The Risk Factor of Diageo

try FACTORS Investing in the securities offered using this course catalogue involves risk. You should consider c arfully the risks set forth below, together with the risks described in the documents structured by reference into this course catalog and some(prenominal) risk factors intromitd in the prospectus supplement, earlier you patch up to buy our securities. If either of these risks actu from for each one oney overtake, our business, pecuniary condition and responses of operations could suffer, and the calling price and fluidness of the securities offered using this prospectus could decline, in which case you whitethorn lose all or part of your investiture. jeopardys Relating to Diageos Business You should read Risk Factors in Diageos Annual Report on Form 20-F for the fiscal class ended June 30, 2008, which is incorpo enume evaluated by reference in this prospectus, or equal sections in subsequent filings incorporated by reference in this prospectus, for t raining on risks relating to Diageos business. Risks Relating to Diageos Sh atomic number 18s Diageos sh ares and American depositary shares whitethorn experience volatility which testament negatively affect your investment. In recent years most major standard grocerys score experienced significant price and trading volume fluctuations.These fluctuations have often been unrelated or disproportionate to the operating performance of the to a lower placelie companies. Accordingly, thither could be significant fluctuations in the price of Diageos shares and American depositary shares, or ADSs, each representing four ordinary shares, even if Diageos operating results meet the expectations of the investment community. In addition, announcements by Diageo or its competitors relating to operating results, earnings, volume, acquisitions or joint ventures, cracking commitments or spending, switchs in financial estimates or investment recommendations by securities analysts, changes i n market valuations of some other(a) food or beverage companies, adverse economical performance or recession in the United States or Europe, or disruptions in trading on major stock markets, could cause the market price of Diageos shares and ADSs to fluctuate significantly. Risks Relating to the Debt Securities, Warrants, Purchase Contracts and Units Because Diageo is a retentivity company and shortly conducts its operations through subsidiaries, your right to receive payments on debt securities issued by Diageo or on the guarantees is subordinated to the other liabilities of its subsidiaries.Diageo is organized as a holding company, and considerably all of its operations are carried on through subsidiaries. Diageo plc had guaranteed a summarize of ? 6,970 million of debt as of June 30, 2008. Diageos ability to meet its financial obligations is dependent upon the approachability of cash flows from its domestic and alien subsidiaries and affiliated companies through dividend s, intercompany advances, management fees and other payments. Diageos subsidiaries are non guarantors of the debt securities we may offer. More all over, these subsidiaries and affiliated ompanies are not necessitate and may not be able to pay dividends to Diageo. Claims of the creditors of Diageos subsidiaries have precedency as to the assets of much(prenominal)(prenominal) subsidiaries over the claims of Diageo. Consequently, in the event of insolvency of Diageo, the claims of pallbearers of notes guaranteed or issued by Diageo would be structurally subordinated to the prior claims of the creditors of subsidiaries of Diageo. 2 hedge of Contents In addition, some of Diageos subsidiaries are subject to laws restricting the amount of dividends they may pay.For example, subsidiaries of Diageo incorporated to a lower place the laws of England and Wales may be restricted by law in their ability to declare dividends due to failure to meet requirements tied to bring in asset leve ls or distributable profits. Because the debt securities are unsecured, your right to receive payments may be adversely affected. The debt securities that we are offering will be unsecured. The debt securities are not subordinated to any of our other debt obligations and therefore they will rank equally with all our other unsecured and unsubordinated indebtedness. As of June 30, 2008, Diageo group had ? 5 million sum of money principal amount of secured indebtedness outstanding. If Diageo Investment, Diageo detonating device, Diageo finance or Diageo slight 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 Capital, Diageo pay or Diageo have granted security over their assets, the assets that secure these debts will be used to satisfy the obligations under that secured debt before Diageo Investment, Diageo Capital, Diageo finance or Diageo could rat payment on the debt securities or the guarantees, respectively.If there is not enough collateral 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 disparate serial generalation pursuant to the indenture. The debt securities are governed by documents called indentures, which are described later under description of Debt Securities and Guarantees. We may issue as many distinct serial of debt securities under the indentures as we wish.We may also 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 emerging to holders of another series. You should read carefully the specialized basis of any particular series of debt securities which will be contained in the prospectus supplement relating to much(prenominal) debt securities. Should Diageo, Diageo Capital or Diageo pay default on its debt securities, or should Diageo default on the guarantees, your right to receive payments on much(prenominal) debt securities or guarantees may be adversely affected by applicable 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 proceedings with respect to Diageo or Diageo Capital are likely to proceed under, and be governed by, UK insolvency law and insolvency proceedings with respect to Diageo Finance are likely to proceed under, and be governed by, Dutch insolvency law.The procedural and significant provisions of such insolvency laws are generally more favorable to secured creditors than like provisions of United States law. These provisions afford debtors and unse cured creditors only special(a) protection from the claims of secured creditors and it will generally not be practical for Diageo, Diageo Capital or Diageo Finance or other unsecured creditors to prevent or delay the secured creditors from enforcing their security to repay the debts due to them under the terms that such security was granted.The debt securities, warrants, procure contracts and units lack a real 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 listed on the New York Stock throw or another 3 Table of Contents recognized stock rally and we expect that debt securities issued by Diageo Investment will not be listed on any stock vary.However, there can be no boldness that an sprightly 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 reciprocation. Similarly, there can be no assurance that an active trading market will develop for any warrants issued by Diageo. in that location can also be no assurance regarding the ability of holders of our debt securities, warrants, purchase contracts and units to sell 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 initial offering price and, in the case of debt securities, this may result in a return that is great or less than the interest rate on the debt security, in each case depending on many factors, including, among other things, prevailing interest order, Diageos financ ial results, any decline in Diageos credit-worthiness and the market for similar securities.Any underwriters, broker-dealers or agents that participate in the distribution of the debt securities, warrants, purchase contracts or units may halt a market in the debt securities, warrants, purchase contracts or units as permitted by applicable laws and regulations but will have no obligation to do so, and any such market-making 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 distant Currency Risks This prospectus does not describe all the risks of an investment in debt securities denominated in a property other than U. S. long horses. You should consult your financial and effective advisors as to any specific r isks entailed by an investment in debt securities that are denominated or collectable in, or the payment of which is linked to the grade of, unusual currency. These debt securities are not appropriate investments for investors who are not sophisticated in foreign currency transactions.The information set forth in this prospectus is directed to prospective purchasers who are United States residents. We disclaim any certificate of indebtedness to advise prospective purchasers who are residents of countries other than the United States of any matters arising under foreign 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. veer judge and Exchange Controls whitethorn Affect the Debt Securities Value or blow overDebt securities Involving Foreign Currencies Are Subject to General Exchange Rate and Exchange Control Risks . An investment in a de bt security that is denominated or payable in, or the payment of which is linked to the value of, currencies other than U. S. bucks entails significant risks. These risks include the possibility of significant changes in rates of flip-flop amongst the U. S. dollar and the relevant foreign currencies and the possibility of the imposition or modification of supervene upon controls by either the U. S. or foreign disposals. 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 occur during the term of any debt security. Depreciation against the U. S. dollar of the currency in which a debt security is payab le would result in a strike in the effective yield of the debt security below its coupon rate and could result in an overall loss to you on a U.S. dollar basis. In addition, depending on the specific terms of a currency-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 flash-frozen by sovereign governments. Exchange rates of most economically developed nations are permitted to fluctuate in value copulation to the U. S. dollar and to each other.However, from time to time governments may use a variety of techniques, such as intervention by a countrys central bank or the imposition of regulatory controls or taxes, to influence the exchange rates of their currencies. Governments may also issue a new currenc y to replace an alert currency or alter the exchange rate or relative exchange characteristics by a devaluation or revaluation of a currency. These political actions could change or interfere with currency valuations and currency fluctuations that would otherwise occur in response 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 render 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 affecting the U.S. dollar or any applicable foreign currency. You will bear those risks. Some Foreig n Currencies May Become Unavailable. 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. Alternative 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 explained in Description of Debt Securities and GuaranteesAdditional MechanicsUnavailability of Foreign Currency below. We Will admit 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 assume that any historic information concerning currency exchange rates will be exemplification of the range of or trends in fluctuations in currency exchange rates that may occur in the future.Currency Conversions May Affect Payments on Some 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 capacity 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