IMPORTANT NOTICE THE OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QUALIFIED INSTITUTIONAL BUYERS ( QIBs ) WITHIN THE MEANING OF RULE 144A ( RULE 144A ) UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT ), OR (2) PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT) AND WHO ARE OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S ( REGULATION S ) UNDER THE U.S. SECURITIES ACT (AND, IF INVESTORS ARE RESIDENT IN A MEMBER STATE OF THE EUROPEAN ECONOMIC AREA, A QUALIFIED INVESTOR). IMPORTANT: You must read the following before continuing. The following applies to the offering memorandum following this notice, and you are therefore advised to read this carefully before reading, accessing or making any other use of the offering memorandum. In accessing the offering memorandum, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE U.S. SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of your representation: In order to be eligible to view the offering memorandum or make an investment decision with respect to the securities described therein, investors must be either (1) QIBs or (2) persons who are not U.S. persons (as defined in Regulation S) and who are outside the United States that would invest in the securities in an offshore transaction in reliance on Regulation S; provided that investors resident in a member state of the European Economic Area are qualified investors (within the meaning of Article 2(1)(e) of Directive 2003/71/EC and any relevant implementing measure in each member state of the European Economic Area). The offering memorandum is being sent at your request. By accepting the email and accessing the offering memorandum, you shall be deemed to have represented to each of the Initial Purchasers (each as defined in the attached offering memorandum), being the sender or senders of the offering memorandum, that: (1) you consent to delivery of such offering memorandum by electronic transmission; (2) either: (a) (b) you and any customers you represent are QIBs, or the email address that you gave us and to which the email has been delivered is not located in the United States, its territories and possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands), any state of the United States or the District of Columbia; and (3) if you are resident in a member state of the European Economic Area, you are a qualified investor. Prospective purchasers that are QIBs are hereby notified that the seller of the securities will be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act pursuant to Rule 144A. You are reminded that the offering memorandum has been delivered to you on the basis that you are a person into whose possession the offering memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver the offering memorandum to any other person. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Initial Purchasers or any affiliate of the Initial Purchasers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Initial Purchasers or such affiliate on behalf of the Issuer (as defined in the attached offering memorandum) in such jurisdiction. Under no circumstances shall the offering memorandum constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
The offering memorandum has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither the Initial Purchasers, nor any person who controls the Initial Purchasers, nor any of their directors, officers, employees or agents, accepts any liability or responsibility whatsoever in respect of any difference between the offering memorandum distributed to you in electronic format and the hard copy version available to you on request from the Initial Purchasers.
CONFIDENTIAL OFFERING MEMORANDUM NOT FOR GENERAL DISTRIBUTION IN THE UNITED STATES AA PIK Co Limited 350,000,000 9 1 2% / 10 1 4% Senior PIK Toggle Notes due 2019 Guaranteed on a senior basis by AA Limited AA PIK Co Limited, a public limited liability company incorporated in Jersey (the Issuer ), is offering (the Offering ) 350,000,000 aggregate principal amount of 9 1 2% / 10 1 4%SeniorPIKToggleNotesdue2019(the Notes ). The Notes are being issued pursuant to an indenture (the Indenture ) that the Issuer will enter into on the date of issuance of the Notes (the Issue Date ). The Issuer will pay interest on the Notes semi-annually in arrear on each 15 June and 15 December, commencing on 15 June 2014. The first three interest payments and the last interest payment on the Notes will be paid entirely in cash. For each other interest payment, the Issuer will be required to pay interest on the Notes entirely in cash ( Cash Interest ), unless the conditions described herein are satisfied, in which case the Issuer will be entitled to pay, to the extent described herein, interest for the relevant interest period by issuing additional Notes in a principal amount equal to such interest ( PIK Interest ). Cash Interest will accrue on the Notes at the rate of 9 1 2% per annum, and PIK Interest will accrue at the rate of 10 1 4% per annum. Prior to 15 June 2015, the Issuer may redeem all or a portion of the Notes at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest and additional amounts, if any, and a make whole premium. At any time on or after 15 June 2015, the Issuer may redeem all or a portion of the Notes at the prices specified herein plus accrued and unpaid interest and additional amounts, if any. In addition, at any time on or after 15 December 2014, the Issuer may redeem at its option up to 100% of the aggregate principal amount of the Notes outstanding with the net proceeds from certain equity offerings at a price of 102% of the principal amount thereof plus accrued and unpaid interest and additional amounts, if any. Upon certain events constituting a change of control, the Issuer may be required to make an offer to repurchase all the Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest and additional amounts, if any. In the event of certain developments affecting taxation, the Issuer may redeem all, but not less than all, of the Notes at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest and additional amounts, if any. The Notes will be general senior obligations of the Issuer and will rank pari passu with any existing and future indebtedness of the Issuer that is not subordinated in right of payment to the Notes. The Notes and the Guarantee will be secured by a first-priority charge over all the shares of AA Mid Co Limited ( Topco ), a first-priority security interest in the Proceeds Loan (as defined herein) and a first-priority security interest in the Cash Interest Account(s) (as defined herein) (collectively, the Collateral ). The Notes will be guaranteed (the Guarantee ) on a senior basis by AA Limited (the Company ), the direct parent entity of the Issuer. The Notes will not be guaranteed by any subsidiaries of the Company. The Notes will be effectively subordinated to any existing and future indebtedness of the Company s subsidiaries, including amounts owing under the Class A Notes, the Class B Notes, the Senior Term Facility, the Working Capital Facility and the Liquidity Facility. This Offering Memorandum includes a description of the terms of the Notes, including with respect to the Guarantee, the Collateral, redemption and repurchase prices, covenants and transfer restrictions. See Description of Notes. There is currently no public market for the Notes. Application has been made for the Notes to be listed on the Official List of the Irish Stock Exchange and admitted to trading on the Global Exchange Market thereof. There is no assurance that the Notes will be, or will remain, admitted to trading on the Global Exchange Market. The Notes will be represented on issue by one or more global notes (the Global Notes ), which will be delivered in book-entry form through the facilities of Euroclear Bank SA/NV ( Euroclear ) and Clearstream Banking, société anonyme ( Clearstream ) on or about 7 November 2013 (the Issue Date ). Investing in the Notes involves a high degree of risk. See Risk Factors beginning on page 28. Issue Price: 100.00% of principal plus accrued interest, if any, from (and including) the Issue Date. The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act ) or the securities laws of any other jurisdiction. Accordingly, the Notes are being offered and sold inside the United States only to qualified institutional buyers ( QIBs ) in accordance with Rule 144A of the U.S. Securities Act ( Rule 144A ) and outside the United States to certain persons in offshore transactions in accordance with Regulation S of the U.S. Securities Act ( Regulation S ). Prospective purchasers that are QIBs are hereby notified that the sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act provided by Rule 144A thereunder. Outside the United States, sellers may be relying on Regulation S. See Notice to Investors for additional information about eligible offerees and transfer restrictions. Joint Global Coordinators and Joint Bookrunners Joint Bookrunners Deutsche Bank The Royal Bank of Scotland Barclays Mizuho Securities The date of this Offering Memorandum is 31 October 2013.
IMPORTANT INFORMATION ABOUT THE OFFERING In this Offering Memorandum, the terms we, our, us, the Company, the Automobile Association, the AA or the AA Group with respect to our historical results of operation, including business operations, refer to AA Limited and its subsidiaries as a whole or to any one or more of its subsidiaries. We have not authorised any dealer, salesperson or other person to give any information or represent anything to you other than the information contained in this Offering Memorandum. You must not rely on unauthorised information or representations. This Offering Memorandum does not offer to sell or solicit offers to buy any of the securities in any jurisdiction where it is unlawful, where the person making the offer is not qualified to do so, or to any person who cannot legally be offered the securities. The information in this Offering Memorandum is current only as of the date on the cover page, and the business or financial condition of us, our subsidiaries and the Issuer, along with other information in this Offering Memorandum, may change after that date. For any time after the cover date of this Offering Memorandum, we do not represent that our affairs are the same as described or that the information in this Offering Memorandum is correct, nor do we imply those things by delivering this Offering Memorandum or selling securities to you. None of the Issuer, the Company, the Company s subsidiaries, any of Deutsche Bank AG, London Branch, The Royal Bank of Scotland plc, Barclays Bank PLC and Mizuho International plc (together, the Initial Purchasers ), represents that the information herein is complete. The Issuer and the Initial Purchasers are offering to sell the Notes only in places where offers and sales are permitted. IN CONNECTION WITH THE OFFERING OF NOTES, DEUTSCHE BANK AG, LONDON BRANCH (THE STABILISATION MANAGER ) OR PERSONS ACTING ON BEHALF OF THE STABILISATION MANAGER MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE CAN BE NO ASSURANCES THAT THE STABILISATION MANAGER OR PERSONS ACTING ON BEHALF OF THE STABILISATION MANAGER WILL UNDERTAKE ANY SUCH STABILISATION ACTION. SUCH STABILISATION ACTION, IF COMMENCED, MAY BEGIN ON OR AFTER THE DATE OF ADEQUATE PUBLIC DISCLOSURE OF THE FINAL TERMS OF THE OFFER OF THE NOTES AND MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 CALENDAR DAYS AFTER THE DATE ON WHICH THE ISSUER RECEIVED THE PROCEEDS OF THE ISSUE AND 60 CALENDAR DAYS AFTER THE DATE OF ALLOTMENT OF THE NOTES. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE STABILISATION MANAGER (OR PERSON(S) ACTING ON BEHALF OF THE STABILISATION MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES. The Issuer is offering the Notes in reliance on exemptions from the registration requirements of the U.S. Securities Act. These exemptions apply to offers and sales of securities that do not involve a public offering. The Notes have not been registered with, recommended by or approved by the U.S. Securities and Exchange Commission (the SEC ) or any other securities commission or regulatory authority, nor has the SEC or any such securities commission or authority passed upon the accuracy or adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offense in the United States. This Offering Memorandum is being provided for informational use solely in connection with consideration of a purchase of the Notes to: (i) investors that the Issuer reasonably believes to be qualified institutional buyers as defined in Rule 144A under the U.S. Securities Act; and (ii) to certain persons in offshore transactions complying with Rule 903 or Rule 904 of Regulation S under the U.S. Securities Act. Its use for any other purpose is not authorised. This Offering Memorandum may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents be disclosed to anyone other than the qualified institutional buyers described in (i) above or to persons considering a purchase of the Notes in offshore transactions described in (ii) above. This Offering Memorandum is for distribution only to persons who are: (i) investment professionals, as such term is defined in Article 19(5) of the U.K. Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Financial Promotion Order ); (ii) persons falling within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations, etc. ) of the Financial Promotion Order; (iii) outside the United Kingdom; or (iv) persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the U.K. Financial Services and Markets Act 2000 ( FSMA )) in connection with the issue or sale of any Notes may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as relevant persons ). This Offering Memorandum is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Offering Memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. i
This Offering Memorandum has been prepared on the basis that all offers of the Notes will be made pursuant to an exemption under Article 3 of Directive 2003/71/EC (the Prospectus Directive ), as implemented in member states of the European Economic Area (the EEA ), from the requirement to produce a prospectus for offers of the Notes. Accordingly, any person making or intending to make any offer within the EEA of the Notes should do so only in circumstances in which no obligation arises for the Issuer or any of the Initial Purchasers to produce a prospectus for such offer. Neither we nor the Initial Purchasers have authorised, nor do we or any of the Initial Purchasers authorise, the making of any offer of the Notes through any financial intermediary, other than offers made by the Initial Purchasers that constitute the final placement of the Notes contemplated in this Offering Memorandum. In addition, the Notes may not be purchased, transferred to or otherwise held by any Plan (as defined in Certain ERISA and Other Considerations ) or any person acting on behalf of any Plan, except in the event that such Plan or person has obtained the written approval of the Issuer to subscribe for and purchase the Notes in the offering directly from the Initial Purchasers. Any Plan that acquires the Notes in accordance with the immediately preceding sentence, and any successor to any such Plan, shall be referred to herein as an Approved Plan. In the event that a Plan or any person acting on any Plan s behalf purchases, acquires or holds the Notes without meeting these requirements, the purported purchase, transfer or holding will be void and, if such purchase or transfer is not treated as being void for any reason, the Notes will automatically be transferred to a charitable trust for the benefit of a charitable beneficiary and the purported holder will acquire no right in the Notes. These restrictions are described in Description of Notes and Certain ERISA and Other Considerations in this Offering Memorandum. We have prepared this Offering Memorandum solely for use in connection with the Offering and for applying to the Irish Stock Exchange for the Notes to be listed on its Official List and admitted to trading on its Global Exchange Market. In the United States, you may not distribute this Offering Memorandum or make copies of it without our prior written consent other than to people you have retained to advise you in connection with the Offering. You are not to construe the contents of this Offering Memorandum as investment, legal or tax advice. You should consult your own legal counsel, accountant and other advisers as to legal, tax, business, financial and related aspects of a purchase of the Notes. You are responsible for making your own examination of us and your own assessment of the merits and risks of investing in the Notes. We are not, and the Initial Purchasers are not, making any representation to you regarding the legality of an investment in the Notes by you. The information contained in this Offering Memorandum has been furnished by us and other sources we believe to be reliable. No representation or warranty, express or implied, is made by the Initial Purchasers or the Trustee and the Paying Agents as to the accuracy or completeness of any of the information set out in this Offering Memorandum, and nothing contained in this Offering Memorandum is or shall be relied upon as a promise or representation by the Initial Purchasers, whether as to the past or the future. This Offering Memorandum contains summaries, believed to be accurate, of certain of the terms of specified documents and copies of certain of the summarised documents will be made available by us upon request for the complete information contained in such documents. Copies of such documents and other information relating to the issuance of the Notes will also be available for inspection at the specified offices of the Principal Paying Agent. All summaries of such documents contained herein are qualified in their entirety by this reference. The Issuer accepts responsibility for the information contained in this Offering Memorandum. To the best of the Issuer s knowledge and belief, the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. No person is authorised in connection with the offering made pursuant to this Offering Memorandum to give any information or to make any representation not contained in this Offering Memorandum, and, if given or made, any other information or representation must not be relied upon as having been authorised by us or the Initial Purchasers. By purchasing the Notes, you will be deemed to have acknowledged that: you have reviewed this Offering Memorandum; this Offering Memorandum relates only to offers and sales with respect to the Notes; and the Initial Purchasers have not separately verified the information contained in this Offering Memorandum and are not responsible for, and are not making any representations to you concerning the AA Group s future performance or the accuracy or completeness of this Offering Memorandum. The Issuer reserves the right to withdraw the Offering at any time, and the Issuer and the Initial Purchasers reserve the right to reject any commitment to subscribe for the Notes in whole or in part and to allot to you less than the full amount of Notes subscribed for by you. This Offering Memorandum does not constitute an offer to sell or an invitation to subscribe for or purchase any of the Notes in any jurisdiction in which such offer or invitation is not authorised or to any person to whom it is unlawful to ii
make such an offer or invitation. You must comply with all laws that apply to you in any place in which you buy, offer or sell any Notes or possess this Offering Memorandum. You must also obtain any consents or approvals that you need in order to purchase any Notes. None of the Issuer, the Company, the Company s subsidiaries or the Initial Purchasers are responsible for your compliance with these legal requirements. The distribution of this Offering Memorandum and the offer and sale of the Notes may be restricted by law in some jurisdictions. Persons into whose possession this Offering Memorandum or any of the Notes come must inform themselves about, and observe any restrictions on the transfer and exchange of, the Notes. The Notes are subject to restrictions on resale and transfer as described under Plan of Distribution and Notice to Investors. By purchasing any Notes, you will be deemed to have made certain acknowledgments, representations and agreements as described in those sections of this Offering Memorandum. You may be required to bear the financial risks of investing in the Notes for an indefinite period of time. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ( RSA 421-B ) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. NOTICE TO U.S. INVESTORS Each purchaser of Notes will be deemed to have made the representations, warranties and acknowledgements that are described in this Offering Memorandum under Notice to Investors. The Notes have not been and will not be registered under the U.S. Securities Act or the securities laws of any state of the United States and are subject to certain restrictions on transfer. Prospective purchasers are hereby notified that the seller of any Note may be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act provided by Rule 144A. Outside the United States, sellers may be relying on Regulation S. For a description of certain further restrictions on resale or transfer of the Notes, see Notice to Investors. The Notes may not be offered to the public within any jurisdiction. By accepting delivery of this Offering Memorandum, you agree not to offer, sell, resell, transfer or deliver, directly or indirectly, any Note to the public. NOTICE TO CERTAIN EUROPEAN INVESTORS European Economic Area. In relation to each member state of the EEA that has implemented the Prospectus Directive (each, a Relevant Member State ), each Initial Purchaser has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date ), it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Offering Memorandum to the public in that Relevant Member State other than: (a) to any legal entity that is a qualified investor as defined in the Prospectus Directive; (b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant Initial Purchaser or Initial Purchasers nominated by the Issuer for any such offer; or (c) in any other circumstances falling within Article 3(2) of the Prospectus Directive; provided that no such offer of the Notes shall require the publication by the Issuer or any Initial Purchaser of a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospective Directive other than in reliance on Article 3(2)(b). For the purposes of this provision, the expression offer of notes to the public in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression Prospectus Directive means Directive 2003/71/EC and amendments hereto, including the 2010 PD Amending Directive, and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU. Each subscriber for or purchaser of the Notes in the offering located within a member state of the EEA will be deemed to have represented, acknowledged and agreed that it is a qualified investor within the meaning of Article 2(1)(e) of the Prospectus Directive. The Issuer, the Initial Purchasers and their affiliates, and others will rely upon the trust and accuracy iii
of the foregoing representation, acknowledgement and agreement. Notwithstanding the above, a person who is not a qualified investor and who has notified the Initial Purchasers of such fact in writing may, with the consent of the Initial Purchasers, be permitted to subscribe for or purchase the Notes in the offering. Austria. This Offering Memorandum has not been or will not be approved and/or published pursuant to the Austrian Capital Markets Act (Kapitalmarktgesetz), as amended. Neither this Offering Memorandum nor any other document connected therewith constitutes a prospectus according to the Austrian Capital Markets Act and neither this Offering Memorandum nor any other document connected therewith may be distributed, passed on or disclosed to any other person in Austria. No steps may be taken that would constitute a public offering of the Notes in Austria and the offering of the Notes may not be advertised in Austria. Any offer of the Notes in Austria will be made only in compliance with the provisions of the Austrian Capital Markets Act and all other laws and regulations in Austria applicable to the offer and sale of the Notes in Austria. Belgium. The offering of Notes in this Offering Memorandum has not been and will not be notified to the Belgian Financial Services and Markets Authority (Autorité des Services et Marchés Financiers/Autoriteit voor Financiële Diensten en Markten), nor has this Offering Memorandum been or will it be approved by the Belgian Financial Services and Markets Authority. The Notes shall not, whether directly or indirectly, be offered, sold, transferred or delivered in Belgium, as part of their initial distribution or at any time thereafter, by way of a public offering in Belgium except under the exemptions provided in Article 3 2 of the Belgian Law of June 16, 2006 on the public offering of securities and the admission of securities to trading on a regulated market, as amended (the Prospectus Law ): (a) to qualified investors within the meaning of Article 10 of the Prospectus Law and the Royal Decree of September 26, 2006 on the extension of the concept of qualified investor and the concept of institutional or professional investor; or (b) when addressed on the Belgian territory, to less than 150 natural persons or legal entities which are not qualified investors. Each investor who in Belgium acquires Notes shall be taken by so doing to have represented and warranted to the Issuer that it is a qualified investor or that it has complied with any other restrictions applicable in Belgium. For the purposes of this provision, the expression offer of notes to the public in relation to any Notes in Belgium means the communication, in any form and by any means, presenting sufficient information on the terms of the offering and the offer of Notes to be offered so as to enable an investor to decide to purchase or subscribe for the offer of Notes. France. This Offering Memorandum has not been prepared in the context of a public offering in France within the meaning of Article L. 411-1 of the Code Monétaire et Financier and Title I of Book II of the Règlement Général of the Autorité des Marchés Financiers (the AMF ) and therefore has not been submitted for clearance to the AMF. Consequently, the Notes may not be, directly or indirectly, offered or sold to the public in France, and offers and sales of the Notes will only be made in France to providers of investment services relating to portfolio management for the account of third parties (personnes fournissant le service d investissement de gestion de portefeuille pour le compte de tiers) and/or to qualified investors (investisseurs qualifiés) and/or to a closed circle of investors (cercle restreint d investisseurs) acting for their own accounts, as defined in and in accordance with L.411-2, D.411-1 to D.411-4, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code Monétaire et Financier. Prospective investors are informed that (a) this Offering Memorandum has not been and will not be submitted for clearance to the AMF, (b) in compliance with Articles L.411-2 and D.411-1 through D.411-4 of the French Code Monétaire et Financier, any investors subscribing for the Notes should be acting for their own account and (c) the direct and indirect distribution or sale to the public of the Notes acquired by them may only be made in compliance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code Monétaire et Financier. Neither this Offering Memorandum nor any other offering material may be distributed to the public in France. Germany. The Notes may be offered and sold in Germany only in compliance with the German Securities Prospectus Act (Wertpapierprospektgesetz) as amended, the Commission Regulation No. (EC) 809/2004 of April 29, 2004 as amended, or any other laws applicable in Germany governing the issue, offering and sale of securities. This Offering Memorandum has not been approved under the German Securities Prospectus Act (Wertpapierprospektgesetz) or the Directive 2003/71/EC and, accordingly, the Notes may not be offered publicly in Germany. Hong Kong. The Notes may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a prospectus within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement, invitation or document relating to the Notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder. Ireland. This Offering Memorandum has been prepared on the basis that any offer of Notes will be made pursuant to the exemptions in Regulation 9(1)(a), (b) or (d) of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the Irish Prospectus Regulations ) from the requirement to publish a prospectus for offers of notes. Accordingly, any person iv
making or intending to make an offer in Ireland of Notes which are subject of the Offering contemplated in this Offering Memorandum may only do so in circumstances in which no obligation arises for the Issuer or the Initial Purchaser to publish a prospectus pursuant to Regulation 12 of the Irish Prospectus Regulations or supplement a prospectus pursuant to Regulation 51 of the Irish Prospectus Regulations, in each case, in relation to such offer. None of the Issuer or the Initial Purchaser has authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for the Issuer or the Initial Purchaser to publish or supplement a prospectus for such offer. Italy. No action has been or will be taken that could allow an offering of the Notes to the public in the Republic of Italy. Accordingly, the Notes may not be offered or sold directly or indirectly in the Republic of Italy, and neither this Offering Memorandum nor any other offering circular, prospectus, form of application, advertisement, other offering material or other information relating to the Issuer or the Notes may be issued, distributed or published in the Republic of Italy, except under circumstances that will result in compliance with all applicable laws, orders, rules and regulations. The Notes cannot be offered or sold to any natural persons or to entities other than qualified investors (according to the definition provided for by the Prospectus Directive) either on the primary or on the secondary market. Japan. The Notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each Initial Purchaser has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan), or to others for reoffering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan. Jersey. The Jersey Financial Services Commission (the Jersey Commission ) has given, and has not withdrawn, its consent under Article 4 of the Control of Borrowing (Jersey) Order 1958 to the issue of the Notes by the Issuer. The Jersey Commission is protected by the Control of Borrowing (Jersey) Law 1947, as amended, against liability arising from the discharge of its functions under that law. A copy of this document has been delivered to the Jersey registrar of companies in accordance with Article 5 of the Companies (General Provisions) (Jersey) Order 2002, and he has given, and has not withdrawn, his consent to its circulation. It must be distinctly understood that, in giving these consents, neither the Jersey registrar of companies nor the Jersey Commission takes any responsibility for the financial soundness of the Issuer or for the correctness of any statements made, or opinions expressed, with regard to it. It should be remembered that the price of securities and the income from them can go down as well as up. If you are in any doubt about the contents of this document you should consult your stockbroker, bank manager, solicitor, accountant or other financial adviser. Grand Duchy of Luxembourg. The terms and conditions relating to this Offering Memorandum have not been approved by and will not be submitted for approval to the Luxembourg Financial Services Authority (Commission de Surveillance du Secteur Financier) for purposes of public offering or sale in the Grand Duchy of Luxembourg ( Luxembourg ). Accordingly, the Notes may not be offered or sold to the public in Luxembourg, directly or indirectly, and neither this Offering Memorandum nor any other circular, prospectus, form of application, advertisement or other material may be distributed, or otherwise made available in or from, or published in Luxembourg, except for the sole purpose of the admission to trading and listing of the Notes on the Official List of the Luxembourg Stock Exchange and except in circumstances that do not constitute a public offer of securities to the public, subject to prospectus requirements, in accordance with the Luxembourg Act of July 10, 2005 on prospectuses for securities. The Netherlands. The Notes (including rights representing an interest in each global note that represents the Notes) may not be offered or sold to individuals or legal entities in The Netherlands unless a prospectus relating to the offer is available to the public which is approved by the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten) or by a supervisory authority of another member state of the European Union. Article 5:3 of the Financial Supervision Act (the FSA ) and article 53, paragraphs 2 and 3 of the Exemption Regulation FSA provide for several exceptions to the obligation to make a prospectus available, such as an offer to qualified investors within the meaning of Article 5:3 of the FSA. Singapore. This Offering Memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Offering Memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than: (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA ); (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the Notes subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries rights and interest in that trust shall not be transferable v
for six months after that corporation or that trust has acquired the Notes under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA. Spain. The Offering has not been registered with the Comisión Nacional del Mercado de Valores and therefore the Notes may not be offered in Spain by any means, except in circumstances that do not qualify as a public offer of securities in Spain in accordance with article 30 bis of the Securities Market Act (Ley 24/1988, de 28 de julio del Mercado de Valores) as amended and restated, or pursuant to an exemption from registration in accordance with article 41 of the Royal Decree 1310/2005 (Real Decreto 1310/2005, de 4 de noviembre por el que se desarrolla parcialmente la Ley 24/1988, de 28 de julio, del Mercado de Valores, en materia de admisión a negociación de valores en mercados secundarios oficiales, de ofertas públicas de venta o suscripción y del folleto exigible a tales efectos). Sweden. This Offering Memorandum is not a prospectus and has not been prepared in accordance with the prospectus requirements provided for in the Swedish Financial Instruments Trading Act (Sw. lagen (1991:980) om handel med finansiella instrument) nor any other Swedish enactment. Neither the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) nor any other Swedish public body has examined, approved or registered this Offering Memorandum or will examine, approve or register this Offering Memorandum. Accordingly, this Offering Memorandum may not be made available, nor may the Notes otherwise be marketed and offered for sale, in Sweden other than in circumstances that are deemed not to be an offer to the public under the Swedish Financial Instruments Trading Act. Switzerland. The Notes offered hereby are being offered in Switzerland on the basis of a private placement only. This Offering Memorandum does not constitute a prospectus within the meaning of Art. 652A of the Swiss Federal Code of Obligations. United Kingdom. This Offering Memorandum is directed solely at persons who (i) are investment professionals, as such term is defined in Article 19(5) of the Financial Promotion Order, (ii) are persons falling within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations, etc. ) of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FMSA) in connection with the issue or sale of any Notes may otherwise be lawfully communicated or caused to be communicated (all such persons together being referred to as relevant persons ). This Offering Memorandum must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Offering Memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this Offering Memorandum or any of its contents. THIS OFFERING MEMORANDUM CONTAINS IMPORTANT INFORMATION WHICH YOU SHOULD READ BEFORE YOU MAKE ANY DECISION WITH RESPECT TO AN INVESTMENT IN THE NOTES. vi
FORWARD-LOOKING STATEMENTS This Offering Memorandum contains various forward-looking statements that reflect management s current views with respect to future events and anticipated financial and operational performance. Forward-looking statements as a general matter are all statements other than statements as to historical facts or present facts or circumstances. The words aim, anticipate, assume, believe, contemplate, continue, could, estimate, expect, forecast, intend, likely, may, might, plan, positioned, potential, predict, project, remain, should, will or would, or, in each case, their negative, or similar expressions, identify certain of these forward-looking statements. Other forward-looking statements can be identified in the context in which the statements are made. Forward-looking statements appear in a number of places in this Offering Memorandum, including, without limitation, in the sections entitled Summary, Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations, Industry and Business and include, among other things, statements relating to: our strategy, outlook and growth prospects, including our plans to increase the sale of our products and services through cross-selling and up-selling to our existing customers; our operational and financial targets; our results of operations, liquidity, capital resources and capital expenditure; our cost-saving programmes; our financing plans and requirements; the separation of our operations from the Acromas Group and the Saga Group; our planned investments; future growth in demand for our products and services; general economic trends and trends in the markets in which we operate; the impact of regulations and laws on us and our operations; our retention of personal members, B2B customers and B2B partners; the competitive environment in which we operate and pricing pressure we may face; our plans to launch new or expand existing products and services; and the outcome of legal proceedings or regulatory investigations. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual financial condition, results of operations and cash flows, and the development of the industry in which we operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this Offering Memorandum. In addition, even if our financial condition, results of operations and cash flows and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Offering Memorandum, those results or developments may not be indicative of results or developments in subsequent periods. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that they will materialise or prove to be correct. Because these forward-looking statements are based on assumptions or estimates and are subject to risks and uncertainties, the actual results or outcome could differ materially from those set out in the forward-looking statements as a result of, among others: the loss or impairment of our favourable brand recognition; the operational failure of our IT and communication systems or the failure to develop our IT and communication systems; the loss of key contractual relationships with certain B2B partners; increased competition within our business segments; existing competition within the insurance broking market; vii
insufficient technical reserves to cover the cost of insurance claims in connection with our insurance underwriting products; changes in the competitive landscape within the insurance industry, and changes relating to our insurance panel members; failure to renew existing contracts or enter into new contracts with suppliers; litigation (including in connection with roadside injuries or death) or regulatory inquiries or investigations; the failure to comply with data protection laws and regulations or failure to secure and protect personal data; a lack of price harmonisation across our personal member and B2B customer base or changes in the levels of price discounts or churn; our ability to achieve cost savings and control or reduce operating costs; severe or unexpected weather, which may increase our operating costs; changes in economic conditions in the United Kingdom; changes within the vehicle market, including the average age of vehicles on the road, extended manufacturer guarantees and reduced vehicle use; failure to protect our brand and other intellectual property rights from infringement; our ability to successfully manage risks and liabilities relating to acquisitions and integrate any future acquisitions or consummate disposals in the future; our ability to operate as a stand-alone business following the Separation and potential increased operating costs incurred as a stand-alone business; our ability to retain or replace senior management and key personnel; union relations, strikes, work stoppages or other disruptions in our workforce; the interests of our controlling shareholders, Acromas or Saga; adverse changes in the laws and regulations governing our business; risks relating to our pension schemes; risks relating to the Notes; factors affecting our leverage, our ability to service our debt and our structure; risks relating to security, enforcement and insolvency; and risks relating to taxation. Additional factors that could cause our actual results, performance or achievements to differ materially include, but are not limited to, those discussed under Risk Factors. The factors described above and others described under the caption Risk Factors should not be construed as exhaustive. Due to such uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this Offering Memorandum. We urge you to read this Offering Memorandum, including the sections entitled Risk Factors, Summary The Offering and Refinancing, Management s Discussion and Analysis of Financial Condition and Results of Operations, Business and Industry Overview for a more complete discussion of the factors that could affect our future performance and the industry in which we operate. These forward-looking statements speak only as of the date of this Offering Memorandum. We expressly undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law or regulation. Accordingly, prospective investors are cautioned not to place undue reliance on any of the forward-looking statements herein. In addition, all subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this Offering Memorandum, including those set forth under the caption Risk Factors. viii
PRESENTATION OF FINANCIAL AND OTHER INFORMATION Financial Information The Issuer is a special purpose company and was formed on 16 October 2013 for the purpose of issuing the Notes offered hereby and lending the proceeds thereof to the Company. The Issuer has not engaged in any activities other than those related to its formation and the Offering. Separate financial information of the Issuer is not presented in this Offering Memorandum. Unless otherwise indicated, this Offering Memorandum presents the (i) audited consolidated financial statements of the Company as of and for the years ended 31 January 2011, 2012 and 2013, which have been prepared in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) ( UK GAAP ) and audited by the Company s independent auditors, Ernst & Young LLP, as set forth in their audit report included elsewhere herein and (ii) the unaudited interim consolidated financial statements of the Company as of and for the six months ended 31 July 2012 and 2013, which have been prepared in accordance with UK GAAP. See Management s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Results of Operations for the Six Months Ended 31 July 2012 and 2013 for further information on our results of operations for the six months ended 31 July 2012 and 2013. On 26 June 2013, we transferred the entire share capital of Acromas Reinsurance Company Limited ( ARCL ) from The Automobile Association Limited ( TAAL ) to the Company. In addition, on 24 October 2013, Acromas Bid Co Limited transferred all the share capital and assets of Automobile Association (Gibraltar) ( AAG ), formerly known as Automobile Association Insurance Company Limited, to the Company. Under the terms of the Indenture, we may prepare and present future consolidated financial statements for AA Intermediate Co Limited ( Holdco ) and its subsidiaries, rather than for the Company, the Issuer or Topco. See Description of Notes Certain Covenants Reports. As a result of the transfer described above, the results of operations of ARCL will not be reflected in Holdco s results of operations or reported on going forward. Furthermore, AAG has not historically been, and will not in the future, be reflected in Holdco s results of operations. Historically, ARCL made up the entirety of our insurance underwriting segment in our results of operations. AAG may conduct underwriting activities on behalf of the Company in the future. We have also historically made payments to the group treasury function within the Acromas Group to cover various costs and expenses, including Acromas obligations under the Existing Senior Facility Agreement and the Former Mezzanine Facility Agreement. Following the Separation, which took place on 2 July 2013, we no longer remit cash to the Acromas Group treasury and we retain this cash within the Topco Restricted Group, which is comprised of Topco and all of its subsidiaries and excludes the Issuer and the Company (the Topco Restricted Group ). In addition, we may incur increased costs from operating as a stand-alone business and other one-off and exceptional costs in connection with the Separation. As a result of the foregoing, our future consolidated financial statements and the future consolidated financial statements of Holdco will not be directly comparable to our consolidated financial statements for any prior periods, including those contained in this Offering Memorandum. See Summary Recent Developments The Separation. We present our financial statements in pounds sterling. For certain information regarding rates of exchange between sterling and euros and sterling and U.S. dollars, see Exchange Rate Information. This Offering Memorandum includes unaudited consolidated adjusted financial ratios and data which have been adjusted to reflect the issuance of the Additional Class A Notes (as defined herein) and the corresponding reduction in the principal amount outstanding under the Senior Term Facility (as defined herein), which took place on 27 August 2013. See Summary The Offering and Refinancing. The unaudited consolidated adjusted financial ratios and data included in this Offering Memorandum have been prepared for illustrative purposes only and do not purport to represent what the actual consolidated financial position or net financial expenses of the AA Group would have been if the issuance of the Additional Class A Notes had occurred (i) on 31 July 2013 for the purposes of the calculation of net financial position and (ii) on 1 August 2012 for the purposes of the calculation of net financial expenses, nor does it purport to project the AA Group s consolidated financial position and net financial expenses at any future date or for any future period. The unaudited adjustments and the unaudited consolidated adjusted financial ratios and data set out in this Offering Memorandum are based on available information and certain assumptions and estimates that we believe are reasonable and may differ materially from the actual amounts. This Offering Memorandum includes unaudited consolidated pro forma financial ratios and data which have been adjusted to reflect certain effects of the Offering of the Notes offered hereby and application of the proceeds therefrom as described under Use of Proceeds, and the issuance of the Additional Class A Notes (as defined herein) and the corresponding reduction in the principal amount outstanding under the Senior Term Facility (as defined herein), which took place on 27 August 2013. See Summary The Offering and Refinancing. This Offering Memorandum does not include pro forma adjustments for any anticipated one-off costs or other adjustments and costs relating to the Separation and there can be no assurance that any such one-off costs or other adjustments and costs relating to the Separation will not be material. See Summary Recent Developments The Separation. The unaudited consolidated pro forma financial ratios and data included in this Offering Memorandum have been prepared for illustrative purposes only and do not purport to represent what the actual consolidated financial position or net financial expenses of the AA Group would have been if the Offering and the issuance of the Additional Class A Notes had occurred (i) on 31 July 2013 for the purposes of the calculation of net financial ix
position and (ii) on 1 August 2012 for the purposes of the calculation of net financial expenses, nor does it purport to project the AA Group s consolidated financial position and net financial expenses at any future date or for any future period. The unaudited pro forma adjustments and the unaudited consolidated pro forma financial ratios and data set out in this Offering Memorandum are based on available information and certain assumptions and estimates that we believe are reasonable and may differ materially from the actual adjusted amounts. Non-UK GAAP Financial Measures We present in this Offering Memorandum various financial measures that are not measures of financial performance or liquidity under UK GAAP, including the following: Trading turnover, which we define as turnover from our roadside assistance, insurance services, driving services, AA Ireland and insurance underwriting segments and excluding turnover not allocated to a segment. Trading EBITDA, which we define as profit before (i) taxation, (ii) net interest payable and similar charges, (iii) goodwill amortisation, (iv) exceptional items, (v) pension curtailment gain, (vi) items not allocated to a segment and (vii) depreciation. Items not allocated to a segment relate to transactions that do not form part of the ongoing segment performance (including head office costs) and include transactions which are one-off in nature or relate to management charges from the Acromas Group for accessing shared services used by each of the AA Group, Saga Group and Acromas Group. We present Trading EBITDA on both a segmental and a consolidated basis. However, the presentation of segmental Trading EBITDA as a percentage of total Trading EBITDA excludes head office costs to accurately reflect the proportion of our trading activities from each segment. See Note 1 Accounting Policies and Note 2 Segmental Analysis to our audited consolidated financial statements as of and for the years ended 31 January 2011, 2012 and 2013 and to our unaudited interim consolidated financial statements as of and for the six months ended 31 July 2012 and 2013, included elsewhere in this Offering Memorandum. Trading EBITDA margin, which we define as Trading EBITDA as a percentage of Trading turnover. See Summary Consolidated Financial, Operating and Other Data. Available cash inflow from operating activities, which we define as the cash generated from operating activities before returns on investments and servicing of finance, taxation, capital expenditure and financial investments and acquisitions and disposals, which cash is available for investing in the business. See Summary Consolidated Financial, Operating and Other Data. Cash conversion, which we define as available cash inflow from operating activities as a percentage of Trading EBITDA. See Summary Consolidated Financial, Operating and Other Data. Capital expenditure, which we define as the total amount of tangible fixed assets acquired, including assets acquired under finance lease arrangements. See Summary Consolidated Financial, Operating and Other Data. In addition, we present certain financial measures for AA Ireland on a constant currency basis to eliminate foreign currency exchange rate fluctuations, and such presentation of financial measures on a constant currency basis is not in accordance with UK GAAP. The non-uk GAAP financial measures presented herein are not recognised measures of financial performance under UK GAAP, but measures used by management to monitor the underlying performance of our business and operations. In particular, the non-uk GAAP financial measures should not be viewed as substitutes for net profit/(loss) for the period, profit/(loss) before taxation, operating income, cash and cash equivalents at period end or other income statement or cash flow items computed in accordance with UK GAAP. The non-uk GAAP financial measures do not necessarily indicate whether cash flow will be sufficient or available to meet our cash requirements and may not be indicative of our historical operating results, nor are such measures meant to be predictive of our future results. We have presented these non-uk GAAP measures in this Offering Memorandum because we consider them to be important supplemental measures of our performance and believe that they are used by investors comparing performance between companies. Since not all companies compute these or other non-uk GAAP financial measures in the same way, the manner in which our management has chosen to compute the non-uk GAAP financial measures presented herein may not be comparable with similarly defined terms used by other companies. The non-uk GAAP financial measures have certain limitations as analytical tools, and you should not consider these measures in isolation from the other financial information presented herein. Some of these limitations are: they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; they do not reflect changes in, or cash requirements for, our working capital needs; x
they do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments on our debts; although depreciation and amortisation are non-cash charges, the assets being depreciated and amortised will often need to be replaced in the future and operating free cash flow does not reflect any cash requirements that would be required for such replacements; and the fact that other companies in our industry may calculate the non-uk GAAP measures differently from the way we do may limit their usefulness as a comparative measure. Differences between UK GAAP, IFRS and US GAAP The financial information presented in this Offering Memorandum has not been prepared or audited in accordance with accounting principles generally accepted in the United States ( US GAAP ) or International Financial Reporting Standards as adopted by the European Union ( IFRS ). No opinion or any other assurance with regard to any financial information has been expressed under US GAAP or IFRS. We prepare our consolidated financial statements in accordance with UK GAAP, which differs in certain significant respects from IFRS and US GAAP. We have not prepared consolidated financial statements in accordance with, nor have we reconciled our consolidated financial statements to, IFRS or US GAAP. We cannot offer any assurance that we will continue to prepare our consolidated financial statements in accordance with UK GAAP. We cannot offer any assurance that the differences described below would, in fact, be the accounting principles creating the greatest differences between our financial statements in the event we were to present our financial statements in accordance with IFRS. Therefore, we are unable to identify or quantify all the differences that may impact our reported profits, financial position or cash flows in the event they were to be reported under IFRS, and the effects of such differences may be material. We have not included in this Offering Memorandum any explanation of the differences between UK GAAP and US GAAP, which also may be material. We summarise below some of the key differences that may arise in the event we were to present our financial statements in accordance with IFRS. This list is not comprehensive and, except as stated, takes no account of current or future changes to IFRS. We would be required to present an analysis of our operating segments under IFRS 8 Operating Segments. Such presentation may differ from the presentation of our segmental information in accordance with SSAP 25, Segmental Reporting under UK GAAP. We would be required to adopt a different presentation, including the format of our primary statements and incorporate additional disclosures, in areas such as employee benefits and leases, into our financial statements under IFRS as compared with UK GAAP. We would not amortise our goodwill under IFRS. Instead, goodwill would be stated at cost less impairment and reviewed annually for impairment. Under UK GAAP, our goodwill is being amortised over 20 years. We would be required to account for taxation on a temporary difference basis. Under UK GAAP, taxation is accounted for on timing differences. More deferred taxation is likely to be recognised under IFRS. We would measure all derivatives at fair value through profit and loss under IFRS. Under UK GAAP, we account for interest rate swaps by accruing the net interest payable. There are some differences between defined benefit accounting under IFRS and UK GAAP which affect the defined benefit cost recognised in profit and loss and may affect the (net of taxation) value of the defined pension liability recognised in the balance sheet. Under IFRS, the defined benefit obligation would be shown in the balance sheet gross of deferred taxation. Under UK GAAP, the defined benefit obligation is shown net of deferred taxation. IFRS requires that the defined benefit pension asset/liability is recognised in either the individual financial statements of the sponsoring employer or allocated across all participating subsidiaries depending on whether there is a contractual agreement or stated policy for charging to individual group entities the net defined benefit cost for the plan as a whole. Under UK GAAP, the defined benefit pension asset/ liability does not need to be charged to any individual group company if they cannot identify their share of the underlying assets and liabilities. The differences between UK GAAP and IFRS described above are not necessarily differences that have existed throughout the periods covered by the consolidated financial statements presented herein. The above discussion is not intended to provide a comprehensive list of all such differences specifically related to us or the industries in which we operate. IFRS is generally more restrictive and comprehensive than UK GAAP regarding recognition and measurement of transactions, account classification and disclosure requirements. No attempt has been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions and events are presented in our consolidated financial statements or the notes thereto. xi
The International Accounting Standards Board (the IASB ) is working on various projects, including projects to revise accounting for financial instruments, insurance contracts, revenue recognition and leases. The outcome of these projects may affect the measurement, recognition, disclosure and presentation of balances and transactions in the consolidated financial statements or the notes thereto. Until a final IFRS is issued, the impact of such changes resulting from these projects on the consolidated financial statements, if any, cannot be reliably assessed. In November 2012 and March 2013 the UK Financial Reporting Council (FRC) issued new accounting standards which will replace extant UK GAAP for accounting periods beginning on or after 1 January 2015. Financial Reporting Standard 101 (FRS 101) allows qualifying entities (including most subsidiaries) to present individual financial statements in accordance with IFRS but with reduced disclosures. Financial Reporting Standard 102 (FRS 102) is the new UK GAAP which can be applied in both consolidated and individual financial statements. For accounting periods beginning on or after 1 January 2015, entities currently preparing financial statements under UK GAAP must change to either FRS 102, FRS 101 or EU-adopted IFRS. FRS 102 has the following key differences compared to extant UK GAAP: Goodwill must have a finite useful life and is amortised over that life. If the useful life of goodwill cannot be reliably estimated, the life cannot exceed five years. Taxation is recognised on a timing differences plus approach which is similar, but not identical, to the temporary differences approach under IFRS. Derivatives must be measured at fair value through profit and loss. Accounting for defined benefit pension schemes is similar to IFRS. The defined benefit asset/liability must be presented gross of deferred taxation and, in individual financial statements, the defined benefit pension asset/ liability is recognised in either the financial statements of the sponsoring employer or allocated across all participating subsidiaries depending on whether there is a contractual agreement or stated policy for charging to individual group entities the net defined benefit cost for the plan as a whole. The differences between extant UK GAAP and FRS 102 described above are not intended to be a comprehensive list of all such differences specifically related to us or the industries in which we operate. In making an investment decision with respect to the Notes, you should rely upon your own examination of the terms of this Offering and the financial information contained in this Offering Memorandum. You should consult your own professional advisors for an understanding of the differences between UK GAAP, IFRS and US GAAP and how those differences could affect the financial information contained in this Offering Memorandum. Adjustments Certain numerical information and other amounts and percentages presented in this Offering Memorandum may not sum due to rounding. Accordingly, certain figures in this Offering Memorandum have been rounded to the nearest whole number. Certain Terms Used For definitions of certain terms used in this Offering Memorandum, as well as a glossary of other terms used in this Offering Memorandum, see Definitions and Glossary. xii
INDUSTRY AND MARKET DATA In this Offering Memorandum, we rely on and refer to information regarding our business and the markets in which we operate and compete. Certain economic and industry data, market data and market forecasts set forth in this Offering Memorandum were extracted from market research, governmental and other publicly available information, independent industry publications and reports prepared by international consulting firms. These external sources include the Association of British Insurers ( ABI ), Business Monitor International ( BMI ), the UK Department for Transport ( DfT ), Datamonitor, the Office for National Statistics ( ONS ), the Society of Motor Manufacturers and Traders ( SMMT ) and industry data provided by third parties, some of which was commissioned on our behalf. While we have accurately reproduced such third-party information, neither we nor the Initial Purchasers have verified the accuracy of such information, market data or other information on which third parties have based their studies. As far as we are aware and are able to ascertain from information published by these third parties, no facts have been omitted that would render the reproduced information inaccurate or misleading. Market studies are frequently based on information and assumptions that may not be exact or appropriate, and their methodology is by nature forward-looking and speculative. This Offering Memorandum also contains estimates of market data and information derived therefrom that cannot be gathered from publications by market research institutions or any other independent sources. Such information is prepared by us based on third-party sources and our own internal estimates, including studies of the market that we have commissioned. In many cases, there is no publicly available information on such market data, for example, from industry associations, public authorities or other organisations and institutions. We believe that our estimates of market data and information derived therefrom are helpful to give investors a better understanding of the industry in which we operate as well as our position within the industry. Although we believe that our internal market observations are reliable, our own estimates are not reviewed or verified by any external sources. While we are not aware of any misstatements regarding the industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the heading Risk Factors. TRADEMARKS AND TRADE NAMES We are the registered owner of, or have rights to, certain trademarks or trade names that we use in conjunction with the operation of our business. Each trademark, trade name or service mark of any other company appearing in this Offering Memorandum is the property of its respective holder. CURRENCY PRESENTATION In this Offering Memorandum, unless otherwise indicated, all references to, pound, pounds, pounds sterling, sterling and GBP are to the lawful currency of the United Kingdom, all references to, euro, euros, and EUR are to the single currency of the Member States of the European Union participating in the European Monetary Union and all references to $, U.S. dollar, U.S. dollars and USD are to the United States dollar, the lawful currency of the United States of America. xiii
EXCHANGE RATE INFORMATION The following table sets forth, for the periods indicated, certain information concerning the exchange rate for pounds sterling based upon the Bloomberg Composite Rate, expressed in U.S. dollars per 1.00 (rounded to three decimal places). The Bloomberg Composite Rate is a best market calculation, in which, at any point in time, the bid rate is equal to the highest bid rate of all contributing bank indications and the ask rate is set to the lowest ask rate offered by these banks. The Bloomberg Composite Rate is a mid-value rate between the applied highest bid rate and the lowest ask rate. The rates may differ from the actual rates used in the preparation of the consolidated financial statements and other financial information appearing in this Offering Memorandum. Average means the average of the exchange rates on the last business day of each month for annual averages and the average of the exchange rates on each business day during the relevant period for monthly averages. These exchange rates are provided only for the convenience of the reader. No representation is made that amounts in pounds sterling have been, could have been, or could be converted into U.S. dollars, or vice versa. As of 30 October 2013, the mid-rate was USD 1.6067 per 1.00. U.S. DOLLARS PER 1.00 Period End Average High Low Year 2008... 1.4575 1.8519 2.0296 1.4411 2009... 1.6148 1.5659 1.7017 1.3703 2010... 1.5591 1.5457 1.6377 1.4324 2011... 1.5509 1.6039 1.6694 1.5390 2012... 1.6242 1.5851 1.6276 1.5295 2013 (through 30 October 2013)... 1.6067 1.5527 1.6254 1.4858 Month April 2013... 1.5540 1.5311 1.5540 1.5115 May 2013... 1.5174 1.5290 1.5575 1.5051 June 2013... 1.5185 1.5495 1.5694 1.5185 July 2013... 1.5177 1.5177 1.5381 1.4858 August 2013... 1.5477 1.5506 1.5691 1.5125 September 2013... 1.6183 1.5865 1.6183 1.5533 October 2013 (through 30 October 2013)... 1.6067 1.6092 1.6240 1.5922 The following table sets forth, for the periods indicated, certain information concerning the exchange rate for pounds sterling based upon the Bloomberg Composite Rate, expressed in euros per 1.00 (rounded to three decimal places). Average means the average of the exchange rates on the last business day of each month for annual averages and the average of the exchange rates on each business day during the relevant period for monthly averages. These exchange rates are provided only for the convenience of the reader. No representation is made that amounts in pounds sterling have been, could have been, or could be converted into euros, or vice versa. As of 30 October 2013, the mid-rate was Euro 1.1663 per 1.00. EUROS PER 1.00 Period End Average High Low Year 2008... 1.0442 1.2574 1.3611 1.0209 2009... 1.1269 1.1229 1.1851 1.0414 2010... 1.1665 1.1663 1.2358 1.0961 2011... 1.1967 1.1525 1.2042 1.1071 2012... 1.2307 1.2332 1.2863 1.1789 2013 (through 30 October 2013)... 1.1663 1.1746 1.2328 1.1431 Month April 2013... 1.1809 1.1756 1.1887 1.1651 May 2013... 1.1700 1.1779 1.1886 1.1656 June 2013... 1.1675 1.1741 1.1787 1.1675 July 2013... 1.1431 1.1601 1.1737 1.1431 August 2013... 1.1723 1.1645 1.1749 1.1446 September 2013... 1.1959 1.1880 1.1959 1.1775 October 2013 (through 30 October 2013)... 1.1663 1.1797 1.1978 1.1663 The rates in each of the foregoing tables may differ from the actual rates used in the preparation of the consolidated financial statements and other financial information appearing in this Offering Memorandum. We have provided these exchange rates solely for the convenience of potential investors. The rates should not be construed as a representation that pounds sterling amounts could have been, or could be, converted into euro or U.S. dollars at the rates set forth herein or at any other rate. No representation is made that amounts in pounds sterling have been, could have been, or could be converted into euros, or vice versa. xiv
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