BASE PROSPECTUS (Basisprospekt)

Transkript

1 BASE PROSPECTUS (Basisprospekt) Morgan Stanley (Luxembourg) S.A. (incorporated as a société anonyme (public limited company) in the Grand Duchy of Luxembourg) Morgan Stanley Select Euro 2,000,000,000 Programme for the Issuance of Notes and Certificates Under the Morgan Stanley Select Euro 2,000,000,000 Programme for the Issuance of Notes and Certificates (the "Programme") Morgan Stanley (Luxembourg) S.A. (the "Company") by acting in respect and on behalf of its relevant Compartment (each a "Relevant Issuer") may, from time to time, issue securities in bearer form or, in case of securities governed by Swiss law, alternatively in dematerialised form (uncertificated securities, Wertrechte) (the "Securities"). The Company is subject to the Grand Duchy of Luxembourg ("Luxembourg") act dated 22 March 2004 on securitisation, as amended (the "Securitisation Act 2004"). Under the Securitisation Act 2004, the Company, as a regulated entity within the meaning of the Securitisation Act 2004, by acting in respect and on behalf of each Relevant Issuer will be entitled, once duly authorised, to issue Securities to the public on an ongoing basis. The Company has filed its authorisation request with the CSSF (as defined below) to be a regulated securitisation company. Shares will not be issued under this Base Prospectus. In the context of the issue of Securities under this Programme, Securities will be issued in form of notes in bearer or, if governed by Swiss law, alternatively in dematerialised form (the "Notes") and certificates in bearer or, if governed by Swiss law, alternatively in dematerialised form (the "Certificates"), whereby Certificates issued under German law are debt securities (Schuldverschreibungen) in the meaning of 793 of the German Civil Code (Bürgerliches Gesetzbuch). In connection with the issue of Securities, all references in this Base Prospectus to "Securities" shall be regarded as reference to "Notes" or "Certificates", as the case may be, and as the context requires, and all references to a a holder of Securities (each a "Securityholder" and, together, the "Securityholders") shall be regarded as reference to a holder of Notes (each a "Noteholder" and, together, the "Noteholders") or a holder of Certificates (each a "Certificateholder" and, together, the "Certificateholders"), as the case may be, and as the context requires. The Securities covered hereunder do not constitute collective investment schemes in the meaning of the Swiss Collective Investment Scheme Act ("CISA") and are not subject to an authorisation by the Swiss Financial Market Supervisory Authority FINMA. Accordingly, Securityholders do not benefit from protection under the CISA or supervision by the FINMA. In relation to Securities issued under this Programme, application (i) has been made to the Commission de Surveillance du Secteur Financier ("CSSF") as competent authority (the "Competent Authority") for its approval of this Base Prospectus and (ii) will be made to the (a) Frankfurt Stock Exchange and/or (b) the Baden-Württemberg Stock Exchange in Stuttgart for such Securities to be admitted to trading, either on the regulated market (regulierter Markt) which is the regulated market for the purposes of Directive 2004/39/EC, or on the unregulated market (unregulierter Markt) of the Frankfurt Stock Exchange (Scoach Premium) and/or the Baden-Württemberg Stock Exchange in Stuttgart (Euwax) and/or the Luxembourg Stock Exchange (Bourse de Luxembourg), as the case may be, and/or (c) to SIX Swiss Exchange ("SIX") for such Securities to be listed at SIX and to be admitted to trading, as applicable, either (x) in the Main Segment (Hauptsegment) of SIX, (y) on the platform of Scoach Switzerland Ltd ("Scoach") or (z) at the Eurex Exchange ("EUREX"). In addition to the Frankfurt Stock Exchange and the Baden-Württemberg Stock Exchange in Stuttgart, the Official List of the Luxembourg Stock Exchange and SIX/Scoach/EUREX, Securities may be listed on further stock exchanges or may not be listed on any segment of any stock exchange or may not be admitted to trading on any unregulated market (e.g., a Freiverkehr) of any stock exchange, as may be agreed between the Relevant Issuer and any relevant manager(s) in relation to such issue of Securities. The CSSF assumes no responsibility as to the economic and financial soundness of any transaction under the Programme and the quality or solvency of the Company and any Relevant Issuer. The Company has applied for a notification of this Base Prospectus into the Federal Republic of Germany ("Germany") and the Republic of Austria ("Austria"). In accordance with the Securitisation Act 2004, the Company may create one or more compartments and will act in respect and on behalf of its relevant Compartment as Relevant Issuer. Each series of Securities (each a "Series of Securities") will be issued by one compartment of the Company. In respect of each such Series of Securities, "Compartment" means the compartment under which such Series of Securities is issued. Each Compartment will comprise a pool of Bond Compartment Assets (as defined below) of the Relevant Issuer separate from the pools of Bond Compartment Assets relating to other Compartments. Each Series of Securities comprises certain bonds of any form, denomination, type or issuer owned by the Relevant Issuer (the "Bond Compartment Assets") and held by the Custodian and funds held from time to time by the Account Bank and/or the Fiscal Agent and/or the Paying Agent (each as defined herein) for payments due under the Securities of such Series of Securities (the "Cash Compartment Assets") and comprises the Relevant Issuer's rights under a swap or other derivative with the swap counterparty (the "Swap Agreement") (as defined in the Terms and Conditions of the Securities) entered into in respect of the relevant Securities (together with the Bond Compartment Assets, the Cash Compartment Assets, the Swap Agreement and any other Related Agreement, if any (as defined in the Terms and Conditions of the Securities), the "Compartment Assets"). The obligations of the Swap Counterparty under a Swap Agreement will also

2 be secured by certain collateral which will also form part of the Compartment Assets. A non-exhaustive list of considerations relating to the Securities is set out in the section herein entitled "Risk Factors". In respect of any Compartment and the related Securities issued by such Compartment all payments to be made by the Relevant Issuer in respect of such Securities and the related Swap Agreement and any other Related Agreement will be made only from and to the extent of the sums received or recovered from time to time by or on behalf of the Relevant Issuer in respect of the Compartment Assets and, following the occurrence of an Event of Default in respect of such Securities the entitlement of a Securityholder will be limited to such Securityholder's pro rata share of the proceeds of the relevant Compartment Assets applied in accordance with the Terms and Conditions of the Securities. If, in respect of any Securities, the net proceeds of the enforcement or liquidation of the relevant Compartment Assets applied as aforesaid are not sufficient to make all payments due in respect of such Securities, no other assets of the Relevant Issuer and the Company will be available to meet such shortfall, and the claims of the Securityholder of such Securities as against the Relevant Issuer in respect of any such shortfall shall be extinguished. In all cases, neither the Securityholder nor any person on its behalf shall have the right to petition for the winding-up of the Relevant Issuer or the Company as a consequence of any shortfall. Securityholders should be aware that the Company and each Relevant Issuer (and any rights and obligations against the Company and the Relevant Issuer) are subject to the provisions of the Securitisation Act 2004 and, in particular, the provisions with respect to compartments, limited recourse, non-petition, subordination and priority of payments. The Securities and, in certain cases, the underlying securities (if any) to be delivered when Securities are redeemed, have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Trading in the Securities has not been approved by the U.S. Commodity Futures Trading Commission under the U.S. Commodity Exchange Act of 1936, as amended (the "Commodity Exchange Act") or by the U.S. Securities Exchange Commission (the "SEC"). The Securities in bearer form may not be offered, sold or delivered, at any time, within the United States or to, or for the account or benefit of, U.S. persons. Potential investors in Securities are explicitly reminded that an investment in the Securities entails financial risks which, if occurred, may result in a decline in the value of the Securities. Potential investors in Securities should be prepared to sustain a total loss of their investment in the Securities. Potential investors in principal protected Securities should note that principal protected Securities are still subject to the general insolvency risk of the Relevant Issuer, the general insolvency risk of the relevant issuer of the Bond Compartment Assets and the general insolvency risk of any counterparty concerning the Compartment Assets and investors may receive less than the protected amount if the Securities are sold or redeemed prior to their maturity. Potential investors in Securities are, therefore, advised to study the full contents of this Base Prospectus (see "Risk Factors"). The Securities are senior unsecured limited recourse obligations of the Relevant Issuer. Recourse in respect of any Series of Securities will be limited to the Compartment Assets of the Compartment relating to such Series of Securities. The Securities are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank. The date of this Base Prospectus is 28 June 2012

3 TABLE OF CONTENTS Page Part A: Summary of the Base Prospectus of the Programme 5 A.I. Summary of the Base Prospectus of the Programme (English Version)... 5 A. Summary of the Risk Factors... 6 B. Summary of the Terms and Conditions of the Securities and Related Information C. Summary of the Description of Morgan Stanley (Luxembourg) S.A D. Summary of the Description of the Swap Agreement A.II Zusammenfassung des Basisprospekts des Programms (Deutsche Fassung) A. Zusammenfassung der Risikofaktoren B. Zusammenfassung der Grundbedingungen der Wertpapiere und ähnliche Informationen C. Zusammenfassung der Geschäftsbeschreibung der Morgan Stanley (Luxembourg) S.A D. Zusammenfassung der Swap Vereinbarung Part B: Risk Factors B.I Risk Factors (English Version) B.II Risikofaktoren (Deutsche Fassung) Part C: Responsibility Statement Part D: Important Notice Part E: Terms and Conditions of the Securities and Related Information E.I General Information applicable to Securities E.II General Description of the Programme 100 E.III Description of the Swap Agreement 102 E. IV Description of the Custody Agreement 105 E.V General Terms and Conditions of the Notes/Certificates General Terms and Conditions of the Notes/Certificates Supplemental Terms and Conditions for Index Linked Notes/Certificates Supplemental Terms and Conditions for Equity Linked Notes/Certificates Supplemental Terms and Conditions for Bond Linked Notes/Certificates Supplemental Terms and Conditions for Commodity Linked Notes/Certificates Supplemental Terms and Conditions for Currency Linked Notes/Certificates E.V Emissionsbedingungen (Deutsche Fassung) Allgemeine Emissionsbedingungen Ergänzende Emissionsbedingungen für Indexbezogene Schuldverschreibungen/Zertifikate Ergänzende Emissionsbedingungen für Aktienbezogene Schuldverschreibungen/Zertifikate Ergänzende Emissionsbedingungen für Anleihebezogene Schuldverschreibungen/Zertifikate Ergänzende Emissionsbedingungen für Warenbezogene Schuldverschreibungen/Zertifikate Ergänzende Emissionsbedingungen für Währungsbezogene Schuldverschreibungen/Zertifikate E.VI Form of Final Terms for Notes/Certificates/ Musterkonditionenblatt für Schuldverschreibungen/Zertifikate 222 Part F: Subscription and Sale Part G: Taxation Part H. I: Description of Morgan Stanley (Luxembourg) S.A Part H. II: Description of the Swap Agreement Part H. III: Description of the Swap Counterparty.. 293

4 Part I: General Information ADDRESS LIST 300

5 5 Part A Summary of the Base Prospectus of the Programme A.I. Summary of the Base Prospectus of the Programme (English Version) SUMMARY OF THE BASE PROSPECTUS OF THE PROGRAMME The information in this section "Summary of the Base Prospectus of the Programme" includes a summary of each of the following parts of this Base Prospectus: A. the "Risk Factors" (Part B. I (English version) and Part B. II (German version) of this Base Prospectus); B. the "Terms and Conditions of the Securities and Related Information" (Part E of this Base Prospectus); and C. the "Description of Morgan Stanley (Luxembourg) S.A." (Part H of this Base Prospectus). The following summary is a summary of the Base Prospectus of the Programme and is taken from the remainder of the Base Prospectus. Words and expressions defined in other Parts of this Base Prospectus and not otherwise defined in this "Summary of the Base Prospectus of the Programme" shall have the same meanings in this Part of the Base Prospectus. The information in this section "Summary of the Base Prospectus of the Programme" should be read and construed as an introduction to the Base Prospectus. Prospective purchasers of Securities should base any decision to invest in Securities not only on the following information but on all other information in this Base Prospectus irrespective of whether it is set out in, or incorporated into, this Base Prospectus by reference. Any judicial proceedings in the Federal Republic of Germany ("Germany") are subject to German Civil Procedural Law (Zivilprozessrecht) as applied by German courts, which, inter alia and without limitation, might require the translation of foreign language documents into the German language, do not provide for discovery and might apportion the costs between the parties different from other jurisdictions and otherwise than as contemplated in any document pertaining to the Programme. Accordingly, where a claim relating to the information contained in a securities prospectus such as this Base Prospectus is brought before a German court or the court of any other Member State of the European Economic Area (each an "EEA State"), the plaintiff might, under German law as well as under the national legislation of any other relevant EEA State, have to bear the costs of translating, to the extent necessary, this Base Prospectus into German and/or any other relevant language, as the case may be, before legal proceedings are initiated. Any judicial proceedings within the Swiss Confederation ("Switzerland") are subject to the Swiss Civil Procedural Law (Schweizerische Zivilprozessordnung) as applied by Swiss courts which, inter alia, and without limitation, might require the translation of foreign language documents into one of the Swiss official languages (German, French, Italian), might not provide for discovery and might apportion the costs between the parties different from other jurisdictions and otherwise than as contemplated in any document pertaining to the Programme. Accordingly, where a claim relating to the information contained in a securities prospectus such as this Base Prospectus is brought before a court in Switzerland, the plaintiff might under the Swiss Civil Procedural Law have to bear the costs of translating, to the extent necessary, this Base Prospectus into the relevant Swiss official language, as the case may be, before legal proceedings are initiated. The Company, and any person who has initiated or caused the translation of this summary, assumes liability for the contents of this section "Summary of the Base Prospectus of the Programme", including any translation thereof, but only to the extent that this summary is misleading, inaccurate or inconsistent when read together with the other parts of, or other information incorporated into, this Base Prospectus.

6 6 A. Summary of the "Risk Factors" An investment in the Securities involves certain risks relating to the Relevant Issuer and the relevant Tranche of Securities. While all of these risk factors are contingencies which may or may not occur, potential investors should be aware that the risks involved with investing in the Securities may (i) affect the ability of the Relevant Issuer to fulfil its obligations under Securities issued under the Programme, and/or (ii) lead to a volatility and/or decrease in the market value of the relevant Tranche of Securities whereby the market value falls short of the expectations (financial or otherwise) of a Securityholder upon making an investment in such Securities. Potential investors in Securities are explicitly reminded that an investment in the Securities entails financial risks which, if occurred, may result in a decline in the value of the Securities. Potential investors in Securities should be prepared to sustain a total loss of their investment in the Securities. Potential investors in principal protected Securities should note that principal protected Securities are still subject to the general insolvency risk of the Relevant Issuer, the general insolvency risk of the relevant issuer of the Bond Compartment Assets and the general insolvency risk of any counterparty concerning the Compartment Assets and investors may receive less than the protected amount if the Securities are sold or redeemed prior to their maturity. The Securities are senior unsecured limited recourse obligations of the Relevant Issuer. Recourse in respect of any Series of Securities will be limited to the Compartment Assets of the Compartment relating to such Series of Securities. The Securities are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank. Potential investors should consider two main categories of risks, I. "Risks relating to the Company and the Relevant Issuer" and II. "Risks Relating to the Securities" which include 1. "General Risks relating to the Securities"; 2. "General Risk Factors relating to Changes in Market Conditions"; and 3. "Risks relating to specific Product Categories", a summary of which is set out below: I. Risks Relating to the Company and the Relevant Issuer The Company is established as a société de titrisation within the meaning of the Securitisation Act The Company's sole business is to enter into, perform and serve as a vehicle for, any transactions permitted under the Securitisation Act In addition, the Securitisation Act 2004 provides that claims against the Company will, in principle, be limited to the net assets of the relevant Compartment through which the relevant Series of Securities (each a Relevant Issuer). Accordingly, in respect of any Compartment and any Securities all payments to be made by the Relevant Issuer in respect of the Securities and the related Swap Agreement and any other Related Agreement, if any, will be made only from and to the extent of the sums received or recovered from time to time by or on behalf of the Relevant Issuer in respect of the Compartment Assets. Accordingly, the Relevant Issuer has, and will have, no assets other than Bond Compartment Assets and/or the other Compartment Assets owned by it, in each case in connection with the issue of the Securities or entry into other obligations relating to the Programme from time to time. The ability of the Relevant Issuer to meet its obligations under Securities issued by it will, in particular, depend on the receipt by it of payments under the Bond Compartment Assets it purchases with the proceeds of each Series of Securities and the relevant Swap Agreement from Morgan Stanley & Co. International plc ("MSIP") as swap counterparty (the "Swap Counterparty"). Consequently, the Relevant Issuer is exposed to the ability of the issuer of the Bond Compartment Assets to perform its obligations under the Bond Compartment Assets and the ability of the Swap Counterparty to perform its obligations under the related Swap Agreement and to their respective creditworthiness. The Swap Counterparty will provide credit support for its obligations under the Swap Agreement. Any credit support provided by the Swap Counterparty will only be in an amount equal to the payment obligations of the Swap Counterparty under the Swap Agreement which will cover interest amounts payable under the Securities.

7 7 Securityholders will have recourse only to the Compartment Assets of the Relevant Issuer (Compartment) through which such Series of Securities is issued. The Relevant Issuer will be the sole party liable under the Securities. Following the occurrence of an Event of Default or Early Redemption Event in respect of a Series of Securities the entitlement of the Securityholder will be limited to such Securityholder's pro rata share of the proceeds of the relevant Compartment Assets of such Relevant Issuer and not to the assets allocated to other Relevant Issuers (i.e. other Compartments) created by the Company. Once all moneys received by the Relevant Issuer in connection with the enforcement or liquidiation of the Compartment Assets have been applied in accordance with the Terms and Conditions of the Securities, no Securityholder is entitled to take any further steps against the Relevant Issuer or the Company to recover any further sums due and the right to receive any such sum shall be extinguished. In all cases, neither the Securityholder nor any person on its behalf shall have the right to petition for the winding-up of the Relevant Issuer or the Company as a consequence of any shortfall. In the event of insolvency proceedings in relation to the Relevant Issuer, Securityholders bear the risk of delay in settlement of their claims they may have against the Relevant Issuer under the Securities or receiving, in respect of their claims, the residual amount following realisation of the Relevant Issuer's assets after certain preferred creditors have been paid (as more fully set out in "Risk Factors" below). Securityholders should be aware that the Company and each Relevant Issuer (and any rights and obligations against the Company and each Relevant Issuer) are subject to the provisions of the Securitisation Act 2004 and, in particular, the provisions with respect to compartments, limited recourse, non-petition, subordination and priority of payments. In addition, there are certain risks in relation to the custody arrangements under which Bond Compartment Assets are held, also described under "Risk Factors" below. II. Risks Relating to the Securities 1. General Risks relating to the Securities General An investment in the Securities entails certain risks, which vary depending on the specification and type or structure of the Securities. An investment in the Securities is only suitable for potential investors who (i) have the requisite knowledge and experience in financial and business matters to evaluate the merits and risks of an investment in the Securities and the information contained or incorporated by reference into the Base Prospectuses or any applicable supplement thereto; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate such merits and risks in the context of the potential investor's particular financial situation and to evaluate the impact the Securities will have on their overall investment portfolio; (iii) understand thoroughly the terms of the relevant Securities and are familiar with the behaviour of the relevant underlyings and financial markets; (iv) are capable of bearing the economic risk of an investment in the Securities until the maturity of the Securities; and (v) recognise that it may not be possible to dispose of the Securities for a substantial period of time, if at all before maturity. Interest Rate Risk The interest rate risk is one of the central risks of interest-bearing Securities. The interest rate level on the money and capital markets may fluctuate on a daily basis and cause the value of the Securities to change on a daily basis. The interest rate risk is a result of the uncertainty with respect to future changes of the market interest rate level. In particular, Securityholders of Fixed Rate Securities are exposed to an interest rate risk that could result in a diminution in value if the market interest rate level increases. In general, the effects of this risk increase as the market interest rates increase. Credit Spread Risk Factors influencing the credit spread include, among other things, the creditworthiness of the Relevant Issuer (which in turn may depend on the quality of the Bond Compartment Assets and the creditworthiness of the Swap Counterparty), probability of default, recovery rate, remaining term to maturity of the Securities and obligations under any collateralisation or guarantee and declarations as to any preferred payment or subordination. The liquidity situation, the general level of interest rates, overall economic

8 8 developments, and the currency, in which the relevant obligation is denominated may also have a positive or negative effect. Securityholders are exposed to the risk that the credit spread of the Relevant Issuer widens which results in a decrease in the price of the Securities. Rating of the Securities A rating of Securities, if any, may not adequately reflect all risks of the investment in such Securities. Equally, ratings may be suspended, downgraded or withdrawn. Such suspension, downgrading or withdrawal may have an adverse effect on the market value and trading price of the Securities. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time. Reinvestment Risk Securityholders may be exposed to risks connected to the reinvestment of cash resources freed from any Securities. The return the Securityholder will receive from the Securities depends not only on the price and the nominal interest rate of the Securities but also on whether or not the interest received during the term of the Securities can be reinvested at the same or a higher interest rate than the rate provided for in the Securities. The risk that the general market interest rate falls below the interest rate of the Securities during their term is generally called reinvestment risk. The extent of the reinvestment risk depends on the individual features of the Securities. Structural Risks Given that the proceeds of the issue of the Securities are invested in the Bond Compartment Assets with respect to a particular Compartment, such Bond Compartment Assets and the cash flows under the Swap Agreement and under any Related Agreement will constitute the only source of funds available to the Relevant Issuer for the satisfaction of its obligations under the relevant Securities and the related Swap Agreement and any Related Agreement. Accordingly, if such Compartment Assets do not generate sufficient cashflows, e.g. due to the occurrence of an event of default under the Bond Compartment Assets or the Swap Agreement, either (i) an Early Redemption Event or (ii) an Event of Default may occur under the relevant Securities which, in turn, may in either case lead to the liquidation and/or enforcement of the Compartment Assets by or on behalf of the Relevant Issuer. The proceeds of any such liquidation and/or enforcement, as the case may be, (net of any costs, including the costs of liquidation and/or enforcement) may at the time of liquidation and/or enforcement, e.g. due to fluctuations in market values of the Bond Compartment Assets and/or the Swap Agreement, not be sufficient to meet the claims of the Securityholders with respect to the relevant Compartment. As more fully described above, claims against the Relevant Issuer and the Company by the Securityholders of a particular Series of Securities will be limited to the relevant Compartment Assets. Risks in connection with costs, fees and charges of liquidation and preferred creditors In case of a liquidation and/or enforcement of the Compartment Assets due to reasons set out above, potential investors should be aware of the fact that from the proceeds of any such liquidation and/or enforcement, costs in connection with any such liquidation and/or enforcement will be deducted. Any such deduction reduces the amount on which basis claims of Securityholders under the Securities will be settled. Hence, Securityholders need to be aware that they may lose parts or all of the invested capital. Furthermore, in the event of insolvency proceedings in relation to the Relevant Issuer, Securityholders bear the risk of delay in settlement of their claims they may have against the Relevant Issuer under the Securities or receiving, in respect of their claims, the residual amount following realisation of the Relevant Issuer's assets after certain preferred creditors (such as the Swap Counterparty) have been paid. Cash Flow Risk Any cash flows depend on the cash flows received by the Relevant Issuer under the Bond Compartment Assets and the relevant Swap Agreement and any other Related Agreement and in the event that the Relevant Issuer does not receive all or part of such cash flows expected under the Compartment Assets, the

9 9 actual cash flows received by the Securityholder may differ from the expected cash flows under the Securities. Inflation Risk The inflation risk is the risk of future money depreciation. The real yield from an investment is reduced by inflation. The higher the rate of inflation, the lower the real yield on the Securities. If the inflation rate is equal to or higher than the nominal yield, the real yield is zero or even negative. Purchase on Credit Debt Financing If a loan is used to finance the acquisition of the Securities by a Securityholder and the Securities subsequently go into default, or if the trading price diminishes significantly, the Securityholder may not only have to face a potential loss on its investment, but it will also have to repay the loan and pay interest thereon. A loan may significantly increase the risk of a loss. Potential investors should not assume that they will be able to repay the loan or pay interest thereon from the profits of a transaction. Instead, potential investors should assess their financial situation prior to an investment, as to whether they are able to pay interest on the loan, repay the loan on demand, and that they may suffer losses instead of realising gains. Distribution Agent Remuneration The Relevant Issuer may enter into distribution agreements with various financial institutions and other intermediaries as determined by the Relevant Issuer (each a "Distribution Agent"). Each Distribution Agent will agree, subject to the satisfaction of certain conditions, to subscribe for the Securities at a price equivalent to or below the Issue Price. A periodic fee may also be payable to the Distribution Agents in respect of all outstanding Securities up to and including the maturity date at a rate as determined by the Relevant Issuer. Such rate may vary from time to time. Transaction Costs/Charges When Securities are purchased or sold, several types of incidental costs (including transaction fees and commissions) are incurred in addition to the purchase or sale price of the Securities. These incidental costs may significantly reduce or eliminate any profit from holding the Securities. Credit institutions as a rule charge commissions which are either fixed minimum commissions or pro-rata commissions, depending on the order value. To the extent that additional domestic or foreign parties are involved in the execution of an order, including but not limited to domestic dealers or brokers in foreign markets, Securityholders may also be charged for the brokerage fees, commissions and other fees and expenses of such parties (third party costs). Change of Law The Terms and Conditions of the Securities will be governed by German or Swiss law, as declared applicable in the Final Terms for each Tranche of Securities (as defined herein below), in effect as at the date of this Base Prospectus. No assurance can be given as to the impact of any possible judicial decision or change to German law (or law applicable in Germany), or to Swiss law (or law applicable in Switzerland), or administrative practice in Germany, England or Switzerland after the date of this Base Prospectus. Provision of Information None of the Company, the Relevant Issuer, any manager(s) or any of their respective affiliates makes any representation as to any issuer of Underlying Securities or Bond Compartment Assets. Any of such persons may have acquired, or during the term of the Securities may acquire, non-public information with respect to an issuer of the Underlying Securities or the Bond Compartment Assets, their respective affiliates or any guarantors that is or may be material in the context of the Securities. The issue the Securities will not create any obligation on the part of any such persons to disclose to the Securityholders or any other party such information (whether or not confidential). Taking the afore-mentioned into consideration, the risk may arise that the Company, the Relevant Issuer, any manager(s) or any of their respective affiliates may have an advantage with regard to information relating to an underlying compared with the level of information of a potential investor.

10 10 Potential Conflicts of Interest Each of the Company, the Relevant Issuer, any manager(s), the Custodian or their respective affiliates may deal with and engage generally in any kind of commercial or investment banking or other business with any issuer of Underlying Securities, their respective affiliates or any guarantor or any other person or entities having obligations relating to any issuer of Underlying Securities or their respective affiliates or any guarantor in the same manner as if any Equity or Bond Linked Securities issued under the Programme did not exist, regardless of whether any such action might have an adverse effect on an issuer of the Underlying Securities, any of their respective affiliates or any guarantor. The Relevant Issuer may from time to time be engaged in transactions (including, without limitation, hedging activities related to the Securities) involving the Underlying Securities, the Index, Index Components or related derivatives or Relevant Commodities which may affect the market price, liquidity or value of the Securities and which could be deemed to be adverse to the interests of the Securityholders. Protection Amount If and to the extent that a Protection Amount has been declared applicable in the relevant Final Terms, the Securities of the Series of Securities will, at maturity, be redeemed for an amount no less than the specified Protection Amount, subject to sufficient funds being available to redeem the Securities at the Protection Amount and an insolvency of the Relevant Issuer and the associated risk of a total loss of the investment made by the Securityholder. A Protection Amount may apply at a level below, at, or above the principal amount/par value of the Securities. The Protection Amount, if any, will not be due if the Securities are redeemed prior to their stated maturity due to an early redemption on the basis of the Relevant Issuer s exercise of a right to redeem the Securities early (such as a general call right, a tax call, right of automatic early termination due to an Early Redemption Event or an early termination due to the occurrence of certain further or other events) or of a Securityholder's exercise of a right to demand an early redemption of the Securities by the Relevant Issuer (such as a general put right or a right of termination due to the occurrence of an event of default), in each case as further specified in the relevant Final Terms. If no Protection Amount is applicable, the full amount invested by the Securityholder may be lost. Even if a Protection Amount applies, the guaranteed return may be less than the investment made by the Securityholder. The payment of the Protection Amount will be affected by the condition (financial or otherwise) of the Relevant Issuer and is subject to sufficient funds being available for the Relevant Issuer to repay the Securities at the relevant Protection Amount. Exchange Rates Potential investors should be aware that an investment in the Securities may involve exchange rate risks. For example the Underlying Securities or other reference assets, such as but not limited to shares or the Relevant Commodities (the "Reference Assets") may be denominated in a currency other than that of the settlement currency for the Securities; the Reference Assets may be denominated in a currency other than the currency of the purchaser's home jurisdiction; and/or the Reference Assets may be denominated in a currency other than the currency in which a purchaser wishes to receive funds. In addition, the Bond Compartment Assets may be denominated in a currency other than that of the settlement currency for the Securities; the Bond Compartment Assets may be denominated in a currency other than the currency of the purchaser's home jurisdiction; and/or the Bond Compartment Assets may be denominated in a currency other than the currency in which a purchaser wishes to receive funds. Exchange rates between currencies are determined by factors of supply and demand in the international currency markets which are influenced by macro economic factors, speculation and central bank and Government intervention (including the imposition of currency controls and restrictions). Fluctuations in exchange rates may affect the value of the Securities, the Reference Assets or the Bond Compartment Assets. Exposure to the credit risk of the issuer of the Bond Compartment Assets and the credit risk of the Swap Counterparty The Securities represent a claim against the Relevant Issuer (i.e. the relevant Compartment) only. The Securities do not represent a claim against the issuer of the Bond Compartment Asset. However, as the ability of the Relevant Issuer depends on the receipt by it of payments under the Bond Compartment Assets and the Swap Agreement, Securityholders will be exposed to the credit risk of any issuer of the Bond Compartment Assets and the creditworthiness of the Swap Counterparty. In order to mitigate the Relevant

11 11 Issuer exposure to the creditworthiness of the Swap Counterparty, the Swap Counterparty will be required to provide collateralisation in respect of its obligations under the relevant Swap Agreement as further described in the Section "Description of the Swap Agreement". If, however, the Swap Counterparty is the defaulting party under the relevant Swap Agreement and has not posted additional eligible collateral or the posted collateral has diminished in value due to market volatility, the proceeds thereof may be insufficient to perfom the obligtaions of the Swap Counterparty under the relevant Swap Agreement in full which will result in a shortfall under the Securities. Risks in connection with a potential insolvency of the Custodian, sub-custodians or the Account Bank The Custodian will appoint one or more sub-custodian(s) to hold the vast majority of the Bond Compartment Assets. Such entities may have their registered office, their operations or branch and the corresponding accounts in various jurisdictions. Securityholders should be aware of the fact that respective applicable insolvency laws, custody laws and other applicable provisions of such jurisdictions when compared to the corresponding provisions applicable in Germany or Luxembourg will comprise provisions to the detriment of the Securityholder or do not provide for a similar protection of Securityholders as this is the case at least to a certain extent in Germany and Luxembourg, as the case may be. In case of an insolvency of the Custodian, of sub-custodians or of the Account Bank it cannot be excluded that the recovery of the Bond Compartment Assets and/or of the Cash Compartment Assets is adversely affected or that it is even prohibited and, hence, Secuityholders may lose parts or all of the principal invested in the Securities. Taxation Potential investors should be aware that they may be required to pay taxes or other documentary charges or duties in accordance with the laws and practices of the country where the Securities are transferred or other jurisdictions. In some jurisdictions, no official statements of the tax authorities or court decisions may be available for innovative financial instruments such as the Securities. Potential investors are advised not to rely upon the tax disclosure contained in this document and/or in the Final Terms but to ask for their own tax adviser's advice on their individual taxation with respect to the acquisition, sale and redemption of the Securities. Only these advisors are in a position to duly consider the specific situation of the potential investor. The afore-mentioned individual tax treatment of the Securities with regard to any potential investor may have an adverse impact on the return which any such potential investor may receive under the Securities. The Relevant Issuer may, under certain circumstances, be required pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder ("FATCA") to withhold U.S. tax at a rate of 30% on all or a portion of payments of principal and interest which are treated as "foreign pass-thru payments" made on or after 1 January 2017 to an investor or any other non-u.s. financial institution through which payment on the Securities is made that is not in compliance with FATCA. If applicable to payments on any Securities, FATCA will be addressed in the relevant Final Terms. The application of FATCA to interest, principal or other amounts paid on or with respect to the Securities is not currently clear. If an amount in respect of U.S. withholding tax were to be deducted or withheld from interest, principal or other payments on the Securities as a result of a Securityholder s failure to comply with FATCA, none of the Relevant Issuer, any paying agent or any other person would pursuant to the Terms and Conditions of the Securities be required to pay additional amounts as a result of the deduction or withholding of such tax. Securities issued on or before 31 December 2012 (other than Securities which are treated as equity for U.S. federal income tax purposes) generally will not be subject to withholding under FATCA. However, if, on or after 1 January 2013, (i) a Substituted Debtor is substituted as the Relevant Issuer of the Securities created and issued on or before 31 December 2012, or (ii) the Securities are otherwise modified, then such Securities would become subject to withholding under FATCA if such substitution or modification results in a deemed exchange of the Securities for U.S. federal income tax purposes. If the Relevant Issuer issues further Securities on or after 1 January 2013 that were originally issued on or before 31 December 2012, payments on such further Securities may be subject to withholding under FATCA and, should the

12 12 originally issued Securities and the further Securities be indistinguishable, such payments on the originally issued Securities may also become subject to withholding under FATCA. In addition, under the U.S. Internal Revenue Code of 1986, as amended, a "dividend equivalent" payment is treated as a dividend from sources within the United States and is subject to withholding at the rate of 30% unless reduced by an applicable tax treaty with the United States ("DEP Withholding"). A "dividend equivalent" payment includes (i) a payment made pursuant to a "specified notional principal contract" that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States, and (ii) any other payment determined by the U.S. Internal Revenue Service to be substantially similar to a payment described in the preceding clause (i). A dividend equivalent payment includes a payment made pursuant to any notional principal contract unless otherwise exempted by the U.S. Internal Revenue Service. Where the Securities reference an interest in a fixed basket of securities or an index, such fixed basket or index will be treated as a single security. Where the Securities reference an interest in a basket of securities or an index that may provide for the payment of dividends from sources within the United States, absent guidance from the U.S. Internal Revenue Service, it is uncertain whether the U.S. Internal Revenue Service would determine that payments under certain Securities, such as the Index Linked Securities and Equity Linked Securities, are substantially similar to a dividend. If the U.S. Internal Revenue Service determines that a payment is substantially similar to a dividend, it may be subject to U.S. withholding tax, unless reduced by an applicable tax treaty. If applicable, DEP Withholding will be addressed in the Final Terms. If an amount in respect of DEP Withholding were to be deducted or withheld from payments on the Securities, none of the Relevant Issuer, any paying agent or any other person would pursuant to the conditions of the Securities be required to pay additional amounts as a result of the deduction or withholding of such tax. Independent Review and Advice Each potential investor must determine, based on its own independent review and such professional advice as it deems appropriate under the circumstances, that its acquisition of the Securities is fully consistent with its (or if it is acquiring the Securities in a fiduciary capacity, the beneficiary's) financial needs, objectives and condition, complies and is fully consistent with all investment policies, guidelines and restrictions applicable to it (whether acquiring the Securities as principal or in a fiduciary capacity) and is a fit, proper and suitable investment for it (or if it is acquiring the Securities in a fiduciary capacity, for the beneficiary), notwithstanding the clear and substantial risks inherent in investing in or holding the Securities. The Relevant Issuer disclaims any responsibility to advise potential investors of any matters arising under the law of the country in which they reside that may affect the purchase of, or holding of, or the receipt of payments or deliveries on the Securities. If a potential investor does not inform itself in an appropriate manner with regard to an investment in the Securities, the investors risk disadvantages in the context of its investment. Risks associated with an Early Redemption The Securities may be subject to an early redemption which may be either automatic or at the option of the Relevant Issuer. Automatic early termination will occur upon the occurrence of an Early Redemption Event e.g. due to the occurrence of an event of default in respect of the Bond Compartment Assets or, if applicable, a breach of the Swap Cover Ratio pursuant to the Final Terms. Optional early redemption at the option of the Relevant Issuer may occur (i) if the Relevant Issuer will be obliged to increase the amounts payable in respect of any Securities due to certain tax related withholdings or deductions or (ii) certain other circumstances as specified in the relevant Final Terms of any particular Tranche of Securities. In respect of any Compartment and the related Securities issued by the Relevant Issuer, all payments to be made by the Relevant Issuer in respect of such Securities (including payments in case of an early redemption) will be made only from and to the extent of the sums received or recovered from time to time by or on behalf of the Relevant Issuer in respect of the Compartment Assets owned by the Relevant Issuer and comprised in the Compartment, including the Bond Compartment Assets, the Swap Agreement and funds held from time to time by the Account Bank and/or the Fiscal Agent and/or the Paying Agent for payments due under the Series of Securities and after the deduction of certain fees, costs, expenses and taxes incurred by the Relevant Issuer in respect of the sale, unwinding or liquidation of such Compartment

13 13 Assets and any due and unpaid fees, costs and expenses of the Agents and the Custodian and any amounts due to be paid to the Swap Counterparty under the Swap Agreement. Accordingly, in case of an early redemption of the Securities, Securityholders may receive less than the original amount invested in the relevant Securities. In addition, Securitiyholders may not be able to reinvest the proceeds of such redemption on equivalent terms and may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the relevant Securities. Potential investors should consider reinvestment risk in light of other investments available at that time. Possible decline in value of an underlying following an early redemption by the Relevant Issuer In case of a Tranche of Securities which are linked to an underlying and if such Securities are redeemed early by the Relevant Issuer, potential investors must be aware that any decline in the price of the underlying between the point of the early redemption announcement and the determination of the price of the underlying used for calculation of the early redemption amount shall be borne by the Securityholders. No Securityholder right to demand early redemption if not specified otherwise If the relevant Final Terms do not provide otherwise, Securityholders have no right to demand early redemption of the Securities during the term. In case the Relevant Issuer has the right to redeem the Securities early but provided that the Relevant Issuer does not exercise such right and it does not redeem the Securities early in accordance with the Terms and Conditions of the Securities, the realisation of any economic value in the Securities (or portion thereof) is only possible by way of their sale. Because the Global Securities (as defined in this Summary of the Base Prospectus of the Programme below) may be held by or on behalf of Euroclear Bank SA/NV ("Euroclear"), Clearstream Banking AG, Frankfurt am Main ("CBF"), Clearstream Banking société anonyme, Luxembourg ("Clearstream Luxembourg") and/or SIX SIS AG, Olten/Switzerland ("SIS"), or by or on behalf of any other relevant clearing system (each a "Clearing System") which may be relevant for a particular Tranche of Securities, Securityholders will have to rely on their procedures for transfer, payment and communication with the Relevant Issuer. Securities issued under the Programme may be represented by one or more Global Security/ies, or, if the Securities are governed by Swiss law, the Securities may alternatively be issued as uncertificated securities (Wertrechte) ("Uncertificated Securities"). Such Global Securities may be deposited with a common depositary for Euroclear and Clearstream Luxembourg or with CBF or with SIS or such other clearing system or such other respective common depositary as may be relevant for the particular Tranche of Securities. Securityholders will under no circumstances be entitled to receive definitive Securities. Euroclear, CBF, Clearstream Luxembourg, SIS or any other relevant clearing system, as the case may be, will maintain records of the beneficial interests in the Global Securities. While the Securities are represented by one or more Global Security/ies, Securityholders will be able to trade their beneficial interests only through Euroclear, CBF, Clearstream Luxembourg, SIS or any other relevant clearing system, as the case may be. While the Securities are represented by one or more Global Security/ies, the Relevant Issuer will discharge its payment obligations under the Securities by making payments to the common depositary for Euroclear and Clearstream Luxembourg or for CBF or for SIS or any other relevant clearing system, if any, for distribution to their account holders. A holder of a beneficial interest in a Global Security must rely on the procedures of Euroclear, CBF, Clearstream Luxembourg, SIS or of any other relevant clearing system, if any, to receive payments under the relevant Securities. The Relevant Issuer generally has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Securities. Securityholders of beneficial interests in the Global Securities will not have a direct right to vote in respect of the relevant Securities. Instead, such Securityholders will be permitted to act only to the extent that they are enabled by Euroclear, CBF, Clearstream Luxembourg; SIS or any other relevant clearing system, if any, to appoint appropriate proxies.

14 14 By registring the Uncertificated Securities or the Global Notes with SIS, Intermediate Securities (Bucheffekten) in accordance with the provisions of the Swiss Federal Intermediated Securities Act (Bucheffektengesetz) are created. The holder and legal owner of the Intermediated Securities is the person holding the Intermediated Securities in a securities account in its own name and for its own account with depositary (Verwahrungsstelle). In accordance with the provisions of the Swiss Federal Intermediated Securities Act (Bucheffektengesetz), Intermediated Securities are transferred and otherwise disposed of by instruction of the account holder to its depositary (Verwahrungsstelle) to transfer the Intermediated Securities and crediting the Intermediated Securities to the account of the transferee with its depositary (Verwahrungsstelle). If Securities are issued as Uncertificated Securities, unless otherwise stated in the relevant Final Terms of a Series of Securities, the holders of the Securities shall at no time have the right to demand the conversion of the uncertificated securities (Wertrechte) into, or the delivery of, a permanent global certificate (Globalurkunde) or definitive securities (Wertpapiere). By contrast, the Relevant Issuer shall have the right to effect the conversion of the uncertificated securities (Wertrechte) into a permanent global certificate (Globalurkunde). Irrespective of whether the Securities are represented by a Global Note or issued as Uncertificated Securities, the Relevant Issuer has no responsibility or liability under any circumstances for any acts and omissions of Euroclear, CBF, Clearstream Luxembourg, SIS or any other relevant clearing system as well as for any losses which might occur to a Securityholder out of such acts and omission in general and for the records relating to, or payments made in respect of, beneficial interests in the Global Notes or in the Uncertificated Securities, as the case may be, in particular. Further factors influencing the value of the Securities in case of Securities linked to an underlying The value of the Securities is determined not only by changes in market prices, changes in the price of an underlying, but also by several other factors. More than one risk factor can influence the value of the Securities at any one time, so that the effect of an individual risk factor cannot be predicted. Moreover, more than one risk factor may have a compounding effect that is also unpredictable. No definitive statement can be made with respect to the effects of combined risk factors on the value of the Securities. These risk factors include the term of the Securities and the frequency and intensity of price fluctuations (volatility) of the underlying as well as general interest and dividend levels. Consequently, the Securities may lose value even if the price of an underlying increases. Investors have No Shareholder Rights The Securities convey no interest in the underlying, including any voting rights or rights to receive dividends, interest or other distributions, as applicable, or any other rights with respect to an underlying. The Relevant Issuer, any manager(s) and/or their respective affiliates may choose not to hold the underlying or any derivatives contracts linked to the underlying. Neither the Relevant Issuer, any manager(s) nor their respective affiliates is restricted from selling, pledging or otherwise conveying all right, title and interest in any underlying or any derivatives contracts linked to the underlying by virtue solely of it having issued the Securities. Transactions to offset or limit risk Any person intending to use the Securities as a hedging instrument should recognise the correlation risk. The Securities may not be a perfect hedge to an underlying or portfolio of which the underlying forms a part. In addition, it may not be possible to liquidate the Securities at a level which directly reflects the price of the underlying or portfolio of which the underlying forms a part. Potential investors should not rely on the ability to conclude transactions during the term of the Securities to offset or limit the relevant risks; this depends on the market situation and, in case of Securities linked to an underlying, the specific underlying conditions. It is possible that such transactions can only be concluded at an unfavourable market price, resulting in a corresponding loss for the investor.

15 15 Expansion of the spread between bid and offer prices In special market situations, where the Relevant Issuer is completely unable to conclude hedging transactions, or where such transactions are very difficult to conclude, the spread between the bid and offer prices which may be quoted by the Relevant Issuer may be temporarily expanded, in order to limit the economic risks to the Relevant Issuer. Thus, Securityholders selling their Securities on an exchange or on the over-the-counter market may be doing so at a price that is substantially lower than the actual value of the Securities at the time of sale. Effect on the Securities of hedging transactions by the Relevant Issuer The Relevant Issuer may use a portion of the total proceeds from the sale of the Securities for transactions to hedge the risks of the Relevant Issuer relating to the relevant Tranche of Securities. In such case, the Relevant Issuer or a company affiliated with it may conclude transactions that correspond to the obligations of the Relevant Issuer under the Securities. As a rule, such transactions are concluded prior to or on the Issue Date, but it is also possible to conclude such transactions after issue of the Securities. On or before a valuation date, if any, the Relevant Issuer or a company affiliated with it may take the steps necessary for closing out any hedging transactions. It cannot, however, be ruled out that the price of an underlying, if any, will be influenced by such transactions in individual cases. Entering into or closing out these hedging transactions may influence the probability of occurrence or non-occurrence of determining events in the case of Securities with a value based on the occurrence of a certain event in relation to an underlying. No Deposit Protection The Securities are neither protected by the Deposit Protection Fund of the Association of German Banks (Einlagensicherungsfonds des Bundesverbandes deutscher Banken e.v.) nor by the German Deposit Guarantee and Investor Compensation Act (Einlagensicherungs- und Anlegerentschädigungsgesetz) nor by any other deposit protection scheme. 2. General Risks relating to Changes in Market Conditions Market Illiquidity There can be no assurance as to how the Securities will trade in the secondary market or whether such market will be liquid or illiquid or that there will be a market at all. If the Securities are not traded on any securities exchange, pricing information for the Securities may be more difficult to obtain and the liquidity and market prices of the Securities may be adversely affected. The liquidity of the Securities may also be affected by restrictions on offers and sales of the securities in some jurisdictions. The Relevant Issuer and any manager may, but is not so obliged, at any time purchase Securities at any price in the open market or by tender or private offer/treaty. In addition, the Swap Counterparty or any of its affiliates may purchase Securities at the time of their initial distribution and from time to time thereafter. Any Securities so purchased may be held or resold or surrendered for cancellation as further described herein. The more limited the secondary market is, the more difficult it may be for the Securityholders to realise value for the Securities prior to the exercise, expiration or maturity date. Market Value of the Securities The market value of the Securities will be affected by the creditworthiness of the Relevant Issuer which in turn depends primarily upon the creditworthiness of the issuer of the Bond Compartment Assets and the creditworthiness of the Swap Counterparty. Furthermore, a number of additional factors, such as the value of the Reference Assets or the Index, including, but not limited to, the volatility of the index, the dividend rate on Underlying Securities, or the dividend on the securities taken up in the Index, the issuer of the Underlying Securities financial results and prospects, market interest yield rates, market liquidity and the time remaining to the maturity date may also influence the market value of the Securities. Market price risk Historic performance The historic price of Securities should not be taken as an indicator of future performance of such Securities. It is not foreseeable whether the market price of Securities will rise or fall. The Relevant Issuer gives no guarantee that the spread between purchase and selling prices is within a certain range or remains constant.

16 16 3. Risks Relating to specific Product Categories General Risks in respect of Structured Securities In general, issues of Securities may feature a number of different economic and/or legal elements including, but not limited to, a combination of different types of interest rates or interest mechanisms (including, but not limited to, range accrual or target mechanisms), specific redemption mechanisms (including, but not limited to, an automatic redemption or a target redemption mechanism) or no periodic payments of interest at all. Securities issued under the Programme may also be structured in a way whereby payments of interest, if any, and/or redemption is determined by reference to the performance of one or more index/indices, equity security/equity securities, bond/bonds, commodity/commodities, currency/currencies or reference interest rate/rates, which may entail significant risks not associated with similar investments in a conventional debt security. Next to certain risks described below in relation to specific structures, such risks may include, without limitation, the following risks: - that Securityholders may receive no interest at all or that the resulting interest rate will be less than that payable on a conventional debt security at the same time; - that the market price of such Securities falls as a result of changes in the market interest rates; - that the market price of such Securities is more volatile than, e.g., prices of Fixed Rate Securities; - that Securityholders could lose all or a substantial portion of their principal held of these Securities; - no interest being payable on the Securities in the event that a reference rate increases or decreases and as a result of this the reference rate remains outside a pre-determined range throughout an entire interest period; or - fluctuating interest rate levels making it impossible to determine the yield of the Securities in advance. Fixed Rate Securities and Step-up / Step-down Securities A holder of Fixed Rate Securities is exposed to the risk that the price of such Securities falls as a result of changes in the market interest rate. While the nominal interest rate of Fixed Rate Securities is fixed during the life of such Securities, the current interest rate on the capital market ("market interest rate") typically changes on a daily basis. As the market interest rate changes, the price of Fixed Rate Securities also changes, but in the opposite direction. If the market interest rate increases, the price of Fixed Rate Securities typically falls, until the yield of such Securities is approximately equal to the market interest rate. If the market interest rate falls, the price of Fixed Rate Securities typically increases, until the yield of such Securities is approximately equal to the market interest rate. If the holder of Fixed Rate Securities holds such Securities until maturity, changes in the market interest rate are without relevance to such holder as the Securities will be redeemed at a specified redemption amount, usually the principal amount of such Securities. The same risks apply to Step-up and Step-down Securities if the market interest rates in respect of comparable Securities are higher then the rates applicable to such Securities. Floating Rate Securities A holder of Floating Rate Securities is exposed to the risk of fluctuating interest rate levels and uncertain interest income. Fluctuating interest rate levels make it impossible to determine the yield of Floating Rate Securities in advance. Reverse Floating Rate Securities The interest income from Reverse Floating Rate Securities is calculated in reverse proportion to the reference rate: if the reference rate increases, interest income decreases, whereas it increases if the reference rate decreases. Unlike the price of ordinary Floating Rate Securities, the price of Reverse Floating Rate Securities is highly dependent on the yield of Fixed Rate Securities having the same maturity. Price

17 17 fluctuations of Reverse Floating Rate Securities are parallel but are substantially sharper than those of Fixed Rate Securities having a similar maturity. Securityholders are exposed to the risk that long-term market interest rates will increase even if short-term interest rates decrease. In this case, increasing interest income cannot adequately offset the decrease in the reverse floating note's price because such decrease is disproportionate. Fixed to Floating Rate Securities Fixed to Floating Rate Securities bear interest at a rate that the Relevant Issuer may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Such Relevant Issuer's ability to convert the interest rate will affect the secondary market and the market value of the Securities since the Relevant Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Relevant Issuer converts from a fixed rate to a floating rate, the spread on the Fixed to Floating Rate Securities may be less favourable than the prevailing spreads on comparable Floating Rate Securities relating to the same reference rate. In addition, the new floating rate at any time may be lower than the interest rates payable on other Securities. If the Relevant Issuer converts from a floating rate to a fixed rate, the fixed rate may be lower than the then prevailing interest rates payable on its Securities. Constant Maturity Swap ("CMS") Spread-Linked Securities The Terms and Conditions of CMS Spread-Linked Securities may provide for a variable interest rate (except for a possible agreed fixed rate payable to the extent provided for in the Terms and Conditions of CMS Spread-Linked Securities) which is dependent on the difference between rates for swaps having different terms. Investors purchasing CMS Spread-Linked Securities expect that, during the term of the CMS Spread- Linked Securities, the interest curve will not, or only moderately, flatten out. In the event that the market does not develop as anticipated by the Securityholder and that the difference between rates for swaps having different terms decreases to a greater extent than anticipated, the interest rate payable on the CMS Spread-Linked Securities will be lower than the interest level prevailing as at the date of purchase. In a worst case scenario, no interest will be payable. In such cases, the price of the CMS Spread-Linked Securities will also decline during the term. Range Accrual Securities The Terms and Conditions of Range Accrual Securities may provide for the interest payable (except for a possible agreed fixed rate payable to the extent provided for in the Terms and Conditions of Range Accrual Securities) to be dependent on the number of days during which the reference rate specified in the Terms and Conditions of Range Accrual Securities is within a certain interest range. The interest payable on the Range Accrual Securities decreases depending on the number of determination dates during which the reference rate remains outside the interest range. No interest may be payable in the event that the reference rate increases or decreases significantly and remains outside the interest range throughout an entire interest period. Target Interest Range Accrual Securities The interest payable on the Target Interest Range Accrual Securities (except for the possible agreed fixed rate payable to the extent provided for in the Terms and Conditions of Target Interest Range Accrual Securities) is dependent on the number of days during which the reference rate specified in the Terms and Conditions of Target Interest Range Accrual Securities remains within a certain interest range. The interest payable on the Target Interest Range Accrual Securities decreases depending on the number of determination dates during which the reference rate remains outside the interest range. No interest may even be payable in the event that the reference rate remains outside the interest range throughout one (or more) entire interest period(s). At the end of the term of the Target Interest Range Accrual Securities, Securityholders may be paid a total interest at the rate of the target interest as provided for in the Terms and Conditions of Target Interest Range Accrual Securities. Target Interest Securities/Target Redemption Securities The automatic redemption feature of Target Interest Securities/Target Redemption Securities may limit their market value. Due to the overall maximum amount of interest paid under Target Interest

18 18 Securities/Target Redemption Securities, even in a favourable market/interest environment, their market value may not rise substantially above the price at which they can be redeemed. The automatic redemption may take place when the cost of borrowing is generally lower than at the Issue Date of the Securities. At those times, Securityholders generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the target interest Securities being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time. Zero Coupon Securities Zero Coupon Securities do not pay current interest but are typically issued at a discount from their nominal value. Instead of periodical interest payments, the difference between the redemption price and the Issue Price constitutes interest income until maturity and reflects the market interest rate. A holder of Zero Coupon Securities is exposed to the risk that the price of such Securities falls as a result of changes in the market interest rate. Prices of Zero Coupon Securities are more volatile than prices of Fixed Rate Securities and are likely to respond to a greater degree to market interest rate changes than interest bearing Securities with a similar maturity. General Risks in respect of Structured Securities In general, an investment in Securities by which payments of interest, if any, and/or redemption is determined by reference to the performance of one or more index/indices, equity security/equity securities, bond/bonds, commodity/commodities, currency/currencies or reference interest rate/rates, may entail significant risks not associated with similar investments in a conventional debt security. Such risks include the risks that the Securityholder may receive no interest at all, or that the resulting interest rate will be less than that payable on a conventional debt security at the same time and/or that the holder of such Securities could lose all or a substantial portion of the principal of his Securities. In addition, potential investors should be aware that the market price of such Securities may be very volatile (depending on the volatility of the relevant underlying/underlyings). Index Linked Securities Index Linked Securities are debt securities which do not provide for predetermined redemption amounts and/or interest payments but amounts due in respect of principal and/or interest will be dependent upon the performance of the Index, which itself may contain substantial credit, interest rate or other risks. The redemption amount and/or interest, if any, payable by the Relevant Issuer might be substantially less than the Issue Price or, as the case may be, the purchase price invested by the Securityholder and may even be zero in which case the Securityholder may lose his entire investment. Equity Linked Securities Equity Linked Securities are debt securities which do not provide for predetermined redemption amounts and/or interest payments. Redemption amounts and/or interest payments will depend on the market value of the Underlying Securities which might be substantially less than the Issue Price or, as the case may be, the purchase price invested by the Securityholder and may even be zero in which case the Securityholder may lose his entire investment. If the Underlying Securities are to be delivered instead of cash redemption, the value of such securities may also be substantially less than the Issue Price or, as the case may be, the purchase price invested by the Securityholder. Bond Linked Securities Bond Linked Securities are debt securities which do not provide for predetermined redemption amounts and/or interest payments. Redemption amounts and/or interest payments will depend on the market value of the Underlying Securities which might be substantially less than the Issue Price or, as the case may be, the purchase price invested by the Securityholder and may even be zero in which case the Securityholder may lose his entire investment. If the Underlying Securities are to be delivered instead of cash redemption, the value of such securities may also be substantially less than the Issue Price or, as the case may be, the purchase price invested by the Securityholder.

19 19 Commodity Linked Securities Commodity Linked Securities are debt securities which do not provide for predetermined amounts and/or interest payments. Commodity Linked Securities may relate to one or more Relevant Commodit(y)(ies) and may bear interest at commodity linked interest amounts and/or will be redeemed at a Commodity Linked Redemption Amount, both of which will be calculated by reference to such Relevant Commodity or the Relevant Commodities, as the case may be. Fluctuations in the value of the Relevant Commodity will affect the value of the Commodity Linked Securities. The amount of principal and/or interest, if any, payable by the Relevant Issuer might be substantially less than the Issue Price or, as the case may be, the purchase price invested by the Securityholder and may even be zero in which case the Securityholder may lose his entire investment. In the case of resources and precious metals as underlyings, Investors should be aware of the fact, that such underlyings may globally nearly be traded non-stop in various time zones. This may lead to a determination of different values of the relevant underlying in different places. The relevant Terms and Conditions of the Securities and/or the relevant Final Terms will determine, which exchange or which trading platform and which timing is used to determine the value of the relevant underlying and to determine whether the relevant underlying went below or above certain barriers, if any. Currency Linked Securities Currency Linked Securities refer to a specific currency or dual currency and do not provide for a predetermined redemption or interest amount. Such payments depend on the performance of the underlying currency(ies) and may be substantially less than the issue or purchase price. B. Summary of the "Terms and Conditions of the Securities and Related Information" I. General Information Method of Issue Securities will be issued on a continuous basis in tranches (each a "Tranche"), each Tranche consisting of Securities which are identical in all respects. One or more Tranches, which are expressed to be consolidated and forming a single series and identical in all respects, but having different issue dates, interest commencement dates, issue prices and dates for first interest payments may form a series of Securities (each a "Series of Securities"). Further Securities may be issued as part of existing Series of Securities. The specific terms of each Tranche (which will be supplemented, where necessary, with supplemental terms and conditions, the "Supplemental Terms and Conditions") will be set forth in the relevant final terms. In the context of the issue of Securities under this Programme, from time to time, Securities may also be referred to as notes (the "Notes") or certificates (the "Certificates"), whereby these terms shall include Notes and Certificates represented by physical securities as well as Notes and Certificates formed as Uncertificated Securities (Wertrechte), unless otherwise defined in this Programme, and whereby Certificates issued under German law are Securities within the meaning of 793 German Civil Code. In connection with the issue of Securities all references in this summary to "Securityholders" shall be regarded as references to "Noteholders" or "Certificateholders", as the case may be and as the context requires. Currencies and Regulatory Matters Subject to any applicable legal or regulatory restrictions, the currency of Securities may be any currency agreed between the Relevant Issuer and any relevant manager(s). Denomination of Securities Securities will be issued in such denominations as may be agreed between the Relevant Issuer and any relevant manager(s) and specified in the relevant Final Terms. The minimum denomination of the Securities will be Euro 1,000 or, if any currency other than Euro, in an amount in such other currency equivalent to or nearly equivalent to Euro 1,000 at the time of the issue of the Securities but may be lower for issues of Securities giving the right to acquire any transferable securities or to receive a cash amount, as a consequence of their being converted or the rights conferred by them being exercised, provided that the Relevant Issuer is not the Relevant Issuer of the underlying securities or an entity belonging to the group of the latter issuer.

20 20 Maturities Such maturities as may be agreed between the Relevant Issuer and any relevant manager(s), subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Relevant Issuer or the relevant specified currency, as stated in the relevant Final Terms. Issue Price Securities may be issued at an issue price which is at par or at a discount to, or premium over, par. The Issue Price may be more than the market value of Securities as at the date of the relevant Final Terms. The Issue Price may include embedded commissions payable to any relevant manager(s) and/or a distributor or distributors. Form of Securities governed by German law The Securities will be issued in bearer form. The Securities will be represented by one or more global security/ies (each a "Global Security" and together, the "Global Securities") without coupons which shall be signed manually by one or more authorised signatory/ies of the Relevant Issuer and shall be authenticated by or on behalf of the Fiscal Agent. The Securityholders will not have the right to demand or to receive definitive securities under any circumstances. Hence, definitive securities will not be printed. Form of Securities governed by Swiss law Securities governed by Swiss law may be issued either in bearer form or in the form of Uncertificated Securities (Wertrechte). If such Securities are issued in bearer form, they will be represented by a global note in bearer form (each a "Global Note"). If such Securities are issued in the form of Uncertificated Securities, they are issued in accordance with article 973c of the Swiss Federal Code of Obligations (SCO). According to article 973c SCO, uncertificated securities have the same function as physical securities. The debtor runs a register of uncertificated securities in which number and denomination of the uncertificated securities and the first holders are entered. Uncertificated securities are created by registration in the register of uncertificated securities (Wertrechtebuch) and transferred by means of written assignment. By registring the Uncertificated Securities or the Global Notes with SIS, Intermediate Securities (Bucheffekten) in accordance with the provisions of the Swiss Federal Intermediated Securities Act (Bucheffektengesetz) are created. The holder and legal owner of the Intermediated Securities is the person holding the Intermediated Securities in a securities account in its own name and for its own account with depositary (Verwahrungsstelle). In accordance with the provisions of the Swiss Federal Intermediated Securities Act (Bucheffektengesetz), Intermediated Securities are transferred and otherwise disposed of by instruction of the account holder to its depositary (Verwahrungsstelle) to transfer the Intermediated Securities and crediting the Intermediated Securities to the account of the transferee with its depositary (Verwahrungsstelle). If Securities are issued as Uncertificated Securities, unless otherwise stated in the relevant Final Terms of a Series of Securities, the holders of the Securities shall at no time have the right to demand the conversion of the uncertificated securities (Wertrechte) into, or the delivery of, a permanent global certificate (Globalurkunde) or definitive securities (Wertpapiere). By contrast, the Relevant Issuer shall have the right to effect the conversion of the uncertificated securities (Wertrechte) into a permanent global certificate (Globalurkunde). Description of Securities Securities may be either interest bearing at fixed or floating rates or non-interest bearing, with principal repayable at a fixed amount or by reference to a formula, index or other parameters as may be agreed between the Relevant Issuer and any relevant manager(s) and as specified in the Final Terms.