1

New Global Note structurefor

international bearer debt securitiesissued through the ICSDs

1 June 2006

2

• The international debt market

• New Global Note

• Legal framework

• Market impacts

• Additional information

3

International debt marketKey features

The international debt market features instruments that are initially issued (and subsequently traded) across borders and has the following features:

• Wide range of issuers• Different jurisdictions• Deposited with ICSDs• Multi-currency• Multi-product• Can be offered simultaneously to investors in a number of

countries• Often stock exchange listed (although the bulk of trading is over-

the-counter)

4

International debt marketAttractiveness of international debt securities

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Q1

2003Q2

2003Q3

2003Q4

2004Q1

2004Q2

US

Dol

lar B

illio

ns

International Debt SecuritiesFrance Germany Italy

Key features:

• Accessibility

• Price

• Liquidity

Data source: www.bis.org

5

International debt marketEurosystem collateral eligibility

• Eurosystem: the ECB and the National Central Banks of member states which have adopted the single currency

• Principal objectives of the Eurosystem are price stability and support of the general economic policies of the European Community

• Eurosystem uses monetary policy instruments to help steer interest rates and manage liquidity

• Liquidity provided to the market via monetary policy instrumentsusually requires the placement of “eligible collateral”

• More information on www.ecb.int

6

International debt marketEurosystem collateral eligibility

Eurosystem collateral eligibility criteria (amongst other requirements):• euro-denominated• debt • issued by an EEA , G10 or supranational issuer• meets high credit standards • is listed or quoted on a regulated market or an approved non

regulated market• is settled in the Eurozone• is held with a Securities Settlement System (SSS) complying

with further Eurosystem criteria• More information on

http://www.ecb.int/pub/pdf/other/gendoc2005en.pdf

7

• The International debt market

• New Global Note

• Legal framework

• Market impacts

• Additional information

8

New Global NoteClassical Global note (CGN) Structure

International securities issued in CGN form

EuroclearICSD

Clients

Issuer

Common Depositary

Clearstream

IssuerAgent

Issuing & PayingAgency

Agreement

Common DepositaryAgreement

Terms & Conditions / Operating

Procedures / Customer Handbook

9

New Global NoteTrigger of the new structure

• Request from Eurosystem leads to the proposal of a new structure for securities to be recognised as eligible collateral

• The new structure will be mandatory for Eurosystem collateral eligible securities as of 1 January 2007

• The NGN structure can also be used at issuer’s choice for other bearer debt securities

10

New Global NoteNew structure

ICSD

Clients

Issuer

CSK

Euroclear

Clearstream

IssuerAgent

Issuing & PayingAgency

Agreement

CSKAgreement

Terms & Conditions / Operating

procedures / Customer handbook

CSP

CSPAgreement

Issuer- ICSD Agreement

Issuer- ICSD Agreement

ICSD

Clients

Issuer

CSK

Euroclear

Clearstream

IssuerAgent

Issuing & PayingAgency

Agreement

CSKAgreement

Terms & Conditions / Operating

procedures / Customer handbook

CSP

CSPAgreement

Issuer- ICSD Agreement

International securities issued in NGN form

11

New Global NoteKey features

• Bearer form securities

• New type of global certificate: New Global Note (NGN)

• Issue Outstanding Amount (IOA) = ICSDs’ records → No need for physical annotation of the Global Note

• Issuer-ICSD agreement

• Two new types of agents:– Common Safekeeper (CSK): commercial banks or ICSDs– Common Service Provider (CSP): commercial banks

12

New Global NoteOverview of the dual structure

Global BearerGlobal Bearer or RegisteredLegal form of security

International debt securitiesInternational securities Type of security

CSK (Bank or ICSD)CDSafekeeping

ICSDsCDLegal record keeper

CSPCDAsset servicing

As from 30 June 2006Since 1986Date of existence

Yes, if deposited with ICSD CSK

Yes, for securities issued before 1 January 2007

Eligibility for Eurosystem monetary policy and credit operations

NGNCGN

13

New Global NoteCollateral eligibility

As from 1 January 2007 collateral eligible international debt securitiesin bearer form will have to comply with:

• The current collateral eligibility criteria, AND

• New criteria:

– NGN form– Kept in safe custody with an ICSD CSK

Grandfathering will apply for securities issued before 1 January 2007

14

New Global NoteCollateral eligibility for securities issued through the ICSDs

30 Jun 1 Jan

As from 1 January 2007, Eurosystem collateral eligibility

= current Eurosystem criteria + NGN form + ICSD CSK

NGN + Commercial bank CSK

NGN + ICSD CSK

CGN

CGN

Not potentiallyeligible

Potentially eligible

Not potentiallyeligible

Potentially eligible

15

• The International debt market

• New Global Note

• Legal framework

• Market impacts

• Additional information

16

Legal frameworkPrinciples

New or updated legal documents:

• New Global Note (NGN)

• Effectuation authorisation

• Issuer-ICSD Agreement

• Legal Opinions for four jurisdictions: England, Germany, Netherlands, New York

• Model provisions for offering documentation

• Standard clauses for Trust Deeds / Issuing and Paying Agent Agreements

17

• The International debt market

• New Global Note

• Legal framework

• Market impacts

• Additional information

18

Market ImpactsGeneric

• New operational flows had to be designed for the NGN structure when necessary

• Changes led to optimisation of the operational flows

• Harmonisation of the current and new flows

• Standard Market Protocol to promote the changes to the market

19

Market impactsIssuance process

Common Safekeeper

LeadManager

NIAccount

Syndicate/Allottees

Positioning

Euroclear

ClearstreamCommon Service Provider

Confirm receipt and validity of the NGN

Confirm Mark Up + Instruction

to credit LM account

Mark Up Instruction

€ €€

Issuer€

CS358F

20

Market ImpactsImpact for issuers• Specific form of security (NGN) deposited with a CSK

• Updated offering documentation

• Issuer-ICSD Agreement

• Legal opinion on validity and enforceability of NGN (except in four markets covered by WG opinions)

• Effectuation authorisation

21

Market ImpactsImpact for issuer agents and lead managersFor issuer agents and lead managers:

• Specific form of security NGN

• New issue documentation

• New procedure for New Issue issuance process.

For issuer agents only:

• New procedures/systems for reconciliation

• Enhanced procedures for Income and Corporate Actions processing

• New responsibilities created by the Issuer-ICSD Agreement

22

Market ImpactsImpact for investors• Eurosystem-eligibility maintained

• Communication of new criteria

• Improved asset servicing

23

• The International debt market

• New Global Note

• Legal framework

• Market impacts

• Additional information

24

Additional informationProject organisation

• Working Group

• Market Advisory Group

25

Additional informationDocuments covering the NGN structure

• NGN brochure • FAQ• Legal pack including:

• NGN templates• standard provisions for agency agreements• standard provisions for offering documentation• Issuer-ICSD agreement• Effectuation authorisation • Operating & Administrative Procedures Memorandum

• NGN New Issues Procedures

26

Additional informationWhere to obtain additional information

www.capmktserv.comNGN@capmktserv.com

www.clearstream.comNGN@clearstream.com+ 352 243 32119

www.euroclear.comNGN@euroclear.com+ 32 2 224 4527

www.icma-group.orgNGN@icma-group.org