Prospectus • Aug 16, 2011
Prospectus
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(incorporated with limited liability in England and Wales under registered number 02921462)
as Issuer
U.S.\$3,000,000,000
Euro Medium Term Note Programme
Arranger
UBS Investment Bank
Dealers
BNP PARIBAS BofA Merrill Lynch HSBC The Royal Bank of Scotland
UBS Investment Bank
This Offering Circular comprises a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the Prospectus Directive).
The Issuer (the Responsible Person) accepts responsibility for the information contained in this Offering Circular. To the best of the knowledge of the Issuer (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.
Under this U.S.\$3,000,000,000 Euro Medium Term Note Programme (the Programme), Man Group plc (the Issuer) may from time to time issue notes (the Notes) denominated in any currency agreed between the 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 U.S.\$3,000,000,000 (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 "Overview of the Programme" and any additional Dealer appointed under the Programme from time to time by the Issuer (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 subscribe such Notes.
Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 (the UK Listing Authority) 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 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 a final terms document (the Final Terms) which, with respect to Notes to be listed on the London Stock Exchange, will be delivered to the UK Listing Authority and the London Stock Exchange.
The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchanges or markets as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted Notes and/or Notes not admitted to trading on any market.
The Issuer may agree with any Dealer and the Trustee (as defined herein) that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event a supplemental Offering Circular, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes.
The Programme has been rated "(P)Baa2" (in respect of Senior Unsecured Notes), "(P)Baa3" (in respect of Dated Subordinated Notes and Undated Subordinated Notes), "(P)Ba1" (in respect of Junior Subordinated Notes) and "(P)P-2" (in respect of Short Term Notes) by Moody's Investors Services Limited (Moody's), "A-2" (in respect of Senior unsecured debt with a maturity of less than 1 year) and "BBB" (in respect of Senior unsecured debt with a maturity of more than 1 year) by Standard & Poor's Credit Market Services Europe Limited (Standard & Poor's) and "BBB" by Fitch Ratings Limited (Fitch). Senior issues Fitch does rate under the Programme whose coupons carry embedded market risk and whose principal does not will be rated "BBB(emr)". Each of Moody's, Standard & Poor's and Fitch is established in the European Union and has applied for registration under Regulation (EC) No. 1060/2009 of the European Parliament and of the Council of 16 September, 2009 on credit rating agencies (the CRA Regulation), although as of the date of this Offering Circular, notification of the corresponding registration decision has not yet been provided by the relevant competent authority.
Tranches of Notes issued under the Programme will be rated or unrated. Where a Tranche of Notes is rated, such rating will not necessarily be the same as the ratings described above or the ratings assigned to Notes already issued. Where a Tranche of Notes is rated, the applicable ratings will be specified in the relevant Final Terms. Whether or not each credit rating applied for in relation to the relevant Series of Notes will be issued by a credit rating agency established in the European Union and registered under the CRA Regulation will be disclosed in the Final Terms.
Copies of Final Terms will be available from the registered office of the Issuer and the specified office set out below of each of the Paying Agents (as defined below).
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"). This Offering Circular shall be read and construed on the basis that such documents are incorporated and form part of this Offering Circular.
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 Issuer in connection with the Programme. No Dealer or the Trustee accepts any liability in relation to the information contained or incorporated by reference in this Offering Circular or any other information provided by the Issuer in connection with the Programme.
No person is or has been authorised by the Issuer or the Trustee 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 Issuer, any of the Dealers or the Trustee.
Neither this Offering Circular nor any other information supplied in connection with the Programme or any Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer, 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 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 Issuer, 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 Issuer 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 Issuer during the life of the Programme or to advise any investor in the Notes of any information coming to their attention.
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 (see "Subscription and Sale").
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 Issuer, 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 Issuer, the Dealers or the Trustee which is intended to permit a public offering of any Notes 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 or sale of Notes in the United States, the European Economic Area (including the United Kingdom) and Japan, (see "Subscription and Sale").
All references in this document to U.S. dollars, U.S.\$ and \$ refer to United States dollars and all references to Sterling and £ refer to pounds sterling and all references to euro and € refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of the European Union, as amended, and all references to Yen refer to the lawful currency of Japan.
| Page | |
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| Overview of the Programme. | 5 |
| Risk Factors | 9 |
| Documents Incorporated by Reference | 24 |
| Form of the Notes | 25 |
| Form of Applicable Final Terms. | 27 |
| Terms and Conditions of the Notes | 38 |
| Page | |
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| Use of Proceeds | 63 |
| Description of the Issuer. | 64 |
| Taxation. | 78 |
| Subscription and Sale | 80 |
| General Information. | 82 |
| Additional Definitions | 85 |
In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in the applicable Final Terms 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.
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. The Issuer and any relevant Dealer may agree that Notes shall be issued in a form other than that contemplated in the Terms and Conditions, in which event, in the case of listed Notes only and if appropriate, a supplemental Offering Circular will be published.
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.
Words and expressions defined in "Form of the Notes" and "Terms and Conditions of the Notes" shall have the same meanings in this Overview.
| Issuer: | Man Group plc |
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| Risk Factors: | There are certain factors that may affect the Issuer's ability to fulfil its obligations under Notes issued under the Programme. 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 |
| Arranger: | UBS Limited |
| Dealers: | BNP PARIBAS HSBC Bank plc Merrill Lynch International The Royal Bank of Scotland plc UBS Limited |
| and any other Dealers appointed in accordance with the Programme Agreement. |
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| 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"). |
| Notes having a maturity of less than one year | |
| Notes having a maturity of less than one year will, if the proceeds of the issue are accepted in the United Kingdom, 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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| Principal Paying Agent: | HSBC Bank plc |
| Programme Size: | Up to U.S.\$3,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement) outstanding at any time. The Issuer 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: | Notes may be denominated in euro, Sterling, U.S. dollars, yen and, subject to any applicable legal or regulatory restrictions, any other currency agreed between the Issuer and the relevant Dealer. |
| Maturities: | The Notes will have such maturities as may be agreed between the 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 Issuer or the relevant Specified Currency. In addition, Undated Subordinated Notes may be issued under the Programme which will be undated and, accordingly, have no final maturity. Under current requirements, in the case of Dated Subordinated Notes which qualify as Lower Tier 2 capital in accordance with the requirements of the Financial Services Authority, the minimum maturity will be five years (Lower Tier 2 capital). Any minimum or maximum maturities may be subject to increase or decrease from time to time as a result of changes in applicable legal or regulatory requirements. |
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| Issue Price: | Notes may be issued on a fully-paid or a partly-paid basis and at an issue price which is at par or at a discount to, or premium over, par. |
| Form of Notes: | The Notes will be issued in bearer form as described in "Form of the Notes". |
| Fixed Rate Notes: | Fixed interest will be payable on such date or dates as may be agreed between the 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 Issuer and the relevant Dealer. |
| Floating Rate Notes: | Floating Rate Notes will bear interest at a rate determined: |
| (a) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc., and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series); or |
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| (b) on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or |
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| (c) on such other basis as may be agreed between the Issuer and the relevant Dealer. |
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| The margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer for each Series of Floating Rate Notes. |
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| Index Linked Notes: | Payments of principal in respect of Index Linked Redemption Notes or of interest in respect of Index Linked Interest Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as the Issuer and the relevant Dealer may agree. |
| Other provisions in relation to Floating Rate Notes and |
Floating Rate Notes and Index Linked Interest Notes may also have a maximum interest rate, a minimum interest rate or both. |
| Index Linked Interest Notes: | Interest on Floating Rate Notes and Index Linked Interest 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. |
| Dual Currency Notes: | Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as the Issuer and the relevant Dealer may agree. |
| Zero Coupon Notes: | Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest. |
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| Redemption: | The applicable Final Terms will indicate either that the relevant Notes (other than Undated Subordinated Notes) cannot be redeemed prior to any stated maturity (other than in specified instalments, if applicable, or for taxation reasons or following an Event of Default) or that such Notes will be redeemable at the option of the Issuer and/or the Noteholders upon giving notice to the Noteholders or the 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 Issuer and the relevant Dealer. |
| The applicable Final Terms may provide that Notes (other than Undated Subordinated Notes) may be redeemable in two or more instalments of such amounts and on such dates as are indicated in the applicable Final Terms. |
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| 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: | The Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer save that the minimum denomination of each Note will be such amount 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 €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 by the United Kingdom as provided in Condition 7. In the event that any such deduction is made, the Issuer will, save in the circumstances provided in Condition 7, be required to pay additional amounts to cover the amounts so deducted. |
| Negative Pledge: | The terms of the Senior Notes will contain a negative pledge provision as further described in Condition 3. |
| Cross Default: | The terms of the Senior Notes will contain a cross default provision as further described in Condition 9. |
| Status of the Senior Notes: | The Senior Notes will constitute direct, unconditional, unsubordinated and (subject to the provisions of the negative pledge in Condition 3) unsecured obligations of the Issuer and will rank pari passu and without any preference 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. |
| Status of the Dated Subordinated Notes: |
The Dated Subordinated Notes will constitute direct and unsecured obligations of the Issuer. The claims of the Trustee and the rights of the holders of the Dated Subordinated Notes will, in the event of the winding up of the Issuer, be subordinated in right of payment to the claims of all unsubordinated creditors of the Issuer and any amounts paid to the Trustee will be held on trust for distribution in satisfaction of the claims of unsubordinated creditors to the extent (if any) not fully paid and thereafter |
in or towards payment of the amounts due under the Dated Subordinated Notes and the relative Receipts and Coupons.
The Undated Subordinated Notes will constitute unsecured obligations of the Issuer. The claims of the Trustee and the rights of holders of the Undated Subordinated Notes will be subordinated to the claims of Creditors (as defined in Condition 2.3) and payments of principal and interest are conditional upon the Issuer being solvent at the time of payment by the Issuer, and no principal or interest shall be payable in respect of such Notes except to the extent that the Issuer could make such payment and still be solvent immediately thereafter. Status of the Undated Subordinated Notes:
Deferral Option: In the case of Undated Subordinated Notes, the Issuer shall have the right to elect to defer payment of interest on any Interest Payment Date by providing notice of such election to the Noteholders as provided in Condition 4.6.
Rating: Tranches of Notes issued under the Programme will be rated or unrated. Where a Tranche of Notes is rated, such rating will not necessarily be the same as the ratings described above or the ratings assigned to Notes already issued. Where a Tranche of Notes is rated, the applicable ratings will be specified in the relevant Final Terms. Whether or not each credit rating applied for in relation to the relevant Series of Notes will be issued by a credit rating agency established in the European Union and registered under Regulation (EC) No. 1060/2009 (the CRA Regulation) will be disclosed in the Final Terms. 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 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.
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. XIII.5.1 Listing and admission to trading:
Notes may be listed or admitted to trading, as the case may be, on other or further stock exchanges or markets agreed between the Issuer and the relevant Dealer in relation to the Series. Notes which are neither listed nor admitted to trading on any market may also be issued.
The applicable Final Terms will state whether or not the relevant Notes are to be listed and/or admitted to trading and, if so, on which stock exchanges and/or markets.
Governing Law: The Notes and any non-contractual obligations arising out of or in connection with the Notes will be governed by, and shall be 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 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").
Regulation S, Category 2. TEFRA C or D, as specified in the applicable Final Terms. United States Selling Restrictions:
The Issuer believes that the following factors may affect its ability to fulfil its obligations under Notes issued under the Programme. All of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. In reading this section, potential investors and others should note that Fund Products may allocate capital or otherwise procure investment exposure to Underlying Third Party Products. Similar factors identified in respect of the Group (including, but not limited to, poor investment performance, liquidity, vulnerability to rapid or high levels of redemptions, operations and employee breaches, the ability to attract and retain hedge fund investment and programming talent and regulatory changes) will likely equally apply to the businesses of third party hedge fund managers and advisers and therefore directly or indirectly impact the Fund Products.
In addition, factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme are also described below.
The Issuer believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision.
The amount of FUM and the performance of Fund Products are affected by a number of factors. The Fund Products may experience poor investment performance (both in absolute terms and relative to the performance of fund products managed by competitors and relative to other asset classes) due to the failure of strategies implemented in managing these Fund Products (including both the implementation of trading styles and the implementation of allocating and weighting towards trading styles). The amount of FUM and performance of Fund Products may also be affected by matters beyond the Group's control including conditions in the domestic and global financial markets and the wider economy, such as the level and volatility of equity prices, bond prices, interest rates (including but not limited to the impact of a low nominal interest rate environment, as recently seen, which may affect the Group's ability to create viable and attractive guaranteed Fund Products and result in lower sales and FUM), exchange rates, commodity prices, liquidity in markets, credit spreads, margin requirements, the availability and cost of credit and the responses of governments and regulators to these economic and market conditions.
Furthermore, loss of investor confidence in the alternative investment sector, whether because of changes in investor risk appetite, investor liquidity requirements, regulatory and fiscal changes, poor relative or absolute performance of alternative investment funds or for any other reason could lead to lower sales and higher redemptions of Fund Products.
Performance fees have historically comprised a significant proportion of the revenues of the Group. Performance fees require positive performance by the Fund Products in excess of "high water marks" or benchmarks, including the London Interbank Offered Rate and the London Interbank Bid Rate, various indices including the S&P 500 and FTSE All Share and various blended indices. To the extent that any of the Fund Products do not generate positive investment performance sufficient to earn performance fees, the revenues and net income of the Group will be lower and this could have a material adverse effect on the business, results of operations, financial condition and/or prospects of the Group.
During the financial year ended 31 March 2011, a significant proportion of the revenues of the Group were generated by, and, going forward, it is expected that a significant proportion of the Group's revenues will continue to be generated by, the AHL programme, either in Fund Products in respect of which AHL is the sole hedge fund manager or adviser or in Fund Products where AHL is a component. Therefore, the Group's revenues could be materially impacted if the AHL programme experiences poor performance and/or high levels of investor redemptions.
AHL is an investment manager which implements primarily directional strategies which seek to take advantage of upward or downward price trends. Accordingly, if global economic and market conditions (including the effect of government interventions) result in no clear trends or trends which abruptly reverse (as for example in 2009), this could adversely affect the performance of managed futures managers such as AHL. Market conditions in the future could be similar to or worse than those experienced in 2009 and could result in negative performance for AHL (and funds with similar trading strategies), reduced FUM, little or no performance fees from these Fund Products and lower sales and/or higher redemptions of Fund Products which comprise or have significant investments in AHL Fund Products in which AHL is the sole hedge fund manager. These in turn could have a disproportionate adverse impact on the business, financial condition, results of operations and/or prospects of the Group. There can also be no assurance that low correlation of AHL's performance to other asset classes (such as equities) will be sustained, which could result in negative performance for AHL, and may also have an adverse impact on one of the benefits of the GLG Acquisition relating to the potential diversification of the business of the Group resulting from a combination of the different investment styles and products offered by the Group.
Investors in the Fund Products have the ability, often at short notice, to redeem their investments. Investors may reduce all or any portion of their investments, or transfer their investments to other asset managers, for any number of reasons, including for reasons that may be unconnected with the performance of the Group. These reasons include, but are not limited to, changes in investor risk appetite, investor liquidity requirements, regulatory and fiscal changes, poor relative or absolute investment performance, fee rates, changes in investment management personnel, actual or perceived reputational risk or a reduction of investments in certain asset classes by investors. In addition, as the investor base of the Group could have a significant investor concentration from time to time, the impact could be exacerbated where the Group suffer redemptions from large investors which account for a material proportion of FUM and revenues. A decline in revenues resulting from high levels of redemptions could have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Group.
Despite the diversity of the Fund Products and the regions in which the Group operates, sources of the Group's FUM or its sales may, from time to time, be concentrated in certain regions and/or countries and/or with certain intermediaries or distributors. Moreover, the geographic concentration of the sources of the Group's FUM or its sales is constantly subject to change, which change may be significant. The Group's business, financial condition, results of operations, prospects and/or net inflows of FUM may therefore be affected significantly by events and circumstances in the relevant regions and countries where such geographic concentration exists.
All or substantially all of the Fund Products are managed pursuant to management or advisory agreements that may be terminated by the independent board of directors of the Fund Product or fund partnership agreements that permit investors to request liquidation of investments in the Fund Products on short notice. The termination of certain management agreements or commencement of the dissolution of certain Fund Products could cause a material reduction in FUM and loss of revenues and adversely affect the Group's reputation, which in turn could affect its business, financial condition, results of operations and/or prospects.
Some of the Fund Products may operate with a substantial degree of leverage. They may borrow and/or invest in futures, forward foreign exchange contracts, options, swaps and other derivative instruments and purchase securities using margining and/or borrowed money, so that the positions held by the Fund Products may support investment exposures which in aggregate value exceed the net asset value of the relevant Fund Products. This leverage creates the potential for higher returns, but the corollary is that it can magnify the impact of adverse market movements on the returns of the Fund Products, as well as result in a reduction in investment exposure and hence in FUM, management fees and performance fees.
Such leveraged Fund Products are designed to have sufficient liquidity to enable them to adjust leverage on a timely basis according to the risk management principles and parameters the Group and/or any member of the Group applies as investment manager. In times of severe market stress, the liquidity of investments including in Underlying Third Party Products may, however, be impaired while at the same time the Fund Product may have suffered losses of an amount which requires leverage to be reduced quickly.
Under these circumstances, the Group may, at its discretion and if considered appropriate, provide discretionary support to such Fund Products, including by purchasing investments in Underlying Third Party Products from the affected Fund Products. For those Fund Products which have committed purchase agreements, the directors of those Fund Products may choose to exercise those committed purchase agreements on behalf of the relevant Fund Product and this would oblige the Group to provide liquidity support to the relevant Fund Products. The provision of this support would reduce the capital and liquidity available to the Group for other purposes and, as a result of the increase in proprietary investments, increase the potential for market risk losses for the Group. If, however, the Group choose not to provide discretionary support in times of severe market stress, the Fund Products may suffer substantial losses if they have either to sell investments including in Underlying Third Party Products in illiquid markets at a large discount to net asset value or if they are obliged to maintain leverage at levels that are higher than would be desirable because there are no willing buyers of such investments. If the Fund Products make substantial losses there would be an adverse effect on FUM, management fees and performance fees.
A number of the Fund Products are dependent on third parties providing financing to support the leverage required for the investment strategies and target investment exposure of those Fund Products. If the risk appetite of these third parties diminishes, the Fund Products may not be able to obtain leverage at the same level, advance rate or cost as they have in the past. This could have a material adverse effect on (i) the performance of these Fund Products; (ii) the investment exposure of the Fund Products; (iii) the ability of these Fund Products to sustain their investment objectives, potentially resulting in a cessation of investment trading for a Fund Product; and (iv) the ability of the Group to bring to market new structured products. A reduction in the investment exposure of these Fund Products and/or the inability of the Group to offer new structured products could result in the reduced FUM of the Group, which in turn could have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Group. The Group may, instead, at its discretion and if considered appropriate, provide funding to these Fund Products. The provision of this discretionary support would reduce the capital and liquidity available to the Group for other purposes and, as a result of the increase in loans to Fund Products, increase the potential for credit risk losses for the Group.
The Fund Products and Underlying Third Party Products may make investments or hold trading positions in markets that are volatile and which may become illiquid. Timely divestiture or sale of trading positions can be impaired by decreased trading volumes, increased price volatility, concentrated trading positions, limitations on the ability to transfer positions in highly specialised or structured transactions to which the Fund Products and/or Underlying Third Party Products may be a party, or by changes in industry and government regulations. When a Fund Product holds a security or position, it is vulnerable to price and value fluctuations and may experience losses to the extent the value of the position decreases and it is unable to sell, hedge or transfer the position on a timely basis. Therefore, it may be impossible or costly for the Fund Products, or their Underlying Third Party Products, to liquidate positions rapidly, particularly if the relevant market is moving against a position or in the event of trading halts or daily price movement limits on the market or otherwise. Alternatively, it may not be possible in certain circumstances for a position to be purchased or sold promptly, particularly if there is insufficient trading activity in the relevant market or otherwise.
The risks identified above will be increased if a Fund Product or Underlying Third Party Product is required to liquidate positions rapidly to meet redemption requests, margin requests, margin calls or other funding requirements on that position or otherwise. The inability to sell positions rapidly due to a lack of liquidity has historically been a cause of substantial losses in the hedge fund industry. The ability of counterparties to force liquidations following losses or a failure to meet a margin call can result in the rapid sale of highly leveraged positions in declining markets, which would likely subject the Fund Products to substantial losses. The Group may fail to adequately predict the liquidity that the Fund Products, or Underlying Third Party Products, require to address counterparty requirements due to falling values of fund investments being financed by such counterparties, which could result not only in losses related to such investments, but in losses related to the need to liquidate unrelated investments in order to meet the relevant Fund Product's, or their Underlying Third Party Products', obligations. The Fund Products or Underlying Third Party Products may incur substantial losses in the event significant capital is invested in highly leveraged investments or investment strategies. Such losses would result in a decline in FUM, lead to investor requests to redeem remaining FUM (in the case of the Fund Products or their Underlying Third Party Products), and damage its reputation, each of which would materially and adversely impact its earnings, as well as its business, financial condition, results of operations and/or prospects.
Alternatively, the Group may, at its discretion and if considered appropriate, provide support to Fund Products in such circumstances, including by purchasing Underlying Third Party Products from or lending money to the affected Fund Products. For those Fund Products which have committed purchase agreements, the directors of those Fund Products may choose to exercise those committed purchase agreements on behalf of the relevant Fund Product and this would oblige the Group to provide liquidity support to the relevant Fund Products. The provision of this support would reduce the capital and liquidity available to the Group for other purposes and, as a result of the increase in proprietary investments or loans to Fund Products, increase the potential for market risk and/or credit risk losses for the Group.
Investors in a number of the Fund Products can redeem their investments at a shorter notice period than may be available to the Fund Products with respect to their investments in Underlying Third Party Products. While in normal market conditions the Fund Products may have sufficient liquidity to meet typical levels of redemptions, liquidity mismatches may become more prevalent in times of severe market stress when the liquidity of the Underlying Third Party Products may be adversely affected and when the investment managers of the Underlying Third Party Products may be more likely to impose "gates" on redeeming investors, suspend redemptions or create "sidepockets". If the level of redemption activity increases to above normal levels, it could become more difficult to manage the liquidity requirements of the Fund Products, making it more difficult or more costly for the Fund Products to liquidate positions rapidly to meet margin calls, redemption requests or otherwise. Under these circumstances, the Group may, at its discretion and if considered appropriate, provide liquidity support to these Fund Products. For those Fund Products which have committed purchase agreements, the directors of those Fund Products may choose to exercise those committed purchase agreements on behalf of the relevant Fund Product and this would oblige the Group to provide liquidity support to the relevant Fund Products.
If the Group choose not to provide discretionary liquidity support, such increased levels of redemption could also result in the Fund Products being forced to sell investments in Underlying Third Party Products at distressed prices and/or the directors of the relevant Fund Products may exercise their rights to restrict redemptions in order to manage liquidity. These difficulties may be exacerbated during periods of increased market disruptions, when asset managers, including the Fund Products, are forced to liquidate positions or redeem investments in Underlying Third Party Products to meet liquidity requirements, which could further contribute to market disruptions. In addition to the impact on FUM, the illiquidity and volatility of the global financial markets may negatively affect the ability of the Fund Products to manage inflows and outflows, to attract new capital to existing Fund Products (including MACs) or to prevent redemptions in Fund Products (including MACs). This in turn could have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Group.
The Group, at its discretion, provides liquidity support to the Fund Products. However, in certain circumstances, the Group may decide that it would not be beneficial or economical to provide such support to the Fund Products. The provision of liquidity support would reduce the capital and liquidity available to the Group for other purposes and, as a result of the increase in proprietary investments or loans to the Fund Products, increase the potential for market risk or credit risk losses for the Group. If, on the other hand, the Group chose not to provide such discretionary support, there is an increased likelihood of these Fund Products having to reduce leverage or suspend investor redemptions which could impair the performance of the Fund Products which, in turn, could have an adverse effect on the reputation of the Group and lead to increased redemptions by investors (including in respect of investments in other Fund Products that have not suspended investor redemptions), lower FUM and revenues, and affect the ability of the Group to sell Fund Products in the future. In addition, it is also possible that in these circumstances, some Fund Products could default on their obligations to counterparties, such as clearing brokers, and that this could severely impair the ability of any of the Fund Products to conduct business with key market counterparties. Any of these circumstances would, in turn, have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Group.
The Group's ability to borrow funds or access debt capital markets is dependent on a number of factors, including credit market conditions and Man's credit rating. The credit rating could be adversely affected by many factors including an actual or perceived material deterioration in the market environment in which the Group operates, a material fall in the value of its FUM or profitability or a significant increase in gearing or net debt levels. Man's credit rating has been, and may continue to be, affected by these and other factors.
Difficult credit market conditions and/or a significant lowering of Man's credit rating may make it difficult for the Group to refinance any existing credit facilities on adequate or economic terms or to refinance other or existing debt or obtain additional debt or other financing for new investment which the Group may need. In addition, the cost and terms of any replacement new credit facilities or debt could be less favourable and may include financial or other onerous covenants. This could in turn restrict the ability of the Group to provide discretionary liquidity support to the Fund Products, and as a result have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Group.
The asset management industry in which the Group is highly competitive. The Group's current competitors typically come from three sectors: independent single manager hedge funds, multi-strategy hedge funds and funds of hedge funds; traditional asset management firms; and large banking institutions. Such competitors offer products and services that are similar to, or compete with, those offered by the Group. The Group's ability to compete may be adversely affected if the Fund Products underperform or if its fee levels are higher in comparison with those of fund products offered by its competitors or if the quality of service provided by the Group in relation to the Fund Products is perceived to be poor in comparison with the quality of service provided by its competitors.
Competition within the asset management industry could lead to pressure on the Group to reduce the fees it charges its investors for products and services, on which its profit margins and earnings are in part dependent. There may also be pressure on the Group to increase expenditure on technology in order to match the service levels provided by its competitors, which may result in increased fixed costs and reduced margins. A failure to compete effectively in the environment described above may result in the loss of existing investors and business, and of opportunities to capture new business, each of which could lead to a reduction in FUM and have a material adverse effect on the Group's business, financial condition, results of operations (including impairments in the value of goodwill) and/or prospects.
The Group has proprietary investments in various Fund Products and Underlying Third Party Products, including seed capital provided to test new Underlying Third Party Products or new strategies, seed capital to support new Fund Product launches and investments resulting from the provision of liquidity support to certain Fund Products. A material decline in the market value of these investments could have a material adverse impact on the earnings of the Group.
Man has U.S. dollars as its functional currency. The majority of the Group's revenues are receivable in U.S. dollars while the majority of its expenses are payable in pounds sterling and Swiss francs. To the extent that these foreign currency exposures are not fully hedged, a strengthening of the pound sterling and/or the Swiss franc against the U.S. dollar would reduce the profits of the Group. A proportion of the Group's revenues is receivable in currencies other than U.S. dollars and to the extent that these currencies depreciate against the U.S. dollars, FUM and revenues in U.S. dollars will decline.
The Group has an interest rate mismatch between certain longer-term liabilities, which pay interest at fixed rates, and certain short-term assets, which receive variable rates of interest. If interest rates decline, the earnings of the Group may be reduced. In addition the variable rate of interest payable on certain long-term liabilities is determined by reference to LIBOR with a tenor that is different from the tenor of LIBOR used to determine the interest receivable on certain short-term assets. If the shape of the LIBOR yield curve changes, the earnings of the Group may be adversely affected.
The Group's future success will depend significantly upon the knowledge, expertise and continued services of certain highly skilled research professionals, portfolio managers and other key personnel, including its directors and senior management, and upon its ability to recruit, retain and motivate such personnel. The Group may fail to attract and/or retain highly skilled personnel or may incur increased costs in attracting and retaining such personnel.
The market for experienced investment and other professionals is extremely competitive and can be characterised by frequent movement of personnel among firms. Such personnel are difficult to attract, retain and, where necessary, replace, and the costs of attracting, retaining and/or replacing such personnel are significant and could increase over time. A significant proportion of the compensation costs of the Group is in the form of discretionary annual bonuses. In periods where the Group earns low or no performance fees, the Group may still have to pay significant compensation to retain or attract key personnel. In these circumstances, such amounts may represent a greater percentage of the Group's revenues than they have historically. An increase in taxes or tax rates may also result in the Group being unable to recruit or retain key personnel in certain jurisdictions.
If the Group were to lose any of its senior or high performing portfolio managers, senior management, research personnel or other key personnel, it could experience withdrawals of FUM or fail to obtain new business, which would result in the loss of related management fees and potential performance fees. The loss of senior management or other key personnel could also affect the ability of the Group to execute its strategy effectively or at all, or could result in a decline in the standards of management or operation of the Group's business. The loss of any senior portfolio manager, senior management or other key personnel for these or other reasons, as well as the inability to attract and/or retain new highly skilled personnel, could have a material adverse effect on the Group's business, financial condition, results of operations and/or prospects.
At its discretion and if considered appropriate, the Group makes loans to several of the Fund Products to support their liquidity requirements. Although this credit exposure is monitored and managed, there is a risk that, in the event of substantial declines in the value of the assets of the Fund Products to which the Group has lent money, such Fund Products could become insolvent and default on their obligations to the Group. This would have an adverse impact on the earnings of the Group.
The Group also has substantial cash deposits with a number of banks. Although these deposits are of short tenor and although the credit exposure is actively monitored and managed, were these banks to default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons, this would have an adverse impact on the earnings of the Group.
The Fund Products and Underlying Third Party Products also enter into numerous types of financing arrangements, including derivative contracts, over-the-counter instruments, swap or hedging transactions and other arrangements, with a wide array of counterparties around the world where, often, the terms of these contracts are customised and complex and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight. In the event that such counterparties fail to perform their obligations and investors in guaranteed Fund Products lose any amount of their principal/capital invested in such Fund Products, this could adversely affect the Group's reputation, lead to investor requests to redeem remaining FUM (including in other similar Fund Products) and potentially increase the risk of civil litigation for any losses suffered as a result of such loss, notwithstanding that these Fund Product guarantees are provided to the relevant Fund Products by third parties and not by Man. Furthermore, the Fund Products and Underlying Third Party Products often depend on the services of prime brokers and custodians to carry out certain securities transactions. In the event of the insolvency of a prime broker and/or custodian (such as in connection with the insolvency of Lehman Brothers), the relevant Fund Products or Underlying Third Party Products might not be able to recover equivalent assets in full as they might rank among the prime broker and custodian's unsecured creditors, or a prime broker or custodian might fail to segregate the Fund Product's or the Underlying Third Party Product's cash held from its own cash.
In the event of a counterparty default, particularly a default by any major investment bank, one or more of the Fund Products could incur material losses, and the resulting market impact of a major counterparty default could harm the Group's business, financial condition, results of operation and/or prospects. In the event that one of the Group's counterparties becomes insolvent or files for bankruptcy, the Group's ability to ultimately recover any losses suffered as a result of that counterparty's default may also be limited by the liquidity of the counterparty or the applicable legal regime governing the bankruptcy proceeding.
The Group, each of their subsidiaries, affiliates and the Fund Products and/or Underlying Third Party Products are subject to extensive regulation, legislation, accounting standards and changing interpretations thereof in a number of jurisdictions and there is a risk that changes to laws, regulations, policies and interpretations may adversely affect the Group, including via Fund Products or Underlying Third Party Products. In particular, following the recent interventions by governments in response to global economic conditions, it is widely expected that there will be a substantial increase in government regulation and supervision of the financial services industry and changes to existing regulatory regimes, whether on a national, European Union or global basis.
Any material changes to regulations can serve to limit the scope of the Group's activities and its flexibility regarding capital structure. Furthermore, any change in such regulations may have a material adverse effect on the ability of the Group to carry on its business and pursue its investment strategies or may affect the attraction of alternative investments generally for either private or institutional investors. Any of these changes could adversely affect the business, financial condition, results of operations and/or prospects of the Group.
On 16 December 2010, the Basel Committee issued its final guidance on changes to capital adequacy and liquidity requirements (Basel III) which envisages a substantial strengthening of existing capital rules. The Issuer cannot predict the precise effects of the potential changes that might result from implementation of the changes on both its own financial position or performance.
European authorities have indicated that they support the work of the Basel Committee on the approved changes in general, and the European Commission's corresponding proposals to implement the changes will be enacted through amendments to the Capital Requirement Directive (known as CRD IV).
If the Group (or any of their respective employees or other persons acting on their behalf), or any of the Fund Products and/or the directors of the Fund Products, breach applicable laws and regulations they are exposed to the risk of investigation by regulatory agencies, fines, temporary or permanent prohibition of the engagement in certain activities, suspensions of personnel or revocation of their licences and suspension or termination of the regulatory permissions given to its regulated subsidiaries. Regulatory proceedings could also result in adverse publicity or negative perceptions regarding the business of the Group and increased redemptions by investors in the Fund Products, as well as harm to their reputation. Any regulatory investigations could result in increased costs, the diversion of management's attention from the day to day running of the business and increase the risk of civil litigation from investors as well as harm to the reputation of the Group. Any regulatory investigations, proceedings, consequent liabilities or sanctions could have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Group.
The business of the Group is highly dependent on the successful and timely execution of complex investment management, operational, risk management and financial processes. Any operational errors or negligence by the employees of, or others acting on behalf of, the Group (including, for example, in the trading systems of AHL or in the execution of trading orders on behalf of the Fund Products) or weaknesses in the internal controls over these processes could result in losses for the Fund Products and/or claims against and/or losses for the Group or a requirement to compensate for losses of investors and/or other relevant parties in respect of Fund Products.
The business of the Group is also highly dependent on the integrity, security and reliability of its information technology (IT) systems and infrastructure. If any of the critical processes or systems do not operate properly or are disabled or are subject to unauthorised access, misuse, hacking and release of confidential information or computer viruses, the Group's ability to perform effective investment management of the Fund Products could be materially impaired. In addition, failure to maintain an adequate infrastructure commensurate with the size and scope of its business, or failure to maintain the Group's IT systems and networks properly or to upgrade and expand such systems in response to technological change or to accommodate the growth of its business could limit the Group's and/or the Enlarged Group's ability to conduct its operations and could impede the Group's productivity and growth.
In the investment management processes carried out on behalf of the Fund Products, the Group seeks to monitor and manage the risk exposure of these Fund Products through a variety of risk models and techniques which also depend on the accuracy of data in the models and the infrastructure and systems used for these processes. If the assumptions made in the models regarding, for example, market risk or liquidity prove to be inappropriate, the data is incorrect, the systems are inadequate or if the Group fails to take or cannot take appropriate steps to mitigate this risk based on information available in its risk monitoring systems, certain Fund Products could suffer significant losses, which could result in claims against and/or losses for the Group or a requirement to compensate for losses of investors and/or other relevant parties in respect of Fund Products.
Notwithstanding anything in this risk factor, the risk factor should not be taken as implying that either the Issuer or any member of the Group will be unable to comply with its obligations as a company with securities admitted to the Official List or as a supervised firm regulated by the Financial Services Authority.
The Fund Products and Underlying Third Party Products rely on third party providers of critical services such as fund administration, custodians, prime brokers, clearing brokers and providers of market data. Any significant interruption in the services of these third parties or a major deterioration in the quality of the service provided or bankruptcy or other termination could have a material adverse impact on these Fund Products and/or the Underlying Third Party Products including in relation to performance, client service levels and significant operational disruption.
Such operational or system failures could result in damage to the reputation of the Group, investor redemptions and reduced prospects for future sales, increased costs and the risk of regulatory action and/or exposure to litigation from investors who have suffered losses, which in turn could adversely affect the business, financial condition, results of operations and/or prospects of the Group.
Before the Fund Products make certain investments or they invest in Underlying Third Party Products, the Group conducts due diligence that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment or allocation. The due diligence investigation that the Group will carry out or will have carried out with respect to any investment opportunity may not, reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity, including, among other things, the existence of fraud or other illegal or improper behaviour. Moreover, such an investigation will not necessarily result in the investment being successful.
Failure by the Group to carry out effective due diligence processes could lead to Fund Products suffering losses as a result of poor investment strategy, operational or compliance failures or fraud by the investment manager of Underlying Third Party Products. As a result, the Group may suffer losses in relation to the Fund Products or on investments in Underlying Third Party Products, which would reduce FUM and revenues and could damage its reputation and result in increased investor redemptions and/or weak future sales. Such due diligence failures could also expose the Group to the risk of litigation from investors who have suffered losses.
The Group sells a number of Fund Products directly to institutional investors and to private investors through intermediaries or distributors. If these investors suffer losses on such Fund Products, they or their advisors may seek compensation from the Group on the basis of allegations that the Fund Products were mis-sold or that the fund prospectuses contained material errors or that misleading marketing materials were provided to or supplied by intermediaries. Despite the controls relating to disclosure in fund prospectuses, the material provided to investor intermediaries and the suitability of intermediaries, it is possible that such action may be successful, which in turn could adversely affect the business, financial condition, results of operations and/or prospects of the Group. Any claim for mis selling may also result in regulatory investigation and censure and may damage the reputation of the Group.
The Group's reputation is critical to maintaining and developing relationships with the investors in the Fund Products, potential investors and third parties with whom it does business. In recent years, there have been a number of highly publicised cases involving fraud, conflicts of interest or other misconduct by individuals in the financial services industry in general and the hedge fund industry in particular. There is a risk that the Group's employees (or others acting on behalf of the Group or others with whom the Group has a relationship) could engage in misconduct that adversely affects its business. For example, if an employee were to engage, or be accused of engaging, in illegal or suspicious activities, the Group could be subject to regulatory sanctions and suffer serious harm to its reputation, financial position, investor relationships and ability to attract future investors. Such illegal or suspicious activities could take the form of improper trading (such as execution of unauthorised transactions for investors, for themselves or any of the Fund Products); disclosure or improper use of confidential information; disregard for, breaches of or any failure in information management processes or systems (including "Chinese walls" or information barriers); breach of fiduciary duties (such as improper or unauthorised use of investor assets); or engagement in, misrecording or concealment of improper activities on behalf of investors or themselves.
Misconduct by employees or intermediaries of the Group's clients could also expose the Group to claims for financial losses or regulatory proceedings when it is alleged that the Group or its employees knew or should have known that such person was not authorised to undertake certain transactions. Dissatisfied investors could make claims against the Group, including but not limited to claims for negligence, fraud, unauthorised trading, failure to supervise, inadequate disclosure of risks, breach of fiduciary duty, intentional misconduct or unauthorised transactions.
Although the Group does not control the activities of its intermediaries, it could be held responsible for their improper conduct. If an intermediary engages in improper or unauthorised conduct, regulators could hold the Group responsible if they were to conclude that it knew or should have known that such conduct was unlawful.
It is not always possible to deter such misconduct, and the precautions that the Group takes to detect and prevent this activity may not be effective in all cases. Misconduct by their employees or others acting on their behalf, or even unsubstantiated allegations, could result in a material adverse effect on the reputation and the business, financial condition, results of operations and/or prospects of the Group.
The Group's reputation is one of its most important assets. The relationship of the Group with its investors, other significant market participants, as well as among its many stakeholders – including its staff, shareholders, investors in Fund Products, intermediaries, lenders, regulators, key business partners and the general public – is very important to its business. The Group's ability to attract and retain investors and employees and raise appropriate financing or capital may be adversely affected to the extent its reputation is damaged. Any deterioration in the market perception of the Group, including but not limited to pursuant to the loss of key personnel or poor investment performance, could lead to a loss of business or a failure to win new business. The Group's reputation could be also damaged by factors such as litigation, regulatory action, misconduct, operational failures, mismanagement, breach of data protection legislation in relation to client data, fraud (by employees or by third parties), failure to manage conflicts of interest or satisfy fiduciary responsibilities, failure to manage inside information, negative publicity or press speculation (whether or not any such allegations or claims are valid or ultimately disproved, dismissed or withdrawn), or a simple deterioration in the Group's performance. These issues could also arise in respect of sub-advisers that manage Group branded Fund Products or in respect of associates and/or joint ventures in which the Group have investments, over whom the Group has limited control. Damage to the reputation of the Group as a result of these or other factors could have a material adverse effect on its business, financial condition, results of operations and/or prospects.
The Group operates in many different territories and is, and is expected to continue to be, subject to many different international tax laws. Tax laws, and the interpretation of tax laws by taxing authorities, frequently change, sometimes with retrospective effect. It is possible that tax laws and the interpretation and/or application of such laws may change in such a way that the Group's effective corporate tax rates are increased, that the current fiscal treatment of alternative investment products is changed in a way that makes them unattractive to potential investors in certain jurisdictions or that taxes on transactions are introduced or applied in a way that adversely affects the viability of certain investment strategies carried out by the Fund Products (for example taxes payable on Underlying Third Party Products increase) or that taxes are levied on the Fund Products themselves. It is also possible that tax laws and their interpretation and/or application may change in such a way that the taxes payable by the employees of the Group in certain countries may increase and that this either results in the loss of key staff or in an increase in costs to prevent the loss of key staff. Any of these changes could adversely affect the financial condition, results of operations or future prospects of the Group.
The Group will be exposed to risk of litigation by investors in and/or directors of the Fund Products if the conduct of the management of or advice provided to any Fund Product is alleged to amount to negligence, wilful misconduct or fraud. Investors and/or Fund Product directors may in such circumstances decide to take legal action against the Group to recover amounts lost. Furthermore, the Group may be subject to litigation arising from investor dissatisfaction with the performance of the Fund Products or from allegations that it improperly exercised control or influence over companies in which the Fund Products have large investments. The Group also faces the risk of litigation from investors in the Fund Products, Fund Product directors and/or third party service providers, if it does not comply with, or if an investor claims that it has not complied with, restrictions in such Fund Products' organisational documents (for example, restrictions on entering into related party transactions).
In respect of Fund Products, the Group is exposed to the risk of litigation if the Fund Products suffer losses which may occur, for example, through the failure of a particular investment strategy or risk management or due diligence processes, or due to the trading activity of an employee who has violated the policies of the Group or market rules and regulations. Any litigation arising in such circumstances is likely to be protracted, expensive and potentially involve circumstances which are damaging to the Group's reputation and business.
If the Group is required to incur all or a portion of the costs arising out of litigation or investigations as a result of inadequate insurance proceeds or failure to obtain indemnification from the Fund Products, its operations and/or financial condition could be materially adversely affected.
Also, as a listed and regulated company, the Group is subject to the risk of investigation or litigation by certain parties including, without limitation, regulators, its public shareholders and/or noteholders arising from an array of possible claims, including investor dissatisfaction with the performance of its businesses or its share price, allegations of misconduct by its officers and directors or claims that it has inappropriately dealt with conflicts of interest or investment allocations. It is also likely that the Group would be brought into any lawsuit that is filed involving any of the Fund Product related litigation and regulatory risks described above. As with the Fund Products, while the Group maintains insurance, there can be no assurance that its insurance will prove to be adequate. If the Group is required to incur all or a portion of the costs arising out of litigation or investigations, its results of operations, financial condition and liquidity could be materially adversely affected. Furthermore, any such litigation or investigation could be protracted, expensive and highly damaging to the Group's reputation, even if the underlying claims are without merit. In addition, the Group may participate in transactions that involve or initiate litigation (including the enforcement of contractual rights) from time to time, and such transactions may expose it to reputational risk and increased risk from countersuits.
Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor's overall investment portfolio.
A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of the most common such features:
An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.
The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.
The Issuer may issue Notes with principal or interest determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or other factors (each, a Relevant Factor). In addition, the Issuer may issue Notes with principal or interest payable in one or more currencies which may be different from the currency in which the Notes are denominated. Potential investors should be aware that:
The historical experience of an index should not be viewed as an indication of the future performance of such index during the term of any Index Linked Notes. Accordingly, each potential investor should consult its own financial and legal advisers about the risk entailed by an investment in any Index Linked Notes and the suitability of such Notes in light of its particular circumstances.
The Issuer may issue Notes where the issue price is payable in more than one instalment. Failure to pay any subsequent instalment could result in an investor losing all of his investment.
Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.
Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as LIBOR. The market values of those Notes typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of these Notes.
Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will affect the secondary market and the market value of the Notes since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate in such circumstances, the fixed rate may be lower than then prevailing rates on its Notes.
The market values of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interestbearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.
The Issuer's obligations under Subordinated Notes will be unsecured and subordinated and will rank junior in priority of payment (i) (in the case of Dated Subordinated Notes) to the claims of all unsubordinated creditors; and (ii) (in the case of Undated Subordinated Notes) to the claims of all Creditors (as defined in Condition 2.3).
Although Subordinated Notes may pay a higher rate of interest than comparable Notes which are not subordinated, there is a real risk that an investor in Subordinated Notes will lose all or some of his investment should the Issuer become insolvent.
Payments in respect of the principal of, and interest on, Undated Subordinated Notes will be conditional upon the Issuer being solvent at the time of payment as provided and as more particularly described in Condition 2.3 and the Issuer shall have no liability to pay any such amount to the extent that it is insolvent or would become insolvent as a result of making such payment.
The Issuer may elect to defer any interest payment subject as provided and as more particularly described in Condition 4.6. Where a payment of interest is so deferred, no interest shall accrue on such Arrears of Interest but it may be paid at any time at the option of the Issuer.
Any deferral of interest payments will likely have an adverse effect on the market price of the Undated Subordinated Notes. In addition, as a result of the interest deferral provision of the Undated Subordinated Notes, the market price of the Undated Subordinated Notes may be more volatile than the market prices of other debt securities on which original issue discount or interest accrues that are not subject to such deferrals and may be more sensitive generally to adverse changes in the Issuer's financial condition.
Set out below is a brief description of certain risks relating to the Notes generally:
The 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 conditions of the Notes also provide that the Trustee may, without the consent of 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 place of the Issuer, in the circumstances described in Condition 14.
Under EC Council Directive 2003/48/EC on the taxation of savings income, 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, or collected by such a person for, an individual resident or certain limited types of entity established in that other Member State. However, for a transitional period, Luxembourg and Austria may instead apply a withholding system in relation to such payments deducting tax at rates rising over time to 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments.
A number of non-EU countries and certain dependent or associated territories of certain Member States have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity established in one of those territories.
The European Commission has proposed certain amendments to the 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 has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the 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. The Issuer is required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the Directive.
The 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.
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 such Notes may be traded in amounts that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination.
If definitive Notes 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.
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:
Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.
The Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the Investor's Currency) other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to the Specified Currency would decrease (1) the Investor's Currency-equivalent yield on the Notes, (2) the Investor's Currency-equivalent value of the principal payable on the Notes and (3) the Investor's Currency-equivalent market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.
Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Fixed Rate Notes.
One or more independent credit rating agencies may assign credit ratings to 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 or withdrawn by the rating agency at any time.
The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) 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 rules.
The following documents which have previously been published or are published simultaneously with this Offering Circular and have been filed with the Financial Services Authority shall be incorporated in, and form part of, this Offering Circular:
| (a) | the auditors' report and audited consolidated annual financial statements of the Issuer for the financial year ended 31 March 2010, as set out in the Issuer's 2010 Annual Report at the following pages: |
|---|---|
| Balance Sheet Page 35 | |
| Income StatementPage 36 | |
| Principal Accounting Policies and NotesPages 40 to 75 | |
| Auditors' ReportPage 77 | |
| (b) | the auditors' report and audited consolidated annual financial statements of the Issuer for the financial year ended 31 March 2011, as set out in the Issuer's 2011 Annual Report at the following pages: |
| Balance Sheet/Group Statement of Financial Position Page 64 | |
| Income StatementPage 59 | |
| Principal Accounting Policies and NotesPages 57 to 75 | |
| Auditors' ReportPage 76 |
(c) the Terms and Conditions of the Notes contained in the previous Offering Circular dated 21 December 2007, pages 29 to 53 (inclusive) (the 2007 Conditions), the Offering Circular dated 16 July 2009, pages 30 to 54 (inclusive) (the 2009 Conditions) and the Offering Circular dated 28 July 2010, pages 38 to 62 (inclusive) (the 2010 Conditions), each prepared by the Issuer in connection with the Programme.
Any documents themselves incorporated by reference in the documents incorporated by reference in this Offering Circular shall not form part of this Offering Circular. Any information contained in any of the documents specified above which is not incorporated by reference in this Offering Circular is either not relevant for the investor or is covered elsewhere in this Offering Circular.
Following the publication of this Offering Circular a supplement may be prepared by the Issuer and approved by the UK Listing Authority in accordance with Article 16 of the Prospectus Directive. 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 office of the Issuer and from the specified office of the Paying Agent for the time being in London.
The Issuer 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.
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:
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 Agent.
On and after the date (the Exchange Date) which is 40 days after the Issue Date (as specified in the applicable Final Terms), interests in such Temporary Global Note will be exchangeable (free of charge) upon a request as described therein either for (a) (i) (if the Final Terms indicates that the Global Note is intended to be a NGN) interests recorded in the records of the relevant Clearing System or (ii) (if the Final Terms indicates that the Global Note is not intended to be a NGN) interests in a Permanent Global Note of the same Series or (b) definitive Notes of the same Series with, where applicable, receipts, interest 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 issued 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, receipts, interest coupons and talons attached upon either (a) not less than 60 days' written notice from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Note) to the Agent as described therein or (b) only upon the occurrence of an Exchange Event or (c) at any time at the request of the Issuer.
For these purposes, Exchange Event means that (i) an event of default under Condition 9 in relation to any Note has occurred and is continuing, or (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 successor clearing system satisfactory to the Trustee is available or (iii) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Permanent Global Note in definitive form and a certificate to such effect signed by two Directors of the Issuer is given to the Trustee.
The Issuer will promptly give notice to Noteholders in accordance with Condition 13 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 Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iii) above, the Issuer may also give notice to the Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Agent.
The following legend will appear on all Notes which have an original maturity of more than 365 days and on all receipts and interest coupons relating to such Notes:
"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."
The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Notes, receipts or interest coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or interest coupons.
Notes which are represented by a Global Note will only be transferable 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 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, 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 at least the expiry of the distribution compliance period (as defined in Regulation S under the Securities Act) applicable to the Notes of such Tranche.
Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms or as may otherwise be approved by the Issuer, the 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 [date] which constitutes a base prospectus for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the Prospectus Directive). 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 is available for viewing [at [website]] [and] during normal business hours at [address] [and copies may be obtained from [address]].
Terms used herein shall be deemed to be defined as such for the purposes of the [date] Conditions (the Conditions) 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 (Directive 2003/71/EC) (the Prospectus Directive) and must be read in conjunction with the Offering Circular dated [current date] which constitutes a base prospectus for the purposes of the Prospectus Directive. 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 dated [current date]. Copies of the Offering Circular are available for viewing [at [website]] [and] during normal business hours at [address] [and copies may be obtained from [address]].
[Each issue of Notes must be approved by the Board or a duly authorised committee of the Board.]
[Include whichever of the following apply or specify as "Not Applicable" (N/A). Note that the numbering should remain as set out below, even if "Not Applicable" is indicated for individual paragraphs or subparagraphs. Italics denote directions for completing the Final Terms.]
[If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination must be £100,000 or its equivalent in any other currency.]
[When completing final terms or adding any other final terms or information consideration should be given as to whether such terms or information constitute "significant new factors" and consequently trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.]
| 1. | Issuer: | [ ] |
|---|---|---|
| 2. | (a) Series Number: |
[ ] |
| (b) Tranche Number: |
[ ] |
|
| (If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible) |
||
| 3. | Specified Currency or Currencies: | [ ] |
| 4. | Aggregate Nominal Amount: | |
|---|---|---|
| (a) Series: |
[ ] |
|
| (b) Tranche: |
[ ] |
|
| 5. | Issue Price: | [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (if applicable)] |
| 6. | (a) Specified Denominations: |
[ ] |
| (N.B. Following the entry into force of the 2010 PD Amending Directive on 31 December 2010, Notes to be admitted to trading on a regulated market within the European Economic Area with a maturity date which will fall after the implementation date of the 2010 PD Amending Directive in the relevant European Economic Area Member State (which is due to be no later than 1 July 2012) must have a minimum denomination of €100,000 (or equivalent) in order to benefit from Transparency Directive exemptions in respect of wholesale securities. Similarly, Notes issued after the implementation of the 2010 PD Amending Directive in a Member State must have a minimum denomination of €100,000 (or equivalent) in order to benefit from the wholesale exemption set out in Article 3.2(d) of the Prospectus Directive in that Member State.) |
||
| (Note –– where multiple denominations above €100,000 or equivalent are being used the following sample wording should be followed: |
||
| "€100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000. No Notes in definitive form will be issued with a denomination above €199,000.") |
||
| (N.B. If an issue of Notes is (i) NOT admitted to trading on a European Economic Area exchange; and (ii) only offered in the European Economic Area in circumstances where a prospectus is not required to be published under the Prospectus Directive the €100,000 minimum denomination is not required.) |
||
| (b) | Calculation Amount: | [ ] |
| (If only one Specified Denomination, insert the Specified Denomination. |
||
| If more than one Specified Denomination, insert the highest common factor. Note: There must be a common factor in the case of two or more Specified Denominations.) |
||
| 7. | (a) Issue Date: |
[ ] |
| (b) Interest Commencement Date: |
[specify/Issue Date/Not Applicable] | |
| (N.B. An Interest Commencement Date will not be relevant for certain Notes, for example Zero Coupon Notes.) |
| 8. | Maturity Date: | [Fixed rate –– specify date/ | |
|---|---|---|---|
| Floating rate –– Interest Payment Date falling in or nearest to [specify month]] |
|||
| 9. | Interest Basis: | [[ ] per cent. Fixed Rate] [[LIBOR/EURIBOR] +/- [ ] per cent. Floating Rate] [Zero Coupon] [Index Linked Interest] [Dual Currency Interest] [specify other] (further particulars specified below) |
|
| 10. | Redemption/Payment Basis: | [Redemption at par] [Index Linked Redemption] [Dual Currency Redemption] [Partly Paid] [Instalment] [specify other] |
|
| 11. | Change of Interest Basis or Redemption/Payment Basis: |
[Specify details of any provision for change of Notes into another Interest Basis or Redemption/Payment Basis] |
|
| 12. | Put/Call Options: | [Investor Put] [Issuer Call] [(further particulars specified below)] |
|
| 13. | Status: | [Senior/[Dated/Undated] Subordinated] | |
| 14. | Method of distribution: | [Syndicated/Non-syndicated] | |
| PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE | |||
| 15. | Fixed Rate Note Provisions | [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) |
|
| (a) | Rate(s) of Interest: | [ ] per cent. per annum [payable [annually/semi annually/quarterly/other (specify)] in arrear] |
|
| (b) | Interest Payment Date(s): | [[ ] in each year up to and including the Maturity Date]/[specify other] |
|
| (N.B. This will need to be amended in the case of long or short coupons) |
|||
| (c) | Fixed Coupon Amount(s): (Applicable to Notes in definitive form) |
[ ] per Calculation Amount |
|
| (d) | Broken Amount(s): (Applicable to Notes in definitive form) |
[ ] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [ ] |
|
| (e) | Day Count Fraction: | [30/360 or Actual/Actual (ICMA) or [specify other]] |
| (f) | [Determination Date(s): | [ ] in each year |
|---|---|---|
| (Insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon |
||
| N.B. This will need to be amended in the case of regular interest payment dates which are not of equal duration N.B. Only relevant where Day Count Fraction is Actual/Actual (ICMA))] |
||
| (g) | Other terms relating to the method of calculating interest for Fixed Rate Notes: |
[None/Give details] |
| 16. | Floating Rate Note Provisions | [Applicable/Not Applicable] |
| (If not applicable, delete the remaining subparagraphs of this paragraph) |
||
| (a) | Specified Period(s)/Specified Interest Payment Dates: |
[ ] |
| (b) | Business Day Convention: | [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/ [specify other]] |
| (c) | Additional Business Centre(s): | [ ] |
| (d) | Manner in which the Rate of Interest and Interest Amount is to be determined: |
[Screen Rate Determination/ISDA Determination/ specify other] |
| (e) (f) |
Party responsible for calculating the Rate of Interest and Interest Amount (if not the Agent): Screen Rate Determination: |
[ ] |
| • Reference Rate: |
[ ] (Either LIBOR, EURIBOR or other, although additional information is required if other –– including fallback provisions in the Agency Agreement) |
|
| • Interest Determination Date(s): |
[ ] |
|
| (Second London business day prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR) |
||
| • Relevant Screen Page: |
[ ] (In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately) |
|
| (g) | ISDA Determination: | |
| • Floating Rate Option: |
[ ] |
|
| • Designated Maturity: |
[ ] |
| • Reset Date: |
[ | ] | ||
|---|---|---|---|---|
| (h) | Margin(s): | [+/-] [ | ] per cent. per annum | |
| (i) | Minimum Rate of Interest: | [ | ] per cent. per annum | |
| (j) | Maximum Rate of Interest: | [ | ] per cent. per annum | |
| (k) | Day Count Fraction: | Actual/360 30/360 30E/360 Other] |
[Actual/Actual (ISDA) Actual/365 (Fixed) Actual/365 (Sterling) 30E/360 (ISDA) |
|
| (l) | Fallback provisions, rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions: |
[ | ] | |
| 17. | Zero Coupon Note Provisions | paragraph) | [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this |
|
| (a) | Accrual Yield: | [ | ] per cent. per annum | |
| (b) | Reference Price: | [ | ] | |
| (c) | Any other formula/basis of determining amount payable: |
[ | ] | |
| (d) | Day Count Fraction in relation to Early Redemption Amounts and late payment: |
[Conditions 6.6(c) and 6.11 apply/specify other] | ||
| 18. | Index Linked Interest Note Provisions | paragraph) | [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this |
|
| (a) | Index/Formula: | [give or annex details] XII.4.2.1 |
||
| (b) | Calculation Agent | address)] | XIII.4.8 [give name (and, if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, |
|
| (c) | Pa rty responsible for calculating the Rate of Interest (if not the Calculation Agent) and Interest Amount (if not the Agent): |
[ | ] XIII.4.8 |
|
| (d) | Provisions for determining Coupon where calculation by reference to Index and/or Formula is impossible or impracticable: |
[need to include a description of market disruption XII.4.2.3 XII.4.2.4 or settlement disruption events and adjustment provisions] |
||
| (e) | Specified Period(s)/Specified Interest Payment Dates: |
[ | ] |
| (f) | Business Day Convention: | other] | [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/ specify |
|
|---|---|---|---|---|
| (g) | Additional Business Centre(s): | [ | ] | |
| (h) | Minimum Rate of Interest: | [ | ] per cent. per annum | |
| (i) | Maximum Rate of Interest: | [ | ] per cent. per annum | |
| (j) | Day Count Fraction: | [ | ] | |
| 19. | Dual Currency Interest Note Provisions [Applicable/Not Applicable] | paragraph) | (If not applicable, delete the remaining subparagraphs of this | |
| (a) | Rate of Exchange/method of calculating Rate of Exchange: |
[give or annex details] | ||
| (b) | Party, if any, responsible for calculating the principal and/or interest due (if not the Agent): |
[ | ] | |
| (c) | Provisions applicable where calculation by reference to Rate of Exchange impossible or impracticable: |
[need to include a description of market disruption or settlement disruption events and adjustment provisions] |
||
| (d) | Person at whose option Specified Currency(ies) is/are payable: |
[ | ] | |
| PROVISIONS RELATING TO REDEMPTION | ||||
| 20. | Issuer Call: | paragraph) | [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this |
|
| (a) | Optional Redemption Date(s): | [ | ] | |
| (b) | Optional Redemption Amount and method, if any, of calculation of such amount(s): |
[[ | ] per Calculation Amount/specify other/see Appendix] | |
| (c) | If redeemable in part: | |||
| (i) Minimum Redemption Amount: |
[ | ] | ||
| (ii) Maximum Redemption Amount: |
[ | ] | ||
| (d) | Notice period (if other than as set out in the Conditions): |
[ | ] | |
| 21. | Investor Put: | paragraph) | [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this |
|
| (a) | Optional Redemption Date(s): | [ | ] |
(a) Form: Bearer Notes:
[Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes [on 60 days' notice given at any time/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 [on 60 days' notice given at any time/only upon an Exchange Event/at any time at the request of the Issuer]]*
(Ensure that this is consistent with the wording in the "Form of the Notes" section in the Offering Circular and the Notes themselves. *N.B. The exchange upon notice/at any time options should not be expressed to be applicable if the Specified Denominations of the Notes in paragraph 6 includes language substantially to the following effect: "[€100,000] and integral multiples of [€1,000] in excess thereof up to and including [€199,000]." Furthermore, such Specified Denomination construction is not permitted in relation to any issue of Notes which is to be represented on issue by a Temporary Global Note exchangeable directly for Definitive Notes.)
(Note that this paragraph relates to the place of payment and not Interest Period end dates to which sub-paragraphs 16(c) and 18(g) relate)
| 27. | Details relating to Partly Paid Notes: amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment: |
[Not Applicable/give details] | |
|---|---|---|---|
| 28. | Details relating to Instalment Notes: | ||
| (a) | Instalment Amount(s): | [Not Applicable/give details] | |
| (b) | Instalment Date(s): | [Not Applicable/give details] | |
| 29. | Redenomination applicable: | Redenomination [not] applicable [(if Redenomination is applicable, specify the terms of the redenomination (including, if applicable, consolidation) in an Annex to the Final Terms)] |
|
| 30. | Other final terms: | [Not Applicable/give details] | |
| DISTRIBUTION | |||
| 31. | (a) | If syndicated, names of Managers: [Not Applicable/give names] | |
| (b) | Date of [Subscription] Agreement: [ | ] (The above is only relevant if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies). |
|
| (c) | Stabilising Manager(s) (if any): | [Not Applicable/give name] | |
| 32. | If | non-syndicated, name of relevant Dealer: |
[Not Applicable/give name] |
| 33. | U.S. Selling Restrictions: | [Reg. S Compliance Category; TEFRA D/TEFRA C/TEFRA not applicable] |
|
| 34. | Additional selling restrictions: | [Not Applicable/give details] |
These Final Terms comprise the final terms required for issue and admission to trading on the London Stock Exchange's Regulated Market and admission to the Official List of the UK Listing Authority of the Notes described herein pursuant to the U.S.\$3,000,000,000 Euro Medium Term Note Programme of Man Group plc.
The Issuer accepts responsibility for the information contained in these Final Terms. [[Relevant third party information, for example in compliance with Annex XII to the Prospectus Directive Regulation in relation to an index or its components] has been extracted from [specify source]. 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 [specify source], no facts have been omitted which would render the reproduced information inaccurate or misleading.]
Signed on behalf of Man Group plc:
By: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Duly authorised
(i) Listing and Admission to trading: [Application has been made by the Issuer (or on its behalf) for the Notes to be admitted to trading on the London Stock Exchange's Regulated Market and admitted to listing on the Official List of the UK Listing Authority with effect from [ ].]
[Not Applicable.]
(ii) [ ] E XIII.6.1 stimate of total expenses related to admission to trading:
names of rating agencies]
The Notes to be issued have been rated: Ra XIII.7.5 tings: [Issuer to confirm legal
| [Standard & Poor's Credit Market Services | ||
|---|---|---|
| Europe Limited: | [ | ]] |
| [Moody's Investors Service Limited: [ | ]] | |
| [Fitch Ratings Limited: | [ | ]] |
(The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.)
[[Insert credit rating agency] is established in the European Union and has applied for registration under Regulation (EC) No. 1060/2009, although notification of the corresponding registration decision has not yet been provided by the relevant competent authority.]
[[Insert credit rating agency] is established in the European Union and is registered under Regulation (EC) No. 1060/2009.]
[[Insert credit rating agency] is not established in the European Union and is not registered in accordance with Regulation (EC) No. 1060/2009.]
[[Insert credit rating agency] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009. However, the application for registration under Regulation (EC) No. 1060/2009 of [insert the name of the relevant EU CRA affiliate that applied for registration], which is established in the European Union, disclosed the intention to endorse credit ratings of [insert credit rating agency].]
[[Insert credit rating agency] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009. The ratings [[have been]/[are expected to be]] endorsed by [insert the name of the relevant EU-registered credit rating agency] in accordance with Regulation (EC) No. 1060/2009. [Insert the name of the relevant EU-registered credit rating agency] is established in the European Union and registered under Regulation (EC) No. 1060/2009.]
[[Insert credit rating agency] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009, but it [is]/[has applied to be] certified in accordance with such Regulation.]
[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. –– Amend as appropriate if there are other interests]
| [(i) Reasons for the offer: | [ | ] |
|---|---|---|
| [(ii)] Estimated net proceeds: | [ | ] |
| [(iii)] Estimated total expenses: | [ | ]] (N.B.: Delete unless the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, in which case (i) above is required where the reasons for the offer are different from making profit and/or hedging certain risks and, where such reasons are inserted in (i), disclosure of net proceeds and total expenses at (ii) and (iii) above are also required.)] |
5. YIELD (Fixed Rate Notes only)
Indication of yield: [ ]
The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.
(Index-linked Notes only)
[Need to include details of where past and future performance and volatility of the index/formula can be obtained.]
[Where the underlying is an index need to include the name of the index and a description if composed by the Issuer and if the index is not composed by the Issuer need to include details of where the information about the index can be obtained.]
[Include other information concerning the underlying required by paragraph 4.2 of Annex XII of the Prospectus Directive Regulation.]
The Issuer [intends to provide post-issuance information [specify what information will be reported and where it can be obtained]] [does not intend to provide post-issuance information].
(N.B. This paragraph 6 only applies if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies.)
[Need to include details of where past and future performance and volatility of the relevant rates can be obtained.]
[(When completing this paragraph, consideration should be given as to whether such matters described constitute "significant new factors" and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)]
(N.B. This paragraph 7 only applies if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies.)
| (i) | ISIN Code: | [ | ] XII.4.1.1 |
|---|---|---|---|
| (ii) | Common Code: | [ | XIII.4.2 ] |
| (iii) | Any clearing system(s) other than Euroclear Bank SA/NV and Clearstream Banking, société anonyme and the relevant identification number(s): |
[Not Applicable/give name(s) and number(s)] | |
| (iv) | Delivery: | Delivery [against/free of] payment | |
| (v) | Nam es and addresses of additional Paying Agent(s) (if any): |
[ | ] XII.4.1.12 |
| (vi) | Intended to be held in a manner | [Yes] [No] | |
| which would allow Eurosystem eligibility: |
form] | [Note that the designation "yes" simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria.] [include this text if "yes"selected in which case the Notes must be issued in NGN |
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 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 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 Man Group plc (the Issuer) constituted by a Trust Deed dated 21 December 2007 made between the Issuer and HSBC Trustee (C.I.) Limited as modified by a First Supplemental Trust Deed dated 16 July 2009 made between (among others) the Issuer and HSBC Corporate Trustee Company (UK) Limited (the Trustee, which expression shall include any successor as Trustee) and as further modified by a Second Supplemental Trust Deed to be dated on or around 16 August 2011 and made between the Issuer and HSBC Corporate Trustee Company (UK) Limited (the Trustee, which expression shall include any successor as Trustee) (such Trust Deed as so modified and as further modified and/or supplemented and/or restated from time to time, the Trust Deed).
References herein to the Notes shall be references to the Notes of this Series and shall mean:
The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an Agency Agreement (such Agency Agreement as amended and/or supplemented and/or restated from time to time, the Agency Agreement) dated 21 December 2007 and made between (among others) the Issuer, the Trustee (following its accession thereto on 16 July 2009), HSBC Bank plc as issuing and principal paying agent and agent bank (the Agent, which expression shall include any successor agent) and the other paying agents named therein (together with the Agent, the Paying Agents, which expression shall include any additional or successor paying agents).
Interest bearing definitive Notes have interest coupons (Coupons) and, if indicated in the applicable Final Terms, 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. Definitive Notes repayable in instalments have receipts (Receipts) for the payment of the instalments of principal (other than the final instalment) attached on issue. Global Notes do not have Receipts, Coupons or Talons attached on issue.
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 supplement these Terms and Conditions (the Conditions) and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the Conditions, replace or modify the Conditions for the purposes of this Note. References to the applicable Final Terms are to Part A of the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note.
Any reference to Noteholders or holders in relation to any Notes shall mean the holders of the Notes and shall, in relation to any Notes represented by a Global Note, be construed as provided below. Any reference herein to Receiptholders shall mean the holders of the Receipts and any reference herein to Couponholders shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons. 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), the holders of the Receipts (the Receiptholders) 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 (a) expressed to be consolidated and form a single series and (b) 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 and the Agency Agreement are available for inspection during normal business hours at the registered office for the time being of the Trustee being at 16 July 2009 at 8 Canada Square, London E14 5HQ and at the specified office of each of the Paying Agents. Copies of the applicable Final Terms are available for viewing at the registered office of the Issuer and of the Agent and copies may be obtained from those offices save that, if this Note is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive, 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, the Trustee and the relevant Paying Agent as to its holding of such Notes and identity. The Noteholders, the Receiptholders 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 the 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, the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in the 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 Trust Deed or the Agency Agreement 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 Specified Currency and the Specified Denomination(s). 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, an Index Linked Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Final Terms.
This Note may be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Redemption Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/Payment Basis shown in the applicable Final Terms.
This Note may be a Senior Note, a Dated Subordinated Note or an Undated Subordinated Note, as indicated 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 the Conditions are not applicable.
Subject as set out below, title to the Notes, Receipts and Coupons will pass by delivery. The Issuer, the Paying Agents and the Trustee will (except as otherwise required by law) deem and treat the bearer of any Note, Receipt 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 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 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. In determining whether a particular person is entitled to a particular nominal amount of Notes as aforesaid, the Trustee may rely on such evidence and/or information and/or certification as it shall, in its absolute discretion, think fit and, if it does so rely, such evidence and/or information and/or certification shall, in the absence of manifest error, be conclusive and binding on all concerned.
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 additional or alternative clearing system specified in the applicable Final Terms or as may otherwise be approved by the Issuer, the Agent and the Trustee.
The Senior Notes and any relative Receipts and Coupons constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 3) unsecured obligations of the Issuer and rank pari passu and without any preference 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.
The Dated Subordinated Notes and any relative Receipts and Coupons constitute direct, unsecured and subordinated obligations of the Issuer and rank pari passu and without any preference among themselves.
The claims of the Trustee and the rights of holders of Dated Subordinated Notes and any relative Receipts and Coupons against the Issuer to payment of principal and interest in respect of the Dated Subordinated Notes are, in the event of the winding-up of the Issuer, subordinated in right of payment in the manner provided in the Trust Deed to the claims of all unsubordinated creditors of the Issuer. Accordingly, any amounts paid to the Trustee in the winding-up of the Issuer as aforesaid will be held on trust for distribution in satisfaction of the claims of unsubordinated creditors to the extent (if any) not fully paid up and thereafter in or towards payment of the amounts due under the Dated Subordinated Notes and the relative Receipts and Coupons.
The provisions of this Condition 2.2 apply only to the principal and interest in respect of the Dated Subordinated Notes and nothing in this Condition 2.2 or in Condition 9 shall affect or prejudice the payment of the costs, charges, expenses, liabilities or remuneration of the Trustee or the rights and remedies of the Trustee in respect thereof.
The Undated Subordinated Notes (together with the Dated Subordinated Notes, the Subordinated Notes) and any relative Coupons constitute unsecured and subordinated obligations of the Issuer, conditional as described below and rank pari passu without any preference among themselves.
The claims of the Trustee and the rights of holders of Undated Subordinated Notes and any relative Coupons against the Issuer to payment of principal and interest in respect of the Undated Subordinated Notes are subordinated in right of payment in the manner provided in the Trust Deed to the claims of all Creditors (as defined below). Accordingly, amounts due and payable in respect of such principal and interest shall be due and payable only if and to the extent that the Issuer could be considered solvent at the time of payment thereof and still be considered solvent immediately thereafter. For this purpose, the Issuer shall be considered solvent if both (i) it is able to pay its debts to Creditors as they fall due and (ii) its Assets exceed its Liabilities to Creditors. For the avoidance of doubt, interest which is unpaid pursuant to this Condition 2.3 shall constitute Arrears of Interest in accordance with Condition 4.6.
A report as to the solvency of the Issuer by two Directors of the Issuer or, in certain circumstances as provided in the Trust Deed, the Auditors (as defined below) or, if the Issuer is being wound up, its liquidator shall, in the absence of manifest error, be treated and accepted by the Issuer, the Trustee and the holders of the Undated Subordinated Notes and any relative Coupons as correct and sufficient evidence thereof.
If at any time an order is made or an effective resolution is passed for the winding-up in England of the Issuer (except for the purposes of a reconstruction, amalgamation, reorganisation, merger or consolidation on terms previously approved in writing by the Trustee or by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders), there shall be payable by the Issuer in respect of each Undated Subordinated Note (in lieu of any other payment by the Issuer) such amount, if any, as would have been payable to the holder thereof if, on the day prior to the commencement of the winding-up and thereafter, such holder were the holder of one of a notional class of preference shares in the capital of the Issuer having a preferential right to a return of assets in the winding-up over the holders of all other classes of issued shares for the time being in the capital of the Issuer on the assumption that such preference share was entitled to receive on a return of assets in such winding-up an amount equal to the principal amount of such Undated Subordinated Note together with Arrears of Interest (as defined in Condition 4.6), if any, and any accrued interest other than Arrears of Interest, as provided in the Trust Deed.
For the purposes of Conditions 2.2 and 2.3:
Assets means the non-consolidated gross assets of the Issuer as shown by the then latest published balance sheet of the Issuer but adjusted for contingencies and for subsequent events and to such extent as two Directors of the Issuer, the Auditors or the liquidator of the Issuer (as the case may be) may determine to be appropriate;
Auditors means the auditors for the time being of the Issuer or, in the event of their being unable or unwilling promptly to carry out any action requested of them pursuant to the provisions of the Trust Deed, such other firm of accountants as may be nominated or approved by the Trustee after consultation with the Issuer;
Creditor means any creditor of the Issuer (i) who is an unsubordinated creditor of the Issuer or (ii) whose claim is or is expressed to be subordinated to the claim of any unsubordinated creditor of the Issuer but not further or otherwise or (iii) who is a subordinated creditor of the Issuer other than any whose claim ranks or is expressed to rank pari passu with or junior to the claims of the holders of any Undated Subordinated Notes; and
Liabilities means the non-consolidated gross liabilities of the Issuer as shown and adjusted in like manner as for Assets.
The obligations of the Issuer in respect of the Undated Subordinated Notes are conditional on the Issuer being solvent, within the meaning described in Condition 2.3, at the time of, and immediately after, payment by the Issuer. If the Issuer would not be so solvent, any amounts which might otherwise have been allocated in or towards payment of principal and interest in respect of the Undated Subordinated Notes may be used to absorb losses. In the event of a winding-up of the Issuer each holder of an Undated Subordinated Note will be treated as a holder of one of a notional class of preference shares as described above.
The provisions of this Condition 2.3 apply only to the principal and interest in respect of the Undated Subordinated Notes and nothing in this Condition 2.3 or in Condition 9 shall affect or prejudice the payment of the costs, charges, expenses, liabilities or remuneration of the Trustee or the rights and remedies of the Trustee in respect thereof.
Subject to applicable law, no holder of any Subordinated Note or any related Receipt or Coupon may exercise, claim or plead any right of set-off, counterclaim or retention in respect of any amount owed to it by the Issuer arising under or in connection with the Dated or Undated Subordinated Notes or any relative Receipts or Coupons and each holder shall, by virtue of being the holder of any Dated or Undated Subordinated Note or, as the case may be, relative Receipt or Coupon, be deemed to have waived all such rights of such set-off, counterclaim or retention.
This Condition 3 shall apply only to the Senior Notes and references to Notes and Noteholders shall be construed accordingly.
So long as any Note remains outstanding (as defined in the Trust Deed) the Issuer shall not and shall procure that no Principal Subsidiary (as defined in Condition 9) shall create or permit to subsist any mortgage, lien, pledge or other charge (Security) upon any part of their respective undertakings or assets, present or future, (including uncalled capital) as security for any Obligation (as defined below) and the Issuer shall not permit any Principal Subsidiary to give any guarantee of or indemnity in respect of any Obligation without in each case at the same time according to the Trustee and the Noteholders a pari passu and rateable interest in the same security and/or guarantee and/or indemnity or such other security and/or guarantee and/or indemnity or other arrangement (whether or not including the granting of security and/or a guarantee and/or an indemnity) as the Trustee shall in its absolute discretion deem not materially less beneficial to the Noteholders or as shall have been approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders provided that any Principal Subsidiary (as defined in Condition 9) acquired after the Issue Date (as defined in the applicable Final Terms) may have outstanding Security with respect to an Obligation of such Principal Subsidiary (without the obligation to secure the Notes as aforesaid) so long as:
For the purpose of this Condition, Obligation means:
Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date (subject in the case of Undated Subordinated Notes to the provisions of Condition 4.6).
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.
Except in the case of Notes in definitive form where an applicable 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 is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate 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.
As used in this Condition:
Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 4.1:
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).
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.
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, one cent.
Each Floating Rate Note and Index Linked Interest Note bears interest 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 (which expression shall, in the Conditions, mean 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 the Conditions, Business Day means:
TARGET Settlement Day means any day on which the TARGET2 System is open for the settlement of payments in euro; and
TARGET2 System means the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) payment system which utilises a single shared platform and which was launched on 19 November 2007.
The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked Interest Notes will be determined in the manner specified in the applicable Final Terms.
(i) ISDA Determination for Floating Rate Notes
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 subparagraph (i), ISDA Rate for an Interest Period means a rate equal to the Floating Rate that would be determined by the Agent under an interest rate swap transaction if the Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the Notes (the ISDA Definitions) and under which:
For the purposes of this subparagraph (i), Floating Rate, Calculation Agent, Floating Rate Option, Designated Maturity and Reset Date have the meanings given to those terms in the ISDA Definitions.
Unless otherwise stated in the applicable Final Terms the Minimum Rate of Interest shall be deemed to be zero.
(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 as at 11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) 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 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 Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.
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 Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Final Terms as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Final Terms.
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 Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Index Linked Interest Notes, 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. In the case of Index Linked Interest Notes, the Calculation Agent will notify the Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.
The Agent will calculate the amount of interest (the Interest Amount) payable on the Floating Rate Notes or Index Linked Interest Notes for the relevant Interest 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 Floating Rate Note or an Index Linked Interest 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.
Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 4.2:
(v) if "30/360", "360/360" or "Bond 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 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;
(vi) 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 = [360 × (Y2 – Y1)] + [30 × (M2 – M1)] + (D2 – D1)] 360
"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;
(vii) 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 = [360 × (Y2 – Y1)] + [30 × (M2 – M1)] + (D2 – D1)] 360
"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.
The 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 Issuer, the Trustee and any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and notice thereof to be published in accordance with Condition 13 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 on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and to the Noteholders in accordance with Condition 13. 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 Agent or, as the case may be, the Calculation Agent defaults in its obligation to determine the Rate of Interest or the Agent defaults in its obligation to calculate any Interest Amount in accordance with subparagraph (b)(i) or subparagraph (b)(ii) above or as otherwise specified in the applicable Final Terms, as the case may be, and in each case in accordance with paragraph (d) above, the Trustee shall determine the Rate of Interest (or shall, at the expense of the Issuer, appoint an agent on its behalf to do so) 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 Agent or the Calculation Agent, as applicable.
All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4.2, whether by the Agent or, if applicable, the Calculation Agent or Trustee, shall (in the absence of wilful default, bad faith and manifest error) be binding on the Issuer, the Agent, the Calculation Agent (if applicable), the other Paying Agents, the Trustee and all Noteholders, Receiptholders and Couponholders and (in the absence of wilful default and bad faith) no liability to the Issuer, the Noteholders, the Receiptholders or the Couponholders shall attach to the Agent, if applicable, the Calculation Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.
The rate or amount of interest payable in respect of Dual Currency Interest Notes shall be determined in the manner specified in the applicable Final Terms.
In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Final Terms.
Each Note (or in the case of the redemption of part only of a Note, that part only of such 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 until whichever is the earlier of:
In the case of Undated Subordinated Notes, on any Interest Payment Date there may be paid (if the Issuer so decides and gives not less than seven days' notice of such decision to the holders in accordance with Condition 13) the interest accrued in the Interest Period which ends on that Interest Payment Date, but the Issuer shall not have any obligation to make such payment and any failure to pay shall not constitute a default by the Issuer for any purpose. Any interest not so paid on an Interest Payment Date together with any other interest not paid on any other Interest Payment Date shall, so long as the same remains unpaid, constitute Arrears of Interest. Arrears of Interest may, at the option of the Issuer, be paid in whole or in part (any such part being the whole of the interest accrued during any Interest Period or Periods) at any time upon the expiration of not less than seven days' notice to such effect given to the Noteholders in accordance with Condition 13 but so that in the case of payment of only part of the Arrears of Interest the interest accrued during any Interest Period shall not be paid prior to that accrued during an earlier Interest Period. All Arrears of Interest in respect of the Undated Subordinated Notes outstanding shall (subject to Condition 2.3) become due in full on the earliest of (i) the date upon which a dividend or distribution is next declared or paid on any class of share capital of the Issuer or any other capital of the Issuer ranking junior to the Undated Subordinated Notes, (ii) the date set for any redemption pursuant to Condition 6.3 or 6.4 or (iii) the commencement of the winding-up of the Issuer (except for the purposes of a reconstruction, amalgamation, reorganisation, merger or consolidation on terms previously approved in writing by the Trustee or by an Extraordinary Resolution of the Noteholders).
Notwithstanding the foregoing, if notice is given by the Issuer of its intention to pay the whole or part of Arrears of Interest, the Issuer shall be obliged (subject to Condition 2.3) to do so upon the expiry of such notice. So long as, and to the extent that, the same have not become due and payable, Arrears of Interest shall not bear interest. All references in these conditions to interest on Undated Subordinated Notes shall, unless the context otherwise requires, include Arrears of Interest.
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 7.
Payments of principal in respect of definitive Notes will (subject as provided below) be made in the manner provided in Condition 5.1 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, its territories, its possessions and other areas subject to its jurisdiction)).
Payments of instalments of principal (if any) in respect of definitive Notes, other than the final instalment, will (subject as provided below) be made in the manner provided in Condition 5.1 above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment will be made in the manner provided in Condition 5.1 above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Note in accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant instalment together with the definitive Note to which it appertains. Receipts presented without the definitive Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any definitive Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof.
Fixed Rate Notes in definitive form (other than Dual Currency Notes, Index Linked Notes or Long Maturity Notes (as defined below)) 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 7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 8) 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, Dual Currency Note, Index Linked Note or Long Maturity 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. A Long Maturity Note is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note.
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 and such record shall be prima facie evidence that the payment in question has been made.
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 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 or Clearstream, Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer to, or to the order of, the holder of such Global Note.
Notwithstanding the foregoing provisions of this Condition, 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, Receipt 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 (subject to Condition 8):
Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as applicable:
(b) the Final Redemption Amount of the Notes;
(c) the Early Redemption Amount of the Notes;
Any reference in the 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 7 or under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to the Trust Deed.
The provisions of this Condition 6.1 shall have effect in relation to any Series of Notes other than Undated Subordinated Notes.
Unless previously redeemed or purchased and cancelled as specified below, each Note (including each Index Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the Maturity Date.
The provisions of this Condition 6.2 shall have effect in relation to any Series of Undated Subordinated Notes.
The Notes are undated and, accordingly, have no final maturity date and may not be repaid except in accordance with this Condition 6 and Condition 2.3.
The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is neither a Floating Rate Note, an Index Linked Interest Note nor a Dual Currency Interest Note) or on any Interest Payment Date (if this Note is either a Floating Rate Note, an Index Linked Interest Note or a Dual Currency Interest Note), on giving not less than 30 nor more than 60 days' notice to the Trustee and the Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), if the Issuer satisfies the Trustee immediately before the giving of such notice that:
Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Trustee a certificate signed by two Directors of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment or, as the case may be, that any payment of interest in respect of Undated Subordinated Notes would be treated as a "distribution" and the Trustee shall be entitled to accept the certificate and the opinion as sufficient evidence of the satisfaction of the conditions precedent set out above, in which event it shall be conclusive and binding on the Noteholders, the Receiptholders and the Couponholders.
Notes redeemed pursuant to this Condition 6.3 will be redeemed at their Early Redemption Amount referred to in Condition 6.6 below together (if appropriate) with interest accrued to (but excluding) the date of redemption.
If Issuer Call is specified in the applicable Final Terms, the Issuer may, having given:
(which notices 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, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date and, in the case of Undated Subordinated Notes, all Arrears of Interest, provided that Dated Subordinated Notes may only be redeemed before the fifth anniversary of their Issue Date pursuant to Condition 6.13. 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 13 not less than 15 days prior to the date fixed for redemption. 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 6.4 and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least five days prior to the Selection Date.
If Investor Put is specified in the applicable Final Terms, upon the holder of any Note (other than an Undated Subordinated Note) giving to the Issuer in accordance with Condition 13 not less than 15 nor more than 30 days' notice the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Final Terms, 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, provided that Dated Subordinated Notes may only be redeemed after the fifth anniversary of their Issue Date. It may be that before an Investor Put can be exercised, certain conditions and/or circumstances will need to be satisfied. Where relevant, the provisions will be set out in the applicable Final Terms.
To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in definitive form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified office of any Paying Agent at any time during normal business hours of such Paying Agent falling within the notice period, 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 accompanied by this Note or evidence satisfactory to the Paying Agent concerned that this Note will, following delivery of the Put Notice, be held to its order or under its control. If this Note is represented by a Global Note or is in definitive form and held through Euroclear or Clearstream, Luxembourg, to exercise the right to require redemption of this Note the holder of this Note must, within the notice period, give notice to the Agent of such exercise in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear or Clearstream, Luxembourg or any common depositary or common safekeeper, as the case may be, for them to the Agent by electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time and, if this Note is represented by a Global Note, at the same time present or procure the presentation of the relevant Global Note to the Agent for notation accordingly.
For the purpose of Condition 6.4 above and Conditions 9.1 and 9.4, each Note will be redeemed at its Early Redemption Amount calculated as follows:
Early Redemption Amount = RP ˘ (1 + AY)y
where:
RP means the Reference Price;
AY means the Accrual Yield expressed as a decimal; and
y is a fraction the numerator of which is equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator of which is 360,
or on such other calculation basis as may be specified in the applicable Final Terms.
In the case of Undated Subordinated Notes the Early Redemption Amount will include all Arrears of Interest (if any).
Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case of early redemption, the Early Redemption Amount will be determined pursuant to Condition 6.6.
Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the applicable Final Terms.
The Issuer or any Subsidiary of the Issuer may at any time purchase Notes (provided that, in the case of definitive Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. Any Notes so purchased may, at the option of the Issuer, be surrendered to a Paying Agent for cancellation.
All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts, Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled, and any Notes purchased and surrendered to a Paying Agent for cancellation pursuant to Condition 6.9 above, shall (together with all unmatured Receipts, Coupons and Talons cancelled therewith) be forwarded to the 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 Condition 6.1, 6.3, 6.4 or 6.5 above or upon its becoming due and repayable as provided in Condition 9 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 Condition 6.6 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 payable were replaced by references to the date which is the earlier of:
Undated Subordinated Notes may only be redeemed and the Issuer or any of its Subsidiaries may only purchase or procure others to purchase for its account any such Notes provided that such redemption or purchase is made in accordance with the provisions of Condition 2.3.
In the case of any Dated Subordinated Note or Undated Subordinated Note, under the practice of the FSA prevailing as at 16 July 2009, no repayment prior to the scheduled maturity date can be made by the Issuer unless, at least one month before it becomes committed to the repayment, the Issuer has given the FSA notice in writing (in the form required by the FSA) of the proposed repayment, detailing how, following such repayment, it will (1) continue to meet its capital resources requirement and (2) have sufficient overall financial resources including capital resources and liquidity resources, which are adequate, both as to amount and quality, to ensure that there is no significant risk that its liabilities cannot be met as they fall due.
Dated Subordinated Notes may be redeemed by the Issuer pursuant to this Condition 6 prior to the fifth anniversary of the Issue Date provided that:
All payments of principal and interest in respect of the Notes, Receipts and Coupons by the 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 Issuer will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes, Receipts 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, Receipts 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, Receipt or Coupon:
As used in these Conditions, 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 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 13.
Subject, in relation to any Series of Undated Subordinated Notes, to the provisions of Condition 4.6, the Notes, Receipts 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 7) 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 5.2 or any Talon which would be void pursuant to Condition 5.2.
The Trustee at its discretion may, and if so requested in writing by the holders of at least one-fifth in nominal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to being indemnified and/or secured and/or prefunded to its satisfaction), (but in the case of the happening of any of the events described in paragraphs (b) to (d) (other than the windingup or dissolution of the Issuer) (inclusive) and (e) to (g) (inclusive) below, only if the Trustee shall have certified in writing to the Issuer that such event is, in its opinion, materially prejudicial to the interests of the Noteholders), give notice in writing to the Issuer that each Note is, and each Note shall thereupon immediately become, due and repayable at its Early Redemption Amount together with accrued interest as provided in the Trust Deed if any of the following events (each an Event of Default) shall occur:
(a) if default is made in the payment of any principal or interest due in respect of the Notes or any of them and the default continues for a period of seven days in the case of principal and 14 days in the case of interest; or
The Trustee may at any time, at its discretion and without notice, take such proceedings against the Issuer as it may think fit to enforce the provisions of the Trust Deed, the Senior Notes, the Receipts and the Coupons, but it shall not be bound to take any such proceedings or any other action in relation to the Trust Deed, the Senior Notes, the Receipts or the Coupons unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by the holders of at least one- fifth in aggregate nominal amount of the Senior Notes then outstanding and (ii) it shall have been indemnified and/or secured and/or prefunded to its satisfaction.
No holder of Senior Notes, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing.
For the purposes of the Conditions:
Indebtedness for Borrowed Money means any indebtedness (whether being principal, premium, interest or other amounts) for or in respect of any notes, bonds, debentures, debenture stock, loan stock or other securities or any borrowed money or any liability under or in respect of any acceptance or acceptance credit but excluding any indebtedness owed by one member of the Group to another member of the Group;
Principal Subsidiary means any Subsidiary whose net assets (based on the unaudited financial information used by the Issuer for the purpose of producing the Issuer's most recent published audited consolidated balance sheet) represent at least 10 per cent. of the Issuer's consolidated net assets (as shown by the Issuer's most recent published audited consolidated balance sheet) or, in the case of a Subsidiary acquired after the Issuer's most recent published audited consolidated balance sheet, any Subsidiary whose net assets would have represented at least 10 per cent. of the Issuer's consolidated net assets had they been included in the Issuer's consolidated balance sheet at that time.
A report by two Directors of the Issuer that in their opinion a Subsidiary of the Issuer is or is not or was or was not at any particular time or throughout any specified period a Principal Subsidiary may be relied upon by the Trustee without further enquiry or evidence and, if relied upon by the Trustee, shall, in the absence of manifest error, be conclusive and binding on all parties.
Subsidiary means any company which is for the time being a subsidiary (within the meaning of Section 736 of the Companies Act 1985 of Great Britain).
In the case of Dated Subordinated Notes, the Trustee at its discretion may, and if so requested in writing by the holders of at least one fifth of the nominal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution of the Noteholders shall (subject to being indemnified and/or secured and/or prefunded to its satisfaction), give notice to the Issuer that the Notes are, and they shall accordingly immediately become, due and repayable at their Early Redemption Amount, together with accrued interest (if any) as provided in the Trust Deed if any of the following events shall occur and be continuing:
If the Notes become immediately due and repayable, the Trustee may, at its discretion and without further notice, institute proceedings for the winding-up of the Issuer in England (but not elsewhere) and prove in such winding-up, provided that no repayment of principal in respect of the Notes may be made by the Issuer pursuant to this Condition, nor will the Trustee accept the same, otherwise than during or after a winding-up or dissolution of the Issuer.
In the case of Undated Subordinated Notes, if the Issuer shall not make any payment of principal in respect of the Notes for a period of seven days or more after the due date for the same or shall not make payment of interest for a period of 14 days or more after a compulsory Interest Payment Date or any other date upon which the payment of interest is compulsory, the Trustee may institute proceedings in England (but not elsewhere) for the winding-up of the Issuer and prove in such winding-up.
For the avoidance of doubt, no payment shall be due if the Issuer does not make such payment as a result of the provisions of Condition 2.3 and no payment of interest shall be due if the Issuer has exercised its right to defer such payment of interest as described in Condition 4.6.
Without prejudice to the rights in Conditions 9.4 and 9.5 above, the Trustee may, at its discretion, and without further notice, institute such proceedings (other than proceedings for the winding-up of the Issuer) against the Issuer as it may think fit to enforce any obligation, condition or provision binding on the Issuer under the Trust Deed, the Subordinated Notes, the Receipts or the Coupons (other than any obligations for the payment of any principal or interest in respect of the Subordinated Notes or the Receipts or the Coupons), provided that the Issuer shall not as a consequence of such proceedings be obliged to pay any sum or sums representing or measured by reference to principal in respect of the Notes sooner than the same would otherwise be payable by it.
The Trustee shall not be bound to take any of the actions referred to above to enforce the obligations of the Issuer under the Trust Deed and the Subordinated Notes, Receipts and Coupons or any other action under the Trust Deed unless (i) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by Noteholders holding at least one-fifth in aggregate nominal amount of the Notes outstanding and (ii) it shall have been indemnified and/or secured and/or prefunded to its satisfaction.
No holder of Subordinated Notes or any relative Receiptholder or Couponholder may proceed directly against the Issuer unless the Trustee, having become bound to proceed, fails to do so within a reasonable period of time and such failure is continuing, in which case the Noteholder, Receiptholder or Couponholder shall have only such rights against the Issuer as those which the Trustee is entitled to exercise. No holder of Subordinated Notes or any relative Receiptholder or Couponholder shall be entitled to institute proceedings for the winding-up of the Issuer, or to prove in any winding-up of the Issuer, unless the Trustee, having become bound to proceed against the Issuer as aforesaid, fails to do so within a reasonable period of time or, being able to prove in any winding-up of the Issuer, fails to do so within a reasonable period of time, in which event any such holder may, on giving an indemnity satisfactory to the Trustee, in the name of the Trustee (but not otherwise), himself institute proceedings for the winding-up in England (but not elsewhere) of the Issuer and/or prove in any winding-up of the Issuer to the same extent (but not further or otherwise) that the Trustee would have been entitled so to do in respect of the Subordinated Notes, Receipts and Coupons held by him. No remedy against the Issuer, other than the institution of proceedings for the winding-up in England of the Issuer or the proving or claiming in the winding-up of the Issuer, shall be available to the Trustee or the Noteholders, Receiptholders, or Couponholders for the recovery of amounts owing in respect of the Subordinated Notes, Receipts or Coupons or under the Trust Deed.
Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the 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, Receipts, 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.
The Issuer is entitled, with the prior written approval of the Trustee, 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 addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 5.4. Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days' prior notice thereof shall have been given to the Noteholders in accordance with Condition 13.
In acting under the Agency Agreement, the Paying Agents act solely as agents of the Issuer and, in certain circumstances specified therein, of the Trustee and do not assume any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Paying Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor paying agent.
On and after the Interest Payment Date 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 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 8.
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. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules of any stock exchange or 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, a notice will be given in such other manner, and will be deemed to have been given on such date, as the Trustee shall 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 are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. Any such notice shall be deemed to have been given to the holders of the Notes on the 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 Agent. Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Agent through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the 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 Receipts, the Coupons or any of the provisions of the Trust Deed. Such a meeting may be convened by the Issuer or the Trustee and shall be convened by the Issuer if required in writing by Noteholders holding not less than five per cent. in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing more than 50 per cent. 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 Receipts or 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 of interest payable in respect of the Notes or altering the currency of payment of the Notes, the Receipts or the Coupons), the quorum shall be one or more persons holding or representing not less than two-thirds 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 shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders.
The Trust Deed provides that a written resolution signed by or on behalf of the holders of not less than 90 per cent. of the aggregate principal amount of Notes for the time being outstanding shall be as valid and effective as a duly passed Extraordinary Resolution of the Noteholders.
The Trustee may agree, without the consent of the Noteholders, Receiptholders or Couponholders, to any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of the Notes or the Trust Deed, or determine, without any such consent as aforesaid, that any Event of Default or potential Event of Default shall not be treated as such, where, in any such case, it is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders so to do or may agree, without any such consent as aforesaid, to any modification which is of a formal, minor or technical nature or to correct a manifest error or an error which, in the opinion of the Trustee, is proven. Any such modification shall be binding on the Noteholders, the Receiptholders and the Couponholders and any such modification shall be notified to the Noteholders in accordance with Condition 13 as soon as practicable thereafter.
In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation, determination or substitution), 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, Receiptholders or Couponholders whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders, Receiptholders 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 or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer, the Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon individual Noteholders, Receiptholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking or covenant given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed.
The Trustee may, without the consent of the Noteholders, agree with the Issuer to the substitution in place of the Issuer (or of any previous substitute under this Condition) as the principal debtor under the Notes, the Receipts, the Coupons and the Trust Deed of another company, being a Subsidiary of the Issuer, subject to (a) the Trustee being satisfied that the interests of the Noteholders will not be materially prejudiced by the substitution and (b) certain other conditions set out in the Trust Deed being complied with.
N.B. In relation to the Dated Subordinated Notes and Undated Subordinated Notes, where the FSA requires it no modification, waiver, determination or substitution will be made to the Conditions unless at least one month before the modification, waiver, determination or substitution is to take effect, the Issuer has given the FSA notice in writing (in the form required by the FSA) of the proposed modification, waiver, determination or substitution and the FSA has not objected to such modification, waiver, determination or substitution.
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 and/or secured and/or prefunded to its satisfaction.
The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (a) to enter into business transactions with the Issuer and/or any of its Subsidiaries and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or any of its Subsidiaries, (b) 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, Receiptholders or Couponholders and (c) 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 Issuer shall be at liberty from time to time without the consent of the Noteholders, the Receiptholders 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.
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 Trust Deed, the Agency Agreement, the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with, English law.
The net proceeds from each issue of Notes will be applied by the Issuer for its general corporate purposes. If, in respect of any particular issue of Notes which are derivative securities for the purposes of Article 15 of the Commission Regulation No 809/2004 implementing the Prospectus Directive, there is a particular identified use of proceeds, this will be stated in the applicable Final Terms.
Man Group plc (Man or the Issuer) is a world-leading alternative investment management business. It has expertise in a wide range of liquid investment styles including managed futures, equity, credit, emerging markets, global macro and multi-manager, combined with powerful product structuring, distribution and client service capabilities. Man has a global distribution network and an investment management track record dating back more than 20 years. Funds under management as at 30 June 2011 were U.S.\$71.0 billion (31 March 2011: U.S.\$69.1 billion).
Man, formerly known as E D & F Man Group plc, was incorporated in England and Wales under the Companies Act 1985 (as amended) (the Act) on 22 April 1994 as a company limited by shares under the name E D & F Man Group Limited, with registered number 02921462. On 5 September 1994, E D & F Man Group Limited was re-registered under the Act as a public company limited by shares of indefinite duration and in the same year was floated on the London Stock Exchange. On 29 September 2000, the name of E D & F Man Group plc was changed to that of Man Group plc. Man's registered office and principal place of business is at Riverbank House, 2 Swan Lane, London EC4R 3AD (telephone +44 20 7144 1000). Man Group plc is the parent company of the Man Group of companies, and is the holding company for the various operating entities and divisions which together constitute Man's business. References to the Group are to Man and the subsidiaries and subsidiary undertakings included in its consolidated accounts, and where the context permits, each of them.
Man can trace its trading origins back to the late eighteenth century. The asset management division of Man was formed in 1983 and in 1989 Man purchased a majority stake in London-based systematic investment manager AHL, acquiring the remaining minority stake in AHL in 1994, the year in which Man was also admitted to trading on the London Stock Exchange. In 2000, Man completed the acquisition of Glenwood, a US fund of funds business and in 2002, Man acquired Swiss fund of hedge funds manager, RMF. At that time, Man operated two principal divisions: "Asset Management" and "Brokerage". In July 2007, Man demerged its brokerage business (renamed MF Global Holdings Ltd. (MF Global)) by way of an initial public offering and listing on the New York Stock Exchange, allowing Man to focus purely on the investment management business.
In March 2009, Man brought together the previous separate in-house fund of fund capabilities in RMF, Glenwood and Man Global Strategies to form Man Multi-Manager, a new multi-manager business.
In October 2010, Man completed the acquisition (the GLG Acquisition) of GLG Partners, Inc., (GLG) a leading global multi-strategy investment manager, for a value of approximately U.S.\$ 1,716 million. GLG is a global asset management company, previously listed on the New York Stock Exchange, offering its clients a wide range of performance-oriented investment products and managed account services. GLG became a wholly-owned subsidiary of Man, and the combination of GLG's and Man's businesses has created a diversified, world-leading alternative asset management business.
In March 2011 Man made two changes to its portfolio of investment management businesses. After a successful eight year commercial relationship with BlueCrest, Man sold its circa 25 per cent. interest to BlueCrest for a total consideration of U.S.\$633 million, generating a pre-tax profit on disposal of around U.S.\$250 million. In May 2011 Man also took its ownership of Ore Hill from 50 per cent. to 100 per cent. for a consideration of U.S.\$18 million. Ore Hill has been integrated into GLG, to lead GLG's expansion into the US credit markets. Both transactions demonstrate Man's general preference for wholly-owned investment management. The Ore Hill transaction also illustrates a further benefit of the GLG Acquisition. In GLG, Man has a single manager platform to which it can add investment management teams organically, to gain exposure to new strategies and markets.
Man provides investment management and advisory services to third party investors and fund entities. The fund entities have independent boards of directors with independent governance and decision making powers, including the ability to remove the investment manager. The fund entities' investment performance, assets and liabilities are therefore separate from Man and are not consolidated into the Group's financial statements.
The investors' capital is managed by Man in accordance with investment management and advisory mandates. These mandates specify the types of investment that are permitted, subscription and redemption criteria and fees. Investors are charged management fees based on asset exposure and incentive fees based on investment performance. The asset exposure, or FUM, is supported by the investors' capital and any financing provided to the fund entities by banks and prime brokers, referred to as 'leverage'.
Funds under management grow through new investor subscriptions, increased leverage, positive investment performance and foreign currency movement and are reduced by redemptions, reduced leverage, negative investment performance and foreign currency movements.
Generally, there is a strong correlation between investment performance and growth in funds under management. If the products have investment performance in line with the investors' expectations, Man may see increased FUM through increased subscriptions from existing and new investors, which could also increase the leverage component, and lower redemption rates. Where investment performance is less than expected, redemptions may increase, new subscriptions may be lower and negative investment performance will reduce the investors' capital which could also reduce the leverage component.
Growth in FUM is therefore an indication of Man's performance as an investment manager and its ability to grow assets and remain competitive.
Funds under management are a key driver of Man's results and prospects, as FUM forms the basis on which its revenue is generated. Man's strategy is to grow funds under management while seeking to maintain its revenue margin.
The table below shows Man's funds under management for each of the three financial years to 31 March 2011, split by product type.
| 2011 –––––––––– |
As at 31 March 2010 –––––––––– |
2009 –––––––––– |
||
|---|---|---|---|---|
| Type of product | (U.S.S billion) | |||
| Guaranteed closed-ended alternatives | 15.1 | 14.0 | 16.4 | |
| Open-ended alternatives | 27.3 | 12.8 | 11.4 | |
| Institutional fund of funds . |
12.7 | 12.6 | 19.0 | |
| Long-only | 14.0 | – | – | |
| Total funds under management . |
–––––––– 69.1 |
–––––––– 39.4 |
–––––––– 46.8 –––––––––––––––– |
|
| –––––––––––––––– | –––––––––––––––– |
The uplift in total funds under management from 2010 to 2011 was largely driven by the acquisition of GLG.
The table below shows Man's gross management fee margins for each of the two financial years to 31 March 2011, split by product type.
| As at 31 March | ||
|---|---|---|
| 2011 –––––––––– |
2010 –––––––––– |
|
| Type of product | Margins bp | |
| Guaranteed | 470 | 463 |
| AHL Open-ended alternatives | 360 | 356 |
| GLG alternatives | 156 | 155 |
| Institutional | 115 | 93 |
| Long-only | 75 | 83 |
Man's business model brings together, in a unified structure, strengths in:
This structure allows for investment management autonomy, while at the same time generating significant operating leverage potential through centralised structuring, legal, compliance and operations support and centralised access to global distribution capability, supported by a managed approach to risk and capital strength.
Founded in 1987, AHL is a world-leading managed futures manager, with funds under management of U.S.\$22.7 billion as at 31 March 2011, and over 20 years of trading experience.
Investment decisions are systematic, with AHL's trading systems sampling around 4,000 prices across about 300 markets daily in order to identify and profit from trends across a broad range of sectors, including currencies, bonds, stocks, energies, interest rates, metals, agriculturalse and credit. This high degree of diversification means that the allocation to each position is small, which helps to control risk across the portfolio. Investment exposure to this broad range of sectors is accessed predominantly through exchange-traded futures and forwards contracts as well as overthe-counter derivative instruments.
Risk management is of paramount importance, with portfolios targeting a level of volatility rather than return. Risk is controlled in real-time by a dynamic volatility process applied across all positions, which reduces position sizes as volatility increases and vice versa. In addition a variety of risk measures such as value-at-risk, stress testing and leverage are monitored daily to adjust portfolios in accordance with pre-defined limits.
Trades are executed either electronically using AHL's proprietary trade execution platform or by the 19 strong team of non-discretionary execution traders. On average 2,000 to 3,000 trades are executed daily using a network of over 60 executing brokers. AHL is fully compliant with industry standards for disclosure, risk management, valuation, fund governance and market related issues, as determined and maintained by the Hedge Fund Standards Board.
Consistent with previous years, AHL continued to invest heavily in people during the 2011 financial year. Hires were made across all parts of the business, reflecting AHL's commitment to further expand its trading, operations and research capabilities. AHL now has 88 research analysts, which is more than double the number at the end of 2007. Man believes that this constitutes one of the largest and most experienced teams in the industry. The steady growth in the research team over time has allowed AHL to adjust its structure and benefit from more focused research on particular segments of the portfolio.
AHL's pursuit of research excellence is shown more publicly by Man's unique collaboration with the University of Oxford, which continues to expand and develop. The Man Research Laboratory (MRL) based in Oxford, which is co-located within the Oxford-Man Institute of Quantitative Finance (OMI), has grown to 13 full time employees spanning AHL's main research areas. Man's close links with the University of Oxford have afforded it the opportunity to enhance its recruitment capabilities. The co-location of the MRL in the same purpose designed building as the OMI has also raised the profile of AHL within the academic world. Core funding for the Oxford-Man Institute has been extended to 2015, highlighting Man's commitment to this unique initiative.
One of AHL's major research projects since 2008/2009 has been the development of a new range of momentum systems that use a predictor/optimiser framework, along with the enhancement of its existing trend-following systems. After first being extensively researched and rigorously tested, both of these were successfully introduced into client portfolios across all sectors, starting in December 2009 and continuing throughout 2010. Even though they have recently been deployed, AHL has already begun to look at ways of improving these models as part of their continuous process of model enhancement.
Electronic trade execution has also been a top priority for AHL, and AHL has successfully increased the range of markets traded by its adaptive execution algorithms. These second generation trade execution algorithms are an integral component of AHL's investment process, shown by the significant reduction in transaction costs achieved where these have been applied. AHL's large research resource has also enabled it to simultaneously implement a number of strategies across a range of sectors and instruments. This includes trading cash equities and options, as well as researching other instruments to further diversify AHL's investment programmes. All of these projects require close collaboration across different teams based in AHL's offices in London, Oxford and Hong Kong.
AHL's trade execution desk in Hong Kong has continued to grow throughout the last financial year, reflecting the strategic importance of Asia to AHL's current and future operations. Since establishing the office in April 2009, AHL has seen a significant improvement in its trade execution across the Asian markets, and forged stronger relationships with counterparties in the region.
Technology and operational infrastructure are central components of AHL operations, and significant investment has been made to improve capabilities across each of these areas. This is highlighted by the tenfold increase in research computing power over the past two years and the improvement of AHL's middle and back office operational systems. Following the completion of the GLG Acquisition, a project is under way to explore potential synergies across operational platforms.
Founded in 1995, GLG is a leading investment manager offering a comprehensive range of alternative, traditional long-only and hybrid investment products and services to a broad range of clients. GLG's primary business is to provide investment management advisory services for various investment funds and companies (the GLG Funds). Today, GLG services a full range of clients, from high net worth individuals, to sovereign wealth funds, pension funds, family trusts and foundations to private banks and intermediaries. Performance is delivered through a comprehensive range of liquid investment styles and products, encompassing pure hedge funds, long only investment products and hybrid investment structures, in all asset classes from equities, fixed income and emerging markets to credit and convertibles. Following the completion of the GLG Acquisition in 2010, GLG is now a wholly-owned subsidiary of Man.
GLG is a global investment manager with operations in London, New York, Hong Kong, Pfaeffikon and Dubai. Throughout its 15 year history, it has focused on delivering superior investment returns to its clients. It has a team of more than 120 dedicated investment professionals managing assets of U.S.\$32.0 billion as at 31 March 2011 in a range of funds across equity, macro, emerging markets, credit, convertible bond and thematic strategies. GLG derives its revenues primarily from management fees and administration fees charged to the GLG Funds and accounts GLG manages based on the value of the assets in these funds and accounts, and performance fees charged to the GLG Funds and accounts GLG manages based on the performance of these funds and accounts.
GLG's investment management process has largely remained unchanged following completion of the GLG Acquisition, although other aspects of the firm have changed and is now supported by fully integrated, larger scale product structuring, distribution and client service capabilities. The sales and marketing capabilities of Man and GLG have been combined, with the result that GLG's funds and strategies are now made available to a broader range of clients than was the case when it was an independent company. Man believes that this is most evident in Asia, where GLG historically had little representation, and where there was demand from Man's long-established customer base for access to a single platform manager such as GLG.
There has been integration in all back and middle office activities, ranging from legal, compliance and risk to information technology, communications and human resources. The result is that GLG has acquired the advantages of the business processes and discipline associated with a large, public company such as Man.
The GLG Acquisition has also led to a pooling of intellectual capital. In January 2011 a new business unit, Man Systematic Strategies, was created, which combines GLG's former quantitative capabilities with elements of AHL and Man Multi-Manager to develop new systematic trading ideas. This new venture is responsible for developing and managing profitable systematic strategies driven by the latest technologies. In February 2011, Man launched its first combined product with GLG, Man IP 220 GLG, the first AHL/GLG guaranteed product, which offers investors a structured investment combining AHL with a portfolio of GLG hedge funds across a broad range of strategies.
There are a range of key investment strategies including equity alternatives, credit and convertibles, emerging markets, macro and special situations and long-only. Long-only funds account for around half of the total assets under GLG's management. Man believes that the long only perspective is crucial in helping it to understand the investment needs of its retail and institutional clients.
The percentage of assets by strategy as at 31 March 2011 is below:
| Equity alternatives | 26% |
|---|---|
| Credit and convertibles | 20% |
| Emerging markets | 9% |
| Macro and special situations | 2% |
| Long-only | 43% |
GLG's investment approach combines fundamental analysis with tactical trading, utilising investment professionals specialising by both region and sector. There is an emphasis on both qualitative and quantitative assessment of investment opportunities. GLG provides the opportunity for individual managers to leverage off other investment specialists and analysts through research and collaboration with each other.
Effective risk management is central to the operation of the business. GLG aims to offer high annual returns combined with a low level of volatility. Risk management helps manage volatility and deliver funds with both strong asset growth and downside protection. This function is performed by a risk committee independent of the investment management team. Many investment strategies have a dual risk management process where there is also a dedicated risk analyst. GLG employs a risk management process by which it measures, monitors and manages aspects of risk including, but not limited to, liquidity risk, market risk, credit risk, counterparty risk and operational risk.
Trades are executed daily by the trading teams through GLG's leading edge centralized order and execution management system, Dynamic Trader. Dynamic Trader is FIX enabled to many of GLG's wide network of brokers, allowing traders access to a range of algorithms and direct market access options from a selection of providers.
In March 2009, Man announced the launch of Man Multi-Manager, a new multi-manager business which brought together the previous separate in-house fund of fund capabilities in RMF, Glenwood and Man Global Strategies. The new business became operational in July 2009 and as at 31 March 2011 had U.S.\$14.4 billion of FUM.
The aim of Man Multi-Manager is to provide investors with attractive long-term, risk-adjusted returns, achieved through controlled risk-taking, with a focus on downside deviation, across multiple underlying hedge fund investment exposures. These hedge fund investment exposures are sourced from Fund Products and/or Underlying Third Party Products. Its investment approach aims to combine structure and process in the selection and monitoring of underlying hedge fund manager content with qualitative judgement and agility, counterbalanced by various risk controls and quantitative analysis.
Man Multi-Manager provides access to a range of global hedge funds. These are accessible through blended portfolios engineered to maximise performance and manage risk or via tailored solutions which utilise Man's strong customisation capabilities. In addition, Man Multi-Manager is able to secure managed account (MAC) arrangements with leading managers and can draw on more than 12 years' experience in constructing MAC-based investment solutions, which are at the core of Man Multi-Manager. During the 2011 financial year, the Man Multi-Manager team has focused on expanding Man's managed account platform both as a discretionary investment tool, and as the foundation of a hedge fund allocation and risk advisory service for institutional investors.
Man Multi-Manager has one of the largest hedge fund research teams in the industry with analysts based in London, New York, Singapore and Switzerland. The selection process for underlying hedge fund managers is supported by a proprietary software application which serves as a central information repository designed to create a structured, consistent approach across all research stages relating to manager selection. Drawing on a broad network of industry contacts, the hedge fund research team seeks to identify high-calibre hedge fund managers with the ability to generate alpha on a consistent basis. The team establishes contact with about 300 to 400 managers each year as part of their new manager sourcing efforts, and maintains an approved list of over 120 managers, over half of which are allocated to through managed accounts.
Man Multi-Manager takes a holistic approach to risk management, looking at market, credit, liquidity, financial and operational risks throughout its business. Risk management is fully integrated into the investment process with dedicated teams working together to ensure a structured approach at all levels. The risk management team's reporting lines are completely independent from that for the investment management team.
Through thorough risk reporting, Man Multi-Manager seeks to provide investors with a clear picture on the fundamental questions surrounding their investments, namely the sources of returns, the sources of risks and finally, the current level of the relevant investment, its monthly change and its historical positions.
For more than 12 years, Man has built its managed account capabilities as an investor. MACs are a separate legal entity, owned by the investor, in which the hedge fund manager's involvement is restricted to the role of investment advisor, with third party service providers performing the operational and custodial duties. In addition to providing an investor with greater control of assets and transparency, MACs enable investment policy and risk guidelines to be framed to meet the needs of individual investors through bespoke arrangements. Furthermore, enhanced terms of engagement which may be negotiated include preferential liquidity, authority limits and special termination clauses relative to the master fund on which the MAC is based. Consequently, Man believes that there are numerous benefits to investors in choosing a partner with deeply established MAC capabilities.
Man uses MACs as part of its broader investment strategy, only investing with managers where it believes the strategy and terms will contribute positively to Man's overall portfolio management capabilities. Man believes that its strong investment brand and global scale make it attractive as an investor to underlying managers providing MACs. During the course of the financial year ending 31 March 2011, Man Multi-Manager launched 17 new MACs and by March 2011 had approximately U.S.\$8.5 billion invested across approximately 70 MACs.
All portfolios are structured to optimise returns relative to the level of risk taken across the market cycle and to manage potential downside during adverse market conditions. Portfolios are constructed for clients in three broad categories:
Man Multi-Manager therefore provides a broad suite of client offerings, ranging from off-the-shelf portfolios, to customised co-managed portfolios, and portfolios run to fit both onshore and offshore product formats, all of which benefit from Man's infrastructure, industry knowledge and risk insight. Although the Man Multi-Manager business is profitable and making good operational progress, particularly with its managed account based solutions. Man's structured products are now expected primarily to use GLG strategies in place of Man Multi-Manager content, which means that future sales and margins anticipated for the Man Multi-Manager business may be lower than previously expected.
Over the past twenty years, Man has structured one of the largest suites of blended alternative investment products and solutions in the world, meeting a broad spectrum of client performance, portfolio, legal, taxation, regulatory, principal protection and risk management needs.
Man's global team of financing and product structuring experts work closely with the investment managers and client service teams to develop a wide range of off-the-shelf and bespoke investment vehicles tailored to a wide range of client needs, which include:
Man believes that its structuring capabilities give it the potential to generate additional fees, particularly for guaranteed products.
Man's products and solutions are distributed using two distinct models, marketing to private investors through a global network of intermediaries, whereas institutional investors, such as pension funds, insurance companies or banking institutions, are typically accessed through direct relationships and are coordinated through dedicated relationship managers.
Man's longstanding network of regional offices helps place its staff close to its investors. Detailed reporting can be provided in both standard and customised format designed specifically to meet the requirements of both private and institutional investors. Its customer service teams include specialised relationship managers, client service professionals embedded in the investment management teams and a network of regional offices around the world.
Man has continued to invest in its distribution network and intermediary relationships and currently has a global sales and client service team supporting its private investor distribution network of approximately 3,850 intermediaries, as well as a dedicated institutional sales force. Man has 20 sales offices across the globe, many of which have been in place for over 10 years but with some new additions – notably Milan in 2010.
Man divides its FUM into two categories: private investor FUM and institutional investor FUM.
As at 31 March 2011, the Group had U.S.\$35.9 billion of private investor FUM. Man's private investor base is focused on the mass affluent market and high net worth individuals. A key growth driver with private investors is the increased availability of onshore products, which make diversified, risk adjusted hedge fund returns available to an expanding global market.
As at 31 March 2011, the Group had U.S.\$33.2 billion of institutional investor FUM. Man has around 1,000 institutional clients – predominantly pension funds, insurance companies, banks, asset managers, sovereign wealth funds and endowments. Institutional investors continue to grow their allocations to hedge fund strategies and seek the transparency, risk management and liquidity offered by managed accounts.
Man's approach to risk management is to identify, monitor and evaluate risk throughout the Group and to manage these risks within the acceptable risk limits set internally. Man aims to maintain sufficient excess capital and substantial liquidity resources in order to give it flexibility both to continue to finance long-term growth and to operate the business effectively under market stress situations.
The Man Board is ultimately responsible for the framework of risk governance and risk management, as well as for determining risk strategy, setting parameters for Man's risk appetite and ensuring that risk is monitored and controlled effectively. The Risk Assurance Committee and the Finance Committee provide oversight across all risks faced by the business. These committees comprise senior management from the business and support areas and provide oversight across all risks faced by the business. The principle of individual accountability and responsibility for risk management is an important feature of Man's corporate culture, with senior management within Man's businesses being accountable for all risks assumed in their areas of responsibility and for the execution of appropriate risk management discipline within the framework of policy and delegated authority set out by the Man Board.
Day to day independent and objective assessment and monitoring of risk is provided by various risk control functions at the Group level and in the particular business divisions, which control functions include group risk, finance, legal, compliance, human resources and internal audit, with formal reporting lines. In addition, risk management functions reside within each business unit, with formal reporting lines and segregation of duties for the key risk, compliance, legal and finance functions.
Man is lead-regulated by the FSA and is therefore subject to the FSA's prudential and capital regulation. Its regulatory capital requirements are calculated in accordance with a full scope investment group under the EU Capital Requirements Directive. In addition, it calculates its economic capital using scenario and statistical modelling. Man's economic capital methodology forms part of its Internal Capital Adequacy Assessment Process (ICAAP) submission to the FSA.
Man's capital and liquidity framework is designed to be conservative, allowing it to invest in the growth of its business. Man utilises capital to support the operation of the investment management process, the testing of research ideas and the launch of new fund products. Man has maintained significant excess capital and available liquidity throughout the recent periods of financial crisis, with a regulatory capital surplus of U.S.\$1.5 billion and net cash balances of U.S.\$1.7 billion as at 31 March 2010. At 31 March 2011 the regulatory capital surplus was around U.S.\$650 million and net cash balance was around U.S.\$900 million. The regulatory capital surplus as at 30 June was around U.S.\$900 million as a result of the inclusion of the profit on disposal of BlueCrest.
On 19 July 2007, Man disposed of its brokerage business, MF Global, through an initial public offering on the New York Stock Exchange. On 28 February 2008, MF Global announced that it had incurred a significant credit loss. Following this disclosure a number of plaintiffs filed class action law suits in the US Federal Court against Man, MF Global, certain of its officers and directors, and certain underwriters asserting various causes of action arising out of the U.S. initial public offering. The consolidated class action complaint alleged claims under certain sections of the Securities Act and alleged, among other things, that the public disclosure documents for the offering contained false and misleading statements concerning risk management and trading risk controls at MF Global. The plaintiffs sought compensatory damages, rescission and attorneys' fees and expenses of an amount which is unquantifiable. On 16 July 2009, the US District Court dismissed the case on the grounds that the plaintiffs had failed to identify any material misrepresentations or omissions in the disclosure documents. The plaintiffs appealed the ruling to the US Court of Appeals. On 14 September 2010, the US Court of Appeals affirmed the US District Court's dismissal of certain of the plaintiffs' claims and vacated and remanded the ruling back to the US District Court as to other claims for reconsideration based on a standard the US Court of Appeals clarified. The claims subject to reconsideration by the US District Court included those questioning the accuracy of disclosures concerning MF Global's risk management system as it applied to trading in employee accounts.
In the US District Court, Man, along with the other defendants, intended to move to dismiss the plaintiffs' remaining claims on grounds not reached in the previous decisions. However, the parties to the litigation entered a mediation process shortly after the US Court of Appeals decision and after a process of mediation and confirmatory due diligence, the parties have reached a settlement with no admission of liability. The settlement however is still subject to the approval of the US federal court. Man will contribute U.S.\$32.5 million to the total settlement of U.S.\$90 million. Man's contribution to the settlement is recorded in Man's income statement for financial year 2011, within discontinued operations.
The Issuer is subject to minimum capital requirements set by various regulators of its worldwide businesses. Adherence to the stipulated capital ratios and requirements is extremely important to the ongoing operations and business of the Group. The Financial Services Authority (the FSA) supervises the Issuer on a consolidated basis and, every six months, the Issuer submits returns to the FSA on its capital adequacy. Various subsidiaries are directly regulated by the FSA or supervisors in other countries, which set and monitor their capital adequacy. As at 31 March 2011, the Issuer had excess regulatory capital of approximately U.S.\$650 million.
On 7 July 2011, Man published its first quarter interim management statement (the IMS). As at 30 June 2011, the Group's funds under management were U.S.\$71.0 billion, up U.S.\$1.9 billion from 31 March 2011. Record sales in the quarter of U.S.\$9.0 billion resulted in a net inflow of U.S.\$3.7 billion after redemptions of U.S.\$5.3 billion. Challenging market conditions led to U.S.\$1.1 billion of negative investment movement in the quarter. Other movements of U.S.\$1.8 billion were driven by routine rebalancing of investment exposure in the guaranteed products after negative AHL performance in the rebalancing period. Foreign exchange movements added U.S.\$0.8 billion and the acquisition of the remaining 50 per cent. of Ore Hill added U.S.\$0.3 billion. As at 30 June 2011, the Man Group had a regulatory capital surplus of around U.S.\$900 million and available liquidity resources of around U.S.\$4.8 billion.
The Directors of the Issuer are as follows: Director Office Jon Aisbitt Non-executive Chairman, Chairman of the Nomination Committee Alison Carnwath Independent non-executive director Peter Clarke Group Chief Executive Phillip Colebatch Independent non-executive director and Chairman of the Remuneration Committee Kevin Hayes Finance Director Ruud Hendriks Independent non-executive director Frédéric Jolly Independent non-executive director Matthew Lester Independent non-executive director Patrick O'Sullivan Senior Independent Director and Chairman of the Audit and Risk Committee Emmanuel Roman Chief Operating Officer
The business address of all the Directors is Riverbank House, 2 Swan Lane, London EC4R 3AD. None of the Directors has any conflicts of interest between their duties to the Issuer and their private interests and/or other interests, nor do they engage in any principal activities outside the Issuer, which may be significant with respect to the Issuer.
The composition of the audit and risk committee is:
Patrick O'Sullivan (Chairman) Alison Carnwath Matthew Lester Frédéric Jolly
The Issuer has the following principal offices:
United Kingdom Riverbank House, 2 Swan Lane, London EC4R 3AD
Switzerland Etzelstrasse 27, CH-8808 Pfäffikon SZ, Huobstrasse 16 and 3, CH-8808 Pfäffikon SZ
As at 11 August 2011, the following exercisable voting interests in the ordinary share capital of the Issuer, disclosable under the Disclosure and Transparency Rules of the Financial Services Authority, had been notified to the Issuer, being that of AXA S.A. (via its funds – 4.15 per cent.), Legal & General Group Plc (via its funds – 3.70 per cent.), BlackRock, Inc. (via its funds – 13.06 per cent.) and G&S Trustees Limited (Pierre Lagrange 3.41 per cent.).
As at 31 March 2011 was as follows:
| Issued and fully paid | ||||
|---|---|---|---|---|
| Nominal Value | Number | Amount | ||
| Ordinary shares Deferred sterling shares |
3 3/7 U.S. cents each £1 each |
1,881,460,689 50,000 |
U.S.\$64,507,223.62 £50,000 |
There has been no material change in the share capital of the Issuer since 31 March 2011.
The following tables set out in summary form the Issuer's consolidated income statement, balance sheet and cash flow statement for each of the years ended 31 March 2009, 31 March 2010 and 31 March 2011. The information included within the table has been extracted from the Issuer's audited consolidated financial statements for the financial years ended 31 March 2011 and 31 March 2010.
The financial statements of the Issuer were prepared in accordance with IFRS as adopted by the European Union. The annual audited consolidated financial statements and notes thereto have been audited by PricewaterhouseCoopers LLP, independent auditors. PricewaterhouseCoopers LLP is a firm of chartered accountants and registered auditors.
| Year to 31 March –––––––––––––––––––––––––––––––––––––– |
|||
|---|---|---|---|
| 2011 | 2010 | 2009 | |
| –––––––––– | –––––––––– (U.S.\$ million) |
–––––––––– | |
| Revenue: | |||
| Performance fees . |
203 | 52 | 627 |
| Management and other fees | 1,452 –––––––––– |
1,293 –––––––––– |
1,861 –––––––––– |
| . | 1,655 | 1,345 | 2,488 |
| Gains/(losses) on investments at fair value | 25 | 39 | (260) |
| Distribution costs Accelerated amortisation of MGS sales commissions |
(318) – |
(325) – |
(411) (107) |
| Total distribution costs | (318) | (325) | (518) |
| Asset services. | (16) | – | – |
| Amortisation of acquired intangible assets | (28) | – | – |
| Compensation | (501) | (330) | (463) |
| Restructuring costs – compensation | (55) | (19) | (37) |
| GLG acquisition costs | (10) | – | – |
| Total compensation costs | (566) | (349) | (500) |
| Other costs | (265) | (232) | (275) |
| Restructuring costs – other | (17) | (34) | – |
| GLG acquisition costs | (25) | – | – |
| Total other costs | (307) | (266) | (275) |
| Share of after tax profit of associates and joint ventures. | 65 | 70 | 144 |
| Gain on disposal of BlueCrest. | 257 | – | - |
| Gain on disposal of 50% of subsidiary | – | – | 48 |
| Impairment of Man Multi-Manager goodwill and Ore Hill | |||
| investments and goodwill | (397) | – | (299) |
| Gain/(loss) arising from residual interest in brokerage assets | – | 34 | (105) |
| Finance income | 40 | 29 | 58 |
| Finance expense. | (86) | (36) | (38) |
| Net finance income | (46) | (7) | 20 |
| Profit before tax from continuing operations | –––––––––– 324 |
–––––––––– 541 |
–––––––––– 743 |
| Taxation | (51) | (96) | (240) |
| Profit after tax from continuing operations | –––––––––– 273 |
–––––––––– 445 |
–––––––––– 503 |
| Discontinued operations – brokerage | (62) | – | – |
| Profit for the year attributable to equity holders of | –––––––––– | –––––––––– | –––––––––– |
| Man Group plc | 211 –––––––––– |
445 –––––––––– |
503 –––––––––– |
| Earnings per share | |||
| From continuing operations | |||
| Basic (cents). | 14.2 | 25.1 | 28.7 |
| Diluted (cents). | 14.0 | 24.8 | 28.4 |
| From continuing and discontinued operations | |||
| Basic (cents). | 10.7 | 25.1 | 28.7 |
| Diluted (cents). | 10.5 | 24.8 | 28.4 |
| Memo: | |||
| Dividends paid in the period | 613 | 745 | 718 |
| Dividends paid in respect of capital securities | 33 | 33 | 25 |
| Year to 31 March –––––––––––––––––––––––––––––––––––––– |
||||
|---|---|---|---|---|
| 2011 –––––––––– |
2010 –––––––––– |
2009 | ||
| (U.S.\$ million) | –––––––––– | |||
| ASSETS | ||||
| Cash and cash equivalents. | 2,359 | 3,229 | 2,361 | |
| Fees and other receivables. | 522 | 320 | 413 | |
| Investments in fund products | 917 | 784 | 1,091 | |
| Pension asset | 91 | 69 | – | |
| Other investments | 11 | 72 | 184 | |
| Investments in associates and joint ventures | 68 | 351 | 317 | |
| Leasehold improvements and equipment. | 138 | 72 | 64 | |
| Franchise value (goodwill) and other intangibles. | 2,712 | 1,135 | 1,140 | |
| Total assets. | –––––––––– 6,818 –––––––––––––––––––– |
–––––––––– 6,032 –––––––––––––––––––– |
–––––––––– 5,570 –––––––––––––––––––– |
|
| LIABILITIES | ||||
| Trade and other payables | 647 | 366 | 475 | |
| Current tax liabilities | 157 | 180 | 246 | |
| Borrowings | 1,478 | 1,489 | 643 | |
| Deferred tax liabilities. | 100 | 10 | 14 | |
| Total liabilities | –––––––––– 2,382 |
–––––––––– 2,045 |
–––––––––– 1,378 |
|
| NET ASSETS | –––––––––– 4,436 |
–––––––––– 3,987 |
–––––––––– 4,192 |
|
| EQUITY | –––––––––– | –––––––––– | –––––––––– | |
| Capital and reserves attributable to shareholders | 4,436 | 3,987 | 4,192 | |
| Equity minority interests | – | – | – | |
| Total equity | –––––––––– 4,436 –––––––––––––––––––– |
–––––––––– 3,987 –––––––––––––––––––– |
–––––––––– 4,192 –––––––––––––––––––– |
| Year to 31 March –––––––––––––––––––––––––––––––––––––– |
|||
|---|---|---|---|
| 2011 –––––––––– |
2010 –––––––––– |
2009 –––––––––– |
|
| (U.S.\$ million) | |||
| Cash flows from operating activities – continuing operations | |||
| Cash generated from operations | 721 | 921 | 1,968 |
| Interest paid | (74) | (26) | (40) |
| Income tax paid | (87) –––––––––– |
(141) –––––––––– |
(312) –––––––––– |
| . | 560 | 754 | 1,616 |
| Cash flows from operating activities – discontinued | |||
| operations | (33) –––––––––– |
– –––––––––– |
– –––––––––– |
| Cash flows from operating activities – total Man Group. | 527 –––––––––– |
754 –––––––––– |
1,616 –––––––––– |
| Cash flows from investing activities – continuing operations | |||
| Acquisition of subsidiaries and joint ventures, net of cash acquired | (486) | – | (245) |
| Purchase of property, plant and equipment | (81) | (44) | (38) |
| Purchase of intangible assets | (78) | (155) | (250) |
| Purchase of other investments | (7) | (43) | (172) |
| Purchase of additional interests in joint ventures and associates . | – | – | (17) |
| Proceeds from sale of other investments | 41 | 253 | 41 |
| Interest received | 25 | 26 | 60 |
| Dividends received from associates and other investments. | 112 | 48 | 141 |
| Proceeds from sale of associate | 443 | – | 25 |
| Cash flows from investing activities – total Man Group | –––––––––– (31) |
–––––––––– 85 |
–––––––––– (455) |
| Cash flows from financing activities – continuing operations | |||
| Proceeds from issue of ordinary shares | 26 | 18 | 53 |
| Proceeds from issue of capital securities, net of issue costs | – | – | 293 |
| Purchase of treasury shares | – | – | (280) |
| Purchase of own shares by ESOP trust | (108) | (61) | (218) |
| Disposal of own shares by ESOP trust . |
– | – | 47 |
| Proceeds from borrowings net of issue costs | – | 813 | 242 |
| Repayment of borrowings | (583) | (17) | – |
| Return of net proceeds from sale of Brokerage | – | – | (67) |
| Dividends paid to Man shareholders | (613) | (745) | (718) |
| Dividend payments in respect of capital securities | (33) | (33) | (25) |
| Dividends paid to minority interests | – | – | (1) |
| Cash flows from financing activities – total Man Group | –––––––––– (1,311) |
–––––––––– (25) |
–––––––––– (674) |
| Net (decrease)/increase in cash and bank overdrafts | –––––––––– (815) |
–––––––––– 814 |
–––––––––– 487 |
| Cash and bank overdrafts at the beginning of the year | 3,174 | 2,360 | 1,873 |
| Cash and bank overdrafts at the end of the year – total | –––––––––– | –––––––––– | –––––––––– |
| Man Group | 2,359 –––––––––––––––––––– |
3,174 –––––––––––––––––––– |
2,360 –––––––––––––––––––– |
Following the acquisition of GLG in October 2010, it was announced that with effect from December 2011 the Company would change its financial year end from March to December. This move aligns the Company's financial reporting with the calendar year based fund performance reporting and performance fee earning periods common across the wider investment management industry. GLG already operated a calendar year reporting and remuneration cycle.
The following applies only to persons who are absolute beneficial owners of Notes and is a summary of the Issuer's understanding of current law and practice in the United Kingdom at the date hereof relating only to United Kingdom withholding tax treatment of payments of principal and interest in respect of Notes. It does not deal with any other United Kingdom taxation implications of acquiring, holding or disposing of Notes. Prospective Noteholders should be aware that the particular terms of issue of any Series of Notes as specified in the relevant Final Terms may affect the tax treatment of that and other Series of Notes. The following is a general guide and should be treated with appropriate caution. Noteholders who are in any doubt as to their tax position should consult their professional advisers. Noteholders who may be liable to taxation in jurisdictions other than the United Kingdom in respect of their acquisition, holding or disposal of Notes are particularly advised to consult their professional advisers as to whether they are so liable (and if so under the laws of which jurisdictions), since the following comments relate only to certain United Kingdom taxation aspects of payments in respect of the Notes. In particular, Noteholders should be aware that they may be liable to taxation under laws of other jurisdictions in relation to payments in respect of the Notes even if such payments may be made without withholding or deduction for or on account of taxation under the laws of the United Kingdom.
Notes which carry a right to interest will constitute "quoted Eurobonds" within the meaning of Section 987 of the Income Tax Act 2007 (the Act) as long as they are and continue to be listed on a "recognised stock exchange" within the meaning of section 1005 of the Act. In the case of Notes to be traded on the London Stock Exchange, which is a recognised stock exchange, the Notes will be treated as "listed" on a recognised stock exchange if the Notes are admitted to listing on the Official List of the UK Listing Authority and to trading on the London Stock Exchange. Notes to be traded on a recognised stock exchange outside the United Kingdom will be treated as "listed" on a recognised stock exchange if (and only if) they are admitted to trading on that exchange and they are officially listed, in accordance with provisions corresponding to those generally applicable in European Economic Areas States, in a country outside the United Kingdom in which there is a recognised stock exchange. Whilst the Notes are and continue to be quoted Eurobonds payments of interest on the Notes may be made without deduction or withholding for or on account of United Kingdom income tax.
Interest on the Notes may also be paid without withholding or deduction on account of United Kingdom tax where the maturity of the Notes is less than 365 days from the date of issue and the Notes are not issued under arrangements the effect of which is to render such Notes part of a borrowing with a total term of a year or more.
In cases falling outside of the exemptions described above, 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.) subject to such relief as may be available under the provisions of any applicable double tax treaty or to any other exemption which may apply.
Noteholders should note that, in certain circumstances, H.M. Revenue & Customs (HMRC) has power to obtain information (including the name and address of the beneficial owner of the interest) from any person in the United Kingdom who either pays or credits interest to a Noteholder (or to any person acting on their behalf) or receives interest for the benefit of a Noteholder. HMRC may also, in certain circumstances, obtain information from any person in the United Kingdom who pays amounts payable on the redemption of Notes which are deeply discounted securities for the purposes of the Income Tax (Trading and Other Income) Act 2005 to, or receives such amounts for the benefit of, another person, although HMRC published practice indicates that HMRC will not exercise the power referred to above to require this information in respect of amounts payable on the redemption of deeply discounted securities where such amounts are paid on or before 5 April 2012. Such information may include the name and address of the beneficial owner of the amount payable on redemption. These provisions will apply whether or not the interest has been paid subject to withholding or deduction for or on account of United Kingdom income tax and whether or not the Noteholder is resident in the United Kingdom for United Kingdom tax purposes. Any information obtained may, in certain circumstances, be exchanged by HMRC with the tax authorities of the jurisdiction in which the Noteholder is resident for tax purposes.
Under EC Council Directive 2003/48/EC on the taxation of savings income, 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, or collected by such a person for, an individual resident or certain limited types of entity established in that other Member State. However, for a transitional period, Luxembourg and Austria may instead apply a withholding system in relation to such payments deducting tax at rates rising over time to 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments.
A number of non-EU countries and certain dependent or associated territories of certain Member States have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity established in one of those territories.
The European Commission has proposed certain amendments to the Directive, which may, if implemented, amend or broaden the scope of the requirements described above.
The Dealers have, in a programme agreement (the Programme Agreement) dated 16 August 2011, agreed with the Issuer a basis upon which they or any of them may from time to time agree to subscribe for 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 Issuer has agreed to reimburse the Dealers for certain of their expenses in connection with the establishment and any future update 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. Terms used in this paragraph have the meanings given to them by Regulation S under 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. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and regulations 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 Notes (a) as part of their distribution at any time or (b) 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.
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.
Each issuance of Index Linked Notes or Dual Currency Notes shall be subject to such additional U.S. selling restrictions as the Issuer and the relevant Dealer may agree as a term of the issuance and purchase of such Notes, which additional selling restrictions shall be set out in the applicable Final Terms.
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 in (a) to (c) 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, the expression an offer of Notes to the public in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and 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), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EC.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:
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 agreed, and each further Dealer appointed under the Programme will be required to 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 reoffering 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 subscribes for, 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 subscription for, or 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 subscriptions, offers, sales or deliveries and neither the Issuer, the Trustee nor any of the other Dealers shall have any responsibility therefor.
None of the Issuer, the Trustee and 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.
With regard to each Tranche, the relevant Dealer will be required to comply with such other restrictions as the Issuer and the relevant Dealer shall agree and as shall be set out in the applicable Final Terms.
The establishment of the Programme was duly authorised by a resolution of the Board of Directors of the Issuer dated 6 November 2007 and a resolution of a Committee of the Board of Directors dated 20 December 2007. The 2011 update of the Programme has been duly authorised by a resolution of the Board of Directors of the Issuer dated 6 July 2011 and a resolution of a Committee of the Board of Directors of the Issuer dated 15 August 2011. Each issue of Notes must be approved by the Board of Directors of the Issuer or a duly authorised committee of the Board of Directors.
It is expected that each Tranche of Notes which is to be admitted to the Official List and 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 before 18 August 2011.
Copies of the following documents will, when published, be available for inspection from the registered office of the Issuer and from the specified offices of the Paying Agent for the time being in London:
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-1 855 Luxembourg.
The price and amount of Notes to be issued under the Programme will be determined by the Issuer and each 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 the Group since 31 March 2011 and there has been no material adverse change in the financial position or prospects of the Group since 31 March 2011.
Save as set out under "Description of the Issuer – Legal and Arbitration Proceedings" on page 72 of this Offering Circular, neither the Issuer nor any other member of the Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) in the 12 months preceding the date of this document which may have or have in such period had a significant effect on the financial position or profitability of the Issuer or the Group.
The auditors of the Issuer are PricewaterhouseCoopers LLP, Chartered Accountants and Registered Auditors of 7 More London Riverside, London SE1 2RT, who have audited the Issuer's accounts, without qualification, in accordance with International Standards on Auditing (UK and Ireland) for each of the two financial years ended on 31 March 2010 and 31 March 2011. The auditors of the Issuer have no material interest in the Issuer.
Unless otherwise stated, financial information relating to Man or the Group has been extracted or provided (without material adjustment) from the annual report and audited accounts for the Group for the 2011 financial year.
Pursuant to the First Supplemental Trust Deed dated 16 July 2009 (the Effective Date), the Issuer has agreed with HSBC Trustee (C.I.) Limited (the Original Trustee) and HSBC Corporate Trustee Company (UK) Limited (the New Trustee) that the New Trustee will (and the Original Trustee will not) act as trustee under the Trust Deed (as defined under "Terms and Conditions of the Notes") with regard to any Notes issued under the Programme on or after the Effective Date, except as described in the following sentence. For the avoidance of doubt, the Original Trustee (having its registered office, at the date of this Offering Circular, at 1 Grenville Street, St. Helier, Jersey JE4 9PF) will continue to act as trustee with regard to any Series of Notes issued under the Programme before the Effective Date and any Notes issued on or after the Effective Date so as to be consolidated and form a single Series with any Series of Notes issued before the Effective Date. All references in this Offering Circular, the Trust Deed and the Agency Agreement (as defined under "Terms and Conditions of the Notes") to the "Trustee" should be read accordingly.
Unless specified in the applicable Final Terms, the Issuer does not intend to provide any post-issuance information in relation to any issues of Note.
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 services to the Issuer and its affiliates in the ordinary course of business.
In particular, certain of the Dealers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of Issuer or the Issuer's affiliates. Certain of the Dealers or their affiliates have a lending relationship with the Issuer and routinely hedge their credit exposure to the Issuer consistent with their customary risk management policies. Typically, such Dealers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in the Issuer's securities, including potentially Notes issued under the Programme. Any such short positions could adversely affect future trading prices of such Notes offered hereby. The Dealers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
The following terms used in this Offering Circular have the meanings ascribed to them below:
FUM means funds under management;
Fund Product means any or all of the following, as the context may require:
MACs means managed accounts, as further described under "Description of the Issuer – Business Overview – Investment Management – Man Multi-Manager – Managed accounts"; and
Underlying Third Party Product means any collective investment scheme, company, unit trust, partnership, note or derivative instrument, bond or other investment vehicle or arrangement in respect of which any third party hedge fund manager or adviser provides investment management or advisory services and to which a Fund Product directly or indirectly allocates capital or otherwise procures investment exposure.
Man Group plc Riverbank House 2 Swan Lane London EC4R 3AD
HSBC Corporate Trustee Company (UK) Limited 8 Canada Square London E14 5HQ
HSBC Bank plc 8 Canada Square London EC14 5HQ
Dexia Banque Internationale à Luxembourg 69 route d'Esch L-2953 Luxembourg
To the Dealers and the Trustee To the Issuer Allen & Overy LLP Clifford Chance LLP One Bishops Square 10 Upper Bank Street London E1 6AD London E14 5JJ
PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT
BNP PARIBAS HSBC Bank plc 10 Harewood Avenue 8 Canada Square
London NW1 6AA London E14 5HQ
Merrill Lynch International The Royal Bank of Scotland plc 2 King Edward Street 135 Bishopsgate London EC1A 1HQ London EC2M 3UR
UBS Limited 1 Finsbury Avenue EC2M 2PP
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