Pinnacle Performance Limited (Incorporated with limited liability in the Cayman Islands) U.S.$5,000,000,000 Structured Note Programme

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1 SUPPLEMENTARY BASE PROSPECTUS DATED 8 MAY 2008 This document is important. If you are in any doubt as to the action you should take, you should consult your legal, financial, tax or other professional adviser. Pinnacle Performance Limited (Incorporated with limited liability in the Cayman Islands) U.S.$5,000,000,000 Structured Note Programme Arranger and Sponsor MORGAN STANLEY ASIA (SINGAPORE) PTE. A copy of this Supplementary Base Prospectus has been lodged with the Monetary Authority of Singapore (the Authority ) on 8 May 2008 under section 241(1A) of the Securities and Futures Act, Chapter 289 of Singapore (the SFA ). The Authority assumes no responsibility for the contents of this Supplementary Base Prospectus. Lodgment of this Supplementary Base Prospectus with the Authority does not imply that the SFA, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of the structured notes being offered for investment. This Supplementary Base Prospectus is supplemental to the base prospectus (the Original Base Prospectus ) dated 7 August 2006 in relation to the U.S.$5,000,000,000 Structured Note Programme of Pinnacle Performance Limited, which was registered by the Authority on 7 August 2006, as supplemented by the Supplementary Base Prospectuses which were lodged with the Authority on 24 April 2007, 13 August 2007 and 28 January 2008 (the Initial Supplementary Base Prospectuses, and the Original Base Prospectus as supplemented by the Initial Supplementary Base Prospectuses, the Base Prospectus ). Terms defined and references construed in the Base Prospectus shall have the same meaning and construction in this Supplementary Base Prospectus. This Supplementary Base Prospectus should be read and construed in conjunction, and as one document, with the Base Prospectus. The Base Prospectus is hereby amended on and with effect from the date of this Supplementary Base Prospectus as follows: 1. DESCRIPTION OF THE ISSUER IN THE BASE PROSPECTUS (a) The second paragraph under the paragraphs headed Incorporation and Registered Office in the section headed Description of the Issuer in Part 1 of the Original Base Prospectus shall be deleted in its entirety and replaced with the following: The registered office of the Issuer is at PO Box 1093, Queensgate House, Grand Cayman, KY1-1102, Cayman Islands. The telephone number of the registered office is and the facsimile number of the registered office is (b) The paragraph headed Management in the section headed Description of the Issuer in Part 1 of the Original Base Prospectus, as replaced by the section headed Description of the Issuer in the Base Prospectus in the Supplementary Base Prospectus dated 13 August 2007 and subsequently replaced by the Supplementary Base Prospectus dated 28 January 2008, shall be deleted in its entirety and replaced with the following: Management The directors of the Issuer, their respective business addresses and other principal activities with effect from the respective dates below are: 1

2 Name Address Occupation Date of appointment Giles Le Sueur... Mark Hill... Le Masurier House, La Rue Le Masurier, St Helier, Jersey, JE2 4YE, Channel Islands Le Masurier House, La Rue Le Masurier, St Helier, Jersey, JE2 4YE, Channel Islands Administrator 25 March 2008 Administrator 17 April 2008 Each of the directors of the Issuer is entitled to be reimbursed for costs and expenses properly and reasonably incurred in connection with his duties. 2. TAXATION IN THE BASE PROSPECTUS The subsection headed Singapore in the section headed Taxation of the Issuer in Part 1 of the Original Base Prospectus shall be deleted in its entirety and replaced with the following: Interest and Other Payments As the Programme has been arranged as a whole by Morgan Stanley Asia (Singapore) Pte. (formerly known as Morgan Stanley Dean Witter Asia (Singapore) Pte ), which is a Financial Sector Incentive (Bond Market) Company (as defined in the Income Tax Act, Chapter 134 of Singapore (the ITA )), any tranche of Notes issued during the period from the date of this Base Prospectus to 31 December 2008 ( Relevant Notes ) are qualifying debt securities for the purposes of the ITA. Subject to certain prescribed conditions having been fulfilled (including the submission of a return on debt securities for the Relevant Notes to the Comptroller of Income Tax in Singapore ( Comptroller ) and the Authority within such period as the Comptroller may specify from the date of issue of the Relevant Notes and the furnishing of such other particulars in connection with the Relevant Notes as the Comptroller may require), interest on the Relevant Notes and discount income (excluding discount income from secondary trading) on the Relevant Notes derived by any company or body of persons (as defined in the ITA) in Singapore is subject to a concessionary tax rate of 10 per cent. However, notwithstanding the foregoing: (a) if during the primary launch of any tranche of Relevant Notes, such Relevant Notes are issued to less than four persons and 50 per cent. or more of the principal amount of such Relevant Notes is beneficially held or funded, directly or indirectly, by related parties of the Issuer, such Relevant Notes would not qualify as qualifying debt securities ; and (b) even though the Relevant Notes are qualifying debt securities, if at any time during the tenure of the Relevant Notes, 50 per cent. or more of the principal amount of such Relevant Notes is beneficially held or funded, directly or indirectly, by any related party(ies) of the Issuer, interest and discount income derived from the Relevant Notes held by (1) any related party of the Issuer; or (2) any other person where the funds used by such person to acquire such Relevant Notes are obtained, directly or indirectly, from any related party of the Issuer, shall not be eligible for the concessionary tax rate of 10 per cent. described above. The term related party, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person, directly or indirectly, are under the control of a common person. All foreign-sourced income received in Singapore on or after 1 January 2004 by Singapore tax-resident individuals will be exempted from tax, provided such foreign-sourced income is not received through a partnership in Singapore. Following the enactment of the Income Tax (Amendment No. 2) Act 2007, the tax incentives for Qualifying Debt Securities Scheme is extended to accord tax exemption or concessionary tax rates on prepayment fee, redemption premium and break cost (as such terms are defined in the ITA) that are derived by investors from qualifying debt securities issued during the period from 15 February 2007 to 31 December 2008, subject to conditions to be prescribed by regulations. It was announced in the Singapore Budget Statement 2008 that the Qualifying Debt Securities Scheme will be renewed for a period of five years from 1 January 2009 to 31 December In addition, the Qualifying Debt Securities Scheme is enhanced to exempt all investors from income tax on qualifying income derived from qualifying debt securities issued during the period from 16 February 2008 to 31 December 2013 that, inter alia, have a tenure of at least 10 years. The MAS is expected to release further details in due course. 2

3 Capital Gains Any gains considered to be in the nature of capital made from the sale of the Notes will not be taxable in Singapore. However, any gains from the sale of Notes which are gains from any trade, business, profession or vocation carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature. Holders of the Notes who are adopting Singapore Financial Reporting Standards 39 ( FRS 39 ) may be required to recognise gains or losses on the Notes, irrespective of disposal, in accordance with FRS 39 for Singapore income tax purposes. Please see the section below on Adoption of FRS 39 treatment for Singapore income tax purposes. Adoption of FRS 39 treatment for Singapore income tax purposes On 30 December 2005, the Inland Revenue Authority of Singapore issued a circular entitled Income Tax Implications arising from the adoption of FRS 39 - Financial instruments: Recognition and Measurement (the FRS 39 Circular ). Legislative amendments to give effect to the FRS 39 Circular have been incorporated in the Income Tax (Amendment) Act The FRS 39 Circular generally applies, subject to certain opt-out provisions, to taxpayers who are required to comply with FRS 39 for financial reporting purposes. Holders of the Notes who may be subject to the tax treatment under the FRS 39 Circular should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, holding or disposal of the Notes. Estate Duty It was announced in the Singapore Budget Statement 2008 that estate duty is abolished with respect to all deaths occurring on or after 15 February ANNEX FOR EQUITY-LINKED NOTE TYPE A new Annex which applies to Equity-Linked Notes (as specified in the Applicable Pricing Statement) set out in the Appendix to this Supplementary Base Prospectus shall be inserted as a new Part 3 of the Original Base Prospectus. 3

4 APPENDIX ANNEX FOR EQUITY-LINKED NOTE TYPE This document constitutes an annex and forms part of the Supplementary Base Prospectus dated 8 May 2008 issued by Pinnacle Performance Limited in relation to its U.S.$5,000,000,000 Structured Note Programme for the issuance of Series of Notes, and which was lodged with the Monetary Authority of Singapore on 8 May This Annex applies to Equity-Linked Notes (as specified in the Applicable Pricing Statement) and not to any other Note Type. References to Notes, Swap Agreement and Underlying Assets in this Annex are to Equity- Linked Notes only and such defined terms as they relate to a particular Series or Tranche of Equity-Linked Notes, and not to any other Note Types or other Series or Tranche of Notes issued under the Programme. THIS ANNEX FORMS PART OF THE PROSPECTUS FOR NOTES WHICH ARE SPECIFIED AS EQUITY-LINKED NOTES IN THE APPLICABLE PRICING STATEMENT. IN RESPECT OF A SERIES OF EQUITY-LINKED NOTES, THIS ANNEX MUST BE READ TOGETHER WITH PART 1 OF THE BASE PROSPECTUS AND THE APPLICABLE PRICING STATEMENT, IF THERE IS ANY INCONSISTENCY BETWEEN THE INFORMATION IN PART 1 OF THE BASE PROPSECTUS AND THIS ANNEX, THE INFORMATION IN THIS ANNEX SHALL PREVAIL. Summary of Equity-Linked Notes DESCRIPTION OF EQUITY-LINKED NOTE TYPE Equity-Linked Notes are Notes with principal and/or interest determined by reference to a single share or index or to a basket of shares or indices (together, Equity-Linked Notes ). In summary, Series of Notes which are Equity-Linked Notes operate as follows. Terms used in the summary below are defined in the Master Conditions for Equity-Linked Notes (the Equity Master Conditions ) set out in this Annex. The summary below relates to a single Series of Equity-Linked Notes and terms which have Series specific defined meanings shall be construed accordingly. For a detailed description of any particular Series of Notes, please refer to the Pricing Statement in respect of such Series. (i) The entire proceeds of the issuance of a Series of Equity-Linked Notes will be invested in an equal aggregate principal amount (after conversion into the Base Currency, where applicable) of Original Underlying Assets, which are assets which satisfy the criteria set out in the section headed Information on the Underlying Assets in Part 1 of the Base Prospectus and the section headed Information about the Original Underlying Assets in the Applicable Pricing Statement, save that Underlying Assets for Equity-Linked Notes shall not comprise CDO Squared Securities, Synthetic CDO Securities, Asset-Backed Securities or Credit Commodity Linked Securities as such references thereto as set out in Part 1 of the Base Prospectus are not applicable for the purposes of the Equity-Linked Notes. In the event that any of the Original Underlying Assets are redeemed, in whole or in part, at or above their outstanding principal amount including any accrued interest in accordance with their terms for any reason whatsoever by the issuer of such Original Underlying Assets (or, in the case of Original Underlying Assets in the form of Commercial Paper, Certificates of Deposit, Cash Deposits or Liquidity Funds, redeemed or repaid for any reason whatsoever (as the case may be)) prior to the Scheduled Maturity Date, the proceeds of redemption or repayment will be paid into the account of the Issuer with the Custodian (which may or may not be interest bearing). The Determination Agent, acting for and on behalf of the Issuer, may in its sole and absolute discretion reinvest the proceeds of redemption or repayment in Eligible Investments (any Eligible Investments acquired shall herein be referred to as Reinvested Eligible Investments ). If any of the Reinvested Eligible Investments are themselves redeemed, in whole or in part, at or above their outstanding principal amount including any accrued interest in accordance with their terms by the issuer of such Reinvested Eligible Investments (or, in the case of Reinvested Eligible Investments in the form of Commercial Paper, Certificates of Deposit, Cash Deposits or Liquidity Funds, redeemed or repaid for any reason whatsoever (as the case may be)) prior to the Scheduled Maturity Date, the proceeds of redemption or repayment will be paid into the account of the Issuer with the Custodian (which may or may not be interest bearing). The Determination Agent, acting for and on behalf of the Issuer, may in its sole and absolute discretion reinvest the proceeds of redemption or repayment of such Reinvested Eligible Investments in other Eligible Investments. Any such Eligible Investments will also constitute Reinvested Eligible Investments. This process can be repeated any number of times if applicable. Neither the redemption, in whole or in part, of any of the Original Underlying Assets or Reinvested Eligible Investments at or above their outstanding principal amount including any accrued interest in accordance with their terms (or, in the case of Original Underlying Assets or Reinvested Eligible Investments in the form of Commercial Paper, Certificates of Deposit, Cash Deposits or Liquidity Funds, redeemed or repaid for any reason whatsoever (as the case may be)) as described above nor the A-1

5 investment in Eligible Investments using the proceeds of redemption or repayment of such Original Underlying Assets or Reinvested Eligible Investment, as the case may be, as described in this paragraph will, in itself, give rise to an early redemption of the Notes. However, prospective investors should note that the monetary value of such proceeds of redemption or repayment of Underlying Assets could be lower than the market value of the Underlying Assets which were redeemed or repaid to yield such proceeds. Similarly, the market value of any Underlying Assets invested in using such proceeds of redemption or repayment of previously redeemed or repaid Underlying Assets could be lower than the market value of the Underlying Assets which were redeemed or repaid to yield such proceeds. Prospective investors should note that this could have an adverse impact on the investors return of the investment in the Notes. See the section headed Information on the Underlying Assets in Part 1 of the Base Prospectus and the section headed Information about the Original Underlying Assets in the Applicable Pricing Statement for an explanation of the terms Original Underlying Assets, Underlying Assets and Eligible Investments, save that Underlying Assets for Equity- Linked Notes shall not comprise CDO Squared Securities, Synthetic CDO Securities, Asset-Backed Securities or Credit Commodity Linked Securities as such references thereto as set out in Part 1 of the Base Prospectus are not applicable for the purposes of Equity-Linked Notes; (ii) pursuant to the Swap Agreement, the Issuer will pay an amount equal to any interest receivable in respect of the Underlying Assets (if any) to the Swap Counterparty and the Swap Counterparty will pay the Issuer an amount equal to the interest (calculated as described below) due to be paid by the Issuer on the Notes. Where necessary the Issuer will enter into interest rate and currency swap agreements to ensure interest and currency payment amounts match; (iii) if the Swap Counterparty Option and the Issuer Call Option is specified in the Applicable Pricing Statement as applicable to a Series or Tranche of Notes, and the Swap Counterparty exercises its Swap Counterparty Option to terminate early the Swap Agreement in respect of a Series or Tranche of Notes on any Interest Payment Date (other than the Interest Payment Date falling on the Scheduled Maturity Date), the Issuer will exercise its irrevocable Issuer Call Option to redeem early in whole (but not in part) such Series or Tranche of Notes on such Interest Payment Date, which shall be the Issuer Call Redemption Date. In such circumstances, such Series or Tranche of Notes will be redeemed in whole (but not in part) at their principal amount plus accrued and unpaid interest thereon up to the relevant Issuer Call Redemption Date (as further described in the Equity Master Conditions and the Applicable Pricing Statement). Following the exercise of an Issuer Call Option in respect of a Series or Tranche of Notes, no interest will be payable thereon after the Issuer Call Redemption Date since such Notes will redeem in whole; (iv) the Notes may also be redeemed early upon the occurrence of a Mandatory Redemption Event (as further described in the Equity Master Conditions and the Applicable Pricing Statement and which includes an Equity Termination Event) or an Event of Default (as further described in the Equity Master Conditions and the Applicable Pricing Statement) at the Early Redemption Amount (or the equivalent of such amount converted into the currency of denomination of the Notes on the basis of the prevailing exchange rates on the date of such redemption of the Notes), being an amount which may be substantially less than the principal amount of the Notes. The Notes will cease to bear any interest from the Early Redemption Date following the occurrence of such Mandatory Redemption Event or, as the case may be, the date of redemption of the Notes following the occurrence of such Event of Default, and no further interest will be payable; (v) provided the Notes are not redeemed as a result of notice being given in respect of the occurrence of a Mandatory Redemption Event, if applicable, the exercise by the Issuer of the Issuer Call Option in relation to the relevant Series or Tranche of Notes or the occurrence of an Event of Default or the occurrence of an Additional Termination Event, the Issuer will apply the redemption monies receivable in respect of the Underlying Assets (and, where necessary, using the swap arrangements to ensure interest and currency payments match) in repayment of the Notes. In such circumstances, the Notes will be redeemed at their principal amount on the Scheduled Maturity Date; and (vi) the Notes may also be redeemed early on such other terms as specified in the Applicable Pricing Statement (each an Additional Termination Event ). Security in respect of the Equity-Linked Notes The obligations of the Issuer under the Notes will be secured principally by security created over its rights in respect of the Underlying Assets, the Swap Agreement and, if applicable, the Forward Agreement. A prior security interest will be given to, among others, the Swap Counterparty and, if applicable, the Forward Counterparty, securing the Issuer s obligations under the Swap Agreement and, if applicable, the Forward Agreement, respectively (see the section headed Information on the Security Arrangements for Notes in Part 1 of the Base Prospectus). A-2

6 The Reference Items Each Series of Notes is equity-linked to (but are not obligations of) a single share or index, or a basket of shares or indices referred to only in this section and the section Risk Disclosures in this Annex (the Reference Items ). There are no material terms, conditions or criteria which apply in the selection of Reference Items in respect of a Series of Notes. Information on the Reference Items relating to a Series will be disclosed in the Applicable Pricing Statement. Following the occurrence of certain events (such as an Extraordinary Event, Currency Inconvertibility Event or Additional Disruption Event), the Determination Agent, acting for and on behalf of the Issuer, may determine to redeem the Notes (such determination being an Equity Termination Event ). The occurrence of an Equity Termination Event will give rise to a Mandatory Redemption Event. Other events which give rise to a Mandatory Redemption Event will be set out in the Applicable Pricing Statement. Each of the terms used above is fully defined in the Equity Master Conditions set out in this Annex. Such definitions are based on (with certain modifications) technical definitions currently applied in the professional equity derivatives market. The above description is a summary intended to convey the general nature of the Equity Termination Event as defined and prospective investors should remember that the actual occurrence of such event would be determined by the Determination Agent, acting for and on behalf of the Issuer, on a strict application of the technical definitions set out in the Equity Master Conditions. Procedure for Redemption of the Notes following Mandatory Redemption Events and Events of Default Following a Mandatory Redemption Event, the Notes will be redeemed on the Early Redemption Date at the Early Redemption Amount. The Early Redemption Amount will be an amount equal to the Liquidation Proceeds of the Underlying Assets (as defined in the Equity Master Conditions) and/or any proceeds received in respect of the Underlying Assets on or prior to the Early Redemption Date plus or minus (as the case may be) the Swap Settlement Amount payable by the Swap Counterparty and/or, if applicable, the Forward Counterparty or the Issuer (as the case may be) on the termination of the Swap Agreement and/or, if applicable, the Forward Agreement. The Liquidation Proceeds will be subject to certain deductions relating to the costs and expenses associated with the sale of the Underlying Assets. The Early Redemption Amount which investors will receive upon redemption of such Notes as described may be substantially less than the principal amount of the Notes invested and could be zero. Following an Event of Default, the Trustee at its discretion may, and if so requested in writing by the holders of at least one-fifth in principal amount of the outstanding Notes of the relevant Series, or if so directed by an Extraordinary Resolution of the Noteholders of the relevant Series, shall (subject in each case being indemnified to its satisfaction) give notice to the Issuer that the Notes are, and they shall accordingly forthwith become, immediately due and repayable at their principal amount together with accrued interest up to the date of redemption of the Notes. Thereafter, the Trustee will have the power to realise the Security in respect of such Series and terminate the Swap Agreement and, if applicable, the Forward Agreement in respect of such Series in accordance with their terms. See the section headed Information on the Security Arrangements for Notes in Part 1 of the Base Prospectus. In any such circumstances, there is no assurance that the Issuer will have sufficient amounts to repay the principal amount due to be paid in respect of the Notes. Prospective investors should appreciate that the Notes will cease to bear any interest from the Early Redemption Date following the occurrence of such Mandatory Redemption Event or, as the case may be, the date of redemption of the Notes following the occurrence of such Event of Default, and no further interest will be payable. Issuer Call Option and Swap Counterparty Option In respect of each Series or Tranche of Notes, if the Swap Counterparty Option and the Issuer Call Option is specified in the Applicable Pricing Statement as applicable to a Series or Tranche of Notes, and the Swap Counterparty has exercised the Swap Counterparty Option under the Swap Agreement in relation to such Notes on any Interest Payment Date (other than the Interest Payment Date falling on the Scheduled Maturity Date), the Issuer will exercise its Issuer Call Option to redeem early such Notes in whole (but not in part) on such Interest Payment Date, which shall be the Issuer Call Redemption Date. Following the exercise by the Issuer of its Issuer Call Option in relation to a Series or Tranche of Notes, such Notes will be redeemed in whole at their principal amount plus accrued and unpaid interest thereon up to the relevant Issuer Call Redemption Date. Any exercise by the Issuer of an Issuer Call Option shall be irrevocable and the redemption of the relevant affected Notes following such exercise of such Issuer Call Option will occur as described above notwithstanding the occurrence of a Mandatory Redemption Event after the exercise of such Issuer Call Option. Following the exercise of an Issuer Call Option in respect of a Series or Tranche of Notes, no interest will be payable thereon after the Issuer Call Redemption Date since such Notes will be redeemed in whole (for A-3

7 further details and a description of the procedure for the redemption of Notes of any Series or Tranche in whole following the exercise of an Issuer Call Option, see the Applicable Pricing Statement). Additional Termination Events In respect of a Series of Notes, the Applicable Pricing Statement may provide that upon the occurrence of such other event or events as specified in the terms for such Notes, the Notes will redeem early. The redemption amount for the Notes following an Additional Termination Event will be provided in the terms of the Notes. Prospective investors to consider if the Notes are appropriate for them Prospective investors should read Part 1 of the Base Prospectus, the Supplementary Base Prospectuses, the Applicable Pricing Statement and any Applicable Annex specified in the Applicable Pricing Statement in respect of a Series of Notes carefully to determine if a particular Series or Tranche of Notes are a suitable investment for them and should not invest in such Notes if they do not fully understand all the features and risks of such Notes. Prospective investors in any Series or Tranche of Notes should therefore consult their own legal, tax, accountancy or other professional advisers to assist them to determine the suitability of such Notes for them as an investment. RISK DISCLOSURES Prior to making an investment decision, prospective investors should carefully consider the contents of the Applicable Pricing Statement, Part 1 of the Base Prospectus, the Supplementary Base Prospectuses and any Applicable Annex specified in the Applicable Pricing Statement in respect of a Series of Notes, in particular regarding the following matters. Prospective investors in a Series of Notes should note that any Applicable Annex in respect of such Notes should be read in conjunction with Part 1 of the Base Prospectus and the Supplementary Base Prospectuses, which contain important information in respect of the Programme and the Notes issued under the Programme, and the Applicable Pricing Statement, which contains information which is specific to such Series of Notes. In particular, prospective investors should carefully study the matters set out in the section headed Risk Factors in Part 1 of the Base Prospectus and any additional risk factors specified in the Applicable Pricing Statement and any Applicable Annex in respect of such Notes. Structured securities such as the Notes are sophisticated instruments and can involve a high degree of risk. Prospective investors however should be aware that the Applicable Pricing Statement, together with Part 1 of the Base Prospectus, the Supplementary Base Prospectuses and any Applicable Annex specified in the Applicable Pricing Statement in respect of a Series of Notes, can only disclose the most relevant risks and cannot disclose all the risks of the Notes. The information set out herein is included for the purpose of enabling prospective investors to make an informed assessment of the terms of the Notes, general risks of investing in the Notes and the capacity of the Issuer to fulfil its obligations under the Notes. No person should purchase or deal in the Notes unless they understand the nature of the transaction and the extent of their exposure to potential loss. Prospective investors in the Notes should therefore consult their own legal, tax, accountancy and other professional advisers to assist them to determine the suitability of the Notes for them as an investment. Notwithstanding its ability to understand and make independent decisions regarding investing in the Notes, by purchasing Notes, an investor in the Notes shall be treated by the Issuer as implicitly representing and warranting that he has assumed, and is willing to assume, the complexity and risks inherent in the Notes, regardless of whether or not he has disclosed the same to the Issuer. Suitability of the Notes The purchase of the Notes involves certain risks including market risk, credit risk and liquidity risk. Prospective investors should ensure that they understand the nature of all these risks before making a decision to invest in the Notes. The Base Prospectus, the Applicable Pricing Statement and any Applicable Annex specified in the Applicable Pricing Statement in respect of a Series of Notes are not and do not purport to be investment advice. Prospective investors should conduct such independent investigation and analysis regarding the Notes and the other assets on which the obligations of the Issuer under the Notes are secured as they deem appropriate. Prospective investors should make an investment only after they have determined that such investment is suitable for their financial investment objectives. Prospective investors should consider carefully whether the Notes are suitable for them in light of their experience, objectives, financial position and other relevant circumstances. A-4

8 Notes linked to shares and indices The Equity-Linked Notes are Notes with principal and/or interest determined by reference to the Reference Items. Prospective investors should be aware that: (a) depending on the terms of the Notes, they may lose all or a substantial portion of their principal; (b) the market price of such Notes may be very volatile; (c) depending on the terms of the Notes, they may receive no interest; (d) depending on the terms of the Notes, payment of principal or interest may occur at a different time or in a different currency than expected; (e) the price or level of a Reference Item may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices; (f) if a Reference Item is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Reference Item on principal or interest payable is likely to be magnified; and (g) the timing of changes in a Reference Item may affect the actual yield to investors, even if the average level is consistent with their expectations. Notes linked to a single share or index, or a basket of shares or indices are not ordinary debt securities The terms of certain Equity-Linked Notes differ from those of ordinary securities because such securities may not pay interest and at maturity may return less than the principal amount or nothing, or in the case of physically-settled Equity-Linked Notes, may return shares forming part or all of the Reference Item(s) for such Notes, the value of which is less than the principal amount, depending on the performance of the Reference Item. Prospective investors who consider purchasing the Notes should reach an investment decision only after carefully considering the suitability of the Notes in light of their particular circumstances. Except for the disclosure on any Reference Item in the Applicable Pricing Statement, neither the Issuer nor the Arranger has conducted or will be conducting independent investigations on the Reference Items in respect of (i) any legal or regulatory provisions which may materially affect the performance of the Reference Items, (ii) any significant representations and warranties made concerning any Reference Item, (iii) the nature and extent of any Reference Item s exposure to any other entity or risks and (iv) the material terms or agreements involving any Reference Item. None of the Issuer, its directors, the Arranger, the Swap Counterparty, the Agents nor any other person or persons on their behalf makes any representation or warranty, express or implied, as to any Reference Item or any information contained in any documents filed by any entity in relation to a Reference Item with any exchange or with any governmental entity regulating the offering or sale of securities. Prospective investors should conduct their own investigations and, in deciding whether or not to purchase Notes, prospective investors should form their own views of the merits of an investment linked to any Reference Item based upon such investigations and not in reliance on any information given in the Prospectus. Prospective investors should determine whether an investment in the Notes is appropriate in their particular circumstances and should consult with their legal, business and tax advisers to determine the consequences of an investment in the Notes and to arrive at their own evaluation of the investment. No affiliation with companies The company (a Company ) which issues any single share or share which is part of a basket of shares or the publisher (a Publisher ) of an underlying index or index which is part of a basket of indices, will not be an Affiliate of the Issuer or the Arranger, unless otherwise specified in the Applicable Pricing Statement. The Arranger or an Affiliate of the Arranger may presently or from time to time engage in business with any Company, or any Publisher, including entering into loans with, or making equity investments in, the Company, or Publisher, or its Affiliates or subsidiaries or providing investment advisory services to the Company, or Publisher, including merger and acquisition advisory services. Moreover, neither the Issuer nor the Arranger has any ability to control or predict the actions of the relevant Company or Publisher, including any actions, or reconstitution of index components, of the type that would require the Determination Agent to adjust the payout to the investor at maturity. No Company or Publisher in respect of any issuance of Notes is involved in the offering of the Notes in any way or has any obligation to consider the prospective investor s interest as an owner of the Notes in taking any corporate actions that might affect the value of the Notes. None of the money an investor pays for the Notes will go to the Company or Publisher in respect of such Notes. A-5

9 Discretion of the Determination Agent For the purposes of the Notes, the Determination Agent, acting for and on behalf of the Issuer, has the sole and absolute discretion to determine (amongst others) whether a Mandatory Redemption Event or Equity Termination Event (which, upon such determination, will give rise to a Mandatory Redemption Event) has occurred and in making calculations as described in the Equity Master Conditions and the Applicable Pricing Supplement. Although the Determination Agent has a general duty to act in good faith, the Equity Master Conditions do not impose any express contractual duty on the Determination Agent to do so and prospective investors should be aware that any decision made by the Determination Agent may have an unforeseen adverse impact on the financial return of the Notes. Any such discretion exercised by, or any calculation or determination made by the Determination Agent (in the absence of manifest error) shall be binding on the Issuer and all investors. Investors have no rights with respect to any Reference Item As an owner of Notes, an investor will not have voting rights or rights to receive dividends, interest or other distributions, as applicable, or any other rights with respect to any Reference Item which is a share. Conflicts of interest The Issuer and the Swap Counterparty and, as the case may be, the Forward Counterparty, will not be (nor be deemed to be acting as) the agent, fiduciary or trustee of the Noteholders in connection with the exercise of, or the failure to exercise, any of the rights or powers of the Issuer or, as the case may be, the Swap Counterparty and/or the Forward Counterparty or their Affiliates arising under or in connection with its holding (if any) of any interest in any share (or shares) which is a Reference Item. The Determination Agent does not have any fiduciary duty to the Noteholders or any other person. The Determination Agent may have certain conflicts of interest. The Determination Agent or its Affiliates may engage in business which may be in conflict with the Notes and/or any Reference Item. The Determination Agent or its Affiliates (i) may deal in any share (or shares) which is a Reference Item or any share (or shares) which comprises an index which is a Reference Item, (ii) may accept information from, make loans or otherwise extend credit to, and generally engage in any kind of commercial or investment banking or other business transactions (including derivatives transactions) with or with respect to, any Company or Publisher, or any investment manager or trustee relating to any share (or shares) which is a Reference Item, (iii) may have placed, underwritten, arranged or structured any share (or shares) which is Reference Item when such share (or shares) were originally issued and (iv) may act, with respect to transactions described in the preceding paragraphs (i), (ii) and (iii), in the same manner as if the Notes did not exist and without regard as to whether such action might have an adverse effect on the Notes, any Company or Publisher, any Reference Item, the Issuer or the Noteholders. Although the Determination Agent or its Affiliates may have entered into and may from time to time enter into business transactions with or with respect to any Company or Publisher, the Determination Agent or its Affiliates at any time may or may not hold obligations of or have any business relationship with any such Company or Publisher. Exchange rate risks On the Issue Date, the Issuer shall invest the proceeds received from the issue of the Notes in the purchase of a principal amount of assets denominated in the Base Currency equal to the total principal amount of the Notes. If there is a Mandatory Redemption Event or a redemption following an Event of Default, the redemption amount payable to the Noteholders will depend on the redemption or sale proceeds of the Underlying Assets, subject also in respect of a redemption of the Notes following a Mandatory Redemption Event or a redemption following an Event of Default to adjustment in respect of the Swap Settlement Amount, which includes any early termination amounts or close out payments under the Swap Agreement and, if applicable, the Forward Agreement. All such amounts and values will be determined on the basis of the Base Currency. The applicable Early Redemption Amount payable following a Mandatory Redemption Event or date of redemption in respect of an Event of Default will be paid to the Noteholders on a pro-rata basis on the relevant Early Redemption Date in the case of a Mandatory Redemption Event or the relevant date of redemption in the case of an Event of Default in the currency of denomination of the relevant Notes, calculated by converting such amounts and values in the Base Currency on the basis of the prevailing exchange rates on the date of such redemption of the Notes, as determined by the Determination Agent, acting for and on behalf of the Issuer, in the case of a Mandatory Redemption Event, or the Trustee, in the case of an Event of Default. Depending on the exchange rate determined by the Determination Agent, acting for and on behalf of the Issuer, or the Trustee, as the case may be, exchange rate risks may adversely impact the return of investment on the Notes. General Exchange Rate and Exchange Control Risks. An investment in a Note denominated in, or the payment of which is linked to the value of, currencies other than the investor s home currency entails significant risks. These risks A-6

10 include the possibility of significant changes in rates of exchange between its home currency and the other relevant currencies and the possibility of the imposition or modification of exchange controls by the relevant governmental authorities. These risks generally depend on economic and political events over which the Issuer has no control. Prospective investors should consult their financial and legal advisors as to any specific risks entailed by an investment in Notes that are denominated or payable in, or the payment of which is linked to the value of, a currency other than the currency of the country in which such prospective investor resides or in which such prospective investor conducts its business, which is referred to as their home currency. Such Notes are not appropriate investments for investors who are not sophisticated in foreign currency transactions. Exchange Rates Will Affect the Investor s Investment. In recent years, rates of exchange between some currencies have been highly volatile and this volatility may continue in the future. Fluctuations in any particular exchange rate that have occurred in the past are not necessarily indicative, however, of fluctuations that may occur during the term of any Note. Depreciation against the investor s home currency or the currency in which a Note is payable would result in a decrease in the effective yield of the Note below its coupon rate and could result in an overall loss to an investor on the basis of the investor s home currency. The Issuer Has No Control Over Exchange Rates. Currency exchange rates can either float or be fixed. Exchange rates of most economically developed nations are permitted to fluctuate in value relative to each other. However, from time to time governments may use a variety of techniques, such as intervention by a country s central bank, the imposition of regulatory controls or taxes, or changes in interest rate to influence the exchange rates of their currencies. Governments may also issue a new currency to replace an existing currency or alter the exchange rate or relative exchange characteristics by a devaluation or revaluation of a currency. These governmental actions could change or interfere with currency valuations and currency fluctuations that would otherwise occur in response to economic forces, as well as in response to the movement of currencies across borders. The Issuer will not make any adjustment or change in the terms of the Notes in the event that exchange rates should become fixed, or in the event of any devaluation or revaluation or imposition of exchange or other regulatory controls or taxes, or in the event of other developments affecting any currency. The investor will bear those risks. Rating Unless otherwise specified in the Applicable Pricing Statement, the Notes will not have the benefit of a credit rating. The value of Notes linked to a single share or index, or to a basket of shares or indices may be influenced by unpredictable factors The value of Equity-Linked Notes may be influenced by several factors beyond the Issuer s control, including (but not limited to): (i) the market price or value of the applicable Reference Item, (ii) the volatility (frequency and magnitude of changes in price) of the Reference Item, (iii) the dividend rate on any share (or shares) which is a Reference Item, (iv) geopolitical conditions and economic, financial and political, regulatory or judicial events that affect stock markets generally and which may affect the market price of the applicable Reference Item, (v) interest and yield rates in the market, (vi) the time remaining to the maturity of the Notes, and (vii) the value of the Underlying Assets (see the paragraph headed Limited Recourse and Non-Petition in the section headed Risk Factors in Part 1 of the Base Prospectus for further details). Some or all of these factors may influence the price an investor will receive if such investor sells its Notes prior to maturity. Physical Settlement of Notes The Applicable Pricing Supplement will provide whether the Notes will or may be redeemed by physical settlement. When such Notes are redeemed by physical settlement, the Issuer will not redeem the Notes by paying the Noteholders a cash amount, but will instead deliver to the Noteholders the shares which are Reference Items as specified in the Applicable Pricing Supplement. There is no guarantee that there will be any market or liquidity in relation to such shares or if Noteholders would be able to dispose or realise such shares for an amount equivalent to the principal amount of the Notes. Therefore, if the Notes are redeemed by physical settlement, Noteholders may upon realization of such shares receive less cash than if the Notes are redeemed by cash settlement. Redemption of Notes following an Event of Default The Issuer will have to redeem the Notes early if an Enforcement Notice is given upon the occurrence of an Event of Default under the Notes. Condition 11(a) of the Equity Master Conditions (as varied or amended in the Applicable Pricing Supplement) sets out the events which constitute an Event of Default. If the Notes are redeemed following an A-7

11 Event of Default, the Security constituted by the Security Documents will become enforceable and the Trustee shall have the right to enforce its rights under the Security Documents in relation to the Charged Assets in relation to the relevant Series of Notes. In such a case, the amount the Issuer will be able to pay back on the Notes will likely be less, and could be significantly less, than the principal amount of the Notes. Accordingly, it is possible that investors could lose all of their investment. MASTER CONDITIONS FOR EQUITY-LINKED NOTES The following is the text of the Equity Master Conditions which (subject to completion and amendment and as supplemented or varied in accordance with the provisions of the relevant Applicable Pricing Supplement (as defined below) and, save for the italicised text (other than sub-headings)) will be incorporated by reference into each Global Note representing Notes in bearer form and Notes in definitive form (if any) issued in exchange for the Global Note(s) representing Notes in bearer form (only if such incorporation by reference is agreed by the Issuer), in each case in respect of Equity-Linked Notes. If such incorporation by reference is not so agreed, each such Note in bearer form and each Registered Note Certificate representing such Notes in registered form will have endorsed thereon or attached thereto such text (as so completed, amended, varied or supplemented). Further information with respect to each such Series of Notes will be given in Part 1 of the Base Prospectus, the Supplementary Base Prospectuses and the Applicable Pricing Statement. The Applicable Pricing Statement will contain the Applicable Pricing Supplement which will provide for those aspects of these Equity Master Conditions which are applicable to those Notes. Terms used in the Applicable Pricing Supplement and not otherwise defined in these Equity Master Conditions shall have the same meanings where used in these Equity Master Conditions. The absence of any such term indicating that such term is not applicable to the Notes and references to a matter being specified means as the same may be specified in the Applicable Pricing Supplement. The Notes (as defined in Condition 1(a) below) are constituted and secured by a principal trust deed dated 7 August 2006 (as amended or supplemented from time to time, the Principal Trust Deed ) by which the issuer and HSBC Institutional Trust Services (Singapore) Limited, (respectively the Issuer and the Trustee which expression shall include all persons for the time being the trustee or trustees in respect of the Notes under the Trust Deed referred to below and shall mean, in relation to any Series of Notes, the persons identified in the relevant Supplemental Trust Deed as the trustee for that Series) are bound (either as original parties thereto or by accession and/or other agreement), as supplemented in relation to the Notes by a supplemental trust deed (as amended or supplemented from time to time, the Supplemental Trust Deed ) dated the Issue Date (as defined in Condition 6(l) below), between the Issuer, the Trustee and the other parties named therein (the Principal Trust Deed and such Supplemental Trust Deed being referred to herein as the Trust Deed ). The Notes will have the benefit (to the extent applicable) of an agency agreement dated 7 August 2006 (as amended or supplemented from time to time, the Agency Agreement ) by which the Issuer, the Trustee, The Hongkong and Shanghai Banking Corporation Limited (the Principal Paying Agent, which expression shall include any successor to The Hongkong and Shanghai Banking Corporation Limited in its capacity as such), The Hongkong and Shanghai Banking Corporation Limited (the Custodian, which expression includes any successor to The Hongkong and Shanghai Banking Corporation Limited in its capacity as such and any other custodian appointed in connection with any Notes), the Calculation Agent, the Settlement Agent, the Determination Agent and the Registrar (in the case of Registered Notes) are bound (either as original parties thereto or by accession and/or other agreement). As used herein, Calculation Agent, Settlement Agent, Determination Agent, Principal Paying Agent, Custodian, and/or Registrar means, in relation to the Notes, the person specified in the Applicable Pricing Supplement relating to the Notes as the Calculation Agent, the Settlement Agent, the Determination Agent, Principal Paying Agent, Custodian and/or Registrar, respectively and, in each case, any successor to such person in such capacity (collectively the Agents ). In respect of any Series the Issuer may appoint any financial institution to act as custodian or, as the case may be, sub-custodian in relation to that Series. The Applicable Pricing Supplement relating to each Series or Tranche, as the case may be, of Notes will be endorsed upon or attached to the Notes and will supplement these terms and conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these terms and conditions, replace or modify these terms and conditions for the purpose of the Notes. The Issuer will also enter into, in relation to a Series of Notes, the Applicable Pricing Supplement(s), a Supplemental Trust Deed and other documents to give effect to the arrangements contemplated in respect of such Series of Notes. Certain statements in the Equity Master Conditions are summaries of the detailed provisions appearing on the face of the Notes (which expression shall include the body thereof), in the Applicable Pricing Supplement, the Trust Deed A-8