DA ITAD BIR Ruling No. 073-08

October 29, 2008 DA ITAD BIR RULING NO. 073-08 Articles 5 (Permanent Establishment), 7 (Business Profits) and 14 (Personal Services); Philippines-Singapore tax treaty; Sections 23 (F), 42 (A) (3) and 108 (A) National Internal Revenue Code of 1997; BIR Ruling No. DA-ITAD 37-07 Angara Abello Concepcion Regala & Cruz Law Offices ACCRA Building 122 Gamboa Street, Legaspi Village 0770 Makati City Attention: Atty. Ruby Rose J. Yusi Atty. Rudyard S. Arbolado Gentlemen : This refers to your letter dated March 9, 2007, requesting confirmation that the servicing fees to be paid by Cameron Granville Asset Management (AMC-SPV), Inc. (Cameron Granville) and LNC (SPV-AMC) Corporation (LNC Corporation) to HVB Asia Limited (HVB Asia) pursuant to their respective Asset Servicing Agreements are exempt from Philippine income tax 1 under the Convention between the Republic of the Philippines and the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (Philippines-Singapore tax treaty). 2 BASIC FACTS It is represented that HVB Asia is a corporation organized and existing under the laws of Singapore, with address at 30 Cecil Street, No. 25-01 Prudential Tower, Singapore 049712, as evidenced by a Certificate of Residence dated December 2, 2005, issued to HVB Asia by the Inland Revenue Authority of Singapore; that HVB Asia is not registered as a corporation or as a partnership in the Philippines, as confirmed by a Certificate of Non-Registration of Corporation/Partnership dated February 17, 2006, issued by the Securities and Exchange Commission; and that, on the other hand, Cameron Granville and LNC Corporation are corporations organized and existing under the laws of the Philippines, with the same address at the Karport Building, 32nd Street, Fort Bonifacio, Global City, 1630 Taguig, Philippines. AHEDaI The Asset Servicing Agreement between Cameron Granville and HVB Asia It is also represented that on July 15, 2005, Cameron Granville and HVB Asia entered into an Asset Servicing Agreement whereby Cameron Granville appointed HVB Asia as its agent to service its Assets; that the Assets consist of the Loans 3 and the other proceeds of the Loans, related assets acquired by Cameron Granville, the Foreclosed Properties, 4 and the Liquidation Proceeds; 5 and that HVB Asia's general obligations under the Agreement are as follows: 1. Performing and complying in the name and on behalf of Cameron Granville, all material provisions, covenants and other terms required of Cameron Granville to perform and comply with under the Loan Documents 6 and under any other related contracts or agreements. EaScHT 2. Initiating, prosecuting and carrying through the completion of the Proceedings Management 7 and the marketing and closing of the sales of the Assets. 3. Executing in a timely manner acts and documents and performing activities or transactions in preserving Cameron Granville's rights under the Loan Documents and any other relevant security or guarantee, and cooperating with Cameron Granville in affecting the transfer of title to the Assets to protect its interest. 4. Performing acts in the name and on behalf of Cameron Granville, making filings, giving notices, and making and maintaining registrations and other modifications required by Philippine laws for the servicing of the Assets. 5. Maintaining an effective system of audits and controls to ensure that HVB Asia's agents, representatives, employees (including any seconded employees), and other staff perform their respective obligations and meet HVB Asia's requirements in the Agreement or requirements pursuant to Philippine laws or any requirements of law. EcaDCI 6. Making reasonable notifications to Cameron Granville of all material communications received from Obligors. 7. Maintaining a complete set of books and records of the Assets and ensuring that they are kept in safe custody in the manner expected of a prudent financial institution and are separated from Cameron Granville's other books and records pertaining to its other assets. 8. Maintaining and keeping custody of the Loan Documents, Loan Files 8 and Loan Evidences. 9. Preparing or causing to be prepared financial, tax and other reports required of Cameron Granville, assisting Cameron Granville in providing notice of meetings of its Board, and supervising independent accountants who audit Cameron Granville's annual reports and accounts. 10. Providing Cameron Granville information it requests in maintaining a complete set of books and records of the Assets. 11. Preparing regulatory reports required of Cameron Granville to file relating to the ownership and administration of the Assets. 12. Managing Qualified Advisors 9 in connection with the enforcement, settlement, management, operation and disposition of the Assets. 13. Arranging the Liquidation Proceeds 10 of the Assets, to be repatriated to Cameron Granville's bank account on a quarterly basis. DcITaC It is further represented that in the course of servicing the Assets, HVB Asia will be undertaking activities in the Philippines, which include but are not limited to: 1. Inspecting the Mortgaged Properties and Foreclosed Properties and performing or causing to be performed their valuations based on market value, appraisals, title searches and other reviews or inspections, which HVB Asia deems necessary or which Cameron Granville directs to determine the economic value of such properties. 2. Maintaining in the name and on behalf of Cameron Granville (or causing the related Obligor to maintain with respect to a Mortgage Loan) a fire and hazard insurance as is usual and customary in the Philippines. At the request of Cameron Granville and when such insurance is available in the Philippines, HVB Asia will also maintain in the name and on behalf of Cameron Granville such insurance for each Foreclosed Property with a Qualified Insurer. 11 3. Using its best efforts in managing each Foreclosure Proceeding to maximize Cameron Granville's recovery from the related Obligor. HVB Asia is thereby authorized to enter into and execute any documents necessary in order to cause title to any Foreclosed Property. TcEAIH 4. Offering as an agent of Cameron Granville in selling any of its Loans or Foreclosed Properties at a fair price to any person. It is further represented that as consideration for the foregoing, Cameron Granville will be paying HVB Asia a servicing fee, payable quarterly in arrears on the last business day of the relevant quarter, with the first quarter commencing on the date of the Agreement on July 15, 2005; that the servicing fee shall be equal to an amount calculated on an hourly rate basis agreed between Cameron Granville and HVB Asia for such work undertaken by the latter's Servicing Officers; 12 and that the Agreement became effective on July 15, 2005, and will continue to be effective until terminated by Cameron Granville by giving written notice to HVB Asia thirty days prior to such termination, or until the Final Recovery Determination 13 of the last remaining Loan or Foreclosed Property. EcHIDT It is further represented, in a notarized Affidavit of the Corporate Secretary of Cameron Granville dated March 13, 2007, that HVB Asia has not yet sent its Servicing Officers in the Philippines to perform its obligations under the Asset Servicing Agreement with Cameron Granville. The Asset Servicing Agreement between LNC Corporation and HVB Asia It is also represented that on July 15, 2005, LNC Corporation and HVB Asia entered into an Asset Servicing Agreement whereby LNC Corporation appointed HVB Asia as its agent to service its Assets; that the Assets consist of any asset described and identified as such in Schedule 1 of the Agreement, including (a) Properties 14 in connection with which LNC Corporation has been registered with the relevant governmental agencies as titleholder, (b) Properties purchased by, constructed by, or transferred to, LNC Corporation, in connection with which LNC Corporation has not yet been registered as titleholder and its interest to such Properties as of the date thereof, (c) the rights and interests of LNC Corporation to receive any Property and/or benefits derived from such Property, if any, under any agreement pursuant to which an Obligor 15 is obliged to transfer such property to LNC Corporation, while the registered title to the relevant Property has not been transferred to LNC Corporation as of the date of thereof, (d) the rights and interest of LNC Corporation to receive any Property and/or benefits derived from such Property, if any, under a final and conclusive court judgment and/or order issued by the court, while the registered title to the relevant Property has not been transferred to LNC Corporation as of the date thereof, and (e) the rights and interests of LNC Corporation to use certain Property and to receive relevant interest from such Property; and that HVB Asia's general obligations under the Agreement are as follows: CDScaT 1. Causing title to any Foreclosed Property 16 or any other asset to be transferred to LNC Corporation in payment or settlement in whole or part of any loan to be registered in the name of LNC Corporation, or otherwise, as LNC Corporation directs. 2. Engaging on behalf of LNC Corporation property managers to manage, conserve, protect and operate any Foreclosed Property for the purpose of its prompt disposition and sale. 3. Offering, on behalf of LNC Corporation, to sell any Foreclosed Property if and when a consultant determines that such sale would be in the best economic interests of LNC Corporation. 4. Timely execution of acts and documents and performing activities or transactions in preserving LNC Corporation's right, and cooperating with LNC Corporation in affecting the transfer of title to the Assets to protect its interest. 5. Performing acts in the name and on behalf of LNC Corporation, making filings, giving notices, and making and maintaining registrations and other modifications required by Philippine laws for the servicing of the Assets. aDcEIH 6. Maintaining an effective system of audits and controls to ensure that HVB Asia's agents, representatives, employees (including any seconded employees), and other staff perform their respective obligations and meet HVB Asia's requirement in the Agreement or requirements pursuant to Philippine laws or any requirements of law. 7. Providing reasonable notifications to LNC Corporation of all material communications received from Obligors. 8. Maintaining a complete set of books and records of the Assets and ensuring that they are kept in safe custody in the manner expected of a prudent financial institution and are separated from LNC Corporation's other books and records pertaining to its other assets. 9. Maintaining and keeping custody of the Asset Documents. 17 10. Preparing or causing to be prepared financial, tax and other reports required of LNC Corporation, assisting LNC Corporation in providing notice of meetings of its Board, and supervising independent accountants who audit LNC Corporation's annual reports and accounts. AcISTE 11. Providing LNC Corporation information it requests in maintaining a complete set of books and records of the Assets. 12. Preparing regulatory reports required LNC Corporation to file relating to the ownership and administration of the Assets. 12. * Managing Qualified Advisors 18 in connection with the enforcement, settlement, management, operation and disposition of the Assets. 13. Arranging the Resolution Proceeds 19 of the Assets, to be repatriated to LNC Corporation's bank account on a quarterly basis. ADHcTE It is further represented that HVB Asia, in the course of servicing the Assets, will be undertaking activities in the Philippines, which include but are not limited to: 1. Inspecting the Foreclosed Properties and performing or causing to be performed their valuations based on market value, appraisals, title searches and other reviews or inspections, which HVB Asia deems necessary or which LNC Corporation directs to determine the economic value of such properties. AcCTaD 2. Maintaining in the name and on behalf of LNC Corporation a fire and hazard insurance as is usual and customary in the Philippines. At the request of Cameron Granville and when such insurance is available in the Philippines, HVB Asia will also maintain in the name and on behalf of LNC Corporation such insurance for each Foreclosed Property with a Qualified Insurer. 20 3. Offering as an agent of LNC Corporation in selling any of its Foreclosed Properties at a fair price to any person. It is further represented that as consideration, LNC Corporation will be paying HVB Asia a servicing fee, payable quarterly in arrear on the last business day of the relevant quarter, with the first quarter commencing on the date of the Agreement on July 15, 2005; that the servicing fee shall be equal to an amount calculated on an hourly rate basis agreed between LNC Corporation and HVB Asia for such work undertaken by the latter's Servicing Officers; 21 and that the Agreement became effective on July 15, 2005, and will continue to be effective until terminated by LNC Corporation by giving written notice to HVB Asia thirty days prior to such termination, or until the Final Recovery Determination 22 of the last remaining Asset. IDAEHT It is finally represented, in a notarized Affidavit of the Assistant Corporate Secretary of LNC Corporation dated March 13, 2007, that HVB Asia has not yet sent its Servicing Officers in the Philippines to perform its obligations under the Asset Servicing Agreement with LNC Corporation. EDcIAC RULING A. On income tax. In reply, please be informed that concerning income tax, Section 23 (F) of the National Internal Revenue Code of 1997 (Tax Code) provides that a foreign corporation like HVB Asia, whether or not engaged in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines, thus: "SEC. 23. General Principles of Income Taxation in the Philippines. Except when otherwise provided in this Code: xxx xxx xxx (F) A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines." TcEaAS Relative thereto, Section 42 (A) (3) of the Tax Code provides that income from furnishing services are considered derived from sources within the Philippines when such services are performed in the Philippines, thus: "Section 42. Income from Sources Within the Philippines. (A) Gross Income from Sources Within the Philippines. The following items of gross income shall be treated as gross income from sources within the Philippines: DTAIaH xxx xxx xxx (3) Services. Compensation for labor or personal services performed in the Philippines;" Thus, pursuant to Sections 23 (F) and 42 (A) (3) of the Tax Code, the servicing fees to be paid by Cameron Granville and LNC Corporation to HVB Asia for such work that will be carried out by the latter's Servicing Officers in the Philippines are generally subject to Philippine income tax, while the servicing fees to be paid by Cameron Granville and LNC Corporation to HVB Asia for such work that will be carried out by the latter's Servicing Officers abroad (particularly, in Singapore) are exempt from Philippine income tax. (BIR Ruling No. DA-ITAD 37-07 dated March 8, 2007.) IScaAE With respect to the servicing fees taxable in the Philippines, paragraph 1, Article 7 of the Philippines-Singapore tax treaty provides, however, that such fees may be taxable only if they are attributable to a permanent establishment which HVB Asia has in the Philippines. Paragraph 1 provides: "Article 7 Business Profits 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on or has carried on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment." CEaDAc Relative thereto, under paragraphs 1 and 2, Article 5 of the Philippines-Singapore tax treaty, a permanent establishment is defined as a fixed place of business in which the business of an enterprise is wholly or partly on, and includes, for example, a branch and an office, and even the furnishing of services which continue for a period or periods aggregating more than 183 days. Paragraphs 1 and 2 provide: "Article 5 Permanent Establishment 1. For the purposes of this Convention, the term 'permanent establishment' means a fixed place of business in which the business of the enterprise is wholly or partly carried on. ADSTCa 2. The term 'permanent establishment' includes specially but is not limited to: a) A seat of management; b) A branch; c) An office; d) A store or other sales outlet; e) A factory; f) A workshop; g) A warehouse, in relation to a person providing storage facilities for others; h) A mine, quarry, or other place of extraction of natural resources; i) A building site or construction or assembly project or installation project or supervisory activities in connection therewith, provided such site, project or activity continues for a period more than 183 days; and j) The furnishing of services, including consultancy services, by a resident of one of the Contracting States through employees or other personnel, provided activities of that nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 183 days." EaCSTc Based on the respective notarized Affidavits dated March 13, 2007, of the Corporate Secretary of Cameron Granville and the Assistant Corporate Secretary of LNC Corporation, which certify that HVB Asia has not yet sent its Servicing Officers in the Philippines to perform its obligations under its respective Asset Servicing Agreements with Cameron Granville and LNC Corporation, the question of permanent establishment is not yet relevant to HVB Asia, at least as of the date of the Affidavits on March 13, 2007, because HVB Asia is not yet considered to derive income from sources within the Philippines. However, if HVB Asia sends its Servicing Officers in the Philippines in the future, the servicing fees to be paid by Cameron Granville and LNC Corporation to HVB Asia for such work carried out by the latter's Servicing Officers will be subject to Philippine income tax if such fees are attributable to a permanent establishment which HVB Asia has in the Philippines. Otherwise, in the absence of a permanent establishment, the servicing fees to be paid to HVB Asia will be exempt from Philippine income tax. (BIR Ruling No. DA-ITAD 37-07 dated March 8, 2007.) AEIHCS With respect to a permanent establishment in the form of a branch or office, HVB Asia is presumed to have this kind of permanent establishment if it registers as a corporation or as a partnership in the Philippines to engage in trade or business. Based on the Certificate of Non-Registration of Corporation/Partnership dated February 17, 2006, issued by the Securities and Exchange Commission to HVB Asia, we believe that HVB Asia, at least as of that date, does not yet have a branch or office in the Philippines since it is not yet registered to engage in trade or business. With respect to a permanent establishment based on the number of days of furnishing services, HVB Asia is considered to have a permanent establishment of this kind if the work being carried out by its Servicing Officers in the Philippines continues for a period or periods aggregating more than 183 days. AaHcIT Furthermore, salaries, allowances, and other remuneration of the Servicing Officers of HVB Asia are income from personal services and are governed by the provisions of paragraphs 1 and 2, Article 14 of the Philippines-Singapore tax treaty, which provide: "Article 14 Personal Services 1. Subject to the provisions of Articles 15, 17, 18, and 19, salaries, wages and other similar remuneration or income for personal (including professional) services derived by a resident of a Contracting State, shall be taxable only in that Contracting State, unless the services are performed in the other Contracting State. If the services are so performed, such remuneration or income as is derived therefrom may be taxed in that other Contracting State. CAcEaS 2. Notwithstanding the provisions of paragraph 1, remuneration or income derived by a resident of a Contracting State for personal (including professional) services performed in the other Contracting State shall be taxable only in the first-mentioned Contracting State if : a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 90 days in the case of professional services and 183 days in other cases, in the calendar year concerned; and b) the remuneration or income is paid by, or on behalf of, a person who is a resident of the first-mentioned Contracting State; and c) the remuneration or income is not borne directly by a permanent establishment which that person has in the other Contracting State." 23 Under paragraph 1, the subject salaries, allowances and other remuneration are generally subject to Philippine income tax. However, under paragraph 2, such income from personal services may be exempt only if the following three conditions concur, namely, (1) that the Servicing Officers (counted individually) are not present in the Philippines for an aggregate period or periods exceeding 183 days in the calendar year concerned, (2) that the salaries, allowances and other remuneration are paid by, or on behalf, of a person who is a resident of Singapore (this is satisfied already because HVB Asia, the person who pays the remuneration, is a resident of Singapore), and (3) that the salaries, allowances and other remuneration are not borne directly by a permanent establishment which that person has in the Philippines. (BIR Ruling No. DA-ITAD 37-07 dated March 8, 2007.) HSTAcI B. On value-added tax. Finally, concerning value-added tax (VAT), Section 108 (A) of the Tax Code of 1997, as amended by Republic Act No. 9337, 24 provides that the VAT is imposed on the sale or exchange of services, including the use or lease of properties, in the Philippines, thus: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties: Provided, that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds one and one-half percent (1 1/2%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%). SITCEA The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration . . ." 25 Thus, pursuant to Section 108 (A) of the Tax Code, the servicing fees to be paid by Cameron Granville and LNC Corporation to HVB Asia for such work that will be carried out by the latter's Servicing Officers in the Philippines are subject to VAT, while the servicing fees to be paid by Cameron Granville and LNC Corporation to HVB Asia for such work that will be carried out by the latter's Servicing Officers abroad (particularly, in Singapore) are exempt from VAT. (BIR Ruling No. DA-ITAD 119-06 dated October 10, 2006.) With regard to the procedures for withholding and paying the VAT, pursuant to Sections 4 and 6 of Revenue Regulations No. 4-2002, Section 3 of Revenue Regulations No. 8-2002, and Section 7 of Revenue Regulations No. 14-2002, Cameron Granville and LNC Corporation shall be responsible for the withholding of VAT on the servicing fees before remitting them to HVB Asia. In remitting to the Bureau of Internal Revenue the VAT withheld, Cameron Granville and LNC Corporation shall use BIR Form No. 1600 (Monthly Remittance Return of VAT and Other Percentage Taxes Withheld). If they are VAT-registered taxpayers, Cameron Granville and LNC Corporation may use as documentary substantiation for their claim of input VAT the duly filed BIR Form No. 1600 and the proof of payment accompanying it. On the other hand, if they are non-VAT-registered taxpayers, Cameron Granville and LNC Corporation may include as part of the cost of the services provided to them by HVB Asia the VAT consequently shifted or passed on to them and may treat such VAT either as expense or asset, whichever is applicable. In addition, Cameron Granville and LNC Corporation are required to issue in quadruplicate the Certificate of Final Tax Withheld at Source (BIR Form No. 2306), the first three copies for HVB Asia and the fourth copy for Cameron Granville and LNC Corporation as their file copy. SCEDAI This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Footnotes 1. In that letter, it was also requested that dividends to be paid by Cameron Granville to HVB Asia are to be subject to Philippine income tax at the rate of 15% of the gross amount thereof, but such request was eventually withdrawn by Angara Abello Concepcion Regala & Cruz Law Offices in its letter dated March 13, 2007. DHSACT 2. Signed on August 1, 1977, and effective on January 1, 1977. 3. Loan means, individually, any of the loans set forth in Schedule 1 of the Asset Servicing Agreement and other related assets and collateral in respect of that Loan acquired by Cameron Granville, and Loans, means, collectively, all of the loans set forth in Schedule 1 and the other related assets and collateral acquired by Cameron Granville. 4. Foreclosed Property means any Settled Asset Property and any Mortgage Property or other asset transferred to Cameron Granville in payment or settlement in whole or in part of any Loan. Settled Asset Property means, with respect to any Settled Asset, the land, improvements, personal property and other items that are covered under such Settled Asset. The term Settled Asset Property shall apply to a particular Settled Asset Property or to the aggregate Settled Asset Property, as the context may require. Settled Assets means those Loans designated as Settled Assets on Schedule 1. Mortgage Property means the property, whether real or personal, encumbered by a Mortgage. Mortgage means any mortgages and/or other instrument or security securing the repayment of any Loan, including any amendments or modifications thereto. ASCTac 5. Liquidation Proceeds means the amount received by HVB Asia on behalf of Cameron Granville (a) in connection with the enforcement of a Mortgage Loan through an auction, sale or otherwise, or (b) in connection with a sale, repayment in full or in part, liquidation or other disposition or satisfaction of a Loan or a Foreclosed Property. Mortgage Loan means each Loan that is secured by a Mortgage. 6. Loan Documents means the agreements, instruments and documents evidencing, securing or relating in any way to a Loan acquired by Cameron Granville, including (but not limited to) any Note, Loan Evidence, or Mortgage evidencing or securing a Loan and any bankruptcy, reorganization, composition, rationalization or other restructuring plan in effect with respect to a Loan or the Obligor under any Loan. Note means the original promissory note or other similar instrument evidencing the indebtedness of an Obligor under a Loan, together with any rider, addendum or amendment thereto. Loan Evidence means any agreement or document evidencing the indebtedness of an Obligor under a Loan (including without any limitation any guarantee, indemnity or other contractual right), other than a Note, together with any rider, addendum or amendment thereto. The Loan evidence might include, without limitation, original documents or copies thereof. Obligor means, with respect to any Loan, the unreleased obligors (including the issuer, guarantors or endorsers of a Note or Loan Evidence) as of the date specified. 7. Proceedings Management means the prosecution of the Foreclosure Proceedings and Insolvency Proceedings as directed by Cameron Granville, management of the Assets and negotiation with Obligors at the direction of Cameron Granville, and any other appropriate action with respect to the resolution, restructuring, settlement or other disposition of the assets and/or the Mortgaged Properties in accordance with instructions of Cameron Granville and with Philippine laws. Foreclosure Proceedings means the court proceedings (including, without limitation, any proceedings, process and/or acts in connection with the enforcement of any judgment or settlement agreement) by which a creditor seeks payment of the outstanding amount of a mortgage loan, together with the related interest and expenses, pursuant to Philippine laws. Foreclosure Proceedings include, but are not limited to, auctions of property subject to a Mortgage in full or partial satisfaction of a non-performing loan. Insolvency Proceedings means any bankruptcy, liquidation, insolvency, dissolution or reorganization procedure under Philippine laws. ASHEca 8. Loan File means the underwriting, servicing and collateral documents relating to a Loan. 9. Qualified Advisor will mean any counsel or third party advisor or consultant who is independent and experienced in real property transactions and investments in the locale with respect to which the advice is being sought. 10. Liquidation Proceeds means the amount received by HVB Asia on behalf of Cameron Granville (a) in connection with the enforcement of a Mortgage Loan through an auction, sale or otherwise, or (b) in connection with a sale, repayment in full or in part, liquidation or other disposition or satisfaction of a Loan or a Foreclosed Property. 11. Qualified Insurer means an insurance company or security or bonding company independent of HVB Asia qualified to write the related insurance policy in the relevant locale whose claims paying ability at the time of determination is rated at least an investment grade by a recognized statistical organization or otherwise approved by Cameron Granville. 12. Servicing Officer means any officer, senior employee or representative of HVB Asia involved in, or responsible for, the administration and servicing of the Assets, whose name and specimen signature appear on a list of servicing officers furnished to Cameron Granville by HVB Asia, as such list may from time to time be amended. aTHCSE 13. Final Recovery Determination means, with respect to any Asset, the actual recovery of the full amount of all Insurance Proceeds, Liquidation Proceeds and other payments or recoveries (including proceeds of the final sale of any Foreclosed Property and any payments from a Surety) that is expected to be finally recoverable. Insurance Proceeds means proceeds of any fire and hazard insurance policy, title insurance policy or other insurance policy relating to a Loan, a Mortgaged Property or a Foreclosed Property to the extent such proceeds are not to be applied to the restoration of the related Mortgaged Property or Foreclosed Property or released to the Obligor in accordance with the express requirements of a Loan Document or other documents included in a Loan File or in accordance with prudent and customary servicing practices. Liquidation Proceeds means the amount received by HVB Asia on behalf of Cameron Granville (a) in connection with the enforcement of a Mortgage Loan through an auction, sale or otherwise, or (b) in connection with a sale, repayment in full or in part, liquidation or other disposition or satisfaction of a Loan or a foreclosed Property. Surety means any payment guarantee on a Loan made by any financial institution or any other institution that issues guarantees as part of its business. TDaAHS 14. Properties means the applicable land, buildings, fixtures, construction in progress or such other properties relating to an Asset. 15. Obligor means any person obliged to transfer a Property to LNC Corporation, or the liquidation committee of such person. 16. Foreclosed Property means any Property or other asset transferred to LNC Corporation in payment or settlement in whole or in part of any loan. 17. Asset Documents means, with respect to each asset, the settlement agreement, the court judgment and/or order, the ownership certificates of buildings and all other documents, agreements, instruments or correspondence relating to such Asset. 18. Qualified Advisor will mean any counsel or third party advisor or consultant who is independent and experienced in real property transactions and investments in the locale with respect to which the advice is being sought. 19. Liquidation Proceeds means the amount received by HVB Asia on behalf of LNC Corporation in connection with a sale, liquidation or other disposition or satisfaction of an Asset. cDCEHa 20. Qualified Insurer means an insurance company or security or bonding company independent of HVB Asia qualified to write the related insurance policy in the relevant locale whose claims paying ability at the time of determination is rated at least an investment grade by a recognized statistical organization or otherwise approved by LNC Corporation. 21. Servicing Officer means any officer, senior employee or representative of HVB Asia involved in, or responsible for, the administration and servicing of the Assets, whose name and specimen signature appear on a list of servicing officers furnished to LNC Corporation by HVB Asia, as such list may from time to time be amended. aHcACI 22. Final Recovery Determination means, with respect to any Asset, the actual recovery of the full amount of all Insurance Proceeds, Resolution Proceeds and other payments or recoveries (including proceeds of the final sale of any Foreclosed Property) that is expected to be finally recoverable. Insurance Proceeds means proceeds of any fire and hazard insurance policy, title insurance policy or other insurance policy relating to a Property to the extent such proceeds are not to be applied to the restoration of the related Property. Resolution Proceeds means the amount received by HVB Asia on behalf of LNC Corporation in connection with a sale, liquidation or other disposition of an Asset. 23. The 90-day period for professional services is not applicable to the Servicing Officers because they are considered employees or 'dependent' of HVB Asia. Under paragraph 3 of Article 15, the term professional services includes independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. HaIATC 24. Entitled An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 238 of the National Internal Revenue Code of 1997, as Amended, and for Other Purposes, which was signed into law on May 24, 2005 and became effective on November 1, 2005. 25. The VAT rate was increased to 12% on February 1, 2006, in accordance with the Memorandum of the Executive Secretary to the Secretary of Finance dated January 31, 2006, as circularized by Revenue Memorandum Circular No. 7-2006 (Publishing the Full Text of the Memorandum from Executive Secretary Eduardo R. Ermita dated January 31, 2006 Approving the Recommendation of the Secretary of Finance to Increase the Value Added Tax Rate from Ten Percent to Twelve Percent) dated January 31, 2006. CcAITa