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MARKS AND SPENCER plc
(incorporated with limited liability in England and Wales with registered number 214436)
Euro Medium Term Note Programme
Under this £3,000,000,000 Euro Medium Term Note Programme (the Programme ), Marks and Spencer plc (the Issuer ) may from time to time issue notes (the Notes ) denominated in any currency agreed between the Issuer and the relevant Dealer (as defined below).
Notes may be issued in bearer or registered form (respectively Bearer Notes and Registered Notes ). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed £3,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described herein.
Factors which may affect the Issuer’s ability to fulfil its obligations under Notes issued under the Programme and factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme are set out on pages 11-17.
The Notes may be issued on a continuing basis to one or more of the Dealers specified under “ Description of the Programme ” and any additional Dealer appointed under the Programme from time to time by the Issuer (each a Dealer and together, the Dealers ), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the relevant Dealer shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe for such Notes.
Application has been made to the Financial Conduct Authority in its capacity as competent authority (the UK Listing Authority ) for Notes issued under the Programme during the period of 12 months from the date of this Offering Circular to be admitted to the official list of the UK Listing Authority (the Official List ) and to the London Stock Exchange plc (the London Stock Exchange ) for such Notes to be admitted to trading on the London Stock Exchange’s regulated market.
References in this Offering Circular to Notes being listed (and all related references) shall mean that such Notes have been admitted to trading on the London Stock Exchange’s regulated market and have been admitted to the Official List. The London Stock Exchange’s regulated market is a regulated market for the purposes of the Markets in Financial Instruments Directive (Directive 2014/65/EU).
Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and certain other information which is applicable to each Tranche (as defined under “ Terms and Conditions of the Notes ”) of Notes will be set out in the Final Terms (the Final Terms ) which, with respect to Notes to be admitted to the Official List and admitted to trading/listed on the London Stock Exchange, will be delivered to the UK Listing Authority and, where listed, the London Stock Exchange on or before the date of issue of the Notes of such Tranche. Copies of Final Terms in relation to Notes to be listed on the London Stock Exchange will also be published on the website of the London Stock Exchange through a regulatory information service.
The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act ) or any U.S. State securities laws and may not be offered or sold in the United States or to, or for the account or the benefit of, U.S. persons as defined in Regulation S under the Securities Act unless an exemption from the registration requirements of the Securities Act is available and in accordance with all applicable securities laws of any state of the United States and any other jurisdiction.
The Issuer has been rated BBB- (long term) and A-3 (short term) by Standard & Poor’s Credit Market Services Europe Limited ( S&P ) and Baa3 (long term) and P-3 (short term) by Moody’s Investors Service Ltd. ( Moody’s ). The Programme has been rated BBB- by S&P and Baa3 (senior unsecured) and P-3 (short term) by Moody’s. Each of S&P and Moody’s is established in the European Union and is registered under the Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation ). Notes issued under the Programme may be rated or unrated by either of the rating agencies referred to above. Where a Tranche of Notes is rated, such rating will not necessarily be the same as the rating assigned to the Programme by the relevant rating agency. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.
This Offering Circular supersedes all previous offering circulars relating to the Programme and supplements thereto. Any Notes issued under the Programme on or after the date hereof are issued subject to the provisions set out herein. This does not affect any Notes issued prior to the date hereof.
Amounts payable on Floating Rate Notes may be calculated by reference to one of LIBOR or EURIBOR as specified in the relevant Final Terms. As at the date of this Offering Circular, the administrator of LIBOR (ICE Benchmark Administration Limited) is included in the register of administrators and benchmarks and maintained by the European Securities and Markets Authority ( ESMA ) under Article 36 of Regulation (EU) No. 2016/1011 of the European Parliament and of the Council of 8 June 2016, as amended (the Benchmarks Regulation ). As at the date of this Offering Circular, the administrator of EURIBOR (the European Money Markets Institute ) is not included in ESMA’s register of administrators and benchmarks and maintained by ESMA under Article 36 of the Benchmarks Regulation. As far as the Issuer is aware, the transitional provisions in Article 51 of the Benchmarks Regulation apply, such that, as at the date of this Offering Circular, European Money Market Institute is not currently required to obtain authorisation or registration (or, if located outside the European Union, recognition, endorsement or equivalence).
Arranger
Citigroup
Dealers
Bank of China BNP PARIBAS Citigroup
HSBC Lloyds Bank Corporate
Markets
Morgan Stanley
MUFG SMBC Nikko NatWest Markets
The date of this Offering Circular is 14 November 2018
MiFID II PRODUCT GOVERNANCE / TARGET MARKET – The Final Terms in respect of any Notes will include a legend entitled "MiFID II product governance" which will outline the target market assessment in respect of the Notes and which channels for distribution of the Notes are appropriate. Any person subsequently offering, selling or recommending the Notes (a distributor ) should take into consideration the target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the target market assessment) and determining appropriate distribution channels.
A determination will be made in relation to each issue about whether, for the purpose of the Product Governance rules under EU Delegated Directive 2017/593 (the MiFID Product Governance Rules ), any Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise none of the Arranger, nor the Dealers and any of their respective affiliates will be a manufacturer for the purpose of the MIFID Product Governance Rules.
IMPORTANT INFORMATION RELATING TO THE USE OF THIS OFFERING CIRCULAR AND OFFERS OF NOTES GENERALLY
This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuer, the Dealers and the Trustee do not represent that this Offering Circular may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Dealers or the Trustee which would permit a public offering of any Notes outside the UK or distribution of this Offering Circular in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Offering Circular or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of Notes in the United States, the EEA (including the United Kingdom) and Japan (see “ Subscription and Sale ”).
SUITABILITY OF INVESTMENT
The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor may wish to consider, either on its own or with the help of its financial and other professional advisers, whether it:
(i) has sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement;
(ii) has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
(iii) has sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes where the currency for principal or interest payments is different from the potential investor’s currency;
(iv) understands thoroughly the terms of the Notes and is familiar with the behaviour of financial markets; and
(v) is able to evaluate possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
Legal investment considerations may restrict certain investments. The investment activities of certain investors are subject to investment laws and regulations, or review or regulation by certain authorities.
Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.
ALTERNATIVE PERFORMANCE MEASURES
A number of the financial measures presented by the Issuer under “Description of the Issuer” below are not defined or specified under the requirements of International Financial Reporting Standards (IFRS) accounting standards. However, the Issuer believes that these measures provide useful supplementary information on the performance of the business to both investors and the Issuer’s management. It is to be noted that, since not all companies calculate financial measurements in the same manner, these are not always comparable to measurements used by other companies. Accordingly, these financial measures should not be seen as a substitute for measures defined according to IFRS. Unless otherwise stated, the list below presents alternative performance measures, along with their reconciliation to the extent that such information is not defined according to IFRS and not included in the Issuer’s financial statements incorporated by reference into this Offering Circular.
“Adjusting items” are those items which the Issuer excludes from its adjusted profit metrics in order to present a further measure of the Group’s performance. Each of these items (costs or incomes) is considered to be significant in nature and/or value. Excluding these items from profit metrics provides readers with helpful additional information on the performance of the business across periods because it is consistent with how the business performance is reported to the Board and the Operating Committee.
“Return on capital employed” is calculated on an annual basis and is calculated as EBIT before adjusting items / Average capital employed, where:
1. “EBIT before adjusting items” means statutory operating profit before the impact of **adjusting items, as disclosed on the face of the income statement;
- “Average capital employed” is calculated as the average of opening and closing capital** **employed; and
- “Capital employed” is the net total of assets and liabilities as reported in the balance** sheet excluding assets and liabilities in relation to: - Investment property - Net retirement benefit position - Derivatives - Current and deferred tax liabilities - Scottish Limited Partnership Liability - Non-Current Borrowings - Provisions in respect of adjusting items and further adjusted to remove any long term borrowing (typically a bond) which has become payable within one year (and hence has become current).
“Like for Like” is the period on period change in revenue (excluding VAT) from stores which have been trading and where there has been no significant change in footage for at least 52 weeks and online sales. The measure is used widely in the retail industry as an indicator of sales performance. It excludes the impact of new stores, closed stores or stores with significant footage change.
“Gross Margin” means gross profit before adjusting items on a management basis divided by revenue. The gross profit used in this calculation is based on an internal measure of margin rather than the statutory margin, which excludes certain downstream logistics costs.
“EBITDA” means earnings before interest, tax, depreciation and amortisation.
CONTENTS
Page
Description of the Programme ................................................................................................................ 8
Risk Factors .......................................................................................................................................... 12
Documents Incorporated by Reference ................................................................................................. 19
Form of the Notes ................................................................................................................................. 20
Applicable Final Terms......................................................................................................................... 23
Terms and Conditions of the Notes....................................................................................................... 30
Use of Proceeds..................................................................................................................................... 57
Description of the Issuer ....................................................................................................................... 58
United Kingdom Taxation .................................................................................................................... 62
Foreign Account Tax Compliance Act ................................................................................................. 63
The Proposed Financial Transaction Tax.............................................................................................. 64
Subscription and Sale............................................................................................................................ 65
General Information .............................................................................................................................. 67
In connection with the issue of any Tranche of Notes, one or more relevant Dealers named as the Stabilisation Manager(s) (or any persons acting on behalf of any Stabilisation Manager(s)) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilisation Manager(s) (or any person acting on behalf of any Stabilisation Manager(s)) in accordance with all applicable laws and rules.
DESCRIPTION OF THE PROGRAMME
The following description does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Offering Circular and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Final Terms.
This description constitutes a general description of the Programme for the purposes of Article 22.5(3) of Commission Regulation (EC) No 809/2004 implementing the Directive 2003/71/EC.
The Issuer and any relevant Dealer may agree that Notes shall be issued in a form other than that contemplated in the Terms and Conditions, in which event, in the case of listed Notes only, a new Offering Circular will be published. Words and expressions defined in “ Form of the Notes ” and “ Terms and Conditions of the Notes ” shall have the same meanings in this summary.
Issuer: Marks and Spencer plc
Issuer Legal Entity Identifier (LEI):
213800CN1RI3UCIZWB
Description: Euro Medium Term Note Programme
Arranger: Citigroup Global Markets Limited
Dealers: Bank of China Limited, London Branch BNP Paribas Citigroup Global Markets Limited HSBC Bank plc Lloyds Bank Corporate Markets plc Morgan Stanley & Co. International plc MUFG Securities EMEA plc NatWest Markets Plc SMBC Nikko Capital Markets Limited
and any other Dealers appointed in accordance with the Programme Agreement.
Risk Factors: There are certain factors that may affect the Issuer’s ability to fulfil its obligations under Notes issued under the Programme. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme and risks relating to the structure of a particular Series of Notes issued under the Programme. All of these are set out under “ Risk Factors ”.
Certain Restrictions: Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see “ Subscription and Sale ”) including the following restrictions applicable at the date of this Offering Circular. Notes having a maturity of less than one year Notes having a maturity of less than one year will constitute deposits for the purposes of the prohibition on accepting deposits contained in section 19 of the Financial Services and Markets Act 2000 ( FSMA ) unless they are issued to a limited class of professional investors and have a denomination of at least £100,000 or its equivalent (see “ Subscription and Sale ”).
Trustee: The Law Debenture Trust Corporation p.l.c.
Issuing and Paying Agent: Citibank, N.A., London Branch
( Redemption at the option of the Issuer (Issuer Call) ) and Condition 7. ( Redemption at par at the option of the Issuer (Issuer Par Call) ) and/or (ii) the Noteholders pursuant to Condition 7.5(a) ( General Investor Put ) and Condition 7.5(b) ( Change of Control Investor Put ), in each case upon giving not less than the minimum period of notice nor more than the maximum period of notice (as set out in the applicable Final Terms) to the Noteholders or the Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the Issuer and the relevant Dealer. Notes having a maturity of less than one year may be subject to restrictions on their denomination and distribution, see “ Certain Restrictions – Notes having a maturity of less than one year ” above.
Denomination of Notes: Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer save that the minimum denomination of each Note admitted to trading on a EEA exchange or offered to the public in a Member State of the EEA in circumstances which would otherwise require the publication of a prospectus under the Prospectus Directive will be €100,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency) or such amount as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency, see “ Certain Restrictions – Notes having a maturity of less than one year ” above.
Taxation: All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed by any Tax Jurisdiction, subject as provided in Condition 8. In the event that any such deduction is made, the Issuer will, save in certain limited circumstances provided in Condition 8 , be required to pay additional amounts to cover the amounts so deducted.
Negative Pledge: The terms of the Notes will contain a negative pledge provision as further described in Condition 4.
Cross Default: The terms of the Notes will contain a cross default provision as further described in Condition 10.
Status of the Notes: The Notes will constitute (subject to the provisions of Condition 4 ) unsecured and unsubordinated obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Notes and the Coupons relating to them shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4 , at all times rank at least equally with all other unsecured and unsubordinated obligations in respect of borrowed money of the Issuer, present and future.
Rating: The Programme has been rated BBB- by S&P and Baa3 (senior unsecured) and P-3 (short term) by Moody’s. Series of Notes issued under the Programme may be rated or unrated. Where a Series of Notes is rated, such rating will be disclosed in the applicable Final Terms and will not necessarily be the same as the ratings assigned to the Programme. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.
Listing: Application has been made for Notes issued under the Programme to be listed on the London Stock Exchange.
Governing Law: The Notes and any non-contractual obligations arising out of or in
connection with them, will be governed by, and construed in accordance with, English law.
Selling Restrictions: There are restrictions on the offer, sale and transfer of the Notes in the United States, the EEA (including the United Kingdom) and Japan and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes (see “ Subscription and Sale ”).
United States Selling Restrictions:
The Issuer is Category 2 for the purposes of Regulation S under the Securities Act. The Notes in bearer form for U.S. federal income tax purposes will be issued in compliance with U.S. Treas. Reg. §1.163- 5(c)(2)(i)(D) (or substantially identical successor U.S. Treasury regulation section including, without limitation, substantially identical successor regulations issued in accordance with Internal Revenue Service Notice 2012-20 or otherwise in connection with the U.S. Hiring Incentives to Restore Employment Act of 2010) (the D Rules ) unless (i) the relevant Final Terms state that Notes are issued in compliance with U.S. Treas. Reg. 1.163- 5(c)(2)(i)(C) (or substantially identical successor U.S. Treasury regulation section including, without limitation, substantially identical successor regulations issued in accordance with Internal Revenue Service Notice 2012-20 or otherwise in connection with the U.S. Hiring Incentives to Restore Employment Act of 2010) (the C Rules ) or (ii) the Notes are issued other than in compliance with the D Rules or the C Rules but in circumstances in which the Notes will not constitute “registration required obligations” under the United States Tax Equity and Fiscal Responsibility Act of 1982 ( TEFRA ), which circumstances will be referred to in the relevant Final Terms as a transaction to which TEFRA is not applicable.
example raw material prices and the impact of Brexit, the Group recognises the need to manage costs, driving efficiencies and delivering savings in areas such as packaging and waste.
Brand and Customer Experience
M&S brand and underpinning customer experience needs to evolve with consumer lifestyles and attitudes for the Group to remain relevant and successfully attract and retain customers. Consumer lifestyles and attitudes continue to evolve at pace in an increasingly diversified and competitive retail environment. The Group is proud of its strong brand recognition, but external pressures make it more difficult for all businesses to drive brand relevance and attract and retain customers and a failure to do so creates the very real risk of a decline in market share. M&S must attract and retain its core customer segments. The Group’s intention to be a customer-centric, ‘Digital First’ business has been clearly communicated. The Group needs to ensure that its organisational design and operating model support this aim and that the Group puts the customer at the forefront of all its decision making. M&S Sparks loyalty programme, marketing strategies and cross functional ways of working will be key enablers in achieving this, supported by meaningful measurement of customer experience.
Food safety and integrity
Food safety and integrity remains vital for the Group’s business. The Group needs to manage the potential risk to customer health and confidence that faces all food retailers, while also considering how external pressures facing the food industry could influence the integrity of its food, its reputation and shareholder value. Many of these pressures, including inflationary costs, labour quality and availability, increased regulatory scrutiny and the as yet unknown impact of Brexit are outside of the Group’s control.
The Group also recognises the criticality of internal influences including the level of change underway in its Food business and the significant levels of new product development. This all places greater demand on the technical team and suppliers to complete required raw material testing and product safety checks to guarantee provenance, safety and integrity.
Information security (including cyber)
The increasing sophistication of potential cyber-attacks, coupled with the General Data Protection Regulation, highlights the escalating information security risk facing all businesses. The Group’s reliance on a number of third-parties to host and hold data also means the risk profile of its information security is changeable. The Group recognises the importance of ongoing education and vigilance within M&S to reduce the likelihood of attack or breach in (i) an internal environment that is undergoing significant transformation and (ii) an external environment that is changing at pace. The Group must ensure that its control environment evolves and that its systems operate effectively. A data protection breach would not only impact its reputation, but would also cause business disruption and could result in a significant fine. Should the Group’s business be subject to a major information security breach, this could have an adverse impact on the M&S brand and impact the Group’s financial results.
Corporate compliance and responsibility
Failure to deliver against the Group’s regulatory obligations, social commitments or stakeholder expectations undermines its reputation as a responsible retailer. Responsible corporate behaviour is a basic expectation of all businesses, especially those that are consumer facing. Public sentiment can shift rapidly, especially as the traditional influencers of public perception evolve and issues can escalate rapidly through social media. Failure to do this could have an adverse impact on the Group’s financial results.
Technology
To support future profitable growth, the Group needs to keep pace and develop its technology and innovation capability. The digital world continues to evolve at an unprecedented rate, influencing consumer behaviours and setting a high bar in terms of IT infrastructure requirements. The Group has clearly communicated its aim to be ‘Digital First’ and recognise the need to invest to achieve this. The Group’s existing IT infrastructure needs to be more flexible to lower costs, leverage developments and enable us to move with pace to meet customer and colleague needs. Any disruption of these systems could affect the Group’s operations.
Talent and capability
The Group needs to attract, develop, motivate and retain the right individuals to achieve its operational and strategic objectives to transform the culture and the business. As the Group transforms its business, the calibre of its people is integral to delivering operational and strategic objectives and is especially important in its drive
to be ‘Digital First’. Attracting, developing and retaining quality individuals is influenced by many factors, a number of which are outside of the Group’s control. Growing market labour shortages, which may be further compounded by Brexit, and the perceived fragility of UK retail could influence the Group’s ability to attract external talent. However, the Group’s focus cannot solely be outwards looking – its existing workforce is one of its greatest assets. The Group needs to ensure that its colleagues and culture are developed to drive a ‘Digital First’ and customer centric mindset, colleagues need to feel empowered to drive change at pace. Failure to achieve this could have an adverse impact on the Group’s operations and results.
Third party management
To drive value for its business the Group needs to successfully manage and leverage its third-party relationships and partnerships. The Group’s business relies on a number of significant third-party relationships. To ensure that such relationships continue to drive value for the business, it is essential that the Group works collaboratively, clearly defines requirements and proactively manages its third parties, as failure to do so could affect the Group’s operations.
Pension funding
As at 31 March 2018 the Group had a net post-retirement asset of £948.2 million on an IAS19 basis. A significant future funding requirement might conflict with cash available from operational activities, operational or strategic financing requirements, or might require funding from external sources. Such a funding requirement could affect the Group’s operations and its financial results.
Rating and funding
The credit rating of the Group depends on many factors, some of which are outside the Group’s control. Deterioration in any of these factors or a combination of these factors may result in a downgrade in the Group’s long term rating. This could potentially impact on both the cost and accessibility of new funding thereby affecting the Group’s operations and its financial results.
Internal controls
The Board has overall responsibility for the Group’s systems of internal control, and for monitoring their effectiveness in providing shareholders with a return that is consistent with a responsible assessment and mitigation of risks. This includes reviewing financial, operational and compliance controls. The role of executive management is to implement the Board’s policies on control, and present assurance on compliance with these policies. Further assurance is presented by internal audit, which operates across the Group. All employees are accountable for operating within these policies.
Due to the limitations that are inherent in any system of internal control, this system is designed to manage, rather than eliminate, the risk of failure. Any such failures could affect the Group’s operations and its financial results.
In addition any irregularities initiated by employees, vendors or third parties could affect the Group’s operations and its financial results.
Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that either the Issuer or the Group will be unable to comply with its obligations as a company with securities admitted to the Official List.
Legal/Compliance
The Group is aware of the significance to its operations of adhering to all legal and compliance legislation. Any one of (i) failure to protect intellectual property; (ii) adverse health and safety or environmental issues; (iii) risk of litigation or breach of competition laws; or (iv) non-compliance with corporate, employee or taxation laws could affect the Group’s financial results.
Treasury default/liquidity
The Group’s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items, such as trade debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group’s Treasury also enters into derivative transactions, principally interest rate and currency swaps and forward currency contracts. The purpose of such transactions is to manage the interest rate and currency risks arising from the Group’s operations and financing.
Notes which are issued at a substantial discount or premium may experience price volatility in response to changes in market interest rates
The market values of securities issued at a substantial discount (such as Zero Coupon Notes) or premium to their principal amount tend to fluctuate more in relation to general changes in interest rates than prices for more conventional interest-bearing securities. Generally, the longer the remaining term of such securities, the greater the price volatility as compared to more conventional interest-bearing securities with comparable maturities.
The regulation and reform of "benchmarks" may adversely affect the value of Notes linked to or referencing such "benchmarks"
Interest rates and indices which are deemed to be "benchmarks", are the subject of recent national and international regulatory guidance and proposals for reform. Some of these reforms are already effective whilst others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, to disappear entirely, or have other consequences which cannot be predicted. Any such consequence could have a material adverse effect on any Notes linked to or referencing such a "benchmark". Regulation (EU) 2016/1011 (the Benchmarks Regulation ) was published in the Official Journal of the EU on 29 June 2016 and applies from 1 January 2018. The Benchmarks Regulation applies to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark within the EU. It will, among other things, (i) require benchmark administrators to be authorised or registered (or, if non-EU-based, to be subject to an equivalent regime or otherwise recognised or endorsed) and (ii) prevent certain uses by EU supervised entities of "benchmarks" of administrators that are not authorised or registered (or, if non-EU based, not deemed equivalent or recognised or endorsed).
The Benchmarks Regulation could have a material impact on any Notes linked to or referencing a "benchmark", in particular, if the methodology or other terms of the "benchmark" are changed in order to comply with the requirements of the Benchmarks Regulation. Such changes could, among other things, have the effect of reducing, increasing or otherwise affecting the volatility of the published rate or level of "benchmark".
More broadly, any of the international or national reforms, or the general increased regulatory scrutiny of "benchmarks", could increase the costs and risks of administering or otherwise participating in the setting of a "benchmark" and complying with any such regulations or requirements. Such factors may have the following effects on certain "benchmarks": (i) discourage market participants from continuing to administer or contribute to the "benchmark"; (ii) trigger changes in the rules or methodologies used in the "benchmark" or (iii) lead to the disappearance of the "benchmark". Any of the above changes or any other consequential changes as a result of international or national reforms or other initiatives or investigations, could have a material adverse effect on the value of and return on any Notes linked to or referencing a "benchmark".
Investors should consult their own independent advisers and make their own assessment about the potential risks imposed by the Benchmarks Regulation reforms in making any investment decision with respect to any Notes linked to or referencing a "benchmark".
Future discontinuance of LIBOR may adversely affect the value of Floating Rate Notes which reference LIBOR
On 27 July 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it does not intend to continue to persuade, or use its powers to compel, panel banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. The announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021. It is not possible to predict whether, and to what extent, panel banks will continue to provide LIBOR submissions to the administrator of LIBOR going forwards. This may cause LIBOR to perform differently than it did in the past and may have other consequences which cannot be predicted.
Investors should be aware that, if LIBOR were discontinued or otherwise unavailable, the rate of interest on Floating Rate Notes which reference LIBOR will be determined for the relevant period by the fall-back provisions applicable to such Notes. Depending on the manner in which the LIBOR rate is to be determined under the Terms and Conditions, this may (i) if ISDA Determination applies, be reliant upon the provision by reference banks of offered quotations for the LIBOR rate which, depending on market circumstances, may not be available at the relevant time or (ii) if Screen Rate Determination applies, result in the effective application of a fixed rate based on the rate which applied in the previous period when LIBOR was available. Any of the foregoing could have an adverse effect on the value or liquidity of, and return on, any Floating Rate Notes which reference LIBOR.
Risks related to Notes generally
Set out below is a description of material risks relating to the Notes generally:
Modification, waivers and substitution
The Terms and Conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.
The Terms and Conditions of the Notes also provide that the Trustee may, without the consent of Noteholders and without regard to the interests of particular Noteholders, agree to (i) any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of the Notes or (ii) determine without the consent of the Noteholders that any Event of Default or potential Event of Default shall not be treated as such or (iii) the substitution of another company as principal debtor under any Notes in place of the Issuer, in the circumstances described in Condition 15 of the Terms and Conditions of the Notes.
The Notes may be subject to withholding taxes in circumstances where the Issuer is not obliged to make gross up payments and this would result in holders receiving less interest than expected and could significantly adversely affect their return on the Notes.
The value of the Notes could be adversely affected by a change in English law or administrative practice
The Terms and Conditions of the Notes are based on English law in effect as at the date of this Offering Circular. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Offering Circular and any such change could materially adversely impact the value of any Notes affected by it.
Investors who hold less than the minimum Specified Denomination may be unable to sell their Notes and may be adversely affected if definitive Notes are subsequently required to be issued
In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts in excess of the minimum Specified Denomination that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system would not be able to sell the remainder of such holding without first purchasing a principal amount of Notes at or in excess of the minimum Specified Denomination such that its holding amounts to a Specified Denomination. Further, a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in its account with the relevant clearing system at the relevant time may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes at or in excess of the minimum Specified Denomination such that its holding amounts to a Specified Denomination.
If definitive Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
Risks related to the market generally
Set out below is a description of material market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:
An active secondary market in respect of the Notes may never be established or may be illiquid and this would adversely affect the value at which an investor could sell his Notes
Notes may have no established trading market when issued, and one may never develop. If a market for the Notes does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities.
DOCUMENTS INCORPORATED BY REFERENCE
The audited consolidated annual financial statements for the financial years ended 1 April 2017 and 31 March 2018 respectively, in each case together with the audit reports prepared in connection therewith, of the Issuer, pages 18 to 38 (inclusive) of the press release dated 7 November 2018 containing the unaudited interim consolidated financial statements for the six month period ended 29 September 2018, of Marks and Spencer Group plc, and the Terms and Conditions of the Notes contained in the Offering Circular dated 20 October 2005 (at pages 27-47), the Offering Circular dated 13 November 2006 (at pages 27-47), the Offering Circular dated 9 November 2007 (at pages 28-49), the Offering Circular dated 11 November 2008 (at pages 28-49), the Offering Circular dated 11 November 2009 (at pages 28-49), the Offering Circular dated 12 November 2010 (at pages 30-51), the Offering Circular dated 11 November 2011 (at pages 31-52), the Offering Circular dated 9 November 2012 (at pages 24-47), the Offering Circular dated 8 November 2013 (at pages 26-51), the Offering Circular dated 10 November 2014 (at pages 26-51), the Offering Circular dated 10 November 2015 (at pages 27-52), the Offering Circular dated 14 November 2016 (at pages 27-53) the Offering Circular dated 13 November 2017 (at pages 30-56), which have previously been published or are published simultaneously with this Offering Circular and have been approved by the Financial Conduct Authority or filed with it shall be incorporated in, and form part of, this Offering Circular (but all information incorporated in such documents by reference shall not be incorporated in, or form part of, this Offering Circular as such information is not considered by the Issuer to be relevant for prospective investors or is covered elsewhere in this Offering Circular). For the avoidance of doubt, information, documents or statements expressed to be incorporated by reference into any, or expressed to form part of any, of the documents referred to above do not form part of this Offering Circular. Any non-incorporated parts of a document referred to herein are either deemed not relevant for an investor or are otherwise covered elsewhere in this Offering Circular. Where reference is made to a website in this Offering Circular, the contents of that website do not form part of this Offering Circular.
Following the publication of this Offering Circular a supplement may be prepared by the Issuer and approved by the UK Listing Authority in accordance with Article 16 of the Prospectus Directive. Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Offering Circular or in a document which is incorporated by reference in this Offering Circular. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Offering Circular.
Copies of documents incorporated by reference in this Offering Circular can be obtained from the registered office of the Issuer at Waterside House, 35 North Wharf Road, London W2 1NW and the offices of Citibank, N.A., London Branch at 13th Floor, Citigroup Centre, Canada Square, London E14 5LB and are available for viewing at http://www.hemscott.com/nsm.do and on the website of the Regulatory News Service operated by the London Stock Exchange at http://www.londonstockexchange.com/exchange/news/market-news/market- news-home.html under the name of the Issuer.
SUPPLEMENTAL OFFERING CIRCULAR
The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Offering Circular which is capable of affecting the assessment of any Notes, prepare a supplement to this Offering Circular or publish a new Offering Circular for use in connection with any subsequent issue of Notes.
FORM OF THE NOTES
Bearer Notes
Each Tranche of Bearer Notes will be in bearer form and will be initially issued in the form of a temporary global note (a Temporary Bearer Global Note ) or, if so specified in the applicable Final Terms, a permanent global note (a Permanent Bearer Global Note and, together with a Temporary Bearer Global Note, each a Global Note ) which, in either case, will be delivered on or prior to the original issue date of the Tranche to a common depositary (the Common Depositary ) for, Euroclear Bank SA/NV ( Euroclear ) and Clearstream Banking S.A. ( Clearstream, Luxembourg ). Whilst any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made against presentation of the Temporary Bearer Global Note only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in the Temporary Global Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Principal Paying Agent.
On and after the date (the Exchange Date ) which is 40 days after a Temporary Bearer Global Note is issued, interests in such Temporary Bearer Global Note will be exchangeable (free of charge) upon a request as described therein either for (i) interests in a Permanent Bearer Global Note of the same Series or (ii) for definitive Bearer Notes of the same Series with, where applicable, interest coupons and talons attached (as indicated in the applicable Final Terms and subject, in the case of definitive Bearer Notes, to such notice period as is specified in the applicable Final Terms), in each case against certification of beneficial ownership as described above unless such certification has already been given, provided that purchasers in the United States and certain U.S. persons will not be able to receive definitive Bearer Notes. The holder of a Temporary Bearer Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Bearer Global Note for an interest in a Permanent Bearer Global Note or for definitive Bearer Notes is improperly withheld or refused.
The option for an issue of Bearer Notes to be represented on issue by a Temporary Bearer Global Note exchangeable for definitive Bearer Notes should not be expressed to be applicable in the applicable Final Terms if the Bearer Notes are issued with a minimum Specified Denomination such as €100,000 (or its equivalent in another currency) plus one or more higher integral multiples of another smaller amount such as €1,000 (or its equivalent in another currency).
Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will be made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent Bearer Global Note without any requirement for certification.
The applicable Final Terms will specify that a Permanent Bearer Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Notes with, where applicable, interest coupons and talons attached upon the occurrence of an Exchange Event. For these purposes, Exchange Event means that (i) an Event of Default (as defined in Condition 10 ) has occurred and is continuing, (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor clearing system satisfactory to the Trustee is available or (iii) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Permanent Bearer Global Note in definitive form. The Issuer will promptly give notice to Noteholders in accordance with Condition 14 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) or the Trustee may give notice to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Principal Paying Agent.
In the event that a global note is exchanged for definitive Notes, such definitive Notes shall be issued in Specified Denomination(s) only. Noteholders who hold Notes in the relevant clearing system in amounts that are not integral multiples of a Specified Denomination may need to purchase or sell, on or before the relevant Exchange Date, a principal amount of Notes such that their holding is an integral multiple of a Specified Denomination.
