Offering Memorandum

ARES VIII CLO LTD. ARES VIII CLO LLC

$233,900,000 Class A-1-A Senior Secured Notes Due 2016 $22,600,000 Class A-1-B Senior Secured Notes Due 2016 $150,000,000 Class A-2 Senior Secured Notes Due 2016 $17,000,000 Class A-3 Senior Secured Notes Due 2016 $23,650,000 Class B-1 Senior Secured Deferrable Interest Notes Due 2016 $9,350,000 Class B-2 Senior Secured Deferrable Interest Notes Due 2016 $19,200,000 Class C-1 Senior Secured Deferrable Interest Notes Due 2016 $13,800,000 Class C-2 Senior Secured Deferrable Interest Notes Due 2016 $6,750,000 Class D-1 Subordinated Secured Deferrable Interest Notes Due 2016 $3,000,000 Class D-2 Subordinated Secured Deferrable Interest Notes Due 2016 $1,250,000 Class D-3 Subordinated Secured Deferrable Interest Notes Due 2016 $49,500,000 Mandatorily Redeemable Preference Shares $8,000,000 Class 1 Composite Securities Due 2016 $8,000,000 Class 2 Composite Securities Due 2016 $4,000,000 Class 3 Composite Securities Due 2016 $10,000,000 Class 4 Composite Securities Due 2016 $2,750,000 Class 5 Composite Securities Due 2016 $3,250,000 Class 6 Composite Securities Due 2016 $13,000,000 Class 7 Composite Securities Due 2016 $2,250,000 Class 8 Composite Securities Due 2016
Ares VIII CLO Ltd. and Ares VIII CLO LLC will co-issue the Class A-1-A Notes, the Class A-1-B Notes, the Class A-2 Notes, the Class A-3 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, and the Class C-2 Notes; and Ares VIII CLO Ltd. will issue the Class D-1 Notes, the Class D-2 Notes, the Class D-3 Notes, the Preference Shares, the Class 1 Composite Securities, the Class 2 Composite Securities, the Class 3 Composite Securities, the Class 4 Composite Securities, the Class 5 Composite Securities, the Class 6 Composite Securities, the Class 7 Composite Securities, and the Class 8 Composite Securities. The Notes and the Composite Securities will be issued pursuant to the Indenture among the Issuer, the Co-Issuer, and U.S. Bank National Association, a national banking association, as trustee. The Preference Shares will be issued by the Issuer pursuant to its Issuer Charter, certain Resolutions of the Issuer, and the Preference Share Paying and Transfer Agency Agreement. The Notes and the Preference Shares are issuable up to the amounts listed above, which include the Notes and Preference Shares issuable upon any exchange of any Class of the Composite Securities for the Securities represented by their respective Components. In addition to Eligible Investments and certain other Collateral described in this Offering Memorandum, the Issuer is permitted to invest in a portfolio of Collateral Obligations consisting of Loans made primarily to corporate obligors, a limited amount of Structured Finance Obligations, a limited amount of High-Yield Bonds, and a limited amount of Synthetic Securities. Ares CLO Management VIII, L.P., an affiliate of Ares Management LLC, will manage the Collateral for the Issuer. Refer to the Glossary for the definitions of capitalized terms or to the Index of Defined Terms for the page where the applicable definition may be found. (continued)
For a discussion of certain risk factors that, among other things, should be considered by prospective purchasers of the Securities, see Risk Factors. Certain pledged assets of the Issuer will be the sole source of payments on the Securities. The Securities will not represent an interest in or obligations of, and will not be insured or guaranteed by, the holders of the Preference Shares, the Portfolio Manager, J.P. Morgan Securities Inc, the Trustee, the Collateral Administrator, the Preference Share Paying Agent, the Administrator, the Share Trustee, any Hedge Counterparty, or any of their respective affiliates. The Securities have not been, and will not be, registered under the United States Securities Act of 1933 or the securities laws of any state of the United States or any other relevant jurisdiction, and neither the Issuer nor the Co-Issuer will be registered under the United States Investment Company Act of 1940. The Securities will be offered and sold in the United States to persons that are either (a) both Qualified Institutional Buyers (as defined in Rule 144A under the Securities Act) and Qualified Purchasers or (b) both institutional Accredited Investors (within the meaning specified in Rule 501(a)(1), (2), (3), or (7) of Regulation D under the Securities Act) and Qualified Purchasers. The Securities will be offered and sold outside the United States to persons that are not U.S. Persons (as defined in Regulation S under the Securities Act) in offshore transactions in reliance on Regulation S. The Preference Shares will be offered and sold in the United States to persons that are both Accredited Investors (as defined in Rule 501(a) of Regulation D) and either Knowledgeable Employees with respect to the Issuer or Qualified Purchasers. In making its purchase, each purchaser of Securities will be required to make or deemed to have made certain acknowledgments, representations, and agreements described under Transfer Restrictions. The Securities are offered by J.P. Morgan Securities Inc. when, as, and if the Securities are received and accepted by it and subject to prior sale, withdrawal, cancellation, or modification of the offer without notice, to its right to reject orders, in whole or in part, and to certain other conditions. The Securities are expected to be delivered on or about March 24, 2004 in the offices of J.P. Morgan Securities Inc., New York, New York, against payment for them in immediately available funds. The Securities are offered by J.P. Morgan Securities Inc. from time to time for sale to investors in negotiated transactions.

April 15, 2004

The Class 1 Composite Securities will consist of a component entitling their holders to rights equivalent to rights in respect of $4,400,000 of Class C-2 Notes, and a component entitling their holders to rights substantially equivalent to rights in respect of 3,600 Preference Shares. The Class 2 Composite Securities will consist of a component entitling their holders to rights equivalent to rights in respect of $5,000,000 of Class B-2 Notes, and a component entitling their holders to rights substantially equivalent to rights in respect of 3,000 Preference Shares. The Class 3 Composite Securities will consist of a component entitling their holders to rights equivalent to rights in respect of $2,580,000 of Class B-2 Notes and a component entitling their holders to rights substantially equivalent to rights in respect of 1,420 Preference Shares. The Class 4 Composite Securities will consist of a component entitling their holders to rights substantially equivalent to rights in respect of $5,000,000 of Class A-1-B Notes, a component entitling their holders to rights substantially equivalent to rights in respect of $3,000,000 of Class D-2 Notes, and a component entitling their holders to rights substantially equivalent to rights in respect of 2,000 Preference Shares. The Class 5 Composite Securities will consist of a component entitling their holders to rights substantially equivalent to rights in respect of $1,770,000 of Class B-2 Notes, and a component entitling their holders to rights substantially equivalent to rights in respect of 980 Preference Shares. The Class 6 Composite Securities will consist of a component entitling their holders to rights to receive proceeds from a trust account initially holding a United States Treasury strip security maturing on February 15, 2016 with a principal amount at maturity of $3,250,000, and a component entitling their holders to rights substantially equivalent to rights in respect of 1,260 Preference Shares. The Class 7 Composite Securities will consist of a component entitling their holders to rights substantially equivalent to rights in respect of $5,600,000 of Class A-1-B Notes, a component entitling their holders to rights substantially equivalent to rights in respect of $3,400,000 of Class C-2 Notes, and a component entitling their holders to rights substantially equivalent to rights in respect of 4,000 Preference Shares. The Class 8 Composite Securities will consist of a component entitling their holders to rights substantially equivalent to rights in respect of 2,250 Preference Shares. The Securities and certain other obligations will have the priorities of payment described in this Offering Memorandum. Payment of interest on, and principal of, the Note Interests, and any distributions on the Preference Share Interests will be made quarterly in arrears on the Business Day after the 25th day of each February, May, August, and November and at Stated Maturity or any other date that the Note Interests are redeemed or paid before then commencing in August 2004, if and to the extent funds are available for that purpose in accordance with the Priority of Payments. Distributions on the Preference Share Interests will not be payable at a stated rate but instead as described under Application of Funds. Interest on the Note Interests and the Class 1 Composite Securities for each Interest Period will be payable quarterly on the next Payment Date after that Interest Period in accordance with the Priority of Payments. Interest on the Class A-1-A, Class A-2, Class A-3, Class B-1, Class C-1, and Class D-1 Notes, and interest on Defaulted Interest and Deferred Interest, will be computed on the basis of a 360-day year and the actual number of days elapsed during each Interest Period, and interest on the Class A-1-B, Class B-2, Class C-2, Class D-2, and Class D-3 Notes and the Class 1 Composite Securities, and interest on Defaulted Interest and Deferred Interest or any Class 1 Composite Security Deferred Interest Amount, if applicable, will be computed on the basis of a 360-day year and twelve 30-day months. The Class A-1-A Notes will accrue interest at an annual rate of LIBOR plus 0.43%. The Class A-1-B Notes will accrue interest at an annual rate of 4.252%. The Class A-2 Notes will accrue interest at an annual rate of LIBOR plus 0.41%. The Class A-3 Notes will accrue interest at an annual rate of LIBOR plus 0.60%. The Class B-1 Notes will accrue interest at an annual rate of LIBOR plus 1.35%. The Class B-2 Notes will accrue interest at an annual rate of 5.535%. The Class C-1 Notes will accrue interest at an annual rate of LIBOR plus 2.65%. The Class C-2 Notes will accrue interest at an annual rate of 6.901%.The Class D-1 Notes will accrue interest at an annual rate of LIBOR plus 6.25%. The Class D-2 Notes will accrue interest at an annual rate of 9.340%. The Class D-3 Notes will accrue interest at an annual rate of 8.840%. The Class 1 Composite Securities will accrue interest at an annual rate of 2.00%. The principal amount of the Notes will be payable on the Payment Date in February 2016, to the extent not redeemed or paid in full before then. The Preference Share Interests will receive, subject to Cayman Islands law and the Preference Share Paying and Transfer Agency Agreement, certain amounts available for distribution to the Holders of the Preference Share Interests in accordance with the Priority of Payments. See Application of Funds. Each Note Interest will be subject to earlier repayment or redemption.

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The Securities will not be issued unless each Class of Securities receives the ratings listed under Summary of TermsSecurities Offered. No rating of the Class 8 Composite Securities or the Preference Shares will be sought or obtained in connection with their issuance. See Summary of TermsRatings. Application has been made to the Irish Stock Exchange to admit the Securities to the Daily Official List of the Irish Stock Exchange. The Issuer cannot assure you that admission will be granted or maintained. In connection with the offering of the Securities, J.P. Morgan Securities Inc. may, as permitted by applicable law, overallot or effect transactions that stabilize or maintain the market price of the Securities at a level that might not otherwise prevail in the open market. Any stabilizing, if commenced, may be discontinued at any time.

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NOTICES TO PURCHASERS Notice to New Hampshire Residents Neither the fact that a registration statement or an application for a license has been filed under Chapter 421B of the New Hampshire revised statutes 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 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 on 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. General No person has been authorized to make or provide any representation or information regarding the CoIssuers or the Securities other than as in this Offering Memorandum (this Offering Memorandum). Any such representation or information should not be relied on as having been authorized by the Co-Issuers, J.P. Morgan Securities Inc. (the Initial Purchaser), or the Portfolio Manager. The delivery of this Offering Memorandum at any time does not imply that the information in this Offering Memorandum is correct as of any time after the date of this Offering Memorandum. Unless otherwise indicated, all information in this Offering Memorandum is given as of the date of this Offering Memorandum. This Offering Memorandum has been prepared by the Issuer solely for use in connection with the offering and listing of the Securities. Except with respect to information relating to the Portfolio Manager, the CoIssuers accept responsibility for the information in this Offering Memorandum. To the best of the knowledge and belief of the Co-Issuers the information in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of the information in this Offering Memorandum. The information under The Portfolio Manager has been prepared by the Portfolio Manager and has not been independently verified by the Initial Purchaser or the Co-Issuers. The Initial Purchaser and the CoIssuers do not assume any responsibility for the accuracy, completeness, or applicability of that information, except that the Co-Issuers assume responsibility for accurately reproducing the information in this Offering Memorandum. The Trustee has not participated in the preparation of this Offering Memorandum and does not assume any responsibility for the accuracy, completeness, or applicability of any information in this Offering Memorandum. The Initial Purchaser, the Portfolio Manager, and the Trustee (except, in the case of the Portfolio Manager, with respect to the information under The Portfolio Manager) do not make any representation or warranty, express or implied, as to the accuracy or completeness of the information in this Offering Memorandum. Each person receiving this Offering Memorandum acknowledges that such person has not relied on the Initial Purchaser, the Portfolio Manager, or the Trustee (except, in the case of the Portfolio Manager, with respect to the information under The Portfolio Manager) or any person affiliated with any of them, in connection with its investigation of the accuracy of the information in this Offering Memorandum or its investment decision. Each person contemplating making an investment in the Securities must make its own investigation and analysis of the creditworthiness of the Issuer and its own determination of the suitability of any investment, with particular reference to its own investment objectives and experience, and any other factors that may be relevant to it in connection with its investment. In making an investment decision investors must rely on their own examination of the Issuer or the CoIssuers, as applicable, and the terms of the offering, including the merits and risks involved. The Securities have not been approved or disapproved by the United States Securities and Exchange Commission or any state securities commission or other regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offense. iv

The Notes and the Composite Securities are non-recourse obligations of the Issuer or Co-Issuers, as applicable. The Preference Shares are unsecured equity interests of the Issuer only. The Securities are not deposits or other interests in or obligations of, and are not guaranteed by or secured by the assets of, the Holders of the Preference Shares, the Portfolio Manager, the Initial Purchaser, the Trustee, the Collateral Administrator, the Share Trustee, the Preference Share Paying Agent, the Administrator, any Hedge Counterparty, or any of their respective Affiliates. Neither the Securities nor the related Collateral is insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency or person, as applicable. Each initial purchaser and subsequent transferee of a Security will be required or deemed, as applicable, to make certain ERISA-related representations, warranties, and covenants as described in Certain ERISA and Other Considerations and Transfer Restrictions. Each purchaser of Class A, Class B, or Class C Notes (except as otherwise agreed by the Co-Issuers and the Initial Purchaser with respect to a Global Note), and each transferee of a Class A, Class B, or Class C Note will be required to acknowledge, represent, and agree in writing (and each purchaser of a Security that is not required to acknowledge, represent, and agree in writing and each transferee of a Class A, Class B, or Class C Note represented by a Global Note will be deemed to have acknowledged, represented, and agreed), at the time of its purchase or acquisition and throughout the period of its holding and disposition of the Class A, Class B, or Class C Note, either that it is not, and it will not be, an employee benefit plan subject to the U.S. Employee Retirement Income Security Act of 1974 (ERISA), a plan described in Section 4975(e)(1) of the U.S. Internal Revenue Code of 1986 (the Code), or an entity whose underlying assets include (or are deemed to include) plan assets, or a governmental or other plan that is subject to any federal, state, local, or foreign law that is substantially similar to Section 406 of ERISA or Section 4975 of the Code (any of the foregoing, a Benefit Plan Investor) or its purchase, holding, and disposition of a Class A, Class B, or Class C Note will not be or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental or other plan, a violation of any substantially similar federal, state, or local law). Each purchaser of a Class D Note, a Composite Security, or a Preference Share will be required to represent and agree, at the time of its purchase or acquisition and throughout the period of its holding and disposition of the Class D Note, Composite Security, or Preference Share that either (a) it is not, and it will not be, a Benefit Plan Investor or acting on behalf of or using the assets of any Benefit Plan Investor to acquire the Class D Note, Composite Security, or Preference Share, or (b) (for purchasers in the original offering only) it is an insurance company acting on behalf of its general account and less than 25% of the assets of the general account are plan assets for purposes of Title I of ERISA and Section 4975 of the Code, the insurance company is not a controlling person with respect to the assets of the Issuer,

without limiting the remedies for a breach of the foregoing assurances, the insurance company agrees that if, after its initial acquisition of the Class D Note, Composite Security, or Preference Share, at any time during any calendar quarter 25% or more of the assets of the general account are plan assets for purposes of Title I of ERISA or Section 4975 of the Code or it becomes a Controlling Person, then the insurance company shall, in a manner consistent with the restrictions on transfer in this Offering Memorandum, dispose of all the Class D Notes, Composite Securities, and Preference Shares held in its general account by the end of the next following calendar quarter unless an exemption or exception pursuant to Section 401(c) of ERISA and the related final v

regulations or under an exemption or regulation issued by the U.S. Department of Labor under ERISA exists such that its continued holding of the Class D Notes, Composite Securities, and Preference Shares could not subject any person to liability on the basis of a claim that the assets of the Issuer are plan assets, and the insurance companys purchase, holding, and disposition of the Class D Note or Composite Security will not be or result in a non-exempt transaction under Section 406 of ERISA or Section 4975 of the Code. See Risk FactorsRelating to the SecuritiesInvestors Should Review ERISA Considerations Applicable to the Securities and Certain ERISA and Other Considerations for a detailed discussion of certain ERISA-related considerations with respect to an investment in the Class D Notes, the Composite Securities, or the Preference Shares. The Securities are new issues of securities. There can be no assurance that a secondary market for any of the Securities will develop, or if a secondary market does develop, that it will provide the Holders of the Securities with liquidity of investment or that it will continue. The Securities are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act of 1933 and applicable state securities laws, pursuant to registration or exemption from registration. Accordingly, investors should be prepared to bear the risks of holding the Securities until final payment is made. The contents of this Offering Memorandum are not to be construed as legal, business, or tax advice. Each prospective investor should consult its own attorney, business advisor, and tax advisor as to legal, business, and tax advice. This Offering Memorandum is not an offer by, or an invitation by or on behalf of, either Co-Issuer or the Initial Purchaser to subscribe to or purchase any of the Securities in any jurisdiction where it is unlawful to make such an offer or invitation. The distribution of this Offering Memorandum and the offering of the Securities in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Memorandum comes are required by the Issuer and the Initial Purchaser to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of Securities and distribution of this Offering Memorandum, see Certain Additional Provisions Relating to the SecuritiesForm, Registration, and Transfer of the Securities, Plan of Distribution, and Transfer Restrictions. Neither the Issuer nor the Co-Issuer will be registered under the Investment Company Act. Each purchaser of Securities represented by an interest in a Rule 144A Global Note will be deemed to, and each U.S. purchaser of Certificated Securities will be required to, acknowledge, represent, and agree that the purchaser is a qualified purchaser for purposes of Section 3(c)(7) of the Investment Company Act (or, with respect to the Preference Shares only, a knowledgeable employee with respect to the Issuer) and is acquiring the Securities in the required minimum denominations (see SummaryMinimum Denominations of Notes and Composite Securities and Minimum Purchase of Preference Shares). See Transfer Restrictions. Prospective purchasers of the Securities are hereby notified that a seller of the Securities may be relying on an exemption from the registration requirements of Section 5 of the Securities Act provided by Rule 144A under the Securities Act. None of the Issuer, the Co-Issuer, the Portfolio Manager, or the Initial Purchaser makes any representation to any offeree or purchaser of Securities regarding the legality of its investment under applicable legal investment or similar laws or regulations or the proper classification of the investment under those laws. Investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether and to what extent the Securities are legal investments for them. No action has been taken or is being contemplated by the Co-Issuers that would permit a public offering of the Securities or possession or distribution of this Offering Memorandum or any other offering material vi

relating to the Securities in any jurisdiction (other than Ireland) where action for those purposes is required. Nothing in this Offering Memorandum is an offer to sell or a solicitation of an offer to purchase any Securities in any jurisdiction where it is unlawful to do so absent taking further action. In addition, notwithstanding anything to the contrary in this Offering Memorandum, all persons may disclose to anyone, without limitation of any kind, the tax treatment and tax structure of the transactions described in this Offering Memorandum and all materials of any kind (including opinions or other tax analyses) relating to the tax treatment and tax structure. This authorization of tax disclosure is retroactively effective to the commencement of discussions regarding the transactions contemplated in this Offering Memorandum. Jurisdictional Notices to Purchasers Notice to Residents of Ireland The Initial Purchaser has represented and agreed that, except in certain circumstances that are not an offer to the public within the meaning of the Companies Act 1963 (as amended) of Ireland (the 1963 Act), it has not offered or sold and will not offer or sell the Securities in Ireland or elsewhere, using any document before an application for listing of the Securities being made and the Irish Stock Exchange having approved the relevant listing particulars in accordance with the 1984 Regulations and thereafter using any document other than (i) the relevant listing particulars or (ii) a form of application issued in connection with the Securities that indicates where the relevant listing particulars can be obtained or inspected and that is issued with the relevant listing particulars. The Initial Purchaser has represented and agreed that it has complied with and will comply with all applicable provisions of the 1963 Act and the 1984 Regulations with respect to anything done by it in relation to the Securities in, from, or otherwise involving Ireland. The Initial Purchaser has represented and agreed that it has not made and will not make any offer of the Securities that would require a prospectus to be issued under the European Communities (Transferable Securities and Stock Exchange) Regulations 1992 of Ireland. To the extent applicable, the Initial Purchaser confirms that it will not underwrite the issue of, or place, the Securities otherwise than in conformity with the Irish Investment Intermediaries Act 1995 (as amended), including Section 9, 23 (including any advertising restrictions made thereunder), and any code of conduct rules made under Section 37 and the Investor Compensation Act 1998, including Section 21. Notice to Residents of Australia Neither this Offering Memorandum nor any other prospectus or disclosure document in relation to the Securities has been lodged with, or registered by, the Australian Securities and Investments Commission (ASIC). (i) No offer or invitation of an offer of the Securities for issue or sale has been made or will be made in Australia (including an offer or invitation that is received by a person in Australia); and No distribution or publication of this Offering Memorandum or any other offering material or advertisement relating to the Securities in Australia has been made or will be made, unless (a) the minimum aggregate consideration payable by each offeree is at least A$500,000 (disregarding moneys lent by the offeror or its associates) or the offer otherwise does not require disclosure to investors in accordance with Part 6d.2 of the Corporations Act, and (b) the action complies with all applicable laws and regulations.

(ii)

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Notice to Residents of Austria The Securities may only be offered in the Republic of Austria in compliance with the Austrian Capital Market Act and other laws applicable in the Republic of Austria governing the offer and sale of the Securities in the Republic of Austria. The Securities are not registered or otherwise authorised for public offer either under the Capital Market Act or the Investment Fund Act. The recipients of this Offering Memorandum and other selling material with respect to the Securities have been individually selected and are targeted exclusively on the basis of a private placement. Accordingly, the Securities may not be, and are not being, offered or advertised publicly or offered similarly under either the Capital Market Act or the Investment Fund Act. This offer may not be made to any other persons than the recipients to whom this document is personally addressed. Notice to Residents of Bahrain The purchase of the Securities will be by invitation only, and no offer will be made in Bahrain to the public to purchase the Securities. This Offering Memorandum is intended to be read only by the addressees. Notice to Residents of Belgium The Issuer represents and agrees that it has not offered or sold and will not offer or sell, directly or indirectly, at the time of the placing, any of the Securities by a public offering in Belgium or that the Securities will be offered only to persons falling under the definition of a professional investor in accordance with the Royal Decree of 7 July 1999. Notice to Residents of the Cayman Islands No invitation may be made to any member of the public in the Cayman Islands to subscribe for the Securities, and this document may not be issued or passed to any such person. Notice to Residents of Denmark This Offering Memorandum has not been filed with or approved by the Danish Securities Council or any other regulatory authority in the Kingdom of Denmark. The Securities have not been offered or sold and may not be offered, sold, or delivered directly or indirectly in Denmark, unless in compliance with the Danish Executive Order No 299 of 20 April 1998 on the first public offer of certain securities issued pursuant to Chapter 12 of the Danish Act on Trading in Securities. Notice to Residents of France This Offering Memorandum is furnished to you solely for your information and may not be reproduced or redistributed to any other person. It is strictly confidential and is solely destined for persons or institutions to which it was initially supplied. This document is not an offer or an invitation to subscribe for or to purchase any securities and neither this document nor anything in this Offering Memorandum shall form the basis of any contract or commitment whatsoever. This document may not be distributed to the public in France or used in connection with any offer for subscription or sale of securities in France other than in accordance with Article l-411-2 of the code montaire et financier et dcret No. 98-880 dated 1 October 1998. This document has not been submitted to the Commission des Oprations de Bourse for approval and is not an offer for sale or subscription of securities. Notice to Residents of Germany The Securities described in the Offering Memorandum may only be acquired in Germany in accordance with the German Wertpapiererkaufsprospektgesetz (Securities Sales Prospectus Act). No prospectus has been filed viii

with the German Federal Securities Trading Supervisory Authority or published in Germany. Consequently, the Securities are only offered on a private placement basis to investors who buy and sell securities as their profession or commerce for their own account. Notice to Residents of Hong Kong The Initial Purchaser has represented and agreed that it has not offered or sold and will not offer or sell in Hong Kong, using any document, any Securities other than to persons whose ordinary business is to buy or sell shares or debentures (whether as principal or agent) or in circumstances that is not an offer to the public within the meaning of the Companies Ordinance of Hong Kong. The Initial Purchaser has further represented and agreed that it has not issued and will not issue any advertisement, invitation, or document relating to the Securities, whether in Hong Kong or elsewhere, that 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 securities laws of Hong Kong) other than with respect to Securities that 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 of Hong Kong and any rules made thereunder. Notice to Residents of Japan The offering or sale of the Securities have not been, and will not be, registered under the Securities and Exchange Law of Japan (Law No. 25 of 1948, as amended). Neither the Securities nor any interest in them may be offered, sold, resold, or otherwise transferred, directly or indirectly, in Japan or to or for the account of any resident of Japan (which term as used in this Offering Memorandum means any person resident in Japan, including any corporation or other entity organised under the laws of Japan), or to others for reoffering or sale, directly or indirectly, in Japan or to or for the account of any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the securities and exchange law and any other applicable law, regulations, and ministerial guidelines of Japan. Notice to Residents of Luxembourg The Securities may not be offered to the public in Luxembourg, unless the applicable legal and regulatory requirements, in particular the rules in the 28 December 1990 Grand Ducal Regulation (On the Requirements for the Drawing-Up, Scrutiny and Distribution of a Prospectus to Be Published Where Transferable Securities to Official Stock Exchange Listing) have been complied with. Notice to Residents of the Netherlands The Securities may not be offered, as part of their initial distribution or as part of any re-offering, in the Netherlands, except for Securities having a denomination of at least euro 45,379 (or its equivalent). If any Securities are issued: (a) (b) (c) At a discount, they may only be offered in the Netherlands if their issue price is no less than euro 45,379 (or its equivalent); On a partly-paid basis, they may only be offered in the Netherlands if paid-up at least to an amount of euro 45,379 (or its equivalent); or With a denomination of precisely euro 45,379 (or equivalent), they may only be offered in the Netherlands on a fully-paid basis and at par or at a premium.

Notice to Residents of Norway The offering of the Securities will not be a public offer in Norway and this Offering Memorandum is intended to be read by the addressee only.

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Notice to Residents of Portugal The Securities have not been offered, advertised, sold, or delivered and will not be directly or indirectly offered, advertised, sold, re-sold, re-offered, or delivered in circumstances that would qualify as a public offer pursuant to the Codigo dos Valores Mobillarios or in circumstances that could qualify the issue of the Securities as an issue in the Portuguese market. The Securities have not been directly or indirectly distributed and this Offering Memorandum, any other document, circular, advertisement, or any offering material will not be directly or indirectly distributed except in accordance with all applicable laws and regulations. Notice to Residents of Singapore This Offering Memorandum has not been registered as a prospectus with the Monetary Authority of Singapore (MAS) and the Securities are offered by the Issuer pursuant to exemptions invoked under Section 274 or Section 275 of the Securities and Futures Act (chapter 289) of Singapore (SFA). Accordingly, the Securities may not be offered or sold or be made the subject of an invitation for subscription or purchase nor may this Offering Memorandum or any other document in connection with the offer or sale, or invitation for subscription or purchase, of the Securities be circulated or distributed, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor or other person specified in Section 274 of the SFA, (ii) to a sophisticated investor, 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. A copy of this document has been lodged with the MAS as an information memorandum for the purposes of Section 275 of the SFA. Notice to Residents of Spain The Securities may not be offered or sold in Spain except in accordance with the requirements of the Spanish Securities Market Law (Ley 24/1988, de 28 de Julio, del Mercado de Valores), as amended and restated, and Royal Decree 291/1992 of 27 March, on Issues and Public Offerings of Securities (Real Decreto 291/1992 de 27 Marzo, Sobre Emisiones y Ofertas Publicas de Venta de Valores), as amended and restated, and the decrees and regulations made thereunder. The Securities have not and will not be sold, offered, or distributed in Spain except in circumstances that are not an offer of securities in Spain within the meaning of Spanish securities laws and regulations. The Offering Memorandum has not been registered with the Spanish Securities Market Commission (Comision Nacional del Mercado de Valores) and therefore it is not intended for the offering or sale of the securities in Spain. Notice to Residents of Sweden This Offering Memorandum is for the recipient only and may not in any way be forwarded to any other person or to the public in Sweden. Notice to Residents of the United Kingdom The Securities may not be offered or sold to persons in the United Kingdom before admission of the Securities to listing in accordance with Part VI of the Financial Services and Markets Act 2000 (the FSMA), except to persons whose ordinary activities involve them in acquiring, holding, managing, or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances that have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 or the FSMA. The Securities may not be offered or sold before the expiry of a period of six months from the issue date of the Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing, or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances that have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995.

Any invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA) in connection with the issue or sale of any Securities may only be communicated or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to the issuer. Each purchaser of the Securities must comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Securities in, from, or otherwise involving the United Kingdom. General Notice Each purchaser of the Securities must comply with all applicable laws and regulations in force in each jurisdiction in which it purchases, offers, or sells the Securities or possesses or distributes this Offering Memorandum and must obtain any consent, approval, or permission required for the purchase, offer, or sale by it of the Securities under the laws and regulations in force in any jurisdictions to which it is subject or in which it makes the purchases, offers, or sales, and none of the Issuer, the Initial Purchaser (or any of their Affiliates), the Portfolio Manager, the Trustee, or the Administrator specified in this Offering Memorandum shall have any responsibility therefor. The Securities are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and the applicable state securities law, pursuant to registration or exemption therefrom. Investors should be aware that they may be required to bear the financial risks of this investment for an indefinite period. Information as to Sale or Placement within the United States This Offering Memorandum is highly confidential and has been prepared by the Issuer solely for use in connection with this offering. This Offering Memorandum is personal to each offeree to whom it has been delivered by the Co-Issuers, the Initial Purchaser, or any affiliate of any of them and is not an offer to any other person or to the public generally to subscribe for or otherwise acquire the Securities. Distribution of this Offering Memorandum to anyone other than the offeree and anyone retained to advise the offeree with respect to the Securities is unauthorized and any disclosure of any of its contents, without the prior written consent of the Issuer, is prohibited. Each prospective purchaser in the United States, by accepting delivery of this Offering Memorandum, agrees to the foregoing and to make no copies of this Offering Memorandum or any documents related to this Offering Memorandum and, if the offeree does not purchase Securities or the offering is terminated, to return this Offering Memorandum and all documents attached to this Offering Memorandum to: J.P. Morgan Securities Inc., 270 Park Avenue, 10th Floor, New York, New York 10017, Attention: Structured Credit Products.

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INTERPRETATION The discussions in this Offering Memorandum conform in form to the generalized methodology of language interpretation and grammatical construction described below, unless the context clearly requires otherwise. Any term that relates to a document or a statute, rule, or regulation includes any amendments, modifications, supplements, or any other changes that may have occurred since the document, statute, rule, or regulation came into being. The term including and all its variations mean including but not limited to. Except when used in conjunction with the word either, the word or is always used inclusively (for example, the phrase A or B means A or B or both, not either A or B but not both). A reference to a [thing] or any [of a thing] does not imply the existence or occurrence of the thing referred to even though not followed by if any, and any [of a thing] is any of it, including all. A reference to the plural of anything as to which there could be either one or more than one does not imply the existence of more than one (for instance, the phrase the obligors on a note means the obligor or obligors on a note). Until [something occurs] does not imply that it must occur. To state that an amount will be paid or a thing will be done by someone means no more than that the party will be obligated to pay the amount or take the action. The word shall is used in its imperative sense, as for instance meaning a party agrees to something or something must occur or exist. In the calculation of amounts of things, differences and sums may generally result in negative numbers, but when the calculation of the excess of one thing over another results in zero or a negative number, the calculation is disregarded and an excess does not exist. Portions of things may be expressed as fractions or percentages interchangeably. In the computation of a period of time from a specified date to a later specified date or an open-ended period, the word from or beginning means from and including, the word after means from but excluding, the words to or until mean to but excluding, and the word through means to and including. Likewise, in setting deadlines or other periods, by means on or before. The word due and the word payable are each generally used in the sense that the stated time for payment has passed. The words preceding, following, and words of similar import mean immediately preceding or immediately following. References to months and years are references to calendar months and calendar years. Any reference to any person includes references to its successors and assigns. References to Exhibits and Schedules are references to the Exhibits and Schedules to this Offering Memorandum. Refer to the Glossary for the definitions of capitalized terms or to the Index of Defined Terms for the page where the applicable definition may be found. References to dollars and $ are to United States dollars. AVAILABLE INFORMATION To permit compliance with Rule 144A under the Securities Act in connection with the sale of the Securities, the Indenture (with respect to the Notes and the Composite Securities) and the Preference Share Paying and Transfer Agency Agreement (with respect to the Preference Shares) will require the Co-Issuers or the Issuer, as applicable, upon request of a Holder of a Note, a Composite Security, or a Preference Share, to furnish to the Holder or any prospective purchaser designated by the Holder the information required to be delivered under Rule 144A(d)(4) under the Securities Act if at the time of the request either of the Co-Issuers is not a reporting company under Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act), or exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. It is not contemplated that either of the Co-Issuers will be a reporting company or so exempt. FORWARD-LOOKING STATEMENTS This Offering Memorandum contains forward-looking statements, which can be identified by words like anticipate, believe, plan, hope, goal, initiative, expect, future, intend, will, could, and should and by similar expressions. The information referred to under Certain Maturity and Prepayment Considerations may also contain forward-looking statements. Prospective investors should not place undue reliance on forward-looking statements. Actual results could differ materially from those referred to in forward-looking statements for many reasons, including the risks described in Risk Factors and the matters referred to under xii

Certain Maturity and Prepayment Considerations, which matters include assumptions referred to therein. Forwardlooking statements are necessarily speculative in nature, and some of or all the assumptions underlying any forwardlooking statements may not materialize or may vary significantly from actual results. Variations between assumptions and results may be material. Without limiting the generality of the foregoing, the inclusion of forward-looking statements in this Offering Memorandum should not be regarded as a representation by the Issuer, the Portfolio Manager, or the Initial Purchaser or any of their respective affiliates or any other person of the results that will actually be achieved by the Issuer or the Securities. None of the foregoing persons has any obligation to update or otherwise revise any forwardlooking statements, including any revisions to reflect changes in any circumstances arising after the date of this Offering Memorandum relating to any assumptions or otherwise. SUMMARIES OF DOCUMENTS This Offering Memorandum summarizes certain provisions of the Securities, the Indenture, the Preference Share Documents, the Management Agreement, and other transactions and documents. The summaries do not purport to be complete and (whether or not so stated in this Offering Memorandum) are subject to, are qualified in their entirety by reference to, and incorporate by reference, the provisions of the actual documents (including definitions of terms). However, no documents incorporated by reference are part of this Offering Memorandum for Irish Stock Exchange listing purposes. Following the Closing Date, copies of the Indenture may be obtained by investors in the Securities upon request in writing to the Trustee at One Federal Street, Third Floor, Boston, MA 02110, Attention: CDO Group, Reference: Ares VIII CLO. Following the Closing Date, copies of the Preference Share Paying and Transfer Agency Agreement may be obtained by investors in the Preference Shares upon request in writing to the Preference Share Paying Agent at One Federal Street, Third Floor, Boston, MA 02110, Attention: CDO Group, Reference: Ares VIII CLO.

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TABLE OF CONTENTS Page SUMMARY OF TERMS .......................................................................................................1 RISK FACTORS ...............................................................................................................31 General; Priorities of Securities .............................................................................31 Relating to the Securities........................................................................................31 Relating to the Portfolio Manager ..........................................................................42 Relating to the Collateral Obligations ....................................................................44 Relating to Certain Conflicts of Interest.................................................................52 THE CO-ISSUERS ............................................................................................................55 General ...................................................................................................................55 Activities ................................................................................................................55 Administration .......................................................................................................56 APPLICATION OF FUNDS .................................................................................................58 Application of Interest Proceeds ............................................................................58 Application of Principal Proceeds..........................................................................60 Application of Composite Security Available Amount..........................................62 Class 6 Component Distributions...........................................................................62 COVERAGE TESTS ..........................................................................................................64 General ...................................................................................................................64 The Overcollateralization Tests .............................................................................64 The Interest Coverage Tests...................................................................................65 The Class D Reinvestment Overcollateralization Test...........................................66 CERTAIN ADDITIONAL PROVISIONS RELATING TO THE SECURITIES ...............................67 General ...................................................................................................................67 Status and Security.................................................................................................67 Issuance of Securities in General ...........................................................................67 Additional Issuance of Securities ...........................................................................68 Exchange of Composite Securities for Related Securities .....................................68 Optional Redemption .............................................................................................69 Special Redemption of Note Interests If the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture..............................72 Mandatory Redemption of the Note Interests ........................................................72 Redemption of the Preference Share Interests in Connection with Mandatory Redemption of the Note Interests..............................................73 Certain Limitations on Distributions on the Preference Shares..............................73 Events of Default....................................................................................................75 Supplemental Indentures ........................................................................................79 Amendments to the Preference Share Paying and Transfer Agency Agreement ...................................................................................................83 Method of Payments ..............................................................................................83 Determination of LIBOR .......................................................................................84 Form, Registration, and Transfer of the Securities.................................................85 General...................................................................................................................85 The Accounts .........................................................................................................87 Reporting to Holders of Securities .........................................................................91 Notices ...................................................................................................................92 Certain Covenants ..................................................................................................92 xiv

Cancellation ...........................................................................................................93 No Gross-Up ..........................................................................................................93 Petitions for Bankruptcy.........................................................................................93 Subordination .........................................................................................................93 Standard of Conduct...............................................................................................94 Certain Provisions Applicable to the Composite Securityholders and Preference Shareholders ..............................................................................95 Satisfaction and Discharge of Indenture ................................................................95 Trustee....................................................................................................................95 Governing Law.......................................................................................................96 CERTAIN MATURITY AND PREPAYMENT CONSIDERATIONS ...........................................97 THE PORTFOLIO MANAGER ..........................................................................................100 General .................................................................................................................100 Investment Professionals......................................................................................101 THE MANAGEMENT AGREEMENT .................................................................................108 General .................................................................................................................108 Assignment and Delegation; Termination............................................................109 Conflicts of Interest..............................................................................................112 Compensation.......................................................................................................112 Initial Portfolio .....................................................................................................113 SECURITY FOR THE NOTES AND THE COMPOSITE SECURITIES......................................114 General .................................................................................................................114 Collateral Obligations ..........................................................................................114 Eligibility Criteria ................................................................................................116 Additional Tax-Related Operating Issues ............................................................118 Acquisition of Collateral Obligations...................................................................118 The Collateral Quality Tests ................................................................................119 Dispositions of Collateral Obligations .................................................................122 Hedge Agreements ...............................................................................................124 Securities Lending................................................................................................126 SETTLEMENT AND CLEARING FOR GLOBAL SECURITIES ..............................................129 Book Entry Registration of the Global Securities ................................................129 Global Security Settlement Procedures................................................................129 TRANSFER RESTRICTIONS ............................................................................................131 Initial Offers and Sales.........................................................................................131 Representations and Transfer Restrictions ...........................................................131 Legends ................................................................................................................131 LISTING AND GENERAL INFORMATION .........................................................................143 CERTAIN INCOME TAX CONSIDERATIONS ....................................................................144 In General.............................................................................................................144 Certain United States Federal Income Tax Considerations..................................144 Other Considerations............................................................................................150 Cayman Islands Tax Considerations ....................................................................151 CERTAIN ERISA AND OTHER CONSIDERATIONS .........................................................153 General .................................................................................................................153 Plan Asset Considerations....................................................................................153 xv

CERTAIN LEGAL INVESTMENT CONSIDERATIONS.........................................................156 PLAN OF DISTRIBUTION ...............................................................................................157 CERTAIN LEGAL MATTERS ..........................................................................................158 IDENTIFYING NUMBERS ...............................................................................................159 GLOSSARY ...................................................................................................................161 INDEX OF DEFINED TERMS ...........................................................................................201 EXHIBIT A - FORM OF NOTE TRANSFEREE CERTIFICATE ............................................ A-1 EXHIBIT B - FORM OF REGULATION S NOTE TRANSFEROR CERTIFICATE ....................B-1 EXHIBIT C - FORM OF NON-REGULATION S NOTE TRANSFEROR CERTIFICATE..................................................................................................C-1 EXHIBIT D - FORM OF PREFERENCE SHARE TRANSFEREE CERTIFICATE ..................... D-1 EXHIBIT E - FORM OF REGULATION S PREFERENCE SHARE TRANSFEROR CERTIFICATE..................................................................................................E-1 EXHIBIT F - FORM OF NON-REGULATION S PREFERENCE SHARE TRANSFEROR CERTIFICATE ............................................................................ F-1

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SUMMARY OF TERMS The following summary of terms does not purport to be complete and is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this Offering Memorandum and the documents referred to in this Offering Memorandum. A Glossary and an Index of Defined Terms appear at the back of this Offering Memorandum. Issuer............................................................ Ares VIII CLO Ltd., an exempted limited liability company incorporated under the laws of the Cayman Islands (the Issuer). Co-Issuer ..................................................... Ares VIII CLO LLC, a limited liability company organized under the laws of the State of Delaware (the Co-Issuer and, together with the Issuer, the Co-Issuers). The Co-Issuer will have no assets other than $100 in equity capital and will have no debt other than as coissuer of the Notes. The Co-Issuer will have no claim against the Issuer in respect of the Collateral Obligations or otherwise. The Issuer will be the sole member of the Co-Issuer. Securities Offered ....................................... The Co-Issuers are issuing the Class A, the Class B, and the Class C Notes and the Issuer is also issuing the Class D Notes, the Composite Securities, and the Preference Shares in the Classes described below. The Composite Securities will consist of the components described below.
Designation Class A-1-A Senior Secured Note Interests Due 2016 Class A-1-B Senior Secured Note Interests Due 2016 Class A-2 Senior Secured Note Interests Due 2016 Class A-3 Senior Secured Note Interests Due 2016 Class B-1 Senior Secured Deferrable Interest Note Interests Due 2016 Class B-2 Senior Secured Deferrable Interest Note Interests Due 2016 Class C-1 Senior Secured Deferrable Interest Note Interests Due 2016 Class C-2 Senior Secured Deferrable Interest Note Interests Due 2016 Class D-1 Subordinated Secured Deferrable Note Interests Due 2016 Class D-2 Subordinated Secured Deferrable Note Interests Due 2016 Class D-3 Subordinated Secured Deferrable Note Interests Due 2016 Class 1 Composite Securities Due 2016 Consisting of $4,400,000 Class C-2 Note Component and $3,600,000 Preference Share Component Class 2 Composite Securities Due 2016 Consisting of $5,000,000 Class B-2 Note Component and $3,000,000 Preference Share Component Class 3 Composite Securities Due 2016 Consisting of $2,580,000 Class B-2 Note Component and $1,420,000 Preference Share Component Class 4 Composite Securities Due 2016 Consisting of $5,000,000 Class A-1-B Note Component, $3,000,000 Class D-2 Note Component, and $2,000,000 Preference Share Component Class 5 Composite Securities Due 2016 Consisting of $1,770,000 Class B-2 Note Component and $980,000 Preference Share Component Class 6 Composite Securities Due 2016 Consisting of $3,250,000 Class 6 Component and $1,260,000 Preference Share Component Amount on the Closing Date $233,900,000 $22,600,000 $150,000,000 $17,000,000 $23,650,000 $9,350,000 $19,200,000 $13,800,000 $6,750,000 $3,000,000 $1,250,000 $8,000,000 $8,000,000 $4,000,000 $10,000,000 Interest Rate LIBOR + 0.43% 4.252% LIBOR + 0.41% LIBOR + 0.60% LIBOR + 1.35% 5.535% LIBOR + 2.65% 6.901% LIBOR + 6.25% 9.340% 8.840% 2.00% N/A N/A N/A Initial Ratings Moodys/S&P Aaa/AAA Aaa/AAA Aaa/AAA Aa1/AAA A2/A A2/A Baa2/BBB Baa2/BBB Ba2/BB Ba2/BB Ba2/BB Baa3/NR1 Baa1/NR1 A2/NR1 Baa2/NR1

$2,750,000 $3,250,000

N/A N/A

A2/NR1 Aaa/NR1

Designation Class 7 Composite Securities Due 2016 Consisting of $5,600,000 Class A-1-B Note Component, $3,400,000 Class C-2 Note Component, and $4,000,000 Preference Share Component Class 8 Composite Securities Due 2016 Consisting of $2,250,000 Preference Share Component 49,500 Mandatorily Redeemable Preference Share Interests 1.

Amount on the Closing Date $13,000,000

Interest Rate N/A

Initial Ratings Moodys/S&P A3/NR1

$2,250,000 $49,500,000

N/A N/A

NR/NR N/A/N/A

The Composite Securities are rated only as to the ultimate payment of their Composite Security Rated Balances or Class 6 Rated Balance, as the case may be.

The amount of Note Interests of a Class on the Closing Date shown in the above table is the sum of the initial principal amount of the Notes of the Class on the Closing Date and the Note Components of the same Class included in the Composite Securities on the Closing Date. Likewise, the amount of Preference Share Interests on the Closing Date shown in the above table is the sum of the initial stated value of the Preference Shares on the Closing Date and the Preference Share Components included in the Composite Securities on the Closing Date. Consequently, the sum of the amounts in the column Amount on the Closing Date overstates the total amount of Securities issued on the Closing Date by that overlapping amount. The Note Components will bear interest in the same manner as their related Notes and the Preference Share Components will receive distributions in the same manner as the Preference Shares. The Class 6 Component does not have a related note and does not bear interest. The Class 1 Composite Securities only will bear interest at the indicated annual rate, and will also receive other distributions on Payment Dates equal to the excess of the amounts distributable on their Note Components and Preference Share Components over the amount of interest due to them. Overview of the Collateral ......................... The Note Interests will be secured by the collateral (the Collateral) under the Indenture. The Collateral will consist primarily of the Collateral Obligations together with certain other investments described in this Offering Memorandum. The Collateral Obligations are, generally, obligations issued by corporate obligors and consist of Loans, a limited amount of Structured Finance Obligations, a limited amount of High-Yield Bonds, and a limited amount of Synthetic Securities, the acquisition of which, in each case, satisfies the criteria under Security for the Notes and the Composite Securities Eligibility Criteria. See Security for the Notes and the Composite SecuritiesCollateral Obligations. The Class 6 Composite Securities will be secured by the Collateral and the Class 6 Collateral. The Class 6 Collateral will consist primarily of property deposited in the Class 6 Component Account, as described in this Offering Memorandum under Security for the Notes and the Composite SecuritiesGeneral. The Preference Shares will not be secured but, together with certain other obligations, will be entitled to certain residual cashflow after payment of senior obligations. Overview of the Notes and the Composite Securities ............................... The Classes of the Notes and the Composite Securities are: $233,900,000 Aggregate face amount of Class A-1-A Senior Secured Floating Rate Notes Due February 2016 (the Class A-1-A Notes). Interest on the Class A-1-A Notes will be payable in arrears on each Payment Date. The Class A-1-A Notes will accrue interest at an annual rate of LIBOR plus 0.43% (the Class A-1-A Note Interest Rate). Interest on the Class A-1-A Notes, and interest on any 2

Defaulted Interest on the Class A-1-A Notes, will be computed on the basis of a 360-day year and the actual number of days elapsed during the applicable Interest Period. $22,600,000 Aggregate face amount of Class A-1-B Senior Secured Fixed Rate Notes Due February 2016 (the Class A-1-B Notes). Interest on the Class A-1-B Notes will be payable in arrears on each Payment Date. The Class A-1-B Notes will accrue interest at an annual rate of 4.252% (the Class A-1-B Note Interest Rate). Interest on the Class A-1-B Notes and interest on any Defaulted Interest on the Class A-1-B Notes, will be computed on the basis of a 360-day year consisting of twelve 30-day months. The Class A-1-A and Class A-1-B Notes are collectively referred to as the Class A-1 Notes. $150,000,000 Aggregate face amount of Class A-2 Senior Secured Floating Rate Notes Due February 2016 (the Class A-2 Notes). Interest on the Class A-2 Notes will be payable in arrears on each Payment Date. The Class A-2 Notes will accrue interest at an annual rate of LIBOR plus 0.41% (the Class A-2 Note Interest Rate). Interest on the Class A-2 Notes, and interest on any Defaulted Interest on the Class A-2 Notes, will be computed on the basis of a 360-day year and the actual number of days elapsed during the applicable Interest Period. $17,000,000 Aggregate face amount of Class A-3 Senior Secured Floating Rate Notes Due February 2016 (the Class A-3 Notes). Interest on the Class A-3 Notes will be payable in arrears on each Payment Date. The Class A-3 Notes will accrue interest at an annual rate of LIBOR plus 0.60% (the Class A-3 Note Interest Rate). Interest on the Class A-3 Notes, and interest on any Defaulted Interest on the Class A-3 Notes, will be computed on the basis of a 360-day year and the actual number of days elapsed during the applicable Interest Period. The Class A-1, Class A-2, and Class A-3 Notes are collectively referred to as the Class A Notes. $23,650,000 Aggregate face amount of Class B-1 Senior Secured Floating Rate Deferrable Interest Notes Due February 2016 (the Class B-1 Notes). Interest on the Class B-1 Notes will be payable in arrears on each Payment Date. The Class B-1 Notes will accrue interest at an annual rate of LIBOR plus 1.35% (the Class B-1 Note Interest Rate). Interest on the Class B-1 Notes, and interest on any Defaulted Interest or Deferred Interest on the Class B-1 Notes, will be computed on the basis of a 360-day year and the actual number of days elapsed during the applicable Interest Period. $9,350,000 Aggregate face amount of Class B-2 Senior Secured Fixed Rate Deferrable Interest Notes Due February 2016 (the Class B-2 Notes). Interest on the Class B-2 Notes will be payable in arrears on each Payment Date. The Class B-2 Notes will accrue interest at an annual rate of 5.535% (the Class B-2 Note Interest Rate). Interest on the Class B-2 Notes and interest on any Defaulted Interest or Deferred Interest on the Class B-2 Notes, will be computed on the basis of a 360-day year consisting of twelve 30-day months. 3

The Class B-1 and Class B-2 Notes are collectively referred to as the Class B Notes. $19,200,000 Aggregate face amount of Class C-1 Senior Secured Floating Rate Deferrable Interest Notes Due February 2016 (the Class C-1 Notes). Interest on the Class C-1 Notes will be payable in arrears on each Payment Date. The Class C-1 Notes will accrue interest at an annual rate of LIBOR plus 2.65% per annum (the Class C-1 Note Interest Rate). Interest on the Class C-1 Notes, and interest on any Defaulted Interest or Deferred Interest on the Class C1 Notes, will be computed on the basis of a 360-day year and the actual number of days elapsed during the applicable Interest Period. $13,800,000 Aggregate face amount of Class C-2 Senior Secured Fixed Rate Deferrable Interest Notes Due February 2016 (the Class C-2 Notes). Interest on the Class C-2 Notes will be payable in arrears on each Payment Date. The Class C-2 Notes will accrue interest at an annual rate of 6.901% (the Class C-2 Note Interest Rate). Interest on the Class C-2 Notes and interest on any Defaulted Interest or Deferred Interest on the Class C-2 Notes, will be computed on the basis of a 360-day year consisting of twelve 30-day months. The Class C-1 and Class C-2 Notes are collectively referred to as the Class C Notes. $6,750,000 Aggregate face amount of Class D-1 Subordinated Secured Floating Rate Deferrable Interest Notes Due February 2016 (the Class D-1 Notes). Interest on the Class D-1 Notes will be payable in arrears on each Payment Date. The Class D-1 Notes will accrue interest at an annual rate of LIBOR plus 6.25% per annum (the Class D-1 Note Interest Rate). Interest on the Class D-1 Notes, and interest on any Defaulted Interest or Deferred Interest on the Class D1 Notes, will be computed on the basis of a 360-day year and the actual number of days elapsed during the applicable Interest Period. $3,000,000 Aggregate face amount of Class D-2 Subordinated Secured Fixed Rate Deferrable Interest Notes Due February 2016 (the Class D-2 Notes). Interest on the Class D-2 Notes will be payable in arrears on each Payment Date. The Class D-2 Notes will accrue interest at an annual rate of 9.340% (the Class D-2 Note Interest Rate). Interest on the Class D-2 Notes and interest on any Defaulted Interest or Deferred Interest on the Class D-2 Notes, will be computed on the basis of a 360-day year consisting of twelve 30-day months. $1,250,000 Aggregate face amount of Class D-3 Subordinated Secured Fixed Rate Deferrable Interest Notes Due February 2016 (the Class D-3 Notes). Interest on the Class D-3 Notes will be payable in arrears on each Payment Date. The Class D-3 Notes will accrue interest at an annual rate of 8.840% (the Class D-3 Note Interest Rate). Interest on the Class D-3 Notes and interest on any Defaulted Interest or Deferred Interest on the Class D-3 Notes, will be computed on the basis of a 360-day year consisting of twelve 30-day months. The Class D-1, Class D-2, and Class D-3 Notes are collectively referred to as the Class D Notes.

The Class A, Class B, Class C, and Class D Notes are collectively referred to as the Notes. The Class A-1-A, Class A-2, Class A-3, Class B-1, Class C-1, and Class D-1 Notes are collectively referred to as the Floating Rate Notes. The Class A-1-B, Class B-2, Class C-2, Class D-2, and Class D-3 Notes are collectively referred to as the Fixed Rate Notes. $8,000,000 Aggregate face amount of Class 1 Composite Securities Due February 2016 (the Class 1 Composite Securities) consisting of the following two Components: $4,400,000 Aggregate stated amount of Class C-2 Note Component having terms similar to the Class C-2 Notes. $3,600,000 Aggregate stated value of Preference Share Component having terms similar to Preference Shares. The Class 1 Composite Securities will accrue interest at an annual rate of 2.00%. Interest on the Class 1 Composite Securities and interest on any Class 1 Composite Security Deferred Interest Amount will be computed on the basis of a 360-day year consisting of twelve 30-day months. $8,000,000 Aggregate face amount of Class 2 Composite Securities Due February 2016 (the Class 2 Composite Securities) consisting of the following two Components: $5,000,000 Aggregate stated amount of Class B-2 Note Component having terms similar to the Class B-2 Notes. $3,000,000 Aggregate stated value of Preference Share Component having terms similar to Preference Shares. $4,000,000 Aggregate face amount of Class 3 Composite Securities Due February 2016 (the Class 3 Composite Securities) consisting of the following two Components: $2,580,000 Aggregate face amount of Class B-2 Note Component having terms similar to the Class B-2 Notes. $1,420,000 Aggregate stated value of Preference Share Component having terms similar to Preference Shares. $10,000,000 Aggregate face amount of Class 4 Composite Securities Due February 2016 (the Class 4 Composite Securities) consisting of the following three components: $5,000,000 Aggregate stated amount of Class A-1-B Note Component having terms similar to the Class A-1-B Notes. $3,000,000 Aggregate stated amount of Class D-2 Note Component having terms similar to the Class D-2 Notes. $2,000,000 Aggregate stated value of Preference Share Component having terms similar to Preference Shares.

$2,750,000 Aggregate face amount of Class 5 Composite Securities Due February 2016 (the Class 5 Composite Securities) consisting of the following two components: $1,770,000 Aggregate stated amount of Class B-2 Note Component having terms similar to the Class B-2 Notes. $980,000 Aggregate stated value of Preference Share Component having terms similar to Preference Shares. $3,250,000 Aggregate face amount of Class 6 Composite Securities Due February 2016 (the Class 6 Composite Securities) consisting of the following two components: $3,250,000 Class 6 Component (the Class 6 Component) representing the right of the Holders of the Class 6 Component Securities to receive the proceeds from a trust account containing the Treasury Strip (the Class 6 Component Account) upon any redemption of the Class 6 Component. $1,260,000 Aggregate stated value of Preference Share Component having terms similar to Preference Shares. $13,000,000 Aggregate face amount of Class 7 Composite Securities Due February 2016 (the Class 7 Composite Securities) consisting of the following three components: $5,600,000 Aggregate stated amount of Class A-1-B Note Component having terms similar to the Class A-1-B Notes. $3,400,000 Aggregate stated amount of Class C-2 Note Component having terms similar to the Class C-2 Notes. $4,000,000 Aggregate stated value of Preference Share Component having terms similar to Preference Shares. $2,250,000 Aggregate face amount of Class 8 Composite Securities Due February 2016 (the Class 8 Composite Securities) consisting of the following component: $2,250,000 Aggregate stated value of Preference Share Component having terms similar to Preference Shares. Distributions on the Preference Share Component will be made at the same time as, and pari passu with, distributions of residual cashflow made to the Preference Share Paying Agent for distribution to the Preference Shareholders. The distributions on each $1,000 of Preference Share Component will be calculated in the same manner as distributions on each $1,000 stated value of Preferred Shares for the same period. Interest on each Class of Note Component will be payable in arrears on each Payment Date pari passu with interest on the corresponding Class of Notes. Interest on each Class of Note Component, and interest on any Defaulted Interest on any Class of Note Component, will accrue and be computed on the same basis as for the corresponding Class of Notes.

The Class 1 Composite Securities, Class 2 Composite Securities, Class 3 Composite Securities, Class 4 Composite Securities, Class 5 Composite Securities, Class 6 Composite Securities, Class 7 Composite Securities, and Class 8 Composite Securities are collectively referred to as the Composite Securities. The Class A-1-B Notes and the Class A-1-B Note Components are collectively referred to as the Class A-1-B Note Interests. The Class A Notes and the Class A-1-B Note Components are collectively referred to as the Class A Note Interests. The Class B Notes and the Class B-2 Note Components are collectively referred to as the Class B Note Interests. The Class C Notes and the Class C-2 Note Components are collectively referred to as the Class C Note Interests. The Class D Notes and the Class D-2 Note Components are collectively referred to as the Class D Note Interests. The Class A Note Interests, the Class B Note Interests, the Class C Note Interests and the Class D Note Interests are collectively referred to as the Note Interests. Each Class of Composite Securities comprises a single Class, and their respective Components are not separately transferable. However, each Composite Security of each Class will be exchangeable in whole or in part for the Securities represented by its Components so long as the amounts of the Securities issued in exchange for the Composite Security satisfy the minimum denomination for the Class of Notes or Preference Shares. the Class 1 Composite Securities will be exchangeable for Class C-2 Notes and Preference Shares, each of the Class 2 Composite Securities, Class 3 Composite Securities, and Class 5 Composite Securities will be exchangeable for Class B-2 Notes and Preference Shares; the Class 4 Composite Securities will be exchangeable for Class A-1-B Notes, Class D-2 Notes, and Preference Shares; the Class 6 Composite Securities will be exchangeable for the Class 6 Component and Preference Shares; the Class 7 Composite Securities will be exchangeable for Class A-1-B Notes, Class C-2 Notes, and Preference Shares; and the Class 8 Composite Securities will be exchangeable for Preference Shares; in each case subject to the minimum denomination or purchase amount with respect to such Class of Notes(or the Class 6 Component in the case of the Class 6 Composite Securities), as applicable, and Preference Shares. A Holder of a Class of Notes and Preference Shares (including a Holder that received a Class of Notes and Preference Shares in exchange for a Class of related Composite Securities) will not have the right to exchange that Class of Notes and Preference Shares for the related Class of Composite Securities unless the Issuer consents to the exchange, and all expenses incidental to the exchange are the responsibility of the Holder. See Certain Additional Provisions Relating to the SecuritiesExchange of Composite Securities for Related Securities. Stated Maturity ........................................... The stated maturity date of each Class of Note Interests is the Payment Date occurring in February 2016 (the Stated Maturity). The Note Interests will mature at the Stated Maturity unless redeemed or repaid before that. A redemption or repayment of any Class of Composite Securities will not terminate the related Preference Share 7

Component unless the Preference Shares are also being redeemed in full, and the Indenture will not be discharged with respect to the Composite Securities unless that condition is satisfied. The weighted average life of each Class of Note Interests is expected to be less than the number of years until their Stated Maturity. See Risk Factors Relating to the SecuritiesThe Weighted Average Lives of the Note Interests May Vary and Certain Maturity and Prepayment Considerations. Priorities ...................................................... The Securities will have the relative priorities described in this Offering Memorandum. For descriptions of the priorities, see Application of Funds. Capitalization of the Co-Issuers ................ The Issuer. In addition to the Notes and the Composite Securities, the Issuer is also issuing 30,990 Preference Shares, par value $0.01 per share (the Preference Shares), with an aggregate stated value of $1,000 per share and a scheduled redemption date in February 2016. As of the Closing Date, the authorized share capital of the Issuer will be 74,250 Preference Shares and 250 ordinary shares, $1.00 par value per share (which are not offered hereby). The Preference Shares will be issued to various Holders as described under Plan of Distribution. The Issuer Ordinary Shares will be registered in the name of Maples Finance Limited, a Cayman Islands licensed trust company, and held pursuant to a declaration of trust. The Issuer will not have any material assets other than the Collateral Obligations and the other components of the Collateral and the Class 6 Collateral, which will be pledged to secure the Note Interests and the Class 6 Component, respectively, among other things. The proposed capitalization of the Issuer as of the Closing Date, after giving effect to the issuance of the Securities and the Issuer Ordinary Shares but before deducting expenses of the offering of Securities and organizational expenses of the Issuer, is: Class A Notes Class B Notes Class C Notes Class D Notes Subtotal Notes Composite Securities Preference Shares Issuer Ordinary Shares Subtotal Shares Total Capitalization
(a)

$412,900,000 $23,650,000 $25,200,000 $8,000,000 $469,750,000 $51,250,000(a) $30,990,000 250 (b) $30,990,250(b) $551,990,250(b)

In view of the varying priorities of the Components of each Class of the Composite Securities (other than the Class 6 Composite Securities and the Class 8 Composite Securities), the presentation of the Composite Securities in this table is not intended to reflect those priorities.

(b)

The proceeds of the issuance of the Issuer Ordinary Shares are not included in the Collateral or the Class 6 Collateral.

The Co-Issuer. On or before the Closing Date, the Co-Issuer will have issued limited liability company membership interests in the amount of $100 (the Co-Issuer Equity), which will not be pledged to secure the Note Interests, and the Co-Issuer will have no other assets other than the Co-Issuer Equity and will have no debt other than the Co-Issued Notes. The Co-Issuer will not receive any funds from the Issuer other than the $100 subscription for the membership interests. Because the Co-Issuer has no material assets, and is not permitted to acquire any additional assets, the Holders of the Notes and the Composite Securities will not be able to enforce the obligations under the Notes or Composite Securities against any assets of the Co-Issuer. The Holders of the Notes and the Composite Securities must rely on the Collateral, and the Holders of the Class 6 Composite Securities must rely on the Class 6 Collateral also, held by the Issuer and pledged to the Trustee owned by the Issuer for payment of the Notes and the Composite Securities in accordance with the Priority of Payments and the payment provisions with respect to the Class 6 Component. The Co-Issuer will not have any claim against the Issuer with respect to the Collateral Obligations or otherwise. Additional Issuances of Securities (not Offered Hereby) ...................................... Subject to certain conditions, the Co-Issuers may issue and sell additional Co-Issued Notes and the Issuer may issue and sell additional Class D Notes, Composite Securities, and Preference Shares at any time during the Reinvestment Period. The Issuer may issue additional Preference Shares pursuant to the Preference Share Documents without simultaneously issuing additional Notes pursuant to the Indenture. Any additional issuance of Preference Shares will be subject to the applicable conditions in the Preference Share Documents. The issuance of additional Securities under the Indenture will not require the issuance of additional Composite Securities. See Certain Additional Provisions Relating to the SecuritiesAdditional Issuance of Securities, which also describes how the proceeds of the issuance of any additional Securities will be applied. Indenture and Preference Share Documents; Trustee and Preference Shares Agent............................................ The Notes and the Composite Securities will be issued pursuant to an indenture, to be dated as of the Closing Date (the Indenture), among the Issuer, the Co-Issuer, and U.S. Bank National Association, as trustee (in that capacity, the Trustee). The Preference Shares will be issued by the Issuer pursuant to its Amended and Restated Memorandum and Articles of Association (the Issuer Charter), certain Resolutions (the Resolutions) of the Issuer, and a Preference Share Paying and Transfer Agency Agreement to be dated as of the Closing Date (the Preference Share Paying and Transfer Agency Agreement) with U.S. Bank National Association as paying agent and transfer agent for the Preference Shares (in that capacity, the Preference Share Paying Agent) and 9

Maples Finance Limited as share registrar. The Issuer Charter, the Resolutions, and the Preference Share Paying and Transfer Agency Agreement are collectively referred to as the Preference Share Documents. The Collateral, the Class 6 Collateral, and the Underlying Assets ...................... The Note Interests will be non-recourse debt obligations of the Issuer or Co-Issuers, as applicable. The Note Interests will be secured solely by a pledge of the Collateral by the Issuer to the Trustee pursuant to the Indenture as security for its obligations with respect to the Note Interests, the Hedge Agreements, and the Management Agreement. See Security for the Notes and the Composite SecuritiesGeneral. The Class 6 Component will be a limited recourse debt obligation of the Issuer. The Class 6 Component will be secured solely by a pledge of the Class 6 Collateral by the Issuer to the Trustee pursuant to the Indenture as security for its obligations with respect to the Class 6 Component. See Security for the Notes and the Composite SecuritiesGeneral. Each of the account maintained by the Issuer for deposit of share capital and certain fees and the Class 6 Component Account will be excluded from the Collateral securing the Note Interests and the other Secured Obligations. In the event of any realization on the Collateral, proceeds will be allocated to the Note Interests in order of seniority and to certain other liabilities of the Co-Issuers in accordance with the Priority of Payments before making any payments or any final distribution on the Preference Share Interests. See Application of Funds. After any payment or any final redemption distribution is made on the Preference Share Interests, such funds will no longer be a part of the Collateral securing the Secured Obligations and will not be available to make any required payment on any Secured Obligations on any subsequent date. The Class 6 Composite Securities will be secured by the Collateral and the United States Treasury strip security maturing on February 15, 2016 paying a principal amount at maturity equal to the original principal amount of the Class 6 Composite Securities (the Treasury Strip) and all proceeds of the foregoing (the Class 6 Collateral) deposited in the Class 6 Component Account, as described in this Offering Memorandum under Security for the Notes and the Composite SecuritiesGeneral. The Collateral and the Class 6 Collateral are distinct, separate collateral pools. The Class 6 Collateral does not secure the payment of any obligations other than the Class 6 Component. No other Securities will have any claim against any of the Class 6 Collateral for any reason. The term Applicable Collateral is used to mean one or the other of the Collateral or the Class 6 Collateral, as the context requires. When the context would refer to the Class 6 Component, the term Applicable Collateral means the Class 6 Collateral and when the context would refer to the Note Interests the term Applicable Collateral means only the Collateral. Collateral Obligations are obligations issued by entities incorporated or otherwise organized in the United States or entities that are Group A Country Obligors or Group B Country Obligors, and consist of 10

Loans, a limited amount of Structured Finance Obligations, a limited amount of High-Yield Bonds, and a limited amount of Synthetic Securities, the acquisition of which, in each case, satisfies the criteria under Security for the Notes and the Composite Securities Eligibility Criteria. The Collateral Obligations are more fully described under Security for the Notes and the Composite SecuritiesCollateral Obligations. Collateral Ramp-Up Period ....................... The Issuer expects that, as of the Closing Date, it will have purchased (or entered into commitments to purchase) at least 60% of the Aggregate Principal Balance of the Collateral Obligations to be included in the anticipated portfolio as of the Ramp-Up Completion Date. The acquisition of the initial portfolio of Collateral Obligations will be completed on the earlier of (i) the Business Day after the 179th day after the Closing Date and (ii) the first date on which the Issuer has purchased Collateral Obligations or entered into agreements to purchase Collateral Obligations for future settlement in accordance with customary settlement procedures in the relevant markets (including Eligible Investments purchased with Principal Proceeds from Collateral Obligations) having an Aggregate Principal Balance of at least $534,100,000 (the Ramp-Up Completion Date). In anticipation of the issuance of the Securities, the Issuer, the Portfolio Manager, and JPMorgan Chase Bank (as Warehouse Provider) have entered into the Warehousing Agreement pursuant to which the Portfolio Manager has agreed to manage, on behalf of the Issuer, the Warehoused Loans to be acquired by the Issuer before the Closing Date and the Warehouse Provider has agreed to acquire a 100% participation in each Warehoused Loan concurrently with its acquisition by the Issuer, for a purchase price equal to the purchase price paid by the Issuer for the related Warehoused Loan. The Issuer, the Portfolio Manager and JPMorgan Securities Ltd., have made similar arrangements with respect to the purchases of High-Yield Bonds. See Security for the Notes and Composite SecuritiesAcquisition of Collateral Obligations. Reinvestment Period; Reinvestment in Collateral Obligations............................. During the Reinvestment Period, the Issuer may generally (and subject to certain requirements) reinvest Principal Proceeds received with respect to the Collateral in additional or substitute Collateral Obligations in compliance with the Eligibility Criteria. The Issuer may likewise reinvest Interest Proceeds representing the portion of the purchase price of any Collateral Obligation that is allocable to accrued interest. The Reinvestment Period will be the period from the Closing Date through the first to occur of: (i) the Payment Date after the date that the Portfolio Manager notifies the Trustee, each Rating Agency, and the Administrator, in the sole discretion of the Portfolio Manager, that, in light of the composition of the Collateral, general market conditions, and other factors, investments in additional Collateral Obligations

11

within the foreseeable future would either be impractical or not beneficial, (ii) if the Overcollateralization Ratio with respect to Class A Notes as of any Monthly Determination Date is less than 107.5%, the Payment Date after the date that a Majority of the Controlling Class votes to end the Reinvestment Period if the Overcollateralization Ratio with respect to the Class A Notes is less than 107.5% on the date the vote is finalized, (iii) the Payment Date in May 2010, (iv) the Payment Date on which all Note Interests are to be optionally redeemed or an earlier date after notice of an Optional Redemption chosen by the Portfolio Manager to facilitate the liquidation of the Collateral for the Optional Redemption, and (v) the date on which the Reinvestment Period terminates or is terminated as a result of an Event of Default and the subsequent acceleration of the Note Interests (subject to the rescission of a declaration of acceleration). No investment will be made in Collateral Obligations after the termination of the Reinvestment Period, except to exercise a warrant held in the Collateral and except that the Issuer may reinvest the proceeds or sale proceeds of Prepaid Collateral Obligations and Credit Improved Obligations in Collateral Obligations (and may use Interest Proceeds to pay for the portion of the purchase price of any Collateral Obligation so purchased that is allocable to accrued interest) subject to the satisfaction of certain restrictions as described under Security for the Notes and the Composite SecuritiesAcquisition of Collateral Obligations. In all other cases, the proceeds or sale proceeds of Prepaid Collateral Obligations and Credit Improved Obligations, along with all other Principal Proceeds, must be applied after the Reinvestment Period to pay the principal of the Note Interests. See Application of Funds and Security for the Notes and the Composite SecuritiesEligibility Criteria. Portfolio Manager and Management Agreement ............................................... Ares CLO Management VIII, L.P. (Ares VIII or the Portfolio Manager) will perform certain advisory and administrative functions with respect to the Collateral for the Issuer as portfolio manager. Ares VIII is an Affiliate of Ares Management LLC. The Portfolio Manager and the Issuer will enter into a Management Agreement, dated as of the Closing Date (the Management Agreement). Ares VIII or its affiliates intend to purchase and currently intend (but are not required) to hold $4,000,000 stated amount of Preference Shares. See The Portfolio Manager and The Management Agreement. Compensation of the Portfolio Manager ................................................... The Portfolio Manager is entitled to compensation as described below. The Senior Management Fee is payable on each Payment Date (subject to availability of funds and to the Priority of Payments) in an amount equal to 0.125% per annum of the sum of the Maximum 12

Investment Amount plus the par value of all Defaulted Collateral Obligations as of the first day of the related Due Period (subject to modification as provided in the definition of Successor Management Fee) payable before any interest payments on the Note Interests calculated on the basis of a calendar year consisting of 360 days and the actual number of days elapsed. The Subordinated Management Fee is payable on each Payment Date (subject to availability of funds and to the Priority of Payments) in an amount equal to 0.375% per annum of the sum of the Maximum Investment Amount plus the par value of all Defaulted Collateral Obligations as of the first day of the related Due Period (subject to modification as provided in the definition of Successor Management Fee) payable before any payments of distributions on the Preference Share Interests calculated on the basis of a calendar year consisting of 360 days and the actual number of days elapsed. The Incentive Management Fee accrues from the Closing Date (subject to availability of funds and to the Priority of Payments) in an amount equal to 0.25% per annum of the sum of the Maximum Investment Amount plus the par value of all Defaulted Collateral Obligations as of the first day of the related Due Period and becomes payable on each Payment Date once the Preference Share Interest Internal Rate of Return for that Payment Date is 12% or more calculated on the basis of a calendar year consisting of 360 days and the actual number of days elapsed. The Incentive Management Fee, the Senior Management Fee, and the Subordinated Management Fee are collectively referred to as the Management Fees. The Portfolio Manager, in its sole discretion may waive all or any portion of the Management Fees, and may defer all or any portion of the Management Fees. Any deferred Management Fees will be retained in the Collection Account until the next Payment Date, when they will become payable in the same manner and priority as their original characterization would have required unless deferred again. Any Subordinated Management Fees and any Incentive Management Fees to which the Portfolio Manager is entitled on any Payment Date that are not paid to the Portfolio Manager, whether as a result of proceeds of the Collateral being insufficient therefor in accordance with the Priority of Payments or because the Portfolio Manager, in its sole discretion, has instructed the Trustee that it wishes to defer payment of the fees until a subsequent Payment Date, will accrue interest at a rate of LIBOR plus 3% (but with respect to the Incentive Management Fee, only after the first Payment Date on which the Preference Share Interest Internal Rate of Return for that Payment Date is 12% or more), and the fees, together with any interest accrued on them, will be payable on the next Payment Date specified by the Portfolio Manager on which funds are available therefor in accordance with the Priority of Payments. The Portfolio Manager will also be entitled to reimbursement of certain expenses incurred in connection with its serving as Portfolio Manager.

13

See The Management AgreementCompensation. Issuance of Securities on the Closing Date .......................................................... Except as described in this Offering Memorandum with respect to the issuance of additional Notes and Notes issued in exchange for Composite Securities, the Issuer and the Co-Issuers, as applicable, will issue all the Notes and the Composite Securities on March 24, 2004 (the Closing Date). Except as described in this Offering Memorandum with respect to the issuance of additional Preference Shares and Preference Shares issued in exchange for Composite Securities, the Issuer will also issue all the Preference Shares on the Closing Date and has issued all the Issuer Ordinary Shares before the Closing Date. See The Co-Issuers and Plan of Distribution for further information as to certain purchasers of Securities. The issuance of the Securities will be subject to certain conditions. See Certain Additional Provisions Relating to the Securities Issuance of Securities in General. Use of Proceeds ........................................... The net proceeds of the offering of the Securities received on the Closing Date, after payment of applicable fees and expenses, are expected to equal approximately $552,000,000 and will be used by the Issuer to: purchase a portfolio of Collateral Obligations; purchase the Treasury Strip for deposit into the Class 6 Component Account; fund a trust account for Revolving Loans (the Revolving Reserve Account) and a trust account for Delayed Drawdown Loans (the Delayed Drawdown Reserve Account) to cover any future draws on Revolving Loans and Delayed Drawdown Loans; enter into any Hedge Agreements; enter into any Securities Lending Agreements (and correspondingly to fund the Securities Lending Account); to enter into Synthetic Security agreements (and correspondingly to fund the related accounts); repurchase and terminate Participations outstanding under the Warehousing Agreement (at a price reflecting the price originally paid by the Issuer to acquire the related Warehouse Loans plus accrued and unpaid interest and fees thereon and the amount of certain expenses of the Warehouse Provider minus principal repayments thereon) and pay certain other amounts to the Warehouse Provider in accordance with the Warehouse Agreement and make similar arrangements for repurchase and payment of High-Yield Bonds under the bond warehousing arrangement entered into among the Issuer, the Portfolio Manager, and JPMorgan Securities, Ltd.; fund the Closing Date Expense Account; and undertake certain related activities. The Issuer expects that, as of the Closing Date, it will have purchased (or entered into commitments to purchase) at least 60% of the Collateral Obligations to be included in the anticipated portfolio as of 14

the Ramp-Up Completion Date. The majority of the Collateral Obligations to be held by the Issuer as of the Closing Date will be purchased before the Closing Date in coordination with the Portfolio Manager and the Warehouse Provider under the Warehousing Agreement and under the bond warehousing agreement among the Issuer, the Portfolio Manager and JPMorgan Securities Ltd. At any time before the Determination Date in the first Due Period, the Trustee will transfer uninvested proceeds of the offering of the Securities not invested in Collateral Obligations on the Closing Date in an amount equal to $1,500,000 (the Interest Reserve Amount) from the Collection Account to the Interest Reserve Account. On or before the Determination Dates in the first and second Due Periods, at the direction of the Portfolio Manager, the Issuer may direct that any portion of the then remaining Interest Reserve Amount be transferred to the Collection Account and included as Interest Proceeds or Principal Proceeds for the related Due Period, except that at least $1,000,000 must be included in Interest Proceeds for the first Due Period. On the Payment Date in November 2004, all amounts on deposit in the Interest Reserve Account shall be transferred to the Payment Account and applied as Principal Proceeds in accordance with the Priority of Payments and the Trustee shall close the Interest Reserve Account. Any proceeds not invested in Collateral Obligations, deposited into the Revolving Reserve Account, Hedging Counterparty Collateral Accounts, Synthetic Security Collateral Accounts, accounts of Synthetic Security counterparties, Securities Lending Accounts, or the Delayed Drawdown Reserve Account or allocated for application as Interest Proceeds will be invested in Eligible Investments pending the use of the proceeds to purchase Collateral Obligations or other permitted applications of the proceeds. The Offering ................................................ The Securities will be offered and sold in accordance with any applicable securities laws of the United States, any state of the United States and any other relevant jurisdiction: (i) in the United States to persons that are either both Qualified Institutional Buyers and Qualified Purchasers purchasing for their own account or one or more accounts with respect to which they exercise sole investment discretion, each of which is both a Qualified Institutional Buyer and a Qualified Purchaser, in accordance with Rule 144A, or Institutional Accredited Investors and Qualified Purchasers in reliance on an exemption from registration under the Securities Act, (ii) outside the United States to persons that are not U.S. Persons as defined in Regulation S (U.S. Person), purchasing for their own account or one or more accounts with respect to which they exercise sole investment discretion, each of which is a non-U.S. Person, in offshore transactions in reliance on Regulation S, and (iii) with respect to the Preference Shares only, also in the United States to persons that are both Accredited Investors and either Knowledgeable Employees with respect to the Issuer, or Qualified Purchasers.

15

In addition to the foregoing, investors in the Securities will be required or deemed (as applicable) to make certain ERISA-related representations and warranties. Form, Registration, and Transfer of the Securities ....................... The Co-Issued Notes and the Class D Notes are being offered in the United States to persons that are both Qualified Institutional Buyers and Qualified Purchasers. Those Securities will be represented by one or more permanent global notes in definitive, fully registered form without interest coupons (the Rule 144A Global Notes). The Rule 144A Global Notes will be deposited with the Trustee as custodian for The Depository Trust Company (the Depository) and will be registered in the name of Cede, as nominee of the Depository. The Co-Issued Notes, the Class D Notes, and the Composite Securities are being offered outside the United States to non-U.S. Persons in reliance on Regulation S. Those Securities will initially be temporary global notes in definitive fully registered form without interest coupons (the Temporary Regulation S Global Notes). On the Business Day after the 39th day after the later of the Closing Date and the commencement of the Offering (the Exchange Date), interests in the Temporary Regulation S Global Notes will be exchanged for interests in permanent global notes of the same Class in definitive, fully registered form without interest coupons (the Regulation S Global Notes and, together with the Rule 144A Global Notes, the Global Notes). The Regulation S Global Notes will be deposited with the Trustee as custodian for the Depository and will be registered in the name of Cede, as nominee of the Depository, for credit to the applicable purchaser accounts at Clearstream or Euroclear. The Co-Issued Notes and the Class D Notes are being offered in the United States to persons that are both Institutional Accredited Investors and Qualified Purchasers. Those Securities will be issued in definitive, fully registered, certificated form without interest coupons, and registered in the name of their beneficial owner in the Indenture Register maintained by the Indenture Registrar under the Indenture. The Co-Issued Notes, the Class D Notes, and the Composite Securities issued in Certificated form are collectively referred to as the Certificated Notes. The Composite Securities issued in certificated form are referred to as the Certificated Composite Securities. The Composite Securities are being offered in the United States to persons that are either both Qualified Institutional Buyers and Qualified Purchasers or both Institutional Accredited Investors and Qualified Purchasers or

outside the United States to non-U.S. Persons in an offshore transaction in accordance with Regulation S.

16

Except for those Composite Securities sold under Regulation S, the Composite Securities will be issued in definitive, fully registered certificated form, and registered in the name of their beneficial owner in the Indenture Register maintained by the Indenture Registrar. The Preference Shares are being offered outside the United States to non-U.S. Persons in reliance on Regulation S. Those Preference Shares will be represented by one or more permanent global share certificates in definitive, fully registered form (the Regulation S Global Preference Shares and, together with the Global Notes, the Global Securities). The Regulation S Global Preference Shares will be deposited with the Preference Share Paying Agent as custodian for the Depository and will be registered in the name of Cede, as nominee of the Depository, for credit to the applicable purchaser accounts at Clearstream or Euroclear. The Preference Shares are being offered in the United States to persons that either are both Qualified Institutional Buyers and Qualified Purchasers or both Accredited Investors and either Knowledgeable Employees or Qualified Purchasers.

Those Preference Shares will be issued in the form of definitive, fully registered, certificated share certificates (the Certificated Preference Shares and, together with the Certificated Notes and the Composite Securities, the Certificated Securities), and registered in the name of their beneficial owner in the Share Register maintained by the Share Registrar. See Certain Additional Provisions Relating to the SecuritiesForm, Registration, and Transfer of the Securities. Transfer Restrictions .................................. The Securities are subject to substantial investor eligibility and transfer restrictions. See Notices to Purchasers and Transfer Restrictions. See also Certain Additional Provisions Relating to the SecuritiesForm, Registration, and Transfer of the Securities. Minimum Denominations of Notes and Composite Securities ................ The Notes will be issuable in minimum denominations of $250,000, and integral multiples of $1,000 in excess of that amount, and each Class of Composite Securities will be issuable in minimum denominations of $100,000, and integral multiples of $1,000 in excess of that amount. After issuance, any Note may fail to be in the required minimum denomination due to the repayment of the principal amount of that Note in accordance with the Priority of Payments. Minimum Purchase of Preference Shares ................................... Each purchaser of the Preference Shares must purchase and hold a minimum of 100 Preference Shares for its own account and, if purchasing for any additional account, a minimum of 100 Preference Shares for each account. Fractional Preference Shares will not be issued. Payment Dates ............................................ Regular payment dates on the Notes will be the Business Day after the 25th day of each February, May, August, and November in each year 17

and at Stated Maturity or any other date on which the Note Interests are redeemed or paid before that, commencing on August 2004 (each date, a Payment Date). Certain Terms of the Securities ................. In connection with the summaries of certain terms of the Securities described below, reference is made to the applicable material under Application of Funds, Security for the Notes and the Composite Securities, and The Co-Issuers and the other information in this Offering Memorandum. Payment on the Notes ................................. General. Subject to the provisions below relating to allocation between tranches of the Class A Note Interests, payments to each Holder of the Note Interests of each Class shall be made ratably among the Holders of the Note Interests of that Class in proportion to the Aggregate Outstanding Amount of the Note Interests of the Class held by each Holder. Holders of Securities are entitled to receive, in the case of Note Interests, payments of interest and principal and, in the case of the Preference Share Interests, distributions and a final redemption distribution, in each case in the priority and to the extent provided under Application of Funds. On each Payment Date, funds with respect to the Class A-1 Note Interests (considered as one subclass) and the Class A-2 Notes and the Class A-3 Notes (considered together as a second subclass) will be applied pro rata based on the Aggregate Outstanding Amounts of each of the subclasses, and between the Class A2 Notes and the Class A-3 Notes sequentially, first, to the Class A-2 Notes and second to the Class A-3 Notes; the Class B Note Interests will be subordinate in right of payment of interest to the interest payments to be made on the Class A Note Interests and subordinate in right of payment of principal to the repayment in full of the principal of the Class A Note Interests, the Class C Note Interests will be subordinate in right of payment of interest to the interest payments to be made on the Class A Note Interests and the Class B Note Interests and subordinate in right of payment of principal to the repayment in full of the principal of the Class A Note Interests and Class B Note Interests, and the Class D Note Interests will be subordinate in right of payment of interest to the interest payments to be made on the Class A Note Interests, the Class B Note Interests, and the Class C Note Interests and subordinate in right of payment of principal to the repayment in full of the principal of the Class A Note Interests, the Class B Note Interests, and the Class C Note Interests. Interest payments on all Note Interests are subordinated to payment of the Senior Management Fee. The Preference Share Interests will be subordinate in right of payment of distributions and other distributions to all amounts payable on the Note Interests and will also be subordinate on each Payment Date to the payment of the Senior Management Fee, the Subordinated Management Fee, and any Incentive Management Fee, certain Hedge 18

Payment Amounts, if any, and certain other administrative expenses of the Issuer Interest. Interest accrued on the Note Interests during each Interest Period will be payable quarterly on the Payment Date immediately succeeding the Interest Period in accordance with the Priority of Payments. Interest on the Floating Rate Notes, and interest on any Defaulted Interest and Deferred Interest in respect of the Floating Rate Notes, will be computed including any adjustment to the number of days in an Interest Period because of the shift of a Payment Date to a Business Day. The Note Interests and the Class 1 Composite Securities will accrue interest at the Note Interest Rates and on the basis provided under Certain Terms of the Class A Notes, Certain Terms of the Class B Notes, Certain Terms of the Class C Notes, Certain Terms of the Class D Notes below and under Overview of the Notes and the Composite Securities above. Interest will cease to accrue on each Note Interest or, in the case of a partial repayment, on that part, from the date of repayment or its Stated Maturity, unless payment of principal is improperly withheld or unless default is otherwise made with respect to those payments. To the extent lawful and enforceable, interest on any Defaulted Interest on any Note Interest will accrue at the applicable Note Interest Rate until paid. Principal. The Note Interests will mature at par at their Stated Maturity unless redeemed or repaid before the Stated Maturity. However, it is expected that the Note Interests will be paid in full before their Stated Maturity. See Certain Maturity and Prepayment Considerations. Any payment of principal with respect to any Class of Note Interests will be made by the Trustee on a pro rata basis among the Note Interests of that Class, according to the respective unpaid principal amounts outstanding immediately before that payment. In general, principal payments will not be made on the Note Interests before the end of the Reinvestment Period, except in the following circumstances: in connection with an Optional Redemption; at the option of the Portfolio Manager, to effect a Special Redemption of the Note Interests; pursuant to a redemption made in connection with a Tax Event; and following a mandatory redemption caused by a failure to meet any of the Coverage Tests or a Rating Confirmation Failure.

See Application of Funds, Certain Additional Provisions Relating to the SecuritiesOptional RedemptionNote Interests, Special Redemption of Note Interests If the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture, 19

Mandatory Redemption of the Note Interests, and Security for the Notes and the Composite SecuritiesAcquisition of Collateral Obligations. No payments of principal will be made on the Class A-3 Notes until the principal of the Class A-2 Notes has been paid in full. No payments of principal will be made on the Class B Note Interests until the principal of the Class A Note Interests has been paid in full. No payments of principal will be made on the Class C Note Interests until the principal of the Class A Note Interests and the Class B Note Interests has been paid in full. No payments of principal will be made on the Class D Note Interests until the principal of the Class A Note Interests, the Class B Note Interests, and the Class C Note Interests has been paid in full. However, Principal Proceeds may be used to pay Deferred Interest and other amounts before the payment of principal of the Note Interests. See Application of Funds. No principal of any Class of Note Interests will be payable on any Payment Date other than in accordance with the Priority of Payments and to the extent funds are available therefor on that Payment Date for that purpose, except that the principal of each Class of Note Interests will be payable in full at the Stated Maturity, unless repaid before that. For a description of the relative priority of payments and level of subordination of the Securities and certain fees, expenses and other liabilities of the Co-Issuers, see Application of Funds. Certain Terms of the Class A Notes .......... Principal Proceeds will be applied following the Reinvestment Period, and in certain limited circumstances during the Reinvestment Period, to the payment of principal of the Class A Notes on each Payment Date in accordance with the Priority of Payments (after the payment in full of any fees and expenses of the Co-Issuers for which Interest Proceeds were insufficient). The Class A Notes are also subject to Optional Redemption and Special Redemption as described below. See Certain Additional Provisions Relating to the Securities Optional Redemption, and Special Redemption of Note Interests If the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture. All payments of interest (including Defaulted Interest) or principal on the Class A Notes will be made pro rata to the Class A-1 Note Interests (considered as one subclass) and the Class A-2 Notes and the Class A-3 Notes (considered as a second subclass) in proportion to the respective interest accrued if applied as interest and in proportion to the respective Aggregate Outstanding Amount if applied as principal. Certain Terms of the Class B Notes .......... On any Payment Date on which the Class A Note Interests remain outstanding, the failure to pay interest accrued on the Class B Note Interests due to the proceeds of the Collateral being insufficient on that Payment Date to pay the interest, will not cause an Event of Default. Instead, the Class B Deferred Interest will be deferred and the Class B Deferred Interest will be payable on subsequent Payment Dates in accordance with the Priority of Payments. Principal Proceeds will be applied following the Reinvestment Period, and in certain limited circumstances during the Reinvestment Period, to the payment of principal of the Class B Note Interests on each Payment Date in accordance with the Priority of Payments (after the 20

payment in full of any fees and expenses of the Co-Issuers for which Interest Proceeds were insufficient). No principal payments will be made on the Class B Note Interests until principal of, and accrued and unpaid interest on, the Class A Note Interests have been paid in full. The Class B Note Interests are also subject to Optional Redemption and Special Redemption as described below. See Certain Additional Provisions Relating to the SecuritiesOptional Redemption, and Special Redemption of Note Interests If the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture. All payments of interest (including Deferred Interest) or principal on the Class B Notes will be made pro rata to the Class B-1 Notes and the Class B-2 Notes in proportion to the respective interest accrued if applied as interest and in proportion to the respective Aggregate Outstanding Amount if applied as principal. Certain Terms of the Class C Notes .......... On any Payment Date on which the Class A Note Interests or the Class B Note Interests remain outstanding, the failure to pay interest accrued on the Class C Note Interests due to the proceeds of the Collateral being insufficient on that Payment Date to pay the interest will not cause an Event of Default. Instead, the unpaid interest will be deferred and the Class C Deferred Interest will be payable on subsequent Payment Dates in accordance with the Priority of Payments. Principal Proceeds will be applied following the Reinvestment Period, and in certain limited circumstances during the Reinvestment Period, to the payment of principal of the Class C Note Interests on each Payment Date in accordance with the Priority of Payments (after the payment in full of any fees and expenses of the Co-Issuers for which Interest Proceeds were insufficient). No principal payments will be made on the Class C Note Interests until principal of, and accrued and unpaid interest on, the Class A Note Interests and the Class B Note Interests have been paid in full. The Class C Note Interests are also subject to Optional Redemption and Special Redemption as described below. See Certain Additional Provisions Relating to the SecuritiesOptional Redemption and Special Redemption of Note Interests if the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture. All payments of interest (including Deferred Interest) or principal on the Class C Notes will be made pro rata to the Class C-1 Notes and the Class C-2 Notes in proportion to the respective interest accrued if applied as interest and in proportion to the respective Aggregate Outstanding Amount if applied as principal. Certain Terms of the Class D Notes .......... On any Payment Date on which the Class A Note Interests, the Class B Note Interests, or the Class C Note Interests remain outstanding, the failure to pay interest accrued on the Class D Note Interests due to the proceeds of the Collateral being insufficient on that Payment Date to pay the interest will not cause an Event of Default. Instead, the unpaid interest will be deferred and the Class D Deferred Interest will be payable on subsequent Payment Dates in accordance with the Priority of Payments. On each Payment Date after the eighth Payment Date, 20.0% of the Interest Proceeds for the related Due Period remaining after payment 21

of items (1) through (21) under Application of FundsApplication of Interest Proceeds will be applied to the payment of principal of the Class D Note Interests in accordance with the Priority of Payments. Principal Proceeds will be applied following the Reinvestment Period and in certain limited circumstances during the Reinvestment Period, to the payment of principal of the Class D Note Interests on each Payment Date in accordance with the Priority of Payments (after the payment in full of any fees and expenses of the Co-Issuers for which Interest Proceeds were insufficient). No principal payments will be made on the Class D Note Interests until principal of, and accrued and unpaid interest on, the Class A Note Interests, the Class B Note Interests, and the Class C Note Interests have been paid in full except for principal payments made from Interest Proceeds after the eighth Payment Date in accordance with the Priority of Payments. The Class D Note Interests are also subject to Optional Redemption and Special Redemption as described below. See Certain Additional Provisions Relating to the SecuritiesOptional Redemption, and Special Redemption of Note Interests If the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture. Certain Terms of the Composite Securities .................................................. Each of the Class 1 Composite Securities, Class 2 Composite Securities, Class 3 Composite Securities, Class 4 Composite Securities, Class 5 Composite Securities, Class 6 Composite Securities, Class 7 Composite Securities; and Class 8 Composite Securities will be a single class and their Components will not be separately issued or transferable. However a holder may exchange its Composite Securities for all or a proportionate amount of Notes corresponding to its Note Component (or the Class 6 Component in the case of the Class 6 Composite Securities) and Preference Shares, as described in Certain Additional Provisions Relating to the SecuritiesExchange of Composite Securities for Related Securities. Until Composite Securities are so exchanged, the Notes and Preference Shares relating to the Components of the Class of Composite Securities will not be issued. All rights with respect to the Components represented by the Composite Securities will be governed by the Indenture. The rights with respect to Preference Share Components provided in the Indenture are determinable by reference to the Preference Share Documents. The Note Components and Preference Share Components will be equivalent to the extent possible to the rights that would have been created if the related Notes and Preference Shares had been issued. The holder of a Composite Security will have no rights under the Issuer Charter or under Cayman Islands law (including to vote or receive dividend or redemption payments) in respect of any Preference Shares. Notwithstanding that the Components of the Composite Securities will not be separate investments, for purposes of this Offering Memorandum, a holder of a Class of Composite Securities is sometimes referred to as a holder of the related Class of Note Components (or the Class 6 Component in the case of the Class 6 Composite Securities) and of the related Preference Share Components. In addition, payments or distributions made or to be made on the Class of Composite Securities on their Note Component, Class 6 Component, or on their Preference Share Component are 22

referred to as payments or distributions made or to be made on the Note Components, Class 6 Component, or Preference Share Components, as the case may be. Certain Terms of the Class 1 Composite Securities .................................................. Interest on the Class 1 Composite Securities will be payable in arrears on each Payment Date. Interest on the Class 1 Composite Securities and interest on any Class 1 Composite Security Deferred Interest Amount will be computed on the basis of a 360-day year consisting of twelve 30-day months, and will accrue on the Composite Security Rated Balance of the Class 1 Composite Securities and on the basis provided under Certain Terms of the Class 1 Composite Securities below and under Overview of the Notes and the Composite Securities above. On any Payment Date on which the Class 1 Composite Securities remain outstanding, the failure to pay interest accrued on the Class 1 Composite Securities due to an insufficiency in the Class 1 Composite Security Preference Share Component Amount on that Payment Date to pay the interest will not cause an Event of Default. Instead, the unpaid interest will be deferred and the Class 1 Composite Securities will be payable on subsequent Payment Dates in accordance with the Priority of Payments. Certain Terms of the Class 6 Composite Securities .................................................. On the Business Day before each Payment Date on which any distributions are to be made with respect to the Preference Share Components under item (24) of Application of FundsApplication of Interest Proceeds and item (12) of Application of FundsApplication of Principal Proceeds, the Trustee shall make commercially reasonable efforts to sell a portion or all of the Treasury Strip held in the Class 6 Collateral Account in accordance with the terms of the Indenture. The face amount of the Treasury Strip to be sold on the relevant Business Day shall be a calculated amount equal to the quotient of the sum of the distributions to be made with respect to Preference Share Components of the Class 6 Composite Securities as described above on the relevant Payment Date divided by one minus the bid-side market price of the Treasury Strip on the Business Day before the Payment Date expressed as a percentage.

On each Payment Date on which distributions are to be made on the Preference Share Components under Application of Funds, the Trustee shall disburse (solely from amounts in the Payment Account attributable to the proceeds from the sale of the Treasury Strip as described above) to the Holders of the Class 6 Components pro rata based on their share of the Class 6 Rated Balance, the proceeds from the sale of the Treasury Strip for that Payment Date. Upon the occurrence of a Tax Event, the Class 6 Components shall be redeemed by the Issuer, in whole but not in part at the applicable Redemption Price, on any Payment Date from funds available for that purpose in the Class 6 Component Account, at the direction of a 23

Super Majority of the Preference Share Interests. All Class 6 Components must be simultaneously redeemed. Upon any redemption of the Class 6 Components the Holders of Class 6 Components shall receive the Redemption Price as a distribution in kind of a pro rata share (based on the Class 6 Rated Balance) of each item of the Class 6 Collateral. Certain Terms of the Preference Shares ....................................................... The Preference Shares will be issued pursuant to the Preference Share Documents. The Issuer will enter into the Preference Share Paying and Transfer Agency Agreement, dated as of March 24, 2004 among the Issuer, the Preference Share Paying Agent and the Share Registrar. Amounts available for distribution to the Preference Share Interests will be distributed pursuant to the Indenture and the Preference Share Documents. Certain Limitations on Distribution. Under Cayman Islands law, the Issuer must have sufficient distributable profits or share premium (being the difference between the par value of the Preference Shares and their stated value) out of which to make any distribution of dividends on the Preference Shares. Also, the Issuer must be and remain solvent following any distributions of dividend or final redemption distribution on the Preference Shares (which in this context means the Issuer is able to pay its debts as they become due in the ordinary course of its business). See Certain Additional Provisions Relating to the SecuritiesCertain Limitations on Distributions on the Preference Shares. The Indenture contains certain provisions that are intended to reduce certain potential effects of the differences in form between the two types of Preference Share Interests, one of which is the Composite Securities, which are partially secured under the Indenture, and the other of which is the Preference Shares, which are not secured. See Certain Additional Provisions Relating to the SecuritiesCertain Provisions Applicable to the Composite Securityholders and Preference Shareholders. Controlling Class ........................................ The Controlling Class will be the most senior Class of Note Interests any of which are at the time outstanding. Coverage Tests and Class D Reinvestment Overcollateralization Test ........................................................... General. The Coverage Tests for each Class of Notes will consist of the Overcollateralization Test and the Interest Coverage Test as applied to the particular Class of Note, and are individually referred to as the Class A Coverage Tests, the Class B Coverage Tests, the Class C Coverage Tests, and the Class D Coverage Tests. See the Indenture for the formulations of these tests, which are highly detailed. The ratios on which they are based are described under Coverage Tests. The tests will be used to determine, among other things, whether Notes will be redeemed in certain circumstances as described under Certain Additional Provisions Relating to the Securities and whether additional Collateral Obligations may be acquired as described under Application of Funds and Security for the Notes and the Composite Securities.

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There will not be any Coverage Test applicable to the Preference Share Interests. The Overcollateralization Test. A test the first Measurement Date for which will be on the Ramp-Up Completion Date and that is satisfied with respect to any Class of Note Interests if, as of any Measurement Date, the Overcollateralization Ratio for the Class is at least equal to the specified Required Level for the Class indicated in the table below: Test
Class A Overcollateralization Test Class B Overcollateralization Test Class C Overcollateralization Test Class D Overcollateralization Test

Required Level 114.7% 108.8% 104.9% 103.6%

The Interest Coverage Test. A test the first Measurement Date for which will be on the third Payment Date and that is satisfied with respect to any specified Class of Note Interests if, as of the third Payment Date and any Measurement Date thereafter on which any Note Interests remain outstanding, the Interest Coverage Ratio equals or exceeds the applicable Required Level specified in the table below for the Class: Test Class A Interest Coverage Test Class B Interest Coverage Test Class C Interest Coverage Test Class D Interest Coverage Test Required Level 125% 120% 115% 110%

Class D Reinvestment Overcollateralization Test. A test that will be satisfied if, as of any Measurement Date during the Reinvestment Period on which Class D Note Interests remain outstanding, the Class D Reinvestment Overcollateralization Ratio is at least equal to 105.5%. Mandatory Redemption of the Note Interests for Failure to Satisfy Coverage Tests ............................ If either of the Class A Coverage Tests is not satisfied on the last day of any Due Period (each, a Determination Date), funds will be used to redeem the Class A Note Interests to the extent necessary for the Class A Coverage Tests to be satisfied that would otherwise be used to purchase additional Collateral Obligations during the Reinvestment Period or to make interest and principal payments on the Class B Note Interests, the Class C Note Interests, and the Class D Note Interests and to make distributions on the Preference Share Interests.

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If either of the Class B Coverage Tests is not satisfied on any Determination Date, funds will be used to redeem the Class A Note Interests and then the Class B Note Interests, in each case to the extent necessary for the Class B Coverage Tests to be satisfied that would otherwise be used to purchase additional Collateral Obligations during the Reinvestment Period or to make interest and principal payments on the Class C Note Interests and the Class D Note Interests, and to make distributions on the Preference Share Interests.

If either of the Class C Coverage Tests is not satisfied on any Determination Date, funds will be used to redeem the Class A Note Interests, then the Class B Note Interests, and then the Class C Note Interests, in each case to the extent necessary for the Class C Coverage Tests to be satisfied that would otherwise be used to purchase additional Collateral Obligations during the Reinvestment Period or to make distributions on the Class D Note Interests and the Preference Share Interests.

If either of the Class D Coverage Tests is not satisfied on any Determination Date, funds will be used to redeem the Class A Note Interests, the Class B Note Interests, the Class C Note Interests, and the Class D Note Interests, in each case to the extent necessary for the Class D Coverage Tests to be satisfied that would otherwise be used to purchase additional Collateral Obligations during the Reinvestment Period or to make distributions on the Preference Share Interests.

See Certain Additional Provisions Relating to the Securities Mandatory Redemption of the Note InterestsMandatory Redemption of the Note Interests for Failure to Satisfy Coverage Tests. If during the Reinvestment Period, the Class D Reinvestment Overcollateralization Test is not satisfied on any Determination Date, certain funds that would otherwise be used to make distributions on the Preferred Share Interests, will be deposited instead to the Collection Account as Principal Proceeds to the extent necessary to cause the Class D Reinvestment Overcollateralization Test to be satisfied as of that Determination Date after application of Principal Proceeds as described in (1) of Application FundsApplication of Principal Proceeds. Mandatory Redemption of the Note Interests Upon Rating Confirmation Failure .............................. The Issuer will request each of the Rating Agencies to confirm, by the Business Day after the 29th day after the Ramp-Up Completion Date, that it has not reduced suspended or withdrawn the ratings assigned to any of the Note Interests or Composite Securities and that it has not placed any Class of Notes or Composite Securities on credit watch with negative implications. If the Trustee does not receive evidence of confirmation before the Payment Date following the 29-day period 26

(such an event, a Rating Confirmation Failure), all Interest Proceeds remaining after payment of amounts referred to in clauses (1) through (12) of Application of FundsApplication of Principal Proceeds will be used to pay principal of the Class A Note Interests, the Class B Note Interests, the Class C Note Interests, and the Class D Note Interests sequentially in order of their priority on the next Payment Date and each Payment Date thereafter until the original ratings are confirmed. If necessary, after the foregoing payments are made out of Interest Proceeds, Principal Proceeds in accordance with clauses (4) through (7) of Application of Funds Application of Principal Proceeds will be used to pay principal of each Class of the Note Interests sequentially in order of their priority on each Payment Date until the original ratings are confirmed. See Certain Additional Provisions Relating to the SecuritiesMandatory Redemption of the Note InterestsMandatory Redemption of the Note Interests Upon Rating Confirmation Failure. Optional Redemption ................................. Upon the occurrence of a Tax Event or at any time after the Payment Date in February 2008, the Holders of a Super Majority of the Preference Share Interests (including the Holders of the Composite Securities with respect to the Preference Share Components) may require the Issuer or Co-Issuers, as applicable, to redeem the Note Interests and the Class 6 Components, in whole but not in part, from Principal Proceeds and all other funds available for that purpose in (i) in the case if the Note Interests, the Collection Account, the Payment Account, the Revolving Reserve Account, and the Delayed Drawdown Reserve Account and (ii) in the case of the Class 6 Components, the Class 6 Component Account in accordance with the redemption procedures described under Certain Additional Provisions Relating to the SecuritiesOptional Redemption. Note Interests and the Class 6 Components to be redeemed shall, on the Redemption Date, become payable at their Redemption Price. From and after the Redemption Date the redeemed Note Interests will cease to bear interest. However, the Composite Securityholders will continue to receive distributions with respect to the Preference Share Components, if applicable, after the Redemption Date. The redemption price payable in connection with the Optional Redemption of any Class of Note Interests will be the sum of the outstanding principal amount of the redeemed portion of the Note Interest on the Redemption Date, plus its accrued interest (including any Defaulted Interest and interest on Defaulted Interest), plus in the case of any Deferred Interest Note, the applicable Deferred Interest on the Note Interest, plus in the case of any Fixed Rate Note, its Redemption Premium.

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Upon any redemption of the Class 6 Components the Holders shall receive the Redemption Price as a distribution in kind of a pro rata share (based on the Class 6 Rated Balance) of each item of Class 6 Collateral. Special Redemption of Note Interests if the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture ............. Note Interests will be redeemed, in whole or in part, by the Issuer or the Co-Issuer, as applicable, on Payment Dates during the Reinvestment Period if the Portfolio Manager has been unable, for at least 45 consecutive Business Days, to identify appropriate Collateral Obligations in sufficient amounts that meet the Eligibility Criteria to permit the investment of all or a portion of the funds then deposited in the Collection Account and the Portfolio Manager elects, in its sole discretion, to designate all or a portion of those funds as a Special Redemption Amount by notification to the Trustee and each Rating Agency, subject to certain conditions to a Special Redemption. See Certain Additional Provisions Relating to the Securities Special Redemption of Note Interests If the Portfolio Manager Does Not Identify Investments as contemplated by the Indenture. Application of Funds .................................. The Indenture provides for the application of available funds on the Closing Date and on each Payment Date, as described under Application of Funds. Listing .......................................................... Application has been made to admit the Securities to the Daily Official List of the Irish Stock Exchange. There can be no assurance that the admission will be granted or maintained. See Listing and General Information. In addition, there is currently no market for the Securities, and there can be no assurance that a market will develop. Governing Law ........................................... The Indenture, the Notes, the Preference Share Paying and Transfer Agency Agreement, the investor representation letters, the Management Agreement, the Collateral Administration Agreement, the Purchase Agreement, the Securities Lending Agreements, and the Hedge Agreements will be governed by the laws of the State of New York. The Preference Shares, the Administration Agreement, and the Issuer Charter will be governed by the laws of the Cayman Islands. Certain Income Tax Considerations ................................. See Certain Income Tax Considerations. Certain ERISA Considerations ................. See Certain ERISA and Other Considerations. Certain Legal Investment Considerations ......................................... See Certain Legal Investment Considerations. Ratings ......................................................... Required Ratings. It is a condition to the issuance of the Securities on the Closing Date that each Class of Note Interests and Composite Securities is rated at least as indicated in the table under Securities Offered above. No rating of the Class 8 Composite Securities or the Preference Shares has been sought or obtained in connection with the issuance thereof. 28

Moodys. A rating assigned to a Class of Note Interests or Composite Securities by Moodys is based on its assessment of expected losses on the Collateral Obligations securing the Note Interests and the Composite Securities and the resulting probability that the Collateral Obligations will generate sufficient proceeds to make scheduled interest and principal payments on the Notes (or, in the case of any Class of the Composite Securities, to make ultimate payment of its related Composite Security Rated Balance or Class 6 Rated Balance, as the case may be). The ratings assigned by Moodys to each Class of Note Interests only address the ultimate receipt of principal and interest as required under the Indenture and are based on the expected loss to the Noteholders relative to the promise of receiving the present value of the principal and interest. The ratings assigned by Moodys to each Class of Composite Securities only address the ultimate receipt of the Composite Security Rated Balance or Class 6 Rated Balance, as the case may be, relative to the promise of receiving the present value of the ultimate payment of the Composite Security Rated Balance or Class 6 Rated Balance, as the case may be, and do not address any other payments or additional amounts that a holder of Composite Securities may receive pursuant to the underlying documents. S&P. The ratings assigned to the Notes by S&P address the timely payment of interest on the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the ultimate payment of interest on the Class B Notes, the Class C Notes, and the Class D Notes and the ultimate payment of principal of each Class of Notes. The ratings assigned to the Class A Notes, the Class B Notes, the Class C Notes, and the Class D Notes by S&P are based on an analysis of the credit quality of the portfolio of Collateral Obligations securing the Notes; expected cash flow used to pay liabilities; the structure and priority of these payments; and qualitative issues and legal considerations. Based on these analyses, S&P determines the necessary level of credit enhancement needed to achieve a desired rating. General. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning Rating Agency. A rating does not comment as to market price or suitability for a particular investor. If a rating initially assigned to a Class of Note Interests is subsequently lowered for any reason, no person is obligated to provide any additional support or credit enhancement with respect to any Note Interests. The Issuer has not requested a rating on the Note Interests by any rating agency other than the Rating Agencies. There can be no assurance that another rating agency will not rate the Note Interests and that, if a rating is assigned to the Note Interests by any other rating agency, that rating will be equivalent to the ratings assigned by Moodys or S&P. A rating of the Notes should be evaluated independently of similar ratings on different securities. The Issuer or the Co-Issuers, as applicable, will request each of the Rating Agencies to confirm, within the 29-days after the Ramp-Up Completion Date, that it has not reduced or withdrawn the ratings assigned by it on the Closing Date to any of the Note Interests and that it has not placed any Class of Notes or Composite Securities on 29

credit watch with negative implications. In the event of a Rating Confirmation Failure, Interest Proceeds and, to the extent necessary, Principal Proceeds, will be applied on each Payment Date as specified under the Priority of Payments to repay the outstanding principal amount of the Note Interests until the ratings are reinstated as described under Summary of TermsMandatory Redemption of the Note Interests Upon Rating Confirmation Failure. In addition, the Indenture provides that, so long as any Class of Securities remains outstanding, on or before March 31, in each year commencing in 2005, the Co-Issuers shall obtain an annual review of the rating of each outstanding Class from each of the Rating Agencies that rated it on the Closing Date, unless any rating has been withdrawn. Any reduction, suspension, or withdrawal of a rating of Note Interests, or any placement of Note Interests on credit watch with negative implications, may adversely affect their marketability or their suitability as an investment and may adversely affect the Holders of the Securities. As used in this Offering Memorandum, references to ratings of Notes means or includes, where applicable, ratings of Note Interests. Reporting to Holders .................................. No later than the second Business Day preceding each Payment Date, the Issuer will deliver a Valuation Report, dated as of the related Determination Date, to the Rating Agencies, the Trustee, the Portfolio Manager, each Hedge Counterparty, the Initial Purchaser, each Holder of a Note (a Noteholder, each Holder of a Composite Security of any Class (a Composite Securityholder, and, upon request to the Preference Share Paying Agent, to any Holder of Preference Shares (a Preference Shareholder) and to the Preference Share Paying Agent. CUSIP, Common Code, ISIN and WKN ........................................ The CUSIP, Common Code, International Securities Identification Number (ISIN), and WKN numbers assigned to each Class of Securities are found under Identifying Numbers.

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RISK FACTORS General; Priorities of Securities The Issuer intends to invest in securities and other financial assets with certain risk characteristics as provided in the Indenture and the Management Agreement. See Security for the Notes and the Composite Securities. There can be no assurance that the Issuers investments will be successful, that its investment objectives will be achieved, that investors will receive their initial investments under the Securities or that they will receive any return (or avoid any loss, including total loss) on their investment in the Securities. Prospective investors are therefore advised to review this entire Offering Memorandum carefully and should consider, among other things, the following risk factors (along with, among other things, the inherent risks of investment activities) before deciding whether to invest in the Securities. Except as is otherwise stated below, the risk factors are generally applicable to all the Securities, although the degree of risk associated with each Class of Securities may vary. In particular, the priorities of payment of the Notes are generally in the order of their alphabetic designation from Class A (the highest priority) to Class D (the lowest), the priorities of payment of the Note Interests are generally higher than priorities of payment of the Preference Share Interests, and the Composite Securities reflect, in effect on a blended basis, the risk characteristics of their respective Components, which correspond to various aspects of the foregoing. Relating to the Securities The Securities Will Have Limited Liquidity There is currently no market for the Securities. Although the Initial Purchaser may from time to time make a market in the Securities, the Initial Purchaser is under no obligation to do so. If the Initial Purchaser commences any market-making, the Initial Purchaser may discontinue the same at any time. There can be no assurance that a secondary market for any Class of Securities will develop, or if a secondary market does develop, that it will provide the Holders of the Securities with liquidity of investment or that it will continue for the life of the Securities. In addition, the Securities are subject to certain transfer restrictions and can only be transferred to certain transferees as described under Transfer Restrictions. The restrictions on the transfer of Securities may further limit their liquidity. Consequently, an investor in the Securities must be prepared to hold the Securities for an indefinite period or, with respect to the Notes, until their Stated Maturity and, with respect to the Preference Shares, until the Scheduled Preference Share Interests Redemption Date. Application has been made to admit each Class of Notes, each Class of Composite Securities, and the Preference Shares to the Daily Official List of the Irish Stock Exchange. There can be no assurance that admission will be granted or maintained. The Subordination of the Class A-3 Notes, Class B Note Interests, the Class C Note Interests, the Class D Note Interests, and the Preference Share Interests Will Affect Their Right to Payment in Relation to the More Senior Securities The Class A-3 Notes are subordinated in right of payment of interest and principal to the Class A-2 Notes in the manner and to the extent described in this Offering Memorandum. Payments of interest on the Class A-3 Notes will not be made until due and unpaid interest on the Class A-2 Notes and certain other amounts (including certain management fees payable to the Portfolio Manager and any successor Portfolio Manager, and certain hedging termination payments and certain administrative fees) have been paid. No payments of principal of the Class A-3 Note Interests will be made until principal of and due and unpaid interest on the Class A-2 Notes and certain other amounts have been paid in full. The Class B Note Interests are subordinated in right of payment of interest and principal to the Class A Note Interests in the manner and to the extent described in this Offering Memorandum. Payments of interest on the Class B Note Interests will not be made until due and unpaid interest on the Class A Note Interests and certain other amounts (including certain management fees payable to the Portfolio Manager and any successor Portfolio Manager, and certain hedging termination payments and certain administrative fees) have been paid. No payments of principal of the Class B Note Interests will be made until principal of and due and unpaid interest on the Class A Note 31

Interests and certain other amounts have been paid in full, except in connection with the payment of any Class B Deferred Interest. The Class C Note Interests are subordinated in right of payment of interest and principal to the Class A Note Interests and the Class B Note Interests in the manner and to the extent described in this Offering Memorandum. Payments of interest on the Class C Note Interests will not be made until due and unpaid interest on the Class A Note Interests, the Class B Note Interests, and certain other amounts (including certain management fees payable to the Portfolio Manager and any successor Portfolio Manager, and certain hedging termination payments and certain administrative fees) have been paid. No payments of principal of the Class C Note Interests will be made until principal of and due and unpaid interest on the Class A Note Interests, the Class B Note Interests and certain other amounts have been paid in full, except in connection with the payment of any Class C Deferred Interest. The Class D Note Interests are subordinated in right of payment of interest and principal to the Class A Note Interests, the Class B Note Interests, and the Class C Note Interests in the manner and to the extent described in this Offering Memorandum. Payments of interest on the Class D Note Interests will not be made until due and unpaid interest on the Class A Note Interests, the Class B Note Interests, the Class C Note Interests, and certain other amounts (including certain management fees payable to the Portfolio Manager and any successor Portfolio Manager, and certain hedging termination payments and certain administrative fees) have been paid. No payments of principal of the Class D Note Interests will be made until principal of and due and unpaid interest on the Class A Note Interests, the Class B Note Interests, the Class C Note Interests, and certain other amounts have been paid in full, except in connection with the payment of any Class D Deferred Interest. Interest Proceeds will not be paid on the Class 6 Component of the Class 6 Composite Securities or the Preference Share Components of the Composite Securities or deposited to the Preference Shares Distribution Account to pay dividends or any final redemption distribution on the Preference Shares on any Payment Date until due and unpaid interest on the Note Interests (including any Deferred Interest) and certain amounts (including certain amounts due under the Hedge Agreements and certain management fees payable to the Portfolio Manager and any successor Portfolio Manager, and certain hedging termination payments and certain administrative fees) have been paid on the Payment Date in accordance with the Priority of Payments. Principal Proceeds will not be paid on the Preference Share Components of the Composite Securities or deposited to the Preference Shares Distribution Account to pay dividends or any final redemption distribution on the Preference Shares until principal of each Class of Note Interests and certain other amounts payable out of Principal Proceeds on each Payment Date have been paid in full. In addition, the Preference Share Interests will not be redeemed until each Class of Notes and certain other amounts have been paid in full. In addition, the Co-Issuers will have only nominal equity capitalization (other than the Preference Shares). Consequently, to the extent that any losses are suffered by any of the Holders of any Securities, the losses will be borne first by the Holders of the Preference Share Interests, and then by the Holders of each Class of Notes, serially in inverse order of their alphabetic designations. See Application of Funds. Interest Will Be Deferred on Deferred Interest Notes and the Class 1 Composite Securities if There Are Insufficient Funds under the Priority of Payments for Payment of Interest So long as any Class A Note Interests are outstanding, any interest due and accrued on the Class B Note Interests that remains unpaid on any Payment Date because insufficient funds are available to pay it in accordance with the Priority of Payments will be added to the Aggregate Outstanding Amount of the Class B Note Interests as Class B Deferred Interest and failure to pay that interest on the Payment Date when it originally became due will not be an Event of Default. Class B Deferred Interest will then be payable on subsequent Payment Dates in accordance with the Priority of Payments, pursuant to which it will remain subordinated to the payment of interest on the Class A Note Interests in the application of Interest Proceeds and to the payment in full of the principal of the Class A Note Interests in the application of Principal Proceeds. See Summary of TermsPayment on the Notes. So long as any Class A Note Interests or Class B Note Interests are outstanding, any interest due and accrued on the Class C Note Interests that remains unpaid on any Payment Date because insufficient funds are 32

available to pay it in accordance with the Priority of Payments will be added to the Aggregate Outstanding Amount of the Class C Note Interests as Class C Deferred Interest and failure to pay that interest on the Payment Date when it originally became due will not be an Event of Default. Class C Deferred Interest will then be payable on subsequent Payment Dates in accordance with the Priority of Payments, pursuant to which it will remain subordinated to the payment of interest on the Class A Note Interests and the Class B Note Interests in the application of Interest Proceeds and to the payment in full of the principal of the Class A Note Interests and the Class B Note Interests in the application of Principal Proceeds. See Summary of TermsPayment on the Notes. So long as any Class A Note Interests, Class B Note Interests, or Class C Note Interests are outstanding, any interest due and accrued on the Class D Note Interests that remains unpaid on any Payment Date because insufficient funds are available to pay it in accordance with the Priority of Payments will be added to the Aggregate Outstanding Amount of the Class D Note Interests as Class D Deferred Interest and failure to pay that interest on the Payment Date when it originally became due will not be an Event of Default. Class D Deferred Interest will then be payable on subsequent Payment Dates in accordance with the Priority of Payments, pursuant to which it will remain subordinated to the payment of interest on the Class A Note Interests, the Class B Note Interests, and the Class C Note Interests in the application of Interest Proceeds and to the payment in full of the principal of the Class A Note Interests the Class B Note Interests, and the Class C Note Interests in the application of Principal Proceeds. See Summary of TermsPayment on the Notes. So long as any Class 1 Composite Securities are outstanding, any interest due and accrued on the Class 1 Composite Securities that remains unpaid on any Payment Date because insufficient funds are available to pay it as described under Application of FundsApplication of Composite Security Available Amount will be added to the Aggregate Outstanding Amount of the Class 1 Composite Securities as Class 1 Composite Security Deferred Interest and failure to pay that interest on the Payment Date when it originally became due will not be an Event of Default. The Class 1 Composite Security Deferred Interest will then be payable on subsequent Payment Dates on which the Class 1 Composite Security Preference Amount is available to be used for that purpose as described under Application of FundsApplication of Composite Security Available Amount. Interest Proceeds May Be Used to Reinvest in Priority to any Payments to Holders of Preference Share Interests During the Reinvestment Period, if the Class D Reinvestment Overcollateralization Test is not met on any Determination Date, a portion of the Interest Proceeds that might otherwise have been paid to the Holders of the Preference Share Interests on the related Payment Date will instead be deposited to the Collection Account as Principal Proceeds. The Controlling Class Will Control Many Rights under the Indenture; However, Some Rights of the Controlling Class to Sell the Applicable Collateral in Connection with an Event of Default Are Limited Under the Indenture, many rights of the Holders of the Note Interests will be controlled by a Majority of the Controlling Class. Remedies pursued by the Holders of the Controlling Class upon an Event of Default could be adverse to the interests of the Holders of Securities subordinated to the Controlling Class. After any realization on the Applicable Collateral, proceeds will be allocated in accordance with the Priority of Payments pursuant to which the Notes and certain other amounts owing by the Co-Issuers will be paid in full before any allocation to the Preference Share Interests, and each Class of Notes (along with certain other amounts owing by the Co-Issuers) will be paid serially in alphabetic order until it is paid in full before any allocation is made to the next Class of Notes. If an Event of Default has occurred and is continuing, the Holders of the Preference Share Interests will not have any creditors rights against the Issuer and will not have the right to determine the remedies to be exercised under the Indenture. There is no guarantee that any funds will remain to pay dividends or to make any other distributions to the Holders of the Preference Share Interests following any liquidation of the Applicable Collateral and the application of the proceeds from the Applicable Collateral to pay the Note Interests and the fees, expenses, and other liabilities payable by the Co-Issuers. However, the ability of the Controlling Class to direct the sale and liquidation of the Applicable Collateral is subject to certain limitations. As described under Certain Additional Provisions Relating to the Securities Events of Default, if an Event of Default occurs and is continuing, the Trustee must retain the Applicable Collateral 33

intact and collect all payments in respect of the Applicable Collateral and continue making payments in accordance with the Priority of Payments and under Application of FundsClass 6 Component Distributions and in accordance with the Indenture unless either (A) the Trustee determines in consultation with the Portfolio Manager in accordance with the Indenture that the anticipated net proceeds of a sale or liquidation of the Applicable Collateral (after deducting the reasonable expenses of the sale or liquidation) would be sufficient to discharge in full the amounts then due and unpaid on the Note Interests for principal and interest (including any Defaulted Interest and Deferred Interest) and all other amounts payable under clauses (1) to (14) under Application of Funds Application of Interest Proceeds and a Majority of the Controlling Class agree with that determination or (B) the Holders of greater than 66-2/3% of the Aggregate Outstanding Amount of each of the Class A Note Interests, the Class B Note Interests, the Class C Note Interests, and the Class D Note Interests (in each case voting as a single class for this purpose) direct, subject to the provisions of the Indenture, the sale of the Applicable Collateral. The Issuer is Highly Leveraged, which Increases Risks to Investors The Issuer will be substantially leveraged. Use of leverage is a speculative investment technique and involves certain risks to investors in the Securities. The leverage provided to the Issuer by the issuance of the Notes will result in interest expense and other costs incurred in connection with the borrowings that may not be covered by the net interest income, dividends, and appreciation of the Collateral Obligations. The use of leverage generally magnifies the Issuers risk of loss, particularly for the more subordinate Classes of Note Interests and the Preference Share Interests. In certain circumstances, such as in connection with the exercise of remedies following an Event of Default, Holders of the Controlling Class may require the Issuer to dispose of some or all of the Collateral Obligations under unfavorable market conditions, thus causing the Issuer to recognize a loss that might not otherwise have occurred. In certain circumstances, the Holders of the Controlling Class are entitled to direct the sales of Collateral Obligations and may be expected to do so in their own interest, rather than in the interests of the more subordinate Classes of Securities. Additional Issuances of Securities Can Dilute or Otherwise Affect Rights of Existing Securityholders At any time during the Reinvestment Period, subject to the approval of the Portfolio Manager and a Majority of the Preference Shares, the Applicable Issuers may issue and sell additional Notes of all existing Classes and Composite Securities having Note Components of all existing Classes in amounts that result in the Note Interests for any one Class being increased by an aggregate maximum initial principal amount of up to 50% of the original principal amount of the Class of Note Interests issued on the Closing Date, and the Issuer may issue and (subject to the approval of the Portfolio Manager) sell additional Preference Shares and Composite Securities having Preferred Share Components in amounts that result in the Preference Share Interests being increased by an aggregate maximum stated value of up to 50% of the original stated value of the Preference Share Interests subject to certain conditions described under Certain Additional Provisions Relating to the SecuritiesAdditional Issuance of Securities. The Issuer may issue and sell additional Composite Securities containing Note Components and Preference Share Components up to an aggregate for which sufficient Note Interests and Preference Share Interests are authorized. Although the Indenture requires that any additional issuance of Notes be proportional, based on the most recent Payment Date, across all Classes of Notes, a larger proportion of Preference Shares (relative to the amount of each Class of Notes) may be issued. The issuances of additional Securities will not be conditioned on a vote of the existing Holders of Note Interests. The Issuer may issue additional Preference Shares pursuant to the Preference Share Documents without simultaneously issuing additional Notes pursuant to the Indenture. Any additional issuance of Preference Shares will be subject to the applicable conditions in the Preference Share Documents. No additional Composite Securities will be required to be issued pursuant to the Indenture if any other additional Securities are issued. If additional Securities are issued, the interest of an existing Holder will represent a smaller outstanding portion of the Aggregate Outstanding Amount of Securities, reducing the Holders relative voting power. In addition, an additional issuance of Preference Shares can reduce the amount of any dividends and final redemption distribution payable to existing Holders of the Preference Shares and the corresponding payments on the Preference Share Components.

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The Issuer Is Newly Formed, Has No Significant Operating History, Has No Material Assets Other than the Applicable Collateral, and Is Limited in its Permitted Activities The Issuer is a newly formed entity and has no significant operating history, other than in connection with the acquisition of the Collateral Obligations during the period up to the Ramp-Up Completion Date. The Issuer will have no material assets other than the Applicable Collateral. The Indenture provides that the Issuer is not permitted to engage in any business activity other than the issuance of the Notes, the Composite Securities, and the Preference Shares and its ordinary shares, the acquisition and disposition of and investment and reinvestment in Collateral Obligations, certain activities conducted in connection with the payment of amounts in respect of the Securities and the management of the Applicable Collateral, and other activities incidental or related to the foregoing. Income derived from the Applicable Collateral will be the Issuers principal source of cash. The Co-Issuer Is Newly Formed, Has No Significant Operating History, Has No Material Assets, and Is Limited in its Permitted Activities The Co-Issuer is a newly formed Delaware limited liability company and has no prior operating history. The Co-Issuer will have no material assets. The Indenture provides that the Co-Issuer is not permitted to engage in any business activity other than the co-issuance and sale of the Notes, the issuance of its share capital, and other activities incidental or related to the foregoing. The Notes Are Non-Recourse Obligations and the Composite Securities are Limited Recourse Obligations; Investors Must Rely on Available Collections from the Applicable Collateral and Will Have No Other Source for Payment The Notes are non-recourse debt obligations of the Co-Issuers and the Composite Securities are limited recourse obligations of the Issuer. The Securities are payable solely from the Applicable Collateral pledged by the Issuer to secure the Note Interests and the Class 6 Component, as applicable. None of the security holders, members, officers, directors, partners, or incorporators of the Issuer, the Co-Issuer, the Portfolio Manager, the Initial Purchaser, the Trustee, the Preference Share Paying Agent, the Administrator, the Share Trustee, the Share Registrar, any of their respective affiliates or the Holders of the Preference Shares, or any other person will be obligated to make payments on the Note Interests or the Class 6 Component. The Issuers ability to make interest payments and principal repayments on the Note Interests will be constrained by the terms of the Indenture. Holders of the Note Interests must rely solely on collections received on the Applicable Collateral pledged to secure the Note Interests or the Class 6 Component, as applicable, for the payment of interest and principal on the Note Interests or distributions on the Class 6 Component, and there can be no assurance that those collections will be sufficient to pay all amounts due on the Note Interests or the Class 6 Components. If distributions on the Applicable Collateral are insufficient to make payments on the Note Interests or distributions on the Class 6 Component, no other assets will be available for payment of the deficiency and, following liquidation of all of the Applicable Collateral, the CoIssuers will not have any obligation to pay any deficiency, which shall be extinguished and shall not revive. Investors in the Preference Share Interests Must Rely on Available Collections from the Applicable Collateral and Will Have No Other Source for Payment; the Preference Shares Are Not Secured by the Applicable Collateral and the Preference Share Components Are Subject to Similar Limitations The Preference Shares are part of the share capital of the Issuer and the Preference Share Components have terms similar to the Preference Shares. There can be no assurance that the distributions on the Applicable Collateral will be sufficient to make deposits to the Preference Shares Distribution Account to pay dividends or any final redemption distribution on the Preference Shares after making payments that rank senior to them. The Preference Shares are payable solely from the proceeds of the Applicable Collateral to the extent available in accordance with the Priority of Payments after payment of all amounts payable on each Class of Note Interests and certain other amounts in accordance with the Priority of Payments. None of the security holders, members, officers, directors, or incorporators of the Issuer, the Co-Issuer, the Portfolio Manager, the Initial Purchaser, the Trustee, the Preference Share Paying Agent, the Administrator, the Share Trustee, the Share Registrar, any of their respective affiliates or any other person will be obligated to make payments on the Preference Shares.

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The Preference Shares will represent equity interests in the Issuer and will not be secured by the Collateral Obligations or any other assets and the Preference Share Components have terms similar to the Preference Shares. Furthermore, the Issuer may not have sufficient funds available on the Preference Share Interests Redemption Date to repay the purchase price of the Preference Shares or the full amount of the aggregate stated amount of the Preference Shares as of the Closing Date. Therefore, the repayment in full of the price paid by Holders of the Preference Shares and the realization of the aggregate stated amount of the Preference Shares, will depend on the dividends paid on the Preference Shares on each Payment Date before the Preference Share Interests Redemption Date in addition to any final distribution made on the Preference Shares on the Preference Share Interests Redemption Date. Because payments on the Preference Share Components of the Composite Securities are intended to be paid pari passu with payments on the Preference Shares, payments to the Composite Securityholders with respect to the Preference Share Components corresponding to dividends and any final distribution paid on the Preference Shares will be similarly limited. In addition, because the Preference Share Components have terms similar to the Preference Shares, the Composite Securities, to the extent of the Preference Share Components, will not be secured by the Applicable Collateral. Distributions on Preference Shares Will Be Subject to Cayman Islands Law Amounts allocable to the Holders of the Preference Shares will be deposited in the Preference Shares Distribution Account on each Payment Date. Distribution of those amounts will then be subject to certain restrictions. All payments to the Holders of the Preference Shares, other than payments made on the Preference Share Interests Redemption Date, will be paid as dividends in accordance with Cayman Islands law. Amounts on deposit in the Preference Shares Distribution Account and payable on the Preference Shares as a dividend will be distributed to the Holders of the Preference Shares only to the extent that the Issuer has sufficient distributable profits or share premium determined under Cayman Islands law and only to the extent that the Issuer is solvent under Cayman Islands law immediately before, and after giving effect to, the distribution. If these conditions are not met, the Issuer, or the Administrator on behalf of the Issuer, will so notify the Preference Share Paying Agent and the Preference Share Paying Agent will not distribute amounts on deposit in the Preference Shares Distribution Account (to the extent of any shortfall) to the Holders of the Preference Shares until the next Payment Date after the Preference Share Paying Agent receives notice from the Issuer, or the Administrator on behalf of the Issuer, that the required conditions have been met. Amounts will be paid to the Holders of the Preference Shares from amounts on deposit in the Preference Shares Distribution Account in a redemption of the Preference Shares on the Preference Share Interests Redemption Date only after payment of the Issuers liabilities not limited in recourse to the Applicable Collateral and only to the extent that the Issuer is solvent under Cayman Islands law immediately before, and after giving effect to, the redemption. Under Cayman Islands law, a company is generally deemed to be solvent if it is able to pay its debts as they become due in the ordinary course of its business. To the extent the requirements under Cayman Islands law described in the preceding paragraph are not met, amounts otherwise payable to the Holders of the Preference Shares will be retained in the Preference Shares Distribution Account until, in the case of a dividend, the Payment Date on which the requirements are met and, in the case of the payment of the Preference Share Redemption Price, the next Business Day on which the requirements are met. Amounts on deposit in the Preference Shares Distribution Account will not be available to pay amounts due to the Holders of the Notes, the Holders of the Composite Securities, the Trustee, the Preference Share Paying Agent, the collateral administrator under the Collateral Administration Agreement, the Portfolio Manager, the Hedge Counterparties, or any other creditor of the Issuer whose claim is limited in recourse to the Applicable Collateral. However, amounts on deposit in the Preference Shares Distribution Account may be subject to the claims of creditors of the Issuer that have not contractually limited their recourse to the Applicable Collateral. As a matter of Cayman Islands law, on a liquidation of the Issuer, the Preference Shares will rank after all creditors of the Issuer, including the Noteholders, subject to certain provisions relating to the Preference Share Components described in the following paragraph. The Indenture will limit the Issuers activities to the issuance and sale of the Securities and the Issuers ordinary shares, the acquisition and disposition of the Collateral Obligations and Eligible Investments, entering into Hedge Agreements, and the other activities related to those. The Issuer therefore does not expect to have any significant full recourse liabilities that would be payable out of amounts on deposit in the Preference Shares Distribution Account. These restrictions could be applicable to payments with respect to the Preference Shares in circumstances in which payments to the Composite Securityholders with respect to the Preference Share Components are not 36

limited on an equivalent or other basis. The Indenture contains certain provisions that are intended to reduce certain potential effects of the differences in form between the two types of Preference Share Interests, that is the difference between Composite Securities, which are partially secured under the Indenture, and Preference Shares, which are not secured. See Certain Additional Provisions Relating to the SecuritiesCertain Provisions Applicable to Composite Securityholders and Preference Shareholders. The Issuer May Not Be Able to Reinvest Available Funds in Appropriate Applicable Collateral The amount of Collateral Obligations purchased on the Closing Date, the amount and timing of the purchase of additional Collateral Obligations before the Ramp-Up Completion Date, and the subsequent reinvestment of Principal Proceeds, will affect the cash flows available to make payments on, and the return to the Holders of, the Securities. Reduced liquidity and relatively lower volumes of trading in certain Collateral Obligations, in addition to restrictions on investment represented by the Eligibility Criteria, could result in periods during which the Issuer is not able to fully invest its available cash in Collateral Obligations, and it is unlikely that the Issuers available cash will be fully invested in Collateral Obligations at any time. The longer the period before reinvestment of cash or cash-equivalents in Collateral Obligations and the larger the amount of uninvested cash or cash equivalents, the greater the adverse impact may be on aggregate interest collected and distributed by the Issuer, thereby resulting in lower yield than could have been obtained if the net proceeds associated with the offering of the Securities and all Principal Proceeds were immediately and fully reinvested. The associated reinvestment risk on the Collateral Obligations will first be borne by Holders of the Preference Share Interests and then by the Holders of the Note Interests, beginning with the most subordinated Class. Although the Portfolio Manager may mitigate this risk to some degree during the Reinvestment Period by declaring a Special Redemption, the Portfolio Manager is not required to do so, and any Special Redemption may result in a lower yield on the Issuers assets than could have been obtained if the net proceeds from the offering of the Securities and all Principal Proceeds were immediately and fully reinvested and no Special Redemption had taken place. Generally, Principal Proceeds (together with Interest Proceeds, but only to the extent used to pay for accrued interest on Collateral Obligations, and sale proceeds received on the Collateral Obligations) will be reinvested during the Reinvestment Period in substitute Collateral Obligations or temporarily reinvested in the Eligible Investments pending reinvestment in substitute Collateral Obligations in accordance with the Priority of Payments. The earnings with respect to substitute Collateral Obligations will depend, among other factors, on reinvestment rates available in the marketplace at the time and on the availability of investments acceptable to the Portfolio Manager that satisfy the criteria under Security for the Notes and the Composite SecuritiesEligibility Criteria. The need to satisfy the criteria and identify acceptable investments may require the purchase of substitute Collateral Obligations having lower yields than those initially acquired or require that Principal Proceeds be held temporarily in cash or Eligible Investments, which will reduce the yield earned by the Issuer. Further, issuers of Collateral Obligations may be more likely to exercise any rights they may have to redeem them when interest rates or spreads are declining. Any decrease in the yield on the Collateral Obligations will reduce the amounts available to make payments of principal and interest on the Note Interests and distributions on the Preference Share Interests. Changes in Tax Law Could Result in the Imposition of Withholding Taxes with Respect to Payments on the Securities, and the Issuer Will Not Gross-Up Payments to Holders Although no withholding tax is currently imposed by the United States or the Cayman Islands on payments on the Securities, there can be no assurance that, as a result of any change in any applicable law, treaty, rule, regulation, or interpretation thereof, the payments with respect to the Securities would not in the future become subject to withholding taxes. If any withholding tax is imposed on payments on any Securities, the Issuer will not gross up payments to their Holders. The Securities Are Subject to Substantial Transfer Restrictions The Securities have not been registered under the Securities Act, under any U.S. state securities or Blue Sky laws, or under the securities laws of any other jurisdiction and are being issued and sold in reliance upon exemptions from registration provided by those laws. No Securities may be sold or transferred unless

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 the sale or transfer is exempt from the registration requirements of the Securities Act (for example, in reliance on exemptions provided by Rule 144A or Regulation S under the Securities Act) and applicable state securities laws and the sale or transfer does not cause either of the Co-Issuers or the pool of Applicable Collateral to become subject to the registration requirements of the Investment Company Act. See Transfer Restrictions. In addition, the Securities are subject to substantial transfer restrictions related to ERISA, as described below under Investors Should Review ERISA Considerations Applicable to the Securities. Investors Should Review United States Federal Income Tax Considerations Applicable to the Securities Prospective investors should review the material under Certain Income Tax ConsiderationsCertain United States Federal Income Tax Considerations. Investors Should Review ERISA Considerations Applicable to the Securities The initial purchaser and any subsequent transferees of the Securities will be required or deemed, as applicable, to make certain ERISA-related representations and warranties described under Certain ERISA and Other Considerations and Transfer Restrictions. The Issuer intends to restrict ownership of the Class D Notes, the Composite Securities, and the Preference Shares so that no transfer of any Class D Note, Composite Security, or Preference Share may be made if the transferee is a person who is or will be a Benefit Plan Investor or acting on behalf of or using the assets of any person who is or will be a Benefit Plan Investor to acquire the Class D Notes, Composite Securities, or Preference Shares, other than an insurance company acting on behalf of its general account that satisfies the conditions described in Transfer Restrictions. In particular, each initial purchaser of Class D Notes, Composite Securities, or Preference Shares will be required to represent, warrant, and agree in the related Subscription Agreement as to its status as a Benefit Plan Investor. Any subsequent purchaser of a Regulation S Global Preference Share will be deemed to represent, warrant, and agree, and any subsequent purchaser of a Class D Note, Certificated Preference Share, or a Composite Note will be required to represent, warrant, and agree in a transfer certificate in the form provided in the Preference Share Paying and Transfer Agency Agreement or Indenture, as applicable, that it is not, and it is not acting on behalf of, a person who is or will be a Benefit Plan Investor. While the purchase of the Class A Notes, Class B Notes, and Class C Notes will not be so restricted, each purchaser of any Class A Notes, Class B Notes, and Class C Notes will be deemed to represent, warrant, and agree either it is not, and is not acting on behalf of, a Plan subject to ERISA or Section 4975 of the Code or a governmental, church, or other plan that is subject to any federal, state, local, or foreign law that is similar to the prohibited transaction provisions of Section 406 or ERISA or Section 4975 of the Code or its purchase and ownership of the Notes will not result in an non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental, church, or other plan, a violation of any similar federal, state, local, or foreign law), because the purchase and holding of the Notes by the purchaser is covered by a prohibited transaction exemption, all of the conditions of which are and will be satisfied on its acquisition of, and throughout the term that it holds, the Notes. Notwithstanding these restrictions, there can be no assurance that ownership of the Class D Notes, the Composite Securities, and Preference Shares will always remain below the Benefit Plan 25% Threshold and thus no assurance that the assets of the Issuer will not be deemed to be plan assets. If the assets of the Issuer were deemed to be plan assets, and no statutory or administrative exemptions were applicable, certain transactions that the Issuer might enter into, or may have entered into, in the ordinary course of business might be non-exempt prohibited transactions under ERISA or Section 4975 of the Code and might have to be rescinded, at significant cost to the Issuer. See Certain ERISA and Other Considerations for a more detailed discussion of certain ERISA-related considerations with respect to an investment in the Securities. 38

Non-Compliance with Restrictions on Ownership of the Securities under the Investment Company Act of 1940 Could Adversely Affect the Issuer Neither of the Co-Issuers has registered with the United States Securities and Exchange Commission (the SEC) as an investment company pursuant to the Investment Company Act. The Issuer has not so registered in reliance on an exclusion from the definition of investment company for companies organized under the laws of a jurisdiction other than the United States or any of its states whose investors residing in the United States are solely qualified purchasers or knowledgeable employees (within the meaning given to those terms in the Investment Company Act and related SEC regulations) or certain transferees thereof identified in Rule 3c-6 under the Investment Company Act and that do not make a public offering of their securities in the United States.

Counsel for the Co-Issuers will opine, in connection with the sale of the Notes and the placement of the Preference Shares, in each case by the Initial Purchaser, that neither the Issuer nor the Co-Issuer is on the Closing Date an investment company required to be registered under the Investment Company Act (assuming, for the purposes of the opinion, that the Notes and the Composite Securities are sold by the Initial Purchaser in accordance with the Purchase Agreement and the Preference Shares are placed by the Initial Purchaser with investors who enter into, and comply with, a Subscription Agreement). No opinion or no-action position with respect to the registration of either of the Co-Issuers or the pool of Applicable Collateral under the Investment Company Act has been requested of, or received from, the SEC. If the SEC or a court of competent jurisdiction were to find that the Issuer or the Co-Issuer is required, but in violation of the Investment Company Act had failed, to register as an investment company, possible consequences include the following: the SEC could apply to a district court to enjoin the violation; investors in the Issuer or the Co-Issuer could sue the Issuer or the Co-Issuer, as the case may be, and recover any damages caused by the violation; and any contract to which the Issuer or the Co-Issuer, as the case may be, is party whose performance involves a violation of the Investment Company Act would be unenforceable by any party to the contract unless a court were to find that under the circumstances enforcement would produce a more equitable result than nonenforcement and would not be inconsistent with the purposes of the Investment Company Act. In addition, the Issuers being required to register as an investment company would result in an Event of Default. See Certain Additional Provisions Relating to the SecuritiesEvents of Default. Should the Issuer or the CoIssuer be subjected to any or all of the foregoing, the Issuer or the Co-Issuer, as the case may be, would be materially and adversely affected. If the Issuer Acquires Non-Qualifying Securities, Margin Stock Regulations May Apply The Issuer may acquire obligations that at the time of acquisition, conversion, or exchange do not satisfy the requirements of a Collateral Obligation (including voting and non-voting common and preferred stock, warrants, and options) solely in connection with the purchase of a Collateral Obligation or in exchange for one, or in connection with a restructuring of a Defaulted Obligation or Credit Risk Obligation. None of the proceeds of the Notes will be used to buy or carry any Margin Stock, including any debt obligation that is by its terms convertible into Margin Stock. If any Margin Stock were to be included among the Applicable Collateral, certain purchases of the Notes and the Composite Securities would then be subject to certain requirements under Regulation U. Regulation U of the Federal Reserve Board governs certain extensions of credit that are secured by Margin Stock by persons other than securities broker-dealers. Under current interpretations of Regulation U by the Federal Reserve Board, the purchase of a debt security such as the Notes or the Composite Securities in a private placement may constitute an extension of credit. Among other things, Regulation U would generally impose certain limits on the amount of credit that an investor in the Notes and the Composite Securities could extend that is used to purchase or carry Margin Stock 39

(Purpose Credit). The provisions of the Indenture and the Management Agreement are intended to support the characterization that any credit extended by investors in the Notes and the Composite Securities is not Purpose Credit. The Bank Holding Company Act May Restrict the Issuers Investments The Issuer expects that it will not be subject to the Bank Holding Company Act of 1956, Regulation Y and Regulation K of the Board of Governors of the Federal Reserve System, or any of the other laws and regulations applicable to banks and bank holding companies and their direct and indirect subsidiaries or, that if it is subject to any of those laws and regulations, their provisions will not have a material impact on its investment activities. Those laws and regulations impose restrictions on the types and amounts of investments that banks and bank holding companies and their subsidiaries may make and the types of activities in which they may engage. However, if any bank regulatory authority or other governmental authority determines that the Issuer is subject to those laws and regulations and reviews the Issuers activities and determines that its activities are not in compliance with them, the Issuer expects that it will be able to take any action necessary, including the transfer of certain assets to a special purpose subsidiary (which, subject to certain restrictions therein, will be permitted under the Indenture), for its activities to be in compliance with those laws and regulations as currently in effect. If the Issuer is unable to take the action necessary for compliance with those laws and regulations or in the event of a subsequent change in any law or regulation or in its interpretation or application by any court or other governmental authority, the Issuer could under certain circumstances be required to dispose of some or all of the Applicable Collateral under unfavorable market conditions and the Portfolio Manager could under certain circumstances be required to discontinue certain or all investment activities with respect to the Issuer, any of which could have a material adverse effect on the Issuer. The Weighted Average Lives of the Note Interests May Vary The Stated Maturity of the Note Interests is the Payment Date in February 2016. The weighted average life of each Class of Note Interests is expected to be shorter than the number of years until their Stated Maturity. See Certain Maturity and Prepayment Considerations. The weighted average life of a Class of Note Interests will be affected by the amount and timing of payments of principal of the Note Interests and the amount and timing of payments received on the Collateral Obligations. The amount and timing of payments of principal on the Note Interests will be affected by, among other things, any Optional Redemption of the Note Interests, a failure of any Coverage Test, a Rating Confirmation Failure, any failure by the Portfolio Manager to invest or reinvest uninvested proceeds of the offering of the Securities in Collateral Obligations, a redemption of the Note Interests made in connection with a Tax Event, any Special Redemption of one or more Classes of Note Interests, and an Event of Default by the Issuer in the payment of the Note Interests and an acceleration of the principal of the Note Interests in connection with an Event of Default. The occurrence of any of the foregoing unscheduled principal repayments of the Note Interests is, in turn, determined by the amount and timing of payments on the Applicable Collateral, which will be dependent on, among other things, the financial condition of the obligors on or issuers of the Applicable Collateral and the characteristics of the Collateral Obligations, including the existence and frequency of exercise of any prepayment, optional redemption, or sinking fund features, the prevailing level of interest rates, the redemption price, the actual default rate and the actual level of recoveries on any Defaulted Obligations, the frequency of tender or exchange offers for the Collateral Obligations and any sales of Collateral Obligations, dividends or other distributions received on any obligations that at the time of acquisition, conversion, or exchange do not satisfy the requirements of a Collateral Obligation, as well as the risks unique to investments in obligations of foreign issuers. See Security for the Notes and the Composite Securities. The Indenture Requires Mandatory Redemption of the Note Interests for Failure to Satisfy Coverage Tests If either of any of the Class A Coverage Tests, Class B Coverage Tests, Class C Coverage Tests, or Class D Coverage Tests is not satisfied on any Determination Date on which Note Interests of the relevant Class are outstanding, Interest Proceeds available on the related Payment Date in accordance with the Priority of Payments (and, to the extent Interest Proceeds are insufficient, Principal Proceeds available on the Payment Date in accordance with the Priority of Payments) are required to be applied to pay principal of the relevant Class of Note Interests (and any Classes senior to it) to the extent necessary for the Coverage Test to be satisfied. See Summary of TermsMandatory Redemption of the Note Interests for Failure to Satisfy Coverage Tests. The application of Interest Proceeds and Principal Proceeds to pay principal of the Note Interests to the extent necessary to restore the 40

Coverage Tests to certain minimum required levels could result in an elimination, deferral, or reduction in the amounts available to make interest and principal payments on one or more classes of Note Interests and to make deposits to the Preference Shares Distribution Account, which would adversely affect the returns to the Holders of the Notes and the Preferences Shares. The Indenture Requires Mandatory Redemption of the Note Interests Upon Rating Confirmation Failure If any rating of any Class of Notes is reduced or withdrawn or placed on credit watch with negative implications by the Business Day after the 29th day after the Ramp-Up Completion Date by either Rating Agency, Interest Proceeds and, if Interest Proceeds are insufficient, Principal Proceeds, are required to be diverted in accordance with the Priority of Payments and used to pay the principal of the Note Interests sequentially in order of their relative priority on the next Payment Date and each Payment Date after that until each rating is reinstated. The application of Interest Proceeds and Principal Proceeds to pay principal of the Note Interests to the extent necessary for one or more ratings to be reinstated could result in an elimination, deferral, or reduction in one or more payments on one or more Classes of Securities, which would adversely affect the returns to the Holders of those Classes of Securities. The Indenture Permits Special Redemption of Note Interests Based on the Portfolio Managers Inability to Identify Investments The Portfolio Manager is permitted under the Indenture to elect to have all or a portion of the funds then in the Collection Account available to be invested in additional Collateral Obligations applied to a Special Redemption of the Note Interests, in whole or in part, on one or more Payment Dates because it has been unable, for a period of at least 45 consecutive Business Days, to identify additional Collateral Obligations that are deemed appropriate by the Portfolio Manager in its sole discretion and meet the Eligibility Criteria in sufficient amounts to permit the investment of the funds then in the Collection Account available to be invested in additional Collateral Obligations. On the first Payment Date following the Due Period for which the notice of a Special Redemption is effective in accordance with the Indenture, the Special Redemption Amount will be applied in accordance with Application of FundsApplication of Principal Proceeds, to the extent available (which includes for this purpose uninvested proceeds specified by the Portfolio Manager), to pay the principal of the Note Interests. The application of funds in that manner could result in an elimination, deferral, or reduction of amounts available to make payments on Securities subordinate in priority to the Securities being amortized. See Certain Additional Provisions Relating to the SecuritiesSpecial Redemption of Note Interests If the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture. The Note Interests Are Subject to Optional Redemption Subject to satisfaction of certain conditions, on any Payment Date upon the occurrence of a Tax Event or at any time after February 2008, the Holders of a Super Majority of the outstanding Preference Share Interests may require that the Note Interests be redeemed, as described under Certain Additional Provisions Relating to the SecuritiesOptional Redemption. In case of an Optional Redemption of the Note Interests, the Portfolio Manager may be required to aggregate Collateral Obligations to be sold together in one block transaction, thereby possibly resulting in a lower realized value for the Collateral Obligations sold. There can be no assurance that the market value of the Applicable Collateral will be sufficient for the Holders of the Preference Share Interests to direct an Optional Redemption of the Note Interests. A decrease in the market value of the Applicable Collateral would adversely affect the Proceeds from their sale. Consequently, the conditions precedent to the exercise of an Optional Redemption may not be met. Moreover, the Holders of the Note Interests may not be able to invest the proceeds of the redemption of the Note Interests in investments providing a return equal to or greater than the Holders of the Note Interests expected to obtain from their investment in the Note Interests. The Class 6 Components Are Subject to Optional Redemption Upon the occurrence of a Tax Event, the Class 6 Components shall be redeemed by the Issuer, in whole but not in part at the applicable Redemption Price, on any Payment Date from funds available for that purpose in the Class 6 Component Account, at the direction of a Super Majority of the Preference Share Interests. All Class 6 Components must be simultaneously redeemed. Upon any redemption of the Class 6 Components the Holders of 41

Class 6 Components shall receive the Redemption Price as a distribution in kind of a pro rata share (based on the Class 6 Rated Balance) of each item of the Class 6 Collateral. Future Ratings of the Notes and the Composite Securities Are Not Assured and Limited in Scope; the Preference Shares Are Not Rated It is a condition to the issuance of the Notes and the Composite Securities that they be rated as provided under Summary of TermsRatings. A credit rating is not a recommendation to buy, sell, or hold securities and is subject to revision or withdrawal at any time. There is no assurance that a rating will remain for any given period or that a rating will not be lowered or withdrawn entirely by each Rating Agency if in its judgment circumstances in the future so warrant. Any such action could have an adverse effect on the Holders of Securities. If a rating initially assigned to a Class of Notes or the Composite Securities is subsequently lowered for any reason, no person is obligated to provide any additional credit support or credit enhancement. The Indenture provides that, so long as any Class of Notes or the Composite Securities remains outstanding, on or before March 31 in each year, commencing in 2005, the Co-Issuers shall obtain an annual review of the rating of each outstanding Class from each of the Rating Agencies that rated it on the Closing Date. No rating of the Class 8 Composite Securities or the Preference Shares will be sought or obtained in connection with their issuance. Events Outside the Control of the Co-Issuers and the Portfolio Manager Can Affect the Securities Various acts of God, force majeure, and certain other events beyond the control of the Co-Issuers, the Trustee, Portfolio Manager, Collateral Administrator, Preference Share Paying Agent, Indenture Registrar, Share Registrar, and Administrator could affect the ability of financial institutions to process payments and transfer funds and could impair the financial records and record-keeping practices of financial institutions and others (including the Trustee, Portfolio Manager, Collateral Administrator, Preference Share Paying Agent, Indenture Registrar, Share Registrar, and Administrator). In addition, the existence of those circumstances could cause lenders and other creditors more readily to agree to restructure debt obligations (including payment terms) than they would in the absence of those circumstances. The existence of those circumstances could adversely affect the ability of the Issuer or the Co-Issuer, as applicable, to make timely payments on the Securities. Investors Will Indirectly Bear Expenses of the Issuer Through their investment in the Securities, investors bear the cost of the Management Fees and other expenses described in this Offering Memorandum. In the aggregate, these fees and expenses may be greater than if an investor were directly to make investments identical to the Collateral Obligations. Payment of any taxes and filing and registration fees (including annual return fees owed by the Co-Issuers) is required to be payable before any of the other amounts owed by the Issuers and are not subject to any limitations. In addition, Interest Proceeds and Principal Proceeds are required to be available for the payment of expenses in accordance with the Priority of Payments. If funds are not sufficient to pay the expenses incurred by the Issuers, the ability of the Issuers to operate effectively may be impaired, and the Issuer may not be able to defend or prosecute legal proceedings brought against it or that it might otherwise bring to protect the interests of the Issuers. Relating to the Portfolio Manager The Issuer Will Depend on the Portfolio Manager and its Key Personnel The success of the Issuer will be highly dependent on the managerial expertise of the Portfolio Manager. As a result, the Issuer will be highly dependent on the managerial expertise of certain individuals comprising the Portfolio Managers management team. There is no requirement that there be employment arrangements with those individuals for the benefit of the Portfolio Manager. The individuals comprising the Portfolio Managers management team are also actively involved in other investment activities and will not be able to devote their full time and attention to the Issuers business and affairs. The loss of any of these individuals could have a material adverse effect on the performance of the Issuer. See The Portfolio ManagerInvestment Professionals. 42

The Portfolio Manager Will Have Limited Control of the Administration and Amendment of Collateral Obligations The Portfolio Manager will cause the Issuer to exercise or enforce, or refrain from exercising or enforcing, its rights in connection with the Collateral Obligations or any related documents or will refuse amendments or waivers of the terms of any Collateral Obligation and related documents in accordance with its ordinary business practices as if the Portfolio Manager were administering the Collateral Obligations for its own account. The authority of the Portfolio Manager to cause the Issuer to change the terms of the Collateral Obligations will generally not be restricted by the Indenture or the Management Agreement. As a result, the Issuer will be relying on the Portfolio Managers ordinary business practices with respect to the servicing of the Collateral Obligations. The Holders of the Securities and the Issuer will not have any right to compel the Issuer or the Portfolio Manager to take or refrain from taking any actions other than in accordance with its ordinary business practices. In addition, when the Issuer holds a Participation, the Issuer generally will have no right to enforce compliance by the borrower with the loan or credit agreement or other instrument evidencing the related loan obligation, no rights of set-off against the borrower, no direct interest in the collateral supporting the loan obligation, and no right to vote with respect to amendments of, or waivers of defaults under, the loan obligation. However, most participation agreements relating to Participations in loans provide that the Participating Institution may not vote in favor of any amendment, modification, or waiver that forgives principal, interest, or fees; reduces principal, interest, or fees that are payable; postpones any payment of principal (whether a scheduled payment or a mandatory prepayment), interest or fees; or releases any material guarantee or security without the consent of the participant (at least to the extent the participant would be affected by the amendment, modification, or waiver). A Participating Institution voting in connection with a potential waiver of a default by an obligor may have interests different from those of the Issuer, and the Participating Institution might not consider the interests of the Issuer in connection with its vote. In addition, many participation agreements relating to Participations in loans that do provide voting rights to the participant further provide that if the participant does not vote in favor of amendments, modifications, or waivers, the Participating Institution may repurchase the Participation at par. In the event of the insolvency of the Participating Institution, the Issuer may be treated as a general creditor of the Participating Institution with respect to a Participation and may not benefit from any set-off between the Participating Institution and the borrower and may not be able to proceed against the collateral supporting the loan obligation. As a result, the Issuer is subject to the credit risk of both the borrower and the Participating Institution. An investment by the Issuer in a Synthetic Security related to a Loan involves many of the same considerations relevant to Participations. See Relating to the Collateral ObligationsInvesting in Loans Involves Particular Risks and Investing in Synthetic Securities Involves Particular Risks below. A modification that would increase the commitment of a lender, reduce the interest rate, or postpone the final maturity of an obligation under a participation agreement, or release all of the collateral for an obligation, generally requires the affirmative vote of the participating lender for a loan in which the Issuer owns a Participation, or of the Issuer for a Loan purchased by assignment, for the increase, reduction, or postponement to be binding. The exercise of remedies may also be subject to the vote of a specified percentage of the lenders under the loan obligation. The Portfolio Manager will have the authority to cause the Issuer to consent to certain amendments, waivers, or modifications to the Collateral Obligations requested by obligors or the lead agents for participation agreements relating to Participations (subject to operating procedures intended to reduce the risk that the Issuer would be deemed to be engaged in a trade or business in the United States for United States federal income tax purposes). The Portfolio Manager may, subject to the transaction documents, cause the Issuer to extend or defer the maturity, adjust the outstanding balance of any Collateral Obligation, reduce or forgive interest or fees, release material collateral or guarantees, or otherwise amend, modify, or waive the terms of any related loan agreement, including its payment terms. The Portfolio Manager will make determinations in accordance with its servicing standards under the Management Agreement. Any amendment, waiver, or modification of a Collateral Obligation could postpone the expected maturity of the Note Interests or reduce the likelihood of timely and complete payment of interest or principal under the Note Interests, as well as the timing and amount of payments to Holders of the Preference Share Interests.

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Performance History of the Portfolio Manager May Not Be Indicative of Future Results Any prior investment results of the Portfolio Manager, and the persons associated with it or any other entity may not be indicative of the Issuers future investment results. The nature of, and risks associated with, the Issuers future investments may differ substantially from those investments and strategies undertaken historically by the Portfolio Manager, and the persons associated with it or any other entity. There can be no assurance that the Issuers investments will perform as well as the past investments of the Portfolio Manager, and the persons associated with it or any other entity. Moreover, since the investment criteria that govern investments in the Collateral Obligations do not govern the Portfolio Managers investments and investment strategies generally, investments in the Collateral Obligations conducted in accordance with the investment criteria that govern investments in the Collateral Obligations, and the results they yield, may differ substantially from other investments undertaken by the Portfolio Manager. Notwithstanding the inapplicability of the results obtained and expected to be obtained from the past investments of the Portfolio Manager, a period of increased volatility in market conditions, including interest rate environments, can have an adverse effect on the realized and unrealized returns to investors in the past investments of the Portfolio Manager. There can be no assurance that current economic conditions and the effects of increased interest rate and corresponding price volatility will not adversely impact the investment returns ultimately realized by investors or continued compliance with, among other things, applicable coverage requirements described in this Offering Memorandum. Relating to the Collateral Obligations In General, the Collateral Obligations Are Subject to Various Risks The Collateral Obligations are subject to credit, liquidity, and interest rate risks, among others. The Eligibility Criteria and the Collateral Quality Tests have been established to address certain assumed deficiencies in payment occasioned by defaults with respect to the Collateral Obligations. If any deficiencies exceed certain modeled scenarios, however, payments on the Notes and dividends and any final distribution on the Preference Shares could be adversely affected. To the extent that a default occurs with respect to any Collateral Obligation securing the Note Interests and the Issuer (on the advice of the Portfolio Manager) sells or otherwise disposes of the Collateral Obligation, it is not likely that the proceeds of the sale or other disposition will be equal to the amount of principal and interest owing to the Issuer on of the Collateral Obligation. The value of the Collateral Obligations generally will fluctuate with, among other things, the financial condition of the obligors on or issuers of the Collateral Obligations and, with respect to Synthetic Securities, both the financial condition of the related Synthetic Security counterparties and the obligors on or issuers of the Reference Obligations, general economic conditions, the condition of certain financial markets, political events, developments or trends in any particular industry, and changes in prevailing interest rates. The ability of the Issuer to sell Collateral Obligations before their maturity is subject to certain restrictions under the Indenture including those described under Security for the Notes and the Composite Securities Dispositions of Collateral Obligations. Investing in Loans Involves Particular Risks The Collateral Obligations will consist primarily of Dollar-denominated senior secured and senior unsecured loans, which are required by the Indenture to be obligations of corporations, partnerships, or other entities organized under the laws of the United States (or any of its states) or of foreign obligors meeting specified criteria, or Synthetic Securities the Reference Obligations of which are such loans. See Security for the Notes and the Composite SecuritiesCollateral Obligations. Loans may become non-performing for a variety of reasons. Non-performing loans may require substantial workout negotiations or restructuring that may entail, among other things, a substantial reduction in the interest rate or a substantial write-down of the principal of a loan. In addition, because of the unique and customized nature of a 44

loan agreement and the private syndication of a loan, loans typically may not be purchased or sold as easily as publicly traded securities, and historically the trading volume in the bank term loan market has been small relative to the corporate bond market. Loans may encounter trading delays due to their unique and customized nature, and transfers may require the consent of an agent bank or borrower. Investments in loans are also subject to interest rate risk and reinvestment risk. Prepayments of loans in the Issuers portfolio are likely to be made during any period of declining interest rates. Prepayments would force the Issuer to replace the loans with lower-yielding investments. The Issuer may acquire interests in loans either directly (by assignment) or indirectly (by participation or through Synthetic Securities). The Issuer may not originate any loans. The purchaser of an assignment of a loan obligation typically succeeds to all the rights and obligations of the selling institution and becomes a lender under the loan or credit agreement with respect to the debt obligation. In contrast, a Participation acquired by the Issuer in a portion of a loan obligation held by a Participating Institution or a security or other debt obligation typically results in a contractual relationship only with the Participating Institution, not with the borrower. The Issuer would have the right to receive payments of principal, interest, and any fees to which it is entitled under a Participation only from the Participating Institution and only upon receipt by the Participating Institution of those payments from the borrower. The Issuer will be subject to restrictions on the amount of Participations that may be acquired for inclusion in the Applicable Collateral. See Security for the Notes and the Composite SecuritiesEligibility Criteria. Certain of the loans in the Issuers portfolio may be unsecured or secured by collateral worth less than the outstanding balance of the loan. In addition to the general risks associated with loans described above, unsecured loans will not be secured by substantial collateral or any collateral and secured loans may be substantially undersecured. Without collateral and with materially inadequate collateral, the ability of the holder of the loan to recover amounts due from the borrower may be substantially limited. Investing in Below Investment-Grade Obligations Involves Particular Risks, as Does Investing in Investment-Grade Obligations A substantial amount of the Collateral Obligations will consist of loans, bonds, and other obligations that are below investment grade, including high-yield loans and securities. Those Collateral Obligations will have greater credit and liquidity risk than investment grade obligations. They are also often unsecured and may be subordinated to certain other obligations of their issuer. The lower rating of those Collateral Obligations reflects a greater possibility that adverse changes in the financial condition of an issuer or in general economic conditions or both may impair the ability of their issuer to make payments of principal or interest. These Collateral Obligations may be speculative. Risks of below investment-grade Collateral Obligations may include (among others): limited liquidity and secondary market support, in the case of fixed-rate high-yield debt securities, substantial market place volatility resulting from changes in prevailing interest rates, subordination to the prior claims of senior lenders and creditors, the operation of mandatory sinking fund or call and redemption provisions during periods of declining interest rates that could cause the Issuer to reinvest premature redemption proceeds in lower-yielding debt obligations, the possibility that earnings of the below investment-grade issuer may be insufficient to meet its debt service, and the declining creditworthiness and potential for insolvency of a below investment-grade issuer during periods of rising interest rates and economic downturn. An economic downturn or an increase in interest rates could severely disrupt the market for below investment-grade obligations and could adversely affect the value of outstanding below investment-grade obligations and the ability of their issuers to repay principal and interest. 45

Issuers that are below investment grade may be highly leveraged and may not have available to them more traditional methods of financing. The risk associated with obligations of below investment-grade issuers is generally greater than is the case with investment grade issuers. For example, during an economic downturn or a sustained period of rising interest rates, below investment-grade issuers may be more likely to experience financial stress, especially if they are highly leveraged. During those periods, timely service of debt obligations may also be adversely affected by specific issuer developments, or the issuers inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss from default by the issuer is significantly greater for the holders of below investment-grade obligations because those obligations may be unsecured and may be subordinated to obligations owed to other creditors of the issuer. In addition, the Issuer may incur additional expenses to the extent it is required to seek recovery upon a default on such an obligation or participate in its restructuring. As a result of the limited liquidity of below investment-grade obligations, their prices have at times experienced significant and rapid decline when a substantial number of holders decided to sell. In addition, the Issuer may have difficulty disposing of certain below investment-grade obligations because there may be a thin trading market for them. To the extent that a secondary trading market for below investment-grade obligations does exist, it is generally not as liquid as the secondary market for highly rated obligations. Reduced secondary market liquidity may have an adverse impact on the Issuers ability to dispose of particular Collateral Obligations in response to a specific economic event, such as a deterioration in the creditworthiness of the issuer of the Collateral Obligation. In addition, a portion of the Collateral Obligations may consist of U.S. dollar-denominated investmentgrade debt obligations. Those Collateral Obligations have higher ratings than high-yield debt securities, but they are subject to many risks similar to the foregoing, in varying degrees depending on the circumstances. Investing in Structured Finance Obligations Involves Particular Risks A portion of the Collateral Obligations may consist of Structured Finance Obligations and Synthetic Securities the Reference Obligations of which are Loans, Structured Finance Obligations, or High-Yield Bonds. Structured Finance Obligations may present risks similar to those of the other types of Collateral Obligations in which the Issuer may invest and, in fact, the risks may be of greater significance in the case of Structured Finance Obligations. Moreover, investing in Structured Finance Obligations may entail a variety of unique risks. Among other risks, Structured Finance Obligations may be subject to prepayment risk, credit risk, liquidity risk, market risk, structural risk, legal risk, and interest rate risk (which may be exacerbated if the interest rate payable on a Structured Finance Obligation changes based on multiples of changes in interest rates or inversely to changes in interest rates). In addition, certain Structured Finance Obligations (particularly subordinated collateralized bond obligations) may provide that non-payment of interest is not an event of default in certain circumstances and the holders of the securities will therefore not have available to them any associated default remedies. During the period of nonpayment, unpaid interest will generally be capitalized and added to the outstanding principal balance of the related security. Furthermore, the performance of a Structured Finance Obligation will be affected by a variety of factors, including its priority in the capital structure of its issuer the availability of any credit enhancement, the level and timing of payments and recoveries on and the characteristics of the underlying receivables, loans, or other assets that are being securitized, bankruptcy remoteness of those assets from the originator or transferor, the adequacy of and ability to realize on any related collateral, and the skill of the manager of the Structured Finance Obligation in managing securitized assets. The price of a Structured Finance Obligation, if required to be sold, may be subject to certain market and liquidity risks for securities of its type at the time of sale. In addition, Structured Finance Obligations may involve initial and ongoing expenses above the costs associated with the related direct investments. Investing in Synthetic Securities Involves Particular Risks As described above, a portion of the Collateral Obligations may consist of Synthetic Securities the Reference Obligations of which are Loans, Structured Finance Obligations, or High-Yield Bonds. Investments in these types of assets through the purchase of Synthetic Securities present risks in addition to those inherently associated with direct purchases of such assets. With respect to Synthetic Securities, the Issuer will usually have a contractual relationship only with the counterparty of the Synthetic Security, and not the reference obligor on the Reference Obligation. The Issuer will have no right to enforce compliance by the reference obligor with the 46

Reference Obligation nor any rights of set-off against the reference obligor, nor have any voting or other consensual rights of ownership with respect to the Reference Obligation. The Issuer will not directly benefit from any collateral supporting the Reference Obligation and will not have the benefit of the remedies that would normally be available to a holder of the Reference Obligation. In addition, in the event of the insolvency of the Synthetic Security counterparty, the Issuer will be treated as a general creditor of the counterparty and will not have any claim of title with respect to the Reference Obligation. Consequently, the Issuer will be subject to the credit risk of the counterparty as well as that of the reference obligor and concentrations of Synthetic Securities entered into with any one counterparty will subject the Securities to an additional degree of risk with respect to defaults by that counterparty. One or more affiliates of the Initial Purchaser may act as counterparty with respect to all or a portion of the Synthetic Securities, which relationship may create certain conflicts of interest. See Relating to Certain Conflicts of InterestThe Issuer Will Be Subject to Various Conflicts of Interest Involving the Initial Purchaser below. In addition, Synthetic Securities may involve initial and ongoing expenses above the costs associated with the related direct investments. The Issuer will be subject to restrictions on the amount of Synthetic Securities it may own at any one time. Many of the Collateral Obligations Will Be Illiquid Many of the Collateral Obligations purchased by the Issuer will have no, or only a limited, trading market. The Issuers investment in illiquid Collateral Obligations may restrict its ability to dispose of investments in a timely fashion and for a fair price, as well as its ability to take advantage of market opportunities, although the Issuer is generally prohibited by the Indenture from selling Collateral Obligations except under certain limited circumstances described under Security for the Notes and the Composite SecuritiesDispositions of Collateral Obligations. Illiquid Collateral Obligations may trade at a discount from comparable, more liquid investments. In addition, the Issuer may invest in privately placed Collateral Obligations that may or may not be freely transferable under the laws of the applicable jurisdiction or due to contractual restrictions on resale, and even if those privately placed Collateral Obligations are transferable, the prices realized from their sale could be less than those originally paid by the Issuer or less than what may be considered their fair value. Insolvency Considerations With Respect to Issuers of Collateral Obligations May Affect the Issuers Rights Various laws enacted for the protection of creditors may apply to the Collateral Obligations. If, in a lawsuit brought by a creditor or representative of creditors of an obligor under a Collateral Obligation (such as a trustee in bankruptcy), a court were to find that the obligor did not receive fair consideration or reasonably equivalent value for incurring the indebtedness evidenced by the Collateral Obligation and, after giving effect to the indebtedness and the use of the proceeds thereof, the obligor (i) was insolvent, (ii) was engaged in a business for which the remaining assets of the obligor constituted unreasonably small capital, or (iii) intended to incur, or believed that it would incur, debts beyond its ability to pay them as they mature, the court could determine to invalidate, in whole or in part, the indebtedness as a fraudulent conveyance, to subordinate the indebtedness to existing or future creditors of the obligor, or to recover amounts previously paid by the obligor in satisfaction of the indebtedness. There can be no assurance as to what standard a court would apply to determine whether the obligor was insolvent or that, regardless of the method of valuation, a court would not determine that the obligor was insolvent, in each case, after giving effect to the incurrence of the Collateral Obligation and the use of its proceeds. In addition, in the event of the insolvency of an obligor under a Collateral Obligation, payments made on the Collateral Obligation may be subject to avoidance as a preference if made within a certain period before insolvency (which may be as long as approximately one year). In general, if payments on a Collateral Obligation are avoidable, whether as fraudulent conveyances or preferences, the payments can be recaptured either from the initial recipient (such as the Issuer) or from subsequent transferees of the payments (such as the Holders of the Securities). To the extent that any payments are recaptured from the Issuer, the resulting reduction in payments on the Securities will be borne by the Securityholders. A court in a bankruptcy or insolvency proceeding would be able to direct the recapture of any payment from a Holder of the Securities to the extent that the court has jurisdiction over the Holder or its assets. Since there is no judicial precedent relating to structured securities such as the Securities, there can be no assurance that a Holder of Securities will be able to avoid recapture on this basis.

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The preceding discussion is based on principles of United States federal and state laws. Insofar as Collateral Obligations that are obligations of non-United States obligors are concerned, the laws of certain foreign jurisdictions may provide for avoidance remedies under factual circumstances similar to, or broader or narrower than, those described above, with consequences that may or may not be analogous to those described above under United States federal and state laws. International Investing Involves Particular Risks A portion of the Collateral Obligations may consist of obligations of Group A Country Obligors or Group B Country Obligors. Investing outside the United States may involve greater risks than investing in the United States. These risks may include: less publicly available information; varying levels of governmental regulation and supervision; and the difficulty of enforcing legal rights in a foreign jurisdiction and uncertainties as to the status, interpretation, and application of laws. Moreover, foreign companies may be subject to accounting, auditing, and financial reporting standards, practices, and requirements different from those applicable to U.S. companies. There generally is less governmental supervision and regulation of exchanges, brokers, and issuers in foreign countries than there is in the United States. For example, there may be no comparable provisions under certain foreign laws with respect to insider trading and similar investor protection securities laws that apply with respect to securities transactions consummated in the United States. Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have failed to keep pace with the volume of securities transactions, making it difficult to conduct transactions. Delays in settlement could result in periods when assets of the Issuer are uninvested and no return is earned on them. The inability of the Issuer to make intended purchases of Collateral Obligations due to settlement problems or the risk of intermediary counterparty failures could cause the Issuer to miss investment opportunities. The inability to dispose of a Collateral Obligation due to settlement problems could result either in losses to the Issuer due to subsequent declines in the value of the Collateral Obligation or, if the Issuer has entered into a contract to sell the security, could result in possible liability to the purchaser. Transaction costs of buying and selling foreign securities, including brokerage, tax, and custody costs, also are generally higher than those involved in domestic transactions. Furthermore, foreign financial markets, while generally growing in volume, have, for the most part, substantially less volume than U.S. markets, and securities of many foreign companies are less liquid and their prices more volatile than securities of comparable domestic companies. In certain foreign countries there is the possibility of expropriation, nationalization, or confiscatory taxation; limitations on the convertibility of currency or the removal of securities, property, or other assets of the Issuer; political, economic, or social instability; or adverse diplomatic developments, each of which could have an adverse effect on the Issuers investments in the foreign countries (which may make it more difficult to pay U.S. Dollar-denominated obligations such as the Collateral Obligations). The economies of individual non-U.S. countries may also differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, volatility of currency exchange rates, depreciation, capital reinvestment, resource selfsufficiency, and balance of payments position.

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Lender Liability Considerations and Equitable Subordination Can Affect the Issuers Rights with Respect to Collateral Obligations In recent years, a number of judicial decisions in the United States have upheld the right of borrowers to sue lenders and bondholders on the basis of various evolving legal theories (collectively termed lender liability). Generally, lender liability is founded on the premise that a lender has violated a duty (whether implied or contractual) of good faith and fair dealing owed to the debtor or has assumed a degree of control over the debtor resulting in the creation of a fiduciary duty owed to the debtor or its other creditors or shareholders. Because of the nature of the Collateral Obligations, the Issuer may be subject to allegations of lender liability. In addition, under common law principles that in some cases form the basis for lender liability claims, a court may elect to subordinate the claim of the offending lender to the claims of the disadvantaged creditors, a remedy called equitable subordination, if a lender: intentionally takes an action that results in the undercapitalization of a borrower to the detriment of other creditors of the borrower, engages in other inequitable conduct to the detriment of the other creditors, engages in fraud with respect to, or makes misrepresentations to, the other creditors, or uses its influence as a lender to dominate or control a borrower to the detriment of other creditors of the borrower. Because the Collateral Obligations are primarily Loans, the Issuer may be subject to claims from creditors of an obligor that Collateral Obligations issued by the obligor that are held by the Issuer should be equitably subordinated. However, the Portfolio Manager does not intend to engage in conduct that would form the basis for a successful cause of action based on lender liability or the equitable subordination doctrine. Nonetheless, no assurances can be given that actions taken in good faith by the Portfolio Manager will not result in losses to issuers of Collateral Obligations, and that the Portfolio Manager will not be liable for any such losses. The preceding discussion is based on principles of United States federal and state laws. Insofar as Collateral Obligations that are obligations of non-United States obligors are concerned, the laws of certain foreign jurisdictions may impose liability on lenders or bondholders under factual circumstances similar to, or broader or narrower than, those described above, with consequences that may or may not be analogous to those described above under United States federal and state laws. Securities May Be Affected by Interest Rate Risks, Including Mismatches Between the Note Interests and the Collateral Obligations The Floating Rate Notes bear interest at a rate based on LIBOR as determined on the relevant LIBOR Determination Date. The Collateral Obligations will consist primarily of obligations that bear interest at floating rates, which floating rates may be different than the floating rates on those Notes and is inherently different from the fixed rates on the Fixed Rate Notes. Accordingly, the Notes are subject to interest rate risk to the extent that there is an interest rate mismatch between the rates at which interest accrues on the Notes and the rates at which interest accrues on the Applicable Collateral. In addition, there may be a timing mismatch between the Notes and the Floating Rate Collateral Obligations as the interest on the Floating Rate Collateral Obligations may adjust more or less frequently, on different dates and based on different indices than the interest rates on the Notes. Furthermore, any payments of principal of or interest on Applicable Collateral received during a Due Period will (except to a limited extent specified in the Indenture) be reinvested in Eligible Investments maturing not later than the Business Day immediately preceding the next Payment Date. There is no requirement that Eligible Investments bear interest at LIBOR or a similar rate, and the interest rates available for Eligible Investments are inherently uncertain. As a result of these mismatches, an increase or decrease in LIBOR for the relevant maturity could adversely affect the ability of the Issuer to make interest payments on the Notes (including due to a rise or a decline in the value of previously issued Collateral Obligations or other Applicable Collateral that bear interest at a fixed rate as LIBOR decreases or increases, as applicable) and to pay dividends or make a final distribution on the Preference Shares. To mitigate a portion of the interest rate mismatch, the Issuer may enter into Hedge Agreements that are (in the case of Hedge Agreements entered into after the Closing Date) subject to a Rating Confirmation. However, there can be no assurance that the Collateral Obligations and Eligible Investments, together with the Hedge Agreements, will in all circumstances generate sufficient Interest Proceeds to make timely payments of interest on the Notes. Moreover, the 49

benefits of any Hedge Agreements may not be achieved in the event of the early termination of the Hedge Agreements, including termination upon the failure of the related Hedge Counterparty to perform its obligations under the Hedge Agreement. See Security for the Notes and the Composite SecuritiesHedge Agreements. The Portfolio Manager may direct the Issuer to reduce the notional amount of, or otherwise adjust the terms of, any Hedge Agreement outstanding at any time, subject, in the case of any reduction or adjustment made on or after the Ramp-Up Completion Date, to obtaining a Rating Confirmation. Changes in Tax Law Could Result in the Imposition of Withholding Taxes with Respect to Payments on the Collateral Obligations, and the Obligors on the Collateral Obligations Will Not Gross-Up Payments to the Issuers The Collateral Obligations are required not to be subject to withholding tax at the time of acquisition by the Issuer unless the issuer of the Collateral Obligation is required to make gross-up payments. With respect to Collateral Obligations that are not subject to withholding tax at the time of acquisition by the Issuer, however, there can be no assurance that, as a result of any change in any applicable law, treaty, rule, or regulation or interpretation of any of them, payments on the Collateral Obligations might not in the future become subject to U.S. or other withholding tax. If any withholding tax should become applicable to payments on the Collateral Obligations that is not compensated for by a gross-up provision under the Collateral Obligations, the withholding tax would reduce the amounts available to make payments on the Securities. There can be no assurance that remaining payments on the Collateral Obligations would be sufficient to make timely payments of interest on and payment of principal at the applicable Stated Maturity of the Note Interests or to permit sufficient payments with respect to the Preference Share Interests to achieve any desired performance (or to avoid losses). The Issuer Has the Right to Engage in Securities Lending, which Involves Counterparty Risks and Other Risks The Collateral Obligations may be loaned for a term of 90 days or less to banks, broker-dealers, or other financial institutions (other than insurance companies) that have, or are guaranteed by entities that have long term and short-term debt ratings or a guarantor with those ratings at the time of the loan, of at least A1 (and not A1 but on credit watch with negative implications) and P-1 (and not on credit watch for possible downgrade) by Moodys and at least A-1 by S&P. See Security for the Notes and the Composite SecuritiesSecurities Lending. The loans must be secured by cash or direct registered debt obligations of the United States of America, in an amount at least equal to 102% of the current Market Value of the loaned Collateral Obligations, determined on a daily basis. However, if the borrower of a loaned Collateral Obligation defaults on its obligation to return the loaned Collateral Obligation because of insolvency or otherwise, the Issuer could experience delays and costs in gaining access to the collateral posted by the borrower (and in extreme circumstances could be restricted from selling the collateral). If the borrower defaults, the Issuer could suffer a loss to the extent that the realized value of the cash or securities securing the obligation of the borrower to return a loaned Collateral Obligation (less expenses) is less than the amount required to purchase the Collateral Obligation in the open market. This shortfall could be due to, among other factors, discrepancies between the mark-to-market and actual transaction prices for the loaned Collateral Obligations arising from limited liquidity or availability of the loaned Collateral Obligations and, in extreme circumstances, the loaned Collateral Obligations being unavailable at any price. The Rating Agencies may downgrade any of the Notes if a borrower of a Collateral Obligation or, if applicable, the entity guaranteeing the performance of the borrower has been downgraded by one of the Rating Agencies such that the Issuer is not in compliance with the Securities Lending Counterparty rating requirements. The Securities Lending Counterparties may be Affiliates of the Initial Purchaser or Affiliates of the Portfolio Manager, which may create certain conflicts of interest. See Relating to Certain Conflicts of InterestThe Issuer Will Be Subject to Various Conflicts of Interest Involving the Portfolio Manager andThe Issuer Will Be Subject to Various Conflicts of Interest Involving the Initial Purchaser below. There Is Limited Disclosure About the Collateral Obligations in this Offering Memorandum A substantial portion of the initial portfolio of Collateral Obligations to be acquired before the Ramp-Up Completion Date has been identified by the Portfolio Manager but, for reasons of confidentiality, is not identified in 50

this Offering Memorandum. Investors that regard the identity of the portfolio in whole or in part necessary or desirable for their investment decision need to consider the availability of that information other than through this Offering Memorandum. The Issuer and the Portfolio Manager will not be required to provide the Holders of the Securities or the Trustee with financial or other information (which may include material non-public information) it receives pursuant to the Collateral Obligations and related documents. The Portfolio Manager also will not disclose to any of these parties the contents of any notice it receives pursuant to the Collateral Obligations or related documents. In particular, the Portfolio Manager will not have any obligation to keep any of these parties informed as to matters arising in relation to any Collateral Obligations, except with respect to the receipt or non-receipt, on an aggregate basis, of principal, interest, or other amounts of collections or recoveries, the cancellation of any Collateral Obligations, default amounts in respect of the Collateral Obligations, and certain other information required to be reported under the Management Agreement and the Indenture. The Holders of the Securities and the Trustee will not have any right to inspect any records relating to the Collateral Obligations, and the Portfolio Manager will not be obligated to disclose any further information or evidence regarding the existence or terms of, or the identity of any obligor on, any Collateral Obligations, unless specifically required by the Management Agreement. Furthermore, the Portfolio Manager and the Trustee may demand that any persons requesting that information execute confidentiality agreements before being provided with the information. A Substantial Amount of Collateral Obligations Was Acquired Before the Closing Date, and the Terms of the Acquisition May Adversely Affect the Issuer In anticipation of the issuance of the Securities, the Issuer, the Portfolio Manager, and JPMorgan Chase Bank (in that capacity, the Warehouse Provider) have entered into an agreement (the Warehousing Agreement) pursuant to which the Portfolio Manager has agreed to manage, on behalf of the Issuer, the selection of certain Loans and other obligations to be acquired by the Issuer before the Closing Date (the Warehoused Loans) and the Warehouse Provider has agreed to acquire a 100% participation in each Warehoused Loan concurrently with its acquisition by the Issuer, for a purchase price equal to the purchase price paid by the Issuer for the related Warehoused Loan.

In connection with the Warehousing Agreement, the Warehouse Provider has agreed to assume certain risks with respect to the Warehoused Loans (including risks associated with defaults affecting the Warehoused Loans). On the Closing Date, the Issuer and the Warehouse Provider will terminate the participations in the Warehoused Loans (with any Warehoused Loans that would not satisfy the Warehousing Eligibility Criteria applicable at the Closing Date being sold by the Issuer). Generally, the price to be paid by the Issuer to the Warehouse Provider in connection with the termination of the participation in a Warehoused Loan will reflect the price originally paid by the Issuer to acquire the Warehoused Loan (although that price may not reflect the market value of the Warehoused Loan on the Closing Date), plus the amount of extensions of credit in respect of certain Warehoused Loans, minus payments of amendment and waiver fees and principal repayments thereon received by the Warehouse Provider, plus reasonable costs owed to the Warehouse Provider under the Warehousing Agreement (those additional amounts not to exceed the excess of the principal amount of eligible Warehoused Loans held by the Issuer after termination of the participations over their initial purchase prices), plus all accrued and unpaid interest and fees on the Warehoused Loan. The Issuer, the Portfolio Manager and JPMorgan Securities Ltd., have made similar arrangements with respect to the purchase of High-Yield Bonds.

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Relating to Certain Conflicts of Interest In General, the Transaction Will Involve Various Potential and Actual Conflicts of Interest Various potential and actual conflicts of interest may arise from the overall advisory, investment, and other activities of the Portfolio Manager and its affiliates and from the conduct by the Initial Purchaser and its respective affiliates of other transactions with the Issuer, including acting as counterparty with respect to Hedge Agreements, Securities Lending Agreements, and Synthetic Securities. The following briefly summarizes some of these conflicts, but is not intended to be an exhaustive list of all such conflicts. The Issuer Will Be Subject to Various Conflicts of Interest Involving the Portfolio Manager Various potential and actual conflicts of interest may arise for the Portfolio Manager with respect to its obligations to the Issuer from the overall investment activities of the Portfolio Manager and its affiliates, for the accounts of its other clients. For example, the Portfolio Manager, its affiliates and their respective clients may invest in loans, securities, and other obligations that would be appropriate for inclusion in the Issuers portfolio of Collateral Obligations, as well as in loans, securities, and other obligations that are senior to, or have interests different from or adverse to, the loans and or other investments that are pledged to secure the Notes. Furthermore, affiliates of the Portfolio Manager may serve as general partners or managers of special-purpose entities organized to issue other collateralized loan obligations (CLOs) secured primarily by corporate loans and collateralized debt obligations (CDOs) secured by corporate debt obligations. The Portfolio Manager and its affiliates may also have ongoing relationships with, render services to, or engage in transactions with, companies whose loan obligations or securities are pledged to secure the Note Interests and may now or in the future own (as portfolio investments or otherwise) loan obligations or equity or debt securities issued by issuers of or obligors on, Collateral Obligations or other Applicable Collateral. The Portfolio Manager and its affiliates may possess information relating to issuers of Collateral Obligations or other Applicable Collateral that (i) may constrain the Issuers investments as a consequence of the Portfolio Managers inability to use such information for advisory purposes or otherwise to take actions that would be in the best of interests of the Issuer or (ii) is not known to the employees of the Portfolio Manager responsible for monitoring the Applicable Collateral and performing the other obligations of the Portfolio Manager under the Management Agreement. The Portfolio Manager, its affiliates and their respective clients may at certain times be simultaneously seeking to purchase or dispose of investments for the respective accounts of the Issuer, any similar entity for which it serves as manager or advisor, and for its clients or affiliates. Neither the Portfolio Manager nor any of its affiliates has any affirmative obligation to offer any investments to the Issuer or to inform the Issuer of any investments before offering any investments to other funds or accounts that the Portfolio Manager or any of its affiliates manage or advise. Furthermore, the Portfolio Manager may be bound by affirmative obligations in the future, whereby the Portfolio Manager is obligated to offer certain investments to funds or accounts that it manages or advises before or without the Portfolio Manager offering those investments to the Issuer. The Portfolio Manager will endeavor to resolve conflicts with respect to investment opportunities in a manner that it deems equitable to the extent possible under the prevailing facts and circumstances. Further, the Portfolio Manager will be prohibited under the Management Agreement from directing the acquisition of Collateral Obligations from, or the disposition of Collateral Obligations to, its affiliates or any other account managed by the Portfolio Manager except in a transaction conducted on an arms-length basis for fair market value and if the Portfolio Manager has complied with its policies and procedures with respect to the acquisition or disposition and the acquisition or disposition otherwise complies with the requirements of the Investment Advisers Act of 1940. The Portfolio Manager currently serves as the portfolio manager for a number of CLOs and CDOs secured by collateral consisting of assets similar to the Collateral Obligations, which may create conflicts in allocating its time and services among the Issuer and the Portfolio Managers other accounts.

52

On the Closing Date, the Portfolio Manager or one or more of its affiliates intend to purchase and are expected (but are not required) to hold a portion of the Preference Shares. Upon the removal or resignation of the Portfolio Manager, the Holders of a Majority of the Preference Share Interests may direct the Issuer to appoint a replacement Portfolio Manager if a Majority of each Class of the Note Interests does not disapprove the replacement Portfolio Manager. Preference Shares and Notes held by the Portfolio Manager or any of its affiliates will have no voting rights with respect to any vote in connection with removal of the Portfolio Manager for cause and will be deemed not to be outstanding in connection with any vote to remove the Portfolio Manager for cause. Preference Shares and Notes held by the Portfolio Manager or any of its affiliates will have voting rights with respect to all other matters as to which the Holders of Preference Shares or Holders of the Notes are entitled to vote, including any vote to direct an Optional Redemption and any vote to appoint a replacement Portfolio Manager in accordance with the Management Agreement. See The Management Agreement and Certain Additional Provisions Relating to the SecuritiesOptional Redemption. The Portfolio Manager and its affiliates may own equity or other securities of issuers of or obligors on Collateral Obligations or other Applicable Collateral and may have provided and may provide in the future, advisory and other services to issuers of Applicable Collateral. The Portfolio Manager will be entitled to the Incentive Management Fee under the Management Agreement, which may create an incentive for the Portfolio Manager to cause the Issuer to make more speculative investments in Collateral Obligations than it would otherwise make in the absence of the Incentive Management Fee. See The Management AgreementCompensation. The Issuer expects to acquire substantially all of the Collateral Obligations to be acquired by the Closing Date during an accumulation period before the Closing Date (the Accumulation Period) and will finance those purchases with financing provided by the Warehouse Provider, which is an affiliate of the Initial Purchaser. The Issuer will be required to repurchase the participations providing that financing by the Closing Date with the proceeds of the issuance of the Securities. The Collateral Obligations purchased before the Closing Date will be chosen by the Portfolio Manager on behalf of the Issuer, subject to certain rights of the Warehouse Provider. Any interest accrued on Collateral Obligations purchased by the Issuer before the Closing Date will be paid to the Warehouse Provider. As a result, investors in the Securities will be assuming the risk of market value and credit quality changes in the Collateral Obligations from the date the Collateral Obligations are acquired during the Accumulation Period but will not receive the benefit of interest earned on the Collateral Obligations during that period. The Issuer, the Portfolio Manager and JPMorgan Securities Ltd., which is also an affiliate of the Initial Purchaser have made similar arrangements with respect to the purchases of High-Yield Bonds. In addition, Portfolio Manager and its Affiliates may act as the Securities Lending Counterparty under any Securities Lending Agreement entered into by the Issuer. The Issuer Will Be Subject to Various Conflicts of Interest Involving the Initial Purchaser It is expected that the Initial Purchaser or its affiliates will have placed or underwritten certain of the Collateral Obligations or other Applicable Collateral at original issuance, will own equity or other securities of issuers of or obligors on Collateral Obligations, and will have provided investment banking services, advisory, commercial banking, and other services to issuers of Collateral Obligations or other Applicable Collateral. In addition, from time to time, the Portfolio Manager on behalf of the Issuer may purchase or sell Collateral Obligations or other Applicable Collateral through the Initial Purchaser or its affiliates. Also, the Issuer may invest in securities of companies affiliated with the Initial Purchaser or in which the Initial Purchaser or its affiliates own equity. The purchase, holding, or sale of such investments may enhance their profitability to the Initial Purchaser or its affiliates, as the case may be. The majority of the Collateral Obligations to be held by the Issuer as of the Closing Date will be purchased before the Closing Date in coordination with the Portfolio Manager at terms prevailing in the market at the time of purchase. The Initial Purchaser or its affiliates will provide financing and, if necessary, hedging arrangements to the Issuer to finance and hedge those purchases, which arrangements must be terminated in all respects on the Closing Date. An Affiliate of the Initial Purchaser is the institution initially serving as the Warehouse Provider and an Affiliate of the Initial Purchaser is the bond warehouse provider. In addition, the Initial Purchaser and its affiliates 53

may from time to time have various banking, securities-related, and other commercial relationships with the Portfolio Manager or the Issuer, as well as with one or more issuers of the Collateral Obligations. In addition, the Initial Purchaser and its affiliates may act as counterparty with respect to one or more Synthetic Securities in the Issuers portfolio or as the Hedge Counterparty under any Hedge Agreements or as the Securities Lending Counterparty under any Securities Lending Agreement entered into by the Issuer. [remainder of page intentionally blank]

54

THE CO-ISSUERS General The Issuer was incorporated as an exempted limited liability company on August 13, 2003 in the Cayman Islands (Company registration number 128140) and the Issuer Charter was adopted by the holder of all the Issuer Ordinary Shares immediately before the Closing Date. The registered office of the Issuer is at the offices of Maples Finance Limited, P.O. Box 1093GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands. The Issuer has no prior operating experience (other than in connection with the acquisition of the Collateral Obligations during the Accumulation Period) and will not have any material assets other than (i) the Applicable Collateral pledged to secure the Note Interests and the other Secured Obligations, and (ii) $500 (of which $250 represents the Issuers ordinary share capital and $250 represents a fee for issuing the Securities). As of the Closing Date, the authorized and issued share capital of the Issuer is (i) 74,250 Preference Shares, par value $0.01 per share, with an aggregate stated amount of $1,000 per share, which will be issued on the Closing Date, and (ii) 250 ordinary shares, par value $1.00 per share (the Issuer Ordinary Shares). All of the Issuer Ordinary Shares are owned by Maples Finance Limited (acting in that capacity, the Share Trustee) under a declaration of trust and the Issuer will have only nominal equity capitalization (excluding the Preference Shares) in the form of its Issuer Ordinary Shares. The proposed capitalization of the Issuer as of the Closing Date, after giving effect to the issuance of the Securities and the Issuer Ordinary Shares but before deducting expenses of the offering of Securities and organizational expenses of the Issuer, is described under Summary of TermsCapitalization of the Co-Issuers. The Co-Issuer is a limited liability company formed on March 16, 2004 in the State of Delaware (filing number 3777493) pursuant to a certificate of formation and limited liability company agreement. The registered office of the Co-Issuer is at the offices of The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The Co-Issuer has no prior operating experience and will not have any material assets. The Issuer will be the sole member of the Co-Issuer. Activities General Article 3 of the Issuer Charter of the Issuer provides that the objects for which the Issuer is established are unrestricted and the Issuer shall have full power and authority to carry out any object not prohibited by the Companies Law (2003 Revision) or as the same may be revised from time to time, or any other law of the Cayman Islands. Section 2.3 of the limited liability company agreement of the Co-Issuer provides that the purpose of the CoIssuer is to engage in any lawful act or activity for which limited liability companies may be organized under Delaware Law and to engage in any and all activities necessary or incidental thereto. The Issuer The Indenture provides that the activities of the Issuer are limited to the following: (i) (ii) acquisition and disposition of, and investment and reinvestment in, Collateral Obligations and Eligible Investments; entering into, and performing its obligations under, the Indenture, the Hedge Agreements, the Securities Lending Agreements, the Management Agreement, the Collateral Administration Agreement, the Preference Share Paying and Transfer Agency Agreement, the Administration Agreement, and the Purchase Agreement; the issuance and sale of the Securities and the Issuer Ordinary Shares;

(iii)

55

(iv) (v) (vi)

the pledge of the Applicable Collateral as security for its obligations in respect of the Note Interests, the Class 6 Component, and the Hedge Agreements; entering into certain pre-closing warehousing arrangements and the agreements relating thereto; and undertaking certain other activities incidental to the foregoing.

The Co-Issuer The Indenture, the certificate of formation and limited liability company agreement of the Co-Issuer provide that the activities of the Co-Issuer are to be limited to the following: (i) (ii) Administration Maples Finance Limited will act as the administrator of the Issuer (the Administrator). The Administrators registered office is at P.O. Box 1093GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands. The office of the Administrator will serve as the general business office and registered office of the Issuer. Through this office and pursuant to an agreement, dated August 14, 2003 and as amended and restated on or around the Closing Date, between the Administrator and the Issuer (the Administration Agreement), the Administrator will perform various management functions on behalf of the Issuer, including communications with the holders of the Issuer Ordinary Shares and the general public, certain communications with the Holders of the Preference Shares and the provision of certain clerical, administrative and other services. In consideration for the foregoing, the Administrator will receive various fees and reimbursement of its expenses. The Administrator will be subject to the overview of the Issuers Board of Directors. The Administration Agreement may be terminated by the Issuer or the Administrator upon 14 days written notice following the happening of certain events, and upon three months written notice in the absence of those events. Upon the termination of the Administration Agreement, the Administrator will be required to take all necessary steps to vest in the Issuer or any new administrator or liquidator, as the case may be, any assets previously held in the name of or to the order of the Administrator on behalf of the Issuer. The Issuer will have three directors, each of whom is an employee or officer of the Administrator. Below is information regarding the background and experience of certain persons who will be the Directors of the Board of the Issuer. Hugh Thompson, Senior Vice President Hugh joined Maples Finance Limited in 1999 from Dai-Ichi Kangyo Bank in London where he was a Manager in the Risk Management Department. Previously, he had been at the United Bank of Kuwait, Hill Samuel Bank, and Chemical Bank working in various risk management, credit, and treasury roles. At Maples Finance Limited, Hugh has worked on a broad range of transactions, including securitizations, CDOs, SIVs, and asset finance transactions. He holds a BA (Hons.) in Business Studies (Finance) from the City of London Polytechnic. Chris Leslie, Vice President Chris joined Maples Finance Limited in 2001. Previously, he was a member of the Transaction Management Team of the Institutional Trust Services Division at JP Morgan Chase in London where he was responsible for the documentation and analysis of securitization and CDO transactions. Before that, Chris worked in the Corporate Trust Department at Perpetual Trust in New Zealand. While at Maples Finance Limited, Chris has worked on securitizations, note issues, and real estate transactions as well as a 56 the co-issuance and sale of the Co-Issued Notes; and undertaking certain other activities incidental to the foregoing.

large number of CDOs and note programs. He has an LL.B and B Com in Accounting and Finance from the University of Canterbury, New Zealand. Carrie Bunton, Vice President Carrie joined Maples Finance Limited in 2001 from Royal Bank of Canada Trust Company (Cayman) Limited. Before that, she worked at Bank of Butterfield International (Cayman) Limited. While at Maples Finance Limited, Carrie has worked on a wide range of structured finance transactions including asset financings, securitisations, note issues, and CDOs. She has a LL.B (Hons.) from the University of Liverpool, England and obtained her Cayman Islands legal professional practice qualification from Queens University, Belfast. Puglisi & Associates will act as manager of the Co-Issuer (the LLC Manager) and will perform management and administrative functions on behalf of the Co-Issuer. In consideration of the foregoing, the LLC Manager will receive a fee and reimbursement of expenses. The principal of the LLC Manager is Donald J. Puglisi, MBNA America Professor of Business Emeritus at the University of Delaware. The address of the LLC Manager is 850 Library Avenue, Suite 204, Newark, Delaware 19711. [remainder of page intentionally blank]

57

APPLICATION OF FUNDS Collections received on the Applicable Collateral during the related Due Period will be segregated into Interest Proceeds and Principal Proceeds and applied on each Payment Date in the priority below under Application of Interest Proceeds and Application of Principal Proceeds, respectively (collectively, the Priority of Payments). Amounts distributed to the Preference Share Paying Agent for distribution to the Preference Shareholders will be distributed to the Preference Shareholders as provided in the Preference Share Documents. Application of Interest Proceeds On each Payment Date, Interest Proceeds with respect to the related Due Period (other than Interest Proceeds previously used to purchase accrued interest in respect of Collateral Obligations or otherwise used as permitted under the Indenture) will be distributed in the following order of priority: (1) to the payment of any taxes and registration and filing fees owed by the Co-Issuers (without limit) and then to payment of Administrative Expenses up to the Administrative Expense Cap as follows: FIRST, fees and expenses of the Trustee; and SECOND, in the following order of priority, (x) (y) (z) fees and expenses of the Preference Share Paying Agent, the Share Registrar, and the Administrator, then fees and expenses of the Collateral Administrator, and then fees and expenses of the Co-Issuers (including fees and expenses of counsel and surveillance, credit estimate, and other fees owing to the Rating Agencies) and any other person (except the Portfolio Manager) if specifically provided for in the Indenture and to the expenses (but not fees) of the Portfolio Manager if payable under the Management Agreement;

(2) (3)

to the payment of all amounts due to the Hedge Counterparties under the Hedge Agreements other than any Defaulted Hedge Termination Payments; to the payment of FIRST, any accrued and unpaid Successor Management Fee then payable and SECOND, accrued and unpaid Senior Management Fee then payable;

(4)

to the payment of accrued and unpaid interest on the Class A Note Interests and any accrued and unpaid Defaulted Interest on the Class A Note Interests pro rata to the Class A-1 Note Interests (considered as one subclass) and the Class A-2 Notes and the Class A-3 Notes (considered together as a second subclass) based on the amounts of accrued and unpaid interest on each of the Classes, and between the Class A-2 Notes and the Class A-3 Notes in the following order of priority: (A) (B) to the payment of accrued and unpaid interest on the Class A-2 Notes; and then to the payment of accrued and unpaid interest on the Class A-3 Notes;

58

(5)

if the Class A Coverage Tests are not satisfied on the related Determination Date, to the payment of principal of the Class A Note Interests in the Note Payment SequenceClass A in the amount necessary so that all of the Class A Coverage Tests would be met on a pro forma basis after giving effect to any payments in reduction of the principal of Note Interests made through this clause, or until paid in full (Interest Proceeds to be applied pursuant to this subparagraph (5) before the application of any Principal Proceeds as described under Application of Principal Proceeds below on the current Payment Date); to the payment of accrued and unpaid interest on the Class B Note Interests (excluding Class B Deferred Interest, but including interest accrued for the preceding Interest Period on Class B Deferred Interest); if the Class B Coverage Tests are not satisfied on the related Determination Date, to the payment of principal of the Class A Note Interests in the Note Payment SequenceClass A, and then to the payment of principal of the Class B Note Interests, in each case in the amount necessary so that all of the Class B Coverage Tests would be met on a pro forma basis after giving effect to any payments in reduction of the principal of Note Interests made through this clause, or until paid in full (Interest Proceeds to be applied pursuant to this subparagraph (7) before the application of any Principal Proceeds as described under Application of Principal Proceeds below on the current Payment Date); to the payment of Class B Deferred Interest; to the payment of accrued and unpaid interest on the Class C Note Interests (excluding Class C Deferred Interest but including interest accrued for the preceding Interest Period on Class C Deferred Interest); if the Class C Coverage Tests are not satisfied on the related Determination Date, to the payment of principal of the Class A Note Interests in the Note Payment SequenceClass A, then to the payment of principal of the Class B Note Interests, and then to the payment of principal of the Class C Note Interests, in each case in the amount necessary so that all of the Class C Coverage Tests would be met on a pro forma basis after giving effect to any payments in reduction of the principal of Note Interests made through this clause, or until paid in full (Interest Proceeds to be applied pursuant to this subparagraph (10) before the application of any Principal Proceeds as described under Application of Principal Proceeds below on the current Payment Date); to the payment of Class C Deferred Interest; to the payment of accrued and unpaid interest on the Class D Note Interests (excluding Class D Deferred Interest but including interest accrued for the preceding Interest Period on Class D Deferred Interest); if the Class D Coverage Tests are not satisfied on the related Determination Date or if a Rating Confirmation Failure exists on the Payment Date, to the payment of principal of the Note Interests in the Note Payment Sequence in the amount necessary so that all of the Class D Coverage Tests would be met on a pro forma basis after giving effect to any payments in reduction of the principal of Note Interests made through this clause, or until paid in full (Interest Proceeds to be applied pursuant to this subparagraph (13) before the application of any Principal Proceeds as described under Application of Principal Proceeds below on the current Payment Date) or until paid in full, unless a Rating Confirmation is otherwise obtained; to the payment of Class D Deferred Interest; to the pro rata payment of any unpaid Administrative Expenses, but only up to an amount equal to 0.005% of the sum of the Maximum Investment Amount for the related Determination Date plus the par value of all Defaulted Collateral Obligations on the related Determination Date;

(6)

(7)

(8) (9)

(10)

(11) (12)

(13)

(14) (15)

59

(16)

to deposit in the Collection Account as Principal Proceeds amounts representing Principal Proceeds previously used to pay amounts referred to in clauses (1) through (4), (6), (8), (9), (11), (12), (14), and (15) above and not previously restored to the Collection Account or, if not restored to the Collection Account, used to purchase Collateral Obligations; to the payment of the Paid Ahead Interest Reserve Amount, to be held in the Collection Account as such; to the payment of accrued and unpaid Subordinated Management Fee then due; during the Reinvestment Period, if the Class D Reinvestment Overcollateralization Test is not satisfied on the related Determination Date, up to 50.0% of the remaining Interest Proceeds for the related Due Period to a deposit to the Collection Account as Principal Proceeds to the extent necessary to cause the Class D Reinvestment Overcollateralization Test to be satisfied as of the Determination Date, after application of Principal Proceeds as described under Application of Principal Proceeds below on the current Payment Date; to the payment of any Defaulted Hedge Termination Payments; to the pro rata payment of any unpaid Administrative Expenses; on each Payment Date after the eighth Payment Date, 20.0% of the remaining Interest Proceeds for the related Due Period to the payment of principal of the Class D Note Interests until they have been paid in full; if the Preference Share Interest Internal Rate of Return for the Payment Date is 12.0% or more, up to 50.0% of the remaining Interest Proceeds for the related Due Period to the payment of accrued and unpaid Incentive Management Fee (including any interest due on it) then payable; and any remaining Interest Proceeds pro rata to the Holders of the Preference Share Components (except for the Class 1 Composite Security Preference Share Component that will be retained in the Collection Account and applied as described below under Application of Composite Security Available Amount) and to the Preference Share Paying Agent (for payment to the Holders of the Preference Shares pursuant to the Preference Share Documents to the extent permitted by the Preference Share Paying and Transfer Agency Agreement and by Cayman Islands law).

(17) (18) (19)

(20) (21) (22)

(23)

(24)

Application of Principal Proceeds On each Payment Date, Principal Proceeds with respect to the related Due Period other than (A) Principal Proceeds previously reinvested in Collateral Obligations (including any related deposit into the Revolving Reserve Account or the Delayed Drawdown Reserve Account or the posting by the Issuer of cash collateral with (or for the benefit of) a Synthetic Security counterparty simultaneously with the Issuers purchase of or entry into a Synthetic Security) or otherwise used as permitted under the Indenture, Principal Proceeds on deposit in the Revolving Reserve Account, the Delayed Drawdown Reserve Account, the Synthetic Security Collateral Account, or the Securities Lending Account, and Principal Proceeds on deposit in the Collection Account in an aggregate amount equal to the agreed Purchase Prices for Collateral Obligations with respect to which the Issuer has entered into a commitment before the end of the Due Period for their purchase, but has not settled the purchase by the end of the Due Period,

(B) (C)

will be distributed in the following order of priority:

60

(1)

to the payment of the amounts referred to in clauses (1) through (5) under Application of Interest Proceeds above (and in the same manner and order of priority) to the extent not previously paid in full thereunder; to the payment of the amounts referred to in clause (7) under Application of Interest Proceeds above to the extent not previously paid in full thereunder; to the payment of the amounts referred to in clause (10) under Application of Interest Proceeds above to the extent not previously paid in full thereunder; to the payment of the amounts referred to in clause (13) under Application of Interest Proceeds above to the extent not previously paid in full thereunder; to the payment of the amounts referred to in clauses (6) and (8) under Application of Interest Proceeds above (and in the same manner and order of priority) to the extent not previously paid in full thereunder, only to the extent that all of the Coverage Tests would be met on a pro forma basis after giving effect to any payments made through this clause (5); to the payment of the amounts referred to in clauses (9) and (11) under Application of Interest Proceeds above (and in the same manner and order of priority) to the extent not previously paid in full thereunder, only to the extent that all of the Coverage Tests would be met on a pro forma basis after giving effect to any payments made through this clause (6); to the payment of the amounts referred to in clauses (12) and (14) under Application of Interest Proceeds above (and in the same manner and order of priority) to the extent not previously paid in full thereunder, only to the extent that all of the Coverage Tests would be met on a pro forma basis after giving effect to any payments made through this clause (7); (A) if the Payment Date is a Redemption Date in the following order of priority, (i) to the payment in the Note Payment Sequence of the Redemption Prices of all of the Note Interests to be redeemed (ii) to the payment of the amounts referred to in clauses (15), (18), (20), (21), and (23) under Application of Interest Proceeds above (and in the same manner and order of priority; and in the case of (23) up to 100% of remaining principal proceeds) to the extent not previously paid in full thereunder; and (iii) pro rata to the Holders of the Preference Share Components of the Redemption Price of any Preference Share Components to be redeemed and to the Preference Share Paying Agent (for payment to Holders of the Preference Shares of the Redemption Price of any Preference Shares to be redeemed pursuant to the Preference Share Documents to the extent permitted by the Preference Share Paying and Transfer Agency Agreement and by Cayman Islands law); and (B) if the Payment Date is a Special Redemption Date, to the payment in the Note Payment Sequence of principal of the Note Interests in an aggregate amount equal to the Special Redemption Amount;

(2) (3) (4) (5)

(6)

(7)

(8)

(9)

during the Reinvestment Period, all remaining Principal Proceeds to the acquisition of additional Collateral Obligations (and, until so applied (including any related deposit into the Revolving Reserve Account or the Delayed Drawdown Reserve Account or the posting by the Issuer of cash collateral with (or for the benefit of) a Synthetic Security counterparty simultaneously with the Issuers purchase of or entry into a Synthetic Security), to be deposited in the Collection Account as Principal Proceeds); after the Reinvestment Period, to the payment in the Note Payment Sequence of principal of Note Interests until paid in full; to the extent not previously paid in full under (8) above, after the Reinvestment Period, to the payment of the amounts referred to in clauses (15), (18), (20), (21), and (23) under Application of Interest Proceeds above (and in the same manner and order of priority; and in the case of (23) 61

(10) (11)

up to 100% of remaining principal proceeds) to the extent not previously paid in full thereunder; and (12) after the Reinvestment Period pro rata to the Holders of the Preference Share Components (except for the Class 1 Composite Security Preference Share Component Amount that will be retained in the Collection Account and applied as described below under Application of Composite Security Available Amount) and to the Preference Share Paying Agent (for payment to the Holders of the Preference Share Interests pursuant to the Preference Share Documents to the extent permitted by the Preference Share Paying and Transfer Agency Agreement and (in the case of the Preference Shares) by Cayman Islands law).

Amounts referred to in clauses (6), (9), and (12) under Application of Interest Proceeds above, to the extent not previously paid in full thereunder, will be added to deferred interest for purposes of calculating the Coverage Tests in clauses (5), (6), and (7) of this Principal Proceeds order of priority. If on any Payment Date the amount available in the Payment Account is insufficient to make the full amount of the disbursements required by the Valuation Report, the Trustee shall make the disbursements called for in the order of priority under Application of Interest Proceeds and Application of Principal Proceeds, to the extent funds are available therefor. The Trustee shall remit funds to pay Administrative Expenses of the Issuer or the Co-Issuer in accordance with the priority of payments under Application of Interest Proceeds and Application of Principal Proceeds above, to the extent available, to the Issuer, the Co-Issuer, or the Preference Share Paying Agent, as the case may be. In connection with the application of funds to pay amounts owing to the Preference Share Paying Agent for forwarding to Holders of Preference Shares in accordance with Application of Interest Proceeds and Application of Principal Proceeds above, the Trustee shall remit the funds, to the extent available, to the Preference Share Paying Agent on the Business Day before each Payment Date. Application of Composite Security Available Amount Except as described below under Certain Additional Provisions Relating to the Securities Subordination, on each Payment Date, the Trustee shall disburse the Class 1 Composite Security Preference Share Component Amount from the Payment Account FIRST, to the payment of accrued and unpaid interest on the Class 1 Composite Securities, SECOND, to the payment of any interest previously accrued but unpaid due to an insufficiency in the Class 1 Composite Security Preference Share Component Amount on any Payment Date (a Class 1 Composite Security Deferred Interest Amount) together with interest on the Class 1 Composite Security Deferred Interest Amount at the rate payable on the Class 1 Composite Securities, and THIRD, any remaining Class 1 Composite Security Preference Share Component Amount pro rata to the Holders of the Class 1 Composite Securities. Class 6 Component Distributions On the Business Day before each Payment Date on which any distributions are to be made with respect to any Preference Share Components under item (24) under Application of FundsApplication of Interest Proceeds or item (12) under Application of FundsApplication of Principal Proceeds (as determined on the related Determination Date), the Trustee shall make commercially reasonable efforts to sell a portion or all of the Treasury Strip held in the Class 6 Collateral Account on the customary open market in accordance with customary industry standards. The face amount of the Treasury Strip to be sold, if any, on the Business Day before the relevant Payment Date shall be a calculated amount (rounded down to the nearest $1,000) equal to the quotient of (i) the sum of the distributions to be made with respect to Preference Share Components of the Class 6 Composite Securities under item (24) under Application of FundsApplication of Interest Proceeds and item (12) under Application of FundsApplication of Principal Proceeds on the Payment Date divided by (ii) one minus the bid-side market price 62

of the Treasury Strip on the Business Day before the Payment Date expressed as a percentage. No portion of the Treasury Strip may be sold if, after its sale, the Principal Balance of the Treasury Strip would not be greater than or equal to the Class 6 Rated Balance. On each Payment Date on which any distributions are to be made with respect to any Preference Share Components under item (24) under Application of FundsApplication of Interest Proceeds or item (12) under Application of FundsApplication of Principal Proceeds (as determined on the related Determination Date), the Trustee shall disburse (solely from amounts in the Class 6 Component Account attributable to the proceeds from the sale of the Treasury Strip pursuant to the paragraph above) to the Holders of the Class 6 Components, pro rata based on their share of the Class 6 Rated Balance, the proceeds from the sale of the Treasury Strip for that Payment Date pursuant to the paragraph above. On each Redemption Date resulting from an optional redemption or due to a Tax Event pursuant to the Indenture, the Trustee shall disburse (solely from Applicable Collateral held in the Class 6 Component Account) to the Holders of the Class 6 Components, pro rata based on their share of the Class 6 Rated Balance, the Redemption Price of the Class 6 Component as a distribution in kind of each item of the Applicable Collateral. [remainder of page intentionally blank]

63

COVERAGE TESTS General The Coverage Tests for each Class of Notes will consist of the Overcollateralization Test and the Interest Coverage Test as applied to the particular Class of Note, and are individually referred to as the Class A Coverage Tests, the Class B Coverage Tests, the Class C Coverage Tests, and the Class D Coverage Tests. The Coverage Tests will be used to determine, among other things, whether Note Interests will be redeemed in certain circumstances as described under Certain Additional Provisions Relating to the Securities and whether additional Collateral Obligations may be acquired as described under Security for the Notes and the Composite Securities. There will not be any Coverage Test applicable to the Preference Shares. The Overcollateralization Tests The Overcollateralization Tests (each, an Overcollateralization Test) will consist of the Class A Overcollateralization Test, the Class B Overcollateralization Test, the Class C Overcollateralization Test, and the Class D Overcollateralization Test. Each Overcollateralization Test is a test that is satisfied with respect to the relevant Class of Note Interests if, as of any Measurement Date, the Overcollateralization Ratio for the Class is at least equal to the specified Required Level for the Class indicated in the table below: Test Required Level Class A Overcollateralization Test Class B Overcollateralization Test Class C Overcollateralization Test Class D Overcollateralization Test 114.7% 108.8% 104.9% 103.6%

The Overcollateralization Ratio, with respect to each Class of Note Interests (treating the Class A Note Interests, Class B Note Interests, Class C Note Interests and Class D Note Interests in each case together as a single Class for this purpose) on any Measurement Date, is referred to as an Overcollateralization Ratio, and is the ratio calculated by dividing (i) the Overcollateralization Ratio Numerator by

(ii) the Aggregate Outstanding Amount of the Class of Note Interests and all Note Interests ranking senior to it together with any Deferred Interest on the Note Interests and all Note Interests ranking senior to it. The Overcollateralization Ratio Numerator on any date, is the sum of: (1) the Aggregate Principal Balance of all Collateral Obligations (other than any Excess Caa/CCC Collateral Obligations, any Non-Performing Collateral Obligations, any Deep Discount Obligations, and any Collateral Obligations loaned pursuant to a Securities Lending Agreement with respect to which an event of default (under and as defined in the Securities Lending Agreement) is continuing); plus unpaid accrued interest purchased with principal (excluding any unpaid accrued interest purchased with principal in respect of Non-Performing Collateral Obligations); plus the Aggregate Principal Balance of any Eligible Investments that were purchased with Principal Proceeds and the amount of Principal Proceeds on deposit in the Collection Account; plus

(2) (3)

64

(4)

the Aggregate Principal Balance of Eligible Investments on deposit in a Securities Lending Account that relate to a Securities Lending Agreement with respect to which an event of default (under and as defined in the Securities Lending Agreement) is continuing); plus for each Collateral Obligation that is any of a Non-Performing Collateral Obligation, a Deep Discount Obligation, or an Excess Caa/CCC Collateral Obligation, include it in either the only one of the following that applies, or if more than one applies, the one of the following that results in including for it the smallest amount: (A) (B) the Market Value of all included Excess Caa/CCC Collateral Obligations; plus the aggregate of the Applicable Collateral Obligation Amounts for all included NonPerforming Collateral Obligations (other than Defaulted Collateral Obligations that have been held by the Issuer for more than three years); plus the aggregate of the Purchase Prices for all included Deep Discount Obligations.

(5)

(C)

As used in this definition, Applicable Collateral Obligation Amount for any Non-Performing Collateral Obligation means (a) (b) the lesser of (x) the Market Value Percentage of the Non-Performing Collateral Obligation and (y) the Applicable Percentage for the Non-Performing Collateral Obligation multiplied by if the Non-Performing Collateral Obligation is (1) (2) (3) (4) any Pledged Obligation other than those in (2) to (5) below, the outstanding principal amount of the Pledged Obligation as of the relevant Measurement Date; a Synthetic Security, the notional amount specified in the Synthetic Security; any Zero Coupon Security or Step-Up Coupon Security, its accreted value; any Revolving Loan or Delayed Drawdown Loan, its Principal Balance including any unfunded amount thereof (regardless of the nature of the contingency relating to the Issuers obligation to fund the unfunded amount); and any PIK Security, its Principal Balance (if it were not a Defaulted Obligation).

(5)

As used in the calculation of Market Value Percentage of the Non-Performing Collateral Obligation, the Principal Balance of any Defaulted Obligation shall be, if the Defaulted Obligation is any Pledged Obligation other than those in the following list, the outstanding principal amount of the Pledged Obligation as of the relevant Measurement Date; a Synthetic Security, the notional amount specified in the Synthetic Security; any Zero Coupon Security or Step-Up Coupon Security, its accreted value; any Revolving Loan or Delayed Drawdown Loan, its Principal Balance including any unfunded amount thereof (regardless of the nature of the contingency relating to the Issuers obligation to fund the unfunded amount); and any PIK Security, its Principal Balance including any principal amount of the PIK Security representing previously deferred or capitalized interest.

The Interest Coverage Tests The Interest Coverage Tests in respect of each Class of Note Interests (each an Interest Coverage Test) is a test the first Measurement Date for which will be on the third Payment Date and that is satisfied with respect to any specified Class of Note Interests if, as of the third Payment Date and any Measurement Date thereafter on which 65

any Note Interests remain outstanding, the Interest Coverage Ratio equals or exceeds the applicable Required Level specified in the table below for the Class: Test Class A Interest Coverage Test Class B Interest Coverage Test Class C Interest Coverage Test Class D Interest Coverage Test Required Level 125% 120% 115% 110%

The Interest Coverage Ratio with respect to any specified Class of Note Interests (treating the Class A Note Interests, Class B Note Interests, Class C Note Interests and Class D Note Interests in each case together as a single Class for this purpose) on any Measurement Date, will be calculated by dividing: (i) the sum of (A) (B) (ii) the Interest Proceeds received or scheduled to be received with respect to the Due Period in which the Measurement Date occurs minus amounts payable under clauses (1), (2), and (3) of Application of FundsApplication of Interest Proceeds on the related Payment Date by

all accrued and unpaid interest on the specified Class of Note Interests and all Note Interests ranking senior to the Class (excluding any Deferred Interest) on the related Payment Date.

For purposes of the Interest Coverage Ratio, only the amount of any interest payment (including any gross up payment) on any Collateral Obligation in excess of any withholding tax or other deductions on account of tax of any jurisdiction on any date of determination shall be included in Interest Proceeds. The Class D Reinvestment Overcollateralization Test The Class D Reinvestment Overcollateralization Test is a test that is satisfied if, as of any Measurement Date during the Reinvestment Period on which Class D Note Interests remain outstanding, the Class D Overcollateralization Ratio is at least equal to 105.5%. [remainder of page intentionally blank]

66

CERTAIN ADDITIONAL PROVISIONS RELATING TO THE SECURITIES General The Notes and the Composite Securities will be issued pursuant to the Indenture, to be dated as of the Closing Date, among the Issuer, the Co-Issuer, and U.S. Bank National Association, as trustee and the Preference Shares will be issued pursuant to the Issuer Charter. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture and the Preference Share Documents. Copies of the Indenture and the Preference Share Paying and Transfer Agency Agreement may be obtained by prospective investors upon request in writing to the Issuer, in care of J.P. Morgan Securities Inc., 270 Park Avenue, 10th Floor, New York, New York 10017, Attention: Structured Credit Products. Status and Security The Co-Issued Notes are non-recourse debt obligations of the Co-Issuers and the Class D Notes are nonrecourse obligations of the Issuer. The Composite Securities are limited recourse obligations of the Issuer secured as described in this Offering Memorandum. Each Note within a Class (other than the Class A Notes) will rank pari passu with all other Notes of that Class. The Class A-3 Notes will rank subordinate to the Class A-2 Notes in right of payment of principal and interest in accordance with the Priority of Payments. Under the Indenture, the Issuer will grant to the Trustee a first-priority security interest in the Applicable Collateral to secure the Issuers obligations under the Indenture, the Note Interests, the Hedge Agreements and the Management Agreement (collectively, the Secured Obligations). The Note Interests are payable solely from amounts received in respect of the Applicable Collateral pledged by the Issuer to secure the Note Interests. The Class 6 Component is payable solely from amounts received in respect of the Applicable Collateral pledged by the Issuer to secure the Class 6 Component. If the amounts received in respect of the Applicable Collateral (net of certain expenses) are insufficient to make payments on the Secured Obligations in accordance with the Priority of Payments, no other assets will be available for payment of the deficiency and, following liquidation of all the Applicable Collateral, the obligations of the Issuer or the Co-Issuer, as the case may be, to pay the deficiency will be extinguished. The Preference Shares constitute part of the share capital of the Issuer. Distributions of dividends and any final distribution in redemption of the Preference Shares will not be secured by the Applicable Collateral and will be subject to restrictions imposed on distributions by Cayman Islands law. The Preference Shares are entitled only to proceeds of the Applicable Collateral to the extent that any Proceeds are remaining on any Payment Date after payment of all interest and principal payable on each Class of Note Interests on that Payment Date and the satisfaction of certain other amounts payable in accordance with the Priority of Payments. Each Preference Share will rank pari passu with all other Preference Shares. The Preference Shares Distribution Account is the account maintained by the Preference Share Paying Agent pursuant to the Preference Share Paying and Transfer Agency Agreement for the deposit of Proceeds of the Applicable Collateral to be distributed as dividends and as any final distribution in redemption of the Preference Shares in accordance with the Priority of Payments. Any amounts on deposit in the Preference Shares Distribution Account, and the account maintained by the Share Trustee for the deposit of the paid up share capital of the Issuer Ordinary Shares and any amounts on deposit in that account will not be included in the Applicable Collateral and will not be subject to the lien created by the Indenture. Issuance of Securities in General The issuance of Notes and the Composite Securities on the Closing Date will be conditioned on the concurrent investment on the Closing Date in Collateral Obligations in accordance with certain guidelines provided in the Indenture and on the satisfaction of certain other conditions. The issuance of Preference Shares on the Closing Date will be conditioned on the concurrent issuance of the Notes and the Composite Securities and on the satisfaction of certain other conditions.

67

Additional Issuance of Securities At any time during the Reinvestment Period, subject to the approval of the Portfolio Manager and a Majority of the Preference Shares, the Applicable Issuers may issue under the Indenture additional Notes of any Classes and Composite Securities having Note Components of any Classes, in amounts that result in the Note Interests for any one Class being increased by an aggregate maximum initial principal amount of up to 50% of the original principal amount of the Class of Note Interests issued on the Closing Date if (i) the Applicable Issuers comply with the requirements of the Indenture including the delivery of officers certificates required under the Indenture, any governmental approvals, legal opinions, accountants certificates, and a certificate of the Portfolio Manager regarding the Applicable Collateral, (ii) the initial Ratings of the Note Interests of each Class and of the Composite Securities have not been reduced or withdrawn or placed on credit watch with negative implications and the Rating Condition with respect to each Rating Agency is satisfied with respect to the additional issue, and (iii) Obligations. the net proceeds of the issuance of additional Note Interests is used to purchase Collateral

At any time during the Reinvestment Period, subject to the approval of the Portfolio Manager and a Majority of the Preference Shares, the Issuer may issue and sell additional Composite Securities containing Note Components and Preference Share Components up to an aggregate for which sufficient Note Interests and Preference Share Interests are authorized. The terms of the additional Notes of any Class and of the additional Composite Securities issued shall be identical to those of the initial Notes of that Class or Composite Securities, as the case may be (except that the issue date of the additional Notes and except that the interest due on the additional Notes shall accrue from the issue date of the additional Notes). Interest on the additional Notes shall be payable commencing on the first Payment Date following the issue date of the additional Notes. The additional Notes of any Class or additional Composite Securities shall rank pari passu in all respects with the initial Notes of that Class or Composite Securities. The Issuer may issue additional Preference Shares pursuant to the Preference Share Documents with or without simultaneously issuing additional Notes pursuant to the Indenture. Any additional issuance of Preference Shares will be subject to the applicable conditions in the Preference Share Documents. The net proceeds of an additional issuance of Preference Shares shall be, in the Portfolio Managers discretion, invested during the Reinvestment Period in Collateral Obligations, pending investment in Collateral Obligations, deposited in the Collection Account and invested in Eligible Investments, or transferred to the Payment Account to be used to make payments on any Payment Date, as Interest Proceeds, in accordance with and subject to the Priority of Payments and until paid, deposited in the Collection Accounts and invested in Eligible Investments. Any additional Securities shall be offered first to existing Holders of that Class of Securities in the amounts necessary to preserve their pro rata holdings of Securities of the Class. Exchange of Composite Securities for Related Securities A Holder of Composite Securities may at any time exchange the Composite Securities for all or a proportionate amount of Notes and Preference Shares relating to the Components of the Composite Security as provided below. Upon receipt by the Issuer and the Indenture Registrar of (A) the Holders Composite Securities properly endorsed for the exchange and (B) written instructions from the Holder designating the number and the principal amount of Notes and number of Preference Shares to be issued (the aggregate of the principal amount and Class of Notes being equal to the aggregate principal amount of the related Note Component and of that Class, and the aggregate number of Preference Shares being equal to the aggregate number of the related Preference Share 68

Components), then the Indenture Registrar shall cancel the Composite Securities in accordance with the Indenture, record the exchange of the Note Components for Notes in the Indenture Register, direct the Issuer to issue the Preference Share Components of the Composite Securities being exchanged in accordance with the Preference Share Paying and Transfer Agency Agreement, direct the Share Registrar to update the Share Register accordingly and upon execution by the Issuer authenticate and deliver one or more Notes of the relevant Class, registered in the same names as the Composite Securities surrendered by the Holder, and in authorized denominations. No service charge will be made for the exchange, but the Trustee or the Preference Share Paying Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Promptly after the consummation of the exchange of Composite Securities for all or a proportionate amount of Notes and Preference Shares relating to the related Components, the Issuer shall give each Rating Agency notice of it. No Holder of Notes or Preference Shares (including a Holder that received the Notes or Preference Shares upon an exchange of a Composite Security) may exchange Notes and Preference Shares for a Composite Security. Upon any exchange of the Class 6 Composite Security, the Class 6 Component shall be distributed to the Class 6 Composite Holder as a distribution in kind of a pro rata share (based on the Class 6 Rated Balance) of each item of the Class 6 Collateral. Optional Redemption Note Interests. Holders of a Super Majority of the Preference Share Interests may give written notice to the Applicable Issuers directing an optional redemption of the Note Interests (with respect to the Note Interests, an Optional Redemption) upon the occurrence of a Tax Event or at any time after the Payment Date in February 2008. Upon receipt of the written notice directing an Optional Redemption of the Note Interests, the Applicable Issuers are required by the Indenture to redeem the Note Interests (in whole but not in part) from amounts available therefor in accordance with Redemption Procedures described below. Any Optional Redemption of the Note Interests shall be made at the applicable Redemption Price. Upon an Optional Redemption of the Note Interests, the Reinvestment Period will terminate in accordance with the definition of that term. The Issuer shall, at least 45 days before the Redemption Date (unless the Trustee agrees to a shorter period), notify the Trustee and each Rating Agency of the Redemption Date, the applicable Record Date, the principal amount of Notes to be redeemed and the applicable Redemption Prices. Class 6 Components. Upon the occurrence of a Tax Event or an optional redemption under the Indenture, the Class 6 Components shall be redeemed by the Issuer, in whole but not in part, on any Payment Date from funds available for that purpose in the Class 6 Component Account, at the direction of a Super Majority of the Preference Share Interests, which direction must be given to the Trustee, the Issuer, the Preference Share Paying Agent, and the Portfolio Manager not later than 45 days before the Payment Date on which the redemption is to be made, at the applicable Redemption Price. All Class 6 Components must be simultaneously redeemed. Upon any redemption of the Class 6 Components the Holder of Class 6 Components shall receive the Redemption Price as a distribution in kind of a pro rata share (based on the Class 6 Rated Balance) of each item of the Class 6 Collateral. Preference Share Interests. On any Payment Date on or after payment in full of the Note Interests, the redemption of the Class 6 Component, all administrative and other fees (without regard to any payment limitations) payable under the Priority of Payments (including the Senior Management Fee and the Subordinated Management Fee) and all amounts owing under any Hedge Agreement to any Hedge Counterparty, (i) at the direction of a Majority of the Preference Share Interests, the Preference Share Paying Agent will make either distributions or redemption payments in redemption of all of the Preference Share Interests, in an aggregate amount equal to all of the proceeds from the sale or other disposition of all of the remaining Applicable Collateral less any fees and expenses owed by the Issuer (including the Redemption Price of any Note Interests being simultaneously redeemed), the aggregate amount to be distributed to the Holders of the Preference Share Interests pro rata in accordance with their respective holdings or 69

(ii) at the unanimous direction of the Holders of the Preference Share Interests, the Preference Share Paying Agent will make either distributions or redemption payments in redemption of all or a directed portion (representing less than all) of the Preference Share Interests, (with respect to the Preference Share Interests and each of (i) and (ii), an Optional Redemption). Upon receipt of the written notice directing an Optional Redemption of the Preference Share Interests, the Co-Issuers are required by the Preference Share Documents to redeem the Preference Share Interests in accordance with Redemption Procedures described below. Any Optional Redemption of the Preference Share Interests shall be made at the applicable Redemption Price, subject to certain restrictions under Cayman Islands law. Upon a distribution pursuant to (i) above, the Portfolio Manager will (subject to the standard of care specified in the Management Agreement), on behalf of the Issuer (and subject to (ii) above), direct the sale of all remaining Collateral Obligations. Upon a distribution pursuant to (ii) above, the Portfolio Manager will effect the sale of Collateral Obligations in accordance with the unanimous direction of the Holders of the Preference Share Interests. Redemption Procedures. Notice of a redemption will be given by first class mail, postage prepaid, mailed not later than 30 days and not earlier than 60 days before the applicable Redemption Date, to (i) each Holder of Note Interests or Class 6 Components to be redeemed at the Holders address in the Indenture Register or otherwise in accordance with the rules and procedure of the Depository, Euroclear and Clearstream, as applicable, (ii) to the Preference Share Paying Agent (for forwarding to the Holders of any Preference Share Interests to be redeemed), and (iii) in the case of an Optional Redemption of the Note Interests or Class 6 Components, to each Rating Agency. In addition, for so long as any Securities are listed on the Irish Stock Exchange and so long as the rules of the exchange so require, notice of and Optional Redemption of Securities shall also be given to the Company Announcements Office of the Irish Stock Exchange. Notice of redemption having been given as provided above, the Note Interests to be redeemed shall, on the Redemption Date, become payable at the Redemption Price and from and after the Redemption Date (unless a default is made in the payment of the Redemption Price) the Note Interests (or the portion thereof to be redeemed) shall cease to bear interest. For the avoidance of doubt, the preceding sentence shall not limit the right of the Composite Securityholders to receive distributions with respect to the Preference Share Components, if applicable, after the Redemption Date. Upon final payment on a Note to be redeemed, the Holder must surrender the Note at the place specified in the notice of redemption to receive the applicable Redemption Price unless the Holder provides an undertaking to surrender the Note thereafter. Presentment only (but not surrender) shall be required in the case of a Composite Security if the right of the Holder of that Composite Security to receive distributions with respect to the Preference Share Components shall continue to be applicable after the Redemption Date. No Note Interests may be optionally redeemed unless either of the following conditions are satisfied: (i) at least ten Business Days before the Redemption Date, the Portfolio Manager shall have furnished to the Trustee evidence (in form reasonably satisfactory to the Trustee) that the Issuer has entered into binding agreements (with a financial or other institution or entity whose short-term unsecured debt obligations (other than obligations whose rating is based on the credit of a person other than the institution) have a credit rating of at least A-1 from S&P and of P-1 (and not on credit watch for possible downgrade) from Moodys (or to any other institution or entity if the Rating Condition with respect to Moodys is satisfied with respect to the other entity)) to sell to the financial or other institutions, not later than the Business Day before the Redemption Date in immediately available funds, all or part of the Applicable Collateral (directly or by participation or other arrangement) at a Purchase Price at least equal to an amount sufficient (together with any cash and other Eligible Investments not subject to the agreements and maturing on or before the Redemption Date and any payments to be received with respect to the Hedge Agreements on or before the Redemption Date) to pay all administrative and other fees and expenses payable under the Priority of Payments without regard to any payment limitations (including the Senior Management Fee and the Subordinated Management Fee), all 70

amounts owing under the Hedge Agreements to the Hedge Counterparties and to redeem the Note Interests on the Redemption Date at the applicable Redemption Prices; or (ii) before entering into any binding agreement to sell all or a portion of the Applicable Collateral and selling or terminating any Hedge Agreement, the Portfolio Manager shall have certified that, in its judgment, the settlement dates of the sales will be scheduled to occur on or before the Business Day before the Redemption Date and that the expected proceeds from the sales are to be delivered to the Trustee no later than the Business Day before the Redemption Date, in immediately available funds, in an amount (calculated as applicable in the manner provided below) sufficient (together with any cash and other Eligible Investments not subject to the agreements and maturing on or before the Redemption Date and any payments to be received with respect to the Hedge Agreements on or before the Redemption Date) to pay all administrative and other fees and expenses payable under the Priority of Payments (including the Senior Management Fee and the Subordinated Management Fee), all amounts owing under the Hedge Agreements to the Hedge Counterparties, and to redeem the Note Interests on the Redemption Date at the applicable Redemption Prices. For purposes of this paragraph, the amount shall be calculated with respect to the classes of Applicable Collateral listed in the table below by multiplying the expected proceeds of sale of the Applicable Collateral by the indicated percentage in the table below. Number of Business Days Between Certification to the Trustee and Sale Same Day 1 to 2 3 to 5 6 to 15 100% 100% 100% 100% 100% 93% 92% 88%

Cash or other Eligible Investments Loans (other than 5 below) High-Yield Bonds (other than 5 below) and Structured Finance Obligations (in each case, other than 4 below) 100% 89% 85% 75% 4. High-Yield Bonds (other than 5 below) and Structured Finance Obligations, in each case with a Moodys Rating of B3 and on credit watch with negative implications or below B3 100% 75% 65% 45% 5. Synthetic Securities 100% 65% 55% 35% Any certification delivered by the Portfolio Manager shall include (A) the prices of, and expected proceeds from, the sale of any Collateral Obligations, Eligible Investments, or Hedge Agreements and (B) all calculations required by the Indenture. Any notice of redemption may be withdrawn by the Issuer up to the fourth Business Day before the scheduled Redemption Date by written notice to the Trustee and the Portfolio Manager only if (i) in the case of an Optional Redemption of Note Interests, the Portfolio Manager does not deliver the sale agreement or certifications required under the Indenture in form satisfactory to the Trustee, (ii) in the case of an Optional Redemption in whole of either the Note Interests or Preference Share Interests as described above in Optional RedemptionNote Interests and clause (i) on Optional RedemptionPreference Share Interests, the Issuer receives the written direction of a Majority of the Preference Share Interests to withdraw the notice of redemption, and (iii) in the case of an Optional Redemption of Preference Share Interests as described in clause (ii) of Optional RedemptionPreference Share Interests , the Issuer receives the unanimous written direction of the Holders of the Preference Share Interests to withdraw the notice of redemption. Notice of withdrawal shall be sent, not later than the third Business Day before the scheduled Redemption Date, by the Trustee or the Preference Share Paying Agent, as the case may be, to each Holder of Securities scheduled to be redeemed at the Holders address in the Indenture Register or the Share Register, as the case may be, by overnight courier guaranteeing next day delivery (or, to the extent the address contained in the Indenture Register is not sufficient for that purpose, by first class mail). If the Issuer withdraws any notice of redemption or is 71

1. 2. 3.

otherwise unable to complete any redemption of the Note Interests or Preference Share Interests, the sale proceeds received from the sale of any Collateral Obligations sold in accordance with the Indenture may, during the Reinvestment Period at the Portfolio Managers discretion, be reinvested in accordance with the Eligibility Criteria. Notice of redemption shall be given by the Co-Issuers or by the Trustee in the name and at the expense of the Co-Issuers. Failure to give notice of redemption, or any defect therein, to any Holder of any Security selected for redemption shall not impair or affect the validity of the redemption of any other Securities. Special Redemption of Note Interests If the Portfolio Manager Does Not Identify Investments as Contemplated by the Indenture Principal payments on the Note Interests shall be made in whole or in part, at par without payment of any Redemption Premium, in accordance with the Priority of Payments if, at any time during the Reinvestment Period, the Portfolio Manager elects (subject to the Management Agreement) to notify the Trustee and each Rating Agency that it has been unable, for 45 consecutive Business Days, to identify additional Collateral Obligations that are deemed appropriate by the Portfolio Manager in its sole discretion and meet the Eligibility Criteria in sufficient amounts to permit the investment or reinvestment of all or a portion of the funds then in the Collection Account available to be invested in additional Collateral Obligations (a Special Redemption). On the first Payment Date following the Due Period for which the notice is effective (a Special Redemption Date), the funds in the Collection Account or the Payment Account representing Principal Proceeds which cannot be reinvested in additional Collateral Obligations (the Special Redemption Amount) will be available to be applied in accordance with Application of FundsApplication of Principal Proceeds to the extent of available Principal Proceeds. Notice of payment of a Special Redemption Amount shall be given by first-class mail, postage prepaid, mailed not later than three Business Days before the applicable Special Redemption Date, to each Holder of Note Interests to be redeemed, at the Holders address in the Indenture Register or otherwise in accordance with the rules and procedures of the Depository. In addition, for so long as any Securities are listed on the Irish Stock Exchange and so long as the rules of the exchange so require, notice of a Special Redemption of Securities shall also be given to the Company Announcements Office of the Irish Stock Exchange. In connection with a Special Redemption, the principal of the Note Interests will be paid from Principal Proceeds in an aggregate amount equal to the Special Redemption Amount (first to any Class A Note Interests to be redeemed, then to any Class B Note Interests to be redeemed, then to any Class C Note Interests to be redeemed, and then to any Class D Note Interests to be redeemed, in each case until paid in full) in accordance with the Priority of Payments. See Application of FundsApplication of Principal Proceeds. Mandatory Redemption of the Note Interests General In the event of a Rating Confirmation Failure or a failure to meet any Coverage Test, a mandatory redemption of one or more Classes of Note Interests in whole or in part will be required. Any Mandatory Redemption could result in an elimination, deferral or reduction in interest or principal payments to one or more Classes of Securities, which would adversely affect the returns to the Holders of the Class or Classes of Securities. See Risk FactorsRelating to the SecuritiesThe Indenture Requires Mandatory Redemption of the Note Interests for Failure to Satisfy Coverage Tests and The Indenture Requires Mandatory Redemption of the Note Interests Upon Rating Confirmation Failure. Mandatory Redemption of the Note Interests for Failure to Satisfy Coverage Tests Except with respect to payments made pursuant to an Optional Redemption or a redemption made in connection with a Tax Event as described under Optional Redemption, on any Payment Date with respect to which any Coverage Test (as described under Coverage Tests) is not met on the related Payment Date, principal payments on the Note Interests will be made as described under Application of Funds.

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Mandatory Redemption of the Note Interests Upon Rating Confirmation Failure Upon the event of a Rating Confirmation Failure, all Interest Proceeds remaining after payment of amounts referred to in clauses (1) through (12) of Application of FundsApplication of Interest Proceeds will be used to pay principal of the Class A Note Interests, the Class B Note Interests, the Class C Note Interests, and the Class D Note Interests sequentially in order of their priority on the next Payment Date and each Payment Date thereafter until the original ratings are confirmed. If necessary, after the foregoing payments are made out of Interest Proceeds, Principal Proceeds in accordance with clause (4) of Application of FundsApplication of Principal Proceeds will be used to pay principal of each Class of the Note Interests sequentially in order of their priority on each Payment Date until the original ratings are confirmed. Upon receipt of notice of a Rating Confirmation Failure and if available Interest Proceeds and Principal Proceeds are insufficient to effect the redemption of the Note Interests at par on any subsequent Payment Date in accordance with the Priority of Payments as and to the extent necessary for each of Moodys and S&P to confirm in writing the ratings assigned by it on the Closing Date to the Securities, at the direction of the Portfolio Manager the Trustee shall sell Collateral Obligations so that the proceeds from the sale and all other funds available for the purpose in the Collection Account will be at least sufficient to redeem the Securities (to the extent necessary for each of Moodys and S&P to confirm in writing the ratings assigned by it on the Closing Date to the Securities) and to pay all administrative and other fees, expenses, and obligations payable under the Priority of Payments. Any sale under this Section shall be conducted in such a manner that (i) after giving effect to the sale each Overcollateralization Test is satisfied or, if any Overcollateralization Test is not satisfied, the extent of compliance with the Overcollateralization Test is not reduced, (ii) if the sale occurs on or after the third Payment Date, after giving effect to the sale each Interest Coverage Test is satisfied or, if any Interest Coverage Test is not satisfied, the extent of compliance with the Interest Coverage Test is not reduced, and (iii) after giving effect to the sale each Collateral Quality Test is satisfied or, if any Collateral Quality Test is not satisfied, the extent of compliance with the Collateral Quality Test is not reduced. Redemption of the Preference Share Interests in Connection with Mandatory Redemption of the Note Interests The Preference Share Interests are not subject to Mandatory Redemption or redemption for any reason or upon the occurrence of any event. However, the Preference Share Interests will be redeemed in whole in accordance with the Priority of Payments on any Payment Date on which a Mandatory Redemption of the Note Interests results in the payment in full of the Aggregate Outstanding Amount of each Class of Note Interests. Certain Limitations on Distributions on the Preference Shares Under Cayman Islands law, the Issuer must have sufficient distributable profits or share premium (being the difference between the par value of the Preference Shares and their issue price) out of which to make any distribution of dividends on the Preference Shares. Also, the Issuer must be and remain solvent following any distributions of dividends or final redemption distribution on the Preference Shares (which in this context means the Issuer is able to pay its debts as they become due in the ordinary course of its business). Under the laws of the Cayman Islands, the jurisdiction in which the Issuer is incorporated, the Preference Shares constitute part of the share capital of the Issuer and, as such, their entitlement is limited to the Applicable Collateral and any other assets remaining after payment of all of the liabilities of the Co-Issuers that are senior to them pursuant to the Preference Share Paying and Transfer Agency Agreement, the Indenture, and the laws of the Cayman Islands. Accordingly, to the extent that the proceeds from the Collateral Obligations, Eligible Investments, other Applicable Collateral, and any other assets of the Issuer are not sufficient to pay dividends on the Preference Shares on any Payment Date or any final redemption distribution on the Preference Shares on the Preference Share 73

Interests Redemption Date after the payment of all liabilities of the Co-Issuers ranking senior thereto, the Issuer will have no obligation to pay the deficiency in respect of the Preference Shares. The Preference Shares will represent equity interests in the Issuer and will not be secured by the Collateral Obligations or any other assets. The distribution of the Preference Share Redemption Price on the Preference Share Interests Redemption Date will be subject to the Issuer being solvent under Cayman Islands law immediately before, and after giving effect to, the distribution, as described above. For purposes of distribution of the Preference Share Redemption Price, a determination as to whether the Issuer is solvent will be made (A) after giving effect to all payments to be made on the Preference Share Interests Redemption Date and (B) in light of the fact that the obligations of the Issuer to the Holders of the Notes, the Portfolio Manager, the Hedge Counterparties and the other persons subject to the Priority of Payments are limited in recourse to the Applicable Collateral, and are not secured by amounts on deposit in the Preference Shares Distribution Account or investment earnings on the amounts, and that after the Applicable Collateral is exhausted, the parties will have no further claim against the Issuer. If the Issuer, or the Administrator on behalf of the Issuer, notifies the Preference Share Paying Agent that the solvency requirement is not satisfied on the Preference Share Interests Redemption Date with respect to any portion of the Preference Share Redemption Price, that portion will not be distributed to the Preference Shares until the next Business Day (or as soon after that as reasonably practical) on which the Preference Share Paying Agent has received notification from the Issuer, or the Administrator on behalf of the Issuer, that the requirement is satisfied. Any amounts so retained in the Preference Shares Distribution Account and investment earnings thereon will be held for the benefit of the Holders of the Preference Shares in accordance with the Preference Share Paying and Transfer Agency Agreement until the time that the requirement is satisfied. The Indenture contains certain provisions that are intended to reduce certain potential effects of the differences in form between the two types of Preference Share Interests, one of which is the Composite Securities, which are partially secured under the Indenture, and the other of which is the Preference Shares, which are not secured. See Certain Provisions Applicable to the Composite Securityholders and Preference Shareholders. The application of Interest Proceeds and Principal Proceeds to pay dividends on each Payment Date and any final distribution on the Preference Shares on the Preference Share Interests Redemption Date will be subject to certain legal restrictions under the laws of the Cayman Islands. In particular, the laws of the Cayman Islands permit dividends and any final distribution to be paid on the Preference Shares only to the extent that the Issuer has sufficient Share Surplus. Under Cayman Islands law as currently in effect: Share surplus is the sum of share premium and distributable profits. Share premium is an amount equal to the excess of the aggregate proceeds to the Issuer of the offering of the Preference Shares after giving effect to any underwriting discounts, but without taking into account any fees and expenses of the Issuer relating to the offering, over the aggregate par value of the Preference Shares, minus

the aggregate of any reductions made to the excess on account of any distributions previously made from share premium to the Holders of the Preference Shares by the Issuer.

Distributable profits is the amount (other than share premium) then available to pay dividends or any final distribution on the Preference Shares in accordance with the Priority of Payments and the laws of the Cayman Islands. In addition, the laws of the Cayman Islands only permit dividends and any final distribution to be paid on the Preference Shares if the Issuer is solvent on the applicable Payment Date or Preference Share Interests Redemption Date, as applicable, and will not be made insolvent as a result of the payment of the dividends or final 74

distribution. Under Cayman Islands law, a company is generally deemed to be solvent if it is able to pay its debts as they become due in the ordinary course of business. If the Issuer, or the Administrator on behalf of the Issuer, notifies the Preference Share Paying Agent that the Issuer is not solvent as of any Payment Date for purposes of Cayman Islands law or does not have sufficient share surplus determined under Cayman Islands law as of any Payment Date, no dividends will be payable on the Preference Shares until the Issuer, or the Administrator on behalf of the Issuer, has notified the Preference Share Paying Agent that the Issuer is solvent for purposes of Cayman Islands law and has sufficient share surplus. However, funds on deposit in the Preference Shares Distribution Account are not subject to the security interest granted to the Trustee on behalf of the holders of the Secured Obligations and, once deposited in the Preference Shares Distribution Account, the funds will not be available to make future payments of interest on or principal of the Notes or other amounts payable by the Co-Issuers that are limited in recourse to the Applicable Collateral. Amounts on deposit in the Preference Shares Distribution Account may be subject to the claims of creditors of the Issuer which have not contractually limited their recourse to the Applicable Collateral. However, the Indenture will limit the Issuers activities to the issuance and sale of the Securities, the acquisition and disposition of the Collateral Obligations and Eligible Investments, and the other related activities described under The CoIssuersGeneral. The Issuer, therefore, does not expect to have any significant full recourse liabilities that would be payable out of amounts on deposit in the Preference Shares Distribution Account. Events of Default An Event of Default is defined in the Indenture as being any one of the following events: (a) a default for five Business Days in the payment of any interest on any Class of Note Interests that is currently part of the Controlling Class when it becomes payable; (b) a default in the payment of principal of any Note Interest or any Redemption Premium, or any distribution with respect to the Class 6 Component under Application of FundsClass 6 Component Distributions when it becomes payable, at its Stated Maturity or on the Redemption Date; (c) the failure on any Payment Date to disburse amounts available in the Payment Account in accordance with the order of priority stated above under Application of Funds, and the failure continues for 3 Business Days; (d) on any Measurement Date, the failure to cause the Overcollateralization Ratio Numerator to be at least 102% of the Aggregate Outstanding Amount of the Class A Note Interests; (e) either of the Co-Issuers or the pool of Applicable Collateral becomes an investment company under the Investment Company Act and that status continues for 45 days; (f) breach of any other covenant or other agreement of the Issuer or the Co-Issuer under the Indenture (other than any failure to satisfy any of the Collateral Quality Tests, any of the Concentration Limitations, any of the Coverage Tests, the Class D Reinvestment Overcollateralization Test, or other covenants or agreements for which a specific remedy has been provided under the Indenture), or the failure of any representation or warranty of the Issuer or the Co-Issuer made in the Indenture, in any certificate or other writing delivered pursuant to the Indenture, or in connection with the Indenture, to be correct in any material respect when made, and the breach or failure continues for 30 days after either of the Co-Issuers has actual knowledge of it or after notice to the Issuer, the Co-Issuer, and the Portfolio Manager by the Trustee or to the Issuer, the Co-Issuer, the Portfolio Manager, and the Trustee by the Holders of at least 25% of the Aggregate Outstanding Amount of the Controlling Class by registered or certified mail or overnight courier specifying the breach or failure and requiring it to be remedied and stating that the notice is a Notice of Default under the Indenture; (g) certain events of bankruptcy, insolvency, liquidation, receivership or reorganization of either the Issuer or the Co-Issuer; or 75

(h) one or more final judgments is rendered against the Issuer or the Co-Issuer that exceed in the aggregate U.S.$2,000,000 (or any lesser amount specified by any Rating Agency) and that remain unstayed, undischarged, and unsatisfied for 30 days after the judgments become nonappealable, unless adequate funds have been reserved or set aside for their payment, and unless (except as otherwise specified in writing by each Rating Agency) the Rating Condition with respect to each Rating Agency is satisfied with respect thereon. If an Event of Default is continuing (other than an Event of Default described in clauses (g) or (h) under Events of Default above), the Trustee may, and upon the written direction of a Majority of the Controlling Class, shall, declare the principal of all the Note Interests to be immediately payable by notice to the Applicable Issuers, and upon the declaration the unpaid principal of all the Note Interests, together with all its accrued and unpaid interest (and any applicable interest on any Defaulted Interest at the relevant per annum interest rates equal to the Note Interest Rates payable on the Note Interests of the relevant Class for the relevant periods), and other amounts payable under the Indenture, shall become immediately payable. The Reinvestment Period will terminate upon a declaration of acceleration. If an Event of Default described in clauses (g) or (h) above under Events of Default occurs, an acceleration will occur automatically and without any declaration or other act on the part of the Trustee or any Noteholder and the Reinvestment Period shall terminate automatically. If an Event of Default occurs with respect to the Class 6 Component, the Note Interests are declared immediately payable, a Majority of the Holders of the Class 6 Composite Securities may declare the Class 6 Component immediately payable by notice to the Issuer, and the Class 6 Rated Balance shall become immediately payable. Payment of the Class 6 Rated Balance when made shall be made to the Holders of Class 6 Components as a distribution in kind of a pro rata share (based on the Class 6 Rated Balance) of each item of the Class 6 Collateral. If the Issuer defaults in the payment of any interest or principal of Notes of any Class other than the Controlling Class, neither the Trustee nor the Holders of a Majority of the Controlling Class nor any other Holders may declare the interest or principal to be immediately payable. Any declaration of acceleration may under certain circumstances be rescinded by the Holders of at least a Majority of the Controlling Class. At any time after the declaration of acceleration of maturity has been made as described above and before a judgment or decree for payment of the money due has been obtained by the Trustee, a Majority of the Controlling Class or a Majority of the Holders of the Class 6 Component, as applicable, by written notice to the Issuer and the Trustee, may rescind the declaration and its consequences if: the Issuer or the Co-Issuer has paid or deposited with the Trustee a sum sufficient to pay: all unpaid installments of interest and principal on the Note Interests then due or all distributions with respect to the Class 6 Component under Application of FundsClass 6 Component Distributions (other than as a result of the acceleration); to the extent that payment of the interest is lawful, interest on any Deferred Interest and Defaulted Interest at the applicable Note Interest Rates or Default Interest Rate, as applicable; all Administrative Expenses of the Co-Issuers and other sums paid or advanced by the Trustee under the Indenture; and all amounts then payable to any Hedge Counterparty; or

the Trustee has determined that all Events of Default, other than the nonpayment of the interest on or principal of the Note Interests or nonpayment of distributions with respect to the Class 6 Component under Application of FundsClass 6 Component Distributions that have become due solely by the acceleration, have (A) been cured, and a Majority of the Controlling Class or a Majority of the Holders of the Class 6 Component by written notice to the Trustee has agreed with that determination (which agreement shall not be unreasonably withheld), or (B) been waived as provided in the Indenture. No rescission shall affect any subsequent default or impair any right resulting from the default.

If an Event of Default is continuing, the Trustee will retain the Class 6 Collateral intact, collect, and cause the collection of the proceeds of the Class 6 Collateral and make and apply all payments and deposits and maintain all accounts in respect of the Class 6 Collateral and the Class 6 Components in accordance with Application of FundsClass 6 Component Distributions and the Indenture and will not sell the Class 6 Collateral in any circumstances unless so directed by all of the Holders of the Class 6 Components. If an Event of Default is 76

continuing, the Trustee will retain the Collateral intact, collect, and cause the collection of the proceeds of the Collateral and make and apply all payments and deposits and maintain all accounts in respect of the Collateral and the Note Interests and any Hedge Agreements (other than any amounts received under a Hedge Agreement that are used in putting a replacement hedge in place) in the manner described under Application of Funds unless either: (i) the Trustee determines in consultation with the Portfolio Manager in accordance with the Indenture that the anticipated net proceeds of a sale or liquidation of the Applicable Collateral would (after deduction of the reasonable expenses of the sale or liquidation) be sufficient to pay in full the amounts then due and unpaid on the Note Interests for principal and interest (including Defaulted Interest and Deferred Interest and any interest on the Defaulted Interest and Deferred Interest) and all other amounts payable under clauses (1) to (14) under Application of FundsApplication of Interest Proceeds and a Majority of the Controlling Class agree with that determination; or (ii) the Holders of at least than 66-2/3% of the Aggregate Outstanding Amount of each of (A) the Class A Note Interests (voting as a single Class), the Class B Note Interests (voting as a single Class), (C) the Class C Note Interests (voting as a single Class), and the Class D Note Interests (voting as a single Class) direct, subject to the provisions of the Indenture the sale and liquidation of the Applicable Collateral. Before any sale of Collateral Obligations, the Trustee will be required to offer the Portfolio Manager or an Affiliate of the Portfolio Manager (so long as the offeree, or an Affiliate of the offeree that guarantees the obligations of the offeree, has a short-term unsecured debt rating of P-1 (and not on credit watch for possible downgrade) from Moodys and at least A-1+ from S&P) the right to purchase the Collateral Obligations at a price equal to the higher bid price received by the Trustee in accordance with the provisions of the Indenture. During the continuance of an Event of Default, a Majority of the Controlling Class with respect to the Note Interests or all of the Holders of the Class 6 Components with respect to the Class 6 Components may institute and direct the Trustee in the conduct of any proceedings for any remedy available to the Trustee or for the exercise of any right of the Trustee under the Indenture if the direction does not conflict with any rule of law or with any express provision of the Indenture and the Trustee has been indemnified to its reasonable satisfaction. Any direction to the Trustee to undertake a sale of the Applicable Collateral shall be by the Holders of Note Interests representing the requisite percentage of the Aggregate Outstanding Amount of the Note Interests specified in the Indenture or by a Majority of the Holders of the Class 6 Component. The Trustee need not take any action that it determines might involve it in liability unless it has received an indemnity against the liability. A Majority of the Controlling Class may on behalf of the Holders of all the Note Interests and all of the Holders of the Class 6 Components may on behalf of the Holders of the Class 6 Components, before the time a judgment or decree for the payment of money due has been obtained by the Trustee, waive any past Event of Default or event that, with notice or the lapse of time or both, would become an Event of Default and its consequences, except such a default in the payment of principal or Redemption Premium of any Note Interest or the Class 6 Component, as the case may be, or in the payment of interest (including Defaulted Interest, Deferred Interest, and any interest on Defaulted Interest or Deferred Interest) on the Note Interests, with respect to a provision of the Indenture that cannot be modified or amended without the waiver or consent of the Holder of each outstanding Note Interest or the Class 6 Component, as the case may be, adversely affected by the modification or amendment, or arising as a result of an Event of Default described in clauses (g) or (h) under Events of Default.

No Holder of a Note Interest or a Class 6 Component may institute any proceeding with respect to the Indenture, or for the appointment of a receiver or trustee, or for any other remedy under the Indenture, unless the Holder previously has given to the Trustee written notice of an Event of Default,

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the Holders of not less than 25% of the Aggregate Outstanding Amount of the Controlling Class or, in the case of the Class 6 Component, of the Class 6 Composite Securities shall have made written request to the Trustee to institute Proceedings with respect to the Event of Default in its own name as Trustee under the Indenture and the Holders have offered to the Trustee reasonable indemnity against the expenses and liabilities to be incurred in compliance with the request; the Trustee has for 30 or more days after its receipt of the notice, request and offer of indemnity failed to institute any proceeding, and no direction inconsistent with the written request has been given to the Trustee during the 30 day period by a Majority of the Controlling Class or, in the case of the Class 6 Component, of the Class 6 Composite Securities.

If the Trustee receives conflicting or inconsistent requests and indemnity from two or more groups of Holders of the Controlling Class or, in the case of the Class 6 Component, of the Class 6 Composite Securities, each representing less than a Majority of the Controlling Class or, in the case of the Class 6 Component, of the Class 6 Composite Securities, the Trustee in its sole discretion may determine what action shall be taken, notwithstanding any other provisions of the Indenture. In determining whether the Holders of the requisite Aggregate Outstanding Amount of the Note Interests or Preference Share Interests have given any request, demand, authorization, direction, notice, consent, or waiver under the Indenture, the Holders of Composite Securities shall be entitled to voting rights in respect of their Note Components in the proportion that the Aggregate Outstanding Amount of their Components bear to the Aggregate Outstanding Amount of the Note Interests and (B) in respect of their Preference Share Components in the proportion that the aggregate number of their Preference Share Components bear to the aggregate number of Preference Share Interests, and shall not have voting rights as a separate Class except to the extent otherwise expressly provided in the Indenture and Note Interests and Preference Share Interests owned or beneficially owned by the Issuer, the Co-Issuer, any Affiliate of either of them, and (only (x) with respect to any matter affecting its status as Portfolio Manager, or (y) in any matter with respect to an acceleration of any Class of Note Interests if the effect of the Portfolio Managers action or inaction as a Holder of Note Interests would effectively prevent acceleration) the Portfolio Manager and its Affiliates shall be disregarded and not be outstanding, except that, in determining whether the Trustee shall be protected in relying on any request, demand, authorization, direction, notice, consent, or waiver, only Note Interests or Preference Share Interests that the Trustee knows to be so owned or beneficially owned shall be so disregarded. Notes, Composite Securities, or Preference Shares so owned or beneficially owned that have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgees right so to act with respect to the Notes, Composite Securities, or Preference Shares and that the pledgee is not the Issuer, the Co-Issuer, or any Affiliate of the Issuer or the Co-Issuer. (A)

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Supplemental Indentures Without Consent of Holders Without the consent of the Holders of any Securities or any Preference Shares, but with the consent of the parties the consent of which is required as described in the following paragraph, the Co-Issuers, in each instance when authorized by resolutions of the respective Boards of Directors, and the Trustee, at any time and from time to time subject to the requirement provided below with respect to receipt of a Rating Agency Confirmation, may enter into one or more indentures supplemental to the Indenture, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another person to the Issuer or the Co-Issuer and the assumption by the successor person of the obligations of the Issuer or the Co-Issuer under the Indenture and in the Securities; (2) to evidence the addition of an additional issuer or of a wholly owned subsidiary of the Issuer that, in either case, will acquire securities from the Issuer and pledge its assets to secure the obligations of the Issuer secured by the Applicable Collateral, to the extent necessary to permit the Issuer to comply with the Bank Holding Company Act of 1956 and the rules and regulations thereunder or any other statute, rule, or regulation applicable to the Issuer, and the assumption by the additional issuer or subsidiary of the obligations of the Issuer in the Indenture and in the Securities; (3) to add to the covenants of the Co-Issuers or the Trustee for the benefit of the Holders of the Notes or the Composite Securities or to surrender any right in the Indenture conferred on the Co-Issuers; (4) to convey, transfer, assign, mortgage, or pledge any property to the Trustee, or add to the conditions, limitations, or restrictions on the authorized amount, terms, and purposes of the issue, authentication, and delivery of the Notes and the Composite Securities; (5) to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee and to add to or change any of the provisions of the Indenture necessary to facilitate the administration of the trusts under the Indenture by more than one Trustee, pursuant to the requirements of the Indenture; (6) to correct or amplify the description of any property at any time subject to the lien of the Indenture, or to better assure, convey, and confirm to the Trustee any property subject or required to be subject to the lien of the Indenture (including all actions appropriate as a result of changes in law) or to subject to the lien of the Indenture any additional property; (7) to modify the restrictions on and procedures for resales and other transfers of the Notes and the Composite Securities to reflect any changes in applicable law (or its interpretation) or to enable the Co-Issuers to rely on any less restrictive exemption from registration under the Securities Act or the Investment Company Act or to remove restrictions on resale and transfer to the extent not required under the Indenture; (8) with the consent of, and upon certification to the Trustee and the Co-Issuers in writing from, the Portfolio Manager, to modify the restrictions on the sales of Collateral Obligations described in Security for the Notes and the Composite SecuritiesDispositions of Collateral Obligations or the Eligibility Criteria described in Security for the Notes and the Composite SecuritiesEligibility Criteria (and the related definitions) in a manner not materially adverse to Holders of any Class of Securities, as evidenced by an opinion of counsel (which may be supported as to factual (including financial and capital markets) matters by any relevant certificates and other documents necessary or advisable in the judgment of counsel delivering the opinion) or a certificate of an officer of the Portfolio Manager, to the effect that the modification would not be materially adverse to the Holders of any Class of the Notes or Composite Securities; (9) to conform the Indenture to this Offering Memorandum; (10) to make appropriate changes for the Notes and the Composite Securities to be listed on an exchange other than the Irish Stock Exchange;

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(11) to otherwise correct any inconsistency or cure any ambiguity or errors in the Indenture; (12) to accommodate the issuance of the Notes in book-entry form through the facilities of the Depository or otherwise; (13) to take any appropriate action to prevent the Issuer, the Holders of Securities, or the Trustee from becoming subject to withholding or other taxes, fees, or assessments or to prevent the Issuer from being treated as being engaged in a U.S. trade or business or otherwise being subject to U.S. federal, state, or local income tax on a net income basis, so long as the action will not cause the Holders of any Notes or Composite Securities to be adversely affected to any material extent by any change to the timing, character, or source of the income from the Notes or Composite Securities; (14) to authorize the appointment of any listing agent, transfer agent, paying agent, or additional registrar for any Class of Notes appropriate in connection with the listing of any Notes or Composite Securities on the Irish Stock Exchange or any other stock exchange, and otherwise to amend the Indenture to incorporate any changes required or requested by any governmental authority, stock exchange authority, listing agent, transfer agent, paying agent, or additional registrar for any Class of Notes or Composite Securities in connection with its appointment, so long as the supplemental indenture would not materially and adversely affect any Holder of Notes or Composite Securities or any Holder of Preference Shares; (15) to evidence and provide for any additional issuance of Notes or Composite Securities in accordance with the Indenture during the Reinvestment Period; (16) to amend, modify, enter into, or accommodate the execution of any contract relating to a Synthetic Security (including posting collateral under a Synthetic Security Agreement); (17) to modify the representations as to Applicable Collateral in Section 3.4 of the Indenture in order that it may be consistent with applicable laws or Rating Agency requirements; (18) to evidence any waiver by any Rating Agency as to any requirement or condition, as applicable, of the Rating Agency in the Indenture; (19) to facilitate the issuance of participation notes, combination notes, composite securities, and other similar securities; (20) to facilitate hedging transactions; (21) to facilitate the ability of the Issuer to lend collateral pursuant to a Securities Lending Agreement; (22) to make any changes necessary to permit the Issuer to use Interest Proceeds remaining after payment of amounts referred to in clauses (1) to (23) under Application of FundsApplication of Interest Proceeds to purchase Notes in the order of their seniority at a discount to satisfy the Coverage Tests; (23) to modify any provision to facilitate an exchange of one security for another security of the same issuers that has substantially identical terms except transfer restrictions, including to effect any serial designation relating to the exchange; or (24) with the consent of, and upon certification in writing from, the Portfolio Manager, to enter into any additional agreements not expressly prohibited by the Indenture as well as any amendment, modification, or waiver if the Issuer determines that the amendment, modification, or waiver would not, upon or after becoming effective, materially and adversely affect the rights or interest of Holders of any Class of Securities, as evidenced by an opinion of counsel (which may be supported as to factual (including financial and capital markets) matters by any relevant certificates and other documents necessary or advisable in the judgment of counsel delivering the opinion) or a certificate of an officer of the Portfolio Manager, to the effect that the modification would not be materially adverse to the Holders of any Class of the Securities.

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The Trustee and the Co-Issuers may enter into one or more indentures supplemental to the Indenture to accommodate the issuance of additional Notes and Composite Securities pursuant to and in accordance with the requirements of the Indenture described in Additional Issuance of Securities. No supplemental indenture without the consent of Holders may be entered into if any Class of Notes, Composite Securities, or if the Preference Share Interests would be adversely affected by it. Any amendment described in clause (9) above made solely to conform the Indenture to the final Offering Memorandum provided to investors in connection with the initial Offering of the Notes, the Composite Securities, and the Preference Shares by the Co-Issuers will be deemed not to materially and adversely affect the interests of the Holders of the Securities. The Trustee is authorized to join in the execution of any supplemental indenture and to make any further appropriate agreements and stipulations that may be in the agreements, but the Trustee will not be obligated to enter into any supplemental indenture that affects the Trustees own rights, duties, liabilities, or immunities under the Indenture or otherwise, except to the extent required by law. Unless notified by a Majority of any Class of the Notes and the Composite Securities or of the Preference Share Interests that the Class of Notes or Composite Securities or the Preference Share Interests, as applicable, would be adversely affected, the Trustee may rely on a certificate of the Portfolio Manager and any required opinion of counsel as to whether the interests of any Holder of the Notes or Composite Securities or Preference Share Interests would be adversely affected by any such supplemental indenture. The Trustee shall give at least 15 Business Days notice of the proposed change to the Holders of the Notes, the Composite Securities, and Preference Share Interests. If any outstanding Notes or Composite Securities are rated by a Rating Agency, the Trustee shall enter into a supplemental indenture without the consent of Holders only if either (1) the Rating Condition with respect to each Rating Agency is satisfied with respect to the supplemental indenture or (2) the Portfolio Manager and the Holders of 100% in Aggregate Outstanding Amount of each Class of Notes or Class of Composite Securities the ratings on which would be reduced or withdrawn consent to the supplemental indenture. For so long as any Notes and Composite Securities are outstanding and rated by a Rating Agency, the Trustee shall provide to the Rating Agency a copy of any proposed supplemental indenture at least 15 Business Days before its execution by the Trustee. With Consent of Holders If the Rating Condition is satisfied with respect to each Rating Agency, with the consent of (a) the Portfolio Manager, (b) a Majority of each Class of Note Interests (and the Class 6 Component) adversely affected thereby, by Act of the Holders of the Note Interests (treating the Class A Note Interests, Class B Note Interests, Class C Note Interests, and Class D Note Interests in each case together as a single Class for this purpose), (c) a Majority of the Composite Securities adversely affected thereby, by Act of the Holders of the Composite Securities, and (d) a Majority of the Preference Share Interests (if the Preference Share Interests are adversely affected thereby), by written consent of the Holders of the Preference Shares (which consent will be evidenced by an officers certificate of the Issuer certifying that the consent has been obtained), the Trustee and the Co-Issuers may enter into a supplemental indenture to add any provisions to, or change in any manner or eliminate any of the provisions of, the Indenture or modify in any manner the rights of the Holders of the Notes, the Holders of the Composite Securities or the holders of the Preference Share Interests under the Indenture. Any proposed supplemental indenture that would also necessitate a change to the Issuer Charter may only be made after a Preference Share Vote and Special Resolution (as defined in the Issuer Charter) has been passed to permit the Issuers constitutional documents to be altered to conform them to the proposed change to the Indenture. Notwithstanding anything in the Indenture to the contrary, without the consent of the Holder of each outstanding Note Interest or Class 6 Component adversely affected thereby, the Holder of each outstanding Composite Security of each Class adversely affected thereby, and the Holder of each outstanding Preference Share Interest adversely affected thereby (which consent, in the case of the Preference Share Interests, shall be evidenced by an officers certificate of the Issuer certifying that the consent has been obtained), in which case no Rating Condition need be satisfied, no supplemental indenture shall:

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(i) change the Stated Maturity of the principal of or the due date of any installment of interest on any Note Interest or the Class 6 Component, reduce its principal amount or the rate of interest on it, or the Default Interest Rate or the Redemption Price with respect to any Note Interest or the Class 6 Component, or change the earliest date on which Note Interests of any Class or the Class 6 Component may be redeemed at the option of the Issuer, change the provisions of the Indenture relating to the application of proceeds of any Applicable Collateral to the payment of principal of, Redemption Premium or interest on Note Interests; the application of proceeds of any Applicable Collateral to the distributions with respect to the Class 6 Component interests; or to payments to the Preference Share Paying Agent, or change any place where, or the coin or currency in which, Note Interests and the Class 6 Component or their principal or interest or Redemption Premium on them is payable, or impair the right to institute suit for the enforcement of any such payment on or after their Stated Maturity (or, in the case of redemption, on or after the applicable Redemption Date); (ii) reduce the percentage of the Aggregate Outstanding Amount of Holders of Note Interests of each Class, of the Class 6 Component, or of Composite Securities or of the Preference Shares whose consent is required for the authorization of any such supplemental indenture or for any waiver of compliance with certain provisions of the Indenture or certain defaults under the Indenture or their consequences provided for in the Indenture; (iii) impair or adversely affect the Applicable Collateral except as otherwise permitted in the Indenture; (iv) permit the creation of any lien ranking prior to or on a parity with the lien of the Indenture with respect to any part of the Applicable Collateral or terminate the lien on any property at any time subject hereto or deprive the Holder of any Security of the security afforded by the lien of the Indenture; (v) reduce the percentage of the Aggregate Outstanding Amount of Holders of Note Interests of each Class or the Class 6 Composite Securities, as applicable, whose consent is required to request the Trustee to preserve the Applicable Collateral or rescind the Trustees election to preserve the Applicable Collateral pursuant to the Indenture or to sell or liquidate the Applicable Collateral pursuant to the Indenture; (vi) modify any of the provisions of the Indenture with respect to supplemental indentures, except to increase the percentage of outstanding Note Interests, Class 6 Component, Composite Securities, Preference Shares, or Preference Share Interests the consent of the Holders of which is required for any such action or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note, Note Interest, Class 6 Component, Composite Security, Preference Share, or Preference Share Interest affected thereby; (vii) modify the definition of Outstanding, Controlling Class, Majority, or the Priority of Payments in the Indenture; or (viii) modify any of the provisions of the Indenture in such a manner as to affect the calculation of the amount of any payment of Redemption Price or of interest or principal on any Note Interest or the Class 6 Component or any payments made to the Preference Share Paying Agent in respect of the Preference Share Interests on any Payment Date or to affect the rights of the Holders of Note Interests or the Class 6 Component to the benefit of any provisions for the redemption of the Note Interests and the Class 6 Component contained in the Indenture. It shall not be necessary for any Act of Holders of Note Interests, the Class 6 Component, or Securities or any consent of Holders of Preference Share Interests under the above provision to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if the Act or consent approves its substance. At the cost of the Co-Issuers, for so long as any Notes and Composite Securities are outstanding and rated by a Rating Agency, the Trustee will provide to the Rating Agency a copy of any proposed supplemental indenture at least ten Business Days before its execution by the Trustee and a copy of the executed supplemental indenture 82

will be mailed to the Holders of the Notes and Composite Securities, the Preference Share Paying Agent (for forwarding to the Holders of the Preference Share Interests), the Portfolio Manager, and each Rating Agency after its execution. Amendments to the Preference Share Paying and Transfer Agency Agreement The Issuer and the Preference Shares Agent, at any time and from time to time without the consent of any Holders of Preference Share Interests, may enter into one or more amendments, in form satisfactory to the Preference Shares Agent, to prevent the Issuer or the Preference Shares Agent from being subject to withholding or other taxes, fees, or assessments or to prevent the Issuer from being treated as engaged in a trade or business within the United States for United States federal income tax purposes or otherwise subject the Issuer to United States federal, state, or local income or franchise tax on a net income tax basis, or if the modification does not, as evidenced by an opinion of counsel (which may be supported as to factual (including financial and capital markets) matters by any relevant certificates and other documents necessary or advisable in the judgment of counsel delivering the opinion) or a certificate of an officer of the Portfolio Manager, adversely affect in any material respect the interests of any Preference Share Interests, for any of the following purposes: to modify any provision or to remove or modify any legend of any Preference Share to reflect changes in applicable law or regulation relating to restrictions on its transfer or eligibility to hold it or the passage of time such that any such restriction or any limitation on eligibility has ceased to be applicable or to modify any provision to facilitate an exchange of Composite Securities.

Otherwise, the Preference Share Documents may not be amended except by each party in writing (with the consent of a Majority of the Preference Share Interests). Method of Payments Payments of principal and interest on any Note Interest (including any Redemption Price paid on the applicable Redemption Date) and of dividends and any final distribution on any Preference Share Interests will be made to the person in whose name the related Note or Preference Share is registered fifteen days before the applicable Payment Date (the Record Date). Payments will be made (i) in the case of a Global Note, to the Depository or its designee and to the Holder or its nominee with respect to a Certificated Note or a Definitive Note, by wire transfer in immediately available funds to a United States dollar account maintained by the Depository or its nominee with respect to a Global Note and to the Holder or its designee with respect to a Certificated Note or a Definitive Note if the Holder has provided written wiring instructions to the Trustee and, if the payment is to be made by the Irish Paying Agent, the Irish Paying Agent on or before the related Record Date or, (ii) if appropriate wiring instructions are not received by the related Record Date, by check drawn on a U.S. bank mailed to the address of the Holder in the Indenture Register. Final payments of principal of the Note Interests will be made against surrender of the related Notes (or presentment only (but not surrender) in the case of the Composite Securities if the Preference Share Component remains outstanding) at the corporate trust office of the Trustee or at the office of any paying agent. Any final distribution on each Preference Share Interest will be made only against surrender of the certificate representing the Preference Share Interest at the office of the Preference Share Paying Agent. None of the Issuer, the Co-Issuer, the Trustee, the Portfolio Manager, the Initial Purchaser, any paying agent, or any of their respective affiliates will have any responsibility or liability for any aspects of the records maintained by the Depository or its nominee or any of its direct or indirect participants (including Euroclear or Clearstream or any of their respective direct or indirect participants) relating to payments made on account of beneficial interests in a Global Security. The Co-Issuers expect that the Depository or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note held by the Depository or its nominee, will immediately credit participants accounts with payments in amounts proportionate to their respective beneficial interests in the Global Note as shown on the records of the Depository or its nominee. The Co-Issuers also expect that payments by participants (i.e., direct participants) to owners of beneficial interests in a Global Note held through the participants (i.e., indirect participants) will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for the customers. The payments will be the responsibility of the participants. 83

If any Payment on the Securities is due on a day that is not a Business Day, then payment will be made on the next succeeding Business Day with the same force and effect as if made on the date payment was due. For so long as any Securities are listed on the Irish Stock Exchange and the rules of the exchange shall so require, the Issuer and the Co-Issuers, as applicable, will have a paying agent (the Irish Paying Agent) for the Securities in Ireland and payments on the Securities may be effected through the Irish Paying Agent. If the Irish Paying Agent is replaced at any time during the period, notice of the appointment of any replacement will be given to the Company Announcements Office of the Irish Stock Exchange. Determination of LIBOR LIBOR, determined by the Calculation Agent for any Interest Period, means the offered rate, as determined by the Calculation Agent, for three month Dollar deposits that appears on Moneyline Telerate Page 3750 as reported on Bloomberg Financial Markets Commodities News (or a page that replaces Moneyline Telerate Page 3750 for the purpose of displaying comparable rates), as of 11:00 A.M. (London time) on the second Business Day before the first day of the Interest Period. If, on the second Business Day before the first day of any relevant Interest Period, that rate does not appear on Moneyline Telerate Page 3750 as reported on Bloomberg Financial Market Commodities News (or a page that replaces Moneyline Telerate Page 3750 for the purpose of displaying comparable rates), the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks to prime banks in the London interbank market for three month Dollar deposits in Europe, by reference to requests by the Calculation Agent to four major banks in the London interbank market selected by the Calculation Agent (in consultation with the Issuer) (the Reference Banks) for quotations as of approximately 11:00 A.M. (London time) on the second Business Day before the first day of the Interest Period. If at least two of the Reference Banks provide quotations as requested, LIBOR shall equal such arithmetic mean. If fewer than two Reference Banks provide quotations, LIBOR shall be the arithmetic mean of the offered quotations that leading banks in New York City selected by the Calculation Agent (after consultation with the Issuer) are quoting to the principal London offices of leading banks in the London interbank market on the second Business Day before the first day of the relevant Interest Period for three month Dollar deposits. If the Calculation Agent is unable to determine a rate in accordance with any of the above procedures, LIBOR for the Interest Period shall be calculated on the last day of the Interest Period and shall be the arithmetic mean of the rate of interest for each day during the Interest Period determined by the Calculation Agent as being the rate of interest most recently announced by the Bank at its New York office as its base rate, prime rate, reference rate, or similar rate for Dollar loans (or if the Bank ceases to exist or is not quoting a base rate, prime rate, reference rate, or similar rate for Dollar loans, another major money center commercial bank in New York City selected by the Calculation Agent (in consultation with the Issuer)). For the first Interest Period, LIBOR shall be determined based on the actual number of days in the Interest Period using straight-line interpolation of two rates calculated in accordance with the above procedure, except that instead of using three month deposits, one rate shall be determined using the period for which rates are obtainable next shorter than the Interest Period and the other rate shall be determined using the period for which rates are obtainable next longer than the Interest Period. All calculations shall be calculated to at least four decimal places and rounded to four decimal places. As used in this Offering Memorandum: Calculation Agent. For purposes of calculating interest on each Class of Note Interests, the Issuer will initially appoint the Trustee as calculation agent (the Trustee in that capacity, and each successor calculation agent, the Calculation Agent). As soon as possible after 11:00 a.m. (London time) on the second Business Day before the first day of each Interest Period, but in no event later than 11:00 a.m. (London time) on the next Business Day, the Calculation Agent will calculate the Note Interest Rate for each Class of Note Interests for the related Interest Period and the amount of 84

interest for the Interest Period payable in respect of each $100,000 in principal amount of each Class of Note Interests (in each case rounded to the nearest cent, with half a cent being rounded upward) on the related Payment Date and will communicate the Note Interest Rate for each Class of Note Interests and the date of the next Payment Date the Trustee, the Initial Purchaser, each paying agent, Euroclear, Clearstream, the Depository, and (as long as the Notes are listed on the Irish Stock Exchange) the Irish Stock Exchange. The Calculation Agent may be removed by the Co-Issuers at any time. If the Calculation Agent is unable or unwilling to act as such or is removed by the Co-Issuers or if the Calculation Agent fails to determine the Note Interest Rate for each Class of Note Interests or the amount of interest payable in respect of each Class of Note Interests for any Interest Period, the Issuer or the Portfolio Manager (on its behalf) will promptly appoint as a replacement Calculation Agent a leading bank which is engaged in transactions in U.S. Dollar deposits in the international U.S. Dollar market and which does not control and is not controlled by or under common control with the Co-Issuers or any of their respective affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed. The determination of the Note Interest Rate with respect to each Class of Note Interests for each Interest Period by the Calculation Agent shall (in the absence of manifest error) be final and binding upon all parties. Form, Registration, and Transfer of the Securities General The Securities will be offered and sold in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction (i) in the United States to persons who are either (A) both Qualified Institutional Buyers and Qualified Purchasers, purchasing for their own account or one or more accounts with respect to which they exercise sole investment discretion, each of which is both a Qualified Institutional Buyer and a Qualified Purchaser, or (B) Institutional Accredited Investors and Qualified Purchasers in reliance on an exemption from registration under the Securities Act, (ii) outside the United States to persons that are not U.S. Persons, purchasing for their own account or one or more accounts with respect to which they exercise sole investment discretion, each of which is a non-U.S. Person, in offshore transactions in reliance on Regulation S, and (iii) with respect to the Preference Shares only, also in the United States to persons who are both Accredited Investors and either Knowledgeable Employees with respect to the Issuer or Qualified Purchasers. In addition to the foregoing, investors in the Securities will be required or deemed (as applicable) to make certain ERISA-related representations and warranties. All subsequent transfers of any Class of the Securities will also be subject to the foregoing restrictions. Purchasers of Global Notes and subsequent transferees of interests of Global Notes will be deemed to agree (except that the transferees not within each of the Rule 144A Global Note or Regulation S Global Note will be required to so agree in a written certification) to comply with the foregoing restrictions with respect to any transfer of the Securities or interest therein. Purchasers of Certificated Notes and subsequent transferees of interests of Certificated Notes will be required to agree in a written certification to comply with the foregoing restrictions with respect to any transfer of the Notes or Composite Securities or interest therein. Purchasers and subsequent transferees of the Preference Shares will be required to provide written certification as to compliance with the restrictions (except that subsequent transferees of an interest in a Regulation S Preference Share will be deemed to agree to comply with the restrictions). Pursuant to the Indenture, the Issuer shall cause a register (the Indenture Register) to be kept in which the Issuer shall provide for the registration of Securities and the registration of transfers of Securities. The Trustee has been appointed and will serve as the registrar with respect to the Securities (the Indenture Registrar) and will provide for the registration of Securities and the registration of transfers of Securities. Pursuant to the Preference Share Paying and Transfer Agency Agreement, the Administrator has been appointed and will serve as the registrar with respect to the Preference Shares and the Issuers Ordinary Shares (the Share Registrar) and will provide for the registration of Preference Shares and the Issuers Ordinary Shares in the register maintained by it (the Share Register). Also pursuant to the Preference Share Paying and Transfer Agency Agreement, the Preference Share Paying Agent has been appointed and will serve as a transfer agent with respect to the Preference Shares. 85

The Notes will be issuable in a minimum denomination of $250,000, and integral multiples of $1,000 in excess of that amount. The Composite Securities will be issuable in denominations sufficient to provide for the exchange of the related Composite Securities for the Class A-1-B Notes, Class B-2 Notes, Class C-2 Notes, Class D2 Notes, the Class 6 Component, and Preference Shares relating to their applicable Components in at least corresponding respective minimum denominations of Notes and the Preference Shares. After issuance, any Note may fail to be in the required minimum denomination due to the repayment of the principal amount thereof in accordance with the Priority of Payments. Each purchaser of the Preference Shares must purchase and hold a minimum of 100 Preference Shares for its own account and, if purchasing for any additional account, a minimum of 100 Preference Shares for each account. Fractional Preference Shares will not be issued. Rule 144A Global Notes The Co-Issued Notes of each Class and the Class D Notes are being offered in the United States to persons that are both Qualified Institutional Buyers and Qualified Purchasers will be represented by one or more Rule 144A Global Notes. The Rule 144A Global Notes will be deposited with the Trustee as custodian for the Depository and will be registered in the name of a nominee of the Depository. Investors may hold their interests in the Rule 144A Global Notes directly through the Depository if they are Depository participants, or indirectly through organizations which are Depository participants. The transfer or exchange of all or a portion of an interest in a Rule 144A Global Note is subject to the applicable procedures described under Transfer Restrictions. Regulation S Global Notes The Co-Issued Notes of each Class, the Class D Notes, and the Composite Securities being offered outside the United States to non-U.S. Persons in reliance on Regulation S will initially be represented by one or more Temporary Regulation S Global Notes. On the Exchange Date, interests in a Temporary Regulation S Global Note will be exchangeable for interests in Regulation S Global Notes. The Regulation S Global Notes will be deposited with the Trustee as custodian for the Depository and will be registered in the name of a nominee of the Depository for the respective accounts at Clearstream or Euroclear. Interests in the Regulation S Global Notes may be held only through Euroclear or Clearstream and may not be held by a U.S. Person at any time. In addition, the transfer or exchange of all or a portion of an interest in a Regulation S Global Note is subject to the applicable procedures described under Transfer Restrictions. Certificated Notes and Certificated Composite Securities The Co-Issued Notes of each Class, the Class D Notes, and the Composite Securities are being offered in the United States to persons that are Accredited Investors that are not Institutional Accredited Investors. Those Notes will be issued in definitive, fully registered, certificated form without interest coupons, and registered in the name of their beneficial owner in the Indenture Register maintained by the Note Registrar under the Indenture. The Composite Securities that are not sold pursuant to Regulation S will be issued in the form of certificated Composite Securities in definitive, fully registered form without interest coupons and will be registered in the name of the beneficial owner or a nominee of the beneficial owner. The transfer or exchange of all or a portion of an interest in a Certificated Note or Certificated Composite Security is subject to the applicable procedures described under Transfer Restrictions. Regulation S Global Preference Shares The Preference Shares are being offered outside the United States to non-U.S. Persons in reliance on Regulation S will be represented by one or more Regulation S Global Preference Shares. The Regulation S Global Preference Shares will be deposited with the Preference Share Paying Agent as custodian for the Depository and will be registered in the name of Cede, as nominee of the Depository, for credit to the applicable purchaser accounts at Clearstream or Euroclear. Interests in the Regulation S Global Preference Shares may be held only through Euroclear or Clearstream and may not be held by a non-U.S. Person at any time. In addition, the transfer or 86

exchange of all or a portion of an interest in a Regulation S Global Preference Share is subject to the applicable procedures described under Transfer Restrictions. Certificated Preference Shares The Preference Shares are being offered in the United States to persons that either are (1) both Qualified Institutional Buyers and Qualified Purchasers or (2) both Accredited Investors and either Knowledgeable Employees or Qualified Purchasers. Those Preference Shares will be issued in the form of Certificated Preference Shares, and registered in the name of the beneficial owner thereof in the Share Register maintained by the Share Registrar. The transfer or exchange of Preference Shares in the form of Certificated Preference Shares is subject to the applicable procedures described under Transfer Restrictions. Definitive Notes A Global Note deposited with the Depository pursuant to the Indenture shall be transferred in the form of a Definitive Note to their beneficial owners only if the transfer complies with the Indenture and either (i) the Depository notifies the Co-Issuers that it is unwilling or unable to continue as Depository for the Global Note or (ii) if at any time the Depository ceases to be a clearing agency registered under the Exchange Act and, in each case, a successor depository is not appointed by the Co-Issuers within 90 days after the notice. Any Global Note that is transferable in the form of a Definitive Note to its beneficial owners pursuant to this provision shall be surrendered by the Depository to the Trustees office located in the City of Boston, Massachusetts (or any other office designated by the Trustee) to be so transferred, in whole or from time to time in part, without charge, and the Applicable Issuers shall execute and the Trustee shall authenticate and deliver, upon the transfer of each portion of the Global Note, an equal aggregate principal amount of definitive physical certificates (pursuant to the instructions of the Depository) (each, a Definitive Note ) in authorized denominations. Any Definitive Note delivered in exchange for an interest in a Global Note, as applicable, shall, except as otherwise provided under the Indenture bear appropriate legends and will be subject to the transfer restrictions referred to in the legends. Upon the occurrence of either of the events specified in (i) and (ii) above, the Co-Issuers shall promptly make available to the Trustee a reasonable supply of Definitive Notes in definitive, fully registered form without interest coupons. The Accounts The Indenture provides that the Trustee will establish separate segregated trust accounts, which will be designated as the Collection Account, the Payment Account, the Custodial Account, the Revolving Reserve Account, the Delayed Drawdown Reserve Account, the Synthetic Security Collateral Account, the Hedge Counterparty Collateral Account, the Closing Date Expense Account, the Interest Reserve Account, the Securities Lending Account, and the Class 6 Component Account. In addition, Synthetic Security Counterparty Accounts may also be established. Any account may contain any number of subaccounts. Collection Account. The Trustee shall deposit into the Collection Account: all funds transferred from the Closing Date Expense Account pursuant to the Indenture, all Principal Proceeds received by the Trustee (unless simultaneously reinvested in Collateral Obligations in accordance with the Indenture (including any related deposit into the Revolving Reserve Account or the Delayed Drawdown Reserve Account or the posting by the Issuer of cash collateral with (or for the benefit of) a Synthetic Security counterparty simultaneously with the Issuers purchase of or entry into a Synthetic Security or in Eligible Investments), all Interest Proceeds received by the Trustee (unless simultaneously reinvested in accrued interest in respect of Collateral Obligations in accordance with the Indenture or in Eligible Investments), and all other funds received by the Trustee. 87

The Issuer and the Portfolio Manager may, but will not be required to, jointly deposit from time to time any monies in the Collection Account it deems, in its sole discretion, to be advisable (and may designate any amounts so deposited as Principal Proceeds or Interest Proceeds in its discretion). The Collection Account shall be maintained for the benefit of the Noteholders, the Composite Securityholders (solely to the extent of their Note Component or the Class 6 Component, in the case of the Holders of the Class 6 Composite Securities), the Trustee, the Portfolio Manager, and each Hedge Counterparty and amounts on deposit in the Collection Account will be available for application in the order of priority under Application of Funds and for the acquisition of Collateral Obligations under the circumstances and pursuant to the requirements in the Indenture. Amounts received in the Collection Account during a Due Period and amounts received in prior Due Periods and retained in the Collection Account under the circumstances stated above in Application of Funds will be invested in Eligible Investments with Stated Maturities no later than the Business Day before the next Payment Date. All the proceeds will be retained in the Collection Account unless used to purchase Collateral Obligations during the Reinvestment Period in accordance with the Eligibility Criteria, to honor commitments with respect thereto entered into during the Reinvestment Period, or used as otherwise permitted under the Indenture. See Security for the Notes and the Composite SecuritiesEligibility Criteria. The Trustee shall transfer to the Payment Account from the Collection Account for application pursuant to the Priority of Payments and the payment provisions with respect to the Class 6 Component, as applicable, no later than the Business Day preceding each Payment Date, the amount set forth to be so transferred in the Valuation Report for the Payment Date. At any time during or after the Reinvestment Period, at the direction of the Portfolio Manager, the Issuer may direct the Trustee to pay from amounts on deposit in the Collection Account on any Business Day during any Interest Period: (i) any amount required to exercise a warrant held in the Collateral in accordance with the requirements of the Indenture and the Issuer Order; and (ii) from Interest Proceeds only, any Administrative Expenses that require payment before the next Payment Date to the extent that the amount of the payments does not exceed the aggregate amount that may be paid on the next Payment Date under, and at the level of priority specified by the Priority of Payments. Custodial Account. The Trustee will from time to time deposit collateral into the Custodial Account, over which the Trustee will have exclusive control and sole right of withdrawal, in accordance with the Indenture. All assets or securities at any time on deposit in or otherwise to the credit of the Custodial Account will be held in trust by the Trustee for the benefit of the Noteholders, the Composite Securityholders (solely to the extent of their Note Component), the Trustee, the Portfolio Manager, and each Hedge Counterparty. Revolving Reserve Account and Delayed Drawdown Reserve Account. Upon the purchase of any Collateral Obligation that is a Revolving Loan or Delayed Drawdown Loan, at the direction of the Portfolio Manager, the Trustee shall deposit Principal Proceeds into the Revolving Reserve Account, in the case of a Revolving Loan, and the Delayed Drawdown Reserve Account, in the case of a Delayed Drawdown Loan, each equal to the unfunded commitment amount of the Revolving Loan or Delayed Drawdown Loan, respectively, and the Principal Proceeds so deposited shall be considered part of the Purchase Price of the Revolving Loan or Delayed Drawdown Loan for purposes of the Indenture. At the direction of the Portfolio Manager, the Trustee shall withdraw funds from the Revolving Reserve Account or the Delayed Drawdown Reserve Account to fund extensions of credit pursuant to Revolving Loans or Delayed Drawdown Loans, respectively. In addition, to the extent that the Issuer receives proceeds of a repayment in respect of a Revolving Loan (except to the extent of any concurrent commitment reduction), the Trustee shall deposit the proceeds into the Revolving Reserve Account. Upon the sale of a Revolving Loan or Delayed Drawdown Loan in whole or in part or the reduction in part or termination of the Issuers commitment thereunder, an amount on deposit in the Revolving Reserve Account or the Delayed Drawdown Reserve Account, as the case may be, specified by the Portfolio Manager as being equal to (i) the unfunded amount of the commitment (in the case of a sale in whole or a termination of the commitment), (ii) the proportionate amount of the amount on deposit (in the case of a sale in part), or (iii) the amount by which the 88

commitment is reduced (in the case of a reduction thereof in part) shall be transferred by the Trustee to the Collection Account as Principal Proceeds. Amounts on deposit in the Revolving Reserve Account or the Delayed Drawdown Reserve Account will be invested in Eligible Investments with Stated Maturities (unless otherwise instructed by the Portfolio Manager) not later than the Business Day after the date of their purchase. All interest and other income from amounts in the Revolving Reserve Account and the Delayed Drawdown Reserve Account deposited to the Collection Account under the Indenture shall be considered Interest Proceeds in the Due Period in which they are so deposited. Synthetic Security Collateral Account. On or before the date on which the Issuer enters into a Synthetic Security the Trustee shall create a sub-account of the trust account established for Synthetic Security Collateral (the Synthetic Security Collateral Account) with respect to the Synthetic Security. All Synthetic Security Collateral posted by any Synthetic Security counterparty in support of its respective obligation under a Synthetic Security shall be immediately deposited into the Synthetic Security Collateral Account and posted to the sub-account related to the Synthetic Security. On each day on which amounts are payable to the Issuer out of Synthetic Security Collateral, the Issuer shall direct the Trustee to withdraw amounts on deposit in the Synthetic Security Collateral Account in an amount sufficient to make the payment (including any total or partial release of Synthetic Security Collateral). The only permitted withdrawal from or application of funds on deposit in, or otherwise to the credit of, the Synthetic Security Collateral Account shall be for application to the obligations of the relevant Synthetic Security counterparty under the Synthetic Security agreement or to return Synthetic Security Collateral to the relevant Synthetic Security counterparty at the termination of the relevant Synthetic Security agreement or as otherwise required by the Synthetic Security agreement, in each case as directed by the Portfolio Manager.

Amounts on deposit in the Synthetic Security Collateral Account will be invested in Eligible Investments having Stated Maturities (unless otherwise instructed by the Portfolio Manager) not later than one Business Day after their purchase. Hedge Counterparty Collateral Account. The Trustee will deposit all collateral received from a Hedge Counterparty under any Hedge Agreement into the Hedge Counterparty Collateral Account. The only permitted withdrawal from or application of funds on deposit in, or otherwise to the credit of, the Hedge Counterparty Collateral Account will be (i) for application to obligations of the relevant Hedge Counterparty to the Issuer under a Hedge Agreement if the Hedge Agreement becomes subject to early termination or (ii) to return collateral to the relevant Hedge Counterparty when and as required by the relevant Hedge Agreement. Amounts on deposit in the Hedge Counterparty Collateral Account will be invested in Eligible Investments with Stated Maturities no later than the Business Day before the next Payment Date. Closing Date Expense Account. Amounts deposited in the Closing Date Expense Account on the Closing Date will be withdrawn to pay certain administrative expenses of the Co-Issuers. On the Payment Date in November 2004, the Trustee will transfer all funds on deposit in the Closing Date Expense Account to the Collection Account as Principal Proceeds and close the Closing Date Expense Account. Amounts on deposit in the Closing Date Expense Account shall be invested in Eligible Investments with Stated Maturities (unless otherwise instructed by the Portfolio Manager) no later than the Business Day before the next Payment Date. Interest Reserve Account. At any time before the Determination Date in the first Due Period, at the direction of the Portfolio Manager, the Trustee will transfer uninvested proceeds from the offering in an amount equal to the Interest Reserve Amount from the Collection Account to the Interest Reserve Account. On or before the Determination Dates in the first and second Due Periods, at the direction of the Portfolio Manager, the Issuer may direct that any portion of the then remaining Interest Reserve Amount be transferred to the Collection Account and included as Interest Proceeds or Principal Proceeds for the related Due Period, except that at least $1,000,000 must be included in Interest Proceeds for the first Due Period. On the Payment Date in November 2004, all amounts remaining on deposit in the Interest Reserve Account will be applied as Principal Proceeds in accordance with the Priority of Payments and the Trustee will close the Interest Reserve Account. Amounts on deposit in the Interest

89

Reserve Account shall be invested in Eligible Investments with Stated Maturities (unless otherwise instructed by the Portfolio Manager) no later than the Business Day before the next Payment Date. Securities Lending Account. The Trustee will deposit all Securities Lending Collateral posted by any Securities Lending Counterparty in support of its respective obligation under a Securities Lending Agreement in a trust account (the Securities Lending Account). The only permitted withdrawal from or application of funds on deposit in, or otherwise to the credit of, the Securities Lending Account will be (i) for application to obligations of the relevant Securities Lending Counterparty to the Issuer under a Securities Lending Agreement if the Securities Lending Agreement becomes subject to early termination or in the exercise of remedies under the Securities Lending Agreement upon any event of default under and as defined in the Securities Lending Agreement, including liquidating the related Securities Lending Collateral, or (ii) to return collateral to the Hedge Counterparty when and as required by a Hedge Agreement. Amounts on deposit in the Securities Lending Account shall be invested in Eligible Investments with Stated Maturities (unless otherwise instructed by the Portfolio Manager) no later than the Business Day before the next Payment Date. Class 6 Component Account. The Trustee will deposit the United States Treasury strip security maturing on February 15, 2016 paying a principal amount at maturity equal to the original principal amount of the Class 6 Composite Securities (the Treasury Strip), which Treasury Strip shall be delivered to the Trustee by the Issuer on the Closing Date, into the Class 6 Component Account, over which the Trustee will have exclusive control and sole right of withdrawal, in accordance with the Indenture. All assets or securities at any time on deposit in or otherwise to the credit of the Class 6 Component Account will be held in trust by the Trustee for the benefit of the Holders of the Class 6 Composite Securities. Payment Account. The Trustee will deposit collateral into the Payment Account, over which the Trustee will have exclusive control and sole right of withdrawal, in accordance with the Indenture. All assets or securities at any time on deposit in or otherwise to the credit of the Payment Account will be held in trust by the Trustee for the benefit of the Noteholders, the Composite Securityholders (solely to the extent of their Note Component), the Trustee, the Portfolio Manager, and each Hedge Counterparty. The only permitted withdrawal from or application of funds on deposit in, or otherwise to the credit of, the Payment Account shall be to pay amounts due and payable on the Notes and Composite Securities and, upon Issuer Order, to pay Administrative Expenses and other amounts specified in the Indenture. Synthetic Security Counterparty Account. To the extent that any Synthetic Security requires the Issuer to secure its obligations to the Synthetic Security counterparty, the Issuer shall direct the Trustee and the Trustee shall establish a segregated trust account for the Synthetic Security which shall be held in trust for the benefit of the related Synthetic Security counterparty and over which the Trustee shall have exclusive control and the sole right of withdrawal in accordance with the applicable Synthetic Security and the Indenture. In the alternative, a Synthetic Security Counterparty Account may be established with a trustee designated by the Synthetic Security counterparty that satisfies the requirements with respect to being a securities intermediary with respect to the posted collateral if that trustee would qualify to be a successor trustee under the Indenture and the account satisfies the other requirements of a Synthetic Security Counterparty Account under the Indenture. As directed in writing by the Portfolio Manager, the Trustee shall deposit (or deliver for deposit) into each Synthetic Security Counterparty Account all amounts or securities that are required to secure the obligations of the Issuer in accordance with the related Synthetic Security. The Portfolio Manager shall direct any such deposit only during the Reinvestment Period and only to the extent that monies are available for the purchase of Collateral Obligations pursuant to the Indenture. Any income received on amounts in the Synthetic Security Counterparty Account shall, after application in accordance with the relevant Synthetic Security, be withdrawn from the Synthetic Security Counterparty Account and deposited in the Collection Account for distribution as Interest Proceeds. As directed by the Portfolio Manager in writing and in accordance with the applicable Synthetic Security and the Indenture, amounts on deposit in a Synthetic Security Counterparty Account shall be invested in Eligible Investments. In connection with the occurrence of a credit event or an event of default or a termination event (each as defined in the applicable Synthetic Security) under the related Synthetic Security, amounts in any Synthetic Security 90

Counterparty Account shall be withdrawn by the Trustee (or the Trustee shall request their withdrawal) and applied toward the payment of any amounts payable by the Issuer to the related Synthetic Security counterparty in accordance with the Synthetic Security, as directed by the Portfolio Manager in writing. Any excess amounts held in a Synthetic Security Counterparty Account, or held directly by a Synthetic Security counterparty, after payment of all amounts owing from the Issuer to the related Synthetic Security Counterparty in accordance with the related Synthetic Security shall be withdrawn from the Synthetic Security Counterparty Account and deposited in the Collection Account for distribution as Principal Proceeds. Amounts on deposit in any Synthetic Security Counterparty Account shall not be considered an asset of the Issuer for the purposes of the Eligibility Criteria or the Coverage Tests, but the Synthetic Security that relates to the Synthetic Security Counterparty Account shall be so considered an asset of the Issuer (with the notional amount as the Principal Balance unless a default exists under the applicable Synthetic Security). The Preference Shares Distribution Account The Preference Share Paying Agent will maintain the Preference Shares Distribution Account into which Interest Proceeds and Principal Proceeds will be deposited on each Payment Date in accordance with the Priority of Payments and, subject to certain restrictions on distributions on the Preference Shares under Cayman Islands law, distributed to the Holders of the Preference Shares as a dividend or any final distribution on the Preference Shares. Amounts on deposit in the Preference Shares Distribution Account will not be available to pay interest on or principal of the Note Interests and will not be subject to the interests of any of the other creditors of the Co-Issuers to the extent that the obligations are limited in recourse to the Collateral. Amounts in the Preference Shares Distribution Account will be available for the payment of the Issuers liabilities not limited in recourse to the Applicable Collateral, and the payment of dividends and any final distribution to the Holders of the Preference Shares will be made to the extent of amounts remaining in the Preference Shares Distribution Account after the payment of, or the release of amounts held in reserve for, the Issuers full recourse liabilities, if any. The Indenture will limit the Issuers activities to the issuance and sale of the Securities and the Issuers Ordinary Shares, the acquisition and disposition of the Collateral Obligations and Eligible Investments and the other related activities described under The Co-IssuersGeneral. The Issuer, therefore, does not expect to have any significant full recourse liabilities that would be payable out of amounts on deposit in the Preference Shares Distribution Account. Reporting to Holders of Securities The Issuer will cause to be rendered an accounting report (the Valuation Report), determined as of the close of business on each Determination Date, and provided to the Portfolio Manager, the Trustee, the Initial Purchaser, each Hedge Counterparty, the Rating Agencies, each Noteholder, each Composite Securityholder, (if so requested by the Initial Purchaser) the Repository, and upon written request therefor by a Beneficial Owner certifying that it is a Beneficial Owner, the Beneficial Owner (or its designee) and the Preference Share Paying Agent (for forwarding to the Holders of Preference Shares) not later than the second Business Day preceding the related Payment Date. Each Valuation Report shall be accompanied by a Section 3(c)(7) Reminder Notice. The Valuation Report shall contain the following information as of the related Payment Date (unless otherwise stated): (i) Portfolio: The Aggregate Principal Balance of the Collateral Obligations (and the aggregate unfunded amount of Revolving Loans and Delayed Drawdown Loans included therein);

(ii)

Securities and Preference Shares: (a) The amount of principal payments to be made on each Class of Securities on the related Payment Date; (b) The Aggregate Outstanding Amount of each Class of Securities after giving effect to any principal payments on the related Payment Date and, for each Class of Securities, the percentage of its initial Aggregate Outstanding Amount that amount represents; (c) For each Class of Securities, the percentage of the initial Aggregate Outstanding Amount of all of the Securities that its initial Aggregate Outstanding Amount represented and, after giving effect to 91

any principal payments on the related Payment Date, the percentage of the Aggregate Outstanding Amount of all of the Securities that its Aggregate Outstanding Amount represents; (d) The interest payable in respect of each Class of Notes and Composite Securities on the related Payment Date (in the aggregate and by Class) and its calculation in reasonable detail; (e) For each Class of Composite Security its Composite Security Rated Balance or Class 6 Rated Balance, as the case may be; and (f) The distribution to the Preference Shares on the related Payment Date; (iii) Payment Date Payments: (a) The amounts to be distributed under each clause of the Priority of Payments as described in Application of Funds itemized by clause, and to the extent applicable, by type of distribution under the clause; and (b) Any amounts payable under the Hedge Agreements by any Hedge Counterparty on or before the related Payment Date and its calculation in reasonable detail (as specified by the calculation agent under the relevant Hedge Agreement); (iv) Accounts: (a) The amount of any proceeds in the Collection Account, distinguishing between amounts credited as Interest Proceeds, Principal Proceeds (excluding uninvested proceeds from the offering), and uninvested proceeds from the offering; (b) The amount in the Collection Account after all payments and deposits to be made on the related Payment Date, distinguishing between amounts credited as Interest Proceeds and as Principal Proceeds; (c) The amount of any Principal Proceeds in the Revolving Reserve Account; (d) The amount of any Principal Proceeds in the Delayed Drawdown Reserve Account; (e) The amount of any Principal Proceeds in the Synthetic Security Collateral Account; (f) The amount of any Principal Proceeds in the Securities Lending Account; and (g) The amount in the Hedge Counterparty Collateral Account; (v) Coverage Tests and Class D Reinvestment Overcollateralization Test: The Interest Coverage Ratios and the Overcollateralization Ratios, after giving effect to payments to be made on the Payment Date, the Overcollateralization Ratios as of the Ramp-Up Completion Date, a statement as to whether each of the Overcollateralization Tests is satisfied on that date, a statement as to whether the Class D Reinvestment Overcollateralization Test is satisfied on that date and, on and after the third Payment Date, a statement as to whether each of the Interest Coverage Tests is satisfied on that date. In addition, on each Payment Date after the Ramp-Up Completion Date, the Overcollateralization Ratios as of the first Payment Date after the Ramp-Up Completion Date after giving effect to payments made on that Payment Date; (vi) A notice setting forth LIBOR, as calculated by the Calculation Agent, for the next Interest Period and the Note Interest Rate for the next Payment Date; and (vii) Any other information the Trustee or the Portfolio Manager reasonably requests. Notices Notices to the Holders of the Securities will be given by first-class mail, postage prepaid, to the registered Holders of the Securities at their respective addresses appearing in the Indenture Register or the Share Register, as applicable. If and for so long as any Class of Securities is listed on the Irish Stock Exchange and the rules of the exchange so require, notice will also be given to the Company Announcements Office of the Irish Stock Exchange. Certain Covenants The Indenture contains certain covenants restricting the conduct of the Co-Issuers, including (i) restrictions on consolidations, mergers and transfers or conveyances of assets involving either Co-Issuer, (ii) restrictions on incurrence of debt other than the Notes and the Composite Securities and certain obligations incidental to the 92

performance by each Co-Issuer of its obligations under the Indenture, (iii) restrictions on the ability of either CoIssuer to conduct activities inconsistent with its special-purpose nature and (iv) certain restrictions on amendments of the Collateral Administration Agreement and the Management Agreement. Cancellation All Notes and Composite Securities that are paid in full or redeemed and surrendered for cancellation, and all Preference Shares that are redeemed and surrendered for cancellation will forthwith be canceled and may not be reissued or resold. No Gross-Up All payments made by the Issuer under the Notes and Composite Securities will be made without any deduction or withholding for or on account of any tax unless the deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If the Issuer is so required to deduct or withhold, then the Issuer will not be obligated to pay any additional amounts in respect of the withholding or deduction. Petitions for Bankruptcy The Indenture provides that the Trustee, each Hedge Counterparty, the Portfolio Manager, and the Holders of the Class 6 Composite Securities and the Securities may not cause the Issuer or Co-Issuer to petition for bankruptcy before one year and one day have elapsed since the final payments to the Holders of all Note Interests or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. The Preference Shares will not carry any right to vote in respect of any resolution of the holders of the share capital of the Issuer on whether to wind-up the Issuer. Subordination In furtherance of the priorities of payments among the Classes of Note Interests, the Indenture contains express subordination provisions pursuant to which the Holders of each Class of Note Interests that is a junior class agree for the benefit of the Holders of the Note Interests of each Priority Class with respect to the junior class that the junior class shall be subordinate and junior to the Note Interests of each Priority Class to the extent and in the manner provided in the Indenture and the Holders of Preference Share Components agree for the benefit of the Holders of the Note Interests that the Preference Share Components shall be subordinate and junior to the Note Interests to the extent and in the manner set forth in the Indenture. The Note Components shall rank pari passu with the Notes of the same Class. If any Event of Default has not been cured or waived and acceleration occurs under and in accordance with the Indenture, each Priority Class of Note Interests shall be paid in full in cash or, to the extent a Majority of the Class consents, other than in cash, before any further payment or distribution is made on account of any junior class of Note Interests with respect to the Priority Class and each Class of Note Interests shall be paid in full in cash or, to the extent a Majority of the Class consents, other than in cash, before any further payment or distribution is made on account of the Preference Share Components. The Holders of each junior class of Note Interests agree, for the benefit of the Holders of the Note Interests of each Priority Class in respect of the junior class, and the Holders of the Preference Share Components agree, for the benefit of the Holders of the Note Interests of each Class, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due to the junior class, of the Note Interests or each Class of Note Interests, as the case may be, or under the Indenture until the payment in full of the Priority Classes or all the Classes, as the case may be, and not before one year and a day, or if longer, the applicable preference period then in effect, has elapsed since the payment. For purposes of this provision, with respect to each Class of Note Interests, the Classes of Note Interests that are Priority Classes and junior classes are as follows:

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Class A-1 A-2 A-3 B C D

Junior Classes B, C, D B, C, D B, C, D C, D D None

Priority Classes None* None* None* A-1, A-2, A-3 A-1, A-2, A-3, B A-1, A-2, A-3, B, C

* Among the Class A Note Interests funds available for principal or interest are allocated pro rata to the Class A1 Note Interests (considered as one subclass) and the Class A-2 Notes and the Class A-3 Notes (considered together as a second subclass) based on the Aggregate Outstanding Amounts of the Classes, and between the Class A-2 Notes and the Class A-3 Notes sequentially, first, to the Class A-2 Notes and second to the Class A-3 Notes, and thus the Class A-3 Notes will be a Junior Class to the Class A-2 Notes and the Class A-2 Notes will be a Priority Class with respect to the Class A-3 Notes.

If, notwithstanding the provisions of the Indenture, any Holder of Note Interests of any junior class has received any payment or distribution in respect of the Note Interests contrary to the provisions of the Indenture or any Holder of Preference Share Components has received any payment or distribution in respect of the Preference Share Components contrary to the provisions of the Indenture, then, until each Priority Class with respect to the junior class of Note Interests or each Class of Note Interests, as the case may be, has been paid in full in cash or, to the extent a Majority of the Priority Class or the Class, as the case may be, consents, other than in cash in accordance with the Indenture, the payment or distribution shall be received and held in trust for the benefit of, and shall forthwith be paid over and delivered to, the Trustee, which shall pay and deliver the same to the Holders of the applicable Priority Classes of Note Interests or the Holders of all Classes of Note Interests, as the case may be, in accordance with the Indenture. If any such payment or distribution is made other than in cash, it shall be held by the Trustee as part of the Applicable Collateral and subject in all respects to the Indenture. Each Holder of Note Interests of any junior class agrees with all Holders of the applicable Priority Classes that the Holder of junior class Note Interests shall not demand, accept, or receive any payment or distribution in respect of the Note Interests in violation of the Indenture. After a Priority Class has been paid in full, the Holders of the related junior class or Classes shall be fully subrogated to the rights of the Holders of the Priority Class. Nothing in these provisions shall affect the obligation of the Issuer to pay Holders of any junior class of Note Interests. Each Holder of Preference Share Components agrees with all Holders of Note Interests that the Holder of Preference Share Components shall not demand, accept, or receive any payment or distribution in respect of the Preference Share Components in violation of the Indenture. After all of the Note Interests have been paid in full, the Holders of the Preference Share Components shall be fully subrogated to the rights of the Holders of the Notes. Nothing in these provisions shall affect the obligation of the Issuer to pay Holders of the Preference Share Components. Distributions to the Preference Share Paying Agent are subordinate to distributions on the Note Interests as described in the Priority of Payments. The Management Fees shall have priority only to the extent provided in the Priority of Payments. For purposes of subordination, the Composite Securities shall not be treated as separate Classes, but the Note Components shall be treated as being pari passu with the Notes of the same Class and the Preference Share Components shall be treated as being subordinate to the Notes and all other obligations of the Issuer and pari passu with the Preference Shares. Standard of Conduct The Indenture provides that, in exercising any of its or their voting rights, rights to direct and consent or any other rights as a Noteholder or a Composite Securityholder under the Indenture, subject to the terms and conditions of the Indenture, a Noteholder or a Composite Securityholder shall not have any obligation or duty to any Person or to consider or take into account the interests of any Person and shall not be liable to any Person for any action taken by it or them or at its or their direction or any failure by it or them to act or to direct that an action be taken, without regard to whether the action or inaction benefits or adversely affects any Noteholder, Composite Securityholder, Preference Shareholder, the Issuer, or any other Person, except for any liability to which the Noteholder or Composite Securityholder may be subject to the extent the same results from the Noteholders or 94

Composite Securityholders taking or directing an action, or failing to take or direct an action, in bad faith or in violation of the express terms of the Indenture. Certain Provisions Applicable to the Composite Securityholders and Preference Shareholders The Indenture contains two provisions that are intended to reduce certain potential effects of the differences in form between the two types of Preference Share Interests, one of which is the Composite Securities, which are partially secured under the Indenture, and the other of which is the Preference Shares, which are not secured. Under the first provision, if the Note Components and the Class 6 Component have been retired (and thus the only outstanding Component is the Preference Shares Component), the Composite Securityholders shall not take, or direct the Trustee to take, any action under the Indenture with respect to the remedies of Noteholders or the Trustee or the ownership or disposition of Applicable Collateral or as Secured Party under the Indenture unless the consent of a sufficient number of Preference Shareholders has been obtained such that the Preference Share Interests the Holders of which shall have consented thereto (as Preference Shareholders) plus the Preference Share Interests the Holders of which shall have taken or directed the action (as Composite Securityholders) shall equal a Majority of the Preference Share Interests. Under the second provision, if any distribution is required or permitted to be made pursuant to the Priority of Payments concurrently to the Composite Securityholders with respect to the Preference Share Components and to the Preference Share Paying Agent for distribution to the Preference Shareholders, and a Disproportionate Preference Share Distribution occurs with respect to the distribution, notwithstanding anything to the contrary in the Priority of Payments, the Indenture provides that proper provision shall be made so that, to the extent practicable, the amounts received by the Preference Shareholders and the Composite Securityholders with respect to the distribution is the same for holding one Preference Share as it is for holding one Preference Share Component so that any Disproportionate Preference Share Distribution is eliminated. A Disproportionate Preference Share Distribution occurs with respect to a distribution if the amount actually distributed to the holder of Preference Shares with respect to each Preference Share is reduced without an equal reduction in the distribution with respect to each Preference Share Component. A reduction could occur, for example, because of limitations on the amount of dividends or other distributions payable with respect to the Preference Shares under the laws of the Cayman Islands. The aggregate amount of all accrued but unpaid amounts payable to the Holders of the Composite Securities with respect to the Preference Share Components on their Redemption Date or, if earlier, following the winding up of the Issuer shall be equal to the lesser of (i) its Aggregate Outstanding Amount and (ii) the amount available for its payment under the Priority of Payments. Satisfaction and Discharge of Indenture The Indenture will be discharged with respect to the Applicable Collateral upon delivery to the Trustee for cancellation of all of the Notes and the Composite Securities , or, within certain limitations (including the obligation to pay interest on or principal of the Notes and to pay distributions with respect to the Class 6 Component) upon deposit with the Trustee of funds sufficient for the payment or redemption thereof and the payment by the CoIssuers or the Issuer, as applicable, of all other amounts due under the Indenture. Trustee U.S. Bank National Association will be the Trustee under the Indenture. The Co-Issuers, the Portfolio Manager and their respective affiliates may maintain other banking relationships in the ordinary course of business with the Trustee and its affiliates. The payment of the fees and expenses of the Trustee relating to the Notes is solely the obligation of the Issuer. The payment of the fees and expenses, which will be paid in accordance with the Priority of Payments, is secured by a lien on the Applicable Collateral which is senior to the lien of the Holders of the Note Interests. The Trustee and its affiliates may receive compensation in connection with the investment of trust assets in certain Eligible Investments as provided in the Indenture. Eligible Investments may include investments for which the Trustee or its affiliates provide services. The Indenture contains provisions for the indemnification of the Trustee for any loss, liability or expense incurred without negligence, willful misconduct or bad faith arising out of or in connection with the acceptance or administration of the Indenture. 95

Pursuant to the Indenture, as security for the payment by the Issuer of the compensation and expenses of the Trustee and any sums the Trustee may be entitled to receive as indemnification by the Issuer, the Issuer will grant the Trustee a senior lien on the Applicable Collateral, which is senior to the lien of the holders of the Secured Obligations on the Applicable Collateral. Pursuant to the Indenture, the Trustee may resign at any time by providing 30 days notice and the Trustee may be removed at any time by the Holders of a majority in Outstanding Principal Amount of each Class of Note Interests, at any time when an Event of Default shall have occurred and be continuing by the Holders of a majority in Aggregate Outstanding Amount of the Controlling Class, or by a court of competent jurisdiction. However, no resignation or removal of the Trustee will become effective until the acceptance of appointment by a successor Trustee pursuant to the terms of the Indenture Governing Law The Notes, the Composite Securities, the Indenture, the Preference Share Paying and Transfer Agency Agreement, the Management Agreement, the Collateral Administration Agreement, the Purchase Agreement, the Subscription Agreements, the Securities Lending Agreements, and the Hedge Agreements will be governed by the laws of the State of New York. The Preference Shares, the Administration Agreement, and the Issuer Charter will be governed by the laws of the Cayman Islands. [remainder of page intentionally blank]

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CERTAIN MATURITY AND PREPAYMENT CONSIDERATIONS Certain hypothetical information relating to the performance of the Securities (Performance), including the weighted average lives of the Note Interests (the Hypothetical Performance Information) follows. Holders of the Securities will receive distributions on the Securities only to the extent permitted by the Indenture and, in the case of the Preference Share Interests, the Preference Share Paying and Transfer Agency Agreement and Cayman Islands law restrictions. The timing and amount of the distributions payable to the holders of each Class of Note Interests, and the weighted average life of each Class will be affected by the weighted average life of any Classes ranking senior to the relevant Class. See Risk FactorsRelating to the SecuritiesThe Weighted Average Lives of the Note Interests May Vary. The weighted average lives of the Note Interests are expected to be shorter than the number of years until the Stated Maturity of the Note Interests. Weighted average life refers to the average number of years that will elapse from the date of issuance of a security until each dollar of the principal of the security will be paid to the investor. The actual Performance of the Note Interests and the Preference Share Interests will also be affected by the financial condition of the obligors on or issuers of the Collateral Obligations and the characteristics of the Collateral Obligations, including the interest rate or other rate of distribution, the actual default rate and actual losses sustained, the existence and frequency of exercise of any prepayment, optional redemption, or sinking fund features and any related premium, the prevailing level of interest rates, any sales of Collateral Obligations, and any unique risks of the Collateral Obligations. Any disposition of a Collateral Obligation may change the composition and characteristics of the portfolio of Collateral Obligations and their rate of payment, and, accordingly, may affect the actual Performance of each respective Class of Note Interests and the Preference Share Interests. The ability of the Issuer to reinvest any Interest Proceeds or Principal Proceeds in the manner described under Security for the Notes and the Composite Securities will also affect the Performance of the Note Interests and the Preference Share Interests. Redemptions will also affect the Performance of the Note Interests and the Preference Share Interests. See Risk FactorsRelating to the SecuritiesThe Weighted Average Lives of the Note Interests May Vary. The Stated Maturity of each class of Note Interests will be the Payment Date in February 2016 and the Scheduled Preference Share Interests Redemption Date will be the Payment Date in February 2016. Under certain assumptions identified below, the Notes are expected to have weighted average life as reflected in the following table. Class Class A-1 Note Interests Class A-2 Note Interests Class A-3 Note Interests Class B Note Interests Class C Note Interests Class D Note Interests Weighted Average Life 7.5 7.3 9.1 9.7 10.3 4.7

There can be no assurance that the weighted average lives of the Note Interests will be as stated above and elsewhere in this Offering Memorandum. Accordingly, prospective investors should make their own determinations of the payments expected to be made in respect of the Note Interests and distributions expected to be made in respect of the Preference Share Interests. The hypothetical scenario used to determine the weighted average lives of the Note Interests is as follows (but subject to various other assumptions, as referred to below): 97

(A) 0.5% per quarter of par amount of the Collateral Obligations experience default, beginning on the fifth payment date after their purchase date, (B) 80.0% and 40.0% of the defaulted par amount with respect to Collateral Obligations that are Loans and Collateral Obligations that are bonds, respectively, and 76.0% of the defaulted par amount with respect to all Collateral Obligations is recovered within three months following default, (C) the proceeds of recoveries are reinvested in Collateral Obligations (during the Reinvestment Period), (D) the original Collateral Obligations that are Loans and additional Collateral Obligations that are Loans are assumed to amortize at 6.25% per quarter and the original Collateral Obligations that are bonds and additional Collateral Obligations that are bonds are assumed to amortize at 2.5% per quarter and, and (E) distributions occur quarterly.

The above hypothetical scenario assumes that 90.0% of the Collateral Obligations are Loans and 10.0% of the Collateral Obligations are bonds. The weighted average life of any Class of the Composite Securities will be dependent on the proceeds received on its Note Components, the Class 6 Component, and the Preference Share Components, as applicable. The assumptions above do not necessarily reflect historical performance and defaults for assets similar to the Collateral Obligations. There is no assurance that actual results will not vary materially and adversely from such assumptions. The Hypothetical Performance Information is presented for illustrative purposes only. The assumptions used to calculate the information are necessarily arbitrary, do not necessarily reflect historical experience with respect to securities similar to the Collateral Obligations and do not constitute a prediction with respect to the rates or timing of defaults, recoveries, sales, reinvestments, prepayments, or optional redemptions to which the Collateral Obligations may be subject. Actual experience as to these matters will differ, and may differ materially, from that assumed in calculating the illustrative weighted average lives above, and consequently the actual returns received by the holders of the Preference Share Interests, and the weighted average lives of the Note Interests will differ, and may differ materially, from those stated above. Accordingly, prospective investors should make their own determinations regarding the actual returns that will be received by holders of the Preference Share Interests and the weighted average lives and maturities of the Note Interests. Some important factors that could cause actual results to differ from those in any Hypothetical Performance Information include changes in interest rates; market, financial, or legal uncertainties; the timing of acquisitions of Collateral Obligations; differences in the actual allocation of the Collateral Obligations among asset categories from those assumed; mismatches between the timing of accrual and receipt of Interest Proceeds from the Collateral Obligations; and the effectiveness of the Hedge Agreements among others. Consequently, the inclusion of Hypothetical Performance Information in this Offering Memorandum should not be regarded as a representation by the Issuer, the Co-Issuer, the Portfolio Manager, the Trustee, the Preference Share Paying Agent, the Initial Purchaser, or any of their respective affiliates or any other person of the results that will actually be achieved by the Issuer. None of the Issuer, the Co-Issuer, the Portfolio Manager, the Trustee, the Preference Share Paying Agent, the Initial Purchaser, any of their respective affiliates, or any other person has any obligation to update or otherwise revise any Hypothetical Performance Information, including any revisions to reflect changes in economic conditions or other circumstances arising after the date of this Offering Memorandum or to reflect the occurrence of unanticipated events, even if the underlying assumptions do not come to fruition. The Hypothetical Performance Information is included only for illustrative purposes and is subject to numerous uncertainties, qualifications, and limitations based on a variety of factors, including the assumptions

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relating to them (whether or not described in this Offering Memorandum). The usefulness of the Hypothetical Performance Information is limited by, among other things, the inherent uncertainties of the underlying assumptions (whether or not described in this Offering Memorandum), the uncertain relevance of the assumptions as compared to other factors that have not been identified or taken into account, and the hypothetical nature of the assumptions, some or all of which may or may not materialize.

The assumptions underlying the Hypothetical Performance Information are inherently subject to significant uncertainties, all of which are impossible to predict and are beyond the control of either Co-Issuer, the Portfolio Manager, the Trustee, the Preference Share Paying Agent, and the Initial Purchaser. In that connection, the individual characteristics of the assumed Collateral Obligations used for purposes of the Hypothetical Performance Information will differ from the individual characteristics of the actual Collateral Obligations purchased on the Closing Date and thereafter. Each prospective investor should evaluate all relevant assumptions, models, and inputs; should determine whether they are appropriate; and should consider whether the Securities should be tested based on different assumptions, models, and inputs. The Hypothetical Performance Information (i) is not a projection or forecast and, therefore, is not prepared with a view to complying with published guidelines of the SEC or the American Institute of Certified Public Accountants regarding projections or forecasts and (ii) is not otherwise prepared with a view to complying with (A) any methods, practices, or procedures that might be applicable to information that might be subject to audit by independent certified public accountants, (B) any other requirement of the SEC, or (C) any requirements of any other governmental authority. In no circumstances should the inclusion of the Hypothetical Performance Information be regarded as a representation, warranty, or prediction by any person (i) with respect to their accuracy or the accuracy or appropriateness of the underlying assumptions or (ii) that the Securities will reflect any particular Performance or that they will achieve or are likely to achieve any particular results or that investors will be able to avoid losses, including total losses of their investments. [remainder of page intentionally blank]

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THE PORTFOLIO MANAGER General The information appearing in this section has been prepared by Ares CLO Management VIII, L.P. (Ares VIII or the Portfolio Manager) and has not been independently verified by the Co-Issuers or the Initial Purchaser. The Co-Issuers and the Initial Purchaser do not assume any responsibility for the accuracy, completeness, or applicability of this information. Ares VIII has been formed to provide certain investment management and monitoring services for the Issuer pursuant to the Management Agreement. See The Management Agreement. Ares VIII was organized by certain of the investment professionals of Ares and will consist of the individuals currently managing bank loan and high yield investments for the seven CDO funds currently managed by Ares. Ares VIII intends to use the facilities and resources of Ares. Ares was founded in November 1997 by five senior investment professionals who have spent most of their professional careers in the bank loan, high yield debt, mezzanine, and special situation investment community, with an average of 20 years of experience in such investment community and each has worked together or known the others in a professional context for over 17 years. Before founding Ares, certain of the founders were involved in the high yield management activities of Lion Advisors, L.P. (Lion). In addition to the founders of Ares, among Ares investment professionals are several individuals with significant experience in leveraged finance at major investment banking firms. From its inception in 1990 through 1994, Lion provided investment consulting services to foreign institutional accounts with respect to the orderly liquidation of a distressed high yield portfolio of over U.S.$450 million. In addition, in 1992, Lion, on behalf of foreign institutional accounts, purchased an investment portfolio consisting principally of non-investment grade securities. Approximately U.S.$1.8 billion of this portfolio consisted of performing non-investment grade securities and was retained under management by Lion until the portfolio was wound down in mid-1997. While several principals of Lion are involved with the Portfolio Manager, a substantial number of the principals of the Portfolio Manager were not involved with the management or investment activities of the investment portfolio managed by Lion. In light of those differences as well as differences in investment objectives, the performance of the investment portfolio managed by Lion is not necessarily indicative of the potential performance of the Issuer. Since its inception in November 1997, Ares has sponsored two market value CBOs and five cash flow CLOs with approximately U.S.$3.6 billion in total committed capital as of December 31, 2003. Those funds are: Ares Leveraged Investment Fund, L.P. (ALIF I), Ares Leveraged Investment Fund II, L.P. (ALIF II), Ares III CLO Ltd. (Ares CLO III), Ares IV CLO Ltd. (Ares CLO IV), Ares V CLO Ltd. (Ares CLO V), Ares VI CLO Ltd. (Ares CLO VI), and Ares VII CLO Ltd. (Ares CLO VII) (collectively, the Ares funds). As of December 2003, approximately U.S.$2.5 billion is allocated, and expected to remain allocated, to investments in bank loans and in excess of U.S.$1.0 billion is allocated, and expected to remain allocated, to investments in the high yield, mezzanine, and special situations market (such amounts include the Ares VIII CLO Ltd. warehousing portfolio). In summer 2002, the Ares Corporate Opportunities Fund, L.P., a fund focused on distressed and private equity investments in middle market companies, held a first closing. Over the past year, Ares CLO III has been out of compliance with certain of its par value overcollateralization tests on certain of the monthly Determination Dates. Ares III CLO was in compliance with its par value overcollateralization tests as of its most recent Determination Date, January 2, 2004. At July 14, 2003 Ares CLO III amortized $1.7 million (or less than 0.6% of the tranche) and at January 13, 2003 Ares CLO III amortized $1.4 million (or less than 0.5% of the tranche) of the Ares CLO III Class A notes to bring the transaction back into compliance. Ares CLO IV, Ares CLO V, Ares CLO VI, and Ares CLO VII have been, and currently are, in compliance with their par value overcollateralization tests. In evaluating investments in CDO transactions, investors should note that the par value collateralization test is one of many factors to consider. Ares VIII is a limited partnership organized under the laws of the State of Delaware and will manage the Issuers assets pursuant to the Management Agreement. Ares VIII will not be registered as an investment advisor 100

under the Advisors Act. Initially, Ares VIII will consist of the professionals described below. See Risk Factors Relating to the Portfolio ManagerThe Issuer Will Depend on the Portfolio Manager and its Key Personnel. Investment Professionals Investment Committee and Senior Advisors Seth J. Brufsky. Mr. Brufsky is a partner of Ares and functions as Co-Portfolio Manager of Ares Capital Markets Group. In March 1998, Mr. Brufsky joined Ares focused on Ares capital markets investment activities. Mr. Brufsky serves as an Investment Committee member on all Ares Capital Markets Funds. Prior to joining Ares, Mr. Brufsky was a member of the Corporate Strategy and Research Group of Merrill Lynch & Co., where he specialized in analyzing and marketing non-investment grade securities. Prior to joining Merrill Lynch, Mr. Brufsky was a member of the Institutional Sales and Trading Group of the Global Fixed Income Division at Union Bank of Switzerland. Mr. Brufsky graduated from Cornell University with a BS in Applied Economics and Business Management and received his MBA in Finance with honors from the University of Southern Californias Marshall School of Business, where he was awarded the Glassick Scholarship for academic achievement. John H. Kissick. Mr. Kissick, a founding partner of Ares, is a co-founder of both Ares and Apollo Management, L.P. (Apollo). In addition, Mr. Kissick serves as a senior advisor to all Ares capital markets funds and as a partner in the Ares Private Equity Group. Mr. Kissick also serves on the Investment Committee for the Ares Corporate Opportunities Fund. Mr. Kissick has been associated since 1991 with Apollo and was a member of the original sixmember management team. From 1990 to 1991, Mr. Kissick was a consultant with Kissick & Associates, an investment advisory firm. Prior to 1990, Mr. Kissick served as a Senior Executive Vice President of Drexel Burnham Lambert, where he began in 1975, eventually heading its Corporate Finance Department. From 1992 to 1997, Mr. Kissick was actively involved in the management of the Lion portfolio. Mr. Kissick serves on the boards of the Cedars-Sinai Medical Center in Los Angeles, the Stanford University Graduate School of Business, and the Fulfillment Fund which helps economically disadvantaged kids graduate from high school and college through mentoring and other programs. Mr. Kissick graduated from Yale University with a BA in Economics and with highest honors from the Stanford Business School with an MBA in Finance. Antony P. Ressler. Mr. Ressler, the Managing Partner of Ares, was a co-founder of Apollo in 1990 and Ares in 1997. At Apollo, Mr. Ressler oversaw its capital markets activities since its inception, focusing particularly on distressed and private equity investment opportunities originating as a result of day-to-day involvement in the capital markets. Mr. Ressler serves as a Partner in the Ares Private Equity Group and as a Senior Advisor to the Ares Capital Markets Group. Mr. Ressler serves as an Investment Committee member on all Ares Funds. Prior to 1990, Mr. Ressler served as a Senior Vice President in the High Yield Bond Department of Drexel Burnham Lambert Incorporated, with responsibility for the New Issue/Syndicate Desk. Mr. Ressler serves on several boards of directors including: Allied Waste Industries, Inc. and Samsonite Luggage. Mr. Ressler also serves on the Board of Directors of Los Angeles Countys Alliance for College Ready Public Schools, an operator of public charter schools, as well as the Board of Trustees of the Center for Early Education. Mr. Ressler is also one of the founding members of the Board of Directors of the Painted Turtle Camp, the Southern California chapter of The Hole in the Wall Gang Camps created to serve children dealing with chronic and life threatening illnesses by creating memorable, old-fashioned camping experiences. Mr. Ressler received his BSFS from Georgetown Universitys School of Foreign Service and received his MBA from Columbia Universitys Graduate School of Business. Bennett Rosenthal. Mr. Rosenthal is a founding Partner of Ares and functions as a Partner in the Ares Private Equity Group. In March 1998, Mr. Rosenthal joined Ares from Merrill Lynch & Co. with responsibility for Ares Special Situation investment activities. Mr. Rosenthal serves as a Senior Advisor to the Ares Capital Markets Group and as an Investment Committee member on all Ares funds. At Merrill Lynch, Mr. Rosenthal was a Managing Director in the Global Leveraged Finance Group and was responsible for originating, structuring, and negotiating many of the firms most significant high yield bond transactions. Mr. Rosenthal was also a senior member of Merrill Lynchs Leveraged Transaction Commitment Committee. His transaction experience is both acquisition and nonacquisition related across a broad range of industries including retail, telecommunications, media, healthcare, financial services and consumer products. From 1986 until 1989, Mr. Rosenthal was an Associate in the Financial Institutions Group at Drexel Burnham Lambert. Mr. Rosenthal is a member of or representative to the following Boards of Directors: Elizabeth Arden Salon Holdings, National Bedding Company LLC, and Speakeasy Networks. 101

Mr. Rosenthal graduated summa cum laude with a BS in Economics from the University of Pennsylvanias Wharton School of Business where he also received his MBA with distinction. David A. Sachs. Mr. Sachs is a founding Partner of Ares and functions as Co-Portfolio Manager of the Capital Markets Group. Mr. Sachs serves as an Investment Committee member on all Ares funds. From 1994 until 1997, Mr. Sachs was a principal of Onyx Partners, Inc. specializing in merchant banking and related capital raising activities in the private equity and mezzanine debt markets. From 1990 to 1994, Mr. Sachs was employed by Taylor & Co., an investment manager providing investment advisory and consulting services to members of the Bass Family of Fort Worth, Texas. From 1984 to 1990, Mr. Sachs was with Columbia Savings and Loan Association, most recently as Executive Vice President, responsible for all asset-liability management as well as running the Investment Management Department. Mr. Sachs serves on the Board of Directors of Terex Corporation. Mr. Sachs graduated from Northwestern University with a BS in Industrial Engineering and Management Science. Capital Markets Group Audrey J. Bryant. Ms. Bryant joined Ares in February 2000 and is focused on Ares Capital Markets investment activities. Prior to that time, Ms. Bryant was a Manager in the Transaction Services Group of PricewaterhouseCoopers LLP, where she was responsible for directing financial due diligence teams in evaluating and structuring merger and acquisition transactions across a variety of industries including retail, publishing, manufacturing, technology and healthcare. Ms. Bryant graduated from the University of California at Los Angeles with a BA in Economics and is a CFA charterholder. Americo Cascella. Mr. Cascella joined Ares in August 1998 and is focused on Ares Capital Markets investment activities. From 1994 to 1998, he was with Price Waterhouse LLP, most recently as a Senior Associate with responsibility for foreign exchange and interest rate derivative risk analysis and corporate treasury risk management consulting. Mr. Cascella also directed financial evaluations of clients in various industries, including financial services, industrial products, manufacturing, professional services, and construction engineering and design. Mr. Cascella graduated from the University of California at Los Angeles where he earned a BA in Economics, with an emphasis in Business. Merritt S. Hooper. Ms. Hooper is a co-founder of Ares and was associated with Lion from 1991 to 1997 where she had responsibility for the investment of debt and equity capital, analyzing and negotiating restructuring alternatives for troubled investments and participating in portfolio management and strategy. Ms. Hooper is focused on Ares Capital Markets investment activities. Ms. Hooper also is responsible for Ares investor relations. From 1987 until 1991, Ms. Hooper was with Columbia Savings and Loan, most recently as Vice President in the Investment Management Division. Ms. Hooper serves on the executive and investment boards of Cedars-Sinai Medical Center in Los Angeles. Ms. Hooper graduated from the University of California at Los Angeles with a BA in Mathematics and received her MBA in Finance from UCLAs Anderson School of Management. Christopher N. Jacobs. Mr. Jacobs joined Ares in February 1999 from Oppenheimer Funds, Inc. and is focused on Ares Capital Markets investment activities as well as acting as the trader for all Ares funds. In the future, Mr. Jacobs will be focused on special situations. From 1996 to 1999, Mr. Jacobs was a distressed/special situations analyst and a senior member of the High Yield Group at Oppenheimer Funds, Inc. From 1993 to 1996, Mr. Jacobs was a member of the High Yield Corporate Finance Group at Chase Securities, Inc. working as a generalist executing high yield financings for a variety of clients. Mr. Jacobs graduated with a BA in History from Davidson College and received his MBA with a concentration in Finance from the Darden School at the University of Virginia. Mr. Jacobs is a CFA charter holder. John A. Leupp. Mr. Leupp joined Ares in October 2003 and is focused on Ares Capital Markets investment activities. From 1997 to 2002, Mr. Leupp was with Credit Suisse First Boston (formerly DLJ), most recently as Director in the Fixed Income Department and was responsible for the gaming, lodging and leisure industries. From 1989 to 1997, Mr. Leupp was involved in the fixed income market as a high yield research analyst covering various industries. Mr. Leupp graduated with a BS in Finance from Santa Clara University and received his Master of Arts in Economics from UCLA.

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Shane T. Mengel. Mr. Mengel joined Ares in June 1999 and is focused on Ares Capital Markets investment activities. Prior to joining Ares, Mr. Mengel was with DeCrane Aircraft Holdings, Inc. where he was DeCranes Manager of Acquisitions and Finance and was responsible for the analysis of strategic acquisition candidates and relationship with its equity sponsor. Prior to joining DeCrane in 1999, Mr. Mengel was a Senior Associate with Price Waterhouse LLP, most recently in the Transaction Services Group where he oversaw due diligence on merger and acquisition candidates and provided consulting services to both financial and strategic buyers. Mr. Mengel graduated from Villanova University with a BS in Accounting and is a Certified Public Accountant. Jeff M. Moore. Mr. Moore is a co-founder of Ares and was associated with Lion from 1992 to 1997. Mr. Moore is focused on Ares Capital Markets investment activities. From 1990 until 1992, Mr. Moore was a Vice President in the Investment Management Division at the Executive Life Insurance Company of California (ELIC) where he had responsibility for portfolio risk credit analysis, and participated in analyzing and negotiating restructuring alternatives for troubled investments. Prior to joining ELIC, Mr. Moore was a Senior Manager with the public accounting firm of Deloitte and Touche where he specialized in credit review and risk analysis of various classes of investment assets. Mr. Moore graduated with honors from St. Louis University with a BS in Business Administration and is a Certified Public Accountant. Laura N. Rogers. Ms. Rogers joined Ares in October 2003 as the trader for all Ares funds. From 1996 to 2002, Ms. Rogers was a Vice President with Robertson Stephens where she was a NASDAQ market maker specializing in the retail sector. From 1994 to 1996, Ms. Rogers was an Associate in International Equity Trading at Smith Barney and was an active market maker in over 50 Latin American equity securities. Ms. Rogers graduated from Tufts University with a BA in History and received her MBA with a concentration in Finance and Accounting from UCLAs Anderson Graduate School of Management. Kort Schnabel. Mr. Schnabel joined Ares in September 2001 and is focused on Ares Capital Markets investment activities. Prior to joining Ares, Mr. Schnabel was a key member of the Corporate Development Group at Walker Digital Corporation where he provided financial analysis for all corporate finance, merger and acquisition, and strategic planning activities. Previously, Mr. Schnabel was in the Corporate Finance Group at Morgan Stanley Dean Witter where he performed detailed financial modeling and analysis for mergers and acquisitions, leveraged buyouts and equity/debt offerings. Mr. Schnabel graduated cum laude from the University of Pennsylvania with a BA in Economics. Masaharu Takenaga. Mr. Takenaga joined Ares in August 2001 and is focused on Ares Capital Markets investment activities. Prior to joining Ares, Mr. Takenaga was a member of the High Yield Group at SunAmerica Investments where he evaluated investments in high yield bonds and leveraged loans. Previously, Mr. Takenaga was with the Financial Restructuring Group at Houlihan Lokey Howard & Zukin where he provided restructuring advisory services including the execution of distressed mergers and acquisition transactions. Mr. Takenaga graduated cum laude from the University of California at Los Angeles with a BA in Business Economics. Andrea Cullen. Ms. Cullen joined Ares in June 2003 and is focused on Ares Capital Markets investment activities. Prior to joining Ares, Ms. Cullen was a member of the Leveraged Finance Division of CS First Boston performing detailed financial modeling and credit analysis for companies in the consumer products sector. Ms. Cullen graduated cum laude from Hunter College with a BA in History and received her MBA from Pepperdine University. Michelle Ngo. Ms. Ngo joined Ares in June 2002 and is focused on Ares Capital Markets investment activities. Prior to joining Ares, Ms. Ngo was a financial analyst in the Investment Banking Division of Lehman Brothers where she performed detailed financial modeling and analysis for mergers and acquisitions, leveraged buyouts and equity/debt offerings. Previously, Ms. Ngo held a similar position in the Investment Banking Division at Credit Suisse First Boston. Ms. Ngo graduated from Brown University with a BS in Neuroscience. Omer S. Salamat. Mr. Salamat joined Ares in July 2003 and is focused on Ares Capital Markets investment activities. Prior to joining Ares, Mr. Salamat was a financial analyst at Morgan Stanley & Co., where he worked on corporate finance and mergers and acquisitions transactions in the financial services sector. Mr. Salamat graduated from Columbia College with a BA in Economics and Mathematics.

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Brian A. Schuring. Mr. Schuring joined Ares in September 2003 and is focused on Ares Capital Markets investment activities. From 2000 to 2002, Mr. Schuring was with Houlihan Lokey Howard & Zukin as an Analyst in the Financial Restructuing Group advising debtors, creditors and financial sponsors on strategic alternatives related to a variety of acquisitions, divestitures and deleveraging transactions. From 1999 to 2000, Mr. Schuring was an analyst in the restructuring group of Ernst & Young, where he was responsible for developing cash flow, debt compliance and valuation analyses for public and private companies. Mr. Schuring graduated with a BS in Business Administration with a dual emphasis in Finance and Management Consulting from University of Southern California. Danielle Vick. Ms. Vick joined Ares in August 2001 and is focused on quantitative and macroeconomic portfolio analysis for all of the Ares Funds. Prior to joining Ares, Ms. Vick was with Franklin Resources, Inc. where she was responsible for trading and portfolio analytics for the Private Client Group. Prior to joining Franklin in 1998, Ms. Vick was a performance analyst at Wilshire Associates, Inc. in the investment consulting area. Ms. Vick graduated from the University of Southern California with a BS in Business Administration with an emphasis in Finance. Howard H. Wang. Mr. Wang joined Ares in October 2000 and is focused on Ares Capital Markets investment activities. From 1997 to 2000, Mr. Wang was with PricewaterhouseCoopers LLP, most recently as a Senior Associate in the Assurance and Business Advisory Services Group with responsibilities of directing financial evaluations of clients across a variety of industries including investment management, real estate, healthcare, retail, manufacturing and non-profit organizations. Mr. Wang graduated from the Haas School of Business at the University of California at Berkeley with a BS in Business Administration and is a Certified Public Accountant. Corporate Opportunities Group Eric B. Beckman. Mr. Beckman joined Ares in April 1998 from Goldman, Sachs & Co. and functions as a Partner in the Ares Private Equity Group. At Goldman Sachs, Mr. Beckman specialized in leveraged finance, arranging leveraged loans and high yield bond financings for financial sponsor clients, including Goldman Sachs own merchant banking funds, as well as for corporate clients of the firm. Mr. Beckman was also involved in raising and managing the firms West Street Bridge Loan Fund, and in certain restructuring advisory and distressed debt investment activities. Earlier in his career, Mr. Beckman worked in the Office of the Mayor and for the City Council of New York. Mr. Beckman graduated summa cum laude with a BA in Political Theory and Economics from Cornell University, where he was elected to Phi Beta Kappa. He received his JD from the Yale Law School where he was a senior editor of the Yale Law Journal. David B. Kaplan. Mr. Kaplan is a Partner of Ares Management and functions as a Partner in the Private Equity Group. In April 2003, Mr. Kaplan joined the firm from Shelter Capital Partners, LLC. From 2000 through 2003, Mr. Kaplan was a Senior Principal of Shelter Capital responsible for the investment management of this technologyfocused private equity firm. From 1991 through 2000, Mr. Kaplan was affiliated with and a Senior Partner of Apollo during which time he served on the Board of Directors of multiple companies, including Allied Waste Industries, Inc., Dominicks Supermarkets, Inc. and WMC Finance Co. Prior to Apollo, Mr. Kaplan was a member of the Investment Banking Department of Donaldson, Lufkin & Jenrette Securities Corp. Mr. Kaplan currently serves on the Board of Governors and Investment Committee of Cedars-Sinai Hospital, the Board of Governors of the University of Michigan Business School and the Board of Trustees of the Center for Early Education. Mr. Kaplan graduated with High Distinction, Beta Gamma Sigma from the University of Michigan School of Business Administration with a BBA concentrating in finance. Jeffrey S. Serota. Mr. Serota joined Ares in October 1997 from Bear, Stearns & Co. Inc. and functions as a Partner in the Ares Private Equity Group. At Bear Stearns, Mr. Serota specialized in providing investment banking services to financial sponsor clients of the firm. Such services included financial advisory and capital raising activities. Prior to Bear Stearns, Mr. Serota was employed by Dabney/Resnick, Inc., a boutique investment bank. At Dabney/Resnick, Mr. Serota specialized in merchant banking and capital raising activities for middle market companies and had primary responsibility for the firms bridge financing activities. Mr. Serota also worked at Salomon Brothers Inc focusing on mergers and acquisitions and merchant banking transactions. Mr. Serota graduated magna cum laude with a BS in Economics from the University of Pennsylvanias Wharton School of Business and received his MBA from UCLAs Anderson School of Management.

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Jennifer E. Hirsch. Ms. Hirsch joined the Ares Private Equity Group in February 1999 from Merrill Lynch & Co., most recently in the London office as a member of the European Leveraged Finance Group. Previously, she was with the Global Leveraged Finance Group in New York where she participated in the origination and structuring of high yield bond and mezzanine financing transactions across a number of industries. Ms. Hirsch graduated from New York Universitys Stern School of Business with a dual BS in Finance and International Business. Dror Bar-Ziv. Mr. Bar-Ziv joined the Ares Private Equity Group in June 2003 from Morgan Stanley & Co. in Hong Kong where he was a member of the Mergers, Acquisitions and Restructuring Department participating in the execution of mergers, acquisitions as well as equity and debt financings and capital restructurings across Asia and spanning various industries. Mr. Bar-Ziv graduated with honors with an AB in Government from Harvard University. Sumeet Nindrajog. Mr. Nindrajog joined the Ares Private Equity Group in August 2003 from the investment banking division of UBS Warburg LLC where he participated in the execution of restructurings, equity and debt financings, and mergers and acquisitions across various industries. Mr. Nindrajog graduated cum laude with a BS in Economics from the University of Pennsylvanias Wharton School with a concentration in Finance and Management. Nav Rahemtulla. Mr. Rahemtulla joined the Ares Private Equity Group in May 2001 from DMC Venture Capital where he was Director of Corporate Finance. He was previously a member of the Investment Banking Division of Donaldson, Lufkin & Jenrette where he participated in the execution of high yield bond and equity financings and mergers and acquisitions across various industries. Mr. Rahemtulla graduated with honors from the University of Western Ontarios Richard Ivey School of Business with concentrations in finance and marketing. Adam Stein. Mr. Stein joined the Ares Private Equity Group in September 2000 from Merrill Lynch & Co. where he was a member of the Global Leveraged Finance Group and participated in the execution of leveraged loan, high yield bond, and mezzanine financing transactions across various industries. Mr. Stein graduated with distinction from Emory Universitys Goizueta Business School, where he received a BA in Business Administration with a concentration in Finance. Legal Kevin A. Frankel. Mr. Frankel joined Ares as General Counsel in April 2003. Previously, Mr. Frankel had been Senior Vice President-Operations and General Counsel of Aurora National Life Assurance Company, a California domiciled life insurance company with over $4 billion in assets. Prior to joining Aurora, Mr. Frankel was a partner in the law firm of Irell & Manella, resident in its corporate securities group and specializing in mergers and acquisitions. Mr. Frankel received his JD in 1986 from the UCLA School of Law, where he was awarded a John M. Olin Fellowship in Law and Economics for academic achievement. He received his BA from UCLA in 1983. Marketing Mark A. Smith. Mr. Smith joined Ares in October 2003 as the Director of Marketing. From 1995 to 2003, Mr. Smith was with ING Capital Advisors (ING), most recently as Chief Executive Officer, where he was principally involved in capital raising activities that ultimately resulted in assets under management of $7 billion. Prior to joining ING, Mr. Smith was Vice President at Citicorp Securities involved in marketing loan-based products from 1993 to 1995. Additionally, Mr. Smith was Vice President at SunAmerica Investments in the high yield loan group from 1991 to 1993. Mr. Smith graduated from Salisbury University with a BA and received his MS from the University of Baltimore. Mr. Smith is a CFA charterholder. Investment Systems/Reporting and Analysis/Investor Relations Pamela Bloom. Ms. Bloom joined Ares in May 2001. After acting as an outside consultant since Ares inception, she is responsible for Ares Information Systems and Technology. Ms. Bloom has more than 18 years experience in the selection and implementation of computerized accounting systems, investment systems evaluations and implementations. She has specialized expertise in compliance requirements, AIMR complaint performance 105

measurement, and investment operations with extensive experience managing the implementation of portfolio management systems for large, buy-side institutions, including project management, data conversion, and interfacing between systems. Ms. Bloom has detailed knowledge of internal and external reporting requirements and investment systems relating to structured market funds (CDO/ CLO) holding collateral consisting of multi-currency high yield bonds, mezzanine investments and bank and term loans. Ms. Bloom graduated from the University of Arizona with a BS in Business Administration and is a Certified Public Accountant. Daniel F. Nguyen. Mr. Nguyen joined Ares in August 2000 and is currently Ares Chief Financial Officer. From 1996 to 2000, Mr. Nguyen was with Arthur Andersen LLP, where he was in charge of conducting business audits on numerous financial clients, performing due diligence investigation of potential mergers and acquisitions, and analyzing changes in accounting guidelines for derivatives. At Arthur Andersen LLP, Mr. Nguyen also focused on treasury risk management and on mortgage-backed securities and other types of structured financing. Mr. Nguyen graduated with honors from the University of Southern Californias Laventhal School of Accounting with concentration in Accounting. Mr. Nguyen is a Certified Public Accountant. Sally Overstreet. Ms. Overstreet joined Ares in July 2003 and is responsible for Ares investor relations. Previously, Ms. Overstreet was a Senior Vice President of Research with Jefferies & Co. in the Taxable Fixed Income Department from 1990 until 1996. Prior to joining Jefferies & Co, Ms. Overstreet was a Senior Vice President in the Investment Management Division of Columbia Savings and Loan from 1984 until 1990, where she was responsible for the primary credit analysis and fundamental valuation of $600 million in high yield and debt securities. Ms. Overstreet graduated from the University of California at Los Angeles with a BA in Economics. Gabriella Magana. Ms. Magana joined Ares in May 2002 and is currently Ares Controller. From 1996 to 2002, Ms. Magana was with Arthur Andersen LLP, where she was a manager in the Assurance and Business Advisory Services division who planned and administered all phases of financial statement examinations and due diligence projects for a variety of publicly traded and privately held entities. Ms. Magana graduated from the University of California at Santa Barbara with a BA in Business Economics and emphasis in Accounting and is a Certified Public Accountant. Hardy Moat. Mr. Moat joined Ares in December 2001 and is currently Ares Manager of Finance and Operations. From 1997 to 2001, Mr. Moat was with Arthur Andersen LLP, where he was in charge of conducting business audits on numerous financial markets clients, performing due diligence on potential merger and acquisition candidates, and analyzing clients financial and operational trends for efficiency and effectiveness. Mr. Moat graduated from the University of Southern California with a BS in Accounting and is a Certified Public Accountant. Henry Sum. Mr. Sum joined Ares in May 2001 and is currently Ares Manager of Reporting. From 1999 to 2001, Mr. Sum was with Alliant Foodservice (formerly Kraft Foodservice), where he was a financial analyst responsible for financial forecasting, budgeting and analysis for the Southern California districts. Mr. Sum graduated from the University of California at Los Angeles with a BA in Business Economics and emphasis in Accounting. Jenny Hashimoto. Ms. Hashimoto joined Ares in July 2003 and is focused on Ares accounting and back office operations. Previously, Ms. Hashimoto was a researcher with Ryan Miller & Associates specializing in recruiting for the financial and accounting industry sectors. She graduated with a BA in Business Administration from Loyola Marymount University. Andrew Katz. Mr. Katz joined Ares in August 2002 and is focused on supporting the Information Technology Infrastructure. He previously worked in the IT department at Global Crossing where he supported employee computer and telecommunications needs. Mr. Katz graduated with honors from California State University of Los Angeles with a BA in Industrial Technology. Scott Lem. Mr. Lem joined Ares in July 2003 and is currently Ares Manager of Finance and Accounting. Previously, Mr. Lem was a senior associate with Ernst & Young, LLP and Arthur Andersen LLP, where he was in the Assurance and Business Advisory Services divisions working on all phases of financial statement examinations and due diligence projects for a variety of publicly traded and privately held entities. He graduated summa cum laude with a BS in Accounting and a BS in Business Administration/Information Systems from the University of Southern California. Mr. Lem is a Certified Public Accountant. 106

Ian Smith. Mr. Smith joined Ares in November 2002 and is focused on quantitative and macroeconomic portfolio analysis for all of the Ares Funds. Prior to joining Ares, Mr. Smith was with DH1 Studios where he was responsible for researching financial strategies and alternatives. Prior to joining DH1 Studios, Mr. Smith was a research analyst at Imagine Venture Capital where he performed detailed financial modeling. Mr. Smith graduated from the University of Southern California with a BS in Business Administration with an emphasis in Finance. Michael Sullivan. Mr. Sullivan joined Ares in October 2003 and is focused on supporting the Information Technology Infrastructure. From 1999 to 2003, Mr. Sullivan was with Thomson Financial where he provided project management and business/technical resources for Thomson clients. Prior to joining Thomson Financial, Mr. Sullivan was a senior associate with Scudder Kemper Investments where he was responsible for the management and administration of computer data and systems for financial analysis, portfolio modeling and reporting. Mr. Sullivan graduated from California State University at Northridge (CSUN) with a BA in Communications and received his MBA from the University of Redlands. Jennifer Sun. Ms. Sun joined Ares in August 2001 and is focused on Ares accounting and operations. From 2000 to 2001, Ms. Sun was with The .tv Corporation, where she was a marketing manager responsible for implementing on-line and off-line advertising, market analysis and the statistical analysis of advertising performance. Ms. Sun graduated from the Marshall School of Business at the University of Southern California with a BS in Business Administration and emphasis in Information Systems. [remainder of page intentionally blank]

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THE MANAGEMENT AGREEMENT General The Portfolio Manager will perform certain investment management functions, including supervising and directing the investment and reinvestment of Collateral Obligations and certain Eligible Investments and perform certain administrative functions on behalf of the Issuer in accordance with the applicable provisions of the Indenture and the Management Agreement. The Portfolio Manager agrees, and will be authorized, to select the Collateral Obligations and Eligible Investments to be acquired by the Issuer, supervise, monitor, invest and reinvest the Assets, direct the Trustee with respect to the acquisition, disposition, or sale of Collateral Obligations or Eligible Investments by the Issuer, and direct the Trustee to exercise any other rights or remedies with respect to a Collateral Obligation or Eligible Investment or take any other action consistent with the Indenture that the Portfolio Manager believes are reasonably necessary to maintain the ratings assigned to the Notes by the Rating Agencies.

The Portfolio Manager will, among other things, have the right, on behalf of the Issuer, to vote or refrain from voting any Collateral Obligation and to exercise any other rights or remedies with respect thereto consistent with the Indenture. The Portfolio Manager shall perform its duties and functions under the Management Agreement in good faith and with reasonable care, using a degree of skill and attention no less than that which the Portfolio Manager exercises with respect to comparable assets, if any, that it manages for itself and exercises with respect to comparable assets that it manages for others, and in a manner which the Portfolio Manager reasonably believes to be consistent with practices and procedures followed by institutional managers of national standing relating to assets of the nature and character of the Assets. Under the Management Agreement, the Portfolio Manager shall indemnify the Issuer, its Affiliates, and their Affiliates against any losses, claims, damages, judgments, assessments, costs, or other liabilities (collectively, Liabilities) that arise out of or in connection with the performance by the Portfolio Manager of its duties under the Management Agreement and the Indenture because of acts or omissions constituting bad faith, willful misconduct, gross negligence, or reckless disregard of the obligations of the Portfolio Manager under the Management Agreement or the Indenture or the information concerning the Portfolio Manager contained in this Offering Memorandum under the headings The Portfolio Manager and Risk Factors Relating to Certain Conflicts of Interest (the Portfolio Manager Information) containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements in the Portfolio Manager Information, in the light of the circumstances under which they were made, not misleading.

United States federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith. Nothing in the Management Agreement waives or limits any rights that the Issuer may have under any applicable federal or state securities laws. Pursuant to the Management Agreement, the Issuer shall indemnify the Portfolio Manager, its Affiliates, and their Affiliates (each, an Indemnified Party) against all Liabilities, and will promptly reimburse each Indemnified Party for all reasonable fees and expenses (including reasonable fees and expenses of counsel) (collectively, the Expenses) as they are incurred in investigating, preparing, pursuing, or defending any claim, action, proceeding, or investigation with respect to any pending or threatened litigation (collectively, the Actions), caused by, or arising out of, or in connection with the issuance of the Notes (including with respect to this Offering Memorandum, any untrue statement of material fact or omission to state a material fact necessary to make the statements in this Offering Memorandum, in light of the circumstances under which they were made, not misleading), the transactions contemplated by this Offering Memorandum, the Indenture, or the Management 108

Agreement, and any action taken by, or any failure to act by, an Indemnified Party. However, an Indemnified Party shall not be indemnified for any Liabilities or Expenses it incurs as a result of any acts or omissions by the Indemnified Party constituting bad faith, willful misconduct, gross negligence, or willful breach of fiduciary duty in the performance, or reckless disregard, of the obligations of the Portfolio Manager under the Management Agreement or under the Indenture applicable to it and affecting the duties and functions that have been delegated to it under the Management Agreement or under the Indenture, it incurs with respect to Portfolio Manager Information that contains any untrue statement of material fact or omits to state a material fact necessary to make the statements in this Offering Memorandum, in the light of the circumstances under which they were made, not misleading, or resulting from any acts or omissions of the Portfolio Manager, its directors, officers, shareholders, employees, or agents constituting bad faith, willful misconduct, or gross negligence in the performance, or reckless disregard, of its duties under the Management Agreement.

The obligations of the Issuer to indemnify any Indemnified Party for any Losses shall be payable solely out of the Assets in accordance with the priority of payments. Assignment and Delegation; Termination The Portfolio Manager may not assign its rights or responsibilities under the Management Agreement without satisfaction of the Rating Condition and the written consent of the Issuer and the Holders of a Majority of the Preference Shares. Notwithstanding the foregoing, the Portfolio Manager may, without consent, assign any of its rights and delegate any of its obligations under the Management Agreement to (i) an Affiliate so long as the assignment is not an assignment for purposes of Section 205(a)(2) of the Advisers Act and the Affiliate (A) has demonstrated an ability to professionally and competently perform duties similar to those imposed on the Portfolio Manager under the Management Agreement, (B) is legally qualified and has the capacity to act as Portfolio Manager under the Management Agreement, and (C) immediately after the assignment, employs principal personnel performing the duties required under the Management Agreement who are the same individuals who would have performed the duties had the assignment not occurred, and (ii) any wholly owned subsidiary of any Affiliate of the Portfolio Manager if the subsidiary meets the criteria in subclauses (A), (B), and (C) of clause (i). The Portfolio Manager may, with the consent of the Issuer and the Holders of a Majority of the Preference Shares assign to an entity, other than an Affiliate, that immediately after the assignment employs the same principal personnel performing the duties required under the Management Agreement who are the same individuals who would have performed the duties had the assignment not occurred if the entity meets the criteria in subclauses (A) and (B) of clause (i) above and the Rating Condition has been satisfied. The Portfolio Manager may resign after 90 days prior written notice to the Issuer. The Portfolio Manager may be removed at any time by the Issuer, at the direction of the Holders of at least 66 2/3% of each Class of Note Interests, upon 90 days prior written notice to the Portfolio Manager and each Rating Agency (or such shorter notice as is acceptable to the Portfolio Manager) in the event that a material adverse change in the business and operations of the Portfolio Manager has occurred and is continuing, such that as a result of this change the Portfolio Manager no longer has the capacity or the competence to perform its obligations as Portfolio Manager. The Portfolio Manager may be removed at any time by the Issuer, at the direction of the Holders of at least 66 2/3% of each of Class of Note Interests (voting separately) and at the direction of 66 2/3% of the Holders of the 109

Preference Share Interests, after 90 days prior written notice to the Portfolio Manager and the Rating Agencies in the event that the Overcollateralization Ratio with respect to the Class A Note Interests is 107.5% or less on two consecutive Monthly Determination Dates. The Portfolio Manager may be removed at the direction of at least 66 2/3% of the Holders of the Preference Shares if both of the following events occur: a person or "group" (as defined in Section 13 of the Securities Exchange Act of 1934), other than the Portfolio Manager or its affiliate, acquires the power to vote at least 50% of the outstanding general partnership interests or other voting equity interests (other than limited partnership interests) of the Portfolio Manager (outstanding immediately prior to the acquisition of such power); and Antony P. Ressler, John H. Kissick, David A. Sachs, and Seth J. Brufsky shall all have ceased to perform their respective functions performed by them prior to the cessation for the Portfolio Manager or any entity having control of the Portfolio Manager. The Portfolio Manager may be removed for cause on the twentieth day after the date on which the Issuer or the Trustee at the direction of (i) Holders of a Majority of the Preference Shares or (ii) the Holders of a Majority of the Controlling Class deliver written notice, setting forth the reason for the removal for cause, to the Portfolio Manager and the Rating Agencies. In each case, written notice thereof shall have been given to the Holders of the Note Interests stating that termination for cause shall be effective unless rejected in writing by a Majority of Holders of each Class of Notes and the notice of rejection is received by the Issuer or the Trustee, as applicable, within 30 days after the date of the notice. The Portfolio Manager shall have the opportunity to cure or remove any breach, event, or other circumstance giving rise to a right to remove for cause stated in the removal notice. If the Portfolio Manager cures the breach, event, or other circumstance within 20 days or receipt of written notice (unless otherwise noted), the Management Agreement will continue to be in effect. For purposes of determining cause with respect to any termination, cause shall mean any one of the following events: the Portfolio Manager willfully violates, or takes any material action that it knows breaches, any material provision of the Management Agreement or the Indenture applicable to it; the Portfolio Manager breaches in any material respect any material provision of the Management Agreement or any material terms of the Indenture applicable to it (failure to meet any Coverage Tests, Concentration Limitations, or Collateral Quality Tests is not a breach) and the breach has had or could reasonably have a materially adverse effect on the Holders of the Note Interests of any Class and, if capable of being cured, is not cured within 30 days of its becoming aware of, or its receiving notice from, the Trustee of, the breach, or, if the breach is not capable of cure within 30 days, the Portfolio Manager fails to cure the breach within the period in which a reasonably diligent person could cure the breach (but in no event more than 60 days); the Portfolio Manager experiences certain bankruptcy or insolvency events;

an Event of Default occurs that consists of a default in the payment of principal of or interest on the Notes when payable or that results from any breach by the Portfolio Manager of its duties under the Management Agreement or under the Indenture that is not cured within any applicable cure period; or an act by the Portfolio Manager or any of its Affiliates that constitutes fraud or criminal activity in the performance of its obligations under the Management Agreement or the Portfolio Manager or any of its executive officers primarily responsible for administration of the Assets being indicted for a criminal offense materially related to its primary business. Any Notes and Composite Securities owned by the Portfolio Manager or any Affiliate of the Portfolio Manager shall be disregarded and deemed not to be outstanding with respect to any vote, consent, or rejection in connection with the removal of the Portfolio Manager or the waiver of cause for termination pursuant to the Management Agreement. Any Notes and Composite Securities held by the Portfolio Manager or any Affiliate of the Portfolio Manager will have voting rights with respect to all other matters as to which the Holders of Notes and

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Composite Securities are entitled to vote (including any vote in connection with the appointment of a replacement Portfolio Manager that is not affiliated with the Portfolio Manager in accordance with the Management Agreement). At any time on or after the Closing Date, the Portfolio Manager may grant to the Issuer the right to remove the Portfolio Manager without cause if the Portfolio Manager determines, in its sole discretion, that the granting of the right would avoid consolidation of the Portfolio Manager or its affiliates with the Issuer for accounting purposes and the Portfolio Manager desires to avoid consolidation. If the right is so granted to the Issuer by the Portfolio Manager, the right may be exercised by the Issuer at the direction of Holders of 80% of the stated amount of the Preference Shares. The Management Agreement shall be automatically terminated if it is determined in good faith that the Issuer or the Co-Issuer or the pool of Assets has become required to register under the Investment Company Act, and the Issuer so notifies the Portfolio Manager. Upon any resignation or removal of the Portfolio Manager while any of the Notes or Composite Securities are outstanding, the Issuer shall use its reasonable best efforts to appoint, subject to approval of a Majority of the Preference Shares, an institution as successor Portfolio Manager that is not an Affiliate of the Portfolio Manager (provided the holders of a Majority of each Class of Notes do not disapprove this appointed institution within 30 days of notice of the appointment). The institution must (i) have demonstrated an ability to professionally and competently perform duties similar to those imposed upon the Portfolio Manager under the Management Agreement, (ii) be legally qualified and have the capacity to act as successor to the Portfolio Manager under the Management Agreement in the assumption of all of the responsibilities, duties, and obligations of the Portfolio Manager under the Management Agreement and under the terms of the Indenture applicable to the Portfolio Manager and have obtained confirmation from each Rating Agency that the selection as successor to the Portfolio Manager under the Management Agreement and the assumption of all of the responsibilities, duties, and obligations of the Portfolio Manager under the Management Agreement and under the terms of the Indenture applicable to the Portfolio Manager will not, at that time, result in the downgrade or withdrawal of any of the Notes and the Composite Securities that are rated by it, (iii) not cause the Issuer or Co-Issuer or the pool of Assets to become required to register under the Investment Company Act, (iv) not cause the Issuer or the Co-Issuer to be treated as engaged in a United States trade or business or subject to United States income tax on a net income basis, and (v) accept its appointment in writing. The Issuer shall then give the Trustee and the Holders of the Controlling Class notice of the appointment, which will be effective on the tenth Business Day following the notice unless a Majority of the Controlling Class have notified the Trustee and the Issuer of their rejection of the appointment. If the Issuer has not appointed a successor within 90 days of any notice of resignation or removal of the Portfolio Manager, the Portfolio Manager may appoint a successor, and will so appoint a successor within 60 days thereafter, subject to the requirements in clauses (i) through (v) above and to the approval of the successor by a Majority of Holders of each Class of Notes. No removal of or resignation by the Portfolio Manager shall be effective until a successor Portfolio Manager has been appointed and approved. If the successor Portfolio Manager appointed by the resigning or removed Portfolio Manager is not approved, the resigning or removed Portfolio Manager may promptly petition any court of competent jurisdiction for the appointment of a successor Portfolio Manager that has satisfied the Rating Condition with respect to each Rating Agency. The appointment by any court of competent jurisdiction will not require the consent of, nor be subject to the disapproval of, the Issuer or any Holder of Notes. Upon expiration of the applicable notice period with respect to termination specified in the Management Agreement and upon acceptance by a successor Portfolio Manager of appointment, all authority and power of the Portfolio Manager under the Management Agreement and the Indenture, whether with respect to the Applicable Collateral or otherwise, shall automatically and without action by any person pass to and be vested in the successor Portfolio Manager. The retiring Portfolio Manager may require the Issuers to remove the word Ares from their names.

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Conflicts of Interest The Management Agreement generally permits the Portfolio Manager or any of its various affiliates or persons related to it to acquire or sell securities, for its own account or for the accounts of its customers, without either requiring or precluding the purchase or sale of the securities for the account of the Issuer. If, in light of market conditions and investment objectives, the Portfolio Manager determines that it would be advisable to purchase the same Collateral Obligation both for the Issuer, and either the proprietary account of the Portfolio Manager or any affiliate of the Portfolio Manager or persons related to it or another client of the Portfolio Manager, the Portfolio Manager will employ allocation procedures more fully described in the Management Agreement. Nothing in the Management Agreement shall preclude the Portfolio Manager or its affiliates or persons related to it from acting as principal, agent, or fiduciary for other clients in connection with securities simultaneously held by the Issuer or of the type eligible for investment by the Issuer or limiting any relationships the Portfolio Manager or any of its affiliates or persons related to it may have with any obligor of any Collateral Obligation. The Management Agreement provides that before all purchases from or sales to an affiliate or related persons of the Portfolio Manager or its clients, the Portfolio Manager shall have certified to the Issuer and the Trustee that the terms thereof are substantially as advantageous to the Issuer as the terms the Issuer would obtain in a comparable arms-length transaction with a non-affiliate and that the transaction is in compliance with all applicable law. Should a conflict of interest actually arise, the Portfolio Manager will endeavor to ensure that it is resolved fairly to the extent possible under the prevailing facts and circumstances. The provisions of the Management Agreement do not override the Portfolio Managers fiduciary and other duties under the Advisors Act. See Risk FactorsRelating to Certain Conflicts of Interest. Compensation As compensation for the performance of its obligations as Portfolio Manager under the Management Agreement, the Portfolio Manager will be entitled to receive from the Issuer a quarterly fee accruing from the Closing Date, payable in arrears on each Payment Date and commencing with the Payment Date in August 2004, equal to the sum of the Senior Management Fee, the Subordinated Management Fee, and the Incentive Management Fee. If Ares VIII is replaced as Portfolio Manager, any successor Portfolio Manager may be paid a Successor Management Fee, including a base management fee of up to 0.20% per annum. The aggregate of the successor Portfolio Managers base management fee and subordinated management fee shall not exceed 0.50% per annum of the Maximum Investment Amount as of the first day of each Due Period calculated on the basis of a 360-day year and the actual number of days elapsed. The Management Fee will be payable from Interest Proceeds, and, if Interest Proceeds are not sufficient, from Principal Proceeds, in accordance with the Priority of Payments. If on any Payment Date there are insufficient funds to pay the Management Fee then due in full, the amount not so paid shall be deferred and shall be payable on the later Payment Date on which any funds are available therefor, as provided in the Indenture. If amounts distributable on any Payment Date in accordance with the Priority of Payments are insufficient to pay the Subordinated Management Fee or the Incentive Management Fee in full, then a portion of the Subordinated Management Fee or the Incentive Management Fee equal to the shortfall will be deferred and will accrue interest at a rate of LIBOR for the applicable period plus 3.00% (but with respect to the Incentive Management Fee, only after the first Payment Date on which the Preference Share Internal Rate of Return for that Payment Date is 12% or more) and will be payable on subsequent Payment Dates on which funds are available therefor in accordance with the Priority of Payments. Any interest due on the amounts so deferred will thereupon constitute accrued Subordinated Management Fees or Incentive Management Fees, as applicable. The Management Agreement provides that any extraordinary expenses incurred by the Portfolio Manager in the performance of the obligations under the Management Agreement shall be reimbursed by the Issuer to the extent funds are available therefor in accordance with and subject to the limitations contained in the Indenture. Those extraordinary expenses include (i) any reasonable expenses incurred by it to employ outside lawyers or consultants reasonably necessary in connection with the evaluation, transfer, or restructuring of any Collateral 112

Obligation and any reasonable expenses incurred by it in obtaining advice from counsel (including Cayman Islands counsel) with respect to its obligations under the Management Agreement and (ii) any other reasonable out-ofpocket fees and expenses incurred in connection with the evaluation, acquisition, holding, and disposition of the Assets, but excluding, any such counsel fees and expenses, not otherwise ordered by any court, incurred in connection with any dispute between the Portfolio Manager and the Trustee or any Noteholder. Initial Portfolio The Collateral Obligations to be purchased on the Closing Date have been selected by the Portfolio Manager in accordance with the Management Agreement, the Indenture, and the Portfolio Managers customary procedures for selecting investments of a type similar to the Collateral Obligations. The Portfolio Manager has undertaken its own investigation in selecting the initial Collateral Obligations and has reviewed the information as it deemed appropriate and proper in its reasonable professional judgment. In accordance with the Management Agreement, the Portfolio Manager has further determined that each of the Collateral Obligations is eligible to be purchased on the Closing Date as described under Security for the Notes and the Composite SecuritiesCollateral Obligations. [remainder of page intentionally blank]

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SECURITY FOR THE NOTES AND THE COMPOSITE SECURITIES General The Notes, the Composite Securities, and the Issuers obligations under the Hedge Agreements and the Management Agreement will be secured by the following: the Collateral Obligations; all Workout Assets; the Collection Account, the Payment Account, the Custodial Account, the Revolving Reserve Account, the Delayed Drawdown Reserve Account, the Synthetic Security Collateral Account, the Synthetic Security Counterparty Account, the Hedge Counterparty Collateral Account, the Closing Date Expense Account, the Interest Reserve Account, and the Securities Lending Account, Eligible Investments purchased with funds on deposit in those accounts, and all income from the investment of funds in those accounts; the Management Agreement, any Securities Lending Agreements, the Hedge Agreements, and the Collateral Administration Agreement; all cash or money delivered to the Trustee (or its bailee); all proceeds with respect to the foregoing;

(the Collateral). Collateral will exclude (i) the Class 6 Collateral, (ii) amounts released from the Trustees lien in connection with certain Synthetic Securities, Hedging Agreements, and Securities Lending Agreements in accordance with the Indenture, and (iii) $500 (attributable to the issue and allotment of the Issuers ordinary shares, a transaction fee paid to the Issuer) and the Preference Shares Distribution Account and any amounts in that account. The Class 6 Composite Securities will be secured by the Class 6 Component Account and the Treasury Strip deposited to the Class 6 Component Account (the Class 6 Collateral) and all proceeds with respect to the foregoing. Collateral Obligations A Collateral Obligation is any obligation or security that, when the Issuer commits to purchase (or otherwise acquire) it, is a Loan, High-Yield Bond, a Structured Finance Obligation, Finance Lease, or Synthetic Security whose Reference Obligation is a Loan, a Structured Finance Obligation, Finance Lease, or a High-Yield Bond that is (1) (2) (3) (4) (5) Dollar-denominated and is not convertible by its obligor into any other currency; an obligation of a U.S. obligor, a Group A Country Obligor, or a Group B Country Obligor; an obligation eligible by its terms to be assigned to the Issuer and pledged by the Issuer to the Trustee for inclusion in the Collateral; not an exchangeable or convertible security that is exchangeable or convertible at the option of its issuer; not an obligation or security that has been called for redemption and is not an obligation or security that is the subject of a tender offer, voluntary redemption, exchange offer, conversion, or other similar action other than a Permitted Offer or an exchange offer in which a security that is not registered under the Securities Act is exchanged for a security that has substantially identical terms (except for transfer restrictions) but is registered under the Securities Act or a security that would otherwise qualify for purchase under the Eligibility Criteria below;

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(6)

not a Current-Pay Obligation, Non-Performing Collateral Obligation, or a Credit Risk Obligation and is not subject to material non-credit related risks (such as the non-occurrence of certain specified catastrophes) as determined by the Portfolio Manager in its sole and conclusive judgment; not an equity security or a component of an equity security unless it is a Qualified Equity Security that is an Attached Equity Security; not an obligation that will cause the Issuer to own 5% or more of the voting securities of any issuer or any securities that are immediately convertible into or immediately exercisable or exchangeable for 5% or more of the voting securities of any issuer, as determined by the Portfolio Manager; not a debt obligation that provides for the payment of interest less frequently than annually; not a debt obligation with a maturity later than one year after the Stated Maturity of the Notes; not subject to withholding tax (other than a withholding tax that relates to commitment fees with respect to a Delayed Drawdown Loan or Revolving Loan) unless the related obligor is required to make gross-up payments to the Issuer that cover the full amount of any withholding tax on an after-tax basis pursuant to the obligations or securitys underlying instrument; not a Loan or Synthetic Security related to a Loan that would require the Issuer after its purchase of the Loan or Synthetic Security to advance any funds to the related borrower or Synthetic Security counterparty or permit the borrower or Synthetic Security counterparty to require that any future advances be made except for (A) any Revolving Loan or Delayed Drawdown Loan if, simultaneously with its purchase of the Revolving Loan or Delayed Drawdown Loan, the Issuer deposited into the Revolving Reserve Account or the Delayed Drawdown Reserve Account, respectively, the maximum amount of any advances that is required of the Issuer under the related underlying instrument, and any Synthetic Security if, simultaneously with its purchase of the Synthetic Security, the Issuer posted cash collateral with (or for the benefit of) the Synthetic Security counterparty simultaneously with the Issuers purchase of or entry into the Synthetic Security in an amount not exceeding the amount of any future advances; not a lease other than a Finance Lease, and if it is a Finance Lease, then the Rating Condition with respect to each Rating Agency has been satisfied with respect to the acquisition of an interest in the Finance Lease; a Structured Finance Obligation that is a collateralized debt obligation but only if it (A) (B) (C) (D) is a collateralized loan obligation, has been assigned a rating by both Moodys and S&P, has a Moodys Rating of Ba2 or higher and an S&P Rating of BB or higher, and has not been placed on the watch list for possible downgrade by Moodys or S&P;

(7) (8)

(9) (10) (11)

(12)

(B)

(13)

(14)

(15) (16) (17) (18)

not a Structured Finance Obligation that is managed by the Portfolio Manager or an Affiliate of the Portfolio Manager; not assigned by S&P a rating that includes the subscript r, t, p, pi, or q so long as S&P rates any Class of Notes; an obligation that provides for a fixed amount of principal payable on scheduled payment dates or at maturity (or a fixed notional amount in the case of Synthetic Securities); or not an obligation that will cause the Issuer, the Co-Issuer, or the pool of Assets to be required to be registered as an investment company under the Investment Company Act. 115

Any deliverable obligation delivered to the Issuer as a result of the occurrence of any credit event under any Synthetic Security that is a Collateral Obligation will itself be a Collateral Obligation whether or not the deliverable obligation satisfies the definition of Collateral Obligation when it is delivered. The Treasury Strip shall not be a Collateral Obligation, and it shall not be taken into account in any calculations involving Collateral Obligations. Eligibility Criteria On any date during the Reinvestment Period, so long as no Event of Default is continuing, at the direction of the Portfolio Manager, the Issuer may direct the Trustee to invest or reinvest Principal Proceeds (together with Interest Proceeds, but only to the extent used to pay for accrued interest on Collateral Obligations) in Collateral Obligations (including any related deposit into the Revolving Reserve Account or the Delayed Drawdown Reserve Account or the posting by the Issuer of cash collateral with (or for the benefit of) a Synthetic Security counterparty simultaneously with the Issuers purchase of or entry into a Synthetic Security) if the conditions specified in the Indenture are satisfied. In addition, upon the sale of any Collateral Obligation and so long as no Event of Default is continuing, the Issuer (or the Portfolio Manager on behalf of the Issuer) may within 20 Business Days of the sale (or, if earlier, by the end of the then-current Due Period) (but not thereafter) direct the Trustee to invest its sale proceeds in one or more substitute Collateral Obligations satisfying the criteria specified below. In addition, at any time during or after the Reinvestment Period, at the direction of the Portfolio Manager, the Issuer may direct the Trustee to pay from amounts on deposit in the Collection Account any amount required to exercise a warrant held in the Applicable Collateral. No obligation may be purchased unless each of the conditions in the following clauses (1) through (11) (the Eligibility Criteria) is satisfied as of the date the Issuer commits to make the purchase in each case after giving effect to the purchase and all other purchases and such previously or simultaneously committed to: (1) (2) the obligation is a Collateral Obligation; each Overcollateralization Test is satisfied and, if the commitment is made on or after the third Payment Date, each Interest Coverage Test is satisfied or, if any such Coverage Test is not satisfied, both (A) the extent of compliance with the Coverage Test is not reduced and (B) the Collateral Obligation is being purchased with Principal Proceeds other than Principal Proceeds received in respect of a Defaulted Collateral Obligation or (3) (4) (5) (6) (7) (8) (9) Principal Proceeds received in respect of a Workout Asset that has been received in exchange for a Defaulted Collateral Obligation;

the Diversity Test is satisfied or, if not satisfied, the extent of compliance with the criteria is not reduced; the Weighted Average Rating Factor Test is satisfied or, if not satisfied, the extent of compliance with the criteria is not reduced; each of the limits in the definition of Concentration Limitations is satisfied or, if any such limit is not satisfied, the extent of compliance with the unsatisfied limit is not reduced; the Weighted Average Spread Test is satisfied or, if not satisfied, the extent of compliance with the criteria is not reduced; the Weighted Average Fixed Rate Coupon Test is satisfied or, if not satisfied, the extent of compliance with the criteria is not reduced; during the Reinvestment Period, the Weighted Average Life Test is satisfied or, if not satisfied, the extent of compliance with the criteria is not reduced; the Weighted Average Moodys Recovery Rate Test is satisfied or, if not satisfied, the extent of compliance with the criteria is not reduced; 116

(10) (11)

the Weighted Average S&P Recovery Rate Test is satisfied or, if not satisfied, the extent of compliance with the criteria is not reduced; and the S&P CDO Monitor Test is satisfied or, if not satisfied, the extent of compliance with the criteria is not reduced. This requirement shall not apply either to reinvestment of the proceeds from the sale of a Credit Risk Obligation, Non-Performing Collateral Obligation, or Workout Asset or to the reinvestment of Principal Proceeds in respect of Defaulted Collateral Obligations.

After the Reinvestment Period if none of the ratings of the Note Interests and the Composite Securities have been withdrawn or downgraded by any Rating Agency or put on credit watch with negative implications by any Rating Agency, at the direction of the Portfolio Manager, the Issuer may reinvest the proceeds or sale proceeds of Prepaid Collateral Obligations and Credit Improved Obligations in one or more substitute Collateral Obligations that: (A) (B) (C) (D) (E) after giving effect to the substitution, satisfy the Eligibility Criteria, without limiting the preceding clause (A), after giving effect to the substitution, satisfy the limit in item (22) of the definition of Concentration Limitations and satisfy the Collateral Quality Tests, have a Moodys Rating equal to or higher than the Moodys Rating of the Prepaid Collateral Obligation or the Credit Improved Obligation, as applicable, have an S&P Rating equal to or higher than the S&P Rating of the Prepaid Collateral Obligation or the Credit Improved Obligation, as applicable, in the case of sales of Prepaid Collateral Obligations or Credit Improved Obligations, have a par value at least equal to the par value of the Prepaid Collateral Obligation or Credit Improved Obligation, if the Prepaid Collateral Obligation was a Credit Risk Obligation, are of better credit quality (in the judgment of the Portfolio Manager) than that of the Credit Risk Obligation, have a stated maturity falling on or before the stated maturity of the Prepaid Collateral Obligation or the Credit Improved Obligation, as applicable, without limiting the preceding clause (A), after giving effect to the substitution, do not increase the Weighted Average Life, and after giving effect to the substitution, will result in the Class A Coverage Tests being satisfied.

(F) (G) (H) (I)

The Issuer may, at the direction of the Portfolio Manager, exchange a Collateral Obligation for another Collateral Obligation in an exchange of one security for another security of the same issuers that has substantially identical terms except transfer restrictions. Cash on deposit in the Collection Account may be invested at any time in Eligible Investments in accordance with this Eligibility Criteria Section pending investment in Collateral Obligations. The Indenture provides that any sale or purchase by the Issuer of a Collateral Obligation shall be conducted on an arms length basis and, if effected with the Portfolio Manager or a person Affiliated with the Portfolio Manager or any fund or account for which the Portfolio Manager or an Affiliate of the Portfolio Manager acts as investment adviser, shall be effected in accordance with the requirements the Management Agreement on terms no less favorable to the Issuer than would be the case if the person were not so Affiliated. Notwithstanding anything contained in the foregoing provisions to the contrary, the Issuer, at the direction of the Portfolio Manager, may effect any sale of any Pledged Obligation, or any purchase of any security, loan, or participation interest in a loan, that has been consented to in writing by Holders of 75% of the Aggregate

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Outstanding Amount of each Class of Notes, by each Holder of Composite Securities, and by each Holder of Preference Shares and of which each Rating Agency and the Trustee have been notified in writing. Additional Tax-Related Operating Issues The Portfolio Manager will follow certain procedures (the Additional Tax-Related Restrictions) in connection with the acquisition of Collateral Obligations that are intended to avoid the Issuers being engaged in the conduct of a trade or business within the United States for U.S. federal income tax purposes. The Portfolio Manager makes no representation or warranty as to whether those procedures are sufficient for that purpose. Acquisition of Collateral Obligations The Issuer shall use commercially reasonable efforts to purchase, or to enter into binding agreements to purchase, Collateral Obligations by the Ramp-Up Completion Date, that, together with the Collateral Obligations purchased on or before the Closing Date and then held by the Issuer, will satisfy, as of the Ramp-Up Completion Date, the Collateral Quality Tests, the Concentration Limitations, and the Overcollateralization Tests. Each purchase after the Closing Date, and each binding agreement to purchase entered into after the Closing Date, must satisfy the Eligibility Criteria. The Issuer or the Portfolio Manager, on behalf of the Issuer, shall provide a notice to each Rating Agency specifying the circumstance and describing in reasonable detail the steps that are then being undertaken by the Issuer and the Portfolio Manager in a timely manner to the extent that on each date the number of days after the Closing Date specified in the table below the Issuer has not purchased, or entered into binding agreements to purchase, Collateral Obligations that, together with the Collateral Obligations purchased on or before the Closing Date by the Issuer, have an Aggregate Principal Balance of at least the amount specified in the table below for that date.
Number of Days After the Closing Date Aggregate Par Amount of Floating Rate Obligations and Eligible Investments Resulting from the Sale or Prepayment of Floating Rate Obligations Aggregate Par Amount of Fixed Rate Obligations and Eligible Investments Resulting from the Sale or Prepayment of Fixed Rate Obligations Target Diversity Score

60 90 120

U.S.$350,000,000 U.S.$375,000,000 U.S.$400,000,000

U.S.$9,000,000 U.S.$18,180,000 U.S.$27,000,000

45 50 55

Within two Business Days after the Ramp-Up Completion Date, the Issuer or the Portfolio Manager, on behalf of the Issuer, shall give the Trustee and the Rating Agencies notice of its occurrence. If the occurrence of the Ramp-Up Completion Date is determined on the basis of the Issuer having entered into agreements to purchase Collateral Obligations for settlement on or following the Ramp-Up Completion Date in accordance with customary settlement procedures in the relevant markets and any of those agreements do not settle in accordance with customary settlement procedures, the Portfolio Manager shall promptly notify the Rating Agencies and the Trustee. Within 30 Business Days after the Ramp-Up Completion Date, the Issuer or the Portfolio Manager, on behalf of the Issuer, shall request a Rating Confirmation on behalf of the Issuer and provide a report to the Rating Agencies identifying the Collateral Obligations then included in the Collateral. Together with the delivery of the Monthly Report following the Ramp-Up Completion Date, the Issuer shall obtain and deliver to the Trustee an accountants agreed upon procedures report or a certification from the Portfolio Manager

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(i)

confirming the information with respect to each Collateral Obligation owned by the Issuer as of the date of the Monthly Report following the Ramp-Up Completion Date and the information provided by the Issuer with respect to every other asset included in the Applicable Collateral, by reference to the sources specified in the certificate, confirming as of the date of the Monthly Report (A) whether each Overcollateralization Test is met; (B) the Aggregate Principal Balance of the Collateral Obligations that the Issuer owned as of the Ramp-Up Completion Date, and (C) whether the Collateral Obligations comply with all of the requirements of the Collateral Quality Tests and the Concentration Limitations; and specifying the procedures undertaken by them to review data and computations relating to the foregoing statements.

(ii)

(iii)

The Collateral Quality Tests The Collateral Quality Tests will be used primarily as criteria for purchasing Collateral Obligations. See Eligibility Criteria. The Collateral Quality Tests will consist of the Diversity Test, the Weighted Average Life Test, the Weighted Average Moodys Recovery Rate Test, the Weighted Average S&P Recovery Rate Test, the Weighted Average Fixed Rate Coupon Test, the Weighted Average Spread Test, the Weighted Average Rating Factor Test, and the S&P CDO Monitor Test described below. Measurement of the degree of compliance with the Collateral Quality Tests will be required on each Measurement Date. The Diversity Test The Diversity Test is a test that will be satisfied if, as of any Measurement Date, the Diversity Score as of the Measurement Date is equal to or greater than the Minimum Diversity Score specified in the applicable row of the Ratings Matrix. The Diversity Score is a single number that indicates collateral concentration in terms of both issuer and industry concentration. A higher Diversity Score reflects a more diverse portfolio. Weighted Average Life Test The Weighted Average Life Test is a test that will be satisfied as of any Measurement Date if the Weighted Average Life on that date of all Collateral Obligations is equal to or less than the number of years in the table below opposite the period in the table below in which the Measurement Date occurs. Period From the Closing Date to the Payment Date in August 2004 From the Payment Date in August 2004 to the Payment Date in November 2004 From the Payment Date in November 2004 to the Payment Date in February 2005 From the Payment Date in February 2005 to the Payment Date in May 2005 From the Payment Date in May 2005 to the Payment Date in August 2005 From the Payment Date in August 2005 to the Payment Date in November 2005 From the Payment Date in November 2005 to the Payment Date in February 2006 Maximum Weighted Average Life 9 years 8.75 years 8.50 years 8.25 years 8 years 7.75 years 7.5 years

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From the Payment Date in February 2006 to the Payment Date in May 2006 From the Payment Date in May 2006 to the Payment Date in August 2006 From the Payment Date in August 2006 to the Payment Date in November 2006 From the Payment Date in November 2006 to the Payment Date in February 2007 From the Payment Date in February 2007 to the Payment Date in May 2007 From the Payment Date in May 2007 to the Payment Date in August 2007 From the Payment Date in August 2007 to the Payment Date in November 2007 From the Payment Date in November 2007 to the Payment Date in February 2008 From the Payment Date in February 2008 to the Payment Date in May 2008 From the Payment Date in May 2008 to the Payment Date in August 2008 From the Payment Date in August 2008 to the Payment Date in November 2008 From the Payment Date in November 2008 to the Payment Date in February 2009 From the Payment Date in February 2009 to the Payment Date in May 2009 From the Payment Date in May 2009 to the Payment Date in August 2009 From the Payment Date in August 2009 to the Payment Date in November 2009 From the Payment Date in November 2009 to the Payment Date in February 2010 From the Payment Date in February 2010 to the Payment Date in May 2010 Weighted Average Moodys Recovery Rate Test

7.25 years 7 years 6.75 years 6.5 years 6.25 years 6.0 years 5.75 years 5.50 years 5.25 years 5 years 4.75 years 4.50 years 4.25 years 4 years 3.75 years 3.50 years 3.25 years

The Weighted Average Moodys Recovery Rate Test is a test that is satisfied as of any Measurement Date if the Moodys Minimum Average Recovery Rate is greater than or equal to 42.50%. Weighted Average S&P Recovery Rate Test The Weighted Average S&P Recovery Rate Test is a test that is satisfied as of any Measurement Date if the S&P Minimum Average Recovery Rate is greater than or equal to 53.67%. S&P Minimum Average Recovery Rate: As of any Measurement Date, a rate equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Obligation (other than Defaulted Collateral Obligations) by its respective S&P Priority Category Recovery Rate, (ii) dividing that sum by the sum of the Aggregate Principal Balance of all Collateral Obligations (other than Defaulted Collateral Obligations), and (iii) rounding up to the first decimal place. Weighted Average Fixed Rate Coupon Test The Weighted Average Fixed Rate Coupon Test is a test that is satisfied as of any Measurement Date if the Weighted Average Fixed Rate Coupon equals or exceeds 8.15%. 120

Weighted Average Spread Test The Weighted Average Spread Test is a test that is satisfied as of any Measurement Date if the Weighted Average Spread as of the Measurement Date equals or exceeds the Minimum Weighted Average Spread specified in the applicable row of the Ratings Matrix. Weighted Average Rating Factor Test The Weighted Average Rating Factor Test is a test that is satisfied as of any Measurement Date, if the Weighted Average Moodys Rating Factor of the Collateral Obligations (excluding Eligible Investments) is less than or equal to the Maximum Weighted Average Moodys Rating Factor specified in the applicable row of the Ratings Matrix. S&P CDO Monitor Test The S&P CDO Monitor Test is a test that will be satisfied on any Measurement Date if, after giving effect to the sale of a Collateral Obligation or the purchase of a Collateral Obligation, each Note Class Loss Differential of the Proposed Portfolio is positive. The S&P CDO Monitor Test shall be considered to be improved if each Note Class Loss Differential of the Proposed Portfolio is at least equal to the corresponding Note Class Loss Differential of the Current Portfolio. The S&P CDO Monitor Test is not required to be satisfied or improved upon the sale of a Credit Risk Obligation and the reinvestment of the related sale proceeds in additional Collateral Obligations. For purposes of the S&P CDO Monitor Test, (i) (ii) (iii) the S&P Rating of any S&P Unrated DIP Loan shall be CCC-, the S&P Industry Classification for a Synthetic Security shall be that of the related Reference Obligation and not the Synthetic Security, and the S&P Rating for any Collateral Obligation that is (A) on credit watch positive for possible upgrade by S&P shall be the S&P Rating one subcategory above the S&P Rating otherwise applicable to the Collateral Obligation, and (B) on credit watch negative for possible downgrade by S&P shall be the S&P Rating one sub-category below the S&P Rating otherwise applicable to the Collateral Obligation.

The Note Class Loss Differential for any Measurement Date and any Class of Notes that is rated by S&P is the rate calculated by subtracting the estimated cumulative default rate for the Current Portfolio or the Proposed Portfolio, as applicable, consistent with S&Ps rating of the Class of Note Interests on the Closing Date, determined by application of the S&P CDO Monitor proprietary computer model for the Class from the applicable Note BreakEven Loss Rate for the Class of Note Interests. The Note Break-Even Loss Rate for each Class of Notes that is rated by S&P is the maximum percentage of defaults that the Current Portfolio or Proposed Portfolio can sustain and nevertheless sufficient funds will remain for the payment of principal of the Class of Notes in full by its Stated Maturity and the timely payment of interest on the Class A Notes and the ultimate payment of interest on the Class B, Class C, and Class D Notes using S&Ps assumptions on recoveries, defaults, and timing, and taking into account the Priority of Payments and the adjusted Weighted Average Spread level specified in the applicable row of the table below. The adjusted Weighted Average Spread as of any Measurement Date is the Weighted Average Spread as of the Measurement Date minus the amount of any Spread Excess added to the Weighted Average Fixed Rate Coupon as of the Measurement Date.

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Row 1 2 3 4 5

Adjusted Weighted Average Spread Greater than or equal to 3.15% Greater than or equal to 3.00% but less than 3.15% Greater than or equal to 2.85% but less than 3.00% Greater than or equal to 2.75% but less than 2.85% Greater than or equal to 2.65% but less than 2.75%

Dispositions of Collateral Obligations Pursuant to the Indenture and so long as no Event of Default has occurred and is continuing, the Issuer may, at the direction of the Portfolio Manager, direct the Trustee to sell (and the Trustee will sell) any Collateral Obligation or Workout Asset if the sale meets the requirements in paragraphs (i) through (ix) below: (i) Credit Risk Securities. At the direction of the Portfolio Manager, the Issuer may direct the Trustee to sell any Credit Risk Obligation at any time during or after the Reinvestment Period without restriction. Following any sale of a Credit Risk Obligation pursuant to the Indenture, at the direction of the Portfolio Manager during the Reinvestment Period, the Issuer shall use commercially reasonable efforts to purchase additional Collateral Obligations (to the extent the purchase is in the best interest of the Issuer) with an Aggregate Principal Balance at least equal to the Sale Proceeds received by the Issuer with respect to the Collateral Obligation sold. For this purpose, the Principal Balance of any Revolving Loan or Delayed Drawdown Loan shall only include its funded amount. Credit Improved Securities. At the direction of the Portfolio Manager, the Issuer may direct the Trustee to sell any Credit Improved Obligation if either: (1) the sale proceeds received in respect of the Credit Improved Obligation are at least equal to its Investment Criteria Adjusted Balance and during the Reinvestment Period, the Portfolio Manager reasonably believes before the sale that it will be able to cause the Issuer to reinvest its sale proceeds, in compliance with the Eligibility Criteria, in one or more additional Collateral Obligations with an Aggregate Principal Balance at least equal to the Investment Criteria Adjusted Balance of the Credit Improved Obligation pursuant to one or more agreements to purchase (providing for settlement in accordance with customary settlement procedures in the relevant markets) entered into by the Issuer within 20 Business Days of the sale (and, following any such sale, the Issuer shall use commercially reasonable efforts to enter into one or more the agreements within the 20 Business Day period). For this purpose, the Principal Balance of any Revolving Loan or Delayed Drawdown Loan shall only include its funded amount and Principal Balance shall include the principal balance of Collateral Obligations that the Trustee does not have a first priority perfected security interest in; or during the Reinvestment Period, the Portfolio Manager reasonably believes before the sale that it will be able to cause the Issuer to reinvest its Sale Proceeds, in compliance with the Eligibility Criteria, in one or more additional Collateral Obligations with an Aggregate Principal Balance at least equal to the Investment Criteria Adjusted Balance of the Credit Improved Obligation pursuant to one or more agreements to purchase (providing for settlement in accordance with customary settlement procedures in the relevant markets) entered into by the Issuer within 20 Business Days of the sale (and, following any such sale, the Issuer shall use commercially reasonable efforts to enter into one or more the agreements within the 20 Business Day period). For this purpose, the Principal Balance of any Revolving Loan or Delayed Drawdown Loan shall only include its funded amount and Principal Balance shall include the principal balance of Collateral Obligations that the Trustee does not have a first priority perfected security interest in;

(ii)

(2)

and the Trustee shall sell the Credit Improved Obligation in accordance with the direction. (iii) Non-Performing Collateral Obligations and Current-Pay Obligations. At the direction of the Portfolio Manager, the Issuer may direct the Trustee to sell any Non-Performing Collateral Obligation or 122

Current-Pay Obligation at any time during or after the Reinvestment Period without restriction. NonPerforming Collateral Obligations may be sold regardless of price. A Current Pay Obligation may be sold only if the sale proceeds are at least equal to its Investment Criteria Adjusted Balance. (iv) Non-qualifying Securities. At the direction of the Portfolio Manager, the Issuer may direct the Trustee to sell any obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of a Collateral Obligation at any time during or after the Reinvestment Period without restriction. Withholding Tax Sales. At the direction of the Portfolio Manager, the Issuer may direct the Trustee to sell any Collateral Obligation subject to withholding tax at any time during or after the Reinvestment Period without restriction. Optional Redemption. After the Issuer has notified the Trustee of an Optional Redemption, at the direction of the Portfolio Manager, the Issuer shall direct the Trustee to sell all or a portion of the Collateral Obligations as contemplated therein if the conditions and requirements in respect of an Optional Redemption under the Indenture have been satisfied and the independent certified public accountants appointed pursuant to the Indenture have confirmed the calculations contained in any required certificate furnished by the Portfolio Manager pursuant to the Indentures Note Interest redemption procedure provisions. After a Majority of the Preference Shares have directed an Optional Redemption in accordance with the Indenture, at the direction of the Portfolio Manager, the Issuer shall direct the Trustee to sell all of the remaining Collateral Obligations pursuant to the Indenture or a portion of the remaining Collateral Obligations pursuant to the Indenture and in accordance with the unanimous directions of Holders of the Preference Shares. Rating Confirmation Failure. After the Portfolio Manager has received notice of a Rating Confirmation Failure and if available Interest Proceeds and Principal Proceeds are insufficient to effect the redemption of the Notes at par on any subsequent Payment Date in accordance with the Priority of Payments as and to the extent necessary for each of Moodys and S&P to confirm the ratings assigned by it on the Closing Date to the Securities, the Issuer may, at the direction of the Portfolio Manager, direct the Trustee to sell Collateral Obligations as contemplated in the Indenture. Discretionary Sales. At the direction of the Portfolio Manager, the Issuer may direct the Trustee to sell any Collateral Obligation: (1) (2) at any time on or before the Ramp-Up Completion Date (without regard to any restriction specified in clause (2) below); and at any time after the Ramp-Up Completion Date if: (A) after giving effect to the sale and the sale of any other Collateral Obligations whose sale is pending, the Aggregate Principal Balance of all Collateral Obligations sold under Discretionary Sales (in each case determined as of the date the direction to sell is given) during each successive rolling twelve month period is not greater than 20% of the Maximum Investment Amount measured as of the beginning of each period. For the purpose of determining the percentage of Collateral Obligations sold during any such period, (i) the amount of any Collateral Obligation sold shall be reduced to the extent of any purchases of Collateral Obligations of the same obligor (which are pari passu with such sold Collateral Obligation) occurring within 20 Business Days of the sale (determined based on the date of any relevant trade confirmation or commitment letter) (but only for so long as (x) the Collateral Obligations purchased have not been downgraded by any of the Rating Agencies during the 20 Business Day period, (y) the Collateral Obligations have not been purchased from the Portfolio Manager or any of its Affiliates acting, in each case, as principal, and (z) the purchase price of each such Collateral Obligation must not exceed the sale price of the sold Collateral Obligation) and (ii) any Synthetic Security that is a basket or portfolio of credit

(v)

(vi)

(vii)

(viii)

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default swaps that is reinvested into a substantially similar basket or portfolio of credit default swaps but with a later maturity shall be treated as having been sold; and (B) either:

(1) the sale proceeds received in respect of the Collateral Obligation are at least equal to its Investment Criteria Adjusted Balance and during the Reinvestment Period, the Portfolio Manager reasonably believes before the sale that it will be able to cause the Issuer to reinvest its Sale Proceeds, in compliance with the Eligibility Criteria, in one or more additional Collateral Obligations with an Aggregate Principal Balance at least equal to the Investment Criteria Adjusted Balance of the Collateral Obligation pursuant to one or more agreements to purchase (providing for settlement in accordance with customary settlement procedures in the relevant markets) entered into by the Issuer within 20 Business Days of the sale (and, following any such sale, the Issuer shall use commercially reasonable efforts to enter into one or more such agreements within the 20 Business Day period). For this purpose, the Principal Balance of any Revolving Loan or Delayed Drawdown Loan shall only include its funded amount and Principal Balance shall include the principal balance of Collateral Obligations that the Trustee does not have a first priority perfected security interest in; or (2) during the Reinvestment Period, the Portfolio Manager reasonably believes before the sale that it will be able to cause the Issuer to reinvest its Sale Proceeds, in compliance with the Eligibility Criteria, in one or more additional Collateral Obligations with an Aggregate Principal Balance at least equal to the Investment Criteria Adjusted Balance of the Collateral Obligation pursuant to one or more agreements to purchase (providing for settlement in accordance with customary settlement procedures in the relevant markets) entered into by the Issuer within 20 Business Days of the sale (and, following any such sale, the Issuer shall use commercially reasonable efforts to enter into one or more such agreements within the 20 Business Day period). For this purpose, the Principal Balance of any Revolving Loan or Delayed Drawdown Loan shall only include its funded amount and Principal Balance shall include the principal balance of Collateral Obligations that the Trustee does not have a first priority perfected security interest in. However, if the rating by Moodys of the Class A Note Interests is one or more rating subcategories below the Initial Rating of the Class A Note Interests or has been withdrawn or the rating by Moodys of the Class B Note Interests or Class C Note Interests is two or more rating sub-categories below the initial rating of the Class B Note Interests or Class C Note Interests or has been withdrawn, no Collateral Obligations may be sold pursuant to Discretionary Sales. The Portfolio Manager may, by notice to the Issuer, the Trustee, and the Collateral Administrator, seek a waiver of this requirement in connection with discretionary sales, subject to obtaining the consent of a Majority of this Controlling Class. (ix) Workout Assets. At the direction of the Portfolio Manager, the Issuer may direct the Trustee to sell any Workout Asset at any time during or after the Reinvestment Period without restriction and regardless of price.

Hedge Agreements On or before the Closing Date and from time to time thereafter, the Issuer, at the direction of the Portfolio Manager, shall enter into the Hedge Agreements and shall assign the Hedge Agreements to the Trustee pursuant to the Indenture and the collateral assignment of Hedge Agreements. The Portfolio Manager, on behalf of the Issuer, shall obtain the approval of each new Hedge Agreement from each Hedge Counterparty to a then-existing Hedge Agreement. The Trustee shall, on behalf of the Issuer and in accordance with the Valuation Report, pay amounts due to the Hedge Counterparties under the Hedge Agreements on any Payment Date in accordance with the Priority of Payments.

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Each Hedge Counterparty will be required to have a debt rating by Moodys for long-term debt of Aa3 (which rating of Aa3 is not on credit watch for a possible downgrade) or higher if the Hedge Counterparty has only a long-term rating; or a debt rating by Moodys for long-term debt of A1 (which rating of A1 is not on credit watch for possible downgrade) or higher and a debt rating by Moodys for short-term debt of P-1 (and not on credit watch for possible downgrade) if the Hedge Counterparty has both long-term and short-term ratings and a short-term debt rating by S&P of not less than A-1 or a long-term debt rating of not less than A+. If at any time a Hedge Counterparty has: (A) only a long-term Moodys rating and that rating is below Aa3 or is Aa3 and has been placed on credit watch for possible downgrade by Moodys; or (B) both a short-term and long-term Moodys rating; and either the long-term Moodys rating is below A1 or that rating is A1 and has been placed on credit watch for possible downgrade by Moodys, or the short-term Moodys rating is below P-1 or that rating is P-1 and has been placed on credit watch for possible downgrade by Moodys

then the Hedge Counterparty shall be required, at its sole expense, to, within 30 days, either: (i) post collateral to the Issuer to secure the Hedge Counterpartys obligations under the Hedge Agreement, in an amount and of the type sufficient to cause the Rating Condition with respect to Moodys to be satisfied; (ii) obtain a guarantor whose short-term and long-term debt ratings equal or exceed the above criteria; (iii) replace itself under the related or substantially equivalent Hedge Agreement with a substitute Hedge Counterparty whose short-term and long-term debt ratings equal or exceed the above criteria; or (iv) take other actions to satisfy the Rating Condition with respect to Moodys. If at any time the Hedge Counterparty has: (A) only a long-term Moodys rating that is A2 or below or has been suspended or withdrawn; (B) both a short-term and long-term Moodys rating; and either the long-term Moodys rating is A3 or below or is suspended or withdrawn, or the short-term Moodys rating is P-2 or below, or

(C) a short-term debt rating by S&P below A-1 and, if the Hedge Counterparty has a long-term rating by S&P, a long-term rating by S&P below A+ or that has been suspended or withdrawn; then the Hedge Counterparty shall be required, at its sole expense, to, within 30 days, either: (i) post collateral to the Issuer to secure the Hedge Counterpartys obligations under the Hedge Agreement, in an amount equal to the greater of: (1) the next payment due under the Hedge Agreement, (2) 1% of the notional amount of the Hedge Agreement, and (3) the markto-market value of the Hedge Agreement and to continue to make commercially reasonable efforts or, after 30 days, best efforts, to find either a guarantor pursuant to clause (ii)(x) below or a replacement Hedge Counterparty pursuant to clause (ii)(y) below, provided that the obligation to post collateral shall continue until the completion of the requirements referenced in either of clauses (ii)(x) or (ii)(y) below; or (ii) (x) obtain a guarantor that has short-term and long-term debt ratings that are equal or exceed the above criteria and that will satisfy the Rating Condition with respect to S&P with respect to its appointment; (y) replace itself under the related or substantially equivalent Hedge Agreement with a substitute Hedge Counterparty whose short-term and long-term debt 125

ratings equal or exceed the above criteria and the appointment of which will satisfy the S&P Rating Condition; or (z) take such other actions to satisfy the Moodys Rating Condition and the S&P Rating Condition. Any payments required to be made under the Hedge Agreements shall be made in accordance with the Priority of Payments. Hedge termination payments shall be subordinate to interest and principal payments on the Note Interests, the Class 6 Component, and any other payments required to be made by the Issuer under the Hedge Agreements, but senior to distributions to the Preference Share Paying Agent for payment to the holders of the Preference Share Interests pursuant to the Preference Share Documents. Unless the Rating Condition with respect to each Rating Agency is otherwise satisfied, following the early termination of a Hedge Agreement (other than on a Redemption Date) the Issuer, at the direction of the Portfolio Manager, shall promptly, but no later than 60 days after the early termination, enter into a replacement hedge, unless, in the exercise of the Portfolio Managers reasonable business judgment, to do so would not be in the best interest of the Issuer and the Rating Condition with respect to each Rating Agency is satisfied with respect to not entering into a replacement hedge. In addition, a replacement hedge may not be entered into unless the Rating Condition with respect to each Rating Agency is satisfied with respect to the replacement hedge. The Issuer shall use commercially reasonable efforts to cause the termination of a Hedge Agreement (other than a termination resulting from the bankruptcy, insolvency, or similar event with respect to the Hedge Counterparty) to become effective simultaneously with its entering into a replacement hedge. To the extent that (i) the Portfolio Manager determines not to replace the Hedge Agreement and the Rating Condition with respect to each Rating Agency is satisfied with respect to the determination; or (ii) termination is occurring on a Redemption Date, the Hedge Termination Receipts shall become part of Principal Proceeds and be distributed in accordance with the Priority of Payments on the next Payment Date (or on the Redemption Date, if the Notes and the Preference Shares are redeemed on the Redemption Date). The notional amounts of the Hedge Agreements outstanding at any time may be reduced or increased from time to time, by the Issuer, and the Hedge Agreements may be amended, modified, or terminated in accordance with the Hedge Agreements if the Rating Condition with respect to each Rating Agency is satisfied with respect to the reduction, increase, amendment, modification, or termination, as the case may be. Each Hedge Agreement may be terminated pursuant to its terms upon an Optional Redemption of the Note Interests or an acceleration of maturity of the Note Interests after an Event of Default. The Hedge Agreement will not be permitted to be terminated as the result of a Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default unless any acceleration of maturity of the Note Interests resulting from the Event of Default is no longer permitted to be rescinded pursuant to the Indenture. Except for Hedge Agreements entered into on or before the Closing Date, the Issuer shall not enter into any Hedge Agreement unless the Rating Condition with respect to each Rating Agency is satisfied. Securities Lending The Indenture permits the Issuer to engage in a limited number of securities lending transactions as described below. The Portfolio Manager may instruct the Trustee to lend Collateral Obligations that are not Defaulted Collateral Obligations for a term of 90 days or less to banks, broker-dealers, and other financial institutions (other than insurance companies) having long-term and short-term senior unsecured debt ratings or guarantors with ratings of at least A1 (and not A1 but on credit watch with negative implications) and P-1 (and not on credit watch for possible downgrade) from Moodys and at least A-1 from S&P (each, a Securities Lending Counterparty) pursuant to one or more agreements (each, a Securities Lending Agreement). The Trustee shall release any lent Collateral Obligations to a Securities Lending Counterparty as directed by the Portfolio Manager. The Securities Lending Counterparties may be Affiliates of the Initial Purchaser or Affiliates of the Portfolio Manager. The duration of any Securities Lending Agreement shall not exceed the Stated Maturity of the Securities. Collateral Obligations representing no more than 15% (measured by Aggregate Principal Balance) of the Maximum Investment Amount may be loaned pursuant to Securities Lending Agreements at any time. 126

Each Securities Lending Agreement shall be on market terms (except to the extent specified in the Indenture) and shall among other things: (i) require that the Securities Lending Counterparty return to the Issuer debt obligations that are identical (in terms of issue and class) to the lent Collateral Obligations; (ii) require that the Securities Lending Counterparty pay to the Issuer amounts equivalent to all interest and other payments that the owner of the lent Collateral Obligation is entitled to for the period during which the Collateral Obligation is lent and require that any such not be subject to withholding tax imposed by any jurisdiction unless the Securities Lending Counterparty is required under the Securities Lending Agreement to make gross-up payments to the Issuer that cover the full amount of the withholding tax on an after-tax basis; (iii) require that the Rating Condition with respect to each Rating Agency shall be satisfied with respect to the execution of the Securities Lending Agreement; (iv) provide for early termination and the delivery of any lent Collateral Obligation with no penalty if the Collateral Obligation becomes a Credit Risk Obligation or is subject to redemption in accordance with its terms; (v) provide for early termination and the delivery of any lent Collateral Obligation with no penalty upon any redemption of the Notes in whole; (vi) require the Securities Lending Counterparty to post with the Trustee collateral consisting of cash or direct registered debt obligations of the United States of America that have a maturity date no later than the Business Day preceding the stated termination date of the Securities Lending Agreement to secure its obligation to return the Collateral Obligations or in the alternative post that collateral with a trustee for the benefit of the Issuer designated by the Securities Lending Counterparty that satisfies the requirements with respect to being a securities intermediary with respect to the posted collateral if that trustee would qualify to be a successor trustee under the Indenture; (vii) provide that the Securities Lending Applicable Collateral shall be maintained at all times in an amount equal to at least 102% of the current Market Value (determined daily and monitored by the Portfolio Manager) of the lent Collateral Obligations and if securities are delivered to the Trustee as security for the obligations of the Securities Lending Counterparty under the related Securities Lending Agreement, the Portfolio Manager on behalf of the Issuer will negotiate with the Securities Lending Counterparty a rate for the loan fee to be paid to the Issuer for lending the lent Collateral Obligations; (viii) the lent Collateral Obligations shall be marked-to-market on a daily basis on the basis of their Market Value; (ix) the Applicable Collateral will include the Issuers rights under the related Securities Lending Agreement rather than the loaned Collateral Obligation; (x) provide for early termination within 30 days at the option of the Issuer and the delivery of any lent Collateral Obligation with no penalty if the Securities Lending Counterparty is no longer in compliance with the requirements relating to the credit ratings of the Securities Lending Counterparty and the noncompliance is not cured as provided in the Indenture; and (xi) contain appropriate limited recourse and non-petition provisions (to the extent the Issuer has contractual payment obligations to the Securities Lending Counterparty) equivalent (mutatis mutandis) to those in the Indenture. In addition, each Securities Lending Agreement must provide that if either Moodys or S&P downgrades a Securities Lending Counterparty such that the Securities Lending Agreements to which the Securities Lending 127

Counterparty is a party are no longer in compliance with the requirements relating to the credit ratings of the Securities Lending Counterparty, then the Issuer, within 30 days of the downgrade, shall (i) terminate its Securities Lending Agreements with the Securities Lending Counterparty unless a guarantor for the Securities Lending Counterpartys obligations under the Securities Lending Agreements has been obtained; or (ii) reduce the percentage of the Aggregate Principal Balance of the Collateral Obligations lent to the downgraded Securities Lending Counterparty so that the Securities Lending Agreements to which the Securities Lending Counterparty is a party, together with all other Securities Lending Agreements, are in compliance with the requirements relating to the credit ratings of Securities Lending Counterparties; or (iii) take any other steps Moodys or S&P may require to cause the Securities Lending Counterpartys obligations under the Securities Lending Agreements to which the Securities Lending Counterparty is a party to be treated by Moodys or S&P, as the case may be, as if the obligations were owed by a counterparty having a rating at least equivalent to the rating that was assigned by Moodys or S&P, as the case may be, to the downgraded Securities Lending Counterparty before its being downgraded. The Portfolio Manager shall instruct the Trustee in writing with respect to the administration of any Securities Lending Agreement (including with respect to any default and the exercise of rights under it). The Trustee shall not have any responsibility for evaluating the sufficiency, validity, or acceptability of any Securities Lending Agreement or for the qualifications or eligibility of any Securities Lending Counterparty. Nothing in the Indenture shall be construed to cause the Trustee to have any fiduciary duties to any Securities Lending Counterparty. So long as any Collateral Obligation is on loan pursuant to a Securities Lending Agreement, (a) the Trustee shall have no liability for any failure or inability on its part to receive any information or take any action with respect to the Collateral Obligation because of its being on loan (including any failure to take action with respect to a notice of redemption, consent solicitation, exchange or tender offer, or similar corporate action), and (b) the loaned Collateral Obligations shall not be disqualified for return to the Trustee as a Collateral Obligation by any change in circumstance or status during the time while on loan (including any change that would cause the Collateral Obligation to be ineligible for purchase by the Issuer under the Indenture if applied to a proposed purchase of it in the open market at the time of its return from loan). [remainder of page intentionally blank]

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SETTLEMENT AND CLEARING FOR GLOBAL SECURITIES Book Entry Registration of the Global Securities So long as the Depository, or its nominee, is the registered owner or Holder of a Global Security, the Depository or the nominee, as the case may be, will be considered the sole owner or Holder of the Note, the Composite Security or Preference Share represented by a Global Security for all purposes under the Indenture, the Preference Share Documents, and the Global Securities, and members of, or participants in, the Depository as well as any other persons on whose behalf the participants may act (including Clearstream and Euroclear and account holders and participants therein) will have no rights under the Indenture, the Preference Share Documents, or a Global Security. Owners of beneficial interests in a Global Security will not be considered to be owners or Holders of the related Note or Composite Security under the Indenture or the related Preference Share under the Preference Share Documents. Unless the Depository notifies the Co-Issuers (or, with respect to the Class D Notes, the Composite Securities, and Preference Shares, the Issuer) that it is unwilling or unable to continue as depositary for a Global Security or ceases to be a clearing agency registered under the Exchange Act, owners of a beneficial interest in a Global Security will not be entitled to have any portion of a Global Security registered in their names, will not receive or be entitled to receive physical delivery of Notes, Composite Securities, or Preference Shares in certificated form and will not be considered to be the owners or Holders of any Notes or Composite Securities under the Indenture or Preference Shares under the Preference Share Documents. In addition, no beneficial owner of an interest in a Global Security will be able to transfer that interest except in accordance with the Depositorys applicable procedures (in addition to those under the Indenture or the Preference Share Paying and Transfer Agency Agreement and, if applicable, those of Euroclear and Clearstream). Investors may hold their interests in a Regulation S Global Note or a Regulation S Global Preference Share directly through Clearstream or Euroclear, if they are participants in Clearstream or Euroclear, or indirectly through organizations which are participants in Clearstream or Euroclear. Clearstream and Euroclear will hold interests in the Regulation S Global Notes or Regulation S Global Preference Shares on behalf of their participants through their respective depositories, which in turn will hold the interests in Regulation S Global Notes in customers securities accounts in the depositories names on the books of the Depository. Investors may hold their interests in a Rule 144A Global Note directly through the Depository if they are participants in the Depository, or in directly through organizations which are participants in the Depository. Payments of principal of, or interest or other distributions on a Global Security will be made to the Depository or its nominee, as the registered owner thereof. The Co-Issuers, the Trustee, the paying agents, the Initial Purchaser, the Portfolio Manager and their respective affiliates will not have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. The Co-Issuers expect that the Depository or its nominee, upon receipt of any payment of principal, interest, or other distributions in respect of a Global Security representing any Notes, Composite Securities, or Preference Shares, as the case may be, held by it or its nominee, will immediately credit participants accounts with payments in amounts proportionate to their respective beneficial interests in the stated aggregate principal amount of a Global Security for the Notes, Composite Securities, or Preference Shares, as the case may be, as shown on the records of the Depository or its nominee. The Co-Issuers also expect that payments by participants to owners of beneficial interests in a Global Security held through the participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for those customers. The payments will be the responsibility of the participants. Global Security Settlement Procedures Transfers between the participants in the Depository will be effected in the ordinary way in accordance with the Depository rules and will be settled in immediately available funds. The laws of some states require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer beneficial interests in a Global Security to these persons may be limited. Because the Depository can only act on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of a person holding a beneficial interest in a Global Security to pledge its interest to persons or entities that do not participate in the 129

Depository system, or otherwise take actions in respect of its interest, may be affected by the lack of a physical certificate of the interest. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures. Subject to compliance with the transfer restrictions applicable to the Securities and Preference Shares described above and under Transfer Restrictions, cross-market transfers between the Depository, on the one hand, and directly or indirectly through Euroclear or Clearstream participants, on the other, will be effected in the Depository in accordance with the Depository rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, the cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in the system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, as the case may be, will if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in a Note, Composite Security, or Preference Share as the case may be, represented by a Regulation S Global Note or a Regulation S Global Preference Share in the Depository and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to the Depository. Clearstream participants and Euroclear participants may not deliver instructions directly to the depositories of Clearstream or Euroclear. Because of time zone differences, cash received in Euroclear or Clearstream as a result of sales of interests in a Regulation S Global Note or a Regulation S Global Preference Share by or through a Euroclear or Clearstream participant to the Depository participant will be received with value on the Depository settlement date but will be available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in the Depository. The Depository has advised the Issuer that it will take any action permitted to be taken by a Holder of Securities or Preference Shares (including the presentation of Securities for exchange as described above) only at the direction of one or more participants in the Depository to whose account with the Depository interests in the Securities are credited and only in respect of the portion of the Aggregate Outstanding Amount of the Securities or Preference Shares as to which the participant or participants has or have given the direction. However, upon the occurrence of certain events, the Depository will exchange the Securities for Certificated Securities, legended as appropriate, which it will distribute to its participants as set out in the Indenture. The Depository has advised the Issuer as follows: The Depository is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the UCC and a clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. The Depository was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants in the Depository include securities brokers and dealers, banks, trust companies, and clearing corporations and may include certain other organizations. Indirect access to the Depository system is available to others such as banks, brokers, dealers, and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Although the Depository, Clearstream and Euroclear have agreed to the foregoing procedures to facilitate transfers of interests in Regulation S Global Notes and Regulation S Global Preference Shares among participants of the Depository, Clearstream and Euroclear, they are under no obligation to perform or continue to perform the procedures, and the procedures may be discontinued at any time. Neither the Co-Issuers nor the Trustee will have any responsibility for the performance by the Depository, Clearstream, or Euroclear or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. [remainder of page intentionally blank]

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TRANSFER RESTRICTIONS Because of the following restrictions, purchasers are advised to consult legal counsel before making any offer, resale, pledge, or other transfer of the Securities. Initial Offers and Sales The Securities have not been registered under the Securities Act, the securities laws of any state of the United States, or the securities laws of any other jurisdiction and may not be offered or sold unless in transactions exempt from or not subject to the registration requirements of, the Securities Act and any other applicable securities laws. Neither Co-Issuer has any obligation or intention to effect the registration. The Securities may not be offered, sold, or delivered by the Issuer or by or through any affiliate or person acting as agent of or intermediary for the Issuer or any affiliate of the Issuer (including any broker or dealer acting as any agent or intermediary), within the United States or to or for the account or benefit of any U.S. Person unless, among other things: (1) in the case of the Global Notes, the purchaser is a Qualified Purchaser and a Qualified Institutional Buyer, purchasing for its own account or for the account of one or more persons that are both Qualified Purchasers and Qualified Institutional Buyers, in accordance with the applicable procedures of the Depository (in addition to those under the Indenture); (2) in the case of the Certificated Notes, the purchaser is both a Qualified Purchaser and either a Qualified Institutional Buyer or an Institutional Accredited Investor purchasing for its own account or for the account of one or more persons that meet those qualifications; (3) in the case of the Preference Shares, the purchaser is either both a Qualified Purchaser and a Qualified Institutional Buyer, purchasing for its own account or one or more accounts with respect to which it exercises sole investment discretion, each of which is both a Qualified Purchaser and a Qualified Institutional Buyer, in accordance with Rule 144A or both an Accredited Investor and either a Knowledgeable Employee or Qualified Purchaser.

Initial sales of Securities to non-U.S. Persons will be made in offshore transactions not subject to the registration requirements of the Securities Act pursuant to Rule 903 of Regulation S. In all cases Securities will only be sold, exchanged, or transferred in a denomination greater than or equal to the required minimum denomination for each account they are purchased for. Representations and Transfer Restrictions Each person that purchases or otherwise acquires any Security or beneficial interest in one will represent and agree, or will be deemed, by its purchase or other acquisition of the Security, to have represented and agreed, as provided under Legends below. Legends The Securities will contain legends substantially as described below to notify transferors and transferees of the applicable restrictions on the resale or other transfer of Securities, in addition to any other legends on the Securities. Each Rule 144A Global Note, Regulation S Global Note, Certificated Note, Composite Security, and Preference Share will contain legends substantially to the following effect (with the noted variations between them):

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Neither this [Note/Composite Security] nor beneficial interests in this [Note/Composite Security] have been or are expected to be registered under the United States Securities Act of 1933 (the Securities Act), the securities laws of any state of the United States, or the securities laws of any other jurisdiction, and Ares VIII CLO Ltd. (the Issuer) has not registered and does not intend to register as an investment company under the United States Investment Company Act of 1940 (the Investment Company Act), in reliance on the exclusion to the definition of investment company provided by Section 3(c)(7) of the Investment Company Act. Neither this [Note/Composite Security] nor any beneficial interests in this [Note/Composite Security] may be reoffered, resold, pledged, exchanged, or otherwise transferred in violation of the Securities Act or any other securities laws. The Holder of this [Note/Composite Security] by accepting this [Note/Composite Security], represents, warrants, acknowledges, and agrees, and each person that purchases or otherwise acquires a beneficial interest in this [Note/Composite Security] (a Beneficial Owner), by purchasing or otherwise acquiring its interest, is deemed to represent, warrant, acknowledge, and agree, for the benefit of the Issuer, that neither it nor any person it is acting for will reoffer, resell, pledge, exchange, or otherwise transfer this [Note/Composite Security] or any beneficial interest in this [Note/Composite Security] except in compliance with the Securities Act and other applicable securities laws. Transfers and exchanges by a Holder or Beneficial Owner that comply with the Securities Act include transfers and exchanges: (a) to a person that is a U.S. person (U.S. Person) as defined in Regulation S under the Securities Act (Regulation S) that it reasonably believes to be both a qualified institutional buyer (QIB), as defined in Rule 144A under the Securities Act (Rule 144A), and a qualified purchaser (QP), as defined in Section 2(a)(51)(A) of the Investment Company Act, or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, in a transaction meeting the requirements of Rule 144A (in which case it will inform the person that the transfer is being made in reliance on Rule 144A) [only in Regulation S Note and Composite Security and Certificated Note where the Indenture Registrar has received a Transferor Certificate in the form of Exhibit B[B2/B7] to the Indenture to the effect that the transaction meets the requirements of Rule 144A and a Transferee Certificate in the form of Exhibit B-3 to the Indenture to the effect that the transferee is both a QIB and a QP, and is aware that the transfer is being made in reliance on Rule 144A]; (b) to a U.S. Person that it reasonably believes to be both a QP and an institutional accredited investor within the meaning specified in Rule 501(a)(1), (2), (3), or (7) of the Securities Act (an Institutional Accredited Investor) taking delivery of the exchange or transfer in the form of a Certificated [Note/Composite Security] where the Indenture Registrar has received a Transferor Certificate in the form of Exhibit B-8 to the Indenture to the effect that the transaction meets the requirements of an available exemption from registration under the Securities Act and a Transferee Certificate in the form of Exhibit B-5 to the Indenture to the effect that the transferee is both a QP and an Institutional Accredited Investor; (c) in a transaction that has received the prior written authorization of the Issuer;

(d) [only in Rule 144Ato a person that is not a U.S. Person taking delivery of the exchange or transfer of the beneficial interest in the form of a beneficial interest in a Regulation S Global [Note/Composite Security] in an offshore transaction, as defined in Regulation S (Offshore Transaction), and the Indenture Registrar has received a Transferor Certificate in the form of Exhibit B-1 to the Indenture to the effect that the transaction meets the requirements of Regulation S and a Transferee Certificate in the form of Exhibit B-4 to the Indenture to the effect that the transferee is not a U.S. Person; or] [only in Regulation S Note and Composite Securityto a U.S. Person in an Eligible Secondary Market Transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws;] (e) to the Issuer or J.P. Morgan Securities Inc. any other agent of the Issuer appointed for the offering of any Securities (each, a Dealer and, collectively, the Dealers).

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[only in Regulation S Note and Composite Security(f) to a non-U.S. Person in a transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws.] [only in Regulation S Note and Composite SecurityAn Eligible Secondary Market Transaction is a transaction in which neither the Issuer nor the Co-Issuer, nor any Affiliate of either, is involved and no Dealer, transferor, transferee, or other person involved in the transaction has been engaged to act, or is otherwise acting, as an agent of or intermediary for the Issuer, the Co-Issuer, or any Affiliate of either of them in connection with the transaction or has received or will receive any compensation from the Issuer, the Co-Issuer, or any Affiliate of either of them in connection with the transaction.]

The Holder of this [Note/Composite Security], by accepting this [Note/Composite Security], represents, warrants, acknowledges, and agrees, and each Beneficial Owner, by purchasing or otherwise acquiring a beneficial interest in this [Note/Composite Security], is deemed to represent, warrant, acknowledge, and agree, for the benefit of the Issuer, that: (a) It is described in one or more of the clauses in this subparagraph (a) (an Authorized Holder): [only in Rule 144A and Certificated Noteit and each person it is acting for are both QPs and QIBs that are aware that the related sale, pledge, exchange, or other transfer is being made in reliance on Rule 144A [only in Certificated Noteor it and each person it is acting for are both QPs and Institutional Accredited Investors purchasing or otherwise acquiring the Note or the beneficial interest in reliance on an available exemption from the registration under the Securities Act;] [only in Rule 144A (or, in the case of a purchase of this Note or a beneficial interest in this Note directly from the Issuer, in reliance on any other exemption from registration under the Securities Act)]; or] [only in Regulation S Note and Composite Securityif it or any person it is acting for is a U.S. Person, to its knowledge, it and each person it is acting for are purchasing or otherwise acquiring this [Note/Composite Security] or the beneficial interest in an Eligible Secondary Market Transaction;] [only in Regulation S Note and Composite Security and Certificated Note and Composite Security it and each person it is acting for are non-U.S. Persons purchasing or otherwise acquiring the [Note/Composite Security] in an Offshore Transaction meeting the requirements of Regulation S; or] it and each person it is acting for are purchasing or otherwise acquiring this [Note/Composite Security] or a beneficial interest in this [Note/Composite Security] in a transaction that has received the prior written authorization of the Issuer.

(b) It and each person it is acting for are either purchasing or otherwise acquiring this [Note/Composite Security] or a beneficial interest in this [Note/Composite Security] in a transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws or purchasing or otherwise acquiring this [Note/Composite Security] or a beneficial interest in this [Note/Composite Security] in a transaction that has received the prior written authorization of the Issuer.

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(c) Unless it and each person it is acting for are QIBs and QPs and all of the beneficial holders of its and each other persons securities are QIBs and QPs, neither it nor any person it is acting for was formed, reformed, or recapitalized for the specific purpose of investing in beneficial interests in securities of the Issuer or has invested more than 40% of its assets in beneficial interests in securities of the Issuer.

(d) If it or any person it is acting for is organized as a corporation, partnership, common trust fund, special trust, pension fund, retirement plan, or other entity, none of the shareholders, partners, members, beneficiaries, beneficial owners, or participants of any such entity may designate the particular investments to be made by the entity or the allocation of the investment to the shareholders, partners, members, beneficiaries, beneficial owners, or participants of the entity. (e) If it is a company excluded from the definition of investment company pursuant to Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act (or a foreign investment company under Section 7(d) thereof relying on Section 3(c)(1) or Section 3(c)(7) with respect to its Holders that are U.S. Persons) and was formed on or before April 30, 1996, it has received the consent of all its beneficial owners that acquired their interests on or before April 30, 1996 with respect to its treatment as a QP in the manner required by Section 2(a)(51)(C) of the Investment Company Act and the rules and regulations under the Investment Company Act. (f) It shall not hold or transfer any interests in this [Note/Composite Security] in an amount below the minimum authorized denominations of this [Note/Composite Security] and shall not sell participation interests in this [Note/Composite Security] or in its interests in this [Note/Composite Security]. (g) It will notify any person that acquires this [Note/Composite Security] or any beneficial interest in this [Note/Composite Security] from it that: neither this [Note/Composite Security] nor any beneficial interests in this [Note/Composite Security] have been or are expected to be registered under the Securities Act, the securities laws of any state of the United States, or the securities laws of any other jurisdiction; the Issuer has not registered and does not intend to register as an investment company under the Investment Company Act in reliance on the exclusion to the definition of investment company provided by Section 3(c)(7) of the Investment Company Act; this [Note/Composite Security] and beneficial interests in this [Note/Composite Security] are subject to the restrictions on resales, pledges, exchanges, and other transfers and rights to compel sales described in these legends and any other applicable restrictions; and the transferee, by accepting this [Note/Composite Security], or by purchasing or otherwise acquiring a beneficial interest in this [Note/Composite Security], will be deemed to have represented, warranted, acknowledged, and agreed, for the benefit of the Issuer, as to all matters in this legend.

(h) It understands and agrees that any purported resale, pledge, exchange, or other transfer of this [Note/Composite Security] or any interest in this [Note/Composite Security] that does not comply with the foregoing requirements shall be void ab initio. (i) It is not a member of the public in the Cayman Islands.

In determining whether to give or withhold prior written authorization to a particular transfer as described above, the Issuer may require the Holder or a Beneficial Owner to provide to it an opinion of 134

counsel addressed to and satisfactory to it to the effect that the transfer is exempt from or not subject to registration under the Securities Act and other applicable securities laws and will not require the Issuer to register as an investment company under the Investment Company Act. In addition, the Issuer and the Indenture Registrar may request additional documents and certifications that either of them reasonably determines to be appropriate to verify that the transfer is exempt from or not subject to registration under the Securities Act and other applicable securities laws and would not require the Issuer to register under the Investment Company Act, and either the Issuer or the Indenture Registrar may deny any transfer if it reasonably determines that the transfer is subject to but not exempt from registration under the Securities Act or any other applicable securities laws or would require the Issuer to register under the Investment Company Act. Any person that is required or deemed to represent that it is a QP will also be required or deemed to represent: if it is a Dealer described in paragraph (a)(1)(ii) of Rule 144A, it owns or invests on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated with it, and is therefore a QP pursuant to Rule 2a51-1(g)(1)(i) under the Investment Company Act; and if it is a plan referred to in paragraph (a)(1)(i)(d) or (a)(1)(i)(e) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(f) of Rule 144A that holds the assets of the plan, investment decisions with respect to the plan are made solely by the fiduciary, trustee, or sponsor of the plan, and the plan or trust fund is therefore a QP pursuant to Rule 2a51-1(g)(1)(ii) under the Investment Company Act.

The Holder of this [Note/Composite Security], by accepting this [Note/Composite Security], further represents, warrants, acknowledges, and agrees, and each Beneficial Owner, by purchasing or otherwise acquiring a beneficial interest in this [Note/Composite Security], is deemed to represent, warrant, acknowledge, and agree, for the benefit of the Issuer, that if it is determined not to have been an Authorized Holder with respect to its acquisition of this [Note/Composite Security] or a beneficial interest in this [Note/Composite Security], the Issuer may compel it to sell this [Note/Composite Security] or the beneficial interest in this [Note/Composite Security] (within 30 days after notice of the sale requirement is given) to either a person that is both a QIB and a QP taking delivery in the form of a Note represented by a Rule 144A Global Note or a Certificated [Note/Composite Security] in a transaction meeting the requirements of Rule 144A, a person that is both a QP and an Institutional Accredited Investor taking delivery in the form of a Certificated [Note/Composite Security] in a transaction meeting the requirements of an available exemption from registration under the Securities Act, or a person that is not a U.S. Person taking delivery in the form of a [Note/Composite Security] represented by a Regulation S Global [Note/Composite Security] or a Certificated [Note/Composite Security] in an Offshore Transaction meeting the requirements of Regulation S.

If it fails to effect the sale within the 30-day period, the Issuer may cause this [Note/Composite Security] or the beneficial interest in this [Note/Composite Security] to be transferred in a commercially reasonable sale (conducted in accordance with Sections 9-610, 9-611, and 9-627 of the Uniform Commercial Code as applied to securities that are sold on a recognized market) to a transferee that certifies to the Indenture Registrar and the Issuer that if the transferee is taking delivery in the form of a Note represented by a [Rule 144A Global Note/Composite Security represented by a Certificated Composite Security], it is both a QIB and a QP and is aware that the transfer is being made in reliance on Rule 144A, if the transferee is taking delivery in the form of a Certificated [Note/Composite Security], either it is both a QP and an Institutional Accredited Investor or it satisfies all of the requirements to be a transferee of

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a Rule 144A Global Note (and is aware that the transfer is being made in reliance on Rule 144A) or a Regulation S Global [Note/Composite Security], or

if the transferee is taking delivery of a [Note/Composite Security] represented by a Regulation S Global [Note/Composite Security], it is not a U.S. Person.

The Issuer may waive the foregoing certification requirement if it has been advised by counsel that the sale would not require the Issuer to register as an investment company under the Investment Company Act. The Holder of this [Note/Composite Security], by accepting this [Note/Composite Security], further represents, warrants, acknowledges, and agrees, and each Beneficial Owner, by purchasing or otherwise acquiring a beneficial interest in this [Note/Composite Security], is deemed to represent, warrant, acknowledge, and agree, for the benefit of the Issuer, that at the time of its purchase or acquisition and throughout the period of its holding and disposition of this [Note/Composite Security] [only in the A, B, Cits purchase, holding, and disposition of this Note or any beneficial interest in this Note will not result in a prohibited transaction or excise tax, as applicable, under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental or other plan, any substantially similar federal, state, local, or foreign law) for which an exemption is not available.] [only in the Class D Note and Composite Securityit is not, and it will not be, an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not it is subject to Title I of ERISA, a plan described in Section 4975 of the Code, whether or not it is subject to Section 4975 of the Code, or an entity whose underlying assets include (or are deemed to include) assets of any employee benefit plans because of any investment by the employee benefit plans in the entity, or a governmental or other plan that is subject to any federal, state, local, or foreign law that is substantially similar to Section 406 of ERISA or Section 4975 of the Code (any of the foregoing, a Benefit Plan Investor); or (for purchasers in the original offering only) it is an insurance company acting on behalf of its general account and [at all times while a Class D Note or Composite Security is held] less than 25% of the assets of the general account are plan assets for purposes of Title I of ERISA and Section 4975 of the Code, the insurance company is not a person, other than a Benefit Plan Investor, exercising discretionary authority or control over the assets of the Issuer or providing investment advice with respect to assets of the Issuer for a direct or indirect fee or any affiliate of any such person (each, a Controlling Person), without limiting the remedies for a breach of the foregoing assurances, the insurance company agrees that if, after its initial acquisition of this [Note/Composite Security], at any time during any calendar quarter 25% or more of the assets of the general account are plan assets for purposes of Title I of ERISA or Section 4975 of the Code or it becomes a Controlling Person, then the insurance company shall, in a manner consistent with the restrictions on transfer in the Indenture and in the Preference Share documents, dispose of all the Notes, Composite Securities, and Preference Shares held in its general account by the end of the next following calendar quarter unless an exemption or exception pursuant to Section 401(c) of ERISA and the final regulations thereunder or under an exemption or regulation issued by the U.S. Department of Labor under ERISA exists such that its continued holding of the Notes, Composite Securities, and Preference Shares could not subject any person to liability on the basis of a claim that the assets of the Issuer are plan assets, and its purchase, holding, and disposition of this [Note/Composite Security] or any beneficial interest in this [Note/Composite Security] will not result in a prohibited transaction or 136

excise tax, as applicable, under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental or other plan, any substantially similar federal, state, local, or foreign law) for which an exemption is not available.] This [Note/Composite Security], the Indenture, and related documentation may be amended or supplemented from time to time as provided in the Indenture. The Holder of this [Note/Composite Security], by accepting this [Note/Composite Security], agrees, and each Beneficial Owner, by purchasing or otherwise acquiring a beneficial interest in this [Note/Composite Security], is deemed to agree, to any amendment or supplement (each of which shall be conclusive and binding on the Holder of this [Note/Composite Security] and the owners of beneficial interests in this [Note/Composite Security] and all future Holders of this [Note/Composite Security] and owners of beneficial interests in this [Note/Composite Security] and any [Notes/Composite Securities] issued in exchange or substitution for this [Note/Composite Security], whether or not any notation of the amendment or supplement is made on this [Note/Composite Security]). [only in 144A and Regulation S Note and Composite SecurityUntil it is exchanged in whole or in part for Certificated [Notes/Composite Securities], this [Note/Composite Security] may not be transferred except as a whole by [only in 144AThe Depository Trust Company] [only in Regulation S Note and Composite SecurityEuroclear Bank S.A./N.V. and Clearstream Banking, socit anonyme] (the Depositary) to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any nominee to a successor depositary or a nominee of the successor depositary.] [only in Composite SecurityThe Holder shall treat this Composite Security, for purposes of United States federal income taxation and all other relevant federal, state and local income taxation of any relevant jurisdiction, as an investment unit consisting of [two/three] separate securities: one security corresponding to the allocable portion of the Class [] Component and one security corresponding to the allocable portion of the Preference Share Component.] Each Regulation S Global Preference Share certificate and Certificated Preference Share certificate will contain legends substantially to the following effect (with the noted variations between them): Neither the Preference Shares represented by this certificate nor beneficial interests in the Preference Shares represented by this certificate have been or are expected to be registered under the United States Securities Act of 1933 (the Securities Act), the securities laws of any state of the United States, or the securities laws of any other jurisdiction, and Ares VIII CLO Ltd. (the Issuer) has not registered and does not intend to register as an investment company under the United States Investment Company Act of 1940 (the Investment Company Act), in reliance on the exclusion to the definition of investment company provided by Section 3(c)(7) of the Investment Company Act. Neither the Preference Shares represented by this certificate nor beneficial interests in the Preference Shares represented by this certificate may be reoffered, resold, pledged, exchanged, or otherwise transferred in violation of the Securities Act or any other securities laws. The Holder of this Preference Share certificate by accepting the Preference Shares represented by this certificate, represents, warrants, acknowledges, and agrees, and each person that purchases or otherwise acquires a beneficial interest in the Preference Shares represented by this certificate (a Beneficial Owner), by purchasing or otherwise acquiring its interest, is deemed to represent, warrant, acknowledge, and agree, for the benefit of the Issuer, that neither it nor any person it is acting for will reoffer, resell, pledge, exchange, or otherwise transfer the Preference Shares represented by this certificate or any beneficial interest in the Preference Shares represented by this certificate except in compliance with the Securities Act and other applicable securities laws. Transfers and exchanges by a Holder or Beneficial Owner that comply with the Securities Act include transfers and exchanges: (a) to a person that is a U.S. person (U.S. Person) as defined in Regulation S under the Securities Act (Regulation S) taking delivery in the form of a Preference Share represented by a Certificated Preference Share that it reasonably believes to be

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both a qualified institutional buyer (QIB), as defined in Rule 144A under the Securities Act (Rule 144A), and a qualified purchaser (QP), as defined in Section 2(a)(51)(A) of the Investment Company Act, or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, in a transaction meeting the requirements of Rule 144A (in which case it will inform the person that the transfer is being made in reliance on Rule 144A); or both a knowledgeable employee with respect to the Issuer (as defined in Rule 3c-5 under the Investment Company Act, a Knowledgeable Employee) or a QP [only in the Regulation S Global Preference Share certificate or a person that acquires the Preference Shares represented by this certificate from a Knowledgeable Employee or a QP in a transaction (a Donation Transaction) satisfying the applicable requirements of Rule 3c-6(b) and, if applicable, Rule 3c-5(b)(3) under the Investment Company Act] and [only in the Regulation S Global Preference Share certificate except in the case of a Donation Transaction, ] an accredited investor within the meaning of Rule 501(a) of Regulation D under the Securities Act (an Accredited Investor) in a transaction that has received the prior written authorization of the Issuer and

in each case, the Preference Share Paying Agent has received both a Transferor Certificate in the form of Exhibit B-1 to the Preference Share Paying and Transfer Agency Agreement to the effect that the transaction meets the requirements of Rule 144A or any other exemption from registration under the Securities Act specified in the Transferor Certificate and a Transferee Certificate in the form of Exhibit C to the Preference Share Paying and Transfer Agency Agreement to the effect that the transferee satisfies the applicable requirements of this subparagraph (a); (b) in a transaction that has received the prior written authorization of the Issuer;

(c) to the Issuer or J.P. Morgan Securities Inc. or any other agent of the Issuer appointed for the offering of any Securities (each, a Dealer and, collectively, the Dealers); [only in the Certificated Preference Share certificate (d) to a person that is not a U.S. Person taking delivery of the exchange or transfer in the form of either a Certificated Preference Share in an offshore transaction as defined in Regulation S (an Offshore Transaction) or a Regulation S Global Preference Share and in either case the Preference Share Paying Agent has received a Transferor Certificate in the form of Exhibit B-2 to the Preference Share Paying and Transfer Agency Agreement to the effect that the transaction meets the requirements of Regulation S and a Transferee Certificate in the form of Exhibit C to the Preference Share Paying and Transfer Agency Agreement to the effect that the transferee is not a U.S. Person; ] [only in the Regulation S Global Preference Share certificate (d) to a non-U.S. Person in a transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws; or] [only in the Regulation S Global Preference Share certificate (e) to a U.S. Person in an Eligible Secondary Market Transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws.] [only in the Regulation S Global Preference Share certificate An Eligible Secondary Market Transaction is a transaction in which neither the Issuer nor the Co-Issuer, nor any Affiliate of either, is involved and

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no Dealer, transferor, transferee, or other person involved in the transaction has been engaged to act, or is otherwise acting, as an agent of or intermediary for the Issuer, the Co-Issuer, or any Affiliate of either of them in connection with the transaction or has received or will receive any compensation from the Issuer, the Co-Issuer, or any Affiliate of either of them in connection with the transaction.]

The Holder of the Preference Shares represented by this certificate, by accepting the Preference Shares represented by this certificate, represents, warrants, acknowledges, and agrees, and each Beneficial Owner, by purchasing or otherwise acquiring a beneficial interest in the Preference Shares represented by this certificate, is deemed to represent, warrant, acknowledge, and agree, for the benefit of the Issuer, that: (a) It is as described in one or more of the clauses in this subparagraph (a) (an Authorized Holder): if it or any person it is acting for is a U.S. Person, to its knowledge, it and each person it is acting for are purchasing or otherwise acquiring the Preference Shares represented by this certificate or a beneficial interest in the Preference Shares represented by this certificate in an Eligible Secondary Market Transaction [only in the Certificated Preference Share certificate or it and each person it is acting for are both QPs and QIBs and are aware that the related purchase is being made in reliance on Rule 144A]; it and each person it is acting for are purchasing or otherwise acquiring the Preference Shares represented by this certificate or a beneficial interest in the Preference Shares represented by this certificate in a transaction that has received the prior written authorization of the Issuer; or it and each person it is acting for are both non-U.S. Persons and are purchasing or otherwise acquiring the Preference Shares represented by this certificate or a beneficial interest in the Preference Shares represented by this certificate in an Offshore Transaction.

(b) It and each person it is acting for are either purchasing or otherwise acquiring the Preference Shares represented by this certificate or a beneficial interest in the Preference Shares represented by this certificate in a transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws or purchasing or otherwise acquiring the Preference Shares represented by this certificate or a beneficial interest in the Preference Shares represented by this certificate in a transaction that has received the prior written authorization of the Issuer.

(c) Unless it and each person it is acting for are non-U.S. Persons and all of the beneficial holders of its and each other persons securities are non-U.S. Persons neither it nor any person it is acting for was formed, reformed, or recapitalized for the specific purpose of investing in beneficial interests in securities of the Issuer or has invested more than 40% of its assets in beneficial interests in securities of the Issuer.

(d) If it or any person it is acting for is organized as a corporation, partnership, common trust fund, special trust, pension fund, retirement plan, or other entity, none of the shareholders, partners, members, beneficiaries, beneficial owners, or participants of any such entity may designate the particular investments to be made by the entity or the allocation of the investment to the shareholders, partners, members, beneficiaries, beneficial owners, or participants of the entity.

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(e) It shall not hold or transfer any interests in the Preference Shares represented by this certificate in an amount below the minimum authorized denominations of Preference Shares and shall not sell participation interests in the Preference Shares represented by this certificate or in its interests in the Preference Shares represented by this certificate. (f) It will notify any person that acquires the Preference Shares represented by this certificate or a beneficial interest in the Preference Shares represented by this certificate from it that: neither the Preference Shares represented by this certificate nor any beneficial interests in the Preference Shares represented by this certificate have been or are expected to be registered under the Securities Act, the securities laws of any state of the United States, or the securities laws of any other jurisdiction; the Issuer has not registered and does not intend to register as an investment company under the Investment Company Act in reliance on the exclusion to the definition of investment company provided by Section 3(c)(7) of the Investment Company Act; the Preference Shares represented by this certificate and beneficial interests in the Preference Shares represented by this certificate are subject to the restrictions on resales, pledges, exchanges, and other transfers and rights to compel sales described in these legends and any other applicable restrictions; and the transferee, by accepting the Preference Shares represented by this certificate, or by purchasing or otherwise acquiring a beneficial interest in the Preference Shares represented by this certificate, will be deemed to have represented, warranted, acknowledged, and agreed, for the benefit of the Issuer, as to all matters in this legend.

(g) It understands and agrees that any purported resale, pledge, exchange, or other transfer of the Preference Shares represented by this certificate or any interest in the Preference Shares represented by this certificate that does not comply with the foregoing requirements shall be void ab initio. (i) It is not a member of the public in the Cayman Islands.

In determining whether to give or withhold prior written authorization to a particular transfer as described above, the Issuer may require the Holder or a Beneficial Owner to provide to it an opinion of counsel addressed to and satisfactory to it to the effect that the transfer is exempt from or not subject to registration under the Securities Act and other applicable securities laws and will not require the Issuer to register as an investment company under the Investment Company Act. In addition, the Issuer and the Preference Share Paying Agent may request additional documents and certifications that either reasonably determines to be appropriate to verify that the transfer is exempt from or not subject to registration under the Securities Act and other applicable securities laws and would not require the Issuer to register under the Investment Company Act, and either the Issuer or the Preference Share Paying Agent may deny any transfer if it reasonably determines that the transfer is subject to but not exempt from registration under the Securities Act or any other applicable securities laws or would require the Issuer to register under the Investment Company Act. Any person that is required or deemed to represent that it is a QP will also be required or deemed to represent: if it is a Dealer described in paragraph (a)(1)(ii) of Rule 144A, it owns or invests on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated with it, and is therefore a QP pursuant to Rule 2a51-1(g)(1)(i) under the Investment Company Act; and if it is a plan referred to in paragraph (a)(1)(i)(d) or (a)(1)(i)(e) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(f) of Rule 144A that holds the assets of the plan, investment decisions with respect to the plan are made solely by the fiduciary, trustee, or sponsor of the 140

plan, and the plan or trust fund is therefore a QP pursuant to Rule 2a51-1(g)(1)(ii) under the Investment Company Act. The Holder of this Preference Share certificate, by accepting the Preference Shares represented by this certificate, further represents, warrants, acknowledges, and agrees, and each Beneficial Owner, by purchasing or otherwise acquiring a beneficial interest in the Preference Shares represented by this certificate, is deemed to represent, warrant, acknowledge, and agree, for the benefit of the Issuer, that if it is determined not to have been an Authorized Holder with respect to its acquisition of the Preference Shares represented by this certificate or a beneficial interest in the Preference Shares represented by this certificate, the Issuer may compel it to sell the Preference Shares represented by this certificate or the beneficial interest in the Preference Shares represented by this certificate (within 30 days after notice of the sale requirement is given) to a person that is both a QIB and a QP taking delivery in the form of a Preference Share represented by a Certificated Preference Share in a transaction meeting the requirements of Rule 144A, or a person that is both an Accredited Investor and either a QP or a Knowledgeable Employee, or a person that is not a U.S. Person taking delivery in the form of a Preference Share represented by a Regulation S Global Preference Share or a Certificated Preference Share in an Offshore Transaction meeting the requirements of Regulation S.

If it fails to effect the sale within the 30-day period, the Issuer may cause the Preference Shares represented by this certificate or the beneficial interest in the Preference Shares represented by this certificate to be transferred in a commercially reasonable sale (conducted in accordance with Sections 9-610, 9-611, and 9-627 of the Uniform Commercial Code as applied to securities that are sold on a recognized market) to a transferee that certifies to the Preference Share Paying Agent and the Issuer that if the transferee is taking delivery in the form of a Certificated Preference Share, either it is both a QIB and a QP and is aware that the transfer is being made in reliance on Rule 144A or it is both an Accredited Investor and either a Knowledgeable Employee or a QP and is aware that the transfer is being made in reliance on Rule 144A or

if the transferee is taking delivery of a Preference Share represented by a Regulation S Global Preference Share, it is not a U.S. Person.

The Issuer may waive the foregoing certification requirement if it has been advised by counsel that the sale would not require the Issuer to register as an investment company under the Investment Company Act. The Holder of this Preference Share certificate, by accepting the Preference Shares represented by this certificate, further represents, warrants, acknowledges, and agrees, and each Beneficial Owner, by purchasing or otherwise acquiring a beneficial interest in the Preference Shares represented by this certificate, is deemed to represent, warrant, acknowledge, and agree, for the benefit of the Issuer, that at the time of its purchase or acquisition and throughout the period of its holding and disposition of the Preference Shares represented by this certificate it is not, and it will not be, an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not it is subject to Title I of ERISA, a plan described in Section 4975 of the Code, whether or not it is subject to Section 4975 of the Code, or an entity whose underlying assets include (or are deemed to include) assets of any employee benefit plans because of any investment by the employee benefit plans in the entity, or a governmental or other plan that is subject to any federal, state, local, or foreign law that is substantially similar to Section 406 of ERISA or Section 4975 of the Code (any of the foregoing, a Benefit Plan Investor); or

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(for purchasers in the original offering only) it is an insurance company acting on behalf of its general account and less than 25% of the assets of the general account are plan assets for purposes of Title I of ERISA and Section 4975 of the Code, it is not a person, other than a Benefit Plan Investor, exercising discretionary authority or control over the assets of the Issuer or providing investment advice with respect to assets of the Issuer for a direct or indirect fee or any affiliate of any such person (each, a Controlling Person), without limiting the remedies for a breach of the foregoing assurances, it agrees that if, after its initial acquisition of this Note, at any time during any calendar quarter 25% or more of the assets of the general account are plan assets for purposes of Title I of ERISA or Section 4975 of the Code or it becomes a Controlling Person, then the insurance company shall, in a manner consistent with the restrictions on transfer in the Indenture and in the Preference Share documents, dispose of all the Notes, Composite Securities, and Preference Shares held in its general account by the end of the next following calendar quarter unless an exemption or exception pursuant to Section 401(c) of ERISA and the final regulations thereunder or under an exemption or regulation issued by the U.S. Department of Labor under ERISA exists such that its continued holding of the Notes, Composite Securities, and Preference Shares could not subject any person to liability on the basis of a claim that the assets of the Issuer are plan assets, and its purchase, holding, and disposition of the Preference Shares represented by this certificate or any beneficial interest in the Preference Shares represented by this certificate will not result in a prohibited transaction or excise tax, as applicable, under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental or other plan, any substantially similar federal, state, local, or foreign law) for which an exemption is not available.

This Preference Share certificate, the Preference Share Paying and Transfer Agency Agreement, the Indenture, and related documentation may be amended or supplemented from time to time as provided in the Preference Share Paying and Transfer Agency Agreement and the Indenture. The Holder of this Preference Share certificate, by accepting the Preference Shares represented by this certificate, agrees, and each Beneficial Owner, by purchasing or otherwise acquiring a beneficial interest in the Preference Shares represented by this certificate, is deemed to agree, to any amendment or supplement (each of which shall be conclusive and binding on the Holder of the Preference Shares represented by this certificate and the owners of beneficial interests in the Preference Shares represented by this certificate and all future Holders of this Preference Share certificate and owners of beneficial interests in the Preference Shares represented by this certificate and any Preference Shares issued in exchange or substitution for the Preference Shares represented by this certificate, whether or not any notation of the amendment or supplement is made on this Preference Share certificate). [Only in the Regulation S Global Preference Share certificate Until it is exchanged in whole or in part for Certificated Preference Shares, this Preference Share certificate may not be transferred except as a whole by the depositary for Euroclear Bank S.A./N.V. and Clearstream Banking, socit anonyme (the Depositary) to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any nominee of the Depositary to a successor Depositary or a nominee of a successor Depositary.] [remainder of page intentionally blank]

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LISTING AND GENERAL INFORMATION Application has been made to the Irish Stock Exchange to admit the Securities to the Daily Official List of the Irish Stock Exchange. No assurance can be given that any admission will be granted or maintained. Copies of this Offering Memorandum, the Issuer Charter, the certificate of formation and limited liability company agreement of the Co-Issuer, the Collateral Administration Agreement, the Administration Agreement, the Indenture, and the Management Agreement will be deposited with the listing agent and Irish Paying Agent and the registered office of the Issuer, where copies thereof may be obtained, free of charge, upon request within 14 days of the date of the listing particulars. Copies of the Issuer Charter, the certificate of formation and limited liability company agreement of the Co-Issuer, the resolutions of the board of directors of the Issuer authorizing the issuance of the Notes and the resolutions of the board of directors of the Co-Issuer authorizing the issuance of the Notes, the Indenture, the Management Agreement, the Collateral Administration Agreement, and the Administration Agreement may be obtained free of charge upon request within 30 days of the date of this Offering Memorandum at the office of the Trustee on behalf of the Issuer. In connection with the listing of the Securities on the Daily Official List of the Irish Stock Exchange, this Offering Memorandum will be filed with the Registrar of Companies of Ireland pursuant to Regulation 13 of the European Communities (Stock Exchange) Regulations, 1984 of Ireland. Each of the Co-Issuers represents that there has been no material adverse change in its financial position since its date of creation. The Co-Issuers are not, and have not since incorporation or formation, as applicable, been, involved in any litigation or arbitration proceedings relating to claims in amounts which may have or have had a material effect on the Co-Issuers in the context of the issue of the Notes, nor, so far as such Co-Issuer is aware, is any litigation or arbitration involving it pending or threatened. The Issuer is not required by Cayman Islands law, and the Issuer does not intend, to publish annual reports and accounts. The Co-Issuer is not required by Delaware state law, and the Co-Issuer does not intend, to publish annual reports and accounts. The Indenture, however, requires the Issuer to provide the Trustee with written notice, on an annual basis, that to the best of its knowledge, following review of the activities in the prior year, no Event of Default or other matter required to be brought to the Trustees attention has occurred or, if one has, specifying the same. The issuance of the Securities will have been authorized by the board of directors of the Issuer by resolutions passed on March 22, 2004. The issuance of the Class A, Class B, and Class C Notes has been authorized by the sole member of the Co-Issuer by resolutions passed on March 23, 2004. Since incorporation or formation, as applicable, neither the Issuer nor the Co-Issuer has commenced trading or established any accounts, except as disclosed in this Offering Memorandum or accounts used to hold amounts received with respect to share capital and fees. [remainder of page intentionally blank]

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CERTAIN INCOME TAX CONSIDERATIONS In General The following discussion generally summarizes the material United States federal income tax and Cayman Islands tax consequences of an investment in the Securities. The discussion addresses only initial holders of the Preference Shares and initial holders of Notes that purchase the Notes of each Class on the Closing Date at their issue price, that is, the first price at which a substantial amount of the Notes is sold for money to the public (not including bond houses, brokers, or similar persons or organizations acting in that capacity of underwriters, placement agents, or wholesalers) and assumes that the holders acquired the Notes at par. This summary discusses only Securities held as capital assets within the meaning of Section 1221 of the Code. This summary does not purport to address prospective purchasers in special tax situations, such as financial institutions, tax-exempt organizations, insurance companies, regulated investment companies, dealers in securities or foreign currencies, persons holding Securities as a hedge against currency risks or as a position in a straddle, conversion transaction, or other integrated transaction, or United States Holders that are not accrual basis taxpayers for United States federal income tax purposes or whose functional currency (as defined in Section 985 of the Code) is not the United States dollar. This summary under the heading Certain Income Tax ConsiderationsCertain United States Federal Income Tax Considerations is based on the Code, administrative pronouncements, judicial decisions, and existing and proposed Treasury Regulations, changes to any of which after the date of this Offering Memorandum may affect the tax consequences described in this Offering Memorandum. Persons considering the purchase of Securities should consult their tax advisors with regard to the application of the United States federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local, or foreign taxing jurisdiction. As used under this heading Certain Income Tax Considerations, the term United States Holder means a beneficial owner of a Security that is, for United States federal income tax purposes, (i) a citizen or resident of the United States, (ii) a corporation (including an entity treated as a corporation for federal income tax purposes) created or organized in or under the laws of the United States or of any political subdivision thereof, or (iii) an estate or trust described in Section 7701(a)(30)(D) or (E) of the Code, respectively. If a partnership (including for this purpose any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of any Security, the treatment of a partner in that partnership will generally depend upon the status of such partner and the activities of such partnership. As used under this heading Certain Income Tax Considerations, the term Foreign Holder means a beneficial owner of a Security that is not a United States Holder. Certain United States Federal Income Tax Considerations Tax Characterization of the Issuer The Issuer does not intend to operate so as to be subject to United States federal income taxes on its net income. In this regard, on the Closing Date the Issuer will receive an opinion from Sidley Austin Brown & Wood LLP to the effect that, under current law and assuming compliance with the Issuers Charter, the Indenture, the Preference Shares Paying and Transfer Agency Agreement, the Warehousing Agreement (including the Additional Tax-Related Restrictions), and other related documents, although it is not aware of any authoritative guidance dealing with entities that engage in the same activities as those engaged by the Issuer, the Issuers contemplated activities will not cause it to be engaged in a trade or business in the United States. Notwithstanding the foregoing, prospective investors should be aware that opinions of counsel are not binding on the Internal Revenue Service (the Service) and there can be no absolute assurance that the Service will not seek to treat the Issuer as engaged in a trade or business in the United States. If the Issuer were engaged in a trade or business in the United States, it potentially would be subject to substantial United States federal income taxes. The imposition of the taxes would materially and adversely affect the Issuers financial ability to repay the Notes and to make any distributions on the Preference Shares.

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Withholding Taxes Although the Issuer will not be subject to United States federal income tax, income derived by the Issuer may be subject to withholding taxes imposed by the United States or other countries. In this regard, the Issuer is permitted to acquire a particular Collateral Obligation or Eligible Investment only if the coupon or other payments thereon are exempt from United States withholding taxes at the time of acquisition or the issuer of the Collateral Obligation or Eligible Investment is required to make gross-up payments sufficient to cause the net amount to be received on the Collateral Obligation or Eligible Investment to equal the amount that would have been paid had no withholding tax applied. In addition, it is not intended that the Issuer will derive material amounts of any other items of income that would be subject to United States withholding taxes. Accordingly, income derived by the Issuer should be free of any material amount of United States withholding tax. The Issuer will also acquire Collateral Obligations and Eligible Investments that consist of obligations of non-United States issuers. In this regard, the Issuer may acquire a particular Collateral Obligation or Eligible Investment only if the Collateral Obligation or Eligible Investment has coupon or other payments that are not subject to foreign withholding tax or the issuer of the Collateral Obligation or Eligible Investment is required to make gross-up payments sufficient to cause the net amount to be received on the Collateral Obligation or Eligible Investment to equal the amount that would have been paid had the withholding tax not applied. Tax Consequences to United States Holders of Notes CLASS A NOTES On the Closing Date, the Issuer will receive an opinion of Sidley Austin Brown & Wood LLP to the effect that the Class A-1-A Notes, the Class A-1-B Notes, the Class A-2 Notes, and the Class A-3 Notes will constitute debt for United States federal income tax purposes. Interest on a Class A-1-A Note, a Class A-1-B Note, a Class A-2 Note, or a Class A-3 Note will be taxable to a United States Holder as ordinary interest income according to such holders regular method of accounting. Debt instruments such as the Class A-1-A Notes, the Class A-2 Notes, and the Class A-3 Notes that provide for stated interest at one or more qualified floating rates (as defined in Treasury Regulations) throughout the term thereof (regardless of whether the instruments are issued at a discount) generally qualify as variable rate debt instruments (as defined in Treasury Regulations). In general, United States Holders must accrue original issue discount and qualified stated interest on a variable rate debt instrument by treating it as a debt instrument with an appropriate fixed rate or rates and then applying the general original issue discount rules. Upon a sale, exchange, or retirement of a Class A-1-A Note, Class A-1-B Note, Class A-2 Note, or a Class A-3 Note a United States Holder will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange, or retirement and the Holders adjusted tax basis in the Note. CLASS B NOTES On the Closing Date, the Issuer will receive an opinion of Sidley Austin Brown & Wood LLP to the effect that the Class B-1 Notes and the Class B-2 Notes will constitute debt for United States federal income tax purposes. The original issue discount on a debt instrument will generally be the excess of the sum of all payments due on the debt instrument, other than payments of qualified stated interest, over the issue price of the debt instrument. Stated interest is qualified stated interest if it is payable at least annually during the entire term of a debt instrument. Prospective United States Holders should note that, because interest on the Class B-1 Notes and the Class B-2 Notes is not unconditionally payable on each Payment Date because such interest can be deferred, the interest could fail to qualify as qualified stated interest. The Issuer has determined that, for purposes of the original issue discount rules, the likelihood of deferral in the case of the Class B-1 Notes and the Class B-2 Notes is remote. Accordingly, this discussion assumes that interest payable on the Class B-1 Notes and the Class B-2 Notes will be qualified stated interest. Thus, interest on a Class B-1 Note or a Class B-2 Note will be taxable to a United States Holder as ordinary interest income according to such holders regular method of accounting.

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Debt instruments such as the Class B-1 Notes that provide for stated interest at one or more qualified floating rates (as defined in Treasury Regulations) throughout the term thereof (regardless of whether the instruments are issued at a discount) generally qualify as variable rate debt instruments (as defined in Treasury Regulations). In general, United States Holders must accrue original issue discount and qualified stated interest on a variable rate debt instrument by treating it as a debt instrument with an appropriate fixed rate or rates and then applying the general original issue discount rules. Upon a sale, exchange, or retirement of a Class B-1 Note or a Class B-2 Note, a United States Holder will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange, or retirement, and the Holders adjusted tax basis in the Note. CLASS C NOTES On the Closing Date, the Issuer will receive an opinion of Sidley Austin Brown & Wood LLP to the effect that the Class C-1 Notes and the Class C-2 Notes will constitute debt for United States federal income tax purposes. The original issue discount on a debt instrument will generally be the excess of the sum of all payments due on the debt instrument, other than payments of qualified stated interest, over the issue price of the debt instrument. Stated interest is qualified stated interest generally if it is payable at least annually during the entire term of a debt instrument. Because interest on the Class C-1 Notes and the Class C-2 Notes is not unconditionally payable on each Payment Date because it can be deferred, although the matter is not free from doubt, the Issuer will not treat the stated interest payable as qualified stated interest and, accordingly, will treat the Class C-1 Notes and the Class C-2 Notes as having been issued with original issue discount. As a result, United States Holders of the Class C-1 Notes and the Class C-2 Notes will be required to include interest on the Class C-1 Notes and the Class C-2 Notes in income for United States federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding of interest. Upon a sale, exchange, or retirement of a Class C-1 Note or a Class C-2 Note, a United States Holder will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange, or retirement, and the Holders adjusted tax basis in the Note. CLASS D NOTES On the Closing Date, the Issuer will receive an opinion of Sidley Austin Brown & Wood LLP to the effect that the Class D-1 Notes, the Class D-2 Notes, and the Class D-3 Notes should constitute debt for United States federal income tax purposes. The original issue discount on a debt instrument will generally be the excess of the sum of all payments of qualified stated interest, over the issue price of the debt instrument. Stated interest is qualified stated interest generally if it is payable at least annually during the entire term of the debt instrument. Because interest on the Class D-1 Notes, the Class D-2 Notes, and the Class D-3 Notes is not unconditionally payable on each Payment Date because it can be deferred, although the matter is not free from doubt, the Issuer will not treat the stated interest payable as qualified stated interest and, accordingly, will treat the Class D-1 Notes, the Class D-2 Notes, and the Class D-3 Notes as having been issued with original issue discount. As a result, United States Holders of the Class D-1 Notes, the Class D-2 Notes, and the Class D-3 Notes will be required to include interest on the Class D-1 Notes, the Class D-2 Notes, and the Class D-3 Notes in income for United States federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding of interest. Upon a sale, exchange, or retirement of a Class D-1 Note, a Class D-2 Note, or a Class D-3 Note, a United States Holder will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange, or retirement, and the Holders adjusted tax basis in the Note. COMPOSITE SECURITIES OTHER THAN THE CLASS 6 COMPOSITE SECURITIES AND THE CLASS 8 COMPOSITE SECURITIES Under the terms of the Composite Securities, although there is no authority directly on point, the Issuer intends to take the position that a beneficial owner of a Composite Security will be treated for United States federal income tax purposes as the beneficial owner of the Components of the Composite Security. Assuming the treatment 146

is correct, the purchase price paid by a United States Holder of a Composite Security (other than a Class 6 Composite Security or a Class 8 Composite Security) will be treated as an amount paid for each Component thereof based on the relative fair market values of each Component. The United States Holders initial tax basis in each Component will equal the portion of the purchase price of the Composite Security allocated to each. In addition, a beneficial owner of a Composite Security (other than a Class 6 Composite Security) will be required to include amounts in income in respect of the Composite Securities in the same amounts and at the same times as a direct owner of the Components of the Composite Securities, regardless of the characterization of distributions on the Composite Security as being applied in respect of interest or reduction of the stated amount of the Composite Security. United States Holders of Composite Securities (other than Class 6 Composite Securities or the Class 8 Composite Securities) should consult the discussions regarding the consequences of acquiring, owning, and disposing of the Notes and the Preference Shares constituting the Components of Composite Securities. CLASS 6 COMPOSITE SECURITIES Under the terms of the Class 6 Composite Securities, although there is no authority directly on point, for United States federal income tax purposes, the Issuer intends to take the position that each United States Holder of a Class 6 Composite Security will be treated as the beneficial owner of a Preference Share Interest and the beneficial owner of a pro rata share of the Class 6 Collateral held in the Class 6 Composite Account. Assuming this treatment is correct, the purchase price paid by a United States Holder of a Class 6 Composite Security will be allocated between its Preference Share Interest and its share of the Class 6 Collateral based on the relative fair market values of each Component. The United States Holders initial tax basis in the Preference Share Interest and in its share of the Class 6 Collateral will equal the portion of the purchase price of the Class 6 Composite Security allocated to each. The Class 6 Collateral will consist of Treasury Strips. A United States Holders share of the Class 6 Collateral will be treated as having original issue discount equal to the excess of such United States Holders allocable share of the amount payable on the maturity date of the Treasury Strips over the portion of such United States Holders purchase price allocable to such Treasury Strips. Each United States Holder will be required to accrue original issue discount in respect of the Treasury Strips as ordinary income on a constant yield basis based on compounding interest. Upon a sale, exchange, or retirement of a Class 6 Composite Security, a United States Holder will be treated as having directly disposed of its share of the Class 6 Collateral and its Preference Share Interest. A United States Holder will be required to allocate the amount realized upon the sale of the Class 6 Composite Security among the Components of the Class 6 Composite Security based on the relative fair market values of such Components at the date of disposition. A United States Holder will recognize gain or loss on the disposition of its share of the Class 6 Collateral in an amount equal to the difference between the amount realized by such United States Holder in respect of its share of the Class 6 Collateral and such United States Holders basis in such share. In general, any gain or loss attributable to the Treasury Strips will be capital gain or loss if the United States Holder has held the Class 6 Composite Security for more than one year at the time of disposition. United States Holders of Class 6 Composite Securities should consult the discussion regarding the tax consequences of acquiring, owning, and disposing of the Preference Shares with respect to their ownership of the Preference Share Interests that are Components of Class 6 Composite Securities. CLASS 8 COMPOSITE SECURITIES Under the terms of the Class 8 Composite Securities, although there is no authority directly on point, for United States federal income tax purposes the Issuer intends to take the position that each United States Holder of a Class 8 Composite Security will be treated as the beneficial owner of a Preference Share Interest. United States Holders of Class 8 Composite Securities should consult the discussion regarding the tax consequences of acquiring, owning, and disposing of the Preference Shares with respect to their ownership of the Preference Share Interests that are Components of Class 8 Composite Securities.

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Tax Consequences to Foreign Holders of Notes A Foreign Holder of Notes will not be subject to withholding of United States federal income taxes on payments in respect of such Notes. In addition, a Foreign Holder will not be subject to United States federal income taxes on its interest from its Notes unless such income is effectively connected with the conduct by the Foreign Holder of a trade or business in the United States. Generally, a Foreign Holder will not be subject to taxes on any amount which constitutes capital gain upon retirement or disposition of a Note, unless such Foreign Holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and such gain is derived from sources within the United States. Certain other exceptions may be applicable, and a Foreign Holder should consult its tax advisor in this regard. Tax Consequences to United States Holders of Preference Shares On the Closing Date, the Issuer will receive an opinion from Sidley Austin Brown & Wood LLP to the effect that the Preference Shares will be characterized as equity (which would likely be considered voting equity) in the Issuer for United States federal income tax purposes. The Issuer and, by acquiring a Preference Share, each United States Holder of a Preference Share will agree to treat a Preference Share as an equity interest in the Issuer for United States federal income tax purposes. Subject to the anti-deferral rules discussed below, dividends distributed by the Issuer to a United States Holder that are subject to United States federal income tax will be taxable to the United States Holder as a dividend to the extent of the current and accumulated earnings and profits of the Issuer. These distributions will not constitute qualified dividend income, which, in the case of United States Holders who are individuals, may be eligible for a reduced rate of tax. In addition, unless the Issuer is treated as being engaged in a United States trade or business, dividend income derived by a United States Holder should generally constitute foreign source income that will be treated as passive income for United States foreign tax credit purposes. Each United States Holder should consult its own tax advisors as to how it should treat this income for purposes of its particular foreign tax credit calculation. Distributions in excess of earnings and profits will be non-taxable to the extent of, and will be applied against and reduce, the United States Holders adjusted tax basis in the Preference Shares. Distributions in excess of earnings and profits and basis will be taxable as gain from the sale or exchange of property. The tax consequences discussed in the two preceding paragraphs may be materially modified by the antideferral rules discussed below. In general, each United States Holders investment in the Issuer will be taxed as an investment in a passive foreign investment company (PFIC), as an investment in a foreign personal holding company (FPHC) or as an investment in a controlled foreign corporation (CFC), depending upon the percentage of the Preference Shares which are acquired and held by certain United States Holders and depending upon whether the Preference Shares are considered stock entitled to vote. If applicable, the rules pertaining to CFCs generally override those pertaining to FPHCs and PFICs and the rules pertaining to FPHCs generally override those pertaining to PFICs. STATUS OF THE ISSUER AS A CFC If a United States person owns at least 10 percent of the voting stock of a foreign corporation, the United States person is considered a U.S. Shareholder with respect to the foreign corporation. If U.S. Shareholders in the aggregate own more than 50 percent of the voting power or value of the stock of the foreign corporation, the foreign corporation will be classified as a controlled foreign corporation or CFC as to the U.S. Shareholders. Complex attribution rules apply for purposes of determining ownership of stock in a foreign corporation such as the Issuer. If the Issuer were classified as a CFC, a U.S. Shareholder would generally be subject to current United States tax on the income of the Issuer, regardless of cash distributions from the Issuer. In this event, the tax basis of a United States Holders Preference Shares would be increased by the amount included in income. In addition, gain on the sale of the CFCs stock by a U.S. Shareholder (during the period that the corporation is a CFC and thereafter for a five-year period) would be classified in whole or in part as dividend income. 148

STATUS OF THE ISSUER AS A FPHC The Issuer will be classified as a foreign personal holding company or FPHC if at any time during a taxable year more than 50 percent of the Preference Shares are owned (directly or indirectly) by not more than five individuals who are citizens or residents of the United States. In the event the Issuer were classified as a FPHC and not as a CFC, United States Holders would include in income for the taxable year as a dividend their share of the undistributed foreign personal holding company income of the Issuer. In this event, the tax basis of a United States Holders Preference Shares would be increased by the amount included in income. STATUS OF THE ISSUER AS A PFIC The Issuer, if it is not classified as a CFC or FPHC as to a United States Holder, will be treated as a passive foreign investment company or PFIC for United States federal income tax purposes as to the United States Holder. United States Holders in PFICs, other than United States Holders that make the qualified electing fund or QEF election described below, are subject to special rules for the taxation of excess distributions (which include both certain distributions by a PFIC and any gain recognized on a disposition of PFIC stock). In general, Section 1291 of the Code provides that the amount of any excess distribution will be allocated to each day of the United States Holders holding period for its PFIC stock. The amount allocated to the current year will be included in the United States Holders gross income for the current year as ordinary earnings. With respect to amounts allocated to prior years, the tax imposed for the current year will be increased by the deferred tax amount (an amount calculated with respect to each prior year by multiplying the amount allocated to the year by the highest rate of tax in effect for the year, together with an interest charge, as though the amounts of tax were overdue). An excess distribution is the amount by which distributions for a taxable year exceed 125 percent of the average distribution in respect of the Preference Shares during the three preceding taxable years (or, if shorter, the United States Holders holding period for the Preference Shares). As indicated above, any gain recognized upon disposition of the Preference Shares will be treated as an excess distribution and taxed as described above (i.e., such gain will not be taxable as capital gain). If a United States Holder makes the qualified electing fund election (the QEF election) provided in Section 1295 of the Code, the United States Holder will be required to include its pro rata share of the Issuers ordinary income and net capital gain (unreduced by any prior year losses) in income (as ordinary income and longterm capital gain, respectively) for each taxable year and pay tax thereon even if the income and gain is not distributed to the United States Holder by the Issuer. In addition, any losses of the Issuer will not be deductible by the United States Holder. If the Issuer later distributes the income or gain on which the United States Holder has already paid taxes, amounts so distributed to the United States Holder will not be further taxable to the United States Holder. A United States Holders tax basis in the Preference Shares will be increased by the amount so included and decreased by the amount of nontaxable distributions. In general, a United States Holder making the QEF election will recognize, on the disposition of the Preference Shares, capital gain or loss equal to the difference, if any, between the amount realized upon the disposition and its tax basis in the Preference Shares. The QEF election is effective only if certain required information is made available by the Issuer to the Service. The Issuer will undertake to comply with the information requirements necessary to be a QEF, which will permit United States Holders to make the QEF election, and to provide to each United States Holder information needed for the determination of the United States Holders pro rata share of the Issuers ordinary income and net capital gain. Nonetheless, there can be no absolute assurance that the information will always be available or presented. Prospective investors should be aware that the Issuers income that is allocated to United States Holders (under the QEF rules as well as under the CFC and FPHC rules discussed above) will not necessarily bear any particular relationship in any year to the amount of cash that is paid in respect of the Preference Shares and in any given year may be substantially greater. An excess will arise, among other circumstances, when interest or other income on the Collateral Obligations (which is included in gross income) is used to repay principal on the Notes (which does not give rise to a deduction).

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SALE OR EXCHANGE OF PREFERENCE SHARES Except as discussed above, gain or loss that is recognized on the Preference Shares generally will be capital gain or loss. Some or all of the gain recognized by a U.S. Shareholder in a CFC and PFIC may be treated as ordinary income. Tax Consequences to Foreign Holders of Preference Shares Assuming that the Issuer at no time is engaged in a United States trade or business, dividends on, and gain from the sale, exchange, or redemption of, Preference Shares generally should not be subject to United States federal income tax in the hands of a Foreign Holder that has no connection with the United States other than the holding of the Preference Shares. In addition, Foreign Holders will not be subject to United States withholding on payments in respect of the Preference Shares. Other Considerations Tax-Exempt Investors Special considerations apply to pension plans and other investors (Tax-Exempt Investors) that are subject to tax only on their unrelated business taxable income (UBTI). A Tax-Exempt Investors income from an investment in Preference Shares generally will not be treated as resulting in UBTI under current law, so long as such Tax-Exempt Investors acquisition of Preference Shares is not debt-financed. Tax-Exempt Investors should consult their own tax advisors regarding an investment in the Preference Shares. Information Reporting and Backup Withholding Under United States federal income tax law and regulations, certain categories of United States persons must file information returns with respect to their investment in, or involvement in, a foreign corporation. These reporting requirements apply to both taxable and tax-exempt United States Holders. Penalties for failure to file certain of these information returns are severe. Investors in the Preference Shares should consult with their own tax advisors regarding the requirements of filing information return. Information reporting to the Service generally will be required with respect to certain payments on or with respect to the Securities. A backup withholding tax will apply to those payments if a United States Holder fails to provide certain identifying information (such as such Holders taxpayer identification number) to the Trustee or relevant paying agent. Foreign Holders may be required to comply with applicable certification procedures to establish that they are not United States Holders to avoid the application of the information reporting requirements and backup withholding. Disclosure Requirements for Holders Recognizing Significant Losses or Experiencing Significant Book-Tax Differences A United States Holder or Foreign Holder that claims significant losses in respect of the Securities for United States federal income tax purposes (generally (i) $10 million or more in a taxable year or $20 million or more in any combination of taxable years for corporations or partnerships all of the partners of which are corporations, (ii) $2 million or more in a taxable year or $4 million or more in any combination of taxable years for all other taxpayers, and (iii) $50,000 or more in a taxable year for individuals or trusts with respect to foreign currency transactions) or reports any item of income, gain, expense, or loss in respect of the Securities for United States federal income tax purposes in an amount that differs from the amount reported for book purposes by more than $10 million on a gross basis in any taxable year may be subject to certain disclosure requirements for reportable transactions. In addition, a United States Holder of 10% of the Preference Shares (or any United States Holder of the Preference Shares if the Issuer is a FPHC) could be subject to these disclosure requirements in certain cases. Prospective investors should consult with their tax advisors concerning any possible disclosure obligation with respect to the Securities.

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Cayman Islands Tax Considerations The following discussion of certain Cayman Islands income tax consequences of an investment in the Securities is based on the advice of Maples and Calder as to Cayman Islands law. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It assumes that the Issuer will conduct its affairs in accordance with assumptions made by, and representations made to, counsel. It is not intended as tax advice, does not consider any investors particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law. Under existing Cayman Islands laws: (i) payments of principal and interest in respect of the Notes of any Class and payments of dividends or final distribution on the Preference Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payments to any holder of a Security, and gains derived from the sale of Securities will not be subject to Cayman Islands income or corporation tax. The Cayman Islands currently have no income, corporation, or capital gains tax and no estate duty, inheritance tax, or gift tax; no stamp duty is payable in respect of the issue or transfer of Securities although duty may be payable if Notes are executed in or brought into the Cayman Islands; and certificates evidencing the Securities, in registered form, to which title is not transferable by delivery, should not attract Cayman Islands stamp duty. However, an instrument transferring title to a Note, if brought to or executed in the Cayman Islands, would be subject to Cayman Islands stamp duty.

(ii) (iii)

The Issuer has been incorporated under the laws of the Cayman Islands as an exempted company and, as such, has obtained an undertaking from the Governor In Cabinet of the Cayman Islands in substantially the following form: The Tax Concessions Law (1999 Revision) Undertaking as to Tax Concessions In accordance with Section 6 of The Tax Concessions Law (1999 Revision), the Governor In Cabinet undertakes with Ares VIII CLO Ltd. (the Company): (a) (b) that no Law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income, gains, or appreciations shall apply to the Company or its operations; and in addition, that no tax to be levied on profits, income, gains, or appreciations or which is in the nature of estate duty or inheritance tax shall be payable: (i) (ii) on or in respect of the shares, debentures, or other obligations of the Company; or by the withholding in whole or in part of any relevant payment as defined in Section 6(3) of The Tax Concessions Law (1999 Revision).

These concessions shall be for a period of twenty years from the date that the original tax concession is granted. Acting Governor In Cabinet The Cayman Islands does not have an income tax treaty arrangement with the U.S. or any other country.

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THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX IMPLICATIONS OF AN INVESTMENT IN THE SECURITIES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS BEFORE INVESTING TO DETERMINE THE TAX IMPLICATIONS OF THE INVESTMENT IN LIGHT OF THE INVESTORS CIRCUMSTANCES. [remainder of page intentionally blank]

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CERTAIN ERISA AND OTHER CONSIDERATIONS General The United States Employee Retirement Income Security Act of 1974 (ERISA), or the United States Internal Revenue Code of 1986 (the Code), impose certain restrictions on (a) employee benefit plans (as defined in Section 3(3) of ERISA), (b) plans described in Section 4975(e)(1) of the Code, including individual retirement accounts or Keogh plans, (c) any entities whose underlying assets include plan assets by reason of a plans investment in the entities (each, a Plan), and (d) persons that have certain specified relationships to the Plans (Parties-in-Interest under ERISA and Disqualified Persons under the Code). Moreover, based on the reasoning of the United States Supreme Court in John Hancock Mutual Life Ins. Co. v. Harris Trust and Sav. Bank, 810 U.S. 86 (1993), an insurance companys general account may be deemed to include assets of the Plans investing in the general account (e.g., through the purchase of an annuity contract), and the insurance company might be treated as a Party-in-Interest with respect to a Plan by virtue of the investment. A Party-in-Interest or Disqualified Person that engages in a non-exempt prohibited transaction may be subject to non-deductible excise taxes and other penalties and liabilities under ERISA and the Code. Each of the Issuer, the Co-Issuer, the Initial Purchaser, and the Portfolio Manager, as a result of their own activities or because of the activities of an affiliate, may be considered a Party-in-Interest or a Disqualified Person with respect to Plans. Accordingly, prohibited transactions within the meaning of Section 406 of ERISA and Section 4975 of the Code may arise if Securities are acquired by a Plan with respect to which any of the Issuer, the Co-Issuer, the Initial Purchaser, the Portfolio Manager, the obligors on the Collateral Obligations or any of their respective affiliates is a Party-in-Interest or Disqualified Person. In addition, if a Party-in-Interest or Disqualified Person with respect to a Plan owns or acquires a beneficial interest in the Issuer or the Co-Issuer, the acquisition or holding of Securities by or on behalf of the Plan could be considered to constitute an indirect prohibited transaction. Moreover, the acquisition or holding of Securities or other securities issued by the Issuer or the Co-Issuer by or on behalf of a Party-in-Interest or Disqualified Person with respect to a Plan that owns or acquires a beneficial interest in the Issuer or the Co-Issuer, as the case may be, also could give rise to an indirect prohibited transaction. Certain class exemptions from the prohibited transaction rules could be applicable, however, depending in part upon the type of Plan fiduciary making the decision to acquire a Security or other indebtedness and the circumstances under which the decision is made. Included among these exemptions are PTCE 90-1, regarding investments by insurance company pooled separate accounts; PTCE 91-38, regarding investments by bank collective investment funds; PTCE 84-14, regarding transactions effected by a qualified professional asset manager; PTCE 96-23, regarding investments by certain in-house asset managers; and PTCE 95-60, regarding investments by insurance company general accounts. Even if the conditions specified in one or more of these exemptions are met, the scope of the relief provided by these exemptions might or might not cover all acts which might be construed as prohibited transactions. If a purchase of Securities were to be a non-exempt prohibited transaction, the purchase might have to be rescinded. Government plans and certain church plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to local, state, or other federal laws that are similar to the foregoing provisions of ERISA and the Code. Fiduciaries of any plans should consult with their counsel before purchasing any Securities. Plan Asset Considerations The United States Department of Labor, the government agency primarily responsible for administering the ERISA fiduciary rules and the prohibited transaction rules under ERISA and the Code, has issued a regulation (the Plan Asset Regulation) that, under specified circumstances, requires plan fiduciaries, and entities with certain specified relationships to a Plan, to look through investment vehicles (such as the Issuer) and treat as an asset of the Plan each underlying investment made by the investment vehicle. The Plan Asset Regulation provides, however, that if equity participation in any entity by benefit plan investors (as defined in the Plan Asset Regulation to include, in addition to Plans, all employee benefit plans whether or not they are subject to ERISA or the Code, each a Benefit Plan Investor) is not significant then the look-through rule will not apply to the entity. Equity participation by Benefit Plan Investors in an entity is significant if, immediately after the most recent acquisition of any equity interest in the entity, 25% or more of the value of any class of equity interests in the entity (excluding the value of any interests held by certain persons, other than Benefit Plan Investors, exercising control over the assets of 153

the entity or providing investment advice to the entity for a fee (such as the Portfolio Manager) or any affiliates of the persons (a Controlling Person)) is held, in the aggregate, by Benefit Plan Investors (the Benefit Plan 25% Threshold). Although there is no guidance under ERISA on how this definition applies generally, and in particular, to securities issued by special-purpose self-liquidating pools of assets such as the Co-Issuers, the Co-Issuers believe that, at the time of their issuance, the Class A Notes, Class B Notes, and Class C Notes should be treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulation. This belief is based in part on the traditional debt features of the Notes, including the reasonable expectation of purchasers of the Notes that the Notes will be repaid when due, as well as the absence of conversion rights, warrants, and other typical equity features. It should be noted that the debt treatment of the Notes for ERISA purposes could change after their issuance (i.e., they could be treated as equity) if, for instance, the Issuer or the Co-Issuer incurs losses or there is a change in ratings for the Rated Notes. The risk of recharacterization is enhanced for the Class B Notes, which are subordinated to the Class A Notes, and the Class C Notes, which are subordinated to the Class A Notes and the Class B Notes. However, it is likely that the Preference Shares will constitute equity interests in the Issuer and possible that the Class D Notes and the Composite Securities could also be so classified. As used in this Offering Memorandum, the Preference Shares, Class D Notes, and Composite Securities are sometimes referred to as Deemed Equity Interests. Accordingly, the Deemed Equity Interests may not be acquired by, or on behalf of, or using the assets of, any Benefit Plan Investors, except as provided below with respect to certain insurance company general accounts purchasing such securities in the original offering. To effect this limitation, each prospective purchaser of any Deemed Equity Interest will be required to acknowledge, represent, and agree in writing (and each purchaser of a Deemed Equity Interest that is not required to acknowledge, represent, and agree in writing and each transferee of a Deemed Equity Interest represented by a Global Note will be deemed to have acknowledged, represented, and agreed) that at the time of its purchase or acquisition and throughout the period of its holding and disposition of the Deemed Equity Interest either it is not, and it will not be, a Benefit Plan Investor or acting on behalf of or using the assets of any Benefit Plan Investor to acquire the Deemed Equity Interest, or (in the case of the original offering only) it is an insurance company acting on behalf of its general account and less than 25% of the assets of the general account are plan assets for purposes of Title I of ERISA and Section 4975 of the Code, the insurance company is not a controlling person with respect to the assets of the Issuer,

without limiting the remedies for a breach of the foregoing assurances, the insurance company agrees that if, after its initial acquisition of the Deemed Equity Interest, at any time during any calendar quarter 25% or more of the assets of the general account are plan assets for purposes of Title I of ERISA or Section 4975 of the Code or it becomes a controlling person, then the insurance company shall, in a manner consistent with the restrictions on transfer in this Offering Memorandum, dispose of all Deemed Equity Interests held in its general account by the end of the next following calendar quarter unless an exemption or exception pursuant to Section 401(c) of ERISA and the related final regulations or under an exemption or regulation issued by the U.S. Department of Labor under ERISA exists such that its continued holding of the Deemed Equity Interests could not subject any person to liability on the basis of a claim that the assets of the Issuer are plan assets, and the insurance companys purchase, holding, and disposition of Deemed Equity Interest will not be or result in a non-exempt transaction under Section 406 of ERISA or Section 4975 of the Code. None of the Issuer, the Trustee, or the Preference Share Paying Agent, as applicable, or the Indenture Registrar or Share Registrar, as applicable, will recognize any transfer of Deemed Equity Interests, as applicable, to a transferee that is a Benefit Plan Investor other than an insurance company general account making the required representations. Each purchaser of a Co-Issued Note, and each transferee of a Co-Issued Note will be required to acknowledge, represent, and agree in writing (and each purchaser of a Security that is not required to acknowledge, represent, and agree in writing and each transferee of a Co-Issued Note represented by a Global Note will be deemed to have acknowledged, represented, and agreed) that at the time of its purchase or acquisition and throughout the 154

period of its holding and disposition of the Co-Issued Note, either it is not, and it will not be, a Benefit Plan Investor or acting on behalf of or using the assets of any Benefit Plan or its purchase, holding, and disposition of a Co-Issued Note will not be or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental or other plan, a violation of any substantially similar federal, state, or local law). If for any reason the assets of the Issuer were deemed to be plan assets of a Plan subject to ERISA or Section 4975 of the Code, and no statutory or administrative exemptions were applicable, certain transactions that the Issuer might enter into, or may have entered into, in the ordinary course of its business might constitute nonexempt prohibited transactions under Section 406 of ERISA or Section 4975 of the Code and might have to be rescinded. In addition, the payment of certain of the fees payable to the Portfolio Manager might be considered to be a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, and other provisions of ERISA could be implicated as well. In addition, Section 404(b) of ERISA, which generally provides that no fiduciary may maintain the indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United States, would need to be satisfied or one or more of the exceptions to this requirement in 29 C.F.R. Section 2550.404b-1 would need to be available. The sale of any Note or Preference Shares to a Plan is in no respect a representation by, with respect to the Notes, the Co-Issuers, and with respect to the Preference Shares, the Issuer, or with respect to any of the Securities, the Initial Purchaser or any of their respective affiliates, that the investment meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan, or that the investment is appropriate for a Plan generally or any particular Plan. Each purchaser of Notes will be deemed to represent and warrant either (a) it is not, and is not acting on behalf of, a Plan subject to ERISA or Section 4975 of the Code or a governmental or church plan that is subject to any federal, state, or local law that is similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code or (b) its purchase and ownership of the Notes will not result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental or church plan, a violation of any similar federal, state, or local law), because the purchase and holding of the Notes by the purchaser is covered by a prohibited transaction exemption (including, for example, prohibited transaction class exemption 84-14, regarding transactions effected by a qualified professional asset manager), all of the conditions of which are and will be satisfied upon its acquisition of, and throughout the term that it holds, the Notes. Any Plan fiduciary that proposes to cause a plan to purchase Securities should consult with its own legal and tax advisors with respect to the potential applicability of ERISA and the Code to the investments, the consequences of the an investment under ERISA and the Code and the ability to make the representations described above. Moreover, each plan fiduciary should determine whether, under the general fiduciary standards of ERISA, an investment in the securities is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plans investment portfolio. Any purchaser of Notes that is an insurance company using the assets of an insurance company general account should note that the Small Business Job Protection Act of 1996 added Section 401(c) of ERISA relating to the status of the assets of insurance company general accounts under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the Department of Labor issued final regulations with respect to insurance policies issued on or before December 31, 1998 that are supported by an insurers general account. As a result of these regulations, assets of an insurance company general account will not be treated as plan assets for purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of the Code to the extent that such assets relate to contracts issued to employee benefit plans on or before December 31, 1998 and the insurer satisfies various conditions. The plan asset status of insurance company separate accounts is unaffected by the new Section 401(c) of ERISA, and separate account assets continue to be treated as the plan assets of any plan invested in a separate account. The discussion of ERISA and Section 4975 of the Code in this Offering Memorandum, is, of necessity, general and does not purport to be complete. Moreover, the provisions of ERISA and Section 4975 of the Code are subject to extensive and continuing administrative and judicial interpretation and review. Therefore, the matters discussed above may be affected by future regulations, rulings, and court decisions, some of which may have retroactive application and effect. 155

CERTAIN LEGAL INVESTMENT CONSIDERATIONS Institutions the investment activities of which are subject to legal investment laws and regulations or to review by certain regulatory authorities may be subject to restrictions on investments in the Securities. Any institution should consult its legal advisors in determining whether and to what extent there may be restrictions on its ability to invest in the Securities. Without limiting the foregoing, any financial institution that is subject to the jurisdiction of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, any state insurance commission, or any other federal or state agencies with similar authority should review any applicable rules, guidelines, and regulations before purchasing Securities. Depository institutions should review and consider the applicability of the Federal Financial Institutions Examination Council Supervisory Policy Statement on Securities Activities, which has been adopted by the respective federal regulators. None of the Issuer, the Co-Issuer, the Portfolio Manager, and the Initial Purchaser makes any representation as to the proper characterization of the Securities for legal investment or other purposes, or as to the ability of particular investors to purchase Securities for legal investment or other purposes, or as to the ability of particular investors to purchase Securities under applicable investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Securities) may affect the liquidity of the Securities. Accordingly, all institutions the activities of which are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult their own legal advisors in determining whether and to what extent the Securities are subject to investment, capital or other restrictions. [remainder of page intentionally blank]

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PLAN OF DISTRIBUTION Subject to the terms and conditions in a purchase agreement (the Purchase Agreement) entered into among the Co-Issuers and the Initial Purchaser, the Co-Issuers have agreed to sell, and the Initial Purchaser has agreed to purchase, the Securities. With respect to all Securities except for the Class D-3 Notes, the sales price is 100%. The sales price for the Class D-3 Notes is 98.15%. The Purchase Agreement provides that the obligations of the Initial Purchaser to pay for and accept delivery of Securities thereunder are subject to certain conditions. In the Purchase Agreement, each of the Issuer and the Co-Issuer agree to indemnify the Initial Purchaser against certain liabilities under the Securities Act or to contribute to payments the Initial Purchaser may be required to make in respect thereof. In addition, the Issuer will agree to reimburse the Initial Purchaser for certain of its expenses incurred in connection with the closing of the transactions contemplated hereby. The Securities have not been and will not be registered under the Securities Act and may not be offered or sold except (i) within the United States or to, or for the account or benefit of, U.S. Persons, except to Qualified Purchasers who are either (a) Qualified Institutional Buyers in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A or (b) Institutional Accredited Investors pursuant to an exemption from the registration requirements of the Securities Act, or (c) in the case of the Preference Shares, Accredited Investors who are either Knowledgeable Employees or Qualified Purchasers, or (ii) outside the United States to non-U.S. Persons in offshore transactions in reliance on Regulation S. In addition, an offer or sale of Securities within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if the offer or sale is made otherwise than in accordance with Rule 144A under the Securities Act. No action has been taken or is being contemplated by the Issuer or the Co-Issuers, as applicable, that would permit a public offering of the Securities or possession or distribution of this Offering Memorandum or any amendment thereof, or supplement thereto or any other offering material relating to the Securities in any jurisdiction (other than Ireland) where, or in any other circumstances in which, action for those purposes is required. Nothing in this Offering Memorandum shall constitute an offer to sell or a solicitation of an offer to purchase any securities in any jurisdiction where it is unlawful to do so absent the taking of the action or the availability of an exemption therefrom. The Initial Purchaser will represent, warrant and agree that: (i) it has not offered or sold and will not offer or sell any Securities to persons in the United Kingdom before admission of the Securities to listing in accordance with Part VI of the Financial Services and Markets Act 2000 (the FSMA), except to persons whose ordinary activities involve them in acquiring, holding, managing, or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 or the FSMA; it has not offered or sold and, before the expiry of a period of six months from the issue date of the Securities, will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing, or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the 157

(ii)

(iii)

meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Securities in circumstances in which Section 21(1) of the FSMA does not apply to the Co-Issuers or the Issuer, as applicable, and (iv) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom.

In addition, no invitation to subscribe for Securities may be made to the public in the Cayman Islands. Application has been made to the Irish Stock Exchange to admit the Securities to the Daily Official List of the Irish Stock Exchange. There can be no assurance that the admission will be granted or maintained. In the Purchase Agreement, the Initial Purchaser will agree to sell Securities in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction (i) in the United States to persons that are either (a) both Qualified Institutional Buyers and Qualified Purchasers, purchasing for their own account or one or more accounts with respect to which they exercise sole investment discretion, each of which is both a Qualified Institutional Buyer and a Qualified Purchaser, in accordance with Rule 144A, or (b) Institutional Accredited Investors and Qualified Purchasers in reliance on an exemption from registration under the Securities Act, (ii) outside the United States to persons that are not U.S. Persons, purchasing for their own account or one or more accounts with respect to which they exercise sole investment discretion, each of which is a non-U.S. Person, in offshore transactions in reliance on Regulation S, and (iii) with respect to the Preference Shares only, also in the United States to persons that are both Accredited Investors and either Knowledgeable Employees or Qualified Purchasers in reliance on an exemption from registration under the Securities Act. For certain restrictions on resale of the Securities, see Transfer Restrictions. The Securities and the Preference Shares are a new issue of securities for which there is currently no market. The Initial Purchaser is not under any obligation to make a market in any class of Securities and the Preference Shares and any market making activity, if commenced, may be discontinued at any time. There can be no assurance that a secondary market for any class of Securities will develop, or if one does develop, that it will continue. Accordingly, no assurance can be given as to the liquidity of or trading market for the Securities. In connection with the offering of the Securities, the Initial Purchaser may, as permitted by applicable law, overallot or effect transactions that stabilize or maintain the market price of the Securities at a level which might not otherwise prevail in the open market. The stabilizing, if commenced, may be discontinued at any time. CERTAIN LEGAL MATTERS Certain legal matters with respect to the Securities will be passed upon for the Co-Issuers by Sidley Austin Brown & Wood LLP, New York, New York. Certain matters with respect to Cayman Islands corporate law and tax law will be passed upon for the Issuer by Maples and Calder. Certain legal matters will be passed upon for the Portfolio Manager by Clifford Chance US LLP, New York, New York. Certain legal matters with respect to the Securities will be passed upon for the Initial Purchaser by Sidley Austin Brown & Wood LLP, New York, New York. No separate counsel has been appointed to represent purchasers of any of the Securities. [remainder of page intentionally blank]

158

IDENTIFYING NUMBERS The Notes sold in offshore transactions in reliance on Regulation S and represented by Regulation S Global Notes have been accepted for clearance under the Common Codes in the table below. The table also lists the CUSIP (CINS) Numbers, the International Securities Identification Numbers (ISIN) and the WKN numbers for each Class of Securities.

Security Class A-1-A Notes Class A-1-A Rule 144A Global Notes Class A-1-A Regulation S Global Notes Class A-1-B Notes Class A-1-B Rule 144A Global Notes Class A-1-B Regulation S Global Notes Class A-2 Notes Class A-2 Rule 144A Global Notes Class A-2 Regulation S Global Notes Class A-3 Notes Class A-3 Rule 144A Global Notes Class A-3 Regulation S Global Notes Class B-1 Notes Class B-1 Rule 144A Global Notes Class B-1 Regulation S Global Notes Class B-2 Notes Class B-2 Rule 144A Global Notes Class B-2 Regulation S Global Notes Class C-1 Notes Class C-1 Rule 144A Global Notes Class C-1 Regulation S Global Notes Class C-2 Notes Class C-2 Rule 144A Global Notes Class C-2 Regulation S Global Notes Class D-1 Notes Class D-1 Rule 144A Global Notes Class D-1 Regulation S Global Notes Class D-2 Notes Class D-2 Rule 144A Global Notes Class D-2 Regulation S Global Notes Class D-3 Notes Class D-3 Rule 144A Global Notes Class D-3 Regulation S Global Notes Class 1 Composite Securities Regulation S Class 1 Composite Securities Certificated Class 1 Composite Securities

CUSIP 04010KAA3 G3332KAA9 04010KAB1 G3332KAB7 04010KAG0 G3332KAG6 04010KAH8 G3332KAH4 04010KAC9 G3332KAC5 04010KAD7 G3332KAD3 04010KAE5 G3332KAE1 04010KAF2 G3332KAF8 04010JAA6 G3331SAA3 04010JAC2 G3331SAC9 04010JAD0 G3331SAD7 G3331SAB1 04010JAB4 159

Common Code 18858991 18859025 18859041 18859068 18859092 18859122 18859157 18859211 18859246 18859289 18859343 18861119 18859491 18859521 18859530 18859386 18859700 18859742 18859866 18859939 18860023 18860155 18885549 18885239

ISIN US04010KAA34 USG3332KAA90 US04010KAB17 USG3332KAB73 US04010KAG04 USG3332KAG60 US04010KAH86 USG3332KAH44 US04010KAC99 USG3332KAC56 US04010KAD72 USG3332KAD30 US04010KAE55 USG3332KAE13 US04010KAF21 USG3332KAF87 US04010JAA60 USG3331SAA36 US04010JAC27 USG3331SAC91 US04010JAD00 USG3331SAD74 USG3331SAB19 US04010JAB44

WKN A0AW0B A0AW0A A0AW0D A0AW0C A0AW0F A0AW0E A0AW0H A0AW0G A0AW0K A0AW0J A0AW0M A0AW0L A0AW0P A0AW0N A0AW0R A0AW0Q A0AW0T A0AW0S A0AW0V A0AW0U A0AW0X A0AW0W A0AW0Y A0AW0Z

Class 2 Composite Securities Regulation S Class 2 Composite Securities Certificated Class 2 Composite Securities Class 3 Composite Securities Regulation S Class 3 Composite Securities Certificated Class 3 Composite Securities Class 4 Composite Securities Regulation S Class 4 Composite Securities Certificated Class 4 Composite Securities Class 5 Composite Securities Regulation S Class 5 Composite Securities Certificated Class 5 Composite Securities Class 6 Composite Securities Regulation S Class 6 Composite Securities Certificated Class 6 Composite Securities Class 7 Composite Securities Regulation S Class 7 Composite Securities Certificated Class 7 Composite Securities Class 8 Composite Securities Regulation S Class 8 Composite Securities Certificated Class 8 Composite Securities Preference Shares Certificated Preference Shares Rule 144A Accredited Investors Regulation S Global Preference Shares ____________________________________ * Under application.

G3331SAE5 04010JAE8 G3331SAF2 04010JAF5 G3331SAG0 04010JAG3 G3331SAH8 04010JAH1 G3331SAJ4 04010JAJ7 G3331SAK1 04010JAK4 G3331SAL9 04010JAL2

18885816 18885735 18885921 18885867 18885999 18885956 18886081 18886014 18886154 18886120 18886286 18886197 18946521 *

USG3331SAE57 US04010JAE82 USG3331SAF23 US04010JAF57 USG3331SAG06 US04010JAG31 USG3331SAH88 US04010JAH14 USG3331SAJ45 US04010JAJ79 USG3331SAK18 US04010JAK43 USG3331SAL90 US04010JAL26

A0AW00 A0AW01 A0AW02 A0AW03 A0AW04 A0AW05 A0AW06 A0AW07 A0AW08 A0AW09 A0AW1A A0AW1B * *

0410J207 04010J306 G3331S204

* N/A 18860678

US0410J2078 US04010J2078 KYG3331S2048

* N/A *

160

GLOSSARY As used in this Offering Memorandum, the following terms have the following meanings: Accredited Investor: The meaning specified in Rule 501(a) of Regulation D. Act: Any request, demand, authorization, direction, notice, consent, waiver, or other action to be given or taken by Noteholders under the Indenture embodied in and evidenced by one or more instruments of substantially similar tenor signed by Noteholders in person or by agents duly appointed in writing. The instruments (and the action embodied in them) are referred to as the Act of the Noteholders signing the instruments. Administrative Expense Cap: An amount on any Payment Date equal to the excess of the sum of (a) 0.05% of the sum of the Maximum Investment Amount plus the par value of all Defaulted Collateral Obligations on the related Determination Date, (b) U.S.$170,000, and (c) during the Reinvestment Period, U.S.$50,000; over the sum of the amounts paid for Administrative Expenses in the twelve months preceding the current Payment Date. Before the fourth Payment Date, all amounts shall be pro rated for the number (and portion) of Due Periods involved on the basis of a 360-day year and the actual number of days elapsed, beginning with the Closing Date. Administrative Expenses: Amounts due or accrued with respect to any Payment Date representing (i) tax preparation, filing, and registration fees or expenses and any other filing and registration fees owed by the Co-Issuers (including all filing, registration, and annual return fees payable to the Cayman Islands government and registered office fees); (ii) fees, indemnities, and expenses of the Trustee (including all amounts in respect of compensation and reimbursement under the Indenture), the Preference Share Paying Agent, the Share Registrar, the Administrator, and the Collateral Administrator; (iii) fees, indemnities, and expenses of the Co-Issuers and of accountants, agents, and counsel for either of the Co-Issuers; (iv) fees and expenses of the Rating Agencies in connection with any rating of the Securities owed by either Co-Issuer (including fees and expenses for surveillance, credit estimate, and other fees owing to the Rating Agencies) (v) expenses and indemnities (but not Management Fees) of the Portfolio Manager if payable under the Management Agreement; and (vi) any other person (except the Portfolio Manager) if specifically provided for in the Indenture.

Affiliate or Affiliated: With respect to a Person, (i) any other Person that, directly or indirectly, is in control of, or controlled by, or is under common control with, the Person or (ii) any other Person that is a director, officer or employee (a) of the Person, (b) of any subsidiary or parent company of the Person, or (c) of any Person described in clause (i) above. For the purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote more than 50% of the securities having ordinary voting power for the election of directors of any Person or (y) to direct or cause the direction of the management and policies of the Person whether by contract or otherwise. This definition shall exclude any other special purpose vehicle to which the Administrator is or will be providing administrative services. Aggregate Outstanding Amount: When used with respect to any of the Notes or the Note Components as of any date, the aggregate principal amount of the Notes or Note Components represented by outstanding Composite Securities on that date. When used with respect to the Outstanding Composite Securities as of any date, the sum of (i) the Aggregate Outstanding Amount of their Note Components on that date, plus (ii) the aggregate original stated value (determined as U.S.$1,000 per Preference Share Components) of their Preference Share Components on that date. The Aggregate Outstanding Amount of the Class 6 Component as of any date is equal to the Class 6 Principal Balance. 161

Aggregate Principal Balance: When used with respect to the Pledged Obligations, the sum of the Principal Balances of all the Pledged Obligations. When used with respect to a portion of the Pledged Obligations, the term Aggregate Principal Balance means the sum of the Principal Balances of that portion of the Pledged Obligations. Applicable Collateral: One or the other of the Collateral or the Class 6 Collateral, as the context requires. When the context would refer to the Class 6 Component, the term Applicable Collateral means the Class 6 Collateral and when the context would refer to the Note Interests the term Applicable Collateral means only the Collateral. Applicable Issuers or Applicable Issuer: With respect to the Class A, Class B, and Class C Notes, each of the Co-Issuers. With respect to the Class D Notes and Composite Securities, the Issuer only. Applicable Percentage: The lesser of the Moodys Priority Category Recovery Rate and the S&P Priority Category Recovery Rate applicable to the Collateral Obligation as specified in the tables below. High-Yield Bonds do not include Structured Finance Obligations for this purpose. Moodys Priority Category Recovery Rate 45.0% 50.0% 60.0% 40.0% 40.0% In the case of (i) a Limited Exposure Synthetic Security, the Moodys Priority Category Recovery Rate in this table for the related Reference Obligation, (ii) a Form-Approved Synthetic Security, the Moodys Priority Category Recovery Rate given by Moodys to the Form-Approved Synthetic Security at the time of approval of the Form-Approved Synthetic Security by Moodys, and (iii) any other Synthetic Security, the Moodys Priority Category Recovery Rate given by Moodys to the Synthetic Security at the time of acquisition of the Synthetic Security.

Moodys Priority Category Class 1 Loans............................... Class 2 Loans............................... Class 3 Loans............................... Class 4 Loans............................... secured Loans whose security interest is not a first priority security interest ............................ Synthetic Securities......................

Finance Leases, unsecured DIP Loans, and Structured Finance Obligations................................... As determined by Moodys on a case-by-case basis Moodys Notched Recovery Rate Table The relevant Moodys Priority Category Recovery Rate is the rate for High-Yield Bonds determined by comparing the Moodys rating of the obligor on the relevant High-Yield Bond to the Moodys rating of the relevant High-Yield Bond and determining whether the rating of the relevant High-Yield Bond is better than the rating of the obligor (and if so, by how many Moodys rating notches), worse than the rating of the obligor (and if so, by how many Moodys rating notches), or the same. The Moodys Priority Category Recovery Rate is the rate at the intersection of the applicable HighYield Bonds row and the column for the number of notches difference between the obligor rating and the instrument rating. The Moodys obligor rating used for High-Yield Bonds is the senior unsecured rating. If, with respect to a HighYield Bond, either the obligation or the obligor is not rated, then the Moodys Priority Category Recovery Rate is the rate in the NR column. 3 or more Have 2 or more Moodys Priority notches 2 notches 1 notch same 1 notch notches Senior Subordinated lower rating higher Category lower lower higher NR NR High-Yield Bonds 2.0% 10.0% 15.0% 30.0% 35.0% 40.0% 30.0% 15.0%

162

Moodys Priority Category

Moodys Priority Category Recovery Rate S&P Priority Category Recovery Rate 57.250% 43.125% 24.425% 47.500% 34.500% 21.500%

S&P Priority Category Senior Secured Loans .................. Senior unsecured Loans ............... Subordinated Loans ..................... Senior secured High-Yield Bonds ........................................... Senior unsecured High-Yield Bonds ........................................... Subordinated High-Yield Bonds ........................................... Structured Finance Obligations....

The S&P Priority Category Recovery Rate determined in accordance with the S&P Structured Finance Obligation Recovery Rate Table below by reference to the type of asset and its then S&P Rating (or, with respect to assets to which that table does not apply, on a case by case basis in connection with the grant of the relevant Collateral Obligation). Synthetic Securities and As assigned by S&P on a case by case basis in connection with the grant of the Finance Leases............................. relevant Collateral Obligation. DIP Loans As determined by S&P on a case-by-case basis S&P Structured Finance Obligation Recovery Rate Table* Senior Asset Class AAA AA A BBB lower than BBB 80.0% 70.0% 60.0% 50.0% **

Junior Asset Class AAA 65.0% AA 55.0% A 40.0% BBB 30.0% BB 10.0% B 2.5% CCC 0.0% ___________________ * This table shall not apply to project finance, future flows, synthetics, CDO repacks of ABS or CDOs, guaranteed ABS, distressed debt CDOs, synthetic CDOs, or emerging market CDOs ** As assigned by S&P on a case by case basis in connection with the grant of the relevant Collateral Obligation Ares: Ares Management LLC. Assets: Certain Collateral Obligations, Eligible Investments, Hedge Agreements, and certain other assets of the Issuer. Attached Equity Security: A Qualified Equity Security purchased as a component of a Collateral Obligation, so long as at the time of the Issuers commitment to purchase, the portion of the total Purchase Price 163

paid by the Issuer for the Collateral Obligation and Attached Equity Security allocable to the Attached Equity Security does not represent more than 2% of the Purchase Price, as determined by the Portfolio Manager on a commercially reasonable basis, unless the portion allocable to the Attached Equity Security that exceeds 2% of the Purchase Price is acquired using Interest Proceeds reasonably expected by the Portfolio Manager to remain after the payment of all amounts payable under the Priority of Payments through clause (23) on the next Payment Date. Bank: U.S. Bank National Association, a national banking association, in its individual capacity and not as Trustee. Bankruptcy Code: The United States bankruptcy code, Title 11 of the United States Code. Business Day: A day on which commercial banks and foreign exchange markets settle payments in each of New York City; Boston, Massachusetts; St. Paul, Minnesota; and London, and any other city in which the designated corporate trust office of the Trustee is located and, in the case of the final payment of principal of any Note or the final payment in respect of any Composite Security, the place of presentation of the Security designated by the Trustee. To the extent action is required of the Irish Paying Agent, Dublin, Ireland shall be considered in determining Business Day for purposes of determining when action by the Irish Paying Agent is required. Caa/CCC Collateral Obligations: The Collateral Obligations (excluding any Non-Performing Collateral Obligations) that on the relevant date have a Moodys Rating of Caa1 or below (or a Moodys Rating of B3 and are on credit watch with negative implications by Moodys) or an S&P Rating of CCC+ or below (or an S&P Rating of B- and are on credit watch with negative implications by S&P). Cede: Cede & Co. Class: A class of Securities consisting of each of the Class A-1-A Notes; the Class A-1-B Notes; the Class A-2 Notes; the Class A-3 Notes; the Class B-1 Notes; the Class B-2 Notes; the Class C-1 Notes; the Class C-2 Notes; the Class D-1 Notes; the Class D-2 Notes; the Class D-3 Notes; the Class 1 Composite Securities; the Class 2 Composite Securities; the Class 3 Composite Securities; the Class 4 Composite Securities; the Class 5 Composite Securities; the Class 6 Composite Securities; the Class 7 Composite Securities; the Class 8 Composite Securities; or the Preference Shares. In addition, when used with respect to Note Interests or Preference Share Interests, means a class of Note Interests or Preference Share Interests consisting of each of the Class A-1 Note Interests, the Class B Note Interests, the Class C Note Interests, the Class D Note Interests and the Preference Share Interests. Class 1 Composite Security Preference Share Component Amount: On any Payment Date, the amount of Interest Proceeds and Principal Proceeds allocated to the Preference Share Component of the Class 1 Composite Securities. Class 1 Loan: A Senior Secured Loan that (i) has a rating from Moodys equal to (A) the Moodys senior implied rating of the borrower or (B) if the borrower does not have a Moodys senior implied rating, the Moodys senior unsecured rating of the borrower, (ii) does not have a rating from Moodys, or (iii) otherwise is not a Class 2 Loan or a Class 3 Loan. Class 2 Loan: A senior secured loan that (i) has a rating from Moodys one sub-category higher than (A) the Moodys senior implied rating of the borrower or (B) if the borrower does not have a Moodys senior implied rating, the Moodys senior unsecured rating of the borrower, (ii) has a rating from Moodys and whose borrower has neither a senior implied rating nor a senior unsecured rating from Moodys, or (iii) is a secured DIP Loan. Class 3 Loan: A senior secured loan that has a rating from Moodys two or more sub-categories higher than (i) the Moodys senior implied rating of the borrower or (ii) if the borrower does not have a Moodys senior implied rating, the Moodys senior unsecured rating of the borrower. Class 4 Loan: A Loan that is a senior unsecured loan or a DIP Loan that is not a Senior Secured Loan.

164

Class 6 Rated Balance: With respect to the rating of the Class 6 Composite Securities by Moodys, on the Closing Date $3,250,000 and on any date of determination thereafter, the initial Class 6 Rated Balance minus the aggregate amount of all distributions paid to the Holders of the Class 6 Composite Securities in respect of its related Components on all prior Payment Dates pursuant to item (24) under Application of FundsApplication of Interest Proceeds, item (12) under Application of FundsApplication of Principal Proceeds, and Application of FundsClass 6 Component Distributions. Class A Note Interests: The Class A Notes and the Class A-1-B Note Components. Class A-1-B Note Components: The Components having the characteristics specified in the Indenture and entitling the Holder of a Composite Security to rights per U.S.$1,000 Aggregate Outstanding Amount of Class A-1-B Note Component equivalent to U.S.$1,000 Aggregate Outstanding Amount of Class A-1-B Notes and having the additional terms provided in the Indenture and in the Composite Security. Class B Deferred Interest: Deferred Interest with respect to the Class B Note Interests. Class B-2 Note Components: The Components having the characteristics specified in the Indenture and entitling the Holder of a Composite Security to rights per U.S.$1,000 Aggregate Outstanding Amount of Class B-2 Note Component equivalent to U.S.$1,000 Aggregate Outstanding Amount of Class B-2 Notes and having the additional terms provided in the Indenture and in the Composite Security. Class C Deferred Interest: Deferred Interest with respect to the Class C Note Interests. Class C-2 Note Components: The Components having the characteristics specified in the Indenture and entitling the Holder of a Composite Security to rights per U.S.$1,000 Aggregate Outstanding Amount of Class C-2 Note Component equivalent to U.S.$1,000 Aggregate Outstanding Amount of Class C-2 Notes and having the additional terms provided in the Indenture and in the Composite Security. Class D Deferred Interest: Deferred Interest with respect to the Class D Note Interests. Class D-2 Note Components: The Components having the characteristics specified in the Indenture and entitling the Holder of a Composite Security to rights per U.S.$1,000 Aggregate Outstanding Amount of Class D-2 Note Component equivalent to U.S.$1,000 Aggregate Outstanding Amount of Class D-2 Notes and having the additional terms provided in the Indenture and in the Composite Security. Class D Reinvestment Overcollateralization Ratio: As of any Measurement Date, the ratio obtained by dividing (i) the Overcollateralization Ratio Numerator by (ii) the Aggregate Outstanding Amount of the Class A Note Interests, the Class B Note Interests, the Class C Note Interests, and the Class D Note Interests together with any Deferred Interest on any Class of Notes. Clearstream: Clearstream Banking, socit anonyme, a corporation organized under the laws of the Grand Duchy of Luxembourg. Closing Date Expense Account: The trust account established pursuant to the Indenture and as described in Certain Additional Provisions Relating to the SecuritiesThe Accounts. Collateral Administration Agreement: The agreement dated as of the Closing Date relating to the administration of the collateral among the Issuer, the Portfolio Manager, and the Collateral Administrator, as modified, amended, and supplemented and in effect from time to time. Collateral Administrator: U.S. Bank National Association, a national banking association, in its capacity as a collateral administrator under the Collateral Administration Agreement. Components: The Note Components and the Preference Share Components.

165

Composite Security Rated Balance: With respect to the rating of any Class of the Composite Securities by Moodys (other than the Class 6 Composite Securities),on any date of determination, the initial Aggregate Outstanding Amount of that Class of Composite Securities minus the aggregate amount of interest, principal, and other distributions paid to the Holders of that Class of Composite Securities in respect of its related Components on all prior Payment Dates for all Classes except the Class 1 Composite Security, and for the Class 1 Composite Security the aggregate amount of interest, principal, and other distributions paid to the Holders of the Class 1 Composite Security in respect of its Components on all prior Payment Dates except for any distributions on previous Payment Dates made pursuant to FIRST and SECOND under Application of FundsApplication of Composite Security Available Amount. Concentration Limitations: The limitations that the Collateral Obligations in the aggregate (measured by Aggregate Principal Balance) must satisfy are the following: (1) not less than 80.0% of the Maximum Investment Amount must consist in the aggregate of (A) Investment Obligations that are Senior Secured Loans, (B) Synthetic Securities whose Reference Obligations are Senior Secured Loans, and (C) Eligible Investments; if the Investment Obligation being acquired is a Revolving Loan or Delayed Drawdown Loan, not more than 15.0% of the Maximum Investment Amount may consist of Investment Obligations that are Revolving Loans and Delayed Drawdown Loans; if the Investment Obligation being acquired is a DIP Loan, not more than 5.0% of the Maximum Investment Amount may consist of Investment Obligations that are DIP Loans and not more than 2.5% of the Maximum Investment Amount may consist of Investment Obligations that are S&P Unrated DIP Loans; if the Investment Obligation being acquired is a PIK Security, not more than 5.0% of the Maximum Investment Amount may consist of Investment Obligations that are PIK Securities; if the Investment Obligation being acquired is a High-Yield Bond, not more than 10.0% of the Maximum Investment Amount may consist of Investment Obligations that are unsecured HighYield Bonds and not more than 15.0% of the Maximum Investment Amount may consist of Investment Obligations that are unsecured and secured High Yield Bonds; if the Investment Obligation being acquired is a Structured Finance Obligation, not more than 0.75% of the Maximum Investment Amount may consist of Investment Obligations issued by a single issuer or any of its Affiliates (excluding Secondary Risk Counterparties) that are Structured Finance Obligations; if the Investment Obligation being acquired is a Structured Finance Obligation, with respect to Investment Obligations that are Structured Finance Obligations (A) not more than 3.0% of the Maximum Investment Amount may consist of Investment Obligations that are Structured Finance Obligations, and (B) not more than 2.5% of the Maximum Investment Amount may consist in the aggregate of Investment Obligations that are Structured Finance Obligations that are collateralized loan obligations; if the Investment Obligation being acquired has an Attached Equity Security, not more than 10.0% of the Maximum Investment Amount may consist of Investment Obligations that have Attached Equity Securities or that are High-Yield Bonds that satisfy the definition of Collateral Obligation and that are convertible into Margin Stock solely at the option of the holder and not more than 5.0% of the Maximum Investment Amount may consist of Investment Obligations that are HighYield Bonds that satisfy the definition of Collateral Obligation and that are convertible into Margin Stock solely at the option of the holder; if the Investment Obligation being acquired is (A) a Zero-Coupon Security or a Step-Up Coupon Security, not more than 5.0% of the Maximum Investment Amount may consist of Investment Obligations that are Zero-Coupon Securities or Step-Up Coupon Securities (not including Zero166

(2)

(3)

(4) (5)

(6)

(7)

(8)

(9)

Coupon Securities and Step-Up Coupon Securities that are Enhanced Bonds); or (B) an Enhanced Bond, not more than 5.0% of the Maximum Investment Amount may consist of Investment Obligations that are Enhanced Bonds; or (C) a Deep Discount Obligation, not more than 7.5% of the Maximum Investment Amount may consist of Investment Obligations that are Deep Discount Obligations (not including fixed rate Deep Discount Obligations that are rated Ba3 (and not on credit watch with negative implications) or higher by Moodys and BB- or higher by S&P); (10) if the Investment Obligation being acquired is the subject of a Permitted Offer, not more than 5.0% of the Maximum Investment Amount may consist of Investment Obligations that are the subject of a Permitted Offer; if the Investment Obligation being acquired is an obligation of a Group A Country Obligor or Group B Country Obligor, not more than the indicated percentage in the table below of the Maximum Investment Amount may consist of Investment Obligations that are obligations of the indicated obligor classification: Group A Country Obligors and Group B Country Obligors Group A Country Obligors domiciled in any single country Group B Country Obligors domiciled in all countries Group B Country Obligors domiciled in any single country (12) (13) 10.0% 10.0% 5.0% 2.0%

(11)

not more than 10.0% of the Maximum Investment Amount may consist of Investment Obligations in any single Moodys Industry Classification; not more than 8.0% of the Maximum Investment Amount may consist of Investment Obligations in any single S&P Industry Classification, except that with respect to up to each of three S&P Industry Classifications (not including Classification Number 39, Telecommunications) the percentage of the Maximum Investment Amount cap shall be 10.0% instead of 8.0%; not more than 2.0% of the Maximum Investment Amount may consist of Investment Obligations issued by any single issuer or any of its Affiliates (excluding Secondary Risk Counterparties), except that with respect to up to each of 4 individual issuers (including any of their respective Affiliates) that are each rated Ba3 (and not on credit watch with negative implications) or higher by Moodys and BB- or higher by S&P the percentage of the Maximum Investment Amount cap shall be 2.5% instead of 2.0%; not more than 1.5% of the Maximum Investment Amount may consist of Investment Obligations that are not Senior Secured Loans issued by any single issuer or any of its Affiliates (excluding Secondary Risk Counterparties), except that with respect to up to each of 4 individual issuers (including any of their respective Affiliates) that are each rated Ba3 (and not on credit watch with negative implications) or higher by Moodys and BB- or higher by S&P the percentage of the Maximum Investment Amount cap shall be 1.75% instead of 1.5%; not less than 7.0% nor more than 12.5% of the Maximum Investment Amount may consist of Fixed Rate Obligations, except that up to 15.0% of the Maximum Investment Amount may consist of Fixed Rate Obligations if the Rating Condition with respect to each Rating Agency is satisfied with respect to the increase; not more than 15.0% of the Maximum Investment Amount may consist of Collateral Obligations that provide for the payment of interest less frequently than quarterly; if the Investment Obligation being acquired is a Synthetic Security, not more than 15.0% of the Maximum Investment Amount may consist of Synthetic Securities and not more than 5.0% of the Maximum Investment Amount may consist of Synthetic Securities that provide for settlement other than by physical delivery; and if the Investment Obligation being acquired is a Synthetic Security that is a credit default swap, a credit linked note, or other similar instrument whose credit events include restructuring, not more than 5.0% of the Maximum Investment Amount 167

(14)

(15)

(16)

(17) (18)

may consist of Synthetic Securities that are credit default swaps, credit linked notes, or other similar instruments whose credit events include restructuring and the Reference Obligation of the Synthetic Securities must be a floating rate senior secured loan and any credit event must settle by physical delivery only and if the Investment Obligation being acquired is a Synthetic Security referencing a basket or portfolio of debt instruments or an index or indices in connection with a basket or portfolio of debt instruments or other similar instruments, not more than 5% of the Maximum Investment Amount may consist of Synthetic Securities that reference a basket or portfolio of debt instruments or an index or indices in connection with a basket or portfolio of debt instruments or other similar instruments; (19) if the Investment Obligation being acquired is a Participation, not more than 10.0% of the Maximum Investment Amount may consist of Investment Obligations that are Participation and no Investment Obligation may be a Participation in a Participation; not more than 20.0% of the Maximum Investment Amount may consist in the aggregate of Collateral Obligations that are Participation, Synthetic Securities, or Enhanced Bonds (in calculating the percentage in this clause (22), the Principal Balance of any Limited Exposure Synthetic Security is its Limited Exposure Amount); if the Collateral Obligation being acquired is a Participation, an Enhanced Bond, or a Synthetic Security each of (A) the Aggregate Principal Balance of Collateral Obligations (expressed as a percentage of the Maximum Investment Amount) entered into with, or issued by, the Secondary Risk Counterparty for the Collateral Obligation and its Affiliates (other than obligors that are Affiliated solely because of common ownership by a financial sponsor) may not exceed the percentage under the Aggregate Individual Counterparty Limit opposite the rating of the Secondary Risk Counterparty in the Secondary Risk Table and the Aggregate Principal Balance of Collateral Obligations entered into with, or issued by, all Secondary Risk Counterparties with the same or a lower credit rating (expressed as a percentage of the Maximum Investment Amount) than the Secondary Risk Counterparty for the Collateral Obligation may not exceed the percentage under Aggregate Counterparty Limit opposite rating of the Secondary Risk Counterparty in the Secondary Risk Table

(20)

(21)

(B)

(in calculating the percentage in this clause (23), the Principal Balance of any Limited Exposure Synthetic Security shall be its Limited Exposure Amount); (22) if the Investment Obligation being acquired has a Moodys Rating of B3 and on credit watch with negative implications or Caa1 or lower or an S&P Rating of CCC+ or lower, not more than 5.0% of the Maximum Investment Amount may consist in the aggregate of Collateral Obligations having a Moodys Rating of B3 and on credit watch with negative implications or Caa1 or lower or an S&P Rating of CCC+ or lower; not more than 2.0% of the Maximum Investment Amount may consist of the portion of the Principal Balance of Long-Dated Collateral Obligations amortizing after the Stated Maturity of the Notes; if the Investment Obligation being acquired is part of an issue or facility whose aggregate original principal amount (whether or not funded and including all tranches thereunder) is less than U.S.$150,000,000, not more than 10.0% of the Maximum Investment Amount may consist of Investment Obligations that are part of an issue or facility whose aggregate original principal amount (whether or not funded and including all tranches thereunder) is less than U.S.$150,000,000 and, unless the Rating Condition with respect to Moodys is satisfied, no Investment Obligation may be a part of an issue or facility whose aggregate principal amount (whether or not funded and including all tranches thereunder) is less than U.S.$75,000,000;

(23)

(24)

168

(25)

if the Investment Obligation being acquired is a Finance Lease, not more than 2.0% of the Maximum Investment Amount may consist of Investment Obligations that are Finance Leases and not more than 1.0% of the Maximum Investment Amount may consist of Investment Obligations that are Finance Leases issued by any single issuer or any of its Affiliates (excluding Secondary Risk Counterparties); if a Collateral Obligation is being lent under Securities Lending Agreement, not more than 15.0% (measured by Aggregate Principal Balance of loaned Collateral Obligations) of the Maximum Investment Amount may be loaned pursuant to Securities Lending Agreements at any time; and if the Investment Obligation being acquired is a secured Loan whose security interest is not a first priority security interest, not more than 10% may consist of secured Loans whose security interest is not a first priority security interest.

(26)

(27)

Subject to the rights in circumstances of the Portfolio Manager to determine otherwise as set out in the Indenture, solely for the purpose of determining whether the Concentration Limitations are met, Eligible Investments and cash or direct registered debt obligations of the United States of America will be treated as Senior Secured Loans and Floating Rate Obligations. Corporate Trust Office: The corporate trust office of the Trustee at which the Trustee performs its duties under the Indenture, currently having an address of One Federal Street, Third Floor, Boston, Massachusetts, 02110, Attention: Collateralized Debt Obligations Unit, Ref. Ares, or any other address the Trustee designates from time to time by notice to the Noteholders, the Portfolio Manager, the Issuer, and each Rating Agency or the principal corporate trust office of any successor Trustee. Credit Improved Obligation: Any Collateral Obligation that since the date on which it was first acquired by the Issuer and as of the date of determination has shown improved results (in the Portfolio Managers reasonable judgment) and: (a) if a Credit Rating Event is not in effect, (i) the Collateral Obligation has been upgraded or put on its credit watch list with the potential for developing positive credit implications by either of the Rating Agencies since the date the Issuer first acquired the Collateral Obligation; (ii) the obligor on the Collateral Obligation has raised equity capital or other capital subordinated to the Collateral Obligation that, in the Portfolio Managers reasonable judgment, has improved the liquidity or credit standing of the obligor; (iii) if the Collateral Obligation is a Floating Rate Obligation, its interest rate spread has decreased (in accordance with its underlying instruments) since the date on which it was first acquired by the Issuer by at least 0.25%; (iv) if the Collateral Obligation is a High Yield Bond, the Collateral Obligation has changed in price during the period from the date on which it was purchased by the Issuer to the date of determination by a percentage either more positive, or less negative, as the case may be, than the percentage change in the Merrill Lynch High Yield Index, Bloomberg ticker JOAO, Average Price Option plus 3.00%, over the same period or, if the Collateral Obligation is a Loan or Finance Lease, the Collateral Obligation has changed in price during the period from the date on which it was purchased by the Issuer to the date of determination by a percentage either more positive, or less negative, as the case may be, than the percentage change in the average price of an Eligible Loan Index plus 0.25% over the same period; or (v) in the reasonable judgment of the Portfolio Manager, the Collateral Obligation has a market value greater than that warranted by its terms and credit characteristics (determined on the date on which the Collateral Obligation is first acquired), and (b) if a Credit Rating Event is in effect,

169

(1)

(2)

(3)

the Collateral Obligation has been upgraded or put on its credit watch list with the potential for developing positive credit implications by either of the Rating Agencies since the date the Issuer first acquired the Collateral Obligation; in the Portfolio Managers reasonable judgment, (x) the Collateral Obligation has improved in credit quality; and (y) if the Collateral Obligation is a High Yield Bond, the Collateral Obligation has changed in price during the period from the date on which it was purchased by the Issuer to the date of determination by a percentage either more positive, or less negative, as the case may be, than the percentage change in the Merrill Lynch High Yield Index, Bloomberg ticker JOAO, Average Price Option plus 3.00%, over the same period or, if the Collateral Obligation is a Loan or Finance Lease, the Collateral Obligation has changed in price during the period from the date on which it was purchased by the Issuer to the date of determination by a percentage either more positive, or less negative, as the case may be, than the percentage change in the average price of an Eligible Loan Index plus 0.50% over the same period; or a Majority of the Controlling Class have voted to suspend the limitations on a Collateral Obligation being a Credit Improved Security, and for each subsequent downgrade by Moodys after a vote to suspend the limitations pursuant to this clause (3) has occurred, a Majority of the Controlling Class must again vote to suspend the limitations on the Collateral Obligation being a Credit Improved Obligation for this clause (3) to remain applicable.

A Synthetic Security shall be considered a Credit Improved Obligation if (i) the Synthetic Security itself is a Credit Improved Obligation or (ii) the Reference Obligation of the Synthetic Security would, if it were a Collateral Obligation, be a Credit Improved Obligation. Credit Rating Event: An event that is in effect if the rating by Moodys of the Class A Note Interests has been withdrawn or is one or more rating sub-categories below its Initial Rating or of the Class B Note Interests or Class C Note Interests has been withdrawn or is two or more rating sub-categories below its respective Initial Rating.

For the purposes of this definition, any withdrawal or reduction in rating shall not be effective if after the withdrawal or reduction Moodys has upgraded the reduced or withdrawn rating to at least the initial ratings in the case of the Class A Note Interests, or to only one subcategory below their initial ratings in the case of the Class B Note Interests and the Class C Note Interests. If the Portfolio Manager has been replaced by a successor Portfolio Manager pursuant to the Management Agreement after the occurrence of a Credit Rating Event, the Holders of a Majority of the Controlling Class may direct that no existing Credit Rating Event shall apply to the successor Portfolio Manager. Credit Risk Obligation: Any Collateral Obligation (other than a Defaulted Collateral Obligation) that, in the reasonable judgment of the Portfolio Manager, has a significant risk of declining in credit quality and, with a lapse of time, becoming a Defaulted Collateral Obligation. So long as a Credit Rating Event is in effect, no Collateral Obligation shall be eligible to be a Credit Risk Obligation unless, as of the date of determination: (i) the Collateral Obligation has been downgraded or put on its credit watch list with the potential for developing negative credit implications by either of the Rating Agencies since the date the Issuer first acquired the Collateral Obligation; (ii) if the Collateral Obligation is a Loan or Finance Lease, the spread over the applicable reference rate has been increased in accordance with the related underlying instruments since the date on 170

(iii)

(iv)

which the Loan or Finance Lease was first acquired by the Issuer by 0.50% or more for reasons primarily due, in the reasonable judgment of the Portfolio Manager, to a deterioration in the related borrowers financial ratios or financial results and not as a result of general market conditions; if the Collateral Obligation is a High Yield Bond, the Collateral Obligation has changed in price during the period from the date on which it was purchased by the Issuer to the date of determination by a percentage either more negative, or less positive, as the case may be, than the percentage change in the Merrill Lynch High Yield Index, Bloomberg ticker JOAO, Average Price Option less 3.00%, over the same period or, if the Collateral Obligation is a Loan or Finance Lease, the Collateral Obligation has changed in price during the period from the date on which it was purchased by the Issuer to the date of determination by a percentage either more negative, or less positive, as the case may be, than the percentage change in the average price of an Eligible Loan Index less 0.50% over the same period; or a Majority of the Controlling Class have voted to suspend the limitations on a Collateral Obligation being a Credit Risk Obligation, and for each subsequent downgrade by Moodys after a vote to suspend the limitations pursuant to this clause (iv) has occurred, a Majority of the Controlling Class must again vote to suspend the limitations on the Collateral Obligation being a Credit Risk Obligation for this clause (iv) to remain applicable.

A Synthetic Security shall be considered a Credit Risk Obligation if (i) (ii) the Synthetic Security itself is a Credit Risk Obligation or the Reference Obligation of the Synthetic Security would, if it were a Collateral Obligation, be a Credit Risk Obligation.

Current-Pay Obligation: A Collateral Obligation as to which (i) an insolvency event has occurred with respect to its obligor or as to which its obligor is rated D or SD by S&P or its obligor has previously been rated CCC- by S&P and the rating has been withdrawn, (ii) no default as to the payment of principal or interest with respect to the Collateral Obligation is then continuing and the Portfolio Manager has delivered to the Trustee an officers certificate to the effect that the Portfolio Manager expects that the obligor will make payments on the Collateral Obligation as they become due, (iii) (A) if the rating by Moodys of the Collateral Obligation is at least Caa1 (and not on credit watch with negative implications) the Market Value of the Collateral Obligation is at least equal to 80% of its Principal Balance or (B) if the rating by Moodys of the Collateral Obligation is less than Caa1 or is Caa1 and on credit watch with negative implications, the Market Value of the Collateral Obligation is at least equal to 85% of its Principal Balance, and (iv) if an insolvency event has occurred with respect to the obligor of the Collateral Obligation, a bankruptcy court has authorized the payment of interest payable on the Collateral Obligation. To the extent that the Aggregate Principal Balance of Collateral Obligations that would otherwise be Current-Pay Obligations exceeds 5% of the Maximum Investment Amount, one or more Collateral Obligations that would otherwise be Current-Pay Obligations designated by the Portfolio Manager with an Aggregate Principal Balance equal to or greater than the amount of the excess shall not be Current-Pay Obligations (and will therefore be Defaulted Collateral Obligations). The Portfolio Manager may, by notice to the Issuer, the Trustee, and the Collateral Administrator, change the definition of a Current-Pay Obligation or how Current-Pay Obligations are treated in the Indenture, subject to the satisfaction of the Rating Condition with respect to each Rating Agency. Current Portfolio: At any time, the portfolio (measured by Aggregate Principal Balance) of Collateral Obligations, Principal Proceeds held as cash on deposit in the Collection Account, and other Eligible Investments

171

purchased with Principal Proceeds on deposit in the Collection Account that exists before the sale, maturity, or other disposition of a Collateral Obligation or before the acquisition of a Collateral Obligation, as the case may be. Deep Discount Obligation: (i) if the Collateral Obligation is rated B3 and on credit watch with negative implications or Caa1 or lower by Moodys or CCC+ or lower by S&P, until the average Market Value Percentage of the Collateral Obligation, as determined daily for any period of 30 consecutive days, equals or exceeds 90% and the Market Value Percentage of the Collateral Obligation equals or exceeds 90% for each of the final 10 days of the 30-day period, any Collateral Obligation acquired by the Issuer for a Purchase Price less than 85% of its Principal Balance (in the case of Loans) or 75% of its Principal Balance (in the case of any Collateral Obligation that is not a Loan); and (ii) if the Collateral Obligation is rated B3 (and not on credit watch with negative implications) or higher by Moodys and B- or higher by S&P, until the average Market Value Percentage of the Collateral Obligation, as determined daily for any period of 30 consecutive days, equals or exceeds 90% in the case of Loans and Finance Leases and 85% in the case of High-Yield Bonds and Structured Finance Obligations and the Market Value Percentage of the Collateral Obligation equals or exceeds 90% in the case of Loans and Finance Leases and 85% in the case of High-Yield Bonds and Structured Finance Obligations for each of the final 10 days of the 30-day period, any Collateral Obligation acquired by the Issuer for a Purchase Price less than 80% of its Principal Balance (in the case of Loans) or 70% of its Principal Balance (in the case of any Collateral Obligation that is not a Loan). For the purpose of calculating Market Value Percentage on any day, the Market Value Percentage on any consecutive Saturday and Sunday shall be the Market Value Percentage on the preceding Friday. Defaulted Collateral Obligation: Any Collateral Obligation or other obligation included in the Collateral: (i) as to which a default in the payment of principal or interest is continuing (without regard to any applicable grace or notice period and without regard to any subsequent waiver of the default) beyond the lesser of three Business Days and any applicable grace or notice period, unless: (A) during the three-Business Day period or the grace or notice period, as the case may be, the Portfolio Manager notifies the Trustee in writing of the default in payment and certifies to the Trustee that the default in payment is not related to the obligors credit quality and since the certification the credit quality has not materially declined as determined by the Portfolio Manager (in its reasonable judgment) or (B) in the case of a failure of the obligor to make required interest payments, the obligor has resumed current cash payments of interest and paid in full any accrued interest payable on the overdue interest; in which case the Collateral Obligation shall cease to be classified as a Defaulted Collateral Obligation; (ii) (other than a Current-Pay Obligation) that is pari passu with or subordinated to other indebtedness for borrowed money owing by its obligor (Other Indebtedness) that the Portfolio Manager determines (in its reasonable judgment) to be material and the obligor has defaulted in the payment of principal or interest (without regard to any applicable grace or notice period and without regard to any waiver of the default) on the Other Indebtedness, unless, in the case of a failure of the obligor to make required interest payments, the obligor has resumed current cash payments of interest on the Other Indebtedness and has paid in full any accrued interest payable on the overdue interest, in which case the Collateral Obligation shall cease to be classified as a Defaulted Collateral Obligation; (iii) (other than a Current-Pay Obligation or a DIP Loan) as to which (A) an insolvency event has occurred with respect to its obligor or (B) its obligor is rated D or SD by S&P, or has previously been rated CCC- or lower by S&P and the rating has been withdrawn;

(iv) if the Collateral Obligation is a Structured Finance Obligation, it is rated CC or below by S&P, or it was rated CC or below by S&P but the rating has since been withdrawn;

172

(v) that is a Participation that would, if the underlying Loan were a Collateral Obligation, be a Defaulted Collateral Obligation under any of clauses (i) through (iii) above or with respect to which the Participating Institution has defaulted in the performance of any of its payment obligations under the Participation; (vi) that is a Synthetic Security referencing a Reference Obligation that would, if the Reference Obligation were a Collateral Obligation, be a Defaulted Collateral Obligation under any of clauses (i) through (iv) above or with respect to which the Synthetic Security counterparty has defaulted in the performance of any of its payment obligations under the Synthetic Security; (vii) that is a Structured Finance Obligation whose Aggregate Principal Balance (including all other Structured Finance Obligations secured by the same pool of collateral that rank pari passu with or senior to it) exceeds the aggregate principal balance of all non-defaulted collateral available to them; (viii) that is a DIP Loan as to which an order has been entered converting the debtors chapter 11 case to a case under chapter 7 of the Bankruptcy Code; or (ix) that is declared to be a Defaulted Collateral Obligation by the Portfolio Manager.

Any Collateral Obligation that is classified as a Defaulted Collateral Obligation shall cease to be so classified if the Collateral Obligation, at any date thereafter, (1) would not otherwise be classified as a Defaulted Collateral Obligation in accordance with this definition; and (2) otherwise meets the Eligibility Criteria as of that date. Any Collateral Obligation that is acquired by the Issuer in exchange for a Defaulted Collateral Obligation shall be considered a Defaulted Collateral Obligation from the date of its acquisition until the first date on which the Issuer receives payment of interest on it and from and after the first date on which the Issuer receives the payment of interest shall not be a Defaulted Collateral Obligation solely because it was received in exchange for a Defaulted Collateral Obligation. If any distressed exchange or other distressed debt restructuring has been effected where the issuer of a Collateral Obligation included in the Collateral has offered the holder of the Collateral Obligation a new security or package of securities that, in the reasonable judgment of the Portfolio Manager, amounts to a diminished financial obligation, the Collateral Obligation shall be a Defaulted Collateral Obligation from the date of the offer until the date of settlement of the distressed exchange or other distressed debt restructuring and the new security or package of securities shall be a Defaulted Collateral Obligation from the date of its acquisition until the first date on which the Issuer receives payment of interest thereon and from and after the first date on which the Issuer receives the payment of interest shall not be a Defaulted Collateral Obligation solely because it was received in the distressed exchange or other distressed debt restructuring. If any portion of a Collateral Obligation has a maturity later than two years after the Stated Maturity of the Notes due to a change in the payment schedule of the Collateral Obligation occurring after its acquisition by the Issuer, that portion of the Collateral Obligation shall be considered a Defaulted Collateral Obligation. Defaulted Hedge Termination Payment: Any termination payment required to be made by the Issuer to a Hedge Counterparty pursuant to a Hedge Agreement upon a termination of the Hedge Agreement in respect of which the Hedge Counterparty is the sole Defaulting Party or Affected Party (each as defined in the Hedge Agreement). Defaulted Interest: Any interest payable in respect of any Class of Note Interests that is not punctually paid or duly provided for on the applicable Payment Date or at Stated Maturity. Deferred Interest: With respect to any Class of Deferred Interest Notes, any payment of interest due on the Class of Deferred Interest Notes that is not available to be paid in accordance with the Priority of Payments on any Payment Date. The Deferred Interest shall not be considered payable for the purposes of the Indenture (and 173

the failure to pay the interest shall not be an Event of Default) until the Payment Date on which the interest is available to be paid in accordance with the Priority of Payments. Deferred Interest on any Class of Deferred Interest Notes shall be payable on the first Payment Date on which funds are available to be used for that purpose in accordance with the Priority of Payments. Deferred Interest Notes: The Class B, Class C, and Class D Note Interests. Delayed Drawdown Loan: A Loan or any Synthetic Security with a Reference Obligation that (i) requires the Issuer to make one or more future advances to the borrower under its underlying instruments, (ii) specifies a maximum amount that can be borrowed on one or more fixed borrowing dates, and (iii) does not permit the re-borrowing of any amount previously repaid. A Loan or Synthetic Security shall only be considered to be a Delayed Drawdown Loan for so long as its commitment amount is greater than zero. DIP Loan: Any Loan (i) that has a rating assigned by Moodys (or if the Loan does not have a rating assigned by Moodys, the Portfolio Manager has commenced the process of having a rating assigned by Moodys within five Business Days of the date the Loan is acquired by the Issuer) and a rating assigned by S&P (or if the Loan does not have a rating assigned by S&P, the Portfolio Manager has commenced the process of having a rating assigned by S&P within two Business Days of the date the Loan is acquired by the Issuer), (ii) that is an obligation of a debtor in possession as described in Section 1107 of the Bankruptcy Code or a trustee (if appointment of a trustee has been ordered pursuant to Section 1104 of the Bankruptcy Code) (a Debtor) organized under the laws of the United States or any state of the United States, and (iii) the terms of which have been approved by a final order of the United States Bankruptcy Court, United States District Court, or any other court of competent jurisdiction, the enforceability of which order is not subject to any pending contested matter or proceeding (as those terms are defined in the Federal Rules of Bankruptcy Procedure) and which order provides that (A) the Loan is secured by liens on the Debtors otherwise unencumbered assets pursuant to Section 364(c)(2) of the Bankruptcy Code, (B) the Loan is secured by liens of equal or senior priority on property of the Debtors estate that is otherwise subject to a lien pursuant to Section 364(d) of the Bankruptcy Code, (C) the Loan is fully secured (based on a current valuation or appraisal report) by junior liens on the Debtors encumbered assets, or (D) if any portion of the Loan is unsecured, the repayment of the Loan retains priority over all other administrative expenses pursuant to Section 364(c)(1) of the Bankruptcy Code. In the case of this clause (D), before the acquisition of the Loan, the Rating Condition is satisfied with respect to each Rating Agency). Diversity Score: A single number that indicates collateral concentration in terms of both issuer and industry concentration, calculated as set forth in Schedule 4 to Indenture. Due Period: With respect to any Payment Date, for all purposes other than payments and receipts under Hedge Agreements the period from the Business Day after the sixth Business Day before the previous Payment Date (or in the case of the first Payment Date, from the Closing Date) to the Business Day after the sixth Business Day before the Payment Date (or in the case of the final Payment Date or any Payment Date that is a Redemption Date, through the Business Day before the Payment Date and for payments and receipts under Hedge Agreements the period from the day after the previous Payment Date (or in the case of the first Payment Date from the Closing Date) through the Payment Date). Eligible Investment Required Rating: With respect to Moodys, a long-term credit rating of at least Aa2 (and not on credit watch with negative implications) from Moodys or a short-term credit rating of P-1( and not on credit watch for possible downgrade) and a long-term credit rating of at least Aa3 (and not on credit watch

174

with negative implications) from Moodys, and with respect to S&P a short-term credit rating of at least A-1 from S&P and, in the case of any Eligible Investment with a maturity of longer than 91 days, at least AA from S&P. Eligible Investments: Any Dollar-denominated investment that, when it is pledged by the Issuer to the Trustee under the Indenture, is one or more of the following: (i) direct Registered obligations of, and Registered obligations the timely payment of principal and interest on which is fully and expressly guaranteed by, the United States of America or any agency or instrumentality of the United States of America the obligations of which are expressly backed by the full faith and credit of the United States of America; (ii) demand and time deposits in, certificates of deposit of, bankers acceptances issued by, or federal funds sold by any depositary institution or trust company incorporated under the laws of the United States of America (including the Bank) or any state of the United States and subject to supervision and examination by federal or state banking authorities so long as the commercial paper or the debt obligations of the depositary institution or trust company (or in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of the holding company) at the time of the investment or contractual commitment providing for the investment have the Eligible Investment Required Ratings; (iii) unleveraged repurchase obligations with respect to (A) any security described in clause (i) above or (B) any other Registered security issued or guaranteed by an agency or instrumentality of the United States of America, in either case entered into with a depositary institution or trust company (acting as principal) described in clause (ii) above or entered into with a corporation (acting as principal) that has, or whose parent company has, the Eligible Investment Required Ratings; (iv) registered securities bearing interest or sold at a discount issued by any entity formed under the laws of the United States of America or any state of the United States that have a long-term credit rating of Aa3 (and not on credit watch with negative implications) and a short-term credit rating of P-1 (and not on credit watch for possible downgrade) from Moodys and AA from S&P at the time of the investment or contractual commitment providing for the investment; (v) commercial paper or other short-term obligations with the Eligible Investment Required Ratings and that are Registered and either bear interest or are sold at a discount from their face amount and have a maturity of not more than 183 days from their date of issuance; (vi) a reinvestment agreement issued by any bank (if treated as a deposit by the bank), including the Bank, or a registered reinvestment agreement issued by any insurance company or other corporation or entity, in each case with the Eligible Investment Required Ratings and that is terminable by the purchaser, if the rating falls below the Eligible Investment Required Ratings; (vii) money market funds the investments of which are limited to any investments described in clauses (i), (ii), (iv), and (v), which funds have, at all times, a credit rating of Aaa or MR1+ (and not on credit watch with negative implications) from Moodys and AAAm from S&P and distributions from which are not subject to United States withholding taxes; (viii) off-shore money market funds which funds have, at all times, credit ratings of Aaa or MR1+ (and not on credit watch with negative implications) by Moodys and AAAm S&P if (A) the ownership of the investment will not subject the Issuer to net income tax or cause the Issuer to be treated as engaged in a trade or business within the United States of America for United States federal income tax purposes and (B) no amount earned by the Issuer with respect to the investment will be subject to withholding tax; (ix) any other investment with respect to which the Issuer has received written notification from each Rating Agency that the acquisition of the investment as an Eligible Investment will not result in a withdrawal or downgrading of any of its ratings on the Note Interests or the Composite Securities if

175

(A)

the ownership of the investment will not subject the Issuer to net income tax or cause the Issuer to be treated as engaged in a trade or business within the United States of America for United States federal income tax purposes and no amount earned by the Issuer with respect to the investment will be subject to withholding tax; and

(B)

(x) cash; and, in each case, with a stated maturity (giving effect to any applicable grace period) no later than the Business Day before the Payment Date next succeeding the date of the investment. Eligible Investments on deposit in the Revolving Reserve Account, the Delayed Drawdown Reserve Account, or the Synthetic Security Collateral Account must have a stated maturity no later than one Business Day after the date of their purchase. Eligible Investments may not include (1) any interest-only security, any security purchased at a price in excess of 100% of its par value, or any security whose repayment is subject to substantial non-credit related risk as determined in the reasonable judgment of the Portfolio Manager, (2) any security whose rating assigned by S&P includes the subscript r, t, p, pi, or q, or (3) any floating rate security whose interest rate is inversely or otherwise not proportionately related to an interest rate index or is calculated as other than the sum of an interest rate index plus a spread (which spread may be zero), (4) any security purchased at a price in excess of 100% of the par value of that security, (5) any security that is subject to an exchange or tender offer, or (6) any security that has payments subject to foreign or United States withholding tax. Eligible Investments may include Eligible Investments for which the Trustee or an Affiliate of the Trustee provides services. Eligible Investments may not include obligations principally secured by real property. Eligible Loan Index: With respect to each Collateral Obligation that is a Loan or Finance Lease, one of the following indices as selected by the Portfolio Manager in writing delivered to the Trustee upon acquisition of the Collateral Obligation: the CSFB Leveraged Loan Indices (formerly DLJ Leveraged Loan Index Plus), the Deutsche Bank Leveraged Loan Index, the Goldman Sachs/Loan Pricing Corporation Liquid Leveraged Loan Index, the Banc of America Securities Leveraged Loan Index, the S&P/LSTA Leveraged Loan Indices, or any other loan index that satisfies the Moodys Rating Condition. Emerging Market Security: A security or obligation issued by a sovereign or non-sovereign issuer located in a country (excluding the Cayman Islands, Bermuda, the British Virgin Islands, the Netherlands Antilles, and the Channel Islands) (i) that is in Latin America, Asia, Africa, Eastern Europe, or the Caribbean or

(ii) the long-term foreign currency debt obligations of which are rated below Aa2 or Aa2 and on credit watch with negative implications by Moodys or the foreign currency issuer credit rating of which is below AA by S&P. Enhanced Bond: A Zero-Coupon Security or Step-Up Coupon Security owned by the Issuer and with respect to which the Issuer has satisfied the Rating Condition with respect to Moodys in connection with either simultaneously or subsequently purchasing or entering into an associated interest-generating structured derivative instrument or associated annuity-generating security (excluding, in both cases, any equity instruments) providing for current interest or annuity payments that provide for current interest payments or annuity payments until (i) in the case of a Zero-Coupon Security, the maturity of the related Zero-Coupon Security, or

176

(ii) in the case of a Step-Up Coupon Security, the payment date preceding the payment date when the Step-Up Coupon Security is scheduled to first pay current interest. These associated interest-generating structured derivative instruments and annuity generating securities are not separately considered a Collateral Obligation of the Issuer for the purpose of any Coverage Tests or Collateral Quality Tests, or for the purpose of calculating the aggregate principal amount of the Collateral Obligations. Upon any default, sale, or termination of an associated interest-generating structured derivative instrument or associated annuity-generating security while the related Zero-Coupon Security or Step-Up Coupon Security remains owned by the Issuer, the Zero-Coupon Security or Step-Up Coupon Security will be treated as a Zero-Coupon Security or Step-Up Coupon Security, as the case may be, for all purposes. Upon the default, sale, redemption, or maturity of a Zero-Coupon Security or Step-Up Coupon Security, the associated interest-generating structured derivative instrument or associated annuity-generating security providing interest or annuity payments shall not be considered a Collateral Obligation of the Issuer for purposes of any Coverage Tests or Collateral Quality Test or for calculating the Aggregate Principal Balance of the Collateral Obligations, but interest distributions actually received on these associated interest-generating structured derivative products or associated annuity-generating securities shall be treated as Interest Proceeds for purposes of the Interest Coverage Tests. Euroclear: Euroclear Bank S.A./N.V., as operator of the Euroclear system. Excess Attached Equity Purchased With Interest: The aggregate for all such Collateral Obligations of the portion of the total Purchase Price paid by the Issuer for a Collateral Obligation with an Attached Equity Security allocable to the Attached Equity Security that exceeds 2% of the Purchase Price of the Collateral Obligation, as determined by the Portfolio Manager on a commercially reasonable basis. Excess Caa/CCC Collateral Obligations: Each of the Caa/CCC Collateral Obligations in ascending order of their Market Value as a percentage of their stated principal balance beginning with the one with the lowest such percentage and continuing until the sum of their Principal Balances equals or first exceeds the Excess Caa/CCC Reduction Amount. If the foregoing sum of Principal Balances exceeds the Excess Caa/CCC Reduction Amount, the last added Caa/CCC Collateral Obligation shall be considered to be two separate Caa/CCC Collateral Obligations, one of which has a Principal Balance equal to the amount necessary for the foregoing sum of Principal Balances to exactly equal the Excess Caa/CCC Reduction Amount and shall be an Excess Caa/CCC Collateral Obligation and the other of which has a Principal Balance equal to the remaining Principal Balance of the last added Caa/CCC Collateral Obligation and shall not be an Excess Caa/CCC Collateral Obligation. There are no Excess Caa/CCC Collateral Obligations when the Aggregate Principal Balance of Caa/CCC Collateral Obligations does not exceed 7.5% of the Maximum Investment Amount on the relevant determination date. Excess Caa/CCC Reduction Amount: On any determination date, zero, unless the Aggregate Principal Balance of Caa/CCC Collateral Obligations exceeds 7.5% of the Maximum Investment Amount on the determination date, and in that case the excess of the aggregate Principal Balance of all of the Caa/CCC Collateral Obligations over 7.5% of the Maximum Investment Amount on the determination date.

Finance Lease: A lease agreement or other agreement entered into evidencing any transaction pursuant to which the obligation of the lessee to pay rent or other amounts on a triple net basis under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination of them, are required to be classified and accounted for as a capital lease on a balance sheet of the lessee under United States generally accepted accounting principles (GAAP); but only if (a) the lease or other transaction provides for the unconditional obligation of the lessee to pay a stated amount of principal no later than a stated maturity date, together with interest on the principal, and the payment of the obligation is not subject to any material non-credit-related risk as reasonably determined by the Portfolio Manager, (b) the obligation of the lessee with respect to the lease or other transaction is fully secured, directly or indirectly, by the property that is the subject of the lease, and

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(c)

the interest held with respect to the lease or other transaction is properly treated as debt for U.S. federal income tax purposes.

Fixed Rate Excess: As of any Measurement Date, a fraction whose numerator is the product of (i) the greater of zero and the excess of the Weighted Average Fixed Rate Coupon for the Measurement Date over the minimum percentage specified to pass the Weighted Average Fixed Rate Coupon Test and the Aggregate Principal Balance of all Fixed Rate Obligations (excluding any Non-Performing Collateral Obligations) held by the Issuer as of the Measurement Date, and whose denominator is the Aggregate Principal Balance of all Floating Rate Obligations (excluding any NonPerforming Collateral Obligations) held by the Issuer as of the Measurement Date. In computing the Fixed Rate Excess on any Measurement Date, the Weighted Average Fixed Rate Coupon for the Measurement Date will be computed as if the Spread Excess were equal to zero. Fixed Rate Obligation: Any Zero-Coupon Security, any Step-Up Coupon Security, and any Collateral Obligation that bears interest at a fixed rate, including a Collateral Obligation that does not bear interest on a floating rate index and whose interest rate is scheduled to increase one or more times over the life of the Collateral Obligation. Floating Rate Obligation: Any Collateral Obligation that bears interest based on a floating rate index. Form-Approved Synthetic Security: A Synthetic Security (i) (A) each of the Reference Obligations of which satisfy the definition of Collateral Obligation and could be purchased by the Issuer without any required action by the Rating Agencies without satisfaction of the Rating Condition or which the Rating Agencies have otherwise approved or (B) each of the Reference Obligations of which would satisfy clause (A) above but for the currency in which the Reference Obligation is payable and the Synthetic Security is payable in Dollars, does not provide for physical settlement, and does not expose the Issuer to Dollar currency risk and (ii) the Synthetic Security Agreement of which conforms (but for the amount and timing of periodic payments, the name of the Reference Obligation, the notional amount, the effective date, the termination date, and other similar necessary changes) to a form that has been expressly identified and approved in writing in connection with a request under the Indenture by Moodys and S&P. Moodys or S&P may at any time, by notice to the Portfolio Manager, withdraw its approval of any such form. A withdrawal of approval shall have no effect on any Synthetic Security acquired, entered into, or committed to before the date on which the Portfolio Manager receives the notice of withdrawal). Group A Country Obligor: With respect to a Collateral Obligation, an obligor that is incorporated or otherwise organized in Australia, Canada, the United Kingdom, the Netherlands, or New Zealand (so long as the U.S. Dollar denominated sovereign debt obligations of the jurisdiction are rated at least Aa2 (and not on credit watch with negative implications) by Moodys and the foreign currency issuer credit rating assigned by S&P to the jurisdiction is at least AA). Group B Country Obligor: With respect to a Collateral Obligation, an obligor that is incorporated or otherwise organized in Austria, Belgium, Bermuda, Denmark, the Federal Republic of Germany, Finland, France, Iceland, Ireland, Liechtenstein, Luxembourg, Norway, Portugal, Spain, Sweden, or Switzerland; or if the Collateral Obligation is a Structured Finance Obligation, any country; or 178 (ii)

 if the Collateral Obligation is not a Structured Finance Obligation and if at the time of acquisition of the Collateral Obligation the Portfolio Manager specifies that the country of the source of substantially all of the obligors revenues or assets is the United States, a country listed in the first bullet, or a country listed in the definition of Group A Country Obligors, then with respect to an Aggregate Principal Balance of Collateral Obligations (that are not Structured Finance Obligations) of up to 4.0% of the Maximum Investment Amount (or such greater percentage as to which the Rating Condition with respect to Moodys has been satisfied), Bermuda, the British Virgin Islands, the Cayman Islands, the Netherlands Antilles, the Bahamas, or the Channel Islands or subject to satisfaction of the Rating Condition with respect to each Rating Agency with respect thereto, any other jurisdiction identified from time to time by the Portfolio Manager by notice to the Trustee, the Collateral Administrator, and the Rating Agencies. Hedge Agreements: Collectively, all interest rate cap or interest rate swap agreements between the Issuer and any Hedge Counterparty, and any replacement agreement entered into pursuant to the Indenture. Hedge Counterparty: JPMorgan Chase Bank or any other counterparty, to the extent that when the Issuer enters into any Hedge Agreement with JPMorgan Chase Bank or the other counterparty, JPMorgan Chase Bank or the other counterparty satisfies the requirements of the Indenture, including, in the case of any other counterparty, to the satisfaction of the Rating Condition for each Rating Agency. Hedge Counterparty Collateral Account: The trust account established pursuant to the Indenture and as described in Certain Additional Provisions Relating to the SecuritiesThe Accounts. Hedge Termination Receipt: Any termination payment paid by the Hedge Counterparty to the Issuer upon any early termination of a Hedge Agreement with respect to which the Hedge Counterparty is the sole Defaulting Party or Affected Party (each as defined in the Hedge Agreements). High-Yield Bond: Any debt security, including any Structured Finance Obligation, that is either (i) Registered or (ii) issued by an obligor that is not resident in the United States, the payments on it are not subject to United States withholding tax, and it is held through a financial institution pursuant to the procedures described in Treasury regulation section 1.165-12(c)(3). Holder: Of any Security, the person whose name appears on the Indenture Register or the Share Register, as the case may be, as the registered holder of the Security; and of any Component, the person whose name appears on the Indenture Register as the registered holder of the Composite Security representing the Component. Initial Holder: Of any Security, any purchaser in the initial sale by the Initial Purchaser and not subsequent transferees. Institutional Accredited Investor: The meaning specified in Rule 501(a)(1), (2), (3), or (7) of the Securities Act. Interest Period: Initially, the period from the Closing Date to the first Payment Date, and, thereafter, each successive period from each Payment Date to the following Payment Date until the principal of the Note Interests is paid or made available for payment. Interest Proceeds: With respect to any Due Period, the sum (without duplication) of all amounts received in cash during the Due Period (or as otherwise specified below) by the Issuer with respect to the Collateral that are: (i) payments of interest, fees, and commissions (excluding (A) accrued interest purchased with principal, (B) interest on Defaulted Collateral Obligations, (C) interest and dividends on Workout Assets, (D) fees and commissions from Defaulted Collateral Obligations, and (E) syndication and other up-front fees and any up-front fixed payments received in connection with entering into a Synthetic Security); 179

(ii) any portion of the sale proceeds of a Collateral Obligation (other than a Defaulted Collateral Obligation) representing accrued interest on sale; (iii) all payments of principal on, or disposition proceeds from the sale of, Eligible Investments to the extent purchased with Interest Proceeds; (iv) interest payments or annuity payments received with respect to interest-generating structured derivative instruments or annuity-generating securities associated with an Enhanced Bond and payments with respect to the Hedge Agreements, in both cases, received on or before the related Payment Date (other than any amount payable thereunder because of any early termination or notional amount reduction), but not any sale proceeds from any of these instruments (except to the extent that they were purchased with Interest Proceeds); (v) all fees received pursuant to any Securities Lending Agreements; (vi) during the continuance of an event of default (under and as defined in the related Securities Lending Agreement), all interest received from the related Securities Lending Collateral; (vii) amounts in the Collection Account designated for distribution as Interest Proceeds pursuant to the Priority of Payments and any Paid Ahead Interest Reserve Amount remaining in the Collection Account from the preceding Payment Date; (viii) all earnings on amounts in the Delayed Drawdown Reserve Account and the Revolving Reserve Account deposited to the Collection Account in accordance with the Indenture; and (ix) for the first and second Due Period, the portion of the Interest Reserve Amount the Portfolio Manager directs by the related Determination Date to include as Interest Proceeds for the relevant Due Period (but not less than $1,000,000 for the first Due Period). Interest Proceeds shall not include U.S.$250 (attributable to the issue and allotment of the Issuers ordinary shares) and a U.S.$250 transaction fee paid to the Issuer, the bank account in which those amounts are credited in the Cayman Islands, any interest earned on those amounts, and the Preference Shares Distribution Account and any amounts in that account, and Interest Proceeds shall not include earnings on amounts on deposit in the Securities Lending Account to the extent the earnings are payable by the Issuer to a Securities Lending Counterparty. Each reference in the definition of Interest Proceeds to a Collateral Obligation shall include a Collateral Obligation that has been loaned pursuant to a Securities Lending Agreement and Interest Proceeds shall include any amounts referred to in clauses (i) through (iii) above received by the Issuer in respect of the Collateral Obligation indirectly from the related Securities Lending Counterparty pursuant to the Securities Lending Agreement. At any time when an event of default (under and as defined in a Securities Lending Agreement) is not continuing, any payments received by the Issuer from the related Securities Lending Collateral are Interest Proceeds. Interest Reserve Account: The trust account established pursuant to the Indenture and as described in Certain Additional Provisions Relating to the SecuritiesThe Accounts. Interest Reserve Amount: U.S.$1,500,000. Investment Company Act: The United States Investment Company Act of 1940. Investment Criteria Adjusted Balance: For any Collateral Obligation other than Deep Discount Obligations and Excess Caa/CCC Collateral Obligations, its Principal Balance; for a Deep Discount Obligation, its purchase price; and for an Excess Caa/CCC Collateral Obligation, its Market Value. Investment Obligation: For a Collateral Obligation that is a Synthetic Security, the reference obligation of the Synthetic Security, and otherwise the Collateral Obligation. Knowledgeable Employee: The meaning specified in Rule 3C-5 under the Investment Company Act. Limited Exposure Amount: For any Limited Exposure Synthetic Security at any time:

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(i) if the Issuer will have no payment obligations in respect of Section 6(e) of the related ISDA Master Agreement between the Issuer and the Synthetic Security counterparty, the amount of the spread payment due under the Limited Exposure Synthetic Security in the following Due Period (as calculated by the Portfolio Manager); or (ii) if the Issuer will have payment obligations in respect of Section 6(e) of the related ISDA Master Agreement, the cost that would be payable by the Issuer if the Limited Exposure Synthetic Security were being unwound (as calculated by the Portfolio Manager), or in each case such lesser amount as the Issuer, at the direction of the Portfolio Manager, may specify, subject to satisfaction of the Rating Condition with respect to each Rating Agency. Limited Exposure Synthetic Security: A Synthetic Security that (i) has an ISDA Master Agreement as its Synthetic Security agreement and (ii) is a credit default swap where the related Synthetic Security counterparty is required only to make spread payments to the Issuer. Any other Synthetic Security the Issuer specifies will also be a Limited Exposure Synthetic Security, subject to satisfaction of the Rating Condition with respect to each Rating Agency. Loan: Any interest in a fully committed, senior secured, unsecured, or subordinated term or revolving loan (including loans involving credit linked deposits) that is acquired by assignment or by Participation (including any DIP Loan) that is either (i) Registered or (ii) issued by an obligor that is not resident in the United States; whose payments are not subject to United States withholding tax; and that is held through a financial institution pursuant to the procedures described in Treasury regulation section 1.165-12(c)(3).

Long-Dated Collateral Obligation: Any Collateral Obligation with a stated maturity later than the Stated Maturity of the Notes other than a Collateral Obligation with a stated maturity later than the Stated Maturities of the Notes that includes a put option to its obligor at a price of at least par payable on or before the Stated Maturity of the Notes. Majority: (i) With respect to any Class of the Note Interests or the Composite Securities, the Holders of more than 50% of the Aggregate Outstanding Amount of the Note Interests of the Class or the Composite Securities, as the case may be, and (ii) with respect to the Preference Share Interests, the Holders of more than 50% of the aggregate number of the Preference Share Interests (subject to the Preference Share Documents). Margin Stock: The meaning specified under Regulation U issued by the Board of Governors of the Federal Reserve System, including any debt security that is by its terms convertible into Margin Stock, but does not include any obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of Collateral Obligation received pursuant to an offer by an issuer of a Defaulted Collateral Obligation. Market Value: As of any Measurement Date the market value (determined by the Portfolio Manager and reported to the Trustee as an amount rather than as a percentage or fraction of par) of any Collateral Obligation based on: (i) the average of the bid-side prices for the purchase of the Collateral Obligation determined by a pricing service (independent from the Portfolio Manager) that derives valuations by polling broker-dealers (independent from the Portfolio Manager); (ii) if the service specified in clause (i) is not available (as reasonably determined by the Portfolio Manager), the arithmetic average of bid-side quotations for the purchase of the Collateral Obligation obtained by the Portfolio Manager from three broker-dealers (Independent from the Portfolio Manager) in the relevant market; (iii) if the service specified in clause (i) is not available and the Portfolio Manager is unable to obtain bid-side quotations for the purchase of the Collateral Obligation from three broker-dealers (each as 181

reasonably determined by the Portfolio Manager), the lower of bid-side quotations for the purchase of the Collateral Obligation obtained by the Portfolio Manager from two broker-dealers (Independent from the Portfolio Manager) in the relevant market; or (iv) if the determinations of the broker-dealers specified in the foregoing clause (iii) are not available (as reasonably determined by the Portfolio Manager), the bid-side market value of the Collateral Obligation as certified by the Portfolio Manager as consistent with reasonable and customary market practice.

Market Value Percentage: For any Collateral Obligation, the ratio obtained by dividing (i) the Market Value of the Collateral Obligation by (ii) the Principal Balance of the Collateral Obligation. Maximum Investment Amount: An amount equal to (i) on any Measurement Date on and after the Closing Date through the Ramp-Up Completion Date, U.S.$534,100,000 and (ii) on any Measurement Date after the Ramp-Up Completion Date, an amount equal to (A) cash representing Principal Proceeds on deposit in the Collection Account, plus (B) the Aggregate Principal Balance of all (x) Collateral Obligations and (y) Eligible Investments (other than cash) purchased by the Issuer with Principal Proceeds on deposit in the Collection Account. Measurement Date: Any date on which the Issuer commits to acquire or dispose of any Collateral Obligation, on which a Collateral Obligation becomes a Defaulted Collateral Obligation, that is a Determination Date, that is the Ramp-Up Completion Date, and that is the date as of which the information in a Monthly Report is calculated pursuant to the Indenture.

The Measurement Date for a Payment Date is the related Determination Date. Monthly Report: A monthly report compiled and provided by the Issuer. Moodys: Moodys Investors Service, Inc. Moodys Minimum Average Recovery Rate as of any Measurement Date, is a rate equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Obligation by its respective Moodys Priority Category Recovery Rate, (ii) dividing that sum by the sum of the Aggregate Principal Balance of all Collateral Obligations, and (iii) rounding up to the first decimal place. Moodys Priority Category Recovery Rate for any Collateral Obligation is the percentage specified in the definition of Applicable Percentage opposite the category of the Collateral Obligation. Moodys Rating: (a) With respect to any Collateral Obligation that is a Class 1, Class 2, or Class 3 Loan (excluding in each case any DIP Loan), the following: (i) If the borrower of the Collateral Obligation (the borrower) has a Moodys senior implied rating, and a guarantor that unconditionally and irrevocably provides a guarantee for the Collateral Obligation (the guarantor) does not have a Moodys senior implied rating, the borrower rating; (ii) If the borrower of the Collateral Obligation has a Moodys senior implied rating, and a guarantor that unconditionally and irrevocably provides a guarantee for the Collateral Obligation also has a 182

Moodys senior implied rating, the higher of the borrowers and the guarantors rating (regardless of whether there is a published rating by Moodys on the Collateral Obligations of the borrower held by the Issuer); (iii) If the borrower of the Collateral Obligation does not have a Moodys senior implied rating, but a guarantor that unconditionally and irrevocably provides a guarantee for the Collateral Obligation has a Moodys senior implied rating, and the Collateral Obligation is not rated by Moodys, the guarantors rating; (iv) If the borrower of the Collateral Obligation does not have a Moodys senior implied rating, but a guarantor that unconditionally and irrevocably provides a guarantee for the Collateral Obligation has a Moodys senior implied rating, and the Collateral Obligation is rated by Moodys, the higher of the guarantors rating and one subcategory below the Collateral Obligations rating; (v) If both the borrower and guarantor of the Collateral Obligation do not have a Moodys senior implied rating, then the Moodys Rating of the Collateral Obligation shall be one subcategory below the rating assigned to it by Moodys (A) if the Collateral Obligation is rated by Moodys or (B) as otherwise designated by Moodys at the request of the Portfolio Manager (in the sole discretion of the Portfolio Manager); (vi) If both the borrower and guarantor of the Collateral Obligation do not have not have a Moodys senior implied rating, but another security or obligation of the borrower or guarantor is rated by Moodys and Moodys has not assigned a rating pursuant to subclause (v) above, then the Moodys Rating of the Collateral Obligation shall be determined in the following order: (A) if a senior unsecured obligation of the borrower or guarantor is rated, then the Moodys Rating of the Collateral Obligation shall equal that rating; (B) if a senior secured obligation of the borrower or guarantor is rated, then the Moodys Rating of the Collateral Obligation shall be one sub-category below that rating; or (C) If a subordinated obligation of the borrower or guarantor is rated, then the Moodys Rating of the Collateral Obligation shall be one sub-category above that rating; or (vii) If the Collateral Obligation is not rated by Moodys and no other security or obligation of the borrower or guarantor is rated by Moodys and neither the Issuer nor the Portfolio Manager obtains a Moodys Rating for the Collateral Obligation pursuant to subclause (ii) above, then the Moodys Rating of the Collateral Obligation may be determined using any one of the methods provided below. No more than 10% (measured by Aggregate Principal Balance) of the Maximum Investment Amount may consist of Collateral Obligations that have a Moodys Rating determined pursuant to subclauses (B), (C), and (D) below: (A) (1) If S&P has issued an issuer rating of the borrower or guarantor (excluding a corporate credit estimate), then the Moodys Rating of the Collateral Obligation shall be (x) one sub-category below the Moodys equivalent of the rating assigned by S&P if the rating is BBB- or higher by S&P and (y) two sub-categories below the Moodys equivalent of the rating assigned by S&P if the rating is BB+ or lower by S&P. (2) No more than 10% (measured by Aggregate Principal Balance) of the Maximum Investment Amount may consist of Collateral Obligations that have a Moodys Rating as provided in this subclause (A) and clause (b)(iii). (3) If S&P has not issued an issuer rating of the borrower or guarantor but a security or obligation of the borrower or guarantor is rated by S&P (excluding a corporate credit estimate) (a parallel security), then the rating of the parallel security shall be determined in accordance with the methodology in subclause (A)(1) above, and the Moodys Rating of the Collateral Obligation shall be determined in accordance with 183

the methodology in clause (iii) above (for those purposes treating the parallel security as if it were rated by Moodys at the rating determined pursuant to this subclause (A)(2)). (B) If the borrower or guarantor of the Collateral Obligation is a U.S. obligor, a Group A Country Obligor, or a Group B Country Obligor and the Collateral Obligation is a senior secured obligation of the borrower or guarantor and (1) neither the borrower or guarantor nor any of its respective Affiliates is subject to reorganization or bankruptcy proceedings, (2) default, (3) neither the borrower or guarantor nor any of their respective Affiliates have defaulted on any debt during the past 2 years, (4) the borrower or guarantor has been in existence for the past five years, (5) the borrower or guarantor is current on any cumulative dividends, (6) the fixed-charge coverage ratio for the borrower or guarantor exceeds 125% for each of the past two fiscal years and for the most recent quarter, (7) the borrower or guarantor had a net profit before tax in the past fiscal year and the most recent quarter, and (8) the annual financial statements of the borrower or guarantor are unqualified and certified by a firm of independent accountants of international reputation, and quarterly statements are unaudited but signed by a corporate officer, the Moodys Rating of the Collateral Obligation shall be B3. (C) If the borrower or guarantor of the Collateral Obligation is a U.S. obligor, a Group A Country Obligor, or a Group B Country Obligor and the Collateral Obligation is a senior secured obligation of the borrower or guarantor and (1) neither the borrower or guarantor nor any of its respective Affiliates is subject to reorganization or bankruptcy proceedings and (2) no debt security or obligation of the borrower or guarantor has been in default during the past two years, the Moodys Rating of the Collateral Obligation shall be Caa2. (D) If any debt security or obligation of the borrower or guarantor of the Collateral Obligation has been in default during the past two years, the Moodys Rating of the Collateral Obligation shall be Ca. (b) With respect to any Collateral Obligation that is not a Class 1 Loan, Class 2 Loan, Class 3 Loan, Synthetic Security, or DIP Loan, the following: (i) If Collateral Obligation is rated by Moodys, that rating. (ii) For Collateral Obligations issued by U.S. issuers if the Collateral Obligation is not rated by Moodys but another security or obligation of the issuer is rated by Moodys, then the Moodys Rating of the Collateral Obligation shall be determined as follows: (A) If an obligation of the issuer of the same priority is rated, then the Moodys Rating of the Collateral Obligation shall be that rating. (B) If the rating is on a senior unsecured obligation of the issuer, then (1) if the Collateral Obligation is a senior secured obligation of the issuer, then the Moodys Rating of the Collateral Obligation shall be one sub-category above that rating, with a rating of Aaa remaining the same; (2) if the rating is B1 or higher and if the Collateral Obligation is a subordinated obligation of the issuer, then the Moodys Rating of the Collateral Obligation shall be two sub-categories below that rating; 184 no debt securities or obligations of the borrower or guarantor are in

(3) if the rating is between B2 and Ca, inclusive, and if the Collateral Obligation is a subordinated obligation of the issuer, then the Moodys Rating of the Collateral Obligation shall be one sub-category below that rating; and (4) if the rating is lower than Ca the Moodys Rating of the Collateral Obligation shall be C, if the Collateral Obligation is a subordinated obligation of the issuer. (C) If the rating is on a subordinated obligation of the issuer and if the Collateral Obligation is a senior secured obligation of the issuer, then (1) if the rating is Baa3 or higher, the Moodys Rating of the Collateral Obligation shall be one sub-category above that rating; (2) if the rating is B2 or higher but lower than Baa3, the Moodys Rating of the Collateral Obligation shall be two sub-categories above that rating; (3) if the rating is B3, the Moodys Rating of the Collateral Obligation shall be one sub-category above that rating; and (4) if the rating is lower than B3, the Moodys Rating of the Collateral Obligation shall equal that rating. (D) If a subordinated obligation of the issuer is rated and if the Collateral Obligation is a senior unsecured obligation of the issuer, then (1) if the rating is B3 or higher, the Moodys Rating of the Collateral Obligation shall be one sub-category above that rating; and (2) if the rating is lower than B3, the Moodys Rating of the Collateral Obligation shall equal that rating. (E) If the rating is on a senior secured obligation of the issuer, then (1) if the rating is Caa2 or higher and the Collateral Obligation is a senior unsecured obligation of the issuer, the Moodys Rating of the Collateral Obligation shall be one sub-category below that rating; (2) if the rating is Caa2 or higher and the Collateral Obligation is a subordinated obligation of the issuer, the Moodys Rating of the Collateral Obligation shall be two sub-categories below that rating, and (3) if the rating is lower than Caa2, the Moodys Rating of the Collateral Obligation shall be C. (iii) If the Collateral Obligation is not rated by Moodys, and no other security or obligation of the issuer is rated by Moodys, then the Moodys Rating of the Collateral Obligation may be determined using any one of the methods below: (A) (1) If the Collateral Obligation is rated by S&P (excluding a corporate credit estimate), then (a) if the rating is BBB- or higher, the Moodys Rating of the Collateral Obligation shall be one sub-category below the Moodys equivalent of the rating assigned by S&P; and (b) if the rating is BB+ or lower, the Moodys Rating of the Collateral Obligation shall be two sub-categories below the Moodys equivalent of the rating assigned by S&P. (2) If the Collateral Obligation is not rated by S&P but another security or obligation of the issuer is rated by S&P (excluding a corporate credit estimate) (a parallel security), then the Issuer or the Portfolio Manager on behalf of the Issuer may elect

185

(B) S&P, or

(x) first to establish the Moodys equivalent of the rating of the parallel security determined in accordance with the methodology in clause (iii)(A)(1) above, in which case the Moodys Rating of the Collateral Obligation shall be determined in accordance with the methodology in clause (ii) above, treating the parallel security as if it were rated by Moodys at the rating determined pursuant to this subclause (2) or (y) to present the Collateral Obligation to Moodys for an estimate of the Collateral Obligations rating factor as provided in clause (B) below. If the Collateral Obligation is not rated by Moodys and (1) no other security or obligation of the issuer is rated by Moodys or

(2) another security or obligation of the issuer is rated by S&P (excluding a corporate credit estimate) and the Issuer or the Portfolio Manager on behalf of the Issuer so elects as provided in clause (A)(2)(y) above, then the Issuer or the Portfolio Manager on behalf of the Issuer, may present the Collateral Obligation to Moodys for an estimate of the Collateral Obligations rating factor, from which its corresponding Moodys Rating may be determined. After it is presented and pending receipt from Moodys of the estimate, if the Portfolio Manager certifies to the Trustee that the Portfolio Manager believes that the estimate will be at least B3, then the Collateral Obligation shall have a Moodys Rating of B3. (C) If the borrower or guarantor of the Collateral Obligation is a U.S. obligor, a Group A Country Obligor, or a Group B Country Obligor and the Collateral Obligation is a senior unsecured obligation of the borrower or guarantor and (1) neither the borrower or guarantor nor any of its respective Affiliates is subject to reorganization or bankruptcy proceedings and (2) no debt security or obligation of the borrower or guarantor has been in default during the past two years, the Moodys Rating of the Collateral Obligation shall be Caa3. With respect to Collateral Obligations that are Synthetic Securities, any of (i) the Moodys Rating assigned in connection with the acquisition of the Synthetic Security, (ii) in the case of a Form-Approved Synthetic Security, the Moodys Rating assigned in connection with the approval by Moodys of the Form-Approved Synthetic Security, and (iii) in the case of a Limited Exposure Synthetic Security, the Moodys Rating of the related Reference Obligation. (d) With respect to any Collateral Obligation that is a DIP Loan, and notwithstanding anything to the contrary in clauses (a) through (c) above, the Moodys Rating of the DIP Loan shall be one sub-category below the rating (including any estimated rating) assigned by Moodys to the DIP Loan. If Moodys has not assigned a rating to the DIP Loan and the Portfolio Manager has commenced the process of having a rating assigned by Moodys (as specified in the definition of DIP Loan), the Moodys Rating of the DIP Loan shall be one sub-category above the rating (including any estimated rating) assigned by Moodys to the most senior, unsecured debt obligations of the issuer of the DIP Loan until Moodys has assigned a rating to the DIP Loan. (c)

186

Moodys Rating Factor: The number in the table below opposite the rating of the Collateral Obligation (excluding Synthetic Securities). Moodys Rating Factor 1 10 20 40 70 120 180 260 360 610 Moodys Rating Factor 940 1350 1766 2220 2720 3490 4770 6500 8070 10000

Moodys Rating Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3

Moodys Rating Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca or lower

The Moodys Rating Factor for Collateral Obligations that are Synthetic Securities shall be determined by Moodys and obtained by the Issuer or the Portfolio Manager on a case-by-case basis. Non-Performing Collateral Obligation: Any Defaulted Collateral Obligation and any PIK Security as to which its issuer or obligor has previously deferred or capitalized any interest due on it and all the interest so deferred or capitalized has not subsequently been paid in full in cash by (i) if the PIK Security has a Moodys Rating of Baa3 (and not on credit watch with negative implications) or above, the earlier of its second payment date or one year following the date of the initial deferral or capitalization of interest due on it or (ii) if the PIK Security has a Moodys Rating of Baa3 and on credit watch with negative implications or below Baa3, the earlier of its first payment date or six months following the date of the initial deferral or capitalization of interest due on it. Note Components: The Class A-1-B Note Components, Class B-2 Note Components, Class C-2 Note Components, and Class D-2 Note Components. Note Interest Rate: With respect to any specified Class of Note Interests and the Class 1 Composite Securities, the per annum interest rate payable on the Note Interests of the Class or the Class 1 Composite Securities with respect to each Interest Period equal to (i) in the case of Floating Rate Notes, LIBOR for Eurodollar deposits for the Interest Period plus the spread specified under Summary of TermsSecurities Offered with respect to the Notes except in the first Interest Period and (ii) in the case of Fixed Rate Note Interests and the Class 1 Composite Securities, the rate specified for them in Summary of TermsSecurities Offered. Note Payment Sequence: The application of funds in the following order: (1) redeemed; (2) (3) (4) to the Class A Note Interests in the Note Payment SequenceClass A until they have been fully to the Class B Note Interests until the Class B Note Interests have been fully redeemed; to the Class C Note Interests until the Class C Note Interests have been fully redeemed; and to the Class D Note Interests until the Class D Note Interests have been fully redeemed.

Note Payment SequenceClass A: The application of funds pro rata to the Class A-1 Note Interests (considered as one subclass) and the Class A-2 Notes and the Class A-3 Notes (considered together as a second subclass) based on the Aggregate Outstanding Amounts of the Classes, and between the Class A-2 Notes and the Class A-3 Notes in the following order of priority: (1) to the Class A-2 Notes, until the Class A-2 Notes have been fully redeemed; and then 187

(2)

to the Class A-3 Notes, until the Class A-3 Notes have been fully redeemed.

Paid Ahead Interest Reserve Amount: For the first Payment Date, $0 and for any subsequent Payment Date, an amount equal to the excess of the sum of all payments of interest received during the related Due Period on Floating Rate Obligations and on Fixed Rate Obligations that pay interest less frequently than quarterly over the sum of

the product of (1) 0.25, (2) the Weighted Average Fixed Rate Coupon of Fixed Rate Obligations that pay interest less frequently than quarterly as of the related Determination Date, and (3) the Aggregate Principal Amount of Fixed Rate Obligations that pay interest less frequently than quarterly as of the related Determination Date and the product of (1) the actual number of days in the related Due Period divided by 360, (2) the sum of LIBOR for the related Interest Period and the Weighted Average Spread on Floating Rate Obligations that pay interest less frequently than quarterly as of the related Determination Date, and (3) the Aggregate Principal Amount of Floating Rate Obligations that pay interest less frequently than quarterly as of the related Determination Date. Participating Institution: An institution that creates a participation interest and that has a long-term senior unsecured debt rating or a guarantor with a long-term senior unsecured debt rating of at least A- by S&P and either a long-term senior unsecured debt rating or a guarantor with a long-term senior unsecured debt rating of at least A2 and a short-term rating of P-1 (and not on credit watch for possible downgrade) by Moodys or a longterm senior unsecured debt rating or a guarantor with a long-term senior unsecured debt rating of at least A1 by Moodys when the participation interest is acquired by the Issuer. Participation: A Loan acquired as a participation interest created by a Participating Institution. Permitted Offer: A tender offer, voluntary redemption, exchange offer, conversion, or other similar action pursuant to which the offeror offers to acquire a debt obligation (including a Collateral Obligation) in exchange solely for cash in an amount equal to or greater than the full face amount of the debt obligation plus any accrued and unpaid interest and as to which the Portfolio Manager has determined in its reasonable commercial judgment that the offeror has sufficient access to financing to consummate the offer. PIK Security: Any Collateral Obligation with respect to which its issuer or obligor may defer or capitalize interest due on the Collateral Obligation under the related underlying instruments. Pledged Obligations: As of any date of determination, the Collateral Obligations, the Workout Assets, the Eligible Investments, and any other securities or obligations that have been granted to the Trustee that form part of the Collateral or the Class 6 Collateral. Preference Share Component: The Components having the characteristics specified in the Indenture and entitling the Holder of a Composite Security to rights for each Preference Share Component equivalent to one Preference Share and having any additional terms provided in the Indenture and in the Composite Security. Each Preference Share Component shall have an original stated value of U.S.$1,000. Preference Share Interests: The Preference Shares and the Preference Share Components. Preference Share Interest Internal Rate of Return: With respect to any Payment Date, the annualized internal rate of return (computed using the XIRR function in Microsoft Excel 97 or an equivalent function in another software package) for the following cash flows, assuming all Preference Share Interests were purchased on the Closing Date at a purchase price of $1,000 per share: (i) each distribution of Interest Proceeds made to the Holders of the Preference Share Components and to the Preference Share Paying Agent (for payment to Holders of the Preference Shares 188

(ii)

pursuant to the Preference Share Paying and Transfer Agency Agreement) on any prior Payment Date and, to the extent necessary to reach the applicable Preference Share Interest Internal Rate of Return, the current Payment Date and each distribution of Principal Proceeds made to the Holders of the Preference Share Components and to the Preference Share Paying Agent (for payment to Holders of the Preference Shares pursuant to the Preference Share Documents to the extent permitted by the Preference Share Paying and Transfer Agency Agreement) on any prior Payment Date and, to the extent necessary to reach the applicable Preference Share Interest Internal Rate of Return, the current Payment Date.

Preference Share Paying Agent: U.S. Bank National Association, a national banking association, in its capacity as Preference Share Paying Agent for the Preference Shares, and any successor under the Preference Share Paying and Transfer Agency Agreement, or any other person authorized by the Issuer (with the consent of the Portfolio Manager) from time to time to make payments on the Preference Shares and to deliver notices to the Preference Shareholders on behalf of the Issuer. Preference Shares Distribution Account: A segregated bank account established by the Preference Share Paying Agent pursuant to the Preference Share Paying and Transfer Agency Agreement into which the Preference Share Paying Agent shall deposit all amounts to be paid to the Holders of the Preference Shares under the Priority of Payments. Prepaid Collateral Obligation: Any Credit Risk Obligation that is sold by the Issuer and any Collateral Obligation that has prepaid, whether by tender, exchange, redemption before the stated maturity of the Collateral Obligation, or other prepayment. Principal Balance: With respect to any Pledged Obligation other than those specifically covered in this definition, the outstanding principal amount of the Pledged Obligation as of the relevant Measurement Date; the Treasury Strip, the face value at its maturity date; a Synthetic Security, the notional amount specified in the Synthetic Security; any Pledged Obligation in which the Trustee does not have a first priority perfected security interest, zero, except as otherwise expressly specified in the Indenture; any Defaulted Collateral Obligation, zero; any Zero Coupon Security, its accreted value; any Step-Up Coupon Security, its accreted value; any Collateral Obligation that has been loaned, its Principal Balance shall be reduced by the excess of the amount of collateral value required to secure the return of such Collateral Obligation and the actual Market Value of the collateral; any Revolving Loan or Delayed Drawdown Loan, its Principal Balance shall include any unfunded amount thereof (regardless of the nature of the contingency relating to the Issuers obligation to fund the unfunded amount), except as otherwise expressly specified in the Indenture; any PIK Security, its Principal Balance shall not include any principal amount of the PIK Security representing previously deferred or capitalized interest, and any obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of a Collateral Obligation, zero. Principal Proceeds: With respect to any Due Period, all amounts received in Cash during the Due Period by the Issuer with respect to the Collateral that are not Interest Proceeds and in addition for the first or second Due Period, the portion of the Interest Reserve Amount the Portfolio Manager directs by the related Determination Date to include as Principal Proceeds for the relevant Due Period, and with respect to the second Due Period, any amount remaining in Interest Reserve Account (after taking into account any portion of the Interest Reserve Amount the Portfolio Manager directs by the related Determination Date to include as Interest Proceeds for the second Due Period). 189

Principal Proceeds do not include the U.S.$250 (attributable to the issue and allotment of the Issuers ordinary shares) and a U.S.$250 transaction fee paid to the Issuer, the bank account in which those amounts are credited in the Cayman Islands, any interest earned on those amounts, the Preference Shares Distribution Account and any amounts in that account, or earnings on amounts on deposit in the Securities Lending Account to the extent the earnings are payable by the Issuer to a Securities Lending Counterparty. At any time when an event of default under a Securities Lending Agreement is not continuing, any payments received by the Issuer from the related Securities Lending Collateral shall not be Principal Proceeds. Priority Class: With respect to any specified Class of Note Interests, each Class of Note Interests that ranks senior to that Class. Proposed Portfolio: As of any Measurement Date, the portfolio (measured by Aggregate Principal Balance) of Collateral Obligations and Principal Proceeds held as cash on deposit in the Collection Account and other Eligible Investments purchased with Principal Proceeds on deposit in the Collection Account resulting from the sale, maturity, or other disposition of a Collateral Obligation or a proposed reinvestment in a Collateral Obligation, as the case may be. Purchase Price: With respect to the purchase of any Collateral Obligation (other than any obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of a Collateral Obligation), the net purchase price paid by the Issuer for the Collateral Obligation. The net purchase price is determined by subtracting from the purchase price the amount of any accrued interest purchased with principal and any syndication and other upfront fees paid to the Issuer and by adding the amount of any related transaction costs (including assignment fees) paid by the Issuer to the seller of the Collateral Obligation or its agent. Qualified Equity Security: Any obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of a Collateral Obligation that is stock or evidence of an interest in or a right to buy stock, or any obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of a Collateral Obligation whose acquisition otherwise is a transaction in stocks or securities within the meaning of Section 864(b)(2)(A)(ii) of the Code and the regulations under the Code. Qualified Equity Securities does not include any obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of a Collateral Obligation that will cause the Issuer to be treated as engaged in or having income from a United States trade or business for United States federal income tax purposes by virtue of its ownership or disposition of the obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of a Collateral Obligation. Qualified Institutional Buyer: The meaning specified in Rule 144A under the Securities Act. Qualified Purchaser: The meaning specified in Section 2(a)(51) of the Investment Company Act and Rule 2a51-2 under the Investment Company Act. Rating Agency: Each of Moodys and S&P or, with respect to Pledged Obligations generally, if at any time Moodys or S&P ceases to provide rating services with respect to high yield debt securities, any other nationally recognized statistical rating organization selected by the Issuer and reasonably satisfactory to a Majority of each Class of Note Interests. If at any time Moodys ceases to be a Rating Agency, references to rating categories of Moodys in the Indenture shall instead be references to the equivalent categories of the replacement rating agency as of the most recent date on which the replacement rating agency and Moodys published ratings for the type of security in respect of which the replacement rating agency is used. If at any time S&P ceases to be a Rating Agency, references to rating categories of S&P in the Indenture shall instead be references to the equivalent categories of the replacement rating agency as of the most recent date on which the replacement rating agency and S&P published ratings for the type of security in respect of which the replacement rating agency is used. Rating Condition: With respect to any Rating Agency and any action taken or to be taken under the Indenture, a condition that is satisfied when the Rating Agency has confirmed to the Portfolio Manager (as agent for the Issuer) in writing that no withdrawal, reduction, suspension, or other adverse action with respect to any then 190

current rating by it (including any private or confidential rating) of any Class of Note Interests or Composite Securities will occur as a result of the action. The Rating Condition with respect to any Rating Agency shall be satisfied for all purposes of the Indenture at any time when no outstanding Securities are rated by it. Rating Confirmation: Confirmation from each Rating Agency (and with respect to the Composite Securities, from Moodys only) that it has not reduced, suspended, or withdrawn the initial rating assigned by it to any Class of Note Interests or Composite Securities. Ratings Matrix: The row of the table below selected by the Portfolio Manager on the Closing Date to apply initially for purposes of the Diversity Test and the Weighted Average Rating Factor Test. Thereafter, on notice to the Trustee, the Portfolio Manager may select a different row of the Ratings Matrix to apply, or may interpolate between rows (interpolating between two Minimum Weighted Average Spreads) on a straight-line basis and round the results to two decimal points. Ratings Matrix Row 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Minimum Diversity Score 50 50 50 50 50 55 55 55 55 55 60 60 60 60 60 65 65 65 65 65 Minimum Weighted Average Spread 2.65% 2.75% 2.85% 3.00% 3.15% 2.65% 2.75% 2.85% 3.00% 3.15% 2.65% 2.75% 2.85% 3.00% 3.15% 2.65% 2.75% 2.85% 3.00% 3.15% Maximum Weighted Average Moodys Rating Factor 2240 plus the Recovery Rate Modifier 2290 plus the Recovery Rate Modifier 2330 plus the Recovery Rate Modifier 2380 plus the Recovery Rate Modifier 2420 plus the Recovery Rate Modifier 2270 plus the Recovery Rate Modifier 2350 plus the Recovery Rate Modifier 2400 plus the Recovery Rate Modifier 2450 plus the Recovery Rate Modifier 2500 plus the Recovery Rate Modifier 2300 plus the Recovery Rate Modifier 2380 plus the Recovery Rate Modifier 2430 plus the Recovery Rate Modifier 2500 plus the Recovery Rate Modifier 2550 plus the Recovery Rate Modifier 2340 plus the Recovery Rate Modifier 2400 plus the Recovery Rate Modifier 2460 plus the Recovery Rate Modifier 2540 plus the Recovery Rate Modifier 2610 plus the Recovery Rate Modifier

Recovery Rate Modifier: As of any Measurement Date, the lesser of 100 and the product of (i) the Moodys Minimum Average Recovery Rate minus the minimum percentage specified to pass the Weighted Average Moodys Recovery Rate Test (but not less than zero) and (ii) 40. Redemption Date: Any Payment Date specified for an Optional Redemption under Certain Additional Provisions Relating to the SecuritiesOptional Redemption. Redemption Premium: The amount payable in connection with an Optional Redemption of any Fixed Rate Note Interest equal to any excess of (i) the present value of the remaining payments of principal of and interest on the portion of the Note Interest being redeemed (excluding any accrued interest, any Deferred Interest, any Defaulted Interest, and any interest accrued on Deferred Interest or Defaulted Interest on the Note Interest) discounted to the Redemption Date on the basis of a 360-day year consisting of twelve 30-day months, calculated by the Issuer in accordance with generally accepted financial practices (A) assuming that the entire outstanding principal amount of the Note Interest being redeemed will be paid in a single payment corresponding to the Remaining Redemption Life of the Note Interest and that each scheduled payment of the Note Interest will be paid and not deferred on its related Payment Date and 191

(ii)

(B) using a discount factor equal to the Reinvestment Yield over the outstanding principal amount of the portion of the Note Interest being redeemed.

No Redemption Premium shall be payable with respect to an Optional Redemption occurring in the period to the Payment Date in February 2008 in connection with a Tax Event or in connection with a Special Redemption under the Indenture. Redemption Price: With respect to any Note Interest and any Optional Redemption, an amount equal to (i) the outstanding principal amount of the portion of the Note Interest being redeemed plus (ii) accrued interest on the Note Interest (including any Defaulted Interest and interest on Defaulted Interest) plus (iii) in the case of any Deferred Interest Note, the applicable Deferred Interest on the Note Interest plus (iv) in the case of any Fixed Rate Note, the Redemption Premium for the Note Interest. With respect to any Preference Share Interest and any Optional Redemption, Redemption Price means the amount payable in respect of the Optional Redemption to the Holder of the Preference Share Interest, determined as specified in Certain Additional Provisions Relating to the SecuritiesOptional RedemptionPreference Share Interests. With respect to any Class 6 Component and any redemption pursuant to the Indenture, Redemption Price means the distribution in kind of the Treasury Strip provided for in the Indenture. Reference Obligation: A Loan, Finance Lease, Structured Finance Obligation, or High-Yield Bond that, when the Issuer commits to purchase (or otherwise acquire) the Synthetic Security, satisfies the definition of Collateral Obligation and on which a Synthetic Security is based. Registered: A debt obligation that is issued after July 18, 1984 and that is in registered form within the meaning of Section 881(c)(2)(B)(i) of the Code and the Treasury regulations promulgated thereunder. Regulation D: Regulation D under the Securities Act. Regulation S: Regulation S under the Securities Act. Reinvestment Yield: When used for purposes of calculating the Redemption Price for any proposed Redemption Date with respect to any Class of Note Interests, a rate per annum equal to the sum of, in the case of the Class A-1-B Note Interests, 0.42%, in the case of the Class B-2 Note Interests, 0.87%, in the case of the Class C-2 Note Interests, 1.51%, in the case of the Class D-2 and D-3 Note Interests, 3.32%, plus the yield to maturity implied by (i) the yields reported, as of 10:00 A.M., New York City time, on the 10th Business Day preceding the related Redemption Date displayed on the Moneyline Telerate Service (or any display replacing the Moneyline Telerate Service) for actively traded United States Treasury securities having a maturity as nearly as practicable equal to the Remaining Redemption Life of the Note Interest or (ii) if the yields are not reported as of that time or the yields reported as of that time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which they have been so reported as of the 10th Business Day preceding the Redemption Date, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded United States Treasury securities having a constant maturity as nearly as practicable equal to the Remaining Redemption Life of the Note Interest. Remaining Redemption Life: (i) with respect to any Redemption Date and the Class A-1-B Notes, 7.5 years, (ii) with respect to any Redemption Date and the Class B-2 Notes, 9.7 years, (iii) with respect to any Redemption Date and the Class C-2 Notes, 10.3 years, (iv) with respect to any Redemption Date and the Class D-2

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Notes, 4.7 years, and (v) with respect to any Redemption Date and the Class D-3 Notes, 4.7 years, in each case less the time elapsed from the Closing Date to the Redemption Date. Repository: The internet-based password protected electronic repository of transaction documents relating to privately offered and sold collateralized debt obligation securities located at www.cdolibrary.com operated by The Bond Market Association. Information on this website is not considered part of this Offering Memorandum in any way. Revolving Loan: A Loan or any Synthetic Security with a Reference Obligation (in each case excluding any Delayed Drawdown Loan) that requires the Issuer to make future advances to (or for the account of) the borrower under its underlying instruments (including any letter of credit for which the Issuer is required to reimburse the issuing bank for under it). A Loan or Synthetic Security shall only be considered to be a Revolving Loan for so long as its commitment amount is greater than zero. Rule 144A: Rule 144A under the Securities Act. S&P: Standard & Poors, a division of The McGraw-Hill Companies, Inc. S&P Bivariate Risk Counterparties: Collectively, Secondary Risk Counterparties and obligors organized under the laws of a sovereign jurisdiction, the long-term foreign currency rating of which is below AA by S&P (excluding any obligor of a Structured Finance Obligation that is a special purpose vehicle organized under the laws of a sovereign jurisdiction that is commonly used as the place of organization of special purpose vehicles). S&P Bivariate Risk Table: As follows: Long-Term Senior Unsecured Debt Rating of S&P Bivariate Risk Counterparty AAA AA+ AA AAA+ A or lower Individual S&P Bivariate Risk Counterparty Limit 20.0% 10.0% 10.0% 10.0% 5.0% 5.0% Aggregate S&P Bivariate Risk Counterparty Limit 20.0% 20.0% 20.0% 15.0% 10.0% 7.5%

S&P Industry Classification: The S&P Industry Classifications in Schedule 3 of the Indenture as modified, amended, and supplemented from time to time by S&P. S&P Priority Category Recovery Rate: For any Collateral Obligation, the percentage specified in the definition of Applicable Percentage opposite the S&P Priority Category of the Collateral Obligation. S&P Rating: With respect to any Collateral Obligation as of any Measurement Date, the rating determined in accordance with the following methodology: (i) If there is an issuer credit rating of the borrower of the Collateral Obligation (the borrower), or the guarantor who unconditionally and irrevocably guarantees the Collateral Obligation (the guarantor), then the S&P Rating shall be that rating (regardless of whether there is a published rating by S&P on the Collateral Obligation held by the Issuer). (ii) If no other security or obligation of the borrower or guarantor is rated by S&P, then the Issuer or the Portfolio Manager on behalf of the Issuer, may apply to S&P for a corporate credit estimate within three Business Days after the later of (A) the date on which the Issuer commits to purchase the Collateral Obligation and (B) the date of which the Issuer is allocated a commitment to purchase the Collateral Obligation, 193

which shall be its S&P Rating. After that application and pending receipt from S&P of the corporate credit estimate, the Collateral Obligation shall have an S&P Rating of B- if (1) the Portfolio Manager certifies to the Trustee that the Portfolio Manager believes, in its reasonable business judgment, that the corporate credit estimate will be at least B- and (2) no Collateral Obligation previously treated as having an S&P Rating of B- under this clause (2) shall have received a corporate credit estimate from S&P of CCC+ or below, otherwise the Collateral Obligation shall have an S&P Rating of CCC-. (iii) If the Collateral Obligation is not rated by S&P, but another security or obligation of the borrower or guarantor is rated by S&P and neither the Issuer nor the Portfolio Manager obtains an S&P Rating for the Collateral Obligation pursuant to subclause (ii) above, then the S&P Rating of the Collateral Obligation shall be the issuer credit rating or shall be determined as follows: (A) If there is a rating on a senior secured obligation of the borrower or guarantor, then the S&P Rating of the Collateral Obligation shall be one sub-category below that rating if the Collateral Obligation is a senior secured or senior unsecured obligation of the borrower or guarantor. (B) If there is a rating on a senior unsecured obligation of the borrower or guarantor, then the S&P Rating of the Collateral Obligation shall equal that rating if the Collateral Obligation is a senior secured or senior unsecured obligation of the borrower or guarantor. (C) If there is a rating on a subordinated obligation of the borrower or guarantor, and if the Collateral Obligation is a senior secured or senior unsecured obligation of the borrower or guarantor, then the S&P Rating of the Collateral Obligation shall be one sub-category above that rating if that rating is higher than BB+, and shall be two sub-categories above that rating if that rating is BB+ or lower. (iv) If there is no issuer credit rating published by S&P and the Collateral Obligation is not rated by S&P, and no other security or obligation of the borrower or guarantor is rated by S&P and neither the Issuer nor the Portfolio Manager obtains an S&P Rating for the Collateral Obligation pursuant to subclause (ii) above, then if the Collateral Obligation is rated by Moodys, then the S&P Rating of the Collateral Obligation shall be (A) one sub-category below the S&P equivalent of the rating assigned by Moodys if the Collateral Obligation is Rated Baa3 or higher by Moodys and (B) two sub-categories below the S&P equivalent of the rating assigned by Moodys if the Collateral Obligation is rated Ba1 or lower by Moodys. The Aggregate Principal Balance of the Collateral Obligations that may have an S&P Rating based on a rating assigned by Moodys as provided in this subclause may not exceed 10% of the Maximum Investment Amount. (v) With respect to a Collateral Obligation that is a DIP Loan, and notwithstanding anything to the contrary in clauses (i) through (iv) above, the S&P Rating of the Collateral Obligation that is a DIP Loan shall be the rating (including any estimated rating) assigned by S&P to the DIP Loan. Notwithstanding the foregoing, if and for so long as the Aggregate Principal Balance of Collateral Obligations consisting in the aggregate of (x) Participation and (y) Synthetic Securities exceeds 20% of the Maximum Investment Amount, then the S&P Rating for the Aggregate Principal Balance of Collateral Obligations representing that excess (determined assuming the excess is comprised of the Collateral Obligations having the lowest S&P Ratings that would otherwise be applicable as determined pursuant to clauses (i) through (v) above) shall be the S&P Rating one sub-category below the S&P Rating of the Collateral Obligations that would otherwise be applicable as determined pursuant to clauses (i) through (v) above. S&P Unrated DIP Loan: A DIP Loan acquired by the Issuer that does not have a rating assigned by S&P and for which the Portfolio Manager has commenced the process of having a rating assigned by S&P (as specified in the definition of DIP Loan).

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Secondary Risk Counterparty: Any Participating Institution, any Synthetic Security counterparty, any Securities Lending Counterparty, and any party obligated to make payments to the Issuer on any interest-generating structural derivative instruments or annuity-generating securities in connection with Enhanced Bonds. Secondary Risk Table: The table below: Long-Term Senior Aggregate Unsecured Debt Rating of Individual Aggregate Secondary Risk Counterparty Counterparty Counterparty Limit Limit Moodys S&P Aaa AAA 20.0% 20.0% Aa1 AA+ 15.0% 20.0% Aa2 AA 10.0% 20.0% Aa3 AA10.0% 15.0% A1* A+ 5.0% 10.0% A2* A 5.0% 10.0% * If the Secondary Risk Counterparty also has a short term rating of P-1 (and not on credit watch for possible downgrade) by Moodys. If any Secondary Risk Counterpartys long-term senior unsecured debt rating or short-term rating is on credit watch with negative implications by Moodys or S&P, then for the purposes of the Secondary Risk Table, its rating by the Rating Agency putting its rating on credit watch shall be one rating notch lower for that Rating Agency. Securities: The Notes, the Composite Securities, and the Preference Shares. Securities Act: The U.S. Securities Act of 1933. Securities Lending Collateral: Cash or direct registered debt obligations of the United States of America that have a maturity date no later than the Business Day preceding the stated termination date of the relevant Securities Lending Agreement and that are pledged by a Securities Lending Counterparty as collateral pursuant to a Securities Lending Agreement. Senior Secured Loan: A secured Loan that is not subordinated by its terms to indebtedness of the borrower for borrowed money, trade claims, capitalized leases, or other similar obligations. Spread Excess: As of any Measurement Date, a fraction whose numerator is the product of (i) the greater of zero and the excess of the Weighted Average Spread for the Measurement Date over the Minimum Weighted Average Spread specified in the applicable row of the Ratings Matrix and (ii) the Aggregate Principal Balance of all Floating Rate Obligations (excluding any Non-Performing Collateral Obligations) held by the Issuer as of the Measurement Date, and whose denominator is the Aggregate Principal Balance of all Fixed Rate Obligations (excluding any Non-Performing Collateral Obligations) held by the Issuer as of the Measurement Date. In computing the Spread Excess on any Measurement Date, the Weighted Average Spread for the Measurement Date will be computed as if the Fixed Rate Excess were equal to zero. Step-Up Coupon Security: A security (i) that does not currently provide for the payment of interest, but that does provide for the payment of interest after the expiration of a specified period ending before its maturity or (ii) the interest rate of which is scheduled to increase over a specified period that has not expired, other than due to the increase of the index of a Floating Rate Obligation. After the securitys interest becomes payable, in the case of (i) above, or the scheduled period for interest rate increases has expired, in the case of (ii) above, the security will no longer be a Step-Up Coupon Security. Structured Finance Obligation: Any obligation

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(i)

(ii) (iii) (iv)

secured directly by, referenced to, or representing ownership of, a pool of receivables or other assets of U.S. obligors, Group A Country Obligors, or Group B Country Obligors, including portfolio credit default swaps, synthetic collateral debt obligations, and collateralized debt obligations, but excludes (A) mortgage-backed securities, (B) collateralized debt obligations backed by Emerging Market Securities, (C) collateralized debt obligations primarily backed by asset-backed securities, (D) market value collateralized debt obligations, (E) securities backed by future flow receivables, (F) net interest margin securitizations, and (G) collateralized debt obligations backed by other collateralized debt obligations, that has a rating and an S&P Priority Category Recovery Rate assigned by S&P, that has a rating and a Moodys Priority Category Recovery Rate assigned by Moodys, and whose acquisition or ownership by the Issuer will not cause the Issuer to be treated as engaged in a U.S. trade or business for United States federal income tax purposes or otherwise subject the Issuer to net income taxes.

In connection with the purchase of a Structured Finance Obligation, the Portfolio Manager shall obtain from Moodys the applicable recovery rates with respect to the Structured Finance Obligation. For purposes of the Moodys Diversity Test, multiple Structured Finance Obligations from CDOs managed by the same Portfolio Manager or multiple Structured Finance Obligations issued by the same master trust will be considered to be obligations of one issuer. Successor Management Fee: A fee that will accrue from the date on which a successor Portfolio Manager (so long as the successor Portfolio Manager is not Ares or any Affiliate of Ares (successor Portfolio Manager)) becomes Portfolio Manager and be payable to the successor Portfolio Manager in arrears on each Payment Date (commencing with the first Payment Date after which the successor Portfolio Manager becomes Portfolio Manager). Any Successor Management Fee may include a base management fee of up to 0.20% per annum, and the aggregate of the Portfolio Managers base management fee and subordinated management fee shall not exceed 0.50% per annum of the Maximum Investment Amount as of the first day of each Due Period calculated on the basis of a 360-day year and the actual number of days elapsed. Super Majority: With respect to any Class of the Note Interests or the Composite Securities, the Holders of more than 66% of the Aggregate Outstanding Amount of the Note Interests of the Class or the Composite Securities, as the case may be. With respect to the Preference Share Interests, the Holders of more than 66% of the aggregate number of the Preference Share Interests. Synthetic Security: Any swap transaction, structured bond investment, credit linked note, or other derivative financial instrument relating to a debt instrument or a basket or portfolio of debt instruments or an index or indices in connection with a basket or portfolio of debt instruments or other similar instruments entered into by the Issuer with a Synthetic Security counterparty (other than tranches of portfolio credit default swaps such as in bespoke collateralized debt obligations and synthetic collateralized debt obligations) that has in the Portfolio Managers reasonable judgment, equivalent expected loss characteristics (those characteristics, credit risk) to those of the related Reference Obligations (taking account of those considerations as they relate to the Synthetic Security counterparty), unless it is a Form-Approved Synthetic Security or the Rating Condition for each Rating Agency is satisfied, and the Reference Obligations of which have a weighted average market value of at least 80% at the time the Synthetic Security is entered into. The maturity, interest rate, and other non-credit characteristics of a Synthetic Security may be different from the Reference Obligations to which the credit risk of the Synthetic Security relates.

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No Synthetic Security shall require the Issuer to make any payment to the Synthetic Security counterparty after its initial purchase other than any payments represented by the release of any cash collateral posted by the Issuer from the Collection Account to the Synthetic Security Collateral Account simultaneously with the Issuers purchase of or entry into the Synthetic Security in an amount not exceeding the amount of the posted cash collateral. Collateral may be posted only to a Synthetic Security Counterparty Account. The term Synthetic Security shall not include any Structured Finance Obligation, any Participation, or any interest-generating structural derivative instrument or annuity-generating security acquired in connection with an Enhanced Bond, but the Reference Obligation of a Synthetic Security may be a Structured Finance Obligation. Each Synthetic Security agreement shall contain appropriate limited recourse and non-petition provisions (to the extent the Issuer has contractual payment obligations to the Synthetic Security counterparty) equivalent (mutatis mutandis) to those contained in the Indenture. The ownership of any Synthetic Security must not cause the Issuer to be treated as engaged in a U.S. trade or business for United States federal income tax purposes or otherwise subject the Issuer to net income taxes. Unless the Rating Condition is otherwise satisfied, any deliverable obligation that may be delivered to the Issuer as a result of the occurrence of any credit event under any proposed Synthetic Security must not provide that its transfer to the Issuer is subject to obtaining any consents and must qualify (when the Issuer purchases the related Synthetic Security) as a Collateral Obligation and satisfy the Concentration Limitations under the Indenture (except that the deliverable obligation shall be denominated and payable in Dollars) and if the Reference Obligation of the Synthetic Security is a Senior Secured Loan then the deliverable obligation under the Synthetic Security must also be a Senior Secured Loan. The Issuer may take delivery of any deliverable obligation notwithstanding that it ceases to qualify as a Collateral Obligation under the Indenture at the time of its delivery to the Issuer if the Portfolio Manager has determined that the Issuers taking delivery of the deliverable obligation is in the best interest of the Issuer. Except for up to 5.0% of the Maximum Investment Amount that may consist of Synthetic Securities that are credit default swaps, credit linked notes, or other similar instruments whose credit events include restructuring as provided by item (18) of the Concentration Limitations, Synthetic Securities may not provide for credit events other than failure to pay or bankruptcy or for credit events that include repudiation, obligation default, or obligation acceleration or any other event that could arise for non-credit related reasons. For purposes of the Coverage Tests and the Class D Reinvestment Overcollateralization Test, unless the Rating Condition for each Rating Agency is satisfied in respect of any proposed alternative treatment, a Synthetic Security shall be included as a Collateral Obligation having the characteristics of the Synthetic Security and not of the related Reference Obligations. For purposes of the Collateral Quality Tests (other than the Diversity Test and the S&P Industry Classification with respect to the S&P CDO Monitor Test), a Synthetic Security shall be included as a Collateral Obligation having the characteristics of the Synthetic Security and not of the related Reference Obligations. For purposes of calculating compliance with the Concentration Limitations other than limits relating to payment characteristics, and all related definitions, unless otherwise specified in the Indenture or by the Rating Agencies, a Synthetic Security shall be included as a Collateral Obligation having the characteristics of its Reference Obligations and not the Synthetic Security. For purposes of calculating compliance with the Concentration Limitations relating to payment characteristics, and all related definitions, unless otherwise specified in the Indenture or by the Rating Agencies, a Synthetic Security shall be included as a Collateral Obligation having the characteristics of the Synthetic Security and not its Reference Obligations. If the Rating Condition must be satisfied to execute the purchase of any Synthetic Security, the Portfolio Manager, on behalf of the Issuer, shall give each applicable Rating Agency not less than 5 days prior notice of the purchase of or entry into any Synthetic Security.

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Synthetic Security Collateral: With respect to any Synthetic Security, amounts posted to the Synthetic Security Collateral Account by the Synthetic Security counterparty in support of its obligations under the Synthetic Security, including all Eligible Investments in the Synthetic Security Collateral Account that are purchased with Synthetic Security Collateral. Tax Event: An event that occurs if either: (i) (A) one or more Collateral Obligations that were not subject to withholding tax when the Issuer committed to purchase them have become subject to withholding tax or the rate of withholding has increased on one or more Collateral Obligations that were subject to withholding tax when the Issuer committed to purchase them and (B) in any Due Period, the aggregate of the payments subject to withholding tax on new withholding tax obligations and the increase in payments subject to withholding tax on increased rate withholding tax obligations, in each case to the extent not grossed-up (on an after-tax basis) by the related obligor, represent 5% or more of Interest Proceeds for the Due Period; or (ii) taxes, fees, assessments, or other similar charges are imposed on the Issuer or the CoIssuer in an aggregate amount in any twelve-month period in excess of U.S.$1,000,000, other than any deduction or withholding for or on account of any tax with respect to any payment owing in respect of any obligation that at the time of acquisition, conversion, or exchange does not satisfy the requirements of a Collateral Obligation or Collateral Obligation. UCC: The Uniform Commercial Code as in effect in the State of New York, and as amended from time to time. Weighted Average Fixed Rate Coupon: As of any Measurement Date, is a fraction obtained by (i) multiplying the Principal Balance of each Collateral Obligation that is a Fixed Rate Obligation held by the Issuer as of the Measurement Date by the current per annum rate at which it pays interest (for this purpose, using only the effective after-tax interest rate determined by the Portfolio Manager on any Fixed Rate Obligation after taking into account any withholding tax or other deductions on account of tax of any jurisdiction and any gross-up paid by the obligor), (ii) summing the amounts determined pursuant to clause (i), (iii) dividing the sum by the Aggregate Principal Balance of all Collateral Obligations that are Fixed Rate Obligations held by the Issuer as of the Measurement Date, and (iv) if the result obtained in clause (iii) is less than the minimum percentage specified to pass the Weighted Average Fixed Rate Coupon Test, adding to the sum the amount of any Spread Excess as of the Measurement Date. Weighted Average Life: As of any Measurement Date is the number obtained by (i) summing the products obtained by multiplying (A) the average life ((1) the sum of the products of (a) the number of years from the Measurement Date to the respective dates of each successive scheduled payment of principal of the Collateral Obligation and (b) the respective amounts of the successive scheduled payments of principal of the Collateral Obligation divided by (2) the sum of all successive scheduled payments of principal of the Collateral Obligation) at that time of each Collateral Obligation by (B) the Principal Balance at that time of the Collateral Obligation and (ii) dividing that sum by the Aggregate Principal Balance at that time of all Collateral Obligations. Weighted Average Moodys Rating Factor: The summation of the products obtained by multiplying the Principal Balance of each Collateral Obligation (excluding Eligible Investments) by its respective Moodys Rating Factor, dividing that sum by the Aggregate Principal Balance of all Collateral Obligations (excluding Eligible Investments) and rounding the result up to the nearest whole number. For purposes of the Weighted Average Rating Factor Test: (i) the Moodys Rating Factor for any Collateral Obligation (other than a collateralized loan obligation or collateralized debt obligation) that is (A) on credit watch positive for possible upgrade by Moodys shall be the Moodys Rating Factor for the Moodys Rating one sub-category above the current Moodys Rating of the Collateral Obligation otherwise applicable to it and (B) on credit watch negative for possible downgrade by Moodys shall be the Moodys Rating Factor for the Moodys Rating one sub-category below the current Moodys Rating of the Collateral Obligation otherwise applicable to it; and 198

(ii) the Moodys Rating Factor for any Collateral Obligation that is a collateralized loan obligation or collateralized debt obligation that is (A) on credit watch positive for possible upgrade by Moodys will be (1) if the Moodys Rating of the Collateral Obligation is A3 or above, the Moodys Factor Rating for the Moodys Rating one sub-category above the Moodys Rating of the Collateral Obligation otherwise applicable to it and (2) if the Moodys Rating of the Collateral Obligation is below A3, the Moodys Rating Factor for the Moodys Rating two sub-categories above the Moodys Rating of the Collateral Obligation that otherwise applicable to it and (B) on credit watch negative for possible downgrade by Moodys will be (1) if the Moodys Rating of the Collateral Obligation is A3 or above, the Moodys Rating for the Moodys Rating one sub-category below the Moodys Rating of the Collateral Obligation otherwise applicable to it and (2) if the Moodys Rating of the Collateral Obligation is below A3, the Moodys Rating Factor for the Moodys Rating two sub-categories below the Moodys Rating of the Collateral Obligation otherwise applicable to it. Weighted Average Spread: As of any Measurement Date, a fraction obtained by (i) multiplying the Principal Balance of each Collateral Obligation that is a Floating Rate Obligation held by the Issuer as of the Measurement Date by the current per annum overall rate at which it pays interest (for this purpose, using only the effective after-tax rate determined by the Portfolio Manager in excess of the three month London interbank offered rate (determined (A) by including the amount of any commitment fee payable to the Issuer in respect of the Floating Rate Obligation (including revolving facility availability fees) in the calculation of the per annum effective after-tax interest rate, (B) with respect to any Revolving Loan and any Delayed Drawdown Loan, all earnings on amounts in the Delayed Drawdown Reserve Account and the Revolving Reserve Account deposited to the Collection Account in accordance with Section 10.3(b) during the most recent Due Period, and (C) with respect to any Floating Rate Obligation that does not bear interest based on the three month London interbank offered rate, by expressing the current interest rate on the Floating Rate Obligation as a spread above the three month London interbank offered rate calculated in a manner consistent with the calculation of LIBOR), (ii) summing the amounts determined pursuant to clause (i), (iii) dividing that sum by the Aggregate Principal Balance of all Floating Rate Obligations held by the Issuer as of the Measurement Date, and (iv) if the result obtained in clause (iii) is less than the minimum percentage specified to pass the Weighted Average Spread Test, adding to that sum the amount of Fixed Rate Excess as of the Measurement Date. For purposes of calculating the Weighted Average Spread, the Principal Balance of each Collateral Obligation that is a Revolving Loan or Delayed Drawdown Loan shall not include any of its unfunded amount. Workout Assets: A Loan, Finance Lease, High-Yield Bond, or Qualified Equity Security acquired in connection with the workout or restructuring of any Collateral Obligation or Workout Asset that the Issuer does not advance any funds to purchase and that is either (i) a Qualified Equity Security or (ii) a Loan, Finance Lease, or High-Yield Bond that does not qualify as a Collateral Obligation or that the Portfolio Manager otherwise designates as a Workout Asset and that satisfies the portion of the definition of Collateral Obligation specified in Security for the Notes and the Composite Securities, clauses (1), (16), and (18) of the definition of Collateral Obligation.

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Zero-Coupon Security: A security that, at the time of determination, does not make periodic payments of interest. Zero-Coupon Security shall not include a security that is a PIK Security, a Step-Up Coupon Security, or the Treasury Strip. [remainder of page intentionally blank]

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INDEX OF DEFINED TERMS The following is an index of defined terms used in this Offering Memorandum and the page number where each definition appears. 1963 Act ................................................................. vii Accumulation Period ...............................................53 Additional Tax-Related Restrictions .....................118 Administration Agreement ......................................56 Administrator...........................................................56 ALIF I....................................................................100 ALIF II ..................................................................100 Apollo....................................................................101 Applicable Collateral Obligation Amount...............65 Ares CLO III..........................................................100 Ares CLO IV .........................................................100 Ares CLO V...........................................................100 Ares CLO VI .........................................................100 Ares CLO VII ........................................................100 Ares VIII..................................................................12 Ares funds ............................................................100 ASIC....................................................................... vii Benefit Plan 25% Threshold..................................154 Benefit Plan Investor .........................................v, 153 Calculation Agent ....................................................84 CDOs .......................................................................52 Certificated Composite Securities ...........................16 Certificated Notes ....................................................16 Certificated Preference Shares.................................17 Certificated Securities..............................................17 CFC .......................................................................148 Class 1 Composite Securities.....................................5 Class 2 Composite Securities.....................................5 Class 3 Composite Securities.....................................5 Class 4 Composite Securities.....................................5 Class 5 Composite Securities.....................................6 Class 6 Collateral.............................................10, 114 Class 6 Component....................................................6 Class 6 Component Account ...............................6, 90 Class 6 Composite Securities.....................................6 Class 7 Composite Securities.....................................6 Class 8 Composite Securities.....................................6 Class A Coverage Tests...........................................24 Class A Note Interests ...............................................7 Class A Notes ............................................................3 Class A-1 Notes .........................................................3 Class A-1-A Note Interest Rate .................................2 Class A-1-A Notes.....................................................2 Class A-1-B Note Interest Rate .................................3 Class A-1-B Note Interests ........................................7 Class A-1-B Notes .....................................................3 Class A-2 Note Interest Rate .....................................3 Class A-2 Notes .........................................................3 Class A-3 Note Interest Rate .....................................3 Class A-3 Notes .........................................................3 Class B Coverage Tests ...........................................24 201 Class B Note Interests................................................7 Class B Notes ........................................................3, 4 Class B-1 Note Interest Rate......................................3 Class B-2 Note Interest Rate......................................3 Class B-2 Notes .........................................................3 Class C Coverage Tests ...........................................24 Class C Note Interests................................................7 Class C Notes ............................................................4 Class C-1 Note Interest Rate......................................4 Class C-1 Notes .........................................................4 Class C-2 Note Interest Rate......................................4 Class C-2 Notes .........................................................4 Class D Coverage Tests...........................................24 Class D Note Interests ...............................................7 Class D Notes ............................................................4 Class D Reinvestment Overcollateralization Test ...66 Class D-1 Note Interest Rate .....................................4 Class D-1 Notes .........................................................4 Class D-2 Note Interest Rate .....................................4 Class D-2 Notes .........................................................4 Class D-3 Note Interest Rate .....................................4 Class D-3 Notes .........................................................4 CLOs .......................................................................52 Closing Date ............................................................14 Code...................................................................v, 153 Co-Issuer....................................................................1 Co-Issuer Equity ........................................................9 Co-Issuers ..................................................................1 Collateral ...........................................................2, 114 Collateral Obligation .............................................114 Collateral Quality Tests .........................................119 Collection Account ..................................................87 Company................................................................151 Composite Securities .................................................7 Composite Securityholder .......................................30 Controlling Class .....................................................24 Controlling Person.................................................154 Coverage Tests ........................................................24 Custodial Account ...................................................88 Debtor....................................................................174 Deemed Equity Interests........................................154 Definitive Note ........................................................87 Delayed Drawdown Reserve Account.....................14 Depository ...............................................................16 Determination Date..................................................25 Disqualified Persons ..............................................153 Diversity Test ........................................................119 Eligibility Criteria..................................................116 ERISA ...............................................................v, 153 Event of Default ......................................................75 Exchange Act.......................................................... xii

Exchange Date.........................................................16 Fixed Rate Notes .......................................................5 Floating Rate Notes ...................................................5 Foreign Holder.......................................................144 FPHC .....................................................................148 FSMA ................................................................x, 157 Global Notes............................................................16 Global Securities .....................................................17 Hypothetical Performance Information ...................97 Incentive Management Fee......................................13 Indenture....................................................................9 Indenture Register....................................................85 Indenture Registrar ..................................................85 Initial Purchaser........................................................iv Interest Coverage Ratio ...........................................66 Interest Coverage Test .............................................65 Interest Reserve Amount .........................................15 Irish Paying Agent ...................................................84 Issuer .........................................................................1 Issuer Charter.............................................................9 Issuer Ordinary Shares.............................................55 lender liability..........................................................49 LIBOR .....................................................................84 Lion .......................................................................100 LLC Manager ..........................................................57 Management Agreement..........................................12 Management Fees ....................................................13 MAS ..........................................................................x Note Break-Even Loss Rate...................................121 Note Class Loss Differential..................................121 Note Interests.............................................................7 Noteholder ...............................................................30 Notes..........................................................................5 Offering Memorandum.............................................iv Optional Redemption.........................................69, 70 Overcollateralization Ratio......................................64 Overcollateralization Ratio Numerator....................64 Overcollateralization Test........................................64 Parties-in-Interest...................................................153 Payment Account.....................................................90 Payment Date...........................................................18 Performance.............................................................97 PFIC.......................................................................148 Plan........................................................................153 Plan Asset Regulation............................................153 Portfolio Manager............................................12, 100 Preference Share Component ................................188 Preference Share Documents...................................10 Preference Share Paying Agent .................................9 Preference Share Paying and Transfer Agreement ....9 Preference Shareholder............................................30

Preference Shares ......................................................8 Priority of Payments ................................................58 Purchase Agreement ..............................................157 Purpose Credit .........................................................40 QEF election..........................................................149 qualified professional asset manager .....................155 Ramp-Up Completion Date .....................................11 Rating Confirmation Failure....................................27 Record Date .............................................................83 Regulation S Global Notes ......................................16 Regulation S Global Preference Shares ...................17 Reinvestment Period................................................11 Resolutions ................................................................9 Revolving Reserve Account ....................................14 Rule 144A Global Notes..........................................16 S&P CDO Monitor Test ........................................121 SEC..........................................................................39 Secured Obligations.................................................67 Securities Lending Account.....................................90 Securities Lending Agreement ..............................126 Securities Lending Counterparty ...........................126 Senior Management Fee ..........................................12 Service ...................................................................144 SFA............................................................................x Share Register..........................................................85 Share Registrar ........................................................85 Share Trustee ...........................................................55 Special Redemption.................................................72 Special Redemption Amount...................................72 Special Redemption Date ........................................72 Stated Maturity ..........................................................7 Subordinated Management Fee ...............................13 Synthetic Security Collateral Account.....................89 Tax-Exempt Investors............................................150 Temporary Regulation S Global Notes....................16 Treasury Strip ....................................................10, 90 Trustee .......................................................................9 U.S. Person ..............................................................15 U.S. Shareholder....................................................148 UBTI......................................................................150 United States Holder..............................................144 Valuation Report......................................................91 Warehouse Provider ................................................51 Warehoused Loans ..................................................51 Warehousing Agreement .........................................51 Weighted Average Fixed Rate Coupon Test .........120 Weighted Average Life Test..................................119 Weighted Average Moodys Recovery Rate Test .120 Weighted Average Rating Factor Test...................121 Weighted Average S&P Recovery Rate Test ........120 Weighted Average Spread Test .............................121

202

EXHIBIT A

FORM OF NOTE TRANSFEREE CERTIFICATE NOTES AND COMPOSITE SECURITIES OF ARES VIII CLO LTD. AND ARES VIII CLO LLC TO: Ares VIII CLO Ltd. [Ares VIII CLO LLC] U.S. Bank National Association, as Trustee

In connection with the proposed acquisition by the undersigned (the Transferee) of $ _______ aggregate face amount of [Class ___ ] [Notes] [Composite Securities] (the [Notes][Composite Securities]) of Ares VIII CLO Ltd. (the Issuer) [and Ares VIII CLO LLC (the Co-Issuer)], the Transferee hereby acknowledges, represents, agrees, and confirms as stated below in this Certificate (which includes the related Questionnaire). Terms used but not defined in this Certificate (including the related Questionnaire) are used as defined in the Indenture dated as of March 24, 2004, among the Issuer, the Co-Issuer, and U.S. Bank National Association, as Trustee, or the legends to the [Notes][Composite Securities] (the Legends): 1. The Transferee is: (check as applicable) __ a U.S. person, as defined in Regulation S (Regulation S) under the Securities Act (U.S. Person), taking delivery in the form of a [Note][Composite Security] represented by a Certificated Note or a Rule 144A Global Note, and that is both a qualified institutional buyer (QIB), as defined in Rule 144A under the Securities Act (Rule 144A), and a qualified purchaser (QP), as defined in Section 2(a)(51)(A) of the Investment Company Act, or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, and as described below in a transaction meeting the requirements of Rule 144A; a U.S. person taking delivery in the form of a [Note][Composite Security] represented by a Certificated Note, and that is both an institutional accredited investor within the meaning specified in Rule 501(a)(1), (2), (3), or (7) of the Securities Act and a QP, and as described below in a transaction exempt from the registration requirements of the Securities Act; or not a U.S. Person.

__

__

In addition to the provisions of Section 2(a)(51)(A) of the Investment Company Act or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, for purposes of this Certificate, a person will be considered to be a QP subject to the following: (1) if the person is a dealer described in paragraph (a)(1)(ii) of Rule 144A, the person must own or invest on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated persons of the person, and is therefore a QP pursuant to Rule 2a51-1(g)(1)(i) under the Investment Company Act; and (2) if the person is a plan referred to in paragraph (a)(1)(i)(d) or (a)(1)(i)(e) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(f) of Rule 144A that holds the assets of the plan, investment decisions with respect to the plan are made solely by the fiduciary, trustee, or sponsor of the plan, and the plan or trust fund is therefore a QP pursuant to Rule 2a51-1(g)(1)(ii) under the Investment Company Act. 2. As follows (check as applicable): __ __ all the beneficial owners of the Transferees securities are QIBs (if the Transferee is required to be a QIB) and QPs; or the Transferee is not an individual, and neither it nor any person it is acting for (i) was formed, reformed, or recapitalized for the specific purpose of investing in beneficial interests in securities

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issued by the Issuer or (ii) has invested more than 40% of its assets in beneficial interests in securities issued by the Issuer. 3. If the Transferee or any person it is acting for is organized as a corporation, partnership, common trust fund, special trust, pension fund, retirement plan, or other entity, none of the shareholders, partners, members, beneficiaries, beneficial owners, or participants, as the case may be, of any such entity may designate the particular investments to be made by the entity or the allocation of the investment to the shareholders, partners, members, beneficiaries, beneficial owners, or participants, as the case may be, of the entity. The Transferee understands that: (a) the [Notes][Composite Securities] are being offered only in a transaction not involving any public offering in the United States within the meaning of the Securities Act; (b) the [Notes][Composite Securities] have not been and are not expected to be registered under the Securities Act, the securities laws of any state of the United States or the securities laws of any other jurisdiction, and the Transferee may not reoffer, resell, pledge, exchange, or otherwise transfer the [Notes][Composite Securities] except in accordance with the Legends. The Transferee has carefully read and understands the final Offering Memorandum relating to the Notes, Composite Securities, and the Preference Shares (the Offering Memorandum), including the Notices to Purchasers and Risk Factors sections. The Transferee has based its decision to purchase the [Notes][Composite Securities] solely on the information in the Offering Memorandum. The Transferee has had access to all the financial and other information concerning the Issuer and the [Notes][Composite Securities] that the Transferee deems necessary or appropriate to make an informed investment decision about the purchase of the [Notes][Composite Securities], including an opportunity to ask questions of and request information from the Issuer. The Transferee is a sophisticated investor with the knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the Transferees investment in the [Notes][Composite Securities], and the Transferee and any accounts for which the Transferee is acting are each able to bear the economic risk of investing in the [Notes][Composite Securities]. In connection with the purchase of [Notes][Composite Securities], the Transferee and each account meet all suitability standards imposed on them by applicable law. The Transferee understands that the [Notes][Composite Securities] are subject to substantial transfer restrictions imposed by applicable law and the terms of the [Notes][Composite Securities], as described or referred to in the Offering Memorandum. The Transferee understands that if the Transferee is purchasing the [Notes][Composite Securities] for other accounts, additional representations may be required. The Transferee is not, and it will not be, (i) an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not it is subject to the provisions of Title I of ERISA; (ii) a plan described in Section 4975 of the Code, whether or not it is subject to Section 4975 of the Code; (iii) an entity the underlying assets of which include (or are deemed to include) assets of any employee benefit plans because of any investment by the employee benefit plans or plans in the entity; or (iv) a governmental or other plan that is subject to any federal, state, local, or foreign law that is substantially similar to Section 406 or Section 4975 of the Code; __ [only in the certificates for the Class A, B, or C Notesthe Transferees purchase, holding, and disposition of this Note or any beneficial interest in this Offering Memorandum will not result in a prohibited transaction or excise tax, as applicable, under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental plan, any substantially similar federal, state, or local law) for which an exemption is not available.]

4.

5.

6.

7.

8.

The information in the Questionnaire attached to this certificate is complete and accurate, and the Transferee has completed a Questionnaire for each account for which it is purchasing [Notes][Composite Securities], and if the account is not its own account, the Transferee has the knowledge required to complete each Questionnaire. The Transferee will notify the Issuer before purchase of any change in the

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information or any change that would mean that the Transferee could no longer make any representations contained above. 9. 10. The Transferee is not a member of the public in the Cayman Islands. Other information relating to the Transferee: Taxpayer Identification Number: Wire Instructions for Payments: Bank: Address: Bank ABA #: Account No.: FAO: Attention: Address for Notices: Tel: Fax: Attn.: Registered Name (if Nominee): IN WITNESS WHEREOF, the Transferee has executed this Certificate. Dated: __________________. __________________________________ [Insert name of Transferee] By:_______________________________ Name: Title:

A-3

QUESTIONNAIRE A. QIB/QP 1. Certain QIBs a. Is the Transferee a QIB that is acting for its own account, the account of another QIB or the account of a QP? _________Yes _________ No b. Is the Transferee, or any person for which the Transferee is acting a QIB that is an entity of the type described below?

a dealer described in paragraph (a)(1)(ii) of Rule 144A that owns or invests on a discretionary basis less than $25,000,000 in securities of issuers that are not affiliated persons of the dealer, or a plan described in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund described in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of the a plan, the investment decisions of which are made by the beneficiaries of the plan and not solely by the fiduciary, trustee, or sponsor of the plan. _________Yes _________ No

If the answer to question (1)(a) above is Yes and the answer to question (1)(b) above is No, then proceed to Section B. 2. All Other Purchasers Instructions: When answering the following questions the Transferee should: aggregate investments held for the account of the Transferee with investments made by the Transferee on a discretionary basis (and, if Purchaser is acting on behalf of another person, aggregate investments held for the account of the person with investments made by the person on a discretionary basis); include investments owned by majority-owned subsidiaries of the Transferee, or owned by a parent company that owns a majority interest in the Transferee (a Parent Company), or owned by other majority-owned subsidiaries of the Parent Company (similarly, if Purchaser is acting on behalf of another person, include investments owned by majority-owned subsidiaries of the person, or owned by a Parent Company of the person, or owned by other majority-owned subsidiaries of the Parent Company); value investments based on either their fair market value on the most recent practicable date or their cost (unless otherwise provided below); and when reporting the value of an asset, exclude the principal amount of any outstanding debt, including margin loans, incurred by the Transferee, or the person for which the Transferee is acting, as the case may be, to acquire, or for the purpose of acquiring, the asset.

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Does the Transferee, or each person for which it is acting, own any investments of the following types worth in the aggregate $25,000,000 or more? securities of public companies1 shares in registered investment companies, such as mutual funds (including money market funds) and publicly-traded closed-end funds shares in private investment companies that are exempt from the Investment Company Act by Section 3(c)(1) or 3(c)(7) of the Investment Company Act2 cash and cash-equivalents3 (including foreign currencies) held for investment purposes real estate held for investment purposes4 securities of non-public companies that have shareholders equity5 of at least $50 million securities of non-public companies that do not control, are not controlled by or under common control with6 the Transferee commodity futures contracts, options on commodity futures contracts and options on physical commodities (in each case held for investment purposes) traded on or subject to the rules of (i) a contract market designated under the Commodity Exchange Act and the rules promulgated thereunder or (ii) a nonU.S. board of trade or exchange as contemplated in the rules promulgated under the Commodity Exchange Act (collectively, Commodity Interests)7 physical commodities held for investment purposes with respect to which a Commodity Interest is traded on a market described in the immediately preceding bullet point, including certain precious metals

A public company is any company or other entity that (i) files reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 or (ii) has a class of securities that are listed on a designated offshore securities market as such term is defined by Regulation S under the Securities Act. For example, a company whose equity securities are listed on a national securities exchange or traded on the National Association of Securities Dealers Automated Quotation System (NASDAQ) would be a public company. 2 The Transferee may also include interests in companies that are (i) exempt from the Investment Company Act by Section 3(c)(2), (3), (4), (5), (6), (8), or (9) of the Investment Company Act, (ii) exempt from the Investment Company Act by Rule 3a-6 or 3a-7 of the Investment Company Act, or (iii) commodity pools. 3 Cash and cash-equivalents include bank deposits, certificates of deposit, bankers acceptances and similar bank instruments held for investment purposes and the net cash surrender value of an insurance policy. 4 Real estate held for investment purposes excludes real estate used by the Transferee (or any person for which it is acting, as the case may be) as a place of business or in connection with a trade or business (unless the Transferee (or any person for which it is acting, as the case may be) is engaged primarily in the business of investing, trading or developing real estate and the real estate in question is part of the business). 5 Shareholders equity should be the amount reflected as such on the relevant companys most recent (and in any event not more than 16 months old) financial statements prepared in accordance with generally accepted accounting principles. 6 For purposes of this question, the term control, when used with respect to any entity, means (i) the possession of the power to appoint an officer or director of the entity and the ownership directly or indirectly of any voting securities of the entity, or (ii) the ownership directly or indirectly of more than 25% of the voting securities of the entity. The terms controlled by or under common control with have meanings correlative to the foregoing. 7 Commodity Interests should be valued at their initial margin or option premium deposited in connection therewith. A-5

swaps and other financial contracts8 held for investment purposes _________Yes _________ No

If the answer to question 2 is Yes, then proceed to Section B. 3. Other Requirements Instructions: a. Only those entities that cannot answer Yes to Question 1(a) or 2 above should proceed to the questions in this Question 3.

Is the Transferee (or any person it is acting for) an entity each of the beneficial owners of which are qualified purchasers (as defined in the Investment Company Act)? _________Yes _________ No NOTE: If the Transferee answers Yes to this Question, each beneficial owner must complete this Questionnaire (insofar as is necessary to determine that the beneficial owner is itself a qualified purchaser). The person will also be required to make the representation relating to qualified purchaser status in paragraph 1 of the Certificate.

b.

Is the Transferee (or any person it is acting for) a trust that was not formed for the specific purpose of acquiring any Notes, each trustee (or each other person authorized to make decisions with respect to the trust) and each settlor grantor (or each other person that has contributed assets to the trust) of which are qualified purchasers (as defined in the Investment Company Act)? _________Yes _________ No NOTE: If the Transferee answers Yes to this Question, each trustee (or other person authorized to make decisions with respect to the trust) and each grantor (or each other person that has contributed assets to the trust) must complete this Questionnaire (insofar as is necessary to determine that the person is itself a qualified purchaser). The person will also be required to make the representation relating to qualified purchaser status in paragraph 1 of the Certificate.

Proceed to Section B. B. Other Certifications for all Purchasers The Transferee (or any person it is acting for) was formed for the specific purpose of purchasing

1. any Notes:
8

Financial contracts are defined in Section 3(c)(2) of the Investment Company Act as any arrangement that (i) takes the form of an individually negotiated contract, agreement or option to buy, sell, lend, swap or repurchase, or other similar individually negotiated transaction commonly entered into by participants in the financial markets, (ii) is in respect of securities, commodities, currencies, interest or other rates, other measures of value, or any other financial or economic interest similar in purpose or function to any of the foregoing, and (iii) is entered into in response to a request from a counter party for a quotation, or is otherwise entered into and structured to accommodate the objectives of the counter party to the arrangement. A-6

_________Yes _________ No NOTE: If the Transferee answers Yes to this Question, each person that is a beneficial owner of the Transferee (or any person it is acting for) must complete a copy of this Questionnaire as if the person were directly purchasing any Notes. NOTE: If the Transferee answers Yes to Question (A)(3)(a), (A)(3)(b), or (B)(1) above, each beneficial owner, trustee, or grantor (as the case may be) of the Transferee (or any person it is acting for, as the case may be) must complete this Questionnaire insofar as is necessary to determine that the person is itself a qualified purchaser. The person may complete the Questionnaire by responding to Questions (A)(1)(a), (A)(2), or (A)(3) above. The person will also be required to make the representation that it is a qualified purchaser. 2. a. The Transferee (or any person it is acting for) is an investment company that (i) is not required to register as an investment company under the Investment Company Act pursuant to Section 3(c)(1), 3(c)(7), or 7(d) under the Investment Company Act and (ii) had any investors on or before April 30, 1996: _________Yes _________ No b. If the Transferee answers Yes to (a) above, the Transferee (and each person for which it is acting) has received the consent required under the Investment Company Act from all of its beneficial owners to be treated as a qualified purchaser under the Investment Company Act: _________Yes _________ No If the Transferee is acting for the account of another person, below is a list of each other person, and attached to this certificate is a completed Questionnaire for each other person; the information in any Questionnaire is complete and accurate.

[TRANSFEREE]

By: Name: Title: Dated: ______, ____

A-7

EXHIBIT B

FORM OF REGULATION S NOTE TRANSFEROR CERTIFICATE Preliminary Note: This form is to be used by a transferor in a Regulation S Transfer of (1) a Certificated Note or (2) a Certificated Note or a Beneficial Interest in a Rule 144A Global Note to a beneficial interest in a Regulation S Global Note. TO: Ares VIII CLO Ltd. [Ares VIII CLO LLC] U.S. Bank National Association, as Trustee

The undersigned (the Transferor) is the owner of $_______________ aggregate face amount of [Class ___] [Notes][Composite Securities] (the [Notes][Composite Securities]) of Ares VIII CLO Ltd. (the Issuer) and Ares VIII CLO LLC (the Co-Issuer). Terms used but not defined in this Certificate are used as defined in the Indenture dated as of March 24, 2004, among the Issuer, the Co-Issuer, and U.S. Bank National Association, as Trustee (the Indenture), the legends to the [Notes][Composite Securities] (the Legends) or Regulation S. The Transferors ownership is in the form of: Check one: __ __ A Certificated Note. A beneficial interest, held ultimately through the Depository, in a Rule 144A Global Note.

The Transferor proposes to transfer the [Notes][Composite Securities] to: Insert name: _____________________________________________________________________, (the Transferee). The Transferor proposes that the Transferee will acquire the [Notes][Composite Securities] in the form of: Check one: __ __ A Certificated Note. A beneficial interest, held ultimately through Clearstream or Euroclear, in a Regulation S Global Note.

In connection with the proposed transfer, the Transferor hereby certifies as follows: 1. 2. __ The transfer is being effected in accordance with the transfer restrictions in the Indenture and the Legends. The transfer is being effected as follows: (a) to a U.S. Person, as defined in Regulation S (Regulation S) under the Securities Act (U.S. Person), taking delivery in the form of a Note represented by a Certificated Note or a Regulation S Global Note with respect to which the Transferor reasonably believes the person to be (x) both a qualified institutional buyer (QIB), as defined in Rule 144A under the Securities Act (Rule 144A), and a qualified purchaser (QP), as defined in Section 2(a)(51)(A) of the Investment Company Act, or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, in a transaction meeting the requirements of

B-1

Rule 144A, and the Transferor has informed the Transferee that the transfer to the Transferee is being made in reliance on Rule 144A; or __ (b) to a U.S. Person taking delivery in the form of a Certificated Note with respect to which the Transferor reasonably believes the person to be both (x) an institutional accredited investor (Institutional Accredited Investor) within the meaning specified in Rule 501(a)(1), (2), (3), or (7) of the Securities Act, and (y) a QP, in a transaction exempt from the registration requirements of the Securities Act, and the Transferor has informed the Transferee that the transfer to the Transferee is being made in reliance on an exemption from the registration requirements of the Securities Act; or (c) to a U.S. Person in an Eligible Secondary Market Transaction exempt from or not subject to the registration requirements of the Securities Act and any other securities laws; or (d) in a transaction that has received the prior written authorization of the Issuer; or (e) to a non-U.S. Person in a transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws; or (f) to the Issuer or J.P. Morgan Securities Inc. or any other agent of the Issuer appointed for the offering of any Securities. The offer of the [Notes][Composite Securities] was not made to a person in the United States. Check one: __ (a) At the time the buy order was originated, the Transferee was outside the United States, or the Transferor and any person acting on the Transferors behalf reasonably believed that the Transferee was outside the United States. (b) The transaction was executed in, on, or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on the Transferors behalf knows that the transaction was prearranged with a buyer in the United States.

__ __ __ __ 3. 4.

__

5. 6. 7.

No directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable. The Transferee is not a member of the public in the Cayman Islands. The transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act.

IN WITNESS WHEREOF, the Transferor has executed this Certificate. Dated: __________________.

__________________________________ [Insert name of Transferor] By:_______________________________ Name: Title:

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EXHIBIT C

FORM OF NON-REGULATION S NOTE TRANSFEROR CERTIFICATE Preliminary Note: This form is to be used by a transferor in a non-Regulation S Transfer of (1) a Certificated Note, (2) a Certificated Note to a beneficial interest in a Rule 144A Global Note, or (3) a beneficial interest in a Regulation S Global Note to a Certificated Note or to a beneficial interest in a Rule 144A Global Note. TO: Ares VIII CLO Ltd. Ares VIII CLO LLC U.S. Bank National Association, as Trustee

The undersigned (the Transferor) is the owner of $_______________ aggregate face amount of [Class ___] [Notes][Composite Securities] (the [Notes][Composite Securities]) of Ares VIII CLO Ltd. (the Issuer) and Ares VIII CLO LLC (the Co-Issuer). Terms used but not defined in this Certificate are used as defined in the Indenture dated as of March 24, 2004, among the Issuer, the Co-Issuer, and U.S. Bank National Association, as Trustee (the Indenture), or the legends to the [Notes][Composite Securities] (the Legends). The Transferors ownership is in the form of: Check one: __ __ A Certificated Note. A beneficial interest, held ultimately through Clearstream or Euroclear, in a Regulation S Global Note.

The Transferor proposes to transfer the [Notes][Composite Securities] to: Insert name: _____________________________________________________________________, (the Transferee). The Transferor proposes that the Transferee will acquire the [Notes][Composite Securities] in the form of: Check one: __ __ A Certificated Note. A beneficial interest, held ultimately through the Depository, in a Rule 144A Global Note.

In connection with the proposed transfer, the Transferor hereby certifies as follows: 1. 2. __ The transfer is being effected in accordance with the transfer restrictions in the Indenture and the Legends. The transfer is being effected as follows: (a) to a person the Transferor reasonably believes to be (x) both a qualified institutional buyer (QIB), as defined in Rule 144A under the Securities Act (Rule 144A), (y) and a qualified purchaser (QP), as defined in Section 2(a)(51)(A) of the Investment Company Act, or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, in a transaction meeting the requirements of Rule 144A, and taking delivery in the form of a Certificated Note or a beneficial interest in a Rule 144A

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Global Note, and the Transferor has informed the Transferee that the transfer to the Transferee is being made in reliance on Rule 144A; or __ (b) to a person the Transferor reasonably believes to be both (x) an institutional accredited investor (Institutional Accredited Investor) within the meaning specified in Rule 501(a)(1), (2), (3), or (7) of the Securities Act, and (y) a QP, in a transaction exempt from the registration requirements of the Securities Act, taking delivery in the form of a Certificated Note, and the Transferor has informed the Transferee that the transfer to the Transferee is being made in reliance on an exemption from the registration requirements of the Securities Act; or (c) in a transaction that has received the prior written authorization of the Issuer; or (d) to a non-U.S. Person in a transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws; or (e) to the Issuer or J.P. Morgan Securities Inc. or any other agent of the Issuer appointed for the offering of any Securities. (f) to a person who is not a member of the public in the Cayman Islands.

__ __ __ __

IN WITNESS WHEREOF, the Transferor has executed this Certificate. Dated: __________________.

__________________________________ [Insert name of Transferor] By:_______________________________ Name: Title:

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EXHIBIT D

FORM OF PREFERENCE SHARE TRANSFEREE CERTIFICATE PREFERENCE SHARES OF ARES VIII CLO LTD. TO: Ares VIII CLO Ltd. U.S. Bank National Association, as Preference Share Paying Agent

In connection with the proposed acquisition by the undersigned (the Transferee) of _______ Preference Shares (the Preference Shares) of Ares VIII CLO Ltd. (the Issuer), the Transferee hereby acknowledges, represents, agrees, and confirms as stated below in this Certificate (which includes the related Questionnaire). Terms used but not defined in this Certificate (including the related Questionnaire) are used as defined in the Preference Share Paying and Transfer Agency Agreement dated as of March 24, 2004, among the Issuer and U.S. Bank National Association, as Preference Share Paying Agent (the Preference Share Paying and Transfer Agency Agreement), the Indenture referred to therein or the legends to the Preference Shares (the Legends): 1. The Transferee is: (check as applicable) __ a U.S. person, as defined in Regulation S (Regulation S) under the Securities Act (U.S. Person) taking delivery in the form of a Preference Share represented by a Certificated Preference Share, and that is (check one): __ (x) both a qualified institutional buyer (QIB), as defined in Rule 144A under the Securities Act (Rule 144A), and a qualified purchaser (QP), as defined in Section 2(a)(51)(A) of the Investment Company Act, or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, and as described below in a transaction meeting the requirements of Rule 144A; or (y) both (1) a knowledgeable employee with respect to the Issuer, as defined in Rule 3c-5 under the Investment Company Act (a Knowledgeable Employee), or a QP or a person that acquires the Preference Shares from a Knowledgeable Employee or a QP in a transaction (a Donation Transaction) satisfying the applicable requirements of Rule 3c-6(b) and, if applicable, Rule 3c-5(b)(3) under the Investment Company Act and (2) except in the case of a Donation Transaction, an accredited investor within the meaning of Rule 501(a) of Regulation D under the Securities Act in a transaction that has received the prior written authorization of the Issuer; in the case of this clause (y), the applicable exemption from registration under the Securities Act is (describe): ; or __ not a U.S. Person.

__

In addition to the provisions of Section 2(a)(51)(A) of the Investment Company Act or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, for purposes of this Certificate, a person will be considered to be a QP subject to the following: (1) if the person is a dealer described in paragraph (a)(1)(ii) of Rule 144A, the person must own or invest on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated persons of the person, and is therefore a QP pursuant to Rule 2a51-1(g)(1)(i) under the Investment Company Act; and (2) if the person is a plan referred to in paragraph (a)(1)(i)(d) or (a)(1)(i)(e) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(f) of Rule 144A that holds the assets of the plan, investment decisions with respect to the plan are made solely by the fiduciary, trustee, or sponsor of the plan, and the plan or trust fund is therefore a QP pursuant to Rule 2a51-1(g)(1)(ii) under the Investment Company Act.

D-1

2.

As follows (skip to 3. if not a U.S. Person was checked under 1., otherwise check as applicable): __ __ __ the Transferee is an individual; the Transferee is not an individual, and the Beneficial Owners of its securities are QIBs and QPs; or the Transferee is not an individual, and neither it nor any person it is acting for (i) was formed, reformed, or recapitalized for the specific purpose of investing in beneficial interests in securities issued by the Issuer or (ii) has invested more than 40% of its assets in beneficial interests in securities issued by the Issuer.

3.

If the Transferee or any person it is acting for is organized as a corporation, partnership, common trust fund, special trust, pension fund, retirement plan, or other entity, none of the shareholders, partners, members, beneficiaries, beneficial owners, or participants, as the case may be, of any such entity may designate the particular investments to be made by the entity or the allocation of the investment to the shareholders, partners, members, beneficiaries, beneficial owners or participants, as the case may be, of the entity. The Transferee understands that: (a) the Preference Shares are being offered only in a transaction not involving any public offering in the United States within the meaning of the Securities Act; (b) the Preference Shares have not been and are not expected to be registered under the Securities Act, the securities laws of any state of the United States or the securities laws of any other jurisdiction, and the Transferee may not reoffer, resell, pledge, exchange, or otherwise transfer the Preference Shares except in accordance with the Legends. The Transferee has carefully read and understands the final Offering Memorandum relating to the Notes, Composite Securities and the Preference Shares (the Offering Memorandum), including the Notices to Purchasers and Risk Factors sections in the Offering Memorandum. The Transferee has based its decision to purchase the Preference Shares solely on the information in the Offering Memorandum. The Transferee has had access to all the financial and other information concerning the Issuer and the Preference Shares that the Transferee deems necessary or appropriate to make an informed investment decision about the purchase of the Preference Shares, including an opportunity to ask questions of and request information from the Issuer. The Transferee is a sophisticated investor with the knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the Transferees investment in the Preference Shares, and the Transferee and any accounts for which the Transferee is acting are each able to bear the economic risk of investing in the Preference Shares. In connection with the purchase of Preference Shares, the Transferee and each account meet all suitability standards imposed on them by applicable law. The Transferee understands that the Preference Shares are subject to substantial transfer restrictions imposed by applicable law and the terms of the Preference Shares, as described or referred to in the Offering Memorandum. The Transferee understands that if the Transferee is purchasing the Preference Shares for other accounts, additional representations may be required. The Transferee is not, and it will not be, (i) an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not it is subject to the provisions of Title I of ERISA; (ii) a plan described in Section 4975 of the Code, whether or not it is subject to Section 4975 of the Code; (iii) an entity the underlying assets of which include (or are deemed to include) assets of any employee benefit plans because of any investment by the employee benefit plans or plans in the entity; or (iv) a governmental or other plan that is subject to any federal, state, local, or foreign law that is substantially similar to Section 406 or Section 4975 of the Code; or The information in the Questionnaire attached to this certificate is complete and accurate, and the Transferee has completed a Questionnaire for each account for which it is purchasing Preference Shares, and if the account is not its own account, the Transferee has the knowledge required to complete each D-2

4.

5.

6.

7.

8.

Questionnaire. The Transferee will notify the Issuer before purchase of any change in the information or any change that would mean that the Transferee could no longer make any representations contained above. 10. 11. The Transferee is not a member of the public in the Cayman Islands. Other information relating to the Transferee: Taxpayer Identification Number: Wire Instructions for Payments: Bank: Address: Bank ABA #: Account No.: FAO: Attention: Address for Notices: Tel: Fax: Attn.: Registered Name (if Nominee): IN WITNESS WHEREOF, the Transferee has executed this Certificate. Dated: __________________. __________________________________ [Insert name of Transferee] By: _______________________________ Name: Title:

D-3

QUESTIONNAIRE A. QIB/QP/Knowledgeable Employees 1. Certain QIBs a. Is the Transferee a QIB that is acting for its own account, the account of another QIB, or the account of a QP? _________Yes _________ No b. Is the Transferee, or any person the Transferee is acting for, a QIB that is an entity of the type described below?

a dealer described in paragraph (a)(1)(ii) of Rule 144A that owns or invests on a discretionary basis less than $25,000,000 in securities of issuers that are not affiliated persons of the dealer, or a plan described in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund described in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of the a plan, the investment decisions of which are made by the beneficiaries of the plan and not solely by the fiduciary, trustee or sponsor of the plan. _________Yes _________ No

c.

Is the Transferee a Knowledgeable Employee with respect to the Issuer or a person that acquires the Preference Shares from a Knowledgeable Employee or a QP in a Donation Transaction satisfying the applicable requirements of Rule 3c-6(b) and, if applicable, Rule 3c-5(b)(3) under the Investment Company Act? _________Yes _________ No

If the answer to question (1)(a) above is Yes and either the answer to question (1)(b) above is No, or the answer to question (1)(c) above is Yes then proceed to Section B. 2. All Other Purchasers Instructions: When answering the following questions the Transferee should: aggregate investments held for the account of the Transferee with investments made by the Transferee on a discretionary basis (and, if Purchaser is acting on behalf of another person, aggregate investments held for the account of the person with investments made by the person on a discretionary basis) and include investments owned by majority-owned subsidiaries of the Transferee, or owned by a parent company that owns a majority interest in the Transferee (a Parent Company), or owned by other majority-owned subsidiaries of the Parent Company (similarly, if Purchaser is acting on behalf of another person, include investments owned by majority-owned subsidiaries of the person, or owned by a Parent Company of the person, or owned by other majority-owned subsidiaries of the Parent Company).

D-4

value investments based on either their fair market value on the most recent practicable date or their cost (unless otherwise provided below). when reporting the value of an asset, exclude the principal amount of any outstanding debt, including margin loans, incurred by the Transferee, or the person for which the Transferee is acting, as the case may be, to acquire, or for the purpose of acquiring, the asset.

Does the Transferee, or each person for which it is acting, own any investments of the following types worth in the aggregate $25,000,000 or more? securities of public companies9 shares in registered investment companies, such as mutual funds (including money market funds) and publicly-traded closed-end funds shares in private investment companies that are exempt from the Investment Company Act by Section 3(c)(1) or 3(c)(7) of the Investment Company Act10 cash and cash-equivalents11 (including foreign currencies) held for investment purposes real estate held for investment purposes12 securities of non-public companies that have shareholders equity13 of at least $50 million securities of non-public companies that do not control, are not controlled by or under common control with14 the Transferee commodity futures contracts, options on commodity futures contracts and options on physical commodities (in each case held for investment purposes) traded on or subject to the rules of (i) a contract market designated under the

A public company is any company or other entity that (i) files reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 or (ii) has a class of securities that are listed on a designated offshore securities market as such term is defined by Regulation S under the Securities Act. For example, a company whose equity securities are listed on a national securities exchange or traded on the National Association of Securities Dealers Automated Quotation System (NASDAQ) would be a public company. 10 The Transferee may also include interests in companies that are (i) exempt from the Investment Company Act by Section 3(c)(2), (3), (4), (5), (6), (8), or (9) of the Investment Company Act, (ii) exempt from the Investment Company Act by Rule 3a-6 or 3a-7 of the Investment Company Act, or (iii) commodity pools. 11 Cash and cash-equivalents include bank deposits, certificates of deposit, bankers acceptances and similar bank instruments held for investment purposes and the net cash surrender value of an insurance policy. 12 Real estate held for investment purposes excludes real estate used by the Transferee (or any person for which it is acting, as the case may be) as a place of business or in connection with a trade or business (unless the Transferee (or any person for which it is acting, as the case may be) is engaged primarily in the business of investing, trading or developing real estate and the real estate in question is part of the business). 13 Shareholders equity should be the amount reflected as such on the relevant companys most recent (and in any event not more than 16 months old) financial statements prepared in accordance with generally accepted accounting principles. 14 For purposes of this question, the term control, when used with respect to any entity, means (i) the possession of the power to appoint an officer or director of the entity and the ownership directly or indirectly of any voting securities of the entity, or (ii) the ownership directly or indirectly of more than 25% of the voting securities of the entity. The terms controlled by or under common control with have meanings correlative to the foregoing. D-5

Commodity Exchange Act and the rules promulgated thereunder or (ii) a nonU.S. board of trade or exchange as contemplated in the rules promulgated under the Commodity Exchange Act (collectively, Commodity Interests)15 physical commodities held for investment purposes with respect to which a Commodity Interest is traded on a market described in the immediately preceding bullet point, including certain precious metals swaps and other financial contracts16 held for investment purposes _________Yes _________ No If the answer to question 2 is Yes, then proceed to Section B. 3. Other Requirements Instructions: a. Only those entities that cannot answer Yes to Question 1(a) or 2 above should proceed to the questions in this Question 3.

Is the Transferee (or any person it is acting for) an entity each of the beneficial owners of which are qualified purchasers (as defined in the Investment Company Act)? _________Yes _________ No NOTE: If the Transferee answers Yes to this Question, each beneficial owner must complete this Questionnaire (insofar as is necessary to determine that the beneficial owner is itself a qualified purchaser). The person will also be required to make the representation relating to qualified purchaser status in paragraph 1 of the Certificate.

b.

Is the Transferee (or any person it is acting for) a trust that was not formed for the specific purpose of acquiring any Preference Shares, each trustee (or each other person authorized to make decisions with respect to the trust) and each settlor grantor (or each other person that has contributed assets to the trust) of which are qualified purchasers (as defined in the Investment Company Act)? _________Yes _________ No NOTE: If the Transferee answers Yes to this Question, each trustee (or other person authorized to make decisions with respect to the trust) and each grantor (or each other person that has contributed assets to the trust) must complete this Questionnaire (insofar as is necessary to determine that the person is itself a

Commodity Interests should be valued at their initial margin or option premium deposited in connection therewith. 16 Financial contracts are defined in Section 3(c)(2) of the Investment Company Act as any arrangement that (i) takes the form of an individually negotiated contract, agreement or option to buy, sell, lend, swap or repurchase, or other similar individually negotiated transaction commonly entered into by participants in the financial markets, (ii) is in respect of securities, commodities, currencies, interest or other rates, other measures of value, or any other financial or economic interest similar in purpose or function to any of the foregoing, and (iii) is entered into in response to a request from a counter party for a quotation, or is otherwise entered into and structured to accommodate the objectives of the counter party to the arrangement. D-6

15

qualified purchaser). The person will also be required to make the representation relating to qualified purchaser status in paragraph 1 of the Certificate. Proceed to Section B. B. Other Certifications for all Purchasers

1. The Transferee (or any person it is acting for) was formed for the specific purpose of purchasing any Preference Shares: _________Yes _________ No NOTE: If the Transferee answers Yes to this Question, each person that is a beneficial owner of the Transferee (or any person it is acting for) must complete a copy of this Questionnaire as if the person were directly purchasing any Preference Shares. NOTE: If the Transferee answers Yes to Question (A)(3)(a), (A)(3)(b), or (B)(1) above, each beneficial owner, trustee, or grantor (as the case may be) of the Transferee (or any person it is acting for, as the case may be) must complete this Questionnaire insofar as is necessary to determine that the person is itself a qualified purchaser. The person may complete the Questionnaire by responding to Questions (A)(1)(a), (A)(2), or (A)(3) above. The person will also be required to make the representation that it is a qualified purchaser. 2. a. The Transferee (or any person it is acting for) is an investment company that (i) is not required to register as an investment company under the Investment Company Act pursuant to Section 3(c)(1), 3(c)(7), or 7(d) under the Investment Company Act and (ii) had any investors on or before April 30, 1996: _________Yes _________ No b. If the Transferee answers Yes to (a) above, the Transferee (and each person for which it is acting) has received the consent required under the Investment Company Act from all of its beneficial owners to be treated as a qualified purchaser under the Investment Company Act: _________Yes _________ No

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If the Transferee is acting for the account of another person, below is a list of each other person, and attached to this certificate is a completed Questionnaire for each other person; the information in any Questionnaire is complete and accurate.

[TRANSFEREE]

By: Name: Title: Dated: ______, ____

D-8

EXHIBIT E

FORM OF REGULATION S PREFERENCE SHARE TRANSFEROR CERTIFICATE Preliminary Note: This form is to be used by a transferor in a Regulation S Transfer of (1) a Certificated Preference Share or (2) a Certificated Preference Share to a beneficial interest in a Regulation S Global Preference Share. TO: Ares VIII CLO Ltd. U.S. Bank National Association, as Preference Share Paying Agent

The undersigned (the Transferor) is the owner of _______________ Preference Shares (the Preference Shares) of Ares VIII CLO Ltd. (the Issuer). Terms used but not defined in this Certificate are used as defined in the Preference Share Paying and Transfer Agency Agreement dated as of [Closing Date] between the Issuer and U.S. Bank National Association, as Preference Share Paying Agent (the Preference Share Paying and Transfer Agency Agreement), the Indenture referred to therein, the legends to the Preference Shares (the Legends) or Regulation S. The Transferors ownership is in the form of a Certificated Preference Share. The Transferor proposes to transfer the Preference Shares to: Insert name: _____________________________________________________________________, (the Transferee). The Transferor proposes that the Transferee will acquire the Preference Shares in the form of: Check one: __ __ A Certificated Preference Share. A beneficial interest, held ultimately through Clearstream or Euroclear, in a Regulation S Global Preference Share.

In connection with the proposed transfer, the Transferor hereby certifies as follows: 1. 2. 3. 4. The transfer is being effected in accordance with the transfer restrictions in the Preference Share Paying and Transfer Agency Agreement and the Legends. The transfer is being effected (i) pursuant to and in accordance with Regulation S and (ii) in accordance with any other applicable securities laws of any jurisdiction. The offer of the Preference Shares was not made to a person in the United States. Check one: __ (a) At the time the buy order was originated, the Transferee was outside the United States, or the Transferor and any person acting on the Transferors behalf reasonably believed that the Transferee was outside the United States. (b) The transaction was executed in, on, or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on the Transferors behalf knows that the transaction was prearranged with a buyer in the United States. E-1

__

5. 6. 7.

No directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable. The transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. The Transferee is not a member of the public in the Cayman Islands.

IN WITNESS WHEREOF, the Transferor has executed this Certificate. Dated: __________________.

[Insert name of Transferor] By: Name: Title:

E-2

EXHIBIT F

FORM OF NON-REGULATION S PREFERENCE SHARE TRANSFEROR CERTIFICATE Preliminary Note: This form is to be used by a transferor in a non-Regulation S Transfer of (1) a Certificated Preference Share or (2) a beneficial interest in a Regulation S Global Preference Share to a Certificated Preference Share. TO: Ares VIII CLO Ltd. U.S. Bank National Association, as Preference Share Paying Agent

The undersigned (the Transferor) is the owner of _______________ Preference Shares (the Preference Shares) of Ares VIII CLO Ltd. (the Issuer). Terms used but not defined in this Certificate are used as defined in the Preference Share Paying and Transfer Agency Agreement dated as of [Closing Date] between the Issuer and U.S. Bank National Association, as Preference Share Paying Agent (the Preference Share Paying and Transfer Agency Agreement), the Indenture referred to therein or the legends to the Preference Shares (the Legends). The Transferors ownership is in the form of: Check one: __ __ A Certificated Preference Share. A beneficial interest, held ultimately through Clearstream or Euroclear, in a Regulation S Global Preference Share.

The Transferor proposes to transfer the Preference Shares to: Insert name: _____________________________________________________________________, (the Transferee). The Transferor proposes that the Transferee will acquire the Preference Shares in the form of a Certificated Preference Share. In connection with the proposed transfer, the Transferor hereby certifies as follows: 1. 2. The transfer is being effected in accordance with the transfer restrictions in the Preference Share Paying and Transfer Agency Agreement and the Legends. The transfer is being effect as follows (check one): __ (a) to a U.S. person, as defined in Regulation S (Regulation S) under the Securities Act (U.S. Person) taking delivery in the form of a Preference Share represented by a Certificated Preference Share with respect to which the Transferor reasonably believes the person to be (check one): __ (x) both a qualified institutional buyer (QIB), as defined in Rule 144A under the Securities Act (Rule 144A), and a qualified purchaser (QP), as defined in Section 2(a)(51)(A) of the Investment Company Act, or in the rules and regulations under Section 2(a)(51)(B) of the Investment Company Act, in a transaction meeting the requirements of Rule 144A, and the Transferor has informed the Transferee that the transfer to the Transferee is being made in reliance on Rule 144A; or F-1

__

(y) both (1) a knowledgeable employee with respect to the Issuer, as defined in Rule 3c-5 under the Investment Company Act (a Knowledgeable Employee), or a QP or a person that acquires this Preference Share from a Knowledgeable Employee or a QP in a transaction (a Donation Transaction) satisfying the applicable requirements of Rule 3c-6(b) and, if applicable, Rule 3c-5(b)(3) under the Investment Company Act and (2) except in the case of a Donation Transaction, an Accredited Investor in a transaction that has received the prior written authorization of the Issuer; in the case of this clause (y); the applicable exemption from registration under the Securities Act is (describe):

__ __ __ 3.

(b) In a transaction that has received the prior written authorization of the Issuer. (c) To a non-U.S. Person in a transaction exempt from or not subject to the registration requirements of the Securities Act and any other applicable securities laws. (d) To the Issuer or J.P. Morgan Securities Inc. or any other agent of the Issuer appointed for the offering of any Securities.

The Transferee is not a member of the public in the Cayman Islands.

IN WITNESS WHEREOF, the Transferor has executed this Certificate. Dated: __________________.

[Insert name of Transferor] By: Name: Title:

F-2

PRINCIPAL OFFICES OF THE CO-ISSUERS

Ares VIII CLO Ltd. c/o Maples Finance Limited P.O. Box 1093 GT Queensgate House South Church Street George Town Grand Cayman, Cayman Islands

Ares VIII CLO LLC 1209 Orange Street Wilmington, Delaware 19801

PORTFOLIO MANAGER Ares CLO Management VIII, L.P. 1999 Avenue of the Stars, Suite 1900 Los Angeles, CA 90067

TRUSTEE, PRINCIPAL PAYING AGENT, TRANSFER AGENT, AND INDENTURE REGISTRAR U.S. Bank National Association Corporate Trust Services One Federal Street, Third Floor Boston, Massachusetts, 02110 IRISH LISTING AGENT AND IRISH PAYING AGENT Ernst & Young Ernst & Young Building Harcourt Centre Harcourt Street Dublin 2, Ireland LEGAL ADVISORS To the Co-Issuers As to United States Law Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 To the Issuer As to Cayman Islands Law Maples and Calder P.O. Box 309 GT Ugland House South Church Street George Town Grand Cayman, Cayman Islands To the Initial Purchaser Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019

To the Portfolio Manager Clifford Chance US LLP 200 Park Avenue New York, New York 10166