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described above or presents a certificate from the relevant tax authority establishing exemption therefrom. The Directive is,
subject to certain conditions being satisfied, expected to apply from July 1, 2005.
United States Federal Income Tax Considerations
The following discussion is a summary based on present law of certain U.S. federal income tax considerations relevant
to the purchase, ownership and disposition of the Notes. This discussion addresses only U.S. Holders who purchase Notes in
the original Offering at the original offering price, hold the Notes as capital assets and use the U.S. dollar as their functional
currency. This discussion is not a complete description of all U.S. tax considerations relating to the Notes. It does not address
the tax treatment of prospective purchasers that will hold the Notes in connection with a German permanent establishment. It
also does not address the tax treatment of prospective purchasers subject to special rules, such as banks, dealers, traders that
elect to mark to market, insurance companies, investors liable for the alternative minimum tax, U.S. expatriates, tax-exempt
entities or persons holding the Notes as part of a hedge, straddle, conversion or other integrated financial transaction. It also
does not address prospective purchasers of Additional Notes, which may be issued at a discount or premium. This summary
assumes that the Notes will be treated as debt for U.S. federal income tax purposes.
THE STATEMENTS ABOUT U.S. FEDERAL INCOME TAX ISSUES ARE MADE TO SUPPORT
MARKETING OF THE NOTES. NO TAXPAYER CAN RELY ON THEM TO AVOID U.S. FEDERAL TAX
PENALTIES. EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT
THE U.S. FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PURCHASING, HOLDING AND
DISPOSING OF THE NOTES.
For purposes of this discussion, a “U.S. Holder” is a beneficial owner that is, for purposes of U.S. federal income
taxation, (i) a citizen or resident alien of the United States, (ii) a corporation or other business entity treated as a corporation
created or organized in or under the laws of the United States or its political subdivisions, (iii) a trust subject to the control of
a U.S. person and the primary supervision of a U.S. court, or (iv) an estate the income of which is subject to U.S. federal
income taxation regardless of its source.
If a partnership acquires or holds the Notes, the tax treatment of a partner generally will depend upon the status of the
partner and the activities of the partnership. A partner of a partnership that acquires or holds the Notes should consult its own
tax advisors.
Interest
Interest paid on the Notes, including any Additional Amounts, will be included in the gross income of a U.S. Holder as
ordinary income in accordance with the holder’s regular method of tax accounting. Interest generally will be income from
sources outside the United States.
In the case of a Euro Note, a cash basis U.S. Holder must include in income a U.S. dollar amount equal to the U.S.
dollar value of the euro interest payment at the spot exchange rate on the date of receipt, whether or not the payment is
converted into U.S. dollars, and an accrual basis U.S. Holder generally must include in income the U.S. dollar value of the
accrued euro interest at the average exchange rate for the accrual period (or, if an accrual period spans two taxable years, the
partial period within each taxable year). Upon receipt of the interest, an accrual basis U.S. Holder generally will recognize
foreign currency exchange gain or loss equal to the difference between the U.S. dollar amount of the interest previously
accrued and the U.S. dollar value of the euro received at the spot exchange rate on the date of receipt. Foreign currency
exchange gain or loss generally will be U.S. source ordinary income or loss.
An accrual basis U.S. Holder may elect to convert accrued euro interest into U.S. dollars at the spot exchange rate on
the last day of the accrual period (or, if an accrual period spans two taxable years, at the spot exchange rate on the last day of
the part of the accrual period within each taxable year). If accrued interest actually is received within five business days of
the last day of the accrual period, an electing accrual basis U.S. Holder may instead convert the accrued interest at the spot
exchange rate on the date of receipt. Any currency conversion election will apply to all debt instruments that the electing U.S.
Holder holds or acquires at or after the beginning of the first taxable year to which the election applies. The election cannot
be revoked without the consent of the U.S. Internal Revenue Service.
Disposition
A U.S. Holder generally will recognize gain or loss on a sale, redemption or other disposition of a Note in an amount
equal to the difference between the U.S. dollar value of the amount realized (less any accrued but unpaid interest, which is
taxed as interest) and the U.S. Holder’s adjusted tax basis in the Note. In the case of a Euro Note, the U.S. dollar amount
realized will be the value of the euro received at the spot exchange rate on the date of disposition (or, if the Notes are traded
on an established securities exchange and the holder is a cash basis or an electing accrual basis U.S. Holder, the settlement
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