MERRILL LYNCH & CO., INC. (Incorporated under the laws of the State of Delaware, U.S.A.)

Transcription

1 Final Terms dated 25 June 2008 MERRILL LYNCH & CO., INC. (Incorporated under the laws of the State of Delaware, U.S.A.) Issue of up to EUR 100,000,000 Fixed Rate and Inflation Index Linked Interest Note due July 2011 under the U.S.$110,000,000,000 Euro-Medium Term Note Program PART A CONTRACTUAL TERMS Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions (the Conditions ) set forth in the Base Prospectus dated April 1, 2008 and supplemented from time to time which together constitute a base prospectus for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the Prospectus Directive ). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with such Base Prospectus as so supplemented. Full information on the Company and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Base Prospectus as supplemented. The Base Prospectus and the supplemental prospectus and these Final Terms are available for viewing during normal office hours at the office of the Agent in London and copies may be obtained from the principal office of the Company. 1. Issuer: Merrill Lynch & Co., Inc. (the Company ) 2. (i) Series Number: 6856 (ii) Tranche Number: 1 Specified Currency or Currencies (in the case of Dual Currency Notes): Euro ( EUR ) 4. Aggregate Principal Amount: Up to EUR 100,000,000 (i) Series: Up to EUR 100,000,000 (ii) Tranche: Up to EUR 100,000, Issue Price: 100 per cent. of the Aggregate Principal Amount 6. Specified Denominations: EUR 1, (i) Issue Date: 30 July, 2008 (ii) Interest Commencement Date: 30 July, Maturity Date: 30 July Interest Basis: Fixed Rate and Inflation Index Linked (further particulars specified below in paragraphs 15 and 21). 10. Redemption/Payment Basis: At par 11. Change of Interest or Redemption/Payment Basis: Applicable to Interest Basis only (a) For the Fixed Interest Period from (and including) the Interest Commencement Date up to (but excluding) 30 July 2009, the Notes shall bear interest on a fixed rate interest basis; and 1

2 (b) For each Interest Period in the period from (and including) 30 July, 2009 up to (but excluding) the Maturity Date (the Index Linked Period ) the Notes shall bear interest on an index linked interest basis. 12. Put/Call Options: 13. Status of the Notes: The Notes will constitute direct, unsecured, unsubordinated and general obligations of the Company and will, save for such exceptions as may be provided by applicable legislation or judicial order, rank pari passu with all other unsecured and unsubordinated indebtedness of the Company. 14. Method of distribution: Non-syndicated PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 15. Fixed Rate Note Provisions: Applicable (i) Fixed Rate (s) of Interest: (ii) Fixed Interest Date(s): 30 July 2009 (iii) Fixed Coupon Amounts: EUR 60 in respect of each Note of Specified Denomination. (iv) Initial/Broken Amounts(s): (v) Fixed Day Count Fraction 30/360 (vi) Determination Date(s): (vii) Other items relating to the method of calculating the interest for Fixed Rate Notes (viii) Additional Business Centre: 16. Floating Rate Note Provisions: 17. Zero Coupon Note Provisions: 18. Dual Currency Note Provisions: 19. Credit Linked Note Provisions: 20. Equity Linked Interest Note Provisions: 21. Index Linked Interest Note Provisions: Applicable (i) Calculation Agent responsible for calculating the interest payable: Merrill Lynch International The Calculation Agent shall act as an independent expert and not as an agent for the Company or the Noteholders. All certificates, communications, opinions, UK v.1 2

3 determinations, calculations, quotations and decisions given, expressed, made or obtained by the Calculation Agent shall, in the absence of manifest error, wilful default or bad faith, be final and conclusive and binding on the Company, the Calculation Agent, the Paying Agents and all Noteholders and Couponholders. In the absence of the aforesaid manifest error, wilful default or bad faith, no liability to the Noteholders, Couponholders, the Company, or the Paying Agents shall attach to the Calculation Agent in connection with the exercise nonexercise by it of its powers, duties and or discretions pursuant to the Conditions in relation to such determinations. (ii) Rate of Interest: (a) Each Note shall bear interest on its principal amount and such interest will be payable annually in arrear on each Interest Payment Date in respect of each Interest Period (which expression shall, in these Final Terms, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date). (b) The Calculation Agent will, on each Interest Determination Date determine the Rate of Interest payable in respect of each Note on the basis of the following formula: 200% * Annual Inflation (c) Promptly after determining the Interest Amount payable in respect of any Interest Payment Date, the Calculation Agent shall notify the Company, the Agent and the Noteholders in accordance with Condition 15 (Notices) thereof. (iii) Interest Amount Specified Denomination * Rate of Interest * Day Count Fraction (rounding the resultant figure to the nearest cent, half a cent being rounded upwards), subject in each case to the Minimum Rate of Interest specified in item 18(vii). (iv) Interest Period(s)/Interest Payment Dates: 30 July in each year from (and including) 30 July 2010 up to (and including) the Maturity UK v.1 3

4 (v) Business Day Convention: There will be no adjustment to Interest Period End dates. Date. (vi) Additional Business Centre(s): (vii) Minimum Rate of Interest: Zero per cent. per annum (viii) Maximum Rate of Interest: (ix) Day Count Fraction: 30/360 (x) Averaging: Not applicable (xi) Initial Valuation Date: (xii) Valuation Date: Each Interest Determination Date being the day falling five (5) Business Days prior to the commencement of each Interest Period. (xiii) Valuation Time: (xiv) Index/Basket of Indices: "Index" means the HICP published by the HICP Sponsor. "HICP" means the Eurostat Harmonised Index of Consumer Prices (excluding Tobacco) for the eurozone as calculated and published (unrevised) monthly in the Eurostat monthly bulletin (Bloomberg ticker: CPTFEMU), as further described in Schedule 2 (Information Regarding the Index). (xv) Exchange(s), Index Sponsor and whether Index is a Designated Multi-Exchange Indices: "HICP Sponsor" means the Statistical Office of the European Commission (Eurostat), and any agent or other person acting from time to time on behalf of such person; (xvi) Related Exchange(s): (xvii) Exchange Business Day: (xviii) Basket Performance: (xix) Disrupted Day: (xx) Weighting: (xxi) Trade Date: 24 July 2008 (xxii) Additional Disruption Events: (xxiii) Other terms or special conditions: "Annual Inflation" means, in respect of each Interest Determination Date, an amount expressed as a percentage rate per annum (rounded to the nearest per cent.) determined by the Calculation Agent in accordance with the following formula: UK v.1 4

5 (CPI 2 CPI 1 ) / CPI 1 Where: Business Day means a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and which is a Target Day. "CPI 1 " means the Index Level as published by the HICP Sponsor for the month falling twenty seven (27) calendar months prior to the relevant Interest Payment Date; "CPI 2 " means the Index Level as published by the HICP Sponsor for the month falling fifteen (15) calendar months prior to the relevant Interest Payment Date; "Index Level" means the level of the Index as published by the HICP Sponsor; Adjustments relating to the Index (a) If at the time for calculation of CPI 1 or CPI 2, the HICP is: (i) not calculated and announced by the HICP Sponsor but is calculated and published by a successor to the HICP Sponsor (the "Successor HICP Sponsor") acceptable to the Calculation Agent; or (ii) replaced by a successor index using, in the determination of the Calculation Agent, the same or a substantially similar formula for, and method of, calculation as used in the calculation of the HICP; or (iii) not in existence but the Calculation Agent considers there to be an alternative index which, if substituted for the HICP, would materially preserve the economic equivalent of the rights of the Noteholders under the Notes immediately prior to such substitution, then the HICP shall be deemed to be the index so calculated and published by the Successor HICP Sponsor or that successor or alternative index, as the case may be. (b) If by the fifth (5 th ) Business Day prior to the relevant Interest Determination Date there is no Successor HICP Sponsor or successor or alternative index available, the Calculation Agent shall take all reasonable measures to determine Annual Inflation using, in lieu of a published Index Level, a level UK v.1 5

6 for the Index as determined by the Calculation Agent in good faith and in a commercially reasonable manner, which may (but is not required to) include the use of the most recently available Index Level prior to the relevant event. (c) For the purpose of calculating Annual Inflation, the first publication of the appropriate Index Level for the Annual Inflation calculation (excluding estimates) by the HICP Sponsor shall be final. (d) Subject only to sub-paragraph (e) below, any subsequent revision of any released Index Level shall be disregarded for the purposes of determining the Index Level for any given Interest Determination Date. (e) In the event that the Index Level for any calculation of Annual Inflation is subject to a modification of its base, the Calculation Agent may make such adjustments (if any) that it deems necessary to the past fixing of the Index Level to reflect such modification. 22. Fund Linked Interest Note Provisions: PROVISIONS RELATING TO REDEMPTION 23. Company's Optional Redemption: 24. Redemption at the option of the Noteholders: 25. Final Redemption Amount: per cent. of the Aggregate Principal Amount of the Notes 26. Early Redemption Amount(s) of each Note payable on redemption for taxation reasons or, upon the other circumstances described in Condition 8 or upon acceleration of the Notes pursuant to Condition 12 and/or the method of calculating the same (if required or if different from that set out in Condition 4(f)): Condition 4(f) shall not apply. If the Notes are redeemed for, as a result of or following: (a) taxation reasons (pursuant to Condition 4(b) or Condition 8); or (b) the occurrence of a Regulatory Redemption Event (as defined in Condition 4(m) (as set out in the Schedule 1 (Special Condition) hereto)); or (c) an acceleration of the Notes (pursuant to Condition 12), the Early Redemption Amount payable in respect of each Note of a Specified Denomination will, in each case, equal the Calculation Agent s determination of the market value of each Note taking into account factors UK v.1 6

7 including but not limited to: interest rates, index levels, implied volatilities in the option markets and exchange rates, less the Associated Costs (as defined below). "Associated Costs" means an amount per Note of a Specified Denomination equal to the pro rata share (on the basis of the principal amount of the Note and the aggregate principal amount of all Notes which have not been redeemed or cancelled as the date on which Early Redemption Amount will be paid) of the total amount of any and all costs associated or incurred by the Company or any company affiliated with it in connection with such early redemption, including, without limitation, any costs associated with unwinding the funding relating to the Notes and any costs associated with unwinding any hedge positions relating to the Notes, all as determined by the Calculation Agent in its sole discretion. 27. Issuer Cash Settlement Amount: PROVISIONS RELATING TO PHYSICAL DELIVERY NOTES 28. Provisions relating to Physical Delivery: GENERAL PROVISIONS APPLICABLE TO THE NOTES 29. Form of Notes: (i) Classic Global Note or New Global Note: Classic Global Note (ii) Bearer Notes: The Notes will be Bearer Notes and will initially be represented by a temporary global Note in bearer form, without interest coupons attached, which will be deposited with a common depositary for Euroclear Bank S.A./N.V. ( Euroclear ) and Clearstream Banking, société anonyme ( Clearstream, Luxembourg ) on or about the Issue Date. Interests in the temporary global Note will be exchangeable for interests in a permanent global Note, without interest coupons attached, on a date (the Exchange Date ) not earlier than 40 days after the closing date upon appropriate certification as to non-u.s. beneficial ownership. The permanent global Note will be exchangeable in whole, but not in part, for definitive Notes in bearer form in denominations of EUR 1,000 each with interest coupons attached upon 60 days written notice expiring at least 30 days after the Exchange Date. Interests in the permanent global Note will not be exchangeable for Notes in registered form. UK v.1 7

8 (iii) Registered Notes: (iv) Registered Short-term Notes: 30. Additional Financial Centre(s) or other special provisions relating to Payment Business Day: 31. Talons for future Coupons or Receipts to be attached to definitive Notes in bearer form (and dates on which such Talons mature): 32. Details relating to Partly Paid Notes: amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences (if any) of failure to pay, including any right of the Company to forfeit the Notes and interest due on late payment: Condition 5(c)(ii) applies No 33. Details relating to Installment Notes: (i) Installment Amount(s): (ii) Installment Date(s): 34. Redenomination, renominalisation and reconventioning provisions: 35. Other terms or specified conditions: 36. Further issue provisions: Condition 16 applies. If the Company issues further Notes of the same Series during the initial 40-day restricted period applicable to the outstanding Notes of such Series, then such 40-day period will be extended until 40 days after the later of the commencement of the offering and the Issue Date of such further issue of Notes. In addition, if the Company issues further Notes of the same Series after the expiration of the 40-day restricted period, a new 40-day restricted period will be applied to such further issue of Notes without applying to the outstanding Notes. After the expiration of the new 40-day restricted period, all such Notes will be consolidated and form a single Series with the outstanding Notes. 37. Details relating to Notes that are payable and/or for which the obligations of the Company may be discharged by the delivery of securities and/or other property or any combination of cash, securities and/or other property where the provisions relating to such Notes amend and/or supplement the Physical Delivery Note Conditions: DISTRIBUTION 38. (i) If syndicated, names and addresses of Dealers and respective underwriting commitments: (ii) Stabilizing Manager (if any): UK v.1 8

9 39. If non-syndicated, name and address of Relevant Dealer: Merrill Lynch International 40. Name and address of Distributors/Placers: The Notes will be publicly offered through distributors to be appointed by the Dealer during the Offer Period (the Distributors ). 41. Total commission and concession: In connection with the distribution of Notes during the Offer Period, the Distributor will realise a placing commission of between 1.75 per cent and 2.25 per cent. of the notional amount of Notes placed by the Distributor and allocated and issued by the Issuer. 42. Non-exempt offer: An offer of the Notes may be made by Distributors in Italy (the "Public Offer Jurisdiction") other than pursuant to Article 3(2) of the Prospectus Directive, during the Offer Period (as defined below). Copies of the Final Terms will be provided to the competent authorities in the Public Offer Jurisdiction. See further Part B, Item 9 in relation to Nonexempt offers. For the avoidance of doubt, Merrill Lynch International will not act as a distributor. 43. Additional selling restrictions: Republic of Italy To the extent that the Notes have not been registered, and until the offering of the Notes has been registered (see further Paragraph 9 of Part B below) pursuant to Italian securities legislation, no Notes may be offered, sold or delivered, nor may copies of the Final Terms or of any other document relating to the Notes be distributed in the Republic of Italy, except: (i) to qualified investors (investitori qualificati), as defined in Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the Financial Services Act) and the relevant implementing CONSOB regulations, as amended from time to time, and in Article 2 of Directive No. 2003/71/EC of 4 November 2003; or (ii) in other circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of the Financial Services Act and Article 33, first paragraph, of CONSOB Regulation No of 14 May 1999, as amended (Regulation No ). Any offer, sale or delivery of the Notes or distribution of copies of the Final Terms or any other document relating to the Notes in the Republic of Italy under (i) or (ii) above must be: UK v.1 9

10 (a) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No of 29 October 2007 (as amended from time to time) and Legislative Decree No. 385 of 1 September 1993, as amended (the Banking Act); and (b) in compliance with Article 129 of the Banking Act, as amended, and the implementing guidelines of the Bank of Italy, as amended from time to time, pursuant to which the Bank of Italy may request information on the issue or the offer of securities in the Republic of Italy; and (c) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or other Italian authority. UK v.1 10

11 PURPOSE OF FINAL TERMS These Final Terms comprise the final terms required for issue and public offer in the countries specified in Part A, Item 42 and admission to trading on the London Stock Exchange of the Notes described herein pursuant to the Company s U.S.$110,000,000,000 Euro Medium Term Note Program. RESPONSIBILITY The Company accepts responsibility for the information contained in these Final Terms. Information regarding the Index has been extracted from Bloomberg Financial Systems. The Company confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from the information published by Bloomberg Financial Systems, no facts have been omitted which would render the reproduced inaccurate or misleading. Signed on behalf of the Company: By: Name: Title: UK v.1 11

12 PART B OTHER INFORMATION 1. LISTINGS: (i) Listing: Application will be made for the Notes to be admitted to the Official List of the UK Listing Authority. (ii) Admission to trading: Application will be made for the Notes to be admitted to trading on the London Stock Exchange s Regulated Market with effect from or about the Issue Date. 2. RATINGS Ratings: The Notes will be issued under the Program, which has been rated: S&P: A/A-1. An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories such as AAA and AA. However, the obligor s capacity to meet its financial commitment on the obligation is still strong. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. A short-term obligation rated A-1 is rated in the highest category by S&P. The obligor s capacity to meet its financial commitment on the obligation is strong. R&I: AA-. An obligation rated AA is judged to be of very high credit quality and accompanied by excellent factors. A plus (+) or minus (-) sign may be added to ratings symbols within a range from AA to CCC to indicate their relative standing within each category. Moody s: A1. Obligations rated A are considered upper-medium grade and are subject to low credit risk. Moody s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Fitch: A+. A ratings denote expectations of low credit risk. They indicate strong capacity for payment of financial commitments. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings such as AAA or AA. The modifiers + or - may be appended to a rating to denote relative status within major rating categories. The information regarding ratings above has been extracted from the websites of Fitch Ratings ( Fitch ), Moody s Investors Service, Inc. ( Moody s ), Ratings UK v.1 12

13 and Investment Information, Inc. ( R&I ) and Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ) as applicable. The Company confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from information published by Fitch, Moody s, R&I and S&P, no facts have been omitted which would render the reproduced inaccurate or misleading. 3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE/OFFER Save as discussed in Subscription and Sale, so far as the Issuer is aware, no person involved in the offer of the Notes has an interest material to the offer. 4. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES (i) Reasons for the offer: The Company intends to use the net proceeds from the sale of the Notes for its general corporate purposes. Such general corporate purposes may include the funding of investments in, or extensions of credit to, its subsidiaries, the funding of assets of the Company and its subsidiaries, the lengthening of the average maturity of the Company s borrowings, and the financing of acquisitions. Pending such applications, the net proceeds will be applied to the reduction of short-term indebtedness or temporarily invested. Management of the Company expects that it will, on a recurrent basis, engage in additional financings as the need arises to finance the growth of the Company, through acquisitions or otherwise, or to lengthen the average maturity of its borrowings. To the extent that Notes being purchased for resale by Merrill Lynch International are not resold, the aggregate proceeds available to the Company and its subsidiaries on a consolidated basis would be reduced. (ii) Estimated net proceeds: Up to EUR 100,000,000. For the avoidance of doubt, the estimated net proceeds reflect the proceeds to be received by the Company on the Issue Date. It is not a reflection of the fees payable by/to the Dealer or the Distributors, which are dealt with separately in item 41 of Part of these Final Terms. 5. Yield Indication of yield: 6.00 per cent per annum for the Fixed Rate Period only As set out above, the yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield. 6. HISTORIC INTEREST RATES 7. PERFORMANCE OF INDEX/SHARE/FUND/FORMULA/OTHER VARIABLE, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT AND ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING THE UNDERLYING 13

14 Certain historical information in respect of the Index to which the Interest Amounts payable in respect of the Notes will be linked and associated risks can be found in Schedule PERFORMANCE OF RATE[S] OF EXCHANGE AND EXPLANATION OF EFFECT ON VALUE OF INVESTMENT 9. INFORMATION IN RESPECT OF PUBLIC OFFERS OF NOTES Applicable The Notes will be offered to the public in Italy (the Public Offer Jurisdiction ) in accordance with the arrangements listed below. (i) (ii) Categories of potential investors to which Notes are offered: Arrangements for publication of final size of issue/offer: Offers or solicitations may be made by the Distributors in the Public Offer Jurisdiction for the period set out in (iii) below to any person. No offer or solicitation in respect of the Notes shall be made by the Distributors except pursuant to an exemption from the obligation under the Prospectus Directive as implemented in such countries to publish a prospectus (a) any other EEA country or (b) after the period set out in (iii) below has ended. A notice (or amended and restated final terms) pursuant to UK Prospectus Rule 2.3.2(2) of the final aggregate principal amount of the Notes will be sent to the document viewing facility of the Financial Services Authority in the UK and published on or about the Issue Date in accordance with the method of publication set out in UK Prospectus Rule (iii) Time period, including any possible amendments, during which the offer will be open: From and including June 25, 2008 (or such later date as all requirements of the Public Offer Jurisdiction to commence a public offer have been satisfied) up to and including July 25, 2008, during the hours in which banks are generally open for business in Milan, Italy (the "Offer Period"). In the case of contracts entered into door-to-door or through the use of distance marketing techniques, from and including June 25, 2008 to and including July 18, (iv) Conditions to which the offer is subject: Offering of the Notes is conditional on their issue and are subject to such conditions as set out in distribution arrangements in place between the Company, the Dealer and the Distributors. The Company reserves the right not to issue the Notes. As between the applicable Distributor and its customers (including Placers), offers of the Notes are further subject to such conditions as may be agreed between them and/or as is specified in any arrangements in place between them. (v) Description of application process: A prospective Noteholder should contact a Distributor prior to the end of the Offer Period. A prospective Noteholder will subscribe for the Notes in accordance with the arrangements existing between such Distributor and its customers relating to the subscription of securities generally. Noteholders will not be required to enter into any contractual 14

15 arrangements directly with the Company or the Dealer related to the subscription for the Notes. If an investor in any jurisdiction other than the Public Offer Jurisdiction wishes to purchase Notes, such investor should (a) be aware that sales in the relevant jurisdiction may not be permitted; and (b) contact its financial advisor, bank or financial intermediary for more information. The Final Terms may only be used in connection with and within the terms of this offer to the public. It does not authorise, and may not be used by a Distributor or any other party in connection with, the subsequent offer or sale of any Notes outside the terms of the offer or the Offer Period. With the exception of the Public Offer Jurisdiction, no action has been or will be taken in any jurisdiction, by the Issuer that would permit a public offering of the Notes, or possession or distribution of any offering material in connection with the issue of the Notes, in any country or jurisdiction where action for that purpose is required. The Distributors must comply with all applicable laws and regulations of the Public Offer Jurisdiction in connection with the offer and sale of Notes at its own expense. (vi) Description of possibility to reduce subscriptions and the manner for refunding excess amounts paid by applicants: (vii) Details of the minimum/maximum amount of application (whether in numbers of securities or aggregate amount to invest): (viii) Details of method and time limits for paying up the securities and for delivery of the Notes: (ix) Full details of the manner and date on which results of the offer are to be made public: All of the Notes requested by the Distributors during the Offer Period will be assigned until reaching the maximum amount of the offer destined to prospective Noteholders. In the event that during the Offer Period the requests exceed the amount of the offer destined to prospective Noteholders, equal to up to the amount of 100,000,000, the acceptance of further requests will be immediately suspended. Upon the close of the Offer Period, in the event that, notwithstanding the above, more than the maximum amount of the Notes is subscribed, each Distributor will notify potential investors of the amount of the Notes to be assigned. Each Distributor will adopt allotment criteria that ensure equal treatment of potential investors. There are no pre-identified allotment criteria. The Dealer will adopt allotment criteria that ensure equal treatment of prospective investors. For the avoidance of doubt, no dealings in the Notes may take place prior to the Issue Date. The Notes will be sold on a delivery versus payment basis on the Issue Date. As set forth under item 9(ii) of Part B of these Final Terms. (x) Procedure for the exercise of any right of pre-emption, the negotiability of subscription rights and the treatment of 15

16 subscription rights not exercised: (xi) Indication of the expected price at which the Notes will be offered or the method of determining the price and the process for its disclosure: (xii) Process for notification to applicants of the amount of Notes allotted and indication whether dealing may begin before notification is made: The Notes will be publicly offered through the Distributors (as defined herein) to investors in the Public Offer Jurisdiction at an amount of per cent. of their Aggregate Principal Amount. As set forth under item 9(vi) of Part B of these Final Terms. A prospective Noteholder will, on the Issue Date, receive per cent. of the amount of Notes allocated to it during the Offer Period. (xiii) Details of any tranche(s) reserved for specific country: (xiv) Amounts of any expenses and taxes specifically charged to the subscriber or purchaser: (xv) Additional information applicable to the terms and conditions of the offer, if any: 10. OPERATIONAL INFORMATION ISIN Code: XS Common Code: Any clearing system(s) other than Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme, and the relevant identification number(s): Delivery: Intended to be held in a manner which would allow Eurosystem eligibility: Names and addresses of initial Paying Agent(s): Names and addresses of additional Paying Agent(s) if any: Governing Law: Additional investment considerations: Delivery against payment No New York. 16

17 SCHEDULE 1 SPECIAL CONDITION The following paragraph shall be added to the Terms and Conditions of the Notes as a new Condition 4(m): "(m) Redemption for Regulatory Reasons: The Company may, at any time, on not less than 10 Business Days irrevocable notice to the Noteholders in accordance with Condition 15, redeem all but not some only, of the Notes in the event that a change in applicable law or regulation occurs that results, or will result, solely by reason of the Notes being outstanding, in the Company being required to be regulated by any additional jurisdiction or regulatory authority, or being subject to any additional legal requirement or regulation considered by the Company to be materially onerous to it (each such change, a "Regulatory Redemption Event"). The Company will redeem the Notes at the Early Redemption Amount on the date specified in such notice, being a date falling not more than 10 clear Business Days after the date that such notice is given." 17

18 SCHEDULE 2 INFORMATION REGARDING THE INDEX The information contained in this Schedule relating to the HICP consists of extracts from, or summaries of, information released publicly by the HICP Sponsor. The Company confirms that such information has been accurately reproduced and, as far as the Company is aware and is able to ascertain from information published by the HICP Sponsor, no facts have been omitted which would render the reproduced information inaccurate or mis-leading. Neither the Company nor the Dealers accept any further responsibility in respect of such information. See the legend appearing at the end of this Appendix for important information regarding the information set forth herein. 1. General The Index is the eurozone Harmonised Index of Consumer Prices (ex tobacco) (the "HICP"), as calculated by Eurostat, the HICP Sponsor, and published on the Eurostat section of the European Commission website ( The HICP measures the level of prices for market goods and services consumed by households in the eurozone. The eurozone HICP is the aggregate of the member states' harmonised consumer price indices, and the eurozone is considered as an entity regardless of the elements of which it is composed. Each member state first publishes its own harmonised consumer price index in conjunction with its own consumer price index ("CPI"). Following each member state's publication of its CPI, Eurostat aggregates these and publishes the HICP for the eurozone, as well as a breakdown of the HICP by item and by country. In year "N", each member state's weight in the eurozone HICP equals the share that such member state's final household consumption constitutes within that of the eurozone as a whole for the year "N-2". These weights are re-estimated every year in the January publication of the eurozone HICP. The HICP is said to be harmonised because the methodology and nomenclatures for the index of prices are the same for all of the member states in the eurozone and the European Union (this is required by Article 121 of the Treaty of Amsterdam (and Article 109j of the Treaty on European Union) and Council Regulation (EC) No. 2494/95). This makes it possible to compare inflation among different member states of the European Union. Emphasis is placed on the quality and comparability of the various countries' indices. The HICP is calculated as an annual chained-index, which makes it possible to change the weights every year. This also makes it easy to integrate new entrants, as in the case of Greece in January If a new entrant is integrated in the year "N", it is included in the eurozone HICP starting from January of year "N". The new member state's weight is included in the annual revaluation of the HICP. 2. Coverage The HICP covers almost all eurozone household consumption (99.1% of the theoretical coverage). The principal difference from national harmonised consumer price indices lies in the treatment of health spending. Thus, for example, the French CPI Index covers all health spending whether or not it is reimbursed by Social Security, whereas the HICP covers only health spending that is not repaid by Social Security. As a result, France's health spending constitutes 9.0% of its CPI Index and only 3.2% of HICP. 3. Release date The HICP ex-tobacco is published every month on Eurostat's internet site, according to a pre-determined official timetable. The internet site of Eurostat is Publication generally occurs around the 16 th -18 th of the following month (for example, the March HICP is published around April 16 th -18 th ). If a revision is made, it is published with the HICP of the following month. Unlike the French CPI, no provisional estimates of the eurozone HICP are published. 4. The media through which the index is made public The series of unrevised eurozone HICP ex-tobacco is published on the website of the Eurostat section of the European Commission website ( it is updated after each publication of a new HICP by Eurostat. It is also available on Bloomberg screen page "CPTFEMU <Index>". The daily inflation reference, calculated by linear interpolation of the two latest monthly inflation indices published by Eurostat, will always be available through major international information networks. 5. Base year changes 18

19 In Europe, the national statistics institutes change the base year of their price indices every 5 to 10 years. This procedure is necessary to ensure that the index follows changes in the consumption pattern through a new consumer spending nomenclature. The resetting of the base generally accompanies changes in the definition of household consumption that occur when the national accounting system is modified. The index value for the year in which the new base is introduced is set at 100. Eurostat has not yet changed the HICP's base, since its base is still recent (100=2005). A new base, however, is expected to be introduced in the next few years. A base year change entails resetting the base for daily inflation references, but it does not affect the indexation coefficient. 6. Historical Performance Monthly Levels of the Harmonised Index Of Consumer Prices (excluding tobacco) for the European Monetary Union Year / Month Level (2005=100) 2005 January February March April May June July August September October November December January February March April May June July August September October November December January February March April May June July August September October November December January February March April May

20 Source: Bloomberg; page CPTFEMU <Index>. HICP SPONSOR DISCLAIMER THE NOTES ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE HICP SPONSOR. THE HICP SPONSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE BENEFICIAL OWNERS OF THE NOTES OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR THE NOTES PARTICULARLY. THE HICP SPONSOR IS NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES OF OR QUANTITIES OF THE NOTES TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE NOTES ARE TO BE CONVERTED INTO CASH. THE HICP SPONSOR HAS NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE NOTES. 20

21 SCHEDULE 3 TAXATION IN ITALY The following is a summary of current Italian law and practise relating to the direct taxation of the Notes. The statements herein regarding direct taxation are based on the laws in force in Italy as at the date of this Base Prospectus and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The following summary does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or commodities) may be subject to special rules. Prospective investors are advised to consult their own tax advisers concerning the overall tax consequences of their interest in the Notes. Italian taxation of Notes Tax treatment of the Notes The Notes may be subject to different tax regimes depending on whether: a) they represent derivative financial instruments or bundles of derivative financial instruments, through which the Noteholders purchase indirectly underlying financial instruments; or b) they represent a debt instrument implying a use of capital (impiego di capitale), through which the Noteholders transfer to the Issuer a certain amount of capital, for the economic exploitation of the same, subject to the right to obtain a (partial or entire) reimbursement of such amount at maturity. Notes representing derivative financial instruments or bundles of derivative financial instruments Italian resident Noteholders Pursuant to Article 67 of Presidential Decree No. 917 of 22 December 1986 and Legislative Decree No. 461 of 21 November 1997, as subsequently amended, where the Italian resident Noteholder is (i) an individual not engaged in an entrepreneurial activity to which the Notes are connected, (ii) a non-commercial partnership, (iii) a non-commercial private or public institution, or (iv) an investor exempt from Italian corporate income taxation, payments in respect of Notes qualifying as securitized derivative financial instruments as well as capital gains realized on any sale transfer for consideration or or exercise or redemption thereof are subject to a 12.5% substitute tax (imposta sostitutiva). The recipient may opt for three different taxation criteria: (1) Under the tax declaration regime (regime della dichiarazione), which is the standard regime for Italian resident individuals not engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva on capital gains will be chargeable, on a cumulative basis, on all capital gains, net of any incurred capital loss, realised by the Italian resident individual holding the Notes not in connection with an entrepreneurial activity pursuant to all disposals or redemptions of the Notes carried out during any given tax year. Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in the annual tax return and pay imposta sostitutiva on such gains together with any balance income tax due for such year. Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four succeeding tax years. (2) As an alternative to the tax declaration regime, Italian resident individuals holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on payments received in respect of Notes and capital gains realised on each sale or redemption of the Notes (the "risparmio 21

22 amministrato" regime). Such separate taxation of capital gains is allowed subject to (i) the Notes being deposited with Italian banks, SIMs or certain authorised financial intermediaries and (ii) an express election for the risparmio amministrato regime being timely made in writing by the relevant Noteholder. The depository is responsible for accounting for imposta sostitutiva in respect of capital gains realised on each sale or redemption of the Notes (as well as in respect of capital gains realised upon the revocation of its mandate), net of any incurred capital loss, and is required to pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this purpose. Under the risparmio amministrato regime, where a sale or redemption of the Notes results in a capital loss, such loss may be deducted from capital gains subsequently realised, within the same securities management, in the same tax year or in the following tax years up to the fourth. Under the risparmio amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return. (3) Any payments received and any capital gains accrued by Italian resident individuals holding the Notes not in connection with an entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to an authorised intermediary and have opted for the so-called "risparmio gestito" regime will be included in the computation of the annual increase in value of the managed assets accrued, even if not realised, at year end, subject to a 12.5 per cent. substitute tax, to be paid by the managing authorised intermediary. Under this risparmio gestito regime, any depreciation of the managed assets accrued at year end may be carried forward against increase in value of the managed assets accrued in any of the four succeeding tax years. Under the risparmio gestito regime, the Noteholder is not required to declare the capital gains realised in the annual tax return. Where an Italian resident Noteholder is a company or similar commercial entity, or the Italian permanent establishment of a foreign commercial entity to which the Notes are effectively connected, capital gains arising from the Notes will not be subject to imposta sostitutiva, but must be included in the relevant Noteholder's income tax return and are therefore subject to Italian corporate tax (and in certain circumstances, depending on the "status" of the Noteholder, also in the net value of production for the purposes of regional tax on productive activities IRAP). Non-Italian resident Noteholders Capital gains realised by non-italian resident Noteholders are not subject to Italian taxation provided that the Notes (i) are traded on regulated markets, or (ii) if not traded on regulated markets, are held outside Italy. Notes representing debt instruments implying a use of capital Taxation of interest Italian resident Noteholders Legislative Decree April 1st, 1996, No. 239 (Decree No. 239) regulates the tax treatment of interest, premiums and other income (including the difference between the redemption amount and the issue price) (hereinafter collectively referred to as Interest) from Notes issued, inter alia, by non-italian resident entities. The provisions of Decree No. 239 only apply to those Notes which qualify as obbligazioni or titoli similari alle obbligazioni pursuant to Article 44 of Presidential Decree 22nd December, 1986, No. 917 (Decree No. 917). In accordance with Article 44 of Decree No. 917, for securities to qualify as titoli similari alle obbligazioni (securities similar to bonds), they must (i) incorporate an unconditional obligation to pay at maturity an amount not less than that indicated therein, and ii) attribute to the holders no direct or indirect right to control or participate to the management of the Issuer. Where the Italian resident Noteholder is an individual holding Notes otherwise than in connection with entrepreneurial activity, (unless he has entrusted the management of his financial assets, including the Notes, to an authorised intermediary and has opted for the Asset Management Option (Risparmio Gestito tax regime)), Interest payments relating to the Notes are subject to a tax, referred to as imposta sostitutiva, levied at the rate of 12.5 per cent (either when Interest is paid or when payment thereof is obtained by the holder on a sale of the Notes), in case Notes' maturity is at least eighteen months. Such investors are qualified as "net recipients". 22

23 Where the above resident Noteholders are engaged in an entrepreneurial activity to which the Notes are connected, imposta sostitutiva applies as a provisional income tax and may be deducted from the taxation on income due. Pursuant to Decree No. 239, the 12.5 per cent imposta sostitutiva is applied by banks, società di intermediazione mobiliare, società di gestione del risparmio, fiduciary companies, exchange agents and other qualified entities identified by the relevant decrees of the Ministry of Finance (Intermediaries). The Intermediaries must: (i) be (a) resident in Italy or (b) permanent establishments in Italy of intermediaries resident outside Italy; and (ii) in any case intervene, in any way, in the collection of Interest or in the transfer of the Notes. Payments of Interest in respect of Notes that qualify as obbligazioni or titoli similari alle obbligazioni and have a maturity of eighteen months or more, are not subject to the 12.5 per cent imposta sostitutiva if made to beneficial owners who are Italian resident individuals holding Notes not in connection with entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to an authorised financial intermediary and have opted for the Asset Management Option. Such investors are qualified as gross recipients. To ensure payment of Interest in respect of the Notes without the application of 12.5 per cent imposta sostitutiva, gross recipients indicated above must (a) be the beneficial owners of payments of Interest on the Notes and (b) timely deposit the Notes with an Italian authorised financial intermediary (or permanent establishment in Italy of foreign intermediary). Where the Notes are not deposited with an authorised Intermediary (or permanent establishment in Italy of foreign intermediary), the imposta sostitutiva is applied and withheld by any Italian bank or any Italian intermediary paying Interest to the Noteholder. Italian resident individuals holding Notes not in connection with entrepreneurial activity who have opted for the Asset Management Option are subject to the 12.5 per cent annual substitute tax (Asset Management Tax) on the increase in value of the managed assets accrued at the end of each tax year (which increase would include Interest accrued on the Notes). The Asset Management Tax is applied on behalf of the taxpayer by the managing authorised intermediary. Where Interest on Notes beneficially owned by Noteholders qualifying as net recipients, as defined above, are not collected through the intervention of an Italian resident intermediary and as such no imposta sostitutiva is applied, the Italian resident beneficial owners qualifying as net recipients will be required to declare Interest in their yearly income tax return and subject them to a final substitute tax at a rate of 12.5 per cent, unless option for a different regime is allowed and made. Italian resident net recipients that are individuals not engaged in entrepreneurial activity may elect instead to pay ordinary personal income taxes at the progressive rates applicable to them in respect of Interest on such Notes: if so, the beneficial owners should be generally entitled to a tax credit for withholding taxes applied outside Italy, if any. Where an Italian resident Noteholder is a company or similar commercial entity and the Notes are deposited with an authorised intermediary, Interest will not be subject to imposta sostitutiva but must be included in the relevant Noteholder s income tax return and is therefore subject to general Italian corporate taxation (and, in certain circumstances, depending on the status of the Noteholder, also to regional tax). Early Repayment Without prejudice to the above provisions, in the event that the Notes with an original maturity of eighteen months or more are made subject to an early repayment within eighteen months from the date of issue, Italian resident Noteholders will be required to pay an additional amount equal to 20 per cent of Interest and other proceeds from the Notes accrued up to the time of the early repayment. Where Italian withholding agents intervene in the collection of Interest on the Notes or in the redemption of the Notes, this additional amount will be levied by such withholding agents by way of withholding. In accordance with one interpretation of Italian tax law, the above 20 per cent additional amount may also be due in the event of any purchase of Notes by the Issuer with subsequent cancellation thereof prior to eighteen months from the date of issue. 23