NIG Prospectus - London Stock Exchange

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Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01Certificateholders of the relevant Series of Trust Certificates will be against the Issuer and NIG toperform their respective obligations under the Transaction Documents. Certificateholders willotherwise have no recourse to any assets of the Trustee, the Delegate, NIG, the relevant Dealer,the Issuer and the Principal Paying Agent or any affiliate of any of the foregoing entities in respectof any shortfall in the expected amounts due under the relevant Trust Assets. NIG is obliged tomake certain payments under the Transaction Documents directly to the Issuer, and the Trusteeand the Delegate will have direct recourse against NIG to recover payments due to the Issuer fromNIG pursuant to the Transaction Documents. There can be no assurance that the net proceeds ofthe realisation of, or enforcement with respect to, the Trust Assets will be sufficient to make allpayments due in respect of the Trust Certificates of the relevant Series. No Certificateholder shallbe entitled to proceed directly against the Issuer, the Obligor or the Mudarib, unless (i) theDelegate, having become bound so to proceed, fails to do so within 30 days of becoming so boundand such failure is continuing and (ii) the relevant Certificateholder (or such Certificateholdertogether with the other Certificateholders who propose to proceed directly against the Issuer, theObligor or the Mudarib) holds at least one-fifth of the aggregate face amount of the TrustCertificates then outstanding. Furthermore, under no circumstances shall any Certificateholder,the Trustee or the Delegate have any right to cause the sale or other disposition of any of the TrustAssets except pursuant to the Transaction Documents and the sole right of the Trustee, theDelegate and the Certificateholders against NIG shall be to enforce the obligation of NIG toperform its obligations under the Transaction Documents.Risk factors relating to taxationTaxation risks on paymentsPayments made by NIG to the Issuer under the Transaction Documents or by the Issuer in respectof the Trust Certificates could become subject to taxation. The Transaction Documents require NIGto pay additional amounts in the event that any withholding or deduction is required by Kuwaiti lawto be made in respect of payments made by it to the Issuer which are intended to fund PeriodicDistribution Amounts and Dissolution Amounts. Condition 12 provides that the Issuer is requiredto pay additional amounts in respect of any such withholdings or deductions imposed by theCayman Islands in certain circumstances. In the event that the Issuer fails to gross-up for any suchwithholding or deduction on payments due in respect of the Trust Certificates to Certificateholders,NIG has, pursuant to the Master Trust Deed, unconditionally and irrevocably undertaken(irrespective of the payment of any fee), as a continuing obligation, to pay to the Issuer (for thebenefit of the Certificateholders) an amount equal to the liabilities of the Issuer in respect of anyand all additional amounts required to be paid in respect of the Trust Certificates pursuant toCondition 12 in respect of any withholding or deduction in respect of any tax as set out in thatCondition. Such tax gross-up commitment would be contractually valid under Kuwaiti law.However, tax gross-up commitments are not binding upon the Kuwaiti tax authorities. If NIG failedto honour its commitment to gross-up tax claims the Issuer would have a valid cause of actionagainst NIG to be indemnified for the tax claim.EU Savings DirectiveUnder EC Council Directive 2003/48/EC on the taxation of savings income, Member States arerequired, from 1 July 2005, to provide to the tax authorities of another Member State details ofcertain payments paid by a person within its jurisdiction to an individual resident in that otherMember State. However, for a transitional period, Belgium, Luxembourg and Austria are insteadrequired (unless during that period they elect otherwise) to operate a withholding system inrelation to such payments (the ending of such transitional period being dependent upon theconclusion of certain other agreements relating to information exchange with certain othercountries). A number of non-EU countries and territories including Switzerland have agreed toadopt similar measures (a withholding system in the case of Switzerland) with effect from thesame date.12
Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01If, following implementation of this Directive, a payment were to be made or collected through aMember State which has opted for a withholding system and an amount of, or in respect of taxwere to be withheld from that payment, neither the Issuer nor any Paying Agent nor any otherperson would be obliged to pay additional amounts with respect to any Trust Certificate as a resultof the imposition of such withholding tax. If a withholding tax is imposed on payment made by aPaying Agent following implementation of this Directive, the Issuer will be required to maintain aPaying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to theDirective.Risk factors relating to enforcementKuwaiti bankruptcy lawAny claims or rights by or on behalf of Certificateholders will rank pari passu, without anypreference, with the other unsecured obligations of NIG. In the event of NIG’s insolvency, Kuwaitibankruptcy law may adversely affect NIG’s ability to perform its obligations under the TransactionDocuments to which it is a party and, consequently, the Issuer’s ability to make payments toCertificateholders. There is little precedent to predict how the claims against NIG on behalf ofCertificateholders would be resolved in the case of the bankruptcy of NIG. Any claims by or onbehalf of the Certificateholders under the Transaction Documents will be subordinated to certainlegally prescribed priority claims (including in respect of the cost of legal proceedings incurred forthe preservation, sale and distribution of the property of NIG, any amounts due to the government(including but not limited to any taxes or fees) and all salary and other payments due to employeesfor the six month period immediately prior to the bankruptcy) and to the claims of any securedcreditors.Change of lawThe structure of the issue of the Trust Certificates under the Programme is based on English law,Kuwaiti law and administrative practices in effect as at the date of this Base Prospectus. Noassurance can be given as to the impact of any possible change to English law, Kuwaiti law oradministrative practices after the date of this Base Prospectus, nor can any assurance be given asto whether any such change could adversely affect the ability of the Issuer to make paymentsunder any Trust Certificates or of the Issuer and NIG to comply with their respective obligationsunder the Transaction Documents.Enforcement riskUltimately the payments under the Trust Certificates are dependent upon NIG making paymentsin the manner contemplated under the Transaction Documents. If NIG fails to do so, it may benecessary to bring an action against NIG to enforce its obligations which could be both timeconsuming and costly. NIG has irrevocably agreed to certain documentation being governed byEnglish law and to the courts of England having exclusive jurisdiction to settle disputes.Any disputes which may arise out of or in connection with the Transaction Documents governedby English law may be finally settled under the Rules of the London Court of InternationalArbitration in London, England. Kuwait and the United Kingdom are both signatories to the 1958New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the NewYork Convention). Accordingly, any arbitration decision awarded in one of the signatory countriesis enforceable in Kuwait without re-examining the substantive merits of the claim subject tosatisfaction of the enforcement conditions established under the New York Convention andpursuant to Kuwait’s Enactment of the Civil & Commercial Procedures Law, which includes,among other issues, the prohibition against any violation of morality or public order in Kuwait asdetermined by Kuwaiti courts in their own discretion (the Enforcement Conditions). Accordingly,subject to the Enforcement Conditions, any arbitral decision awarded pursuant to the TransactionDocuments will be enforceable in the State of Kuwait. Kuwait courts are likely to decline13
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NIG Prospectus - London Stock Exchange

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