FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

Insolvency of the Issuer
The Issuer is neither subject to the provisions of the French Commercial Code relating to bankruptcy and
insolvency proceedings, nor to the provisions of the French Monetary and Financial Code relating to
credit institutions (établissements de crédit), investment companies (entreprises d’investissement) or
investment funds (organismes de placement collectif en valeurs mobilières) and its liquidation may only be
effected in accordance with the French Monetary and Financial Code and the Issuer Regulations (see
‘‘The Issuer’’).
Change of law
The structure of the issue of the Notes is based on French law and French tax, regulatory and
administrative practice in effect as at the date of this Offering Circular having due regard to the expected
tax treatment of all relevant entities under such law and practice. No assurance can be given as to the
impact of any possible change to French law and French tax, regulatory or administrative practice after
the date of this Offering Circular.
Changes to the Basel Capital Accord (Basel II)
In June 2004, the Basel Committee on Banking Supervision (the ‘‘Committee’’) published Basel II, which
will replace the 1988 Capital Accord and contains a new set of standards for determining the minimum
capital requirements for banking organisations and places enhanced emphasis on market discipline and
sensitivity to risk. It is the intention of the Committee that, for the most part, the new framework will be
available for implementation by member jurisdictions by the end of 2006. However, for more advanced
approaches to risk measurement, implementation will not occur until the end of 2007. In addition a capital
floor may be imposed on some banks until 2009. In order for the new framework to be put into effect for
credit and financial institutions in Europe it will need to be implemented via an EU Capital Adequacy
Directive, proposals for which have been presented by the European Commission. Basel II may, amongst
other things, affect the risk-weighting of the Notes in respect of certain investors if those investors are
regulated in a manner which will be affected by the new framework. Consequently, prospective purchasers
should consult their own advisers as to the consequences of, and the effect on them of, the implementation
of Basel II.
4. Risks relating to Taxation
French corporate income status of the Borrowers
The Borrowers have different corporate forms. They consist of sociétés à responsabilité limité (each, an
‘‘SARL’’), sociétés par actions simplifiées (each, an ‘‘SAS’’) and sociétés civiles immobilières (each, an
‘‘SCI’’).
Each Borrower that is an SARL or an SAS is liable to French corporate income tax.
Under French tax law, an SCI is deemed to be a transparent entity, subject to certain exceptions which do
not apply to the Borrowers. Accordingly, the shareholders of a Borrower that is incorporated as an SCI
include their share of the profits or losses realised by that Borrower in their taxable income and are
directly liable vis-à-vis the French tax authorities for the payment of French income tax due on those
taxable profits, if any.
Interest paid by the Borrowers to the Issuer
Pursuant to current French tax legislation, interest paid by the Borrowers to the Issuer on the Commercial
Mortgage Loans is not subject to withholding tax in France.
French corporate income status of the Issuer
The Issuer is exempt from French corporate income tax on income (including interest income) realised
within the framework of its legal purpose.
Withholding Tax in respect of the Notes and the Hedging Agreements
In the event that withholding taxes are imposed in respect of payments to Noteholders of amounts due
pursuant to the Notes (as to which see the section entitled ‘‘Taxation’’ below), neither the Issuer nor any
Paying Agent nor any other person will be obliged to pay any additional amounts to Noteholders or to
otherwise compensate Noteholders for the reduction in the amounts which they will receive as a result of
such withholding or deduction. If such a withholding or deduction is required to be made, the Issuer will
have the option (but not the obligation, unless the Borrowers have exercised their rights to prepay the
Commercial Mortgage Loans in such circumstances and in certain circumstances subject to the consent of
the Borrowers) of redeeming all outstanding Notes in full at their Principal Amount Outstanding
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