ALBA 2007 – 1 plc - Irish Stock Exchange

unforeseen taxable profits in the Issuer could have an adverse affect on its ability to make payments to
Noteholders.
EU Savings Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is
required to provide to the tax authorities of another Member State details of payments of interest or
other similar income paid by a person within its jurisdiction to, or secured by such a person for, an
individual resident in that other Member State; however, for a transitional period, Austria, Belgium and
Luxembourg are instead required (unless during that period they elect otherwise) to apply a withholding
system in relation to such payments, deducting tax at rates rising over time to 35%. The transitional
period is to terminate at the end of the first full fiscal year following agreement relating to information
exchange with certain non-EU countries.
A number of non-EU countries, and certain dependent or associated territories of certain Member
States, have agreed to adopt similar measures (either provision of information or transitional
withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a
person for, an individual resident or certain limited types of entity established in a Member State. In
addition, the Member States have entered into provision of information or transitional withholding
arrangements with certain of those dependent or associated territories in relation to payments made by a
person in a Member State to, or collected by such a person for, an individual resident or certain limited
types of entity established in one of those territories.
Withholding Tax under the Notes
In the event that withholding taxes are imposed in respect of payments due in respect of the Notes,
neither the Issuer nor any Paying Agent nor any other person is obliged to gross up or otherwise
compensate Noteholders for the lesser amounts received as a result of the imposition of such
withholding taxes. The imposition of such withholding taxes would entitle (but not oblige) the Issuer to
redeem the Notes at their Principal Amount Outstanding (plus accrued and unpaid interest). See
Condition 5(e) for further details.
Legal Considerations
European Monetary Union
Prior to the maturity of the Notes and Instruments, the United Kingdom may become a participating
Member State in the European Economic and Monetary Union and the euro may become the lawful
currency of the United Kingdom. Adoption of the euro by the United Kingdom may have the following
consequences: (i) all amounts payable in respect of the Notes may become payable in euro; (ii) the
introduction of the euro as the lawful currency of the United Kingdom may result in the disappearance
of published or displayed rates for deposits in sterling used to determine the rates of interest on the
Notes and Subordinated Notes and the Mortgage Loans, or changes in the way those rates are
calculated, quoted and published or displayed; and (iii) the Issuer may choose to redenominate the
Notes into euro and take additional measures in respect of the Notes.
The introduction of the euro could also be accompanied by a volatile interest rate environment which
could adversely affect a Borrower's ability to repay its Mortgage Loan as well as adversely affect
investors. It cannot be said with certainty what effect, if any, adoption of the euro by the United
Kingdom will have on investors in the Notes and Instruments.
Change of Law