Final Termsheet. Fixed Income Coverage Wealth Managers

Transcription

1 EUR Credit Default Warrant Protection on EUR Banco Santander S.A. Senior Debt Issued by UBS AG, London Branch SVSP Product Type: Warrant (2110) heet Prospective investors of the EUR Credit Default Warrant should recognize that the Warrants described in this Term Sheet constitute a risk investment which can lead to a total loss of their investment in the Warrants. Prospective investors should understand the risks associated with an investment in the Warrants, which may, in particular, but not limited to, derive from the credit linkage of the Warrants. Potential investors must therefore be prepared and able to sustain a partial or even a total loss of the invested capital. Any investors interested in purchasing the Warrants should assess their financial situation, to ensure that they are in a position to bear the risks of loss connected with the Warrants. Specific risks are in particular related to the credit linked nature of the Warrants: Linkage to the default risk of a third party: The Warrants are linked to the default risk of a third party, called the "Reference Entity". The investor will be reversely exposed to the credit risk of the Reference Entities. If no event defined in the terms and conditions as a "Credit Event" occurs, the redemption amount of the Warrants will be zero. Less transparent pricing: Credit as an underlying of the Warrants is not comparable to an equity. Equities are typically listed on or traded via an exchange and therefore the pricing and valuation follow defined rules while the trading and price determination of the underlying of the Warrants can be less transparent. Dependency on the International Swaps and Derivatives Association / Involvement of the Issuer: The redemption of the Warrants depends on the determination of a Credit Event. The determination of a Credit Event is made by reference to the determinations by the International Swaps and Derivatives Association (ISDA, where in the following the term "ISDA" shall also refer to any successor to ISDA as identified by the Calculation Agent) which follow their own rules. Moreover, the redemption amount is typically priced and valuated through an auction which is held in accordance with the international ISDA standards and determinations made by the Credit Derivatives Determination Committee. The Issuer is a member of ISDA and similar industry associations and may, in such capacity, be involved in the pricing and valuation process as well as in voting on any determinations by the Credit Derivatives Determination Committee, including inter alia, whether a Credit Event has occurred. Determination of a Credit Event: The Calculation Agent will determine the occurrence of a Credit Event only after the Credit Derivatives Determination Committee has determined such occurrence of a Credit Event. However, not all Credit Events may be subject to a Credit Derivatives Determination Committee decision. If the Credit Derivatives Determination Committee has not determined the occurrence of a Credit Event, the Calculation Agent is not entitled to make such determination instead of the Derivatives Determination Committee, and the investors in the Warrants may suffer a total loss of their investments. The determination of a Credit Event by the Credit Derivatives Determination Committee is governed by rules which are different from the rules applicable to credit default swaps. Therefore, the determination of a Credit Event under a credit default swap relating to the Reference Entity does not automatically result in the determination of a Credit Event in relation to the Warrants. Discretionary determinations by the Calculation Agent: The Calculation Agent may exercise its discretion when making certain determinations that may have a direct or indirect effect on the return on investment. The redemption amount may not suffice to compensate for other losses incurred by the investor: If the Calculation Agent determines that a Credit Event has occurred, the redemption amount payable by the Issuer following an automatic exercise of the Warrants may not suffice to compensate for the losses the investors suffers from an investment in the Reference Obligation or other obligations of the Reference Entity.

2 Page 2/32 Non-linearity of pricing dependencies: The market value of the Warrants may be influenced by changes in the price levels on the market for credit default swaps relating to the Reference Entity. However, changes in the price of the Warrants may differ from the changes in the price of the relevant credit default swaps. Events leading to a decrease in the price on the market for credit default swaps may lead to an even higher decrease in the price of the Warrants. Potential mismatch following a succession event: A Reference Entity may be replaced by a successor. As a result, the likelihood that a Credit Event will occur with respect to the new Reference Entity may decrease. This will adversely affect the price of the Warrants. In addition, the Warrants may not longer be suitable for hedging an exposure to the credit risk of the original Reference Entity.

3 Page 3/32 It is expressly recommended that potential investors familiarize themselves with the specific risk profile of the Warrants described in this Term Sheet and seek the advice of a professional, if necessary. 1. Description of the Product Information on the Reference Entity/Reference Obligation Reference Entity Reference Obligation Reference Entity Type Banco Santander, S.A. or in case of the occurrence of a Succession Event its Successor. Primary Obligor: Santander International Debt, S.A. Unipersonal Guarantor: Reference Entity Maturity Date: 9 August 2013 Coupon: Variable ISIN: XS European Corporate Further information regarding the stock price of and other exchange relevant information on the Reference Entity is available on the website of the Six Swiss Exchange Product Details Security Numbers WKN: UB2ABA Common Code: Issue Size Specified Denomination / Nominal Issue Price Settlement Currency Settlement Type Units EUR 1,000 per Product EUR per unit (subject to market conditions) EUR Auction Settlement (Fallback Settlement: Valuation Method) Dates Trade Date / Fixing Date 23 June 2010 Issue Date / Payment Date 6 th July 2010 Expiration Date 20 September 2015 Redemption/Settlement Subject to an early termination by the Issuer, the Redemption Amount, if any, is payable on the 135 th Business Day after the Credit Event Determination Date (the "Cash Redemption Date"), provided that the Issuer is entitled to determine an earlier Cash Redemption Date by giving 3 Business Days' prior notice to the holders of the Warrants.

4 Page 4/32 Redemption Redemption Amount per Product: Means the Cash Redemption Amount, calculated according to the following provisions: a.) if no Credit Event Determination Date has occurred during the Notice Delivery Period 0 b.) if a Credit Event Determination Date has occurred during the Notice Delivery Period Loss Amount Loss Amount Specified Denomination x (100% - Final Price) Termination following Tax Redemption: Applicable See "4. Schedule - UBS Credit Linked Definitions, Part 7" Product Structure The following EUR denominated Credit Protection Warrant offers investors cash settled protection against the credit risk related to the Reference Entity. Following the determination of a Credit Event in respect of the Reference Entity, the Warrant shall be automatically exercised. Following the exercise of the Warrant the investor shall receive a cash amount as set out under "Redemption" above. Credit Related Provisions Credit Event(s) Bankruptcy Failure to Pay Restructuring Payment Requirement: USD 1,000,000 or its equivalent in the relevant Obligation Currency as of the occurrence of the relevant Failure to Pay. Modified Restructuring Maturity Limitation and Conditionally Transferable Obligation: Applicable Multiple Holder Obligation: Applicable Default Requirement: USD 10,000,000 or its equivalent in the relevant Obligation Currency as of the occurrence of the relevant Credit Event. Obligation See "4. Schedule - UBS Credit Linked Definitions, Part 4" Obligation Category Borrowed Money Obligation Characteristics None Deliverable Obligation See "4. Schedule - UBS Credit Linked Definitions, Part 4". Deliverable Obligation Category Bond or Loan Deliverable Obligation Characteristics Not Subordinated

5 Page 5/32 All Guarantees Specified Currency: Standard Specified Currencies Not Contingent Assignable Loan Consent Required Loan Transferable Maximum Maturity: 30 years Not Bearer Applicable General Information Issuer Issuer s Rating Lead Manager Calculation Agent Principal Paying Agent Secondary Market Business Days Minimum Investment Minimum Trading Lot Status Clearing Form of Deed Governing Law / Jurisdiction Product Public Offering UBS AG, London Aa3 Moody s / A+ S&P s / A+ Fitch UBS AG, London UBS AG, London UBS AG, Zurich Daily price indications will be available on London, New York, TARGET 1 unit 1 unit Unsecured / Unsubordinated SIX SIS, Euroclear, Clearstream (registered as intermediated securities with SIX SIS AG, in Switzerland) Uncertificated Securites Swiss / Zurich One Credit Default Warrant with the given Specified Denomination/Par Value is equivalent to one (1) "Product" or "Warrant". "Products" or "Warrant" wherever used herein shall be construed to mean integral multiples of the same, subject to the Issue Size. Switzerland, Germany, Austria and Luxembourg Tax Treatment Swiss Federal Stamp Duty Swiss Federal Income Tax Swiss Withholding Tax EU Savings Tax For Swiss Stamp Duty purposes, the product is treated as a warrant. Secondary market transactions are not subject to Swiss Stamp Duty. For private investors with tax domicile in Switzerland, the transaction is subject to neither Swiss federal nor cantonal or communal income tax. The product is not subject to the Swiss Withholding Tax. For Swiss paying agents, the Product is not subject to EU Savings Tax. The tax information only provides a general overview of the potential tax consequences linked to this Product at the time of issue. Tax laws and tax doctrine may change, possibly with retroactive effect.

6 Page 6/32 Product Documentation The term sheet together with the UBS Structured Warrant Programme ( SWP ) and the respective shall form the documentation for this Product ( Product Documentation ), and accordingly the term sheet should always be read in conjunction with these documents. The terms Product respectively Holder as used in this Simplified Prospectus correspond to the terms Warrant / Security respectively Securityholder as defined in the SWP. During the whole term of this Product, the respective documents can be ordered free of charge from UBS AG at P.O. Box, CH-8098 Zurich (Switzerland), via telephone (+41-(0) ), fax (+41-(0) ) or via (swiss-prospectus@ubs.com). In addition, the respective documents are available on the internet at Notices in connection with this Product shall be validly given by publication on the internet at In addition, any changes with regard to the terms of this Product shall be published on the internet at Classification This Product does not represent a participation in any of the collective investment schemes pursuant to Art. 7 ss of the Swiss Federal Act on Collective Investment Schemes (CISA) and thus does not require an authorisation of the Swiss Financial Market Supervisory Authority (FINMA). Therefore, investors in this Product are not eligible for the specific investor protection under the CISA. Prudential Supervision UBS AG is authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA). In addition, its London Branch is authorised and regulated by the Financial Services Authority (FSA) and its Jersey Branch by the Jersey Financial Services Commission (JFSC). 2. Prospects of Profits and Losses Market Expectation Risk Tolerance Profit Potential Loss Potential Investors in this Product expect Credit Events in respect of the Issuer of the Reference Obligation. Investors in this Product are experienced investors, familiar with credit valuation and comfortable with the view taken on the Underlying. They require protection from Credit Events concerning the Reference Entity. Investors are also prepared to take on the additional risk of losing all of their invested capital in the product should no Credit Event occur. The prospective gain is limited to Specified Denomination minus the upfront premium. Investors return is linked to the recovery amounts in respect of obligations of the Reference Entity as determined by the Calculation Agent. Investors are exposed to the credit risk of the Issuer. Default protection in respect of the Reference Entity is acquired for a specified period of time in exchange for an upfront fee. The loss is limited to the initial amount invested in the Warrants.

7 Page 7/32 3. Significant Risks for Investors Prospective investors of the Warrants should recognise that the Warrants described in this Term Sheet constitute a risk investment which can lead to a total loss of their investment in the Warrants. Prospective investors should understand the risks associated with an investment in the Warrants, which may, in particular, but not limited to, derive from the credit linkage of the Warrants. Potential investors must therefore be prepared and able to sustain a partial or even a total loss of the invested capital. Any investors interested in purchasing the Warrants should assess their financial situation, to ensure that they are in a position to bear the risks of loss connected with the Warrants. Specific risks are in particular related to the credit linked nature of the Warrants: 1. CREDIT AS AN UNDERLYING 1.1 The Warrants are linked to the default risk of a third party, called the "Reference Entity". The investor will be reversely exposed to the credit risk of the Reference Entity. If no event defined in the terms and conditions as a "Credit Event" (such as Failure to Pay or Bankruptcy, each as defined in the terms and conditions of the Warrants) occurs, the redemption amount of the Warrants will be zero. 1.2 Credit as an underlying of the Warrants is not comparable to an equity as an underlying. Equities are typically listed on or traded via an exchange and therefore the pricing and valuation follow defined rules while the trading and price determination of the underlying of the Warrants can be less transparent. 1.3 In case of the non-determination of a Credit Event, the Warrants will be worthless on expiry. In this case, investors do not have any right of recourse against the Issuer to cover their losses. Investors never have a right of recourse against the Reference Entity. In particular, the occurrence of a Credit Event may not be determined retrospectively, i.e. after expiration of the Warrants. The economic and risk profile of the Warrants is, consequently, comparable to the purchase of protection against the occurrence of a Credit Event in relation to the Reference Entity, where the holder of Warrants is also exposed to the Issuer s credit risk. Thus, investors are exposed to the credit risk of the Issuer as well as to the credit risk of the Reference Entity. 1.4 The payment of a redemption amount is conditional upon (i) the determination of a Credit Event; and (ii) the Final Price being less than 100%. 1.5 Even if a Credit Event occurs, the redemption amount of the Warrants may be below the Issue Price. 1.6 The Warrants are neither guaranteed by the Reference Entity nor are the Warrants secured by any obligations of the Reference Entity. 1.7 The Reference Entity may be replaced by a successor. As a result, the likelihood that a Credit Event will occur with respect to the new Reference Entity could decrease. This will adversely affect the price of the Warrants. 2. HEDGING MISMATCH 2.1 If the Calculation Agent determines that a Credit Event has occurred, the redemption amount payable by the Issuer following an automatic exercise of the Warrants (as described in more detail in the terms and conditions of the Warrants) may not suffice to compensate for the losses the investors suffers from an investment in the Reference Obligation or other obligations of the Reference Entity. Thus, the Warrants may not be suitable to hedge the investor's exposure to the credit risk of the Reference Entity. 2.2 As a result of a succession event, the Reference Entity may change. Thus, the Warrants may not longer be suitable for hedging an exposure to the credit risk of the original Reference Entity. 3. DETERMINATION OF CREDIT EVENTS AND REDEMPTION AMOUNT BY THE INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION; INVOLVEMENT OF THE ISSUER 3.1 The redemption of the Warrants depends on the determination of a Credit Event. The determination of a Credit Event is made by reference to the determinations by the International Swaps and Derivatives Association (ISDA, where in the following the term "ISDA" shall also refer to any successor to ISDA as identified by the Calculation Agent) which follow their own rules and may be subject to voting procedures by the Credit Derivatives Determination Committee, of which the Issuer is a member. 3.2 The redemption amount is typically priced and valued through an auction which is held in accordance with

8 Page 8/32 the international ISDA standards and determinations made by the Credit Derivatives Determination Committee. The Issuer is a member of ISDA and similar industry associations. In such capacity, the Issuer may be involved in the pricing and valuation process. 3.3 The Calculation Agent may exercise its discretion when making certain determinations that may have a direct or indirect effect on the return on investment, such as the determination of the redemption amount. The Issuer also acts as Calculation Agent. 3.4 Neither the Issuer nor the Calculation Agent nor any industry association is under an obligation to set out the criteria applied in making any determination and/or exercising their discretion. Therefore, the investor may not be able to assess the reasonableness of any determination and/or the exercise of discretion by such industry association or the Calculation Agent. 3.5 An investment in the Warrants will result in a total loss if the occurrence of a Credit Event on or prior to the Expiration Date is not determined during the Notice Delivery Period. Even if a Credit Event occurs on or prior to the Expiration Date, the investor is still exposed to the risk that the occurrence of such Credit Event is not determined on or prior to the Expiration Date. 3.6 The Issuer will not have any liability to any investor or any other person as a result of giving (or not giving) a Credit Event Notice. 3.7 In connection with the determination of the value of obligations of the Reference Entity, as well as in connection with other rights and obligations in relation to the Warrants, the Issuer, the Calculation Agent and the relevant industry association may rely on information received from third parties, such as dealers and data service providers. The methodology used by such third parties may differ from the methodology used by comparable third parties and may involve the exercise of discretion. Therefore, the Issuer, the Calculation Agent and the relevant industry association may rely on determinations and information even though such determinations or information may differ from the determinations and information provided by comparable third parties such as other dealers or data providers. 4. LACK OF LIQUIDITY 4.1 There is no assurance as to the development or liquidity of any trading market for the Warrants and, therefore, any prospective purchaser should be prepared to hold the Warrants indefinitely or until the maturity or final redemption of such Warrants. 4.2 Lack of liquidity in the market for credit default swaps will result in a widening of the bid-offer spreads on the secondary market for the Warrants. This may lead to a decrease in the price of the Warrants. 5. COMPLEXITY IN PRICING; DIFFERENCES TO THE MARKET FOR CREDIT DEFAULT SWAPS 5.1 The price of the Warrants will be affected by factors that interrelate in complex ways. In particular, the market value of the Warrants may be influenced by changes in the price levels on the market for credit default swaps relating to the Reference Entity. However, changes in the price of the Warrants may differ from the changes in the price of the relevant credit default swaps. Events leading to a decrease in the price on the market for credit default swaps may lead to an even higher decrease in the price of the Warrants. 5.2 The price of credit derivatives depends inter alia on the supply and demand for protection against the occurrence of Credit Events by such Reference Entity. Such supply and demand may be influenced by macro economic conditions. A change in such macro economic conditions may therefore have a detrimental influence on the value of the Warrants, even though the risk of a Credit Event regarding any Reference Entity may not have changed. 5.3 The Calculation Agent will determine the occurrence of a Credit Event only after the Credit Derivatives Determination Committee has determined such occurrence of a Credit Event. However, not all Credit Events may be subject to a Credit Derivatives Determination Committee decision. If the Credit Derivatives Determination Committee has not determined the occurrence of a Credit Event, the Calculation Agent is not entitled to make such determination instead of the Derivatives Determination Committee, and the investors in the Warrants may suffer a total loss of their investments. 5.4 The determination of a Credit Event by the Credit Derivatives Determination Committee is governed by rules which are different from the rules applicable to credit default swaps. Therefore, the determination of a Credit Event under a credit default swap relating to the Reference Entity does not automatically result in the determination of a Credit Event in relation to the Warrants. 6. NO REPRESENTATION OR INFORMATION REGARDING THE REFERENCE ENTITY

9 Page 9/ Neither the Issuer nor any of its affiliates make any representation or give any warranty whatsoever with respect to the Reference Entity, including its creditworthiness, or the likelihood of the occurrence or nonoccurrence of a Credit Event, either at the time of issue of the Warrants or at any time thereafter. 6.2 Neither the Issuer nor any of its affiliates is under any obligation to provide the investor with any public or non-public information with respect to the Reference Entity that is or may be material in the context of the Warrants. The issue of Warrants will not create any obligation on the part of any such persons to disclose to the investors or any other party any of such information (whether or not confidential). 7. NO RECOURSE AGAINST THE REFERENCE ENTITY 7.1 The Warrants do not create any rights of the investors against a Reference Entity. In particular, the investors have no right of recourse against a Reference Entity due to a loss suffered as a result of the non-occurrence of a Credit Event with respect to such Reference Entity. 7.2 The Reference Entity is not involved in the issuance of the Warrants. The Reference Entity does not have any obligation to consider the interests of the investors in taking any corporate actions that might affect the value of the Warrants. 8. BUSINESS RELATIONSHIPS BETWEEN THE ISSUER AND THE REFERENCE ENTITY 8.1 The Issuer may have existing or future business relationships with the Reference Entity and will pursue actions and take steps that it deems necessary or appropriate to protect its own interests arising therefrom without regard to the consequences for an investor. 8.2 The business relationships between the Issuer and the Reference Entity may include the granting of loans and other measures which may prevent the occurrence of a Credit Event. In such case, the investor may suffer a loss of its entire investment. 8.3 The Issuer and any of its affiliates may deal in any obligation of the Reference Entity, including the Reference Obligation and may act with respect to such business in the same manner as if the Warrants did not exist. 9. COMPLEXITY IN THE TERMS AND CONDITIONS OF THE WARRANTS Due to the evolving nature of the credit derivatives market, it is possible that ISDA will revise the definitions and rules commonly used for credit default swaps (the "Credit Derivatives Rules") in the future. Any change in the interpretation of the terms of the Credit Derivatives Rules may be reflected in the determinations of the Calculation Agent, such as the determination whether a Credit Event in relation to the Warrants has occurred, thereby adversely affecting investors in the Warrants. Although ISDA has promulgated the Credit Derivatives Rules to facilitate transactions in the credit default swap market, differing interpretations could exist with respect to the definition and rules governing credit default swaps. Therefore, in addition to the other risks summarised herein, the Warrants are also subject to the risk that the interpretation of the terms of the Credit Derivatives Rules may undergo changes that (indirectly) adversely affect investors. For more product specific risks please see above (2. Prospects of Profits and Losses) Risk Factors relating to the Issuer In addition to the market risk with regard to the development of the Underlying, each investor bears the general risk that the financial situation of the Issuer could deteriorate. The Products constitute immediate, unsecured and unsubordinated obligations of the Issuer, which, particularly in case of insolvency of the Issuer, rank pari passu with each and all other current and future unsecured and unsubordinated obligations of the Issuer, with the exception of those that have priority due to mandatory statutory provisions. The general assessment of the Issuer s creditworthiness may affect the value of the Products. This assessment generally depends on the ratings assigned to the Issuer or its affiliated companies by rating agencies such as Moody s, Fitch and Standard & Poor s. The Issuer Ratings indicated in this document reflect the situation at the time of issuance and may be subject to changes. The actual Issuer Ratings at any given time can be seen on the Issuer s website ( under Analysts & Investors.

10 Page 10/32 Secondary Market The Issuer or the Lead Manager, as applicable, intends, under normal market conditions, to provide bid and offer prices for this Product on a regular basis. However, the Issuer or the Lead Manager, as applicable, makes no firm commitment to provide liquidity by means of bid and offer prices for this Product, and assumes no legal obligation to quote any such prices or with respect to the level or determination of such prices. Potential investors therefore should not rely on the ability to sell this Product at a specific time or at a specific price. In special market situations, where the Issuer is completely unable to enter into hedging transactions, or where such transactions are very difficult to enter into, the spread between the bid and offer prices may be temporarily expanded, in order to limit the economic risks of the Issuer. Market Risk The investor is exposed to market disruption events (such as trading disruption, exchange disruption and early closure of the relevant exchange), adjustments and early termination which could have an impact on the redemption amount through delay in payment or change in value. For a detailed description of such events and their effects please read the and the base prospectus (Structured Warrants Programme). Important Information This information is communicated by UBS AG and/or its affiliates ("UBS"). UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the transaction to which this document relates. UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this document. UBS' trading and/or hedging activities related to this transaction may have an impact on the price of the underlying asset. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. In certain circumstances UBS sells this Product to dealers and other financial institutions at a discount to the issue price or rebates to them for their account some proportion of the issue price. Further information is available on request. Structured transactions are complex and may involve a high risk of loss. Prior to entering into a transaction you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of this transaction) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in any transaction. This document should not be construed as an offer, personal recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. The terms of any investment will be exclusively subject to the detailed provisions, including risk considerations, contained in the Information Memorandum, Prospectus or other issuer documentation for the issue of the Products/Notes (the "Prospectus"). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS' prior written permission. No action has been or will be taken in any jurisdiction that would permit a public offering of the Products described herein, save where explicitly stated in the Product Documentation. The Products must be sold in accordance with all applicable selling restrictions in the jurisdictions in which they are sold. There is a possibility that costs, including taxes, related to transactions in connection with this Product may arise for the investor that are not paid by UBS or imposed by it.

11 Page 11/32 4. Schedule UBS Credit Linked Definitions Part 1: Redemption upon determination of Credit Event(s) Determination of a Credit Event: Credit Event Backstop Date: If the Calculation Agent determines that a Credit Event has occurred during the period from (and including) the Credit Event Backstop Date to (and including) the Expiration Date on the basis that any committee established by the International Swaps and Derivatives Association, Inc. ("ISDA", where in the following the term "ISDA" shall also refer to any successor to ISDA as identified by the Calculation Agent) for such purposes (the "Credit Derivatives Determination Committee") has determined or is deemed to have determined the occurrence of a Credit Event in accordance with the rules applicable to Credit Derivatives Determinations Committees as published by ISDA on its website at (or any successor website thereto) from time to time and as amended from time to time in accordance with the terms thereof (the "Rules") the Calculation Agent shall notify the Issuer. The Issuer shall deliver a Credit Event Notice to the holders of the Product and the Warrant shall be automatically exercised, so triggering the Redemption Terms. For the avoidance of doubt, unless the Credit Derivatives Determination Committee determines or is deemed to have determined that a Credit Event has occurred in relation to the Reference Entity, no Credit Event shall have occurred in relation to the Warrants. For the avoidance of doubt, the Calculation Agent will not determine whether or not a Credit Event has occurred prior to the Issue Date. Means (a) for purposes of any event that constitutes a Credit Event as determined by a resolution according to the Rules, the date that is 60 calendar days prior to the Credit Event Resolution Request Date or (b) otherwise, the date that is 60 calendar days prior to the earlier of (i) the first date on which the Credit Event Notice is delivered by the Issuer to the holders of the Product and is effective during the Notice Delivery Period and (ii) in circumstances where (A) the conditions to convening a Credit Derivatives Determinations Committee to resolve in accordance with the Rules the matters described in items (a) and (b) of the definition of Credit Event Resolution Request Date are satisfied in accordance with the Rules, (B) the relevant Credit Derivatives Determinations Committee has resolved according to the Rules not to determine such matters and (C) the Credit Event Notice is delivered by the Issuer to the holders of the Product and is effective not more than fourteen calendar days after the day on which ISDA publicly announces that the relevant Credit Derivatives Determinations Committee has resolved according to the Rules not to determine such matters, the Credit Event Resolution Request Date. The Credit Event Backstop Date shall not be subject to adjustment in accordance with any business day convention.

12 Page 12/32 Credit Event Resolution Request Date: With respect to a notice to ISDA, delivered in accordance with the Rules, requesting that a Credit Derivatives Determinations Committee be convened to resolve in accordance with the Rules: (a) whether an event that constitutes a Credit Event has occurred with respect to the relevant Reference Entity or Obligation thereof; and (b) if the relevant Credit Derivatives Determinations Committee resolves according to the Rules that such event has occurred, the date of the occurrence of such event, the date, as publicly announced by ISDA, that the relevant Credit Derivatives Determinations Committee resolves according to the Rules to be the first date on which such notice was effective and on which the relevant Credit Derivatives Determinations Committee was in possession, in accordance with the Rules, of Publicly Available Information with respect to the resolutions according to the Rules referred to in items (a) and (b) above. Notice Delivery Period: Credit Event Determination Date: Credit Event Notice: Notices: The period from and including the Trade Date to and including the date that is 14 calendar days after the Expiration Date. The date, during the Notice Delivery Period, on which the Issuer delivers a Credit Event Notice to the holders. A notice given by the Issuer to the holders of the Product of the determination that a Credit Event has occurred on or after the Credit Event Backstop Date and on or prior to the Expiration Date. The Credit Event Notice shall describe in reasonable detail the facts relevant to the determination that a Credit Event has occurred and, subject as provided below, shall confirm the occurrence of a Credit Event by reference to Publicly Available Information. The Credit Event that is the subject of the Credit Event Notice needs not be continuing on the date that the Credit Event Notice is given. Notwithstanding the foregoing, no Publicly Available Information shall be required in circumstances where ISDA publicly announces on or prior to the date on which relevant Credit Event Notice is delivered (including prior to the Trade Date) that the relevant Credit Derivatives Determinations Committee has resolved according to the Rules that an event that constitutes a Credit Event has occurred with respect to the relevant Reference Entity. In respect of any notice to be delivered to the holders of the Product pursuant to the terms of this Schedule, such notice shall be deemed to have been delivered to the holders of the Product upon publication on the internet at

13 Page 13/32 Redemption Terms: Cash Redemption: Cash Redemption Amount: Loss Amount: Final Price: Auction Final Price Valuation Method: If a Credit Event Determination Date occurs, the Issuer will pay the Cash Redemption Amount, as determined by the Calculation Agent, on the Cash Redemption Date. The Calculation Agent may determine the Cash Redemption Amount either (i) on the basis of the Auction Final Price or (ii) on the basis of the Final Price in accordance with the Valuation Method as set out in more detail in the definition of "Final Price". An amount as defined in section Redemption within this Term Sheet. An amount as defined in section Redemption within this Term Sheet. Means, subject to the provisions herein: (a) in case that ISDA announces an Auction Final Price with respect to the relevant Credit Event within 60 Business Days following the Credit Event Determination Date, a Final Price determined by the Calculation Agent in accordance with such Auction Final Price. (b) in case that (a) the Credit Derivatives Determination Committee decides not to hold an auction with respect to the relevant Credit Event, or (b) does not announce an Auction Final Price within 60 Business Days following the Credit Event Determination Date, a Final Price determined by the Calculation Agent in accordance with the Valuation Method. If the Calculation Agent decides to determine the Final Price as set out under (b) above, the Issuer shall give to the holders of the Product 10 Business Day s notice prior to the Valuation Date (the Notice of Valuation Obligation ) of: aa) bb) a detailed description of the relevant Deliverable Obligation to be the Valuation Obligation the date for which the Valuation Obligation is to be valued (the Valuation Date ), which date will not be later than the Final Valuation Date. The Issuer may serve subsequent Notices of Valuation Obligation to change the Valuation Date and/or the Deliverable Obligation specified in the Notice of Valuation Obligation and/or the detailed description thereof at any time on or prior to the 10th Business Day before the Final Valuation Date and the last Notice of Valuation Obligation served within this period shall override all such previous notices. The Issuer may correct any errors or inconsistencies in the detailed description of the Valuation Obligation specified in the Notice of Valuation Obligation by notice to the Calculation Agent and the holders of the Product prior to the applicable Valuation Date. On the Valuation Date, the Calculation Agent shall commence determination of the Final Price using a Deliverable Obligation specified in the Notice of Valuation Obligation. This Deliverable Obligation is referred to below as Valuation Obligation. Means a final price determined in an auction among market participants, conducted by ISDA to determine the final price under market standard credit default swaps referencing the Reference Entity. Means the highest Quotation obtained by the Calculation Agent on the Valuation Date.

14 Page 14/32 Quotations: Full Quotation: Weighted Average Quotation: Valuation Time: Dealer: Final Valuation Date: Cash Redemption Date: Means each Full Quotation or the Weighted Average Quotation obtained and expressed as a percentage with respect to a Valuation Date in the manner that follows: The Calculation Agent shall attempt to obtain Full Quotations on the Valuation Date from at least five Dealers; if at least two such Full Quotations are not available on the same Business Day within three Business Days of the Valuation Date, on the next following Business Day (and, if necessary, on each Business Day thereafter until the 15th Business Day following the relevant Valuation Date) the Calculation Agent shall attempt to obtain Full Quotations from at least five Dealers and, if at least two Full Quotations are not available, a Weighted Average Quotation. If the Calculation Agent is unable to obtain at least two Full Quotations or a Weighted Average Quotation within such period, the Calculation Agent shall determine the Final Price in its reasonable discretion (which, for the avoidance of doubt, may be zero). The Quotations shall exclude accrued but unpaid interest. All Quotations shall be requested in an amount equal to the outstanding principal balance of the relevant Valuation Obligation unless, in the reasonable discretion of the Calculation Agent, such an amount would not result in a commercially reasonable determination, in which case, the relevant Quotation shall be requested in an amount selected by the Calculation Agent in its reasonable discretion. Means each firm offer quotation obtained from a Dealer at the Valuation Time, to the extent reasonably practicable, for the relevant Valuation Obligation. Means the weighted average of firm bid quotations obtained from Dealers at the Valuation Time, to the extent reasonably practicable, each for an amount of the relevant Valuation Obligation with an outstanding principal balance of as large a size as available that in the aggregate are approximately equal to the then outstanding principal balance of that obligation. At or around 11:00 a.m. in the principal trading centre for the relevant Valuation Obligation. Means a dealer in the Valuation Obligation for which Quotations are to be obtained, as selected by the Calculation Agent in its reasonable discretion. The Final Valuation Date shall be the 25 th Business Day preceding the Cash Redemption Date. The Cash Redemption Date shall be the 135 th Business Day after the Credit Event Determination Date, provided that the Issuer may determine an earlier Cash Redemption Date by giving 3 Business Days' prior notice to the holders of the Warrants.

15 Page 15/32 Part 2: Credit Event Definitions: Credit Event: Bankruptcy: Failure to Pay: Means Bankruptcy, Failure to Pay and Restructuring, each is defined below. If an occurrence that would otherwise constitute a Credit Event, such occurrence will constitute a Credit Event whether or not such occurrence arises directly or indirectly from, or is subject to a defence based upon: (a) any lack or alleged lack of authority or capacity of a Reference Entity to enter into any Obligation or, as applicable, an Underlying Obligor to enter into any Underlying Obligation, (b) any actual or alleged unenforceability, illegality, impossibility or invalidity with respect to any Obligation, or, as applicable, any Underlying Obligation, however described (c) any applicable law, order, regulation, decree or notice, howsoever described, or the promulgation of, or any change in, the interpretation by any court, tribunal, regulatory authority or similar administrative or judicial body with competent or apparent jurisdiction of any applicable law, order, regulation, decree or notice, howsoever described, or (d) the imposition of, or any change in any exchange controls, capital restrictions or any other similar restrictions imposed by any monetary or other authority, however described. Means a Reference Entity (a) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (b) becomes insolvent or is unable to pay its debts or fails or admits in writing in a judicial, regulatory or administrative proceeding or filing its inability generally to pay its debts as they become due; (c) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (d) institutes or has instituted against it a proceeding seeking a judgement of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (i) results in a judgement of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (ii) is not dismissed, discharged, stayed or restrained in each case within 30 calendar days of the institution or presentation thereof; (e) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (f) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (g) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 calendar days thereafter; or (h) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (a) to (g) (inclusive). Means the failure by a Reference Entity to make, when and where due, any payments in an aggregate amount of not less than the Payment Requirement under one or more Obligations, in accordance with the terms of such Obligations at the time of such failure.

16 Page 16/32 Restructuring: Means that, (a) with respect to one or more Obligations and in relation to an aggregate amount of not less than the Default Requirement, any one or more of the following events occurs in a form that binds all holders of such Obligation, is agreed between a Reference Entity or a Governmental Authority and a sufficient number of holders of such Obligation to bind all holders of the Obligation or is announced (or otherwise decreed) by a Reference Entity or a Governmental Authority in a form that binds all holders of such Obligation, and such event is not expressly provided for under the terms of such Obligation in effect as of the later of the Credit Event Backstop Date and the date as of which such Obligation is issued or incurred: (i) a reduction in the rate or amount of interest payable or the amount of scheduled interest accruals; (ii) a reduction in the amount of principal or premium payable at maturity or at scheduled redemption dates; (iii) a postponement or other deferral of a date or dates for either (A) the payment or accrual of interest or (B) the payment of principal or premium; (iv) a change in the ranking in priority of payment of any Obligation, causing the Subordination of such Obligation to any other Obligation; or (v) any change in the currency or composition of any payment of interest or principal to any currency which is not a Permitted Currency. (b) Notwithstanding the provisions of (a) above, none of the following shall constitute a Restructuring: (i) the payment in euros of interest or principal in relation to an Obligation denominated in a currency of a Member State of the European Union that adopts or has adopted the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union; (ii) the occurrence of, agreement to or announcement of any of the events described in (a)(i) to (v) above due to an administrative adjustment, accounting adjustment or tax adjustment or other technical adjustment occurring in the ordinary course of business; and (iii) the occurrence of, agreement to or announcement of any of the events described in (a)(i) to (v) above in circumstances where such event does not directly or indirectly result from a deterioration in the creditworthiness or financial condition of the Reference Entity. (c) For the purposes of the definition of Restructuring and the definition of Multiple Holder Obligation the term Obligation shall be deemed to include Underlying Obligations for which the Reference Entity is acting as provider of a Qualifying Affiliate Guarantee or as provider of any Qualifying Guarantee. In the case of a Qualifying Guarantee and an Underlying Obligation references to the Reference Entity in section (a) above of the definition of Restructuring shall be deemed to refer to the Underlying Obligor and the reference to the Reference Entity in section (b) above of the definition of Restructuring shall continue to refer to the Reference Entity.

17 Page 17/32 Related Credit Definitions: Publicly Available Information: Means information that reasonably confirms any of the facts relevant to the determination that the Credit Event described in the relevant Notice has occurred and which: (i) (ii) (iii) (iv) has been published in or on not less than two Public Sources regardless of whether the reader or user thereof pays a fee to obtain such information; provided that, if the Issuer or an affiliate of the Issuer is cited as the sole source of such information, then such information shall not be deemed to be Publicly Available Information unless the Issuer or an affiliate of the Issuer, as the case may be is acting in its capacity as trustee, fiscal agent, administrative agent, clearing agent, paying agent, facility agent or agent bank for an Obligation; is information received from or published by (A) a Reference Entity or (B) a trustee, fiscal agent, administrative agent, clearing agent, paying agent, facility agent or agent bank for an Obligation; is information contained in any petition or filing instituting a proceeding described in Bankruptcy against or by a Reference Entity; or is information contained in any order, decree, notice or filing, however described, of or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body. In relation to any information described above in sections (ii), (iii) and (iv), recipients may assume that such information has been disclosed to them without violating any law, agreement or understanding regarding the confidentiality of such information and that the Issuer has not taken any action or entered into any agreement or understanding with the Reference Entity or any affiliate of the Reference Entity that would be breached by, or would prevent, the disclosure of such information to third parties. Publicly Available Information need not state (i) in relation to Qualifying Affiliate Guarantees the percentage of Voting Shares owned directly or indirectly by the Reference Entity or (ii) that the relevant occurrence (A) has met the Payment or Default Requirement or (B) has met the subjective criteria specified in certain Credit Events. If the Issuer or an affiliate of the Issuer is (i) the sole source of information in its capacity as trustee, fiscal agent, administrative agent, clearing agent, paying agent, facility agent or agent bank for the Obligation with respect to which a Credit Event has occurred and (ii) a holder of such Obligations, the Issuer shall be required to deliver a certificate signed by a Managing Director (or other substantively equivalent title), certifying the occurrence of a Credit Event with respect to the Reference Entity. Public Source: Means each of Bloomberg Service, Dow Jones Telerate Service, Reuter Monitor Money Rates Services, Dow Jones News Wire, Wall Street Journal, New York Times, Nihon Keizai Shinbun, Asahi Shinbun, Yomiuri Shinbun, Financial Times, La Tribune, Les Echos and Australian Financial Review (and any successor publications), the main source(s) of business news in the country in which the Reference Entity is organized and any other internationally recognized published or electronically displayed news sources.