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Page 1: Squared Cdo 2007

IMPORTANT NOTICE THIS OFFERING IS AVAILABLE ONLY TO INVESTORS ("ELIGIBLE INVESTORS") THAT ARE EITHER (1)(A)(I) QUALIFIED INSTITUTIONAL BUYERS ("QUALIFIED INSTITUTIONAL BUYERS") (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (II) SOLELY IN THE CASE OF THE SUBORDINATED NOTES, INSTITUTIONAL "ACCREDITED INVESTORS" AS DEFINED IN RULE 501(A)(1) AND RULE 501(A)(3) AND TO "ACCREDITED INVESTORS" AS DEFINED IN RULE 501(A)(8) IF ALL OF THE EQUITY OWNERS OF EACH SUCH ACCREDITED INVESTOR ARE ALSO INSTITUTIONAL "ACCREDITED INVESTORS" UNDER RULE 501(A)(1) OR (3) AND ALSO (B) QUALIFIED PURCHASERS ("QUALIFIED PURCHASERS") (FOR THE PURPOSES OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT) OR (2) PERSONS THAT ARE NON-U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND THAT ARE OUTSIDE THE UNITED STATES IN RELIANCE ON REGULATION S. IMPORTANT: You must read the following before continuing. The following applies to the offering document (the "Offering Circular") following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the Offering Circular. In accessing the Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN, AND WILL NOT, BE REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE U.S. OR OTHER JURISDICTION, AND THE CO-ISSUERS REFERRED TO HEREIN WILL NOT BE REGISTERED UNDER THE INVESTMENT COMPANY ACT. THE SECURITIES DESCRIBED HEREIN MAY NOT BE OFFERED OR SOLD WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE FOLLOWING OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of your Representation: To be eligible to view the Offering Circular or make an investment decision with respect to the securities described herein, investors must be Eligible Investors (as defined above). The Offering Circular is being sent at your request and by accepting this e-mail and accessing the Offering Circular, you shall be deemed to have represented to us that (1) you and any customers you represent are either (i) Qualified Institutional Buyers and Qualified Purchasers or (ii) not U.S. Persons and the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the United States and (2) you consent to delivery of the Offering Circular by electronic transmission. You are reminded that the Offering Circular has been delivered to you on the basis that you are a person into whose possession the Offering Circular may be lawfully delivered in accordance with the laws of jurisdiction in which you are located and you may not, nor are you authorized to, deliver the Offering Circular to any other person. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by or through a licensed broker or dealer and J.P. Morgan Securities Inc. ("JPMorgan") or any affiliate thereof is a licensed broker or dealer in such jurisdiction, the offering shall be deemed to be made by or through JPMorgan or such affiliate on behalf of the Co-Issuers in such jurisdiction.

The Offering Circular has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither JPMorgan nor any person who controls JPMorgan nor any director, officer, employee nor agent of it or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Offering Circular distributed to you in electronic format and the hard copy version available to you on request from JPMorgan.

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Offering Circular Strictly confidential

Squared CDO 2007-1, Ltd. Squared CDO 2007-1, Inc. U.S.$935,000,000 Class A-1 Senior Secured Floating Rate Notes due 2057 U.S.$70,000,000 Class A-2a Senior Secured Floating Rate Notes due 2057 U.S.$10,000,000 Class A-2b Senior Secured Fixed Rate Notes due 2057 U.S.$37,000,000 Class B Senior Secured Floating Rate Notes due 2057 U.S.$21,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2057 U.S.$5,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2057 U.S.$6,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2057 Composite Notes due 2037 U.S.$16,000,000 Subordinated Notes due 2057 *The Composite Notes are comprised of two Components (as defined herein). The Class E Component of the Composite Notes are included in (and are not in addition to) the Class E Notes referred to above.

The Issuer's investment portfolio consists primarily of "pay as you go or physical settlement" credit default swaps referencing CDO Securities, as well as CDO Securities. The investment portfolio will be managed by GSCP (NJ), L.P., an investment adviser that is registered under the U.S. Investment Advisers Act of 1940, as amended.

The Offered Securities will be sold at negotiated prices determined at the time of sale. See "Plan of distribution" beginning on page 150.

See "Risk factors" beginning on page 24 for a discussion of certain risks that you should consider in connection with an investment in the Offered Securities.

It is a condition of the issuance of the Offered Securities that (a) the Class A-1 Notes and Class A-2 Notes be rated "Aaa" by Moody's and "AAA" by S&P, (b) the Class B Notes be rated at least "Aa2" by Moody's and at least "AA" by S&P, (c) the Class C Notes be rated at least "A2" by Moody's and at least "A" by S&P, (d) the Class D Notes be rated at least "A3" by Moody's and at least "A-" by S&P, (e) the Class E Notes be rated at least "Baa2" by Moody's and at least "BBB" by S&P and (f) the Composite Notes be rated at least "Aaa" by Moody's and at least "AAA" by S&P, in each case as more fully described under "Ratings of the Secured Notes and the Composite Notes." The Composite Notes are rated only as to, with respect to Moody’s, the ultimate payment of the Rated Balance and, with respect to S&P, the ultimate payment of the Treasury Strip Component. The Subordinated Notes will not be rated. A credit 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.

Application will be made to the Irish Financial Services Regulatory Authority (the "Financial Regulator"), as competent authority under Directive 2003/71/EC (the "Prospectus Directive"), for the Prospectus (the "Prospectus") to be approved. Approval by the Financial Regulator will relate only to the Offered Securities that are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of the Prospectus Directive or which are to be offered to the public in any Member State of the European Economic Area. This Offering Circular does not constitute the Prospectus for the purposes of the Prospectus Directive. Application will be made to the Irish Stock Exchange for the Secured Notes and the Composite Notes to be admitted to the Official List and to trading on its regulated market. There can be no assurance that such listing will be approved or maintained.

The Offered Securities have not been registered under the Securities Act and neither the Issuer nor the Co-Issuer has been registered under the Investment Company Act. The Offered Securities are being offered only (i) to non-U.S. persons outside the United States in reliance on Regulation S and, with respect to the Secured Notes and the Subordinated Notes only (ii) to, or for the account or benefit of, U.S. persons that are (A)(I) Qualified Institutional Buyers or (II) solely in the case of the Subordinated Notes, institutional "accredited investors" as defined in Rule 501(a)(1) and Rule 501(a)(3) or "accredited investors" as defined in Rule 501(a)(8) if all of the equity owners of each such accredited investor are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act and also (B) Qualified Purchasers. For a description of certain restrictions on transfer, see "Transfer restrictions" beginning on page 152.

The Offered Securities are expected to be delivered to investors in book-entry form through The Depository Trust Company (and, in the case of the Subordinated Notes (other than the Regulation S Global Subordinated Notes), physical form) and its participants and indirect participants, including, without limitation, Euroclear and Clearstream, on or about May 11, 2007.

Placement Agent of the Notes

JPMorgan May 10, 2007

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TABLE OF CONTENTS Page Page

Summary of terms....................................................................... 1 Principal terms of the Offered Securities ............................ 1

Risk Factors ................................................................................ 24 Description of the Offered Securities ...................................... 50

Issuance of the Secured Notes, the Composite Notes and the Subordinated Notes.................................... 50 Terms applicable to the Secured Notes ............................. 50 Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes................. 54 The Indenture...................................................................... 64 Additional information regarding the Subordinated Notes ............................................................ 74

Ratings of the Secured Notes and the Composite Notes................................................................. 81 The Secured Notes............................................................... 81 The Composite Notes .......................................................... 81

Security for the Secured Notes................................................. 82 The Collateral ...................................................................... 82 Collateral accumulation on or prior to the Closing Date; Ramp-Up Period........................................... 83 The Funded Portfolio Assets and Reference Obligations .......................................................................... 84 The CDS Portfolio Assets..................................................... 87 The Collateral Quality Tests................................................ 93 Eligibility Criteria................................................................. 95 Dispositions of Portfolio Assets; Offsetting Short Transactions......................................................................... 99 The Collateral Manager .................................................... 102 The Management Agreement.......................................... 109 The Total Return Swap ..................................................... 114 General .............................................................................. 114 Total Return Floating Payments....................................... 114 Delivery of TRS Covered Security ..................................... 115 Optional Termination ....................................................... 116 Termination date payments and deliveries under TRS Transactions................................................................ 116 Replacements, increases and reductions under TRS Transactions................................................................ 117 TRS Reference Obligation Criteria ................................... 119 Voting rights under TRS Transactions.............................. 120 Credit Enhancement of TRS Transactions ........................ 120 Rating Downgrade of the TRS Counterparty .................. 121 Governing law................................................................... 123 The TRS Counterparty ....................................................... 123 TRS Counterparty .............................................................. 123 Description of the TRS Guaranty...................................... 124 TRS Guarantor ................................................................... 124 The Collection and Payment Accounts ............................ 124 The TRS Asset Account...................................................... 125 The Custodial Account ...................................................... 125 The Expense Account ........................................................ 125 The Synthetic Counterparty Account............................... 126 The TRS Counterparty Account ........................................ 127 The TRS Interest Account.................................................. 127 The TRS/CDS Swap Receipts Account ............................... 128

Use of proceeds ....................................................................... 128 General .............................................................................. 128

The Co-Issuers.......................................................................... 129 General .............................................................................. 129 Capitalization of the Issuer............................................... 130 Business of the Co-Issuers ................................................. 130

Income tax considerations ......................................................131 U.S. federal income tax considerations ............................131 General...............................................................................131 Tax treatment of the Issuer...............................................132 Tax treatment of U.S. Holders of the Secured Notes ..................................................................................134 Tax Treatment of Non-U.S. Holders of Composite Notes ..................................................................................137 Tax treatment of U.S. Holders of Subordinated Notes ..................................................................................137 Tax treatment of Tax-Exempt U.S. Holders......................143 Transfer reporting requirements......................................143 Tax return disclosure and investor list requirements......................................................................144 Tax treatment of Non-U.S. Holders of Notes and Composite Notes................................................................145 Information reporting and backup withholding.............145 Cayman Islands taxation ...................................................146

ERISA and legal investment considerations ..........................147 The Secured Notes and the Composite Notes..................148 The Subordinated Notes ...................................................149 Legal investment considerations ......................................150

Plan of distribution..................................................................150 Transfer restrictions.................................................................152

Global Notes and Regulation S Global Subordinated Notes...........................................................152 Certificated Subordinated Notes ......................................154 Additional restrictions.......................................................154 Legends ..............................................................................154 Non-Permitted Holder/Non-Permitted ERISA Holder.................................................................................159 Cayman Islands placement provisions ..............................161

Listing and general information.............................................161 Legal matters............................................................................163 Glossary of defined terms.......................................................164 Index of Defined Terms ...........................................................196 Annex A-1 – Form of Purchaser

Representation Letter For Subordinated Notes..................................................................................A-1-1

Annex A-2 – Form of Certificated Subordinated Note ERISA Certificate ..............................A-2-1

Annex B – Types of Structured Finance Obligations ........................................................................... B-1

Annex C – Definitions of Moody's Rating and S&P Rating.............................................................................. C-1

Annex D-1 – Moody's Recovery Rate Matrix and Moody’s Criteria ........................................................D-1-1

Annex D-2 – S&P Recovery Rate Matrix and S&P Criteria........................................................................D-2-1

Annex E – S&P Types of Asset-Backed Securities Ineligible for Notching ........................................E-1

Annex F-1 – Moody's Notching of Asset-Backed Securities................................................................F-1-1

Annex F-2 – S&P Notching of Asset-Backed Securities.............................................................................F-2-1

Annex G – Form ADV Part II of Collateral Manager ............................................................................... G-1

Annex H – Minimum Bid Price For Treasury Strip Component.................................................................. H-1

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Important information regarding this Offering Circular and the Offered Securities

In making your investment decision, you should rely only on the information contained in this Offering Circular. No person has been authorized to give you any information or to make any representation other than as contained in this Offering Circular. If you receive any other information, you should not rely on it.

You should not assume that the information contained in this Offering Circular is accurate as of any date other than the date of this Offering Circular.

The Offered Securities are being offered and sold only in places where offers and sales are permitted.

The Co-Issuers and JPMorgan reserve the right, for any reason, to reject any offer to purchase in whole or in part, to allot to you less than the full amount of Offered Securities sought by you or to sell less than the stated initial principal amount of any Class of Offered Securities.

The Offered Securities do not represent interests in or obligations of, and are not insured or guaranteed by, JPMorgan, the Collateral Manager, the Trustee, the Synthetic Counterparty, the TRS Counterparty, JPMorgan Financing Party or any of their respective affiliates.

The Offered Securities are subject to restrictions on resale and transfer as described under "Description of the Offered Securities," "Plan of distribution" and "Transfer restrictions." By purchasing any Offered Securities, you will be deemed to have made certain acknowledgments, representations and agreements as described in "Transfer restrictions." You may be required to bear the financial risks of investing in the Offered Securities for an indefinite period of time.

Unless the context otherwise requires or as otherwise indicated, in this Offering Circular, "JPMorgan" means J.P. Morgan Securities Inc. in its capacity as placement agent of the Offered Securities (other than the Class A-1 Notes).

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This Offering Circular is a confidential document that is being provided only to prospective purchasers of the Offered Securities. You should read this Offering Circular before making a decision whether to purchase any Offered Securities. Except as otherwise authorized under "Income tax considerations—Tax return disclosure and investor list requirements," you must not:

• use this Offering Circular for any other purpose;

• make copies of any part of this Offering Circular or give a copy of it to any other person; or

• disclose any information in this Offering Circular to any other person.

The information contained in this Offering Circular has been provided by the Co-Issuers and other sources identified herein. The Co-Issuers (and, with respect to the information contained under the headings "Risk factors—Relating to certain conflicts of interest—The Issuer will be subject to various conflicts of interest involving the Collateral Manager" and "The Collateral Manager", the Collateral

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Manager), having made all reasonable inquiries, confirm that the information contained in this Offering Circular is true and correct in all material respects and is not misleading, that the opinions and intentions expressed in this Offering Circular are honestly held and that there are no other facts whose omission would make any of such information or the expression of any such opinions or intentions misleading. The Co-Issuers (and, with respect to the information contained under the headings "Risk Factors—Relating to certain conflicts of interest—The Issuer will be subject to various conflicts of interest involving the Collateral Manager" and "The Collateral Manager", the Collateral Manager) take responsibility accordingly.

You are responsible for making your own examination of the Co-Issuers and the Collateral Manager and your own assessment of the merits and risks of investing in the Offered Securities. By purchasing any Offered Securities, you will be deemed to have acknowledged that:

• you have reviewed this Offering Circular;

• you have had an opportunity to request any additional information that you need from the Issuer and the Co-Issuer; and

• neither JPMorgan nor (except with respect to the information contained under the headings "Risk Factors—Relating to certain conflicts of interest—The Issuer will be subject to various conflicts of interest involving the Collateral Manager" and "The Collateral Manager", the Collateral Manager) the Collateral Manager is responsible for, or is making any representation to you concerning, the future performance of the Issuer or the accuracy or completeness of this Offering Circular.

None of the Co-Issuers, JPMorgan nor any party to the transaction contemplated by this Offering Circular is providing you with any legal, business, tax or other advice in this Offering Circular. You should consult with your own advisors as needed to assist you in making an investment decision and to advise you as to whether you are legally permitted to purchase the Offered Securities.

The Offered Securities are being offered in reliance on exemptions from the registration requirements of the Securities Act. These exemptions apply to offers and sales of securities that do not involve a public offering. The Offered Securities have not been approved or disapproved by the United States Securities and Exchange Commission or any state securities commission or other regulatory authority, and none of the foregoing authorities has confirmed the accuracy or determined the adequacy of this Offering Circular. Any representation to the contrary is a criminal offense.

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You must comply with all laws that apply to you in any place where you buy, offer or sell any Offered Securities or possess this Offering Circular. You must also obtain any consents or approvals that you need in order to purchase any Offered Securities. None of the Co-Issuers, JPMorgan nor any party to the transaction contemplated by this Offering Circular is responsible for your compliance with these legal requirements.

You are hereby notified that a seller of the Offered Securities may rely on an exemption from the registration requirements of Section 5 of the Securities Act provided by Rule 144A or by Section 4(2) of the Securities Act. These exemptions apply to offers and sales of securities that do not involve a public offering.

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This document is considered an advertisement for purposes of applicable measures implementing the Prospectus Directive. A prospectus prepared pursuant to the Prospectus Directive will be published, which can be obtained in printed form from the offices of the Irish Stock Exchange.

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Important notice regarding offers and sales of the Offered Securities

The Offered Securities, and the assets backing them, are subject to modification or revision and are offered on a "when, as and if issued" basis. You understand that, when you are considering the purchase of the Offered Securities, a binding contract of sale will not exist prior to the time that the relevant Class of Offered Securities has been priced and JPMorgan has confirmed the allocation of all or a portion of such Offered Securities to be made to you; prior to that time any "indications of interest" expressed by you, and any "soft circles" generated by JPMorgan will not create binding contractual obligations for you or JPMorgan and may be withdrawn at any time.

You may commit to purchase one or more Classes of Offered Securities that have characteristics that may change and you are advised that all or a portion of the Offered Securities may not be issued with the characteristics described in this Offering Circular. JPMorgan's obligation to sell such Offered Securities to you is conditioned on such Offered Securities having the characteristics described in this Offering Circular. If JPMorgan determines that such condition is not satisfied in any material respect, you will be notified and none of the Issuer, the Co-Issuer, JPMorgan or any of their respective affiliates will have any obligation to you to deliver any portion of the Offered Securities that you have committed to purchase, and there will be no liability among the Issuer, the Co-Issuer, JPMorgan or any of their respective affiliates and you as a consequence of any such non-delivery.

The information contained herein supersedes any previous information delivered to you and may be superseded by information delivered to you prior to the time of contract of sale.

Notice to New Hampshire residents

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B 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 OF NEW HAMPSHIRE 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 UPON 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.

Notice to Florida residents

The Offered Securities are offered pursuant to a claim of exemption under Section 517.061 of the Florida Securities Act and have not been registered under said act in the State of Florida. All Florida

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residents who are not institutional investors described in Section517.061(7) of the Florida Securities Act have the right to void their purchase of the Offered Securities, without penalty, within three (3) days after the first tender of consideration.

Notice to Georgia residents

The Offered Securities will be issued or sold in reliance on Paragraph (13) of Code Section 10-5-9 of the Georgia Securities Act of 1973, and may not be sold or transferred except in a transaction which is exempt under such Act or pursuant to an effective registration under such Act.

Notice to residents of the Cayman Islands

No offer or invitation may be made to the public in the Cayman Islands to subscribe for the Offered Securities.

Notice to residents of the European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), JPMorgan has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date") it has not made and will not make an offer of Offered Securities to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Offered Securities which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Offered Securities to the public in that Relevant Member State at any time:

• to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;

• to any legal entity which has two or more of (a) an average of at least 250 employees during the last financial year, (b) a total balance sheet of more than EUR 43,000,000 and (c) an annual net turnover of more than EUR 50,000,000, as shown in its last annual or consolidated accounts; or

• in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an "offer of Notes to the public" in relation to any Offered Securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Offered Securities to be offered so as to enable an investor to decide to purchase or subscribe the Offered Securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

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Notice to residents of the United Kingdom

JPMorgan has represented, warranted and agreed that:

(A) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection with the issue or sale of the Offered Securities in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

(B) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom.

Forward-looking statements

This Offering Circular contains forward-looking statements, which can be identified by words like "anticipate," "believe," "plan," "hope," "goal," "initiative," "expect," "future," "intend," "will," "could," "should" and by other similar expressions. You 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." Forward-looking statements are necessarily speculative in nature, and some, or all, of the assumptions underlying any forward-looking 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, you should not regard the inclusion of forward-looking statements in this Offering Circular as a representation by the Issuer, Co-Issuer, the Collateral Manager, JPMorgan, the Trustee or any of their respective affiliates or any other person of the results that will actually be achieved by the Issuer, the Co-Issuer or the Offered Securities. None of the foregoing persons has any obligation to update or otherwise revise any forward-looking statements, including any revisions to reflect changes in any circumstances arising after the date of this Offering Circular relating to any assumptions or otherwise.

Certain definitions and related matters

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 definitions of terms herein apply equally to the singular and plural forms of the terms defined. Unless otherwise indicated, (a) references herein to "U.S. Dollars," "Dollars" and "U.S.$" are to United States dollars, (b) references to the term "holder" mean the person in whose name a security is registered; except where the context otherwise requires, holder includes the beneficial owner of such security and (c) references to "U.S." and "United States" are to the United States of America, including its territories and its possessions.

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Summaries of documents

This Offering Circular summarizes certain provisions of the Offered Securities, the Indenture, 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 Circular) 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 Circular for purposes of the admission of the Offered Securities to trading on the regulated market of the Irish Stock Exchange.

You should direct any requests and inquiries regarding this Offering Circular and such documents to the Issuer in care of JPMorgan at the following address: J.P. Morgan Securities Inc., 270 Park Avenue, 8th Floor, New York, New York 10017, Attention: Structured Credit Products.

Available information

To permit compliance with Rule 144A in connection with the sale of the Offered Securities, the Co-Issuers (and, solely in the case of the Subordinated Notes, the Issuer alone) under the Indenture referred to under "Description of the Notes" will be required to furnish, upon request of a holder of any Note, to such holder and a prospective purchaser designated by such holder the information required to be delivered under Rule 144A(d)(4) under the Securities Act, if at the time of the request, the Issuer and the Co-Issuer are not reporting companies under Section 13 or Section 15(d) of the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), or exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. Such information may be obtained directly from the Issuer or through the paying agent in Ireland at the address set forth on the final page of this Offering Circular.

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Summary of terms The following summary does not purport to be complete and is qualified in its entirety by reference to the detailed information appearing elsewhere in this Offering Circular and related documents referred to herein. An index of defined terms appears at the back of this Offering Circular. Principal terms of the Offered Securities

Designation1 Class A-1 Notes Class A-2a Notes Class A-2b Notes Class B Notes Class C Notes Class D Notes Class E Notes Composite Notes3 Subordinated

Notes

Type Senior Secured Floating Rate

Senior Secured Floating Rate

Senior Secured Fixed Rate

Senior Secured Floating Rate

Senior Secured Deferrable

Floating Rate

Senior Secured Deferrable

Floating Rate

Senior Secured Deferrable

Floating Rate

Unsecured

Issuer(s) Issuer and Co-Issuer

Issuer and Co-Issuer

Issuer and Co-Issuer

Issuer and Co-Issuer

Issuer and Co-Issuer

Issuer and Co-Issuer

Issuer and Co-Issuer

Issuer and Co-Issuer

Issuer

Initial Principal Amount / Face Amount (U.S.$)

U.S.$935,000,000 U.S.$70,000,000 U.S.$10,000,000 U.S.$37,000,000 U.S.$21,000,000 U.S.$5,000,000 U.S.$6,000,000 U.S.$3,996,000 U.S.$16,000,000

Expected Moody's Initial Rating

"Aaa" "Aaa" "Aaa" "Aa2" "A2" "A3" "Baa2" "Aaa"4 N/A

Expected S&P Initial Rating

"AAA" "AAA" "AAA" "AA" "A" "A-" "BBB" "AAA"4 N/A

Note Interest Rate2

LIBOR2+ 0.25% LIBOR2+ 1.00% 6.35% LIBOR2+ 2.00% LIBOR2+ 5.00% LIBOR2+ 6.00% LIBOR2+ 9.00 9.50%5 N/A

Spread 0.25% 1.00% N/A 2.00% 5.00% 6.00% 9.00% N/A N/A

Stated Maturity May 11, 2057 Payment Date

May 11, 2057 Payment Date

May 11, 2057 Payment Date

May 11, 2057 Payment Date

May 11, 2057 Payment Date

May 11, 2057 Payment Date

May 11, 2057 Payment Date

February 15, 2037 Composite Note Payment Date

May 11, 2057 Payment Date

Minimum Denominations

(U.S.$)

(Integral Multiples)

$500,000

($1,000)

$500,000

($1,000)

$500,000

($1,000)

$500,000

($1,000)

$500,000

($1,000)

$500,000

($1,000)

$500,000

($1,000)

$2,000,000

($4,000)

$500,000

($1,000)

Priority Class(es) None A-1 A-1 A-1, A-2 A-1, A-2, B A-1, A-2, B, C A-1, A-2, B, C, D N/A A-1, A-2, B, C, D, E

Junior Class(es)

A-2, B, C, D, E, Subordinated

Notes

B, C, D, E, Subordinated

Notes

B, C, D, E, Subordinated

Notes

C, D, E, Subordinated

Notes D, E, Subordinated

Notes E, Subordinated

Notes Subordinated

Notes N/A None

Deferred Interest Notes No No No No Yes Yes Yes N/A N/A

________________________ 1 Each class or sub-class of Notes is referred to in this Offering Circular by the applicable name set forth under the heading "Designation" in the table above. The Class A-1 Notes (the "Class A-1 Notes"), the Class A-2a Notes (the "Class A-2a

Notes"), the Class A-2b Notes (the "Class A-2b Notes,", and together with the Class A-2a Notes, the "Class A-2 Notes" and together with the Class A-1 Notes, the "Class A Notes") the Class B Notes (the "Class B Notes"), the Class C Notes (the "Class C Notes"), the Class D Notes (the "Class D Notes") and the Class E Notes (the "Class E Notes"), are collectively referred to herein as the "Secured Notes". The Subordinated Notes (the "Subordinated Notes") are referred to herein collectively with the Secured Notes as the "Notes". The Notes and the Composite Notes (the "Composite Notes") are collectively referred to herein as the "Offered Securities."

2 Three-Month LIBOR, calculated as set forth under "Description of the Offered Securities —Terms applicable to the Secured Notes–Interest." 3 The Composite Notes will consist of the "Treasury Strip Component" representing the rights of the holders of the Composite Notes to receive payments from the Treasury Strip having an initial aggregate face amount of U.S.$4,000,000 and the

"Class E Component" representing U.S.$3,000,000 initial Aggregate Outstanding Amount of the Class E Notes. The initial face amount of the Class E Component is included in the initial principal amount of the Class E Notes and is not issued in addition thereto. The Treasury Strip Component and the Class E Component are referred to herein as the "Components". On each Composite Note Payment Date, the holders of the Composite Notes will be entitled to receive the proceeds from the sale of the portion of the Treasury Strip on or immediately prior to such Composite Note Payment Date, together with any other distributions made under the Treasury Strip on or immediately prior to such date and a pro rata share of the payments made under the Class E Component on such date pursuant to the Indenture. See "Description of the Offered Securities—The Composite Notes".

4 The Composite Notes are rated only to, in the case of Moody’s, the ultimate payment of the Rated Balance and, in the case of S&P, the ultimate payment of the Treasury Strip Component. 5 The stated Note Interest Rate for the Composite Notes is a notional interest rate, and no interest shall be due and payable on the Composite Notes except that interest shall accrue and be payable on the Class E Component of the Composite

Notes pursuant to this Indenture. Payments made with respect to the Composite Notes shall be deemed to have been applied in the manner contemplated in "Description of the Offered Securities—The Composite Notes". The failure to pay any Notional Interest Amount on the Composite Notes on any Composite Note Payment Date shall not constitute an Event of Default and any Notional Interest Amount that remains unpaid on such date shall not accrue interest.

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Issuer: Squared CDO 2007-1, Ltd., an exempted company with limited liability incorporated in the Cayman Islands ("Issuer").

Co-Issuer: Squared CDO 2007-1, Inc., a Delaware corporation ("Co-Issuer" and, together with the Issuer, the "Co-Issuers").

Trustee: LaSalle Bank National Association ("Trustee").

Placement Agent: J.P. Morgan Securities Inc.

Eligible Purchasers: The Offered Securities are being offered hereby (i) to non-U.S. persons in offshore transactions in reliance on Regulation S ("Regulation S") under the Securities Act of 1933, as amended (the "Securities Act" ), and with respect to the Secured Notes and Subordinated Notes only (ii) to, or for the account or benefit of, U.S. persons that are (A)(I) qualified institutional buyers ("Qualified Institutional Buyers") within the meaning of Rule 144A under the Securities Act ("Rule 144A") or (II) solely in the case of the Subordinated Notes, institutional "accredited investors" as defined in Rule 501(a)(1) and Rule 501(a)(3) or "accredited investors" as defined in Rule 501(a)(8) if all of the equity owners of each such accredited investor are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act ("Regulation D") ("Institutional Accredited Investors") and also (B) Qualified Purchasers (as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended (the "Investment Company Act")) ("Qualified Purchasers"). See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Form, denomination and registration of the Notes" and "Transfer restrictions."

Payments on the Notes:

Payment Dates ...........................................Subject to the Indenture, the 27th day of February, May, August and November of each year (or, if such day is not a Business Day, then the next succeeding Business Day), commencing in November 27, 2007 (each, a "Payment Date"); provided that the final Payment Date with respect to the Secured Notes and Subordinated Notes shall be May 11, 2057.

Stated Note Interest .................................. Interest on the Secured Notes is payable quarterly in arrears on each Payment Date in accordance with the Priority of Payments described herein.

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Deferral of Interest ....................................So long as any one or more senior Classes of Notes are outstanding, to the extent funds are not available in accordance with the Priority of Payments to pay the full amount of interest on the Class C Notes, Class D Notes or Class E Notes on any Payment Date, such amounts will be deferred and will bear interest at the Note Interest Rate applicable to such Notes, and the failure to pay such amounts will not be an Event of Default under the Indenture. See "Description of the Offered Securities—Terms applicable to the Secured Notes—Interest."

Principal Repayment of the Secured Notes ............................................On each Payment Date occurring after the Reinvestment

Period and prior to Maturity, and as long as a Sequential Paydown Trigger Event has not occurred or is continuing, Principal Proceeds will be applied in accordance with the Priority of Payments on such Payment Date to repay the Secured Notes on a pro rata basis and according to the Aggregate Outstanding Amount (exclusive of any amount attributable to Deferred Interest included therein) of each Class of Notes on the related Determination Date.

On each Payment Date occurring after the Reinvestment Period and prior to Maturity, if a Sequential Paydown Trigger Event has occurred and is continuing, Principal Proceeds will be applied in accordance with the Priority of Payments on such Payment Date to repay the Secured Notes sequentially in direct order of seniority.

Payments of principal may be made on the Secured Notes during the Reinvestment Period (subject to the Priority of Payments) only in connection with the occurrence of an Early Redemption. See "—Early Redemption" below.

Distributions on Subordinated Notes...........................................................The Subordinated Notes will not bear a stated rate of

interest, but will be entitled to receive distributions on each Payment Date if and to the extent funds are available for such purpose in accordance with the Priority of Payments. Such amounts will be released from the lien of the Indenture for payment to the Subordinated Note Paying Agent and such payments will be made on the Subordinated Notes only pursuant to the Priority of Payments. See "—Priority of Payments" below and "Description of the Offered Securities—Additional information regarding the Subordinated Notes—Distributions on the Subordinated Notes."

Payments on the Composite Notes: .........On each Payment Date on which payments are made on the Class E Notes, a portion of such payments will be

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allocated to the Class E Component of the Composite Notes in the proportion that the principal amount of such Component bears to the principal amount of the Class E Notes as a whole (including the related Component) and paid to the Composite Noteholders on the next following Composite Note Payment Date, together with all distributions in respect of the Treasury Strip Component received on or immediately prior to such Composite Note Payment Date as described herein under "Description of the Offered Securities—The Composite Notes". If and to the extent that such payments are in repayment of the principal amount of the Class E Notes, the principal amount of the related Class E Component of the Composite Notes shall be deemed to have been repaid on the applicable Composite Note Payment Date to the extent of such payment.

No payments will be made on the Composite Notes other than payments made on the related Class E Component and the Treasury Strip Component.

Early Redemption: ..................................... In certain circumstances, which are described below, the Secured Notes may be redeemed prior to their Stated Maturity. Each type of redemption described below is referred to herein as an "Early Redemption".

Mandatory Redemption ............................ If (i) any Collateral Quality Test that relates to Moody’s is not satisfied as of the Ramp-Up Completion Date and Moody’s has not confirmed the ratings assigned by it on the Closing Date to each Class of Secured Notes prior to the date 30 days after the delivery of the Ramp-Up Notice or (ii) S&P has not confirmed the rating assigned by it on the Closing Date to any Class of Secured Notes (which notice has not been withdrawn) to the Trustee prior to the date 30 days after the delivery of the Ramp-Up Notice (a "Ratings Confirmation Failure"), Uninvested Proceeds will be applied, in accordance with the Priority of Payments, on the first Payment Date (and on each subsequent Payment Date until a Rating Confirmation is obtained), to repay principal of each applicable Class of Secured Notes (sequentially in direct order of seniority), to the extent necessary to obtain confirmation from each downgrading or non-confirming Rating Agency that it has restored the ratings (including private and confidential ratings) on such affected Class of Secured Notes to (or will maintain) the ratings assigned by it to such Class of Secured Notes on the Closing Date (a "Rating Confirmation") or, if earlier, until each Class of Secured Notes is paid in full. The Subordinated Notes will not be entitled to any such prepayments. At any time prior to the 7th Business Day

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following the Ramp-Up Completion Date, the Collateral Manager may, acting in its sole discretion on behalf of the Issuer, propose a reasonable plan (a "Proposed Plan") to both Rating Agencies in order to obtain the Rating Confirmation from each such Rating Agency which may include changing the Ramp-Up Completion Date to a later date.

On any Payment Date on or prior to the last day of the Reinvestment Period if the Collateral Manager (in its sole discretion) determines that purchasing additional Funded Portfolio Assets or entering into additional CDS Portfolio Assets in the near future would either be impractical or not beneficial to the Issuer, the Collateral Manager may, by notice to the Trustee on the related Determination Date, direct the Trustee to apply all or any portion of the Principal Proceeds remaining on such date after payment of all amounts payable pursuant to paragraph (b)(i) of the Principal Priority of Payments to repay the Secured Notes in accordance with paragraph (b)(ii) of the Principal Priority of Payments. See "—Priority of Payments" below.

Optional Redemption; Optional Redemption by Refinancing......................During the period from and including May 11, 2007 (the

"Closing Date"), to but excluding the Payment Date on November 27, 2010 (such period, the "Non-Call Period"), the Notes are not subject to optional redemption. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Optional Redemption."

Following the Non-Call Period, the Secured Notes and the Subordinated Notes may be redeemed, in whole but not in part, on any Payment Date, from Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on such Payment Date, at the written direction of the holders of at least a Special Majority-in-Interest of the Subordinated Notes then outstanding; provided that all Secured Notes and Subordinated Notes are simultaneously redeemed (an "Optional Redemption") at the applicable Redemption Price and the proceeds available for such Optional Redemption are no less than the Total Senior Redemption Amount. There are certain other restrictions on the ability of the Co-Issuers to effect an Optional Redemption.

In addition, subject to certain conditions described herein and in the Indenture, any Class or Classes of Secured Notes

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may be redeemed by the Issuer from the Refinancing Proceeds of a loan, credit or similar facility from one or more financial institutions or an issuance of replacement notes to one or more purchasers, in whole but not in part, on any Payment Date, in the case of the Class A-1 Notes and, in the case of all other Classes of Secured Notes, on any Payment Date occurring on or after the Non-Call Period at the written direction of, or with the consent of, the holders of at least a Special Majority-in-Interest of the Subordinated Notes then outstanding, but subject to the prior written approval of the Synthetic Counterparty, at its sole discretion, pursuant to an Optional Redemption by Refinancing. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Optional Redemption."

Tax Redemption:........................................ In addition, upon the occurrence of a Tax Event, the Issuer may redeem the Secured Notes and the Subordinated Notes (such redemption, a "Tax Redemption"), in whole but not in part on any Payment Date from Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on such Payment Date (a) at the written direction of the holders of a Majority of any Class of Secured Notes that, as a result of the occurrence of such Tax Event, has not received 100% of the aggregate amount of principal and interest payable to such Class on any Payment Date (each such Class, an "Affected Class") or (b) at the direction of a Special Majority-in-Interest of the Subordinated Notes, at the applicable Redemption Price. No Tax Redemption may be effected, however, unless (A) all Sale Proceeds and all other funds available for distribution by the Issuer from the Issuer Accounts on the applicable Payment Date that are to be applied to effect such a Tax Redemption are no less than the Total Senior Redemption Amount and (B) the Tax Materiality Condition is satisfied. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Tax Redemption."

Clean-up Call: ............................................The Notes will be redeemed, in whole but not in part, on or after the Payment Date on which the Aggregate Principal/Notional Balance of the Portfolio Assets has been reduced to 10% or less of the Aggregate Principal/Notional Balance of the Portfolio Assets on the Ramp-Up Completion Date (such redemption, a "Clean-up Call") from Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other

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funds available for distribution by the Issuer from the Issuer Accounts on the relevant Payment Date at the applicable Redemption Price. No Clean-up Call may be effected, however, unless all Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on the relevant Payment Date are greater than or equal to the Total Senior Redemption Amount. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Clean-up Call."

Auction Call Redemption: ........................ If, on or prior to the Payment Date occurring on November 27, 2015, the Secured Notes and the Subordinated Notes have not been redeemed in full, the Secured Notes shall be redeemable, in whole but not in part, at the relevant Redemption Price and the Subordinated Notes shall be redeemable, in whole but not in part, at the relevant Auction Call Redemption Price on the Auction Call Date in accordance with the procedures described in "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Auction Call Redemption" (such redemption, an "Auction Call Redemption").

Early Redemption Procedures and Redemption Price....................................... In the event of an Optional Redemption, Tax Redemption,

Clean-up Call or Auction Call Redemption, the Trustee will direct the sale of Collateral in order to make payments as described under "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Early Redemption Procedures". In addition, the Issuer shall deliver the TRS Covered Securities to the TRS Counterparty or the Highest Bidder, as the case may be, pursuant to the Total Return Swap and the TRS Counterparty or the Highest Bidder, as the case may be, shall make payments to the Issuer as described in "Security for the Secured Notes—The Total Return Swap".

"Sale Proceeds" means (a) with respect to the termination or assignment of any CDS Portfolio Asset, the net amounts, if any, received by the Issuer in connection with such termination or assignment (other than accrued Fixed Amounts and any other amounts constituting Interest Proceeds) resulting from such termination or assignment, together with any amounts received from the TRS Counterparty and released from the TRS Counterparty Account pursuant to and in accordance with the Total

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Return Swap as a result of delivery of the TRS Covered Securities to the TRS Counterparty or the Highest Bidder, as the case may be, as a result of such termination or assignment; and (b) with respect to the sale or disposition of any Funded Portfolio Asset, the proceeds (other than accrued interest and any other amounts constituting Interest Proceeds) received by the Issuer as a result of such sale or disposition, net of any reasonable expenses incurred by the Trustee or the Collateral Manager (other than amounts payable as Administrative Expenses (as defined herein)) in connection with such sale or other disposition, in each case, pursuant to an Optional Redemption, Tax Redemption, Clean-up Call or Auction Call Redemption.

The redemption price of each Class of Secured Notes (the "Redemption Price" for such Secured Notes) will be (a) 100% of the outstanding principal amount of the Secured Notes (including any Deferred Interest) to be redeemed plus (b) accrued and unpaid interest thereon (including any Defaulted Interest, interest on Defaulted Interest and accrued and unpaid interest on Deferred Interest on such Secured Notes) to the day of redemption. The redemption price of the Composite Notes (the "Redemption Price" of the Composite Notes) will be the Redemption Price of the Class E Component (if the Class E Notes are to be redeemed) in the proportion that the principal amount of such Class E Component bears to the principal amount of the Class E Notes and, if the stated maturity date for the Treasury Strip has not occurred, the Treasury Strip (and any other items in the Composite Note Collateral) will be distributed in kind to the Holders of the Composite Notes pro rata according to the outstanding principal amount of their respective Composite Notes.

Each Subordinated Note will be redeemed at its proportional share of the amount of the proceeds of the Collateral (including proceeds created when the lien of the Indenture is released) remaining after giving effect to the Optional Redemption, Tax Redemption, Clean-up Call or Auction Call Redemption of the Secured Notes and payment in full of all expenses of the Co-Issuers.

Priority of Payments:

Application of Interest Proceeds and Principal Proceeds............... (a) Interest Proceeds: On each Payment Date other than

the Maturity, Interest Proceeds with respect to the related Due Period will be distributed in the order of priority set forth below (the "Interest Priority of Payments"):

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(i) first, to the payment of taxes and filing and registration fees owed by the Co-Issuers, if any and, second, to the payment to the JPMorgan Financing Party of any unpaid Financed Amount due on such Payment Date; provided that such amount paid on any Payment Date may not exceed the Financed Amount Threshold for such Payment Date;

(ii) to the payment of accrued and unpaid Administrative Expenses in the order set forth in the definition thereof and to the replenishment of the Expense Account, in an amount not to exceed, in the aggregate, the Administrative Expense Cap;

(iii) to the payment to the Collateral Manager of the Senior Management Fee and any Senior Management Fee in respect of a prior Payment Date that was payable but not paid on such prior Payment Date;

(iv) to the payment to the TRS Counterparty of any TRS LIBOR Breakage Amounts and TRS Hedging Amounts that are due and unpaid in accordance with the Total Return Swap;

(v) on a pro rata basis, to the payment of (A) any termination payments (and any accrued interest thereon) payable by the Issuer to the Synthetic Counterparty pursuant to the CDS Portfolio Assets other than by reason of an event of default or termination event as to which the Synthetic Counterparty is the "defaulting party" or the sole "affected party", and (B) any termination payments (and any accrued interest thereon) payable by the Issuer to a Short Synthetic Counterparty pursuant to the applicable Offsetting Short Transaction other than by reason of an event of default or termination event as to which the Short Synthetic Counterparty is the "defaulting party" or the sole "affected party", in each case, other than the amounts set out in paragraph (xvii) below;

(vi) to the payment of the Interest Distribution Amount with respect to the Class A-1 Notes (including Defaulted Interest);

(vii) on a pro rata basis, to the payment of the Interest Distribution Amount with respect to the Class A-2a Notes and Class A-2b Notes (including Defaulted Interest);

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(viii) to the payment of the Interest Distribution Amount with respect to the Class B Notes (including Defaulted Interest);

(ix) to the payment of the Interest Distribution Amount with respect to the Class C Notes (including Defaulted Interest, and accrued interest on Class C Deferred Interest, but excluding Class C Deferred Interest);

(x) to the payment of Class C Deferred Interest (in reduction of the principal amount of the Class C Notes);

(xi) to the payment of the Interest Distribution Amount with respect to the Class D Notes (including Defaulted Interest, and accrued interest on Class D Deferred Interest, but excluding Class D Deferred Interest);

(xii) to the payment of Class D Deferred Interest (in reduction of the principal amount of the Class D Notes);

(xiii) to the payment of the Interest Distribution Amount with respect to the Class E Notes (including Defaulted Interest, and accrued interest on Class E Deferred Interest, but excluding Class E Deferred Interest);

(xiv) to the payment of Class E Deferred Interest (in reduction of the principal amount of the Class E Notes);

(xv) to the payment to the Collateral Manager of the Subordinated Management Fee and any Subordinated Management Fee in respect of a prior Payment Date that was payable but not paid on such prior Payment Date;

(xvi) to the payment of all other accrued and unpaid Administrative Expenses (in the order of priority set forth in the definition thereof) not paid pursuant to paragraph (ii) above (whether as the result of the limitations on amounts set forth therein or otherwise);

(xvii) on a pro rata basis, to the payment of (A) any termination payments (and any accrued interest thereon) payable by the Issuer to the Synthetic

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Counterparty pursuant to the CDS Portfolio Assets by reason of an event of default or termination event as to which the Synthetic Counterparty is the "defaulting party" or the sole "affected party", and (B) any termination payments (and any accrued interest thereon) payable by the Issuer to a Short Synthetic Counterparty pursuant to the applicable Offsetting Short Transaction by reason of an event of default or termination event as to which the Short Synthetic Counterparty is the "defaulting party" or the sole "affected party";

(xviii) unless the Secured Notes have previously been repaid in full, on each Payment Date falling on or after the first Failed Auction Call Date, to the payment of principal (including any Deferred Interest thereon) of, first, the Class E Notes until the Class E Notes are paid in full, second, the Class D Notes until the Class D Notes are paid in full, third, the Class C Notes until the Class C Notes are paid in full, fourth, the Class B Notes until the Class B Notes are paid in full, fifth, the Class A-2 Notes until the Class A-2 Notes are paid in full, and, sixth, the Class A-1 Notes until the Class A-1 Notes are paid in full; and

(xix) to the Subordinated Note Paying Agent for distribution to the Subordinated Noteholders.

(b) Principal Proceeds: On each Payment Date other than the Maturity, after application of Interest Proceeds as provided above, Principal Proceeds with respect to the related Due Period will be distributed in the order of priority set forth below (the "Principal Priority of Payments"):

(i) first, to the payment of the amounts referred to in paragraphs (a)(i) to (a)(ii) under the Interest Priority of Payments above, second, to the payment to the Collateral Manager of the Senior Management Fee and any Senior Management Fee in respect of a prior Payment Date that was payable but not paid on such prior Payment Date, third, to the payment to the TRS Counterparty of any TRS LIBOR Breakage Amounts and TRS Hedging Amounts that are due and unpaid, and, fourth, to the payment of the amounts referred to in paragraphs (a)(v) through (a)(viii) under Interest Priority of Payments above, but only to the extent not paid in full thereunder, in accordance with the order of priority set out under Interest Priority of Payments above;

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(ii) (A) first, upon the occurrence of a Rating Confirmation Failure (after giving effect to the application of Uninvested Proceeds on such Payment Date), to the payment, from Uninvested Proceeds only, sequentially in the following order of priority, of first, principal of the Class A-1 Notes until the principal of such Class of Notes is paid in full; second, principal of the Class A-2 Notes until the principal of such Class of Notes is paid in full; third, principal of the Class B Notes until the principal of such Class of Notes is paid in full; fourth, principal of the Class C Notes until the principal of such Class of Notes is paid in full; fifth, principal of the Class D Notes until the principal of such Class of Notes is paid in full; and sixth, principal of the Class E Notes until the principal of such Class of Notes is paid in full, but only to the extent that, as determined by the Collateral Manager, acting on behalf of the Issuer, doing so would be necessary or advisable to obtain a Rating Confirmation on such affected Class of Secured Notes and, (B) second, prior to, or on, the last day of the Reinvestment Period, to the Principal Collection Account, in order to permit the Issuer to enter into or purchase additional Portfolio Assets in accordance with the Eligibility Criteria and the Collateral Quality Tests as more fully described herein; provided that, if the Collateral Manager (in its sole discretion) determines that entering into additional Portfolio Assets in the near future would be impractical or not beneficial to the Issuer, the Collateral Manager may, by notice to the Trustee on the related Determination Date, direct the Trustee to apply Principal Proceeds, after giving effect to the payment of all amounts payable pursuant to paragraph (b)(i) above and this paragraph (b)(ii), as follows:

(A) prior to the occurrence of a Sequential Paydown Trigger Event, to the payment, on a pro rata basis and according to the respective Aggregate Outstanding Amount of each Class of Notes on the related Determination Date, of the principal of the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, until the principal of each such Class of Notes is paid in full; provided that any Class C Deferred Interest, Class D Deferred Interest and Class E Deferred Interest shall be excluded from the

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Aggregate Outstanding Amount for purposes of this paragraph (A); or

(B) after the occurrence of a Sequential Paydown Trigger Event, to the payment, sequentially in the following order of priority, of first, principal of the Class A-1 Notes until the principal of such Class of Notes is paid in full; second, principal of the Class A-2 Notes until the principal of such Class of Notes is paid in full; third, principal of the Class B Notes until the principal of such Class of Notes is paid in full; fourth, principal of the Class C Notes until the principal of such Class of Notes is paid in full; fifth, principal of the Class D Notes until the principal of such Class of Notes is paid in full; and sixth, principal of the Class E Notes until the principal of such Class of Notes is paid in full;

(iii) on each Payment Date after the last day of the Reinvestment Period and prior to the occurrence of a Sequential Paydown Trigger Event, to the payment, on a pro rata basis and according to the respective Aggregate Outstanding Amount of each Class of Notes on the related Determination Date, of the principal of the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, until the principal of each such Class of Notes is paid in full; provided that any Class C Deferred Interest, Class D Deferred Interest and Class E Deferred Interest shall be excluded from the Aggregate Outstanding Amount for purposes of this paragraph (iii);

(iv) on each Payment Date after the last day of the Reinvestment Period and following the occurrence of a Sequential Paydown Trigger Event, to the payment, sequentially in the following order of priority, of first, principal of the Class A-1 Notes until the principal of such Class of Notes is paid in full; second, principal of the Class A-2 Notes until the principal of such Class of Notes is paid in full; third, principal of the Class B Notes until the principal of such Class of Notes is paid in full; fourth, principal (including any Deferred Interest thereon) of the Class C Notes until the principal of such Class of Notes is paid in full; fifth, principal (including any Deferred Interest thereon) of the Class D Notes until the principal of such Class of Notes is paid in full; and sixth, principal (including

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any Deferred Interest thereon) of the Class E Notes until the principal of such Class of Notes is paid in full;

(v) to the payment of any amounts referred to under paragraphs (a)(xvi) and (xvii) in accordance with the order of priority set out under Interest Priority of Payments above to the extent not fully covered by Interest Proceeds; and

(vi) any remaining Principal Proceeds to the Subordinated Note Paying Agent for distribution to the Subordinated Noteholders pursuant to the Subordinated Note Paying Agency Agreement.

(c) Notwithstanding any of the foregoing provisions, on the Maturity, the Principal Proceeds and the Interest Proceeds (together with any funds in the Issuer Accounts (other than funds required to remain reserved in any Account pursuant to the Indenture)) will be distributed in the following order of priority:

(i) to the payment of the amounts referred to in paragraphs (a)(i) through (a)(v) in the relevant order of priority set out under Interest Priority of Payments above;

(ii) to make payments on the Notes in the following order: first, to the payment of the accrued and unpaid interest (including Defaulted Interest) on the Class A-1 Notes, and then, to the payment of the Aggregate Outstanding Amount of the Class A-1 Notes; second, to the payment of the accrued and unpaid interest (including Defaulted Interest) on the Class A-2 Notes, and then, to the payment of the Aggregate Outstanding Amount of the Class A-2 Notes; third, to the payment of the accrued and unpaid interest (including Defaulted Interest) on the Class B Notes, and then, to the payment of the Aggregate Outstanding Amount of the Class B Notes; fourth, to the payment of the accrued and unpaid interest (including any Defaulted Interest and any interest on Class C Deferred Interest) on the Class C Notes, then, to the payment of Class C Deferred Interest and then, to the payment of the Aggregate Outstanding Amount of the Class C Notes; fifth, to the payment of the accrued and unpaid interest (including any Defaulted Interest and any interest on Class D Deferred Interest) on the Class D Notes, then, to the payment of Class D Deferred Interest and then, to the payment of the Aggregate Outstanding

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Amount of the Class D Notes; sixth, to the payment of the accrued and unpaid interest (including any Defaulted Interest and any interest on Class E Deferred Interest) on the Class E Notes, then, to the payment of Class E Deferred Interest and then, to the payment of the Aggregate Outstanding Amount of the Class E Notes;

(iii) to make payments of the amounts referred to in paragraph (a)(xv) in accordance with the same order of priority set out under Interest Priority of Payments;

(iv) to make payments of the amounts referred to in paragraph(a)(xvi) in accordance with the same order of priority set out under Interest Priority of Payments;

(v) to make payments of any amounts referred to in paragraph (a)(xvii) in accordance with the same order of priority set out under Interest Priority of Payments; and

(vi) to make payment of any remaining amounts to the Subordinated Note Paying Agent for distribution to the Subordinated Noteholders.

The priority of payments set out in sections (a), (b) and (c) above shall be referred to as the "Priority of Payments".

Security for the Secured Notes:

General .......................................................The Secured Notes will be secured by the Collateral, which will consist primarily of the Portfolio Assets, the Eligible Investments and the various Issuer Accounts pledged under the Indenture. On or prior to the Closing Date, the Issuer is expected to have entered into or purchased, or have entered into binding agreements to enter into or purchase, a portfolio of Portfolio Assets selected by the Collateral Manager representing at least 95% of U.S.$1,100,000,000 (the "Ramp-Up Completion Date Balance"). The actual composition of the portfolio of Portfolio Assets over time may differ, and may differ significantly, from the composition of the portfolio of Portfolio Assets as of the Closing Date and the Ramp-Up Completion Date.

If (i) any Collateral Quality Test that relates to Moody's is not satisfied as of the Ramp-Up Completion Date and Moody's has not confirmed the ratings assigned by it on the Closing Date to each Class of Secured Notes prior to

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the date 30 days after the delivery of the Ramp-Up Notice or (ii) S&P has not confirmed the rating assigned by it on the Closing Date to any Class of Secured Notes (which notice has not been withdrawn) to the Trustee prior to the date 30 days after the delivery of the Ramp-Up Notice (a "Ratings Confirmation Failure"), (1) Uninvested Proceeds will be applied, in accordance with the Priority of Payments, on the first Payment Date (and on each subsequent Payment Date until a Rating Confirmation is obtained), to repay principal of each applicable Class of Secured Notes (sequentially in direct order of seniority) and (2) first, any Uninvested Proceeds remaining after application thereof pursuant to clause (1) above, and then Principal Proceeds will be applied during the Reinvestment Period in accordance with the Priority of Payments to acquire additional Portfolio Assets, but, in each case, only to the extent that, as determined by the Collateral Manager, acting on behalf of the Issuer, doing so would be necessary or advisable to obtain a Rating Confirmation. At any time prior to the 7th Business Day following the Ramp-Up Completion Date, the Collateral Manager may, acting in its sole discretion on behalf of the Issuer, propose a Proposed Plan in order to obtain the Rating Confirmation from each Rating Agency which may include changing the Ramp-Up Completion Date to a later date.

The entry into and purchase of Portfolio Assets by the Issuer during the Reinvestment Period will result in percentage concentrations of each type of Portfolio Asset as of any date of determination during the Reinvestment Period that will change over time. The percentage concentration of each type of Portfolio Asset as of any date of determination following the Reinvestment Period is also expected to change over time as the Portfolio Assets are paid down or amortize or, to the extent permitted pursuant to the Indenture, are sold. Offsetting Short Transactions will not constitute Portfolio Assets for any purpose under the Transaction Documents; however, as described herein, Offsetting Short Transactions will be given effect in all the Collateral Quality Tests and the Eligibility Criteria as a negative balance to offset the related Offset Portfolio Asset and any Short Synthetic Premium Amounts will be reflected as a deduction in the Weighted Average Spread Test.

The initial portfolio of TRS Covered Securities to be held in the TRS Asset Account will be purchased through the application of the net proceeds of the sale of the Offered Securities. See "Security for the Secured Notes—The Funded Portfolio Assets and Reference Obligations." The

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portfolio of TRS Covered Securities may change from time to time, pursuant to the terms of the Total Return Swap. See "Security for the Secured Notes—The Total Return Swap."

CDS Portfolio Assets...................................On the Closing Date the Issuer will have entered into and, as described above, following the Closing Date, through the Ramp-Up Completion Date and during the Reinvestment Period, may enter into, credit default swap transactions (each of such transactions is referred to herein as a "CDS Portfolio Asset") with JPMorgan Chase Bank, National Association, as the Synthetic Counterparty, pursuant to which the Issuer sells credit protection to the Synthetic Counterparty with respect to certain CDO Securities (each, a "Reference Obligation"). All of the CDS Portfolio Assets will reference CDO Securities.

Each CDS Portfolio Asset has been or will be entered into pursuant to a separate confirmation (or in certain cases, a group of CDS Portfolio Assets may be entered into pursuant to a single confirmation) between the Issuer and the Synthetic Counterparty (each, a "Confirmation"), which confirmation supplements, forms a part of, and is subject to, the 1992 ISDA Master Agreement (Multicurrency Cross Border), the related Schedule and any credit support annex relating thereto dated as of the Closing Date between the Issuer and the Synthetic Counterparty, as amended and restated from time to time (collectively, the "ISDA Master Agreement"). Each Confirmation is based on the form of "Credit Derivative Transaction on Collateralized Debt Obligation with Pay-As-You-Go or Physical Settlement (Dealer Form)" that has been published by ISDA. Each Confirmation entered into by the Issuer with respect to a CDS Portfolio Asset on the Closing Date may differ, and may differ significantly, from the Confirmations that may be entered into by the Issuer after the Closing Date. See "Risk factors – Relating to the Collateral – There are legal risks relating to the CDS Portfolio Assets".

Under each CDS Portfolio Asset, the Issuer will be obligated under certain circumstances to pay Physical Settlement Amounts and/or Floating Amounts to the Synthetic Counterparty in return for which the Synthetic Counterparty will pay periodic Fixed Amounts, and in certain circumstances, Additional Floating Amounts, to the Issuer. For a further description of the CDS Portfolio Assets see "Security for the Secured Notes—The CDS Portfolio Assets" herein.

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Unless terminated earlier as described in the definition of "Reinvestment Period" herein, the Reinvestment Period will terminate on the Payment Date occurring in August, 2011.

Total Return Swap .....................................On the Closing Date the Issuer shall enter into a 1992 ISDA Master Agreement (Multicurrency - Cross Border) (together with the schedule thereto and any confirmations entered into thereunder, the "Total Return Swap") with Merrill Lynch International (the "TRS Counterparty"), in its capacity as counterparty to the Total Return Swap.

The Total Return Swap is intended to (i) to provide the Issuer with a source of liquidity in respect of TRS Covered Securities deposited in the TRS Asset Account which it may from time to time be required to sell so that it may make payments to the Secured Parties, as further described herein and (ii) to ensure a predictable rate of return on amounts standing to the credit of the TRS Asset Account.

For a description of the Total Return Swap, see "Security for the Secured Notes—The Total Return Swap" herein.

Management Agreement .................................................GSCP (NJ), L.P., a Delaware limited partnership ("GSC" or

the "Collateral Manager") and a registered investment adviser, will select and manage the Portfolio Assets under a collateral management agreement to be entered into between the Issuer and the Collateral Manager (the "Management Agreement"). Pursuant to the Management Agreement and in accordance with the Indenture, the Collateral Manager will manage the entry into and the acquisition or Disposition of the CDS Portfolio Assets and the Funded Portfolio Assets (including exercising, on behalf of the Issuer, rights and remedies associated with such assets) in accordance with the restrictions set forth in the Indenture (including the Eligibility Criteria described herein) and on the Collateral Manager's research, credit analysis and judgment. For a summary of the provisions of the Management Agreement and certain other information concerning the Collateral Manager and key individuals associated therewith who will be managing the Issuer's portfolio. See "Security for the Secured Notes—The Collateral Manager" and " Security for the Secured Notes—The Management Agreement."

Use of Proceeds: The net cash proceeds of the issuance of the Offered Securities together with the amount of the Financed Amount Initial Balance, after the payment of applicable

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fees and expenses in connection with the structuring and placement of the Offered Securities (including making a deposit to the Closing Date Expense Subaccount of funds to be used to pay expenses following the Closing Date) and the payment of an upfront fee to the Collateral Manager, are expected to be approximately U.S.$1,100,500,000. Approximately U.S.$1,100,600,000 of the net proceeds from the offering and sale of the Offered Securities will be applied by the Issuer to purchase Funded Portfolio Assets from the Warehouse Provider to be held in the Custodial Account, the Treasury Strip to be held in the Composite Note Collateral Account and TRS Covered Securities to be held in the TRS Asset Account on the Closing Date and to be deposited into the Closing Date Expense Subaccount and the remaining U.S.$0 will be deposited to the Principal Collection Account on the Closing Date and invested in Eligible Investments pending the application of such funds to, among other things, the entry into or purchase of additional Portfolio Assets by the Issuer during the period commencing on the Closing Date and ending on the Ramp-Up Completion Date (the "Ramp-Up Period"), all of which will be pledged under the Indenture by the Issuer to the Trustee. See "Use of proceeds."

Acquisition and Sale/Termination of Portfolio Assets: On the Closing Date, the Issuer expects to have purchased

or entered into Portfolio Assets having an Aggregate Principal/Notional Balance of not less than 95% of the Ramp-Up Completion Date Balance, and to have purchased or entered into by the Ramp-Up Completion Date Portfolio Assets having an Aggregate Principal/Notional Balance at least equal to the Ramp-Up Completion Date Balance. Except as otherwise described herein, the Issuer will not acquire or enter into Portfolio Assets after the termination of the Reinvestment Period. Portfolio Assets may be Disposed in connection with an Early Redemption, an acceleration of the Notes following an Event of Default, a Disposition of a Credit-Impaired Portfolio Asset, a Credit-Improved Portfolio Asset, a Defaulted Portfolio Asset, a Discretionary Sale or the Stated Maturity of the Notes.

Financed Amount: The organizational fees and expenses of the Co-Issuers (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers and the Placement Agent) and the fees and expenses of offering the Notes will be financed on the Closing Date by J.P. Morgan Ventures Corporation, an Affiliate of JPMorgan (the "JPMorgan Financing Party") and will be included as part of the

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Financed Amount payable in accordance with the Priority of Payments.

Ratings: It is a condition of the issuance of the Offered Securities that (a) the Class A-1 Notes and the Class A-2 Notes be rated "Aaa" by Moody's Investors Service, Inc. ("Moody's") and "AAA" by Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. ("S&P" and together with Moody's, the "Rating Agencies"), (b) the Class B Notes be rated at least "Aa2" by Moody's and at least "AA" by S&P, (c) the Class C Notes be rated at least "A2" by Moody's and at least "A" by S&P, (d) the Class D Notes be rated at least "A3" by Moody's and at least "A-" by S&P, (e) the Class E Notes be rated at least "Baa2" by Moody's and at least "BBB" by S&P and (f) the Composite Notes be rated at least "Aaa" by Moody's and at least "AAA" by S&P, in each case as more fully described under "Ratings of the Secured Notes and the Composite Notes." The Composite Notes are rated only as to, in the case of Moody’s, the ultimate payment of the Rated Balance and, in the case of S&P, the ultimate payment of the Treasury Strip Component. The Subordinated Notes will not be rated. A credit 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.

Other Information:

Minimum Denominations .........................The Notes will be issued in minimum denominations of U.S.$500,000 and integral multiples of U.S.$1,000 in excess thereof. The Composite Notes will be issued in minimum denominations of U.S.$2,000,000 and integral multiples of U.S.$4,000 in excess thereof.

Listing, Trading and Form of Notes ......................................................Application will be made to the Irish Financial Services

Regulatory Authority, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Approval by the Financial Regulator will relate only to the Offered Securities that are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of the Prospectus Directive or which are to be offered to the public in any Member State of the European Economic Area. This Offering Circular does not constitute the Prospectus for the purposes of the Prospectus Directive. Application will be made to the Irish Stock Exchange for the Secured Notes and the Composite Notes to be admitted to the Daily Official List, and traded on its regulated market but there can be no assurance that such listing will be granted or, if

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granted, that it will be maintained. In particular, if the Issuer reasonably determines that delisting may be necessary in order to prevent the Issuer from being treated as engaged in a United States trade or business or otherwise being subject to United States federal, state or local income tax on a net income basis, the Co-Issuers may de-list the Secured Notes and the Composite Notes. See "Listing and general information." The Holders of the Subordinated Notes may direct the Issuer to make application to the Irish Stock Exchange for the Subordinated Notes to be admitted to the Daily Official List, and traded on its regulated market, at any time after the Closing Date at the expense of the Issuer. There is currently no market for the Offered Securities of any Class and there can be no assurance that such a market will develop. See "Risk factors—Relating to the Offered Securities—The Offered Securities will have limited liquidity; the Offered Securities are subject to substantial transfer restrictions."

The Secured Notes sold to persons who are Qualified Purchasers in reliance on Rule 144A under the Securities Act will be represented by global notes in fully registered form without interest coupons to be deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company ("DTC"). The Secured Notes and the Composite Notes offered in reliance upon Regulation S initially will be represented by one or more temporary global notes ("Regulation S Temporary Global Secured Notes" and "Regulation S Temporary Global Composite Notes", respectively) in fully registered form without interest coupons deposited with the Trustee as custodian for, and registered in the name of DTC, initially for the accounts of Euroclear or Clearstream or for the accounts of both Euroclear and Clearstream.

On the 40th day after which all of the Secured Notes of any Class and the Composite Notes have been sold to investors, and subject to the receipt by the Trustee of a certificate in the form provided by the Indenture from the person holding such interest, a beneficial interest in a Class of Regulation S Temporary Global Secured Notes or Regulation S Temporary Global Composite Note, as applicable, may be exchanged for an interest in a permanent global note of such Class or Composite Notes in fully registered form without coupons (each such Secured Note as referred to herein, a "Regulation S Permanent Global Secured Note" and, together with the Regulation S Temporary Global Secured Notes, the "Regulation S Global Secured Notes" and each such Composite Note as referred

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to herein, a "Regulation S Permanent Global Composite Notes" and, together with the Regulation S Temporary Global Composite Notes, the "Regulation S Global Composite Notes" and, together with the Regulation S Global Secured Notes, the "Regulation S Global Notes"), in an amount equal to the Aggregate Outstanding Amount of such interest in the Regulation S Temporary Global Secured Note or Regulation S Temporary Global Composite Note, as applicable.

Interests in the Regulation S Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its direct and indirect participants (including Euroclear and Clearstream). Until and including the 40th day after the later of the commencement of the offering and the closing of the offering of the Secured Notes (the "Distribution Compliance Period"), interests in a Regulation S Global Note may be held only through Euroclear or Clearstream.

All Subordinated Notes sold to U.S. purchasers will be evidenced by notes in definitive, fully registered form without interest coupons ("Certificated Subordinated Notes"). Subordinated Notes sold to non-U.S. Persons in offshore transactions in reliance on Regulation S will each be represented, initially, by one or more temporary global notes in fully registered form without interest coupons (each, a "Regulation S Temporary Global Subordinated Note"), to be exchanged, after the expiration of the Distribution Compliance Period and as further described in the Subordinated Note Paying Agency Agreement, for beneficial interests in one or more permanent global notes in fully registered form without interest coupons (each, a "Regulation S Permanent Global Subordinated Note" and, together with the Regulation S Temporary Global Subordinated Notes, the "Regulation S Global Subordinated Notes"). Each subsequent transferee of a Subordinated Note will be required to provide a purchaser representation letter in which it will be required to certify, among other matters, as to its status under the Securities Act, the Investment Company Act and ERISA. The Subordinated Notes are being offered hereby (1)(A)(I) to Qualified Institutional Buyers or (II) to institutional "accredited investors" as defined in Rule 501(a)(1) and Rule 501(a)(3) and to "accredited investors" as defined in Rule 501(a)(8) if all of the equity owners of each such accredited investor are also "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act that (in each case) and (B) also Qualified Purchasers or (2) to non-U.S. persons under Regulation S. The Regulation

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S Global Subordinated Notes will be deposited with the Trustee as custodian for, and registered in the name of, a nominee of DTC for the respective accounts of Euroclear and Clearstream.

Governing Law...........................................The Secured Notes, the Composite Notes, the Indenture, the Subscription Agreements, the Collateral Administration Agreement, the Subordinated Note Paying Agency Agreement (other than the terms and conditions of the Subordinated Notes attached thereto) and the Placement Agreement will be governed by, and construed in accordance with, the law of the State of New York. The Subordinated Notes, the Issuer Charter and the Deed of Covenant (including the terms and conditions of the Subordinated Notes) will be governed by, and construed in accordance with, the laws of the Cayman Islands.

Tax Matters ................................................See "Income tax considerations."

ERISA........................................................... See "ERISA and legal investment considerations."

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Risk Factors

An investment in the Offered Securities involves certain risks. Prospective investors should carefully consider the following factors, in addition to the matters set forth elsewhere in this Offering Circular, prior to investing in the Offered Securities.

Relating to the Offered Securities

Projections, forecasts and estimates are forward looking statements.

Any projections, forecasts and estimates contained herein are forward looking statements and are based upon certain assumptions that the Co-Issuers consider reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. Accordingly, the projections are only estimates. Actual results may vary from the projections, and the variations may be material. Some important factors that could cause actual results to differ materially from those in any forward looking statements include changes in interest rates, market, financial or legal uncertainties, differences in the actual allocation of the Funded Portfolio Assets, the CDS Portfolio Assets and Eligible Investments among asset categories from those assumed, the timing of acquisitions of or receipts on the Funded Portfolio Assets, the CDS Portfolio Assets and Eligible Investments, the timing and frequency of defaults, writedowns, principal shortfalls and interest shortfalls on the Eligible Investments and Reference Obligations, and mismatches between the timing of accrual and receipt of Interest Proceeds and Principal Proceeds from the Collateral, among others. Consequently, the inclusion of projections herein should not be regarded as a representation by the Issuer, the Co-Issuer, the Collateral Manager, the Trustee, the Collateral Administrator, the Synthetic Counterparty or any of their respective Affiliates or any other person or entity of the results that will actually be achieved by the Issuer. None of the Issuer, the Co-Issuer, the Collateral Administrator, the Collateral Manager, the Synthetic Counterparty and their respective Affiliates has any obligation to update or otherwise revise any projections, including any revisions to reflect changes in economic conditions or other circumstances arising after the date hereof or to reflect the occurrence of unanticipated events, even if the underlying assumptions do not come to fruition.

The Offered Securities will have limited liquidity; the Offered Securities are subject to substantial transfer restrictions.

Currently, no market exists for the Offered Securities. The Placement Agent is not under any obligation to make a market for the Offered Securities. There can be no assurance that any secondary market for any of the Offered Securities will develop, or if a secondary market does develop, that it will provide the holders of the Offered Securities with liquidity of investment or will continue for the life of the Offered Securities. Consequently, a purchaser of Offered Securities must be prepared to hold the Offered Securities until their Stated Maturity. In addition, the Offered Securities are subject to certain transfer restrictions and can only be transferred to certain transferees as described herein under "Transfer restrictions." Except as otherwise described herein, the Components of the Composite Notes, whether in certificated form or global form, may not be exchanged for proportional interests in the underlying securities represented by the Components thereof. As described herein, the Issuer may, in the future, impose additional restrictions to comply with changes in applicable law. Such restrictions on the transfer of the Offered Securities may

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further limit their liquidity. The Offered Securities will not be registered under the Securities Act or any state securities laws, and the Co-Issuers have no plans, and are under no obligation, to register the Offered Securities under the Securities Act.

The Placement Agent will not have ongoing responsibility for the Collateral or the actions of the Issuer.

Neither JPMorgan nor any of its Affiliates will have any obligation to monitor the performance of the Collateral (including the Reference Obligations of the CDS Portfolio Assets, the Offsetting Short Transactions, if any, and the Funded Portfolio Assets) and/or the Composite Note Collateral or the actions of the Issuer or any authority to advise the Issuer or to direct its actions, which will be solely the responsibility of the Issuer and the Collateral Manager. If JPMorgan or any of its affiliates acts as the Synthetic Counterparty, JPMorgan Financing Party or the TRS Counterparty or owns Notes or Composite Notes, it will have no responsibility to consider the interests of any holders of Notes or Composite Notes in actions it takes in such capacities. While JPMorgan or any of its affiliates may own Notes or Composite Notes at any time, they have no obligation to make any investment in any Notes or Composite Notes and may sell at any time any Notes or Composite Notes they do purchase.

The Secured Notes and Composite Notes are limited recourse obligations and the Subordinated Notes are unsecured obligations; investors must rely on available collections from the Collateral (or in the case of the Composite Noteholders, the Composite Note Collateral) and will have no other source for payment.

The Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and the Composite Notes are limited recourse obligations of the Co-Issuers and the Subordinated Notes are unsecured obligations of the Issuer; therefore, the Secured Notes (including the Class E Component of the Composite Notes) are expected to be payable solely from the Funded Portfolio Assets held in the Custodial Account, amounts paid by the Synthetic Counterparty under the CDS Portfolio Assets, amounts paid by the TRS Counterparty to the Issuer pursuant to the Total Return Swap and all other Collateral pledged by the Issuer pursuant to the Indenture and the Composite Notes will be payable solely from and to the extent of the available proceeds of the Composite Note Collateral (which will include the Class E Component and the Treasury Strip Component). None of the Trustee, the Subordinated Note Paying Agent, the Synthetic Counterparty, the JPMorgan Financing Party, the Collateral Manager, the TRS Counterparty, the Placement Agent or any of their respective affiliates or any other person or entity will be obligated to make payments on the Offered Securities. Consequently, holders of the Notes and Composite Notes must rely solely on distributions on the Collateral for payments on the Notes and Composite Notes (except that the Composite Notes will also have the benefit of the Composite Note Collateral). If distributions on the Collateral are insufficient to make payments on the Notes (including the Class E Component of the Composite Notes), no other assets (in particular, no assets of the holders of the Notes or Composite Notes, the Synthetic Counterparty, the JPMorgan Financing Party, the TRS Counterparty, the Collateral Manager, the Placement Agent, the Trustee, the Subordinated Note Paying Agent, or any affiliates of any of the foregoing) will be available for payment of the deficiency and all obligations of the Co-Issuers and any claims against the Co-Issuers in respect of the Notes and Composite Notes will be extinguished and will not thereafter revive.

The Issuer is obligated under the terms of the Total Return Swap to liquidate the TRS Covered Securities at par pursuant to the Total Return Swap rather than in the market. In respect of such a liquidation, Noteholders would not be able to benefit from any premium available in the market for such TRS Covered Securities at the time of liquidation.

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Any amounts that are released from the lien of the Indenture for distribution to the holders of Subordinated Notes in accordance with the Priority of Payments on any Payment Date will not be available to make payments in respect of the Secured Notes or the Composite Notes on any subsequent Payment Date.

The Subordinated Notes are unsecured obligations of the Issuer.

The Subordinated Notes will not be secured by any of the Collateral or the Composite Note Collateral, and will not generally be entitled to exercise remedies under the Indenture and the Subordinated Note Paying Agency Agreement and, while the Secured Notes and the Composite Notes are outstanding, the Trustee will have no obligation to act on behalf of the holders of Subordinated Notes. Distributions to holders of the Subordinated Notes will be made solely from distributions on the Collateral after all other payments have been made pursuant to the Priority of Payments described herein. There can be no assurance that the distributions on the Collateral will be sufficient to make distributions to holders of the Subordinated Notes after making payments that rank senior to payments on the Subordinated Notes. The Issuer's ability to make distributions to the holders of the Subordinated Notes will be limited by the terms of the Indenture. If distributions on the Collateral are insufficient to make distributions on the Subordinated Notes, no other assets will be available for any such distributions. See "Description of the Offered Securities—Additional information regarding the Subordinated Notes."

The Subordinated Notes are highly leveraged, which increases risks to investors in that Class.

The Subordinated Notes represent a highly leveraged investment in the Collateral. Therefore, the market value of the Subordinated Notes would be anticipated to be significantly affected by, among other things, the occurrence of any Credit Events and the payment by the Issuer of any Floating Amounts, any termination payments with respect to the CDS Portfolio Assets, the Offsetting Short Transactions (if any) and/or the Total Return Swap, changes in the market value of the Collateral, changes in the distributions on the Reference Portfolio and the Funded Portfolio Assets, defaults and recoveries on the Reference Obligations and the Funded Portfolio Assets, capital gains and losses on the Collateral, prepayments on Reference Obligations and the Funded Portfolio Assets and the availability, prices and interest rates of Collateral and other risks associated with the Collateral. Accordingly, the Subordinated Notes may not be paid in full and may be subject to up to 100% loss. Furthermore, the leveraged nature of each subordinated class of the Notes may magnify the adverse impact on each such class of changes in the market value of the Collateral, changes in the distributions on the Reference Portfolio, the Offsetting Short Transactions (if any) and the Funded Portfolio Assets, defaults and recoveries on the Reference Portfolio, the Offsetting Short Transactions (if any) and the Funded Portfolio Assets, capital gains and losses on the Collateral, prepayments on the Reference Portfolio and the Funded Portfolio Assets and availability, prices and interest rates of Collateral.

The Subordination of the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Subordinated Notes will affect their right to payment.

Except in certain limited circumstances with respect to the payment of principal of the Secured Notes prior to the occurrence of a Sequential Paydown Trigger Event, the Class A-1 Notes and Class A-2 Notes are subordinated to certain amounts payable by the Issuer to other parties as set forth in the Priority of Payments (including taxes, Administrative Expenses and certain payments under the CDS Portfolio Assets, the Offsetting Short Transactions (if any), the Senior Management Fee and the Total Return Swap); the Class B Notes are subordinated on each Payment Date to the Class A-1

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Notes and Class A-2 Notes; the Class C Notes are subordinated on each Payment Date to the Class B Notes; the Class D Notes are subordinated on each Payment Date to the Class C Notes; the Class E Notes are subordinated on each Payment Date to the Class D Notes; and the Subordinated Notes are subordinated on each Payment Date to the Class E Notes and certain fees and expenses, in each case to the extent described herein. No payments of interest or distributions from Interest Proceeds will be made on any such Class of Secured Notes on any Payment Date until interest on the Secured Notes of each Class to which it is subordinated has been paid, and, except in certain limited circumstances with respect to the payment of principal of the Secured Notes prior to the occurrence of a Sequential Paydown Trigger Event, no payments of principal or distributions from Principal Proceeds will be made on any such Class of Secured Notes on any Payment Date until principal on the Notes of each Class to which it is subordinated has been paid in full. Accordingly, to the extent that any losses are suffered by any of the holders of any Notes, such losses will be borne in the first instance by holders of the Subordinated Notes, then by the holders of the Class E Notes, then by the holders of the Class D Notes, then by the holders of the Class C Notes, then by the holders of the Class B Notes and last by the holders of the Class A-2 Notes and Class A-1 Notes. See "—Relating to the Collateral—Credit Events and Floating Amounts under the CDS Portfolio Assets may effect performance of the Notes."

For the purposes of subordination, the Composite Notes will not be treated as a separate Class of Notes, but the Class E Component will be treated as part of the Class E Notes.

In addition, if an Event of Default occurs, the holders of the Controlling Class of Notes (which will be the most senior Class or Classes then outstanding) will be entitled to determine the remedies to be exercised under the Indenture. See "Description of the Offered Securities—The Indenture—Events of Default." Remedies pursued by the Controlling Class could be and are likely to be adverse to the interests of the holders of the Notes that are subordinated to the Controlling Class, and the Controlling Class will have no obligation to consider any possible adverse effect on such other interests. Further, the Funded Portfolio Assets held in the Custodial Account may be sold and the TRS Covered Securities held in the TRS Asset Account may be sold or delivered pursuant to the Total Return Swap only if, among other things, (a) the Trustee determines that the anticipated proceeds of such sale or liquidation (after deducting the reasonable expenses of such sale or liquidation) would be sufficient to discharge in full the amounts then due and unpaid on the Secured Notes, due and unpaid Administrative Expenses, any accrued and unpaid Financed Amounts, any accrued and unpaid amounts payable by the Issuer pursuant to the CDS Portfolio Assets and Total Return Swap, including termination payments, if any, and any accrued and unpaid fees due and payable to the Collateral Manager, or (b) the holders of not less than 66-2/3% in Aggregate Outstanding Amount of each Class of Secured Notes, voting as separate Classes, direct, subject to the provisions of the Indenture, such sale and liquidation. Holders of the Subordinated Notes will have no right to determine the remedies to be exercised under the Indenture upon an Event of Default in any circumstance. There can be no assurance that, following any liquidation of the Collateral and the application of the proceeds thereof to pay the Secured Notes (including the Class E Component of the Composite Notes) and the fees, expenses and other liabilities payable by the Co-Issuers, including amounts payable to the TRS Counterparty and the Collateral Manager, sufficient funds will remain to pay the Notes (including the Class E Component of the Composite Notes), or that any funds will remain to make any distributions to the Holders of the Subordinated Notes.

The Notes are subject to a Ramp-Up Period; there exists reinvestment risk on the Portfolio Assets.

The Issuer expects that by the Ramp-Up Completion Date it will have entered into or acquired Portfolio Assets having an Aggregate Principal/Notional Balance at least equal to the Ramp-Up

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Completion Date Balance. If the Issuer does not enter into or acquire additional Portfolio Assets promptly after the Aggregate Principal/Notional Balance of the existing Portfolio Assets is reduced by principal amortization or otherwise, the Interest Proceeds received by the Issuer will be reduced but the interest on the Secured Notes payable by the Issuer to the Noteholders, will generally not be reduced during the Reinvestment Period unless the Collateral Manager directs the Trustee to apply Principal Proceeds to redeem Secured Notes in accordance with the Principal Priority of Payments. The associated reinvestment risk on the Portfolio Assets will first be borne by holders of the Subordinated Notes and then by the holders of the Secured Notes in the reverse order of seniority.

The Notes are subject to mandatory redemption.

The Issuer will notify each Rating Agency in writing of the occurrence of the Ramp-Up Completion Date within 7 days after the Ramp-Up Completion Date occurs (each such notice a "Ramp-Up Notice"). If a Ratings Confirmation Failure occurs, the Issuer will apply Uninvested Proceeds, in accordance with the Priority of Payments, on the first Payment Date (and on each subsequent Payment Date until a Rating Confirmation is obtained), to repay principal of each applicable Class of Secured Notes (sequentially in direct order of seniority), but only to the extent that, as determined by the Collateral Manager, acting on behalf of the Issuer, doing so would be necessary or advisable to obtain a Rating Confirmation with respect to the Secured Notes. At any time prior to the 7th Business Day following the Ramp-Up Completion Date, the Collateral Manager may, acting in its sole discretion on behalf of the Issuer, propose a Proposed Plan in order to obtain the Rating Confirmation from each Rating Agency which may include changing the Ramp-Up Completion Date to a later date. See "Description of the Offered Securities—Mandatory Redemption" and "Summary of Terms—Priority of Payments".

On any Payment Date on or prior to the last day of the Reinvestment Period, the Collateral Manager may, if the Collateral Manager (in its sole discretion) determines that purchasing additional Funded Portfolio Assets or entering into additional CDS Portfolio Assets in the near future would either be impractical or not beneficial to the Issuer, direct the Trustee, by notice to the Trustee on the related Determination Date, to apply all or any portion of the Principal Proceeds to redeem the Secured Notes in accordance with the Principal Priority of Payments.

Any of the foregoing could result in an elimination, deferral or reduction in the payments in respect of interest or the principal repayments made to the holders of one or more Classes of Secured Notes that are subordinate to any other outstanding Class of Secured Notes, which could adversely impact the returns of such holders, and Noteholders receiving payments of principal pursuant to any of the foregoing may not be able to reinvest such amounts in investments with a return greater than or equal to the Notes being redeemed.

The Collateral may be insufficient to redeem the Notes in an Event of Default.

In the event that an Event of Default occurs in respect of the Notes, the Issuer may not be able to pay the principal of the Notes (including the Class E Component of the Composite Notes) as a result of (a) paying unpaid termination payments relating to the CDS Portfolio Assets and/or the Offsetting Short Transactions, if any, owing to the Synthetic Counterparty and/or the applicable Short Synthetic Counterparties, as applicable, (b) paying unpaid termination payments, if any, owing to the TRS Counterparty or any Short Synthetic Counterparty, (c) paying unpaid Financed Amounts, if any, owing to the JPMorgan Financing Party, (d) paying unpaid Management Fees, if

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any, owing to the Collateral Manager and (e) the then applicable market value of the Funded Portfolio Assets held in the Custodial Account being less than their principal amount.

The Notes are subject to Optional Redemption.

The holders of at least a Special Majority-in-Interest of the Subordinated Notes may cause the Secured Notes and the Subordinated Notes to be redeemed as described under "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Optional Redemption" on any Payment Date after the expiration of the Non-Call Period. In the event of an early redemption, the holders of the Secured Notes and the Subordinated Notes will be repaid prior to the respective Stated Maturity dates of such Notes. There can be no assurance that, upon any such redemption, the Sale Proceeds realized and other available funds would permit any distribution on the Subordinated Notes after all required payments are made to the holders of the Secured Notes. In addition, an Optional Redemption of Notes could require the liquidation of Collateral more rapidly than would otherwise be desirable, which could adversely affect the realized value of the Collateral sold. There may exist at times only limited markets for the Portfolio Assets, resulting in low or non-existent volumes of trading in such obligations, and therefore a lack of liquidity and price volatility of such obligations.

The Notes are subject to Optional Redemption by Refinancing.

Subject to the satisfaction of certain conditions, the Issuer (at the direction of or with the written consent the holders of at least a Special Majority-in-Interest of the Subordinated Notes, but subject to the prior approval of the Synthetic Counterparty, at its sole discretion) may effect an optional redemption of any Class or Classes of Secured Notes through an Optional Redemption by Refinancing. Among other reasons, the requisite majority holders of the Subordinated Notes, subject to the prior approval of the Synthetic Counterparty, at its sole discretion, may elect to direct the Issuer to effect an Optional Redemption by Refinancing if interest rates on investments similar to any Class or Classes of Secured Notes fall below current levels or if such holders otherwise expect the Issuer to be able to achieve improved pricing. If exercised, such Optional Redemption by Refinancing would result in each such Class of Secured Notes being redeemed at the Redemption Price in respect thereof at a time when they may be trading in the market at a premium and when other investments bearing the same rate of interest relative to the level of risk assumed may be difficult or expensive to acquire. In addition, if any Class or Classes of Secured Notes are redeemed in connection with an Optional Redemption by Refinancing in which additional notes are issued or borrowings under secured loans are made, the Subordinated Notes will be, and certain Classes of Notes may be, subordinate to payments on such additional notes or secured loans. The additional notes issued, or secured loans obtained, as the case may be, in connection with an Optional Redemption by Refinancing would have such terms and priorities as are negotiated at the time and that are set forth in a supplemental indenture.

The Notes are subject to redemption upon a Tax Event.

Subject to satisfaction of certain conditions, upon the occurrence of a Tax Event, the Issuer may redeem the Notes, in whole but not in part, on a Payment Date from the Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on such Payment Date, at the direction of (i) holders of a Majority of any Affected Class of Secured Notes or (ii) a Special Majority-in-Interest of the Subordinated Notes, at the applicable Redemption Price. No Tax Redemption may be effected, however, unless (a) all Sale Proceeds arising from the sale of Pledged Securities in accordance with

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the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on the applicable Payment Date are sufficient to redeem the Secured Notes simultaneously and to pay certain other amounts in accordance with the procedures set forth in the Indenture and (b) the Tax Materiality Condition is satisfied. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Tax Redemption." There may exist at times only limited markets for the Funded Portfolio Assets, resulting in low or non-existent volumes of trading in such obligations, and therefore a lack of liquidity and price volatility of such obligations.

The Notes are subject to redemption upon a Clean-up Call.

Subject to satisfaction of certain conditions, the Issuer will redeem the Notes pursuant to a Clean-up Call, in whole but not in part, on a Payment Date from Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on such Payment Date, at the applicable Redemption Price. No Clean-up Call may be effected, however, unless all Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on the relevant Payment Date are no less than the Total Senior Redemption Amount. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Clean-up Call." There may exist at times only limited markets for the Funded Portfolio Assets, resulting in low or non-existent volumes of trading in such obligations, and therefore a lack of liquidity and price volatility of such obligations.

The Notes are subject to redemption upon an Auction Call.

Subject to satisfaction of certain conditions, if, on or prior to the Payment Date occurring in November 27, 2015, the Secured Notes and the Subordinated Notes have not been redeemed in full, the Issuer will redeem the Notes pursuant to an Auction Call Redemption, in whole but not in part (subject to the completion of the related Auction), on the Payment Date falling on November 27, 2015 subject to the conditions described under "Description of the Offered Securities—Terms applicable to the Secured Notes and the Subordinated Notes—Early Redemption—Auction Call Redemption" and only from (a) the Sale Proceeds and (b) all other funds available for distribution by the Issuer from the Issuer Accounts on such Payment Date, at the applicable Redemption Price with respect to the Secured Notes and the applicable Auction Call Redemption Price with respect to the Subordinated Notes. There may exist at times only limited markets for the Funded Portfolio Assets, resulting in low or non-existent volumes of trading in such obligations, and therefore a lack of liquidity and price volatility of such obligations. If there has been a Failed Auction Call Date, the Issuer will conduct an Auction on or immediately prior to each Auction Call Date thereafter until the proceeds expected to be raised thereby, together with all other funds available for distribution by the Issuer from the Issuer Accounts, are sufficient to effect an Auction Call Redemption of the Notes in full.

The Weighted Average Lives of the Offered Securities may vary.

The Stated Maturity of the Notes is May 11, 2057. The Stated Maturity of the Composite Notes is February 15, 2037. The average life of each Class of Offered Securities is expected to be shorter than the number of years until its respective Stated Maturity. Each such average life may vary due to various factors including, early retirement of the Offered Securities, dispositions of Portfolio Assets and the occurrence of any Optional Redemption, Optional Redemption by Refinancing, Tax

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Redemption, Auction Call Redemption or Clean-up Call. Retirement of the Reference Obligations under the CDS Portfolio Assets and the Funded Portfolio Assets prior to their respective final maturities will depend, among other things, on the financial condition of the Reference Entities and the issuers of the underlying Funded Portfolio Assets and the respective characteristics of such Reference Obligations under the CDS Portfolio Assets and the Funded Portfolio Assets, including the existence and frequency of exercise of any optional redemption, mandatory redemption, or sinking fund features, the prevailing level of interest rates, the redemption prices, the actual default rates and the actual amount collected on any Defaulted Portfolio Assets and the frequency of tender or exchange offers for such Reference Obligations under the CDS Portfolio Assets and the Funded Portfolio Assets. The amount of Portfolio Assets purchased or entered into on or prior to the Closing Date, the amount and timing of the entry into or purchase of additional Portfolio Assets during the Ramp-Up Period and the Reinvestment Period and the ability of the Collateral Manager to terminate or sell Portfolio Assets and invest or reinvest Principal Proceeds in the manner described under "Security for the Secured Notes—Dispositions of Portfolio Assets; Offsetting Short Transactions" will also affect the average lives of the Offered Securities.

Changes in tax law could result in the imposition of withholding taxes with respect to payments on the Offered Securities and interest and other payments on the Collateral, and the Issuer will not gross-up payments to holders of Offered Securities.

The Issuer expects that payments on the Collateral generally will not be subject to withholding taxes or reduced by withholding taxes imposed by the United States or other countries from which such payments are sourced. These payments, however, might become subject to U.S. or other withholding tax due to a change in law or other causes. The imposition of unanticipated withholding taxes or tax on the Issuer's net income could materially impair the Issuer's ability to pay principal, interest and other amounts on the Secured Notes and the Composite Notes or make distributions on the Subordinated Notes.

The Issuer expects that payments of principal and interest on the Notes will ordinarily not be subject to withholding tax in the Cayman Islands, the United States or any other jurisdiction. See "Income tax considerations". In the event that tax must be withheld or deducted from payments of principal or interest, neither Co-Issuer shall be obliged to make any additional payments to the holders of any Notes on account of such withholding or deduction.

U.S. federal income tax treatment of the Offered Securities depends on the classification of the Offered Securities.

The proper U.S. federal income tax treatment of the Notes will depend upon whether the Notes are classified as debt or equity for U.S. federal income tax purposes. However, there are no authorities addressing similar transactions involving instruments issued by an entity with terms similar to those of the Notes. As a result, certain aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain. The Issuer intends, and each holder, by purchasing the Secured Notes, agrees to treat, in the absence of an administrative determination or judicial ruling to the contrary, such Secured Notes as indebtedness for U.S. federal income tax purposes.

The Composite Notes are not expected to be offered to U.S. Holders; accordingly, any U.S. Holder should consult its own tax advisor prior to making an investment in the Composite Notes regarding the U.S. federal, state and local income and franchise tax (as well as non-U.S. tax) consequences of holding the Composite Notes. Non-U.S. Holders should carefully review the discussion under "U.S. federal income tax considerations—Tax treatment of Non-U.S. Holders of Composite Notes."

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Upon the issuance of the Notes, Allen & Overy LLP, special U.S. tax counsel to the Issuer ("Special U.S. Tax Counsel") will deliver an opinion generally to the effect that, although there is no statutory, judicial or administrative authority directly addressing the characterisation of the Notes for U.S. federal income tax purposes, the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes and Class D Notes will, and the Class E Notes should, when issued, be treated as indebtedness for U.S. federal income taxation purposes. Only the persons to whom the opinion is addressed may rely upon the foregoing opinion and such opinion will not be binding upon the U.S. Internal Revenue Service ("IRS") or the courts, and no ruling will be sought from the IRS regarding this, or any other, aspect of the U.S. federal income tax treatment of the Notes. Accordingly, there can be no assurances that the IRS will not contend, and that a court will not ultimately hold, that any of the Classes of Secured Notes are equity in the Issuer or that any of the other items discussed below under "U.S. federal income tax considerations" are treated differently. If any of the Secured Notes were treated as equity in the Issuer for U.S. federal income tax purposes, there might be adverse tax consequences to U.S. Holders (as defined below) as a result of the ownership and upon the sale, exchange, or other disposition of, or the receipt of certain types of distributions on, such Notes, as discussed under "U.S. federal income tax considerations -– Tax treatment of U.S. Holders of Subordinated Notes", below.

As described below under "U.S. federal income tax considerations -– Tax treatment of U.S. Holders of the Secured Notes", the Class C Notes, Class D Notes and Class E Notes will be treated as issued with original issue discount ("OID") and, as a result, U.S. Holders (as defined below) of the Class C Notes, the Class D Notes and the Class E Notes may be required to include in gross income increasingly greater amounts of OID and may be required to include OID in advance of the receipt of cash attributable to such income.

Although issued in the form of debt, based on the capital structure of the Issuer and the terms of the Subordinated Notes, it is likely that the Subordinated Notes will be treated as equity for U.S. federal income tax purposes. The Issuer will treat, and each holder of a Subordinated Note will agree by purchase of such Subordinated Note to treat, in the absence of an administrative determination or judicial ruling to the contrary, the Subordinated Notes as equity for U.S. federal income tax purposes. A U.S. Holder (as defined below) of a Subordinated Note would generally be treated as owning an equity interest in a passive foreign investment company for U.S. federal income tax purposes. As such, a U.S. Holder (as defined below) investing in the Subordinated Notes (or any Class of Notes that is recharacterized as equity for U.S. federal income tax purposes) typically has an option to either (a) make an election to treat the Issuer as a qualified electing fund ("QEF") and to include in gross income on a current basis (i) as ordinary income, its pro rata share of the Issuer's ordinary earnings, and (ii) as long term capital gain, its pro rata share of the Issuer's net capital gain, whether or not distributed or (b) to report any gain on the disposition of any Subordinated Notes as ordinary income, rather than capital gain, and to compute the tax liability on such gain and any "Excess Distributions" (as defined below) received in respect of the Subordinated Notes as if such items had been earned ratably over each day in the U.S. Holder's holding period (or a certain portion thereof) for such Subordinated Notes. A U.S Holder that does not make a QEF election would be subject to tax on such items at the highest ordinary income tax rate for each taxable year, other than the current year, in which the items were treated as having been earned, regardless of the rate otherwise applicable to the U.S. Holder. Further, such U.S. Holder would also be liable for an interest charge as if such income tax liabilities had been due with respect to each such prior year. For purposes of these rules, gifts, exchanges pursuant to corporate reorganizations and use of the Subordinated Notes as security for a loan may be treated as a taxable disposition of such Subordinated Notes.

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Depending on the ultimate composition of the pool of equity investors, the Issuer may be classified as a controlled foreign corporation, in which case a U.S. Shareholder (as defined below) may be required to pay income tax based on its pro rata share of the Issuer's "Subpart F income" generally as if such shareholder had made the QEF election, except that no portion of the amount includible in income by the U.S. Shareholder will be taxable as net capital gain.

Generally, a QEF election should be made on or before the due date for filing the Holder's U.S. federal income tax return for the first taxable year during which such Holder held the Note that is deemed to be an equity interest in the Issuer for U.S. federal income tax purposes. A Holder making this election is required to report its pro rata share of the Issuer's income regardless of whether the Issuer makes cash distributions during the period. The Issuer may have in any given year substantial amounts of earnings for U.S. federal income tax purposes that are not distributed on the Subordinated Notes. A Holder making a QEF election generally has the ability to defer paying the tax on the phantom income until the cash is received, subject to a non-deductible interest charge.

A U.S. Holder (as defined below) that does not make a QEF election generally will pay income tax on the amount of cash received in any year including both certain distributions by the Issuer and any gain recognized on the disposition of the Subordinated Notes. Annually, commencing in the second year of the investment, to the extent that distributions exceed 125 percent of the average distribution for the prior three years (or lesser period if the Subordinated Notes are held for less than three prior years), such "excess distributions" are allocated ratably over the Holder's holding period and are subject to income tax as ordinary income in the current year and at the highest rate in effect for individuals or corporations in the preceding years. An interest charge at a statutory rate would also be imposed as if the excess distributions and the gains recognized on the disposition of the Subordinated Notes were earned rateably over the Holder's holding period.

The Issuer will not seek a ruling from the IRS regarding the characterisation of the Notes for U.S. federal income tax purposes and there can be no assurance that the IRS will agree with, or a court will uphold, the conclusions expressed herein. Prospective investors should carefully review the discussion under "U.S. federal income tax considerations" below for a more complete discussion regarding the characterisation of, and the consequences of investing in, the Notes for U.S. federal income tax purposes and should consult their own tax advisors regarding the tax consequences of investing in the Notes under their particular situation.

There would be an adverse effect if the Issuer were determined to be engaged in a U.S. trade or business.

Upon the issuance of the Notes, the Issuer will receive an opinion from Special U.S. Tax Counsel to the effect that, although no activity closely comparable to that contemplated by the Issuer has been the subject of any Treasury Regulation, revenue ruling or judicial decision, under current law and assuming compliance with the Management Agreement, the Indenture, the Subordinated Note Paying Agency Agreement, and other related Transaction Documents by all parties thereto, the Issuer's contemplated activities will not cause it to be engaged in a trade or business in the United States under and, consequently, the Issuer's profits will not be subject to U.S. federal income tax on a net income basis (or the branch profits tax described below). The opinion is based on certain assumptions and on certain representations and agreements regarding restrictions on the conduct of the activities of the Issuer and the Collateral Manager.

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Although the Issuer intends to conduct its business in accordance with such assumptions, representations and agreements, if it were nonetheless determined that the Issuer was engaged in a U.S. trade or business and had taxable income that is effectively connected with such U.S. trade or business, then the Issuer would be subject to the regular U.S. corporate income tax on such effectively connected taxable income and possibly to the 30 percent branch profits tax as well. Such taxes would reduce the amounts available to make payments on the Notes. Investors should note that the Treasury and the IRS recently announced that they are considering taxpayer requests for specific guidance on, among other things, whether a foreign person may be treated as engaged in a trade or business in the United States virtue of entering into credit default swaps, such as the CDS Portfolio Assets. However, the Treasury and the IRS have not yet provided any guidance on whether they believe entering into credit default swaps may cause a foreign person to be treated as engaged in a trade or business in the United States and if so, what facts and circumstances must be present for this conclusion to apply. Any future guidance issued by the Treasury and/or the IRS may have an adverse impact on the tax treatment of the Issuer. See discussion under the heading "U.S. federal income tax considerations— Tax treatment of the Issuer" below. There can be no assurance that, if the Issuer were determined to be engaged in a trade or business in the United States and, thus, subject to U.S. federal income taxes, remaining payments on the Collateral would be sufficient to make timely payments of interest on, and payment of principal at the applicable stated maturity of the Notes. In addition, interest paid on the Secured Notes or distributions from Interest Proceeds with respect to the Subordinated Notes to a holder that is not a U.S. Holder (as defined below) could in such circumstance be subject to a 30 percent U.S. withholding tax.

Each of the Issuer and the Co-Issuer is recently formed, has no significant operating history, has no assets other than the Collateral and the Composite Note Collateral and is limited in its permitted activities.

Each of the Issuer and the Co-Issuer is a recently incorporated or organized entity and has no prior operating history or track record. Accordingly, neither of the Issuer nor the Co-Issuer has a performance history for a prospective investor to consider in making its decision to invest in the Notes.

The Offered Securities are not guaranteed by the Issuer, the Co-Issuer, the Placement Agent, the Synthetic Counterparty, the Collateral Manager, JPMorgan Financing Party, the TRS Counterparty, the Trustee or the Subordinated Note Paying Agent.

None of the Co-Issuers, the Placement Agent, the Synthetic Counterparty, the Collateral Manager, JPMorgan Financing Party, the TRS Counterparty, the Trustee or the Subordinated Note Paying Agent or any affiliate thereof makes any assurance, guarantee or representation whatsoever as to the expected or projected success, profitability, return, performance result, effect, consequence or benefit (including legal, regulatory, tax, financial, accounting or otherwise) to investors of ownership of the Offered Securities and no purchaser may rely on any such party for a determination of expected or projected success, profitability, return, performance result, effect, consequence or benefit (including legal, regulatory, tax, financial, accounting or otherwise) to such purchaser of ownership of the Notes. Each purchaser of any Class of the Notes and the Composite Notes, by its acceptance thereof, will be deemed, and each purchaser of the Subordinated Notes, by its acceptance thereof, will be required, to represent to the Issuer or the Placement Agent, as applicable, among other things, that such purchaser has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors regarding investment in the Offered Securities as such purchaser has deemed necessary and that the investment by such purchaser is

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within its powers and authority, is permissible under applicable laws governing such purchase, has been duly authorized by it and complies with applicable securities laws and other laws.

Non-compliance with restrictions on ownership of the Offered Securities and the United States Investment Company Act of 1940 could adversely affect the Issuer.

Neither the Issuer nor the Co-Issuer has registered with the United States Securities and Exchange Commission ("SEC") as an investment company pursuant to the Investment Company Act, in reliance on an exception under Section 3(c)(7) of the Investment Company Act for investment companies (a) whose outstanding securities are beneficially owned only by "qualified purchasers" and "knowledgeable employees" and certain transferees thereof identified in Rules 3c-5 and 3c-6 under the Investment Company Act and (b) which do not make a public offering of their securities in the United States.

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, but are not limited to, the following: (a) the SEC could apply to a district court to enjoin the violation; (b) investors in the Issuer and the Co-Issuer could sue the Issuer and the Co-Issuer and recover any damages caused by the violation; and (c) any contract to which the Issuer and/or the Co-Issuer is party that is made in violation of the Investment Company Act or whose performance involves such violation 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 non-enforcement and would not be inconsistent with the purposes of the Investment Company Act. In addition, such a finding would constitute an Event of Default under the Indenture. Should the Issuer or the Co-Issuer be subjected to any or all of the foregoing, the Issuer and the Co-Issuer would be materially and adversely affected.

Book-entry holders are not considered holders under the Indenture.

Holders of beneficial interests in any Offered Securities held in global form will not be considered holders of such Offered Securities under the Indenture. After payment of any interest, principal or other amount to DTC, neither the Issuer nor the Co-Issuer will have any responsibility or liability for the payment of such amount by DTC or to any holder of a beneficial interest in a Note or a Composite Note. DTC or its nominee will be the sole holder of any Notes and Composite Notes held in global form, and therefore each person owning a beneficial interest in an Offered Security held in global form must rely on the procedures of DTC (and if such person is not a participant in DTC on the procedures of the participant through which such person holds such interest) with respect to the exercise of any rights of a holder of a Note or a Composite Note, as applicable, under the Indenture.

Credit ratings are not a guarantee of quality.

Credit ratings of the Offered Securities represent rating agencies' opinions regarding their credit quality and are not a guarantee of quality. Rating agencies attempt to evaluate the safety of principal and interest payments and do not evaluate the risks of fluctuations in market value. Therefore, they may not fully reflect the true risks of an investment. Also, rating agencies may fail to make timely changes in credit ratings in response to subsequent events, so that an issuer's current financial condition may be better or worse than a rating indicates. Consequently, credit ratings of the Funded Portfolio Assets and the CDS Portfolio Assets will be used by the Collateral Manager only as a preliminary indicator of investment quality. Investments in non-investment grade

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and comparable unrated obligations will be more dependent on the Collateral Manager's credit analysis than would be the case with investments in investment-grade debt obligations.

Prior investment results are not indicative of future performance.

The prior investment results of the Collateral Manager and the persons associated with the Collateral Manager or any other entity or person described herein are not indicative of the Issuer's future investment results. The nature of, and risks associated with, the Issuer's future investments may differ substantially from those investments and strategies undertaken historically by such persons and entities. There can be no assurance that the Issuer's investments will perform as well as the past investments of any such persons or entities.

The Reinvestment Period is subject to early termination.

Although the Reinvestment Period is scheduled to terminate on the Payment Date occurring in August, 2011, the Reinvestment Period may terminate prior to such date if (i) the Collateral Manager (in its sole discretion) notifies the Trustee and the Synthetic Counterparty that, in light of the composition of Portfolio Assets, general market conditions and other factors, the Collateral Manager (in its sole discretion) has determined that investments in additional Portfolio Assets within the foreseeable future would either be impractical or not beneficial, (ii) an Event of Default occurs and is continuing or (iii) a Sequential Paydown Trigger Event occurs. The inability to enter into new Portfolio Assets after an early termination of the Reinvestment Period may shorten the expected average lives of the Secured Notes and the Composite Notes and the duration of the Subordinated Notes.

There is dependence on key personnel of the Collateral Manager.

Because the composition of the CDS Portfolio Assets and the Funded Portfolio Assets will vary over time, the performance of the CDS Portfolio Assets and the Funded Portfolio Assets depends heavily on the skills of the Collateral Manager in analyzing, selecting and managing the CDS Portfolio Assets and the Funded Portfolio Assets. As a result, the Issuer will be highly dependent on the financial and managerial experience of the Collateral Manager and certain of its officers to whom the task of managing the Collateral has been assigned. There can be no assurance that the employees of the Collateral Manager responsible for the management of the Issuer's portfolio as of the Closing Date will remain employed by the Collateral Manager or otherwise remain involved with managing the Issuer's portfolio of investments after the Closing Date. It will not be an Event of Default under the Indenture or constitute "cause" for removal of the Collateral Manager under the Management Agreement if any such individual is no longer employed by the Collateral Manager or otherwise involved with the management of the Issuer's investment portfolio. Moreover, the Management Agreement may be terminated under certain circumstances described herein. See "Security for the Secured Notes—The Management Agreement" and "The Collateral Manager".

Relating to the Collateral

There are risks associated with the reference portfolio of CDS Portfolio Assets and Funded Portfolio Assets and Treasury Strips.

The Synthetic Counterparty may deliver any Delivered Obligations to the Issuer in exchange for the related Physical Settlement Amount. In addition, the Collateral Manager may, under certain

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circumstances, direct the Issuer, and the Issuer shall be permitted to terminate or remove CDS Portfolio Assets. A CDS Portfolio Asset will be terminated at a price agreed between the Collateral Manager and the Synthetic Counterparty. In the event that the Collateral Manager and the Synthetic Counterparty cannot agree upon the price at which such CDS Portfolio Asset should be terminated, then notwithstanding anything to the contrary herein, the Collateral Manager will not be able to remove such Portfolio Asset from the Reference Portfolio by terminating the related confirmation. Notwithstanding certain restrictions with respect to the ability of the Collateral Manager to direct dispositions of Portfolio Assets (including CDS Portfolio Assets) set forth in the Indenture, the Disposition of Portfolio Assets could result in losses to the Issuer, which losses could affect the timing and amount of payments in respect of the Offered Securities or result in the reduction in or withdrawal of the rating on any or all of the Secured Notes and/or the Composite Notes by one or more of the Rating Agencies. Although the Issuer is permitted to invest in Funded Portfolio Assets and CDS Portfolio Assets, the Issuer may find that, as a practical matter, these investment opportunities are not available to it for a variety of reasons such as the limitations imposed by the Eligibility Criteria and the Collateral Quality Tests. At any time there may be a limited universe of investments that would satisfy the Eligibility Criteria and the Collateral Quality Tests given the other investments in the Issuer's portfolio. As a result, the Issuer may at times find it difficult to acquire suitable investments and may decide to terminate the Reinvestment Period. See "Security for the Secured Notes". Further, although any reinvestment in additional Portfolio Assets will be subject to the Collateral Quality Tests and certain Eligibility Criteria, the composition of the portfolio of Collateral could change as a result of such reinvestment by the Collateral Manager. It is possible that the additional Portfolio Assets will not perform as well as the Portfolio Assets purchased or entered into on the Closing Date. If the Issuer is unable to enter into or acquire sufficient suitable Portfolio Assets, principal of all or a portion of the Secured Notes may be repaid on each Payment Date during the Reinvestment Period. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Mandatory Redemption". Circumstances and events affecting the portfolio of Portfolio Assets after the initial composition of such portfolio may result in such portfolio ceasing to meet the original criteria and restrictions for their selection.

The amount and nature of the Portfolio Assets securing the Secured Notes have been established in light of certain assumptions with respect to defaults on the Funded Portfolio Assets and payments to be made by the Issuer in respect of the CDS Portfolio Assets. However, if defaults under the Funded Portfolio Assets and/or payments by the Issuer (including termination payments) in respect of CDS Portfolio Assets exceed such assumed levels, payments on the Offered Securities could be materially adversely affected. In particular, CDS Portfolio Assets may be "fixed cap" or "variable cap" and where "variable cap" applies to a CDS Portfolio Asset, payments payable by the Issuer in respect of interest shortfalls (unlike where "fixed cap" applies) may significantly exceed the premium due from the Synthetic Counterparty with respect to the related CDS Portfolio Asset, thus reducing the funds available to the Issuer and potentially adversely affecting the ability of the Issuer to make payments in respect of the Offered Securities. The value of the Portfolio Assets generally will fluctuate with, among other things, the financial condition of the obligors on or issuers of the Funded Portfolio Assets and the Reference Obligations related to the CDS Portfolio Assets, 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 interest rate spreads over LIBOR (or in the case of fixed rate Portfolio Assets, over the applicable swap rates) of the Portfolio Assets acquired by the Issuer on the Closing Date reflect lower levels than the interest rate spreads prevailing in the current market. In the event that such interest rate spreads further widen after the Closing Date, the value of the Portfolio Assets is likely to decline and, in the case of a

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substantial spread widening, could decline by a substantial amount. If any deficiencies in the payments of the underlying Collateral should occur, payment of the Offered Securities may be adversely affected. In addition, if the Collateral Manager resigns or is removed and no replacement manager is appointed pursuant to the terms of the Management Agreement, the portfolio of Portfolio Assets will be static and no further dispositions of Portfolio Assets will be made until a substitute collateral manager is appointed.

The concentration of the CDS Portfolio Assets or Funded Portfolio Assets in any one industry or geographic region will subject the Offered Securities to a greater degree of risk of loss resulting from defaults within such industry or geographic region.

Holders of the Composite Notes may be adversely affected by changes in interest rates that affect the market value of the Treasury Strip from time to time. A portion of the Treasury Strip may be subject to sale prior to each Composite Note Payment Date as described in "Description of the Offered Securities—The Composite Notes". No assurance can be given that adverse changes in interest rates will not affect the sale proceeds realized from any sale of the Treasury Strip.

The ability of the Issuer and the Co-Issuer to meet their obligations under the Offered Securities is dependent on the creditworthiness of the Synthetic Counterparty and issuers of Funded Portfolio Assets.

The ability of the Co-Issuers to meet their obligations under the Offered Securities will be dependent on the Issuer's receipt of payments from the Synthetic Counterparty pursuant to the CDS Portfolio Assets. In addition, in the event of the insolvency of the Synthetic Counterparty, the Issuer will be treated as a general creditor of the Synthetic Counterparty, and will not have any claim with respect to the Reference Obligations. Consequently, in addition to relying upon the creditworthiness of the Reference Entities, the Issuer will also be relying upon the creditworthiness of the Synthetic Counterparty to perform its obligations under the CDS Portfolio Assets and of the issuers of or obligors with respect to the Funded Portfolio Assets. As a result, the Offered Securities are subject to an additional degree of risk with respect to defaults by the Synthetic Counterparty as well as by the reference obligor and the underlying obligors or issuers of the Funded Portfolio Assets. Moody's or S&P may downgrade any Class of Secured Notes or Composite Notes then rated by it if the Synthetic Counterparty has been downgraded by Moody's or S&P, respectively.

The Issuer will be exposed to the creditworthiness of the TRS Counterparty.

The amounts on deposit in the TRS Asset Account are expected to be invested in TRS Covered Securities, which, if required to be liquidated to make payments owing by the Issuer to any of the Secured Parties, shall be delivered in exchange for payment by the TRS Counterparty pursuant to the Total Return Swap and, accordingly, the Issuer will be exposed to the creditworthiness of the TRS Counterparty. The insolvency of the TRS Counterparty or a default by the TRS Counterparty under the Total Return Swap would adversely affect the ability of the Issuer to pay principal and interest and other amounts and other amounts when due under the Offered Securities and could result in a downgrade of the ratings of the Secured Notes or the Composite Notes by the Rating Agencies. See "Security for the Secured Notes—The Total Return Swap" and "The TRS Counterparty".

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The Issuer will be exposed to the creditworthiness of the Short Synthetic Counterparties.

The Issuer may enter into Offsetting Short Transactions with respect to certain Defaulted Portfolio Assets, Credit-Impaired Portfolio Assets, Credit-Improved Portfolio Assets or a Portfolio Asset that may be terminated or sold in a Discretionary Sale. Following the occurrence of a credit event or other events with respect to any such Portfolio Assets, and the satisfaction of certain other conditions, the related Short Synthetic Counterparty will be obligated to make a settlement payment to the Issuer. However, the Issuer's payment of Short Synthetic Payments will reduce Interest Proceeds and/or Principal Proceeds. Moreover, the Issuer will be subject to counterparty risk with respect to the applicable Short Synthetic Counterparty.

Certain reductions in the Principal/Notional Balances can affect payments on the Offered Securities.

Reductions to any Principal/Notional Balance (as described under "Security for the Secured Notes—CDS Portfolio Assets—Principal/Notional Balances") will reduce the Fixed Amounts payable by the Synthetic Counterparty to the Issuer under the related CDS Portfolio Assets and effectively reduce the available proceeds from which the Issuer can make payments on the Offered Securities.

There are certain other risks relating to the CDS Portfolio Assets.

Investments in CDO Securities through the CDS Portfolio Assets present risks in addition to those resulting from direct purchases of such assets. Under the CDS Portfolio Assets, the Issuer will have a contractual relationship only with the Synthetic Counterparty. Consequently, the Issuer will have no legal or beneficial interest in any Reference Obligation or any other obligation of any Reference Entity (other than any Delivered Obligations). The Issuer will have rights solely against the Synthetic Counterparty, in accordance with each CDS Portfolio Asset, and will have no recourse against any of the Reference Entities. The Issuer will have no right directly to enforce compliance by the obligor under any Reference Obligation with the terms thereof, will not have any rights of set-off against such obligor, will not have any voting rights with respect to such Reference Obligation, will not directly benefit from any collateral supporting such Reference Obligation and will not have the benefit of the remedies that would normally be available to a holder of such Reference Obligation.

Following the occurrence of a Credit Event with respect to a Reference Entity, the Issuer will, at the Synthetic Counterparty's option, be obligated to purchase the related Reference Obligation at par and such price will likely exceed the value of such Reference Obligations.

Each CDS Portfolio Asset may have a different expected return, a different (and potentially greater) probability of default and expected loss characteristics following a default, and a different expected recovery following default than the related Reference Obligation. Additionally, when compared to the Reference Obligation, the terms of the applicable CDS Portfolio Asset may provide for different maturities, payment dates, interest rates, interest rate references, credit exposures, or other credit or non-credit related characteristics. Upon maturity, default, acceleration or any other termination (including a put or call) other than pursuant to a credit event (as defined therein) of each CDS Portfolio Asset, the terms of each CDS Portfolio Asset will permit the Synthetic Counterparty to satisfy its obligations under such CDS Portfolio Asset by delivering to the Issuer a par amount different than the then current market value of the Reference Obligation.

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Credit Events and Floating Amounts under the CDS Portfolio Assets may effect performance of the Notes.

Investing in the CDS Portfolio Assets gives the Issuer credit and interest rate exposure to a portfolio of Reference Obligations, each of which is a CDO Security. The Reference Obligations will be primarily investment grade at the time the Issuer invests in the CDS Portfolio Assets, but any such rating may be downgraded or withdrawn thereafter.

Under each CDS Portfolio Asset, the Issuer will be obligated to pay Floating Amounts to the Synthetic Counterparty. In each case, the occurrence of such Floating Amounts and/or Credit Events may adversely affect the amounts of interest and principal proceeds available for payments on the Offered Securities and may result in a loss of an investor's investment.

There are legal risks relating to the CDS Portfolio Assets.

The CDS Portfolio Assets will be "Pay As You Go" credit default swaps. "Pay As You Go" credit default swaps are a new type of credit default swap developed to incorporate the unique structures of Structured Finance Securities. In June 2006, the International Swaps and Derivatives Association, Inc. ("ISDA") published its latest form confirmation for "Pay As You Go" credit default swap referencing CDO Securities. While ISDA has published its form confirmations and has published and supplemented the 2003 ISDA Credit Derivatives Definitions as published by ISDA (the "Credit Derivatives Definitions") in order to facilitate transactions and promote uniformity in the credit default swap market, the credit default swap market is expected to change and the "Pay As You Go" credit default swap forms and the Credit Derivatives Definitions and terms applied to credit derivatives are subject to interpretation and further evolution. In addition, the form credit default swap confirmation upon which the Confirmations with respect to the CDS Portfolio Assets are expected to be based is structured for CDO Securities. As a result of the continued evolution of the ISDA "Pay As You Go" credit default swap forms, the credit default swap confirmations may differ in the future because of future market standards. Such a result may have a negative impact on the liquidity and market value of the CDS Portfolio Assets.

There can be no assurances that changes to the Credit Derivatives Definitions and other terms applicable to credit derivatives generally will be predictable or favorable to the Issuer. Future amendments or supplements to the "Pay As You Go" confirmation forms and amendments and supplements to the Credit Derivatives Definitions that are published by ISDA will only apply to any of the CDS Portfolio Assets if the Issuer and the Synthetic Counterparty agree to amend such CDS Portfolio Assets to incorporate such amendments or supplements and other conditions to amending such CDS Portfolio Assets have been met.

The holders of the Offered Securities will have limited access to certain information.

The holders of the Offered Securities will not have any right to obtain from the Issuer, the Trustee, the Synthetic Counterparty or the Collateral Manager information on the Funded Portfolio Assets, the Reference Obligations, the TRS Covered Securities or information regarding any obligation of any Funded Portfolio Asset, Reference Obligation or TRS Covered Securities. The Synthetic Counterparty (except to the extent of JPMorgan Chase Bank, National Association serving as calculation agent under any Confirmation) will have no obligation to keep the Issuer, the Trustee, the Collateral Manager or the Noteholders informed as to matters arising in relation to any Reference Obligation including whether or not circumstances exist under which there is a possibility of the occurrence of a Credit Event or an obligation to make Floating Amounts.

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Investing in CDO Securities involves particular risks.

The Reference Portfolio of CDS Portfolio Assets and Funded Portfolio Assets will consist of or reference CDO Securities. Investing in CDO Securities may entail a variety of unique risks. Generally, CDO Securities 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 CDO Security changes based on multiples of changes in interest rates or inversely to changes in interest rates). In addition, certain CDO Securities 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 non-payment, unpaid interest will generally be capitalized and added to the outstanding principal balance of the related security. Furthermore, the performance of a CDO Security 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 appointed by the issuer of the CDO Security in managing securitized assets. The price of a CDO Security, 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, CDO Securities may involve initial and ongoing expenses above the costs associated with the related direct investments.

CDO Securities are securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from, or market value of, a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the CDO Securities.

Credit risk is an important issue in CDO Securities because of the significant credit risks inherent in the underlying collateral and because issuers are primarily private entities. The structure of a CDO Security and the terms of the investors' interest in the collateral can vary widely depending on the type of collateral, the desires of investors and the use of credit enhancements. Although the basic elements of all CDO Securities are similar, individual transactions can differ markedly in both structure and execution. Important determinants of the risk associated with issuing or holding the securities include the process by which principal and interest payments are allocated and distributed to investors, how credit losses affect the issuing vehicle and the return to investors in such CDO Securities, whether collateral represents a fixed set of specific assets or accounts, whether the underlying collateral assets are revolving or closed-end, under what terms (including maturity of the asset-backed instrument) any remaining balance in the accounts may revert to the issuing entity and the extent to which the entity that is the actual source of the collateral assets is obligated to provide support to the issuing vehicle or to the investors in such CDO Securities.

Holders of CDO Securities bear various risks, including credit risks, liquidity risks, interest rate risks, market risks, operations risks, structural risks and legal risks. See "Security for the Secured Notes—The Funded Portfolio Assets and Reference Obligations" below.

CDO Securities generally are limited recourse obligations of the issuer thereof payable solely from the underlying assets of the issuer ("CDO Collateral") or proceeds thereof. Consequently, CDO Securities must rely solely on distributions on the underlying CDO Collateral or proceeds thereof for payment in respect thereof. If distributions on the underlying CDO Collateral are insufficient to make payments on the CDO Securities, no other assets will be available for payment of the

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deficiency and following realization of the underlying assets, the obligations of the issuer to pay such deficiency shall be extinguished.

CDO Securities are subject to credit, liquidity and interest rate risks. CDO Collateral may consist of high yield debt securities, loans, structured finance securities and other debt instruments. High yield debt securities are generally unsecured (and loans may be unsecured) and may be subordinated to certain other obligations of the issuer thereof. The below investment grade ratings of high yield securities reflect 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 the issuer to make payments of principal or interest. Such investments may be speculative.

Issuers of CDO Securities may acquire interests in loans and other debt obligations by way of assignment or participation. The purchaser of an assignment typically succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect to the debt obligation; however, its rights can be more restricted than those of the assigning institution.

CDO Securities are subject to interest rate risk. The CDO Collateral of an issuer of CDO Securities may bear interest at a fixed rate while the CDO Securities issued by such issuer may bear interest at a floating rate, and vice versa. As a result, there could be a floating/fixed rate or basis mismatch between such CDO Securities and CDO Collateral which bears interest at a fixed rate and there may be a timing mismatch between the CDO Securities and assets that bear interest at a floating rate as the interest rate on such assets bearing interest at a floating rate may adjust more frequently or less frequently, on different dates and based on different indices than the interest rates on the CDO Securities. As a result of such mismatches, an increase or decrease in the level of the floating rate indices could adversely impact the ability to make payments on the CDO Securities.

In addition, certain CDO Securities may by their terms defer payment of interest or pay interest "in-kind".

While the Issuer's investments in Portfolio Assets will be subject to the Eligibility Criteria, because these investment guidelines treat CDO Securities as a separate asset type and do not require the Issuer to take into account the underlying collateral backing a CDO Security, these guidelines (including those relating to issuer, servicer and asset-type concentrations) may be indirectly exceeded through the Issuer's investments in CDO Securities. For example, the underlying collateral backing a CDO Security may include securities that are also owned directly by the Issuer at a time when direct investment by the Issuer in such securities is near or equal to the concentration limits set forth in the Eligibility Criteria. In addition, because the investment guidelines of the Underlying Instruments of a CDO Security may allow investment by the related issuer in securities that the Issuer would not otherwise be permitted to purchase directly, the Issuer may, through the acquisition of such CDO Security, indirectly acquire such prohibited securities.

There are additional risks relating to sub-prime investments.

Recent developments in the residential mortgage market, including the nonprime sector, could adversely affect the performance and market value of various CDO Securities (and therefore CDS Portfolio Assets and Funded Portfolio Assets), which could adversely affect the holders of the Offered Securities.

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Recently, the residential mortgage market in the United States has experienced a variety of difficulties and changed economic conditions that could adversely affect the performance and market value of various CDO Securities (and therefore CDS Portfolio Assets and Funded Portfolio Assets). In particular, issuers of many of the CDO Securities are in the business of originating, servicing and investing in mortgage loans and related activities. As a result of these developments, such issuers will experience (or may continue to experience) credit, liquidity and other difficulties, which could affect the CDO Securities issued or guaranteed by them. These developments could in turn adversely affect the CDS Portfolio Assets and Funded Portfolio Assets and therefore the holders of the Offered Securities (with losses to be borne in inverse order of the priorities of the Notes).

Delinquencies and losses with respect to residential mortgage loans generally have increased in recent months, and may continue to increase, particularly in the nonprime sector. The "nonprime" mortgage sector consists of loan origination and servicing of mortgage loans (including second-lien and home equity lines) made to (i) "subprime" borrowers that have poor or "impaired" credit histories, including, for example, prior bankruptcy of the borrower and (ii) "Alt-A" borrowers that may have credit scores above subprime levels but below prime levels and that borrow under mortgage loans with non-traditional features, such as negative amortization. Nonprime mortgage loans generally have higher interest rates than loans made to "prime" borrowers. In addition, in recent months housing prices and appraisal values in many states have declined or stopped appreciating, after extended periods of significant appreciation. A continued decline or an extended flattening of those values may result in additional increases in delinquencies and losses on residential mortgage loans generally.

Another factor that may result in higher delinquency rates is the increase in monthly payments on adjustable rate mortgage loans. Borrowers with adjustable rate mortgage loans are being exposed to increased monthly payments when the related mortgage interest rate adjusts upward from the initial fixed rate or a low introductory rate, as applicable, to the rate computed in accordance with the applicable index and margin. This increase in borrowers' monthly payments, together with any increase in prevailing market interest rates, may result in significantly increased monthly payments for borrowers with adjustable rate mortgage loans. This issue is exacerbated by a rising interest rate environment.

Borrowers seeking to avoid these increased monthly payments by refinancing their mortgage loans may no longer be able to find available replacement loans at comparably low interest rates. A decline in housing prices may also leave borrowers with insufficient equity in their homes to permit them to refinance. In addition, many mortgage loans have prepayment premiums that inhibit refinancing. Furthermore, borrowers who intend to sell their homes on or before the expiration of the fixed rate periods on their mortgage loans may find that they cannot sell their properties for an amount equal to or greater than the unpaid principal balance of their loans. These events, alone or in combination, may contribute to higher delinquency rates.

Higher delinquencies and default rates may decrease the value of these mortgage loans in the mortgage market, forcing originators of subprime or adjustable mortgage loans to sell these loans at a greater discount to par, resulting in decreased revenues or losses. Additionally, delinquencies and defaults may result in increased repurchase obligations with respect to the sellers of these mortgage loans, diverting capital for that purpose, and exposing the seller to 100% of the risk of loss on the loans upon repurchase. Even if the seller is not required to repurchase a delinquent or defaulted loan, increased defaults and delinquencies may decrease the value of, and cash flow from, any residual interests retained by sellers of mortgage loans in the securitization market. Moreover, servicing delinquent loans may result in higher costs for the servicer without a corresponding

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increase in compensation. Finally, in certain securitization transactions, if certain triggers are met with respect to loss and delinquency numbers, the servicer may lose its rights to service the portfolio, which would result in decreased servicing revenues and reputational damage as a servicer.

A rising interest rate environment may decrease the number of borrowers seeking to refinance their loans, thus decreasing overall originations. Declining real estate values also have the result of reducing a borrower's equity in a home and making new loan originations more difficult.

These factors, among others, may have the overall effect of increasing costs and expenses of these seller/servicers while at the same time decreasing servicing cash flow and loan origination revenues. This will adversely affect their ability to meet their existing financial obligations and obtain additional financing. In turn, this will increase their cost of funds and of doing business generally. These developments may negatively affect the ability of the related issuers of CDO Securities to make payments on such CDO Securities. It is expected that the Funded Portfolio Assets and CDS Portfolio Assets acquired or entered into by the Issuer will be or will reference CDO Securities that may be affected by the recent developments in the non-prime sector. If such CDO Securities perform poorly, there may be an increased likelihood of Floating Amount Events and/or Credit Events under the CDS Portfolio Assets (each as defined therein) and the Issuer may therefore be more likely to make Floating Payments and/or payments of Physical Settlement Amounts to the Synthetic Counterparty under such CDS Portfolio Assets. Such CDS Portfolio Assets and Funded Portfolio Assets may also be more likely to decline in value.

International investing involves particular risks.

Subject to compliance with certain Eligibility Criteria described herein, the Reference Obligations under the CDS Portfolio Assets and Funded Portfolio Assets may consist of obligations of an issuer located in a Special Purpose Vehicle Jurisdiction or obligations of a Qualifying Foreign Obligor. Investing outside the United States may involve greater risks than investing in the United States. These risks may include: (a) less publicly available information; (b) varying levels of governmental regulation and supervision; (c) the difficulty of enforcing legal rights in a foreign jurisdiction and uncertainties as to the status, interpretation and application of laws therein, (d) risks of economic dislocations in such other country and (e) less data on historic default and recovery rates for the Funded Portfolio Assets and the Reference Obligations. Moreover, many foreign companies are not subject to accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies.

In addition, 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 such transactions. 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.

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In many 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 Issuer's investments in such foreign countries. 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 self sufficiency and balance of payments position.

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 investment activity of the Synthetic Counterparty, the Collateral Manager, JPMorgan Financing Party and the Placement Agent and their affiliates. 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 JPMorgan Companies.

Various potential and actual conflicts of interest may arise as a result of the investment banking, commercial banking, asset management, financing and financial advisory services and products provided by JPMorgan Chase Bank, National Association and its affiliates (each, a "JPMorgan Company" and together the "JPMorgan Companies"), including JPMorgan and JPMorgan Chase Bank, National Association, to the Issuer, the issuers of the Funded Portfolio Assets and the Reference Obligations and others, as well as in connection with the investment, trading and brokerage activities of the JPMorgan Companies. The following briefly summarizes some of these conflicts, but is not intended to be an exhaustive list of all such conflicts.

On the Closing Date, JPMorgan, in its capacity as the Warehouse Provider, is expected to sell to the Issuer Portfolio Assets having an Aggregate Principal/Notional Balance equal to at least 95% in the aggregate of the Ramp-Up Completion Date Balance. The purchase price of such Portfolio Assets will be the value (in certain cases, net of any hedging costs and expenses) on the date such Portfolio Assets were acquired or entered into by the Warehouse Provider for the Issuer's benefit (at the direction of the Collateral Manager) with the intention of transferring such Portfolio Assets to the Issuer. The current market value of certain of such Portfolio Assets may be less than the original purchase price or acquisition value thereof, and the Issuer bears this risk although JPMorgan rather than the Issuer received the interest or premium paid on the Portfolio Assets during the warehouse period and will pay the higher original purchase price for the Portfolio Assets in the case of Funded Portfolio Assets or receive a lower premium than current market rate in the case of CDS Portfolio Assets, as the case may be. In addition, the Synthetic Counterparty may enter into intermediating trades with a third party whereby, in connection with the entry into of any CDS Portfolio Asset, the Synthetic Counterparty will sell credit protection on the same reference obligation to that party. The premium payable by the Synthetic Counterparty to the Issuer under a CDS Portfolio Asset will be less than the premium payable to the Synthetic Counterparty on any corresponding intermediating trade as result of an intermediation fee payable by the Issuer to the Synthetic Counterparty on such intermediating trade. JPMorgan will serve as the placement agent (the "Placement Agent") for the Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, the Subordinated Notes and the Composite Notes (the "Placed Securities") and will be paid fees and commissions for such service by the Issuer from the proceeds of the issuance of the Offered

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Securities. One or more of the JPMorgan Companies may from time to time hold Offered Securities for investment, trading or other purposes. The Issuer may purchase, on the Closing Date, Funded Portfolio Assets from, to or through, and enter into the CDS Portfolio Assets with one or more of the JPMorgan Companies. Certain Eligible Investments may be issued, managed or underwritten by one or more of the JPMorgan Companies.

One or more of the JPMorgan Companies may:

• have placed or underwritten, or acted as a financial arranger, structuring agent or advisor in connection with the original issuance of, or may act as a broker or dealer with respect to, certain of Funded Portfolio Assets or the Reference Obligations;

• act as trustee, paying agent and in other capacities in connection with certain of the Funded Portfolio Assets or other classes of securities issued by an issuer of a Funded Portfolio Asset or a Reference Obligation or an affiliate thereof;

• be a counterparty to issuers of certain of the Funded Portfolio Assets or the Reference Obligations under the CDS Portfolio Assets;

• lend to certain of the issuers of Funded Portfolio Assets or Reference Obligations or their respective affiliates or receive guarantees from the issuers of those Funded Portfolio Assets or Reference Obligations or their respective affiliates;

• provide other investment banking, asset management, commercial banking, financing or financial advisory services to the issuers of Funded Portfolio Assets or Reference Obligations or their respective affiliates;

• have an equity interest, which may be a substantial equity interest, in certain issuers of Funded Portfolio Assets or Reference Obligations or their respective affiliates; or

• invest in, or cause an investment or funding vehicle (such as a commercial paper conduit) administered by it to invest in, Secured Notes, Composite Notes or Subordinated Notes.

When acting as a trustee, paying agent or in other service capacities with respect to the issuance of a Funded Portfolio Asset or a Reference Obligation, the JPMorgan Companies will be entitled to fees and expenses senior in priority to payments to such Funded Portfolio Asset or Reference Obligation. When acting as a trustee for other classes of securities issued by the issuer of a Funded Portfolio Asset or a Reference Obligation or an affiliate thereof, the JPMorgan Companies will owe fiduciary duties to the holders of such other classes of securities, which classes of securities may have differing interests from the holders of the class of securities of which the Funded Portfolio Asset or Reference Obligation is a part, and may take actions that are adverse to the holders (including the Issuer) of the class of securities of which the Funded Portfolio Asset or Reference Obligation, as the case may be, is a part. As the Synthetic Counterparty under the ISDA Master Agreement, JPMorgan Chase Bank, National Association might take actions adverse to the interests of the Issuer, including, but not limited to, demanding collateralization of its exposure under such agreements (if provided for thereunder) or terminating such swaps or agreements in accordance with the terms thereof. In addition, if the Collateral Manager wishes to remove a CDS Portfolio Asset by terminating the confirmation relating to such CDS Portfolio Asset, the Synthetic Counterparty and the Collateral Manager will mutually agree the termination payment due by one party to the CDS Portfolio Asset to the other party to the CDS Portfolio Asset. The Synthetic Counterparty has a conflict of interest

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with the Noteholders in determining the level of such termination payment. In making and administering loans and other obligations, the JPMorgan Companies might take actions including, but not limited to, restructuring a loan, foreclosing on or exercising other remedies with respect to a loan, requiring additional collateral or other credit enhancement, charging significant fees and interest, placing the obligor in bankruptcy or demanding payment on a loan guarantee or under other credit enhancement. The Issuer's purchase, holding and sale of Funded Portfolio Assets may enhance the profitability or value of investments made by the JPMorgan Companies in the issuers thereof. As a result of all such transactions or arrangements between the JPMorgan Companies and issuers of Funded Portfolio Assets or their respective affiliates, JPMorgan Companies may have interests that are contrary to the interests of the Issuer and the holders of the Offered Securities.

The Placement Agent, the Synthetic Counterparty and the JPMorgan Financing Party and certain of their respective affiliates are acting in a number of capacities in connection with the transactions described herein. The Placement Agent, the Synthetic Counterparty and the JPMorgan Financing Party and each of their respective affiliates acting in such capacities will have only the duties and responsibilities expressly agreed to by such entity in the relevant capacity and will not, by virtue of acting in any other capacity, be deemed to have other duties or responsibilities, other than as expressly provided with respect to each such capacity. The Placement Agent, the Synthetic Counterparty and the JPMorgan Financing Party and their respective affiliates in their various capacities may enter into business dealings from which they may derive revenues and profits in addition to the fees stated in the various Transaction Documents, without any duty to account therefor. In such dealings, the Placement Agent, the Synthetic Counterparty and the JPMorgan Financing Party and their respective affiliates may act in the same manner as if the Offered Securities had not been issued, regardless of whether any such action (including without limitation, any action that might constitute or give rise to a Credit Event) might have an adverse effect on a Reference Entity, a Reference Obligation or any guarantor in respect thereof or otherwise.

The Placement Agent, the Synthetic Counterparty and the JPMorgan Financing Party and their respective affiliates may hold long or short positions with respect to Reference Obligations and/or other securities or obligations of related Reference Entities and may enter into credit derivative or other derivative transactions with other parties pursuant to which it sells or buys credit protection with respect to one or more related Reference Entities and/or Reference Obligations. The Placement Agent, the Synthetic Counterparty and the JPMorgan Financing Party and their respective affiliates may act with respect to such transactions and may exercise or enforce, or refrain from exercising or enforcing, any or all of its rights and powers in connection therewith as if it had not entered into the CDS Portfolio Assets and the Total Return Swap, and without regard to whether any such action might have an adverse effect on the Issuer, the Noteholders, a related Reference Entity or any Reference Obligation. If the Placement Agent, the Synthetic Counterparty and the JPMorgan Financing Party or their respective affiliates, holds claims against a Reference Entity or a Reference Obligation other than in connection with the transactions contemplated in this Offering Circular, such party's interest as a creditor may be in conflict with the interests of the Issuer.

The JPMorgan Companies may, by virtue of the relationships described above or otherwise, at the date hereof or at any time hereafter, be in possession of information regarding certain of the issuers of the Funded Portfolio Assets or Reference Obligations and their respective affiliates, that is or may be material in the context of the Offered Securities and that is or may not be known to the general public. None of the JPMorgan Companies has any obligation, and the offering of the Offered Securities will not create any obligation on their part, to disclose to any purchaser of the Offered Securities any such relationship or information, whether or not confidential.

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There may exist conflicts of interest involving the holders of the Offered Securities.

One or more holders of the Offered Securities and their respective affiliates may hold long or short positions with respect to Reference Obligations and/or other securities or obligations of related Reference Entities and may enter into credit derivative or other derivative transactions with other parties, including the Synthetic Counterparty, pursuant to which it sells or buys credit protection with respect to one or more related Reference Entities and/or Reference Obligations. The holders of the Offered Securities and their respective affiliates may act with respect to such transactions and may exercise or enforce, or refrain from exercising or enforcing, any or all of its rights and powers in connection therewith without regard to whether any such action might have an adverse effect on the Issuer, the Noteholders, a related Reference Entity or any Reference Obligation.

There may exist conflicts of interest involving the Collateral Manager.

Various potential and actual conflicts of interest may arise from the overall investment activities of the Collateral Manager and its affiliates. The following briefly summarizes some of these conflicts but is not intended to be an exhaustive list of all such conflicts. The Collateral Manager and its affiliates may invest for the account of others in credit default swaps or directly in debt obligations that would be appropriate as Funded Portfolio Assets or Reference Obligations in respect of the CDS Portfolio Assets and have no duty in making such investments to act in a way that is favorable to the Issuer or the holders of the Secured Notes (the "Secured Noteholders"), the holders of the Composite Notes (the "Composite Noteholders") or the holders of the Subordinated Notes (the "Subordinated Noteholders" and, together with the Secured Noteholders and the Composite Noteholders, the "Noteholders"). Such investments may be different from, or conflict with, those made on behalf of the Issuer. For example, the Collateral Manager may enter into short positions with respect to certain Funded Portfolio Assets or Reference Obligations on behalf of other accounts managed by it while maintaining long positions with respect to such Funded Portfolio Assets or Reference Obligations on behalf of the Issuer.

The Collateral Manager, its affiliates and client accounts for which the Collateral Manager or its affiliates act as investment adviser may at times own other Offered Securities of one or more Classes.

At any given time, the Collateral Manager, its affiliates and accounts managed by any of them will not be entitled to vote Collateral Manager Notes with respect to (i) any removal of the Collateral Manager, (ii) any assignment of the rights or obligations of the Collateral Manager under the Management Agreement or (iii) any change in the compensation to the Collateral Manager (other than with respect to a successor Collateral Manager). However, at any given time the Collateral Manager, its affiliates and such accounts will be entitled to vote Collateral Manager Notes with respect to all other matters, including in connection with approving or objecting to a replacement collateral manager.

The Collateral Manager and its affiliates will not be restricted in their performance of any other services or types of investments, which they may make, and will not be required to offer such services or investments to the Issuer or provide notice of such activities to the Issuer. Although the officers and employees of the Collateral Manager will devote as much time to the Issuer as the Collateral Manager deems appropriate, such officers and employees may have conflicts in allocating their time and services among the Issuer and other accounts advised by the Collateral Manager and/or its affiliates.

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The Collateral Manager and its affiliates currently manage investment entities that invest in private equity securities, mezzanine securities and/or distressed debt securities. The Collateral Manager and its affiliates intend to establish in the future additional investment entities to invest in such securities. The Collateral Manager also acts as collateral manager with respect to, and is an investor in, certain other collateralized debt obligation vehicles some of which invest in securities similar to those in which the Issuer will synthetically invest. The Collateral Manager and its affiliates may also have ongoing relationships with companies whose securities constitute the Funded Portfolio Assets or Reference Obligations of the CDS Portfolio Assets and may own debt or equity securities issued by issuers of the Funded Portfolio Assets or Reference Obligations of the CDS Portfolio Assets. The Collateral Manager may take into consideration such relationships in its management of the Collateral. For instance, there may be certain investments that the Collateral Manager generally will not undertake on behalf of the Issuer in view of such relationships. Furthermore, as a result of such relationships the Collateral Manager may have material non-public information, which would place significant restriction on the Collateral Manager's ability to buy or sell the related securities or otherwise using such information for the benefit of its clients or itself, which may prevent the Collateral Manager from taking actions which it might consider in the best interests of the Issuer and the Noteholders.

As described in greater detail herein, the Collateral Manager may not knowingly direct the Trustee to enter into a securities transaction with the Collateral Manager or its affiliates as principal unless such transaction is not in violation of the Investment Advisers Act of 1940 (the "Investment Advisers Act"), the Board of Directors of the Issuer has been informed and has approved of such transaction and such transaction would be representative of an arm's-length transaction. In addition, the Collateral Manager may not knowingly direct the Trustee to enter into a securities transaction with any accounts or portfolios for which the Collateral Manager or an affiliate serves as an investment adviser unless such transaction is not in violation of the Investment Advisers Act and such transaction will be representative of an arm's-length transaction. See "Security for the Secured Notes—The Management Agreement".

The Collateral Manager and its affiliates may serve as a general partner or manager of, or as an investment adviser for entities organized to issue collateralized debt obligations secured by asset-backed securities, high-yield debt securities and loans (or synthetic securities referencing the foregoing) which may compete with the Issuer for investment opportunities. The Collateral Manager may at certain times be simultaneously seeking to purchase investments for the Issuer and any other related entity for which it serves as manager or investment advisor, or for its own account or for affiliates (including investment funds managed by the Collateral Manager or its affiliates) (the "Related Entities"). In its capacity as investment adviser and manager, the Collateral Manager may engage in other business and furnish investment management and advisory services to Related Entities whose investment policies differ from those followed by the Collateral Manager on behalf of the Issuer as required by the Indenture. The Collateral Manager may make recommendations or effect transactions which differ from those effected with respect to the Collateral. In addition, the Collateral Manager may, from time to time, cause or direct Related Entities to enter into, buy or sell, or may recommend to Related Entities the entering into, buying and selling of, securities (including synthetic securities) of the same or of a different kind or class of the same obligor (or reference obligor), as securities or Funded Portfolio Assets or CDS Portfolio Assets which are part of the Collateral which the Collateral Manager directs to be purchased or Disposed on behalf of the Issuer. Situations may occur where the Issuer could be disadvantaged because of the investment activities conducted by the Collateral Manager for the Related Entities, including through reduced availability of investment opportunities and resources for the Issuer.

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The Indenture places significant restrictions on the Collateral Manager's ability to direct the Issuer to enter into the Funded Portfolio Assets and the CDS Portfolio Assets, and the Collateral Manager is required to comply with these restrictions contained in the Indenture. Accordingly, during certain periods or in certain specified circumstances, the Collateral Manager may be unable to direct the Issuer's entry into Funded Portfolio Assets and the CDS Portfolio Assets or to take other actions which it might consider in the best interests of the Issuer and the Noteholders, as a result of the restrictions set forth in the Indenture.

The ownership of Offered Securities of any Class by the Collateral Manager, its affiliates and client accounts, for which the Collateral Manager or its affiliates act as investment adviser will give the Collateral Manager an incentive to take actions that vary from the interests of the holders of the other Classes of Offered Securities. Although an account for which the Collateral Manager acts as investment adviser will acquire a portion of the Subordinated Notes on the Closing Date, none of the Collateral Manager, its affiliates or such accounts is contractually restricted under the Indenture or the Management Agreement or otherwise from selling or otherwise disposing of all or part of the Subordinated Notes held by it. Although the Collateral Manager or one of its affiliates may at times be a holder of the Offered Securities, the interests and incentives of the Collateral Manager will not necessarily be completely aligned with those of the other holders of the Offered Securities (or of the holders of any particular Class of the Secured Notes or Composite Notes or of the Subordinated Notes).

The Collateral Manager may bid at each Auction and, even if it may not have been the highest bidder, will have the option to purchase the Funded Portfolio Assets and/or the CDS Portfolio Assets (or any subpool) for a purchase price equal to the highest bid therefore, which could discourage some potential bidders from participating in the Auctions.

Anti-money laundering legislation impacts the Offered Securities.

The Uniting and Strengthening America By Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA PATRIOT Act"), signed into law on and effective as of October 26, 2001, imposes anti-money laundering obligations on different types of financial institutions, including banks, broker-dealers and investment companies. The USA PATRIOT Act requires the Secretary of the United States Department of the Treasury (the "Treasury") to prescribe regulations to define the types of investment companies subject to the USA PATRIOT Act and the related anti-money laundering obligations. It is not clear whether the Treasury will require entities such as the Issuer to enact anti-money laundering policies. It is possible that the Treasury will promulgate regulations requiring the Co-Issuers or other service providers to the Co-Issuers, in connection with the establishment of anti-money laundering procedures, to share information with governmental authorities with respect to investors in the Secured Notes, the Composite Notes or the Subordinated Notes. Such legislation and regulations could require the Co-Issuers to implement additional restrictions on the transfer of the Secured Notes, the Composite Notes or the Subordinated Notes. As may be required, the Issuer reserves the right to request such information and take such actions as are necessary to enable it to comply with the USA PATRIOT Act.

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Description of the Offered Securities

Issuance of the Secured Notes, the Composite Notes and the Subordinated Notes

The Secured Notes and the Composite Notes will be issued pursuant to the Indenture and the Subordinated Notes will be constituted by the Deed of Covenant and issued subject to the terms and conditions attached as an exhibit to the Subordinated Note Paying Agency Agreement. However, only the Secured Notes (and the Class E Component of the Composite Notes) and the Composite Notes (solely to the extent of Composite Note Collateral) will be secured obligations of the Issuer. The following summary describes certain provisions of the Secured Notes and the Indenture and, to a limited extent, the Subordinated Notes and the Composite Notes. The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture. Additional information regarding the Subordinated Notes appears under "—Additional information regarding the Subordinated Notes" below and additional information regarding the Composite Notes appears under "The Composite Notes" below.

Terms applicable to the Secured Notes

Status and security

The Secured Notes will be limited recourse obligations of the Co-Issuers secured as described below and will rank in priority with respect to each other as described herein. Under the terms of the Indenture, the Issuer will grant to the Trustee a security interest in the Collateral to secure the Issuer's obligations under the Indenture and the Secured Notes. See "Security for the Secured Notes."

Payments of interest and principal on the Secured Notes will be made from the proceeds of the Collateral, in accordance with the priorities described under "Summary of terms—Priority of Payments" herein. The aggregate amount that will be available from the Collateral for payment on the Secured Notes and of certain expenses of the Co-Issuers on any Payment Date will be (i) the sum of Interest Proceeds and Principal Proceeds for the Due Period plus (ii) without duplication, any payments received on or before such Payment Date or Stated Maturity, as the case may be, on the Portfolio Assets and the Total Return Swap. To the extent these amounts are insufficient to meet payments due in respect of the Secured Notes and expenses following liquidation of the Collateral, the Co-Issuers will have no obligation to pay such deficiency.

If a Ratings Confirmation Failure occurs, the Issuer will be required to apply on the Payment Date occurring thereafter (and on each subsequent Payment Date, until a Rating Confirmation is obtained), Uninvested Proceeds to the payment of principal of the Secured Notes (sequentially in direct order of seniority) in accordance with the Priority of Payments and as and to the extent necessary to obtain a Rating Confirmation.

Interest

The Secured Notes will bear stated interest from the Closing Date and such interest will be payable in arrears on each quarterly Payment Date. The period from and including the Closing Date to but excluding the first Payment Date, and each succeeding period from and including each Payment Date to but excluding the following Payment Date, until the principal of the Secured Notes is paid or made available for payment, is an "Interest Period". For purposes of determining any Interest Period, if any Payment Date is not a Business Day, then the Interest Period ending on such Payment

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Date shall be extended to but excluding the date on which payment is required to be made pursuant to an adjustment for legal holidays pursuant to the Indenture and the succeeding Interest Period shall begin on and include such date.

The per annum stated interest rate payable on the Secured Notes of each Class or sub-Class (the "Note Interest Rate" for such Class or sub-Class) with respect to each Interest Period will be the rate indicated under "Summary of terms—Principal terms of the Notes"; provided, that in the case of the first Interest Period and with respect to the Floating Rate Notes, LIBOR will equal 5.35725%.

So long as one or more senior Classes of Secured Notes are outstanding, to the extent that funds are not available on any Payment Date in accordance with the Priority of Payments to pay the full amount of interest on the Class C Notes, the Class D Notes or the Class E Notes, such amounts ("Deferred Interest") will not be due and payable on such Payment Date, but will be deferred and added to the principal balance of such Classes and, thereafter, will bear interest at the Note Interest Rate for such Classes until paid, and the failure to pay such Deferred Interest on such Payment Date will not be an Event of Default under the Indenture; provided, however, that any such Deferred Interest must, in any case, be paid no later than the earlier of the redemption date or Stated Maturity of the relevant Class of the Secured Notes. See "—The Indenture—Events of Default." Interest may be deferred on the Class C Notes as long as any Class A-1 Note, Class A-2 Note or Class B Note is outstanding, on the Class D Notes as long as any Class A-1 Note, Class A-2 Note, Class B Note or Class C Note is outstanding and on the Class E Notes as long as any Class A-1 Note, Class A-2 Note, Class B Note, Class C Note or Class D Note is outstanding.

If any interest due and payable in respect of any Class A-1 Note, Class A-2 Note or Class B Note is not punctually paid or duly provided for on the applicable Payment Date or at the applicable Stated Maturity and such default continues for five Business Days, an Event of Default will occur. To the extent lawful and enforceable, interest on such defaulted interest will accrue at a per annum rate equal to the Note Interest Rate applicable to such Notes from time to time in each case until paid.

Interest on the Floating Rate Notes will be calculated on the basis of the actual number of days elapsed in the applicable Interest Period divided by 360. Interest on the Class A-2b Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months. If the funds available to the payment of any accrued and unpaid interest on the Class A-2 Notes in accordance with the Priority of Payments on any Payment Date are insufficient to pay such interest in full, such available funds shall be allocated between the Holders of the Class A-2a Notes and Class A-2b Notes on a pro rata basis according to the aggregate amount of interest due and payable to each of them.

The Issuer has initially appointed the Trustee as calculation agent (the "Calculation Agent") for purposes of determining LIBOR for each Interest Period. The Calculation Agent will determine LIBOR for each Interest Period on the second London Banking Day preceding the first day of each Interest Period (each, an "Interest Determination Date").

"LIBOR" for any Interest Period will equal (a) the rate appearing on the Reuters Screen LIBOR01 Page for deposits with a term of three months; provided, that LIBOR for the first Interest Period will equal the linear interpolation of the rates appearing on the Reuters Screen LIBOR01 Page for deposits with a term of 6 months and 7 months; or (b) if such rate is unavailable at the time LIBOR is to be determined, LIBOR shall be determined on the basis of the rates at which deposits in U.S. Dollars are offered by four major banks in the London market selected by the Calculation Agent (the "Reference Banks") at approximately 11:00 a.m., London time, on the Interest Determination Date to prime banks in the London interbank market for a period approximately equal to such

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Interest Period and an amount approximately equal to the aggregate outstanding amount of the Secured Notes. The Calculation Agent will request the principal London office of each Reference Bank to provide a quotation of its rate. If at least two such quotations are provided, LIBOR shall be the arithmetic mean of such quotations (rounded upward to the next higher 1/100). If fewer than two quotations are provided as requested, LIBOR with respect to such Interest Period will be the arithmetic mean of the rates quoted by three major banks in New York, New York selected by the Calculation Agent at approximately 11:00 a.m., New York Time, on such Interest Determination Date for loans in U.S. Dollars to leading European banks for a term approximately equal to such Interest Period and an amount approximately equal to the aggregate outstanding amount of the Secured Notes. If the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures described above, LIBOR will be LIBOR as determined with respect to the prior Interest Period.

"London Banking Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London, England.

"Reuters Screen LIBOR01 Page" means, with respect to any Interest Period, the rates for deposits in dollars which appear on Reuters Screen LIBOR01 Page on the Reuters service (or such other page that may replace that page on such service for the purpose of displaying comparable rates) as of 11:00 a.m., London time, on the applicable Interest Determination Date.

As soon as possible after 11:00 a.m. London time on each Interest Determination Date, but in no event later than 11:00 a.m. New York time on the London Banking Day immediately following each Interest Determination Date, the Calculation Agent will calculate the Note Interest Rate for each Class of Secured Notes for the next Interest Period and the amount of interest payable in respect of each U.S.$1,000 principal amount of each Class of Secured Notes (the "Note Interest Amount" with respect thereto) (in each case, rounded to the nearest cent, with half a cent being rounded upward) on the related Payment Date to be given to the Co-Issuers, the Trustee, the Paying Agents (other than the Subordinated Note Paying Agent), Euroclear, Clearstream and, so long as any Secured Notes are listed thereon, the Irish Stock Exchange. The Calculation Agent will also specify to the Co-Issuers the quotations upon which the Note Interest Rate for each Class of Secured Notes are based, and in any event the Calculation Agent shall notify the Co-Issuers before 7:00 p.m. (New York time) on every Interest Determination Date if it has not determined and is not in the process of determining any such Note Interest Rate or Note Interest Amount, together with its reasons therefor.

The Issuer will agree that for so long as any Secured Notes remain outstanding there will at all times be a Calculation Agent which shall not control, be controlled by or be under common control with the Issuer or its affiliates. The Calculation Agent may be removed by the Issuer at any time. If the Calculation Agent is unable or unwilling to act as such or is removed by the Issuer, or if the Calculation Agent fails to determine any of the information required to be published by an announcement to the Companies Announcement Office of the Irish Stock Exchange, the Issuer will be required to appoint promptly a replacement Calculation Agent which does not control and is not controlled by or under common control with the Issuer or its affiliates. In addition, for so long as any Notes are listed on the Irish Stock Exchange and the guidelines of such exchange so require, notice of the appointment of any replacement Calculation Agent will be published by an announcement to the Companies Announcement Office of the Irish Stock Exchange as promptly as practicable after such appointment.

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Principal

The Secured Notes of each Class will mature at par on May 11, 2057 (the "Stated Maturity" for each Class of Secured Notes), unless previously redeemed or repaid prior thereto as described herein. On each Payment Date, Principal Proceeds will be payable on the Secured Notes in accordance with the priorities set forth under "Summary of terms—Priority of Payments—Application of Principal Proceeds."

The average life of each Class of Secured Notes is expected to be less than the number of years until the Stated Maturity of such Secured Notes. See "Risk factors—Relating to the Offered Securities—The Weighted Average Lives of the Notes may vary."

Payments of principal may be made on the Secured Notes during the Reinvestment Period only in the following circumstances (subject to the Priority of Payments): (a) in connection with an acceleration of the Secured Notes following an Event of Default, (b) if the Collateral Manager directs the Trustee to apply all or a portion of Principal Proceeds to redeem Secured Notes in accordance with paragraph (b)(ii) under the heading "Summary of terms—Priority of Payments" and (c) upon the occurrence of a Rating Confirmation Failure, Uninvested Proceeds will be applied to redeem the Secured Notes accordance with paragraph (b)(ii) under the heading "Summary of Terms—Priority of Payments." In addition, the Issuer may redeem the Secured Notes, in whole but not in part, at the applicable Redemption Price therefor on any Payment Date under the circumstances described in "Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Optional Redemption", —Tax Redemption", "—Auction Call Redemption" and "—Clean-Up Call".

Any payment of principal on a Class of Secured Notes will be made by the Trustee on a pro rata basis among the holders of such Class of Notes according to the respective unpaid principal amounts thereof outstanding immediately prior to such payment.

Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes

Priority of Payments

On each Payment Date, Interest Proceeds and Principal Proceeds will be applied in the order of priority described under "Summary of terms—Priority of Payments—Application of Interest Proceeds and Principal Proceeds."

For so long as any Class of Offered Securities is listed on the Irish Stock Exchange, the Trustee at the direction of the Issuer will render an accounting report to the Irish Paying Agent for delivery to the Irish Stock Exchange prior to the related Payment Date which will contain the Aggregate Outstanding Amount of the Offered Securities of each such Class at the beginning of the Interest Period and such amount as a percentage of the original Aggregate Outstanding Amount of the Offered Securities of such Class, the amount of principal payments to be made on the Secured Notes of such Class on the next Payment Date, the amount of any Deferred Interest on any such Class of Secured Notes, and the Aggregate Outstanding Amount of the Secured Notes of such Class after giving effect to the principal payments, if any, on the next Payment Date and such amount as a percentage of the original Aggregate Outstanding Amount of the Secured Notes of such Class.

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Subordination

• For the benefit of the Holders of the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and the Issuer's rights in and to the Collateral (with respect to the Class A-1 Notes, the "Subordinate Interests") shall be subordinate and junior to the Class A-1 Notes to the extent and in the manner set forth in the Indenture. If any Event of Default has not been cured or waived and acceleration occurs, including as a result of an Event of Default, the Class A-1 Notes shall be paid in full before any further payment or distribution is made on account of the Subordinate Interests, in either case, in accordance with the Priority of Payments.

• For the benefit of the Holders of the Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and the Issuer's rights in and to the Collateral (with respect to the Class A-2 Notes, the "Subordinate Interests") shall be subordinate and junior to the Class A-2 Notes to the extent and in the manner set forth in the Indenture. If any Event of Default has not been cured or waived and acceleration occurs, including as a result of an Event of Default, the Class A-2 Notes shall be paid in full before any further payment or distribution is made on account of the Subordinate Interests, in either case, in accordance with the Priority of Payments.

• For the benefit of the Holders of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and the Issuer's rights in and to the Collateral (with respect to the Class B Notes, the "Subordinate Interests") shall be subordinate and junior to the Class B Notes to the extent and in the manner set forth in the Indenture. If any Event of Default has not been cured or waived and acceleration occurs, including as a result of an Event of Default, the Class B Notes shall be paid in full before any further payment or distribution is made on account of the Subordinate Interests, in either case, in accordance with the Priority of Payments.

• For the benefit of the Holders of the Class C Notes, the Class D Notes and Class E Notes and the Issuer's rights in and to the Collateral (with respect to the Class C Notes, the "Subordinate Interests") shall be subordinate and junior to the Class C Notes to the extent and in the manner set forth in the Indenture. If any Event of Default has not been cured or waived and acceleration occurs, including as a result of an Event of Default, the Class C Notes shall be paid in full before any further payment or distribution is made on account of the Subordinate Interests, in either case, in accordance with the Priority of Payments.

• For the benefit of the Holders of the Class D Notes, the Class E Notes and the Issuer's rights in and to the Collateral (with respect to the Class D Notes, the "Subordinate Interests") shall be subordinate and junior to the Class D Notes to the extent and in the manner set forth in the Indenture. The Issuer shall cause the Subordinated Noteholders to agree to the foregoing in the Subordinated Note Paying Agency Agreement. If any Event of Default has not been cured or waived and acceleration occurs, including as a result of an Event of Default, the Class D Notes shall be paid in full before any further payment or distribution is made on account of the Subordinate Interests, in either case, in accordance with the Priority of Payments.

• For the benefit of the Holders of the Class E Notes, the rights of both the Subordinated Noteholders and the Issuer in and to the Collateral (with respect to the Class E Notes, the "Subordinate Interests") shall be subordinate and junior to the Class E Notes to the extent and in the manner set forth in the Indenture. The Issuer shall cause the Subordinated Noteholders to agree to the foregoing in the Subordinated Note Paying Agency Agreement. If any Event of Default has not been cured or waived and acceleration occurs, including as a result of an Event of

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Default, the Class E Notes shall be paid in full before any further payment or distribution is made on account of the Subordinate Interests, in either case, in accordance with the Priority of Payments.

For the purposes of subordination, the Composite Notes will not be treated as a separate Class of Notes, but the Class E Component will be treated as part of the Class E Notes.

Early Redemption

Mandatory Redemption

The Issuer will notify each Rating Agency in writing (each such notice a "Ramp-Up Notice") of the occurrence of the date that is the earlier of (a) 90 days following the Closing Date and (b) the first day on which the aggregate Principal/Notional Balance of the Portfolio assets to which the Issuer is a party is at least equal to the Ramp-Up Date Completion Balance (such date, the "Ramp-Up Completion Date") within 7 days after the Ramp-Up Completion Date occurs.

If (i) any Collateral Quality Test that relates to Moody’s is not satisfied as of the Ramp-Up Completion Date and Moody’s has not confirmed the ratings assigned by it on the Closing Date to each Class of Secured Notes prior to the date 30 days after the delivery of the Ramp-Up Notice or (ii) S&P has not confirmed the rating assigned by it on the Closing Date to any Class of Secured Notes (which notice has not been withdrawn) to the Trustee prior to the date 30 days after the delivery of the Ramp-Up Notice (a "Ratings Confirmation Failure"), Uninvested Proceeds will be applied, in accordance with the Priority of Payments, on the first Payment Date (and on each subsequent Payment Date until a Rating Confirmation is obtained), to repay principal of each applicable Class of Secured Notes (sequentially in direct order of seniority), to the extent necessary to obtain confirmation from each downgrading or non-confirming Rating Agency that it has restored the ratings (including private and confidential ratings) on such affected Class of Secured Notes to (or will maintain) the ratings assigned by it to such Class of Secured Notes on the Closing Date (a "Rating Confirmation") or, if earlier, until each Class of Secured Notes is paid in full.

On any Payment Date on or prior to the last day of the Reinvestment Period, the Collateral Manager may, if the Collateral Manager (in its sole discretion) determines that purchasing additional Funded Portfolio Assets or entering into additional CDS Portfolio Assets in the near future would either be impractical or not beneficial to the Issuer, direct the Trustee, by notice to the Trustee on the related Determination Date, to apply all or any portion of Principal Proceeds to redeem Secured Notes in accordance with paragraph (b)(ii) under the heading "Summary of terms—Priority of Payments."

Optional Redemption; Optional Redemption by Refinancing

The Secured Notes are redeemable by the Co-Issuers and the Subordinated Notes are redeemable by the Issuer, in whole but not in part, on any Payment Date after the end of the Non-Call Period at the applicable Redemption Price, at the written direction of the holders of at least a Special Majority-in-Interest of the Subordinated Notes provided to the Issuer, the Trustee and the Subordinated Note Paying Agent not later than 60 days prior to the Payment Date on which such redemption shall occur); provided that all Secured Notes and Subordinated Notes must be redeemed simultaneously. In such event, the Trustee will direct the sale of all of the Collateral in an amount sufficient such that the proceeds of sale therefrom and all other funds available for distribution by the Issuer from the Issuer Accounts in relation thereto will be at least sufficient to

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redeem all of the Secured Notes and to pay all other fees, expenses and amounts included in the Total Senior Redemption Amount.

Subject to certain conditions described herein, any Class or Classes of Secured Notes may be redeemed by the Issuer from the net cash proceeds (the "Refinancing Proceeds") of a loan, credit or similar facility or an issuance of replacement notes, from or to one or more financial institutions or purchasers, in whole but not in part, on any Payment Date, in the case of the Class A-1 Notes and, in the case of all other Classes of Secured Notes, on any Payment Date on or after the end of the Non-Call Period, at the written direction of, or with the written consent of, the holders of at least a Special Majority-in-Interest of the Subordinated Notes, but subject to the prior approval of the Synthetic Counterparty, at its sole discretion (an "Optional Redemption by Refinancing"). The Issuer will conduct an Optional Redemption by Refinancing only if the Collateral Manager determines that: (i) the principal amount of any obligations providing the funds to be applied in respect of such Optional Redemption by Refinancing is no greater than the principal amount of the Secured Notes being redeemed; (ii) the stated maturity of the obligations providing the funds to be applied in respect of such Optional Redemption by Refinancing is no earlier than the Stated Maturity of the Secured Notes being redeemed; (iii) the agreements relating to the Optional Redemption by Refinancing contain limited-recourse and non-petition provisions equivalent to those set forth in the Indenture; (iv) the proceeds from the Optional Redemption by Refinancing will be at least sufficient to pay in full the Aggregate Outstanding Amount of the applicable Secured Notes; (v) amounts are expected to be available in accordance with the Priority of Payments on the Payment Date related to such Optional Redemption by Refinancing (a) to pay any fees and administrative expenses of the Issuer related to the Optional Redemption by Refinancing, and (b) to pay any accrued and unpaid interest on the Secured Notes being redeemed (including Defaulted Interest and interest on Defaulted Interest); (vi) the Refinancing Proceeds will be used (to the extent necessary) to redeem the applicable Secured Notes; (vii) such Optional Redemption by Refinancing will not cause an Event of Default; and (viii) the Rating Agency Condition for each Rating Agency shall be satisfied (other than with respect to the Secured Notes being redeemed). Any Refinancing Proceeds will be applied directly on the related Payment Date pursuant to the Indenture to redeem the Secured Notes being refinanced without regard to the Priority of Payments described herein. Any Refinancing Proceeds that are not used to redeem the Secured Notes being refinanced and to pay any administrative expenses of the Issuer will be treated as Principal Proceeds and will be applied in accordance with the Priority of Payments. None of the Issuers, the Trustee or any other Person will be liable to the Holders of the Secured Notes for the failure to issue additional notes or to obtain secured loans.

Tax Redemption

Upon the occurrence of a Tax Event, the Issuer may redeem the Notes (such redemption, a "Tax Redemption"), in whole but not in part (a) at the direction of the holders of a Majority of any Class of Secured Notes that, as a result of the occurrence of such Tax Event, has not received 100% of the aggregate amount of principal and interest payable to such Class on any Payment Date (each such Class, an "Affected Class") or (b) at the direction of a Special Majority-in-Interest of the Subordinated Notes. Any such redemption may only be effected on a Payment Date from the Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on the relevant Payment Date, at the applicable Redemption Price. No Tax Redemption may be effected, however, unless (a) all Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on the relevant

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Payment Date are no less than the Total Senior Redemption Amount and (b) the Tax Materiality Condition is satisfied.

Clean-up Call

The Notes will be redeemed, in whole but not in part, on or after the Payment Date on which the Aggregate Principal/Notional Balance of the Portfolio Assets has been reduced to 10% or less of the Aggregate Principal/Notional Balance of the Portfolio Assets on the Ramp-Up Completion Date (such redemption, a "Clean-up Call") from Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on the relevant Payment Date at the applicable Redemption Price. No Clean-up Call may be effected, however, unless all Sale Proceeds arising from the sale of Pledged Securities in accordance with the Indenture and all other funds available for distribution by the Issuer from the Issuer Accounts on the relevant Payment Date are greater than or equal to the Total Senior Redemption Amount. On the applicable Redemption Date, the respective Redemption Price for each Class of the Notes shall be distributed by the Trustee acting as Paying Agent to the holders of the Notes pursuant to the Priority of Payments.

Auction Call Redemption

If, on or prior to the Payment Date occurring on November 27, 2015, the Secured Notes and the Subordinated Notes have not been redeemed in full, the Secured Notes shall be redeemable, in whole but not in part, at the relevant Redemption Price and the Subordinated Notes shall be redeemable, in whole but not in part, at the relevant Auction Call Redemption Price on the Auction Call Date in accordance with the procedures described below (such redemption, an "Auction Call Redemption"). The related auction of the Eligible Investments and the Funded Portfolio Assets (the "Auction") will be conducted not later than five Business Days prior to the related Auction Call Date, unless the Secured Notes and the Subordinated Notes have previously been redeemed in full. An "Auction Call Date" means each Payment Date occurring on or after the Payment Date falling on November 27, 2015. The last Auction Call Date will be deemed to be the Maturity. An Auction Call Redemption may only be effected if the Trustee, with the assistance of the Collateral Manager, has determined that, after taking into account any related Auction conducted in accordance with the Indenture, the proceeds that would be available for such redemption would be no less than the Total Senior Redemption Amount. Notwithstanding anything to the contrary contained or implied herein, the holders of 100% of the Aggregate Outstanding Amount of a Class of Notes may elect, in connection with any Auction Call Redemption, to receive less than 100% of the Redemption Price that would otherwise be payable to holders of such Class (and the Redemption Price will be reduced by such amount). In addition, the holders of 100% of the Aggregate Outstanding Amount of the Subordinated Notes may elect, in connection with any Auction Call Redemption, to receive less than 100% of the Auction Call Redemption Price that would otherwise be payable to holders of the Subordinated Notes (and the Auction Call Redemption Price will be reduced by such amount).

Early redemption procedures

Notice of Optional Redemption, Optional Redemption by Refinancing, Tax Redemption, Clean-up Call and Auction Call Redemption will be given by first-class mail, postage prepaid, mailed not later than twenty calendar days prior to the applicable Redemption Date, to each holder of Secured Notes (including the Class E Component) (or in the case of an Optional Redemption by Refinancing the applicable Class of Secured Notes) at such holder's address in the register maintained by the registrar under the Indenture, to each holder of Subordinated Notes at such holder's address in the

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register maintained by the registrar under the Subordinated Note Paying Agency Agreement and each Rating Agency. In addition, for so long as any Offered Securities are listed on the Irish Stock Exchange and so long as the guidelines of such exchange so require, notice of Optional Redemption, Optional Redemption by Refinancing, Tax Redemption, Clean-up Call and Auction Call Redemption to the holders of such Offered Securities shall also be given by publication by an announcement to the Companies Announcement Office of the Irish Stock Exchange. Secured Notes (including the Class E Component) and Subordinated Notes called for redemption must be surrendered at the office of any paying agent (each, a "Paying Agent"), other than the Irish Paying Agent, appointed under the Indenture or the Subordinated Note Paying Agency Agreement, as applicable, in order to receive the Redemption Price. The initial Paying Agents for the Secured Notes and the Composite Notes will be the Trustee and, so long as any Offered Securities are listed on the Irish Stock Exchange, Maples Finance Dublin (the "Irish Paying Agent") will be the Irish paying agent for the Offered Securities and the initial Paying Agents for the Subordinated Notes will be the Subordinated Note Paying Agent. Maples and Calder Listing Services Limited (the "Irish Listing Agent") will be the Irish listing agent for the Offered Securities.

The Co-Issuers will (at the written direction of Special Majority-in-Interest of Subordinated Noteholders) have the option to withdraw any notice of redemption up to the fourth Business Day prior to the scheduled Redemption Date by written notice to the Trustee and the Subordinated Note Paying Agent only if the Trustee is unable to deliver the sale agreement or agreements or certifications as described in the following paragraph in form satisfactory to the Trustee.

No Secured Notes or Subordinated Notes may be redeemed early unless at least four Business Days before the scheduled Redemption Date, the Trustee shall have furnished to the Subordinated Note Paying Agent and the Synthetic Counterparty evidence (which evidence may be in the form of fax or electronic mail indicating firm bids that satisfy the requirements set out in the Indenture, that the Trustee (on behalf of the Issuer) has entered into a binding agreement or agreements with a financial institution or institutions whose (a) long-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a person other than such institution) have a credit rating from S&P at least equal to its highest rating of any Secured Notes then Outstanding or short term unsecured debt obligations have a credit rating of "A-1" by S&P and (b) short term unsecured debt obligations have a credit rating of "P-1" by Moody's (and, if rated "P-1", are not on watch for possible downgrade by Moody's) to sell, not later than the Business Day immediately preceding the scheduled Redemption Date, for Cash in immediately available funds, all or part of the Funded Portfolio Assets, if any, at a sale price which, when added to the aggregate amount of (i) all Cash and Eligible Investments maturing on or prior to the scheduled Redemption Date credited to the Interest Collection Account, the Principal Collection Account, the Expense Account and the Payment Account and all other funds available for distribution by the Issuer from the other Issuer Accounts on the relevant Payment Date, (ii) any termination payments to be received by the Issuer from the Synthetic Counterparty with respect to the CDS Portfolio Assets and from the Short Synthetic Counterparties with respect to the Offsetting Short Transactions, if any, on or prior to the scheduled Redemption Date and (iii) the amounts to be received by the Issuer pursuant to the Total Return Swap on or prior to the scheduled Redemption Date, is at least equal to an amount sufficient to pay all accrued and unpaid amounts payable under the Priority of Payments prior to making any payments or distributions on any Subordinated Notes (including the outstanding balance of the Financed Amount payable to the JPMorgan Financing Party, any payments payable by the Issuer pursuant to the CDS Portfolio Assets, the Offsetting Short Transactions, if any, or the Total Return Swap (including any TRS Hedging Amounts and TRS LIBOR Breakage Amounts and any other termination payment that is due thereunder, whether under the Priority of Payments, pursuant to Section 11.2 of the Indenture or otherwise), amounts payable to the Collateral Manager,

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any fees and expenses incurred by the Trustee in connection with such sale of the Funded Portfolio Assets, and to redeem the Secured Notes on the scheduled Redemption Date at the applicable Redemption Prices (the aggregate amount required to make all such payments, the "Total Senior Redemption Amount")). The Trustee may rely upon such evidence as being conclusive as to the facts contained therein, and the Trustee shall have no obligation to evaluate or otherwise determine the sufficiency of any evidence provided pursuant to this subsection. Any certification delivered as described in this subsection shall include the relevant expected Fair Market Value of each applicable Funded Portfolio Assets.

Notice of redemption shall be given by the Co-Issuers or, at the Co-Issuers' request, by the Trustee and the Subordinated Note Paying Agent 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 Note selected for redemption shall not impair or affect the validity of the redemption of any other Notes.

Cancellation

All Notes that are redeemed or paid in full and surrendered for cancellation as described herein will forthwith be cancelled and may not be reissued or resold.

Entitlement to payments

Payments in respect of principal and interest on the Secured Notes will be made to the person in whose name the Note is registered fifteen days prior to the applicable Payment Date (the "Record Date"). Payments on certificated Notes will be made in U.S. Dollars by wire transfer, as directed by the investor, in immediately available funds to the investor; provided, that wiring instructions have been provided to the Trustee on or before the related Record Date and provided, further, that if appropriate instructions for any such wire transfer are not received by the Record Date, then such payment shall be made by check drawn on a U.S. bank mailed to such holder of a Note at such holder's address specified in the applicable register maintained by the Trustee. Final payments in respect of principal on the Notes will be made only against surrender of the Notes at the office of any Paying Agent (other than the Irish Paying Agent) appointed under the Indenture.

Payments in respect of the principal and interest of any Global Note and the Regulation S Global Subordinated Notes will be made to DTC or its nominee, as the registered owner thereof. Neither the Co-Issuers, the Trustee, the Subordinated Note Paying Agent nor any other Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in Global Notes and the Regulation S Global Subordinated Notes or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. The Co-Issuers expect that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note or a Regulation S Global Subordinated Note representing a Class of Notes or Composite Notes, as applicable, held by it or its nominee, will immediately credit participants' accounts (through which, in the case of Regulation S Global Notes, Euroclear and Clearstream hold their respective interests) with payments in amounts proportionate to their respective beneficial interests in the stated original principal amount of a Global Note or Regulation S Global Subordinated Note for a Class of Notes or Composite Notes, as applicable, as shown on the records of DTC or its nominee. The Co-Issuers also expect that payments by participants to owners of beneficial interests in a Global Note or Regulation S Global Subordinated Note 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 the customers. The payments will be the responsibility of the participants.

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Prescription

Except as otherwise required by applicable law, claims by holders of Notes in respect of principal and interest must be made to the Trustee or any Paying Agent if made within two years of such principal or interest becoming due and payable. Any funds deposited with the Trustee or any Paying Agent in trust for the payment of principal or interest remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Issuer and, if applicable, the Co-Issuer, pursuant to the Indenture; and the holder of a Note shall thereafter, as an unsecured general creditor, look only to the Issuer and, if applicable, the Co-Issuer, for payment of such amounts and all liability of the Trustee and any Paying Agent with respect to such trust funds shall thereupon cease.

Form, denomination and registration of the Offered Securities

The Secured Notes will be sold only to (a) non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act and (b) persons that are Qualified Purchasers and are Qualified Institutional Buyers. Each Secured Note sold to a person that, at the time of the acquisition, purported acquisition or proposed acquisition of any such Secured Note is both a Qualified Institutional Buyer and a Qualified Purchaser, will be issued in the form of one or more permanent global notes in definitive, fully registered form without interest coupons (the "Rule 144A Global Notes"). Secured Notes sold to persons that are not U.S. Persons and outside the United States initially will be represented by one or more Regulation S Temporary Global Secured Notes in definitive, fully registered form, without interest coupons, and deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee, initially for the accounts of Euroclear and Clearstream. On the 40th day after which all of the Secured Notes of any Class have been sold to investors, and subject to the receipt by the Trustee of a certificate in the form provided by the Indenture from the person holding such interest, a beneficial interest in a Class of Regulation S Temporary Global Secured Notes may be exchanged for an interest in a Regulation S Permanent Global Secured Note of such Class in fully registered form without coupons in an amount equal to the Aggregate Outstanding Amount of such interest in the Regulation S Temporary Global Secured Note. The Composite Notes will be sold only to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act. The Composite Notes sold to persons that are non-U.S. Persons and outside the United States will initially be represented by one or more Regulation S Temporary Global Composite Notes in definitive, fully registered form, without interest coupons, and deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee, initially for the accounts of Euroclear and Clearstream. On the 40th day after which all of the Composite Notes have been sold to investors, and subject to the receipt by the Trustee of a certificate in the form provided by the Indenture from the person holding such interest, a beneficial interest in the Regulation S Temporary Global Composite Note may be exchanged for an interest in a Regulation S Permanent Global Composite Note in fully registered form without coupons in an amount equal to the Aggregate Outstanding Amount of such interest in the Regulation S Temporary Global Composite Note. During the Distribution Compliance Period, beneficial interests in a Regulation S Global Note may only be held through Euroclear or Clearstream. By acquisition of a beneficial interest in a Regulation S Global Note, any purchaser thereof will, during the Distribution Compliance Period, be deemed to represent that it is not a U.S. Person and that, if in the future it decides to transfer such beneficial interest, it will transfer such interest only in an offshore transaction in accordance with Regulation S or to a person who takes delivery in the form of a Rule 144A Global Note. Beneficial interests in each Regulation S Global Note will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its direct and indirect participants, including Euroclear and Clearstream. The Rule 144A Global Notes and the

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Regulation S Global Notes are referred to herein collectively as the "Global Notes". No owner of an interest in a Regulation S Global Note will be entitled to receive a definitive Note (a "Definitive Note") (a) until after the expiration of the Distribution Compliance Period and (b) unless (i) for a person other than a distributor (as defined in Regulation S), such person provides certification that the Definitive Note is beneficially owned by a person that is not a U.S. Person (as defined in Regulation S) or (ii) for a person that is a U.S. Person, such person provides certification that any interest in such Definitive Note was purchased in a transaction that did not require registration under the Securities Act. Each initial investor and each subsequent transferee of the Notes and Composite Notes will be required to provide a Subscription Agreement or a transfer certificate, as the case may be, in which it will be required to certify, among other matters, as to its status under the Securities Act, the Investment Company Act and ERISA.

The Subordinated Notes are being initially offered, and may subsequently be transferred, only (1) to persons in the United States that are (a)(i)Qualified Institutional Buyers or (ii) institutional "accredited investors" as defined in Rule 501(a)(1) and Rule 501(a)(3) or "accredited investors" as defined in Rule 501(a)(8) if all of the equity owners of each such accredited investor are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act, and also (b) Qualified Purchasers and (2) to certain non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act.

All Subordinated Notes sold to U.S. purchasers will be evidenced by notes in definitive, fully registered form without interest coupons ("Certificated Subordinated Notes"). Subordinated Notes sold to non-U.S. Persons in offshore transactions in reliance on Regulation S will each be represented, initially, by one or more temporary global notes in fully registered form without interest coupons (each, a "Regulation S Temporary Global Subordinated Note"), to be exchanged, after the expiration of the Distribution Compliance Period and as further described in the Subordinated Note Paying Agency Agreement, for beneficial interests in one or more permanent global notes in fully registered form without interest coupons (each, a "Regulation S Permanent Global Subordinated Note" and, together with the Regulation S Temporary Global Subordinated Notes, the "Regulation S Global Subordinated Notes"). Each subsequent transferee of a Subordinated Note will be required to provide a purchaser representation letter in which it will be required to certify, among other matters, as to its status under the Securities Act, the Investment Company Act and ERISA.

The Global Notes and the Regulation S Global Subordinated Notes will be deposited with the Trustee as custodian for, and registered in the name of, a nominee of DTC and, in the case of the Regulation S Global Notes and the Regulation S Global Subordinated Notes, for the respective accounts of Euroclear and Clearstream.

A beneficial interest in a Regulation S Global Secured Note may be transferred to a person who takes delivery in the form of an interest in the corresponding Rule 144A Global Note only upon receipt by the Trustee of (a) a written certification from the transferor in the form required by the Indenture to the effect that such transfer is being made to a person whom the transferor reasonably believes is a Qualified Institutional Buyer in a transaction meeting the requirements of Rule 144A under the Securities Act and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction, and (b) a written certification from the transferee in the form required by the Indenture to the effect, among other things, that such transferee is a Qualified Institutional Buyer and a Qualified Purchaser. Beneficial interests in a Rule 144A Global Note may be transferred to a person who takes delivery in the form of an interest in the corresponding Regulation S Global Secured Note only upon receipt by the Trustee of (a) a

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written certification from the transferor in the form required by the Indenture to the effect that such transfer is being made in accordance with Regulation S under the Securities Act, and (b) a written certification from the transferee in the form required by the Indenture to the effect, among other things, that such transferee is a non-U.S. person purchasing such Rule 144A Securities in an offshore transaction pursuant to Regulation S. Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in another Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in such other Global Note, and accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.

A beneficial interest in a Regulation S Global Subordinated Note may be transferred to a person who takes delivery in the form of an interest in such Regulation S Global Subordinated Note only upon receipt by the Issuer and the Trustee of a written certification in the form of Annex A-2 hereto from such transferee. A beneficial interest in a Regulation S Global Subordinated Note may be transferred to a person who takes delivery in the form of a Certificated Subordinated Note only upon receipt by the Issuer and the Trustee of (a) a certificate substantially in the form of Annex A-1 attached hereto executed by the transferee and (b) a certificate substantially in the form of Annex A-2 attached hereto executed by the transferee. A Certificated Subordinated Note may be transferred to a person who takes delivery in the form of an interest in a Regulation S Global Subordinated Note only upon receipt by the Issuer and the Trustee of (a) the transferor's Subordinated Note together with an interest transfer form in the form prescribed by the Indenture executed by the transferor and (b) a certificate substantially in the form of Annex A-2 attached hereto executed by the transferee. A Certificated Subordinated Note may be transferred to a person who takes delivery in the form of an interest in a Certificated Subordinated Note only upon receipt by the Issuer and the Trustee of (a) the transferor's Subordinated Note together with an interest transfer form in the form prescribed by the Indenture executed by the transferor and (b) certificates substantially in the form of Annex A-1 and Annex A-2 attached hereto executed by the transferee.

No service charge will be made for any registration of transfer or exchange of Notes, but the Trustee may require payment of a sum sufficient to cover any transfer, tax or other governmental charge payable in connection therewith.

The registered owner of the relevant Global Note or Regulation S Global Subordinated Note will be the only person entitled to receive payments in respect of the Offered Securities represented thereby, and the Co-Issuers will be discharged by payment to, or to the order of, the registered owner of such Global Note or Regulation S Global Subordinated Note in respect of each amount so paid. No person other than the registered owner of the relevant Global Note or Regulation S Global Subordinated Note will have any claim against the Co-Issuers in respect of any payment due on that Global Note or Regulation S Global Subordinated Note. Account holders or participants in Euroclear and Clearstream shall have no rights under the Indenture with respect to Global Notes or Regulation S Global Subordinated Notes held on their behalf by the Trustee as custodian for DTC, and DTC may be treated by the Co-Issuers, the Trustee and any agent of the Co-Issuers or the Trustee as the holder of Global Notes or Regulation S Global Subordinated Notes for all purposes whatsoever.

Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to have Notes or Composite Notes, as applicable, registered in their names, will not receive or be entitled to receive definitive physical Notes, as applicable, and will not be considered "Holders" of Notes or Composite Notes, as applicable, under the Indenture or the

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Notes or Composite Notes, as applicable. If (a) DTC (i) notifies the Co-Issuers that it is unwilling or unable to continue as depositary for Global Notes of such Class or Classes of Notes or Composite Notes, (ii) ceases to be a "clearing agency" registered under the Exchange Act or (iii) notifies the Co-Issuers that it will not act on behalf of and at the direction of beneficial owners following an Event of Default and a majority of the Controlling Class so directs, and in the case of (i) or (ii), a successor depository is not appointed by the Co-Issuers within 90 days after such notice (a "Depository Event"), or (b) as a result of any amendment to or change in, the laws or regulations of the Cayman Islands or of any authority therein or thereof having power to tax or in the interpretation or administration of such laws or regulations which become effective on or after the Closing Date, the Issuer or the Paying Agent becomes aware that it is or will be required to make any deduction or withholding from any payment in respect of the Notes or Composite Notes which would not be required if the Notes or Composite Notes were in definitive form, the Issuer will issue or cause to be issued, Notes or Composite Notes of such Class or Classes in the form of definitive physical certificates in exchange for the applicable Global Notes to the beneficial owners of such Global Notes in the manner set forth in the Indenture. In addition, the owner of a beneficial interest in a Global Note will be entitled to receive a definitive physical Note or Composite Note, as applicable, in exchange for such interest if an Event of Default has occurred and is continuing. In the event that definitive physical Notes or Composite Notes, as applicable, are not so issued by the Issuer to such beneficial owners of interests in Global Notes, the Issuer expressly acknowledges that such beneficial owners shall be entitled to pursue any remedy that the holders of a Global Note would be entitled to pursue in accordance with the Indenture (but only to the extent of such beneficial owner's interest in the Global Note) as if definitive physical Notes or Composite Notes, as applicable, had been issued. In the event that definitive physical Notes or Composite Notes, as applicable, are issued in exchange for Global Notes as described above, the applicable Global Note will be surrendered to the Trustee by DTC and the Issuer or the Co-Issuers, as applicable, will execute and the Trustee will authenticate and deliver an equal aggregate outstanding principal amount of definitive physical Notes or Composite Notes, as applicable.

Owners of beneficial interests in Regulation S Global Subordinated Notes will receive definitive Subordinated Notes registered in their names in connection with a Depository Event, and may also exchange such beneficial interests for Certificated Subordinated Notes in accordance with the procedures described under "Transfer restrictions."

For so long as any Offered Securities are listed on the Irish Stock Exchange and the guidelines of such exchange shall so require, the Issuer or the Co-Issuers, as applicable, will have a paying agent (which shall be the Irish Paying Agent) for such Offered Securities in Ireland. In the event that the Irish Paying Agent is replaced at any time during such period, notice of the appointment of any replacement will be published by an announcement to the Companies Announcement Office of the Irish Stock Exchange.

Both certificated Notes and Composite Notes and interests in Global Notes and Regulation S Global Subordinated Notes will be subject to certain restrictions on transfer set forth therein and in the Indenture and the Notes will bear the restrictive legend set forth under "Transfer restrictions."

The Notes will be issued in minimum denominations of U.S.$500,000 and integral multiples of U.S.$1,000 in excess thereof. The Composite Notes will be issuable in minimum denominations of U.S.$2,000,000 and, in each case, only in integral multiples of U.S.$4,000 in excess of such minimum denominations; provided that the Composite Notes may not be exchanged for the Class E Component in the manner provided in this Indenture unless the Class E Component (in respect of the Class E Notes) will satisfy the required minimum denomination for such Class of Notes.

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The Indenture

The following summary describes certain provisions of the Indenture among the Co-Issuers and the Trustee to be dated as of the Closing Date. The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture.

Events of Default

An "Event of Default" is defined in the Indenture as:

(a) a default in the payment of any accrued interest (i) on any Class A-1 Note, Class A-2 Note or Class B Note or (ii) if there are no Class A-1 Notes, Class A-2 Notes or Class B Notes outstanding, on any Class C Note or (iii) if there are no Class A-1 Notes, Class A-2 Notes, Class B Notes or Class C Notes outstanding, on any Class D Note or (iv) if there are no Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes or Class D Notes outstanding, on any Class E Note, in each case, when the same becomes due and payable and which default continues for a period of five Business Days;

(b) a default in the payment of principal of any Secured Note when the same becomes due at its Stated Maturity or Redemption Date (and, in the case of a payment default resulting solely from an administrative error or omission by the Trustee, the Administrator, a Paying Agent (other than the Subordinated Note Paying Agent) or the Note Registrar, such default continues for a period of seven days);

(c) the failure on any Payment Date to disburse amounts available in the Interest Collection Account or Principal Collection Account in accordance with the Priority of Payments (other than a default in payment described in clause (a) or (b) above), which failure continues for a period of five Business Days;

(d) either of the Co-Issuers or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act and such requirement has not been eliminated after a period of 45 days;

(e) a default in the performance, or a breach, of any other covenant or other agreement (it being understood that non-compliance with any of the Collateral Quality Tests or in connection with the conditions to the acquisition of or entry into a Portfolio Asset, including the Eligibility Criteria shall not constitute a default or breach) of the Issuer or the Co-Issuer under the Indenture or any representation or warranty of the Issuer or the Co-Issuer made in the Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proves to be incorrect when made, which default or breach has a material adverse effect on any Secured Noteholder, and the continuation of such default or breach for a period of 30 days (or, if such default, breach or failure has an adverse effect on the validity, perfection or priority of the security interest granted hereunder, 15 days) after any of the Issuer or the Co-Issuer has actual knowledge thereof or after notice thereof to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in Aggregate Outstanding Amount of any Class of Notes;

(f) (i) the entry of a decree or order by a court having competent jurisdiction adjudging either of the Issuer or the Co-Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of either of the Issuer or the Co-Issuer under the Bankruptcy Code or any other applicable law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Issuer or the Co-

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Issuer, or of any substantial part of the property of either of the Issuer or Co-Issuer, or ordering the winding up or liquidation of the affairs of either of the Issuer or Co-Issuer, and the continuance of any such decree or order unstayed and in effect for a period of 30 consecutive days; or

(ii) the institution by either of the Issuer or the Co-Issuer of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Bankruptcy Code or any other similar applicable law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee in such proceeding or sequestrator (or other similar official) of either of the Issuer or the Co-Issuer or of any substantial part of its property, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by the Issuer in writing of its inability to pay its debts generally as they become due, or the taking of any action by the Issuer in furtherance of any such action; or

(g) on any Measurement Date, the ratio of (1) the Portfolio Balance as of such date to (2) the Aggregate Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes as of such date (expressed as a percentage) is less than 100%.

If either of the Co-Issuers obtains knowledge, or has reason to believe, that an Event of Default has occurred and is continuing, such Co-Issuer is obligated to promptly notify the Trustee, the Subordinated Note Paying Agent, the Synthetic Counterparty, the Collateral Manager, the TRS Counterparty, the Secured Noteholders and each Rating Agency of such Event of Default in writing.

"Default" means any Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default.

If an Event of Default occurs and is continuing (other than an Event of Default referred to in clause (f) above), the Trustee may, and shall, upon the written direction of the holders of not less than 66-2/3% of Aggregate Outstanding Amount of the Controlling Class (except with respect to an Event of Default referred to in clause (g) above, where such written direction shall be given by the majority in principal amount of each of the Class A-1 Notes and the Class A-2 Notes (voting separately)) by notice to the Co-Issuers, declare (A) the principal of, and any accrued and unpaid interest on, all the Secured Notes to be immediately due and payable, and upon any such declaration such principal, together with all accrued and unpaid interest thereon, and other amounts payable under the Indenture, shall become immediately due and payable and (B) terminate the Reinvestment Period. If an Event of Default described in clause (f) above occurs, (x) such an acceleration will occur automatically and (y) the Reinvestment Period will terminate automatically. A majority of the Controlling Class may rescind and annul a declaration of acceleration and its consequences if the Issuer or the Co-Issuer has paid or provided for all unpaid amounts then due (other than as a result of such acceleration) by the Issuer and all Events of Defaults, other than the non-payment of interest on or principal of the Notes that have become due solely by such acceleration, have been cured or waived.

The "Controlling Class" will be the Class A-1 Notes or, if there are no Class A-1 Notes Outstanding, then, the Class A-2 Notes or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, then, the Class B Notes or, if there are no Class A-1 Notes, Class A-2 Notes or Class B Notes Outstanding, then, the Class C Notes or, if there are no Class A-1 Notes, Class A-2 Notes Class B Notes or Class C Notes Outstanding, then, the Class D Notes or, if there are no Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes or Class D Notes Outstanding, then, the Class E Notes. With respect to the

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Composite Notes, the related Class E Component shall be considered to be Class E Notes with a principal amount equal to the principal amount of such Class E Component, and Holders of the Composite Notes shall be entitled to vote the relevant portion of such Class E Component as part of the Controlling Class if the Class E Notes are the Controlling Class.

If an Event of Default occurs and is continuing, the Trustee (a) will not sell or liquidate the Collateral (except as expressly permitted by the terms of the Indenture) and (b) will collect and cause the collection of the proceeds thereof, make and apply all payments and deposits and maintain all accounts in respect in respect of the Collateral, deliver Collateral in connection with Offers and the terms of any contractual arrangements entered into prior to such Event of Default, and continue making payments in the manner described under "Summary of terms—Priority of Payments" above unless either (a) the Trustee determines that the anticipated proceeds of such sale or liquidation (after deducting the reasonable expenses of such sale or liquidation) would be sufficient to discharge in full the amounts then due and unpaid with respect to all the Secured Notes, due and unpaid Administrative Expenses, any accrued and unpaid Financed Amounts, any accrued and unpaid amounts payable by the Issuer pursuant to the related ISDA master agreement, schedules and related confirmations in respect of the CDS Portfolio Assets, the Offsetting Short Transactions, if any, and the Total Return Swap, including termination payments, if any, and any accrued and unpaid fees owing and payable to the Collateral Manager and the TRS Counterparty, as applicable, or (b) the holders of not less than 66-2/3% in Aggregate Outstanding Amount of each Class of Secured Notes, voting as separate Classes, direct, subject to the provisions of the Indenture, such sale and liquidation. If an Event of Default has occurred and is continuing, the Trustee shall retain the Composite Note Collateral intact, collect, and cause the collection of the proceeds of the Composite Note Collateral and make and apply all payments and deposits and maintain all accounts in respect of the Composite Note Collateral and the Treasury Strip Component as described herein and shall not sell the Composite Note Collateral in any circumstances unless so directed by the Holders of more than 50% of the Aggregate Outstanding Amount of the Composite Notes, in which case the Trustee shall liquidate the Composite Note Collateral at the written direction of such requisite majority of the Composite Notes; provided that, following the liquidation of the Collateral in full, the Trustee will distribute the Composite Note Collateral in kind to the Holders of the Composite Notes pro rata according to the Aggregate Outstanding Amount of the Composite Notes held by each of them unless the Trustee receives a prior written direction from the Majority of the Composite Noteholders to liquidate the Composite Note Collateral, in which case the Trustee shall liquidate the Composite Note Collateral.

The Majority of the Controlling Class will have the right following the occurrence, and during the continuance of, an Event of Default to cause the institution of and direct the time, method and place of conducting any proceeding for any remedy available to the Trustee; provided that (a) such direction shall not conflict with any rule of law or with any express provision of the Indenture, (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction, (c) the Trustee shall have been provided with indemnity reasonably satisfactory to it, and (d) notwithstanding the foregoing, any direction to the Trustee to undertake a sale of Collateral may be given only in accordance with the preceding paragraph and the applicable provisions of the Indenture.

The Majority of the Controlling Class may, in certain cases, waive any past Default with respect to such Notes, except a Default (a) in the payment of the principal of any Secured Note, (b) in the payment of interest (including any Defaulted Interest or interest on Defaulted Interest) on the Secured Notes for a period of more than 5 Business Days, (c) in respect of a provision of the Indenture that cannot be modified or amended without the waiver or consent of the holder of each

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such outstanding Note adversely affected thereby or (d) in connection with an Event of Default described under clause (f) of the definition thereof.

No holder of a Note will have the right to institute any proceeding with respect to the Indenture unless (a) such holder previously has given to the Trustee written notice of an Event of Default, (b) the holders of not less than 25% in Aggregate Outstanding Amount of the Controlling Class have made a written request upon the Trustee to institute such proceedings in its own name as Trustee and such holders have provided the Trustee reasonable indemnity, (c) the Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding and (d) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the holders of a majority of the Aggregate Outstanding Amount of the Controlling Class.

In determining whether the holders of the requisite Aggregate Outstanding Amount have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, (a) Notes owned by the Issuer or the Co–Issuer or any other obligor upon the Notes or any affiliate thereof shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Trustee knows to be so owned shall be so disregarded, and (b) Notes so owned that have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, the Co–Issuer or any other obligor upon the Notes or any affiliate of the Issuer, the Co–Issuer or such other obligor.

Notices

Notices to the holders of the Notes and the Composite Notes shall be given by first class mail, postage prepaid, to registered holders of Notes and the Composite Notes at each such holder's address appearing in the register maintained by the Trustee. In addition, for so long as the Offered Securities are listed on the Irish Stock Exchange and so long as the guidelines of such exchange so require, notices to the holders of such Offered Securities shall also be given by publication on the website of the Irish Stock Exchange at http://www.ise.ie/

Modification of Indenture

With (a) the consent of the Holders of not less than a Majority of each Class of Secured Notes or Composite Notes whose interests could reasonably be expected to be materially and adversely affected by such supplemental indenture (or in the case of the Holders of the Class A-1 Notes, the consent of the Holders of not less than a Majority of the Class A-1 Notes whose interests could reasonably be expected to be adversely affected by such supplemental indenture) and a Majority-in-Interest of Subordinated Noteholders if their interests would reasonably be expected to be materially and adversely affected by such supplemental indenture, by act of said Secured Noteholders or Composite Noteholders, or by written consent of the Subordinated Noteholders (which consent shall be evidenced by an Officer's certificate of the Issuer certifying that such consent has been obtained) delivered to the Trustee and the Co-Issuers, (b) the consent of the Synthetic Counterparty, (c) the consent of the JPMorgan Financing Party, (d) the consent of the TRS Counterparty if affected by such supplemental indenture, (e) the consent of each Short Synthetic Counterparty if affected by such supplemental indenture, and (f) the consent of the Collateral Manager, the Trustee and Co-Issuers may enter into one or more supplemental indentures to add any provisions to, or change in any manner or eliminate any of the provisions of, the Indenture or

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modify in any manner the rights of the Holders of the Secured Notes of such Class, the Composite Notes or the Subordinated Notes or the Synthetic Counterparty, each applicable Short Synthetic Counterparty, the Collateral Manager, the TRS Counterparty or the JPMorgan Financing Party under the Indenture; provided that notwithstanding anything in the Indenture to the contrary, no such supplemental indenture shall be entered into without the consent of each Holder of each outstanding Secured Note of each Class if such Class would be affected by such supplemental indenture, each Composite Noteholder if the Composite Notes would be affected by such supplemental indenture and each Subordinated Noteholder if the Subordinated Notes would be affected by such supplemental indenture (which consent shall be evidenced by an Officer's certificate of the Issuer certifying that such consent has been obtained), the Synthetic Counterparty, the Collateral Manager, the JPMorgan Financing Party, the TRS Counterparty if affected by such supplemental indenture, and each applicable Short Synthetic Counterparty if affected by such supplemental indenture, if such supplemental indenture proposes to:

(a) change the Stated Maturity of the principal of or the due date of any installment of interest on any Secured Note or Composite Note, reduce the principal amount thereof or the Note Interest Rate thereon, or the Redemption Price with respect thereto, or change the earliest date on which the Issuer may redeem any Secured Note or Composite Note, change the provisions of the Indenture relating to the application of proceeds of any Collateral or Composite Note Collateral to the payment of principal of or interest or any other applicable amounts on the Secured Notes or Composite Notes or the payment of amounts payable by the Issuer to the Collateral Manager or change any place where, or the coin or currency in which, any Secured Note or Composite Note or the principal thereof or interest thereon or amounts payable by the Issuer to any other Secured Party is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the applicable Redemption Date);

(b) reduce the percentage of the Aggregate Outstanding Amount of Holders of Secured Notes of each Class or Composite Notes and holders of Subordinated Notes 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 hereunder or their consequences provided for in the Indenture;

(c) 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 Collateral or Composite Note Collateral or terminate such lien on any property at any time subject thereto (other than in connection with the sale thereof in accordance with the Indenture) or deprive any Secured Party of the security afforded by the lien of the Indenture;

(d) reduce the percentage of the aggregate outstanding amount of holders of Secured Notes of each Class or Composite Notes whose consent is required to request the Trustee to preserve the Collateral or Composite Note Collateral or rescind the Trustee's election to preserve the Collateral or Composite Note Collateral pursuant to the Indenture or to sell or liquidate the Collateral or Composite Note Collateral pursuant to the Indenture;

(e) modify any of the provisions of the Indenture with respect to the undertaking of party litigants to pay (if required) costs of suits for (among others) the enforcement of rights under the Indenture or against the Trustee,

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(f) modify any of the provisions of the Indenture requiring the consent of Secured Noteholders, Composite Noteholders, Subordinated Noteholders, the TRS Counterparty, the JPMorgan Financing Party, each applicable Short Synthetic Counterparty or the Synthetic Counterparty, except to increase any percentages of votes required to pass supplemental indentures or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Secured Note, Composite Note and Subordinated Note affected thereby, the Synthetic Counterparty, the JPMorgan Financing Party if affected thereby, the Collateral Manager, each applicable Short Synthetic Counterparty if affected thereby or the TRS Counterparty if affected thereby;

(g) modify the definition of the term "Outstanding" or the Priority of Payments set forth in the Indenture; or

(h) change the minimum denominations of any Class of Secured Notes or Composite Notes; or

(i) modify any of the provisions of the Indenture in such a manner as to affect the calculation of the amount of any payment of interest on or principal of or any other applicable amounts payable under any Secured Note or Composite Note or any amount available for distribution to the Subordinated Notes, the Synthetic Counterparty, the TRS Counterparty, the JPMorgan Financing Party, each applicable Short Synthetic Counterparty or the Collateral Manager or the rights of the holders of Secured Notes, the Synthetic Counterparty, the TRS Counterparty, the JPMorgan Financing Party, each applicable Short Synthetic Counterparty or the Collateral Manager to the benefit of any provisions for the redemption of such Secured Notes contained in the Indenture.

The Trustee may rely on a certificate of the Issuer or the Collateral Manager, as needed, to determine whether or not the holders of Notes or Composite Notes would be affected by such change. Such determination shall be conclusive and binding on all present and future holders.

The Co-Issuers and the Trustee may also enter into supplemental indentures, without the consent of the Secured Noteholders (other than the holders of the Class A-1 Notes to the extent such supplemental indenture could reasonably be expected to adversely affect the rights of the Class A-1 Noteholders under the Indenture), the Composite Noteholders, the Subordinated Noteholders, or the TRS Counterparty (except to the extent such supplemental indenture could reasonably be expected to materially and adversely affect (i) the rights of the TRS Counterparty under the Total Return Swap or the Indenture or (ii) any term used in the Total Return Swap), at any time and from time to time, subject to certain requirements described in the Indenture:

(a) to evidence the succession of another person to the Issuer or the Co-Issuer and the assumption by any such successor person of the covenants of the Issuer or the Co–Issuer in the Indenture and in the Secured Notes and the Composite Notes;

(b) to add to the covenants of the Co-Issuers or the Trustee for the benefit of the Holders of all of the Secured Notes and the Composite Notes or to surrender any right or power conferred upon the Co-Issuers;

(c) to convey, transfer, assign, mortgage or pledge any property to or with 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 Secured Notes or the Composite Notes;

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(d) 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 as shall be necessary to facilitate the administration of the trusts under the Indenture by more than one Trustee, pursuant to the requirements of the Indenture;

(e) 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 unto the Trustee any property subject or required to be subjected to the lien of the Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien of the Indenture any additional property;

(f) to facilitate the transfer of Notes or Composite Notes in accordance with applicable law, which may include providing for maintenance of a book-entry trading system;

(g) to modify certain representations and warranties relating to the Trustee's security interest in the Collateral or Composite Note Collateral as necessary to provide assurance of the maintenance of such security interest following any change in applicable law;

(h) to modify the restrictions on and procedures for resales and other transfers of the Secured Notes or Composite Notes to reflect any changes in applicable law or regulation (or the interpretation thereof) or to enable the Co-Issuers to rely upon 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 thereunder;

(i) to correct any inconsistency or defect, cure any ambiguity or correct any typographical or other manifest errors, including any inconsistency with any then current Rating Agency methodology, (a) arising under the Indenture or (b) in connection with this Offering Circular or any other Transaction Document;

(j) to obtain ratings on one or more Classes of the Secured Notes or Composite Notes from any rating agency;

(k) to accommodate the issuance of Secured Notes or Composite Notes in exchange for existing Secured Notes or Composite Notes to be held in global form through the facilities of DTC, Euroclear or Clearstream, Luxembourg or otherwise or the listing of the Secured Notes or Composite Notes on any exchange or the issuance of additional Secured Notes;

(l) to take any action necessary or advisable to prevent the Co-Issuers, the Noteholders or the Trustee from becoming subject to withholding or other taxes, fees or assessments or to reduce the risk that the Co-Issuers will be engaged in a United States trade or business for U.S. federal income tax purposes or otherwise subject to U.S. federal, state, local or foreign income or franchise tax on a net income basis provided that such action will not cause the Noteholders to experience any material change to the timing, character or source of the income from the Notes, and will not be considered a significant modification resulting in an exchange for purposes of Treas. Reg. § 1.1001-3;

(m) to avoid the Issuer or the Co-Issuer or the Collateral or the Composite Note Collateral being required to register as investment company under the Investment Company Act;

(n) to accommodate the issuance of any Class of Secured Notes as definitive Secured Notes or any Composite Notes as definitive Composite Notes;

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(o) to effect an Optional Redemption by Refinancing;

(p) to make any change required by the stock exchange on which any Class of Secured Notes or Composite Notes or the Subordinated Notes is listed, if any, in order to permit or maintain such listing; or

(q) to conform the terms of the Indenture to the terms set forth in this Offering Circular.

Notwithstanding anything in this section to the contrary, no amendment or supplement to the Indenture shall be effective unless and until each of the Synthetic Counterparty, the JPMorgan Financing Party and the Collateral Manager has received written notice of such amendment or supplement and has consented thereto.

Not later than fifteen (15) Business Days prior to the execution of any such supplemental indenture, the Trustee, at the expense of the Co-Issuers shall mail to the Secured Noteholders, the Composite Noteholders, the JPMorgan Financing Party, the Synthetic Counterparty, the TRS Counterparty, each Short Synthetic Counterparty, the Subordinated Note Paying Agent (for distribution to the holders of the Subordinated Notes), the Collateral Manager and each Rating Agency a copy of such proposed supplemental indenture (or a description of the substance thereof followed, in due course, by a copy of the proposed supplemental indenture) and the Issuer or an agent of the Issuer shall request that the Rating Condition with respect to such supplemental indenture be satisfied. If any Class of Secured Notes is then rated by any Rating Agency, the Trustee will not enter into any such supplemental indenture if, as a result of such supplemental indenture, the Rating Condition would not be satisfied with respect to such supplemental indenture, unless each holder of Secured Notes of each Class whose rating will be reduced or withdrawn as a result of such supplemental indenture has consented to such supplemental indenture and to such failure to meet the Rating Condition. Unless notified by a Majority of any Class of Secured Notes or Composite Notes or a Majority-in-Interest of Subordinated Noteholders that such Class of Secured Notes, Composite Notes or the Subordinated Notes could be materially and adversely affected (or in the case of the Class A-1 Notes, unless notified by a Majority of the Class A-1 Notes that such Class of Notes could be adversely affected), or by each applicable Short Synthetic Counterparty that it would be materially and adversely affected, or by the TRS Counterparty that it would be materially and adversely affected, the Trustee may rely in good faith with the written advice of counsel or an officer's certificate of the Issuer or the Collateral Manager delivered to the Trustee as to whether or not such Class of Secured Notes or Composite Notes, the Subordinated Notes, each applicable Short Synthetic Counterparty or the TRS Counterparty (or with respect to any Short Synthetic Counterparty or the TRS Counterparty, an opinion of counsel only) would be materially and adversely affected (or in the case of the Class A-1 Notes, could be adversely affected) by such change (after giving notice of such change to the holders of the Secured Notes, the Composite Notes and the Subordinated Notes and to each applicable Short Synthetic Counterparty and the TRS Counterparty). Any determination by the Trustee in reliance in good faith upon such written advice or officer's certificate shall be conclusive and binding on all present and future holders of the Secured Notes and the Composite Notes and the Subordinated Noteholders and each applicable Short Synthetic Counterparty and the TRS Counterparty. As long as any of the Secured Notes, the Composite Notes or Subordinated Notes are listed on the Irish Stock Exchange, the Issuer shall notify the Irish Stock Exchange following any modification to the Indenture that affects any of the Secured Notes, the Composite Notes or Subordinated Notes that are listed on the Irish Stock Exchange.

Notwithstanding anything to the contrary in this section, if any of the Rating Agencies changes the method of calculating any of the Collateral Quality Tests or its methodologies in respect of any of

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the Eligibility Criteria (a "Rating Agency Modification"), the Co-Issuers may incorporate corresponding changes into the Indenture without the consent of the Secured Noteholders, the Composite Noteholders or the Subordinated Noteholders, if (i) the Rating Condition is satisfied with respect to the Rating Agency that made such Rating Agency Modification, (ii) the TRS Counterparty or the Synthetic Counterparty, as the case may be, if such person could reasonably be expected to be materially and adversely affected thereby has consented to such Rating Agency Modification and (iii) notice of such change is delivered by the Collateral Manager to the Trustee, and by the Trustee to the Secured Noteholders, the Composite Noteholders, the Subordinated Noteholders, the TRS Counterparty, the Synthetic Counterparty and each Rating Agency. Any such modification will be effected without execution of a supplemental indenture.

Consolidation, merger or transfer of assets

Except under the limited circumstances set forth in the Indenture, neither the Issuer nor the Co-Issuer may consolidate with, merge into, or transfer or convey all or substantially all of its assets to, any other corporation, partnership, trust or other person or entity.

Petitions for bankruptcy

The Indenture will provide that the holders of the Notes and the Composite Notes may not cause the filing of a bankruptcy proceeding against the Issuer or Co-Issuer until the payment in full of the Offered Securities and not before one year and a day, or if longer, the applicable preference period then in effect, has elapsed since such payment.

Satisfaction and discharge of the Indenture

The Indenture will be discharged with respect to the Collateral securing the Secured Notes (including the Class E Component of the Composite Notes) and the Composite Note Collateral securing the Composite Notes upon (a) delivery to the Trustee for cancellation of all of the Notes and Composite Notes, or, with certain exceptions (including the obligation to pay principal and interest), upon deposit with the Trustee of funds sufficient for the payment or redemption thereof, (b) the payment by the Co-Issuers of all other amounts due under the Indenture and (c) the delivery to the Trustee of certain certificates and documents as described in the Indenture.

Trustee

LaSalle Bank National Association will be the Trustee under the Indenture for the Notes and the Composite Notes. The payment of the fees and expenses of the Trustee relating to the Notes and the Composite Notes is solely the obligation of the Co-Issuers and solely payable out of the Collateral or the Composite Note Collateral, as applicable. The Trustee and/or its affiliates may receive compensation in connection with the Trustee's investment of trust assets in certain Eligible Investments as provided in the Indenture. Eligible Investments may include investments for which the Trustee or an affiliate of the Trustee provides services. The Co-Issuers and their affiliates may maintain other banking relationships in the ordinary course of business with the Trustee or its affiliates.

On April 22, 2007, ABN AMRO Holding N.V. agreed to sell ABN AMRO North America Holding Company, the indirect parent of LaSalle Bank National Association, to Bank of America Corporation. The proposed sale currently includes all parts of the Global Securities and Trust Services Group within LaSalle Bank engaged in the business of acting as trustee, securities administrator, master

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servicer, custodian, collateral administrator, securities intermediary, fiscal agent and issuing and paying agent in connection with securitization transactions.

The contract between ABN AMRO Bank N.V. and Bank of America Corp. contains a 14 calendar day "go shop" clause which continued until 11:59 PM New York time on May 6th, 2007. ABN AMRO Bank N.V. filed a copy of this contract on Form 6-K with the Securities and Exchange Commission on April 25, 2007. The contract provides that the sale of LaSalle Bank National Association is subject to regulatory approvals and other customary closing conditions.

The contract referenced above was entered into by ABN AMRO Bank N.V. without shareholder approval. In response to a challenge of the sale by a shareholders group, a judge in the Enterprise Chamber of the Amsterdam Superior Court in the Netherlands ruled on May 3, 2007 that ABN AMRO Holding N.V. was not permitted to proceed with the sale of LaSalle Bank without shareholder approval. As of the date hereof, neither a shareholders meeting to vote on the proposed sale of LaSalle Bank National Association nor an appeal of the ruling has occurred. On May 4, 2007, Bank of America Corporation filed a lawsuit against ABN AMRO Bank N.V. and ABN AMRO Holding N.V. in the U.S. District Court for the Southern District of New York (Manhattan) seeking, among other things, an injunction prohibiting ABN AMRO Bank N.V. and ABN AMRO Holding N.V. from negotiating a sale of LaSalle Bank National Association or selling LaSalle Bank National Association to any third party other than as provided for in the contract referenced above, monetary damages and specific performance.

The Indenture contains provisions for the indemnification of the Trustee by the Issuer, payable solely out of the Collateral, for any loss, liability or expense incurred without negligence, willful misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust. The Trustee may resign at any time by providing 30 days' notice. The Trustee may be removed at any time by the holders of at least 66-2/3% in Aggregate Outstanding Amount of each Class of Secured Notes, or, at any time when an Event of Default shall have occurred and be continuing, by the Collateral Manager or by the holders of a majority in Aggregate Outstanding Amount of the Controlling Class or by order of a court of competent jurisdiction as set forth in the Indenture. No resignation or removal of the Trustee will become effective until the acceptance of the appointment of the successor Trustee.

Governing law

The Indenture, the Secured Notes and the Composite Notes will be governed by, and construed in accordance with, the law of the state of New York.

Additional information regarding the Subordinated Notes

General

The Subordinated Notes will be constituted by the Deed of Covenant and issued subject to the terms and conditions attached as an exhibit to the Subordinated Note Paying Agency Agreement (the terms and conditions of the Subordinated Notes, the Subordinated Note Paying Agency Agreement and the Deed of Covenant collectively, the "Subordinated Note Documents"). The following summary describes certain provisions of the Subordinated Notes, the Subordinated Note Paying Agency Agreement and the Subscription Agreements. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Subordinated Note Paying Agency Agreement and the Subscription Agreements. After the closing,

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copies of the Subordinated Note Paying Agency Agreement may be obtained by prospective investors upon request in writing to the Subordinated Note Paying Agent.

Status and ranking

The Subordinated Notes will be fully subordinated to the Secured Notes and to the payment of all other amounts payable in accordance with the Priority of Payments. The Subordinated Notes will not be secured by the Collateral and the Composite Note Collateral or any pledge of the Collateral or the Composite Note Collateral but, under the terms of the Indenture, the Trustee will pay to the Subordinated Note Paying Agent for distribution to holders of the Subordinated Notes amounts available pursuant to the Priority of Payments. To the extent that following realization of the Collateral, these amounts are insufficient to repay the face amount of the Subordinated Notes or distributions thereon, no other funds will be available to make such payments.

Distributions on the Subordinated Notes

The Stated Maturity of the Subordinated Notes will be May 11, 2057. To the extent funds are available for such purpose under the Indenture as described above, payments will be made to the holders of the Subordinated Notes on each Payment Date and in connection with any redemption of the Subordinated Notes.

Payments on the Subordinated Notes will be made to the person in whose name the Subordinated Note is registered on the applicable Record Date in the same manner as payments are made to the holders of the Secured Notes as described under "—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Entitlements to payments" and any unclaimed payments will be subject to the terms described under "— Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Prescription." Payments will be made by wire transfer in immediately available funds to a Dollar account maintained by the holder thereof appearing in the Subordinated Note Register in accordance with wire transfer instructions received from such holder by the Subordinated Note Paying Agent on or before the Record Date or, if no wire transfer instructions are received by the Subordinated Note Paying Agent, by a Dollar check drawn on a bank in the United States. Final distributions or payments made in the course of a winding up will be made only against surrender of the certificate representing such Subordinated Notes at the office designated by the Subordinated Note Registrar. The Subordinated Note Registrar will communicate such distributions and payments and the related Payment Date to the Issuer, the Subordinated Note Paying Agent and, for so long as the Subordinated Notes are listed on the Irish Stock Exchange, the Irish Paying Agent.

Mandatory Redemption

The Subordinated Notes will be fully redeemed on the Stated Maturity indicated in "Summary of terms—Principal Terms of the Notes" unless previously redeemed as described herein. The average life of the Subordinated Notes is expected to be less than the number of years until their Stated Maturity. See "Risk Factors—Relating to the Offered Securities—The Weighted Average Lives of the Offered Securities may vary."

Optional Redemption

The Subordinated Notes will be redeemed by the Issuer, in whole but not in part, on any Payment Date on or after which all of the Secured Notes have been redeemed or repaid, from the proceeds

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of the Collateral remaining after giving effect to redemption or repayment of the Secured Notes and payment in full of all expenses of the Co-Issuers, at the direction of the holders of at least a Special Majority-in-Interest of the Subordinated Notes. The Redemption Price payable to each holder of the Subordinated Notes will be its proportionate share of the proceeds of the Collateral remaining after the payments described above.

Final distributions will be made only against surrender of the certificate representing such Subordinated Notes at the office designated by the Subordinated Note Registrar. The Subordinated Note Registrar will communicate such distributions and payments and the related Payment Date to the Issuer, the Subordinated Note Paying Agent, and, for so long as the Subordinated Notes are listed on the Irish Stock Exchange, the Irish Paying Agent, as described above under "—Optional Redemption".

Voting

Holders of the Subordinated Notes will have no voting rights except as set forth in the Indenture, the Subordinated Note Paying Agency Agreement or the other Transaction Documents, as described herein. The requisite majority of holders of the Subordinated Notes will be able to direct a redemption (including a Tax Redemption) of the Secured Notes and the Subordinated Notes pursuant to the Indenture as described herein.

Cancellation

All Subordinated Notes that are redeemed and surrendered for cancellation will forthwith be cancelled and may not be reissued or resold. The Issuer will not reissue or resell any such Subordinated Notes.

Subordinated Note Paying Agency Agreement

The Subordinated Note Paying Agency Agreement may be amended by the Issuer and LaSalle Bank National Association, as Subordinated Note paying agent (in such capacity, the "Subordinated Note Paying Agent") without the consent of the holders of any Subordinated Notes, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, or in regard to matters or questions arising thereunder as the Issuer and the Subordinated Note Paying Agent may deem necessary or desirable and which shall not materially adversely affect the interests of holders of the Subordinated Notes. The Subordinated Note Paying Agency Agreement may also be amended with the consent of a Majority-in-Interest of the Subordinated Notes materially and adversely affected thereby; provided that the Issuer is not permitted to consent to any amendment of the Subordinated Note Paying Agency Agreement without the consent of each Subordinated Noteholder if such amendment would (a) reduce in any manner the amount of, or delay the timing of, or change the allocation of, the payment of any final distributions on the Subordinated Notes or (b) reduce the voting percentage of holders of Subordinated Notes required to consent to any amendment to the Subordinated Note Paying Agency Agreement that requires the consent the holders of Subordinated Notes. As permitted under the Subordinated Note Paying Agency Agreement, the Subordinated Note Paying Agent is entitled to receive, and will be fully protected in relying upon, an opinion of counsel, consent or certificate of the Issuer as to whether or not any proposed amendment is permitted under the Subordinated Note Paying Agency Agreement and all conditions thereto have been satisfied.

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Deed of Covenant

The Issuer is not permitted to amend, vary, terminate or suspend the Deed of Covenant except to extend or increase its obligations, or as otherwise permitted under the Subordinated Note Paying Agency Agreement with the consent of the holders of Subordinated Notes.

Petitions for bankruptcy

Each original purchaser of Subordinated Notes executing a Subscription Agreement with the Issuer will be required to covenant in a Subscription Agreement (and each transferee or other purchaser of Subordinated Notes will be required to covenant in a transfer certificate (or deemed to have covenanted, as applicable)) that it will not cause the filing of a petition in bankruptcy against the Issuer before one year and one day have elapsed since the payment in full of the Offered Securities or, if longer, the applicable preference period then in effect.

Governing law

The Subordinated Notes, the Deed of Covenant (including the terms and conditions of the Subordinated Notes) and the Issuer Charter will be governed by, and construed in accordance with, the laws of the Cayman Islands. The Subordinated Note Paying Agency Agreement (other than the terms and conditions of the Subordinated Notes attached thereto) and the Subscription Agreements will be governed by, and construed in accordance with, the law of the State of New York.

Certain definitions

"Majority-in-Interest of the Subordinated Notes" means, at any time, holders of more than 50% of the Aggregate Outstanding Amount of the Subordinated Notes held by all holders of Subordinated Notes at such time.

"Special Majority-In-Interest" means, at any time, holders of more than 66-2/3% of the Aggregate Outstanding Amount of the Subordinated Notes.

Form, registration and transfer

The Subordinated Notes are being initially offered, and may subsequently be transferred, only (a) to U.S. Persons in the United States that are (i) Qualified Purchasers and (ii) Qualified Institutional Buyers or Institutional Accredited Investors and (b) to certain non-U.S. Persons outside the United States in reliance on Regulation S under the Securities Act. Transfers of the Subordinated Notes will be subject to certain restrictions set forth in the Subordinated Note Documents. Each initial investor and each subsequent transferee of a Subordinated Note will be required to provide a Subscription Agreement or transfer certificate, as the case may be, in which it will be required to certify, among other matters, as to its status under the Securities Act, the Investment Company Act and ERISA.

The Subordinated Notes initially issued to Non-U.S. Persons in "offshore transactions" (within the meaning of Regulation S) shall be represented by a temporary global note, in fully registered form without coupons (each, a "Regulation S Temporary Global Subordinated Note"). The Subordinated Notes initially issued to U.S. Persons in transactions exempt from the registration requirements of the Securities Act shall be issued as definitive notes in fully registered form without coupons ("Certificated Subordinated Notes").

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Upon the termination of the Distribution Compliance Period, the Regulation S Temporary Global Subordinated Notes shall be exchanged, in whole or from time to time in part, for the permanent global notes, in fully registered form without coupons (each, a "Regulation S Permanent Global Subordinated Note").

If at any time any of the Subordinated Notes are listed on the Irish Stock Exchange and the guidelines of such exchange shall so require, the Issuer will have a paying agent (which shall be the Irish Paying Agent) for such Subordinated Notes in Ireland. In the event that the Irish Paying Agent is replaced at any time during such period, notice of the appointment of any replacement will be published by an announcement to the Companies Announcement Office of the Irish Stock Exchange as promptly as practicable after such appointment.

The Subordinated Notes will be subject to certain restrictions on transfer set forth therein and in the Subordinated Note Documents, and the Subordinated Notes will bear the applicable legends regarding the restrictions set forth under "Transfer restrictions."

LaSalle Bank National Association, as Subordinated Note Paying Agent, has been appointed as transfer agent with respect to the Subordinated Notes.

Pursuant to the Subordinated Note Paying Agency Agreement, LaSalle Bank National Association (on behalf of the Issuer) has been appointed and will serve as the registrar with respect to the Subordinated Notes (in such capacity, the "Subordinated Note Registrar") and will provide for the registration of Subordinated Notes and the registration of transfers of Subordinated Notes in the register maintained by it (the "Subordinated Note Register"). Written instruments of transfer are available at the office designated by the Subordinated Note Registrar.

No gross up

All distributions of principal of and interest on the Subordinated Notes will be made without any deduction or withholding for or on account of any tax unless such 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 becomes aware that it is so required to deduct or withhold, then the Issuer will instruct the Subordinated Note Paying Agent to make such deduction or withholding and will pay any such withholding taxes to the relevant tax authorities, but will not be obligated to pay any additional amounts in respect of such withholding or deduction.

The Composite Notes

General

Concurrently with the issuance of the Notes, the Issuer will issue the Composite Notes. All references to any Class of Notes in this Offering Circular relating to payments (including redemptions) to be made with respect to, or amounts to be deferred with respect to, or to votes or consents to be given by the holders of, such Class of Notes include a reference to a proportional amount of such payments, distributions, amounts, votes or consents, as applicable, with respect to the related Component (whether or not explicitly mentioned).

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Status and Ranking

The Composite Notes are limited recourse secured obligations of the Issuer. For the purposes of subordination, the Composite Notes will not be treated as a separate Class of Notes, but the Class E Component will be treated as part of the Class E Notes. The Class E Component of the Composite Notes will be secured by the Collateral.

Payments on the Composite Notes

The Stated Maturity of the Composite Notes will be February 15, 2037 (the "Stated Maturity" for the Composite Notes).

On or before the fifth Business Day following each Payment Date that occurs in May and November in each calendar year, beginning on the Payment Date occurring in May 2008 (each a "Treasury Strip Disposition Date"), the Trustee shall use commercially reasonable efforts to sell all or a portion of the Treasury Strip held in the Composite Note Collateral Account (i) in the secondary market in accordance with customary industry practices and standards for sales of similar securities and (ii) in all other respects, in accordance with the provisions hereof. The face amount, if any, of the Treasury Strip to be sold on a Treasury Strip Disposition Date shall be the amount (rounded down to the nearest $1,000) (the "Treasury Strip Disposition Amount" for such Treasury Strip Disposition Date) equal to the positive difference, if any, between (i) the sum of (A) all distributions made to the holders of the Composite Notes then Outstanding (including any distributions made under the Composite Notes with respect to the sale of the Treasury Strip as described hereunder) prior to such date and (B) all distributions with respect to the Class E Component to be made to the holders of the Composite Notes then Outstanding on the next following Composite Note Payment Date and (ii) the difference between (x) the Adjusted Initial Face Amount as of such date and (y) the aggregate face amount of the Treasury Strip Component held in the Composite Note Collateral Account as of such date. (It is understood that, if the Treasury Strip Disposition Amount for any Treasury Strip Disposition Date shall be zero or a negative amount, no portion of the Treasury Strip shall be sold on such date). The Trustee may, in its sole discretion, engage a broker-dealer to assist in the sale of any Treasury Strip as described herein.

Notwithstanding any of the foregoing, no portion of the Treasury Strip may be sold on any Treasury Strip Disposition Date if the highest bid price received by the Trustee for the purchase of such portion of the Treasury Strip on such Treasury Strip Disposition Date (the "Highest Bid Price" for such Treasury Strip Disposition Date) is less than the minimum bid price prescribed for the Payment Date immediately preceding such Treasury Strip Disposition Date by Annex H (the "Minimum Bid Price" for such Payment Date and Treasury Strip Disposition Date). If the Highest Bid Price received by the Trustee for the purchase of all or any portion of the Treasury Strip on a Treasury Strip Disposition Date as described above shall be less than the Minimum Bid Price for such Treasury Strip Disposition Date, the Trustee shall notify in writing the Holders of the Composite Notes no later than four Business Days prior to such Treasury Strip Disposition Date of the Treasury Strip Disposition Amount and the Highest Bid Price for the portion of the Treasury Strip proposed to be sold on such Treasury Strip Disposition Date. On or before the third Business Day to occur after the delivery of such written notification by the Trustee to the Holders of the Composite Notes, the Holders of no less than 100% of the Aggregate Outstanding Amount of the Composite Notes may direct the Trustee, by written notice delivered to the Trustee, to sell the Treasury Strip in an amount equal to the Treasury Strip Disposition Amount for a minimum sale price specified by such Holders in such written notice (the "Minimum Sale Price"). (For the avoidance of doubt, the Trustee shall not be obligated to sell the Treasury Strip if it does not receive written notice from the Composite

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Noteholders within the time limit prescribed herein and/or if the Composite Noteholders fail to designate a Minimum Sale Price as contemplated by this paragraph.)

On each Composite Note Payment Date, the Trustee shall disburse all amounts in the Composite Note Collateral Account attributable to the proceeds from the sale of the Treasury Strip on or immediately prior to such Composite Note Payment Date, any other distributions received under the Treasury Strip on or immediately prior to such Composite Note Payment Date and any payments received under the Class E Component on the Payment Date or Redemption Date, as the case may be, immediately preceding such Composite Note Payment Date to the Holders of the Composite Notes on a pro rata basis based on the Aggregate Outstanding Amount of the Composite Notes held by each Holder of the Composite Notes.

On each Composite Note Payment Date, payments made to the Holders of the Composite Notes shall be deemed to be applied (A) first, to the payment of the Notional Interest Amount on the Composite Notes for such date, (B) second, if the amount deemed to be applied pursuant to this clause (B) is greater than zero, to reduce, by an amount equal to the amount deemed to be applied pursuant to this clause (B), the Notional Principal Amount of the Composite Notes on such date until such amount is reduced to U.S.$1,000,000 and (c) third, as an additional payment on the Composite Notes. Although the Notional Principal Amount of the Composite Notes may be reduced to zero, the Composite Notes will remain outstanding to the extent the Components thereof have not been redeemed. Any failure to pay the Notional Interest Amount on a Composite Note Payment Date shall not constitute an Event of Default and any Notional Interest Amount remaining unpaid on such date shall not accrue interest.

If the stated maturity date of the Treasury Strip has occurred and the aggregate face amount of the Treasury Strip has been reduced to zero, or if the sale of the entire face amount of Treasury Strip held in the Composite Note Collateral Account has occurred prior to the Maturity of the Class E Notes, the Class E Notes (and any other items in the Composite Note Collateral) will be distributed in kind to the Holders of the Composite Notes pro rata according to the Aggregate Outstanding Amount of the Composite Notes held by each of them.

Exchange of Composite Notes into Components

A holder of a beneficial interest in the Composite Notes may, at any time, exchange such interest for interests in the Class E Notes and Treasury Strip representing the Components by delivering to the Trustee, as Note Registrar, (x) in the case of certificated Composite Notes, such holder’s certificated Composite Note(s) properly endorsed for such exchange and (y) exchange instructions given by the holder of such note(s). Upon receipt thereof, the Trustee, as Note Registrar, shall (x) cancel such certificated Composite Note(s) or reduce the Aggregate Outstanding Amount of the Global Composite Note and (y) either approve the instructions at the Depository to credit to the securities account at Euroclear, Clearstream or DTC, as applicable, specified by the holder in its exchange instructions, a beneficial interest in a Regulation S Global Secured Note representing the Class E Notes (if the holder has represented that it is not a U.S. Person and elects to take delivery in the form of an interest in a Regulation S Global Secured Note) or a Restricted Global Secured Note representing the Class E Notes (if the holder has represented that it is both a Qualified Institutional Buyer and a Qualified Purchaser and elects to take delivery in the form of an interest in a Restricted Global Secured Note) or cause the issue and delivery of definitive notes, if all Class E Notes are in definitive form at such time, in the same principal amount as the Class E Component to be exchanged as described herein and (z) record such transfers in the Note Register. If a holder of the Composite Notes exchanges such Composite Notes for the Class E Component in the manner

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described herein, such holder shall also receive in kind its pro rata share of the Composite Note Collateral including, without limitation, its pro rata share of the Treasury Strip, according to the pro rata share of the Aggregate Outstanding Amount attributable to its Composite Note as of the date of exchange.

Until Composite Notes are exchanged for the related Components in the manner provided in the Indenture, the Class E Notes relating to the Class E Component will not be issued to the Holders or beneficial owners of the Composite Notes. No holder of an interest in the Class E Notes (including a Holder that received such Class E Notes upon an exchange of a Composite Note) will have the right to exchange such interest in the Class E Notes for a Composite Note. No service charge will be made for any such exchange, but the Trustee 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 Notes for all or a portion of the Class E Notes relating to the Class E Component, the Issuer shall give each Rating Agency notice thereof.

Redemption of the Composite Notes

In the event of a redemption of the Class E Notes, if the Composite Notes have not been previously exchanged for the Class E Component, the related Class E Component will be redeemed in the manner described herein. In connection therewith, the Composite Notes will be redeemed at the applicable Redemption Price upon any redemption of the Class E Notes. If the stated maturity date for the Treasury Strip has not occurred prior to the redemption of the Class E Notes, upon redemption of the Composite Notes, the Treasury Strip (and any other items in the Composite Note Collateral) will be distributed in kind to the Holders of the Composite Notes pro rata according to the outstanding principal amount of their respective Composite Notes.

Voting

The holders of Composite Notes are not entitled to any rights to vote as a single Class, but are entitled to voting rights in the Class E Notes in the proportion that the Class E Component bears to the principal amount of such Class of Notes (including the related Class E Component). However, the Holders of the Composite Notes will have the right to vote as a separate Class solely with respect to any supplemental indenture that affects the Composite Notes in a manner that is materially different from the Class represented by the Class E Component. Any supplemental indenture to the Indenture that requires the consent of the Holders of the Composite Notes will not require the consent of any other Class of Notes if such supplemental indenture affects solely the Holders of the Composite Notes.

Ratings of the Secured Notes and the Composite Notes

The Secured Notes

It is a condition of the issuance of the Secured Notes that the Secured Notes of each Class receive from each of Moody's and S&P (each, a "Rating Agency") the minimum rating indicated under "Summary of terms— Principal terms of the Notes." A security rating is not a recommendation to buy, sell or hold securities and is subject to withdrawal at any time. There is no assurance that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by the assigning Rating Agency if in its judgment circumstances in the future so warrant.

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The ratings of the Secured Notes address the likelihood of full and ultimate payment to holders of the Secured Notes of all distributions of stated interest and the ultimate payment in full of the principal amount of each such Class not later than its respective Stated Maturity. The ratings assigned to the Secured Notes of each Class by each Rating Agency are based upon its assessment of the probability that the Portfolio Assets and Eligible Investments will provide sufficient funds to pay the Secured Notes of such Class (based upon the Note Interest Rate and principal balance or face amount, as applicable, of such Class), based largely upon such Rating Agency's statistical analysis of historical default rates on debt securities with various ratings, the terms of the Indenture, the asset and interest coverage required for the Secured Notes (which is achieved through the subordination of the Subordinated Notes and certain Classes of Secured Notes as described herein).

In addition to their respective quantitative tests, the ratings of each Rating Agency take into account qualitative features of a transaction, including the legal structure and the risks associated with such structure, such Rating Agency's view as to the quality of the participants in the transaction and other factors that it deems relevant.

The Composite Notes

It is a condition of the issuance of the Composite Notes that the Composite Notes be rated at least "Aaa" by Moody's and "AAA" by S&P, solely with respect to, in the case of Moody’s, the ultimate receipt of payments equal to the Rated Balance and, in the case of S&P, the ultimate payment of the Treasury Strip Component. A security rating is not a recommendation to buy, sell or hold securities and is subject to withdrawal at any time. There is no assurance that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by Moody's or S&P if in its judgment circumstances in the future so warrant.

The rating assigned to the Composite Notes by Moody's is based largely upon Moody's statistical analysis of historical default rates on debt securities with various ratings, the terms of the Indenture, the asset and interest coverage required for the Secured Notes (which is achieved through the subordination of the Subordinated Notes and certain Classes of Secured Notes as described in this Offering Circular), the Collateral Quality Test, each of which must be satisfied, maintained or improved in order to reinvest in additional Portfolio Assets and the Treasury Strip on deposit in the Composite Note Collateral Account. In addition to its quantitative tests, the rating of Moody's takes into account qualitative features of a transaction, including the legal structure and the risks associated with such structure, Moody's view as to the quality of the participants in the transaction and other factors that it deems relevant.

The rating assigned to the Composite Notes by S&P is based primarily on the then-current rating of the Treasury Strip.

Security for the Secured Notes

The Collateral

The "Collateral" will consist of, and the Issuer will grant to the Trustee a perfected security interest for the benefit of the Secured Parties in all of the Issuer's right, title and interest in, to and under:

• the Funded Portfolio Assets owned or acquired by the Issuer and delivered to the Trustee (directly or through a Securities Intermediary) pursuant to the terms of the Indenture, the CDS

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Portfolio Assets and the Offsetting Short Transactions, if any, and all payments thereon or with respect thereto,

• the ISDA Master Agreement,

• the Total Return Swap,

• the Issuer Accounts (excluding the TRS Interest Account, the TRS Counterparty Account, the Synthetic Counterparty Account and any Short Synthetic Counterparty Account),

• the TRS Counterparty Account, the Synthetic Counterparty Account and each Short Synthetic Counterparty Account, but, in each case, to the extent of the Issuer's security interest therein,

• the Management Agreement,

• the Collateral Administration Agreement,

• all Cash delivered to the Trustee (directly or through a Securities Intermediary), and

• all proceeds, accessions, profits, income benefits, substitutions and replacements, whether voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses;

provided that such grants shall not include the U.S.$250 transaction fee paid to the Issuer in consideration of the issuance of the Offered Securities, the funds attributable to the issue and allotment of the Issuer's ordinary shares and the Co-Issuer's common shares or the bank account in the Cayman Islands in which such funds are deposited (or any interest thereon) (or any funds deposited therein or credited thereto) (collectively, the "Excepted Property"). Offsetting Short Transactions will not constitute Portfolio Assets for any purpose under the Transaction Documents; however, as described herein, Offsetting Short Transactions will be given effect in all the Collateral Quality Tests and the Eligibility Criteria as a negative balance to offset the related Offset Portfolio Asset and any Short Synthetic Premium Amounts will be reflected as a deduction in the Weighted Average Spread Test.

Under the Indenture, the Issuer will also grant to the Trustee a perfected security interest for the benefit of the holders of the Composite Notes only in (a) the Treasury Strip, (b) any proceeds of the Treasury Strip Component, (c) the Composite Note Collateral Account and (d) all proceeds with respect to the foregoing (collectively, the "Composite Note Collateral").

"Issuer Accounts" means the Interest Collection Account, the Principal Collection Account, the Composite Note Collateral Account, the Payment Account, the Expense Account, the Synthetic Counterparty Account, the TRS Counterparty Account, the TRS Interest Account, the TRS/CDS Swap Receipts Account, the Custodial Account, the TRS Asset Account, each Short Synthetic Counterparty Account and any sub-account thereof that the Trustee deems necessary or appropriate.

Collateral accumulation on or prior to the Closing Date; Ramp-Up Period

On the Closing Date, the Issuer is expected to enter into or purchase Portfolio Assets having an Aggregate Principal/Notional Balance equal to at least 95% in the aggregate of the Ramp-Up

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Completion Date Balance from JPMorgan Chase (in such capacity, the "Warehouse Provider"). Such Portfolio Assets were selected by the Collateral Manager subject to the consent of the Warehouse Provider over a warehouse period beginning in January 2007. Holders of the Offered Securities assume the risk of market value and credit quality changes in the Portfolio Assets from the date such Portfolio Assets were acquired or entered into prior to the Closing Date but will not receive the benefit of interest earned on the Portfolio Assets during such period. The purchase price of such Portfolio Assets will be the value (net of any hedging costs and expenses) on the date such Portfolio Assets were acquired or entered into by the Warehouse Provider for the Issuer's benefit (at the direction of the Collateral Manager) with the intention of transferring such Portfolio Assets to the Issuer. Accordingly, the Issuer is assuming the market risk on such assets for the warehouse period preceding the Closing Date. Certain of the Portfolio Assets may have declined in market value since the date of purchase by the Warehouse Provider although the Issuer will still be obligated to purchase such Portfolio Assets at the agreed-upon prices, which will reduce the funds available to the Issuer to purchase additional Portfolio Assets during the Ramp-Up Period.

The Issuer is expected to enter into or purchase additional Portfolio Assets comprising the remaining portion of the Ramp-Up Completion Date Balance during the Ramp-Up Period.

The Issuer will notify each Rating Agency in writing (each such notice a "Ramp-Up Notice") of the occurrence of the date that is the earlier of (a) 90 days following the Closing Date and (b) the first date on which the Issuer has purchased or entered into Portfolio Assets in an amount such that the Aggregate Principal/Notional Balance of the Portfolio Assets (without giving effect to any principal payments on or sales or termination of the Portfolio Assets on or prior to such date) equals or exceeds the Ramp-Up Completion Date Balance; provided that if the Collateral Manager extends the Ramp-Up Completion Date as part of a Proposed Plan in the manner provided in the Indenture, the Ramp-Up Completion Date will mean such later date designated in the Proposed Plan (such date, the "Ramp-Up Completion Date") within 7 days after the Ramp-Up Completion Date occurs.

If (i) any Collateral Quality Test that relates to Moody's is not satisfied as of the Ramp-Up Completion Date and Moody's has not confirmed the ratings assigned by it on the Closing Date to each Class of Secured Notes prior to the date 30 days after the delivery of the Ramp-Up Notice or (ii) S&P has not confirmed the rating assigned by it on the Closing Date to any Class of Secured Notes (which instruction has not been withdrawn) to the Trustee prior to the date 30 days after the delivery of the Ramp-Up Notice, a "Ratings Confirmation Failure" will occur. In the event of a Ratings Confirmation Failure with respect to any Class of Secured Notes, the Issuer will apply (1) Uninvested Proceeds, in accordance with the Priority of Payments, on the first Payment Date (and on each subsequent Payment Date until a Rating Confirmation is obtained), to repay principal of each applicable Class of Secured Notes (sequentially in direct order of seniority) and (2) first, any Uninvested Proceeds remaining after application thereof pursuant to clause (1) above, and then Principal Proceeds during the Reinvestment Period, in accordance with the Priority of Payments, to acquire additional Portfolio Assets, but, in each case, only to the extent that, as determined by the Collateral Manager, acting on behalf of the Issuer, doing so would be necessary or advisable to obtain a Rating Confirmation on such affected Class of Secured Notes or, if earlier, until each Class of Secured Notes is paid in full. At any time prior to the 7th Business Day following the Ramp-Up Completion Date, the Collateral Manager may, acting in its sole discretion on behalf of the Issuer, propose a Proposed Plan in order to obtain the Rating Confirmation from such Rating Agency which may include changing the Ramp-Up Completion Date to a later date.

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The Funded Portfolio Assets and Reference Obligations

The Reference Obligations and the Funded Portfolio Assets will consist of CDO Securities. Such securities entitle the holders thereof to receive payments that depend primarily on the cash flow from a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities.

The collateral underlying such securities includes assets such as credit card receivables, home equity loans, leases, commercial mortgage loans, residential mortgage loans and debt obligations. Issuers of such securities are primarily banks and finance companies, captive finance subsidiaries of non-financial corporations or specialized originators such as credit card lenders. Credit risk is an important issue in such securities because of the significant credit risks inherent in the underlying collateral and because issuers are primarily private entities. Accordingly, such securities generally include one or more credit enhancements that are designed to raise the overall credit quality of the security above that of the underlying collateral. Another important type of such security is commercial paper issued by special-purpose entities. Asset-backed commercial paper is usually backed by trade receivables, though such conduits may also fund commercial and industrial loans. Banks are typically more active as issuers of these instruments than as investors in them.

A CDO Security is created by the sale of assets or collateral to a conduit, which becomes the legal issuer of the such securities. The securitization conduit or issuer is generally a bankruptcy-remote vehicle such as a grantor trust or, in the case of an asset-backed commercial paper program, a special-purpose entity. The sponsor or originator of the collateral usually establishes the issuer. Interests in the trust, which embody the right to certain cash flows arising from the underlying assets, are then sold in the form of securities to investors through an investment bank or other securities underwriter. Each such security has a servicer (often the originator of the collateral) that is responsible for collecting the cash flows generated by the securitized assets—principal, interest and fees net of losses and any servicing costs as well as other expenses—and for passing them along to the investors in accordance with the terms of the securities. The servicer processes the payments and administers the borrower accounts in the pool.

The structure of CDO Securities and the terms of the investors' interest in the collateral can vary widely depending on the type of collateral, the desires of investors and the use of credit enhancements. Often such securities are structured to reallocate the risks entailed in the underlying collateral (particularly credit risk) into security tranches that match the desires of investors. For example, senior subordinated security structures give holders of senior tranches greater credit risk protection (albeit at lower yields) than holders of subordinated tranches. Under this structure, at least two classes of such securities are issued, with the senior class having a priority claim on the cash flows from the underlying pool of assets. The subordinated class must absorb credit losses on the collateral before losses can be charged to the senior portion. Because the senior class has this priority claim, cash flows from the underlying pool of assets must first satisfy the requirements of the senior class. Only after these requirements have been met will the cash flows be directed to service the subordinated class.

Such securities also use various forms of credit enhancements to transform the risk return profile of underlying collateral, including third-party credit enhancements, recourse provisions, overcollateralization and various covenants. Third-party credit enhancements include standby letters of credit, collateral or pool insurance, or surety bonds from third parties. Recourse provisions are guarantees that require the originator to cover any losses up to a contractually agreed upon

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amount. One type of recourse provision, usually seen in securities backed by credit card receivables, is the "spread account." This account is actually an escrow account whose funds are derived from a portion of the spread between the interest earned on the assets in the underlying pool of collateral and the lower interest paid on securities issued by the trust. The amounts that accumulate in this escrow account are used to cover credit losses in the underlying asset pool, up to several multiples of historical losses on the particular assets collateralizing the securities. Overcollateralization is another form of credit enhancement that covers a predetermined amount of potential credit losses. It occurs when the value of the underlying assets exceeds the face value of the securities. A similar form of credit enhancement is the cash-collateral account, which is established when a third party deposits cash into a pledged account. The use of cash-collateral accounts, which are considered by enhancers to be loans, grew as the number of highly rated banks and other credit enhancers declined in the early 1990s. Cash-collateral accounts provide credit protection to investors of a securitization by eliminating "event risk," or the risk that the credit enhancer will have its credit rating downgraded or that it will not be able to fulfil its financial obligation to absorb losses. An investment banking firm or other organization generally serves as an underwriter for such securities. In addition, a credit-rating agency often will analyze the policies and operations of the originator and servicer, as well as the structure, underlying pool of assets, expected cash flows and other attributes of the securities. Before assigning a rating to the issue, the rating agency will also assess the extent of loss protection provided to investors by the credit enhancements associated with the issue.

Although the basic elements of all such securities are similar, individual transactions can differ markedly in both structure and execution. Important determinants of the risk associated with issuing or holding the securities include the process by which principal and interest payments are allocated and down-streamed to investors, how credit losses affect the trust and the return to investors, whether collateral represents a fixed set of specific assets or accounts, whether the underlying collateral assets are revolving or closed-end, under what terms (including maturity of the asset-backed instrument) any remaining balance in the accounts may revert to the issuing company and the extent to which the company that is the actual source of the collateral assets is obligated to provide support to the trust or conduit or to the investors. Further issues may arise based on discretionary behavior of the issuer within the terms of the securitization agreement, such as voluntary buybacks from, or contributions to, the underlying pool of loans when credit losses rise. A bank or other issuer may play more than one role in the securitization process. An issuer can simultaneously serve as originator of loans, servicer, administrator of the trust, underwriter, provider of liquidity and credit enhancer. Issuers typically receive a fee for each element of the transaction they undertake. Institutions acquiring such securities should recognize that the multiplicity of roles that may be played by a single firm—within a single securitization or across a number of them—means that credit and operational risk can accumulate into significant concentrations with respect to one or a small number of firms.

There are many different varieties of such securities, often customized to the terms and characteristics of the underlying collateral. The most common types are securities collateralized by revolving credit-card receivables, but instruments backed by home equity loans, other second mortgages and automobile-finance receivables are also common.

Securities backed by closed-end installment loans are typically the least complex form of asset-backed instruments. Collateral for these securities typically includes leases, student loans and automobile loans. The loans that form the pool of collateral for such securities may have varying contractual maturities and may or may not represent a heterogeneous pool of borrowers. Unlike a mortgage pass-through instrument, the trustee does not need to take physical possession of any

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account documents to perfect a security interest in the receivables under the Uniform Commercial Code. The repayment stream on installment loans is fairly predictable, since it is primarily determined by a contractual amortization schedule. Early repayment on these instruments can occur for a number of reasons, with most tied to the disposition of the underlying collateral (for example, in the case of Asset-Backed Securities backed by automobile loans, the sale of the vehicles). Interest is typically passed through to security holders at a fixed rate that is slightly below the weighted average coupon of the loan pool, allowing for servicing and other expenses as well as credit losses.

Unlike closed-end installment loans, revolving credit receivables involve greater uncertainty about future cash flows. Therefore, such securities structures using this type of collateral must be more complex to afford investors more comfort in predicting their repayment. Accounts included in the securitization pool may have balances that grow or decline over the life of such securities. Accordingly, at maturity of such securities, any remaining balances revert to the originator. During the term of such securities, the originator may be required to sell additional accounts to the pool to maintain a minimum Dollar amount of collateral if accountholders pay down their balances in advance of predetermined rates. Credit card securitizations are the most prevalent form of revolving credit Structured Finance Obligations, although home equity lines of credit are a growing source of Structured Finance Obligation collateral. Credit card securitizations are typically structured to incorporate two phases in the life cycle of the collateral: an initial phase during which the principal amount of the securities remains constant and an amortization phase during which investors are paid off. A specific period of time is assigned to each phase. Typically, a specific pool of accounts is identified in the securitization documents, and these specifications may include not only the initial pool of loans but a portfolio from which new accounts may be contributed. The dominant vehicle for issuing securities backed by credit cards is a master trust structure with a "spread account," which is funded up to a predetermined amount through "excess yield"—that is, interest and fee income less credit losses, servicing and other fees. With credit card receivables, the income from the pool of loans—even after credit losses—is generally much higher than the return paid to investors. After the spread account accumulates to its predetermined level, the excess yield reverts to the issuer. Under United States generally accepted accounting principles, issuers are required to recognize on their balance sheet an excess yield asset that is based on the fair value of the expected future excess yield; in principle, this value would be based on the net present value of the expected earnings stream from the transaction. Issuers are further required to revalue the asset periodically to take account of changes in fair value that may occur due to interest rates, actual credit losses and other factors relevant to the future stream of excess yield. The accounting and capital implications of these transactions are discussed further below.

A number of banks have used a structure—a "special-purpose entity"—that is designed to acquire trade receivables and commercial loans from high-quality (often investment-grade) obligors and to fund those loans by issuing (asset backed) commercial paper that is to be repaid from the cash flow of the receivables. Capital is contributed to the special-purpose entity by the originating bank that, together with the high quality of the underlying borrowers, is sufficient to allow the special purpose entity to receive a high credit rating. The net result is that the special-purpose entity's cost of funding can be at or below that of the originating bank itself. The special-purpose entity is "owned" by individuals who are not formally affiliated with the bank, although the degree of separation is typically minimal. These securitization programs enable banks to arrange short-term financing support for their customers without having to extend credit directly. This structure provides borrowers with an alternative source of funding and allows banks to earn fee income for managing the programs. As the asset-backed commercial paper structure has developed, it has been used to finance a variety of underlying loans—in some cases, loans purchased from other firms

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rather than originated by the bank itself—and as a "remote origination" vehicle from which loans can be made directly. Like other securitization techniques, this structure allows banks to meet their customers' credit needs while incurring lower capital requirements and a smaller balance sheet than if it made the loans directly.

Issuers obtain a number of advantages from securitizing assets, including improving their capital ratios and return on assets, monetizing gains in loan value, generating fee income by providing services to the securitization conduit, closing a potential source of interest-rate risk and increasing institutional liquidity by providing access to a new source of funds. Investors are attracted by the high credit quality of Structured Finance Obligations, as well as their attractive returns.

Structured Finance Obligations carry coupons that can be fixed or floating. Pricing is typically designed to mirror the coupon characteristics of the loans being securitized. The spread will vary depending on the credit quality of the underlying collateral, the degree and nature of credit enhancement and the degree of variability in the cash flows emanating from the securitized loans.

Credit risk arises from (a) losses due to defaults by the borrowers in the underlying collateral and (b) the issuer's or servicer's failure to perform. These two elements can blur together as, for example, in the case of a servicer who does not provide adequate credit-review scrutiny to the serviced portfolio, leading to higher incidence of defaults. Structured Finance Obligations are rated by major rating agencies. Market risk arises from the cash-flow characteristics of the security, which for many Structured Finance Obligations tend to be predictable. The greatest variability in cash flows comes from credit performance, including the presence of wind-down or acceleration features designed to protect the investor in the event that credit losses in the portfolio rise well above expected levels. Interest rate risk arises for the issuer from the relationship between the pricing terms on the underlying collateral and the terms of the rate paid to security holders and from the need to mark to market the excess servicing or spread account proceeds carried on the balance sheet. Liquidity risk can arise from increased perceived credit risk, like that which occurred in 1996 and 1997 with the rise in reported delinquencies and losses on securitized pools of credit cards. Liquidity can also become a major concern for asset-backed commercial paper programs if concerns about credit quality, for example, lead investors to avoid the commercial paper issued by the relevant special-purpose entity. For these cases, the securitization transaction may include a "liquidity facility," which requires the facility provider to advance funds to the relevant special-purpose entity should liquidity problems arise. To the extent that the bank originating the loans is also the provider of the liquidity facility, and that the bank is likely to experience similar market concerns if the loans it originates deteriorate, the ultimate practical value of the liquidity facility to the transaction may be questionable. Operations risk arises through the potential for misrepresentation of loan quality or terms by the originating institution, misrepresentation of the nature and current value of the assets by the servicer and inadequate controls over disbursements and receipts by the servicer.

The CDS Portfolio Assets

The following section provides a description of the CDS Portfolio Assets. Capitalized terms used in this section, but not otherwise defined in this Offering Circular, have the meanings set forth in the Credit Derivatives Definitions.

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General

On the Closing Date the Issuer will enter into and, during the Reinvestment Period, the Issuer may enter into, credit default swap transactions (each of such transactions is referred to herein as a "CDS Portfolio Asset") with JPMorgan Chase Bank, National Association, as the Synthetic Counterparty, pursuant to which the Issuer will sell credit protection to the Synthetic Counterparty credit protection with respect to certain CDO Securities (each, a "Reference Obligation"). As of the Closing Date, the Aggregate Principal/Notional Balance of the CDS Portfolio Assets is expected to be U.S.$968,000,000. All of the CDS Portfolio Assets will reference CDO Securities. JPMorgan Chase Bank, National Association will act as the calculation agent for each CDS Portfolio Asset (together with its permitted successors and assigns in such capacity, the "CDS Calculation Agent").

Each CDS Portfolio Asset will be evidenced by, and subject to the terms of, a separate confirmation between the Issuer and the Synthetic Counterparty (each, a "Confirmation"), which confirmation supplements, forms a part of, and is subject to, the 1992 ISDA Master Agreement (Multicurrency Cross Border), the related schedule and any credit support annex relating thereto dated as of the Closing Date between the Issuer and the Synthetic Counterparty, as the same may be amended and restated from time to time (collectively, the "ISDA Master Agreement"). Each Confirmation is based on the form of "Credit Derivative Transaction on Collateralized Debt Obligation with Pay-As-You-Go or Physical Settlement (Dealer Form)" that has been published by ISDA and that can be accessed at http://www.isda.org/publications/isdacredit-deri-def-sup-comm.html. However, each Confirmation includes certain modifications from, and is subject to specific elections that may be made under, such form, including but not limited to the following: (a) certain explanatory footnotes that appear in the form have been removed, (b) the "Implied Writedowns" provisions have been elected to be "Applicable" for certain Transactions and have been elected to be "Not Applicable" for other Transactions, as specified in the related Confirmations, (c) the "Interest Shortfall Cap" provisions have been elected to be "Applicable" with respect to all Transactions, provided that the Interest Shortfall Cap Basis has been elected to be "Fixed Cap" with respect to certain Transactions and has been elected to be "Variable Cap" with respect to other Transactions, as specified in the related Confirmations. In addition, there may be certain variations among the Confirmations relating to the different Reference Obligations.

Capitalized terms used in this section, and not defined herein or in the ISDA Master Agreement have the meanings specified in the 2003 ISDA Credit Derivatives Definitions as published by ISDA, as amended (the "Credit Derivatives Definitions").

The Synthetic Counterparty

JPMorgan Chase Bank, National Association ("JPMCB") is a wholly owned bank subsidiary of JPMorgan Chase & Co. ("JPMorgan Chase" or the "Firm"). JPMorgan Chase is incorporated in the State of Delaware in the United States and is headquartered in New York, New York. JPMCB is a commercial bank offering a wide range of banking services to its customers both domestically and internationally. JPMCB is chartered and its business is subject to examination and regulation by the U.S. Office of the Comptroller of the Currency, a bureau of the United States Department of the Treasury. Its powers are set forth in the National Bank Act and include all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes. JPMCB's main office is located in Columbus, Ohio. JPMCB was organized in the legal form of a banking corporation organized under the laws of the State of New

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York on November 26, 1968 for an unlimited duration. On November 13, 2004, JPMCB converted from a New York state-chartered bank to a national banking association.

Chase Bank USA, National Association with its main office located in Newark, Delaware, is another principal bank subsidiary of JPMorgan Chase. JPMorgan Chase's principal nonbank subsidiary is J.P. Morgan Securities Inc. The bank and nonbank subsidiaries of JPMorgan Chase operate nationally as well as through overseas branches and subsidiaries, representative offices and affiliated banks.

As of December 31, 2006, JPMCB had total assets of U.S.$1,179.4 billion, total net loans of U.S.$416.7 billion, total deposits of $650.6 billion, and total stockholder's equity of U.S.$96.0 billion. These figures are extracted from JPMCB's unaudited Consolidated Reports of Condition and Income as at December 31, 2006, which are filed with the Federal Deposit Insurance Corporation.

JPMCB is a member of the Federal Reserve System and its deposits are insured by the Federal Deposit Insurance Corporation. Its Federal Reserve Bank Identification Number is 852218.

Additional information on JPMorgan Chase, including the most recent Annual Report on Form 10-K for the year ended December 31, 2006 of JPMorgan Chase, quarterly and current reports filed with the U.S. Securities and Exchange Commission ("SEC") by JPMorgan Chase, as they become available, may be obtained from the SEC internet site (http:\\www.sec.gov).

Fixed Amounts payable by the Synthetic Counterparty to the Issuer

Under each CDS Portfolio Asset, on each Fixed Rate Payer Payment Date, the Synthetic Counterparty will be obligated to pay to the Issuer a fixed amount equal to the product of (a) the Fixed Rate specified in the related Confirmation, (b) an amount determined by the CDS Calculation Agent equal to (i) the sum of the Reference Obligation Notional Amount as of 5:00 p.m. in the Calculation Agent City (as defined in the related ISDA Master Agreement) on each day in the related Fixed Rate Payer Calculation Period divided by (ii) the actual number of days in the related Fixed Rate Payer Calculation Period and (c) the actual number of days in the related Fixed Rate Payer Calculation Period divided by 360 (the "Fixed Amount").

In addition, (a) on each Fixed Rate Payer Payment Date and (b) in relation to each Additional Fixed Payment Event occurring after the second Business Day prior to the last Fixed Rate Payer Payment Date, on the fifth Business Day after the Synthetic Counterparty has received notification from the Issuer or the CDS Calculation Agent of the occurrence of such Additional Fixed Payment Event ((a) and (b), an "Additional Fixed Amount Payment Date"), the Synthetic Counterparty may be obligated to pay to the Issuer an Additional Fixed Amount.

Delivered Obligations

The Synthetic Counterparty may, at its option, at any time following the occurrence of a Credit Event and satisfaction of the related conditions, physically deliver all or a portion of the underlying Reference Obligation to the Issuer (any Reference Obligation or portion thereof so delivered by the Synthetic Counterparty to the Issuer is referred to herein as a "Delivered Obligation") with an Exercise Amount not to exceed the Reference Obligation Notional Amount of the related CDS Portfolio Asset. Upon the physical delivery of any Delivered Obligation, the Issuer will be obligated to pay to the Synthetic Counterparty an amount equal to the Physical Settlement Amount. Any Delivered Obligation will be credited to the Custodial Account. On the first Business Day to occur after its Physical Settlement Date, and on each day thereafter, each Delivered Obligation will be

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considered to be a Funded Portfolio Asset with a Principal/Notional Balance equal to its outstanding principal balance (for as long as it is held by the Issuer), and the related CDS Portfolio Asset will cease to be considered to be one of the CDS Portfolio Assets.

Floating Amounts payable by the Issuer

With respect to each CDS Portfolio Asset, the Issuer will be obligated to pay to the Synthetic Counterparty on each Floating Rate Payer Payment Date the "Floating Amount" applicable to such CDS Portfolio Asset as calculated by the CDS Calculation Agent, which will equal the related Writedown Amount, Principal Shortfall Amount or Interest Shortfall Payment Amount, as applicable.

Credit Events

With respect to each CDS Portfolio Asset, "Credit Event" means, with respect to any Reference Obligation, the occurrence of a:

(a) "Failure to Pay Principal", which means (i) a failure by the Reference Entity (or any Insurer) to pay an Expected Principal Amount on the Final Amortization Date or the Legal Final Maturity Date, as the case may be or (ii) payment on any such day of an Actual Principal Amount that is less than the Expected Principal Amount; provided that the failure by the Reference Entity (or any Insurer) to pay any such amount in respect of principal in accordance with the foregoing shall not constitute a Failure to Pay Principal if such failure has been remedied within any grace period applicable to such payment obligation under the Underlying Instruments or, if no such grace period is applicable, within three Business Days after the day on which the Expected Principal Amount was scheduled to be paid.

(b) "Writedown", which means the occurrence at any time on or after the Effective Date of:

(i) (A) a writedown or applied loss (however described in the Underlying Instruments) resulting in a reduction in the Outstanding Principal Amount (other than as a result of a scheduled or unscheduled payment of principal); or

(B) the attribution of a principal deficiency or realized loss (however described in the Underlying Instruments) to the Reference Obligation resulting in a reduction or subordination of the current interest payable on the Reference Obligation;

(ii) the forgiveness of any amount of principal by the holders of the Reference Obligation pursuant to an amendment to the Underlying Instruments resulting in a reduction in the Outstanding Principal Amount; or

(iii) if Implied Writedown is applicable and the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (a) above to occur in respect of the Reference Obligation, an Implied Writedown Amount being determined in respect of the Reference Obligation by the Calculation Agent.

(c) "Failure to Pay Interest", which means the occurrence of an Interest Shortfall Amount or Interest Shortfall Amounts (calculated on a cumulative basis) in excess of the relevant Payment Requirement.

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(d) "Distressed Ratings Downgrade", which means that the Reference Obligation:

(i) if publicly rated by Moody's, (A) is downgraded to "Caa2" or below by Moody's or (B) has the rating assigned to it by Moody's withdrawn and, in either case, not reinstated within five Business Days of such downgrade or withdrawal; provided that if such Reference Obligation was assigned a public rating of "Baa3" or higher by Moody's immediately prior to the occurrence of such withdrawal, it shall not constitute a Distressed Ratings Downgrade if such Reference Obligation is assigned a public rating of at least "Caa1" by Moody's within three calendar months after such withdrawal; or

(ii) if publicly rated by S&P, (A) is downgraded to "CCC" or below by S&P or (B) has the rating assigned to it by S&P withdrawn and, in either case, not reinstated within five Business Days of such downgrade or withdrawal; provided that if such Reference Obligation was assigned a public rating of "BBB-" or higher by S&P immediately prior to the occurrence of such withdrawal, it shall not constitute a Distressed Ratings Downgrade if such Reference Obligation is assigned a public rating of at least "CCC+" by S&P within three calendar months after such withdrawal; or

(iii) if publicly rated by Fitch, (A) is downgraded to "CCC" or below by Fitch or (B) has the rating assigned to it by Fitch withdrawn and, in either case, not reinstated within five Business Days of such downgrade or withdrawal; provided that if such Reference Obligation was assigned a public rating of "BBB-" or higher by Fitch immediately prior to the occurrence of such withdrawal, it shall not constitute a Distressed Ratings Downgrade if such Reference Obligation is assigned a public rating of at least "CCC+" by Fitch within three calendar months after such withdrawal.

Termination date of the CDS Portfolio Assets

Each CDS Portfolio Asset will terminate on the last to occur of (a) the fifth Business Day following the Effective Maturity Date, (b) the last Floating Rate Payer Payment Date, (c) the last Delivery Date and (d) the last Additional Fixed Amount Payment Date.

Downgrade of the Synthetic Counterparty

I. If a Ratings Event I occurs and is continuing with respect to the Synthetic Counterparty, then the Synthetic Counterparty shall use its best efforts to either:

(a) at its sole option and expense, provide, or cause to be provided, a Third Party Credit Support Document to the Issuer;

(b) at its sole option and expense, use reasonable efforts to transfer its rights and obligations under the ISDA Master Agreement and all CDS Portfolio Assets to another party that has the required ratings; provided that such transfer to such other party (i) shall not cause an Event of Default or Termination Event under the Indenture and the ISDA Master Agreement, (ii) shall be at no cost to the Issuer, (iii) shall be on identical terms and (iv) shall not cause a Tax Event as defined in the ISDA Master Agreement; or

(c) post Eligible Collateral in accordance with the Credit Support Annex to be entered into between the Issuer and the Synthetic Counterparty on the Closing Date (the "Credit Support Annex").

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Each of I(a), I(b) and I(c) above are subject to satisfaction of the Rating Condition.

The failure by the Synthetic Counterparty to comply with the provisions hereof within 30 calendar days shall constitute an Additional Termination Event (as defined in the ISDA Master Agreement), with Synthetic Counterparty as the sole Affected Party (as defined in the ISDA Master Agreement) and all Transactions then outstanding between the parties as Affected Transactions (as defined in the ISDA Master Agreement).

II. If a Ratings Event II shall occur and be continuing with respect to the Synthetic Counterparty, then the Synthetic Counterparty shall use its best efforts to either:

(a) to the extent that it has not already done so in accordance with part I above, at its sole option and expense, provide, or cause to be provided, a Third Party Credit Support Document to the Issuer; or

(b) at its sole option and expense, use reasonable efforts to transfer its rights and obligations under the ISDA Master Agreement and all CDS Portfolio Assets to another party that has the required ratings; provided that such transfer to such other party (i) shall not cause an Event of Default or Termination Event under the Indenture or the ISDA Master Agreement, (ii) shall be at no cost to the Issuer, (iii) shall be on identical terms and (iv) shall not cause a Tax Event as defined in the ISDA Master Agreement.

Each of II(a) and II(b) above shall be subject to satisfaction of the Rating Condition.

If, (a) on or prior to the date that is 10 Business Days after the occurrence of a Ratings Event II, the Synthetic Counterparty has not provided a Third Party Credit Support Document as provided in II(a) above or transferred its rights and obligations as provided in II(b) above, or (b) the Synthetic Counterparty has provided a Third Party Credit Support Document as provided in II(a) or I(a) above but such Third Party Credit Support Document has ceased to be in effect and/or the Rating Condition is no longer satisfied, then, on the first Business Day following the date that is 10 Business Days after the occurrence of the Ratings Event II (in respect of (a) above) or on the first Business Day following the date on which the Third Party Credit Support Document referred to in (b) above has ceased to be in effect and/or fails to satisfy the Rating Condition, and only to the extent that the Synthetic Counterparty is not already delivering Eligible Collateral to the Issuer in accordance with the terms of the Credit Support Annex pursuant to the provisions of part I above, the Synthetic Counterparty shall deliver Eligible Collateral to the Issuer in accordance with the terms of the Credit Support Annex. Upon request and only if necessary to satisfy the Rating Condition, concurrently with such delivery of Eligible Collateral, the Synthetic Counterparty shall cause its counsel to deliver to the issuer an opinion as to the enforceability of the Issuer's security interest in such Eligible Collateral in all relevant jurisdictions. Notwithstanding the Synthetic Counterparty's posting of Eligible Collateral in accordance with the terms of the Credit Support Annex, the Synthetic Counterparty shall use best efforts to either transfer its rights and obligations to an acceptable third party or to provide a Third Party Credit Support Document.

The failure by the Synthetic Counterparty to comply with the provisions of the related agreement shall constitute an Additional Termination Event, with the Synthetic Counterparty as the sole Affected Party and all Transactions then outstanding between the parties as Affected Transactions.

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Governing law

Each CDS Portfolio Asset will be governed by, and will be construed in accordance with, the laws of the State of New York without regard to any conflicts of laws principles.

Assignment

Except in the limited circumstances permitted by Section 7 of the ISDA Master Agreement or described below, neither the Issuer nor the Synthetic Counterparty will be permitted to assign or otherwise transfer any of its rights, obligations or interests under the ISDA Master Agreement (or any portion thereof, such as any Transaction) to any person or entity without the prior written consent of the other party.

The Synthetic Counterparty may assign the ISDA Master Agreement (or a portion thereof) without the Issuer's consent:

(a) pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of substantially all of its assets to, another entity, or an incorporation, reincorporation or reconstitution; or

(b) to any Affiliate of the Synthetic Counterparty, subject to satisfaction of the following conditions:

(i) as of the date of such assignment, neither the assignee nor the Issuer will be required to withhold or deduct on account of any tax from any payments under the CDS Portfolio Assets;

(ii) a termination event or event of default does not occur under the CDS Portfolio Assets as a result of such assignment;

(iii) the assignment will not give rise to a taxable event or any other adverse tax consequences to the Issuer or investors in the Notes;

(iv) the assignee satisfies the ratings requirements that are prescribed by the ISDA Master Agreement;

(v) pursuant to an instrument in writing, the assignee acquires and assumes all of the rights and obligations of the Synthetic Counterparty so transferred;

(vi) the Synthetic Counterparty will be responsible for the costs or expenses related to the assignment; and

(vii) such assignment satisfies the Rating Condition.

Amendments

Each of the Issuer and the Synthetic Counterparty will agree that (i) it will give notice to each Rating Agency of any proposed material amendment, waiver or modification to any CDS Portfolio Asset and (ii) without the satisfaction of the Rating Condition, it will not consent to any material amendment, waiver or modification to any CDS Portfolio Asset.

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The Collateral Quality Tests

The Collateral Quality Tests will be used primarily as criteria for purchasing Funded Portfolio Assets and entering into CDS Portfolio Assets. See "—Eligibility Criteria" below. The "Collateral Quality Tests" will consist of the Moody's Asset Correlation Test, the Moody's Maximum Rating Factor Test, the Moody's Minimum Weighted Average Recovery Rate Test, the Weighted Average Fixed Coupon Test, the Weighted Average Spread Test, the Weighted Average Life Test, the S&P Minimum Weighted Average Recovery Rate Test and the S&P CDO Monitor Test described below.

Unless otherwise stated in this section or unless the context clearly otherwise requires, in respect of the CDS Portfolio Assets, any rating criteria and any criteria relating to a status as a "Specified Type" described in this section in respect of such CDS Portfolio Assets will be deemed to relate to the related Reference Obligations, and any quantitative criteria and limits so described will be deemed to apply to the Principal/Notional Balance of the relevant CDS Portfolio Assets.

Measurement of the degree of compliance with the Collateral Quality Tests will be required on the Ramp-Up Completion Date as contemplated in "—Collateral accumulation on or prior to the Closing Date, Ramp-Up Period" and, after the Ramp-Up Completion Date, on each day on which the Issuer purchases or sells a Portfolio Asset.

Offsetting Short Transactions will be given effect in all the Collateral Quality Tests as a negative balance to offset the related Offset Portfolio Asset and any Short Synthetic Premium Amounts will be reflected as a deduction in the Weighted Average Spread Test.

Moody's Asset Correlation Test

The "Moody's Asset Correlation Test" means a test that will be satisfied if, on any Measurement Date, the Moody's Asset Correlation Factor is no greater than 35%.

Moody's Maximum Rating Factor Test

The "Moody's Maximum Rating Factor Test" will be satisfied if the Moody's Weighted Average Rating Factor of the Portfolio Assets (determined in accordance with procedures prescribed by Moody's and more fully described in Annex D-1 hereto and as set forth in the Indenture) is equal to or less than 20.

Moody's Minimum Weighted Average Recovery Rate Test

The "Moody's Minimum Weighted Average Recovery Rate Test" will be satisfied, as of any Measurement Date, if the Moody's Weighted Average Recovery Rate of the Portfolio Assets (determined in accordance with procedures prescribed by Moody's and more fully described in Annex D-1 hereto and as set forth in the Indenture) is greater than or equal to 53%.

S&P Minimum Weighted Average Recovery Rate Test

The "S&P Minimum Weighted Average Recovery Rate Test" will be satisfied, as of any Measurement Date, if the S&P Weighted Average Recovery Rate of the Portfolio Assets is greater than or equal to 54% with respect to the Class A Notes, 64% with respect to the Class B Notes, 74% with respect to the Class C Notes, 74% with respect to the Class D Notes and 79% with respect to the Class E Notes.

S&P CDO Monitor Test The "S&P CDO Monitor Test" will be in compliance if after giving effect to the disposition of a Portfolio Asset or the acquisition of a Portfolio Asset (or both), as the case may be, the Loss Differential of

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the Proposed Portfolio is positive or, if the Loss Differential of the Proposed Portfolio is negative prior to giving effect to such sale or acquisition, the extent of compliance is improved after giving effect to the acquisition or disposition of a Portfolio Asset.

Weighted Average Fixed Coupon Test

The "Weighted Average Fixed Coupon Test" will be satisfied, as of any Measurement Date, if the Weighted Average Fixed Coupon as of such Measurement Date is greater than or equal to 6.10%.

Weighted Average Spread Test

The "Weighted Average Spread Test" will be satisfied, as of any Measurement Date, if the Weighted Average Spread as of such Measurement Date is greater than or equal to 1.15%.

Weighted Average Life Test

The "Weighted Average Life Test" will be satisfied, as of any Measurement Date, on and after the Ramp-Up Completion Date during any period set forth below if the Weighted Average Life of all Portfolio Assets as of such Measurement Date is less than or equal to the number of years set forth in the table below.

As of any Measurement Date occurring during the period below (Weighted Average Life):

On the Ramp-Up Completion Date to but excluding the November 2008 Payment Date:

8 years

On and including the November 2008 Payment Date to but excluding the November 2009 Payment Date

7 years

On and including the November 2009 Payment Date to but excluding the November 2010 Payment Date

6 years

On and including the November 2010 Payment Date to but excluding the November 2011 Payment Date

5 years

Thereafter

4 years

Eligibility Criteria

The Issuer (a) may purchase or enter into Funded Portfolio Assets and CDS Portfolio Assets on the Closing Date and during the Ramp-Up Period and the Reinvestment Period and (b) may purchase or enter into additional Funded Portfolio Assets and CDS Portfolio Assets after the Reinvestment Period in respect of commitments entered into prior to the end of the Reinvestment Period and in respect of Sale Proceeds from any Discretionary Sale, Disposition of a Credit-Impaired Portfolio Asset or Disposition of a Credit-Improved Portfolio Asset, in each case only if, after giving effect to such purchase or entry, with respect the entry into a CDS Portfolio Asset, no Notional Amount Shortfall would exist, and in each case only if, at the time of the entry into (or at the time of the Issuer's

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commitment to enter into), after giving effect to the purchase or entry into such Funded Portfolio Asset or CDS Portfolio Asset, (i) each of the Collateral Quality Tests is satisfied or, if a Collateral Quality Test is not satisfied, the degree of compliance with such Collateral Quality Test would be improved or not diminished and (ii) each of the following criteria (the "Eligibility Criteria") are complied with or, if the Eligibility Criteria is not complied with prior to, or will not be complied with following the purchase or entry into such Funded Portfolio Asset or CDS Portfolio Asset, the degree of compliance with the Eligibility Criteria would be improved or not diminished, in each case, with respect to the purchase or entry into such Funded Portfolio Asset or CDS Portfolio Asset:

Assignable (1) the Underlying Instrument in respect of the Funded Portfolio Asset or the related Reference Obligation pursuant to which such Funded Portfolio Asset or Reference Obligation was issued permits the Issuer to purchase it and pledge it to the Trustee and such Funded Portfolio Asset or Reference Obligation is a type subject to Article 8 or Article 9 of the UCC;

Jurisdiction of Issuer

(2) the obligor on or issuer of the Funded Portfolio Asset or related Reference Obligation (x) is organized or incorporated under the law of the United States or a State thereof or in a Special Purpose Vehicle Jurisdiction or (y) is a Qualifying Foreign Obligor;

Dollar Denominated

(3) the Funded Portfolio Asset or the related Reference Obligation is denominated and payable only in Dollars and may not be converted into a security payable in any other currency;

Fixed Principal Amount

(4) the Funded Portfolio Asset or the related Reference Obligation requires the payment of a fixed amount of principal in cash no later than its applicable stated maturity or termination date;

Rating (5) the Funded Portfolio Asset or the related Reference Obligation has been assigned, pursuant to the terms of the Indenture, an S&P Rating (and such rating does not include the subscript "p", "pi", "q", "r" or "t") and a Moody's Rating;

Issuer or Obligor not Owned or Managed by the Collateral Manager

(6) the obligor on or issuer of the Funded Portfolio Asset or the related Reference Obligation is not a fund or other entity owned or managed by the Collateral Manager or any of its affiliates;

Registered (7) the Funded Portfolio Asset or the related Reference Obligation is Registered;

No withholding (8) the Issuer would receive payments due under the terms of such Funded Portfolio Asset or CDS Portfolio Asset and proceeds from Disposing of such security free and clear of withholding tax, other than withholding tax as to which the obligor or issuer must make additional payments so that the net amount received by the Issuer after satisfaction of such tax is the amount due to the Issuer before the imposition of any withholding tax;

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Does not subject Issuer to Tax on a Net Income Basis

(9) the acquisition (including the manner of acquisition), ownership, enforcement and disposition of such Funded Portfolio Asset or CDS Portfolio Asset will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. Federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer's jurisdiction of incorporation;

Prohibited Securities

(10) the Funded Portfolio Asset or the related Reference Obligation is not a Prohibited Security;

Limitation on Stated Final Maturity

(11) if the scheduled maturity or termination date of such Portfolio Asset occurs later than the Stated Maturity of the Secured Notes, the Aggregate Principal/Notional Balance of all such Portfolio Assets does not exceed 5% of the Portfolio Balance; provided that, the scheduled maturity or termination date of such Portfolio Asset shall not occur more than 5 years after the Stated Maturity of the Secured Notes and the Expected Maturity Date of the Funded Portfolio Assets or the related Reference Obligation is not later than the Stated Maturity of the Secured Notes;

No Foreign Exchange Controls

(12) the Funded Portfolio Asset or the related Reference Obligation is not a security issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of Dollars to make when due the scheduled payments of principal of and interest on such security;

No Substantial Non-Credit-Related Risk

(13) the Funded Portfolio Asset or the related Reference Obligation is not a security whose timely repayment is subject to substantial non-credit-related risk, as reasonably determined by the Collateral Manager;

Investment Company Act

(14) the acquisition of the Funded Portfolio Asset or the related Reference Obligation would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act; and if the issuer of such Funded Portfolio Asset or Reference Obligation is excepted from the definition of an "investment company" solely by reason of Section 3(c)(1) of the Investment Company Act, then either (x) such Funded Portfolio Asset or Reference Obligation does not constitute a "voting security" for purposes of the Investment Company Act or (y) the notional amount of such Funded Portfolio Asset or Reference Obligation is less than 10% of the entire issue of which such security is a part;

Not Subject to an Offer or a Called for Redemption

(15) the Funded Portfolio Asset or the related Reference Obligation is not the subject of an Offer and has not been called for redemption;

CDO Securities (16) the Aggregate Principal/Notional Balance of the Portfolio Assets consisting of:

(a) CDO Securities that are rated "Aaa" by Moody's and

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"AAA" by S&P are not less than 10% of the Portfolio Balance;

(b) CDO Securities that are rated at least "Aa2" by Moody's and at least "AA" by S&P are not less than 95% of the Portfolio Balance;

(c) CDO Securities that are rated "Aa3" by Moody's and "AA-" by S&P does not exceed 5% of the Portfolio Balance; and

(d) CDO Securities that are rated below "Aa3" by Moody's or below "AA-" by S&P does not exceed 0% of the Portfolio Balance;

Single Manager Concentration

(17) the Aggregate Principal/Notional Balance of the Portfolio Assets consisting of CDO Securities managed by any single collateral manager shall not exceed 7% of the Portfolio Balance;

Single Name Concentration

(18) if such Funded Portfolio Asset or the related Reference Obligation is rated "Aaa" by Moody's and "AAA" by S&P, then the Principal/Notional Balance of such Funded Portfolio Asset or related CDS Portfolio Asset does not exceed 3% of the Portfolio Balance; provided that the Principal/Notional Balance of up to 3 such Portfolio Assets may exceed 3% of the Portfolio Balance so long as the Principal/Notional Balance of such Portfolio Asset does not exceed 3.5%;

(19) if such Funded Portfolio Asset or the related Reference Obligation is rated "Aa2" or "Aa3" by Moody's and "AA" or "AA-" by S&P, then the Principal/Notional Balance of such Funded Portfolio Asset or related CDS Portfolio Asset does not exceed 2% of the Portfolio Balance; provided that the Principal/Notional Balance of up to 3 such Portfolio Assets may exceed 2% of the Portfolio Balance so long as the Principal/Notional Balance of such Portfolio Asset does not exceed 2.5%;

Fixed Rate Security (20) if such Funded Portfolio Asset or the related Reference Obligation is a Fixed Rate Security, the Aggregate Principal/Notional Balance of the Portfolio Assets consisting of Fixed Rate Securities shall not exceed 3% of the Portfolio Balance; and

CDO of CDOs (21) if such Funded Portfolio Asset or the related Reference Obligation is a CDO of CDOs, the Aggregate Principal/Notional Balance of the Portfolio Assets consisting of CDO of CDOs shall not exceed 4% of the Portfolio Balance.

The Issuer will be deemed to have complied with paragraph (9) above (and with any obligation or limitation imposed on the Issuer under the Indenture or any other Transaction Document that prohibits the Issuer from engaging in a U.S. trade or business or being subject to net income tax in the United States for federal income tax purposes) so long as it complies with the investment restrictions set forth in of the Management Agreement.

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If the Issuer has previously entered into a commitment to purchase or enter into a Funded Portfolio Asset or CDS Portfolio Asset to be granted to the Trustee for inclusion in the Collateral, then the Eligibility Criteria (other than paragraphs (7) through (9)) need not be satisfied (x) on the date of such grant if the Eligibility Criteria were satisfied on the date on which the Issuer entered into such commitment or (y) on the date on which the Issuer entered into such commitment if the Eligibility Criteria were or will be satisfied on the date of such grant. Notwithstanding the foregoing, the Issuer may only enter into commitments to purchase or enter into Funded Portfolio Assets or CDS Portfolio Assets for inclusion in the Collateral if such commitments to purchase or enter into Funded Portfolio Assets or CDS Portfolio Assets do not extend beyond a 60-day period.

During and after the Reinvestment Period, the Issuer, acting at the direction of the Collateral Manager, may reinvest Sale Proceeds from a Discretionary Sale or from the Disposition of a Credit-Improved Portfolio Asset or a Credit-Impaired Portfolio Asset in one or more additional or substitute Portfolio Assets; provided that (A) with respect to any reinvestment made during and after the Reinvestment Period, any such reinvestment results in compliance with the Collateral Quality Tests (or, if a Collateral Quality Test (other than the Moody’s Maximum Rating Factor Test and the S&P CDO Monitor Test which, for the avoidance of doubt, must, following such reinvestment, be in compliance) is not satisfied, the degree of compliance with such Collateral Quality Test would be improved or not diminished, after giving effect to such reinvestment) and the Eligibility Criteria (or, if the Eligibility Criteria is not complied with prior to, or will not be complied with following such reinvestment, the degree of compliance with the Eligibility Criteria would be improved or not diminished) and (B) with respect to any reinvestment made after the Reinvestment Period only, (i) no Sequential Paydown Trigger Event has occurred or is continuing, (ii) the Weighted Average Life of the additional Portfolio Asset(s) to be acquired or entered into is less than or equal to the Weighted Average Life of such Portfolio Asset, (iii) the rating of the Class A-1 Notes, the Class A-2 Notes and the Class B Notes have not been downgraded by one or more rating subcategories from that in effect on the Closing Date by Moody’s (unless it has been reinstated to the rating assigned on the Closing Date) or the rating of the Class C Notes, the Class D Notes and the Class E Notes have not been downgraded by two or more rating subcategories from that in effect on the Closing Date by Moody’s (unless it has been reinstated to one rating subcategory below the rating assigned on the Closing Date or better), (iv) with respect to the entry into an additional CDS Portfolio Asset, no Notional Amount Shortfall would exist after giving effect to such entry, and (v) with respect to the reinvestment of Sale Proceeds from the Disposition of a Credit-Improved Portfolio Asset in one or more additional Portfolio Assets, the Principal/Notional Balance of such additional Portfolio Assets is at least equal to 100% of the Principal/Notional Balance of the Credit-Improved Portfolio Asset that is Disposed; and with respect to the reinvestment of Sale Proceeds from the Disposition of a Credit-Impaired Portfolio Asset in one or more additional Portfolio Assets, the Principal/Notional Balance of such additional Portfolio Assets, together with any accrued interest thereon, is at least equal to the Sale Proceeds from the Disposition of such Credit-Impaired Portfolio Asset.

Notwithstanding the foregoing provisions, if an Event of Default shall have occurred and be continuing, no Funded Portfolio Asset or CDS Portfolio Asset may be entered into unless it was the subject of a commitment entered into by the Issuer prior to the occurrence of such Event of Default.

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Dispositions of Portfolio Assets; Offsetting Short Transactions

Dispositions

Funded Portfolio Assets or CDS Portfolio Assets may be Disposed of, in whole or in part, prior to their respective final scheduled maturity or termination dates due to, among other things, the existence and frequency of exercise of any optional or mandatory redemption or principal prepayment features of the Funded Portfolio Asset or related Reference Obligations or due to early terminations, assignments or settlements, in accordance with their respective terms. Pursuant to the Indenture and so long as no Event of Default has occurred and is continuing, the Collateral Manager may direct the Issuer to Dispose of:

(1) any Defaulted Portfolio Asset and any Delivered Obligation at any time;

(2) any Equity Security at any time;

(3) any Credit-Impaired Portfolio Asset at any time;

(4) any Credit-Improved Portfolio Asset at any time; provided that if such sale occurs during the Reinvestment Period, in the Collateral Manager's judgment one or more substitute Portfolio Assets can be purchased such that after giving effect to such sale and to the purchase of substitute Portfolio Assets with the sale proceeds thereof, the Eligibility Criteria will be satisfied; and

(5) any Portfolio Asset that may be terminated or sold in a Discretionary Sale as described below.

The Collateral Manager, acting on behalf of the Issuer, may direct the Trustee to terminate or sell, and the Trustee will terminate or sell, Portfolio Assets that are not Defaulted Portfolio Assets, Equity Securities, Credit-Impaired Portfolio Assets or Credit-Improved Portfolio Assets (each such termination or sale, a "Discretionary Sale") but only so long as:

(a) the Aggregate Principal/Notional Balance of all such Portfolio Assets terminated or sold in any calendar year (with the first such calendar year beginning on the Closing Date) does not exceed 20% of the Portfolio Balance at the beginning of that calendar year or, in the case of the calendar year in which the Closing Date occurs, as of the Closing Date;

(b) no Sequential Paydown Trigger Event has occurred or is continuing;

(c) the rating of the Class A-1 Notes, the Class A-2 Notes and the Class B Notes have not been downgraded by one or more rating subcategories from that in effect on the Closing Date by Moody’s (unless it has been reinstated to the rating assigned on the Closing Date) or the rating of the Class C Notes, the Class D Notes and the Class E Notes have not been downgraded by two or more rating subcategories from that in effect on the Closing Date by Moody’s (unless it has been reinstated to one rating subcategory below the rating assigned on the Closing Date or better); and

(d) the Sale Proceeds of the Portfolio Asset that is terminated or sold will be reinvested in one or more substitute Portfolio Assets as contemplated in "—Eligibility Criteria" above, and the Principal/Notional Balance of such substitute Portfolio Assets is at least equal to 100% of the Principal/Notional Balance of the Portfolio Asset that is terminated or sold; provided that no termination payment may be payable by the Issuer upon the termination or sale of a CDS Portfolio

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Asset pursuant to this provision unless the Issuer will receive an up-front payment from the applicable counterparty on one or more substitute CDS Portfolio Assets at least equal to the termination payment to be paid by the Issuer.

Any Defaulted Portfolio Asset that is held for more than three years shall be treated as having a Principal/Notional Balance of zero.

Any Equity Security or security or other consideration that is received in an exchange and any Delivered Obligation that, in each of the foregoing cases, does not comply with Eligibility Criteria (7), (8) or (9) must be, sold, assigned, terminated or otherwise liquidated within a reasonable period of time after the Issuer's receipt thereof.

In the event of an Auction Call Redemption, Optional Redemption, Clean-up Call or a Tax Redemption of the Secured Notes, the Collateral Manager may direct the Trustee to Dispose of Portfolio Assets without regard to the foregoing limitations; provided that (i) the proceeds therefrom will be at least sufficient to pay certain expenses and other amounts and redeem in whole but not in part all Secured Notes, in accordance with the Priority of Payments; and (ii) such proceeds are applied to make such a redemption. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption".

In connection with the Stated Maturity, if any Class of Secured Notes then remains outstanding, all of the Portfolio Assets will be Disposed of by the Issuer in accordance with the terms of the Indenture.

Offsetting Short Transactions

The Issuer, or the Collateral Manager acting on its behalf, may, subject to compliance with the provisions of the Indenture and instead of Disposing of a CDS Portfolio Asset that is a Defaulted Portfolio Asset, Credit-Impaired Portfolio Asset, Credit-Improved Portfolio Asset or a CDS Portfolio Asset that may be terminated or sold in a Discretionary Sale, as the case may be, enter into credit default swap transactions as a buyer of protection (each, an "Offsetting Short Transaction") with the applicable counterparty (each, a "Short Synthetic Counterparty") in respect of such CDS Portfolio Asset that relates to the same reference obligation and provides for all obligations thereunder to have the same characteristics as obligations specified in such CDS Portfolio Asset (other than premium payable).

The entry into an Offsetting Short Transaction by the Issuer will, notwithstanding anything to the contrary described herein, be subject to the condition that the Weighted Average Spread Test will remain satisfied or improved, after giving effect to the entry of such Offsetting Short Transaction but will not be subject to satisfaction of the Eligibility Criteria or the other Collateral Quality Tests. Offsetting Short Transactions will be given effect in all the Collateral Quality Tests and the Eligibility Criteria as a negative balance to offset the related Offset Portfolio Asset and any Short Synthetic Premium Amounts (as defined below) will be reflected as a deduction in the Weighted Average Spread Test.

Any premium amount (a "Short Synthetic Premium Amount"), up-front payment and reimbursement amounts payable by the Issuer under any Offsetting Short Transaction (collectively, the "Short Synthetic Payments") will be paid from Interest Proceeds and/or Principal Proceeds

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and/or funds available for such purpose under the Total Return Swap in accordance with the synthetic payment priority set forth in the Indenture.

Any amounts received by the Issuer under an Offsetting Short Transaction with respect to a "Principal Shortfall Amount" or "Writedown" (as defined in the confirmation relating to such Offsetting Short Transaction) will be paid into the Collection Account as Principal Proceeds and any amounts received by the Issuer under an Offsetting Short Transaction with respect to an "Interest Shortfall" (as determined in the confirmation relating to such Offsetting Short Transaction) will be paid into the Collection Account as Interest Proceeds. Upon the occurrence of a "credit event" under an Offsetting Short Transaction, the physical settlement payment or any cash settlement amount received by the Issuer will be paid into the Collection Account as Principal Proceeds, except to the extent that such amounts are offset against any amount payable by the Issuer.

In the event that any CDS Portfolio Asset in respect of which an Offsetting Short Transaction has been acquired and remains outstanding is terminated or assigned, the Collateral Manager, acting on behalf of the Issuer, will be required to terminate the related Offsetting Short Transaction if funds are available in accordance with the Priority of Payments to pay any termination payment that will be payable by the Issuer in respect of such Offsetting Short Transaction in connection with such termination. In no other event shall the Issuer, or the Collateral Manager on behalf of the Issuer, terminate any Offsetting Short Transaction except upon the occurrence of an event of default or termination event as provided therein.

Any termination payments payable to the Issuer upon termination of any Offsetting Short Transaction will constitute Principal Proceeds.

Any Short Synthetic Counterparty will be required to satisfy the rating requirements applicable to the Synthetic Counterparty as described in "—The CDS Portfolio Assets". If and to the extent that the terms of an Offsetting Short Transaction require the related Short Synthetic Counterparty to secure its obligations with respect to such Offsetting Short Transaction, the Trustee will establish a single, segregated, non-interest bearing trust account held in the name of the Issuer (each, a "Short Synthetic Counterparty Account") with respect to such Offsetting Short Transaction, which shall be held in trust for the benefit of the Issuer and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall deposit into the Short Synthetic Counterparty Account all amounts received from the related Short Synthetic Counterparty that are required to secure the obligations of such Short Synthetic Counterparty in accordance with the terms of the related Offsetting Short Transaction. Except for investment earnings, the Short Synthetic Counterparty shall not have any legal, equitable or beneficial interest in the related Short Synthetic Counterparty Account other than in accordance with the Indenture, the terms of the related Offsetting Short Transaction and applicable law. Cash and Eligible Investments on deposit in the Short Synthetic Counterparty Account will not be included in the Collateral and will not be available to make payments under the Secured Notes or the Composite Notes other than as a result of an event of default or termination event under the related Offsetting Short Transaction caused by the Short Synthetic Counterparty.

Each Offsetting Short Transaction will be governed by, and will be construed in accordance with, the laws of the State of New York without regard to any conflicts of laws principles.

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The Collateral Manager

The information appearing in this section has been prepared by the Collateral Manager and has not been independently verified by JPMorgan, the Issuer or the Co-Issuer. Neither JPMorgan, the Issuer nor the Co-Issuer assumes any responsibility for the accuracy, completeness or applicability of such information. The Collateral Manager accepts responsibility for the information contained in this section. To the best of the knowledge and belief of the Collateral Manager (which has taken all reasonable care to ensure that such is the case) the information contained in this section is in accordance with the facts and does not omit anything likely to affect the import of such information.

General

The Collateral Manager is GSCP (NJ), L.P. (together with its affiliates, referred to herein as "GSC Group"), which together with certain affiliates presently does business as GSC Group and was formerly known as GSC Partners. GSC Group is an SEC-registered investment adviser with over $22 billion (including leverage and warehouse assets) of assets under management as of December 31, 2006. GSC Group specializes in credit-based alternative investment strategies including corporate credit, equity and distressed debt investing, and real estate. GSC Group is privately owned and has over 170 employees with headquarters in New Jersey, and offices in New York, London and Los Angeles. GSC Group was founded in 1999 by Alfred C. Eckert III, its Chairman and Chief Executive Officer.

GSC Group—Key personnel

The Collateral Manager will direct the management of the Issuer's portfolio of Collateral pursuant to the Management Agreement and in accordance with the terms of the Indenture governing sale and reinvestment of the Collateral and other obligations contained therein. In performing its obligations pursuant to the Management Agreement, the Collateral Manager will use the services and/or leverage the expertise and experience of the people set forth below, although it may not necessarily continue to use their services during the entire term of the Management Agreement. There can be no assurance that the employees of the Collateral Manager responsible for the management of the Issuer's portfolio as of the Closing Date will remain employed by the Collateral Manager or otherwise remain involved with managing the Issuer's portfolio of investments after the Closing Date.

Alfred C. Eckert III, Chairman and Chief Executive Officer. Mr. Eckert founded GSC Group in 1999. Prior to that, he was Chairman and CEO of Greenwich Street Capital Partners which he co-founded in 1994. Mr. Eckert was previously with Goldman, Sachs & Co. from 1973 to 1991, where he was elected as a Partner in 1984. Mr. Eckert founded the firm's Leveraged Buyout Department in 1983 and had senior management responsibility for it until 1991. He was Chairman of the Commitments and Credit Committees from 1990 to 1991 and co-head of the Merchant Bank from 1989 to 1991. He was also the Chairman of the Firm's Investment Committee from its inception in 1986 until 1991. Mr. Eckert is a director of The Willow School and is Vice Chairman of the Kennedy Center Corporate Fund Board. Mr. Eckert graduated from Northwestern University with a B.S. degree in Engineering and graduated with Highest Distinction as a Baker Scholar from the Harvard Graduate School of Business Administration with a M.B.A. degree.

Richard M. Hayden, Vice Chairman, GSC Group and Head of the Corporate Credit Group. Mr. Hayden joined GSC Group in 2000 and is a member of the firm's Management Committee. Mr.

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Hayden was previously with Goldman, Sachs & Co. from 1969 until 1999 and became a Partner in 1980. Mr. Hayden transferred to London in 1992, where he was a Managing Director and the Deputy Chairman of Goldman Sachs International Ltd., responsible for all European investment banking activities. He was also Chairman of the Credit Committee from 1991 to 1996, a member of the firm's Commitment Committee from 1990 to 1995, a member of the firm's Partnership Committee from 1997 to 1998 and a member of the Goldman, Sachs International Executive Committee from 1995 to 1998. In 1998, Mr. Hayden retired from Goldman, Sachs & Co. and was retained as an Advisory Director to consult in the Principal Investment Area. Mr. Hayden is non-executive director of COFRA Holdings, AG and Deutsche Boerse. He is also a member of The Wharton Business School International Advisory Board. Mr. Hayden graduated Magna Cum Laude and Phi Beta Kappa from Georgetown University with a B.A. degree in Economics, and graduated from The Wharton School with a M.B.A. degree.

Robert F. Cummings, Jr., Senior Managing Director, Chairman of the Risk & Conflicts Committee and Valuation Committee. Mr. Cummings joined GSC Group in 2002 as a Managing Director and is a member of the firm's Management Committee. For the prior 28 years, Mr. Cummings was with Goldman, Sachs & Co., where he was a member of the Corporate Finance Department, advising corporate clients on financing, mergers and acquisitions, and strategic financial issues. Mr. Cummings became a Partner of Goldman, Sachs & Co. in 1986. He retired in 1998 and was retained as an Advisory Director by Goldman, Sachs & Co. to work with certain clients on a variety of banking matters. Mr. Cummings is a director of ATSI Holdings, Corning Incorporated, GSC Capital Corp., Precision Partners Inc., RR Donnelley and Sons Co., Viasystems Group Inc., and a member of the Board of Trustees of Union College. Mr. Cummings graduated from Union College with a B.A. degree and from the University of Chicago with a M.B.A. degree.

Peter R. Frank, Senior Managing Director and Senior Operating Executive, Control Distressed Debt. Mr. Frank joined GSC Group in 2001 and since 2005 has served as a Senior Operating Executive. Mr. Frank was appointed Chairman of Atlantic Express, Inc. in 2003 and served as their Chief Restructuring Officer from 2002 to 2003. Prior to that, Mr. Frank was the CEO of Ten Hoeve Bros., Inc. and was an investment banker at Goldman, Sachs & Co. He is Chairman of the Board of Atlantic Express Transportation Group, Scovill Fasteners, Inc., Worldtex, Inc., and a director of K-R Automation and North Star Media. Mr. Frank graduated from the University of Michigan with a B.S.E.E. degree and from the Harvard Graduate School of Business Administration, with a M.B.A. degree.

David L. Goret, Senior Managing Director, General Counsel and Chief Compliance Officer. Mr. Goret joined GSC Group in 2004 and manages legal, compliance, and certain administrative functions at the firm. Mr. Goret has served as General Counsel for several private and public companies over the last 16 years, and has significant expertise in a wide range of legal matters. Mr. Goret graduated Magna Cum Laude from Duke University, with a B.A. degree in Religion and Political Science and graduated from the University of Michigan with a J.D. degree.

Robert A. Hamwee, Senior Managing Director and Head of the Equity and Distressed Investing Group. Mr. Hamwee joined GSC Group at its inception in 1999. Mr. Hamwee is a member of the firm's Management Committee. He was with Greenwich Street Capital Partners from 1994 to 1999. Prior to that, Mr. Hamwee was with The Blackstone Group from 1992 to 1994, where he worked on a wide range of assignments in the Restructuring and Merchant Banking Departments. Mr. Hamwee is Chairman of the Board of APW Ltd. and ATSI Holdings, and a director of Precision Partners, Inc. and Viasystems Group, Inc. He graduated Phi Beta Kappa from the University of Michigan with a B.B.A. degree in Finance and Accounting.

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Thomas V. Inglesby, Senior Managing Director, Collateralized Corporate Debt. Mr. Inglesby joined GSC Group at its inception in 1999. Mr. Inglesby has senior responsibility for GSC's US Collateralized Corporate Debt business and joint responsibility for the European Collateralized Corporate Debt business. From 1997 to 1999, he was with Greenwich Street Capital Partners. Prior to that, Mr. Inglesby was a Managing Director with Harbour Group in St. Louis, Missouri, an investment firm specializing in the acquisition of manufacturing companies in fragmented industries. In 1986, he joined PaineWebber and was a Vice President in the Merchant Banking Department from 1989 to 1990. Mr. Inglesby graduated with Honors from the University of Maryland with a B.S. degree in Accounting, from the University of Virginia School of Law with a J.D. degree and from the Darden Graduate School of Business Administration with a M.B.A. degree.

Matthew C. Kaufman, Senior Managing Director, Equity Portfolio. Mr. Kaufman joined GSC Group at its inception in 1999. Mr. Kaufman currently has day-to-day responsibility for the management of GSC's portfolio of controlled companies and selected equity investments. Additionally, he structures and oversees the provision of cross portfolio initiatives and services. Prior to that, he was with Greenwich Street Capital Partners from 1997 to 1999. Mr. Kaufman was previously Director of Corporate Finance with NextWave Telecom, Inc. From 1994 to 1996, Mr. Kaufman was with The Blackstone Group, in the Merchant Banking and Mergers and Acquisitions Department, and from 1993 to 1994 was with Bear Stearns working primarily in the Mergers & Acquisitions department. Mr. Kaufman is Chairman of the Board of Aeromet Holdings Inc. and a director of Atlantic Express Transportation Group, Burke Industries, Inc., Day International Group, Inc., Dukes Place Holdings Limited, Safety-Kleen Corp., Seaton Insurance Company and Stonewall Insurance Company. He graduated from the University of Michigan, with a B.B.A. degree and a M.A.C.C. degree.

Thomas J. Libassi, Senior Managing Director, Control Distressed Debt. Mr. Libassi joined GSC Group in 2000. Mr. Libassi specializes in the sourcing, evaluating and execution of distressed debt transactions. Prior to that, Mr. Libassi was Senior Vice President and Collateral Manager at Mitchell Hutchins, a subsidiary of PaineWebber Inc. where he was responsible for managing approximately $1.2 billion of high yield assets for the Paine Webber Mutual Funds. In 1998, Mr. Libassi developed and launched the approximate $550 million Managed High Yield Plus Fund, a leveraged closed-end fund that was ranked number one by Lipper in its category in 1999. From 1986 to 1994, Mr. Libassi was a Vice President and Collateral Manager at Keystone Custodian Funds, Inc., with portfolio management responsibilities for three diverse institutional high yield accounts with $250 million in assets. Mr. Libassi is a director of DTN Holding Company, LLC., Outsourcing Services Group and Scovill Fasteners, Inc. Mr. Libassi graduated from Connecticut College, with a B.A. degree in Economics and Government, and from The Wharton School with a M.B.A. degree.

Michael R. Lynch, Senior Managing Director and Chairman of the Strategic Initiatives Committee. Mr. Lynch joined GSC's Board of Advisors in 2005 and became a Senior Managing Director in 2006. He is a member of the investment committee for GSC European Mezzanine Funds, Chairman of the Strategic Initiatives Committee and is a member of the Compliance Committee. Prior to 2005, he was a managing director of Goldman, Sachs & Co. and a member of that firm's Investment Banking Division. Mr. Lynch joined Goldman, Sachs & Co. in 1976 and became a Partner in 1986. He is a member of the board of directors of Williams-Sonoma, Inc. and is also a trustee of Rice University in Houston, the Clark Art Institute in Williamstown, Massachusetts and the Glyndebourne Arts Trust in Lewes, East Sussex, England. Mr. Lynch is also a member of the board of directors of Good Shepherd Services, a New York-based social services agency. Mr. Lynch graduated from Rice University with a B.A. degree in Chemical Engineering and Behavioral Science and from the University of Texas with a M.B.A. degree.

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Robert M. Paine, Senior Managing Director, Credit Strategies. Mr. Paine joined GSC Group in 2006 as a Senior Managing Director. Prior to his current position with GSC, he was at Stanfield Capital Partners from 2002 to 2005, where he managed Stanfield Recovery Strategies, the corporate credit-focused hedge fund, concentrating on stressed, distressed and arbitrage situations. Before joining Stanfield, Mr. Paine was at Putnam Investments for 15 years. At Putnam, Mr. Paine was responsible for managing over $1 billion of distressed assets. From 1995 to 1999, Mr. Paine also served as a Collateral Manager within Putnam's High Yield Group, overseeing more than $5 billion of assets. Mr. Paine began his finance career at Putnam Investments as an Analyst in the firm's High Yield Group. Mr. Paine graduated from Boston University with a B.S. degree in Business Administration and a M.B.A. degree.

Christine K. Vanden Beukel, Senior Managing Director, Corporate Mezzanine Lending and European Collateralized Corporate Debt. Ms. Vanden Beukel joined GSC Group at its inception in 1999. Ms. Vanden Beukel currently manages the day-to-day operations of GSC's European investment activities. She was with Greenwich Street Capital Partners from 1994 to 1999. Prior to that, Ms. Vanden Beukel was with Smith Barney Inc. from 1992 to 1994 as an Analyst in the Restructuring and Mergers and Acquisitions Groups, where she worked on a variety of advisory and financing transactions. Ms. Vanden Beukel graduated Cum Laude from Dartmouth College, with an A.B. Degree in Government and Economics.

Andrew J. Wagner, Senior Managing Director, Finance and Administration. Mr. Wagner joined GSC Group in 2000 and is a member of the firm's Management Committee. Mr. Wagner oversees the Finance and Administration departments and the Investor Services group. From 1995 to 2000, Mr. Wagner was a General Partner and Chief Financial Officer of RFE Investment Partners, a private equity investment firm located in Connecticut. In addition to being responsible for the financial reporting of the RFE funds, Mr. Wagner was a Director of several RFE portfolio companies. Before joining RFE, Mr. Wagner was the Partner in charge of the Arthur Andersen LLP tax practice in Stamford, Connecticut. Mr. Wagner graduated from the University of Connecticut, with a B.S. degree in Accounting.

Joseph H. Wender, Senior Managing Director, Head of the Real Estate Group and Chairman of the Finance Committee. Mr. Wender joined GSC Group in 2005 as a Managing Director and became a Senior Managing Director in 2006. He is a member of the investment committee for GSC Structured Finance Funds, Chairman of the Finance Committee and is a member of the firm's Management Committee. Prior to this, he began with Goldman, Sachs & Co. in 1971 and became a Partner of that firm in 1982, where he headed the Financial Institutions Group for over a decade. He is Chairman of the Board of GSC Capital Corp. and a director of Affinity Financial, First Coastal Bancshares, Isis Pharmaceuticals and Vintrust. He is also a director of a number of not-for-profit institutions, including the St. Helena Hospital, The Joffrey Ballet and the Actors' Fund. Mr. Wender graduated from Northwestern University with a B.S.B.A. degree and graduated with Highest Distinction as a Baker Scholar from the Harvard Graduate School of Business Administration with a M.B.A. degree.

Alexander K. Zabik, Senior Managing Director, High Yield Real Estate. Mr. Zabik joined GSC Group in 2006 as a Senior Managing Director. Prior to GSC, Mr. Zabik served as a Managing Director and senior member of the BlackRock, Inc. Real Estate Debt Group, as a member of the Investment Committee and as a member of the Investment Strategy Group. Mr. Zabik also served as an officer of Anthracite Inc., a BlackRock-sponsored mortgage REIT. Mr. Zabik was responsible for the development and growth of the high yield commercial real estate debt business at BlackRock, including acting as Head of Originations and Collateral Manager for the $650 million Carbon

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Capital funds investing in bridge loans, mezzanine loans, B-notes and preferred equity. Prior to BlackRock, Mr. Zabik was Principal for AEC, L.P., a private commercial real estate equity opportunity fund, a Managing Director at Blaylock & Partners, L.P., an advisor to the RTC, and a Senior Vice President-Structured Finance Group at Fitch Investors Service, Inc., where he managed the analysis of credit, financial and legal structures for mortgage-backed securities ratings. Mr. Zabik joined Fitch in 1991 from Chase Manhattan Bank as Vice President and Deal Manager-Structured Finance Group. He is a member of the Urban Land Institute, Commercial Mortgage Securities Association and the Real Estate Lenders Association. Mr. Zabik graduated from Boston University with a B.A. degree and from Babson College with a M.B.A. degree in Finance.

Daniel I. Castro, Jr., Managing Director, Structured Finance. Mr. Castro joined GSC Group in 2005. Mr. Castro has over 23 years experience in Structured Finance Products. From 1991 to 2004, he was employed by Merrill Lynch in various capacities, most recently as Managing Director, Structured Finance Research. Prior to Merrill Lynch, he was a Senior Analyst, Structured Transactions at Moody's Investor's Service. Mr. Castro also spent four years with Citigroup in various securitization capacities. He was a member every year, since its inception in 1992 until he left Merrill Lynch in 2004, of the Institutional Investor All-American Fixed Income Research Team. Mr. Castro also ranked on the first team for ABS Strategy twice. Mr. Castro graduated from University of Notre Dame with a B.A. degree in Government/International Relations and from Washington University with a M.B.A. degree.

Edward S. Steffelin, Managing Director, Structured Finance. Mr. Steffelin joined GSC Group in 2005. He is currently the Chief Operating Officer for GSC's Structured Finance business. He was previously with the Trust Company of the West creating and managing CDO equity funds as a Senior Vice President. From 2001 to 2004, he was a principal at Allianz Risk Transfer, Inc. (New York), a wholly owned subsidiary of Allianz AG. Mr. Steffelin has also held positions at XL Financial Solutions, CGA Investment Management, and CapMAC. He is on the board of Walton USA. Mr. Steffelin graduated Phi Beta Kappa and with Honors from Occidental College with a B.A. degree in Economics and graduated from Dartmouth College with a M.B.A. degree.

Wenbo Zhu, Managing Director, Structured Finance. Ms. Zhu joined GSC Group in 2005. She has twelve years experience as Senior Quantitative Analyst for a broad range of MBS and ABS securities. From 1998 to 2005, Ms. Zhu worked at Merrill Lynch, Global Securities Research and Economics. She was a Director responsible for research and publications focused on ABS, MBS, synthetic CDOs and cash CDO backed by ABS, leveraged loans, and trust preferred assets. Prior to this, Ms. Zhu worked at Paine Webber, Inc, in various capacities. Ms. Zhu graduated from Shanghai Institute of Science and Technology with a B.S. degree in Physics, from Rensselaer Polytechnic Institute with both a M.S. degree and a Ph.D. in Mechanical Engineering.

Brian H. Oswald, Managing Director, GSC Group and Chief Financial Officer, GSC Capital Corp. Mr. Oswald joined GSC Group in 2006. Prior to GSC, Mr. Oswald was the Chief Financial Officer of Capital Trust, Inc. a self-managed finance and investment management REIT that specializes in credit-sensitive structured financial products. Mr. Oswald began his career in 1982 at KPMG Peat Marwick where for the next ten years he held various positions, including senior manager in the financial institutions group. After leaving KPMG, he was employed as the president of Gloversville Federal Savings and Loan Association, director of financial reporting and subsidiary accounting for River Bank America and corporate controller for Magic Solutions International, an international computer software company. Mr. Oswald graduated from Moravian College with a B.A. degree in Accounting and is a licensed certified public accountant in the States of New York and Pennsylvania and is a certified management accountant.

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Thomas E. Dial, Vice President, Structured Finance. Mr. Dial joined GSC Group in 2006. He was previously with Natexis Banques Populaires. He has 13 years of experience in the financial arena as a sell side structurer, whole loan trader and on the buy side as a member of a team managing Investment Grade & Mezzanine CDO's. His asset experience includes whole loans, Home Equities, Asset Backs, Corporate CDO's and CDO's of ABS. Mr. Dial graduated from the New Jersey Institute of Technology with a B.S. degree in Mechanical Engineering and from Rutgers Graduate School of Business Management with an M.B.A. degree.

Xiaopeng Jiang, Vice President, Structured Finance. Mr. Jiang joined GSC Group in 2006 focusing on model development and implementation. Prior to joining GSC, Mr. Jiang was a VP Senior Manager at Citigroup in their credit card division for 5 years where he was involved in business process analysis, data mapping, model design and data quality assurance. He was responsible for designing and implementing their price forecasting system. Mr. Jiang graduated from Xi'an Science and Technology University in China with Bachelor of Engineering degree and from the University of South Carolina with a M.B.A. degree in International Business.

Dave Ray, Associate General Counsel, GSC Group. Mr. Ray joined GSC Group in 2005 and is focusing on transaction management and legal affairs for the Structured Finance Group. He was previously with Schulte Roth & Zabel LLP as an associate in the Business Transactions Group. Prior to that, Mr. Ray was associated with Dechert LLP from 2003 to 2004 and Cravath, Swaine & Moore LLP from 1999 to 2002. Mr. Ray graduated Cum Laude as a University Scholar from the University of Pennsylvania with a B.A. degree in Physics and Mathematics and graduated as a Harlan Fiske Stone Scholar from Columbia University with a J.D. degree.

Evan D. Sotiriou, Vice President, Structured Finance. Mr. Sotiriou joined GSC Group in 2000 and is currently responsible for managing the operations and administration of the Structured Finance Group. From 2003-2006, he was responsible for the operations and administration of the Control Distressed Group at GSC. He was previously with J.P. Morgan, Inc. in the Consumer Mergers & Acquisitions Group. Mr. Sotiriou is a director of Burke Industries, Inc. and formerly a director of Scovill Fasteners Inc. and Woods Equipment Company. Mr. Sotiriou graduated Summa Cum Laude, Phi Beta Kappa from Dartmouth College, with an A.B. degree in Economics and a minor in Statistical Mathematics.

Joshua S. Bissu, Associate, Structured Finance. Mr. Bissu joined GSC Group in 2005. Prior to that, he was at Financial Security Assurance, Inc. in their Structured Credit/CDO group. Mr. Bissu was primarily responsible for structuring and modelling cash flows and yield tables for cash and synthetic CDOs/CLOs. In 2004, Mr. Bissu managed and closed transactions totalling $11 billion gross par exposure. Mr. Bissu graduated Magna Cum Laude from Duke University, with a B.A. degree in Economics.

Emily Chiang, Associate, Structured Finance. Ms. Chiang joined GSC Group in 2005. Ms. Chiang was previously with JP Morgan and Credit Suisse First Boston reviewing and analyzing CDOs and structured credit trades. Ms. Chiang graduated from Cornell University with a B.S. degree in Operations Research and from the Walter A. Haas School of Business at University of California Berkeley with a M.S. degree in Financial Engineering.

Rajiv A. Savai, Associate, Structured Finance. Mr. Savai joined GSC Group in 2005. He was previously with the Florida State Board of Administration where he worked as a Research Analyst-Intern. Prior to that, Mr. Savai worked as a Trader/Collateral Manager in Bombay, India. Mr. Savai graduated from Ramrao Adik Institute of Technology, Mumbai University with a B.E. degree in

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Electronic Engineering and from Florida State University with a M.S. degree in Financial Mathematics.

William Shieh, Associate, Structured Finance. Mr. Shieh joined GSC Group in 2005. He was previously with DRW Trading Group where he worked as a proprietary trader. Mr. Shieh graduated from the University of Pennsylvania with a B.S. degree in Economics and a concentration in Accounting and Finance.

W. Timothy Nest, Analyst, Structured Finance. Mr. Nest joined GSC Group in 2004. He was previously with Ernst & Young Corporate Finance LLP. Prior to that, he worked at PricewaterhouseCoopers LLP in the Corporate Value Consulting Group. He is a CFA charterholder and a member of the CFA Institute and NY Society of Securities Analysts. Mr. Nest graduated from Boston College, with a B.S. degree in Finance and Management Information Systems.

Xiaoying Zheng, Analyst, Structured Finance. Mr. Zheng joined GSC Group in 2006. Prior to that, he worked as an Investment Manager in Xi'an, China P.R. Mr. Zheng graduated from University of Electronic Science and Technology of China with a B.E. degree in Electronic Engineering and from Columbia University with a M.A. degree in Statistics.

Investment Advisers Act

GSCP (NJ), L.P. has informed the Co-Issuers that it is registered as an investment adviser under the Investment Advisers Act. Additional information with respect to GSCP (NJ), L.P. can be obtained from GSCP (NJ), L.P.'s Form ADV on file with the SEC. A current copy of Part II of GSCP (NJ), L.P.'s Form ADV (a copy of which is set forth in Annex G and incorporated by reference herein) has been delivered to the Issuer.

The Management Agreement

Management Fee

As compensation for the performance of its obligations as Collateral Manager under the Management Agreement, the Collateral Manager will receive a Senior Management Fee and a Subordinated Management Fee (together, the "Management Fee") on each Payment Date, to the extent of funds available for such purpose in accordance with the Priority of Payments. "Senior Management Fee" means an amount (calculated on the basis of a year of 360 days of twelve 30–day months) equal to 0.08% per annum of the Portfolio Balance determined as of the first day of the most recently ended Due Period. "Subordinated Management Fee" means an amount (calculated on the basis of a year of 360 days of twelve 30 day months) equal to 0.02% per annum of the Portfolio Balance determined as of the first day of the most recently ended Due Period.

To the extent not paid on any Payment Date when due, any accrued Management Fee will be deferred and will be payable on subsequent Payment Dates in accordance with the Priority of Payments. Any unpaid Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest.

Standard of care

The Collateral Manager is required under the Management Agreement, subject to the terms and conditions of the Management Agreement and of the Indenture, to perform its obligations under

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the Management Agreement and under the Indenture with reasonable care and in good faith using commercially reasonable efforts and commercially reasonable judgment, and using a degree of skill and attention no less than that which the Collateral Manager exercises with respect to comparable assets that it manages for itself and for others in a manner reasonably consistent with its understanding of accepted asset management practices and procedures followed by reasonable and prudent institutional managers of national standing managing assets of the nature and character of the Collateral. The Management Agreement provides that, to the extent not inconsistent with the foregoing, the Collateral Manager will follow its customary standards, policies and procedures in performing its duties under the Management Agreement and under the Indenture.

Indemnification and exculpation of Collateral Manager

The Collateral Manager, its directors, officers, partners, employees, affiliates and agents will not be liable to the Co-Issuers, the Trustee, the Collateral Administrator, the Subordinated Note Paying Agent, the Noteholders, the Placement Agent or any other person for any expenses, losses, damages, demands, charges, judgments, assessments, costs or other liabilities or claims (including reasonable attorneys' and accountants' fees and expenses) (collectively, "Liabilities") of any nature whatsoever incurred by the Co-Issuers, the Trustee, the Subordinated Note Paying Agent, the Noteholders, the Placement Agent or any other person that arise out of or in connection with the performance by the Collateral Manager of its duties under the Management Agreement, the Collateral Administration Agreement or the Indenture or for any acts or omissions by the Collateral Manager or any affiliate under or in connection with the Management Agreement, the Indenture, the Subordinated Note Paying Agency Agreement, the Placement Agreement, the Collateral Administration Agreement and the Notes and Composite Notes applicable to it, except (i) by reason of acts or omissions of the Collateral Manager constituting criminal conduct, fraud, bad faith, willful misconduct or gross negligence in the performance, or reckless disregard, of the obligations of the Collateral Manager under the terms of the Management Agreement and the Indenture applicable to the Collateral Manager; (ii) with respect to any representations or warranties made by the Collateral Manager under the terms of the Management Agreement or in any certificate or document furnished pursuant thereto that proves to be incorrect in any material respect when made; or (iii) with respect to the information, concerning the Collateral Manager set forth under the headings "Risk factors—Relating to certain conflicts of interest—The Issuer will be subject to conflicts of interest involving the Collateral Manager" and "The Collateral Manager" in this Offering Circular, such information containing any untrue statement of material fact or omitting to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (each occurrence of an event described in the immediately preceding clauses (i), (ii) and (iii), a "Collateral Manager Breach"). Notwithstanding the foregoing, in no event shall the Collateral Manager or any other affiliates of the Collateral Manager be liable for consequential, special, exemplary or punitive damages. For the avoidance of doubt, the Collateral Manager will not be liable for trade errors that may result from ordinary negligence, such as errors in the trade process (including, but not limited to, a buy order being entered instead of a sell order, or the wrong security being purchased or sold (including synthetically), or a security being purchased or sold (including synthetically) in an amount or at a price (or notional amount) other than the correct amount or price (or notional amount)), except to the extent that any such errors are due to a Collateral Manager Breach. Any stated limitations on liability shall not relieve the Collateral Manager from any responsibility it has under any state or federal statutes. As more specifically set forth in the Management Agreement, the Collateral Manager and its affiliates and their respective members, principals, partners, managers, directors, officers, stockholders, employees and agents (each, an "Indemnified Person") will be entitled to indemnification by the Issuer, payable in accordance with the Priority of Payments, in respect of any

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Liabilities, and each Indemnified Person will be reimbursed for all reasonable fees and expenses (including reasonable fees and expenses of counsel) as such fees and expenses are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation with respect to any pending or threatened litigation, caused by, or arising out of or in connection with, (i) the issuance of the Notes, the Composite Notes or the transactions contemplated by this Offering Circular, the Indenture, the Management Agreement or other Transaction Documents, and/or (ii) any action taken by, or any failure to act by, the Collateral Manager or any other Indemnified Person, in either case to the extent not constituting a Collateral Manager Breach. Any amounts paid by the Issuer in respect of indemnification of an Indemnified Person will be subject to the Collateral Manager's obligation to repay such amounts to the Issuer to the extent the Liabilities in respect of which such Indemnified Person was indemnified by the Issuer are found by a court of competent jurisdiction in a judgment which has become final (whether or not subject to appeal) to have resulted from a Collateral Manager Breach.

Subject to the next following sentence, the Issuer will be entitled to indemnification by the Collateral Manager in respect of any Liabilities incurred by the Issuer, and will be reimbursed for all reasonable fees and expenses (including reasonable fees and expenses of counsel) incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation with respect to any pending or threatened litigation, in each case, to the extent and only to the extent that such Liabilities, fees, expenses and other amounts result from a Collateral Manager Breach. Any Liabilities, fees, expenses and other amounts to be paid by the Collateral Manager in respect of its indemnification of the Issuer will be payable only upon and to the extent that a court of competent jurisdiction has found in a judgment which has become final (whether or not subject to appeal) that such Liabilities, fees, expenses and other amounts resulted from a Collateral Manager Breach.

The provisions of the Management Agreement may not be amended or waived other than (i) by an agreement in writing executed by the parties to the Management Agreement, (ii) with the consent of the Noteholders, or without such consent, in each case in a manner that would be sufficient to meet the consent requirements (if any) for such a modification or amendment if it were made to the Indenture and (iii) upon the satisfaction of the Rating Condition (or waiver thereof by any affected Classes) with respect to such modification or amendment.

The Indenture places significant restrictions on the Collateral Manager's ability to direct the Issuer to enter into and Dispose of the Funded Portfolio Assets and the CDS Portfolio Assets representing Collateral for the Secured Notes and the Collateral Manager is required to comply with these restrictions contained in the Indenture. Accordingly, during certain periods or in certain specified circumstances, the Collateral Manager may be unable to enter into Funded Portfolio Assets and CDS Portfolio Assets or to take other actions which it might consider in the best interests of the Issuer and the Noteholders, as a result of such restrictions set forth in the Indenture.

In its capacity as investment adviser and manager, the Collateral Manager may engage in other businesses and furnish services of any kind (including investment management and advisory services) to other clients whose investment policies may be similar to or may differ from those followed by the Collateral Manager on behalf of the Issuer with respect to the Funded Portfolio Assets, the CDS Portfolio Assets or the Eligible Investments and which may own securities or loans of the same or different class, or which are of the same or different type, as the assets included in the Collateral, including the Reference Obligations relating to the CDS Portfolio Assets. The Collateral Manager and its affiliates, in their sole discretion, may make recommendations or effect transactions on

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behalf of themselves or for others which may be similar to or differ from those made or effected with respect to the Collateral.

The Collateral Manager shall not knowingly direct the Trustee to purchase any security to be included in the Collateral from the Collateral Manager or any of its affiliates as principal or to sell any security to the Collateral Manager or any of its affiliates as principal unless (a) such purchase or sale is not in violation of the Investment Advisers Act, (b) the Board of Directors of the Issuer shall have received from the Collateral Manager such information relating to such acquisition or disposition as it shall reasonably require and (c) the Board of Directors of the Issuer shall have been informed of and approved such purchase or sale. The Collateral Manager shall not knowingly direct the Trustee to purchase any security or loan for inclusion in the Collateral from any account or portfolio for which the Collateral Manager or any of its affiliates serve as investment adviser or direct the Trustee to sell any security or loan to any account or portfolio for which the Collateral Manager or any of its affiliates serve as investment adviser unless (a) such purchase or sale is not in violation of the Investment Advisers Act and (b) such purchase or sale is effected in a transaction that reflects arm's length terms. For the foregoing purposes, no person or entity shall be deemed an affiliate of the Collateral Manager by reason of the Collateral Manager or an affiliate of the Collateral Manager acting as an investment adviser, asset manager or collateral manager (or acting in a similar capacity, however denominated) with respect to such person or entity.

In addition, the Collateral Manager may, from time to time, cause or direct Related Entities to buy or sell, or may recommend to Related Entities the buying and selling of (including synthetically), securities of the same or of a different kind or class of the same issuer as the Funded Portfolio Assets and the Reference Obligations in respect of the CDS Portfolio Assets which the Collateral Manager directs the Issuer to enter. Situations may occur where the Issuer could be disadvantaged because of the investment activities conducted by the Collateral Manager for the Related Entities.

The Collateral Manager may be removed without cause upon 90 days' (or such shorter notice as is acceptable to the Collateral Manager) prior written notice to the Collateral Manager (with a copy to each Rating Agency) by the Issuer, with the consent of (i) the Noteholders owning at least 66-2/3% in Aggregate Outstanding Amount of each Class of Secured Notes voting separately and (ii) the Noteholders owning at least 66-2/3% of the Aggregate Outstanding Amount of the Subordinated Notes; provided, however, that such termination or removal shall not be effective until the date as of which a successor Collateral Manager has been appointed in accordance with the Management Agreement and has accepted the duties of the successor Collateral Manager thereunder. In determining whether the requisite Noteholders have given any such direction, notice or consent, Collateral Manager Notes will be disregarded and deemed not to be outstanding. The Issuer will use its best efforts to appoint a successor Collateral Manager to assume such duties and obligations.

The Collateral Manager may also be removed for cause upon ten Business Days' prior written notice by the Issuer, at the direction of a Majority of the Secured Noteholders and the Subordinated Noteholders. In determining whether the requisite Noteholders have given the foregoing direction, notice or consent, Collateral Manager Notes will be disregarded and deemed not to be outstanding. The term "Collateral Manager" for purposes of this paragraph includes any successor or successors to GSC.

For purposes of the Management Agreement, "cause" will mean (a) the Collateral Manager willfully violates any material provision of the Management Agreement or the Indenture applicable to it; (b) the Collateral Manager breaches in any material respect any provision of the Management

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Agreement or any term of the Indenture applicable to it (other than the failure to satisfy any Collateral Quality Test or an Eligibility Criteria) or any representation, certificate or other statement made or given in writing by the Collateral Manager (or any of its directors or officers) pursuant to the Management Agreement or the Indenture shall prove to have been incorrect in any material respect when made or given, which breach or materially incorrect representation, certificate or statement (i) has a material adverse effect on the rights of any Class of Notes and (ii) if such breach or such materially incorrect representation, certificate or statement is capable of being cured, the Collateral Manager fails (within 30 days of its becoming aware or receiving notice from the Trustee) to cure such breach, or to take such action so that the facts (after giving effect to such actions) conform in all material respects to such representation, certificate or statement; (c) certain events of bankruptcy or insolvency in respect of the Collateral Manager; (d) the occurrence of an Event of Default, other than certain events of bankruptcy or insolvency of the Co-Issuers, that primarily results from any breach by the Collateral Manager of its duties under the Indenture or Management Agreement; or (e) the occurrence of an act by the Collateral Manager which constitutes fraud or criminal activity in the performance of the Collateral Manager's obligations under the Management Agreement or the Indenture or the indictment of the Collateral Manager or any of its affiliates or any senior officer of the Collateral Manager having direct responsibility over the Issuer's investment activities for a criminal offense materially related to its business of providing investment advisory services. Notwithstanding the foregoing, no occurrence of one of the foregoing events shall constitute "cause" from and after the date of the Collateral Manager's receipt of a waiver of such occurrence from the holders owning a Majority of the Secured Notes and the Subordinated Notes, voting collectively. In determining whether the requisite Secured Noteholders and Subordinated Noteholders have given any such waiver, Collateral Manager Notes will be disregarded and deemed not to be outstanding. In no event will the Trustee be obligated to determine if "cause" exists.

Following the occurrence of a Collateral Manager MAE, the Collateral Manager may be removed upon 90 days' prior written notice by the Majority of the Secured Noteholders and the Subordinated Noteholders (voting as a single class); provided, however, that such termination or removal shall not be effective until the date as of which a successor Collateral Manager has been appointed in accordance with the Management Agreement and has accepted the duties of the successor Collateral Manager thereunder.

"Collateral Manager MAE" means any event, development or change in the business, operations or condition (financial or otherwise) of the Collateral Manager which, taken together with all other such events, developments or changes and, after giving effect to any remedial or corrective action taken by the Collateral Manager, has a material adverse effect on the Collateral Manager's ability to perform its obligations under the Management Agreement in accordance with the standard of care set forth therein.

The Collateral Manager may not assign its rights or obligations under the Management Agreement without the prior written consent of the Issuer and the Noteholders owning a majority in outstanding principal amount of each Class of Notes voting separately, and without satisfying the Rating Condition; provided, however, that the Collateral Manager may assign its obligations under the Management Agreement to an affiliate of the Collateral Manager without obtaining the consent of the Issuer or any Noteholder, so long as such assignment does not constitute an "assignment" under the Investment Advisers Act. Subject to the following paragraph, the Collateral Manager may resign upon 90 days' (or such shorter notice as is acceptable to the Issuer) written notice to the Issuer, the Trustee and the Rating Agencies.

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No removal, termination or resignation will be effective unless a successor Collateral Manager has been appointed and approved pursuant to the Management Agreement and has agreed in writing to assume all of the Collateral Manager's duties and obligations pursuant to the Management Agreement. Any successor Collateral Manager must be appointed by the Issuer, subject to the requirements of the following paragraph, and not rejected by the Noteholders owning more than 33-1/3% of the Aggregate Outstanding Amount of any Class of Secured Notes voting separately, or the Noteholders owning more than 33-1/3% of the Aggregate Outstanding Amount of the Subordinated Notes, within 20 days after the issuance of a notice of a vote regarding the successor Collateral Manager to the Noteholders. In determining whether the requisite Noteholders have given such rejection, Collateral Manager Notes will not be disregarded and will be deemed to be outstanding.

Upon any resignation or removal of the Collateral Manager while any of the Notes are outstanding, the Issuer (in consultation with the Holders of the Notes then outstanding) will appoint as successor Collateral Manager an institution which (i) has demonstrated an ability to professionally and competently perform duties similar to those imposed upon the Collateral Manager (or that has been approved in writing by a Majority of the Controlling Class), (ii) is legally qualified and has the capacity to act as successor Collateral Manager, (iii) shall not cause the Issuer or the Co-Issuer or the pool of Collateral to become required to register under the provisions of the Investment Company Act and (iv) with respect to which the Rating Condition is satisfied. No compensation payable to a successor Collateral Manager from payments on the Collateral will be greater than that paid to the Collateral Manager under the Management Agreement without the prior written consent of (i) a Majority of the Secured Notes and (ii) a Majority of the Subordinated Notes and without the Rating Condition being satisfied with respect thereto. Upon the later of (1) expiration of the applicable notice period with respect to termination specified in the Management Agreement and (2) the time that the successor Collateral Manager has otherwise been appointed and has agreed in writing to assume the rights and obligations of the Collateral Manager under the Management Agreement, all authority and power of the Collateral Manager under the Management Agreement, whether with respect to the Portfolio Assets or otherwise, will automatically and without further action by any person or entity pass to and be vested in such successor Collateral Manager.

In the event of a removal of the Collateral Manager, if no successor Collateral Manager has been appointed or an instrument of acceptance by a successor Collateral Manager has not been delivered to the Collateral Manager (a) within 20 days after approval of a successor Collateral Manager by the Issuer, and the issuance of notice of a vote regarding such successor Collateral Manager to the Noteholders of each Class of Notes or (b) within 90 days after the date of notice of removal of the Collateral Manager, the removed Collateral Manager may petition any court of competent jurisdiction for the appointment of a successor Collateral Manager without the approval of any Noteholders.

In the event of a resignation by the Collateral Manager, if no successor Collateral Manager will have been appointed or an instrument of acceptance by a successor Collateral Manager has not been delivered to the Collateral Manager within 120 days after the date of notice of resignation by the Collateral Manager, the resigned Collateral Manager may petition any court of competent jurisdiction for the appointment of a successor Collateral Manager without the approval of the Noteholders.

Copies of the Management Agreement will be available for inspection during the term of the Notes at the office of the Trustee.

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In certain circumstances, the interests of the Issuer and/or the holders of the Notes with respect to matters as to which the Collateral Manager is advising the Issuer may conflict with the interests of the Collateral Manager and its affiliates. See "Risk factors— Relating to certain conflicts of interest".

The Collateral Manager will be bound by various U.S. Federal income tax-related restrictions, which are fully described in the Management Agreement.

The Total Return Swap

The following summary does not purport to be complete, and prospective investors must refer to the Total Return Swap for detailed information regarding the Total Return Swap. Copies of the Total Return Swap and the other Transaction Documents are available for inspection by prospective holders of Notes during usual business hours at the specified offices of the Trustee. Capitalized terms used in this section, but not otherwise defined, shall have the meanings set forth in the Total Return Swap.

General

On the Closing Date the Issuer shall enter into a 1992 ISDA Master Agreement (Multicurrency - Cross Border) (together with the schedule thereto and any confirmations entered into thereunder, the "Total Return Swap") with Merrill Lynch International (the "TRS Counterparty") pursuant to which the Issuer and the TRS Counterparty will enter into a master total return swap confirmation covering each TRS Covered Security in the TRS Asset Account.

The Total Return Swap is intended (i) to provide the Issuer with a source of liquidity in respect of TRS Covered Securities deposited in the TRS Asset Account which the Issuer may from time to time deliver to the TRS Counterparty in return for payments by the TRS Counterparty as further described herein, so that the Issuer may make payments to the Secured Parties, as further described herein and (ii) to ensure a predictable rate of return on amounts standing to the credit of the TRS Asset Account.

Total Return Floating Payments

On the Closing Date, the Issuer shall deposit approximately U.S.$ 1,023,250,000 (the "Initial Deposit") in the TRS Asset Account and shall invest such amounts at the direction of the TRS Counterparty in TRS Covered Securities pursuant to and in accordance with the terms of the Total Return Swap. Pursuant to each TRS Transaction in respect of a TRS Covered Security:

(i) during the period from and including the Closing Date to and including the Termination Date in respect of such TRS Transaction, the Issuer will pay to the TRS Counterparty one Business Day following the date each such amount is received by a holder of the relevant TRS Covered Security (i) any interest payable in respect of and pursuant to the terms of such TRS Covered Security (including regularly scheduled interest and any interest payable on such amount pursuant to the terms of the TRS Covered Security because such interest was not timely paid), (ii) any amounts that have accreted in accordance with the terms of such TRS Covered Security since the determination of the initial principal amount of such TRS Covered Security and (iii) any commitment fees, make-whole amounts, redemption premium, amendment fees, collateral realization amounts, insurance payouts and other similar fees and amounts that would be received by a holder of the relevant TRS

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Covered Security (whether paid by the Reference Entity, a trustee or paying agent in respect of the TRS Covered Securities or any other similar entity or obligor in respect of such TRS Covered Security to a holder of such TRS Covered Security) that do not constitute a payment of principal of such TRS Covered Security ("Interest and Fees") less any Withheld Taxes (as defined in the Total Return Swap); and

(ii) the TRS Counterparty will pay to the Issuer, in respect of each period from (and including) one Payment Date to (but excluding) the next Payment Date (or in the case of the first period, commencing on (and including) the Closing Date), an amount equal to the product of (i) the weighted average notional amount of the balance of such TRS Covered Security in the TRS Asset Account in such period (excluding, for the avoidance of doubt, amounts received by the Issuer in respect of Interest and Fees and the aggregate amount of any Rounding Shortfalls, each in respect of such TRS Covered Security), (ii) LIBOR and (iii) the day count fraction, one Business Day prior to each Payment Date (the "TRS Counterparty Floating Amount").

Delivery of TRS Covered Security

On the termination date of a TRS Transaction the Issuer shall deliver at the discretion of the TRS Counterparty pursuant to and in accordance with the Total Return Swap a principal amount of the relevant TRS Covered Security equal to the outstanding principal amount (or, in the case of a partial termination, the portion thereof being terminated) to the highest firm bidder identified by the calculation agent under the Total Return Swap for such TRS Covered Security against payment to it from such bidder, in U.S. Dollars, of an amount equal to the product of (i) the Final Price minus the Initial Price (as defined in the Total Return Swap) and (ii) the outstanding principal amount of such TRS Covered Security. If the amount received by the Issuer is greater than par, the Issuer shall pay the difference between such amount and par to the TRS Counterparty and if the amount received by the TRS Counterparty is less than par, the TRS Counterparty shall pay the difference between par and such amount to the Issuer (the "Final Total Return Amount"), in either case as adjusted for any TRS LIBOR Breakage Amounts or TRS Hedging Amounts owed by the respective parties.

If on the date of the delivery of the TRS Covered Security against payment of the Final Price as provided above there is any accrued interest on the TRS Covered Security, the highest bidder need not pay any additional amount in respect of any such accrued interest and the Issuer shall be deemed to have received payment for such interest through the TRS Counterparty's payment of the Total Return Swap Counterparty Floating Amount. If the highest bidder pays any accrued interest, the Issuer shall pay the amount thereof to the TRS Counterparty, subject to having received the related portion of the TRS Counterparty Floating Amount from the TRS Counterparty.

"Final Price" means the actual price (excluding accrued interest) received for the purchase of the entire outstanding principal amount of the TRS Covered Security (or, in the case of a Replacement, the portion of such TRS Covered Security being reduced or replaced), expressed as a percentage, as determined by the Calculation Agent no later than 2:00 p.m. (New York time) (the "Valuation Time") on the termination date of the relevant TRS Transaction which shall be the highest firm bid price; provided that the Issuer shall have the right to require the Calculation Agent to request as many as three firm bids for the TRS Covered Security for settlement on the applicable termination date, from each of three market-makers or other major market participants designated by the Issuer and agreed to by the calculation agent, subject to certain exceptions set out in the Total Return Swap. The party that provides such highest firm bid is the "Highest Bidder".

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If the Issuer fails to deliver the TRS Covered Security as described above on the termination date for the related TRS Transaction (as described below) after giving effect to any applicable grace periods contained in the Total Return Swap, (a "Failed Delivery Event"), such Failed Delivery Event shall be a Termination Event under the Total Return Swap with the Issuer as the affected party and a termination payment will be calculated and payable in accordance with the terms of the Total Return Swap.

Optional Termination

The TRS Counterparty may terminate any TRS Transaction by giving written notice to the Issuer and specifying therein the date it is designating as the Termination Date in respect of such TRS Transaction upon the occurrence of any of the following events in respect of such TRS Transaction:

(i) if at any time the Interest and Fees is (or is expected to be) less than the Interest and Fees that would have been paid to a holder of the TRS Covered Security as a result of withholding tax;

(ii) a Voting Rights Event (as defined in the Total Return Swap); or

(iii) a Credit Enhancement Event (as defined in the Total Return Swap).

In addition, the TRS Counterparty may terminate all of the TRS Transactions (a "TRS Clean-up Call") at any time after the Payment Date on November 27, 2015 if the aggregate principal balance of the TRS Covered Securities under all the TRS Transactions at such time is less than U.S.$20,000,000 (the "TRS Clean-up Call Condition") pursuant to and in accordance with the Total Return Swap.

Termination date payments and deliveries under TRS Transactions

On any termination date with respect to a TRS Transaction (except in connection with a Failed Delivery Event), in full satisfaction of any amounts due in respect of the termination of such TRS Transaction (in whole or in part) each party shall pay to the other the amounts accrued and unpaid through the termination date (including any Final Total Return Amount, any TRS LIBOR Breakage Amounts and any TRS Hedging Amounts); and the Issuer shall deliver the TRS Covered Security (or applicable portion thereof) as described above.

Replacements, increases and reductions under TRS Transactions

(a) If on any Payment Date the balance standing to the credit of the TRS/CDS Swap Receipts Account is greater than U.S.$ 100,000 (the full amount of any such Balance, an "Investment Subaccount Excess"), then the TRS Counterparty or the Issuer may propose that one or more TRS Transactions be increased or replaced by one or more replacement TRS Transactions on such Payment Date such that, after giving effect to such increase or replacement, the Investment Subaccount Excess as of such Payment Date is reduced to zero (or such other amount determined by the Issuer, provided that no less than U.S.$100,000 is proposed for investment in TRS Covered Securities under one or more TRS Transactions) and the applicable amount (the "Investment Subaccount Transfer Amount") will be transferred from the TRS/CDS Swap Receipts Account to the TRS Asset Account for investment in TRS Covered Securities; provided that, (i) if there is no agreement between the Issuer and the TRS Counterparty as to such increase or replacement within three Business Days of such proposal by the Issuer, the Investment Subaccount Transfer Amount will be transferred to the TRS Asset Account and the TRS Counterparty shall have the right to designate

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(in its sole discretion) a TRS Transaction for which the TRS Covered Security meets the TRS Reference Obligation Criteria for an amount up to the Investment Subaccount Transfer Amount.

(b) If on any Payment Date the aggregate outstanding principal amount of all TRS Transactions under the Total Return Swap is greater than the aggregate Reference Obligation Notional Amount under all CDS Portfolio Assets minus certain other amounts each as further described in the Total Return Swap (the "Aggregate Adjusted Notional Amount") (a "Payment Date Collateral Excess") then the TRS Counterparty may propose to the Issuer or the Issuer may propose to the TRS Counterparty that one or more outstanding TRS Transactions be reduced or replaced on such Payment Date such that, after giving effect to such reduction or replacement, the aggregate outstanding principal amount of all TRS Transactions under the Total Return Swap is (or would be) equal to the Aggregate Adjusted Notional Amount as of such Payment Date, provided that, if the TRS Counterparty and the Issuer do not agree to such reduction or replacement, the TRS Counterparty shall have the right to designate an early termination date to occur on such Payment Date in respect of one or more TRS Transactions with an aggregate outstanding principal amount equal to such excess.

(c) If with respect to any date other than a Payment Date the Issuer has notified the TRS Counterparty that the aggregate outstanding principal amount of all TRS Transactions under the Total Return Swap is greater than the Aggregate Adjusted Notional Amount as of such date (an "Intraperiod Collateral Excess"), other than as the result of a Trading Collateral Excess as described below, then the TRS Counterparty may propose to the Issuer or the Issuer may propose to the TRS Counterparty with five Business Days prior written notice (except if such Intraperiod Collateral Excess is a result of a Credit Event or a Floating Amount Event (each as defined in the CDS Portfolio Assets), in which case only three Business Days' prior written notice shall be required) that one or more outstanding TRS Transactions be reduced or replaced (with a TRS Covered Security that satisfies the TRS Reference Obligation Criteria) on such date such that, after giving effect to such reduction or replacement, the aggregate outstanding principal amount of all TRS Transactions under the Total Return Swap is (or would be) equal to the Aggregate Adjusted Notional Amount as of such date; provided that, if the TRS Counterparty and the Issuer do not agree to such reduction or replacement by the third Business Day after such notice (or second Business Day in the case of a notice in respect of a Credit Event or Floating Amount Event), the TRS Counterparty or the Issuer shall have the right to designate an early termination date to occur on such date in respect of one or more TRS Transactions with an aggregate outstanding principal amount equal to such Intraperiod Collateral Excess; provided further that the TRS Counterparty or the Issuer shall pay the TRS LIBOR Breakage Amount in connection with any Intraperiod Collateral Excess. For the avoidance of doubt, the TRS LIBOR Breakage Amount shall not be due if the replacement date occurs on a Payment Date.

(d) If the aggregate outstanding principal amount of all TRS Transactions under the Total Return Swap is greater than the Aggregate Adjusted Notional Amount as the result of the Disposition by the Issuer of a CDS Portfolio Asset other than as the result of (I) any Disposition of a CDS Portfolio Asset that is a Defaulted Portfolio Asset or (II) payment by the Issuer to the Synthetic Counterparty of any Physical Settlement Amounts and Floating Amounts (each as defined in the CDS Portfolio Assets) (a "Trading Collateral Excess"), then the TRS Counterparty may propose to the Issuer or the Issuer may propose to the TRS Counterparty, with seven Business Days prior written notice, that one or more outstanding TRS Transactions under the Total Return Swap be reduced or replaced (with a TRS Covered Security that satisfies the TRS Reference Obligation Criteria) on such date such that the aggregate outstanding principal amount of all TRS Transactions is equal to the Aggregate Adjusted Notional Amount as of such date; provided that, if the TRS Counterparty and

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the Issuer do not agree to such reduction or replacement by the third Business Day after such notice, the Issuer or the TRS Counterparty shall have the right to designate an early termination date to occur on such date in respect of one or more TRS Transactions (where the Issuer shall be the sole Affected Party and the TRS Transaction(s) (or portion thereof) designated by the TRS Counterparty shall be the sole Affected Transaction(s)) with an aggregate outstanding principal amount equal to such Trading Collateral Excess (with such TRS Transactions to be designated by the TRS Counterparty or, if the TRS Counterparty fails to make such designation, by the Issuer); provided further that the TRS Counterparty or the Issuer (as applicable) shall be obligated to pay, (i) if the Excess Trading Amount is greater than zero, the TRS Hedging Amount applicable to such Excess Trading Amount and (ii) unless the replacement date is also a Payment Date, the TRS LIBOR Breakage Amount on the next succeeding Payment Date following such Disposition. For the avoidance of doubt, if the Excess Trading Amount is greater than zero for the applicable one year period, the TRS Hedging Amount for such Excess Trading Amount shall be due regardless of whether the replacement date occurs on a Payment Date.

(e) If the Issuer is required to pay a Physical Settlement Amount, Floating Amount or CDS Termination Payment in respect of any particular CDS Portfolio Asset or a Short Synthetic Payment, the Issuer shall deliver to the TRS Counterparty a notice designating an early termination date (to occur no earlier than the second Business Day, provided such notice is delivered on or prior to 12:00PM New York time, in the case of a Physical Settlement Amount or a Floating Amount or a Short Synthetic Payment, or the seventh Business Day, in the case of a CDS Termination Payment, in each case, after the date of such notice) in respect of the outstanding principal amount of TRS Transactions (or portion of TRS Transactions) in the amount required to pay such Physical Settlement Amount, Short Synthetic Payment, Floating Amount or CDS Termination Payment, and TRS Transactions in respect of such amount shall be terminated in accordance with the terms of the Total Return Swap (with such TRS Transactions to be designated by the TRS Counterparty or, if the TRS Counterparty fails to make a designation, by the Issuer). Neither the TRS Counterparty nor the Issuer shall be required to pay any TRS Hedging Amount in connection with any such termination effected in connection with the payment of (I) a Physical Settlement Amount, (II) a Floating Amount or (III) a CDS Termination Payment relating to the Disposition of a CDS Portfolio Asset that is a Defaulted Portfolio Asset. If the TRS Covered Securities under such TRS Transactions are subject to minimum denomination requirements, then TRS Covered Securities with an outstanding principal amount rounded up to the minimum permissible denomination of such TRS Covered Securities shall be terminated and the proceeds thereof in excess of the amount required by the Issuer to make the applicable payment described in the preceding sentence (net of the amount required to be paid to the TRS Counterparty in respect of any Final Total Return Amount, if applicable) shall be deposited in the TRS/CDS Swap Receipts Account.

(f) If at any time any TRS Covered Security is not rated at least "Aa3" by Moody's (or if rated "Aa3", is on watch for possible downgrade) and at least "AA-" by S&P (any such occurrence, a "Ratings Event"), then the TRS Counterparty may propose to the Issuer or the Issuer may propose to the TRS Counterparty one or more replacement TRS Transactions or increases to one or more existing TRS Transactions (x) having TRS Covered Securities that are rated at least "Aa2" by Moody's and at least "AA-" by S&P and that satisfy the TRS Reference Obligation Criteria and (y) having an aggregate outstanding principal amount equal to the outstanding principal amount of the TRS Transaction being replaced; provided that if there is no agreement as to such a replacement or increase (or the Issuer or the TRS Counterparty does not make such proposal) within thirty Business Days following the occurrence of such Ratings Event, the TRS Counterparty shall have the right to designate (in its sole discretion) a replacement TRS Transaction (which TRS Transaction shall be the

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sole Affected Transaction) for which the TRS Covered Security meets the TRS Reference Obligation Criteria.

(g) The TRS Counterparty may at any time elect to replace (in whole or in part) one or more TRS Transactions by proposing one or more replacement TRS Transactions (or increasing the outstanding principal amount of one or more existing TRS Transactions) the related TRS Covered Security of which satisfies the TRS Reference Obligation Criteria and having an aggregate outstanding principal amount equal to the aggregate outstanding principal amount of the TRS Transaction(s) being replaced (any such replacement, an "Elective Replacement") by giving the Issuer at least two Business Days prior written notice specifying the effective date of such Elective Replacement.

TRS Reference Obligation Criteria

Each TRS Covered Security will be required to satisfy the TRS Reference Obligation Criteria. "TRS Reference Obligation Criteria" means criteria that will be satisfied with respect to any TRS Covered Security if it is an obligation (i) that either (a) (x) has an S&P rating of "AAA" or "A-1" and a Moody's rating of "Aaa" or "P-1" (provided that if such obligation is a collateralized debt obligation that is not a collateralized loan obligation, such obligation shall have a separate class of securities subordinate to it that has a rating by S&P of "AAA" and a Moody's rating of "Aaa") and (y) was issued in a registered offering under the Securities Act of 1933 or was privately placed under Rule 144A or Section 4(2) of the Securities Act of 1933 pursuant to an offering memorandum, private placement memorandum or other similar document or (b) is an Eligible Investment or commercial paper with a maturity of not more than 183 days from the day of issuance and have a Moody's rating of at least "P-1" and an S&P rating of at least "A-1", (ii) that is purchased at a price not in excess of its principal balance or principal amount (exclusive of any discount included therein) unless the TRS Counterparty pays any accrued interest or other amount in excess thereof, if it will be subject to the Total Return Swap, (iii) that is registered, (iv) the income from or proceeds of disposition of which is not subject to reduction for or on account of withholding or similar tax and (v) that is not a Tax Ineligible Equity Security. The Issuer shall determine, in its reasonable judgment, whether the TRS Reference Obligation Criteria has been satisfied and if the Issuer (or the Collateral Manager on its behalf) concludes, in good faith, that such security does not satisfy the TRS Reference Obligation Criteria and therefore is not eligible for acquisition by the Issuer, the Issuer (or the Collateral Manager on its behalf) will notify the TRS Counterparty in writing as to which criterion would be violated by its acquisition and provide in reasonable detail the reason for such failure). A "Tax Ineligible Equity Security" means an obligation or security that is, for U.S. Federal income tax purposes, (a) any equity in a pass-through entity such as a partnership or trust where such pass-through entity is engaged in a trade or business directly or indirectly within the United States or (b) any interest (other than an interest solely as a creditor) in a United States real property holding corporation.

Voting rights under TRS Transactions

If the Issuer, in its capacity as a holder of a TRS Covered Security or otherwise, receives written notice or otherwise determines that a holder of such TRS Covered Security is required or has been invited to exercise any Voting Rights, the Issuer shall, as soon as practicable, notify the TRS Counterparty or any designee designated by the TRS Counterparty by prior written notice to the Issuer (the "TRS Counterparty's Designee") to such effect. The Issuer shall exercise all Voting Rights in respect of the related TRS Covered Security (or cause such Voting Rights to be exercised) in respect of such TRS Covered Security solely at the TRS Counterparty's expense and in accordance

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with the instructions (if any) received by it from the TRS Counterparty or the TRS Counterparty's Designee; provided that such instructions are given in a timely manner.

If, for any reason, the Issuer (i) issues a Negative Voting Notice (as defined in the Total Return Swap); (ii) fails to issue a voting notice by the relevant cut-off date; (iii) fails to exercise, or cause to be exercised, any Voting Rights in respect of the related TRS Covered Security in accordance with the instructions timely received by it from the TRS Counterparty or the TRS Counterparty's Designee; or (iv) fails to notify the TRS Counterparty that any Voting Rights are exercisable with respect to the issuer of the related TRS Covered Security (any such event, a "Voting Rights Event"), then the TRS Counterparty may, subject to the provisions contained in the Total Return Swap, terminate the related TRS Transaction.

"Voting Rights" means, in respect of any TRS Covered Security, any right of a holder of such TRS Covered Security to exercise any voting rights with respect to such TRS Covered Security or give any instructions or consent to any action or take any other action with respect to such TRS Covered Security. Provided that no early termination date in respect of a TRS Transaction has occurred, and performance would not contravene any law, rule or regulation, the Issuer shall reasonably promptly deliver (or arrange for the delivery of), to the TRS Counterparty or its designee, a copy of each notice and report delivered to it by the related issuer or any other person on behalf of such issuer of the related TRS Covered Security or otherwise in connection with such TRS Covered Security in relation to the Voting Rights in respect thereof.

Credit Enhancement of TRS Transactions

The TRS Counterparty may, solely at its own expense, obtain credit enhancement of any TRS Covered Security ("Credit Enhancement") by means of a financial guarantee (or similar insurance policy) or by means of a custodial receipt representing an interest in both the TRS Covered Securities and a policy or other type of credit enhancement, pursuant to which the entity providing the credit enhancement will guarantee certain payments of interest and principal on the TRS Covered Security if and to the extent those payments are not made by the issuer of the TRS Covered Security (a "Reference Security Custodial Receipt"), such that in either case either the TRS Covered Security or the TRS Covered Security Custodial Receipt has a rating, or a rating equivalent, which is no lower than the rating of the TRS Covered Security on the date the Credit Enhancement is obtained.

The Issuer will agree under the Total Return Swap to cooperate to the extent reasonably practicable, at the TRS Counterparty's expense, with any request of the TRS Counterparty in arranging for such Credit Enhancement, including if requested by the TRS Counterparty, by delivering, if the Issuer is the holder of the related TRS Covered Security at such time, or, if the Issuer is not the holder of such TRS Covered Security at such time and it is able and legally permitted to do so, by requesting the holder of such TRS Covered Security to deliver such TRS Covered Security in exchange for the delivery of the TRS Covered Security Custodial Receipt.

If the TRS Counterparty is unable to arrange for Credit Enhancement of a TRS Covered Security either because the Issuer does not cooperate to the extent reasonably practicable with the TRS Counterparty or because the Issuer is unable to cause the delivery of such TRS Covered Security in exchange for the delivery of a TRS Covered Security Custodial Receipt (any such event, a "Credit Enhancement Event"), the TRS Counterparty may, subject to the provisions contained in the Total Return Swap, without prejudice to any other rights and remedies of the TRS Counterparty in connection therewith, designate a termination event with respect to the related TRS Transaction (or, in lieu of terminating such TRS Transaction, designate a replacement for such TRS Transaction).

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Rating Downgrade of the TRS Counterparty

It shall be an Additional Termination Event if a TRS Counterparty Downgrade Event shall occur and be continuing. "TRS Counterparty Downgrade Event" shall mean either a First Level TRS Counterparty Downgrade Event or a Second Level TRS Counterparty Downgrade Event. A "First Level TRS Counterparty Downgrade Event" shall mean that TRS Counterparty fails to take one of the actions set forth in (A) below within the time period set forth therein after any such action is required to be taken by TRS Counterparty. A "Second Level TRS Counterparty Downgrade Event" shall mean that the TRS Counterparty fails to take one of the actions set forth in (B) below within the time period set forth therein after any such action is required to be taken by the TRS Counterparty.

(A) In the event that neither the TRS Counterparty nor any Credit Support Provider of the TRS Counterparty has (x) a short-term debt rating of "A-1+" by S&P or (if it has no short-term debt rating from S&P) a long-term debt rating of at least "AA-" by S&P (or, in each case, if S&P has revised its rating requirement to a lesser rating, such lesser rating) and (y) a short-term debt rating of "P-1" by Moody's (and not on credit watch for downgrade) and a long-term debt rating of at least "Aa3" by Moody's (and not on credit watch for downgrade) (the "Required Ratings"), the TRS Counterparty is required to (at the TRS Counterparty's sole expense):

(i) Within 30 calendar days thereof, post and maintain pursuant to the Credit Support Annex ("CSA") at all times in the TRS Counterparty Account established by the Trustee pursuant to the Indenture permissible collateral under the CSA on each Valuation Date (as defined in the CSA) equal to (i) the TRS Floating Amount (if any) payable to the Issuer calculated as of the date of determination, plus (ii) the Collateral TRS Payment Amount, if any (such amount with respect to any Business Day, the "Required Balance"), in which case, on each Payment Date, the Trustee shall at the written direction of the TRS Counterparty transfer an amount equal to the TRS Floating Amount in accordance with the payment instructions set forth in the TRS Confirmation. The TRS Counterparty shall only be obligated to deposit to the TRS Counterparty Account the amount necessary for the balance thereof to equal the Required Balance on such date;

"Collateral TRS Payment Amount" means, as of any date of determination, the sum, for each TRS Covered Security in the TRS Asset Account of an amount equal to the following formula:

(100%-(Underlying Asset Market Value * Valuation Percentage))* the principal amount of such TRS Covered Security.

"Underlying Asset Market Value" means, with respect to a TRS Covered Security, the value (expressed as a percentage) of such TRS Covered Security which shall take into account any credit enhancement, in the TRS Counterparty Account, determined by the TRS Counterparty in accordance with its customary methods. The Valuation Agent (as defined in the CSA) shall, on the first Valuation Date (as defined in the CSA) of each month (commencing 14 Business Days after the Closing Date), verify the Underlying Asset Market Value for each TRS Covered Security determined by the TRS Counterparty on such Valuation Date by obtaining quotations from at least two reference market makers (which shall exclude the TRS Counterparty or its Affiliates) and inform the Trustee, the TRS Counterparty and the Issuer of the highest

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quotation obtained (the "Market Maker Quotation"); provided that the Market Maker Quotation cannot be based on a quotation from the same reference market maker more than four times in any 12-month period. In the event that such Market Maker Quotation is different from the valuation provided by the TRS Counterparty, the Underlying Asset Market Value shall be the lower of such amounts.

"Valuation Percentage" has the meaning specified in the CSA under "Valuation Percentage" or under "Advance Rate."

(ii) assign all of its rights and obligations with respect to the TRS Confirmation (in whole but not in part) within 30 calendar days thereafter to a replacement counterparty (at the TRS Counterparty's sole expense) that has the Required Ratings; provided that such assignment occurs on substantially the same terms and conditions as those contained in the Total Return Swap (including, for the avoidance of doubt, similar obligations as those described in Part 1(h) of the related schedule), with representations and elections appropriate for the assignee and such other changes as satisfy the Rating Condition;

(iii) deliver to the Trustee an absolute and unconditional guarantee from a third party of all of the obligations of the TRS Counterparty under the Total Return Swap within 30 calendar days thereafter; provided that such third party has the Required Ratings and such guarantee either (a) satisfies S&P then current criteria for guarantees or (b) the form of such guarantee satisfies the Rating Condition with respect to S&P (any such third party shall be a "Rated Guarantor" and shall be a Credit Support Provider under this Agreement); or

(iv) take such other action as shall satisfy the Rating Condition.

(B) In the event that the TRS Counterparty, its Credit Support Provider and any Rated Guarantor shall each cease to have a short-term debt rating of at least "A-2" by S&P, or, if it does not have a short-term debt rating, a long-term debt rating of at least "BBB+" by S&P (or, in each case, if S&P has revised its rating requirement to a lesser rating, such lesser rating), the TRS Counterparty agrees that it shall (at the TRS Counterparty's sole expense):

(i) post to and maintain under the CSA at all times to the TRS Counterparty Account established by the Trustee, pursuant to the Indenture, permissible collateral under the CSA in the amounts and at the times provided in clause (A)(i) above and deliver a Security Interest Opinion (if required by S&P's current published criteria) to the Issuer within 10 Business Days after such downgrade; provided that, in the event that the TRS Counterparty is already posting collateral pursuant to the CSA, it need only deliver the Security Interest Opinion. A "Security Interest Opinion" shall mean a reasoned opinion of counsel in form and substance satisfactory to S&P which provides, subject to customary qualifications and assumptions for such an opinion, that upon the bankruptcy of the TRS Counterparty, Party B shall have the right to terminate the Total Return Swap, net amounts owed under the Total Return Swap, and to liquidate any collateral without obtaining the prior approval of a court overseeing the bankruptcy of the TRS Counterparty;

(ii) assign all of its rights and obligations with respect to the Total Return Swap (in whole but not in part) within 10 Business Days thereafter to a replacement counterparty (at the TRS Counterparty's sole expense) that has the Required Ratings; provided that such assignment occurs on substantially the same terms and conditions as those contained in the Total Return Swap (including, for the avoidance of doubt, similar obligations as those

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described in Part 1(h) of the related schedule), with representations and elections appropriate for the assignee and such other changes as satisfy the Rating Condition;

(iii) deliver to the Trustee an absolute and unconditional guarantee or letter of credit from a third party of all of the obligations of the TRS Counterparty under the Total Return Swap within 10 Business Days thereafter; provided that such third party has the Required Ratings and (a) such guarantee satisfies S&P's then-current criteria for guarantees or (b) the form of such guarantee satisfies the Rating Condition with respect to S&P (any such third party shall be a "Rated Guarantor" and shall be a Credit Support Provider under this Agreement); or

(iv) take such other action as shall satisfy the Rating Condition;

provided that if neither the TRS Counterparty nor any Credit Support Provider of the TRS Counterparty has (i) a short-term debt rating of at least "P-2" by Moody's (which, if such rating is "P-2", is not on credit watch for possible downgrade) or a long-term debt rating of at least "A2" by Moody's (which, if such rating is "A2", is not on credit watch for possible downgrade), then the TRS Counterparty shall take the action set forth in (ii), (iii) or (iv) above.

Governing law

The Total Return Swap will be governed by, and will be construed in accordance with, the laws of the State of New York without regard to any conflicts of laws principles.

The TRS Counterparty

The information appearing in this section has been prepared by Merrill Lynch International ("MLI") in its capacity as the TRS Counterparty and has not been independently verified by the Co-Issuers, JPMorgan, the Trustee, the Collateral Manager or any other person. The TRS Counterparty accepts responsibility only for the information contained in the following four paragraphs.

TRS Counterparty

MLI is organized under the laws of England with its principal executive office located at Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ, United Kingdom. It is a wholly owned indirect subsidiary of Merrill Lynch & Co., Inc. ("ML&Co."). MLI does not publish financial statements. The obligations of MLI under the Total Return Swap will be guaranteed by ML&Co.

Description of the TRS Guaranty

The payment obligations of the TRS Counterparty under the Total Return Swap and all transactions thereunder are guaranteed by ML&Co. (the "TRS Counterparty Guarantor"), pursuant to a TRS Guaranty dated as of the Closing Date (the "TRS Counterparty Guaranty").

TRS Guarantor

ML&Co. is incorporated under the laws of the State of Delaware and has its principal executive office at 4 World Financial Center, 250 Vesey Street, New York, New York 10281, (212) 449-1000. Its

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registered office in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.

ML&Co. files reports, proxy statements and other information with the SEC. The SEC filings are also available over the Internet at the SEC's web site at http:/www.sec.gov. Investors may also read and copy any document filed at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. Investors may also inspect the SEC reports and other information at the New York Stock Exchange, 20 Broad Street, New York, New York 10005. ML&Co. will provide without charge to each person to whom this Offering Circular is delivered, upon written request of such person, a copy (without exhibits other than exhibits specifically incorporated by reference) of any or all such documents so filed since January 1, 2002. Requests for such copies should be directed to the Corporate Secretary, Merrill Lynch & Co., Inc., 222 Broadway, New York, New York 10038, telephone (212) 670-0432.

The Collection and Payment Accounts

All distributions on the Funded Portfolio Assets will be remitted to a single, segregated trust account held in the name of the Issuer, subject to the lien of the Trustee (the "Collection Account") for the benefit of the Secured Parties, and will be available, together with reinvestment earnings thereon, for application to the payment of the amounts set forth under "Summary of terms—Priority of Payments" and any Issuer payments to the Synthetic Counterparty of a Physical Settlement Amount. Two segregated subaccounts will be established within the Collection Account, one of which will be designated the "Interest Collection Account" (which may be a subaccount of the Custodial Account) one of which will be designated the "Principal Collection Account" (which may be a subaccount of the Custodial Account). All Interest Proceeds received by the Trustee after the Closing Date will be deposited in the Interest Collection Account. All other amounts remitted to the Collection Account (including all cash pledged to the Trustee on the Closing Date which is to be invested in additional Portfolio Assets on or before the Ramp-Up Completion Date (the "Uninvested Proceeds")) will be deposited in the Principal Collection Account, including Principal Proceeds.

Amounts received in the Collection Account during a Due Period will be invested in Eligible Investments with stated maturities no later than the Business Day prior to the Payment Date next succeeding the acquisition of such securities or instruments. All proceeds from the Eligible Investments will be retained in the Collection Account unless used to purchase or enter into Portfolio Assets during the Reinvestment Period in accordance with the Eligibility Criteria and the Collateral Quality Tests and Delivered Obligations, or used as otherwise permitted under the Indenture. The Issuer shall, from time to time at the direction of the Collateral Manager, (a) reinvest any proceeds of interest or principal in respect of the Eligible Investments into Eligible Investments and (b) substitute Eligible Investments.

On the Business Day preceding each Payment Date, the Trustee will deposit into a separate account maintained by the Trustee (the "Payment Account") all funds in the Collection Account (other than amounts (including Uninvested Proceeds) that the Issuer is required to retain to acquire or enter into Portfolio Assets in accordance with the Indenture) required for payments to holders of the Secured Notes and distributions on the Subordinated Notes and payments of fees and expenses in accordance with the priorities described under "Summary of terms—Priority of Payments."

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The TRS Asset Account

The Trustee will establish a single, non-interest bearing, segregated trust account held in the name of the Issuer, subject to the lien of the Trustee (the "TRS Asset Account") for the benefit of the Secured Parties and over which the Trustee shall have exclusive control and the sole right of withdrawal.

The Issuer will deposit the net proceeds from the sale of the Notes on the Closing Date into the TRS Asset Account. The balance standing to the credit of such account will be invested from time to time by the Issuer at the instruction of the TRS Counterparty pursuant to and in accordance with the terms of the Total Return Swap (and in the absence of such direction, in Eligible Investments of the type described in clause (c) of the definition of Eligible Investments).

The only permitted withdrawal from or application of funds on deposit in, or otherwise to the credit of, the TRS Asset Account shall be as described pursuant to the Total Return Swap and the Indenture. See "Security for the Secured Notes—The Total Return Swap".

The Custodial Account

The Trustee will establish a single, segregated trust account held in the name of the Issuer, subject to the lien of the Trustee (the "Custodial Account") for the benefit of the Secured Parties and over which the Trustee shall have exclusive control and the sole right of withdrawal. At each time the Trustee receives Funded Portfolio Assets acquired by the Issuer, the Trustee shall deposit such Funded Portfolio Assets into the Custodial Account. The Trustee will agree to give the Co-Issuers, the Collateral Manager and the Synthetic Counterparty immediate notice if (to the Trustee's actual knowledge) the Custodial Account or any assets or securities on deposit therein, or otherwise to the credit of the Custodial Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Custodial Account other than in accordance with the Indenture and the Priority of Payments.

The Expense Account

The Trustee will, prior to the Closing Date, establish a single, segregated trust account held in the name of the Issuer, subject to the lien of the Trustee (the "Expense Account"). Within the Expense Account, the Trustee shall establish a sub-account designated as the "Closing Date Expense Subaccount". Approximately U.S.$ 100,000 will be deposited in the Closing Date Expense Subaccount on the Closing Date for the payment of certain expenses incurred by or on behalf of the Issuer in connection with the issuance of the Notes. On any Business Day from the Closing Date to and including the Determination Date relating to the first Payment Date, the Trustee will apply funds from the Closing Date Expense Subaccount, to pay expenses of the Co-Issuers incurred in connection with the establishment of the Co-Issuers, the structuring and consummation of the offering and the issuance of the Notes and the Composite Notes. By the Determination Date relating to the first Payment Date following the Closing Date, all funds in the Closing Date Expense Subaccount (after deducting any expenses paid on such Determination Date) credited to the Closing Date Expense Subaccount that are not being held for the payment of an expense that was previously identified or another anticipated payment shall be transferred by the Trustee to the Payment Account for payment to the JPMorgan Financing Party on such Payment Date in accordance with the Priority of Payments, and shall reduce the Financed Amount owed to the JPMorgan Financing Party by the Issuer. In addition, on each Payment Date on which the balance of

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the Expense Account is less than U.S.$100,000, additional amounts will be deposited therein to the extent funds are available therefor in accordance with the Priority of Payments to the extent necessary to cause the balance of all Eligible Investments and Cash in the Expense Account immediately after such deposit to equal U.S.$100,000. Any income earned on amounts deposited in the Expense Account will be deposited in the Interest Collection Subaccount as Interest Proceeds as it is paid.

The Synthetic Counterparty Account

If and to the extent that the terms of a CDS Portfolio Asset require the Synthetic Counterparty to secure its obligations with respect to such CDS Portfolio Asset, the Trustee will establish a single, segregated, non-interest bearing trust account held in the name of the Issuer (the "Synthetic Counterparty Account"), which shall be held in trust for the benefit of the Issuer and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall deposit into the Synthetic Counterparty Account all amounts received from the Synthetic Counterparty that are required to secure the obligations of the Synthetic Counterparty in accordance with the terms of the related CDS Portfolio Asset. Except for investment earnings, the Synthetic Counterparty shall not have any legal, equitable or beneficial interest in the Synthetic Counterparty Account other than in accordance with the Indenture, the terms of the related CDS Portfolio Asset and applicable law.

Cash on deposit in the Synthetic Counterparty Account on behalf of the Issuer shall be invested in Eligible Investments selected by the Synthetic Counterparty. Income received on amounts on deposit in the Synthetic Counterparty Account shall be withdrawn from such account and paid to the Synthetic Counterparty or the Issuer, as directed by the Issuer, in accordance with the CDS Portfolio Assets.

Cash and Eligible Investments on deposit in the Synthetic Counterparty Account will not be included in the Collateral and will not be available to make payments under the Secured Notes other than as a result of an event of default or termination event under the CDS Portfolio Assets caused by the Synthetic Counterparty.

Upon the occurrence of an event of default or a termination event under the CDS Portfolio Assets, amounts contained in the Synthetic Counterparty Account shall, as directed by the Issuer be withdrawn, by the Trustee and applied to the payment of any termination payment as a result of such event of default or termination event and any other amounts payable by the Synthetic Counterparty to the Issuer. Any excess amounts held in the Synthetic Counterparty Account after payment of all amounts owing from the Synthetic Counterparty to the Issuer shall be withdrawn as directed by the Issuer from the Synthetic Counterparty Account and paid to the Synthetic Counterparty in accordance with the CDS Portfolio Assets.

The TRS Counterparty Account

If and to the extent that the Total Return Swap requires the TRS Counterparty to secure its obligations with respect to the Total Return Swap, the Trustee will establish a single, segregated, non-interest bearing trust account held in the name of the Issuer (the "TRS Counterparty Account"), which shall be held in trust for the benefit of the Issuer and over which the Trustee shall have exclusive control and sole right of withdrawal (but only if there has been an early termination date under the Total Return Swap in relation to which the TRS Counterparty is the defaulting party or the affected party). The Trustee shall deposit into the TRS Counterparty Account all amounts

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received from the TRS Counterparty that are required to secure the obligations of the TRS Counterparty in accordance with the terms of the Total Return Swap.

Amounts credited to the TRS Counterparty Account shall be invested as directed by the TRS Swap Counterparty in accordance with the terms of the Total Return Swap (and in the absence of such direction, in Eligible Investments of the type described in clause (c) of the definition of "Eligible Investments"). Income received on amounts credited to the TRS Counterparty Account shall be withdrawn from such account and paid to the TRS Counterparty in accordance with the terms of the Total Return Swap.

Cash and Eligible Investments on deposit in the TRS Counterparty Account will not be included in the Collateral and will not be available to make payments under the Secured Notes other than as a result of an event of default or termination event under the Total Return Swap caused by the TRS Counterparty.

The TRS Interest Account

The Issuer shall, on or prior to the Closing Date, establish the "TRS Interest Account" which will be held for the benefit of the TRS Counterparty.

The Issuer shall not have any legal, equitable or beneficial interest in the TRS Interest Account. Interest deposited in the TRS Interest Account (and any other amounts deposited thereto) shall constitute property of the TRS Counterparty, and the TRS Interest Account shall be invested by the Trustee in Eligible Investments or TRS Covered Securities as directed (pursuant to an order, which may be a standing order) by the TRS Counterparty (and in the absence of such direction, in Eligible Investments of the type described in clause (c) of the definition of "Eligible Investments").

Upon receipt of any TRS Asset Interest Distribution the Issuer shall deposit such TRS Asset Interest Distributions in the TRS Interest Account. For as long as the Total Return Swap remains in effect, the Issuer shall withdraw all amounts on deposit in the TRS Interest Account and pay such funds to the TRS Counterparty in accordance with the Total Return Swap. TRS Asset Interest Distributions deposited from the TRS Asset Account that would otherwise have been payable to the TRS Counterparty but for the termination of the Total Return Swap, shall be held by the Trustee on behalf of the TRS Counterparty and, subject to the Total Return Swap, paid to the TRS Counterparty on the first Business Day following receipt thereof.

Cash, TRS Covered Securities, TRS Asset Interest Distributions and Eligible Investments on deposit in the TRS Interest Account will not be included in the Collateral and will not be available to make payments under the Secured Notes. All deposits into, and payments made out of, the TRS Interest Account shall be made without regard to the Priority of Payments or the occurrence of any Event of Default.

Amounts payable to the TRS Counterparty from the TRS Interest Account shall be paid in accordance with the wire transfer instructions in the Total Return Swap.

The TRS/CDS Swap Receipts Account

The Issuer shall, on or prior to the Closing Date, establish the "TRS/CDS Swap Receipts Account".

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The only permitted withdrawal from or application of funds on deposit in, or otherwise to the credit of, the TRS/CDS Swap Receipts Account shall be as so directed, upon Issuer Order, in accordance with the provisions of the Indenture and the Total Return Swap.

The Composite Note Collateral Account

The Issuer shall, on or prior to the Closing Date, establish the "Composite Note Collateral Account" which shall be held in trust for the benefit of the Holders of the Composite Notes and over which the Trustee shall have exclusive control and sole right of withdrawal in accordance with this Indenture.

Upon the Issuer's acquisition of the Treasury Strip on the Closing Date, the Issuer shall cause the Treasury Strip to be deposited or otherwise credited to the Composite Note Collateral Account on such date and to be registered in the name of the Trustee solely for the benefit of the Holders of the Composite Notes. Any and all Composite Note Collateral at any time on deposit in, or otherwise to the credit of, the Composite Note Collateral Account shall be held in trust by the Trustee solely for the benefit of the Holders of the Composite Notes. The only permitted withdrawal from or release of Composite Note Collateral on deposit in, or otherwise to the credit of, the Composite Note Collateral Account shall be for the purposes described herein.

Use of proceeds

General

The net proceeds from the issuance of the Offered Securities, together with the aggregate of any upfront payments received by the Issuer from the Synthetic Counterparty under the CDS Portfolio Assets and the amount of the Financed Amount Initial Balance, after the payment of applicable fees and expenses in connection with the structuring of the Offered Securities and placement of the Placed Securities (including by making a deposit to the Closing Date Expense Subaccount of funds to be used to pay expenses following the Closing Date) and the payment of an upfront fee to the Collateral Manager, are expected to be approximately U.S.$ 1,100,500,000. The expenses related to the admission of the Notes to trading on the Irish Stock Exchange are expected to be approximately €5,940. These expenses are to be paid from the Financed Amount and not borne from the proceeds from the issuance of the Offered Securities.

Approximately U.S.$100,000 will be deposited into the Closing Date Expense Subaccount on the Closing Date for use as described herein.

On or prior to the Closing Date, the Issuer is expected to have entered into or purchase, or have entered into binding agreements to enter into or purchase, a portfolio of Portfolio Assets selected by the Collateral Manager representing at least 95% of the Ramp-Up Completion Date Balance. The Issuer is expected to enter into or purchase the remaining portion of the Ramp-Up Completion Date Balance during the Ramp-Up Period. The Issuer will be required to obtain Rating Confirmation of the original ratings of the Secured Notes in connection with the Ramp-Up Completion Date. See "Description of the Offered Securities—Terms applicable to the Secured Notes, the Composite Notes and the Subordinated Notes—Early Redemption—Mandatory Redemption".

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The Co-Issuers

General

Both the Issuer and the Co-Issuer have been established as special purpose vehicles for the purpose of co-issuing the Offered Securities.

Squared CDO 2007-1, Ltd. is an exempted company incorporated with limited liability under the laws of the Cayman Islands for the sole purpose of acquiring Funded Portfolio Assets, entering into the CDS Portfolio Assets and Offsetting Short Transactions, if any, issuing the Offered Securities and engaging in certain related transactions. The Issuer was incorporated on April 10, 2007 in the Cayman Islands with registered number 185247 and has an indefinite existence. The Issuer's registered office is at the offices of Maples Finance Limited, P.O. Box 1093 GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands. The directors of the Issuer are Carrie Bunton and Helen Allen. The principal outside function of the directors of the Issuer consists of serving as officers for Maples Finance Limited, a licensed trust company incorporated in the Cayman Islands, and they may be contacted at the offices of Maples Finance Limited. The directors of the Issuer serve as directors of and provide services to other special purpose companies that issue collateralized obligations and perform other duties for the Administrator. The Issuer has no prior operating history. The Issuer does not publish any financial statements.

Subject to the contracting restrictions imposed upon the Issuer by the Indenture and the Subordinated Note Paying Agency Agreement, the Issuer has the power to borrow. A director of the Issuer is not required to own any shares in the Issuer in order to qualify as a director.

A director of the Issuer (or his alternate director in his absence) is at liberty to vote in respect of any contract or transaction in which he is interested; provided, that the nature of the interest of any director or alternate director in any such contract or transaction is disclosed by him or the alternate director appointed by him at or prior to its consideration and any vote on it.

The directors (and their alternates) are not currently entitled to any remuneration. Any director may act by himself or his firm in a professional capacity for the Issuer and he or his firm is entitled to remuneration for professional services as if he were not a director. A director is at liberty to vote in respect of any matter relating to his remuneration; provided, that the nature of his interest is disclosed prior to the matter being considered and voted upon by the board of directors.

As of the Closing Date, the authorized share capital of the Issuer will consist of 50,000 ordinary voting shares of U.S.$1.00 par value per share (the "Issuer Ordinary Shares"). 250 of the Issuer Ordinary Shares of the Issuer are, or will be on the Closing Date, issued, outstanding and held by the Administrator (in such capacity, the "Share Trustee"), under the terms of a declaration of trust in favor of charitable purposes. The Issuer will not have any material assets other than its rights under the CDS Portfolio Assets, the Funded Portfolio Assets and certain other eligible assets that are held by it from time to time, all of which will be pledged to the Trustee as security for the Issuer's obligations under the Secured Notes and the Indenture. The Composite Note Collateral will be pledged to the Trustee as security for the Issuer's obligations under the Composite Notes and the Indenture.

Squared CDO 2007-1, Inc. was incorporated under the laws of the State of Delaware for the sole purpose of co-issuing the Secured Notes. The Co-Issuer was incorporated on April 5, 2007 in the State of Delaware with registered number 4329711 and has an indefinite existence. The Co-Issuer's

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registered office is at 850 Library Avenue, Suite 204, Newark, Delaware (Newcastle County) 19711. The Co-Issuer has no substantial assets and will not pledge any assets to secure the Notes and the Composite Notes.

The sole director and officer of the Co-Issuer is Donald J. Puglisi. The principal outside function of Donald J. Puglisi consists of being a finance professor emeritus at the University of Delaware and serving as a corporate director for a variety of entities. Donald J. Puglisi may be contacted at the office of the Co-Issuer. The Co-Issuer has no prior operating history. Unless otherwise required pursuant to the Indenture, the Co-Issuer will not publish any financial statements.

The Co-Issuer's authorized common stock consists of 1,000 shares of common stock, U.S.$0.01 par value (the "Co-Issuer Common Stock").

The Offered Securities are not obligations of the Trustee, the Subordinated Note Paying Agent, the Synthetic Counterparty, JPMorgan Financing Party, the Collateral Manager, the TRS Counterparty, the Placement Agent or any of their respective affiliates, the Administrator, the Share Trustee or any directors or officers of the Co-Issuers.

Capitalization of the Issuer

The Issuer's initial proposed capitalization and indebtedness as of the Closing Date after giving effect to the issuance of the Offered Securities and the Issuer Ordinary Shares (before deducting expenses of the offering) is set forth below:

Amount1 Class A-1 Notes.................................................... U.S.$935,000,000 Class A-2a Notes.................................................. U.S.$70,000,000 Class A-2b Notes.................................................. U.S.$10,000,000 Class B Notes ....................................................... U.S.$37,000,000 Class C Notes ....................................................... U.S.$21,000,000 Class D Notes ....................................................... U.S.$5,000,000 Class E Notes........................................................ U.S.$6,000,000 Composite Notes................................................. U.S.$3,996,0001 Subordinated Notes............................................ U.S.$16,000,000

Total Debt .............................................. U.S.$1,103,996,000 Issuer Ordinary Shares ........................................ U.S.$250 Retained Earnings U.S.$250

Total Equity ............................................ U.S.$500 Total Capitalization ............................... U.S.$1,103,996,500

1 Unaudited

The Co-Issuer has no other liabilities other than the Secured Notes and the Composite Notes.

Business of the Co-Issuers

The Issuer's Memorandum of Association describes the objects of the Issuer, which are unrestricted and include the business to be carried out by the Issuer in connection with the Offered Securities. The Co-Issuer's certificate of incorporation describes the objects of the Co-Issuer, which include the business to be carried out by the Co-Issuer in connection with the Secured Notes and the Composite Notes. The Co-Issuers have not issued securities, other than common shares, prior to this date of

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this Offering Circular and have not listed any securities on any exchange. The Co-Issuers will not undertake any business other than the issuance of the Secured Notes and the Composite Notes, and, in the case of the Issuer, the issuance of the Subordinated Notes and the management of the Collateral and other related transactions. Other than the Co-Issuer being a subsidiary of the Issuer, neither of the Co-Issuers will have any subsidiaries. In general, subject to the need to obtain funds for the redemption or payment of the Notes, the Issuer will own the Collateral and will receive payments of premium under the CDS Portfolio Assets and interest and principal on the Funded Portfolio Assets and the Eligible Investments as the principal source of its income.

Maples Finance Limited (the "Administrator"), a Cayman Islands licensed trust company, will act as the administrator of the Issuer. The office of the Administrator will serve as the general business office of the Issuer. Through this office and pursuant to the terms of an agreement between the Administrator and the Issuer (the "Administration Agreement"), the Administrator will perform various administrative functions on behalf of the Issuer, including communications with shareholders and the general public, and the provision of certain clerical, administrative and other services in the Cayman Islands until termination of the Administration Agreement. In consideration of the foregoing, the Administrator will receive various fees and other charges payable by the Issuer at rates agreed upon from time to time plus expenses.

The activities of the Administrator under the Administration Agreement will be subject to the overview of the Issuer's Board of Directors. The Administration Agreement may be terminated by either the Issuer or the Administrator upon three months' written notice, in which case a replacement Administrator will be appointed. The Administrator's principal office is P.O. Box 1093 GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands.

Income tax considerations

U.S. federal income tax considerations

To ensure compliance with Internal Revenue Service Circular 230, investors are hereby notified that: (a) any discussion of federal tax issues contained or referred to in this Offering Circular is not intended or written to be used, and cannot be used, by investors for the purpose of avoiding penalties that may be imposed on them under the Code; (b) such discussion is written to support the promotion or marketing of the transactions or matters addressed herein; and (c) prospective investors should seek advice based on their particular circumstances from an independent tax adviser.

General

The following is a general summary of certain material U.S. federal income tax consequences that may be relevant with respect to the purchase, ownership and disposition of the Notes. This summary addresses only the U.S. federal income tax considerations of holders who purchase the Notes in the original offering at the original issue price and that will hold the Notes as capital assets. It is not a comprehensive description of all the tax considerations that may be relevant to a decision to purchase the Notes. In particular, this summary does not address tax considerations applicable to holders that are subject to special tax rules, including, without limitation, the following (a) financial institutions; (b) insurance companies; (c) dealers or traders in securities or currencies or notional principal contracts; (d) tax-exempt entities; (e) regulated investment companies; (f) real estate investment trusts; (g) persons that will hold the Notes as part of a "hedging" or "conversion"

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transaction or as a position in a "straddle" or as part of a "synthetic security" or other integrated transaction for U.S. federal income tax purposes; (h) partnerships or pass-through entities or persons who hold the Notes through partnerships or other pass-through entities; (i) persons that own (or are deemed to own) 10 per cent. or more of the voting shares (or interests treated as equity) of the Issuer); (j) persons (or their "qualified business units") that have a "functional currency" other than the U.S. dollar; and (k) certain U.S. expatriates and former long-term residents of the United States. Further, this summary does not address alternative minimum tax consequences or the indirect effects on the holders of equity interests in a holder of the Notes. This summary also does not describe any tax consequences arising under the laws of any taxing jurisdiction other than the federal income tax laws of the U.S. federal government.

This summary is based on the Code, U.S. Treasury Regulations and judicial and administrative interpretations thereof, in each case as in effect and available on the date of this Offering Circular. All of the foregoing are subject to change, which change could apply retroactively and could affect the tax consequences described below.

For the purposes of this summary, a "U.S. Holder" is a beneficial owner of the Notes that is, for U.S. federal income tax purposes: (a) a citizen or individual resident of the United States; (b) a corporation or other entity treated as a corporation, created or organised in or under the laws of the United States or any state thereof (including the District of Columbia); (c) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (d) a trust if (i) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust or (ii) it has a valid election in effect under the applicable Treasury Regulations to be treated as a U.S. person. A "Non-U.S. Holder" is a beneficial owner of the Notes that is not a U.S. Holder. If a partnership or other pass-through entity taxable as a partnership holds the Notes, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A partner of a partnership holding the Notes should consult its own tax advisor.

No rulings have been sought from the IRS regarding the matters discussed herein and there can be no assurance that the IRS or the courts will agree with the conclusions expressed herein. This discussion is a general summary and does not cover all tax matters that may be important to a particular investor. Prospective investors should consult their own tax advisers regarding the proper treatment of the Notes for U.S. federal income tax purposes and the tax consequences of an investment in the Notes under the federal, state and local laws of the United States and any other jurisdiction where the investor may be subject to taxation with respect to their particular situation.

Tax treatment of the Issuer

For U.S. federal income tax purposes, the Issuer, and not the Co-Issuer, will be treated as the Issuer of the Notes.

The Issuer will be treated as a foreign corporation for U.S. federal income tax purposes. The Code and the Treasury Regulations promulgated thereunder provide a specific exemption from U.S. federal income tax to non-U.S. corporations which restrict their activities in the United States to trading in stocks and securities (and any other activity closely related thereto) for their own account, whether such trading (or such other activity) is conducted by the corporation or its employees or through a resident broker, commission agent, custodian or other agent. This particular exemption does not apply to non-U.S. corporations that are engaged in activities in the United States other

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than trading in stocks and securities (and any other activity closely related thereto) for their own account or that are dealers in stocks and securities.

The Issuer intends to rely on the above exemption and does not intend to operate so as to be subject to U.S. federal income taxes on its net income. In this regard, on the Closing Date, the Issuer will receive an opinion from Special U.S. Tax Counsel to the effect that, although no activity closely comparable to that contemplated by the Issuer has been the subject of any Treasury Regulation, revenue ruling or judicial decision, under current law and assuming compliance with the Management Agreement, the Indenture, the Subordinated Note Paying Agency Agreement, and other Transaction Documents (the "Documents") by all parties thereto, the Issuer's contemplated activities will not cause it to be engaged in a trade or business in the United States under the Code and, consequently, the Issuer's profits will not be subject to U.S. federal income tax on a net income basis (or the branch profits tax described below). The opinion of Special U.S. Tax Counsel will be based on the Code, the Treasury Regulations (final, temporary and proposed) thereunder, the existing authorities, and Special U.S. Tax Counsel's interpretation thereof, and on certain factual assumptions and representations as to the Issuer's contemplated activities. Investors should note that the relevant law is subject to change and modifications after the date the foregoing opinion is rendered. For example, the Treasury and the Internal Revenue Service recently announced that they are considering taxpayer requests for specific guidance on, among other things, whether a foreign person may be treated as engaged in a trade or business in the United State by virtue of entering into credit default swaps, such as the CDS Portfolio Assets. Any future guidance issued by the Treasury or the Internal Revenue Service may have an adverse impact on the tax treatment of the Issuer. The Issuer intends to conduct its affairs in accordance with such assumptions and representations, and the remainder of this summary assumes such result. In addition, in interpreting and complying with the Documents and such assumptions and representations, the Issuer is entitled to rely upon the advice and/or opinions of their selected counsel, and the opinion of Special U.S. Tax Counsel will assume that any such advice and/or opinions are correct and complete. However, the opinion of Special U.S. Tax Counsel and any such other advice or opinions are not binding on the IRS or the courts, and no ruling will be sought from the IRS regarding this, or any other, aspect of the U.S. federal income tax treatment of the Issuer. Accordingly, in the absence of authority on point, the U.S. federal income tax treatment of the Issuer is not entirely free from doubt, and there can be no assurance that positions contrary to those stated in the opinion of Special U.S. Tax Counsel or any such other advice or opinions may not be asserted successfully by the IRS.

If, notwithstanding the aforementioned opinion of Special U.S. Tax Counsel, it were determined that the Issuer were engaged in a trade or business in the United States (as defined in the Code), and the Issuer had taxable income that was effectively connected with such U.S. trade or business, the Issuer would be subject under the Code to the regular U.S. corporate income tax on such effectively connected taxable income (and possibly to the 30% branch profits tax as well). The imposition of such taxes would materially affect the Issuer's financial ability to make payments with respect to the Notes and could materially affect the yield of the Secured Notes and the return on the Subordinated Notes.

United States withholding taxes

Although, based on the foregoing, the Issuer is not expected to be subject to U.S. federal income tax on a net income basis, income derived by the Issuer may be subject to withholding taxes imposed by the United States or other countries. Generally, U.S. source interest income received by a foreign corporation not engaged in a trade or business within the United States is subject to U.S.

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withholding tax at the rate of 30% of the amount thereof. The Code provides an exemption (the "Portfolio Interest Exemption") from such withholding tax for interest paid with respect to certain debt obligations issued after July 18, 1984, unless the interest constitutes a certain type of contingent interest or is paid to a 10% shareholder of the payor, to a controlled foreign corporation related to the payor, or to a bank with respect to a loan entered into in the ordinary course of its business. In this regard, the Issuer is permitted to acquire a particular Funded Portfolio Asset only if the payments thereon are exempt from U.S. withholding taxes at the time of purchase or the obligor is required to make "gross-up" payments that offset fully any such tax on any such payments. Accordingly, assuming compliance with the foregoing restrictions and subject to the foregoing qualifications, the Issuer expects that income derived by the Issuer from any Funded Portfolio Assets will be free of or fully "grossed up" for any material amount of U.S. withholding tax. As for the CDS Portfolio Assets, payments under the CDS Portfolio Assets do not constitute interest for purposes of U.S. withholding taxes. The Issuer intends to treat each CDS Portfolio Asset as either a "notional principal contract" or an option for U.S. federal income tax purposes. Generally, payments made pursuant to a notional principal contract or an option are not subject to U.S. withholding. However, the IRS may seek to characterize each CDS Portfolio Asset in a manner that would make payment under it subject to U.S. withholding. Furthermore, there can be no assurance that income derived by the Issuer will not generally become subject to U.S. withholding tax as a result of a change in U.S. tax law or administrative practice, procedure, or interpretations thereof. Any change in U.S. tax law or administrative practice, procedure, or interpretations thereof resulting in the income of the Issuer becoming subject to U.S. withholding taxes could constitute a Tax Event. Furthermore, it is also possible that the Issuer will acquire Funded Portfolio Assets that consist of obligations of non-U.S. issuers. In this regard, the Issuer may only acquire a particular Funded Portfolio Asset if either the payments thereon are not subject to foreign withholding tax or the obligor of the Funded Portfolio Asset is required to make "gross-up" payments.

Tax treatment of U.S. Holders of the Secured Notes

Treatment of the Secured Notes

The proper U.S. federal income tax treatment of the Notes will depend upon whether the Notes are classified as debt or equity for U.S. federal income tax purposes. However, there are no authorities addressing similar transactions involving instruments issued by an entity with terms similar to those of the Notes. As a result, certain aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain. The Issuer intends, and each holder, by purchasing the Secured Notes, agrees to treat, in the absence of an administrative determination or judicial ruling to the contrary, such Secured Notes as indebtedness for U.S. federal income tax purposes. Upon the issuance of the Notes, Special U.S. Tax Counsel will deliver an opinion generally to the effect that, although there is no statutory, judicial or administrative authority directly addressing the characterisation of the Notes for U.S. federal income tax purposes, the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes and Class D Notes will, and the Class E Notes should, when issued, be treated as indebtedness for U.S. federal income taxation purposes. Such opinion will not be binding upon the IRS or the courts, and no ruling will be sought from the IRS regarding this, or any other, aspect of the U.S. federal income tax treatment of the Secured Notes. Accordingly, there can be no assurances that the IRS will not contend, and that a court will not ultimately hold, that any of the Classes of Secured Notes are equity in the Issuer or that any of the other items discussed below are treated differently. In addition, it is possible that the IRS could assert that the Secured Notes should be treated as the issuance of credit-linked debt by the protection buyer, which may require accrual of income under the contingent debt rules which could affect the timing of such income

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and cause any gain and certain losses from the sale of such Notes to be treated as ordinary income or loss. In the alternative, it is possible the IRS could assert that certain assets of the Issuer represent credit-linked notes issued by the protection buyer, which would affect the timing and character of the income of the Issuer. This summary assumes that the treatment of the Secured Notes as debt and the Subordinated Notes as equity of the Issuer for U.S. federal income tax purposes is correct.

Recharacterization of a Class of Secured Notes, particularly the Class E Notes because of their place in the capital structure, may be more likely if a single investor or a group of investors that holds all of the Subordinated Notes also holds all of the more senior Class of Notes in the same proportion as the Subordinated Notes are held. If any of the Secured Notes were treated as equity in the Issuer for U.S. federal income tax purposes, the U.S. federal income tax consequences to U.S. Holders of such Secured Notes would be substantially the same as those set forth under "Tax treatment of U.S Holders of Subordinated Notes" and there might be adverse U.S. federal income tax consequences to a U.S. Holder of such recharacterized Secured Notes upon the sale, redemption, retirement or other disposition of, or the receipt of certain types of distributions on, such recharacterized Secured Notes. The following discussion assumes that the Secured Notes will be treated as debt of the Issuer for U.S. federal income tax purposes.

Interest or discount on the Secured Notes

Generally, stated interest on a Secured Note that is considered "unconditionally payable" (as described below) will be ordinary income taxable to a U.S. Holder when received or accrued in accordance with such U.S. Holder's method of accounting for U.S. federal income tax purposes. Such interest income will be treated as foreign source income for foreign tax credit purposes.

If the "stated redemption price at maturity" ("SRPM") of a Secured Note exceeds the "issue price" of such Secured Note by more than a "de minimis amount", then the excess of SRPM over the issue price will generally constitute OID. The SRPM of a debt instrument is generally the sum of all payments provided by the debt instrument other than "qualified stated interest" payments. The "issue price" is the first price at which a substantial amount of a debt instrument is sold to the public (excluding bond houses, brokers, underwriters, placement agents, and wholesalers). The "de minimis amount" is any amount less than one-fourth of one percent of a debt instrument's SRPM multiplied by the number of complete years to maturity from the issue date of such debt instrument. "Qualified stated interest" is generally interest paid on a debt instrument that is unconditionally payable at least annually at a single fixed rate.

The Treasury Regulations provide that, for purposes of determining whether a debt instrument is issued with OID, stated interest must be included in the SRPM of the debt instrument if such interest is not "unconditionally payable". Interest is considered "unconditionally payable" if reasonable legal remedies exist to compel timely payment or terms and conditions of the debt instrument make the likelihood of late payment (other than late payment that occurs within a reasonable grace period) or non-payment (ignoring the possibility of non-payment due to default, insolvency or similar circumstances) a remote contingency. The Issuer intends, pursuant to its interpretation of the foregoing rules, to take the position that payments of interest on the Class A-1 Notes, the Class A-2 Notes and the Class B Notes are unconditionally payable, and thus not included in the SRPM of such Class A-1 Notes, Class A-2 Notes and Class B Notes and should be treated as "qualified stated interest". Because the interest payments on the Class C Notes, Class D Notes and Class E Notes are subject to deferral (and the possibility of deferral may not be remote), the Issuer intends to take the position that all interest (including interest on accrued but unpaid interest) payable on the Class C Notes, Class D and Class E Notes should be included in the SRPM and the Class C Notes, Class D Notes

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and Class E Notes should be treated as issued with OID. However, because there is no authority addressing when the likelihood of a contingency such as the deferral of interest should be considered not "remote", there can be no assurance the IRS will agree with this position.

The U.S. federal income tax treatment of the Class C Notes, Class D Notes and the Class E Notes under the OID rules is uncertain. Since the Class C Notes, Class D Notes and the Class E Notes are issued at an issue price equal to their principal amount, the Issuer intends not to calculate OID under the PAC Method referred to below, and instead to take the position that the amount of OID that accrued on such Class C Notes, Class D Notes and Class E Notes in each accrual period is equal to the amount of interest (including any Deferred Interest with respect to the Class C Notes, Class D Notes and the Class E Notes) that accrues on such Class C Notes, Class D Notes and Class E Notes during such period. A U.S. Holder of such Class of Notes issued with OID will be required to accrue and include in gross income the sum of the daily portions of total OID on such Notes for each day during the taxable year on which the U.S. Holder held such Notes, generally under a constant yield method, regardless of such U.S. Holder's usual method of accounting for U.S. federal income tax purposes. Because the Class C Notes, Class D Notes and Class E Notes provide for a floating rate of interest, the amount of OID to be accrued over the term of such Notes will be based initially on the assumption that the floating rate in effect for the first accrual period of the Class C Notes, Class D Notes or Class E Notes will remain constant throughout their term. To the extent such rate varies with respect to any accrual period, such variation will be reflected in an increase or decrease of the amount of OID accrued for such period. Under the foregoing method, U.S. Holders of the Class C Notes, the Class D Notes and the Class E Notes may be required to include in gross income increasingly greater amounts of OID and may be required to include OID in advance of the receipt of cash attributable to such income.

If the Class C Notes, Class D Notes or the Class E Notes are issued at an issue price different to their principal amount, in including stated interest in the SRPM of the Class C Notes, Class D Notes and the Class E Notes, the Issuer intends, absent definitive guidance, to treat the Class C Notes, Class D Notes and the Class E Notes as subject to an income accrual method analogous to the methods applicable to debt instruments having payments that are contingent as to time but not as to amount and debt instruments whose payments are subject to acceleration (prescribed by Section 1272(a)(6) of the Code) using an assumption as to the expected prepayments on the Class C Notes, Class D Notes and/or the Class E Notes (the "PAC Method"). As such, accruals of any such additional OID will generally be based upon the weighted average life of such Class C Notes, Class D Notes or Class E Notes rather than the stated maturity.

Special Treasury Regulations govern the calculation of OID on instruments having contingent interest payments. The Issuer does not believe the Class C Notes, the Class D Notes and the Class E Notes will be treated as contingent payment debt instruments. In the event, however, that the Class C Notes, the Class D Notes or the Class E Notes are treated as contingent payment debt instruments, the Issuer will use the non-contingent bond method for determining the amount of OID.

Investors should consult their own tax advisors regarding the application of the OID rules to the Secured Notes and the tax characterisation and treatment of payments on such Secured Notes.

Election to treat all interest as OID

The OID rules permit a U.S. Holder of a Secured Note to elect to accrue all interest, discount (including de minimis market or original issue discount) and premium in income, based on a

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constant yield method. If an election to treat all interest as OID were to be made with respect to a Secured Note with market discount, the U.S. Holder of such Secured Note would be deemed to have made an election to include in income currently market discount with respect to all other debt instruments having market discount that such U.S. Holder acquires during the taxable year of the election or thereafter. A U.S. Holder that makes this election for a Secured Note that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that such U.S. Holder owns or acquires. The election to accrue interest, discount and premium on a constant yield method with respect to a Secured Note cannot be revoked without the consent of the IRS.

Disposition of the Secured Notes

In general, a U.S. Holder of a Secured Note initially will have a basis in such Secured Note equal to the cost of such Secured Note to such U.S. Holder, (i) increased by any amount includable in income by such U.S. Holder as OID, and (ii) reduced by any payments on such Secured Note, other than payments of qualified stated interest. Upon a sale, exchange, redemption, retirement or other taxable disposition of a Secured Note, a U.S. Holder will generally recognize gain or loss equal to the difference between the amount realized on the disposition (other than amounts attributable to accrued qualified stated interest, which will be taxable as ordinary interest income) and the U.S. Holder's tax basis in such Secured Note. Such gain or loss from the disposition of a Secured Note generally will be long term capital gain or loss if the U.S. Holder held the Secured Note for more than one year at the time of disposition. Prospective investors should consult their own tax advisors with respect to the treatment of capital gains (which may be taxed at lower rates than ordinary income for taxpayers that are individuals, trusts or estates and that held the Secured Notes for more than one year) and capital losses (the deductibility of which is subject to limitations).

Gain recognized by a U.S. Holder on the sale, exchange, redemption, retirement or other taxable disposition of a Secured Note generally will be treated as from sources within the United States and loss so recognized generally will generally offset gains from sources within the United States.

Tax Treatment of Non-U.S. Holders of Composite Notes

The U.S. federal income tax treatment of the Composite Notes is subject to significant uncertainty. However, the Composite Notes are not expected to be offered to U.S. Holders; accordingly, any U.S. Holder should consult its own tax advisor prior to making an investment in the Composite Notes regarding the U.S. federal, state and local income and franchise tax (as well as non-U.S. tax) consequences of holding the Composite Notes.

Tax treatment of U.S. Holders of Subordinated Notes

Although not denominated as equity, based on the capital structure of the Issuer and the terms of the Subordinated Notes, it is likely the Subordinated Notes will be treated as equity for U.S. federal income tax purposes. The Issuer will treat, and each holder of Subordinated Notes will agree by purchase of such Subordinated Notes to treat, in the absence of an administrative determination or judicial ruling to the contrary, the Subordinated Notes as equity for U.S. federal income tax purposes. As a result, a U.S. Holder of a Subordinated Note would be treated as owning an equity interest in a passive foreign investment company (and possibly a controlled foreign corporation) for U.S. federal income tax purposes. Accordingly, a U.S. Holder of a Subordinated Note may be subject to adverse tax consequences upon the sale, exchange, retirement or other disposition of, or the receipt of certain types of distributions on, such Subordinated Note. In addition, the Issuer's income,

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gain or loss, as determined for U.S. federal income tax purposes, could impact the recognition of income, gain or loss with respect to the Subordinated Notes by a U.S. Holder for U.S. federal income tax purposes. Prospective investors should consult their own tax advisors about the U.S. federal income tax consequences of a U.S. Holder owning equity interests in a passive foreign investment company or a controlled foreign corporation. The following discussion is based on the assumption that the Subordinated Notes are treated as equity of the Issuer for U.S. federal income tax purposes.

Investment in a passive foreign investment company

The Issuer will constitute a "passive foreign investment company" ("PFIC") and the Subordinated Notes will be treated as equity in the Issuer. Accordingly, U.S. Holders of Subordinated Notes (other than certain U.S. Holders that are subject to the rules pertaining to a "controlled foreign corporation" with respect to the Issuer, described below) will be considered U.S. shareholders in a PFIC. In general, a U.S. Holder of a PFIC may desire to make an election to treat the Issuer as a "qualified electing fund" ("QEF") with respect to such U.S. Holder. Generally, a QEF election should be made with the filing of a U.S. Holder's federal income tax return for the first taxable year for which it held the Subordinated Notes. If a timely QEF election is made for the Issuer, an electing U.S. Holder will be required in each taxable year to include in gross income (a) as ordinary income, such holder's pro rata share of the Issuer's ordinary earnings and (b) as long-term capital gain, such holder's pro rata share of the Issuer's net capital gain, whether or not distributed. For this purpose, a U.S. Holder's pro rata share of the Issuer's ordinary income and net capital gain is the amount which would have been distributed to the U.S. Holder if, on each day during its taxable year, the Issuer had distributed to each U.S. Holder of an equity interest a pro rata share of that day's pro rata share of the Issuer's ordinary earnings and net capital gain for such year. A U.S. Holder will not be eligible for the preferential income tax rate on "qualified dividend income" (as defined in the Code) or the dividends received deduction in respect of such income or gain. In addition, any losses of the Issuer in a taxable year will not be available to such U.S. Holder and may not be carried back or forward in computing the Issuer's ordinary earnings and net capital gain in other taxable years. An amount included in an electing U.S. Holder's gross income should be treated as income from sources outside the United States for U.S. foreign tax credit limitation purposes. However, if U.S. Holders collectively own (directly or constructively) 50% or more (measured by vote or value) of the Subordinated Notes, such amount will be treated as income from sources within the United States for such purposes to the extent that such amount is attributable to income of the Issuer from sources within the United States. If applicable to a U.S. Holder of Subordinated Notes, the rules pertaining to a "controlled foreign corporation", discussed below, generally override those pertaining to a PFIC with respect to which a QEF election is in effect.

The Issuer's income, gain or loss, as determined for U.S. federal income tax purposes, could impact the U.S. Holder's recognition of income, gain or loss for U.S. federal income tax purposes where such holder has made a QEF election. In certain cases in which a QEF does not distribute all of its earnings in a taxable year, U.S. shareholders may also be permitted to elect to defer payment of some or all of the taxes on the QEF's undistributed income subject to an interest charge on the deferred amount. In this respect, prospective purchasers of Subordinated Notes should be aware that it is expected that the Funded Portfolio Assets may be purchased by the Issuer with substantial OID the cash payment of which may be deferred, perhaps for a substantial period of time, and the Issuer may use interest and other income from the Funded Portfolio Assets to purchase additional Funded Portfolio Assets or to retire the Secured Notes. As a result, the Issuer may have in any given year substantial amounts of earnings for U.S. federal income tax purposes that are not distributed on the Subordinated Notes. Thus, absent an election to defer payment of taxes, U.S. Holders that make a QEF election with respect to the Issuer may owe tax on significant "phantom" income.

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In addition, in the event that any portion of a Class of Secured Notes is not fully paid upon maturity, the Issuer in some circumstances may recognise income without any corresponding offsetting losses (due to tax character differences or otherwise). In such circumstances, the holders of Subordinated Notes may have phantom income as a result of such recognition by the Issuer, for which offsetting losses may never be realized by holders.

Each U.S. Holder who desires to make a QEF election must individually make the QEF election. The QEF election is effective for the U.S. Holder's taxable year for which it is made and all subsequent taxable years and may not be revoked without the consent of the IRS. U.S. Holders seeking to make a QEF election must timely file an IRS Form 8621 with its U.S. federal income tax return for the relevant taxable year. The Issuer will provide, upon written request, all information and documentation that a U.S. Holder making a QEF election is required to obtain for U.S. federal income tax purposes.

A U.S. Holder of Subordinated Notes (other than certain U.S. Holders that are subject to the rules pertaining to a "controlled foreign corporation," described below) that does not make a timely QEF election will be required to report any gain on disposition of any Subordinated Notes as if it were an excess distribution, rather than capital gain, and to compute the tax liability on such gain and other "excess distributions" received in respect of the Subordinated Notes as if such items had been earned ratably over each day in the U.S. Holder's holding period (or a certain portion thereof) for the Subordinated Notes. The U.S. Holder will be subject to tax on such items at the highest ordinary income tax rate for each taxable year, other than the current year of the U.S. Holder, in which the items were treated as having been earned, regardless of the rate otherwise applicable to the U.S. Holder. Further, such U.S. Holder will also be liable for an additional tax equal to interest on the tax liability attributable to income allocated to prior years as if such liability had been due with respect to each such prior year. For purposes of these rules, gifts, exchanges pursuant to corporate reorganizations and use of the Subordinated Notes as security for a loan may be treated as a taxable disposition of the Subordinated Notes. Very generally, an "excess distribution" is the amount by which distributions during a taxable year in respect of a Subordinated Notes exceed 125 percent of the average amount of distributions in respect thereof during the three preceding taxable years (or, if shorter, the U.S. Holder's holding period for the Subordinated Note). Because the Subordinated Notes do not provide for a payment of stated interest, it is possible that a U.S. Holder will receive "excess distributions" as a result of fluctuations in the amount of available funds on each Payment Date over the term of the Subordinated Notes.

In many cases, application of the tax on gain on disposition and receipt of excess distributions will be substantially more onerous than the treatment applicable if a timely QEF election is made. ACCORDINGLY, U.S. HOLDERS OF SUBORDINATED NOTES SHOULD CONSIDER CAREFULLY WHETHER TO MAKE A QEF ELECTION WITH RESPECT TO THE SUBORDINATED NOTES AND THE CONSEQUENCES OF NOT MAKING SUCH AN ELECTION AND SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PROCEDURES REQUIRED TO BE FOLLOWED IN MAKING A QEF ELECTION AND ALL THE CONSEQUENCES OF MAKING AND OF FAILURE TO MAKE A QEF ELECTION.

PFIC information returns

Each U.S. Holder of Subordinated Notes must make an annual return on IRS Form 8621, reporting distributions received and gains realised with respect to each PFIC in which it holds a direct or indirect interest. Prospective purchasers should consult their own tax advisers regarding the status of the Issuer as a PFIC, whether an investment in the Subordinated Notes will be treated as an investment in PFIC stock and the consequences of an investment in a PFIC.

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Investment in a controlled foreign corporation

The Issuer may be classified as a controlled foreign corporation ("CFC"). In general, a foreign corporation will be classified as a CFC if more than 50% of the shares of the corporation, measured by reference to combined voting power or value, is owned (actually or constructively) by "U.S. Shareholders" A U.S. Shareholder, for this purpose, is in general any U.S. Holder that possesses (actually or constructively) 10% or more of the combined voting power (generally the right to vote for directors of the corporation) of all classes of shares of a corporation. Although the Subordinated Notes do not vote for directors of the Issuer, it is possible that the IRS would assert that the Subordinated Notes are de facto voting securities and that U.S. Holders possessing (actually or constructively) 10% or more of the total stated amount of Outstanding Subordinated Notes are U.S. Shareholders. If this argument were successful and more than 50% of the Subordinated Notes (determined with respect to aggregate value or vote) are owned (actually or constructively) by such U.S. Shareholders, the Issuer would be treated as a CFC.

If the Issuer were treated as a CFC, a U.S. Shareholder of the Issuer (at the end of the taxable year of the Issuer) would be treated, subject to certain exceptions, as receiving a deemed dividend in an amount equal to that person's pro rata share of the "subpart F income" of the Issuer. Such deemed dividend normally would be treated as income from sources within the United States for U.S. foreign tax credit limitation purposes to the extent that it is attributable to income of the Issuer from sources within the United States. Among other items, and subject to certain exceptions, "subpart F income" includes dividends, interest, annuities, gains from the sale of shares and securities, certain gains from commodities transactions, income from certain notional principal contracts, certain types of insurance income and income from certain transactions with related parties. It is likely that, if the Issuer were to constitute a CFC, all or most of its income would be subpart F income. In general, if the subpart F income exceeds 70% of the Issuer's gross income, the entire amount of the Issuer's income will be subpart F income. U.S. Holders should consult their tax advisors regarding these special rules.

If the Issuer were treated as a CFC, a U.S. Shareholder of the Issuer (including a U.S. Shareholder which made a QEF election with respect to the Issuer) would be taxable on the subpart F income of the Issuer under rules described in the preceding paragraph and not under the PFIC and QEF rules previously described. As a result, to the extent subpart F income of the Issuer includes net capital gains, such gains would be treated as ordinary income of the U.S. Shareholder under the CFC rules, notwithstanding the fact that the character of such gains generally would otherwise be preserved under the QEF rules.

Furthermore, if the Issuer were treated as a CFC and a U.S. Holder were treated as a U.S. Shareholder therein, the Issuer would not be treated as a PFIC or a QEF with respect to such U.S. Holder for the period during which the Issuer remained a CFC and such U.S. Holder remained a U.S. Shareholder therein (the "qualified portion" of the U.S. Holder's holding period for the Subordinated Notes). If the qualified portion of such U.S. Holder's holding period for the Subordinated Notes subsequently ceased (either because the Issuer ceased to be a CFC or the U.S. Holder ceased to be a U.S. Shareholder), then solely for purposes of the PFIC rules, such U.S. Holder's holding period for the Subordinated Notes would be treated as beginning on the first day following the end of such qualified portion, unless the U.S. Holder had owned any Subordinated Notes for any period of time prior to such qualified portion and had not made a QEF election with respect to the Issuer. In that case, the Issuer would again be treated as a PFIC which is not a QEF with respect to such U.S. Holder and the beginning of such U.S. Holder's holding period for the Subordinated Notes would continue to be the date upon which such U.S. Holder acquired the

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Subordinated Notes, unless the U.S. Holder made an election to recognize gain with respect to the Subordinated Notes and a QEF election with respect to the Issuer.

The relationship between the PFIC and CFC rules and the possible consequences of those rules for a particular U.S. Holder depend upon the circumstances of the Issuer and the U.S. Holder. U.S. Holders should note that, under the PFIC or CFC rules described above, U.S. Holders may be required to recognise income for tax purposes that substantially exceeds the cash they receive in any taxable period. Each prospective investor should consult its tax adviser about the possible application of the PFIC and CFC rules to its particular situation.

Indirect interests in PFICs and CFCs

If the Issuer owns a Funded Portfolio Asset or an Equity Security issued by a non-U.S. corporation that is treated as equity for U.S. federal income tax purposes, U.S. Holders of Subordinated Notes could be treated as owning an indirect equity interest in a PFIC or a CFC and could be subject to certain adverse tax consequences.

In particular, if the Issuer owns equity interests in PFICs ("Lower-Tier PFICs"), a U.S. Holder of Subordinated Notes would be treated as owning directly the U.S. Holder's proportionate amount (by value) of the Issuer's equity interests in the Lower-Tier PFICs. A U.S. Holder's QEF election with respect to the Issuer would not be effective with respect to such Lower-Tier PFICs. However, a U.S. Holder would be able to make QEF elections with respect to such Lower-Tier PFICs if the Lower-Tier PFICs provide certain information and documentation to the Issuer in accordance with applicable Treasury Regulations. However, there can be no assurance that the Issuer would be able to obtain such information and documentation from any Lower-Tier PFIC and, thus, there can be no assurance that a U.S. Holder would be able to make or maintain a QEF election with respect to any Lower-Tier PFIC. If a U.S. Holder does not have a QEF election in effect with respect to a Lower-Tier PFIC, as a general matter, the U.S. Holder would be subject to the adverse consequences described above under "—Investment in a passive foreign investment company" with respect to any excess distributions made by such Lower-Tier PFIC to the Issuer, any gain on the disposition by the Issuer of its equity interest in such Lower-Tier PFIC treated as indirectly realized by such U.S. Holder, and any gain treated as indirectly realized by such U.S. Holder on the disposition of its equity in the Issuer (which may arise even if the U.S. Holder realizes a loss on such disposition). Such amount would not be reduced by expenses or losses of the Issuer, but any income recognized may increase a U.S. Holder's tax basis in its Subordinated Notes. Moreover, if the U.S. Holder has a QEF election in effect with respect to a Lower-Tier PFIC, the U.S. Holder would be required to include in income the U.S. Holder's pro rata share of the Lower-Tier PFIC's ordinary earnings and net capital gain as if the U.S. Holder's indirect equity interest in the Lower-Tier PFIC were directly owned, and it appears that the U.S. Holder would not be permitted to use any losses or other expenses of the Issuer to offset such ordinary earnings and/or net capital gains but recognition of such income may increase a U.S. Holder's tax basis in its Subordinated Notes.

Accordingly, if any of the Funded Portfolio Assets or Equity Securities are treated as equity interests in a PFIC, such U.S. Holders could experience significant amounts of phantom income with respect to such interests. Other adverse tax consequences may arise for such U.S. Holders that are treated as owning indirect interests in CFCs. U.S. Holders should consult their own tax advisors regarding the tax issues associated with such investments in light of their own individual circumstances.

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Distributions on the Subordinated Notes

The treatment of actual distributions of cash on the Subordinated Notes, in very general terms, will vary depending on whether a U.S. Holder has made a timely QEF election as described above. See "—Investment in a passive foreign investment company." If a timely QEF election has been made, distributions should be allocated first to amounts previously taxed pursuant to the QEF election (or pursuant to the CFC rules, if applicable) and to this extent will not be taxable to U.S. Holders. Distributions in excess of such previously taxed amounts pursuant to a QEF election (or pursuant to the CFC rules, if applicable) will be taxable to U.S. Holders as ordinary income upon receipt to the extent of any remaining amounts of untaxed current and accumulated earnings and profits of the Issuer. Distributions in excess of any current and accumulated earnings and profits will be treated first as a nontaxable reduction to the U.S. Holder's tax basis for the Subordinated Notes to the extent thereof and then as capital gain.

In the event that a U.S. Holder does not make a timely QEF election, then except to the extent that distributions may be attributable to amounts previously taxed pursuant to the CFC rules, some or all of any distributions with respect to the Subordinated Notes may constitute "excess distributions," taxable as previously described. See "—Investment in a passive foreign investment company." In that event, except to the extent that distributions may be attributable to amounts previously taxed to the U.S. Holder pursuant to the CFC rules or are treated as "excess distributions," distributions on the Subordinated Notes generally would be treated as dividends to the extent paid out of the Issuer's current or accumulated earnings and profits not allocated to any "excess distributions," then as a nontaxable reduction to the U.S. Holder's tax basis for the Subordinated Notes to the extent thereof and then as capital gain. Dividends received from a foreign corporation generally will be treated as income from sources outside the United States for U.S. foreign tax credit limitation purposes. However, if U.S. Holders collectively own (directly or constructively) 50% or more (measured by vote or value) of the Subordinated Notes, a percentage of the dividend income equal to the proportion of the Issuer's earnings and profits from sources within the United States generally will be treated as income from sources within the United States for such purposes.

Purchase or disposition of the Subordinated Notes

In general, a U.S. Holder of a Subordinated Note will recognize a gain or loss upon the sale, exchange, redemption or other taxable disposition of a Subordinated Note equal to the difference between the amount realized and such U.S. Holder's adjusted tax basis in the Subordinated Note. Except as discussed below, such gain or loss will be a capital gain or loss and will be a long-term capital gain or loss if the U.S. Holder held the Subordinated Notes for more than one year at the time of the disposition. Prospective investors should consult their own tax advisors with respect to the treatment of capital gains (which may be taxed at lower rates than ordinary income for taxpayers that are individuals, trusts or estates and that held the Secured Notes for more than one year) and capital losses (the deductibility of which is subject to limitations). Any gain recognized by a U.S. Holder on the sale, exchange, redemption or other taxable disposition of a Subordinated Note (other than, in the case of a U.S. Holder treated as a "U.S. Shareholder," any such gain characterized as a dividend, as discussed below) generally will be treated as from sources within the United States and loss so recognized generally will offset gain from sources within the United States.

Initially, a U.S. Holder's tax basis for a Subordinated Note will equal the cost of such Subordinated Note to such U.S. Holder. Such basis will be increased by amounts taxable to such U.S. Holder by virtue of a QEF election, or by virtue of the CFC rules, as applicable, and decreased by actual distributions from the Issuer that are deemed to consist of such previously taxed amounts or are

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treated as a nontaxable reduction to the U.S. Holder's tax basis for the Subordinated Note (as described above).

If a U.S. Holder does not make a timely QEF election as described above, any gain realized on the sale, exchange, redemption or other taxable disposition of a Subordinated Note (or any gain deemed to accrue prior to the time a non-timely QEF election is made) will be taxed as ordinary income and subject to an additional tax reflecting a deemed interest charge under the special tax rules governing excess distributions described above. See "—Investment in a passive foreign investment company."

If the Issuer were treated as a CFC and a U.S. Holder were treated as a "U.S. Shareholder" therein, then any gain realized by such U.S. Holder upon the disposition of Subordinated Notes, other than gain constituting an excess distribution under the PFIC rules, if applicable, would be treated as ordinary income to the extent of the U.S. Holder's share of the current or accumulated earnings and profits of the Issuer. In this regard, earnings and profits would not include any amounts previously taxed pursuant to a timely QEF election or pursuant to the CFC rules.

Tax treatment of Tax-Exempt U.S. Holders

U.S. Holders which are tax-exempt entities ("Tax-Exempt U.S. Holders") will not be subject to the tax on unrelated business taxable income ("UBTI") with respect to interest and capital gains income derived from an investment in the Secured Notes. However, a Tax-Exempt U.S. Holder that also acquires the Subordinated Notes (or, any Secured Note recharacterized as equity in the Issuer) should consider whether interest it receives in respect of the Secured Notes may be treated as UBTI under rules governing certain payments received from controlled entities.

A Tax-Exempt U.S. Holder generally will not be subject to the tax on UBTI with respect to regular distributions or "excess distributions" (defined above under "Tax treatment of U.S. Holders of Subordinated Notes—Investment in a passive foreign investment company") on the Subordinated Notes (or, any Secured Note recharacterized as equity in the Issuer). A Tax-Exempt U.S. Holder which is not subject to tax on UBTI with respect to "excess distributions" may not make a QEF election. In addition, a Tax-Exempt U.S. Holder which is subject to the rules relating to "controlled foreign corporations" with respect to the Subordinated Notes (or, any Secured Note recharacterized as equity in the Issuer) generally should not be subject to the tax on UBTI with respect to income from such Subordinated Notes (or, any Secured Note recharacterized as equity in the Issuer).

Notwithstanding the discussion in the preceding two paragraphs, a Tax-Exempt U.S. Holder which incurs "acquisition indebtedness" (as defined in Section 514(c) of the Code) with respect to the Notes may be subject to the tax on UBTI with respect to income from the Notes to the extent that the Notes constitute "debt-financed property" (as defined in Section 514(b) of the Code) of the Tax-Exempt U.S. Holder. A Tax-Exempt U.S. Holder subject to the tax on UBTI with respect to income from the Subordinated Notes (or, any Secured Note recharacterized as equity in the Issuer) will be taxed on "excess distributions" in the manner discussed above under "Tax treatment of U.S. Holders of Subordinated Notes—Investment in a passive foreign investment company". Such a Tax-Exempt U.S. Holder will be permitted, and should consider whether, to make a QEF election with respect to the Issuer as discussed above.

Tax-Exempt U.S. Holders should consult their own tax advisors regarding an investment in the Notes.

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Transfer reporting requirements

A U.S. Holder of Subordinated Notes (and, any Secured Note recharacterized as equity in the Issuer) that owns (actually or constructively) at least 10% by vote or value of the Issuer (and each officer or director of the Issuer that is a U.S citizen or resident) may be required to file an information return on IRS Form 5471. A U.S. Holder of Subordinated Notes (and, any Secured Note recharacterized as equity in the Issuer) generally is required to provide additional information regarding the Issuer annually on IRS Form 5471 if it owns (actually or constructively) more than 50% by vote or value of the Issuer. U.S. Holders should consult their own tax advisors regarding whether they are required to file IRS Form 5471.

A U.S. person (including a Tax-Exempt U.S. Holder) that purchases the Subordinated Notes for cash will be required to file a Form 926 or similar form with the IRS if (a) such person owned, directly or by attribution, immediately after the transfer at least 10% by vote or value of the Issuer or (b) if the transfer, when aggregated with all transfers made by such person (or any related person) within the preceding 12 month period, exceeds $100,000. In the event a U.S. Holder fails to file any such required form, the U.S. Holder could be required to pay a penalty equal to 10% of the gross amount paid for such Subordinated Notes (subject to a maximum penalty of $100,000, except in cases involving intentional disregard). U.S. persons should consult their tax advisors with respect to this or any other reporting requirement which may apply with respect to their acquisition of the Subordinated Notes.

Tax return disclosure and investor list requirements

Any person that files a U.S. federal income tax return or U.S. federal information return and participates in a "reportable transaction" in a taxable year is required to disclose certain information on IRS Form 8886 (or its successor form) attached to such person's U.S. tax return for such taxable year (and also file a copy of such form with the IRS's Office of Tax Shelter Analysis) and to retain certain documents related to the transaction. In addition, under certain circumstances, certain organizers and sellers and advisors of a "reportable transaction" are required to file reports with the IRS and also will be required to maintain lists of participants in the transaction containing identifying information, retain certain documents related to the transaction, and furnish those lists and documents to the IRS upon request. Significant penalties are imposed for failure to comply with these disclosure and list keeping requirements. The definition of "reportable transaction" is highly technical. However, in very general terms, a transaction may be a "reportable transaction" if, among other things, it is offered under conditions of confidentiality or it results in the claiming of a loss or losses for U.S. federal income tax purposes in excess of certain threshold amounts.

In this regard, in order to prevent the investors' purchase of the Notes in this offering from being treated as offered under conditions of confidentiality, the Issuer and the holders and beneficial owners of the Notes (and each of their respective employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions described herein (including the ownership and disposition of the Notes) and all materials of any kind (including opinions or other tax analyses) that are provided to them relating to such tax treatment and tax structure. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. federal income or state and local tax treatment of the transaction, and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction.

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In addition, under these Treasury Regulations, if the Issuer participates in a "reportable transaction", a U.S. Holder of Subordinated Notes that is a "reporting shareholder" of the Issuer will be treated as participating in the transaction and will be subject to the rules described above. Although most of the Issuer's activities generally are not expected to give rise to "reportable transactions", the Issuer nevertheless may participate in certain types of transactions that could be treated as "reportable transactions." A U.S. Holder of Subordinated Notes will be treated as a "reporting shareholder" of the Issuer if (a) such U.S. Holder owns 10% or more of the Subordinated Notes and makes a QEF election with respect to the Issuer or (b) the Issuer is treated as a CFC and such U.S. Holder is a "U.S. Shareholder" (as defined above) of the Issuer. The Issuer will make reasonable efforts to make such information available.

Prospective investors in the Notes should consult their own tax advisors concerning any possible disclosure obligations under these Treasury Regulations with respect to their ownership or disposition of the Notes in light of their particular circumstances.

Tax treatment of Non-U.S. Holders of Notes and Composite Notes

Subject to the backup withholding tax discussion below, assuming the Issuer is not engaged in a U.S. trade or business, a Non-U.S. Holder generally should not be subject to U.S. federal income or withholding tax on any payments on the Notes or Composite Notes and gain from the sale, exchange, redemption or other disposition of the Notes or Composite Notes unless (a) that payment and/or gain is effectively connected with the conduct by that Non-U.S. Holder of a trade or business in the United States; (b) in the case of any gain realised by an individual Non-U.S. Holder, that Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the sale or other disposition and certain other conditions are met; or (c) the Non-U.S. Holder is subject to tax pursuant to provisions of the Code applicable to certain expatriates. Non-U.S. Holders should consult their own tax advisers regarding the U.S. federal income tax considerations and other tax consequences of owning the Notes or Composite Notes.

Information reporting and backup withholding

Under certain circumstances, the Code requires "information reporting," and may require "backup withholding" with respect to certain payments made on the Notes and the payment of the proceeds from the disposition of the Notes. Backup withholding generally will not apply to corporations, tax-exempt organizations, qualified pension and profit sharing trusts, and individual retirement accounts. Backup withholding will apply to a U.S. Holder if the U.S. Holder fails to provide certain identifying information (such as the U.S. Holder's taxpayer identification number) or otherwise comply with the applicable requirements of the backup withholding rules. The application for exemption from backup withholding for a U.S. Holder is available by providing a properly completed IRS Form W-9.

A Non-U.S. Holder of the Notes generally will not be subject to these information reporting requirements or backup withholding with respect to payments of interest or distributions on the Notes if (a) it certifies to the Trustee its status as a Non-U.S. Holder under penalties of perjury on the appropriate IRS Form W-8, and (b) in the case of a Non-U.S. Holder that is a "nonwithholding foreign partnership," "foreign simple trust" or "foreign grantor trust" as defined in the applicable Treasury Regulations, the beneficial owners of such Non-U.S. Holder also certify to the Trustee their status as non-U.S. persons under penalties of perjury on the appropriate IRS Form W-8 or as U.S. persons under penalties of perjury on IRS Form W-9.

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The payments of the proceeds from the disposition of a Note by a Non-U.S. Holder to or through the U.S. office of a broker generally will not be subject to information reporting and backup withholding if the Non-U.S. Holder certifies its status as a Non-U.S. Holder (and, if applicable, its beneficial owners also certify their status as Non-U.S. Holders) under penalties of perjury on the appropriate IRS Form W-8, satisfies certain documentary evidence requirements for establishing that it is a Non-U.S. Holder or otherwise establishes an exemption. The payment of the proceeds from the disposition of a Note by a Non-U.S. Holder to or through a non-U.S. office of a non-U.S. broker will not be subject to backup withholding or information reporting unless the non-U.S. broker has certain specific types of relationships to the United States, in which case the treatment of such payment for such purposes will be as described in the following sentence. The payment of proceeds from the disposition of a Note by a Non-U.S. Holder to or through a non-U.S. office of a U.S. broker or to or through a non-U.S. broker with certain specific types of relationships to the United States generally will not be subject to backup withholding but will be subject to information reporting unless the Non-U.S. Holder certifies its status as a Non-U.S. Holder (and, if applicable, its beneficial owners also certify their status as Non-U.S. Holders) under penalties of perjury or the broker has certain documentary evidence in its files as to the Non-U.S. Holder's foreign status and the broker has no actual knowledge to the contrary.

Backup withholding is not an additional tax and may be refunded (or credited against the U.S. Holder's or Non-U.S. Holder's U.S. federal income tax liability, if any); provided, that certain required information is furnished to the U.S. Internal Revenue Service. The information reporting requirements may apply regardless of whether withholding is required.

Cayman Islands taxation

The following is a discussion of certain Cayman Islands tax consequences of an investment in the Notes and the Composite Notes. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor's particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.

Under existing Cayman Islands Laws:

• Payments of interest, principal and other amounts on the Secured Notes and the Composite Notes and amounts in respect of the Subordinated Notes will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of interest and principal and other amounts on the Secured Notes and the Composite Notes or a distribution to any holder of the Subordinated Notes, nor will gains derived from the disposal of the Notes and the Composite Notes 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; and

• no stamp duty is payable in respect of the issue of the Notes, the Composite Notes and the Subordinated Notes. The Notes, the Composite Notes and the Subordinated Notes themselves will be stampable if they are executed in or brought into the Cayman Islands. An instrument of transfer in respect of a Note, Composite Note or Subordinated Note is stampable if executed or brought into the Cayman Islands.

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 the following form:

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"The Tax Concessions Law 1999 Revision

Undertaking as to Tax Concessions

In accordance with the provision of Section 6 of The Tax Concession Law (1999 Revision), the Governor in Cabinet undertakes with:

Squared CDO 2007-1, Ltd. ("the Company")

(a) 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

(b) 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) on or in respect of the shares, debentures or other obligations of the Company; or

(ii) by way of the withholding in whole or 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 17th day of April 2007.

GOVERNOR IN CABINET"

The Cayman Islands does not have an income tax treaty arrangement with the United States or any other country; however, the Cayman Islands has entered into an information exchange agreement with the United States.

ERISA and legal investment considerations

___________________________________________

The advice below was not written and is not intended to be used and cannot be used by any taxpayer for purposes of avoiding United States federal income tax penalties that may be imposed. The advice is written to support the promotion or marketing of the transaction. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.

The foregoing disclaimer is provided to satisfy obligations under Circular 230 governing standards of practice before the Internal Revenue Service.

___________________________________________

The United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes certain requirements on "employee benefit plans" (as defined in and subject to Section 3(3) of ERISA), including entities such as collective investment funds and separate accounts whose underlying assets include the assets of such plans (collectively, "ERISA Plans") and on those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that an ERISA Plan's investments be made in accordance with

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the documents governing the ERISA Plan. The prudence of a particular investment must be determined by the responsible fiduciary of an ERISA Plan by taking into account the ERISA Plan's particular circumstances and all of the facts and circumstances of the investment including, but not limited to, the matters discussed above under "Risk factors" and the fact that in the future there may be no market in which such fiduciary will be able to sell or otherwise dispose of the Notes.

Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans, "Plans") and certain persons (referred to as "parties in interest" or "disqualified persons") having certain relationships to such Plans, unless a statutory or administrative exemption is applicable to the transaction. A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and Section 4975 of the Code.

ERISA and a regulation promulgated by the U.S. Department of Labor, 29 C.F.R. Section 2510.3-101 as modified by ERISA (collectively, the "Plan Asset Regulations"), describes what constitutes the assets of a Plan with respect to the Plan's investment in an entity for purposes of certain provisions of ERISA and Section 4975 of the Code, including the fiduciary responsibility provisions of Title I of ERISA and Section 4975 of the Code. Under the Plan Asset Regulations, if a Plan invests in an "equity interest" of an entity that is neither a "publicly offered security" nor a security issued by an investment company registered under the Investment Company Act, the Plan's assets include both the equity interest and an undivided interest in each of the entity's underlying assets, unless it is established that the entity is an "operating company" or, as further discussed below, that equity participation in the entity by "Benefit Plan Investors" (as defined herein) is not "significant."

Prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code may arise if Notes are acquired with the assets of a Plan with respect to which the Issuer, the Trustee, any seller of Funded Portfolio Assets to the Issuer or any of their respective affiliates, is a party in interest or a disqualified person. Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may be applicable, however, depending in part on the type of Plan fiduciary making the decision to acquire a Note and the circumstances under which such decision is made. Included among these exemptions are Prohibited Transaction Class Exemption ("PTCE") 91-38 (relating to investments by bank collective investment funds), PTCE 84-14 (relating to transactions effected by independent "qualified professional asset managers"), PTCE 90-1 (relating to investments by insurance company pooled separate accounts), PTCE 95-60 (relating to investments by insurance company general accounts), and PTCE 96-23 (relating to transactions effected by certain in-house asset managers), ("Investor-Based Exemptions"). There can be no assurance that any of these Investor-Based Exemptions or any other exemption (including, without limitation, the service provider exemption in new Section 408(b)(17) of ERISA and new Section 4975(d)(20) of the Code) will be available with respect to any particular transaction involving the Notes.

Governmental plans, certain church plans and other 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 state, local or other federal or non-U.S. laws that are substantially similar to the foregoing provisions of ERISA and the Code ("Similar Law"). Fiduciaries of any such plans should consult with their counsel before purchasing any Notes.

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Any insurance company proposing to invest assets of its general account in Notes should consider the extent to which such investment would be subject to the requirements of Title I of ERISA and Section 4975 of the Code in light of the U.S. Supreme Court's decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), and the enactment of Section 401(c) of ERISA on August 20, 1996. In particular, such an insurance company should consider (a) the exemptive relief granted by the U.S. Department of Labor for transactions involving insurance company general accounts in PTCE 95-60 and (b) if such exemptive relief is not available, whether its purchase of Notes will be permissible under the final regulations issued under Section 401(c) of ERISA. The final regulations provide guidance on which assets held by an insurance company constitute "plan assets" for purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of the Code. The regulations do not exempt the assets of insurance company general accounts from treatment as "plan assets" to the extent they support certain participating annuities issued to Plans after December 31, 1998.

The Secured Notes and the Composite Notes

The Plan Asset Regulations define an "equity interest" as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and which has no substantial equity features. As noted above in Income Tax Considerations, it is the opinion of tax counsel to the Issuer that the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes and the Class D Notes will, and the Class E Notes should, when issued, be treated as debt for U.S. income tax purposes. Because of this, and the traditional debt features of the Secured Notes and the Composite Notes, as well as the absence of conversion rights, warrants and other typical equity features, neither the Secured Notes nor the Composite Notes should be considered to be "equity interests" in the Issuer. Nevertheless, without regard to whether the Secured Notes or the Composite Notes are considered equity interests, prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code may arise if Secured Notes or the Composite Notes are acquired with the assets of an ERISA Plan with respect to which the Issuer or the Trustee or in certain circumstances, any of their respective affiliates, is a party in interest or a disqualified person. The Investor-Based Exemptions may be available to cover such prohibited transactions.

By its purchase of any Secured Notes or any Composite Notes, each purchaser and subsequent transferee thereof will be deemed to have represented and warranted either that (a) it is neither a Plan nor any entity whose underlying assets include "plan assets" by reason of such Plan's investment in the entity, nor a governmental, church or other plan which is subject to any Similar Law or (b) its purchase, holding and disposition of a Secured Note will not constitute 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, church or other plan, a violation of any Similar Law).

The Subordinated Notes

Equity participation in an issuer of Notes by "benefit plan investors" is "significant" and will cause the assets of the Issuer to be deemed the assets of an investing Plan (in the absence of another applicable Plan Asset Regulations exception) if 25% or more of the value of any class of equity interest in the Issuer is held by "benefit plan investors". Under the Plan Asset Regulations, as modified by Section 3(42) of ERISA, the term "benefit plan investor" includes (a) an employee benefit plan (as defined in Section 3(3) of ERISA) subject to the provisions of ERISA, (b) a plan described in and subject to Section 4975 of the Code or (c) any entity whose underlying assets include "plan assets" by reason of any such plan's investment in the entity (collectively "Benefit Plan Investors"). For purposes of making the 25% determination, the value of any equity interests held

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by a person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Co-Issuers or any person that provides investment advice for a fee (direct or indirect) with respect to such assets, or any affiliate of such a person ("Controlling Person"), is disregarded. Under the Plan Asset Regulation, an "affiliate" of a person includes any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person, and "control" with respect to a person other than an individual, means the power to exercise a controlling influence over the management or policies of such person. The Subordinated Notes will likely be considered equity interests for the purposes of applying Title I of ERISA and Section 4975 of the Code. Accordingly, purchases of the Subordinated Notes by Benefit Plan Investors from an initial purchaser and any subsequent purchaser will be limited to less than 25% of the value of all outstanding Subordinated Notes by requiring each such purchaser to make certain representations and/or to agree to certain transfer restrictions regarding their status as Benefit Plan Investors or Controlling Persons. Subordinated Notes (i) held as principal by an initial purchaser, the Placement Agent, the Trustee, the Subordinated Note Paying Agent any of their respective affiliates, employees of an initial purchaser, the Placement Agent, the Trustee, the Subordinated Note Paying Agent or any of their affiliates and any charitable foundation of any such employees (other than any of such interests held as a Benefit Plan Investor) or (ii) held by persons that have represented that they are Controlling Persons will be disregarded (to the extent that such a Controlling Person is not a Benefit Plan Investor) and will not be treated as outstanding for purposes of determining compliance with such 25% limitation.

With respect to the certificated Subordinated Notes or any beneficial interest therein, a purchaser will be required to represent and warrant (a) whether or not the purchaser is a Benefit Plan Investor and (b) whether or not the purchaser is a Controlling Person, without regard to whether such Notes are in certificated form or are represented by interests in Regulation S Global Subordinated Notes. No such Notes may be acquired by Benefit Plan Investors or Controlling Persons if it would cause the above 25% limitation to be exceeded.

By its purchase of any certificated Subordinated Notes, each purchaser and subsequent transferee thereof will be required to represent and warrant that (a) it is neither a Benefit Plan Investor nor a governmental, church or other plan which is subject to any Similar Law or (b) its purchase, holding and disposition of certificated Subordinated Notes will not constitute 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, church or other plan, any Similar Law). By its purchase of any Regulation S Global Subordinated Notes, each purchaser and subsequent transferee thereof will be deemed to have represented and warranted that (a) it is neither a Benefit Plan Investor nor a governmental, church or other plan which is subject to any Similar Law or (b) it is a governmental, church or other plan and its purchase, holding and disposition of the Regulation S Global Subordinated Notes will not constitute or result in a non-exempt prohibited transaction under any Similar Law.

Legal investment considerations

None of the Issuer, the Co-Issuer and the Placement Agent make any representation as to the proper characterization of the Subordinated Notes or any Class of Secured Notes or Composite Notes for legal investment or other purposes, as to the ability of particular investors to purchase Subordinated Notes or any Class of Secured Notes or Composite Notes for legal investment or other purposes or as to the ability of particular investors to purchase Subordinated Notes or any Class of Secured Notes or Composite Notes under applicable investment restrictions. 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

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determining whether and to what extent the Subordinated Notes or any Class of Secured Notes or Composite Notes are subject to investment, capital or other restrictions. Without limiting the generality of the foregoing, none of the Issuer, the Co-Issuer, and the Placement Agent makes any representation as to the characterization of the Subordinated Notes or any Class of Secured Notes or Composite Notes as a U.S.-domestic or foreign (non-U.S.) investment under any state insurance code or related regulations, and they are not aware of any published precedent that addresses such characterization. Although they are not making any such representation, the Co-Issuers understand that the New York State Insurance Department, in response to a request for guidance, has been considering the characterization (as U.S.-domestic or foreign (non-U.S.)) of certain collateralized debt obligation securities co-issued by a non-U.S. issuer and a U.S. Co-Issuer. There can be no assurance as to the nature of any advice or other action that may result from such consideration. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Subordinated Notes or any Class of Secured Notes or Composite Notes) may affect the liquidity of the Subordinated Notes or any Class of Secured Notes or Composite Notes.

Plan of distribution

Subject to the terms and conditions contained in a placement agreement (the "Placement Agreement") to be entered into among the Co-Issuers and JPMorgan, as placement agent, the Notes and the Composite Notes (other than the Class A-1 Notes) will be placed in privately negotiated transactions by JPMorgan. The Issuer will agree to sell, and the purchaser of the Class A-1 Notes will agree to purchase, the Class A-1 Notes in a privately negotiated transaction at varying prices to be determined in each case at the time of sale. JPMorgan is not acting as a placement agent for the Class A-1 Notes.

The Placement Agreement will provide that the obligation of the Placement Agent to act as placement agent of the Issuer thereunder is subject to certain conditions.

In the Placement Agreement, each of the Issuer and the Co-Issuer will agree to indemnify the Placement Agent against certain liabilities under the Securities Act or to contribute to payments the Placement Agent may be required to make in respect thereof. In addition, the Issuer will agree to reimburse the Placement Agent for certain of its expenses incurred in connection with the closing of the transactions contemplated hereby.

The offering of the Offered Securities has not been and will not be registered under the Securities Act and may not be offered or sold in non-offshore transactions except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

No action has been taken or is being contemplated by the Issuer that would permit a public offering of the Offered Securities or possession or distribution of this Offering Circular or any amendment thereof, or supplement thereto or any other offering material relating to the Offered Securities in any jurisdiction (other than Ireland) where, or in any other circumstances in which, action for those purposes is required. No offers, sales or deliveries of any Offered Securities, or distribution of this Offering Circular or any other offering material relating to the Offered Securities, may be made in or from any jurisdiction except in circumstances that will result in compliance with any applicable laws and regulations and will not impose any obligations on the Issuer or the Placement Agent. Because of the restrictions contained in the front of this Offering Circular,

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purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of the Offered Securities.

In the Placement Agreement, the Placement Agent will agree that it or one or more of their affiliates will place the Placed Securities only to or with, in each case, purchasers it reasonably believes to be (i) with respect to the Placed Securities (other than the Composite Notes), both Qualified Institutional Buyers and Qualified Purchasers and (ii) non-U.S. persons in offshore transactions pursuant to Regulation S. The Subordinated Notes may also be placed with Institutional Accredited Investors who are also Qualified Purchasers. In the Placement Agreement, the Placement Agent will also agree that it will send to each other dealer to which it sells Placed Securities pursuant to Regulation S during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of securities in non-offshore transactions or to, or for the account or benefit of, U.S. persons. Until 40 days after completion of the distribution by the Issuer, an offer or sale of Placed Securities, in a non-offshore transaction 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 pursuant to Rule 144A or, in the case of the Subordinated Notes, a transaction exempt from the registration requirements under the Securities Act. Resales of the Offered Securities offered in reliance on Rule 144A or in a transaction exempt from the registration requirements under the Securities Act, as the case may be, are restricted as described under the "Transfer restrictions." Beneficial interests in a Regulation S Global Note or a Regulation S Global Subordinated Note may not be held by a U.S. person at any time, and resales of the Offered Securities offered in offshore transactions to non-U.S. persons in reliance on Regulation S may be effected only in accordance with the transfer restrictions described herein. As used in this paragraph, the terms "United States" and "U.S." have the meanings given to them by Regulation S.

The Offering Securities are a new issue of securities for which there is currently no market. The Placement Agent is not under any obligation to make a market in any Class of Offered Securities 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 Offered 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 Offered Securities.

In connection with the offering of the Placed Securities, the Placement Agent may, as permitted by applicable law, overallot or effect transactions that stabilize or maintain the market price of the Placed Securities at a level which might not otherwise prevail in the open market. The stabilizing, if commenced, may be discontinued at any time.

Transfer restrictions

Because of the following restrictions, purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of the Offered Securities.

The Placement Agent will receive notice of any transfer of Offered Securities.

The Offered Securities have not been registered under the Securities Act or any state securities or "Blue Sky" laws or the securities laws of any other jurisdiction and, accordingly, may not be reoffered, resold, pledged or otherwise transferred except in accordance with the restrictions described herein and set forth in the Indenture.

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Without limiting the foregoing, by holding an Offered Security, each holder will acknowledge and agree, among other things, that such holder understands that neither of the Co-Issuers is registered as an investment company under the Investment Company Act, and that the Co-Issuers are exempt from registration as such by virtue of Section 3(c)(7) of the Investment Company Act. Section 3(c)(7) excepts from the provisions of the Investment Company Act those issuers who privately place their securities solely to persons who at the time of purchase are "qualified purchasers." In general terms, "qualified purchaser" is defined to mean, among other things, any natural person who owns not less than $5,000,000 in investments; any person who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments; and trusts as to which both the settlor and the decision-making trustee are qualified purchasers (but only if such trust was not formed for the specific purpose of making such investment).

Global Notes and Regulation S Global Subordinated Notes

Each initial purchaser and each transferee of Secured Notes, Composite Notes or Subordinated Notes represented by an interest in a Global Note or Regulation S Global Subordinated Note will be deemed to have represented and agreed as follows (except as may be expressly agreed in writing between the Co-Issuers and any initial purchasers):

• In connection with the purchase of such Offered Securities: (a) none of the Co-Issuers, the Trustee, the Subordinated Note Paying Agent, the Placement Agent, the Synthetic Counterparty, JPMorgan Financing Party, the Collateral Manager or the TRS Counterparty or any of their respective affiliates is acting as a fiduciary or financial or investment advisor for such beneficial owner; (b) such beneficial owner is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the Co-Issuers, the Trustee, the Subordinated Note Paying Agent, the Placement Agent, the Synthetic Counterparty, JPMorgan Financing Party, the Collateral Manager or the TRS Counterparty or any of their respective affiliates other than any statements in the final Offering Circular, and such beneficial owner has read and understands such final Offering Circular; (c) such beneficial owner has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent it has deemed necessary and has made its own investment decisions (including decisions regarding the suitability of any transaction pursuant to the Indenture) based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the Co-Issuers, the Trustee, the Subordinated Note Paying Agent, the Placement Agent, the Synthetic Counterparty, JPMorgan Financing Party, the Collateral Manager, the TRS Counterparty or any of their respective affiliates; (d) such beneficial owner is either (i) (in the case of a beneficial owner of an interest in a Rule 144A Global Note) both (A) a qualified institutional buyer (as defined under Rule 144A under the Securities Act) that is not a broker-dealer which owns and invests on a discretionary basis less than U.S.$25 million in securities of issuers that are not affiliated persons of the dealer and is not a plan referred to in paragraph (a)(1)(d) or (a)(1)(e) of Rule 144A under the Securities Act or a trust fund referred to in paragraph (a)(1)(f) of Rule 144A under the Securities Act that holds the assets of such a plan, if investment decisions with respect to the plan are made by beneficiaries of the plan and (B) a "qualified purchaser" for purposes of Section 3(c)(7) of the Investment Company Act or (ii) not a "U.S. person" as defined in Regulation S and is acquiring the Offered Securities in an offshore transaction (as defined in Regulation S) in reliance on the exemption from registration provided by Regulation S and understands that prior to the end of the Distribution Compliance Period, interests in a Regulation S Global Note may only be held through Euroclear or Clearstream or (iii) (solely in the case of the Subordinated Notes only) institutional "accredited investors" as defined in Rule 501(a)(1) and Rule 501(a)(3) and to "accredited investors" as defined in Rule 501(a)(8) if all of the equity owners of each such

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accredited investor are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act that (in each case) are also Qualified Purchasers; (e) such beneficial owner is acquiring its interest in such Notes for its own account; (f) such beneficial owner was not formed for the purpose of investing in such Offered Securities; (g) such beneficial owner understands that the Issuer may receive a list of participants holding interests in the Offered Securities from one or more book-entry depositories, (h) such beneficial owner will hold and transfer at least the minimum denomination of such Offered Securities, (i) (in the case of the Subordinated Notes) such beneficial owner is a sophisticated investor and is purchasing the Notes with a full understanding of all of the terms, conditions and risks thereof, and is capable of and willing to assume those risks and (j) such beneficial owner will provide notice of the relevant transfer restrictions to subsequent transferees.

• Such beneficial owner understands that such Offered Securities are being offered only in a transaction not involving any public offering in the United States within the meaning of the Securities Act, such Offered Securities have not been and will not be registered under the Securities Act, and, if in the future such beneficial owner decides to offer, resell, pledge or otherwise transfer such Offered Securities, such Offered Securities may be offered, resold, pledged or otherwise transferred only in accordance with the provisions of the Indenture and the legend on such Offered Securities. Such beneficial owner acknowledges that no representation has been made as to the availability of any exemption under the Securities Act or any state securities laws for resale of such Offered Securities. Such beneficial owner understands that neither of the Co-Issuers has been registered under the Investment Company Act, and that the Co-Issuers are exempt from registration as such by virtue of Section 3(c)(7) of the Investment Company Act.

• It is aware that, except as otherwise provided in the Indenture or the Subordinated Note Paying Agency Agreement, any Offered Securities being sold to it in reliance on Regulation S will be represented by one or more Regulation S Global Notes or Regulation S Global Subordinated Notes, as applicable, and that in each case beneficial interests therein may be held only through DTC for the respective accounts of Euroclear or Clearstream.

• It will provide notice to each person to whom it proposes to transfer any interest in the Offered Securities of the transfer restrictions and representations set forth in the Indenture or the Subordinated Note Paying Agency Agreement, as applicable.

In addition, each Person who purchases a Global Note or Regulation S Global Subordinated Note representing an interest in a Subordinated Note on the Closing Date or through subsequent sale or transfer will be required to provide the Trustee with a certificate in the form of Annex A-2 hereto.

Certificated Subordinated Notes

No purchase or transfer of a Subordinated Note in certificated form (including a transfer of an interest in a Regulation S Global Subordinated Note to a transferee acquiring a Subordinated Note in certificated form) will be recorded or otherwise recognized unless the purchaser thereof has provided the Subordinated Note Paying Agent with certificates substantially in the form of Annex A-1 (which, in the case of initial purchasers of the Subordinated Notes, will be delivered in the form of a subscription agreement containing substantially the representations set forth in Annex A-1) and Annex A-2 hereto.

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Additional restrictions

No transfer of any certificated Subordinated Note will be effective, and the Trustee will not recognize any such transfer, if it may result in 25% or more of the value of the certificated Subordinated Notes being held by Benefit Plan Investors (the "25% Limitation"). For purposes of this determination, the value of equity interests held by the Placement Agent, the Trustee, the Subordinated Note Paying Agent and certain of their affiliates (other than those interests held by a Benefit Plan Investor) or a person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Co-Issuers or that provides investment advice for a fee (direct or indirect) with respect to such assets (or any affiliate of such a person) is disregarded. See "ERISA and legal investment considerations."

To the extent required by the Issuer, as determined by the Issuer, the Issuer may, upon notice to the Subordinated Note Paying Agent, impose additional transfer restrictions on the Subordinated Notes to comply with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA PATRIOT Act") and other similar laws or regulations, including, without limitation, requiring each transferee of a Subordinated Note to make representations to the Issuer in connection with such compliance.

Legends

The Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes in the form of a Global Note will bear a legend substantially to the following effect unless the Issuer determines otherwise in compliance with applicable law:

This Note has not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") or the securities laws of any state of the United States, and may be reoffered, resold, pledged or otherwise transferred only (a) to a "Qualified Purchaser" (as defined for purposes of Section 3(c)(7) of the Investment Company Act) that is a "Qualified Institutional Buyer" (as defined in rule 144a under the Securities Act) in reliance on the exemption from Securities Act registration provided by such rule that is not a broker-dealer which owns and invests on a discretionary basis less than U.S.$25 million in securities of issuers that are not affiliated persons of the dealer and is not a plan referred to in Paragraph (a)(1)(d) or (a)(1)(e) of Rule 144a or a trust fund referred to in Paragraph (a)(1)(f) of Rule 144a that holds the assets of such a plan, if investment decisions with respect to the plan are made by the beneficiaries of the plan or (b) to a person that is not a "U.S. Person" (as defined in Regulation S under the Securities Act) and is acquiring this Note in reliance on the exemption from Securities Act registration provided by such regulation, and in each case in compliance with the certification and other requirements specified in the Indenture referred to herein and in compliance with any applicable securities law of any applicable jurisdiction.

The Notes may not be acquired by, or on behalf of, or with the assets of (i) any "employee benefit plan" (as defined in Section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA")) which is subject to the fiduciary responsibility provisions thereof, any "Plan" subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or any entity part or all of the assets of which constitute assets of any such employee benefit plan or plan by reason of U.S. Department of Labor Regulation Section 2510.3-101 as modified by ERISA or otherwise, or (ii) any governmental, church or other plan subject to federal, state, local or non-U.S. law substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code unless, under this clause (ii), such purchase, holding and subsequent disposition of the Notes

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would not result in any non-exempt prohibited transaction under such substantially similar federal, state, local or non-U.S. law. Each beneficial owner of this Note will be deemed to have made the representations and agreements set forth in Section 2.4 of the Indenture. The Issuer has the right, under the Indenture, to compel any beneficial owner of an interest in a Global Note (as defined in the Indenture) that is a U.S. Person and is not a qualified purchaser and a qualified institutional buyer to sell its interest in the Notes, or may sell such interest on behalf of such owner.

Any transfer, pledge or other use of this Note for value or otherwise by or to any person is wrongful since the registered owner hereof, Cede & Co., has an interest herein, unless this Note is presented by an authorized representative of the Depository Trust Company ("DTC"), New York, New York, to the Co-Issuers or their agent for registration of transfer, exchange or payment and any note issued is registered in the name of Cede & Co. or of such other entity as is requested by an authorized representative of DTC (and any payment hereon is made to Cede & Co.).

Transfers of this Note shall be limited to transfers in whole, but not in part, to nominees of DTC or to a successor thereof or such successor's nominee and transfers of portions of this Note shall be limited to transfers made in accordance with the restrictions set forth in the indenture referred to herein.

Principal of this Note is payable as set forth herein. Accordingly, the outstanding principal of this note at any time may be less than the amount shown on the face hereof. Any person acquiring this note may ascertain its current principal amount by inquiry of the trustee.

Each holder and each beneficial owner of a Note (other than a Subordinated Note), by acceptance of such Note, or its interest in a Note (other than a Subordinated Note), as the case may be, shall be deemed to have agreed to treat, and shall treat, such Note (other than a Subordinated Note) as debt of the Issuer for United States Federal income tax purposes.

[Legend to be included in relation to the Class C Notes, Class D Notes and Class E Notes only] [This Note has been issued with Original Issued Discount ("OID") for U.S. Federal income tax purposes. Information relating to the issue price of the Note, the Note, the amount of OID on the Note, its issue date and the yield to maturity of the Note may be obtained from the placement agent at J.P. Morgan Securities Inc., attention: Structured Credit Products, 270 Park Ave, 8th floor, New York, NY 10017].

The failure to provide the Issuer, the Trustee and any Paying Agent with the applicable U.S. Federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or successor applicable form) in the case of a person that is a "United States Person" within the meaning of Section 7701(a)(30) of the code or an appropriate Internal Revenue Service Form W-8 (or successor applicable form) in the case of a person that is not a "United States Person" within the meaning of Section 7701(a)(30) of the Code may result in the imposition of U.S. Federal back-up withholding upon payments to the holder in respect of this Note.

The Composite Notes in the form of a Global Note will bear a legend substantially to the following effect unless the Issuer determines otherwise in compliance with applicable law:

This Note has not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") or the securities laws of any state of the United States, and may be reoffered, resold, pledged or otherwise transferred only to a person that is not a "U.S. Person" (as defined in Regulation S under the Securities Act) and is acquiring this Note in reliance on the exemption from

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Securities Act registration provided by such regulation, and in each case in compliance with the certification and other requirements specified in the Indenture referred to herein and in compliance with any applicable securities law of any applicable jurisdiction.

Any transfer, pledge or other use of this Note for value or otherwise by or to any person is wrongful since the registered owner hereof, Cede & Co., has an interest herein, unless this Note is presented by an authorized representative of the Depository Trust Company ("DTC"), New York, New York, to the Co-Issuers or their agent for registration of transfer, exchange or payment and any note issued is registered in the name of Cede & Co. or of such other entity as is requested by an authorized representative of DTC (and any payment hereon is made to Cede & Co.).

Transfers of this Note shall be limited to transfers in whole, but not in part, to nominees of DTC or to a successor thereof or such successor's nominee and transfers of portions of this Note shall be limited to transfers made in accordance with the restrictions set forth in the indenture referred to herein.

Principal of this Note is payable as set forth herein. Accordingly, the outstanding principal of this Note at any time may be less than the amount shown on the face hereof. Any person acquiring this note may ascertain its current principal amount by inquiry of the trustee.

Each holder and each beneficial owner of a Composite Note, by acceptance of such Composite Note, or its interest in a Composite Note, as the case may be, shall be deemed to have agreed to treat, and shall treat, such Composite Note as a pro rata undivided ownership interest in the related Components and shall treat the Class E Component as debt of the Issuer for United States Federal income tax purposes.

This Note has been issued with Original Issued Discount ("OID") for U.S. Federal income tax purposes. Information relating to the issue price of the Note, the Note, the amount of OID on the Note, its issue date and the yield to maturity of the Note may be obtained from the placement agent at J.P. Morgan Securities Inc., attention: Structured Credit Products, 270 Park Ave, 8th floor, New York, NY 10017.

The failure to provide the Issuer, the Trustee and any Paying Agent with the applicable U.S. Federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or successor applicable form) in the case of a person that is a "United States Person" within the meaning of Section 7701(a)(30) of the code or an appropriate Internal Revenue Service Form W-8 (or successor applicable form) in the case of a person that is not a "United States Person" within the meaning of Section 7701(a)(30) of the Code may result in the imposition of U.S. Federal back-up withholding upon payments to the holder in respect of this Note.

The Subordinated Notes in the form of a Regulation S Global Subordinated Note will bear a legend substantially to the following effect unless the Issuer determines otherwise in compliance with applicable law:

This Subordinated Note has not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") or the securities laws of any state of the United States, and may be reoffered, resold, pledged or otherwise transferred only (a)(i) to a "Qualified Purchaser" (as defined for purposes of Section 3(c)(7) of the Investment Company Act) that is also either (ii) (x) a "Qualified Institutional Buyer" (as defined in Rule 144a under the Securities Act) in reliance on the exemption from Securities Act Registration provided by such rule that is not a broker-dealer which owns and

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invests on a discretionary basis less than U.S.$25 million in securities of issuers that are not affiliated persons of the dealer and is not a plan referred to in Paragraph (a)(1)(d) or (a)(1)(e) of Rule 144a or a Trust Fund referred to in Paragraph (a)(1)(f) of Rule 144a that holds the assets of such a plan, if investment decisions with respect to the plan are made by the or (y) an institutional "accredited investor" as defined in Rule 501(a)(1) and Rule 501(a)(3) or an "accredited investor" as defined in Rule 501(a)(8) if all of the equity owners of it are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act (each, an "Institutional Accredited Investor") or (b) to a person that is not a "U.S. Person" (as defined in Regulation S under the Securities Act) and is acquiring this Subordinated Note in reliance on the exemption from Securities Act registration provided by such regulation, and in each case in compliance with the certification and other requirements specified in the Subordinated Note Paying Agency Agreement and the Deed of Covenant (the "Subordinated Note Documents") referred to herein and in compliance with any applicable securities law of any applicable jurisdiction.

The Subordinated Notes may not be acquired by, or on behalf of, or with the assets of (i) any "employee benefit plan" (as defined in Section 3(3) of the United States Employee Retirement income Security Act of 1974, as amended ("ERISA")) and subject to Title I of ERISA, any "Plan" defined in and subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or any entity part or all of the assets of which constitute assets of any such employee benefit plan or plan by reason of the U.S. Department of Labor Regulation Section 2510.3-101 as modified by ERISA or otherwise, or (ii) any governmental, church or other plan subject to federal, state, local or non-U.S. law substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code unless, under this clause (ii), such purchase, holding and subsequent disposition of the Subordinated Notes would not result in any non-exempt prohibited transaction under such substantially similar federal, state, local or non-U.S. law. Each beneficial owner of this Subordinated Note will be deemed to have made the representations and agreements set forth in the Subordinated Note Paying Agency Agreement. The Issuer has the right, under the Subordinated Note Paying Agency Agreement, to compel any beneficial owner of an interest in a Subordinated Note that is a U.S. Person and is not a qualified purchaser and either a qualified institutional buyer or an Institutional Accredited Investor to sell its interest in the Subordinated Notes, or may sell such interest on behalf of such owner.

Any transfer, pledge or other use of this Subordinated Note for value or otherwise by or to any person is wrongful since the registered owner hereof, Cede & Co., has an interest herein, unless this Subordinated Note is presented by an authorized representative of the depository trust company ("DTC"), New York, New York, to the issuer or its agent for registration of transfer, exchange or payment and any subordinated note issued is registered in the name of Cede & Co. or of such other entity as is requested by an authorized representative of DTC (and any payment hereon is made to Cede & Co.).

Transfers of this Subordinated Note shall be limited to transfers made in accordance with the restrictions set forth in the Subordinated Note Paying Agency Agreement referred to herein.

Distributions of principal proceeds and interest proceeds to the holder of the Subordinated Notes represented hereby are subordinate to the payment on each payment date of principal of and interest on the Secured Notes of the Issuer and the payment of certain other amounts, to the extent and as described in the Indenture governing such Secured Notes.

Each Holder and each Beneficial Owner of a Subordinated Note, by acceptance of such Note, or its interest in a Subordinated Note, as the case may be, shall be deemed to have agreed to treat, and

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shall treat, such Subordinated Note as equity of the issuer for United States Federal Income Tax purposes.

The failure to provide the issuer and the Subordinated Note paying agent with the applicable U.S. Federal Income Tax Certifications (generally, an Internal Revenue Service Form W-9 (or Successor Applicable Form) in the case of a person that is a "United States Person" within the meaning of Section 7701(a)(30) of the Code or an appropriate Internal Revenue Service Form W-8 (or Successor Applicable Form) in the case of a person that is not a "United States Person" within the meaning of Section 7701(a)(30) of the Code) may result in the imposition of U.S. Federal back-up withholding upon payments to the holder in respect of this Subordinated Note.

The Subordinated Notes in the form of a certificated Subordinated Note will bear a legend substantially to the following effect unless the Issuer determines otherwise in compliance with applicable law:

This Subordinated Note has not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") or the securities laws of any state of the United States, and may be reoffered, resold, pledged or otherwise transferred only (a) (i) to a "Qualified Purchaser" that is (ii) (x) a "Qualified Institutional Buyer" (as defined in Rule 144a under the Securities Act) in reliance on the exemption from Securities Act registration provided by such rule that is not a broker-dealer which owns and invests on a discretionary basis less than U.S.$25 million in securities of issuers that are not affiliated persons of the dealer and is not a plan referred to in Paragraph (a)(1)(d) or (a)(1)(e) of Rule 144a or a Trust Fund referred to in Paragraph (a)(1)(f) of Rule 144a that holds the assets of such a plan, if investment decisions with respect to the plan are made by the beneficiaries of the plan or (y) an institutional "accredited investor" as defined in Rule 501(a)(1) and Rule 501(a)(3) or an "accredited investor" as defined in Rule 501(a)(8) if all of the equity owners of it are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act (each, an "Institutional Accredited Investor")or (b) to a person that is not a "U.S. Person" (as defined in Regulation S under the Securities Act) and is acquiring this Subordinated Note in reliance on the exemption from Securities Act registration provided by such regulation, and in each case in compliance with the certification and other requirements specified in the Subordinated Note Paying Agency Agreement referred to herein and in compliance with any applicable Securities Law of any applicable jurisdiction.

The acquisition of the Subordinated Notes by, or on behalf of, or with the assets of any "employee benefit plan" (as defined in Section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and subject to Title I of ERISA, any "Plan" subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or any entity part or all of the assets of which constitute assets of any such employee benefit plan or plan by reason of U.S. Department of Labor Regulation Section 2510.3-101 as modified by ERISA or otherwise (the "Plan Asset Regulation") (collectively, the "Benefit Plan Investors"), or any governmental, church or other plan subject to federal, state, local or non-U.S. law substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code is prohibited unless such purchase, holding and subsequent disposition of the Subordinated Notes would not result in any prohibited transaction under Section 406 of ERISA or under Section 4975 of the Code (or in the case of a governmental, church or other plan, any substantially similar federal, state, local or non-U.S. Law) or if such purchase would result in Benefit Plan Investors holding 25% or more of the value of the Subordinated Notes in aggregate. Each Beneficial Owner of this Subordinated Note will be required to make the representations and agreements set forth in the Subordinated Note Paying Agency Agreement. The Issuer has the right, under the Subordinated Note Paying Agency

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Agreement, to compel any Beneficial Owner of an interest in a Subordinated Note that is a U.S. Person and is not a Qualified Purchaser and either a Qualified Institutional Buyer or an Institutional Accredited Investor to sell its interest in the Subordinated Notes, or may sell such interest on behalf of such Owner.

Any transferee of an interest in this Subordinated Note is required to provide the Subordinated Note Paying Agent written certification of its ERISA status in the form set forth in the Subordinated Note Paying Agency Agreement. No transfer of any interest in this Subordinated Note will be effective, and the Subordinated Note Paying Agent will not recognize any such transfer, if it would result in 25% or more of the value of the Subordinated Notes being held by Benefit Plan Investors as defined in the Plan Asset Regulation.

Distributions of principal proceeds and interest proceeds to the Holder of the Subordinated Notes represented hereby are subordinate to the payment on each payment date of principal of and interest on the Secured Notes of the Issuer and the payment of certain other amounts, to the extent and as described in the Indenture governing such Secured Notes.

Each Holder and each Beneficial Owner of a Subordinated Note, by acceptance of such Note, or its interest in a Subordinated Note, as the case may be, shall be deemed to have agreed to treat, and shall treat, such Subordinated Note as equity of the Issuer for United States Federal Income Tax purposes.

The failure to provide the Issuer, the Subordinated Note Paying Agent and the Paying Agent with the applicable U.S. Federal Income Tax Certifications (generally, an Internal Revenue Service Form W-9 (or Successor Applicable Form) in the case of a person that is a "United States Person" within the meaning of Section 7701(a)(30) of the Code or an appropriate Internal Revenue Service Form W-8 (or Successor Applicable Form) in the case of a person that is not a "United States Person" within the meaning of Section 7701(a)(30) of the Code) may result in the imposition of U.S. Federal Back-up Withholding upon payments to the holder in respect of this Subordinated Note.

Non-Permitted Holder/Non-Permitted ERISA Holder

If any U.S. person that is not a Qualified Institutional Buyer and a Qualified Purchaser shall become the beneficial owner of an interest in any Global Note or any U.S. person that is not a Qualified Purchaser or that does not have an exemption available under the Securities Act and the Investment Company Act shall become the holder or beneficial owner of a Subordinated Note (any such person a "Non-Permitted Holder"), the Issuer shall, promptly after discovery by the Issuer that such person is a Non-Permitted Holder (or upon notice from the Trustee, the Subordinated Note Paying Agent or the Co-Issuer to the Issuer, if any of them makes the discovery (who, in each case, agree to notify the Issuer of such discovery, if any)), send notice to such Non-Permitted Holder demanding that such Non-Permitted Holder transfer its interest to a person that is not a Non-Permitted Holder within 30 days of the date of such notice. If such Non-Permitted Holder fails to so transfer its Notes, the Issuer shall have the right, without further notice to the Non-Permitted Holder, to sell such Notes or interest in such Notes to a purchaser selected by the Issuer that is not a Non-Permitted Holder on such terms as the Issuer may choose. The Issuer, or the Trustee or the Subordinated Note Paying Agent, as applicable, acting on behalf of the Issuer, may select the purchaser by soliciting one or more bids from one or more brokers or other market professionals that regularly deal in securities similar to the Notes and selling such Notes to the highest such bidder. However, the Issuer or the Trustee or Subordinated Note Paying Agent, as applicable, may select a purchaser by any other means determined by it in its sole discretion. The holder of each Note, the Non-Permitted Holder

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and each other person in the chain of title from the holder to the Non-Permitted Holder, by its acceptance of an interest in the Notes agrees to cooperate with the Issuer and the Trustee or the Subordinated Note Paying Agent, as applicable, to effect such transfers. The proceeds of such sale, net of any commissions, expenses and taxes due in connection with such sale shall be remitted to the Non-Permitted Holder. The terms and conditions of any sale shall be determined in the sole discretion of the Issuer, and the Issuer shall not be liable to any person having an interest in the Notes sold as a result of any such sale or the exercise of such discretion.

If any person shall become the beneficial owner of an interest in a Subordinated Note who has made a Benefit Plan Investor or Controlling Person representation that is subsequently shown to be false or misleading or whose beneficial ownership otherwise causes a violation of the 25% Limitation (any such person a "Non-Permitted ERISA Holder"), the Issuer shall, promptly after discovery by the Issuer that such person is a Non-Permitted ERISA Holder by the Issuer (or upon notice from the Subordinated Note Paying Agent if it makes the discovery (who agrees to notify the Issuer of such discovery, if any)), send notice to such Non-Permitted ERISA Holder demanding that such Non-Permitted ERISA Holder transfer its interest to a person that is not a Non-Permitted ERISA Holder within 30 days of the date of such notice. If such Non-Permitted ERISA Holder fails to so transfer its Subordinated Notes, as applicable, the Issuer shall have the right, without further notice to the Non-Permitted ERISA Holder, to sell such Subordinated Notes or interest in such Subordinated Notes to a purchaser selected by the Issuer that is not a Non-Permitted ERISA Holder on such terms as the Issuer may choose. The Issuer may select the purchaser by soliciting one or more bids from one or more brokers or other market professionals that regularly deal in securities similar to the Subordinated Notes, and selling such Subordinated Notes to the highest such bidder. However, the Issuer may select a purchaser by any other means determined by it in its sole discretion. The holder of each Subordinated Note, the Non-Permitted ERISA Holder and each other person in the chain of title from the holder to the Non-Permitted ERISA Holder, by its acceptance of an interest in the Subordinated Notes, agrees to cooperate with the Issuer to effect such transfers. The proceeds of such sale, net of any commissions, expenses and taxes due in connection with such sale shall be remitted to the Non-Permitted ERISA Holder. The terms and conditions of any sale under this subsection shall be determined in the sole discretion of the Issuer, and the Issuer shall not be liable to any person having an interest in the Subordinated Notes sold as a result of any such sale or the exercise of such discretion.

Cayman Islands placement provisions

The Placement Agent has agreed that it has not made and will not make any offer or invitation to the public in the Cayman Islands to subscribe for the Offered Securities.

Listing and general information

• Application will be made to the Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Application will be made to the Irish Stock Exchange for the Secured Notes and the Composite Notes to be admitted to the Daily Official List, and traded on its regulated market. There can be no assurance that such listings will be granted or, if granted, will be maintained. In particular, if the Issuer reasonably determines that delisting may be necessary in order to prevent the Issuer from being treated as engaged in a United States trade or business or otherwise being subject to United States federal, state or local income tax on a net income basis, the Co-Issuers may de-list the Secured Notes and the Composite Notes. The Holders of the Subordinated Notes may direct the Issuer to make application to the Irish

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Stock Exchange for the Subordinated Notes to be admitted to the Daily Official List, and traded on its regulated market, at any time after the Closing Date at the expense of the Issuer.

• During the life of the Prospectus, physical copies of the Memorandum of Association and Articles of Association of the Issuer, the Certificate of Incorporation and By-laws of the Co-Issuer and the Indenture will be available for inspection and will be obtainable at the principal office of the Issuer, and copies thereof may be obtained upon request. It is not intended for post-issuance information regarding the Notes or Composite Notes or the performance of the Collateral or Composite Note Collateral to be provided.

• Since incorporation, neither the Issuer nor the Co-Issuer has commenced trading, established any accounts or declared any dividends, except for the transactions described herein.

• Neither of the Co-Issuers is, or has since incorporation been, involved in any legal, governmental or arbitration proceedings relating to claims in amounts which may have a significant effect on the financial position of the Co-Issuers in the context of the issue of the Notes, nor, so far as the Co-Issuers are aware, is any such governmental, litigation or arbitration proceedings involving the Co-Issuers pending or threatened.

• The issuance by the Issuer of the Offered Securities is expected to be authorized by the Board of Directors of the Issuer by resolutions to be passed prior to the Closing Date and the issuance by the Co-Issuer of the Offered Securities is expected to be authorized by the Board of Directors of the Co-Issuer by resolutions to be passed prior to the Closing Date.

• Since incorporation, neither the Issuer nor the Co-Issuer has produced annual reports and accounts. 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 confirmation, on an annual basis, that to the best of its knowledge following review of the activities of the prior year, no Event of Default has occurred or, if one has, specifying the same.

• The Notes and Composite Notes sold in offshore transactions in reliance on Regulation S under the Securities Act and represented by the Regulation S Global Notes or the Regulation S Global Subordinated Notes, as applicable, have been accepted for clearance through Clearstream and Euroclear. The Notes sold to persons that are Qualified Institutional Buyers and Qualified Purchasers in reliance on Rule 144A under the Securities Act and represented by Rule 144A Global Notes have been accepted for clearance through DTC. The CUSIP Numbers, Common Codes and International Securities Identification Numbers (ISIN) for the Notes and Composite Notes represented by Regulation S Global Notes and Rule 144A Global Notes and the Subordinated Notes represented by the Regulation S Global Subordinated Notes and the Certificated Subordinated Notes are as indicated below, as applicable.

• Any website mentioned in this Offering Circular does not form part of the Prospectus prepared for the purpose of seeking admission to the regulated market of the Irish Stock Exchange.

• The Co-Issuers have been established as special purpose vehicles for the purpose of issuing asset-backed securities.

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• Maples and Calder Listing Services Limited, as the Irish Listing Agent, is acting solely in its capacity as listing agent for the Issuer in connection with the Secured Notes and the Composite Notes and is not itself seeking admission of the Secured Notes and the Composite Notes to the official list of the Irish Stock Exchange or to trading on the Irish Stock Exchange for the purposes of the Prospectus Directive.

Regulation S Global Rule 144A Global

Common Code CUSIP ISIN CUSIP ISIN

Class A-1 Notes 029855196 G8405QAA7 USG8405QAA79 85223XAA7 US85223XAA72

Class A-2a Notes 029855218 G8405QAB5 USG8405QAB52 85223XAC3 US85223XAC39

Class A-2b Notes 029855234 G8405QAG4 USG8405QAG40 85223XAN9 US85223XAN93

Class B Notes 029855269 G8405QAC3 USG8405QAC36 85223XAE9 US85223XAE94

Class C Notes 029855285 G8405QAD1 USG8405QAD19 85223XAG4 US85223XAG43

Class D Notes 029855307 G8405QAE9 USG8405QAE91 85223XAJ8 US85223XAJ81

Class E Notes 029855323 G8405QAF6 USG8405QAF66 85223XAL3 US85223XAL38

Composite Notes 030097700 G8405QAH2 USG8405QAH23 N/A N/A

Subordinated Notes 029855331 G84056AA1 USG84056AA15 N/A N/A

• The Subordinated Notes in certificated form will also bear the following identification numbers: Regulation S Rule 144A

Common Code CUSIP ISIN CUSIP ISIN

Subordinated Notes N/A N/A N/A 85223NAA9 US85223NAA90

Legal matters

Certain legal matters with respect to the Notes will be passed upon for the Co-Issuers and the Placement Agent by Allen & Overy LLP, New York, New York. Certain matters with respect to Cayman Islands law will be passed upon for the Issuer by Maples and Calder.

Certain legal matters with respect to the Collateral Manager will be passed upon for the Collateral Manager by internal counsel to the Collateral Manager and by Orrick, Herrington & Sutcliffe LLP, New York, New York. No separate counsel has been appointed to represent the Holders of any Class of Offered Securities.

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Glossary of defined terms

"Actual Interest Amount" means, with respect to any Reference Obligation Payment Date, payment by or on behalf of the Issuer of an amount in respect of interest due under Reference Obligation including, without limitation, any deferred interest, defaulted interest, but excluding payments in respect of prepayment penalties, yield maintenance provisions or principal (except that the Actual Interest Amount will include any payment of principal representing capitalized interest) paid to the holder(s) of the Reference Obligation in respect of the Reference Obligation.

"Actual Principal Amount" means, with respect to the Final Amortization Date or the Legal Final Maturity Date, an amount paid on such day by or on behalf of the related issuer in respect of principal (excluding any capitalized interest) to the holder(s) of the Reference Obligation in respect of the Reference Obligation.

"Additional Fixed Amount" has the meaning specified in the terms of each CDS Portfolio Asset.

"Additional Fixed Payment Event" means the occurrence on or after the Effective Date and on or before the day that is one calendar year after the Effective Maturity Date of a Writedown Reimbursement, a Principal Shortfall Reimbursement or an Interest Shortfall Reimbursement.

"Adjusted Initial Face Amount" means, initially, (i) U.S.$4,000,000 and (ii) if any exchange of the Composite Notes for their Components shall occur as described in “—Exchange of Composite Notes into Components” below, thereafter the difference between (x) U.S.$4,000,000 and (y) the aggregate face amount of the Treasury Strip exchanged for Composite Notes as described in “—Exchange of Composite Notes into Components” below.

"Administrative Expense Cap" means (a) with respect to the first Payment Date, an amount equal to (i) U.S.$135,000 plus (ii) 0.016% of the sum of the Aggregate Principal/Notional Balance of the Portfolio Assets as of the related Determination Date and (b) with respect to each other Payment Date, an amount equal to (i) U.S.$65,000 plus (ii) 0.008% of the Aggregate Principal/Notional Balance of the Portfolio Assets as of the related Determination Date.

"Administrative Expenses" means amounts due or accrued with respect to any Payment Date and payable by the Issuer or the Co-Issuer to:

(a) first, the Trustee or any co-trustee, (excluding any indemnities if an Event of Default has not occurred and is not continuing); and then

(b) second, the Collateral Administrator under the Collateral Administration Agreement, excluding any indemnities; and then

(c) third, the Subordinated Note Paying Agent under the Subordinated Note Paying Agency Agreement, excluding any indemnities; and then

(d) fourth, the Administrator under the Administration Agreement, excluding any indemnities; and then

(e) fifth, the Rating Agencies for fees (including surveillance and estimated rating fees) and expenses in connection with any rating of the Secured Notes, the Composite Notes or any Portfolio

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Assets (including the annual fee payable with respect to the monitoring of any rating) and any amounts in respect of any indemnities; and then

(f) sixth, any amounts in respect of any indemnities with respect to the parties in subsections (a), (b) and (c) above except any indemnities paid out under subsection (i) above;

(g) seventh, the Collateral Manager under the Management Agreement, other than the Management Fee, including any amounts in respect of indemnities and the CM Technology Expense Allowance for such Payment Date;

(h) eighth, the TRS Counterparty under the Total Return Swap, excluding any TRS LIBOR Breakage Amounts, TRS Hedging Amounts or indemnities; and then

(i) ninth, on a pro rata basis (and including amounts in respect of any indemnities):

(i) the Independent accountants, the agents, and the counsel and other advisors of the Issuer for fees and expenses incurred on behalf of the Issuer, including, but not limited to, in connection with the preparation of any financial statements and reports and any supplemental indenture or proposed supplemental indenture;

(ii) any Person for amounts payable in connection with the use of a reputable market pricing service to the extent directly attributable to pricing any of the Collateral; and

(iii) any other person in respect of any other fees or expenses (including indemnities) permitted under the Indenture, the Subordinated Note Documents and the Secured Notes, the Subordinated Notes, the Composite Notes and the documents delivered pursuant to or in connection with the Indenture, the Subordinated Note Documents and the Secured Notes, the Composite Notes and the Subordinated Notes (including the payment of assignment fees, facility rating fees and all legal and other fees and expenses required in connection with the purchase or sale of any Funded Portfolio Assets to the extent not taken into account in determining the purchase or sale prices of such Funded Portfolio Assets), including but not limited to, amounts owed to the Issuer or Co-Issuer pursuant to the Indenture and any amounts due in respect of the listing of the Secured Notes, the Composite Notes and the Subordinated Notes on the Irish Stock Exchange and any other stock exchange, if any; provided that Closing Date Expenses shall not be payable as Administrative Expenses but shall be payable only from the Expense Account pursuant to the Indenture; provided further that, for the avoidance of doubt, amounts owed by the Issuer under the CDS Portfolio Assets and the Offsetting Short Transactions, if any, shall not be payable as Administrative Expenses.

"Affiliate" or "affiliate" means, with respect to a specified Person, (a) any other Person who, directly or indirectly, is in control of, or controlled by, or is under common control with, such Person or (b) any other Person who is a director, Officer, employee, member or partner of such Person or any such other Person described in clause (a) above. For the purposes of this definition, "control" of a Person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such Person or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Notwithstanding the foregoing, with respect to the Issuer, no other special purpose company to which the Administrator provides directors and acts as share trustee or administrator shall be an Affiliate of the Issuer.

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"Aggregate Discount Amount" means, solely for the purpose of determining whether, at any time, a Sequential Paydown Trigger Event has occurred, the sum, at such time, of:

(a) 10% of the Aggregate Principal/Notional Balance of all Portfolio Assets with a Moody's Rating equal to or higher than "Ba3" but lower than or equal to "Ba1" or an S&P Rating of equal to or higher than "BB-" but lower than or equal to "BB+";

(b) 30% of the Aggregate Principal/Notional Balance of all Portfolio Assets with a Moody's Rating equal to or higher than "B3" but lower than or equal to "B1" or an S&P Rating of equal to or higher than "B-" but lower than or equal to "B+"; and

(c) 50% of the Aggregate Principal/Notional Balance of all Portfolio Assets with a Moody's Rating equal to or higher than "Ca" but lower than or equal to "Caa1" or an S&P Rating of equal to or higher than "CCC-" but lower than or equal to "CCC+",

provided that, if a Portfolio Asset is rated by both Moody's and S&P, and such ratings correspond to different subsections of this definition of Aggregate Discount Amount, then the subsection resulting in the larger discount shall be applied without duplication.

"Aggregate Implied Writedown Amount" means the greater of (a) zero and (b) the aggregate of all Implied Writedown Amounts minus the aggregate of all Implied Writedown Reimbursement Amounts, provided that if Implied Writedown is not applicable, the Aggregate Implied Writedown Amount shall be deemed to be zero.

"Aggregate Outstanding Amount" means, (a) when used with respect to any of the Secured Notes at any time, the aggregate principal amount of such Secured Notes Outstanding at such time, (b) when used with respect to any Composite Note at any time, the aggregate principal amount of the Class E Component at such time and, (c) when used with respect to any of the Subordinated Notes, shall have the meaning set forth in the Subordinated Note Paying Agency Agreement. Except as otherwise provided herein, the Aggregate Outstanding Amount of a Class C Note, Class D Note or Class E Note at any time shall include all Class C Deferred Interest, Class D Deferred Interest or Class E Deferred Interest, as applicable, with respect to such Secured Note at such time.

"Aggregate Principal/Notional Balance" means, when used with respect to one or more Portfolio Assets as of any date of determination, the sum of the Principal/Notional Balances on such date of determination of all such Portfolio Assets.

"Amortization Adjustment Amount" means an amount equal to the principal payments made on any Reference Obligations during the related Due Period.

"Applicable Percentage" means, on any day, a percentage equal to A divided by B, where:

"A" means the product of the Initial Face Amount and the Initial Factor as decreased on each Delivery Date by an amount equal to (a) the outstanding principal balance of Delivered Obligations delivered to the day multiplied by (b) the Initial Factor.

"B" means the product of Issuer (as adjusted in accordance with the relevant Confirmation) divided by the Current Factor on such the Original Principal Amount and the Initial Factor;

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(a) as increased by the outstanding principal balance of any further issues by the Reference Entity that are fungible with and form the same part of the same legal series as the Reference Obligation; and

(b) as decreased by any cancellations of some or all of the Outstanding Principal Amount resulting from purchases of the Reference Obligation by or on behalf of the Reference Entity.

"Applicable Recovery Rate" means with respect to any Portfolio Asset on any Measurement Date, the lesser of:

(a) an amount equal to the percentage for such Funded Portfolio Asset set forth in the Moody's recovery rate matrix set forth in Annex D-1 in (i) the table corresponding to the relevant Specified Type of Asset-Backed Security or REIT Debt Security, (ii) the column in such table setting forth the Moody's Rating of such Funded Portfolio Asset as of the date of issuance of such Funded Portfolio Asset and (iii) the row in such table opposite the percentage of the issue of which such Funded Portfolio Asset was a part including all other bonds which are pari passu in terms of losses, is a part relative to the total capitalization of (including both debt and equity securities issued by) the relevant issuer of or obligor on such Funded Portfolio Asset, determined on the original issue date of such Funded Portfolio Asset; provided that:

(A) if such Funded Portfolio Asset is a U.S. Agency Guaranteed Security, such amount shall be 100%;

(B) if the timely payment of principal of and interest on such Funded Portfolio Asset is guaranteed (and such guarantee ranks equally and ratably with the guarantor's senior unsecured debt) by another person, unless such Funded Portfolio Asset is a U.S. Agency Guaranteed Security, such amount shall be 30%; and

(C) if such Funded Portfolio Asset is a Reinsurance Security, such amount shall be assigned by Moody's upon the purchase of each such Funded Portfolio Asset and,

(b) an amount equal to the percentage for such Funded Portfolio Asset set forth in the S&P recovery rate matrix set forth in Annex D-2 in (i) the applicable table, (ii) the row in such table opposite the S&P Rating of such Funded Portfolio Asset at the time such Funded Portfolio Asset was issued and (iii) in the column in such table below the rating of the most senior Class of outstanding Secured Notes.

"Approved Credit Support Document" means a security agreement in the form of the 1994 ISDA Credit Support Annex (ISDA Agreements Subject to New York Law Only), as modified by mutual agreement between the Synthetic Counterparty and the Issuer and subject to satisfaction of the Rating Condition;

"Auction Call Redemption Price" means, in respect of an Auction Call Redemption, an amount that would result in an Internal Rate of Return on the Subordinated Notes equal to or greater than 0%.

"Average Life" means, on any Measurement Date with respect to any Portfolio Asset (provided that, for any CDS Portfolio Asset, such determination shall be made with respect to the related Reference Obligation), the quotient obtained by the Collateral Manager by dividing (a) the sum of the products of (i) the number of years (rounded to the nearest one tenth thereof) from such Measurement Date to the respective dates of each successive distribution of principal of such

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Portfolio Asset (other than a Defaulted Portfolio Asset) (assuming that (A) such Portfolio Asset does not default and is not sold and (B) any clean-up call, auction call or similar redemption of such Portfolio Asset occurs in accordance with its terms), and (ii) the respective amounts of principal of such distributions by (b) the sum of all successive distributions of principal on such Portfolio Asset (other than a Defaulted Portfolio Asset).

"Bank" means LaSalle Bank National Association, in its individual capacity.

"Business Day" means any day other than (a) a Saturday or a Sunday or (b) a day on which commercial banks are authorized or required by applicable law, regulation or executive order to close in New York, New York or in the city in which the principal corporate trust office of the Trustee is located (initially being Chicago, Illinois) or, for any final payment of principal, in the relevant place of presentation.

"Calculation Amount" means at any date of determination, and with respect to any Defaulted Portfolio Asset or Deferred Interest PIK Bond, the lesser of (a) the Fair Market Value (as determined by the Collateral Manager in accordance with the definition thereof) of such Defaulted Portfolio Asset or Deferred Interest PIK Bond and (b) the product of the Applicable Recovery Rate multiplied by the Principal/Notional Balance of such Defaulted Portfolio Asset or Deferred Interest PIK Bond; provided, however, that with respect to a Deferred Interest PIK Bond, the related Principal/Notional Balance of such bond shall not include the aggregate amount of any unpaid and deferred interest thereon.

"Cash" means such funds denominated with currency of the United States of America as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a securities account.

"CDS Portfolio Assets" means each "pay-as-you-go credit default swap" transaction related to a specific Reference Obligation evidenced by a confirmation (incorporating provisions of the ISDA Master Agreement and the related schedule attached thereto) dated as of the Closing Date, by and between the Issuer and the Synthetic Counterparty, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, pursuant to which the Issuer sells credit protection to the Synthetic Counterparty on a single Reference Obligation or a Reference Portfolio.

"Class" means the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Subordinated Notes, as applicable for which purpose the Composite Notes shall not be a separate Class of Notes except for certain voting purposes as described in the following paragraph. For voting purposes, the holders of the Composite Notes shall vote with respect to the Aggregate Outstanding Amount of the Class E Notes comprising the related Class E Component. The holders of the Composite Notes shall have the right to vote as a separate Class solely with respect to any supplemental Indenture to the Indenture that affects the Composite Notes in a manner that is materially different from the Class represented by its Components.

"Class C Deferred Interest" means, with respect to the Class C Notes, any interest due on such Secured Notes that is not available to be paid as a result of the operation of the Priority of Payments on any Payment Date and that is deferred and added to the Aggregate Outstanding Amount of the Class C Notes until the Payment Date on which such interest is available to be paid in accordance with the Priority of Payments.

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"Class D Deferred Interest" means, with respect to the Class D Notes, any interest due on such Secured Notes that is not available to be paid as a result of the operation of the Priority of Payments on any Payment Date and is deferred and added to the Aggregate Outstanding Amount of the Class D Notes until the Payment Date on which such interest is available to be paid in accordance with the Priority of Payments.

"Class E Deferred Interest" means, with respect to the Class E Notes, any interest due on such Secured Notes that is not available to be paid as a result of the operation of the Priority of Payments on any Payment Date and is deferred and added to the Aggregate Outstanding Amount of the Class E Notes until the Payment Date on which such interest is available to be paid in accordance with the Priority of Payments.

"Clearstream" means Clearstream Banking, société anonyme, 42, Avenue JF Kennedy, 855 Luxembourg, Luxembourg.

"CM Technology Expense Allowance" means, with respect to each Determination Date and the next following Payment Date, an amount (calculated on the basis of a year of 360 days of twelve 30-day months) invoiced by the Collateral Manager to pay certain technology expenses, which will not be greater than 0.01% per annum of the Portfolio Balance on such Determination Date.

"Collateral Administration Agreement" means the Collateral Administration Agreement dated as of the Closing Date by and between the Issuer, the Collateral Manager and the Collateral Administrator relating to certain functions performed by the Collateral Administrator for the Issuer with respect to the Indenture and the Collateral, as amended from time to time.

"Collateral Administrator" means LaSalle Bank National Association and any successor appointed as Collateral Administrator pursuant to the Collateral Administration Agreement.

"Collateral Manager Notes" means any Notes held directly or indirectly by the Collateral Manager, an affiliate of the Collateral Manager or an account for which the Collateral Manager or an affiliate acts as investment adviser (and for which the Collateral Manager or such affiliate has discretionary voting authority); provided that "Collateral Manager Notes" shall not include Notes held directly or indirectly by an account for which the Collateral Manager or an affiliate acts as investment adviser if, with respect to any particular vote, such vote is in fact directed by a board of directors or similar governing body with a majority of members that are independent from the Collateral Manager.

"Composite Note Collateral " means (a) the Treasury Strip, (b) any proceeds of the Treasury Strip Component, (c) the Composite Note Collateral Account and (d) all proceeds with respect to the foregoing.

"Composite Note Payment Date" means the tenth Business Day after each Payment Date; provided that the final Composite Notes Payment Date shall be the Stated Maturity for the Composite Notes.

"Credit-Impaired Portfolio Asset" means (a) if neither the Class A-1 Notes, the Class A-2 Notes nor the Class B Notes have been downgraded by one or more rating subcategories by Moody's since the Closing Date (or if the rating of any such Class of Notes had been so downgraded, it has been reinstated to the rating assigned by Moody's to such Class on the Closing Date or better) and none of the Class C Notes, the Class D Notes and the Class E Notes have been downgraded by two or more rating subcategories by Moody's since the Closing Date (or if the rating of any such Class of Notes had been so downgraded, it has been reinstated to one rating subcategory below the rating

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assigned by Moody's to such Class on the Closing Date or better), any Portfolio Asset (or with respect to a CDS Portfolio Asset, the related Reference Obligation) which, in the sole determination of the Collateral Manager, acting on behalf of the Issuer (which determination shall not be called into question as a result of subsequent events), is believed to have a significant risk of declining in credit quality or, over time, becoming a Deferred Interest PIK Bond or a Defaulted Portfolio Asset or is a Written-Down Security, Deferred Interest PIK Bond or Defaulted Portfolio Asset or (b) if the Class A-1 Notes, the Class A-2 Notes or the Class B Notes have been downgraded by one or more rating subcategories by Moody's since the Closing Date (unless it has been reinstated to the rating assigned by Moody's to such Class on the Closing Date or better) or the Class C Notes, the Class D Notes or the Class E Notes have been downgraded two or more rating subcategories by Moody's since the Closing Date (unless it has been reinstated to one rating subcategory below the rating assigned by Moody's to such Class on the Closing Date or better), any Portfolio Asset (or with respect to a CDS Portfolio Asset, the related Reference Obligation) which (1) in the sole determination of the Collateral Manager, acting on behalf of the Issuer (which determination shall not be called into question as a result of subsequent events), is believed to have a significant risk of declining in credit quality or, over time, becoming a Deferred Interest PIK Bond or a Defaulted Portfolio Asset or is a Written-Down Security, Deferred Interest PIK Bond or Defaulted Portfolio Asset and (2) has either (A) been (i) placed on negative watch or (ii) downgraded by at least one rating subcategory, by either S&P or Moody's since the date on which such Portfolio Asset was acquired or entered into by the Issuer or (B) experienced an increase in credit spread of 10% or more compared to the credit spread at which such Portfolio Asset was acquired or entered into by the Issuer, determined by reference to an applicable index selected by the Collateral Manager. With respect to any Portfolio Asset acquired on the Closing Date, such Portfolio Asset shall be deemed to be a Credit-Impaired Portfolio Asset as of such date for purposes of paragraph (10) of the Eligibility Criteria solely if such Portfolio Asset was a Credit-Impaired Portfolio Asset as of the trade date of the related transaction entered into by the Warehouse Provider during the warehouse period.

"Credit-Improved Portfolio Asset" means (a) if neither the Class A-1 Notes, the Class A-2 Notes nor the Class B Notes have been downgraded by one or more rating subcategories by Moody's since the Closing Date (or if the rating of any such Class of Notes had been so downgraded, it has been reinstated to the rating assigned by Moody's to such Class on the Closing Date or better) and none of the Class C Notes, the Class D Notes and the Class E Notes have been downgraded by two or more rating subcategories by Moody's since the Closing Date (or if the rating of any such Class of Notes had been so downgraded, it has been reinstated to one rating subcategory below the rating assigned by Moody’s to such Class on the Closing Date or better), any Portfolio Asset included in the Collateral (or with respect to a CDS Portfolio Asset, the related Reference Obligation) that the Collateral Manager believes (based on its judgment exercised in accordance with the standard of care prescribed by the Management Agreement) has significantly improved in credit quality since the date on which such Portfolio Asset was acquired or entered into by the Issuer or (b) if the Class A-1 Notes, the Class A-2 Notes or the Class B Notes have been downgraded by one or more rating subcategories by Moody’s since the Closing Date (unless it has been reinstated to the rating assigned by Moody’s to such Class on the Closing Date or better) or the Class C Notes, the Class D Notes or the Class E Notes have been downgraded two or more rating subcategories by Moody’s since the Closing Date (unless it has been reinstated to one rating subcategory below the rating assigned by Moody’s to such Class on the Closing Date or better), any Portfolio Asset (or with respect to a CDS Portfolio Asset, the related Reference Obligation) (1) that the Collateral Manager believes (based on its judgment exercised in accordance with the standard of care prescribed by the Management Agreement) has significantly improved in credit quality since the date on which such

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Portfolio Asset was acquired or entered into by the Issuer and (2) which has either (A) been (i) placed on a watch list for possible upgrade or (ii) upgraded at least one rating subcategory, by either S&P or Moody’s since the date on which such Portfolio Asset was acquired or entered into by the Issuer or (B) experienced a decrease in credit spread of 10% or more compared to the credit spread at which such Portfolio Asset was acquired or entered into by the Issuer, determined by reference to an applicable index selected by the Collateral Manager.

"Current Factor" means the factor of the Reference Obligation as specified in the most recent Servicer Report; provided that if the factor is not specified in the most recent Servicer Report or such specified factor includes deferred or capitalized interest relating to the term of the relevant Transaction, then the Current Factor shall be the ratio equal to (a) the Outstanding Principal Amount as of such date, determined in accordance with the most recent Servicer Report over (b) the Original Principal Amount.

"Current Period Implied Writedown Amount" means, in respect of a Reference Obligation Calculation Period, an amount determined in accordance with the terms of each Confirmation.

"Deed of Covenant" means the deed of covenant executed by the Issuer on May 11, 2007 pursuant to which the Subordinated Notes are constituted (including the terms and conditions of the Subordinated Notes attached to the Subordinated Note Paying Agency Agreement and incorporated into the Deed of Covenant by reference).

"Defaulted Interest" means any interest due and payable in respect of any Secured Note which is not punctually paid or duly provided for on the applicable Payment Date or at Stated Maturity and which remains unpaid, including any interest due and payable thereon. In no event shall interest which is deferred and capitalized as Class C Deferred Interest, Class D Deferred Interest or Class E Deferred Interest in accordance with the Priority of Payments constitute Defaulted Interest.

"Defaulted Portfolio Asset" means (a) any Portfolio Asset or any other security included in the Collateral and concerning which a Responsible Officer of the Trustee, the Collateral Manager or the Collateral Administrator, as the case may be, has received notice or has actual knowledge of any of the following:

(i) the occurrence and continuance of a payment default under the Underlying Instrument related to (A) such Portfolio Asset if such Portfolio Asset is a Funded Portfolio Asset or (B) the related Reference Obligation if such Portfolio Asset is a CDS Portfolio Asset other than a payment default of up to five days with respect to which the Collateral Manager has certified in writing to the Trustee that, in its judgment (exercised in accordance with the standard of care prescribed by the Management Agreement) is due to non-credit and non-fraud related reasons shall not be classified as a Defaulted Portfolio Asset;

(ii) the occurrence and continuance of a default as to scheduled payment of principal or interest with respect to another security of the issuer of (A) such Portfolio Asset if it is a Funded Portfolio Asset or (B) the related Reference Obligation if such Portfolio Asset is a CDS Portfolio Asset, that is pari passu with, or senior to, such Portfolio Asset;

(iii) the occurrence and continuance of a default (other than any payment default) which entitles the holders of (A) such Portfolio Asset if it is a Funded Portfolio Asset or (B) the related Reference Obligation if such Portfolio Asset is a CDS Portfolio Asset, with the

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giving of notice or passage of time or both, to accelerate the maturity of all or a portion of the principal amount of (A) such Portfolio Asset if it is a Funded Portfolio Asset or (B) the related Reference Obligation if such Portfolio Asset is a CDS Portfolio Asset, and such default has not been cured or waived;

(iv) as to which a bankruptcy, insolvency, or receivership proceeding has been initiated with respect to the issuer of (A) such Portfolio Asset if it is a Funded Portfolio Asset or (B) the related Reference Obligation if such Portfolio Asset is a CDS Portfolio Asset; or

(v) (A) that has a Moody's Rating of "Ca" or "C" or (B) that (1) if such Portfolio Asset is, or has a related Reference Obligation that is, an Asset-Backed Security, is rated "CC", "D" or "SD" by S&P (or S&P has withdrawn its rating which, prior to such withdrawal, was "CCC" or below) and (2), if such Portfolio Asset is, or has a related Reference Obligation that is other than an Asset-Backed Security, the issuer credit rating is rated "D" or "SD" by S&P (or S&P has withdrawn its rating which, prior to such withdrawal, was "CCC" or below); or

(b) without limiting the foregoing, any Delivered Obligation delivered to the Issuer in connection with the physical settlement of a CDS Portfolio Asset that became a Defaulted Portfolio Asset.

"Deferred Interest PIK Bond" means a PIK Bond with respect to which payment of interest either in whole or in part has been deferred and capitalized in an amount equal to the amount of interest payable in respect thereof for (a) in the case of a PIK Bond with a Moody's Rating of "Baa3" or higher at the time of purchase, the lesser of (i) two consecutive payment periods and (ii) one year and (b) in the case of a PIK Bond with a Moody's Rating below "Baa3" at the time of purchase, the lesser of (i) one payment period and (ii) six consecutive months, but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest has been paid in accordance with the terms of the Underlying Instruments.

"Deferred PIK Amount" means, as of any Quarterly Distribution Date, the aggregate amount of all scheduled interest payments on any PIK Bonds that were, during the related Due Period, deferred or paid "in-kind" in accordance with the terms of such PIK Bonds, which deferral or payment "in-kind" does not constitute an event of default pursuant to the terms of the related Underlying Instruments, provided that the Deferred PIK Amount shall not include any amounts attributable to a Deferred Interest PIK Bond which has been a Deferred Interest PIK Bond for two consecutive years from the date on which such PIK Bond last became a Deferred Interest PIK Bond.

"Delivered Obligation" means a Reference Obligation that is delivered to the Issuer upon the occurrence and physical settlement of a "credit event" or a "physical settlement event", as applicable, under the related CDS Portfolio Asset.

"Determination Date" means the last day of each Due Period. For any Payment Date, the term "related Determination Date" is used to refer to the Determination Date that immediately precedes such Payment Date.

"Discount Asset" means:

(A) any Funded Portfolio Asset acquired after the Ramp-Up Completion Date, excluding any security that is a Deferred Interest PIK Bond or Defaulted Portfolio Asset, that:

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(i) (a) is acquired by the Issuer at a purchase price of less than 92% of its principal balance, until such time as the market value of such Funded Portfolio Asset exceeds 95% of its principal balance for 60 consecutive Business Days and (b) was publicly rated at least “Aa3” by Moody’s at the time of such acquisition; or

(ii) (a) is acquired by the Issuer at a purchase price of less than 75% of its principal balance, until such time as the market value of such Funded Portfolio Asset exceeds 85% of its principal balance for 60 consecutive Business Days and (b) was publicly rated less than “Aa3” by Moody’s at the time of such acquisition; and

(B) any CDS Portfolio Asset acquired after the Ramp-Up Completion Date, excluding any such CDS Portfolio Asset the Reference Obligation of which would be a Deferred Interest PIK Bond or Defaulted Portfolio Asset, the Reference Obligation of which (in the notional amount of such CDS Portfolio Asset):

(i) (a) if purchased directly by the Issuer on the trade date of the related CDS Portfolio Asset (or, if earlier, the trade date of the related transaction entered into by an affiliate of the Placement Agent prior to the Closing Date), would have been purchased at a purchase price of less than 92% of its principal balance, until such time as the market value of such Reference Obligation exceeds 95% of its principal balance for 60 consecutive Business Days and (b) was publicly rated at least “Aa3” by Moody’s at the time of such deemed purchase; or

(ii) (a) if purchased directly by the Issuer on the trade date of the related CDS Portfolio Asset (or, if earlier, the trade date of the related transaction entered into by an affiliate of the Placement Agent prior to the Closing Date), would have been purchased at a purchase price of less than 75% of its principal balance, until such time as the market value of such Reference Obligation exceeds 85% of its principal balance for 60 consecutive Business Days and (b) was publicly rated less than “Aa3” by Moody’s at the time of such deemed purchase.

"Discount Haircut Amount" means, as of any date of determination after the Ramp-Up Completion Date, as determined by the Collateral Manager:

(A) with respect to each Discount Asset that is a Funded Portfolio Asset acquired after the Ramp-Up Completion Date, (i) the principal balance of such Funded Portfolio Asset as of such date multiplied by (ii) one minus the purchase price (expressed as a percentage of par) at which such Funded Portfolio Asset was acquired by the Issuer; and

(B) with respect to each Discount Asset that is a CDS Portfolio Asset acquired after the Ramp-Up Completion Date, (i) the notional amount of such CDS Portfolio Asset multiplied by (ii) one minus the Fair Market Value (expressed as a percentage of par) of the underlying Reference Obligation at the time such CDS Portfolio Asset was acquired by the Issuer;

provided that the definition of “Discount Haircut Amount” may be modified, by written notice from the Collateral Manager to the Trustee and without the execution of a supplemental indenture, in order to comply with or conform to any amendments or modifications to the applicable Rating Agency criteria if the Rating Condition is satisfied with respect thereto

"Disposition" means, with respect to a Portfolio Asset, Eligible Investment or any other asset or security included in the Collateral, any termination, assignment, sale, liquidation, transfer, exchange, participation or other disposition thereof. "Disposition" of a CDS Portfolio Asset shall include any

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manner of disposition that results in the termination of such CDS Portfolio Asset under the terms of the ISDA Master Agreement and the related schedule. With respect to a CDS Portfolio Asset, a Disposition shall be deemed to have occurred on the earlier to occur of (i) the date of the termination of such CDS Portfolio Asset, and (ii) with respect to any "Assignment" of such CDS Portfolio Asset, the trade date for either (a) the assignment or novation of the related "Market Transaction" or (b) the "Related Transaction" entered into in connection with such "Assignment," as applicable (each such term as defined in the ISDA Master Agreement and the related schedule). The terms "Dispose of", "Disposes of", "Disposed of" and "Disposing of" shall have correlative meanings.

"Due Period" means, with respect to any Payment Date, the period commencing on the day immediately following the fifth Business Day prior to the preceding Payment Date (or on the Closing Date, in the case of the Due Period relating to the first Payment Date) and ending on the fifth Business Day prior to such Payment Date (without giving effect to any Business Day adjustment thereto), except that in the case of the Due Period that is applicable to the Payment Date relating to the Stated Maturity of the Secured Notes, such Due Period shall end on the day preceding the Stated Maturity.

"Effective Maturity Date" means the earlier of (a) the Scheduled Termination Date and (b) the Final Amortization Date.

"Eligible Investment" means any Dollar-denominated investment that is one or more of the following (and may include investments for which the Trustee and/or its Affiliates provides services or receives compensation):

(a) Cash;

(b) 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 or any agency or instrumentality of the United States the obligations of which are expressly backed by the full faith and credit of the United States;

(c) demand and overnight deposits in, certificates of deposit of, bankers' acceptances payable within 183 days of issuance issued by, or Federal funds sold by any depository institution or trust company incorporated under the laws of the United States (including LaSalle Bank National Association) or any state thereof and subject to supervision and examination by Federal and/or state banking authorities so long as the commercial paper and/or the debt obligations of such depository 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 such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of not less than "Aa2" by Moody's (and, if such rating is "Aa2", such rating is not on watch for possible downgrade by Moody's) and not less than "AA+" by S&P in the case of long-term debt obligations, or "P-1" by Moody's (and such rating is not on watch for possible downgrade by Moody's) and not less than "A-1+" (or "A-1" in the case of overnight deposits offered by LaSalle Bank National Association as long as it acts as Trustee hereunder) by S&P in the case of commercial paper and short-term debt obligations; provided that (i) in each case, the issuer thereof must have at the time of such investment a long-term credit rating of not less than "Aa3" by Moody's (and, if such rating is "Aa3", such rating is not on watch for possible downgrade by Moody's), and (ii) in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days,

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the issuer thereof must also have at the time of such investment a long-term credit rating of not less than "AA+" by S&P;

(d) unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to (i) any security described in clause (b) above or (ii) any other Registered security issued or guaranteed by an agency or instrumentality of the United States (in each case without regard to the Stated Maturity of such security), in either case entered into with a U.S. Federal or state depository institution or trust company (acting as principal) described in clause (c) above or entered into with a corporation (acting as principal) (including LaSalle Bank National Association) whose long-term rating is not less than "Aa2" by Moody's (and, if such rating is "Aa2", such rating is not on watch for possible downgrade by Moody's) and not less than "AA+" by S&P or whose short-term credit rating is "P-1" by Moody's (and such rating is not on watch for possible downgrade by Moody's) and "A-1+" by S&P at the time of such investment; provided that (i) in each case, the issuer thereof must have at the time of such investment a long-term credit rating of not less than "Aa2" by Moody's (and, if such rating is "Aa2", such rating is not on watch for possible downgrade by Moody's) and (ii) if such security has a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than "AA+" by S&P;

(e) Registered debt securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any state thereof that have a credit rating of not less than "Aa2" by Moody's (and, if such rating is "Aa2", such rating is not on watch for possible downgrade by Moody's) and not less than "AA+" by S&P;

(f) commercial paper or other short-term obligations with a maturity of not more than 183 days from the date of issuance and having at the time of such investment a credit rating of "P-1" by Moody's (and such rating is not on watch for possible downgrade by Moody's) and "A-1+" by S&P; provided that (i) in each case, the issuer thereof must have at the time of such investment a long-term credit rating of not less than "Aa2" by Moody's (and, if such rating is "Aa2", such rating is not on watch for possible downgrade by Moody's), and (ii) if such security has a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than "AA+" by S&P;

(g) Reinvestment Agreements, subject to satisfaction of the Rating Condition, issued by any bank (if treated as a deposit by such bank), or a Registered Reinvestment Agreement issued by any insurance company or other corporation or entity organized under the laws of the United States or any state thereof (if treated as debt for tax purposes by the Issuer), in each case, that has a credit rating of not less than " P-1" by Moody's (and such rating is not on watch for possible downgrade by Moody's) and "A-1+" by S&P; provided that (i) in any case, the issuer thereof must have at the time of such investment a long-term credit rating of not less than "Aa2" by Moody's (and, if such rating is "Aa2", such rating is not on watch for possible downgrade by Moody's), and (ii) if such security has a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than "AA+" by S&P; and

(h) any money market fund or similar investment vehicle having at the time of investment therein a rating of "AAA/MR1+" by Moody's and a rating of "AAAm" or "AAAm/G" by S&P; provided that such fund or vehicle is formed and has its principal office outside the United States;

and, in each case (other than with regard to the Eligible Investments contemplated by clauses (a) and (b)), with a Stated Maturity (giving effect to any applicable grace period) no later than the Business Day immediately preceding the Payment Date next following the Due Period in which the

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date of investment occurs; provided that Eligible Investments may not include (i) any interest only securities, (ii) any security purchased at a price in excess of 100% of the par value thereof, (iii) any investment the income from or proceeds of disposition of which is or will be subject to deduction or withholding for or on account of any withholding or similar tax or the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which will subject the Issuer to net income tax in any jurisdiction, (iv) any security the rating of which by S&P includes the subscript "p", "pi", "q", "r" or "t", (v) any mortgage-backed security, (vi) any security that is subject to an Offer, (vii) except for overnight deposits offered by LaSalle Bank National Association pursuant to clause (c) above, the related interest rate must not be less than 0%, 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, or (viii) any security subject to substantial non-credit risk as determined by the Collateral Manager.

"Emerging Market Country" means a country that does not have a sovereign debt rating, or has a sovereign debt rating of less than "Aa3" by Moody's or "AA-" by S&P.

"Equity Security" means any equity security which is acquired by the Issuer as a result of the exercise or conversion of any Funded Portfolio Asset, in conjunction with the acquisition of Funded Portfolio Assets or in exchange for a Defaulted Portfolio Asset and which does not entitle the holder thereof to receive periodic payments of interest and one or more instalments of principal.

"Excepted Property" means (a) the proceeds of issuance of the Issuer's ordinary shares (U.S.$250) and the transaction fee paid to the Issuer in connection with the issuance of the Offered Securities (U.S.$250), together with, in each case, any interest accruing thereon and the bank account in which such Cash is held and (b) the shares of the Co-Issuer and any assets of the Co-Issuer.

"Exercise Amount" means, for purposes of a Transaction, an amount to which a Notice of Physical Settlement (as defined in the related ISDA Master Agreement) relates equal to the product of (a) the original face amount of the Reference Obligation to be delivered by the Synthetic Counterparty to the Issuer on the applicable Physical Settlement Date; and (b) the Current Factor as of such date. The Exercise Amount to which a Notice of Physical Settlement (as defined in the related ISDA Master Agreement) relates shall (i) be equal to or less than the Reference Obligation Notional Amount (determined, for this purpose, without regard to the effect of any Writedown or Writedown Reimbursement within paragraphs (a)(ii) or (c) of "Writedown" or paragraphs (b)(ii) or (c) of "Writedown Reimbursement", respectively) as of the date on which the relevant Notice of Physical Settlement is delivered calculated as though the Physical Settlement of all previously delivered Notices of Physical Settlement has occurred in full and (ii) not be less than the lesser of (A) the Reference Obligation Notional Amount as of the date on which the relevant Notice of Physical Settlement is delivered calculated as though Physical Settlement in respect of all previously delivered Notices of Physical Settlement has occurred in full and (B) U.S.$ 100,000. The cumulative original face amount of Delivered Obligations specified in all Notices of Physical Settlement shall not at any time exceed the Initial Face Amount. For the avoidance of doubt: (a) if any capitalization of interest in respect of the Reference Obligation occurred during the term of the relevant Transaction and has not been recovered by holders of the relevant Reference Obligation pursuant to the terms of the Underlying Instruments, then, for the purposes of determining the amount of Delivered Obligations to be delivered, the Exercise Amount (determined above by reference to the original face amount) will represent an outstanding principal balance of the Reference Obligation to be delivered by the Synthetic Counterparty that includes the proportion of unrecovered interest attributable to the Reference Obligation to be delivered and (b) notwithstanding the foregoing,

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the Physical Settlement Amount payable by the issuer in relation to such Exercise Amount shall not include any amount in respect of such unrecovered interest.

"Exercise Percentage" means, with respect to a Notice of Physical Settlement, a percentage equal to the original face amount of the Delivered Obligations specified in such Notice of Physical Settlement divided by an amount equal to (a) the Initial Face Amount minus (b) the aggregate of the original face amount of all Delivered Obligations specified in all previously delivered Notices of Physical Settlement.

"Expected Interest Amount" means, with respect to any Reference Obligation Payment Date, the amount of current interest that would accrue during the related Reference Obligation Calculation Period calculated using the Reference Obligation Coupon on a principal balance of the Reference Obligation equal to (a) the Outstanding Principal Amount taking into account any reductions due to a principal deficiency balance or realized loss amount (howsoever described in the Underlying Instruments) that are attributable to the Reference Obligation minus (b) the Aggregate Implied Writedown Amount (if any) and that will be payable on the related Reference Obligation Payment Date assuming for this purpose that sufficient funds are available therefor in accordance with the Underlying Instruments. Except as provided in (a) in the previous sentence, the Expected Interest Amount will be determined without regard to the effect of any limited recourse provisions (however described) of the Underlying Instruments that permit the limitation of due payments or distributions of funds pursuant to an available funds cap or otherwise, that provide for the capitalization or deferral of interest on the Reference Obligation, or that provide for the extinguishing or reduction of such payments or distributions (but, for the avoidance of doubt, taking account of any Writedown within paragraph (a) of the definition of "Writedown" occurring in accordance with the terms of the Underlying Instruments).

"Expected Maturity Date" means, with respect to any Portfolio Asset, the expected date of the last scheduled distribution on the Portfolio Asset (or with respect to a CDS Portfolio Asset, the related Reference Obligation) determined as of the date of purchase or entry by the Issuer into such Portfolio Asset.

"Expected Principal Amount" means, with respect to the Final Amortization Date or the Legal Final Maturity Date, an amount equal to (a) the Outstanding Principal Amount of the Reference Obligation payable on such day (excluding capitalized interest) assuming for this purpose that sufficient funds are available for such payment, where such amount shall be determined in accordance with the Underlying Instruments, minus (b) the sum of (i) the Aggregate Implied Writedown Amount (if any) and (ii) the net aggregate principal deficiency balance or realized loss amounts (however described in the Underlying Instruments) that are attributable to the Reference Obligation. The Expected Principal Amount shall be determined without regard to the effect of any provisions (however described) of the Underlying Instruments that permit the limitation of due payments or distributions of funds in accordance with the terms of such Reference Obligation or that provide for the extinguishing or reduction of such payments or distributions.

"Euroclear" means Euroclear Clearance System plc., 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium.

"Failed Auction Call Date" means, with respect to any Auction Call Redemption, the related Auction Call Date with respect to which the Trustee has determined, after taking into account any related Auction conducted prior to such date, that the proceeds that would be available for the related Auction Call Redemption would be less than the Total Senior Redemption Amount.

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"Fair Market Value" means, with respect to any Pledged Security or Reference Obligation on any Determination Date, at the discretion of the Collateral Manager, either (a) (i) the median of the bid prices for such Pledged Security or Reference Obligation quoted by at least three financial institutions that are Independent from each other and of the Collateral Manager and JPMorgan Chase Bank, National Association or any of its Affiliates or (ii) if the market value cannot be determined in the manner described in clause (i) (as reasonably determined by the Collateral Manager, acting on behalf of the Issuer), the lesser of the bid prices for such Pledged Security or Reference Obligation quoted by at least two financial institutions that are Independent from each other and of the Collateral Manager and JPMorgan Chase Bank, National Association or any of its Affiliates or (iii) if the market value cannot be determined in the manner described in clause (ii) (as reasonably determined by the Collateral Manager, acting on behalf of the Issuer) and if the Collateral Manager is, as of such Determination Date, a registered investment advisor under the Investment Advisers Act, the bid price for such Pledged Security or Reference Obligation quoted by a financial institution that is Independent of the Collateral Manager and JPMorgan Chase Bank, National Association or any of its Affiliates, but only if such bid price is, or would be used, by the Collateral Manager as the basis for making similar determinations with regard to other investment portfolios managed by the Collateral Manager; or, if the bid prices described in (a) immediately above are not available, (b) the price supplied by any of Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley, Greenwich Capital, UBS and Wachovia or, subject to the Rating Condition, another nationally recognized pricing service selected by the Collateral Manager, acting on behalf of the Issuer, which price shall be expressed in Dollars. If the Issuer or the Collateral Manager, on behalf of the Issuer, determines that it is not reasonably feasible to determine the Fair Market Value of any Pledged Security or Reference Obligation pursuant to clause (a) or (b) above, the Fair Market Value shall be (a) for a period not to exceed 30 days, the product of the Principal/Notional Balance of such Pledged Security or Reference Obligation and the Applicable Recovery Rate, and (b) thereafter, U.S.$0, until such time as the Issuer or the Collateral Manager, on behalf of the Issuer, determines that it is reasonably feasible to determine the Fair Market Value of any Pledged Security or Reference Obligation pursuant to clause (A) or (B) above.

"Final Amortization Date" means the first to occur of (a) the date on which the Reference Obligation Notional Amount (determined for this purpose on the basis that Implied Writedown is not applicable) is reduced to zero and (b) the date on which the assets securing the Reference Obligation or designated to fund amounts due in respect of the Reference Obligation are liquidated, distributed or otherwise disposed of in full and the proceeds thereof are distributed or otherwise disposed of in full.

"Financed Amount" means, with respect to any Payment Date, the sum of (a) the unpaid Financed Amount Initial Balance, if any, and (b) unpaid interest accrued during each Interest Period on the unpaid Financed Amount Initial Balance (and on unpaid interest accrued during prior Interest Periods) calculated from the later of the Closing Date and the immediately preceding Payment Date until the date paid at a per annum rate of LIBOR plus .30%, calculated on the basis of the actual number of days elapsed in the applicable Interest Period divided by 360, which amount shall be represented by the Financed Amount Note.

"Financed Amount Initial Balance" means the amount loaned by the JPMorgan Financing Party to the Issuer on the Closing Date in an amount not to exceed U.S.$21,450,000.

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"Financed Amount Note" means the promissory note issued by the Issuer on the Closing Date to the JPMorgan Financing Party under which the Issuer promises to repay the Financed Amount in accordance with the Indenture.

"Financed Amount Threshold" means, with respect to any Payment Date, the lesser of (a) the Financed Amount for such Payment Date (prior to giving effect to any payments to be made in respect thereof on such Payment Date), (b) the scheduled payment amount for such Payment Date as set forth in the Financed Amount Note, and (c) any such lower amount as directed by the holder of the Financed Amount Note; provided that, unless an Event of Default has occurred and is continuing, the Financed Amount Threshold for any Payment Date prior to the Payment Date in May 2014 shall not be an amount that would result in the non-payment of interest in respect of the Class A-1 Notes, Class A-2 Notes or the Class B Notes. Notwithstanding the foregoing, if (a) an Event of Default described in clause (f) of the definition of such term in this Offering Circular has occurred or (b) the Secured Notes have been accelerated in accordance with the Indenture, the Financed Amount will automatically be accelerated without the giving of notice and become due and payable in its entirety and the Financed Amount Threshold will be deemed to be the Financed Amount. In addition, if the Financed Amount is not paid in full prior to May 2014, the Financed Amount Threshold on such Payment Date will be the entire amount of the Financed Amount for such Payment Date (prior to giving effect to any payments to be made in respect thereof on such Payment Date).

"Fitch" means Fitch, Inc. and any successor or successors thereto.

"Fixed Rate Excess" means, as of any date of determination, a fraction (expressed as a percentage) the numerator of which is the product of (i) the greater of zero and the excess of the Weighted Average Spread for such date of determination over the minimum percentage necessary to pass the Weighted Average Spread Test on such date of determination and (ii) the Aggregate Principal/Notional Balance of all Fixed Rate Portfolio Assets (excluding any Defaulted Portfolio Assets) held by the Issuer as of such date of determination, and the denominator of which is the Aggregate Principal/Notional Balance of all Floating Rate Securities (excluding any Defaulted Portfolio Assets) held by the Issuer as of such date of determination. In computing the Fixed Rate Excess on any date of determination, the Weighted Average Spread for such date will be computed as if the Spread Excess were equal to zero.

"Fixed Rate Payer Calculation Period" shall correspond to the relevant Reference Obligation calculation period and shall end on and include the related Reference Obligation Payment Date.

"Fixed Rate Payer Payment Date" means each day falling five Business Days after a Reference Obligation Payment Date; provided that the final Fixed Rate Payer Payment Date shall fall on the fifth Business Day following the Effective Maturity Date.

"Fixed Rate Portfolio Asset" means any Funded Portfolio Asset that is a Fixed Rate Security.

"Fixed Rate Security" means a Portfolio Asset (provided that, with respect to the CDS Portfolio Assets, such determination will be made with respect to the related Reference Obligation), other than a Floating Rate Security.

"Floating Rate Notes" means each Class of Secured Notes (other than the Class A-2b Notes).

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"Floating Rate Payer Payment Date" has the meaning specified in the related Confirmation, but will generally mean the first Fixed Rate Payer Payment Date falling at least two Business Days after delivery of a notice by the CDS Calculation Agent to the Synthetic Counterparty and the Issuer, or by the Synthetic Counterparty to the Issuer, that the related Floating Amount is due.

"Floating Rate Security" means a Portfolio Asset (provided that, with respect to the CDS Portfolio Assets, such determination will be made with respect to the related Reference Obligation) in respect of which interest payable is calculated by reference to a floating interest rate or index, which, for the avoidance of doubt, shall include any pass through debt security that entitles the holders thereof to receive payments that depend on the cash flow from mortgages with an interest rate currently based upon such a floating rate index.

"Funded Portfolio Asset" means (i) any CDO Security and (ii) any Delivered Obligation.

"Holder" means a Secured Noteholder, a Composite Noteholder or a Subordinated Noteholder, as applicable.

"Implied Writedown Amount" means, (a) if the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (a) of the definition of "Writedown" to occur in respect of the Reference Obligation, on any Reference Obligation Payment Date, an amount determined by the Calculation Agent equal to the excess, if any, of the Current Period Implied Writedown Amount over the Previous Period Implied Writedown Amount, in each case in respect of the Reference Obligation Calculation Period to which such Reference Obligation Payment Date relates, and (b) in any other case, zero.

"Implied Writedown Reimbursement Amounts" means, (a) if the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (a) of the definition of "Writedown" to occur in respect of the Reference Obligation, on any Reference Obligation Payment Date, an amount determined by the Calculation Agent equal to the excess, if any, of the Previous Period Implied Writedown Amount over the Current Period Implied Writedown Amount, in each case in respect of the Reference Obligation Calculation Period to which such Reference Obligation Payment Date relates, and (b) in any other case, zero, as further described in the Confirmations.

"Initial Face Amount" shall be as specified in respect of each Reference Obligation in the relevant Confirmation.

"Initial Factor" shall be as specified in respect of each Reference Obligation in the relevant Confirmation.

"Interest Distribution Amount" means, with respect to any Class or sub-Class of Secured Note, on any Payment Date, the sum of

(a) the aggregate amount of interest accrued at the Note Interest Rate for such Class or sub-Class, during the Interest Period ending immediately prior to such Payment Date, on the Aggregate Outstanding Amount of the Secured Notes of such Class or sub-Class on the first day of such Interest Period (after giving effect to any redemption of the Secured Notes of such Class or sub-Class or other payment of principal of the Secured Notes of such Class or sub-Class on the prior Payment Date occurring on such first day of the relevant Interest Period or any other preceding Payment Date), plus

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(b) any Defaulted Interest in respect of the Secured Notes of such Class or sub-Class and accrued interest thereon. The Interest Distribution Amount with respect to the Class C Notes, Class D Notes or Class E Notes shall not include Class C Deferred Interest, Class D Deferred Interest or Class E Deferred Interest, as applicable (but shall include interest on such Class C Deferred Interest, Class D Deferred Interest or Class E Deferred Interest, as applicable).

"Interest Period" with respect to the Secured Notes means (a) in the case of the initial Interest Period, the period from and including the Closing Date to but excluding the first Payment Date, and (b) thereafter, the period from and including the last Payment Date to but excluding the next succeeding Payment Date. For purposes of determining any Interest Period, if any Payment Date is not a Business Day, then the Payment Date shall be deemed to be the next succeeding Business Day and with respect to any Class of Secured Notes, interest shall accrue on such payment for the period from and after any such nominal date to but excluding the next succeeding Business Day and the next succeeding Interest Period shall begin on and include such Business Day.

"Interest Proceeds" means, with respect to any Due Period, the sum (without duplication) of:

(a) for each CDS Portfolio Asset, any Fixed Amounts received by the Issuer from the Synthetic Counterparty, after giving effect to the netting of any Interest Shortfall Payment Amounts payable by the Issuer to the Synthetic Counterparty and any Interest Shortfall Reimbursement Payment Amounts payable to the Issuer by the Synthetic Counterparty, pursuant to such CDS Portfolio Asset during such Due Period; provided that if such CDS Portfolio Asset is an Offset Portfolio Asset, then the amount (the "Net Premium Amount") equal to the positive difference, if any, between (i) any Fixed Amounts received by the Issuer from the Synthetic Counterparty, after giving effect to the netting of any Interest Shortfall Payment Amounts payable by the Issuer to the Synthetic Counterparty and any Interest Shortfall Reimbursement Payment Amounts payable to the Issuer by the Synthetic Counterparty, pursuant to such CDS Portfolio Asset during such Due Period and (ii) any Short Synthetic Premium Amounts paid by the Issuer to the applicable Short Synthetic Counterparty during such Due Period pursuant to such Offsetting Short Transaction, after giving effect to the netting of any amounts relating to an "Interest Shortfall" (as defined in the confirmation relating to such Offsetting Short Transaction) payable by the Short Synthetic Counterparty to the Issuer and any related "Interest Shortfall Reimbursement Payment Amounts" (as defined in the confirmation relating to such Offsetting Short Transaction) payable by the Issuer to the Short Synthetic Counterparty pursuant to such Offsetting Short Transaction, shall be treated as "Principal Proceeds" pursuant to clause (1) of the definition of the term "Principal Proceeds" herein;

(b) the aggregate amount of all payments of interest on the Funded Portfolio Assets, if any, received in Cash by the Issuer during such Due Period, but excluding for such Due Period:

(i) the aggregate amount of all payments of deferred interest on Deferred Interest PIK Bonds, which deferred interest was previously capitalized, and which payments are intended to be treated as "Principal Proceeds" pursuant to clause (j) of the definition of the term "Principal Proceeds" herein; and

(ii) the aggregate amount of all payments of interest and other amounts in respect of any Funded Portfolio Asset that was a Defaulted Portfolio Asset or a Written-Down Security during such Due Period until the aggregate amount of all payments received in Cash by the Issuer with respect to such Funded Portfolio Asset equals the par amount of such Funded Portfolio Asset at the time it was acquired by the Issuer (for the avoidance of doubt, it is

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agreed and understood that any payments of interest and other amounts received by the Issuer in respect of such Funded Portfolio Asset after the aggregate amount of all payments received in Cash by the Issuer with respect to such Funded Portfolio Asset equals the par amount of such Funded Portfolio Asset at the time it was acquired by the Issuer shall be considered to be Interest Proceeds);

(c) the aggregate amount of any Sale Proceeds received in Cash by the Issuer during such Due Period,

(i) but only to the extent that such Sale Proceeds are attributable to accrued interest on Funded Portfolio Assets sold by the Issuer, and

(ii) excluding

(A) Sale Proceeds received in respect of Deferred Interest PIK Bonds, Defaulted Portfolio Assets or Written-Down Securities during such Due Period until the aggregate amount of all payments received in Cash by the Issuer with respect to Deferred Interest PIK Bonds, Defaulted Portfolio Assets or Written-Down Securities equals the par amount of such Deferred Interest PIK Bonds, Defaulted Portfolio Assets or Written-Down Securities at the time it was acquired by the Issuer, and

(B) payments in respect of accrued interest included in Principal Proceeds pursuant to clause (g) of the definition of Principal Proceeds);

(d) the aggregate amount of (i) all payments of interest on Eligible Investments (including any amount representing the accreted portion of a discount from the face amount of an Eligible Investment) in the Issuer Accounts (other than the TRS Asset Account, the TRS Counterparty Account and the TRS Interest Account) received in Cash by the Issuer during such Due Period and to which the Issuer is entitled and (ii) all payments of principal, including repayments, on Eligible Investments received in Cash by the Issuer during such Due Period, which Eligible Investments were purchased by the Issuer with amounts credited to the Interest Collection Account;

(e) the aggregate amount of all amendment and waiver fees, late payment fees and other fees and commissions received in Cash by the Issuer during such Due Period in connection with such Funded Portfolio Assets and Eligible Investments (other than (i) fees and commissions received in respect of Defaulted Portfolio Assets, Deferred Interest PIK Bonds and Written-Down Securities (but only so long as the aggregate amount of payments received by the Issuer in respect of any such Defaulted Portfolio Asset, Deferred Interest PIK Bond or Written-Down Security does not exceed the original principal amount of such Defaulted Portfolio Asset, Deferred Interest PIK Bond or Written-Down Security) and (ii) yield maintenance payments included in Principal Proceeds pursuant to clause (h) of the definition thereof);

(f) any TRS LIBOR Amounts received by the Issuer under the Total Return Swap; and

(g) for each Offsetting Short Transaction, any amounts received by the Issuer, after giving effect to any netting, from the related Short Synthetic Counterparty under the Offsetting Short Transaction with respect to an "Interest Shortfall" (as defined in the confirmation relating to such Offsetting Short Transaction);

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provided that, notwithstanding any of the foregoing, (i) Interest Proceeds shall not include (A) any payment or proceeds that are intended to be considered "Principal Proceeds" pursuant to the definition of the term "Principal Proceeds" herein, (B) the Excepted Property or (C) any TRS Asset Interest Distribution and (ii) if the occurrence of a legal or business holiday causes a Scheduled Distribution to be received in the period between the end of the Due Period in which such payment would otherwise have been received and the related Payment Date, such payment will be deemed to have been received during such Due Period.

"Interest Shortfall Amount" means, with respect to any Reference Obligation Payment Date, an amount equal to the greater of (a) zero and (b) the product of (i) the Expected Interest Amount minus the Actual Interest Amount and (ii) the Applicable Percentage.

"Interest Shortfall Payment Amount" means, in respect of an Interest Shortfall, the relevant Interest Shortfall Amount; provided that such payment will be capped with respect to a CDS Portfolio Asset if the Interest Shortfall Cap is specified to apply in the relevant Confirmation.

"Interest Shortfall Reimbursement" means, with respect to any Reference Obligation Payment Date, the payment by or on behalf of the Issuer of an Actual Interest Amount in respect of the Reference Obligation that is greater than the Expected Interest Amount.

"Internal Rate of Return" means the compounded annual rate (computed on the basis of a 365 day year and the actual number of days elapsed) derived with the Microsoft Excel XIRR function that, when used to discount all of the payments made (including those payments already made or to be made on the date of determination) by the Issuer to the holders as distributions in respect of the Subordinated Notes, results in a present value at the Closing Date that is equal to the aggregate issue price of the Subordinated Notes on the Closing Date.

"JPMorgan" means J.P. Morgan Securities Inc.

"Legal Final Maturity Date" means the date set out with respect to each Reference Obligation in the relevant Confirmation.

"Majority" means (a) with respect to any Class or Classes of Secured Notes or Composite Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Secured Notes of such Class or Classes (including the Class E Component of the Composite Notes) or Composite Notes, as the case may be, and (b) with respect to the Subordinated Notes, Holders of more than 50% of the Aggregate Outstanding Amount of Subordinated Notes held by all Subordinated Noteholders at such time.

"Maturity" means, with respect to any Secured Note or Composite Note, the date on which all outstanding unpaid principal of such Secured Note or Composite Note becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

"Measurement Date" means any of the following: (a) the Closing Date; (b) the Ramp-Up Completion Date, (c) any date after the Ramp-Up Completion Date upon which the Issuer purchases or enters into any Portfolio Asset, (d) each Determination Date; (e) the last Business Day of each calendar month (other than any calendar month immediately preceding a month in which a Determination Date occurs); (f) the date on which any Portfolio Asset or other security contained in the Collateral becomes a Defaulted Portfolio Asset; (g) the date on which any PIK Bond becomes a

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Deferred Interest PIK Bond; (h) any date on which the Issuer Disposes of a Portfolio Asset or the date on which an Offsetting Short Transaction is entered into by the Issuer; and (i) with written notice of at least two Business Days to the Issuer, the Collateral Manager and the Trustee, any other Business Day that either the Rating Agency, the Collateral Manager or the Holders of more than 66-2/3% of Aggregate Outstanding Amount of any Class of Notes requests be a "Measurement Date"; provided that if any such date would otherwise fall on a day that is not a Business Day, the relevant Measurement Date will be the next succeeding day that is a Business Day.

"Noteholder" means a Secured Noteholder, a Composite Noteholder or a Subordinated Noteholder, as the context may require.

"Note Registrar" means a appointed registrar of the Secured Notes and the Composite Notes in the Indenture.

"Notional Amount Shortfall" means, on any date of determination, a Notional Amount Shortfall shall exist if (A) the sum of (i) the aggregate outstanding principal amount of all TRS Transactions (after taking into account any additional TRS Transactions entered into and/or termination of any TRS Transactions on or prior to such date but excluding, for the avoidance of doubt, any accrued and unpaid interest due and payable under all TRS Transactions) and (ii) the aggregate amount of all Interest Shortfall Payment Amounts that were funded from the TRS Asset Account and that are reimbursable to the TRS Asset Account as of such date in accordance with the Total Return Swap and the Indenture is less than (B) the aggregate Reference Obligation Notional Amount of all CDS Portfolio Assets (after taking into account any CDS Portfolio Assets to be entered into on or prior to such date).

"Notional Interest Amount" means, for any Composite Note Payment Date for the Composite Notes, a notional amount equal to the product of (a) 9.5% per annum, (b) the Notional Principal Amount of the Composite Notes, prior to giving effect to the deemed application of payments made on the Composite Notes on such date and (c) a fraction (expressed as a percentage) the numerator of which is 90 (or with respect to the first Composite Note Payment Date, 196) to but excluding such Composite Note Payment Date and the denominator of which is 360.

"Notional Principal Amount" means, for any Composite Note Payment Date for the Composite Notes, an amount equal to (A) the initial notional principal amount of the Composite Notes (which is U.S.$3,996,000) plus (B) the aggregate amount of any Notional Principal Amount Deficit on any prior Composite Note Payment Dates minus (C) the aggregate amount of the deemed reductions of such amount effected on all prior Composite Note Payment Dates as described herein; provided that, notwithstanding any of the foregoing, the Notional Principal Amount shall be deemed to be zero on the Stated Maturity of the Composite Notes.

"Notional Principal Amount Deficit" means, for any Composite Note Payment Date on which the amount of the payments made to the holders of the Composite Notes is less than the Notional Interest Amount for such date, the difference between (A) the Notional Interest Amount for such date minus (B) the amount of the payments made to the holders of the Composite Notes on such date.

"Offer" means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any

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other type of consideration or (b) any solicitation by the issuer of such security or any other person to amend, modify or waive any provision of such security or any related Underlying Instrument.

"Offset Portfolio Asset" means any CDS Portfolio Asset with respect to which the Issuer has entered into an Offsetting Short Transaction; provided that if the Issuer enters into an Offsetting Short Transaction with respect to only a portion of such CDS Portfolio Asset, "Offset Portfolio Asset" means only such portion of such CDS Portfolio Asset.

"Original Principal Amount" shall be as specified in respect of each Reference Obligation in the relevant Confirmation.

"Outstanding Principal Amount" means, as of any date of determination with respect to the Reference Obligation, the outstanding principal balance of the Reference Obligation as of such date, which shall take into account:

(a) all payments of principal;

(b) all writedowns or applied losses (however described in the Underlying Instruments) resulting in a reduction in the outstanding principal balance of the Reference Obligation (other than as a result of a scheduled or unscheduled payment of principal);

(c) forgiveness of any amount by the holders of the Reference Obligation pursuant to an amendment to the Underlying Instruments resulting in a reduction in the outstanding principal balance of the Reference Obligation;

(d) any payments reducing the amount of any reductions described in (b) and (c) of this definition; and

(e) any increase in the outstanding principal balance of the Reference Obligation that reflects a reversal of any prior reductions described in (b) and (c) of this definition.

For the avoidance of doubt, the Outstanding Principal Amount shall not include any portion of the outstanding principal balance of the Reference Obligation that is attributable to the deferral or capitalization of interest during the term of the relevant Transaction.

"Physically Settled CDS Portfolio Asset" means any CDS Portfolio Asset with respect to which the physical settlement of a "credit event" or a "physical settlement event" has occurred and, in connection with the occurrence of such event, a Delivered Obligation has been delivered by the Synthetic Counterparty to the Issuer pursuant to the terms of such CDS Portfolio Asset.

"Physical Settlement Amount" means an amount equal to:

(a) the product of the Exercise Amount and the Reference Price, as specified in the relevant Confirmation; minus

(b) the sum of:

(i) if the Aggregate Implied Writedown Amount is greater than zero, the product of (A) the Aggregate Implied Writedown Amount, (B) the Applicable Percentage, each as

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determined immediately prior to the relevant delivery and (C) the relevant Exercise Percentage; and

(ii) the product of (A) the aggregate of all Writedown Amounts in respect of Writedowns within paragraph (a)(ii) of the definition of "Writedown" minus the aggregate of all Writedown Reimbursement Amounts in respect of Writedown Reimbursements within paragraph (ii)(B) of the definition of "Writedown Reimbursement" and (B) the relevant Exercise Percentage,

provided that if the Physical Settlement Amount would exceed the product of:

(a) the Reference Obligation Notional Amount as of the date on which the relevant Notice of Physical Settlement is delivered calculated as though Physical Settlement in respect of all previously delivered Notices of Physical Settlement (as defined in the related ISDA Master Agreement) has occurred in full; and

(b) the Exercise Percentage;

then the Physical Settlement Amount shall be deemed to be equal to such product.

"PIK Bond" means any Funded Portfolio Asset that or any CDS Portfolio Asset the Reference Obligation in respect of which, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred and capitalized as additional principal thereof or that issues identical securities in place of payments of interest in cash.

"Pledged Securities" means, on any date of determination, (a) the Funded Portfolio Assets and Eligible Investments that have been granted to the Trustee and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of the Indenture pursuant thereto.

"Portfolio Asset" means any Funded Portfolio Asset or CDS Portfolio Asset (it being agreed and understood that an Offsetting Short Transactions shall not constitute a Portfolio Assets for any purpose under any of the Transaction Documents, but shall be included to the extent provided herein in all Collateral Quality Tests and the Eligibility Criteria as a negative balance to offset the related Offset Portfolio Asset and any Short Synthetic Premium Amounts will be reflected as a deduction in the Weighted Average Spread Test).

"Portfolio Balance" means, on any date of determination, the Aggregate Principal/Notional Balance of all of the Portfolio Assets included in the Collateral plus the outstanding principal amount of all Eligible Investments acquired with Principal Proceeds, determined (in each case) on such date.

"Previous Period Implied Writedown Amount" means, in respect of a Reference Obligation Calculation Period, the Current Period Implied Writedown Amount as determined in relation to the last day of the immediately preceding Reference Obligation Calculation Period.

"Principal Proceeds" means, with respect to any Due Period, the sum (without duplication) of:

(a) with respect to the CDS Portfolio Assets, proceeds transferred from the TRS/CDS Swap Receipts Account to the Principal Collection Account pursuant to Section 11.2 of the Indenture in an amount equal to the Amortization Adjustment Amount and any proceeds relating to an early termination of a CDS Portfolio Asset; and, with respect to the CDS Portfolio Assets that are Offset

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Portfolio Assets, any Net Premium Amounts relating to such CDS Portfolio Assets that are not intended to be treated as "Interest Proceeds" pursuant to the definition of the term "Interest Proceeds" herein;

(b) the aggregate amount of all payments of principal on the Funded Portfolio Assets and Eligible Investments in the Principal Collection Account (excluding any amount representing the accreted portion of a discount from the face amount of an Eligible Investment) received in Cash by the Issuer during such Due Period, including prepayments or mandatory sinking fund payments, or payments in respect of optional redemptions, exchange offers, tender offers, or other recoveries of principal made with respect to any of the Funded Portfolio Assets (other than payments of principal made with respect to Eligible Investments that were acquired with Interest Proceeds);

(c) the aggregate amount of any Sale Proceeds received in Cash by the Issuer during such Due Period, but only to the extent that such Sale Proceeds are not intended to be treated as "Interest Proceeds" pursuant to clause (c) of the definition of the term "Interest Proceeds" herein;

(d) the aggregate amount of all amendment, waiver, late payment fees and other fees and commissions, received in Cash by the Issuer during such Due Period in respect of Defaulted Portfolio Assets, Deferred Interest PIK Bonds and Written-Down Securities that are not treated as Interest Proceeds pursuant to clause (e) of the definition thereof;

(e) all payments received in Cash by the Issuer during such Due Period that represent call or prepayment premiums;

(f) the aggregate amount of all payments of interest on Funded Portfolio Assets received in Cash by the Issuer to the extent that they represent purchased accrued interest;

(g) the aggregate amount of all yield maintenance payments received in Cash by the Issuer during such Due Period;

(h) the aggregate amount of all amounts transferred to the Principal Collection Account from the Closing Date Expense Subaccount during such Due Period;

(i) the aggregate amount of all payments received in Cash by the Issuer in respect of deferred interest on Deferred Interest PIK Bonds previously capitalized during such Due Period; and

(j) the aggregate amount of all other payments received in connection with the Funded Portfolio Assets and Eligible Investments (other than the principal amount of the TRS Covered Securities in the TRS Asset Account) that are not intended to be treated as "Interest Proceeds" pursuant to the definition of the term "Interest Proceeds" herein;

(k) any Uninvested Proceeds that have not been applied to purchase or enter into additional Portfolio Assets by the Ramp-Up Completion Date; and

(l) for each Offsetting Short Transaction, any amounts, after giving effect to any netting, other than amounts payable by the related Short Synthetic Counterparty with respect to an "Interest Shortfall" (as defined in the confirmation relating to such Offsetting Short Transaction), received by the Issuer from the related Short Synthetic Counterparty under the Offsetting Short Transaction;

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provided that, notwithstanding any of the foregoing, (a) Principal Proceeds shall not include the Excepted Property, and (b) if the presence of a legal or business holiday causes a Scheduled Distribution to be received in the period between the end of the Due Period in which such payment would otherwise have been received and the related Payment Date, such payment will be deemed to have been received during such Due Period.

"Principal Shortfall Amount" means, with respect to a Failure to Pay Principal, an amount equal to the greater of (a) zero; and (b) the amount equal to the product of (i) the Expected Principal Amount minus the Actual Principal Amount, (ii) the Applicable Percentage and (iii) the Reference Price.

If the Principal Shortfall Amount would be greater than the Reference Obligation Notional Amount immediately prior to the occurrence of such Failure to Pay Principal, then the Principal Shortfall Amount shall be deemed to be equal to the Reference Obligation Notional Amount at such time.

"Principal Shortfall Reimbursement" means, with respect to any day, the payment by or on behalf of the Issuer of an amount in respect of the Reference Obligation in or toward the satisfaction of any deferral of or failure to pay principal arising from one or more prior occurrences of a Failure to Pay Principal.

"Principal/Notional Balance" or "par" means, as of any date of determination, (a) with respect to any Pledged Security, the aggregate outstanding principal balance of such Pledged Security; provided that, with respect to any Funded Portfolio Asset that is a Written-Down Security, the Principal/Notional Balance of such Funded Portfolio Asset shall be reduced by the Writedown Amount of such Written-Down Security; and (b) with respect to any CDS Portfolio Asset, the Reference Obligation Notional Amount thereof (as determined pursuant to the confirmation related thereto).

"Priority of Payments" has the meaning specified in "Summary of Terms – Priority of Payments" herein.

"Prohibited Security" means ABS Chassis Security, ABS Container Security, ABS Natural Resource Receivable Security, Aircraft Leasing Security, Car Rental Receivable Security, Catastrophe Bond, CMBS Credit Tenant Lease Security, CMBS Single Property Security, Combination Security, Credit-Impaired Portfolio Asset, Defaulted Portfolio Assets, Deferred Interest PIK Bond, EETC Security, Emerging Market ABS Security, Floorplan Receivable Security, Franchise Security, Future Flow Security, Guaranteed Corporate Debt Security, Healthcare Security, Interest Only Security, Lottery Receivable Security, Manufactured Housing Security, Mutual Fund Security, NIM Security, Oil and Gas Security, PIK Bond, Principal Only Security, Project Finance Security, Recreational Vehicle Security, Restaurant and Food Services Security, Static Investment Grade Synthetic CDO Security, Stranded Cost Security, Structured Settlement Security, Tax Lien Security, Time Share Security, Tobacco Bond Security, Trust Preferred CDO Security, Written-Down Security, Zero Coupon Bond or a security that accrues interest at a floating rate that moves inversely to a reference rate or index.

"Quarterly Distribution Date" shall mean each Payment Date.

"Rated Balance" means, with respect to the rating of the Composite Notes by Moody’s, on any date of determination, an amount equal to the initial face amount of the Composite Notes (being U.S.$3,996,000), reduced by the aggregate amount, if any, of all distributions of interest, principal or other amounts (including proceeds from the sale of the Treasury Strip) paid to the holders of the

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Composite Notes in respect of its Components; provided that, notwithstanding any of the foregoing, the Rated Balance, at any time, shall not exceed the face amount of the Treasury Strip Component.

"Rating Condition" means, with respect to any action taken or to be taken under the Indenture, a condition that is satisfied when each Rating Agency (or, if only one Rating Agency is specified, such Rating Agency) has provided written confirmation to the Issuer and the Trustee to the effect that such action will not result in the withdrawal, reduction or other adverse action with respect to its then-current public rating of any Class of Secured Notes.

"Ratings Event I" means, with respect to the Synthetic Counterparty or the TRS Counterparty, as the case may be, the occurrence of the following with respect to such party: to the extent that such party's relevant obligations are rated by S&P and/or Moody's, (a) its long-term senior unsecured debt rating by S&P is lower than "AA-"; (b) its short-term senior unsecured debt rating by S&P is lower than "A-1+"; (c) its long-term senior unsecured debt rating by Moody's is lower than "A1" or is "A1" on negative credit watch by Moody's; or (d) its short-term senior unsecured debt rating by Moody's is lower than "P-1" or is "P-1" on negative credit watch by Moody's.

"Ratings Event II" means, with respect to the Synthetic Counterparty or the TRS Counterparty, as the case may be, the occurrence of the following with respect to such party: to the extent that such party's relevant obligations are rated by S&P and/or Moody's, (a) its long-term senior unsecured debt rating by S&P is lower than "BBB+"; (b) its short-term senior unsecured debt rating by S&P is lower than "A-1"; (c) its short-term senior unsecured debt rating by Moody's is "P-2" or lower; or (d) its long-term senior unsecured debt rating by Moody's is "A3" or lower.

"Redemption Date" means any date set for a redemption of Secured Notes as provided in the Indenture or, if such date is not a Business Day, the next following Business Day.

"Reference Entity" means, with respect to any CDS Portfolio Asset, the entity specified as such in such CDS Portfolio Asset.

"Reference Obligation" means, with respect to any CDS Portfolio Asset, the reference obligation specified as such in the terms of each CDS Portfolio Asset.

"Reference Obligation Calculation Period" means, with respect to each Reference Obligation Payment Date, a period corresponding to the interest accrual period relating to such Reference Obligation Payment Date pursuant to the Underlying Instruments.

"Reference Obligation Coupon" means the periodic interest rate applied in relation to each Reference Obligation Calculation Period on the related Reference Obligation Payment Date, as determined in accordance with the terms of the Underlying Instruments as at the Effective Date, without regard to any subsequent amendment.

"Reference Obligation Notional Amount" means, with respect to any CDS Portfolio Asset, the notional amount of the related Reference Obligation, as set out in or otherwise determined pursuant to the relevant Confirmation.

"Reference Obligation Payment Date" means (a) each scheduled distribution date for the Reference Obligation occurring on or after the Effective Date and on or prior to the Scheduled Termination Date, determined in accordance with the Underlying Instruments and (b) any day after the Effective Maturity Date on which a payment is made in respect of the Reference Obligation.

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"Reference Portfolio" means, collectively, the Reference Obligations specified in the terms of CDS Portfolio Assets.

"Registered" means in registered form for U.S. Federal income tax purposes and issued after July 18, 1984, provided, that a certificate of interest in a trust that is treated as a grantor trust for U.S. Federal income tax purposes shall not be treated as Registered unless each of the obligations or securities would satisfy this definition, or each obligation or security was issued after July 18, 1984 and there are at least three securities in the trust none of which has a nominal value.

"Reinvestment Period" means the period from the Closing Date and ending on and including the first to occur of (i) the Payment Date immediately following the date that the Collateral Manager notifies the Trustee and the Synthetic Counterparty that, in light of the composition of Portfolio Assets, general market conditions and other factors (including any change in U.S. Federal tax law requiring tax to be withheld on payments to the Issuer with respect to obligations or securities held by the Issuer), the Collateral Manager (in its sole discretion) has determined that entering into additional Portfolio Assets within the foreseeable future would either be impractical or not beneficial to the Issuer; (ii) the Payment Date occurring in August, 2011; (iii) the date on which a Sequential Paydown Trigger Event first occurs; and (iv) the termination of the Reinvestment Period as a result of the occurrence of an Event of Default.

"Reinvestment Agreement" means a guaranteed reinvestment agreement from a bank, insurance company or other corporation or entity.

"Scheduled Termination Date" means, with respect to a CDS Portfolio Asset, the Legal Final Maturity Date of the Reference Obligation, subject to adjustment in accordance with the Following Business Day Convention (as defined in the related ISDA Master Agreement).

"Secured Noteholder" means the person in whose name a Secured Note is registered in the Note Register.

"Secured Parties" means the Secured Noteholders, the Composite Noteholders (to the extent of the Class E Component only), the Synthetic Counterparty, the Collateral Manager, the TRS Counterparty, each Short Synthetic Counterparty, if any, the Collateral Administrator, the Subordinated Note Paying Agent, the Trustee, the Placement Agent and, to the extent of the Financed Amount, the JPMorgan Financing Party.

"Securities Account Control Agreements" means the Securities Account Control Agreements each dated as of the Closing Date, among the Issuer, the Trustee and the Securities Intermediary relating to the Issuer Accounts.

"Securities Intermediary" has the meaning specified in Article 8 of the UCC.

"Sequential Paydown Trigger Event" shall be deemed to have occurred at any time after the Closing Date if at such time:

(a) (i) the difference between (A) the Aggregate Principal/Notional Balance of all Portfolio Assets at such time and (B) the sum of (x) the Aggregate Discount Amount at such time and (y) the aggregate of the Discount Haircut Amounts for all Portfolio Assets that are Discount Assets at such time is less than or equal to (ii) the product of (A) 50% and (B) the Aggregate Principal/Notional Balance of all Portfolio Assets as of the Ramp-Up Completion Date; or

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(b) (i) the sum of (A) all Floating Amounts paid by the Issuer to the Synthetic Counterparty in respect of all CDS Portfolio Assets other than Physically Settled CDS Portfolio Assets (after giving effect to any Additional Fixed Amounts paid by the Synthetic Counterparty to the Issuer) at or prior to such time, (B) with respect to any Funded Portfolio Asset that has become a Defaulted Portfolio Asset or a Deferred Interest PIK Bond, an amount equal to the product of (1) the Principal/Notional Balance of such Funded Portfolio Asset or Deferred Interest PIK Bond and (2) one minus the Applicable Recovery Rate for such Funded Portfolio Asset, (C) the Aggregate Discount Amount at such time and (D) the aggregate of the Discount Haircut Amounts for all Portfolio Assets that are Discount Assets at such time is greater than or equal to (ii) the product of (A) 50% and (B) the initial Aggregate Outstanding Amount of the Subordinated Notes on the Closing Date.

For the avoidance of doubt, following the occurrence of a Sequential Paydown Trigger Event, a Sequential Paydown Trigger Event will be deemed to continue to exist regardless of whether or not the condition contemplated by (a) or (b) above that gave rise to such Sequential Paydown Trigger Event is still satisfied; provided that, for the purposes of reinvestment of Sale Proceeds in respect of a Discretionary Sale and reinvestment of the Sale Proceeds from the Disposition of a Credit-Improved Portfolio Asset or Credit-Impaired Portfolio Asset after the Reinvestment Period, a Sequential Paydown Trigger Event will not be deemed to be continuing if the conditions contemplated by (a) or (b) above that gave rise to such Sequential Paydown Trigger Event are no longer satisfied.

"Servicer" means any trustee, servicer, sub-servicer, master servicer, fiscal agent, paying agent or other similar entity responsible for calculating payment amounts or providing reports in relation to the Reference Obligation pursuant to the Underlying Instruments.

"Servicer Report" means a periodic statement or report regarding the Reference Obligation provided by the Servicer to holders of the Reference Obligation.

"Special Purpose Vehicle Jurisdiction" means (a) the Cayman Islands, the Bahamas, Bermuda, the Netherlands Antilles, the Netherlands, Luxembourg and the Channel Islands and (b) any other jurisdiction (x) that is commonly used as the place of organization of special or limited purpose vehicles that issue asset-backed securities, (y) that generally impose no or nominal tax on the income of such special purpose vehicle and (z) the designation of which as a Special Purpose Vehicle Jurisdiction satisfies the Rating Condition.

"Spread" means, with respect to each Class of Secured Notes, the rate set out under "Summary of Terms—Principal Terms of the Notes".

"Spread Excess" means, as of any Measurement Date, an amount equal to a fraction (expressed as a percentage), the numerator of which is equal to the product of (i) the greater of zero and the excess, if any, of the Weighted Average Spread for such Measurement Date over the Weighted Average Spread required to satisfy the Weighted Average Spread Test for such Measurement Date and (ii) the Aggregate Principal/Notional Balance of all Portfolio Assets that are Floating Rate Securities and the denominator of which is the Aggregate Principal/Notional Balance of all Portfolio Assets that are Fixed Rate Securities.

"Structured Finance Obligation" means a non-recourse or limited-recourse debt obligation issued by a special purpose vehicle and secured solely by the assets thereof (including, without limitation, a mortgage backed security, an asset backed security, a collateralized bond obligation or a collateralized loan obligation (or any combination thereof)).

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"Subordinated Note Paying Agency Agreement" means the Subordinated Note Paying Agency Agreement dated as of the Closing Date between the Issuer and the Subordinated Note Paying Agent (including the terms and conditions of the Subordinated Notes (the "Terms and Conditions") attached thereto).

"Subordinated Noteholders" means the Persons in whose names Subordinated Notes are registered in the ownership register relating to the Subordinated Notes maintained by the Subordinated Note Registrar.

"Subscription Agreements" means the several subscription agreements, each dated on or prior to the Closing Date, between the Issuer and the respective original purchasers of the Class A-1 Notes and the Subordinated Notes named on the signature pages thereof, as modified and supplemented and in effect from time to time.

"Synthetic Counterparty" means JPMorgan Chase Bank, National Association.

"Tax Materiality Condition" means a condition which will be satisfied during any 12-month period if any combination of Tax Events results, in aggregate, in a payment by, or charge or tax burden to, the Issuer in excess of U.S.$1,000,000.

"Tax Event" means the occurrence, whether or not as a result of any change in law or interpretations, of any of the following: (a) any obligor is, or on the next scheduled payment date under any Funded Portfolio Asset any obligor will be, required to deduct or withhold from any payment under any Funded Portfolio Asset to the Issuer for or on account of any tax, and such obligor is not, or will not be, required to pay to the Issuer such additional amount as is necessary to ensure that the net amount actually received by the Issuer (free and clear of taxes, whether assessed against such obligor or the Issuer) will equal the full amount that the Issuer would have received had no such deduction or withholding occurred, (b) the Issuer, the Synthetic Counterparty or the TRS Counterparty is required to deduct or withhold from any payment under any CDS Portfolio Asset or the Total Return Swap, respectively, for or on account of any tax and the Issuer is obligated, or the Synthetic Counterparty or the TRS Counterparty is not obligated, to make a gross-up payment or (c) any net-basis tax measured by or based on the income of the Issuer is imposed on the Issuer.

"Third Party Credit Support Document" means any agreement or instrument (including any guarantee, insurance policy, security agreement or pledge agreement) whose terms provide for the guarantee of the obligations of the Synthetic Counterparty under the ISDA Master Agreement, or the TRS Counterparty under the ISDA Master Agreement by a third party.

"TRS Asset Interest Distributions" has the meaning given in the Total Return Swap.

"TRS Counterparty" means Merrill Lynch International or any successor or assignee. Merrill Lynch International is located at 2 King Edward Street, London, EC1A 1HQ.

"TRS Covered Securities" means the "Reference Securities" (as defined in the Total Return Swap).

"TRS Floating Amount" means the "Counterparty Floating Amount" (as defined in the Total Return Swap).

"TRS Hedging Amount" means the "Hedging Amount" (as defined in the Total Return Swap).

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"TRS LIBOR Amount" means the "MLI Floating Amount" (as defined in the Total Return Swap).

"TRS LIBOR Breakage Amount" means the "LIBOR Breakage Amount" (as defined in the Total Return Swap).

"TRS Transaction" means each transaction entered into pursuant to the Total Return Swap in respect of a TRS Covered Security.

"Transaction" means each credit default swap transaction entered into by the Issuer and the Synthetic Counterparty on the Closing Date under the ISDA Master Agreement.

"Transaction Document" means any one of the Indenture, the Management Agreement, the ISDA Master Agreement and the Confirmations relating to CDS Portfolio Assets, the Total Return Swap, the Financed Amount Note, any ISDA master agreement and the confirmation relating to an Offsetting Short Transaction, the Collateral Administration Agreement, the Deed of Covenant, the Subordinated Note Paying Agency Agreement, Terms and Conditions of the Subordinated Notes, the Securities Account Control Agreements and the Administration Agreement.

"Treasury Strip" means the United States Treasury strip security maturing on February 15, 2037 (CUSIP 912803CZ4), with an aggregate face amount of U.S.$4,000,000.

"UCC " means the Uniform Commercial Code as in effect in the State of New York.

"Underlying Assets" means the assets securing the Portfolio Asset (or with respect to a CDS Portfolio Asset, the related Reference Obligation) for the benefit of the holders of the Portfolio Asset and which are expected to generate the cashflows required for the servicing and repayment (in whole or in part) of the Portfolio Asset, or the assets to which a holder of such Portfolio Asset is economically exposed where such exposure is created synthetically.

"Underlying Instruments" means, with respect to any Pledged Security or CDS Portfolio Asset, the indenture, pooling agreement, servicing agreement or other agreement pursuant to which such Pledged Security or the related Reference Obligation, as applicable, has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Pledged Security or the related Reference Obligation, as applicable, or of which the holders of such Pledged Security or the related Reference Obligation, as applicable, are the beneficiaries.

"Weighted Average Life" means on any Measurement Date on or after the Ramp-Up Completion Date with respect to any Portfolio Asset, the number obtained by (a) summing the products obtained by multiplying (i) the Average Life at such time of each Portfolio Asset (excluding Defaulted Portfolio Assets) by (ii) the Principal/Notional Balance of such Portfolio Assets and (b) dividing such sum by the Aggregate Principal/Notional Balance at such time of all Portfolio Assets; provided, however, that with respect to any CDS Portfolio Asset, such calculations shall be made with respect to the related Reference Obligation.

"Weighted Average Fixed Rate Coupon" means as of any date of determination, a rate (expressed as a percentage) (rounded up to the next 0.001%) obtained by:

(a) summing the products obtained by multiplying the Principal/Notional Balance of each Fixed Rate Portfolio Asset held in the portfolio as of such date by the stated rate at which interest accrues on such Fixed Rate Portfolio Asset;

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(b) dividing such sum by the Aggregate Principal/Notional Balance of all Fixed Rate Portfolio Assets held in the portfolio as of such date;

(c) if such rate would not satisfy the Weighted Average Fixed Coupon Test for such Measurement Date, adding the amount of Spread Excess, if any as of such Measurement Date (but only to the extent necessary to cause the Weighted Average Fixed Coupon Test to be satisfied).

For purposes of calculating the Weighted Average Fixed Rate Coupon, Portfolio Assets that are currently deferring interest, Defaulted Portfolio Assets and Equity Securities shall be excluded.

"Weighted Average Spread" means, as of any Measurement Date, the number (rounded up to the next 0.001%) obtained by summing the products obtained by multiplying the stated spread above LIBOR at which interest accrues on each Portfolio Asset that is a Floating Rate Security (and which, in the case of a CDS Portfolio Asset, shall equal the Fixed Amount (as defined in the related Confirmation) payable under such CDS Portfolio Asset) (excluding all Defaulted Portfolio Assets, Written Down Securities, Deferred Interest PIK Bonds or Interest Only Securities) by the Aggregate Principal/Notional Balance of each such Portfolio Asset less the aggregate amount of all scheduled Short Synthetic Premium Amounts on an annualized basis on all Offsetting Short Transactions outstanding as of such date and dividing such sum by the Aggregate Principal/Notional Balance of all Portfolio Assets that are Floating Rate Securities (which shall be deemed to include any CDS Portfolio Assets for all purposes under this test) (excluding all Defaulted Portfolio Assets, Written Down Securities, Deferred Interest PIK Bonds and Interest Only Securities); provided that, if such number would not satisfy the Weighted Average Spread Test for such Measurement Date, the amount of Fixed Rate Excess, if any as of such Measurement Date (but only to the extent necessary to cause the Weighted Average Spread Test to be satisfied) shall be added to such number. For purposes of this definition, (1) a PIK Bond shall be deemed to be a Deferred Interest PIK Bond so long as any interest thereon has been deferred and capitalized for at least one payment date (until payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and scheduled principal has been paid in cash in accordance with the terms of the Underlying Instruments) and (2) no contingent payment of interest will be included in such calculation.

"Writedown" means the occurrence at any time on or after the Effective Date of:

(a) (i) a writedown or applied loss (however described in the Underlying Instruments) resulting in a reduction in the Outstanding Principal Amount (other than as a result of a scheduled or unscheduled payment of principal); or

(ii) the attribution of a principal deficiency or realized loss (however described in the Underlying Instruments) to the Reference Obligation resulting in a reduction or subordination of the current interest payable on the Reference Obligation;

(b) the forgiveness of any amount of principal by the holders of the Reference Obligation pursuant to an amendment to the Underlying Instruments resulting in a reduction in the Outstanding Principal Amount; or

(c) if Implied Writedown is applicable and the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (a) above to occur in respect of the Reference Obligation, an Implied Writedown Amount being determined in respect of the Reference Obligation by the Calculation Agent.

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"Writedown Amount" means, with respect to any day, the product of (a) the amount of any Writedown on such day, (b) the Applicable Percentage and (c) the Reference Price.

"Writedown Reimbursement" means, with respect to any day, the occurrence of:

(a) a payment by or on behalf of the Issuer of an amount in respect of the Reference Obligation in reduction of any prior Writedowns;

(b) (i) an increase by or on behalf of the Issuer of the Outstanding Principal Amount of the Reference Obligation to reflect the reversal of any prior Writedowns; or

(ii) a decrease in the principal deficiency balance or realized loss amounts (however described in the Underlying Instruments) attributable to the Reference Obligation; or

(c) if Implied Writedown is applicable and the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (b) above to occur in respect of the Reference Obligation, an Implied Writedown Reimbursement Amount being determined in respect of the Reference Obligation by the Calculation Agent.

"Written-Down Security" means any Portfolio Asset other than a Defaulted Portfolio Asset as to which the trustee or servicer of (x) such Portfolio Asset if such Portfolio Asset is a Funded Portfolio Asset or (y) the related Reference Obligation if such Portfolio Asset is a CDS Portfolio Asset has effected an appraisal reduction or other write-down based on its determination that the aggregate par amount of such Funded Portfolio Asset or Reference Obligation as the case may be, and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Funded Portfolio Asset or Reference Obligations as the case may be, exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral). "Zero Coupon Bond" means a security that, pursuant to the terms of its Underlying Instruments, on the date on which it is delivered to, or entered into (in the case of a related CDS Portfolio Asset) by, the Issuer, does not provide for the periodic payment of interest or provides that all payments of interest will be deferred until the final maturity thereof.

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INDEX OF DEFINED TERMS

Following is an index of defined terms used in this Offering Circular and the page number where each definition appears. 25% Limitation ........................................................................................................................................154 ABS Chassis Securities ...............................................................................................................................B-1 ABS Container Securities ..........................................................................................................................B-1 ABS Natural Resource Receivable Securities ...........................................................................................B-1 ABS Type Diversified Securities................................................................................................................B-1 ABS Type Residential Securities ...............................................................................................................B-2 ABS Type Undiversified Securities ...........................................................................................................B-2 Actual Interest Amount...........................................................................................................................164 Actual Principal Amount .........................................................................................................................164 Additional Fixed Amount........................................................................................................................164 Additional Fixed Amount Payment Date .................................................................................................89 Additional Fixed Payment Event ............................................................................................................164 Adjusted Initial Face Amount .................................................................................................................164 Administration Agreement.....................................................................................................................131 Administrative Expense Cap....................................................................................................................164 Administrative Expenses..........................................................................................................................164 Administrator...........................................................................................................................................131 Aerospace and Defense Securities...........................................................................................................B-2 Affected Class.........................................................................................................................................6, 57 affiliate .....................................................................................................................................................165 Affiliate.....................................................................................................................................................165 Aggregate Adjusted Notional Amount..................................................................................................117 Aggregate Discount Amount..................................................................................................................166 Aggregate Implied Writedown Amount................................................................................................166 Aggregate Outstanding Amount ...........................................................................................................166 Aggregate Principal/Notional Balance ...................................................................................................166 Aircraft Leasing Securities ........................................................................................................................B-2 Amortization Adjustment Amount ........................................................................................................166 Applicable Percentage.............................................................................................................................166 Applicable Recovery Rate........................................................................................................................167 Approved Credit Support Document .....................................................................................................167 Asset Rating ..........................................................................................................................................D-2-2 Asset-Backed Securities ............................................................................................................................B-3 Auction .......................................................................................................................................................57 Auction Call Date.......................................................................................................................................57 Auction Call Redemption ......................................................................................................................7, 57 Auction Call Redemption Price ...............................................................................................................167 Automobile Securities ..............................................................................................................................B-3 Average Life .............................................................................................................................................167 Bank..........................................................................................................................................................168 Bank Guaranteed Securities .....................................................................................................................B-3 Benefit Plan Investors ..............................................................................................................................149 Break-even Loss Rate ............................................................................................................................D-2-2 Business Day .............................................................................................................................................168 Calculation Agent ......................................................................................................................................52 Calculation Amount.................................................................................................................................168 Car Rental Receivable Securities ..............................................................................................................B-4 Cash...........................................................................................................................................................168

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Catastrophe Bonds....................................................................................................................................B-4 cause .........................................................................................................................................................112 CDO Collateral ...........................................................................................................................................41 CDO of CDOs .............................................................................................................................................B-4 CDO Securities...........................................................................................................................................B-4 CDO Security ..............................................................................................................................................39 CDS Calculation Agent ..............................................................................................................................88 CDS Portfolio Asset ..............................................................................................................................16, 88 CDS Portfolio Assets.................................................................................................................................168 Certificate..............................................................................................................................................A-2-1 Certificated Subordinated Notes ........................................................................................................61, 77 CFC ............................................................................................................................................................139 Class ..........................................................................................................................................................168 Class A Notes ................................................................................................................................................1 Class A-1 Notes.............................................................................................................................................1 Class A-2a Notes...........................................................................................................................................1 Class A-2b Notes...........................................................................................................................................1 Class B Notes ................................................................................................................................................1 Class C Deferred Interest .........................................................................................................................168 Class C Notes ................................................................................................................................................1 Class D Deferred Interest.........................................................................................................................169 Class D Notes ................................................................................................................................................1 Class E Component ......................................................................................................................................1 Class E Deferred Interest .........................................................................................................................169 Class E Notes.................................................................................................................................................1 Clean-up Call ..........................................................................................................................................6, 57 Clearstream ..............................................................................................................................................169 CLO Security ..............................................................................................................................................B-5 Closing Date .................................................................................................................................................5 Closing Date Expense Subaccount..........................................................................................................125 CM Technology Expense Allowance.......................................................................................................169 CMBS Conduit Securities ..........................................................................................................................B-5 CMBS Credit Tenant Lease Securities ......................................................................................................B-6 CMBS Large Loan Securities .....................................................................................................................B-7 CMBS Securities.........................................................................................................................................B-7 CMBS Single Property Securities ..............................................................................................................B-7 Code..................................................................................................................................................157, 159 Co-Issuer Common Stock .........................................................................................................................130 Collateral ....................................................................................................................................................82 Collateral Administration Agreement....................................................................................................169 Collateral Administrator..........................................................................................................................169 Collateral Manager....................................................................................................................................18 Collateral Manager Breach .....................................................................................................................110 Collateral Manager MAE.........................................................................................................................113 Collateral Manager Notes .......................................................................................................................169 Collateral Quality Tests..............................................................................................................................93 Collateral TRS Payment Amount ............................................................................................................121 Collection Account...................................................................................................................................124 Combination Securities.............................................................................................................................B-8 Components .................................................................................................................................................1 Composite Note Collateral ......................................................................................................................169 Composite Note Payment Date ..............................................................................................................169 Composite Noteholders.............................................................................................................................48 Composite Notes..........................................................................................................................................1

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Confirmation........................................................................................................................................17, 88 Controlling Class ........................................................................................................................................66 Controlling Person ...................................................................................................................................149 Credit Card Securities ...............................................................................................................................B-8 Credit Derivatives Definitions .............................................................................................................40, 88 Credit Enhancement ................................................................................................................................120 Credit Enhancement Event......................................................................................................................121 Credit Event................................................................................................................................................90 Credit Support Annex................................................................................................................................91 Credit-Impaired Portfolio Asset .............................................................................................................169 Credit-Improved Portfolio Asset .............................................................................................................170 CSA............................................................................................................................................................121 Current Factor ..........................................................................................................................................171 Current Period Implied Writedown Amount .........................................................................................171 Current Portfolio...................................................................................................................................D-2-4 Custodial Account....................................................................................................................................125 de minimis amount..................................................................................................................................135 Deed of Covenant....................................................................................................................................171 Default........................................................................................................................................................65 Defaulted Interest....................................................................................................................................171 Defaulted Security ...................................................................................................................................171 Deferred Interest .......................................................................................................................................51 Deferred Interest PIK Bond .....................................................................................................................172 Deferred PIK Amount ..............................................................................................................................172 Definitive Note...........................................................................................................................................61 Delivered Obligation .........................................................................................................................89, 172 Depository Event........................................................................................................................................63 Determination Date.................................................................................................................................172 Discount Asset..........................................................................................................................................172 Discount Haircut Amount........................................................................................................................173 Discretionary Sale ....................................................................................................................................100 Disposition................................................................................................................................................173 Distressed Ratings Downgrade .................................................................................................................90 Distribution Compliance Period................................................................................................................22 Documents................................................................................................................................................133 Dollars........................................................................................................................................................... v DTC..............................................................................................................................................21, 155, 158 Due Period................................................................................................................................................174 Early Redemption ........................................................................................................................................4 EETC Securities ..........................................................................................................................................B-8 Effective Maturity Date ...........................................................................................................................174 Elective Replacement...............................................................................................................................119 Eligibility Criteria .......................................................................................................................................95 Eligible Investment ..................................................................................................................................174 Emerging Market ABS Security................................................................................................................B-8 Emerging Market Country ......................................................................................................................176 Equipment Leasing Securities ..................................................................................................................B-8 Equity Security .........................................................................................................................................176 ERISA.........................................................................................................................................147, 157, 159 ERISA Plans ...............................................................................................................................................147 Euroclear...................................................................................................................................................177 Event of Default.........................................................................................................................................64 Excepted Property..............................................................................................................................82, 176 Exchange Act............................................................................................................................................... vi

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Exercise Amount ......................................................................................................................................176 Exercise Percentage .................................................................................................................................176 Expected Interest Amount ......................................................................................................................177 Expected Maturity Date ..........................................................................................................................177 Expected Principal Amount.....................................................................................................................177 Expense Account......................................................................................................................................125 Failed Auction Call Date..........................................................................................................................177 Failed Delivery Event ...............................................................................................................................116 Failure to Pay Interest................................................................................................................................90 Failure to Pay Principal ..............................................................................................................................90 Fair Market Value ....................................................................................................................................177 Final Amortization Date..........................................................................................................................178 Final Price .................................................................................................................................................116 Final Total Return Amount .....................................................................................................................115 Financed Amount ....................................................................................................................................178 Financed Amount Initial Balance............................................................................................................178 Financed Amount Note ...........................................................................................................................178 Financed Amount Threshold...................................................................................................................178 Financial Regulator....................................................................................................................................... i Firm.............................................................................................................................................................88 First Level TRS Counterparty Downgrade Event....................................................................................121 Fitch ..........................................................................................................................................................179 Fixed Amount.............................................................................................................................................89 Fixed Rate Excess......................................................................................................................................179 Fixed Rate Payer Calculation Period.......................................................................................................179 Fixed Rate Payer Payment Date..............................................................................................................179 Fixed Rate Portfolio Asset .......................................................................................................................179 Fixed Rate Security...................................................................................................................................179 Floating Amount........................................................................................................................................90 Floating Rate Notes .................................................................................................................................179 Floating Rate Payer Payment Date.........................................................................................................179 Floating Rate Security..............................................................................................................................179 Floorplan Receivable Securities ...............................................................................................................B-9 Franchise Securities...................................................................................................................................B-9 FSMA............................................................................................................................................................. v Funded Portfolio Asset ............................................................................................................................180 Future Flow Securities ..............................................................................................................................B-9 Global Notes...............................................................................................................................................61 GSC..............................................................................................................................................................18 GSC Group ................................................................................................................................................102 Guaranteed Corporate Debt Security......................................................................................................B-9 Healthcare Securities ................................................................................................................................B-9 High Diversity CDO Securities ..................................................................................................................B-9 Highest Bidder .........................................................................................................................................116 Holder .......................................................................................................................................................180 Home Equity Loan Securities..................................................................................................................B-10 Implied Writedown Amount...................................................................................................................180 Implied Writedown Reimbursement Amounts......................................................................................180 Indemnified Person..................................................................................................................................110 Initial Deposit...........................................................................................................................................114 Initial Face Amount .................................................................................................................................180 Initial Factor .............................................................................................................................................180 Institutional Accredited Investors...............................................................................................................2 Insurance Company Guaranteed Security .............................................................................................B-10

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Interest and Fees......................................................................................................................................115 Interest Collection Account.....................................................................................................................124 Interest Determination Date.....................................................................................................................52 Interest Distribution Amount..................................................................................................................180 Interest Only Security .............................................................................................................................B-10 Interest Period....................................................................................................................................51, 180 Interest Priority of Payments.......................................................................................................................8 Interest Proceeds......................................................................................................................................181 Interest Shortfall Amount .......................................................................................................................183 Interest Shortfall Payment Amount .......................................................................................................183 Interest Shortfall Reimbursement ..........................................................................................................183 Internal Rate of Return ...........................................................................................................................183 Intraperiod Collateral Excess...................................................................................................................117 Investment Advisers Act ............................................................................................................................49 Investment Company Act ............................................................................................................................2 Investment Subaccount Excess................................................................................................................117 Investment Subaccount Transfer Amount .............................................................................................117 Investor-Based Exemptions .....................................................................................................................148 Irish Listing Agent......................................................................................................................................58 Irish Paying Agent......................................................................................................................................58 IRS ...............................................................................................................................................................32 ISDA ............................................................................................................................................................40 ISDA Master Agreement......................................................................................................................17, 88 Issue price .................................................................................................................................................135 Issuer ......................................................................................................................................................A-2-1 Issuer Accounts...........................................................................................................................................83 Issuer Ordinary Shares .............................................................................................................................129 JPMCB .........................................................................................................................................................88 JPMorgan..................................................................................................................................................183 JPMorgan Chase.........................................................................................................................................88 JPMorgan Companies ................................................................................................................................45 JPMorgan Company...................................................................................................................................45 JPMorgan Financing Party.........................................................................................................................19 Legal Final Maturity Date........................................................................................................................183 Liabilities...................................................................................................................................................109 LIBOR ..........................................................................................................................................................52 London Banking Day .................................................................................................................................52 Loss Differential ....................................................................................................................................D-2-2 Lottery Receivable Security ....................................................................................................................B-10 Low Diversity CDO Securities .................................................................................................................B-11 Lower-Tier PFICs.......................................................................................................................................141 Majority ....................................................................................................................................................183 Majority-in-Interest of the Subordinated Notes......................................................................................76 Management Agreement..........................................................................................................................18 Management Fee.....................................................................................................................................109 Manufactured Housing Securities .........................................................................................................B-11 Market Maker Quotation........................................................................................................................122 Maturity....................................................................................................................................................183 Measurement Date ..................................................................................................................................183 ML&Co. .....................................................................................................................................................123 MLI ............................................................................................................................................................123 Moody's ......................................................................................................................................................19 Moody's Applicable Recovery Rate .....................................................................................................D-1-3 Moody's Asset Correlation Factor........................................................................................................D-1-3

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Moody's Asset Correlation Test ................................................................................................................94 Moody's Maximum Rating Factor Test.....................................................................................................94 Moody's Minimum Weighted Average Recovery Rate Test ...................................................................94 Moody's Rating .........................................................................................................................................C-1 Moody's Rating Factor..........................................................................................................................D-1-3 Moody's Weighted Average Rating Factor.........................................................................................D-1-4 Moody's Weighted Average Recovery Rate........................................................................................D-1-4 Mortgage-Related Securities..................................................................................................................B-11 Mutual Fund Securities...........................................................................................................................B-11 Net Premium Amount .............................................................................................................................181 NIM Security ............................................................................................................................................B-11 Non-Call Period ............................................................................................................................................5 Non-Permitted ERISA Holder ..................................................................................................................160 Non-Permitted Holder .............................................................................................................................160 Non-U.S. Holder .......................................................................................................................................132 Note Interest Amount ...............................................................................................................................52 Note Interest Rate......................................................................................................................................51 Note Registrar ..........................................................................................................................................184 Noteholder ...............................................................................................................................................184 Noteholders................................................................................................................................................48 Notes.............................................................................................................................................................1 Notional Interest Amount.......................................................................................................................184 Notional Principal Amount .....................................................................................................................184 Notional Principal Amount Deficit .........................................................................................................184 Offer .........................................................................................................................................................184 Offered Securities ........................................................................................................................................1 Offset Portfolio Asset ..............................................................................................................................184 Offsetting Short Transaction...................................................................................................................101 OID..............................................................................................................................................................32 Oil and Gas Securities .............................................................................................................................B-11 Optional Redemption..................................................................................................................................5 Optional Redemption by Refinancing......................................................................................................56 Original Principal Amount ......................................................................................................................185 other security ............................................................................................................................................C-1 Outstanding Principal Amount...............................................................................................................185 PAC Method .............................................................................................................................................136 par.............................................................................................................................................................188 Paying Agent..............................................................................................................................................58 Payment Account.....................................................................................................................................125 Payment Date...............................................................................................................................................2 Payment Date Collateral Excess ..............................................................................................................117 PFIC ...........................................................................................................................................................138 Physical Settlement Amount...................................................................................................................185 Physically Settled CDS Portfolio Asset ....................................................................................................185 PIK Bond ...................................................................................................................................................186 Placed Securities.........................................................................................................................................45 Placement Agent .......................................................................................................................................45 Placement Agreement.............................................................................................................................150 Plan Asset Regulation..............................................................................................................................159 Plan Asset Regulations .................................................................................................................147, A-2-1 Plans..........................................................................................................................................................147 Pledged Securities....................................................................................................................................186 Portfolio Asset..........................................................................................................................................186 Portfolio Balance .....................................................................................................................................186

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Portfolio Interest Exemption ..................................................................................................................133 Previous Period Implied Writedown Amount........................................................................................186 Principal Collection Account ...................................................................................................................124 Principal Only Security.................................................................................................................... B-9, B-12 Principal Priority of Payments...................................................................................................................11 Principal Proceeds ....................................................................................................................................186 Principal Shortfall Amount......................................................................................................................187 Principal Shortfall Reimbursement.........................................................................................................188 Principal/Notional Balance ......................................................................................................................188 Priority of Payments ..........................................................................................................................15, 188 Prohibited Security ..................................................................................................................................188 Project Finance Securities .......................................................................................................................B-12 Proposed Plan ..............................................................................................................................................5 Proposed Portfolio................................................................................................................................D-2-4 Prospectus...................................................................................................................................................... i Prospectus Directive...................................................................................................................................... i PTCE ..........................................................................................................................................................148 QEF......................................................................................................................................................32, 138 Qualified Institutional Buyers .....................................................................................................................2 Qualified Purchasers ....................................................................................................................................2 Qualified stated interest .........................................................................................................................135 Qualifying Foreign Obligor......................................................................................................................C-4 Quarterly Distribution Date ....................................................................................................................188 Ramp-Up Completion Date.................................................................................................................55, 83 Ramp-Up Completion Date Balance.........................................................................................................15 Ramp-Up Notice.............................................................................................................................28, 55, 83 Ramp-Up Period.........................................................................................................................................19 Rated Balance ..........................................................................................................................................188 Rated Guarantor ......................................................................................................................................122 Rating Agencies .........................................................................................................................................19 Rating Agency............................................................................................................................................81 Rating Agency Modification .....................................................................................................................72 Rating Condition......................................................................................................................................188 Rating Confirmation..............................................................................................................................4, 55 Ratings Confirmation Failure....................................................................................................4, 15, 55, 83 Ratings Event ...........................................................................................................................................119 Ratings Event I .........................................................................................................................................188 Ratings Event II ........................................................................................................................................189 Record Date................................................................................................................................................59 Recreational Vehicle Securities ..............................................................................................................B-13 Redemption Date.....................................................................................................................................189 Redemption Price.........................................................................................................................................8 Reference Banks.........................................................................................................................................52 Reference Entity.......................................................................................................................................189 Reference Obligation ..................................................................................................................17, 88, 189 Reference Obligation Calculation Period...............................................................................................189 Reference Obligation Coupon ................................................................................................................189 Reference Obligation Notional Amount................................................................................................189 Reference Obligation Payment Date......................................................................................................189 Reference Portfolio..................................................................................................................................189 Reference Security Custodial Receipt .....................................................................................................120 Refinancing Proceeds ................................................................................................................................56 Registered.................................................................................................................................................189 Regulation D ................................................................................................................................................2

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Regulation S .................................................................................................................................................2 Regulation S Global Notes ........................................................................................................................21 Regulation S Global Subordinated Notes ................................................................................................61 Regulation S Permanent Global Note ......................................................................................................21 Regulation S Permanent Global Subordinated Note ........................................................................61, 77 Regulation S Temporary Global Notes .....................................................................................................21 Regulation S Temporary Global Subordinated Note ........................................................................61, 77 Reinsurance Securities ............................................................................................................................B-13 Reinvestment Agreement .......................................................................................................................190 Reinvestment Period................................................................................................................................190 REIT Debt Securities—Diversified ..........................................................................................................B-13 REIT Debt Securities—Health Care ........................................................................................................B-13 REIT Debt Securities—Hotel ...................................................................................................................B-13 REIT Debt Securities—Industrial ............................................................................................................B-14 REIT Debt Securities—Mortgage ...........................................................................................................B-14 REIT Debt Securities—Multi-Family .......................................................................................................B-14 REIT Debt Securities—Office ..................................................................................................................B-14 REIT Debt Securities—Residential..........................................................................................................B-14 REIT Debt Securities—Retail...................................................................................................................B-14 REIT Debt Securities—Storage ...............................................................................................................B-14 REIT Debt Security...................................................................................................................................B-13 Related Entities ..........................................................................................................................................49 REMIC.......................................................................................................................................................B-15 Required Balance .....................................................................................................................................121 Required Ratings......................................................................................................................................121 Re-REMIC .................................................................................................................................................B-15 Residential A Mortgage Securities ........................................................................................................B-15 Residential B/C Mortgage Securities......................................................................................................B-15 Restaurant and Food Services Securities ...............................................................................................B-16 Reuters Screen LIBOR01 Page ...................................................................................................................52 Rule 144A .....................................................................................................................................................2 Rule 144A Global Secured Notes ..............................................................................................................60 S&P ..............................................................................................................................................................19 S&P Applicable Recovery Rate .............................................................................................................D-2-2 S&P Break Even Default Rate...............................................................................................................D-2-4 S&P CDO Monitor Test....................................................................................................................94, D-2-4 S&P Default Differential.......................................................................................................................D-2-4 S&P Minimum Weighted Average Recovery Rate Test ...........................................................................94 S&P Rating.................................................................................................................................................C-4 S&P Scenario Default Rate ...................................................................................................................D-2-4 S&P Weighted Average Recovery Rate ...............................................................................................D-2-3 Sale Proceeds................................................................................................................................................7 Scenario Loss Rate.................................................................................................................................D-2-2 Scheduled Termination Date ..................................................................................................................190 SEC ..............................................................................................................................................................35 Second Level TRS Counterparty Downgrade Event...............................................................................121 Secured Noteholder.................................................................................................................................190 Secured Noteholders .................................................................................................................................48 Secured Notes ..............................................................................................................................................1 Secured Parties.........................................................................................................................................190 Securities Account Control Agreements ................................................................................................190 Securities Act........................................................................................................................2, 154, 157, 158 Securities Intermediary............................................................................................................................190 Security Interest Opinion.........................................................................................................................123

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Senior Management Fee .........................................................................................................................109 Sequential Paydown Trigger Event ........................................................................................................190 Servicer .....................................................................................................................................................191 Servicer Report.........................................................................................................................................191 Share Trustee ...........................................................................................................................................129 Short Synthetic Counterparty .................................................................................................................101 Short Synthetic Counterparty Account ..................................................................................................102 Short Synthetic Payments........................................................................................................................101 Short Synthetic Premium Amount..........................................................................................................101 Similar Law ...............................................................................................................................................148 Small Business Loan Securities ...............................................................................................................B-16 Special Majority-In-Interest .......................................................................................................................76 Special Purpose Vehicle Jurisdiction.......................................................................................................191 Special U.S. Tax Counsel ............................................................................................................................32 Specified Type .........................................................................................................................................B-17 Spread.......................................................................................................................................................191 Spread Excess ...........................................................................................................................................191 SRPM.........................................................................................................................................................135 Stated Maturity..........................................................................................................................................53 Static Investment Grade Synthetic CDO Security..................................................................................B-17 Stranded Cost Securities .........................................................................................................................B-17 Structured Finance Obligation................................................................................................................191 Structured Settlement Securities ...........................................................................................................B-17 Student Loan Securities ..........................................................................................................................B-17 Subordinate Interests ................................................................................................................................54 Subordinated Management Fee.............................................................................................................109 Subordinated Note Documents ........................................................................................................74, 157 Subordinated Note Paying Agency Agreement ....................................................................................191 Subordinated Note Paying Agent ............................................................................................................75 Subordinated Note Register......................................................................................................................77 Subordinated Note Registrar ....................................................................................................................77 Subordinated Noteholders................................................................................................................48, 191 Subordinated Notes.....................................................................................................................................1 Subprime Automobile Securities ...........................................................................................................B-18 Subscription Agreements ........................................................................................................................192 Synthetic Counterparty ...........................................................................................................................192 Synthetic Counterparty Account ............................................................................................................126 Tax Event ..................................................................................................................................................192 Tax Ineligible Equity Security..................................................................................................................119 Tax Lien Securities...................................................................................................................................B-18 Tax Materiality Condition .......................................................................................................................192 Tax Redemption.....................................................................................................................................6, 57 Tax-Exempt U.S. Holders .........................................................................................................................143 Terms and Conditions..............................................................................................................................191 The S&P CDO Monitor ..........................................................................................................................D-2-4 Third Party Credit Support Document....................................................................................................192 Time Share Securities..............................................................................................................................B-18 Tobacco Bonds ........................................................................................................................................B-18 Total Return Swap .............................................................................................................................17, 114 Total Senior Redemption Amount ...........................................................................................................59 Trading Collateral Excess.........................................................................................................................118 Transaction...............................................................................................................................................193 Transaction Document ............................................................................................................................193 Treasury ......................................................................................................................................................50

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Treasury Strip ...........................................................................................................................................193 Treasury Strip Component ..........................................................................................................................1 TRS Asset Account....................................................................................................................................125 TRS Asset Interest Distributions ..............................................................................................................192 TRS Clean-up Call .....................................................................................................................................116 TRS Clean-up Call Condition ...................................................................................................................116 TRS Counterparty.......................................................................................................................17, 114, 192 TRS Counterparty Account......................................................................................................................127 TRS Counterparty Downgrade Event .....................................................................................................121 TRS Counterparty Floating Amount .......................................................................................................115 TRS Counterparty Guarantor ..................................................................................................................124 TRS Counterparty Guaranty ....................................................................................................................124 TRS Counterparty's Designee..................................................................................................................120 TRS Covered Securities.............................................................................................................................192 TRS Floating Amount...............................................................................................................................192 TRS Hedging Amount ..............................................................................................................................192 TRS Interest Account................................................................................................................................127 TRS LIBOR Amount ..................................................................................................................................192 TRS LIBOR Breakage Amount..................................................................................................................192 TRS Reference Obligation Criteria..........................................................................................................119 TRS Transaction........................................................................................................................................192 TRS/CDS Swap Receipts Account.............................................................................................................128 Trust Preferred CDO Security .................................................................................................................B-19 U.S. ................................................................................................................................................................ v U.S. Agency Guaranteed Securities .......................................................................................................B-19 U.S. Dollars ................................................................................................................................................... v U.S. Holder................................................................................................................................................132 U.S. Shareholders .....................................................................................................................................139 U.S.$ .............................................................................................................................................................. v UBTI...........................................................................................................................................................143 UCC ...........................................................................................................................................................193 unconditionally payable..........................................................................................................................135 Underlying Asset Market Value..............................................................................................................122 Underlying Assets ....................................................................................................................................193 Underlying Instruments...........................................................................................................................193 Undiversified ABS Securities.................................................................................................................D-1-3 Uninvested Proceeds................................................................................................................................124 United States................................................................................................................................................ v USA PATRIOT Act ...............................................................................................................................50, 154 Valuation Percentage ..............................................................................................................................122 Valuation Time.........................................................................................................................................116 Voting Rights ...........................................................................................................................................120 Voting Rights Event .................................................................................................................................120 Warehouse Provider ..................................................................................................................................83 Weighted Average Fixed Rate Coupon..................................................................................................193 Weighted Average Life ...........................................................................................................................193 Weighted Average Life Test .....................................................................................................................95 Weighted Average Spread......................................................................................................................194 Weighted Average Spread Test ................................................................................................................94 Writedown .........................................................................................................................................90, 194 Writedown Amount ................................................................................................................................194 Writedown Reimbursement....................................................................................................................194 Written-Down Security............................................................................................................................195 Zero Coupon Bond...................................................................................................................................195

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Annex A-1

Form of Purchaser Representation Letter for Subordinated Notes

LaSalle Bank National Association 181 West Madison Street, 32nd Floor Chicago, Illinois 60602 Attention: CDO Trust Services Group—Squared CDO 2007-1, Ltd.

Re: Squared CDO 2007-1, Ltd.

Subordinated Notes

Reference is hereby made to the Indenture, dated as of May 11, 2007, among the Issuer, Squared CDO 2007-1, Inc., as Co-Issuer of the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Composite Notes, and the Trustee (the "Indenture"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.

This letter relates to U.S.$[ ] Aggregate Outstanding Amount of Subordinated Notes (the "Subordinated Notes"), which are held in the form of (a) one or more Regulation S Temporary Global Subordinated Notes (the "Regulation S Temporary Global Subordinated Notes"), (b) one or more Regulation S Permanent Global Subordinated Notes (the "Regulation S Permanent Global Subordinated Notes", together with the Regulation S Temporary Global Subordinated Notes, the "Regulation S Global Subordinated Notes") and/or (c) one or more Certificated Subordinated Notes (the "Certificated Subordinated Notes") in the name of [ ] (the "Transferor") to effect the transfer of the Subordinated Notes to [ ] (the "Transferee").

In connection with such request, and in respect of such Subordinated Notes, the Transferee does hereby certify that the Subordinated Notes are being transferred (a) in accordance with the transfer restrictions set forth in the Indenture and (b) pursuant to an exemption from registration under the United States Securities Act of 1933, as amended (the "Securities Act") and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction.

In addition, the Transferee hereby represents, warrants and covenants for the benefit of the Issuer and their counsel that we are:

(a) (PLEASE CHECK ONLY ONE)

(1) _____ a "qualified institutional buyer" as defined in Rule 144A under the Securities Act that is also a Qualified Purchaser as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended (the "Investment Company Act") that is also a Qualified Purchaser as defined in Section 2(a)(51) of the Investment Company Act, and are acquiring the Subordinated Notes in reliance on the exemption from Securities Act registration provided by Rule 144A thereunder ; and/or

______ an institutional "accredited investor" as defined in Rule 501(a)(1) and Rule 501(a)(3) or an "accredited investor" as defined in Rule 501(a)(8) if all of the equity owners of it are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under

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the Securities Act that is also a Qualified Purchaser as defined in Section 2(a)(51) of the Investment Company Act, and are acquiring the Subordinated Notes in reliance on the exemption from Securities Act registration provided by Rule 501(a) thereunder; or

(2) _____ a person that is not a "U.S. person" as defined in Regulation S under the Securities Act, and are acquiring the Subordinated Notes in an offshore transaction (as defined in Regulation S) in reliance on the exemption from Securities Act registration provided by Regulation S; and

(b) acquiring the Subordinated Notes for our own account (and not for the account of any other Person) in a minimum denomination of U.S.$500,000 (or in such other minimum denominations as the Issuer may agree on a case-by-case basis) and in integral multiples of U.S.$1,000 in excess thereof.

The Transferee further represents and warrants as follows:

• It understands that the Subordinated Notes have not been and will not be registered under the Securities Act, and, if in the future it decides to offer, resell, pledge or otherwise transfer the Subordinated Notes, such Subordinated Notes may be offered, resold, pledged or otherwise transferred only in accordance with the provisions of the Indenture and the legends on such Subordinated Notes, including the requirement for written certifications. In particular, it understands that the Subordinated Notes may be transferred only to a person that is (a) a "qualified purchaser" (as defined in the Investment Company Act) and is (i) a "qualified institutional buyer" as defined in Rule 144A under the Securities Act who purchases such Subordinated Notes in reliance on the exemption from Securities Act registration provided by Rule 144A thereunder or (ii) an institutional "accredited investor" as defined in Rule 501(a)(1) and Rule 501(a)(3) or an "accredited investor" as defined in Rule 501(a)(8) if all of the equity owners of it are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act or (b) a person that is not a "U.S. person" as defined in Regulation S under the Securities Act, and is acquiring the Subordinated Notes in an offshore transaction (as defined in Regulation S thereunder) in reliance on the exemption from registration provided by Regulation S thereunder. It acknowledges that no representation is made as to the availability of any exemption under the Securities Act or any state securities laws for resale of the Subordinated Notes.

• In connection with its purchase of the Subordinated Notes: (a) none of the Co-Issuers, the Placement Agent, the Trustee, the Collateral Manager, the Subordinated Note Paying Agent or any of their respective affiliates are acting as a fiduciary or financial or investment adviser for it; (b) it is not relying (for purposes of making any investment decision or otherwise) on any written or oral advice, counsel or representations of the Co-Issuers, the Placement Agent, the Trustee, the Subordinated Note Paying Agent, the Collateral Manager or any of their respective affiliates other than any statements in the final Offering Circular for such Subordinated Notes; (c) it has read and understands the final Offering Circular for such Subordinated Notes (including, without limitation, the descriptions therein of the structure of the transaction in which the Subordinated Notes are being issued and the risks to purchasers of the Subordinated Notes); (d) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent it has deemed necessary, and has made its own investment decisions (including decisions regarding the suitability of any transaction pursuant to the Indenture) based upon its own judgment and upon any advice from such advisers as it has deemed necessary and not upon any view expressed by the Co-Issuer, the Placement Agent, the Trustee, the Subordinated Note Paying Agent, the Collateral Manager or any of their respective affiliates; (e) it will hold and transfer at least the

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minimum denomination of such Subordinated Notes; (f) it understands that the Issuer may receive a list of participants holding interests in the Subordinated Notes from one or more book-entry depositories, (g) it was not formed for the purpose of investing in the Subordinated Notes; and (h) it is a sophisticated investor and is purchasing the Subordinated Notes with a full understanding of all of the terms, conditions and risks thereof, and it is capable of assuming and willing to assume those risks.

• (a) It is (i) a "qualified purchaser" for purposes of Section 3(c)(7) of the Investment Company Act, that is (x) a "qualified institutional buyer" as defined in Rule 144A under the Securities Act who purchases such Subordinated Notes in reliance on the exemption from Securities Act registration provided by Rule 144A thereunder or (y) an institutional "accredited investor" as defined in Rule 501(a)(1) and Rule 501(a)(3) or an "accredited investor" as defined in Rule 501(a)(8) if all of the equity owners of it are also institutional "accredited investors" under Rule 501(a)(1) or (3), of Regulation D under the Securities Act who purchases such Subordinated Notes in reliance on the exemption from the Securities Act registration provided by Regulation D thereunder or (ii) not a "U.S. person" as defined in Regulation S under the Securities Act and is acquiring the Subordinated Notes in an offshore transaction (as defined in Regulation S thereunder) in reliance on the exemption from registration provided by Regulation S thereunder; (b) it is acquiring the Subordinated Notes as principal solely for its own account for investment and not with a view to the resale, distribution or other disposition thereof in violation of the Securities Act; (c) it is not a (i) partnership, (ii) common trust fund, or (iii) special trust, pension, profit sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants may designate the particular investments to be made; (d) it agrees that it shall not hold any Subordinated Notes for the benefit of any other person, that it shall at all times be the sole beneficial owner thereof for purposes of the Investment Company Act and all other purposes and that it shall not sell participation interests in the Subordinated Notes or enter into any other arrangement pursuant to which any other person shall be entitled to a beneficial interest in the distributions on the Subordinated Notes; (e) it is acquiring its interest in the Subordinated Notes for its own account; and (f) it will hold and transfer at least the minimum denomination of the Subordinated Notes and provide notice of the relevant transfer restrictions to subsequent transferees.

• It agrees and acknowledges that none of Issuer or the Trustee will recognize (i) any transfer of the Regulation S Global Subordinated Notes or (ii) any transfer of the certificated Subordinated Notes if such transfer may result in 25% or more of the value of the Subordinated Notes being held by Benefit Plan Investors.

• It will treat its Subordinated Notes as equity of the Issuer for United States federal income tax purposes.

• It is ______ (check if applicable) a "United States person" within the meaning of Section 7701(a)(30) of the Code, and a properly completed and signed Internal Revenue Service Form W-9 (or applicable successor form) is attached hereto; or ______ (check if applicable) not a "United States person" within the meaning of Section 7701(a)(30) of the Code, and a properly completed and signed appropriate Internal Revenue Service Form W-8 (or applicable successor form) is attached hereto. It understands and acknowledges that failure to provide the Issuer or the Trustee with the applicable United States federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or successor applicable form) in the case of a person that is a "United States person" within the meaning of Section 7701(a)(30) of the Code or an applicable Internal Revenue Service Form W-8 (or successor applicable form) in the case of a person that is not a "United States person"

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within the meaning of Section 7701(a)(30) of the Code) may result in United States federal back-up withholding from payments to it in respect of the Subordinated Notes.

• It agrees not to seek to commence in respect of the Issuer or the Co-Issuer, or cause the Issuer or Co-Issuer to commence, a bankruptcy proceeding before a year and a day has elapsed since the payment in full to the holders of the Notes or, if longer, the applicable preference period then in effect.

• To the extent required by the Issuer, as determined by the Issuer, the Issuer may, upon notice to the Subordinated Note Paying Agent, impose additional transfer restrictions on the Subordinated Notes to comply with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA PATRIOT Act") and other similar laws or regulations, including, without limitation, requiring each transferee of a Subordinated Note to make representations to the Issuer in connection with such compliance.

• It is not a member of the public in the Cayman Islands.

• It understands that the Issuer, the Trustee, the Subordinated Note Paying Agent, the Placement Agent, the Collateral Manager and their respective counsel will rely upon the accuracy and truth of the foregoing representations, and it hereby consents to such reliance.

• Name of Purchaser: •

• Dated: • • By:

Name: Title:

• Amount of Subordinated Notes: $[ ] •

• Taxpayer identification number: •

• •

• Address for notices: • Wire transfer information for payments:

• • Bank:

• • Address:

• • Bank ABA#:

• • Account #:

• Telephone: • FAO:

• Facsimile: • Attention:

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• Attention: •

• •

• Denominations of certificates (if more than one):

Registered name:

• •

• cc: Squared CDO 2007-1, Ltd. P.O. Box 1093 GT Queensgate House, South Church Street George Town Grand Cayman, Cayman Islands

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Annex A-2

Form of Certified Subordinated Note ERISA Certificate

The purpose of this Benefit Plan Investor Certificate (this "Certificate") is, among other things, to (a) endeavor to ensure that less than 25% of the value of the Subordinated Notes issued by Squared CDO 2007-1, Ltd. (the "Issuer") is held by "Benefit Plan Investors" as contemplated and defined under the U.S. Department of Labor's regulations set forth at 29 C.F.R. Section 2510.3-101 as modified by ERISA (the "Plan Asset Regulation") so that the Issuer will not be subject to the U.S. federal pension laws contained in ERISA and Section 4975 of the Code, (b) obtain from you certain representations and agreements and (c) provide you with certain related information with respect to your acquisition, holding or disposition of the certificated Subordinated Notes. By signing this Certificate, you agree to be bound by its terms.

Please be aware that the information contained in this Certificate is not intended to constitute advice and the examples given below are not intended to be, and are not, comprehensive. You should contact your own counsel if you have any questions in completing this Certificate. Capitalized terms not defined in this Certificate shall have the meanings ascribed to them in the final Offering Circular of the Issuer or the Indenture.

Please review the information in this Certificate and check the box(es) that are applicable to you.

If a box is not checked, you are agreeing that the applicable Section does not, and will not, apply to you.

1. Employee Benefit Plans Subject to ERISA or Section 4975 of the Code. We, or the entity on whose behalf we are acting, are an "employee benefit plan" within the meaning Section 3(3) of ERISA that is subject to the fiduciary responsibility provisions of ERISA or a "plan" within the meaning of Section 4975(e)(2) of the Code that is subject to Section 4975 of the Code.

Examples: (a) tax qualified retirement plans such as pension, profit sharing and section 401(k) plans, (b) welfare benefit plans such as accident, life and medical plans, (c) individual retirement accounts or "IRAs" and "Keogh" plans and (d) certain tax-qualified educational and savings trusts.

2. Employee Benefit Plans Not Subject to ERISA or Section 4975 of the Code. We, or the entity on whose behalf we are acting, are a plan or retirement arrangement of a type described in the definition of an "employee benefit plan" within the meaning of Section 3(3) of ERISA but which is NOT subject to the fiduciary provisions of ERISA or to Section 4975 of the Code.

Examples: (a) governmental plans, (b) certain church plans that did not elect to be subject to the tax-qualification provisions of the Code and (c) non-US plans.

3. Entity Holding Plan Assets by Reason of Plan Asset Regulations. We, or the entity on whose behalf we are acting, are an entity or fund whose underlying assets include "plan assets" of any Benefit Plan Investor, as determined under the Plan Asset Regulation.

Examples: (a) an insurance company separate account, (b) a bank collective trust

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fund and (c) a hedge fund or other private investment vehicle where 25% or more of the value of any class of its equity is held by Benefit Plan Investors.

Note, the Plan Asset Regulations are technical. Accordingly, if you have any question regarding whether you may be an entity described in this Section 3, you should consult with your counsel. 4. Insurance Company General Account. We, or the entity on whose behalf we are acting, are an insurance company purchasing the Subordinated Notes with funds from our or their general account (i.e., the insurance company's corporate investment portfolio), the assets of which, in whole or in part, constitute "plan assets" for purposes of the Plan Asset Regulations.

If you check Box 4, please also check either Box A or Box B.

A. We are not able to determine an exact percentage of the general account that constitutes "plan assets" but the maximum percentage of the general account that constitutes (or will constitute) "plan assets" for purposes of the Plan Asset Regulations is less than 25%.

B. The maximum percentage of the insurance company general account that will constitute "plan assets" for purposes of conducting the 25% test under the Plan Asset Regulations is: ____%. IF YOU CHECK THIS BOX B BUT DO NOT INCLUDE ANY PERCENTAGE IN THE BLANK SPACE, YOU WILL BE COUNTED AS IF YOU FILLED IN 100% IN THE BLANK SPACE.

5. None of Sections (1) Through (4) Above Apply. We, or the entity on whose behalf we are acting, are a person that does not fall into any of the categories described in Sections (1) through (4) above. 6. No Prohibited Transaction. If we checked any of the boxes in Sections (1) through (4) above, we represent, warrant and agree that our acquisition, holding and disposition of the Subordinated Notes, as applicable, do not and will not constitute or give rise to a non-exempt prohibited transaction under ERISA or under Section 4975 of the Code, or give rise to a violation of any similar federal, state, local or foreign law, as applicable. 7. Controlling Person. We are, or we are acting on behalf of any of: (a) the Trustee, (b) the Subordinated Note Paying Agent, (c) any person that has discretionary authority or control with respect to the assets of the Issuer, (d) any person who provides investment advice for a fee (direct or indirect) with respect to such assets or (e) any "affiliate" of any of the above persons. "Affiliate" shall have the meaning set forth in the Plan Asset Regulations. Any of the persons described in the first sentence of this Section (7) is referred to in this Certificate as a "Controlling Person."

Note: We understand that, for purposes of determining whether Benefit Plan Investors hold less than 25% of the value of the Subordinated Notes, the value of any Subordinated Notes held by Controlling Persons (other than Benefit Plan Investors) is required to be disregarded.

Compelled Disposition. We acknowledge and agree that:

• if any representation that we made hereunder is subsequently shown to be false or misleading or our beneficial ownership otherwise causes a violation of the 25% Limitation, the Issuer shall, promptly after such discovery (or upon notice from the Trustee if the Trustee makes the discovery (who, in each case, agree to notify the Issuer of such discovery, if any)), send notice to us demanding that