Magnetar CDO Deal - Squared CDO 2007-1 Ltd. Prospectus

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Magnetar CDO Deal - Squared CDO 2007-1 Ltd. Prospectus Powered By Docstoc
					                                              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.
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
                                                                       TABLE OF CONTENTS
                                                                                 Page                                                                                              Page
Summary of terms....................................................................... 1          Income tax considerations ......................................................131
    Principal terms of the Offered Securities ............................ 1                            U.S. federal income tax considerations ............................131
Risk Factors ................................................................................ 24        General ...............................................................................131
Description of the Offered Securities ...................................... 50                         Tax treatment of the Issuer...............................................132
    Issuance of the Secured Notes, the Composite                                                        Tax treatment of U.S. Holders of the Secured
    Notes and the Subordinated Notes.................................... 50                             Notes ..................................................................................134
    Terms applicable to the Secured Notes ............................. 50                              Tax Treatment of Non-U.S. Holders of Composite
    Terms applicable to the Secured Notes, the                                                          Notes ..................................................................................137
    Composite Notes and the Subordinated Notes................. 54                                      Tax treatment of U.S. Holders of Subordinated
    The Indenture...................................................................... 64              Notes ..................................................................................137
    Additional information regarding the                                                                Tax treatment of Tax-Exempt U.S. Holders......................143
    Subordinated Notes ............................................................ 74                  Transfer reporting requirements......................................143
Ratings of the Secured Notes and the                                                                    Tax return disclosure and investor list
    Composite Notes................................................................. 81                 requirements......................................................................144
    The Secured Notes............................................................... 81                 Tax treatment of Non-U.S. Holders of Notes and
                                                                                                        Composite Notes................................................................145
    The Composite Notes .......................................................... 81
                                                                                                        Information reporting and backup withholding.............145
Security for the Secured Notes................................................. 82
                                                                                                        Cayman Islands taxation ...................................................146
    The Collateral ...................................................................... 82
    Collateral accumulation on or prior to the                                                     ERISA and legal investment considerations ..........................147
    Closing Date; Ramp-Up Period ........................................... 83                         The Secured Notes and the Composite Notes..................148
    The Funded Portfolio Assets and Reference                                                           The Subordinated Notes ...................................................149
    Obligations .......................................................................... 84           Legal investment considerations ......................................150
    The CDS Portfolio Assets..................................................... 87               Plan of distribution ..................................................................150
    The Collateral Quality Tests................................................ 93                Transfer restrictions.................................................................152
    Eligibility Criteria................................................................. 95            Global Notes and Regulation S Global
    Dispositions of Portfolio Assets; Offsetting Short                                                  Subordinated Notes...........................................................152
    Transactions......................................................................... 99            Certificated Subordinated Notes ......................................154
    The Collateral Manager .................................................... 102                     Additional restrictions.......................................................154
    The Management Agreement.......................................... 109                              Legends ..............................................................................154
    The Total Return Swap ..................................................... 114                     Non-Permitted Holder/Non-Permitted ERISA
    General .............................................................................. 114          Holder.................................................................................159
    Total Return Floating Payments....................................... 114                           Cayman Islands placement provisions ..............................161
    Delivery of TRS Covered Security ..................................... 115                     Listing and general information .............................................161
    Optional Termination ....................................................... 116               Legal matters............................................................................163
    Termination date payments and deliveries under                                                 Glossary of defined terms .......................................................164
    TRS Transactions................................................................ 116
    Replacements, increases and reductions under                                                   Index of Defined Terms ...........................................................196
    TRS Transactions................................................................ 117           Annex A-1 – Form of Purchaser
    TRS Reference Obligation Criteria ................................... 119                        Representation Letter For Subordinated
    Voting rights under TRS Transactions.............................. 120                           Notes.................................................................................. A-1-1
    Credit Enhancement of TRS Transactions ........................ 120                            Annex A-2 – Form of Certificated
    Rating Downgrade of the TRS Counterparty .................. 121                                  Subordinated Note ERISA Certificate .............................. A-2-1
    Governing law ................................................................... 123          Annex B – Types of Structured Finance
    The TRS Counterparty ....................................................... 123                 Obligations ........................................................................... B-1
    TRS Counterparty .............................................................. 123            Annex C – Definitions of Moody's Rating and
                                                                                                     S&P Rating.............................................................................. C-1
    Description of the TRS Guaranty...................................... 124
                                                                                                   Annex D-1 – Moody's Recovery Rate Matrix
    TRS Guarantor ................................................................... 124            and Moody’s Criteria ........................................................ D-1-1
    The Collection and Payment Accounts ............................ 124                           Annex D-2 – S&P Recovery Rate Matrix and
    The TRS Asset Account...................................................... 125                  S&P Criteria........................................................................ D-2-1
    The Custodial Account ...................................................... 125               Annex E – S&P Types of Asset-Backed
    The Expense Account ........................................................ 125                 Securities Ineligible for Notching ........................................E-1
    The Synthetic Counterparty Account............................... 126                          Annex F-1 – Moody's Notching of Asset-
    The TRS Counterparty Account ........................................ 127                        Backed Securities................................................................F-1-1
    The TRS Interest Account.................................................. 127                 Annex F-2 – S&P Notching of Asset-Backed
                                                                                                     Securities.............................................................................F-2-1
    The TRS/CDS Swap Receipts Account ............................... 128
                                                                                                   Annex G – Form ADV Part II of Collateral
Use of proceeds ....................................................................... 128          Manager ............................................................................... G-1
    General .............................................................................. 128     Annex H – Minimum Bid Price For Treasury
The Co-Issuers .......................................................................... 129        Strip Component.................................................................. H-1
    General .............................................................................. 129
    Capitalization of the Issuer............................................... 130
    Business of the Co-Issuers ................................................. 130
                  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).

                                        ____________________

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
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.
                                        ____________________

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.



                                              ii
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.
                                        ____________________

   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


                                               iii
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.




                                              iv
                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.




                                              v
                              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.




                                              vi
                                                                                                  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
                                                                                                                                                                                                                                      Subordinated
      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              Notes
          Type               Senior Secured           Senior Secured           Senior Secured           Senior Secured           Senior Secured           Senior Secured           Senior Secured                                       Unsecured
                              Floating Rate            Floating Rate             Fixed Rate              Floating Rate             Deferrable               Deferrable               Deferrable
                                                                                                                                  Floating Rate            Floating Rate            Floating Rate
        Issuer(s)             Issuer and Co-           Issuer and Co-           Issuer and Co-           Issuer and Co-           Issuer and Co-           Issuer and Co-           Issuer and Co-           Issuer and Co-               Issuer
                                  Issuer                   Issuer                   Issuer                   Issuer                   Issuer                   Issuer                   Issuer                   Issuer
     Initial Principal      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.$16,000,000
     Amount / Face
     Amount (U.S.$)
    Expected Moody's              "Aaa"                    "Aaa"                    "Aaa"                    "Aa2"                    "A2"                      "A3"                   "Baa2"                    "Aaa"4                    N/A
      Initial Rating
      Expected S&P               "AAA"                    "AAA"                    "AAA"                     "AA"                      "A"                      "A-"                    "BBB"                   "AAA"4                     N/A
      Initial Rating
                                    2                        2                                                 2                        2                        2                         2                            5
      Note Interest          LIBOR + 0.25%            LIBOR + 1.00%                 6.35%               LIBOR + 2.00%            LIBOR + 5.00%            LIBOR + 6.00%             LIBOR + 9.00                 9.50%                     N/A
         Rate2
         Spread                   0.25%                    1.00%                     N/A                     2.00%                    5.00%                    6.00%                    9.00%                     N/A                      N/A
     Stated Maturity          May 11, 2057             May 11, 2057             May 11, 2057             May 11, 2057             May 11, 2057             May 11, 2057             May 11, 2057           February 15, 2037          May 11, 2057
                              Payment Date             Payment Date             Payment Date             Payment Date             Payment Date             Payment Date             Payment Date            Composite Note            Payment Date
                                                                                                                                                                                                             Payment Date
       Minimum                  $500,000                 $500,000                 $500,000                 $500,000                 $500,000                 $500,000                 $500,000                 $2,000,000                $500,000
     Denominations
        (U.S.$)                  ($1,000)                 ($1,000)                 ($1,000)                 ($1,000)                 ($1,000)                 ($1,000)                 ($1,000)                 ($4,000)                 ($1,000)
       (Integral
       Multiples)
    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
                             A-2, B, C, D, E,            B, C, D, E,              B, C, D, E,               C, D, E,
                             Subordinated              Subordinated             Subordinated             Subordinated           D, E, Subordinated        E, Subordinated           Subordinated
     Junior Class(es)            Notes                     Notes                    Notes                    Notes                     Notes                   Notes                   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.




                                                                                                                            1
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.




                                                         2
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


                                                            3
                                               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


                                                         4
                                           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


                                                    5
                                                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


                                                          6
                                               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


                                                        7
                                           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"):


                                                    8
(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);


   9
(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



  10
     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;


       11
(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




  12
       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


  13
     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


       14
                                                        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



                                                            15
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


        16
                                                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.



                                                         17
                                                 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


                                                          18
                                      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



                                              19
                                                   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


                                                            20
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


        21
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


        22
                                                   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."




                                                             23
                                          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



                                                   24
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.


                                                   25
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


                                                   26
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


                                                  27
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




                                                  28
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


                                                   29
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


                                                  30
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."


                                                  31
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.



                                                  32
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.




                                                 33
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




                                                 34
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



                                                   35
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



                                                  36
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



                                                   37
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".




                                                  38
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.




                                                  39
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.



                                                  40
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


                                                     41
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.




                                                  42
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


                                                 43
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.


                                                     44
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


                                                   45
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



                                                   46
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.


                                                   47
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.




                                                  48
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.



                                                   49
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.




                                                  50
                      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


                                                 51
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


                                                  52
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.




                                                  53
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.




                                                  54
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




                                                   55
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




                                                  56
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



                                                  57
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


                                                  58
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,


                                                 59
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.


                                                 60
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


                                                  61
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


                                                  62
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


                                                   63
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.


                                                   64
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-



                                                   65
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


                                                   66
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


                                                  67
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


                                                  68
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,




                                                  69
(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;




                                                  70
(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;



                                                  71
(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


                                                 72
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



                                                   73
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,



                                                   74
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



                                                75
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.




                                                  76
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").




                                                 77
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).




                                                  78
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


                                                  79
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


                                                   80
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.



                                                   81
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



                                                   82
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



                                                   83
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.




                                                 84
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


                                                  85
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


                                                  86
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


                                                  87
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.




                                                   88
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


                                                  89
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



                                                   90
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.




                                                  91
(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").



                                                   92
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.




                                                   93
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.



                                                  94
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      The "Moody's Asset Correlation Test" means a test that will be
Test                           satisfied if, on any Measurement Date, the Moody's Asset Correlation
                               Factor is no greater than 35%.

Moody's Maximum Rating         The "Moody's Maximum Rating Factor Test" will be satisfied if the
Factor Test                    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                The "Moody's Minimum Weighted Average Recovery Rate Test" will
Weighted Average               be satisfied, as of any Measurement Date, if the Moody's Weighted
Recovery Rate Test             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           The "S&P Minimum Weighted Average Recovery Rate Test" will be
Average Recovery Rate          satisfied, as of any Measurement Date, if the S&P Weighted Average
Test                           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


                                                  95
                              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        The "Weighted Average Fixed Coupon Test" will be satisfied, as of
Coupon Test                   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       The "Weighted Average Spread Test" will be satisfied, as of any
Test                          Measurement Date, if the Weighted Average Spread as of such
                              Measurement Date is greater than or equal to 1.15%.

Weighted Average Life         The "Weighted Average Life Test" will be satisfied, as of any
Test                          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               8 years
                              excluding the November 2008 Payment Date:

                               On and including the November 2008 Payment         7 years
                               Date to but excluding the November 2009
                               Payment Date

                              On and including the November 2009 Payment          6 years
                              Date to but excluding the November 2010
                              Payment Date

                              On and including the November 2010 Payment          5 years
                              Date to but excluding the November 2011
                              Payment Date

                              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



                                                 96
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             (2)       the obligor on or issuer of the Funded Portfolio Asset or related
Issuer                      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                      (3)     the Funded Portfolio Asset or the related Reference Obligation is
Denominated                 denominated and payable only in Dollars and may not be converted into a
                            security payable in any other currency;

Fixed Principal             (4)      the Funded Portfolio Asset or the related Reference Obligation
Amount                      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           (6)     the obligor on or issuer of the Funded Portfolio Asset or the
not Owned or                related Reference Obligation is not a fund or other entity owned or
Managed by the              managed by the Collateral Manager or any of its affiliates;
Collateral Manager

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;



                                                   97
Does not subject     (9)      the acquisition (including the manner of acquisition), ownership,
Issuer to Tax on a   enforcement and disposition of such Funded Portfolio Asset or CDS
Net Income Basis     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           (10)    the Funded Portfolio Asset or the related Reference Obligation is
Securities           not a Prohibited Security;

Limitation on        (11)    if the scheduled maturity or termination date of such Portfolio
Stated               Asset occurs later than the Stated Maturity of the Secured Notes, the
Final Maturity       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           (12)    the Funded Portfolio Asset or the related Reference Obligation is
Exchange Controls    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       (13)    the Funded Portfolio Asset or the related Reference Obligation is
Non-Credit-Related   not a security whose timely repayment is subject to substantial non-credit-
Risk                 related risk, as reasonably determined by the Collateral Manager;

Investment           (14)     the acquisition of the Funded Portfolio Asset or the related
Company Act          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    (15)    the Funded Portfolio Asset or the related Reference Obligation is
Offer or a Called    not the subject of an Offer and has not been called for redemption;
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



                                           98
                                           "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             (17)    the Aggregate Principal/Notional Balance of the Portfolio Assets
Concentration              consisting of CDO Securities managed by any single collateral manager
                           shall not exceed 7% of the Portfolio Balance;

Single Name                (18)     if such Funded Portfolio Asset or the related Reference Obligation
Concentration              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.




                                                 99
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.




                                                    100
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


                                                  101
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




                                                   102
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.




                                                 103
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.



                                                104
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




                                                 112
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


                                                  113
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



                                                124
       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



                                                127
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".




                                                 129
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".




                                                130
                                         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


                                                   131
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



                                                              132
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"



                                                  133
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


                                                   134
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.


                                                  135
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


                                                  136
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


                                                    137
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


                                                  138
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,



                                                 139
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.


                                                 140
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.


                                                 141
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


                                                  142
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.




                                                  143
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


                                                 144
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.




                                                145
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.




                                                  146
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.




                                                   147
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:



                                                  148
                                    "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



                                                 149
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.




                                                  150
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


                                                   151
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


                                                 152
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,




                                                  153
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.



                                                  154
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


                                                 155
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.




                                                  156
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


                                                  157
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



                                                 158
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



                                                  159
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


                                                   160
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


                                                  161
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


                                                  162
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



                                                  163
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.




                                                  164
•        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.




                                                  165
                              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



                                                 166
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



                                                  171
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



                                                   173
       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


                                                  177
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,




                                                  178
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



                                                  182
(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


                                                 183
        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



                                                 186
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




                                                  187
        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



                                                   188
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;




                                                 189
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



                                                 190
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.



                                                 191
"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



                                                 192
(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)).



                                                  193
"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).



                                                 194
"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;



                                                  195
(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.




                                                  196
"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.




                                                  197
                                                            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



                                                                              198
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



                                                                              199
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



                                                                              200
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



                                                                               201
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



                                                                               202
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



                                                                               203
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



                                                                              204
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



                                                                               205
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



                                                                             206
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



                                                                                207
208
                                                                                             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



                                                  A-1-1
        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


                                                   A-1-2
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"




                                                   A-1-3
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:




                                                A-1-4
•      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




                                                 A-1-5
                                                                                            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



                                                 A-2-1
       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 we transfer our interest to a person that is not a Non-Permitted ERISA Holder
within 30 days of the date of such notice;



                                                A-2-2
•        if we fail to transfer our certificated Subordinated Notes, the Issuer shall have the right,
without further notice to us, to sell our certificated Subordinated Notes or our interest in the
certificated 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 Certificated
Subordinated Notes and selling such securities to the highest such bidder. However, the Issuer may
select a purchaser by any other means determined by it in its sole discretion;

•        by our acceptance of an interest in the Subordinated Notes, we agree to cooperate with the
Issuer to affect such transfers;

•      the proceeds of such sale, net of any commissions, expenses and taxes due in connection
with such sale shall be remitted to us; and

•       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 us, as applicable, sold as a result of any
such sale or the exercise of such discretion.

Required Notification. We hereby agree that we (a) will inform the Trustee of any proposed
transfer by us of all or a specified portion of the Subordinated Notes owned by us to a transferee
who would be deemed to a Benefit Plan Investor or a Controlling Person or of any proposed change
in our status under ERISA which would result in all or a portion of the Subordinated Notes owned
by us and not previously so characterized being deemed to be held by a Benefit Plan Investor or a
Controlling Person and (b) will not permit any such transfer or change of status that would cause
the 25% Limitation to be exceeded to become effective. We hereby agree and acknowledge that
after the Trustee effects any permitted transfer of the Subordinated Notes owned by us to a Benefit
Plan Investor or a Controlling Person or receives notice of any such permitted change of status, the
Trustee shall include such Subordinated Notes in future calculations of the 25% Limitation made
pursuant hereto unless subsequently notified that such Subordinated Notes (or such portion), as
applicable, would no longer be deemed to be held by Benefit Plan Investors or Controlling Persons.

8.      Continuing Representation; Reliance. We acknowledge and agree that the representations
contained in this Certificate shall be deemed made on each day from the date we make such
representations through and including the date on which we dispose of our interests in the
Subordinated Notes. We understand and agree that the information supplied in this Certificate will
be used and relied upon by the Issuer, the Subordinated Note Paying Agent to determine that
Benefit Plan Investors own or hold less than 25% of the value of each of the Subordinated Notes
upon any subsequent transfer of the Subordinated Notes in accordance with the Subordinated Note
Documents.

9.      Further Acknowledgement. We acknowledge and agree that (a) all of the assurances
contained in this Certificate are for the benefit of the Issuer, the Trustee, the Subordinated Note
Paying Agent and the Placement Agent as third-party beneficiaries hereof, (b) copies of this
Certificate and any information contained herein may be provided to the Issuer, the Trustee, the
Subordinated Note Paying Agent, the Placement Agent, affiliates of any of the foregoing parties
and to each of the foregoing parties' respective counsel for purposes of making the determinations
described above and (c) any acquisition or transfer of the Subordinated Notes by us that is not in
accordance with the provisions of this Certificate shall be null and void from the beginning, and of



                                                  A-2-3
no legal effect.




                   A-2-4
10.      Future Transfer Requirements.

Transferee Letter and its Delivery. We acknowledge and agree that we may not transfer any
certificated Subordinated Notes to any person unless the Trustee has received a certificate
substantially in the form of this Certificate. Any attempt to transfer in violation of this section will
be null and void from the beginning, and of no legal effect.

                Note:   Unless you are notified otherwise, the name and address of the
                        Subordinated Note Paying Agent is as follows:
                        LaSalle Bank National Association
                        181 West Madison Street, 32nd Floor
                        Chicago, Illinois 60602
                        Attention: CDO Trust Services Group—Squared CDO 2007-1, Ltd.

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Certificate.

________________________ [Insert Purchaser's Name]
By:
Name:
Title:

Dated:



This Certificate relates to $_________ of certificated Subordinated Notes.




                                                 A-2-5
                                                                                               Annex B

                               Types of Structured Finance Obligations

"ABS Chassis Securities" means Asset-Backed Securities (other than Aircraft Leasing Securities, Oil
and Gas Securities, Project Finance Securities and Restaurant and Food Services Securities) that
entitle the holders thereof to receive payments that depend (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed
Securities) on the cash flow from leases and subleases of chassis (other than automobiles) to
commercial and industrial customers, generally having the following characteristics: (1) the leases
and subleases have varying contractual maturities; (2) the leases or subleases are obligations of a
relatively limited number of obligors and accordingly represent an undiversified pool of obligor
credit risk; (3) the repayment stream on such leases and subleases is primarily determined by a
contractual payment schedule, with early termination of such leases and subleases predominantly
dependent upon the disposition to a lessee, sublessee or third party of the underlying chassis; and
(4) such leases or subleases typically provide for the right of the lessee or sublessee to purchase the
chassis for their stated residual value, subject to payments at the end of lease term for excess usage.

"ABS Container Securities" means Asset-Backed Securities (other than Aircraft Leasing Securities, Oil
and Gas Securities, Project Finance Securities and Restaurant and Food Services Securities) that
entitle the holders thereof to receive payments that depend (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed
Securities) on the cash flow from leases and subleases of containers to commercial and industrial
customers, generally having the following characteristics: (1) the leases and subleases have varying
contractual maturities; (2) the leases or subleases are obligations of a relatively limited number of
obligors and accordingly represent an undiversified pool of obligor credit risk; (3) the repayment
stream on such leases and subleases is primarily determined by a contractual payment schedule,
with early termination of such leases and subleases predominantly dependent upon the disposition
to a lessee, sublessee or third party of the underlying containers; and (4) such leases or subleases
typically provide for the right of the lessee or sublessee to purchase the containers for their stated
residual value, subject to payments at the end of lease term for excess usage.

"ABS Natural Resource Receivable Securities" means Asset-Backed Securities that entitle the holders
thereof to receive payments that depend on the cash flow from the sale of products derived from
the right to harvest, mine, extract or exploit a natural resource such as timber, oil, gas and minerals,
generally having the following characteristics: (i) the contracts have standardized payment terms,
(ii) the contracts are the obligations of a few consumers of natural resources and accordingly
represent an undiversified pool of credit risk and (iii) the repayment stream on such contracts is
primarily determined by a contractual payment schedule.

"ABS Type Diversified Securities" means (a) Automobile Securities; (b) Car Rental Receivable
Securities; (c) Credit Card Securities; (d) Student Loan Securities; and (e) any other type of Asset-
Backed Securities that become a Specified Type after the date hereof pursuant to clause (a)(29) of
the definition thereof and is designated as "ABS Type Diversified Securities" in connection
therewith.




                                                  B-1
"ABS Type Residential Securities" means (a) Home Equity Loan Securities; (b) Residential A
Mortgage Securities; (c) Residential B/C Mortgage Securities; (d) Time Share Securities and (e) any
other type of Asset-Backed Securities that become a Specified Type after the date hereof pursuant
to clause (a)(29) of the definition thereof and is designated as "ABS Type Residential Securities" in
connection therewith.

"ABS Type Undiversified Securities" means each Specified Type of Asset-Backed Securities, other
than (a) ABS Type Diversified Securities, (b) ABS Type Residential Securities or (c) CDO Securities; and
any other type of Asset-Backed Securities that becomes a Specified Type after the date hereof
pursuant to clause (a)(29) of the definition thereof and is designated as "ABS Type Undiversified
Securities" in connection therewith.

"Aerospace and Defense Securities" means Asset-Backed Securities that entitle the holders thereof
to receive payments that depend (except for rights or other assets designed to assure the servicing
or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from
leases and subleases of aircraft, vessels and telecommunications equipment to businesses for use in
the provision of goods or services to consumers, the military or the government, generally having
the following characteristics:

•       the leases and subleases have varying contractual maturities;

•      the leases or subleases are obligations of a relatively limited number of obligors and
accordingly represent an undiversified pool of obligor credit risk;

•      the repayment stream on such leases and subleases is primarily determined by a contractual
payment schedule, with early termination of such leases and subleases predominantly dependent
upon the disposition to a lessee, sublessee or third party of the underlying equipment;

•      such leases or subleases typically provide for the right of the lessee or sublessee to purchase
the equipment for its stated residual value, subject to payments at the end of lease term for excess
usage or wear and tear; and

•       the obligations of the lessors or sublessors may be secured not only by the leased equipment
but also by other assets of the lessee, sublessee or guarantees granted by third parties.

"Aircraft Leasing Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from a
portfolio consisting of aircraft leases and subleases, generally having the following characteristics:
(1) the leases and subleases have varying contractual maturities; (2) the leases or subleases are
obligations of a relatively limited number of obligors and accordingly represent an undiversified
pool of obligor credit risk; (3) the repayment stream on such leases and subleases is primarily
determined by a contractual payment schedule, with early termination of such leases and subleases
predominantly dependent upon the disposition to a lessee, sublessee or third party of the
underlying equipment; (4) such leases or subleases typically provide for the right of the lessee or
sublessee to purchase the equipment for its stated residual value, subject to payments at the end of
lease term for excess usage or wear and tear; and (5) the obligations of the lessee or sublessee may
be secured not only by the leased equipment but also by other assets of the lessee or sublessee or
guarantees granted by third parties. For purposes of this definition, Aircraft Leasing Securities shall
include enhanced equipment trust certificates with respect to aircraft.



                                                  B-2
"Asset-Backed Securities" means securities that 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, or

•       real estate mortgage loans, either fixed or revolving, together with rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of such securities;
provided that, in the case of this clause, any such Asset-Backed Security does not entitle the holder
to a right to share in the appreciation in value of or the profits generated by the related real estate
assets.

"Automobile Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from installment
sale loans made to finance the acquisition of, or from leases of, automobiles, generally having the
following characteristics:

•       the loans or leases may have varying contractual maturities;

•      the loans or leases are obligations of numerous borrowers or lessors and accordingly
represent a diversified pool of obligor credit risk;

•       the borrowers or lessors under the loans or leases generally do not have a poor credit rating;

•       the repayment stream on such loans or leases is primarily determined by a contractual
payment schedule, with early repayment on such loans or leases predominantly dependent upon
the disposition of the underlying vehicle; and

•       such leases typically provide for the right of the lessee to purchase the vehicle for its stated
residual value, subject to payments at the end of lease term for excess mileage or use.

"Bank Guaranteed Securities" means any Asset-Backed Security as to which, (a) if interest thereon is
not timely paid when due, or the principal thereof is not timely paid at stated legal maturity, a
national banking association organized under United States law or banking corporation organized
under the laws of a state of the United States has undertaken in an irrevocable letter of credit or
other similar instrument to make such payment against the presentation of documents, but only if
such letter of credit or similar instrument (i) expires no earlier than such stated maturity (or contains
"evergreen" provisions entitling the beneficiary thereof to draw the entire undrawn amount
thereof upon the failure of the expiration date of such letter of credit or other similar instrument to
be extended beyond its then current expiry date), (ii) provides that payment thereunder is
independent of the performance by the obligor on the relevant Asset-Backed Security and (iii) was
issued by a bank having a credit rating assigned by each nationally recognized statistical rating
organization that currently rates such Asset-Backed Security higher than the credit rating assigned
by such rating organization to such Asset-Backed Security, determined without giving effect to such
letter of credit or similar instrument; provided that any Asset-Backed Security falling within this
definition shall be excluded from the definition of each other Specified Type of Asset-Backed
Security.




                                                   B-3
"Car Rental Receivable Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from
leases and subleases of vehicles to car rental systems (such as Hertz, Avis, National, Dollar, Budget,
etc.) and their franchisees, generally having the following characteristics:

•      the leases and subleases have varying contractual maturities;

•        the subleases are obligations of numerous franchisees and accordingly represent a
diversified pool of obligor credit risk;

•      the repayment stream on such leases and subleases is primarily determined by a contractual
payment schedule, with early termination of such leases and subleases predominantly dependent
upon the disposition to a lessee or third party of the underlying vehicle; and

•      such leases or subleases typically provide for the right of the lessee or sublessee to purchase
the vehicle for its stated residual value, subject to payments at the end of lease term for excess
mileage or use.

"Catastrophe Bonds" means Asset-Backed Securities that entitle the holders thereof to receive a
fixed principal or similar amount and a specified return on such amount, generally having the
following characteristics: (i) the issuer of such Asset-Backed Security has entered into a swap,
insurance contract or similar arrangement with a counterparty pursuant to which such issuer agrees
to pay amounts to the counterparty upon the occurrence of certain specified events, including but
not limited to: hurricanes, earthquakes and other events; and (ii) payments on such Asset-Backed
Security depend primarily upon the occurrence and/or severity of such events.

"CDO of CDOs" means Asset-Backed Securities that entitle the holders thereof to receive payments
that depend (except for rights or other assets designed to assure the servicing or timely distribution
of proceeds to holders of the Asset-Backed Securities) on the cash flow from a portfolio permitted
by the applicable Underlying Instruments to consist of greater than 40% CDO Securities.

"CDO Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from a portfolio
that is comprised of commercial and industrial bank loans, mortgage loans, corporate debt
securities, other Asset-Backed Securities or REIT Debt Securities or any combination of the foregoing,
generally having the following characteristics:

•       the bank loans, commercial mortgage loans, residential mortgage loans, corporate debt
securities, REIT Debt Securities and Asset-Backed Securities have varying contractual maturities;

•       repayment thereof can vary substantially from the contractual payment schedule (if any),
with early prepayment of individual bank loans, corporate debt securities, REIT Debt Securities and
Asset-Backed Securities depending on numerous factors specific to the particular issuers or obligors
and upon whether, in the case of loans or securities bearing interest at a fixed rate, such loans or
securities include an effective prepayment premium;




                                                 B-4
•       proceeds from such repayments may for a limited period and subject to compliance with
certain eligibility criteria be reinvested in additional bank loans, corporate debt securities, REIT Debt
Securities and/or Asset-Backed Securities; and

•       the percentage of corporate debt securities and (except in the case of CLO Securities)
commercial and industrial bank loans in the portfolio underlying any CDO Security is limited to 10%
of such portfolio.

The term CDO Securities includes both High-Diversity CDO Securities and Low-Diversity CDO
Securities.

"CBO/CLO Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from a portfolio
that is comprised of commercial and industrial bank loans, corporate debt securities, other Asset-
Backed Securities or REIT Debt Securities or any combination of the foregoing, generally having the
following characteristics:

•      the bank loans, corporate debt securities, REIT Debt Securities and Asset-Backed Securities
have varying contractual maturities;

•       repayment thereof can vary substantially from the contractual payment schedule (if any),
with early prepayment of individual bank loans, corporate debt securities, REIT Debt Securities and
Asset-Backed Securities depending on numerous factors specific to the particular issuers or obligors
and upon whether, in the case of loans or securities bearing interest at a fixed rate, such loans or
securities include an effective prepayment premium;

•       proceeds from such repayments may for a limited period and subject to compliance with
certain eligibility criteria be reinvested in additional bank loans, corporate debt securities, REIT Debt
Securities and/or Asset-Backed Securities; and

•      the percentage of corporate debt securities and (except in the case of CLO Securities)
commercial and industrial bank loans in the portfolio underlying any CBO/CLO Security is limited to
10% of such portfolio.

The term CBO/CLO Securities includes both High-Diversity CBO/CLO Securities and Low-Diversity
CBO/CLO Securities.

"CLO Security" means a CDO Security that entitles the holders thereof to receive payments that
depend (except for rights or other assets designed to assure the servicing or timely distribution of
proceeds to holders of the CDO Securities) on the cash flow from a portfolio of assets required by
the applicable Underlying Instruments to consist of at least 50% commercial and industrial bank
loans.

"CMBS Conduit Securities" means Asset-Backed Securities (a) issued by a single-seller or multi-seller
conduit under which the holders of such Asset-Backed Securities have recourse to a specified pool of
assets (but not other assets held by the conduit that support payments on other series of securities)
and (b) that entitle the holders thereof to receive payments that depend (except for rights or other
assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-




                                                  B-5
Backed Securities) on the cash flow from a pool of commercial mortgage loans generally having the
following characteristics:

•      the commercial mortgage loans have varying contractual maturities;

•      the commercial mortgage loans are secured by real property purchased or improved with
the proceeds thereof (or to refinance an outstanding loan the proceeds of which were so used);

•       the commercial mortgage loans are obligations of a relatively limited number of obligors
(with the creditworthiness of individual obligors being less material than for CMBS Large Loan
Securities, CMBS Single Property Securities and CMBS Credit Tenant Lease Securities) and
accordingly represent a relatively undiversified pool of obligor credit risk;

•      upon original issuance of such Asset Backed Securities, there are no less than sixty (60)
commercial mortgage loans and no commercial mortgage loan represents more than 15% of, and
no three (3) commercial mortgage loans account in the aggregate for more than 30% of the
aggregate principal balance of the entire pool of commercial mortgage loans supporting payments
on such securities; and

•       repayment thereof can vary substantially from the contractual payment schedule (if any),
with early prepayment of individual loans depending on numerous factors specific to the particular
obligors and upon whether, in the case of loans bearing interest at a fixed rate, such loans include
an effective prepayment premium, yield maintenance premium, other prepayment protection terms
or extension options.

"CMBS Credit Tenant Lease Securities" means Asset-Backed Securities (other than CMBS Large Loan
Securities, CMBS Single Property Securities and CMBS Conduit Securities) that entitle the holders
thereof to receive payments that depend (except for rights or other assets designed to assure the
servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash
flow from a pool of commercial mortgage loans made to finance the acquisition, construction and
improvement of properties leased to corporate tenants (or on the cash flow from such leases). They
generally have the following characteristics:

•      the commercial mortgage loans or leases have varying contractual maturities;

•      the commercial mortgage loans are secured by real property purchased or improved with
the proceeds thereof (or to refinance an outstanding loan the proceeds of which were so used);

•      the leases are secured by leasehold interests;

•       the commercial mortgage loans or leases are obligations of a relatively limited number of
obligors and accordingly represent a relatively undiversified pool of obligor credit risk;

•       payment thereof can vary substantially from the contractual payment schedule (if any), with
prepayment of individual loans or termination of leases depending on numerous factors specific to
the particular obligors or lessees and upon whether, in the case of loans bearing interest at a fixed
rate, such loans include an effective prepayment premium; and

•       the creditworthiness of such corporate tenants is the primary factor in any decision to invest
in these securities.



                                                 B-6
"CMBS Large Loan Securities" means Asset-Backed Securities (other than CMBS Conduit Securities,
CMBS Single Property Securities and CMBS Credit Tenant Lease Securities) that entitle the holders
thereof to receive payments that depend (except for rights or other assets designed to assure the
servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash
flow from one or more commercial mortgage loans made to finance the acquisition, construction
and improvement of more than one property. They generally have the following characteristics:

•       in the case of a pool of commercial mortgage loans, the commercial mortgage loans have
varying contractual maturities;

•      the commercial mortgage loans are secured by real property purchased or improved with
the proceeds thereof (or to refinance an outstanding loan the proceeds of which were so used);

•       in the case of a pool of commercial mortgage loans, the commercial mortgage loans are
obligations of a relatively limited number of obligors and accordingly represent a relatively
undiversified pool of obligor credit risk; and

•       repayment thereof can vary substantially from the contractual payment schedule (if any),
with early prepayment of individual loans depending on numerous factors specific to the particular
obligors and upon whether, in the case of loans bearing interest at a fixed rate, such loans or
securities include an effective prepayment premium, yield maintenance premium, other
prepayment protection terms or extension options.

"CMBS Securities" means Asset-Backed Securities (excluding, for the avoidance of doubt, any
commercial loan or participation interest in a commercial loan) that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of such Asset-Backed Securities) on the cash flow from a
commercial mortgage loan or a pool of commercial mortgage loans (including, without limitation,
CMBS Conduit Securities, CMBS Credit Tenant Lease Securities, CMBS Large Loan Securities and
CMBS Single Property Securities).

"CMBS Single Property Securities" means Asset-Backed Securities (other than CMBS Conduit
Securities, CMBS Large Loan Securities and CMBS Credit Tenant Lease Securities) that entitle the
holders thereof to receive payments that depend (except for rights or other assets designed to
assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on
the cash flow from one or more commercial mortgage loans made to finance the acquisition,
construction and improvement of a single property. They generally have the following
characteristics:

•       in the case of a pool of commercial mortgage loans, the commercial mortgage loans have
varying contractual maturities;

•      the commercial mortgage loans are secured by a single item of real property purchased or
improved with the proceeds thereof (or to refinance an outstanding loan the proceeds of which
were so used);

•       in the case of a pool of commercial mortgage loans, the commercial mortgage loans are
obligations of a relatively limited number of obligors and accordingly represent a relatively
undiversified pool of obligor credit risk; and




                                                 B-7
•       repayment thereof can vary substantially from the contractual payment schedule (if any),
with early prepayment of individual loans depending on numerous factors specific to the particular
obligors and upon whether, in the case of loans bearing interest at a fixed rate, such loans or
securities include an effective prepayment premium, yield maintenance premium, other
prepayment protection terms or extension options.

"Combination Securities" means any securities consisting of two or more separate component
securities, including a debt security component and an equity security component.

"Credit Card Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from balances
outstanding under revolving consumer or commercial credit card accounts, generally having the
following characteristics:

•      the accounts have standardized payment terms and require minimum monthly payments;

•       the balances are obligations of numerous borrowers and accordingly represent a diversified
pool of obligor credit risk; and

•      the repayment stream on such balances does not depend upon a contractual payment
schedule, with early repayment depending primarily on interest rates, availability of credit against a
maximum credit limit and general economic matters.

"EETC Securities" means enhanced equipment trust certificates that constitute Aerospace and
Defense Securities.

"Emerging Market ABS Security" means an Asset Backed Security in respect of which, on the date
the related Portfolio Asset is purchased or entered into, more than 20% of the Underlying Assets
are located in one or more Emerging Market Countries.

"Equipment Leasing Securities" means Asset Backed Securities (other than Aerospace and Defense
Securities, Healthcare Securities, Oil and Gas Securities and Restaurant and Food Services Securities)
that entitle the holders thereof to receive payments that depend (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed
Securities) on the cash flow from leases and subleases of equipment (other than automobiles) to
commercial and industrial customers, generally having the following characteristics:

•      the leases and subleases have varying contractual maturities;

•      the leases or subleases are obligations of a relatively limited number of obligors and
accordingly represent an undiversified pool of obligor credit risk;

•      the repayment stream on such leases and subleases is primarily determined by a contractual
payment schedule, with early termination of such leases and subleases predominantly dependent
upon the disposition to a lessee, sublessee or third party of the underlying equipment; and

•      such leases or subleases typically provide for the right of the lessee or sublessee to purchase
the equipment for its stated residual value, subject to payments at the end of lease term for excess
usage.



                                                  B-8
"Principal Only Security" means any security (other than a Zero Coupon Bond) that does not
provide for the periodic payment of interest.

"Floorplan Receivable Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) upon assets that will
consist of a revolving pool of receivables arising from the purchase and financing by domestic retail
motor vehicle dealers for their new and used automobile and light-duty truck inventory. The
receivables are comprised of principal receivables and interest receivables. In addition to
receivables arising in connection with designated accounts, the trust assets may include interests in
other floorplan assets, such as: (1) participation interests in pools of assets existing outside the trust
and consisting primarily of receivables arising in connection with dealer floorplan financing
arrangements originated by a manufacturer or one of its affiliates; (2) participation interests in
receivables arising under dealer floorplan financing arrangements originated by a third party and
participated to a manufacturer; (3) receivables originated by a manufacturer under syndicated
floorplan financing arrangements between a motor vehicle dealer and a group of lenders; or (4)
receivables representing dealer payment obligations arising from purchases of vehicles.

"Franchise Securities" means any Asset Backed Security that entitles the holders thereof to receive
payments that depend on the cash flow from a pool of franchise loans made to operators of
franchises.

"Future Flow Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from trade
accounts receivable, entertainment royalties, structured litigation settlements or ticket receivables.

"Guaranteed Corporate Debt Security" means a CDO Security guaranteed by a third party as to
ultimate or timely payment of principal or interest, including a CDO Security guaranteed by a
monoline financial insurance company.

"Healthcare Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from (a) leases
and subleases of equipment to hospitals, non-hospital medical facilities, physicians and physician
groups for use in the provision of healthcare services or (b) Medicare, Medicaid or any other third-
party payor receivables related to medical, hospital or other health care related expenses, charges
or fees.

"High-Diversity CBO/CLO Securities" means CBO/CLO Securities where the underlying portfolio of
loans, corporate debt securities, Asset-Backed Securities and debt securities of any such CBO/CLO
Security are obligations of a pool of obligors or issuers that represent a relatively diversified pool of
obligor credit risk having a Diversity Score higher than 20.

"High Diversity CDO Securities" means CDO Securities where the underlying portfolio of loans,
corporate debt securities, Asset-Backed Securities and debt securities of any such CDO Security are
obligations of a pool of obligors or issuers that represent a relatively diversified pool of obligor
credit risk having a Diversity Score higher than 20.




                                                   B-9
"Home Equity Loan Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) primarily on the cash flow
from balances (including revolving balances) outstanding under loans or lines of credit typically
made to prime borrowers secured by (but which typically have a second priority lien on) residential
real estate (single or multi-family properties) the proceeds of which loans or lines of credit are not
generally used to purchase such real estate or to purchase or construct dwellings thereon (or to
refinance indebtedness previously so used), generally having the following characteristics:

•       the balances have standardized payment terms and require minimum monthly payments;

•       the balances are obligations of numerous borrowers and accordingly represent a diversified
pool of obligor credit risk;

•     early repayment depends primarily on interest rates, availability of credit against a
maximum line of credit and general economic matters; and

•      the loan or line of credit may be secured by residential real estate with a market value
(determined on the date of origination of such loan or line of credit) that is less, more or equal to
than the original proceeds of such loan or line of credit.

"Insurance Company Guaranteed Security" means any Asset-Backed Security as to which the timely
payment of interest when due, and the payment of principal no later than stated legal maturity, is
unconditionally guaranteed pursuant to an insurance policy, guarantee or other similar instrument
issued by an insurance company organized under the laws of a state of the United States, but only if
such insurance policy, guarantee or other similar instrument (a) expires no earlier than such stated
maturity, (b) provides that payment thereunder is independent of the performance by the obligor
on the relevant Asset-Backed Security and (c) is issued by an insurance company having a credit
rating assigned by each nationally recognized statistical rating organization that currently rates
such Asset-Backed Security higher than the credit rating assigned by such rating organization to
such Asset-Backed Security determined without giving effect to such insurance policy, guarantee or
other similar instrument, provided that any Asset-Backed Security falling within this definition shall
be excluded from the definition of each other type of Asset-Backed Security.

"Interest Only Security" means any security or obligation that does not provide for the repayment
of a stated principal amount in one or more instalments on or prior to the date two Business Days
prior to the Stated Maturity of the Secured Notes.

"Lottery Receivable Security" means an Asset-Backed Security that (a) entitles the holders thereof
to receive payments that depend (except for rights or other assets designed to assure the servicing
or timely distribution of proceeds to holders of such Asset-Backed Security) upon an arrangement
that compensates a winner of a state lottery with one lump sum payment in exchange for a pledge
of the lottery payments that individual would have received over a future period of time and (b) is
backed by a diversified pool of payments received from various state lottery commissions in
exchange for a lump sum payment to a bona fide winner of a given state lottery.

"Low-Diversity CBO/CLO Securities" means CBO/CLO Securities where the underlying portfolio of
loans, corporate debt securities, Asset-Backed Securities and debt securities of any such CBO/CLO
Security are obligations of a pool of obligors or issuers that represent a relatively undiversified pool
of obligor credit risk having a Diversity Score of 20 or lower.



                                                  B-10
"Low Diversity CDO Securities" means CDO Securities where the underlying portfolio of loans,
corporate debt securities, Asset-Backed Securities and debt securities of any such CDO Security are
obligations of a pool of obligors or issuers that represent a relatively undiversified pool of obligor
credit risk having a Diversity Score of 20 or lower.

"Manufactured Housing Securities" means Funded Portfolio Assets or Reference Obligations that
entitle the holders thereof to receive payments that depend primarily (except for rights or other
assets designed to assure the servicing or timely distribution of proceeds to holders of the Funded
Portfolio Assets) on the cash flow from manufactured housing (also known as mobile homes and
prefabricated homes) installment sales contracts and installment loan agreements, generally having
the following characteristics:

•       the contracts and loan agreements have varying, but typically lengthy contractual maturities;

•       the contracts and loan agreements are secured by the manufactured homes and, in certain
cases, by mortgages and/or deeds of trust on the real estate to which the manufactured homes are
deemed permanently affixed;

•      the contracts and/or loans are obligations of a large number of obligors and accordingly
represent a relatively diversified pool of obligor credit risk;

•       repayment thereof can vary substantially from the contractual payment schedule, with early
prepayment of individual loans depending on numerous factors specific to the particular obligors
and upon whether, in the case of loans bearing interest at a fixed rate, such loans or securities
include an effective prepayment premium; and

•      in some cases, obligations are fully or partially guaranteed by a governmental agency or
instrumentality.

"Mortgage-Related Securities" means CMBS Securities, ABS Type Residential Securities, REIT Debt
Securities, U.S. Agency Guaranteed Securities and ABS Type Undiversified Securities that are
mortgage-related.

"Mutual Fund Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from a pool of
brokerage fees and costs relating to various mutual funds, generally having the following
characteristics: (a) the brokerage arrangements have standardized payment terms and require
minimum payments; (b) the brokerage fees and costs arise out of numerous mutual funds and
accordingly represent a very diversified pool of credit risk; and (c) the collection of brokerage fees
and costs can vary substantially from the contractual payment schedule (if any), with collection
depending on numerous factors specific to the particular mutual funds, interest rates and general
economic matters.

"NIM Security" means a net-interest margin security.

"Oil and Gas Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from (a) a pool
of franchise loans made to operators of franchises that provide oil and gasoline and provide other



                                                  B-11
services related thereto and (b) leases or subleases of equipment to such operators for use in the
provision of such goods and services. They generally have the following characteristics:

•      the loans, leases or subleases have varying contractual maturities;

•       the loans are secured by real property purchased or improved with the proceeds thereof (or
to refinance an outstanding loan the proceeds of which were so used);

•       the obligations of the lessors or sublessors of the equipment may be secured not only by the
leased equipment but also the related real estate;

•      the loans, leases and subleases are obligations of a relatively limited number of obligors and
accordingly represent a relatively undiversified pool of obligor credit risk;

•       payment of the loans can vary substantially from the contractual payment schedule (if any),
with prepayment of individual loans depending on numerous factors specific to the particular
obligors and upon whether, in the case of loans bearing interest at a fixed rate, such loans include
an effective prepayment premium;

•      the repayment stream on the leases and subleases is primarily determined by a contractual
payment schedule, with early termination of such leases and subleases predominantly dependent
upon the disposition to a lessee, a sublessee or third party of the underlying equipment;

•       such leases and subleases typically provide for the right of the lessee or sublessee to
purchase the equipment for its stated residual value, subject to payments at the end of a lease term
for excess usage or wear and tear; and

•       the ownership of a franchise right or other similar license and the creditworthiness of such
franchise operators is the primary factor in any decision to invest in these securities.

"Principal Only Security" means any security (other than a Zero Coupon Bond) that does not
provide for the periodic payment of interest.

"Project Finance Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from

•       the sale of products, such as electricity, nuclear energy, steam or water, in the utility
industry by a special purpose entity formed to own the assets generating or otherwise producing
such products and such assets were or are being constructed or otherwise acquired primarily with
the proceeds of debt financing made available to such entity on a limited-recourse basis (including
recourse to such assets and the land on which they are located) or

•       fees or other usage charges, such as tolls collected on a highway, bridge, tunnel or other
infrastructure project, collected by a special purpose entity formed to own one or more such
projects that were constructed or otherwise acquired primarily with the proceeds of debt financing
made available to such entity on a limited-recourse basis (including recourse to the project and the
land on which it is located).




                                                B-12
For the avoidance of doubt, the S&P Rating of any Project Finance Security will be determined
pursuant to clause (b)(i) or (ii) of the definition of the term "Rating".

"Recreational Vehicle Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from
installment sale loans made to finance the acquisition of, or from leases of, recreational vehicles,
generally having the following characteristics: (1) the loans or leases may have varying contractual
maturities; (2) the loans or leases are obligations of numerous borrowers or lessors and accordingly
represent a very diversified pool of obligor credit risk; (3) the borrowers or lessees under the loans
or leases generally do not have a poor credit rating; (4) the repayment stream on such loans or
leases is primarily determined by a contractual payment schedule, with early repayment on such
loans or leases predominantly dependent upon the disposition of the underlying recreational
vehicle; and (5) such leases typically provide for the right of the lessee to purchase the recreational
vehicle for its stated residual value, subject to payments at the end of lease term for excess mileage
or use.

"Reinsurance Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend in part on the premiums from reinsurance policies held by a special purpose
vehicle created for such purpose, generally having the following characteristics: (a) proceeds from
the security are invested in a collateral account; (b) such collateral account is subject to claims from
the reinsurance policies; and (c) the repayment of principal on the security is dependent on the
exercise of the reinsurance policies.

"REIT Debt Security" means a debt security issued by a real estate investment trust (as defined in
Section 856 of the Code or any successor provision).

"REIT Debt Securities—Diversified" means REIT Debt Securities whose assets consist primarily
(except for rights or other assets designed to assure the servicing or timely distribution of proceeds
to holders of the REIT Debt Securities) of mortgages on a portfolio of diverse real property interests;
provided that (a) any REIT Debt Security falling within this definition shall be excluded from the
definition of each other Specified Type of REIT Debt Security and (b) any REIT Debt Security falling
within any other REIT Debt Security description set forth herein shall be excluded from this
definition.

"REIT Debt Securities—Health Care" means REIT Debt Securities whose assets consist primarily
(except for rights or other assets designed to assure the servicing or timely distribution of proceeds
to holders of the REIT Debt Securities) of mortgages on hospitals, clinics, sport clubs, spas and other
health care facilities and other similar real property interests used in one or more similar businesses;
provided that any REIT Debt Security falling within this definition shall be excluded from the
definition of each other Specified Type of REIT Debt Security.

"REIT Debt Securities—Hotel" means REIT Debt Securities whose assets consist primarily (except for
rights or other assets designed to assure the servicing or timely distribution of proceeds to holders
of the REIT Debt Securities) of hotels, motels, youth hostels, bed and breakfasts and other similar
real property interests used in one or more similar businesses, including assets in the form of
mortgages on any of the foregoing; provided that any REIT Debt Security falling within this
definition shall be excluded from the definition of each other Specified Type of REIT Debt Security.




                                                  B-13
"REIT Debt Securities—Industrial" means REIT Debt Securities whose assets consist primarily (except
for rights or other assets designed to assure the servicing or timely distribution of proceeds to
holders of the REIT Debt Securities) of factories, refinery plants, breweries and other similar real
property interests used in one or more similar businesses, including assets in the form of mortgages
on any of the foregoing; provided that any REIT Debt Security falling within this definition shall be
excluded from the definition of each other Specified Type of REIT Debt Security.

"REIT Debt Securities—Mortgage" means REIT Debt Securities whose assets consist primarily (except
for rights or other assets designed to assure the servicing or timely distribution of proceeds to
holders of the REIT Debt Securities) of mortgages, commercial mortgage-backed securities,
collateralized mortgage obligations and other similar Mortgage-Related Securities (including REIT
Debt Securities issued by a hybrid form of such trust that invests in both commercial real estate and
commercial mortgages); provided that any REIT Debt Security falling within this definition shall be
excluded from the definition of each other Specified Type of REIT Debt Security.

"REIT Debt Securities—Multi-Family" means REIT Debt Securities whose assets consist primarily
(except for rights or other assets designed to assure the servicing or timely distribution of proceeds
to holders of the REIT Debt Securities) of multi-family dwellings such as apartment blocks,
condominiums and co-operative owned buildings, including assets in the form of mortgages on any
of the foregoing; provided that any REIT Debt Security falling within this definition shall be
excluded from the definition of each other Specified Type of REIT Debt Security.

"REIT Debt Securities—Office" means REIT Debt Securities whose assets consist primarily (except for
rights or other assets designed to assure the servicing or timely distribution of proceeds to holders
of the REIT Debt Securities) of office buildings, conference facilities and other similar real property
interests used in the commercial real estate business, including assets in the form of mortgages on
any of the foregoing; provided that any REIT Debt Security falling within this definition shall be
excluded from the definition of each other Specified Type REIT Debt Security.

"REIT Debt Securities—Residential" means REIT Debt Securities whose assets consist primarily
(except for rights or other assets designed to assure the servicing or timely distribution of proceeds
to holders of the REIT Debt Securities) of residential mortgages (other than multi-family dwellings)
and other similar real property interests; provided that any REIT Debt Security falling within this
definition shall be excluded from the definition of each other Specified Type of REIT Debt Security.

"REIT Debt Securities—Retail" means REIT Debt Securities whose assets consist primarily (except for
rights or other assets designed to assure the servicing or timely distribution of proceeds to holders
of the REIT Debt Securities) of retail stores, restaurants, bookstores, clothing stores and other similar
real property interests used in one or more similar businesses, including assets in the form of
mortgages on any of the foregoing; provided that any REIT Debt Security falling within this
definition shall be excluded from the definition of each other Specified Type of REIT Debt Security.

"REIT Debt Securities—Storage" means REIT Debt Securities whose assets consist primarily (except
for rights or other assets designed to assure the servicing or timely distribution of proceeds to
holders of the REIT Debt Securities) of storage facilities and other similar real property interests
used in one or more similar businesses, including assets in the form of mortgages on any of the
foregoing; provided that any REIT Debt Security falling within this definition shall be excluded from
the definition of each other Specified Type of REIT Debt Security.




                                                  B-14
"REMIC" means a real estate mortgage investment conduit within the meaning of Section 860D of
the Code.

"Re-REMIC" means an Asset-Backed Security the issuer of which is a REMIC (within the meaning of
the Code) and whose holders are entitled to receive payments that depend entirely on the cash
flow from one or more subordinated tranches of securities issued by other REMICs.

"Residential A Mortgage Securities" means Asset-Backed Securities (other than Residential B/C
Mortgage Securities) that entitle the holders thereof to receive payments that depend primarily
(except for rights or other assets designed to assure the servicing or timely distribution of proceeds
to holders of the Asset-Backed Securities) on the cash flow from residential mortgage loans secured
(on a first priority basis, subject to permitted liens, easements and other encumbrances) by
residential real estate (single or multi-family properties) the proceeds of which are used to purchase
real estate and purchase or construct dwellings thereon (or to refinance indebtedness previously so
used), generally having the following characteristics:

•       the mortgage loans have generally been underwritten to the standards of the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation (without regard
to the size of the loan);

•     the mortgage loans have standardized payment terms and require minimum monthly
payments;

•        the mortgage loans are obligations of numerous borrowers and accordingly represent a
diversified pool of obligor credit risk; and

•       the repayment of such mortgage loans is subject to a contractual payment schedule, with
early repayment depending primarily on interest rates and the sale of the mortgaged real estate
and related dwelling.

"Residential B/C Mortgage Securities" means Asset-Backed Securities that entitle the holders
thereof to receive payments that depend primarily (except for rights or other assets designed to
assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on
the cash flow from subprime residential mortgage loans secured (solely on a first priority basis,
subject to permitted liens, easements and other encumbrances) by residential real estate (single or
multi-family properties) the proceeds of which are used to purchase real estate and purchase or
construct dwellings thereon (or to refinance indebtedness previously so used), generally having the
following characteristics:

•       the mortgage loans have generally not been underwritten to the standards of the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation (without regard
to the size of the loan);

•     the mortgage loans have standardized payment terms and require minimum monthly
payments of interest and minimum monthly payments of principal each month;

•        the mortgage loans are obligations of numerous borrowers and accordingly represent a very
diversified pool of obligor credit risk; and




                                                B-15
•       the repayment of such mortgage loans is subject to a contractual payment schedule, with
early repayment depending primarily on interest rates and the sale of the mortgaged real estate
and related dwelling.

"Restaurant and Food Services Securities" means Asset-Backed Securities that entitle the holders
thereof to receive payments that depend (except for rights or other assets designed to assure the
servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash
flow from (a) a pool of franchise loans made to operators of franchises that provide goods and
services relating to the restaurant and food services industries and (b) leases or subleases of
equipment to such operators for use in the provision of such goods and services. They generally
have the following characteristics:

•      the loans, leases or subleases have varying contractual maturities;

•       the loans are secured by real property purchased or improved with the proceeds thereof (or
to refinance an outstanding loan the proceeds of which were so used);

•       the obligations of the lessors or sublessors of the equipment may be secured not only by the
leased equipment but also the related real estate;

•      the loans, leases and subleases are obligations of a relatively limited number of obligors and
accordingly represent a relatively undiversified pool of obligor credit risk;

•       payment of the loans can vary substantially from the contractual payment schedule (if any),
with prepayment of individual loans depending on numerous factors specific to the particular
obligors and upon whether, in the case of loans bearing interest at a fixed rate, such loans include
an effective prepayment premium;

•      the repayment stream on the leases and subleases is primarily determined by a contractual
payment schedule, with early termination of such leases and subleases predominantly dependent
upon the disposition to a lessee, a sublessee or third party of the underlying equipment;

•       such leases and subleases typically provide for the right of the lessee or sublessee to
purchase the equipment for its stated residual value, subject to payments at the end of a lease term
for excess usage or wear and tear; and

•       the ownership of a franchise right or other similar license and the creditworthiness of such
franchise operators is the primary factor in any decision to invest in these securities.

"Small Business Loan Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from
general purpose corporate loans made to "small business concerns" (generally within the meaning
given to such term by regulations of the United States Small Business Administration), including but
not limited to those (a) made pursuant to Section 7(a) of the United States Small Business Act, as
amended, and (b) partially guaranteed by the United States Small Business Administration. Small
Business Loan Securities generally have the following characteristics: (i) the loans have payment
terms that comply with any applicable requirements of the Small Business Act, as amended; (ii) the
loans are obligations of a relatively limited number of borrowers and accordingly represent an
undiversified pool of obligor credit risk; and (iii) repayment thereof can vary substantially from the



                                                 B-16
contractual payment schedule (if any), with early prepayment of individual loans depending on
numerous factors specific to the particular obligors and upon whether, in the case of loans bearing
interest at a fixed rate, such loans or securities include an effective prepayment premium.

"Specified Type" means (a) With respect to any Asset-Backed Security, whether such Asset-Backed
Security is: (1) an Automobile Security; (2) a Bank Guaranteed Security; (3) a Car Rental Receivable
Security; (4) a CMBS Conduit Security; (5) a CMBS Credit Tenant Lease Security; (6) a CMBS Large
Loan Security; (7) a CMBS Single Property Security; (8) a Credit Card Security; (9) an Equipment
Leasing Security, (10) a High-Diversity CDO Security; (11) a Home Equity Loan Security; (12) an
Insurance Company Guaranteed Security; (13) a Low-Diversity CDO Security; (14) a Mutual Fund
Security; (15) an Oil and Gas Security; (16) a Project Finance Security; (17) a Reinsurance Security; (18)
a Residential A Mortgage Security; (19) a Residential B/C Mortgage Security; (20) a Restaurant and
Food Services Security; (21) a Small Business Loan Security; (22) a Structured Settlement Security; (23)
a Student Loan Security; (24) a Subprime Automobile Security; (25) a Tax Lien Security; (26) a Time
Share Security; (27) a Re-REMIC or (28) U.S. Agency Guaranteed Security; and

(b)     with respect to any REIT Debt Security, whether such REIT Debt Security is (1) a REIT Debt
Security—Diversified; (2) a REIT Debt Security—Health Care; (3) a REIT Debt Security—Hotel; (4) a
REIT Debt Security—Industrial; (5) a REIT Debt Security—Mortgage; (6) a REIT Debt Security—Multi-
Family; (7) a REIT Debt Security—Office; (8) a REIT Debt Security—Residential; (9) a REIT Debt
Security—Retail or (10) a REIT Debt Security—Storage.

"Static Investment Grade Synthetic CDO Security" means a Portfolio Asset (or with respect to a CDS
Portfolio Asset, the related Reference Obligation) that is a CDO Security in respect of which
economic exposure to corporate assets is generated synthetically and the amount of such exposure
is greater than 50% of the Underlying Assets. For the avoidance of doubt, a Static Investment
Grade Synthetic CDO does not include any CDO Security as to which an asset manager has rights to
manage and modify the portfolio of corporate assets.

"Stranded Cost Securities" means any Asset-Backed Security that entitles the holders thereof to
receive payments that depend on the cash flow from an irrevocable right to collect cash flows from
a tariff from a power utility customer.

"Structured Settlement Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from
receivables representing the right of litigation claimants to receive future scheduled payments
under settlement agreements that are funded by annuity contracts, which receivables may have
varying maturities.

"Student Loan Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from loans
made to students (or their parents) to finance educational needs, generally having the following
characteristics: (a) the loans have standardized terms; (b) the loans are obligations of numerous
borrowers and accordingly represent a diversified pool of obligor credit risk; (c) the repayment
stream on such loans is primarily determined by a contractual payment schedule, with early
repayment on such loans predominantly dependent upon interest rates and the income of
borrowers following the commencement of amortization; and (d) such loans may be fully or
partially insured or reinsured by the United States Department of Education.


                                                  B-17
"Subprime Automobile Securities" means Asset-Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from
installment sale loans made to finance the acquisition of, or from leases of, automobiles, generally
having the following characteristics: (a) the loans or leases may have varying contractual maturities;
(b) the loans or leases are obligations of numerous borrowers or lessors and accordingly represent a
diversified pool of obligor credit risk; (c) the borrowers or lessors under the loans or leases have a
poor credit rating; (d) the repayment stream on such loans or leases is primarily determined by a
contractual payment schedule, with early repayment on such loans or leases predominantly
dependent upon the disposition of the underlying vehicle; and (e) such leases typically provide for
the right of the lessee to purchase the vehicle for its stated residual value, subject to payments at
the end of lease term for excess mileage or use.

"Tax Lien Securities" means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from a pool of
tax obligations owed by businesses and/or individuals to state and municipal governmental taxing
authorities, generally having the following characteristics: (a) the obligations have standardized
payment terms and require minimum payments; (b) the tax obligations are obligations of numerous
borrowers and accordingly represent a diversified pool of obligor credit risk; and (c) the repayment
stream on the obligation is primarily determined by a payment schedule entered into between the
relevant tax authority and obligor, with early repayment on such obligation predominantly
dependent upon interest rates and the income of the obligor following the commencement of
amortization.

"Time Share Securities" means Asset-Backed Securities (other than Residential A Mortgage
Securities, Residential B/C Mortgage Securities and Home Equity Loan Securities) that entitle the
holders thereof to receive payments that depend primarily on the cash flow from installment sales
contracts secured on a first priority basis, subject to permitted liens, easements and other
encumbrances, by residential real estate the proceeds of which were used to purchase fee simple
interests in timeshare estates in units in a condominium or hotel, generally having the following
characteristics:

•     the mortgage loans have standardized payment terms and require minimum monthly
payments;

•        the mortgage loans are obligations of numerous borrowers and accordingly represent a
diversified pool of obligor credit risk;

•      repayment of such securities can vary substantially from their contractual payment schedules
and depends entirely upon the rate at which the mortgage loans are repaid; and

•       the repayment of such mortgage loans is subject to a contractual payment schedule, with
early prepayment of individual loans depending on numerous factors specific to the particular
obligors and upon whether, in the case of loans bearing interest at a fixed rate, such loans or
securities include an effective prepayment premium and with early repayment depending primarily
on interest rates and the sale of the mortgaged real estate and related dwelling and generally no
penalties for early repayment.

"Tobacco Bonds" means Structured Settlement Securities resulting from tobacco-related litigation.



                                                B-18
"Trust Preferred CDO Security" means any security that entitles the holders thereof to receive
payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the securities) on the cash flow from a pool of (a) trust
preferred securities issued by wholly-owned trust subsidiaries of U.S. institutions (which may include
any depository institution, insurance company or other types of institution in the financial sector)
which use the proceeds of such issuance to purchase a debt instrument issued by their parent and/or
(b) surplus notes issued by a U.S. institution.

"U.S. Agency Guaranteed Securities" means any Asset-Backed Security as to which the timely
payment of interest when due, and the payment of principal no later than stated legal maturity, is
(a) unconditionally guaranteed by a U.S. Federal agency backed by the full faith and credit of the
United States, but only if such guarantee (i) expires no earlier than such stated maturity and (ii) is
independent of the performance by the obligor on the relevant Asset-Backed Security or (b) is
issued by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association; provided that any Asset-Backed Security falling within this definition shall be excluded
from the definition of each other type of Asset-Backed Security.




                                                 B-19
                                                                                             Annex C

                          Definitions of Moody's Ratings and S&P Ratings

"Moody's Rating" means with respect to any Asset-Backed Security or REIT Debt Security, for
determining the Moody's Rating as of any date of determination:

(a)     if such Asset-Backed Security or REIT Debt Security is publicly rated by Moody's, the Moody's
Rating shall be such rating;

(b)     If such Asset-Backed Security or REIT Debt Security is not publicly rated by Moody's, then the
Moody's Rating of such Asset-Backed Security or REIT Debt Security may be determined using any
one of the methods below:

(c)     with respect to any ABS Type Residential Security not publicly rated by Moody's, if such ABS
Type Residential Security is publicly rated by S&P, then the Moody's Rating thereof will be (i) one
subcategory below the Moody's equivalent rating assigned by S&P if the rating assigned by S&P is
"AAA"; (ii) two rating subcategories below the Moody's equivalent rating assigned by S&P if the
rating assigned by S&P is below "AAA" but above "BB+"; and (iii) three rating subcategories below
the Moody's equivalent rating assigned by S&P if the rating assigned by S&P is below "BBB-";

(d)     with respect to any CMBS Conduit Security or CMBS Credit Tenant Lease Security not
publicly rated by Moody's, (i) if Moody's has rated a tranche or class of CMBS Conduit Security or
CMBS Credit Tenant Lease Security senior to the relevant Issue, then the Moody's Rating thereof
shall be one rating subcategory below the Moody's equivalent rating assigned by S&P and (ii) if
Moody's has not rated any such tranche or class and S&P has rated the subject CMBS Conduit
Security or CMBS Credit Tenant Lease Security, then the Moody's Rating thereof will be two rating
subcategories below the Moody's equivalent rating assigned by S&P;

               (A)    with respect to notched ratings on any other type of Asset-Backed Securities,
               the Moody's Rating shall be determined in conjunction with the notching
               conventions set forth in Annex F-1; and

               (B)      with respect to any other type of Asset-Backed Securities or REIT Debt
               Securities designated as a Specified Type after the date hereof pursuant to clause
               (a)(29) or clause (b)(11) of the definition thereof, pursuant to any method specified
               by Moody's;

(e)      with respect to any corporate guarantees on Asset-Backed Securities or REIT Debt Securities,
if such corporate guarantees are not publicly rated by Moody's but another security or obligation of
the issuer or guarantor thereof (an "other security") is publicly rated by Moody's, and no rating has
been assigned in accordance with clause (a) above, the Moody's Rating of such corporate guarantee
shall be determined as follows:

       (i)     if the corporate guarantee is a senior secured obligation of the issuer, guarantor or
       obligor and the other security is also a senior secured obligation, the Moody's Rating of such
       corporate guarantee shall be the rating of the other security;




                                                 C-1
(ii)    if the corporate guarantee is a senior unsecured obligation of the issuer, guarantor
or obligor and the other security is a senior secured obligation, the Moody's Rating of such
corporate guarantee shall be one rating subcategory below the rating of the other security;

(iii)   if the corporate guarantee is a subordinated obligation of the issuer, guarantor or
obligor and the other security is a senior secured obligation that is:

       (A)    rated "Ba3" or higher by Moody's, the Moody's Rating of such corporate
       guarantee shall be three rating subcategories below the rating of the other security;
       or

       (B)    rated "B1" or lower by Moody's, the Moody's Rating of such corporate
       guarantee shall be two rating subcategories below the rating of the other security;

(iv)    if the corporate guarantee is a senior secured obligation of the issuer, guarantor or
obligor and the other security is a senior unsecured obligation that is:

       (A)    rated "Baa3" or higher by Moody's, the Moody's Rating of such corporate
       guarantee shall be the rating of the other security; or

       (B)    rated "Ba1" or lower by Moody's, the Moody's Rating of such corporate
       guarantee shall be one rating subcategory above the rating of the other security;

(v)     if the corporate guarantee is a senior unsecured obligation of the issuer, guarantor
or obligor and the other security is also a senior unsecured obligation, the Moody's Rating
of such corporate guarantee shall be the rating of the other security;

(vi)    if the corporate guarantee is a subordinated obligation of the issuer, guarantor or
obligor and the other security is a senior unsecured obligation that is:

       (A)    rated "B1" or higher by Moody's, the Moody's Rating of such corporate
       guarantee shall be two rating subcategories below the rating of the other security;
       or

       (B)    rated "B2" or lower by Moody's, the Moody's Rating of such corporate
       guarantee shall be one rating subcategory below the rating of the other security;

(vii)   if the corporate guarantee is a senior secured obligation of the issuer, guarantor or
obligor and the other security is a subordinated obligation that is:

       (A)    rated "Baa3" or higher by Moody's, the Moody's Rating of such corporate
       guarantee shall be one rating subcategory above the rating of the other security;

       (B)     rated below "Baa3" but not rated "B3" by Moody's, the Moody's Rating of
       such corporate guarantee shall be two rating subcategories above the rating of the
       other security; or

       (C)     rated "B3" by Moody's, the Moody's Rating of such corporate guarantee
       shall be "B2";




                                         C-2
       (viii)  if a corporate guarantee is a senior unsecured obligation of the issuer, guarantor or
       obligor and the other security is a subordinated obligation that is:

               (A)    rated "Baa3" or higher by Moody's, the Moody's Rating of such corporate
               guarantee shall be one rating subcategory above the rating of the other security; or

               (B)     rated "Ba1" or lower by Moody's, the Moody's Rating of such corporate
               guarantee shall also be one rating subcategory above the rating of the other
               security; and

       (ix)    if the Funded Portfolio Asset is a subordinated obligation of the issuer, guarantor or
       obligor and the other security is also a subordinated obligation, the Moody's Rating of such
       corporate guarantee shall be the rating of the other security;

(f)     with respect to corporate guarantees issued by U.S., U.K. or Canadian issuers or guarantors
or by any other Qualifying Foreign Obligor, if such corporate guarantee is not publicly rated by
Moody's, and no other security or obligation of the issuer or guarantor thereof is rated by Moody's,
then the Moody's Rating of such corporate guarantee may be determined using any one of the
methods below:

       (i)     (A)      if such corporate guarantee is publicly rated by S&P, then the Moody's
       Rating of such corporate guarantee shall be (x) one rating subcategory below the Moody's
       equivalent of the rating assigned by S&P if such security is rated "BBB-" or higher by S&P
       and (y) two subcategories below the Moody's equivalent of the rating assigned by S&P if
       such security is rated "BB+" or lower by S&P; and

               (B)     if such corporate guarantee is not publicly rated by S&P but another security
               or obligation of the issuer is publicly rated by S&P (a "parallel security"), then the
               Moody's equivalent of the rating of such parallel security will be determined in
               accordance with the methodology set forth in subclause (1) above, and the Moody's
               Rating of such corporate guarantee will be determined in accordance with the
               methodology set forth in clause (iii) above (for such purpose treating the parallel
               security as if it were rated by Moody's at the rating determined pursuant to this
               subclause (2));

       (ii)    [Reserved];

       (iii)   with respect to a corporate guarantee issued by a U.S. corporation, if (A) neither the
       issuer nor any of its Affiliates is subject to reorganization or bankruptcy proceedings, (B) no
       debt securities or obligations of the issuer are in default, (C) none of the issuer, guarantor or
       any of their Affiliates have defaulted on any debt during the past two years, (D) the issuer
       or guarantor has been in existence for the past five years, (E) the issuer or guarantor is
       current on any cumulative dividends, (F) the fixed-charge ratio for the issuer or guarantor
       exceeds 125% for each of the past two fiscal years and for the most recent quarter, (G) the
       issuer or guarantor had a net annual profit before tax in the past fiscal year and the most
       recent quarter and (H) the annual financial statements of the issuer or guarantor are
       unqualified and certified by a firm of independent accountants of national reputation, and
       quarterly statements are unaudited but signed by a corporate officer, the Moody's Rating of
       such corporate guarantee will be "B3";




                                                 C-3
        (iv)     with respect to a corporate guarantee issued by a non-U.S. issuer, if (A) none of the
        issuer, guarantor or any of their Affiliates is subject to reorganization or bankruptcy
        proceedings and (B) no debt security or obligation of the issuer or guarantor has been in
        default during the past two years, the Moody's Rating of such corporate guarantee will be
        "Caa2"; and

        (v)     if a debt security or obligation of the issuer or guarantor has been in default during
        the past two years, the Moody's Rating of such corporate guarantee will be "Ca";

provided that (a) in respect of any U.S. Agency Guaranteed Security, if such U.S. Agency Guaranteed
Security is not assigned a Moody's Rating pursuant to clause (i) above, the Moody's Rating will be
the rating assigned to the relevant guarantor of such U.S. Agency Guaranteed Security by Moody's,
(b) the rating of either Rating Agency used to determine the Moody's Rating pursuant to any of
clauses (a), (b), (c) or (d) above shall be a public, non-exclusive rating (but not a rating estimate, a
shadow rating or any rating given for information purposes only or an S&P rating with any subscript)
that addresses the obligation of the obligor (or guarantor, where applicable) to pay principal of and
interest on the relevant Funded Portfolio Asset in full and is monitored on an ongoing basis by the
relevant Rating Agency and (c) if a Funded Portfolio Asset or a Reference Obligation (i) is placed on
a watch list for possible upgrade by Moody's, the Moody's Rating applicable to such Funded
Portfolio Asset or Reference Obligation, while it is on watch for possible upgrade, shall be one
rating subcategory above the Moody's Rating applicable to such Funded Portfolio Asset or
Reference Obligation immediately prior to such Funded Portfolio Asset or Reference Obligation
being placed on such watch list and (ii) if a Funded Portfolio Asset or a Reference Obligation is
placed on a watch list for possible downgrade by Moody's, the Moody's Rating applicable to such
Funded Portfolio Asset or Reference Obligation shall, while it is on watch for possible downgrade,
be (A) if the Moody's Rating applicable to such Funded Portfolio Asset or Reference Obligation
immediately prior to such Funded Portfolio Asset or Reference Obligation being placed on such
watch list was "Aaa", one rating subcategory below such Moody's Rating and (B) if the Moody's
Rating applicable to such Funded Portfolio Asset or Reference Obligation immediately prior to such
Funded Portfolio Asset or Reference Obligation being placed on such watch list was below "Aaa",
two rating subcategories below such Moody's Rating.

"Qualifying Foreign Obligor" means a corporation, partnership, trust or other entity organized in
any of (a) Australia, Austria, Belgium, Denmark, Finland, the Isle of Man, Italy, Luxembourg, Norway,
Portugal, Spain, Canada, France, Germany, Ireland, the Netherlands, the Netherlands Antilles, New
Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and
otherwise unsupported long-term U.S. Dollar sovereign debt obligations of such country are rated
"Aa2" or better by Moody's and "AA" or better by S&P or (b) any other jurisdiction for which the
Rating Condition with respect to S&P has been satisfied and of which Moody's has been given prior
written notice.

"S&P Rating" means with respect to any Asset-Backed Security or REIT Debt Security, for
determining the S&P Rating as of any date of determination:

(a)     if S&P has assigned a rating to such Funded Portfolio Asset either publicly or privately (in the
case of a private rating, with the appropriate consents for the use of such private rating), the S&P
Rating shall be the rating assigned thereto by S&P (or, in the case of a REIT Debt Security, the issuer
credit rating assigned by S&P);

(b)     [reserved];


                                                  C-4
(c)     if such Funded Portfolio Asset is a Funded Portfolio Asset that has not been assigned a
rating by S&P pursuant to clause (a) or (b) above, but is guaranteed by a corporate guarantee, the
issuer of which is rated by S&P, the S&P Rating shall be the rating so assigned to such issuer;

(d)     if such Funded Portfolio Asset is a Funded Portfolio Asset that has not been assigned a
rating by S&P pursuant to clause (a) or (b) above, and is not of a type listed on Annex E, the S&P
Rating of such Funded Portfolio Asset shall be the rating determined in accordance with Annex F-2;
provided that if any Funded Portfolio Asset shall, at any time at which it is held by the Issuer, be on
watch for a possible upgrade or downgrade by Moody's, the S&P Rating of such Funded Portfolio
Asset while on such watch shall be one subcategory above or below, respectively, the rating
otherwise assigned to such Funded Portfolio Asset in accordance with Annex F-2; provided, further
that the Aggregate Principal/Notional Balance of Portfolio Assets that may be given a rating based
on this subparagraph (d) may not exceed 20% of the Aggregate Principal/Notional Balance of all
Portfolio Assets; and

(e)      if such Portfolio Asset is not rated by S&P but the Issuer or the Collateral Manager on behalf
of the Issuer has requested that S&P assign a credit estimate prior to its acquisition or entry into of
such Portfolio Asset, the S&P Rating shall be the credit estimate so assigned by S&P; provided that
pending receipt from S&P of such credit estimate, such Portfolio Asset shall have a S&P Rating of
"CCC-"; provided, further that the Issuer (or the Collateral Manager on its behalf) shall re-apply
with S&P for the renewal of such credit estimate on or prior to each anniversary of the acquisition
or entry into such Portfolio Asset, whereupon the S&P Rating shall be the rating so assigned by S&P
following such re-application;

provided that, in regard to paragraphs (a), (b) and (c) above, if a Funded Portfolio Asset (a) is placed
on a watch list for possible upgrade by S&P, the S&P Rating applicable to such Funded Portfolio
Asset shall, while it is on watch for possible upgrade, be one rating subcategory above the S&P
Rating applicable to such Funded Portfolio Asset immediately prior to such Funded Portfolio Asset
being placed on such watch list or (b) is placed on a watch list for possible downgrade by S&P, the
S&P Rating applicable to such Funded Portfolio Asset shall, while it is on watch for possible
downgrade, be one rating subcategory below the S&P Rating applicable to such Funded Portfolio
Asset immediately prior to such Funded Portfolio Asset being placed on such watch list; provided,
further, that in respect of any U.S. Agency Guaranteed Security, the S&P Rating will be the rating
assigned to the relevant guarantor of such Funded Portfolio Asset by S&P if such U.S. Agency
Guaranteed Security is not assigned an S&P Rating pursuant to clause (a) above.




                                                  C-5
                                                                                               Annex D-1

                         Moody's Recovery Rate Matrix and Moody's Criteria

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 its 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.

(SEE DEFINITION OF "APPLICABLE RECOVERY RATE")

                                     Moody's Recovery Rate Matrix

A. ABS TYPE DIVERSIFIED SECURITIES

Percentage of Total    Moody's Rating at issuance
Capitalization
                         Aaa         Aa           A            Baa          Ba             B

Greater than 70%         85%         80%         70%          60%          50%           40%

Less than or equal       75%         70%         60%          50%          40%           30%
to 70%, but greater
than 10%

Less than or equal