1. New Global Note structure for international bearer debt securities issued through the ICSDs 1 June 2006

2. The international debt market
New Global Note
Legal framework
Market impacts
Additional information

3. International debt market Key features
The international debt market features instruments that are initially issued (and subsequently traded) across borders and has the following features:
Wide range of issuers
Different jurisdictions
Deposited with ICSDs
Multi-currency
Multi-product
Can be offered simultaneously to investors in a number of countries
Often stock exchange listed (although the bulk of trading is over-the-counter)

4. Data source: www.bis.org
International debt market
Attractiveness of international debt securities
Key features:
Accessibility
Price
Liquidity
The attractiveness of international debt securities owes something to the flexibility and economics of the current common depository structure.
Key features
Market accessible by issuers irrespective of jurisdiction and domicile
Market priced attractively for issuers
Issuers gain access to a broad market through access to both ICSDs
Multi-product and multi-currency.
The new but important consideration issuers will face is whether or not to structure the security to satisfy the Eurosystem requirements for securities to be recognised as eligible collateral for intra-day credit and monetary operations.
Data source:

5. International debt market Eurosystem collateral eligibility
Eurosystem: the ECB and the National Central Banks of member states which have adopted the single currency
Principal objectives of the Eurosystem are price stability and support of the general economic policies of the European Community
Eurosystem uses monetary policy instruments to help steer interest rates and manage liquidity
Liquidity provided to the market via monetary policy instruments usually requires the placement of “eligible collateral”
More information on

6. International debt market Eurosystem collateral eligibility
Eurosystem collateral eligibility criteria (amongst other requirements):
euro-denominated
debt
issued by an EEA , G10 or supranational issuer
meets high credit standards
is listed or quoted on a regulated market or an approved non regulated market
is settled in the Eurozone
is held with a Securities Settlement System (SSS) complying with further Eurosystem criteria
More information on

7. The International debt market
New Global Note
Legal framework
Market impacts
Additional information

8. New Global Note Classical Global note (CGN) Structure
International securities issued in CGN form I C S D l i e n t s I s u e r
Euroclear
Common Depositary
Agreement
Issuing & Paying
Agency Agreement
Terms & Conditions / Operating Procedures / Customer Handbook
Common Depositary
Issuer
Agent
Main features of the current structure:
One Global Note deposited with a Common Depositary for the account of EB and CBL
No direct relationship between the issuer and the ICSDs
Asset servicing and safekeeping performed by one entity (the Common Depositary) under one single contract (Depositary Agreement)
For bearer debt securities, the Issued Outstanding Amount is the one indicated on the face of the note
Clearing and settlement is only through and between the ICSDs
The Common Depositary will be selected in priority among the issuer agents network.
Clearstream

9. New Global Note Trigger of the new structure
Request from Eurosystem leads to the proposal of a new structure for securities to be recognised as eligible collateral
The new structure will be mandatory for Eurosystem collateral eligible securities as of 1 January 2007
The NGN structure can also be used at issuer’s choice for other bearer debt securities
Following a recommendation by the Eurosystem concerning the custody structure of international debt securities, the ICSDs have worked with market participants to create a new structure for the issuance, processing and safekeeping of international bearer debt securities issued using a New Global Note (NGN) form.
This new structure will be mandatory for Eurosystem collateral eligible securities.
The NGN structure can also be used at issuer’s choice for other bearer debt securities (e.g. multi currency issuer).

10. New Global Note New structure
International securities issued in NGN form
Issuer -
ICSD Agreement
Euroclear
Euroclear
CSK
CSK
Issuing & Paying
Issuing & Paying I I
Agreement
Agreement
Agency
Agency C C
Agreement
Agreement S S I I
Terms & Conditions /
Terms & Conditions / D D
CSK
CSK s s
Operating
Operating s s
procedures /
procedures /
Issuer
Issuer C C u u
Customer handbook
Customer handbook
Agent
Agent l l e e i i r r
CSP
CSP e e
See next slides key features. n n t t
CSP
CSP s s
Agreement
Agreement
Clearstream
Clearstream
Issuer
Issuer - -
ICSD Agreement
ICSD Agreement

11. New Global Note Key features
Bearer form securities
New type of global certificate: New Global Note (NGN)
Issue Outstanding Amount (IOA) = ICSDs’ records
No need for physical annotation of the Global Note
Issuer-ICSD agreement
Two new types of agents:
Common Safekeeper (CSK): commercial banks or ICSDs
Common Service Provider (CSP): commercial banks
New issuances of international debt securities in global bearer form to use a new form of global certificate, known as the New Global Note (NGN).
Under the terms of the NGN, the Issue Outstanding Amount (IOA) is determined primarily based on the ICSDs’ records avoiding the need for physical annotation of the bearer form global note.
Issuers provide a signed Issuer-ICSD agreement requesting acceptance of the securities with the ICSDs. A direct relationship exists between the ICSDs and the issuer via the Issuer-ICSD agreement.
The securities will be serviced by two new types of agents, the Common Safekeeper (CSK) and the Common Service Provider (CSP) appointed by the ICSDs. The commercial banks will provide the function of CSP.
For the CSK, it will be:
Clearstream Banking Luxembourg or Euroclear Bank for securities that issuers wish to make potentially eligible as collateral for Eurosystem monetary policy or intra-day credit operations, or
the same entity as the CSP for all other securities issued in NGN form.

12. New Global Note Overview of the dual structure
CGN
NGN
Type of security
International securities
International debt securities
Legal form of security
Global Bearer or Registered
Global Bearer
Asset servicing CD
CSP
Safekeeping
CSK (Bank or ICSD)
Legal record keeper
ICSDs
Date of existence
Since 1986
As from 30 June 2006
Eligibility for Eurosystem monetary policy and credit operations
Yes, for securities issued before 1 January 2007
Yes, if deposited with ICSD CSK

13. New Global Note Collateral eligibility
As from 1 January 2007 collateral eligible international debt securities
in bearer form will have to comply with:
The current collateral eligibility criteria, AND
New criteria:
NGN form
Kept in safe custody with an ICSD CSK
Grandfathering will apply for securities issued before 1 January 2007
Securities eligible as collateral for Eurosystem operations
Based on information provided by the ECB, the Eurosystem collateral-eligibility criteria currently require that, among other things, a security:
is euro-denominated debt issued by an EEA, G10 or supranational issuer,
meets high credit standards,
is listed or quoted on a regulated market or an approved non regulated market,
is settled in the Eurozone, and
is held with a Securities Settlement System (SSS) complying with further Eurosystem criteria
AND
the international bearer debt security will have to be issued under the NGN form; and
the NGN will have to be kept in safe custody with one of the ICSDs acting as CSK.
Securities issued in CGN form before 1 January 2007 continue to be eligible (grandfathering)

14. New Global Note Collateral eligibility for securities issued through the ICSDs
30 Jun
1 Jan
CGN
NGN + ICSD CSK
NGN + Commercial bank CSK
Potentially eligible
Not potentially eligible
As from 1 January 2007, Eurosystem collateral eligibility
= current Eurosystem criteria + NGN form + ICSD CSK

15. The International debt market
New Global Note
Legal framework
Market impacts
Additional information

16. Legal framework Principles
New or updated legal documents:
New Global Note (NGN)
Effectuation authorisation
Issuer-ICSD Agreement
Legal Opinions for four jurisdictions: England, Germany, Netherlands, New York
Model provisions for offering documentation
Standard clauses for Trust Deeds / Issuing and Paying Agent Agreements
The NGN structure relies on a series of new or updated legal documents, including:
NGN template: issuers should use a new model form of global note. Compared to the CGN, the main difference is that the nominal amount of the issuer’s debt is no longer recorded on the face of the note or on the attached schedule(s), but is determined by the records of the ICSDs.
Effectuation: the Lead Manager or issuer agent can deliver the NGN electronically to the CSK; in such a case, the issuer should authorise the CSK to effectuate the NGN to make it validly issued.
Issuer – ICSD agreement: issuers will be requested to provide a signed Issuer-ICSD agreement requesting acceptance of their securities with the ICSDs
Documentation: issuers will need to update their programme or offering documentation, trust deeds or indentures to account for this new form of note, and modify their term sheets, pricing supplements and offering documentation accordingly.
Legal opinion: the WG has obtained a legal opinion on the validity and enforceability of the NGN for four of the main jurisdictions used to issue international debt securities: the law of England, Germany, The Netherlands and New York. For other jurisdictions, issuers will be asked to provide a copy of the validity and enforceability opinion prior to acceptance.
Agency agreements: agency agreements will be updated to reflect the new structure to be serviced by the issuer’s agent.

17. The International debt market
New Global Note
Legal framework
Market impacts
Additional information

18. Market Impacts Generic
New operational flows had to be designed for the NGN structure when necessary
Changes led to optimisation of the operational flows
Harmonisation of the current and new flows
Standard Market Protocol to promote the changes to the market
New operational flows had to be designed for the NGN structure when necessary, e.g. issuance process (see next slide) IOA reconciliation, …
Changes led to optimisation of the operational flows: the aim of the new operational flows is not only to adapt them to the new structure but also to make them more efficient
Harmonisation of the current and new flows: whenever possible, current operational flows (CGN structure) will be harmonised to the new structure
The Standard Market Protocol will record the changes to the operational flows and will be available to all market participants. It will establish best market practices for the issuance and asset servicing of international debt securities issued in CGN and NGN form.

19. Common Service Provider
Market impacts Issuance process €
Issuer
Common
Safekeeper
Positioning
Confirm receipt and validity of the NGN € € €
NGN deposit: the NGN certificate must be deposited with and confirmed by the CSK
Effectuation authorisation if electronic delivery
IOA mark-up: the issuer agent must confirm the initial amount to be credited to the ICSDs (via the CSP).
Euroclear
Mark Up Instruction
Lead
Manager NI
Account
Common Service Provider
Syndicate/
Allottees
Clearstream
Confirm Mark Up + Instruction to credit LM account
CS358F
CS358F

20. Market Impacts Impact for issuers
Specific form of security (NGN) deposited with a CSK
Updated offering documentation
Issuer-ICSD Agreement
Legal opinion on validity and enforceability of NGN (except in four markets covered by WG opinions)
Effectuation authorisation
The NGN structure will have the following impacts on the issuers:
Issuance of a specific form of security (NGN). The NGN certificate must be deposited with and confirmed by the CSK; for securities expected to meet Eurosystem eligibility criteria, the CSK will need to be one of the ICSDs;
Updated offering documentation includes prior to June 2006: Prospectus/Offering Circular/Subscription Agreement, Trust Deeds, Fiscal Agency, Issuing & Paying Agency and Paying Agency Agreements, as the case may. The issuer or its agent will be required to specify whether the security is to be issued in NGN or CGN form and whether the security is expected or not to meet Eurosystem eligibility criteria at the time of issuance or in the future. The latter will allow the ICSDs to determine whether the security should be deposited with an ICSD acting as CSK.
Issuer-ICSD Agreement: before depositing the security (stand alone security) or the first draw-down (securities under a programme) in NGN form, the issuer or its agent must ensure that the issuer has signed the Issuer-ICSD agreement.
Legal opinion on validity and enforceability of NGN (except in four markets covered by WG opinions)
Effectuation authorisation: for NGN securities sent electronically to the ICSDs CSK, the issuer or its agent will have to provide the CSK with an authorisation to effectuate the Global Note to make it a valid security.

21. Market Impacts Impact for issuer agents and lead managers
Specific form of security NGN
New issue documentation
New procedure for New Issue issuance process.
For issuer agents only:
New procedures/systems for reconciliation
Enhanced procedures for Income and Corporate Actions processing
New responsibilities created by the Issuer-ICSD Agreement
New Issues
New form of security: New Global Note
Lead Manager / Issuer Agent to ensure Issuer–ICSD Agreement is place as its absence will prevent closing.
Update offering documentation
Issuer or agent chooses channel of delivery of NGN.
New issuance process (see slide 19)
Accounting and reconciliation
There will be a regular reconciliation (daily for securities for which the IOA has been modified and monthly for all securities) between the Issuer or its agent (via the CSP) and each ICSD of the IOA portion held by each ICSD.
Agent - Income
Provide proactively to the CSP any income related information as soon as announced to the market, to optimise flow of information between the CSP, the ICSDs and beneficial owner. Pro-active support in particular from Calculation Agent to provide accurate and timely information to the CSP & ICSDs.
Agent - Corporate Action
Provide MU/MD confirmation to the CSP the same day as the Issuer Agent has booked the movement.

22. Market Impacts Impact for investors
Eurosystem-eligibility maintained
Communication of new criteria
Improved asset servicing
Eurosystem-eligibility maintained: the new NGN structure will allow maintenance of the collateral eligibility for international bearer debt securities in global note form issued after June 2006.
Communication of new criteria: new eligibility criteria (NGN form and ICSDs CSK) will be available from ICSDs’ website.
Improved asset servicing through the new operational flows (improved operational flows will apply to NGN and CGN).

23. The International debt market
New Global Note
Legal framework
Market impacts
Additional information

24. Additional information Project organisation
Working Group
Market Advisory Group
The NGN structure is a market initiative undertaken by leading entities active on the international debt market.
Market Advisory Group Role: providing strategic guidance to the Working Group on market feedback and how to communicate the proposed changes to the market and ensuring high level monitoring of the project. Membership: Issuers, ICSDs, ICMA (Lead Managers), leading IPAs, EIB, ECB, BNB, BCL (last four as observers). Chairman is George Faux from Citigroup.
Working Group Role: supervising the effective implementation of the ECB Standard 3 project and overseeing the project deliverables Membership: ICSDs, ICMA, leading IPAs.

25. Additional information Documents covering the NGN structure
NGN brochure
FAQ
Legal pack including:
NGN templates
standard provisions for agency agreements
standard provisions for offering documentation
Issuer-ICSD agreement
Effectuation authorisation
Operating & Administrative Procedures Memorandum
NGN New Issues Procedures
NGN brochure: New Global Note structure for international debt securities issued through the ICSDs – General information.
New Global Note templates: Form of the global note to be issued for securities under programme and stand-alone securities.
Legal pack: this legal pack will include: - NGN templates- standard provisions for agency agreements- standard provisions for offering documentation- Issuer-ICSD agreement- Effectuation and disposal authorisation.

26. Additional information Where to obtain additional information