* This document is signed on behalf of Allen & Overy, a société en commandite simple, registered on list V of the Luxembourg bar. The individual signing this document is a qualified

lawyer representing this entity.

Allen & Overy, société en commandite simple, is an affiliated office of Allen & Overy LLP. Allen & Overy LLP or an affiliated undertaking has an office in each of: Abu Dhabi,

Amsterdam, Antwerp, Athens, Bangkok, Beijing, Belfast, Bratislava, Brussels, Bucharest (associated office), Budapest, Casablanca, Doha, Dubai, Düsseldorf, Frankfurt, Hamburg,

Hanoi, Ho Chi Minh City, Hong Kong, Istanbul, Jakarta (associated office), London, Luxembourg, Madrid, Mannheim, Milan, Moscow, Munich, New York, Paris, Perth, Prague,

Riyadh (associated office), Rome, São Paulo, Shanghai, Singapore, Sydney, Tokyo, Warsaw and Washington, D.C.

Allen & Overy

société en commandite simple, inscrite au barreau de Luxembourg

MEMORANDUM

To Breda Walsh

International Swaps and Derivatives Association, Inc.

New York

(by e-mail)

Steve Bradbury / Maria Banks / Beth Thompson / Barbara Wierzynski

Futures Industry Association

Washington, DC

(by e-mail)

From Henri Wagner / Anne-George Kuzuhara

Our ref 0030047-0001012 LU:6636384.5

Date 4 December 2013

Subject Memorandum of law on the enforceability under Luxembourg law of the

liquidation, set-off, netting and credit support provisions of certain futures account

agreements and a cleared derivatives addendum upon a customer’s default or

insolvency

This memorandum of law (the Memorandum) examines the enforceability, under the laws of the Grand

Duchy of Luxembourg (Luxembourg), of the liquidation, set-off, netting and credit support provisions, upon

a customer’s default or insolvency, of:

(a) certain Covered Base Agreements (as defined below) entered into by an entity that is registered with

the United States Commodity Futures Trading Commission (the CFTC) as a futures commission

merchant (FCM) and is a member of one or more CFTC-registered derivatives clearing

organisations (each such FCM, a Clearing Member) and such Clearing Member’s Covered

Customer (as defined below), setting forth the right of such Clearing Member, upon the occurrence

of an event giving rise to any right of such Clearing Member to liquidate all Futures Transactions (as

defined below), to liquidate such transactions and to determine amounts owing with respect thereto,

to exercise remedies in respect of Futures Payment Rights (as defined below) and rights of netting

and set-off with respect to obligations arising from Futures Transactions and to apply Futures Credit

Support (as defined below) transferred by a Covered Customer in connection therewith; and

(b) an addendum for Cleared Derivatives Transactions (a CDA), entered into by a Clearing Member and

such Clearing Member’s Covered Customer, setting forth the right of such Clearing Member, upon

the occurrence of an event giving rise to any right of such Clearing Member to liquidate either (i) all

0030047-0001012 LU:6636384.5 2

Cleared Derivatives Transactions (as defined below) or (ii) any Cleared Derivatives Transactions

affected by a Tax Liquidation Event (as defined in the form of Cleared Derivatives Addendum

published by the Futures Industry Association (FIA) and the International Swaps and Derivatives

Association, Inc. (ISDA)) under a Covered Base Agreement, to liquidate such transactions and to

determine amounts owing with respect thereto, to exercise remedies in respect of Cleared

Derivatives Payment Rights (as defined below) and rights of netting and set-off with respect to

obligations arising from Cleared Derivatives Transactions, to apply Cleared Derivatives Credit

Support (as defined below) transferred by a Covered Customer in connection therewith and to offset

obligations arising from Cleared Derivatives Transactions against Cleared Derivatives Credit

Support transferred to the Covered Customer.

This Memorandum is limited to the matters stated herein and does not extend, and is not to be read as

extending by implication, to any other matters.1 It is based exclusively on, and relates solely to matters of,

Luxembourg laws as now in force. To the extent that we have not reviewed any draft Covered Base

Agreement or CDA, this Memorandum has been prepared on the basis of the description of the proposed

contractual framework set forth in your e-mailed letter dated 1 October 2013 (the Instruction Letter) and is

subject to the assumptions and comments made below. This Memorandum applies to any and all Covered

Transactions and to the types of counterparties referred to in Appendix B below.

This Memorandum is addressed to ISDA and FIA solely for the benefit of their members in relation to the

matters referred to herein. This Memorandum may not be relied upon by any other person or used,

circulated, quoted or otherwise referred to or relied upon for any other purpose without our prior written

consent.

Paragraph Page

1. Assumptions .................................................................................................................................... 3 1.1 Covered Customers ....................................................................................................... 3 1.2 Covered Base Agreements ............................................................................................. 3 1.3 The CDA ....................................................................................................................... 4 1.4 The FCM clearing model ............................................................................................... 6 1.5 General assumptions ...................................................................................................... 6

2. Derivative transactions and netting under Luxembourg law .............................................................. 9 2.1 General legal features .................................................................................................... 9 2.2 Specific legal framework ............................................................................................. 10 2.3 Basic features of Luxembourg insolvency laws ............................................................ 13

3. Netting under a Covered Base Agreement and CDA ....................................................................... 18 4. Collateral under a Covered Base Agreement and CDA ................................................................... 22 5. Miscellaneous ................................................................................................................................ 29

1 In particular, this Memorandum is limited to the matters stated herein and does not extend, and is not to be read as extending by implication, to

compliance with, or the effects of (including any unenforceability as a result of a failure to comply with) (i) any Luxembourg laws and

regulations of the financial sector (including applicable circulars of the CSSF (as defined below)), (ii) any European regulation directly

applicable into the laws of the European member States (including Luxembourg), including, but not limited to, the Regulation (EU) No

648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories

(EMIR) and the relevant implementing and regulatory technical standards of the European Commission, (iii) any Luxembourg laws

transposing European Directives, including but not limited to, Directive 2011/61/EU of the European Parliament and of the Council of 8

June 2011 on Alternative Investment Fund Managers (AIFMD), and (iv) Luxembourg laws applicable to natural persons, including but

not limited to, the regime applicable to individuals in a situation of over-indebtedness.

0030047-0001012 LU:6636384.5 3

1. ASSUMPTIONS

1.1 Covered Customers

This Memorandum addresses and covers the types of counterparty to a Covered Base Agreement and

a CDA listed in Appendix B below (the Covered Customers, and each a Covered Customer), to

the exclusion of any other counterparty.

1.2 Covered Base Agreements

(a) Pursuant to a futures customer account agreement (a Covered Base Agreement) entered into

between a Clearing Member and a Covered Customer, the Clearing Member agrees to carry one or

more accounts on behalf of that Covered Customer (each, an Account) and to execute, carry and

clear transactions for the purchase or sale of commodities for future delivery on, or subject to the

rules of a derivatives clearing organization (a DCO) registered as such under the United States

Commodity Exchange Act (the CEA) or traded on, or subject to the rules of, a board of trade outside

the United States (the U.S.) (such contracts executed on a contract market designated pursuant to

Section 5 of the CEA and cleared by a U.S.-registered DCO, a U.S. Futures, and such contracts

traded on or subject to the rules of, a board of trade outside the U.S., and options thereon, a Foreign

Futures, and together with the U.S. Futures, a Futures) and/or options on U.S. Futures subject to

Part 33 of the rules of the CFTC (such contracts, Options, and collectively with Futures, Futures

Transactions). With respect to Foreign Futures, the Clearing Member acts for the Covered

Customer by carrying Foreign Futures on the Covered Customer’s behalf with, and guaranteeing the

Covered Customer’s performance to, clearing members (the Foreign Clearing Members) of the

relevant foreign clearinghouses, which Foreign Clearing Members may frequently be affiliates of the

Clearing Member, and the Foreign Clearing Members will, in turn, enter into back-to-back futures

transactions cleared by foreign clearinghouses.

(b) Each Covered Base Agreement is governed by New York law.

(c) Pursuant to a Covered Base Agreement, the Covered Customer agrees to transfer, as applicable,

initial margin and variation margin payments as the Clearing Member may require in respect of the

Covered Customer’s Futures Transactions. Also, pursuant to the Covered Base Agreement, the

Covered Customer grants a security interest to the Clearing Member in all of the Covered

Customer’s rights in the following property, whether at the time of the grant or thereafter existing:

(i) with respect to U.S. Futures and Options, its Account and all assets credited thereto,

including assets held by a DCO, as well as other property of the Covered Customer held in

respect of Futures Transactions by or for the Clearing Member, the DCO or any agent acting

for the Clearing Member, the DCO or the Covered Customer;

(ii) with respect to Foreign Futures, its Account and all assets credited thereo, including assets

held by a foreign clearing member or foreign clearing house, as well as other property of the

Covered Customer held in respect of Futures Transactions by or for, or for the Account and

due from, the Clearing Member, any foreign clearing member, any foreign clearing house or

others, or any agent acting for the Clearing Member, any foreign clearing member, any

foreign clearing house or others;

(iii) with respect to U.S. Future and Options, its Futures Transactions and all rights to payment

thereunder whether constituting obligations of the Clearing Member or a DCO; and

(iv) with respect to Foreign Futures, its Futures Transactions and all rights to payment

thereunder (whether constituting obligations of the Clearing Member, a foreign clearing

member or a foreign clearing house).

0030047-0001012 LU:6636384.5 4

The Accounts and assets referred to under sub-paragraphs (i) and (ii) above shall collectively be

referred to as Futures Credit Support. The Accounts and assets referred to under sub-paragraphs

(iii) and (iv) above shall collectively be referred to as Futures Payment Rights.

The security interest secures all obligations of the Covered Customer to the Clearing Member under

the Covered Base Agreement.

(d) A Covered Base Agreement contains one or more events of default (whether or not described therein

as “events of default”) (each, an Event of Default) the effect of which is to give the Clearing

Member the right to liquidate the Futures Transactions held in the Covered Customer’s Account

(Futures Liquidation Rights). Among such Events of Default are defaults predicated on (A) a

Covered Customer’s filing under applicable bankruptcy or similar insolvency laws, (B) the filing of

a petition for the commencement of involuntary proceedings in respect of the Covered Customer

under applicable bankruptcy or similar insolvency laws which filing results in a judgment of

insolvency or bankruptcy or an order for relief and (C) the appointment in respect of the Covered

Customer or substantially all of its assets of an administrator, conservator, receiver or similar

official, including the possession and control of the property of the Covered Customer by such an

official pursuant to seizure orders. The terms of the Covered Base Agreement provide the Clearing

Member with the right as a secured party to exercise remedies in respect of Futures Payment Rights

and to net and set off amounts owing under Futures Transactions on account of their liquidation and

termination (collectively, the Futures Netting Rights).

(e) The Covered Base Agreement includes a provision the effect of which is to permit the Clearing

Member, upon the occurrence of an Event of Default in respect of a Covered Customer, to dispose of

or realise on all Futures Credit Support posted by the Covered Customer to the Clearing Member in

respect of Futures Transactions and net or apply the foregoing or the liquidation value thereof to any

obligations the Covered Customer owes to the Clearing Member under the Covered Base

Agreement. In this Memorandum, we refer to the foregoing collectively as “Futures Credit

Support Rights.”

A futures account agreement that does not alone satisfy the above requirements is nevertheless a

“Covered Base Agreement” to the extent it is paired with a CDA that supplies any of the otherwise

unsatisfied requirements.

1.3 The CDA

(a) In addition to entering into a Covered Base Agreement with the Covered Customer, the Clearing

Member and the Covered Customer execute the CDA. The CDA supplements a Covered Base

Agreement with respect to, among other things, the liquidation and netting of Cleared Derivatives

Transactions carried in the Covered Customer’s account holding Cleared Derivatives Transactions

(the Cleared Derivatives Account), as well as the application of collateral related to those Cleared

Derivatives Transactions. “Cleared Derivatives Transactions” are swaps, forwards, options, or

similar transactions (but excluding Futures Transactions executed on or subject to the rules of a U.S.

designated contract market or on a foreign board of trade and subject to regulation in that

jurisdiction) that are (a) entered into by a Covered Customer in the over-the-counter market, or (b)

executed or traded by such Covered Customer on or subject to the rules or protocols of any

multilateral or other trading facility, system or platform, including any communication network or

auction facility permitted under applicable law or any designated contract market and, in either case,

subsequently submitted to and accepted for clearing by a DCO and subject to the CFTC’s Part 22

rules. To the extent that a security-based swap is, in accordance with applicable law, carried by an

FCM in a cleared swaps customer account (as defined in the CFTC’s Part 22 rules), such security-

based swap constitutes a Cleared Derivatives Transaction. A list of example types of Cleared

Derivatives Transactions appears in Appendix A attached hereto.

0030047-0001012 LU:6636384.5 5

In this Memorandum, Cleared Derivatives Transactions and Futures Transactions shall be together

referred to as the Covered Transactions. We assume that this construction is legally valid, binding

and enforceable under New York law.

(b) Each CDA is governed by New York law.

(c) Pursuant to the CDA, Cleared Derivatives Transactions become incorporated into the related

Covered Base Agreement, which incorporation is accomplished by considering references to

“Contracts,” “Futures,” “Futures Contracts” and similar terms in such Covered Base Agreement to

include references to the Cleared Derivatives Transactions. Through this incorporation, the Covered

Customer grants a security interest to the Clearing Member in all of the Covered Customer’s rights

in the following property, whether at the time of the grant or thereafter existing:

(i) (1) its Cleared Derivatives Account and all assets credited thereto, including assets held by a

DCO, and (2) other property of the Covered Customer held in respect of Cleared Derivatives

Transactions by or for the Clearing Member, the DCO and any agent acting for the Clearing

Member, the DCO or the Covered Customer (collectively, Cleared Derivatives Credit

Support); and

(ii) its Cleared Derivatives Transactions and all rights to payment thereunder (whether

constituting obligations of the Clearing Member or a DCO) (collectively, Cleared

Derivatives Payment Rights).

(d) Pursuant to the CDA, following the occurrence of an Event of Default, the Clearing Member is

entitled to set off or apply any margin transferred to the Covered Customer under Cleared

Derivatives Transactions (Customer Received Margin) against obligations to the Covered

Customer under the CDA.

(e) The Clearing Member is entitled, upon the occurrence of an Event of Default, to designate a date and

thereupon cause the liquidation of a Covered Customer’s Cleared Derivatives Transactions (such

rights, the Cleared Derivatives Liquidation Rights). The Clearing Member is entitled to exercise

its remedies as a secured party in respect of Cleared Derivatives Payment Rights and to net amounts

owing in respect of liquidated Cleared Derivatives Transactions.

(f) Upon the liquidation of a Covered Customer’s Cleared Derivatives Transactions, the CDA provides

the Clearing Member with rights to (a) dispose of or realize on all Cleared Derivatives Credit

Support posted by the Covered Customer to the Clearing Member in respect of Cleared Derivatives

Transactions and set off or apply the foregoing or the liquidation value thereof to any obligations the

Covered Customer owes to Clearing Member under the CDA and (b) apply the value of any

Customer Received Margin against any obligations owed to the Covered Customer under the CDA

(such rights, the Cleared Derivatives Credit Support Rights).

We understand that the FIA-ISDA Cleared Derivatives Addendum in the form published jointly by the FIA

and ISDA satisfies the above requirements.

A CDA that does not alone satisfy the above requirements is nevertheless a “CDA” to the extent it is paired

with a Covered Base Agreement that supplies any of the otherwise unsatisfied requirements. In addition, a

single document that satisfies the above requirements for a Covered Base Agreement and a CDA is both a

“Covered Base Agreement” and a “CDA.”

0030047-0001012 LU:6636384.5 6

1.4 The FCM clearing model

(a) We understand that, unlike the bilateral model (where the clearing members transact with clearing

houses on a principal-to-principal basis) prevailing in most non-U.S. jurisdictions,2 under the FCM

clearing model, the ultimate counterparties to a derivatives contract that has been novated through

the clearing process, are (i) the FCM’s customer and (ii) the DCO that has accepted the FCM

customer’s derivative contract for clearing.3 In the context of a Covered Base Agreement and CDA,

the Covered Customer will accordingly interact with the DCO via its clearing FCM (the Clearing

Member). The Clearing Member will be exposed to the Covered Customer as, under applicable DCO

rules, the Clearing Member must meet the Covered Customer’s obligations to the DCO under the

Futures Transactions and Cleared Derivatives Transactions it clears regardless of whether the

Covered Customer itself performs. Thus, the DCO has two potential sources of payment under a

cleared derivatives contract, that is, the Covered Customer itself and the Clearing Member. The

Clearing Member, however, does not guarantee the obligations of the DCO to the Covered

Customer.

(b) We further understand that, following a Covered Customer’s default, the Clearing Member (liable to

the DCO for amounts owed by the Covered Customer under Futures Transactions and Cleared

Derivatives Transactions it clears for the Covered Customer) would want to reduce its exposure by

any amounts owing by the DCO to the Covered Customer. However, while the Clearing Member

owes the DCO in its capacity as a principal (by virtue of its obligation to perform for its Covered

Customer), the DCO, with respect to its derivatives contracts with the Covered Customer, owes not

the Clearing Member (who serves only as an intermediary and one-way guarantor) but the Covered

Customer. In some cases, amounts may be owed to and from different DCOs, which may raise

certain issues for the collection of amounts.4

(c) You have asked us to analyse whether the FCM model impact the availability of traditional set-off or

netting in Luxembourg and, if so, to consider whether the parties may achieve a similar result

through the grant of and perfection of a security interest in, and the exercise of remedies against,

collateral, including in particular the security interest in the Covered Customer’s right, title and

interest in (i) its contractual rights under its Futures Transactions and Cleared Derivatives

Transactions, (ii) its right to payment from DCOs in respect of those Futures Transactions and

Cleared Derivatives Transactions and (iii) the proceeds of such rights, which the Covered Customer

grants to the Clearing Member under the Covered Base Agreement and CDA (as described in

paragraphs 1.2 and 1.3 above).

1.5 General assumptions

In this Memorandum, we have assumed that:

(a) On the basis of the terms and conditions of a Covered Base Agreement and CDA and other relevant

factors, and acting in a manner consistent with the intentions stated in the Covered Base Agreement

and CDA, the parties over time enter into a number of Covered Transactions that are intended to be

governed by the Covered Base Agreement and CDA. The Covered Transactions entered into include

any or all of the transactions described in Appendix A.

2 That is, a transaction entered into by a customer is first novated to the clearing member, which subsequently enters into a back-to-back transaction

with a clearing house. 3 The Clearing Member accordingly acts as an agent for (and guarantor of) the Covered Customer by carrying a Covered Transaction on the Covered

Customer’s behalf with clearing members. However, legally-speaking, the Covered Transaction is ultimately between the Covered

Customer and the DCO. 4 We understand, for example, that in the case of amounts owing by one DCO to the Covered Customer, whereas amounts are owing by the Covered

Customer to other CDOs (for which the Clearing Member would be liable), the Clearing Member should be entitled to liquidate the

Covered Transactions and to collect amounts owed by the DCO to the Covered Customer to satisfy the obligations of the Covered

Customer to other DCOs (as the case may be).

0030047-0001012 LU:6636384.5 7

(b) Some of the Covered Transactions provide for an exchange of cash by both parties and others

provide for the physical delivery of shares, bonds or commodities in exchange for cash.

(c) After entering into these Covered Transactions and prior to the maturity thereof, the Covered

Customer, which is organized in Luxembourg, becomes the subject of a voluntary or involuntary

case under the insolvency laws of Luxembourg and, subsequent to the commencement of the

insolvency, either the Covered Customer or an insolvency official seeks to assume the profitable

Covered Transactions for the Covered Customer and reject the unprofitable Covered Transactions

for the Covered Customer or otherwise prevent the exercise of close-out rights by the Clearing

Member.

(d) Pursuant to the relevant Covered Base Agreement and CDA, the counterparties agree that collateral

will include cash credited to an account (as opposed to physical notes and coins) and certain types of

securities (as further described below) that are located or deemed located either (i) in Luxembourg,

or (ii) outside Luxembourg (the Eligible Collateral).

(e) Any securities provided as Eligible Collateral are denominated in either euros or any freely

convertible currency and consist of (i) corporate debt securities whether or not the issuer is organized

or located in Luxembourg; (ii) debt securities issued by the government of Luxembourg; and (iii)

debt securities issued by the government of a member of the “G-10” group of countries, in one of the

following forms:

(1) directly held bearer debt securities, that is, debt securities issued in certificated form, in

bearer form (meaning that ownership is transferable by delivery of possession of the

certificate) and, when held by a Clearing Member or a DCO as collateral under a Covered

Base Agreement and CDA, held directly in this form by the Clearing Member or a DCO

(that is, not held by the Clearing Member or DCO indirectly with an Intermediary (as

defined below));

(2) directly held registered debt securities, that is, debt securities issued in registered form and,

when held by a Clearing Member or DCO as collateral under a Covered Base Agreement

and CDA, held directly in this form by the Clearing Member or DCO so that the Clearing

Member or DCO is shown as the relevant holder in the register for such securities (that is,

not held by the Clearing Member or DCO indirectly with an Intermediary);

(3) directly held dematerialized debt securities, that is, debt securities issued in dematerialized

form and, when held by a Clearing Member or DCO as collateral under a Covered Base

Agreement and CDA, held directly in this form by the Clearing Member or DCO so that the

Clearing Member or DCO is shown as the relevant holder in the electronic register for such

securities (that is, not held by the Clearing Member or DCO indirectly with an Intermediary

(as defined below));

(4) intermediated debt securities, that is, a form of interest in debt securities recorded in fungible

book entry form in an account maintained by a financial intermediary (which could be a

central securities depositary (a CSD) or a custodian, nominee or other form of financial

intermediary, in each case, an Intermediary) in the name of the Clearing Member or DCO

where such interest has been credited to the account of the Clearing Member or DCO in

connection with a transfer of collateral by the Covered Customer to the Clearing Member

under a Covered Base Agreement and CDA.

The precise nature of the rights of the Clearing Member in relation to its interest in

intermediated debt securities and as against its Intermediary will be determined, among

others, by the law of the agreement between the Clearing Member and its Intermediary

relating to its account with the Intermediary, as well as the law generally applicable to the

0030047-0001012 LU:6636384.5 8

Intermediary, and possibly by other considerations arising under the general law or the rules

of private international law of Luxembourg. The Clearing Member’s Intermediary may

itself hold its interest in the relevant debt securities indirectly with another Intermediary or

directly in one of the three forms mentioned in (1), (2) and (3) above. In practice, there is

likely to be a number of tiers of Intermediaries between the Clearing Member and the issuer

of such securities, at least one of which will be an Intermediary that is a national or

international CSD.

We understand that the expectation is that the Clearing Member will normally hold debt

securities in the form of intermediated debt securities rather than directly in one of the three

forms mentioned in (1), (2) and (3) above.

(f) Due to regulatory requirements, collateral posted will be held by Intermediaries in a way that

identifies the collateral as belonging to customers of the Clearing Member. For example, if the

collateral is held by the Clearing Member or an Intermediary of the Clearing Member, that account

will show that it is held for customers generally and the Clearing Member’s books will show that the

collateral is held for the individual customer. If the Collateral is held by the DCO or an intermediary

of the DCO, that account will show that it is held for customers generally and the DCO’s books will

show that the collateral is held for the individual customer.

(g) Cash collateral is denominated in a freely convertible currency and is held in an account under the

control of the Clearing Member or DCO.

(h) In the case of cash collateral that is transferred to a Clearing Member as margin, such cash collateral

can be viewed either as a transfer of title in that cash to the Clearing Member, or as collateral in

which the Clearing Member can take a security interest.

(i) the Covered Base Agreement and the CDA are legally valid, binding and enforceable against the

contracting parties so far as the law by which they are governed is concerned;

(j) the Covered Base Agreement and the CDA have been duly authorised and are within each

contracting party's capacity, power and authority; and each contracting party has taken all necessary

corporate and other appropriate steps to execute, deliver and perform the Covered Base Agreement

and the CDA;

(k) the execution and delivery of the Covered Base Agreement and the CDA, including the documents

and other confirming evidence exchanged between the contracting parties confirming the Covered

Transactions have been duly authorised by all necessary actions on the part of either contracting

party;

(l) any payments made by or any security interest granted to one contracting party in any of the assets

of the other contracting party were not taken by a party in contemplation of the latter party's

insolvency or with the intent to hinder, delay or defraud that party or the creditors of that party;

(m) there is no fraud in connection with the Covered Base Agreement and the CDA;

(n) each of the Covered Transactions was entered into, and each payment or delivery made thereunder

was made, at arm's-length so that no element of gift or undervalue from one party to the other party

was involved and without any intention of the former party to prefer the latter party in the event of

the former party's going into insolvent liquidation; and

(o) the Covered Base Agreement and the CDA and each Covered Transaction in relation thereto are

entered into prior to the formal commencement of any Luxembourg Insolvency Proceedings (as

defined in paragraph 2.3(a) below) against the Luxembourg Party.

0030047-0001012 LU:6636384.5 9

2. DERIVATIVE TRANSACTIONS AND NETTING UNDER LUXEMBOURG LAW

Under Luxembourg law, there are no specific autonomous provisions on derivative transactions

(other than directly applicable EU provisions relating to EMIR, AIFMD and its delegated regulation

or to short selling). There is no legal definition of any of the derivative transactions that may be

documented under the Covered Base Agreement and/or CDA and that are described in Appendix A

attached to this Memorandum.

The Luxembourg act dated 5 August 2005 relating to financial collateral arrangements, as amended (the

Collateral Act 2005), which implements Directive 2002/47/EC of 6 June 2002 on financial collateral

arrangements into Luxembourg law, recognises netting between assets (that is, financial instruments and

cash) operated in the event of reorganisation measures, liquidation proceedings or any situation of

competition between creditors, notwithstanding the occurrence of Luxembourg Insolvency Proceedings,

provided that netting is made in respect of transactions which are covered by bilateral or multilateral

netting clauses or contracts between two or more parties.

For the purposes of this Memorandum, netting and set-off (compensation) shall have the same

meaning.

2.1 General legal features

(a) Luxembourg is essentially a country of French law as regards civil law (in that the Code

Napoléon of 1804 is applicable in Luxembourg) and a country of Belgian law to the extent

that company law and bankruptcy law are concerned. We therefore refer, to the extent

relevant, to both French and Belgian case law and legal literature.

(b) The contracting parties' freedom to select the governing law in respect of a contract may

not lead to the avoidance of mandatory provisions (including public order and policy) of

national law of the country with which the contractual performance is most closely

connected. Mandatory provisions of national law will typically include matters such as, for

instance, taxation, consumer protection legislation, requirements in respect of the transfer

and pledge of securities and, particularly, insolvency laws. The choice of the laws of the

State of New York as the governing law of the Covered Base Agreement and/or CDA

should, subject to the comments made below, not infringe upon mandatory provisions of

Luxembourg law or Luxembourg international public policy.

(c) We understand that the Covered Base Agreement and/or CDA would be entered into by

sophisticated commercial parties only. Therefore, Luxembourg consumer protection

legislation will in principle not be relevant.

(d) A contracting party would be subject to Luxembourg Insolvency Proceedings (as defined in

paragraph 2.3(a) below) only if it has its principal place of business (siège social réel ou

principal établissement) or its centre of main interests (centre des intérêts principaux) in

Luxembourg. If the contracting party concerned is a branch of a non-Luxembourg

commercial company or credit institution which has its principal place of business abroad,

the contracting party would not be subject to Luxembourg Insolvency Proceedings (and

Luxembourg insolvency laws) except where the home country insolvency proceedings

decline to assert jurisdiction over the assets of that contracting party.

(e) The enforceability of the close-out netting provisions in the Covered Base Agreement

and/or CDA must be specifically analysed under Luxembourg law where (i) the Covered

Customer to a Covered Base Agreement and/or CDA is an entity which is excluded from the

scope of the Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency

proceedings, as amended (the EU Insolvency Regulation) or (ii) (as discussed below) set-

0030047-0001012 LU:6636384.5 10

off (as referred to in articles 4.2.(d) and 6. of the EU Insolvency Regulation) does not

include netting as contemplated by the Covered Base Agreement and the CDA or (iii) the

provisions of article 4.2.(m) of the EU Insolvency Regulation are applicable.

(f) Under the Council Regulation No (EC) N°44/2001 of 22 December 2000 on Jurisdiction and

the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the

Council Regulation 44/2001), a clause attributing jurisdiction to a foreign court will be

binding on a Luxembourg resident only if the latter has accepted this clause (i) in writing or

orally and evidenced in writing or (ii) in a form in accordance with practices which the

parties have established between themselves or (iii) in accordance with the parties' usage in

international trade and commerce. Furthermore, if it were applicable, the Convention on

Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 30

October 2007 (the Lugano Convention 2007), states that a clause attributing jurisdiction to

a foreign court will be binding on a Luxembourg resident.5

(g) Under the laws of Luxembourg, a judgment legally rendered by a foreign court against a

Luxembourg contracting party is enforceable in Luxembourg on condition that exequatur

(in respect of that judgment) is obtained in accordance with articles 678 et seq. of the

Luxembourg new code of civil procedure or, if the Council Regulation 44/2001 applies, in

accordance with the exequatur procedure of the Council Regulation 44/2001 and provided

that the recognition of the judgment may not be refused on the grounds specified in articles

34 and 35 of the Council Regulation 44/2001.

2.2 Specific legal framework

(a) According to legal literature, forward contracts (marchés à terme) are synallagmatic (that is,

the parties enter into mutual commitments, each binding itself to the other) and onerous

contracts (that is, one party gives or promises something as a consideration for the

commitment of the other party) and contain an aleatory element (contrat aléatoire). The

term "forward contracts" is used in this Memorandum with a broad meaning and includes

option and swap agreements and typical derivative transactions.

(b) It must also be examined whether forward contracts would not constitute a wagering and

gaming contract which is unenforceable pursuant to article 1965 of the Luxembourg civil

code.

In the past, Luxembourg courts consistently held (by reference to article 1965 of the

Luxembourg civil code) that forward contracts constitued wagering and gaming contracts,

thereby jeopardizing the legal enforceability thereof (Cour, 18 December 1884, Pas. II,

346; Cour, 20 March 1934, Pas. XIII, 300).

This above concern has been significantly mitigated by more recent case law and

legislative changes.

On the one hand, pursuant to a decision rendered by the Luxembourg court of appeal,

forward contracts are valid and enforceable unless they are entered into with the sole view to

hide a wagering and gaming purpose (Cour, 15 June 1983; Cassation, 6 December 1984;

André Elvinger, Les opérations d'échange de taux d'intérêt et de devises en droit

luxembourgeois ALJB; Edition 1987, page 182).

5 The Lugano Convention 2007 has entered into force for the European Union, Denmark and Norway on 1 January 2010, for Switzerland on 1 January

2011 and for Iceland on 1 May 2011. The Lugano Convention 2007 replaces the Lugano Convention of 16 September 1988 for the

contracting states. The contents of the Lugano Convention 2007 has been adapted to be coherent with the Council Regulation 44/2001.

0030047-0001012 LU:6636384.5 11

On the other hand, article 39 of the Luxembourg act dated 13 July 2007 relating to markets

in financial instruments (the MiFI Act 2007) expressly states that article 1965 of the

Luxembourg civil code does not apply to forward contracts (in the largest sense) concluded

on a regulated market or a multilateral trading facility (MTF) or to forward contracts to

which at least one of the parties is a credit institution, a professional in the financial sector,

an undertaking for collecting investing, a management company of an investment fund, a

pension fund, an insurance or reinsurance undertaking, a commercial or industrial enterprise

benefitting from a professional access to the financial markets or an international public

body active in the financial markets.

Accordingly, there are valid arguments to the effect that article 1965 of the Luxembourg

civil code does not endanger the enforceability of forward contracts (and, in general,

derivative transactions).

(c) Luxembourg legal literature as well as Belgian and French literature (to which Luxembourg

courts tend to turn) have discussed the issue whether credit derivative transactions could be

re-characterised as insurance contracts. To our knowledge, there is no Luxembourg case law

on the question as to whether credit derivatives constitute contracts of insurance. Although

the matter cannot be entirely free from doubt, there are, in our view, arguments in support of

the proposition (although we do not express a definite opinion) that credit derivatives would

not be considered as contracts of insurance by a Luxembourg court (if competent) because

credit derivatives are, a priori, not a form of contract of insurance as governed by the

Luxembourg act dated 27 July 1997 on contracts of insurance, as amended (the Insurance

Act 1997). What is analogous between a credit derivative and a contract of insurance is the

existence of a risk (independent from the parties’ will), the realisation of which triggers

payment in favour of the protection buyer or the insured person and the obligation to pay a

premium to the protection seller or the insurer to obtain protection or coverage.

What differentiates a credit derivative from a contract of insurance is that (i) in the case of a

credit default product, the seller is obliged to pay the protection buyer on the occurrence of

the credit event irrespective of whether the protection buyer has suffered a loss or not,

whereas insurance products give rise to payment, in principle, only if the policyholder has

suffered a loss (article 50 of the Insurance Act 1997), (ii) in the case of an insurance

contract, the policyholder must have an economic interest that the secured risk is not realised

whereas the derivative counterparty of the credit default product may have an interest in

having the secured risk realised and (iii) pursuant to the Insurance Act 1997, an insurance

company is subrogated in the rights of the policyholder (subrogation légale) for its claims

against the person responsible for the loss suffered by it. Thus, provided the relevant contract

is not expressed to cover the risk of loss and provided that the credit derivative (as

documented under its governing law) is not considered (and cannot be construed or treated)

as a contract of insurance pursuant to the law by which it is expressed to be governed, we

believe that credit derivatives should not be considered as contracts of insurance. However,

there may be circumstances where the character of the specific financial instruments and/or

interests and obligations of the parties are such that the transaction would be considered as

an insurance contract under Luxembourg insurance law.

(d) It was generally held that forward contracts were entered into intuitu personae. This means

that the parties essentially rely on the personality of the other party in order to enter into the

contract (Jean-Pierre Mattout, Les opérations d'échange de taux d'intérêt et de devise en

droit luxembourgeois, ALJB, Edition 1987, page 95). French and Belgian legal literature

now seem to consider that forward contracts are generally made without an intuitu personae

consideration. Although it is likely that Luxembourg courts will follow French and Belgian

legal literature on this point, a Luxembourg court could, depending on the circumstances,

consider that derivative transactions constitute intuitu personae contracts. Under

0030047-0001012 LU:6636384.5 12

Luxembourg Insolvency Laws (as defined in paragraph 2.3(a) below), contracts made intuitu

personae terminate automatically, by operation of law, upon the opening of the Luxembourg

Insolvency Proceedings.

(e) Derivative transactions do not fall within the monopoly of credit institutions (as described in

articles 1-2 and 2 of the Banking Act 1993).

(f) Under the laws of Luxembourg, unless otherwise provided or agreed between the parties, a

power of attorney or agency (mandat), whether or not irrevocable, will terminate by force of

law, and without notice, upon the occurrence of insolvency events affecting the principal or

the agent. A power of attorney or agency (mandat) might become ineffective upon the

principal entering into controlled management (gestion contrôlée) or reprieve from payment

(sursis de paiement).

(g) Penalty clauses (clauses pénales), and similar clauses on damages or liquidated damages, as

governed by article 1152 and articles 1226 et seq. of the Luxembourg civil code, are allowed

to the extent that they provide for a reasonable level of damages. The judge has however the

right to reduce (or increase) the amount of damages if it is unreasonably high (or low). The

provisions of article 1152 and articles 1226 et seq. of the civil code are generally considered

to be a point of public policy under Luxembourg law. It is likely that a Luxembourg court

would consider them to be a point of international public policy that would set aside the

foreign governing law. In relation to the Covered Base Agreement and/or the CDA, we

assume that the level of damages provided for is in accordance with general market practice

and arm's length principles and can therefore be considered to be reasonable. If so, the risk

that the provisions of the Covered Base Agreement and/or the CDA would be construed as

an excessive clause pénale should, in principle, be limited.

(h) Interest may not accrue on interest that is due on principal, unless such interest has been due

for at least one year (article 1154 of the Luxembourg civil code). The right to compound

interest is limited to cases where (i) the interest has been due for at least one year and (ii) the

parties have specifically provided in an agreement (to be made after that interest has become

due for at least one year) that such interest may be compounded (or in the absence of such an

agreement, the creditor may file an appropriate request with the relevant court). The

provisions of article 1154 of the civil code are generally considered to be a point of public

policy under Luxembourg law. It is possible that a Luxembourg court would consider these

provisions to be a point of international public policy that would set aside the foreign

governing law.

(i) Article 1184 of the Luxembourg civil code states that the termination of a synallagmatic

contract is subject to court action except if the contracting parties have provided for an

express (by operation of law) termination clause (clause expresse de résolution de plein

droit) in the contract. Furthermore, unless expressly excluded by way of contract, prior

written notice (mise en demeure) must be given to the defaulting party in an unequivocal

manner. Oral notice is not sufficient (Lux., 17 July 1926, Pas. XII, 412).

(j) According to article 109 of the Luxembourg commercial code, any means of proof is

acceptable in commercial matters. However, there could be circumstances in which

Luxembourg law and Luxembourg courts would not treat as conclusive records, certificates

or determinations, which are stated to be so treated in a contract. It is recommended that

confirmation is obtained of the receipt of a facsimile transmission or an electronic message

by, for instance, an electronic messaging system or by an exchange of e-mails or other

means of proof.

0030047-0001012 LU:6636384.5 13

2.3 Basic features of Luxembourg insolvency laws

(a) General provisions

The main provisions governing the bankruptcy, survival of insolvent commercial companies or

generally insolvency laws and proceedings to which an entity incorporated or organised in

Luxembourg would be subject, are the following:

(i) the book III of the commercial code (code de commerce) concerning bankruptcy (faillite);

(ii) the Luxembourg act dated 14 April 1886, as amended, concerning composition proceedings

designed to avoid bankruptcy (concordat préventif de faillite);

(iii) articles 508 to 527 of the commercial code concerning post-bankruptcy composition

proceedings (concordat après faillite; which is an arrangement between the bankrupt, its

creditors and the court aimed mainly at enabling the bankrupt to pay its debts in

installments);

(iv) the grand ducal decree dated 24 May 1935 concerning controlled management (gestion

contrôlée);

(v) the grand ducal decree dated 4 October 1934 concerning suspension of payment or

moratorium (sursis de paiement);

(vi) articles 141 to 151 of the Luxembourg act dated 10 August 1915 concerning commercial

companies, as amended (the Companies Act 1915) concerning voluntary liquidation of

commercial companies and article 1865 of the civil code;

(vii) article 203 of the Companies Act 1915 concerning judicial (compulsory) liquidation of

commercial companies;

(viii) articles 60 and 61 to 61-22 (inclusive) of the Banking Act 1993 relating to suspension of

payment, and liquidation of credit institutions and undertakings managing third party funds.

The above laws and proceedings are called Luxembourg Insolvency Laws and Luxembourg

Insolvency Proceedings, respectively. They correspond broadly to the term bankruptcy as referred

to in the Covered Base Agreement and/or the CDA.

The proceedings referred to in paragraphs (vi) and (vii) above are, in principle, not subject to

Luxembourg bankruptcy, insolvency or similar laws, and do not necessarily imply that the entity

concerned is insolvent or bankrupt.

Insolvency situations are governed by a set of rules which have been elaborated by courts and legal

literature around the cardinal principle of pari passu ranking of creditors. Under applicable

Luxembourg law, it is possible for a company to be insolvent without necessarily being bankrupt. If

a company fails to meet the two cumulative tests of bankruptcy, namely the cessation of payments

(cessation de paiement) and the loss of creditworthiness (ébranlement de crédit), it is not bankrupt.

The judgment declaring the bankruptcy, or a subsequent judgment issued by the court, usually

specifies a period not to exceed six months before the day of the judgment declaring the bankruptcy.

During this period, which is commonly referred to as the suspect period (période suspecte), the

debtor is deemed to have been already unable to pay its debts generally and to obtain further credit

from its creditors or third parties. Payments made, as well as other transactions concluded or

performed, during the suspect period, and, as for specific payments and transactions, during ten days

0030047-0001012 LU:6636384.5 14

before the commencement of that period, are subject to cancellation by the Luxembourg court upon

proceedings instituted by the Luxembourg insolvency or bankruptcy receiver (curateur).

In particular,

article 445 of the Luxembourg commercial code sets out that specific transactions concluded

or performed during the suspect period and an additional period of ten days preceding the

suspect period (such as, for instance, security interest for debts incurred previously, the

payment of debts which have not fallen due) must be set aside if so requested by the

receiver;

article 446 of the Luxembourg commercial code states that payments made for matured

debts as well as other transactions concluded for consideration during the suspect period are

subject to cancellation by the court upon proceedings instituted by the receiver if they were

concluded with the knowledge of the bankrupt's cessation of payments; and

regardless of the suspect period, article 448 of the Luxembourg commercial code and article

1167 of the Luxembourg Civil Code (actio pauliana) give the creditor the right to challenge

any fraudulent payments and transactions made prior to the bankruptcy, without limitation of

time.

Foreign creditors have the same rights as Luxembourg creditors. The provisions of the EU

Insolvency Regulation apply with regard to the recognition and enforcement of a foreign judgment

issued by a Member State of the European Union (other than Denmark) in relation to insolvency

proceedings (as defined in the EU Insolvency Regulation) opened against an entity covered by the

EU Insolvency Regulation. A foreign judgment establishing a bankruptcy originated abroad and to

which the EU Insolvency Regulation does not apply, is effective in Luxembourg, pursuant to the

principle of universality and unity of bankruptcy and does not need, subject to Luxembourg public

policy, to be declared enforceable. Where enforcement (actes d’exécution) of a foreign bankruptcy

judgment is sought in Luxembourg, the judgment is subject to the exequatur procedure of articles

648 et seq. of the new code of civil procedure.

Luxembourg Insolvency Proceedings have, among other things, the following effects:

as a matter of principle, bankruptcy judgments do not result in automatic termination of

contracts, except for intuitu personae contracts, which are contracts for which the identity of

the counterparty or its solvency are crucial. Contracts, therefore, continue to exist in full

force unless the insolvency receiver chooses to terminate a contract. The insolvency receiver

examines, on a case-by-case basis, whether to pursue or terminate a contract. Where it is in

the interest of the bankruptcy estate, the receiver may, for instance, maintain a lease or an

insurance policy, or pursue commercial operations. Termination by reason of insolvency

may also be effectively provided for in a contract;

once a company has been declared bankrupt, unsecured creditors and the creditors with a

general priority right (privilège général) are no longer permitted to take any action based on

title to movables and immovables, nor any enforcement action against the bankrupt

company's movable or immovable assets. Actions may only be exercised against the

insolvency receiver.

The two effects of Luxembourg Insolvency Proceedings above does not apply in the following cases:

• creditors may, notwithstanding the bankruptcy of a company, initiate proceedings against the

co-debtors of the company;

0030047-0001012 LU:6636384.5 15

• secured creditors may still enforce their rights after the bankruptcy adjudication; and

• creditors of new debts, contracted by the insolvency receiver in view of continuing the

business of the bankrupt pursuant to an order of the court or in performing the contracts

entered into by the bankrupt company, or in making use of the real estate or the movables of

the bankrupt (dettes de la masse), may still initiate proceedings to have their rights

recognised and enforced.

(b) Special regime applicable to Luxembourg credit institutions and undertakings managing third

party funds

Under Luxembourg law, the only Luxembourg Insolvency Proceedings that credit institutions and

investment firms managing third party funds may be subject to are (1) reprieve from payment

measures and (2) liquidation proceedings.

(i) Reprieve from payment

Reprieve from payment (sursis de paiement) may be applied for in the event that (1) the global

performance of an undertaking's business is compromised, (2) the undertaking is unable to obtain

further credit or fresh monies or no longer has any liquidity whether there is a cessation of payments

or not, or (3) a provisional decision has been taken to withdraw the undertaking's licence (agrément).

In these circumstances, the undertaking or the Luxembourg financial sector and stock exchange

regulator, the Commission de surveillance du secteur financier (the CSSF) may request the court to

apply reprieve from payment proceedings to the undertaking. The reprieve from payment cannot

exceed six months and the court will lay down the terms and conditions thereof, including the

appointment of one or more persons responsible for managing the reorganisation measures

(administrateurs) and supervising the undertaking's activities.

(ii) Liquidation

A petition for liquidation may be filed either by the Luxembourg public prosecutor or the CSSF.

This will typically occur in a situation where the reprieve from payment cannot cure the

undertaking's difficult financial situation, where the undertaking's financial situation is so serious

that it can no longer satisfy its creditors or where the undertaking's licence has been permanently

withdrawn. The court will appoint a judge-commissioner (juge-commissaire) and one or more

liquidators. The court may decide to apply bankruptcy rules in respect of the liquidation and,

accordingly, fix the suspect period (which is the period which may date back not more than six

months before the date of filing of the application for reprieve from payment). The court as well as

the judge-commissioner and the liquidator(s) may decide to vary the mode of liquidation initially

agreed upon. The liquidation procedure is terminated when the court has examined the documents

submitted to it by the liquidator(s) and the documents have been reviewed by one or more

commissioners.

Voluntary liquidation by an entity is possible only where the CSSF has been notified thereof by the

undertaking one month before notice is given to hold the extraordinary general meeting of the

shareholders called to consider the voluntary liquidation.

0030047-0001012 LU:6636384.5 16

(c) Specific cross-border insolvency provisions6

Directive 2001/24/EC has been transposed literally into the Banking Act 1993 except that the scope

of the CI Winding Up Act 20047 (in addition to covering credit institutions) has been extended to

investment firms. The overall aims of the CI Winding Up Act 2004 are similar to those of the EU

Insolvency Regulation. Many of the substantive provisions of the CI Winding Up Act 2004

correspond to the provisions of the EU Insolvency Regulation.

(i) Article 61-14 of the Banking Act 1993 (so far as contractual set-off is concerned) provides

that netting agreements shall be governed solely by the law of the contract which governs

such agreements. By derogation to the rule that it is the lex concursus that determines the

conditions of effectiveness (and binding character) of netting, the effects of the Luxembourg

reorganisation measures or winding-up proceedings on a netting agreement are exclusively

determined by the law applicable to such netting agreement. Accordingly, if a netting

agreement is governed by a law other than Luxembourg law (and provided that the netting

agreement is legally valid, binding and enforceable under such law), Luxembourg

reorganisation measures or winding-up proceedings would not interfere with the

effectiveness of netting under the netting agreement.

(ii) Furthermore, article 61-12 of the Banking Act 1993 (so far as legal set-off is concerned)

states that the opening of Luxembourg reorganisation measures or winding-up proceedings

shall not affect the right of creditors to demand the set-off of their claims against the claims

of an institution managing third party funds (which would include Luxembourg credit

institutions), where such a set-off is permitted by the law applicable to that institution’s

claims. This principle shall not preclude the actions for voidness, voidability or

unenforceability of legal acts detrimental to all the creditors (unless the beneficiary of these

acts provides proof that the act detrimental to the creditors as a whole is subject to the law of

a state other than the home Member State and that the law does not allow any means of

challenging that act in the case in point). Accordingly, to the extent that the claims arising

under a netting agreement are governed by a law other than Luxembourg law (and provided

that set-off is legally valid, binding and enforceable under that law), Luxembourg

reorganisation measures or winding-up proceedings would not interfere with the

effectiveness of netting under such agreement.

(d) EU Insolvency Regulation

The EU Insolvency Regulation is applicable, with the exception of Denmark, in all EU Member

States. Its objective is to establish common rules on cross-border insolvency proceedings, based on

principles of mutual recognition and co-operation. Insurance undertakings, credit institutions,

investment undertakings holding funds or securities for third parties and collective investment

undertakings are specifically excluded from the scope of the EU Insolvency Regulation.

In broad terms, the EU Insolvency Regulation provides that main insolvency proceedings are to be

opened in the Member State where the debtor has the centre of his main interests. These proceedings

will have universal scope and encompass a debtor's assets throughout the European Union (subject to

secondary proceedings opened in one or more Member States although such proceedings will be

limited to the assets in that State and will run in parallel to the main proceedings). Creditors will

have the comfort that where a company has a branch or significant assets or activities in more than

one EU Member State, the proceedings opened in one Member State will encompass assets located

6 It is important to bear in mind that the EU Insolvency Regulation does not apply to credit institutions and investment firms.

7 The Luxembourg act dated 19 March 2004 on the liquidation of credit institutions (the CI Winding Up Act 2004), which has implemented

Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding-up of credit

institutions (the Directive 2001/24/EC) into Luxembourg law.

0030047-0001012 LU:6636384.5 17

throughout the European Union and even those assets moved by the debtor to another Member State

after the date of filing.

Party A will in principle be subject to the Luxembourg Insolvency Proceedings if it has its "centre of

main interests" (the COMI) in Luxembourg. The COMI is presumed, in the case of a company or

legal person, to be the place of its registered office. Accordingly, if a Covered Customer's registered

office is located in Luxembourg, Luxembourg courts will be entitled to open main insolvency

proceedings against it and apply the Luxembourg Insolvency Laws. However, this assumption may

be rebutted if it can be established, by applying article 3 (1) in combination with recital 13 of the EU

Insolvency Regulation, that despite being registered in Luxembourg, a Covered Customer conducts

the administration of its interests on a regular basis in and/or from another Member State, which is

ascertainable by third parties. Hence, another Member State's courts could consider having

jurisdiction and open main insolvency proceedings against a Covered Customer where it is

established that the COMI is located in that Member State. Following a decision of the Court of

Justice of the European Union (the CJEU) in the Susanne Staubitz-Schreiber matter, a German

insolvency court has held, in the PIN Group matter, that in determining the COMI, only the

circumstances of the debtor before and at the time of filing of the insolvency petition are relevant

and should be taken into account. Any changes in the circumstances of the debtor in the period

falling between the insolvency petition being filed and the court ruling on such a petition are not

relevant to the determination of the COMI. This decision would mean that a court could assert that

the COMI of, say, a company, that has its registered office in Luxembourg, was in Germany on the

basis of a careful planning by that company to shift the company's COMI from Luxembourg to

Germany.

While there is currently no consistent case law as to the factors which the court will take into

account in determining where the COMI is located, some look to the place of the high-level decision

meetings and the place where the board of directors' meetings take place as being likely to be

relevant in this context. The European Court of Justice has ruled, in the Eurofood IFSC Limited

matter, which was referred to it by the Irish Supreme Court, that the presumption of the COMI to be

the registered office may only be rebutted if factors, which are both objective and ascertainable by

third parties, establish that an actual situation exists which is different from that which locating it at

the registered office is deemed to reflect. The mere fact that economic choices are or can be

controlled by a parent company located in another EU Member State would not constitute sufficient

evidence. The CJEU clarifies its decision in the recent Interedil matter, which was referred to it by

the Italian Tribunale de Bari, by deciding that a debtor company's COMI must be determined by

attaching greater importance to the place of the company's central administration, as may be

established by objective factors which are ascertainable by third parties. Where the bodies

responsible for the management and supervision of a company are in the same place as its registered

office and the management decisions of the company are taken, in a manner that is ascertainable by

third parties, in that place, the presumption in that provision cannot be rebutted. Where a company's

central administration is not in the same place as its registered office, the presence of company assets

and the existence of contracts for the financial exploitation of those assets in a Member State other

than that in which the registered office is situated cannot be regarded as sufficient factors to rebut the

presumption unless a comprehensive assessment of all the relevant factors makes it possible to

establish, in a manner that is ascertainable by third parties, that the company's actual COMI and

supervision and of the management of its interests is located in that other Member State. The CJEU

also confirmed, in the Interedil matter, that where a debtor company's registered office is transferred

before a request to open insolvency proceedings is lodged, the company's centre of main activities is

presumed to be the place of its new registered office.

0030047-0001012 LU:6636384.5 18

Under the EU Insolvency Regulation, the conditions under which set-off is available are normally

governed by the law of the Member State in which insolvency proceedings are opened. If the

Luxembourg Insolvency Proceedings are commenced in Luxembourg and Luxembourg law allows

for insolvency set-off, it will in principle be effective. If however Luxembourg law does not

recognize insolvency set-off, article 6 of the EU Insolvency Regulation comes into play and,

provided the law applicable to the insolvent debtor's claim allows for set-off in the event of

insolvency, the right of set-off will be recognized in Luxembourg Insolvency Proceedings opened in

Luxembourg (subject to the avoidance rules of the relevant lex concursus). Accordingly, if the claim

is governed by, say, German or English law and a contractual right of set-off is available as a matter

of German or English law, the creditor is able to exercise the right of set-off even if it is not available

under Luxembourg law (which would be the insolvency law of the main proceedings).

Whether the EU Insolvency Regulation applies to close-out netting have been debated (article 4 of

the EU Insolvency Regulation refers to "set-off" rather than "close-out netting"). Close-out netting

implies a three stage process. First, all transactions are terminated upon the occurrence of an event of

default. Secondly, each party calculates the gains and losses to itself. Thirdly, the parties set-off their

gains and losses under the terminated transactions. If close-out netting is to be considered, in legal

terms, as an indivisible operation (distinct from set-off as a simple payment mechanism governed by

articles 1298 et seq. of the civil code), it is debatable whether the EU Insolvency Regulation applies

(so far as the EU Insolvency Regulation deals with set-off as one operation only and which is a mere

operation of reciprocal termination of obligations). If however, each stage of close-out netting has to

be assessed separately as to its validity and enforceability upon the opening of insolvency

proceedings, article 6 of the EU Insolvency Regulation would apply to the close-out netting and the

effects on the Luxembourg Insolvency Proceedings on the Covered Base Agreement and the CDA so

far as termination is concerned, would have to be assessed in accordance with the Luxembourg

Insolvency Laws.

The validity and enforceability of a contractual set-off clause of the Covered Base Agreement and

the CDA would, pursuant to the EU Insolvency Regulation, not be affected by Luxembourg

Insolvency Laws unless article 4.2 (m) of the EU Insolvency Regulation applies. Article 4.2 (m)

states that the avoidance rules (such as those included in article 445 of the Luxembourg commercial

code concerning pre-insolvency set-off during the suspect period) continue to apply in respect of a

challenge of the validity or enforceability of a claim to which the benefit of set-off would otherwise

be applicable under article 6.1. of the EU Insolvency Regulation (unless the conditions of article 13

of the EU Insolvency Regulation are satisfied).

The above discussion is largely academic though in that under the Collateral Act 2005 set-off and

close-out netting are generally recognized and enforceable.

3. NETTING UNDER A COVERED BASE AGREEMENT AND CDA

(a) Are the provisions of the Covered Base Agreement and CDA permitting the Clearing Member to

terminate all the Covered Transactions upon the insolvency of the Covered Customer enforceable

under the law of Luxembourg?

We understand that the Covered Base Agreement and the CDA contain a clause, whereby, upon the

occurrence of an Event of Default with respect to a Covered Customer, a Clearing Member is

entitled to designate an early termination date and to liquidate the Covered Transactions of such

Covered Customer. We also understand that the Clearing Member is only an agent of the Covered

Customer (through which the Covered Customer interacts with the DCO), but that the Covered

Transactions are ultimately between the Covered Customer and the DCO. In other words, when

terminating the Covered Transaction, the Clearing Member continues to act by virtue of the agency

relationship with the Covered Customer.

0030047-0001012 LU:6636384.5 19

Article 19 of the Collateral Act 2005 provides that termination clauses (clauses de resolution and

clauses de résiliation) entered into with a view to set-off assets (that is, financial instruments and

cash) are valid and binding against third parties, administrators, insolvency receivers and liquidators

or other similar organs and are effective:

notwithstanding the commencement or continuation of a reorganisation measure or

liquidation proceedings, irrespective of the time at which such clauses have been agreed

upon or enforced; and

notwithstanding any civil, criminal or judicial attachment or criminal confiscation as well as

a purported assignment or other disposition of or in respect of such rights.

The termination of a contract made by reason of enforcement or conservatory measures or

proceedings including one of the measures or procedures set out above is deemed to have occurred

before any such measure or proceedings apply.

The Collateral Act 2005 does not distinguish, in respect of termination clauses, between optional and

automatic termination and we are aware of no reason why optional termination clauses would not be

covered by article 19 of the Collateral Act 2005.

The Collateral Act 2005 applies (and article 19 comes into play), irrespective of the status of the

parties involved, each time where set-off between assets (including financial instruments and cash) is

made with respect to transactions that are covered by bilateral or multilateral clauses between two or

more parties.

As discussed in paragraph 2.2(f) above, a power of attorney or agency, whether or not irrevocable,

will, unless otherwise provided for, terminate by force of law, and without notice, upon the

occurrence of insolvency events affecting the principal or the agent. A power of attorney or agency

might become ineffective upon the principal entering into controlled management (gestion

contrôlée) or reprieve from payment (sursis de paiement), unless otherwise provided or agreed. If

the agency relationship between the Covered Customer and the Clearing Member become ineffective

upon the insolvency of the Covered Customer, as a matter of Luxembourg law, the Clearing Member

would no longer be entitled to liquidate the Covered Transactions. It is therefore recommended to

expressly provide in the Covered Base Agreement and CDA that, upon the occurrence of insolvency

proceedings affecting the Covered Customer, the parties agree that the Clearing Member shall

continue to act as agent to ensure that, as a matter of Luxembourg law, the Futures Liquidation

Rights and Cleared Derivatives Liquidation Rights are enforceable.

(b) Are the provisions of the Covered Base Agreement and CDA providing for the netting of termination

values and any cash collateral that is viewed as a title transfer (please see assumption in paragraph

1.5(h) above) in determining a single lump-sum termination amount upon the insolvency of a

Covered Customer enforceable under the law of Luxembourg?

We understand that the Covered Base Agreement and the CDA contain a set-off clause operating in

the event of early termination upon the occurrence of an Event of Default (which is, as we have

assumed, a Luxembourg Insolvency Proceedings related event of default). We also understand that,

following the exercise by the Clearing Member of its Futures Liquidation Rights and its Cleared

Derivatives Liquidation Rights in connection with Covered Transactions (whereby the Clearing

Member, acting as agent of the Covered Customer, is entitled to liquidated Covered Transactions

upon the occurrence of an Event of Default), the set-off clause would entitle the Clearing Member to

set off claims, which the Clearing Member has against the Covered Customer in connection with the

Futures Payment Rights, the Cleared Derivatives Payment Rights and the Customer Received

Margin, with claims, which the Covered Customer has in connection with Futures Credit Support

0030047-0001012 LU:6636384.5 20

and Cleared Derivatives Credit Support transferred by the Covered Customer to the Clearing

Member in connection with the Covered Transactions.

According to article 18 of the Collateral Act 2005, set-off between assets (that is, financial

instruments and cash) operated in the event of reorganisation measures, liquidation proceedings or

any situation of competition between creditors, is valid and binding against third parties,

administrators (commissaires), insolvency receivers and liquidators or other similar organs,

irrespective of the maturity date, the subject matter or the currency of the assets, provided that set-off

is made in respect of transactions which are covered by bilateral or multilateral set-off provisions

between two or more parties.

Furthermore, clauses establishing connexity between assets, termination clauses, close-out netting

provisions and all other clauses stipulated in order to allow for set-off are valid and binding against

third parties, administrators, insolvency receivers and liquidators or other similar organs and are

effective:

(A) notwithstanding the commencement or continuation of a reorganisation measure or

liquidation proceedings, irrespective of the time at which such clauses (including set-off

clauses) have been agreed upon or enforced; and

(B) notwithstanding any civil, criminal or judicial attachment or criminal confiscation as well as

a purported assignment or other disposition of or in respect of such rights.

Set-off clauses (and valuation and enforcement methods) agreed upon by the parties in accordance

with the Collateral Act 2005 are valid and binding against third parties, administrators, insolvency

receivers, liquidators and other similar organs notwithstanding the existence of a reorganisation

measure, liquidation proceedings or the occurrence of any situation of competition between

creditors, Luxembourg or foreign.

Set-off made by reason of enforcement or conservatory measures or proceedings including one of

the measures and proceedings set out in paragraphs (A) and (B) above, is deemed to have occurred

before any such measure or proceeding.

With the exception of Luxembourg law provisions on over-indebtedness (surendettement),

Luxembourg law provisions relating to bankruptcy (as set out in book III, Title XVII of the

Luxembourg civil code, Book I, Title VIII and Book III of the code of commerce) and Luxembourg

and foreign provisions relating to reorganisation measures, liquidation proceedings, attachments

other situations of competition between creditors or other measures or proceedings set out in

paragraphs (A) and (B) above are not applicable to set-off contracts and do not affect the

enforcement of such contracts.

Set-off clauses that are made on the date of opening of liquidation proceedings or the entry into

effect of or reorganisation measure but before the issue of a judgment declaring the opening of such

proceedings or the coming into force of such measure, are valid and binding against third parties,

administrators, liquidators, insolvency receivers and similar organs. Similarly, where a set-off clause

has been made on the date of opening of liquidation proceedings or the coming into force of

reorganisation measures but after the rendering of a judgment declaring the opening of such

proceedings or the coming into force of such measures, the set-off contract is valid and binding

against third parties, administrators, insolvency receivers, liquidators and similar organs if the

relevant party proves that it ignored the fact that such proceedings had been opened or that such

measures had been taken or that it could not reasonably know it.

0030047-0001012 LU:6636384.5 21

It is important to note that termination and close-out netting clauses and contracts are valid and

binding irrespective of the date (even if such date falls in the pre-bankruptcy suspect period) on

which they have been entered into. Luxembourg bankruptcy provisions or other similar national or

foreign law provisions on insolvency proceedings are disapplied pursuant to article 21 of the

Collateral Act 2005.

Given the broad scope of the Collateral Act 2005 and the nature of the Covered Transactions, we

will not discuss the situation where the Collateral Act 2005 would not be applicable. The Collateral

Act 2005 applies each time where set-off between assets (including financial instruments and cash)

is made with respect to transactions that are covered by bilateral or multilateral clauses between two

or more parties.

It follows that, provided the respective obligations of the Clearing Member (acting both in a capacity

as agent of the Covered Customer and as secured party) and of the Covered Customer are subject to

a bilateral agreement between the Covered Customer and the Clearing Member (as is the case in

respect of the Covered Base Agreement and the CDA), the netting of termination values resulting in

a single lump-sum termination amount upon the insolvency of a Covered Customer would be

enforceable under the Collateral Act 2005.

Finally, Article 111 et seq. of the Luxembourg act of 10 November 2009 on payment services, as

amended (the Payment Services Act 2009) strengthens the legal certainty of transfer orders (ordre

de transfert), and the netting (compensation) of claims operated, in an authorised Luxembourg

securities settlement system (a System) (for example, the system operated by Clearstream

Luxembourg qualifies as such), by a participant in a System against whom insolvency proceedings

are instituted. According to the Payment Services Act 2009, transfer orders may not be revoked or

challenged by a participant in a System or a third party from the moment of entry thereof in the

System. Similarly, netting in relation to transfer orders entered into a System before the moment of

opening of insolvency proceedings may not be challenged notwithstanding any legal, regulatory,

contractual or customary provision providing for the contrary. The above would only be relevant if

the Covered Transactions to be cleared by the DCO involve the delivery or transfer of securities in

book-entry form held in a System.

(c) Assuming the parties have entered into a Covered Base Agreement and CDA, the Covered Customer

is insolvent and the Clearing Member has determined a lump-sum termination amount in a currency

other than the currency of the jurisdiction in which the insolvent party is organized:

(i) would a court in Luxembourg enforce a claim for the net termination amount in the currency

in which it was determined?

A judgment awarded in the courts of Luxembourg may be expressed in a currency other than

the euro or the euro equivalent at the time of judgment or payment. However, any obligation

to pay a sum of money in any currency other than the euro will only be enforceable in

Luxembourg in terms of the euro equivalent.

(ii) can a claim for the net termination amount be proved in insolvency proceedings in

Luxembourg without conversion into the local currency?

Currency claims expressed in currencies other than euro must be converted into euro at the

market rate of exchange prevailing on the date of the bankruptcy judgment (Cloquet, op. cit.,

n°1725; Van Ryn and Heenen, op. cit., n° 2752 2). Although there is an isolated court

decision (Cour, 2nd March, 1923, Pas. XI, 134) according to which the conversion (into the

euro) must be made on the day of the verification of claims, we are inclined to believe, on

the basis of subsequent contrary Belgian legal literature, that the conversion must be effected

on the day of the bankruptcy judgment.

0030047-0001012 LU:6636384.5 22

(iii) If in either case the claim must be converted to local currency for purposes of enforcement

or proof in insolvency proceedings, please set out the rules governing the timing and

exchange rate for such conversion.

We are not aware of any specific rule as to the exchange rate which Luxembourg courts

ought to use to convert the amounts expressed in a foreign currency into the euro and there

is, to our knowledge, no court precedent discussing this specific question.

4. COLLATERAL UNDER A COVERED BASE AGREEMENT AND CDA

(a) Validity of Security Interests

(i) Under the laws of Luxembourg, what law governs the contractual aspects of a security

interest in the various forms of Eligible Collateral deliverable under the Covered Base

Agreement and CDA? Would the courts of Luxembourg recognize the validity of a security

interest created under each Covered Base Agreement and CDA, assuming it is valid under

the governing law of such Covered Base Agreement and CDA?

Under Luxembourg conflict of laws rules, it is generally held that the creation, perfection

and enforcement of a security interest are governed by the law of the place where the

collateral is located (that is, the lex rei sitae).

Luxembourg law, and in particular the provisions of the Collateral Act 2005, will be the

governing law of a financial collateral arrangement only to the extent that it applies as the

lex rei sitae. This will be the case if the collateral is located (or deemed to be located) in

Luxembourg.

More specifically,

with respect to cash or cash claims (standing to the credit of an account), Luxembourg law

applies if the account is held with a bank located in Luxembourg); and

with respect to book-entry securities (that is, securities in fungible form credited to a bank

account irrespective of whether they are in bearer, registered or dematerialised form) (and

securities lodged in a securities settlement system, like, for example, Clearstream

Luxembourg, are in principle book-entry securities) it is generally held that the relevant

location is the law of the country where the securities are credited to a securities account

held by the relevant intermediary. As a result, ownership rights in respect of book-entry

securities are considered to be located in the books of the intermediary, which maintains the

account in which the entries are made by which these book-entry securities are transferred to

the collateral receiver regardless of the place where the underlying securities are actually

located. In other words, the location of book-entry securities is the place of the account held

by the most immediate intermediary in the books of which the securities have been booked.

This is supported, among others, by article 23 of the Collateral Act 2005, which specifies

that the rules on creation, perfection and enforcement of a financial collateral arrangement

over book-entry securities are governed by reference to the law of the place where the

relevant account (compte pertinent) is located. The "relevant account" means, in relation to

book-entry securities, the account (which may be maintained by the collateral receiver) in

which the entries are made by which the book-entry securities are provided as collateral to

the collateral receiver.

The courts of Luxembourg would recognize the validity of a security interest created under

each Covered Base Agreement and CDA, assuming it is valid under the governing law of

such Covered Base Agreement and CDA.

0030047-0001012 LU:6636384.5 23

(ii) Under the laws of Luxembourg, what law governs the proprietary aspects of a security

interest (that is, the formalities required to protect a security interest in Eligible Collateral

against competing claims) granted by the Covered Customer under each Covered Base

Agreement and CDA (for example, the law of the jurisdiction of incorporation or

organization of the Covered Customer, the jurisdiction where the Eligible Collateral is

located, or the jurisdiction of location of the Clearing Member or DCO’s Intermediary in

relation to Eligible Collateral in the form of indirectly held securities)? What factors would

be relevant to this question? Where the location (or deemed location) of the Eligible

Collateral is the determining factor, please briefly describe the principles governing such

determination under the law of Luxembourg with respect to the different types of Eligible

Collateral. In particular, please describe how the laws of Luxembourg apply to each form

in which securities Eligible Collateral may be held as described in assumption 1.5(e) above.

Please refer to the answer to paragraph 4(a)(i) above.

(iii) Would the courts of Luxembourg recognize a security interest in each type of Eligible

Collateral created under each Covered Base Agreement and CDA? In answering this

question, please bear in mind the different forms in which securities Collateral may be held,

as described in assumption 1.5(e) above. Please indicate, in relation to cash Collateral, if

your answer depends on the location of the account in which the relevant obligations are

recorded and/or upon the currency of those obligations.

The Collateral Act 2005 sets out the legal framework for financial collateral arrangements

(including, among others, pledges and transfers of title by way of security) in Luxembourg.

The Collateral Act 2005 covers financial instruments in the widest sense and generally

money and cash claims (créances de sommes d’argent). It follows that the Eligible Collateral

would, a priori, fall within the class of assets subject to the Collateral Act 2005 given that

the Eligible Collateral is either a financial instrument or cash.8

The Collateral Act 2005 applies to financial collateral arrangements, which include the

pledge (gage), the transfer of title by way of security (transfert de propriété à titre de

garantie), the repurchase agreement (mise en pension) and the fiduciary collateral transfer

(fiducie-sûreté), when such collateral financial arrangements relate to financial instruments

(in the widest sense) and generally money and cash claims (créances de sommes d’argent).

It follows that a Luxembourg court would apply the provisions of the Collateral Act 2005 to

a Luxembourg law financial collateral arrangement with respect to the Eligible Collateral

(assuming that Luxembourg law is the applicable law according to the Luxembourg conflict

of laws rules).

Article 24 of the Collateral Act 2005 also protects security interests and financial collateral

arrangements (garanties financières) which are granted by a Luxembourg entity under the

law of another EU Member State or under the law of a third country, and which have a

nature similar to the financial collateral arrangements referred to under the Collateral Act

2005. In other words, a validly created and perfected financial collateral arrangement made

by a Luxembourg entity and governed by a foreign law is valid and binding against third

parties, administrators, insolvency receivers, liquidators and other similar organs

notwithstanding the existence of a reorganisation measure, liquidation proceedings or any

situation of competition between creditors, Luxembourg or foreign.

8 Accordingly, rights, titles and interest, other than attaching to cash or securities are excluded from the Collateral Act 2005.

0030047-0001012 LU:6636384.5 24

(iv) What is the effect, if any, under the laws of Luxembourg of the fact that the amount secured

or the amount of Eligible Collateral subject to the security interest will fluctuate under the

Covered Base Agreement and CDA (including as a result of entering into additional

Covered Transactions from time to time)? In particular:

(A) would the security interest be valid in relation to future obligations of the

Covered Customer?

The Collateral Act 2005 provides that a pledge may be created, pursuant to a pledge

agreement, over all present and future assets of the pledgor to and in favour of the pledgee in

order to guarantee the “relevant financial obligations” (obligations financières couvertes) of

the pledgor (or a third party).

The “relevant financial obligations” are defined by the Collateral Act 2005 as “obligations

which are secured by a financial collateral arrangement and which give a right to cash

settlement or delivery of financial instruments or underlying assets of such financial

instruments”. The relevant financial obligations may consist of or include:

present or future, actual or contingent obligations, which do not need to be specified;

obligations owed to the collateral taker by a person other than the collateral

provider; or

obligations of a specified class or kind arising from time to time.

It follows that that a pledge agreement would be valid, as a matter of Luxembourg law,

provided that the relevant financial obligations are accurately defined by reference to a

secured amount that may vary over time

(B) would the security interest be valid to future Collateral (that is, Eligible

Collateral not yet delivered to the Clearing Member at the time of entry into

the relevant Covered Base Agreement and CDA)?

Article 4 of the Collateral Act 2005 recognizes the validity of financial collateral

arrangement covering future collateral, provided that the assets over which the financial

collateral arrangement is made can be identified.

(C) is there any difficulty with the concept of creating a security interest over a

fluctuating pool of assets, for example, by reason of the impossibility of

identifying in the Covered Base Agreement and CDA the specific assets

transferred by way of security?

Although floating charges (in respect of a fluctuating pool of assets) do not exist under

Luxembourg law, it is possible under the Collateral Act 2005 to include in a pledge

agreement current or future assets that belong or will belong to the pledgor, without the

obligation to specify these assets in the pledge agreement.

(D) is it necessary under the laws of Luxembourg for the amount secured by

each Covered Base Agreement and CDA to be a fixed amount or subject to a

fixed maximum amount?

No.

0030047-0001012 LU:6636384.5 25

(E) Is it permissible under the laws of Luxembourg for Clearing Member to hold

Collateral in excess of its actual exposure to the Covered Customer under

the related Covered Base Agreement and CDA?

Yes (though in the event of enforcement, the surplus (if any) needs to be returned to the

pledgor).

(v) Assuming that the courts of Luxembourg would recognize the security interest in each type

of Eligible Collateral created under each Covered Base Agreement and CDA, is any action

(filing, registration, notification, stamping, notarization or any other action or the obtaining

of any governmental, judicial, regulatory or other order, consent or approval) required in

Luxembourg to perfect that security interest? If so, please indicate what actions must be

taken and how such actions may differ depending upon the type of Eligible Collateral in

question?

To create a security interest (typically a pledge) over Eligible Collateral, Luxembourg law

requires that the pledged Eligible Collateral be transferred from the pledgor's control to the

control of the pledgee or of a third party selected by the pledgor and the pledgee.

Luxembourg law provides that this requirement is met when:

- in the case of financial instruments in bearer form, the relevant instruments/certificates

have physically been transferred to the pledgee or a third party;

- in the case of financial instruments in registered form, the relevant instruments have

been recorded in a register for registered securities; and

- in the case of financial instruments in book-entry form, the relevant instruments have

been recorded in an account and are designated as being pledged in the books of the

depository or the pledge has been notified to or accepted by the depository (with whom

the account is held), so that the beneficiary of the security acquires possession or control

of the collateral.

Practical actions are also required depending on the type of Eligible Collateral:

(i) as to shares, notices have to be sent to the companies whose shares are pledged

which will include the wording to be registered in the relevant shareholders registers of

these companies;

(ii) as to account, a notice has to be sent to the account bank; and

(iii) as to receivables, a notice has to be sent to the debtor(s) of the pledged receivables.

(vi) If there are any other requirements to ensure the validity or perfection of a security interest

in each type of Eligible Collateral created by the Covered Customer under each Covered

Base Agreement and CDA, please indicate the nature of such requirements. For example, is

it necessary as a matter of formal validity that the Covered Base Agreement and CDA be

expressly governed by the law of Luxembourg or translated into any other language or for

the Covered Base Agreement and CDA to include any specific wording? Are there any other

documentary formalities that must be observed in order for a security interest created under

each Covered Base Agreement and CDA to be recognized as valid and perfected in

Luxembourg?

0030047-0001012 LU:6636384.5 26

No (except that the depository will have to be represented to exercise its right of pledge, set-

off and retention in respect of the pledged account).

(vii) Assuming that the Clearing Member has obtained a valid and perfected security interest in

the Eligible Collateral under the laws of Luxembourg, to the extent such laws apply, by

complying with the requirements set forth in your responses to questions 1 to 6 above, as

applicable, will the Clearing Member or the Covered Customer need to take any action

thereafter to ensure that the security interest in the Eligible Collateral continues and/or

remains perfected, particularly with respect to additional Collateral transferred by way of

security from time to time when required pursuant to the Covered Base Agreement and

CDA?

No.

(viii) Assuming that (a) pursuant to the laws of Luxembourg, the laws of another jurisdiction

govern the creation and/or perfection of a security interest in the Eligible Collateral

transferred by way of security pursuant to each Covered Base Agreement and CDA (for

example, because such Collateral is located or deemed to be located outside Luxembourg)

and (b) the Clearing Member has obtained a valid and perfected security interest in the

Eligible Collateral under the laws of such other jurisdiction, will the Clearing Member have

a valid security interest in the Collateral so far as the laws of Luxembourg are concerned?

Is any action (filing, registration, notification, stamping or notarization or any other action

or the obtaining of any governmental, judicial, regulatory or other order, consent or

approval) required under the laws of Luxembourg to establish, perfect, continue or enforce

this security interest? Are there any other requirements of the type referred to in question 6

above?

No. This is not a matter of Luxembourg law as the Eligible Collateral is not (or not deemed

to be) located in Luxembourg.

(ix) Are there any particular duties, obligations or limitations imposed on the Clearing Member

in relation to the care of the Eligible Collateral held by it pursuant to each Covered Base

Agreement and CDA?

Apart from the contractual requirements relating to such care of the Eligible Collateral, the

Clearing Member will only be submitted to its relevant national rules. However, contractual

limitations of liability will be unenforceable in case of gross negligence (faute lourde) or

wilful misconduct (faute dolosive).

(x) A Covered Base Agreement and CDA may grant the Clearing Member broad rights with

respect to the use of Collateral. Additionally, the Covered Base Agreement and CDA are

subject to the rules of DCOs, which may also grant DCOs similar rights with respect to the

use of Collateral that has been on-posted from a Clearing Member to a DCO. Such use

might include pledging or rehypothecating the securities, disposing of the securities under a

securities repurchase (repo) agreement or simply selling the securities. Do the laws of

Luxembourg recognize the right of the Clearing Member or CDO so to use such Collateral

pursuant to an agreement with the Covered Customer? In particular, how does such use of

the Collateral affect, if at all, the validity, continuity, perfection or priority of a security

interest otherwise validly created and perfected prior to such use? Are there any other

obligations, duties or limitations imposed on the Clearing Member or DCO with respect to

its use of the Collateral under the laws of Luxembourg?

Luxembourg law recognizes the possibility for the Clearing Member to use Collateral

pursuant to an agreement with the Covered Customer. By the time the secured debt is repaid,

0030047-0001012 LU:6636384.5 27

the pledgee must return equivalent collateral, or, if so agreed by the parties, apply the value

of the collateral to the secured debt.

(b) Enforcement of Futures Credit Support Rights and Cleared Derivatives Credit Support Rights

under the Covered Base Agreement and CDA by the Clearing Member in the absence of an

insolvency proceeding

For the purpose of this question, we have also assumed that, after entering into the Covered

Transactions and prior to the maturity thereof, an event of default exists and is continuing with

respect to the Covered Customer, and/or the Clearing Member has designated a date to begin

exercising its Futures Liquidation Rights or Cleared Derivatives Liquidation Rights (a Liquidation

Date) as a result thereof (however, a Luxembourg Insolvency Proceeding has not been instituted).

(i) Assuming that the Clearing Member has obtained a valid and perfected security interest in

the Eligible Collateral under the laws of Luxembourg, to the extent such laws apply, by

complying with the requirements set forth in your responses to questions 4(a)(i) to 4(a)(vi)

above, as applicable, what are the formalities (including the necessity to obtain a court

order or conduct an auction), notification requirements (to the Covered Customer or any

other person) or other procedures, if any, that the Clearing Member must observe or

undertake in enforcing its security interest in the Eligible Collateral and exercising its

Futures Credit Support Rights and Cleared Derivatives Credit Support Rights (“Credit

Support Rights”) as a Clearing Member under each Covered Base Agreement and CDA,

such as the right to liquidate Eligible Collateral? For example, is it free to sell the Eligible

Collateral (including to itself) and apply the proceeds to satisfy the Covered Customer’s

outstanding obligations under the Covered Base Agreement and CDA? Do such formalities

or procedures differ depending on the type of Eligible Collateral involved?

No court order is required. The enforcement procedure will be set out in the pledge

agreement.

(ii) Assuming that (a) pursuant to the laws of Luxembourg, the laws of another jurisdiction

govern the creation and/or perfection of a security interest in the Eligible Collateral

transferred by way of security pursuant to each Covered Base Agreement and CDA (for

example, because such Eligible Collateral is located or deemed located outside

Luxembourg) and (b) the Clearing Member has obtained a valid and perfected security

interest in the Eligible Collateral under the laws of such other jurisdiction, are there any

formalities, notification requirements or other procedures, if any, that the Clearing Member

must observe or undertake in Luxembourg in exercising its Credit Support Rights as a

Clearing Member under each Covered Base Agreement and CDA?

No.

(iii) Are there any laws or regulations in Luxembourg that would limit or distinguish a creditor’s

enforcement rights with respect to Eligible Collateral depending on (a) the type of

transaction underlying the creditor’s exposure, (b) the type of Eligible Collateral, or (c) the

nature of the creditor or the debtor? For example, are there any types of “statutory liens”

that would be deemed to take precedence over a creditor’s security interest in the Eligible

Collateral?

The Collateral Act 2005 only applies to “relevant financial obligations” as defined in

paragraph 4(a)(iv) (and would therefore apply to any transactions listed in Appendix A

entered into under a Covered Base Agreement and CDA) and to assets (cash and securities)

0030047-0001012 LU:6636384.5 28

as described above (which includes Eligible Collateral). The nature of the creditors or

debtors does not have any impact as long as they are Covered Customers.

In Luxembourg, there are rights of preference (such as, for example, for tax payments, social

security charges and wages) existing by operation of law and ranking prior to the ranking of

security rights.

(iv) How would your response to questions 4(b)(i) to 4(b)(iii) above change, if at all, assuming

that an insolvency proceeding described in assumption (e) above has occurred with respect

to the Clearing Member (notwithstanding that the Covered Base Agreement and CDA may

not provide for any events of default in respect of the Clearing Member) rather than or in

addition to the Covered Customer (for example, would this affect this ability of the Clearing

Member to exercise its enforcement rights with respect to the Eligible Collateral)?

No (subject to insolvency laws applicable to Clearing Members).

(c) Enforcement of Credit Support Rights under the Covered Base Agreement and DCA by the

Clearing Member after the commencement of an Insolvency Proceedings

For the purpose of this paragraph, we have assumed that a formal foreign bankruptcy, insolvency,

liquidation, reorganization, administration or comparable proceeding has been instituted by or

against the Covered Customer and an Event of Default has accordingly occurred under the Covered

Base Agreement and CDA.

(i) How are competing priorities between creditors determined in Luxembourg? What

conditions must be satisfied if the Clearing Member’s security interest is to have priority

over all other claims (secured or unsecured) of an interest in the Eligible Collateral, other

than claims of a DCO?

Subject to the fulfillment of the conditions of the Collateral Act 2005 (as discussed above), the

Clearing Member would a priori have priority over all other claims over the Eligible Collateral

(although there are, under Luxembourg law, rights of preference (such as, for example, for tax

payments, social security charges and wages) existing by operation of law and ranking prior to the

ranking of security rights, and which could, in certain circumstances, have priority over the Clearing

Member’s claim).

(ii) Would the Clearing Member’s right to enforce its security interest in the Eligible Collateral

and exercise its Credit Support Rights under each Covered Base Agreement and CDA, such

as the right to liquidate the Eligible Collateral, be subject to any stay or freeze or otherwise

be affected by commencement of the insolvency (that is, how does the institution of an

insolvency proceeding change your responses to questions 4(b)(i) and 4(b)(ii) above, if at

all)?

No (so far as the Collateral Act 2005 is concerned).

(iii) Will the Covered Customer (or its administrator, provisional liquidator, conservator,

receiver, trustee, custodian or other similar official) be able to recover any transfers of

Collateral made to the Clearing Member during a certain “suspect period” preceding the

date of the insolvency as a result of such a transfer constituting a “preference” (however

called and whether or not fraudulent) in favor of the Clearing Member or on any other

basis? If so, how long before the insolvency does this suspect period begin? If such a period

exists, would the substitution of Collateral by the Covered Customer during this period

invalidate an otherwise valid security interest if the substitute Collateral is of no greater

value than the assets it is replacing? Would the posting of additional “variation margin”

0030047-0001012 LU:6636384.5 29

(that is, an amount that reflects a change in the mark-to-market value of one or more

Covered Transactions) during the suspect period be subject to avoidance, either because the

Collateral was considered to relate to an antecedent or pre-existing obligation or for some

other reason?

No (so far as the Collateral Act 2005 is concerned).

5. MISCELLANEOUS

(a) Would the parties’ agreement on governing law of each Covered Base Agreement and CDA and

submission to jurisdiction be upheld in Luxembourg, and what would be the consequences if they

were not?

Luxembourg courts might not apply a chosen foreign law if that choice was not made bona fide

and/or:

(1) if it were not pleaded and proved; or

(2) if such foreign law would be contrary to the mandatory provisions (lois impératives) or

overriding mandatory provisions (lois de police) of Luxembourg law or manifestly

incompatible with Luxembourg public policy; or

(3) to the extent that relevant contractual obligations or matters fall outside of the scope of the

Rome Convention of 19 June 1980 on the law applicable to contractual obligations (if

Denmark); or

(4) if all other elements relevant to the situation are located in a country other than the

jurisdiction of the chosen governing law, in which case the Luxembourg courts may apply

the applicable mandatory provisions of such country; or

(5) where the chosen governing law is not the law of an EU Member State, if all other elements

relevant to the situation are located in one or several EU Member States, in which case the

Luxembourg courts may apply applicable mandatory EU law provisions (as implemented in

Luxembourg); or

(6) where contractual obligations are to be or have been performed in another country where

such performance is prohibited by overriding mandatory provisions; or

(7) if a party is subject to insolvency proceedings, in which case the Luxembourg courts would

apply the law of the jurisdiction where such insolvency proceedings have been duly opened

(lex concursus) to the effects of such insolvency proceedings without prejudice to the

exceptions provided for in the EU Insolvency Regulation.

(b) Are there any other local law considerations that you would recommend the Clearing Member to

consider in connection with taking and realizing upon the Eligible Collateral from the Covered

Customer?

No.

(c) Are there any other circumstances you can foresee that might affect the Clearing Member’s ability to

enforce its security interest in Luxembourg?

No.

0030047-0001012 LU:6636384.5 30

APPENDIX A

SEPTEMBER 2012

CERTAIN DERIVATIVES TRANSACTIONS

Basis Swap. A transaction in which one party pays periodic amounts of a given currency based on a floating rate and the other party pays periodic amounts of the same currency based on another floating rate, with both

rates reset periodically; all calculations are based on a notional amount of the given currency.

Bond Forward. A transaction in which one party agrees to pay an agreed price for a specified amount of a

bond of an issuer or a basket of bonds of several issuers at a future date and the other party agrees to pay a

price for the same amount of the same bond to be set on a specified date in the future. The payment

calculation is based on the amount of the bond and can be physically-settled (where delivery occurs in exchange for payment) or cash-settled (where settlement occurs based on the difference between the agreed

forward price and the prevailing market price at the time of settlement).

Bond Option. A transaction in which one party grants to the other party (in consideration for a premium

payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in the case of a put) a

specified amount of a bond of an issuer, such as Kingdom of Sweden or Unilever N.V., at a specified strike

price. The bond option can be settled by physical delivery of the bonds in exchange for the strike price or may be cash settled based on the difference between the market price of the bonds on the exercise date and

the strike price.

Bullion Option. A transaction in which one party grants to the other party (in consideration for a premium

payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in the case of a put) a

specified number of Ounces of Bullion at a specified strike price. The option may be settled by physical delivery of Bullion in exchange for the strike price or may be cash settled based on the difference between

the market price of Bullion on the exercise date and the strike price.

Bullion Swap. A transaction in which one party pays periodic amounts of a given currency based on a fixed price or a fixed rate and the other party pays periodic amounts of the same currency or a different currency

calculated by reference to a Bullion reference price (for example, Gold-COMEX on the COMEX Division of

the New York Mercantile Exchange) or another method specified by the parties. Bullion swaps include cap, collar or floor transactions in respect of Bullion.

Bullion Trade. A transaction in which one party agrees to buy from or sell to the other party a specified number of Ounces of Bullion at a specified price for settlement either on a “spot” or two-day basis or on a

specified future date. A Bullion Trade may be settled by physical delivery of Bullion in exchange for a

specified price or may be cash settled based on the difference between the market price of Bullion on the

settlement date and the specified price.

For purposes of Bullion Trades, Bullion Options and Bullion Swaps, “Bullion” means gold, silver, platinum

or palladium and “Ounce” means, in the case of gold, a fine troy ounce, and in the case of silver, platinum

and palladium, a troy ounce (or in the case of reference prices not expressed in Ounces, the relevant Units

of gold, silver, platinum or palladium).

Buy/Sell-Back Transaction. A transaction in which one party purchases a security (in consideration for a

cash payment) and agrees to sell back that security (or in some cases an equivalent security) to the other party (in consideration for the original cash payment plus a premium).

Cap Transaction. A transaction in which one party pays a single or periodic fixed amount and the other party

pays periodic amounts of the same currency based on the excess, if any, of a specified floating rate (in the case of an interest rate cap), rate or index (in the case of an economic statistic cap) or commodity price (in

the case of a commodity cap) in each case that is reset periodically over a specified per annum rate (in the

case of an interest rate cap), rate or index (in the case of an economic statistic cap) or commodity price (in the case of a commodity cap).

0030047-0001012 LU:6636384.5 31

Collar Transaction. A collar is a combination of a cap and a floor where one party is the floating rate, floating index or floating commodity price payer on the cap and the other party is the floating rate, floating

index or floating commodity price payer on the floor.

Commodity Forward. A transaction in which one party agrees to purchase a specified quantity of a

commodity at a future date at an agreed fixed or floating price, and the other party agrees to deliver such

quantity in exchange for payment at such price on a specified date in the future.

Commodity Index Transaction. A transaction, structured in the form of a swap, cap, collar, floor, option or

some combination thereof, between two parties in which the underlying value of the transaction is based on a

rate or index based on the price of one or more commodities.

Commodity Option. A transaction in which one party grants to the other party (in consideration for a

premium payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in the case of a put) a specified quantity of a commodity at a specified strike price. The option can be settled either by

physically delivering the quantity of the commodity in exchange for the strike price or by cash settling the

option, in which case the seller of the option would pay to the buyer the difference between the market price

of that quantity of the commodity on the exercise date and the strike price.

Commodity Swap. A transaction in which one party pays periodic amounts of a given currency based on a

fixed price and the other party pays periodic amounts of the same currency based on the price of a commodity, such as natural gas or gold, or a futures contract on a commodity (e.g., West Texas Intermediate

Light Sweet Crude Oil on the New York Mercantile Exchange); all calculations are based on a notional

quantity of the commodity.

Contingent Credit Default Swap. A Credit Default Swap Transaction under which the calculation amounts

applicable to one or both parties may vary over time by reference to the mark-to-market value of a

hypothetical swap transaction.

Credit Default Swap Option. A transaction in which one party grants to the other party (in consideration for a premium payment) the right, but not the obligation, to enter into a Credit Default Swap.

Credit Default Swap. A transaction in which one party pays either a single fixed amount or periodic fixed

amounts or floating amounts determined by reference to a specified notional amount, and the other party (the credit protection seller) pays either a fixed amount or an amount determined by reference to the value of one

or more loans, debt securities or other financial instruments (each a “Reference Obligation”) issued,

guaranteed or otherwise entered into by a third party (the “Reference Entity”) upon the occurrence of one or more specified credit events with respect to the Reference Entity (for example, bankruptcy or payment

default). The amount payable by the credit protection seller is typically determined based upon the market

value of one or more debt securities or other debt instruments issued, guaranteed or otherwise entered into by the Reference Entity. A Credit Default Swap may also be physically settled by payment of a specified fixed

amount by one party against delivery of specified obligations (“Deliverable Obligations”) by the other party.

A Credit Default Swap may also refer to a “basket” (typically ten or less) or a “portfolio” (eleven or more) of

Reference Entities or may be an index transaction consisting of a series of component Credit Default Swaps.

Credit Derivative Transaction on Asset-Backed Securities. A Credit Default Swap for which the Reference

Obligation is a cash or synthetic asset-backed security. Such a transaction may, but need not necessarily, include “pay as you go” settlements, meaning that the credit protection seller makes payments relating to

interest shortfalls, principal shortfalls and write-downs arising on the Reference Obligation and the credit

protection buyer makes additional fixed payments of reimbursements of such shortfalls or write-downs.

Credit Spread Transaction. A transaction involving either a forward or an option where the value of the

transaction is calculated based on the credit spread implicit in the price of the underlying instrument.

0030047-0001012 LU:6636384.5 32

Cross Currency Rate Swap. A transaction in which one party pays periodic amounts in one currency based

on a specified fixed rate (or a floating rate that is reset periodically) and the other party pays periodic amounts in another currency based on a floating rate that is reset periodically. All calculations are

determined on predetermined notional amounts of the two currencies; often such swaps will involve initial

and or final exchanges of amounts corresponding to the notional amounts.

Currency Option. A transaction in which one party grants to the other party (in consideration for a premium

payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in the case of a put) a specified amount of a given currency at a specified strike price.

Currency Swap. A transaction in which one party pays fixed periodic amounts of one currency and the other

party pays fixed periodic amounts of another currency. Payments are calculated on a notional amount. Such swaps may involve initial and or final payments that correspond to the notional amount.

Economic Statistic Transaction. A transaction in which one party pays an amount or periodic amounts of a given currency by reference to interest rates or other factors and the other party pays or may pay an amount

or periodic amounts of a currency based on a specified rate or index pertaining to statistical data on

economic conditions, which may include economic growth, retail sales, inflation, consumer prices, consumer

sentiment, unemployment and housing.

Emissions Allowance Transaction. A transaction in which one party agrees to buy from or sell to the other

party a specified quantity of emissions allowances or reductions at a specified price for settlement either on a "spot" basis or on a specified future date. An Emissions Allowance Transaction may also constitute a swap

of emissions allowances or reductions or an option whereby one party grants to the other party (in

consideration for a premium payment) the right, but not the obligation, to receive a payment equal to the amount by which the specified quantity of emissions allowances or reductions exceeds or is less than a

specified strike. An Emissions Allowance Transaction may be physically settled by delivery of emissions

allowances or reductions in exchange for a specified price, differing vintage years or differing emissions

products or may be cash settled based on the difference between the market price of emissions allowances or reductions on the settlement date and the specified price.

Equity Forward. A transaction in which one party agrees to pay an agreed price for a specified quantity of shares of an issuer, a basket of shares of several issuers or an equity index at a future date and the other party

agrees to pay a price for the same quantity and shares to be set on a specified date in the future. The

payment calculation is based on the number of shares and can be physically-settled (where delivery occurs in exchange for payment) or cash-settled (where settlement occurs based on the difference between the agreed

forward price and the prevailing market price at the time of settlement).

Equity Index Option. A transaction in which one party grants to the other party (in consideration for a premium payment) the right, but not the obligation, to receive a payment equal to the amount by which an

equity index either exceeds (in the case of a call) or is less than (in the case of a put) a specified strike price.

Equity Option. A transaction in which one party grants to the other party (in consideration for a premium

payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in the case of a put) a

specified number of shares of an issuer or a basket of shares of several issuers at a specified strike price. The

share option may be settled by physical delivery of the shares in exchange for the strike price or may be cash settled based on the difference between the market price of the shares on the exercise date and the strike

price.

Equity Swap. A transaction in which one party pays periodic amounts of a given currency based on a fixed

price or a fixed or floating rate and the other party pays periodic amounts of the same currency or a different

currency based on the performance of a share of an issuer, a basket of shares of several issuers or an equity index, such as the Standard and Poor’s 500 Index.

0030047-0001012 LU:6636384.5 33

Floor Transaction. A transaction in which one party pays a single or periodic amount and the other party

pays periodic amounts of the same currency based on the excess, if any, of a specified per annum rate (in the case of an interest rate floor), rate or index level (in the case of an economic statistic floor) or commodity

price (in the case of a commodity floor) over a specified floating rate (in the case of an interest rate floor),

rate or index level (in the case of an economic statistic floor) or commodity price (in the case of a commodity floor).

Foreign Exchange Transaction. A deliverable or non-deliverable transaction providing for the purchase of one currency with another currency providing for settlement either on a "spot" or two-day basis or a

specified future date.

Forward Rate Transaction. A transaction in which one party agrees to pay a fixed rate for a defined period and the other party agrees to pay a rate to be set on a specified date in the future. The payment calculation is

based on a notional amount and is settled based, among other things, on the difference between the agreed

forward rate and the prevailing market rate at the time of settlement.

Freight Transaction. A transaction in which one party pays an amount or periodic amounts of a given

currency based on a fixed price and the other party pays an amount or periodic amounts of the same currency

based on the price of chartering a ship to transport wet or dry freight from one port to another; all calculations are based either on a notional quantity of freight or, in the case of time charter transactions, on a

notional number of days.

Fund Option Transaction: A transaction in which one party grants to the other party (for an agreed payment

or other consideration) the right, but not the obligation, to receive a payment based on the redemption value

of a specified amount of an interest issued to or held by an investor in a fund, pooled investment vehicle or any other interest identified as such in the relevant Confirmation (a “Fund Interest”), whether i) a single

class of Fund Interest of a Single Reference Fund or ii) a basket of Fund Interests in relation to a specified

strike price. The Fund Option Transactions will generally be cash settled (where settlement occurs based on

the excess of such redemption value over such specified strike price (in the case of a call) or the excess of such specified strike price over such redemption value (in the case of a put) as measured on the valuation

date or dates relating to the exercise date).

Fund Forward Transaction: A transaction in which one party agrees to pay an agreed price for the

redemption value of a specified amount of i) a single class of Fund Interest of a Single Reference Fund or ii)

a basket of Fund Interests at a future date and the other party agrees to pay a price for the redemption value of the same amount of the same Fund Interests to be set on a specified date in the future. The payment

calculation is based on the amount of the redemption value relating to such Fund Interest and generally cash-

settled (where settlement occurs based on the difference between the agreed forward price and the

redemption value measured as of the applicable valuation date or dates).

Fund Swap Transaction: A transaction a transaction in which one party pays periodic amounts of a given

currency based on a fixed price or a fixed rate and the other party pays periodic amounts of the same currency based on the redemption value of i) a single class of Fund Interest of a Single Reference Fund or ii)

a basket of Fund Interests.

Interest Rate Option. A transaction in which one party grants to the other party (in consideration for a premium payment) the right, but not the obligation, to receive a payment equal to the amount by which an

interest rate either exceeds (in the case of a call option) or is less than (in the case of a put option) a specified

strike rate.

Interest Rate Swap. A transaction in which one party pays periodic amounts of a given currency based on a

specified fixed rate and the other party pays periodic amounts of the same currency based on a specified floating rate that is reset periodically, such as the London inter-bank offered rate; all calculations are based

on a notional amount of the given currency.

0030047-0001012 LU:6636384.5 34

Longevity/Mortality Transaction. (a) A transaction employing a derivative instrument, such as a forward, a

swap or an option, that is valued according to expected variation in a reference index of observed demographic trends, as exhibited by a specified population, relating to aging, morbidity, and

mortality/longevity, or (b) A transaction that references the payment profile underlying a specific portfolio of

longevity- or mortality- contingent obligations, e.g. a pool of pension liabilities or life insurance policies (either the actual claims payments or a synthetic basket referencing the profile of claims payments).

Physical Commodity Transaction. A transaction which provides for the purchase of an amount of a commodity, such as oil including oil products, coal, electricity or gas, at a fixed or floating price for actual

delivery on one or more dates.

Property Index Derivative Transaction. A transaction, often structured in the form of a forward, option or total return swap, between two parties in which the underlying value of the transaction is based on a rate or

index based on residential or commercial property prices for a specified local, regional or national area.

Repurchase Transaction. A transaction in which one party agrees to sell securities to the other party and

such party has the right to repurchase those securities (or in some cases equivalent securities) from such

other party at a future date.

Securities Lending Transaction. A transaction in which one party transfers securities to a party acting as the

borrower in exchange for a payment or a series of payments from the borrower and the borrower’s obligation

to replace the securities at a defined date with identical securities.

Swap Deliverable Contingent Credit Default Swap. A Contingent Credit Default Swap under which one of

the Deliverable Obligations is a claim against the Reference Entity under an ISDA Master Agreement with respect to which an Early Termination Date (as defined therein) has occurred.

Swap Option. A transaction in which one party grants to the other party the right (in consideration for a

premium payment), but not the obligation, to enter into a swap with certain specified terms. In some cases the swap option may be settled with a cash payment equal to the market value of the underlying swap at the

time of the exercise.

Total Return Swap. A transaction in which one party pays either a single amount or periodic amounts based

on the total return on one or more loans, debt securities or other financial instruments (each a “Reference

Obligation”) issued, guaranteed or otherwise entered into by a third party (the “Reference Entity”), calculated by reference to interest, dividend and fee payments and any appreciation in the market value of

each Reference Obligation, and the other party pays either a single amount or periodic amounts determined

by reference to a specified notional amount and any depreciation in the market value of each Reference

Obligation.

A total return swap may (but need not) provide for acceleration of its termination date upon the occurrence

of one or more specified events with respect to a Reference Entity or a Reference Obligation with a termination payment made by one party to the other calculated by reference to the value of the Reference

Obligation.

Weather Index Transaction. A transaction, structured in the form of a swap, cap, collar, floor, option or some combination thereof, between two parties in which the underlying value of the transaction is based on a

rate or index pertaining to weather conditions, which may include measurements of heating, cooling,

precipitation and wind.

0030047-0001012 LU:6636384.5 35

APPENDIX B

SEPTEMBER 2009

CERTAIN COUNTERPARTY TYPES9

Description Covered

by

opinion

Legal form(s)10

Bank/Credit Institution. A legal entity, which may

be organized as a corporation, partnership or in

some other form, that conducts commercial banking

activities, that is, whose core business typically

involves (a) taking deposits from private individuals

and/or corporate entities and (b) making loans to

private individual and/or corporate borrowers. This

type of entity is sometimes referred to as a

“commercial bank” or, if its business also includes

investment banking and trading activities, a

“universal bank”. (If the entity only conducts

investment banking and trading activities, then it

falls within the “Investment Firm/Broker Dealer”

category below.) This type of entity is referred to

as a “credit institution” in European Community

(EC) legislation. This category may include

specialised types of bank, such as a mortgage

savings bank (provided that the relevant entity

accepts deposits and makes loans), or such an entity

may be considered in the local jurisdiction to

constitute a separate category of legal entity (as in

the case of a building society in the United

Kingdom (UK)).

Yes Credit institutions are legal persons established

under the Companies Act 1915 and governed

by the Banking Act 1993.

Under the Banking Act 1993, a Luxembourg

credit institution must be formed under one of

the following legal forms:

(i) établissement de droit public

(public establishment);

(ii) S.A.;

(iii) S.C.A.; or

(iv) société coopérative.

Naming convention rules set out under an

entity that is a corporation (as referred to

below) above apply to the relevant legal form

adopted by a credit institution.

Central Bank. A legal entity that performs the

function of a central bank for a Sovereign or for an

area of monetary union (as in the case of the

European Central Bank in respect of the euro zone).

No11

9 In these definitions, the term “legal entity” means an entity with legal personality other than a private individual.

10 If appropriate, please indicate, as discussed in the Instruction Letter, any naming convention or rule that would help a reader of the opinion to

identify and classify the entity. 11

Further legal analysis would be required to cover this counterparty type in the Memorandum.

0030047-0001012 LU:6636384.5 36

Description Covered

by

opinion

Legal form(s)10

Corporation. A legal entity that is organized as a

corporation or company rather than a partnership, is

engaged in industrial and/or commercial activities

and does not fall within one of the other categories

in this Appendix B.

Yes Under Luxembourg law, an ordinary trading

corporation (a Luxembourg Corporation)

engaged in industrial or commercial

activities12

would typically be established

under the Companies Act 1915 and be set up

under one of the following legal forms:13

(i) a société anonyme (S.A.) is a public

limited liability company;

(ii) a société européenne (S.E.) is a société

anonyme set up in accordance with

article 2 of Council Regulation (EC) No.

2157/2001 dated 8 October 2001 on the

statute for a European company, which

has established its registered office and

its central administration in

Luxembourg;

(iii) a société en nom collectif (S.N.C.) is an

unlimited company or general

partnership in which all the members are

jointly and severally liable without

limitation for the obligations of the

company;

(iv) a société en commandite simple (S.C.S.)

is a company that is entered into for a

limited or unlimited duration between

one or more unlimited members

(associés commandités) with unlimited

and joint and several liability for all the

obligations of the company and one or

more limited members (associés

commanditaires), who only contribute a

specific amount, constituting parts of

interests, represented or not by securities

12

The Memorandum does not cover sociétés civiles governed by the Luxembourg civil code and the objects of which are of a civil (rather than

commercial) nature or economic interest groups (GIE) or European economic interest groups (GEIE). The Memorandum also does not cover special

limited partnerships (sociétés en commandite spéciale).

Unlike common limited partnerships, special limited partnerships have no legal personality. 13

As regards naming convention in relation to ordinary trading corporations, in principle, terms describing the corporate form of a company or its

acronym are not, strictly speaking, part of the legal name of the company unless the founding members have decided to include the form or acronym

in the name of the company. In contractual documents (including confirmations evidencing a derivative transaction), reference to a Luxembourg

Corporation should be made as is set out in its articles of incorporation (registered with the Luxembourg trade and companies register and published

in the Luxembourg official Gazette (Mémorial C, Recueil des Sociétés et Associations (the Mémorial C)). Notwithstanding the foregoing, all

instruments, invoices, notices, publications, letters, order forms and any other document issued by an S.A., S.E., S.C.A., société cooperative or a S.à

r.l. must state, among other things the corporate denomination of the company and include respectively, the words "société anonyme" or "SA", "SE",

"société en commandite par action", "société cooperative" and "société à responsabilité limitée" reproduced legibly and in full, immediately before or

after the denomination of the Luxembourg Corporation.

0030047-0001012 LU:6636384.5 37

Description Covered

by

opinion

Legal form(s)10

in accordance with the terms of the

partnership agreement;

(v) a société en commandite par actions

(S.C.A.) is a corporate partnership

limited by shares between one or more

shareholders (associés commandités)

with unlimited and joint and several

liability for all the obligations of the

company and shareholders (associés

commanditaires) who only contribute a

specific share of the capital;

(vi) a société coopérative is a co-operative

company made up of a number of

members (at least seven) whose

contributions are variable. The corporate

units in a société coopérative may not be

sold to third parties; or

(vii) a société à responsabilité limitée (S.à

r.l.) is a private limited liability

company, the corporate units of which

are exclusively represented by non-

negotiable securities.

Hedge Fund/Proprietary Trader. A legal entity,

which may be organized as a corporation,

partnership or in some other legal form, the

principal business of which is to deal in and/or

manage securities and/or other financial instruments

and/or otherwise to carry on an investment business

predominantly or exclusively as principal for its

own account.

No The Memorandum does not address the

situation where a Covered Customer is a fund

existing under the Luxembourg act dated 17

December 2010 on undertakings for collective

investment (the UCIT Act 2010) or the

Luxembourg act dated 13 February 2007

relating to specialised investment funds (fonds

d’investissement spécialisés) (the SIF Act

2007). Luxembourg law does not recognise

Hedge Funds/Proprietary Traders as a category

of Luxembourg Funds per se. However, if an

undertaking were to take in Luxembourg the

legal form of either an undertaking for

collective investment (a UCI) or a specialised

investment fund (a SIF) under the UCIT Act

2010 or the SIF Act 2007, respectively, and

were to deal in and/or manage securities and/or

other financial instruments and/or otherwise to

carry on an investment business predominantly

or exclusively as principal for its own account,

then such undertaking would fall within the

0030047-0001012 LU:6636384.5 38

Description Covered

by

opinion

Legal form(s)10

relevant category of investment funds.

The Luxembourg act dated 12 July 2013 on

alternative investment fund managers (the

AIFM Act 2013) entered into force on 15 July

2013. The AIFM Act 2013 implements the

AIFMD (as defined in the Memorandum),

which regulates alternative investment fund

managers (AIFMs), into Luxembourg law. The

AIFM Directive and the AIFM Act 2013 are

supplemented by the Commission Delegated

Regulation (EU) No 231/2013 of 19 December

2012 regarding exemptions, general operating

conditions, depositaries, leverage, transparency

and supervision.

AIFMs are defined under the AIFM Directive

as “legal persons whose regular business is

managing one or more alternative investment

funds (AIFs)”. AIFs are themselves defined as

“collective investment undertakings14

[…]

which: (i) raise capital from a number of

investors with a view to investing it in

accordance with a defined investment policy

for the benefit of those investors; and (ii) do

not require authorisation as a UCITS.”

The AIFM Act 2013 regulates all Luxembourg

AIFMs (including internally-managed AIFs)

and, indirectly, all AIFs managed by those

AIFMs.

Insurance Company. A legal entity, which may be

organised as a corporation, partnership or in some

other legal form (for example, a friendly society or

industrial & provident society in the UK), that is

licensed to carry on insurance business, and is

typically subject to a special regulatory regime and

a special insolvency regime in order to protect the

interests of policyholders.

No Insurance undertakings are legal persons

established under the Companies Act 1915 and

governed by the Luxembourg act dated 6

December 1991 relating to the insurance sector,

as amended (the Insurance Act 1991).

Under the Insurance Act 1991, a Luxembourg

insurance undertaking must be formed under

one of the following legal forms: 15

14

According to the AIFM Delegated Regulation, a collective investment undertaking is an undertaking that displays the following characteristics: (a)

the undertaking does not have a general commercial or industrial purpose; (b) the undertaking pools together capital raised from its investors for the

purpose of investment with a view to generating a pooled return for those investors; and (c) the unitholders or shareholders of the undertaking – as a

collective group – have no day-to-day discretion or control. 15

Naming convention rules apply to insurance undertakings organised under the form of commercial companies subject to the Companies Act 1915.

So far as Insurance Undertakings under the form of association d'assurance mutuelle are concerned, all instruments, invoices, notices, publications,

0030047-0001012 LU:6636384.5 39

Description Covered

by

opinion

Legal form(s)10

(i) association d'assurance mutuelle (mutual

insurance association). A mutual insurance

association derives its capacity from the

terms of its corporate objects as set out in

its articles of association (that must take

the form of a notarial deed published in

accordance with article 9 of the

Companies Act 1915, the (minimum)

content of which is set out in the Insurance

Act 1991);

(ii) S.A.;

(iii) S.C.A.;

(iv) société coopérative; or

(v) société coopérative organisée comme une

société anonyme (co-operative company

organised as a Luxembourg public limited

liability company) (SCoSA).

International Organization. An organization of

Sovereigns established by treaty entered into

between the Sovereigns, including the International

Bank for Reconstruction and Development (the

World Bank), regional development banks and

similar organizations established by treaty.

No16

letters, orders forms and any other document issued by the association d'assurance mutuelle must include the words "association d'assurance

mutuelle" reproduced legibly and in full, immediately before or after the denomination.

16

Further legal analysis would be required to cover this counterparty type in the Memorandum.

0030047-0001012 LU:6636384.5 40

Description Covered

by

opinion

Legal form(s)10

Investment Firm/Broker Dealer. A legal entity,

which may be organized as a corporation,

partnership or in some other form, that does not

conduct commercial banking activities but deals in

and/or manages securities and/or other financial

instruments as an agent for third parties. It may

also conduct such activities as principal (but if it

does so exclusively as principal, then it most likely

falls within the “Hedge Fund/Proprietary Trader”

category above.) Its business normally includes

holding securities and/or other financial instruments

for third parties and operating related cash accounts.

This type of entity is referred to as a

“broker-dealer” in US legislation and as an

“investment firm” in EC legislation.

Yes Investment firms (which manage third party

funds) must be set up either as a commercial

company under the Companies Act 1915 (and

accordingly may be set up under one of the

legal forms set out in the category

"Corporation" above) or as a public

establishment (établissement de droit public).

They are subject to the Banking Act 1993.

Investment Fund. A legal entity or an arrangement

without legal personality (for example, a common

law trust) established to provide investors with a

share in profits or income arising from property

acquired, held, managed or disposed of by the

manager(s) of the legal entity or arrangement or a

right to payment determined by reference to such

profits or income. This type of entity or

arrangement is referred to as a “collective

investment scheme” in EC legislation. It may be

regulated or unregulated. It is typically

administered by one or more persons (who may be

private individuals and/or corporate entities) who

have various rights and obligations governed by

general law and/or, typically in the case of regulated

Investment Funds, financial services legislation.

Where the arrangement does not have separate legal

personality, one or more representatives of the

Investment Fund (for example, a trustee of a unit

trust) contract on behalf of the Investment Fund, are

owed the rights and owe the obligations provided

for in the contract and are entitled to be indemnified

out of the assets comprised in the arrangement.

No A Luxembourg UCI may be set up either as a

fonds commun de placement (a FCP) (i.e., a

collective investment fund that has no legal

personality) or as a société d'investissement à

capital variable (a SICAV) (i.e., an investment

company with a variable share capital that has

a legal personality). It is also possible to set up

other forms of legal structures that are not

expressly defined by the UCIT Act 2010 or the

SIF Act 2007. The main type is the société

d'investissement à capital fixe (a SICAF).

An FCP is managed by a management

company (société de gestion) that has a legal

personality and that is the statutory

management body of the FCP.

SICAVs that are subject to the UCIT Act 2010

must be set up in the form of an S.A..

SICAVs that are subject to the SIF Act 2007

(and therefore qualify as specialised investment

funds) (SICAV-FIS) may be set up under the

form of an S.A., an S.C.S., a société en

commandite spéciale, an S.C.A., an S.à r.l. or a

SCoSA.

A SICAF is usually established either as an

S.A., an S.C.S or an S.C.A.. A SICAF may also

be established, for example, under the form of

an S.à r.l. or a société en commandite spéciale.

0030047-0001012 LU:6636384.5 41

Description Covered

by

opinion

Legal form(s)10

As regards naming convention, in respect of

UCIs organised as commercial companies with

variable capital (i.e., a SICAV), the reference

to the corporate form that must in principle be

included in all invoices, notices, publications,

letters, order forms and any other document

according to the Companies Act 1915 is to be

replaced by a reference to "société

d'investissement à capital variable".17

In respect of UCIs organised as commercial

companies with a fixed capital (i.e. SICAF),

although neither the UCIT Act 2010 nor the

SIF Act 2007 expressly provides for specific

naming convention, it is market practice to

include in agreements, invoices, notices,

publications, letters, order forms and other

documents of the SICAF, a reference to the

denomination of the SICAF followed by the

terms "société d'investissement à capital fixe".

In respect of UCIs organised under the

contractual form or FCPs, although neither the

UCIT Act 2010 nor the SIF Act 2007 expressly

provides for specific naming convention, it is

market practice to include in agreements,

invoices, notices, publications, letters, order

forms and other documents of a FCP, a

reference to the denomination of the FCP

followed by the terms "fonds commun de

placement".

Finally, if the relevant UCI is subject to the SIF

Act 2007, the terms "fonds d'investissement

spécialisé" (or the acronym "FIS") must follow

the terms "société d'investissement", "société

d'investissement à capital variable" or "fonds

commun de placement" on all invoices, notices,

publications, letters, order forms and any other

document.

Under the AIFM Act 2013, a Luxembourg

investment fund may qualify as an AIF, which

can either be internally managed or managed

by an external alternative investment fund

17

There may be further naming conventions that apply under the ESMA Guidelines 2012/832 for exchange traded funds (ETF) and under the CESR

Guidelines 10-049 for money market funds (MMF), if applicable.

0030047-0001012 LU:6636384.5 42

Description Covered

by

opinion

Legal form(s)10

manager.

Local Authority. A legal entity established to

administer the functions of local government in a

particular region within a Sovereign or State of a

Federal Sovereign, for example, a city, county,

borough or similar area.

No18

Partnership. A legal entity or form of arrangement

without legal personality that is (a) organised as a

general, limited or some other form of partnership

and (b) does not fall within one of the other

categories in this Appendix B. If it does not have

legal personality, it may nonetheless be treated as

though it were a legal person for certain purposes

(for example, for insolvency purposes) and not for

other purposes (for example, tax or personal

liability).

No19

18

Further legal analysis would be required to cover this counterparty type in the Memorandum. 19

Further legal analysis would be required to cover this counterparty type in the Memorandum.

0030047-0001012 LU:6636384.5 43

Description Covered

by

opinion

Legal form(s)10

Pension Fund. A legal entity or an arrangement

without legal personality (for example, a common

law trust) established to provide pension benefits to

a specific class of beneficiaries, normally sponsored

by an employer or group of employers. It is

typically administered by one or more persons (who

may be private individuals and/or corporate entities)

who have various rights and obligations governed

by pensions legislation. Where the arrangement

does not have separate legal personality, one or

more representatives of the Pension Fund (for

example, a trustee of a pension scheme in the form

of a common law trust) contract on behalf of the

Pension Fund and are owed the rights and owe the

obligations provided for in the contract and are

entitled to be indemnified out of the assets

comprised in the arrangement.

No Luxembourg law does not recognise Pension

Funds as a category of Luxembourg Funds per

se.20

However, if an undertaking were to take

in Luxembourg the legal form of either a UCI

or a SIF (as defined above) under the UCIT Act

2010 or the SIF Act 2007, and were to be

established to provide pension benefits to a

specific class of beneficiaries, normally

sponsored by an employer or group of

employers, then such undertaking would fall

within the relevant category of Investment

Funds.

Under the AIFM Act 2013, a Luxembourg fund

which qualifies as a Pension Fund may qualify

as

(i) an alternative investment fund manager

(AIFM) or

(ii) an alternative investment fund21

(AIF)

which can either be

(a) internally managed or

(b) managed by an external AIFM.

Sovereign. A sovereign nation state recognized

internationally as such, typically acting through a

direct agency or instrumentality of the central

government without separate legal personality, for

example, the ministry of finance, treasury or

national debt office. This category does not include

a State of a Federal Sovereign or other political

sub-division of a sovereign nation state if the

sub-division has separate legal personality (for

example, a Local Authority) and it does not include

any legal entity owned by a sovereign nation state

(see “Sovereign-owned Entity”).

No22

20

There exist however, under Luxembourg law, particular types of pension funds or schemes, subject to the Luxembourg act dated 13 July 2005

relating to pension institutions set up under the form of a SEPCAV (société d'épargne-pension à capital variable) and ASSEP (association d'épargne-

pension) (the Luxembourg Pension Funds). We understand that there are currently 14 Luxembourg Pension Funds existing in Luxembourg. The

Luxembourg Pension Funds currently do not fall within the scope of the Memorandum. 21

We understand that SEPCAV and ASSEP currently do not qualify as AIF or AIFM subject to the AIFM Act 2013, because they are exempted from

the scope of the AIFM Act 2013 pursuant to article 2(b) AIFM Act 2013. Pension Funds may further be out of scope of the AIFM Act 2013 to the

extent they qualify as institutions relating to state-controlled social security and pension systems as well as employee related schemes as defined in

article 2(e) and (f) AIFM Act 2013. 22

Further legal analysis would be required to cover this counterparty type in the Memorandum.

0030047-0001012 LU:6636384.5 44

Description Covered

by

opinion

Legal form(s)10

Sovereign Wealth Fund. A legal entity, often

created by a special statute and normally wholly

owned by a Sovereign, established to manage assets

of or on behalf of the Sovereign, which may or may

not hold those assets in its own name. Such an

entity is often referred to as an “investment

authority”. For certain Sovereigns, this function is

performed by the Central Bank, however for

purposes of this Appendix B the term “Sovereign

Wealth Fund” excludes a Central Bank.

No Luxembourg law does not recognise Sovereign

Wealth Funds as a category of Luxembourg

Funds per se.23

However, if an undertaking

were to take in Luxembourg the legal form of

either a UCI or a SIF (as defined in the

Memorandum) and were to be wholly-owned

by a Sovereign, established to manage assets

of, or on behalf of, the Sovereign, which may

or may not hold those assets in its own name,

then such undertaking would fall within the

relevant category of Investment Funds.

Sovereign-Owned Entity. A legal entity wholly or

majority-owned by a Sovereign, other than a

Central Bank, or by a State of a Federal Sovereign,

which may or may not benefit from any immunity

enjoyed by the Sovereign or State of a Federal

Sovereign from legal proceedings or execution

against its assets. This category may include

entities active entirely in the private sector without

any specific public duties or public sector mission

as well as statutory bodies with public duties (for

example, a statutory body charged with regulatory

responsibility over a sector of the domestic

economy). This category does not include local

governmental authorities (see “Local Authority”).

No24

State of a Federal Sovereign. The principal political

sub-division of a federal Sovereign, such as

Australia (for example, Queensland), Canada (for

example, Ontario), Germany (for example,

Nordrhein-Westfalen) or the United States of

America (for example, Pennsylvania). This

category does not include a Local Authority.

No25

23

There currently does not exist a special statute or act on Sovereign Wealth Funds under Luxembourg law. 24

Further legal analysis would be required to cover this counterparty type in the Memorandum. 25

This counterparty type does not exist in Luxembourg.