM will be measured over the period 2011/12 to 2013/14. Depending upon UUW's relative performance under the SIM it could receive a revenue penalty or reward when price limits are next reset in 2014 for the period 2015-2020.
Unexpected capital costs or savings arising from changes in certain regulatory assumptions during a review period are recorded and agreed by UUW and Ofwat. This process, known as 'logging up and down', allows prices to be adjusted up or down at the next periodic review to compensate companies or customers respectively for the unexpected change.
In addition, through a process known as an Interim Determination of K or 'IDoK', UUW can request and/or Ofwat can instigate a re-setting of the price cap between price reviews. This process is only available for certain categories of change and requires changes in capital and/or operating costs or revenues to exceed a specified materiality threshold. An IDoK may be sought when changes in legal obligations arise which, among other things, could include the transfer of private sewers and pumping stations.
All water and sewerage companies' licences also include a 'shipwreck' or substantial effect clause, which allows companies' price limits to be revised when events beyond their control have a significant effect (less than or equal to 20 per cent.) on their costs or revenues.
Current price limits were published in 2009 when Ofwat set out its final determination of price limits for the period 1 April 2010 to 31 March 2015 UUW's profile of price limits for the five years is set out below:
| 2010/11 | 2011/12 | 2012/13 | 2013/14 | 2014/15 | |
|---|---|---|---|---|---|
| K factor | -4.3 | -0.2 | +0.6 | +1.0 | +1.2 |
Ofwat's final determination of price limits for UUW was based upon:
Every year, all water companies are required to publish details of their annual financial and operational performance. Ofwat uses this information and other data to monitor and compare companies' performance both individually and relative to the other water companies across a wide range of measures. This includes key performance indicators such as the SIM, Serviceability and Leakage.
In preparation for the price control period 2015-2020, UUW accepted revised licence modification proposals which were published by the regulator on 21 December 2012. These revised licence proposals focus on the changes required to facilitate the forthcoming 2014 price review ("PR14")
Ofwat issued the methodology for the next price control period, 2015-2020 in July 2013, which sets out the key principles it expects to follow in future price reviews. The principal decisions are that Ofwat will set two binding retail price controls (one for household retail activities and one for non-household retail activities) and two binding wholesale controls (one for water and one for wastewater). Other changes include: the setting of the household retail control based on an average cost to serve; the introduction of a new 'Totex' menu approach to assessing cost assumptions; the use of a revenue cap on total revenues – as opposed to a price cap on average revenues – for the wholesale controls; greater customer involvement in the development of company business plans and moves towards company-defined outcomes and incentives to support delivery of customer priorities and statutory environmental and quality regulations.
Business plans are due to be submitted to Ofwat in December 2013. Ofwat's determinations are expected during 2014 and will apply to prices charged for the five year period commencing 1 April 2015.
For details of UUW's credit ratings, see the subsection entitled "Group capital structure and target credit rating for UUW and credit ratings of UU and UUW" in the section entitled "Description of the Issuers – United Utilities Group PLC" above.
In practice, many regulatory issues arising between licensees and Ofwat are settled without the need to resort to formal proceedings. However, where Ofwat is satisfied that a licensee is in breach of, or is likely to breach, the conditions of its licence or its statutory obligations, it has powers to secure compliance by means of an enforcement order, and to impose financial penalties.
Ofwat will not be required to make an enforcement order if it is satisfied that the regulated company has given, and is complying with, an undertaking to take all such steps as it appears to him for the time being to be appropriate for the company to take for the purpose of securing compliance with the condition or requirement in question. The requirement to comply with that undertaking will then become a statutory requirement, enforceable by Ofwat in circumstances of breach.
The imposition of financial penalties for breach of licence conditions and other regulatory duties was introduced by the Water Act 2003 to bring Ofwat's powers into line with those of other regulators. Companies may face a penalty of up to ten per cent. of relevant regulated turnover for breaching licence conditions, prescribed standards of performance or other statutory obligations. Ofwat has published a statement of the policy that it intends to apply to the imposition of any penalty and the determination of its amount. According to the Water Act 2003, such penalties can be appealed to the High Court on the grounds that their imposition is not within Ofwat's power; that Ofwat has failed to follow the procedure for imposing such penalties; and that the dates required for payment of such penalties are unreasonable.
Failure to comply with an enforcement order can lead to court action by Ofwat for an injunction and claims for compensation by any person who suffers loss or damage as a result of the breach. Alternatively, where actual or likely contravention of an enforcement order (or of one of a licensee's principal statutory duties under the Act) is so serious as to make it inappropriate for the licensee to continue to hold its licence, the Secretary of State or, with his consent, Ofwat, may apply to the High Court for the appointment of a special administrator to run the company. A special administrator may also be appointed in other circumstances such as where the licensee is, or is likely to be, unable to pay its debts.
A special administrator has powers similar to those of an administrator under the Insolvency Act 1986, but with certain important differences. He is appointed only for the purposes of transferring to one or more different companies, as a going concern, so much of the business of the licensee as is necessary to transfer in order to ensure the proper carrying out of its water supply or sewerage functions as the case may be and, pending the transfer, of carrying out those functions.
On any application for the winding up of a licensee the court is obliged (if it is otherwise satisfied that it would be appropriate to make the order) to make a special administration order instead. A licensee also cannot be wound up voluntarily, or have an administration order made in relation to it, unless fourteen days notice is given to the Secretary of State or Ofwat (which gives them time to decide whether to apply for a special administration order). Notice must also be given before any step is taken by any person to enforce security over the licensee's property.
The water and wastewater industry in the UK is subject to substantial domestic and European Community regulation, placing significant statutory obligations on water and wastewater companies with regard to, amongst other factors, the quality of treated water supplied, wastewater treatment and the effects of their activities on the natural environment.
All water and wastewater companies have a general duty to exercise their powers to protect and, where appropriate, enhance the natural environment and to promote the efficient use of water. Environmental regulation is the responsibility of the Secretary of State for Environment, Food and Rural Affairs together with:
The ongoing development of the regulatory framework applicable to UUW by, among others, the EC, the UK Government and Ofwat could lead to additional obligations being imposed on UUW and to increased costs of compliance, which are at present difficult to ascertain with confidence. These include the Water Bill, as well as a number of regulatory measures resulting from EU directives, which are expected to have a significant impact on UUW in the longer term, particularly after 2015. These include measures under the Water Framework Directive (2000/60/EC) ("WFD") which may result in limitations on abstraction licences and restrictions on discharge consents and could result in material expenditure by UUW. The Drinking Water Directive and Priority Substances Directive (both daughter Directives of the WFD) are also expected to affect the regulatory environment in which UUW operates.
UU is a public limited company registered in England and Wales. UU (then known as North West Water Group PLC) was incorporated on 1 April 1989 under the Companies Act 1985 with registered number 02366616.
In November 1995, UU acquired United Utilities Electricity Limited ("UUE") (then known as NORWEB plc), the distributor of electricity in North West England and, at that time, a supplier of electricity and gas in the UK. In August 2000, UU sold the electricity and gas supply business.
In February 2006, UU disposed of its telecommunications business, Your Communications, to THUS Group in exchange for shares in THUS Group. In June 2007, UU sold its 22.63 per cent. stake in THUS Group via an accelerated book build.
In March 2007, UU's business process outsourcing business, Vertex, was sold to a consortium of US-based private equity firms led by Oak Hill Capital Partners.
In order to best serve shareholders' interests by focusing on the Group's much larger regulated water and wastewater asset base, in December 2007 UU sold UUE (which owned the licensed electricity distribution network in the North West of England), to North West Electricity Networks, a joint venture between Colonial First State Global Asset Management (part of the Commonwealth Bank of Australia) and IIF Int'l Holding GP Limited (for and on behalf of IIF Int'l Holding L.P., a fund advised by JPMorgan Asset Management Infrastructure Investments Group).
As part of the Group's strategy to focus on its core regulated activities undertaken by UUW, during 2009-10 the Group completed the disposal of almost all of its remaining non-regulated activities.
The directors of UU and their functions within the Group are as follows:
| Name | Function | |
|---|---|---|
| Steve Mogford | Chief executive officer (and director of both UUG and UUW) | |
| Russ Houlden | Chief financial officer (and director of both UUG and UUW) | |
| Philip Aspin | Director | |
| Steven Fraser | Director |
There is no existing or potential conflict of interest between the directors' duties to UU and/or their private interests or other duties.
The business address of each of the directors is UU's registered office which is Haweswater House, Lingley Mere Business Park, Lingley Green Avenue, Great Sankey, Warrington WA5 3LP.
On 28 July 2008, a new statutory holding company structure became effective by way of a share exchange between UU (the Group's previous listed holding company) and UUG (the new holding company) and UUG became the listed holding company of the Group.
UU is the intermediate holding company of the UK's largest listed water and wastewater business. The Group owns and manages the regulated water and wastewater network in the North West of England through its subsidiary UUW, which constitutes the vast majority of the Group's assets and profit.
UUW's activities comprise the operation of its licensed water and wastewater assets in the North West of England. This involves the removal and treatment of wastewater from, and the treatment and distribution of almost 1,750 million litres of water a day to approximately 3.2 million homes and businesses.
Following the completion of the disposal of the bulk of its non-regulated activities in November 2010, the Group's activities now comprise a single segment for financial reporting purposes. The Group also has a 35.3 per cent. holding in AS Tallinna Vesi (Tallinn Water).
For details of UU's credit ratings, see the subsection entitled "Group capital structure and target credit rating for UUW and credit ratings of UU and UUW" in the section entitled "Description of the Issuers – United Utilities Group PLC" above.
The Issuers have not entered into any contracts (being contracts not entered into in the ordinary course of business) which are, or may be, material or which contain a provision under which either Issuer or another member of the Group has an obligation or entitlement which is material to the relevant Issuer's ability to meet its obligations to security holders in respect of securities to be issued under the Programme.
The following applies only to persons who are the beneficial owners of Notes and is a summary of the Issuers' understanding of current United Kingdom law and published HM Revenue & Customs ("HMRC") practice relating to certain aspects of United Kingdom taxation and is subject to changes therein and thereof (possibly with retrospective effect). Some aspects do not apply to certain classes of person (such as dealers, certain professional investors and persons connected with the Issuers) to whom special rules may apply. The United Kingdom tax treatment of prospective Noteholders depends on their individual circumstances and may be subject to change in the future. This summary does not purport to constitute legal or tax advice. Prospective Noteholders who may be subject to tax in a jurisdiction other than the United Kingdom or who may be unsure as to their tax position should seek their own professional advice.
Payments of interest on the Notes may be made without deduction of or withholding for or on account of United Kingdom income tax provided that the Notes are and continue to be listed on a "recognised stock exchange", as defined in section 1005 of the Income Tax Act 2007. The London Stock Exchange is a recognised stock exchange for these purposes. Securities will be treated as listed on the London Stock Exchange if they are included in the Official List (within the meaning of and in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000) and admitted to trading on the London Stock Exchange. Provided, therefore, that the Notes remain so listed, interest on the Notes will be payable without withholding or deduction on account of United Kingdom income tax.
Interest on the Notes may also be paid without withholding or deduction for or on account of United Kingdom tax where interest on the Notes is paid and, at the time the payment is made, that the relevant Issuer reasonably believes (and any person by or through whom interest on the Notes is paid reasonably believes) that the person beneficially entitled to the income in respect of which the payment is made is within the charge to United Kingdom corporation tax as regards the payment of interest; provided that HMRC has not given a direction (in circumstances where it has reasonable grounds to believe that the exemption is not available in respect of such payment of interest at the time the payment is made) that the interest should be paid under deduction of tax.
Interest on the Notes may also be paid without withholding or deduction for or on account of United Kingdom tax where the maturity of the Notes is less than 365 days and those Notes do not form part of a scheme or arrangement of borrowing intended to be capable of remaining outstanding for more than 364 days.
In all other cases, an amount must generally be withheld from payments of interest on the Notes on account of United Kingdom income tax at the basic rate (currently 20 per cent.). However, where an applicable double tax treaty provides for a lower rate of withholding tax (or for no tax to be withheld) in relation to a Noteholder, HMRC can issue a notice to the relevant Issuer to pay interest to the Noteholder without deduction of tax (or for interest to be paid with tax deducted at the rate provided for in the relevant double tax treaty).
Where interest has been paid under deduction for or on account of United Kingdom income tax, Noteholders who are not resident in the United Kingdom may be able to recover all or part of the tax deducted under an appropriate provision in an applicable double taxation treaty.
HMRC have powers to obtain information, including in relation to interest or payments treated as interest and payments derived from securities. This may include details of the beneficial owners of the Notes (or the persons for whom the Notes are held), details of the persons to whom payments derived from the Notes are or may be paid and information in connection with transactions relating to the Notes. Information obtained by HMRC may be provided to tax authorities in other countries.
Under EC Council Directive 2003/48/EC on the taxation of savings income (the "Savings Directive"), Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories have adopted similar measures. In April 2013, the Luxembourg Government announced its intention to abolish the withholding system with effect from 1 January 2015, in favour of automatic information exchange under the Savings Directive. The Savings Directive does not preclude Member States from levying other types of withholding tax.
The European Commission has proposed certain amendments to the Savings Directive which may, if implemented, amend or broaden the scope of the requirements described above.
The Dealers have in a programme agreement dated 21 November 2013 (as supplemented and/or amended and/or restated from time to time) (the "Programme Agreement"), agreed with the Issuers a basis upon which they or any of them may from time to time agree to purchase Notes. Any such agreement will extend to those matters stated under "Form of the Notes" and "Terms and Conditions of the Notes". In the Programme Agreement, the Issuers have agreed to reimburse the Dealers for certain of their expenses in connection with the establishment of the Programme and the issue of Notes under the Programme and to indemnify the Dealers against certain liabilities incurred by them in connection therewith.
The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act.
The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. Treasury regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and Treasury regulations promulgated thereunder.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer, sell or deliver such Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution, as determined and certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated basis, the relevant lead manager, of all Notes of the Tranche of which such Notes are a part, within the United States or to, or for the account or benefit of, U.S. persons. Each Dealer has further agreed, and each further Dealer appointed under the Programme will be required to agree, that it will send to each dealer to which it sells any Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.
In connection with any Notes which are offered or sold outside the United States in reliance on an exemption from the registration requirements of the Securities Act provided under Regulation S:
Until 40 days after the commencement of the offering of any Series of Notes, an offer or sale of such Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from registration under the Securities Act.
The RPI Linked Notes have not been and will not be, registered under the Securities Act and trading in the RPI Linked Notes has not been approved by the CFTC under the CEA. No RPI Linked Notes may at any time be offered, sold, resold or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. person or to others for offer, sale, resale or delivery, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. person.
Offers, sales, resales or deliveries of the RPI Linked Notes or interests therein, directly or indirectly, in the United States or to, or for the account or benefit of U.S. persons would constitute a violation of United States securities laws unless made in compliance with the registration requirements of the Securities Act or pursuant to an exemption therefrom. In addition, in the absence of relief from the CFTC, offers, sales, resales, trades or deliveries of the RPI Linked Notes, or interests therein, directly or indirectly, in the United States or to, or for the account or benefit of, U.S. Persons, may constitute a violation of United States law governing commodities trading.
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Offering Circular as completed by the final terms in relation thereto to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State:
provided that no such offer of Notes referred to above shall require the Issuer or any 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.
For the purposes of this provision:
Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that:
(a) in relation to any Notes which have a maturity of less than one year, (a) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (b) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for
the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 (the "FSMA") by the relevant Issuer;
Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that Notes have not been and will not be offered, sold or publicly promoted or advertised by it in the Federal Republic of Germany other than in compliance with the provisions of the German Securities Prospectus Act (Wertpapierprospektgesetz), as amended, and any other laws applicable in the Federal Republic of Germany governing the issue, offering and sale of securities.
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the "FIEA") and each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.
Each Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that it will (to the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes this Offering Circular and will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and neither the relevant Issuer nor any of the other Dealers shall have any responsibility therefor.
None of the relevant Issuers, the Trustee nor any of the Dealers represents that Notes may at any time lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility for facilitating such sale.
The establishment of the Programme and the issue of the Notes by the relevant Issuer have been duly authorised by:
United Utilities Water PLC was duly authorised to join the Programme in place of North West Water Finance PLC and to issue Notes hereunder by a resolution of the Board of Directors of United Utilities Water PLC dated 13 September 2001.
This update of the Programme was duly authorised by:
Additionally, issues of Notes by either Issuer will require authorisation.
The admission of Notes to the Official List will be expressed as a percentage of their nominal amount (excluding accrued interest). It is expected that each Tranche of Notes which is to be admitted to the Official List and admitted to trading on the London Stock Exchange's Regulated Market will be admitted separately as and when issued, subject only to the issue of a Global Note or Notes initially representing the Notes of such Tranche. Application has been made to the UK Listing Authority for Notes issued under the Programme to be admitted to the Official List and to the London Stock Exchange for such Notes to be admitted to trading on the London Stock Exchange's Regulated Market. The listing of the Programme in respect of Notes is expected to be granted on or around 26 November 2013.
For the period of 12 months following the date of this Offering Circular, copies of the following documents will, when published, be available from the registered office of each Issuer and from the specified office of the Paying Agent for the time being in London:
(a) the Memorandum and Articles of Association of each of the Issuers;
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg (which are the entities in charge of keeping the records). The appropriate Common Code and ISIN for each Tranche of Notes allocated by Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms. If the Notes are to clear through an additional or alternative clearing system the appropriate information will be specified in the applicable Final Terms.
The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.
The price and amount of Notes to be issued under the Programme will be determined by the relevant Issuer and the relevant Dealer at the time of issue in accordance with prevailing market conditions.
There has been no significant change in the financial or trading position of each of UU and its consolidated group since 31 March 2013 and there has been no material adverse change in the financial position or prospects of each of UU and its consolidated group since 31 March 2013.
There has been no significant change in the financial or trading position of UUW since 31 March 2013 and there has been no material adverse change in the financial position or prospects of UUW since 31 March 2013.
In February 2009, United Utilities International Limited ("UUIL") was served with notice of a multiparty 'class action' in Argentina related to the issuance and payment default of a US\$230 million bond by Inversora Eléctrica de Buenos Aires S.A. ("IEBA"), an Argentine project company set up to purchase one of the Argentine electricity distribution networks which was privatised in 1997. UUIL had a 45 per cent shareholding in IEBA which it sold in 2005. The claim is for a non-quantified amount of unspecified damages and purports to be pursued on behalf of unidentified consumer bondholders in IEBA. UUIL has
filed a defence to the action and will vigorously resist the proceedings given the robust defences that UUIL has been advised that it has on procedural and substantive grounds.
In March 2010, Manchester Ship Canal Company ("MSCC") issued proceedings seeking, amongst other relief, damages alleging trespass against UUW in respect of UUW's discharges of water and treated effluent into the canal. UUW filed a Defence and Counterclaim in support of its believed entitlement to make discharges into the canal without charge and await MSCC's response. Although UUW won a 'summary judgment' application against MSCC in January 2012 on a significant element of the claim, MSCC subsequently appealed to the Court of Appeal who dismissed UUW's summary judgment. UUW was then granted permission to appeal to the Supreme Court, the hearing is expected to be in May 2014.
Except as set out above in this section titled "Litigation" there are no other governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened) of which UU, UUW or any of UU's consolidated subsidiaries are aware in the last 12 months preceding the date of this document which may have, or have had in the recent past, a significant effect on the financial position or profitability of UU, UUW or any of UU's consolidated subsidiaries.
The Group is engaged in litigation in the ordinary course of its operations, such as contract disputes, disputes over easements/wayleaves and other similar property matters, bill collections, personal injury claims and workers' compensation claims. The Group does not believe that such litigation, either individually or in aggregate, is material. The Group maintains insurance and, to the extent that the amounts in dispute may not be covered by such insurance, maintains provisions in those situations where management deems it appropriate in accordance with International Financial Reporting Standards ("IFRS").
KPMG Audit Plc audited the financial statements of the Issuers in accordance with United Kingdom auditing standards issued by the Auditing Practices Board for the year ended 31 March 2013 and 31 March 2012 and issued an unqualified report thereon. KPMG Audit Plc has no material interest in the Issuers.
The Trust Deed provides that the Trustee may rely on any certificate or report (whether or not addressed to the Trustee) of the auditors or any other person called for by or provided to the Trustee for the purposes of the Trust Deed notwithstanding that such certificate or report and/or any engagement letter or other document entered into by the Trustee in connection therewith contains a monetary or other limit on the liability of the auditors or such other person in respect thereof.
As of 16 July 2013, KPMG Audit Plc, St James' Square, Manchester M2 6DS, was replaced by KPMG LLP as the Issuers' external auditor.
The Financial Statements for UU for each of the years ended 31 March 2012 and 31 March 2013 were audited in accordance with IFRS.
The Financial Statements for UUW for each of the years ended 31 March 2012 and 31 March 2013 were audited in accordance with UK GAAP.
The Contracts (Rights of Third Parties) Act 1999 (the "Act") was enacted on 11 November 1999 and provides, inter alia, that persons who are not parties to a contract governed by the laws of England and Wales may be given enforceable rights under such contract.
The Issuers do not intend to provide any post-issuance information in relation to any issues of Notes.
Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform other services for, the Issuers and their affiliates in the ordinary course of business.
RPI is one of the most familiar general purpose domestic measures of inflation in the UK. RPI has been used as a measure of inflation since 1947 and measures the average change from month to month in the prices of goods and services purchased by most households in the UK. The spending pattern on which the RPI is based is revised each year, mainly using information from official expenditure and food surveys.
RPI is compiled by the UK Office of National Statistics ("ONS") using a large and representative selection of separate goods and services for which price movements are regularly measured in various areas throughout the UK. If prices rise compared to the previous month, the RPI goes up and if prices fall compared to the previous month, the RPI goes down. It takes two or three weeks for the ONS to compile the index, so each month's RPI figure is published during the following month, (e.g. the figure relating to July will be published in August). The RPI figures used in the calculation of payments of interest on, and the redemption amount of, the RPI Linked Notes are numerical representations of where prices on a list of items bought by an average family stand at a point in time, in relation to their past values.
More information on RPI, including past and current levels, can be found at the following website: www.statistics.gov.uk.
Payments of principal and interest on RPI Linked Notes will be adjusted to take into account changes in RPI from the Base Index Figure specified in the applicable Final Terms.
In respect of each Tranche of RPI Linked Notes, a rate of interest will be specified in the applicable Final Terms. The interest amount due on each Interest Payment Date (such dates to be specified in the applicable Final Terms) will be that rate multiplied by the ratio which reflects the change in RPI between the Base Index Figure and the RPI figure relating to a particular month or date (as specified in the applicable Final Terms) prior to the relevant Interest Payment Date.
Subject to any early redemption of RPI Linked Notes, such RPI Linked Notes will be redeemed on their specified Maturity Date at a Final Redemption Amount specified in the applicable Final Terms, provided that:
The RPI figure (or "Index Figure applicable") relating to a particular month or date will be the figure either 3 months or 8 months prior to the particular month or date (3 months or 8 months to be specified in the applicable Final Terms). If an 8 month period is specified as the Index Figure applicable it will be the first day of the month that is 8 months prior to the month in which the relevant payment falls due. The examples below, setting out how payments of interest and principal are calculated (as adjusted for inflation), are based on an 8 month period. The calculations would work in the same way if a 3 month lag were specified, except that the Index Figure applicable would be determined using the formula which is calculated by the linear interpolation between the reference RPI applicable to the first calendar day of the month in which the relevant day falls and the reference RPI applicable to the first calendar day of the month immediately following (set out in Condition 6.1).
Set out below is a worked example illustrating how payments of interest in relation to a Series of RPI LinkedNotes might be calculated. The real rate of interest offered on a Series of RPI Linked Notes (i.e. the rate before taking inflation into account) is fixed when the first Tranche of such Series of RPI Linked Notes is issued (the "Real Rate of Interest" in the example below). For the purposes of the example below, this Real Rate of Interest is 1 per cent. (before any adjustments for inflation). This amount will be adjusted upwards or downwards to take into account the effect of inflation or deflation as indicated below. In the example below, the Issuer will pay interest in two half-yearly instalments until the RPI Linked Notes mature, which is why the Real Rate of Interest in the example below is being divided by 2. In the example below, the interest amount due on each Interest Payment Date will be adjusted to take into account a change in inflation. To calculate any inflation adjustment that might apply, two inflation index "fixing" figures are required – one that relates to the start of the RPI Linked Note's life (i.e. the "Base Index Figure") and one that relates to the relevant Interest Payment Date. The "fixing" figures can be taken either 3 months or 8 months prior to the relevant issue date or relevant Interest Payment Date (commonly referred to as a "lag" period). The "lag" period will be specified in the applicable Final Terms.
In the example below, both the Base Index Figure and the RPI figure that relates to any relevant Interest Payment Date are taken 8 months prior to the relevant issue date and the relevant Interest Payment Date respectively (such 8 month period being referred to as the Relevant Period), but this "Relevant Period" can be 3 months or 8 months as specified in the applicable Final Terms. In the example below, the interest amount due on each Interest Payment Date will be adjusted to take into account the effect of inflation between the Base Index Figure relating to January 2012 (which is 8 months prior to the issue date of the first Tranche of the Series of RPI Linked Notes in the example below, i.e. September 2012, and the figure for which is 238.0) and the RPI figure relating to the 8th month prior to the relevant Interest Payment Date, and is calculated as follows:
BaseRPIof 238.0 RPIrelating to themonth 8 prior to theInterest Payment Date 2 RealRate of Interest Calculation Amount of the relevant Notes
Interest amounts are calculated with reference to each Calculation Amount as set out in the applicable Final Terms.
As an example, if an Investor owns £100,000 face value of RPI Linked Notes issued in September 2012 for which the Real Rate of Interest is 1 per cent. and the Calculation Amount is £1000, the interest amount per Calculation Amount each Investor will receive on the first Interest Payment Date in March 2013 will be:
$$
\pounds1000 \times \frac{1\%}{2} \times \frac{\text{RPI relating to July 2012}}{\text{Base RPI of 238.0}}
$$
$$
= £1000 \times 0.0005 \times \frac{242.1}{238.0} = £5.09
$$
As the face value of RPI Linked Notes held by the Investor in this example is equal to the Calculation Amount multiplied by 100, the actual amount this Investor will receive on the first Interest Payment Date in March 2013 will be £5.09 x 100 = £509.00.
0015437-0009001 ICM:18466404.1 94 £5.09 Set out below is a worked example illustrating how repayment of principal in relation to a Series of RPI Linked Notes might be calculated. The RPI Linked Notes will be redeemed either (a) on their specified Maturity Date as specified in the applicable Final Terms at the Final Redemption Amount specified in the applicable Final Terms (in this example, at 100 per cent. of the nominal amount), or (b) in certain limited circumstances described in the Terms and Conditions of the RPI Linked Notes (see, for example, Condition 7.3 on page 52 of this Offering Circular) upon expiry of the notice required by the Terms and Conditions, at 100 per cent. of their nominal amount, in the case of each of (a) and (b) above, plus or minus an additional amount to take into account the effect of inflation or deflation. To calculate any inflation adjustment that might apply, two inflation index "fixing" figures are required – one that relates to the start of the RPI Linked Note's life (i.e. the "Base Index Figure") and one that relates to the relevant Maturity Date or early redemption date, as applicable, of the RPI Linked Notes. The "fixing" figures can be taken either 3 months or 8 months prior to the issue date or relevant Maturity Date, or early redemption date, as applicable (commonly referred to as a "lag" period). The "lag" period will be specified in the applicable Final Terms.
In the example below, both the Base Index Figure and the RPI figure that relates to the relevant redemption date used in the example below are taken 8 months prior to the issue date and the example redemption date respectively (such 8 month period being referred to as the "Relevant Period"), but this Relevant Period can be 3 months or 8 months as specified in the applicable Final Terms. In the example below, the final amount due on the redemption of the RPI Linked Notes will be adjusted to take into account the effect of inflation between the Base Index Figure relating to January 2012 (which is 8 months prior to the issue date of the first Tranche of the Series of RPI Linked Notes in the example below, i.e. September 2012, and the figure for which is 238.0) and a hypothetical RPI figure of 253.8 relating to April 2019, being the 8th month prior to the relevant redemption date (which redemption date, in the example below, is to fall in December 2019) and is calculated as follows:
Where the Final Redemption Amount of any RPI Linked Note is specified in the applicable Final Terms as being 100 per cent. of the nominal amount of the RPI Linked Notes, the amount payable to an Investor on the redemption of any such Note will be:
The amount so payable to an Investor is calculated with reference to each Calculation Amount as set out in the applicable Final Terms.
As an example, if an Investor owns £100,000 face value of the RPI Linked Notes issued in September 2012 and the Calculation Amount is £1000, the amount per Calculation Amount each Investor will receive on redemption of the Notes in December 2019 will be:
£1066.38 BaseRedemptionRPI of 238.0 RPI relating to April2019 of 253.8 £1000
As the face value of RPI Linked Notes held by the Investor in this example is equal to the Calculation Amount multiplied by 100, the actual amount this Investor will receive on redemption of the Notes in December 2019 will be £1066.38 x 100 = £106,638.00.
In this example, the Final Redemption Amount of the RPI Linked Notes is not subject to a maximum or minimum redemption amount as may be specified for any given issue of RPI Linked Notes in the applicable Final Terms.
Lingley Mere Business Park Lingley Mere Business Park Lingley Green Avenue Lingley Green Avenue Great Sankey Great Sankey Warrington WA5 3LP Warrington WA5 3LP
Haweswater House Haweswater House
Deutschland AG KGaA German Agency and Trust Department Reuterweg 16 60323 Frankfurt am Main Germany
To the Issuers Slaughter and May One Bunhill Row London EC1Y 8YY
To the Dealers and the Trustee Allen & Overy LLP One Bishops Square London E1 6AD
To the Issuers
St James' Square Manchester M2 6DS
5 The North Colonnade
133 Fleet Street London E14 5JP London EC4A 2BB
London EC2Y 9AJ London EC4M 9JA
2 Swan Lane London EC2M 3UR
0015437-0009001 ICM:18466404.1
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