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OFFERING CIRCULAR
Mitsubishi UFJ Securities International plc A9.4.1.1 (Incorporated with limited liability in England)
U.S.$8,000,000,000 Euro Medium Term Note Programme
Under this Euro Medium Term Note Programme (the ‘‘Programme’’), Mitsubishi UFJ Securities International plc (the ‘‘Issuer’’) may from time to time A12.1.1 issue in one or more Tranches (as defined on page 58) notes in bearer form (‘‘Bearer Notes’’) or registered form (‘‘Registered Notes’’) (together, the ‘‘Notes’’) A12.4.1.1 denominated in any currency (including euro) agreed by the Issuer and the relevant Dealer(s) (as defined below). Notes will be issued on either an unsubordinated A13.1.1 or a subordinated basis. The Notes will not be guaranteed by The Bank of Tokyo-Mitsubishi UFJ, Ltd. (‘‘BTMU’’) or by Mitsubishi UFJ Financial Group, Inc. (‘‘MUFG’’). The Issuer will have the benefit of a Keep Well Agreement (the ‘‘Keep Well Agreement’’) between MUFG, BTMU, the Issuer and the Trustee (as defined below) as more fully described herein under ‘‘Relationship of the Issuer with BTMU and MUFG’’ on page 106. The maximum aggregate nominal amount of all Notes from time to time outstanding will not exceed U.S.$8,000,000,000 (or its equivalent in other currencies calculated as described herein), subject to increase as provided herein. A description of the restrictions applicable at the date of this Offering Circular relating to the maturity of certain Notes is set out on page 8. The Notes may be issued on a continuing basis to the Dealer specified on page 7 and any additional Dealer appointed under the Programme from time to time (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. An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see ‘‘Risk Factors’’. Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 A12.6.1 (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 A13.5.1 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 Professional Securities Market. Unless the context requires otherwise, 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 Professional Securities Market and have been admitted to the Official List. The London Stock Exchange’s Professional Securities Market is not a regulated market for the purposes of Directive 2004/39/EC (the “Markets in Financial Instruments Directive”). Notice of the aggregate nominal amount of interest (if any) payable in respect of the issue price of, the issue date and maturity date of, and any other terms and conditions not contained herein which are applicable to, each Tranche of Notes will be set forth in a final terms document (the ‘‘Final Terms’’) applicable to such Tranche which, with respect to Notes to be listed (‘‘Listed Notes’’), 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 A12.6.1 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. This Offering Circular constitutes ‘‘Listing Particulars’’ for the purpose of the listing rules of the UK Listing Authority. Unless otherwise provided with respect to a particular Series of Registered Notes, the Registered Notes of each Tranche of such Series sold outside the United States in reliance on Regulation S under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’), will be represented by a permanent global note in registered form, without interest coupons (a ‘‘Reg. S Global Note’’). Prior to expiry of the period that ends 40 days after completion of the distribution of each Tranche of Notes, as certified by the relevant Dealer, in the case of a non-syndicated issue, or the Lead Manager, in the case of a syndicated issue (the ‘‘Distribution Compliance Period’’), beneficial interests in the Reg. S Global Note may not be offered or sold to, or for the account or benefit of, U.S. persons as defined in Regulation S (‘‘U.S. Persons’’) and may not be held otherwise than through Euroclear Bank S.A./N.V. (‘‘Euroclear’’) and Clearstream Banking, société anonyme (‘‘Clearstream, Luxembourg’’). The Registered Notes of each Tranche of such Series sold in private transactions to qualified institutional buyers within the meaning of Rule 144A under the Securities Act (‘‘QIBs’’) will be represented by a restricted permanent global note in registered form, without interest coupons (a ‘‘Restricted Global Note’’, and, together with a Reg. S Global Note, ‘‘Registered Global Notes’’). Registered Global Notes will either be (i) deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company (‘‘DTC’’) for the accounts of Euroclear and Clearstream, Luxembourg or (ii) be deposited with a common depositary for, and registered in the name of a common nominee of, Euroclear and Clearstream, Luxembourg, as specified in the applicable Final Terms. The Registered Notes of each Tranche of such Series sold to ‘‘accredited investors’’ as defined in Rule 501(a) (1), (2), (3) or (7) under the Securities Act that are institutions (‘‘Institutional Accredited Investors’’) will be in definitive form, registered in the name of the holder thereof. Registered Notes in definitive form will be issued in exchange for interests in the Registered Global Notes upon compliance with the procedures for exchange as described in ‘‘Form of the Notes’’ on page 44 in the circumstances described in the applicable Final Terms. Registered Notes in definitive registered form from the date of issue may also be sold outside the United States in reliance on Regulation S under the Securities Act. Each Tranche of Bearer Notes will initially be represented by a temporary bearer global Note (a ‘‘Temporary Bearer Global Note’’) or, if so specified in the applicable Final Terms, a permanent bearer global note (a ‘‘Permanent Bearer Global Note’’) which, in either case, will be deposited on the issue date thereof with a common depositary on behalf of Euroclear and Clearstream, Luxembourg. Beneficial interests in a Temporary Bearer Global Note will be exchangeable for either beneficial interests in a Permanent Bearer Global Note or definitive Bearer Notes upon certification as to non-U.S. beneficial ownership as required by U.S. Treasury regulations. A Permanent Bearer Global Note may be exchanged for definitive Bearer Notes in the circumstances described in the applicable Final Terms,in accordance with the procedures described in ‘‘Form of the Notes’’ on page 44. References to Euroclear, Clearstream, Luxembourg and/or DTC shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system approved by the Issuer, The Bank of New York Mellon, London (the ‘‘Agent’’) and The Law Debenture Trust Corporation p.l.c. as trustee under the Programme (the ‘‘Trustee’’). For further details of clearing and settlement of the Notes issued under the Programme, see ‘‘Book-Entry Clearance Procedures’’ below. The Programme has been rated Aa2 (in respect of the Unsubordinated Notes) and Aa3 (in respect of the Subordinated Notes) by Moody’s Investors Service Limited, AA (in respect of Unsubordinated Notes) and AA (in respect of Subordinated Notes) by Japan Credit Rating Agency, Ltd. and A+ (in respect of Unsubordinated Notes) and A (in respect of Subordinated Notes) by Rating and Investment Information, Inc. Any Notes issued under the Programme may be rated or unrated. Where an issue of Notes is rated, its rating will not necessarily be the same as the rating applicable to the Programme. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, change or withdrawal at any time by the assigning rating agency. The Issuer may agree with any Dealer and the Trustee that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event (in the case of Notes admitted to the Official List only) a Supplemental Offering Circular, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes. This Offering Circular supersedes any previous Offering Circular. Any Note issued under the Programme on or after the date of this Offering Circular is issued subject to the provisions described herein. This does not affect any Notes already in issue.
Arranger Mitsubishi UFJ Securities International plc
Dealer Mitsubishi UFJ Securities International plc
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The Issuer, BTMU and MUFG accept responsibility for the information contained in these Listing A9.1.1 Particulars. A12.1.1 A13.1.1 To the best of the knowledge of the Issuer, BTMU and MUFG (having taken all reasonable care to ensure A9.1.2 A12.1.2 that such is the case), the information contained in these Listing Particulars is in accordance with the facts and does A13.1.2 not omit anything likely to affect the import of such information.
This Offering Circular is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (with the exception of any documents incorporated by reference thereto) (see ‘‘Documents Incorporated by Reference’’ on page 6). This Offering Circular shall be read and construed on the basis that such documents are so incorporated and form part of this Offering Circular.
Neither the Dealers nor the Trustee have separately verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility is accepted by the Dealers or the Trustee as to the accuracy or completeness of the information contained in this Offering Circular or any other information provided by the Issuer. Neither the Dealers nor the Trustee accept any liability in relation to the information contained in this Offering Circular (save for information supplied in writing by the Dealers) or any other information provided by the Issuer in connection with the Programme.
No person is or has been authorised by the Issuer, any Dealer 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 and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer or any of the Dealers or the Trustee.
Neither this Offering Circular nor any other information supplied in connection with the Programme (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation by the Issuer or any of the Dealers or the Trustee that any recipient of this Offering Circular or any other information supplied in connection with the Programme 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 and/or BTMU and/or MUFG. 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 or any of the Dealers 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.
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 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 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, and the Dealers have represented that all offers and sales by them will be made in compliance with 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 offer or sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of Notes in the
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United States, the European Economic Area (including the United Kingdom and France), Japan and Hong Kong (see ‘‘Subscription and Sale and Transfer Restrictions’’ on pages 119 to 125).
The Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority of any State or other jurisdiction of the United States, and the Bearer Notes are subject to U.S. tax law requirements. The Notes may not be offered, sold or delivered within the United States or its possessions or to or for the account or benefit of U.S. Persons unless the Notes are registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available. The Notes are being offered and sold outside the United States to non-U.S. Persons in reliance on Regulation S under the Securities Act. In addition, the Registered Notes may be offered or sold within the United States only to QIBs in reliance on Rule 144A under the Securities Act, or to Institutional Accredited Investors pursuant to an exemption from the registration requirements of the Securities Act (see ‘‘Subscription and Sale and Transfer Restrictions’’ on pages 119 to 125). Prospective purchasers are hereby notified that sellers of Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A under the Securities Act.
To permit compliance with Rule 144A under the Securities Act in connection with resales or other transfers of the Notes that are ‘‘restricted securities’’ within the meaning of the Securities Act, the Issuer will furnish upon the request of a holder or beneficial owner of a Note and a prospective purchaser designated by such holder or beneficial owner the information required to be delivered under Rule 144A(d)(4) under the Securities Act if at the time of such request the Issuer is neither a reporting company under Section 13 or Section 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder. The Issuer is not currently a reporting company under the Exchange Act.
Institutional Accredited Investors who purchase definitive Registered Notes will be required to execute and deliver an IAI Investment Letter (as defined under ‘‘Terms and Conditions of the Notes’’). Each purchaser or holder of Registered Notes in definitive form issued to Institutional Accredited Investors and each purchaser or holder of an interest in Restricted Global Notes or any Notes issued in registered form in exchange or substitution therefor (together ‘‘Legended Notes’’) will be deemed, by its acceptance or purchase of any such Legended Notes, to have made certain representations and agreements intended to restrict the resale or other transfer of such Notes as set out in ‘‘Subscription and Sale and Transfer Restrictions’’. Unless otherwise stated, terms used in this paragraph have the meanings given to them in ‘‘Form of the Notes’’.
The Notes in bearer form 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 United States persons, 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 and the regulations promulgated thereunder.
This Offering Circular is being submitted on a confidential basis in the United States to a limited number of QIBs and Institutional Accredited Investors for informational use solely in connection with the consideration of the purchase of the Notes being offered hereby. Its use for any other purpose in the United States is not authorised. It may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents disclosed to anyone other than the prospective investors to whom it is originally submitted.
In making an investment decision, investors must rely on their own examination of the Issuer, BTMU and MUFG and the terms of the Notes being offered, including the merits and risks involved. The Notes have not been approved or disapproved by the United States Securities and Exchange Commission or any other securities commission or other regulatory authority in the United States, nor have the foregoing authorities approved this Offering Circular or confirmed the accuracy or determined the adequacy of the information contained in this Offering Circular. Any representation to the contrary is unlawful.
The Issuer is a corporation organised under the laws of England. Some of the officers and directors named herein reside outside the United States and some of the assets of the Issuer and of such officers and directors are located outside the United States. As a result, it may not be possible for investors to effect service of process outside England upon the Issuer or such persons, or to enforce judgments against them obtained in courts outside England predicated upon civil liabilities of the Issuer or such directors and officers under laws other than English law,
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including any judgment predicated upon United States federal securities laws.
BTMU and MUFG are both corporations organised under the laws of Japan. Some of the officers and directors named herein reside outside the United States and some of the assets of both BTMU and MUFG and of such officers and directors are located outside the United States. As a result, it may not be possible for investors to effect service of process outside Japan upon BTMU or MUFG, as the case may be, or such persons, or to enforce judgments against them obtained in courts outside Japan predicated upon civil liabilities of BTMU or MUFG, as the case may be, or such directors and officers under laws other than Japanese law, including any judgment predicated upon United States federal securities laws.
Notwithstanding any limitation on disclosure by any party provided for herein, or any other provision of this Offering Circular and its contents or any associated Final Terms, and effective from the date of commencement of any discussions concerning any of the transactions contemplated herein (the ‘‘Transactions’’), each recipient of this Offering Circular or any associated Final Terms (a ‘‘Recipient’’) (and each employee, representative, or other agent of such Recipient) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Transactions and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure, except to the extent that any such disclosure could reasonably be expected to cause this Programme or any offering of Notes thereunder not to be in compliance with securities laws. For the purposes of this paragraph, the tax treatment the Transactions is the purported or claimed U.S. Federal income tax treatment of the Transactions, and the tax structure of the Transactions is any fact that may be relevant to understanding the purported or claimed U.S. Federal income tax treatment of the Transactions.
This Offering Circular has been prepared on the basis that any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly, any person making or intending to make an offer in that Relevant Member State of Notes which are the subject of an offering contemplated in this Offering Circular as completed by final terms in relation to the offer of those Notes may only do so in circumstances in which no obligation arises for 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, in each case, in relation to such offer. Neither the Issuer nor any Dealer has authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for the Issuer or any Dealer to publish or supplement a prospectus for such offer.
All references in this Offering Circular to ‘‘U.S. dollars’’, ‘‘U.S.$’’ and ‘‘$’’ refer to United States dollars, those to ‘‘Sterling’’, ‘‘GB£’’ and ‘‘£’’ refer to pounds sterling, those to ‘‘Japanese Yen’’, ‘‘Yen’’ and ‘‘¥’’ refer to the currency of Japan and those 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 establishing the European Community, as amended.
NOTICE TO NEW HAMPSHIRE RESIDENTS: NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
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CONTENTS
Page
Documents Incorporated by Reference ...... 6 Summary of the Programme and Terms and Conditions of the Notes ...... 7 Risk Factors ...... 12 Form of the Notes ...... 44 Applicable Final Terms...... 47 Terms and Conditions of the Notes...... 58 Use of Proceeds...... 88 Mitsubishi UFJ Securities International plc ...... 89 The Bank of Tokyo-Mitsubishi UFJ, Ltd...... 91 Mitsubishi UFJ Financial Group, Inc...... 98 Relationship of the Issuer with BTMU and MUFG ...... 106 Taxation ...... 111 Book-Entry Clearance Procedures...... 113 Subscription and Sale and Transfer Restrictions ...... 119 General Information ...... 126
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.
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have previously been published 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 for the financial years ended A9.11.1 31st December, 2008 and 31st December, 2007 of the Issuer and the interim unaudited financial A9.11.2 statements for the six months ended 30th June, 2009 of the Issuer; A9.11.4.1
(b) the auditors report and audited consolidated annual financial statements for the financial years ended 31st March, 2009 and 31st March, 2008 for BTMU;
(c) the auditors report and audited consolidated annual financial statements for the financial years ended 31st March, 2009 and 31st March, 2008 for MUFG; and
(d) the Terms and Conditions of the Notes contained in each of the Offering Circular dated 29th October, 2008 (pages 55 to 84), the Offering Circular dated 24th October, 2007 (pages 52 to 77), the Offering Circular dated 27th October, 2006 (pages 47 to 73), the Offering Circular dated 2nd November, 2005 (pages 47 to 73), the Offering Circular dated 26th October, 2004 (pages 22 to 48), the Offering Circular dated 27th October, 2003 (pages 22 to 49), the Offering Circular dated 15th August, 2002 (pages 21 to 48) and the Offering Circular dated 17th August, 2001 (pages 19 to 45), in each case prepared by the Issuer in connection with the Programme.
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 section 81 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’). 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 be deemed, except as so modified or superseded, to 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 offices of the Paying Agents.
Any documents themselves incorporated by reference in the documents incorporated by reference in this Offering Circular shall not form part of this Offering Circular.
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.
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SUMMARY OF THE PROGRAMME AND TERMS AND CONDITIONS OF THE NOTES
The following summary does not purport to be complete and is taken from, and is qualified 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. Words and expressions defined in “Form of the Notes” and “Terms and Conditions of the Notes” below shall have the same meanings in this summary.
Issuer: Mitsubishi UFJ Securities International plc
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 that may affect the ability of each of BTMU and MUFG to fulfil its respective obligations under the Keep Well Agreement. These are set out under “Risk Factors” below. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme, see “Risk Factors”.
Description: Euro Medium Term Note Programme
Arranger: Mitsubishi UFJ Securities International plc
Dealer: Mitsubishi UFJ Securities International plc
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 and Transfer Restrictions” on pages 119 to 125) including the following restrictions applicable at the date of this Offering Circular.
Notes having a maturity Notes having a maturity of less than one year will, if the proceeds of the issue are of less than one year: 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 and Transfer Restrictions”. Registrars: The Bank of New York Mellon Mitsubishi UFJ Securities International plc
Trustee: The Law Debenture Trust Corporation p.l.c.
Issuing and Principal The Bank of New York Mellon, London Branch Paying Agent:
Size: Up to U.S.$8,000,000,000 (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: Subject to any applicable legal or regulatory restrictions, such currencies as may be A12.4.1.5 agreed between the Issuer and the relevant Dealer(s), including, without limitation, A13.4.5 Australian dollars, Canadian dollars, Danish kroner, euro, Hong Kong dollars, Indonesian rupiah, Japanese yen, New Zealand dollars, Sterling, Swiss francs, Thai bahts and U.S. dollars (as indicated in the applicable Final Terms).
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The Issuer may use the Programme to issue Notes denominated in various Asian currencies, in addition to Hong Kong dollars, Indonesian rupiah and Thai bahts as referred to in the previous paragraph, and will seek the agreement of the relevant Dealer(s) to do so as and when a suitable investment opportunity arises and in circumstances where applicable legal and/or regulatory requirements, which are satisfactory to the Issuer, the relevant Dealer(s) and the Trustee, exist to permit such issue.
Redenomination and The applicable Final Terms may provide that certain Notes may be redenominated Exchange: in euro and/or exchanged for other series of Notes denominated in euro. The relevant provisions applicable to any such redenomination and exchange are contained in Condition 3.
Maturities: The Notes will have such maturities as may be agreed between the Issuer and the relevant Dealer(s) and as indicated in the applicable Final Terms, 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.
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: Notes will be issued in bearer form or registered form as described in “Form of the Notes” below.
Fixed Rate Notes: Fixed interest will be payable on such date or dates as may be agreed between the Issuer and the relevant Dealer(s) (as indicated in the applicable Final Terms) 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: A13.4.8
(i) 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 either the 2000 ISDA Definitions or the 2006 ISDA Definitions (in each case, 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 (the “ISDA Definitions”)); or
(ii) on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or
(iii) on such other basis as may be agreed between the Issuer and the relevant Dealer(s) (as indicated in the applicable Final Terms).
The Margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer(s) for each Series of Floating Rate Notes.
Index Linked Notes: Payments of interest in respect of Index Linked Interest Notes or of principal in respect of Index Linked Redemption Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or movements in currency exchange rates or to such other factors as the Issuer and the relevant Dealer(s) may agree (as indicated in the applicable Final Terms).
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Equity Linked Notes: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Equity Linked Notes will be calculated by reference to such formula or to changes in the prices of securities as the Issuer and the relevant Dealer(s) may agree (as indicated in the applicable Final Terms).
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(s) may agree (as indicated in the applicable Final Terms).
Other provisions in Floating Rate Notes, Index Linked Interest Notes and Equity Linked Interest A13.4.8 relation to Floating Rate Notes may also have a maximum interest rate, a minimum interest rate or both. Notes, Index Linked Interest on Floating Rate Notes, Index Linked Interest Notes and Equity Linked Interest Notes and Interest Notes in respect of each Interest Period, as agreed prior to issue by the Equity Linked Interest Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and Notes: will be calculated on the basis of such Day Count Fraction, as may be agreed between the Issuer and the relevant Dealer.
Zero Coupon Notes: Zero Coupon Notes may be offered and sold at a discount to their nominal amount and will not bear interest.
Redemption: The applicable Final Terms will indicate either that the relevant Notes cannot be A13.4.9 redeemed prior to their stated maturity (other than in specified instalments (see below), 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 terms as are indicated in the applicable Final Terms.
The Final Terms may provide that Notes may be repayable in two or more instalments of such amounts and on such dates as are indicated in the applicable Final Terms.
Notes having a maturity of less than one year may be subject to restrictions on their denomination and distribution, see “Notes having a maturity of less than one year” above.
Denomination of Notes: Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer(s) and as indicated in the applicable Final Terms 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. The minimum denomination of each Note sold, resold or transferred to an Institutional Accredited Investor will be U.S.$100,000 or its equivalent in other specified currencies.
Taxation: All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed within the United Kingdom, subject as provided in Condition 7. In the event that any such deduction is made, the Issuer will, save in certain limited circumstances provided in Condition 7, be required to pay additional amounts to cover the amounts so deducted.
Negative Pledge: None.
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Cross Default: The terms and conditions of the Unsubordinated Notes will contain a cross- default provision in respect of the Issuer relating to Financial Indebtedness (as therein defined) having an aggregate nominal amount of at least U.S.$10,000,000 (or its equivalent in any other currency) as further described in Condition 9.
Status of the The Unsubordinated Notes will constitute direct, unconditional, unsubordinated A12.4.1.6 Unsubordinated Notes: and unsecured obligations of the Issuer and will rank pari passu and rateably without any preference among themselves and (subject to such exceptions as from time to time exist under applicable law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer from time to time outstanding.
Status of the Notes will be issued on either an unsubordinated or a subordinated basis. The A13.4.6 Subordinated Notes: Subordinated Notes will constitute direct, unsecured and subordinated obligations of the Issuer and rank pari passu without any preference among themselves. In the event of the winding-up of the Issuer, the rights of the holders of Subordinated Notes will be subordinated to the claims of all Senior Creditors (as defined in Condition 2(b)), all as more fully described in Condition 2(b).
Limited Rights of The Trustee may only accelerate the Subordinated Notes during or after a Acceleration in respect winding-up or dissolution of the Issuer (as more fully described in Condition of Subordinated Notes: 9(b)).
Keep Well Agreement: The Notes will have the benefit of the Keep Well Agreement between BTMU, MUFG, the Issuer and the Trustee, as more fully described herein under “Relationship of the Issuer with BTMU and MUFG” on pages 106 to 110.
Rating: The Programme has been rated Aa2 (in respect of the Unsubordinated Notes) and Aa3 (in respect of the Subordinated Notes) by Moody’s Investors Service Limited (“Moody’s”), and AA (in respect of Unsubordinated Notes) and AA- (in respect of Subordinated Notes) by Japan Credit Rating Agency, Ltd. and A+ (in respect of Unsubordinated Notes) and A (in respect of Subordinated Notes) by Rating and Investment Information, Inc.
The rating of certain Series of Notes to be issued under the Programme may be specified in the applicable Final Terms. Any Notes issued under the Programme may be rated or unrated. Where an issue of Notes is rated, its rating will not necessarily be the same as the rating applicable to the Programme. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, change or withdrawal at any time by the assigning rating agency.
Listing and admission to Application has been made to the UK Listing Authority for Notes issued under A12.6.1 trading: the Programme to be admitted to the Official List and to the London Stock A13.5.1 Exchange for such Notes to be admitted to trading on the London Stock A12.6.2 Exchange’s Professional Securities Market. 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.
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Selling Restrictions: There are restrictions on the offer, sale and transfer of the Notes in the United A13.4.3 States, the European Economic Area (including the United Kingdom and France), A12.4.1.3 Japan and Hong Kong 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 and Transfer Restrictions” on pages 119 to 125.
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RISK FACTORS
Each of the Issuer, BTMU and MUFG believes that the following factors may affect its ability to fulfil its obligations A9.3.1 under Notes issued under the Programme. All of these factors are contingencies which may or may not occur and none of the Issuer, A12.2 BTMU or MUFG is in a position to express a view on the likelihood of any such contingency occurring. A13.2
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.
Each of the Issuer, BTMU and MUFG 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, BTMU or MUFG 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, BTMU and MUFG based on information currently available to them and which they 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.
Factors that may affect the Issuer’s ability to fulfil its obligations under the Notes
Risks concerning counterparty credit quality and general economic conditions are inherent in the Issuer’s business.
Risks arising from changes in credit quality and amounts due from counterparties are inherent in a wide range of the Issuer’s business. Adverse changes in the credit quality of the Issuer’s counterparties or a general deterioration in Japan, the UK or global economic conditions or arising from systemic risks in the financial systems, could reduce the recoverability and value of the Issuer’s assets and require an increase in the Issuer’s level of provisions for bad and doubtful debts.
Market risks associated with fluctuations in interest rates, foreign exchange rates, bond and equity prices and other market factors are inherent in the Issuer’s business.
The most significant market risks the Issuer faces are interest rate, foreign exchange and bond and equity price risks. Changes in interest rate levels, yield curves and spreads may affect the interest rate margin realised between lending and borrowing costs. Changes in currency rates, particularly in the yen-dollar and yen-sterling rates, affect the value of assets and liabilities denominated in foreign currencies and affect earnings reported by the Issuer’s non-yen denomination businesses.
The Issuer has implemented risk management methods to mitigate and control these and other market risks to which the Issuer is exposed. However, it is difficult to predict changes in economic or market conditions and to anticipate the effects that such changes could have on its financial performance and business operations.
The Issuer’s business may be adversely affected by conditions in the financial markets and economic conditions in Japan and elsewhere around the world.
The Issuer’s securities and investment banking businesses are affected by domestic and overseas economic conditions and market trends, and commissions received and net gains (losses) on trading are highly susceptible to change. To the extent possible, the Issuer aims to establish a revenue structure that is resilient to the effects of changes in economic conditions or market trends. To achieve this, the Issuer aims to: diversify its sources of income in the corporate and wholesale businesses; manage the various types of risk; work to achieve a thorough reduction in costs; and develop systems for close cooperation with the group comprising Mitsubishi UFJ Financial Group, Inc. and its subsidiary undertakings (the ‘‘MUFG Group’’).
Despite the policies the Issuer adopts in this regard, the nature of its business (including the nature of its business as compared to other industries) means that economic conditions and market trends will have some unavoidable effect on its financial position and results of operations. Consequently, the Issuer cannot guarantee that it will avoid changes in commission amounts received and in net gains (losses) on trading, or that the diversification of its sources of income will proceed favourably.
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In addition, the Issuer’s results of operations may be directly or indirectly affected by changes in laws, regulations and ordinances, unpredictable and uncontrollable damage to infrastructure, disasters, war, terrorism, and similar factors.
The Issuer’s revenues generated from its brokerage business may decline.
A significant portion of the Issuer’s revenues is generated from brokerage commissions, which are commissions earned when the companies execute securities transactions for customers. In the Issuer’s brokerage business, profits may decrease substantially if investors’ demand for investments declines due to market downturns or other factors.
The Issuer’s revenues generated from investment banking business may decline.
The Issuer’s business in securities underwriting, financial advisory and other investment banking services is naturally affected by economic conditions and market trends, and therefore fee income is highly susceptible to change. Furthermore, if the Issuer is unable to sell underwritten securities smoothly due to market declines or other circumstances, there is a risk that it will incur losses.
The Issuer also engages in medium- to long-term investment, using its own capital, which may target companies not yet publicly traded or securitisation-related products. In such cases, the Issuer engages in investment with the intention of receiving investment profit through profit distribution from the investment or resale after an increase in the value of the investment. However, long periods may be required to recoup such investment or the Issuer may incur losses due to factors such as low liquidity of the investment and/or the uncertainty of investment profits.
The Issuer may incur significant losses from its trading and investment activities.
The Issuer engages in trading with the objective of providing products and services through the securities markets that respond to diverse customer needs. Various trading positions occur as a result. The major risks materialising in the course of trading that may have a significant impact on the Issuer’s financial position include: (i) market risk, which is the risk that the Issuer will incur losses due to changes in the market value (the market price and volatility of equities, interest rates, foreign exchange and commodities and others) of the financial products that the Issuer holds; and (ii) credit risk, which is the risk that the Issuer will incur losses due to a worsening of the financial position of borrowers, securities issuers, counterparties in market trades, counterparties to agreements and other relevant parties as well as the non-performance of agreements and additional factors. Through management of these risks, the Issuer aims to identify, control and avoid the risks inherent in trading, but the Issuer cannot guarantee that it will be able to sufficiently avoid large losses in the course of its trading business.
Liquidity risk could impair the Issuer’s ability to fund operations and adversely affect its results of operation and financial condition.
The securities business, the Issuer’s major business, requires a large amount of funds and as such necessitates the procurement of funds in a flexible and stable manner. Liquidity risk is the risk of incurring losses by not being able to trade at an appropriate level as a result of factors such as market conditions or credit position. Liquidity risk is comprised of: (i) funding liquidity risk (financing risk), the risk that the Issuer will incur losses as a result of not being able to procure, at an appropriate price, the necessary funds to execute trades or other business; and (ii) product liquidity risk, the risk that the Issuer will incur losses as a result of not being able to trade the volume required at an appropriate level.
Of the liquidity risks, funding liquidity risk is in particular a difficult risk to avoid for market participants. When carrying out transactions, the Issuer manages its cash position by analysing the characteristics of cash flows, such as the degree of certainty of cash flows and their timing, and develops contingency plans for financing methods in times of emergency. These contingency plans consist of alternative financing methods such as secured financing or the sale of highly liquid assets. The Issuer’s Risk Management Committee manages product liquidity risk by
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taking into account the market size (depth) of the trade and other factors, and when necessary, establishing a product liquidity framework and striving to minimise the normally assumable risk. Nevertheless, in the event that a funding liquidity risk materialises and there is a marked deterioration in financing conditions, or in the event that there is a marked deterioration in the liquidity of the financial products the Issuer holds, there may be constraints on its ability to smoothly execute its business.
Additionally, the Issuer is working to maintain and improve its credit rating, but if the credit rating falls, it may become difficult to smoothly fund or re-fund debt, and there is therefore a risk of constraints on its business.
The Issuer’s business may be adversely affected by information asset risk and other operational risks.
Information asset risk is the risk that the Issuer will incur losses through the loss, falsification, improper use or disclosure to external parties of information or the failure, stoppage, malfunction or improper use of information technology systems.
The Issuer has established a dedicated Information Security (‘‘IS’’) function to assess and monitor this risk. IS matters are managed under direction from an Operational Risk Working Group which reports and escalates issues to the Corporate Controls Committee. The IS function is working to develop and maintain its information security systems, but the Issuer cannot guarantee that it will always be able to sufficiently avoid being affected by information asset risk.
The Issuer has made a significant investment in its computer systems. However, the related depreciation costs and maintenance and operating costs may also affect its financial position and results of operations.
Other operational risks include:
Operating Risk: The risk that the Issuer will incur losses due to a failure to conduct internal processes properly, or due to accidents or improprieties occurring in the course of internal (transaction management) processes.
Legal Risk: The risk that the Issuer will incur losses due to insufficient consideration of and response to laws and regulations in respect of transactions and contracts (including the risk that the Issuer will incur losses due to insufficient response to changes in laws and regulations).
Reputational Risk: The risk that the Issuer will incur losses (or fail to realise potential gains) as a result of damage to its reputation caused by the materialisation of risks, problems with customers, the occurrence of misconduct and other circumstances (including the risk that the Issuer’s reputation will be damaged and it will incur losses due to the spreading of rumours and information by third parties, regardless of whether such rumours and information have any factual basis).
With regard to operating risk, the Issuer has established the Operational Risk Working Group, an advisory body to the Corporate Controls Committee, in order to engage in comprehensive detection of operating risks and to develop effective improvement measures. For legal risk, the Issuer is working to ensure there are processes able to sufficiently consider, as necessary, the opinions of legal experts from both inside and outside the Issuer. Regarding reputational risk, the Issuer is fully aware that trust and reliability are key pillars of its business, and is striving to ensure that at all times it engages in appropriate conduct in its transactions with customers, preventing unfair trading, and the like, through the use of various regulations, procedures and other systems.
The Issuer is striving to accomplish the following as the basis of its overall operational risk management: (i) governance framework for managing and directing operational risk matters; (ii) risk assessments and scenario work to identify and mitigate operational risks; (iii) development of indicators and risk profiles to monitor performance; and (iv) tracking of loss event and incident data to manage and drive process and control improvements. However,
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the Issuer cannot guarantee that as a result of these measures it will always be able to sufficiently avoid being affected by the risks noted above.
Extensive regulations of the financial services industry may limit the Issuer’s business activities and expose it to the risk of significant intervention from regulatory authorities and significant penalties.
Securities companies must comply with a range of regulations, and in the event that any such regulations with which the Issuer must comply are changed or new such regulations are added, it may affect its operations. Furthermore, when the Issuer engages in the securities business through overseas branches, it must comply with the various legal regulations of the countries in question. In the event that those legal regulations change as a result of the policy of a foreign government, the Issuer’s overseas operations may be affected.
MUFG’s policies may change and the Issuer’s business and financial performance could be adversely affected.
The Issuer is a consolidated subsidiary of Mitsubishi UFJ Financial Group, Inc. (‘‘MUFG’’) and through MUFG’s integrated business group system its parent conducts its business in close cooperation with the integrated business groups. The Issuer’s immediate parent, Mitsubishi UFJ Securities, Co., Ltd. (‘‘MUS’’), concluded a management alliance agreement with MUFG as well as various business alliance agreements with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (‘‘BTMU’’) and Mitsubishi UFJ Trust and Banking Corporation (“MUTBC”), all with the aim of realising maximum synergies within the MUFG Group. Under the management alliance agreement, MUFG advises and consults on matters, including risk management, where necessary to ensure the sound and proper business operations of the MUFG Group and the continued business development of MUS and the Issuer. Under the business alliance agreements, the Issuer offers its products and services in collaboration with BTMU and MUTBC. Ultimately, each agreement is designed to ensure profit growth at the Issuer as well as the MUFG Group as a whole. Guided by the aforementioned agreements, the Issuer aims to augment its management structure and MUFG Group collaboration from a consolidated perspective. If in the future the MUFG Group’s policies or the terms of the aforementioned agreements with other MUFG Group companies change significantly, the Issuer’s business operations and financial performance could be significantly affected.
Factors that may affect MUFG’s ability to fulfil its obligations under the Keep Well Agreement
MUFG’s business, operating results and financial condition could be materially adversely affected by any of the factors A9.4.1 discussed below.
MUFG has experienced and may continue to experience difficulty integrating its operations with those of the UFJ group and, as a result, may have difficulty achieving the benefits expected from the integration.
Since MUFG’s merger with UFJ Holdings in October 2005, MUFG has been implementing a business integration plan that is complex, time-consuming and costly. Achieving the targeted revenue synergies and cost savings is dependent on the successful implementation of MUFG’s ongoing integration process. MUFG may not succeed in addressing the risks or other problems encountered in the ongoing integration process. In particular, there may be delays or other difficulties in coordinating, consolidating and integrating the branch and subsidiary networks, and customer products and services of the two groups as planned. These and other problems in the ongoing integration process may cause MUFG to incur significant unanticipated additional costs, preventing it from achieving the previously announced cost reduction targets as scheduled. In addition, the two groups’ previous relationships with their respective customers, employees and strategic partners could be impaired in future periods. Those problems could also damage MUFG’s reputation. In addition, previously expected revenue synergies may not materialise in the expected time period if MUFG fails to address any problems that arise in the ongoing integration process. If MUFG is unable to resolve smoothly any problems that arise in the ongoing integration process, its business, results of operations, financial condition and stock price may be materially and adversely affected.
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MUFG may have difficulty achieving the benefits expected from the recently completed and planned mergers and other business combinations.
In line with MUFG’s ongoing strategic effort to create a leading comprehensive financial group that offers a broad range of financial products and services, MUFG has recently completed or is planning to complete mergers and other business combinations, including transactions with some of MUFG’s subsidiaries and equity method investees. For example, in August 2008, MUFG acquired, through a share exchange transaction, all the shares of its consolidated subsidiary, Mitsubishi UFJ NICOS Co., Ltd., not owned by MUFG, and sold a minority stake in Mitsubishi UFJ NICOS Co., Ltd. to The Norinchukin Bank. In November 2008, MUFG’s consolidated subsidiary, The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”) completed the acquisition of all of the shares of common stock of UnionBanCal Corporation (“UNBC”) not owned by MUFG. In March 2009, MUFG signed a memorandum of understanding with Morgan Stanley to form a securities joint venture combining MUFG’s consolidated subsidiary, Mitsubishi UFJ Securities Co., Ltd. (“MUS”) and Morgan Stanley Japan Securities Co., Ltd., by March 2010, subject to regulatory approval. MUFG intends to own a 60 per cent. interest in the joint venture. In addition, MUFG regularly reviews opportunities to pursue new acquisitions or business combinations.
If a planned merger or business combination fails, MUFG may be subject to various material risks. For example, MUFG’s growth strategies in Japan and globally may not be implemented as planned. In addition, the price of MUFG’s stock may decline to the extent that the current market price reflects a market assumption that any pending transaction will be completed. Furthermore, MUFG’s costs which relate to any planned transaction, including legal, accounting and certain financial adviser fees, must be paid even if the transaction is not completed. MUFG’s reputation may also be harmed due to its failure to complete an announced transaction. Even after a transaction is completed, there are various risks that could adversely affect MUFG’s ability to achieve its business objectives, including: • the growth opportunities and other expected benefits of these business combinations or acquisitions may not be realised in the expected time period and unanticipated problems could arise in the integration process, including unanticipated expenses which relate to the integration process as well as delays or other difficulties in coordinating, consolidating and integrating personnel, information and management systems, and customer products and services; • MUFG may be unable to cross-sell its products and services as effectively as anticipated and it may lose customers and business as some of the operations are reorganised, consolidated with other businesses and, in some cases, rebranded; • MUFG may have difficulty in coordinating the operations of its subsidiaries and affiliates as planned due to legal restrictions, internal conflict or market resistance; • the diversion of management and key employees’ attention may detract from MUFG’s ability to increase revenues and minimise costs; and • MUFG may encounter difficulties in penetrating certain markets due to adverse reactions to its newly acquired ownership in, or closer affiliation with, other financial institutions or businesses.
Any of the foregoing and other risks may adversely affect MUFG’s business, results of operations, financial condition and stock price.
MUFG’s recently completed and planned investments may increase its exposure to market fluctuations and other factors over which it has little or no control.
In line with MUFG’s ongoing strategic effort to create a leading comprehensive financial group that offers a broad range of financial products and services, it has recently agreed to enter into, and has entered into, several business combinations and strategic business alliances. For example: • on 2nd October, 2008, MUFG acquired 9.9 per cent. of the issued shares of Aberdeen Asset Management PLC (“Aberdeen”) and intends to increase its holdings but not to a level that exceeds 19.9 per cent., subject to receiving the required regulatory approvals;
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• on 13th October, 2008, MUFG purchased approximately $9 billion of convertible and non- convertible shares of Morgan Stanley preferred stock, which provided MUFG with an approximately 21 per cent. interest in Morgan Stanley on a fully diluted basis at the time of MUFG’s purchase, which interest decreased to approximately 20 per cent. on a fully diluted basis as a result of the U.S. Department of the Treasury’s subsequent purchase of a warrant to purchase up to 65,245,759 shares of common stock. Since this initial investment, MUFG has acquired 46,553,055 additional shares of common stock for a total of approximately $1,176 million and sold back to Morgan Stanley $705 million of the non-convertible preferred stock. As a result of these transactions, MUFG’s interest in Morgan Stanley remains approximately 20 per cent. on a fully diluted basis. MUFG has also signed a memorandum of understanding with Morgan Stanley to form a securities joint venture in Japan and a memorandum of understanding to expand the scope of MUFG’s strategic alliance into new geographies and businesses; and • on 21st October, 2008, MUFG completed a tender offer for outstanding shares of ACOM CO., LTD. (“ACOM”) common stock, raising its stake in ACOM to approximately 40 per cent.
The fair value of MUFG’s investments in those financial institutions may be impaired if their business results are adversely affected by current or future financial market instability or otherwise, resulting in a decline in the fair value of their securities that is other than temporary. Any significant impairment of the fair value of MUFG’s investments could have a material adverse impact on MUFG’s results of operations and financial condition.
Changes in economic policies of governments and central banks, laws and regulations, including capital adequacy requirements for financial institutions and applicable accounting rules implemented in response to current and future market fluctuations, may have a greater impact on MUFG’s results of operations and financial condition because of MUFG’s recent investments.
In addition, the most significant investments MUFG has made or announced in the fiscal year ended 31st March, 2009 involve companies in industries undergoing significant change or restructuring. As a result, it may be difficult to evaluate the prospects of such investments based on historical results, and MUFG’s results of operations may be subject to greater uncertainty.
In cases where MUFG holds a minority interest in the investees, MUFG typically cannot control the operations and assets of these investees or make major decisions without the consent of other shareholders or participants. In some cases, increasing MUFG’s shareholding to a controlling stake could also trigger additional regulatory approvals and subject MUFG to significantly increased regulatory supervision. If MUFG’s investees encounter financial or other business difficulties, if their strategic objectives change or if they no longer perceive MUFG to be an attractive alliance partner, they may no longer desire or be able to participate in alliances with MUFG. MUFG’s business and results of operations could be adversely affected if MUFG is unable to continue with one or more strategic business alliances.
If the Japanese stock market or other global markets decline in the future, MUFG may incur losses on its securities portfolio and its capital ratios will be adversely affected. MUFG may also need to reduce its strategic shareholdings, which could affect its relationship with customers.
MUFG holds large amounts of marketable equity securities, of which a significant portion are securities of Japanese issuers. The market values of these securities are inherently volatile. MUFG has recently experienced impairment losses on its marketable equity securities as a result of a decline in Japanese stock prices. The Nikkei Stock Average, which is an average of 225 blue chip stocks listed on the Tokyo Stock Exchange, declined from ¥12,656.42 at 1st April, 2008 to ¥8,109.53 at 31st March, 2009. The Nikkei Stock Average was ¥10,492.53 on 31st August, 2009. The Tokyo Stock Price Index (“TOPIX”), a composite index of all stocks listed on the First Section of the Tokyo Stock Exchange, declined from 1,230.49 at 1st April, 2008 to 789.54 at 31st March, 2009. The TOPIX was 965.73 on 31st August, 2009. If the Japanese stock market or other global markets further decline or do not improve, MUFG may incur additional losses on its securities portfolio. Further declines in the Japanese stock market or other global markets may also materially and adversely affect MUFG’s capital ratios, results of operations and financial condition.
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In addition, like many Japanese financial institutions, a substantial portion of MUFG’s equity securities portfolio is held for strategic and business relationship purposes. The sale of equity securities, whether to reduce MUFG’s risk exposure to fluctuations in equity security prices, or otherwise, will reduce MUFG’s strategic shareholdings, which may have an adverse effect on relationships with its customers. MUFG’s plans to further reduce its strategic shareholdings may also encourage some of its customers to sell their shares of MUFG’s common stock, which may have a negative impact on MUFG’s stock price.
MUFG’s trading and investment activities as well as its international operations expose it to interest rate, exchange rate and other risks.
MUFG undertakes extensive trading and investment activities involving a variety of financial instruments, including derivatives. MUFG also has significant business operations abroad, including operations of UNBC, in the United States and elsewhere. MUFG’s income from these activities as well as its foreign assets and liabilities resulting from its international operations are subject to volatility caused by, among other things, changes in interest rates, foreign currency exchange rates and equity and debt prices. For example: • increases in interest rates may have an adverse effect on the value of MUFG’s fixed income securities portfolio; and • fluctuations in foreign currency exchange rates against the Japanese yen may adversely affect MUFG’s financial condition, including its capital ratios, to the extent that its foreign currency-denominated assets and liabilities are not matched in the same currency or appropriately hedged, and will create foreign currency translation gains or losses.
In addition, downgrades of the credit ratings of some of the securities in MUFG’s portfolio could negatively affect MUFG’s results of operations. MUFG’s trading and investment activities in financial instruments may also be adversely affected by regulatory measures taken by government agencies. MUFG’s results of operations and financial condition are exposed to the risks of loss associated with these activities.
MUFG may suffer additional credit-related losses in the future due to problem loans.
When MUFG loans money or commits to loan money, it incurs credit risk, or the risk of losses if its borrowers do not repay their loans. MUFG may incur credit losses or have to provide for additional allowance for credit losses if: • large borrowers become insolvent or must be restructured; • domestic or global economic conditions, either generally or in particular industries in which large borrowers operate, deteriorate; • the value of the collateral MUFG holds, such as real estate or securities, declines; or • MUFG is adversely affected by other factors, including corporate credibility issues among its borrowers, to an extent that is worse than anticipated.
If actual credit losses are higher than currently expected, the current allowances for credit losses will be insufficient. MUFG’s allowance for credit losses in its loan portfolio is based on evaluations, assumptions and estimates about customers, the value of collateral MUFG holds and the economy as a whole. MUFG’s loan losses could prove to be materially different from the estimates and could materially exceed these allowances. In addition, the standards for establishing allowances may change, causing MUFG to change some of the evaluations, assumptions and estimates used in determining the allowances. As a result, MUFG may need to provide for additional allowances for credit losses. For example, as a result of recent deteriorating economic conditions, declines in real estate values and securities price levels, and worsening operations of borrowers, MUFG experienced increases in the amount of problem loans and provision for credit losses in the fiscal year ended 31st March, 2009.
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Credit losses may also increase if MUFG elects, or is forced by economic or other considerations, to sell or write off its problem loans at a larger discount, in a larger amount or in a different time or manner than it may otherwise want. MUFG may not be able to realise the value of the collateral it holds or enforce its rights against defaulting customers because of the difficulty of foreclosing on collateral in Japan, the illiquidity of and depressed values in the Japanese real estate market, or other reasons.
Although MUFG from time to time enters into credit derivative transactions, including credit default swap contracts, to manage its credit risk exposure, such transactions may not provide the protection against credit defaults that MUFG intended due to counterparty defaults or otherwise. In addition, negative changes in financial market conditions may restrict the availability and liquidity of credit default swaps.
In addition, MUFG may provide additional loans, equity capital or other forms of support to troubled borrowers in order to facilitate their restructuring and revitalisation efforts. MUFG may forbear from exercising some or all of its rights as a creditor against them, and MUFG may forgive loans to them in conjunction with their debt restructuring. These practices may substantially increase MUFG’s exposure to troubled borrowers and increase MUFG’s losses. An increase in loan losses would adversely affect MUFG’s results of operations, weaken its financial condition and erode its capital base.
MUFG may be adversely affected if economic conditions in Japan or elsewhere worsen.
MUFG’s performance is affected by general economic conditions of the countries in which MUFG operates, particularly Japan, where MUFG primarily conducts its business. General economic conditions that could affect MUFG include interest rates, inflation, investor sentiment, the availability and cost of credit, the liquidity of the global financial markets, the level and volatility of debt and equity capital markets, the levels of corporate capital investments and individual consumption, and raw material prices. Any of these economic conditions, currently existing or occurring in the future, may adversely affect MUFG’s financial condition and results of operations.
MUFG’s business may be adversely affected by negative developments with respect to other financial institutions, both directly and through the effect they may have on the overall banking environment and on their borrowers.
Some domestic and foreign financial institutions, including banks, non-bank lending and credit institutions, securities companies and insurance companies, have experienced declining asset quality and capital adequacy and other financial problems. This may lead to severe liquidity and solvency problems, which have in the past resulted in the liquidation, government control or restructuring of affected institutions. For example, the deterioration of the asset-backed securitisation products market and residential mortgage market in the United States resulted in Lehman Brothers Holdings Inc. filing a petition under Chapter 11 of the U.S. Bankruptcy Code. Other banks, securities companies, insurance companies and other financial institutions, especially U.S. institutions, continue to be under significant pressure due to declining asset quality as a result of the continuing deterioration of the global financial markets. These developments may continue to adversely affect MUFG’s financial results. Other financial difficulties relating to financial institutions could adversely affect MUFG because: • MUFG has extended loans, some of which may need to be classified as non-accrual and restructured loans, to banks, securities companies, insurance companies and other financial institutions that are not MUFG’s consolidated subsidiaries; • MUFG may be requested to participate in providing assistance to support distressed financial institutions that are not MUFG’s consolidated subsidiaries; • MUFG is a shareholder of some other banks and financial institutions that are not MUFG’s consolidated subsidiaries; • the government may elect to provide regulatory, tax, funding or other benefits to those financial institutions to strengthen their capital, facilitate their sale or otherwise, which in turn may increase their competitiveness against MUFG;
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• deposit insurance premiums could rise if deposit insurance funds prove to be inadequate; • bankruptcies or government support or control of financial institutions could generally undermine confidence in financial institutions or adversely affect the overall banking environment; and • negative media coverage of the financial industry, regardless of its accuracy and applicability to MUFG, could affect customer or investor sentiment, harm MUFG’s reputation and have a materially adverse effect on MUFG’s business or the price of its securities.
Changes in interest rate policy, particularly unexpected or sudden increases in interest rates, could adversely affect the value of MUFG’s bond and financial derivative portfolios, problem loans and results of operations.
MUFG holds a significant amount of Japanese government bonds and foreign bonds, including U.S.Treasury bonds. MUFG also holds a large financial derivative portfolio, consisting primarily of interest-rate futures, swaps and options, for its asset liability management. An increase in relevant interest rates, particularly if such increase is unexpected or sudden, may negatively affect the value of MUFG’s bond portfolio and reduce the so called “spread”, which is the difference between the rate of interest earned and the rate of interest paid. In addition, an increase in relevant interest rates may increase losses on MUFG’s derivative portfolio and increase MUFG’s problem loans as some of its borrowers may not be able to meet the increased interest payment requirements, thereby adversely affecting MUFG’s results of operations and financial condition.
A downgrade of MUFG’s credit ratings could have a negative effect on MUFG’s business.
A downgrade of MUFG’s credit ratings by one or more of the credit rating agencies could have a negative effect on its treasury operations and other aspects of its business. In the event of a downgrade of MUFG’s credit ratings, its treasury business unit may have to accept less favourable terms in MUFG’s transactions with counterparties, including capital-raising activities, or may be unable to enter into some transactions. This could have a negative impact on the profitability of MUFG’s treasury and other operations and adversely affect MUFG’s results of operations and financial condition.
MUFG is exposed to new or increased risks as it expands the range of its products and services and the geographic scope of its business.
MUFG currently plans to pursue various business strategies to improve its profitability. In addition to the risks associated with investments, business combinations and mergers described above, there are various other risks which could adversely affect MUFG’s ability to achieve its business objectives. For example, as MUFG expands the range of its products and services beyond its traditional banking and trust businesses and as the sophistication of financial products and management systems grows, MUFG will be exposed to new and increasingly complex risks. MUFG may have only limited experience with the risks which relate to the expanded range of these products and services. In addition, MUFG may have difficulty developing and operating the necessary information systems. As a result, MUFG may not be able to foresee certain risks, and new products and services MUFG introduces may not gain acceptance among customers. Moreover, some of the activities that MUFG’s subsidiaries are expected to engage in, such as derivatives and foreign currency trading, present substantial risks. As MUFG expands the geographic scope of its business, it will also be exposed to risks that are unique to particular jurisdictions or markets. MUFG’s risk management systems may prove to be inadequate and may not work in all cases or to the degree required. As a result, MUFG is subject to substantial market, credit and other risks in relation to the expanding scope of its products, services and trading activities or expanding its business beyond its traditional markets, which could result in MUFG incurring substantial losses. In addition, MUFG’s efforts to offer new services and products or penetrate new markets may not succeed if product or market opportunities develop more slowly than expected or if the profitability of opportunities is undermined by competitive pressures. If MUFG fails to achieve some or all of the goals of its business strategies, MUFG’s results of operations could be materially and adversely affected.
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MUFG is exposed to substantial credit and market risks in emerging market countries.
MUFG is active in countries in Asia, Latin America, Central and Eastern Europe and other emerging market countries through a network of branches and subsidiaries and is thus exposed to a variety of credit and market risks associated with these countries. These risks will increase if the global financial crisis and recession continue or worsen. For example, a decline in the value of local currencies of these countries could adversely affect the creditworthiness of some of MUFG’s borrowers in these countries. The loans MUFG has made to borrowers and banks in these countries are often denominated in U.S. dollars, Euro or other foreign currencies. These borrowers often do not hedge the loans to protect against fluctuations in the values of local currencies. A devaluation of the local currency would make it more difficult for a borrower earning income in that currency to pay its debts to MUFG and other foreign lenders. In addition, some countries in which MUFG operates may attempt to support the value of their currencies by raising domestic interest rates. If this happens, the borrowers in these countries would have to devote more of their resources to repaying their domestic obligations, which may adversely affect their ability to repay their debts to MUFG and other foreign lenders. The limited credit availability resulting from these and related conditions may adversely affect economic conditions in some countries. This could cause a further deterioration of the credit quality of borrowers and banks in those countries and cause MUFG to incur further losses.
In addition, MUFG is active in other countries and regions that expose it to risks similar to the risks described above and also risks specific to those countries and regions, which may cause MUFG to incur losses or suffer other adverse effects.
Any adverse changes in Union Bank’s business could significantly affect MUFG’s results of operations.
Union Bank, N.A. (“Union Bank”) is UNBC’s primary subsidiary. Union Bank contributes to a significant portion of MUFG’s net income. Any adverse change in the business or operations of Union Bank could significantly affect MUFG’s results of operations. Factors that could negatively affect Union Bank’s results include adverse economic conditions in California, including the downturn in the real estate and housing industries in California, substantial competition in the California banking market, uncertainty over the U.S. economy due to deteriorating economic conditions in the United States, the threat of terrorist attacks, fluctuating oil prices and rising interest rates, negative trends in debt ratings, and additional costs and other adverse consequences which may arise from enterprise-wide compliance, or failure to comply, with applicable laws and regulations, such as the U.S. Bank Secrecy Act and related amendments under the USA PATRIOT Act. Compared to prior years, any adverse developments which could arise at Union Bank will have a greater negative impact on MUFG’s results of operation and financial condition, since Union Bank became, through UNBC, MUFG’s wholly owned subsidiary in November 2008 compared with approximately 65 per cent. ownership in prior years.
Changes in the business environment for consumer finance companies in Japan have adversely affected MUFG’s recent financial results, and may further adversely affect MUFG’s future financial results.
MUFG has a large loan portfolio in the consumer lending industry as well as large shareholdings in subsidiaries and equity method investees in the consumer finance industry. The Japanese government has been implementing regulatory reforms affecting the consumer lending industry in recent years. In December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the Law Concerning Acceptance of Investment, Cash, Deposit and Interest Rate, etc., which is currently 29.2 per cent. per annum, to 20 per cent. per annum. The reduction in the maximum permissible interest rate will be implemented before mid-2010. Under the reforms, all interest rates will be subject to the lower limits (15-20 per cent. per annum) imposed by the Interest Rate Restriction Law, which will compel, or has already compelled, lending institutions to lower the interest rates they charge borrowers.
Currently, and until the reduction in the maximum permissible interest rate as described above takes effect, consumer finance companies are able to charge interest rates exceeding the limits stipulated by the Interest Rate Restriction Law, provided that they satisfy certain conditions set forth in the Law Concerning Lending Business. Accordingly, MUFG’s consumer finance subsidiaries and equity method investees offer loans at interest rates above
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the Interest Rate Restriction Law. As a result of recent decisions by the Supreme Court of Japan, consumer finance companies experienced a significant increase in borrowers’ claims for reimbursement of previously collected interest payments in excess of the limits stipulated by the Interest Rate Restriction Law. New regulations that are scheduled to be effective before mid-2010 may also have a negative impact on the business of consumer finance companies as those new regulations are expected to require, among other things, consumer finance companies to review the repayment capability of borrowers before lending, thereby limiting the amount of borrowing available to individual borrowers.
These and other related developments have adversely affected, and may further adversely affect, the operations and financial condition of MUFG’s subsidiaries and borrowers which are engaged in consumer lending, which in turn may affect the value of MUFG’s related shareholdings and loan portfolio.
MUFG may have to compensate for losses in MUFG’s loan trusts and money in trusts.
MUFG’s trust bank subsidiary may have to compensate for losses of principal of all loan trusts and some money in trusts. Funds in those guaranteed trusts are generally invested in loans and securities. If the amount of assets and reserves held in the guaranteed trusts falls below the principal as a result of loan losses, losses in the investment portfolio or otherwise, it would adversely affect MUFG’s results of operations.
MUFG’s results of operations may be negatively affected by the global financial crisis and recession triggered by disruptions in the financial markets in the United States.
The recent global financial crisis and recession may continue to adversely affect MUFG’s loan and investment portfolios, which include securitisation products such as asset-backed securities. For example, some of MUFG’s investment securities have been, and may continue to be, marked at a significantly lower price because the market for those securities is inactive. MUFG has also been, and may continue to be, affected by credit market deterioration caused by defaults on these higher risk residential mortgages. Specifically, the availability of credit has become, and may continue to be, limited, causing some of MUFG’s counterparties to default, or some of MUFG’s credit derivative transactions may also be negatively affected. Moreover, the negative developments in the U.S. credit markets have caused, and may continue to cause, significant fluctuations in global stock markets and foreign currency exchange rates, which in turn affect MUFG’s results of operations. If credit market conditions continue to deteriorate, MUFG’s capital funding structure may need to be adjusted, its funding costs may increase, or its credit- related losses may increase, all of which could have a material impact on MUFG’s financial results and financial condition.
MUFG’s information systems and other aspects of its business and operations are exposed to various system, political and social risks.
As a major financial institution, MUFG’s information systems and other aspects of its business and operations are exposed to various system, political and social risks beyond its control. Incidents such as disruptions of the Internet and other information networks due to major virus outbreaks, major terrorist activity, serious political instability and major health epidemics have the potential to directly affect MUFG’s business and operations by disrupting MUFG’s operational infrastructure or internal systems. Such incidents may also negatively impact the economic conditions, political regimes and social infrastructure of countries and regions in which MUFG operates, and possibly the global economy as a whole. MUFG’s risk management policies and procedures may be insufficient to address these and other large-scale unanticipated risks.
In particular, the capacity and reliability of MUFG’s electronic information technology systems are critical to MUFG’s day-to-day operations and a failure or disruption of these systems would adversely affect MUFG’s capacity to conduct its business. In addition to MUFG’s own internal information systems, MUFG also provides its customers with access to MUFG’s services and products through the Internet and ATMs. These systems as well as MUFG’s hardware and software are subject to malfunction or incapacitation due to human error, accidents, power loss, sabotage, hacking, computer viruses and similar events, as well as the loss of support services from third parties such as telephone and Internet service providers.
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Additionally, as with other Japanese companies, MUFG’s offices and other facilities are subject to the risk of earthquakes and other natural disasters. MUFG’s redundancy and back-up measures may not be sufficient to avoid a material disruption in its operations, and its contingency plans may not address all eventualities that may occur in the event of a material disruption.
These various factors, the threat of such risks or related countermeasures, or a failure to address such risks, may materially and adversely affect MUFG’s business, operating results and financial condition.
MUFG’s business may be adversely affected by competitive pressures, which have partly increased due to regulatory changes and recent market changes in the financial industry domestically and globally.
In recent years, the Japanese financial system has been increasingly deregulated and barriers to competition have been reduced. The privatisation of the Japanese postal savings system and the establishment of Japan Post Bank Co., Ltd. in October 2007, as well as the establishment of Japan Finance Corporation, a public corporation wholly owned by the Japanese government, in October 2008, could also substantially increase competition within the financial services industry. In addition, there has been significant consolidation and convergence among financial institutions domestically and globally, and this trend may continue in the future and further increase competition in the market. A number of large commercial banks and other broad-based financial services firms have merged or formed strategic alliances with, or have acquired, other financial institutions both in Japan and overseas. If MUFG is unable to compete effectively in this more competitive and deregulated business environment, MUFG’s business, results of operations and financial condition will be adversely affected.
MUFG is subject to increased regulatory requirements and supervision in the United States as a financial holding company.
In October 2008, MUFG, BTMU, Mitsubishi UFJ Trust and Banking Corporation (“MUTBC”) and UNBC, which is a subsidiary of BTMU, elected to become financial holding companies respectively under the U.S. Bank Holding Company Act. As a financial holding company, MUFG is authorised to engage in an expanded list of activities in the United States, including merchant banking, insurance underwriting, and a full range of securities activities.
Under MUFG’s financial holding company status, MUFG is also subject to additional regulatory requirements. For example, each of MUFG’s banking subsidiaries with operations in the United States, comprising Bank of Tokyo-Mitsubishi UFJ Trust Company, Mitsubishi UFJ Trust & Banking Corporation (U.S.A.) and Union Bank, which are MUFG’s U.S. domestic depository institutions, as well as BTMU and MUTBC, must be “well capitalised”, meaning a Tier 1 risk-based capital ratio of at least 6 per cent. and a total risk-based capital ratio of at least 10 per cent.. MUFG’s U.S. banking operations must also be “well managed”, including that they maintain examination ratings that are at least satisfactory. Failure to comply with such requirements would require MUFG to prepare a remediation plan and MUFG would not be able to undertake new business activities or acquisitions based on its status as a financial holding company during any period of non-compliance, and, as a result, it may negatively affect MUFG’s future financial results.
In June 2009, the U.S. government released a regulatory reform proposal called “Financial Regulatory Reform, A New Foundation: Rebuilding Financial Supervision and Regulation.” This proposal includes, among other things, sweeping financial regulatory reforms designed to promote enhanced supervision and regulation of financial firms, establish comprehensive supervision of financial markets, protect consumers and investors from financial abuse, provide government with the tools needed to manage a financial crisis, and raise international regulatory standards and improve international cooperation. This reform, if enacted, could have a significant impact on MUFG’s regulatory and financial compliance systems and practices, possibly requiring it to incur a significant amount of resources to implement measures to come into compliance with the reform and manage them on an ongoing basis.
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MUFG has recently been subject to several regulatory actions for non-compliance with legal requirements. These regulatory matters and any future regulatory matters or regulatory changes could have a negative impact on MUFG’s business and results of operations.
MUFG conducts its business subject to ongoing regulation and associated regulatory risks, including the effects of changes in laws, regulations, policies, voluntary codes of practice and interpretations in Japan and other markets where MUFG operates. MUFG’s compliance risk management systems and programmes may not be fully effective in preventing all violations of laws, regulations and rules.
The Financial Services Agency of Japan and regulatory authorities in the United States and elsewhere also have the authority to conduct, at any time, inspections to review banks’ accounts, including those of MUFG’s banking subsidiaries. Some of MUFG’s other financial services businesses, such as its securities business, are also subject to regulations set by, and inspections conducted by, various self-regulatory organisations such as the Financial Industry Regulatory Authority in the United States. In recent years, MUFG has been subject to several regulatory actions by, among others, the Financial Services Agency of Japan, the Securities and Exchange Surveillance Commission of Japan and various U.S. banking regulators.
MUFG’s failure or inability to comply fully with applicable laws and regulations could lead to fines, public reprimands, damage to reputation, enforced suspension of operations or, in extreme cases, withdrawal of authorisation to operate, adversely affecting MUFG’s business and results of operations. Regulatory matters may also adversely affect MUFG’s ability to obtain regulatory approvals for future strategic initiatives. Furthermore, failure to take necessary corrective action, or the discovery of violations of law in the process of further review of any of the matters mentioned above or in the process of implementing any corrective measures, could result in further regulatory action.
In addition, future developments or changes in laws, regulations, policies, voluntary codes of practice and their effects are unpredictable and beyond MUFG’s control. For example, new regulations to be enacted before mid- 2010 are expected to require, among other things, consumer finance companies in Japan to review the repayment capabilities of borrowers before lending, thereby limiting the amount of borrowing available to individual borrowers, which in turn may negatively affect MUFG’s future financial results.
Transactions with counterparties in countries designated by the U.S. Department of State as state sponsors of terrorism may lead some potential customers and investors in the United States and other countries to avoid doing business with MUFG or investing in MUFG’s shares.
MUFG, through its banking subsidiaries, engages in operations with entities in or affiliated with Iran and Syria, including transactions with entities owned or controlled by the Iranian or Syrian governments, and the banking subsidiary has a representative office in Iran. The U.S. Department of State has designated Iran, Syria and other countries as “state sponsors of terrorism”, and U.S. law generally prohibits U.S. persons from doing business with such countries. MUFG’s activities with counterparties in or affiliated with Iran, Syria and other countries designated as state sponsors of terrorism are conducted in compliance in all material respects with both applicable Japanese and U.S. regulations.
MUFG’s operations with entities in Iran consist primarily of loans to Iranian financial institutions in the form of financing for petroleum projects and trade financing for general commercial purposes, as well as letters of credit and foreign exchange services. MUFG’s operations relating to Syria are primarily foreign exchange services. MUFG does not believe its operations relating to Iran and Syria are material to its business or financial condition. As of 31st March, 2009, the loans outstanding to borrowers in or affiliated with Iran and Syria were approximately $151.7 million and less than $0.1 million, respectively. These represented less than 0.1 per cent. of MUFG’s total assets as of 31st March, 2009. In addition, MUFG receives deposits or hold assets on behalf of several individuals resident in Japan who are citizens of countries designated as state sponsors of terrorism.
MUFG is aware of initiatives by U.S. governmental entities and U.S. institutional investors such as pension funds to adopt or consider adopting laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran, Syria and other countries identified as state sponsors
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of terrorism. It is possible that such initiatives may result in MUFG being unable to gain or retain entities subject to such prohibitions as customers or as investors in MUFG’s shares. In addition, depending on socio-political developments, MUFG’s reputation may suffer due to its association with these countries. The above circumstances could have an adverse effect on MUFG’s business and financial condition.
MUFG may not be able to maintain its capital ratios above minimum required levels, which could result in the suspension of some or all of its operations.
MUFG, as a holding company, and its Japanese banking subsidiaries are required to maintain risk-weighted capital ratios above the levels specified in the capital adequacy guidelines of the Financial Services Agency of Japan. The capital ratios are calculated in accordance with Japanese banking regulations based on information derived from the relevant entity’s financial statements prepared in accordance with Japanese GAAP. MUFG’s subsidiaries in California, UNBC and Union Bank are subject to similar U.S. capital adequacy guidelines. MUFG or its banking subsidiaries may be unable to continue to satisfy the capital adequacy requirements because of: • increases in credit–risk assets and expected losses MUFG or its banking subsidiaries may incur due to fluctuations in MUFG’s or its banking subsidiaries’ loan and securities portfolios as a result of deteriorations in the credit of MUFG’s borrowers and the issuers of equity and debt securities; • increases in credit costs MUFG or its banking subsidiaries may incur as MUFG or its banking subsidiaries dispose of problem loans or as a result of deteriorations in the credit of MUFG’s borrowers; • declines in the value of MUFG’s or its banking subsidiaries’ securities portfolio; • changes in the capital ratio requirements or in the guidelines regarding the calculation of bank holding companies’ or banks’ capital ratios or changes in the regulatory capital requirements for securities firms; • a reduction in the value of MUFG’s or its banking subsidiaries’ deferred tax assets; • adverse changes in foreign currency exchange rates; and • other adverse developments discussed in these risk factors. MUFG’s capital ratios may also be adversely affected if MUFG or its banking subsidiaries fail to refinance MUFG’s subordinated debt obligations with equally subordinated debt. As of 31st March, 2009, subordinated debt accounted for approximately 32.9 per cent. of MUFG’s total regulatory capital, 35.7 per cent. of BTMU’s total regulatory capital and 23.7 per cent. of total regulatory capital of MUTBC, in each case, as calculated under Japanese GAAP. The failure to refinance these subordinated debt obligations with equally subordinated debt may reduce MUFG’s total regulatory capital and, as a result, negatively affect MUFG’s capital ratios.
If MUFG’s capital ratios fall below required levels, the Financial Services Agency of Japan could require MUFG to take a variety of corrective actions, including withdrawal from all international operations or suspension of all or part of MUFG’s business operations.
The valuation of certain financial instruments may change due to market price fluctuations, changes in accounting standards or otherwise.
A substantial portion of the assets on MUFG’s consolidated balance sheets includes financial instruments that MUFG carries at fair value. Generally, in order to establish the fair value of these instruments, MUFG relies on quoted market prices. If the value of these financial instruments declines, a corresponding write-down may be recognised in MUFG’s consolidated statement of operations. As the global financial markets became unstable following concerns of increased defaults of higher risk mortgages in the United States, there have been increasing circumstances where quoted market prices for securities became significantly depressed or were not properly quoted. Specifically, due to the reduction in liquidity of certain debt securities resulting from the global financial
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market instability in the second half of the fiscal year ended 31st March, 2009, MUFG observed that the market for collateralised loan obligations (“CLOs”) backed by general corporate loans became significantly inactive compared with normal market activity. In light of such circumstances, MUFG concluded that the unadjusted non-binding quotes from broker-dealers became less reflective of the fair value as defined by Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”, with respect to such CLOs. Consequently, MUFG changed the estimation method for estimating the fair value of such CLOs from the method adopting unadjusted quotes from independent broker-dealers to the estimation method weighting the internal model valuation and the non-binding broker-dealer quotes during the second half of the fiscal year ended 31st March, 2009. Additional fluctuations in the market or instabilities in the market could have a significant adverse effect on the fair value of the financial instruments that MUFG holds.
In response to the recent instabilities in financial markets, several international organisations which set accounting standards announced new or revised rules for estimating the fair value for certain financial instruments. Accounting standards applicable to these financial instruments remain subject to further debate and revision by international organisations which set accounting standards. If the current accounting standards change in the future, the reported values of some of MUFG’s financial instruments may need to be modified, and such modification could have a significant impact on MUFG’s financial results or financial condition. Specifically, changes in accounting standards applicable to some of MUFG’s financial instruments could have a significant negative impact on MUFG’s capital ratios.
Losses relating to MUFG’s pension plans and a decline in returns on MUFG’s plan assets may negatively affect MUFG’s results of operations and financial condition.
The fair value of MUFG’s pension plan assets has declined and MUFG’s investment return has decreased under the current market circumstances. If the fair value of MUFG’s pension plan assets decline or MUFG’s investment return decreases further, or if there is a change in the actuarial assumptions on which the calculations of the projected pension obligations or pension plan assets are based, such as a decline in the discount rate or the expected rate of return on plan assets, MUFG may incur additional losses. Changes in the interest rate environment and other factors may also adversely affect the amount of unfunded pension obligations and the resulting annual amortisation expense. In addition, MUFG may have to record expenses relating to the amortisation of previously unrecognised prior service costs if MUFG’s pension plans are amended.
If the goodwill recorded in connection with MUFG’s acquisitions becomes impaired, MUFG may be required to record impairment charges, which may adversely affect MUFG’s financial results and the price of its securities.
In accordance with U.S. GAAP, MUFG has accounted for its acquisitions using the purchase method of accounting. MUFG recorded the excess of the purchase price over the fair value of the assets and liabilities of the acquired companies as goodwill. U.S. GAAP requires MUFG to test goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Goodwill is tested by initially estimating fair value and then comparing it against the carrying amount. If the carrying amount of a reporting unit exceeds its estimated fair value, MUFG is required to record an impairment loss. The amount of impairment and the remaining amount of goodwill, if any, is determined by comparing the fair value of the reporting unit as of the test date against the fair value of the assets and liabilities of that reporting unit as of the same date.
The global financial crisis and recession led to the decline in MUFG’s market capitalisation and negatively affected the fair value of MUFG’s reporting units for purposes of MUFG’s periodic testing of goodwill for impairment. As a result, MUFG recorded ¥845.8 billion of goodwill impairment charges for the fiscal year ended 31st March, 2009, in addition to having recorded ¥893.7 billion of goodwill impairment charges for the previous fiscal year. As of 31st March, 2009, the balance of goodwill was ¥379.4 billion.
MUFG may be required to record additional impairment charges relating to goodwill in future periods if the fair value of any of its reporting units declines below the fair value of related assets net of liabilities. Any
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additional impairment charges will negatively affect MUFG’s financial results, and the price of MUFG’s securities could be adversely affected.
MUFG may incur significant additional costs for implementing effective internal controls.
In order to operate as a global financial institution, it is essential for MUFG to have effective internal controls, corporate compliance functions, and accounting systems to manage MUFG’s assets and operations. Moreover, under the U.S. Sarbanes-Oxley Act of 2002, which applies by reason of MUFG’s status as an SEC reporting company, MUFG is required to establish internal control over its financial reporting, and MUFG’s management is required to assess the effectiveness of MUFG’s internal control over financial reporting and disclose whether such internal control is effective. MUFG’s independent auditors must also conduct an audit to evaluate and then render an opinion on the effectiveness of MUFG’s internal control over financial reporting. MUFG is also subject to regulations on internal control over financial reporting under Japanese law from the fiscal year ended 31st March, 2009.
Designing and implementing an effective system of internal control capable of monitoring and managing MUFG’s business and operations requires significant management and human resources and considerable costs. If MUFG identifies any material weaknesses in its internal control system, it may incur significant additional costs for remediating such weaknesses. In addition, if MUFG adopts a new accounting system, it may be required to incur significant additional costs for establishing and implementing effective internal controls, which may materially and adversely affect MUFG’s financial condition and results of operations.
MUFG’s risk management policies, procedures and methods may leave MUFG exposed to unidentified or unanticipated risks, which could lead to material losses.
MUFG has devoted significant resources to developing and implementing its risk management policies, procedures and assessment methods and intends to continue to do so in the future. MUFG’s risk management policies, procedures and methods, however, may not be fully effective in mitigating MUFG’s risk exposures in all economic or market environments or against all types of risk, including risks that MUFG fails to identify or anticipate.
Some of MUFG’s risk management policies, procedures and methods may not be fully effective in forecasting, identifying and managing MUFG’s future risks because these risk management policies, procedures and methods are based primarily on MUFG’s experiences. If MUFG’s risk management policies, procedures or methods prove ineffective, MUFG’s business, operating results and financial condition could be materially and adversely affected.
MUFG may be subject to liability and regulatory action if MUFG is unable to protect personal and other confidential information.
There have been many cases where personal information and records in the possession of corporations and institutions were leaked or improperly accessed. In the event that personal information in MUFG’s possession about MUFG’s customers or employees is leaked or improperly accessed and subsequently misused, MUFG may be subject to liability and regulatory action. As an institution in possession of personal information, MUFG is required to treat personal and other confidential information as required by the Personal Information Protection Law of Japan, as well as the Banking Law and the Financial Instruments and Exchange Law of Japan. MUFG may have to provide compensation for economic loss and emotional distress arising out of a failure to protect such information. In addition, such incidents could create a negative public perception of MUFG’s operations, systems or brand, which may in turn decrease customer and market confidence and materially and adversely affect MUFG’s business, operating results and financial condition.
For example, in March 2009, MUS discovered that an employee had illegally stolen and sold customer information to information vendors. In June 2009, MUS received from the Financial Services Agency of Japan an order to improve business operations under the Financial Instruments and Exchange Law and a recommendation
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under the Personal Information Protection Law requiring MUS, among other things, to enhance its information security controls so as to prevent any recurrence of similar incidents and to submit a report on MUS’s progress on adopting and implementing remedial and preventive measures.
Damage to MUFG’s reputation could harm its business.
MUFG is one of the largest and most influential financial institutions in Japan by virtue of its market share and the size of its operations and customer base. MUFG’s reputation is critical in maintaining its relationships with clients, investors, regulators and the general public. MUFG’s reputation could be damaged by numerous causes, including, among others, system troubles, employee misconduct, failure to properly address potential conflicts of interest, litigation, compliance failures, the activities of customers and counterparties over which MUFG has limited or no control, and exacting scrutiny from regulatory authorities and customers regarding MUFG’s trade practices and potential abuses of MUFG’s dominant bargaining position in its dealings with customers. If MUFG is unable to prevent or properly address these causes, it could lose existing or prospective customers and investors, in which case MUFG’s business, financial condition and results of operations could be materially and adversely affected.
MUFG’s businesses may be materially and adversely affected if it is unable to hire and retain qualified employees.
MUFG’s performance is largely dependent on the talents and efforts of highly skilled individuals. Competition for qualified employees in the banking, securities and financial services industries is intense. MUFG’s continued ability to compete effectively in its businesses depends on its ability to attract new employees as necessary and to retain and motivate its existing employees. If MUFG is not successful in attracting and retaining sufficient skilled employees through its hiring efforts and training programmes aimed to maintain and enhance the skills and expertise of its employees, its competitiveness and performance could be negatively affected, and consequently, MUFG’s business, operating results and financial condition may also be adversely affected.
Factors that may affect BTMU’s ability to fulfil its obligations under the Keep-Well Agreement A9.3.1
BTMU’s business, operating results and financial condition could be materially adversely affected by any of the factors discussed below.
If the Japanese stock market or other global markets decline in the future, BTMU may incur losses on its securities portfolio and its capital ratios will be adversely affected. BTMU may also need to reduce its strategic shareholdings, which could affect its relationship with customers.
BTMU holds large amounts of marketable equity securities, of which a significant portion is securities of Japanese issuers. The market values of these securities are inherently volatile. BTMU has recently experienced impairment losses on its marketable equity securities as a result of a decline in Japanese stock prices. The Nikkei Stock Average, which is an average of 225 blue chip stocks listed on the Tokyo Stock Exchange, Inc. (the “Tokyo Stock Exchange”), declined from ¥12,656.42 as at 1st April, 2008 to ¥8,109.53 as at 31st March, 2009. The Nikkei Stock Average was ¥10,492.53 on 31st August, 2009. The Tokyo Stock Price Index (“TOPIX”), a composite index of all stocks listed on the First Section of the Tokyo Stock Exchange, declined from 1,230.49 as at 1st April, 2008 to 789.54 as at 31st March, 2009. The TOPIX was 965.73 on 31st August, 2009. If the Japanese stock market or other global markets further decline or do not improve, BTMU may incur additional losses on its securities portfolio. Further declines in the Japanese stock market or other global markets may also materially and adversely affect BTMU’s capital ratios, results of operations and financial condition.
In addition, like many Japanese financial institutions, a substantial portion of BTMU’s equity securities portfolio is held for strategic and business relationship purposes. The sale of equity securities, whether to reduce BTMU’s risk exposure to fluctuations in equity security prices, or otherwise, will reduce its strategic shareholdings, which may have an adverse effect on relationships with its customers. BTMU’s plans to further reduce its strategic shareholdings may also encourage some of its customers to sell their shares of its common stock, which may have a negative impact on its stock price.
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BTMU’s trading and investment activities as well as its international operations expose it to interest rate, exchange rate and other risks.
BTMU undertakes extensive trading and investment activities involving a variety of financial instruments, including derivatives. BTMU also has significant business operations abroad, including operations of UnionBanCal Corporation (“UNBC”), in the United States and elsewhere. BTMU’s income from these activities as well as its foreign assets and liabilities resulting from its international operations are subject to volatility caused by, among other things, changes in interest rates, foreign currency exchange rates and equity and debt prices. For example: • increases in interest rates may have an adverse effect on the value of BTMU’s fixed income securities portfolio, as discussed in “Changes in interest rate policy, particularly unexpected or sudden increases in interest rates, could adversely affect the value of BTMU’s bond and financial derivatives portfolios, problem loans and results of operations” below; and • fluctuations in foreign currency exchange rates against the Japanese yen may adversely affect BTMU’s financial condition, including its capital ratios, to the extent that its foreign currency denominated assets and liabilities are not matched in the same currency or appropriately hedged, and will create foreign currency translation gains or losses.
In addition, downgrades of the credit ratings of some of the securities in BTMU’s portfolio could negatively affect its results of operations. BTMU’s trading and investment activities in financial instruments may also be adversely affected by regulatory measures taken by government agencies. BTMU’s results of operations and financial condition are exposed to the risks of loss associated with these activities.
BTMU may suffer additional credit-related losses in the future due to problem loans.
When BTMU loans money or commits to loan money, BTMU incurs credit risk, or the risk of losses if its borrowers do not repay their loans. BTMU may incur credit losses or have to provide for additional allowance for credit losses if: • large borrowers become insolvent or must be restructured; • domestic or global economic conditions, either generally or in particular industries in which large borrowers operate, deteriorate; • the value of the collateral BTMU holds, such as real estate or securities, declines; or • BTMU is adversely affected by other factors, including corporate credibility issues among its borrowers, to an extent that is worse than anticipated.
If actual credit losses are higher than currently expected, the current allowances for credit losses will be insufficient. BTMU’s allowance for credit losses in its loan portfolio is based on evaluations, assumptions and estimates about customers, the value of collateral it holds and the economy as a whole. BTMU’s loan losses could prove to be materially different from the estimates and could materially exceed these allowances. In addition, the standards for establishing allowances may change, causing BTMU to change some of the evaluations, assumptions and estimates used in determining the allowances. As a result, BTMU may need to provide for additional allowances for credit losses. For example, as a result of recent deteriorating economic conditions, declines in real estate values and securities price levels, and worsening operations of borrowers, BTMU experienced increases in the amount of problem loans and provision for credit losses in the fiscal year ended 31st March, 2009.
Credit losses may also increase if BTMU elects, or is forced by economic or other considerations, to sell or write off its problem loans at a larger discount, in a larger amount or in a different time or manner than it may otherwise want. BTMU may not be able to realise the value of the collateral it holds or enforce its rights against defaulting customers because of the difficulty of foreclosing on collateral in Japan, the illiquidity of and depressed values in the Japanese real estate market, or other reasons.
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Although BTMU from time to time enters into credit derivative transactions, including credit default swap contracts, to manage its credit risk exposure, such transactions may not provide the protection against credit defaults that BTMU intended due to counterparty defaults or otherwise. In addition, negative changes in financial market conditions may restrict the availability and liquidity of credit default swaps.
In addition, BTMU may provide additional loans, equity capital or other forms of support to troubled borrowers in order to facilitate their restructuring and revitalisation efforts. BTMU may forbear from exercising some or all of its rights as a creditor against them, and it may forgive loans to them in conjunction with their debt restructuring. These practices may substantially increase BTMU’s exposure to troubled borrowers and increase its losses. An increase in loan losses would adversely affect BTMU’s results of operations, weaken its financial condition and erode its capital base.
BTMU may be adversely affected if economic conditions in Japan or elsewhere worsen.
BTMU’s performance is affected by general economic conditions of the countries in which it operates, particularly Japan, where it primarily conducts its business. General economic conditions that could affect BTMU include interest rates, inflation, investor sentiment, the availability and cost of credit, the liquidity of the global financial markets, the level and volatility of debt and equity capital markets, the levels of corporate capital investments and individual consumption, and raw material prices. Any of these economic conditions, currently existing or occurring in the future, may adversely affect BTMU’s financial condition and results of operations.
BTMU’s business may be adversely affected by negative developments with respect to other financial institutions, both directly and through the effect they may have on the overall banking environment and on their borrowers.
Some domestic and foreign financial institutions, including banks, non-bank lending and credit institutions, securities companies and insurance companies, have experienced declining asset quality and capital adequacy and other financial problems. This may lead to severe liquidity and solvency problems, which have in the past resulted in the liquidation, government control or restructuring of affected institutions. For example, deterioration of the asset-backed securitisation products market and residential mortgage market in the United States resulted in Lehman Brothers Holdings Inc. filing a petition under Chapter 11 of the U.S. Bankruptcy Code. Other banks, securities companies, insurance companies and other financial institutions, especially U.S. institutions, continue to be under significant pressure due to declining asset quality as a result of the continuing deterioration of the global financial markets. These developments may continue to adversely affect BTMU’s financial results. Other financial difficulties relating to financial institutions could adversely affect BTMU because: • BTMU has extended loans, some of which may need to be classified as non-accrual and restructured loans, to banks, securities companies, insurance companies and other financial institutions that are not its consolidated subsidiaries; • BTMU may be requested to participate in providing assistance to support distressed financial institutions that are not its consolidated subsidiaries; • BTMU is a shareholder of some other banks and financial institutions that are not its consolidated subsidiaries; • the government may elect to provide regulatory, tax, funding or other benefits to those financial institutions to strengthen their capital, facilitate their sale or otherwise, which in turn may increase their competitiveness against BTMU; • deposit insurance premiums could rise if deposit insurance funds prove to be inadequate; • bankruptcies or government support or control of financial institutions could generally undermine confidence in financial institutions or adversely affect the overall banking environment; and
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• negative media coverage of the financial industry, regardless of its accuracy and applicability to BTMU, could affect customer or investor sentiment, harm its reputation and have a materially adverse effect on its business or the price of its securities.
Changes in interest rate policy, particularly unexpected or sudden increases in interest rates, could adversely affect the value of BTMU’s bond and financial derivative portfolios, problem loans and results of operations.
BTMU holds a significant amount of Japanese government bonds and foreign bonds, including U.S. Treasury bonds. BTMU also holds a large financial derivative portfolio, consisting primarily of interest-rate futures, swaps and options, for its asset liability management. An increase in relevant interest rates, particularly if such increase is unexpected or sudden, may negatively affect the value of BTMU’s bond portfolio and reduce the so called “spread”, which is the difference between the rate of interest earned and the rate of interest paid. In addition, an increase in relevant interest rates may increase losses on BTMU’s derivative portfolio and increase its problem loans as some of its borrowers may not be able to meet the increased interest payment requirements, thereby adversely affecting its results of operations and financial condition.
A downgrade of BTMU’s credit ratings could have a negative effect on its business.
A downgrade of BTMU’s credit ratings by one or more of the credit rating agencies could have a negative effect on its treasury operations and other aspects of its business. In the event of a downgrade of BTMU’s credit ratings, its treasury business unit may have to accept less favourable terms in its transactions with counterparties, including capital-raising activities, or may be unable to enter into some transactions. This could have a negative impact on the profitability of BTMU’s treasury and other operations and adversely affect its results of operations and financial condition.
BTMU is exposed to new or increased risks as it expands the range of its products and services and the geographic scope of its business.
BTMU currently plans to pursue various business strategies to improve its profitability. In addition to the risks associated with investments, business combinations and mergers described herein, there are various other risks which could adversely affect BTMU’s ability to achieve its business objectives. For example, as BTMU expands the range of its products and services beyond its traditional banking business and as the sophistication of financial products and management systems grows, it will be exposed to new and increasingly complex risks. BTMU may have only limited experience with the risks related to the expanded range of these products and services. As a result, BTMU may not be able to foresee certain risks, and the new products and services BTMU introduces may not gain acceptance among customers. Moreover, some of the activities that BTMU is expected to engage in, such as derivatives and foreign currency trading, present substantial risks. As BTMU expands the geographic scope of its business, it will also be exposed to risks that are unique to particular jurisdictions or markets. BTMU’s risk management systems may prove to be inadequate and may not work in all cases or to the degree required. In addition, BTMU may have difficulty developing and operating the necessary information systems. As a result, BTMU is subject to substantial market, credit and other risks in relation to the expanding scope of its products, services and trading activities or expanding its business beyond its traditional markets, which could result in it incurring substantial losses. In addition, BTMU’s efforts to offer new services and products or penetrate new markets may not succeed if product or market opportunities develop more slowly than expected or if the profitability of opportunities is undermined by competitive pressures. If BTMU fails to achieve some or all of the goals of its business strategies, its results of operations could be materially and adversely affected.
BTMU is exposed to substantial credit and market risks in emerging market countries.
BTMU is active in Asia, Latin America, Central and Eastern Europe and other emerging market countries through a network of branches and subsidiaries and is thus exposed to a variety of credit and market risks associated with these countries. These risks will increase if the global financial crisis and recession continue or worsen. For example, a decline in the value of local currencies of these countries could adversely affect the creditworthiness of
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some of BTMU’s borrowers in these countries. The loans BTMU has made to borrowers and banks in these countries are often denominated in U.S. dollars, Euro or other foreign currencies. These borrowers often do not hedge the loans to protect against fluctuations in the values of local currencies. A devaluation of the local currency would make it more difficult for a borrower earning income in that currency to pay its debts to BTMU and other foreign lenders. In addition, some countries in which BTMU operates may attempt to support the value of their currencies by raising domestic interest rates. If this happens, the borrowers in these countries would have to devote more of their resources to repaying their domestic obligations, which may adversely affect their ability to repay their debts to BTMU and other foreign lenders. The limited credit availability resulting from these and related conditions may adversely affect economic conditions in some countries. This could cause a further deterioration of the credit quality of borrowers and banks in those countries and cause BTMU to incur further losses.
In addition, BTMU is active in other countries and regions that expose it to risks similar to the risks described above and also risks specific to those countries and regions, which may cause it to incur losses or suffer other adverse effects.
Any adverse changes in Union Bank’s business could significantly affect BTMU’s results of operations.
Union Bank, N.A. (“Union Bank”), is UNBC’s primary subsidiary. Union Bank contributes to a significant portion of BTMU’s net income. Any adverse change in the business or operations of Union Bank could significantly affect BTMU’s results of operations. Factors that could negatively affect Union Bank’s results include adverse economic conditions in California, including the downturn in the real estate and housing industries in California, substantial competition in the California banking market, uncertainty over the U.S. economy due to deteriorating economic conditions in the United States, the threat of terrorist attacks, fluctuating oil prices and rising interest rates, negative trends in debt ratings, and additional costs and other adverse consequences which may arise from enterprise-wide compliance, or failure to comply, with applicable laws and regulations, such as the U.S. Bank Secrecy Act and related amendments under the USA PATRIOT Act. Compared to prior years, any adverse developments which could arise at Union Bank will have a greater negative impact on BTMU’s results of operation and financial condition, since Union Bank became, through UNBC, its wholly owned subsidiary in November 2008 compared with approximately 65% ownership in prior years.
Changes in the business environment for consumer finance companies in Japan have adversely affected BTMU’s recent financial results, and may further adversely affect its future financial results.
BTMU has a large loan portfolio in the consumer lending industry as well as large shareholdings in subsidiaries and equity method investees in the consumer finance industry. The Japanese government has been implementing regulatory reforms affecting the consumer lending industry in recent years. In December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the Law Concerning Acceptance of Investment, Cash, Deposit and Interest Rate, etc., which is currently 29.2 per cent. per annum, to 20 per cent. per annum. The reduction in the maximum permissible interest rate will be implemented before mid-2010. Under the reforms, all interest rates will be subject to the lower limits (15-20 per cent. per annum) imposed by the Interest Rate Restriction Law, which will compel, or has already compelled, lending institutions to lower the interest rates they charge borrowers.
Currently and until the reduction in the maximum permissible interest rate as described above takes effect, consumer finance companies are able to charge interest rates exceeding the limits stipulated by the Interest Rate Restriction Law, provided that they satisfy certain conditions set forth in the Law Concerning Lending Business. Accordingly, BTMU’s consumer finance subsidiaries and equity method investees offer loans at interest rates above the Interest Rate Restriction Law. As a result of recent decisions by the Supreme Court of Japan, consumer finance companies experienced a significant increase in borrowers’ claims for reimbursement of previously collected interest payments in excess of the limits stipulated by the Interest Rate Restriction Law. New regulations that are scheduled to be effective before mid-2010 may also have a negative impact on the business of consumer finance companies as those new regulations are expected to require, among other things, consumer finance companies to review the repayment capability of borrowers before lending, thereby limiting the amount of borrowing available to individual borrowers.
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These and other related developments have adversely affected, and may further adversely affect, the operations and financial condition of BTMU’s subsidiaries and borrowers which are engaged in consumer lending, which in turn may affect the value of its related shareholdings and loan portfolio.
BTMU’s results of operations may be negatively affected by the global financial crisis and recession triggered by disruptions in the residential market in the United States.
The recent global financial crisis and recession may continue to adversely affect BTMU’s loan and investment portfolios, which includes securitisation products, such as asset-backed securities. For example, some of BTMU’s investment securities have been, and may continue to be, marked at a significantly lower price because the market for those securities is inactive. BTMU has also been, and may continue to be, affected by credit market deterioration caused by defaults on these higher risk residential mortgages. Specifically, the availability of credit has become, and may continue to be, limited causing some of BTMU’s counterparties to default, or some of its credit derivative transactions may also be negatively affected. Moreover, the negative developments in the U.S. credit markets have caused, and may continue to cause, significant fluctuations in global stock markets and foreign currency exchange rates, which in turn affect BTMU’s results of operations. If credit market conditions continue to deteriorate, BTMU’s capital funding structure may need to be adjusted, its funding costs may increase, or its credit- related losses may increase, all of which could have a material impact on its financial results and financial condition.
BTMU’s information systems and other aspects of its business and operations are exposed to various system, political and social risks.
As a major financial institution, BTMU’s information systems and other aspects of its business and operations are exposed to various system, political and social risks. Incidents such as disruptions of the Internet and other information networks due to major virus outbreaks, major terrorist activity, serious political instability and major health epidemics have the potential to directly affect BTMU’s business and operations by disrupting its operational infrastructure or internal systems. Such incidents may also negatively impact the economic conditions, political regimes and social infrastructure of countries and regions in which BTMU operates, and possibly the global economy as a whole. BTMU’s risk management policies and procedures may be insufficient to address these and other large-scale unanticipated risks.
In particular, the capacity and reliability of BTMU’s electronic information technology systems are critical to its day-to-day operations and a failure or disruption of these systems would adversely affect its capacity to conduct its business. In addition to its own internal information systems, BTMU also provides its customers with access to its services and products through the Internet and ATMs. These systems as well as its hardware and software are subject to malfunction or incapacitation due to human error, accidents, power loss, sabotage, hacking, computer viruses and similar events, as well as the loss of support services from third parties such as telephone and Internet service providers.
Additionally, as with other Japanese companies, BTMU’s offices and other facilities are subject to the risk of earthquakes and other natural disasters. BTMU’s redundancy and back-up measures may not be sufficient to avoid a material disruption in its operations, and its contingency plans may not address all eventualities that may occur in the event of a material disruption.
These various factors, the threat of such risks or related countermeasures, or a failure to address such risks, may materially and adversely affect BTMU’s business, operating results and financial condition.
BTMU’s business may be adversely affected by competitive pressures, which have partly increased due to regulatory changes and recent market changes in the financial industry domestically and globally.
In recent years, the Japanese financial system has been increasingly deregulated and barriers to competition have been reduced. The privatisation of the Japanese postal savings system and the establishment of Japan Post Bank Co., Ltd. in October 2007, as well as the establishment of Japan Finance Corporation, a public corporation wholly owned by the Japanese government, in October 2008, could also substantially increase competition within the
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financial services industry. In addition, there has been significant consolidation and convergence among financial institutions domestically and globally, and this trend may continue in the future and further increase competition in the market. A number of large commercial banks and other broad-based financial services firms have merged or formed strategic alliances with, or have acquired other financial institutions both in Japan and overseas. If BTMU is unable to compete effectively in this more competitive and deregulated business environment, its business, results of operations and financial condition will be adversely affected.
BTMU is subject to increased regulatory requirements and supervision in the United States as a financial holding company.
In October 2008, BTMU, its parent company, Mitsubishi UFJ Financial Group, Inc. (“MUFG”), MUFG’s subsidiary, Mitsubishi UFJ Trust and Banking Corporation (“MUTB”), and BTMU’s subsidiary, UNBC, elected to become financial holding companies under the U.S. Bank Holding Company Act. As a financial holding company, BTMU is authorised to engage in an expanded list of activities in the United States, including merchant banking, insurance underwriting, and a full range of securities activities.
Under BTMU’s financial holding company status, it is also subject to additional regulatory requirements. For example, each of its banking subsidiaries with operations in the United States, comprising Bank of Tokyo- Mitsubishi UFJ Trust Company and Union Bank, which are BTMU’s U.S. domestic depository institutions, as well as BTMU, must be “well capitalised,” meaning a Tier I risk-based capital ratio of at least 6 per cent. and a total risk- based capital ratio of at least 10 per cent. Its U.S. banking operations must also be “well managed,” including that they maintain examination ratings that are at least satisfactory. Failure to comply with such requirements would require BTMU to prepare a remediation plan and it would not be able to undertake new business activities or acquisitions based on its status as a financial holding company during any period of non-compliance, and as a result, it may negatively affect its future financial results.
In June 2009, the U.S. government released a regulatory reform proposal called “Financial Regulatory Reform, A New Foundation: Rebuilding Financial Supervision and Regulation.” This proposal includes, among other things, sweeping financial regulatory reforms designed to promote enhanced supervision and regulation of financial firms, establish comprehensive supervision of financial markets, protect consumers and investors from financial abuse, provide government with the tools needed to manage a financial crisis, and raise international regulatory standards and improve international cooperation. This reform, if enacted, could have a significant impact on BTMU’s regulatory and financial compliance systems and practices, possibly requiring BTMU to incur a significant amount of resources to implement measures to come into compliance with the reform and manage them on an ongoing basis.
BTMU has recently been subject to several regulatory actions for non-compliance with legal requirements. These regulatory matters and any future regulatory matters or regulatory changes could have a negative impact on its business and results of operations.
BTMU conducts its business subject to ongoing regulation and associated regulatory risks, including the effects of changes in laws, regulations, policies, voluntary codes of practice and interpretations in Japan and other markets in which it operates. BTMU’s compliance risk management systems and programmes may not be fully effective in preventing all violations of laws, regulations and rules.
The Financial Services Agency of Japan and regulatory authorities in the United States and elsewhere also have the authority to conduct, at any time, inspections to review banks’ accounts, including those of BTMU. Some of BTMU’s other financial services businesses, such as its securities business, are also subject to regulations set by, and inspections conducted by, various self-regulatory organisations, such as the Financial Industry Regulatory Authority in the United States. In recent years, BTMU has been subject to several regulatory actions by, among others, the Financial Services Agency of Japan, the Securities and Exchange Surveillance Commission of Japan and various U.S. banking regulators.
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BTMU’s failure or inability to comply fully with applicable laws and regulations could lead to fines, public reprimands, damage to reputation, enforced suspension of operations or, in extreme cases, withdrawal of authorisation to operate, adversely affecting its business and results of operations. Regulatory matters may also negatively affect BTMU’s ability to obtain regulatory approvals for future strategic initiatives. Furthermore, failure to take necessary corrective action, or the discovery of violations of law in the process of further review of any of the matters mentioned above or in the process of implementing any corrective measures, could result in further regulatory action.
In addition, future developments or changes in laws, regulations, policies, voluntary codes of practice, fiscal or other policies and their effects are unpredictable and beyond BTMU’s control. For example, new regulations to be enacted before mid-2010 are expected to require, among other things, consumer finance companies in Japan to review the repayment capabilities of borrowers before lending, thereby limiting the amount of borrowing available to individual borrowers, which in turn may negatively affect BTMU’s future financial results.
Transactions with counterparties in countries designated by the U.S. Department of State as state sponsors of terrorism may lead some potential customers and investors in the U.S. and other countries to avoid doing business with BTMU or investing in BTMU’s securities.
BTMU engages in operations with entities in or affiliated with Iran and Syria, including transactions with entities owned or controlled by the Iranian or Syrian governments, and it has a representative office in Iran. The U.S. Department of State has designated Iran, Syria and other countries as “state sponsors of terrorism”, and U.S. law generally prohibits U.S. persons from doing business with such countries. BTMU’s activities with counterparties in or affiliated with Iran, Syria and other countries designated as state sponsors of terrorism are conducted in compliance in all material respects with both applicable Japanese and U.S. regulations.
BTMU’s operations with entities in Iran consist primarily of loans to Iranian financial institutions in the form of financing for petroleum projects and trade financing for general commercial purposes, as well as letters of credit and foreign exchange services. BTMU’s operations relating to Syria are primarily foreign exchange services. BTMU does not believe its operations relating to Iran and Syria are material to its business or financial condition. As of 31st March, 2009, the loans outstanding to borrowers in or affiliated with Iran and Syria were approximately $151.7 million and less than $0.1 million, respectively. These represented less than 0.1 per cent. of BTMU’s total assets as of 31st March, 2009. In addition, BTMU receives deposits or holds assets on behalf of several individuals resident in Japan who are citizens of countries designated as state sponsors of terrorism.
BTMU is aware of initiatives by U.S. governmental entities and U.S. institutional investors, such as pension funds, to adopt or consider adopting laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran, Syria and other countries identified as state sponsors of terrorism. It is possible that such initiatives may result in BTMU being unable to gain or retain entities subject to such prohibitions as customers. In addition, depending on socio-political developments BTMU’s reputation may suffer due to its association with these countries. The above circumstances could have an adverse effect on BTMU’s business and financial condition.
BTMU may not be able to maintain its capital ratios above minimum required levels, which could result in the suspension of some or all of its operations.
BTMU is required to maintain risk-weighted capital ratios above the levels specified in the capital adequacy guidelines of the Financial Services Agency of Japan. The capital ratios are calculated in accordance with Japanese banking regulations based on information derived from the relevant entity’s financial statements prepared in accordance with Japanese GAAP. BTMU’s subsidiaries in California, UNBC and Union Bank, are subject to similar U.S. capital adequacy guidelines. BTMU or its subsidiary banks may be unable to continue to satisfy the capital adequacy requirements because of: • increases in credit risk assets and expected losses BTMU or its subsidiary banks may incur due to fluctuations in its or its subsidiary banks’ loan and securities portfolios as a result of deteriorations in the credit of its borrowers and the issuers of equity and debt securities;
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• increases in credit costs BTMU or its subsidiary banks may incur as BTMU or its subsidiary banks dispose of problem loans or as a result of deteriorations in the credit of its borrowers; • declines in the value of BTMU’s or its subsidiary banks’ securities portfolio; • changes in the capital ratio requirements or in the guidelines regarding the calculation of banks’ capital ratios or changes in the regulatory capital requirements for securities firms; • a reduction in the value of BTMU’s or its subsidiary banks’ deferred tax assets; • adverse changes in foreign currency exchange rates; and • other adverse developments discussed in these risk factors. BTMU’s capital ratios may also be adversely affected if BTMU or its banking subsidiaries fail to refinance its subordinated debt obligations with equally subordinated debt. As of 31st March, 2009, subordinated debt accounted for approximately 35.7 per cent. of BTMU’s total regulatory capital, as calculated under Japanese GAAP. The failure to refinance these subordinated debt obligations with equally subordinated debt may reduce BTMU’s total regulatory capital and, as a result, negatively affect its capital ratios.
If BTMU’s capital ratios fall below required levels, the Financial Services Agency could require it to take a variety of corrective actions, including withdrawal from all international operations or suspension of all or part of its business operations.
The valuation of certain financial instruments relies on quoted market prices that may fluctuate significantly.
A substantial portion of the assets on BTMU’s consolidated balance sheets includes financial instruments that it carries at fair value. Generally, in order to establish the fair value of these instruments, BTMU relies on quoted market prices. If the value of these financial instruments declines, a corresponding write-down may be recognised in BTMU’s consolidated statement of operations. As the global financial markets became unstable following concerns of increased defaults of higher risk mortgages in the United States, there have been increasing circumstances where quoted market prices for securities became significantly depressed or were not properly quoted. Specifically, due to the reduction in liquidity of certain debt securities resulting from the global financial market instability in the second half of the fiscal year ended 31st March, 2009, BTMU observed that the market for collateralised loan obligations (“CLOs”) backed by general corporate loans became significantly inactive compared with normal market activity. In light of such circumstances, BTMU concluded that the unadjusted non-binding quotes from broker-dealers became less reflective of the fair value, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”, with respect to such CLOs. Consequently, BTMU changed the estimation method for estimating the fair value of such CLOs from the method adopting unadjusted quotes from independent broker-dealers to the estimation method weighting the internal model valuation and the non-binding broker-dealer quotes during the second half of the fiscal year ended 31st March, 2009. Additional fluctuations in the market or instabilities in the market could have a significant adverse effect on the fair value of the financial instruments that BTMU holds.
In response to the recent instabilities in financial markets, several international organisations which set accounting standards announced new or revised rules for estimating the fair value for certain financial instruments. Accounting standards applicable to these financial instruments remain subject to further debate and revision by international organisations which set accounting standards. If the current accounting standards change in the future, the reported values of some of BTMU’s financial instruments may need to be modified, and such modification could have a significant impact on its financial results or financial condition. Specifically, changes in accounting standards applicable to some of BTMU’s financial instruments could have a significant negative impact on its capital ratios.
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Losses relating to BTMU’s pension plans and a decline in returns on its plan assets may negatively affect its results of operations and financial condition.
The fair value of BTMU’s pension plan assets has declined and its investment return has decreased under the current market circumstances. If the fair value of BTMU’s pension plan assets decline or its investment return decreases further, or if there is a change in the actuarial assumptions on which the calculations of the projected pension obligations or pension plan assets are based, such as a decline in the discount rate or the expected rate of return on plan assets, BTMU may incur additional losses. Changes in the interest rate environment and other factors may also adversely affect the amount of unfunded pension obligations and the resulting annual amortisation expense. In addition, BTMU may have to record expenses relating to the amortisation of previously unrecognised prior service costs if its pension plans are amended.
If the goodwill recorded in connection with its recent acquisitions becomes impaired, BTMU may be required to record impairment charges, which may adversely affect its financial results and the price of its securities.
In accordance with U.S. GAAP, BTMU has accounted for its acquisitions using the purchase method of accounting. BTMU recorded the excess of the purchase price over the fair value of the assets and liabilities of the acquired companies as goodwill. U.S. GAAP requires BTMU to test goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Goodwill is tested by initially estimating fair value and then comparing it against the carrying amount. If the carrying amount of a reporting unit exceeds its estimated fair value, BTMU is required to record an impairment loss. The amount of impairment and the remaining amount of goodwill, if any, is determined by comparing the fair value of the reporting unit as of the test date against the fair value of the assets and liabilities of that reporting unit as of the same date.
The global financial crisis and recession led to the decline in BTMU’s market capitalisation and negatively affected the fair value of its reporting units for purposes of its periodic testing of goodwill for impairment. As a result, BTMU recorded ¥581.0 billion of goodwill impairment charges for the fiscal year ended 31st March, 2009, in addition to having recorded ¥816.3 billion of goodwill impairment charges for the previous fiscal year. As of 31st March, 2009, the balance of goodwill was ¥369.4 billion.
BTMU may be required to record additional impairment charges relating to goodwill in future periods if the fair value of any of its reporting units declines below the fair value of related assets net of liabilities. Any additional impairment charges will negatively affect BTMU’s financial results, and the price of its securities could be adversely affected.
BTMU may incur significant additional costs for implementing effective internal controls.
In order to operate as a global financial institution, it is essential for BTMU to have effective internal controls, corporate compliance functions, and accounting systems to manage its assets and operations. Moreover, under the U.S. Sarbanes-Oxley Act of 2002, which applies by reason of its status as an SEC reporting company, BTMU is required to establish internal control over its financial reporting and its management is required to assess the effectiveness of its internal control over financial reporting and disclose whether such internal control is effective. MUFG, its parent company, is subject to regulations on internal control over financial reporting under Japanese Law from the fiscal year ended 31st March, 2009. Accordingly, BTMU, as an important subsidiary of MUFG, must establish, maintain and operate its internal control system in accordance with MUFG policy.
Designing and implementing an effective system of internal control capable of monitoring and managing BTMU’s business and operations requires significant management and human resources and considerable costs. If BTMU identifies any material weakness in its internal control system, it may incur significant additional costs for remediating such weakness. In addition, if BTMU adopts a new accounting system, it may be required to incur significant additional costs for establishing and implementing effective internal controls which may materially adversely affect its financial condition and results of operations.
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Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that BTMU will be unable to comply with its obligations as a company with securities admitted to trading on the Official List.
BTMU’s risk management policies, procedures and methods may leave it exposed to unidentified or unanticipated risks, which could lead to material losses.
BTMU has devoted significant resources to developing and implementing its risk management policies, procedures and assessment methods and intends to continue to do so in the future. BTMU’s risk management policies, procedures and methods, however, may not be fully effective in mitigating its risk exposures in all economic or market environments or against all types of risk, including risks that it fails to identify or anticipate.
Some of BTMU’s risk management policies, procedures and methods may not be fully effective in forecasting, identifying and managing its future risks because these risk management policies, procedures and methods are based primarily on its experiences. If BTMU’s risk management policies, procedures or methods prove ineffective, its business, operating results and financial condition could be materially and adversely affected.
BTMU may be subject to liability and regulatory action if it is unable to protect personal and other confidential information.
There have been many cases where personal information and records in the possession of corporations and institutions were leaked or improperly accessed. In the event that personal information in its possession about its customers or employees is leaked or improperly accessed and subsequently misused, BTMU may be subject to liability and regulatory action. As an institution in possession of personal information, BTMU is required to treat personal and other confidential information as required by the Personal Information Protection Law of Japan, as well as the Banking Law and the Financial Instruments and Exchange Law of Japan.
BTMU may have to provide compensation for economic loss and emotional distress arising out of a failure to protect such information. In addition, such incidents could create a negative public perception of BTMU’s operations, systems or brand, which may in turn decrease customer and market confidence and materially and adversely affect its business, operating results and financial condition.
Damage to BTMU’s reputation could harm its business.
BTMU is one of the largest and most influential financial institutions in Japan by virtue of its market share and the size of its operations and customer base. BTMU’s reputation is critical in maintaining its relationships with clients, investors, regulators and the general public. BTMU’s reputation could be damaged by numerous causes, including, among others, system troubles, employee misconduct, failure to properly address potential conflicts of interest, litigation, compliance failures, the activities of customers and counterparties over which BTMU has limited or no control, and exacting scrutiny from regulatory authorities and customers regarding its trade practices and potential abuses of its dominant bargaining position in its dealings with customers. If BTMU is unable to prevent or properly address these causes, it could lose existing or prospective customers and investors, in which case its business, financial condition and results of operations could be materially and adversely affected.
BTMU’s businesses may be materially and adversely affected if it is unable to hire and retain qualified employees.
BTMU’s performance is largely dependent on the talents and efforts of highly skilled individuals. Competition for qualified employees in the banking, securities and financial services industries is intense. BTMU’s continued ability to compete effectively in its businesses depends on its ability to attract new employees as necessary and to retain and motivate its existing employees. If BTMU is not successful in attracting and retaining sufficient skilled employees through its hiring efforts and training programmes aimed to maintain and enhance the skills and expertise of its employees, its competitiveness and performance could be negatively affected, and consequently, its business, operating results and financial condition may also be adversely affected.
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Factors which are material for the purpose of assessing the market risks associated with Notes issued A13.2 under the Programme A12.2
The Notes may not be a suitable investment for all investors
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:
(i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor’s currency;
(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and
(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
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.
Risks related to the structure of a particular issue of Notes
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:
Notes subject to optional redemption by the Issuer
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.
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Index Linked Notes, Equity Linked Notes and Dual Currency Notes
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:
(i) the market price of such Notes may be volatile;
(ii) they may receive no interest;
(iii) payment of principal or interest may occur at a different time or in a different currency than expected;
(iv) they may lose all or a substantial portion of their principal; A12.2
(v) a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices;
(vi) if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable likely may be magnified; and
(vii) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the greater the effect on yield.
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 or Equity 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 or Equity Linked Notes and the suitability of such Notes in light of their particular circumstances.
Partly-paid Notes
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.
Variable rate Notes with a multiplier or other leverage factor
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
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.
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Fixed/Floating Rate 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.
Notes issued at a substantial discount or premium
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 interest-bearing 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 are subordinated
The Issuer’s obligations under Subordinated Notes will be unsecured and subordinated and will rank junior in priority of payment to the claims of Senior Creditors. ‘‘Senior Creditor’’ means any creditor of the Issuer whose claims have been accepted by the liquidator in the winding-up of the Issuer not being a creditor:
(a) whose right to repayment ranks or is expressed to rank postponed to or subordinate to that of unsubordinated creditors of the Issuer; or
(b) whose right to repayment is made subject to a condition or is restricted (whether by operation of law or otherwise) or is expressed to be restricted in each case such that the amount which may be claimed for his own retention by such creditor in the event that the Issuer is not solvent is less than in the event that the Issuer is solvent; or
(c) whose debt is irrecoverable or expressed to be irrecoverable unless the persons entitled to payment of principal and interest in respect of the Subordinated Notes recover the amounts of such principal and interest which such persons would be entitled to recover if payment of such principal and interest to such persons were not subject to any condition.
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.
Risks related to Notes generally
Set out below is a brief description of certain risks relating to the Notes generally:
Modification, waivers and substitution
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
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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 17 of the Conditions of the Notes.
EU Savings Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States, including Belgium from 1st January 2010, are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland).
On 15th September, 2008, the European Commission issued a report to the Council of the European Union on the operation of the Directive, which included the Commission’s advice on the need for changes to the Directive. On 13th November, 2008, the European Commission published a more detailed proposal for amendments to the Directive, which included a number of suggested changes. If any of those proposed changes are made in relation to the Directive, they may 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. If a withholding tax is imposed on payment made by a Paying Agent, the Issuer will be required to maintain a Paying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Directive.
Change of law
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.
Notes where denominations involve integral multiples: definitive Notes
In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that 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 will not receive a definitive Note in respect of such holding (should definitive Notes be printed). If the Noteholder requires a definitive Note for such holding the Noteholder would need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination.
If definitive Bearer Notes are issued, holders should be aware that definitive Bearer Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
Risks related to the market generally
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:
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The secondary market generally
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.
In addition, Noteholders should be aware of the prevailing and widely reported global credit market conditions (which continue at the date of this Offering Circular), whereby there is a general lack of liquidity in the secondary market for instruments similar to the Notes. Such lack of liquidity may result in investors suffering losses on the Notes in secondary resales even if there is no decline in the performance of the assets of the Issuer. The Issuer cannot predict which of these circumstances will change and whether, if and when they do change, there will be a more liquid market for the Notes and instruments similar to the Notes at that time.
Exchange rate risks and exchange controls
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.
Interest rate risks
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.
Credit ratings may not reflect all risks
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.
Legal investment considerations may restrict certain investments
The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) 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 advisors or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.
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FORM OF THE NOTES
The Notes of each Tranche will be either in bearer form or in registered form. However, in the circumstances A13.4.4 described in Condition 10, bearer Notes in definitive form may be exchanged for Registered Notes.
Unless otherwise provided with respect to a particular Series of Registered Notes, the Registered Notes of each Tranche of such Series offered and sold in reliance on Regulation S under the Securities Act (“Reg. S”), which will be sold to non-U.S. Persons outside the United States, will be represented by a Reg. S Global Note. Prior to expiry of the distribution compliance period as defined in Reg. S applicable to each Tranche of Notes (the “Distribution Compliance Period”), beneficial interests in a Reg. S Global Note may not be offered or sold to, or for the account or benefit of, a U.S. person save as otherwise provided in Condition 10 and may not be held otherwise than through Euroclear or Clearstream, Luxembourg and such Reg. S Global Note will bear a legend regarding such restrictions on transfer.
Registered Notes of each Tranche of a particular Series may only be offered and sold in the United States or to U.S. Persons in private transactions: (i) to QIBs; or (ii) to Institutional Accredited Investors who agree to purchase the Notes for their own account and not with a view to the distribution thereof. The Registered Notes A13.4.4 of each Tranche sold to QIBs in reliance on Rule 144A under the Securities Act (“Rule 144A”) will be represented A12.4.1.4 by a Restricted Global Note.
Registered Global Notes will either be (i) deposited with a custodian for, and registered in the name of a common nominee of The Depository Trust Company (“DTC”), currently of 55 Water Street, New York, New York 10041, USA for the account of Euroclear and Clearstream, Luxembourg; or (ii) be deposited with a custodian for, and registered in the name of a nominee of, Euroclear and Clearstream, Luxembourg, as specified in the applicable Final Terms.
Persons holding beneficial interests in Registered Global Notes will be entitled or required, as the case may be, in the circumstances described below, in Condition 10, to receive physical delivery of definitive Notes in fully registered form.
The Registered Notes of each Tranche sold to Institutional Accredited Investors will be in definitive form, registered in the name of the holder thereof. The Restricted Global Note and the Registered Notes in definitive form issued to Institutional Accredited Investors will be subject to certain restrictions on transfer set forth therein and will bear a legend regarding such restrictions as described under “Subscription and Sale and Transfer Restrictions”. Registered Notes will not be exchangeable for Bearer Notes.
Registered Notes in definitive form may also be sold outside the United States to non-U.S. Persons in reliance on Reg. S.
Payments of the principal of, and interest (if any) on, the Registered Global Notes will be made to the nominee of DTC and/or of Euroclear and/or Clearstream, Luxembourg as the registered holders of the Registered Global Notes. None of the Issuer, the Trustee, the Agent, any Paying Agent or the Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Payments of principal on the Registered Notes will be made to the persons shown on the Register at the close of business on the business day immediately prior to the relevant payment date. Payments of interest on the Registered Notes will be made on the relevant payment date to the person in whose name such Notes are registered on the Record Date (as defined in Condition 5(b)) immediately preceding such payment date.
Each Tranche of Bearer Notes will be initially represented by a Temporary Bearer Global Note (without receipts, interest coupons or talons) or, if so specified in the applicable Final Terms, a Permanent Bearer Global Note which, in either case, will be delivered to a common depositary for Euroclear and Clearstream, Luxembourg. Whilst any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal and 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 Bearer Global Note only to the extent that certification (in a form to be
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provided) to the effect that the beneficial owner of interests in such Note is not a U.S. person or a person who has purchased for resale to any U.S. person, as required by provisions of the U.S. Internal Revenue Code and Treasury regulations promulgated thereunder, has been received by Euroclear and/or Clearstream, Luxembourg, as applicable, 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 the later of (i) 40 days after the date on which a Temporary Bearer Global Note is issued and (ii) expiry of the applicable Distribution Compliance Period, interests in the Temporary Bearer Global Note will be exchangeable (free of charge) upon a request as described therein either for interests in a Permanent Bearer Global Note (without receipts, interest coupons or talons) or for security printed definitive Bearer Notes (as indicated in the applicable Final Terms and subject, in the case of definitive Bearer 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 Bearer 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 Bearer Global Note for an interest in a Permanent Bearer Global Note or for definitive Bearer Notes is improperly withheld or refused.
Payments of principal and interest (if any) or any other amounts on a Permanent Bearer Global Note will be made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent Bearer Global Note without any requirement for certification as regards U.S. persons (save for any certification in respect of applicable tax obligations). A Permanent Bearer Global Note will (save as otherwise indicated in the applicable Final Terms) be exchangeable (free of charge), in whole but not in part, for definitive Notes (with, where applicable, receipts, interest coupons and talons attached) either (as specified in the applicable Final Terms) (A) in the following limited circumstances (each an “Exchange Event”): (1) if the Permanent Bearer Global Note is held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing system and the Issuer has been notified that such clearing system has been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or has announced an intention permanently to cease business or has in fact done so and no successor clearing system acceptable to the Trustee is available or (2) if an Event of Default (as defined in Condition 9) occurs and is continuing in relation to the Notes represented by a Permanent Bearer Global Note or (B) at the request of the holder upon not less than 60 days’ written notice through Euroclear and/or Clearstream, Luxembourg, as applicable to the Agent. In such circumstances the Issuer will (1) within 60 days of the occurrence of the relevant event in (A)(1) or (2) above or (2) at the expiry of the written notice specified in (B) above issue definitive Bearer Notes in exchange for the entire Permanent Bearer Global Note. The Issuer will promptly give notice to Noteholders in accordance with Condition 13 if an Exchange Event occurs. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Agent.
Pursuant to the Agency Agreement (as defined under “Terms and Conditions of the Notes” below) the Agent shall arrange that, where a further Tranche of Notes is issued, the Notes of such Tranche shall be assigned a common code and ISIN and, where applicable, a CUSIP and CINS number which are different from the common code, ISIN, CUSIP and CINS number assigned to Notes of any other Tranche of the same Series until at least expiry of the Distribution Compliance Period applicable to the Notes of such Tranche. The end of such period and, as the case may be, the common code, ISIN, CUSIP and CINS number thereafter applicable to the Notes of the relevant Series will be notified by the Agent to the relevant Dealer.
All global Notes and definitive Notes will be issued pursuant to the Trust Deed and the Agency Agreement.
For so long as any of the Notes is represented by a Bearer Global Note deposited with, or a Reg. S Global Note registered in the name of a nominee of, a common depositary for Euroclear and Clearstream, Luxembourg or so long as DTC or its nominee is the registered holder of a Registered Global Note, each person who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg or, as the case may be, DTC as entitled to a particular nominal amount of Notes (in which regard any certificate or other document issued by Euroclear, Clearstream, Luxembourg or DTC or its nominee as to the nominal amount of 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 deemed to be the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of
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principal or interest on the Notes, for which purpose such common depositary or its nominee or, as the case may be, DTC or its nominee shall be deemed to be the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant global Note and the Trust Deed (and the expressions “Noteholder” and “holder of Notes” and related expressions shall be construed accordingly).
No beneficial owner of an interest in a Registered Global Note will be able to exchange or transfer that interest, except in accordance with the applicable procedures of DTC, Euroclear and Clearstream, Luxembourg, in each case, to the extent applicable.
The following legend will appear on all bearer global Notes and definitive Bearer Notes which have an original maturity of more than 365 days and on all receipts, interest coupons and talons 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 Bearer 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 Bearer Notes, receipts or interest coupons.
Notes which are represented by a Bearer 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.
References to Euroclear, Clearstream, Luxembourg and/or DTC 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.
No Noteholder, 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.
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APPLICABLE FINAL TERMS
Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued under the Programme.
[Date]
MITSUBISHI UFJ SECURITIES INTERNATIONAL PLC Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] under the U.S.$8,000,000,000 Euro Medium Term Note Programme
PART A – CONTRACTUAL TERMS
Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions (the “Conditions”) set forth in the Offering Circular dated 15th October, 2009 which constitutes Listing Particulars for the purpose of the listing rules of the UK Listing Authority. This document constitutes the Final Terms of the Notes described herein 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 and copies may be obtained, free of charge, from the registered office of the Issuer.
[The following alternative language applies if the first tranche of an issue which is being increased was issued under an Offering Circular with an earlier date.
Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions (the “Conditions”) set forth in the Offering Circular dated [original date] and incorporated by reference into the Offering Circular dated 15th October, 2009 and which are attached hereto. This document constitutes the Final Terms of the Notes described herein and must be read in conjunction with the Offering Circular dated [current date] which constitutes Listing Particulars for the purpose of the listing rules of the UK Listing Authority. Copies of the Offering Circular are available for viewing at and copies may be obtained, free of charge, from the registered office of the Issuer.]
[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 sub-paragraphs. 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 may need to be £100,000 or its equivalent in any other currency.]
1. Issuer: Mitsubishi UFJ Securities International plc
2. [(i)] Series Number: [ ]
[(ii) 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: A13.4.5 A12.4.1.5 [(i) Series: [ ] A13.4.1 [(ii) Tranche: [ ]
5. [Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] if applicable]
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6. Specified Denominations: [ ]
7. (i) Issue Date: [ ] A12.4.1.9 A13.4.13 (ii) Interest Commencement Date: [Specify/Not Applicable]
8. Maturity Date: [Fixed rate – specify date/Floating rate where the Interest A12.4.1.11 Period end date(s) are adjusted or any other rate where the A13.4.9 Interest Period end date(s) are adjusted - Interest Payment Date falling in or nearest to [specify month]]
9. Interest Basis: [[ ] per cent. Fixed Rate] A13.4.8 [[LIBOR/EURIBOR] [ ] per cent. Floating Rate] [Zero Coupon] [Index Linked Interest] [Equity Linked Interest] [Dual Currency Interest] [specify other] (further particulars specified below)
10. Redemption/Payment Basis: [Redemption at par] [Index Linked Redemption] [Equity Linked Redemption] [Dual Currency Redemption] [Partly Paid] [Instalment] [specify other]
11. Change of Interest Basis or Redemption/ [Specify details of any provision for change of Notes into Payment Basis: another Interest Basis or Redemption/Payment Basis]
12. Put/Call Options: [Investor Put] [Issuer Call] [(further particulars specified below)]
13. Status of the Notes: [Subordinated/Unsubordinated] A12.4.1.6 A13.4.6 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 sub-paragraphs of this paragraph)
(i) Rate(s) of Interest: [ ] per cent. per annum [payable [annually/semi- annually/quarterly] in arrear] (If payable other than annually, consider amending Condition 4)
(ii) Interest Payment Date(s): [[ ] in each year up to and including the Maturity A13.4.8 Date]/[specify other] (NB: This will need to be amended in the case of long or short coupons)
(iii) Fixed Coupon Amount(s): [ ] per [ ] in nominal amount
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(iv) Broken Amount(s): [Insert particulars of any initial or final broken interest amounts which do not correspond with the Fixed Coupon Amount]
(v) Day Count Fraction: [30/360 or Actual/Actual (ICMA) or specify other]
(vi) 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 NB: This will need to be amended in the case of regular interest payment dates which are not of equal duration NB: Only relevant where Day Count Fraction is Actual/ Actual (ICMA)]
(vii) Other terms relating to the method of [None/Give details] calculating interest for Fixed Rate Notes:
16. Floating Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Specified Period(s)/Specified Interest [ ] Payment Dates:
(ii) First Interest Payment Date: [ ]
(iii) Business Day Convention [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/ [specify other]]
(iv) Additional Business Centre(s): [ ]
(v) Manner in which the Rate of Interest [Screen Rate Determination/ISDA and Interest Amount is to be Determination/specify other] determined:
(vi) Party responsible for calculating the [ ] Rate of Interest and Interest Amount (if not the Agent):
(vii) 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
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ensure it is a page which shows a composite rate or amend the fallback provisions appropriately)
(viii) ISDA Determination:
– Floating Rate Option: [ ]
– Designated Maturity: [ ]
– Reset Date: [ ]
(ix) Margin(s): [ +/-] [ ] per cent. per annum
(x) Minimum Rate of Interest: [ ] per cent. per annum
(xi) Maximum Rate of Interest: [ ] per cent. per annum
(xii) Applicable ISDA Definitions: [2000/2006] ISDA Definitions apply (for the purpose of Condition 4)
(xiii) Day Count Fraction: [Actual/Actual (ISDA) Actual/365 Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 30/360 30E/360 30E/360 (ISDA) Other] (See Condition 4 for alternatives) (N.B. Floating Day Count Fractions should be consistent with the applicable ISDA Definitions specified in sub-paragraph (xii) above.)
(ix)Fallback provisions, rounding [ ] A12.4.2 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 [Applicable/Not Applicable] (If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Accrual Yield: [ ] per cent. per annum
(ii) Reference Price: [ ]
(iii) Any other formula/basis of [ ] determining amount payable:
(iv) Day Count Fraction in relation to [Conditions 6(e)(iii) and 6(j) apply/specify other] Early Redemption Amounts and late (Consider applicable day count fraction if not U.S. dollar payment: denominated)
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18. Index Linked Interest Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)
(i) Index/Formula: [give or annex details]
(ii) Calculation Agent: [give name (and, if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, address)]
(iii) Party responsible for calculating the Rate of Interest (if not the Calculation Agent) and Interest Amount (if not the Agent):
(iv) Provisions for determining Coupon (Needs to include a description of market disruption or A12.4.2.4 where calculation by reference to settlement disruption events and adjustment provisions) A12.4.2.3 Index and/or Formula is impossible A13.4.8 or impracticable:
(v) Specified Period(s)/Specified Interest [ ] Payment Dates:
(vi) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/specify other]
(vii) Additional Business Centre(s): [ ]
(viii) Minimum Rate of Interest: [ ] per cent. per annum
(ix) Maximum Rate of Interest: [ ] per cent. per annum
(x) Day Count Fraction: [ ]
19. Equity Linked Interest Note Provisions
(i) Equity/Formula: [give or annex details]
(ii) Calculation Agent responsible for [give name] calculating the interest due:
(iii) Provisions for determining Coupon (Need to include a description of market disruption or A12.4.2.3 where calculation by reference to settlement disruption and adjustment provisions) A12.4.2.4 Equity and/or Formula is impossible or impracticable:
(iv)Specified Period(s)/Specified Interest [ ] Payment Dates:
(v)Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/specify other]
(vi) Additional Business Centre(s): [ ]
(vii) Minimum Rate of Interest: [ ] per cent.per annum
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(viii) Maximum Rate of Interest: [ ] per cent.per annum
(ix) Day Count Fraction: [ ]
(x) Other terms relating to the method of [give or annex details] calculating interest for Equity Linked Interest Notes:
20. Dual Currency Interest Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Rate of Exchange/method of [give or annex details] calculating Rate of Exchange:
(ii) Party, if any, responsible for calculating [ ] the principal and/or interest due (if not the Agent):
(iii) Provisions applicable where (Needs to include a description of market disruption or A13.4.8 calculation by reference to Rate of settlement disruption events and adjustment provisions) Exchange impossible or impracticable:
(iv) Person at whose option Specified [ ] Currency(ies) is/are payable:
PROVISIONS RELATING TO REDEMPTION
21. Issuer Call: [Applicable/Not Applicable] (If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Optional Redemption Date(s): [ ]
(ii) Optional Redemption Amount of [ ] per Note of [ ] Specified Denomination each Note and method, if any, of calculation of such amount(s):
(iii) If redeemable in part:
(a) Minimum Redemption Amount: [ ]
(b) Maximum Redemption Amount: [ ]
(iv) Notice period (if other than as set out [ ] in the Conditions): (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent or Trustee)
22. Investor Put: [Applicable/Not Applicable] (If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Optional Redemption Date(s): [ ]
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(ii) Optional Redemption Amount of [ ] per Note of [ ] Specified Denomination each Note and method, if any, of calculation of such amount(s):
(iii) Notice period (if other than as set out [ ] in the Conditions): (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent or Trustee)
23. Final Redemption Amount of each Note: [[ ] per Note of [ ] Specified A13.4.9 Denomination/specify other/see Schedule] (N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value, the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
24. Early Redemption Amount of each Note [[ ] per Note of [ ] Specified payable on redemption for taxation reasons Denomination/specify other/see Schedule] or on event of default and/or the method of calculating the same (if required or if different from that set out in Condition 6(e)):
GENERAL PROVISIONS APPLICABLE TO THE NOTES
25. Form of Notes: [Bearer Notes: [Temporary Global Note exchangeable A12.4.1.4 for a Permanent Global Note which is exchangeable for A13.4.4 Definitive Notes [on 60 days’ notice given at any time/ only in the limited circumstances set out in the Offering Circular)]] [Temporary Global Note exchangeable for Definitive Notes on and after the Exchange Date (as defined in the Trust Deed)] [Permanent Global Note exchangeable for Definitive Notes [on 60 days’ notice given at any time/only in the limited circumstances set out in the Offering Circular)]]]
(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 Denomination of the Notes in paragraph 6 includes language substantially to the following effect: “€50,000 and integral multiples of €1,000 in excess thereof up to and including €99,000.” 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 for Definition Notes.)
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[In the case of Registered Notes that are [Registered Notes: Restricted Global Note and/or Reg. A13.4.4 Restricted Notes and/or Reg. S Notes S Global Note (exchangeable into definitive Registered A12.4.1.4 whether the Notes are to be represented on Notes [if requested by the holder upon not less than 60 issue by a Restricted Global Note and/or days’ notice or] in the limited circumstances set out in Reg. S Global Note and/or by definitive the Offering Circular) and/or definitive Registered Registered Notes]: Notes] (Note: in the case of Registered Notes, insert a further paragraph to identify the entity acting as Registrar)
26. Additional Financial Centre(s) or other [Not Applicable/give details] special provisions relating to Payment Days: (Note that this paragraph relates to the place of payment and not Interest Period end dates to which sub paragraphs 16(iv) and 18(vii) relate)
27. Talons for future Coupons or Receipts to be [Yes/No. If yes, give details] attached to Definitive Notes (and dates on which such Talons mature):
28. Details relating to Partly Paid Notes: amount [Not Applicable/give details. NB: a new form of Temporary of each payment comprising the Issue Price Global Note and/or Permanent Global Note may be required and date on which each payment is to be for Partly Paid issues] made and consequences of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment:
29. Details relating to Instalment Notes:
[(i) Instalment Amount(s): [Not Applicable/give details]
[(ii) Instalment Date(s): [Not Applicable/give details]
30. Redenomination applicable: Redenomination [not] applicable (If Redenomination is applicable, specify the applicable Day Count Fraction and any provisions necessary to deal with floating rate interest calculation (including alternative reference rates))
31. Other final terms: [Not Applicable/give details]
DISTRIBUTION
32. (i) If syndicated, names of Managers: [Not Applicable/give names]
(ii) [Date of Subscription Agreement:] [ ]
(iii) Stabilising Manager(s) (if any): [Not Applicable/give name]
33. If non-syndicated, name and address of [Not Applicable/give name] relevant Dealer:
34. Whether TEFRA D or TEFRA C rules [TEFRA D/TEFRA C/TEFRA not applicable] applicable or TEFRA not applicable:
35. Additional selling restrictions: [Not Applicable/give details]
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PURPOSE OF FINAL TERMS
These Final Terms comprise the final terms required for issue and admission to the Official List of the UK A12.6.1 Listing Authority and admission to trading on the Professional Securities Market of the London Stock Exchange plc the issue of Notes described herein pursuant to the U.S.$8,000,000,000 Euro Medium Term Note Programme of Mitsubishi UFJ Securities International plc.
RESPONSIBILITY
The Issuer accepts responsibility for the information contained in these Final Terms. [[Relevant third party A12.1.2 information, for example in compliance with Annex XII to the Prospectus Directive Regulation in relation to an index or its A13.1.2 components] has been extracted from [specify source]. The Issuer confirms that such information has been accurately A12.7.4 reproduced and that, so far as it is aware and is able to ascertain from information published by [specify source], no A13.7.4 facts have been omitted which would render the reproduced information inaccurate or misleading.]
Signed on behalf of the Issuer:
By......
Duly authorised
If Notes are issued under the Programme pursuant to Rule 144A of the Securities Act, the following legend shall appear on the Final Terms for such issue of Notes:
“The offering and sale of the Notes have not been registered under the Securities Act and may not be offered or sold within the United States or to U.S. Persons, except to persons reasonably believed to be Qualified Institutional Buyers. Prospective purchasers are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.”
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PART B – OTHER INFORMATION
1. LISTING AND ADMISSION TO TRADING
(i) Listing: [London Professional Securities Market/None] A13.5.1
(ii) Admission to trading: [Application has been made for the Notes to be A12.6.1 admitted to the Official List of the UK Listing Authority and to trading on the Professional Securities Market of the London Stock Exchange plc.] [Not Applicable.]
(iii) Estimate of total expenses related to [ ] A13.6.1 admission to trading:
2. RATINGS
Ratings: [The Notes to be issued shall have the same ratings as A13.7.5 given under the Programme] [The Notes to be issued have been rated: [JCR: [ ]] [Moody’s: [ ]] [R&I: [ ]] [[Other]: [ ]] (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.)
3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE
[Save for fees (if any) payable to the [Managers/Dealer(s)], so far as the Issuer is aware, no person involved A12.3.1 in the issue of the Notes has an interest material to the offer. – Amend as appropriate if there are other interests] A13.3
4. YIELD (Fixed Rate Notes Only) A13.4.10 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.
5. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES A12.3.2
[(i) Reasons for the offer: [ ]
[(ii)] Estimated net proceeds: [ ]
[(iii)] Estimated total expenses: [ ]] (N.B.: If the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies (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.)
6. PERFORMANCE OF INDEX/FORMULA, EXPLANATION OF EFFECT ON VALUE OF A12.4.1.2 INVESTMENT AND ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING THE UNDERLYING (Index-Linked Notes Only) [Need to include details of where past and future performance and volatility of the index/formula can be obtained.] A12.4.2.2
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[Where the underlying is an index need to include the name of the index and a description if composed by the Issuer and A12.4.2.1 if the index is not composed by the Issuer need to include details of where the information about the index can be obtained. Where the underlying is not an index need to include equivalent information.]
[Include other information concerning the underlying required by paragraph 4.2 of Annex XII of the Prospectus Directive Regulation.]
7. PERFORMANCE OF RATE[S] OF EXCHANGE (Dual Currency Notes Only)
[Need to include details of where past and future performance and volatility of the relevant rates can be obtained.] A12.4.2.1 A12.4.2.2 (N.B. The above applies if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation A12.4.1.2 applies.)
8. OPERATIONAL INFORMATION
(i) ISIN Code: [ ] (ii) Common Code: [ ] (iii) CUSIP: [ ] (iv) CINS: [ ] (v) Any clearing system(s) other than [Not Applicable/give name(s) and number(s)] A12.4.1.1 Euroclear Bank S.A./N.V. and A12.4.1.12 Clearstream Banking, société anonyme/The Depository Trust Company and the relevant identification number(s): (vi) Delivery: Delivery [against/free of] payment A13.5.2 (vii) Names and addresses of additional [ ] Paying Agent(s) (if any):
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TERMS AND CONDITIONS OF THE NOTES
The following are the Terms and Conditions of the Notes which will be incorporated by reference into each global Note and each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed between 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’’ above for a description of the content of the Final Terms which will include the definitions of certain terms used in the following Terms and Conditions and which will specify which of such terms are to apply in relation to the relevant Notes.
This Note is one of a series of Notes constituted by a Trust Deed (as modified and/or supplemented from A13.4.11 time to time, the ‘‘Trust Deed’’) dated 24th November, 1994, and made between inter alia Mitsubishi UFJ Securities International plc (the ‘‘Issuer’’) (known as Mitsubishi Finance International plc as at the original date of execution of the Trust Deed), and The Law Debenture Trust Corporation p.l.c. (the ‘‘Trustee’’), which expression shall include any successor as trustee). References herein to the ‘‘Notes’’ shall be references to the Notes of this Series (as defined below) and shall mean (i) in relation to any Notes represented by a global Note, units of each Specified Denomination in the Specified Currency, (ii) definitive Bearer Notes issued in exchange (or part exchange) for a global Note, (iii) definitive Registered Notes either issued in definitive registered form or issued in exchange (or part exchange) for a global Note and (iv) any global Note. The Notes, the Receipts and the Coupons (as defined below) have the benefit of an Amended and Restated Agency Agreement (as modified and/or supplemented from time to time, the ‘‘Agency Agreement’’) dated 15th October, 2009 and made between the Issuer, The Bank of New York Mellon, London branch, as issuing and principal paying agent (the ‘‘Agent’’, which expression shall include any successor agent), the other paying agents named therein (together with the Agent, the ‘‘Paying Agents’’, which expression shall include any additional or successor paying agents), the registrar named therein (the ‘‘Registrar’’, which expression shall include any additional or successor registrar), The Bank of New York Mellon, as exchange agent (the ‘‘Exchange Agent’’, which shall include any successor as exchange agent), the transfer agents named therein (the ‘‘Transfer Agents’’, which expression shall include any additional or successor transfer agents) and the Trustee and an amended and restated Keep Well Agreement (the ‘‘Keep Well Agreement’’) dated 3rd August, 2006 and made between Mitsubishi UFJ Financial Group Inc (‘‘MUFG’’), The Bank of Tokyo-Mitsubishi UFJ, Ltd. (‘‘BTMU’’), the Issuer and the Trustee. References to the Registrar herein shall be references to the party specified as such in the applicable Final Terms.
Interest bearing definitive Bearer Notes (unless otherwise indicated in the applicable Final Terms) 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 Bearer Notes repayable in instalments have receipts (‘‘Receipts’’) for the payment of the instalments of principal (other than the final instalment) attached on issue. Neither Registered Notes nor global Notes have Receipts or Coupons attached on issue.
The Trustee acts for the benefit of the holders of the Notes and (in the case of Registered Notes) the persons in whose name the Notes are registered (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 (‘‘Receiptholders’’) and the holders of the Coupons (the ‘‘Couponholders’’, which expression shall, unless the context otherwise requires, include the holders of the Talons), all in accordance with the provisions of the Trust Deed.
The final terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached hereto or endorsed hereon which supplement these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Terms and Conditions, replace or modify these Terms and Conditions for the purposes of this Note. References herein to the ‘‘applicable Final Terms’’ are to the Final Terms (or the relevant provisions thereof) attached hereto or endorsed hereon.
As used herein, ‘‘Tranche’’ means Notes (whether in global or definitive form or both) which are identical A13.4.8 in all respects (including as to listing and admission to trading) and ‘‘Series’’ means a Tranche of Notes together with
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any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices.
Copies of the Trust Deed, the Agency Agreement and the Keep Well Agreement are available for inspection at the registered office of the Trustee, being at 15th October, 2009 at Fifth Floor, 100 Wood Street, London EC2V 7EX. Copies of the applicable Final Terms are available for viewing at and copies can be obtained from the registered office of the Issuer and specified office of each Paying Agent and at the specified office of each of the Agent, the other Paying Agents, the Registrar and the Transfer Agents 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 Directive 2003/71/EC the applicable Final Terms will only be available for inspection by a Noteholder upon proof satisfactory to the Trustee, the Registrar or the relevant Paying Agent or Transfer Agent, as the case may be, 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, the Keep Well Agreement and the applicable Final Terms, which are binding on them.
Words and expressions defined in the Trust Deed or the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the Agency Agreement, the Trust Deed will prevail and, in the event of inconsistency between the Trust Deed or the Agency Agreement and the applicable Final Terms, the applicable Final Terms will prevail.
1. Form, Denomination and Title A12.4.1.4 A12.4.1.1 The Notes are either in bearer form (‘‘Bearer Notes’’) or in registered form (‘‘Registered Notes’’), as A13.4.4 specified in the applicable Final Terms, and, in the case of definitive Notes, serially numbered, in the Specified Currency and the Specified Denomination(s). Bearer Notes of one Specified Denomination may not be exchanged for Bearer Notes of another Specified Denomination.
This Note is an Unsubordinated Note or a Subordinated Note as indicated in the applicable Final Terms.
This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note, an Equity 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, an Equity Linked Redemption 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.
In the case of Zero Coupon Notes, references to Coupons and Couponholders in these Terms and Conditions are not applicable.
Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery and title to the Registered Notes will pass upon the registration of transfers in accordance with the provisions of the Agency Agreement and the Trust Deed. The Issuer, the Trustee, the Replacement Agent (as defined in the Agency Agreement), any Paying Agent, the Registrar, the Exchange Agent and any Transfer Agent will (except as otherwise required by law) deem and treat the bearer of any Bearer Note, Receipt or Coupon and the registered holder of any Registered Note 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 Bearer Notes is represented by a bearer global Note held by a common depositary on behalf of Euroclear Bank S.A./N.V. (‘‘Euroclear’’) and/or Clearstream Banking, société anonyme (‘‘Clearstream, Luxembourg’’), or for so long as a nominee of a common depositary for Euroclear and Clearstream, Luxembourg
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or The Depository Trust Company (‘‘DTC’’) or its nominee is the registered holder of a Registered Global Note, each person who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg or, as the case may be, of DTC 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 or, as the case may be, DTC as to the nominal amount of Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error or proven error) shall be treated by the Issuer, the Replacement Agent, any Paying Agent, the Registrar, the Exchange Agent, any Transfer Agent 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 such common depositary or its nominee or, as the case may be, DTC or its nominee shall be treated by the Issuer, the Replacement Agent, any Paying Agent, the Registrar, the Exchange Agent, any Transfer 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 Trust Deed and the expressions ‘‘Noteholder’’ and ‘‘holder of Notes’’ and related expressions shall be construed accordingly. Notes which are represented by a global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear, Clearstream, Luxembourg or DTC, as the case may be.
References to Euroclear, Clearstream, Luxembourg and/or DTC 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 approved by the Issuer, the Agent and the Trustee.
2. Status of the Notes A12.4.1.6 A12.4.1.7 (a) Unsubordinated Notes A13.4.6 A13.4.7 The Unsubordinated Notes and any related Receipts and Coupons are direct, unconditional, unsubordinated and unsecured obligations of the Issuer and rank pari passu and rateably without any preference among themselves and (subject to such exceptions as from time to time exist under applicable law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer from time to time outstanding.
(b) Subordinated Notes
The Subordinated Notes and any related Receipts and Coupons constitute direct, unsecured and subordinated obligations of the Issuer and rank pari passu and without any preference among themselves.
The rights of holders of Subordinated Notes and any related Receipts and Coupons against the Issuer to payment of principal and interest in respect of the 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 Senior Indebtedness (as defined in the Trust Deed).
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 Subordinated Notes or any related Receipts or Coupons and each holder shall, by virtue of being the holder of any Subordinated Note or, as the case may be, related Receipt or Coupon, be deemed to have waived all such rights of such set-off, counterclaim or retention.
The provisions of this Condition 2 apply only to the principal and interest in respect of the Notes and nothing in this Condition 2 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.
3. Redenomination and Exchange
(a) Redenomination
Where redenomination is specified in the applicable Final Terms as being applicable, the Issuer may, without the consent of the Noteholders, the Receiptholders and the Couponholders, on giving prior notice to the Trustee,
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the Agent, Euroclear and Clearstream, Luxembourg and at least 30 days’ prior notice to the Noteholders and, in the case of Subordinated Notes, to the FSA in accordance with Condition 13, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be redenominated in euro.
The election will have effect as follows:
(i) the Notes and the Receipts shall be deemed to be redenominated in euro in the denomination of euro 0.01 with a nominal amount for each Note and Receipt equal to the nominal amount of that Note or Receipt in the Specified Currency, converted into euro at the Established Rate, provided that, if the Issuer determines, with the agreement of the Trustee and the Agent, that the then market practice in respect of the redenomination in euro of internationally offered securities is different from the provisions specified above, such provisions shall be deemed to be amended so as to comply with such market practice and the Issuer shall promptly notify the Noteholders, the stock exchange or other relevant authority (if any) on which the Notes may be listed, the FSA (in the case of Subordinated Notes) and the Paying Agents of such deemed amendments;
(ii) save to the extent that an Exchange Notice has been given in accordance with paragraph (iv) below, the amount of interest due in respect of the Notes will be calculated by reference to the aggregate nominal amount of Notes presented (or, as the case may be, in respect of which Coupons are presented) for payment by the relevant holder and the amount of such payment shall be rounded down to the nearest euro 0.01;
(iii) if definitive Notes are required to be issued after the Redenomination Date, they shall be issued at the expense of the Issuer in the denominations of euro 1,000, euro 10,000, euro 100,000 and (but only to the extent of any remaining amounts less than euro 1,000 or such smaller denominations as the Agent may approve) euro 0.01 and such other denominations as the Agent shall determine and notify to the Noteholders;
(iv) if issued prior to the Redenomination Date, all unmatured Coupons denominated in the Specified Currency (whether or not attached to the Notes) will become void with effect from the date on which the Issuer gives notice (the ‘‘Exchange Notice’’) that replacement euro-denominated Notes, Receipts and Coupons are available for exchange (provided that such securities are so available) and no payments will be made in respect of them. The payment obligations contained in any Notes and Receipts so issued will also become void on that date although those Notes and Receipts will continue to constitute valid exchange obligations of the Issuer. New euro-denominated Notes, Receipts and Coupons will be issued in exchange for Notes, Receipts and Coupons denominated in the Specified Currency in such manner as the Agent may specify and as shall be notified to the Noteholders in the Exchange Notice. No Exchange Notice may be given less than 15 days prior to any date for payment of principal or interest on the Notes;
(v) after the Redenomination Date, all payments in respect of the Notes, the Receipts and the Coupons, other than payments of interest in respect of periods commencing before the Redenomination Date, will be made solely in euro as though references in the Notes to the Specified Currency were to euro. Payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque;
(vi) if the Notes are Fixed Rate Notes and interest for any period ending on or after the Redenomination Date is required to be calculated for a period ending other than on an Interest Payment Date, it will be calculated by applying the Rate of Interest to each Specified Denomination, 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;
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(vii) if the Notes are Floating Rate Notes the applicable Final Terms will specify any relevant changes to the provisions relating to interest; and
(viii) such other changes shall be made to these Terms and Conditions as the Issuer may decide, with the prior written approval of the Trustee and after consultation with the Agent to conform them to conventions then applicable to instruments denominated in euro or to enable the Notes to be consolidated with one or more issues of other notes, whether or not originally denominated in the Specified Currency or euro. Any such other changes will not take effect until after they have been notified to the Noteholders in accordance with Condition 13.
(b) Exchange
Where exchange is specified in the applicable Final Terms as being applicable, the Issuer may, without the consent of the Noteholders, the Receiptholders and the Couponholders, on giving prior notice to the Agent, the Trustee, Euroclear and Clearstream, Luxembourg and not less than 30 days’ prior notice to the Noteholders in accordance with Condition 13, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be exchangeable for Notes expressed to be denominated in euro in accordance with such arrangements as the Issuer may decide, with the prior written approval of the Trustee and after consultation with the Agent, and as may be specified in the notice, including arrangements under which Receipts and Coupons unmatured at the date so specified become void.
(c) Definitions
In these Conditions, the following expressions have the following meanings:
‘‘Established Rate’’ means the rate for the conversion of the Specified Currency (including compliance with rules relating to roundings in accordance with applicable European Community regulations) into euro established by the Council of the European Union pursuant to Article 123 of the Treaty;
‘‘euro’’ means the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty;
‘‘Redenomination Date’’ means (in the case of interest bearing Notes) any date for payment of interest under the Notes or (in the case of Zero Coupon Notes) any date, in each case specified by the Issuer in the notice given to the Noteholders pursuant to paragraph (a) or, as the case may be, (b) above and which falls on or after the date on which the country of the Specified Currency first participates in the third stage of European economic and monetary union; and
‘‘Treaty’’ means the Treaty establishing the European Community, as amended.
4. Interest
(a) Interest on Fixed Rate Notes A13.4.8
Each Fixed Rate Note bears interest on its nominal amount (or, if it is a Partly Paid Note, the amount paid up) 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 (but excluding) the Maturity Date. Except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified.
As used in the Conditions, ‘‘Fixed Interest Period’’ means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.
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If interest is required to be calculated for a period other than a Fixed Interest Period, such interest shall be calculated by applying the Rate of Interest to each Specified Denomination, 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.
‘‘Day Count Fraction’’ means, in respect of the calculation of an amount of interest in accordance with this Condition 4(a):
if ‘‘Actual/Actual (ICMA)’’ is specified in the applicable Final Terms:
(i) in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the ‘‘Accrual Period’’) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or
(ii) in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:
(A) the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and
(B) the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and
if ‘‘30/360’’ is specified in the applicable Final Terms, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.
In the Conditions:
‘‘Determination Period’’ means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and
‘‘sub-unit’’ means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent.
(b) Interest on Floating Rate Notes, Index Linked Interest Notes and Equity Linked Interest Notes
(i) Interest Payment Dates
Each Floating Rate Note, Index Linked Interest Note and Equity Linked Interest Note bears interest on its outstanding nominal amount (or, if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date at the rate equal to the Rate of Interest payable in arrear on either:
(A) the Specified Interest Payment Date(s) in each year specified in the applicable Final Terms; or
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(B) if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (each such date, together with each Specified Interest Payment Date, an ‘‘Interest Payment Date’’) which falls the number of months or other period specified as the Specified Period in the applicable Final Terms after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.
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).
(ii) Rate of Interest
The Rate of Interest payable from time to time in respect of Floating Rate Notes, Index Linked Interest Notes and Equity Linked Interest Notes will be determined in the manner specified in the applicable Final Terms.
(iii) 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 sub-paragraph (iii), ‘‘ISDA Rate’’ for an Interest Period means a rate equal to the Floating Rate that would be determined by the Agent or other person specified in the applicable Final Terms under an interest rate swap transaction if the Agent or that other person were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating either the 2000 ISDA Definitions or 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) (as specified in the applicable Final Terms) (the ‘‘ISDA Definitions’’) and under which:
(A) the Floating Rate Option is as specified in the applicable Final Terms;
(B) the Designated Maturity is a period specified in the applicable Final Terms; and
(C) the relevant Reset Date is either (i) if the applicable Floating Rate Option is based on the London inter-bank offered rate (‘‘LIBOR’’) or on the Euro-zone inter-bank offered rate (‘‘EURIBOR’’) for a currency, the first day of that Interest Period or (ii) in any other case, as specified in the applicable Final Terms.
For the purposes of this sub-paragraph (iii), ‘‘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.
(iv) Screen Rate Determination for Floating Rate Notes
Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:
(A) the offered quotation; or
(B) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,
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(expressed as a percentage rate per annum) 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 pursuant to this sub- paragraph (iv) 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.
(v) Minimum Rate of Interest and/or Maximum Rate of Interest
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 (ii) above is less than such Minimum Rate of Interest, then 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 (ii) above is greater than such Maximum Rate of Interest, then the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.
(vi) Determination of Rate of Interest and Calculation of Interest Amounts
The Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Index Linked Interest Notes and Equity 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 and Equity 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, Index Linked Interest Notes or Equity Linked Interest Notes in respect of each Specified Denomination for the relevant Interest Period. Each Interest Amount shall be calculated by applying the Rate of Interest to each Specified Denomination, 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.
‘‘Day Count Fraction’’ means, in respect of the calculation of an amount of interest in accordance with this Condition 4(b):
(A) if the 2000 ISDA Definitions and either ‘‘Actual/365’’ or ‘‘Actual/Actual’’ are specified in the applicable Final Terms, or if the 2006 ISDA Definitions and either ‘‘Actual/Actual (ISDA)’’ or ‘‘Actual/Actual’’ are specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the
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sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);
(B) if ‘‘Actual/365 (Fixed)’’ is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365;
(C) if ‘‘Actual/365 (Sterling)’’ is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;
(D) if ‘‘Actual/360’’ is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 360;
(E) (x) if the 2000 ISDA Definitions and any of ‘‘30/360’’, ‘‘360/360’’ or ‘‘Bond Basis’’ are specified in the applicable Final Terms, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (a) the last day of the Interest Period is the 31st day of a month but the first day of the Interest Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (b) the last day of the Interest Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)) or (y) if the 2006 ISDA Definitions and any of ‘‘30/360’’, “360/360’’ or ‘‘Bond Basis’’ are specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: [360 x (Y – Y )] + [30 x (M – M )] + (D – D ) Day Count Fraction = 1111211111111111111112 1 2 1 2 1 360 where:
“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;
“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and
‘‘D2’’ is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30; (F) (x) if the 2000 ISDA Definitions and either ‘‘30E/360’’ or ‘‘Eurobond Basis’’ are specified in the applicable Final Terms, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Interest Period unless, in the case of the final Interest Period, the Maturity Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month) or (y) if the 2006 ISDA Definitions and either ‘‘30E/360’’ or ‘‘Eurobond Basis’’ are
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specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: [360 x (Y – Y )] + [30 x (M – M )] + (D – D ) Day Count Fraction = 1111211111111111111112 1 2 1 2 1 360 where:
‘‘Y1’’ is the year, expressed as a number, in which the first day of the Interest Period falls;
‘‘Y2’’ is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
‘‘M1’’ is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
‘‘M2’’ is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
‘‘D1’’ is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D1 will be 30; and
‘‘D2’’ is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D2 will be 30; and (G) if the 2006 ISDA Definitions and ‘‘30E/360 (ISDA)’’ are specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: [360 x (Y – Y )] + [30 x (M – M )] + (D – D ) Day Count Fraction = 1111211111111111111112 1 2 1 2 1 360 where:
‘‘Y1’’ is the year, expressed as a number, in which the first day of the Interest Period falls;
‘‘Y2’’ is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
‘‘M1’’ is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
‘‘M2’’ is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
‘‘D1’’ is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
‘‘D2’’ is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31 in which case D2 will be 30.
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(vii) Notification of Rate of Interest and Interest Amount
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 or other relevant authority on which the relevant Floating Rate Notes, Index Linked Interest Notes or Equity 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 day which is the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange or other relevant authority on which the relevant Floating Rate Notes, Index Linked Interest Notes or Equity 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.
(viii) Determination or Calculation by Trustee
If for any reason the Agent or, as the case may be, the Calculation Agent at any time after the Issue Date defaults in its obligations to determine the Rate of Interest or calculate any Interest Amount in accordance with sub-paragraphs (ii) and (iv) above respectively, the Trustee shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition, but subject always to any Minimum Rate of Interest or Maximum Rate of Interest specified in the applicable Final Terms), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Trustee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Agent or the Calculation Agent, as applicable.
(ix) Certificates to be final
All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this paragraph (b), whether by the Agent, or if applicable the Calculation Agent or the Trustee, shall (in the absence of wilful default, bad faith or manifest error or proven error) be binding on the Issuer, the Agent, the Trustee, the Calculation Agent, the other Paying Agents, the Transfer Agent, the Exchange Agent, the Registrars and all Noteholders, Receiptholders and Couponholders and (in the absence as aforesaid) no liability to the Issuer, the Noteholders, the Receiptholders or the Couponholders shall attach to the Agent, the Calculation Agent (if applicable) or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.
(c) Interest on Dual Currency Interest Notes
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.
(d) Interest on Partly Paid Notes
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.
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(e) Accrual of Interest
Each Note (or, in the case of the redemption of part only of such a Note, that part only of a Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue as provided in the Trust Deed or in the applicable Final Terms.
(f) Applicable Business Day Convention
If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day on 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:
(i) in any case where Interest Periods are specified in accordance with Condition 4(b)(i)(B) above, the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (B) below shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (A) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (B) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the period specified as the Interest Period in the applicable Final Terms after the preceding applicable Interest Payment Date occurred; or
(ii) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or
(iii) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or
(iv) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.
Notwithstanding the foregoing, where the applicable Final Terms specifies that the relevant business day convention is to be applied on an ‘‘unadjusted’’ basis, the amount of interest payable on any date shall be determined by reference to the Maturity Date and/or Interest Payment Date(s) originally specified in the applicable Final Terms without regard to any adjustment to such date(s) arising as a result of the application of such business day convention.
In this Condition, ‘‘Business Day’’ means a day which is both:
(A) a day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and each Additional Business Centre specified in the applicable Final Terms; and
(B) either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than London and any Additional Business Centre and which, if the Specified Currency is Australian dollars, shall be Sydney) or (2) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System or any successor thereto (the ‘‘TARGET2 System’’) is open.
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5. Payments A12.4.1.12 A12.4.1.13 (a) Method of Payment
Subject as provided below:
(i) payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency (which, in the case of a payment in Japanese yen to a non-resident of Japan, shall be a non-resident account) maintained by the payee with, or, at the option of the payee, by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively); and
(ii) payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque.
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.
(b) Presentation of definitive Notes, Receipts and Coupons
Payments of principal in respect of definitive Bearer Notes will (subject as provided below) be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due only, endorsement) of definitive Bearer Notes, and payments of interest in respect of definitive Bearer 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 only, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States. Payments under paragraph (a) above made by cheque shall be mailed or delivered to an address outside the United States furnished by such bearer. Subject to any applicable laws and regulations, such payments made by transfer will be made in immediately available funds to an account maintained by the payee with a bank located outside the United States. Subject as provided below, no payment in respect of any definitive Bearer Note or Coupon will be made upon presentation of such definitive Bearer Note or Coupon at any office or agency of the Issuer or any Paying Agent in the United States, nor will any such payments be made by transfer to an account, or by mail to an address, in the United States.
In respect of Bearer Notes, 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 paragraph (a) above against presentation and surrender (or, in the case of part payment of any sum due only, endorsement) of the relevant Receipt. Payment of the final instalment will be made in the manner provided in paragraph (a) above against presentation and surrender (or, in the case of part payment of any sum due only, endorsement) of the relevant definitive Bearer Note. Each Receipt must be presented for payment of the relevant instalment together with the definitive Bearer Note to which it appertains. Receipts presented without the definitive Bearer Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any definitive Bearer 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 bearer form (other than Dual Currency Notes, Index Linked Notes, Equity 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
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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 ten 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 such Fixed Rate Note in definitive bearer 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, Equity Linked Notes or Long Maturity Note in definitive bearer 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 Bearer Note is not an Interest Payment Date, interest (if any) accrued in respect of such definitive Bearer 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 Bearer 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 Bearer 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 such 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 the relevant global Note (or, as provided in the Trust Deed, the Trustee) 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 (or the Trustee, as the case may be) in respect of each amount so paid. Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the beneficial holder of a particular nominal amount of Notes represented by such global Note must look solely to Euroclear, Clearstream, Luxembourg or DTC, 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 (or the Trustee, as the case may be). No person other than the holder of such global Note (or the Trustee, as the case may be) shall have any claim against the Issuer in respect of any payments due on that global Note.
All amounts payable to DTC or its nominee as registered holder of a Registered Global Note in respect of Notes denominated in a Specified Currency other than U.S. dollars shall be paid by transfer by the Registrar to an account in the relevant Specified Currency of the Exchange Agent on behalf of DTC or its nominee for payment in such Specified Currency or conversion into U.S. dollars in accordance with the provisions of the Agency Agreement.
Notwithstanding the foregoing, U.S. dollar payments of principal and/or interest in respect of Bearer Notes will be made at the specified office of a Paying Agent in the United States (which expression, as used in this Condition, 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)) if:
(i) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such
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specified offices outside the United States of the full amount of principal and interest on the Bearer Notes in the manner provided above when due;
(ii) payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and
(iii) such payment is then permitted under United States law without involving, in the opinion of the Issuer, adverse tax consequences to the Issuer.
Payments of principal in respect of Registered Notes will be made in the manner provided in paragraph (a) above against presentation and surrender (or, in the case of part payment of any sum due only, endorsement) of such Notes at the specified office of the Registrar or at the specified office of any Paying Agent. Payments of interest due on a Registered Note and payments of instalments (if any) of principal on a Registered Note, other than the final instalment, will be made to the person in whose name such Note is registered at the close of business on the fifteenth day (whether or not such fifteenth day is a business day (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar is located) (the ‘‘Record Date’’)) prior to such due date. In the case of payments by cheque, cheques will be mailed to the holder (or the first named of joint holders) at such holder’s registered address on the due date. If payment is required by credit or transfer as referred to in paragraph (a) above, application for such payment must be made by the holder to the Registrar not later than the relevant Record Date.
(c) Payment Day
If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day (as defined below), then 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. In this Condition (unless otherwise specified in the applicable Final Terms), ‘‘Payment Day’’ means any day which (subject to Condition 8) is:
(i) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in:
(A) the relevant place of presentation;
(B) London; and
(C) each Additional Financial Centre specified in the applicable Final Terms; and
(ii) a Business Day (as defined in Condition 4(f)); and
(iii) in the case of any payment in respect of a Restricted Global Note denominated in a Specified Currency other than U.S. dollars and registered in the name of DTC or its nominee and, in respect of which an accountholder of DTC (with an interest in such Restricted Global Note) has elected to receive any part of such payment in U.S. dollars, not a day on which banking institutions are authorised or required by law or regulation to be closed in New York City.
(d) Interpretation of Principal and Interest
Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable:
(i) any additional amounts which may be payable with respect to principal under Condition 7 or pursuant to any undertakings given in addition thereto or in substitution therefor pursuant to the Trust Deed;
(ii) the Final Redemption Amount of the Notes;
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(iii) the Early Redemption Amount of the Notes;
(iv) the Optional Redemption Amount(s) (if any) of the Notes;
(v) in relation to Notes redeemable in instalments, the Instalment Amounts;
(vi) in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 6(e)); and
(vii) any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.
Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 7 or pursuant to any undertakings or covenant given in addition thereto or in substitution therefor pursuant to the Trust Deed.
6. Redemption and Purchase
(a) Redemption at Maturity
Unless previously redeemed or purchased and cancelled as specified below, each Note (including each Index A13.4.9 Linked Redemption Note, Equity 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 specified in the applicable Final Terms rounded (if necessary) to (i) the nearest sub-unit of the relevant Specified Currency (except in cases where the Specified Currency is Japanese yen), half of any such sub-unit being rounded upwards, or (ii) in cases where the Specified Currency is Japanese yen, rounded to the nearest whole Japanese yen, half a yen being rounded upwards, or (iii) otherwise in accordance with applicable market convention.
(b) Redemption for Tax Reasons
The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (in the case of Notes other than Floating Rate Notes, Index Linked Interest Notes, Equity Linked Interest Notes or Dual Currency Notes) or on any Interest Payment Date (in the case of Floating Rate Notes, Index Linked Interest Notes, Equity Linked Interest Notes or Dual Currency Notes), on giving not less than 15 nor more than 30 days’ notice to the Trustee, 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 the aforementioned notice that:
(i) on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 as a result of any change in, or amendment to, the laws or regulations of a Tax Jurisdiction (as defined in Condition 7) or any political sub-division or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the Issue Date of the first Tranche of the Notes; and
(ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,
provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this Condition, the 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
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of such change or amendment and the Trustee shall be entitled to accept the certificate 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(b) will be redeemed at their Early Redemption Amount referred to in paragraph (e) below together (if appropriate) with interest accrued to (but excluding) the date of redemption.
(c) Redemption at the Option of the Issuer (Issuer Call)
If Issuer Call is specified in the applicable Final Terms, the Issuer may, having given:
(i) not less than 15 nor more than 30 days’ notice in accordance with Condition 13 to the Noteholders; and
(ii) not less than 15 days before the giving of the notice referred to in (i), notice to the Trustee and the Agent,
(both of which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only (as specified in the applicable Final Terms) 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(s). 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 Bearer Notes (or, as the case may be, parts of Registered Notes) to be redeemed (‘‘Redeemed Notes’’) will be selected individually by lot (without involving any part of a Bearer Note), in the case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of Euroclear and/or Clearstream, Luxembourg or, as the case may be, DTC, in the case of Redeemed Notes represented by a global Note, not more than 60 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 30 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 sub-paragraph (c) and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least 10 days prior to the Selection Date.
(d) Redemption at the Option of the Noteholders (Investor Put)
If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the Issuer in accordance with Condition 13 not less than 30 nor more than 60 days’ notice or such other period of notice as is specified in the applicable Final Terms (which notice shall be irrevocable), the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Final Terms, in whole (but not in part), such Note on the Optional Redemption Date and at the Optional Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the Optional Redemption 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 deliver, at the specified office of any Paying Agent, Transfer Agent or, as the case may be, the Registrar at any time during the normal business hours of such Paying Agent, Transfer Agent or the Registrar within the notice period, a duly signed and completed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent, Transfer Agent or the Registrar (a ‘‘Put Notice’’) in which the holder must specify a bank account (or, if payment is by cheque, an address) to which payment is to be made under this paragraph
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(d) accompanied by, if this Note is in definitive form, this Note or evidence satisfactory to the Paying Agent, Transfer Agent or Registrar concerned that this Note will, following delivery of the Put Notice, be held to its order or under its control.
Subordinated Notes with a maturity of five years or more cannot be redeemed at the option of the Noteholders.
(e) Early Redemption Amounts
For the purpose of paragraph (b) above and Condition 9, each Note will be redeemed at its Early Redemption Amount calculated as follows:
(i) in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof; or
(ii) in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and a Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Note is denominated, at the amount specified in, or determined in the manner specified in, the applicable Final Terms or, if no such amount or manner is so specified in the applicable Final Terms, at its nominal amount; or
(iii) in the case of a Zero Coupon Note, at an amount (the ‘‘Amortised Face Amount’’) calculated in accordance with the following formula:
Early Redemption Amount = RP x (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.
(f) Instalments
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 paragraph (e) above.
(g) Partly Paid Notes
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.
(h) Purchases
The Issuer or any of its Subsidiaries (and any direct or indirect Subsidiary of BTMU and/or MUFG, as the case may be) may at any time purchase or otherwise acquire Notes (provided that, in the case of definitive Bearer Notes, all unmatured Receipts and Coupons appertaining thereto are attached thereto or surrendered therewith) in the open market either by tender or private agreement or otherwise, without restriction as to
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price. Such Notes may be held, reissued, resold or, at the option of the Issuer, surrendered to any Paying Agent or the Registrar for cancellation.
(i) Cancellation
All Notes which are redeemed will forthwith be cancelled (together with, in the case of definitive Bearer Notes, all unmatured Receipts and Coupons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and Notes purchased and cancelled pursuant to paragraph (h) above (together with, in the case of definitive Bearer Notes, all unmatured Receipts and Coupons cancelled therewith) shall be forwarded to the Agent and cannot be re-issued or resold.
(j) Late Payment on Zero Coupon Notes
If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to paragraph (a), (b), (c) or (d) 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 paragraph (e)(iii) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and repayable were replaced by references to the date which is the earlier of:
(i) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and
(ii) the date on which the full amount of the moneys payable in respect of such Zero Coupon Note has been received by the Agent and notice to that effect has been given to the Noteholders in accordance with Condition 13 or as provided in the Trust Deed.
7. Taxation
All payments of principal and/or interest in respect of the Notes, Receipts and Coupons by the Issuer shall be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of any Tax Jurisdiction unless such withholding or deduction is required by law. In such event, the Issuer shall 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:
(i) to, or to a third party on behalf of, a holder who (a) is able to avoid such withholding or deduction by satisfying any statutory requirements or by making a declaration of non-residence or other claim for exemption to the relevant taxing authority but fails to do so or (b) is liable to such taxes, duties, assessments or governmental charges in respect of such Note, Receipt or Coupon by reason of his having some connection with a Tax Jurisdiction other than the mere holding or ownership of such Note, Receipt or Coupon; or
(ii) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such 30-day period; or
(iii) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or
(iv) presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note, Receipt or Coupon to another Paying Agent in a Member State of the European Union.
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As used herein, ‘‘Tax Jurisdiction’’ means the United Kingdom or any political subdivision or any authority thereof or therein having power to tax; and 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 Agent or the Trustee 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 has been duly given to the Noteholders in accordance with Condition 13.
8. Prescription
The Notes (whether in bearer or registered form), Receipts and Coupons will become void unless presented for payment within a period of ten 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(b) or any Talon which would be void pursuant to Condition 5(b).
9. Events of Default
(a) Unsubordinated Notes
The provisions of this Condition 9(a) apply to Unsubordinated Notes only.
If any one or more of the following events (each an ‘‘Event of Default’’) shall have occurred and be continuing:
(i) default is made for more than seven days in the payment of any amount of principal or any amount of interest due in respect of any of the Notes when and as the same ought to be paid in accordance with these Conditions; or
(ii) default is made in the performance or observance by the Issuer of any obligation, condition or provision under the Notes or the Trust Deed (other than any obligation for the payment of any amount due in respect of any of the Notes) and (but only in a case where the Trustee considers such default to be capable of being remedied) such default shall not be remedied to the Trustee’s satisfaction within 30 days (or such longer period as the Trustee may permit) of first written notification from the Trustee to the Issuer requiring the same to be remedied; or
(iii) any Financial Indebtedness (as defined below) of the Issuer having an aggregate nominal amount of at least U.S.$10,000,000 (or its equivalent in any other currency) shall become prematurely repayable as a result of a default in respect of the terms thereof or as a result of any event treated in effect as a default or steps are taken to enforce any security therefor or the Issuer defaults in repayment of any such Financial Indebtedness when due or at the expiration of any applicable grace period therefor (as originally provided) or any guarantee or indemnity in respect of any Financial Indebtedness of others having an aggregate nominal amount of at least U.S.$10,000,000 (or its equivalent in any other currency) shall not be honoured when due and called upon; or
(iv) an effective resolution is passed or an order of a court of competent jurisdiction is made that the Issuer be liquidated, wound up or dissolved otherwise than for the purposes of or pursuant to a consolidation, amalgamation, merger, reconstruction or other similar arrangement the terms whereof have previously been approved either in writing by the Trustee or by an Extraordinary Resolution of the Noteholders; or
(v) possession is taken on behalf of an encumbrancer, or a receiver is appointed, of the whole or a material part of the assets or undertaking of the Issuer; or
(vi) a distress, execution or seizure before judgment is levied or enforced upon or sued out against a material part of the property of the Issuer, and is not discharged within 30 days thereof; or
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(vii) the Issuer stops payment (within the meaning of any applicable bankruptcy law) or (otherwise than for the purposes of such a consolidation, amalgamation, merger, reconstruction or other similar arrangement as is referred to in paragraph (iv) above) ceases or through an official action of the Board of Directors of the Issuer threatens to cease to carry on business or is unable to pay its debts as and when they fall due; or
(viii) proceedings shall have been initiated against the Issuer under any applicable bankruptcy, reorganisation or insolvency law and such proceedings shall not have been discharged or stayed within a period of 60 days; or
(ix) the Issuer shall initiate or consent to proceedings relating to itself under any applicable bankruptcy, reorganisation or insolvency law or make a conveyance or assignment for the benefit of, or enter into any composition with, its creditors; or
(x) except with the prior consent in writing of the Trustee or the sanction of an Extraordinary Resolution of the Noteholders, the Keep Well Agreement is terminated or any provision of the Keep Well Agreement is modified or waived in circumstances where such modification or waiver would have a material adverse effect on the interests of the Noteholders or is not enforced in a timely manner by the Issuer or is breached by BTMU and/or MUFG, as the case may be,
then the Trustee at its discretion may, and if so requested in writing by Noteholders holding 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 to its satisfaction), (provided that, except in the case of the happening of any of the events mentioned in paragraph (i) above, the Trustee shall have certified that, in its opinion, such event is materially prejudicial to the interests of the Noteholders) give notice to the Issuer that the Notes are, and they shall thereby forthwith become, immediately due and repayable at their Early Redemption Amount (as described in Condition 6(e)) together with accrued interest as provided in the Trust Deed.
For the purpose of paragraph (iii) above, ‘‘Financial Indebtedness’’ means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or acceptance credit or (iii) any notes, bonds, debentures, debenture stock, loan stock or other securities offered, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash. Any Financial Indebtedness which is denominated or payable in a currency other than U.S. dollars shall be translated into U.S. dollars at the spot rate for the sale of U.S. dollars against the purchase of the relevant currency as quoted by the Agent on the calendar day in London on which the relevant default occurs (or, if for any reason such a rate is not available on that day, on the earliest possible date thereafter).
(b) Subordinated Notes
The provisions of this Condition 9(b) apply to Subordinated Notes only.
In the case of 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 Subordinated Notes then outstanding or if so directed by an Extraordinary Resolution of the Noteholders shall (subject to being indemnified to its satisfaction), give notice to the Issuer that the Subordinated 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:
(i) default is made for a period of seven or more days in the payment of any principal due in respect of the Subordinated Notes or any of them or 14 or more days in the payment of any interest due in respect of the Subordinated Notes or any of them; or
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(ii) the winding-up or dissolution of the Issuer is commenced (other than a winding-up or dissolution which has been approved in writing by the Trustee or by an Extraordinary Resolution of the Noteholders).
If the Subordinated 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) to enforce the obligations of the Issuer in respect of the Subordinated Notes and any Receipts, the Coupons and the Trust Deed, provided that no repayment of principal in respect of the Subordinated 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.
10. Exchange of Notes, Transfer of definitive Registered Notes and Replacement of Notes, Receipts, Coupons and Talons
(a) Exchange of Bearer Notes for Registered Notes
A Bearer Note in definitive form may be exchanged for Registered Notes of like aggregate nominal amount (in global or definitive form) by submission of a duly completed request for exchange substantially in the form provided in the Agency Agreement (an ‘‘Exchange Request’’), copies of which are available from the specified office of the Registrar or any Transfer Agent, together with the Bearer Note and all unmatured Coupons, Talons and Receipts appertaining thereto, to a Transfer Agent at its specified office. Within three business days of the request, if the Registered Notes for which the Bearer Note is to be exchanged are in definitive form, the relevant Transfer Agent will authenticate and deliver, or procure the authentication and delivery of, at its specified office to the holder or (at the risk of the holder) send by mail to such address as may be specified by the holder in the Exchange Request, a Registered Note of a like aggregate nominal amount to the Bearer Note(s) exchanged and will enter the exchange of the Bearer Note(s) in the Register maintained by the Registrar as of the Exchange Date. If the Registered Note(s) for which such Bearer Note(s) is/are to be exchanged is/are in global form, the amount of the applicable Registered Global Note(s) will be increased accordingly.
Exchange Requests may not be presented on or after the Record Date (as defined in Condition 5(b)) in respect of any Fixed Interest Date or Interest Payment Date up to and including such Fixed Interest Date or Interest Payment Date. Interest on a Registered Note issued on exchange will accrue as from the immediately preceding Fixed Interest Date or Interest Payment Date, as the case may be.
No exchanges of Bearer Notes for Registered Notes or interests in Registered Global Notes will be permitted for so long as the Bearer Notes are represented by a Temporary Bearer Global Note.
(b) Form of Registered Notes
Registered Notes of each Tranche sold outside the United States to persons that are not U.S. Persons as defined in Regulation S (‘‘Regulation S’’) under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) (such persons, ‘‘U.S. Persons’’), in reliance on Regulation S will be represented by a permanent global Note in registered form, without interest coupons (the ‘‘Reg. S Global Note’’), deposited with a custodian for, and registered in the name of a nominee of, a common depositary for Euroclear and Clearstream, Luxembourg for the accounts of their participants. Notes in definitive form issued in exchange for Reg. S Global Notes or otherwise sold or transferred in reliance on Regulation S under the Securities Act, together with the Reg. S Global Notes, are referred to herein as ‘‘Reg. S Notes’’. Prior to expiry of the period that ends 40 days after completion of the distribution of each Tranche of Notes, as certified by the relevant Dealer, in the case of a non-syndicated issue, or by the Lead Manager, in the case of a syndicated issue (the ‘‘Distribution Compliance Period’’), beneficial interests in a Reg. S Global Note may be held only through Euroclear or Clearstream, Luxembourg.
Registered Notes of each Tranche sold in private transactions to qualified institutional buyers within the meaning of Rule 144A (‘‘Rule 144A’’) under the Securities Act (‘‘QIBs’’) will be represented by a
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permanent global Note in registered form, without interest coupons (the ‘‘Restricted Global Note’’ and, together with the Reg. S Global Note, the ‘‘Registered Global Notes’’) deposited with a custodian for, and registered in the name of a nominee of, DTC. Notes in definitive form issued in exchange for Restricted Global Notes or otherwise sold or transferred in accordance with the requirements of Rule 144A under the Securities Act, together with the Restricted Global Notes and Registered Notes, if any of such Tranche, sold to Institutional Accredited Investors are referred to herein as ‘‘Restricted Notes’’.
Registered Notes of each Tranche sold to institutional ‘‘accredited investors’’ as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act (‘‘Institutional Accredited Investors’’) who agree to purchase the Notes for their own account and not with a view to the distribution thereof will be in definitive form, registered in the name of the holder thereof.
Restricted Notes shall bear the legend set forth in the Restricted Global Note (the ‘‘Legend’’), such Notes being referred to herein as ‘‘Legended Notes’’. Upon the transfer, exchange or replacement of Legended Notes, or upon specific request for removal of the Legend, the Registrar shall (save as provided in Condition 10(f)) deliver only Legended Notes or refuse to remove such Legend, as the case may be, unless there is delivered to the Issuer and the Registrar such satisfactory evidence as may reasonably be required by the Issuer, which may include an opinion of U.S. counsel, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.
Registered Notes in definitive form from the date of issue may, if specified in the applicable Final Terms, be issued in reliance on Regulation S under the Securities Act.
Subject as otherwise provided in this Condition 10, Registered Notes in definitive form may be exchanged or transferred in whole or in part in the authorised denominations for one or more definitive Registered Notes of like aggregate nominal amount.
(c) Exchange of interests in Registered Global Notes for Registered Notes in definitive form
Interests in the Reg. S Global Note and the Restricted Global Note will be exchangeable for Registered Notes in definitive form, either (as specified in the applicable Final Terms) (A) in the following limited circumstances: (i) if Euroclear and/or Clearstream, Luxembourg or DTC, as the case may be, notifies the Issuer that it is unwilling or unable to continue as depositary for such Registered Global Note, or (ii) if applicable, DTC ceases to be a ‘‘Clearing Agency’’ registered under the United States Securities Exchange Act of 1934, as amended, or either Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces its intention permanently to cease business or does in fact do so and no successor clearing system acceptable to the Trustee is available, (iii) if an Event of Default (as defined in Condition 9) occurs and is continuing in relation to the Notes represented by such global Note, or (iv) if the holder of a beneficial interest in the Restricted Global Note notifies the Registrar in writing that it is transferring such beneficial interest to an Institutional Accredited Investor who is required to hold its beneficial interest in the Registered Notes in definitive form, or (B) unless otherwise provided in the applicable Final Terms, a written request for one or more Registered Notes in definitive form is made by a holder of a beneficial interest in a Registered Global Note, provided that in the case of (B) such written notice or request, as the case may be, is submitted to the Registrar by the beneficial owner not less than 60 days (or such other period as may be indicated in the applicable Final Terms) prior to the requested date of such exchange. Upon the occurrence of any of the events described in the preceding sentence, the Issuer will cause the appropriate Registered Notes in definitive form to be delivered, provided that notwithstanding the above, no Registered Notes in definitive form will be issued until expiry of the applicable Distribution Compliance Period.
(d) Transfers of Registered Global Notes
Transfers of a Registered Global Note shall be limited to transfers of such Registered Global Note, in whole but not in part, to a nominee of Euroclear, Clearstream, Luxembourg or DTC or to a successor of any of them or such successor’s nominee.
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(e) Transfers of interests in Reg. S Notes
Prior to expiry of the applicable Distribution Compliance Period, transfers by the holder of, or of a beneficial interest in, a Reg. S Global Note to a transferee in the United States or who is a U.S. Person will only be made upon receipt by the Registrar of a written certification substantially in the form set out in the Agency Agreement, amended as appropriate (a ‘‘Transfer Certificate’’), copies of which are available from the specified office of the Registrar or any Transfer Agent, from the transferor of the Note or beneficial interest therein to the effect that such transfer is being made to a person whom the transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, and in accordance with any applicable securities laws of any State of the United States or any other jurisdiction. Such transferee shall take delivery through an interest in the applicable Restricted Global Note. After expiry of the applicable Distribution Compliance Period such certification requirements will no longer apply to such transfers.
(f) Transfers of interests in Legended Notes
Transfers of Legended Notes or beneficial interests therein may be made:
(i) to a transferee who takes delivery of such interest through a Reg. S Note, upon receipt by the Registrar of a duly completed Transfer Certificate from the Transferor to the effect that such transfer is being made in accordance with Regulation S and that, if such transfer is being made prior to expiry of the applicable Distribution Compliance Period, the interests in the Notes being transferred will be held immediately thereafter through Euroclear and/or Clearstream, Luxembourg; or
(ii) to a transferee who takes delivery of such interest through a Legended Note:
(A) where the transferee is a person whom the transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, without certification; or
(B) where the transferee is an Institutional Accredited Investor, subject to delivery to the Registrar of a Transfer Certificate from the transferor to the effect that such transfer is being made to an Institutional Accredited Investor, together with a duly executed IAI Investment Letter from the relevant transferee; or
(iii) otherwise pursuant to the Securities Act or an exemption therefrom, subject to receipt by the Issuer of such satisfactory evidence as the Issuer may reasonably require, which may include an opinion of U.S. counsel, that such transfer is in compliance with any applicable securities laws of any state of the United States,
in each case, in accordance with any applicable securities laws of any state of the United States or any other jurisdiction.
Notes transferred by Institutional Accredited Investors to QIBs pursuant to Rule 144A or outside the United States to non-U.S. Persons pursuant to Regulation S will be eligible to be held by such QIBs or non-U.S. Persons through DTC, Euroclear or Clearstream, Luxembourg as appropriate and the Registrar will arrange for any Notes which are the subject of such a transfer to be represented by the appropriate Registered Global Note, where applicable.
Upon the transfer, exchange or replacement of Legended Notes, or upon specific request for removal of the Legend, the Registrar shall deliver only Legended Notes or refuse to remove the Legend, as the case may be, unless there is delivered to the Issuer such satisfactory evidence as may reasonably be required by the Issuer, which may include an opinion of U.S. counsel, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.
(g) Exchanges and transfers of Registered Notes generally
Registered Notes may not be exchanged for Bearer Notes.
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Holders of Registered Notes in definitive form, other than Institutional Accredited Investors, may exchange such Notes for interests in a Registered Global Note of the same type at any time.
Transfers of beneficial interests in Registered Global Notes will be effected by DTC, Euroclear or Clearstream, Luxembourg, as the case may be, and, in turn, by participants and, if appropriate, indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees of such interests. A beneficial interest in a Registered Global Note will be transferable and exchangeable for Notes in definitive form or for a beneficial interest in another Registered Global Note only in accordance with the rules and operating procedures for the time being of DTC, Euroclear or Clearstream, Luxembourg, as the case may be (the ‘‘Applicable Procedures’’).
Upon the terms and subject to the conditions set forth in the Agency Agreement, a Registered Note in definitive form may be transferred in whole or in part (in the authorised denominations set out in the applicable Final Terms) by the holder or holders surrendering the Registered Note for registration of the transfer of the Registered Note (or the relevant part of the Registered Note) at the specified office of the Registrar or any Transfer Agent, with the form of transfer thereon duly executed by the holder or holders thereof or his or their attorney or attorneys duly authorised in writing and upon the Registrar or, as the case may be, the relevant Transfer Agent, after due and careful enquiry, being satisfied with the documents of title and the identity of the person making the request and subject to such reasonable regulations as the Issuer and the Registrar, or as the case may be, the relevant Transfer Agent may with the prior approval of the Trustee prescribe, including any restrictions imposed by the Issuer on transfers of Registered Notes originally sold to a U.S. person. Subject as provided above, the Registrar or, as the case may be, the relevant Transfer Agent will, within three business days (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar or, as the case may be, the relevant Transfer Agent is located) of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations) authenticate and deliver, or procure the authentication and delivery of, at its specified office to the transferee or (at the risk of the transferee) send by mail to such address as the transferee may request, a new Registered Note in definitive form of a like aggregate nominal amount to the Registered Note (or the relevant part of the Registered Note) transferred. In the case of the transfer of part only of a Registered Note in definitive form, a new Registered Note in definitive form in respect of the balance of the Registered Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent to the transferor.
Exchanges or transfers by a holder of a Registered Note in definitive form for an interest in, or to a person who takes delivery of such Note through, a Registered Global Note will be made no later than 60 days after the receipt by the Registrar or as the case may be, relevant Transfer Agent of the Registered Note in definitive form to be so exchanged or transferred and, if applicable, upon receipt by the Registrar of a written certification from the transferor.
(h) Registration of transfer upon partial redemption
In the event of a partial redemption of Notes under Condition 6(c), the Issuer shall not be required:
(i) to register the transfer of Registered Notes (or parts of Registered Notes) during the period beginning on the sixty-fifth day before the date of the partial redemption and ending on the date on which notice is given specifying the serial numbers of Notes called (in whole or in part) for redemption (both inclusive); or
(ii) to register the transfer of any Registered Note, or part of a Registered Note, called for partial redemption.
(i) Closed Periods
No Noteholder may require the transfer of a Registered Note to be registered during the period of 30 days ending on the due date for any payment of principal or interest on that Note.
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(j) Costs of exchange or registration
Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as provided above, except for any costs or expenses of delivery other than by regular uninsured mail and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation to the registration or exchange.
(k) Replacement of Notes, Receipts, Coupons and Talons
Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Replacement Agent (in the case of a Bearer Note, Receipt or Coupon) or the Registrar (in the case of a Registered Note) or at any other place approved by the Trustee of which notice shall have been published in accordance with Condition 13, 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.
11. Agent, Paying Agents, Transfer Agents, Exchange Agent and Registrars
The names of the initial Agent, the other initial Paying Agents, the initial Registrars, the initial Exchange Agent and the initial Transfer Agents and their initial specified offices are set out below.
The Issuer is, with the prior approval of the Trustee, entitled to vary or terminate the appointment of any Paying Agent or Registrar or Transfer Agent or Exchange Agent and/or appoint additional or other Paying Agents, Registrars, Transfer Agents or Exchange Agents and/or approve any change in the specified office through which any Paying Agent, Registrar, Transfer Agent or Exchange Agent acts, provided that:
(i) so long as the Notes are listed on any stock exchange or other relevant authority, there will at all times be a Paying Agent (in the case of Bearer Notes) and a Transfer Agent (in the case of Registered Notes) with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange (or other relevant authority);
(ii) there will at all times be a Paying Agent with a specified office in a city approved by the Trustee in continental Europe;
(iii) there will at all times be an Agent;
(iv) (in the case of Registered Notes), there will at all times be a Transfer Agent having a specified office in a place approved by the Trustee;
(v) so long as any of the Registered Global Notes are held through DTC or its nominee, there will at all times be an Exchange Agent with a specified office in New York City;
(vi) (in the case of Registered Notes), there will at all times be a Registrar with a specified office in New York City and in such place as may be required by the rules and regulations of the relevant stock exchange (or other relevant authority); and
(vii) the Issuer undertakes that it will ensure that it maintains a Paying Agent in a Member State of the European Union that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to such Directive.
In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in the final paragraph of Condition 5(b). 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.
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12. Exchange of Talons
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. Each Talon shall, for the purposes of these Terms and Conditions, be deemed to mature on the Interest Payment Date on which the final Coupon comprised in the relative Coupon sheet matures.
13. Notices
All notices regarding the Notes shall be valid if published in a leading English language daily newspaper of general circulation in London. It is expected that such publication will be made in the Financial Times or another daily newspaper in London approved by the Trustee or, if this is not possible, in one other English language daily newspaper approved by the Trustee with general circulation in Europe. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules of any stock exchange (or any other relevant authority) on which the Notes are for the time being listed or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of such publication or, if published more than once or, if required to be published in more than one newspaper, on different dates, on the date of the first publication in all the required newspapers. Receiptholders and Couponholders shall be deemed to have notice of the contents of any notice given to the Noteholders pursuant to this Condition 13.
All notices to holders of Registered Notes will be deemed to be validly given if mailed to their registered addresses appearing on the register. Any such notice shall be deemed to have been given on the fourth day after the day on which it is mailed.
Until such time as any definitive Notes are issued, there may, so long as the global Note(s) is or are held in its or their entirety on behalf of Euroclear and/or Clearstream, Luxembourg or DTC, be substituted for such publication in such newspaper the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg or DTC 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 any other 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 third day after the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg or DTC.
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 Noteholder to the Agent and/or the Registrar via Euroclear and/or Clearstream, Luxembourg or DTC, as the case may be, in such manner as the Agent and/or the Registrar and Euroclear and/or Clearstream, Luxembourg or DTC, as the case may be, may approve for this purpose.
14. Meetings of Noteholders, Modification and Waiver
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 any of these Terms and Conditions or any of the provisions of the Trust Deed. Such a meeting may be convened by the Issuer or requisitioned by Noteholders holding not less than 5 per cent. in nominal amount of the Notes for the time being outstanding. The quorum at any such meeting for passing an Extraordinary Resolution will be one or more persons holding or representing a clear majority in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of
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certain provisions of these Terms and Conditions (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, Receipts or Coupons) or certain provisions of the Trust Deed, the necessary quorum for passing an Extraordinary Resolution will be one or more persons holding or representing not less than two-thirds, or at any adjourned such meeting 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 the Trustee may agree, without the consent of the Noteholders, Receiptholders or Couponholders, to any modification (subject as provided above) of, or to any waiver or authorisation of any breach or proposed breach of, any of these Terms and Conditions or any of the provisions of the Trust Deed, or may determine that any condition, event or act which, but for such determination, would constitute an Event of Default, shall not be treated as such which in any such case, in the opinion of the Trustee, is not materially prejudicial to the interests of the Noteholders or to any modification of any of these Terms and Conditions or any of the provisions of the Trust Deed which is of a formal, minor or technical nature or which is made to correct a manifest or proven error. Any such modification, waiver, authorisation or determination shall be binding on the Noteholders, Receiptholders and Couponholders and, unless the Trustee agrees otherwise, any such modification shall be notified to the Noteholders as soon as practicable thereafter in accordance with Condition 13.
In connection with the exercise by it of any of its trusts, powers, authorities, or discretions (including, but without limitation, any modification, waiver, authorisation or substitution referred to in Condition 17), the Trustee shall have regard to the interests of the Noteholders as a class and, in particular, but without limitation, shall not have regard to the consequences of such exercise for individual Noteholders, Receiptholders and Couponholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders, Receiptholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed.
15. Further Issues
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 ranking pari passu in all respects (or in all respects save for the amount and date of the first payment of interest thereon) with the outstanding Notes and so that the same shall be consolidated and form a single Series with the outstanding Notes.
16. Enforcement A12.4.1.7
(a) Unsubordinated Notes
The provisions of this Condition 16(a) apply to Unsubordinated Notes only.
The Trustee may at its discretion and without further notice take such proceedings against the Issuer as it may think fit to enforce the obligations of the Issuer under the Trust Deed and the Notes, Receipts and Coupons, but it shall not be bound to take any such proceedings or any other action unless (i) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by holders of at least one-fifth in nominal amount of the Notes outstanding and (ii) it shall have been indemnified to its satisfaction. No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to do, fails to do so within a reasonable period and such failure is continuing.
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(b) Subordinated Notes
The provisions of this Condition 16(b) apply to Subordinated Notes only.
Without prejudice to the rights under Condition 9(b), 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, any Receipts or Coupons (other than any obligations for the payment of any principal or interest in respect of the Subordinated Notes), 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 Subordinated 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 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 nominal amount of the Notes outstanding and (ii) it shall have been indemnified or secured to its satisfaction.
No holder of Subordinated Notes, 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, 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.
(c) Keep Well Agreement
The Trustee shall be entitled on behalf of the Noteholders to enforce against MUFG and/or BTMU and/or the Issuer their obligations under the Keep Well Agreement, if and only insofar as any Notes which have become due and payable remain unpaid in whole or in part at the time the proceedings for such enforcement are instituted.
17. Substitution
(a) Substitution at the option of the Issuer
The Trustee shall, if requested by the Issuer, be obliged, without the consent of the Noteholders, the Receiptholders or the Couponholders, to 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 Trust Deed, the Notes, the Receipts and the Coupons of any Subsidiary of BTMU or MUFG (the ‘‘Substituted Debtor’’), subject to (i) the Substituted Debtor becoming or remaining a party to, and having the benefit of BTMU’s and MUFG’s obligations contained in, the Keep Well Agreement, (ii) legal opinions being obtained from lawyers approved by the Trustee in England and from lawyers approved by the Trustee in the jurisdiction of incorporation of the Substituted Debtor in form and substance satisfactory to the Trustee, (iii) a certificate of solvency in form and substance satisfactory to the Trustee being issued to the Trustee by a duly authorised officer or officers of the Substituted Debtor, (iv) if Moody’s Investors Service Limited has a current rating for the programme pursuant to which the Notes are issued, confirmation being received by the Trustee from Moody’s Investors Service Limited confirming that it will not
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downgrade such rating solely as a result of the proposed substitution taking effect, (v) if Moody’s Investors Service Limited does not have a current rating for the programme pursuant to which the Notes are issued, the Substituted Debtor having net assets (consolidated, if consolidated accounts are prepared by the Substituted Debtor) at least equal to those of the Issuer in relation to whom the substitution is proposed and (vi) certain other conditions set out in the Trust Deed being complied with.
(b) Substitution with the consent of the Trustee
The Trustee may, without the consent of the Noteholders, the Receiptholders or the Couponholders, 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 Trust Deed, the Notes, the Receipts and the Coupons of any Subsidiary of BTMU or MUFG (the ‘‘Substituted Debtor’’), subject to (i) the Substituted Debtor becoming or remaining a party to, and having the benefit of BTMU’s and MUFG’s obligations contained in, the Keep Well Agreement, (ii) the Trustee being satisfied that the interests of the Noteholders will not be materially prejudiced by the proposed substitution and (iii) certain other conditions set out in the Trust Deed being complied with.
18. Indemnification
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility in certain circumstances, including provisions relieving it from instituting proceedings to enforce repayment or to enforce the Keep Well Agreement unless indemnified to its satisfaction.
19. Governing Law A12.4.1.3 A13.4.3 The Trust Deed, the Notes, the Receipts and the Coupons and any non-contractual obligations arising out of or in connection with the Trust Deed, the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with, English law.
20. Contracts (Rights of Third Parties) Act 1999
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.
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USE OF PROCEEDS
The net proceeds from each issue of Notes will be applied by the Issuer for its general corporate purposes. A12.3.2 If, in respect of any particular issue, there is a particular identified use of proceeds, this will be stated in the applicable Final Terms.
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MITSUBISHI UFJ SECURITIES INTERNATIONAL PLC
History and Business
Mitsubishi UFJ Securities International plc (‘‘MUSI’’ or the ‘‘Issuer’’) was incorporated in England and Wales A9.4.1.1 on 11th February, 1983 pursuant to the Companies Act 1948 to 1985 as a company with liability limited by shares, A9.4.1.2 and changed its name from Alnery No. 180 Limited to Mitsubishi Finance International Limited on 16th May, 1983 A9.4.1.3 prior to commencing business on 3rd October, 1983. The Issuer was re-registered as a public limited company on A9.4.1.4 3rd August, 1989. The Issuer’s registered office is located at 6 Broadgate, London EC2M 2AA, and its telephone A9.6.1 number is 44 20-7628-5555. The Issuer’s registration number is 01698498. On 1st April, 1996, the Issuer changed A9.10.1 its name from Mitsubishi Finance International plc to Tokyo-Mitsubishi International plc, following the merger of its then parent The Mitsubishi Bank, Limited with The Bank of Tokyo, Ltd., the merged entity being named The Bank of Tokyo-Mitsubishi, Ltd. (‘‘BTM’’, which is now known as The Bank of Tokyo-Mitsubishi UFJ, Ltd. (‘‘BTMU’’) (see the section entitled ‘‘The Bank of Tokyo-Mitsubishi UFJ, Ltd.’’ below)). BTM subsequently became a wholly owned subsidiary of Mitsubishi Tokyo Financial Group, Inc (‘‘MTFG’’, which is now known as Mitsubishi UFJ Financial Group, Inc. (‘‘MUFG’’) (see the section entitled ‘‘Mitsubishi UFJ Financial Group, Inc.’’ below)) following its merger with The Mitsubishi Trust and Banking Corporation (‘‘MTBC’’) in 2001. As part of a restructuring of the securities subsidiaries of BTM, on 1st July, 2004 BTM transferred its 100 per cent. shareholding in the Issuer to Mitsubishi Securities Co., Ltd. (‘‘Mitsubishi Securities’’, which is now known as Mitsubishi UFJ Securities Co., Ltd. (‘‘MUS’’)), which at that time was a 52 per cent. owned subsidiary of BTMU. On 5th July, 2004, the Issuer changed its name from Tokyo-Mitsubishi International plc to Mitsubishi Securities International plc. Further to the global merger between MTFG and UFJ Holdings, Inc., the Issuer changed its name from ‘‘Mitsubishi Securities International plc’’ to ‘‘Mitsubishi UFJ Securities International plc’’ on 3rd October, 2005. In furtherance of MUFG’s integrated group strategy,MUS became a wholly owned subsidiary of MUFG on 30th September, 2007. Transactions between the Issuer, BTMU, MUFG and MUS are made on an arm’s length basis and on normal commercial terms. Under English law, when acting as directors of the Issuer, the directors are required to act in accordance with the best interests of the Issuer. The Issuer has, at the date hereof, an authorised share capital of £1,000,000,000 consisting of 1,000,000,000 shares each of a nominal value of £1 each, of which £760,611,000 has been issued and fully paid up. The Issuer has one subsidiary, a nominee company incorporated in England and Wales called TMI Nominees Limited. The Issuer is a principal part of the securities and capital markets arm of MUFG and provides a wide range of services in the worldwide securities and derivatives businesses to governments, their monetary authorities and central banks, state authorities, supranational organisations and corporations. The Issuer is also engaged in market- making and dealing in securities in the international securities markets, in swaps and various other derivative instruments and in the management and underwriting of issues of securities and securities investment. The Issuer is regulated by the Financial Services Authority.
The Issuer continues to promote and develop its international capital markets business from London, dealing A9.5.1.1 in its main areas of activity: debt and equity securities, derivatives and structured products. The Issuer’s commitment to strong risk control, systems development and the enhancement of the quality of its personnel continues.
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Directors and Management A9.9.1
The Directors of the Issuer are:
1111111111Name 111111111111111111111111111111124Principal Occupation Tsutomu Tanaka Deputy President, Mitsubishi UFJ Securities Co., Ltd. Clifford De Souza Chief Executive Officer, MUSI Joseph Schmuckler Senior Executive Officer, Head of Global Markets Business Unit and Co-Head of International Business Unit, Mitsubishi UFJ Securities Co., Ltd. and Chairman of Mitsubishi UFJ Securities (USA), Inc. Takashi Morimura Chief Executive Officer for Europe, Middle East and Africa at The Bank of Tokyo-Mitsubishi UFJ, Ltd. Shigeyasu Kasamatsu Chief Operating Officer, MUSI Thomas Heffernan Chief Risk Officer, MUSI Yasutaka Suehiro Chief Administration Officer, MUSI Oliver Page Non-Executive Director Malcolm Aish Non-Executive Director
All the Directors of the Issuer are nationals of Japan with the exception of Messrs. Heffernan, Schmuckler and De Souza, who are nationals of the U.S.A., and Messrs. Aish and Page, who are nationals of the United Kingdom. The business address of Mr. Tanaka is Mitsubishi UFJ Securities Co., Ltd., 4-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100 6317, Japan. The business address of Mr. Schmuckler is Mitsubishi UFJ Securities (USA), Inc., 1633 Broadway, New York, N.Y.10019, U.S.A. The business address of Messrs. De Souza, Suehiro, Heffernan, Kasamatsu, Aish and Page is 6 Broadgate, London EC2M 2AA. The business address of Mr. Morimura is The Bank of Tokyo-Mitsubishi UFJ, Ltd., 12-15 Finsbury Circus, London, EC2M 7BT. Messrs. Tanaka, Schmuckler, Morimura, Aish and Page are non-executive Directors of the Issuer.
There are no potential conflicts of interest between the duties to the Issuer of the directors listed above, and A9.9.2 their private interests or other duties.
Material Contracts A9.12
MUSI has not entered into any material contracts which are not in the ordinary course of its business, which could result in MUSI being under an obligation or entitlement that is material to MUSI’s ability to meet its obligations to Noteholders.
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THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
Introduction
The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”, and together with its consolidated subsidiaries, the RDA9-5.1.1 “Group”) is a major commercial banking organisation in Japan and provides a broad range of domestic and international banking services from its offices in Japan and around the world. BTMU is a “city” bank, as opposed to a regional bank. BTMU’s registered head office is located at 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100- RDA9-4.1.4 8388, Japan, and its telephone number is 81-3-3240-1111. BTMU is a joint stock company (kabushiki kaisha) RDA9-4.1.3 incorporated in Japan on 15th August, 1919 for an indefinite duration under the Company Law of Japan (Law No. 86 of 2005, also known as the “Corporation Act”).
History
BTMU was formed through the merger, on 1st January, 2006, of BTM and UFJ Bank, after their respective parent companies, Mitsubishi Tokyo Financial Group, Inc. (“MTFG”) and UFJ Holdings, Inc. (“UFJ Holdings”) had merged to form MUFG on 1st October, 2005. BTMU is a wholly owned subsidiary of MUFG. RDA9-6.1
BTM was formed through the merger, on 1st April, 1996, of The Mitsubishi Bank, Limited and The Bank of Tokyo, Ltd.
The origins of Mitsubishi Bank can be traced to the Mitsubishi Exchange Office, a money exchange house established in 1880 by Yataro Iwasaki, the founder of the Mitsubishi industrial, commercial and financial group. In 1895, the Mitsubishi Exchange Office was succeeded by the Banking Division of the Mitsubishi Goshi Kaisha, the holding company of the “Mitsubishi group” of companies. Mitsubishi Bank had been a principal bank to many of the Mitsubishi group companies, but broadened its relationships to cover a wide range of Japanese industries, small and medium-sized companies and individuals.
Bank of Tokyo was established in 1946 as a successor to The Yokohama Specie Bank, Ltd., a special foreign exchange bank established in 1880. When the government of Japan promulgated the Foreign Exchange Bank Law in 1954, Bank of Tokyo became the only bank licensed under that law. Because of its licence, Bank of Tokyo received special consideration from the Ministry of Finance in establishing its offices abroad and in many other aspects relating to foreign exchange and international finance.
UFJ Bank was formed through the merger, on 15th January, 2002, of The Sanwa Bank, Limited (“Sanwa Bank”) and The Tokai Bank, Limited (“Tokai Bank”).
Sanwa Bank was established in 1933 when the three Osaka-based banks, the Konoike Bank, the Yamaguchi Bank, and the Sanjyushi Bank merged. Sanwa Bank was known as a city bank having the longest history in Japan, since the foundation of Konoike Bank can be traced back to the Konoike Exchange Office established in 1656. The origin of Yamaguchi Bank was also a money exchange house, established in 1863. Sanjyushi Bank was founded by influential fibre wholesalers in 1878. The corporate philosophy of Sanwa Bank had been the creation of the premier banking services especially for small and medium-sized companies and individuals.
Tokai Bank was established in 1941 when three Nagoya-based banks, the Aichi Bank, the Ito Bank, and the Nagoya Bank merged. In 1896, Aichi Bank took over businesses of the Jyuichi Bank established by wholesalers in 1877 and the Hyakusanjyushi Bank established in 1878. Ito Bank and Nagoya Bank were established in 1881 and 1882, respectively. Tokai Bank had expanded the commercial banking business to contribute to economic growth mainly of the Chubu area in Japan, which is known for the manufacturing industry, especially automobiles.
Business RDA9-5.1.1
BTMU is a major Japanese commercial banking organisation, and provides a broad range of domestic and international banking services in Japan and around the world. As of 30th June, 2009, BTMU’s network in Japan included 665 branches, 101 sub-branches, 1,830 branch ATMs and 29,014 convenience store-based, non-exclusive ATMs. BTMU organises its operations based on customer and product segmentation, as follows:
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• Retail Banking. The Retail Banking Business Unit offers a full range of banking products and services, including financial consulting services to individual customers in Japan through BTMU’s branch offices and other direct distribution channels. The products and services offered include deposits, investment trusts, insurance, financial products intermediation services, loans and credit cards. • Corporate Banking. The Corporate Banking Business Unit provides banking products and services to a wide range of business customers, from large corporations to medium-sized and small businesses, and is responsible for customer relationships. BTMU provides services through 307 offices in Japan as well as directly from its headquarters, and provides traditional commercial banking services, such as deposits, settlement, foreign exchange and loans, as well as investment banking services, electronic banking and highly sophisticated consultancy services to meet its customers’ needs. The unit works closely with other business units, such as the Global Business Unit and the Global Markets Unit. • Corporate and Investment Banking. This unit provides corporate and investment banking solutions mainly to large corporations, financial institutions and public sector organisations, including capital markets, derivatives, securitisation, syndicated loans, structured finance and other services globally. • Commercial Banking. This unit provides advice on financing and fund management, business expansion overseas, corporate management/financial strategies, corporate welfare facilities and trust business. • Transaction Banking. This unit also provides online banking services that allow customers to electronically conduct financial transactions such as domestic and overseas remittances. • Global Business. The Global Business Unit provides a full range of banking services not only to the overseas operations of Japanese corporations but to non-Japanese corporations, including overseas business support and global cash management services. The unit serves these customers through a global network of 62 overseas branches and sub-branches, 14 representative offices and 23 overseas subsidiary banks. In the United States, with a particular focus on California, the unit provides a wide range of financial services to consumers, small businesses, middle-market companies and major corporations through UNBC, its wholly owned subsidiary. • Global Markets. The Global Markets Unit is active in international financial markets, with global markets divisions in Tokyo, New York, London, Singapore and Hong Kong. The three primary functions of the Global Markets Unit are sales and trading, asset liability management and strategic portfolio investment. • Corporate Services. Through the Corporate Services Unit, BTMU provides operations and settlement services to its other business units. The unit also earns fee income by providing settlement and remittance services, including correspondent banking services, to its customers, and yen custody services to international institutional investors. In addition, the unit also offers competitive operations and settlement services to other financial institutions to meet their outsourcing needs. • Corporate Centre. The Corporate Centre retains functions such as BTMU’s strategic planning, overall risk management, internal auditing and compliance.
BTMU is a wholly owned subsidiary of MUFG. The members of the Board of Directors of BTMU, in taking RDA9-6.1 any decisions in their capacity as member of the board, do so after taking into account the best interests of BTMU RDA9-10.1 and their responsibilities as directors. BTMU is not aware of any arrangements the operation of which may at a RDA9-10.2 subsequent date result in a change of control of BTMU.
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Recent Developments RDA9-4.1.5
Completion of Tender Offer and Merger to Acquire All the Outstanding Shares of UNBC
In September 2008, BTMU and MUFG completed a cash tender offer for approximately $3.5 billion to purchase all of the outstanding shares of UNBC, that BTMU, MUFG and MUFG’s affiliates did not already own. As of the close of the offer, shares representing approximately 33 per cent. of the outstanding shares of UNBC had been validly tendered or guaranteed to be delivered. When added to its 64 per cent. stake at the time, the amount represented approximately 97 per cent. of UNBC’s total outstanding shares. All shareholders who tendered shares were paid $73.50 per share in cash after 30th September, 2008, and accordingly the settlement of this transaction was not reflected in the financial statements for the six months ended 30th September, 2008. In November 2008, BTMU and UNBC completed a second-step merger as a result of which UNBC became a wholly owned subsidiary of BTMU.
Agreement on Integration between Bank of Ikeda and Senshu Bank
In May 2008, BTMU signed a basic agreement with The Senshu Bank Ltd. (“Senshu Bank”), BTMU’s regional bank subsidiary headquartered in Osaka and The Bank of Ikeda, Ltd. (“Bank of Ikeda”), another regional bank headquartered in Osaka, concerning the planned business integration between the two regional banks.
On 25th May, 2009, Bank of Ikeda and Senshu Bank entered into an agreement concerning their business integration (the “Business Integration”), with BTMU, which had agreed to the planned Business Integration. The new integrated company incorporated on 1st October, 2009 has become its equity method affiliate. As a leading independent financial group in the Osaka region, the new integrated company will not only contribute to the development of the regional society and economy, but will also aim for the improvement of its enterprise value. In order to respect the business independence of the new financial group consisting of Bank of Ikeda, Senshu Bank and the new integrated company, BTMU plans to divest a part of its common stock in the new integrated company through, including but not limited to, the creation of a trust to dispose of the stock. By doing so, BTMU intends to exclude the new integrated company from an equity method affiliate of MUFG by 30th September, 2014 at the latest. However, BTMU also intends to continuously and appropriately support the formation and development of the new financial group and Nobuo Kuroyanagi, the Chairman of BTMU as well as the President and CEO of MUFG, will be seconded as an outside director to the new integrated company upon its incorporation. As of 31st March, 2009, BTMU owned 3.45 per cent. of the outstanding common stock and ¥30.0 billion of the non- convertible preferred stock of Bank of Ikeda. BTMU’s voting right ratio in Bank of Ikeda increased to approximately 22 per cent. on 26th June 2009 in accordance with the terms and conditions of the non-convertible preferred stock of Bank of Ikeda.
Effects of Challenging Business Environment in Recent Periods
The global financial market crisis and recession initially triggered by disruptions in the U.S. residential mortgage market and negative trends in the global economy has continued in recent months. Japan is also experiencing a difficult business environment with the Nikkei Stock Average, which is an average of 225 blue chip stocks listed on the Tokyo Stock Exchange and which was ¥8,109.53 as of 31st March, 2009, declined from ¥12,525.54 as of 31st March, 2008. The Nikkei Stock Average was ¥10,492.53 as of 31st August, 2009.
The difficult business environment in Japan and globally has adversely affected BTMU’s business and financial results in recent periods, and BTMU expects the severe business conditions, resulting from the global financial market crisis and the recession in Japan and globally, to continue in the near term. As a result, BTMU expects, among other things, increased credit costs resulting mainly from deteriorating business conditions for its borrowers, lower fees from investment products in retail business and derivative transactions in its corporate banking business, lower trading income, and increased impairment losses on equity securities resulting from the continuing decline in equity security prices in Japan generally.
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The financial markets and overall economy, both in Japan and globally, may not improve in the near term. In fact, business conditions in Japan and globally could become even more challenging than BTMU currently anticipates.
Permission to Operate as Financial Holding Companies in the United States
BTMU, MUFG, MUTB and UNBC have received notification from the Board of Governors of the U.S. Federal Reserve System that their election to become financial holding companies under the U.S. Bank Holding Company Act became effective as of 6th October, 2008. This change in status means that BTMU is able to engage in a broader range of financial activities in the United States without prior regulatory approval. More specifically, BTMU will be able to engage in financial activities including a full range of securities and insurance businesses, as well as merchant banking activities.
Under BTMU’s financial holding company status, BTMU is also subject to additional regulatory requirements. For example, each of BTMU’s banking subsidiaries with operations in the United States must be “well capitalised,” meaning a Tier 1 risk-based capital ratio of at least 6 per cent. and a total risk-based capital ratio of at least 10 per cent.. BTMU’s U.S. banking operations must also be “well managed,” including that they maintain examination ratings that are at least satisfactory. Failure to comply with such requirements would require BTMU to prepare a remediation plan and BTMU would not be able to undertake new business activities or acquisitions based on its status as a financial holding company during any period of non-compliance.
Allotment of Stock Compensation Type Stock Options (Stock Acquisition Rights)
In July 2009, MUFG allotted stock compensation type stock options, or stock acquisition rights, to the directors, corporate auditors and executive officers of BTMU, MUFG, MUTB and Mitsubishi UFJ Securities Co., Ltd. to acquire an aggregate amount of 5,655,800 shares of MUFG’s common stock. The stock acquisition rights have an exercise price of ¥1 per share of common stock, and are exercisable until 13th July, 2039. The purpose of issuing the stock acquisition rights is to further motivate the directors and executive officers to contribute to the improvement of stock prices and profits of MUFG and, with respect to the corporate auditors, to improve their audits and investigations aiming to increase the corporate value of MUFG.
Strategic Global Alliance with Morgan Stanley
As part of the strategic global alliance between MUFG and Morgan Stanley, BTMU plans to pursue a global strategic alliance in certain business areas with Morgan Stanley. Specifically, measures include: • a global alliance in corporate and investment banking consisting of the creation of Morgan Stanley MUFG Loan Partners, LLC., a loan marketing joint venture that will be focused on generating attractive credit opportunities for both companies and on providing clients in the United States, Canada and Latin America (subject to clearance of any regulatory requirement in each jurisdiction) with access to expanded, world-class lending and capital markets services from both companies; • business referral arrangements in Asia, Europe, the Middle East and Africa, which are intended to cover a number of products and services, including capital markets, loans, fixed income sales and other ancillary businesses; and • a commodities-specific initiative, in the form of a referral agreement for commodities transactions executed outside of Japan, which will enable BTMU to refer its clients to the Morgan Stanley Capital Group for commodity transactions and receive referral fees upon completion of any deals.
Management
BTMU’s Articles of Incorporation provide that the number of directors shall not exceed 20 and that the number of corporate auditors shall not exceed eight. BTMU’s shareholders elect directors usually at BTMU’s annual
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ordinary general meeting of shareholders for one-year terms. BTMU’s shareholders also elect corporate auditors usually at BTMU’s annual ordinary general meeting of shareholders for four-year terms.
BTMU currently have 17 directors, including three outside directors. BTMU’s board of directors has ultimate responsibility for the administration of BTMU’s affairs. BTMU’s board of directors is empowered to appoint by resolution representative directors from among the directors who may represent BTMU severally. BTMU’s board of directors may also appoint from their members by resolution a chairman, a deputy chairman, a president, deputy presidents, senior managing directors and managing directors. Deputy presidents assist the president. Senior managing directors and the managing directors assist the president and deputy presidents, if any, in the management of BTMU’s day-to-day business.
Set forth below is a list of the Board of Directors of BTMU as of the date hereof. RDA9-9.1
Board of Directors
111111111122Name 1111111111111Current Position Principal11111111111111111113 Activities outside BTMU Nobuo Kuroyanagi Chairman President & Chief Executive Officer of MUFG Director of Isetan Mitsukoshi Holdings Ltd. Director of Honda Motor Co., Ltd. Statutory Auditor of Mitsubishi Heavy Industries, Ltd.
Takamune Okihara Deputy Chairman and in charge of the Internal Audit and Credit Examination Division
Katsunori Nagayasu President Director of MUFG
Takao KawanishiDeputy President and Chief Managing Officer and Group Head, Integrated Executive of the Corporate Corporate Banking Business Group of MUFG Banking Unit
Tatsuo TanakaDeputy President and Chief Managing Officer and Deputy Group Head, Executive of the Global Integrated Corporate Banking Business Group Business Unit of MUFG
Toshiro Toyoizumi Deputy President, in charge of the Western Region of Japan
Nobuyuki Hirano Deputy President Director of Morgan Stanley, Managing Officer in charge of MUFG/MS Strategic Alliance Office of MUFG Tamotsu Kokado Deputy President, in charge of the Central Region of Japan
Takashi Hara Senior Managing Director, in charge of the Human Resources Division
Takashi NagaokaManaging Director and Chief Managing Officer and Group Head, Integrated Executive, Retail Banking Retail Banking Business Group of MUFG Business Unit
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Takesihi OgasawaraManaging Director and Chief Managing Officer and Deputy Chief Compliance Officer, in charge Compliance Officer of MUFG of the Corporate Risk Management Division, the Information Security Management Division and the Credit Policy & Planning Division
Hitoshi Suzuki Managing Director and Chief Executive, the Global Markets Unit
Takehiko NemotoManaging Director and Chief Managing Officer in charge of the Operations Executive, Corporate Services & Systems Planning Division of MUFG
Takashi OyamadaManaging Director in charge of Director of MUFG the Corporate Administration Division, the Corporate Planning Division, the Public Relations Division and the CSR Promotion Division
Hiroshi Saito Director Senior Managing Director and Chief Financial Officer of MUFG
Kunio Ishihara Director Chairman of the Board of Tokio Marine & Nichido Fire Insurance Co., Ltd., Chairman of the Board of Tokio Marine Holdings, Inc. (formerly Millea Holdings, Inc.), Senior Vice President of Japan Airlines Corporation
Teruo Ozaki Director Certified Public Accountant, Managing Partner of Teruo Ozaki & Co., Corporate Auditor of Kirin Holdings Company Limited, Corporate Auditor of Tokai Rubber Industries, Ltd., CEO, President of Andersen Business Associates Inc., Director of Daikyo Incorporated, Director of Orix Corporation
The business address of all the Directors is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8388, Japan. RDA9-9.1
There are no potential conflicts of interest between the duties to BTMU of its Directors listed above and RDA9-9.2 their private interests or other duties.
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Set forth below is a list of the Corporate Auditors of BTMU as of the date hereof. RDA9-12
Corporate Auditors
111111111122Name 1111111111111111111111111111111113Current Position Tatsunori Imagawa Full-time Corporate Auditor Jun Sato Full-time Corporate Auditor Akira Enomoto Full-time Corporate Auditor Hiroshi Sato Full-time Corporate Auditor Tsutomu Takasuka Full-time Corporate Auditor Kotaro Muneoka Corporate Auditor Kenji Matsuo Corporate Auditor Tetsuya Nakagawa Corporate Auditor
Material Contracts
BTMU has not entered into material contracts which are not in the ordinary course of its business, which could result in BTMU being under an obligation or entitlement that is material to BTMU’s ability to meet its obligation to Noteholders.
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MITSUBISHI UFJ FINANCIAL GROUP, INC.
Mitsubishi UFJ Financial Group, Inc. (‘‘MUFG’’) is a bank holding company incorporated as a joint stock company (kabushiki kaisha) under the Company Law of Japan. MUFG is the holding company for The Bank of Tokyo-Mitsubishi UFJ, Ltd. (‘‘BTMU’’), Mitsubishi UFJ Trust and Banking Corporation (‘‘MUTBC’’), Mitsubishi UFJ Securities Co., Ltd. (‘‘MUS’’), Mitsubishi UFJ NICOS Co., (“Mitsubishi UFJ NICOS”) and other companies engaged in a wide range of financial businesses.
MUFG’s registered address is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan, and its telephone number is 81-3-3240-8111.
History and Business
MUFG was incorporated on 1st October, 2005 as a result of a merger between Mitsubishi Tokyo Financial Group, Inc. (‘‘MTFG’’) and UFJ Holdings, Inc (‘‘UFJ Holdings’’) of which MTFG, later renamed ‘‘MUFG’’, was the surviving entity. MUFG is the ultimate parent company of the group comprising MUFG and all its subsidiary undertakings (the ‘‘MUFG Group’’).
MUFG operates its main businesses under an integrated business group system, which combines the operations of BTMU, MUTBC, MUS, Mitsubishi UFJ NICOS and other subsidiaries in the following three areas: Retail, Corporate, and Trust Assets. This integrated business group system is intended to enhance synergies by promoting more effective and efficient collaboration between its subsidiaries. Under this system, as the holding company, MUFG formulates strategies for the MUFG Group on an integrated basis, which are then executed by the subsidiaries. Through this system, MUFG aims to reduce the overlapping of functions within the MUFG Group, thereby increasing efficiency and realising the benefits of group resources and scale of operations. Moreover, through greater integration of the MUFG Group’s shared expertise in banking, trust and securities businesses, MUFG aims to deliver a more diverse but integrated line-up of products and services for its customers.
Operations
Integrated Retail Banking Business Group
The Integrated Retail Banking Business Group covers all domestic retail businesses, including commercial banking, trust banking and securities businesses, and enables MUFG to offer a full range of banking products and services, including financial consulting services, to retail customers in Japan. The Integrated Retail Banking Business Group integrates the retail business of BTMU, MUTBC and MUS as well as retail product development, promotion and marketing in a single management structure.
Integrated Corporate Banking Business Group
The Integrated Corporate Banking Business Group covers all domestic and overseas corporate businesses, including commercial banking, investment banking, trust banking and securities businesses, as well as UnionBanCal Corporation. Through the integration of these business lines, MUFG provides diverse financial products and services to its corporate clients, from large corporations to medium-sized and small businesses. The Integrated Corporate Banking Business Group has clarified strategic domains, sales channels and methods to match the different growth stages and financial needs of the MUFG Group’s corporate customers.
Integrated Trust Assets Business Group
The Integrated Trust Assets Business Group covers asset management and administration services for products such as pension trusts and security trusts by integrating the trust banking expertise of MUTBC and the international strengths of BTMU. The Integrated Trust Assets Business Group provides a full range of services to corporate and pension funds, including stable and secure pension fund management and administration, advice on pension schemes, and payment of benefits to scheme members. The Integrated Trust Assets Business Group combines MUTBC’s trust assets business comprising trust assets management services, asset administration and
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custodial services, and the businesses of Mitsubishi UFJ Global Custody S.A., Mitsubishi UFJ Asset Management Co., Ltd. and Kokusai Asset Management Co., Ltd.
Compliance
The MUFG Group’s policy is to strictly observe laws, regulations and internal rules, and to conduct its business in a fair, trustworthy and highly transparent manner based on the MUFG Group’s management philosophy of obtaining the trust and confidence of society as a whole. Furthermore, MUFG has established an ethical framework and code of conduct as the basic ethical guidelines for the MUFG Group’s directors and employees. MUFG has expressed its commitment to building a corporate culture in which it acts with integrity and fairness in conformity with these guidelines.
Despite these measures, in the past few fiscal years, MUFG has received administrative orders from government authorities in Japan and abroad. MUFG views these actions with the deepest concern. In response, MUFG has been working to ensure an appropriate compliance structure in Japan and abroad across the MUFG Group to enable sound and appropriate business management.
Recent Developments
Strategic Global Alliance with Morgan Stanley
On 13th October, 2008, MUFG acquired approximately $7,839.2 million of perpetual non-cumulative convertible preferred stock without voting rights and approximately $1,160.8 million of perpetual non-cumulative non-convertible preferred stock without voting rights issued by Morgan Stanley.
The acquisition was made pursuant to an agreement with Morgan Stanley to enter into a strategic capital alliance originally executed on 29th September, 2008, and subsequently modified on 3rd October, 8th October and 13th October, 2008.
The acquired shares of the convertible preferred stock are convertible to 310,464,033 shares of common stock (at a conversion price of $25.25 per share). One half of the convertible preferred stock will be converted to common stock one year after MUFG’s investment if the price of Morgan Stanley’s common stock exceeds $37.875 for 20 or more days out of 30 consecutive trading days. The remainder of the convertible preferred stock will be converted to common stock two years after MUFG’s investment if the same conditions are satisfied. The non- convertible preferred stock is redeemable at Morgan Stanley’s option on or after three years of MUFG’s investment for an aggregate redemption price of approximately $1,276.9 million. The shares of the convertible and non- convertible preferred stock have a fixed non-cumulative annual dividend of 10 per cent.. The convertible shares provided MUFG with an aggregate of approximately 21 per cent. of the voting rights of Morgan Stanley on a fully diluted basis at the time of MUFG’s acquisition. The conversion terms contained in the convertible preferred stock were approved by Morgan Stanley’s shareholders on 9th February, 2009.
MUFG has the right to maintain 20 per cent. of the voting rights in Morgan Stanley on a fully diluted basis and the right to appoint one director and one observer to its board as long as MUFG holds a voting right ratio of 10 per cent. or more in Morgan Stanley on a fully diluted basis. Beginning one year after MUFG’s investment, MUFG also has the right to demand that Morgan Stanley register, under the United States Securities Act of 1933, the shares of common stock issued or issuable by Morgan Stanley that MUFG requests to be so registered on up to five occasions, subject to certain conditions. Effective 10th March, 2009, Mr. Nobuyuki Hirano, a director of MUFG, was appointed as a member of the board of directors of Morgan Stanley.
In a separate transaction, on 28th October, 2008, the U.S. Department of the Treasury purchased for an aggregate purchase price of $10,000,000,000, (1) 10,000,000 shares of fixed rate cumulative perpetual preferred stock, and (2) a warrant to purchase up to 65,245,759 shares of common stock, of Morgan Stanley. The purchase was transacted pursuant to the “Capital Purchase Program”, announced on 14th October, 2008, through which the U.S. Department of the Treasury invests in various U.S. financial institutions. As a result of this purchase, MUFG’s voting right ratio in Morgan Stanley decreased to approximately 20 per cent. on a fully diluted basis.
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Since this initial investment, MUFG has acquired 29,375,000 additional shares of Morgan Stanley common stock for a total of $705 million and sold back to Morgan Stanley $705 million of the perpetual non-cumulative non-convertible preferred stock on 22nd May, 2009, and MUFG has also acquired 17,178,055 additional shares of Morgan Stanley common stock for a total of approximately $471 million on 11th June, 2009, in each case at the time of public offerings of common stock by Morgan Stanley. MUFG beneficially owns approximately 20 per cent. of the common stock of Morgan Stanley (assuming full conversion of the convertible preferred stock of Morgan Stanley that MUFG currently owns).
Through MUFG’s capital alliance with Morgan Stanley, MUFG plans to pursue a global strategic alliance in corporate and investment banking, retail, investment management and other businesses. On 26th March, 2009, MUFG signed a memorandum of understanding with Morgan Stanley to form a securities joint venture combining MUS and Morgan Stanley Japan Securities Co., Ltd. by March 2010. The proposed joint venture is expected to become a new industry leader in Japan offering a large domestic retail brokerage network, a full range of institutional businesses and significant global reach. MUFG will own a 60 per cent. interest of the joint venture while Morgan Stanley will own a 40 per cent. interest. On 30th June, 2009, the scope of the strategic alliance was expanded into new geographies and businesses. These include: • A global alliance in corporate and investment banking consisting of the creation of Morgan Stanley MUFG Loan Partners, LLC., a loan marketing joint venture that will be focused on generating attractive credit opportunities for both companies and provide clients in the United States, Canada and Latin America (subject to clearance of any regulatory requirement in each jurisdiction) with access to expanded, world-class lending and capital markets services from both companies; • Business referral arrangements in Asia, Europe, the Middle East and Africa, which are intended to cover a number of products and services, including capital markets, loans, fixed income sales and other ancillary businesses; • A commodities-specific initiative, in the form of a referral agreement for commodities transactions executed outside of Japan, which will enable BTMU to refer its clients to the Morgan Stanley Capital Group for commodity transactions and receive referral fees upon completion of any deals; and • Secondment of personnel to share best practices and expertise, through which the secondees will be able to share knowledge and help maximise the benefits of the strategic alliance across a variety of business areas.
Completion of Tender Offer and Merger to Acquire All the Outstanding Shares of UNBC
In September 2008, MUFG and BTMU completed a cash tender offer for approximately $3.5 billion to purchase all of the outstanding shares of UnionBanCal Corporation (“UNBC”) that MUFG and its affiliates did not already own. As of the close of the offer, shares representing approximately 33 per cent. of the outstanding shares of UNBC had been validly tendered or guaranteed to be delivered. When added to MUFG’s and its affiliates’ 64 per cent. stake at the time, the amount represented approximately 97 per cent. of UNBC’s total outstanding shares. All shareholders who tendered shares were paid $73.50 per share in cash. In November 2008, BTMU and UNBC completed a second-step merger as a result of which UNBC became a wholly owned subsidiary of BTMU.
Completion of Tender Offer to Acquire Additional Shares of ACOM
In October 2008, MUFG completed a tender offer and acquired, for ¥4,000 per share in cash, 38,140,009 shares of common stock of ACOM CO., LTD., an equity method investee engaged in the consumer loan business in which MUFG owned approximately 15 per cent. of the voting rights. As a result, MUFG increased its voting rights to approximately 40 per cent.. Although ACOM remains an equity method investee under U.S. GAAP, MUFG’s increased ownership in ACOM complements its related efforts to increase the competitiveness of its consumer finance operations, which include a business and capital alliance among JACCS Co., Ltd., another equity method investee, BTMU and Mitsubishi UFJ NICOS centering on credit card related operations, instalment credit sales, settlement operations and housing loan related operations.
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Strategic Business and Capital Alliance between MUTBC and Aberdeen
In October 2008, MUTBC and Aberdeen Asset Management PLC (“Aberdeen”) entered into a strategic business and capital alliance. Aberdeen is an asset management company based in Scotland and manages a wide range of investment products, including emerging market equities, global equities, and global fixed income. Under the business alliance, MUTBC has an exclusive right to access Aberdeen’s services on behalf of domestic institutional investors, such as pension funds, in Japan. MUFG believes the alliance will enable MUTBC to meet its clients’ demands for global investment products.
As part of the capital alliance, MUTBC initially acquired 9.9 per cent. of Aberdeen’s issued share capital for approximately ¥20 billion in October 2008. As of 8th December, 2008, MUTBC owned 11.0 per cent. of Aberdeen’s issued share capital. Subject to receiving the required regulatory approvals, MUTBC intends to increase its holdings but not to a level that exceeds 19.9 per cent.. MUTBC may appoint a representative as a non-executive director to the board of Aberdeen if MUTBC’s holding reaches 15 per cent. or more of Aberdeen’s issued share capital. MUTBC has agreed that, until 2nd April, 2010, it will not raise its holding in Aberdeen’s shares beyond 19.9 per cent., subject to some exceptions.
MUTBC and Aberdeen plan to continue to work towards further strengthening their strategic alliance by collaborating in marketing and product development.
Agreement on Integration between Bank of Ikeda and Senshu Bank
In May 2008, BTMU signed a basic agreement with The Senshu Bank, Ltd. (“Senshu Bank”), a regional bank subsidiary of BTMU headquartered in Osaka, and The Bank of Ikeda Ltd. (“Bank of Ikeda”), another regional bank headquartered in Osaka, concerning the planned business integration between the two regional banks.
On 25th May, 2009, Bank of Ikeda and Senshu Bank entered into an agreement concerning their business integration (the “Business Integration”), with BTMU, which had agreed to the planned Business Integration. The new integrated company incorporated on 1st October, 2009 has become an equity method affiliate of BTMU. As a leading independent financial group in the Osaka region, the new integrated company will not only contribute to the development of the regional society and economy, but will also aim for the improvement of its enterprise value. In order to respect the business independence of the new financial group consisting of Bank of Ikeda, Senshu Bank and the new integrated company, BTMU plans to divest a part of its common stock in the new integrated company and intends to exclude the new integrated company from an equity method affiliate of MUFG by 30th September, 2014 at the latest. However, BTMU also intends to continuously and appropriately support the formation and development of the new financial group and Nobuo Kuroyanagi, the Chairman of BTMU as well as the President and CEO of MUFG, will be seconded as an outside director to the new integrated company upon its incorporation. As of 31st March, 2009, BTMU owned 3.45 per cent. of the outstanding common stock and ¥30.0 billion of the non-convertible preferred stock of Bank of Ikeda. BTMU’s voting right ratio in Bank of Ikeda increased to approximately 22 per cent. on 26th June, 2009 following the terms and conditions of the non- convertible preferred stock of Bank of Ikeda.
MUTBC’s Agreement to Acquire NikkoCiti Trust and Banking and Subsequent Rescission of the Agreement
In December 2008, MUTBC entered into an agreement with Nikko Citi Holdings Inc. and Citigroup International LLC under which MUTBC will purchase all of the issued shares of NikkoCiti Trust and Banking Corporation for ¥25 billion in cash, subject to certain purchase price adjustments as well as pending regulatory approvals and other closing conditions. However, on 14th May, 2009, MUTBC agreed with Nikko Citi Holdings Inc. to terminate the transaction due to the changes in its business environment and strategy.
Effects of Challenging Business Environment in Recent Periods
The global financial market crisis and recession, initially triggered by disruptions in the U.S. residential mortgage market and negative trends in the global economy, has continued in recent months. Japan is also experiencing a difficult business environment with the Nikkei Stock Average, which is an average of 225 blue chip
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stocks listed on the Tokyo Stock Exchange and which was ¥8,109.53 as of 31st March, 2009, declining from ¥12,525.54 as of 31st March, 2008. The Nikkei Stock Average was ¥10,492.53 as of 31st August, 2009.
The difficult business environment in Japan and globally has adversely affected MUFG’s business and financial results in recent periods, and MUFG expects the severe business conditions, resulting from the global financial market crisis and the recession in Japan and globally, to continue in the near term. As a result, MUFG expects, among other things, increased credit costs resulting mainly from deteriorating business conditions for its borrowers, lower fees from investment products in retail business and derivative transactions in its corporate banking business, lower trading income, and increased impairment losses on equity securities resulting from the continuing decline in equity security prices in Japan generally.
The financial markets and overall economy, both in Japan and globally, may not improve in the near term. In fact, business conditions in Japan and globally could become even more challenging than MUFG currently anticipates.
Permission to Operate as Financial Holding Companies in the United States
MUFG, BTMU, MUTBC and UNBC have received notification from the Board of Governors of the U.S. Federal Reserve System that MUFG’s elections to become financial holding companies under the U.S. Bank Holding Company Act became effective as of 6th October, 2008. This change in status means that MUFG is able to engage in a broader range of financial activities in the United States without prior regulatory approval. More specifically, MUFG will be able to engage in financial activities including a full range of securities and insurance businesses, as well as merchant banking activities.
Under MUFG’s financial holding company status, it is also subject to additional regulatory requirements. For example, each of MUFG’s banking subsidiaries with operations in the United States must be “well capitalized”, meaning a Tier 1 risk-based capital ratio of at least 6 per cent. and a total risk-based capital ratio of at least 10 per cent.. MUFG’s U.S. banking operations must also be “well managed”, including that they maintain examination ratings that are at least satisfactory. Failure to comply with such requirements would require MUFG to prepare a remediation plan and MUFG would not be able to undertake new business activities or acquisitions based on its status as a financial holding company during any period of non-compliance.
Completion of Global Offering of Common Stock
In December 2008, MUFG completed the sale of 934,800,000 shares of common stock in public offerings in the United States and Japan as well as private placements in other countries. On 14th January, 2009, MUFG completed the sale of an additional 65,200,000 shares of common stock through a third-party allotment pursuant to the over-allotment option granted in connection with the Japanese offering. MUFG sold 700 million newly issued shares of common stock and 300 million shares of treasury stock in the global offering. The proceeds from the global offering after underwriting discounts and commissions were ¥399.8 per share. The total net proceeds from the global offering after underwriting discounts and commissions and offering expenses were approximately ¥398.7 billion.
The total net proceeds from the global offering after underwriting discounts and commissions and offering expenses were used to make an equity investment in BTMU to strengthen MUFG’s overall group capital base.
Issuance of Preferred Stock in Japan
In November 2008, MUFG issued and sold 156,000,000 shares of non-convertible preferred stock, First Series Class 5 Preferred Stock, through a third-party allotment to Japanese institutional investors in order to further strengthen its financial base for MUFG Group’s future growth. A dividend of ¥43 per share of preferred stock was paid for the fiscal year ended 31st March, 2009 and a dividend of ¥115 per share of preferred stock will be paid annually, subject to certain conditions, in priority to the common stock. MUFG received approximately ¥388.6 billion in net cash proceeds from the third-party allotment and used the net proceeds from the issuance and sale of the preferred stock to invest in its consolidated subsidiaries.
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Issuance of Preferred Securities by Special Purpose Companies
In September 2008, MUFG Capital Finance 7 Limited, a special purpose company established in the Cayman Islands, issued ¥222 billion in non-cumulative and non-dilutive perpetual preferred securities in order to enhance the flexibility of MUFG’s capital management. The securities have a fixed dividend rate of 3.60 per cent. per annum until January 2019 and a floating dividend rate after January 2019, and were sold primarily to Japanese institutional investors.
In March 2009, MUFG Capital Finance 8 Limited, a special purpose company established in the Cayman Islands, issued ¥90 billion in series A non-cumulative and non-dilutive perpetual preferred securities to enhance the flexibility of MUFG’s capital management. The securities have a fixed dividend rate of 4.88 per cent. per annum until July 2019 and a non-step up floating dividend rate after July 2019. MUFG Capital Finance 8 Limited also issued ¥7.4 billion in series B non-cumulative and non-dilutive perpetual preferred securities with a fixed dividend rate of 4.55 per cent. per annum until July 2014 and a non-step up floating dividend rate after July 2014. These offerings were targeted towards Japanese institutional investors.
The proceeds from the sale of these preferred securities were reflected in MUFG’s Tier I capital as of 31st March, 2009 under the BIS capital adequacy requirements, which is calculated primarily from MUFG’s Japanese GAAP financial information pursuant to the regulations promulgated by the Financial Services Agency of Japan. However, for accounting purposes under U.S. GAAP, because those special purpose companies are not consolidated entities, the loans, which are made to MUFG from the proceeds of sale of the preferred securities issued by the special purpose companies, are presented as long-term debt on MUFG’s consolidated balance sheet as of 31st March, 2009.
In July 2009, MUFG Capital Finance 9 Limited, a special purpose company established in the Cayman Islands, issued ¥130 billion in series A non-cumulative and non-dilutive perpetual preferred securities with a fixed dividend rate of 4.52 per cent. per annum until January 2020 and a non-step up floating dividend rate after January 2020, ¥110 billion in series B non-cumulative and non-dilutive perpetual preferred securities with a fixed dividend rate of 4.02 per cent. per annum until January 2020 and a step up floating dividend rate after January 2020, and ¥130 billion in series C non-cumulative and non-dilutive perpetual preferred securities with a fixed dividend rate of 4.02 per cent. per annum until January 2015 and a non-step up floating dividend rate after January 2015. These offerings were targeted towards Japanese institutional investors. The preferred securities will also be reflected in MUFG’s Tier I capital.
Redemption of Preferred Securities issued by a Special Purpose Company
In July 2009, Sanwa Capital Finance 2 Limited, a special purpose company established in the Cayman Islands, redeemed a total of ¥130 billion in non-cumulative and non-dilutive perpetual preferred securities. These preferred securities were previously reflected as part of MUFG’s Tier I capital.
Allotment of Stock Compensation Type Stock Options (Stock Acquisition Rights)
In July 2009, MUFG allotted stock compensation type stock options, or stock acquisition rights, to the directors, corporate auditors and executive officers of MUFG, BTMU, MUTBC and MUS to acquire an aggregate amount of 5,655,800 shares of MUFG’s common stock. The stock acquisition rights have an exercise price of ¥1 per share of common stock and are exercisable until 13th July, 2039. The purpose of issuing the stock acquisition rights is to further motivate the directors and executive officers to contribute to the improvement of stock prices and profits of MUFG and, with respect to the corporate auditors, to improve their audits and investigations aiming to increase the corporate value of MUFG.
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Management
The following table sets forth the members of MUFG’s board of directors, together with their positions, as of the date hereof.
111111111122Name 1111111111111Position at MUFG 11111111111111111113Principal Activities outside MUFG Ryosuke Tamakoshi Chairman None Haruya UeharaDeputy Chairman and Chief Chairman of MUTBC Audit Officer Nobuo KuroyanagiPresident and Chief Executive Chairman of BTMU Officer Kyota OmoriDeputy President and Chief None Compliance Officer Saburo SanoSenior Managing Director and Director of MUS Chief Risk Management Officer Nobushige KameiSenior Managing Director and Director of MUTBC Chief Planning Officer Hiroshi SaitoSenior Managing Director and Director of BTMU Chief Financial Officer Shintaro Yasuda Director Deputy Chairman of MUTBC Katsumori Nagayasu Director President of BTMU Fumiyuki Akikusa Director President of MUS Kazuo Takeuchi Director Senior Managing Director of MUS Kinya Okauchi Director President of MUTBC Takashi Oyamada Director Managing Director of BTMU Kaoru Wachi Director Managing Director of MUTBC Ryuji Araki Director Adviser of Toyota Financial Corporation, Adviser of Toyota Motor Corporation, Adviser of Aioi Insurance Company, Limited Akio Harada Director Attorney-at-law Takuma Otoshi Director Chairman of IBM Japan, Ltd.
The business address of all the Directors is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan.
The Articles of Incorporation of MUFG provide for a board of directors of not more than 20 members and not more than seven corporate auditors. The corporate officers are responsible for executing the business operations, and the directors oversee these officers and set the fundamental strategies of MUFG. The board of directors, executive officers and corporate auditors may be contacted through MUFG’s registered address.
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The following table sets forth MUFG’s corporate auditors, together with their respective positions, as of the date hereof.
111111111122Name 1111111111111111111111111111111113Position at MUFG Tetsuo Maeda Corporate Auditor (Full-time) Shota Yasuda Corporate Auditor (Full-time) Yasushi Ikeda Corporate Auditor Tsutomu Takasuka Corporate Auditor Kunie Okamoto Corporate Auditor
There are currently five corporate auditors, including three external corporate auditors. The corporate auditors, who are not required to be certified public accountants, have various statutory duties, including principally: • the examination of the financial statements, business reports, proposals and other documents which the board of directors prepares and submits to a general meeting of shareholders; • the examination of the directors’ administration of MUFG’s affairs; and • the preparation and submission of a report on their examination to a general meeting of shareholders. There are no potential conflicts of interest between the duties to MUFG of the Directors listed above and their private interests or other duties.
Material Contracts Except as described elsewhere in this Offering Circular MUFG has not entered into material contracts which are not in the ordinary course of its business, which could result in MUFG being under an obligation or entitlement that is material to MUFG’s ability to fulfil its obligations under the Keep Well Agreement.
Shareholders As at 31st March, 2009, the top 10 ordinary shareholders of MUFG were as follows: Percentage of Number of total shares 11111111111111111111111111111112Name 1111123shares held 3411112 in issue Japan Trustee Services Bank, Ltd. (Trust account)(1) ...... 671,885,900 5.76% Japan Trustee Services Bank, Ltd. (Trust account 4G)(1) ...... 635,316,500 5.45 The Master Trust Bank of Japan, Ltd. (Trust account)(1) ...... 489,585,800 4.20 Nippon Life Insurance Company ...... 285,603,153 2.45 The Bank of New York Mellon as Depositary Bank for DR Holders(2) ...... 263,905,468 2.26 Meiji Yasuda Life Insurance Company(3) ...... 175,000,000 1.50 Toyota Motor Corporation...... 149,263,153 1.28 Meiji Yasuda Life Insurance Company ...... 139,185,671 1.19 The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account .. 129,374,761 1.11 (4) Mitsubishi Heavy Industries, Ltd...... 1111123 120,914,991 411112 1.03 Total...... 3,060,035,397 26.27% 1111123 411112
Notes: (1) Includes the shares held in trust accounts, which do not disclose the names of beneficiaries. (2) An owner of record for MUFG’s American depositary shares. (3) These shares are those held in a pension trust account with The Master Trust Bank of Japan, Ltd. for the benefit of retirement plans with voting rights retained by Meiji Yasuda Life Insurance Company. (4) These shares are those held in a pension trust account with The Master Trust Bank of Japan, Ltd. for the benefit of retirement plans with voting rights retained by Mitsubishi Heavy Industries, Ltd.
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RELATIONSHIP OF THE ISSUER WITH BTMU AND MUFG
Keep Well Agreement A6.2 A6.1 MUFG (formerly MTFG), BTMU, the Issuer and the Trustee have entered into an amended and restated A9.12 keep well agreement dated 3rd August, 2006 (the ‘‘Keep Well Agreement’’) governed by English law. The following is the text of the Keep Well Agreement.
‘‘This amended and restated Keep Well Agreement (the ‘‘Agreement’’) is made by way of deed poll on 3rd August, 2006 by and among (1) Mitsubishi UFJ Financial Group, Inc. (formerly Mitsubishi Tokyo Financial Group, Inc.), whose registered office at the date hereof is at 7-1 Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan, (‘‘MUFG’’), (2) The Bank of Tokyo-Mitsubishi UFJ, Ltd. (formerly The Bank of Tokyo-Mitsubishi, Ltd.), whose registered office at the date hereof is at 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8388, Japan, (‘‘BTMU’’), (3) Mitsubishi UFJ Securities International plc (formerly Mitsubishi Securities International plc), whose registered office as the date hereof is at 6 Broadgate, London EC2M 2AA, England, (‘‘MUSI’’) and (4) The Law Debenture Trust Corporation p.l.c., whose registered office at the date hereof is Fifth Floor, 100 Wood Street, London EC2V 7EX, England.
WHEREAS: (A) MUSI is a subsidiary of MUFG.
(B) BTMU is a 100 per cent. owned subsidiary of MUFG.
(C) MUSI has issued and intends to issue debt securities or other financial instruments (including warrants) and to enter into swap and other derivative transactions with financial counterparties (MUSI’s payment obligations in respect of all such securities, instruments and transactions being referred to collectively in this Agreement as Payment Obligations).
(D) BTMU and MUSI, inter alios, previously entered into keep well agreements (‘‘Former Keep Well Agreements’’) in connection with (i) notes (‘‘Notes’’) issued under MUSI’s Euro Medium Term Note Programme (the ‘‘EMTN Programme’’), (ii) warrants (‘‘Warrants’’) issued under MUSI’s Warrant Programme (the ‘‘Warrant Programme’’) and (iii) counterparty payment obligations (‘‘Counterparty Payment Obligations’’) to financial counterparties, respectively.
(E) On 1 July, 2005 the parties hereto entered into a keep well agreement (the ‘‘Original Keep Well Agreement’’) which replaced the Former Keep Well Agreements and as from such date all Notes and Warrants issued, and Counterparty Payment Obligations assumed by MUSI prior to the date of the Original Keep Well Agreement which had the benefit of a Former Keep Well Agreement, were thereby granted the benefit of the Original Keep Well Agreement.
(F) The aggregate nominal amount of the EMTN Programme (the ‘‘Programme Limit’’) was initially U.S.$4,000,000,000. On 3rd August, 2006 the Programme Limit was increased to U.S.$8,000,000,000; the Programme Limit may be further increased after the date hereof in accordance with the provisions of the EMTN Programme.
(G) As a consequence of the increase to the Programme Limit referred to in recital (F) above, the parties hereto have agreed to make certain modifications to the Original Keep Well Agreement.
(H) Each of the parties hereto confirms for the purposes of Clause 8 of the Original Keep Well Agreement that the modifications referred to in recital (G) above shall not have any material adverse effect upon any of the Beneficiaries (as defined below) having the benefit of the Original Keep Well Agreement.
(I) This Agreement amends and restates the Original Keep Well Agreement. All Notes and Warrants issued, and Counterparty Payment Obligations assumed, by MUSI (i) on or after the date of this
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Agreement and (ii) prior to the date of this Agreement which had the benefit of the Original Keep Well Agreement, will have the benefit of this Agreement.
NOW, THEREFORE, MUFG, BTMU, MUSI and the Trustee hereby agree as follows: A6.2
1. MUFG and/or BTMU will own, directly or indirectly, a majority of the issued share capital of MUSI and will control the composition of the board of directors of MUSI, in each case so long as any Payment Obligations are outstanding. Neither MUFG nor BTMU will pledge, grant a security interest in or encumber any such share capital.
2. MUFG and/or BTMU shall be obliged to cause MUSI to have Tangible Net Worth, as determined in accordance with generally accepted accounting principles in the United Kingdom and as shown in MUSI’s most recent published audited balance sheets from time to time, at all times of at least GB £1,000,000.
For the purpose of this Clause 2, ‘‘Tangible Net Worth’’ means the aggregate amount of issued and fully paid equity capital, reserves, capital surplus and retained earning (or less losses carried forward), less any intangible assets.
3. (A) If MUSI at any time determines that it shall have insufficient cash or other liquid assets to meet its Payment Obligations as they fall due and that it shall have insufficient unused commitments available under its credit facilities with lenders other than MUFG and/or BTMU or insufficient funds otherwise made available by MUFG and/or BTMU through one or more third parties, then it will promptly notify MUFG and BTMU of the shortfall and MUFG and/or BTMU shall be obliged to make available to it, before the due date of any relevant Payment Obligations, funds sufficient to enable it to satisfy such Payment Obligations in full as they fall due. It will use the funds made available to it by MUFG and/or BTMU solely for the satisfaction when due of such Payment Obligations.
(B) Any and all funds from time to time provided by MUFG and/or BTMU to MUSI pursuant to Clause 3(A) above shall be either (i) by way of the subscription for and payment of its share capital (other than redeemable share capital) or (ii) by way of subordinated loan, that is to say a loan which, and interest on which, is not permitted to be, and is not capable of being, repaid or paid unless, and then only to the extent that, MUSI is, and immediately thereafter would continue to be, solvent in all respects and is thus subordinated on a winding up of MUSI to all of the other unsecured creditors (whether subordinated or unsubordinated) of MUSI.
4. Each of MUFG and BTMU warrants and agrees that its payment obligations which may arise under this Agreement constitute its unsecured and unsubordinated obligations and rank pari passu with all its other unsecured and unsubordinated obligations.
5. This Agreement is not, and nothing herein contained and nothing done by MUFG and/or BTMU pursuant hereto shall be deemed to constitute, a guarantee, direct or indirect, by MUFG and/or BTMU of any Payment Obligations.
6. If MUSI shall be in liquidation, administration or receivership or other analogous proceedings, and MUFG and/or BTMU shall be in default of its or their obligations hereunder, MUFG and/or BTMU shall be liable by way of liquidated damages to MUSI for such breach in an amount equal to the sum that MUFG and/or BTMU would have paid had it performed in full its obligations under this Agreement, and MUSI (and any liquidator, administration or receiver of MUSI or other analogous officer or official) shall be entitled to claim accordingly.
7. Each of MUFG, BTMU and MUSI hereby covenants that it will fully and promptly perform its respective obligations and exercise its respective rights under this Agreement and, in the case of MUSI (without limitation to the foregoing), exercise its right to enforce performance of the terms of this Agreement by MUFG and BTMU.
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8. This Agreement may be modified, amended or terminated only by the written agreement (executed as a deed) of MUFG, BTMU, MUSI and the Trustee(s) (as defined below); provided, however, that no such modification, amendment or termination shall have any material adverse effect upon any of the Beneficiaries (as defined below) having the benefit of this Agreement. In particular, notwithstanding any such termination, this Agreement will continue in full force and effect with respect to all outstanding Payment Obligations which have been incurred prior to such termination of this Agreement.
9. MUFG, BTMU and MUSI will give written notice to Moody’s Investor Services, Limited and Japan Credit Rating Agency, Ltd. at least 30 days prior to any proposed modification, amendment or termination of this Agreement.
10. (A) This Agreement shall take effect as a deed poll for the benefit of the Beneficiaries. No other person, firm, company or association (unincorporated or incorporated) shall be entitled to any benefit under this Agreement whatsoever.
(B) Each of MUFG, BTMU and MUSI hereby acknowledges and covenants that the respective obligations binding upon it contained herein are owed to, and shall be for the benefit of, the Beneficiaries and that each of the Beneficiaries shall be entitled to enforce the said obligations against MUFG, BTMU and/or MUSI if, and only insofar as at the time the proceedings for such enforcement are instituted, the relevant Payment Obligations which have become due and payable remain unpaid in whole or in part.
(C) For the purposes of this Agreement
‘‘Beneficiaries’’ means, in relation to any Payment Obligations, the person(s) to whom such Payment Obligations are owed by MUSI (including, in the case of Trust Securities (as defined below), the Trustee(s));
‘‘Trustee(s)’’ means (i) in relation to the Notes, The Law Debenture Trust Corporation p.l.c. as trustee for the holders of the Notes (which expression shall include any successor as trustee for the holders of the Notes) under a Trust Deed dated 24th November, 1994 and made between, inter alia, MUSI (under its former name of Mitsubishi Finance International plc) and The Law Debenture Trust Corporation p.l.c. as supplemented or amended from time to time and (ii) in relation to any other Trust Securities, the trustee for the holders thereof from time to time; and
‘‘Trust Securities’’ means the Notes and other debt securities of MUSI constituted by a trust deed.
(D) No holder of any Trust Securities (including the Notes) shall be entitled to enforce the provisions of this Agreement unless the relevant Trustee, having become bound to do so, fails to do so within a reasonable period and such failure is continuing.
11. A copy of this Agreement shall be deposited with, and held by, each of MUSI, the Trustee(s) (for so long as Trust Securities are outstanding) and the Principal Warrant Agent appointed from time to time under the Warrant Programme (for so long as any Warrants are outstanding).
12. This Agreement shall be governed by and construed in accordance with English law. Each of MUFG, BTMU and MUSI hereby irrevocably agrees that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that accordingly any suit, action or proceedings (together Proceedings) arising out of or in connection with this Agreement may be brought in such courts and each waives any objection to Proceedings in such courts whether on the grounds that the Proceedings have been brought in an inconvenient forum or otherwise. In relation to Proceedings in England, any Deputy General Manager for the time being of the London Branch of BTMU (being at the date hereof at 12-15 Finsbury Circus, London EC2M 7BT) has agreed to accept service of process on behalf of MUFG and BTMU in England. Nothing in this clause shall affect the right to serve process in any other manner permitted by applicable law.
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13. This Agreement and any deed supplemental hereto may be executed and delivered in any number of counterparts, all of which, taken together, shall constitute one and the same deed and any party to this Agreement or any deed supplemental hereto may enter into the same by executing and delivering, a counterpart.
IN WITNESS WHEREOF this Agreement has been executed and delivered as a deed poll on the date which appears first on page 1. Executed as a deed by
MITSUBISHI UFJ FINANCIAL GROUP, INC. acting by } acting under the authority of that company in the presence of: }
Witness:
Name:
Address:
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. acting by } acting under the authority of that company in the presence of: } acting by
Witness:
Name:
Address:
The COMMON SEAL of MITSUBISHI UFJ SECURITIES INTERNATIONAL PLC was hereunto affixed to this deed in the presence of: }
Director
Director/Secretary
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The COMMON SEAL of THE LAW DEBENTURE TRUST CORPORATION p.l.c. was hereunto affixed to this deed in the presence of: }
Director
Authorised Signatory”
The Keep Well Agreement is not, and should not be regarded as equivalent to, a guarantee by BTMU or MUFG of the payment of any Notes. The Keep Well Agreement provides that the Trustee shall be entitled on behalf of the Noteholders to enforce against BTMU and/or MUFG and the Issuer their respective obligations under the Keep Well Agreement. These obligations include covenants by BTMU, MUFG and the Issuer to perform their obligations and exercise their rights under the Keep Well Agreement. Enforcement in the English courts will be subject, among other things, to the powers of such courts to stay proceedings and to other principles of law and equity of general application.
Financial and other information concerning BTMU and MUFG is provided in this Offering Circular for background purposes only in view of the importance of the Keep Well Agreement; it should not be treated as implying that the Keep Well Agreement can be viewed as a guarantee.
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TAXATION
United Kingdom
The following applies only to persons who are the beneficial owners of Notes and is a summary of the A12.4.1.14 Issuer’s understanding of current law and practice in the United Kingdom relating to the withholding tax treatment at the date hereof in relation to interest payments on the Notes. It does not deal with any United Kingdom taxation implications of acquiring, holding or disposing of Notes. Some aspects do not apply to certain classes of person (such as dealers and persons connected with the Issuer) to whom special rules may apply. The United Kingdom tax treatment of prospective Noteholders depends on their individual circumstances and may be subject to change in the future. Prospective Noteholders who may be subject to tax in a jurisdiction other than the United Kingdom or who are in any doubt as to their tax position should consult their own professional advisers.
1. The Issuer, provided that it continues to be authorised for the purpose of the Financial Services and Markets Act 2000 (“FSMA 2000”) and provided that its business continues to consist wholly or mainly of dealing in financial instruments within the meaning of section 885 of the Income Tax Act 2007 (the “Act”) as principal and provided that the interest on the Notes is paid in the ordinary course of that business, will be entitled to make payments of interest without withholding or deduction for or on account of United Kingdom income tax.
Payments of interest on the Notes may be made without deduction of or withholding on account of United Kingdom income tax provided that the Notes continue to be listed on a ‘‘recognised stock exchange’’, as defined in section 1005 of the Act. The London Stock Exchange plc (the ‘‘London Stock Exchange’’) is a recognised stock exchange. Securities will be treated as listed on the London Stock Exchange if they are included in the Official List (within the meaning of and in accordance with the provisions of Part 6 of the FSMA 2000) and admitted to trading on the London Stock Exchange. Provided, therefore, that the Notes are and remain so listed, interest on the Notes will be payable without withholding or deduction on account of United Kingdom tax whether or not the Issuer continues to be authorised for the purpose of FSMA 2000 and its business continues to consist wholly or mainly of dealing in financial instruments as principal and whether or not the interest is paid in the ordinary course of its business.
Interest on the Notes may also be paid without withholding or deduction on account of United Kingdom tax where interest on the Notes is paid by a company and, at the time the payment is made, the Issuer reasonably believes (and any person by or through whom interest on the Notes is paid reasonably believes) that the beneficial owner is within the charge to United Kingdom corporation tax as regards the payment of interest at the time the payment is made, provided that HMRC has not given a direction (in circumstances where it has reasonable grounds to believe that the above exemption is not available in respect of such payment of interest at the time the payment is made) that the interest should be paid under deduction of tax.
In other cases interest on Notes must generally be paid under deduction of United Kingdom income tax at the basic rate (currently 20 per cent.). However, where an applicable double tax treaty provides for a lower rate of withholding tax (or for no tax to be withheld) in relation to a Noteholder, HMRC can issue a notice to the Issuer to pay interest to the Noteholder without deduction of tax (or for interest to be paid with tax deducted at the rate provided for in the relevant double tax treaty).
2. If the Notes carry a right to interest and have a maturity date less than 365 days from the date of issue (and do not form part of a scheme or arrangement of borrowing intended to be capable of remaining outstanding for more than 364 days) payments of interest may be made without withholding or deduction for or on account of United Kingdom income tax.
3. Noteholders may wish to note that, in certain circumstances, 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 or receives interest for the benefit of a Noteholder. HMRC also has power, in certain circumstances, to 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
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another person. HMRC published practice indicates that it will not exercise its power to require this information in respect of amounts payable on redemption of deeply discounted securities where such amounts are paid on or before 5th April, 2010. Such information may include the name and address of the beneficial owner of the amount payable on redemption. 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.
Discounts and Premiums on Notes
4. Where Notes are issued at an issue price of less than 100 per cent. of their principal amount, any payments in respect of the accrued discount will not be made subject to any withholding or deduction for or on account of United Kingdom income tax as long as they do not constitute payments in respect of interest. Where Notes are issued with a redemption premium, as opposed to being issued at a discount, then any such element of premium may constitute a payment of interest and, if so, paragraphs 1 and 2 above (as appropriate) will apply.
EU Savings Directive
5. Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States, including Belgium from 1st January, 2010, are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland).
On 15th September, 2008, the European Commission issued a report to the Council of the European Union on the operation of the Directive, which included the Commission’s advice on the need for changes to the Directive. On 13th November, 2008, the European Commission published a more detailed proposal for amendments to the Directive, which included a number of suggested changes. If any of those proposed changes are made in relation to the Directive, they may amend or broaden the scope of the requirements described above.
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BOOK-ENTRY CLEARANCE PROCEDURES
The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of A12.4.1.12 DTC, Euroclear or Clearstream, Luxembourg (together, the ‘‘Clearing Systems’’) currently in effect. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. Neither the Issuer, nor the Trustee nor any agent party to the Agency Agreement will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Global Notes
Each Tranche of Notes offered and sold outside the United States in reliance on Regulation S will be represented by interests in a Reg. S Global Note which will be deposited with and registered in the name of a nominee for a common depositary for Euroclear and/or Clearstream, Luxembourg for the account of its participants. A beneficial interest in a Reg. S Global Note may at all times be held only through Euroclear and Clearstream, Luxembourg.
Each Tranche of Notes offered and sold in reliance on Rule 144A will be represented by interests in a Restricted Global Note which will be deposited with a custodian for, and registered in the name of a nominee of DTC for the accounts of Euroclear and Clearstream, Luxembourg. The Restricted Global Note will be subject to certain restrictions on transfer contained in a legend appearing on the face of such Note set forth under ‘‘Subscription and Sale and Transfer Restrictions – United States’’.
Each Reg. S Global Note will have an ISIN number and each Restricted Global Note will have a CUSIP number.
Transfer within and between DTC, Clearstream, Luxembourg and Euroclear
On or prior to the 40th day after completion of the distribution of each Tranche of Notes, a beneficial interest in the Reg. S Global Note may be transferred to a person who wishes to take delivery of such beneficial interest through the Restricted Global Note only upon receipt by the Registrar of a written certification from the transferor (in the applicable form provided in the Agency Agreement) to the effect that such transfer is being made to a person whom the transferor reasonably believes is a QIB, in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. After such 40th day, such certification requirements will no longer apply to such transfers, but such transfers will continue to be subject to the transfer restrictions contained in the legend appearing on the face of such Reg. S Global Note, as set out under ‘‘Subscription and Sale and Transfer Restrictions – United States’’.
A beneficial interest in a Restricted Global Note may be transferred to a person who wishes to take delivery of such beneficial interest through a Reg. S Global Note, whether before, on or after such 40th day, only upon receipt by the Registrar of a written certification from the transferor (in the applicable form provided in the Agency Agreement) to the effect that such transfer is being made in accordance with Regulation S or Rule 144 under the Securities Act (if available).
Any beneficial interest in either a Restricted Global Note or a Reg. S Global Note that is transferred to a person who takes delivery in the form of a beneficial interest in another Global Note will, upon transfer, cease to be a beneficial interest in such Registered Global Note and become a beneficial interest in that other Global Note and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to a beneficial interest in such other Registered Global Note for as long as it remains such an interest.
So long as DTC or its nominee or Euroclear, Clearstream, Luxembourg or the nominee of their common depositary is the registered holder of a Registered Global Note, DTC, Euroclear, Clearstream, Luxembourg or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Registered Global Note for the sole purpose of making payments in respect of the Notes (provided that the applicable tax treatment and procedures will be determined as if the person who is shown in the records of DTC, Euroclear or Clearstream, Luxembourg, as the case may be, as the holder of a particular nominal amount of such
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Notes were the registered holder itself). Payments of principal, interest and additional amounts, if any, pursuant to Condition 7, in respect of a Registered Global Note will be made to DTC, Euroclear, Clearstream, Luxembourg or such nominee, as the case may be, as the registered holder thereof. Neither the Issuer, nor any Agent nor any Dealer nor any affiliate of any of the above or any person by whom any of the above is controlled for the purposes of the Securities Act will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Note Certificates
Registration of title to Notes initially represented by a Restricted Global Note in a name other than DTC or a successor depositary or one of their respective nominees will not be permitted unless such depositary notifies the Issuer that it is no longer willing or able to discharge properly its responsibilities as depositary with respect to the Restricted Global Note or ceases to be a ‘‘clearing agency’’ registered under the Exchange Act or is at any time no longer eligible to act as such, and the Issuer is unable to locate a qualified successor within 90 days of receiving notice of such ineligibility on the part of such depositary.
Registration of title to Notes initially represented by a Reg. S Global Note in a name other than the nominee of the common depositary for Euroclear and Clearstream, Luxembourg will not be permitted unless Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business and does in fact do so and no alternative clearance system acceptable to the Trustee is available.
In such circumstances, the Issuer will, at the cost of the Issuer, cause sufficient Note certificates to be executed and delivered to the Registrar for completion and dispatch to the relevant Noteholders. A person having an interest in a Registered Global Note must provide the Registrar with:
(i) a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such Note certificates; and
(ii) in the case of the Restricted Global Note only, a fully completed, signed certification substantially to the effect that the exchanging holder is not transferring its interest at the time of such exchange or, in the case of simultaneous sale pursuant to Rule 144A, a certification that the transfer is being made in compliance with the provisions of Rule 144A. Note certificates issued in exchange for a beneficial interest in the Restricted Global Note shall bear the legends applicable to transfers pursuant to Rule 144A (as set out under ‘‘Subscription and Sale and Transfer Restrictions – United States’’).
The holder of a Registered Note may transfer such Registered Note in accordance with the provisions of Condition 10 of the Terms and Conditions of the Notes.
The holder of a Note certificate may transfer the Registered Note represented thereby by surrendering it at the specified office of the Registrar or any Transfer Agent, together with the completed form of transfer thereon. Upon the transfer, exchange or replacement of a Note certificate issued in exchange for a Restricted Global Note (‘‘144A Note Certificates’’) bearing the legend referred to under ‘‘Subscription and Sale and Transfer Restrictions – United States’’, or upon specific request for removal of the legend on a 144A Note Certificate, the Issuer will deliver only 144A Note Certificates that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Issuer and the Registrar such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Issuer, that neither the legend nor the restriction on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.
The Registrar will not register the transfer of or exchange of interests in a Registered Global Note for Note certificates for a period of 15 calendar days preceding the due date for any payment of principal or interest in respect of the Notes.
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With respect to the registration of transfer of any 144A Note Certificate, the Registrar will register the transfer of any such 144A Note Certificate if the transferor, in the form of Transfer on such 144A Note Certificate, has certified to the effect that such transfer is (i) to persons whom the transferor reasonably believes is a QIB, in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction, (ii) in accordance with Regulation S or (iii) pursuant to Rule 144 under the Securities Act (if available).
If only one of the Global Notes (an ‘‘Exchanged Global Note’’) becomes exchangeable for Note certificates in accordance with the above paragraphs, transfers of Notes may not take place between, on the one hand, persons holding Note certificates issued in exchange for beneficial interests in the Exchanged Global Note and, on the other hand, persons wishing to purchase beneficial interests in the other Global Note representing the same series of Notes of the relevant Tranche.
Euroclear, Clearstream, Luxembourg and DTC
Custodial and depositary links have been established with Euroclear and Clearstream, Luxembourg and DTC to facilitate the initial issue of the Registered Notes and cross-market transfers of the Registered Notes associated with secondary market trading.
Euroclear and Clearstream, Luxembourg each holds securities for participating organisations and facilitates the clearance and settlement of securities transactions between their respective participants through electronic book- entry changes in the accounts of such participants. Euroclear and Clearstream, Luxembourg provide to their respective participants, among other things, services for safekeeping, administration, clearance and settlement of internationally-traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg participants are financial institutions throughout the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to Euroclear or Clearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trust companies which clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg participant either directly or indirectly.
Distributions of principal and interest with respect to book-entry interests in the Registered Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Agent, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures.
DTC has informed the Issuer as follows: DTC is a limited-purpose trust company organised under the New York banking law, a ‘‘banking organisation’’ within the meaning of the New York banking law, a member of the Federal Reserve System, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code, and a ‘‘clearing agency’’ registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities for DTC participants and facilitates the clearance and settlement of securities transactions between DTC participants through electronic book-entry changes in the accounts of DTC participants. DTC participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organisations such as the Dealer. Indirect access to DTC is also available to others, such as banks, brokers, dealers and trust companies which clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly.
Holders of book-entry interests in the Registered Notes holding through DTC will receive, to the extent received by the Agent, all distributions of principal and interest with respect to book-entry interests in the Registered Notes from the Agent through DTC. Distributions in the United States will be subject to relevant U.S. tax laws and regulations.
The laws of some states of the United States require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer interests in a Global Note to such persons may be limited. Because DTC, Euroclear and Clearstream, Luxembourg can only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having an interest in a Global Note to pledge such interest to
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persons or entities which do not participate in the relevant clearing system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate in respect of such interest.
The aggregate holdings of book-entry interests in the Registered Notes in Euroclear, Clearstream, Luxembourg and DTC will be reflected in the book-entry accounts of each institution. As necessary, the Registrar will adjust the amounts of Registered Notes on the Register for the accounts of (i) Euroclear and Clearstream, Luxembourg and (ii) DTC to reflect the amounts of Notes held through Euroclear, Clearstream, Luxembourg and DTC, respectively. Beneficial ownership in Registered Notes will be held through financial institutions as direct and indirect participants in Euroclear, Clearstream, Luxembourg and DTC. Euroclear, Clearstream, Luxembourg or DTC, as the case may be, and every other intermediate holder in the chain to the beneficial owner of book-entry interests in the Registered Notes will be responsible for establishing and maintaining accounts for their participants and customers having interests in the book-entry interests in the Registered Notes.
The Registrar will be responsible for maintaining a record of the aggregate holdings of Registered Notes registered in the name of a nominee for the common depositary for Euroclear and Clearstream, Luxembourg, a nominee for DTC and/or holders of Registered Notes represented by Note certificates.
The Agent will be responsible for ensuring that payments received by it from the Issuer for holders of interests in the Notes holding through Euroclear and Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be, and the Agent will also be responsible for ensuring that payments received by the Registered Agent from the Issuer for holders of interests in the Notes holding through DTC are credited to DTC.
The Issuer will not impose any fees in respect of the Registered Notes; however, holders of book-entry interests in the Registered Notes may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear, Clearstream, Luxembourg or DTC.
Interests in the Reg. S Global Note and the Restricted Global Note will be in uncertificated book-entry form. Purchasers electing to hold book-entry interests in the Registered Notes through Euroclear and Clearstream, Luxembourg accounts will follow the settlement procedures applicable to conventional eurobonds. Book-entry interests in the Reg. S Global Note will be credited to Euroclear participant securities clearance accounts on the business day following the closing date for the Relevant Notes against payment (value at closing date) and to Clearstream, Luxembourg participant securities custody accounts on such closing date against payment in same day funds. DTC participants acting on behalf of purchasers electing to hold book-entry interests in the Registered Notes through DTC will follow the delivery practices applicable to securities eligible for DTC’s Same-Day Funds Settlement (‘‘SDFS’’) system. DTC participant securities accounts will be credited with book-entry interests in the Registered Notes following confirmation of receipt of payment to the Issuer on the closing date for the Relevant Notes.
Trading between Euroclear and/or Clearstream, Luxembourg participants: Secondary market sales of book-entry interests in Registered Notes held through Euroclear or Clearstream, Luxembourg to purchasers of book-entry interests in Registered Notes through Euroclear or Clearstream, Luxembourg will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to conventional eurobonds.
Trading between DTC participants: Secondary market sales of book-entry interests in the Registered Notes between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled using the procedures applicable to United States corporate debt obligations in DTC’s SDFS system in same-day funds, if payment is effected in U.S. dollars, or free of payment, if payment is not effected in U.S. dollars. Where payment is not effected in U.S. dollars separate payment arrangements outside DTC are required to be made between the DTC participants.
Trading between DTC seller and Euroclear/Clearstream, Luxembourg purchaser: When book- entry interests in Registered Notes are to be transferred from the account of a DTC participant holding a beneficial interest in a Restricted Global Note to the account of a Euroclear or Clearstream, Luxembourg participant wishing
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to purchase a beneficial interest in a Reg. S Global Note (subject to such certification procedures as provided in the Agency Agreement), the DTC participant will deliver the book-entry interests in the Registered Notes represented thereby free of payment by 3.00 p.m., New York time, on the settlement date to the custodian’s account at DTC together with instructions for delivery to the relevant Euroclear or Clearstream, Luxembourg participant. Separate payment arrangements are required to be made between the DTC participant and the relevant Euroclear or Clearstream, Luxembourg participant. On the settlement date, the Custodian will instruct the Registrar to (i) reduce the number of Registered Notes registered in the name of the depositary for DTC and evidenced by the Restricted Global Note and (ii) increase the number of Notes registered in the name of the nominee of the common depositary for Euroclear and Clearstream, Luxembourg and evidenced by the Reg. S Global Note. Book-entry interests will be delivered free of payment to Euroclear or Clearstream, Luxembourg, as the case may be, for credit to the relevant participant’s account on the second business day following the settlement date.
Trading between Euroclear/Clearstream, Luxembourg seller and DTC purchaser: When book- entry interests in the Registered Notes are to be transferred from the account of a Euroclear or Clearstream, Luxembourg participant to the account of a DTC participant wishing to purchase a beneficial interest in a Restricted Global Note (subject to such certification procedures as provided in the Agency Agreement), the Euroclear or Clearstream, Luxembourg participant must send to Euroclear/Clearstream, Luxembourg delivery free of payment instructions by 10.00 a.m., Brussels or Luxembourg time one business day prior to the settlement date. Euroclear or Clearstream, Luxembourg, as the case may be, will in turn transmit appropriate instructions to the common depositary for Euroclear and Clearstream, Luxembourg and the Registrar to arrange delivery to the DTC participant on the settlement date. Separate payment arrangements are required to be made between the DTC participant and the relevant Euroclear or Clearstream, Luxembourg participant, as the case may be. On the settlement date, the common depositary for Euroclear and Clearstream, Luxembourg will (a) transmit appropriate instructions to the custodian for DTC who will in turn deliver such book-entry interests in the Notes free of payment to the relevant account of the DTC participant and (b) instruct the Registrar to (i) reduce the number of Registered Notes registered in the name of the nominee of the common depositary for Euroclear and Clearstream, Luxembourg and evidenced by the relevant Reg. S Global Note and (ii) increase the number of Notes registered in the name of the depositary for DTC and evidenced by the Restricted Global Note.
Although the foregoing sets out the procedures of Euroclear, Clearstream, Luxembourg and DTC in order to facilitate the transfers of interests in the Notes among participants of DTC, Clearstream, Luxembourg and Euroclear, none of Euroclear, Clearstream, Luxembourg or DTC is under any obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Issuer, nor any Agent nor any Manager nor any affiliate of any of the above, nor any person by whom any of the above is controlled for the purposes of the Securities Act, will have any responsibility for the performance by DTC, Euroclear and Clearstream, Luxembourg or their respective direct or indirect participants or accountholders of their respective obligations under the rules and procedures governing their operations.
Transfer Restrictions A12.4.1.10 A13.4.14 The Restricted Global Note and Note certificates issued in exchange for a beneficial interest in the Restricted Global Note will bear a legend to the effect contained in paragraph (v) under ‘‘Subscription and Sale and Transfer Restrictions – United States’’ hereof.
All purchasers of beneficial interests in a Restricted Global Note shall be deemed to have represented and agreed to reoffer, resell, pledge or otherwise transfer such beneficial interests only in accordance with such legend.
Meetings of Noteholders
The provisions for meetings of Noteholders scheduled to the Trust Deed provide that, where all the outstanding Notes are held by one person, the quorum in respect of the relevant meeting will be one person present (being an individual, present in person, or being a corporation, present by a representative) holding all of the outstanding Notes or being a proxy in respect of such Notes.
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Purchase and cancellation of beneficial interests in Global Notes
Cancellation of any Registered Note represented by a beneficial interest in the Reg. S Global Note or the Restricted Global Note which is surrendered for cancellation following its purchase will be recorded in the Register by the Registrar.
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SUBSCRIPTION AND SALE AND TRANSFER RESTRICTIONS
The Dealers have in an amended and restated programme agreement (the ‘‘Programme Agreement’’) dated A13.4.14 15th October, 2009 agreed with the Issuer a basis upon which they or any of them may from time to time agree A12.4.1.10 to purchase Notes. Any such agreement will extend to those matters stated under ‘‘Form of the Notes’’ and ‘‘Terms and Conditions of the Notes’’ above. 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. The Issuer may pay the Dealers commissions from time to time in connection with the sale of any Notes. The Dealers are entitled to be released and discharged from their obligations in relation to any agreement to issue and purchase Notes under the Programme Agreement in certain circumstances prior to payment to the Issuer.
(a) United States
The Notes have not been and will not be registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. Persons unless the Notes are registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available.
(i) Offers, sales, resales and other transfers of Notes in the United States made or approved by a Dealer (including in connection with secondary trading) shall be made with respect to Registered Notes only and shall be effected pursuant to an exemption from the registration requirements of the Securities Act.
(ii) Offers, sales, resales and other transfers of Notes in the United States will be made only in private transactions to persons that are reasonably believed to be QIBs, or to Institutional Accredited Investors that have executed and delivered to a Dealer the IAI Investment Letter addressed to the Issuer substantially in the form set out in the Agency Agreement. Notes sold to Institutional Accredited Investors will be issued solely in definitive registered form.
(iii) Notes will be offered in the United States only by approaching prospective purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) has been or will be used by a Dealer or any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act), nor by any person acting on its or their behalf in connection with the offering and sale of the Notes in the United States.
(iv) No sale of the Notes in the United States to an Institutional Accredited Investor or to a QIB will be for less than U.S.$100,000 (or its foreign currency equivalent) principal amount and no Note will be issued in connection with such a sale in a smaller principal amount. If such purchaser is a non-bank fiduciary acting on behalf of others, each person for whom it is acting must purchase at least U.S.$100,000 principal amount of the Notes.
(v) Each Registered Note (other than Reg. S Notes) shall contain a legend in substantially the following form:
‘‘The securities evidenced hereby (the ‘‘Notes’’) have not been registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), or any other applicable U.S. state securities laws and, accordingly, may not be offered or sold within the United States or to or for the account or benefit of U.S. persons as defined in Regulation S under the Securities Act (‘‘U.S. Persons’’) except as set forth in the following sentence. Neither the Notes nor any interest or participation therein may be reoffered, sold, assigned, transferred, pledged, encumbered or otherwise disposed of in the absence of such registration or unless such transaction is exempt from registration.
The holder of the Notes by its acquisition thereof or of any interest or participation therein, on its own behalf and on behalf of any account for which it is purchasing the Notes or any interest or participation therein (A) represents that (1) it is a ‘‘qualified institutional buyer’’ as defined in Rule 144A under the Securities Act (‘‘QIB’’) purchasing for its own account or for the account of one or more QIBs or (2) it is an institutional ‘‘accredited investor’’ as defined in Rule 501(a)(1), (2), (3) or
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(7) under the Securities Act (an ‘‘Institutional Accredited Investor’’); and (B) agrees that it will not offer, sell, resell or otherwise transfer the Notes or any interest or participation therein except, (i) to, or for the account or benefit of, the Issuer or a Dealer (as defined in the Offering Circular for the Notes), (ii) to, or for the account or benefit of, a QIB in a transaction meeting the requirements of Rule 144A under the Securities Act, (iii) to, or for the account or benefit of, an Institutional Accredited Investor that, prior to such transfer, furnishes a written certification containing certain representations and agreements relating to the restrictions on transfer of the Notes or any interest or participation therein (the form of which letter can be obtained from the Registrar and the Transfer Agents), (iv) outside the United States to a non-U.S. Person in a transaction which meets the requirements of Rule 903 or 904 of Regulation S under the Securities Act, (v) pursuant to an effective registration statement under the Securities Act, or (vi) pursuant to any other available exemption from the registration requirements of the Securities Act, in each case in accordance with all applicable securities laws of the States of the United States and any other jurisdiction. Upon any transfer of the Notes or any interest or participation therein pursuant to clauses (iii), (iv) or (vi), the holder will be required to furnish to the Issuer or the Registrar, as appropriate, such certifications, legal opinions or other information as it may reasonably require to confirm that such transfer is being made pursuant to an exemption from or in a transaction not subject to the registration requirements of the Securities Act. The holder will also be required to deliver to the transferee of the Notes or any interest or participation therein a notice substantially to the effect of this legend. Any resale or other transfer or attempted resale or other transfer of the Notes made other than in compliance with the foregoing restriction shall not be recognised by the Issuer, the Registrar or any other agent of the Issuer.
The Notes and related documentation (including, without limitation, the Agency Agreement) may be amended or supplemented from time to time, without the consent of, but upon notice to, the holders of such Notes sent to their registered addresses, to modify the restrictions on and procedures for resales and other transfers of the Notes to reflect any change in applicable law or regulation (or the interpretation thereof) or in practices relating to resales or other transfers of restricted securities generally. The holder of the Notes shall be deemed, by its acceptance or purchase thereof, to have agreed to any such amendment or supplement (each of which shall be conclusive and binding on the holder thereof and all future holders of the Notes and any notes issued in exchange or substitution therefor, whether or not any notation thereof is made hereon).
The holder of the Notes, by its acceptance or purchase thereof, shall be deemed to have agreed that the Issuer and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that if any of such acknowledgements, representations or agreements made by it are no longer accurate, it shall promptly notify the Issuer; and if it is acquiring any Notes as a fiduciary or agent for one or more accounts it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account.
Unless this Global Note is presented by an authorised representative of The Depository Trust Company, a New York corporation (‘‘DTC’’), to the Issuer or its agent for registration of transfer, exchange or payment, and any registered Note issued is registered in the name of Cede & Co. or in such other name as is required by an authorised representative of DTC (and any payment is made to Cede & Co. or to such other entity as is required by any authorised representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful in as much as the registered owner hereof, Cede & Co., has an interest herein.’’
(vi) By its purchase of any Registered Notes, each investor in the United States shall be deemed to have agreed to the restrictions contained in any legend endorsed on the Note purchased by it (to the extent still applicable) and each such purchaser shall be deemed to have represented to the Issuer, the seller and the Dealer, if applicable, that it is either (i) a QIB or (ii) an Institutional Accredited Investor and in each case that is acquiring the Notes for its own account for investment and not with a view
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to the distribution thereof. Each investor (other than an investor in Reg. S Notes following expiry of the applicable Distribution Compliance Period), by its purchase of any Notes, also agrees to deliver to the transferee of any Note a notice substantially to the effect of the above legend.
(vii) Dealers may arrange for the resale of Notes to QIBs pursuant to Rule 144A and each such purchaser of Notes is hereby notified that the Dealers may be relying on the exemption from the registration requirements of the Securities Act provided by Rule 144A. To the extent that the Issuer is not subject to or does not comply with the reporting requirements of Section 13 or 15(d) of the Exchange Act or the information furnishing requirements of Rule 12g3-2(b) thereunder, the Issuer has agreed to furnish to holders of the Notes and to prospective purchasers designated by such holders, upon request thereby, such information as may be required by Rule 144A(d)(4).
(viii) In connection with any Notes which are offered or sold outside the United States in reliance on an exemption from the registration requirements of the Securities Act provided under Regulation S, each prospective investor outside the United States is hereby offered the opportunity to ask questions of, and receive answers from, the Issuer and the Dealers concerning the terms and conditions of the offering.
Any purchaser of Notes must have sufficient knowledge and experience in business matters to be capable of evaluating the merits and risks of investing in and holding Notes and be able to bear the economic risk of the investment for an indefinite period of time because the Notes have not been registered under the Securities Act. There is no undertaking to register the Notes thereafter, and they cannot be sold unless they are subsequently registered or an exemption from such registration requirement is available. There can be no assurance that the Notes will be sold or that there will be a secondary market for the Notes.
(ix) Each Reg. S Note shall contain a legend in substantially the following form:
‘‘The securities evidenced hereby (the ‘‘Notes’’) have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), or any other applicable U.S. state securities laws and, accordingly, may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons as defined in Regulation S under the Securities Act (‘‘U.S. Persons’’) except pursuant to an exemption from registration under the Securities Act or pursuant to an effective registration statement under the Securities Act.
The holder of the Notes by its acquisition thereof or of any interest or participation therein, on its own behalf and on behalf of any account for which it is purchasing the Notes or any interest or participation therein (A) represents that it is outside the United States and is not a U.S. Person and (B) agrees that it will not offer, sell, resell or otherwise transfer the Notes or any interest or participation therein prior to the expiration of the distribution compliance period (defined as 40 days after the later of the commencement of the offering and the closing date with respect to the original issuance of the Notes), except (1) outside the United States to a non-U.S. Person in a transaction which meets the requirements of Rule 903 or 904 of Regulation S under the Securities Act or (2) to, or for the benefit of, a QIB in a transaction meeting the requirements of Rule 144A under the Securities Act, in each case in accordance with all applicable securities laws of the States of the United States and any other jurisdiction. Upon any transfer of the Notes or any interest or participation therein pursuant to clause (2), the holder will be required to furnish to the Registrar a written certification of transfer substantially in the form set out in the Agency Agreement.’’
(x) By its purchase of any Reg. S Note, each investor outside the United States shall be deemed to have agreed to the restrictions contained in any legend endorsed on the Note purchased by it (to the extent still applicable) and each such purchaser shall be deemed to have represented to the Issuer, the seller and the Dealer, if applicable, that it is outside the United States and is not a U.S. Person.
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(xi) Pursuant to the Programme Agreement, the Issuer has agreed to indemnify the Dealers against, or to contribute to losses arising out of, certain liabilities, including liabilities under certain securities laws.
(xii) In connection with any Notes which are offered or sold outside the United States in reliance on an exemption from the registration requirements of the Securities Act provided under Regulation S, each Dealer has represented and agreed, or will be required to represent and agree, that it will not offer or sell any Notes of any Tranche (i) as part of their distribution at any time or (ii) otherwise until expiry of the Distribution Compliance Period applicable to such Tranche issued prior to such determination, within the United States or to, or for the account or benefit of, U.S. Persons except as provided above, and it will have sent to each Dealer to which it sells 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 to, or for the account or benefit of, U.S. Persons.
In addition, except with respect to Registered Notes or other Notes for which the relevant Dealer and the Issuer agree, provided that such transaction is in accordance and compliance with applicable laws, that the following restrictions shall not apply, each Dealer represents:
(A) except to the extent permitted under U.S. Treas. Reg. §1.163-5(c)(2)(i)(D) (the ‘‘D Rules’’):
(i) it has not offered or sold, and during the restricted period it will not offer or sell, Notes in bearer form to a person who is within the United States or its possessions or to a United States person; and
(ii) it has not delivered and agrees that it will not deliver within the United States or its possessions definitive Notes in bearer form that are sold during the restricted period;
(B) it has and agrees that throughout the restricted period it will have in effect procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling Notes in bearer form are aware that such Notes may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a United States person, except as permitted by the D Rules;
(C) if it is a United States person, it is acquiring the Notes in bearer form for the purposes of resale in connection with their original issuance and if it retains Notes in bearer form for its own account, it will only do so in accordance with the requirements of U.S. Treas. Reg. §1.163- 5(c)(2)(i)(D)(6); and
(D) with respect to each affiliate that acquires from it Notes in bearer form for the purpose of offering or selling such notes during the restricted period, it either (i) repeats and confirms the representations contained in Clauses (xii)(A), (B) and (C) on behalf of such affiliate or (ii) agrees that it will obtain from such affiliate for the benefit of the Issuer the representations and agreements contained in Clauses (xii)(A), (B) and (C).
Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder, including the D Rules.
Each Dealer represents that it has not entered into and will not enter into any contractual arrangements with any distributor (as that term is defined in Regulation S under the Securities Act) with respect to the distribution of Notes, except to its affiliates or with the prior written consent of the Issuer.
In addition, until expiry of the relevant Distribution Compliance Period, an offer or sale of Reg. S Notes within the United States by a Dealer, including a dealer that is 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 Rule 144A under the Securities Act.
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(xiii) Each issuance of Dual Currency, Index Linked Notes, or Equity Linked Notes will be subject to such additional U.S. selling restrictions as the Issuer and the relevant Dealer(s) may agree, as indicated in the applicable Final Terms. Each Dealer has agreed and, if different, the relevant dealer in respect of each such issue will be required to agree that it will offer, sell and deliver such Notes only in compliance with such additional U.S. selling restrictions.
(b) Public Offer Selling Restriction under the Prospectus Directive
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, or 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 Notes to the public in that Relevant Member State:
(a) at any time to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;
(b) at any time to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or
(c) at any time to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or
(d) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (a) to (d) 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 includes any relevant implementing measure in each Relevant Member State.
(c) United Kingdom
Each Dealer has represented and agreed, or will be required to represent and agree, that:
(i) in relation to any Notes which have a maturity of less than one year, (a) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (b) it has not offered or sold and will not offer or sell any such Notes other than to persons:
(A) whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses; or
(B) who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses,
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where the issue of the Notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’) by the Issuer;
(ii) it has only communicated and caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and
(iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.
(d) Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948 as amended; the ‘‘FIEA’’) and each Dealer has represented and agreed, or will be required to represent and agree, that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5 Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Control Law (Law 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.
(e) Hong Kong
Each Dealer has represented and agreed, or will be required to represent and agree, that:
(i) it has not offered or sold and will not offer or sell in Hong Kong by means of any document, any Notes other than (A) to persons whose ordinary business it is to buy or sell shares or debentures (whether as principal or agent); or (B) to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (iii) in other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and
(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
(f) France
Each of the Dealers and the Issuer has represented and agreed, or will be required to represent and agree, that it has not offered or sold and will not offer or sell, directly or indirectly, Notes to the public in France, and it has not distributed or caused to be distributed and will not distribute or cause to be distributed to the public in France, the Offering Circular, the applicable Final Terms or any other offering material relating to the Notes, and that such offers, sales and distributions have been and will be made in France only to (i) providers of investment services relating to portfolio management for the account of third parties, and/or (ii) qualified investors (investisseurs qualifiés), other than individuals, all as defined in, and in accordance with, Articles L.411-1, L.411-2 and D.411-1 to D.411-3 of the French Code monétaire et financier.
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(g) General
Each Dealer has agreed, or will be required to agree, that it will (to the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes this Offering Circular and will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and neither the Issuer nor any other Dealer shall have responsibility therefor.
Neither the Issuer nor any of the Dealers represents that Notes may at any time lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder or assumes any responsibility for facilitating such sale.
With regard to each Tranche, the relevant Dealer(s) will be required to comply with such other additional restrictions as the Issuer and the relevant Dealer(s) shall agree and as shall be set out in the applicable Final Terms.
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GENERAL INFORMATION
Authorisation
Authorisation for the amendment and restatement of the Programme and the issue of Notes under the A12.4.1.8 Programme has been duly obtained by resolutions of the Executive Committee as authorised by the Board of A13.4.12 Directors of the Issuer dated 6th October, 2009.
Listing of Notes
The admission of Notes to the Official List will be expressed as a percentage of their nominal amount A12.6.1 (excluding accrued interest). It is expected that each Tranche of Notes which is to be admitted to the Official List A13.5.1 and to trading on the London Stock Exchange’s Professional Securities Market will be admitted separately as and when issued, subject only to the issue of the Notes of that 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 Professional Securities Market. The listing of the Programme in respect of such Notes is expected to be granted on or around 20th October, 2009.
Documents Available for Inspection
For the period of 12 months following the date of this Offering Circular, copies of the following documents A9.14 will, when published, be available for inspection from the respective registered offices of the Issuer, BTMU and MUFG and from the specified office of the Agent for the time being in London:
(i) the constitutional documents (in English) of the Issuer, BTMU and MUFG;
(ii) the audited consolidated financial statements (in English) of BTMU and MUFG for the years ended 31st March, 2008 and 31st March, 2009 and the audited financial statements (in English) of the Issuer in respect of the financial years ended 31st December, 2007 and 2008;
(iii) the most recently published audited annual financial statements (in English) of the Issuer, BTMU and MUFG, in each case together with any audit or review reports prepared in connection therewith; and the most recently published unaudited interim financial statements (in English) (if any) of the Issuer and BTMU;
(iv) the Programme Agreement, the Trust Deed (which contains the forms of the bearer and registered, A6.4.1 temporary and permanent global Notes, the definitive Notes, the Receipts, the Coupons and the Talons), the Agency Agreement and the Keep Well Agreement;
(v) this Offering Circular;
(vi) any future offering circulars, prospectuses, information memoranda and supplements including Final Terms (save that Final Terms relating to a Note which is neither admitted to trading on the London Stock Exchange’s Professional Securities Market or 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 will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the Issuer and the Paying Agent as to its holding of Notes and identity) to this Offering Circular and any other documents incorporated herein or therein by reference; and
(vii) in the case of each issue of Notes admitted to trading on the Professional Securities Market of the London Stock Exchange, subscribed pursuant to a syndication agreement, the syndication agreement (or equivalent document).
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Clearing Systems
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. 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. In addition, the Issuer will make an application for any Notes in registered form to be accepted for trading in book-entry form by DTC. The CUSIP and/or CINS numbers for each Tranche of Registered Notes, together with the relevant ISIN and common code, 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 S.A./N.V., 1 Boulevard du Roi Albert 11, B-1210 Brussels and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.
Significant or Material Change A9.7.1 A9.11.6 There has been no significant change in the financial or trading position of the Issuer and its subsidiary since 30th June, 2009 and there has been no material adverse change in the financial position or prospects of the Issuer and its subsidiary since 31st December, 2008. There has been no significant change in the financial or trading position of BTMU or its subsidiaries, taken as a whole, since 31st March, 2009 or of MUFG or its subsidiaries, taken A9.11.6 as a whole since 31st March, 2009 and there has been no material adverse change in the financial position of or prospects of BTMU or BTMU and its subsidiaries, taken as a whole, since 31st March, 2009, and no material adverse change in the financial position or prospects of MUFG or MUFG and its subsidiaries, taken as a whole, since 31st March, 2009.
Conditions for determining price
The price and amount of Notes to be issued under the Programme will be determined by the Issuer and the relevant Dealer at the time of issue in accordance with prevailing market conditions.
Post-issuance information
The Issuer does not intend to provide any post-issuance information in relation to any issues of Notes. A12.7.5
Dealers transacting with the Issuer
Certain Dealers and their affiliates may engage in investment banking and/or commercial banking transactions with, and may perform services for, the Issuer and its affiliates in the ordinary course of business.
Litigation
Neither the Issuer nor its subsidiary nor BTMU nor any of its subsidiaries nor MUFG nor any of its A9.11.5 subsidiaries 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, BTMU or MUFG, as the case may be, is aware) during 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 and its subsidiary, taken as a whole, or BTMU and its subsidiaries, taken as a whole or MUFG and its subsidiaries, taken as a whole, as the case may be.
Auditors
The auditors of the Issuer are KPMG LLP, Chartered Accountants. KPMG LLP, Chartered Accountants, A9.2.1 audited the Issuer’s accounts, without qualification, in accordance with generally accepted auditing standards in the A9.11.3.1 United Kingdom for each of the two financial periods ended 31st December, 2007 and 31st December, 2008, respectively. The auditors of the Issuer have no material interest in the Issuer.
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The audited accounts for each of these years included the following wording:‘‘This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept to assume responsibility to anyone other than the company and the company’s members as body, for our audit work, for this report, or for the opinions we have formed.’’
The consolidated financial statements of BTMU and its subsidiaries for the year ended 31st March, 2009, A9.2.1 incorporated by reference in this Offering Circular, have been audited in accordance with the standards of the A9.11.3.1 Public Company Accounting Oversight Board (United States) by Deloitte Touche Tohmatsu LLC (a Japanese member firm of Deloitte Touche Tohmatsu, a Swiss Verein), an independent registered public accounting firm (authorised and regulated under the Japanese Certified Public Accountant Law (Law No. 103 of 1948, as amended)), as stated in their report which is incorporated by reference herein (which report expresses an unqualified opinion on the financial statements and includes explanatory paragraphs referring to (i) the restatements of certain disclosures in Notes 6, 11, 14 and 24 to the consolidated financial statements, and (ii) the changes in methods of accounting for (a) defined benefit pension and other post-retirement plans, (b) stock-based compensation, (c) uncertainty in income taxes, (d) leveraged leases, (e) fair value measurements, (f) fair value options for financial assets and liabilities and (g) netting of cash collateral against derivative exposures.
The consolidated financial statements of MUFG and its subsidiaries for the year ended 31st March, 2009, A9.2.1 incorporated by reference in this Offering Circular, have been audited in accordance with the standards of the A9.11.3.1 Public Company Accounting Oversight Board (United States) by Deloitte Touche Tohmatsu LLC (a Japanese member firm of Deloitte Touche Tohmatsu, a Swiss Verein), an independent registered public accounting firm (authorised and regulated under the Japanese Certified Public Accountant Law (Law No. 103 of 1948, as amended)), as stated in their report which is incorporated by reference herein (which report expresses an unqualified opinion on the financial statements and includes explanatory paragraphs referring to (i) the restatements of certain disclosures in Notes 6, 11, 15 and 25 to the consolidated financial statements, and (ii) the changes in methods of accounting for (a) defined benefit pension and other post-retirement plans, (b) stock-based compensation, (c) uncertainty in income taxes, (d) leveraged leases, (e) fair value measurements, (f) fair value option for financial assets and financial liabilities and (g) netting of cash collateral against derivative exposures.
Trustee
The Trust Deed will provide that the Trustee may rely on any certificate or report of the auditors or any other person as sufficient evidence of the facts stated therein in accordance with the provisions of the Trust Deed whether or not called for by or addressed to the Trustee and whether or not any such certificate or report or engagement letter or other document entered into by the Trustee and the auditors or any other person in connection therewith contains any limit on the liability of the auditors or such other person. However, the Trustee will have no recourse to the auditors in respect of such certificates or reports unless the auditors have agreed to address such certificates or reports to the Trustee.
Ratings
The ratings (if any) of the Notes of each Tranche by Moody’s Investors Service Limited, Japan Credit Rating A13.7.5 Agency, Ltd. and/or Rating and Investment Information, Inc. will be specified in the applicable Final Terms.
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REGISTERED AND HEAD OFFICES OF THE ISSUER Mitsubishi UFJ Securities International plc 6 Broadgate London EC2M 2AA England
BTMU and MUFG The Bank of Tokyo-Mitsubishi UFJ, Ltd. 7-1, Marunouchi 2-chome Chiyoda-ku Tokyo 100-8388 Japan
Mitsubishi UFJ Financial Group, Inc. 7-1, Marunouchi 2-chome Chiyoda-ku Tokyo 100-8330 Japan
TRUSTEE AGENT The Law Debenture Trust Corporation p.l.c. The Bank of New York Mellon Fifth Floor One Canada Square 100 Wood Street London E14 5AL London EC2V 7EX England England
PAYING AGENTS AND TRANSFER AGENTS A13.5.1 The Bank of New York (Luxembourg) S.A. The Bank of Tokyo-Mitsubishi UFJ, Ltd. Aerogolf Center London Branch 1A Hoehenhof Finsbury Circus House L-1736 Senningerberg 12-15 Finsbury Circus Luxembourg London EC2M 7BT England
REGISTRAR AND EXCHANGE AGENT The Bank of New York Mellon 101 Barclay Street 21st Floor West New York NY 10286 United States of America
REGISTRAR Mitsubishi UFJ Securities International plc 6 Broadgate London EC2M 2AA England Level: 3 – From: 3 – From: 3 – Tuesday, October 13, 2009 – 17:53 – eprint3 – 4154 Section 10 : 4154 Section 10
LEGAL ADVISERS
To the Dealer A12.7.1 as to English law A13.7.1 Allen & Overy LLP One Bishops Square London E1 6AD England
DEALER Mitsubishi UFJ Securities International plc 6 Broadgate London EC2M 2AA England
INDEPENDENT PUBLIC ACCOUNTANTS A9.2.1
To the Issuer KPMG LLP 8 Salisbury Square London EC4Y 8BB England
To BTMU and MUFG
Deloitte Touche Tohmatsu LLC A9.2.1 (a Japanese member firm of Deloitte Touche Tohmatsu, a Swiss Verein) MS Shibaura Building 13-23 Shibaura 4-chome Minato-ku Tokyo 108-8530 Japan Level: 3 – From: 3 – From: 3 – Tuesday, October 13, 2009 – 17:53 – eprint3 – 4154 Section 10 : 4154 Section 10
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