1. GENERAL
On each Issue Date, the Issuer enters into a repurchase transaction (each, a "Floating Long-Term Repo Transaction") with the Repo Counterparty in respect of each Class of Floating LTR Notes issued by it on such Issue Date.
2. PURCHASE PRICE
The purchase price paid by the Issuer in respect of each Floating Long-Term Repo Transaction will be a proportion of the balance of the issue proceeds of the relevant Class of Notes after (in the case of FX Notes) conversion into EUR under the related Floating Currency Swap.
3. PURCHASED SECURITIES
The Repo Counterparty transfers to the Issuer, under each Floating Long-Term Repo Transaction, eligible securities consisting of OECD government bonds, asset-backed securities and/or corporate and/or financial securities, all of which are investment grade, having a market value equal to the applicable purchase price.
4. DOWNGRADE OF REPO COUNTERPARTY
If and for so long as the Repo Counterparty Assigned Rating is below the Repo Counterparty Required Rating, certain haircuts specified by the Rating Agency will apply to the eligible securities transferred under each Floating Long-Term Repo Transaction. If and for so long as the Repo Counterparty Assigned Rating is below the Repo Counterparty Required Floor Rating, the Repo Counterparty will provide a third party guarantee from a party with the ratings required by the Rating Agency or transfer its obligations under the Repo Agreement to an alternative Repo Counterparty with the ratings required by the Rating Agency.
5. REPURCHASE DATE & REPURCHASE PRICE
Each Floating Long-Term Repo Transaction will be for a term of 3 months and will be rolled for successive 3 month periods until the Redemption Date of the related Class of Notes, unless an event resulting in the early redemption of such Notes occurs or a Portfolio Close-Out Event occurs under the related Performance Swap or is deemed to occur under the Conditions of the Notes.
The repurchase price of each Floating Long-Term Repo Transaction will be determined by applying the relevant repo rate to the purchase price for the term of such Floating Long-Term Repo Transaction. On each roll date of a Floating Long-Term Repo Transaction, an amount equal to the difference between the purchase price and the repurchase price (each, a "Long-Term Repo Rate Amount") will be paid by the Issuer to the Swap Counterparty under the relevant Floating Currency Swap (in the case of FX Notes) and to the Swap Counterparty under the relevant Performance Swap (in the case of EUR Notes).
On the final repurchase date of each Floating Long-Term Repo Transaction, the Repo Counterparty will pay to the Issuer the applicable repurchase price in exchange for the transfer by the Issuer to the Repo Counterparty of securities equivalent to those previously delivered to the Issuer under such Floating Long-Term Repo Transaction. Securities are "equivalent to" other securities if they are: (a) issued by the same issuer; (b) part of the same issue; and (c) of an identical type, nominal value, description and amount as those other securities.
6. DECREASE AND INCREASE OF FLOATING LONG-TERM REPO TRANSACTION If (a) a Liquidity Event occurs in respect of any Class of Floating LTR Notes and sufficient cash to cure such Liquidity Event is not generated by alternative permitted means as described in paragraph 10 (Rebalancing Events) of the section of this Prospectus headed "The Performance Swaps", or (b) the Portfolio Manager may (for example, in order to prevent a Liquidity Event or an FX Sensitivity Event under the related Performance Swap) with the consent of the Swap Counterparty decrease the nominal amount of a Floating Long-Term Repo Transaction or (c) the Investor Noteholding in respect of any Class of Floating LTR Notes decreases, the nominal amount of the related Floating Long-Term Repo Transaction will be decreased accordingly. In the case of (a) and (b) above, the nominal amount of the related Floating Long-Term Repo
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Transaction will only be decreased to the extent that the repurchase price (converted into the Notes Currency, in the case of FX Notes, in accordance with the related Floating Currency Swap) on such date is not less than the relevant Protected Amount of the relevant Investor Noteholding on such date. The Repo Counterparty will pay to the Issuer an amount equal to the applicable decrease in the nominal amount which will, in the case of FX Notes, be paid by the Issuer to the Swap Counterparty under the related Floating Currency Swap for exchange of an equivalent amount in the relevant Notes Currency. In the case of (a) and (b) above, such amount will be paid by the Issuer to the Swap Counterparty under the related Performance Swap and credited to the related Note Account, as described in the section of this Prospectus headed "The Performance Swaps" above.
If (a) the Portfolio Manager (for example, if there is sufficient liquidity under a Performance Swap) with the consent of the Swap Counterparty elects to increase the nominal amount of the related Floating Long-Term Repo Transaction in respect of any Class of Floating LTR Notes, or (b) the Investor Noteholding in respect of any Class of Floating LTR Notes increases, the nominal amount of the related Floating Long-Term Repo Transaction will be increased accordingly. The Issuer will pay to the Repo Counterparty an amount equal to the applicable increase in the nominal amount.
In the case of (a) above, the Swap Counterparty will pay to the Issuer an equivalent amount in the related Notes Currency to such increase amount, under the related Performance Swap, to the extent this does not trigger a Liquidity Event, and the related Note Account will be debited accordingly, as described in the section of this Prospectus headed "The Performance Swaps"
above, and, in the case of FX Notes, such amount will be converted into EUR under the related Floating Currency Swap.
On the date of any increase or decrease, the Repo Counterparty and, in the case of FX Notes, the Swap Counterparty will determine the applicable cost or gain to the Issuer of the applicable increase or decrease of the related Floating Long-Term Repo Transaction and, in the case of FX Notes, the related Floating Currency Swap. The Issuer will pay an amount equal to any such cost to the Repo Counterparty or Swap Counterparty (as applicable) and the Repo Counterparty or Swap Counterparty (as applicable) will pay an amount equal to any such gain to the Issuer. Any net gain or cost arising from the partial increase or decrease of any Floating Long-Term Repo Transaction will be determined by the Repo Counterparty by reference to prices offered by the Repo Counterparty to its clients generally. Any net gain or cost arising from the partial increase or decrease of any Floating Currency Swap will be determined by the Swap Counterparty by reference to prices offered by the Swap Counterparty to its clients generally.
7. PORTFOLIO CLOSE-OUT EVENT
If a Portfolio Close-Out Event occurs in respect of any Class of Floating LTR Notes, the related Floating Term Repo Transaction will be terminated and replaced with a Zero-Coupon Long-Term Repo Transaction relating to such Class of Notes, as described in paragraph 11 (Portfolio Close-Out Events) of the section of this Prospectus headed "The Performance Swaps" above.
In respect of each Zero-Coupon Long-Term Repo Transaction relating to a Class of Floating LTR Notes which are EUR Notes, the purchase price to be paid by the Issuer will be an amount equal to the present value of the Protected Amount (excluding any Lock-In Amount) as of the
Eligible securities will be the same as for the applicable Floating Long-Term Repo Transaction.
Each Zero-Coupon Long-Term Repo Transaction will mature on the Redemption Date of the related Class of Notes, unless the Notes of such Class are required to be redeemed early in accordance with the Conditions. In the case of EUR Notes, the repurchase price of each Zero-Coupon Long-Term Repo Transaction will be equal to the Protected Amount of the Investor Noteholding of the related Class of Notes. In the case of FX Notes, the repurchase price of each Zero-Coupon Long-Term Repo Transaction will be exchanged through the related Zero-Coupon Currency Swap for an amount equal to the Protected Amount of the Investor Noteholding of the related Class of Notes.
On the repurchase date of each Zero-Coupon Long-Term Repo Transaction, the Repo Counterparty will pay to the Issuer the applicable repurchase price in exchange for the transfer by
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the Issuer to the Repo Counterparty of securities equivalent to those then held by the Issuer under such Zero-Coupon Long-Term Repo Transaction and the nominal of any Zero-Coupon Long-Term Repo Transaction may be increased or decreased following an increase or decrease of the related Investor Noteholding in the same way as a Floating Long-Term Repo Transaction, as described above.
On the date of any Portfolio Close-Out Event, the Repo Counterparty and, in the case of FX Notes, the Swap Counterparty will determine the applicable cost or gain to the Issuer of the termination of the related Floating Long-Term Repo Transaction and in the case of FX Notes, the related Floating Currency Swap. The Issuer will pay an amount equal to any such cost to the Repo Counterparty or Swap Counterparty (as applicable) and the Repo Counterparty or Swap Counterparty (as applicable) will pay an amount equal to any such gain to the Issuer. Any net gain or cost arising from the termination of any Floating Long-Term Repo Transaction will be determined by the Repo Counterparty by reference to prices offered by the Repo Counterparty to its clients generally. Any net gain or cost arising from the termination of any Floating Currency Swap will be determined by the Swap Counterparty by reference to prices offered by the Swap Counterparty to its clients generally.
SECTION B: ZERO-COUPON LTR NOTES 1. GENERAL
On each Issue Date, the Issuer enters into a Zero-Coupon Long-Term Repo Transaction with the Repo Counterparty in respect of each Class of Zero-Coupon LTR Notes issued by it on such Issue Date.
2. PURCHASE PRICE
The purchase price paid by the Issuer in respect of each Zero-Coupon Long-Term Repo Transaction will be an amount equal to the Protected Amount (excluding any Lock-In Amount) as of the Redemption Date of such Class of Notes (converted into EUR at the FX rate specified in the related Zero-Coupon Currency Swap, in the case of FX Notes).
3. PURCHASED SECURITIES
The Repo Counterparty transfers to the Issuer, under each Zero-Coupon Long-Term Repo Transaction, eligible securities consisting of OECD government bonds, asset-backed securities and/or corporate and/or financial securities, all of which are investment grade, having a market value equal to the applicable purchase price.
4. DOWNGRADE OF REPO COUNTERPARTY
If and for so long as the Repo Counterparty Assigned Rating is below the Repo Counterparty Required Rating, certain haircuts specified by the Rating Agency will apply to the eligible securities transferred under each Zero-Coupon Long-Term Repo Transaction. If and for so long as the Repo Counterparty Assigned Rating is below the Repo Counterparty Required Floor Rating, the Repo Counterparty will provide a third party guarantee from a party with the ratings required by the Rating Agency or transfer its obligations under the Repo Agreement to an alternative Repo Counterparty with the ratings required by the Rating Agency.
5. REPURCHASE DATE & REPURCHASE PRICE
Each Zero-Coupon Long-Term Repo Transaction will be for a term of 3 months and will be rolled for successive 3 month periods until the Redemption Date of the related Class of Notes, unless an event resulting in the early redemption of such Notes occurs. The repurchase price of each Zero-Coupon Long-Term Repo Transaction will be determined by applying the relevant repo rate to the purchase price for the term of such Zero-Coupon Long-Term Repo Transaction. On each roll date of a Zero-Coupon Long-Term Repo Transaction, an amount equal to the difference between the purchase price and the repurchase price will be paid by the Issuer to the Swap Counterparty under the relevant Performance Swap.
On the final repurchase date of each Zero-Coupon Long-Term Repo Transaction, the Repo Counterparty will pay to the Issuer the applicable repurchase price in exchange for the transfer by the Issuer to the Repo Counterparty of securities equivalent to those previously delivered to the
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Issuer under such Zero-Coupon Long-Term Repo Transaction. Securities are "equivalent to" other securities if they are: (a) issued by the same issuer; (b) part of the same issue; and (c) of an identical type, nominal value, description and amount as those other securities.
6. DECREASE AND INCREASE OF ZERO-COUPON LONG-TERM REPO TRANSACTION
If the Investor Noteholding in respect of any Class of Zero-Coupon LTR Notes decreases, the nominal amount of the related Zero-Coupon Long-Term Repo Transaction will be decreased accordingly. The Repo Counterparty will pay to the Issuer an amount equal to the applicable decrease in the nominal amount which will, in the case of FX Notes, be paid by the Issuer to the Swap Counterparty under the related Zero-Coupon Currency Swap in exchange for an equivalent amount in the relevant Notes Currency.
If the Investor Noteholding in respect of any Class of Zero-Coupon LTR Notes increases, the nominal amount of the related Zero-Coupon Long-Term Repo Transaction will be increased accordingly. The Issuer will pay to the Repo Counterparty an amount equal to the applicable increase in the nominal amount.
On the date of any increase or decrease, the Repo Counterparty and, in the case of FX Notes, the Swap Counterparty will determine the applicable cost or gain to the Issuer of the applicable increase or decrease of the related Zero-Coupon Long-Term Repo Transaction and, in the case of FX Notes, the related Zero-Coupon Currency Swap. The Issuer will pay an amount equal to any such cost to the Repo Counterparty or Swap Counterparty (as applicable) and the Repo Counterparty or Swap Counterparty (as applicable) will pay an amount equal to any such gain to the Issuer.
7. PORTFOLIO CLOSE-OUT EVENT
If a Portfolio Close-Out Event occurs in respect of any Class of Zero-Coupon LTR Notes, the Issuer and the Repo Counterparty will enter into an additional Zero-Coupon Long-Term Repo Transaction relating to such Class of Notes, as described in paragraph 11 (Portfolio Close-Out Events) of the section of this Prospectus headed "The Performance Swaps" above.
In respect of each such Coupon Long-Term Repo Transaction relating to a Class of Zero-Coupon LTR Notes which are EUR Notes, the purchase price to be paid by the Issuer will be an amount equal to the Lock-In Amount on the date of the occurrence of the Portfolio Close-Out Event. In respect of each such Zero-Coupon Long-Term Repo Transaction relating to a Class of Zero-Coupon LTR Notes which are FX Notes, the purchase price to be paid by the Issuer will be an amount equal to the initial amount received under the related Zero-Coupon Currency Swap.
Eligible securities will be the same as for the existing Zero-Coupon Long-Term Repo Transaction.
The relevant repo rate for each such Coupon Long-Term Repo Transaction will be the Zero-Coupon Yield in respect of the related Class of Notes on the date of the occurrence of the Portfolio Close-Out Event. Each such Zero-Coupon Long-Term Repo Transaction will mature on the Redemption Date of the related Class of Notes, unless the Notes of such Class are required to be redeemed early in accordance with the Conditions.
On the repurchase date of each such Zero-Coupon Long-Term Repo Transaction, the Repo Counterparty will pay to the Issuer the applicable repurchase price in exchange for the transfer by the Issuer to the Repo Counterparty of securities equivalent to those then held by the Issuer under such Zero-Coupon Term Repo Transaction and the nominal of any such Zero-Coupon Long-Term Repo Transaction may be increased or decreased following an increase or decrease of the related Investor Noteholding in the same way as the existing Zero-Coupon Long-Term Repo Transaction, as described above.
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SECTION C: DOCUMENTATION