REG - Macquarie Group Ltd - Publication of a Prospectus <Origin Href="QuoteRef">MQG.AX</Origin> - Part 10
15/06/2016 07:05
- Part 10: For the preceding part double click ID:nRSO2097Bi
exposure to central counterparties arising from over the counter derivatives, exchange traded derivatives and securities
financing transactions. These prudential standards will require the Macquarie Group to hold more capital for its
counterparty credit risk exposures and other credit exposures.
United States Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act")
The Dodd-Frank Act was signed into law in the United States on 21 July 2010. The Act contains a wide range of provisions
that will affect financial institutions operating in the United States or trading with U.S. persons, including Macquarie
Group's U.S. and foreign subsidiaries. Included under the Dodd-Frank Act are reforms designed to reduce systemic risk
presented by very large financial firms, promote enhanced supervision, regulation and prudential standards for financial
firms, establish comprehensive supervision of financial markets, impose new limitations on permissible financial
institution activities and investments, expand regulation of the derivatives markets, protect consumers and investors from
financial abuse, and provide the US government with the tools needed to manage a financial crisis.The Macquarie Group's
businesses will be affected by a variety of new regulations under the Dodd-Frank Act, including but not limited to (i)
greater regulation of over-the-counter derivatives including stricter capital and margin requirements, the centralised
execution and clearing of standardised over-the-counter derivatives, and heightened supervision and required registration
of all over-the-counter swap dealers and major swap participants (ii) more stringent and extensive position limits on
derivatives on physical commodities and (iii) increased regulation of investment advisers. In addition, if MGL is
determined by U.S. regulators to be a "systemically important" non-bank financial company, U.S. regulators may have
increased regulatory authority over MGL and its subsidiaries, including MBL, and may impose stricter capital, leverage and
risk management requirements. The Dodd-Frank Act will increase compliance and execution costs for derivative trading in
the United States and have an impact on certain Macquarie Group businesses, such as on its U.S. derivatives business. For
instance, two Macquarie Group Limited affiliates have registered as swap dealers. Many of the rules under the Dodd-Frank
Act have already been issued and made effective. However, some of these rules are yet to take effect and others are yet to
be finalised. It is not possible at this point in time to determine definitively the full extent of the impact of the
Dodd-Frank Act because the rulemaking process is ongoing and the process of implementation is still expected to continue
for several years. Nevertheless, it is clear that the regulatory changes will increase costs, which would cause some
entities to reduce or eliminate their trading activity, thereby also potentially reducing liquidity and increasing
volatility.
UK Bank Levy
Effective 1 January 2011, the United Kingdom introduced a new bank levy to apply to all accounting periods ending
subsequent to the effective date. In respect of non-UK banking groups operating in the United Kingdom, the bank levy will
apply to the notional consolidated balance sheets of its UK branches, UK entities and their worldwide subsidiaries and
branches. Currently, the bank levy is calculated by reference to chargeable equity and liabilities included in the
consolidated balance sheet at different rates for short term chargeable liabilities and long term chargeable equity and
liabilities. From 1 January, 2016, the applicable bank levy rates are 0.18% for short-term chargeable liabilities and
0.09% for long-term chargeable equity and liabilities. The bank levy is not applicable on the first £20 billion of
chargeable equity and liabilities on the consolidated balance sheet. Based on the 31 March 2016 balance sheet position, the
Macquarie Group was not impacted by the bank levy on the basis that its chargeable equity and liabilities were below £20
billion for the full accounting period. MGL will continue to monitor its position on a regular basis.
Other developments
In addition, there have also been a series of legislative changes and other regulatory releases from regulators in the
various jurisdictions in which the Macquarie Group operates resulting in significant regulatory change for financial
institutions, the legal and practical implications of which may not yet be fully understood.
These include:
· further capital reforms for conglomerate banking groups;
· recovery and resolution planning requirements;
· greater regulation of derivatives, particularly over the counter (OTC) derivatives, including the European
Market Infrastructure Regulation and the Dodd-Frank reforms, which have resulted in increased reporting and stricter
capital and margin requirements, the centralised execution and clearing of standardised OTC derivatives and heightened
supervision and required registration of swap dealers and major swap and major swap participants;
· in December 2015, the ASIC Derivative Transaction Rules (Clearing) 2015 were released. The rules are applicable
to Australian and foreign financial institutions that meet the clearing threshold specified in the rules and commenced in
April 2016;
· ongoing work on the Future of Financial Advice reforms primarily in relation to fee disclosure, advisor
remuneration and changes required given the end of grandfathering of conflicted remuneration on 1 July 2014;
· the Senior Manager Regime in the UK, which took effect from March 2016;
· new laws and regulation relating to data protection and privacy, consumer credit and consumer protection and
personal property securities; and
· changes to accounting and reporting requirements, tax legislation, regulation relating to remuneration and
superannuation, competition legislation and bribery and anti-money laundering laws.
Further changes may occur driven by policy, prudential or political factors.
The Macquarie Group reviews these changes and releases, engages with government, regulators and industry bodies and amends
its systems, processes and operations to align with changes and new regulatory requirements as they occur. Further
information on the risk management and other policies of the Macquarie Group is contained in the documents incorporated by
reference into this Base Prospectus (see Section 5 (Documents incorporated by reference) on pages 57 to 58 of this Base
Prospectus).
Directors of MGL
As at the date of this Base Prospectus the persons named below are the current Voting Directors of MGL under MGL's
constitution and exercise the powers of directors for the purposes of the Corporations Act. All members of the Board of
Voting Directors of MGL have the business address of Level 6, 50 Martin Place, Sydney, NSW, 2000, Australia. The principal
outside activities, where significant, of the Voting Directors of MGL are set out below:
Peter H Warne Chairman Chairman, ALE Property Group, and OzForex Group Limited.Director, ASX Limited, and New South Wales Treasury Corporation.
Nicholas W Moore Managing Director and Chief Executive Officer Chairman, Screen Australia, Sydney Opera House Trust and University of NSW Business School Advisory Council. Director, the Centre for Independent Studies
Gary R Banks AO Independent Non-Executive Director Chief Executive and Dean, Australia and New Zealand School of Government. Chair, Regulatory Policy Committee of the Organisation for Economic Co-operation and Development. Member, Advisory Board of the Melbourne Institute.
Gordon M Cairns Independent Non-Executive Director Chairman, Woolworths Limited and Origin Energy Limited. Director, Quick Service Restaurant Group.
Michael J Coleman Independent Non-Executive Director Member, Audit Committee of the Reserve Bank of Australia, National Board and NSW Council of the Australian Institute of Company Directors (AICD). Chairman, Reporting Committee of the AICD, and Planet Ark Environmental Foundation.
Patricia A Cross Independent Non-Executive Director Director, Aviva plc.
Chairman, Commonwealth Superannuation Corporation. Ambassador, Australian Indigenous Education Foundation.
Diane J Grady AM Independent Non-Executive Director Director, Spotless Group Holdings Limited. Member, McKinsey Advisory Council, Centre for Ethical Leadership, NSW Innovation and Productivity Council, the Heads Over Heels Advisory Board, NFP Chairs Forum. Chair, Ascham School and The Hunger Project Australia.
Michael J Hawker AM Independent Non-Executive Director Director, Aviva plc, Rugby World Cup Limited and Washington H Soul Pattinson and Company Limited. Chairman, the George Institute for Global Health.
Nicola M Wakefield Evans Independent Non-Executive Director Director, Lend Lease Corporation Limited, Toll Holdings Limited, BUPA Australia & New Zealand Group, and Asialink. Member, Advisory Board at the University of New South Wales Law School and the Takeovers Panel.
Nicola M Wakefield Evans
Independent Non-Executive Director
Director, Lend Lease Corporation Limited, Toll Holdings Limited, BUPA Australia & New Zealand Group, and Asialink. Member,
Advisory Board at the University of New South Wales Law School and the Takeovers Panel.
Board Committees
The Board Audit Committee ("BAC"), and the Board Risk Committee are joint Committees of MGL and Macquarie Bank.
The members of the BAC are Michael Coleman (Chairman), Michael Hawker, Patricia Cross and Nicola Wakefield Evans. The main
objective of the BAC is to assist the Board of Voting Directors of MGL and Macquarie Bank in fulfilling the Boards'
responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of
the Macquarie Group.
All Non-Executive Directors of MGL and Macquarie Bank are members of the Board Risk Committee. The Chairman of the
Committee is Patricia Cross. The main objective of the Board Risk Committee is to assist the Boards of Voting Directors of
MGL and Macquarie Bank to provide oversight of the Macquarie Group's risk management framework.
Director Independence and Conflicts of Interest
A Voting Director (Director) will be considered independent if not a member of management, and if they are free of any
interests or relationships that could materially interfere with the director's ability to act in the best interests of MGL
and independently of management. The Board believes that independence is evidenced by an ability to constructively
challenge and independently contribute to the work of the Board.
The independence of each Non-Executive Director ("NED") is considered prior to appointment and then confirmed annually by
the Board Governance and Compliance Committee ("BGCC"). Prior to the BGCC's consideration of director independence, each
NED is asked to declare whether they have any interests or relationships that could materially interfere with the
director's ability to act in the best interests of MGL and independently of management ("Declaration"). Each NED is also
asked to provide information regarding relationships with MGL, including relationships of close family members with MGL,
for review by the BGCC. A NED will normally be considered independent if they:
· Are not a substantial shareholder of MGL or of a company holding more than five per cent of MGL's voting stock
or an officer of or otherwise associated directly with a shareholder holding more than five per cent of MGL's voting
stock.
· Have not been employed within the last three years in an executive capacity by MGL or another group member or
been a director after ceasing to hold any such employment.
· Have not been a partner, director or senior employee of a material professional adviser to MGL and its entities
within the last three years.
· Have not had a material business relationship, including as a supplier or customer, within the last three years
with MGL or its entities, or an officer of or otherwise associated with someone with such a relationship.
· Do not have a material contractual relationship with MGL or any of its group entities other than as a
director.
· Are not a director of any of MGL's subsidiaries or its responsible entities, other than Macquarie Bank Limited
and any intermediate holding company.
· Do not have any other interests or relationships (including close family ties with any person who falls within
any of the categories described above), that could materially interfere with the director's ability to act in the best
interests of MGL and independently of management.
MGL's eight non-executive Directors, being Gary R Banks, Gordon M Cairns, Michael J Coleman, Patricia A Cross, Diane J
Grady, Michael J Hawker, Nicola M Wakefield Evans and Peter H Warne, are each considered to be independent.
All Directors are required to disclose any material personal interest in a matter that relates to the affairs of MGL and
any conflict or potential conflict of interest upon appointment and then update the MGL Board on an on-going basis.
MGL has in place procedures that utilise the interests disclosed by Voting Directors to assist in detecting conflicts of
interest within MGL. Where a Director has a material personal interest or conflict of interest, the Director will:
· notify the other Directors of their interest in the matter when the conflict arises (unless a standing notice
regarding the material personal interest has already been given to the other Directors); and
· not receive the relevant MGL Board paper nor be present whilst the matter that they have an interest in is
being considered at a Directors' meeting and subsequently not vote on the matter unless the MGL Board (excluding the
relevant MGL Board member) resolves otherwise.
As at the date of this Base Prospectus, and having regard to the above criteria, requirements and procedures utilised by
MGL to detect and manage conflicts of interest and to restrict participation where a conflict arises, there are:
· no actual conflicts of interest; and
· no potential conflicts of interest, other than in respect of any dealings between MGL and any of the companies
listed above under "Principal Outside Activities" which may arise in the future and will be referred to the Board of Voting
Directors of MGL,
between duties owed to MGL and dischargeable by members of its Board of Voting Directors listed above and their private
interests and/or other duties.
As noted above, all Directors are required to disclose any conflict or potential conflict of interest on an on-going basis.
In respect of conflicts or potential conflicts of interest that may arise in the future, MGL will manage those conflicts in
accordance with the Corporations Act, any other applicable law and the other procedures referred to above.
11. Selected Financial Information
This section sets out certain financial information in relation to MGL's business and includes extracts of financial
statements.
The additional audited financial information on pages 129 to 130 of this Base Prospectus has been extracted from the 2016
annual report of MGL and MGL consolidated with its controlled entities for the financial year ended 31 March 2016.
The Macquarie Group is required to prepare annual financial statements for itself and itself consolidated with its
controlled entities in accordance with Australian Accounting Standards. Compliance with Australian Accounting Standards
ensures compliance with International Financial Reporting Standards.
The independent auditors of the Macquarie Group are PricewaterhouseCoopers, an Australian partnership, ("PwC Australia"),
who are a member of The Institute of Chartered Accountants in Australia and New Zealand.
PwC Australia has audited the financial statements included in Macquarie Group's 2016 annual report for the financial years
ended 31 March 2015 and 31 March 2016 in accordance with Australian Auditing Standards. The Independent Auditor's Report
dated 6 May 2016 was unqualified.
Limitation on Auditors' Liability
PwC Australia may be able to assert a limitation of liability with respect to claims arising out of its audit report
described or included in the documents identified under "Documents incorporated by reference" on pages 57 to 58 of this
Base Prospectus, and elsewhere in this Base Prospectus, to the extent it is subject to the limitations set forth in the
Professional Standards Act 1994 of New South Wales, Australia ("Professional Standards Act") and the Institute of Chartered
Accountants in Australia (NSW) Scheme adopted by The Institute of Chartered Accountants in Australia and approved by the
New South Wales Professional Standards Council pursuant to the Professional Standards Act (together, the "NSWAccountants
Scheme") (or, in relation to matters occurring prior to 7 October 2007, the predecessor scheme).
The Professional Standards Act and the NSW Accountants Scheme may limit the liability of PwC Australia for damages with
respect to certain civil claims arising in, or governed by the laws of, New South Wales directly or vicariously from
anything done or omitted in the performance of its professional services to the Macquarie Group, including, without
limitation, its audits of the Macquarie Group's financial statements, to the lesser of ten times the reasonable charge for
the service by PwC Australia that gave rise to the claim and a maximum of A$75 million and for other work of A$20 million
(or in relation to matters occurring prior to 7 October 2007, A$20 million). The limit does not apply to claims for breach
of trust, fraud or dishonesty. The Professional Standards Act and the NSW Accountants Scheme have not been subject to
judicial consideration and therefore how the limitation will be applied by the courts and the effect of the limitation on
the enforcement of foreign judgments are untested.
There is also legislation similar to the Professional Standards Act in the other states and territories of Australia and
federally. Schemes similar to the NSW Accountants Scheme have been implemented in other states and territories of
Australia and in relation to various civil claims under federal Australian law.
Macquarie Group Limited and its controlled entities
Income Statements for the financial years ended 31 March 2016 and 31 March 2015
Consolidated 2016 Consolidated 2015 MGL MGL
A$m A$m 2016 2015
A$m A$m
Interest and similar income 5,461 5,009 519 372
Interest expense and similar charges (3,182) (2,917) (433) (375)
Net interest income/(expense) 2,279 2,092 86 (3)
Fee and commission income 4,862 4,739 - 9
Net trading income 2,067 1,727 22 67
Share of net profits of associates and joint ventures
accounted for using the equity method 4 5 - -
Other operating income and charges 923 699 4,320 2,544
Net operating income 10,135 9,262 4,428 2,617
Employment expenses (4,244) (4,143) (4) (4)
Brokerage, commission and trading-related expenses (892) (824) (4) -
Occupancy expenses (397) (374) - -
Non-salary technology expenses (587) (437) - -
Other operating expenses (1,000) (962) (2) -
Total operating expenses (7,120) (6,740) (10) (4)
Operating profit before income tax 3,015 2,522 4,418 2,613
Income tax (expense)/benefit (927) (899) (39) (32)
Profit after income tax 2,088 1,623 4,379 2,581
Profit attributable to non-controlling interests:
Macquarie Income Securities (16) (18) - -
Macquarie Income Preferred Securities (1) (5) - -
Other non-controlling interests (8) 4 - -
Profit attributable to non-controlling interests (25) (19)
Profit attributable to ordinary equity holders of Macquarie Group Limited 2,063 1,604 4,379 2,581
Cents per share
Basic earnings per share 619.2 502.3
Diluted earnings per share 600.1 484.2
Macquarie Group Limited and its controlled entities
Statements of Financial Position as at 31 March 2016 and 31 March 2015
Consolidated 2016 Consolidated 2015 MGL MGL
A$m A$m 2016 2015
A$m A$m
Assets - -
Receivables from financial institutions 33,128 28,705 - -
Trading portfolio assets 23,537 30,406 - -
Derivative assets 17,983 20,080 - -
Investment securities available for sale 11,456 8,896 - -
Other assets 12,496 13,557 36 138
Loan assets held at amortised cost 80,366 72,762 - -
Other financial assets at fair value through profit or loss 1,649 2,125 - -
Due from subsidiaries - - 10,853 10,361
Property, plant and equipmentInterests in associates and joint ventures accounted for using the equity method 11,5212,691 7,0792,328 -- --
Intangible assets 1,078 1,164 - -
Investments in subsidiaries - - 20,339 15,871
Deferred tax assets 850 874 74 59
Totalassets 196,755 187,976 31,302 26,429
LiabilitiesTrading portfolio liabilities 5,030 5,295 - -
Derivative liabilities 14,744 18,267 - -
Deposits 52,245 47,386 - 18
Other liabilities 13,103 16,050 198 68
Payables to financial institutions 23,860 18,645 2,850 2,566
Due to subsidiaries - - 873 810
Debt issued at amortised cost 63,685 61,463 6,425 6,179
Other financial liabilities at fair value through profit or loss 2,672 1,626 - -
Deferred tax liabilities 543 464 - -
Total liabilities excluding loan capital 175,882 169,196 10,346 9,641
Loan capital
Subordinated debt at amortised cost 5,209 4,384 1,126 603
Total loan capital 5,209 4,384 1,126 603
Total liabilities 181,091 173,580 11,472 10,244
Net assets 15,664 14,396 19,830 16,185
Equity
Contributed equity 6,422 5,947 9,097 8,667
Reserves 1,536 1,656 686 654
Retained earnings 7,158 6,306 10,047 6,864
Total capital and reserves attributable to ordinary equity holders of Macquarie Group Limited 15,116 13,909 19,830 16,185
Non-controlling interests 548 487 - -
Total equity 15,664 14,396 19,830 16,185
12. Subscription and Sale
This section contains a description of certain selling restrictions applicable to making offers of the PD Debt Instruments
under the Programme.
Pursuant to the Third amended and restated Debt Instrument Programme Dealer Agreement dated 18 June 2014 ("Dealer
Agreement"), as amended from time to time, the PD Debt Instruments may be offered on a continuing basis through the persons
that are appointed as dealers in respect of the whole Programme and whose appointment has not been terminated ("Permanent
Dealers"). However, MGL has reserved the right to sell PD Debt Instruments directly on its own behalf to Dealers that are
not Permanent Dealers. MGL will have the sole right to accept any such offers to purchase PD Debt Instruments and may
reject any such offer in whole or (subject to the terms of such offer) in part. Each Dealer shall have the right, in its
discretion reasonably exercised, to reject any offer to purchase PD Debt Instruments made to it in whole or (subject to the
terms of such offer) in part.
In the Dealer Agreement, MGL has agreed to reimburse the Dealers for certain of their expenses in connection with the
establishment of the Programme and the issue of PD Debt Instruments under the Programme and to indemnify the Dealers
against certain liabilities incurred by them in connection therewith.
By its purchase and acceptance of PD Debt Instruments issued under the Dealer Agreement, each Dealer agrees that it will
observe all applicable laws and regulations in any jurisdiction in which it may offer, sell, or deliver PD Debt
Instruments, and it will not directly or indirectly offer, sell, resell, re-offer or deliver PD Debt Instruments or
distribute the Base Prospectus, any Final Terms, circular, advertisement or other offering material relating to the PD Debt
Instruments in any country or jurisdiction except under circumstances that will result, to the best of its knowledge and
belief, in compliance with all applicable laws and regulations.
Neither MGL nor any Dealer represents that any PD Debt Instruments may at any time lawfully be sold in compliance with any
applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder, or
assumes any responsibility for facilitating such sale.
In addition and unless the Final Terms otherwise provides, each Dealer has agreed that, in connection with the primary
distribution of the PD Debt Instruments, it will not sell PD Debt Instruments to any person if, at the time of such sale,
the employees of the Dealer aware of, or involved in, the sale knew or had reasonable grounds to suspect that, as a result
of such sale, any PD Debt Instruments or an interest in any PD Debt Instruments were being, or would later be, acquired
(directly or indirectly) by an associate of MGL for the purposes of section 128F of the Income Tax Assessment Act 1936 (as
amended) of Australia ("Australian Tax Act") and associated regulations and, where applicable, any replacement legislation
including, but not limited to, the Income Tax Assessment Act 1997 of Australia, except as permitted by section 128F(5) of
the Australian Tax Act.
The Dealers may be paid fees in relation to any issue of PD Debt Instruments under the Programme. Any such Dealer and its
affiliates may also have engaged, and may in the future engage, in investment banking and/or commercial banking
transactions with, and may perform other services for, MGL and the Macquarie Bank Group and their affiliates in the
ordinary course of business.
1 General
This Base Prospectus has not been, nor will be, lodged with the Australian Securities and Investments Commission ("ASIC")
and is not a 'prospectus', 'product disclosure statement', or other 'disclosure document' for the purposes of the
Corporations Act 2001 of Australia ("Corporations Act").
Except for registration of this Base Prospectus by the UK Listing Authority and the London Stock Exchange, no action has
been taken in any jurisdiction that would permit a public offering of any of the PD Debt Instruments, or possession or
distribution of the Base Prospectus or any other offering material or any Final Terms, in any country or jurisdiction where
action for that purpose is required.
Persons into whose hands this Base Prospectus comes are required by MGL and the Dealers to comply with all applicable laws,
regulations and directives in each country or jurisdiction in which they purchase, offer, sell, resell, reoffer or deliver
PD Debt Instruments or have in their possession or distribute or publish the Base Prospectus or such other offering
material and to obtain any authorisation, consent, approval or permission required by them for the purchase, offer, sale,
reoffer, resale or delivery by them of any PD Debt Instruments under any applicable law, regulation or directive in force
in any jurisdiction to which they are subject or in which they make such purchases, offers, sales, reoffers, resales or
deliveries, in all cases at their own expense, and neither MGL nor any Dealer has responsibility for such matters. In
accordance with the above, any PD Debt Instruments purchased by any person which it wishes to offer for sale or resale may
not be offered in any jurisdiction in circumstances which would result in MGL being obliged to register any further
prospectus or corresponding document relating to the PD Debt Instruments in such jurisdiction.
In particular, there are restrictions on the distribution of this Base Prospectus and the offer or sale of PD Debt
Instruments in Australia, the United States, the European Economic Area, the United Kingdom, Hong Kong, Singapore, Japan,
Korea, India, Canada, the PRC, Malaysia, Mexico and Taiwan as set out below.
2 Australia
No prospectus or other disclosure document, nor any product disclosure statement, (each as defined in the Corporations Act)
in relation to the Programme or any PD Debt Instruments has been, or will be, lodged with ASIC. Each Dealer has
represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree,
that, unless the relevant Final Terms (or relevant supplement to this Base Prospectus) otherwise provides, it:
(a) has not offered or invited applications, and will not offer or invite applications, for the issue, sale or
purchase of any PD Debt Instruments in Australia (including an offer or invitation which is received by a person in
Australia); and
(b) has not distributed or published, and will not distribute or publish, the Base Prospectus or any other
offering material or advertisement relating to any PD Debt Instruments in Australia,
unless
(i) the aggregate consideration payable by each offeree is at least A$500,000 (or its equivalent in other
currencies and, in either case, disregarding moneys lent by the offeror or its associates) or the offer or invitation
otherwise does not require disclosure to investors in accordance with Part 6D.2 or 7.9 of the Corporations Act;
(ii) such action complies with all applicable laws, regulations and directives in Australia (including, without
limitation, the licensing requirements set out in Chapter 7 of the Corporations Act);
(iii) the offer or invitation does not constitute an offer or invitation to a person who is a "retail client" as
defined for the purposes of section 761G of the Corporations Act; and
(iv) such action does not require any document to be lodged with ASIC or any other regulatory authority in
Australia.
3 United States
Regulation S Category 2; TEFRA D
The PD Debt Instruments have not been and will not be registered under the U.S. Securities Act of 1933, as amended
("Securities Act"). The PD Debt Instruments may not be offered or sold in the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S under the Securities Act or in transactions exempt from the
registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them under
Regulation S under the Securities Act.
Bearer PD Debt Instruments with a maturity of more than one year are subject to United States tax law requirements and may
not be offered, sold or delivered within the United States or its possessions or to a U.S. person, except in certain
transactions permitted by the U.S. Internal Revenue Code and U.S. tax regulations. Terms used in this paragraph have the
meanings given to them by the U.S. Internal Revenue Code.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme and each other Purchaser will
be required to represent and agree, except as permitted by the Dealer Agreement, that it has not offered, sold, resold or
delivered, and will not offer, sell, resell or deliver, the PD Debt Instruments of any Tranche:
(a) as part of their distribution at any time; and
(b) otherwise until 40 days after the later of (i) the closing date of such Tranche of PD Debt Instruments and
(ii) the completion of the distribution of all PD Debt Instruments of such Tranche, as determined and certified by the
relevant Dealer or, in the case of an issue of PD Debt Instruments on a syndicated basis, the Lead Manager,
within the United States or to, or for the account or benefit of, U.S. persons only in accordance with Regulation S and
that during the distribution compliance period, it will have sent to each distributor to which it sells the PD Debt
Instruments, a confirmation or other notice setting forth the restrictions on offers and sales of the PD Debt Instruments
within the United States or to, or for the account or benefit of, U.S. persons.
In addition, an offer or sale of PD Debt Instruments within the United States by any dealer or other distributor (whether
or not participating in the offering of such Series during the distribution compliance period described in the preceding
paragraph) may violate the registration requirements of the Securities Act.
Each Dealer who has purchased PD Debt Instruments of a Tranche hereunder (and in the case of an issue of a Tranche of PD
Debt Instruments on a syndicated basis, the Lead Manager) shall determine and certify to the I&P Agent (being Deutsche Bank
AG, London Branch or any of its successors in such capacity) or, in the case of PD Debt Instruments cleared through the
Central Moneymarkets Unit Service ("CMU" Service), the CMU Lodging Agent (being Deutsche Bank AG, Hong Kong Branch or any
of its successors in such capacity) when it has completed the distribution of the PD Debt Instruments of such Tranche.
4 European Economic Area
Unless otherwise stated in this "Subscription and Sale" section, in relation to each Member State of the European Economic
Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), each Dealer has represented and
agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that with effect
from and including the date on which the Prospectus Directive is implemented in that Relevant Member State ("Relevant
Implementation Date") it has not made and will not make an offer of PD Debt Instruments, which are the subject of the
offering contemplated by this Base Prospectus as completed by the Final Terms thereto, to the public in that Relevant
Member State, except that it may, with effect from and including the Relevant Implementation Date, make an offer of PD Debt
Instruments to the public in that Relevant Member State:
(a) if the Final Terms in relation to the PD Debt Instruments specify that an offer of those PD Debt Instruments
may be made other than pursuant to Article 3.2 of the Prospectus Directive in that Relevant Member State (a "Non-exempt
Offer"), following the date of publication of a prospectus in relation to such PD Debt Instruments which has been approved
by the competent authority in the Relevant Member State or, where appropriate, approved in another Relevant Member State
and notified to the competent authority in that Relevant Member State, provided that any such prospectus has subsequently
been completed by the final terms contemplated in such a Non-exempt Offer, in accordance with the Prospectus Directive, in
the period beginning and ending on the dates specified in such prospectus or Final Terms, as applicable and the Issuer has
consented in writing to its use for the purpose of that Non-exempt Offer;
(b) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(c) at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the
Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for
any such offer; or
(d) at any time in any other circumstances falling within Article 3.2 of the Prospectus Directive,
provided that no such offer of PD Debt Instruments referred to in (b) to (d) above shall require the Issuer or any Dealer
to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16
of the Prospectus Directive.
For the purposes of this provision, the expression an "offer of PD Debt Instruments to the public" in relation to any PD
Debt Instruments in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and the PD Debt Instruments to be offered so as to enable an investor to decide to
purchase or subscribe the PD Debt Instruments, as the same may be varied in that Relevant Member State by any measure
implementing the Prospectus Directive in that Relevant Member State and the expression "Prospectus Directive" means
Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) and includes any relevant implementing measure in each
Relevant Member State.
This European Economic Area selling restriction is in addition to any other selling restrictions set out in this Base
Prospectus.
5 The United Kingdom
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent
and agree, 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 (UK), as amended ("FSMA")) received by it in connection with the issue or sale of any PD Debt
Instruments in circumstances in which section 21(1) of the FSMA would not, if MGL was not an authorised person, apply to
MGL; 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 any PD Debt Instruments in, from or otherwise involving the United Kingdom.
6 Hong Kong
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent
and agree, that:
(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any PD Debt
Instruments (except for PD Debt Instruments which are a "structured product" as defined in the Securities and Futures
Ordinance (Cap. 571) (as amended) of Hong Kong (the "Securities and Futures Ordinance")) other than:
(i) to "professional investors" as defined in that Ordinance and any rules made under that Ordinance; or
(ii) in other circumstances which do not result in the document being a "prospectus" as defined in the
Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (as amended) of Hong Kong or which do not
constitute an offer to the public within the meaning of that Ordinance; and
(b) it has not issued, or had in its possession for the purpose of issue, and will not issue, or have in its
possession for the purpose of issue (in each case whether in Hong Kong or elsewhere) any advertisement, invitation or other
offering material or other document relating to the PD Debt Instruments, which is directed at, or the contents of which are
likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the applicable securities
laws of Hong Kong) other than with respect to PD Debt Instruments which are or are intended to be disposed of only to
persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance
and any rules made under that Ordinance.
7 Singapore
The Base Prospectus has not been and will not be registered as a prospectus with the Monetary Authority of Singapore under
the Securities and Futures Act, Chapter 289 of Singapore, as amended ("Securities and Futures Act"). Accordingly, each
Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will be required to
represent, warrant and agree, that it has not offered or sold any PD Debt Instruments or made the PD Debt Instruments
subject of an invitation for subscription or purchase and has not circulated or distributed, nor will it circulate or
distribute the Base Prospectus or any other document or material in connection with the offer or sale or invitation for
subscription or purchase of any PD Debt Instruments, whether directly or indirectly, to any person in Singapore other
than:
(a) to an institutional investor pursuant to Section 274 of the Securities and Futures Act;
(b) to a relevant person pursuant to Section 275(1) of the Securities and Futures Act, or to any person pursuant
to Section 275(1A) of the Securities and Futures Act, and in accordance with the conditions specified in Section 275 of the
Securities and Futures Act; or
(c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the
Securities and Futures Act.
Each Dealer has further represented, warranted and agreed, and each further Dealer appointed under the Programme will be
required to represent, warrant and agree, to notify (whether through the distribution of this Base Prospectus or any other
document or material in connection with the offer or sale or invitation for subscription or purchase of any PD Debt
Instruments or otherwise) each of the following relevant persons specified in Section 275 of the Securities and Futures Act
which has subscribed or purchased PD Debt Instruments from and through that Dealer, namely a person who is:
(1) a corporation (which is not an accredited investor (as defined in Section 4A of the Securities and Futures
Act)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more
individuals, each of whom is an accredited investor; or
(2) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor,
securities (as defined under Section 239(1) of the Securities and Futures Act) of that corporation or the beneficiaries'
rights and interest (however described) in that trust shall not be transferred within 6 months after that corporation or
that trust has acquired the PD Debt Instruments pursuant to an offer made under Section 275 of the Securities and Futures
Act except:
(i) to an institutional investor or to a relevant person defined under Section 275(2) of the Securities and
Futures Act, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the
Securities and Futures Act;
(ii) where no consideration is or will be given for the transfer;
(iii) where the transfer is by operation of law;
(iv) as specified in Section 276(7) of the Securities and Futures Act; or
(v) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures)
Regulations 2005 of Singapore.
8 Japan
The PD Debt Instruments have not been and will not be registered under the Financial Instruments and Exchange Act of Japan
(Act No. 25 of 1948, as amended, the "Financial Instruments and Exchange Act") and, accordingly, each Dealer has
represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that
it has not offered or sold, and will not offer or sell, any PD Debt Instruments, directly or indirectly, in Japan or to, or
for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any
corporation or other entity organised under the laws of Japan) or to others for re-offering or resale, directly or
indirectly, in Japan or to, or for the benefit of, any resident of Japan, except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other
applicable laws, regulations and ministerial guidelines of Japan.
9 Korea, Republic of
The PD Debt Instruments have not been and will not be registered with the Financial Services Commission of Korea for public
offering in the Republic of Korea ("Korea").
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent
and agree, that PD Debt Instruments have not been and will not be offered, delivered or sold directly or indirectly in
Korea or to any resident of Korea (as defined under the Foreign Exchange Transaction Law of Korea and the regulations
thereunder) or to others for re-offering or resale directly or indirectly in Korea or to any resident of Korea except as
otherwise permitted under applicable Korean laws and regulations, including the Financial Investment Services and Capital
Markets Act and the decrees and regulations thereunder, the Foreign Exchange Transaction Law of Korea and the decrees and
regulations thereunder and other relevant laws and regulations of Korea.
Each Dealer has undertaken, and each further Dealer appointed under the Programme will be required to undertake to ensure
that any securities dealer to which it sells PD Debt Instruments confirms that it is purchasing such PD Debt Instruments as
principal and agrees with such Dealer that it will comply with the restrictions described above.
10 India
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent
and agree, that it has not offered, sold or transferred and will not offer, sell or transfer in India, directly or
indirectly, by means of any document, any PD Debt Instruments (a) other than to persons permitted to acquire the PD Debt
Instruments under Indian law, whether as a principal or an agent, or (b) in circumstances which would constitute an
offering to the public within the meaning of the Companies Act, 1956 of India, and that this Base Prospectus and any
document by means of which it offers the PD Debt Instruments will not be generally distributed or circulated in India and
will be for the sole consideration and exclusive use of the persons permitted to acquire the PD Debt Instruments under
Indian law to whom it is issued or passed on.
The PD Debt Instruments have not been approved by the Securities and Exchange Board of India, Reserve Bank of India or any
other regulatory authority of India, nor have the foregoing authorities approved this Base Prospectus or confirmed the
accuracy or determined the adequacy of the information contained in it. This Base Prospectus has not been and will not be
registered as a prospectus or a statement in lieu of a prospectus with the Registrar of Companies in India. Prospective
investors must seek legal advice as to whether they are entitled to subscribe to the PD Debt Instruments and must comply
with all relevant Indian laws in this respect. Each investor is deemed to have acknowledged and agreed that it is eligible
to invest in the PD Debt Instruments under applicable laws and regulations and that it is not prohibited under any law or
regulation in India from acquiring, owning or selling the PD Debt Instruments.
11 Canada
The PD Debt Instruments are not and will not be qualified for sale under the securities laws of any province or territory
of Canada. Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required
to represent and agree, that:
(a) it has
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