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									     Daiwa Capital Markets Financial Products (Cayman) Ltd.
                      (formerly known as Daiwa Securities SMBC Financial Products (Cayman) Ltd.)
                                 (incorporated with limited liability in the Cayman Islands)

                             Warrant and Certificate Programme
                                        Unconditionally and irrevocably guaranteed by

                            Daiwa Securities Capital Markets Co. Ltd.
                                         (formerly known as Daiwa Securities SMBC Co. Ltd.)
                                              (incorporated with limited liability in Japan)
         This base prospectus dated 7 October 2010 (this “Base Prospectus”) supersedes the previous base prospectus dated 28 January 2010. Any Securities
(as defined below) issued on or after the date of this Base Prospectus are issued subject to the provisions herein. This does not affect any Securities issued
before the date of this Base Prospectus.
         Under the terms of its Warrant and Certificate Programme (the “Programme”), Daiwa Capital Markets Financial Products (Cayman) Ltd. (the
“Issuer”) may from time to time issue either (i) warrants (“Warrants”) or (ii) certificates (“Certificates”) of any kind (Warrants and Certificates collectively
referred to as “Securities”) including, but not limited to, Securities relating to a specified index or a basket of indices (“Index Securities”), a specified share
or a basket of shares (“Share Securities”), a specified debt instrument or a basket of debt instruments (“Debt Securities”), a specified currency or a basket of
currencies (“Currency Securities”) or a specified commodity or a basket of commodities (“Commodity Securities”). Each issue of Securities will be issued on
the terms set out herein which are relevant to such Securities under “Terms and Conditions of the Securities” (the “Conditions”) and on such additional terms
as will be set out in Final Terms (the “Final Terms”) which, with respect to Securities which are to be listed on a stock exchange, will be delivered to such
stock exchange on or prior to the date of listing of such Securities.
       Each issue of Securities will be guaranteed by Daiwa Securities Capital Markets Co. Ltd. (the “Guarantor”) pursuant to a Deed of Guarantee (the
“Guarantee”), the form of which is set out herein.
        The Issuer has a right of substitution as set out in Condition 16.
         The Final Terms in respect of an issue of Securities (the forms of which are set out herein beginning on page 12) will specify for that issue, inter
alia, the specific designation of the Securities, the aggregate number and type of the Securities, the date of issue of the Securities, the issue price, the
exercise price (in the case of Warrants), the multiplier, the underlying asset, index or other item(s) to which the Securities relate, the exercise period or date
(in the case of Warrants), whether (in the case of Warrants) automatic exercise applies, the redemption date (in the case of Certificates) and certain other
terms relating to the offering and sale of the Securities. The Final Terms relating to an issue of Securities will be attached to, or endorsed upon, one or more
Global Securities (as defined below) representing such Securities. The Final Terms supplement the Conditions and may specify other terms and conditions
which shall, to the extent so specified or to the extent inconsistent with the Conditions, supplement, replace or modify the Conditions.
         Each issue of Securities will entitle the holder thereof (on due exercise or redemption, as the case may be, and subject to certain certifications) either
to receive a cash amount (if any) calculated in accordance with the relevant terms or to receive physical delivery of the underlying assets against payment of
a specified sum, all as set forth herein and in the applicable Final Terms.
        Prospective purchasers of Securities should ensure that they understand the nature of the relevant Securities and the extent of their
exposure to risks and that they consider the suitability of the relevant Securities as an investment in the light of their own circumstances and
financial condition. Securities involve a high degree of risk, including the risk of their expiring or redeeming worthless. Potential investors should be
prepared to sustain a total loss of the purchase price of their Securities. See “Risk Factors Relating to the Securities” on page 7.
         The Securities have not been and will not be registered under the United States Securities Act of 1933 (the “Securities Act”) or any state
securities laws and may not be offered, sold, resold, traded or delivered, directly or indirectly, in the United States or to, or for the account or
benefit of, any U.S. person, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities
Act and in accordance with any applicable securities laws of any state of the United States (see “Subscription and Sale” and “Transfer
Restrictions”).
        If offered to persons outside the United States, the Securities are being offered and sold pursuant to the exemption from registration
contained in Regulation S under the Securities Act (“Regulation S”). There will be no public offer in the United States. The Issuer has not been and
will not be registered under the United States Investment Company Act of 1940 (the “Investment Company Act”) in reliance on the exemption
provide by Section 3(c)(7) thereof, and investors will not be entitled to the benefit of that Act. The Securities, or interests therein, may not at any
time be offered, sold, resold, traded or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, a U.S. person.
However, notwithstanding the above, the Final Terms may provide that the Issuer may arrange for the offer and sale of all or a portion of the
Securities of a certain series within the United States exclusively to persons who are qualified institutional buyers (“QIBs”) as defined in Rule 144A
under the Securities Act (“Rule 144A”) that are also qualified purchasers (“QPs”) as defined in Section 2(a)(51) of the Investment Company Act.
        Furthermore, neither the sale of nor trading in Securities which relate to currencies, commodity prices or indices has been approved under
the United States Commodity Exchange Act (the “Commodity Exchange Act”) and no U.S. person may at any time purchase, trade or maintain a
position in such Securities unless otherwise specified in the applicable Final Terms. On exercise, holders of any Securities may be required to certify
that (a) the Securities are not being exercised by or on behalf of a U.S. person or a person within the United States or (b) in certain circumstances,
that the Securities are being exercised by a QIB who is also a QP.
        Application has been made to list Securities to be issued under the Programme on the Luxembourg Stock Exchange and to be admitted to trading on
the Euro MTF market of the Luxembourg Stock Exchange (the “Euro MTF”). The Programme provides that Securities may be listed on such further or other
stock exchange(s) as the Issuer and Daiwa Capital Markets Europe Limited (“Daiwa Capital Markets Europe”) (formerly known as Daiwa Securities SMBC
Europe Limited) or any manager of an issue of Securities (together with Daiwa Capital Markets Europe, as applicable to such issue of Securities, the
“Managers” and each a “Manager”) may agree. The applicable Final Terms will specify whether or not Securities are to be listed on the Luxembourg Stock
Exchange and traded on the Euro MTF and/or any other stock exchange(s) or market(s). The Issuer may also issue unlisted Securities.
        Each series of Securities will be represented by, in the case of Warrants, one or more global warrants or, in the case of Certificates, one or more
global certificates (any such global warrant or global certificate, a “Global Security”) which will be issued and deposited with a common depositary on
                                        ´´
behalf of Clearstream Banking, societe anonyme (“Clearstream, Luxembourg”) and Euroclear Bank S.A./N.V. (“Euroclear”) on the date of issue of the
relevant Securities or with a custodian (the “Custodian”) for, and in the name of a nominee of, The Depository Trust Company (“DTC”) or any other
additional or alternative clearing system which is specified in the applicable Final Terms. Definitive Securities will not be issued.


                                          Daiwa Capital Markets Europe

Dated 7 October 2010
      Except as provided below, the Issuer and the Guarantor accept responsibility for the information
contained in this Base Prospectus. To the best of the knowledge and belief of the Issuer and the
Guarantor (who have taken all reasonable care to ensure that such is the case), the information
contained herein is in accordance with the facts and does not omit anything likely to affect the import
of such information.

      The applicable Final Terms will (if applicable) specify the nature of the responsibility taken by the
Issuer and the Guarantor for the information relating to the underlying asset, index or other item(s) to
which the Securities relate.

      No person is authorised to give any information or to make any representation not contained in or
not consistent with this document or any other information supplied in connection with the Programme
and, if given or made, such information or representation must not be relied upon as having been
authorised by the Issuer, the Guarantor, Daiwa Capital Markets Europe or any Manager. This
document does not constitute, and may not be used for the purposes of, an offer or solicitation by
anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to
whom it is unlawful to make such offer or solicitation and no action is being taken to permit an
offering of the Securities or the distribution of this document in any jurisdiction where any such action
is required.

      This document is to be read and construed in conjunction with any amendment or supplement
hereto, with any Final Terms and with all documents which are deemed to be incorporated herein by
reference (see “Documents Incorporated by Reference” on page 6).

      Warrants create options either which are exercisable by the relevant holder or which will be
automatically exercised as provided herein. There is no obligation on the Issuer to pay any amount or
deliver any asset to any holder of a Warrant unless the relevant holder duly exercises such Warrant or
such Warrants are automatically exercised and an Exercise Notice is duly delivered. The Warrants will
be exercised or will be exercisable in the manner set forth herein and in the applicable Final Terms. In
order to receive payment of any amount due under a Warrant, the holder of a Warrant will be
required to certify (in accordance with the provisions outlined in “Subscription and Sale” below) that
(a) it is not a U.S. person or exercising such Warrant on behalf of a U.S. person or (b) in certain
circumstances, that it is a QIB who is also a QP. In order to receive delivery of any asset due under a
Warrant, the holder of a Warrant will be required to certify (in accordance with the provisions outlined
in “Subscription and Sale” below”) that it is not a U.S. Person or exercising such Warrant on behalf of
a U.S. person.

      Certificates will be redeemed on the redemption date as provided herein and in the applicable
Final Terms. In order to receive payment of any amount due under a Certificate, the holder of such
Certificate will be required to certify (in accordance with the provisions outlined in “Subscription and
Sale” below) that (a) it is not a U.S. person or redeeming such Certificate on behalf of a U.S. person or
(b) in certain circumstances, that it is a QIB who is also a QP. In order to receive delivery of any asset
due under a Certificate, the holder of a Certificate will be required to certify (in accordance with the
provisions outlined in “Subscription and Sale” below”) that it is not a U.S. Person or exercising such
Certificate on behalf of a U.S. person.

     Securities may be issued to one or more Managers on a syndicated basis.

      Securities may be sold by the Issuer and/or any Manager at such time and at such prices as the
Issuer and/or the Manager(s) may select. There is no obligation upon the Issuer or any Manager to sell
all of the Securities of any issue. Securities may be offered or sold from time to time in one or more
transactions in the over-the-counter market or otherwise at prevailing market prices or in negotiated
transactions, at the discretion of the Issuer.

     The Issuer shall have complete discretion as to what type of Securities it issues and when.

     No Manager has separately verified the information contained herein. Accordingly, no
representation, warranty or undertaking, express or implied, is made and no responsibility is accepted
by any Manager as to the accuracy or completeness of the information contained in this Base




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Prospectus or any other information provided by the Issuer and/or the Guarantor. No Manager accepts
any liability in relation to the information contained in this Base Prospectus or any other information
provided by the Issuer and/or the Guarantor in connection with the Programme.

      Neither this Base Prospectus nor any other information supplied in connection with the
Programme (i) is intended to provide the basis of any credit or other evaluation or (ii) should be
considered as a recommendation by the Issuer or the Guarantor or any Manager that any recipient of
this Base Prospectus or any other information supplied in connection with the Programme should
purchase any Securities. Each investor contemplating purchasing any Securities should make its own
independent investigation of the financial condition and affairs, and its own appraisal of the
creditworthiness, of the Issuer and the Guarantor. Neither this Base Prospectus nor any other
information supplied in connection with the Programme constitutes an offer or an invitation by or on
behalf of the Issuer, the Guarantor or any Manager or any other person to subscribe for or to purchase
any Securities.

      The delivery of this Base Prospectus does not at any time imply that the information contained
herein concerning the Issuer and/or the Guarantor is correct at any time subsequent to the date hereof
or that any other information supplied in connection with the Programme is correct as of any time
subsequent to the date indicated in the document containing the same. No Manager undertakes to
review the financial condition or affairs of the Issuer and/or the Guarantor during the life of the
Programme. Investors should review, inter alia, the most recently published financial statements of the
Issuer (if any) and the Guarantor, when deciding whether or not to purchase any Securities.

     This Base Prospectus may only be used for the purposes for which it has been published.

      This Base Prospectus does not constitute an offer of, or invitation by or on behalf of, the Issuer or
the Guarantor or any Manager to subscribe for or purchase any Securities. The distribution of this
Base Prospectus and the offering of Securities in certain jurisdictions may be restricted by law. Persons
into whose possession this Base Prospectus comes are required by the Issuer, the Guarantor and each
Manager to inform themselves about and to observe any such restrictions. In particular, the Securities
have not been and will not be registered under the Securities Act and trading in the Securities has not
been approved by the United States Commodity Futures Trading Commission (the “CFTC”) under the
Commodity Exchange Act. Unless specified in the applicable Final Terms, Securities, or interests
therein, may not at any time be sold, resold, traded or delivered, directly or indirectly, in the United
States or to, or for the account or benefit of, U.S. persons and any offer, sale, resale, trade or delivery
made, directly or indirectly, within the United States or to, or for the account or benefit of, a U.S.
person will not be recognised. For a description of certain further restrictions on offers and sales of the
Securities and on the distribution of this Base Prospectus, see “Subscription and Sale” and “Transfer
Restrictions” below.

    THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION IN THE UNITED STATES
OR ANY OTHER U.S. REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE SECURITIES OR THE
ACCURACY OR THE ADEQUACY OF THIS BASE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.




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                             NOTICE TO NEW HAMPSHIRE RESIDENTS

    NEITHER THE FACT THAT A REGISTRATION STATEMENT NOR AN APPLICATION FOR A
LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENCED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE
THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE
FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED
IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR
CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

                                     ADDITIONAL INFORMATION

      Neither the Issuer nor the Guarantor is required to file periodic reports under Section 13 or 15 of the
United States Securities Exchange Act of 1934 (the “Exchange Act”). For so long as either the Issuer or the
Guarantor is not a reporting company under Section 13 or 15(d) of the Exchange Act, or exempt from
reporting pursuant to Rule 12g3-2(b) thereunder, the Issuer or the Guarantor, as the case may be, will, upon
request, furnish to each holder or beneficial owner of Securities that are “restricted securities” (within the
meaning of Rule 144(a)(3) under the Securities Act) and to each prospective purchaser thereof designated by
such holder or beneficial owner upon request of such holder, beneficial owner or prospective purchaser, in
connection with a transfer or proposed transfer of any such Securities pursuant to Rule 144A under the
Securities Act or otherwise, the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.

      In this Base Prospectus references to “¥”, “Japanese Yen” and “yen” are to the lawful currency for
the time being of Japan and references to “U.S.$”, “$” and “U.S. Dollars” are to the lawful currency for
the time being of the United States of America.




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                            TABLE OF CONTENTS

DOCUMENTS INCORPORATED BY REFERENCE                       6

RISK FACTORS RELATING TO THE SECURITIES                   7

FORM OF FINAL TERMS – WARRANTS                           12

FORM OF FINAL TERMS – CERTIFICATES                       22

TERMS AND CONDITIONS OF THE SECURITIES                   34

USE OF PROCEEDS                                          78

FORM OF THE DEED OF GUARANTEE                            79

DAIWA CAPITAL MARKETS FINANCIAL PRODUCTS (CAYMAN) LTD.   83

DAIWA SECURITIES CAPITAL MARKETS CO. LTD.                84

TAXATION                                                 86

SUBSCRIPTION AND SALE                                    104

CERTAIN ERISA CONSIDERATIONS                             108

TRANSFER RESTRICTIONS                                    110

GENERAL INFORMATION                                      114

INDEX TO FINANCIAL STATEMENTS                            F-1

GUARANTOR’S AUDIT REPORT                                 F-2

FINANCIAL STATEMENTS                                     F-3




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                    DOCUMENTS INCORPORATED BY REFERENCE

       This Base Prospectus should be read and construed in conjunction with each relevant Final Terms, and
(i) the non-consolidated audited annual accounts for the two financial years ended 31 December 2009 and 31
December 2008 of the Issuer, and (ii) the consolidated audited annual accounts for the two financial years
ended 31 March 2010 and 31 March 2009 of the Guarantor, and (iii) the interim unaudited consolidated
accounts for the three months ended 30 June 2010 of the Guarantor, each of which shall be deemed to be
incorporated in, and to form part of, this Base Prospectus and which shall be deemed to modify or supersede
the contents of this Base Prospectus to the extent that a statement contained in any such document is
inconsistent with such contents. All documents incorporated by reference will be available free of charge from
                                                    `                  ´´
the specified office of Dexia Banque Internationale a Luxembourg societe anonyme in Luxembourg.

       Copies of any documents incorporated by reference will be made available, free of charge, by the
Warrant and Certificate Agents during normal office hours (save that Final Terms relating to an unlisted
Security will only be provided to a holder of such Security and such holder must produce evidence
satisfactory to the Warrant and Certificate Agent as to the identity of such holder). Requests for such
documents should be directed to Citibank N.A., London Branch at Citigroup Centre, Canada Square, Canary
                                                                                   `
Wharf, London E14 5LB, attention Agency and Trust or Dexia Banque Internationale a Luxembourg societe´´
anonyme at 69 route d’Esch, L-1470 Luxembourg, attention Transaction Execution Group.

     All documents incorporated herein by reference will be published on the website of the Luxembourg
Stock Exchange at www.bourse.lu.

                                  ENFORCEABILITY OF JUDGMENTS

      The Issuer is a corporation organised under the laws of the Cayman Islands and the Guarantor is a
corporation organised under the laws of Japan. Most of the directors and executive officers of the Issuer and
the Guarantor are non-residents of the United States, and all or a substantial portion of the assets of the
Issuer, the Guarantor and such persons are located outside the United States. As a result, it may not be
possible for investors to effect service of process within the United States upon the Issuer, the Guarantor or
such persons or to enforce against any of them in the United States courts judgments obtained in United
States courts, including judgments predicated upon the civil liability provisions of the securities laws of the
United States or any State or territory within the United States.

                                  FORWARD-LOOKING STATEMENTS

       This Base Prospectus may include forward-looking statements. All statements other than statements of
historical facts included in this Base Prospectus, including, without limitation, those regarding the Issuer’s or
the Guarantor’s financial position, business strategy, plans and objectives of management for future
operations, are forward-looking statements. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results, performance or achievements of the
Issuer or the Guarantor, or industry results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such forward-looking statements are
based on numerous assumptions regarding the Issuer’s present and future business strategies and the
environment in which the Issuer will operate in the future. Additional factors that could cause actual results,
performance or achievements to differ materially include, but are not limited to, those discussed under “Risk
Factors Relating to the Securities”. These forward-looking statements speak only as of the date of this Base
Prospectus. Each of the Issuer and the Guarantor expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in
the Issuer’s or the Guarantor’s expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.




                                                       6
                   RISK FACTORS RELATING TO THE SECURITIES

     Words and expressions defined in the Terms and Conditions of the Securities and each Form of Final
Terms shall have the same meanings in this section.

General Risks Associated with Investing in Securities

      The Securities involve a high degree of risk, which may include, among others, interest rate, foreign
exchange, time value and political risks. Prospective purchasers of Securities should recognise that their
Securities, other than any Securities having a minimum expiration or redemption, as the case may be, value,
may be worthless on expiry or redemption. Purchasers should be prepared to sustain a total loss of the
purchase price of their Securities, except, if so indicated in the applicable Final Terms, to the extent of any
minimum expiration or redemption, as the case may be, value attributable to such Securities. This risk reflects
the nature of a Security as an asset which, other factors held constant, tends to decline in value over time and
which may become worthless when it expires or is redeemed (except to the extent of any minimum expiration
or redemption, as the case may be, value). See “Certain Factors Affecting the Value and Trading Price of
Securities” below. Prospective purchasers of Securities should be experienced with respect to options and
option transactions, should understand the risks of transactions involving the relevant Securities and should
reach an investment decision only after careful consideration, with their advisers, of the suitability of such
Securities in light of their particular financial circumstances, the information set forth herein and the
information regarding the relevant Securities and the particular share (or basket of shares), debt instrument (or
basket of debt instruments), index (or basket of indices), currency (or basket of currencies) or commodity (or
basket of commodities) or other basis of reference to which the value of the relevant Securities may relate
(each a “Reference Item”), as specified in the applicable Final Terms.

      An investment in Securities is not the same as an investment in any Reference Item(s) related to such
Securities, or any securities comprised in a relevant index or any investment which is directly linked to any of
them. In particular, if the relevant Reference Item(s) consist of shares or indices and if so specified in the
applicable Final Terms, the terms and conditions of the relevant Securities may be amended to account for
dividends or investors may receive periodic payments in respect of dividends, otherwise investors will not
benefit from dividends and investors will not otherwise benefit from any voting or other rights in respect of
any such Reference Item(s). In the event that a holder of Securities suffers any loss, such holder shall not
have recourse to any Reference Item(s).

      The risk of the loss of some or all of the purchase price of a Security upon expiration or redemption, as
the case may be, means that, in order to recover and realise a return upon his or her investment, a purchaser
of a Security must generally be correct about the direction, timing and magnitude of an anticipated change in
the value of the relevant Reference Item(s). Assuming all other factors are held constant, the more a Security
is “out-of-the-money” and the shorter its remaining term to expiration or redemption, as the case may be, the
greater the risk that purchasers of such Securities will lose all or part of their investment. With respect to
European Style Warrants or Certificates, the only means through which a holder can realise value from such
Security prior to the Exercise Date or Redemption Date, as the case may be, is to sell it at its then market
price in an available secondary market. See “Possible Illiquidity of the Securities in the Secondary Market”
below.

      Fluctuations in the value of the relevant index or basket of indices will affect the value of Index
Securities. Fluctuations in the price of the relevant equity security or value of the basket of equity securities
will affect the value of Share Securities. Fluctuations in the price or yield of the relevant debt instrument or
value of the basket of debt instruments will affect the value of Debt Securities. Fluctuations in the rates of
exchange between the relevant currencies will affect the value of Currency Securities. Also, due to the
character of the particular market on which a debt instrument is traded, the absence of last sale information
and the limited availability of quotations for such debt instrument may make it difficult for many investors to
obtain timely, accurate data for the price or yield of such debt instrument. Fluctuations in the value of the
relevant commodity or value of the basket of commodities will affect the value of Commodity Securities.
Purchasers of Securities risk losing their entire investment if the value of the relevant Reference Item(s) do
not move in the anticipated direction.




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Securities are Unsecured Obligations

      The Securities constitute unsecured obligations of the Issuer which at all times rank pari passu and
without preference among themselves. The obligations of the Issuer under the Securities shall, save for such
exceptions as may be provided by applicable legislation, at all times rank at least equally with all other
unsecured and unsubordinated obligations of the Issuer, present and future. Each issue of Securities will be
guaranteed by the Guarantor. The obligations of the Guarantor under the Guarantee are direct, unconditional,
unsecured and unsubordinated obligations of the Guarantor and rank and will rank pari passu with all other
outstanding unsecured and unsubordinated obligations of the Guarantor, present and future, but only to the
extent permitted by applicable laws relating to creditors’ rights.

      The Issuer may issue several issues of Securities relating to various Reference Item(s) which may be
specified in the applicable Final Terms. However, no assurance can be given that the Issuer will issue any
Securities other than the Securities to which any particular Final Terms relate. At any given time, the number
of Securities outstanding may be substantial. Securities provide opportunities for investment and pose risks to
investors as a result of fluctuations in the value of the underlying investment. In general, certain of the risks
associated with the Securities are similar to those generally applicable to other securities of private corporate
issuers. Securities linked to equities or debt securities are priced primarily on the basis of the value of
underlying securities while Currency and Commodity Securities are priced primarily on the basis of present
and expected values of the reference currency (or basket of currencies) or commodity (or basket of
commodities) specified in the applicable Final Terms.

Certain Factors Affecting the Value and Trading Price of Securities

       Either (1) the Cash Settlement Amount (in the case of Cash Settled Securities) or (2)(i) the difference in
the value of the Entitlement and the Exercise Price (in the case of Physical Delivery Securities which are
Warrants) or (ii) the value of the Entitlement (in the case of Physical Delivery Securities which are
Certificates) ((2)(i) or (2)(ii), as applicable the “Physical Settlement Value”) at any time prior to expiration or
redemption, as the case may be, is typically expected to be less than the trading price of such Securities at
that time. The difference between the trading price and the Cash Settlement Amount or the Physical
Settlement Value, as the case may be, will reflect, among other things, the “time value” of the Securities. The
“time value” of the Securities will depend partly upon the length of the period remaining to expiration or
redemption, as the case may be, and expectations concerning the value of the Reference Item(s) specified in
the applicable Final Terms. Securities offer hedging and investment diversification opportunities but also pose
some additional risks with regard to interim value. The interim value of the Securities varies with the price
level of the Reference Items specified in the applicable Final Terms, as well as by a number of other
interrelated factors, including those specified herein.

      Before exercising (in the case of Warrants) or selling Securities, Securityholders should carefully
consider, among other things, (i) the trading price of the Securities, (ii) the value and volatility of the
Reference Item(s) specified in the applicable Final Terms, (iii) the time remaining to expiration or redemption,
as the case may be, (iv) in the case of Cash Settled Securities, the probable range of Cash Settlement
Amounts, (v) any change(s) in interim interest rates and dividend yields if applicable, (vi) any change(s) in
currency exchange rates, (vii) the depth of the market or liquidity of the Reference Item(s) specified in the
applicable Final Terms and (viii) any related transaction costs.

Certain Considerations Regarding Hedging

      Prospective purchasers intending to purchase Securities to hedge against the market risk associated with
investing in any Reference Item(s) should recognise the complexities of utilising Securities in this manner.
For example, the value of the Securities may not exactly correlate with the value of the relevant Reference
Item(s). Due to fluctuating supply and demand for the Securities, there is no assurance that their value will
correlate with movements of the relevant Reference Item(s). For these reasons, among others, it may not be
possible to purchase or liquidate securities in a portfolio at the prices used to calculate the value of any
relevant index or basket.

Effect of Credit Rating Reduction

      The value of the Securities is expected to be affected, in part, by investors’ general appraisal of the
creditworthiness of the Issuer and the Guarantor. Such perceptions are generally influenced by the ratings
accorded to the outstanding securities of the Issuer (if any) and the Guarantor by standard statistical rating


                                                        8
services, such as Moody’s Investors Service Inc. and Standard & Poor’s Ratings Services, a division of The
McGraw Hill Companies, Inc. A reduction in the rating, if any, accorded to outstanding debt securities of the
Issuer or the Guarantor by one of these rating agencies could result in a reduction in the trading value of the
Securities.

Certain Additional Risk Factors Associated with Currency Securities

      Fluctuations in exchange rates of the relevant currency (or basket of currencies) will affect the value of
Currency Securities. Furthermore, investors who intend to convert gains or losses from the exercise or sale of
Currency Securities into their home or another currency may be affected by fluctuations in exchange rates
between their home or such other currency and the relevant currency (or basket of currencies). Currency
values may be affected by complex political and economic factors, including governmental action to fix or
support the value of a currency (or basket of currencies), regardless of other market forces. Purchasers of
Currency Securities risk losing their entire investment if exchange rates of the relevant currency (or basket of
currencies) do not move in the anticipated direction.

     If additional securities relating to particular non-U.S. currencies or particular currency indices are
subsequently issued, the supply of such securities in the market will increase, which could cause the price at
which the Securities and such securities trade in the secondary market to decline significantly.

Possible Illiquidity of the Securities in the Secondary Market

      It is not possible to predict the price at which Securities will trade in the secondary market or whether
such market will be liquid or illiquid. Application has been made to list Securities issued under the
Programme on the Euro MTF, but the Issuer is not obliged to list Securities on the Euro MTF or any another
stock exchange or market. Also, to the extent Securities of a particular issue are exercised or redeemed, as the
case may be, the number of Securities of such issue outstanding will decrease, resulting in a diminished
liquidity for the remaining Securities of such issue. A decrease in the liquidity of an issue of Securities may
cause, in turn, an increase in the volatility associated with the price of such issue of Securities.

       The Issuer and/or the Guarantor may, but is not obliged to, at any time purchase Securities at any price
in the open market or by tender or private treaty on behalf of the Issuer. Any Securities so purchased may be
held or resold or surrendered for cancellation. The Issuer and/or the Guarantor may, but are not obliged to, be
a market-maker for an issue of Securities. Even if the Issuer and/or the Guarantor is a market-maker for an
issue of Securities, the secondary market for such Securities may be limited. To the extent that an issue of
Securities becomes illiquid, an investor may have to exercise, or await redemption of, such Securities to
realise value.

Certain Additional Risk Factors Associated with Warrants

Limitations on Exercise

      If so indicated in the applicable Final Terms, the Issuer will have the option to limit the number of
applicable Warrants exercisable on any date (other than the final exercise date) to the maximum number
specified in the Final Terms and, in conjunction with such limitation, to limit the number of Warrants
exercisable by any person or group of persons (whether or not acting in concert) on such date. In the event
that the total number of Warrants being exercised on any date (other than the final exercise date) exceeds
such maximum number and the Issuer elects to limit the number of Warrants exercisable on such date, a
Warrantholder may not be able to exercise on such date all Warrants that such holder desires to exercise. In
any such case, the number of Warrants to be exercised on such date will be reduced until the total number of
Warrants exercised on such date no longer exceeds such maximum, such Warrants being selected at the
discretion of the Issuer or in any other manner specified in the applicable Final Terms. Unless otherwise
specified in the applicable Final Terms, the Warrants tendered for exercise but not exercised on such date will
be automatically exercised on the next date on which Warrants may be exercised, subject to the same daily
maximum limitation and delayed exercise provisions.

Minimum Exercise Amount

      If so indicated in the Final Terms, a Warrantholder must tender or, in the case of automatic exercise,
hold a specified number of Warrants at any one time for such Warrants to be exercised. Thus, Warrantholders
with fewer than the specified minimum number of Warrants will either have to sell their Warrants or purchase


                                                       9
additional Warrants, incurring transaction costs in each case, in order to realise their investment. Furthermore,
holders of such Warrants incur the risk that there may be differences between the trading price of such
Warrants and the Cash Settlement Amount (in the case of Warrants which are Cash Settled Securities) or the
Physical Settlement Value (in the case of Warrants which are Physical Delivery Securities) of such Warrants.

Time Lag after Exercise

      Unless otherwise specified in the applicable Final Terms, in the case of any exercise of Warrants, there
will be a time lag between the time a Warrantholder gives instructions to exercise or the relevant Warrants are
automatically exercised and the time the applicable Cash Settlement Amount (in the case of Warrants which
are Cash Settled Securities) relating to such exercise is determined. Any such delay between the time of
exercise and the determination of the Cash Settlement Amount will be specified in the applicable Final Terms
or the applicable Terms and Conditions. However, such delay could be significantly longer, particularly in the
case of a delay in exercise of Warrants arising from any daily maximum exercise limitation, the occurrence of
a market disruption event (if applicable) or following the imposition of any exchange controls or other similar
regulations affecting the ability to obtain or exchange any relevant currency (or basket of currencies) in the
case of Warrants which are Currency Securities. The applicable Cash Settlement Amount may change
significantly during any such period, and such movement or movements could decrease the Cash Settlement
Amount of the Warrants being exercised and may result in such Cash Settlement Amount being zero.

Certain Additional Risk Factors Associated with Certificates

Optional Redemption by the Issuer

      Any call option of the Issuer in respect of Certificates may negatively impact their market value. During
any period when the Issuer may elect to redeem Certificates, the market value of those Certificates generally
will not rise substantially above the price at which they can be redeemed. This also may be true prior to any
redemption period. The Issuer may be expected to redeem Certificates when its cost of borrowing is lower
than the interest rate (if any) on the Certificates. At those times, an investor generally would not be able to
reinvest the redemption proceeds at an effective interest rate as high as the interest rate (if any) on the
Certificates being redeemed.

Potential Conflicts of Interest

      The Issuer, the Guarantor, Daiwa Capital Markets Europe and their respective affiliates may also engage
in trading activities (including hedging activities) related to the Reference Item(s) and other instruments or
derivative products based on or related to the Reference Item(s) for their proprietary accounts or for other
accounts under their management. The Issuer, the Guarantor, Daiwa Capital Markets Europe and their
respective affiliates may also issue other derivative instruments in respect of the Reference Item(s). The
Issuer, the Guarantor, Daiwa Capital Markets Europe and their respective affiliates may also act as
underwriter in connection with future offerings of shares or other securities related to the Reference Item(s) or
may act as financial adviser to certain Companies or Basket Companies or in a commercial banking capacity
for certain Companies or Basket Companies. Such activities could present certain conflicts of interest, could
influence the prices of such shares or other securities and could adversely affect the value of such Securities.

Expenses and Taxation

(A)   Expenses

      A holder of Securities must pay, in the case of Warrants, all Exercise Expenses (as defined in Condition
7) relating to such Warrants and, in the case of Certificates, all Redemption Expenses (as defined in Condition
9), as provided in the Conditions.

(B)   Taxation

      Neither the Issuer nor the Guarantor shall be liable for or otherwise obliged to pay any tax, duty,
withholding or other payment which may arise as a result of the ownership, transfer, exercise or enforcement
of any security and all payments made by the Issuer under the Securities or made by the Guarantor under the
Guarantee shall be made subject to any such tax, duty, withholding or other payment which may be required
to be made, paid, withheld or deducted.



                                                       10
The Dodd-Frank Act

      The Dodd-Frank Act, adopted 21 July 2010, contains numerous provisions that may or may not affect
(i) U.S. persons who purchase, hold or have beneficial interests in Securities and/or (ii) the Issuer. Among
other things, it is not known at this time to what extent Securities sold to U.S. persons that (a) are based on
underlying securities that are not traded in the United States or (b) are issued by non-U.S. persons such as the
Issuer or Guarantor or (c) are sold by dealers outside the U.S. will be subject to regulation. Subject to
regulations to be adopted by the U.S. Securities and Exchange Commission (the “SEC”) in consultation with
the CFTC,

      U.S. persons that own specified amounts or types of “security-based swaps” or “swaps” which may or
may not include the Securities, may be required to register with the SEC or the CFTC after adoption of
regulations as “major swap participants” or “swap dealers” subject to detailed regulation.

      The Issuer could be required to register as a major swap participant or a swap dealer subjecting it to
detailed regulation and affecting its ability to perform.

     Major swap participants and swap dealers will be subject to minimum capital requirements.

      Major swap participants and swap dealers may be required to post minimum initial and variation margin
as required by registered clearing organizations for cleared swaps or initial and variation margin with the
Issuer and the holder, as the case may be, as required by the SEC or the CFTC, for uncleared swaps.

     The Securities might be required to be submitted for clearing to a registered clearing organization.

      The regulations may require the acquisition of Securities and their terms (possibly, including pricing
information), even those acquired before the effective date of the regulations, to be reported to a “registered
swap data repository” on or after 19 October 2010 or 21 January 2011.

      Swap dealers and major swap participants might be required to make periodic reports as to their
positions in Securities and their financial condition.

     Major swap participants and swap dealers will be subject to detailed recordkeeping and business
conduct requirements.

      Persons transacting with major swap participants and swap dealers will have the right to demand
segregation of all credit support collateral other than variation margin.

     Dealers outside the U.S. that sell to U.S. persons might be required to register as swap dealers.

      The full scope and potential consequences of the Dodd-Frank Act (including any rules promulgated
thereunder) with respect to the Securities, contracts or collateral underlying the securities, as applicable,
investors holding the Securities or the Issuer is not presently known. The above list of examples is
non-exclusive and it is possible, as a result of the Dodd-Frank Act (including any rules promulgated
thereunder), that there could be other significant and material consequences in respect of the Securities,
contracts or collateral underlying the Securities, as applicable, investors holding the securities or the Issuer.
Investors should conduct their own diligence in respect of these matters and should bear in mind that any
such consequences could result in significant or total losses on the Securities. If so provided in the applicable
Final Terms the Securities may contain provisions permitting redemption or the passing on of costs in certain
circumstances due to changes in law, increased costs of hedging or compliance or other similar events.




                                                       11
[DATE]

                           FORM OF FINAL TERMS – WARRANTS

                        Daiwa Capital Markets Financial Products (Cayman) Ltd.

                                      [Issue of up to] [¼] (the Warrants)

                             Under the Warrant and Certificate Programme

      The Final Terms relating to each issue of Warrants may contain (without limitation) such of the
following information as is applicable in respect of such Warrants (all references to numbered Conditions
being to the terms and conditions of the relevant Warrants and words and expressions defined in such terms
and conditions shall bear the same meaning in the relevant Final Terms):

      These Final Terms, under which the Warrants (the “Warrants”) described herein are issued, are
supplemental to, and should be read in conjunction with, the Base Prospectus dated 7 October 2010 (the
“Base Prospectus”) issued in relation to the Warrant and Certificate Programme of Daiwa Capital Markets
Financial Products (Cayman) Ltd. (the “Issuer”). Terms defined in the Base Prospectus have the same
meaning in these Final Terms.

1    Issuer:                                        Daiwa Capital Markets Financial Products (Cayman) Ltd.

2    Guarantor:                                     Daiwa Securities Capital Markets Co. Ltd.

3    (a)   Series number of the Warrants            [¼]

     (b)   Consolidation                            [The Warrants are not to be consolidated and form a
                                                    single series.]

4    Type of Security                               [Index   Securities/Share Securities/Debt     Securities/
                                                    Currency Securities/Commodity Securities/other.]

5    Exercise type                                  [American Style Warrants/European Style Warrants/other.]

6    Call/Put Warrant                               [Call Warrants/Put Warrants.]

7    Number of Warrants being issued                [¼]

8    Unit(s)                                        [The Warrants must be exercised in units and the number
                                                    of Warrants constituting a Unit is [¼] Warrants.]

                                                    (N.B. This is in addition to any requirements relating to
                                                    “Minimum Exercise Number” or “Maximum Exercise
                                                    Number” set out below).

9    Issue Price per [Warrant/unit]                 [¼]

10   Exercise Price per [Warrant/unit]              [¼]

11   Issue Date                                     [¼]

12   Exercise Date                                  [Specify [¼]/Not Applicable]

13   Exercise Period                                [Specify [¼]/Not Applicable]

14   Automatic Exercise                             [Not applicable/Applicable.]

15   Automatic Settlement:                          [Not applicable/Applicable.]




                                                      12
16   Averaging                               [Not applicable/Applicable.]

                                             [The Averaging Dates are [¼].]

                                             In the event of a Market Disruption Event (as defined in
                                             Condition 18) occurring on an Averaging Date [Omission/
                                             Postponement/ Modified Postponement] (each as defined
                                             in Condition 4) will apply.

                                             [In the case of Debt Securities, Currency Securities or
                                             Commodity Securities, specify further particulars for
                                             determining the Averaging Date where Modified
                                             Postponement applies.]

17   Relevant Time                           [The relevant time (the “Relevant Time”) being the time
                                             specified on the Valuation Date or an Averaging Date for
                                             the calculation of the Settlement Price. If no Relevant
                                             Time is specified, the settlement price will be determined
                                             by reference to the relevant closing value or closing
                                             price.]

18   Scheduled Trading Day                   [(As per the Conditions)]/[specify other]

19   Business Day Centres                    [¼]

20   Settlement date                         [¼]

21   Settlement                              Settlement will be by way of [cash settlement/physical
                                             delivery.]

                                             [In order to exercise a Warrant, the holder must deliver in
                                             accordance with Condition 7 an Exercise Notice in the
                                             form attached in Schedule [¼] hereto.]

22   Issuer’s option to vary settlement      The Issuer [does not have/has] the option to vary
                                             settlement in respect of the Warrants.

23   Failure to Deliver due to Illiquidity   Failure to Deliver due to Illiquidity [applies/does not
                                             apply] to the Securities.

                                             (N.B. Only applicable in the case of Physical Delivery
                                             Securities which are Share Securities. Careful
                                             consideration should be given to whether Failure to
                                             Deliver is applicable to other Physical Delivery
                                             Securities.)

24   Exchange Rate                           [The applicable rate of exchange (the “Exchange Rate”)
                                             for conversion of any amount into the relevant settlement
                                             currency for the purposes of determining the Settlement
                                             Price (as defined in Condition 4) shall be [¼].]

25   Settlement Currency                     [The settlement currency for the payment of the Cash
                                             Settlement Amount is [¼].]

26   Calculation Agent                       [Daiwa Securities Capital Markets Co. Ltd.]/[Daiwa
                                             Capital Markets Europe Limited]/[specify other]

27   Minimum Exercise Number                 The minimum number of Warrants that may be exercised
                                             (including automatic exercise) on any day by any
                                             Warrantholder is [¼] [and Warrants may only be exercised
                                             (including automatic exercise) in integral multiples of [¼]
                                             Warrants in excess thereof].


                                              13
28   Maximum Exercise Number                        The maximum number of Warrants that may be exercised
                                                    on any day by any Warrantholder or group of
                                                    Warrantholders (whether or not acting in concert) is [¼].
                                                    (N.B. Not applicable for European Style Warrants)

29   Exchange(s)                                    [For the purpose of Condition 4 and Condition 18(B)
                                                    (terms for Share Securities), the relevant Exchange(s).]

                                                    [¼]

30   Related Exchange(s)                            [¼]

31   For the purposes of Condition 18(A) (terms
     for Index Securities and the definition of
     “Settlement Price” (in the case of (c))):

     (a)   the relevant Exchanges                   [¼]

     (b)   the relevant Index Sponsor               [¼]

     (c)   the Index Currency                       [¼]

32   Multiplier per [Warrant/Unit]                  [¼]

33   Cash Settled Securities relating to a Basket   [Not applicable/Applicable.]

     (a)   Multiplier to be applied to each item    [¼]
           comprising the Basket in order to
           ascertain the Settlement price, and

     (b)   Share Substitution                       [Not applicable/Applicable.]

34   Cash Settled Securities relating to Debt       [Not applicable/Applicable.]
     Instruments

     –     Nominal Amount (for the purposes         [¼]
           of Condition 6(B) (Cash Settlement))

35   Currency Securities                            [Not applicable/Applicable.]

     (a)   Relevant Screen Page                     [¼]

     (b)   Base Currency                            [¼]

     (c)   Subject Currency                         [¼]

36   Commodity Securities                           [Not applicable/Applicable.]

     –     Provisions for the calculation of the    [¼]
           Settlement Price

37   Relevant asset(s)                              Not Applicable/The relevant [asset (the “Relevant Asset”)/
     (in the case of          Physical   Delivery   assets (the “Relevant Assets”)] to which the Warrants
     Securities)                                    relate [is/are] [¼].

38   Entitlement                                    [¼]

39   Evidence of Entitlement                        [¼]
     (in the case of Physical            Delivery
     Securities)




                                                     14
40   Delivery of the Entitlement                    [¼]
     (in the case of Physical            Delivery
     Securities)

41   Guaranteed Cash Settlement Amount              Not Applicable/The computation of the Guaranteed Cash
     (in the case of Physical Delivery              Settlement Amount (as defined in Condition 3) in respect
     Securities)                                    of each Physical Delivery Security) is as follows:

                                                    [¼]

42   Debt Securities                                [Not applicable/Applicable.]

     –     Provisions dealing with the situation    [¼]
           where one or more of the relevant
           Debt Instruments redeemed (or
           otherwise ceases to exist) before the
           expiration of the relevant Warrants

43   Additional Disruption Events                   The following Additional Disruption Events shall apply to
                                                    the Warrants: [Change in Law; Hedging Disruption;
                                                    Increased Cost of Hedging; Increased Cost of Stock
                                                    Borrow; Insolvency Filing (N.B. Only applicable in the
                                                    case of Share Securities); and Loss of Stock Borrow]

     (a)   [Trade Date] (if Change in Law and/      [¼]
           or Increased Cost of Hedging is
           applicable)

     (b)   [Maximum Stock Loan Rate in              [¼]
           respect of each relevant Share/
           Security/Commodity] (if Loss of
           Stock Borrow is applicable)

     (c)   [Initial Stock Loan Rate in respect of   [¼]
           each       relevant    Share/security/
           commodity] (if Increased Cost of
           Stock Borrow is applicable)

44   (a)   Merger Event                             [Not applicable/Applicable.]

           Consequences of a Merger Event:

           (i)    [Share-for-Combined]              [Alternative Obligation/Cancellation and Payment/
                                                    Calculation Agent Adjustment/Component Adjustment]

           (ii)   [Share-for-Other]                 [Alternative Obligation/Cancellation     and    Payment/
                                                    Calculation Agent Adjustment]

           (iii) [Share-for-Share]                  [Alternative Obligation/ Cancellation     and   Payment/
                                                    Calculation Agent Adjustment]

     (b)   Tender Offer                             [Not applicable/Applicable.]

           Consequences of a Tender Offer:

           (i)    [Share-for-Combined]              [Cancellation and Payment/Calculation Agent Adjustment]

           (ii)   [Share-for-Other]                 [Cancellation and Payment/Calculation Agent Adjustment]

           (iii) [Share-for-Share]                  [Cancellation and Payment/Calculation Agent Adjustment]

     (c)   Nationalisation                          [Not applicable/Applicable.]



                                                     15
     (d)   De-Listing                              [Not applicable/Applicable.]

     (e)   Insolvency                              [Not applicable/Applicable.]

45   Special conditions or other modification to   [¼]
     the Conditions
                                                   [The Issuer may offer or sell all or a portion of these
                                                   Warrants within the United States exclusively to persons
                                                   who are qualified institutional buyers (“QIBs”) as defined
                                                   in Rule 144A under the Securities Act (“Rule 144A”) that
                                                   are also qualified purchasers (“QPs”) as defined in
                                                   Section 2(a)(51) of the Investment Company Act. No
                                                   Warrant offered or sold to a U.S. Person shall be a
                                                   Physical Delivery Security. In order to receive delivery of
                                                   any asset due under a Warrant, the holder of a Warrant
                                                   will be required to certify (in accordance with the
                                                   provisions outlined in “Subscription, Sale and Transfer”
                                                   in the Offering Circular) that it is not a U.S. Person or
                                                   exercising such Warrant on behalf of a U.S. person. The
                                                   Warrants will be represented by a Rule 144A Global
                                                   Security held by the clearing system specified in
                                                   paragraph 51.] [Include this wording only where Warrants
                                                   are to be sold to U.S. Persons]

46   Listing                                       [The Warrants are [not] to be listed[on the Luxembourg
                                                   Stock Exchange [specify other exchange].]

                                                   The Warrants are [not] to be traded [on [the Euro MTF]/
                                                   [specify other]].

47   Additional Selling Restrictions               [Not applicable/Applicable.]

48   Syndication                                   The Warrants will be distributed on a [non-]syndicated
                                                   basis.

49   Material adverse change                       [Except as disclosed in the Base Prospectus (including
                                                   any document deemed to be incorporated by reference
                                                   therein) (i) there has been no material adverse change in
                                                   the financial position of the Issuer since the date of its
                                                   most recently published audited annual financial
                                                   statements and (ii) there has been no significant change in
                                                   the financial or trading position of the Guarantor since the
                                                   date of the most recently published audited financial
                                                   statements of the Guarantor.]

                                                   [Details of any such material adverse change]




                                                    16
50   Proceedings                               [Except as disclosed in the Base Prospectus (including
                                               any document deemed to be incorporated by reference
                                               therein) (i) there are no legal or arbitration proceedings
                                               (including any such proceedings which are pending or
                                               threatened of which the Issuer is aware) which may have
                                               or have had a significant effect on the financial position
                                               of the Issuer and (ii) there are no legal or arbitration
                                               proceedings (including any such proceedings which are
                                               pending or threatened of which the Guarantor is aware)
                                               which may have or have had a significant effect on the
                                               financial position of the Guarantor.]

                                               OR

                                               [Give details of any such proceedings.]

51   Clearing system other than Clearstream,   [The Depository Trust Company]/[¼]
     Luxembourg and Euroclear                  [NB The Depository Trust Company should be specified
                                               for 144A issues and the applicable CUSIP should also be
                                               specified instead of ISIN/Common Code]

52   ISIN code                                 [¼]

53   Common Code                               [¼]




                                                17
To be included in an Annex to the Final Terms:

1    For the purpose of describing the
     underlying asset, index or other item(s) to
     which the Warrants relate:

     (a)   Details of the “Basket of Shares”         [¼]
           (including, but not limited to, the
           number and type of each Share
           comprising the Basket) and of the
           Basket Companies or the single
           Share and the issuer of the Share

     (b)   Details of the “Basket of Debt            [¼]
           Instruments” or the single “Debt
           Instrument”

     (c)   Details of the “Basket of Indices” or     [¼]
           the single “Index”

     (d)   Details  of       the    “Basket     of   [¼]
           Commodities”        or    the    single
           “Commodity”

     (e)   Details of any combination of the         [¼]
           above, or other

2    Further details of the underlying asset,        [¼]
     index or other item(s) to which the
     Warrants relate which are required to
     comply with the regulations of the stock
     exchange(s) or market(s) on which the
     Warrants are to be listed (if any) [please
     see the following items for Euro MTF
     disclosure]

3    Share Securities

     (a)   Information on the issuer of the          [Name, registered office or main administrative office, if
           Shares                                    different from the registered office, country of
                                                     establishment and website]

     (b)   Information on the underlying Shares

           (i)    Type of underlying Shares

           (ii)   Indication of the main listing
                  place

           (iii) [If the terms and conditions for
                 the issue of the Warrants
                 provide for a physical delivery
                 of the underlying Shares, the
                 following             additional
                 information set out below:

                  –     procedures, place, time
                        limits, and conditions for
                        the delivery of the
                        underlying Shares;




                                                      18
                  –       form of the underlying
                          Shares;

                  –       method of transfer and
                          restrictions, if any, on the
                          transfer of underlying
                          Shares;

                  –       name of the registrar and
                          paying agent in the main
                          listing country of the
                          underlying Shares;

                  –       tax scheme applicable to
                          the income of the
                          underlying Shares in the
                          country of origin; and

                  –       place in Luxembourg
                          where the annual and,
                          where applicable, interim
                          reports     in     French,
                          German, or English can
                          be obtained (indicate if
                          and how often interim
                          reports are published).

           If the issuer of the underlying Shares
           does not publish its reports in one of
           these languages, the language in
           which the reports are available in the
           risk factor section.]1



           (iv) Information source                            [Specify Bloomberg or Reuters code of other applicable
                                                              information source]

4   Warrants relating to equity indices, bonds
    or other underlying references

    (a)    Information on the index

           (i)    Description and name of the
                  index publisher

           (ii)   Place of publication of the
                  index

           (iii) [Where     the    terms     and              [The Issuer agrees to provide the information set out in
                 conditions for the issue of the              item 54(b)(iii)]
                 Warrants provide for the
                 physical delivery of the
                 underlying]2

           (iv) Information source                            [specify Bloomberg or Reuters code or other applicable
                                                              information source]




1
    Only applicable for Physical Delivery Securities. Delete for Cash Settled Securities.
2
    Only applicable for Physical Delivery Securities. Delete for Cash Settled Securities.


                                                                 19
(b)   Information on the issuer of the           [Name, registered office or main administrative office, if
      bonds or other debt                        different from the registered office.]

(c)   Information on the underlying bonds
      or debt

      (i)    Short description of         the
             underlying bonds or debt

      (ii)   Name of stock exchange or of
             another regulated market which
             is     regularly     operating,
             recognised and open to the
             public, where the underlying
             bonds or other debt are
             admitted or indication of the
             markets) where the underlying
             bonds or debt are regularly
             traded

      (iii) [Where     the   terms      and
            conditions of the Warrants
            provide for the physical
            delivery of the underlying
            bonds or other debt, the Final
            Terms must contain the
            following            additional
            information:

             –    place in Luxembourg
                  where the detailed terms
                  and conditions of the
                  issue of underlying bonds
                  or other debt may be
                  consulted;

             –    procedure, place, time
                  frame, and conditions for
                  the delivery of the
                  underlying bonds or other
                  debt;

             –    form of the underlying
                  bonds or other debt;

             –    method of transfer, and
                  restrictions, if any, on the
                  transfer of underlying
                  bonds and other debt;

             –    name of the paying agent
                  in the listing country of
                  the underlying bonds and
                  other debt;

             –    tax scheme applicable to
                  the income of bonds or
                  other           underlying
                  transferable debt in the
                  country of origin; and




                                                  20
                    –       place in Luxembourg
                            where the annual and if
                            any, interim, reports can
                            be obtained in French,
                            German       or     English
                            (indicate if an how often
                            interim     reports     are
                            published).

      In the event that the issuer does not
      publish its reports in one of these
      languages, it shall specify the language in
      which the reports are available in the risk
      factor section.]3

             (iv) Information source                            [specify Bloomberg or Reuters code or other applicable
                                                                information source]

5     Warrants relating to currencies, interest
      rates, commodities, precious metals and
      other assets

      (i)    Description of the underlying asset

      (ii)   Description of the market(s) or
             exchange(s) where the underlying
             asset regularly trades and to which
             the assessment of the price refers

      (iii) Information source                                  [specify Bloomberg or Reuters code or other applicable
                                                                information source]

[Listing Application

     These Final Terms comprise the final terms required to list [and have admitted to trading] the issue of
Warrants described herein pursuant to the Warrant and Certificate Programme of Daiwa Capital Markets
Financial Products (Cayman) Limited dated 7 October 2010.]

Responsibility

      Each of the Issuer (in respect of itself) and the Guarantor (in respect of itself and the Issuer) accepts
responsibility for the information contained in these Final Terms. The information relating to the Reference
Item(s) contained herein has been accurately extracted from the Information source and/or other publicly
available information. [Each of the]/[The] Issuer [and the Guarantor (each as aforesaid)] accept[s]
responsibility for the accuracy of such extraction but accept[s] no further responsibility in respect of such
information.

Signed on behalf of Daiwa Capital Markets Financial Products (Cayman) Ltd.

As Issuer:

By:                                        Duly authorised




3
      Only applicable for Physical Delivery Securities. Delete for Cash Settled Securities.


                                                                   21
[DATE]

                         FORM OF FINAL TERMS – CERTIFICATES

                                     [Issue of up to] [¼] (the Certificates)

                                Under the Warrant and Certificate Programme

      The Final Terms relating to each issue of Certificates may contain (without limitation) such of the
following information as is applicable in respect of such Certificates (all references to numbered Conditions
being to the terms and conditions of the relevant Certificates and words and expressions defined in such
terms and conditions shall bear the same meaning in the relevant Final Terms):

      These Final Terms, under which the Certificates (the “Certificates”) described herein are issued, are
supplemental to, and should be read in conjunction with, the Base Prospectus dated 7 October 2010 (the
“Base Prospectus”) issued in relation to the Warrant and Certificate Programme of Daiwa Capital Markets
Financial Products (Cayman) Ltd. (the “Issuer”). Terms defined in the Base Prospectus have the same
meaning in these Final Terms.

1    Issuer:                                         Daiwa Capital Markets Financial Products (Cayman) Ltd.

2    Guarantor:                                      Daiwa Securities Capital Markets Co. Ltd.

3    (a)    Series number of the Certificates        [¼]

     (b)    Consolidation                            [The Certificates are not to be consolidated and form a
                                                     single series.]

4    Type of Security                                [Index   Securities/Share Securities/Debt     Securities/
                                                     Currency Securities/Commodity Securities/other.]

5    Number of Securities being issued               [¼]

6    Issue Price                                     [¼]

7    Net proceeds                                    [¼]

8    Issue Date                                      [¼]

9    Redemption Date                                 [¼]

10   Valuation Date                                  [¼]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE (Delete this section in its entirety if
interest is not payable on the Certificates)

11   Interest Basis                                  [[¼] per cent. Fixed Rate]

                                                     [[LIBOR/EURIBOR] +/– [¼] per cent. Floating Rate]

                                                     [specify other]

12   Fixed Rate Certificate Provisions               [Applicable/Not Applicable]

                                                     (If not applicable, delete the remaining sub-paragraphs of
                                                     this paragraph)

     (i)    Nominal Amount:                          [¼]

     (ii)   Rate[(s)] of Interest:                   [¼] per cent. per annum [payable [annually/semi-annually/
                                                     quarterly/monthly/ (specify)] in arrear]



                                                       22
     (iii) Interest Commencement Date:              [¼]

     (iv) Fixed Coupon Amount[(s)]:                 [¼] per Nominal Amount

     (v)    Broken Amount:                          [¼] per Nominal Amount payable on the Interest Payment
                                                    Date falling [in/on][¼]

     (vi) Interest Payment Date(s):                 [¼] in each year [adjusted in accordance with [Following
                                                    Business Day Convention/Modified Following Business
                                                    Day Convention/Preceding Business Day Convention/
                                                    other (give details)]/not adjusted]

     (vii) Business Day Centre(s):                  [¼]

                                                    (NB: only relevant where Business Day Convention is
                                                    applicable)

     (viii) Day Count Fraction:                     [Actual/Actual or Actual/Actual (ISDA)
                                                    Actual/365 (Fixed)
                                                    Actual/360
                                                    30E/360 or Eurobond Basis
                                                    Actual/Actual (ICMA)
                                                    specify other]

     (ix) Determination Date(s):                    [¼] in each year [Insert interest payment dates except
                                                    where there are long or short periods. In these cases,
                                                    insert regular interest payment dates] (NB: Only relevant
                                                    where Day Count Fraction is Actual/Actual (ICMA))

     (x)    Other terms relating to the method of   [Not Applicable/give details]
            calculating interest for Fixed Rate
            Certificates:

13   Floating Rate Certificate Provisions:          [Applicable/Not Applicable]

                                                    (If not applicable, delete the remaining sub-paragraphs of
                                                    this paragraph. Also consider whether EURO BBA
                                                    LIBOR or EURIBOR is the appropriate reference rate)

     (i)    Nominal Amount:                         [¼]

     (ii)   Interest Commencement Date:             [¼]

     (iii) Specified Period(s)/Specified Interest   [¼]
           Payment Dates:

     (iv) First Interest Payment Date:              [¼]

     (v)    Business Day Convention:                [Floating Rate Convention/Following Business Day
                                                    Convention/Modified Following Business Convention/
                                                    Preceding Business Day Convention/other (give details)]

     (vi) Business Day Centre(s):                   [¼]

     (vii) Manner in which the Rate(s) of           [Screen Rate Determination/ISDA Determination/other
           Interest is/are to be determined:        (give details)]

     (viii) Party responsible for calculating the   [¼]
            Interest Amount(s) (if not the
            [Calculation Agent]):




                                                     23
(ix) Screen Rate Determination:              [Applicable/Not Applicable]

                                             (If not applicable, delete the remaining sub-paragraphs of
                                             this paragraph)

–     Reference Rate:                        [¼]

                                             (Either LIBOR, EURIBOR or other, although additional
                                             information is required if other – including fallback
                                             provisions in the Agency Agreement)

–     Interest Determination Date(s):        [¼]

                                             (Second day on which commercial banks are open for
                                             business (including dealings in foreign exchange and
                                             foreign currency deposits) in London prior to the start of
                                             each Interest Period if LIBOR (other than Sterling or euro
                                             LIBOR), first day of each Interest Period if Sterling
                                             LIBOR and the second day on which the TARGET
                                             System is open prior to the start of each Interest Period if
                                             EURIBOR or euro LIBOR)

–     Relevant Screen Page:                  [¼]

                                             (In the case of EURIBOR, if not Reuters EURIBOR01
                                             ensure it is a page which shows a composite rate or
                                             amend the fallback provisions appropriately)

(x)   ISDA Determination:                    [Applicable/Not Applicable]

                                             (If not applicable, delete the remaining sub-paragraphs of
                                             this paragraph)

–     Floating Rate Option:                  [¼]

–     Designated Maturity:                   [¼]

–     Reset Date:                            [¼]

(xi) Margin(s):                              [+/-][¼] per cent. per annum

(xii) Minimum Rate of Interest:              [¼] per cent. per annum

(xiii) Maximum Rate of Interest:             [¼] per cent. per annum

(xiv) Day Count Fraction:                    [Actual/Actual or Actual/Actual (ISDA)
                                             Actual/365 (Fixed)
                                             Actual/360
                                             30/360 or 360/360 or Bond Basis
                                             30E/360 or Eurobond Basis
                                             specify other]

                                             (See definition of “Day Count Fraction” in Condition
                                             5(h) for alternatives)

(xv) Fall back provisions, rounding          [¼]
     provisions, denominator and any
     other terms relating to the method of
     calculating interest on Floating Rate
     Certificates, if different from those
     set out in the Conditions:



                                              24
14   Averaging                               [Not applicable/Applicable.]

                                             [The Averaging Dates are [¼].]

                                             In the event of a Market Disruption Event (as defined in
                                             Condition 18) occurring on an Averaging Date [Omission/
                                             Postponement/Modified Postponement] (each as defined
                                             in Condition 4) will apply.

                                             [In the case of Debt Securities, Currency Securities or
                                             Commodity Securities, specify further particulars for
                                             determining the Averaging Date where Modified
                                             Postponement applies.]

15   Relevant Time                           [The relevant time (the “Relevant Time”) being the time
                                             specified on the Valuation Date or an Averaging Date for
                                             the calculation of the Settlement Price. If no Relevant
                                             Time is specified, the settlement price will be determined
                                             by reference to the relevant closing value or closing
                                             price.]

16   Scheduled Trading Day                   [(As per the Conditions)]/[specify other]

17   Business Day Centres                    [¼]

18   Settlement                              Settlement will be by way of [cash settlement/physical
                                             delivery.]

                                             [In order to receive physical delivery, the holder must
                                             deliver in accordance with Condition 9 an Asset Transfer
                                             Notice in the form attached in Schedule [¼] hereto.]

19   Cash Settlement Amount:                 [Specify formula and include further particulars of any
                                             amendment to the Terms and Conditions to account for
                                             dividends if “Dividend: Adjustment” is specified to apply
                                             in paragraph 49 (Interim Payment)]

                                             [For Cash Settlement Securities which are Certificates]

20   Issuer’s option to vary settlement      The Issuer [does not have/has] the option to vary
                                             settlement in respect of the Certificates.

21   Failure to Deliver due to Illiquidity   Failure to Deliver due to Illiquidity [applies/does not
                                             apply] to the Securities.

                                             (N.B. Only applicable in the case of Physical Delivery
                                             Securities which are Share Securities. Careful
                                             consideration should be given to whether Failure to
                                             Deliver is applicable to other Physical Delivery
                                             Securities.)

22   Exchange Rate                           [The applicable rate of exchange (the “Exchange Rate”)
                                             for conversion of any amount into the relevant settlement
                                             currency for the purposes of determining the Settlement
                                             Price (as defined in Condition 4) shall be [¼].]

23   Settlement Currency                     [The settlement currency for the payment of the Cash
                                             Settlement Amount is [¼].]

24   Calculation Agent                       [Daiwa Securities Capital Markets Co. Ltd.]/[Daiwa
                                             Capital Markets Europe Limited]/[specify other]



                                              25
25   Exchange(s)                                    [For the purpose of Condition 4 and Condition 18(B)
                                                    (terms for Share Securities), the relevant Exchange(s).]

                                                    [¼]

26   Related Exchange(s)                            [¼]

27   For the purposes of Condition 18(A) (terms
     for Index Securities and the definition of
     “Settlement Price” (in the case of (c))):

     (a)   the relevant Exchanges                   [¼]

     (b)   the relevant Index Sponsor               [¼]

     (c)   the Index Currency                       [¼]

28   Multiplier per Certificate                     [¼]

29   Cash Settled Securities relating to a Basket   [Not applicable/Applicable.]

     (a)   Multiplier to be applied to each item    [¼]
           comprising the Basket in order to
           ascertain the Settlement price, and

     (b)   Share Substitution                       [Not applicable/Applicable.]

30   Currency Securities                            [Not applicable/Applicable.]

     (a)   Relevant Screen Page                     [¼]

     (b)   Base Currency                            [¼]

     (c)   Subject Currency                         [¼]

31   Commodity Securities                           [Not applicable/Applicable.]

     –     Provisions for the calculation of the    [¼]
           Settlement Price

32   Relevant asset(s)                              [Not applicable]/[The relevant [asset (the “Relevant
     (in the case of          Physical   Delivery   Asset”)/assets (the “Relevant Assets”)] to which the
     Securities)                                    Certificates relate [is/are] [¼].]

33   Entitlement                                    [¼]

34   Evidence of Entitlement                        [¼]
     (in the case of Physical            Delivery
     Securities)

35   Delivery of the Entitlement                    [¼]
     (in the case of Physical            Delivery
     Securities)

36   Guaranteed Cash Settlement Amount              [Not applicable]/[The computation of the Guaranteed
     (in the case of Physical Delivery              Cash Settlement Amount (as defined in Condition 3) in
     Securities)                                    respect of each Physical Delivery Security is as follows:

                                                    [¼]]




                                                     26
37   Call Option:                                    [Applicable]/[Not Applicable]

                                                     (If not applicable, delete the remaining sub-paragraphs of
                                                     this paragraph)

     (a)   Optional Redemption Date(s):              [¼]

     (b)   Optional Redemption Amount(s) and         [¼]
           method, if any, of calculation of such
           amount(s):                                [together with any interest accrued to the date fixed for
                                                     redemption]

     (c)   If redeemable in part:                    [¼]

           (i)     Minimum          number      of   [¼]
                   Certificates to be redeemed:

           (ii)    Maximum          number      of   [¼]
                   Certificates to be redeemed:

     (d)   Description of any other Issuer’s         [¼]/[Not Applicable]
           option:

     (e)   Notice period (if other than as set       [¼]/[Not Applicable]
           out in the Conditions):

38   Put Option:                                     [Applicable]/[Not Applicable]

                                                     (If not applicable, delete the remaining sub-paragraphs of
                                                     this paragraph)

     (a)   Optional Redemption Date(s):              [¼]

     (b)   Optional Redemption Amount(s) and         [¼] [together with any interest accrued to the date fixed
           method, if any, of calculation of such    for redemption]
           amount(s):

     (c)   Description      of      any      other   [¼]
           Certificateholder’s option:

     (d)   Notice period (if other than as set       [¼]
           out in the conditions):

39   Debt Securities                                 [Not applicable/Applicable.]

     –     Provisions dealing with the situation     [¼]
           where one or more of the relevant
           Debt Instruments is redeemed (or
           otherwise ceases to exist) before the
           redemption     of    the     relevant
           Certificates

40   Additional Disruption Events                    The following Additional Disruption Events shall apply to
                                                     the Certificates: [Change in Law; Hedging Disruption;
                                                     Increased Cost of Hedging; Increased Cost of Stock
                                                     Borrow; Insolvency Filing (N.B. Only applicable in the
                                                     case of Share Securities); and Loss of Stock Borrow]

     (a)   [Trade Date] (if Change in Law and/       [¼]
           or Increased Cost of Hedging is
           applicable)




                                                      27
     (b)   [Maximum Stock Loan Rate in              [¼]
           respect of each relevant Share/
           security/commodity] (if Loss of Stock
           Borrow is applicable)

     (c)   [Initial Stock Loan Rate in respect of   [¼]
           each       relevant    Share/security/
           commodity] (if Increased Cost of
           Stock Borrow is applicable)

41   Merger Event                                   [Not applicable/Applicable.]

           Consequences of a Merger Event:

           (i)    [Share-for-Combined]              [Alternative Obligation/Cancellation and Payment/
                                                    Calculation Agent Adjustment/Component Adjustment]

           (ii)   [Share-for-Other]                 [Alternative Obligation/Cancellation      and    Payment/
                                                    Calculation Agent Adjustment]

           (iii) [Share-for-Share]                  [Alternative Obligation/Cancellation      and    Payment/
                                                    Calculation Agent Adjustment]

     (a)   Tender Offer                             [Not applicable/Applicable.]

           Consequences of a Tender Offer:

           (i)    [Share-for-Combined]              [Cancellation and Payment/Calculation Agent Adjustment]

           (ii)   [Share-for-Other]                 [Cancellation and Payment/Calculation Agent Adjustment]

           (iii) [Share-for-Share]                  [Cancellation and Payment/Calculation Agent Adjustment]

     (b)   Nationalisation                          [Not applicable/Applicable.]

     (c)   De-Listing                               [Not applicable/Applicable.]

     (d)   Insolvency                               [Not applicable/Applicable.]

42   Special conditions or other modification to    [¼]
     the Conditions
                                                    [The Issuer may offer or sell all or a portion of these
                                                    Certificates within the United States exclusively to
                                                    persons who are qualified institutional buyers (“QIBs”) as
                                                    defined in Rule 144A under the Securities Act (“Rule
                                                    144A”) that are also qualified purchasers (“QPs”) as
                                                    defined in Section 2(a)(51) of the Investment Company
                                                    Act. No Certificate offered or sold to a U.S. Person shall
                                                    be a Physical Delivery Security. In order to receive
                                                    delivery of any asset due under a Certificate, the holder
                                                    of a Certificate will be required to certify (in accordance
                                                    with the provisions outlined in “Subscription, Sale and
                                                    Transfer” in the Offering Circular) that it is not a U.S.
                                                    Person or exercising such Certificate on behalf of a U.S.
                                                    person. The Certificates will be represented by a Rule
                                                    144A Global Security held by the clearing system
                                                    specified in paragraph 48.] [Include this wording only
                                                    where Certificates are to be sold to U.S. Persons]




                                                     28
43   Listing                                                  [The Certificates are [not] to be listed[on the Luxembourg
                                                              Stock Exchange [specify other exchange].]

                                                              The Certificates are [not] to be traded [on [the Euro
                                                              MTF]/[specify other]].

44   Additional Selling Restrictions                          [Not applicable/Applicable.]

45   Syndication                                              The Certificates will be distributed on a [non-]syndicated
                                                              basis.

46   Material adverse change                                  [Except as disclosed in the Base Prospectus (including
                                                              any document deemed to be incorporated by reference
                                                              therein) (i) there has been no material adverse change in
                                                              the financial position of the Issuer since the date of its
                                                              most recently published audited annual financial
                                                              statements and (ii) there has been no significant change in
                                                              the financial or trading position of the Guarantor since the
                                                              date of the most recently published audited financial
                                                              statements of the Guarantor.]

                                                              [Details of any such material adverse change]

47   Proceedings                                              [Except as disclosed in the Base Prospectus (including
                                                              any document deemed to be incorporated by reference
                                                              therein) (i) there are no legal or arbitration proceedings
                                                              (including any such proceedings which are pending or
                                                              threatened of which the Issuer is aware) which may have
                                                              or have had a significant effect on the financial position
                                                              of the Issuer and (ii) there are no legal or arbitration
                                                              proceedings (including any such proceedings which are
                                                              pending or threatened of which the Guarantor is aware)
                                                              which may have or have had a significant effect on the
                                                              financial position of the Guarantor.]

                                                              OR

                                                              [Give details of any such proceedings.]

48   Clearing system other than Clearstream,                  [The Depository Trust Company]/[¼]
     Luxembourg and Euroclear                                 [NB The Depository Trust Company should be specified
                                                              for 144A issues and the applicable CUSIP should also be
                                                              specified instead of ISIN/Common Code]

49   ISIN code                                                [¼]

50   Common Code                                              [¼]

51   Dividend: [Interim Payment]/[Adjustment]                 [Applicable/Not Applicable]

                                                              (If Dividend: Interim Payment applies, specify further
                                                              particulars)

                                                              [(further particulars specified in paragraph 17 (Cash
                                                              Settlement Amount))]1




1
     Include this language only if Dividend: Adjustment applies.


                                                                   29
To be included in an Annex to the Final Terms:

1    For the purpose of describing the
     underlying asset, index or other item(s) to
     which the Certificates relate:

     (a)   Details of the “Basket of Shares”          [¼]
           (including, but not limited to, the
           number and type of each Share
           comprising the Basket) and of the
           Basket Companies or the single
           Share and the issuer of the Share

     (b)   Details of the “Basket of Debt             [¼]
           Instruments” or the single “Debt
           Instrument”

     (c)   Details of the “Basket of Indices” or      [¼]
           the single “Index”

     (d)   Details  of       the    “Basket     of    [¼]
           Commodities”        or    the    single
           “Commodity”

     (e)   Details of any combination of the          [¼]
           above, or other

2    Further details of the underlying asset,         [¼]
     index or other item(s) to which the
     Certificates relate which are required to
     comply with the regulations of the stock
     exchange(s) or market(s) on which the
     Certificates are to be listed (if any) [please
     see the following items for Euro MTF
     disclosure]

3    Share Securities

     (a)   Information on the issuer of the           [Name, registered office or main administrative office, if
           Shares                                     different from the registered office, country of
                                                      establishment and website]

     (b)   Information on the underlying Shares

           (i)    Type of underlying Shares

           (ii)   Indication of the main listing
                  place

           (iii) [If the terms and conditions for
                 the issue of the Certificates
                 provide for a physical delivery
                 of the underlying Shares, the
                 following             additional
                 information set out below:

                  –     procedures, place, time
                        limits, and conditions for
                        the delivery of the
                        underlying Shares;




                                                       30
                  –       form of the underlying
                          Shares;

                  –       method of transfer and
                          restrictions, if any, on the
                          transfer of underlying
                          Shares;

                  –       name of the registrar and
                          paying agent in the main
                          listing country of the
                          underlying Shares;

                  –       tax scheme applicable to
                          the income of the
                          underlying Shares in the
                          country of origin; and

                  –       place in Luxembourg
                          where the annual and,
                          where applicable, interim
                          reports     in     French,
                          German, or English can
                          be obtained (indicate if
                          and how often interim
                          reports are published).

    If the issuer of the underlying Shares does
    not publish its reports in one of these
    languages, the language in which the
    reports are available in the risk factor
    section.]2



           (iv) Information source                            [specify Bloomberg or Reuters code or other applicable
                                                              information source]

4   Certificates relating to equity indices,
    bonds or other underlying references

    (a)    Information on the index

           (i)    Description and name of the
                  index publisher

           (ii)   Place of publication of the
                  index

           (iii) [Where      the   terms     and              [The Issuer agrees to provide the information set out in
                 conditions for the issue of the              item 52(b)(iii)]
                 Certificates provide for the
                 physical delivery of the
                 underlying]3

           (iv) Information source                            [specify Bloomberg or Reuters code or other applicable
                                                              information source]




2
    Only applicable for Physical Delivery Securities. Delete for Cash Settled Securities.
3
    Only applicable for Physical Delivery Securities. Delete for Cash Settled Securities.


                                                                 31
(b)   Information on the issuer of the           [Name, registered office or main administrative office, if
      bonds or other debt                        different from the registered office.]

(c)   Information on the underlying bonds
      or debt

      (i)    Short description of         the
             underlying bonds or debt

      (ii)   Name of stock exchange or of
             another regulated market which
             is     regularly     operating,
             recognised and open to the
             public, where the underlying
             bonds or other debt are
             admitted or indication of the
             markets) where the underlying
             bonds or debt are regularly
             traded

      (iii) [Where     the   terms      and
            conditions of the Certificates
            provide for the physical
            delivery of the underlying
            bonds or other debt, the Final
            Terms must contain the
            following            additional
            information:

             –    place in Luxembourg
                  where the detailed terms
                  and conditions of the
                  issue of underlying bonds
                  or other debt may be
                  consulted;

             –    procedure, place, time
                  frame, and conditions for
                  the delivery of the
                  underlying bonds or other
                  debt;

             –    form of the underlying
                  bonds or other debt;

             –    method of transfer, and
                  restrictions, if any, on the
                  transfer of underlying
                  bonds and other debt;

             –    name of the paying agent
                  in the listing country of
                  the underlying bonds and
                  other debt;

             –    tax scheme applicable to
                  the income of bonds or
                  other           underlying
                  transferable debt in the
                  country of origin; and




                                                  32
                    –       place in Luxembourg
                            where the annual and if
                            any, interim, reports can
                            be obtained in French,
                            German       or     English
                            (indicate if an how often
                            interim     reports     are
                            published).

      In the event that the issuer does not
      publish its reports in one of these
      languages, it shall specify the language in
      which the reports are available in the risk
      factor section.]4

             (iv) Information source                            [specify Bloomberg or Reuters code or other applicable
                                                                information source]

5     Certificates relating to currencies, interest
      rates, commodities, precious metals and
      other assets

      (i)    Description of the underlying asset

      (ii)   Description of the market(s) or
             exchange(s) where the underlying
             asset regularly trades and to which
             the assessment of the price refers

      (iii) Information source                                  [specify Bloomberg or Reuters code or other applicable
                                                                information source]

[Listing Application

      These Final Terms comprise the final terms required to list [and have admitted to trading] the issue of
Certificates described herein pursuant to the Warrant and Certificate Programme of Daiwa Capital Markets
Financial Products (Cayman) Limited dated 7 October 2010.]

Responsibility

      Each of the Issuer (in respect of itself) and the Guarantor (in respect of itself and the Issuer) accepts
responsibility for the information contained in these Final Terms. The information relating to the Reference
Item(s) contained herein has been accurately extracted from the Information source and/or other publicly
available information. [Each of the]/[The] Issuer [and the Guarantor (each as aforesaid)] accept[s]
responsibility for the accuracy of such extraction but accept[s] no further responsibility in respect of such
information.]

Signed on behalf of Daiwa Capital Markets Financial Products (Cayman) Ltd.

As Issuer:

By:                                        Duly authorised




4
      Only applicable for Physical Delivery Securities. Delete for Cash SettledSecurities.


                                                                   33
                    TERMS AND CONDITIONS OF THE SECURITIES

     The following is the text of the Terms and Conditions of the Securities which will be attached to each
Global Security.

      The Securities of this series (such Securities being hereinafter referred to as the “Securities”) are
constituted by, in the case of Warrants, one or more global warrants or, in the case of Certificates, one or
more global certificates, (any such global warrant or global certificate, a “Global Security”) and are issued
pursuant to an agency agreement dated 7 October 2010 (the “Agency Agreement”) between Daiwa Capital
Markets Financial Products (Cayman) Ltd. as issuer (the “Issuer”), Daiwa Securities Capital Markets Co. Ltd.
as guarantor (the “Guarantor”) and as initial calculation agent (the “Initial Calculation Agent”), Daiwa Capital
Markets Europe Limited as additional calculation agent (the “Additional Calculation Agent”), Citibank N.A.,
London Branch as principal warrant and certificate agent (the “Principal Warrant and Certificate Agent”,
which expression shall include any successor principal warrant and certificate agent) and Dexia Banque
               `                  ´´
Internationale a Luxembourg societe anonyme as warrant and certificate agent (the “Warrant and Certificate
Agent” and, together with the Principal Warrant and Certificate Agent, the “Warrant and Certificate Agents”,
which expression shall include any additional or successor warrant and certificate agents). The Initial
Calculation Agent shall undertake the duties of calculation agent (in such capacity, the “Calculation Agent”)
in respect of the Securities as set out below and in the applicable Final Terms unless the Additional
Calculation Agent or any other entity is so specified as calculation agent in the applicable Final Terms. The
expression Calculation Agent shall, in relation to the relevant Securities, include such other specified
calculation agent.

      No Securities in definitive form will be issued. Each Global Security will be deposited with a
                                                                             ´´
depositary (the “Common Depositary”) common to Clearstream Banking, societe anonyme (“Clearstream,
Luxembourg”) and Euroclear Bank S.A./N.V. (“Euroclear”) or with a custodian (the “Custodian”) for, and in
the name of a nominee of, The Depository Trust Company (“DTC”).

      The applicable Final Terms for the Securities are attached to each Global Security and
supplement these Terms and Conditions (these “Terms and Conditions” and each a “Condition”) and
may specify other terms and conditions which shall, to the extent so specified or to the extent
inconsistent with these Terms and Conditions, supplement, replace or modify these Terms and
Conditions for the purposes of the Securities. References herein to the “applicable Final Terms” are to the
Final Terms or two or more sets of Final Terms (in the case of any further securities issued pursuant to
Condition 15 and forming a single series with the Securities) attached to each Global Security.

      Subject as provided in Condition 3 and in the Guarantee (as defined below), the obligations of the
Issuer with respect to physical delivery (if applicable) and/or the payment of amounts payable by the Issuer
are guaranteed by the Guarantor pursuant to a deed of guarantee (the “Guarantee”) dated 7 October 2010
executed by the Guarantor. The original of the Guarantee is held by the Principal Warrant and Certificate
Agent on behalf of the Securityholders at its specified office.

      Copies of the Agency Agreement (which contains the forms of Final Terms), the Guarantee and the
applicable Final Terms may be obtained during normal office hours from the specified office of each Warrant
and Certificate Agent, save that if the Securities are unlisted, the applicable Final Terms will only be
obtainable by a Securityholder and such Securityholder must produce evidence satisfactory to the relevant
Warrant and Certificate Agent as to identity.

      Words and expressions defined in the Agency Agreement or used in the applicable Final Terms shall
have the same meanings where used in these Terms and Conditions unless the context otherwise requires or
unless otherwise stated.

      The Securityholders (as defined in Condition 1(B)) are entitled to the benefit of and are deemed to have
notice of and are bound by all the provisions of the Agency Agreement (insofar as they relate to the
Securities) and the applicable Final Terms, which are binding on them.




                                                      34
1     Type, Form, Title and Transfer

(A)   Type

      The Securities are certificates (“Certificates”) or warrants (“Warrants”) as is specified in the applicable
Final Terms.

      The Securities are index securities (“Index Securities”), share securities (“Share Securities”), debt
securities (“Debt Securities”), currency securities (“Currency Securities”), commodity securities (“Commodity
Securities”) or any other or further type of Securities as is specified in the applicable Final Terms. Certain
terms which will, unless otherwise varied in the applicable Final Terms, apply to Index Securities, Share
Securities, Debt Securities or Commodity Securities are set out in Condition 18.

      In the case of Warrants, the applicable Final Terms will indicate whether the Warrants are American
style Warrants (“American Style Warrants”) or European style Warrants (“European Style Warrants”) or such
other type as may be specified in the applicable Final Terms, whether automatic exercise (“Automatic
Exercise”) applies to the Warrants, whether settlement shall be by way of cash payment (“Cash Settled
Securities”) or physical delivery (“Physical Delivery Securities”), whether the Warrants are call Warrants
(“Call Warrants”) or put Warrants (“Put Warrants”), or such other type as may be specified in the applicable
Final Terms, whether the Warrants may only be exercised in units (“Units”) and whether Averaging
(“Averaging”) will apply to the Warrants. If Units are specified in the applicable Final Terms, Warrants must
be exercised in Units and any Exercise Notice which purports to exercise Warrants in breach of this provision
shall be void and of no effect.

      In the case of Certificates, the applicable Final Terms will indicate whether settlement shall be by way
of cash payment (“Cash Settled Securities”) or physical delivery (“Physical Delivery Securities”) and whether
Averaging will apply to the Certificates.

      If Averaging is specified as applying in the applicable Final Terms, the applicable Final Terms will state
the relevant Averaging Dates and, in the case of a Disrupted Day (as defined in Condition 4) occurring on an
Averaging Date, whether Omission, Postponement or Modified Postponement (each as defined in Condition 4
below) applies.

       References in these Terms and Conditions, unless the context otherwise requires, to Cash Settled
Securities shall be deemed to include references to Physical Delivery Securities, which include an option (as
set out in the applicable Final Terms) at the Issuer’s election to request cash settlement of such Security and
where settlement is to be by way of cash payment, and references in these Terms and Conditions, unless the
context otherwise requires, to Physical Delivery Securities shall be deemed to include references to Cash
Settled Securities which include an option (as set out in the applicable Final Terms) at the Issuer’s election to
request physical delivery of the relevant underlying asset in settlement of such Security and where settlement
is to be by way of physical delivery.

      Securities may allow holders to elect for settlement by way of cash payment or by way of physical
delivery or by such other method of settlement as is specified in the applicable Final Terms. Those Securities
where the holder has elected for cash payment will be Cash Settled Securities and those Securities where the
holder has elected for physical delivery will be Physical Delivery Securities. The rights of a holder as
described in this paragraph may be subject to the Issuer’s right to vary settlement as indicated in the
applicable Final Terms.

(B)   Form

      In the event that the applicable Final Terms specify that the Securities are eligible for sale in the United
States to QIBs that are also QPs, the Securities may be sold only to U.S. persons who are QIBs that are also
QPs, such Securities being represented by a Rule 144A Global Security (the “Rule 144A Global Security”)
and may be sold outside the United States only to non-U.S. persons in offshore transactions in compliance
with Regulation S under the Securities Act, such Securities being represented by a Regulation S Global
Security (the “Regulation S Global Security”).

     In the event that the applicable Final Terms do not specify that the Securities are eligible for sale in the
United States to QIBs that are also QPs, the Securities will be represented by a single Regulation S Global
Security.


                                                       35
     References herein to a “Global Security” include, if the context so requires, a Rule 144A Global
Security and/or a Regulation S Global Security.

(C)   Title to Securities

      Each person who is for the time being shown in the records of Clearstream, Luxembourg, Euroclear or
DTC, as the case may be, as the holder of a particular number of Securities (in which regard any certificate
or other document issued by Clearstream, Luxembourg or Euroclear as to the amount of Securities standing to
the account of any person shall be conclusive and binding for all purposes save in the case of manifest error)
shall be treated by the Issuer and any Warrant and Certificate Agent as the holder of such number of
Securities for all purposes (and the expressions “Securityholder”, “Warrantholder”, “Certificateholder” and
“holder of Securities” and related expressions shall be construed accordingly).

(D)   Transfers of Securities

      All transactions (including transfers of Securities) in the open market or otherwise must be effected
through an account at Clearstream, Luxembourg, Euroclear or DTC, as the case may be, subject to and in
accordance with the rules and procedures for the time being of Clearstream, Luxembourg, Euroclear or DTC,
as the case may be. Title will pass upon registration of the transfer in the books of either Clearstream,
Luxembourg or Euroclear, as the case may be. Transfers of Warrants may not be effected after the exercise of
such Warrants pursuant to Condition 7. After delivery of an Asset Transfer Notice pursuant to Condition 9,
the relevant Certificates may not be transferred.

     The Securities will also be subject to the transfer restrictions described in “Transfer Restrictions” on
page 110.

      Any reference herein to Clearstream, Luxembourg and/or Euroclear or DTC shall, whenever the context
so permits, be deemed to include a reference to any additional or alternative clearing system approved by the
Issuer and the Principal Warrant and Certificate Agent from time to time and notified to the Securityholders in
accordance with Condition 13.

2     Status of the Securities and Guarantee

     The Securities constitute unsecured obligations of the Issuer and shall at all times rank pari passu and
without any preference among themselves. The obligations of the Issuer under the Securities shall, save for
such exceptions as may be provided by applicable legislation, at all times rank at least equally with all other
unsecured and unsubordinated obligations of the Issuer, present and future.

     The obligations of the Guarantor under the Guarantee are direct, unconditional, unsecured and
unsubordinated obligations of the Guarantor and rank and will rank pari passu with all other outstanding,
unsecured and unsubordinated obligations of the Guarantor, present and future, but only to the extent
permitted by applicable laws relating to creditors’ rights.

3     Guarantee

      Subject as provided below and in the Guarantee, the Guarantor has in the Guarantee unconditionally
and irrevocably (a) guaranteed to each Securityholder all obligations of the Issuer in respect of such
Securityholder’s Securities as and when such obligations become due and (b) agreed that if and each time that
the Issuer fails to satisfy any obligations under such Securities as and when such obligations become due, the
Guarantor will not later than 10 Tokyo Business Days (as defined in the Guarantee) after a demand has been
made on the Guarantor pursuant to clause 10 thereof (without requiring the relevant Securityholder first to
take steps against the Issuer or any other person) make or cause to be made such payment or satisfy or cause
to be satisfied such obligations as though the Guarantor were the principal obligor in respect of such
obligations provided that (A) in the case of Physical Delivery Securities, notwithstanding that the Issuer had
the right to vary settlement in respect of such Physical Delivery Securities in accordance with Condition 6(E)
and exercised such right or failed to exercise such right, the Guarantor will have the right at its sole and
unfettered discretion to elect not to deliver or procure delivery of the Entitlement to the holders of such
Physical Delivery Securities, but in lieu thereof, to make payment in respect of each such Physical Delivery
Security of an amount equal to the Guaranteed Cash Settlement Amount calculated pursuant to the terms of
the relevant Final Terms (the “Guaranteed Cash Settlement Amount”) and (B) in the case of Securities where
the obligations of the Issuer which fall to be satisfied by the Guarantor constitute the delivery of the


                                                      36
Entitlement to the holders of such Securities the Guarantor will as soon as practicable following the Issuer’s
failure to satisfy its obligations under such Securities deliver or procure delivery of such Entitlement using the
method of delivery specified in the applicable Final Terms provided that, if in the opinion of the Guarantor,
delivery of the Entitlement using such method is not practicable by reason of a Settlement Disruption Event
(as defined in Condition 6(C)(ii)) in lieu of such delivery of the Guarantor will make payment in respect of
each such Warrant of the Guaranteed Cash Settlement Amount. Any payment of the Guaranteed Cash
Settlement Amount in respect of a Security shall constitute a complete discharge of the Guarantor’s
obligations in respect of such Security.

4     Definitions

      For the purposes of these Terms and Conditions, the following general definitions will apply:

      “Actual Exercise Date” means the Exercise Date (in the case of European Style Warrants) or, subject to
Condition 6(A)(ii), the date during the Exercise Period on which the Warrant is actually or is deemed
exercised or, if Automatic Exercise is specified in the applicable Final Terms, is automatically exercised (in
the case of American Style Warrants (as more fully set out in Condition 6(A)(i)));

      “Affiliate” means in relation to the Issuer or the Guarantor, as the case may be, any entity controlled,
directly or indirectly, by the Issuer or the Guarantor, as the case may be, any entity that controls, directly or
indirectly, the Issuer or the Guarantor, as the case may be, or any entity under common control with the
Issuer or the Guarantor, as the case may be. As used herein “control” means the ownership of a majority of
the voting power of the entity or, the Issuer or the Guarantor, as the case may be, and “controlled by” and
“controls” shall be construed accordingly;

      “Averaging Date” means, in respect of a Security and, in the case of a Warrant, its Actual Exercise
Date, each date specified as an Averaging Date in the applicable Final Terms or, if any such date is not a
Scheduled Trading Day, the immediately following Scheduled Trading Day unless, in the opinion of the
Calculation Agent, any such day is a Disrupted Day. If any such day is a Disrupted Day, then:

      (a)   if “Omission” is specified as applying in the applicable Final Terms, then such date will be
            deemed not to be an Averaging Date for the purposes of determining the relevant Settlement Price
            provided that, if through the operation of this provision no Averaging Date would occur in respect
            of such Security and, in the case of a Warrant, in respect of its Actual Exercise Date, then the
            provisions of the definition of “Valuation Date” will apply for purposes of determining the
            relevant level, price or amount on the final Averaging Date with respect to that Actual Exercise
            Date as if such Averaging Date were a Valuation Date that was a Disrupted Day; or

      (b)   if “Postponement” is specified as applying in the applicable Final Terms, then the provisions of
            the definition of “Valuation Date” will apply for the purposes of determining the relevant level,
            price or amount on that Averaging Date as if such Averaging Date were a Valuation Date that was
            a Disrupted Day irrespective of whether, pursuant to such determination, that deferred Averaging
            Date would fall on a day that already is or is deemed to be an Averaging Date; or

      (c)   if “Modified Postponement” is specified as applying in the applicable Final Terms,

            (i)     where the Securities are Index Securities relating to a single Index or Share Securities
                    relating to a single Share, the Averaging Date shall be the first succeeding Valid Date (as
                    defined below). If the first succeeding Valid Date has not occurred as of the Valuation Time
                    on the eighth Scheduled Trading Day immediately following the original date that, but for
                    the occurrence of another Averaging Date or Disrupted Day, would have been the final
                    Averaging Date in respect of such Security and, in the case of a Warrant, its Actual Exercise
                    Date, then (A) that eighth Scheduled Trading Day shall be deemed to be the Averaging Date
                    (irrespective of whether that eighth Scheduled Trading Day is already an Averaging Date),
                    and (B) the Calculation Agent shall determine the relevant level or price for that Averaging
                    Date in accordance with sub-paragraph (a)(ii) of the definition of “Valuation Date” below;

            (ii)    where the Securities are Index Securities relating to a basket of Indices (a “Basket of
                    Indices”) or Share Securities relating to a basket of Shares (a “Basket of Shares”), the
                    Averaging Date for each Index or Share not affected by the occurrence of a Disrupted Day
                    shall be the originally designated Averaging Date (the “Scheduled Averaging Date”) and the


                                                        37
                 Averaging Date for an Index or Share affected by the occurrence of a Disrupted Day shall
                 be the first succeeding Valid Date (as defined below) in relation to such Index or Share. If
                 the first succeeding Valid Date in relation to such Index or Share has not occurred as of the
                 Valuation Time on the eighth Scheduled Trading Day immediately following the original
                 date that, but for the occurrence of another Averaging Date or Disrupted Day, would have
                 been the final Averaging Date in respect of such Actual Exercise Date, then (A) that eighth
                 Scheduled Trading Day shall be deemed the Averaging Date (irrespective of whether that
                 eighth Scheduled Trading Day is already an Averaging Date) in respect of such Index or
                 Share, and (B) the Calculation Agent shall determine the relevant level, price or amount for
                 that Averaging Date in accordance with sub-paragraph (b)(ii) of the definition of “Valuation
                 Date” below; and

           (iii) where the Securities are Debt Securities, Currency Securities or Commodity Securities,
                 provisions for determining the Averaging Date in the event of Modified Postponement
                 applying will be set out in the applicable Final Terms;

           for the purposes of these Terms and Conditions “Valid Date” means a Scheduled Trading Day that
           is not a Disrupted Day and on which another Averaging Date in relation to the Security and, in
           the case of a Warrant, in relation to its Actual Exercise Date does not or is not deemed to occur;

      “Business Day” means (i) a day (other than a Saturday or Sunday) on which commercial banks           are
open for general business (including dealings in foreign exchange and foreign currency deposits) in        the
relevant Business Day Centre(s) and Clearstream, Luxembourg and Euroclear or, as the case may be, DTC      are
open for business and (ii) for the purposes of making payments in euro, any day on which                   the
Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System is open;

      “Cash Settlement Amount” means, in relation to Cash Settled Securities, the amount to which the
Securityholder is entitled in the Settlement Currency in relation to each such Security or, if Units are
specified in the applicable Final Terms, each Unit, as the case may be, as determined by the Calculation
Agent pursuant to the terms of the relevant Securities;

      “Disrupted Day” means (i) in respect of a Share or an Index, as the case may be, any Scheduled
Trading Day on which a relevant Exchange or any Related Exchange fails to open for trading during its
regular trading session or on which a Market Disruption Event (Index) or a Market Disruption Event (Equity)
has occurred and (ii) in respect of Debt Securities or Commodity Securities, a day on which a Market
Disruption Event occurs;

       “Early Closure” means, the closure on any Exchange Business Day of any relevant Exchange (or in the
case of an Index, any relevant Exchange(s) relating to securities that comprise 20 per cent. or more of the
level of the relevant Index) or any Related Exchange(s) prior to its Scheduled Closing Time unless such
earlier closing time is announced by such Exchange(s) or Related Exchange(s) at least one hour prior to the
earlier of (i) the actual closing time for the regular trading session on such Exchange(s) or Related
Exchange(s) on such Exchange Business Day and (ii) the submission deadline for orders to be entered into
the Exchange or Related Exchange system for execution at the Valuation Time on such Exchange Business
Day;

       “Entitlement” means, in relation to a Physical Delivery Security or, if Units are specified in the
applicable Final Terms, each Unit, as the case may be, the quantity of the Relevant Asset or the Relevant
Assets, as the case may be, which a Securityholder is entitled to receive on the Settlement Date or
Redemption Date, as the case may be, in respect of each such Security or Unit, as the case may be, following
(if there is an Exercise Price) payment of the Exercise Price (and any other sums payable) rounded down as
provided in Condition 6(C)(i), as determined by the Calculation Agent including any documents evidencing
such Entitlement;

      “Exchange” means, (a) in respect of a Share, each exchange or quotation system specified hereon as
such for such Share, any successor to such exchange or quotation system or any substitute exchange or
quotation system to which trading in the Share has temporarily relocated as the Calculation Agent may (in its
absolute discretion) select and as notified to Securityholders by the Issuer in accordance with Condition 13,
(provided that the Calculation Agent has determined that there is comparable liquidity relative to such Share
on such temporary substitute stock exchange or quotation system as on the original Exchange), and (b) in
respect of an Index, each exchange or quotation system specified hereon as such for such Index, any


                                                     38
successor to such exchange or quotation system or any substitute exchange or quotation system to which
trading in the Shares underlying such Index has temporarily relocated as the Calculation Agent may (in its
absolute discretion) select and as notified to Securityholders by the Issuer in accordance with Condition 13,
(provided that the Calculation Agent has determined that there is comparable liquidity relative to the Shares
underlying such Index on such temporary substitute exchange or quotation system as on the original
Exchange);

      “Exchange Business Day” means, any Scheduled Trading Day on which each Exchange and each
Related Exchange are open for trading during their respective regular trading sessions, notwithstanding any
such Exchange or Related Exchange closing prior to its Scheduled Closing Time;

      “Exchange Disruption” means any event (other than an Early Closure) that disrupts or impairs (as
determined by the Calculation Agent) the ability of market participants in general (i) to effect transactions in,
or obtain market values for, the Shares on the Exchange (or in the case of an Index, on any relevant
Exchange(s) in securities that comprise 20 per cent. or more of the level of the relevant Index), or (ii) to
effect transactions in, or obtain market values for, futures or options contracts relating to the Share or the
relevant Index on any relevant Related Exchange;

     “Index Currency” means the currency specified as such in the applicable Final Terms;

      “Related Exchange” means, in respect of Index Securities and in relation to an Index or, in respect of
Share Securities and in relation to a Share, each exchange or quotation system specified as such for such
Index or Share in the applicable Final Terms, any successor to such exchange or quotation system or any
substitute exchange or quotation system to which trading in futures or options contracts relating to such Index
or Share has temporarily relocated (provided that the Calculation Agent has determined that there is
comparable liquidity relative to the futures or options contracts relating to such Index or such Share on such
temporary substitute exchange or quotation system as on the original Related Exchange), provided that where
“All Exchanges” is specified as the Related Exchange in the applicable Final Terms, “Related Exchange”
shall mean each exchange or quotation system where trading has a material effect (as determined by the
Calculation Agent) on the overall market for futures or options contracts relating to such Index or such Share;

      “Scheduled Closing Time” means, in respect of an Exchange or Related Exchange and a Scheduled
Trading Day, the scheduled weekday closing time of such Exchange or Related Exchange on such Scheduled
Trading Day, without regard to after hours or any other trading outside of the regular trading session hours;

     “Scheduled Trading Day” means any day on which each Exchange and each Related Exchange are
scheduled to be open for trading for their respective regular trading sessions;

     “Scheduled Valuation Date” means any original date that, but for the occurrence of an event causing a
Disrupted Day, would have been a Valuation Date;

     “Settlement Date” means:

     (a)   in relation to Cash Settled Securities which are Warrants:

           in relation to each Actual Exercise Date, (i) where Averaging is not specified in the applicable
           Final Terms, the fifth Business Day following the Valuation Date provided that if the Warrants are
           Index Securities relating to a Basket of Indices, Share Securities relating to a Basket of Shares,
           Debt Securities relating to a basket of Debt Instruments (a “Basket of Debt Instruments”) or
           Commodity Securities relating to a basket of Commodities (a “Basket of Commodity Securities”)
           and the occurrence of a Disrupted Day has resulted in a Valuation Date for one or more Indices,
           Shares, Debt Instruments or Commodities, as the case may be, being adjusted as set out in the
           definition of “Valuation Date” below, the Settlement Date shall be the fifth Business Day next
           following the last occurring Valuation Date in relation to any Index, Share, Debt Instrument or
           Commodity, as the case may be, or (ii) where Averaging is specified in the applicable Final
           Terms, the fifth Business Day following the last occurring Averaging Date provided that where the
           Warrants are Index Securities relating to a Basket of Indices, Share Securities relating to a Basket
           of Shares, Debt Securities relating to a Basket of Debt Instruments or Commodity Securities
           relating to a Basket of Commodities and the occurrence of a Disrupted Day has resulted in an
           Averaging Date for one or more Indices, Shares, Debt Instruments or Commodities, as the case
           may be, being adjusted as set out in the definition of “Averaging Date” above, the Settlement


                                                       39
           Date shall be the fifth Business Day next following the last occurring Averaging Date in relation
           to any Index, Share, Debt Instrument or Commodity, as the case may be, or such other date as is
           specified in the applicable Final Terms; and

     (b)   in relation to Physical Delivery Securities which are Warrants:

           the date specified as such in the applicable Final Terms;

      “Settlement Price” means, in relation to each Cash Settled Security or, if Units are specified in the
applicable Final Terms, each Unit, as the case may be:

     (a)   in respect of Index Securities, subject to Condition 18(A) and as referred to in “Valuation Date”
           below or “Averaging Date” above, as the case may be:

           (i)    in the case of Index Securities relating to a Basket of Indices, an amount (which shall be
                  deemed to be a monetary value, in the case of Warrants, on the same basis as the Exercise
                  Price and, in the case of Certificates, in the Index Currency) equal to the sum of the values
                  calculated for each Index as the official closing level for each Index as determined by the
                  Calculation Agent or, if so specified in the applicable Final Terms, the level of each Index
                  determined by the Calculation Agent as set out in the applicable Final Terms at the Relevant
                  Time on (A) if Averaging is not specified in the applicable Final Terms, the Valuation Date
                  or (B) if Averaging is specified in the applicable Final Terms, an Averaging Date and, in
                  either case, without regard to any subsequently published correction, multiplied by the
                  relevant Multiplier, each such value to be converted, if so specified in the applicable Final
                  Terms, into the Settlement Currency at the Exchange Rate and the sum of such converted
                  amounts to be the Settlement Price, all as determined by or on behalf of the Calculation
                  Agent; and

           (ii)   in the case of Index Securities relating to a single Index, an amount (which shall be deemed
                  to be a monetary value, in the case of Warrants, on the same basis as the Exercise Price and,
                  in the case of Certificates, in the Index Currency) equal to the official closing value of the
                  Index as determined by the Calculation Agent or, if so specified in the applicable Final
                  Terms, the level of the Index determined by the Calculation Agent as set out in the
                  applicable Final Terms at the Relevant Time on (A) if Averaging is not specified in the
                  applicable Final Terms, the Valuation Date or (B) if Averaging is specified in the applicable
                  Final Terms, an Averaging Date and, in either case, without regard to any subsequently
                  published correction, such amount to be converted, if so specified in the applicable Final
                  Terms, into the Settlement Currency at the Exchange Rate and such converted amount to be
                  the Settlement Price, all as determined by or on behalf of the Calculation Agent;

     (b)   in respect of Share Securities, subject to Condition 18(B) and as referred to in “Valuation Date”
           below or “Averaging Date” above, as the case may be:

           (i)    in the case of Share Securities relating to a Basket of Shares, an amount equal to the sum of
                  the values calculated for each Share at the official closing price (or the price at the Relevant
                  Time on the Valuation Date or an Averaging Date, as the case may be, if so specified in the
                  applicable Final Terms) quoted on the relevant Exchange for such Share (as defined in
                  Condition 18(B)) on (A) if Averaging is not specified in the applicable Final Terms, the
                  Valuation Date or (B) if Averaging is specified in the applicable Final Terms, an Averaging
                  Date and, in either case, without regard to any subsequently published correction (or if in
                  the opinion of the Calculation Agent, any such official closing price (or the price at the
                  Relevant Time on the Valuation Date or such Averaging Date, as the case may be, if so
                  specified in the applicable Final Terms) cannot be so determined and the Valuation Date or
                  Averaging Date, as the case may be, is not a Disrupted Day, an amount determined by the
                  Calculation Agent to be equal to the arithmetic mean of the closing fair market buying price
                  (or the fair market buying price at the Relevant Time on the Valuation Date or such
                  Averaging Date, as the case may be, if so specified in the applicable Final Terms) and the
                  closing fair market selling price (or the fair market selling price at the Relevant Time on the
                  Valuation Date or such Averaging Date, as the case may be, if so specified in the applicable
                  Final Terms) for the relevant Share whose official closing price (or the price at the Relevant
                  Time on the Valuation Date or such Averaging Date, as the case may be, if so specified in


                                                       40
             the applicable Final Terms) cannot be determined based, at the Calculation Agent’s
             discretion, either on the arithmetic mean of the foregoing prices or middle market quotations
             provided to it by two or more financial institutions (as selected by the Calculation Agent)
             engaged in the trading of the relevant Share or on such other factors as the Calculation
             Agent shall decide), multiplied by the relevant Multiplier, each such value to be converted,
             if so specified in the applicable Final Terms, into the Settlement Currency at the Exchange
             Rate and the sum of such converted amounts to be the Settlement Price, all as determined
             by or on behalf of the Calculation Agent; and

      (ii)   in the case of Share Securities relating to a single Share, an amount equal to the official
             closing price (or the price at the Relevant Time on the Valuation Date or an Averaging Date,
             as the case may be, if so specified in the applicable Final Terms) quoted on the relevant
             Exchange for such Share (as defined in Condition 18(B)) on (A) if Averaging is not
             specified in the applicable Final Terms, the Valuation Date or (B) if Averaging is specified
             in the applicable Final Terms, an Averaging Date and, in either case, without regard to any
             subsequent published correction (or if, in the opinion of the Calculation Agent, any such
             official closing price (or the price at the Relevant Time on the Valuation Date or such
             Averaging Date, as the case may be, if so specified in the applicable Final Terms) cannot be
             so determined and the Valuation Date or Averaging Date, as the case may be, is not a
             Disrupted Day, an amount determined by the Calculation Agent to be equal to the arithmetic
             mean of the closing fair market buying price (or the fair market buying price at the Relevant
             Time on the Valuation Date or such Averaging Date, as the case may be, if so specified in
             the applicable Final Terms) and the closing fair market selling price (or the fair market
             selling price at the Relevant Time on the Valuation Date or such Averaging Date, as the case
             may be, if so specified in the applicable Final Terms) for the Share based, at the Calculation
             Agent’s discretion, either on the arithmetic mean of the foregoing prices or middle market
             quotations provided to it by two or more financial institutions (as selected by the
             Calculation Agent) engaged in the trading of the Share or on such other factors as the
             Calculation Agent shall decide), such amount to be converted, if so specified in the
             applicable Final Terms, into the Settlement Currency at the Exchange Rate and such
             converted amount to be the Settlement Price, all as determined by or on behalf of the
             Calculation Agent;

(c)   in respect of Debt Securities, subject as referred to in “Valuation Date” below or “Averaging
      Date” above:

      (i)    in the case of Debt Securities relating to a Basket of Debt Instruments, an amount equal to
             the sum of the values calculated for each Debt Instrument at the bid price for such Debt
             Instrument as determined by or on behalf of the Calculation Agent by reference to the bid
             price for such Debt Instrument appearing on the Relevant Screen Page at the Relevant Time
             on (A) if Averaging is not specified in the applicable Final Terms, the Valuation Date or (B)
             if Averaging is specified in the applicable Final Terms, an Averaging Date, or if such price
             is not available, the arithmetic mean of the bid prices for such Debt Instrument at the
             Relevant Time on the Valuation Date or such Averaging Date, as the case may be, as
             received by it from two or more market-makers (as selected by the Calculation Agent) in
             such Debt Instrument, such bid prices to be expressed as a percentage of the nominal
             amount of such Debt Instrument, multiplied by the relevant Multiplier;

      (ii)   in the case of Debt Securities relating to a single Debt Instrument, an amount equal to the
             bid price for the Debt Instrument as determined by or on behalf of the Calculation Agent by
             reference to the bid price for such Debt Instrument appearing on the Relevant Screen Page
             at the Relevant Time on (A) if Averaging is not specified in the applicable Final Terms, the
             Valuation Date or (B) if Averaging is specified in the applicable Final Terms, an Averaging
             Date, or if such price is not available, the arithmetic mean of the bid prices for such Debt
             Instrument at the Relevant Time on the Valuation Date or such Averaging Date, as the case
             may be, as received by it from two or more market-makers (as selected by the Calculation
             Agent) in such Debt Instrument, such bid prices to be expressed as a percentage of the
             nominal amount of the Debt Instrument;




                                                 41
      (d)   in respect of Currency Securities:

            (i)    in the case of Currency Securities relating to a Basket of Subject Currencies, an amount
                   equal to the sum of the values calculated for each Subject Currency at the spot rate of
                   exchange appearing on the Relevant Screen Page at the Relevant Time on (A) if Averaging
                   is not specified in the applicable Final Terms, the Valuation Date or (B) if Averaging is
                   specified in the applicable Final Terms, an Averaging Date, for the exchange of such Subject
                   Currency into the Base Currency (expressed as the number of units (or part units) of such
                   Base Currency for which one unit of the Subject Currency can be exchanged) or, if such
                   rate is not available, the arithmetic mean (rounded, if necessary, to four decimal places (with
                   0.00005 being rounded upwards)) as determined by or on behalf of the Calculation Agent of
                   the bid and offer Subject Currency/Base Currency exchange rates (expressed as aforesaid) at
                   the Relevant Time on the Valuation Date or such Averaging Date, as the case may be, of
                   two or more leading dealers (as selected by the Calculation Agent) on a foreign exchange
                   market (as selected by the Calculation Agent), multiplied by the relevant Multiplier; and

            (ii)   in the case of Currency Securities relating to a single Subject Currency, an amount equal to
                   the spot rate of exchange appearing on the Relevant Screen Page at the Relevant Time on
                   (A) if Averaging is not specified in the applicable Final Terms, the Valuation Date or (B) if
                   Averaging is specified in the applicable Final Terms, an Averaging Date for the exchange of
                   such Subject Currency into the Base Currency (expressed as the number of units (or part
                   units) of the Base Currency for which one unit of the Subject Currency can be exchanged)
                   or, if such rate is not available, the arithmetic mean (rounded, if necessary, to four decimal
                   places (with 0.00005 being rounded upwards)) as determined by or on behalf of the
                   Calculation Agent of the bid and offer Subject Currency/Base Currency exchange rates
                   (expressed as aforesaid) at the Relevant Time on the Valuation Date or such Averaging Date,
                   as the case may be, of two or more leading dealers (as selected by the Calculation Agent)
                   on a foreign exchange market (as selected by the Calculation Agent);

      (e)   in respect of Commodity Securities, the provisions relating to the calculation of the Settlement
            Price will be set out in the applicable Final Terms;

      “Trade Date” means the Trade Date specified in the applicable Final Terms.

      “Trading Disruption” means any suspension of or limitation imposed on trading by the relevant
Exchange or Related Exchange or otherwise and whether by reason of movements in price exceeding limits
permitted by the relevant Exchange or Related Exchange or otherwise (i) relating to the Share on the
Exchange (or in the case of the Index, on any relevant Exchange(s) relating to securities that compromise 20
percent or more of the level of the relevant Index), or (ii) in futures or options contracts relating to the Share
or the relevant Index on any relevant Related Exchange;

      “Valuation Date” means (i) in the case of an issue of Warrants, the first Scheduled Trading Day
following the Actual Exercise Date of the relevant Warrant or (ii) in the case of an issue of Certificates, the
Valuation Date unless (in either case), in the opinion of the Calculation Agent, such day is a Disrupted Day. If
such day is a Disrupted Day, then:

      (a)   where the Securities are Index Securities relating to a single Index, Share Securities relating to a
            single Share, Debt Securities relating to a single Debt Instrument or Commodity Securities
            relating to a single Commodity, the Valuation Date shall be the first succeeding Scheduled Trading
            Day that is not a Disrupted Day, unless each of the eight Scheduled Trading Days immediately
            following the Scheduled Valuation Date is a Disrupted Day. In that case, (i) that eighth Scheduled
            Trading Day shall be deemed to be the Valuation Date, notwithstanding the fact that such day is a
            Disrupted Day, and (ii) the Calculation Agent shall determine the Settlement Price in the manner
            set out in the applicable Final Terms or, if not set out or if not practicable, determine the
            Settlement Price:

            (x)    in the case of Index Securities, by determining the level of the Index as of the Valuation
                   Time on that eighth Scheduled Trading Day in accordance with (subject to Condition
                   18(A)(2)) the formula for and method of calculating the Index last in effect prior to the
                   occurrence of the first Disrupted Day using the Exchange traded or quoted price as of the
                   Valuation Time on that eighth Scheduled Trading Day of each security/commodity


                                                        42
                  comprised in the Index (or, if an event giving rise to a Disrupted Day has occurred in
                  respect of the relevant security/commodity on that eighth Scheduled Trading Day, its good
                  faith estimate of the value for the relevant security/commodity as of the Valuation Time on
                  that eighth Scheduled Trading Day); or

            (y)   in the case of Share Securities, Debt Securities or Commodity Securities, in accordance with
                  its good faith estimate of the Settlement Price as of the Valuation Time on that eighth
                  Scheduled Trading Day; or

      (b)   where the Securities are Index Securities relating to a basket of Indices, Share Securities relating
            to a Basket of Shares, Debt Warrants relating to a Basket of Debt Instruments or Commodity
            Securities relating to a Basket of Commodities, the Valuation Date for each Index, Share, Debt
            Instrument or Commodity, as the case may be, not affected by the occurrence of a Disrupted Day
            shall be the Scheduled Valuation Date, and the Valuation Date for each Index, Share, Debt
            Instrument or Commodity affected, as the case may be, (each an “Affected Item”) by the
            occurrence of a Disrupted Day shall be the first succeeding Scheduled Trading Day that is not a
            Disrupted Day relating to the Affected Item unless each of the eight Scheduled Trading Days
            immediately following the Scheduled Valuation Date is a Disrupted Day relating to the Affected
            Item. In that case, (i) that eighth Scheduled Trading Day shall be deemed to be the Valuation Date
            for the Affected Item, notwithstanding the fact that such day is a Disrupted Day, and (ii) the
            Calculation Agent shall determine the Settlement Price using, in relation to the Affected Item, the
            level or value as applicable, determined in the manner set out in the applicable Final Terms, and,
            in the case of a Share, Debt Instrument or Commodity a price determined in the manner set out in
            the applicable Final Terms or, if not set out or if not practicable, using:

            (x)   in the case of an Index, the level of that Index as of the Valuation Time on that eighth
                  Scheduled Trading Day in accordance with the formula for and method of calculating that
                  Index last in effect prior to the occurrence of the first Disrupted Day using the Exchange
                  traded or quoted price as of the Valuation Time on that eighth Scheduled Trading Day of
                  each security/commodity comprised in that Index (or, if an event giving rise to a Disrupted
                  Day has occurred in respect of the relevant security/commodity on that eighth Scheduled
                  Trading Day, its good faith estimate of the value for the relevant security/commodity as of
                  the Valuation Time on that eighth Scheduled Trading Day); or

            (y)   in the case of a Share, Debt Instrument or Commodity, its good faith estimate of the value
                  for the Affected Item as of the Valuation Time on that eighth Scheduled Trading Day,

and otherwise in accordance with the above provisions; and

      “Valuation Time” means the Relevant Time specified in the applicable Final Terms or, in the case of
Index Securities or Share Securities, if no Relevant Time is specified, the Scheduled Closing Time on the
relevant Exchange on the relevant Valuation Date or Averaging Date, as the case may be, in relation to each
Index or Share to be valued. If the relevant Exchange closes prior to its Scheduled Closing Time and the
specified Valuation Time is after the actual closing time for its regular trading session, then the Valuation
Time shall be such actual closing time.

5     Interest and other Calculations [THIS CONDITION IS APPLICABLE TO ISSUES OF
      CERTIFICATES ONLY]

     The Securities may bear interest by reference to one or more fixed rates (“Fixed Rate Certificates”) or
one or more floating rates (“Floating Rate Certificates”).

(a)   Interest on Fixed Rate Certificates

      Each Fixed Rate Certificate bears interest on its outstanding Nominal Amount from the Interest
Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate of Interest, such
interest being payable in arrear on each Interest Payment Date. The amount of interest payable shall be
determined in accordance with Condition 5(e).




                                                      43
(b)   Interest on Floating Rate Certificates

      (i)    Interest Payment Dates Each Floating Rate Certificate bears interest on its outstanding Nominal
             Amount from the Interest Commencement Date at the rate per annum (expressed as a percentage)
             equal to the Rate of Interest, such interest being payable in arrear on each Interest Payment Date.
             The amount of interest payable shall be determined in accordance with Condition 5(e). Such
             Interest Payment Date(s) is/are either shown hereon as Specified Interest Payment Dates or, if no
             Specified Interest Payment Date(s) is/are shown hereon, Interest Payment Date shall mean each
             date which falls the number of months or other period shown hereon as the Interest Period after
             the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the
             Interest Commencement Date.

      (ii)   Business Day Convention If any date referred to in these Terms and Conditions that is specified to
             be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a
             day that is not a Business Day, then, if the Business Day Convention specified is (A) the Floating
             Rate Business Day Convention, such date shall be postponed to the next day that is a Business
             Day unless it would thereby fall into the next calendar month, in which event (x) such date shall
             be brought forward to the immediately preceding Business Day and (y) each subsequent such date
             shall be the last Business Day of the month in which such date would have fallen had it not been
             subject to adjustment, (B) the Following Business Day Convention, such date shall be postponed
             to the next day that is a Business Day, (C) the Modified Following Business Day Convention,
             such date shall be postponed to the next day that is a Business Day unless it would thereby fall
             into the next calendar month, in which event such date shall be brought forward to the
             immediately preceding Business Day or (D) the Preceding Business Day Convention, such date
             shall be brought forward to the immediately preceding Business Day.

      (iii) Rate of Interest for Floating Rate Certificates The Rate of Interest in respect of Floating Rate
            Certificates for each Interest Accrual Period shall be determined in the manner specified hereon
            and the provisions below relating to either ISDA Determination or Screen Rate Determination
            shall apply, depending upon which is specified hereon.

      (A)    ISDA Determination for Floating Rate Certificates:

             Where ISDA Determination is specified hereon as the manner in which the Rate of Interest is to
             be determined, the Rate of Interest for each Interest Accrual Period shall be determined by the
             Calculation Agent as a rate equal to the relevant ISDA Rate, subject as provided in Condition
             5(d). For the purposes of this sub-paragraph (iii), “ISDA Rate” for an Interest Accrual Period
             means a rate equal to the Floating Rate that would be determined by the Calculation Agent under
             a Swap Transaction under the terms of an agreement incorporating the ISDA Definitions and
             under which:

             (x)   the Floating Rate Option is as specified hereon;

             (y)   the Designated Maturity is a period specified hereon; and

             (z)   the relevant Reset Date is the first day of that Interest Accrual Period unless otherwise
                   specified hereon.

             For the purposes of this sub-paragraph (A), “Floating Rate”, “Calculation Agent”, “Floating Rate
             Option”, “Designated Maturity”, “Reset Date” and “Swap Transaction” have the meanings given
             to those terms in the ISDA Definitions.

      (B)    Screen Rate Determination for Floating Rate Certificates

             (x)   Where Screen Rate Determination is specified hereon as the manner in which the Rate of
                   Interest is to be determined, the Rate of Interest for each Interest Accrual Period will,
                   subject as provided below and Condition 5(d), be either:

                   (1)   the offered quotation; or

                   (2)   the arithmetic mean of the offered quotations,


                                                       44
      (expressed as a percentage rate per annum) for the Reference Rate which appears or appear,
      as the case may be, on the Relevant Screen Page as at either 11.00 a.m. (London time in the
      case of LIBOR or Brussels time in the case of EURIBOR) on the Interest Determination
      Date in question as determined by the Calculation Agent. If five or more of such offered
      quotations are available on the Relevant Screen Page, the highest (or, if there is more than
      one such highest quotation, one only of such quotations) and the lowest (or, if there is more
      than one such lowest quotation, one only of such quotations) shall be disregarded by the
      Calculation Agent for the purpose of determining the arithmetic mean of such offered
      quotations.

      If the Reference Rate from time to time in respect of Floating Rate Certificates is specified
      hereon as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such
      Certificates will be determined as provided hereon.

(y)   If the Relevant Screen Page is not available or if, sub-paragraph (x)(1) applies and no such
      offered quotation appears on the Relevant Screen Page or if sub-paragraph (x)(2) above
      applies and fewer than three such offered quotations appear on the Relevant Screen Page in
      each case as at the time specified above, subject as provided below, the Calculation Agent
      shall request, if the Reference Rate is LIBOR, the principal London office of each of the
      Reference Banks or, if the Reference Rate is EURIBOR, the principal Euro-zone office of
      each of the Reference Banks, to provide the Calculation Agent with its offered quotation
      (expressed as a percentage rate per annum) for the Reference Rate if the Reference Rate is
      LIBOR, at approximately 11.00 a.m. (London time), or if the Reference Rate is EURIBOR,
      at approximately 11.00 a.m. (Brussels time) on the Interest Determination Date in question.
      If two or more of the Reference Banks provide the Calculation Agent with such offered
      quotations, the Rate of Interest for such Interest Accrual Period shall be the arithmetic mean
      of such offered quotations as determined by the Calculation Agent; and

(z)   If paragraph (y) above applies and the Calculation Agent determines that fewer than two
      Reference Banks are providing offered quotations, subject as provided below, the Rate of
      Interest shall be the arithmetic mean of the rates per annum (expressed as a percentage) as
      communicated to (and at the request of) the Calculation Agent by the Reference Banks or
      any two or more of them, at which such banks were offered, if the Reference Rate is
      LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR,
      at approximately 11.00 a.m. (Brussels time) on the relevant Interest Determination Date,
      deposits in the Specified Currency for a period equal to that which would have been used
      for the Reference Rate by leading banks in, if the Reference Rate is LIBOR, the London
      inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market,
      as the case may be, or, if fewer than two of the Reference Banks provide the Calculation
      Agent with such offered rates, the offered rate for deposits in the Specified Currency for a
      period equal to that which would have been used for the Reference Rate, or the arithmetic
      mean of the offered rates for deposits in the Specified Currency for a period equal to that
      which would have been used for the Reference Rate, at which, if the Reference Rate is
      LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR,
      at approximately 11.00 a.m. (Brussels time), on the relevant Interest Determination Date,
      any one or more banks (which bank or banks is or are in the opinion of the Trustee and the
      Issuer suitable for such purpose) informs the Calculation Agent it is quoting to leading
      banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference
      Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, provided that, if
      the Rate of Interest cannot be determined in accordance with the foregoing provisions of
      this paragraph, the Rate of Interest shall be determined as at the last preceding Interest
      Determination Date (though substituting, where a different Margin or Maximum or
      Minimum Rate of Interest is to be applied to the relevant Interest Accrual Period from that
      which applied to the last preceding Interest Accrual Period, the Margin or Maximum or
      Minimum Rate of Interest relating to the relevant Interest Accrual Period, in place of the
      Margin or Maximum or Minimum Rate of Interest relating to that last preceding Interest
      Accrual Period.




                                          45
(c)   Accrual of Interest

      Interest shall cease to accrue on each Certificate on the due date for redemption unless, upon due
presentation, payment is improperly withheld or refused, in which event interest shall continue to accrue (as
well after as before judgment) at the Rate of Interest in the manner provided in this Condition 5 to the
Relevant Date (as defined in Condition 5(h)).

(d)   Margin, Maximum/Minimum Rates of Interest

      (i)    If any Margin is specified hereon (either (x) generally, or (y) in relation to one or more Interest
             Accrual Periods), an adjustment shall be made to all Rates of Interest, in the case of (x), or the
             Rates of Interest for the specified Interest Accrual Periods, in the case of (y), calculated in
             accordance with Condition 5(b) above by adding (if a positive number) or subtracting the absolute
             value (if a negative number) of such Margin, subject always to the next paragraph.

      (ii)   If any Maximum or Minimum Rate of Interest is specified hereon, then any Rate of Interest shall
             be subject to such maximum or minimum, as the case may be.

      (iii) For the purposes of any calculations required pursuant to these Conditions (unless otherwise
            specified), (x) all percentages resulting from such calculations shall be rounded, if necessary, to
            the nearest one hundred-thousandth of a percentage point (with halves being rounded up), (y) all
            figures shall be rounded to seven significant figures (with halves being rounded up) and (z) all
            currency amounts that fall due and payable shall be rounded to the nearest unit of such currency
            (with halves being rounded up), save in the case of yen, which shall be rounded down to the
            nearest yen. For these purposes “unit” means the lowest amount of such currency that is available
            as legal tender in the country of such currency.

(e)   Calculations

      The amount of interest payable per Certificate for any Interest Accrual Period (the “Interest Amount”)
shall be equal to the product of the Rate of Interest, the Nominal Amount specified hereon, and the Day
Count Fraction for such Interest Accrual Period. The Issuer will on each Interest Payment Date pay or cause
to be paid the relevant Interest Amount to or to the order of the Common Depositary or the Custodian, as the
case may be, for crediting to the account of the relevant Certificateholders, in accordance with the rules of
Clearstream, Luxembourg, Euroclear or DTC, as the case may be.

(f)   Determination and Publication of Rates of Interest

      The Calculation Agent shall, as soon as practicable on each Interest Determination Date, or such other
time on such date as the Calculation Agent may be required to calculate any rate or amount, obtain any
quotation or make any determination or calculation, determine such rate and calculate the Interest Amounts
for the relevant Interest Accrual Period, obtain such quotation or make such determination or calculation, as
the case may be, and cause the Rate of Interest and the Interest Amounts for each Interest Accrual Period and
the relevant Interest Payment Date to be notified to the Issuer, each of the Warrant and Certificate Agents, the
Certificateholders, any other Calculation Agent appointed in respect of the Certificates that is to make a
further calculation upon receipt of such information and, if the Certificates are listed on a stock exchange and
the rules of such exchange or other relevant authority so require, such exchange or other relevant authority as
soon as possible after their determination but in no event later than (i) the commencement of the relevant
Interest Period, if determined prior to such time, in the case of notification to such exchange of a Rate of
Interest and Interest Amount, or (ii) in all other cases, the fourth Business Day after such determination.
Where any Interest Payment Date or Interest Period Date is subject to adjustment pursuant to Condition
5(b)(ii), the Interest Amounts and the Interest Payment Date so published may subsequently be amended
without notice in the event of an extension or shortening of the Interest Period. The determination of any rate
or amount, the obtaining of each quotation and the making of each determination or calculation by the
Calculation Agent(s) shall (in the absence of manifest error) be final and binding upon all parties.

(g)   Determination or Calculation by Issuer

      If the Calculation Agent does not at any time for any reason determine or calculate the Rate of Interest
for an Interest Accrual Period or any Interest Amount, the Issuer shall do so (or shall appoint an agent on its
behalf to do so) and such determination or calculation shall be deemed to have been made by the Calculation


                                                       46
Agent. In doing so, the Issuer shall apply the foregoing provisions of this Condition 5(g), with any necessary
consequential amendments, to the extent that, in its opinion, it can do so, and, in all other respects it shall do
so in such manner as it shall deem fair and reasonable in all the circumstances.

(h)   Definitions

     In this Condition 5, unless the context otherwise requires, the following defined terms shall have the
meanings set out below:

      “Day Count Fraction” means, in respect of the calculation of an amount of interest on any Certificate
for any period of time (from and including the first day of such period to but excluding the last) (whether or
not constituting an Interest Period or an Interest Accrual Period, the “Calculation Period”):

      (i)    if “Actual/Actual” or “Actual/Actual-ISDA” is specified hereon, the actual number of days in the
             Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in a leap
             year, the sum of (A) the actual number of days in that portion of the Calculation Period falling in
             a leap year divided by 366 and (B) the actual number of days in that portion of the Calculation
             Period falling in a non-leap year divided by 365)

      (ii)   if “Actual/365 (Fixed)” is specified hereon, the actual number of days in the Calculation Period
             divided by 365

      (iii) if “Actual/360” is specified hereon, the actual number of days in the Calculation Period divided
            by 360

      (iv) if “30/360”, “360/360” or “Bond Basis” is specified hereon, the number of days in the Calculation
           Period divided by 360, calculated on a formula basis as follows:

                                         [360 × (Y2 – Y1)] + [30 × (M2 – M1)] + (D2 – D1)
             Day Count Fraction    =
                                                                 360

             where:

             “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls;

             “Y2” is the year, expressed as a number, in which the day immediately following the last day
             included in the Calculation Period falls;

             “M1” is the calendar month, expressed as a number, in which the first day of the Calculation
             Period falls;

             “M2” is the calendar month, expressed as a number, in which the day immediately following the
             last day included in the Calculation Period falls;

             “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless such
             number would be 31, in which case D1 will be 30; and

             “D2” is the calendar day, expressed as a number, immediately following the last day included in
             the Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case
             D2 will be 30

      (v)    if “30E/360” or “Eurobond Basis” is specified hereon, the number of days in the Calculation
             Period divided by 360, calculated on a formula basis as follows:

                                         [360 × (Y2 – Y1)] + [30 × (M2 – M1)] + (D2 – D1)
             Day Count Fraction    =
                                                                 360

             where:

             “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls;


                                                        47
     “Y2” is the year, expressed as a number, in which the day immediately following the last day
     included in the Calculation Period falls;

     “M1” is the calendar month, expressed as a number, in which the first day of the Calculation
     Period falls;

     “M2” is the calendar month, expressed as a number, in which the day immediately following the
     last day included in the Calculation Period falls;

     “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless such
     number would be 31, in which case D1 will be 30; and

     “D2” is the calendar day, expressed as a number, immediately following the last day included in
     the Calculation Period, unless such number would be 31, in which case D2 will be 30

(vi) if “30E/360 (ISDA)” is specified hereon, the number of days in the Calculation Period divided by
     360, calculated on a formula basis as follows:

                                 [360 × (Y2 – Y1)] + [30 × (M2 – M1)] + (D2 – D1)
     Day Count Fraction    =
                                                         360

     where:

     “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls;

     “Y2” is the year, expressed as a number, in which the day immediately following the last day
     included in the Calculation Period falls;

     “M1” is the calendar month, expressed as a number, in which the first day of the Calculation
     Period falls;

     “M2” is the calendar month, expressed as a number, in which the day immediately following the
     last day included in the Calculation Period falls;

     “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless (i) that day
     is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and

     “D2” is the calendar day, expressed as a number, immediately following the last day included in
     the Calculation Period, unless (i) that day is the last day of February but not the Redemption Date
     or (ii) such number would be 31, in which case D2 will be 30

(vii) If “Actual/Actual-ICMA” is specified hereon:

     (a)   If the Calculation Period is equal to or shorter than the Determination Period during which
           it falls, the number of days in the Calculation Period divided by the product of (x) the
           number of days in such Determination Period and (y) the number of Determination Periods
           normally ending in any year; and

     (b)   if the Calculation Period is longer than one Determination Period, the sum of:

           (a)   the number of days in such Calculation Period falling in the Determination Period in
                 which it begins divided by the product of (1) the number of days in such
                 Determination Period and (2) the number of Determination Periods normally ending in
                 any year; and

           (b)   the number of days in such Calculation Period falling in the next Determination Period
                 divided by the product of (1) the number of days in such Determination Period and (2)
                 the number of Determination Periods normally ending in any year.




                                                48
where:

“Determination Period” means the period from and including a Determination Date in any
year to but excluding the next Determination Date and

“Determination Date” means the date specified as such hereon or, if none is so specified, the
Interest Payment Date.

“Euro-zone” means the region comprised of member states of the European Union that
adopt the single currency in accordance with the Treaty establishing the European
Community, as amended.

“Interest Accrual Period” means the period beginning on (and including) the Interest
Commencement Date and ending on (but excluding) the first Interest Period Date and each
successive period beginning on (and including) an Interest Period Date and ending on (but
excluding) the next succeeding Interest Period Date.

“Interest Amount” means in respect of an Interest Accrual Period, the amount of interest
payable per Nominal Amount for that Interest Accrual Period and which, in the case of
Fixed Rate Certificates, and unless otherwise specified hereon, shall mean the Fixed Coupon
Amount or Broken Amount specified hereon as being payable on the Interest Payment Date
ending the Interest Period of which such Interest Accrual Period forms part.

“Interest Commencement Date” means the Issue Date or such other date as may be specified
hereon.

“Interest Determination Date” means, with respect to a Rate of Interest and Interest Accrual
Period, the date specified as such hereon or, if none is so specified, (i) the first day of such
Interest Accrual Period if the Specified Currency is Sterling or (ii) the day falling two
Business Days in London for the Specified Currency prior to the first day of such Interest
Accrual Period if the Specified Currency is neither Sterling nor euro or (iii) the day falling
two TARGET Business Days prior to the first day of such Interest Accrual Period if the
Specified Currency is euro.

“Interest Period” means the period beginning on (and including) the Interest Commencement
Date and ending on (but excluding) the first Interest Payment Date and each successive
period beginning on (and including) an Interest Payment Date and ending on (but excluding)
the next succeeding Interest Payment Date.

“Interest Period Date” means each Interest Payment Date unless otherwise specified hereon.

“ISDA Definitions” means the 2006 ISDA Definitions, as published by the International
Swaps and Derivatives Association, Inc., unless otherwise specified hereon.

“Nominal Amount” means the Nominal Amount specified in the applicable Final Terms.

“Rate of Interest” means the rate of interest payable from time to time in respect of this
Certificate and that is either specified or calculated in accordance with the provisions
hereon.

“Reference Banks” means, in the case of a determination of LIBOR, the principal London
office of four major banks in the London inter-bank market and, in the case of a
determination of EURIBOR, the principal Euro-zone office of four major banks in the
Euro-zone inter-bank market, in each case selected by the Calculation Agent or as specified
hereon.

“Reference Rate” means the rate specified as such hereon.

“Relevant Date” means, in respect of any Certificate, the date on which payment in respect
of it first becomes due or (if any amount of the money payable is improperly withheld or
refused) the date on which payment in full of the amount outstanding is made or (if earlier)


                                     49
                 the date seven days after that on which notice is duly given to the Certificateholders that,
                 upon further presentation of the Certificate being made in accordance with the Terms and
                 Conditions, such payment will be made, provided that payment is in fact made upon such
                 presentation.

                 “Relevant Screen Page” means such page, section, caption, column or other part of a
                 particular information service as may be specified hereon.

                 “Specified Currency” means the currency specified as such hereon or, if none is specified,
                 the currency in which the Certificates are denominated.

(i)   Calculation Agent

      The Issuer shall procure that there shall at all times be one or more Calculation Agents if provision is
made for them hereon and for so long as any Certificate is outstanding. Where more than one Calculation
Agent is appointed in respect of the Certificates, references in these Terms and Conditions to the Calculation
Agent shall be construed as each Calculation Agent performing its respective duties under the Terms and
Conditions. If the Calculation Agent is unable or unwilling to act as such or if the Calculation Agent fails
duly to establish the Rate of Interest for an Interest Accrual Period or to calculate any Interest Amount, as the
case may be, or to comply with any other requirement, the Issuer shall appoint a leading bank or investment
banking firm engaged in the interbank market (or, if appropriate, money, swap or over-the-counter index
options market) that is most closely connected with the calculation or determination to be made by the
Calculation Agent (acting through its principal London office or any other office actively involved in such
market) to act as such in its place. The Calculation Agent may not resign its duties without a successor
having been appointed as aforesaid.

6     Exercise Rights [THIS CONDITION IS APPLICABLE FOR ISSUES OF WARRANTS ONLY]

(A)   Exercise Period

      (i)   American Style Warrants

            American Style Warrants are exercisable on any Business Day during the Exercise Period
      specified in the applicable Final Terms (the “Exercise Period”).

            If Automatic Exercise is not specified in the applicable Final Terms, any American Style Warrant
      with respect to which no Exercise Notice (as defined below) has been delivered in the manner set out in
      Condition 7, at or prior to 10.00 a.m., Luxembourg, Brussels or New York time, as the case may be, on
      the last Business Day of the Exercise Period (the “Expiration Date”), shall become void.

            If Automatic Exercise is specified in the applicable Final Terms, any American Style Warrant with
      respect to which no Exercise Notice has been delivered in the manner set out in Condition 7, at or prior
      to 10.00 a.m., Luxembourg or Brussels time, as the case may be, on the Expiration Date shall be
      automatically exercised on the Expiration Date and the provisions of Condition 7(D) shall apply. The
      expressions “exercise”, “due exercise” and related expressions shall be construed to apply to any
      Warrants which are automatically exercised on the Expiration Date in accordance with this provision.

            In relation to any Warrant, the Business Day during the Exercise Period on which an Exercise
      Notice is delivered prior to 10.00 a.m., Luxembourg, Brussels or New York time (as appropriate), to
      Clearstream, Luxembourg, Euroclear or DTC, as the case may be, and the copy thereof so received by
      the Principal Warrant and Certificate Agent, or, if Automatic Exercise is specified in the applicable Final
      Terms, the Expiration Date is referred to herein as the “Actual Exercise Date”.

            If any Exercise Notice is received by Clearstream, Luxembourg, Euroclear or DTC, as the case
      may be, or if the copy thereof is received by the Principal Warrant and Certificate Agent, in each case,
      after 10.00 a.m., Luxembourg, Brussels or New York time (as appropriate), on any Business Day during
      the Exercise Period, such Exercise Notice will be deemed to have been delivered on the next Business
      Day, which Business Day shall be deemed to be the Actual Exercise Date, provided that any such
      Warrant in respect of which no Exercise Notice has been delivered in the manner set out in Condition 7
      at or prior to 10.00 a.m. Luxembourg, Brussels or New York time (as appropriate) on the Expiration



                                                       50
      Date shall (i) if Automatic Exercise is not specified in the applicable Final Terms, become void or (ii) if
      Automatic Exercise is specified in the applicable Final Terms, be automatically exercised on the
      Expiration Date as provided above.

      (ii)   European Style Warrants

            European Style Warrants are only exercisable on the Exercise Date specified in the applicable
      Final Terms (the “Exercise Date”).

            If Automatic Exercise is not specified in the applicable Final Terms, any European Style Warrant
      with respect to which no Exercise Notice has been delivered in the manner set out in Condition 7, at or
      prior to 10.00 a.m., Luxembourg, Brussels or New York time (as appropriate) on the Actual Exercise
      Date, shall become void.

            If Automatic Exercise is specified in the applicable Final Terms, any European Style Warrant with
      respect to which either (a) no Exercise Notice has been delivered in the manner set out in Condition 7,
      at or prior to 10.00 a.m., Luxembourg, Brussels or New York time, as the case may be, on the Actual
      Exercise Date, or (b) no Exercise Price is payable, shall be automatically exercised on the Actual
      Exercise Date and the provisions of Condition 7(D) shall apply. The expressions “exercise”, “due
      exercise” and related expressions shall be construed to apply to any Warrants which are automatically
      exercised on the Actual Exercise Date in accordance with this provision.

(B)   Cash Settlement

      If the Warrants are Cash Settled Securities, each such Warrant or, if Units are specified in the applicable
Final Terms, each Unit entitles its holder, upon due exercise, to receive from the Issuer on the Settlement
Date a Cash Settlement Amount calculated by the Calculation Agent (which shall not be less than zero) equal
to:

      (i)    where Averaging is not specified in the applicable Final Terms:

             (a)   if such Warrants are Call Warrants,

                   (Settlement Price – Exercise Price) multiplied by the Multiplier and, in the case of Warrants
                   which are Debt Securities only, multiplied by the nominal amount of the Debt Instrument
                   specified in the applicable Final Terms (the “Nominal Amount”);

             (b)   if such Warrants are Put Warrants,

                   (Exercise Price – Settlement Price) multiplied by the Multiplier and, in the case of Debt
                   Securities only, multiplied by the Nominal Amount; and

             (c)   if such Warrants are not Call Warrants nor Put Warrants, settlement will be as specified in
                   the applicable Final Terms;

      (ii)   where Averaging is specified in the applicable Final Terms:

             (a)   if such Warrants are Call Warrants,

                   (the arithmetic mean of the Settlement Prices for all the Averaging Dates – Exercise Price)
                   multiplied by the Multiplier and, in the case of Warrants which are Debt Securities only,
                   multiplied by the Nominal Amount;

             (b)   if such Warrants are Put Warrants,

                   (Exercise Price – the arithmetic mean of the Settlement Prices for all the Averaging Dates)
                   multiplied by the Multiplier and, in the case of Warrants which are Debt Securities only,
                   multiplied by the Nominal Amount; and

             (c)   if such Warrants are not Call Warrants nor Put Warrants, settlement will be as specified in
                   the applicable Final Terms.


                                                         51
      Any amount determined pursuant to the above, if not an amount in the Settlement Currency, will be
converted into the Settlement Currency at the Exchange Rate specified in the applicable Final Terms for the
purposes of determining the Cash Settlement Amount. The Cash Settlement Amount will be rounded to the
nearest two decimal places (or, in the case of Japanese Yen, the nearest Yen) in the relevant Settlement
Currency, 0.005 (or, in the case of Japanese Yen, half a Yen) being rounded upwards, with Warrants exercised
at the same time by the same Warrantholder being aggregated for the purpose of determining the aggregate
Cash Settlement Amounts payable in respect of such Warrants or Units, as the case may be.

(C)   Physical Settlement

      (i)    Exercise Rights in relation to Warrants which are Physical Delivery Securities

            If the Warrants are Physical Delivery Securities, each such Warrant or, if Units are specified in the
      applicable Final Terms, each Unit, as the case may be, entitles its holder, upon due exercise and subject
      to certification as to non-U.S. beneficial ownership, to receive from the Issuer on the Settlement Date
      the Entitlement subject to payment of the relevant Exercise Price and any other sums payable. The
      method of delivery of the Entitlement is set out in the applicable Final Terms.

            Warrants or Units, as the case may be, exercised at the same time by the same Warrantholder will
      be aggregated for the purpose of determining the aggregate Entitlements in respect of such Warrants or
      Units, as the case may be provided that the aggregate Entitlements in respect of the same Warrantholder
      will be rounded down to the nearest whole unit of the Relevant Asset or each of the Relevant Assets, as
      the case may be, in such manner as the Calculation Agent shall determine. Therefore, fractions of the
      Relevant Asset or of each of the Relevant Assets, as the case may be, will not be delivered and no cash
      adjustment will be made in respect thereof.

            Following exercise of a Share Security which is a Physical Delivery Security, all dividends on the
      relevant Shares to be delivered will be payable to the party that would receive such dividend according
      to market practice for a sale of the Shares executed on the relevant Actual Exercise Date and to be
      delivered in the same manner as such relevant Shares. Any such dividends to be paid to a Warrantholder
      will be paid to the account specified by the Warrantholder in the relevant Exercise Notice as referred to
      in Condition 7(A)(2)(vi).

      (ii)   Settlement Disruption

             If, following the exercise of Warrants which are Physical Delivery Securities, in the opinion of the
      Calculation Agent, delivery of the Entitlement using the method of delivery specified in the applicable
      Final Terms is not practicable by reason of a Settlement Disruption Event (as defined below) having
      occurred and continuing on any Settlement Date, then such Settlement Date for such Warrants shall be
      postponed to the first following Settlement Business Day in respect of which there is no such
      Settlement Disruption Event, provided that the Issuer may elect in its sole discretion to satisfy its
      obligations in respect of the relevant Warrant or Unit, as the case may be, by delivering the Entitlement
      using such other commercially reasonable manner as it may select and in such event the Settlement
      Date shall be such day as the Issuer deems appropriate in connection with delivery of the Entitlement in
      such other commercially reasonable manner. For the avoidance of doubt, where a Settlement Disruption
      Event affects some but not all of the Relevant Assets comprising the Entitlement, the Settlement Date
      for the Relevant Assets not affected by the Settlement Disruption Event will be the originally designated
      Settlement Date. In the event that a Settlement Disruption Event will result in the delivery on a
      Settlement Date of some but not all of the Relevant Assets comprising the Entitlement, the Calculation
      Agent shall determine in its discretion the appropriate pro rata portion of the Exercise Price to be paid
      by the relevant Warrantholder in respect of that partial settlement. For so long as delivery of the
      Entitlement is not practicable by reason of a Settlement Disruption Event, then in lieu of physical
      settlement and notwithstanding any other provision hereof, the Issuer may elect in its sole discretion to
      satisfy its obligations in respect of the relevant Warrant or Unit, as the case may be, by payment to the
      relevant Warrantholder of the Disruption Cash Settlement Price (as defined below) on the fifth Business
      Day following the date that notice of such election is given to the Warrantholders in accordance with
      Condition 13. Payment of the Disruption Cash Settlement Price will be made in such manner as shall be
      notified to the Warrantholders in accordance with Condition 13. The Calculation Agent shall give notice
      as soon as practicable to the Warrantholders in accordance with Condition 13 that a Settlement
      Disruption Event has occurred. No Warrantholder shall be entitled to any payment in respect of the



                                                       52
      relevant Warrant or Unit, as the case may be, in the event of any delay in the delivery of the
      Entitlement due to the occurrence of a Settlement Disruption Event and no liability in respect thereof
      shall attach to the Issuer.

            For the purposes hereof:

            “Disruption Cash Settlement Price” in respect of any relevant Warrant or Unit, as the case may
      be, shall be the fair market value of such Warrant or Unit, as the case may be (taking into account,
      where the Settlement Disruption Event affected some but not all of the Relevant Assets comprising the
      Entitlement and such non-affected Relevant Assets have been duly delivered as provided above, the
      value of such Relevant Assets), less the cost to the Issuer and/or the Guarantor of unwinding any
      underlying related hedging arrangements, all as determined by the Calculation Agent in its sole and
      absolute discretion plus, if already paid, the Exercise Price (or, where as provided above some Relevant
      Assets have been delivered, and a pro rata portion has been paid, such pro rata portion); and

           “Settlement Disruption Event” means, in the opinion of the Calculation Agent or, if proviso (B) of
      Condition 3 applies, the Guarantor, an event beyond the control of the Issuer or, if proviso (B) of
      Condition 3 applies, the Guarantor as a result of which the Issuer or the Guarantor, as the case may be,
      cannot make delivery of the Relevant Asset(s) using the method specified in the applicable Final Terms.

(D)   Failure to Deliver due to Illiquidity

      If, “Failure to Deliver due to Illiquidity” is specified as applying in the applicable Final Terms and,
following the exercise of such Warrants, in the opinion of the Calculation Agent, it is impossible or
impracticable to deliver, when due, some or all of the Relevant Assets (the “Affected Relevant Assets”)
comprising the Entitlement, where such failure to deliver is due to illiquidity in the market for the Relevant
Assets (a “Failure to Deliver”), then:

      (a)   subject as provided elsewhere in these Conditions, any Relevant Assets which are not Affected
            Relevant Assets, will be delivered on the originally designated Settlement Date in accordance with
            Condition 6(C)(i) and the Calculation Agent shall determine the appropriate pro rata portion of the
            Exercise Price to be paid by the relevant Warrantholder in respect of that partial settlement; and

      (b)   in respect of any Affected Relevant Assets, in lieu of physical settlement and notwithstanding any
            other provision hereof, the Issuer may elect in its sole and absolute discretion in lieu of delivery
            of the Affected Relevant Assets, to pay to the relevant Warrantholder the Failure to Deliver
            Settlement Price no later than the fifth Business Day following the date that notice of such
            election is given to the Warrantholders in accordance with Condition 13. Payment of the Failure to
            Deliver Settlement Price will be made to the account specified by the Warrantholder in the
            relevant Exercise Notice referred to in Condition 7(A) or in such manner as shall be notified to
            the Warrantholders in accordance with Condition 13. The Calculation Agent shall give notice as
            soon as practicable to the Warrantholders in accordance with Condition 13 that the provisions of
            this Condition 6(D) apply. If the Issuer does not so elect, the provisions of Condition 6(C)(ii) shall
            apply.

      For the purposes hereof:

      “Failure to Deliver Settlement Price” in respect of any relevant Warrant or Unit, as the case may be,
shall be the fair market value of the Affected Relevant Assets on a day selected by the Issuer in its sole and
absolute discretion prior to the date on which the Calculation Agent gives notice to the Warrantholders as
provided above (taking into account the pro rata portion of the Exercise Price paid or payable in relation to
the Affected Relevant Assets adjusted to take account fully for any proportionate losses, expenses and costs to
the Issuer and/or any of its Affiliates of unwinding or adjusting any underlying or related hedging
arrangements (including but not limited to any options or selling or otherwise realising any Relevant Asset or
other instruments of any type whatsoever which the Issuer and/or any of its Affiliates may hold as part of
such hedging arrangements), all as calculated by the Calculation Agent.




                                                       53
(E)   Issuer’s Option to Vary Settlement

       If the applicable Final Terms indicates that the Issuer has an option to vary settlement in respect of the
Warrants, upon a valid exercise of Warrants in accordance with these Terms and Conditions, the Issuer may at
its sole and unfettered discretion in respect of each such Warrant or, if Units are specified in the applicable
Final Terms, each Unit, elect not to pay the relevant Warrantholders the Cash Settlement Amount or to deliver
or procure delivery of the Entitlement to the relevant Warrantholders, as the case may be, but, in lieu thereof
to deliver or procure delivery of the Entitlement or make payment of the Cash Settlement Amount on the
Settlement Date to the relevant Warrantholders, as the case may be. Notification of such election will be
given to Warrantholders no later than 10.00 a.m. (London time) on the second Business Day following the
Actual Exercise Date.

(F)   General

     None of the Issuer, the Guarantor, the Calculation Agent and the Warrant and Certificate Agents shall
have any responsibility for any errors or omissions in the calculation of any Cash Settlement Amount or of
any Entitlement.

      The purchase of Warrants does not confer on any holder of such Warrants any rights (whether in respect
of voting, distributions or otherwise) attaching to any Relevant Asset.

      All references in this Condition 6 to “Luxembourg, Brussels or New York time” shall, where Warrants
are cleared through an additional or alternative clearing system, be deemed to refer as appropriate to the time
in the city where the relevant clearing system is located.

7     Exercise Procedure [THIS CONDITION IS APPLICABLE FOR ISSUES OF WARRANTS ONLY]

(A)   Exercise Notice

      Subject as provided in Conditions 7(F) and 7(H), Warrants may only be exercised by the delivery, or
the sending by tested telex (confirmed in writing), of a duly completed exercise notice (an “Exercise Notice”)
in the form set out in the Agency Agreement (copies of which form may be obtained from Clearstream,
Luxembourg, Euroclear, DTC and the Warrant and Certificate Agents) to Clearstream, Luxembourg, Euroclear
or DTC, as the case may be, with a copy to the Principal Warrant and Certificate Agent in accordance with
the provisions set out in Condition 6 and this Condition 7.

      (1)   In the case of Warrants which are Cash Settled Securities, the Exercise Notice shall:

            (i)    specify the series number of the Warrants and the number of Warrants being exercised and,
                   if Units are specified in the applicable Final Terms, the number of Units being exercised;

            (ii)   specify the number of the Warrantholder’s account at Clearstream, Luxembourg, Euroclear
                   or DTC, as the case may be, to be debited with the Warrants being exercised;

            (iii) irrevocably instruct Clearstream, Luxembourg, Euroclear or DTC, as the case may be, to
                  debit on or before the Settlement Date the Warrantholder’s account with the Warrants being
                  exercised;

            (iv) specify the number of the Warrantholder’s account at Clearstream, Luxembourg, Euroclear
                 or DTC, as the case may be, to be credited with the Cash Settlement Amount (if any) for
                 each Warrant or Unit, as the case may be, being exercised; and

            (v)    include an undertaking to pay all taxes, duties and/or expenses, including any applicable
                   depository charges, transaction or exercise charges, stamp duty, stamp duty reserve tax,
                   issue, registration, securities transfer and/or other taxes or duties arising in connection with
                   the exercise of such Warrants (“Exercise Expenses”) and an authority to Clearstream,
                   Luxembourg, Euroclear or DTC, as the case may be, to deduct an amount in respect thereof
                   from any Cash Settlement Amount due to such Warrantholder and/or to debit a specified
                   account of the Warrantholder at Clearstream, Luxembourg, Euroclear or DTC, as the case
                   may be, in respect thereof and to pay such Exercise Expenses,



                                                        54
      all as provided in the Agency Agreement.

(2)   In the case of Warrants which are Physical Delivery Securities, the Exercise Notice shall:

      (i)    specify the series number of the Warrants and the number of Warrants being exercised and,
             if Units are specified in the applicable Final Terms, the number of Units being exercised;

      (ii)   specify the number of the Warrantholder’s account at Clearstream, Luxembourg or
             Euroclear, as the case may be, to be debited with the Warrants being exercised;

      (iii) irrevocably instruct Clearstream, Luxembourg or Euroclear, as the case may be, to debit on
            or before the Settlement Date the Warrantholder’s account with the Warrants being
            exercised;

      (iv) irrevocably instruct Clearstream, Luxembourg or Euroclear to debit on the Actual Exercise
           Date a specified account of the Warrantholder with Clearstream, Luxembourg and Euroclear,
           as the case may be, with the aggregate Exercise Prices in respect of such Warrants or Units,
           as the case may be, (together with any other amounts payable);

      (v)    include an undertaking to pay all taxes, duties and/or expenses, including any applicable
             depository charges, transaction or exercise charges, stamp duty, stamp duty reserve tax,
             issue, registration, securities transfer and/or other taxes or duties arising from the exercise of
             such Warrants and/or the delivery or transfer of the Entitlement pursuant to the terms of
             such Warrants (“Exercise Expenses”) and an authority to Clearstream, Luxembourg or
             Euroclear, as the case may be, to debit a specified account of the Warrantholder at
             Clearstream, Luxembourg or Euroclear, as the case may be, in respect thereof and to pay
             such Exercise Expenses;

      (vi) include such details as are required by the applicable Final Terms for delivery of the
           Entitlement which may include account details and/or the name and address of any person(s)
           into whose name evidence of the Entitlement is to be registered and/or any bank, broker or
           agent to whom documents evidencing the Entitlement are to be delivered and specify the
           name and the number of the Warrantholder’s account with Euroclear or Clearstream,
           Luxembourg, as the case may be, to be credited with any cash payable by the Issuer, either
           in respect of any cash amount constituting the Entitlement or any dividends relating to the
           Entitlement or as a result of the occurrence of a Settlement Disruption Event and the Issuer
           electing to pay the Disruption Cash Settlement Price;

      (vii) in the case of Warrants which are Currency Securities only, specify the number of the
            Warrantholder’s account at Clearstream, Luxembourg or Euroclear, as the case may be, to be
            credited with the amount due upon exercise of the Warrants;

      (viii) certify, inter alia, that the beneficial owner of each Warrant being exercised is not a U.S.
             person (as defined in the Exercise Notice) (or, to the extent such Warrant is represented by a
             Rule 144A Global Security, that the holder is a “qualified institutional buyer” as defined in
             Rule 144A under the United States Securities Act of 1933 who is also a “qualified
             purchaser” as defined in Section 2(a)(51) of the United States Investment Company Act of
             1940); and

      (ix) authorise the production of such certification in any applicable administrative or legal
           proceedings,

      all as provided in the Agency Agreement.

(3)   If Condition 6(E) applies, the form of Exercise Notice required to be delivered will be different
      from that set out above. Copies of such Exercise Notice may be obtained from Clearstream,
      Luxembourg, Euroclear and the Warrant and Certificate Agents.




                                                   55
(B)   Verification of the Warrantholder

      Upon receipt of an Exercise Notice, Clearstream, Luxembourg, Euroclear or DTC, as the case may be,
shall verify that the person exercising the Warrants is the holder thereof according to the books of
Clearstream, Luxembourg or Euroclear, as the case may be. Subject thereto, Clearstream, Luxembourg or
Euroclear, as the case may be, will confirm to the Principal Warrant and Certificate Agent the series number
and number of Warrants being exercised and the account details, if applicable, for the payment of the Cash
Settlement Amount or, as the case may be, the details for the delivery of the Entitlement of each Warrant or
Unit, as the case may be, being exercised. Upon receipt of such confirmation, the Principal Warrant and
Certificate Agent will inform the Issuer thereof. Clearstream, Luxembourg or Euroclear, as the case may be,
will on or before the Settlement Date debit the account of the relevant Warrantholder with the Warrants being
exercised. If the Warrants are American Style Warrants, upon exercise of less than all the Warrants constituted
by each Global Security, the Common Depositary or the Custodian, as the case may be, will, on the
instructions of, and on behalf of, the Principal Warrant and Certificate Agent, note such exercise on the
Schedule to each Global Security and the number of Warrants so constituted shall be reduced by the
cancellation pro tanto of the Warrants so exercised.

(C)   Settlement

      (i)    Warrants which are Cash Settled Securities

            The Issuer, through the Principal Warrant and Certificate Agent, shall on the Settlement Date pay
      or cause to be paid the Cash Settlement Amount (if any) for each duly exercised Warrant or Unit, as the
      case may be, to the Warrantholder’s account specified in the relevant Exercise Notice for value on the
      Settlement Date less any Exercise Expenses.

      (ii)   Warrants which are Physical Delivery Securities

            Subject to payment of the aggregate Exercise Prices and payment of any Exercise Expenses with
      regard to the relevant Warrants or Units, as the case may be, the Issuer shall on the Settlement Date
      deliver, or procure the delivery of, the Entitlement for each duly exercised Warrant or Unit, as the case
      may be, pursuant to the details specified in the Exercise Notice. Subject as provided in Condition 6(C),
      the Entitlement shall be delivered and evidenced in such manner as set out in the applicable Final
      Terms.

(D)   Determinations

      Any determination as to whether an Exercise Notice is duly completed and in proper form shall be
made by Clearstream, Luxembourg, Euroclear or DTC, as the case may be, in consultation with the Principal
Warrant and Certificate Agent, and shall be conclusive and binding on the Issuer, the Warrant and Certificate
Agents and the relevant Warrantholder. Subject as set out below, any Exercise Notice so determined to be
incomplete or not in proper form, or which is not copied to the Principal Warrant and Certificate Agent
immediately after being delivered or sent to Clearstream, Luxembourg, Euroclear or DTC, as the case may
be, as provided in paragraph (A) above, shall be null and void.

      If such Exercise Notice is subsequently corrected to the satisfaction of Clearstream, Luxembourg,
Euroclear or DTC, as the case may be, in consultation with the Principal Warrant and Certificate Agent, it
shall be deemed to be a new Exercise Notice submitted at the time such correction was delivered to
Clearstream, Luxembourg, Euroclear or DTC, as the case may be, and the Principal Warrant and Certificate
Agent.

      If Automatic Exercise is not specified in the applicable Final Terms, any Warrant with respect to
which the Exercise Notice has not been duly completed and delivered in the manner set out above by
the cut-off time specified in Condition 6(A)(i), in the case of American Style Warrants, or Condition
6(A)(ii), in the case of European Style Warrants, shall become void.

      Clearstream, Luxembourg, Euroclear or DTC, as the case may be, shall use its best efforts promptly to
notify the Warrantholder submitting an Exercise Notice if, in consultation with the Principal Warrant and
Certificate Agent, it has determined that such Exercise Notice is incomplete or not in proper form. In the
absence of negligence or wilful misconduct on its part, none of the Issuer, the Guarantor, the Warrant and



                                                      56
Certificate Agents, Clearstream, Luxembourg, Euroclear or DTC shall be liable to any person with respect to
any action taken or omitted to be taken by it in connection with such determination or the notification of such
determination to a Warrantholder.

(E)   Delivery of an Exercise Notice

      Delivery of an Exercise Notice shall constitute an irrevocable election by the relevant Warrantholder to
exercise the Warrants specified. After the delivery of such Exercise Notice, such exercising Warrantholder
may not transfer such Warrants.

(F)   Automatic Exercise

    This paragraph only applies if Automatic Exercise is specified in the applicable Final Terms and
Warrants are Physical Delivery Securities automatically exercised as provided in Condition 6(A)(i) or
Condition 6(A)(ii).

       In order to receive the Entitlement, in respect of a Warrant, or if Units are specified in the applicable
Final Terms, a Unit, as the case may be, the relevant Warrantholder must deliver or send by tested telex
(confirmed in writing) a duly completed Exercise Notice to Clearstream, Luxembourg, Euroclear or DTC, as
the case may be, with a copy to the Principal Warrant and Certificate Agent on any Business Day until not
later than 10.00 a.m., Luxembourg, Brussels or New York time (as appropriate), on the day (the “Cut-off
Date”) falling 180 days after (i) the Expiration Date, in the case of American Style Warrants, or (ii) the
Actual Exercise Date, in the case of European Style Warrants. The Exercise Notice shall include the
applicable information set out in the Exercise Notice referred to in Condition 7(A)(2) or Condition 7(A)(3) as
applicable. The Business Day during the period from the Expiration Date or the Actual Exercise Date, as the
case may be, until the Cut-off Date on which an Exercise Notice is delivered to Clearstream, Luxembourg,
Euroclear or DTC, as the case may be, and a copy thereof delivered to the Principal Warrant and Certificate
Agent is referred to in this Condition 7(F) as the “Exercise Notice Delivery Date” provided that if the
Exercise Notice is delivered to Clearstream, Luxembourg, Euroclear or DTC, as the case may be, and a copy
thereof delivered to the Principal Warrant and Certificate Agent at or after 10.00 a.m., Luxembourg, Brussels
or New York time (as appropriate) on a Business Day the Exercise Notice Delivery Date shall be deemed to
be the next succeeding Business Day.

      Subject to the relevant Warrantholder performing its obligations in respect of the relevant Warrant or
Unit, as the case may be, in accordance with these Terms and Conditions, the Settlement Date for such
Warrants or Units, as the case may be, shall be subject to Condition 6(C)(ii), the fifth Settlement Business
Day following the Exercise Notice Delivery Date. In the event that a Warrantholder does not so deliver an
Exercise Notice in accordance with this Condition 7(F) prior to 10.00 a.m. Luxembourg, Brussels or New
York time (as appropriate) on the Cut-off Date, the Issuer’s obligations in respect of such Warrants shall be
discharged and no further liability in respect thereof shall attach to the Issuer.

(G)   Exercise Risk

       Exercise of the Warrants is subject to all applicable laws, regulations and practices in force on the
relevant Exercise Date and none of the Issuer, the Guarantor and the Warrant and Certificate Agents shall
incur any liability whatsoever if it is unable to effect the transactions contemplated, after using all reasonable
efforts, as a result of any such laws, regulations or practices. None of the Issuer, the Guarantor and the
Warrant and Certificate Agents shall under any circumstances be liable for any acts or defaults of
Clearstream, Luxembourg, Euroclear or DTC, as the case may be, in relation to the performance of its duties
in relation to the Warrants.

       The Issuer will be discharged by payment or delivery to, or to the order of, the Common Depositary or
Clearstream, Luxembourg, Euroclear or DTC, as the case may be, in respect of the amount so paid or
delivered. Each of the persons shown in the records of Clearstream, Luxembourg, Euroclear or DTC, as the
case may be, as the holder of a particular amount of the Certificates must look solely to Clearstream,
Luxembourg, Euroclear or DTC, as the case may be, for his share of each such payment or delivery so made
to, or to the order of, Clearstream, Luxembourg, Euroclear or DTC, as the case may be.




                                                       57
(H)   No Exercise Price

      In the case of European Style Warrants in respect of which (i) Automatic Exercise has been specified
and (ii) there is no Exercise Price payable, in order to receive the Entitlement, in respect of a Warrant, or if
Units are specified in the applicable Final Terms, a Unit, as the case may be, the relevant Warrantholder is
not required to deliver any Exercise Notice (“Automatic Settlement”). Such European Style Warrants shall be
automatically exercised on the Actual Exercise Date in accordance with Condition 6(A)(ii).

8     Minimum and Maximum Number of Warrants Exercisable [THIS CONDITION IS APPLICABLE
      FOR ISSUES OF WARRANTS ONLY]

(A)   American Style Warrants

      This paragraph (A) applies only to American Style Warrants.

      (i)    The number of Warrants exercisable by a Warrantholder on any Actual Exercise Date, as
             determined by the Issuer, must be not less than the Minimum Exercise Number specified in the
             applicable Final Terms and, if specified in the applicable Final Terms, if a number greater than the
             Minimum Exercise Number, must be an integral multiple of the number specified in the applicable
             Final Terms. Any Exercise Notice which purports to exercise Warrants in breach of this provision
             shall be void and of no effect. If Automatic Exercise is specified in the applicable Final Terms
             and the Warrants are automatically exercised as set out in Condition 6(A)(i) this Condition 8(A)(i)
             will not apply to Warrants automatically exercised on the Expiration Date.

      (ii)   If the Issuer determines that the number of Warrants being exercised on any Actual Exercise Date
             by any Warrantholder or a group of Warrantholders (whether or not acting in concert) exceeds the
             Maximum Exercise Number (a number equal to the Maximum Exercise Number being the
             “Quota”), the Issuer may deem the Actual Exercise Date for the first Quota of such Warrants,
             selected at the discretion of the Issuer, to be such day and the Actual Exercise Date for each
             additional Quota of such Warrants (and any remaining number thereof) to be each of the
             succeeding Business Days until all such Warrants have been attributed with an Actual Exercise
             Date, provided, however, that the deemed Actual Exercise Date for any such Warrants which
             would thereby fall after the Expiration Date shall fall on the Expiration Date. In any case where
             more than the Quota of Warrants are exercised on the same day by Warrantholder(s), the order of
             settlement in respect of such Warrants shall be at the sole discretion of the Issuer.

(B)   European Style Warrants

      This paragraph (B) applies only to European Style Warrants.

      The number of Warrants exercisable by any Warrantholder on the Exercise Date as determined by the
Issuer must be not less than the Minimum Exercise Number specified in the applicable Final Terms and, if
specified in the applicable Final Terms, if a number greater than the Minimum Exercise Number, must be an
integral multiple of the number specified in the applicable Final Terms. Any Exercise Notice which purports
to exercise Warrants in breach of this provision shall be void and of no effect. If Automatic Exercise is
specified in the applicable Final Terms and the Warrants are automatically exercised as set out in Condition
6(A)(ii) this Condition 8(B) will not apply to Warrants automatically exercised on the Actual Exercise Date.

9     Redemption, Redemption Procedure, Interim Payments and Adjustments for Certificates [THIS
      CONDITION IS APPLICABLE FOR ISSUES OF CERTIFICATES ONLY]

(A)   Redemption

      Subject as provided in these Terms and Conditions and as specified in the applicable Final Terms, each
Certificate will be redeemed by the Issuer:

      (i)    in the case of a Cash Settled Security, by payment of the Cash Settlement Amount; or

      (ii)   in the case of a Physical Delivery Security, subject as provided herein, by delivery of the
             Entitlement,



                                                       58
such redemption to occur in either case, subject as provided below, on the Redemption Date. If (i) the date
for payment of any amount in respect of the Certificates is not a Business Day, the Certificateholder shall not
be entitled to payment until the next following Business Day and shall not be entitled to any further payment
in respect of such delay or (ii) the date for delivery of any Entitlement in respect of the Certificates is not a
Settlement Business Day, the Certificateholder shall not be entitled to delivery of the Entitlement until the
next following Settlement Business Day.

(B)   Cash Settlement

      Subject as provided herein, if the Certificates are Cash Settled Securities, each Certificate entitles its
holder to receive from the Issuer, on the Redemption Date, the Cash Settlement Amount determined in
accordance with the formula specified in the applicable Final Terms. The Issuer shall on the Redemption Date
pay or cause to be paid the Cash Settlement Amount for each Certificate to, or to the order of, the Common
Depositary for the account of the relevant Certificateholders, for value on the Redemption Date less any
Redemption Expenses (defined below), such payment to be made in accordance with the rules of Clearstream,
Luxembourg, Euroclear or DTC, as the case may be.

(C)   Physical Settlement

      (1)   Asset Transfer Notices

            In relation to Certificates which are Physical Delivery Securities, in order to obtain delivery of the
      Entitlement(s) in respect of any Certificate, the relevant Certificateholder must deliver, or send by tested
      telex (confirmed in writing), to Clearstream, Luxembourg, Euroclear or DTC (as applicable) with a copy
      to the Principal Warrant and Certificate Agent and the Issuer, in each case, not later than 10.00 a.m.,
      Luxembourg, Brussels or New York time, as the case may be, on the date (the “Cut-off Date”) falling
      two Business Days prior to the Redemption Date, a duly completed asset transfer notice (an “Asset
      Transfer Notice”) in the form set out in the Agency Agreement (copies of which form may be obtained
      from Clearstream, Luxembourg, Euroclear or DTC (as appropriate) and the Warrant and Certificate
      Agents during normal office hours) in accordance with the provisions set out in this Condition 9.

            The Asset Transfer Notice shall:

            (i)    specify the series number of the Certificates and the number of Certificates the subject of
                   the Asset Transfer Notice;

            (ii)   specify the number of the Certificateholder’s account at Clearstream, Luxembourg, Euroclear
                   or DTC, as the case may be, to be debited with such Certificates;

            (iii) irrevocably instruct Clearstream, Luxembourg, Euroclear or DTC, as the case may be, to
                  debit on or before the Redemption Date the relevant Certificateholder’s account with the
                  relevant Certificates;

            (iv) include an undertaking to pay all taxes, duties and/or expenses, including any applicable
                 depository charges, transaction charges, stamp duty, stamp duty reserve tax, issue,
                 registration, securities transfer and/or other taxes or duties arising from the redemption of
                 such Certificates and/or the delivery or transfer of the Entitlement pursuant to the terms of
                 the Certificates (“Redemption Expenses”) and an authority to Clearstream, Luxembourg,
                 Euroclear or DTC, as the case may be, debit a specified account of the Certificateholder at
                 Clearstream, Luxembourg, Euroclear or DTC, as the case may be, in respect thereof and to
                 pay such Redemption Expenses or other taxes or duties;

            (v)    include such details as are required by the applicable Final Term for delivery of the
                   Entitlement which may include account details and/or the name and address of any person(s)
                   into whose name evidence of the Entitlement is to be registered and/or any bank, broker or
                   agent to whom documents evidencing the Entitlement are to be delivered and specify the
                   name and number of the Certificateholder’s account with Euroclear, Clearstream,
                   Luxembourg or DTC, as the case may be, to be credited with any cash payable by the
                   Issuer, either in respect of any cash amount constituting the Entitlement or any dividends
                   relating to the Entitlement or as a result of the occurrence of a Settlement Disruption Event



                                                       59
            and the Issuer electing to pay the Disruption Cash Settlement Price or as a result of the
            occurrence of a Failure to Deliver and the Issuer electing to pay the Failure to Deliver
            Settlement Price;

      (vi) in the case of Certificates which are Currency Securities only, specify the number of the
           Certificateholder’s account at Clearstream, Luxembourg, Euroclear or DTC, as the case may
           be, to be credited with the amount due upon redemption of the Certificates; and

      (vii) certify, inter alia, that the beneficial owner of each Certificate is not a U.S. person (as
            defined in the Asset Transfer Notice) or a person who purchased such Certificate for resale
            to U.S. persons, that the Certificate is not being redeemed within the United States or on
            behalf of a U.S. person and no cash, securities or other property have been or will be
            delivered within the United States or to, or the account or benefit of, a U.S. person in
            connection with any redemption thereof (or, to the extent the Certificate is represented by a
            Rule 144A Global Security, that the beneficial owner is a “qualified institutional buyer” as
            defined in Rule 144A under the United States Securities Act of 1933 who is also a
            “qualified purchaser” as defined in Section 2(a)(51) of the United States Investment
            Company Act of 1940); and

      (viii) authorise the production of such certification in any applicable administrative or legal
             proceedings,

all as provided in the Agency Agreement.

      If Condition 9(D) applies, the form of Asset Transfer Notice required to be delivered will be
different from that set out above. Copies of such Asset Transfer Notice may be obtained from
Clearstream, Luxembourg, Euroclear and the Warrant and Certificate Agents during normal office hours.

(2)   Verification of the Certificateholder

      Upon receipt of an Asset Transfer Notice, Clearstream, Luxembourg, Euroclear or DTC, as the
case may be, shall verify that the person delivering the Asset Transfer Notice is the holder of the
Certificates described therein according to the books of Clearstream, Luxembourg, Euroclear or DTC, as
the case may be. Subject thereto, Clearstream, Luxembourg, Euroclear or DTC, as the case may be, will
confirm to the Principal Warrant and Certificate Agent the series number and number of Certificates the
subject of such notice, the details for the delivery of the Entitlement in respect of each Certificate. Upon
receipt of such confirmation, the Principal Warrant and Certificate Agent will inform the Issuer thereof.
Clearstream, Luxembourg, Euroclear or DTC, as the case may be, will on or before the Delivery Date
debit the account of the relevant Certificateholder with the relevant Certificates.

(3)   Determinations

      Any determination as to whether an Asset Transfer Notice is duly completed and in proper form
shall be made by Clearstream, Luxembourg, Euroclear or DTC, as the case may be, in each case, in
consultation with the Principal Warrant and Certificate Agent and the Issuer, and shall be conclusive and
binding on the Issuer, the Warrant and Certificate Agents and the relevant Certificateholder. Subject as
set out below, any Asset Transfer Notice so determined to be incomplete or not in proper form, or
which is not copied to the Principal Warrant and Certificate Agent and the Issuer immediately after
being delivered or sent to Clearstream, Luxembourg or Euroclear, as the case may be, as provided in
paragraph (1) above, shall be null and void.

      If such Asset Transfer Notice is subsequently corrected to the satisfaction of Clearstream,
Luxembourg or Euroclear, as the case may be, in consultation with the Principal Warrant and Certificate
Agent and the Issuer, it shall be deemed to be a new Asset Transfer Notice submitted at the time such
correction was delivered to Clearstream, Luxembourg, Euroclear or DTC, as the case may be, and
copied to the Principal Warrant and Certificate Agent and the Issuer.

     The Issuer shall use reasonable endeavours promptly to notify the Certificateholder submitting an
Asset Transfer Notice if it has determined as provided above that such Asset Transfer Notice is
incomplete or not in proper form. In the absence of negligence or wilful misconduct on its part, none of



                                                 60
the Issuer, the Warrant and Certificate Agents, Clearstream, Luxembourg, Euroclear or DTC (as
appropriate) shall be liable to any person with respect to any action taken or omitted to be taken by it in
connection with such determination or the notification of such determination to a Certificateholder.

(4)   Delivery of an Asset Transfer Notice

      After delivery of an Asset Transfer Notice, the relevant Certificateholder may not transfer the
Certificates which are the subject of such notice.

(5)   Delivery of the Entitlement

      Subject as provided herein, the Issuer shall deliver, or procure the delivery of, the Entitlement for
each duly redeemed Certificate herein on the Redemption Date (such date, subject to adjustment in
accordance with this Condition, the “Delivery Date”) pursuant to the details specified in the applicable
Asset Transfer Notice, provided that the Asset Transfer Notice is duly delivered to Clearstream,
Luxembourg, Euroclear or DTC, as the case may be, with a copy to the Principal Warrant and
Certificate Agent and the Issuer, as provided above on or prior to the Cut-Off Date. Subject as provided
in Condition 9(C)(6) and Condition 9(C)(7), the Entitlement shall be delivered and evidenced in such
manner as set out in the applicable Final Terms.

      If a Certificateholder fails to give an Asset Transfer Notice as provided herein with a copy to the
Principal Warrant and Certificate Agent and the Issuer, on or prior to the Cut-Off Date, then the
Entitlement will be delivered as soon as practicable after the Redemption Date (in which case, such date
of delivery shall be the Delivery Date) at the risk of such Certificateholder in the manner provided
herein. For the avoidance of doubt, in such circumstances such Certificateholder shall not be entitled to
any payment, whether of interest or otherwise, as a result of such Delivery Date falling after the
Redemption Date and no liability in respect thereof shall attach to the Issuer PROVIDED THAT In
the event that a Certificateholder does not so deliver an Asset Transfer Notice in accordance with
this Condition 9(C) at or prior to 10.00am., Luxembourg, Brussels or New York time (as
appropriate), on the date falling 180 days after the Cut-off Date, the Issuer’s obligations in respect
of such Certificates shall be discharged and no further liability in respect thereof shall attach to
the Issuer.

      All Redemption Expenses arising from the delivery of the Entitlement in respect of such
Certificates shall be for the account of the relevant Certificateholder and no delivery of the Entitlement
shall be made until all Expenses have been paid to the satisfaction of the Issuer by the relevant
Certificateholder.

      Certificates held by the same Certificateholder will be aggregated for the purpose of determining
the aggregate Entitlements in respect of such Certificates Provided That the aggregate Entitlements in
respect of the same Certificateholder will be rounded down to the nearest whole unit of the Relevant
Asset or each of the Relevant Assets, as the case may be, in such manner as the Issuer shall determine.
Therefore, fractions of the Relevant Asset or of each of the Relevant Assets, as the case may be, will
not be delivered and in lieu thereof the relevant Certificateholder will receive an amount in the
Settlement Currency equal to the value of any such fractions after such aggregation as calculated by the
Calculation Agent from such source(s) as it may select (and converted if necessary into the Settlement
Currency by reference to such exchange rate as the Calculation Agent deems appropriate). Payment of
any such amount will be made to the account specified by the Certificateholder in the relevant Asset
Transfer Notice as referred to in Condition 9(C)(1)(v) or in such manner as shall be notified to the
Certificateholders in accordance with Condition 13.

      For the purposes of any Certificate which is a Physical Delivery Security (i) the Issuer shall be
under no obligation to register or procure the registration of any Certificateholder or any other person as
the registered shareholder in the register of members of any Share Company or Basket Company, as the
case may be, and (ii) the Issuer shall not be obliged to account to any Certificateholder or any person
for any entitlement received or that is receivable in respect of any Shares comprising the Entitlement in
respect of any Certificate or Unit if the date on which the Shares are first traded on the relevant
Exchange ex such entitlement is on or prior to the Delivery Date.




                                                 61
      Following the Delivery Date of a Share Security which is a Physical Delivery Security all
dividends on the relevant Shares to be delivered will be payable to the party that would receive such
dividend according to market practice for a sale of the Shares executed on the relevant Delivery Date
and to be delivered in the same manner as such relevant Shares. Any such dividends to be paid to a
Certificateholder will be paid to the account specified by the Certificateholder in the relevant Asset
Transfer Notice as referred to in Condition 9(C)(1)(v).

      After delivery of the Entitlement and for the Intervening Period, none of the Issuer, the
Calculation Agent and any other person shall at any time (i) be under any obligation to deliver or
procure delivery to any Certificateholder any letter, certificate, notice, circular or any other document or,
except as provided herein, payment whatsoever received by that person in respect of the Entitlement,
(ii) be under any obligation to exercise or procure exercise of any or all rights attaching to the
Entitlement or (iii) be under any liability to a Certificateholder in respect of any loss or damage which
such Certificateholder may sustain or suffer as a result, whether directly or indirectly, of that person
being registered during such Intervening Period as legal owner of the Entitlement.

      “Intervening Period” means such period of time as any person other than the relevant
Certificateholder shall continue to be regarded as the legal owner of any securities or other obligations
comprising the Entitlement.

(6)   Settlement Disruption

       If, in the opinion of the Calculation Agent, delivery of the Entitlement using the method of
delivery specified in the applicable Final Terms is not practicable by reason of a Settlement Disruption
Event (as defined below) subsisting on any Delivery Date, then such Delivery Date for such Certificates
shall be postponed to the first following Settlement Business Day in respect of which no Settlement
Disruption Event is subsisting, Provided That the Issuer may elect in its sole and absolute discretion to
satisfy its obligations in respect of the relevant Certificate by delivering the Entitlement using such
other commercially reasonable manner as it may select and, in such event, the Delivery Date shall be
such day as the Issuer deems appropriate in connection with delivery of the Entitlement in such other
commercially reasonable manner. For the avoidance of doubt, where a Settlement Disruption Event
affects some but not all of the Relevant Assets comprising the Entitlement, the Delivery Date for the
Relevant Assets not affected by the Settlement Disruption Event will be the originally designated
Delivery Date.

      For so long as delivery of the Entitlement is not practicable by reason of a Settlement Disruption
Event, then in lieu of physical settlement and notwithstanding any other provision hereof, the Issuer
may elect in its sole and absolute discretion to satisfy its obligations in respect of the relevant
Certificate by payment to the relevant Certificateholder of the Disruption Cash Settlement Price not later
than the fifth Business Day following the date that notice of such election is given to the
Certificateholders in accordance with Condition 13. Payment of the Disruption Cash Settlement Price
will be made to the account specified by the Certificateholder in the relevant Asset Transfer Notice as
referred to in Condition 9(C)(1)(v) or in such manner as shall be notified to the Certificateholders in
accordance with Condition 13. The Calculation Agent shall give notice as soon as practicable to the
Certificateholders in accordance with Condition 13 that a Settlement Disruption Event has occurred.

      No Certificateholder shall be entitled to any payment in respect of the relevant Certificate in the
event of any delay in the delivery of the Entitlement due to the occurrence of a Settlement Disruption
Event and the Issuer shall not be in breach of these Conditions and no liability in respect thereof shall
attach to the Issuer.

      For the purposes hereof:

      “Disruption Cash Settlement Price” in respect of any relevant Certificate shall be the fair market
value of such Certificate on a day selected by the Issuer in its sole and absolute discretion provided that
such day is not more than 15 days before the date that the Calculation Agent gives notice to the
Certificateholders that a Settlement Disruption Event has occurred as provided above (taking into
account, were the Settlement Disruption Event affected some but not all of the Relevant Assets
comprising the Entitlement and such non-affected Relevant Assets have been duly delivered as provided
above, the value of such Relevant Assets) adjusted to take account fully for any losses, expenses and
costs to the Issuer and/or any of its Affiliates of unwinding and adjusting any underlying or related


                                                  62
      hedging arrangements (including but not limited to any options or selling or otherwise realising any
      Relevant Asset or other instruments of any type whatsoever which the Issuer and/or any of its Affiliates
      may hold as part of such hedging arrangements), all as calculated by the Calculation Agent.

            “Settlement Disruption Event” means, in the opinion of the Calculation Agent, an event beyond
      the control of the Issuer as a result of which delivery of the Relevant Asset(s) by or on behalf of the
      Issuer using the method specified in the applicable Final Terms is not practicable.

      (7)   Failure to Deliver due to Illiquidity

             If “Failure to Deliver due to Illiquidity” is specified as applying in the applicable Final Terms and
      in the opinion of the Calculation Agent, it is impossible or impracticable to deliver, when due, some or
      all of the Relevant Assets (the “Affected Relevant Assets”) comprising the Entitlement, where such
      failure to deliver is due to illiquidity in the market for the Relevant Assets (a “Failure to Deliver”),
      then:

            (a)   subject as provided elsewhere in these Conditions, any Relevant Assets which are not
                  Affected Relevant Assets, will be delivered on the originally designated Redemption Date in
                  accordance with this Condition 9 (subject as provided herein); and

            (b)   in respect of any Affected Relevant Assets, in lieu of physical settlement and
                  notwithstanding any other provision hereof, the Issuer may elect in its sole and absolute
                  discretion in lieu of delivery of the Affected Relevant Assets, to pay to the relevant
                  Certificateholder of the Failure to Deliver Settlement Price no later than the fifth Business
                  Day following the date that notice of such election is given to the Certificateholders in
                  accordance with Condition 13. Payment of the Failure to Deliver Settlement Price will be
                  made to the account specified by the Certificateholder in the relevant Asset Transfer Notice
                  referred to in Condition 9(C)(1)(v) or in such manner as shall be notified to the
                  Certificateholders in accordance with Condition 13. The Calculation Agent shall give notice
                  as soon as practicable to the Certificateholders in accordance with Condition 13 that the
                  provisions of this Condition 9(C)(7) apply. If the Issuer does not so elect, the provisions of
                  Condition 9(C)(6) shall apply.

            For the purposes hereof:

            “Failure to Deliver Settlement Price” in respect of any relevant Certificate shall be the fair market
      value of the Affected Relevant Assets on a day selected by the Issuer in its sole and absolute discretion
      prior to the date on which the Calculation Agent gives notice to the Certificateholders as provided
      above adjusted to take account fully for any proportionate losses, expenses and costs to the issuer and/
      or any of its Affiliates of unwinding or adjusting any underlying or related hedging arrangements
      (including but not limited to any options or selling or otherwise realising any Relevant Asset or other
      instruments of any type whatsoever which the Issuer and/or any of its Affiliates may hold as part of
      such hedging arrangements), all as calculated by the Calculation Agent.

(D)   Issuer’s Option to Vary Settlement

      If the applicable Final Terms indicates that the Issuer has an option to vary settlement in respect of the
Certificates, the Issuer may at its sole and absolute discretion in respect of each such Certificate, elect not to
pay the relevant Certificateholders the Cash Settlement Amount or not to deliver or procure delivery of the
Entitlement to the relevant Certificateholders, as the case may be, but, in lieu thereof to deliver or procure
delivery of the Entitlement or make payment of the Cash Settlement Amount on the Redemption Date to the
relevant Certificateholders, as the case may be. Notification of such election will be given to
Certificateholders no later than 10.00am (London time) on the second Business Day following the
Redemption Date in accordance with Condition 13.

(E)   General

      None of the Issuer, the Calculation Agent and the Warrant and Certificate Agents shall have any
responsibility for any errors or omissions in the calculation of any Cash Settlement Amount or of any
Entitlement.



                                                       63
      The purchase of Certificates does not confer on any Certificateholder any rights (whether in respect of
voting, distributions or otherwise) attaching to any Relevant Asset.

      All references in Condition 9 to Luxembourg, Brussels or New York time shall, where Certificates are
cleared through an additional or alternative clearing system, be deemed to refer as appropriate to the time in
the city where the relevant clearing system is located.

(F)   Redemption Risk

      Redemption of the Certificates is subject to all applicable laws, regulations and practices in force on the
relevant Delivery Date and none of the Issuer and the Warrant and Certificate Agents shall incur any liability
whatsoever if it is unable to effect the transactions contemplated, after using all reasonable efforts, as a result
of any such laws, regulations or practices. None of the Issuer and the Warrant and Certificate Agents shall
under any circumstances be liable for any acts or defaults of any of the Common Depositary, Clearstream,
Luxembourg, Euroclear or DTC, as the case may be, in relation to the performance of its duties in relation to
the Certificates.

       The Issuer will be discharged by payment or delivery to, or to the order of, the Common Depositary or
Clearstream, Luxembourg, Euroclear or DTC, as the case may be, in respect of the amount so paid or
delivered. Each of the persons shown in the records of Clearstream, Luxembourg, Euroclear or DTC, as the
case may be, as the holder of a particular amount of the Certificates must look solely to Clearstream,
Luxembourg, Euroclear or DTC, as the case may be, for his share of each such payment or delivery so made
to, or to the order of, Clearstream, Luxembourg, Euroclear or DTC, as the case may be.

(G)   Redemption at the Option of the Issuer

      If Call Option is specified in the applicable Final Terms, the Issuer may, on giving not less than 15 nor
more than 30 days’ irrevocable notice to the Certificateholders (or such other notice period as may be
specified in the applicable Final Terms) redeem in relation to, all or, if so provided, some, of the Certificates
on any Optional Redemption Date. Any such redemption of Securities shall be at their Optional Redemption
Amount. Any such redemption must relate to a number of Certificates at least equal to the minimum number
to be redeemed and no greater than the maximum number to be redeemed specified in the applicable Final
Terms. All Certificates in respect of which any such notice is given shall be redeemed on the date specified in
such notice in accordance with this Condition 9.

(H)   Redemption at the Option of Certificateholders

      If Put Option is specified in the applicable Final Terms, the Issuer shall, at the option of the holder of
any such Certificate, upon the holder of such Certificate giving not less than 15 nor more than 30 days’
notice to the Issuer (or such other notice period as may be specified in the applicable Final Terms) redeem
such Certificate on the Optional Redemption Date(s) specified in the applicable Final Terms at its Optional
Redemption Amount specified in the Final Terms. No such option may be exercised if the Issuer has given
notice of redemption of the Certificates.

(I)   Interim Payments and Adjustments

      Each Certificate entitles its holder to receive from the Issuer, on any Interim Payment Date, the relevant
Interim Payment (if any). If applicable, the Issuer will on each Interim Payment Date pay or cause to be paid
the relevant Interim Payment for each Certificate to or to the order of the Common Depositary or the
Custodian, as the case may be, for crediting to the account of the relevant Certificateholder, in accordance
with the rules of Clearstream, Luxembourg, Euroclear or DTC, as the case may be. The Terms and Conditions
may be amended to account for any dividend payments in the calculation of the Cash Settlement Amount, if
“Dividend: Adjustment” is specified to apply in, and as further described in, the applicable Final Terms.

      For these purposes:

      “Interim Payment” means, if “Dividend: Interim Payment” is specified to apply in the applicable Final
Terms, in respect of a Reference Item which is a Share, an amount equal to the net dividend amount per
Share or, where the Reference Item is an Index, the net dividend amount per share which is a constituent of
the Index (“Constituent Share”) (expressed in the same currency as the relevant Share or Constituent Share or
converted into cash in the same currency as the relevant Share or Constituent Share at a rate determined by


                                                        64
the Calculation Agent acting in a commercially reasonable manner) to which the Issuer, the Guarantor or any
Affiliate (the “Recipient”) would be entitled if it held the relevant Share or Constituent Share on the
ex-dividend date of the Share or Constituent Share.

     “Interim Payment Date” means the date as determined by the Issuer falling not more than five Business
Days after the date on which the Recipient would have received such dividend.

10    Illegality

     If the Issuer or the Guarantor, as the case may be, determines that the performance of its obligations
under the Securities has become illegal in whole or in part for any reason, the Issuer or the Guarantor, as the
case may be, may cancel the Securities by giving notice to Securityholders in accordance with Condition 13.

      Should any one or more of the provisions contained in these Terms and Conditions be or become
invalid, the validity of the remaining provisions shall not in any way be affected thereby.

       If the Issuer or the Guarantor, as the case may be, cancels the Securities then the Issuer or the
Guarantor, as the case may be, will, if and to the extent permitted by applicable law and subject as provided
above, pay an amount to each Securityholder in respect of each Security or, if Units are specified in the
applicable Final Terms, each Unit, as the case may be, held by such holder which amount shall be the fair
market value of a Security or Unit, as the case may be, notwithstanding such illegality less the cost to the
Issuer and/or the Guarantor of unwinding any underlying related hedging arrangements plus, in relation to
Warrants and if already paid by or on behalf of the Securityholder, the Exercise Price, all as determined by
the Calculation Agent in its sole and absolute discretion. Payment will be made in such manner as shall be
notified to the Securityholders in accordance with Condition 13.

11    Purchases

      The Issuer, the Guarantor or any Affiliate of the Issuer or the Guarantor may, but is not obliged to, at
any time purchase Securities at any price in the open market or by tender or private treaty. Any Securities so
purchased may be held or resold or surrendered for cancellation.

12    Agents, Determinations and Modifications

(A)   Warrant and Certificate Agents

     The specified offices of the Warrant and Certificate Agents are as set out at the end of these Terms and
Conditions.

      The Issuer and the Guarantor reserve the right at any time to vary or terminate the appointment of any
Warrant and Certificate Agent and to appoint further or additional Warrant and Certificate Agents, provided
that no termination of appointment of the Principal Warrant and Certificate Agent shall become effective until
a replacement Principal Warrant and Certificate Agent shall have been appointed and provided that, so long as
any of the Securities are listed on a stock exchange or market, there shall be a Warrant and Certificate Agent
having a specified office in each location required by the rules and regulations of the relevant stock exchange
or market. Notice of any termination of appointment and of any changes in the specified office of any
Warrant and Certificate Agent will be given to Securityholders in accordance with Condition 13. In acting
under the Agency Agreement, each Warrant and Certificate Agent acts solely as agent of the Issuer and the
Guarantor and does not assume any obligation or duty to, or any relationship of agency or trust for or with,
the Securityholders and any determinations and calculations made in respect of the Securities by any Warrant
and Certificate Agent shall (save in the case of manifest error) be final, conclusive and binding on the Issuer,
the Guarantor and the Securityholders.

(B)   Calculation Agent

      The Calculation Agent (whether it be the Guarantor or another entity) acts solely as agent of the Issuer
and does not assume any obligation or duty to, or any relationship of agency or trust for or with, the
Securityholders. All calculations and determinations made in respect of the Securities by the Calculation
Agent shall (save in the case of manifest error) be final, conclusive and binding on the Issuer, the Guarantor
and the Securityholders.



                                                      65
      The Calculation Agent may, with the consent of the Issuer and the Guarantor, delegate any of its
obligations and functions to a third party as it deems appropriate.

(C)   Determinations by the Issuer

     Any determination made by the Issuer pursuant to these Terms and Conditions shall (save in the case of
manifest error) be final, conclusive and binding on the Issuer and the Securityholders.

(D)   Modifications

      The Issuer may modify these Terms and Conditions and/or the Agency Agreement without the consent
of the Securityholders in any manner which the Issuer may deem necessary or desirable provided that such
modification is not materially prejudicial to the interests of the Securityholders or such modification is of a
formal, minor or technical nature or to correct a manifest error or to cure, correct or supplement any defective
provision contained herein and/or therein. Notice of any such modification will be given to the
Securityholders in accordance with Condition 13 but failure to give, or non-receipt of, such notice will not
affect the validity of any such modification.

13    Notices

      All notices to Securityholders shall be valid if delivered (i) to Clearstream, Luxembourg and Euroclear
or, as the case may be, DTC, for communication by them to the Securityholders and (ii) if and so long as the
Securities are listed on a stock exchange or market, in accordance with the rules and regulations of the
relevant stock exchange or market. If the Securities are listed on the Luxembourg Stock Exchange and traded
on the Euro MTF, and so long as making notices available on the website of the Luxembourg Stock
Exchange (“www.bourse.lu”) is required by the rules of the Euro MTF, notices shall be made so available.
Any such notice shall be deemed to have been given on the second Business Day following such delivery or,
if earlier, the date of such publication or, if published more than once, on the date of the first such
publication.

14    Expenses and Taxation

(A)   Expenses

      A holder of Securities must pay, in the case of Warrants, all Exercise Expenses and, in the case of
Certificates, all Redemption Expenses, as provided above.

(B)   Taxation

      Neither the Issuer nor the Guarantor shall be liable for or otherwise obliged to pay any tax, duty,
withholding or other payment which may arise as a result of the ownership, transfer, exercise or enforcement
of any security and all payments made by the Issuer under the Securities or made by the Guarantor under the
Guarantee shall be made subject to any such tax, duty, withholding or other payment which may be required
to be made, paid, withheld or deducted.

15    Further Issues

      The Issuer shall be at liberty from time to time without the consent of Securityholder to create and issue
further Securities so as to be consolidated with and form a single series with the outstanding Securities.

16    Substitution of the Issuer

      The Issuer, or any previous substituted company may, at any time, without the consent of the
Securityholders, substitute for itself as principal obligor under the Securities any company (the “Substitute”),
being the Issuer or any other company, subject to:

      (a)   the Guarantor unconditionally and irrevocably guaranteeing in favour of each Securityholder the
            performance of all obligations by the Substitute under the Securities;




                                                      66
      (b)   all actions, conditions and things required to be taken, fulfilled and done to ensure that the
            Securities represent legal, valid and binding obligations of the Substitute having been taken,
            fulfilled and done and are in full force and effect;

      (c)   the Substitute shall have become party to the Agency Agreement, with any appropriate
            consequential amendments, as if it had been an original party to it;

      (d)   each stock exchange or market on which the Securities are listed shall have confirmed that,
            following the proposed substitution of the Substitute, the Securities will continue to be listed on
            such stock exchange or market);

      (e)   if appropriate, the Substitute shall have appointed a process agent as its agent in England to
            receive service of process on its behalf in relation to any legal action or proceedings arising out of
            or in connection with the Securities; and

      (f)   the Issuer shall have given at least 30 days’ prior notice of the date of such substitution to the
            Securityholders in accordance with Condition 13.

17    Governing Law and Jurisdiction

(A)   The Securities, each Global Security, the Agency Agreement and the Guarantee and any non-contractual
      obligations arising out of or in connection with them are governed by English law.

(B)   The Issuer agrees, for the exclusive benefit of the Securityholders, that the courts of England are to
      have jurisdiction to settle any disputes which may arise out of or in connection with the Securities and
      that accordingly any suit, action or proceedings (together referred to as “Proceedings”) arising out of or
      in connection with the Securities may be brought in such courts.

      The Issuer hereby irrevocably waives any objection which it may have now or hereafter to the laying of
      the venue of any such Proceedings in any such court and any claim that any such Proceedings have
      been brought in an inconvenient forum and hereby further irrevocably agrees that a judgment in any
      such Proceedings brought in the English courts shall be conclusive and binding upon it and may be
      enforced in the courts of any other jurisdiction.

      Nothing contained in this Condition 17 shall limit any right to take Proceedings in any other court of
      competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the
      taking of Proceedings in any other jurisdiction, whether concurrently or not.

(C)   Appointment of Process Agent

      The Issuer appoints Daiwa Capital Markets Europe Limited at its registered office at 5 King William
Street, London EC4N 7AX (attention: Head of Legal), as its agent for service of process, and undertakes that,
in the event of Daiwa Capital Markets Europe Limited ceasing so to act or ceasing to be registered in
England, it will appoint another person as its agent for service of process in England in respect of any
Proceedings. Nothing herein shall affect the right to serve proceedings in any other manner permitted by law.

(D)   Other documents

      The Issuer has in the Agency Agreement, and the Guarantor has in the Guarantee, submitted to the
jurisdiction of the English courts and appointed an agent for service of process in terms substantially similar
to those set out above.

18    Terms for Index Securities, Share Securities, Debt Securities and Commodity Securities

(A)   Index Securities

      For the purposes of this Condition 18(A):




                                                       67
       “Indices” and “Index” mean, subject to adjustment in accordance with this Condition 18(A), in the case
of an issue of Securities relating to a Basket of Indices, each index and, in the case of an issue of Securities
relating to a Single Index, the index specified in the applicable Final Terms and related expressions shall be
construed accordingly; and

      “Index Sponsor” means, in relation to an Index, the corporation or other entity that (a) is responsible for
setting and reviewing the rules and procedures and the methods of calculation and adjustments, if any, related
to such Index and (b) announces (directly or through an agent) the level of such Index on a regular basis
during each Scheduled Trading Day, which as of the issue date of the Security is the index sponsor specified
for such Index in the applicable Final Terms.

     (1)   Market Disruption and Disrupted Days

           “Market Disruption Event (Index)” means in respect of an Index, the occurrence or existence on
     any Scheduled Trading Day of (i) a Trading Disruption, (ii) an Exchange Disruption, which in either
     case the Calculation Agent determines is material, at any time during the one hour period that ends at
     the relevant Valuation Time, or (iii) an Early Closure. For the purposes of determining whether a
     Market Disruption Event in respect of an Index exists at any time, if a Market Disruption Event occurs
     in respect of a security included in the Index at any time, then the relevant percentage contribution of
     that security to the level of the Index shall be based on a comparison of (x) the portion of the level of
     the Index attributable to that security and (y) the overall level of the Index, in each case immediately
     before the occurrence of such Market Disruption Event.

           For the purposes of determining whether a Market Disruption Event in respect of an Index exists
     at any time, if a Market Disruption Event occurs in respect of a security/commodity included in the
     Index at any time, then the relevant percentage contribution of that security/commodity to the level of
     the Index shall be based on a comparison of (i) the portion of the level of the Index attributable to that
     security/commodity and (ii) the overall level of the Index, in each case immediately before the
     occurrence of such Market Disruption Event.

            The Calculation Agent shall give notice as soon as practicable to the Securityholders in
     accordance with Condition 13 of the occurrence of a Disrupted Day on any day that, but for the
     occurrence of a Disrupted Day, would have been an Averaging Date or a Valuation Date. Without
     limiting the obligation of the Issuer to notify the Securityholders as set forth in the preceding sentence,
     failure by the Issuer to notify the Securityholders of the occurrence of a Disrupted Day shall not affect
     the validity of the occurrence and effect of such Disrupted Day on any Security.

     (2)   Adjustments to an Index

           (a)   Successor Index Sponsor Calculates and Reports an Index

                 If a relevant Index is (i) not calculated and announced by the Index Sponsor but is
           calculated and announced by a successor sponsor acceptable to the Calculation Agent, or (ii)
           replaced by a successor index using, in the determination of the Calculation Agent, the same or a
           substantially similar formula for and method of calculation as used in the calculation of that
           Index, then in each case that index (the “Successor Index”) will be deemed to be the Index.

           (b)   Modification and Cessation of Calculation of an Index

                 If (i) on or prior to a Valuation Date or an Averaging Date the relevant Index Sponsor
           makes or announces that it will make a material change in the formula for or the method of
           calculating a relevant Index or in any other way materially modifies that Index (other than a
           modification prescribed in that formula or method to maintain that Index in the event of changes
           in constituent stock and capitalisation, contracts or commodities and other routine events) (an
           “Index Modification”), or permanently cancels a relevant Index and no Successor Index exists (an
           “Index Cancellation”), or (ii) on a Valuation Date or an Averaging Date the Index Sponsor or (if
           applicable) the Successor Index Sponsor fails to calculate and announce a relevant Index (an
           “Index Disruption” and, together with an Index Modification and an Index Calculation, each an
           “Index Adjustment Event”), then




                                                       68
                 (i)     the Calculation Agent shall determine if such Index Adjustment Event has a material
                         effect on the Securities and, if so, shall calculate the relevant Settlement Price using,
                         in lieu of a published level for that Index, the level for that Index as at the Valuation
                         Time on that Valuation Date or that Averaging Date, as the case may be, as
                         determined by the Calculation Agent in accordance with the formula for and method
                         of calculating that Index last in effect prior to the change, failure or cancellation, but
                         using only those securities/commodities that comprised that Index immediately prior to
                         that Index Adjustment Event; or

                 (ii)    the Issuer shall cancel the Securities by giving notice to Securityholders in accordance
                         with Condition 13. If the Securities are so cancelled the Issuer will pay an amount to
                         each Securityholder in respect of each Security or, if Units are specified in the
                         applicable Final Terms, each Unit, as the case may be, held by him which amount
                         shall be the fair market value of a Security or a Unit, as the case may be, taking into
                         account the Index Adjustment Event, less the cost to the Issuer and/or its Affiliates of
                         unwinding any underlying related hedging arrangements, all as determined by the
                         Calculation Agent in its sole and absolute discretion. Payments will be made in such
                         manner as shall be notified to the Securityholders in accordance with Condition 13.

           (c)   Notice

                 The Calculation Agent shall, as soon as practicable, notify the Warrant and Certificate Agent
           of any determination made by it pursuant to paragraph (b) above and the action proposed to be
           taken in relation thereto and the Warrant and Certificate Agent shall make available for inspection
           by Securityholders copies of any such determinations.

(B)   Share Securities

      For the purposes of this Condition 18(B):

    “Basket Company” means a company whose shares are included in the Basket of Shares and “Basket
Companies” means all such companies;

      “Extraordinary Dividend” means, in respect of a Share, an amount specified or otherwise determined as
provided hereon. If no Extraordinary Dividend is specified or otherwise determined as provided hereon, the
characterisation of a dividend or portion thereof as an Extraordinary Dividend shall be determined by the
Calculation Agent;

      “New Shares” means ordinary or common shares, whether of the entity or person (other than the Basket
Company or Share Company) involved in the Merger Event or the making of the Tender Offer or a third
party, that are, or that as of the Merger Date or Tender Offer Date are promptly scheduled to be, (i) publicly
quoted, traded or listed on an exchange or quotation system located in the same country as the Exchange (or,
where the Exchange is within the European Union, in any member of state of the European Union) or on
another exchange acceptable to the Calculation Agent and (ii) not subject to any currency exchange controls,
trading restrictions or other trading limitations;

     “Other Consideration” means cash and/or any securities (other than New Shares) or assets (whether of
the entity or person (other than the Share Company) involved in the Merger Event or the making of the
Tender Offer or a third party);

      “Reverse Merger” is as defined under “Merger Event”;

       “Shares” and “Share” mean, subject to adjustment in accordance with this Condition 18(B), in the case
of an issue of Securities relating to a basket of Shares, each share and, in the case of an issue of Securities
relating to a single Share, the share, specified in the applicable Final Terms and related expressions shall be
construed accordingly;

      “Share Company” means, in the case of an issue of Securities relating to a single share, the company
that has issued such share; and




                                                        69
      “Tender Offer Date” means, in respect of a Tender Offer, the date on which voting shares in the amount
of the applicable percentage threshold specified hereon are actually purchased or otherwise obtained (as
determined by the Calculation Agent).

     (1)   Market Disruption and Disrupted Days

           “Market Disruption Event (Equity)” means, in respect of a Share, the occurrence or existence on
     any Scheduled Trading Day of (i) a Trading Disruption, (ii) an Exchange Disruption, which in either
     case the Calculation Agent determines is material, at any time during the one hour period that ends at
     the relevant Valuation Time, or (iii) an Early Closure.

            The Calculation Agent shall give notice as soon as practicable to the Securityholders in
     accordance with Condition 13 of the occurrence of a Disrupted Day on any day that, but for the
     occurrence of a Disrupted Day, would have been an Averaging Date or a Valuation Date. Without
     limiting the obligation of the Issuer to notify the Securityholders as set forth in the preceding sentence,
     failure by the Issuer to notify the Securityholders of the occurrence of a Disrupted Day shall not affect
     the validity of the occurrence and effect of such Disrupted Day on any Security.

     (2)   Potential Adjustment Events, Merger Event, Tender Offer, De-listing, Nationalisation and
           Insolvency

           (a)   “Potential Adjustment Event” means any of the following:

                 (i)    a subdivision, consolidation or reclassification of relevant Shares (unless resulting in a
                        Merger Event) or a free distribution or dividend of any such Shares to existing
                        Holders by way of bonus, capitalisation or similar issue;

                 (ii)   a distribution, issue or dividend to existing holders of the relevant Shares of (a) such
                        Shares or (b) other share capital or securities granting the right to payment of
                        dividends and/or the proceeds of liquidation of the Basket Company or Share
                        Company, as the case may be, equally or proportionately with such payments to
                        holders of such Shares or (c) share capital or other securities of another issuer
                        acquired or owned (directly or indirectly) by the Basket Company or Share Company,
                        as the case may be, as a result of a spin-off or other similar transaction or (d) any
                        other type of securities, rights or warrants or other assets, in any case for payment (in
                        cash or in other consideration) at less than the prevailing market price as determined
                        by the Calculation Agent;

                 (iii) an Extraordinary Dividend;

                 (iv) a call by a Basket Company or Share Company, as the case may be, in respect of
                      relevant Shares that are not fully paid;

                 (v)    a repurchase by the Basket Company or its subsidiaries or Share Company or its
                        subsidiaries, as the case may be, of relevant Shares whether out of profits or capital
                        and whether the consideration for such repurchase is cash, securities or otherwise;

                 (vi) in respect of a Basket Company or Share Company, as the case may be, an event that
                      results in any shareholder rights being distributed or becoming separated from shares
                      of common stock or other shares of the capital stock of such Basket Company or
                      Share Company, as the case may be, pursuant to a shareholder rights plan or
                      arrangement directed against hostile takeovers that provides upon the occurrence of
                      certain events for a distribution of preferred stock, warrants, debt instruments or stock
                      rights at a price below their market value, as determined by the Calculation Agent,
                      provided that any adjustment effected as a result of such an event shall be readjusted
                      upon any redemption of such rights; or

                 (vii) any other event that may have, in the opinion of the Calculation Agent, a diluting or
                       concentrative effect on the theoretical value of the relevant Shares.




                                                       70
      Following the declaration by the Basket Company or Share Company, as the case may be,
      of the terms of any Potential Adjustment Event, the Calculation Agent will, in its sole and
      absolute discretion, determine whether such Potential Adjustment Event has a diluting or
      concentrative effect on the theoretical value of the Shares and, if so, will (i) make the
      corresponding adjustment, if any, to any one or more of any Relevant Asset and/or the
      Entitlement and/or the Exercise Price and/or the Multiplier and/or any of the other terms of
      these Terms and Conditions and/or the applicable Final Terms as the Calculation Agent in its
      sole and absolute discretion determines appropriate to account for that diluting or
      concentrative effect including in the case of a Security relating to a Basket, if Share
      Substitution is specified hereon and the Calculation Agent so determines in its absolute
      discretion, the replacement of the relevant Basket Company or Share Company and its
      Shares as provided in Condition 18(F) and (ii) determine the effective date of that
      adjustment. The Calculation Agent may, but need not, determine the appropriate adjustment
      by reference to the adjustment in respect of such Potential Adjustment Event made by an
      options exchange to options on the Shares traded on that options exchange. Notwithstanding
      the foregoing, such adjusted number of the Shares shall always be a multiple of a trading
      unit of the Shares (a “Unit”); and the Issuer shall pay in the Specified Currency stated
      hereon to the holder of a Security a cash adjustment equal to the aggregate market value (as
      determined by the Calculation Agent in its sole and absolute discretion) of the Shares
      representing less than one Unit. Unless the context otherwise requires, references herein to
      the delivery of the Shares shall include the payment of such cash adjustment.

      Upon the making of any such adjustment by the Calculation Agent, the Calculation Agent
      shall give notice as soon as practicable to the Securityholders in accordance with Condition
      13, stating the adjustment to any Relevant Asset and/or the Entitlement and/or the Exercise
      Price and/or the Multiplier and/or any of the other terms of these Terms and Conditions and/
      or the applicable Final Terms and giving brief details of the Potential Adjustment Event.

(b)   “De-Listing” means that the relevant Exchange announces that pursuant to the rules of such
      Exchange, the Shares cease (or will cease) to be listed, traded or publicly quoted on the
      Exchange for any reason (other than a Merger Event or Tender Offer) and are not
      immediately re-listed, re-traded or re-quoted on an exchange or quotation system located in
      the same country as the Exchange (or, where the Exchange is within the European Union, in
      any member state of the European Union) and such Shares are no longer listed on an
      Exchange acceptable to the Issuer.

      “Insolvency” means that by reason of the voluntary or involuntary liquidation, bankruptcy,
      insolvency, dissolution or winding-up of or any analogous proceeding affecting the Basket
      Company or Share Company, as the case may be, (i) all the Shares of that Basket Company
      or Share Company, as the case may be, are required to be transferred to a trustee, liquidator
      or other similar official or (ii) holders of the Shares of that Basket Company or Share
      Company, as the case may be, become legally prohibited from transferring them.

      “Merger Date” means, in respect of a Merger Event, the closing date of such Merger Event
      or, where a closing date cannot be determined under the local law applicable to such Merger
      Event, such other date as determined by the Calculation Agent.

      “Merger Event” means, in respect of any relevant Shares, any (i) reclassification or change
      of such Shares that results in a transfer of or an irrevocable commitment to transfer all of
      such Shares outstanding to another entity or person, (ii) consolidation, amalgamation, merger
      or binding share exchange of a Basket Company or Share Company, as the case may be,
      with or into another entity or person (other than a consolidation, amalgamation, merger or
      binding share exchange in which such Basket Company or Share Company, as the case may
      be, is the continuing entity and which does not result in a reclassification or change of all of
      such Shares outstanding), (iii) takeover offer, tender offer, exchange offer, solicitation,
      proposal or other event by any entity or person to purchase or otherwise obtain 100 per
      cent. of the outstanding Shares of the Basket Company or Share Company, as the case may
      be, that results in a transfer of or an irrevocable commitment to transfer all such Shares
      (other than such Shares owned or controlled by such other entity or person), or (iv)
      consolidation, amalgamation, merger or binding share exchange of the Basket Company or
      its subsidiaries or the Share Company or its subsidiaries, as the case may be, with or into


                                           71
      another entity in which the Basket Company or Share Company, as the case may be, is the
      continuing entity and which does not result in a reclassification or change of all such Shares
      outstanding but results in the outstanding Shares (other than Shares owned or controlled by
      such other entity) immediately prior to such event collectively representing less than 50 per
      cent. of the outstanding Shares immediately following such event (a “Reverse Merger”), in
      each case if the Merger Date is on or before the relevant Valuation Date or where Averaging
      is specified in the applicable Final Terms, the final Averaging Date in respect of the relevant
      Security.

      “Nationalisation” means that all the Shares or all or substantially all the assets of the Basket
      Company or Share Company, as the case may be, are nationalised, expropriated or are
      otherwise required to be transferred to any governmental agency, authority, entity or
      instrumentality thereof.

      “Tender Offer” means a takeover offer, tender offer, exchange offer, solicitation, proposal or
      other event by any entity or person that results in such entity or person purchasing, or
      otherwise obtaining or having the right to obtain, by conversion or other means, greater than
      10 per cent. and less than 100 per cent. of the outstanding voting shares of the Basket
      Company or Share Company, as the case may be, as determined by the Calculation Agent,
      based upon the making of filings with governmental or self-regulatory agencies or such
      other information as the Calculation Agent deems relevant.

(c)   If Merger Event is specified hereon as being applicable, the following provisions will apply
      if the Calculation Agent determines (in its sole and absolute discretion) that a Merger Event
      has occurred:

      (i)    if under “Consequences of a Merger Event” in relation to “Share-for-Combined”,
             “Share-for-Other” or “Share-for-Share”, the consequence specified hereon is
             “Alternative Obligation”, then except in respect of a Reverse Merger, on or after the
             relevant Merger Date, the New Shares and/or the amount of Other Consideration, if
             applicable (as subsequently modified in accordance with any relevant terms and
             including the proceeds of any redemption, if applicable), and their issuer (if any) will
             be deemed the relevant “Shares” and the relevant “Basket Company” or “Share
             Company”, respectively, the number of New Shares and/or the amount of Other
             Consideration, if applicable, (as subsequently modified in accordance with any
             relevant terms and including the proceeds of any redemption, if applicable) to which a
             holder of the relevant number of Shares immediately prior to the occurrence of the
             Merger Event would be entitled upon consummation of the Merger Event will be
             deemed the relevant “number of Shares” and, if the Calculation Agent determines it to
             be appropriate, the Calculation Agent will adjust any relevant terms as it may, in its
             discretion determine, including, in the case of a Security relating to a Basket, if Share
             Substitution is specified as applicable hereon and the Calculation Agent so determines
             in its absolute discretion, the replacement of the relevant Basket Company or Share
             Company and its Shares as provided in Condition 18(F), provided, however, that no
             adjustments will be made to account solely for changes in volatility, expected
             dividends, stock loan rate or liquidity relevant to the Shares;

      (ii)   if under “Consequences of a Merger Event” in relation to “Share-for-Combined”,
             “Share-for-Other” or “Share-for-Share”, the consequence specified hereon is
             “Cancellation and Payment”, then the Issuer may in its sole and absolute discretion
             cancel the Securities by giving notice to Securityholders in accordance with Condition
             13. If the Securities are so cancelled, subject as provided above, the Issuer will pay an
             amount to each Securityholder in respect of each Security or, if Units are specified in
             the applicable Final Terms, each Unit, as the case may be, held by him which amount
             shall be the fair market value of a Security or a Unit, as the case may be, taking into
             account the Merger Event less the cost to the Issuer and/or the Guarantor of
             unwinding any underlying related hedging arrangement plus, if already paid, the
             Exercise Price, all as determined by the Calculation Agent in its sole and absolute
             discretion. Payments will be made in such manner as shall be notified to the
             Securityholders in accordance with Condition 13. If, however in the case of Security
             relating to a Basket, Share Substitution is specified as applicable hereon, the


                                            72
             Calculation Agent may, in its absolute discretion, as an alternative to so cancelling the
             Securities, replace the relevant Basket Company or Share Company and its Shares as
             provided in Condition 18(F);

      (iii) if under “Consequences of a Merger Event” in relation to “Share-for-Combined”,
            “Share-for-Other” or “Share-for-Share”, the consequence specified hereon is
            “Calculation Agent Adjustment” or if no consequence of a Merger Event is so
            specified then, on or after the relevant Merger Date, the Calculation Agent shall either
            (i)(A) make such adjustment to the exercise, settlement, payment or any other terms of
            the Securities as the Calculation Agent determines appropriate to account for the
            economic effect on the Securities of such Merger Event, including, in the case of a
            Security relating to a Basket, if Share Substitution is specified as applicable hereon
            and the Calculation Agent so determines in its absolute discretion, the replacement of
            the relevant Basket Company or Share Company and its Shares as provided in
            Condition 18(F) (provided that no adjustments will be made to account solely for
            changes in volatility, expected dividends, stock loan rate or liquidity relevant to the
            Shares or to the Securities), which may, but need not, be determined by reference to
            the adjustment(s) made in respect of such Merger Event by an options exchange to
            options on the relevant Shares traded on such options exchange and (B) determine the
            effective date of that adjustment, or (ii) if the Calculation Agent determines that no
            adjustment that it could make under (i) will produce a commercially reasonable result,
            the Issuer shall notify the Securityholders in accordance with Condition 13 that the
            relevant consequence shall be the cancellation of the Securities in which case
            “Cancellation and Payment” will be deemed to apply;

      (iv) if under “Consequences of a Merger Event” in relation to “Share-for-Combined”, the
           consequence specified hereon is “Component Adjustment”, then in respect of a
           Share-for-Combined Merger Event, the consequence specified opposite
           “Share-for-Share” shall apply to that portion of the consideration that consists of New
           Shares (as determined by the Calculation Agent) and the consequence specified
           opposite “Share-for-Other” shall apply to that portion of the consideration that consists
           of Other Consideration (as determined by the Calculation Agent).

(d)   If Tender Offer is specified as applicable in respect of any Shares hereon and the
      Calculation Agent has determined (in its sole and absolute discretion) that a Tender Offer
      has occurred, the following provisions will apply:

      (i)    if under “Consequences of a Tender Offer” in relation to “Share-for-Combined”,
             “Share-for-Other” or “Share-for-Share”, the consequence specified hereon is
             “Cancellation and Payment”, then the Issuer may in its sole and absolute discretion
             cancel the Securities by giving notice to Securityholders in accordance with Condition
             13. If the Securities are so cancelled, subject as provided above, the Issuer will pay an
             amount to each Securityholder in respect of each Security or, if Units are specified in
             the applicable Final Terms, each Unit, as the case may be, held by him which amount
             shall be the fair market value of a Security or a Unit, as the case may be, taking into
             account the Tender Offer less the cost to the Issuer and/or the Guarantor of unwinding
             any underlying related hedging arrangement plus, if already paid, the Exercise Price,
             all as determined by the Calculation Agent in its sole and absolute discretion.
             Payments will be made in such manner as shall be notified to the Securityholders in
             accordance with Condition 13. If, however in the case of a Security relating to a
             Basket, Share Substitution is specified as applicable hereon, the Calculation Agent
             may, in its absolute discretion, as an alternative to so cancelling the Securities, replace
             the relevant Basket Company or Share Company and its Shares as provided in
             Condition 18(F);

      (ii)   if under “Consequences of a Tender Offer” in relation to “Share-for-Combined”,
             “Share-for-Other” or “Share-for-Share”, the consequence specified hereon is
             “Calculation Agent Adjustment” or if no consequence of a Tender Offer is so specified
             then, on or after the relevant Tender Offer Date, the relevant Basket Company or
             Share Company and the corresponding Shares will not change, but the Calculation
             Agent shall either (i)(A) make such adjustment to the exercise, settlement, payment or


                                             73
           any other terms of the Securities as the Calculation Agent determines appropriate to
           account for the economic effect on the Securities of such Tender Offer including, in
           the case of a Security relating to a Basket, if Share Substitution is specified as
           applicable hereon and the Calculation Agent so determines in its absolute discretion,
           the replacement of the relevant Basket Company or Share Company and its Shares as
           provided in Condition 18(F) (provided that no adjustments will be made to account
           solely for changes in volatility, expected dividends, stock loan rate or liquidity relevant
           to the Shares or to the Securities), which may, but need not, be determined by
           reference to the adjustment(s) made in respect of such Tender Offer by an options
           exchange to options on the relevant Shares traded on such options exchange and (B)
           determine the effective date of that adjustment, or (ii) if the Calculation Agent
           determines that no adjustment that it could make under (i) will produce a
           commercially reasonable result, then the Issuer shall cancel the Securities by giving
           notice to Securityholders in accordance with Condition 13. If the Securities are so
           cancelled, subject as provided above, the Issuer will pay an amount to each
           Securityholder in respect of each Security or, if Units are specified in the applicable
           Final Terms, each Unit, as the case may be, held by him which amount shall be the
           fair market value of a Security or a Unit, as the case may be, taking into account the
           Tender Offer less the cost to the Issuer and/or the Guarantor of unwinding any
           underlying related hedging arrangement plus, in the case of Warrants and if already
           paid, the Exercise Price, all as determined by the Calculation Agent in its sole and
           absolute discretion. Payments will be made in such manner as shall be notified to the
           Securityholders in accordance with Condition 13, in which case “Cancellation and
           Payment” will be deemed to apply; and

      (iii) if under “Consequences of a Tender Offer” in relation to “Share-for-Combined”, the
            consequence specified hereon is “Component Adjustment”, then in respect of a
            Share-for-Combined      Tender    Offer,    the    consequence     specified    opposite
            “Share-for-Share” shall apply to that portion of the consideration that consists of New
            Shares (as determined by the Calculation Agent) and the consequence specified
            opposite “Share-for-Other” shall apply to that portion of the consideration that consists
            of Other Consideration (as determined by the Calculation Agent).

(e)   If Nationalisation, Insolvency or De-Listing is specified as applicable in respect of any
      shares hereon and the Calculation Agent has determined (in its sole and absolute discretion)
      that a Nationalisation, Insolvency or De-Listing event has occurred in relation to the Shares
      on or prior to the Valuation Date, either (a) the Issuer may, in its sole and absolute
      discretion, cancel the Securities by giving notice to Securityholders in accordance with
      Condition 13. If the Securities are so cancelled the Issuer will pay an amount to each
      Securityholder in respect of each Security or, if Units are specified in the applicable Final
      Terms, each Unit, as the case may be, held by him which amount shall be the fair market
      value of a Security or a Unit, as the case may be, taking into account the Nationalisation,
      Insolvency or, as the case may be, De-Listing less the cost to the Issuer and/or its Affiliates
      of unwinding any underlying related hedging arrangements plus, in the case Warrants and if
      already paid, the Exercise Price, all as determined by the Calculation Agent in its sole and
      absolute discretion. Payments will be made in such manner as shall be notified to the
      holders in accordance with Condition 13, or (b) in respect of a Security relating to a Basket,
      if “Share Substitution” is specified as applicable hereon, the Issuer may apply the provisions
      of Condition 18(F). Notice of any cancellation of the Securities or determination pursuant to
      this paragraph shall be given to Securityholders in accordance with Condition 13.

(f)   The Issuer shall notify each of the Principal Warrant and Certificate Agent, Warrant and
      Certificate Agent and each stock exchange on which the Securities are listed of any
      adjustment made pursuant to this Condition 18(F) and the Issuer shall procure that such
      adjustments are made available to Securityholders at the specified offices of the Principal
      Warrant and Certificate Agent and, if so required by the rules of the stock exchange(s) on
      which the Securities are listed or the relevant competent authority, that notice of such
      adjustments are notified to Securityholders as required by the relevant stock exchange or
      competent authority.




                                           74
            (g)   If an Exchange is changed, the Calculation Agent may make such consequential
                  modifications to any provisions of the terms and conditions as it may determine. Any such
                  modification will be promptly notified to the Securityholders in accordance with Condition
                  13.

(C)   Debt Securities

      For the purpose of this Condition 18(C):

      “Debt Instruments” and “Debt Instrument” mean, in the case of an issue of Securities relating to a
Basket of Debt Instruments, each debt instrument and, in the case of an issue of Securities relating to a single
Debt Instrument, the debt instrument specified in the applicable Final Terms and related expressions shall be
construed accordingly.

      Market Disruption

            “Market Disruption Event” shall mean the suspension of or limitation imposed on trading either
      on any exchange on which the Debt Instrument or any of them (in the case of a Basket of Debt
      Instruments) are traded or on any exchange on which options contracts or futures contracts with respect
      to the Debt Instruments or any of them (in the case of a Basket of Debt Instruments) are traded if, in
      the determination of the Calculation Agent, such suspension or limitation is material.

           The Issuer shall give notice as soon as practicable to the Securityholder in accordance with
      Condition 13 that a Market Disruption Event has occurred.

(D)   Commodity Securities

      For the purposes of this Condition 18(D):

    “Commodities” and “Commodity” mean, in the case of an issue of Securities relating to a Basket of
Commodities, each commodity and, in the case of an issue of Securities relating to a single Commodity, the
commodity specified in the applicable Final Terms and related expressions shall be construed accordingly.

      Market Disruption

            “Market Disruption Event” shall mean the suspension of or limitation imposed on trading on
      either any exchange on which the Commodity or any of the Commodities (in the case of a Basket of
      Commodities) are traded or on any exchange on which options contracts or futures contracts with
      respect to the Commodity or any of the Commodities (in the case of a Basket of Commodities) are
      traded if, in the determination of the Calculation Agent, such suspension or limitation is material.

           The Issuer shall give notice as soon as practicable to the Securityholders in accordance with
      Condition 13 that a Market Disruption Event has occurred.

(E)   Additional Disruption Events

      (a)   “Additional Disruption Event” means any of Change in Law, Hedging Disruption, Increased Cost
            of Hedging, Increased Cost of Stock Borrow, Insolvency Filing and/or Loss of Stock Borrow, in
            each case if specified in the applicable Final Terms.

            “Change in Law” means that, on or after the Trade Date (as specified in the applicable Final
            Terms) (A) due to the adoption of or any change in any applicable law or regulation (including,
            without limitation, any tax law), or (B) due to the promulgation of or any change in the
            interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any
            applicable law or regulation (including any action taken by a taxing authority), the Issuer
            determines in its sole and absolute discretion that (X) it has become illegal to hold, acquire or
            dispose of any relevant Share (in the case of Share Securities) or any relevant security/commodity
            comprised in an Index (in the case of Index Securities) or (Y) it will incur a materially increased
            cost in performing its obligations in relation to the Securities (including, without limitation, due to
            any increase in tax liability, decrease in tax benefit or other adverse effect on the tax position of
            the Issuer and/or any of its Affiliates).


                                                        75
      “Hedging Disruption” means that the Issuer and/or any of its Affiliates is unable, after using
      commercially reasonable efforts, to (A) acquire, establish, re-establish, substitute, maintain,
      unwind or dispose of any transaction(s) or asset(s) it deems necessary to hedge the equity or other
      price risk of the Issuer issuing and performing its obligations with respect to the Securities, or (B)
      realise, recover or remit the proceeds of any such transaction(s) or asset(s).

      “Hedging Shares” means the number of Shares (in the case of Share Securities) or securities/
      commodities comprised in an Index (in the case of Index Securities) that the Issuer deems
      necessary to hedge the equity or other price risk of entering into and performing its obligations
      with respect to the Securities.

      “Increased Cost of Hedging” means that the Issuer and/or any of its Affiliates would incur a
      materially increased (as compared with circumstances existing on the Trade Date) amount of tax,
      duty, expense or fee (other than brokerage commissions) to (A) acquire, establish, re-establish,
      substitute, maintain, unwind or dispose of any transaction(s) or asset(s) it deems necessary to
      hedge the equity or other price risk of the Issuer issuing and performing its obligations with
      respect to the Securities, or (B) realise, recover or remit the proceeds of any such transaction(s) or
      asset(s), provided that any such materially increased amount that is incurred solely due to the
      deterioration of the creditworthiness of the Issuer and/or any of its Affiliates shall not be deemed
      an Increased Cost of Hedging.

      “Increased Cost of Stock Borrow” means that the Issuer and/or any of its Affiliates would incur a
      rate to borrow any Share (in the case of Share Securities) or any security/commodity comprised in
      an Index (in the case of Index Securities) that is greater than the Initial Stock Loan Rate.

      “Initial Stock Loan Rate” means, in respect of a Share (in the case of Share Securities) or a
      security/commodity comprised in an Index (in the case of Index Securities), the Initial Stock Loan
      Rate specified in relation to such Share, security or commodity in the applicable Final Terms.

      “Insolvency Filing” means that a Share Company or Basket Company institutes or has instituted
      against it by a regulator, supervisor or any similar official with primary insolvency, rehabilitative
      or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the
      jurisdiction of its head or home office, or it consents to a proceeding seeking a judgement of
      insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other
      similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation
      by it or such regulator, supervisor or similar official or it consents to such a petition, provided that
      proceedings instituted or petitions presented by creditors and not consented to by the Share
      Company or Basket Company shall not be deemed an Insolvency Filing.

      “Loss of Stock Borrow” means that the Issuer and/or any Affiliate is unable, after using
      commercially reasonable efforts, to borrow (or maintain a borrowing of) any Share (in the case of
      Share Securities) or any securities/commodities comprised in an Index (in the case of Index
      Securities) in an amount equal to the Hedging Shares at a rate equal to or less than the Maximum
      Stock Loan Rate.

      “Maximum Stock Loan Rate” means, in respect of a Share (in the case of Share Securities) or a
      security/commodity comprised in an Index (in the case of Index Securities), the Maximum Stock
      Loan Rate specified in the applicable Final Terms.

(b)   If an Additional Disruption Event occurs, the Issuer in its sole and absolute discretion may take
      the action described in (i) or (ii) below:

      (i)   require the Calculation Agent to determine in its sole and absolute discretion the appropriate
            adjustment, if any, to be made to any one or more of any Relevant Asset and/or the
            Entitlement and/or the Exercise Price (in the case of Warrants) and/or the Multiplier and/or
            any of the other terms of these Terms and Conditions and/or the applicable Final Terms to
            account for the Additional Disruption Event and determine the effective date of that
            adjustment; or




                                                  76
            (ii)   cancel the Securities by giving notice to Securityholders in accordance with Condition 13. If
                   the Securities are so cancelled the Issuer will pay an amount to each Securityholder in
                   respect of each Security or, if Units are specified in the applicable Final Terms, each Unit,
                   as the case may be, held by him which amount shall be the fair market value of a Security
                   or a Unit, as the case may be, taking into account the Additional Disruption Event less the
                   cost to the Issuer and/or its Affiliates of unwinding any underlying related hedging
                   arrangements plus, in the case of Warrants and if already paid, the Exercise Price, all as
                   determined by the Calculation Agent in its sole and absolute discretion. Payments will be
                   made in such manner as shall be notified to the holders in accordance with Condition 13.

      (c)   Upon the occurrence of an Additional Disruption Event, the Issuer shall give notice as soon as
            practicable to the Securityholders in accordance with Condition 13 stating the occurrence of the
            Additional Disruption Event, as the case may be, giving details thereof and the action proposed to
            be taken in relation thereto.

(F)   Share Substitution

      If, in the case of a Security relating to a Basket of Shares, “Share Substitution” is specified as
applicable hereon, then, in place of any Basket Company or Share Company relating to such Security (an
“Affected Share Company”), the Calculation Agent may, at its sole and absolute discretion, select a substitute
company which shall be deemed to be a Basket Company or, as the case may be, a Share Company and the
Shares of such company as determined by the Calculation Agent shall be deemed to be Shares in the place of
the Shares of the Affected Share Company (the “Affected Shares”) and the Calculation Agent shall make such
adjustments to any relevant terms as it may determine in good faith, in its absolute discretion, to be
appropriate.

      In addition, following a Merger Event involving two or more Basket Companies or Share Companies,
the Calculation Agent may, in its absolute discretion, designate one or more of such companies as an Affected
Share Company and select, at its sole and absolute discretion, a substitute company in order to maintain the
same number of Basket Companies or, as the case may be, Share Companies as before the relevant Merger
Event and, in the event of a demerger of a Basket Company or Share Company such that the holder of Shares
in the relevant company would thereby become the holder of Shares in two or more companies in place of
the relevant Shares, the Calculation Agent may, in its absolute discretion, following the declaration by the
Basket Company or Share Company of the terms of such demerger, deem such company an Affected Share
Company.

19    Contracts (Rights of Third Parties) Act 1999

      The Securities do not confer on a third party any right under the Contracts (Rights of Third Parties) Act
1999 to enforce any term of the Securities but this does not affect any right or remedy of a third party which
exists or is available apart from that Act.




                                                       77
                                       USE OF PROCEEDS

     The net proceeds from each issue of Securities less certain expenses in respect of such issue will be
used by the Issuer for its general corporate purposes.




                                                   78
                          FORM OF THE DEED OF GUARANTEE

      THIS DEED OF GUARANTEE (the “Guarantee”) is made on 7 October 2010 by Daiwa Securities
Capital Markets Co. Ltd. (the “Guarantor”) in favour of the holders for the time being of the Securities (as
defined below) (each a “Securityholder”).

     WHEREAS:

     (A)   Daiwa Capital Markets Financial Products (Cayman) Ltd. (the “Issuer”) and the Guarantor have
           entered into an Agency Agreement (the “Agency Agreement”, which expression includes the same
           as it may be amended, supplemented or restated from time to time) dated 7 October 2010 with
           Citibank N.A., London Branch as principal warrant and certificate agent (the “Principal Warrant
           and Certificate Agent”) and the other agents named therein under which the Issuer proposes to
           issue from time to time warrants and certificates (the “Securities”) of any kind including, but not
           limited to, Securities relating to a specified index or basket of indices, a specified share or basket
           of shares, a specified debt instrument or basket of debt instruments, a specified currency or basket
           of currencies or a specified commodity or basket of commodities.

     (B)   Terms defined in the Terms and Conditions of the Securities (the “Conditions”), and/or the
           Agency Agreement and not otherwise defined in this Guarantee shall have the same meanings
           when used in this Guarantee.

     NOW THIS DEED WITNESSES as follows:

1    Guarantee

     (A)   Subject as provided in Clause 1(B), the Guarantor hereby irrevocably and unconditionally
           guarantees by way of deed poll to each Securityholder all obligations of the Issuer to such
           Securityholder under the Securities when and as the same become due in accordance with the
           terms thereof.

     (B)   If the Issuer fails for any reason whatsoever to satisfy its obligations under the Securities when
           and as the same shall become due in accordance with the terms thereof, the Guarantor hereby
           undertakes to make or cause to be made such payment or to satisfy or cause to be satisfied such
           obligations as if the Guarantor instead of the Issuer were expressed to be the primary obligor in
           respect of such obligations not later than five Tokyo Business Days (as used herein, “Tokyo
           Business Day” means a day (other than a Saturday or Sunday) on which banks are open for
           business in Tokyo) after a demand has been made on the guarantor pursuant to Clause 10 hereof,
           provided that (A) in the case of Physical Delivery Securities, notwithstanding that the Issuer had
           the right to vary settlement in respect of such Physical Delivery Securities in accordance with
           Condition 6(E) (in the case of Warrants) or Condition 9(D) (in the case of Certificates), as the
           case may be, and exercised such right or failed to exercise such right, the Guarantor will have the
           right at its sole and unfettered discretion to elect not to deliver or procure delivery of the
           Entitlement to the holders of such Physical Delivery Securities, but in lieu thereof, to make
           payment in respect of each such Physical Delivery Security of an amount equal to the guaranteed
           Cash Settlement Amount calculated pursuant to the terms of the relevant Final Terms (the
           “Guaranteed Cash Settlement Amount”) and (B) in the case of Securities where the obligations of
           the Issuer which fall to be satisfied by the Guarantor constitute the delivery of the Entitlement to
           the holders of such Securities the Guarantor will as soon as practicable following the Issuer’s
           failure to satisfy its obligations under such Securities deliver or procure delivery of such
           Entitlement using the method of delivery specified in the applicable Final Terms provided that, if
           in the opinion of the Guarantor, delivery of the Entitlement using such method is not practicable
           by reason of a Settlement Disruption Event (as defined in Condition 6(C)(ii), in the case of
           Warrants, and Condition 9(C)(7), in the case of Certificates, as the case may be) in lieu of such
           delivery the Guarantor will make payment in respect of each such Security of the Guaranteed
           Cash Settlement Amount. Any payment of the Guaranteed Cash Settlement Amount in respect of a
           Security shall constitute a complete discharge of the Guarantor’s obligations in respect of such
           Security. The Guarantor will be liable under this Guarantee as if it were the principal obligor and
           not merely as surety (but without affecting the Issuer’s obligations) to the intent that the
           obligation shall be performed as if such obligation had been performed by the Issuer.



                                                      79
2     Reinstatement

       If any payment or delivery of any Entitlement received by any Securityholder pursuant to the provisions
of these presents in relation to the Securities shall (whether on the subsequent bankruptcy, insolvency or
corporate reorganisation of the Issuer or, without limitation, on any other event) be avoided or set aside for
any reason, such payment or delivery (as the case may be) shall not be considered as discharging or
diminishing the liability of the Guarantor and this Guarantee shall continue to apply as if such payment or
delivery obligation (as the case may be) had at all times remained owing by the Issuer and the Guarantor
shall indemnify the relevant Securityholders in respect thereof provided that the obligations of the Issuer and/
or the Guarantor under this Clause 2 shall, as regards each payment or delivery obligation (as the case may
be) made to any Securityholder which is avoided or set aside, be contingent upon such payment or delivery
obligation (as the case may be) being reimbursed or redelivered (as the case may be) to the Issuer or other
persons entitled through the Issuer.

3     Waiver of Defences

       The Guarantor hereby agrees that its obligations hereunder shall be unconditional and that the Guarantor
shall be fully liable irrespective of the validity, regularity, legality or enforceability against the Issuer of, or of
any defence or counterclaim whatsoever available to the Issuer in relation to, its obligations under the
Securities, whether or not any action has been taken to enforce the same or any judgment obtained against the
Issuer, whether or not any of the other provisions of the Securities have been modified, whether or not any
time, indulgence, waiver, authorisation or consent has been granted to the Issuer by or on behalf of any
Securityholders, whether or not there have been any dealings or transactions between the Issuer and any
Securityholders, whether or not the Issuer has been dissolved, liquidated, merged, consolidated, bankrupted or
has changed its status, functions, control or ownership, whether or not the Issuer has been prevented from
making payment by foreign exchange provisions applicable at its place of registration or incorporation and
whether or not any other circumstances have occurred which might otherwise constitute a legal or equitable
discharge of or defence to a guarantor. Accordingly, the validity of this Guarantee shall not be affected by
reason of any invalidity, irregularity, illegality or unenforceability of all or any of the obligations of the Issuer
under any provision of any Security and this Guarantee shall not be discharged nor shall the liability of the
Guarantor under these presents be affected by any act, thing or omission or means whatever whereby its
liability would not have been discharged if it had been the principal debtor.

4     Continuing Guarantee

      Subject as provided in Clause 1(B), the Guarantor hereby waives diligence, presentment, demand of
payment or delivery, filing of claims with a court in the event of dissolution, liquidation, merger or
bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with
respect to any Securities and all demands whatsoever and hereby covenants that this Guarantee shall be a
continuing guarantee, shall extend to the ultimate balance of all sums payable and obligations owed by the
Issuer under these presents in relation to any Securities, shall not be discharged except by complete
performance of the obligations contained in these presents in relation to such Warrants and is additional to,
and not instead of, any security or other guarantee or indemnity at any time existing in favour of a
Securityholder, whether from the Guarantor or otherwise.

5     Non-Competition

       If any obligations fall to be performed by the Guarantor under this Guarantee, the Guarantor shall not,
until such obligations are discharged in full:

      (i)    in respect of any obligations performed by it under this Guarantee, exercise any rights of
             subrogation or contribution or, without limitation, any other right or remedy which may accrue to
             it in respect of or as a result of any such obligation; or

      (ii)   in respect of moneys for the time being due to the Guarantor by the Issuer not falling within (i)
             above, claim payment thereof or exercise any other right or remedy;

(including in either case claiming the benefit of any security or right of set-off or, on the liquidation of the
Issuer, proving in competition with any Securityholder). If, notwithstanding the foregoing, upon the
bankruptcy, insolvency or liquidation of the Issuer any payment or distribution of assets of the Issuer of any
kind or character, whether in cash, property or securities, shall be received by the Guarantor before the


                                                          80
obligations under the Securities have been performed in full, such payment or distribution shall be received
by the Guarantor on trust to pay or deliver the same over immediately to the relevant Securityholders for
application in or towards the satisfaction of the obligations due under such Securities.

6    Status of Guarantee

     The obligations of the Guarantor under this Guarantee are direct, unconditional, unsecured and
unsubordinated obligations of the Guarantor and rank and will rank pari passu with all other outstanding
unsecured and unsubordinated obligations of the Guarantor, present and future, but only to the extent
permitted by applicable laws relating to creditors’ rights.

7    Power to Execute

       The Guarantor hereby warrants, represents and covenants with each Securityholder that it has all power,
that it has obtained all necessary governmental consents and authorisations, and that it has taken all necessary
steps, in each case to enable it to execute, deliver and perform this Guarantee and that this Guarantee
constitutes legal, valid and binding obligations of the Guarantor in accordance with its terms.

8    Deposit of Guarantee

      This Guarantee shall take effect as a deed poll for the benefit of the Securityholders from time to time
and for the time being. This Guarantee shall be deposited with and held by Citibank N.A., London Branch as
Principal Warrant and Certificate Agent for the benefit of the Securityholders. If Citibank N.A., London
Branch ceases to be the Principal Warrant and Certificate Agent its successor shall hold this Guarantee.

9    Production of Guarantee

      The Guarantor hereby acknowledges the right of every Securityholder to the production of, and the right
of every Securityholder to obtain (upon payment of a reasonable charge) a copy of, this Guarantee, and
further acknowledges and covenants that the obligations binding upon it contained herein are owed to, and
shall be for the benefit of, each and every Securityholder, and that each Securityholder shall be entitled
severally to enforce the said obligations against the Guarantor.

10   Demand on the Guarantor

      Any demand hereunder shall be given in writing addressed to the Guarantor served at GranTokyo North
Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo 100-6753 attention Equity Planning and Administration
Department. A demand so made shall be deemed to have been duly made five Tokyo Business Days after the
day it was served or if it was served on a day that was not a Tokyo Business Day or after 5.30 p.m. (Tokyo
time) on any day, the demand shall be deemed to be duly made five Tokyo Business Days after the Tokyo
Business Day immediately following such day.

11   Governing Law and Jurisdiction

     (A)   This Guarantee and any non-contractual obligations arising out of or in connection with it shall be
           governed by English law.

     (B)   The Guarantor agrees, for the exclusive benefit of the Securityholders that the courts of England
           are to have jurisdiction to settle any disputes which may arise out of or in connection with this
           Guarantee and that accordingly any suit, action or proceedings (together referred to as
           “Proceedings”) arising out of or in connection with this Guarantee may be brought in such courts.
           The Guarantor hereby irrevocably waives any objection which it may have now or hereafter to the
           laying of the venue of any such Proceedings in any such court and any claim that any such
           Proceedings have been brought in an inconvenient forum and hereby further irrevocably agrees
           that a judgment in any such Proceedings in the English courts shall be conclusive and binding
           upon it and may be enforced in the courts of any other jurisdiction. Nothing contained in this
           Clause shall limit any right to take Proceedings against the Guarantor in any other court of
           competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude
           the taking of Proceedings in any other jurisdiction, whether concurrently or not. The Guarantor
           appoints Daiwa Capital Markets Europe Limited at its registered office at 5 King William Street,
           London EC4N 7AX (attention: Head of Legal), as its agent for service of process and undertakes


                                                      81
           that, in the event of Daiwa Capital Markets Europe Limited ceasing so to act or ceasing to be
           registered in England, it will appoint another person as its agent for service of process in England
           in respect of any proceedings. Nothing herein shall affect the right to serve proceedings in any
           other manner permitted by law.

      IN WITNESS whereof this Guarantee has been executed as a deed poll on behalf of the Guarantor.

DAIWA SECURITIES CAPITAL MARKETS CO. LTD.

By:

Dated 7 October 2010




                                                     82
                                  DAIWA CAPITAL MARKETS FINANCIAL
                                      PRODUCTS (CAYMAN) LTD.

      Daiwa Capital Markets Financial Products (Cayman) Ltd. was incorporated on 18 January 2000 under
the Companies Law (1998 Revision) of the Cayman Islands, with limited liability. The registered number of
Daiwa Capital Markets Financial Products (Cayman) Ltd. is CR 95985 and its registered office is c/o BNP
Paribas Bank & Trust Cayman Limited, Royal Bank House, 3rd Floor, PO Box 10632 APO, Shedden Road,
Grand Cayman KY1-1006, Cayman Islands.

     The authorised share capital of the Issuer is JPY 20,000,000 divided into 400 shares of JPY 50,000 each
of which 200 are issued and fully paid (the “Shares”). The Shares are held by the Guarantor.

Objects

      The Issuer was established to issue Securities and enter into related transactions. The objects of the
Issuer are unrestricted and the Issuer may carry out any object not prohibited by law.

Directors of the Issuer

         The Directors of the Issuer are as follows:

Name                                             Principal Occupation

Yukio Shishitani                                 Deputy General Manager, Daiwa Securities Capital Markets Co. Ltd.
Susumu Murai                                     Manager, Daiwa Securities Capital Markets Co. Ltd.
Gregory Stevens                                  Executive Director, Daiwa Capital Markets Europe Limited

      The business address of the Directors is c/o Daiwa Securities Capital Markets Co. Ltd., GranTokyo
North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo 100-6753, Japan, except Gregory Stevens, whose
business address is c/o Daiwa Capital Markets Europe Limited, 5 King William Street, London EC4N 7AX.
Save as disclosed above, the Directors have no significant principal outside activities.

Employees

         The Issuer has no employees.

Financial Statements

      The Issuer does not produce consolidated accounts. The Issuer has published its audited financial
statements for the year ended 31 December 2009. The Issuer’s financial statements have been audited without
qualification by KPMG Azsa & Co. The Issuer does not publish interim financial statements.

Capitalisation

         The following table sets out the capitalisation of the Issuer as at the date of this Base Prospectus.

Share capital and reserves

                                                                                                                     (¥)
200 Ordinary shares of JPY50,000 each, issued and fully paid                                               10,000,000
Total capitalisation                                                                                       10,000,000


Notes:

(1)      The authorised share capital of the Issuer is 400 ordinary shares of JPY 50,000 each.

(2)      As at the date of this Base Prospectus, the Issuer has no loan capital or borrowings.




                                                                      83
                      DAIWA SECURITIES CAPITAL MARKETS CO. LTD.

      The Guarantor (formerly Daiwa Securities SMBC Co. Ltd.) was established on 5 April 1999 as a joint
venture company between Daiwa Securities Co. Ltd. (“Daiwa Securities”) and The Sumitomo Bank, Limited
(“Sumitomo”). The Guarantor was incorporated as a limited liability company (Kabushiki Kaisha) for an
unlimited duration under Japanese law. For the purpose of establishing the Guarantor, Daiwa Securities
transferred its wholesale capital markets business to the Guarantor and Sumitomo Capital Securities Co. Ltd.,
a subsidiary of Sumitomo, transferred almost all of its business to the Guarantor, in each case, on the
establishment date. Following the establishment, the Guarantor was a 60 per cent. owned consolidated
subsidiary of Daiwa Securities Group Inc. (“Daiwa Securities Group”), the remaining 40 per cent. of its
shares being held by Sumitomo Mitsui Financial Group, Inc. (“SMFG” and together with Daiwa Securities
Group the “Shareholders”). Following an announcement on 10 September 2009 to dissolve the joint venture,
Daiwa Securities Group purchased the 40 per cent. shareholding of SMFG on 31 December 2009. The
Guarantor is 99.97 per cent. owned by Daiwa Securities Group and 0.03 per cent. owned by Hinode
Securities Co. Ltd. (subsidiary of Daiwa Securities Group). Following an announcement on 5 November
2009, the Guarantor changed its name to Daiwa Securities Capital Markets Co. Ltd. with effect from 1
January 2010.

     The Guarantor is currently engaged in, amongst other activities, the wholesale brokerage, trading,
underwriting and distribution of securities and related derivatives business to Japanese and foreign clients.

Acquisition of Close Brothers Corporate Finance

      On 1 July 2009, Daiwa Capital Markets Europe Limited, the European subsidiary of the Guarantor,
acquired the entire issued share capital of Close Brothers Corporate Finance (Holdings) Limited, an
investment bank which mainly conducts M&A advisory business, from Close Brothers Group plc for a cash
consideration of £75 million.

Directors and Statutory Auditors

       The Directors and Statutory Auditors of the Guarantor as at 7 October 2010 were as follows:

Name                              Position                      Other Directorships

Shin Yoshidome*                   President                     Director, Deputy President and COO of
                                                                Daiwa Securities Group Inc.
Takashi Hibino*                   Deputy President              Director and Deputy President of Daiwa
                                                                Securities Group Inc.
Akio Takahashi                    Senior Managing Director
Takatoshi Wakabayashi*            Senior Managing Director      Director, Corporate Executive Vice President
                                                                and CRO of Daiwa Securities Group Inc.
Masami Tada                       Senior Managing Director      Chairman and CEO of Daiwa Capital Markets
                                                                Europe Limited
Kazuo Oda                         Managing Director             Director, Corporate Senior Exective Officer
                                                                and CIO of Daiwa Securities Group Inc.
                                                                Director of Daiwa Institute of Research
                                                                Holdings Ltd.
                                                                Senior Managing Director of Daiwa Institute
                                                                of Research Ltd.
Motoi Takahashi                   Managing Director
Toshinao Matsushima               Managing Director             Director of Daiwa Capital Markets Europe
                                                                Limited
Shinya Nishio                     Managing Director
Seiji Nakata                      Managing Director


*      Representative Director.




                                                      84
Statutory Auditors

Name                                                                     Position

Shigeharu Tominaga                                                       Full Time Statutory Auditor
Satoshi Otsu                                                             Full Time Statutory Auditor
Tatsuru Asano                                                            Full Time Statutory Auditor

       The business address of the Directors and Statutory Auditors is GranTokyo North Tower, 1-9-1
Marunouchi, Chiyoda-ku, Tokyo 100-6753, Japan, except Masami Tada and Toshinao Matsushima, both of
whose business address is c/o Daiwa Capital Markets Europe Limited, 5 King William Street, London EC4N
7AX. Save as disclosed above, the Directors and Statutory Auditors have no significant principal outside
activities.

Capitalisation

      The consolidated capitalisation of the Guarantor as at 30 June 2010, which amounts are consistent with
the corresponding amounts in its unaudited accounts as at 30 June 2010, was as follows:

                                                                                                            (¥ millions)
Loans:
  Short-term borrowings                                                                                      1,920,859
  Commercial paper                                                                                             413,800
  Medium-term notes                                                                                            798,804
  Subordinated loans                                                                                           271,000
  Long-term borrowings                                                                                          44,500
Total loans                                                                                                  3,448,963
Net Assets:
  Common stock no par value:
    Authorised – 3,800 shares
    Issued – 3,800 shares                                                                                      255,700
  Capital surplus                                                                                              167,421
  Retained earnings                                                                                             70,493
  Net unrealised gain on securities, net of tax effect                                                            (640)
  Translation adjustments                                                                                      (23,371)
      Minority Interests                                                                                          1,237
Total net assets                                                                                               470,840
Total capitalisation                                                                                         3,919,803


Note:

(1)      There has been no change in the consolidated capitalisation of the Guarantor since 30 June 2010.




                                                                    85
                                               TAXATION

      Purchasers of Securities may be required to pay stamp taxes and other charges in accordance with the
laws and practices of the country of purchase in addition to the issue price of each Security.

    POTENTIAL PURCHASERS WHO ARE IN ANY DOUBT ABOUT THE TAX POSITION OF
ANY ASPECT OF TRANSACTIONS INVOLVING SECURITIES SHOULD CONSULT THEIR OWN
TAX ADVISERS.

United Kingdom Taxation

       Potential purchasers of Securities should note that each Global Security may constitute an instrument
which is subject to United Kingdom stamp duty by reference to the amount of the consideration given for the
Securities represented by such Global Security. However, each Global Security is being executed and
delivered outside the United Kingdom and should not be brought into the United Kingdom save for the
purposes of enforcement. So long as a Global Security is held outside the United Kingdom, no requirement to
pay United Kingdom stamp duty will arise. However, if a Global Security were brought into the United
Kingdom to be used as evidence (for example, for enforcement purposes) or for any other purposes, United
Kingdom stamp duty may be required to be paid on such Global Security. If stamp duty is payable on the
Global Security, interest will be payable (in addition to the stamp duty) in respect of the period from 30 days
after the date of execution of the Global Security to the date of payment. Furthermore penalties may also be
payable if the Global Security is not stamped within 30 days of being brought into the United Kingdom. If a
Global Security is subject to United Kingdom stamp duty, it would be inadmissible in evidence in an English
court unless duly stamped.

       Transactions involving Securities may have tax consequences for potential purchasers which may
depend, amongst other things, upon the status of the potential purchaser and laws relating to transfer and
registration taxes.

     Condition 14 (“Expenses and Taxation”) on page 66 should be considered carefully by all potential
purchasers of any Securities.

Cayman Islands Taxation

      The following is a discussion of certain Cayman Islands income tax consequences of an investment in
Securities. The discussion is a general summary of present law, which is subject to prospective and retroactive
change. It is not intended as tax advice, does not consider any investor’s particular circumstances, and does
not consider tax consequences other than those arising under Cayman Islands law.

     Under Cayman Islands law at the date of this Base Prospectus:

     (a)   payments to Securityholders by the Issuer in respect of Securities will not be subject to taxation in
           the Cayman Islands and no withholding will be required on such payments to any holder of
           Securities and gains derived from the sales of Securities will not be subject to the Cayman Islands
           tax. The Cayman Islands currently has no income, corporation or capital gains tax and no estate
           duty, inheritance tax or gift tax; and

     (b)   the holder of any Securities issued in bearer form (or the legal personal representative of such
           holder) whose Securities are brought into the Cayman Islands may in certain circumstances be
           liable to pay stamp duty imposed under the laws of the Cayman Islands in respect of such
           Securities. Certificates evidencing a registered Securities to which title is not transferable by
           delivery, will not attract Cayman Islands stamp duty. However, an instrument transferring title to
           registered Securities, if brought to or executed in the Cayman Islands, would be subject to the
           Cayman Islands stamp duty.




                                                      86
      The Issuer has been incorporated under the laws of the Cayman Islands as an exempted company and,
as such, has received an undertaking from the Governor in Council of the Cayman Islands substantially in the
following form:

                                         “The Tax Concessions Law

                                               (1995 Revision)

                                     Undertaking as to Tax Concessions

    In accordance with Section 6 of the Tax Concessions Law (1995 Revision), the Governor in
Council undertakes with the Issuer (the “Company”):

     (a)   that no Law which is hereafter enacted in the Islands imposing any tax to be levied on profits,
           income, gains or appreciations shall apply to the Company or its operations; and

     (b)   in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the
           nature of estate duty or inheritance tax shall be payable by the Company:

           (i)    on or in respect of the shares, debentures or other obligations of the Company; or

           (ii)   by way of the withholding in whole or in part of any relevant payment as defined in Section
                  6(3) of the Tax Concessions Law (1995 Revision).

     These concessions shall be for a period of twenty years from the 1st day of February 2000.

                                                                                         Governor in Council”.




                                                      87
United States Federal Income Tax Considerations

    TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, HOLDERS ARE
HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS BASE
PROSPECTUS IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED
UPON, BY HOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON
HOLDERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS INCLUDED
HEREIN BY THE ISSUER IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN
THE MEANING OF CIRCULAR 230) BY THE ISSUER OF THE TRANSACTIONS OR MATTERS
ADDRESSED HEREIN; AND (C) HOLDERS SHOULD SEEK ADVICE BASED ON THEIR
PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER.



      The following is a summary of certain material U.S. federal income tax consequences of the acquisition,
ownership and disposition of Securities by a U.S. Holder (as defined below). This summary does not address
the material U.S. federal income tax consequences of every type of Security which may be issued under the
Warrant and Certificate Programme, and the applicable Final Terms may contain additional or modified
disclosure concerning the material U.S. federal income tax consequences relevant to such type of Security as
appropriate. This summary deals only with initial purchasers of Securities at the issue price that are U.S.
Holders that will hold the Securities as capital assets. The discussion does not cover all aspects of U.S.
federal income taxation that may be relevant to, or the actual tax effect that any of the matters described
herein will have on, the acquisition, ownership or disposition of Securities by particular investors, and does
not address state, local, foreign or other tax laws. This summary also does not discuss all of the tax
considerations that may be relevant to certain types of investors subject to special treatment under the U.S.
federal income tax laws (such as financial institutions, insurance companies, investors liable for the alternative
minimum tax, individual retirement accounts and other tax-deferred accounts, tax-exempt organisations,
dealers in securities or currencies, investors that will hold the Securities as part of straddles, hedging
transactions or conversion transactions for U.S. federal income tax purposes or investors whose functional
currency is not the U.S. dollar). Further, this summary does not address tax considerations that may be
relevant to the holding and disposition of Underlying Assets received upon a physical settlement of a Security.

      As used herein, the term “U.S. Holder” means a beneficial owner of Securities that is, for U.S. federal
income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or
organised under the laws of the United States or any State thereof, (iii) an estate the income of which is
subject to U.S. federal income tax without regard to its source or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the trust, or the trust has elected to be treated
as a domestic trust for U.S. federal income tax purposes.

      The U.S. federal income tax treatment of a partner in a partnership that holds Securities will depend on
the status of the partner and the activities of the partnership. Prospective purchasers that are partnerships
should consult their tax advisers concerning the U.S. federal income tax consequences to their partners of the
acquisition, ownership and disposition of Securities by the partnership.

      The summary is based on the tax laws of the United States, including the Internal Revenue Code of
1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and
court decisions, all as of the date hereof and all subject to change at any time, possibly with retroactive effect.

    THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR
GENERAL INFORMATION ONLY. ALL PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR
TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING THE
SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND POSSIBLE CHANGES IN TAX LAW.

U.S. Federal Income Tax Characterisation of the Securities

      The characterisation of an issue of Securities may be uncertain and will depend on the terms of those
Securities. The determination of whether an obligation represents debt, equity, or some other instrument or
interest is based on all the relevant facts and circumstances. There may be no statutory, judicial or



                                                        88
administrative authority directly addressing the characterisation of some of the types of Securities that are
anticipated to be issued under the Warrant and Certificate Programme or of instruments similar to such
Securities.

      The Issuer expects to treat Warrants as option contracts for U.S. federal income tax purposes, although
the applicable Final Terms may specify a different tax treatment of an issue of Warrants.

      Depending on the terms, Certificates may be characterised as debt or as some other type of financial
instrument for U.S. federal income tax purposes. For example, Certificates may be more properly
characterised as collateralised put options, prepaid forward contracts or some other type of financial
instrument. Additional alternative characterisations may also be possible. Further possible characterisations, if
applicable, may be discussed in the relevant Final Terms.

      No rulings will be sought from the IRS regarding the characterisation of any of the Securities for U.S.
federal income tax purposes. Each holder should consult its own tax adviser about the proper characterisation
of the Securities for U.S. federal income tax purposes and consequences to such holder of acquiring, owning
or disposing of the Securities.

U.S. Federal Income Tax Treatment of Certificates Treated as Debt

      The following summary applies to Certificates that are properly treated as debt for U.S. federal income
tax purposes.

1.   Payments of Interest

     General

           Interest on a Certificate, whether payable in U.S. dollars or a currency, composite currency or
     basket of currencies other than U.S. dollars (a “foreign currency”), other than interest on a “Discount
     Certificate” that is not “qualified stated interest” (each as defined below under “Original Issue Discount
     – General”), will be taxable to a U.S. Holder as ordinary income at the time it is received or accrued,
     depending on the holder’s method of accounting for tax purposes. Interest paid by the Issuer on the
     Certificates and OID, if any, accrued with respect to the Certificates (as described below under
     “Original Issue Discount”) generally will constitute income from sources outside the United States.
     Prospective purchasers should consult their tax advisers concerning the applicability of the foreign tax
     credit and source of income rules to income attributable to the Certificates.

2.   Original Issue Discount

     General

          The following is a summary of the principal U.S. federal income tax consequences of the
     ownership of Certificates issued with original issue discount (“OID”).

           A Certificate, other than a Certificate with a term of one year or less (a “Short-Term
     Certificate”), will be treated as issued with OID (a “Discount Certificate”) if the excess of the
     Certificate’s “stated redemption price at maturity” over its issue price is equal to or more than a de
     minimis amount (0.25 per cent. of the Certificate’s stated redemption price at maturity multiplied by the
     number of complete years to its maturity). An obligation that provides for the payment of amounts other
     than qualified stated interest before maturity (an “installment obligation”) will be treated as a Discount
     Certificate if the excess of the Certificate’s stated redemption price at maturity over its issue price is
     equal to or greater than 0.25 per cent. of the Certificate’s stated redemption price at maturity multiplied
     by the weighted average maturity of the Certificate. A Certificate’s weighted average maturity is the
     sum of the following amounts determined for each payment on a Certificate (other than a payment of
     qualified stated interest): (i) the number of complete years from the issue date until the payment is
     made multiplied by (ii) a fraction, the numerator of which is the amount of the payment and the
     denominator of which is the Certificate’s stated redemption price at maturity. Generally, the issue price
     of a Certificate will be the first price at which a substantial amount of Certificates included in the issue
     of which the Certificate is a part is sold to persons other than bond houses, brokers, or similar persons
     or organisations acting in the capacity of underwriters, placement agents, or wholesalers. The stated
     redemption price at maturity of a Certificate is the total of all payments provided by the Certificate that


                                                       89
are not payments of “qualified stated interest.” A qualified stated interest payment is generally any one
of a series of stated interest payments on a Certificate that are unconditionally payable at least annually
at a single fixed rate (with certain exceptions for lower rates paid during some periods), or a variable
rate (in the circumstances described below under “Variable Interest Rate Certificates”), applied to the
outstanding principal amount of the Certificate. Solely for the purposes of determining whether a
Certificate has OID, the Issuer will be deemed to exercise any call option that has the effect of
decreasing the yield on the Certificate, and the U.S. Holder will be deemed to exercise any put option
that has the effect of increasing the yield on the Certificate.

      U.S. Holders of Discount Certificates must include OID in income calculated on a constant-yield
method before the receipt of cash attributable to the income, and generally will have to include in
income increasingly greater amounts of OID over the life of the Discount Certificates. The amount of
OID includible in income by a U.S. Holder of a Discount Certificate is the sum of the daily portions of
OID with respect to the Discount Certificate for each day during the taxable year or portion of the
taxable year on which the U.S. Holder holds the Discount Certificate. The daily portion is determined
by allocating to each day in any “accrual period” a pro rata portion of the OID allocable to that accrual
period. Accrual periods with respect to a Certificate may be of any length selected by the U.S. Holder
and may vary in length over the term of the Certificate as long as (i) no accrual period is longer than
one year and (ii) each scheduled payment of interest or principal on the Certificate occurs on either the
final or first day of an accrual period. The amount of OID allocable to an accrual period equals the
excess of (a) the product of the Discount Certificate’s adjusted issue price at the beginning of the
accrual period and the Discount Certificate’s yield to maturity (determined on the basis of compounding
at the close of each accrual period and properly adjusted for the length of the accrual period) over (b)
the sum of the payments of qualified stated interest on the Certificate allocable to the accrual period.
The “adjusted issue price” of a Discount Certificate at the beginning of any accrual period is the issue
price of the Certificate increased by (x) the amount of accrued OID for each prior accrual period and
decreased by (y) the amount of any payments previously made on the Certificate that were not qualified
stated interest payments.

Acquisition Premium

       A U.S. Holder that purchases a Discount Certificate for an amount less than or equal to the sum
of all amounts payable on the Certificate after the purchase date, other than payments of qualified stated
interest, but in excess of its adjusted issue price (any such excess being “acquisition premium”) and
that does not make the election described below under “Election to Treat All Interest as Original Issue
Discount”, is permitted to reduce the daily portions of OID by a fraction, the numerator of which is the
excess of the U.S. Holder’s adjusted basis in the Certificate immediately after its purchase over the
Certificate’s adjusted issue price, and the denominator of which is the excess of the sum of all amounts
payable on the Certificate after the purchase date, other than payments of qualified stated interest, over
the Certificate’s adjusted issue price.

Short-Term Certificates

      In general, an individual or other cash basis U.S. Holder of a Short-Term Certificate is not
required to accrue OID (as specially defined below for the purposes of this paragraph) for U.S. federal
income tax purposes unless it elects to do so (but may be required to include any stated interest in
income as the interest is received). Accrual basis U.S. Holders and certain other U.S. Holders are
required to accrue OID on Short-Term Certificates on a straight-line basis or, if the U.S. Holder so
elects, under the constant-yield method (based on daily compounding). In the case of a U.S. Holder not
required and not electing to include OID in income currently, any gain realised on the sale or retirement
of the Short-Term Certificate will be ordinary income to the extent of the OID accrued on a straight-line
basis (unless an election is made to accrue the OID under the constant-yield method) through the date
of sale or retirement. U.S. Holders who are not required and do not elect to accrue OID on Short-Term
Certificates will be required to defer deductions for interest on borrowings allocable to Short-Term
Certificates in an amount not exceeding the deferred income until the deferred income is realised.

      For purposes of determining the amount of OID subject to these rules, all interest payments on a
Short-Term Certificate are included in the Short-Term Certificate’s stated redemption price at maturity.
A U.S. Holder may elect to determine OID on a Short-Term Certificate as if the Short-Term Certificate
had been originally issued to the U.S. Holder at the U.S. Holder’s purchase price for the Short-Term



                                                 90
      Certificate. This election will apply to all obligations with a maturity of one year or less acquired by the
      U.S. Holder on or after the first day of the first taxable year to which the election applies, and may not
      be revoked without the consent of the IRS.

      Fungible Issue

            The Issuer may, without the consent of the Holders of outstanding Certificates, issue additional
      Certificates with identical terms. These additional Certificates, even if they are treated for non-tax
      purposes as part of the same series as the original Certificates, in some cases may be treated as a
      separate series for U.S. federal income tax purposes. In such a case, the additional Certificates may be
      considered to have been issued with OID even if the original Certificates had no OID, or the additional
      Certificates may have a greater amount of OID than the original Certificates. These differences may
      affect the market value of the original Certificates if the additional Certificates are not otherwise
      distinguishable from the original Certificates.

      Market Discount

            A Certificate, other than a Short-Term Certificate, generally will be treated as purchased at a
      market discount (a “Market Discount Certificate”) if the Certificate’s stated redemption price at
      maturity or, in the case of a Discount Certificate, the Certificate’s “revised issue price”, exceeds the
      amount for which the U.S. Holder purchased the Certificate by at least 0.25 per cent. of the Certificate’s
      stated redemption price at maturity or revised issue price, respectively, multiplied by the number of
      complete years to the Certificate’s maturity (or, in the case of a Certificate that is an installment
      obligation, the Certificate’s weighted average maturity). If this excess is not sufficient to cause the
      Certificate to be a Market Discount Certificate, then the excess constitutes “de minimis market
      discount”. For this purpose, the “revised issue price” of a Certificate generally equals its issue price,
      increased by the amount of any OID that has accrued on the Certificate and decreased by the amount of
      any payments previously made on the Certificate that were not qualified stated interest payments.

             Under current law, any gain recognised on the maturity or disposition of a Market Discount
      Certificate (including any payment on a Certificate that is not qualified stated interest) will be treated as
      ordinary income to the extent that the gain does not exceed the accrued market discount on the
      Certificate. Alternatively, a U.S. Holder of a Market Discount Certificate may elect to include market
      discount in income currently over the life of the Certificate. This election will apply to all debt
      instruments with market discount acquired by the electing U.S. Holder on or after the first day of the
      first taxable year to which the election applies. This election may not be revoked without the consent of
      the Internal Revenue Service (the “IRS”). A U.S. Holder of a Market Discount Certificate that does not
      elect to include market discount in income currently will generally be required to defer deductions for
      interest on borrowings incurred to purchase or carry a Market Discount Certificate that is in excess of
      the interest and OID on the Certificate includible in the U.S. Holder’s income, to the extent that this
      excess interest expense does not exceed the portion of the market discount allocable to the days on
      which the Market Discount Certificate was held by the U.S. Holder.

            Under current law, market discount will accrue on a straight-line basis unless the U.S. Holder
      elects to accrue the market discount on a constant-yield method. This election applies only to the
      Market Discount Certificate with respect to which it is made and is irrevocable.

3.    Variable Interest Rate Certificates

       Certificates that provide for interest at variable rates (“Variable Interest Rate Certificates”) generally
will bear interest at a “qualified floating rate” and thus will be treated as “variable rate debt instruments”
under Treasury regulations governing accrual of OID. A Variable Interest Rate Certificate will qualify as a
“variable rate debt instrument” if (a) its issue price does not exceed the total noncontingent principal
payments due under the Variable Interest Rate Certificate by more than a specified de minimis amount, (b) it
provides for stated interest, paid or compounded at least annually, at (i) one or more qualified floating rates,
(ii) a single fixed rate and one or more qualified floating rates, (iii) a single objective rate, or (iv) a single
fixed rate and a single objective rate that is a qualified inverse floating rate, and (c) it does not provide for
any principal payments that are contingent (other than as described in (a) above).




                                                        91
      A “qualified floating rate” is any variable rate where variations in the value of the rate can reasonably
be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in
which the Variable Interest Rate Certificate is denominated. A fixed multiple of a qualified floating rate will
constitute a qualified floating rate only if the multiple is greater than 0.65 but not more than 1.35. A variable
rate equal to the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more
than 1.35, increased or decreased by a fixed rate, will also constitute a qualified floating rate. In addition, two
or more qualified floating rates that can reasonably be expected to have approximately the same values
throughout the term of the Variable Interest Rate Certificate (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Interest Rate Certificate’s issue
date) will be treated as a single qualified floating rate. Notwithstanding the foregoing, a variable rate that
would otherwise constitute a qualified floating rate but which is subject to one or more restrictions such as a
maximum numerical limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may, under
certain circumstances, fail to be treated as a qualified floating rate.

      An “objective rate” is a rate that is not itself a qualified floating rate but which is determined using a
single fixed formula and which is based on objective financial or economic information (e.g., one or more
qualified floating rates or the yield of actively traded personal property). A rate will not qualify as an
objective rate if it is based on information that is within the control of the Issuer (or a related party) or that is
unique to the circumstances of the Issuer (or a related party), such as dividends, profits or the value of the
Issuer’s stock (although a rate does not fail to be an objective rate merely because it is based on the credit
quality of the Issuer). Other variable interest rates may be treated as objective rates if so designated by the
IRS in the future. Despite the foregoing, a variable rate of interest on a Variable Interest Rate Certificate will
not constitute an objective rate if it is reasonably expected that the average value of the rate during the first
half of the Variable Interest Rate Certificate’s term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the Variable Interest Rate Certificate’s term.
A “qualified inverse floating rate” is any objective rate where the rate is equal to a fixed rate minus a
qualified floating rate, as long as variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. If a Variable Interest Rate Certificate provides for
stated interest at a fixed rate for an initial period of one year or less followed by a variable rate that is either
a qualified floating rate or an objective rate for a subsequent period and if the variable rate on the Variable
Interest Rate Certificate’s issue date is intended to approximate the fixed rate (e.g., the value of the variable
rate on the issue date does not differ from the value of the fixed rate by more than 25 basis points), then the
fixed rate and the variable rate together will constitute either a single qualified floating rate or objective rate,
as the case may be.

       A qualified floating rate or objective rate in effect at any time during the term of the instrument must be
set at a “current value” of that rate. A “current value” of a rate is the value of the rate on any day that is no
earlier than 3 months prior to the first day on which that value is in effect and no later than 1 year following
that first day.

       If a Variable Interest Rate Certificate that provides for stated interest at either a single qualified floating
rate or a single objective rate throughout the term thereof qualifies as a “variable rate debt instrument”, then
any stated interest on the Certificate which is unconditionally payable in cash or property (other than debt
instruments of the Issuer) at least annually will constitute qualified stated interest and will be taxed
accordingly. Thus, a Variable Interest Rate Certificate that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof and that qualifies as a “variable
rate debt instrument” will generally not be treated as having been issued with OID unless the Variable Interest
Rate Certificate is issued at a “true” discount (i.e., at a price below the Certificate’s stated principal amount)
in excess of a specified de minimis amount. OID on a Variable Interest Rate Certificate arising from “true”
discount is allocated to an accrual period using the constant yield method described above by assuming that
the variable rate is a fixed rate equal to (i) in the case of a qualified floating rate or qualified inverse floating
rate, the value, as of the issue date, of the qualified floating rate or qualified inverse floating rate, or (ii) in
the case of an objective rate (other than a qualified inverse floating rate), a fixed rate that reflects the yield
that is reasonably expected for the Variable Interest Rate Certificate.

      In general, any other Variable Interest Rate Certificate that qualifies as a “variable rate debt instrument”
will be converted into an “equivalent” fixed rate debt instrument for purposes of determining the amount and
accrual of OID and qualified stated interest on the Variable Interest Rate Certificate. Such a Variable Interest
Rate Certificate must be converted into an “equivalent” fixed rate debt instrument by substituting any
qualified floating rate or qualified inverse floating rate provided for under the terms of the Variable Interest
Rate Certificate with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating


                                                         92
rate, as the case may be, as of the Variable Interest Rate Certificate’s issue date. Any objective rate (other
than a qualified inverse floating rate) provided for under the terms of the Variable Interest Rate Certificate is
converted into a fixed rate that reflects the yield that is reasonably expected for the Variable Interest Rate
Certificate. In the case of a Variable Interest Rate Certificate that qualifies as a “variable rate debt instrument”
and provides for stated interest at a fixed rate in addition to either one or more qualified floating rates or a
qualified inverse floating rate, the fixed rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Interest Rate Certificate provides for a qualified inverse floating rate).
Under these circumstances, the qualified floating rate or qualified inverse floating rate that replaces the fixed
rate must be such that the fair market value of the Variable Interest Rate Certificate as of the Variable Interest
Rate Certificate’s issue date is approximately the same as the fair market value of an otherwise identical debt
instrument that provides for either the qualified floating rate or qualified inverse floating rate rather than the
fixed rate. Subsequent to converting the fixed rate into either a qualified floating rate or a qualified inverse
floating rate, the Variable Interest Rate Certificate is converted into an “equivalent” fixed rate debt instrument
in the manner described above.

      Once the Variable Interest Rate Certificate is converted into an “equivalent” fixed rate debt instrument
pursuant to the foregoing rules, the amount of OID and qualified stated interest, if any, are determined for the
“equivalent” fixed rate debt instrument by applying the general OID rules to the “equivalent” fixed rate debt
instrument and a U.S. Holder of the Variable Interest Rate Certificate will account for the OID and qualified
stated interest as if the U.S. Holder held the “equivalent” fixed rate debt instrument. In each accrual period,
appropriate adjustments will be made to the amount of qualified stated interest or OID assumed to have been
accrued or paid with respect to the “equivalent” fixed rate debt instrument in the event that these amounts
differ from the actual amount of interest accrued or paid on the Variable Interest Rate Certificate during the
accrual period.

      If a Variable Interest Rate Certificate, such as a Certificate the payments on which are determined by
reference to an index, does not qualify as a “variable rate debt instrument”, then the Variable Interest Rate
Certificate will be treated as a contingent payment debt obligation. See “Contingent Payment Debt
Instruments” below for a discussion of the U.S. federal income tax treatment of such Certificates.

4.    Certificates Purchased at a Premium

      A U.S. Holder that purchases a Certificate for an amount in excess of its principal amount, or for a
Discount Certificate, its stated redemption price at maturity, may elect to treat the excess as “amortisable
bond premium”, in which case the amount required to be included in the U.S. Holder’s income each year
with respect to interest on the Certificate will be reduced by the amount of amortisable bond premium
allocable (based on the Certificate’s yield to maturity) to that year. Any election to amortise bond premium
will apply to all bonds (other than bonds the interest on which is excludable from gross income for U.S.
federal income tax purposes) held by the U.S. Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the U.S. Holder, and is irrevocable without the consent of the IRS.
See also “Original Issue Discount – Election to Treat All Interest as Original Issue Discount”.

5.    Election to Treat All Interest as Original Issue Discount

      A U.S. Holder may elect to include in gross income all interest that accrues on a Certificate using the
constant-yield method described above under “Original Issue Discount – General,” with certain modifications.
For purposes of this election, interest includes stated interest, OID, de minimis OID, market discount, de
minimis market discount and unstated interest, as adjusted by any amortisable bond premium (described
above under “Certificates Purchased at a Premium”) or acquisition premium. This election will generally
apply only to the Certificate with respect to which it is made and may not be revoked without the consent of
the IRS. If the election to apply the constant-yield method to all interest on a Certificate is made with respect
to a Market Discount Certificate, the electing U.S. Holder will be treated as having made the election
discussed above under “Market Discount” to include market discount in income currently over the life of all
debt instruments with market discount held or thereafter acquired by the U.S. Holder. U.S. Holders should
consult their tax advisers concerning the propriety and consequences of this election.

6.    Contingent Payment Debt Instruments

      Certain Series or Tranches of Certificates may be treated as “contingent payment debt instruments” for
U.S. federal income tax purposes (“Contingent Certificates”). Under applicable U.S. Treasury regulations,
interest on Contingent Certificates will be treated as OID, and must be accrued on a constant-yield basis


                                                         93
based on a yield to maturity that reflects the rate at which the Issuer would issue a comparable fixed-rate
non-exchangeable instrument (the “comparable yield”), in accordance with a projected payment schedule.
This projected payment schedule must include each non-contingent payment on the Contingent Certificates
and an estimated amount for each contingent payment, and must produce the comparable yield.

       The Issuer is required to provide to holders, solely for U.S. federal income tax purposes, a schedule of
the projected amounts of payments on Contingent Certificates. This schedule must produce the comparable
yield.

    THE COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE WILL NOT BE
DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF INTEREST
ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF CONTINGENT CERTIFICATES FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES AND WILL NOT CONSTITUTE A
PROJECTION OR REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE TO THE
HOLDERS OF THE CERTIFICATES.

      The use of the comparable yield and the calculation of the projected payment schedule will be based
upon a number of assumptions and estimates and will not be a prediction, representation or guarantee of the
actual amounts of interest that may be paid to a U.S. Holder or the actual yield of the Contingent Certificates.
A U.S. Holder will generally be bound by the comparable yield and the projected payment schedule
determined by the Issuer, unless the U.S. Holder determines its own comparable yield and projected payment
schedule and explicitly discloses such schedule to the IRS, and explains to the IRS the reason for preparing
its own schedule. The Issuer’s determination, however, is not binding on the IRS, and it is possible that the
IRS could conclude that some other comparable yield or projected payment schedule should be used instead.

      A U.S. Holder of a Contingent Certificate will generally be required to include OID in income pursuant
to the rules discussed in the third paragraph under “Original Issue Discount – General”, above, applied to the
projected payment schedule. The “adjusted issue price” of a Contingent Certificate at the beginning of any
accrual period is the issue price of the Certificate increased by the amount of accrued OID for each prior
accrual period, and decreased by the projected amount of any payments on the Certificate. No additional
income will be recognised upon the receipt of payments of stated interest in amounts equal to the annual
payments included in the projected payment schedule described above. Any differences between actual
payments received by the U.S. Holder on the Certificates in a taxable year and the projected amount of those
payments will be accounted for as additional interest (in the case of a positive adjustment) or as an offset to
interest income in respect of the Certificate (in the case of a negative adjustment), for the taxable year in
which the actual payment is made. If the negative adjustment for any taxable year exceeds the amount of OID
on the Contingent Certificate for that year, the excess will be treated as an ordinary loss, but only to the
extent the U.S. Holder’s total OID inclusions on the Contingent Certificate exceed the total amount of any
ordinary loss in respect of the Contingent Certificate claimed by the U.S. Holder under this rule in prior
taxable years. Any negative adjustment that is not allowed as an ordinary loss for the taxable year is carried
forward to the next taxable year, and is taken into account in determining whether the U.S. Holder has a net
positive or negative adjustment for that year. However, any negative adjustment that is carried forward to a
taxable year in which the Contingent Certificate is sold, exchanged or retired, to the extent not applied to
OID accrued for such year, reduces the U.S. Holder’s amount realised on the sale, exchange or retirement.

7.   Purchase, Sale and Retirement of Certificates

     Certificates other than Contingent Certificates

          A U.S. Holder’s tax basis in a Certificate will generally be its cost, increased by the amount of
     any OID or market discount included in the U.S. Holder’s income with respect to the Certificate and the
     amount, if any, of income attributable to de minimis OID and de minimis market discount included in
     the U.S. Holder’s income with respect to the Certificate, and reduced by (i) the amount of any
     payments that are not qualified stated interest payments, and (ii) the amount of any amortisable bond
     premium applied to reduce interest on the Certificate.

           A U.S. Holder will generally recognise gain or loss on the sale or retirement of a Certificate equal
     to the difference between the amount realised on the sale or retirement and the tax basis of the
     Certificate. The amount realised does not include the amount attributable to accrued but unpaid interest,
     which will be taxable as interest income to the extent not previously included in income. Except to the
     extent described above under “Original Issue Discount – Market Discount” or “Original Issue Discount


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     – Short Term Certificates” or attributable to changes in exchange rates (as discussed below), gain or
     loss recognised on the sale or retirement of a Certificate will be capital gain or loss and will be
     long-term capital gain or loss if the U.S. Holder’s holding period in the Certificates exceeds one year.

           Gain or loss realised by a U.S. Holder on the sale or retirement of a Certificate generally will be
     U.S. source.

     Contingent Certificates

           Gain from the sale or retirement of a Contingent Certificate will be treated as interest income
     taxable at ordinary income (rather than capital gains) rates. Any loss will be ordinary loss to the extent
     that the U.S. Holder’s total interest inclusions to the date of sale or retirement exceed the total net
     negative adjustments that the U.S. Holder took into account as ordinary loss, and any further loss will
     be capital loss. Gain or loss realised by a U.S. Holder on the sale or retirement of a Contingent
     Certificate will generally be foreign source.

           A U.S. Holder’s tax basis in a Contingent Certificate will generally be equal to its cost, increased
     by the amount of interest previously accrued with respect to the Certificate (determined without regard
     to any positive or negative adjustments reflecting the difference between actual payments and projected
     payments), increased or decreased by the amount of any positive or negative adjustment that the Holder
     is required to make to account for the difference between the Holder’s purchase price for the Certificate
     and the adjusted issue price of the Certificate at the time of the purchase, and decreased by the amount
     of any projected payments scheduled to be made on the Certificate to the U.S. Holder through such date
     (without regard to the actual amount paid).

8.   Foreign Currency Certificates

     Interest

            If an interest payment is denominated in, or determined by reference to, a foreign currency, the
     amount of income recognised by a cash basis U.S. Holder will be the U.S. dollar value of the interest
     payment, based on the exchange rate in effect on the date of receipt, regardless of whether the payment
     is in fact converted into U.S. dollars.

           An accrual basis U.S. Holder may determine the amount of income recognised with respect to an
     interest payment denominated in, or determined by reference to, a foreign currency in accordance with
     either of two methods. Under the first method, the amount of income accrued will be based on the
     average exchange rate in effect during the interest accrual period (or, in the case of an accrual period
     that spans two taxable years of a U.S. Holder, the part of the period within the taxable year).

            Under the second method, the U.S. Holder may elect to determine the amount of income accrued
     on the basis of the exchange rate in effect on the last day of the accrual period (or, in the case of an
     accrual period that spans two taxable years, the exchange rate in effect on the last day of the part of the
     period within the taxable year). Additionally, if a payment of interest is actually received within five
     business days of the last day of the accrual period, an electing accrual basis U.S. Holder may instead
     translate the accrued interest into U.S. dollars at the exchange rate in effect on the day of actual receipt.
     Any such election will apply to all debt instruments held by the U.S. Holder at the beginning of the
     first taxable year to which the election applies or thereafter acquired by the U.S. Holder, and will be
     irrevocable without the consent of the IRS.

            Upon receipt of an interest payment (including a payment attributable to accrued but unpaid
     interest upon the sale or retirement of a Certificate) denominated in, or determined by reference to, a
     foreign currency, the U.S. Holder may recognise U.S. source exchange gain or loss (taxable as ordinary
     income or loss) equal to the difference between the amount received (translated into U.S. dollars at the
     spot rate on the date of receipt) and the amount previously accrued, regardless of whether the payment
     is in fact converted into U.S. dollars.




                                                       95
OID

      OID for each accrual period on a Discount Certificate that is denominated in, or determined by
reference to, a foreign currency, will be determined in the foreign currency and then translated into U.S.
dollars in the same manner as stated interest accrued by an accrual basis U.S. Holder, as described
above. Upon receipt of an amount attributable to OID (whether in connection with a payment on the
Certificate or a sale or disposition of the Certificate), a U.S. Holder may recognise U.S. source
exchange gain or loss (taxable as ordinary income or loss) equal to the difference between the amount
received (translated into U.S. dollars at the spot rate on the date of receipt) and the amount previously
accrued, regardless of whether the payment is in fact converted into U.S. dollars.

Market Discount

      Market discount on a Certificate that is denominated in, or determined by reference to, a foreign
currency, will be accrued in the foreign currency. If the U.S. Holder elects to include market discount in
income currently, the accrued market discount will be translated into U.S. dollars at the average
exchange rate for the accrual period (or portion thereof within the U.S. Holder’s taxable year). Upon the
receipt of an amount attributable to accrued market discount, the U.S. Holder may recognise U.S.
source exchange gain or loss (which will be taxable as ordinary income or loss) determined in the same
manner as for accrued interest or OID. A U.S. Holder that does not elect to include market discount in
income currently will recognise, upon the disposition or maturity of the Certificate, the U.S. dollar value
of the amount accrued, calculated at the spot rate on that date, and no part of this accrued market
discount will be treated as exchange gain or loss.

Bond Premium

      Bond premium (including acquisition premium) on a Certificate that is denominated in, or
determined by reference to, a foreign currency, will be computed in units of the foreign currency, and
any such bond premium that is taken into account currently will reduce interest income in units of the
foreign currency. On the date bond premium offsets interest income, a U.S. Holder may recognise U.S.
source exchange gain or loss (taxable as ordinary income or loss) equal to the amount offset multiplied
by the difference between the spot rate in effect on the date of the offset, and the spot rate in effect on
the date the Certificates were acquired by the U.S. Holder. A U.S. Holder that does not elect to take
bond premium (other than acquisition premium) into account currently will recognise a market loss
when the Certificate matures.

Foreign Currency Contingent Certificates

      Special rules apply to determine the accrual of OID, and the amount, timing, source and character
of any gain or loss on a Contingent Certificate that is denominated in, or determined by reference to, a
foreign currency (a “Foreign Currency Contingent Certificate”). The rules applicable to Foreign
Currency Contingent Certificates are complex, and U.S. Holders are urged to consult their tax advisers
concerning the application of these rules.

      Under these rules, a U.S. Holder of a Foreign Currency Contingent Certificate will generally be
required to accrue OID in the foreign currency in which the Foreign Currency Contingent Certificate is
denominated (i) at a yield at which the Issuer would issue a fixed rate debt instrument denominated in
the same foreign currency with terms and conditions similar to those of the Foreign Currency
Contingent Certificate, and (ii) in accordance with a projected payment schedule determined by the
Issuer, under rules similar to those described above under “Contingent Payment Debt Instruments”. The
amount of OID on a Foreign Currency Contingent Certificate that accrues in any accrual period will be
the product of the comparable yield of the Foreign Currency Contingent Certificate (adjusted to reflect
the length of the accrual period) and the adjusted issue price of the Foreign Currency Contingent
Certificate. The adjusted issue price of a Foreign Currency Contingent Certificate will generally be
determined under the rules described above, and will be denominated in the foreign currency of the
Foreign Currency Contingent Certificate.

      OID on a Foreign Currency Contingent Certificate will be translated into U.S. dollars under
translation rules similar to those described above under “Foreign Currency-Interest”. Any positive
adjustment (i.e. the excess of actual payments over projected payments) in respect of a Foreign
Currency Contingent Certificate for a taxable year will be translated into U.S. dollars at the spot rate on


                                                 96
the last day of the taxable year in which the adjustment is taken into account, or if earlier, the date on
which the Foreign Currency Contingent Certificate is disposed of. The amount of any negative
adjustment on a Foreign Currency Contingent Certificate (i.e. the excess of projected payments over
actual payments) that is offset against accrued but unpaid OID will be translated into U.S. dollars at the
same rate at which the OID was accrued. To the extent a net negative adjustment exceeds the amount of
accrued but unpaid OID, the negative adjustment will be treated as offsetting OID that has accrued and
been paid on the Foreign Currency Contingent Certificate, and will be translated into U.S. dollars at the
spot rate on the date the Foreign Currency Contingent Certificate was issued. Any net negative
adjustment carry forward will be carried forward in the relevant foreign currency.

Sale or Retirement

      Certificates other than Foreign Currency Contingent Certificates. As discussed above under
“Purchase, Sale and Retirement of Certificates”, a U.S. Holder will generally recognise gain or loss on
the sale or retirement of a Certificate equal to the difference between the amount realised on the sale or
retirement and its tax basis in the Certificate. A U.S. Holder’s tax basis in a Certificate that is
denominated in a foreign currency will be determined by reference to the U.S. dollar cost of the
Certificate increased by the amount of any OID or market discount included in the U.S. Holder’s
income with respect to the Note (translated into U.S. dollars using the exchange rate applicable to such
OID or market discount) and reduced by (i) the U.S. dollar amount of any principal paid on the Note,
and (ii) the U.S. dollar amount of any amortisable bond premium applied to reduce interest on the Note.
The U.S. dollar cost of a Certificate purchased with foreign currency will generally be the U.S. dollar
value of the purchase price on the date of purchase, or the settlement date for the purchase, in the case
of Certificates traded on an established securities market, within the meaning of the applicable Treasury
Regulations, that are purchased by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so
elects).

      The amount realised on a sale or retirement for an amount in foreign currency will be the U.S.
dollar value of this amount on the date of sale or retirement, or the settlement date for the sale, in the
case of Certificates traded on an established securities market, within the meaning of the applicable
Treasury Regulations, sold by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects).
Such an election by an accrual basis U.S. Holder must be applied consistently from year to year and
cannot be revoked without the consent of the IRS.

       A U.S. Holder will recognise U.S. source exchange rate gain or loss (taxable as ordinary income
or loss) on the sale or retirement of a Certificate equal to the difference, if any, between the U.S. dollar
values of the U.S. Holder’s purchase price for the Certificate (or, if less, the principal amount of the
Certificate) (i) on the date of sale or retirement and (ii) the date on which the U.S. Holder acquired the
Certificate. Any such exchange rate gain or loss will be realised only to the extent of total gain or loss
realised on the sale or retirement (including any exchange gain or loss with respect to the receipt of
accrued but unpaid interest).

      Foreign Currency Contingent Certificates. Upon a sale, exchange or retirement of a Foreign
Currency Contingent Certificate, a U.S. Holder will generally recognise taxable gain or loss equal to the
difference between the amount realised on the sale, exchange or retirement and the U.S. Holder’s tax
basis in the Foreign Currency Contingent Certificate, both translated into U.S. dollars as described
below. A U.S. Holder’s tax basis in a Foreign Currency Contingent Certificate will equal (i) the cost
thereof (translated into U.S. dollars at the spot rate on the issue date), (ii) increased by the amount of
OID previously accrued on the Foreign Currency Contingent Certificate (disregarding any positive or
negative adjustments and translated into U.S. dollars using the exchange rate applicable to such OID)
and (iii) decreased by the projected amount of all prior payments in respect of the Foreign Currency
Contingent Certificate. The U.S. dollar amount of the projected payments described in clause (iii) of the
preceding sentence is determined by (i) first allocating the payments to the most recently accrued OID
to which prior amounts have not already been allocated and translating those amounts into U.S. dollars
at the rate at which the OID was accrued and (ii) then allocating any remaining amount to principal and
translating such amount into U.S. dollars at the spot rate on the date the Foreign Currency Contingent
Certificate was acquired by the U.S. Holder. For this purpose, any accrued OID reduced by a negative
adjustment carry forward will be treated as principal.




                                                 97
            The amount realised by a U.S. Holder upon the sale, exchange or retirement of a Foreign
     Currency Contingent Certificate will equal the amount of cash and the fair market value (determined in
     foreign currency) of any property received. If a U.S. Holder holds a Foreign Currency Contingent
     Certificate until its scheduled maturity, the U.S. dollar equivalent of the amount realised will be
     determined by separating such amount realised into principal and one or more OID components, based
     on the principal and OID comprising the U.S. Holder’s basis, with the amount realised allocated first to
     OID (and allocated to the most recently accrued amounts first) and any remaining amounts allocated to
     principal. The U.S. dollar equivalent of the amount realised upon a sale, exchange or unscheduled
     retirement of a Foreign Currency Contingent Certificate will be determined in a similar manner, but will
     first be allocated to principal and then any accrued OID (and will be allocated to the earliest accrued
     amounts first). Each component of the amount realised will be translated into U.S. dollars using the
     exchange rate used with respect to the corresponding principal or accrued OID. The amount of any gain
     realised upon a sale, exchange or unscheduled retirement of a Foreign Currency Contingent Certificate
     will be equal to the excess of the amount realised over the holder’s tax basis, both expressed in foreign
     currency, and will be translated into U.S. dollars using the spot rate on the payment date. Gain from the
     sale or retirement of a Foreign Currency Contingent Certificate will generally be treated as interest
     income taxable at ordinary income (rather than capital gains) rates. Any loss will be ordinary loss to the
     extent that the U.S. Holder’s total OID inclusions to the date of sale or retirement exceed the total net
     negative adjustments that the U.S. Holder took into account as ordinary loss, and any further loss will
     be capital loss. Gain or loss realised by a U.S. Holder on the sale or retirement of a Foreign Currency
     Contingent Certificate will generally be foreign source. Prospective purchasers should consult their tax
     advisers as to the foreign tax credit implications of the sale or retirement of Foreign Currency
     Contingent Certificates.

           A U.S. Holder will also recognise U.S. source exchange rate gain or loss (taxable as ordinary
     income or loss) on the receipt of foreign currency in respect of a Foreign Currency Contingent
     Certificate if the exchange rate in effect on the date the payment is received differs from the rate
     applicable to the principal or accrued OID to which such payment relates.

     Disposition of Foreign Currency

           Foreign currency received as interest on a Certificate or on the sale or retirement of a Certificate
     will have a tax basis equal to its U.S. dollar value at the time the foreign currency is received. Foreign
     currency that is purchased will generally have a tax basis equal to the U.S. dollar value of the foreign
     currency on the date of purchase. Any gain or loss recognised on a sale or other disposition of a foreign
     currency (including its use to purchase Certificates or upon exchange for U.S. dollars) will be U.S.
     source ordinary income or loss.

U.S. Federal Income Tax Treatment of Certificates Not Treated as Debt

      The following summary may apply to Certificates that are not treated as debt for U.S. federal income
tax purposes. This summary does not discuss all types of Certificates that may not be treated as debt for U.S.
federal income tax purposes. The applicable Final Terms will specify if the discussion below will apply to the
Certificates. The U.S. federal income tax consequences of owning Certificates that are not treated as debt for
U.S. federal income tax purposes and are not described below will be discussed, as appropriate, in the
applicable Final Terms.

1.   Forward Certificates

     General

           A Certificate that provides for a payment in redemption at maturity that is based on the value of
     one or more Reference Items (whether physically settled by delivery of those Reference Items or settled
     in cash) and does not provide for a current coupon, may be identified as a “Forward Certificate” by
     the Issuer in the applicable Final Terms or any Prospectus or series prospectus. A U.S. Holder of a
     Forward Certificate would generally be subject to the U.S. federal income tax consequences discussed
     below.

           Legislation was recently proposed in the U.S. House of Representatives that would require a
     holder of an instrument such as a Forward Certificate to accrue interest income on a current basis in
     certain circumstances. In addition, the IRS and the U.S. Department of Treasury have recently


                                                     98
     announced that they are considering whether the holder of an instrument such as a Forward Certificate
     should be required to accrue ordinary income on a current basis. It is not possible to predict the final
     form of any legislative or regulatory changes that might affect holders of instruments such as the
     Forward Certificates, but it is possible that any such changes could be applied retroactively. The IRS
     and U.S. Department of Treasury are also considering other relevant issues, including whether gain or
     loss from these instruments should be treated as ordinary or capital, whether foreign holders of these
     instruments should be subject to withholding tax on any deemed income accruals, and whether the
     special constructive ownership rules of Section 1260 of the Code might be applied to these instruments.
     Holders are urged to consult their tax advisers concerning the potential impact of these proposals. The
     Issuers intend to treat the Forward Certificates as described below, unless and until the Issuers
     determine, based on future developments, that a different treatment is appropriate.

     Characterisation

           A Forward Certificate should constitute a prepaid forward contract for U.S. federal income tax
     purposes. Under current law, U.S. Holders should not be required to recognise income or loss upon the
     acquisition of a Certificate, and U.S. Holders should not be required to accrue income with respect to a
     Certificate over the life of the Certificate.

     Purchase, Sale and Retirement

            A U.S. Holder will recognise U.S. source gain or loss on the sale or retirement for cash of a
     Forward Certificate equal to the difference between the amount of cash received upon sale or retirement
     and the U.S. Holder’s tax basis in the Certificate. A U.S. Holder’s tax basis in a Forward Certificate
     will generally be the Certificate’s U.S. Dollar cost. The U.S. Dollar cost of a Forward Certificate
     purchased with a foreign currency will generally be the U.S. Dollar value of the purchase price on the
     date of purchase increased by the nominal exercise price, if any, paid by the U.S. Holder. Except as
     provided under “Constructive Ownership Transactions” below, any gain or loss recognised on the sale
     or retirement of a Forward Certificate will be capital gain or loss and will be long-term capital gain or
     loss if the U.S. Holder’s holding period in the Certificate exceeds one year.

           Upon a retirement of a Forward Certificate by physical delivery of the Reference Items, a U.S.
     Holder will not be required to recognise gain or loss at that time. A U.S. Holder will have a basis in the
     Reference Items equal to the U.S. Holder’s basis in the Forward Certificate. A U.S. Holder’s holding
     period in the Reference Items will not include the U.S. Holder’s holding period in the Forward
     Certificates.

2.   Option Certificates

      A Certificate that provides for a payment in redemption at maturity that may under certain
circumstances be based on the value of one or more Reference Items (whether physically settled by delivery
of those Reference Items or settled in cash) and also provides for a current coupon, may be identified as an
“Option Certificate” by the Issuer. The discussion below describes the U.S. federal income tax consequences
to a U.S. Holder of holding Option Certificates.

       The treatment of Option Certificates for U.S. federal income tax purposes is highly uncertain. It would
be reasonable to treat the purchase of an Option Certificate by a U.S. Holder as a grant by the U.S. Holder to
the Issuer of an option contract (the “Put Option”), pursuant to which the U.S. Holder may be required to
purchase from the Issuer one or more the Reference Items (or an amount equal to the value of the Reference
Items in the case of a cash-settled Option Certificate), and under which option (a) at the time of the issuance
of the Option Certificate the U.S. Holder deposits irrevocably with the Issuer a fixed amount of cash to assure
the fulfilment of the holder’s purchase obligation described below (the “Deposit”), (b) until maturity the
Issuer will be obligated to pay interest to the U.S. Holder, as compensation for the use of the cash Deposit
during the term of the Option Certificate, (c) the Issuer will be obligated to pay an option premium to the
holder in consideration for granting the option (the “Put Premium”), which premium will be payable as part
of the coupon payments, (d) if pursuant to the terms of the Option Certificates at maturity the holder is
obligated to purchase the Reference Item(s), then the Deposit will be applied by the Issuer in full satisfaction
of the holder’s purchase obligation under the Put Option, and the Issuer will deliver to the holder the number
of Reference Items that the holder is entitled to receive at that time pursuant to the terms of the Certificates
(or, if the Option Certificates are cash settled, a cash amount equal to the value of the Reference items), and



                                                      99
(e) if pursuant to the terms of the Option Certificates the holder is not obligated to purchase the Reference
Items at maturity, the Issuer will return the cash Deposit to the U.S. Holder at maturity. The discussion below
assumes that an Option Certificate is so treated, except as explicitly provided.

      Amounts paid to the Issuer in respect of the original issue of the Option Certificates will be treated as
allocable in their entirety to the amount of the cash Deposit attributable to such Certificates. A portion of the
coupon on the Certificates will be characterised as interest payable on the amount of such Deposit, includible
in the income of a U.S. Holder as interest in the manner described below. A portion of the coupon will be
characterised as Put Premium, includible in the income of a U.S. Holder in the manner described below.
There is no assurance that the IRS will agree with this treatment, and alternative treatments of the Option
Certificates could result in less favourable U.S. federal income tax consequences to a holder, including a
requirement to accrue income with respect to the Put Option on a current basis.

     Interest Payments

           Interest payments on the Deposit will generally be included in the income of a U.S. Holder as
     interest at the time that such interest is accrued or received in accordance with such U.S. Holder’s
     method of accounting. If the Option Certificates are issued at a discount or have a term of one year or
     less, U.S. Holders will be subject to the rules discussed above under “U.S. Federal Income Tax
     Treatment of Certificates Treated as Debt – Original Issue Discount” with respect to interest or OID
     payable on the Deposit. Interest paid by the Issuer and OID, if any, accrued with respect to the Option
     Certificates, generally constitute income from sources outside the United States.

     Payments of Put Premium

           Payments of the Put Premium will not be included in the income of a U.S. Holder until sale or
     other taxable disposition of Option Certificates or retirement of Option Certificates for cash; if the
     Option Certificate is settled by delivery of Reference Items, the payments of Put Premium will instead
     be incorporated into the U.S. Holder’s basis in the such Reference Items. Upon the sale or other taxable
     disposition of Option Certificates or at maturity, as the case may be, the Put Premium payment will be
     treated in the manner described below.

     Retirement of an Option Certificate for Cash

           If the Put Option is deemed not to have been exercised at maturity, the cash payment of the full
     principal amount of the Option Certificate at maturity would likely be treated as (i) payment in full of
     the principal amount of the Deposit (which would likely not result in the recognition of gain or loss to
     an initial purchaser) and (ii) the lapse of the Put Option, which would likely result in a U.S. Holder’s
     recognition of U.S. source short-term capital gain in an amount equal to the Put Premium paid to the
     Holder.

           If the Put Option is deemed to be exercised at maturity and is cash-settled, the payment at
     maturity would likely be treated as (i) payment in full of the principal amount of the Deposit (resulting
     in neither gain nor loss for an initial purchaser) and (ii) the exercise by the Issuer of the Put Option.
     The exercise of the Put Option would result in U.S. source short-term capital gain or loss to the U.S.
     Holder in an amount equal to the difference between (i) the sum of the cash received at maturity (other
     than amounts attributable to accrued but unpaid interest) and all previous payments of Put Premium,
     and (ii) the holder’s adjusted basis in the Deposit, as determined under “U.S. Federal Income Tax
     Treatment of Certificates Treated as Debt – Purchase, Sale and Retirement of Certificates”.

     Other Retirement of an Option Certificate

           Delivery at maturity of Reference Items would likely be treated as (i) payment in full of the
     Deposit (resulting in neither gain nor loss for an initial purchaser) and (ii) the exercise by the Issuer of
     the Put Option and the U.S. Holder’s purchase of the Reference Items for an amount equal to the
     principal amount of the Option Certificate. The U.S. Holder will have a tax basis in the Reference Items
     equal to the principal amount of the Option Certificates less an amount equal to the aggregate amount
     of the Put Premium payments and less the portion of the tax basis of the Option Certificates allocable to
     any fractional Reference Item, as described in the next sentence. A U.S. Holder will recognise U.S.
     source gain or loss (which will be treated as short-term capital gain or loss) with respect to cash
     received in lieu of fractional Reference Items, in an amount equal to the difference between the cash


                                                      100
received and the portion of the basis of the Option Certificates allocable to fractional Reference Items
(based on the relative value of fractional Reference Items and full Reference Items delivered to the U.S.
Holder). A U.S. Holder’s holding period in the Reference Items received will not include the U.S.
Holder’s holding period in the Option Certificates.

Sale or Other Taxable Disposition of an Option Certificates Prior to Maturity

      Upon the sale or other taxable disposition of an Option Certificate, a U.S. Holder should allocate
the amount received between the Deposit and the Put Option on the basis of their respective values on
the date of sale or other disposition. The U.S. Holder should generally recognise U.S. source gain or
loss with respect to the Deposit in an amount equal to the difference between the amount of the sales
proceeds allocable to the Deposit and the U.S. Holder’s adjusted tax basis in the Deposit (which will
generally equal the issue price of the Option Certificate for an initial purchaser (as may be adjusted for
any accrued OID on the Deposit)). Except to the extent attributable to accrued but unpaid interest,
which will be taxed as such, this gain or loss will be long-term capital gain or loss if the U.S. Holder
has held the Option Certificates for more than one year. If the Put Option has a positive value on the
date of a sale of the Option Certificate, the U.S. Holder should recognise short-term capital gain equal
to the portion of the sale proceeds allocable to the Put Option plus any previously received Put
Premium. If the put option has a negative value on the date of sale, the U.S. Holder should be treated
as having paid the buyer an amount equal to the negative value in order to assume the U.S. Holder’s
rights and obligations under the Put Option. In such a case, the U.S. Holder should recognise U.S.
source short-term capital gain or loss in an amount equal to the difference between the total Put
Premium previously received and the amount of the payment deemed made by the U.S. Holder with
respect to the assumption of the Put Option.

Foreign Currency Option Certificates

       Option Certificates relating to Debt Instruments that are denominated in, or determined by
reference to, a foreign currency (“Foreign Currency Option Certificates”) will be subject to special
rules. Interest and OID denominated in, or determined by reference to, a foreign currency will generally
be subject to the rules described in “U.S. Federal Income Tax Treatment of Certificates Treated as Debt
– Foreign Currency Certificates” above.

      The treatment upon the sale, retirement or disposition of the Deposit, as described above, should
also be governed by the rules described under “U.S. Federal Income Tax Treatment of Certificates
Treated as Debt – Foreign Currency Certificates” above, regardless of whether the Option Certificate is
cash settled. A U.S. Holder will have a tax basis in any Reference Items received in an amount equal to
the excess of the purchase price of the Option Certificate, translated into U.S. dollars at the exchange
rate in effect on the date of retirement, over the total premium payments received, with each premium
likely translated into U.S. dollars at the exchange rate in effect on the date that it is received. U.S.
Holders should consult their tax advisers about the proper method for translating foreign currency with
respect to an Option Certificate into U.S. dollars.

Possible Alternative Characterisations

      Due to the absence of authority as to the proper characterisation of the Option Certificates, no
assurance can be given that the IRS will accept, or that a court will uphold, the characterisation and tax
treatment described above. It is possible, for example, that the IRS could maintain that amounts
denominated as Put Premium (i) should be includible in the U.S. Holder’s income as interest in the
manner described above regarding the interest payment, or (ii) should be included in a U.S. Holder’s
income even in a case where the Option Certificates is retired for Reference Items. Such treatment
might arise, for example, if the IRS were successfully to maintain that amounts denominated as Put
Premium (i) should be characterised for federal income tax purposes as interest, or (ii) should be treated
as a return on the U.S. Holder’s investment in the Option Certificates that constitutes income.
Alternatively, the IRS could maintain that the Option Certificates should be treated as contingent
payment debt obligations, in which case the U.S. Holder would be treated as owning Contingent
Certificates (or Foreign Currency Contingent Certificates), subject to the treatment discussed above
under “U.S. Federal Income Tax Treatment of Certificates Treated as Debt”.




                                                101
U.S. Federal Income Tax Treatment of Warrants

     General

           The following discussion assumes that the Warrants are properly treated as call options for U.S.
     federal income tax purposes.

     Sale, Exchange, Lapse or Cash Settlement of a Warrant

           A U.S. Holder will recognise U.S. source gain or loss on the sale or other disposition (including
     cash settlement or lapse) of a Warrant equal to the difference between the amount of cash received upon
     sale or disposition and the U.S. Holder’s tax basis in the Warrant. If a U.S. Holder’s Warrant expires
     unexercised, the U.S. Holder will recognise a loss equal to the U.S. Holder’s tax basis in the Warrant.

            A U.S. Holder’s tax basis in a Warrant will generally be the Warrant’s U.S. dollar cost. The U.S.
     dollar cost of a Warrant purchased with a foreign currency will generally be the U.S. dollar value of the
     purchase price on the date of purchase. The amount realised on a sale or other disposition for an
     amount in foreign currency will be the U.S. dollar value of this amount on the date of sale or
     retirement. Except as provided under “Constructive Ownership Transactions” below or to the extent
     attributable to exchange rate gain or loss, any gain or loss recognised on the sale or other disposition of
     a Warrant will be capital gain or loss. This capital gain or loss will be long-term capital gain or loss if
     the U.S. Holder’s holding period in the Warrant exceeds one year.

            In the case of Warrants relating to Debt Instruments that are denominated in a foreign currency, a
     U.S. Holder will recognise U.S. source exchange rate gain or loss (taxable as ordinary income or loss)
     on the sale or other disposition of the Warrant equal to the difference, if any, between the U.S. dollar
     values of the U.S. Holder’s purchase price for the Warrant (or, if less, the principal amount of the
     Warrant) (i) on the date of sale or retirement and (ii) the date on which the U.S. Holder acquired the
     Warrant. Any such exchange rate gain or loss will be realised only to the extent of total gain or loss
     realised on the sale or other disposition (including any exchange gain or loss with respect to the receipt
     of accrued but unpaid interest).

     Physical Settlement

           If a Warrant is physically settled by delivery of the Underlying Assets, a U.S. Holder will not be
     required to recognise gain or loss at that time. A U.S. Holder will have a basis in the Underlying Assets
     received equal to the sum of the U.S. dollar value of the Exercise Price determined at the spot rate on
     the date of exercise and the U.S. Holder’s basis in the Warrant. A U.S. Holder’s holding period in the
     Underlying Assets will not include the U.S. Holder’s holding period in the Warrant.

Constructive Ownership Transactions

      To the extent that a Security is treated as a constructive ownership transaction, any gain on disposition
may be treated as ordinary income and an interest charge may be imposed on a deemed underpayment of tax
for each taxable year during which the Security was held. For purposes of determining the interest charge,
gain treated as ordinary income is allocated to each such taxable year during which the Security was held so
that the amount of gain accrued from each year to the next increases at a constant rate equal to the
“applicable federal rate” (a rate published monthly by the IRS based on prevailing Treasury yields) in effect
at the time the Warrant is sold or redeemed.

      A Security could be treated in whole or in part as a constructive ownership transaction if the issuer of a
Reference Item and, if the Reference Item is an index, possibly the issuer of any security included in that
index is treated for U.S. federal income tax purposes as, among others, a passive foreign investment company,
a partnership, a trust, or a common trust fund.

      The Issuer does not intend to determine whether the issuers of any Reference Item in fact fall in any of
these categories. Prospective purchasers should consult their tax advisers regarding the status of the Reference
Items and the application of the constructive ownership transaction rules to ownership of the Security.




                                                      102
Backup Withholding and Information Reporting

      In general, the proceeds of a sale, exercise or other disposition of the Securities, payable to a U.S.
Holder by a U.S. paying agent or other U.S. intermediary will be reported to the IRS and to the U.S. Holder
as may be required under applicable regulations. Backup withholding may apply to these payments if the U.S.
Holder fails to provide an accurate taxpayer identification number or certification of exempt status. Certain
U.S. Holders are not subject to backup withholding. U.S. Holders should consult their tax advisers as to their
qualification for exemption from backup withholding and the procedure for obtaining an exemption.

New Legislation

      Recently enacted legislation imposes new reporting requirements on the holding of certain foreign
financial assets, including financial instruments and contracts issued by foreign entities, if the aggregate value
of all of these assets exceeds $50,000. The Securities are expected to constitute foreign financial assets
subject to these requirements unless the Securities are held in an account at a domestic financial institution.
U.S. Holders should consult their tax advisors regarding the application of this legislation.

     Potential purchasers who are in doubt about their tax position on purchase, ownership, transfer
or exercise of any Security should consult their own tax advisers.




                                                       103
                                     SUBSCRIPTION AND SALE

     Daiwa Capital Markets Europe has in an amended and restated programme agreement (the “Programme
Agreement”) dated 7 October 2010, agreed with the Issuer and the Guarantor a basis upon which it may from
time to time agree to purchase Securities. Any such agreement will extend to those matters stated under
“Form of Final Terms” and “Terms and Conditions of the Securities” above.

      No action has been or will be taken by the Issuer, the Guarantor or any Manager that would permit a
public offering of any Securities or possession or distribution of any offering material in relation to any
Securities in any jurisdiction where action for that purpose is required. No offers, sales, re-sales or deliveries
of any Securities, or distribution of any offering material relating to any Securities, may be made in or from
any jurisdiction except in circumstances which will result in compliance with any applicable laws and
regulations and which will not impose any obligation on the Issuer, the Guarantor and/or any Manager.

United States

       No Securities of any series have been, or will be, registered under the Securities Act or any state
securities law, and trading in the Securities has not been approved by the CFTC under the Commodity
Exchange Act. No Securities of any series, or interests therein, may at any time be sold, resold, traded or
delivered, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. person or
to others for sale, resale, trading or delivery, directly or indirectly, in the United States or to, or for the
account or benefit of, any U.S. person unless specified in the applicable Final Terms in compliance with any
applicable United States laws, including securities and commodities laws and regulations and state securities
laws. Offers, sales, resales, trades or deliveries of Securities of any series, or interests therein, directly or
indirectly in the United States or to, or for the account or benefit of, U.S. persons would constitute a violation
of United States securities laws unless made in compliance with the registration requirements of the Securities
Act or pursuant to an exemption therefrom. In addition, in the absence of relief from the CFTC, offers, sales,
resales, trades or deliveries of Securities, or interests therein, that relate to currencies, commodity prices or
broad-based indices, directly or indirectly, in the United States or to, or for the account or benefit of, U.S.
persons may constitute a violation of United States law governing commodities trading. Consequently, any
offer, sale, resale, trade or delivery made, directly or indirectly, within the United States or to, or for the
account or benefit of, a U.S. person will not be recognised except at the discretion of the Issuer upon
presentation to it of such evidence as it shall require regarding compliance with any applicable United States
laws, including securities and commodities laws and regulations. As used herein, “U.S. person” means any
“U.S. person” as such term may be defined in Regulation S under the Securities Act or in regulations adopted
under the Commodity Exchange Act.

        Unless an issue of Securities is eligible for sale in the United States, each Manager of an issue of
Securities may not at any time offer, sell, resell, trade or deliver, directly or indirectly, Securities of such
series in the United States or to, or for the account or benefit of, any U.S. person or to others for offer, sale,
resale, trade or delivery, directly or indirectly, in the United States or to, or for the account or benefit of, any
such U.S. person. Any person (other than an affiliate of the Issuer) who purchases Securities of any series
must agree with a Manager of such series or the seller of such Securities that unless specified in the
applicable Final Terms and unless the Issuer of the Securities consents in writing, (i) it will not at any time
offer, sell, resell, trade or deliver, directly or indirectly, any Securities of such series so purchased in the
United States or to, or for the account or benefit of, any U.S. person or to others for offer, sale, resale, trade
or delivery, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. person,
(ii) it is not purchasing any Securities of such series for the account or benefit of any U.S. person and (iii) it
will not make offers, sales, resales, trades or deliveries of any Securities of such series (otherwise acquired),
directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. person. Each
Manager of an issue of Securities must, and any person purchasing Securities of such series must agree, to
send each person who purchases any Securities of such series from it a written confirmation (which shall
include the definitions of “United States” and “U.S. persons” set forth herein) stating that the Securities have
not been registered under the Securities Act, that trading in the Securities has not been approved by the CFTC
under the Commodity Exchange Act and stating that such purchaser agrees that it will not at any time offer,
sell, resell, trade or deliver Securities, directly or indirectly, in the United States or to, or for the account or
benefit of, any U.S. person except as specified in the applicable Final Terms.

      The applicable Final Terms may provide that the Issuer may arrange for the offer and sale of a portion
of the Securities of a certain series within the United States exclusively to persons who are both QIBs and
QPs. For further information on certain restrictions on offers, sales, resales, trades or deliveries of Securities,


                                                        104
see “Transfer Restrictions”. Any person exercising a Warrant will be required to represent that it is not a U.S.
person or exercising such Warrant on behalf of a U.S. person (or, to the extent such Warrant is represented by
a Rule 144A Global Security, that it is a QIB who is also a QP). In order to receive delivery of any asset due
under a Warrant, the holder of a Warrant will be required to certify (in accordance with the provisions
outlined in “Subscription and Sale” below) that it is not a U.S. Person or exercising such Warrant on behalf
of a U.S. person. (See “Terms and Conditions of the Securities, Condition 7 – Exercise Procedure”). Any
person wishing to obtain physical delivery of any underlying assets upon redemption of any Certificate will
be required to represent that it is not a U.S. person or redeeming such Certificate on behalf of a U.S. person
(or, to the extent such Certificate is represented by a Rule 144A Global Security, that it is a QIB who is also
a QP). In order to receive delivery of any asset due under a Certificate, the holder of a Certificate will be
required to certify (in accordance with the provisions outlined in “Subscription and Sale” below) that it is not
a U.S. Person or exercising such Certificate on behalf of a U.S. person. (see “Terms and Conditions of the
Securities, Condition 9 – Redemption and Redemption Procedure for Certificates).

European Economic Area

      In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a “Relevant Member State”), each Manager appointed under the Programme will
be required to represent and agree that with effect from and including the date on which the Prospectus
Directive is implemented in that Member State (the “Relevant Implementation Date”) it has not made and
will not make an offer of Securities which are the subject of the offering contemplated by this Base
Prospectus as completed by the Final Terms in relation thereto to the public in that Relevant Member State,
except that it may, with effect from and including the Relevant Implementation Date, make an offer of
Securities to the public in that Relevant Member State:

      ¼     in (or in Germany, where the offer starts within) the period beginning on the date of publication
            of a prospectus in relation to those Securities which has been approved by the competent authority
            in that Relevant Member State or, where appropriate, approved in another Relevant Member State
            and notified to the competent authority in that Relevant Member State, all in accordance with the
            Prospectus Directive and ending on the date which is 12 months after the date of such publication;

      ¼     at any time to legal entities which are authorised or regulated to operate in the financial markets
            or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;

      ¼     at any time to any legal entity which has two or more of (1) an average of at least 250 employees
            during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an
            annual net turnover of more than €50,000,000, as shown in its last annual or consolidated
            accounts;

      ¼     at any time to fewer than 100 natural or legal persons (other than qualified investors as defined in
            the Prospectus Directive) subject to obtaining the prior consent of the relevant Manager or
            Managers nominated by the Issuer for any such offer; or

      ¼     at any time in any other circumstances which do not require the publication by the relevant Issuer
            of a prospectus pursuant to Article 3 of the Prospectus Directive.

       For the purposes of this provision, the expression an “offer of Securities to the public” in relation to any
Securities in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the Securities to be offered so as to enable an investor to
decide to purchase or subscribe the Securities, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member State and the expression “Prospectus
Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant
Member State.

United Kingdom

     All applicable provisions of the Financial Services and Markets Act 2000 (the “FSMA”) must be
complied with in respect to anything done in relation to any Securities in, from or otherwise involving the
United Kingdom. An invitation or inducement to engage in investment activity (within the meaning of Section




                                                       105
21 of the FSMA) may only be communicated or caused to be communicated in connection with the issue or
sale of any Warrants in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the
Guarantor.

      Each Manager appointed under the Programme will be required to represent and agree, that:

      ¼     it has only communicated or caused to be communicated and will only communicate or cause to
            be communicated an invitation or inducement to engage in investment activity (within the
            meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any
            Securities in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or
            the Guarantor; and

      ¼     it has complied and will comply with all applicable provisions of the FSMA with respect to
            anything done by it in relation to any Securities in, from or otherwise involving the United
            Kingdom.

Japan

      The Securities have not been and will not be registered under the Financial Instruments and Exchange
Act of Japan (the “Financial Instruments and Exchange Act”) and the Manager has represented and agreed
and each purchaser of Securities will be required to represent and agree that the Securities that it subscribes
will be subscribed by it as principal and that in connection with the initial offering of the Securities, it will
not directly or indirectly offer or sell any Securities in Japan or to or for the benefit of any resident of Japan
which term as used herein means any person resident in Japan, (including any Japanese corporation or other
entity organised under the laws of Japan), or to others for reoffering or resale, directly or indirectly, in Japan
or to or for the benefit of any resident of Japan (except in compliance with the Financial Instruments and
Exchange Act and all other applicable laws and regulations of Japan).

Hong Kong

      Each Manager has represented and agreed that:

      ¼     it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any
            Securities other than (i) to “professional investors” as defined in the Securities and Futures
            Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (ii) in other
            circumstances which do not result in the document being a “prospectus” as defined in the
            Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public
            within the meaning of that Ordinance; and

      ¼     it has not issued or had in its possession for the purposes of issue, and will not issue or have in
            its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,
            invitation or document relating to the Securities, which is directed at, or the contents of which are
            likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the
            securities laws of Hong Kong) other than with respect to Securities which are or are intended to
            be disposed of only to persons outside Hong Kong or only to “professional investors” as defined
            in the Securities and Futures Ordinance and any rules made under that Ordinance.

Singapore

       Each Manager has acknowledged that this Base Prospectus has not been registered as a prospectus with
the Monetary Authority of Singapore. Accordingly, each Manager has represented and agreed that it has not
offered or sold any Securities or caused such Securities to be made the subject of an invitation for
subscription or purchase and will not offer or sell such Securities or cause such Securities to be made the
subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate
or distribute, this Base Prospectus or any other document or material in connection with the offer or sale, or
invitation for subscription or purchase, of such Securities, whether directly or indirectly, to persons in
Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person
pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or
(iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the
SFA.


                                                       106
Note:

        Where Securities are subscribed or purchased under Section 275 by a relevant person which is:

        (a)    a corporation (which is not an accredited investor) (as defined in Section 4A of the SFA) the sole
               business of which is to hold investments and the entire share capital of which is owned by one or
               more individuals, each of whom is an accredited investor; or

        (b)    a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments
               and each beneficiary of the trust is an individual who is an accredited investor,

shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and
interest (howsoever described) in that trust shall not be transferred within 6 months after that corporation or
that trust has acquired the Securities pursuant to an offer made under Section 275 except:

        (i)    to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant
               person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on
               terms that such shares, debentures and units of shares and debentures of that corporation or such
               rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its
               equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in
               cash or by exchange of securities or other assets, and further for corporations, in accordance with
               the conditions specified in Section 275 of the SFA;

        (ii)   where no consideration is or will be given for the transfer; or

        (iii) where the transfer is by operation of law.

Cayman Islands

      Securities may not be offered to the public in the Cayman Islands unless at the time of such offer the
Issuer is listed on the Cayman Islands Stock Exchange.

General

      With regard to each issue of Securities, any Manager will be required to comply with such other
additional restrictions as shall be set out in the applicable Final Terms.




                                                           107
                             CERTAIN ERISA CONSIDERATIONS

      To ensure compliance with United States Treasury Department Circular 230, prospective
purchasers are hereby notified that (A) any discussion of United States Federal tax matters in this Base
Prospectus is not intended or written to be relied upon, and cannot be relied upon, by prospective
purchasers for the purpose of avoiding penalties that may be imposed on them under the United States
tax laws; (B) such discussion is included herein in connection with the promotion or marketing (within
the meaning of United States Treasury Department Circular 230) of the matters addressed herein; and
(C) prospective purchasers should seek advice based on their particular circumstances from an
independent tax advisor.

      The United States Employee Retirement Income Security Act of 1974, of amended (“ERISA”) and the
Internal Revenue Code of 1986, as amended, impose fiduciary standards and certain other requirements on
employee benefit plans subject thereto (collectively, “ERISA Plans”), including individual retirement accounts
and annuities, Keogh plans and certain collective investment funds, separate accounts or insurance company
general or separate accounts in which such plans, accounts or arrangements are invested, and other entities or
accounts whose underlying assets are treated as assets of such plans pursuant to ERISA and the U.S.
Department of Labor “plan assets” regulation, 29 CFR Section 2510.3-101, as modified by Section 3(42) of
ERISA (the “Plan Assets Regulation”), and on those persons who are fiduciaries with respect to ERISA Plans.

      Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of
an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975 of
the Code (together with ERISA Plans, “Plans”)) and certain persons (referred to as “parties in interest” under
ERISA or “disqualified persons” under the Code) having certain relationships to such Plans, unless a statutory
or administrative exemption or other applicable exemption applies to the transaction. In particular, an
extension of credit between a Plan and a “party in interest” or “disqualified person” may constitute a
prohibited transaction. A party in interest or disqualified person who engages in a prohibited transaction may
be subject to excise taxes, penalties or other liabilities under ERISA and the Code.

      The Issuer, directly or through affiliates, may be considered a party in interest or disqualified person
with respect to many Plans. Prohibited transactions within the meaning of Section 406 of ERISA or Section
4975 of the Code may arise if the Securities are acquired by a Plan with respect to which the Issuer or any of
their respective affiliates is a party in interest or a disqualified person, unless the Securities are acquired
pursuant to and in accordance with an applicable exemption. Certain exemptions from the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code may apply depending in part
on the type of Plan fiduciary making the decision to acquire a Security and the circumstances under which
that decision is made. However, unless otherwise specified in the applicable Final Terms, Securities may not
be acquired by any Benefit Plan Investors as discussed below.

       Under a “look through rule” set forth in Section 3(42) of ERISA and the Plan Assets Regulation, if a
Plan invests in an “equity interest” of an entity and no other exception applies, the Plan’s assets include both
the equity interest and an undivided interest in each of the entity’s underlying assets. This rule will not apply
where less than 25 percent of the value of any class of equity interest in the entity is held by Benefit Plan
Investors immediately after the most recent acquisition of any equity interest in the entity (disregarding equity
interests held by certain persons, other than Benefit Plan Investors, with discretionary authority or control
over the assets of the entity or who provide investment advice with respect to such assets, or any affiliates of
such persons). An equity interest does not include debt (as determined by applicable local law) which does
not have substantial equity features. Under the Plan Assets Regulation a “Benefit Plan Investor” means (1) an
employee benefit plan (as defined in Section 3(3) of ERISA) subject to the provisions of part 4 of subtitle B
of Title I of ERISA, (2) a plan to which Section 4975 of the Code applies, or (3) any entity whose underlying
assets include “plan assets” by reason of any such plan’s investment in the entity, (to the extent of the
percentage of the equity interests in such entity that are held by Benefit Plan Investors). The Plan Assets
Regulation provides that where the value of an interest in an entity relates solely to identified property of the
entity, that property is treated as the sole property of a separate entity.

       The Issuer will not be able to monitor the Securityholders’ possible status as Benefit Plan Investors.
Accordingly, unless otherwise specified in the applicable Final Terms, the Securities may not be purchased or
held by Benefit Plan Investors. The Securities may be purchased and held by governmental, non-electing
church or non-U.S. plans which are not Benefit Plan Investors but which may be subject to any U.S. Federal,
state, local or non-U.S. law that is substantially similar to the fiduciary responsibility and/or the prohibited
transaction provisions of ERISA and/or Section 4975 of the Code and other restrictions (“Similar Laws”) if


                                                      108
such purchase, holding or disposition does not and will not result in a non-exempt violation of any Similar
Laws, and will not subject the Issuer to any laws, rules or regulations applicable to such Plan as a result of
the purchase, holding or disposition of the Securities by such Plan. The fiduciary of a Plan governed by
Similar Laws considering the purchase or holding of the Securities must make its own determination that such
purchase or holding is permissible under Similar Laws.

      It should be noted that an insurance company’s general account may be deemed to include assets of
Plans under certain circumstances, e.g., where a Plan purchases an annuity contract issued by such insurance
company, based on the reasoning of the United States Supreme Court in John Hancock Mutual Life Ins. Co.
v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), and in such circumstances such general account may
be subject to ERISA’s fiduciary provisions.

    EACH PURCHASER AND EACH TRANSFEREE OF THE SECURITIES OR ANY INTEREST
THEREIN, AND EACH FIDUCIARY ACTING ON BEHALF OF THE PURCHASER OR TRANSFEREE
(BOTH IN ITS INDIVIDUAL AND CORPORATE CAPACITY), WILL BE DEEMED TO REPRESENT,
WARRANT AND AGREE THAT, DURING THE PERIOD IT HOLDS ANY SECURITY OR ANY
INTEREST IN ANY SECURITY: (1) EITHER (A) IT IS NOT, AND IS NOT ACTING ON BEHALF OF A
BENEFIT PLAN INVESTOR OR A GOVERNMENTAL, CHURCH OR NON-U.S. PLAN WHICH IS
SUBJECT TO ANY SIMILAR LAWS AND/OR LAWS OR REGULATIONS THAT PROVIDE THAT THE
ASSETS OF THE ISSUER COULD BE DEEMED TO INCLUDE “PLAN ASSETS” OF SUCH PLAN,
AND NO PART OF THE ASSETS TO BE USED BY IT TO PURCHASE OR HOLD SUCH SECURITIES
OR ANY INTEREST THEREIN CONSTITUTES THE ASSETS OF ANY BENEFIT PLAN INVESTOR OR
SUCH A GOVERNMENTAL, CHURCH OR NON-U.S. PLAN, OR (B) IT IS, OR IS ACTING ON
BEHALF OF, A GOVERNMENTAL, NON-ELECTING CHURCH OR NON-U.S. PLAN, AND SUCH
PURCHASE OR THE HOLDING OR DISPOSITION OF THE SECURITIES DOES NOT AND WILL NOT
RESULT IN A NON EXEMPT VIOLATION OF ANY SIMILAR LAWS, AND WILL NOT SUBJECT THE
ISSUER TO ANY LAWS, RULES OR REGULATIONS APPLICABLE TO SUCH PLAN SOLELY AS A
RESULT OF THE PURCHASE, HOLDING OR DISPOSITION OF THE SECURITIES BY SUCH PLAN;
AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER SUCH SECURITIES OR ANY INTEREST
THEREIN OTHERWISE THAN TO A PERSON THAT IS DEEMED TO REPRESENT, WARRANT AND
AGREE WITH RESPECT TO ITS PURCHASE, HOLDING OR DISPOSITION OF THE SECURITIES TO
THE SAME EFFECT AS THE PURCHASER’S REPRESENTATIONS, WARRANTIES AND
AGREEMENTS SET OUT IN THIS SENTENCE. NO PURCHASE BY OR TRANSFER TO A BENEFIT
PLAN INVESTOR OF ANY SECURITY WILL BE EFFECTIVE, AND THE ISSUER WILL NOT
RECOGNISE SUCH PURCHASE OR TRANSFER OF SUCH SECURITY. IN THE EVENT THAT THE
ISSUER DETERMINES THAT ANY SECURITY IS HELD BY A BENEFIT PLAN INVESTOR, THE
ISSUER MAY CAUSE A SALE OR TRANSFER OF SUCH SECURITY. SUCH REPRESENTATION
SHALL BE DEEMED TO BE MADE EACH DAY FROM THE DATE ON WHICH THE PURCHASER
PURCHASES THE SECURITY THROUGH AND INCLUDING THE DATE ON WHICH THE
PURCHASER DISPOSES OF THE SECURITY.




                                                     109
                                   TRANSFER RESTRICTIONS

      Because of the following restrictions, you are advised to consult legal counsel prior to making any offer,
resale or other transfer of the Securities offered hereby.

     RULE 144A SECURITIES

     Each purchaser of a beneficial interest in the Rule 144A Global Security, by accepting delivery of this
Base Prospectus and the Securities will be deemed to have represented, agreed and acknowledged that:

     1.    If it is a U.S. Person within the meaning of Regulation S, it is (a) a QIB that is also a QP, (b) not
           a broker-dealer which owns and invests on a discretionary basis less than U.S.$25 million in
           securities of unaffiliated issuers, (c) not a participant-directed employee plan, such as a 401(k)
           plan, (d) acquiring such Securities for its own account, or for the account of one or more QIBs
           each of which is also a QP, (e) not formed for the purpose of investing in the Securities or the
           Issuer, and (f) aware, and each beneficial owner of such Securities has been advised, that the
           seller of such Securities may be relying on the exemption from the provisions of Section 5 of the
           Securities Act provided by Rule 144A.

     2.    It will, (a) along with each account for which it is purchasing, hold and transfer beneficial
           interests in the Rule 144A Global Security in a principal amount that is not less than
           U.S.$100,000 and (b) provide notice of these transfer restrictions to any subsequent transferees. In
           addition, it understands that the Issuer may receive a list of participants holding positions in the
           Issuer’s securities from one or more book-entry depositories.

     3.    It understands that the Securities have not been and will not be registered under the Securities Act
           and may not be offered, sold, pledged or otherwise transferred except (a) in accordance with Rule
           144A to a person that it and any person acting on its behalf reasonably believe is a QIB that is
           also a QP purchasing for its own account or for the account of one or more QIBs, each of which
           is also a QP or (b) to a non-U.S. person within the meaning of Regulation S in an offshore
           transaction in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, in
           each case in accordance with any applicable securities laws of any State or another jurisdiction of
           the United States.

     4.    It understands that the Issuer has the power to compel any beneficial owner of interests in the
           Rule 144A Global Security that is a U.S. person and is not a QIB and also a QP to sell its interest
           in the Rule l44A Global Security, or may sell such interest on behalf of such owner. The Issuer
           has the right to refuse to honour the transfer of an interest in the Rule 144A Global Security to a
           U.S. person who is not both a QIB and a QP.

     5.    It understands and acknowledges that its purchase and holding of such Securities or any interest
           therein constitutes a representation and agreement by it that that at the time of its purchase and
           throughout the period in which it holds such Securities or any interest therein (a) either (i) is not,
           and is not acting on behalf of (and for so long as it holds such Securities (or any interest therein)
           will not be, or be acting on behalf of), a Benefit Plan Investor or a governmental, church or
           non-U.S. plan which is subject to any Similar Laws and/or laws or regulations that provide that
           the assets of the Issuer could be deemed to include “plan assets” of such Plan, and no part of the
           assets used by it to purchase or hold such Securities or any interest therein constitutes the assets
           of such Benefit Plan Investor or such Plan, or (ii) it is, or is acting on behalf of, a governmental,
           non-electing church or non-U.S. Plan, and such purchase, holding or disposition of such Securities
           does not and will not result in a non-exempt violation of any Similar Laws, and will not subject
           the Issuer to any laws, rules or regulations applicable to such Plan solely as a result of the
           purchase, holding or disposition of the Securities by such Plan; and (b) it will not sell or
           otherwise transfer any such Securities or interest therein to any person without first obtaining
           these same foregoing representations and warranties from that person.

     6.    It understands that the Rule 144A Global Security issued in respect thereof, unless otherwise
           agreed between the Issuer and the Trustee in accordance with applicable law, will bear a legend to
           the following effect:




                                                      110
THE SECURITIES REPRESENTED BY THIS RULE 144A GLOBAL SECURITY HAVE NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”) OR WITH ANY SECURITIES REGULATORY
AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1)
IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO
A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE l44A (A “QIB”) AND THAT IS A QUALIFIED PURCHASER (A “QP”)
WITHIN THE MEANING OF SECTION 2(a)(51) OF THE U.S. INVESTMENT COMPANY
ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”) PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QIBS EACH OF
WHICH IS A QP WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH
OFFER, SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A UNDER THE SECURITIES ACT, AND IN AN AMOUNT FOR EACH ACCOUNT
OF NOT LESS THAN U.S.$100,000 PRINCIPAL AMOUNT OF SECURITIES AND THAT CAN
REPRESENT THAT IT MEETS CRITERIA (1) THROUGH (8) SET OUT BELOW OR (2) IN
AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”)
IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S, AND, IN EACH
CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES AND (3) THAT IS NOTIFIED THAT IT MAY NOT REOFFER,
RESELL, PLEDGE OR OTHERWISE TRANSFER ANY INTEREST IN THE SECURITIES
REPRESENTED BY THIS RULE 144A GLOBAL SECURITY TO ANY PERSON EXCEPT TO
OR THROUGH THE ISSUER TO A PERSON THAT MEETS ALL OF THE REQUIREMENTS
OF EITHER CLAUSE (1) OR (2) AND THAT IS NOTIFIED THAT IT MAY NOT
SUBSEQUENTLY TRANSFER ANY INTEREST IN THE SECURITIES REPRESENTED BY
THIS RULE 144A GLOBAL SECURITY EXCEPT IN ACCORDANCE WITH THIS CLAUSE
(3).

THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THE SECURITIES IN RESPECT HEREOF OF THE
RESALE RESTRICTIONS REFERRED TO ABOVE. TRANSFER IN VIOLATION OF THE
FOREGOING WILL BE OF NO FORCE OR EFFECT, WILL BE VOID AB INITIO, AND
WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE,
NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE ISSUER OF
THIS SECURITY OR ANY INTERMEDIARY. NO REPRESENTATION CAN BE MADE AS
TO THE AVAILABILITY OF ANY EXEMPTION UNDER THE SECURITIES ACT FOR
RESALES OF THIS SECURITY.

IF THE BENEFICIAL OWNER HEREOF IS A U.S. PERSON WITHIN THE MEANING OF
REGULATION S, SUCH BENEFICIAL OWNER REPRESENTS THAT (1) IT IS A QIB THAT
IS ALSO A QP; (2) IT IS NOT A BROKER-DEALER WHICH OWNS AND INVESTS ON A
DISCRETIONARY BASIS LESS THAN U.S.$25,000,000 IN SECURITIES OF UNAFFILIATED
ISSUERS; (3) IT IS NOT A PARTICIPANT-DIRECTED EMPLOYEE PLAN, SUCH AS A
401(k) PLAN; (4) IT IS HOLDING THIS SECURITY FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF ONE OR MORE QIBS, EACH OF WHICH IS A QP; (5) IT WAS NOT
FORMED FOR THE PURPOSE OF INVESTING IN THE ISSUER OR THIS SECURITY; (6) IT
UNDERSTANDS THAT THE ISSUER MAY RECEIVE A LIST OF PARTICIPANTS HOLDING
POSITIONS IN ITS SECURITIES FROM ONE OR MORE BOOK-ENTRY DEPOSITARIES; (7)
IT AND EACH ACCOUNT FOR WHICH IT HOLDS SECURITIES, WILL HOLD AND
TRANSFER AT LEAST U.S.$100,000 IN PRINCIPAL AMOUNT OF SECURITIES; AND (8) IT
WILL PROVIDE NOTICE OF THE FOREGOING TRANSFER RESTRICTIONS TO ITS
SUBSEQUENT TRANSFEREES.

THE BENEFICIAL OWNER HEREOF HEREBY ACKNOWLEDGES THAT IF AT ANY TIME
WHILE IT HOLDS AN INTEREST IN THIS SECURITY IT IS A U.S. PERSON WITHIN THE
MEANING OF REGULATION S THAT IS NOT A QIB AND A QP, THE ISSUER MAY (A)
COMPEL IT TO SELL ITS INTEREST IN THIS SECURITY TO A PERSON WHO IS (I) A U.S.
PERSON WHO IS A QIB AND A QP AND THAT IS, IN EACH CASE, OTHERWISE
QUALIFIED TO PURCHASE THIS SECURITY IN A TRANSACTION EXEMPT FROM


                                111
          REGISTRATION UNDER THE SECURITIES ACT OR (II) OUTSIDE THE UNITED STATES
          AND NOT A U.S. PERSON WITHIN THE MEANING OF REGULATION S OR (B) COMPEL
          THE BENEFICIAL OWNER TO SELL ITS INTEREST IN THIS SECURITY TO THE ISSUER
          OR AN AFFILIATE OF THE ISSUER OR TRANSFER ITS INTEREST IN THIS SECURITY
          TO A PERSON DESIGNATED BY OR ACCEPTABLE TO THE ISSUER AT A PRICE EQUAL
          TO THE LESSER OF (X) THE PURCHASE PRICE THEREFOR PAID BY THE BENEFICIAL
          OWNER, (Y) 100% OF THE PRINCIPAL AMOUNT THEREOF OR (Z) THE FAIR MARKET
          VALUE THEREOF. THE ISSUER HAS THE RIGHT TO REFUSE TO HONOUR A TRANSFER
          OF AN INTEREST IN THIS SECURITY TO A U.S. PERSON WHO IS NOT A QIB AND A QP.
          THE ISSUER HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
          INVESTMENT COMPANY ACT.

          EACH BENEFICIAL OWNER HEREOF REPRESENTS AND WARRANTS THAT FOR SO
          LONG AS IT HOLDS THIS SECURITY OR ANY INTEREST HEREIN (A) EITHER (I) IT IS
          NOT, AND IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS SUCH
          SECURITIES (OR ANY INTEREST THEREIN) WILL NOT BE, OR BE ACTING ON BEHALF
          OF), A BENEFIT PLAN INVESTOR OR A GOVERNMENTAL, CHURCH OR NON-U.S.
          PLAN WHICH IS SUBJECT TO ANY SIMILAR LAWS AND/OR LAWS OR REGULATIONS
          THAT PROVIDE THAT THE ASSETS OF THE ISSUER COULD BE DEEMED TO INCLUDE
          “PLAN ASSETS” OF SUCH PLAN, AND NO PART OF THE ASSETS USED BY IT TO
          PURCHASE OR HOLD SUCH SECURITY OR ANY INTEREST THEREIN CONSTITUTES
          THE ASSETS OF SUCH BENEFIT PLAN INVESTOR OR SUCH PLAN, OR (II) IT IS, OR IS
          ACTING ON BEHALF OF, A GOVERNMENTAL, NON-ELECTING CHURCH OR NON-U.S.
          PLAN, AND SUCH PURCHASE, HOLDING OR DISPOSITION OF SUCH SECURITY DOES
          NOT AND WILL NOT RESULT IN A NON-EXEMPT VIOLATION OF ANY SIMILAR LAWS,
          AND WILL NOT SUBJECT THE ISSUER TO ANY LAWS, RULES OR REGULATIONS
          APPLICABLE TO SUCH PLAN SOLELY AS A RESULT OF THE PURCHASE, HOLDING OR
          DISPOSITION OF THE SECURITIES BY SUCH PLAN; AND (B) IT WILL NOT SELL OR
          OTHERWISE TRANSFER ANY SECURITY OR INTEREST THEREIN TO ANY PERSON
          WITHOUT FIRST OBTAINING THE SAME FOREGOING REPRESENTATIONS,
          WARRANTIES AND COVENANTS FROM THAT PERSON.

          THE ISSUER MAY COMPEL EACH BENEFICIAL OWNER OF THIS SECURITY THAT IS A
          U.S. PERSON WITHIN THE MEANING OF REGULATION S TO CERTIFY PERIODICALLY
          THAT SUCH BENEFICIAL OWNER IS A QIB AND A QP.

     7.   It acknowledges that the Issuer, the Guarantor, the Dealers and their respective affiliates, and
          others, will rely upon the truth and accuracy of the above acknowledgements, representations and
          agreements and agrees that, if any of the acknowledgements, representations or agreements
          deemed to have been made by it by its purchase of the Securities is no longer accurate, it shall
          promptly notify the Issuer, the Guarantor and the Dealers. If it is acquiring any Securities as a
          fiduciary or agent for one or more investor accounts, it represents that it has sole investment
          discretion with respect to each such account and that it has full power to make the above
          acknowledgements, representations and agreements on behalf of each account.

     8.   It understands that Rule 144A Securities of a Series will be evidenced by a Rule 144A Global
          Security. Before any interest in a Rule 144A Global Security may be offered, sold, pledged or
          otherwise transferred to a person who takes delivery in the form of an interest in a Regulation S
          Global Security, it will be required to provide to whichever of DTC, Euroclear or Clearstream,
          Luxembourg records or will record on its books ownership of the Securities being transferred,
          with a copy to the Principal Warrant and Certificate Agent as to compliance with applicable
          securities laws.

    Prospective purchasers are hereby notified that sellers of the Securities may be relying on the
exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.




                                                  112
REGULATION S GLOBAL SECURITY

      Each purchaser of a beneficial interest in a Regulation S Global Security outside the United States, by
accepting delivery of this Base Prospectus and the Regulation S Global Security, will be deemed to have
represented, agreed and acknowledged that:

     (1)   It is, or at the time the interest in the Regulation S Global Security is purchased will be, the
           beneficial owner of such Regulation S Global Security and it is (a) not a U.S. person and it is
           located outside the United States (within the meaning of Regulation S) and (b) not an affiliate of
           the Issuer, the Guarantor or a person acting on behalf of such an affiliate.

     (2)   It understands that the Securities represented by the Regulation S Global Security have not been
           and will not be registered under the Securities Act and, prior to the expiration of the distribution
           compliance period, it will not offer, sell, pledge or otherwise transfer such Securities except (a) in
           accordance with Rule 144A to a person that it and any person acting on its behalf reasonably
           believes is a QIB that is also a QP purchasing for its own account or for the account of a QIB
           that is also a QP or (b) in an offshore transaction in accordance with Rule 903 or Rule 904 of
           Regulation S, in each case in accordance with any applicable securities laws of any state of the
           United States.

     (3)   It understands that Securities of a Series issued pursuant to Regulation S will be evidenced by a
           Regulation S Global Security. Before any interest in a Regulation S Global Security may be
           offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an
           interest in a Rule 144A Global Security, it will be required to provide a Transfer Agent with a
           written certification as to compliance with applicable securities laws.

     (4)   It understands and acknowledges that its purchase and holding of such Regulation S Global
           Security and any interest therein constitutes a representation and agreement by it that at the time
           of its purchase and throughout the period it holds such Regulation S Global Security or any
           interest therein (a) either (i) it is not, and is not acting on behalf of (and for so long as it holds
           such Regulation S Global Security (or any interest will not be, or be acting on behalf of), a
           Benefit Plan Investor or a governmental, church or non-U.S. Plan which is subject to any Similar
           Laws and/or laws or regulations that provide that the assets of the Issuer could be deemed to
           include “plan assets” of such Plan, and no part of the assets used by it to purchase or hold such
           Security or any interest therein constitutes the assets of such Benefit Plan Investor or such Plan,
           or (ii) it is, or is acting on behalf of, a governmental, non-electing church or non-U.S. Plan, and
           such purchase, holding or disposition of such Regulation S Global Security does not and will not
           result in a non-exempt violation of any Similar Laws, and will not subject the Issuer to any laws,
           rules or regulations applicable to such Plan solely as a result of the purchase, holding or
           disposition of the Securities by such Plan; and (b) it will not sell or otherwise transfer any such
           Regulation S Global Security or interest therein to any person without first obtaining these same
           foregoing representations and warranties from that person.

     (5)   It acknowledges that the Issuer, the Guarantor the Managers and their respective affiliates, and
           others, will rely upon the truth and accuracy of the above acknowledgements, representations and
           agreements and agree that, if any of the acknowledgements, representations or agreements deemed
           to have been made by it by its purchase of an interest in the Regulation S Global Security is no
           longer accurate, it shall promptly notify the Issuer, the Guarantor, and the Managers. If it is
           acquiring any Regulation S Global Security or any interest therein as a fiduciary or agent for one
           or more investor accounts, it represents that it has sole investment discretion with respect to each
           such account and that it has full power to make the above acknowledgements, representations and
           agreements on behalf of each account.




                                                      113
                                    GENERAL INFORMATION

1    Authorisation

     The establishment of the Programme has been duly authorised by the Issuer on 8 February 2001 and the
update of the Programme has been duly authorised by the Issuer on or about 7 October 2010. The giving of
the Guarantee was authorised by the Board of Directors of the Guarantor on or about 7 October 2010.

2    Listing

      Application has been made for Securities to be issued under the Programme to be listed on the
Luxembourg Stock Exchange and admitted to trading on the Euro MTF. The Luxembourg Stock Exchange
has allocated the Programme the number 12345 for the purposes of listing Securities on the Euro MTF.

3    Documents Available

      From the date hereof and so long as Securities are outstanding under the Programme, copies of the
following documents will, when published, be available from the specified office of the Warrant and
Certificate Agents for the time being in London and Luxembourg:

     (i)    the constitutional documents of the Issuer and the Guarantor;

     (ii)   the audited non-consolidated financial statements of the Issuer in respect of the period ended 31
            December 2009 and any audited non-consolidated financial statements of the Issuer published
            thereafter;

     (iii) the audited consolidated and non-consolidated annual accounts of the Guarantor, in English, for
           the year ended 31 March 2010 and unaudited consolidated and non-consolidated interim accounts
           of the Guarantor, in English, for the three months ended 30 June 2010 and those published
           thereafter;

     (iv) the Agency Agreement (which contains the forms of Global Security);

     (v)    the Guarantee;

     (vi) this Base Prospectus;

     (vii) any future prospectuses, offering circulars, information memoranda and supplements to this Base
           Prospectus (save that Final Terms relating to an unlisted Security will only be available for
           inspection by a holder of such Security and such holder must produce evidence satisfactory to the
           relevant Warrant and Certificate Agent as to the identity of such holder) and any other documents
           incorporated herein or therein by reference; and

     (viii) in the case of a syndicated issue of listed Securities, the syndication agreement (or equivalent
            document).

4    Financial Statements

      The Issuer does not produce consolidated accounts. The Issuer’s financial statements for the year ended
31 December 2009 have been audited without qualification by KPMG Azsa & Co. The Issuer does not
publish interim financial statements. The Guarantor publishes audited consolidated annual, unaudited
consolidated quarterly and unaudited non-consolidated annual and quarterly accounts.

5    Clearing Systems

     The Securities have been accepted for clearance through Clearstream, Luxembourg and Euroclear. The
appropriate common code and ISIN for each issue of Securities allocated by Clearstream, Luxembourg,
Euroclear and the Cayman Islands Stock Exchange will be specified in the applicable Final Terms. If the
Securities of any series are to clear through DTC or an additional or alternative clearing system the
appropriate information will be specified in the applicable Final Terms.



                                                     114
6     Material Change

      Save as disclosed in this Base Prospectus, (i) there has been no significant change in the financial or
trading position of the Issuer since 31 December 2009 and there has been no material adverse change in the
financial position of the Issuer since that date and (ii) there has been no significant change in the financial or
trading position of the Guarantor since 30 June 2010 and there has been no material change in the financial
position of the Guarantor since that date (being the date of the most recent unaudited financial accounts of the
Guarantor).

7     Litigation

      There are no legal or arbitration proceedings (including any such proceedings which are pending or
threatened of which the Issuer is aware) which may have or have had a significant effect on the financial
position of the Issuer and there are no legal or arbitration proceedings (including any such proceedings which
are pending or threatened of which the Guarantor is aware) which may have or have had a significant effect
on the financial position of the Guarantor.

8     Updating of this Base Prospectus

      The Issuer and the Guarantor will, in connection with the listing of Securities on the Luxembourg Stock
Exchange and trading on the Euro MTF, so long as any Security remains outstanding and listed and trading
on such exchange, in the event of any material change in the financial condition of the Issuer or the
Guarantor which is not reflected in this Base Prospectus, prepare a supplement to this Base Prospectus or
publish a new offering circular for use in connection with any subsequent issue of Securities to be listed on
such exchange. If the terms of the Programme are modified or amended (other than with respect to a
particular issue of Securities) in a manner which would make this Base Prospectus inaccurate or misleading
the Issuer and the Guarantor will prepare a further supplement to this Base Prospectus or publish a new Base
Prospectus for use in connection with any subsequent issue of Securities.




                                                       115
                           INDEX TO FINANCIAL STATEMENTS

Guarantor’s Audit Report                                    F-2

Audited consolidated 2010 and 2009 accounts                 F-3

Unaudited non-consolidated 2010 and 2009 accounts          F-31

Unaudited interim consolidated 2010 and 2009 accounts      F-34




                                                    F-1
To the Shareholders and Board of Directors of Daiwa Securities Capital Markets Co. Ltd.:

      We have audited the accompanying consolidated balance sheets of Daiwa Securities Markets Co. Ltd.
and consolidated subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of
operations, changes in net assets and cash flows for each of the three years in the period ended March 31,
2010. These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to independent express an opinion on these consolidated financial statements based on our
audits.

      We conducted our audits in accordance with auditing standards generally accepted in Japan. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Daiwa Securities Capital Markets Co. Ltd. and subsidiaries as
of March 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of
the three years in the period ended March 31, 2010, in conformity with accounting principles generally
accepted in Japan.

     Without qualifying our opinion, we draw attention to the following;

       As discussed in Note 26 to the consolidated financial statements, on April 1, 2010, the Company took
all of shares of Daiwa Capital Markets America Holdings Inc. from Daiwa Securities Group Inc.




Tokyo, Japan
June 28, 2010




                                                     F-2
                         DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                              CONSOLIDATED BALANCE SHEETS
                                   March 31, 2010 and 2009

                                                                                2010            2009
                                                                                 ¥ millions
Assets
Cash and cash deposits:
  Cash and cash equivalents                                                  246,859          107,209
  Cash segregated as deposits for regulatory purposes                        103,550           67,731
  Time deposits                                                                6,313            6,056
                                                                             356,722          180,996

Receivables:
  Loans receivable from customers                                                  –           10,504
  Loans receivable from other than customers                                 113,585           10,273
  Receivables related to margin transactions (Note 3)                         64,095          158,514
  Other                                                                      116,184          290,227
  Less: Allowance for doubtful accounts                                         (597)             (89)


                                                                             293,267          469,429

Collateralised short-term financing agreements (Notes 4 and 10)             5,676,455     4,073,497

Trading and private equity investments
  Trading assets (Notes 6 and 9)                                            6,930,133     5,644,744
  Private equity and other securities (Note 7)                                  6,288       466,014


                                                                            6,936,421     6,110,758
Trading account receivables, net                                                    –       179,248

Other assets:
  Property and equipment, at cost                                              15,672          14,641
  Less: Accumulated depreciation                                              (12,114)        (10,240)


                                                                               3,558            4,401
  Intangible fixed assets                                                     69,798           60,658
  Lease deposits                                                               6,283            6,116
  Investment securities (Note 7 and 9)                                        17,337           21,783
  Deferred tax assets (Note 15)                                                1,810            6,213
  Other (Notes 8 and 9)                                                       36,887           25,051
  Less: Allowance for doubtful accounts                                         (368)            (357)


                                                                             135,305          123,865


                                                                           13,398,170    11,137,793




                                                 See accompanying notes.


                                                        F-3
                          DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                               CONSOLIDATED BALANCE SHEETS
                                    March 31, 2010 and 2009

                                                                              2010            2009
                                                                               ¥ millions
Liabilities and Net Assets
Borrowings:
  Short-term borrowings (Note 9)                                          4,035,497       748,814
  Commercial paper                                                          331,750       320,400
  Long-term debt (Notes 10 and 13)                                        1,183,280     1,131,259

                                                                          5,550,527     2,200,473
Payables:
  Payables to customers and counterparties (Note 12)                       222,424          326,505
  Payables related to margin transactions (Note 3)                          46,474          107,776

                                                                           268,898          434,281

  Collateralised short-term financing agreements (Notes 4 and 10)         2,175,674     3,285,156

  Trading liabilities (Note 6)                                            4,574,622     4,620,770
  Trading account payables, net                                             239,720             –

Accrued and other liabilities:
  Income taxes payable                                                       2,637              313
  Deferred tax liabilities (Note 15)                                           482           22,856
  Accrued bonuses                                                           13,077            5,299
  Retirement benefits (Note 14)                                              5,984            5,148
  Other (Notes 8 and 10)                                                    60,886           29,419

                                                                            83,066           63,035
Statutory reserves (Note 16)                                                 2,830            3,099

  Total liabilities                                                      12,895,337    10,606,814

Contingent liabilities (Note 17)

Net assets:
  Owners’ equity (Note 18):
    Common stock, no par value;
       Authorised – 3,800 shares
       Issued – 3,800 shares                                               255,700          255,700
    Capital surplus                                                        167,421          167,421
    Retained earnings                                                       93,999           42,938

                                                                           517,120          466,059
  Valuation and translation adjustments
    Net unrealised gain (loss) on securities, net of tax effect                  93          78,733
    Translation adjustments                                                 (15,685)        (15,048)

                                                                            (15,592)         63,685

Minority Interests                                                            1,305           1,235

  Total net assets                                                         502,833          530,979

                                                                         13,398,170    11,137,793

                                               See accompanying notes.


                                                       F-4
                         DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                Year ended March 31, 2010 and 2009

                                                                                 2010              2009
                                                                                   ¥ millions
Operating revenues:
 Commissions (Note 20)                                                         98,977             56,285
 Net gain (loss) on trading (Note 21)                                          59,475             (4,755)
 Net gain (loss) on private equity and other securities                        89,845            (75,192)
 Interest and dividend income (Note 10)                                        31,858             68,399
 Other sales revenues                                                             102                777


                                                                              280,257            45,514

Interest expense (Note 10)                                                     30,731            65,062
Cost of other sales revenues                                                       85               442


Net operating revenues (Note 19)                                              249,441            (19,990)

Selling, general and administrative expenses (Notes 10, 14, 19 and 20)        182,013           148,510


Operating income (loss) (Note 19)                                              67,428           (168,500)

Other income (expenses):
  Gain on sale of subsidiaries stock                                           22,103                  –
  Provision for statutory reserves, net (Note 16)                                 269              2,311
  Other, net (Notes 10 and 23)                                                    806             (4,463)


                                                                               23,178             (2,152)


Income (loss) before income taxes and minority interests                       90,606           (170,652)

Income taxes (Note 15)
  Current                                                                       2,298               (110)
  Deferred                                                                     37,201            (25,587)


                                                                               39,499            (25,697)
Minority interest                                                                 (46)                (4)


Net income (loss)                                                              51,061           (144,959)
Per share amounts:                                                                    Yen
  Net income (loss)                                                      13,437,037.61    (38,147,090.74)
  Cash dividends applicable to the year (Note 24)                                    –                 –




                                              See accompanying notes.


                                                     F-5
                             DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                         CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
                                    Year ended March 31, 2010 and 2009

                                                                                       Net
                                                                                unrealised
                              Number of                                        gain (loss)
                               shares of                                     on securities,     Deferred
                               common      Common        Capital    Retained    net of tax       loss on    Translation   Minority
                                   stock      stock      surplus    earnings        effect       hedges    adjustments    interests
                                                                        ¥ millions
Balance at March 31, 2008         3,800     255,700      167,421    187,897              (48)       (76)         3,851       1,177


  Net income (loss)                                                 (144,959)
  Net change of items other
    than owners’ equity                                                              78,781          76        (18,899)         58


Balance at March 31, 2009         3,800     255,700      167,421     42,938          78,733           –        (15,048)      1,235


  Net income (loss)                                                  51,061
  Net change of items other
    than owners’ equity                                                              (78,640)                     (637)         70


Balance at March 31, 2010         3,800     255,700      167,421     93,999              93           –        (15,685)      1,305




                                                      See accompanying notes.


                                                              F-6
                           DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  Year ended March 31, 2010 and 2009

                                                                                            2010              2009
                                                                                             ¥ millions
Cash flows from operating activities:
Net income (loss)                                                                         51,061          (144,959)
Adjustments to reconcile net income to net cash provided by (used in)
  operating activities:
  Depreciation and amortisation                                                           18,541            15,821
  Provision for retirement benefits, net                                                     836               432
  Statutory reserves, net                                                                   (269)           (2,311)
  Gains related to investment securities                                                 (21,582)            3,428
  Deferred income taxes                                                                   37,201           (25,587)
  Minority interests                                                                          46                 4
  Changes in operating assets and liabilities:
     Receivables and payables related to margin transactions                               33,117          (55,645)
     Other receivables and other payables                                                 (99,520)         264,935
     Private equity and other securities                                                  152,106           61,272
     Trading assets and liabilities                                                      (916,680)       1,896,382
     Collateralised short-term financing agreements                                    (2,709,444)        (578,481)
     Other, net                                                                            59,029          (40,094)

       Total adjustments                                                               (3,446,619)       1,540,156

Net cash flows provided by (used in) operating activities                              (3,395,558)       1,395,197

Cash flows provided by (used in) investing activities:
  Payments for purchases of property and equipment                                          (924)           (1,975)
  Payments for purchases of intangible fixed assets                                      (18,749)          (21,723)
  Payments for purchases of investment securities                                        (13,666)           (4,075)
  Proceeds from sales of investment securities                                            11,851             2,888
  Payments from acquisitions of subsidiary companies’ stock resulting in
    changes in scope of consolidation                                                      (3,673)                –
  Proceeds from acquisitions of subsidiary companies’ stock resulting in changes
    in scope of consolidation                                                            208,706                 –
  Decrease (increase) in long-term loans receivable                                           16                 1
  Other, net                                                                                 531             7,820

    Net cash flows provided by (used in) investing activities                            184,092           (17,064)

Cash flows provided by (used in) financing activities:
  Increase (decrease) in short-term borrowings and commercial paper                    3,298,149         (1,530,023)
  Increase (decrease) in long-term debt                                                   31,000             96,500
  Proceeds from issuance of notes                                                        108,051            148,344
  Payments for redemption of bonds and notes                                             (86,609)           (96,239)
  Payments of cash dividends to minority shareholders                                         33                (56)

    Net cash flows provided by (used in) financing activities                          3,350,624         (1,381,474)

Effect of exchange rate changes on cash and cash equivalents                                 492             (9,243)

Net increase (decrease) in cash and cash equivalents                                     139,650           (12,584)
Cash and cash equivalents at beginning of year                                           107,209           119,793

Cash and cash equivalents at end of year                                                 246,859           107,209

Supplemental information on cash flows:
  Cash paid during the year for:
  Interest                                                                         ¥           –     ¥      66,789
  Income taxes                                                                     ¥      24,454     ¥       5,175

                                             See accompanying notes.


                                                       F-7
                          DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               Fiscal year ended March 31, 2010 and 2009

1.   Basis of financial statements

      The consolidated financial statements include the accounts of Daiwa Securities Capital Markets Co. Ltd.
(the “Company”), a Japanese corporation, and its consolidated subsidiaries (together with the Company, the
“Group”). The Company’s principal consolidated subsidiaries include:

     –      Daiwa PI Partners Co., Ltd.
     –      Daiwa Capital Markets Europe Limited
     –      Daiwa Capital Markets Hong Kong Limited
     –      Daiwa Capital Markets Singapore Limited
     –      Daiwa Capital Markets Australia Limited
     –      DBP-Daiwa Capital Markets Philippines, Inc.
     –      Daiwa-Cathay Capital Markets Co., Ltd.
     –      Close Brothers Corporate Finance (Holdings) Limited (*1)
     –      Close Brothers Corporate Finance Limited (*2)

      In the fiscal year ended March 31, 2010, nine companies including Close Brothers Corporate Finance
(Holdings) Limited and Close Brothers Corporate Finance Limited were newly consolidated due mainly to
acquisition of shares and 2 companies are excluded from the scope of consolidation due mainly to sales of
shares.
     (*1)   Close Brothers Corporate Finance (Holdings) Limited has been renamed Daiwa Corporate Advisory Limited in May 11
            2010.

     (*2)   Close Brothers Corporate Finance Limited has been renamed DC Advisory Partners Limited in May 11 2010.

      The accompanying consolidated financial statements have been prepared in accordance with generally
accepted accounting principles in Japan (“Japanese GAAP”), with some expanded descriptions and
reclassifications. Some supplementary information included in the Japanese GAAP consolidated financial
statements, which is not considered necessary for fair presentation is not presented in the accompanying
financial statements. Japanese GAAP is different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards (“IFRS”). The accounts of overseas consolidated
subsidiaries are maintained in conformity with generally accepted accounting principles and practices
prevailing in the respective countries of domicile. The accompanying consolidated financial statements have
been prepared by incorporating the accounts of the domestic companies prepared under Japanese GAAP with
the accounts of the overseas subsidiaries maintained on the basis described above and changing the difference
in accounting policies from Japanese GAAP, if any.

     (Changes in accounting policy)

      The Group has adopted “Practical Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements” (Accounting Standards Board of Japan (“ASBJ”) Practical
Issues Task Force No. 18, “PITF”) from April 1, 2008.

      Previously the accounting policies applied to a parent company and those of its foreign subsidiaries
were tentatively not required to be uniform, even if accounting policies applied locally to foreign subsidiaries
in their respective countries of domicile differed from the accounting policies uniformly applied to the parent
company and its other subsidiaries.

       Under PITF, the accounting policies and procedures applied to a parent company and its subsidiaries for
similar transactions and events under similar circumstances should, in principle, be unified for the preparation
of consolidated financial statements. Meanwhile, financial statements prepared by foreign subsidiaries in
accordance with IFRS or the generally accepted accounting principles in the United States (U.S. GAAP)
tentatively can be used for the consolidation process by adjusting certain items such as amortisation of
goodwill.

     However, this change has no effect on the consolidated financial statements as of March 31, 2009.

      The Company has applied ‘Guidance on determining a subsidiary and an affiliate’ (ASBJ Guidance
No.22, May 13, 2008) from fiscal year 2009. This change has no effect on the consolidated financial
statement of income.


                                                            F-8
2.   Significant accounting policies

       Consolidation – The consolidated financial statements include the accounts of the Company and the
entities which are controlled by the Company, directly or indirectly. Control exists generally when the
Company holds more than 50% of the voting rights of the entity. Also, control is regarded to exist when the
Company holds 40% or more of the voting rights of an entity and there are certain facts and circumstances
which indicate that the Company controls the decision making body of the entity. However, investee entities
are excluded from the consolidation even though the Company has control of them, such as, when the
investee entity is held for part of the principal investment or venture capital investment business purposes
where the objective for the Company to have control of the investee entity is merely to seek capital gain
opportunities and the Company does not intend to operate its business with the entity as a part of the group.

      The Company accounts for its investment by the equity method of accounting if the Company does not
have control of an entity but can exercise significant influence over the entity’s operating and financial
policies. The ability to exercise such significant influence is generally regarded to exist when the Company
holds 20% or more but 50% or less of the voting rights of the entity, or 15% or more of the voting rights
coupled with certain facts and circumstances which indicate that the Company can exercise significant
influence over the entity’s operating and financial policies. As is with the policy and considerations for
consolidation described above, certain investee entities are excluded from the scope of the equity method even
though the Company holds significant influence, when the investee entity is held for principal investment or
for venture capital investment business purposes.

     (Changes in accounting policy)

     The Company has applied ‘Guidance on determining a subsidiary and an affiliate’ (ASBJ Guidance
No.22, May 13, 2008) from the fiscal year ended March 31, 2010. This guidance clarified the condition
where investments held for part of the principal investment or venture capital investment business purpose are
excluded from consolidation scope or equity method of accounting. However, this change has no effect on the
consolidated financial statements.

     Goodwill and negative goodwill are amortised under the straight-line method of accounting over the
term of 20 years which is estimated based on the condition in each case. In the case of no materiality, it is
amortised in a lump sum when it accrues.

     Material inter-company balances, transactions and profits have been eliminated in consolidation.

      Statements of cash flows – For purposes of consolidated statements of cash flows, the Group defines
cash equivalents as highly liquid investments with original maturities of three months or less.

       Trading assets and trading liabilities – Trading assets and liabilities including securities and financial
derivatives for trading purposes are recorded on a trade date basis at fair value in the consolidated balance
sheets. Gains and losses “including unrealised gains and losses” related to transactions for trading purposes
are reported as “Net gain (loss) on trading” in the accompanying consolidated statements of operations. Fair
value is determined based on market prices, quoted prices, internal pricing models (utilising indicators of
general market conditions or other economic measurements), or management’s estimates of amounts to be
realised on settlement, assuming current market conditions and an orderly disposition over a reasonable period
of time. Securities owned for non-trading purposes, shown in the accompanying consolidated balance sheets
as “Private equity and other investments” and “Investment securities”, are discussed below.

      Private equity, investment securities and other investments – The Group examines the intent of
holding investments and classifies those investments as debt securities intended to be held to maturity
(“held-to-maturity debt securities”) which are carried at amortised cost, other marketable securities available
for sale (marketable “available-for-sale securities”) which are stated at their fair values based on quoted
market closing prices with unrealised gain or loss reported in a separate component within the net assets on a
net-of-tax basis, or other non-marketable investments (non-marketable “available-for-sale securities”) which
are carried at cost. Investment business partnerships (“Toshi Jigyo Kumiai”) which are regarded as equivalent
to securities by Article 2 (2) of the Financial Instruments and Exchange Act are reported as “Private equity
and other investments” in the consolidated financial statements in proportion to the Group’s share of the
investment business partnership and designated as “available-for-sale-securities”. The cost of those
investments is determined by the moving average method of accounting.



                                                      F-9
      Impairment is assessed for investments including private equity holding. For marketable investments, if
the year-end market value declines 30% or more but less than 50% from the carrying value for individual, an
impairment loss is recognised if there is no chance of recoverability in value. Recoverability is assessed based
on whether the decline is temporal by considering the movements of the market price over the last and the
financial conditions of the issuer. If the year-end market value declines 50% or more from the carrying value,
then an impairment loss is recognised immediately. For non-marketable equity investments, the Group
generally compares the carrying amount and the net asset value of the issuing company attributable to the
Group’s holding share, and recognises an impairment loss if the net asset value attributable to the Group’s
holding share is significantly lower from the carrying value and such decline is considered other than
temporary. For non-marketable investments other than equities, the Group reviews the financial conditions of
the issuers and provides for allowance for possible investment losses, if necessary.

      Derivatives used for non-trading purpose – The Group records derivative financial instruments at fair
value except for certain cases as described below, and recognises changes in the fair value as gains or losses
unless the derivative financial instruments are used for hedging purposes. Valuation gains or losses on
hedging instruments are deferred in a separate component within the net assets until the gains or losses on the
underlying hedged instruments are realised. Certain forward foreign exchange contracts are exempted from
marked-to-market valuation. The premium or discount on such exempt forward foreign exchange contracts
used for hedging purposes is allocated to each fiscal term without being marked-to-market under special
treatment.

      Collateralised short-term financing agreements – Collateralised short-term financing agreements
consist of securities purchased under agreements to resell (“resell transactions”) or securities sold under
agreements to repurchase (“repurchase transactions”), and securities borrowed or loaned. Repurchase
transactions and resell transactions are carried at their contractual amounts. Securities borrowed or loaned are
recorded at the amount of cash collateral advanced or received.

      Allowance for doubtful accounts – Allowance for doubtful accounts are provided for probable losses
on loan and receivable, based on the actual historical default rate for general loans, and based on individually
assessed amounts for doubtful and default loans.

     Property and equipment – Property and equipment are stated at the acquisition cost, net of
accumulated depreciation. The Group computes depreciation principally by the straight-line method of the
accounting over estimated useful lives.

      Intangible fixed assets – Intangible fixed assets are generally amortised by the straight-line method of
the accounting. The Group computes the amortisation over estimated useful lives. The useful lives of software
of in-house use, which is the most significant intangible fixed asset, are generally five years.

      Leased assets – Leased assets in finance lease transactions that do not transfer ownership of the assets
to the lessee are amortised under the straight-line method of the accounting over estimated useful lives (taken
to be leasing periods) and residual values taken to be nil.

     (Changes in accounting policy)

      The Company and its consolidated subsidiaries have adopted “Accounting Standard for Lease
Transactions” (ASBJ Statement No.13) and “Guidance on Accounting Standard for Lease Transactions”
(ASBJ Guidance No. 16) from April 1, 2008. The accounting treatments of finance lease transactions that do
not transfer ownership has changed to be applied from the manner similar to accounting treatment for
ordinary rental transactions to the manner similar to the accounting treatment for ordinary sale and purchase
transactions and are capitalised as leased assets.

      Financial lease transactions that do not transfer ownership to the lessee started before March 31, 2008
are accounted for in the manner similar to accounting treatment for ordinary rental transactions. Information
on these non-capitalised financial lease transactions is contained in Note 11.

      Impairment – Non-current assets, principally property and equipment, leased assets, intangible fixed
assets, and goodwill are reviewed for impairment whenever events or changes in circumstances indicate that a
carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of the




                                                     F-10
carrying amount to future undiscounted net cash flows expected to be generated by the asset or certain asset
group. If an asset is considered to be impaired, then an impairment loss is recognised for the difference
between the carrying amount and the recoverable amount of the asset or the related asset group.

      Bonuses – Accrued bonuses for employees and directors represent liabilities estimated as of the balance
sheet date.

       Retirement benefits – The Company and most domestic subsidiaries have unfunded retirement benefit
plans for eligible employees, under which the benefit amount is determined annually based on the
performance during the year in which the related service is rendered, plus interest earned to date. Accordingly
this liability does not change subsequently due to other the facts, such as changes in compensation level in
the subsequent years. The annually earned benefits and the related interest to the accumulated benefits are
expensed annually.

     The Company and most domestic consolidated subsidiaries also have defined contribution plans for
which annual contribution is charged to expense.

      Retirement benefits for directors and corporate auditors are recognised based on the amount as
calculated in accordance with the internal rule.

       Income taxes – Income taxes consist of corporation, enterprise and inhabitants’ taxes. The provision for
current income taxes is computed based on the pre-tax income of the Company and each of its consolidated
subsidiaries with certain adjustments, as appropriate. Deferred tax assets and liabilities are recognised for the
future tax consequences attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards, if
any. A valuation allowance is recognised for any portion of the deferred tax assets if it is considered not
realisable based on its tax planning, other studies, and reference to certain set requirements under Japanese
GAAP.

      Translation of foreign currencies – The Company and its domestic consolidated subsidiaries translate
assets and liabilities in foreign currencies into yen at the year-end exchange rate, and translate income and
expenses in foreign currencies into yen using generally the applicable exchange rate on the day when the
related transaction occurred. Any gains and losses resulting from such translation are included in current
income or expense. The financial statements of overseas consolidated subsidiaries and affiliates are translated
into yen using the year-end exchange rates. Income and expenses are translated at the average exchange rates
of the applicable year.

     Net income (loss) per share – Net income (loss) per share of common stock is based on the average
number of common shares outstanding. Diluted net income (loss) per share is not presented because the
Group has issued no dilutive potential common shares.

      Reclassification – Certain reclassifications have been made in the 2009 and 2008 consolidated financial
statements to conform to the presentation for 2010.

3.    Margin transactions

      Margin transactions at March 31, 2010 and 2009 consisted of the followings:

                                                                                              2010             2009
                                                                                                ¥ millions
      Assets:
        Customers’ margin loans                                                              7,113                20
        Cash deposits as collateral for securities borrowed                                 56,982           158,494


                                                                                            64,095           158,514


      Liabilities:
        Proceeds of securities sold for customers’ accounts                                 46,474           107,776




                                                       F-11
     Customers’ margin loans are stated at amounts equal to the purchase amounts of the relevant securities,
which are collateralised by customers’ securities and customers’ deposits. Proceeds of securities sold for
customers’ accounts are stated at the sales amounts.

4.   Collateralised short-term financing agreements

     Collateralised short-term financing agreements at March 31, 2010 and 2009 consisted of the followings:

                                                                                           2010           2009
                                                                                            ¥ millions

     Assets:
       Securities purchased under agreements to resell                                   15,518         11,695
       Securities borrowed                                                            5,660,937      4,061,802


                                                                                      5,676,455      4,073,497


     Liabilities:
       Securities sold under agreements to repurchase                                   663,785        830,226
       Securities loaned                                                              1,511,889      2,454,930


                                                                                      2,175,674      3,285,156


5.   Financial instruments

      The Group has adopted the revised Accounting Standard, “Accounting Standard for Financial
Instruments” (ASBJ Statement No. 10, revised on March 10, 2008) and the “Guidance on Disclosures about
Fair Value of Financial Instruments” (ASBJ Guidance No. 19, revised on March 10, 2008) from this fiscal
year ended March 31, 2010.

     Qualitative Information on financial instruments

     (1)   Policy for using financial instruments

           The Group, the primary businesses of which are investment and financial services businesses with
     a core focus on securities related business, is involved in trading and brokerage of securities and
     derivative products, underwriting and secondary offering of securities, treating of public offering for
     subscription and secondary offering of securities, treating of private offering for subscription of
     securities, and other businesses related to the securities and financial fields. The Group holds financial
     assets and liabilities as follows to trade with customers and execute proprietary trades: – “trading
     securities” which include equities, bonds and investment trusts, “derivatives” like option, transactions,
     futures and forward transactions and swap agreements, “collateralised short-term financing agreements,”
     and “receivables and payables related to margin transactions.” In addition to those, the Group holds
     “investment securities” as long-term holding for the business relationship.

           On the other hand, the Group is raising capital by utilising a variety of financial instruments such
     as corporate bonds, medium-term notes, borrowing from financial institutions, commercial paper, call
     market, gensaki transactions, and repurchase agreements. Under the Group’s basic financing policy
     which is that enough liquidity for continuing business should be effectively secured, the Group is
     maintaining an appropriate balance between assets and liabilities by diversifying financial measures and
     maturity dates, and realising effective and stable finance when it raises capital. Also, the Group uses
     interest rate swaps and foreign currency swaps, etc. for the purpose of hedging fluctuation of interest
     rates and foreign currencies in terms of financial assets and liabilities.

           The Group entirely and efficiently manages the variety of risks incurred by its holding of such
     financial assets and liabilities and maintains sound finances.




                                                    F-12
(2)   Details of financial instruments used and the exposures to risk and how they arise

      The Group mainly conducts trading business. Categories of products in the trading business are as
follows: (a) trading securities, collateralised short-term financing agreements, receivables and payables
related to margin transactions, (b) derivatives, traded at exchange and (c) OTC derivatives.

       Of the various risks, the major risks implied in cash and derivative transactions in the trading
business are market risk and credit risk. Market risk means the risk of suffering losses from fluctuations
in the value of holding financial assets and liabilities in accordance with changes in the market value of
equities, interest rates (in case of bonds), currencies, commodities and derivatives of those and interest
rates. Credit risk means the risk of suffering losses from defaults of counterparties or credit changing of
issuers of financial instruments which the Group holds, etc.

      In the trading business, the Group conducts derivative transactions solely and as a part of
structured notes to meet customers’ needs. These include transactions of which volatilities are higher
than that of stock indices, foreign exchange rates and interest rates of reference assets or those
correlation or which tend to move in a complicated manner. Therefore, these carry higher risk than the
reference assets. These derivative transactions are categorised as trading assets and liabilities in the
consolidated balance sheets and the realised and unrealised profit/loss by fluctuation of fair values are
stated as the net gain on trading.

      Other than the trading business, the Group holds financial instruments like investment securities as
long-term holding for the business relationship, etc. These financial instruments carry market risk and
credit risk as well.

      The Group raises capital by utilising corporate bonds, medium-term notes, borrowing from
financial institutions, etc. when the Group holds financial instruments, and is exposed to liquidity risk.
Liquidity risk indicates the risk of suffering losses such that cash management may be impossible and
remarkably higher financing cost than usual may be requested as a result of an abrupt change of market
environment or unexpected credit crunch, etc.

       The Group enters derivative transactions as brokers and end-users. Derivative products are
necessary to deal with a variety of customers’ financial needs and the Group provides customers with
financial instruments to meet their requests. For instance, the Group provides customers with forward
exchange contracts to hedge the exchange rate risk of foreign currency of foreign bonds held by
customers and interest rate swaps to hedge interest rates when customers issue corporate bonds, etc. As
end-users, the Group uses interest rate swaps to hedge interest rate risk regarding financial assets and
liabilities of the Group and utilise many kinds of futures and options to hedge trading positions.

(3)   Policy and process for managing the risk

     While the economy and social structure have been drastically changed due to globalisation and IT
advances, the financial business continues to be diversified and complicated and the importance of risk
management is increasing in the Group as a financial institution. The Group recognises that to properly
understand the risk existing in the Group and to manage the risk entirely is a significant target for
management and works to construct a risk management system for the Group.

      For risk management of the entire Group, our Group has resolved the “Risk Management Rule” at
the meeting of the Board of Directors which states the basic policy of risk management. The Company
unifies risk management of the entire Group by monitoring the structure and process of its Subsidiaries’
risk management and giving necessary guidance.

       In addition, the Group is working on an integrated risk management system aiming to secure
sufficiently sound finances and properly understand return in consideration of risk. The Group grasps all
the market and credit risk with the quantitative method as systematically as possible and controls the
risk within the amount suitable for management strength of the Group.




                                                F-13
(i)    Management of credit risk

      Concerning transactions in the trading businesses which generate credit risk, the Group has
established the credit limit based on ratings of counterparties in advance and has monitored
notional principals and credit amounts. Furthermore, the Group has established a credit limit for
each of the counterparties based on the credit analysis rating which was obtained by adding
qualitative analysis to quantitative analysis utilising the rating analysis model and has conducted
daily monitoring in consideration of transaction conditions such as the term, collateral, etc. In
addition, concerning the credit risk of financial instruments held in the trading business, the Group
has established the upper limit of holding and the holding period in accordance with each issuer’s
category and credit rating in relation to the relevant financial instruments, and monitored the
status of them.

(ii)   Management of market risk

       Most of the trading business of the Group is exposed to market risk. Therefore, it would be
most important to quantify the effect of fluctuation of the market on the value of assets and
liabilities held by the Group and to understand the risk as objectively as possible.

      Considering the above, the Company grasps the market risk of the entire Group based on
the position limit on each product, profit/loss and Value at Risk (VaR) which indicates the
estimate of the maximum loss amount under a certain probability, etc. Concerning VaR, the
Company verifies the effectiveness of the valuation model of market risk by regularly conducting
back tests which compare VaR and the actual profit / loss. And concerning the impact of an
abrupt change in the market, in order to cover the capacity limit of VaR that is the valuation
method based on past data and statistical hypothesis, the Company evaluates the maximum loss
amount of its portfolio utilising a scenario based on past huge market fluctuation or a scenario in
which a certain risk factor vastly changes, etc.

       (a)   Management of equity risk

             Equity risk indicates the risk that the Group suffers losses from changes in the price of
       equity related position by fluctuation of the price of equities. The equity risk to which the
       Group is mainly exposed is the one relating to equity related products and derivatives, etc.
       in the trading business. The Group manages the risk by establishing the limit for VaR,
       position and sensibility (delta, gamma and vega, etc.) etc. considering the financial situations
       such as the amount of capital adequacy, the business plan and budget of each division. The
       risk management department of the Company recognises the equity risk of the entire Group
       and reports it to the management of the Company on a daily basis.

       (b)   Management of interest rate risk

             Interest rate risk means the risk that the Group suffers losses from changes in the price
       of interest rate related positions caused by fluctuation of interest rate. The interest rate risk
       to which the Group is mainly exposed is the one relating to interest rate related products
       and derivatives, etc. in the trading business. The Group manages the risk by establishing the
       limit for VaR, position and sensibility (BPV, gamma and vega, etc.) etc. considering the
       financial situations such as the amount of capital adequacy, the business plan and budget of
       each division. The risk management department of the Company recognises the interest rate
       risk of the entire Group and reports it to the management of the Company on a daily basis.

       (c)   Management of foreign exchange rate risk

              Foreign exchange rate risk indicates the risk that the Group suffers losses from
       changes in the price of foreign currency positions caused by fluctuation of foreign exchange
       rate. The foreign exchange rate risk to which the Group is mainly exposed is the one
       relating to foreign currency related products and instruments such as derivatives in the
       trading business. The Group manages the risk by establishing the limit for VaR, position and
       sensibility (BPV, gamma and vega, etc.) etc. considering the financial situations such as the




                                           F-14
            amount of capital adequacy, the business plan and budget of each division. The risk
            management department of the Company recognises foreign exchange rate risk of the entire
            Group and informs it to the management of the Company on a daily basis.

      (iii) Management of risk of financial instruments other than trading purpose

            The Group holds financial instruments other than for its trading business such as investment
      securities as long-term holding for the business relationship.

             In connection with investment securities as long-term holding for maintaining business
      relationships with the investees, etc, the Group decides to acquire or sell the securities in
      accordance with the policy defined by its rules.

      (iv) Management of liquidity risk

            The basic policy of financing of the Group is to effectively secure enough liquidity in order
      to continue its business because the Group mainly focuses its business on the security related
      business by utilising large volume of assets and liabilities. Financing methods of the Group
      include issuing corporate bonds, medium-term notes, borrowing from financial institutions,
      commercial paper, call market, gensaki transactions and repurchase agreements, etc. By those
      methods, the Group manages to realise effective and stable financing.

             The Company has also prescribed a liquidity management policy, and manages its cash and
      deposits, trading assets easily converted into funds, assets that can be offered as collateral and
      commitment lines in a manner that ensures it is able to continue its businesses without having to
      take actions such as shrinking its assets, even if circumstances that make unsecured financing
      difficult continue for one year.

            The Company collectively monitors and manages the liquidity of the entire Group. Although
      overseas subsidiaries have their own independent financing function, the Company has established
      maximum limits on the use of unsecured financing and monitors the status of use daily.

             Liquidity risk often occurs in connection with the occurrence of certain events. For entities
      such as the Group that require large amounts of financing in conjunction with holding liquid
      assets mainly as trading position, it is important to establish action procedures beforehand. For
      this reason, the Group has established contingency plans as one measure for responding to a crisis,
      such as when financial markets are beset by turmoil. The Group’s contingency plans set out
      measures such as financing funds secured by government bonds, corporate bonds and similar
      securities, and selling negotiable securities. As a result of these plans, the Group should be able to
      ensure sufficient liquidity even if unsecured short-term financing becomes difficult.

          To ensure a financing mechanism in an emergency, the Company has entered into
      commitment line agreements with several financial institutions, and the total value of its unused
      commitment line agreements as of March 31, 2010 is 90 billion yen.

(4)   Supplemental information on fair values

      The fair value of financial instruments includes the values based on market prices and the
calculation rationale if no market price is available. Certain assumptions and conditions are used for
such calculations. Therefore the results of such calculations may vary with different assumptions and
conditions.




                                                F-15
Fair values of financial instruments

      The amounts stated on the consolidated balance sheet, fair values and the difference between them
as of March 31, 2010 are as below. Financial instruments whose fair values are extremely difficult to
determine are excluded from the below table (see Note 2).

                                                                                     Consolidated fiscal year under review
                                                                                           (As of March 31, 2010)
                                                                                  Amounts on
                                                                                  consolidated
                                                                                 balance sheet         Fair value        Difference
                                                                                                     ¥ millions

Assets
(1) Cash and cash equivalents                                                          246,859           246,859                  –
(2) Cash segregated as deposits for regulatory purposes                                103,550           103,550                  –
(3) Time deposits                                                                        6,313             6,313                  –
(4) Trading assets                                                                   6,930,133         6,930,133                  –
(5) Receivables related to margin transactions                                          64,095            64,095                  –
(6) Collateralised short-term financing agreements                                   5,676,455         5,676,455                  –
(7) Loans receivable from other than customers                                         113,585           113,585                  –
(8) Investment securities, and private equity and other
       securities
       Held-to-maturity securities                                                       1,400              1,397                 (2)
       Other securities                                                                 12,679             12,679                  –


Total Assets                                                                       13,155,069         13,155,066                  (2)


Liabilities
(1) Trading liabilities                                                              4,574,622         4,574,622                  –
(2) Trading account payables, net                                                      239,720           239,720                  –
(3) Payables related to margin transactions                                             46,474            46,474                  –
(4) Collateralised short-term financing agreements                                   2,175,674         2,175,674                  –
(5) Payables to customers and counterparties
      Cash deposits received from customers                                            187,863           187,863                  –
(6) Short-term borrowings                                                            4,035,497         4,035,497                  –
(7) Commercial paper                                                                   331,750           331,750                  –
(8) Long-term debt                                                                   1,183,280         1,163,191             20,089


Total Liabilities                                                                  12,774,880         12,754,791             20,089


Derivative transactions other than trading
  Transactions to which hedge accounting is not applied                                      20                 20                –
  Transactions to which hedge accounting is applied                                           –                  –                –


Total Derivative Transactions Other Than Trading                                             20                 20                –

(*) Assets and liabilities that are generated from derivative transactions other than trading are stated on a net amount basis.

(Note 1) Method for fair values of financial instruments

(1)    Cash and cash equivalents, time deposits and loans receivable from other than customers

       Cash and cash equivalents, time deposits and loans receivable from other than customers are stated at their book value
       since the terms of the settlement period are short and the fair values approximate the book values.




                                                           F-16
(2)    Cash segregated as deposits for regulatory purposes

       Cash segregated as deposits for regulatory purposes, which consist of cash segregated as deposits for customers and
investments in securities like government bonds, is calculated based on reasonably calculated prices utilising the yield spread with
index interest rates for each term that are defined by immediately previous traded prices including ones of similar bonds.

(3)    Trading assets and liabilities

       Trading securities and others

       Equities and others                         Closing price or closing prices quoted at the main stock exchange

       Bonds                                       Reasonably calculated price based on the immediately previous traded price
                                                   including similar bonds (OTC and broker screen etc.) or market value
                                                   information (trading price statistics etc.) by utilising the spread with the index
                                                   interest rate

       Investment trusts                           Closing price, closing prices quoted at the exchange; or net asset value

       Derivatives

       Derivatives traded at exchange              Mainly liquidation prices at the exchange or basic price for margin calculation

       Interest rate swaps etc.                    Prices calculated using price valuation models generally acknowledged in the
                                                   market or extended models of them, based on expected cash flow calculated
                                                   from yield curve, prices and coupon rates of underlying bond, interest rates,
                                                   discount rates, volatility, correlation, etc.

       OTC equity derivatives                      Prices calculated by price valuation models generally acknowledged in the
                                                   market or extended models of them, based on prices of equities or equities
                                                   indices, interest rates, dividends, volatility, discount rates, correlation, etc.

       Credit derivatives                          Prices calculated using price valuation models generally acknowledged in the
                                                   market or extended models of them, based on the entire cash flows defined
                                                   with discount rates that are calculated from interest rates and credit spread of
                                                   the reference entity

       Concerning OTC derivatives, both credit risk and liquidity risk attributable to the counterparty are added to the fair value
as necessary.

(4)    Trading account payables, net

       Trading account payables, net are stated at their book value since the terms of the settlement period are short and the fair
values approximate the book values.

(5)    Receivables related to margin transactions and payables related to margin transactions

        Receivables related to margin transactions consist of lending money to customers generated from margin transaction and
collaterals to securities finance companies. Those are stated as their book value as settled in the short term because the former is
settled by reversing trades by customers’ decisions and the latter is collaterals marked to market on lending and borrowing
transactions.

        Payables related to margin transactions consist of customers’ borrowing money from securities finance companies and
proceeds of securities sold for customers’ accounts generated from margin transactions. Those are deemed to be settled in the
short term and are stated as their book value because the former are marked to market and the latter is settled by reversing trades
based on customers’ decision.

(6)    Collateralised short-term financing agreements

      These are stated at their book value since the terms of the settlement period are short and the fair values approximate the
book values.

(7)    Investment securities, private equity and other securities

       Equities                            Closing prices or closing quoted prices at the main stock exchange

       Bonds                               Reasonably calculated price based on the latest traded price including those of similar
                                           bonds (OTC and broker screen etc.) or market value information (trading price
                                           statistics etc.) by utilising the spreads with the index interest rates, or reasonably
                                           calculated price based on the value of collateralised assets

       Investment trusts                   Closed price, closed quotation at the exchange or net asset value




                                                           F-17
(8)    Cash deposits received from customers

        These are mainly deposits as guarantees related to derivative transactions and stated as their book value as settled in the
short term with those characteristics, which are marked to market for each transaction. Concerning the other cash deposits
received as guarantees from customers, the payment amount (book value) when settled at the end of the fiscal year is considered
fair values.

(9)    Short-term borrowings, Commercial paper

      These are stated as their book value since the terms of the settlement period are short and the fair values approximate the
book values.

(10)   Long-term debt

       Concerning fair values of bonds and notes due within one year, these are stated as their book value since the terms of the
settlement period are short and the fair values approximate the book values.

        Concerning fair value of bonds and notes whose maturities are longer than one year, in the case that market prices (trading
price statistics, etc.) are available in the market, fair values are calculated from the market price. If the market prices are not
available, fair value is calculated from book values which are adjusted with consideration of interest rate fluctuation from the
issuances and change of credit spread of the Company. The credit spread of the Company is referred to interest rate of the latest
issuance or market prices of similar bonds issued by the Company, etc.

       Concerning fair value of long-term borrowings, there are calculated from book values which are adjusted with
consideration of interest rate fluctuations from the latest issuance and change of credit spread of the Company. The credit spread
of the Company is referred to interest rates of the latest issuance or market prices of similar bonds issued by the Company, etc.

(11)   Derivative transactions other than trading

       The accounting method is the same as “(3) Trading assets and liabilities – Derivatives”.

(Note 2)    Financial instruments whose fair value are extremely difficult to determine are as below and are not included in the
           “Assets (8) Investment securities, and private equity and other securities – Other securities” of fair value information
           of financial instruments.

                                                                                                      Amount on the consolidated
                                                                                                            balance sheet
       Category                                                                                        (As of March 31, 2010)

                                                                                                                         ¥ millions

       Non consolidated subsidiaries’ equities and related company’s equities
         Equities not listed on any exchange                                                                                 2,824
       Other securities
         Equities not listed on any exchange                                                                                 4,004
         Investments in business partnerships                                                                                3,525
         Other                                                                                                               2,783

       The above are deemed to be extremely difficult to determine fair values because there are no market prices and it is
extremely difficult to estimate future cash flows from the investments. Therefore, their fair values are not disclosed.

(Note 3) Scheduled redemption amount of financial receivables and securities with a maturity date after March 31, 2010

                                                               Within 1 year      1 to 5 years     5 to 10 years    Over 10 years


       Cash and cash equivalents and time deposits                  253,172                  –                 –                 –
       Cash segregated as deposits for regulatory
         purposes                                                   103,550                  –                 –                 –
       Receivables related to margin transactions                    64,095                  –                 –                 –
       Collateralised short-term financing agreements             5,676,455                  –                 –                 –
       Securities, private equity and other securities
         Held-to-maturity securities                                       –             1,400                 –                 –
         Other securities with a maturity date
            Bonds
               Government bonds, municipal bonds, etc.                 3,590                 –                 –                 –
               Corporate bonds                                             –                 –                 –                 –
               Other bonds                                                 –                 –                 –                 –
            Other securities                                               –                 –                 –                 –


       Total                                                      6,100,862              1,400                 –                 –




                                                           F-18
           * Cash segregated as deposits are included in “within 1 year” because they consist of deposits from customers.

     (Note 4) Scheduled redemption amount of corporate bonds, long-term borrowings and other interest-bearing liabilities after
              consolidated March 31, 2010

                                                                Within 1 year       1 to 5 years    5 to 10 years    Over 10 years

                                                                                            ¥ millions

           Commercial paper                                           331,750                 –                –                  –
           Long-term debt                                              48,403           419,307           76,001            639,570


           Total                                                      380,153           419,307           76,001            639,570



6.   Trading assets and trading liabilities

     Trading assets and trading liabilities at March 31, 2010 and 2009 consisted of the followings:

                                                                                                           2010              2009
                                                                                                             ¥ millions

     Trading assets:
       Trading securities:
          Equities                                                                                     323,684           161,359
          Government, corporate and other bonds                                                      4,533,877         2,680,088
          Investment trusts                                                                            102,649           126,290
          Commercial paper, certificates of deposits and others                                         26,936            44,676
       Derivatives:
          Option transactions                                                                          277,873           267,305
          Futures and forward transactions                                                              52,862           100,949
          Swap agreements                                                                            1,583,753         2,179,874
          Other derivatives                                                                             39,604            92,199
          Risk reserves                                                                                (11,105)           (7,996)


                                                                                                     6,930,133         5,644,744


     Trading liabilities:
       Trading securities:
          Equities                                                                                     123,768            89,082
          Government, corporate and other bonds                                                      2,995,613         2,369,315
          Investment trusts                                                                                253                 0
       Derivatives:
          Option transactions                                                                          238,800           269,555
          Futures and forward transactions                                                             115,269           287,720
          Swap agreements                                                                            1,061,941         1,523,363
          Other derivatives                                                                             38,978            81,735


                                                                                                     4,574,622         4,620,770


     Government, corporate and other bonds include convertible bonds.




                                                             F-19
7.   Investment securities, private equity and other securities

     Cost and fair value of marketable securities as of March 31, 2010 and 2009 consisted of the followings:

                                                                           Cost     Fair value    Difference
                                                                                   ¥ millions

     March 31, 2010:
      Equities                                                            1,127         2,323            1,196
      Bonds                                                               3,587         3,589                2

     March 31, 2009:
      Equities                                                         164,126        298,176          134,050

      Cost/amortised cost of non-marketable securities as of March 31, 2010 and 2009 consisted of the
followings:

                                                                                         2010            2009
                                                                                          ¥ millions

     Held-to-maturity-bonds                                                             1,400            1,300
       Bonds                                                                            1,400            1,300
     Other securities                                                                  17,078          181,868
       Equities                                                                         4,004           36,831
       Bonds                                                                                –           34,004
       Investments in business partnerships                                            10,292          104,032
       Other                                                                            2,782            7,001


8.   Derivatives used for non-trading purposes

     Net unrealised gains of derivatives for non-trading purposes at March 31, 2010 and 2009 (excluding
hedging transactions) consisted of the followings:

                                                                       Contract                  Unrealized
                                                                        amount      Fair value        gains
                                                                                   ¥ millions

     March 31, 2010:
      Foreign exchange contracts                                            484            (0)             (0)
      Currency swap                                                       6,937            20              20

     March 31, 2009:
      Currency swap                                                       7,988            33               33
      Interest swap                                                      40,000           (51)             (51)
      Foreign exchange contracts                                            127             1                1

9.   Pledged assets

     Secured obligations at March 31, 2010 and 2009 consisted of the followings:

                                                                                         2010            2009
                                                                                          ¥ millions

     Short-term borrowings                                                          3,726,600          270,423

      The Company also has secured obligations for non-consolidated subsidiaries amounting to ¥3,213
million at March 31, 2009



                                                   F-20
      Above obligations were secured by the following assets:

                                                                                                                    2010                 2009
                                                                                                                      ¥ millions

      Trading assets                                                                                         2,723,331             423,145
      Investment securities                                                                                          –               3,360


                                                                                                             2,723,331             426,505


     In addition to the above, securities borrowed amounting to ¥1,288,899 million and ¥215,641 million
were pledged as guarantee at March 31, 2010 and 2009, respectively.

      Total fair value of the securities pledged as collateral at March 31, 2010 and 2009 consisted of the
followings:

                                                                                                                    2010                 2009
                                                                                                                      ¥ millions

      Securities loaned                                                                                      1,570,957           2,394,037
      Securities sold under agreements to repurchase                                                           664,714             834,926
      Other                                                                                                    447,355             507,488


                                                                                                             2,683,026           3,736,451


      Total fair value of the securities received as collateral at March 31, 2010 and 2009 consisted of the
followings:

                                                                                                                    2010                 2009
                                                                                                                      ¥ millions

      Securities borrowed                                                                                    5,859,049           4,089,929
      Securities purchased under agreements to resell                                                           13,539              10,689
      Other                                                                                                    300,180             382,631


                                                                                                             6,172,768           4,483,249


10.   Transactions with related parties

      For the year ended March 31, 2009

            The information on the Group’s material transactions with its related companies and individuals
      for the year ended March 31, 2009 and the resulting account balances with such related parties at such
      balance sheet date were as follows:

                                                  Percentage of equity
                                                     ownership by the       Description of transactions               Account balances
      Name of related company   Paid-in capital       related company                  2009                                2009

                                                                                                 (Millions                           (Millions
                                    (Millions)                                                     of yen)                             of yen)

      Daiwa Securities Group         ¥178,324                  60.0%     Increase in                60,000   Long-term debt              150,000
        Inc.(DSGI)                                                       long-term debt
                                                                         (subordinated
                                                                         loan)

                                                                         Interest expense            2,625   Other liabilities             1,596



                                                              F-21
                                                  Percentage of equity
                                                     ownership by the         Description of transactions                  Account balances
Name of related company         Paid-in capital       related company                    2009                                   2009

                                                                                                    (Millions                             (Millions
                                    (Millions)                                                        of yen)                               of yen)

Daiwa Securities America Inc.            $100                       –     Continual transactions of               Collateralized              165,484
                                                    (DSGI subsidiary)     collateralized short-term financing     short-term
                                                                          agreements                              financing
                                                                                                                  agreements
                                                                                                                  (liabilities)

                                                                          Interest and                      567
                                                                          dividend income

                                                                          Interest expense                  769

Sumitomo Mitsui Banking              ¥664,986                         –   Continual transactions of               Collateralized              185,185
  Corporation                                       (Sumitomo Mitsui      collateralized short-term financing     short-term
                                                  Financial Group Inc.    agreements                              financing
                                                            subsidiary)                                           agreements
                                                                                                                  (assets)

                                                                          Interest and                      246
                                                                          dividend income

                                                                          Interest expense                   13


For the year ended March 31, 2010

      The information on the Group’s material transactions with its related companies and individuals
for the year ended March 31, 2010 and the resulting account balances with such related parties at such
balance sheet date were as follows:

                                                  Percentage of equity
                                                     ownership by the         Description of transactions                  Account balances
Name of related company         Paid-in capital       related company                    2010                                   2010

                                      millions                                                     ¥ millions                            ¥ millions

Daiwa Securities Group               ¥247,384                  99.97%     Interest expense             3,440      Long-term debt              150,000
  Inc.(DSGI)

                                                                                                                  Other liabilities             1,440

Daiwa Securities America Inc.            $100                       –     Continual transactions of               Collateralised              119,445
                                                    (DSGI subsidiary)     collateralised short-term financing     short-term
                                                                          agreements                              financing
                                                                                                                  agreements
                                                                                                                  (liabilities)

                                                                          Interest and                   (32)
                                                                          dividend income

                                                                          Interest expense                  171

Sumitomo Mitsui Banking            ¥1,770,996                         –   Continual transactions of               Collateralised               54,114
  Corporation                                       (Sumitomo Mitsui      collateralised short-term financing     short-term
                                                  Financial Group Inc.    agreements                              financing
                                                            subsidiary)                                           agreements
                                                                                                                  (assets)

                                                                          Interest and                      12
                                                                          dividend income

                                                                          Interest expense                   10

Daiwa Investment Management              ¥500                       –     Corporate                  118,690      –                                –
  2nd Inc. (Note 25)                                (DSGI subsidiary)     separation

Daiwa Investment Management              ¥500                       –     Sale of related
  1st Inc. (Note 25)                                (DSGI subsidiary)     company’s stock



                                                               F-22
                                                  Percentage of equity
                                                     ownership by the       Description of transactions             Account balances
      Name of related company   Paid-in capital       related company                  2010                              2010

                                      millions                                                  ¥ millions                        ¥ millions

                                                                         Proceeds from            219,921    –                            –
                                                                         sale of related
                                                                         company’s stock

                                                                         Gain on sale of            13,261   –                            –
                                                                         related
                                                                         company’s stock


11.   Lease transactions

      Assets used under financial leases of which legal ownership does not transfer to the lessee at the end of
the lease term and which started before March 31, 2008 are accounted for in the manner similar to accounting
treatment for ordinary rental transactions. Certain information concerning such non-capitalised finance leases
and operating leases at March 31, 2010 and 2009 is summarised as follows:

      Lessee:                                                                                                      2010                2009
                                                                                                                    ¥ millions

      Non-capitalised finance leases:
        Total assets under non-capitalised finance leases                                                           155                 175
        Accumulated depreciation                                                                                    116                 102

         Future lease payments in respect of non-capitalised leases                                                  41                  74
         Due within one year                                                                                         22                  33

      Operating leases:
        Future lease payments in respect of operating leases                                                      38,060           39,508
        Due within one year                                                                                        6,705            6,127

      Lessor:                                                                                                      2010                2009
                                                                                                                    ¥ millions

      Operating leases:
        Future lease receipts in respect of operating leases                                                        205                 454
        Due within one year                                                                                         137                 182

12.   Payables to customers and counterparties

      Payables to customers and counterparties at March 31, 2010 and 2009 consisted of the followings:

                                                                                                                   2010                2009
                                                                                                                    ¥ millions

      Cash received for customers’ accounts                                                                       32,388          43,040
      Cash deposits received from customers                                                                      187,863         278,073
      Other                                                                                                        2,173           5,392


                                                                                                                 222,424         326,505




                                                              F-23
13.   Long-term debt

      Long-term debt at March 31, 2010 and 2009 consisted of the followings:

                                                                                           2010            2009
                                                                                            ¥ millions

      Bond payable: 1.40% due CY 2014                                                    30,000                –
      Medium-term notes with various rates and maturities
        through CY 2038                                                                 840,780          849,759
      Subordinated loans with maturities through CY 2014                                271,000          255,000
      Borrowings                                                                         41,500           26,500


                                                                                      1,183,280      1,131,259


      The amount for medium-term notes as of March 31, 2010 includes $70,950 thousand of
foreign-currency notes, and the amount for medium-term notes as of March 31, 2009 includes $97,350
thousand of foreign-currency notes.

      The aggregate annual maturities of long-term debt as of March 31, 2010 were as follows:

      Year ending March 31
                                                                                                     ¥ millions

      2011                                                                                                48,402
      2012                                                                                               139,475
      2013                                                                                               100,737
      2014                                                                                                44,270
      2015                                                                                               134,825
      2016 and thereafter                                                                                715,571


                                                                                                     1,183,280


14.   Retirement benefits

      Retirement benefits for employees

            Accumulated contribution plus interest to this unfunded plan are included in “Retirement benefits”
      in the consolidated balance sheets as of March 31, 2010 and 2009, in the amount of ¥5,934 million and
      ¥5,066 million. Benefit expenses recorded for the years ended March 31, 2010, 2009 and 2008 were
      ¥2,285 million, ¥2,074 million and ¥1,854 million respectively.

      Retirement benefits for directors and corporate auditors

            Directors’ and corporate auditors’ retirement benefits of ¥50 million and ¥82 million were
      included in “Retirement benefits” in the accompanying consolidated balance sheets as of March 31,
      2010 and 2009. Benefit expenses recorded for the years ended March 31, 2010, 2009 and 2008 were
      ¥22 million, ¥32 million and ¥29 million respectively.

15.   Income taxes

      Japanese effective statutory income tax rate was approximately 40.7% for the fiscal years ended March
31, 2010, 2009 and 2008.

      Overseas consolidated subsidiaries are subject to income taxes of the countries in which they operate.




                                                     F-24
      Details of deferred tax assets and liabilities at March 31, 2010 and 2009 were as follows:

                                                                                           2010             2009
                                                                                             ¥ millions

      Deferred tax assets:
        Net operating losses carried-forward                                             37,630           40,264
        Loss on trading                                                                   6,853            5,474
        Employees’ compensation and bonuses                                               2,531            1,006
        Retirement benefits                                                               2,419            2,079
        Write-down of investment securities                                               1,916            1,733
        Statutory reserves                                                                1,151            1,261
        Loss on private equity and other securities                                         229           34,849
        Other                                                                             3,972            6,307


        Gross deferred tax assets                                                         56,701           92,973
        Less: Valuation allowance                                                        (54,754)         (52,563)


        Total deferred tax assets                                                          1,947          40,410

      Deferred tax liabilities:
        Net unrealised gain (loss) on securities                                            (594)         (56,176)
        Accrued enterprise tax                                                                 –             (210)
        Other                                                                                (25)            (667)


        Total deferred tax liabilities                                                      (619)         (57,053)


      Net deferred tax assets                                                              1,328          (16,643)


      The Group recorded a valuation allowance to reflect the estimated amount of gross deferred tax assets
that will not be realised.

      A reconciliation of the difference between Japanese statutory income tax rate and the effective income
tax rate reflected in the accompanying consolidated statements of operations for the fiscal year ended March
31, 2010 is as follows. Reconciliations of the difference between the normal effective statutory income tax
rate and the effective income tax rate for the years ended March 31, 2009 and 2008 are not presented, since
the net loss is reported in the consolidated statements of operations.

                                                                                                            2010


      Japanese statutory income tax rate                                                                   40.69%
      Valuation allowance                                                                                   3.51
      Permanent difference (Non– taxable)                                                                  (1.40)
      Permanent difference (Non– deductible)                                                                0.69
      Lower tax rate applicable to income of overseas subsidiaries                                         (0.32)
      Adjusted amount of unrealised profit                                                                  0.59
      Other, net                                                                                           (0.16)


      Effective income tax rate                                                                            43.59%


16.   Statutory reserves

      The Financial Instruments and Exchange Act of Japan requires a securities company to set aside a
reserve in proportion to its securities transactions and other related trading to cover future eventual
operational losses caused by the securities company for customer transactions.



                                                      F-25
17.   Contingent liabilities

     The outstanding balances of the guarantees obligated by the Group were ¥181 million and ¥233 million
at March 31, 2010 and 2009 respectively, arising as guarantors of employees’ borrowings.

18.   Owners’ equity

      In principle, the Companies Act of Japan (the “Act”) requires a company to credit the entire amount of
issued shares to common stock (and preferred stock, if any); however, a company may classify an amount not
exceeding one-half of the entire issued amount of shares as additional paid-in capital, which is included in
capital surplus, with a resolution of the Board of Directors.

      According to the Act, a company should set aside 10% of cash dividends and other cash appropriations
as “Additional paid-in capital” or “Earned surplus” until the total becomes one quarter of the common stock
(and preferred stock, if any). “Additional paid-in capital” and “Earned surplus” are allowed to be utilised to
eliminate or reduce a deficit with a resolution of the Shareholders or may be transferred to common stock
with a resolution of the Board of Directors, and also may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends. “Additional paid-in capital” and “Earned
surplus” are included in “Capital surplus” and “Retained earnings” in the accompanying consolidated balance
sheets.

     The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with the Act.

19.   Segment information

      The Group operates predominantly in a single industry segment. The Group’s primary business activities
include (1) trading in securities and derivatives, (2) brokerage of securities and derivatives, (3) underwriting
and distribution of securities, (4) other business related to securities transactions and (5) private offering of
securities.




                                                      F-26
    A summary of revenues by geographic area for the fiscal years ended March 31, 2010 and 2009 and a
summary of total assets by geographic area at March 31, 2010 and 2009 were as follows:

                                                                            Asia,      Elimination
                                                                        Oceania &               or
                                                 Japan       Europe          other     unallocated    Consolidated
                                                                        ¥ millions

     Year ended March 31, 2010:
     Net operating revenues:
       Outside customer                       212,497        24,724         12,220               –        249,441
       Inter-segment                            4,333        10,354          4,027         (18,714)             –


     Total                                    216,830        35,078         16,247         (18,714)       249,441
     Selling, general and administrative
       expenses                               150,806        33,109         17,138         (19,040)       182,013


     Operating income (loss)                   66,024         1,969            (891)           326         67,428


     At March 31, 2010:
     Total assets by geographic area        12,309,984     1,484,152       129,762        (525,728)    13,398,170


     Year ended March 31, 2009:
     Net operating revenues:
       Outside customer                        (36,704)       8,285           8,429              –        (19,990)
       Inter-segment                               509        6,625           2,075         (9,209)             –


     Total                                     (36,195)      14,910         10,504          (9,209)       (19,990)
     Selling, general and administrative
       expenses                               125,457        20,245         12,068          (9,260)       148,510


     Operating income (loss)                  (161,652)       (5,335)        (1,564)            51       (168,500)


     At March 31, 2009
     Total assets by geographic area        10,588,664      823,821        103,367        (378,059)    11,137,793


     Geographic overseas revenues for the fiscal years ended March 31, 2010 and 2009 were as follows:

                                                                                            Asia,
                                                                                       Oceania &
                                                                          Europe            other           Total
                                                                                       ¥ millions

     Year ended March 31, 2010:
     Overseas revenues                                                    19,693            7,783          27,476

     Net operating revenues                                                                              249,441


     Percentage of net operating revenues                                   7.9%            3.1%           11.0%




                                                    F-27
                                                                                             Asia,
                                                                                        Oceania &
                                                                        Europe               other      Total
                                                                                        ¥ millions

      Year ended March 31, 2009:
      Overseas revenues                                                  10,750             10,706     21,456
      Net operating revenues                                                                          (19,990)


      Percentages of net operating revenues are not presented since net operating revenues are reported in a
loss in the consolidated statement of operations for the fiscal year ended March 31, 2009.

                                                                                             Asia,
                                                                                        Oceania &
                                                                        Europe               other      Total
                                                                                        ¥ millions

      Year ended March 31, 2008:
      Overseas revenues                                                   6,457             11,731     18,188
      Net operating revenues                                                                          161,954


      Percentage of net operating revenues                                4.0%               7.2%      11.2%


20.   Commissions

      Commissions derived from each department for the fiscal years ended March 31, 2010 and 2009 were
as follows:

                                                   Fixed
                                                 income Investment Investment
                                     Equity      (Bond)       trust   banking                Others     Total
                                                                  ¥ millions

      Year ended March 31,
        2010:
      Brokerage                      18,217           89          45                –             –    18,351
      Underwriting                        –            –           –           59,967             –    59,967
      Distribution                        –            –         133              419             –       552
      Other                             294          170         975           15,931         2,736    20,106


                                     18,511          259        1,153          76,317         2,736    98,976


                                                   Fixed
                                                 income Investment Investment
                                     Equity      (Bond)       trust   banking                Others     Total
                                                                  ¥ millions

      Year ended March 31,
        2009:
      Brokerage                      17,934          213           67               –             –    18,214
      Underwriting                        –            –            –          20,750             –    20,750
      Distribution                        –            –          195             129             –       324
      Other                             213          357        1,379          13,176         1,872    16,997


                                     18,147          570        1,641          34,055         1,872    56,285


                                                   F-28
21.   Net gain (loss) on trading

      Breakdown of net gain (loss) on trading for the fiscal years ended March 31, 2010and 2009 were as
follows:

                                                                                        2010             2009
                                                                                          ¥ millions

      Equity and other                                                                 13,987          (31,505)
      Bond, forex and other                                                            45,488           26,750


                                                                                       59,475           (4,755)


22.   Selling, general and administrative expenses

     Major components of selling, general and administrative expenses for the fiscal years ended March 31,
2010 and 2009 are summarised as follows:

                                                                                        2010             2009
                                                                                          ¥ millions

      Compensation and benefits                                                        55,800           41,918
      Commissions and brokerage                                                        48,842           32,297
      Communications                                                                    7,242            6,959
      Occupancy and rental                                                             17,203           16,877
      Data processing and office supplies                                              21,505           23,449
      Taxes other than income taxes                                                     4,025            3,074
      Depreciation and amortisation                                                    18,541           15,821
      Other                                                                             8,855            8,115


                                                                                      182,013          148,510


23.   Other income (expenses)

     Details of “Other, net” in the accompanying consolidated statements of operations for the fiscal years
ended March 31, 2010 and 2009 were as follows:

                                                                                        2010             2009
                                                                                          ¥ millions

      Gains or losses on sales of investment securities, net                           22,103                –
      Write-down of investment securities                                                (521)          (3,427)
      Losses on sale of loan receivables                                                    –           (1,837)
      Other                                                                             1,327              801


                                                                                       22,909           (4,463)


24.   Dividends

       Under the Corporate Law of Japan, a plan for appropriation of retained earnings proposed by the Board
of Directors must be approved at a shareholders’ meeting to be held within three months after the end of the
fiscal year.

      Payments

           There is no dividend for the fiscal year ended March 31, 2010.


                                                      F-29
      The dividends of which the record date is in this fiscal year and the effective date is in the next fiscal
      year.

           The dividend for the fiscal year ended March 31, 2010 is not scheduled.

25.   Business combination

      Transactions under common control during the year ended March 31, 2010 is as follows;

      1.   Outline of the transactions

            On February 1, 2010, Daiwa Securities SMBC Principal Investments Co. Ltd. (“PI”), which was a
      wholly-owned subsidiary of the Company, transferred its principal investment business to Daiwa
      Investment Management 2nd Inc. which was a wholly-owned subsidiary of Daiwa Securities Group,
      Inc. by corporate de-merger. PI acquired the succeeding companys’ shares as the consideration for the
      transferred business. Subsequently, PI sold 60% of the shares to Daiwa Investment Management 1st
      Inc., which was a wholly-owned subsidiary of Daiwa Securities Group Inc., and 40% of the shares to
      Sumitomo Mitsui Banking Corporation.

            The purpose for the transfer is that Daiwa Securities Group, Inc., Sumitomo Mitsui Financial
      Group, Inc. and Sumitomo Mitsui Banking Corporation agreed about the terms and conditions of the
      PI’s operations after the dissolution of the joint venture.

            Daiwa Investment Management 2nd Inc, PI and Daiwa Investment Management 1st Inc. changed
      their name to Daiwa Securities SMBC Principal Investments Co. Ltd., Daiwa PI Partners Co. Ltd. and
      Daiwa Investment Management Inc., respectively on February 1, 2010.

      2.   Accounting method

           This transaction was accounted for as a transaction under common control based on “Accounting
      Standard for Business Combinations in Japan” (Business Accounting Council, October 31, 2003), and
      “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
      Divestitures” (ASBJ Guidance No.10, November 15, 2007).

26.   Subsequent events

      Transactions under common control

      1.   Outline of the transactions

            The Company took all of its shares of “Daiwa Capital Markets America Holdings Inc.” from a
      parent company “Daiwa Securities Group Inc.” on April 1, 2010.

            The purpose of the transfer is to further strengthen the global network and enable more strategic
      and efficient staff deployment and allocation of management resources by integrating the subsidiary into
      the international business franchises of the Group as has been done in Europe and Asia.

           The summary of Daiwa Capital Markets America Holdings Inc. is as below.

           (1)   Amount of capital: 539 million USD

           (2)   Business: U.S. holding company with subsidiaries including the U.S. SEC registered
                 broker-dealer (Daiwa Capital Markets America Inc.)

      2.   Accounting method

           This transaction was accounted for as a transaction under common control based on “Accounting
      Standard for Business Combinations in Japan” (Business Accounting Council, December 26, 2008), and
      “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
      Divestitures” (ASBJ Guidance No.10, December 26, 2008).



                                                     F-30
                        DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                      NON-CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                AT 31 MARCH 2010 AND 2009

                                                              Fiscal 2009      Fiscal 2008     Increase/
                                                           31 March 2010    31 March 2009      Decrease
                                                                            (¥ millions)
ASSETS
Current assets:                                               12,097,939         10,392,828    1,705,111
  Cash and deposits                                              157,219             66,689       90,530
  Cash segregated as deposits for regulatory purposes             84,005             39,315       44,690
  Trading assets:                                              6,718,184          5,571,684    1,146,500
    Trading securities and others                              4,775,904          2,940,612    1,835,292
    Derivative assets                                          1,942,280          2,631,071     (688,791)
  Trading receivables, net                                             –            189,801     (189,801)
  Receivables related to margin transactions:                     64,095            158,514      (94,419)
    Customer margin loans                                          7,113                 19        7,094
    Cash deposits as collateral for securities                    56,981            158,494     (101,513)
  Collateralised short term financing agreements:              4,717,649          3,628,507    1,089,142
    Cash deposits as collateral for securities borrowed        4,608,234          3,470,558    1,137,676
    Receivables related to gensaki transactions                  109,414            157,949      (48,535)
  Receivables                                                        349             12,876      (12,527)
  Short-term guarantee money deposited                           101,156            266,954     (165,798)
  Short-term loans receivable                                    215,571            424,536     (208,965)
  Accrued income                                                   7,656              8,271         (615)
  Deferred tax assets – current                                        –             17,518      (17,518)
 Other current assets                                             33,100              9,541       23,559
 Less: Allowance for doubtful accounts – current                  (1,047)            (1,384)         337

Non-current assets:                                              194,399            160,205      34,194
  Tangible fixed assets                                            1,962              3,012      (1,050)
  Intangible fixed assets                                         57,205             58,143        (938)
  Investments and others                                         135,231             99,049      36,182
     Investment securities                                        13,759             14,089        (330)
     Related companies stock                                     109,460             77,064      32,396
     Long-term loans receivable                                    3,277                 31       3,246
     Long-term guarantee deposits                                  5,328              5,011         317
     Other investments                                             3,800              3,234         566
     Less: Allowance for doubtful accounts – non-current            (394)              (381)        (13)


Total assets                                                  12,292,339         10,553,033    1,739,306




                                                    F-31
                         DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                       NON-CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                 AT 31 MARCH 2010 AND 2009

                                                                Fiscal 2009      Fiscal 2008          Increase/
                                                             31 March 2010    31 March 2009           Decrease
                                                                              (¥ millions)
LIABILITIES
Current liabilities:                                            10,702,062          8,958,758         1,743,304
  Trading liabilities:                                           4,478,698          4,606,856          (128,158)
    Trading securities and others                                3,001,233          2,413,031           588,202
    Derivative liabilities                                       1,477,464          2,193,824          (716,360)
    Trading payables, net                                          225,524                  –           225,524
  Payables related to margin transactions:                          46,474            107,776           (61,302)
    Proceeds of securities sold for customers’ accounts             46,474            107,776           (61,302)
  Collateralised short-term financing agreements:                1,245,062          2,832,023        (1,586,961)
    Cash deposits as collateral for securities loaned              450,517          1,924,839        (1,474,322)
    Payables related to gensaki transactions                       794,544            907,184          (112,640)
  Deposits received                                                 61,705             35,168            26,537
  Cash deposits received as guarantee                              194,676            266,600           (71,922)
  Short-term borrowings                                          4,033,600            759,523         3,274,077
  Commercial paper                                                 331,750            320,400            11,350
  Bonds and notes due within one year                               48,402              9,632            38,770
  Accrued expenses                                                   9,849             12,347            (2,498)
  Income taxes payable                                                 350                247               103
  Accrued bonuses                                                    6,170              1,930             4,240
  Other current liabilities                                         19,798              6,253            13,545

Non-current liabilities:                                          1,141,379         1,116,118           25,261
  Medium-term notes                                                 822,377           840,126          (17,749)
  Bonds and notes                                                   312,500           270,500           42,000
  Retirement benefits                                                 5,881             5,016              865
  Other non-current liabilities                                         620               475              145
Statuary reserves:                                                    2,829             3,098             (269)


Total liabilities                                                11,846,272        10,077,975        1,768,297


Net assets:
  Owners’ equity                                                   446,195            475,338          (29,143)
    Common stock                                                   255,700            255,700                –
    Capital surplus                                                167,421            167,421                –
    Retained earnings                                               23,074             52,217          (29,143)
  Valuation and translation adjustments                               (128)              (280)             152
    Net unrealised gain (loss) on securities, net of tax
       effect                                                         (128)                  (280)         152


Total net assets:                                                  446,066            475,057          (28,991)


Total liabilities and net assets                                12,292,339         10,553,033        1,739,306




                                                      F-32
                      DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                   NON-CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
                      FOR THE YEARS ENDED 31 MARCH 2010 AND 2009

                                            Fiscal 2009       Fiscal 2008
                                         1 April 2009 –    1 April 2008 –      Increase/    Yr/yr
                                         31 March 2010     31 March 2009       Decrease    change
                                                           (¥ millions)                       (%)
Operating revenues                             160,119               94,356      65,763     69.70
  Commissions                                   79,428               49,910      29,518     59.14
  Net gain (loss) on trading                    50,948              (10,682)     61,630         –
  Interest and dividend income                  29,743               55,129     (25,386)    (46.5)
Interest expenses                               28,559               53,139     (24,580)   (46.26)


Net operating revenues                         131,560              41,217       90,343    219.19


Selling, general and administrative
  expenses                                     150,096             122,997       27,099     22.03
  Commission and other expenses                 59,440              45,684       13,756     30.11
  Employees’ compensation and benefits          29,837              22,818        7,019     30.76
  Occupancy and rental                          12,857              13,085         (228)    (1.74)
  Data processing and office supplies           26,427              21,281        5,146     24.18
  Depreciation expenses                         16,822              14,444        2,378     16.46
  Taxes other than income taxes                  2,721               1,969          752     38.19
  Others                                         1,988               3,714       (1,726)   (46.47)


Operating income                                (18,536)           (81,779)      63,243         –


  Non-operating income                           3,187               8,190       (5,003)    61.09
  Non-operating expenses                         1,540               2,311         (771)   (33.36)


Ordinary income                                 (16,889)           (75,900)      59,011         –


Extraordinary gains                                  268             2,311       (2,043)   (88.40)
Extraordinary losses                                 521             5,264       (4,743)   (90.10)


Income before income taxes                      (17,142)           (78,853)      61,711         –


Income taxes – current                          (5,518)               (245)      (5,273)       –
Income taxes – deferred                         17,518              (8,859)      26,377        –


Net income                                      (29,142)           (69,748)      40,606        –


Net financial income included in net
  operating revenues                             1,183               1,990         (807)   (40.55)




                                              F-33
                 DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                 CONSOLIDATED BALANCE SHEETS (UNAUDITED)
               THREE-MONTH PERIOD ENDED JUNE 30, 2010 AND 2009

                                                                 2010          2009
                                                                  ¥ millions
Current assets                                             14,549,419     11,893,197
  Cash and deposits                                           283,046        120,774
  Cash segregated as deposits                                 112,412        131,125
  Trading assets:                                           8,183,698      6,279,780
    Trading securities and other                            5,748,074      3,927,812
    Derivative assets                                       2,435,623      2,351,967
    Private equity and other securities                             –        692,710
    Less Allowance for possible investment losses                   –        (21,462)
    Loans receivable from customers                                 –         11,478
    Receivables related to margin transactions:                56,013        132,445
    Customer margin loans                                       8,887            220
    Cash deposits as collateral for securities borrowed        47,126        132,225
 Collateralised short-term financing agreements:            5,660,128      4,262,346
    Cash deposits as collateral for securities borrowed     5,660,128      4,243,637
    Receivables related to gensaki transactions                     –         18,780
 Short-term loans receivable                                   16,894            310
 Accrued income                                                27,359          8,909
 Deferred tax assets-current                                      483          7,084
 Other current assets                                         209,720        267,756
 Less: Allowance for doubtful accounts-current                   (338)           (65)

Non-current assets:                                          104,566         98,231
  Tangible fixed assets                                        3,911          3,929
  Intangible fixed assets                                     67,759         60,862
  Investments and other assets:                               32,895         33,439
     Investment securities                                    18,537         21,436
     Long-term guarantee deposits                              5,888          6,172
     Deferred tax assets-non-current                           3,834            997
     Other                                                     5,032          5,193
     Less: Allowance for doubtful accounts-non-current          (398)          (360)
Total assets                                               14,653,985    11,991,428




                                                    F-34
                DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
                CONSOLIDATED BALANCE SHEETS (UNAUDITED)
              THREE-MONTH PERIOD ENDED JUNE 30, 2010 AND 2009

                                                                     2010           2009
                                                                       ¥ millions
Current liabilities                                             14,183,144    10,209,090
  Trading liabilities:                                           4,519,343     4,634,027
    Trading securities and others                                2,540,785     2,791,537
    Derivative liabilities                                       1,978,558     1,842,490
  Trading payables, net                                            447,499        479,219
  Payables related to margin tranactions:                           55,509        104,565
    Proceeds of securities sold for customers’ accounts             55,509        104,565
 Collateralised short-term financing agreements:                 5,328,324     3,236,605
    Cash deposits as collateral for securities loaned            4,795,743     2,385,428
    Payables related to gensaki transactions                       532,580        851,177
 Deposits received                                                  50,848        107,179
 Cash deposits received as guarantee                               175,938        221,822
 Short-term borrowings                                           2,030,859        788,329
 Commercial paper                                                  413,800        420,180
 Medium-term notes due within one year                              40,679         13,541
 Income taxes payable                                                  243            301
 Deferred tax liabilities-current                                        9        108,730
 Other current liabilities                                          96,180         94,587

Non-current liabilities:                                         1,021,077     1,108,992
  Medium-term notes                                                808,824       822,860
  Long-term debt                                                   205,500       280,000
  Deferred tax liabilities                                             233           532
  Retirement benefits                                                6,175         5,261
  Other non-current liabilities                                        343           339

Statutory reserves:                                                  2,829         3,098
Total liabilities                                               14,183,144    11,321,181


Net Assets
Owners’ equity                                                    493,614        476,194
  Common stock                                                    255,700        255,700
  Capital surplus                                                 167,421        167,421
  Retained earnings                                                70,493         53,073
Valuation and translation adjustments                             (24,011)       192,748
  Net unrealised gain on securities, net of tax effect               (640)       202,716
  Translation adjustments                                         (23,371)        (9,968)
Minority interests                                                  1,237          1,303
Total net assets                                                  470,840        670,246
Total liabilities and Net assets                                14,653,985    11,991,428




                                                         F-35
            DAIWA SECURITIES CAPITAL MARKETS CO. LTD.
        CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
          THREE-MONTH PERIOD ENDED JUNE 30, 2010 AND 2009

                                                                2010         2009
                                                                 ¥ millions
Operating revenues:                                           31,573        64,358
  Commissions                                                 15,500        31,699
  Net gain on trading                                          1,160        22,258
     Net gain (loss) on private equity and other securities        –           919
     Interest and dividend income                             14,912         9,380
  Other sales                                                      –           100
Interest expenses                                             11,260         9,275
Cost of sales                                                      –           84
Net operating revenues                                        20,313       54,998
Selling, general and administrative expenses:                 44,385       45,692
  Commission and other expenses                               12,169       17,829
  Employees’ compensation and benefits                        15,689       11,810
  Occupancy and rental                                         4,662        3,823
  Data processing and office supplies                          4,512        5,633
  Depreciation expenses                                        5,075        4,426
  Taxes other than income taxes                                  773        1,147
  Other                                                        1,500        1,022
Operating income                                              (24,072)      9,306
Non-operating income                                             959        1,257
Non-operating expenses                                           938          386
Ordinary income                                               (24,050)     10,177
Extraordinary income/(losses)                                    608         (521)
Income before income taxes and minority interests             (23,441)      9,655
Income taxes-current                                              52           36
Income taxes-deferred                                             14         (564)
Minority interests                                                (4)          48
Net income                                                    (23,505)     10,135
Net financial income included in net operating revenues        3,652          105




                                                      F-36
                         REGISTERED OFFICE OF THE ISSUER

                      c/o BNP Paribas Bank & Trust Cayman Limited
                               Royal Bank House, 3rd Floor
                                   PO Box 10632 APO
                                      Shedden Road
                                 Grand Cayman KY1-1006
                                      Cayman Islands


                                       GUARANTOR

                         Daiwa Securities Capital Markets Co. Ltd.
                                  GranTokyo North Tower
                              1-9-1, Marunouchi, Chiyoda-ku,
                                      Tokyo 100-6753


                   PRINCIPAL WARRANT AND CERTIFICATE AGENT

                               Citibank N.A., London Branch
                                      Citigroup Centre
                                       Canada Square
                                       Canary Wharf
                                      London E14 5LB


                         WARRANT AND CERTIFICATE AGENT

                                            `                 ´ ´
                Dexia Banque Internationale a Luxembourg, societe anonyme
                                      69 route d’Esch
                                   L-1470 Luxembourg


                                     LEGAL ADVISERS

to Daiwa Capital Markets Europe as to English          to the Issuer as to Cayman Islands law
           and United States law                                       Walkers
              Linklaters LLP                                     6 Gracechurch Street
               One Silk Street                                    London EC3V 0AT
            London EC2Y 8HQ


                             LUXEMBOURG LISTING AGENT

                                            `                 ´ ´
                Dexia Banque Internationale a Luxembourg, societe anonyme
                                      69 route d’Esch
                                   L-1470 Luxembourg
A300499

								
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