IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the attached document and you are advised to read this disclaimer carefully before reading, accessing or making any other use of the attached document. In accessing the attached document you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from the Issuer, the Guarantor or the Joint Lead Managers named in the attached document as a result of such access. The attached document is intended for the addressee only.
THE ATTACHED DOCUMENT MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, REDISTRIBUTION OR REPRODUCTION OF THE ATTACHED DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE US SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF BONDS (AS DEFINED IN THE ATTACHED DOCUMENT) FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE BONDS AND THE GUARANTEE (AS DEFINED IN THE ATTACHED DOCUMENT) HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND THE BONDS AND THE GUARANTEE MAY NOT BE OFFERED, SOLD OR DELIVERED EXCEPT IN AN OFFSHORE TRANSACTION TO PERSONS OTHER THAN U.S. PERSONS IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS.
Confirmation of your Representation: In order to be eligible to view the attached document or make an investment decision with respect to the Bonds, investors must comply with the following provisions. You have been sent the following document on the basis that you have confirmed to the Issuer, the Guarantor and the Joint Lead Managers named in the attached document, being the senders of the attached document, that you are a person that is (i) outside the United States (within the meaning of Regulation S under the Securities Act) and (ii) not a U.S. person (within the meaning of Regulation S under the Securities Act) and that you are (a) a relevant person (as defined below) if in the United Kingdom or are (b) outside the United Kingdom (and the electronic mail address that you gave us and to which this e-mail has been delivered is not located in such jurisdictions). By accepting this e-mail and accessing the attached document, you shall be deemed to have made the above representation and to have consented to delivery of such document by electronic transmission.
In addition, in the United Kingdom, the attached document is being distributed only to and is directed only at: (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”); (b) high net worth entities falling within Article 49 of the Order; and (c) other persons to whom it may otherwise lawfully be communicated under the Order (all such persons together referred to as “relevant persons”). Any investment or investment activity to which the document relates is available only in the United Kingdom to relevant persons and will be engaged in only with such persons. The attached document has been delivered to you on the basis that you are a person into whose possession the attached document may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located.
MiFID II PRODUCT GOVERNANCE / PROFESSIONAL INVESTORS AND ECPs ONLY TARGET MARKET – Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the Bonds has led to the conclusion that: (i) the target market for the Bonds is eligible counterparties and professional clients only, each as defined in Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments, as amended (“MiFID II”); and (ii) all channels for distribution of the Bonds to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Bonds (a “distributor”) should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Bonds (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.
PROHIBITION OF SALES TO EEA AND UK RETAIL INVESTORS – The Bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”) or in the United Kingdom (the “UK”). For these purposes, a retail investor means a person who is one (or both) of: (i) a retail client as defined in point (11) of MiFID II; and (ii) a customer within the meaning of Directive (EU) 2016/97 (the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently, no key information document required by Regulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Bonds or otherwise making them available to retail investors in the EEA or in the UK has been prepared and therefore offering or selling the Bonds or otherwise making them available to any retail investor in the EEA or in the UK may be unlawful under the PRIIPs Regulation.
Neither this electronic transmission nor the attached document constitutes or contains any offer to sell or invitation to subscribe or make commitments for or in respect of any securities in any jurisdiction where such an offer or invitation would be unlawful.
The attached document has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Issuer, the Guarantor, the Joint Lead Managers, the Trustee, the Agents, nor any person who controls any of them, nor any director, officer, employee or agent of any of them, nor any affiliate of any such person, accepts any liability or responsibility whatsoever in respect of any difference between the attached document distributed to you in electronic format and the hard copy version available to you on request from the Joint Lead Managers.
No representation or warranty, expressed or implied, is made or given by or on behalf of the Joint Lead Managers, the Trustee, the Agents, nor any person who controls any of them, nor any director, officer, employee or agent of any of them, nor any affiliate of any such person, as to the accuracy, completeness or fairness of the information or opinions contained in the attached document and such persons do not accept responsibility or liability for any such information or opinions. Prospectus dated 12 May 2020
Swisscom Finance B.V. (incorporated in the Netherlands with limited liability) €500,000,000 0.375 per cent. Guaranteed Bonds due 2028 guaranteed by Swisscom AG (incorporated in Switzerland with limited liability) Issue Price: 99.127 per cent.
The €500,000,000 0.375 per cent. Guaranteed Bonds due 2028 (the “Bonds”) will be issued by Swisscom Finance B.V. (the “Issuer”) and guaranteed by Swisscom AG (the “Guarantor”). Interest on the Bonds will be payable annually in arrear on 14 November in each year, save that the first payment of interest shall be payable on 14 November 2020 in respect of the period from (and including) 14 May 2020 to (but excluding) 14 November 2020 and will amount to €1.885 per Calculation Amount. Payments on the Bonds will be made without deduction for or on account of taxes of the Netherlands or Switzerland to the extent described under “Terms and Conditions of the Bonds — Taxation”. The Bonds will mature on 14 November 2028 (the “Maturity Date”). The Bonds will be subject to redemption in whole, but not in part at their principal amount, together with accrued interest, at the option of the Issuer (a) during the period between 90 days prior to the Maturity Date (the “Early Call Date”) and the Maturity Date; (b) at any time if 80 per cent. or more in principal amount of the Bonds originally issued have been redeemed (other than where 80 per cent. or more in principal amount of the Bonds originally issued have been redeemed pursuant to the Issuer Make Whole Call Option) or purchased; and (c) at any time in the event of certain changes affecting taxation in the Netherlands or Switzerland. The Bonds will also be subject to redemption in whole or in part at the higher of (a) their principal amount or (b) the sum of the then present values of the remaining scheduled payments of principal and interest discounted to the Make Whole Optional Redemption Date (as defined herein) on an annual basis and assuming, for this purpose, that the Bonds are to be redeemed on the date falling 90 days prior to the Maturity Date, in each case together with accrued interest, at the option of the Issuer at any time. In addition, upon the occurrence of a Change of Control Event (as defined herein), the Bonds may be redeemed at the option of the relevant holder at their principal amount together with accrued interest. See “Terms and Conditions of the Bonds — Redemption and Purchase”. Application has been made to the Irish Stock Exchange plc trading as Euronext Dublin (“Euronext Dublin”) for the Bonds to be admitted to its official list (the “Official List”) and to trading on Euronext Dublin’s Regulated Market (the “Market”). References in this Prospectus to the Bonds being “listed” (and all related references) shall mean that the Bonds have been admitted to the Official List and have been admitted to trading on the Market. The Market is a regulated market for the purposes of Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments, as amended (“MiFID II”). This Prospectus has been approved by the Central Bank of Ireland (the “Central Bank”), as competent authority under Regulation (EU) 2017/1129 (the “Prospectus Regulation”). The Central Bank only approves this Prospectus as meeting the standards of completeness, comprehensibility and consistency imposed by the Prospectus Regulation. Such approval should not be considered as an endorsement of either the Issuer, the Guarantor or the quality of the Bonds that are the subject of this Prospectus and investors should make their own assessment as to the suitability of investing in the Bonds. The Bonds are not intended to be offered, sold or otherwise made available to, and should not be offered, sold or otherwise made available to, retail clients, as defined in MiFID II and/or as defined in the Swiss Financial Services Act (“FinSA”). The Bonds will be issued in minimum denominations of €100,000 and higher integral multiples of €1,000. The Bonds will initially be represented by a global certificate (the “Global Certificate”), which will be deposited with, and registered in the name of a nominee for, a common safekeeper (the “Common Safekeeper”) on behalf of Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream, Luxembourg”) on or prior to 14 May 2020. The Global Certificate will be exchangeable for individual certificates in registered form (“Certificates”) in the limited circumstances set out in it. See “Summary of Provisions relating to the Bonds while in Global Form”. The Bonds and the Guarantee have not been, and will not be, registered under the United States Securities Act 1933, as amended (the “Securities Act”). The Bonds are being offered outside the United States by the Joint Lead Managers (as defined in “Subscription and Sale” below) in accordance with Regulation S under the Securities Act (“Regulation S”), and may not be offered or sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from the registration requirements of the Securities Act. The Bonds and the Guarantee have neither been, nor will be, prepared, approved, filed or published in accordance with the FinSA. The Bonds are expected to be rated A2 by Moody’s Investor Services Ltd and A by S&P Global Ratings Europe Limited. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction, revision or withdrawal at any time by the assigning rating agency. Moody’s Investor Services Ltd is established in the United Kingdom (the “UK”) and S&P Global Ratings Europe Limited is established in the European Union (the “EU”) and each is registered under Regulation (EC) No 1060/2009, as amended (the “CRA Regulation”). This Prospectus will be valid for a year from 14 May 2020. The obligation to supplement the Prospectus in the event of significant new factors, material mistakes or material inaccuracies will not apply when the Prospectus is no longer valid. For this purpose, “valid” means valid for making offers to the public or admissions to trading on a regulated market by or with the consent of the Issuer and the obligation to supplement the Prospectus is only required within its period of validity between the time when the Prospectus is approved and the closing of the offer period for the Bonds or the time when trading on a regulated market begins, whichever occurs later. Prospective investors should have regard to the factors described under the section headed “Risk Factors” in this Prospectus. Global Coordinator Credit Suisse Joint Lead Managers BNP PARIBAS Credit Suisse Landesbank Baden-Württemberg UniCredit Bank IMPORTANT NOTICES
This Prospectus comprises a prospectus within the meaning of Article 6(3) of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 (the “Prospectus Regulation”). The Issuer and the Guarantor (the “Responsible Persons”) accept responsibility for the information contained in this Prospectus. To the best of the knowledge of each of the Issuer and the Guarantor, the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
This Prospectus is to be read in conjunction with all the documents which are incorporated herein by reference (see “Documents Incorporated by Reference”).
To the fullest extent permitted by law, BNY Mellon Corporate Trustee Services Limited (the “Trustee”), The Bank of New York Mellon, London Branch (the “Principal Paying Agent”), The Bank of New York Mellon SA/NV, Luxembourg Branch (the “Registrar” and the “Transfer Agent”, and together with the Principal Paying Agent, the “Agents”) and the Joint Lead Managers (as defined in “Subscription and Sale” below), accept no responsibility whatsoever for the contents of this Prospectus or for any other statement, made or purported to be made by a Joint Lead Manager, the Trustee or any Agent or on its behalf in connection with the Issuer, the Guarantor or the issue and offering of the Bonds. Each Joint Lead Manager, the Trustee and each Agent accordingly disclaims all and any liability whether arising in tort or contract or otherwise (save as referred to above) which it might otherwise have in respect of this Prospectus or any such statement.
No person is authorised to give any information or to make any representation not contained in this Prospectus and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Issuer, the Guarantor, the Joint Lead Managers, the Trustee or the Agents. Neither the delivery of this Prospectus nor any sale made in connection herewith shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer or the Guarantor since the date hereof or the date upon which this Prospectus has been most recently amended or supplemented or that there has been no adverse change in the financial position of the Issuer or the Guarantor since the date hereof or the date upon which this Prospectus has been most recently amended or supplemented or that the information contained in it or any other information supplied in connection with the Bonds is correct as of any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same.
The Bonds may not be a suitable investment for all investors. Each potential investor in the Bonds must determine the suitability of the investment in light of its own circumstances. In particular, each potential investor should (a) have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, the merits and risks of investing in the Bonds and the information contained in this Prospectus or any applicable supplement; (b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Bonds and the impact such investment will have on its overall investment portfolio; (c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Bonds, including where the currency for principal or interest payments is different from the potential investor’s currency; (d) understand thoroughly the terms of the Bonds and be familiar with the behaviour of any relevant indices and financial markets; and (e) 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.
OFFER RESTRICTIONS
This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer, the Guarantor or the Joint Lead Managers to subscribe or purchase, any of the Bonds. The distribution of this Prospectus and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes
3 are required by the Issuer, the Guarantor and the Joint Lead Managers to inform themselves about and to observe any such restrictions.
For a description of further restrictions on offers and sales of Bonds and distribution of this Prospectus, see “Subscription and Sale” below.
MiFID II PRODUCT GOVERNANCE/PROFESSIONAL INVESTORS AND ECPs ONLY TARGET MARKET – Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the Bonds has led to the conclusion that: (i) the target market for the Bonds is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the Bonds to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Bonds (a “distributor”) should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Bonds (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.
PROHIBITION OF SALES TO EEA AND UK RETAIL INVESTORS – The Bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”) or the United Kingdom (the “UK”). For these purposes, a retail investor means a person who is one (or both) of: (i) a retail client as defined in point (11) of MiFID II; and (ii) a customer within the meaning of Directive (EU) 2016/97 (the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently, no key information document required by Regulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Bonds or otherwise making them available to retail investors in the EEA or the UK has been prepared and therefore offering or selling the Bonds or otherwise making them available to any retail investor in the EEA or the UK may be unlawful under the PRIIPs Regulation.
NOTICE TO INVESTORS IN SWITZERLAND – The Bonds will not be listed on the SIX Swiss Exchange or any other exchange or regulated trading venue in Switzerland. Neither this Prospectus nor any other offering or marketing material relating to the Bonds constitutes (i) a prospectus as such term is understood pursuant to Article 652a or Article 1156 of the Swiss Federal Code of Obligations (as such articles were in effect immediately prior to the entry into effect of the Swiss Federal Act on Financial Services ("FinSA")) or pursuant to the relevant provisions of the FinSA or (ii) a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange or any other exchange or regulated trading venue in Switzerland.
STABILISATION
In connection with the issue of the Bonds, Credit Suisse Securities (Europe) Limited (the “Stabilisation Manager”) (or any person acting on behalf of the Stabilisation Manager) may over-allot Bonds or effect transactions with a view to supporting the market price of the Bonds at a level higher than that which might otherwise prevail. However, stablisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Bonds is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the Bonds and 60 days after the date of the allotment of the Bonds. Any stabilisation action or over-allotment must be conducted by the Stabilisation Manager (or any person acting on behalf of the Stabilisation Manager) in accordance with all applicable laws and rules.
GENERAL
Unless otherwise specified or the context requires, references to “Swiss Francs” and “CHF” are to the lawful currency of Switzerland and references to “euro”, “EUR” and “€” are to the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the Treaty establishing the European Community.
4 Unless otherwise specified or the context requires, references herein to “Swisscom”, the “Group” and the “Swisscom Group” are to the Guarantor and its subsidiaries.
The language of this Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law.
FORWARD-LOOKING STATEMENTS
This Prospectus includes statements that are, or may be deemed to be, “forward-looking statements”. These forward- looking statements may be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Prospectus and include, but are not limited to, statements regarding the intentions of the Issuer and/or the Guarantor, beliefs or current expectations concerning, among other things, the business, results of operations, financial position and/or prospects of the Issuer and/or the Guarantor.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the financial position and results of operations of the Group, and the development of the markets and the industries in which members of the Group operate, may differ materially from those described in, or suggested by, the forward-looking statements contained in this Prospectus. In addition, even if the Group’s results of operations and financial position, and the development of the markets and the industries in which the Group operates, are consistent with the forward-looking statements contained in this Prospectus, those results or developments may not be indicative of results or developments in subsequent periods. A number of risks, uncertainties and other factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements. See “Risk Factors” below.
5 TABLE OF CONTENTS
Page
RISK FACTORS ...... 7
DOCUMENTS INCORPORATED BY REFERENCE...... 21
OVERVIEW...... 22
DESCRIPTION OF THE ISSUER...... 26
DESCRIPTION OF THE GUARANTOR ...... 28
USE AND ESTIMATED NET AMOUNT OF PROCEEDS...... 39
GREEN BOND FRAMEWORK...... 40
TERMS AND CONDITIONS OF THE BONDS...... 41
SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM...... 56
TAXATION ...... 59
SUBSCRIPTION AND SALE ...... 64
INDEPENDENT AND STATUTORY AUDITORS...... 66
ALTERNATIVE PERFORMANCE MEASURES...... 67
GENERAL INFORMATION ...... 70
6 RISK FACTORS
The following is a description of risk factors which are specific to the Issuer, the Guarantor, the Bonds and/or the Guarantee and which are material in respect of the Bonds and the financial situation of the Issuer and the Guarantor.
Each of the Issuer and the Guarantor believes that the following factors may have a significant impact on its financial situation and/or future prospects and may therefore affect the Issuer’s or the Guarantor’s ability to fulfil its obligations under the Bonds or the Guarantee. In addition, any of these factors may significantly affect the price of the Bonds, as well as the rights of the prospective investors. As a result, prospective investors assume the risk that the Issuer and/or the Guarantor may become insolvent or otherwise are at risk of losing all or part of the invested amount and/or not receiving all payments due in respect of the Bonds and the Guarantee. Most of these factors are contingencies which may or may not occur and neither the Issuer nor the Guarantor is in a position to express a view on the likelihood of any such contingency occurring.
In addition, factors which are material for the purpose of assessing the market risks associated with the Bonds are also described below.
Each of the Issuer and the Guarantor believes that the factors described below represent the principal risks inherent in investing in the Bonds, but the inability of the Issuer and/or the Guarantor to pay interest, principal or other amounts on or in respect of the Bonds and the Guarantee may occur for other reasons and neither the Issuer nor the Guarantor represents that the statements below regarding the risks of holding the Bonds are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Prospectus, conduct an independent risk assessment and consult their respective financial, legal, tax and other advisors prior to making any investment decision.
Investment decisions should not be made solely based on the risk presentations contained in this Prospectus, as this information cannot replace individual advice and information tailored to the needs, objectives, experiences, circumstances and knowledge of a prospective investor.
Prospective investors should only decide to buy the Bonds if they are aware of the risks involved and are able to bear any losses due to their financial circumstances and opportunities.
1 RISKS RELATED TO THE GUARANTOR’S BUSINESS AND ITS MARKET
Business conditions and the general economy
The Group faces strong competition in highly competitive markets.
All business activities of the Guarantor and its subsidiaries concern highly competitive markets. The telecommunications industry is influenced by rapidly changing customer demand for new products and services at competitive prices. Management estimates that the Group is the market leader by revenue and customer numbers in the telecommunications industry in Switzerland and its Swiss operations account for the bulk of the Group’s revenue and EBITDA. The Group faces tough competition from cable companies and other network operators as it strives to meet current and future customer needs and defend its own market share. The competitiveness of the Group depends on a variety of factors, in particular, the quality of its products and services, its expertise, its ability to innovate, its pricing structure, the success of its marketing and sales efforts, its reputation, its cost structure and the ability of its employees. If the Group fails to maintain its market position in Switzerland, Italy and/or its other markets in relation to these and other factors, it could lose existing customers, fail to attract new customers or incur substantial costs and investments in order to maintain its customer base. This could have a negative impact on the Group’s business, operations, operating profit, financial situation and/or future prospects. See also “Regulatory authorities may affect the way the Group operates its business” below.
7 A prolonged economic downturn could have a material impact on the Group’s business.
A prolonged economic downturn in Switzerland, Italy and/or the rest of the world, or continued volatility of the financial markets could have a negative impact on the Group’s business, operations, operating profit, financial situation and/or future prospects. In addition, unfavourable economic conditions may arise which could impact the Group’s ability to generate sufficient cash flow or to access capital markets to enable the Group to service or repay its indebtedness or to fund its other liquidity requirements on commercially reasonable terms. If economic conditions worsen, the Group may find that its financial performance could be impacted by delays in its customers making purchasing decisions, reductions in customers’ use of the Group’s services, default of customers, counterparties and suppliers, or (in certain circumstances) the redenomination of their contractual payment obligations. These factors could all result in a material adverse impact on the Group’s business, operations, operating profit, financial situation and/or future prospects.
Operational risks
The Group’s success depends on the effective execution of its strategy.
The Group’s success depends on its ability effectively to identify, develop and execute its strategy, including expanding and developing its growing ultra-fast broadband coverage and fifth generation wireless technology (“5G”) network, optimising costs and efficiency and development of its core businesses and areas related to its core businesses (such as its TV/entertainment offering and cloud-based services). The execution of the Group’s strategy may result in significant costs and take longer than anticipated, and the results may be materially different from those originally planned. This could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
The Group is heavily reliant on its network and technological infrastructure.
The Group’s network and technological infrastructure is vulnerable to damage and disruptions from numerous events, including fire, flood, windstorms and other natural disasters, power outages, terrorist acts, equipment and system failures, human errors and third-party criminal acts, including cyber-attacks and other breaches of the Group’s network and information technology security. The occurrence of unexpected problems affecting the Group’s facilities, network or systems, or third-party local and long-distance networks on which the Group relies, could result in reduced user traffic and revenue, regulatory penalties and/or penal sanctions or require unanticipated capital expenditures. The occurrence of network or system failure and business interruptions could also harm the reputation or impair the ability of the Group to retain current customers or attract new customers, which could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
The Group’s business is capital intensive and depends on maintaining and continually upgrading its network infrastructure.
The Group is committed to maintaining the high quality and availability of its network infrastructures as well as expanding its network and offering (particularly with the rollout of its 5G network). As a result, the Group faces significant capital expenditure requirements, both in Switzerland and in Italy in connection with the Group’s subsidiary, Fastweb S.p.A. The combination of maintaining existing infrastructure while implementing new networks and infrastructure is expected to involve significant levels of investment, which can be hard to predict particularly when taking into account increasing regulatory requirements, the disruptive impact of unexpected events and the costs involved in obtaining licences associated with the Group’s businesses. As a result, the amount and timing of future capital requirements may differ materially from current estimates and, to the extent the Group does not have sufficient cash resources available to meet its capital expenditure needs, this may involve the Group being required to raise additional debt or equity financing at times of market dislocation when the availability of funding on commercially attractive terms is limited. Any such increase in
8 the need for capital expenditure or lack of availability of financing for capital expenditure on commercially attractive terms could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
The Group operates in a market with rapidly changing technologies.
Automation and other digital processes may not only lead to cost and efficiency gains but also pose significant risks associated with such transformation processes. New services, products and technologies are constantly emerging that can render products and services offered by the Group obsolete, as well as its technology. In addition, the increasing size of the digital market and the entrance of new competitors in the communications market, such as mobile virtual network operators, internet companies or device manufacturers, could imply the loss of value of certain assets, affect the generation of income, or otherwise cause the Group to have to update its business model. This causes the Group to invest in the development of new services, products and technology in order to compete with current or future competitors, which may result in the decrease of the Group’s profits and revenue margins. Additionally, such investments may not lead to the development or commercialisation of successful services or products.
The Group could be a target of cyber and information security threats.
The Group’s networks and systems are exposed to a number of security threats, including cyber-attacks. Hacking tools, phishing scams and disruptive malware are becoming more sophisticated and more accessible to attackers. The Group continues to develop its cyber defence capability and prevention systems to keep the likelihood of any ‘successful’ attack to a minimum, but complete protection can never be guaranteed.
A failure of the Group’s protective measures to prevent or contain a major security incident or business interruption could result in major financial loss, long-term reputational damage and loss of market share. Regulatory sanctions, fines and contract penalties might be applied, contracts might be terminated and costly concessions might be needed, together with unplanned and rapid improvements to retain business and rebuild trust. The Group might also miss opportunities to grow revenue and launch new services ahead of the Group’s competition. All of these possibilities could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
The Group is dependent on its suppliers.
The Group sources its supplies from a global market. The existence of critical suppliers in the Group’s supply chain, especially in areas such as network infrastructure, information systems or handsets with a high concentration in a small number of suppliers, poses risks that may affect the Group’s operations, and may cause legal contingencies or damages to its image in the event that a participant in the supply chain engages in unlawful practices or is exposed to trade restrictions and/or sanctions from sanctions’ authorities, A global marketplace also exposes the Group to global risks, including different standards in labour, environmental and climate change practices, increasing regulation and geopolitical events. The financial costs and/or reputational damage associated with supplier failure could be significant, particularly if it results in the Group having to change a technology or system. If the Group is unable to contract with an alternative supplier, the commitments the Group makes to its customers could be compromised, which could lead to a contractual breach, loss of revenue or penalties.
The Group’s operations are dependent on licences for information technology and intellectual property.
The Group and its operations depend to a certain degree on the use of information technology tools. The intellectual property rights related to such tools are either owned by the Group or licensed from third parties, as disclosed in “Description of the Guarantor – Licences”. Such licences may need to be secured and/or renewed from time to time. Failure by the Group successfully to secure and/or renew such licences or failure to do so on
9 commercially reasonable terms could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
Legal and regulatory risks
The business of the Group is subject to significant legal and regulatory risks.
The business activities of the Guarantor and its subsidiaries are subject to detailed and comprehensive legal and regulatory provisions as well as supervision by local, cantonal, federal and foreign authorities (where a subsidiary of the Guarantor operates in foreign states). Changes to these provisions or the adoption of new legal and regulatory provisions may affect the way in which the Group operates. Although the Group strives to comply with all applicable legal and regulatory provisions, risks exist, in particular in areas where the relevant provisions are re-enacted or are unclear, or where authorities have adapted their policies and instructions or initiated proceedings against the Group. Additionally, the Guarantor and its subsidiaries are subject to numerous risks relating to legal, employment, civil, tax, regulatory and competition proceedings to which they are a party or in which they are otherwise involved, or which could develop in the future, the outcome of which is unpredictable. The consequences of proceedings being brought against the Guarantor or any member of the Group may include, but are not limited to, fines, penalties, negative reporting, reputational damage, suspension or revocation of authorisations, injunctions and claims for damages, all of which could have a negative impact on the Group’s business, operations, operating profit, financial situation and/or future prospects.
Regulatory authorities may affect the way the Group operates its business.
As the Group operates in heavily regulated markets, decisions that regulatory authorities impose on the Group may restrict flexibility in managing the business of the Group and may force the Group to offer services to competitors or reduce the prices that the Group charges for products and services, either of which could have a material negative impact on the Group’s revenues, profits and market shares. In addition, the Swiss competition authorities have in recent years classified the Guarantor and its subsidiaries as being market dominant in a number of sub-markets, and the Guarantor has been subject to fines as a result of this (see “Description of the Guarantor - Legal and Arbitration Proceedings” and Note 3.5 of the Group’s audited consolidated financial statements for the financial year ended 31 December 2019, which is incorporated by reference to this Prospectus).
Furthermore, national regulatory authorities have extensive powers to intervene in product design and pricing, with significant effects on operations. The Group can anticipate only to a limited extent such regulatory interventions, which may additionally intensify existing price and competitive pressure and which could have a negative impact on the Group’s business, operations, operating profit, financial situation and/or future prospects.
Failure to comply with relevant data protection and privacy laws could adversely affect the Group.
The Group collects, stores and uses data in the ordinary course of operations, which is protected by data protection laws. Although the Group takes precautions to protect customer data in accordance with the privacy requirements provided for under applicable laws, they may fail to do so and unauthorised access to customer data could result. The Group works with independent and third-party suppliers, partners, sales agents, service providers and call centre agents, and cannot exclude the possibility that such third parties could also experience system failures involving the storage or transmission of proprietary information. Laws such as the European Union’s General Data Protection Regulation impose a wide range of compliance obligations and carry with them significant financial penalties for non-compliance. Violations of data protection laws by the Group or one of its partners or suppliers may result in fines, reputational harm and customer churn and could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
10 The Group may be negatively affected as a consequence of failing to comply with applicable laws and regulations.
Failure by the Group, the Group’s directors, officers or employees, or associated persons such as suppliers, partners, agents and service providers, to comply with anti-corruption, anti-money laundering, bribery, sanctions or other legislation could result in significant penalties, criminal prosecution and damage to the Group’s reputation. This could in turn impact the Group’s future revenue and cash flow, the extent of which would depend on the nature of the breach, the legislation concerned and any penalties. Allegations of corruption, bribery or violation of sanctions regulations or other laws could also lead to reputational damage with investors, regulators, civil society and customers. Further, if fraud is committed, there is a risk of financial misstatement which if undetected can have a material financial impact and potential litigation and regulatory consequences.
Although the Group has internal policies and procedures designed to ensure compliance with applicable laws and regulations, in particular with anti-corruption laws and anti-money laundering regulations, there can be no assurance that such policies and procedures will be sufficient or that the Group’s employees, directors, officers, suppliers, partners, agents and service providers will not take actions in violation of the Group’s policies and procedures (or otherwise in violation of the relevant regulations) for which the Group may be ultimately held responsible. Violations of anti-corruption laws and anti-money laundering regulations could lead to financial penalties, exclusion from government contracts, damage to the Group’s reputation and result in other consequences, that could have a material adverse effect on the Group’s business, results of operations and financial condition.
Environmental, social, governance and employee risks
Environmental, social and governance risks may adversely impact the Group’s business.
The Group is subject to environmental, social and governance (“ESG”) risks, such as any failure to follow ethical business behaviour or accusations of its operations having a negative environmental impact. The Group’s supply chains for direct suppliers and subcontractors primarily cover Europe, the United States and Asia. They are part of the electronics sector, particularly in the entertainment electronics, data processing hardware and network equipment segments. The raw materials contained in Swisscom’s various products come from a wide range of countries and regions. Questions are increasingly being raised on the origin of the raw materials used and the associated environmental and sociological risks. Similarly, the Group has been subject to scrutiny over its network expansion, particularly as regards the rollout of 5G in Switzerland where concerns around the effect of electromagnetic radiation from mobile antennas or mobile handsets has resulted in the imposition of very strict rules and regulations which may hamper the further development of the 5G network and/or result in increased cost for the Group.
A failure to comply with any requisite ESG standards could adversely affect the Group’s reputation, have a negative impact on its relations with employees and customers and/or increase significantly the Group’s costs, all of which could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
The Group is reliant on the ability to retain and/or recruit appropriately skilled employees.
The Group has a large number of employees and faces a significant challenge in maintaining employee motivation and high staff loyalty in a fast-changing cultural environment, while also managing the pressure on costs and at the same time seeking to drive growth and efficiency. If the Group is unable to retain and/or recruit sufficient numbers of appropriately skilled employees this could result in a loss of critical skills and greater need for external recruitment, which would add cost to the business, and may impact the Group’s ability to execute its strategy. This could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
11 Failure adequately to protect the health, safety and well-being of the Group’s employees and other stakeholders could adversely impact the Group’s reputation, profitability and future growth.
Although the Group has invested in health and safety procedures and controls to safeguard the health, safety and wellbeing of its employees and other stakeholders, accidents or incidents could still occur due to unforeseen risks, causing injury or harm to individuals and impacting the Group’s business operations. This has the potential to damage the Group’s reputation and lead to criminal and civil litigation, as well as business disruption, which could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
Outbreaks of infectious disease, pandemics or public health emergencies could have a material adverse effect on the Group.
Outbreaks of infectious disease, pandemics or public health emergencies, such as the recent outbreak of COVID-19, could negatively impact economic conditions and financial markets regionally and globally. If such outbreaks of infectious disease, pandemics or public health emergencies continue for any length of time, whilst the full potential impact is difficult to estimate, this could result in a prolonged period of restrictions or disruptions to travel, commercial and business activities. Additionally, such events could give rise to additional cost, cause disruption to the Group’s operations and its supply chains and could lead to lower customer demand for services provided by the Group, in particular in a prolonged economic downturn. This could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
Ownership and ratings risks
Any change in the ownership of the Group could have a negative impact on the Group’s business and financial condition.
The Guarantor is the parent company of the Group, with the Swiss federal government (“Swiss Confederation”) as a majority shareholder of 50.95% of the issued share capital of the Guarantor. The Swiss Confederation is required to hold the majority of the share capital and voting rights of the Guarantor pursuant to the Telecommunication Enterprises Act of Switzerland of 30 April 1997 (“TEA”). The Guarantor is not aware of any prospective change to the TEA that may result in the Swiss Confederation reducing its shareholding in the Guarantor, and if this were to occur it may have a material adverse effect on the Group’s perceived creditworthiness and consequently on its business, financial situation and/or future prospects.
Any changes in the Guarantor’s credit rating could have a material adverse impact on the Group.
The Guarantor is currently rated A (stable) by S&P Global Ratings Europe Limited and A2 (stable) by Moody’s Investors Services Ltd. If the Guarantor’s credit rating were to be downgraded, this could have a significant adverse impact on the Group’s ability to gain access to funding at advantageous rates which could materially impact the Group’s business, operations, operating profit, financial situation and/or future prospects.
Market risks
The Group is subject to fluctuations in foreign exchange rates.
The Guarantor reports its financial results in Swiss Francs and the Guarantor’s principal exposure to currency exchange rates arises from fluctuations in euro/Swiss Franc exchange rate and USD/Swiss Franc exchange rate. As the Guarantor reports its financial results in Swiss Francs, the results for each period are affected by fluctuations in exchange rates. Sustained adverse changes in exchange rates against the Swiss Franc could have a material adverse effect on the Group’s business, operations, operating profit, financial situation and/or future prospects.
12 Whilst the Guarantor manages the Group’s foreign currency risk through hedging activity which aims to reduce the impact of exchange rate volatility on the results and cash flows of the Group, there can be no assurance that such foreign currency risk management will be effective. If such foreign currency risk management is not effective, this could have a material adverse effect on the Guarantor’s results of operations and financial condition.
The Group is subject to fluctuations in interest rates.
An adverse movement in interest rates could negatively affect the Group’s profitability, cash flow and balance sheet. The Group’s interest rate risk mainly arises from third-party borrowings. The Group’s interest-bearing liabilities consisted of debt securities and loans, the majority of which bear interest at fixed rates but some of which have a variable interest rate. To the extent that the Group has liabilities with a variable interest rate, significant changes to the interest rate could have a material adverse effect on the financial condition of the Group.
Other business-related risks
The Group may experience impairment loss with relation to its assets.
The competitive dynamics carry risks that could have a detrimental impact on Fastweb’s or other members of the Group’s strategy and jeopardise projected revenue growth. The recoverability of Fastweb’s or other members of the Group’s net assets recognised in the consolidated financial statements is contingent above all on achieving the financial targets set out in the business plan (revenue growth, improvement in EBITDA margin and reduction in capital expenditure ratio). If future growth is lower than projected, there is a risk that this will result in an impairment loss. In Italy, major uncertainty also surrounds the future trend in interest rates and the country risk premium. An increase in such interest rates or the country risk premium could lead to an impairment loss.
Failure to perform on major or high-value contracts/reliance on such contracts could adversely affect the Group.
The Group has several major, complex and high-value government, national and multinational customer contracts. The revenue arising from, and the profitability of, these contracts is subject to a number of factors including: variation in cost, achievement of cost reductions anticipated in the contract pricing, delays in the achievement of agreed milestones owing to factors either within or outside the Group’s control, changes in customers’ needs, their budgets, strategies or businesses, penalties for failing to perform against agreed service levels and the performance of the Group’s suppliers. Any of these factors could make a contract less profitable or even loss-making. Failure by the Group to manage and meet its commitments under these contracts, as well as changes in customers’ requirements, their budgets, strategies or businesses, may lead to a reduction in the Group’s expected future revenue, profitability and cash generation.
The Group’s insurance may not cover all potential losses or liabilities that may arise.
The Group is not insured against all potential losses or liabilities that may arise. Consequently, if a loss or liability occurs that is not or not fully covered by an insurance, it may have a material adverse effect on the Group’s business, financial situation and/or future prospects.
13 2 OTHER RISKS RELATING TO THE ISSUER OR THE GUARANTOR
The Guarantor is a holding company and depends on members of the Group.
The Guarantor’s results of operations and financial condition are dependent on the trading performance of members of the Group and upon the level of distributions, interest payments and loan repayments (if any) received from the Group’s operating subsidiaries and associated undertakings, any amounts received from asset disposals and the level of cash balances. Certain of the Group’s operating subsidiaries and associated undertakings are or may, from time to time, be subject to restrictions on their ability to make distributions and loans including as a result of foreign exchange and other regulatory restrictions and agreements with the other shareholders of such subsidiaries or associated undertakings and, from time to time, restrictive covenants in loan agreements, which may negatively impact the liquidity position of the Group.
The Issuer relies on the credit of the Guarantor.
The Issuer is a finance entity and relies on the credit of the Guarantor. The assets of the Issuer should not be primarily relied upon by prospective investors in making an investment decision to purchase the Bonds. Rather, any investment decision to purchase the Bonds should be based primarily on the guarantee and the financial strength of the Guarantor.
The Issuer’s and Guarantor’s financial performance and other factors could adversely impact the Issuer’s and the Guarantor’s ability to make payments on the Bonds or perform under the Guarantee, as applicable.
The Issuer’s ability to make scheduled payments with respect to the Bonds, and the Guarantor’s ability to perform its obligations under the Guarantee, depends on the Issuer’s and the Guarantor’s financial and operating performance, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors beyond the Issuer’s and Guarantor’s control.
The Bonds do not restrict the Issuer’s or the Guarantor’s ability to incur additional debt or prohibit the Issuer or the Guarantor from taking other action that could negatively impact the holders of the Bonds.
Neither the Issuer nor the Guarantor is restricted under the terms and conditions of the Bonds from incurring additional indebtedness, and there is no guarantee that the Issuer or the Guarantor will not create, incur, assume or guarantee additional indebtedness and that such debt may not rank ahead of the Bonds, either by virtue of security granted by the Issuer or the Guarantor or by way of structural subordination of the Bonds. In addition, the Bonds do not require the Issuer or the Guarantor to achieve or maintain any minimum financial results relating to their respective financial positions or results of operations. The Issuer’s and/or the Guarantor's ability to recapitalise, incur additional debt, secure existing or future debt, or take a number of other actions that are not limited by the terms of the Bonds, including repurchasing indebtedness or common shares or preferred shares, if any, or paying dividends, could have the effect of diminishing the Issuer’s and/or the Guarantor's ability to make payments on the Bonds when due.
The right to receive payments under the Guarantee of the Guarantor may be adversely affected by Swiss bankruptcy laws.
The Guarantor is incorporated under the laws of Switzerland. Accordingly, bankruptcy proceedings with respect to the Guarantor are likely to proceed under, and to be governed primarily by, Swiss bankruptcy law. These
14 provisions afford debtors and unsecured creditors only limited protection from the claims of secured creditors and it may not be possible for other unsecured creditors to prevent or delay the secured creditors from enforcing their security to repay the debts due to them under the terms that such security was granted.
Enforcement claims or court judgments against the Guarantor must be converted into Swiss francs.
Enforcement claims, including for court judgments, against the Guarantor under Swiss debt collection or bankruptcy proceedings may only be made in Swiss francs and any foreign currency amounts must accordingly be converted into Swiss francs. With respect to enforcing creditors, any such foreign currency amounts will be converted at the exchange rate prevailing on (i) the date of instituting the enforcement proceedings (Betreibungsbegehren), (ii) the date of the filing for the continuation of the bankruptcy procedure (Fortsetzungsbegehren) or (iii) the date on which any amounts claimed first became due and payable (Fälligkeit), whichever date is more favourable for the creditors. With respect to non-enforcing creditors, foreign currency amounts will be converted at the exchange rate prevailing at the time of the adjudication of bankruptcy (Konkurseröffnung).
3 FACTORS WHICH ARE MATERIAL FOR THE PURPOSE OF ASSESSING THE MARKET RISKS ASSOCIATED WITH THE BONDS
Set out below is a brief description of certain risks relating to the Bonds, of the principal market risks (including liquidity risk and exchange rate risk) and of certain tax risks relating to the Bonds:
The Bonds may not be a suitable investment for all investors seeking exposure to green assets, and there is currently no market consensus on what constitutes a “green” bond. The Issuer has indicated that the net proceeds from the issue of the Bonds will be applied specifically to finance or refinance a portfolio of eligible green projects in Switzerland (the “Eligible Green Projects”) which is selected based on specific categories and criteria (the “Eligible Green Project Portfolio”) under the Green Bond Framework of the Guarantor dated March 2020 (the “Green Bond Framework”), published on the Guarantor’s website at https://www.swisscom.ch/en/about/investors/financing.html#swisscom-green-bonds and as updated from time to time. Prospective investors should have regard to the information set out in this Prospectus and the Green Bond Framework regarding such use of proceeds and must determine for themselves the relevance of such information for the purpose of any investment in the Bonds together with any other investigation such investor deems necessary.
Pursuant to the recommendations under the 2018 edition of the Green Bond Principles published by the International Capital Markets Association, the Guarantor has engaged Sustainalytics to provide a second party opinion regarding its Green Bond Framework (the “second party opinion”). The Green Bond Framework, the second party opinion and associated reporting are available on Swisscom’s website https://www.swisscom.ch/en/about/investors/financing.html#swisscom-green-bonds. The Green Bond Framework and the second party opinion are not incorporated into and do not form part of this Prospectus. The second party opinion may not reflect the potential impact of all risks related to the structure, market, additional risk factors discussed here and other factors that may affect the value of the Bonds. The second party opinion is not a recommendation to buy, sell or hold securities and is only current as of the date on which the opinions were initially issued.
There is currently no clearly defined definition (legal, regulatory or otherwise) of, nor market consensus as to what constitutes, a "green" or "sustainable" or an equivalently labelled project, or as to what precise attributes are required for a particular project to be defined as “green” or “sustainable” or such other equivalent label, nor can there be any assurance that a clear definition or consensus will develop over time or that the Green Bond Framework will reflect any such definition or consensus. As such, no assurance can be given that the Eligible
15 Green Project Portfolio will meet the criteria, expectations and objectives of investors regarding the environmental impact or sustainability performance of such green (or equivalently labelled) projects or that any adverse environmental, social and/or other impacts will not occur during the implementation of any Eligible Green Projects.
No assurance is given by the Issuer, the Guarantor, the Joint Lead Managers, the Trustee or the Agents that the use of such proceeds for any Eligible Green Projects will satisfy, whether in whole or in part, any present or future investor expectations or requirements as regards any investment criteria or guidelines with which such investor or its investments are required to comply, whether by any present or future applicable law or regulations or by its own by-laws or other governing rules or investment portfolio mandates, in particular with regard to any direct or indirect environmental, sustainability or social impact of any projects or uses, the subject of or related to, any Eligible Green Projects.
No assurance or representation is given as to the suitability or reliability for any purpose whatsoever of any opinion or certification of any third party (whether or not solicited by the Issuer or the Guarantor) which may be made available in connection with the issue of the Bonds and in particular with any Eligible Green Project to fulfil any environmental, sustainability, social and/or other criteria. For the avoidance of doubt, any such opinion or certification is not, and shall not be deemed to be, incorporated into or form part of this Prospectus, and is not, and should not be deemed to be, a recommendation by the Issuer, the Guarantor, the Joint Lead Managers, the Trustee, the Agents or any other person to buy, sell or hold the Bonds, and is only current as of the date that it was initially issued. Prospective investors should determine for themselves the relevance of any such opinion or certification (if issued) and/or the information contained therein and/or the provider of such opinion or certification for the purpose of any such investment in the Bonds. At present, the providers of such opinions and certifications are not subject to any specific regulatory regime or oversight.
While it is the intention of the Issuer to apply the net proceeds of the issue of the Bonds in accordance with the Green Bond Framework, there can be no assurance that the relevant project(s) or use(s) the subject of, or related to, the Eligible Green Project Portfolio will be capable of being implemented in or substantially in such manner and/or accordance with any timing schedule and that accordingly such proceeds will be totally or partially disbursed for such green projects. Nor can there be any assurance that such green projects will be completed within any specified period or at all or with the results or outcome (whether or not related to the environment) as originally expected or anticipated.
Any such event or failure by the Issuer or the Guarantor will not constitute an Event of Default under the Bonds. Any such event or failure to apply the proceeds for any green projects as aforesaid and/or withdrawal of any second party opinion or certification or any opinion or certification attesting that the Issuer is not complying in whole or in part with any matters for which such opinion or certification is opining or certifying on may have a material adverse effect on the value of the Bonds and result in adverse consequences for investors with portfolio mandates to invest in securities to be used for a particular purpose.
None of the Joint Lead Managers will verify or monitor the proposed use of proceeds of the Bonds.
Risks associated with redemption of the Bonds. The Bonds contain optional redemption features. An optional redemption feature is likely to limit the market value of the Bonds. During any period when the Issuer may elect to redeem Bonds, the market value of those Bonds generally will not rise substantially above the price at which they can be redeemed. This may also be true prior to any redemption period. The Issuer may be expected to redeem Bonds when its cost of borrowing is lower than the interest rate on the Bonds. 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 on the Bonds 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.
16 The Bonds are subject to a fixed rate of interest. The Bonds are subject to a fixed rate of interest. An investment in the Bonds involves the risk that if market interest rates subsequently increase above the rate paid on the Bonds, this will adversely affect the value of the Bonds.
Modification, waivers and substitution. The terms and conditions of the Bonds and the Trust Deed contain provisions for calling meetings of Bondholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Bondholders including Bondholders who did not attend and vote at the relevant meeting and Bondholders who voted in a manner contrary to the majority.
Changes in law. The terms and conditions of the Bonds are governed by, and construed in accordance with, English law. 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 Prospectus and any such change could materially adversely affect the value of any Bonds affected by it.
Payments of additional amounts are subject to exceptions and may not be enforceable. Although the terms and conditions of the Bonds provide, in certain circumstances, for the payment of additional amounts by the Issuer or the Guarantor, as the case may be, if either of them becomes obligated by law to make any withholding or tax deduction in respect of any interest payable by it in respect of the Bonds or the Guarantee, as applicable, the obligation to pay such additional amounts is subject to certain exceptions. Further, under Swiss law, an agreement to pay additional amounts for the deduction of Swiss withholding tax may not be valid and, thus, may prejudice the validity and/or enforceability of anything to the contrary contained in the Bonds, the Guarantee or any other document or agreement.
There is no active trading for the Bonds. The Bonds are new securities which may not be widely distributed and for which there is currently no active trading market. If the Bonds are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon factors such as the prevailing interest rates, the market for similar securities, the time remaining to the maturity of the Bonds, the outstanding amount of the Bonds, the redemption features of the Bonds, general economic conditions and the financial condition of the Issuer. Although application has been made for the Bonds to be admitted to trading on the Market and to be listed on the Official List, there is no assurance that such application will be accepted or that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for the Bonds.
Such factors will also affect the market value of the Bonds. Investors may not be able to sell Bonds readily or at prices that will enable investors to realise their anticipated yield. No investor should purchase Bonds unless the investor understands and is able to bear the risk that the Bonds may not be readily sellable, that the value of Bonds will fluctuate over time and that such fluctuations might be significant.
The market prices of the Bonds may be volatile. The market prices of the Bonds will depend on many factors that may vary over time and some of which are beyond the Issuer’s control, including the Issuer’s and Guarantor’s financial performance, the amount of indebtedness the Guarantor and its subsidiaries on a consolidated basis have outstanding, market interest rates, the market for similar securities, competition and general economic conditions. As a result of these factors, investors may only be able to sell their Bonds at prices below those investors believe to be appropriate, including prices below the price the investors have paid for them.
17 Exchange rate risks and exchange controls. The Issuer will pay principal and interest on the Bonds and the Guarantor will make any payments under the Guarantee in euro. 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 euro. These include the risk that exchange rates may significantly change (including changes due to devaluation of the euro 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 euro would decrease (i) the Investor’s Currency-equivalent yield on the Bonds, (ii) the Investor’s Currency-equivalent value of the principal payable on the Bonds and (iii) the Investor’s Currency-equivalent market value of the Bonds.
Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate or the ability of the Issuer or the Guarantor to make payments in respect of the Bonds. As a result, investors may receive less interest or principal than expected, or no interest or principal. Any of the foregoing events could adversely affect the value of the Bonds.
Limited tax gross-up protection for eligible investors. Potential investors should be aware that if the Issuer, the Guarantor, any Agent or any other person is required to make any withholding or deduction for, or on account of, any present or future taxes, duties or charges of whatever nature in respect of any payment in respect of the Bonds, then the Issuer, Guarantor, any Agent or that other person shall make such payment after such withholding or deduction has been made and will account to the relevant authorities for the amount so required to be withheld or deducted.
The Issuer, or as the case may be, the Guarantor, will pay such additional amounts as may be necessary in order that the net payment received by each holder of the Bonds, after withholding for any taxes imposed by tax authorities in the Netherlands or Switzerland upon payments made by or on behalf of the Issuer in respect of the Bonds or the Guarantor in respect of the Guarantee (as applicable), will equal the amount which would have been received in the absence of any such withholding taxes, except that no such additional amounts shall be payable in respect of any Bonds in the circumstances described in Conditions 8(a) to (f) (inclusive).
EU financial transactions tax (“FTT”) proposals may give rise to tax liabilities. On 14 February 2013, the European Commission published a proposal (the “Commission’s Proposal”) for a Directive for a common FTT in the Kingdom of Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia, although Estonia has since stated that it will not participate (the “FTT Participating Member States”). The Commission’s Proposal has a very broad scope and could, if introduced, apply to certain dealings in the Bonds (including secondary market transactions) in certain circumstances.
Under the Commission’s Proposal, the FTT could apply in certain circumstances to persons both within and outside of the FTT Participating Member States. Generally, it would apply to certain dealings in the Bonds where at least one party is a financial institution, and at least one party is established in a FTT Participating Member State. A financial institution may be, or be deemed to be, “established” in a FTT Participating Member State in a broad range of circumstances, including: (a) by transacting with a person established in a FTT Participating Member State; or (b) where the financial instrument which is subject to the dealings is issued in a FTT Participating Member State.
The FTT proposal remains subject to negotiation between the FTT Participating Member States and the scope of any such tax is uncertain. Additional EU member states may decide to participate. Prospective holders of the Bonds are advised to seek their own professional advice in relation to the FTT.
18 The tax treatment of the Bonds with respect to Swiss withholding tax. The Swiss withholding taxation laws impose a 35 per cent. withholding tax on interest payments (including if covered by a guarantee in respect thereof) on bonds issued (i) by an issuer resident in Switzerland for Swiss withholding taxation purposes, or (ii) by a non-Swiss member of a group with the parental guarantee of a Swiss member of the group if the aggregate amount of proceeds from the issuance of all outstanding debt instruments issued by a non-Swiss member of the group with the parental guarantee of a Swiss member of the group that is being applied by any member of the group in Switzerland exceeds the amount that is permissible under the Swiss withholding taxation laws.
So long as any Bonds are outstanding, the Group will ensure that (i) the Issuer will have its domicile and place of effective management outside Switzerland, and (ii) the aggregate amount of proceeds from the issuance of all outstanding relevant debt instruments issued by a non-Swiss member of the Group with the parental guarantee of a Swiss member of the Group (including the Bonds) that is being applied by any member of the Group in Switzerland does not exceed the amount that is permissible under the taxation laws in effect at such time in Switzerland without subjecting interest payments due under the Bonds (or any payments under the Guarantee in respect thereof) to Swiss federal withholding tax. On the basis of practice guidelines published on 5 February 2019, the Swiss Federal Tax Administration has confirmed in a private advance tax ruling procedure the principles of determining the amount permissible. The holders of Bonds should be aware that the amount permissible is determined by reference to values (that are not fixed but subject to change, and the referenced values include, for example, the relevant net equity of the direct and indirect non-Swiss subsidiaries of the Group).
The holders of Bonds should be aware that, although the terms of the Bonds provide that, in the event of any withholding or deduction on account of Swiss tax being required by Swiss law, the Issuer or the Guarantor, as the case may be, shall, subject to certain exceptions, pay additional amounts so that the net amount received by the holders of the Bonds shall equal the amount which would have been received by such holder in the absence of such withholding or deduction, such obligation may contravene Swiss legislation and be null and void and not enforceable in Switzerland. (See also above under “Payments of additional amounts are subject to exceptions and may not be enforceable”).
Potential changes in Swiss withholding tax legislation could adversely affect payments of interest to Swiss-based holders in respect of the Bonds On 4 November 2015, the Swiss Federal Council announced that it had mandated the Swiss Federal Finance Department to appoint a group of experts to prepare a proposal for a reform of the Swiss withholding tax system. The proposal is expected to, among other things, replace the current debtor-based regime applicable to interest payments with a paying agent-based regime for Swiss federal withholding tax.
On 3 April 2020, the Swiss Federal Council submitted the reform proposal to the consultations procedure. The reform proposal replaces the current debtor-based regime applicable to interest payments with a paying agent- based regime for Swiss withholding tax. This paying agent-based regime (i) subjects all interest payments made by paying agents in Switzerland to individuals resident in Switzerland to Swiss withholding tax and (ii) exempts from Swiss withholding tax interest payments to all other persons, including to Swiss domiciled legal entities and foreign investors. Accordingly, the Swiss withholding tax is also imposed on interest payments on foreign notes. If the reform proposal is approved, a Swiss paying agent would have to levy and pay Swiss withholding tax on interest payments and the like of domestic and foreign notes, provided that the beneficiary is an individual resident in Switzerland. Swiss-based financial institutions holding notes in depository accounts, Swiss-based issuers (provided no financial institution holds the notes), Swiss-based portfolio managers and trustees and other Swiss-based payors may qualify as a paying agent. The proposal specifies that change to a paying-agent based regime is voluntary in respect of Swiss notes and obligatory for foreign notes. The Bonds should qualify as foreign notes for the purpose of the proposed regime.
19 The consultations procedure is open until July 2020. The parliamentary debates are not expected before 2021 and entry into force, if adopted, is not expected before 2022. The exact measures of the proposed reform may be changed as the result of the consultations procedure and / or the parliamentary debates.
If a paying agent-based regime, such as the one as proposed, were to be enacted and were to result in the deduction or withholding of Swiss withholding tax on any interest payments in respect of any Bonds by any person other than the Issuer or a Guarantor, the holder of such Bonds would not be entitled to receive any additional amounts as a result of such deduction or withholding under the terms of the Bonds.
20 DOCUMENTS INCORPORATED BY REFERENCE
This Prospectus should be read and construed in conjunction with the following:
1. the Group’s interim report for the three months ended 31 March 2020 (the “2020 Q1 Guarantor Interim Report”) (which is available at https://www.swisscom.ch/dam/swisscom/de/about/investoren/documents/2020/2020-q1-interim-report- en.pdf), which includes the unaudited consolidated interim financial statements of the Group and the unaudited financial statements of the Guarantor for the three months ended 31 March 2020;
2. the Group’s annual report for the year ended 31 December 2019 (the “2019 Guarantor Annual Report”) (which is available at https://reports.swisscom.ch/download/2019/en/swisscom_geschaeftsbericht_gesamt_2019_en.pdf), which includes the audited consolidated financial statements of the Group and the audited financial statements of the Guarantor for the financial year ended 31 December 2019; and
3. the Group’s annual report for the year ended 31 December 2018 (the “2018 Guarantor Annual Report”) (which is available at https://reports.swisscom.ch/download/2018/en/swisscom_geschaeftsbericht_gesamt_2018_en.pdf), which includes the audited consolidated financial statements of the Group and the audited financial statements of the Guarantor for the financial year ended 31 December 2018, together, the “Documents Incorporated by Reference”.
The Documents Incorporated by Reference have been previously published or are published simultaneously with this Prospectus and have been filed with the Central Bank. The Documents Incorporated by Reference shall be incorporated in, and form part of, this Prospectus, save that any statement contained in a document which is incorporated by reference herein shall be modified or superseded for the purpose of this Prospectus to the extent that a statement contained herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Prospectus. Those parts of the documents incorporated by reference in this Prospectus which are not specifically incorporated by reference in this Prospectus are either not relevant for prospective investors in the Bonds or the relevant information is included elsewhere in this Prospectus. Any documents themselves incorporated by reference in the documents incorporated by reference in this Prospectus shall not form part of this Prospectus.
Copies of the documents incorporated by reference in this Prospectus may be obtained (without charge) from the Guarantor’s website at http://www.swisscom.ch/en/about/investors/reports.html.
21 OVERVIEW
The overview below describes the principal terms of the Bonds and is qualified in its entirety by the more detailed information contained elsewhere in this Prospectus. Capitalised terms used herein and not otherwise defined have the respective meanings given to them in the “Terms and Conditions of the Bonds” (the “Conditions”).
Issuer Swisscom Finance B.V. Legal Entity Identifier of the Issuer 549300L41E8X8K71RV25 Guarantor Swisscom AG Legal Entity Identifier of the 5493005SL9HHOXS3B739 Guarantor Website of the Guarantor http://www.swisscom.ch Trustee BNY Mellon Corporate Trustee Services Limited Principal Paying Agent The Bank of New York Mellon, London Branch Registrar The Bank of New York Mellon SA/NV, Luxembourg Branch Transfer Agent The Bank of New York Mellon SA/NV, Luxembourg Branch Global Coordinator Credit Suisse Securities (Europe) Limited Joint Lead Managers BNP Paribas Credit Suisse Securities (Europe) Limited Landesbank Baden-Württemberg UniCredit Bank AG Bonds €500,000,000 0.375 per cent. Guaranteed Bonds due 14 November 2028
Maturity Date 14 November 2028 Issue Price 99.127 per cent. Interest 0.375 per cent. per annum Securities Identifiers ISIN: XS2169243479 Common Code: 216924347 FISN: See the website of the Association of National Numbering Agencies (ANNA) or alternatively sourced from the responsible National Numbering Agency that assigned the ISIN CFI Code: See the website of the Association of National Numbering Agencies (ANNA) or alternatively sourced from the responsible National Numbering Agency that assigned the ISIN Issue Date 14 May 2020 Form and Denomination The Bonds will be issued in registered form in denominations of €100,000 and higher integral multiples of €1,000.
22 Status of the Bonds The Bonds will constitute (subject to Condition 4) direct, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves and (subject to Condition 4) at least equally with all other present and future unsecured and unsubordinated obligations of the Issuer, as further described in Condition 3 Status of the Guarantee The payment obligations of the Guarantor under the Guarantee will constitute (subject to Condition 4) unconditional and irrevocable obligations of the Guarantor and shall at all times rank (subject to Condition 4) at least equally with all other present and future unsecured and unsubordinated obligations of the Guarantor, as further described in Condition 3 Interest Payment Dates Interest in respect of the Bonds will be payable annually in arrear on 14 November in each year, save that the first payment of interest shall be payable on 14 November 2020 in respect of the period from (and including) 14 May 2020 to (but excluding) 14 November 2020, and ending on the Maturity Date (unless the Bonds are previously redeemed or purchased and cancelled) Redemption Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at their principal amount on the Maturity Date Issuer Call Option for Taxation The Issuer may, at its option, redeem all, but not some only, of Reasons the Bonds at any time at their principal amount, together with interest accrued to (but excluding) the date fixed for redemption, in the event of certain tax changes, as further described in Condition 6(b) Issuer Par Call Options The Issuer may, at its option, redeem all, but not some only, of the Bonds (a) at any time during the period between 90 days prior to the Maturity Date and the Maturity Date (inclusive) or (b) at any time if 80 per cent. or more in principal amount of the Bonds originally issued have been redeemed (other than where 80 per cent. or more in principal amount of the Bonds originally issued have been redeemed pursuant to the Issuer Make Whole Call Option as described in Condition 6(c)) or purchased, in each case, at their principal amount together with accrued interest, as further described in Conditions 6(c), (d) and (e) Issuer Make Whole Call Option The Issuer may, at its option, redeem all or some only of the Bonds outstanding at any time prior to 90 days prior to the Maturity Date at their Make Whole Redemption Price (as defined in the Conditions), as further described in Condition 6(c) Change of Control Put Option Upon the occurrence of a Change of Control Event (as defined in the Conditions), each Bondholder shall have the option to require the Issuer to redeem all or some only of the Bonds of such holder at their principal amount together with interest
23 accrued to (but excluding) the Put Date (as defined in the Conditions), as further described in Condition 6(f) Events of Default The Bonds will be subject to certain events of default including (among others) non-payment of principal or interest for a period of 14 days, failure to perform or comply with any of the other obligations in respect of the Bonds, cross-default and certain events relating to bankruptcy and insolvency of the Issuer or the Guarantor, as further described in Condition 9 Negative Pledge The Conditions include a negative pledge, as further described in Condition 4 Taxation All payments of principal and interest by or on behalf of the Issuer or the Guarantor in respect of the Bonds or under the Guarantee shall be made without withholding or deduction for, or on account of, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by the Netherlands or Switzerland or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event, the Issuer or, as the case may be, the Guarantor shall pay such additional amounts as will result in receipt by the Bondholders of such amounts as would have been received by them had no such withholding or deduction been required, subject to certain exceptions, as further described in Condition 8 Governing Law The Bonds and any non-contractual obligations arising out of or in connection with them, will be governed by, and construed in accordance with, English law Clearing and Settlement Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream, Luxembourg”) The Bonds will initially be represented by a Global Certificate, which will be deposited with, and registered in the name of a nominee for, the Common Safekeeper on behalf of Euroclear and Clearstream, Luxembourg on or prior to the Issue Date. The Bonds will be issued in the new safekeeping structure. The Global Certificate will be exchangeable for Certificates representing Bonds in the limited circumstances set out in it Listing and Admission to Trading Application has been made for the Bonds to be admitted to the Official List and to trading on the Market. Ratings The Bonds are expected to be rated A2 by Moody’s Investors Service Ltd and A by S&P Global Ratings Europe Limited. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction, revision or withdrawal at any time by the assigning rating agency. As at the date of this Prospectus, Moody’s Investors Service Ltd is a credit rating agency established in the UK, and S&P Global Ratings Europe Limited is a credit rating agency established in
24 the European Union and each is registered under the CRA Regulation. As such each of Moody’s Investors Service Ltd and S&P Global Ratings Europe Limited is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with such Regulation. Use and Estimated Net Amount of The net proceeds of the Bonds will be used for the purpose Proceeds described under “Green Bond Framework – Use and Management of Proceeds”. Selling Restrictions There are restrictions on offers of the Bonds to EEA and UK retail investors and into, or to persons resident in, the United States, the United Kingdom, Switzerland and elsewhere. See “Subscription and Sale” Category 2 selling restrictions will apply to the Bonds for the purposes of Regulation S under the Securities Act Risk Factors For a discussion of certain risk factors relating to the Issuer, the Guarantor and the Bonds that prospective investors should carefully consider prior to making an investment in the Bonds, see “Risk Factors”
25 DESCRIPTION OF THE ISSUER
Introduction
Swisscom Finance B.V. (the “Issuer”) is a Dutch B.V. (besloten vennootschap) incorporated with limited liability in the Netherlands on 5 March 2020, having its corporate seat in Rotterdam and being subject to Dutch legislation. The registered office of the Issuer is located at c/o NGT International BV, Central Post, 10th Floor, Delftseplein 30K, 3013 AA Rotterdam, The Netherlands, with telephone number +31 102130300.
The Issuer is a wholly-owned subsidiary of the Guarantor and has been established as a special purpose vehicle with the trade register (handelsregister) of the Dutch Chamber of Commerce (Kamer van Koophandel) under number 77555104. The Issuer’s Legal Entity Identifier (LEI) is 549300L41E8X8K71RV25.
According to Article 3.1 of the Articles of Association of the Issuer, the object of the Issuer is the issuance of financial instruments of all kinds for the financing of the Guarantor.
Business Overview
The principal activity of the Issuer is to act as a finance company for the Guarantor, principally by raising funds from the capital markets through the issuing of debt instruments such as bonds and notes in order to on-lend those funds to the Guarantor.
The Issuer has not engaged, since its incorporation, in any activities other than those incidental to its incorporation, the issuance and listing of the Bonds and matters referred to as contemplated in this Prospectus and the authorisation, execution, delivery and performance of the other documents to which it is or will be a party and matters which are incidental or ancillary to the aforegoing.
Directors
The Directors of the Issuer are as follows:
Name Role within the Issuer Principal External Activities
Carmen Wäfler Director Deputy Treasurer, Swisscom AG
Thomas Ackermann Director Senior Legal Counsel, Swisscom AG
Suzanne Röell Director Director, Legal Corporate Services, Intertrust B.V.
Yuri Schuurman Director Director, Finance, Intertrust B.V.
The business address of each of the directors of the Issuer is c/o NGT International BV, Central Post, 10th Floor, Delftseplein 30K, 3013 AA Rotterdam, The Netherlands.
There are no potential conflicts of interest of the directors of the Issuer between their respective duties to the Issuer and their private interests or other duties.
Supervisory Board
The members of the Supervisory Board of the Issuer are as follows:
Name Role within the Issuer Principal External Activities
Peter Burkhalter Member Head of Accounting, Swisscom AG
26 Name Role within the Issuer Principal External Activities
Stefan Zahler Member Deputy Head of Accounting, Swisscom AG
The business address of each of the members of the Supervisory Board is c/o NGT International BV, Central Post, 10th Floor, Delftseplein 30K, 3013 AA Rotterdam, The Netherlands
There are no potential conflicts of interest of the members of the Supervisory Board of the Issuer between their respective duties to the Issuer and their private interests or other duties.
Auditors
The auditors of the Issuer since its incorporation are PricewaterhouseCoopers Accountants N.V. of Westgate, Thomas R. Malthusstraat 5, Amsterdam 1066 JR, The Netherlands, registered with Dutch Authority for the Financial Markets, with registration number 13000291.
Share Capital
The Issuer’s authorised share capital consists of EUR 100,000.00 divided into 100,000 ordinary shares at EUR 1.00 par value per share. The share capital of the Issuer is fully subscribed and paid up by the Guarantor as the sole shareholder.
27 DESCRIPTION OF THE GUARANTOR
Introduction
Swisscom AG (the “Guarantor”) is a public limited company with special status (spezialgesetzliche Aktiengesellschaft) established under Article 2 ff of the Telecommunication Enterprises Act of Switzerland of 30 April 1997 (the “TEA”) and the Swiss Code of Obligations with unlimited duration. The Guarantor maintains its registered office at 3063 Ittigen, Switzerland, with its business address at Alte Tiefenaustrasse 6, 3048 Worblaufen and telephone number +41 58 221 73 08. The Guarantor is registered in the Canton of Berne under company identification number (UID) CHE-102.753.938. The Guarantor is the parent company of the Swisscom Group (the “Group”), and has its shares listed on the International Reporting Standard of the SIX Swiss Exchange.
The Guarantor is rated A (stable) by S&P Global Ratings Europe Limited and A2 by Moody’s Investors Services Ltd.
The Guarantor is the Swiss market leader for mobile telecommunications, fixed-line telephony and television, as well as a market leader in a wide range of other information technology (“IT”) business segments and estimates that it held 59 per cent. of the market share in the mobile communications market, 53 per cent. in the broadband market, and 36 per cent. in the television (“TV”) market in Switzerland as at 31 December 2019 (Source: the 2019 Guarantor Annual Report).
Purpose
Article 2 of the Guarantor’s articles of association provides the corporate purpose of the Guarantor as follows:
“The purpose of the Corporation is to provide telecommunications and radiocommunication services in and outside Switzerland, and to offer products and services related thereto.
The Corporation may enter into all transactions which the business purpose entails, including the purchase and sale of real estate, the procurement and investment of funds on the money and capital markets, the establishment and purchase of interests in corporations and other means of co-operation with third parties.”
History and development
The Guarantor was created on 1 October 1997 through the transformation of Telecom PTT. Telecom PTT was created in 1920 by the Swiss government through the combination of the telegraph and telephony networks with the postal service. Following the deregulation of the Swiss telecommunications market in 1997 with the passage of the TEA, Telecom PTT was transformed and rebranded as Swisscom AG and listed on the SIX Swiss Exchange on 5 October 1998.
The Guarantor undertook a Group reorganisation between 2007 and 2008, with the aim of aligning the organisation structure to strengthen customer service and the Swisscom brand identity. Changes made include reorganising the business to align with customer segments (Residential Customers, Business Customers, etc.), adopting a new visual brand identity, as well as the consolidation of several subsidiaries into (the former) Swisscom Fixnet Ltd that was subsequently renamed as Swisscom (Switzerland) Ltd (“Swisscom Switzerland”). The introduction of a new visual identity reflected the repositioning of the Guarantor as a telecommunications, IT, multimedia and entertainment company with one clear corporate branding strategy.
To support the Group’s growth in light of decreasing prices in the telecommunications business in Switzerland, the Guarantor acquired Fastweb S.p.A. (“Fastweb”) in May 2007, one of Italy’s largest broadband telecom companies, expanding its operations to the fourth largest broadband market in Europe. The Guarantor also entered the TV industry in 2007 with the introduction of Bluewin TV (renamed Swisscom TV in 2009), an Internet-based TV service combining telecommunications, Internet technology, multimedia and entertainment.
28 To keep pace with the developments of high-speed transmission, the Guarantor extended fibre-optic access to residential customers and small and medium-sized enterprises (“SMEs”), and in May 2009 launched an extensive fibre-optic network for households and businesses in Switzerland. This was extended in 2012 to expanding fibre- optics outside major Swiss urban centres through the “Fibre to the Street” initiative. In the same way, Fastweb launched its “Fibre to the Street” initiative in 2012 to complement its existing “Fibre to the Home” network and provide enhanced communication services for its customers in Italy.
Outside Switzerland and Italy, the Guarantor holds strategic interests, primarily through its subsidiary Swisscom Switzerland, as well as technology and development outposts in Silicon Valley, Shanghai and Berlin. These outposts conduct technology scouting and transfers for the Guarantor, while the venture department of Swisscom Switzerland connects start-ups with the Guarantor’s various business units to promote innovation.
Business Overview and Organisation Structure
The Guarantor is the parent company of the Group and acts as a holding company. The following chart shows the simplified structure of the Group:
The business activities of the Group are carried out by the companies within the Group, which are divided into three categories: strategic, important and other. The Guarantor, Swisscom Switzerland and Fastweb are classified as strategic Group companies. All other Group companies are assigned to a Group division or business division for management purposes.
Swisscom Switzerland
Swisscom Switzerland was formed through the merger of three of the Guarantor’s subsidiaries – Swisscom Fixnet AG, Swisscom Mobile AG and Swisscom Solutions AG. Swisscom Switzerland commenced operations on 1 January
29 2008, and is focused on the business divisions of Residential Customers, Business Customers and IT, Network & Infrastructure.
In order to provide customers with a more streamlined and consistent product and customer experience, a minor reorganisation of the Group structure was completed in late 2019, and as of 1 January 2020, the SMEs and corporate customer divisions were consolidated into the Business Customers division under Swisscom Switzerland, and the sales & services and products & marketing divisions were merged into the Residential Customers division.
Swisscom Switzerland provides services to residential customers in Switzerland including telephony, broadband, TV and mobile services, as well as providing holistic information and communications technology (“ICT”) solutions for SMEs. For corporate customers, Swisscom Switzerland assists in provided individual products, integrated solutions or entire ICT infrastructures. The IT, Network & Infrastructure division within Swisscom Switzerland is responsible for the operation and maintenance of the Swisscom network and IT infrastructure in Switzerland. Finally, Swisscom Switzerland also makes its fixed and mobile network in Switzerland available to selected third-party providers so that they can offer proprietary products and services to their customers via the Swisscom network.
For the financial year ended 31 December 2019, the Guarantor generated approximately 74.8 per cent. of its net revenue and 80.1 per cent. of operating income before depreciation and amortisation (“EBITDA”) from the business operations of Swisscom Switzerland (2018: 75.2 per cent. and 84.8 per cent., respectively). For the financial year ended 31 December 2019, Swisscom Switzerland recorded net revenue of CHF 8,563 million (2018: CHF 8,806 million), and EBITDA of CHF 3,491 million (2018: CHF 3,576 million).
Fastweb
Fastweb is one of Italy’s largest broadband telecoms companies, and is an infrastructure-based, alternative provider of fixed-network and mobile services for residential and business customers. It is the second largest fixed-network broadband provider in Italy with an estimated market share in 2019 of approximately 15 per cent. in the residential segment and a customer base of approximately 1.8 million in mobile communications. Its product portfolio includes voice, data, broadband and TV services, as well as video-on-demand and mobile services. Fastweb also provide wholesale and customer-specific solutions for its business customers.
To complement the Group’s strategy to expand and develop its ultra-fast broadband coverage, Fastweb has entered into a strategic partnership with Wind Tre S.p.A. (“Wind Tre”) to develop a nationwide fifth generation wireless technology (“5G”) network in Italy, and also a long-term cooperation agreement with Linkem S.p.A. to expand the 5G fixed wireless access network infrastructure in medium and small-sized towns in Italy, as well as the mutual provision of wholesale services. Fastweb has also entered into a long-term agreement with Open Fibre S.p.A. to use their ultra-fast broadband network infrastructure to continue to improve and expand on Fastweb’s own ultra-fast broadband coverage.
For the financial year ended 31 December 2019, Fastweb recorded revenues of EUR 2,218 million (2018: EUR 2,104 million), and EBITDA of EUR 750 million (2018: EUR 696 million).
Other Business Lines
The Guarantor supplements its core businesses in other related areas, including network construction and maintenance (through its subsidiary cablex), broadcast services (through its subsidiary Swisscom Broadcast) and the Digital Business unit.
The Digital Business unit focuses on providing digital services for SMEs, by supporting developments both within and outside the Group through joint ventures with strategic partners and intrapreneurship. Recent innovations include:
- Swisscom Directories Ltd (“localsearch”) – this subsidiary of the Guarantor operates as an online directory, helping SMEs establish a presence in the digital world by using digital marketing to enable them to be found online and acquire new customers. Since the launch of its product SWISS LIST in 2019, it has amassed more than 100,000 customers. localsearch also operates the local.ch and search.ch platforms, which are the online directories with the most extensive reach in Switzerland.
30 - Swisscom Blockchain Ltd – this subsidiary of Swisscom Switzerland was established in 2017 and offers tailormade services ranging from blockchain consulting and education to smart contract development and operation of banking grade blockchain infrastructure
- Other FinTech – the Guarantor has partnered with Sygnum Bank Ltd to construct an ecosystem for digital assets, allowing for the issue of securities, safekeeping and access to liquidity and banking services. This ecosystem will be based on a distributed ledger technology developed and operated by the Guarantor, the crypto vault developed by its subsidiary Custodigit Ltd and the daura ltd platform (of which the Guarantor holds a minority interest). The daura ltd platform allows unlisted companies to register or issue equities via blockchain and to transfer them securely worldwide, while Custodigit Ltd allows regulated financial service providers to have a technical solution for the safekeeping of digital assets. Whilst the above is still subject to regulatory and supervisory approval, the Guarantor intends to digitise documents on the basis of this blockchain infrastructure and to digitally issue, verify, transfer and archive registers, contracts and certificates.
Research and Development
The Guarantor recognises the importance of innovation and has consistently invested in disruptive innovation, creating new markets and anticipating strategic challenges, new growth areas and future customer needs. To this end, the Guarantor maintains several outposts in Silicon Valley, Shanghai and Berlin, as well as working closely with its partners, universities, start-ups and established technology companies. The Guarantor’s outposts review technological developments.
Separately, through the venture department of Swisscom Switzerland, the Guarantor works with start-ups by connecting them to the Guarantor’s various business units to inspire innovation. The Digital Transformation Fund, launched in 2018, as well as the internal intrapreneurship programme “Kickbox”, also aims to support both internal and external innovation.
Strategy
The Guarantor’s strategic aspirations are threefold: best customer experience, operational excellence and new growth.
Best customer experience
The Guarantor strives to provide its customers with the best service at all times based on a high-performance infrastructure, which is constantly enhanced to keep pace with the latest developments. In line with its strategy to expand and develop its ultra-fast broadband coverage, since 2015, the Guarantor has been working with Ericsson to introduce 5G in Switzerland. In February 2019, the Guarantor successfully participated in the 5G frequencies auction, and on 17 April 2019 became the first European provider to launch commercially its 5G network. Basic 5G coverage had been extended to 90 per cent. of the Swiss population by the end of 2019, and the Guarantor remains committed to introducing 5G on various frequencies to complement the introduction of devices capable of using 5G.
The Guarantor’s commitment to developing infrastructure, both in Switzerland and abroad, has been recognised in the industry. The Guarantor was rated “outstanding” in “connect” magazine’s mobile network test for the 10th time in 2019, and in the same year also won the CHIP magazine Swiss mobile network test for the fourth year in a row, as well as placing first in Ookla LLC’s speed test for the fastest mobile network and best coverage in Switzerland.
As a service provider providing dynamic solutions to its customers, the Guarantor has created Swisscom Cloud, which forms the basis for its new scalable offerings in Switzerland. The Guarantor complements this with global solutions (such as Amazon Web Services and Microsoft Azure). Other innovative offerings include the Guarantor’s inOne mobile go offering, which allows its customers to surf the Internet in the European Union with the same flexibility as in Switzerland, and the introduction of the new generation of Swisscom TV which gives customers access to a wide range of TV apps, gaming and other features.
31 Operational excellence
The Guarantor faces competition from UPC Switzerland, Sunrise Communications Group and Salt Mobile in the Swiss telecommunications market; and the British Telecom Group and T-Systems in the Swiss IT services market. Likewise, the Guarantor’s Italian operations face competition from three integrated telecommunications market participants: Telecom Italia, Vodafone Italy and Wind Tre, as well as Iliad in the mobile network sphere and Enel Open Fibre in the broadband services sector.
The Guarantor recognises the strong competition within its core businesses both in Switzerland and Italy and looks to offset any revenue losses as far as possible through growth in new areas and strict cost management. A main strategy of the Guarantor is to optimise costs to secure long-term profitability, including simplifying and adjusting the product portfolio, using agile development methods, modernising and consolidating the IT platforms, and increasing efficiency of staff deployments. Internally, the Guarantor is also conducting digital transformation and engaging in a higher level of digitisation, to virtualise network functions, strengthen and expand online channels, and increasingly to automate processes and use enhanced artificial intelligence and analytics. In 2019, the Guarantor reduced its cost base in the Swiss business by CHF 127 million, exceeding the intended goal set in 2016 of reducing its cost base by CHF 100 million annually.
New growth
The Guarantor seeks to develop further its core businesses, as well as areas related to the core businesses, for instance through further expansion of its TV/entertainment offering, growth in the wholesale sector, provision of the Swisscom Cloud and Swisscom’s “Smart ICT” for SMEs (a package of telephony and IT services), and digital security. The Guarantor has launched new digital services under the Digital Business unit and will look for further growth areas guided by future customer requirements and future-oriented business models and making use of partnerships.
In the same way, Fastweb is growing in Italy in broadband and mobile communications. The Guarantor has strengthened Fastweb’s market position through targeted investments and partnerships, such as a strategic partnership with Wind Tre and the acquisition of mobile spectrum in Italy.
Major Shareholders
The Guarantor is the parent company of the Group, with the Swiss federal government (Swiss Confederation) as a majority shareholder of 50.95 per cent. of the issued share capital of the Guarantor. The Swiss Confederation is required to hold the majority of the share capital and voting rights of the Guarantor pursuant to the TEA.
As at 31 December 2019, the share capital of the Guarantor totalled CHF 51,801,943 divided into 51,801,943 registered shares with a par value of CHF 1 each. All shares issued are fully paid-up, with no authorised or conditional share capital.
Licences
The Guarantor holds a basic service provision licence (currently effective from 2018 through 2022), the aim of which is to provide reliable, affordable basic telecommunications to all sections of the population in all regions of Switzerland. The scope of services as well as the related quality and pricing requirements are reviewed periodically by the Swiss Federal Council. The current licence comprises a multifunctional telephone line, Internet access, and other barrier-free services including transcription, SMS messaging and directory services for people with disabilities. The Swiss Federal Council has, as of 1 January 2020, decided to increase the minimum data transmission rate from 3 megabits per second (“Mbps”) (download) and 300 kilobits per second (“Kbps”) (upload) to 10 Mbps and 1 Mbps, respectively.
In 2012, the Guarantor also acquired 44 per cent. of the auctioned frequencies available for mobile communications as auctioned by the Swiss Federal Communications Commission. The licences for such frequencies run until the end of 2028 and can be used with all technologies. As mentioned above (see “– Strategy – Best Customer Experience”), in February 2019 the Guarantor also acquired further mobile radio frequencies which could be used for the new 5G technology. Together with the frequencies already acquired in 2012, the Guarantor now holds 45 per cent. of all
32 frequencies in operation in Switzerland with mobile communications providers. The licence for the frequency spectrum acquired in February 2019 is valid until April 2034.
Legal and regulatory framework
The Guarantor is a public limited company with special status (spezialgesetzliche Aktiengesellschaft), having been constituted pursuant to the TEA, and is governed by Swiss law. In this capacity and as a listed company, the Guarantor and its business activities are bound by various legislation including the TEA, the Telecommunications Act, Federal Cartel Act, Federal Radio and Television Act, and other capital market laws. The European Union’s General Data Protection Regulation (the “GDPR”) may also have an impact on the Guarantor’s business as regards its provision of services to residential customers within the European Economic Area and provision of IT services to business customers directly subject to the GDPR.
Legal and Arbitration Proceedings
As a result of the Guarantor’s market position, competition law is highly relevant for several of its products and services. The Swiss competition authorities (“COMCO”) have classified the Guarantor as being market dominant in a number of submarkets. In 2009, COMCO imposed a fine of CHF 220 million on the Guarantor for abuse of a market dominant position in the area of Asymmetric Digital Subscriber Line (ADSL) services, which was reduced to CHF 186 million on appeal to the Federal Administrative Court in September 2015. On 9 December 2019, the Federal Supreme Court dismissed the Guarantor’s appeal in the last instance and confirmed the fine. As no suspensive relief was granted after the appeal in 2015, the Guarantor has already paid the fine of CHF 186 million at the beginning of 2016. As a result of the Federal Supreme Court’s decision, claims could be asserted against the Guarantor under civil law, and the Guarantor has accordingly made provisions for regulatory and competition law proceedings, but the 2019 decision otherwise has no impact on the Guarantor’s 2019 annual financial statements.
Two other proceedings are currently underway in relation to the broadcast of live sporting events on pay TV and the broadband connections of post office locations, within which COMCO has classified the Guarantor as being market dominant and its conduct unlawful, and have imposed direct financial sanctions. In November 2015, COMCO imposed a penalty of CHF 8 million on the Guarantor for its dominant position on the market for broadband access for business clients (specifically relating to the invitation to tender for the corporate network of the Swiss Post in 2008) which was judged unlawful under competition law. Separately, in May 2016, COMCO imposed a penalty of CHF 72 million on the Guarantor pursuant to investigations concerning the broadcasting of live sporting events on pay TV. The Guarantor has challenged both rulings in the Federal Administrative Court, and await the results of the appeals.
Administrative, Management and Supervisory Bodies
Board of Directors
The Directors of the Guarantor are as follows:
Name Role within the Guarantor Principal External Activities
Hansueli Loosli Chairman Chairman of the Board of Directors, Bell AG, Basel
Chairman of the Board of Directors, Coop Group Cooperative, Basel
Chairman of the Board of Directors, Transgourmet Holding AG, Basel
Chairman of Board of Directors, Coop Mineraloel AG, Allschwil
33 Member of Advisory Board, Deichmann SE, Essen
Roland Abt Member of the Board of Directors Member of Board of Directors of Conzzeta AG, Zurich
Member of Board of Directors, Raiffeisenbank, Zufikon
Chairman of Board of Directors, Eisenbergwek Gonzen AG, Sargans
Chairman of Board of Directors, Aargau Verkehr AG (AVA), Aarau
Alain Carrupt Member of the Board of Directors, Representative of the Employees
Frank Esser Deputy Chairman Member of Board of Directors, interXion Holding N.V., Amsterdam
Member of Board of Directors, S.E.S S.A., Betzdorf, Luxembourg
Barbara Frei Member of the Board of Directors Chief Executive Officer of ELSO GmbH, Merten GmbH, Schneider Electric GmbH, Schneider Electric Holding Germany GmbH, SE Real Estate GmbH, Schneider Electric “Austria” Ges.m.b.H
Member of the Supervisory Board of Schneider Electric Sachsenwerk GmbH
Chair of the Board of Directors of Schneider Electric (Switzerland) AG, Ittigen
Delegate of the Board of Directors, Feller AG, Horgen
Chairman of Schneider Nordic Baltic A/S
Member of Board of Directors, Swiss Prime Site, Olten
Sandra Lathion-Zweifel Member of the Board of Directors, Member of Board of Directors, Representative of the Employees Banque Cantonale du Valais, Sion
Member of Advisory Board of the Capital Markets and Technology Association, Geneva
34 Anna Mossberg Member of the Board of Directors Member of Board of Directors, Swedbank AG, Sweden
Member of Board of Directors, Schibsted ASA, Oslo
Michael Rechsteiner Member of the Board of Directors Chairman of Executive Board, General Electric (Switzerland) GmbH, Baden, Switzerland
Member of Supervisory Board, GE Power Sp z.o.o., Warsaw, Poland
Board of Trustees of General Electric Switzerland Pension Fund
Member of Board of Swissmem
Renzo Simoni Member of the Board of Directors, Member of Board of Directors, Representative of the Swiss Gruner AG, Basel Confederation Member of Board of Directors, Rhätische Bahn AG
Chairman of Board of the Psychiatric Hospital of the University of Zurich
The business address of each of the directors of the Guarantor is Alte Tiefenaustrasse 6, 3048 Worblaufen, Switzerland.
Management Committees
The Board of Directors has delegated various tasks to the following standing committees of the Board of Directors: the Finance Committee, the Audit Committee and Compensation Committee, the composition of which are as follows:
Committee Members Note
Finance Committee Frank Esser Chairman of Committee
Alain Carrupt
Anna Mossberg
Michael Rechsteiner
Hansueli Loosli
Audit Committee Roland Abt Chairman of Committee
Sandra Lathion-Zweifel
35 Committee Members Note
Renzo Simoni
Hansueli Loosli
Compensation Committee Barbara Frei Chairman of Committee
Roland Abt
Frank Esser
Renzo Simoni
Hansueli Loosli without voting right
The Board of Directors also has one ad-hoc Nomination Committee. Each committee is responsible for carrying out examinations of matters of importance.
According to the Finance Committee’s rules of procedure, the Finance Committee advises the Board of Directors on corporate transactions including transactions relating to establishment or dissolution of significant Group companies or strategic alliances, or acquisition or disposal of significant shareholdings. The Finance Committee has the ultimate decision-making authority on issuing rules of procedure and directives in relation to mergers and acquisitions and corporate venturing.
In accordance with the Audit Committee’s rules of procedure, the Audit Committee is responsible for financial management and Group-wide assurance functions, including accounting, financial planning, risk management and external audit. It also advises the Board of Directors on matters requiring specific financial expertise such as dividend policy. The Audit Committee is composed of four members with expertise in the financial or accounting field, and may also involve independent third parties where required.
The Compensation Committee handles all matters of the Board of Directors concerning remuneration, with its decision-making powers governed by, among others, the Regulations of the Compensation Committee. It is responsible for submitting remuneration proposals to the Board of Directors, and is empowered to decide upon the remuneration of individual Group Executive Board members (except for the Chief Executive Officer (“CEO”)). Neither the CEO nor other members of the Group Executive Board are entitled to participate in meetings at which their remuneration is discussed or decided.
Executive Leadership
Daily business management is delegated by the Board of Directors to Urs Schaeppi, CEO of the Guarantor, who may in turn delegate his powers to subordinates, specifically other members of the Group Executive Board. According to Article 10 of the TEA, the Group Executive Board is in charge of executive management of the business of the Guarantor, and its members are elected by the Board of Directors.
The Group Executive Board is comprised of the following members:
Name Role within the Guarantor Principal External Activities
Urs Schaeppi CEO Member of Executive Board, Association Suisse des Télécommunications (asut), Berne
Member of the Foundation Board, IMD International Institute for
36 Name Role within the Guarantor Principal External Activities
Management Development, Lausanne
Member of Board of Trustees, Swiss Entrepreneurs Foundation
Member of Board of Directors, Swiss-American Chamber of Commerce, Zurich
Member of Executive Board, Glasfasernetz Schweiz, Berne
Member of Advisory Board of Department of Economics of University of Zurich
Member of Steering Committee of digital switzerland, Zurich
Member of Advisory Board on Digital Transformation for the Federal Department of the Environment, Transport, Energy and Communications and the Federal Department of Economic Affairs, Education and Research
Member of the International Advisory Committee of the ZHAW School of Management and Law, Zurich
Mario Rossi Head of Group Business Steering / President of Board of Trustees, Chief Financial Officer comPlan, Berne
Member of Board of Directors, Belgacom International Carrier Services S.A., Brussels
Member of Foundation Board of the Hasler Foundation, Berne
Member of Sanctions Committee, SIX Swiss Exchange AG, Zurich
Member of Board of Directors, SwissHoldings, Berne
Hans C. Werner Head of Group Human Resources / Member of Board of Trustees, Chief Personnel Officer comPlan, Berne
37 Name Role within the Guarantor Principal External Activities
Member of Board of Directors, Kantonsspital Aarau AG
Member of the Board, Swiss Employer’s Association, Zurich
President of the Institute Council of the International Institute of Management in Technology (iimt), University of Fribourg
Urs Lehner Head of Business Customers N/A
Christoph Aeschlimann Head of IT, Network & N/A Infrastructure
Dirk Wierzbitzki Head of Residential Customers Member of Board of Directors, SoftAtHome, Paris
There are no potential conflicts of interest of the directors of the Guarantor or members of the Group Executive Board between their respective duties to the Guarantor and their private interests or other duties.
Employees
As at 31 December 2019, the Guarantor had 19,317 employees (full-time equivalents), 16,628 (86 per cent.) of which were in Switzerland. Approximately 20 per cent. of the Guarantor’s employees are part-time employees, and the Guarantor also has around 900 apprentices in training in Switzerland. The Guarantor offers training courses and digital “Lifelong Learning” initiatives to support its employees in enhancing and supplementing their skills. To this end, the Guarantor grants all employees five training and development days per year, which is also provided for under the Guarantor’s Collective Employment Agreement.
Save for the Guarantor’s management employees (which are subject to general terms and conditions of employment), employees are subject to the Guarantor’s Collective Employment Agreement (a requirement under the TEA), which exceed the minimum standards defined by the Swiss Code of Obligations. The Collective Employment Agreement and the social plan are negotiated by the Guarantor, the employee associations and its social partners. The Guarantor’s subsidiaries may adopt the agreement either in its original form or as adapted to specific sectors or lines of business by an affiliation agreement. The current Collective Employment Agreement has been in force since 1 July 2018, with around 81 per cent. of the Guarantor’s employees in Switzerland covered by the agreement.
Fastweb employees in Italy are bound by the terms and conditions of employment which are subject to the Contratto Colletivo Nazionale di Lavoro, a state Collective Employment Agreement. The agreement also contains provisions governing relations between Fastweb and the relevant unions.
38 USE AND ESTIMATED NET AMOUNT OF PROCEEDS
The estimated net proceeds of the issue of the Bonds, after deduction of commissions and fees, will be €494,385,000. The net proceeds will be used for the purpose described under “Green Bond Framework – Use and Management of Proceeds”. The Guarantor may amend or update the Green Bond Framework from time to time. The Guarantor will publicly announce any change to the Green Bond Framework.
None of the Joint Lead Managers will verify or monitor the proposed use of proceeds of the Bonds.
39 GREEN BOND FRAMEWORK
The Guarantor has in place a sustainability strategy (the “Sustainability Strategy”), setting out three main goals the Guarantor intends to achieve by 2025:
1. doing more for the environment, by promoting energy efficiency and climate protection;
2. doing more for its people regarding diversity and inclusion; and
3. doing more for the country (Switzerland), by contributing to a sound economic framework.
As part of implementing its Sustainability Strategy, the Guarantor has published its Green Bond Framework, prepared in alignment with the 2018 edition of the Green Bond Principles published by the International Capital Markets Association (“ICMA”). The Green Bond Framework sets out how the Guarantor proposes to use available proceeds (including proceeds from the issue of the Bonds) to finance or refinance Eligible Green Projects, as well as to provide for the transparency and disclosures required to investors.
Use and Management of Proceeds
The net proceeds of the issue of the Bonds will be allocated to finance or refinance a portfolio of Eligible Green Projects within the following Eligible Green Project Portfolio. As technologies evolve, the Guarantor expects that the Eligible Green Project Portfolio will be updated from time to time.
1. Energy efficiency – including investment in network development and operations, Internet of Things (“IoT”) networks, solutions and products, and enhancing energy efficiency in new or existing structures.
2. Renewable energy.
3. Clean transportation.
The Guarantor has set up a Green Bond Committee, which will be responsible for evaluating and selecting the Eligible Green Project Portfolio and ensuring compliance with all relevant laws and regulations.
The allocations of the net proceeds of the issue of the Bonds will be recorded in the Guarantor’s Treasury Management System. Any unallocated net proceeds will be managed in accordance with the Guarantor’s liquidity and cash management policies.
Reporting
The Guarantor expects to publish reports on the allocation of net proceeds to the Eligible Green Project Portfolio in line with its general annual reporting cycle.
External Review
The Green Bond Framework has been reviewed by Sustainalytics, which has issued a second party opinion confirming the compliance of the Green Bond Framework with the ICMA Green Bond Principles. The Green Bond Framework (which is not incorporated by reference to this Prospectus) and the second party opinion are available for viewing at https://www.swisscom.ch/en/about/investors/financing.html#swisscom-green-bonds.
The Guarantor will obtain post-issuance verification from its external auditor PricewaterhouseCoopers AG of Birchstrasse 160, Postfach, CH-8050 Zürich, Switzerland on the allocation of proceeds to the Eligible Green Project Portfolio to ensure that allocations are made in accordance with the Green Bond Framework.
40 TERMS AND CONDITIONS OF THE BONDS
The following subject to modification and except for provisions in italics are the terms and conditions substantially in the form which will apply to the Bonds:
The issue of the €500,000,000 0.375 per cent. Guaranteed Bonds due 2028 (the “Bonds”) was authorised by a resolution of the Board of Directors of Swisscom Finance B.V. (such entity or such substitute issuer as is appointed in accordance with Condition 12(c), being the “Issuer”) passed on 30 April 2020 and the guarantee of the Bonds was authorised by resolutions of the Board of Directors of Swisscom AG (the “Guarantor”) passed on 11 December 2019 and 5 February 2020. The Bonds are constituted by a Trust Deed (the “Trust Deed”) dated 14 May 2020 between the Issuer, the Guarantor and BNY Mellon Corporate Trustee Services Limited (the “Trustee” which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds. These terms and conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Bonds. Copies of the Trust Deed, and of the Agency Agreement (the “Agency Agreement”) dated 14 May 2020 relating to the Bonds between the Issuer, the Guarantor, the Trustee, the registrar (the “Registrar”), any transfer agents (each a “Transfer Agent”), the initial principal paying agent and any other agents named in it, are available for inspection during usual business hours at the principal office of the Trustee (presently at One Canada Square, London E14 5AL, United Kingdom) and at the specified offices of the principal paying agent for the time being (the “Principal Paying Agent”), the Registrar and any Transfer Agents. “Agents” means the Principal Paying Agent, the Registrar, the Transfer Agents and any other agent or agents appointed from time to time with respect to the Bonds. The Bondholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those applicable to them of the Agency Agreement.
All capitalised terms that are not defined in these terms and conditions (the “Conditions”) will have the meanings given to them in the Trust Deed.
1 Form, Denomination and Title
The Bonds are issued in the specified denomination of €100,000 and higher integral multiples of €1,000.
The Bonds are represented by registered certificates (“Certificates”) and, save as provided in Condition 2(a), each Certificate shall represent the entire holding of Bonds by the same holder.
Title to the Bonds shall pass by registration in the register that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement (the “Register”). Except as ordered by a court of competent jurisdiction or as required by law, the holder (as defined below) of any Bond shall be deemed to be and may be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or an interest in it, any writing on the Certificate representing it or the theft or loss of such Certificate and no person shall be liable for so treating the holder.
In these Conditions, “Bondholder” and “holder” means the person in whose name a Bond is registered.
2 Transfers of Bonds
(a) Transfer: A holding of Bonds may, subject to Condition 2(e), be transferred in whole or in part upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate(s) representing such Bonds to be transferred, together with the form of transfer endorsed on such Certificate(s) (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Issuer), duly completed and
41 executed, and any other evidence as the Registrar or Transfer Agent may reasonably require. In the case of a transfer of part only of a holding of Bonds represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. In the case of a transfer of Bonds to a person who is already a holder of Bonds, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. All transfers of Bonds and entries on the Register will be made in accordance with the detailed regulations concerning transfers of Bonds scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Trustee. A copy of the current regulations will be made available by the Registrar to any Bondholder upon request.
(b) Exercise of Options or Partial Redemption in respect of Bonds: In the case of an exercise of an Issuer’s or Bondholders’ option in respect of, or a partial redemption of, a holding of Bonds represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent.
(c) Delivery of New Certificates: Each new Certificate to be issued pursuant to Condition 2(a) or 2(b) shall be available for delivery within three business days of receipt of a duly completed form of transfer and surrender of the existing Certificate(s). Delivery of the new Certificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such form of transfer or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Transfer Agent or the Registrar (as the case may be) the costs of such other method of delivery and/or such insurance as it may specify. In this Condition 2(c), “business day” means a day, other than a Saturday or Sunday, on which banks are open for business in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be).
(d) Transfer or Exercise Free of Charge: Certificates, on transfer, exercise of an option or partial redemption, shall be issued and registered without charge by or on behalf of the Issuer, the Registrar or any Transfer Agent, but upon payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity as the Registrar or the relevant Transfer Agent may require).
(e) Closed Periods: No Bondholder may require the transfer of a Bond to be registered (i) during the period of 15 days ending on (and including) the due date for redemption of that Bond, (ii) during the period of 15 days prior to (and including) any date on which Bonds may be called for redemption by the Issuer at its option pursuant to Condition 6, (iii) after any such Bond has been called for redemption or purchased by the Issuer at its option pursuant to Condition 6(g), (iv) after a Change of Control Put Exercise Notice has been delivered in respect of such Bond or (v) during the period of seven days ending on (and including) any Record Date (as defined in Condition 7(a)(ii)).
3 Guarantee and Status
(a) Guarantee: The Guarantor has unconditionally and irrevocably guaranteed the due payment of all sums expressed to be payable by the Issuer under the Trust Deed and the Bonds. Its obligations in that respect (the “Guarantee”) are contained in the Trust Deed. The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and by provisions
42 of law that are mandatory and of general application, and subject to Condition 4, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations.
(b) Status: The Bonds constitute (subject to Condition 4) direct, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and by provisions of law that are mandatory and of general application, and subject to Condition 4, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations.
4 Negative Pledge
So long as any Bond remains outstanding (as defined in the Trust Deed), neither the Issuer nor the Guarantor will create any mortgage, charge, lien, pledge or other security interest (each an “Encumbrance”) upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital but excluding assets which, in accordance with Applicable GAAP (as defined below), need not be, and in the latest non-consolidated or consolidated audited financial statements of the Guarantor have not been, reflected in the non-consolidated or consolidated balance sheet of the Guarantor) to secure any Relevant Indebtedness (as defined below), or any guarantee or indemnity in respect of any Relevant Indebtedness, without at the same time or prior thereto securing the Bonds equally and rateably with any such Relevant Indebtedness, guarantee or indemnity or granting such other security as either (x) the Trustee shall in its absolute discretion deem not materially less beneficial to the interests of the Bondholders or (y) shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders; provided that nothing in this Condition 4 shall limit the ability of each of the Issuer or the Guarantor to grant or permit to subsist Encumbrances over the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness, to the extent that the aggregate principal amounts so secured do not exceed CHF 1,000,000,000; and provided further that this Condition 4 shall not apply to any Encumbrance, or any guarantee or indemnity, existing as at 14 May 2020.
In this Condition 4:
“Applicable GAAP” means, at any time in relation to the Guarantor, the generally accepted accounting policies in accordance with which it is required by applicable law or regulation to prepare its audited consolidated or its non-consolidated financial statements, as the case may be; and
“Relevant Indebtedness” means any indebtedness for borrowed money which (i) is in the form of, or represented or evidenced by, bonds, notes, debentures, loan stock or other securities which upon issuance are, or are intended by the issuer thereof to be, or are capable of being, quoted, listed or dealt in or traded on any stock exchange or over-the-counter or other securities market (but excluding any existing or future indebtedness for borrowed money issued by the Issuer or the Guarantor in private placements that the Issuer or the Guarantor has required in writing not to be so quoted, listed, dealt or traded) (“Relevant Tradable Securities”) or (ii) is incurred in circumstances where the relevant creditor, with the agreement of the debtor, shall issue Relevant Tradable Securities, the claims of holders of which are secured, and recourse in respect of which is limited to, such indebtedness for borrowed money (“Relevant Secured Securities”).
5 Interest
The Bonds bear interest on their outstanding principal amount from and including 14 May 2020 at the rate of 0.375 per cent. per annum (the “Rate of Interest”), payable annually in arrear on 14 November in each year (each an “Interest Payment Date”), save that the first Interest Payment Date shall be 14 November 2020 in respect of the period from (and including) 14 May 2020 to (but excluding) 14 November 2020 and will amount
43 to €1.885 per Calculation Amount (as defined below). Each Bond will cease to bear interest from (and including) the due date for redemption unless, upon surrender of the Certificate representing such Bond, payment of principal is improperly withheld or refused. In such event the outstanding principal amount shall continue to bear interest at such rate (both before and after judgment) until (but excluding) whichever is the earlier of (a) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant holder, and (b) the day seven days after the Trustee or the Principal Paying Agent has notified Bondholders of receipt of all sums due in respect of all the Bonds up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions).
If interest is to be calculated in respect of a period which is equal to or shorter than an Interest Period (as defined below), the day-count fraction used will be the number of days in the relevant period, from and including the date from which interest begins to accrue to but excluding the date on which it falls due, divided by the number of days in the Interest Period in which the relevant period falls (including the first such day but excluding the last day of such period).
In these Conditions, the period beginning on and including 14 May 2020 and ending on but excluding the first Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next succeeding Interest Payment Date is called an “Interest Period”.
Interest in respect of any Bond shall be calculated per €1,000 in principal amount of the Bonds (the “Calculation Amount”). The amount of interest payable per Calculation Amount for any period shall be equal to the product of the Rate of Interest, the Calculation Amount and the day-count fraction for the relevant period, rounding the resulting figure to the nearest cent (half a cent being rounded upwards).
6 Redemption and Purchase
(a) Final Redemption:
Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at their principal amount on 14 November 2028 (the “Maturity Date”). The Bonds may not be redeemed at the option of the Issuer other than in accordance with this Condition 6.
(b) Redemption for Taxation and other Reasons:
The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Bondholders in accordance with Condition 16 (which notice shall be irrevocable and shall specify the date fixed for redemption) and to the Trustee at their principal amount, (together with interest accrued to (but excluding) the date fixed for redemption), if:
(i) the Issuer (or, if the Guarantee was called, the Guarantor) certifies to the Trustee immediately prior to the giving of such notice that it has or will become obliged to pay additional amounts as provided or referred to in Condition 8 as a result of any change in, or amendment to, the laws, treaties, protocols, rulings or regulations of the Netherlands (in the case of a payment by or on behalf of the Issuer or the Guarantor) or Switzerland (in the case of a payment by or on behalf of the Guarantor) or, in each case, any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws, treaties, protocols, rulings or regulations, which change or amendment is announced, is enacted or becomes effective on or after 12 May 2020; and
(ii) such obligation cannot be avoided by the Issuer (or the Guarantor, as the case may be) taking commercially reasonable measures available to it,
44 provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer (or the Guarantor, as the case may be) would be obliged to pay such additional amounts were a payment in respect of the Bonds (or the Guarantee, as the case may be) then due.
Prior to the publication of any notice of redemption pursuant to this Condition 6(b), the Issuer (or the Guarantor, as the case may be) shall deliver to the Trustee a certificate signed by two Authorised Signatories of the Issuer (or the Guarantor, as the case may be) certifying that the obligation referred to in (i) above has arisen or will arise and that such obligation cannot be avoided by the Issuer (or the Guarantor, as the case may be) taking commercially reasonable measures available to it. The Trustee shall be entitled to accept and rely on such certificate as sufficient evidence of the satisfaction of the conditions precedent set out in (i) and (ii) above (without making any further enquiries and without liability to any person), in which event it shall be conclusive and binding on the Bondholders.
(c) Redemption at the Option of the Issuer (Make Whole Redemption): The Issuer may, at any time prior to 90 days prior to the Maturity Date, on giving not less than 30 nor more than 60 days’ notice to the Bondholders in accordance with Condition 16 (which notice shall be irrevocable and shall specify the Make Whole Optional Redemption Date) and to the Trustee, redeem all or some only of the Bonds at the Make Whole Redemption Price together with interest accrued to, but excluding, the Make Whole Optional Redemption Date.
Any notice of redemption given under Condition 6(b) will override any notice of redemption given (whether previously, on the same date or subsequently) under this Condition 6(c).
In this Condition:
“Determination Agent” means a reputable financial adviser or a reputable bank or financial institution, appointed by the Issuer or the Guarantor for the purpose of determining the Make Whole Redemption Price;
“Make Whole Optional Redemption Date” means the date specified for redemption in accordance with this Condition 6(c) and which shall fall prior to the date falling 90 days prior to the Maturity Date;
“Make Whole Redemption Price” means, in respect of each Bond, (a) the principal amount of such Bond or, if higher, (b) the sum of the then present values of the remaining scheduled payments of principal and interest in respect of such Bond discounted to the Make Whole Optional Redemption Date on an annual basis (based on the actual number of days elapsed divided by 365 or (in the case of a leap year) by 366 and assuming, for this purpose, that the Bonds are to be redeemed at their principal amount on the date falling 90 days prior to the Maturity Date) at the Reference Dealer Rate (as defined below) plus 0.20 per cent., in each case as determined by the Determination Agent;
“Reference Bond” means (a) the German government bond bearing interest at a rate of 0.25 per cent. per annum and maturing in August 2028 with (as at 14 May 2020) ISIN DE0001102457 or, (b) if, at 11:00 a.m. Central European time on the third Business Day (as defined in Condition 7(d)) preceding the Make Whole Optional Redemption Date, the Reference Bond referred to in (a) is no longer outstanding, such other central bank or government security that, in the opinion of the Determination Agent: (i) has a maturity as near as possible to the date falling 90 days prior to the Maturity Date; and (ii) would be utilised, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Bonds (assuming, for this purpose, that such term ends on the date falling 90 days prior to the Maturity Date);
“Reference Dealer Rate” means, with respect to the Reference Dealers and the Make Whole Optional Redemption Date, the average of the four quotations of the mid-market annual yield to maturity of the
45 Reference Bond at 11:00 a.m. Central European time on the third Business Day preceding the Make Whole Optional Redemption Date quoted in writing to the Determination Agent by the Reference Dealers; and
“Reference Dealers” means four credit institutions or financial services institutions that regularly deal in bonds and other debt securities as selected by the Determination Agent after consultation with the Guarantor.
(d) Redemption at the Option of the Issuer (Pre-Maturity Call): The Issuer may, at any time on or after the date falling 90 days prior to the Maturity Date, on giving not less than 30 nor more than 60 days’ notice to the Bondholders in accordance with Condition 16 (which notice shall be irrevocable and shall specify the date fixed for redemption (the “Pre-Maturity Optional Redemption Date”)), redeem all, but not some only, of the Bonds at their principal amount together with interest accrued to but excluding the Pre-Maturity Optional Redemption Date.
Any Bonds which are the subject of Change of Control Put Exercise Notices which have been validly delivered pursuant to Condition 6(f) before the date on which notice is provided by the Issuer as referred to in the preceding paragraph shall be redeemed as provided in Condition 6(f) and not as provided in this Condition 6(d).
Any notice of redemption given under this Condition 6(d) will override any notice of redemption given (whether previously, on the same date or subsequently) under Condition 6(b) or Condition 6(c).
(e) Redemption at the Option of Issuer (Clean Up Par Call): The Issuer may, at any time when 80 per cent. or more in principal amount of the Bonds originally issued have been redeemed (other than where 80 per cent. or more in principal amount of the Bonds originally issued have been redeemed pursuant to Condition 6(c)) or purchased, on giving not less than 30 nor more than 60 days’ notice to the Bondholders (which notice shall be irrevocable and shall specify the date fixed for redemption), redeem, at its option, all but not some only of the remaining outstanding Bonds at their principal amount, together with interest accrued to (but excluding) the date fixed for such redemption or purchase.
(f) Redemption at the Option of the Bondholders following a Change of Control:
If a Change of Control Event (as defined below) occurs, the holder of each Bond will have the option (a “Change of Control Put Option”) (unless prior to the giving of the relevant Change of Control Put Event Notice (as defined below) the Issuer has given notice of redemption under Condition 6(b), 6(c), 6(d) or 6(e) above) to require the Issuer to redeem or, at the Issuer’s option, purchase (or procure the purchase of) that Bond on the Change of Control Put Date (as defined below) at the principal amount of that Bond together with interest accrued to (but excluding) the Change of Control Put Date.
Promptly upon the Issuer or the Guarantor becoming aware that a Change of Control Event has occurred, and in any event not later than 21 days after the occurrence of the Change of Control Event, the Issuer shall give notice (a “Change of Control Put Event Notice”) to the Bondholders in accordance with Condition 16 and to the Trustee and the Agents specifying the nature of the Change of Control Event, the procedure for exercising the Change of Control Put Option and the Change of Control Put Date.
To exercise the Change of Control Put Option, the holder of a Bond must deliver the certificate in respect of such Bond to the specified office of any Agent at any time during normal business hours of such Agent falling within the period (the “Change of Control Put Period”) of 30 days after the relevant Change of Control Put Event Notice is given, accompanied by a duly signed and completed notice of exercise in the form (for the time being current) obtainable from the specified office of any Agent (a “Change of Control Put Exercise Notice”).
46 Payment in respect of any Bond so delivered will be made on the date which is the fifth payment business day (as defined in Condition 7(d)) after the expiration of the Change of Control Put Period (the “Change of Control Put Date”).
A Change of Control Put Exercise Notice, once given, shall be irrevocable.
The Issuer shall redeem or purchase (or procure the purchase of) the relevant Bonds on the Change of Control Put Date unless previously redeemed (or purchased) and cancelled.
In this Condition 6:
A “Change of Control Event” will be deemed to occur if:
(i) a person or persons acting directly, indirectly or in concert (as defined in the Swiss Federal Act on Stock Exchanges and Securities Dealers), with the exception of the Schweizerische Eidgenossenschaft, acquires (directly or indirectly) (a) shares in the capital of the Guarantor representing, together with the shares already held by such person or persons, more than 50 per cent. of the voting rights irrespective of whether they are exercisable at a general meeting of the Guarantor or (b) more than 50 per cent. of the issued or allotted ordinary share capital of the Guarantor (such event being a “Change of Control”); and
(ii) on the date (the “Relevant Announcement Date”) that is the earlier of (1) the date of the first public announcement of the relevant Change of Control and (2) the date of the earliest Relevant Potential Change of Control Announcement (as defined below) (if any), the Bonds carry from any Rating Agency (as defined below):
(A) an investment grade credit rating (Baa3/BBB-, or equivalent, or higher) (an “Investment Grade Rating”), and such rating from any Rating Agency is, within the Change of Control Period, either downgraded to a non-investment grade credit rating (Ba1/BB+, or equivalent, or lower) (a “Non-Investment Grade Rating”) or withdrawn and is not, within the Change of Control Period, subsequently (in the case of a downgrade) upgraded or (in the case of a withdrawal) reinstated to an Investment Grade Rating by such Rating Agency; or
(B) a Non-Investment Grade Rating and such rating from any Rating Agency is, within the Change of Control Period, either downgraded by one or more notches (by way of example, Baa1 to Baa2 being one notch) or withdrawn and is not, within the Change of Control Period, subsequently (in the case of a downgrade) upgraded or (in the case of a withdrawal) reinstated to its earlier credit rating or higher by such Rating Agency; or
(C) no credit rating and a Ratings Procurement Failure (as defined below) also occurs within the Change of Control Period,
provided that if at the time of the occurrence of the Change of Control the Bonds carry a credit rating from more than one Rating Agency, at least one of which is an Investment Grade Rating, then sub-paragraph (ii)(A) above will apply; and
(iii) in making any decision to downgrade or withdraw a credit rating pursuant to sub-paragraphs (ii)(A) and (ii)(B) above of this definition or not to award a credit rating of at least investment grade as described in sub-paragraph (ii) of the definition of Ratings Procurement Failure, the relevant Rating Agency announces publicly or confirms in writing to the Guarantor that such decision(s) resulted, in whole or in part, from the occurrence of the Change of Control or the Relevant Potential Change of Control Announcement.
47 “Rating Agency” means Moody’s Investors Service Ltd or S&P Global Ratings Europe Limited or any of their respective successors or any other international rating agency of similar repute substituted for any of them by the Guarantor from time to time; and
“Change of Control Period” means the period commencing on the Relevant Announcement Date and ending 180 days after the Change of Control (or such longer period for which the Bonds are under consideration (such consideration having been announced publicly within the period ending 180 days after the Change of Control) for rating review or, as the case may be, rating by a Rating Agency, such period not to exceed 60 days after the public announcement of such consideration);
a “Ratings Procurement Failure” shall be deemed to have occurred if at such time as there is no rating assigned to the Bonds by a Rating Agency (i) the Guarantor does not, either prior to, or not later than 21 days after, the occurrence of the Change of Control seek, and thereafter throughout the Change of Control Period use all reasonable endeavours to obtain, a rating of the Bonds, or any other unsecured and unsubordinated debt of the Guarantor or (ii) if the Guarantor does so seek and use such endeavours, it is unable to obtain an Investment Grade Rating by the end of the Change of Control Period; and
“Relevant Potential Change of Control Announcement” means any public announcement or statement by the Guarantor, any actual or potential bidder or any adviser acting on behalf of any actual or potential bidder relating to any potential Change of Control where within 180 days following the date of such announcement or statement, a Change of Control occurs.
(g) Purchase: the Issuer, the Guarantor and any of the Guarantor’s Subsidiaries (as defined in Condition 9) may at any time purchase Bonds in the open market or otherwise at any price. The Bonds so purchased, while held by or on behalf of the Issuer, the Guarantor or any such Subsidiary, shall not entitle the holder to vote at any meetings of the Bondholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Bondholders or for the purposes of Condition 12(a).
(h) Cancellation: All Bonds redeemed pursuant to this Condition 6 will be cancelled and may not be re- issued or resold. Any Bond purchased under Condition 6(g) may be cancelled (in which case it may not be reissued), held or, to the extent permitted by law, resold.
7 Payments
(a) Method of Payment:
(i) Payments of principal (including any Make Whole Redemption Price) shall be made (subject to surrender of the relevant Certificates at the specified office of any Transfer Agent or of the Registrar if no further payment falls to be made in respect of the Bonds represented by such Certificates) in the manner provided in paragraph (ii) below.
(ii) Interest on each Bond shall be paid to the person shown on the Register at the close of business on the business day before the due date for payment thereof (the “Record Date”). Payments of interest on each Bond shall be made in euro by transfer to an account in euro maintained by the payee with a bank in a city in which banks have access to the TARGET System.
(iii) If the amount of principal being paid upon surrender of the relevant Certificate is less than the outstanding principal amount of such Certificate, the Registrar will annotate the Register with the amount of principal so paid and will (if so requested by the Issuer or a Bondholder) issue a new Certificate with a principal amount equal to the remaining unpaid outstanding principal amount. If the amount of interest being paid is less than the amount then due, the Registrar will annotate the Register with the amount of interest so paid.
48 (b) Payments subject to Laws: All payments are subject in all cases to any applicable fiscal or other laws, regulations and directives in the place of payment, but without prejudice to the provisions of Condition 8. No commission or expenses shall be charged to the Bondholders in respect of such payments.
(c) Appointment of Agents: The Principal Paying Agent, the Registrar and the Transfer Agents initially appointed by the Issuer and their respective specified offices are listed below. Each of the Principal Paying Agent, the Registrar and the Transfer Agents acts solely as an agent of the Issuer and does not assume any obligation or relationship of agency or trust for or with any Bondholder. The Issuer reserves the right at any time with the approval of the Trustee to vary or terminate the appointment of any Agent and to appoint additional or other agents, provided that the Issuer shall at all times maintain (i) a Principal Paying Agent, (ii) a Registrar, (iii) a Transfer Agent and (iv) and such other agents as may be required by any other stock exchange on which the Bonds may be listed, in each case, as approved by the Trustee.
Notice of any such change or any change of any specified office shall promptly be given to the Bondholders.
(d) Non-Business Days: If any date for payment in respect of any Bond is not a Business Day, the holder shall not be entitled to payment until the next following Business Day nor to any interest or other sum in respect of such postponed payment. For the purpose of calculating the interest amount payable under the Bonds, the Interest Payment Date shall not be adjusted.
In these Conditions:
“Business Day” means a day (other than a Saturday or a Sunday) on which the specified office of the Registrar is located and which is a TARGET Business Day;
“TARGET Business Day” means a day on which the TARGET System is open for the settlement of payments in euro; and
“TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) system or any successor thereto.
8 Taxation
All payments of principal (including any Make Whole Redemption Price (if applicable)) and interest by or on behalf of the Issuer or the Guarantor in respect of the Bonds or Guarantee (as applicable) shall be made without withholding or deduction for, or on account of, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by the Netherlands or Switzerland or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event the Issuer or, as the case may be, the Guarantor shall pay such additional amounts as will result in receipt by the Bondholders of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Bond or under the Guarantee (as applicable):
(a) where such Bond is held by or on behalf of a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of his having some connection with the Netherlands or, in the case of payments made by the Guarantor, Switzerland (as applicable), other than merely by being a holder of the Bond; or
(b) where such withholding or deduction is imposed on a payment and is required to be made pursuant to laws enacted by the Netherlands or Switzerland providing for the taxation of payments changing the Dutch or Swiss federal withholding tax system from an issuer-based system to a paying agent-based
49 system pursuant to which a person in the Netherlands or Switzerland other than the Issuer or the Guarantor, as the case may be, is required to withhold tax on any interest payments; or
(c) on account of any withholding imposed on any payments pursuant to FATCA; or
(d) to, or to a third party on behalf of, a Bondholder who could lawfully avoid (but has not so avoided) such deduction or withholding by complying or procuring that any third party complies with any statutory requirements or by making or procuring that any third party makes a declaration of non-residence or other similar claim for exemption to any tax authority in the place where the relevant Bonds are presented for payment; or
(e) in respect of which the Certificate representing it is presented for payment more than 30 days after the Relevant Date except to the extent that the holder of it would have been entitled to such additional amounts on surrendering the Certificate representing such Bond for payment on the last day of such period of 30 days; or
(f) by reason of any combination of (a) to (e) above.
Any reference in these Conditions to principal and/or interest shall be deemed to include any additional amounts which may be payable under this Condition 8.
As used in these Conditions:
“FATCA” means:
(i) Sections 1471 to 1474 of the U.S. Internal Revenue Code of 1986 or any associated regulations;
(ii) any treaty, law, regulation of any other jurisdiction, or relating to an intergovernmental agreement between the U.S. and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (i) above; and
(iii) any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (i) or (ii) above with the US Internal Revenue Service, the U.S. government or any governmental or taxation authority in any other jurisdiction.
“Relevant Date” means, in respect of any Bond, whichever is the later of:
(i) the date on which payment in respect of it becomes due; or
(ii) if any payment is improperly withheld or refused the date on which payment in full of the amount outstanding is made or (if earlier) the date seven days after that on which notice is duly given by the Issuer to the Bondholders in accordance with Condition 16 that, upon further presentation of the Bond, where required pursuant to these Conditions, being made, such payment will be made, provided that such payment is in fact made as provided in these Conditions.
9 Events of Default
If any of the following events (each an “Event of Default”) occurs the Trustee at its discretion may, and if so requested in writing by holders of at least one-fifth in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall (provided in each case that the Trustee shall have been indemnified and/or secured and/or prefunded to its satisfaction), give notice to the Issuer that the Bonds are, and they shall immediately become, due and payable at their principal amount together (if applicable) with accrued interest:
50 (a) Non-Payment: the Issuer, failing whom the Guarantor, fails to pay the principal of or any interest on any of the Bonds when due and such failure continues for a period of 14 days; or
(b) Breach of Other Obligations: the Issuer or the Guarantor does not perform or comply with any one or more of its obligations, conditions or provisions binding on it under the Bonds or the Trust Deed (other than any obligation for the payment of principal or interest) which default is incapable of remedy or, if in the opinion of the Trustee capable of remedy, is not in the opinion of the Trustee remedied within 60 Business Days after notice of such default shall have been given to the Issuer or the Guarantor by the Trustee; or
(c) Cross-Acceleration: (i) any other present or future indebtedness of the Issuer, the Guarantor or any of the Material Subsidiaries for or in respect of moneys borrowed or raised becomes immediately due and payable prior to its stated maturity by reason of an event of default (howsoever described), or (ii) any such indebtedness is not paid when due or, as the case may be, within any originally applicable grace period, or (iii) the Issuer, the Guarantor or any of the Material Subsidiaries fails to pay when due or, as the case may be, within any originally applicable grace period, any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this Condition 9(c) have occurred equals or exceeds CHF100,000,000 or its equivalent in other currencies (on the basis of the middle spot rate for the relevant currency against the Swiss Francs as quoted by any leading bank on the day on which this Condition 9(c) operates), unless, in the case of any of (i), (ii) or (iii) above, the Issuer or the Guarantor is contesting that such payment obligation was due and payable in good faith by taking appropriate action; or
(d) Encumbrance: an encumbrancer or a receiver or a person with similar functions appointed for execution (in Switzerland for example, a Sachwalter or Konkursverwalter) takes possession of the whole, or substantially the whole, of the assets or undertaking of the Issuer, the Guarantor or any of the Material Subsidiaries or a distress, execution or analogous process under the applicable law of any jurisdiction is levied or enforced upon substantially the whole of the assets or undertaking of the Issuer, the Guarantor or any of the Material Subsidiaries and is not paid, discharged, removed or stayed within 30 days; or
(e) Insolvency: the Issuer, the Guarantor or any of the Material Subsidiaries is declared insolvent or bankrupt or unable to pay its debts as and when they fall due by a court of competent jurisdiction or the Issuer, the Guarantor or any of the Material Subsidiaries has initiated or becomes subject to proceedings relating to itself under any applicable bankruptcy, liquidation, insolvency, composition, Nachlassvertrag, faillite, administration, examinership, insolvency or analogous law of any jurisdiction, or makes a general assignment for the benefit of, or enters into any composition or analogous arrangement with, its creditors or notifies the court of its financial situation in accordance with Article 725(2) of the Swiss Code of Obligations or any analogous law applicable in any other jurisdiction or enters into a moratorium (Stundung) or analogous arrangement; or
(f) Winding-up: an order is made or an effective resolution passed for the winding-up or dissolution or liquidation of the Issuer, the Guarantor or any of the Material Subsidiaries, or the Issuer, the Guarantor or any of the Material Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by an Extraordinary Resolution, or (ii) in the case of a Material Subsidiary, whereby the undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in the Issuer, the Guarantor or another of the Material Subsidiaries; or
(g) Guarantee: the Guarantee is not in full force and effect or is claimed by the Guarantor not to be in full force and effect,
51 provided that in the case of paragraphs (b), (d), and insofar as it relates to the Material Subsidiaries (e) and (f), the Trustee shall have certified that in its opinion such event is materially prejudicial to the interests of Bondholders.
In these Conditions,
“Group” means the Guarantor and its Subsidiaries;
“Material Subsidiary” means, at any date, any member of the Group (excluding the Issuer) (i) of which the Guarantor holds, either directly or indirectly, more than 50 per cent. of the voting rights, (ii) where the Guarantor may appoint a majority of the administrative board members and (iii) whose revenue (excluding intra-Group items) over the three fiscal years immediately preceding such time equalled or exceeded on average 10 per cent. of the revenue of the Group, calculated on a consolidated basis.
For this purpose:
(a) the revenue of a member of the Group (other than the Guarantor) will be determined from the financial statements (unconsolidated if it has Subsidiaries) upon which the latest three fiscal years audited consolidated financial statements of the Group have been based;
(b) if a Subsidiary of the Guarantor becomes a member of the Group after the date on which the latest audited consolidated financial statements of the Group have been prepared, the revenue of that Subsidiary will be determined from its latest three fiscal years audited financial statements;
(c) the revenue of the Group will be determined from its latest three fiscal years audited consolidated financial statements, adjusted (where appropriate) to reflect the revenue of any company or business subsequently acquired or disposed of; and
(d) if a Material Subsidiary disposes of all or substantially all of its assets to another Subsidiary of the Guarantor, it will immediately cease to be a Material Subsidiary and the other Subsidiary (if it is not already) will immediately become a Material Subsidiary; the subsequent audited consolidated financial statements of the Group (and the financial statements upon which such audited consolidated financial statements are based) will be used to determine whether those Subsidiaries are Material Subsidiaries or not.
If there is a dispute as to whether or not a company is a Material Subsidiary, a certificate of the auditors of the Guarantor will be conclusive, in the absence of manifest error; and
“Subsidiary” means any entity whose financial statements at any time are required by law or in accordance with Swiss generally accepted accounting principles or International Financial Reporting Standards to be fully consolidated with those of the Guarantor.
10 Prescription
Claims against the Issuer for payment in respect of the Bonds shall be prescribed and become void unless made within 10 years (in the case of principal) or five years (in the case of interest) after their due date.
11 Replacement of Certificates
If any Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, regulations or other relevant regulatory authority regulations, at the specified office of the Registrar or such other Transfer Agent as may from time to time be designated by the Issuer for that purpose and notice of whose designation is given to Bondholders, in each case on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, security, indemnity and otherwise as the Issuer may
52 require (provided that the requirement is reasonable in light of prevailing market practice). Mutilated or defaced Certificates must be surrendered before replacements will be issued.
12 Meetings of Bondholders, Modification and Substitution
(a) Meetings of Bondholders: The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any provisions of the Trust Deed. The Issuer, the Guarantor or the Trustee may at any time convene a meeting. If it receives a written request by Bondholders holding at least 10 per cent in principal amount of the Bonds for the time being outstanding and is indemnified and/or secured and/or prefunded to its satisfaction, the Trustee shall convene a meeting of the Bondholders. The quorum for any meeting convened to consider an Extraordinary Resolution will be two or more persons holding or representing a clear majority in principal amount of the Bonds for the time being outstanding, or at any adjourned meeting two or more persons being or representing Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to modify the maturity of the Bonds or the dates on which interest is payable in respect of the Bonds, (ii) to reduce or cancel the principal amount of, any premium payable on redemption of, or interest on, the Bonds, (iii) to change the currency of payment of the Bonds, (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, or (v) to modify or cancel the Guarantee, in which case the necessary quorum will be two or more persons holding or representing not less than 66 2/3 per cent., or at any adjourned meeting not less than 33 1/3 per cent., in principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on Bondholders (whether or not they were present at the meeting at which such resolution was passed).
The Trust Deed provides that a resolution in writing signed by or on behalf of the holders of not less than 75 per cent. in principal amount of the Bonds outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Bondholders duly convened and held. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Bondholders. Any resolution in writing duly passed shall be binding on all Bondholders (whether or not they participated in such resolution).
(b) Modification: The Trustee may agree, without the consent of the Bondholders, to (i) any modification of any of these Conditions or any of the provisions of the Trust Deed or the Agency Agreement, that is of a formal, minor or technical nature or is made to correct a manifest error or to comply with mandatory provisions of law, and (ii) any other modification (except as mentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach, of any of these Conditions or any of the provisions of the Trust Deed or the Agency Agreement that is in the opinion of the Trustee not materially prejudicial to the interests of the Bondholders. Any such modification, authorisation or waiver shall be binding on the Bondholders and shall be notified to the Bondholders as soon as practicable.
(c) Substitution: The Trust Deed contains provisions permitting the Trustee to agree, subject to such amendment of the Trust Deed, the Agency Agreement and such other conditions as the Trustee may require, but without the consent of the Bondholders, to the substitution of the Issuer’s successor in business or any Subsidiary of the Issuer or the Guarantor or any of their successors in business in place of the Issuer (or of any previous substituted company) as the principal debtor under the Trust Deed, the Agency Agreement and the Bonds and the Trustee may, without the consent of the Bondholders, agree to the substitution of the Guarantor’s successor in business or any Subsidiary of the Guarantor or its
53 successor in business in place of the Guarantor (or of any previous substituted company) as guarantor under the Trust Deed, the Agency Agreement and the Bonds.
(d) Entitlement of the Trustee: In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Bondholders as a class and shall not have regard to the consequences of such exercise for individual Bondholders and the Trustee shall not be entitled to require, nor shall any Bondholder be entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders.
13 Enforcement
At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such steps, actions and/or proceedings against the Issuer and/or the Guarantor as it may think fit to enforce the terms of the Trust Deed and the Bonds and/or the Guarantee, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least one-fifth in principal amount of the Bonds outstanding, and (b) it shall have been indemnified and/or secured and/or prefunded to its satisfaction. No Bondholder may proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.
14 Indemnification of the Trustee
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer, the Guarantor and any entity related to the Issuer or the Guarantor without accounting for any profit.
The Trustee may rely without liability to Bondholders on a report, confirmation or certificate or any advice of any accountants, financial advisers, financial institution or any other expert, whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by any engagement letter relating thereto entered into by the Trustee or in any other manner) by reference to a monetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely on any such report, confirmation or certificate or advice (without further enquiry and without liability to any person) and such report, confirmation or certificate or advice shall be binding on the Issuer, the Trustee and the Bondholders.
15 Further Issues
The Issuer may from time to time without the consent of the Bondholders create and issue further securities having the same terms and conditions as the Bonds in all respects (or in all respects except for the original issue date, the first payment of interest on them, if any, and the issue price) and so that such further issue shall be consolidated and form a single series with the outstanding Bonds. References in these Conditions to the Bonds include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Bonds. Any further securities which are to form a single series with the outstanding Bonds may be constituted by a deed supplemental to the Trust Deed.
16 Notices
Notices required to be given to the holders of Bonds pursuant to the Conditions shall be mailed to them at their respective addresses in the Register and deemed to have been given on the fourth weekday (being a day other than a Saturday or a Sunday) after the date of mailing.
54 Notices required to be given to the holders of Bonds pursuant to the Conditions shall also be published (if such publication is required) in a manner which complies with the rules and regulations of the stock exchange or other relevant authorities on which the Bonds are for the time being listed and/or admitted to trading. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the first date on which publication is made. If publication as provided above is not practicable, notice will be given by publication in a newspaper of general circulation in London (which is expected to be the Financial Times) or in such other manner, and shall be deemed to be given on such date, as the Trustee may approve.
Any such notice by publication in a newspaper shall be deemed given on the date of publication or, if published more than once or on different dates, on the first date on which such publication is made.
17 Contracts (Rights of Third Parties) Act 1999
No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.
18 Governing Law and Jurisdiction
(a) Governing Law: The Trust Deed and the Bonds and any non-contractual obligations arising out of or in connection with them are governed by, and shall be construed in accordance with, English law.
(b) Jurisdiction: The courts of England are to have jurisdiction to settle any disputes that may arise out of or in connection with the Bonds or the Guarantee and any non-contractual obligations arising out of or in connection with them and accordingly any legal action or proceedings arising out of or in connection with any Bonds or the Guarantee or any such non-contractual obligations (“Proceedings”) may be brought in such courts. Pursuant to the Trust Deed, each of the Issuer and the Guarantor has irrevocably submitted to the jurisdiction of such courts.
(c) Agent for Service of Process: Pursuant to the Trust Deed, each of the Issuer and the Guarantor has irrevocably appointed an agent in England to receive service of process in any Proceedings in England based on any of the Bonds or the Guarantee.
55 SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM
The Bonds will be issued in the New Safekeeping Structure (“NSS”) form. On 22 October 2018, the European Central Bank (the “ECB”) announced that international debt securities in global registered form issued after 30 September 2010 would only be eligible as collateral for Eurosystem credit operations when the NSS form is used.
The Bonds are intended to be held in manner which would allow Eurosystem eligibility that is, in a manner which would allow the Bonds to be recognised as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.
1 Initial Issue of Certificates
The Global Certificate will be registered in the name of a nominee (the “Registered Holder”) for a common safekeeper for Euroclear and Clearstream, Luxembourg (the “Common Safekeeper”) and may be delivered on or prior to the original issue date of the Bonds. Depositing the Global Certificate with the Common Safekeeper does not necessarily mean that the Bonds will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue, or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria.
Upon the registration of the Global Certificate in the name of any nominee for Euroclear and Clearstream, Luxembourg and delivery of the Global Certificate to the Common Safekeeper, Euroclear or Clearstream, Luxembourg will credit each subscriber with a nominal amount of Bonds equal to the nominal amount thereof for which it has subscribed and paid.
2 Relationship of Accountholders with Clearing Systems
Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or any other clearing system (“Alternative Clearing System”) as the holder of a Bond represented by a Global Certificate must look solely to Euroclear, Clearstream, Luxembourg or any such Alternative Clearing System (as the case may be) for his share of each payment made by the Issuer or the Guarantor to the holder of the Global Certificate and in relation to all other rights arising under the Global Certificate, subject to and in accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg, or such Alternative Clearing System (as the case may be). Such persons shall have no claim directly against the Issuer or the Guarantor in respect of payments due on the Bonds or under the Guarantee, as applicable, for so long as the Bonds are represented by the Global Certificate and such obligations of the Issuer or the Guarantor will be discharged by payment to the holder of the Global Certificate in respect of each amount so paid.
3 Exchange
The following will apply in respect of transfers of Bonds held in Euroclear or Clearstream, Luxembourg or an Alternative Clearing System. These provisions will not prevent the trading of interests in the Bonds within a clearing system whilst they are held on behalf of such clearing system, but will limit the circumstances in which the Bonds may be withdrawn from the relevant clearing system.
Transfers of the holding of Bonds represented by the Global Certificate pursuant to Condition 2(a) may only be made in part:
56 (i) if the relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so; or
(ii) upon or following any failure to pay principal in respect of any Bonds when it is due and payable; or
(iii) with the consent of the Issuer,
provided that, in the case of the first transfer of part of a holding pursuant to paragraph (i) or (ii) above, the Registered Holder has given the Registrar not less than 30 days’ notice at its specified office of the Registered Holder’s intention to effect such transfer.
4 Amendment to Conditions
The Global Certificate contains provisions that apply to the Bonds that it represents, some of which modify the effect of the terms and conditions of the Bonds set out in this Prospectus. The following is a summary of certain of those provisions:
4.1 Payments
All payments in respect of Bonds represented by a Global Certificate will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the record date which shall be on the Clearing System Business Day immediately prior to the date for payment, where “Clearing System Business Day” means Monday to Friday inclusive except 25 December and 1 January.
4.2 Meetings
For the purposes of any meeting of Bondholders, the holder of the Bonds represented by the Global Certificate shall (unless the Global Certificate represents only one Bond) be treated as two persons for the purposes of any quorum requirements of a meeting of Bondholders and as being entitled to one vote in respect of each €1.
4.3 Trustee’s Powers
In considering the interests of Bondholders while the Global Certificate is held on behalf of, or registered in the name of any nominee for, a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Global Certificate and may consider such interests, and treat such accountholders, as if such accountholders were the holders of the Bonds represented by the Global Certificate.
5 Electronic Consent and Written Resolution
While the Global Certificate is registered in the name of any nominee for a clearing system, then:
(a) approval of a resolution proposed by the Issuer, the Guarantor or the Trustee (as the case may be) given by way of electronic consents communicated through the electronic communications systems of the relevant Clearing System(s) in accordance with their operating rules and procedures by or on behalf of the holders of not less than 75 per cent. in nominal amount of the Bonds outstanding (an “Electronic Consent” as defined in the Trust Deed) shall, for all purposes (including matters that would otherwise require an Extraordinary Resolution to be passed at a meeting for which a special quorum (as specified in the Trust Deed) was satisfied), take effect as an Extraordinary Resolution passed at a meeting of Bondholders duly convened and held, and shall be binding on all Bondholders whether or not they participated in such Electronic Consent; and
57 (b) where Electronic Consent is not being sought, for the purpose of determining whether a Written Resolution (as defined in the Trust Deed) has been validly passed, the Issuer, the Guarantor and the Trustee shall be entitled to rely on consent or instructions given in writing directly to the Issuer, the Guarantor and/or the Trustee, as the case may be, (a) by accountholders in the clearing system with entitlements to such Global Certificate and/or (b) where the accountholders hold any such entitlement on behalf of another person, on written consent from or written instruction by the person identified by that accountholder as the person for whom such entitlement is held. For the purpose of establishing the entitlement to give any such consent or instruction, the Issuer, the Guarantor and the Trustee shall be entitled to rely on any certificate or other document issued by, in the case of (a) above, Euroclear, Clearstream, Luxembourg or any Alternative Clearing System (the “relevant clearing system”) and, in the case of (b) above, the relevant clearing system and the accountholder identified by the relevant clearing system for the purposes of (b) above. Any resolution passed in such manner shall be binding on all Bondholders, even if the relevant consent or instruction proves to be defective. Any such certificate or other document shall, be conclusive and binding for all purposes. Any such certificate or other document may comprise any form of statement or print out of electronic records provided by the relevant clearing system (including Euroclear’s EUCLID or Clearstream, Luxembourg’s CreationOnline system) in accordance with its usual procedures and in which the accountholder of a particular principal or nominal amount of the Bonds is clearly identified together with the amount of such holding. None of the Issuer, the Guarantor or the Trustee shall be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by any such person and subsequently found to be forged or not authentic.
58 TAXATION
The following is a general description of the Issuer’s and the Guarantor’s understanding of certain Dutch and Swiss tax considerations relating to the Bonds and the Guarantee. It is restricted to the matters of Dutch and Swiss taxation stated herein and is intended neither as tax advice nor as a complete analysis of all tax considerations relating to the Bonds, whether in those countries or elsewhere. Prospective purchasers of the Bonds should consult their own tax advisers as to which countries’ tax laws could be relevant to acquiring, holding and disposing of the Bonds and receiving payments of interest, principal and/or other amounts under the Bonds and the consequences of such actions under the tax laws of those countries. This overview is based upon the law as in effect on the date of this Prospectus and is subject to any change in law that may take effect after such date, even with retroactive effect.
DUTCH TAXATION
Withholding tax
All payments of principal and interest by the Issuer under the Bonds can be made without withholding or deduction of any taxes of whatever nature imposed, levied, withheld or assessed by the Netherlands or any political subdivision or taxing authority thereof or therein.
Taxes on income and capital gains
A Bondholder who derives income from a Bond or who realises a gain from the disposal or redemption of a Bond will not be subject to Dutch taxation on such income or capital gain, provided that:
(i) the Bondholder is neither resident nor deemed to be a resident of the Netherlands for the purpose of the relevant Dutch tax law provisions;
(ii) the Bondholder does not have an enterprise or deemed enterprise (as defined in Dutch tax law) or an interest in an enterprise or deemed enterprise (as defined in Dutch tax law) that is, in whole or in part, carried on through a permanent establishment (vaste inrichting) or a permanent representative (vaste vertegenwoordiger) in the Netherlands and to which enterprise or part of that enterprise, as the case may be, the Bonds are attributable;
(iii) the Bondholder is not entitled to a share in the profits of an enterprise that is effectively managed in the Netherlands, other than by way of securities, and to which enterprise the Bonds are attributable;
(iv) the Bondholder does not have a substantial interest (aanmerkelijk belang) or a deemed substantial interest in the Issuer as defined in the Dutch Income Tax Act 2001 (Wet op de inkomstenbelasting 2001);
(v) if the Bondholder is an individual, the Bondholder does not derive benefits from the Bonds that are taxable as benefits from miscellaneous activities in the Netherlands (resultaat uit overige werkzaamheden in Nederland) as defined in the Dutch Income Tax Act 2001, which include, but are not limited to, activities in respect of the Bonds which are beyond the scope of “regular active asset management” (normaal actief vermogensbeheer) or benefits which are derived from the holding, whether directly or indirectly, of (a combination of) shares, debt claims or other rights which form a “lucrative interest” (lucratief belang). A lucrative interest is an interest which the holder thereof has acquired under such circumstances that benefits arising from this lucrative interest are intended to be a remuneration for work or services performed by such holder (or a person related to such holder) in the Netherlands, whether within or outside an employment relationship, where such lucrative interest provides the holder thereof, economically, with certain benefits that have a relationship to the relevant work or services; and
(vi) the Bondholder is not an entity which is, as of 1 January 2021, (deemed) affiliated to the Issuer within the meaning of the Withholding Tax Act of 2021 (Wet Bronbelasting 2021).
59 Under Dutch tax law, a Bondholder will not be deemed a resident, domiciled or carrying on a business in the Netherlands by reason only of its holding of the Bonds or the performance by the Issuer of its obligations under the Bonds.
Gift and inheritance taxes
No gift or inheritance taxes will arise in the Netherlands with respect to the acquisition of Bonds by way of gift by, or on the death of, a Bondholder, unless:
(i) the Bondholder is a resident or deemed to be resident of the Netherlands for the purpose of the relevant Dutch tax law provisions; or
(ii) in the case of a gift of Bonds by an individual who at the date of the gift was neither resident nor deemed to be resident in the Netherlands, such individual dies within 180 days after the date of the gift, while being resident or deemed to be resident of the Netherlands.
For the purpose of Dutch gift and inheritance tax, an individual who has the Dutch nationality will be deemed to be a resident of the Netherlands at the date of the gift or the date of his death, if he has been a resident of the Netherlands at any time during the ten years preceding the date of the gift or the date of his death.
For the purposes of Dutch gift tax, an individual who does not have the Dutch nationality will be deemed to be a resident of the Netherlands at the date of the gift, if he has been a resident of the Netherlands at any time during the twelve months preceding the date of the gift.
Other taxes and duties
No Dutch value added tax, capital duty, registration tax, customs duty, transfer tax, stamp duty or any other similar levy, tax or duty, will be due in the Netherlands by a Bondholder in respect of or in connection with the subscription, issue, placement, allotment or delivery of the Bonds.
International Exchange of Information in Tax Matters
The Netherlands falls under the scope of the EU rules regarding the international automatic exchange of information (“AEOI”) in tax matters, which applies to all EU member states. In addition, the Netherlands has concluded a number of bilateral AEOI agreements with other countries and also has domestic laws concerning the exchange of information. Based on the aforementioned rules, treaties and laws, the Netherlands collects and exchanges data in respect of financial assets, including the Bonds, and exchanges this information with other nations.
Dutch Facilitation of the Implementation of the U.S. Foreign Account Tax Compliance Act
The United States and the Netherlands have entered into an intergovernmental agreement to facilitate the implementation of FATCA (an “IGA”). Under the IGA, financial institutions acting out of the Netherlands generally are directed to become participating foreign financial institutions (“FFIs”). The agreement ensures that accounts held by U.S. persons with Dutch financial institutions are disclosed to the U.S. tax authorities either with the consent of the account holder or by means of group requests within the scope of administrative assistance on the basis of the double taxation agreement between the United States and the Netherlands. Certain information with respect to the holders of the Bonds may have to be disclosed to the United States under the FATCA rules.
SWISS TAXATION
Swiss Withholding Tax
Payments by the Issuer of interest on, and repayment of principal of, the Bonds, or any payments by the Guarantor under the Guarantee, will not be subject to Swiss withholding tax. So long as the Bonds are outstanding, the Issuer and the Guarantor will ensure that (i) the Issuer will have its domicile and place of effective management outside Switzerland, and (ii) the aggregate amount of proceeds from the issuance of all outstanding debt instruments issued
60 by a non-Swiss member of the Group with the parental guarantee of a Swiss member of the Group (including the Bonds) that is being applied by any member of the Group in Switzerland does not exceed the amount that is permissible under the taxation laws in effect at such time in Switzerland without subjecting interest payments due under the Bonds (or any payments under the Guarantee) to Swiss federal withholding tax. On the basis of practice guidelines published on 5 February 2019, the Swiss Federal Tax Administration has confirmed in a private advance tax ruling procedure the principles of determining the amount permissible (see also above under Risk Factors - “The tax treatment of the Bonds with respect to Swiss withholding tax”).
On 3 April 2020, the Swiss Federal Council submitted the reform of the withholding tax regime to the consultations procedure. The reform proposal replaces the current debtor-based regime applicable to interest payments with a paying agent-based regime for Swiss withholding tax. This paying agent-based regime (i) subjects all interest payments made by paying agents in Switzerland to individuals resident in Switzerland to Swiss withholding tax and (ii) exempts from Swiss withholding tax interest payments to all other persons, including to Swiss domiciled legal entities and foreign investors. Accordingly, the Swiss withholding tax is also imposed on interest payments on foreign notes. If the reform proposal is approved, a Swiss paying agent would have to levy and pay Swiss withholding tax on interest payments and the like of domestic and foreign notes, provided that the beneficiary is an individual resident in Switzerland. Swiss-based financial institutions holding notes in depository accounts, Swiss-based issuers (provided no financial institution holds the notes), Swiss-based portfolio managers and trustees and other Swiss- based payors may qualify as a paying agent. The proposal specifies that change to a paying-agent based regime is voluntary in respect of Swiss notes and obligatory for foreign notes. The Bonds should qualify as foreign notes for the purpose of the proposed regime.
The consultations procedure is open until July 2020. The parliamentary debates are not expected before 2021 and entry into force, if adopted, is not expected before 2022. The exact measures of the proposed reform may be changed as the result of the consultations procedure and / or the parliamentary debates.
If a paying agent-based regime, such as the one as proposed, were to be enacted and were to result in the deduction or withholding of Swiss withholding tax on any interest payments in respect of any Bonds by any person other than the Issuer or a Guarantor, the holder of such Bonds would not be entitled to receive any additional amounts as a result of such deduction or withholding under the terms of the Bonds.
Swiss Securities Turnover Tax
The issuance and sale of the Bonds on the issue date are exempt from Swiss securities turnover tax (Umsatzabgabe) (primary market). Secondary market dealings in Bonds may be subject to the Swiss securities turnover tax at a rate of up to 0.30 per cent. of the purchase price of the Bonds, however, only if a securities dealer in Switzerland or Liechtenstein, as defined in the Swiss Federal Act on Stamp Duties (Bundesgesetz über die Stempelabgaben), is a party or an intermediary to the transaction and no exemption applies. An exemption applies, inter alia, for each party to a transaction in Bonds that is not resident in Switzerland or Liechtenstein.
Swiss Income Taxation of Non-Swiss tax resident Investors
Payments of interest on, and repayment of principal of, the Bonds, by the Issuer to, and payments under the Guarantee by the Guarantor, and gain realised on the sale or redemption of a Bond by a holder of a Bond who is not a resident of Switzerland and who during the current taxation year has not engaged in a trade or business through a permanent establishment in Switzerland to which such Bond is attributable, will, in respect of such Bond, not be subject to any Swiss federal, cantonal or communal income tax.
For a discussion of the potential new Swiss withholding tax legislation that may replace the current issuer-based withholding tax system with a paying-agent based withholding tax system, see above under “Swiss Withholding Tax”, for a discussion of the automatic exchange of information in tax matters, see below under “International Automatic Exchange of Information in Tax Matters”, and for a discussion of the Swiss facilitation of the implementation of the
61 Foreign Account Tax Compliance Act, see below under “Swiss Facilitation of the Implementation of the U.S. Foreign Account Tax Compliance Act”.
Swiss Income Taxation of Bonds held by Swiss tax resident Individuals as Private Assets
A holder of a Bond who is an individual resident in Switzerland and who holds such Bond as a private asset is required to include interest payments and any payment by the Issuer upon redemption relating to accrued interest on such Bond in their personal income tax return for the relevant tax period, converted from Euro into Swiss francs at the exchange rate prevailing at the time of payment, and will be taxable on any net taxable income (including the payments of interest on such Bond) for such tax period. A gain (including a gain in respect of interest accrued, foreign currency exchange rate appreciation or change in market interest rate) on the sale of such a Bond is a tax-free private capital gain. Conversely, a loss realised on the sale of a Bond is a non-tax-deductible private capital loss.
Swiss Income Taxation of Bonds held by Swiss tax resident Individuals or Entities as Business Assets
Individuals who hold Bonds as part of a business in Switzerland and Swiss resident corporate taxpayers and corporate taxpayers resident abroad holding Bonds as part of a Swiss permanent establishment in Switzerland are required to recognise the payments of interest and any capital gain or loss realised on the sale or other disposition of such Bond (including relating to accrued interest, a foreign exchange rate change or a change of market interest rates) in their income statement for the respective tax period and will be taxable on any net taxable earnings for such period. The same taxation treatment also applies to Swiss resident individuals who, for income tax purposes, are classified as “Professional Securities Dealers” for reasons of, inter alia, frequent dealings, or leveraged investments, in securities.
International Automatic Exchange of Information in Tax Matters
Switzerland has concluded a multilateral agreement with the EU on the AEOI in tax matters, which applies to all EU member states. In addition, Switzerland has concluded the multilateral competent authority agreement on the automatic exchange of financial account information (“MCAA”), and based on the MCAA, a number of bilateral AEOI agreements with other countries. Based on such agreements and the implementing laws of Switzerland, Switzerland collects and exchanges data in respect of financial assets, including the Bonds, as the case may be, held in, and income derived thereon and credited to, accounts or deposits with a paying agent in Switzerland for the benefit of individuals resident in a EU member state or in another treaty state. An up-to-date list of the AEOI agreements to which Switzerland is a party that are in effect, or signed but not yet in effect, can be found on the website of the State Secretariat for International Financial Matters (SIF).
Swiss Facilitation of the Implementation of the U.S. Foreign Account Tax Compliance Act
The United States and Switzerland have entered into an intergovernmental agreement to facilitate the implementation of FATCA (an “IGA”). Under the IGA, financial institutions acting out of Switzerland generally are directed to become participating foreign financial institutions (“FFIs”). The agreement ensures that accounts held by U.S. persons with Swiss financial institutions are disclosed to the U.S. tax authorities either with the consent of the account holder or by means of group requests within the scope of administrative assistance on the basis of the double taxation agreement between the United States and Switzerland. In this regard, on 17 July 2019, the US Senate approved the 2009 protocol (the “Protocol”) amending the double taxation agreement regarding income tax between Switzerland and the US (“DTA”). The Protocol had been approved by the Swiss Federal Assembly on 18 June 2010. On 20 September 2019, Switzerland and the US exchanged the instruments of ratification of the Protocol. With the exchange of the ratification instruments, the amended DTA formally entered into force. The Protocol introduces a mechanism for the exchange of information upon request in tax matters between Switzerland and the United States, which is in line with international standards, and allows the United States to make group requests under FATCA concerning non- consenting U.S. accounts and non-consenting non-participating foreign financial institutions.
GENERAL
62 Prospective purchasers of the Bonds should be aware that they may be required to pay taxes or other documentary charges or duties in accordance with the laws and practices of the country where the Bonds are transferred or other jurisdictions. In addition, payments of interest on the Bonds (if any), or profits realised by a Bondholder upon the sale or repayment of its Bonds, may be subject to taxation in the home jurisdiction of the potential investor or in other jurisdictions in which it is required to pay taxes.
63 SUBSCRIPTION AND SALE
BNP Paribas, Credit Suisse Securities (Europe) Limited, Landesbank Baden-Württemberg and UniCredit Bank AG (the “Joint Lead Managers”) have, pursuant to a Subscription Agreement dated 12 May 2020, jointly and severally agreed with the Issuer and the Guarantor, subject to the satisfaction of certain conditions, to subscribe to the Bonds at 99.127 per cent. of their principal amount, less a combined management and underwriting commission. In addition, the Issuer, failing which the Guarantor, has agreed to reimburse the Joint Lead Managers for certain of their expenses in connection with the issue of the Bonds. The Subscription Agreement entitles the Joint Lead Managers to terminate it in certain circumstances prior to payment being made to the Issuer.
General
Neither the Issuer nor the Guarantor nor any Joint Lead Manager has made any representation that any action will be taken in any jurisdiction by the Joint Lead Managers or the Issuer or the Guarantor that would permit a public offering of the Bonds, or possession or distribution of this Prospectus (whether or not in final form) or any other offering or publicity material relating to the Bonds, in any country or jurisdiction where action for that purpose is required. Each Joint Lead Manager has agreed that it will comply, to the best of its knowledge and belief in all material respects, with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Bonds or has in its possession or distributes this Prospectus (whether or not in final form) or any such other material, in all cases at its own expense. It will also ensure that no obligations are imposed on the Issuer, the Guarantor or any of the other Joint Lead Managers in any such jurisdiction as a result of any of the foregoing actions.
United States
The Bonds and the Guarantee have not been and will not be registered under the Securities Act, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.
Each Joint Lead Manager has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Bonds and the Guarantee (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date (the “distribution compliance period”), within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Bonds and the Guarantee during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Bonds and the Guarantee within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S.
In addition, until 40 days after the commencement of the offering of the Bonds and the Guarantee, an offer or sale of Bonds or Guarantee within the United States by a dealer that is not participating in the offering may violate the registration requirements of the Securities Act.
Prohibition of Sales to EEA and UK Retail Investors
Each Joint Lead Manager has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Bonds to any retail investor in the EEA or the UK. For the purposes of this provision the expression “retail investor” means a person who is one (or both) of the following:
(i) a retail client as defined in point (11) of Article (4)1 of MiFID II; and
(ii) a customer within the meaning of Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.
United Kingdom
64 Each Joint Lead Manager has represented and agreed that:
(a) it has only communicated or 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 Financial Services and Markets Act 2000 (“FSMA”) received by it in connection with the issue or sale of the Bonds in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the Guarantor; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.
Switzerland
The Bonds will not be listed on the SIX Swiss Exchange or any other exchange or regulated trading venue in Switzerland. Neither this Prospectus nor any other offering or marketing material relating to the Bonds constitutes (i) a prospectus as such term is understood pursuant to Article 652a or Article 1156 of the Swiss Federal Code of Obligations (as such articles were in effect immediately prior to the entry into effect of the FinSA) or pursuant to the relevant provisions of the FinSA or (ii) a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange or any other exchange or regulated trading venue in Switzerland.
65 INDEPENDENT AND STATUTORY AUDITORS
PricewaterhouseCoopers Accountants N.V. of Westgate, Thomas R. Malthusstraat 5, Amsterdam 1066 JR, The Netherlands, are the statutory auditors of the Issuer.
The current statutory auditors of the Guarantor and the Group are PricewaterhouseCoopers AG of Birchstrasse 160, Postfach, CH-8050 Zürich, Switzerland. PricewaterhouseCoopers AG is a member of EXPERTsuisse – Swiss Expert Association for Audit, Tax and Fiduciary.
66 ALTERNATIVE PERFORMANCE MEASURES
The Issuer and the Guarantor consider each metric set out below to constitute an “alternative performance measure” (an “APM”) as described in the European Securities and Markets Authority Guidelines on Alternative Performance Measures (the “ESMA Guidelines”) published on 5 October 2015 by the European Securities and Markets Authority and which came into force on 3 July 2016.
The Issuer and the Guarantor consider that these metrics provide useful information for investors and other interested parties in order to better understand the underlying business, the financial position and results of operations of the Guarantor.
The financial measures presented in this section are not defined in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). An APM should not be considered in isolation from, or as substitute for any analysis of, financial measures defined according to IFRS. Investors are advised to review these APMs in conjunction with the 2019 Guarantor Annual Report and the 2018 Guarantor Annual Report incorporated by reference into this Prospectus.
EBITDA
Operating income before depreciation, amortisation and impairment losses (“EBITDA”) is calculated by excluding depreciation and amortisation and impairment losses on property, plant and equipment and intangible assets and depreciation on right-of-use assets.
The following table presents the reconciliation of operating income to EBITDA for the years ended 31 December 2018 and 2019:
For the year For the year ended 31 ended 31 December 2018 December 2019
CHF in millions CHF in millions
Operating income 2,069 1,910 Depreciation, amortisation and impairment losses on property, plant and 2,144 2,166 equipment and intangible assets Depreciation on right-of-use-assets - 282 Operating income before depreciation, amortisation and impairment losses (EBITDA) 4,213 4,358
The Guarantor believes that EBITDA is an accurate performance measure to evaluate the profitability of the Group and of the operating segments.
Net debt including lease liabilities
Net debt including lease liabilities is defined as total financial liabilities and lease liabilities less cash and cash equivalents, other non-current financial assets relating to non-current financial liabilities (certificates of deposit, US treasury bond strips), non-current derivative financial instruments held to hedge financial liabilities and other current financial assets.
The following table presents the reconciliation of financial liabilities and lease liabilities to net debt including lease liabilities as at 31 December 2018 and 2019:
67 As at 31 As at 31 December 2018 December 2019
CHF in millions CHF in millions Financial liabilities 7,783 7,460 Lease liabilities 384 2,027 Total financial liabilities and lease liabilities 8,167 9,487 Cash and cash equivalents (474) (328) Other non-current financial assets relating to non-current financial (145) (236) liabilities (certificates of deposits, US treasury bond strips) Non-current derivative financial instruments held to hedge financial (81) (73) liabilities Other current financial assets (74) (65) Net debt including lease liabilities 7,393 8,785
The Guarantor believes that net debt including lease liabilities is a meaningful APM for investors and financial analysts for the assessment of the financial position and the capital management of the Group.
Free cash flow
Free cash flow is defined as cash flow from operating activities and cash flow used in investing activities excluding cash flows from the purchase and sale of subsidiaries and purchase of and proceeds from equity-accounted investees and other financial assets. In 2018, dividends received were not included in free cash flow.
The Guarantor has been applying IFRS 16 since 1 January 2019. For the lessee, IFRS 16 provides a single lessee accounting model, dropping the differentiation between finance and operating leases previously required under IAS 17. The lessee shall recognise lease liabilities in its balance sheet for all future lease payments to be made as well as recognising a right to use the underlying asset. Depreciation and interest expense for 2019 was recognised in the income statement instead of rental expense. This led to an increase in EBITDA in 2019. In the statement of cash flows, the share of the lease payments representing repayment of the principal portion of the newly accounted leases reduced cash flows from financing activities instead of cash flows from operating activities in 2019.
The following table present the reconciliation of cash flow from operating activities to free cash flow for the years ended 31 December 2018 and 2019:
For the year For the year ended 31 ended 31 December 2018 December 2019
CHF in millions CHF in millions
Cash flow from operating activities 3,720 3,981 Cash flow used in investing activities (2,495) (2,733) Repayment of lease liabilities - (276) Acquisition of subsidiaries, net of cash and cash equivalent acquired 78 394 Sale of subsidiaries, net of cash and cash equivalents sold - 3 Purchase of equity-accounted investees 35 15 Purchase of other financial assets 31 13
68 Proceeds from other financial assets (32) (52) Dividends received (18) - Free cash flow 1,319 1,345
The Guarantor believes that the measure free cash flow provides meaningful measures for investors and financial analysts for the assessment of the cash performance and the capital management of the Group.
69 GENERAL INFORMATION
1. It is expected that listing of the Bonds on the Official List and admission of the Bonds to trading on the Market will be granted on or around 14 May 2020. Transactions will normally be effected for delivery on the third working day after the day of the transaction. The expenses in connection with the admission to trading of the Bonds are expected to amount to €17,540.
2. Each of the Issuer and the Guarantor has obtained all necessary consents, approvals and authorisations in the Netherlands and Switzerland in connection with the issue and performance of the Bonds and of the Guarantee. The issue of the Bonds was authorised by resolutions of the board of directors of the Issuer passed on 30 April 2020 and the giving of the Guarantee by the Guarantor was authorised by resolutions of the board of directors of the Guarantor passed on 11 December 2019 and 5 February 2020.
3. There has been no material adverse change in the prospects of (i) the Issuer since 5 March 2020, being its date of incorporation or (ii) the Guarantor since 31 December 2019, being the date of the last published audited consolidated financial statements of the Guarantor.
4. There has been no significant change in the financial performance or financial position of the Group since 31 March 2020, being the end of the last financial period for which financial information has been published with respect to the Group.
5. Neither the Issuer, the Guarantor nor the Group is, nor has been, involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer or Guarantor are aware) during the 12 months preceding the date of this Prospectus which may have or have had in the recent past significant effects on the financial position or profitability of the Issuer, the Guarantor or the Group.
6. The Bonds have been accepted for clearance through Euroclear and Clearstream, Luxembourg systems (which are the entities in charge of keeping the records). The International Securities Identification Number (“ISIN”) for the Bonds is XS2169243479 and the Common Code is 216924347. For FISN and CFI Code, see the website of the Association of National Numbering Agencies (ANNA) or alternatively sourced from the responsible National Numbering Agency that assigned the ISIN.
7. The Legal Entity Identifier code of the Issuer is 549300L41E8X8K71RV25.
8. The Legal Entity Identifier code of the Guarantor is 5493005SL9HHOXS3B739.
9. The website of the Guarantor is http://www.swisscom.ch. The information on http://www.swisscom.ch does not form part of this Prospectus, except where that information has been incorporated by reference into this Prospectus.
10. The Bank of New York Mellon SA/NV, Dublin Branch is acting solely in its capacity as listing agent for the Issuer in connection with the Bonds and is not itself seeking admission of the Bonds to the Official List or to trading on the Market for the purposes of the Prospectus Regulation.
11. The yield of the Bonds is 0.480 per cent. on an annual basis. The yield is calculated as at 14 May 2020 on the basis of (i) the issue price; and (ii) the Bonds being redeemed on the Early Call Date. It is not an indication of future yield.
12. There are no material contracts entered into other than in the ordinary course of the Issuer’s or the Guarantor’s business, which could result in any member of the Group being under an obligation or entitlement that is material to the Issuer’s ability to meet its obligations to Bondholders in respect of the Bonds being issued or the Guarantor’s ability to meet its obligations to Bondholders under the Guarantee.
70 13. For so long as the Bonds remain outstanding, copies of the following documents will be available for inspection at the website of the Guarantor (http://www.swisscom.ch/en/about/investors.html):
(a) the Trust Deed;
(b) the articles of association of the Issuer and the Guarantor;
(c) the materials incorporated by reference into this Prospectus, as set out in “Documents Incorporated by Reference”; and
(d) all reports, letters and other documents, balance sheets, valuations and statements by any expert, any part of which is extracted or referred to in this Prospectus.
This Prospectus (together with any supplement to this Prospectus or further Prospectus) will be published on the website of Euronext Dublin at www.ise.ie.
14. PricewaterhouseCoopers Accountants N.V. of Westgate, Thomas R. Malthusstraat 5, Amsterdam 1066 JR, The Netherlands are the statutory auditors of the Issuer.
15. PricewaterhouseCoopers AG of Birchstrasse 160, Postfach, CH-8050 Zürich, Switzerland have audited, and rendered unqualified audit reports on the consolidated financial statements of the Group and the financial statements of the Guarantor for the financial year ended 31 December 2019. KPMG SA of Esplanade de Pont- Rouge 6, CH-1211 Geneva, Switzerland have audited, and rendered unqualified audit reports on the consolidated financial statements of the Group and the financial statements of the Guarantor for the financial year ended 31 December 2018.
16. There is no natural or legal person involved in the issue of the Bonds and having an interest that is material to the issue of the Bonds, other than certain of the Joint Lead Managers and their affiliates who have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services for the Issuer and/or the Guarantor and their affiliates in the ordinary course of business. Certain of the Joint Lead Managers and their affiliates may have positions, deal or make markets in the Bonds, related derivatives and reference obligations, including (but not limited to) entering into hedging strategies on behalf of the Issuer and/or the Guarantor and their affiliates, investor clients, or as principal in order to manage their exposure, their general market risk, or other trading activities.
In addition, in the ordinary course of their business activities, the Joint Lead Managers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer and/or the Guarantor and their affiliates. Certain of the Joint Lead Managers and their affiliates that have a lending relationship with the Issuer and/or the Guarantor routinely hedge their credit exposure to the Issuer and/or the Guarantor consistent with their customary risk management policies. Typically, such Joint Lead Managers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Bonds. Any such positions could adversely affect future trading prices of the Bonds. The Joint Lead Managers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
71 THE ISSUER Swisscom Finance B.V. c/o NGT International BV, Central Post 10th Floor, Delftseplein 30K 3013 AA Rotterdam The Netherlands THE GUARANTOR Swisscom AG Alte Tiefenaustrasse 6 3048 Worblaufen Switzerland GLOBAL COORDINATOR Credit Suisse Securities (Europe) Limited One Cabot Square London E14 4QJ United Kingdom JOINT LEAD MANAGERS BNP Paribas Credit Suisse Securities (Europe) Limited 16, boulevard des Italiens One Cabot Square 75009 Paris London E14 4QJ France United Kingdom Landesbank Baden-Württemberg UniCredit Bank AG Am Hauptbahnhof 2 Arabellastraβe 12 70173 Stuttgart 81925 Munich Germany Germany AUDITORS OF THE ISSUER AUDITORS OF THE GUARANTOR PricewaterhouseCoopers Accountants N.V. PricewaterhouseCoopers AG Westgate, Birchstrasse 160 Thomas R. Malthusstraat 5 Postfach Amsterdam 1066 JR CH-8050 Zürich The Netherlands Switzerland TRUSTEE BNY Mellon Corporate Trustee Services Limited One Canada Square London E14 5AL United Kingdom PRINCIPAL PAYING AGENT REGISTRAR AND TRANSFER AGENT
The Bank of New York Mellon, London Branch The Bank of New York Mellon SA/NV, Luxembourg Branch One Canada Square 2-4 rue Eugene Ruppert London E14 5AL Vertigo Building - Polaris United Kingdom L-2453 Luxembourg
IRISH LISTING AGENT
The Bank of New York Mellon SA/NV, Dublin Branch Riverside II, Sir John Rogerson’s Quay Grand Canal Dock Dublin 2, Ireland
LEGAL ADVISERS
To the Issuer and the Guarantor
as to Swiss law as to Dutch law as to English law
Pestalozzi Attorneys at Law Ltd Simmons & Simmons LLP Simmons & Simmons LLP Loewenstrasse 1 Claude Debussylaan 247 Citypoint 8001 Zurich 1082 MC Amsterdam 1 Ropemaker Street Switzerland The Netherlands London EC2Y 9SS United Kingdom
72 To the Joint Lead Managers and the Trustee
as to Swiss law as to English law
Bär & Karrer AG Linklaters LLP Brandschenkestrasse 90 One Silk Street 8002 Zurich London EC2Y 8HQ Switzerland United Kingdom
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