The Risk Factor of Diageo

RISK FACTORS invest in the securities offered using this course catalogue involves risk. You should recollect c arfully the risks set forrad below, together with the risks mentiond in the documents compound by point of computer address into this prospectus and all risk factors include in the prospectus postscript, before you patch up to buy our securities. If each of these risks actu totallyy occur, our business, pecuniary condition and conducts of operations could suffer, and the affair hurt and liquidity of the securities offered using this prospectus could decline, in which incase you whitethorn lose all or part of your enthronement funds.Risks Relating to Diageos Business You should accept Risk Factors in Diageos Annual idea on Form 20-F for the fiscal socio-stinting class ended June 30, 2008, which is incorpo layd by annex in this prospectus, or similar sections in subsequent filings incorporated by reference in this prospectus, for information on risks relating to Diageos business. Risks Relating to Diageos Sh bes Diageos sh bes and American depositary shares whitethorn experience volatility which go forth negatively come to your investment. In upstart years most major(ip) line of merchandise trades learn experienced monumental monetary value and trading volume fluctuations.These fluctuations call for lots been unrelated or disproportionate to the direct performance of the beneathlying companies. Accordingly, in that location could be significant fluctuations in the wrong of Diageos shares and American depositary shares, or ADSs, each representing four habitual shares, even if Diageos operational upshots playact the expectations of the investment community. In addition, announcements by Diageo or its competitors relating to operating results, earnings, volume, acquisitions or joint ventures, capital commitments or spending, changes in fiscal estimates or investment recommendations by securities analysts, c hanges in grocery valuations of some separate food or beverage companies, contrary economic performance or cartridge holder out in the United States or Europe, or disruptions in trading on major stock markets, could cause the market boundarys of Diageos shares and ADSs to fluctuate significantly. Risks Relating to the Debt Securities, Warrants, Purchase Contracts and Units Because Diageo is a place comp all and legitimately conducts its operations done subsidiaries, your proper(ip) to receive payments on debt securities phone numberd by Diageo or on the guarantees is subordinated to the early(a) liabilities of its subsidiaries.Diageo is unionized as a holding company, and cheeringly all of its operations are carried on through subsidiaries. Diageo plc had guaranteed a total of ? 6,970 one million million million of debt as of June 30, 2008. Diageos major power to meet its financial obligations is dependent upon the availability of cash flows from its domestic he lp and exotic subsidiaries and affiliated companies through dividends, intercompany advances, anxiety fees and other(a) payments. Diageos subsidiaries are non guarantors of the debt securities we may offer. Moreover, these subsidiaries and affiliated ompanies are not essential and may not be able-bodied to pay dividends to Diageo. Claims of the creditors of Diageos subsidiaries go through priority as to the assets of such subsidiaries over the claims of Diageo. Consequently, in the consequence of insolvency of Diageo, the claims of holders of notes guaranteed or figured by Diageo would be structurally subordinated to the prior claims of the creditors of subsidiaries of Diageo. 2 Table of content In addition, some of Diageos subsidiaries are vitrine to laws restricting the get along of dividends they may pay.For example, subsidiaries of Diageo incorporated down the stairs the laws of England and Wales may be curb by law in their ability to declare dividends due to fai lure to meet requirements tied to net asset levels or distributable profits. Because the debt securities are un tightend, your right to receive payments may be adversely touched. The debt securities that we are whirl leave aloneing be unfastened. The debt securities are not subordinated to any of our other debt obligations and in that respectfore they go out rank equally with all our other unsecured and unsubordinated indebtedness. As of June 30, 2008, Diageo group had ? 5 million aggregate principal amount of secured indebtedness outstanding. If Diageo Investment, Diageo uppercase, Diageo pay or Diageo slackness on the debt securities or Diageo defaults on the guarantees, or in the event of bankruptcy, liquidation or reorganization, then, to the extent that Diageo Investment, Diageo chief city, Diageo pay or Diageo take away granted earnest over their assets, the assets that secure these debts go forth be used to compensate the obligations chthonian that secured de bt before Diageo Investment, Diageo Capital, Diageo finance or Diageo could make payment on the debt securities or the guarantees, obligingnessively.If there is not enough corroborative to satisfy the obligations of the secured debt, then the remaining amounts on the secured debt would share equally with all unsubordinated unsecured indebtedness. Your rights as a holder of debt securities may be inferior to the rights of holders of debt securities issued under a incompatible series pursuant to the indenture. The debt securities are governed by documents called indentures, which are described afterwards under Description of Debt Securities and Guarantees. We may issue as umteen distinct series of debt securities under the indentures as we wish.We may too issue a series of debt securities under the indentures that provides holders with rights superior to the rights already granted or that may be granted in the future to holders of another(prenominal) series. You should read ca refully the specific terms of any concomitant series of debt securities which will be contained in the prospectus supplement relating to such debt securities. Should Diageo, Diageo Capital or Diageo Finance default on its debt securities, or should Diageo default on the guarantees, your right to receive payments on such debt securities or guarantees may be adversely affected by relevant insolvency laws.Diageo plc is incorporated under the laws of England and Wales, Diageo Capital is incorporated under the laws of Scotland and Diageo Finance is incorporated under the laws of The Netherlands. Accordingly, insolvency transactions with respect to Diageo or Diageo Capital are apt(predicate) to proceed under, and be governed by, UK insolvency law and insolvency proceedings with respect to Diageo Finance are probable to proceed under, and be governed by, Dutch insolvency law.The adjective and substantive provisions of such insolvency laws are generally more favorable to secured credit ors than similar provisions of United States law. These provisions sacrifice debtors and unsecured creditors only limited resistance from the claims of secured creditors and it will generally not be possible for Diageo, Diageo Capital or Diageo Finance or other unsecured creditors to hold back or delay the secured creditors from enforcing their security measure to give back the debts due to them under the terms that such security was granted.The debt securities, warrants, obtain contracts and units lack a developed trading market, and such a market may never develop. each of Diageo, Diageo Investment, Diageo Capital and Diageo Finance may issue debt securities in different series with different terms in amounts that are to be determined. Debt securities issued by Diageo, Diageo Capital or Diageo Finance may be jousted on the revolutionary York Stock supplant or another 3 Table of Contents recognize stock qualify and we expect that debt securities issued by Diageo Investm ent will not be listed on any stock stand in.However, there can be no assertion that an participating trading market will develop for any series of debt securities of Diageo, Diageo Capital or Diageo Finance even if we list the series on a securities switch. Similarly, there can be no authorization that an active trading market will develop for any warrants issued by Diageo. in that location can also be no authorization regarding the ability of holders of our debt securities, warrants, purchase contracts and units to mete out their debt securities, warrants, purchase contracts or units or the price at which such holders may be able to sell their debt securities, warrants, purchase contracts or units.If a trading market were to develop, the debt securities, warrants, purchase contracts and units could trade at prices that may be higher or lower than the sign offering price and, in the case of debt securities, this may result in a return that is greater or slight than the i nterest rate on the debt security, in each case depending on many factors, including, among other things, prevailing interest place, Diageos financial results, any decline in Diageos credit-worthiness and the market for similar securities.Any underwriters, broker-dealers or agents that act in the distribution of the debt securities, warrants, purchase contracts or units may make a market in the debt securities, warrants, purchase contracts or units as permitted by relevant laws and regulations but will have no obligation to do so, and any such market- do activities may be discontinued at any time. Therefore, there can be no assurance as to the liquidity of any trading market for the debt securities, warrants, purchase contracts and units or that an active public market for the debt securities, warrants, purchase contracts or units will develop.General Information regarding extraneous notes Risks This prospectus does not describe all the risks of an investment in debt securities denominated in a coin other than U. S. one dollar bill signs. You should denote your financial and legal advisors as to any specific risks entailed by an investment in debt securities that are denominated or collectible in, or the payment of which is linked to the value of, external funds. These debt securities are not appropriate investments for investors who are not sophisticated in contrasted coin transactions.The information set forth in this prospectus is directed to prospective purchasers who are United States residents. We disclaim any responsibility to advise prospective purchasers who are residents of countries other than the United States of any matters arising under unlike law that may affect the purchase of or holding of, or receipt of payments on, the debt securities. These persons should consult their own legal and financial advisors concerning these matters. convince Rates and Exchange Controls May stir the Debt Securities Value or ReturnDebt securities I nvolving international Currencies Are content to General Exchange Rate and Exchange Control Risks . An investment in a debt security that is denominated or payable in, or the payment of which is linked to the value of, currencies other than U. S. dollars entails significant risks. These risks include the opening night of significant changes in judge of alternate mingled with the U. S. dollar and the relevant contrasted currencies and the possibility of the imposition or modification of central controls by either the U. S. or foreign governments. These risks generally depend on economic and political events over which we have no control.Exchange Rates Will Affect Your Investment. In recent years, rates of exchange between U. S. dollars and some foreign currencies have been highly volatile and this volatility may continue in the future. Fluctuations in any particular exchange rate that have occurred in the past are not necessarily indicative, however, of fluctuations that may o ccur during the term of any debt security. Depreciation against the U. S. dollar of the funds in which a debt security is payable would result in a mitigate in the effective yield of the debt security below its coupon rate and could result in an overall going to you on a U.S. dollar basis. In addition, depending on the specific terms of a up-to-dateness-linked debt security, 4 Table of Contents changes in exchange rates relating to any of the relevant currencies could result in a decrease in its effective yield and in your loss of all or a substantial portion of the value of that debt security. We Have No Control Over Exchange Rates. Foreign exchange rates can either float or be obstinate by sovereign governments. Exchange rates of most economically developed nations are permitted to fluctuate in value sex act to the U. S. dollar and to each other.However, from time to time governments may use a motley of techniques, such as intervention by a countrys central bank or the impo sition of regulatory controls or taxes, to enamour the exchange rates of their currencies. Governments may also issue a new currency to replace an existing currency or alter the exchange rate or relative exchange characteristics by a devaluation or revue of a currency. These political actions could change or interfere with currency valuations and currency fluctuations that would otherwise occur in reaction o economic forces, as well as in response to the movement of currencies across borders. As a consequence, these government actions could adversely affect the U. S. dollar-equivalent yields or payouts for (a) debt securities denominated or payable in currencies other than U. S. dollars and (b) currency-linked debt securities. We will not make any adjustment or change in the terms of the debt securities in the event that exchange rates should become fixed, or in the event of any devaluation or revaluation or imposition of exchange or other regulatory controls or taxes, or in the event of other developments rear upon the U.S. dollar or any relevant foreign currency. You will bear those risks. or so Foreign Currencies May Become Un forthcoming. Governments have imposed from time to time, and may in the future impose, exchange controls that could also affect the availability of a specified foreign currency. Even if there are no actual exchange controls, it is possible that the applicable currency for any debt security not denominated in U. S. dollars would not be available when payments on that debt security are due. resource remuneration Method Used if Payment Currency Becomes Unavailable.If a payment currency is unavailable, we would make required payments in U. S. dollars on the basis of the market exchange rate. However, if the applicable currency for any debt security is not available because the euro has been substituted for that currency, we would make the payments in euro. The mechanisms for making payments in these alternative currencies are exp lained in Description of Debt Securities and GuaranteesAdditional Mechanicsinaccessibility of Foreign Currency below. We Will propose Currency Exchange Information in Prospectus Supplements.The applicable prospectus supplement will include information regarding current applicable exchange controls, if any, and historic exchange rate information for any debt security denominated or payable in a foreign currency or requiring payments that are related to the value of a foreign currency. That information will be furnished only for information purposes. You should not put one across that any historic information concerning currency exchange rates will be representative of the range of or trends in fluctuations in currency exchange rates that may occur in the future.Currency Conversions May Affect Payments on many Debt securities The applicable prospectus supplement may provide for (1) payments on a non-U. S. dollar denominated debt security to be made in U. S. dollars or (2) payments on a U. S. dollar denominated debt security to be made in a currency other than U. S. dollars. In these cases, The Bank of New York Mellon, in its aptitude as exchange rate agent, or a different exchange rate agent identified in the prospectus supplement, will convert the currencies. You will bear the costs of conversion through deductions from those payments. 5