Prospectus
    
    EXHIBIT 2(b).10.1
 
 NATIONAL GRID GAS plc
 (incorporated with limited liability in England and Wales on 1 April 1986 under registered number 2006000)
 NATIONAL GRID GAS FINANCE (NO 1) plc
 (incorporated with limited liability in England and Wales on 3 August 2006 under registered number 5895068)
 Euro 10,000,000,000
 Euro Medium Term Note Programme
   NATIONAL GRID GAS plc
 Programme Prospectus National Grid Gas National Grid Gas Finance (No 1) Issuer Issuers Instruments Guarantor 
 UK Listing
Authority FSMA Official List London Stock Exchange Market listed
 temporary Global Instrument permanent Global Instrument NGN Common Safekeeper Euroclear société anonyme Clearstream, Luxembourg Classic Global Notes CGNs Common Depositary
  Prospectus Directive 
  Arranger for the Programme
 HSBC
 The Dealers
 BARCLAYS CAPITAL
    
    DEUTSCHE BANKHSBC
    
    JPMORGAN CAZENOVEMIZUHO INTERNATIONAL PLC
    
    MORGAN STANLEYRBC CAPITAL MARKETS
    
    THE ROYAL BANK OF SCOTLAND




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IMPORTANT NOTICES
 National Grid Gas Group
  Relevant Member State
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 euro Japanese yen £ Sterling U.S.$ U.S. dollars Canadian dollars Australian dollars New Zealand dollars Swedish krona Danish krone Hong
Kong dollars Swiss francs
 In connection with the issue of any Tranche (as defined in Overview of the Programme), the
Dealer or Dealers (if any) named as the stabilising manager(s) (the Stabilising Manager(s))
in the applicable Final Terms (or any person acting on behalf of any Stabilising Manager(s))
may, to the extent permitted by applicable laws and directives, over-allot Instruments or
effect transactions with a view to supporting the market price of the Instruments at a level
higher than that which might otherwise prevail. However, there is no assurance that the
Stabilising Manager(s) (or any person acting on behalf of any Stabilising Manager) will
undertake stabilisation action. 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 is made and,
if begun, may be ended at any time, but it must end no later than the earlier of 30 days after
the issue date of the relevant Tranche and 60 days after the date of the allotment of the
relevant Tranche. Any stabilisation action or over-allotment must be conducted by the relevant
Stabilising Manager(s) (or person(s) acting on behalf of any Stabilising Manager(s)) in
accordance with all applicable laws and rules.
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CONTENTS
 PageDOCUMENTS INCORPORATED BY REFERENCE
    
    
    5SUPPLEMENTAL PROSPECTUS
    
    
    6OVERVIEW OF THE PROGRAMME
    
    
    7RISK FACTORS
    
    
    13TERMS AND CONDITIONS OF THE INSTRUMENTS
    
    
    21SUMMARY OF PROVISIONS RELATING TO THE INSTRUMENTS WHILE IN GLOBAL FORM
    
    
    50USE OF PROCEEDS
    
    
    55DESCRIPTION OF NATIONAL GRID GAS PLC
    
    
    56DESCRIPTION OF NATIONAL GRID GAS FINANCE (NO 1) PLC
    
    
    62DESCRIPTION OF THE GUARANTEE
    
    
    63UNITED KINGDOM TAXATION
    
    
    64PLAN OF DISTRIBUTION
    
    
    67FORM OF FINAL TERMS
    
    
    70GENERAL INFORMATION
    
    
    82
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DOCUMENTS INCORPORATED BY REFERENCE
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SUPPLEMENTAL PROSPECTUS
 Supplemental Prospectus
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OVERVIEW OF THE PROGRAMME
  Issuers
    
    National Grid Gas plc (registered number 2006000).National Grid Gas Finance (No 1) plc (registered number
5895068).Guarantor
    
    National Grid Gas plc (in respect of Instruments to be
issued by National Grid Gas Finance (No 1) plc).Description
    
    Euro Medium Term Note Programme.Size
    
    Up to 10,000,000,000 (or the equivalent in other
currencies at the date of issue) aggregate nominal
amount of Instruments outstanding at any one time.Arranger
    
    HSBC Bank plcPrincipal Dealers
    
    Barclays Bank PLCDeutsche Bank AG, London BranchHSBC Bank plcJ.P. Morgan Securities Ltd.Mizuho International plcMorgan Stanley & Co. International plcRoyal Bank of Canada Europe LimitedThe Royal Bank of Scotland plcThe Issuers and the Guarantor
may from time to time terminate
the appointment of any dealer
under the Programme or appoint
additional dealers either in
respect of one or more Tranches
or in respect of the whole
Programme. References in this
Prospectus to Permanent
Dealers are to the persons
listed above as Dealers and to
such additional persons that
are appointed as dealers in
respect of the whole Programme
(and whose appointment has not
been terminated) and to
Dealers are to all Permanent
Dealers and all persons
appointed as a dealer in
respect of one or more
Tranches.Trustee
    
    The Law Debenture Trust Corporation p.l.c.Issuing and Paying Agent
    
    The Bank of New York MellonOther Paying Agents
    
    Kredietbank S.A. Luxembourgeoise.Method of Issue
    
    The Instruments will be issued on a syndicated or non-syndicated basis. The
Instruments will be issued in series (each a
Series) having one or more issue dates and
on terms otherwise identical (or identical
other than in respect of the first payment of
interest), the Instruments of each Series
being intended to be interchangeable with all
other Instruments of that Series. Each Series
may be issued in tranches (each a Tranche)
on the same or different issue dates. The
specific terms of each Tranche (which will be
completed, where necessary, with supplemental
terms and conditions and, save in respect of
the issue date, issue price,
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first payment of
interest and nominal amount of the Tranche,
will be identical to the terms of other
Tranches of the same Series) will be
completed in the final terms document (the
Final Terms).Issue Price
    
    Instruments may be issued
at their nominal amount or
at a discount or premium to
their nominal amount.
Partly Paid Instruments may
be issued, the issue price
of which will be payable in
two or more instalments.Form of Instruments
    
    The Instruments may be
issued in bearer form only.
Each Tranche of Instruments
will be represented on
issue by a temporary Global
Instrument if (a)
Definitive Instruments are
to be made available to
Instrumentholders following
the expiry of 40 days after
their issue date or (b)
such Instruments have an
initial maturity of more
than one year and are being
issued in compliance with
the D Rules (as defined in
Selling Restrictions
below), otherwise such
Tranche will be represented
by a permanent Global
Instrument. Any permanent
Global Instrument shall
only be exchanged for
Instruments in definitive
form in the limited
circumstances set out in
the permanent Global
Instrument.Clearing Systems
    
    Clearstream, Luxembourg,
Euroclear and, in relation
to any Tranche, such other
clearing system as may be
agreed between the relevant
Issuer, the Guarantor (if
applicable), the Issuing
and Paying Agent, the
Trustee and the relevant
Dealer.Initial Delivery of Instruments
    
    On or before the issue date
for each Tranche, if the
relevant Global Instrument
is intended to be
recognised as eligible
collateral for Eurosystem
monetary policy and
intra-day credit
operations, the Global
Instrument will be
delivered to a Common
Safekeeper for Euroclear
and Clearstream,
Luxembourg. On or before
the issue date for each
Tranche, if the relevant
Global Instrument is not
intended to be recognised
as eligible collateral for
Eurosystem monetary policy
and intra-day credit
operations, the Global
Instrument representing the
relevant Instruments may be
deposited with a common
depositary for Euroclear
and Clearstream,
Luxembourg. Global
Instruments may also be
deposited with any other
clearing system or may be
delivered outside any
clearing system provided
that the method of such
delivery has been agreed in
advance by the relevant
Issuer, the Guarantor (if
applicable), the Issuing
and Paying Agent, the
Trustee and the relevant
Dealer.Currencies
    
    Subject to compliance with
all relevant laws,
regulations and directives,
Instruments may be issued
in U.S. dollars, Australian
dollars, Canadian dollars,
Danish krone, Euro, Hong
Kong dollars, New Zealand
dollars, Sterling, Swedish
krona, Swiss francs or
Japanese yen or in other
currencies if the relevant
Issuer and the relevant
Dealer(s) so agree.
Instruments may, subject to
compliance as above, be
issued as Dual Currency
Instruments.Maturities
    
    Subject to compliance with
all relevant laws,
regulations and
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directives,
any maturity from one month
to perpetuity.Any Instruments having a
maturity of less than one
year from their date of
issue must (a) have a
minimum redemption value of
£100,000 (or its equivalent
in other currencies) and be
issued only to persons
whose ordinary activities
involve them in acquiring,
holding, managing or
disposing of investments
(as principal or agent) for
the purposes of their
businesses; or who it is
reasonable to expect will
acquire, hold, manage or
dispose of investments (as
principal or agent) for the
purposes of their
businesses or (b) be issued
in other circumstances
which do not constitute a
contravention of Section 19
of the FSMA by the relevant
Issuer.Denominations
    
    Definitive Instruments will
be in such denominations as
may be specified in the
relevant Final Terms, save
that (a) in the case of any
Instruments which are to be
admitted to trading on a
regulated market within the
European Economic Area or
offered to the public in a
Member State of the
European Economic Area in
circumstances which require
the publication of a
prospectus under the
Prospectus Directive, the
minimum denomination shall
be 50,000 (or its
equivalent in any other
currency as at the date of
issue of the Instruments)
and (b) unless otherwise
permitted by then current
laws and regulations,
Instruments which have a
maturity of less than one
year will have a minimum
denomination of £100,000
(or its equivalent in other
currencies).Fixed Rate Instruments
    
    Fixed interest will be
payable in arrear on the
date or dates in each year
specified in the relevant
Final Terms and at
maturity.Floating Rate Instruments
    
    Floating Rate Instruments
will bear interest set
separately for each Series
as follows:(a)   on the same basis as
the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement
incorporating the 2006 ISDA Definitions published by the International Swaps and
Derivatives Association,
Inc. or(b)   by reference to LIBOR,
LIBID, LIMEAN or EURIBOR
(or such other benchmark as
may be specified in the
relevant Final Terms) as
adjusted for any applicable
margin. Interest periods
will be selected by the
relevant Issuer prior to
issue and specified in the
relevant Final Terms.
Floating Rate Instruments
may also have a maximum
interest rate, a minimum
interest rate, or both.Zero Coupon Instruments
    
    Zero Coupon Instruments may
be issued at their nominal
amount or at a discount to
it and will not bear
interest.Dual Currency Instruments
    
    Payments (whether in
respect of principal or
interest and whether at
maturity or otherwise) in
respect of Dual Currency
Instruments will be made in
such currencies, and based on
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such rates of exchange
as may be specified in the
relevant Final Terms.Index Linked Instruments
    
    Payments of principal in
respect of Index Linked
Redemption Instruments or
of interest in respect of
Index Linked Interest
Instruments will be
calculated by reference to
such index and/or formula
as may be specified in the
relevant Final Terms and
(if applicable) the
relevant Supplemental
Prospectus.Interest Periods and Rates of Interest
    
    The length of the interest
periods for the Instruments
and the applicable interest
rate or its method of
calculation may differ from
time to time or be constant
for any Series. Instruments
may have a maximum interest
rate, a minimum interest
rate, or both. The use of
interest accrual periods
permits the Instruments to
bear interest at different
rates in the same interest
period. All such
information will be set out
in the relevant Final
Terms.Redemption
    
    The relevant Final Terms
will specify the basis for
calculating the redemption
amounts payable, which may
be by reference to a stock
index or formula or as
otherwise provided in the
relevant Final Terms.Unless permitted by then
current laws and
regulations, Instruments
which have a maturity of
less than one year must
have a minimum redemption
amount of £100,000 (or its
equivalent in other
currencies).Redemption by Instalments
    
    The Final Terms issued in
respect of each issue of
Instruments that are
redeemable in two or more
instalments will set out
the dates on which, and the
amounts in which, such
Instruments may be
redeemed.Other Instruments
    
    Terms applicable to high
interest Instruments, low
interest Instruments,
step-up Instruments,
step-down Instruments, Dual
Currency Instruments,
reverse Dual Currency
Instruments, optional Dual
Currency Instruments,
Partly Paid Instruments and
any other type of
Instrument that the
relevant Issuer, the
Trustee and any Dealer or
Dealers may agree to issue
under the Programme,
subject to compliance with
all relevant laws,
regulations and directives,
will be set out in the
relevant Final Terms and
(if applicable) the
relevant Supplemental
Prospectus.Optional Redemption
    
    The Final Terms issued in
respect of each issue of
Instruments will state
whether such Instruments
may be redeemed prior to
their stated maturity at
the option of the relevant
Issuer (either in whole or
in part) and/or the
holders, and if so the
terms applicable to such
redemption.The relevant Issuer may
elect to redeem all, but
not some only, of the
Instruments of any Series
at their Residual Holding
Redemption Amount (as set
out in the relevant Final
Terms) at any time if the
Residual Holding Percentage
(as set out in the relevant
Final Terms) or more of the
aggregate nominal amount of
such Instruments originally
issued shall have been
redeemed or purchased and
cancelled.
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Status of Instruments and the Guarantee
    
    The Instruments (and where
applicable, the guarantee
in respect of them) will
constitute unsubordinated
and unsecured obligations
of the relevant Issuer (and
where applicable, the
Guarantor, respectively),
all as described in Terms
and Conditions of the
Instruments - Status.Negative Pledge
    
    None of the Issuers or the
Guarantor will give any
negative pledge in respect
of Instruments to be issued
under the Programme.Cross Default
    
    The events of default in
respect of Instruments in
any Series will not contain
any cross default provision
in respect of any other
indebtedness of the
relevant Issuer or the
Guarantor, where
applicable, whether with
respect to Instruments in
any other Series or
otherwise.Events of Default
    
    The events of default under
the Instruments are as
specified below under
Terms and Conditions of
the Instruments - Events of
Default.Early Redemption
    
    Except as provided in
Optional Redemption above
and subject always to any
laws, regulations and
directives applicable to
the relevant currency in
which such Instruments are
denominated, Instruments
will be redeemable at the
option of the relevant
Issuer prior to maturity
only for tax reasons. See
Terms and Conditions of
the Instruments -
Redemption, Purchase and
Options.Withholding Tax
    
    All payments of principal
and interest in respect of
the Instruments will be
made free and clear of
withholding taxes of the
United Kingdom save as
compelled by law. In the
event that any deduction or
withholding on account of
tax is required to be made,
the Issuer will, in the
circumstances provided in
Terms and Conditions of
the Instruments - Taxation
and subject to the
exceptions therein, pay
additional amounts so as to
compensate for the amounts
withheld or deducted.Governing Law
    
    English.Listing
    
    Each Series may be admitted
to the Official List and
admitted to trading on the
Market and/or admitted to
listing, trading and/or
quotation by any other
listing authority, stock
exchange and/or quotation
system as may be agreed
between the relevant Issuer
and the relevant Dealer(s)
and specified in the
relevant Final Terms or may
be unlisted.Ratings
    
    Tranches of Instruments may
be rated or unrated. Where
a Tranche of Instruments is
rated, such rating will be
specified in the relevant
Final Terms. A 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.Selling Restrictions
    
    United States, United
Kingdom, Public Offer
Selling Restriction under
the Prospectus Directive
(in the case of unlisted
Instruments) and Japan. See
Plan of Distribution.Category 2 selling
restrictions will apply to
the Instruments
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for the
purposes of Regulation S
under the Securities Act.The Instruments will be
issued in compliance with
U.S. Treas. Reg.
§1.163-5(c)(2)(i)(D) (the
D Rules) unless (a) the
relevant Final Terms states
that Instruments are issued
in compliance with U.S.
Treas. Reg.
§1.163-5(c)(2)(i)(C) (the
C Rules) or (b) the
Instruments are issued
other than in compliance
with the D Rules or the C
Rules but in circumstances
in which the Instruments
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.Terms and Conditions
    
    The Terms and Conditions
applicable to each Series
will be as agreed between
the relevant Issuer, the
Guarantor (where
applicable), the Trustee
and the relevant Dealer(s)
or other purchaser at or
prior to the time of
issuance of such Series and
will be specified in the
relevant Final Terms. The
Terms and Conditions
applicable to each Series
will therefore be those as
set out in Terms and
Conditions of the
Instruments below as
supplemented, modified or
replaced by the relevant
Final Terms.
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RISK FACTORS
 The relevant Issuer and the Guarantor believe that the following factors may affect their
ability to fulfil their obligations under Instruments issued under the Programme. All of these
factors are contingencies which may or may not occur and the relevant Issuer and the Guarantor
are not in a position to express a view on the likelihood of any such contingency occurring.
 Factors which the relevant Issuer and the Guarantor believe may be material for the purpose of
assessing the market risks associated with Instruments issued under the Programme are also
described below.
 The relevant Issuer and the Guarantor believe that the factors described below represent the
principal risks inherent in investing in Instruments issued under the Programme, but the
relevant Issuer or the Guarantor may be unable to pay interest, principal or other amounts on
or in connection with any Instruments for other reasons and such Issuer and the Guarantor do
not represent that the statements below regarding the risks of holding any Instruments are
exhaustive. Prospective investors should also read the detailed information set out elsewhere
in this Prospectus (including any documents deemed to be incorporated by reference herein) and
reach their own views prior to making any investment decision.
 Risks relating to National Grid Gas plc and its business
 Changes in law or regulation could have an adverse effect on National Grid Gass results of
operations
  Breaches of or changes in environmental or health and safety laws or regulations could expose
National Grid Gas to claims for financial compensation and adverse regulatory consequences and
could damage National Grid Gass reputation
  Network failure or the inability to carry out critical non-network operations may have
significant adverse impacts on both National Grid Gass financial position and its reputation
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National Grid Gass results of operations depend on a number of factors relating to business
performance including performance against regulatory targets and the delivery of anticipated
costs and efficiency savings
 Ofgem
 Changes to the regulatory treatment of commodity costs may have an adverse effect on the
results of operations
  National Grid Gass reputation may be harmed if consumers of energy suffer a disruption to
their supply even if this disruption is outside of National Grid Gass control
  National Grid Gas is subject to the risk that business development activity, such as
significant acquisitions or disposals, will be based on incorrect assumptions or conclusions or
that significant liabilities will be overlooked or there may be other unanticipated adverse
impacts
  The nature and extent of National Grid Gass borrowings means that an increase in interest
rates could have an adverse impact on its financial position and business results
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National Grid Gass overall financial position may be adversely affected by a number of factors
including restrictions on borrowing and debt arrangements, changes to credit ratings, adverse
changes in the global credit markets and effective tax rates
  Future funding requirements of the National Grid plc UK Pension Scheme could adversely affect
National Grid Gass results of operations
  New or revised accounting standards, rules and interpretations by the UK, or international
accounting standard setting boards and other relevant bodies could have an adverse effect on
National Grid Gass reported financial results
 IFRS
 Risk relating to National Grid Gas Finance (No 1) plc and its business
  Factors which are material for the purpose of assessing the market risks associated with
Instruments issued under the Programme
 Instruments may not be a suitable investment for all investors
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(i)
    
    have sufficient knowledge and experience to make a meaningful evaluation of the
relevant Instruments, the merits and risks of investing in the relevant Instruments and
the information contained or incorporated by reference in this Prospectus or any
applicable supplement;(ii)
    
    have access to, and knowledge of, appropriate analytical tools to evaluate, in the
context of its particular financial situation, an investment in the relevant Instruments
and the impact such investment will have on its overall investment portfolio;(iii)
    
    have sufficient financial resources and liquidity to bear all of the risks of an
investment in the relevant Instruments, including where principal or interest is payable
in one or more currencies, or where the currency for principal or interest payments is
different from the potential investors currency;(iv)
    
    understand thoroughly the terms of the relevant Instruments and be familiar with the
behaviour of any relevant indices and financial markets; and(v)
    
    be able to evaluate (either alone or with the help of a financial adviser) possible
scenarios for economic, interest rate and other factors that may affect its investment and
its ability to bear the applicable risks.
  Risks related to the structure of a particular issue of Instruments
  Instruments subject to optional redemption by the Issuer
   Index Linked Instruments and Dual Currency Instruments
 Relevant Factor
 (i)
    
    the market price of such Instruments may be volatile;(ii)
    
    they may receive no interest;(iii)
    
    payment of principal or interest may occur at a different time or in a different
currency than expected;
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(iv)
    
    the amount of principal payable at redemption may be less than the nominal amount of
such Instruments or even zero;(v)
    
    a Relevant Factor may be subject to significant fluctuations that may not correlate
with changes in interest rates, currencies or other indices;(vi)
    
    if a Relevant Factor is applied to Instruments in conjunction with a multiplier
greater than one or contains some other leverage factor, the effect of changes in the
Relevant Factor on principal or interest payable likely will be magnified; and(vii)
    
    the timing of changes in a Relevant Factor may affect the actual yield to investors,
even if the average level is consistent with their expectations. In general, the earlier
the change in the Relevant Factor, the greater the effect on yield.
 Partly Paid Instruments
  Variable rate Instruments with a multiplier or other leverage factor
  Fixed/Floating Rate Instruments
  Instruments issued at a substantial discount or premium
  Risks related to Instruments generally
  Modification, waivers and substitution
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European Monetary Union
  EU Savings Directive
 EU Savings
Directive Residual Entities
    Change of law
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Integral multiples of less than 50,000
   
 Risks related to the market generally
  The secondary market generally
  The Clearing Systems
 Euroclear société anonyme Clearstream, Luxembourg
    Exchange rate risks and exchange controls
 Investors Currency
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Interest rate risks
  Credit ratings may not reflect all risks
  Legal investment considerations may restrict certain investments
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TERMS AND CONDITIONS OF THE INSTRUMENTS
 The following is the text of the terms and conditions which, save for the text in italics and
subject to completion and amendment and as supplemented or varied in accordance with the
provisions of Part A of the relevant Final Terms, will be endorsed on the Instruments in
definitive form (if any) issued in exchange for the Global Instrument(s) representing each
Series. Either (a) the full text of these terms and conditions together with the relevant
provisions of Part A of the Final Terms or (b) these terms and conditions as so completed,
amended, supplemented or varied (and subject to simplification by the deletion of
non-applicable provisions), shall be endorsed on such Instruments. All capitalised terms which
are not defined in these Conditions will have the meanings given to them in the Trust Deed or
Part A of the relevant Final Terms. Those definitions will be endorsed on the Definitive
Instruments. References in these terms and conditions to  Instruments  are to the Instruments
of one Series only of the relevant Issuer (as defined below), not to all Instruments that may
be issued under the Programme. Provisions which are marked with * only apply where National
Grid Gas Finance (No 1) is the Issuer.
 National Grid Gas National
Grid Gas Finance (No 1) Issuer Issuers Guarantor Programme  Instruments
 Trust Deed Trustee Agency
Agreement Issuing and Paying Agent Paying Agents Calculation Agent(s)
 Coupons Talons Couponholders Receipts
 1
    
    Form, Denomination and Title
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Prospectus Directive 
    Instrumentholder holder
 2
    
    Status [and Guarantee]*
 2.1
    
    Status
 pari passu
 2.2
    
    [Guarantee
 Guarantee
 3
    
    Interest
 3.1
    
    Interest on Fixed Rate Instruments
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3.2
    
    Interest on Floating Rate Instruments and Index Linked Interest Instruments
 3.2.1
    
    Interest Payment DatesEach Floating Rate Instrument and Index Linked Interest Instrument bears interest
on its outstanding nominal amount from the Interest Commencement Date at the rate
per annum (expressed as a percentage) equal to the Rate of Interest, such interest
being payable in arrear on each Interest Payment Date. The amount of interest
payable shall be determined in accordance with Condition 3.2.4(f). Such Interest
Payment Date(s) is/are either specified in the relevant Final Terms as Specified
Interest Payment Dates or, if no Specified Interest Payment Date(s) is/are
specified in the relevant Final Terms, Interest Payment Date shall mean each date
which falls the number of months or other period shown on this Instrument as the
Interest Period after the preceding Interest Payment Date or, in the case of the
first Interest Payment Date, after the Interest Commencement Date.3.2.2
    
    Business Day ConventionIf any date which is specified to be subject to adjustment in accordance with a
Business Day Convention would otherwise fall on a day which is not a Business Day,
then, if the Business Day Convention specified is (A) the Floating Rate Convention,
such date shall be postponed to the next day which is a Business Day unless it
would then fall into the next calendar month, in which event (x) such date shall be
brought forward to the immediately preceding Business Day and (y) each subsequent
such date shall be the last Business Day of the month in which such date would have
fallen had it not been subject to adjustment, (B) the Following Business Day
Convention, such date shall be postponed to the next day which is a Business Day;
(C) the Modified Following Business Day Convention, such date shall be postponed to
the next day which is a Business Day unless it would then fall into the next
calendar month, in that event such date shall be brought forward to the immediately
preceding Business Day or (D) the Preceding Business Day Convention, such date
shall be brought forward to the immediately preceding Business Day.3.2.3
    
    Rate of Interest for Floating Rate InstrumentsThe Rate of Interest in respect of Floating Rate Instruments for each Interest
Accrual Period shall be determined in the manner specified in the relevant Final
Terms and the provisions below relating to either ISDA Determination or Screen Rate
Determination shall apply, depending upon which is specified in the relevant Final
Terms.
 (A)
    
    ISDA Determination for Floating Rate Instruments: Where ISDA
Determination is specified in the relevant Final Terms as the manner in which
the Rate of Interest is to be determined, the Rate of Interest for each
Interest Accrual Period shall be determined by the Calculation Agent as a rate
equal to the relevant ISDA Rate. For the purposes of this sub-paragraph (A),
ISDA Rate for an Interest Accrual Period means a rate equal to the Floating
Rate which would be determined by the Calculation Agent under a Swap
Transaction under the terms of an agreement incorporating the ISDA Definitions
and under which:
 (x)
    
    the Floating Rate Option is as specified in the relevant Final Terms;(y)
    
    the Designated Maturity is a period specified in
the relevant Final Terms; and(z)
    
    the relevant Reset Date is the first day of that
Interest Accrual Period unless otherwise specified in the relevant Final
Terms.
 For the purposes of this sub-paragraph (A), Floating Rate, Calculation
Agent, Floating Rate Option, Designated Maturity, Reset Date and Swap
Transaction have the meanings given to those terms in the ISDA Definitions.
 23




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(B)
    
    Screen Rate Determination for Floating Rate Instruments:
Where Screen Rate Determination is specified in the relevant Final Terms as
the manner in which the Rate of Interest is to be determined, the Rate of
Interest for each Interest Accrual Period shall be determined by the
Calculation Agent at or about the Relevant Time on the Interest Determination
Date in respect of such Interest Accrual Period in accordance with the
following:
 (x)
    
    if the Primary Source for Floating Rate is a
Page, subject as provided below, the Rate of Interest shall be:
 (a)
    
    the Relevant Rate (where such
Relevant Rate on such Page is a composite quotation or is
customarily supplied by one entity); or(b)
    
    the arithmetic mean of the Relevant
Rates of the persons whose Relevant Rates appear on that Page,in each case appearing on such Page at the Relevant Time on the
Interest Determination Date;
 (y)
    
    if the Primary Source for the Floating Rate is
Reference Banks or if sub-paragraph (x) (a) applies and no Relevant Rate
appears on the Page at the Relevant Time on the Interest Determination
Date or if sub-paragraph (x) (b) above applies and fewer than two
Relevant Rates appear on the Page at the Relevant Time on the Interest
Determination Date, subject as provided below, the Rate of Interest
shall be the arithmetic mean of the Relevant Rates that each of the
Reference Banks is quoting to leading banks in the Relevant Financial
Centre at the Relevant Time on the Interest Determination Date, as
determined by the Calculation Agent; and(z)
    
    if paragraph (y) above applies and the
Calculation Agent determines that fewer than two Reference Banks are so
quoting Relevant Rates, subject as provided below, the Rate of Interest
shall be the arithmetic mean of the rates per annum (expressed as a
percentage) that the Calculation Agent determines to be the rates (being
the nearest equivalent to the Benchmark) in respect of a Representative
Amount of the Specified Currency that at least two out of five leading
banks selected by the Calculation Agent in the principal financial
centre of the country of the Specified Currency or, if the Specified
Currency is euro in those Member States of the European Union which are
participating in European economic and monetary union as selected by the
Calculation Agent (the Principal Financial Centre) are quoting at or
about the Relevant Time on the date on which such banks would
customarily quote such rates for a period commencing on the Effective
Date for a period equivalent to the Specified Duration (I) to leading
banks carrying on business in Europe, or (if the Calculation Agent
determines that fewer than two of such banks are so quoting to leading
banks in Europe) (II) to leading banks carrying on business in the
Principal Financial Centre; except that, if fewer than two of such banks
are so quoting to leading banks in the Principal Financial Centre, the
Rate of Interest shall be the Rate of Interest determined on the
previous Interest Determination Date (after readjustment for any
difference between any Margin, Rate Multiplier or Maximum or Minimum
Rate of Interest applicable to the preceding Interest Accrual Period and
to the relevant Interest Accrual Period).
 24




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3.2.4
    
    Rate of Interest for Index Linked Interest InstrumentsThe Rate of Interest in respect of Index Linked Interest Instruments for each
Interest Accrual Period shall be determined in the manner specified in the relevant
Final Terms and interest will accrue by reference to an Index or Formula as
specified in the relevant Final Terms.
 (a)
    
    Zero Coupon InstrumentsWhere an Instrument, the Interest Basis of which is specified to be Zero
Coupon, is repayable prior to the Maturity Date and is not paid when due, the
amount due and payable prior to the Maturity Date shall be the Early
Redemption Amount of such Instrument. As from the Maturity Date, the Rate of
Interest for any overdue principal of such an Instrument shall be a rate per
annum (expressed as a percentage) equal to the Amortisation Yield (as defined
in Condition 5.4.1(b)).(b)
    
    Dual Currency InstrumentsIn the case of Dual Currency Instruments, if the rate or amount of interest
falls to be determined by reference to a Rate of Exchange or a method of
calculating a Rate of Exchange, the rate or amount of interest payable shall
be determined in the manner specified in the relevant Final Terms.(c)
    
    Partly Paid InstrumentsIn the case of Partly Paid Instruments (other than Partly Paid Instruments
which are Zero Coupon Instruments), interest will accrue as previously stated
on the paid-up nominal amount of such Instruments and otherwise as specified
in the relevant Final Terms.(d)
    
    Accrual of InterestInterest shall cease to accrue on each Instrument on the due date for
redemption unless, upon due presentation, payment is improperly withheld or
refused, in which event interest shall continue to accrue (as well after as
before judgment) at the Rate of Interest in the manner provided in this
Condition 3 to the Relevant Date (as defined in Condition 7).(e)
    
    Margin, Maximum/Minimum Rates of Interest, Instalment Amounts
and Redemption Amounts, Rate Multipliers and Rounding
 (i)
    
    If any Margin or Rate Multiplier is specified in
the relevant Final Terms (either (x) generally, or (y) in relation to
one or more Interest Accrual Periods), an adjustment shall be made to
all Rates of Interest, in the case of (x), or the Rates of Interest for
the specified Interest Accrual Periods, in the case of (y), calculated
in accordance with Condition 3.2 above, by adding (if a positive number)
or subtracting (if a negative number) the absolute value of such Margin
or multiplying by such Rate Multiplier, subject always to the next
paragraph.(ii)
    
    If any Maximum or Minimum Rate of Interest,
Instalment Amount or Redemption Amount is specified in the relevant
Final Terms, then any Rate of Interest, Instalment Amount or Redemption
Amount shall be subject to such maximum or minimum, as the case may be.(iii)
    
    For the purposes of any calculations required
pursuant to these Conditions (unless otherwise specified), (x) all
percentages resulting from such calculations shall be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point
(with halves being rounded up), (y) all
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figures shall be rounded to seven significant figures (with halves
being rounded up) and (z) all currency amounts that fall due and
payable shall be rounded to the nearest unit of such currency (with
halves being rounded up), save in the case of yen, which shall be
rounded down to the nearest yen. For these purposes unit means the
lowest amount of such currency which is available as legal tender in
the country of such currency.
 (f)
    
    CalculationsThe amount of interest payable per Calculation Amount in respect of any
Instrument for any Interest Accrual Period shall be equal to the product of
the Rate of Interest, the Calculation Amount specified thereon, and the Day
Count Fraction for such Interest Accrual Period, unless an Interest Amount
(or a formula for its calculation) is applicable to such Interest Accrual
Period, in which case the amount of interest payable per Calculation Amount
in respect of such Instrument for such Interest Accrual Period shall equal
such Interest Amount (or be calculated in accordance with such formula).
Where any Interest Period comprises two or more Interest Accrual Periods, the
amount of interest payable per Calculation Amount in respect of such Interest
Period shall be the sum of the Interest Amounts payable in respect of each of
those Interest Accrual Periods. In respect of any other period for which
interest is required to be calculated, the provisions above shall apply save
that the Day Count Fraction shall be for the period for which interest is
required to be calculated.(g)
    
    Determination and Publication of Rates of Interest, Interest
Amounts, Final Redemption Amounts, Early Redemption Amounts, Optional
Redemption Amounts and Instalment AmountsAs soon as practicable after the Relevant Time on each Interest Determination
Date, or such other time on such date as the Calculation Agent may be
required to calculate any rate or amount, obtain any quotation or make any
determination or calculation, it shall determine such rate and calculate the
Interest Amounts in respect of each Specified Denomination of the Instruments
for the relevant Interest Accrual Period, calculate the Redemption Amount or
Instalment Amount, obtain such quote or make such determination or
calculation, as the case may be, and cause the Rate of Interest and the
Interest Amounts for each Interest Period and the relevant Interest Payment
Date and, if required to be calculated, the Final Redemption Amount, Early
Redemption Amount, Optional Redemption Amount or any Instalment Amount to be
notified to the Trustee, the Issuer,[ the Guarantor,]* each of the Paying
Agents, the Instrumentholders, any other Calculation Agent appointed in
respect of the Instruments that is to make a further calculation upon receipt
of such information and, if the Instruments are listed on a stock exchange
and the rules of such exchange so require, such exchange as soon as possible
after their determination but in no event later than (i) the commencement of
the relevant Interest Period, if determined prior to such time, in the case
of notification to such exchange of a Rate of Interest and Interest Amount,
or (ii) in all other cases, the fourth Business Day after such determination.
Where any Interest Payment Date or Interest Period Date is subject to
adjustment pursuant to Condition 3.2.2, the Interest Amounts and the Interest
Payment Date so published may subsequently be amended (or appropriate
alternative arrangements made with the consent of the Trustee by way of
adjustment) without notice in the event of an extension or shortening of the
Interest Period. If the Instruments become due and payable under Condition 9,
the accrued interest and the Rate of Interest payable in respect of the
Instruments shall nevertheless continue to be calculated as previously in
accordance with this Condition but no publication of the Rate of Interest or
the Interest Amount so calculated need be made unless the Trustee otherwise
requires. The determination
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of any rate or amount, the obtaining of each quotation and the making of each
determination or calculation by the Calculation Agent(s) shall (in the
absence of manifest error) be final and binding upon all parties.(h)
    
    Determination or Calculation by TrusteeIf the Calculation Agent does not at any time for any reason determine or
calculate the Rate of Interest for an Interest Period or any Interest Amount,
Instalment Amount, Final Redemption Amount, Early Redemption Amount or
Optional Redemption Amount the Trustee shall do so (or shall appoint an agent
on its behalf to do so) and such determination or calculation shall be deemed
to have been made by the Calculation Agent. In doing so, the Trustee shall
apply the preceding provisions of this Condition, with any necessary
consequential amendments, to the extent that, in its opinion, it can do so,
and, in all other respects it shall do so in such manner as it shall deem
fair and reasonable in all the circumstances.(i)
    
    DefinitionsIn these Conditions, unless the context otherwise requires, the following
defined terms shall have the meanings set out below:Benchmark means LIBOR, LIBID, LIMEAN, EURIBOR or such other Benchmark as
may be specified in the relevant Final Terms.Business Day means:
 (i)
    
    in the case of a currency other than euro, a day
(other than a Saturday or Sunday) on which commercial banks and foreign
exchange markets settle payments in the principal financial centre for
such currency; and/or(ii)
    
    in the case of euro, a day on which the TARGET
System is operating (a TARGET Business Day); and/or(iii)
    
    in the case of a currency and/or one or more
Business Centres as specified in the relevant Final Terms, a day (other
than a Saturday or a Sunday) on which commercial banks and foreign
exchange markets settle payments in such currency or, if no currency is
indicated, generally in each of the Business Centres.
 Calculation Amount means the amount specified as such in the relevant Final
Terms.Day Count Fraction means, in respect of the calculation of an amount of
interest on any Instrument for any period of time (from and including the
first day of such period to but excluding the last) (whether or not
constituting an Interest Period, the Calculation Period):
 (i)
    
    if Actual/Actual or Actual/Actual-ISDA is
specified in the relevant Final Terms, the actual number of days in the
Calculation Period divided by 365 (or, if any portion of that
Calculation Period falls in a leap year, the sum of (i) the actual
number of days in that portion of the Calculation Period falling in a
leap year divided by 366 and (ii) the actual number of days in that
portion of the Calculation Period falling in a non-leap year divided by
365);(ii)
    
    if Actual/365 (Fixed) is specified in the
relevant Final Terms, the actual number of days in the Calculation
Period divided by 365;(iii)
    
    if Actual/360 is specified in the relevant
Final Terms, the actual number of days in the Calculation Period divided
by 360;
 27




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(iv)
    
    if 30/360, 360/360 or Bond Basis is
specified in the relevant Final Terms, the number of days in the
Calculation Period divided by 360, calculated on a formula basis as
follows:(EQUATION)where:Y1 is the year, expressed as a number, in which the first
day of the Calculation Period falls;Y2 is the year, expressed as a number, in which the day
immediately following the last day included in the Calculation Period
falls;M1 is the calendar month, expressed as a number, in which
the first day of the Calculation Period falls;M2 is the calendar month, expressed as a number, in which
the day immediately following the last day included in the Calculation
Period falls;D1 is the first calendar day, expressed as a number, of
the Calculation Period, unless such number would be 31, in which case
D1 will be 30; andD2 is the calendar day, expressed as a number,
immediately following the last day included in the Calculation Period,
unless such number would be 31 and D1 is greater than 29,
in which case D2 will be 30 ;(v)
    
    if 30E/360 or Eurobond Basis is specified in
the relevant Final Terms, the number of days in the Calculation Period
divided by 360, calculated on a formula basis as follows:(EQUATION)where:Y1 is the year, expressed as a number, in which the first
day of the Calculation Period falls;Y2 is the year, expressed as a number, in which the day
immediately following the last day included in the Calculation Period
falls;M1 is the calendar month, expressed as a number, in which
the first day of the Calculation Period falls;M2 is the calendar month, expressed as a number, in which
the day immediately following the last day included in the Calculation
Period falls;D1 is the first calendar day, expressed as a number, of
the Calculation Period, unless such number would be 31, in which case
D1 will be 30; andD2 is the calendar day, expressed as a number,
immediately following the last day included in the Calculation Period,
unless such number would be 31, in which case D2 will be
30;(vi)
    
    if 30E/360 (ISDA) is specified hereon, the
number of days in the Calculation Period divided by 360, calculated on a
formula basis as follows:(EQUATION)
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where:Y1 is the year, expressed as a number, in which the first
day of the Calculation Period falls;Y2 is the year, expressed as a number, in which the day
immediately following the last day included in the Calculation Period
falls;M1 is the calendar month, expressed as a number, in which
the first day of the Calculation Period falls;M2 is the calendar month, expressed as a number, in which
the day immediately following the last day included in the Calculation
Period falls;D1 is the first calendar day, expressed as a number, of
the Calculation Period, unless (i) that day is the last day of
February or (ii) such number would be 31, in which case D1
will be 30; andD2 is the calendar day, expressed as a number,
immediately following the last day included in the Calculation Period,
unless (i) that day is the last day of February but not the Maturity
Date or (ii) such number would be 31, in which case D2 will
be 30; and(vii)
    
    if Actual/Actual-ICMA is specified in the
relevant Final Terms,
 (a)
    
    if the Calculation Period is equal
to or shorter than the Determination Period during which it
falls, the actual number of days in the Calculation Period
divided by the product of (x) the actual number of days in such
Determination Period and (y) the number of Determination Periods
in any year; and(b)
    
    if the Calculation Period is longer
than one Determination Period, the sum of:
 (x)
    
    the actual number of
days in such Calculation Period falling in the
Determination Period in which it begins divided by the
product of (1) the actual number of days in such
Determination Period and (2) the number of Determination
Periods in any year; and(y)
    
    the actual number of
days in such Calculation Period falling in the next
Determination Period divided by the product of (1) the
actual number of days in such Determination Period and (2)
the number of Determination Periods in any year,where:Determination Period means the period from and including a
Determination Date in any year to but excluding the next
Determination Date; andDetermination Date means the date specified as such in the
relevant Final Terms or, if none is so specified, the
Interest Payment Date.
 Effective Date means, with respect to any Floating Rate to be determined on
an Interest Determination Date, the date specified as such in the relevant
Final Terms or, if none is so specified, the first day of the Interest
Accrual Period to which such Interest Determination Date relates.
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Euro-zone means the region comprising of Member States of the European
Union that adopt the single currency in accordance with the Treaty
establishing the European Community as amended.Interest Accrual Period means the period beginning on (and including) the
Interest Commencement Date and ending on (but excluding) the first Interest
Period Date and each successive period beginning on (and including) an
Interest Period Date and ending on (but excluding) the next succeeding
Interest Period Date.Interest Amount means:
 (i)
    
    in respect of an Interest Accrual Period, the
amount of interest payable per Calculation Amount for that Interest
Accrual Period and which, in the case of Fixed Rate Instruments, and
unless otherwise specified hereon, shall mean the Fixed Coupon Amount or
Broken Amount specified hereon as being payable on the Interest Payment
Date ending the Interest Period of which such Interest Accrual Period
forms part; and(ii)
    
    in respect of any other period, the amount of
interest payable per Calculation Amount for that period.
 Interest Commencement Date means the Issue Date or such other date as may
be specified in the relevant Final Terms.Interest Determination Date means, with respect to a Rate of Interest and
Interest Accrual Period, the date specified as such in the relevant Final
Terms or, if none is so specified, (i) the first day of such Interest Accrual
Period if the Specified Currency is Sterling or (ii) the day falling two
Business Days in London prior to the first day of such Interest Accrual
Period if the Specified Currency is neither Sterling nor euro or (iii) the
day falling two TARGET Business Days prior to the first day of such Interest
Accrual Period if the Specified Currency is euro.Interest Payment Date means the date or dates specified as such in, or
determined in accordance with the provisions of, the relevant Final Terms
and, if a Business Day Convention is specified in the relevant Final Terms,
as the same may be adjusted in accordance with the relevant Business Day
Convention.Interest Period means the period beginning on (and including) the Interest
Commencement Date and ending on (but excluding) the first Interest Payment
Date and each successive period beginning on (and including) an Interest
Payment Date and ending on (but excluding) the next succeeding Interest
Payment Date.Interest Period Date means each Interest Payment Date unless otherwise
specified in the relevant Final Terms.ISDA Definitions means the 2006 ISDA Definitions as published by the
International Swaps and Derivatives Association, Inc., unless otherwise
specified in the relevant Final Terms.Page means such page, section, caption, column or other part of a
particular information service (including, but not limited to, the Reuters
Market 3000 (Reuters)) as may be specified for the purpose of providing a
Relevant Rate, or such other page, section, caption, column or other part as
may replace it on that information service or on such other information
service, in each case as may be nominated by the person or organisation
providing or sponsoring the information appearing there for the purpose of
displaying rates or prices comparable to that Relevant Rate.
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Rate of Interest means the rate of interest payable from time to time in
respect of this Instrument and that is either specified, or calculated in
accordance with the provisions, in the relevant Final Terms.Redemption Amount means, as appropriate, the Final Redemption Amount, the
Early Redemption Amount (Tax), the Optional Redemption Amount (Call), the
Optional Redemption Amount (Put), the Early Termination Amount or such other
amount in the nature of a redemption amount as may be specified in, or
determined in accordance with the provisions of the relevant Final Terms.Reference Banks means the institutions specified as such in the relevant
Final Terms or, if none, five leading banks selected by the Calculation Agent
in the interbank market (or, if appropriate, money, swap or over-the-counter
index options market) that is most closely connected with the Benchmark
(which, if EURIBOR is the relevant Benchmark, shall be Europe).Relevant Financial Centre means, with respect to any Floating Rate to be
determined in accordance with a Screen Rate Determination on an Interest
Determination Date, the financial centre as may be specified as such in the
relevant Final Terms or, if none is so specified, the financial centre with
which the relevant Benchmark is most closely connected (which, in the case of
EURIBOR, shall be Europe) or, if none is so connected, London.Relevant Rate means the Benchmark for a Representative Amount of the
Specified Currency for a period (if applicable or appropriate to the
Benchmark) equal to the Specified Duration commencing on the Effective Date.Relevant Time means, with respect to any Interest Determination Date, the
local time in the Relevant Financial Centre specified in the relevant Final
Terms or, if no time is specified, the local time in the Relevant Financial
Centre at which it is customary to determine bid and offered rates in respect
of deposits in the Specified Currency in the interbank market in the Relevant
Financial Centre or, if no such customary local time exists, 11.00 hours in
the Relevant Financial Centre and, for the purpose of this definition local
time means, with respect to Europe as a Relevant Financial Centre, Brussels
time.Representative Amount means, with respect to any Floating Rate to be
determined in accordance with a Screen Rate Determination on an Interest
Determination Date, the amount specified as such in the relevant Final Terms
or, if none is specified, an amount that is representative for a single
transaction in the relevant market at the time.Specified Currency means the currency specified as such in the relevant
Final Terms or, if none is specified, the currency in which the Instruments
are denominated.Specified Duration means, with respect to any Floating Rate to be
determined in accordance with a Screen Rate Determination on an Interest
Determination Date, the duration specified in the relevant Final Terms or, if
none is specified, a period of time equal to the relevant Interest Accrual
Period, ignoring any adjustment pursuant to Condition 3.2.2.TARGET System means the Trans-European Automated Real-Time Gross Settlement
Express Transfer (known as TARGET 2) System which was launched on 19 November
2007 or any successor to it.
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(j)
    
    Calculation Agent and Reference BanksThe Issuer[, failing whom the Guarantor,]* shall procure that there shall at
all times be four Reference Banks (or such other number as may be required)
with offices in the Relevant Financial Centre and one or more Calculation
Agents if provision is made for them in the relevant Final Terms and for so
long as any Instrument is outstanding. If any Reference Bank (acting through
its relevant office) is unable or unwilling to continue to act as a Reference
Bank, then the Issuer[ or the Guarantor]* shall (with the prior approval of
the Trustee) appoint another Reference Bank with an office in the Relevant
Financial Centre to act as such in its place. Where more than one Calculation
Agent is appointed in respect of the Instruments, references in these
Conditions to the Calculation Agent shall be construed as each Calculation
Agent performing its respective duties under these Conditions. If the
Calculation Agent is unable or unwilling to act as such or if the Calculation
Agent fails duly to establish the Rate of Interest for an Interest Period or
Interest Accrual Period or to calculate any Interest Amount, Instalment
Amount, Final Redemption Amount, Early Redemption Amount or Optional
Redemption Amount, as the case may be, or to comply with any other
requirement, the Issuer [or the Guarantor]* shall (with the prior approval of
the Trustee) appoint a leading bank or investment banking firm engaged in the
interbank market (or, if appropriate, money, swap or over-the-counter index
options market) which is most closely connected with the calculation or
determination to be made by the Calculation Agent (acting through its
principal London office or any other office actively involved in such market)
to act as such in its place. The Calculation Agent may not resign its duties
without a successor having been appointed as specified in this paragraph.
 4
    
    IndexationThis Condition 4 is applicable only if the relevant Final Terms specifies the Instruments as
Index Linked Instruments.Where the RPI (as defined below) is specified as the Index or Index Figure (each as defined
below) in the relevant Final Terms, the following Conditions 4.1 to 4.6 will apply:
 4.1
    
    DefinitionsBase Index Figure means (subject to Condition 4.3(i)) the base index figure as
specified in the relevant Final Terms;Index or Index Figure means, subject as provided in Condition 4.3(i), the UK Retail
Price Index (RPI) (for all items) published by the Office for National Statistics
(January 1987 = 100) or any comparable index which may replace the RPI for the purpose of
calculating the amount payable on repayment of the Reference Gilt. Any reference to the
Index Figure which is specified in the relevant Final Terms as:
 (i)
    
    applicable to a particular month, shall, subject as provided in
Conditions 4.3 and 4.5, be construed as a reference to the Index Figure published in
the seventh month prior to that particular month and relating to the month before
that of publication; or(ii)
    
    applicable to the first calendar day of any month shall, subject as
provided in Conditions 4.3 and 4.5, be construed as a reference to the Index Figure
published in the second month prior to that particular month and relating to the
month before that of publication; or(iii)
    
    applicable to any other day in any month shall, subject as provided in
Conditions 4.3 and 4.5, be calculated by linear interpolation between (x) the Index
Figure applicable to the first calendar day of the month in which the day falls,
calculated as specified in sub-paragraph (ii) above and (y) the Index Figure
applicable to the first calendar day of the month
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##### 



following, calculated as specified in sub-paragraph (ii) above and rounded to the
nearest fifth decimal place.
 If the Index is replaced, the Issuer will describe the replacement Index in a supplement
to the Prospectus;Index Ratio applicable to any month or date, as the case may be, means the Index Figure
applicable to such month or date, as the case may be, divided by the Base Index Figure
and rounded to the nearest fifth decimal place;Limited Index Ratio means (a) in respect of any month or date, as the case may be,
prior to the relevant Issue Date, the Index Ratio for that month or date, as the case may
be, (b) in respect of any Limited Indexation Date after the relevant Issue Date, the
product of the Limited Indexation Factor for that month or date, as the case may be, and
the Limited Index Ratio as previously calculated in respect of the month or date, as the
case may be, twelve months prior thereto; and (c) in respect of any other month, the
Limited Index Ratio as previously calculated in respect of the most recent Limited
Indexation Month;Limited Indexation Date means any date falling during the period specified in the
relevant Final Terms for which a Limited Indexation Factor is to be calculated;Limited Indexation Factor means, in respect of a Limited Indexation Month or Limited
Indexation Date, as the case may be, the ratio of the Index Figure applicable to that
month or date, as the case may be, divided by the Index Figure applicable to the month or
date, as the case may be, twelve months prior thereto, provided that (a) if such ratio is
greater than the Maximum Indexation Factor specified in the relevant Final Terms, it
shall be deemed to be equal to such Maximum Indexation Factor and (b) if such ratio is
less than the Minimum Indexation Factor specified in the relevant Final Terms, it shall
be deemed to be equal to such Minimum Indexation Factor;Limited Indexation Month means any month specified in the relevant Final Terms for
which a Limited Indexation Factor is to be calculated;Limited Index Linked Instruments means Index Linked Instruments to which a Maximum
Indexation Factor and/or a Minimum Indexation Factor (as specified in the relevant Final
Terms) applies; andReference Gilt means the Treasury Stock specified as such in the relevant Final Terms
for so long as such stock is in issue, and thereafter such issue of index-linked Treasury
Stock determined to be appropriate by a gilt-edged market maker or other adviser selected
by the Issuer[ or the Guarantor]* (an Indexation Adviser).4.2
    
    Application of the Index RatioEach payment of interest and principal in respect of the Instruments shall be the amount
provided in, or determined in accordance with, these Conditions, multiplied by the Index
Ratio or Limited Index Ratio in the case of Limited Index Linked Instruments applicable
to the month or date, as the case may be, on which such payment falls to be made and
rounded in accordance with Condition 3.2.4(e).4.3
    
    Changes in Circumstances Affecting the Index
 (i)
    
    Change in base: If at any time and from time to time the Index is changed
by the substitution of a new base therefor, then with effect from the month from and
including that in which such substitution takes effect or the first date from and
including that on which such substitution takes effect, as the case may be, (1) the
definition of Index and Index Figure in Condition 4.1 shall be deemed to refer
to the new date or month in substitution for January 1987 (or, as the case may be,
to such other date or month as may have been
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substituted therefor), and (2) the new Base Index Figure shall be the product of
the existing Base Index Figure and the Index Figure for the date on which such
substitution takes effect, divided by the Index Figure for the date immediately
preceding the date on which such substitution takes effect.(ii)
    
    Delay in publication of Index if sub-paragraph (i) of the definition of
Index Figure is applicable: If the Index Figure which is normally published in the
seventh month and which relates to the eighth month (the relevant month) before
the month in which a payment is due to be made is not published on or before the
fourteenth business day before the date on which such payment is due (the date for
payment), the Index Figure applicable to the month in which the date for payment
falls shall be (1) such substitute index figure (if any) as the Trustee considers
(acting solely on the advice of the Indexation Adviser) to have been published by
the United Kingdom Debt Management Office or the Bank of England, as the case may
be, for the purposes of indexation of payments on the Reference Gilt or, failing
such publication, on any one or more issues of index-linked Treasury Stock selected
by an Indexation Adviser (and approved by the Trustee (acting solely on the advice
of the Indexation Adviser)) or (2) if no such determination is made by such
Indexation Adviser within seven days, the Index Figure last published (or, if later,
the substitute index figure last determined pursuant to Condition 4.3(i)) before the
date for payment.(iii)
    
    Delay in publication of Index if sub-paragraph (ii) and/or (iii) of the
definition of Index Figure is applicable: If the Index Figure relating to any month
(the calculation month) which is required to be taken into account for the
purposes of the determination of the Index Figure for any date is not published on
or before the fourteenth business day before the date on which such payment is due
(the date for payment), the Index Figure applicable for the relevant calculation
month shall be (1) such substitute index figure (if any) as the Trustee considers
(acting solely on the advice of the Indexation Adviser) to have been published by
the United Kingdom Debt Management Office or the Bank of England, as the case may
be, for the purposes of indexation of payments on the Reference Gilt or, failing
such publication, on any one or more issues of index-linked Treasury Stock selected
by an Indexation Adviser (and approved by the Trustee (acting solely on the advice
of the Indexation Adviser)) or (2) if no such determination is made by such
Indexation Adviser within seven days, the Index Figure last published (or, if later,
the substitute index figure last determined pursuant to Condition 4.3(i)) before the
date for payment.
 4.4
    
    Application of ChangesWhere the provisions of Condition 4.3(ii) or Condition 4.3(iii) apply, the determination
of the Indexation Adviser as to the Index Figure applicable to the month in which the
date for payment falls or the date for payment, as the case may be, shall be conclusive
and binding. If, an Index Figure having been applied pursuant to Condition 4.3(ii)(2) or
Condition 4.3(iii)(2), the Index Figure relating to the relevant month or relevant
calculation month, as the case may be, is subsequently published while an Instrument is
still outstanding, then:
 (i)
    
    in relation to a payment of principal or interest in respect of such
Instrument other than upon final redemption of such Instrument, the principal or
interest (as the case may be) next payable after the date of such subsequent
publication shall be increased or reduced, as the case may be, by an amount equal to
the shortfall or excess, as the case may be, of the amount of the relevant payment
made on the basis of the Index Figure applicable by virtue of Condition 4.3(ii)(2)
or Condition 4.3(iii)(2) below or above the amount of the relevant payment that
would have been due if the Index Figure subsequently published had been published on
or before the fourteenth business day before the date for payment; and(ii)
    
    in relation to a payment of principal or interest upon final redemption,
no subsequent adjustment to amounts paid will be made.
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4.5
    
    Cessation of or Fundamental Changes to the Index
 (i)
    
    If (1) the Trustee and the Issuer [and the Guarantor]* have been notified
by the Calculation Agent that the Index has ceased to be published or (2) any change
is made to the coverage or the basic calculation of the Index which constitutes a
fundamental change which would, in the opinion of (A) the Issuer be materially
prejudicial to the interests of the Issuer,[ or the Guarantor]* or (B) the Trustee
acting solely on the advice of an Indexation Adviser, be materially prejudicial to
the interests of the Instrumentholders, the Trustee will give written notice of such
occurrence to the Issuer in the case of (B), and the Issuer[, the Guarantor]* and
the Trustee (acting solely on the advice of the Indexation Adviser) together shall
seek to agree for the purpose of the Instruments one or more adjustments to the
Index or a substitute index (with or without adjustments) with the intention that
the same should leave the Issuer[, the Guarantor]* and the Instrumentholders in no
better and no worse position than they would have been had the Index not ceased to
be published or the relevant fundamental change not been made.(ii)
    
    If the Issuer[, the Guarantor]* and the Trustee (acting solely on the
advice of the Indexation Adviser) fail to reach agreement as mentioned above within
20 business days following the giving of notice as mentioned in paragraph (i), a
bank or other person in London shall be appointed by the Issuer[, the Guarantor]*
and the Trustee or, failing agreement on and the making of such appointment within
20 business days following the expiry of the 20 day period referred to above, by the
Trustee (acting solely on the advice of the Indexation Adviser) (in each case, such
bank or other person so appointed being referred to as the Expert), to determine
for the purpose of the Instruments one or more adjustments to the Index or a
substitute index (with or without adjustments) with the intention that the same
should leave the Issuer[, the Guarantor]* and the Instrumentholders in no better and
no worse position than they would have been had the Index not ceased to be published
or the relevant fundamental change not been made. Any Expert so appointed shall act
as an expert and not as an arbitrator and all fees, costs and expenses of the Expert
and of any Indexation Adviser and of any of the Issuer[, the Guarantor]* and the
Trustee in connection with such appointment shall be borne by the Issuer[ or the
Guarantor]*.(iii)
    
    The Index shall be adjusted or replaced by a substitute index as agreed
by the Issuer[, the Guarantor]* and the Trustee (acting solely on the advice of the
Indexation Adviser) or as determined by the Expert pursuant to the foregoing
paragraphs, as the case may be, and references in these Conditions to the Index and
to any Index Figure shall be deemed amended in such manner as the Trustee (acting
solely on the advice of the Indexation Adviser)[, the Guarantor]* and the Issuer
agree are appropriate to give effect to such adjustment or replacement. Such
amendments shall be effective from the date of such notification and binding upon
the Issuer,[ the Guarantor and]* the Trustee and the Instrumentholders, and the
Issuer [and the Guarantor]* shall give notice to the Instrumentholders in accordance
with Condition 14 of such amendments as promptly as practicable following such
notification.
 4.6
    
    Redemption for Index ReasonsIf either (i) the Index Figure for three consecutive months is required to be determined
on the basis of an Index Figure previously published as provided in Condition 4.3(ii)(2)
and the Trustee has been notified by the Calculation Agent that publication of the Index
has ceased or (ii) notice is published by Her Majestys Treasury, or on its behalf,
following a change in relation to the Index, offering a right of redemption to the
holders of the Reference Gilt, and (in either case) no amendment or substitution of the
Index shall have been advised by the Indexation Adviser to the Issuer [and the
Guarantor]* and such circumstances are continuing, the Issuer may, upon giving not more
than 60 nor less than 30 days notice to the Instrumentholders in accordance with
Condition 14, redeem all, but not some only, of the Instruments at their principal amount
together
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with interest accrued but unpaid up to and including the date of redemption (in each case
adjusted in accordance with Condition 4.2).
  4.7
    
    DefinitionsBase Index Level means the base index level as specified in the relevant Final Terms;Index or Index Level means (subject as provided in Condition 4.9) the Non-revised
Index of Consumer Prices excluding tobacco or relevant Successor Index (as defined in
Condition 4.9(i)), measuring the rate of inflation in the European Monetary Union
excluding tobacco, expressed as an index and published by Eurostat (the HICP). The
first publication or announcement of a level of such index for a calculation month (as
defined in Condition 4.9(i)) shall be final and conclusive and later revisions to the
level for such calculation month will not be used in any calculations. Any reference to
the Index Level which is specified in these Conditions as applicable to any day (d) in
any month (m) shall, subject as provided in Condition 4.9, be calculated as follows:(EQUATION)where:Id is the Index Level for the day dHICPm-2 is HICP for month m-2HICPm-3 is HICP for month m-3nbdis the actual number of days from and excluding the first day of month m to but
including day d; andqm is the actual number of days in month m,provided that if Condition 4.9 applies, the Index Level shall be the Substitute Index
Level determined in accordance with such Condition.If the Index is replaced, the Issuer will describe the replacement Index in a supplement
to the Prospectus;Index Business Day means a day on which the TARGET System is operating;Index Determination Date means in respect of any date for which the Index Level is
required to be determined, the fifth Index Business Day prior to such date;Index Ratio applicable to any date means the Index Level applicable to the relevant
Index Determination Date divided by the Base Index Level and rounded to the nearest fifth
decimal place, 0.000005 being rounded upwards; andRelated Instrument means an inflation-linked bond selected by the Calculation Agent
that is a debt obligation of one of the governments (but not any government agency) of
France, Italy, Germany or Spain and which pays a coupon or redemption amount which is
calculated by reference to the level of inflation in the European Monetary Union with a
maturity date which falls on (a) the same day as the Maturity Date, (b) the next longest
maturity date after the Maturity Date if there is no such bond maturing on the Maturity
Date, or (c) the next shortest maturity before the Maturity Date if no bond defined in
(a) or (b) is selected by the Calculation Agent. The Calculation Agent will select the
Related Instrument from such of those inflation-linked bonds issued on or before the
relevant Issue Date and, if there is more than one such inflation-linked bond maturing on
the same date, the Related Instrument shall be selected by the Calculation Agent from
such of
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those bonds. If the Related Instrument is redeemed, the Calculation Agent will select a
new Related Instrument on the same basis, but selected from all eligible bonds in issue
at the time the originally selected Related Instrument is redeemed (including any bond
for which the redeemed originally selected Related Instrument is exchanged).4.8
    
    Application of the Index RatioEach payment of interest and principal in respect of the Instruments shall be the amount
provided in, or determined in accordance with, these Conditions, multiplied by the Index
Ratio applicable to the date on which such payment falls to be made and rounded in
accordance with Condition 3.2.4(e).4.9
    
    Changes in Circumstances Affecting the Index
 (i)
    
    Delay in publication of Index:
 (a)
    
    If the Index Level relating to any month (the calculation
month) which is required to be taken into account for the purposes of the
determination of the Index Level for any date (the Relevant Level) has not
been published or announced by the day that is five Business Days before the
date on which such payment is due (the Affected Payment Date), the
Calculation Agent shall determine a Substitute Index Level (as defined below)
(in place of such Relevant Level) by using the following methodology:
 (1)
    
    if applicable, the Calculation Agent will take
the same action to determine the Substitute Index Level for the Affected
Payment Date as that taken by the calculation agent (or any other party
performing the function of a calculation agent (whatever such partys
title)) pursuant to the terms and conditions of the Related Instrument;(2)
    
    if (1) above does not result in a Substitute
Index Level for the Affected Payment Date for any reason, then the
Calculation Agent shall determine the Substitute Index Level as follows:Substitute Index Level = Base Level x (Latest Level / Reference Level)where:Base Level means the level of the Index (excluding any flash
estimates) published or announced by Eurostat (or any successor entity
which publishes such index) in respect of the month which is 12
calendar months prior to the month for which the Substitute Index
Level is being determined;Latest Level means the latest level of the Index (excluding any
flash estimates) published or announced by Eurostat (or any successor
entity which publishes such index) prior to the month in respect of
which the Substitute Index Level is being calculated; andReference Level means the level of the Index (excluding any flash
estimates) published or announced by Eurostat (or any successor entity
which publishes such index) in respect of the month that is 12
calendar months prior to the month referred to in Latest Level
above.
 (b)
    
    If a Relevant Level is published or announced at any time
after the day that is five Business Days prior to the next Interest Payment
Date, such Relevant Level will not be used in any calculations. The Substitute
Index Level so determined pursuant to this Condition 4.9(i) will be the
definitive level for that calculation month.
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(ii)
    
    Cessation of publication: If the Index Level has not been published or
announced for two consecutive months or Eurostat announces that it will no longer
continue to publish or announce the Index, then the Calculation Agent shall
determine a successor index in lieu of any previously applicable Index (the
Successor Index) by using the following methodology:
 (a)
    
    if at any time (other than after an Early Termination Event
(as defined below) has been designated by the Calculation Agent pursuant to
paragraph (e) below) a successor index has been designated by the calculation
agent (or any other party performing the function of a calculation agent
(whatever such partys title)) pursuant to the terms and conditions of the
Related Instrument, such successor index shall be designated the Successor
Index for the purposes of all subsequent Interest Payment Dates,
notwithstanding that any other Successor Index may previously have been
determined under paragraphs (b), (c) or (d) below; or(b)
    
    if a Successor Index has not been determined under paragraph
(a) above (and there has been no designation of an Early Termination Event
pursuant to paragraph (e) below), and a notice has been given or an
announcement has been made by Eurostat (or any successor entity which
publishes such index) specifying that the Index will be superseded by a
replacement index specified by Eurostat (or any such successor), and the
Calculation Agent determines that such replacement index is calculated using
the same or substantially similar formula or method of calculation as used in
the calculation of the previously applicable Index, such replacement index
shall be the Index from the date that such replacement index comes into
effect; or(c)
    
    if a Successor Index has not been determined under paragraphs
(a) or (b) above (and there has been no designation of an Early Termination
Event pursuant to paragraph (e) below), the Calculation Agent shall ask five
leading independent dealers to state what the replacement index for the Index
should be. If between four and five responses are received, and of those four
or five responses, three or more leading independent dealers state the same
index, this index will be deemed the Successor Index. If three responses are
received, and two or more leading independent dealers state the same index,
this index will be deemed the Successor Index. If fewer than three responses
are received, the Calculation Agent will proceed to paragraph (d) below;(d)
    
    if no Successor Index has been determined under paragraphs
(a), (b) or (c) above on or before the fifth Index Business Day prior to the
next Affected Payment Date the Calculation Agent will determine an appropriate
alternative index for such Affected Payment Date, and such index will be
deemed the Successor Index;(e)
    
    if the Calculation Agent determines that there is no
appropriate alternative index, the Issuer and the Instrumentholders shall, in
conjunction with the Calculation Agent, determine an appropriate alternative
index. If the Issuer and the Instrumentholders, in conjunction with the
Calculation Agent, do not reach agreement on an appropriate alternative index
within a period of ten Business Days, then an Early Termination Event will be
deemed to have occurred and the Issuer will redeem the Instruments pursuant to
Condition 4.10.
 (iii)
    
    Rebasing of the Index: If the Calculation Agent determines that the
Index has been or will be rebased at any time, the Index as so rebased (the Rebased
Index) will be used for the purposes of determining each relevant Index Level from
the date of such rebasing; provided, however, that the Calculation Agent shall make
such adjustments as are made by the calculation agent (or any other party performing
the function of a calculation agent (whatever such partys title)) pursuant to the
terms and conditions of the Related Instrument to the levels of the Rebased Index so
that the Rebased Index levels reflect the same rate of
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inflation as the Index before it was rebased. Any such rebasing shall not affect
any prior payments made.(iv)
    
    Material Modification Prior to Interest Payment Date: If, on or prior to
the day that is five Business Days before an Interest Payment Date, Eurostat
announces that it will make a material change to the Index then the Calculation
Agent shall make any such adjustments to the Index consistent with adjustments made
to the Related Instrument .(v)
    
    Manifest Error in Publication: If, within thirty days of publication, the
Calculation Agent determines that Eurostat (or any successor entity which publishes
such index) has corrected the level of the Index to remedy a manifest error in its
original publication, the Calculation Agent will notify the parties of (A) that
correction, (B) the amount that is payable as a result of that correction and (C)
take such other action as it may deem necessary to give effect to such correction.
 4.10
    
    Redemption for Index ReasonsIf an Early Termination Event as described under Condition 4.9(ii)(e) is deemed to have
occurred, the Issuer will, upon giving not more than 60 nor less than 30 days notice to
the Instrumentholders in accordance with Condition 14, redeem all, but not some only, of
the Instruments at their principal amount together with interest accrued but unpaid up to
and including the date of redemption (in each case adjusted in accordance with Condition
4.8).
 5
    
    Redemption, Purchase and Options
 5.1
    
    Final RedemptionUnless previously redeemed, purchased and cancelled as provided below, this Instrument
will be redeemed at its Final Redemption Amount (which, unless otherwise provided, is its
nominal amount) on the Maturity Date specified in the relevant Final Terms provided,
however, that if this Instrument is a Perpetual Instrument it will only be redeemable and
repayable in accordance with the following provisions of this Condition 5.5.2
    
    Redemption for Taxation ReasonsIf, on the occasion of the next payment in respect of the Instruments, the Issuer [(or,
if the Guarantee were called, the Guarantor)]* satisfies the Trustee immediately before
the giving of the notice referred to below that it would be unable to make such payment
without having to pay additional amounts as described in Condition 7, and such
requirement to pay such additional amounts arises by reason of a change in the laws of
the United Kingdom or any political sub-division of the United Kingdom or taxing
authority in the United Kingdom or any political sub-division of the United Kingdom or in
the official interpretation or application of the laws of the United Kingdom or any
political sub-division of the United Kingdom or in any applicable double taxation treaty
or convention, which change becomes effective on or after the date on which agreement is
reached to issue the first Tranche of the Instruments, and such requirement cannot be
avoided by the Issuer [(or the Guarantor, as the case may be)]* taking reasonable
measures (such measures not involving any material additional payments by, or expense
for, the Issuer [(or the Guarantor, as the case may be)]*), the Issuer may, at its
option, on any Interest Payment Date or, if so specified in the relevant Final Terms, at
any time, having given not less than 30 nor more than 45 days notice to the
Instrumentholders in accordance with Condition 14, redeem all, but not some only, of the
Instruments at their Early Redemption Amount together with interest accrued to the date
of redemption, provided that the date fixed for redemption shall not be earlier than 90
days prior to the earliest date on which the Issuer [(or the Guarantor, as the case may
be)]* would be obliged to pay such additional amounts or make such withholding or
deduction, as the case may be, were a payment in respect of the Instruments [(or the
Guarantee, as the case may be)]* then due. Prior to the publication of any notice of
redemption pursuant to this Condition 5.2, the
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Issuer shall deliver to the Trustee a certificate signed by two Directors of the Issuer
[(or the Guarantor, as the case may be)]* stating that the requirement referred to above
cannot be avoided by the Issuer [(or the Guarantor, as the case may be)]* taking
reasonable measures available to it and the Trustee shall be entitled to accept such
certificate as sufficient evidence of the satisfaction of the condition precedent set out
above in which event it shall be conclusive and binding on Instrumentholders and
Couponholders.5.3
    
    PurchasesThe Issuer[, the Guarantor]* and any of [its/their] subsidiary undertakings may at any
time purchase Instruments (provided that all unmatured Receipts and Coupons and
unexchanged Talons appertaining to them are attached or surrendered with them) in the
open market or otherwise at any price.5.4
    
    Early Redemption
 5.4.1
    
    Zero Coupon Instruments:
 (a)
    
    The Early Redemption Amount payable in respect of any Zero
Coupon Instrument, the Early Redemption Amount of which is not linked to an
index and/or a formula, upon redemption of such Instrument pursuant to
Condition 5.2 or upon it becoming due and payable as provided in Condition 9
shall be the Amortised Face Amount (calculated as provided below) of such
Instrument unless otherwise specified in the relevant Final Terms.(b)
    
    Subject to the provisions of sub-paragraph (c) below, the
Amortised Face Amount of any such Instrument shall be the scheduled Final
Redemption Amount of such Instrument on the Maturity Date discounted at a rate
per annum (expressed as a percentage) equal to the Amortisation Yield (which,
if none is specified in the relevant Final Terms, shall be such rate as would
produce an Amortised Face Amount equal to the issue price of the Instruments
if they were discounted back to their issue price on the Issue Date)
compounded annually.(c)
    
    If the Early Redemption Amount payable in respect of any such
Instrument, upon its redemption pursuant to Condition 5.2 or, if applicable,
Condition 5.5 or 5.6 or upon it becoming due and payable as provided in
Condition 9, is not paid when due, the Early Redemption Amount due and payable
in respect of such Instrument shall be the Amortised Face Amount of such
Instrument as defined in sub-paragraph (b) above, except that such
sub-paragraph shall have effect as though the reference in that sub-paragraph
to the date on which the Instrument becomes due and payable was replaced by a
reference to the Relevant Date as defined in Condition 7. The calculation of
the Amortised Face Amount in accordance with this sub-paragraph shall continue
to be made (as well after as before judgment) until the Relevant Date, unless
the Relevant Date falls on or after the Maturity Date, in which case the
amount due and payable shall be the scheduled Final Redemption Amount of such
Instrument on the Maturity Date together with any interest that may accrue in
accordance with Condition 3.2.
  5.4.2
    
    Other InstrumentsThe Early Redemption Amount payable in respect of any Instrument (other than
Instruments described in Condition 5.4.1 above), upon redemption of such Instrument
pursuant to this Condition 5.4 or upon it becoming due and payable as provided in
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Condition 9, shall be the Final Redemption Amount unless otherwise specified in the
relevant Final Terms.
 5.5
    
    Redemption at the Option of the Issuer and Exercise of Issuers Options
 5.5.1
    
    Residual Holding Call OptionIf (i) Residual Holding Call Option is specified in the relevant Final Terms as
applicable, and (ii) if at any time the Residual Holding Percentage or more of the
aggregate nominal amount of Instruments originally issued shall have been redeemed
or purchased and cancelled, the Issuer shall have the option to redeem such
outstanding Instruments in whole, but not in part, at their Residual Holding
Redemption Amount. Unless otherwise specified in the relevant Final Terms, the
Residual Holding Redemption Amount will be calculated by the Calculation Agent by
discounting the outstanding nominal amount of the Instruments and the remaining
interest payments (if applicable) to the Maturity Date by a rate per annum
(expressed as a percentage to the nearest one hundred thousandth of a percentage
point (with halves being rounded up)) equal to the Benchmark Yield, being the yield
on the Benchmark Security at the close of business on the third Business Day prior
to the date fixed for such redemption, plus the Benchmark Spread. Where the
specified calculation is to be made for a period of less than one year, it shall be
calculated using the Benchmark Day Count Fraction. The Issuer will give not less
than 15 nor more than 30 days irrevocable notice to the Instrumentholders and the
Trustee of any such redemption pursuant to this Condition 5.5.1.5.5.2
    
    Call OptionIf Call Option is specified in the relevant Final Terms as applicable, the Issuer
may, on giving not less than 15 nor more than 30 days irrevocable notice to the
Instrumentholders (or such other notice period as may be specified in the relevant
Final Terms), redeem, or exercise any Issuers option in relation to, all or, if so
provided, some of such Instruments on any Optional Redemption Date or Option
Exercise Date, as the case may be. Any such redemption of Instruments shall be at
their Optional Redemption Amount together with interest accrued to the date fixed
for redemption. Any such redemption or exercise must relate to Instruments of a
nominal amount at least equal to the minimum nominal amount (if any) to be redeemed
specified hereon and no greater than the maximum nominal amount (if any) to be
redeemed specified on this Instrument.All Instruments in respect of which any such notice is given shall be redeemed, or
the Issuers option shall be exercised, on the date specified in such notice in
accordance with this Condition.In the case of a partial redemption or a partial exercise of an Issuers option,
the notice to Instrumentholders shall also contain the serial numbers of the
Instruments to be redeemed, which shall have been drawn in such place as the
Trustee may approve and in such manner as it deems appropriate, subject to
compliance with any applicable laws, listing authority and stock exchange
requirements.
 5.6
    
    Redemption at the Option of Instrumentholders and Exercise of Instrumentholders
OptionsIf Put Option is specified in the relevant Final Terms as applicable, the Issuer shall,
at the option of the holder of any such Instrument, upon the holder of such Instrument
giving not less than 15 nor more than 30 days notice to the Issuer (or such other notice
period as may be specified on this Instrument) redeem such Instrument on the Optional
Redemption Date(s) at its Optional Redemption Amount together with interest accrued to
the date fixed for redemption.
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To exercise such option or any other Instrumentholders option which may be set out on
this Instrument (which must be exercised on an Option Exercise Date) the holder must
deposit such Instrument with any Paying Agent at its specified office, together with a
duly completed option exercise notice (Exercise Notice) in the form obtainable from any
Paying Agent within the Instrumentholders Option Period (as specified in the relevant
Final Terms). No Instrument so deposited and option exercised may be withdrawn (except as
provided in the Agency Agreement) without the prior consent of the Issuer.5.7
    
    Partly Paid InstrumentsPartly Paid Instruments will be redeemed, whether at maturity, early redemption or
otherwise, in accordance with the provisions of this Condition and the provisions
specified in the relevant Final Terms.5.8
    
    Redemption by InstalmentsUnless previously redeemed, purchased and cancelled as provided in this Condition 5, each
Instrument which provides for Instalment Dates and Instalment Amounts will be partially
redeemed on each Instalment Date at the Instalment Amount specified in the relevant Final
Terms. The outstanding nominal amount of each such Instrument shall be reduced by the
Instalment Amount (or, if such Instalment Amount is calculated by reference to a
proportion of the nominal amount of such Instrument, such proportion) for all purposes
with effect from the related Instalment Date, unless payment of the Instalment Amount is
improperly withheld or refused on presentation of the related Receipt, in which case,
such amount shall remain outstanding until the Relevant Date relating to such Instalment
Amount.5.9
    
    CancellationAll Instruments redeemed pursuant to any of the foregoing provisions will be cancelled
forthwith (together with all unmatured Receipts and Coupons and unexchanged Talons
attached thereto). All Instruments purchased by or on behalf of the Issuer [, the
Guarantor]* or any of [its/their] subsidiary undertakings may, at the option of the
Issuer, be held by or may be surrendered together with all unmatured Receipts and Coupons
and all unexchanged Talons attached to them to a Paying Agent for cancellation, but may
not be resold and when held by the Issuer [, the Guarantor]* or any of [its/their]
respective subsidiary undertakings shall not entitle the holder to vote at any meeting of
Instrumentholders and shall not be deemed to be outstanding for the purposes of
calculating quorums at meetings of Instrumentholders or for the purposes of Condition 11.
 6
    
    Payments and Talons
 6.1
    
    PaymentsPayments of principal and interest in respect of Instruments will, subject as mentioned
below, be made against presentation and surrender of the relevant Receipts (in the case
of payments of Instalment Amounts other than on the due date for redemption and provided
that the Receipt is presented for payment together with its relative Instrument),
Instruments (in the case of all other payments of principal and, in the case of interest,
as specified in Condition 6.5.6) or Coupons (in the case of interest, save as specified
in Condition 6.5.6), as the case may be, at the specified office of any Paying Agent
outside the United States by a cheque payable in the currency in which such payment is
due drawn on, or, at the option of the holder, by transfer to an account denominated in
that currency with, a bank in the principal financial centre for that currency; provided
that in the case of euro, the transfer shall be in a city in which banks have access to
the TARGET System.
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6.2
    
    Payments in the United StatesNotwithstanding the above, if any Instruments are denominated in U.S. dollars, payments
in respect of them may be made at the specified office of any Paying Agent in New York
City in the same manner as specified above if (a) the Issuer shall have appointed Paying
Agents with specified offices outside the United States with the reasonable expectation
that such Paying Agents would be able to make payment of the amounts on the Instruments
in the manner provided above when due, (b) payment in full of such amounts at all such
offices is illegal or effectively precluded by exchange controls or other similar
restrictions on payment or receipt of such amounts and (c) such payment is then permitted
by United States law, without involving, in the opinion of the Issuer, any adverse tax
consequence to the Issuer.6.3
    
    Payments subject to Fiscal Laws etc.All payments are subject in all cases to any applicable fiscal or other laws, regulations
and directives, but without prejudice to the provisions of Condition 7. No commission or
expenses shall be charged to the Instrumentholders or Couponholders in respect of such
payments.6.4
    
    Appointment of AgentsThe Issuing and Paying Agent, the Paying Agents and the Calculation Agent initially
appointed by the Issuer [and the Guarantor]* and their respective specified offices are
listed below. The Issuing and Paying Agent, the Paying Agents and the Calculation Agent
act solely as agents of the Issuer [and the Guarantor]* and do not assume any obligation
or relationship of agency or trust for or with any holder. The Issuer [and the
Guarantor]* reserve[s] the right at any time with the approval of the Trustee to vary or
terminate the appointment of the Issuing and Paying Agent, any other Paying Agent or the
Calculation Agent and to appoint additional or other Paying Agents, provided that the
Issuer shall at all times maintain (i) an Issuing and Paying Agent, (ii) a Paying Agent
having a specified office in a continental European city, (iii) a Calculation Agent where
the Conditions so require one, (iv) so long as the Instruments are listed on any stock
exchange or admitted to listing by any other relevant authority, a Paying Agent having a
specified office in such place as may be required by the rules and regulations of the
relevant stock exchange or other relevant authority and (v) to the extent that the Issuer
is able to do so and not provided for by the foregoing provisions of this Condition 6.4,
a Paying Agent with a specified office in a European Union Member State that will not be
obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or
any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27
November 2000 or any law implementing or complying with, or introduced in order to
conform to, such Directive. As used in these Conditions, the terms Issuing and Paying
Agent, Calculation Agent, and Paying Agent include any additional or replacement
Issuing and Paying Agent, Calculation Agent or Paying Agent appointed under this
Condition.In addition, the Issuer [and the Guarantor]* shall forthwith appoint a Paying Agent in
New York City in respect of any Instruments denominated in U.S. dollars in the
circumstances described in Condition 6.2.Notice of any such change or any change of any specified office shall promptly be given
to the Instrumentholders in accordance with Condition 14.6.5
    
    Unmatured Coupons and Receipts and unexchanged Talons:
 6.5.1
    
    Unless the Instrument provides that the relevant Coupons are to become
void upon the due date for redemption of those Instruments, Instruments should be
surrendered for payment together with all unmatured Coupons (if any) appertaining to
them, failing which an amount equal to the face value of each missing unmatured
Coupon (or, in the case of payment not being made in full, that proportion of the
amount of such missing unmatured Coupon that the sum of principal so paid bears to
the total principal due) will be deducted from the Final
 43




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Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the
case may be, due for payment. Any amount so deducted shall be paid in the manner
mentioned above against surrender of such missing Coupon within a period of 10
years from the Relevant Date for the payment of such principal (whether or not such
Coupon has become void pursuant to Condition 8).6.5.2
    
    If the relevant Instrument so provides, upon the due date for redemption
of any Instrument, unmatured Coupons relating to such Instrument (whether or not
attached) shall become void and no payment shall be made in respect of them.6.5.3
    
    If the relevant Instrument so provides, upon the due date for redemption
of any Instrument, any unexchanged Talon relating to such Instrument (whether or not
attached) shall become void and no Coupon shall be delivered in respect of such
Talon.6.5.4
    
    Upon the due date for redemption of any Instrument which is redeemable
in instalments, all Receipts relating to such Instrument having an Instalment Date
falling on or after such due date (whether or not attached) shall become void and no
payment shall be made in respect of them.6.5.5
    
    Where any Instrument which provides that the relevant Coupons are to
become void upon the due date for redemption of those Instruments is presented for
redemption without all unmatured Coupons and any unexchanged Talon relating to it,
and where any Instrument is presented for redemption without any unexchanged Talon
relating to it, redemption shall be made only against the provision of such
indemnity as the Issuer may require.6.5.6
    
    If the due date for redemption of any Instrument is not a due date for
payment of interest, interest accrued from the preceding due date for payment of
interest or the Interest Commencement Date, as the case may be, shall only be
payable against presentation (and surrender if appropriate) of the relevant
Instrument. Interest accrued on an Instrument that only bears interest after its
Maturity Date shall be payable on redemption of that Instrument against presentation
of that Instrument.
 6.6
    
    Non-business daysIf any date for payment in respect of any Instrument, Receipt or Coupon is not a business
day, the holder shall not be entitled to payment until the next following business day
nor to any interest or other sum in respect of such postponed payment. In this paragraph,
business day means a day (other than a Saturday or a Sunday) on which banks and foreign
exchange markets are open for business in the relevant place of presentation, in such
jurisdictions as shall be specified as Financial Centres in the relevant Final Terms
and:
 (i)
    
    (in the case of a payment in a currency other than euro) where payment is
to be made by transfer to an account maintained with a bank in the relevant
currency, on which foreign exchange transactions may be carried on in the relevant
currency in the principal financial centre of the country of such currency; or(ii)
    
    (in the case of a payment in euro), which is a TARGET Business Day.
 6.7
    
    TalonsOn or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet
issued in respect of any Instrument, the Talon forming part of such Coupon sheet may be
surrendered at the specified office of the Issuing and Paying Agent in exchange for a
further Coupon sheet (but excluding any Coupons which may have become void pursuant to
Condition 8).
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7
    
    TaxationAll payments of principal and interest by or on behalf of the Issuer [or the Guarantor]* in
respect of the Instruments, the Receipts and the Coupons [or under the Guarantee]* will be made
without withholding or deduction for or on account of, any present or future taxes or duties of
whatever nature imposed or levied by or on behalf of the United Kingdom or any political
sub-division of the United Kingdom or any authority in or of the United Kingdom having power to
tax, unless such withholding or deduction is compelled by law. In that event, the Issuer [or,
as the case may be, the Guarantor]* will pay such additional amounts of principal and interest
as will result in the payment to the Instrumentholders, Receiptholders or, as the case may be,
the Couponholders of the amounts which would otherwise have been receivable in respect of the
Instruments, Receipts or Coupons had no withholding or deduction been made, except that no such
additional amounts shall be payable in respect of any Instrument, Receipt or Coupon presented
for payment:
 (a)
    
    by or on behalf of a person who is liable to such taxes or duties in respect of such
Instrument, Receipt or Coupon by reason of his having some connection with the United
Kingdom other than the mere holding of such Instrument, Receipt or Coupon; or(b)
    
    by or on behalf of a person who would not be liable or subject to such deduction or
withholding by making a declaration of non-residence or other claim for exemption to a tax
authority; or(c)
    
    more than 30 days after the Relevant Date except to the extent that the holder would
have been entitled to such additional amounts on presenting the same for payment on such
thirtieth day; or(d)
    
    where such withholding or deduction is imposed on a payment to an individual and is
required to be made pursuant to European Council Directive 2003/48/EC or any other
Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November
2000 or any law implementing or complying with, or introduced in order to conform to, such
Directive; or(e)
    
    by or on behalf of a holder who would have been able to avoid such withholding or
deduction (i) by presenting the relevant Instrument, Receipt or Coupon to another Paying
Agent in a Member State of the European Union; or (ii) by satisfying any statutory or
procedural requirements (including, without limitation, the provision of information).
 As used in these Conditions, Relevant Date in respect of any Instrument, Receipt or Coupon
means the date on which payment in respect of it first becomes due or (if any amount of the
money payable is improperly withheld or refused) the date on which payment in full of the
amount outstanding is made or (if earlier) the date on which notice is duly given to the
Instrumentholders in accordance with Condition 14 that, upon further presentation of the
Instrument, Receipt or Coupon being made in accordance with the Conditions, such payment will
be made, provided that payment is in fact made upon such presentation. References in these
Conditions to (i) principal shall be deemed to include any premium payable in respect of the
Instruments, all Instalment Amounts, Final Redemption Amounts, Early Redemption Amounts,
Optional Redemption Amounts, Amortised Face Amounts and all other amounts in the nature of
principal payable pursuant to Condition 5 or any amendment or supplement to it, (ii) interest
shall be deemed to include all Interest Amounts and all other amounts payable pursuant to
Condition 3 or any amendment or supplement to it or pursuant to Condition 6 or any amendment or
supplement to it and (iii) principal and/or interest shall be deemed to include any
additional amounts which may be payable under this Condition or any undertaking given in
addition to or in substitution for it under the Trust Deed.8
    
    PrescriptionInstruments, Receipts and Coupons (which, for this purpose, shall not include Talons) shall be
prescribed and become void unless presented for payment within 10 years (in the case of
principal) or five years (in the case of interest) from the appropriate Relevant Date in
respect of them.
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9
    
    Events of DefaultIf any of the following events (each an Event of Default) occurs and is continuing, the
Trustee at its discretion may, and if so requested by the holders of at least one-quarter in
nominal amount of the Instruments then outstanding or if so directed by an Extraordinary
Resolution shall, give notice to the Issuer at its registered office that the Instruments are,
and they shall accordingly immediately become due and repayable at their Redemption Amount
together with accrued interest (if any) to the date of payment:
 (a)
    
    Non-Payment: there is default for more than 30 days in the payment of any principal
or interest due in respect of the Instruments; or(b)
    
    Breach of Other Obligations: there is default in the performance or observance by the
Issuer [or the Guarantor]* of any other obligation or provision under the Trust Deed or
the Instruments (other than any obligation for the payment of any principal or interest in
respect of the Instruments) which default is incapable of remedy or, if in the opinion of
the Trustee capable of remedy, is not remedied within 90 days after notice of such default
shall have been given to the Issuer [or the Guarantor]* by the Trustee; or(c)
    
    Winding-up: a resolution is passed, or a final order of a court in the United Kingdom
is made and, where possible, not discharged or stayed within a period of 90 days, that the
Issuer [or the Guarantor]* be wound up or dissolved; or(d)
    
    Enforcement Proceedings: attachment is made of the whole or substantially the whole
of the assets or undertaking of the Issuer [or the Guarantor]* and such attachment is not
released or cancelled within 90 days or an encumbrancer takes possession or an
administrative or other receiver or similar officer is appointed of the whole or
substantially the whole of the assets or undertaking of the Issuer [or the Guarantor]* or
an administration or similar order is made in relation to the Issuer [or the Guarantor]*
and such taking of possession, appointment or order is not released, discharged or
cancelled within 90 days; or(e)
    
    Insolvency: the Issuer [or the Guarantor]* ceases to carry on all or substantially
all of its business or is unable to pay its debts within the meaning of Section 123(1)(e)
or Section 123(2) of the Insolvency Act 1986; or(f)
    
    Bankruptcy: the Issuer [or the Guarantor]* is adjudged bankrupt or insolvent by a
court of competent jurisdiction in its country of incorporation,
 provided that in the case of paragraph (b) the Trustee shall have certified that in its opinion
such event is materially prejudicial to the interests of the Instrumentholders.Any such notice by the Trustee to the Issuer shall specify the serial number(s) of the
Instrument(s) concerned.10
    
    EnforcementThe Trustee may, at its discretion and without further notice, institute such proceedings
against the Issuer as it may think fit to enforce any obligation, condition or provision
binding on the Issuer under the Instruments or under the Trust Deed, but shall not be bound to
do so unless:
 (a)
    
    it has been so directed by an Extraordinary Resolution or in writing by the holders
of at least one-quarter of the principal amount of the Instruments outstanding; and(b)
    
    it has been indemnified to its satisfaction.
 No Instrumentholder, Receiptholder or Couponholder shall be entitled to institute proceedings
directly against the Issuer unless the Trustee, having become bound to proceed as specified
above, fails to do so within a reasonable time and such failure is continuing.
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11
    
    Meetings of Instrumentholders, Modifications and Substitution
 11.1
    
    Meetings of InstrumentholdersThe Trust Deed contains provisions for convening meetings of Instrumentholders to
consider any matter affecting their interests, including the sanctioning by Extraordinary
Resolution (as defined in the Trust Deed) of a modification of any of these Conditions or
any provisions of the Trust Deed. An Extraordinary Resolution duly passed at any such
meeting shall be binding on Instrumentholders (whether or not they were present at the
meeting at which such resolution was passed) and on all Couponholders, except that any
Extraordinary Resolution proposed, inter alia, (i) to amend the dates of maturity or
redemption of the Instruments, any Instalment Date or any date for payment of interest on
the Instruments, (ii) to reduce or cancel the nominal amount of, or any Instalment Amount
of, or any premium payable on redemption of, the Instruments, (iii) to reduce the rate or
rates of interest in respect of the Instruments or to vary the method or basis of
calculating the rate or rates or amount of interest or the basis for calculating any
Interest Amount in respect of the Instruments, (iv) if a Minimum and/or a Maximum Rate of
Interest is shown on the face of the Instrument, to reduce any such Minimum and/or
Maximum Rate of Interest, (v) to vary any method of calculating the Final Redemption
Amount, the Early Redemption Amount or the Optional Redemption Amount, (vi) to take any
steps that as specified in this Instrument may only be taken following approval by an
Extraordinary Resolution to which the special quorum provisions apply [,or] (vii) to
modify the provisions concerning the quorum required at any meeting of Instrumentholders
or the majority required to pass the Extraordinary Resolution [or (viii) to modify or
cancel the Guarantee]* will only be binding if passed at a meeting of the
Instrumentholders (or at any adjournment of that meeting) at which a special quorum (as
defined in the Trust Deed) is present. A resolution in writing signed by the holders of
not less than 95 per cent. in nominal amount of the Instruments will be binding on all
Instrumentholders and Couponholders. The Issuer may convene a meeting of
Instrumentholders jointly with the holders of all other instruments issued pursuant to
the Agency Agreement and not forming a single series with the Instruments to which
meeting the provisions referred to above apply as if all such instruments formed part of
the same series, provided that the proposals to be considered at such meeting affect the
rights of the holders of the instruments of each series attending the meeting in
identical respects (save insofar as the Conditions applicable to each such series are not
identical).11.2
    
    Modification of the Trust DeedThe Trustee may agree, without the consent of the Instrumentholders or Couponholders, to
(i) any modification of any of the provisions of the Trust Deed that is of a formal,
minor or technical nature or is made to correct a manifest error, and (ii) any other
modification (except as mentioned in the Trust Deed), and any waiver or authorisation of
any breach or proposed breach, of any of the provisions of the Trust Deed that is in the
opinion of the Trustee not materially prejudicial to the interests of the
Instrumentholders. Any such modification, authorisation or waiver shall be binding on the
Instrumentholders and the Couponholders and, if the Trustee so requires, such
modification shall be notified to the Instrumentholders as soon as practicable.11.3
    
    SubstitutionThe Trust Deed contains provisions permitting the Trustee to agree, subject to such
amendment of the Trust Deed and such other conditions as the Trustee may require, but
without the consent of the Instrumentholders or the Couponholders, to the substitution of
[a Successor in Business (as defined in the Trust Deed) or any subsidiary/any other
company]± in place of the Issuer or of any previous substituted company,
as principal debtor under the Trust Deed and the Instruments [and the substitution of the
Guarantors Successor in Business (as defined in the Trust Deed) or any
 
 ±
    
    Where National Grid Gas plc is the Issuer, delete the
text any other company. Where National Grid Gas Finance (No 1) is the Issuer,
delete the text a Successor in Business (as defined in the Trust Deed) or any
subsidiary. 47




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subsidiary of the Guarantor in place of the Guarantor]*. In the case of such a
substitution the Trustee may agree, without the consent of the Instrumentholders or the
Couponholders, to a change of the law governing the Instruments, the Receipts, the
Coupons, the Talons and/or the Trust Deed provided that such change would not in the
opinion of the Trustee be materially prejudicial to the interests of the
Instrumentholders.11.4
    
    Entitlement of the TrusteeIn connection with the exercise of its functions (including but not limited to those
referred to in this Condition) the Trustee shall have regard to the interests of the
Instrumentholders as a class and shall not have regard to the consequences of such
exercise for individual Instrumentholders or Couponholders and the Trustee shall not be
entitled to require, nor shall any Instrumentholder or Couponholder be entitled to claim,
from the Issuer [or the Guarantor]* any indemnification or payment in respect of any tax
consequence of any such exercise upon individual Instrumentholders or Couponholders.
 12
    
    Replacement of Instruments, Receipts, Coupons and TalonsIf an Instrument, Receipt, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it
may be replaced, subject to applicable laws, listing authority and stock exchange regulations,
at the specified office of such other Paying Agent as may from time to time be designated by
the Issuer[ or the Guarantor]* for the purpose and notice of whose designation is given to
Instrumentholders in accordance with Condition 14 on payment by the claimant of the fees and
costs incurred in connection with that replacement and on such terms as to evidence, security
and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed
Instrument, Receipt, Coupon or Talon is subsequently presented for payment or, as the case may
be, for exchange for further Coupons, there shall be paid to the Issuer[ or the Guarantor]* on
demand the amount payable by the Issuer[ or the Guarantor]* in respect of such Instruments,
Receipts, Coupons or further Coupons) and otherwise as the Issuer[ or the Guarantor]* may
require. Mutilated or defaced Instruments, Receipts, Coupons or Talons must be surrendered
before replacements will be issued.13
    
    Further IssuesThe Issuer may from time to time without the consent of the Instrumentholders or Couponholders
create and issue further instruments having the same terms and conditions as the Instruments
and so that such further issue shall be consolidated and form a single series with such
Instruments. References in these Conditions to the Instruments include (unless the context
requires otherwise) any other instruments issued pursuant to this Condition and forming a
single series with the Instruments. Any such further instruments forming a single series with
Instruments constituted by the Trust Deed or any deed supplemental to it shall, and any other
instruments may (with the consent of the Trustee), be constituted by the Trust Deed.The Trust Deed contains provisions for convening a single meeting of the Instrumentholders and
the holders of instruments of other series if the Trustee so decides.14
    
    NoticesAll notices to the Instrumentholders will be valid if published in a daily English language
newspaper of general circulation in the United Kingdom (which is expected to be the Financial
Times). If in the opinion of the Trustee any such publication is not practicable, notice shall
be validly given if published in another leading daily English language newspaper with general
circulation in Europe. Any such notice shall be deemed to have been given on the date of such
publication or, if published more than once or on different dates, on the first date on which
publication is made, as provided above.
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Couponholders shall be deemed for all purposes to have notice of the contents of any notice
given to the holders of Instruments in accordance with this Condition.15
    
    Indemnification of TrusteeThe Trust Deed contains provisions for the indemnification of the Trustee and for its relief
from responsibility, including provisions relieving it from any obligation to take proceedings
to enforce repayment unless indemnified to its satisfaction. The Trustee is entitled to enter
into business transactions with the Issuer[, the Guarantor]* or any of [its/their] subsidiary
undertakings, parent undertakings, joint ventures or associated undertakings without accounting
for any profit resulting from these transactions and to act as trustee for the holders of any
other securities issued by the Issuer or any of its subsidiary undertakings, parent
undertakings, joint ventures or associated undertakings.16
    
    Contracts (Rights of Third Parties) Act 1999No person shall have any right to enforce any term or condition of the Instruments under the
Contracts (Rights of Third Parties) Act 1999.17
    
    Governing Law and Jurisdiction
 (a)
    
    The Instruments and any non-contractual obligations arising out of or in connection
with them shall be governed by, and construed in accordance with, English law.(b)
    
    The courts of England have exclusive jurisdiction to settle any dispute (a
Dispute), arising from or connected with the Instruments.(c)
    
    [Each of the]* /[The] Issuer[, and the Guarantor]* agrees that the courts of England
are the most appropriate and convenient courts to settle any Dispute and, accordingly,
that it will not argue to the contrary.(d)
    
    Nothing in this Condition 17 prevents the Trustee or any Instrumentholder from taking
proceedings relating to a Dispute (Proceedings) in any other courts with jurisdiction.
To the extent allowed by law, the Trustee or Instrumentholders may take concurrent
Proceedings in any number of jurisdictions.
 49




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SUMMARY OF PROVISIONS
RELATING TO THE INSTRUMENTS WHILE IN GLOBAL FORM
 Initial Issue of InstrumentsUpon the initial deposit of a Global Instrument with a common depositary for Euroclear and
Clearstream, Luxembourg (the Common Depositary), Euroclear or Clearstream, Luxembourg will
credit each subscriber with a nominal amount of Instruments equal to the nominal amount of
those Instruments for which it has subscribed and paid.If the Global Instruments are stated in the applicable Final Terms to be issued in NGN form,
they are intended to be eligible collateral for Eurosystem monetary policy and the Global
Instruments will be delivered on or prior to the original issue date of the Tranche to a Common
Safekeeper. Depositing the Global Instruments with the Common Safekeeper does not necessarily
mean that the Instruments will be recognised as eligible collateral for Eurosystem monetary
policy and intra-day credit operations by the Eurosystem either upon issue, or at any or all
times during their life. Such recognition will depend upon satisfaction of the Eurosystem
eligibility criteria.Global Instruments which are issued in CGN form may be delivered on or prior to the original
issue date of the Tranche to a Common Depositary.If the Global Instrument is a CGN, upon the initial deposit of a Global Instrument with a
common depositary for Euroclear and Clearstream, Luxembourg (the Common Depositary),
Euroclear or Clearstream, Luxembourg will credit each subscriber with a nominal amount of
Instruments equal to the nominal amount thereof for which it has subscribed and paid. If the
Global Instrument is an NGN, the nominal amount of the Instruments shall be the aggregate
amount from time to time entered in the records of Euroclear or Clearstream, Luxembourg. The
records of such clearing system shall be conclusive evidence of the nominal amount of
Instruments represented by the Global Instrument and a statement issued by such clearing system
at any time shall be conclusive evidence of the records of the relevant clearing system at that
time.Instruments which are initially deposited with the Common Depositary may also be credited to
the accounts of subscribers with (if indicated in the relevant Final Terms) other clearing
systems through direct or indirect accounts with Euroclear and Clearstream, Luxembourg held by
such other clearing systems. Conversely, Instruments that are initially deposited with another
clearing system may similarly be credited to the accounts of subscribers with Euroclear,
Clearstream, Luxembourg or other clearing systems.Relationship of Accountholders with Clearing SystemsEach of the persons shown in the records of Euroclear, Clearstream, Luxembourg or any other
clearing system as the holder of an Instrument represented by a Global Instrument must look
solely to Euroclear, Clearstream, Luxembourg or such clearing system (as the case may be) for
his share of each payment made by the relevant Issuer to the bearer of such Global Instrument
and in relation to all other rights arising under the Global Instruments, subject to and in
accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg or
such clearing systems (as the case may be). Such persons shall have no claim directly against
the relevant Issuer in respect of payments. due on the Instruments for so long as the
Instruments are represented by such Global Instrument and such obligations of such Issuer will
be discharged by payment to the bearer of such Global Instrument in respect of each amount so
paid.The Trustee may call for any certificate or other document to be issued by Euroclear,
Clearstream, Luxembourg or any other clearing system as to the principal amount of Instruments
represented by a Global Instrument standing to the account of any person. Any such certificate
or other document shall, in the absence of manifest error, be conclusive and binding for all
purposes. Any such certificate or other
 50




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document may comprise any form of statement or print out of electronic records provided by the
relevant clearing system (including Euroclears EUCLID or Clearstream, Luxembourgs Cedcom
system) in accordance with its usual procedures and in which the holder of a particular
principal amount of any other clearing system is clearly identified together with the amount of
such holding. The Trustee shall not be liable to any person by reason of having accepted as
valid or not having rejected any certificate or other document to such effect purporting to be
issued by Euroclear, Clearstream, Luxembourg or any other clearing system and subsequently
found to be forged or not authentic.
 Exchange
1 Temporary Global InstrumentsEach temporary Global Instrument will be exchangeable, free of charge to the holder, on or
after its Exchange Date:
 (i)
    
    if the relevant Final Terms indicates that such Global Instrument is issued in
compliance with the C Rules or in a transaction to which TEFRA is not applicable (as to
which, see Summary of the Programme  Selling Restrictions), in whole, but not in part,
for the Definitive Instruments defined and described below; and(ii)
    
    otherwise, in whole or in part upon certification as to non-U.S. beneficial ownership
in the form set out in the Agency Agreement for interests in a permanent Global Instrument
or, if so provided in the relevant Final Terms, for Definitive Instruments.
 2
    
    Permanent Global InstrumentsEach permanent Global Instrument will be exchangeable, free of charge to the holder, on or
after its Exchange Date in whole but not, except as provided under Partial Exchange of
Permanent Global Instruments, in part for Definitive Instruments if the permanent Global
Instrument is held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing
system (an Alternative Clearing System) and any such clearing system is closed for business
for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise)
or announces an intention permanently to cease business or in fact does so.In the event that a Global Instrument is exchanged for Definitive Instruments, such Definitive
Instruments shall be issued in Specified Denomination(s) only. An Instrumentholder who holds a
principal amount of less than the minimum Specified Denomination will not receive a Definitive
Instrument in respect of such holding and would need to purchase a principal amount of
Instruments such that it holds an amount equal to one or more Specified Denominations.3
    
    Partial Exchange of Permanent Global InstrumentsFor so long as a permanent Global Instrument is held on behalf of a clearing system and the
rules of that clearing system permit, such permanent Global Instrument will be exchangeable in
part on one or more occasions for Definitive Instruments (i) if principal in respect of any
Instruments is not paid when due or (ii) if so provided in, and in accordance with, the
Conditions (which will be set out in the relevant Final Terms) relating to Partly Paid
Instruments.4
    
    Delivery of InstrumentsIf the Global Instrument is a CGN, on or after any due date for exchange the holder of a Global
Instrument may surrender such Global Instrument or, in the case of a partial exchange, present
it for endorsement to or to the order of the Issuing and Paying Agent. In exchange for any
Global Instrument, or the part of that Global Instrument to be exchanged, the relevant Issuer
will (i) in the case of a temporary Global Instrument exchangeable for a permanent Global
Instrument, deliver, or procure the
 51




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delivery of, a permanent Global Instrument in an aggregate nominal amount equal to that of the
whole or that part of a temporary Global Instrument that is being exchanged or, in the case of
a subsequent exchange, endorse, or procure the endorsement of, a permanent Global Instrument to
reflect such exchange or (ii) in the case of a Global Instrument exchangeable for Definitive
Instruments, deliver, or procure the delivery of, an equal aggregate nominal amount of duly
executed and authenticated Definitive Instruments or, if the Global Instrument is an NGN, the
relevant Issuer will procure that details of such exchange be entered pro rata in the records
of the relevant clearing system. In this Prospectus, Definitive Instruments means, in
relation to any Global Instrument, the Definitive Instruments for which such Global Instrument
may be exchanged (if appropriate, having attached to them all Coupons and Receipts in respect
of interest or Instalment Amounts that have not already been paid on the Global Instrument and
a Talon). Definitive Instruments will be security printed in accordance with any applicable
legal and stock exchange requirements in or substantially in the form set out in the Schedules
to the Trust Deed. On exchange in full of each permanent Global Instrument, the relevant Issuer
will, if the holder so requests, procure that it is cancelled and returned to the holder
together with the relevant Definitive Instruments.5
    
    Exchange DateExchange Date means, in relation to a temporary Global Instrument, the day falling after the
expiry of 40 days after its issue date and, in relation to a permanent Global Instrument, a day
falling not less than 60 days, or in the case of failure to pay principal in respect of any
Instruments when due 30 days, after that on which the notice requiring exchange is given and on
which banks are open for business in the city in which the specified office of the Issuing and
Paying Agent is located and in the city in which the relevant clearing system is located.Amendment to ConditionsThe temporary Global Instruments and permanent Global Instruments contain provisions that apply
to the Instruments which they represent, some of which modify the effect of the terms and
conditions of the Instruments set out in this Prospectus. The following is a summary of certain
of those provisions:1
    
    PaymentsNo payment falling due after the Exchange Date will be made on any Global Instrument unless
exchange for an interest in a permanent Global Instrument or for Definitive Instruments is
improperly withheld or refused. Payments on any temporary Global Instrument issued in
compliance with the D Rules before the Exchange Date will only be made against presentation of
certification as to non-U.S. beneficial ownership in the form set out in the Agency Agreement.
All payments in respect of Instruments represented by a Global Instrument in CGN form will be
made against presentation for endorsement and, if no further payment falls to be made in
respect of the Instruments, surrender of that Global Instrument to or to the order of the
Issuing and Paying Agent or such other Paying Agent as shall have been notified to the
Instrumentholders for such purpose. If the Global Instrument is a CGN, a record of each payment
so made will be endorsed on each Global Instrument, which endorsement will be prima facie
evidence that such payment has been made in respect of the Instruments. Condition 6.4(v) and
Condition 7(e) will apply to the Definitive Instruments only. If the Global Instrument is an
NGN, the relevant Issuer shall procure that details of each such payment shall be entered pro
rata in the records of the relevant clearing system and in the case of payments of principal,
the nominal amount of the Instruments recorded in the records of the relevant clearing system
and represented by the Global Instrument will be reduced accordingly. Payments under the NGN
will be made to its holder. Each payment so made will discharge the relevant Issuers
obligations in respect thereof. Any failure to make the entries in the records of the relevant
clearing system shall not affect such discharge.
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The records of the relevant clearing systems which reflect the amount of the Instrumentholders
interests in the instruments shall be conclusive evidence of the nominal amount of Instruments
represented by the Global Instruments.2
    
    PrescriptionClaims against the relevant Issuer in respect of Instruments which are represented by a
permanent Global Instrument will become void unless it is presented for payment within a period
of 10 years (in the case of principal) and five years (in the case of interest) from the
appropriate Relevant Date (as defined in Condition 7).3
    
    MeetingsThe holder of a permanent Global Instrument shall (unless such permanent Global Instrument
represents only one Instrument) be treated as being two persons for the purposes of any quorum
requirements of a meeting of Instrumentholders and, at any such meeting, as having one vote in
respect of each integral currency unit of the Specified Currency of the Instruments for which
it may be exchanged in accordance with its terms.4
    
    CancellationCancellation of any Instrument represented by a permanent Global Instrument which is required
by the Conditions to be cancelled (other than upon its redemption) will be effected by
reduction in the nominal amount of the relevant permanent Global Instrument.5
    
    PurchaseInstruments represented by a permanent Global Instrument may only be purchased by the relevant
Issuer or any of its subsidiary undertakings if they are purchased together with the rights to
receive all future payments of interest and Instalment Amounts (if any) on those Instruments.6
    
    Issuers OptionAny option of the relevant Issuer provided for in the Conditions of any Instruments while such
Instruments are represented by a permanent Global Instrument shall be exercised by such Issuer
giving notice to the Instrumentholders within the time limits set out in and containing the
information required by the Conditions, except that the notice shall not be required to contain
the serial numbers of Instruments drawn in the case of a partial exercise of an option and
accordingly no drawing of Instruments shall be required. In the event that any option of such
Issuer is exercised in respect of some but not all of the Instruments of any Series, the rights
of accountholders with a clearing system or Approved Intermediary in respect of the Instruments
will be governed by the standard procedures of Euroclear, Clearstream, Luxembourg (to be
reflected in the records of Euroclear and Clearstream, Luxembourg either as a pool factor or as
a reduction in nominal amount, at their discretion) or any other clearing system (as the case
may be).7
    
    Instrumentholders OptionsAny option of the Instrumentholders provided for in the Conditions of any Instruments while
such Instruments are represented by a permanent Global Instrument may be exercised by the
holder of the permanent Global Instrument giving notice to the Issuing and Paying Agent within
the time limits relating to the deposit of Instruments with a Paying Agent set out in the
Conditions substantially in the form of the notice available from any Paying Agent, except that
the notice shall not be required to contain the serial numbers of the Instruments in respect of
which the option has been exercised, and stating the nominal amount of Instruments in respect
of which the option is exercised and at the same time, where the
 53




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##### 



permanent Global Instrument is a CGN, presenting the permanent Global Instrument for notation.
Where the Global Instrument is an NGN, the relevant Issuer shall procure that details of such
exercise shall be entered pro ratain the records of the relevant clearing system and the
nominal amount of the Instruments recorded in those records will be reduced accordingly.8
    
    NGN nominal amountWhere the Global Instrument is an NGN, the relevant Issuer shall procure that any exchange,
payment, cancellation, exercise of any option or any right under the Instruments, as the case
may be, in addition to the circumstances set out above shall be entered in the records of the
relevant clearing systems and upon any such entry being made, in respect of payments of
principal, the nominal amount of the Instruments represented by such Global Instrument shall be
adjusted accordingly.9
    
    Trustees PowersIn considering the interests of Instrumentholders while any Global Instrument is held on behalf
of a clearing system, the Trustee may have regard to any information provided to it by such
clearing system or its operator as to the identity (either individually or by category) of its
accountholders with entitlements to such Global Instrument and may consider such interests as
if such accountholders were the holders of the Instruments represented by such Global
Instrument.10
    
    Events of DefaultEach Global Instrument provides that the Trustee, at its discretion, may, and if so requested
by holders of at least one-quarter in nominal amount of the Instruments then outstanding or if
so directed by an Extraordinary Resolution, shall cause such Global Instrument, or a portion of
it, to become due and repayable in the circumstances described in Condition 9 by stating in the
notice to the relevant Issuer the principal amount of such Global Instrument which is becoming
due and repayable. If principal in respect of any Instrument is not paid when due, only the
Trustee may enforce the rights of the Instrumentholders against such Issuer under the terms of
the Trust Deed unless the Trustee, having become bound to proceed, fails to do so within a
reasonable time and such failure is continuing.11
    
    NoticesSo long as any Instruments are represented by a Global Instrument and such Global Instrument is
held on behalf of a clearing system, notices to the holders of Instruments of that Series may
be given by delivery of the relevant notice to that clearing system for communication by it to
entitled accountholders in substitution for publication as required by the Conditions or by
delivery of the relevant notice to the holder of the Global Instrument.12
    
    Partly Paid InstrumentsThe provisions relating to Partly Paid Instruments are not set out in this Prospectus, but will
be contained in the relevant Final Terms and so in the Global Instruments. While any
instalments of the subscription moneys due from the holder of Partly Paid Instruments are
overdue, no interest in a Global Instrument representing such Instruments may be exchanged for
an interest in a permanent Global Instrument or for Definitive Instruments (as the case may
be). If any Instrumentholder fails to pay any instalment due on any Partly Paid Instruments
within the time specified, the relevant Issuer may forfeit such Instruments and shall have no
further obligation to their holder in respect of them.
 54




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USE OF PROCEEDS
 The net proceeds of the issue of each Series of Instruments will be used by the relevant Issuer
for its general corporate purposes. If in respect of any particular issue of Instruments, there
is a particular identified use of proceeds, this will be stated in the relevant Final Terms.
 55




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##### 



DESCRIPTION OF NATIONAL GRID GAS PLC
 Incorporation and Businesses
  Business of National Grid Gas plc
  (i)
    
    owning and operating the high pressure gas national transmission system (NTS) in
Great Britain, comprising approximately 4,326 miles (7,400 km) of high pressure pipe and
26 compressor stations, connecting to eight distribution networks and to third party
independent systems for onward transportation of gas to end consumers as well as
interconnectors;(ii)
    
    operating four gas distribution networks (DNs), comprising approximately 82,000
miles (131,200 km) of distribution pipeline, conveying gas on behalf of approximately 33
active gas shippers to around 10.8 million customers, domestic and industrial/commercial
users in central, eastern and north west England, as well as a large part of London and
the northern Home Countries;(iii)
    
    providing regulated gas metering and meter reading services in Great Britain; and(iv)
    
    owning and operating liquefied natural gas (LNG) storage facilities.
 Licences
  GB system
   56




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##### 



Subsidiaries
  Country of
    
    National Grid Gass ShareholdingName
    
    Incorporation
    
    (either direct or indirect)British Transco Capital Inc.
    
    U.S.A. (Delaware)
    
    100 %British Transco Finance (No. 1) Limited
    
    Cayman Islands
    
    100 %British Transco Finance (No. 2) Limited
    
    Cayman Islands
    
    100 %British Transco Finance (No. 3) Limited
    
    England & Wales
    
    100 %British Transco Finance (No. 5) Limited
    
    England & Wales
    
    100 %British Transco Finance Inc.
    
    U.S.A. (Delaware)
    
    100 %British Transco International Finance B.V.
    
    The Netherlands
    
    100 %National Grid Gas Finance (No 1) plc
    
    England & Wales
    
    100 %National Grid Metering Limited
    
    England & Wales
    
    100 %Xoserve Limited
    
    England & Wales
    
    56.57%
 57




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##### 



Directors
  Principal
    
    Principal Activities outside NationalName
    
    Occupation
    
    Grid Gas Group
    
    Business AddressMark Fairbairn
    
    Director
    
    Executive Director of National Grid plc
and a director of National Grid Gas
Holdings Limited, National Grid
Electricity Transmission plc and National
Grid UK Limited.
    
    1-3 Strand
London
WC2N 5EHNick Winser
    
    Director
    
    Executive Director of National Grid plc
and a director of National Grid
Electricity
Transmission plc, National Grid UK
Limited, and National Grid Grain LNG
Limited.
    
    1-3 Strand
London
WC2N 5EHStuart Humphreys
    
    Director
    
    Director of National Grid Electricity
Transmission plc, National Grid
Interconnectors Limited and NG Leasing
Limited, Britned Development Ltd and
National Grid Grain LNG Limited.
    
    National Grid House
Warwick Technology Park
Gallows Hill
Warwick
CV34 6DAMalcolm Cooper
    
    Director
    
    Director of National Grid Gas Holdings
Limited, National Grid Electricity
Transmission plc, British Transco
Capital Inc., British Transco Finance
Inc., National Grid Commercial Holdings
Limited, National Grid Holdings Limited,
National Grid Holdings One plc, National
Grid (US) Holdings Ltd, National Grid
International Limited, Lattice Group plc,
National Grid Insurance Company (Isle
of Man) Ltd, National Grid Insurance
Company (Ireland) Ltd, CLS Holdings
plc, ACT (Administration) Ltd and the
Association of Corporate Treasurers
    
    1-3 Strand
London 
WC2N 5EHPaul Whittaker
    
    Director
    
    Director of National Grid Electricity
Transmission plc, Fulcrum Gas Services
Ltd. Fulcrum Infrastructure Services Ltd,
Fulcrum Pipelines Ltd and Fulcrum
Group Holdings Ltd.
    
    National Grid House
Warwick Technology Park
Gallows Hill
Warwick
CV34 6DAAdam Wiltshire
    
    Director
    
    Director of National Grid Gas Holdings
Limited.
    
    National Grid House
Warwick Technology Park
Gallows Hill
Warwick
CV34 6DA
  Regulatory Framework
 Gas Act GEMA Ofgem
 58




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##### 



(i)
    
    the NTS; and(ii)
    
    the DNs (taken as a whole),
     (i)
    
    prohibiting National Grid Gas from carrying on activities other than those permitted
by the Licences;(ii)
    
    requiring that each business has sufficient managerial and financial resources
available to it to conduct the relevant licensed activities;(iii)
    
    requiring National Grid Gas to maintain an investment grade issuer credit rating;(iv)
    
    prohibiting National Grid Gas from creating indebtedness or entering into any other
obligations (except in limited circumstances) other than on an arms length basis on
normal commercial terms for one of its permitted purposes;(v)
    
    prohibiting the creation of cross-default obligations; and(vi)
    
    prohibiting either the NTS or the DN business from giving or receiving any
cross-subsidy from any other group business.
   59




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##### 



Recent Developments
      60




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##### 



61




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##### 



DESCRIPTION OF NATIONAL GRID GAS FINANCE (NO 1) PLC
 Incorporation and Businesses
    Subsidiaries
  Directors
  Principal Activities outsideName
    
    Principal Occupation
    
    National Grid Gas Finance (No 1)Malcolm Cooper
    
    Director
    
    Director of National Grid
Holdings One plc (NGH1) and
certain other wholly owned
subsidiaries of National Grid
plc, and Director of ACT
(Administration) Limited and
director of CLS Holdings plc.Steve Noonan
    
    Director
    
    Director of NGH1 and certain
other wholly owned
subsidiaries of National Grid
plc.Mark Flawn
    
    Director
    
    Director NGH1 and certain
other wholly owned
subsidiaries of National Grid
plc.Alexandra Lewis
    
    Director
    
    Director of NGH1 and certain
other wholly owned
subsidiaries of National Grid
plc.Christopher Waters
    
    Director
    
    Director of NGH1 and certain
other wholly owned
subsidiaries of National Grid
plc.
   62




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##### 



DESCRIPTION OF THE GUARANTEE
 Guarantee
   63




---



##### 



UNITED KINGDOM TAXATION
 The following is a summary of the United Kingdom withholding taxation treatment at the date
hereof in relation to payments of principal and interest in respect of the Instruments. It is
based on current law and the practice of HM Revenue and Customs, which may be subject to
change, sometimes with retrospective effect. The comments do not deal with other United Kingdom
tax aspects of acquiring, holding or disposing of Instruments. The comments relate only to the
position of persons who are absolute beneficial owners of the Instruments. Prospective
Instrumentholders should be aware that the particular terms of issue of any series of
Instruments as specified in the relevant Final Terms may affect the tax treatment of that and
other series of Instruments. The following is a general guide and should be treated with
appropriate caution. Instrumentholders who are in any doubt as to their tax position should
consult their professional advisers. Instrumentholders who may be liable to taxation in
jurisdictions other than the United Kingdom in respect of their acquisition, holding or
disposal of the Instruments are particularly advised to consult their professional advisers as
to whether they are so liable (and if so under the laws of which jurisdictions), since the
following comments relate only to certain United Kingdom taxation aspects of payments in
respect of the Instruments. In particular, Instrumentholders should be aware that they may be
liable to taxation under the laws of other jurisdictions in relation to payments in respect of
the Instruments even if such payments may be made without withholding or deduction for or on
account of taxation under the laws of the United Kingdom.
 (A)
    
    UK Withholding Tax on UK Source Interest1.
    
    The Instruments issued by an Issuer which carry a right to interest will constitute
quoted Eurobonds provided they are and continue to be listed on a recognised stock
exchange within the meaning of section 1005 of the Income Tax Act 2007. The London Stock
Exchange is a recognised stock exchange for these purposes. Instruments will be treated as
listed on the London Stock Exchange if they are included in the Official List by the
United Kingdom Listing Authority and are admitted to trading on the Regulated Market of
the London Stock Exchange. Instruments to be traded on a recognised stock exchange outside
the United Kingdom will be treated as listed on a recognised stock exchange if (and only
if) they are admitted to trading on that exchange and they are officially listed, in
accordance with provisions corresponding to those generally applicable in European
Economic Area Member States, in a country outside the United Kingdom in which there is a
recognised stock exchange. Whilst the Instruments are and continue to be quoted Eurobonds,
payments of interest by the Issuer on the Instruments may be made without withholding or
deduction for or on account of United Kingdom income tax.2.
    
    In all cases falling outside the exemption described above, interest on the
Instruments will generally fall to be paid under deduction of United Kingdom income tax at
the basic rate (currently 20 per cent.) subject to such relief as may be available
following a direction from HM Revenue and Customs under the provisions of any applicable
double taxation treaty, or to any other exemption which may apply. However, the obligation
to withhold will not apply if the relevant interest is paid on Instruments with a maturity
date of less than one year from the date of issue and which are not issued under
arrangements the effect of which is to render such Instruments part of a borrowing with a
total term of a year or more.(B)
    
    Provision of Information
 paying agent collecting agent
 64




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##### 



(C)
    
    Payments under the Guarantee
  (D)
    
    Other Rules Relating to United Kingdom Withholding Tax1.
    
    Instruments may be issued at an issue price of less than 100 per cent. of their
principal amount. Any discount element on any such Instruments should not generally be
subject to any United Kingdom withholding tax pursuant to the provisions mentioned in (A)
above, but may be subject to reporting requirements as outlined in (B) above.2.
    
    Where Instruments are to be, or may fall to be, redeemed at a premium, as opposed to
being issued at a discount, then any such element of premium may constitute a payment of
interest. Payments of interest are subject to United Kingdom withholding tax and reporting
requirements as outlined above.3.
    
    Where interest has been paid under deduction of United Kingdom income tax,
Instrumentholders who are not resident in the United Kingdom may be able to recover all or
part of the tax deducted if there is an appropriate provision in any applicable double
taxation treaty.4.
    
    The references to interest above mean interest as understood in United Kingdom
tax law. The statements above do not take any account of any different definitions of
interest or principal which may prevail under any other law or which may be created by
the terms and conditions of the Instruments or any related documentation.
Instrumentholders should seek their own professional advice, as regards the withholding
tax treatment of any payment on the Instruments which does not constitute interest or
principal as those terms are understood in United Kingdom tax law.5.
    
    The above description of the United Kingdom withholding tax position assumes that
there will be no substitution of an Issuer pursuant to Condition 11.3 of the Instruments
or otherwise and does not consider the tax consequences of any such substitution.
 65




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##### 



(E)
    
    EU Savings Directive
    66




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##### 



PLAN OF DISTRIBUTION
 Summary of Agreement
 Dealer Agreement
 Selling Restrictions
 United States
 Securities Act
    Public Offer Selling Restriction Under the Prospectus Directive
 Relevant Member State Relevant Implementation Date
 67




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##### 



(a)
    
    if the final terms in relation to the Instruments specify that an offer of those
Instruments may be made other than pursuant to Article 3(2) of the Prospectus Directive in
that Relevant Member State (a Non-exempt Offer), following the date of publication of a
prospectus in relation to such Instruments which has been approved by the competent
authority in that Relevant Member State or, where appropriate, approved in another
Relevant Member State and notified to the competent authority in that Relevant Member
State, provided that any such prospectus has subsequently been completed by the final
terms contemplating such Non-exempt Offer, in accordance with the Prospectus Directive, in
the period beginning and ending on the dates specified in such prospectus or final terms,
as applicable;(b)
    
    at any time to legal entities which are authorised or regulated to operate in the
financial markets or, if not so authorised or regulated, whose corporate purpose is solely
to invest in securities;(c)
    
    at any time to any legal entity which has two or more of (1) an average of at least
250 employees during the last financial year; (2) a total balance sheet of more than
43,000,000 and (3) an annual net turnover of more than 50,000,000, as shown in its
last annual or consolidated accounts;(d)
    
    at any time to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) subject to obtaining the prior consent
of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or(e)
    
    at any time if the denomination per Instrument being offered amounts to at least
50,000; or(f)
    
    at any time in any other circumstances falling within Article 3(2) of the Prospectus
Directive,
  offer of Instruments to the public Prospectus Directive
 United Kingdom
  (a)
    
    in relation to any Instruments which have a maturity of less than one year, (i) it is
a person whose ordinary activities involve it in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of its business and (ii) it has
not offered or sold and will not offer or sell any Instruments other than to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or as agent) for the purposes of their businesses or who it is
reasonable to expect will acquire, hold, manage or dispose of investments (as principal or
agent) for the purposes of their businesses where the issue of the Instruments would
otherwise constitute a contravention of Section 19 of the FSMA by the relevant Issuer or
the Guarantor (if applicable);(b)
    
    it has only communicated or caused to be communicated and will only communicate or
cause to be communicated an invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the FSMA) received by it in connection with the issue
or sale of any Instruments in circumstances in which Section 21(1) of the FSMA does not
apply to the relevant Issuer or the Guarantor (if applicable); and
 68




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##### 



(c)
    
    it has complied and will comply with all applicable provisions of the FSMA (and all
rules and regulations made pursuant to the FSMA) with respect to anything done by it in
relation to any Instruments in, from or otherwise involving the United Kingdom.
 Japan
 Financial Instruments and Exchange Law resident of Japan
 General
    69




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##### 



FORM OF FINAL TERMS
 The Final Terms in respect of each Tranche of Instruments will be substantially in the
following form, duly supplemented (if necessary), amended (if necessary) and completed to
reflect the particular terms of the relevant Instruments and their issue. Text in this section
appearing in italics does not form part of the form of the Final Terms but denotes directions
for completing the Final Terms.
 Final Terms dated []
 [NATIONAL GRID GAS PLC/NATIONAL GRID GAS FINANCE (NO 1) PLC] +
 *
 PART A  CONTRACTUAL TERMS
 Prospectus Directive www.londonstockexchange.com/en-gb/pricesnews/marketnews.
 The following alternative language applies if the first Tranche of an issue which is being
increased was issued under a Prospectus with an earlier date.
 Conditions original date original date current date Prospectus
Directive current date www.londonstockexchange.com/en-gb/pricesnews/marketnews.
 [Include whichever of the following apply or specify as Not Applicable (N/A). Note that the
numbering should remain as set out below, even if Not Applicable is indicated for individual
paragraphs or sub-paragraphs.]
 
 +
    
    Delete as applicable.*
    
    Only applicable where National Grid Gas Finance (No 1)
is the Issuer. 70




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##### 



[When completing final terms or adding any other final terms or information consideration
should be given as to whether such terms or information constitute significant new factors
and consequently trigger the need for a supplement to the Prospectus under Article 16 of the
Prospectus Directive.]
 1
    
    
    (i)
    
    Issuer:
    
    [National Grid Gas plc/National Grid Gas Finance (No 1)]+[(ii)
    
    Guarantor:
    
    National Grid Gas plc]*2
    
    
    (i)
    
    Series Number:
    
    [][(ii)
    
    Tranche Number:
    
    [](If fungible with an existing Series, details of that Series, including the date on which the Instruments become fungible).]3
    
    
    Specified Currency or Currencies:
    
    []4
    
    
    Aggregate Nominal Amount:
    
    [][(i)]
    
    Series:
    
    [][(ii)
    
    Tranche:
    
    []]5
    
    
    Issue Price:
    
    [] per cent of the Aggregate Nominal Amount [plus accrued interest from [insert date]
(if applicable)]6
    
    
    Specified Denominations:
    
    []1[Note  where multiple denominations above 50,000 (or equivalent) are being used
the following sample wording should be followed:[50,000] and integral multiples of [1,000] in excess thereof [up to and
including [99,000]. No Instruments in definitive form will be issued with a
denomination above [99,000]].]Calculation Amount:
    
    [If only one Specified Denomination, insert the Specified Denomination. If more than
one Specified Denomination, insert the highest common factor][Note: There must be a
common factor in the case of two or more Specified Denominations]7
    
    
    [(i)]
    
    Issue Date:
    
    [][(ii)]
    
    Interest Commencement Date:
    
    []8
    
    
    Maturity Date:
    
    [specify date or (for Floating Rate Instruments) Interest Payment Date falling in or
nearest to the relevant month and year]9
    
    
    Interest Basis:
    
    [[] per cent. Fixed Rate]
[[specify reference rate] +/ [] per cent. Floating Rate]
 
 +
    
    Delete as applicable.*
    
    Only applicable where National Grid Gas Finance (No 1)
is the Issuer.1
    
    Instruments which have a maturity of less than one year
must have a minimum denomination of £100,000 (or it equivalent in other
currencies). 71




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[Zero Coupon]
[Index Linked Interest]
[Other(specify)]
(further particulars specified below)10
    
    
    Redemption/Payment Basis:
    
    [Redemption at par][Index Linked Redemption][Dual Currency][Partly Paid][Instalment][Other(specify)]11
    
    
    Change of Interest or Redemption/Payment Basis:
    
    [Specify details of any provision for convertibility of Instruments into another
interest or redemption/ payment basis]12
    
    
    Put/Call Options:
    
    [Investor Put][Issuer Call][(further particulars specified below)]13
    
    
    (i)
    
    Status of the Instruments:
    
    Senior[(ii)
    
    Status of the Guarantee:
    
    Senior]*[(iii)]
    
    Date [Board] approval for issuance of Instruments [and the Guarantee]* obtained:
    
    []
(N.B Only relevant where Board (or similar) authorisation is required for the
particular tranche of Instruments[or related Guarantee])]14
    
    
    Method of distribution:
    
    [Syndicated/Non-syndicated]PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE15
    
    
    Fixed Rate Instrument Provisions
    
    [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)(i)
    
    Rate[(s)] of Interest:
    
    [] per cent. per annum [payable [annually/semi-annually/quarterly/monthly] in arrear](ii)
    
    Interest Payment Date(s):
    
    [] in each year commencing on [] and ending on [](iii)
    
    Fixed Coupon Amount[(s)]:
    
    [] per Calculation Amount(iv)
    
    Broken Amount(s):
    
    [] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [](v)
    
    Day Count Fraction (Condition 3.2.4(i)):
    
    [30/360 / Actual/Actual (ICMA/ISDA)/Other](vi)
    
    Determination Dates (Condition 3.2.4(i)):
    
    [] in each year (insert regular interest payment dates, ignoring issue date or
maturity date in the case of a long or short first or last coupon. N.B. only relevant
where Day Count Fraction is Actual/Actual (ICMA))(vii)
    
    Other terms relating to the method of calculating interest for Fixed Rate Instruments:
    
    [Not Applicable/give details]
 
 *
    
    Only applicable where National Grid Gas Finance (No 1)
is the Issuer. 72




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##### 



16
    
    
    Floating Rate Instrument Provisions
    
    [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)(i)
    
    Interest Period(s):
    
    [](ii)
    
    Specified Interest Payment Dates:
    
    [](iii)
    
    First Interest Payment Date:
    
    [](iv)
    
    Business Day Convention:
    
    [Floating Rate Convention/ Following Business Day Convention/ Modified Following
Business Day Convention/ Preceding Business Day Convention/ other(give details)](v)
    
    Business Centre(s) (Condition 3.2.4(i)):
    
    [](vi)
    
    Manner in which the Rate(s) of Interest is/are to be determined:
    
    [Screen Rate Determination/ISDA Determination/other(give details)](vii)
    
    Interest Period Date(s):
    
    [Not Applicable/specify dates](viii)
    
    Party responsible for calculating the Rate(s) of Interest and Interest Amount(s) (if not the Calculation Agent):
    
    [](ix)
    
    Screen Rate Determination (Condition 3.2.3(B)):
    
    Relevant Time:
    
    []
    
    Interest Determination Date(s):
    
    [[] [TARGET] Business Days in [specify city] for [specify currency] prior to [the
first day in each Interest Accrual Period/each Interest Payment Date]]
    
    Primary Source for Floating Rate:
    
    [Specify relevant screen page or Reference Banks]
    
    Reference Banks (if Primary Source is Reference Banks):
    
    [Specify five]
    
    Relevant Financial Centre:
    
    [The financial centre most closely connected to the Benchmark  specify if not London]
    
    Benchmark:
    
    [LIBOR, LIBID, LIMEAN, EURIBOR or other benchmark]
    
    Representative Amount:
    
    [Specify if screen or Reference Bank quotations are to be given in respect of a
transaction of a specified notional amount]
    
    Effective Date:
    
    [Specify if quotations are not be obtained with effect from commencement of Interest
Accrual Period]
    
    Specified Duration:
    
    [Specify period for quotation if not duration of Interest Accrual Period](x)
    
    ISDA Determination (Condition 3.2.3(A)):
    
    Floating Rate Option:
    
    []
    
    Designated Maturity:
    
    []
    
    Reset Date:
    
    []
 73




---



##### 




    
    ISDA Definitions (if different from those set out in the Conditions):
    
    [](xi)
    
    Margin(s):
    
    [+/-][] per cent. per annum(xii)
    
    Minimum Rate of Interest:
    
    [] per cent. per annum(xiii)
    
    Maximum Rate of Interest:
    
    [] per cent. per annum(xiv)
    
    Day Count Fraction (Condition 3.2.4(i)):
    
    [](xv)
    
    Rate Multiplier:
    
    [](xvi)
    
    Fall back provisions, rounding provisions, denominator and any other terms relating to the method of calculating
interest on Floating Rate Instruments, if different from those set out in the Conditions:
    
    []17
    
    
    Zero Coupon Instrument Provisions
    
    [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)(i)
    
    Amortisation Yield (Condition 5.4):
    
    [] per cent. per annum(ii)
    
    Day Count Fraction (Condition 3.2.4(i)):
    
    [](iii)
    
    Any other formula/basis of determining amount payable:
    
    []18
    
    
    Index Linked Interest Instrument
    
    [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)(i)
    
    Index/Formula:
    
    [give or annex details](ii)
    
    Interest Rate:
    
    [](iii)
    
    Party responsible for calculating the Rate(s) of Interest, Interest Amount and Redemption Amount(s) (if not the
Calculation Agent):
    
    [](iv)
    
    Provisions for determining Coupon where calculation by reference to Index and/or Formula is impossible or
impracticable:
    
    [](v)
    
    Specified Interest Payment Dates:
    
    [](vi)
    
    First Interest Payment Date:
    
    [](vii)
    
    Interest Period(s):
    
    [](viii)
    
    Business Day Convention:
    
    [Following Business Day Convention/Modified Following Business Day Convention/Preceding
Business Day Convention/other(give details)](ix)
    
    Minimum Indexation Factor:
    
    [Not Applicable/specify](x)
    
    Business Centre(s) (Condition 3.2.4(i)):
    
    []
 74




---



##### 



(xi)
    
    Maximum Indexation Factor:
    
    [Not Applicable/specify](xii)
    
    Limited Indexation Month(s) or Period for calculation of Limited Indexation Factor:
    
    [] per cent. per annum(xiii)
    
    Base Index Figure (Condition 4.1):
    
    [](xiv)
    
    Day Count Fraction (Condition 3.2.4(i)):
    
    [](xv)
    
    Index or Index Figure (Condition 4.1):
    
    Sub-paragraph [(i)/(ii) (iii)] of the definition of Index or Index Figure as set
out in Condition 4.1 shall apply(xvi)
    
    Reference Gilt:
    
    []19
    
    
    Dual Currency Instrument Provisions
    
    [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)(i)
    
    Rate of Exchange/method of calculating Rate of Exchange:
    
    [give details](ii)
    
    Calculation Agent, if any, responsible for calculating the principal and/or interest due:
    
    [](iii)
    
    Provisions applicable where calculation by reference to Rate of Exchange impossible or impracticable:
    
    [](iv)
    
    Person at whose option Specified Currency(ies) is/are payable:
    
    [](v)
    
    Day Count Fraction (Condition 3.2.4(i)):
    
    []PROVISIONS RELATING TO REDEMPTION20
    
    
    Residual Holding Call Option
    
    [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)(i)
    
    Residual Holding Percentage:
    
    [] per cent.(ii)
    
    Party responsible for calculating the Residual Holding Redemption Amount (if not the Calculation Agent):
    
    [](iii)
    
    Benchmark Security:
    
    [Specify Government Security/swap benchmark](iv)
    
    Benchmark Spread:
    
    [] per cent. per annum(v)
    
    Benchmark Day Count Fraction:
    
    [](vi)
    
    [Other relevant provisions:
    
    []]21
    
    
    Call Option*
    
    [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)
 
 *
    
    [This does not include the tax call in Condition 5.2]. 75




---



##### 



(i)
    
    Optional Redemption Date(s):
    
    [](ii)
    
    Optional Redemption Amount(s) of each Instrument and method, if any, of calculation of such amount(s):
    
    [] per Calculation Amount(iii)
    
    If redeemable in part:(a)
    
    Minimum nominal amount to be redeemed:
    
    [] per Calculation Amount(b)
    
    Maximum nominal amount to be redeemed:
    
    [] per Calculation Amount(iv)
    
    Option Exercise Date(s):
    
    [](v)
    
    Notice period (if other than as set out in the Conditions):
    
    []22
    
    
    Put Option
    
    [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)(i)
    
    Optional Redemption Date(s):
    
    [](ii)
    
    Optional Redemption Amount(s) of each Instrument and method, if any, of calculation of such amount(s):
    
    [] per Calculation Amount(iii)
    
    Option Exercise Date(s):
    
    [](iv)
    
    Notice period (if other than as set out in the Conditions):
    
    [](v)
    
    Option Period:
    
    []23
    
    
    Final Redemption Amount of each Instrument
    
    [[] per Calculation Amount/other/see Appendix]In cases where the Final Redemption Amount is Index-Linked:(i)
    
    Index/Formula:
    
    [give or annex details](ii)
    
    Party responsible for calculating the Final Redemption Amount (if not the Calculation Agent):
    
    [](iii)
    
    Provisions for determining Final Redemption Amount where calculated by reference to Index and/or Formula and/or other
variable:
    
    [](iv)
    
    Determination Date(s):
    
    [](v)
    
    Provisions for determining Final Redemption Amount where calculation by reference to Index and/or Formula and/or other
variable is impossible or impracticable or otherwise disrupted:
    
    []
 76




---



##### 



(vi)
    
    Payment Date:
    
    [](vii)
    
    Minimum Final Redemption Amount:
    
    [] per Calculation Amount(viii)
    
    Maximum Final Redemption Amount:
    
    [] per Calculation Amount24
    
    
    Early Redemption Amount(i)
    
    Early Redemption Amount(s) of each Instrument payable on redemption for taxation reasons (Condition 5.2) or on Event of
Default (Condition 9) or other early redemption and/or the method of calculating the same (if required or if different from
that set out in the Conditions):
    
    [](ii)
    
    Redemption for taxation reasons permitted on days other than Interest Payment Dates (Condition 5.2):
    
    [Yes/No](iii)
    
    Unmatured Coupons to become void upon early redemption (Condition 6.5):
    
    [Yes/No/Not Applicable]GENERAL PROVISIONS APPLICABLE TO THE INSTRUMENTS25
    
    
    Form of Instruments:
    
    Bearer Instruments:[Temporary Global Instrument exchangeable for a permanent Global Instrument which is
exchangeable for Definitive Instruments in the limited circumstances specified in the
Permanent Global Instrument][Temporary Global Instrument exchangeable for Definitive Instruments on 40 days notice][Permanent Global Instrument exchangeable for Definitive Instruments in the limited
circumstances specified in the permanent Global Instrument](The exchange upon notice/at any time option should not be expressed to be applicable
if the Specified Denomination of the Instruments in paragraph 6 includes language
substantially to the following effect [50,000] and integral multiples of
[1,000] in excess thereof up to and including [99,000].)New Global Note intended to be held in a manner which would allow Eurosystem eligibility:
    
    [No1/Yes]
[Note that the designation Yes simply means that the Instruments are intended upon
issue to be deposited with Euroclear or Clearstream, Luxembourg as common safekeeper
and does not necessarily mean that the Instruments will be
 
 1
    
    Specify No if the Instruments being issued are Classic
Global Notes/CGNs. 77




---



##### 



recognised as eligible
collateral for Eurosystem monetary policy and intra-day credit operations by the
Eurosystem either upon issue or at any or all times during their life. Such recognition
will depend upon satisfaction of the Eurosystem eligibility criteria.] [Include this
text if Yes selected in which case the Instruments must be issued in NGN form]26
    
    
    Financial Centre(s) or other special provisions relating to Payment Dates (Condition 6.6):
    
    [Not Applicable/give details. Note that this item relates to the date and place of
payment, and not interest period end dates, to which items 16(iv) and 18(x) relate]27
    
    
    Talons for future Coupons or Receipts to be attached to Definitive Instruments (and dates on which such Talons mature):
    
    [Yes/No. If yes, give details]28
    
    
    Details relating to Partly Paid Instruments: amount of each payment comprising the Issue Price and date on which each
payment is to be made and consequences (if any) of failure to pay, including any right of the Issuer[ or the Guarantor] to
forfeit the Instruments and interest due on late payment:
    
    [Not Applicable/give details]29
    
    
    Details relating to Instalment Instruments:
    
    [Not Applicable/give details]
    
    Amount of each instalment:
    
    []
    
    Date on which each payment is to be made:
    
    []
    
    Maximum Instalment Amount:
    
    []
    
    Minimum Instalment Amount:
    
    []30
    
    
    Redenomination, renominalisation and reconventioning provisions:
    
    [Not Applicable/give details]31
    
    
    Other final terms:
    
    [Not Applicable/give details][(When adding any other final terms consideration should be given as to whether such
terms constitute a significant new factor and consequently trigger the need for a
supplement to the Prospectus under Article 16 of the Prospectus Directive.)]DISTRIBUTION32
    
    
    (i)
    
    If syndicated, names of Managers:
    
    [Not Applicable/give names](ii)
    
    Stabilising Manager(s) (if
any):
    
    [Not Applicable/give name(s)]33
    
    
    If non-syndicated, name of Dealer:
    
    [Not Applicable/give name]34
    
    
    U.S Selling Restrictions
    
    Reg. S Compliance Category 2; [TEFRA C] / [TEFRA D] / [TEFRA not applicable]35
    
    
    Additional selling restrictions:
    
    [Not Applicable/give details]
 78




---



##### 



[PURPOSE OF FINAL TERMS
 specify relevant regulated market
 RESPONSIBILITY
 *   
  By:Duly authorised[Signed on behalf of the Guarantor:By:Duly authorised]*
 PART B  OTHER INFORMATION *
 1
    
    LISTING
 (i)
    
    Listing:
    
    [London/other(specify)/None](ii)
    
    Admission to trading:
    
    [Application has been made by the
Issuer (or on its behalf) for the
Instruments to be admitted to trading
on [] with effect from [].]
[Application is expected to be made by
the Issuer (or on its behalf) for the
Instruments to be admitted to trading
on [] with effect from [].] [Not
Applicable.](Where documenting a fungible issue
need to indicate that original
Instruments are already admitted to
trading.)(iii)
    
    Estimate of total expenses
related to admission to trading:
    
    []
 
 *
    
    Only applicable where National Grid Gas Finance (No 1)
is the Issuer.*
    
    If an issue of Instruments is (i) NOT admitted to
trading on a regulated market within the European Economic Area and (ii) only
offered in the European Economic Area in circumstances where a prospectus is
not required to be published under the Prospectus Directive, the Issuer may
elect to amend and/or delete certain of the above paragraphs of Part B. 79




---



##### 



2
    
    RATINGS
 Ratings:
    
    The Instruments to be issued have been rated:[S & P: []][Moodys: []][[Fitch: []][[Other]: []](The above disclosure should reflect the rating allocated to
Instruments of the type being issued under the Programme
generally or, where the issue has been specifically rated, that
rating.)
 3
    
    [INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE
 Need to include a description of any interest, including conflicting ones, that is material to
the issue/offer, detailing the persons involved and the nature of the interest. May be
satisfied by the inclusion of the following statement:
  [(When adding any other description, consideration should be given as to whether such matters
described constitute significant new factors and consequently trigger the need for a
supplement to the Prospectus under Article 16 of the Prospectus Directive.)]
 4
    
    [REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES
 [(i)]
    
    Reasons for the offer:
    
    [][(ii)]
    
    Estimated net proceeds:
    
    [](If proceeds are intended for more than
one use will need to split out and
present in order of priority. If proceeds
insufficient to fund all proposed uses
state amount and sources of other
funding.)[(iii)]
    
    Estimated total
expenses:
    
    [] [Include breakdown of expenses.](Only necessary to include disclosure of
net proceeds and total expenses at (ii)
and (iii) above where disclosure is
included at (i) above.)]
 5
    
    [Fixed Rate Instruments only  YIELD
 Indication of yield:
    
    [] The yield is calculated at the Issue Date on the
basis of the Issue Price. It is not an indication of
future yield.]
 6
    
    [Index Linked Instruments only  PERFORMANCE OF INDEX/FORMULA/OTHER VARIABLE AND OTHER
INFORMATION CONCERNING THE UNDERLYING
 Need to include details of where past and future performance and volatility of the
index/formula/other variable can be obtained. Where the underlying is an index need to include
the name of the index and a
 80




---



##### 



description if composed by the Issuer and if the index is not composed by the Issuer need to
include details of where the information about the index can be obtained. Where the underlying
is not an index need to include equivalent information.
  7
    
    [Dual Currency Instruments only  PERFORMANCE OF RATE[S] OF EXCHANGE
 Need to include details of where past and future performance and volatility of the relevant
rate[s] can be obtained.
 8
    
    OPERATIONAL INFORMATION
 ISIN Code:
    
    []Common Code:
    
    []Any clearing system(s) other than Euroclear
Bank S.A./N.V. and Clearstream Banking,
société anonymeand the identification
number(s):
    
    [Not Applicable/give name(s) and number(s)]Delivery:
    
    Delivery [against/free of] paymentNames and addresses of initial Paying Agent(s):
    
    []Names and addresses of additional Paying
Agent(s) (if any):
    
    []
 9
    
    GENERAL
 The aggregate principal amount of
Instruments issued has been translated into
Euro at the rate of [], producing a sum of
(for Instruments not denominated in euro):
    
    [Not Applicable/[[euro]][]]Additional steps that may only be taken
following approval by an Extraordinary
Resolution in accordance with Condition
11.1:
    
    [Not Applicable/give details]
 81




---



##### 



GENERAL INFORMATION
 (1)
    
    The admission of the Programme to listing on the Official List and to trading on the
Market is expected to take effect on or about 26 February 2009. The listing of the
Instruments on the Official List will be expressed as a percentage of their nominal amount
(exclusive of accrued interest). Any Tranche of Instruments intended to be admitted to
listing on the Official List and admitted to trading on the Market will be so admitted to
listing and trading upon submission to the UK Listing Authority and the London Stock
Exchange (in accordance with their rules and procedures) of the relevant Final Terms and
any other information required by the UK Listing Authority and the London Stock Exchange,
subject in each case to the issue of the relevant Instruments. Prior to official listing,
dealings will be permitted by the Market in accordance with its rules. Transactions will
normally be effected for delivery on the third working day in London after the day of the
transaction.However, Instruments may be issued pursuant to the Programme which will not be admitted
to listing, trading and/or quotation by the UK Listing Authority or the Market or any
other listing authority, stock exchange and/or quotation system or which will be admitted
to listing, trading and/or quotation by such listing authority, stock exchange and/or
quotation system as the relevant Issuer and the relevant Dealer(s) may agree.(2)
    
    National Grid Gas has obtained all necessary consents, approvals and authorisations
in the United Kingdom in connection with the issue and performance of the Instruments.(3)
    
    National Grid Gas Finance (No 1) has obtained all necessary consents, approvals and
authorisations in the United Kingdom in connection with the issue and performance of the
Instruments.(4)
    
    The establishment of the Programme was authorised by a resolution of the Finance
Committee of the Board of Directors of National Grid Gas passed on 17 July 2003. The
update of the Programme was authorised by a resolution of the Finance Committee of the
Board of Directors of National Grid Gas passed on 25 April 2005. The guarantee of the
Instruments issued by National Grid Gas Finance (No 1) was authorised by a resolution of
the Finance Committee of the Board of Directors of National Grid Gas passed on 31 July
2006.(5)
    
    The update of the Programme was authorised by a resolution of the Board of Directors
of National Grid Gas Finance (No 1) passed on 18 August 2006.(6)
    
    Instruments have been accepted for clearance through the Euroclear and Clearstream,
Luxembourg. The appropriate common code and the International Securities Identification
Number in relation to the Instruments of each Series will be specified in the relevant
Final Terms relating thereto. The relevant Final Terms shall specify any other clearing
system(s) as shall have accepted the relevant Instruments for clearance together with any
further appropriate information. The address of Euroclear is 1 Boulevard du Roi Albert II,
B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42 Avenue JF
Kennedy, L-1855 Luxembourg.(7)
    
    Save as disclosed in the first paragraph under the heading Description of National
Grid Gas plc  Recent Developments on page 61, there are no, nor have there been any,
governmental, legal or arbitration proceedings (including any such proceedings which are
pending or threatened of which National Grid Gas is aware) during the 12 months preceding
the date of this Prospectus which may have, or have had in the recent past a significant
effect on the financial position or profitability of National Grid Gas or of the National
Grid Gas Group.(8)
    
    There are no, nor have there been any, governmental, legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which National Grid Gas
Finance (No 1) is aware) during the 12 months preceding the date of this Prospectus which
may have, or have
 82




---



##### 



had in the recent past a significant effect on the financial position or profitability of
National Grid Gas Finance (No 1).(9)
    
    Save as disclosed in the section entitled Description of National Grid Gas plc -
Recent Developments on page 61, there has been no significant change in the financial or
trading position of the National Grid Gas Group since 31 March 2008.(10)
    
    There has been no material adverse change in the prospects of National Grid Gas or
the National Grid Gas Group since 31 March 2008.(11)
    
    There has been no significant change in the financial or trading position and no
material adverse change in the prospects of National Grid Gas Finance (No 1) since its
incorporation on 3 August 2006.(12)
    
    PricewaterhouseCoopers LLP (chartered accountants and registered auditors authorised
and regulated by the Financial Services Authority) has audited the financial statements of
the National Grid Gas Group for the years ended 31 March 2007 and 31 March 2008, in
accordance with United Kingdom generally accepted auditing standards and reported thereon,
respectively, without qualification.(13)
    
    Each Instrument, Receipt, Coupon and Talon will bear the following legend: Any
United States person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections 165(j) and
1287(a) of the Internal Revenue Code.(14)
    
    For a period of 12 months following the date of this Prospectus, copies of the
following documents may be inspected during usual business hours on any weekday
(Saturdays, Sundays and public holidays excepted), for inspection at the offices of The
Bank of New York Mellon, One Canada Square, London E14 5AL:
 (i)
    
    a copy of this Prospectus with any supplement to this Prospectus or
further Prospectus;(ii)
    
    the Memorandum and Articles of Association of National Grid Gas;(iii)
    
    the Memorandum and Articles of Association of National Grid Gas Finance
(No 1);(iv)
    
    the audited consolidated financial statements of National Grid Gas for
the years ended 31 March 2007 and 31 March 2008, together with the audit report
thereon; and(v)
    
    the amended and restated Trust Deed dated 24 February 2009 which
incorporates the Guarantee.
 In addition, this Prospectus is and, in the case of Instruments to be admitted to the
Official List and admitted to trading on the Market, the relevant Final Terms will be,
available on the website of the Regulatory News Service operated by the London Stock
Exchange at www.londonstockexchange.com/en-gb/pricesnews/marketnews.(15)
    
    The Issuers do not intend to provide any post-issuance information.
 83




---



##### 



REGISTERED OFFICE OF THE ISSUERS AND THE GUARANTOR
 
 THE TRUSTEE
 The Law Debenture Trust Corporation p.l.c.
 THE ARRANGER
 HSBC Bank plc
 THE DEALERS
 Barclays Bank PLC
    
    Deutsche Bank AG, London Branch5 The North Colonnade
    
    Winchester HouseCanary Wharf
    
    1 Great Winchester StreetLondon E14 4BB
    
    London EC2N 2DBHSBC Bank plc
    
    J.P. Morgan Securities Ltd.8 Canada Square
    
    125 London WallLondon E14 5HQ
    
    London EC2Y 5AJMizuho International plc
    
    Morgan Stanley & Co. International plcBracken House
    
    25 Cabot SquareOne Friday Street
    
    Canary WharfLondon EC4M 9JA
    
    London E14 4QARoyal Bank of Canada Europe Limited
    
    The Royal Bank of Scotland plc71 Queen Victoria Street
    
    135 BishopsgateLondon EC4V 4DE
    
    London EC2M 3UR
 LEGAL ADVISERS
 To the Issuers
 Linklaters LLP
 84




---



##### 



To the Dealers and to the Trustee
 Clifford Chance LLP
 ISSUING AND PAYING AGENT
 The Bank of New York Mellon
 PAYING AGENTS
 Kredietbank S. A. Luxembourgeoise
 REGISTERED AUDITORS TO NATIONAL GRID GAS PLC
 PricewaterhouseCoopers LLP
 85