IMPORTANT NOTICE
THIS OFFERING IS AVAILABLE ONLY TO INVESTORS ("ELIGIBLE INVESTORS") THAT ARE EITHER
(1) (I) QUALIFIED INSTITUTIONAL BUYERS ("QUALIFIED INSTITUTIONAL BUYERS") (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) AND (II) QUALIFIED PURCHASERS
("QUALIFIED PURCHASERS") (FOR THE PURPOSES OF SECTION 3(c)(7) OF THE INVESTMENT
COMPANY ACT) OR (2) PERSONS THAT ARE NOT "U.S. PERSONS" ("U.S. PERSONS") (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) AND THAT ARE OUTSIDE THE UNITED STATES.
IMPORTANT: You must read the following before continuing. The following applies to the offering document
(the "Athena Offering Circular") following this page, and you are therefore advised to read this carefully before
reading, accessing or making any other use of the Athena Offering Circular. In accessing the Athena 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 ISSUER
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 ATHENA 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 Athena Offering Circular or make an investment
decision with respect to the securities described herein, investors must be Eligible Investors (as defined above). The
Athena Offering Circular is being sent at your request and by accepting this e-mail and accessing the Athena
Offering Circular, you shall be deemed to have represented to us that (1) you and any customers you represent are
either (a) (x) Qualified Institutional Buyers and (y) Qualified Purchasers or (b) 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 Athena Offering Circular by electronic transmission.
You are reminded that the Athena Offering Circular has been delivered to you on the basis that you are a person into
whose possession the Athena 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 Athena 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.
The Athena 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 the Pantheon Master Fund plc (the "Issuer") nor any person who controls the Issuer nor any
director, officer, employee nor agent of the Issuer or affiliate of any such persons accepts any liability or
responsibility whatsoever in respect of any difference between the Athena Offering Circular distributed to you in
electronic format and the hard copy version available to you on request from the Issuer.
Offering Circular
OFFERING CIRCULAR RELATING TO ATHENA SERIES 2008-1
Pantheon Master Fund plc
(a public company with limited liability incorporated under the laws of Ireland)
Issue of Athena Series 2008-1 Notes in Aggregate Outstanding Amount of up to $1,000,000,000
____________________
The terms related to Athena Series 2008-1 shall be as set forth in Annex A hereto, the series supplement
dated May 16, 2008 (the "Series Supplement") and Annex B, the base offering circular, dated August 18, 2006
(the "Base Offering Circular" and, together with the Series Supplement and the pages preceding page "A-1", the
"Athena Offering Circular"). The Athena Offering Circular in its entirety shall constitute a "Prospectus" for the
purpose of the Prospectus Directive.
____________________
The Athena Series 2008-1 Notes are being offered hereby by Pantheon Master Fund plc (the "Issuer") in the
United States to Qualified Institutional Buyers in reliance on Rule 144A under the Securities Act. In addition to the
offering of such Athena Series 2008-1 Notes by the Issuer in the United States, the Issuer is concurrently offering the
Athena Series 2008-1 Notes outside the United States to non-U.S. Persons in offshore transactions in reliance on
Regulation S under the Securities Act.
____________________
See "Risk Factors" beginning on page A-22 of the Series Supplement and page B-24 of the Base Offering
Circular to read about factors you should consider before buying any Note.
There is no established trading market for the Athena Series 2008-1 Notes. Application will be made to the
Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for this Athena
Offering Circular to be approved. Application will be made to the Irish Stock Exchange for the Athena Series 2008-1
Notes to be admitted to the Official List of the Irish Stock Exchange and to trading on its regulated market. There can
be no assurance that such admission will be approved or maintained. The issuance and settlement of the Athena Series
2008-1 Notes on the Closing Date are not conditioned on the listing of the Athena Series 2008-1 Notes on the Irish
Stock Exchange.
____________________
The Athena Series 2008-1 Notes will not be rated by any credit rating agency.
____________________
THE ATHENA SERIES 2008-1 NOTES DO NOT REPRESENT AN INTEREST IN OR OBLIGATIONS OF,
AND ARE NOT INSURED OR GUARANTEED BY, THE INVESTMENT MANAGER, THE ADMINISTRATOR,
THE TRUSTEE, THE CUSTODIAN, THE COLLATERAL ADMINISTRATOR, THE PAYING AGENT OR ANY OF
THEIR RESPECTIVE AFFILIATES. THE ATHENA SERIES 2008-1 NOTES HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, NOR THE
ISSUER WILL BE REGISTERED UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS
AMENDED. THE ATHENA SERIES 2008-1 NOTES ARE BEING OFFERED AND SOLD IN THE UNITED
STATES ONLY TO PERSONS WHO ARE (1) QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS PROVIDED BY RULE 144A UNDER THE SECURITIES ACT AND (2) QUALIFIED
PURCHASERS (FOR PURPOSES OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT).
PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT THE SELLER OF ANY ATHENA SERIES 20081 NOTES MAY BE RELYING ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE ATHENA SERIES 2008-1 NOTES ARE
BEING OFFERED AND SOLD OUTSIDE THE UNITED STATES TO PERSONS THAT ARE NOT "U.S.
PERSONS" (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND THAT ARE OUTSIDE
THE UNITED STATES IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S UNDER THE
SECURITIES ACT. THE ATHENA SERIES 2008-1 NOTES ARE NOT TRANSFERABLE EXCEPT IN
ACCORDANCE WITH THE RESTRICTIONS DESCRIBED UNDER "DISTRIBUTION AND TRANSFER" IN THE
SERIES SUPPLEMENT.
____________________
The Athena Series 2008-1 Notes are offered by the Issuer, subject to its right to reject any order in whole or in
part. It is expected that the Athena Series 2008-1 Notes will be ready for delivery in New York, New York, on or about
May 16, 2008 against payment therefor in immediately available funds. The Athena Series 2008-1 Notes will have the
minimum denomination requirements set forth in "Series Descriptive Terms and General Description" in the Series
Supplement.
The date of this Athena Offering Circular is July 11, 2008.
Pantheon Master Fund plc (the "Issuer") accepts responsibility for the information contained in this document (save
for the information contained in the sections of this document headed "The Investment Manager" in the Base
Offering Circular) and to the best of the knowledge and belief of the Issuer, the information contained in this
document is in accordance with the facts and does not omit anything likely to affect the import of such information.
Prytania Investment Advisors, LLP (the "Investment Manager") accepts responsibility for the information contained
in the section of this document headed "The Investment Manager" in the Base Offering Circular. To the best of the
knowledge and belief of the Investment Manager, such information is in accordance with the facts and does not omit
anything likely to affect the import of such information.
Except with respect to the sections of this document headed "The Investment Manager" in the Base Offering
Circular, the Issuer represents that this Athena Offering Circular contains all information which is (in the context of
the issue, offering and sale of the Athena Series 2008-1 Notes) material; that such information is true and accurate in
all material respects and is not misleading in any material respect; that any opinions, predictions or intentions
expressed herein are honestly held or made and are not misleading in any material respect; that this Athena Offering
Circular does not omit to state any material fact necessary to make such information, opinions, predictions or
intentions (in the context of the issue, offering and sale of the Athena Series 2008-1 Notes) not misleading in any
material respect; and that all proper inquiries have been made to verify the foregoing.
The Issuer represents and agrees that:
(a)
it will not underwrite the issue of, or place the Athena Series 2008-1 Notes, otherwise than in
conformity than with the provisions of S.I. No. 60 of 2007, European Communities (Markets in
Financial Instruments) Regulations 2007 ("MiFID Regulations"), including, without limitation,
Parts 6, 7, and 12 thereof;
(b)
it will not underwrite the issue of, or place, the Athena Series 2008-1 Notes, otherwise than in
conformity with the provisions of the Irish Central Bank Acts 1942 – 2004 (as amended) and any
codes of conduct rules made under Section 117(1) thereof;
(c)
it will not underwrite the issue of, or place, or do anything in Ireland in respect of the Athena
Series 2008-1 Notes otherwise than in conformity with the provisions of the Irish Prospectus
(Directive 2003/71/EC) Regulations 2005 and any rules issued under Section 51 of the Irish
Investment Funds, Companies and Miscellaneous Provisions Act 2005, by the Central Bank and
Financial Services Authority of Ireland ("IFSRA");
(d)
it will not underwrite the issue of, place or otherwise act in Ireland in respect of the Athena Series
2008-1 Notes, otherwise than in conformity with the provisions of the Irish Market Abuse
(Directive 2003/6/EC) Regulations 2005 and any rules issued under Section 34 of the Irish
Investment Funds, Companies and Miscellaneous Provisions Act 2005 by IFSRA.
AVAILABLE INFORMATION
To permit compliance with Rule 144A in connection with the sale of the Notes, the Issuer under the Indenture
referred to under "Terms and Conditions of the Notes" in the Base Offering Circular will be required to furnish upon
request of a holder of a 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 is not
a reporting company 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 at the address set forth on the final page of the Base
Offering Circular.
GENERAL
The Investment Manager is located at Plantation Place South, 6th Floor, 60 Great Tower Street, London EC3R 5AZ,
United Kingdom.
The auditors are located at Deloitte & Touche House, Earlsfort Terrace, Dublin 2, Ireland.
All references to "Deutsche Bank Trust Company Americas" shall be read to mean "Wilmington Trust Company"
and all references to "Deutsche Bank AG, London Branch" shall be read to mean "Wilmington Trust Conduit
Services, LLC".
Termination of the Collateral Administrator and assignment of the duties of the Collateral Administrator to a
successor shall be governed by the provisions set forth in the Collateral Administration Agreement. A copy of the
Collateral Administration Agreement is available for inspection in accordance with the provisions of the Base
Offering Circular set forth under the heading "Listing and General Information—Documents Available for
Inspection".
Appendix A to the Base Offering Circular is designed to serve only as a form of Series Supplement and any
reference therein to "Danube Delta Series" should be disregarded.
For so long as any of the Athena Series 2008-1 Notes are listed on the Irish Stock Exchange and such exchange shall
so require, A&L Listing Limited, on behalf of the Issuer, will inform the Irish Stock Exchange and publish a notice,
which notice is expected to be published on the website of the Irish Stock Exchange through the Company
Announcements Office, when Drawdowns on the Athena Series 2008-1 Notes are made.
Table of Contents
Annex A – Series Supplement Dated May 16, 2008 .................................................................................................A-1
A. Series Descriptive Terms And General Description....................................................................................A-3
B. Terms Of Notes ...........................................................................................................................................A-4
C. Definitions...................................................................................................................................................A-7
D. Series Fees And Series Administrative Expenses .....................................................................................A-12
E. Investment Guidelines...............................................................................................................................A-13
F. Payments / Redemption.............................................................................................................................A-16
G. Events Of Default......................................................................................................................................A-18
H. Priority Of Payments .................................................................................................................................A-18
I. Distribution And Transfer .........................................................................................................................A-19
J. Note Issuance Expenses ............................................................................................................................A-20
K. Other..........................................................................................................................................................A-21
L. Series Risk Factors ....................................................................................................................................A-22
M. Issuance Of Additional Notes Of The Series.............................................................................................A-36
N. Schedules And Appendices .......................................................................................................................A-36
Annex A – Form Of Note.............................................................................................................................. A-A-1
Annex B – Form Of Noteholder Certificate ...................................................................................................A-B-1
Annex B – Base Offering Circular Dated August 18, 2006.......................................................................................B-1
Notice To Purchasers..........................................................................................................................................B-6
Documents Incorporated By Reference..............................................................................................................B-9
Summary Of Terms ..........................................................................................................................................B-10
Risk Factors......................................................................................................................................................B-23
The Issuer .........................................................................................................................................................B-46
Terms And Conditions Of The Notes...............................................................................................................B-48
1. Introduction ...............................................................................................................................................B-48
2. Interpretation .............................................................................................................................................B-49
3. Investment Manager ..................................................................................................................................B-74
4. Portfolio Investments ................................................................................................................................B-75
5. Portfolio Management...............................................................................................................................B-78
6. Form, Denomination And Title Of Notes..................................................................................................B-80
7. Status Of Notes..........................................................................................................................................B-88
8. Security For The Notes..............................................................................................................................B-89
9. Accounts....................................................................................................................................................B-90
10. Negative Pledge.........................................................................................................................................B-92
11. Fixed Rate Note Provisions.......................................................................................................................B-92
12. Floating Rate Note And Index-Linked Interest Note Provisions...............................................................B-94
13. Zero Coupon Note Provisions ...................................................................................................................B-96
14. Dual Currency Note Provisions.................................................................................................................B-96
15. Redemption ...............................................................................................................................................B-96
16. Payments ...................................................................................................................................................B-97
17. Hedge Agreements ....................................................................................................................................B-99
18. Taxation.....................................................................................................................................................B-99
19. Events Of Default......................................................................................................................................B-99
20. Non Petition And Limited-Recourse .......................................................................................................B-100
21. Prescription .............................................................................................................................................B-101
22. Replacement Of Notes.............................................................................................................................B-101
23. Agents .....................................................................................................................................................B-101
24. Modification ............................................................................................................................................B-102
25. Further Issues ..........................................................................................................................................B-102
26. Notices.....................................................................................................................................................B-102
27. Rounding .................................................................................................................................................B-102
28. Redenomination, Renominalisation And Reconventioning.....................................................................B-103
29. Governing Law And Jurisdiction ............................................................................................................B-104
Certain Erisa Considerations .................................................................................................................................B-112
Certain Legal Investment Considerations..............................................................................................................B-114
Subscription And Sale ...........................................................................................................................................B-115
Listing And General Information ..........................................................................................................................B-117
The Management Agreement ................................................................................................................................B-119
The Investment Manager .......................................................................................................................................B-123
Glossary Of Certain Defined Terms ...............................................................................................................B-127
Schedule A ................................................................................................................................................. B-S-A-1
Schedule B.................................................................................................................................................. B-S-B-1
Schedule C.................................................................................................................................................. B-S-C-1
Schedule D ................................................................................................................................................. B-S-D-1
Index Of Defined Terms...................................................................................................................................... I-1
Appendix A ....................................................................................................................................................B-A-1
ANNEX A – SERIES SUPPLEMENT DATED MAY 16, 2008
A-1
ATHENA SERIES 2008-1 SUPPLEMENT
Dated May 16, 2008
Pantheon Master Fund plc
Issue of Athena Series 2008-1 Notes in Aggregate Outstanding Amount of up to $1,000,000,000
This document constitutes the Series Supplement relating to the issue of the Notes described herein, the detailed
terms of which are not set out in the terms and conditions set forth in the Base Offering Circular dated August 18,
2006 (the "Terms and Conditions"). In addition, this Series Supplement may vary the terms of the Terms and
Conditions to the extent that they relate to the Series of Notes described herein. The description of the Notes in this
Series Supplement does not purport to be complete and is qualified in its entirety by reference to, and must be read
in conjunction with the detailed information appearing in the Terms and Conditions.
Terms used herein shall be deemed to be used herein as defined in the Terms and Conditions, except as otherwise
defined herein. In the event any terms in this Series Supplement conflict with any terms in the Indenture or the
Terms and Conditions, the terms as used in this Series Supplement shall control for all purposes related to the
Athena Series 2008-1. This Series Supplement must be read in conjunction with the Terms and Conditions.
A. SERIES DESCRIPTIVE TERMS AND GENERAL DESCRIPTION
1.
Issuer:
Pantheon Master Fund plc, a public company with limited
liability incorporated under the laws of Ireland.
2.
Noteholder(s):
Restricted only according to Clause 6.1 of the Terms and
Conditions.
3.
Series Number:
2008-1
4.
Series Name:
Athena Series 2008-1
General description:
A series invested in collateral consisting of structured finance
investments, including asset-backed securities and collateralized
debt obligations, invested across one or more currencies,
targeting first-loss and other tranches offering significant yield,
with currency hedging applied, as deemed advisable by the
Investment Manager, to the expected cash flows of the Series.
5.
Specified Currency or
Currencies:
USD
6.
Primary Currency:
USD
7.
Minimum
Denomination:
$100,000 (and integral multiples of $1 in excess thereof)
8.
Issue Date:
May 16, 2008.
9.
Paying Agent:
No additional Paying Agents.
10.
Further Issuance of
Notes after initial
Issuance:
Applicable. See "M. Issuance of Additional Notes of the Series"
and "B. Terms of Notes—B6: Details regarding Drawdowns"
below.
(ii)
A-3
11.
Rating
Not Applicable.
12.
Other:
The Rating Agency Condition must be satisfied before the Issuer
issues any additional Series of Notes, but shall not be required
for any additional issuances of any Series 2008-1 Notes issued
pursuant to this Series Supplement or in respect of acceptance by
the Issuer of any additional commitments as contemplated
herein. See "B. Terms of Notes-B5: Commitment" below.
B. TERMS OF NOTES
B1.
Initial Aggregate
Outstanding Amount:
On the Issue Date, the Aggregate Outstanding Amount of the
Athena Series 2008-1 Notes will equal $0.
B2.
Aggregate Outstanding
Amount:
After the Issue Date, the Aggregate Outstanding Amount of the
Athena Series 2008-1 Notes may increase by way of the sale of
additional Notes and Drawdowns on already issued Notes and
will be equal to the sum of all Noteholder Principal Amounts.
With respect to each Noteholder, the “Noteholder Principal
Amount” will be the sum, for each Commitment of such
Noteholder, of (i) each Drawdown Principal Amount minus (ii)
any Redemption Principal Amounts, in each case as recorded by
the Collateral Administrator on Schedule N1 to the Series
Supplement maintained by the Collateral Administrator pursuant
to the Indenture. Schedule N1 will be adjusted periodically by
the Collateral Administrator.
B3.
Maximum Aggregate
Outstanding Amount:
USD 1,000,000,000.
B4.
Maturity Date:
February 15, 2038.
B5.
Commitment:
One or more commitments (each, a "Commitment"), in amounts
denominated in USD (each, a "Commitment Amount"), made by
a Noteholder or prospective Noteholder to purchase Notes of the
Athena Series 2008-1, each as set forth in the relevant
commitment letter or subscription agreement (which shall set
forth the details of such Commitment including, without
limitation, the termination date of such Commitment) between
the Issuer and such Noteholder for such Commitment.
Additional Commitments from a prospective Noteholder or
increases to the Commitment Amount of an existing
Commitment may be accepted at any time and from time to time
as determined by the Investment Manager on behalf of the
Issuer, provided that the existing Majority of Athena Series
2008-1 at the time of such addition or increase, as the case may
be, has approved such action (such approval not to be
unreasonably withheld) (such approval as evidenced by a
consent, substantially in the form of Schedule N5 attached
hereto and made part hereof (the "Majority Approval Notice")).
The Investment Manager shall deliver to the Trustee and the
Collateral Administrator a written certification that such
A-4
approval has been obtained together with a copy of such
Majority Approval Notice prior to the acceptance and execution
by the Issuer of such additional Commitment. Each such
additional Commitment shall be subject to Allocated Issuance
Costs as described in "J2: Note Issuance Expenses—Issuance
Costs".
The Trustee and the Collateral Administrator shall be given a
copy of any commitment letter or subscription agreement to be
entered into between the Issuer and any additional investor
(including the identity of such additional investor) for
information purposes only prior to any additional Notes being
issued. Upon execution of the commitment letter or subscription
agreement, as applicable, the Investment Manager shall forward
a copy of the same to the Collateral Administrator together with
a list of authorized representatives of such additional investor
and specimen signatures.
Upon the occurrence of the Commitment Expiration Date, the
relevant Noteholder shall not have any further obligation, nor
shall the Issuer or the Investment Manager have any right to
request such Noteholder, to fund any amounts remaining
undrawn under the Commitment.
B6.
Details regarding
Drawdowns:
Applicable as set forth and subject to Condition 6 of the Terms
and Conditions.
Aggregate Drawdown
Request Amount:
The amount of the drawdown request from the Investment
Manager in a Portfolio Change Proposal, which shall be no less
than the sum, for each Commitment, of the Minimum
Drawdown Amount, and shall be no greater than the sum, for
each Commitment, of the Remaining Commitment Amount.
Notice Period for
Drawdowns:
5 Business Days.
A copy of any Drawdown Notice (as hereinafter defined) will
also be forwarded by the Investment Manager to the Trustee and
the Collateral Administrator.
Consequences of Failure
to Fund:
Breach by Noteholder under any commitment letter or
subscription agreement, as applicable, to be enforced by the
Issuer, or the Investment Manager on behalf of the Issuer.
Amounts for Each
Drawdown:
For each Commitment, no less than the Minimum Drawdown
Amount and in integral multiples of a single unit of the relevant
currency in excess thereof up to the Remaining Commitment
Amount in the amount defined under “Drawdown Amount”.
Information provided in
connection with a
Drawdown request to
Noteholders:
An initial Drawdown request will be delivered to each relevant
Noteholder no later than 5 Business Days prior to the date of any
requested Drawdown substantially in the form attached hereto as
Schedule N3 (a "Drawdown Notice") and will contain the
following information on an individual Noteholder basis:
(a)
The Drawdown Amount for each Commitment of such
A-5
Noteholder;
(b)
The date on which the Drawdown should occur; and
(c) If available on the date such request is made (or if not
available on such date, a revised Drawdown Notice shall be
provided no later than the date that is one day prior to the date
on which the funding of such Drawdown is to occur): the Series
Net Asset Value, Net NAV (or such higher value as agreed by
such Noteholder), any Allocated Issuance Costs to be paid from
the proceeds of such Drawdown Amount, the Drawdown
Principal Amount for each Commitment and the resulting
Noteholder Principal Amount after all Drawdown Amounts
applicable to such Noteholder have been paid.
Pro-rata drawdowns:
Drawdowns shall be made from each Noteholder according to
the computation of the Drawdown Amount for each
Commitment.
Dates permitted for
Drawdowns:
Other than with respect to the initial Drawdown, on any
Business Day during the 10 Business Day period following the
Valuation Date for each month; provided that if the funding of a
Drawdown is to occur in a month with a Semi-annual Payment
Date, such Drawdown will be made on the Business Day
immediately succeeding such Semi-annual Payment Date; and
provided, further, that the Monthly Series Net Asset Value for
such Valuation Date is based on a Series Net Asset Value
computed as of such Valuation Date and not adjusted as
described in second sentence of the definition thereof.
Maintenance of a
Noteholder Commitment
Schedule:
The Trustee shall update the Noteholder Commitment Schedule
upon each Drawdown and upon each Commitment Expiration
Date.
B7.
Form of Note Upon
Issuance:
The Notes will be in the form of definitive certificated Notes
registered without interest coupons in the name of the applicable
Noteholder substantially in the form of Annex A attached hereto.
B8.
Listing:
Application will be made to the Irish Stock Exchange for the
Notes to be admitted to the Official List and trading on the Main
Market of the Irish Stock Exchange.
The expenses related to admission to trading will be
approximately €5,000.
B9.
Listing Agent:
A&L Listing Limited (Dublin, Ireland).
B10.
Identifiers:
144A CUSIP: 69866MAA7
Reg S CUSIP: G6901WAA7
B11.
Rated:
The Notes will not be rated.
B12.
Other:
Since incorporation the Issuer has not engaged in any business
that could materially affect the Holders, other than the issue of
Danube Delta Series A 2006-1 Notes and Danube Delta Series B
A-6
2006-2 Notes to Danube Delta plc.
The financial year end of the Issuer is September 30th in each
year. The Issuer will publish its financial statements for the
period since its incorporation to September 30, 2007 in early
2008.
In no event is repayment in full of a Commitment required prior
to maturity or a redemption as herein provided.
C. DEFINITIONS
C1
Reference to defined
terms in the Terms and
Conditions:
Terms used herein that are defined in the Master Indenture
(including the Terms and Conditions) refer to the terms as defined
in such Master Indenture (including the Terms and Conditions)
unless otherwise modified or replaced as set forth in this Series
Supplement.
C2
Additional Definitions:
Applicable.
Accrued Semi-annual
Incentive Fees:
As of the Valuation Date for any month, the greater of zero and
10% of the excess of the current Semi-annual Return Amount
over the Semi-annual Hurdle Return Amount.
Accrued Long-term
Incentive Fees:
As of the Valuation Date for any month, 10% of the Excess Longterm Return Amount.
Adjusted Monthly Series
NAV:
The Monthly Series NAV, as adjusted to exclude in such
computation any Portfolio Investments managed by the
Investment Manager.
Aggregate Drawdown
Request Amount:
As defined in Clause B6(i) of this Series Supplement.
Allocated Issuance
Costs:
Issuance Costs related to a Commitment, and paid either from the
proceeds of a Drawdown Amount or directly by a Noteholder to
the Issuer as further described in "J2: Note Issuance Expenses—
Issuance Costs".
Allocated Portion of
Group D Securities:
The sum, for all Series Allocated Investments that are Group D
Securities, and for a specific Group, of the product, for each such
security, of (x) the portion, expressed as a percentage, of the
underlying investments of such Group D Security that would be
applicable to such Group were such underlying investments held
directly as a Series Allocated Investment rather than as part of a
Group D Security (as provided to the Issuer by the Investment
Manager at the time of the acquisition of such Group D Security
by the Issuer or first allocation to this Series, whichever is later,
or at such other time as requested by the Investment Manager)
and (y) the Series Allocated Investment.
Auction:
As defined in Schedule N2 of this Series Supplement.
A-7
Auction Date:
As defined in Schedule N2 of this Series Supplement.
Auction Purchase
Agreement:
As defined in Schedule N2 of this Series Supplement.
Auction Procedures:
As defined in Schedule N2 of this Series Supplement.
Commitment:
As defined in Clause B5 of this Series Supplement.
Commitment Amount:
As defined in Clause B5 of this Series Supplement.
Commitment Date:
The date of the relevant commitment letter or subscription
agreement, as applicable, between the Issuer and a Noteholder for
a Commitment.
Commitment Expiration
Date:
That date, on a following business day convention, which is 18
months after the Commitment Date.
Current Drawn Amount:
For each Commitment, the sum of all Drawdown Amounts under
such Commitment.
Drawdown Amount:
For each Commitment and rounded to the nearest integral
multiples of a single unit of the relevant currency, the Minimum
Drawdown Amount plus the product of (i) the Remaining
Commitment Amount less the Minimum Drawdown Amount and
(ii) the Drawdown Fraction.
Drawdown Fraction:
A fraction, never greater than 1, and equal to zero if the sum, for
all Commitments, of the Remaining Commitment Amount is
equal to the Minimum Drawdown Amount, and otherwise, equal
to fraction, the numerator of which is (x) the Aggregate
Drawdown Request Amount less the sum, for all Commitments,
of the Minimum Drawdown Amount, and the denominator of
which is (y) the sum, for all Commitments, of the Remaining
Commitment Amount less the Minimum Drawdown Amount.
Drawdown Notice
As defined in Clause B6(v) of this Series Supplement and whose
form is attached as Schedule N3 to this Series Supplement.
Drawdown Principal
Amount:
For each Commitment and for each Drawdown, the Drawdown
Amount less any Allocated Issuance Costs paid with the proceeds
of such Drawdown Amount, and then divided by the Net NAV
(before giving effect to such Drawdown) or such higher value as
agreed by an investor in the relevant commitment letter or
subscription agreement (separate written notice of which shall be
given by the Investment Manager to the Trustee and the
Collateral Administrator).
Eligible Currency:
As defined in Schedule N2 of this Series Supplement.
Excess Long-term
Return Amount:
As defined in Clause D4 of this Series Supplement.
Excess Semi-annual
As defined in Clause D3 of this Series Supplement.
A-8
Return Amount:
Expense and Fee
Reimbursement
Amount:
As defined in Clause F6(v) of this Series Supplement.
Gate Amount:
As defined in Clause F6 of this Series Supplement.
Gross NAV:
The value equal to (i) the Monthly Series NAV divided by (ii) the
Aggregate Outstanding Amount of the Athena Series 2008-1.
Group:
One of Group A Securities, Group B Securities, Group C
Securities and Group D Securities.
Group A Securities:
Second Lien RMBS and Consumer ABS Securities.
Group B Securities:
Commercial ABS Securities, Small Business Loan Securities,
Corporate CDO Securities.
Group C Securities:
CMBS Securities, Non-performing Loans, Residential Mortgage
Securities, Other Real Estate Securities.
Group D Securities:
CLO Securities, RMBS CDO Securities, CDO of CDO Securities,
Emerging Markets CDO Securities, Trust Preferred CDO
Securities.
Highest Auction Price:
As defined in Schedule N2 of this Series Supplement.
Issuance Costs:
Costs, fees and expenses associated with the Series issuance and
the taking in of additional Commitments, plus the Existing Series
Reimbursement, if any.
Issue Date:
As defined in Clause A8 of this Series Supplement.
Long-term Base Hurdle
Value:
Initially equal to zero, and thereafter, on each Valuation Date, an
amount equal to (x) the sum of (i) the Long-Term Base Hurdle
Value in effect at the start of the Semi-annual Calculation Period,
(ii) a 10% annualized return on such amount (computed on a
30/360 basis over such period), (iii) the sum of all Drawdown
Amounts during the Semi-annual Calculation Period, and (vi) the
Semi-annual Additional Hurdle Return Amount, minus (y) the
total of all redemptions occurring during the Semi-annual
Calculation Period prior to such Valuation Date.
Long-term Hurdle
Return Calculation
Amount:
The Long-term Base Hurdle Value less (ii) the Long-term Base
Hurdle Value in effect at Long-term Incentive Fee Starting Date.
Long-term Incentive
Management Fee:
As defined in Clause D4 of this Series Supplement.
Long-term Incentive Fee
Starting Date:
Initially, the Issue Date.
Thereafter, the Valuation Date
immediately prior to the most recent Semi-annual Payment Date
on which a Long-term Incentive Management Fee was, or could
have been, paid.
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Long-term Return
Calculation Amount:
The current Long-term Return Value less the Long-term Return
Value as of the Long-term Incentive Fee Starting Date.
Long-term Return
Value:
Initially zero, and thereafter, on each Valuation Date, an amount
equal to (x) the sum of (i) the Long-term Return Value in effect at
the start of the Semi-annual Calculation Period, (ii) the Semiannual Return Amount, and (iii) the sum of all Drawdown
Amounts during the Semi-annual Calculation Period, minus (y)
the total of all redemptions occurring during the Semi-annual
Calculation Period prior to such Valuation Date.
Majority:
The Noteholders of more than 50% of the Aggregate Outstanding
Amount of the Athena Series 2008-1.
Majority Approval
Notice
As defined in Clause B5 of this Series Supplement.
Minimum Drawdown
Amount:
For each Commitment, the lesser of (a) 25% of the Commitment
Amount rounded to the nearest integral multiples of a single unit
of the relevant currency and (b) the Remaining Commitment
Amount.
Monthly Report:
As defined in Clause K2 of this Series Supplement.
Monthly Series NAV:
The Series Net Asset Value determined as of a Valuation Date. In
the case that no Series Net Asset Value is capable of being
computed as of such date, the Series Net Asset Value shall equal
(i) the previous Series Net Asset Value plus (ii) the sum of all
Drawdown Amounts since the date of such Monthly Series NAV
less (iii) the sum of all Redemption Amounts since such date.
Net NAV:
Initially equal to 100%. Thereafter, on each Valuation Date,
equal to (i) the Monthly Series NAV less (a) accrued
administrative expenses and Base Management Fees, less
(b) Accrued Semi-annual Incentive Fees, less (c) Accrued Longterm Incentive Fees, divided by (ii) the Aggregate Outstanding
Amount of the Athena Series 2008-1.
Non-Redeemable
Period:
For each Commitment, three years from the date of the
Commitment.
Noteholder Principal
Amount:
As defined in Clause B2 of this Series Supplement.
Noteholder Commitment
Schedule:
A schedule maintained by the Trustee listing, for each unexpired
Commitment, the name of the Noteholder, the Commitment
Amount, the Commitment Expiration Date, the Current Drawn
Amount of the Commitment and the Commitment Date of such
Commitment, in each case, as updated from time to time based on
information that is actually available to the Trustee or that is
provided by the Issuer or the Investment Manager on behalf of the
Issuer.
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Payment Dates:
As defined in Clause F3 of this Series Supplement.
Portfolio Percentage
Tests:
As defined in Clause E3(i) of this Series Supplement.
Qualified Bidder:
As defined in Schedule N2 to this Series Supplement.
Qualified Bidder List:
As defined in Schedule N2 to this Series Supplement.
Redemption Amount:
As defined in Clause F6(iv) of this Series Supplement.
Redemption Principal
Amount:
As defined in Clause F6(iv) of this Series Supplement.
Remaining Commitment
Amount:
For each Commitment, (i) if the date is after the Commitment
Expiration Date, zero and (ii) otherwise, the Commitment
Amount in effect on the Commitment Date less all Drawdown
Amounts actually paid under such Commitment.
Semi-annual Additional
Hurdle Return Amount:
For each Drawdown occurring during a Semi-annual Calculation
Period, an amount equal to a 10% annual rate (computed on a
30/360 basis from the date of such Drawdown to the Valuation
Date for which such calculation is being made) of the sum of all
Drawdown Amounts for such Drawdown.
Semi-annual Base
Hurdle Return Amount:
An amount equal to a 10% annual rate (computed on a 30/360
basis over the Semi-annual Calculation Period) of the Semiannual Incentive Fee Starting NAV.
Semi-annual Calculation
Period:
The period beginning from and including the day following the
Valuation Date for the month immediately preceding the next
most recent Semi-annual Payment Date (or the Issue Date if
none) to but excluding the Valuation Date for the month in
respect of such calculation.
Semi-annual Hurdle
Return Amount:
The sum of the Semi-annual Base Hurdle Return Amount and the
sum, for all Drawdowns occurring during the related Semi-annual
Calculation Period, of all Semi-annual Additional Hurdle Return
Amounts.
Semi-annual Incentive
Fee Starting NAV
Initially zero, but after each Semi-annual Incentive Management
Fee, the value will be reset to the Adjusted Monthly Series NAV
less the sum of administrative expenses, all management fees
(base and incentive) and distributions in respect of the Athena
Series 2008-1 Notes paid at the time of such payment.
Semi-annual Incentive
Management Fee:
As defined in Clause D3 of this Series Supplement.
Semi-annual Liquidity
Date:
As defined in Clause F7 of this Series Supplement.
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C3
Semi-annual Payment
Date:
Any Payment Date occurring on the 15th day of each February
and the 15th day of each August (or if such day is not a Business
Day, the next succeeding Business Day), commencing in August
2008.
Semi-annual Return
Amount:
Equal to the current Adjusted Monthly Series NAV less the Semiannual Incentive Fee Starting NAV less (i) the sum of all
Drawdown Amounts during the Semi-annual Calculation Period
plus (ii) any Allocated Issuance Costs paid from Drawdown
Amounts after the beginning of such period plus (iii) the
administrative fees and Base Management Fees paid since the last
Semi-annual Payment Date.
Series Collateral Quality
Tests:
The Portfolio Percentage Tests set forth in Section E hereto and
applicable to the Athena Series 2008-1.
Series Net Asset Value:
The sum, as of such date of determination, of (a) the aggregate
Series Value, (b) without duplication, any Cash and Eligible
Investments held in the Series Accounts and (c) the Swap Mark
on any Hedge Agreements and Synthetic Securities at the Series
level.
Valuation Date:
The 25th day of each month (or if such day is not a Business Day,
the next succeeding Business Day).
Override of Pantheon
Definitions:
Applicable.
Valid:
Solely for the purposes of computing the Series Value and Series
Net Asset Value, Valid shall mean, with respect to a Securities
Mark or Swap Mark, that such Securities Mark or Swap Mark is
being applied during that period which extends from the date that
is five Business Days prior to the date of such Securities Mark or
Swap Mark to the date that is five Business Days thereafter and,
in the case that a bona fide attempt has been made to obtain a
Securities Mark or Swap Mark for a particular date but has not
been provided, to the date that is 45 days thereafter, provided that
the sum of such Allocated Investments divided by the Series
Value is no greater than 25% and provided, further, that the most
recent Securities Mark or Swap Mark shall be utilized.
D. SERIES FEES AND SERIES ADMINISTRATIVE EXPENSES
D1
Base Management Fee:
At an annual rate of 1.25% on the average of the three most recent
Adjusted Monthly Series NAV, including such Adjusted Monthly
Series NAV as of the date of such calculation.
D2
Incentive Management
Fee:
On any Payment Date that is not also a Semi-annual Payment
Date, zero.
On any Semi-annual Payment Date, the sum of the Semi-annual
Incentive Management Fee and the Long-term Incentive
Management Fee.
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D3
Semi-annual Incentive
Management Fee:
A fee computed for each Semi-annual Payment Date in an amount
equal to the product of 10% and the Excess Semi-annual Return
Amount.
The "Excess Semi-annual Return Amount" means the greater of
(i) zero and (ii) the Semi-annual Return Amount less the Semiannual Hurdle Return Amount.
D4
Long-term Incentive
Management Fee:
A fee computed for the Semi-annual Payment Date occurring in
February 2011 and each Semi-annual Payment Date thereafter in
an amount equal to the product of 10% and the Excess Long-term
Return Amount.
The "Excess Long-term Return Amount" means (x) prior to and
including the Semi-annual Payment Date occurring in February
2011, all and (y) thereafter, one-sixth of the greater of (i) zero and
(ii) the Long-term Return Calculation Amount less the Long-term
Hurdle Return Calculation Amount.
D5
Series Administrative
Expenses:
Administrative Expenses (as set forth in the Terms and
Conditions) specifically related to the Athena Series 2008-1.
D6
Limitation on Issuance
Costs:
Applicable.
All Issuance Costs related to the Athena Series 2008-1 shall be
paid, up to an amount equal to 1% of the sum of all Commitment
Amounts as of the Issue Date, as soon as practicable from the
proceeds of the first Drawdown. If the issuance costs exceed the
percentage limitation set forth in the immediately preceding
sentence, such excess costs shall be borne solely by the
Investment Manager.
D7
Other:
"Existing Series Reimbursement" shall be applicable to all
Noteholders on the Issue Date based on their Commitment
Amounts and, notwithstanding anything to the contrary set forth
in such definition, shall be applicable to each additional
Noteholder in respect of its Commitment Amount and each
existing Noteholder in respect of each additional Commitment
after the Issue Date.
The Collateral Administrator shall be entitled to conclusively rely
on all calculations and reports provided to it hereunder and shall
not be liable for any action it takes or omits to take in reliance on
such calculations and reports. In no event shall the Collateral
Administrator have any obligations to independently calculate or
verify any information set forth in such calculations and reports.
E. INVESTMENT GUIDELINES
E1
Additions to Series
Specific Transaction
Characteristics:
Applicable. The definition of Series Specific Transaction
Characteristics set forth in the Terms and Conditions is
supplemented as set forth below:
Additional Provisions:
Any addition to the types of Portfolio Investments securing the
Athena Series 2008-1 Notes or other variations to the Investment
A-13
Guidelines herein after the date hereof is subject to the consent of
a Majority of the Noteholders of the Athena Series 2008-1.
E2
(i)
E3
Purchase of Portfolio
Investments or a
transfer of an asset
from an Asset Pool that
is not allocated to
Athena Series 2008-1
to one that is allocated
to Athena Series 20081:
Single Security Tests – "Pass"
Portfolio Percentage Tests – "Pass" or "Maintain or Improve"
Tests:
(i)
Portfolio Percentage
Tests:
Applicable only after that date which is six months after the Issue
Date. Once applicable, the value for each of the tests below shall
be computed using the Primary Currency Equivalent of the
Principal Balance of the asset group defined below divided by (a)
for the first twelve months after the Issue Date, the greater of
$100,000,000 and the Net Outstanding Series Applicable
Collateral Balance and (b) afterwards, the Net Outstanding Series
Applicable Collateral Balance.
For the purposes of these Portfolio Percentage Tests, the Principal
Balance of each Portfolio Investment that is a short position shall
be equal to zero.
"Pass" for this Investment Guideline shall mean that the value is
less than or equal to the percentage limit in the table below.
"Maintain or Improve" for this Investment Guideline shall mean
that the value computed based on the Pro-Forma Transaction
Characteristics is no farther away from passing than the value
computed based on the current Series Specific Transaction
Characteristics.
Test
%
Consumer ABS Securities (including Second Lien RMBS)
CMBS Securities and Other Real Estate Securities
Non-performing loans
RMBS
30%
30%
25%
40%
ABS CDO Securities other than CDO of CDO Securities
CDO of CDO Securities
CLO Securities
Emerging Markets CDO Securities
Market Value CDO Securities and similar economic positions
Trust Preferred CDO Securities
40%
20%
55%
15%
20%
30%
Group tests
Group A Securities, including the Allocated Portion of Group D Securities for
A-14
40%
such Group
Group B Securities, including the Allocated Portion of Group D Securities for
such Group
Group C Securities, including the Allocated Portion of Group D Securities for
such Group
Group D Securities
75%
60%
85%
Characteristic Limits
From a single collateral manager or asset originator
From a single asset servicer
(ii)
15%
20%
Single Security Tests:
Applicable, and "Pass" for this Investment Guideline shall mean
that the criteria set forth in Clause 4.2 of the Terms and
Conditions are satisfied, provided that subclause (6) thereof shall
not be applicable.
Hedge Agreements:
Applicable, as set forth in the Terms and Conditions, but shall
further include with respect to Athena Series 2008-1 any long or
short credit derivatives (including, without limitation, single
name trades, basket trades and/or index trades) executed in
connection with a Portfolio Investment.
(i)
Hedge Agreements for
Series:
Permitted.
(ii)
Hedge Agreements for
Asset Pool:
Permitted.
(iii)
Hedge Counterparty
Ratings Requirement:
At least "A+" by Standard & Poor's or at least "A1" by Moody’s.
(iv)
Single Hedge
Counterparty Exposure
Limit:
Not to exceed 15% of the Net Outstanding Series Applicable
Collateral Balance.
E5
Short Positions:
Permitted.
E6
Other:
Approval of the Majority of Athena Series 2008-1 (such
approval not to be unreasonably withheld) shall be required for
purchases of any investments (other than the Portfolio
Investments already held by the Issuer) managed by the
Investment Manager for the Athena Series 2008-1. The
Investment Manager will provide, or cause to be provided, the
Collateral Administrator with a Majority Approval Notice prior
to making any such purchases.
E7
Limit on Leverage:
Applied only as needed, as determined by the Investment
Manager, through one or more facilities (including, without
limitation, repurchase agreements, total return swaps, credit
default swaps or any other similar forms of leverage), with a
maximum total of 30%. All forms of leverage based on the value
of the assets will require a minimum three month rolling term.
E4
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F. PAYMENTS / REDEMPTION
F1.
Additional Financial
Center(s) or other
special provisions
relating to Payment
Dates:
Payments shall be made on Payment Business Days.
F2.
Interest Commencement
Date if different from
Issue Date:
Not applicable.
F3.
Payment Dates:
Quarterly, on February 15th, May 15th, August 15th and
November 15th (or if such day is not a Business Day, the next
succeeding Business Day), commencing in August 2008.
F4.
Interest Payments:
Pass-through in each Specified Currency to the extent of the
proceeds in such Specified Currency in the related Series
Distribution Account.
F5.
Principal Payments:
Pass-through in each Specified Currency to the extent of the
proceeds in such Specified Currency in the related Series
Distribution Account.
F6.
Redemption:
For each Noteholder and Commitment thereof, permitted after
expiry of the Non-Redeemable Period.
(i)
Frequency:
On Semi-annual Payment Dates.
(ii)
Notice:
Three months. See "F7. Redemption Mechanics" below.
(iii)
Gate Amount:
10% of the total Aggregate Outstanding Amount of the Athena
Series 2008-1 on any Semi-annual Payment Date.
(iv)
Redemption Principal
Amount
The Redemption Principal Amount shall be the product of (i)
the specified percentage in the redemption notice and (ii) the
Noteholder Principal Amount.
(v)
Expense and Fee
Reimbursement
Amount:
The Expense and Fee Reimbursement Amount shall, for each
redemption notice, be equal to the product of (i) the excess of
the Gross NAV less the Net NAV and (ii) the Redemption
Principal Amount.
(vi)
Redemption Amount :
For each Redemption, the Redemption Principal Amount
multiplied by the Gross NAV (before giving effect to such
Redemption). However, it is hereby understood and agreed that
the actual Redemption Amount shall be determined based on
the actual proceeds received from the sale of the Portfolio
Investments as set forth in Section F7 below and, accordingly,
may be lower or higher than the Redemption Amount
calculated pursuant to the immediately preceding sentence.
(vii)
Segregation:
For each Noteholder and Commitment thereof, permitted after
the expiry of the related Non-Redeemable Period for Holders
having, in the aggregate, more than $20,000,000 initially
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invested in the Athena Series 2008-1 and more than $5,000,000
invested in the Athena Series 2008-1 at the time of Segregation;
provided that the Investment Manager reasonably deems that
such action will not be detrimental to other Holders in the
Athena Series 2008-1. After Segregation is accomplished,
assets may be (a) sold in an auction in accordance with the
Auction Procedures set forth in Schedule N2, (b) made
available for sale to other Pantheon Master Fund plc Asset
Pools, (c) placed in run-off mode, as directed by the applicable
Holders or (d) transferred to a Holder's own custodian account.
Any such Segregation shall be effected by the Collateral
Administrator, as directed by the Investment Manager on behalf
of the Issuer, in accordance with the Terms and Conditions.
F7.
Redemption Mechanics:
Each Holder of Notes, after the expiry of the related NonRedeemable Period, may by written notice (substantially in the
form attached hereto as Schedule N4) to the Issuer, the
Investment Manager, the Collateral Administrator and the
Trustee, at least three months prior to each Semi-annual
Payment Date (each, a "Semi-Annual Liquidity Date") request
that the Issuer redeem all or a portion of its Notes in accordance
with the procedures and subject to the conditions set forth
below and Section 7 of the Master Indenture. If a notice is
provided that requests more Notes to be redeemed than is
permitted, based on the Commitments of the Holder, the
Collateral Administrator, on behalf of the Issuer, shall notify
the Holder and the Holder shall be offered a choice of
withdrawing the notice or redeeming the maximum percentage
of Notes held.
In the event that one or more Noteholders notifies the Issuer
that they wish to redeem less than the entire Aggregate
Outstanding Amount of such Series and each indicates the
specific percentage of their Notes that they wish to redeem, the
Investment Manager shall select the Portfolio Investments to be
sold in connection with such redemption requests (provided
that, to the extent practicable in the judgment of the Investment
Manager, any redemption shall be made through the pro-rata
sale of Portfolio Investments), the currencies to be exchanged,
if any, and any other changes to the liability structure relating to
the Athena Series 2008-1 Notes, including, without limitation
with respect to the termination of any Hedge Agreements. In
connection with such redemption, the Notes will be redeemed
in part, from the sale proceeds and other funds available for
such purpose in the Series Principal Collection Account and the
Series Distribution Account on such Semi-Annual Liquidity
Date. Prior to making such redemption, proceeds and funds
available for redemption shall first be used to pay the Expense
and Fee Reimbursement Amount to the relevant parties.
No more than the Gate Amount shall be redeemed on any SemiAnnual Liquidity Date. If the Issuer receives notice from a
Holder or Holders requesting an amount, which is greater than
the Gate Amount, be redeemed on such date, the Issuer shall
make pro rata payments to all of the Holders requesting such
partial redemption up to the Gate Amount. However, no partial
A-17
redemptions shall be effected if following such partial
redemption any of the Single Security Tests or Portfolio
Percentage Tests would not be satisfied; provided that notice
shall be provided to all Noteholders if a partial redemption
cannot be effected due to the failure to satisfy this condition.
Provided, however, that none of the foregoing conditions
specified in the immediately preceding paragraph shall apply
and a Noteholder shall be entitled to redeem its entire
investment if (i) Mark Hale is no longer employed by the
Investment Manager as portfolio manager for the Athena Series
2008-1 (it being agreed that notice of such occurrence shall be
provided by the Investment Manager to the Trustee, the
Collateral Administrator and the Noteholders) and (ii) upon the
occurrence of the condition in clause (i), such Noteholder gives
written notice of its intention to redeem at least three months
prior to the date of such redemption.
If after giving effect to a partial redemption, as described
above, the Aggregate Outstanding Amount of the Athena Series
2008-1 would be less than $25,000,000, the Issuer, at the
direction of the Investment Manager, may, upon 90 days (or
such shorter period as reasonably determined by the Investment
Manager) written notice to the Noteholders, the Trustee and the
Collateral Administrator, choose to redeem the entire remaining
Aggregate Outstanding Amount of Athena Series 2008-1 Notes
on the related Semi-annual Liquidity Date. In connection with
such redemption in full, the assets shall be sold in an auction in
accordance with the Auction Procedures set forth in Schedule
N2.
F8.
Change of Interest or
Redemption/Payment
Basis:
Not applicable.
G. EVENTS OF DEFAULT
G1
Additional Events of
Default:
Not applicable.
G2
Additional Actions upon
Event of Default
(if different from Terms
and Conditions):
Upon Redemption as a result of an Event of Default, the
Investment Guidelines shall no longer be applicable.
G3
Other:
Not applicable.
H. PRIORITY OF PAYMENTS
H1
Override:
Applicable.
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H2
Priority of Payments for
this Series of Notes:
Applicable, except that
1. Only Clauses 16(b)(i) through 16(b)(iii) shall be given
effect on each Payment Date. Clauses 16(b)(iv) and thereafter
shall be given effect only on Semi-annual Payment Dates.
2. Clause 16(b)(vi) shall be modified and restated as follows:
"(vi)
from the Series Interest Collection Accounts and the
Series Principal Collection Accounts to the Series Distribution
Accounts for distribution to Noteholders of such Series in
accordance with (c) below, with any required currency
conversions to be performed at the direction of the Investment
Manager. Amounts so distributed shall be identified as
principal or interest as the case may be. It is hereby agreed
that, on each Payment Date that is a Semi-annual Payment
Date, (a) 85% (or such higher percentage as specified by the
Investment Manager, in its reasonable discretion) of the
Interest Proceeds received and allocable to the Athena Series
2008-1 will be transferred to the Series Distribution Account
for distribution to the Holders of the Athena Series 2008-1
Notes, and (b) the remainder of such Interest Proceeds received
and allocable to the Athena Series 2008-1 shall be transferred
to the Series Investment Accounts and reinvested at the written
direction of the Investment Manager."
I.
H3
Asset Pool Priority of
Payments:
No changes shall be made to the priority of payments set forth
herein except in accordance with the Indenture.
H4
Interest Proceeds and
Principal Proceeds:
Such terms are applicable to the Athena Series 2008-1 subject
to the following modifications:
(a)
distributions or payments received by the Issuer on any
Portfolio Investment that is reasonably identified by the
Investment Manager as consisting of CDO equity shall
be considered Principal Proceeds up to the purchase
price paid for such Portfolio Investment and thereafter,
shall be considered Interest Proceeds; and
(b)
any Principal Proceeds and any other funds not
distributed shall be reinvested at the written direction of
the Investment Manager.
DISTRIBUTION AND TRANSFER
I1
Manager(s) (if
syndicated):
Not applicable.
I2
Placement Agent(s) (if
non-syndicated):
Not applicable.
I3
Selling Restrictions:
The Notes are being offered and sold in the United States only
to Persons who are (1) both (x) Qualified Institutional Buyers
A-19
(as defined in Rule 144A under the U.S. Securities Act) in
reliance on Rule 144A under the Securities Act and (y)
Qualified Purchasers for the purposes of Section 3(c)(7) of the
Investment Company Act of 1940, as amended, or (2) to certain
Non-U.S. Persons outside the United States in reliance on the
exemption from registration provided by Regulation S under
the Securities Act.
I4
J.
Notice to Investors:
Applicable.
Transfer Restrictions:
In accordance with Sections 6.6 and 6.7 of the Terms and
Conditions.
Each Noteholder will deliver a certificate
substantially in the form of Annex B attached hereto.
Legend:
The Athena Series 2008-1 Notes will bear the legend set forth
in the Note attached hereto as Annex A.
I5
Method of Delivery:
Physical Delivery.
I6
Other:
Not applicable.
NOTE ISSUANCE EXPENSES
J1
Placement or
Syndication Fees:
Not applicable.
J2
Issuance Costs:
Applicable.
Allocated Issuance Costs up to 1% of (i) the Commitment
Amount for a new Commitment or (ii) the increase in the
Commitment Amount for an existing Commitment shall be
payable from the proceeds of the first Drawdown under such
Commitment or next Drawdown, in the case of an existing
Commitment.
The "Allocated Issuance Costs" shall be reasonably determined
solely by the Investment Manager such that the average ratio, for
each Noteholder, of Allocated Issuance Costs to the total of all
Commitment Amounts (expired and unexpired) is equal. The
Existing Series Reimbursement component of such Allocated
Issuance Costs shall be distributed in accordance with the
Master Indenture, and any Allocated Issuance Costs not required
to be paid by Pantheon shall be distributed to the Noteholders
according to the value of their total Commitment Amounts
(expired and unexpired) immediately prior to the additional
Commitments being accepted by the Issuer.
J3
Other:
Not applicable.
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K. OTHER
K1
Synthetic Securities
Permitted.
K2
Reporting
Four Business Days before the 15th of each month,
commencing in July, 2008, the Issuer shall make available to
the Investment Manager and the Noteholders, a monthly report
(the "Monthly Report"), which shall contain the following
information, together with calculations in reasonable detail,
with respect to this Series, determined as of the Valuation Date
for the prior calendar month (based in part on information
provided by the Investment Manager):
(1)
the Series Specific Transaction Characteristics as of
such date;
(2)
the results from the following tests, computed as of such
date:
Portfolio Percentage Tests: for each test, the computed
value and whether such test is passing;
(3)
the Series Net Asset Value;
(4)
with respect to any month in which a Payment Date
occurs, the Aggregate Outstanding Amount of the
Athena Series 2008-1 Notes, the Base Management
Fee, the Semi-annual Incentive Management Fee and
the Long-Term Incentive Management Fee, as
applicable, payable on such Payment Date and any
payments or distributions payable to the Noteholders
on such Payment Date;
(5)
the Series Allocated Investments purchased and/or sold
during such monthly period;
(6)
the amount of Interest Proceeds and Principal Proceeds
actually received on the Series Allocated Investments
relating to the Athena Series 2008-1 during such
monthly period; and
(7)
such other information as the Trustee, the Collateral
Administrator or the Investment Manager may
reasonably request.
The Monthly Reports shall not be disclosed to any Person
unless (a) such disclosure is required by law, court order,
regulation or governmental authority or (b) such disclosure is
made to any prospective or potential investor in the Athena
Series 2008-1.
K3
Amendments:
Amendments to the Indenture incorporating this Series
Supplement may be made only upon receipt of Majority
Approval Notice (or as otherwise permitted under the Master
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Indenture) and with the consent of the Investment Manager.
K4
Redenomination,
renominalisation and
reconventioning
provisions:
Not applicable.
K5
Consolidation
provisions:
Not applicable.
K6
Calculation Agent:
Not applicable.
L. SERIES RISK FACTORS
In addition to the Risk Factors described in the Pantheon Master Fund plc Base Offering Circular dated
August 18, 2006, the following risk factors apply as a result of the nature of the Series Allocated Investments.
Nature of Portfolio Investments.
It is expected that a significant portion of the Series Allocated Investments will generally be subordinated
to one or more other classes of securities of the same series for purposes of, among other things, offsetting losses
and other shortfalls with respect to the related underlying assets.
The Series Allocated Investments are subject to credit, liquidity, interest rate, market, operations, fraud and
structural risks. Prices of the Series Allocated Investments may be volatile, and will generally fluctuate due to a
variety of factors that are inherently difficult to predict, including but not limited to changes in interest rates,
prevailing credit spreads, general economic conditions, financial market conditions, domestic and international
economic or political events, developments or trends in any particular industry, and the financial condition of the
obligors of the Series Allocated Investments. Such price fluctuation and volatility may adversely affect the Series
Net Asset Value, which in turn may adversely affect investments made by existing Noteholders pursuant to their
respective commitments and any redemptions made by such Noteholders. In addition, prices or valuations for Series
Allocated Investments may not be readily available; in such circumstances and to a limited degree, the Issuer will
use previously obtained prices or valuations to determine the Series Net Asset Value and such method of
determining the Series Net Asset Value may adversely impact the value of the investment of the Noteholders. See
Clause C3 of this Series Supplement.
In addition, a significant portion of the Series Allocated Investments will be acquired by the Issuer after the
Issue Date and, accordingly, the financial performance of the Issuer may be affected by the price and availability of
Series Allocated Investments to be acquired. The amount and nature of the Series Allocated Investments securing
the Athena Series 2008-1 Notes will be established to withstand certain assumed deficiencies in payment occasioned
by defaults in respect of the related Portfolio Investments and a certain assumed number and frequency of Credit
Events under the Synthetic Securities in the form of Credit Default Swaps and similar instruments. If any
deficiencies and Credit Events exceed such assumed levels, however, payment of the distributions on the Athena
Series 2008-1 Notes could be adversely affected. To the extent that a default occurs with respect to any Allocated
Investment securing the Athena Series 2008-1 Notes and the Issuer (upon the advice of the Investment Manager)
sells or otherwise disposes of such Allocated Investment, it is not likely that the proceeds of such sale or disposition
will be equal to the amount of principal and interest owing to the Issuer in respect of such Allocated Investment.
There is Limited Disclosure About the Portfolio Investments in this Series Supplement.
The Issuer and the Investment Manager will not be required to provide Noteholders or the Trustee with
financial or other information (which may include material non-public information) it receives pursuant to the
Portfolio Investments and related documents. The Investment Manager also will not disclose to any of these parties
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the contents of any notice it receives pursuant to the Portfolio Investments or related documents. In particular, the
Investment Manager will not have any obligation to keep any of these parties informed as to matters arising in
relation to any Portfolio Investments, except with respect to: (i) the Asset Pools and related Pool Accounts in which
the Series Allocation Percentage of this Series is greater than zero, (ii) the Series Allocation Percentage for each of
such Asset Pools, (iii) the receipt or non-receipt, on an aggregate basis, of principal, interest, or other amounts of
collections or recoveries with respect to such Asset Pools, (iv) the cancellation of any Portfolio Investment held in
such Asset Pools, (v) default amounts in respect of the Portfolio Investment held in such Asset Pools and (vi) certain
other information required to be reported under the Management Agreement and the Indenture.
The Trustee will not have any right to inspect any records relating to the Portfolio Investments held in the
related Asset Pools, and the Investment Manager will not be obligated to disclose any further information or
evidence regarding the existence or terms of, or the identity of any obligor on, such Portfolio Investments, unless
specifically required by the Management Agreement. Furthermore, the Investment Manager may demand that any
persons requesting such information execute confidentiality agreements before being provided with the information.
Lender Liability Considerations and Equitable Subordination Can Affect the Issuer's Rights with Respect to
Portfolio Investments.
A number of judicial decisions have upheld judgments of borrowers against lending institutions on the
basis of various evolving legal theories, collectively termed "lender liability". Generally, lender liability is founded
on the premise that a lender has violated a duty (whether implied or contractual) of good faith, commercial
reasonableness and fair dealing, or a similar duty owed to the borrower or has assumed an excessive degree of
control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or
shareholders. Because of the potential nature of some of the Collateral, the Issuer may be subject to allegations of
lender liability.
In addition, under common law principles that in some cases form the basis for lender liability claims, if a
lender or bondholder (a) intentionally takes an action that results in the undercapitalization of a borrower to the
detriment of other creditors of such borrower, (b) engages in other inequitable conduct to the detriment of such other
creditors, (c) engages in fraud with respect to, or makes misrepresentations to, such other creditors or (d) uses its
influence as a stockholder to dominate or control a borrower to the detriment of other creditors of such borrower, a
court may elect to subordinate the claim of the offending lender or bondholder to the claims of the disadvantaged
creditor or creditors, a remedy called "equitable subordination". Because of the nature of the Collateral, the
Collateral may be subject to claims of equitable subordination.
Because affiliates of, or persons related to, the Investment Manager may hold equity or other interests in
obligors of Portfolio Investments, the Issuer could be exposed to claims for equitable subordination or lender
liability or both based on such equity or other holdings.
The preceding discussion is based upon principles of United States federal and state laws. Insofar as
Portfolio Investments that are obligations of non-United States obligors are concerned, the laws of certain foreign
jurisdictions may impose liability upon lenders or bondholders under factual circumstances similar to those
described above, with consequences that may or may not be analogous to those described above under United States
federal and state laws.
The Issuer May Not Be Able to Acquire Portfolio Investments That Satisfy the Investment Criteria.
The ability of the Issuer to acquire Portfolio Investments that satisfy the Investment Guidelines at the
projected prices, ratings, rates of interest and any other applicable characteristics will be subject to market
conditions and availability of such Portfolio Investments. Any inability of the Issuer to acquire Portfolio
Investments that satisfy such investment criteria may adversely affect the timing and amount of the payments
received by Noteholders. There is no assurance that the Issuer will be able to acquire Portfolio Investments that
satisfy the investment criteria for any given Series of Notes.
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Synthetic Securities Involve Particular Risks.
A portion of the Series Allocated Investments may consist of Synthetic Securities, the Reference
Obligations of which may be leveraged loans, high-yield debt securities or similar securities. Investments in such
types of assets through the purchase of Synthetic Securities present risks in addition to those resulting from direct
purchases of such Portfolio Investments. With respect to each Synthetic Security, the Issuer will usually have a
contractual relationship only with the counterparty of such Synthetic Security, and not the reference obligor on the
Reference Obligation. The Issuer generally will have no right directly to enforce compliance by the reference
obligor with the terms of the Reference Obligation nor any rights of set-off against the reference obligor, may be
subject to set-off rights exercised by the reference obligor against the counterparty or another person or entity, and
generally will not have any voting or other contractual rights of ownership with respect to the Reference Obligation.
The Issuer will not directly benefit from any collateral supporting the Reference Obligation and will not have the
benefit of the remedies that would normally be available to a holder of such Reference Obligation. In addition, in
the event of the insolvency of the counterparty, the Issuer will be treated as a general creditor of such counterparty,
and will not have any claim with respect to the Reference Obligation. Consequently, the Issuer will be subject to the
credit risk of the counterparty as well as that of the reference obligor. As a result, concentrations of Synthetic
Securities entered into with any one counterparty will subject to an additional degree of risk with respect to defaults
by such counterparty as well as by the reference obligor.
Additionally, while the Issuer expects that the returns on a Synthetic Security will generally reflect those of
the related Reference Obligation, as a result of the terms of the Synthetic Security and the assumption of the credit
risk of the Synthetic Security Counterparty, a Synthetic Security 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. Additionally, when compared to the Reference Obligation, the terms of a
Synthetic Security 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 the Synthetic
Security, the terms of the Synthetic Security may permit or require the issuer of such Synthetic Security to satisfy its
obligations under the Synthetic Security by delivering to the Issuer securities other than the Reference Obligation or
an amount different than the then current market value of the Reference Obligation.
Recent Events in the CDO and Leveraged Finance Markets.
In late 2006 the sub-prime mortgage loan market in the United States commenced a period characterised by
a large number of borrower defaults. Prior to the commencement of such period, a significant volume of sub-prime
mortgage loans had been securitised and, in turn, sub-prime mortgage-backed securities had been sold to
collateralized debt obligation ("CDO") vehicles and other investment funds. As a result of the deterioration of the
U.S. sub-prime mortgage loan market, CDO vehicles and other investment funds that invested in U.S. sub-prime
mortgage-backed securities began experiencing significant losses which has triggered a series of events that resulted
in a severe liquidity crisis in the global credit markets beginning significantly during the summer of 2007. Among
the sectors of the global credit markets that are, and have been, experiencing particular difficulty due to the current
lack of liquidity are the CDO and leveraged finance markets including CDO vehicles and other investment funds
with little or no exposure to sub-prime mortgages.
There exist significant additional risks for the Issuer and investors as a result of the current liquidity crisis.
Those risks include, among others, (i) the likelihood that the Issuer will find it harder to sell any of its assets in the
secondary market, (ii) the possibility that, on or after the Issue Date, the price at which assets can be sold by the
Issuer will have deteriorated from their effective purchase price and (iii) the increased illiquidity of the Notes as
there is currently little or no secondary trading in CDO Securities. These additional risks may affect the returns on
the Notes to investors.
In addition, the current liquidity crisis has stalled the primary market for a number of financial products
including leveraged loans. As a result, there exists a large volume of leveraged loans which remain on the books of
the relevant arranging banks, that have not yet been sold to investors including CDOs of leveraged loans or other
investment vehicles. This may reduce opportunities for the Issuer to purchase assets in the primary market. In
addition, while it is anticipated that new loans entered into after the date of the onset of the liquidity crisis will have
A-24
a different set of covenants imposed on the relevant Obligors (as compared with those loans entered into prior to the
onset of the liquidity crisis), the ability of private equity sponsors and leveraged loan arrangers to effectuate new
leveraged buy-outs and the ability of the Issuer to make purchases of such assets may be partially or significantly
limited to the secondary market. The impact of the liquidity crisis on the primary market may adversely effect the
management flexibility of the Investment Manager in relation to the Collateral and, ultimately the returns on the
Notes to investors.
Recently, delinquencies, defaults and losses on residential mortgage loans have increased significantly and
may continue to increase, which will likely affect the performance of U.S. non-prime mortgage loan market, CDO
vehicles and other investment funds that invested in U.S. non-prime mortgage-backed securities and such
delinquencies, defaults and losses on underlying mortgage loans will reduce interest and principal actually paid to
investors to less than the amounts owed to investors in accordance with the terms of their Notes.
In addition, a number of originators and servicers of mortgage loans have recently experienced serious
financial difficulties and, in some cases, have entered bankruptcy proceedings. These difficulties have resulted in
part from declining markets for their mortgage loans as well as from claims for repurchases of mortgage loans
previously sold under provisions that require repurchase in the event of early payment defaults or for breaches of
representations regarding loan quality. Delinquencies and losses on, and, in some cases, claims for repurchase by
the originator of, mortgage loans originated by some mortgage lenders have recently increased as a result of
inadequate underwriting procedures and policies, including inadequate due diligence, failure to comply with
predatory and other lending laws and, particularly in the case of any "low documentation" or "limited
documentation" mortgage loans that may support RMBS, inadequate verification of income and employment
history. Delinquencies and losses on, and claims for repurchase of, mortgage loans originated by some mortgage
lenders have also resulted from fraudulent activities of borrowers, lenders and appraisers including misstatements of
income and employment history, identity theft and overstatements of the appraised value of mortgaged properties.
Such financial difficulties may have a negative effect on the ability of servicers to pursue collection on mortgage
loans that are experiencing increased delinquencies and defaults and to maximize recoveries on sale of underlying
properties following foreclosure. The inability of the originator to repurchase such mortgage loans in the event of
early payment defaults and other loan representation breaches may also affect the performance of CDO vehicles and
other investment funds backed by those mortgage loans.
There can be no assurance that originators and servicers of mortgage loans will not continue to experience
serious financial difficulties or experience other difficulties in the future, such as becoming subject to bankruptcy
proceedings, or that underwriting procedures and policies and protections against fraud will be sufficient in the
future to prevent such financial difficulties or significant levels of default or delinquency on mortgage loans.
These economic trends have been accompanied by a recent downward trend of property values after a
sustained period of increase in property values. A continued decline or a lack of increase in those values may result
in additional increases in delinquencies and losses on residential mortgage loans. Accordingly, various national
recognized statistical rating organizations, including Moody's, Standard & Poor's and Fitch, have downgraded a
significant number of U.S. non-prime mortgage loans, obligations issued by CDO vehicles and other investment
funds in recent months. CDO vehicles and other structured investment funds with exposure to U.S. non-prime
mortgage-backed securities are likely to experience further downgrades.
While it is possible that the current liquidity crisis may alleviate for certain sectors of the global credit
markets, there can be no assurance that the CDO market will recover or, if it does, that it will recover at the same
time or to the same degree as such other recovering global credit market sectors.
Asset-Backed Securities.
The Issuer may from time to time acquire Asset-Backed Securities or Synthetic Securities with respect to
which the Reference Obligations are Asset-Backed Securities. Asset Backed Securities are debt obligations or debt
securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from (a) a
specified pool of financial assets, either static 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 (b) real estate mortgages, either static or revolving, together with rights or other assets
A-25
designed to assure the servicing or timely distribution of proceeds to holders of such securities; provided that, in the
case of clause (b), such Asset-Backed Securities do not entitle the holders to a right to share in the appreciation in
value of or the profits generated by the related real estate assets.
Asset-Backed Securities include, but are not limited to, securities for which the underlying collateral
consists of assets such as home equity loans, leases, residential mortgage loans, commercial mortgage loans, auto
finance receivables, credit card receivables and other debt obligations. Sponsors of issuers of Asset-Backed
Securities are primarily banks and finance companies, captive finance subsidiaries of non-financial corporations or
specialized originators such as credit card lenders.
Asset-Backed Securities carry coupons that can be fixed or floating. 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 assets.
Holders of Asset-Backed Securities bear various risks, including credit risk, liquidity risk, interest rate risk,
market risk, operations risk, structural risk and legal risk. The structure of an Asset-Backed 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 Asset-Backed 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
Asset-Backed 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 Asset-Backed Securities.
Holders of Asset-Backed Securities bear various risks, including credit risks, liquidity risks, interest rate
risks, market risks, operations risks, structural risks and legal risks. Credit risk is an important issue in AssetBacked Securities because of the significant credit risks inherent in the underlying collateral and because issuers are
primarily private entities. Credit risk arises from losses due to defaults by the borrowers or obligors in the
underlying collateral or the issuer's or servicer's failure to perform. These two elements can overlap as, for example,
in the case of a servicer who does not provide adequate credit-review scrutiny to the serviced portfolio, leading to a
higher incidence of defaults. Market risk arises from the cash-flow characteristics of the security, which for many
Asset-Backed Securities 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 if 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 securityholders. Liquidity
risk can arise from increased perceived credit risk, such as 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 significant
problem if concerns about credit quality, for example, lead investors to avoid the securities issued by the relevant
special-purpose entity. Some securitization transactions may include a "liquidity facility," which requires the
facility provider to advance funds to the relevant special-purpose entity should liquidity problems arise. However,
where the originator is also the provider of the liquidity facility, the originator may experience similar market
concerns if the assets it originates deteriorate and the ultimate practical value of the liquidity facility to the
transaction may be questionable. Additional risk arises through the potential for misrepresentation of asset 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.
In addition, concentrations of Asset-Backed Securities of a particular type, as well as concentrations of
Asset-Backed Securities issued or guaranteed by affiliated obligors, serviced by the same servicer or backed by
underlying collateral located in a specific geographic region, may subject the Notes of each Series to additional risk.
Further issues may arise based on discretionary behavior of the issuer within the terms of the securitization
agreements, 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
A-26
serve as two or more of originator of underlying collateral, 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 Asset-Backed 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.
Prepayment risk on Asset-Backed Securities, including the Series Allocated Investments, arises from the
uncertainty of the timing of payments of principal on the underlying securitized assets. The assets underlying a
particular Portfolio Investment may be paid more quickly than anticipated, resulting in payments of principal on the
related Portfolio Investment sooner than expected. Alternatively, amortization may take place more slowly than
anticipated, resulting in payments of principal on the related Portfolio Investment later than expected. In addition, a
particular Portfolio Investment may, by its terms, be subject to redemption prior to its maturity, resulting in a full or
partial payment of principal in respect of such Portfolio Investment. Similarly, defaults on the underlying
securitized assets may lead to sales or liquidations and result in a prepayment of such Portfolio Investment.
If the Issuer purchases a Series Allocated Investment at a premium, a prepayment rate that is faster than
expected may result in a lower than expected yield to maturity on such security. Alternatively, if the Issuer
purchases a Series Allocated Investment at a discount, slower than expected prepayments may result in a lower than
expected yield to maturity on such security.
Often Asset-Backed 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 Asset-Backed 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 allocated 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 satisfied will the cash flows be directed to service the
subordinated class. The Series Allocated Investments may consist of Asset-Backed Securities that are (or Synthetic
Securities with respect to which the Reference Obligations are Asset-Backed Securities that are) subordinate in right
of payment and rank junior to other securities that are secured by or represent an ownership interest in the same pool
of assets. In addition, many of the Asset-Backed Securities included in the Series Allocated Investments may have
been issued in transactions that have structural features that divert payments of interest and/or principal to more
senior classes when the delinquency or loss experience of the pool exceeds certain levels. As a result, such
securities have a higher risk of loss as a result of delinquencies or losses on the underlying assets. In certain
circumstances, payments of interest may be reduced or eliminated for one or more payment dates. Additionally, as a
result of cash flow being diverted to payments of principal on more senior classes, the average life of such securities
may lengthen. For example, in the case of certain ABS Type Residential Securities, no distributions of principal
will generally be made with respect to any class until the aggregate principal balances of the more senior classes of
securities have been reduced to zero. Subordinate Asset-Backed Securities generally do not have the right to call a
default or vote on remedies following a default unless more senior securities have been paid in full. As a result, a
shortfall in payments to subordinate investors in Asset-Backed Securities will generally not result in a default being
declared on the transaction and the transaction will not be restructured or unwound. Furthermore, because
subordinate Asset-Backed Securities may represent a relatively small percentage of the size of the asset pool being
securitized, the impact of a relatively small loss on the overall pool may disproportionately affect the holders of such
subordinate security.
CDO Securities.
A portion of the Series Allocated Investments acquired by the Issuer will consist of CDO Securities. In
addition, a portion of the Reference Obligations under the Synthetic Securities may consist of CDO Securities.
CDO Securities are usually limited recourse obligations of the issuer thereof payable solely from the
Underlying Portfolios of such issuer or proceeds thereof. Consequently, holders of CDO Securities must rely solely
on distributions on the Underlying Portfolio or proceeds thereof for payment in respect thereof. If distributions on
the Underlying Portfolio are insufficient to make payments on the CDO Security, no other assets will be available
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for payment of the deficiency and following realization of the underlying assets, the obligation of such issuer to pay
such deficiency shall be extinguished. As a result, the amount and timing of interest and principal payments will
depend on the performance and characteristics of the related Underlying Portfolios.
Some of the CDO Securities included in the Series Allocated Investments for the Athena Series 2008-1
Notes may have Underlying Portfolios that hold or invest in some of the same assets as the Series Allocated
Investments pledged to secure the Athena Series 2008-1 Notes or held in the Underlying Portfolios of other CDO
Securities pledged as Series Allocated Investments. The concentration in any particular asset may adversely affect
the Issuer's ability to make payments on the Athena Series 2008-1 Notes. In addition, the Underlying Portfolios of
the CDO Securities may be actively traded. As a result, Noteholders are exposed to the risk of loss on such Series
Allocated Investments both directly and indirectly through the CDO Securities acquired by the Issuer.
CDO Securities are subject to interest rate risk. The Underlying Portfolio of an issue of CDO Securities
will include assets that bear interest at a fixed or floating rate of interest, and while the CDO Securities issued by
such issuer also may bear interest at a floating or fixed rate, the proportions of a CDO Security issuer's assets
bearing interest at fixed and floating rates will typically not match the proportions to which such CDO Security
issuer's liabilities bear interest at fixed and floating rates. As a result, there could be a floating/fixed rate or basis
mismatch between such CDO Securities and Underlying Portfolios which bear interest at a fixed rate, and there may
be a timing or basis mismatch between the CDO Securities and Underlying Portfolios that bear interest at a floating
rate as the interest rate on such floating rate Underlying Portfolios 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.
The CDO Securities may be subordinated to other classes of securities issued by each respective issuer
thereof. CDO Securities that are not part of the most senior tranche(s) of the securities issued by the issuer thereof
may allow for the deferral of the payment of interest on such CDO Securities. The deferral of interest by the issuer
of CDO Securities forming part of the Collateral could result in a reduction in the amounts available to distribute to
Noteholders. The CDO Securities may include both senior and mezzanine debt issued by the related CDO Security
issuers. The CDO Securities that are mezzanine debt will have payments of interest and principal that are
subordinated to one or more classes of notes that are more senior in the related issuer's capital structure, and
generally will allow for the deferral of interest subject to the related issuer's priority of payments. To the extent that
any losses are incurred by the issuer thereof in respect of its CDO Securities, such losses will be borne by holders of
the mezzanine tranches before any losses are borne by the holders of senior tranches. In addition, if an event of
default occurs under the applicable indenture, as long as any senior tranche of CDO Securities is outstanding, the
holders of the senior tranche thereof generally will be entitled to determine the remedies to be exercised under the
indenture, which could be adverse to the interests of the holders of the mezzanine tranches (including the Issuer).
In order to acquire and hold CDO Securities, the Issuer must satisfy at all times the investor qualifications
in the applicable Underlying Instruments and applicable securities laws. Such Underlying Instruments governed by
the laws of the United States generally require that the Issuer either be a Qualified Institutional Buyer that is also a
Qualified Purchaser or a non-U.S. Person, and may require that other criteria be satisfied. In the event that the
Issuer does not satisfy the requirements applicable to investors in a CDO Security, it will not be able to purchase
such CDO Security. In addition, if it does not satisfy such requirements at any time after it purchases such CDO
Security, the applicable Underlying Instruments may permit the issuer of such CDO Security to force the Issuer to
sell such CDO Security, which sale by the Issuer could be made at a loss.
The risks associated with investing in CDO Securities may in addition depend on the skill and experience
of the Investment Manager managing the Underlying Portfolio, in particular, if the Underlying Instruments provide
for active trading in securities comprising the Underlying Portfolio. This risk is greater if the Underlying Portfolio
itself consists of collateralized debt obligations that rely on the skill and experience of the Investment Manager.
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Commercial Mortgage-Backed Securities.
A portion of the Asset-Backed Securities acquired by the Issuer may consist of commercial mortgagebacked securities and a portion of the Reference Obligations under the Synthetic Securities may consist of
commercial mortgage-backed securities.
Commercial mortgage loans underlying commercial mortgage-backed securities are generally secured by
income producing property, such as multi-family housing or commercial property, and may entail risks of
delinquency and foreclosure, and risks of loss in the event thereof, that are greater than similar risks associated with
loans secured by one- to four family residential property. The ability of a borrower to repay a loan secured by an
income producing property typically is dependent primarily upon the successful operation of such property rather
than upon the existence of independent income or assets of the borrower. If the net operating income of the property
is reduced (for example, if rental or occupancy rates decline or real estate tax rates or other operating expenses
increase), the borrower's ability to repay the loan may be impaired. Net operating income of an income-producing
property can be affected by, among other things, tenant mix, success of tenant businesses, property management
decisions (including responding to changing market conditions, planning and implementing rental or pricing
structures and causing maintenance and capital improvements to be carried out in a timely fashion), property
location and condition, competition from comparable types of properties, changes in laws that increase operating
expense or limit rents that may be charged, any need to address environmental contamination at the property and the
occurrence of any uninsured casualty at the property. In general, incremental risks of delinquency, foreclosure and
loss with respect to an underlying commercial mortgage loan pool may be greater than those associated with
residential mortgage loan pools. In part, this may be caused by lack of diversity.
RMBS are typically backed by mortgage loan pools consisting of hundreds of mortgage loans and related
mortgaged properties. Each residential mortgage loan represents a small percentage of the entire underlying
collateral pool, the borrowers and mortgaged properties of which are geographically dispersed. Risk of delinquency,
foreclosure and loss with respect to a residential mortgage loan pool can be analyzed statistically. By contrast,
CMBS Securities may be backed by an underlying mortgage pool of only a few mortgage loans. As a result, each
commercial mortgage loan in the underlying mortgage pool represents a large percentage of the principal amount of
CMBS Securities backed by such underlying mortgage pool. A failure in performance of any one commercial
mortgage loan in the underlying mortgage pool will have a much greater impact on the performance of the related
CMBS Securities. Credit risk relating to commercial mortgage-backed transactions is, as a result, property-specific.
In this respect, commercial mortgage-backed transactions resemble traditional non-recourse secured loans. The
collateral must be analyzed and transaction structured to address issues specific to an individual commercial
property and its business.
Commercial mortgage loans are obligations of the borrowers thereunder only and are not typically insured
or guaranteed by any other person or entity. Distributions on the CMBS Securities will depend solely upon the
amount and timing of payments and other collections on the related underlying mortgage loans. The value of an
income producing property is directly related to the net operating income derived from such property. Furthermore,
rates of defaults and losses on commercial mortgage loans, and the value of any commercial property, may be
adversely affected by risks generally incident to interests in real property, including various events which the related
borrower and/or manager of the commercial property, the issuer, the depositor, the trustee, the master servicer or the
special servicer may be unable to predict or control, such as: changes in general or local economic conditions and/or
specific industry segments; declines in real estate values; declines in rental or occupancy rates; increases in interest
rates, real estate tax rates and other operating expenses; changes in governmental rules, regulations and fiscal
policies, including environmental legislation; acts of God; environmental hazards; and social unrest and civil
disturbances. If a commercial mortgage loan is in default, foreclosure of such commercial mortgage loan may be a
lengthy and difficult process, and may involve significant expenses. Furthermore, the market for defaulted
commercial mortgage loans or foreclosed properties may be very limited.
At any one time, a portfolio of CMBS Securities may be backed by mortgage loans with disproportionately
large aggregate principal amounts secured by properties in only a few states or regions. As a result, the mortgage
loans may be more susceptible to geographic risks relating to such areas, such as adverse economic conditions,
adverse events affecting industries located in such areas and natural hazards affecting such areas, than would be the
case for a pool of mortgage loans having more diverse property locations.
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Each underlying commercial mortgage loan in an issue of CMBS Securities may have a balloon payment
due on its maturity date. Balloon mortgage loans involve a greater risk to a lender than fully-amortizing loans,
because the ability of a borrower to pay such amount will normally depend on its ability to obtain refinancing of the
related mortgage loan or sell the related mortgaged property at a price sufficient to permit the borrower to make the
balloon payment, which will depend on a number of factors prevailing at the time such refinancing or sale is
required, including, without limitation, the strength of the commercial real estate markets, tax laws, the financial
situation and operating history of the underlying property, interest rates and general economic conditions. If the
borrower is unable to make such balloon payment, the related issue of CMBS Securities may experience losses.
Prepayments on the underlying commercial mortgage loans in an issue of CMBS Securities will be
influenced by the prepayment provisions of the related mortgage notes and may also be affected by a variety of
economic, geographic and other factors, including the difference between the interest rates on the underlying
mortgage loans (giving consideration to the cost of refinancing) and prevailing mortgage rates and the availability of
refinancing. In general, if prevailing interest rates fall significantly below the interest rates on the related mortgage
loans, the rate of prepayment on the underlying mortgage loans would be expected to increase. Conversely, if
prevailing interest rates rise to a level significantly above the interest rates on the related mortgages, the rate of
prepayment would be expected to decrease. Prepayments could reduce the yield received on the related issue of
CMBS Securities.
Additional risks may be presented by the type and use of a particular commercial property. For instance,
commercial properties that operate as hospitals and nursing homes may present special risks to lenders due to the
significant governmental regulation of the ownership, operation, maintenance and financing of health care
institutions. Hotel and motel properties are often operated pursuant to franchise, management or operating
agreements which may be terminable by the franchisor or operator; and the transferability of a hotel's operating,
liquor and other licenses upon a transfer of the hotel, whether through purchase or foreclosure, is subject to local law
requirements.
Furthermore, a commercial property may not readily be converted to an alternative use in the event that the
operation of such commercial property for its original purpose becomes unprofitable for any reason. In such cases,
the conversion of the commercial property to an alternative use would generally require substantial capital
expenditures. Thus, if the borrower becomes unable to meet its obligations under the related commercial mortgage
loan, the liquidation value of any such commercial property may be substantially less, relative to the amount
outstanding on the related commercial mortgage loan, than would be the case if such commercial property were
readily adaptable to other uses.
In addition, structural and legal risks of CMBS Securities include the possibility that, in a bankruptcy or
similar proceeding involving the originator or the servicer (often the same entity or affiliates), the assets of the issuer
could be treated as never having been truly sold by the originator to the issuer and could be substantively
consolidated with those of the originator, or the transfer of such assets to the issuer could be voided as a fraudulent
transfer. Challenges based on such doctrines could result in cash flow delays and losses on the related issue of
CMBS Securities.
It is expected that some of the CMBS Securities owned by the Issuer and pledged as part of the Applicable
Collateral will be subordinated to one or more other senior classes of securities of the same series for purposes of,
among other things, offsetting losses and other shortfalls with respect to the related underlying mortgage loans. In
addition, in the case of certain CMBS Securities, no distributions of principal will generally be made with respect to
any class until the aggregate principal balances of the corresponding senior classes of securities have been reduced
to zero. As a result, the subordinate classes are more sensitive to risk of loss and writedowns than senior classes of
such securities.
Successful management and operation of the related business (including property management decisions
such as pricing, maintenance and capital improvements) will have a significant impact on performance of
commercial mortgage loans. Issues such as tenant mix, success of tenant business, property location and condition,
competition, taxes and other operational expenses, general economic conditions, governmental rules, regulations and
fiscal policies, environmental issues and insurance coverage are among the factors that may impact both
performance and market value.
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CMBS Securities may have structural characteristics that distinguish them from other Asset-Backed
Securities. The rate of interest payable on CMBS Securities may be set or effectively capped at the weighted
average net coupon of the underlying mortgage loans themselves, often referred to as an "available funds cap." As a
result of this cap, the return to investors is dependent on the relative timing and rate of delinquencies and
prepayments of mortgage loans bearing a higher rate of interest. In general, early prepayments will have a greater
impact on the yield to investors. Federal and state law may also affect the return to investors by capping the interest
rates payable by certain mortgagors. Many of the CMBS Securities which the Issuer may purchase and pledge as
part of the Applicable Collateral are subject to available funds caps or other caps on the interest rate payable to
holders of such securities. The effect of such caps is to reduce the rate at which interest is paid to the holders of
such securities (including the Issuer), which would have an adverse effect on the Issuer's ability to make
distributions on the Athena Series 2008-1 Notes.
Residential Mortgage-Backed Securities.
A portion of the asset-backed securities acquired by the Issuer may consist of residential mortgage-backed
securities. Holders of RMBS bear various risks, including credit, market, interest rate, structural and legal risks.
RMBS are, generally, ownership or participation interests in pools of residential mortgage loans secured by one- to
four- family residential properties. Such loans may be prepaid at any time. RMBS are subject to various risks.
Credit risk arises from losses due to defaults by the borrowers in the underlying collateral and the servicer's failure
to perform. Residential mortgage loans are obligations of the borrowers thereunder only and are not typically
insured or guaranteed by any other person or entity. Distributions on the RMBS will depend solely upon the amount
and timing of payments and other collections on the related underlying mortgage loans. The rate of defaults and
losses on residential mortgage loans will be affected by a number of factors, including general economic conditions,
particularly those in the area where the related mortgaged property is located, the borrower's equity in the mortgaged
property and the financial circumstances of the borrower. If a residential mortgage loan is in default, foreclosure of
such residential mortgage loan may be a lengthy and difficult process, and may involve significant expenses.
Furthermore, the market for defaulted residential mortgage loans or foreclosed properties may be very limited. At
any one time, a portfolio of RMBS may be backed by residential mortgage loans with disproportionately large
aggregate principal amounts secured by properties in only a few states or regions. As a result, the residential
mortgage loans may be more susceptible to geographic risks relating to such areas, such as adverse economic
conditions, adverse events affecting industries located in such areas and natural hazards affecting such areas, than
would be the case for a pool of mortgage loans having more diverse property locations. In addition, the residential
mortgage loans may include so-called "jumbo" mortgage loans, having original principal balances that are higher
than the Fannie Mae and Freddie Mac loan balance limitations. As a result, such portfolio of RMBS may experience
increased losses.
Each underlying residential mortgage loan in an issue of RMBS may have a balloon payment due on its
maturity date. Balloon residential mortgage loans involve a greater risk to a lender than fully-amortizing loans,
because the ability of a borrower to pay such amount will normally depend on its ability to obtain refinancing of the
related mortgage loan or sell the related mortgaged property at a price sufficient to permit the borrower to make the
balloon payment, which will depend on a number of factors prevailing at the time such refinancing or sale is
required, including, without limitation, the strength of the residential real estate markets, tax laws, the financial
situation and operating history of the underlying property, interest rates and general economic conditions. If the
borrower is unable to make such balloon payment, the related issue of RMBS may experience losses.
RMBS are susceptible to prepayment risks as they generally do not contain prepayment penalties and a
reduction in interest rates will increase the prepayments on the RMBS resulting in a reduction in yield to maturity
for holders of such securities. Prepayments on the underlying residential mortgage loans in an issue of RMBS will
be influenced by the prepayment provisions of the related mortgage notes and may also be affected by a variety of
economic, geographic and other factors, including the difference between the interest rates on the underlying
residential mortgage loans (giving consideration to the cost of refinancing) and prevailing mortgage rates and the
availability of refinancing. In general, if prevailing interest rates fall significantly below the interest rates on the
related residential mortgage loans, the rate of prepayment on the underlying residential mortgage loans would be
expected to increase. Conversely, if prevailing interest rates rise to a level significantly above the interest rates on
the related mortgages, the rate of prepayment would be expected to decrease. Prepayments could reduce the yield
received on the related issue of RMBS.
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In addition, structural and legal risks of RMBS include the possibility that, in a bankruptcy or similar
proceeding involving the originator or the servicer (often the same entity or affiliates), the assets of the issuer could
be treated as never having been truly sold by the originator to the issuer and could be substantively consolidated
with those of the originator, or the transfer of such assets to the issuer could be voided as a fraudulent transfer.
Challenges based on such doctrines could result in cash flow delays and losses on the related issue of RMBS.
RMBS may have structural characteristics that distinguish them from other Asset-Backed Securities. The
rate of interest payable on RMBS directly or synthetically held by the Issuer may be set or effectively capped at the
weighted average net coupon of the underlying mortgage loans themselves, often referred to as an "available funds
cap." As a result of this cap, the return to the Issuer on such RMBS is dependent on the relative timing and rate of
delinquencies and prepayments of mortgage loans bearing a higher rate of interest. In general, early prepayments
will have a greater negative impact on the yield to the Issuer on such RMBS. Federal and state law may also affect
the return to investors by capping the interest rates payable by certain mortgagors (including hard caps and lifetime
caps). Many of the RMBS which the Issuer may purchase are subject to such available funds caps or other caps on
the interest rate payable to holders of such securities. The effect of such caps is to reduce the rate at which interest
is paid to the holders of such securities (including the Issuer), which would have an adverse effect on the Issuer's
ability to make distributions on the Athena Series 2008-1 Notes. Furthermore, RMBS often are in the form of
certificates of beneficial ownership of the underlying mortgage loan pool. These securities are entitled to payments
provided for in the underlying agreement only when and if funds are generated by the underlying mortgage loan
pool. The likelihood of the return of interest and principal may be assessed as a credit matter. However,
securityholders do not have the legal status of secured creditors, and cannot accelerate a claim for payment on their
securities, or force a sale of the mortgage loan pool in the event that insufficient funds exist to pay such amounts on
any date designated for such payment. The sole remedy available to such securityholders would be removal of the
servicer of the mortgage loans.
RMBS may be subordinated to one or more other senior classes of securities of the same series for
purposes of, among other things, offsetting losses and other shortfalls with respect to the related underlying
mortgage loans. In addition, in the case of certain RMBS, no distributions of principal will generally be made with
respect to any class until the aggregate principal balances of the corresponding senior classes of securities have been
reduced to zero. As a result, the subordinate classes are more sensitive to risk of loss and writedowns than senior
classes of such securities.
Residential mortgage loans in an issue of RMBS may be subject to various federal and state laws, public
policies and principles of equity that protect consumers, which among other things may regulate interest rates and
other charges, require certain disclosures, require licensing of originators, prohibit discriminatory lending practices,
regulate the use of consumer credit information and regulate debt collection practices. Violation of certain
provisions of these laws, public policies and principles may limit the servicer's ability to collect all or part of the
principal of or interest on a mortgage loan, entitle the borrower to a refund of amounts previously paid by it, or
subject the servicer to damages and sanctions. Any such violation could result also in cash flow delays and losses
on the related issue of RMBS. Federal and state law may also affect the return to investors by capping the interest
rates payable by certain mortgagors. The Servicemembers Civil Relief Act of 2003 provides relief for soldiers and
members of the reserve called to active duty by capping the interest rates on their mortgage loans at 6% per annum.
Legal risks can arise as a result of the procedures followed in connection with the origination of the
mortgage loans or the servicing thereof which may be subject to various federal and state laws, public policies and
principles of equity that protect consumers, which among other things may regulate interest rates and other charges,
require certain disclosures, require licensing of originators, prohibit discriminatory lending practices, regulate the
use of consumer credit information and debt collection practices and may limit the servicer's ability to collect all or
part of the principal of or interest on a residential mortgage loan, entitle the borrower to a refund of amounts
previously paid by it or subject the servicer to damages and sanctions. Any such violation could also result in cash
flow delays and losses on the related issue of RMBS. In addition, structural and legal risks of RMBS include the
possibility that, in a bankruptcy or similar proceeding involving the originator or the servicer (often the same entity
or affiliates), the assets of the issuer could be treated as never having been truly sold by the originator to the issuer
and could be substantively consolidated with those of the originator, or the transfer of such assets to the issuer could
be voided as a fraudulent transfer. Challenges based on such doctrines could result also in cash flow delays and
losses on the related issue of RMBS.
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In some cases, liability of a lender under a mortgage loan may affect subsequent assignees of such
obligations, including the issuer of an RMBS. In particular in the case of RMBS originated in the United States, a
lender's failure to comply with the Truth in Lending Act could subject such lender and its assignees to monetary
penalties and could result in rescission. Numerous class action lawsuits have been filed in multiple states alleging
violations of these statutes and seeking damages, rescission and other remedies. These suits have named the
originators and current and former holders, including the issuers of related RMBS. If an issuer of RMBS included in
the Collateral were to be named as a defendant in a class action lawsuit, the costs of defending or settling such
lawsuit or a judgment could reduce the amount available for distribution on the related RMBS. In such event, the
Issuer, as holder of such RMBS, could suffer a loss.
Some of the RMBS originated in the United States may be backed by non-conforming mortgage loans,
mortgage loans that do not qualify for purchase by government-sponsored agencies such as Fannie Mae and Freddie
Mac due to credit characteristics that do not satisfy Fannie Mae and Freddie Mac guidelines, including loans to
mortgagors whose creditworthiness and repayment ability do not satisfy Fannie Mae and Freddie Mac underwriting
guidelines and loans to mortgagors who may have a record of credit write-offs, outstanding judgments, prior
bankruptcies and other negative credit events. Accordingly, non-conforming mortgage loans are likely to
experience rates of delinquency, foreclosure and loss that are higher, and that may be substantially higher, than
mortgage loans originated in accordance with Fannie Mae or Freddie Mac underwriting guidelines. The majority of
mortgage loans made in the United States qualify for purchase by government-sponsored agencies. The principal
differences between conforming mortgage loans and non-conforming mortgage loans include the applicable loan-tovalue ratios, the credit and income histories of the related mortgagors, the documentation required for approval of
the related mortgage loans, the types of properties securing the mortgage loans, the loan sizes and the mortgagors'
occupancy status with respect to the mortgaged properties. As a result of these and other factors, the interest rates
charged on non-conforming mortgage loans are often higher than those charged for conforming mortgage loans.
The combination of different underwriting criteria and higher rates of interest may also lead to higher delinquency,
foreclosure and losses on non-conforming mortgage loans as compared to conforming mortgage loans.
Violations of consumer protection laws may result in losses on Consumer Protected Securities. Applicable
state laws generally regulate interest rates and other charges require licensing of originators and require specific
disclosures and foreign jurisdictions may have similar requirements. In addition, other state laws, public policy and
general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt
collection practices may apply to the origination, servicing and collection of the loans backing Home Equity Loan
Securities, Prime Residential Mortgage Securities, Subprime Residential Mortgage Securities and Manufactured
Housing Securities (collectively, "Consumer Protected Securities"). Depending on the provisions of the applicable
law and the specific facts and circumstances involved, violations of these laws, policies and principles may limit the
ability of the issuer of a Consumer Protected Security to collect all or part of the principal of or interest on the
underlying loans, may entitle a borrower to a refund of amounts previously paid and, in addition, could subject the
owner of a mortgage loan to damages and administrative enforcement.
The mortgage loans originated in the United States are also subject to federal laws, including:
(1)
the Federal Truth in Lending Act and Regulation Z promulgated under the Truth in Lending Act,
which require particular disclosures to the borrowers regarding the terms of the loans;
(2)
the Equal Credit Opportunity Act and Regulation B promulgated under the Equal Credit
Opportunity Act, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national
origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the
extension of credit;
(3)
the Americans with Disabilities Act, which, among other things, prohibits discrimination on the
basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or
accommodations of any place of public accommodation;
(4)
the Fair Credit Reporting Act, which regulates the use and reporting of information related to the
borrower's credit experience;
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(5)
cost loans;
the Home Ownership and Equity Protection Act of 1994, which regulates the origination of high
(6)
the Depository Institutions Deregulation and Monetary Control Act of 1980, which preempts
certain state usury laws; and
(7)
the Alternative Mortgage Transaction Parity Act of 1982, which preempts certain state lending
laws which regulate alternative mortgage transactions.
In addition to the laws described above in the United States, a number of legislative proposals have been
introduced at both the federal, state and municipal level that are designed to discourage predatory lending practices.
Some states have enacted, or may enact, laws or regulations that prohibit inclusion of some provisions in mortgage
loans that have mortgage rates or origination costs in excess of prescribed levels, and require that borrowers be
given certain disclosures prior to the consummation of such mortgage loans. In some cases, state law may impose
requirements and restrictions greater than those in the Home Ownership and Equity Protection Act of 1994. An
originator's failure to comply with these laws could subject the issuer of a Consumer Protected Security to monetary
penalties and could result in the borrowers rescinding the loans underlying such Consumer Protected Security.
Violations of particular provisions of these federal laws may limit the ability of the issuer of a Consumer
Protected Security to collect all or part of the principal of or interest on the loans and in addition could subject such
issuer to damages and administrative enforcement. In this event, the Issuer, as a holder of the Consumer Protected
Security, may suffer a loss.
In some cases, liability of a lender under a mortgage loan may affect subsequent assignees of such
obligations, including the issuer of a Consumer Protected Security. In particular, a lender's failure to comply with
the Federal Truth in Lending Act could subject such lender and its assignees to monetary penalties and could result
in rescission. Numerous class action lawsuits have been filed in multiple states alleging violations of these statutes
and seeking damages, rescission and other remedies. These suits have named the originators and current and former
holders, including the issuers of related Consumer Protected Securities. If an issuer of a Consumer Protected
Security included in the applicable Collateral were to be named as a defendant in a class action lawsuit, the costs of
defending or settling such lawsuit or a judgment could reduce the amount available for distribution on the related
Consumer Protected Security. In such event, the Issuer, as holder of such Consumer Protected Security, could suffer
a loss.
Some of the mortgages loans backing a Consumer Protected Security may have been underwritten with,
and finance the cost of, credit insurance. From time to time, originators of mortgage loans that finance the cost of
credit insurance have been named in legal actions brought by federal and state regulatory authorities alleging that
certain practices employed relating to the sale of credit insurance constitute violations of law. If such an action were
brought against such issuer with respect to mortgage loans backing such Consumer Protected Security and were
successful, it is possible that the borrower could be entitled to refunds of amounts previously paid or that such issuer
could be subject to damages and administrative enforcement.
In addition, numerous federal and state statutory provisions, including the federal bankruptcy laws, the
Servicemembers' Civil Relief Act of 2003, as amended and state debtor relief laws, may also adversely affect the
ability of an issuer of a Consumer Protected Security to collect the principal of or interest on the loans, and holders
of the affected Consumer Protected Securities may suffer a loss if the applicable laws result in these loans becoming
uncollectible.
Insolvency Considerations With Respect to Issuers of Portfolio Investments May Affect the Issuer's Rights.
Various laws enacted for the protection of creditors may apply to the Series Applicable Investments. The
information in this and the following paragraph is applicable with respect to U.S. issuers. Insolvency considerations
will differ with respect to non-U.S. issuers. If a court in a lawsuit brought by an unpaid creditor or representative of
creditors of an issuer of a Series Applicable Investment, such as a trustee in bankruptcy, were to find that the issuer
did not receive fair consideration or reasonably equivalent value for incurring the indebtedness constituting such
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Series Applicable Investment and, after giving effect to such indebtedness, the issuer (i) was insolvent, (ii) was
engaged in a business for which the remaining assets of such issuer constituted unreasonably small capital or (iii)
intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, such
court could determine to invalidate, in whole or in part, such indebtedness as a fraudulent conveyance, to
subordinate such indebtedness to existing or future creditors of the issuer or to recover amounts previously paid by
the issuer in satisfaction of such indebtedness. The measure of insolvency for purposes of the foregoing will vary.
Generally, an issuer would be considered insolvent at a particular time if the sum of its debts were then greater than
all of its property at a fair valuation or if the present fair salable value of its assets were then less than the amount
that would be required to pay its probable liabilities on its existing debts as they became absolute and matured.
There can be no assurance as to what standard a court would apply in order to determine whether the issuer was
"insolvent" after giving effect to the incurrence of the indebtedness constituting the Portfolio Investments or that,
regardless of the method of valuation, a court would not determine that the issuer was "insolvent" upon giving effect
to such incurrence. In addition, in the event of the insolvency of an issuer of a Series Applicable Investment,
payments made on such Portfolio Investments could be subject to avoidance as a "preference" if made within a
certain period of time (which may be as long as one year under federal bankruptcy law or even longer under state
laws) before insolvency.
In general, if payments on Series Applicable Investments are avoidable, whether as fraudulent conveyances
or preferences, such payments can be recaptured either from the initial recipient (such as the Issuer) or from
subsequent transferees of such payments (such as the Noteholders). To the extent that any such payments are
recaptured from the Issuer, the resulting loss will be borne by Noteholders. However, a court in a bankruptcy or
insolvency proceeding would be able to direct the recapture of any such payment from Noteholders only to the
extent that such court has jurisdiction over such holder or its assets. Moreover, it is likely that avoidable payments
could not be recaptured directly from a holder that has given value in exchange for its note, in good faith and
without knowledge that the payments were avoidable. Nevertheless, since there is no judicial precedent relating to a
structured transaction such as the Notes, there can be no assurance that a Noteholder will be able to avoid recapture
on this or any other basis.
International Investing.
A portion of the Portfolio Investments may consist of obligations of an issuer located in a Special Purpose
Vehicle Jurisdiction or obligations of a Qualifying Foreign Obligor. Moreover, subject to compliance with certain
of the Investment Guidelines for each Series of Notes, collateral securing Asset-Backed Securities may consist of
obligations of issuers or borrowers organized under the laws of various jurisdictions other than the United States.
Investing outside the United States may involve greater risks than investing in the United States. These risks may
include: (i) less publicly available information; (ii) varying levels of governmental regulation and supervision; (iii)
the difficulty of enforcing legal rights in a foreign jurisdiction and uncertainties as to the status, interpretation and
application of laws therein; (iv) risks of economic dislocations in such other country; and (v) less data on historic
default and recovery rates for the Portfolio Investments. 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. Delays in settlement could result in periods when assets of the Issuer are uninvested
and no return is earned thereon. The inability of the Issuer to make intended Portfolio Investment acquisitions due
to settlement problems or the risk of intermediary counterparty failures could cause the Issuer to miss investment
opportunities. The inability to dispose of a Portfolio Investment due to settlement problems could result either in
losses to the Issuer due to subsequent declines in the value of such Portfolio Investment or, if the Issuer has entered
into a contract to sell the security, could result in possible liability to the purchaser. Transaction costs of buying and
selling foreign securities, including brokerage, tax and custody costs, also are generally higher than those involved
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in domestic transactions. Furthermore, foreign financial markets, while generally growing in volume, have, for the
most part, substantially less volume than U.S. markets, and securities of many foreign companies are less liquid and
their prices more volatile than securities of comparable domestic companies.
In 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.
Series of Notes.
The existence of the other Series of Notes being issued by the Issuer presents certain risks to the
Noteholders. There can be no assurance that the Issuer will issue such other Series of Notes, in which event these
Noteholders will bear additional expenses resulting from the structure. The Issuer will incur expenses and liabilities
which will be paid by the Issuer prior to making distributions on this Note. The other Series issued by the Issuer in
the future pursuant to the Master Indenture may be issued on terms different from the terms described herein. To the
extent that such Series have interests in the same Asset Pools as this Series, the Investment Guidelines with respect
to such other series may adversely affect the investments that the Investment Manager would otherwise be able to
make on behalf of the Notes. Early redemption on the other Series of Notes and other events may also effect, at
least temporarily, the Asset Pools in which this Series will be invested. In the event of an Event of Default under
this or another Series, minimum denominations may prevent segregation with respect to certain Portfolio
Investments between the this Series and such other Series, with adverse effect to the holders of the these Notes.
M. ISSUANCE OF ADDITIONAL NOTES OF THE SERIES
M1
Issuance of Additional
Notes:
Permitted (in accordance with the Master Indenture and the
Terms and Conditions) with respect to the issuance of Notes of
Athena Series 2008-1 to any additional investors after the date
hereof.
M2
Specified
Denominations:
Applicable.
M3
Schedule of Payments:
Not applicable.
M4
Other:
Not applicable.
N. SCHEDULES AND APPENDICES
N1
(i)
Date
Drawdown and
Redemption Schedule:
Drawdown
Amount
A schedule showing the sequence of Drawdowns on a
Commitment basis and redemptions in each currency on the
Athena Series 2008-1 Note.
Drawdown Principal
Amount
A-36
Redemption
Amount
Redemption
Price
Comment
N2
Schedule of Auction
Procedures:
The following sets forth the auction procedures (the "Auction Procedures") to be followed in connection with an
auction of the assets (an "Auction"):
A.
Pre-Auction Process
(a)
The Trustee will initiate the Auction Procedures at least 24 Business Days prior to the date of the
commencement of each Auction (the "Auction Date") by:
(i)
with the assistance of the Investment Manager, preparing a list containing the names of
the issuer and guarantor (if any), the par amount and the CUSIP number (if any) with respect to each Series
Allocated Investment and such other information as shall be notified to the Trustee by the Investment Manager;
(ii)
delivering a list of the constituents of each subpool received from the Investment
Manager as described in subparagraph (b) below, which the Investment Manager shall prepare based upon the
Investment Manager's good faith determination of the composition of subpools that will maximize sale proceeds;
provided that the maximum number of subpools shall be eight and if the Trustee has not received such list from the
Investment Manager at least 24 Business Days prior to the relevant Auction Date, the Trustee shall be entitled to
assume that the Series Allocated Investments will not be divided into subpools for the purposes of the relevant
Auction; and
(iii)
sending the lists prepared pursuant to clauses (i) and (ii) above to the Qualified Bidders
identified on the then-current Qualified Bidder List (the "Qualified Bidders") and requesting bids on the Auction
Date.
(b)
The general solicitation package (prepared in consultation with the Investment Manager) which
the Trustee shall deliver to the Qualified Bidders will include: (i) a form of a purchase agreement provided to the
Trustee by the Investment Manager (which shall, among other things, provide that (A) upon satisfaction of all
conditions precedent therein, the purchaser is irrevocably obligated to purchase, and the Issuer is irrevocably
obligated to sell, the Series Allocated Investments (or relevant subpool, as the case may be) on the date and on the
terms and conditions set forth therein and (B) if the subpools are to be sold to more than one Qualified Bidder, the
consummation of the purchase of each subpool must occur simultaneously and the closing of each purchase is
conditional on the closing of each of the other purchases); (ii) the minimum purchase price (as determined solely by
the Investment Manager); (iii) a formal bidsheet (which shall permit the relevant Qualified Bidder to bid for all of
the Series Allocated Investments, any subpool or separately for each of the subpools) provided to the Trustee by the
Investment Manager including a representation from the Qualified Bidder that it is eligible to purchase all of the
Series Allocated Investments; (iv) a detailed timetable; and (v) copies of all transfer documents provided to the
Trustee by the Investment Manager (including transfer certificates and subscription agreements which a Qualified
Bidder must execute pursuant to the Underlying Instruments and a list of the requirements which the Qualified
Bidder must satisfy under the Underlying Instruments (i.e., Qualified Institutional Buyer, Qualified Purchaser, etc.)).
(c)
The Trustee shall send solicitation packages to all Qualified Bidders at least 15 Business Days
before the Auction Date. No later than 10 Business Days before the Auction Date, Qualified Bidders may submit
written due diligence questions relating to the legal documentation and other information contained in the general
solicitation package (including comments on the draft purchase agreement to be used in connection with the Auction
(the "Auction Purchase Agreement")) to the Investment Manager; provided that the Investment Manager shall only
be obligated to answer questions relating to the Collateral to the extent that it is able to do so by reference to
information which it is required to provide under the Management Agreement. The Investment Manager shall be
solely responsible for (i) responding to all relevant questions and/or comments submitted to it in accordance with the
foregoing and (ii) distributing the questions, answers and revised final Auction Purchase Agreement to all Qualified
Bidders at least five Business Days prior to the Auction Date.
A-37
(d)
To the extent that the information contained in the list of Series Allocated Investments or general
solicitation package delivered to the Qualified Bidders pursuant to clauses (a), (b) and (c) above is provided to the
Trustee by the Investment Manager for inclusion in the information delivered to the Qualified Bidders and is not
true or accurate in any material respect or is misleading in any material respect, the Investment Manager shall
indemnify the Trustee and its officers, directors, employees and agents for, and hold them harmless against, any
loss, liability or expense (including reasonable counsel fees and expenses) incurred without negligence, willful
misconduct or bad faith on their part, as a result of such information provided by the Investment Manager to the
Trustee, including the costs and expenses of defending themselves against any claim or liability in connection with
the exercise or performance of any of their powers or duties hereunder.
B.
Auction Process
(a)
The Investment Manager will be allowed to bid in the Auction if it deems appropriate, but will not
be required to do so.
(b)
On the Auction Date, all bids will be due by facsimile to the Trustee with a copy to the Investment
Manager by 11:00 a.m.(in the city in which such Auction is conducted), with the winning bidder to be notified by
2:00 p.m. (in the city in which such Auction is conducted). All bids from Qualified Bidders will be due on the bid
sheet contained in the solicitation package. Each bid shall be for the purchase and delivery to one purchaser of (i)
all (but not less than all) of the Series Allocated Investments or (ii) all (but not less than all) of the Series Allocated
Investments that constitute the components of one or more subpools.
(c)
Unless otherwise directed by the Investment Manager in its reasonable judgment, if the Trustee
receives fewer than two bids from Qualified Bidders to purchase all of the Series Allocated Investments or to
purchase each subpool, the Trustee shall decline to consummate the sale.
(d)
Subject to clause (c), the Investment Manager shall select as the winning bidder the bid or bids
that result in the Highest Auction Price (in excess of the minimum purchase price as determined solely by the
Investment Manager) from one or more Qualified Bidders and shall notify the Trustee by 1:00 p.m. (in the city in
which Auction is conducted).
(e)
Upon notification to the winning bidder(s), the winning bidder (or, if the Highest Auction Price
requires the sale of subpools to more than one bidder, each winning bidder) will be required to deliver to the Trustee
a signed counterpart of the Auction Purchase Agreement and a good faith deposit equal to one percent (1%) of the
Aggregate Principal Balance will be required to be wired to the Trustee no later than 4:00 p.m. New York City time
on the Auction Date. If the Highest Auction Price requires the sale of subpools to more than one bidder, each
winning bidder shall contribute to the good faith deposit requested by the preceding sentence an amount equal to one
percent (1%) of the Aggregate Principal Balance of the subpool or subpools to which its bid relates. Such deposit
will not be invested. This deposit will be credited to the purchase price but will not be refundable. The Trustee will
establish a separate account for the acceptance of the good faith deposit, until such time as the winning bidder (or, if
the Highest Auction Price requires the sale of subpools to more than one bidder, each winning bidder) pays the full
purchase price in Cash, at which time all Cash will be transferred into the Collection Accounts, such payment in full
of the purchase price to be made by the winning bidder prior to the sixth Business Day following the relevant
Auction Date. If such good faith deposit or payment in full of the purchase price is not made when due (or, if the
subpools are to be sold to more than one bidder, if any bidder fails to make its contribution to the good faith deposit
or make payment of the purchase price when due), the Trustee shall decline to consummate the sale of each subpool
and shall give notice (in accordance with Section 7 of the Master Indenture) that the Auction will not occur.
(f)
Notwithstanding the foregoing, the Investment Manager, although it may not have been the
highest bidder, will have the option to purchase the Series Allocated Investments (or any subpool) for a purchase
price equal to the highest bid therefor.
A-38
(g)
Definitions.
"Eligible Currency": Means each of U.S. Dollars ($, USD or Dollars), Euros (€ or EUR) or Pounds
Sterling (£ or GBP).
"Highest Auction Price": Means, with respect to an optional redemption as a result of an Auction, the
greater of (a) the highest price bid by any Qualified Bidder for all of the Series Allocated Investments and (b) the
sum of the highest prices bid by one or more Qualified Bidders for each subpool. In each case, the price bid by a
Qualified Bidder shall be the amount in each Eligible Currency that the Investment Manager certifies to the Trustee
based on the Investment Manager's review of the bids, which certification shall be binding and conclusive.
"Qualified Bidder": Means the Persons whose names appear from time to time on the Qualified Bidder List.
"Qualified Bidder List": Means a list of not less than three and not more than eight Persons prepared by the
Investment Manager and delivered to the Trustee at least two Business Days prior to such Auction Date; provided
that notice will be provided to the Noteholders at the time of the commencement of the Auction Procedures and the
Noteholders shall have the right to specify, within 10 Business Days of the date of such notice, one or more Persons
(including any Noteholder) to be included in such Qualified Bidder List.
A-39
N3
To:
Form of Drawdown
Notice:
[Name of Applicable Holder of the Athena Series 2008-1 Notes]
[Address]
Re:
Athena Series 2008-1
Ladies and Gentlemen:
Reference is made to: (i) the Master Indenture dated as of August 18, 2006 (including the Terms and
Conditions) among Pantheon Master Fund plc, as Issuer, Wilmington Trust Company, as Trustee, Custodian,
Account Bank, Registrar, Paying Agent and Transfer Agent, and Wilmington Trust Conduit Services, as Collateral
Administrator, as supplemented by the Athena Series 2008-1 Supplement dated as of May 16, 2008 (together, the
Indenture") and (ii) the Investor Commitment Letter dated as of [
], 20[ ] (the "Commitment Letter")
between the investor and the Issuer. Capitalized terms used herein but not defined herein shall have the meanings
set forth in the Indenture. This Drawdown Notice is being delivered to you pursuant to Section B6 of the Athena
Series 2008-1 Supplement.
The undersigned has determined that a Drawdown will take place on [
requested to provide funds in the amount of $[
].
], 20[ ]. You are hereby
The Series Net Asset Value (or such higher value as agreed upon by the Holder) [as of the date hereof is
$[
]][will be provided at a later date]. The Drawdown Principal Amount [as of the date hereof is $[
]][will
be provided at a later date]. The Noteholder Principal Amount following the payment of this Drawdown will be
[$[
]][provided at a later date].
Delivery of the Drawdown amount set forth above should be made to the following account of the Issuer
before 10:00 a.m., New York City time, on [
], 20[ ]:
Bank:
ABA:
Account Name:
Account No.:
Further Credit:
Re:
Attn:
[
]
[
]
[
]
[
]
[
]
Athena Series 2008-1
[
]
If you fail to fund the Drawdown amount by the date stated above you will be in breach of your
Commitment Letter.
Dated: [
], 20[ ]
Wilmington Trust Conduit
Administrator,
acting on behalf of the Issuer
Services,
as
By: ___________________________________
Authorized Signatory
Print Name Here
A-40
Collateral
CC: Prytania Investment Adviosrs LLP
Plantation Place South, 6th Floor
60 Great Tower Street
London EC3R 5AZ
UK
Attention: Mid Office
Fax: +44 20 7015 8851
A-41
N4
Form of Redemption
Request Notice:
Direction of Holder of Athena Series 2008-1 Notes
under Section 15(e) of the Terms and Conditions and
Section F7 of the Series Supplement
________________, 20__
TO:
Pantheon Master Fund plc
5 Harbourmaster Place
IFSC
Dublin
Ireland
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: CDO Services
Fax: (646) 808-3990
CC:
Wilmington Trust Conduit Services
591 Broadway, 2nd Floor
New York, New York 10012
Attention: Sergio Godinho
Fax: (212) 941-4434
Attention:
Prytania Investment Advisors LLP
6th Floor, Plantation Place South
60 Great Tower Street
London, EC3R 5AZ
UK
United Kingdom
Dear Sir or Madam:
Reference is made hereby to the Master Indenture dated as of August 18, 2006 (including the Terms and
Conditions) among Pantheon Master Fund plc, as Issuer, Wilmington Trust Company, as Trustee, Custodian,
Account Bank, Registrar, Paying Agent and Transfer Agent, and Wilmington Trust Conduit Services, as Collateral
Administrator, as supplemented by the Athena Series 2008-1 Supplement dated as of May 16, 2008 (together, the
Indenture"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the
Indenture.
Pursuant to Section F7 of the Series Supplement, the undersigned, the Holder of $____________ Athena
Series 2008-1 Notes, CUSIP No.: _____________, held in the name _____________________________, hereby
notifies the Issuer and the Trustee that it wishes to direct the Issuer to optionally redeem ______% of its Notes,
pursuant to Section F7 of the Series Supplement on the Payment Date in _____________, 20__.
[Name of Holder]
By: ________________________
Name:
Title:
A-42
Annex A – Form of Note
FORM OF ATHENA SERIES 2008-1 NOTE
PANTHEON MASTER FUND PLC
ATHENA SERIES 2008-1 NOTE, DUE 2038
AGGREGATE OUTSTANDING AMOUNT UP TO $1,000,000,000
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE ISSUER HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(THE "INVESTMENT COMPANY ACT"). THE HOLDER HEREOF, BY PURCHASING THE NOTES IN
RESPECT OF WHICH THIS NOTE HAS BEEN ISSUED, AGREES FOR THE BENEFIT OF THE ISSUER
THAT THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (A)(1)
TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT, PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT OR (2)
TO A PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT AND, IN THE CASE OF CLAUSE (1) FOR THE
PURCHASER AND FOR EACH ACCOUNT FOR WHICH IT IS ACTING, TO A PURCHASER THAT (W) IS A
QUALIFIED PURCHASER WITHIN THE MEANING OF SECTION 3(c)(7) OF THE INVESTMENT
COMPANY ACT, (X) WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN THE ISSUER (EXCEPT
WHEN EACH BENEFICIAL OWNER OF THE PURCHASER IS A QUALIFIED PURCHASER), (Y)
UNDERSTANDS AND AGREES THAT THE ISSUERS MAY RECEIVE A LIST OF PARTICIPANTS IN THE
NOTES FROM ONE OR MORE BOOK-ENTRY DEPOSITORIES AND (Z) HAS RECEIVED THE
NECESSARY CONSENT FROM ITS BENEFICIAL OWNERS WHEN THE PURCHASER IS A PRIVATE
INVESTMENT COMPANY FORMED ON OR BEFORE APRIL 30, 1996, AND IN A TRANSACTION THAT
MAY BE EFFECTED WITHOUT LOSS OF ANY APPLICABLE INVESTMENT COMPANY ACT
EXEMPTION OR EXCLUSION, (B) IN A PRINCIPAL AMOUNT OF NOT LESS THAN THE MINIMUM
DENOMINATION SET FORTH IN THE ATHENA SERIES 2008-1 SUPPLEMENT AND (C) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES
OR OTHER APPLICABLE JURISDICTION. ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL
BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO AND WILL NOT OPERATE TO TRANSFER
ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY
TO THE ISSUER OR THE TRUSTEE. EACH TRANSFEROR OF THIS NOTE WILL PROVIDE NOTICE OF
THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND IN THE INDENTURE TO ITS TRANSFEREE.
IN ADDITION TO THE FOREGOING, THE ISSUER MAINTAINS THE RIGHT TO RESELL NOTES
PREVIOUSLY TRANSFERRED TO NON-PERMITTED HOLDERS (AS DEFINED IN THE INDENTURE) IN
ACCORDANCE WITH AND SUBJECT TO THE TERMS OF THE INDENTURE.
INTEREST ON AND 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.
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 INTERNAL
REVENUE CODE OF 1986, AS AMENDED (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-A-1
A "UNITED STATES PERSON" WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE CODE) MAY
RESULT IN U.S. FEDERAL BACK-UP WITHHOLDING FROM PAYMENTS TO THE HOLDER IN RESPECT
OF THIS NOTE.
EACH HOLDER OF THIS NOTE OR INTERESTS HEREIN WILL BE REQUIRED TO MAKE THE
REPRESENTATIONS AND AGREEMENTS SET FORTH IN THE INDENTURE, INCLUDING THE
REPRESENTATION AND AGREEMENT THAT IT IS NOT (A) AN EMPLOYEE BENEFIT PLAN (AS
DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA")) WHICH IS SUBJECT TO TITLE I OF ERISA OR A PLAN (AS DEFINED IN SECTION
4975(e)(1) OF THE CODE AND SUBJECT TO SECTION 4975 OF THE CODE) OR (B) ANY ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (WITHIN THE MEANING OF 29 C.F.R. § 2510.3-101)
BY REASON OF SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S INVESTMENT IN THE ENTITY OR (C)
A "BENEFIT PLAN INVESTOR" AS SUCH TERM IS OTHERWISE DEFINED IN ANY REGULATIONS
PROMULGATED BY THE U.S. DEPARTMENT OF LABOR UNDER SECTION 3(42) OF ERISA. IF SUCH
HOLDER IS A GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN WHICH IS SUBJECT TO ANY
FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO THE
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, SUCH HOLDER WILL BE
REQUIRED TO REPRESENT THAT ITS PURCHASE, HOLDING AND DISPOSITION OF THIS NOTE WILL
NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION UNDER ANY SUCH SUBSTANTIALLY
SIMILAR LAW. ANY PURPORTED TRANSFER OF THIS NOTE TO A PURCHASER THAT DOES NOT
COMPLY WITH THE ABOVE REQUIREMENTS SHALL BE NULL AND VOID AB INITIO.
A-A-2
ATHENA SERIES 2008-1 NOTE, DUE 2038
AGGREGATE OUTSTANDING AMOUNT UP TO $1,000,000,000
Commitment Amount: U.S.$[
]
Noteholder Principal Amount: As set forth on Schedule I
C-[1]
[144A CUSIP: 69866MAA7][REG S CUSIP: G6901WAA7]
PANTHEON MASTER FUND PLC, a public company with limited liability incorporated under the laws
of Ireland (the "Issuer"), for value received, hereby promises to pay to [
] or its registered assigns, upon
presentation and surrender of this Note (except as otherwise permitted by the Master Indenture hereinafter referred
to), the Noteholder Principal Amount as set forth in the Series Supplement on February 15, 2038 (the "Maturity
Date"), as adjusted upward or downward in accordance with Schedule I as attached hereto, or upon the unpaid
principal of this Note becoming due and payable at an earlier date by declaration of acceleration, call for redemption
or as otherwise provided below and in the Master Indenture dated as of August 18, 2006 among and the Issuer,
Wilmington Trust Company, as Trustee, Custodian, Account Bank, Registrar, Paying Agent and Transfer Agent,
and Wilmington Trust Conduit Services, as Collateral Administrator (the "Master Indenture") or the Athena Series
2008-1 Supplement dated as of May 16, 2008 (the "Series Supplement").
The Issuer promise to make distributions of interest thereon on the 15th calendar day of each February,
May, August and November (or if such day is not a Business Day, the next succeeding Business Day) in each year,
commencing August 2008 and at the Maturity Date on the unpaid principal amount hereof until the principal hereof
is paid or duly provided for in accordance with the Master Indenture and the Series Supplement. Failure to pay such
amounts will not constitute an Event of Default under the Master Indenture or the Series Supplement. All payments
in respect of principal and interest due on any Payment Date of this Note shall be made by the Trustee or any Paying
Agent in accordance with the terms of the Master Indenture and the Series Supplement
The obligations of the Issuer under this Note and the Master Indenture and the Series Supplement are
limited recourse obligations of the Issuer payable solely from the Applicable Collateral pledged by the Issuer to the
Noteholders in accordance with the Priority of Payments, and in the event the Applicable Collateral is insufficient to
satisfy such obligations, any claims of the Noteholders shall be extinguished.
This Note is duly authorized by the Issuer and issued under the Master Indenture.
The Trustee shall, and is hereby authorized to, record the date and amount of each Drawdown in the
Specified Currency and the date and amount of each principal repayment hereunder on the Schedule of Drawdowns
and Redemptions annexed to the Series Supplement and any such recordation shall constitute prima facie evidence
of the accuracy of the amount so recorded; provided that the failure of the Trustee to make such recordation (or any
error in such recordation) shall not affect the obligations of the Issuer hereunder or under the Master Indenture and
the Series Supplement.
Reference is hereby made to the Master Indenture, the Series Supplement and all indentures supplemental
thereto for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Issuer,
the Trustee and the Holders of this Note and the terms upon which this Note is authenticated and delivered.
Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the
Master Indenture and the Series Supplement.
The registered Holder of this Note shall be treated as the owner hereof for all purposes.
A-A-3
Except as specifically provided herein and in the Master Indenture and Series Supplement, the Issuer shall
not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by
any government or any political subdivision or taxing authority thereof or therein.
AS PROVIDED IN THE MASTER INDENTURE AND THE SERIES SUPPLEMENT, THE MASTER
INDENTURE, THE SERIES SUPPLEMENT AND THE NOTES SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED THEREIN.
Unless the certificate of authentication hereon has been executed by the Trustee by the manual signature of
one of its Authorized Officers, this Note shall not be entitled to any benefit under the Master Indenture or the Series
Supplement or be valid or obligatory for any purpose.
A-A-4
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.
Dated ___________________, 2008.
PANTHEON MASTER FUND PLC
By:
Name:
Title:
A-A-5
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Series Supplement.
WILMINGTON TRUST COMPANY
as Trustee
By: ___________________________
Authorized Signatory
A-A-6
ASSIGNMENT FORM
For value received
hereby sells, assigns and transfers unto
Please insert social security or other identifying
number of assignee
Please print or type name and address, including zip
code of assignee:
the within Note and does hereby irrevocably constitute and appoint _________________
Attorney to transfer the Note on the books of the Issuer with full power of substitution in the
premises.
Date:_______________
Your Signature:______________________
(Sign exactly as your name appears
on this Note)
A-A-7
SCHEDULE
Date
Amount of Increase
(Drawdown) in
Noteholder Principal
Amount of this Note
I
Amount of Decrease
(Redemption) in
Noteholder Principal
Amount of this Note
A-A-8
Noteholder Principal
Amount of this
Note following such
Decrease or Increase
Annex B – Form of Noteholder Certificate
As of __________________, 20__
Pantheon Master Fund plc
Deutsche International Corporate Series (Ireland) Limited
5 Harbourmaster Place, IFSC
Dublin 1
Ireland
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: CDO Services
Fax: (646) 808-3990
Wilmington Trust Conduit Services LLC
591 Broadway, 2nd Floor
New York, New York 10012
Attention: Sergio Godinho
Fax: (212) 941-4434
Prytania Investment Advisors LLP
6th Floor, Plantation Place South
60 Great Tower Street
London EC3R 5AZ
United Kingdom
Ladies and Gentlemen:
Reference is hereby made to the Athena Series 2008-1 Notes (the "Notes") issued by Pantheon Master Fund
plc (the "Issuer"), described in the Issuer's Series Supplement dated ___________, 2008 (the "Series Supplement")
and the base offering circular dated August 18, 2006 (the "Base Offering Circular" and, together with the Series
Supplement, the "Offering Circular"). We (the "Purchaser") are purchasing the principal amount of Notes listed on
the signature page hereto. Capitalized terms used and not otherwise defined herein shall have the meanings set forth
in the Offering Circular.
The Purchaser hereby represents and warrants for the benefit of the Issuer, the Investment Manager and the
Trustee that:
1.
The Purchaser is: (PLEASE CHECK ONLY ONE):
(x)
___ a qualified institutional buyer (within the meaning of Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act")), or
(y)
___ not a U.S. person (within the meaning of Regulation S under the Securities Act).
A-B-1
2.
If the Purchaser has indicated in paragraph 1 above that clause (x) applies to the Purchaser, the
Purchaser is a qualified purchaser for the purposes of Section 3(c)(7) of the United States Investment Company Act
of 1940, as amended (the "Investment Company Act").
3.
The Purchaser understands and agrees that:
(i)
the Notes have not been and will not be registered or qualified under the Securities Act or
any applicable state securities laws or the securities laws of any other jurisdiction and the sale of the Notes
to the Purchaser is being made in reliance on an exemption from registration under the Securities Act;
(ii)
in the case of the Notes, the Purchaser is acquiring the Notes (on behalf of itself and any
account for which the Purchaser is acquiring the Notes) in a principal amount of not less than $100,000;
(iii)
the Notes may be reoffered, resold, pledged or otherwise transferred only:
(a)
(I) to a person whom the Purchaser reasonably believes is (x) a qualified
institutional buyer purchasing for its own account or for the account of a qualified institutional
buyer as to which the transferee exercises sole investment discretion in a transaction meeting the
requirements of Rule 144A under the Securities Act, and (y) a qualified purchaser for the purposes
of Section 3(c)(7) of the Investment Company Act or (II) to a person that is not a U.S. person and
is acquiring the Notes in an offshore transaction complying with Rule 903 or Rule 904 of
Regulation S, and
(b)
in accordance with all applicable securities laws of the states of the United
States or the applicable laws of any other jurisdiction;
(iv)
if any U.S. Person that is not (I) a qualified purchaser for the purposes of Section 3(c)(7)
of the Investment Company Act and (II) a qualified institutional buyer within the meaning of Rule 144A of
the Securities Act, shall become the owner of any Notes (any such person, an "Ineligible Holder"), the
Issuer shall, promptly after discovery; it being understood that there is no obligation of investigation or
inquiry on the Trustee, that such Person is an Ineligible Holder by the Issuer or the Trustee (and notice by
the Trustee to the Issuer, if the Trustee makes the discovery), send notice to such Ineligible Holder
demanding that such Ineligible Holder transfer its interest to a Person that is not an Ineligible Holder within
30 days of the date of such notice. If such Ineligible Holder fails to so transfer its Notes, the Issuer shall
have the right, without further notice to the Ineligible Holder, to sell such Notes or interest in such Notes to
a purchaser selected by the Issuer that is not an Ineligible 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 Notes and selling such 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 Note, the Ineligible Holder and each other Person in the chain of title
from the Holder to the Ineligible Holder, by its acceptance of an interest in the Notes, agrees to cooperate
with the Issuer and the Trustee 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 Ineligible Holder. The terms
and conditions of any sale under this subsection shall be determined in the sole discretion of the Issuer, and
neither the Issuer nor the Trustee shall 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.
(v)
each Purchaser of a Note or interests therein represents and agrees that (a) it is not an
Employee Benefit Plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) which is subject to Title I of ERISA or a Plan (as defined in section
4975(e)(1) of the Code and subject to Section 4975 of the Code) or any entity whose underlying assets
include "plan assets" (within the meaning of 29 C.F.R. § 2510.3-101) by reason of such Employee Benefit
Plan's or Plan's investment in the entity a "benefit plan investor" as such term is otherwise defined in any
regulations promulgated by the U.S. Department of Labor under Section 3(42) of ERISA or (b) if it is a
governmental, church, non-U.S. or other Plan which is subject to any federal, state, local or non-U.S. law
that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code, its
A-B-2
purchase, holding and disposition of the Note will not constitute or result in a non-exempt violation under
any such substantially similar law. Any purported transfer of a Note to a Purchaser or transferee that does
not comply with the above requirements shall be null and void ab initio.
(vi)
(a) it and each such account shall not hold the Notes for the benefit of any other person
and shall be the sole beneficial owner thereof for all purposes; and (b) it is acquiring the Notes as principal
for its own account and not for sale in connection with any distribution thereof;
(vii)
the Issuer and the Collateral have not been registered under the Investment Company Act
and, therefore, no transfer of any beneficial interest in any Note or any portion thereof having the effect of
causing the Issuer or the Collateral to be required to be registered as an investment company under the
Investment Company Act will be recognized and any such purported transfer shall be null and void ab
initio and vest in the transferee no rights against the Collateral, the Issuer, the Trustee, any Hedge
Counterparty or any other Agent;
(viii)
the Notes will bear the legends substantially in the forms set forth in the Series
Supplement and are subject to the restrictions on transfer set forth herein, in the Master Indenture, the Base
Offering Circular and in the Notes, respectively;
(ix)
before any interest in a Note may be offered, sold, pledged or otherwise transferred, the
transferee will be required to provide the Trustee with a written certificate containing the representations
substantially in the form of this letter;
(x)
the Purchaser will provide notice of the transfer restrictions set forth herein to any
transferee of its Notes;
(xi)
any purported transfer of the Notes to a purchaser that does not comply with the
requirements of clauses (i) through (x) above shall be null and void ab initio; and
(xii)
to the extent required by the Issuer, as determined by the Issuer or the Investment
Manager on behalf of the Issuer, the Issuer may, upon notice to the Trustee, impose additional transfer
restrictions on the 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 beneficial interest
in a Note to make representations to the Issuer in connection with such compliance.
(xiii)
Executive Orders issued by the President of the United States of America, Federal
regulations administered by the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC")
and other federal laws prohibit, among other things, U.S. persons or persons under the jurisdiction of the
United States from engaging in certain transactions with certain foreign countries, territories, entities and
individuals, and that the lists of prohibited countries, territories, entities and individuals can be found on,
among other places, the OFAC website at www.treas.gov/ofac. Neither the Purchaser nor any of its
Affiliates, owners, directors or officers is, or is acting on behalf of, a country, territory, entity or individual
named on such lists, nor is the purchaser or any of its Affiliates, owners, directors or officers a natural
person or entity with whom dealings are prohibited under any OFAC regulation or other applicable federal
law or acting on behalf of such a natural person or entity.
4.
The Purchaser is not purchasing the Notes with a view toward the resale, distribution or other
disposition thereof in violation of the Securities Act.
5.
The Purchaser understands and agrees that an investment in the Notes involves certain risks,
including the risk of loss of its entire investment in the Notes under certain circumstances. The Purchaser has had
access to such financial and other information concerning the Issuer and the Notes, as it deemed necessary or
appropriate in order to make an informed investment decision with respect to its purchase of the Notes, including an
opportunity to ask questions of, and request information from, the Issuer.
A-B-3
6.
If the Purchaser or any account for which the Purchaser is purchasing the Notes is a U.S. person
(as defined in Regulation S under the Securities Act) the following representations shall be true and correct:
(i)
the Purchaser and each such account: (a) was not organized or reorganized for
the specific purpose of acquiring the Notes (except when each beneficial owner of the Purchaser
or each such account is a qualified purchaser for purposes of Section 3(c)(7) of the Investment
Company Act) and (b) to the extent the Purchaser (or any account for which it is purchasing the
Notes) is a private investment company formed on or before April 30, 1996, the Purchaser has
received the necessary consent from its beneficial owners;
(ii)
that the Notes purchased directly or indirectly by it or any account for which it is
purchasing the Notes constitute an investment of no more than 40% of the Purchaser's and each
such account's assets (except when each beneficial owner of the Purchaser and each such account
is a qualified purchaser for purposes of Section 3(c)(7) of the Investment Company Act); and
(iii)
the Purchaser understands and agrees that any purported transfer of the Notes to
a purchaser that does not comply with the requirements of clauses (i) and (ii) above shall be null
and void ab initio.
7.
The Purchaser will not, at any time, offer to buy or offer to sell the Notes by any form of general
solicitation or advertising, including, but not limited to, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over television or radio or seminar or
meeting whose attendees have been invited by general solicitations or advertising.
8.
In connection with the purchase of the Notes:
(i)
none of the Issuer, the Trustee, the Custodian, the Account Bank, the Registrar, the
Transfer Agent, the Paying Agent, the Collateral Administrator or the Investment Manager (or any of their
respective Affiliates) is acting as a fiduciary or financial or investment adviser for the Purchaser;
(ii)
the Purchaser is not relying (for purposes of making any investment decision or
otherwise) upon any advice, counsel or representations (whether written or oral) of the Issuer, the Trustee,
the Custodian, the Account Bank, the Registrar, the Transfer Agent, the Paying Agent, the Collateral
Administrator or the Investment Manager (or any of their respective Affiliates) other than in the Offering
Circular and any representations expressly set forth in a written agreement with such party;
(iii)
none of the Issuer, the Trustee, the Custodian, the Account Bank, the Registrar, the
Transfer Agent, the Paying Agent, the Collateral Administrator or the Investment Manager (or any of their
respective Affiliates) has given to the Purchaser (directly or indirectly through any other person) 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) as to an investment in the Notes;
(iv)
the Purchaser has consulted with its own legal, regulatory, tax, business, investment,
financial and accounting advisers to the extent it has deemed necessary, and it 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 Issuer, the Trustee, the Custodian, the Account Bank, the Registrar, the Transfer
Agent, the Paying Agent, the Collateral Administrator or the Investment Manager (or any of their
respective Affiliates);
(v)
the Purchaser has evaluated the terms and conditions of the purchase and sale of the
Notes with a full understanding of all of the risks thereof (economic and otherwise), and it is capable of
assuming and willing to assume (financially and otherwise) those risks;
A-B-4
(vi)
the Purchaser is a sophisticated investor; and
(vii)
if acquiring the Notes for any account, the Purchaser has not made any disclosure,
assurance, guarantee or representation not consistent with the provisions and requirements of this letter.
9.
For United States federal income tax purposes, the Purchaser is (check one):
(x)
____ a "United States person" within the meaning of Section 7701(a)(30) of the Code (a
"U.S. Person"), or
(y)
____ not a U.S. Person.
The Purchaser understands and agrees that, in order for the Issuer to satisfy its obligations to provide
certain United States federal income tax information to beneficial owners of the Notes that are U.S. Persons, the
Issuer or the Trustee may provide to the Issuer's accountants information concerning the Purchaser's name and
address, the principal amount of Notes owned by the Purchaser and the date of their purchase, and the information
related to the tax status of the Purchaser as provided by the Purchaser pursuant to the certifications required in the
Indenture.
10.
The Purchaser understands and agrees that the Issuer will treat the Notes as equity in the Issuer for
United States federal, state and local income tax purposes, and the Purchaser and the registered holder of the Notes
(if different from the Purchaser), by acceptance of its Notes or its interests in the Notes, agrees to treat the Notes as
equity in the Issuer for United States federal, state and local income tax purposes.
11.
If we, or the entity on whose behalf we are acting, is acquiring, directly or in conjunction with
affiliates, more than 33⅓% of the aggregate principal amount Outstanding of the Notes, we are not a "bank" for
purposes of Section 881 of the Code or an entity affiliated with such a bank that is neither (x) a U.S. Person (within
the meaning of Section 7701(a)(30) of the Code) or (y) entitled to the benefits of an income tax treaty with the
United States under which withholding taxes on interest payments made by obligors resident in the United States to
such bank are reduced to 0% (an "Affected Bank").
12.
The Purchaser (A) confirms that it is aware of the transfer restrictions and representations set forth
in Condition 6.5 and this Condition 6.6 of the Indenture and (B) confirms that it understands that as a condition to
the payment of principal of and interest on any Note without U.S. Federal back-up withholding, the Issuer may
require the delivery of properly completed and signed applicable U.S. federal income tax certifications (generally,
an Internal Revenue Service Form W-9, or applicable successor form, in the case of a person that is a "United States
person" (within the meaning of the Code) or an appropriate Internal Revenue Form W-8, or applicable successor
form, or other appropriate documentation in the case of a person that is not a "United States person" (within the
meaning of the Code)).
13.
The Purchaser understands and agrees it may be required to provide appropriate documentation
establishing their status for purposes of the U.S. withholding and backup withholding rules. Each Purchaser is
required, as a condition to the continued holding of their Notes and the transfer of such Notes to a subsequent
transferee, to agree to provide a properly completed, newly executed U.S. tax form (e.g., an IRS Form W-9 or an
appropriate IRS Form W-8 (or an applicable successor form)) to the Issuer, the Transfer Agent or Trustee in each of
the following circumstances: (i) no later than 120 days prior to the expiration (if applicable) of the last previously
provided U.S. tax form, (ii) upon a request by the Issuer, the Transfer Agent or the Trustee, and (iii) upon any
change of circumstance that would cause the last previously provided U.S. tax form to be incorrect. The Purchaser
understands that if they fail to provide a properly completed, newly executed U.S. tax form no later than 120 days
prior to the expiration of the last previously provided U.S. tax form or, if earlier, within the time specified in any
request by the Issuer (which shall not be less than 30 days) or upon any change in circumstances that would cause
the last previously provided U.S. tax from to be incorrect, the Issuer may make no further payments to such holder
and the Issuer will have the unconditional right (which it can choose to exercise in its sole discretion) to cause the
Purchaser to sell any and all Notes to the Issuer or to a person chosen by the Issuer or the Issuer's agent on such
terms as the Issuer may choose (which price can reflect the need to dispense of the security with haste). For this
A-B-5
purpose, an IRS Form W-8IMY (or any successor form thereto) will be deemed to expire upon the expiration of any
withholding statement or U.S. tax forms associated with such IRS Form W-8IMY.
14.
Any purported transfer of a Note in violation of the requirements set forth in the Indenture and in
the Offering Circular shall be null and void ab initio and will not operate to transfer any rights to the transferee,
notwithstanding any instructions to the contrary to the Issuer, the Trustee or any intermediary. In addition to the
foregoing, the Issuer maintains the right to resell any Notes previously transferred to Ineligible Holders in
accordance with and subject to the terms of the Indenture. Further, the Purchaser acknowledges that any purchase or
transfer of Notes or beneficial interests therein may only be effected in accordance with the provisions set forth in
"Notice to Investors" in the Series Supplement relating to the Notes and each Purchaser by its acquisition of a Note
or an ownership interest therein represents that it will only transfer Notes in compliance therewith and agrees with
the provisions set forth therein.
15.
The Purchaser understands and agrees that each of the addressees of this letter will rely upon our
confirmation, acknowledgments, representations, warranties, covenants and agreements set forth herein, and the
Purchaser hereby irrevocably authorizes each of the addressees of this letter to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered
hereby.
16.
The Purchaser has the power and authority (corporate and/or other) to execute and deliver this
letter and to purchase the Notes, has duly authorized such execution, delivery and purchase, and has duly executed
and delivered this letter.
17.
The execution and delivery of this letter, and the purchase of the Notes by the Purchaser do not (i)
conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any
agreement or instrument to which the Purchaser is a party or by which the Purchaser is bound or to which any of the
property or assets of the Purchaser are subject or (ii) result in any violation of the provisions of the certificates of
incorporation, by-laws or other constitutive documents of the Purchaser or (iii) result in any violation of any statute,
order, rule or regulation of any court or governmental agency or body having jurisdiction over the Purchaser or its
property or assets.
18.
No consent, approval, authorization, order, registration or qualification of or with any such court
or governmental agency or body is required for the execution or delivery of this letter by the Purchaser.
19.
This letter constitutes the legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting creditors' rights and general equity
principles.
20.
Notwithstanding any other provision of this letter, the Purchaser agrees that it will not, directly or
indirectly, prior to the date that is two years and one day after the payment in full or redemption, as applicable, of all
of the Securities or such longer period as is required by Irish bankruptcy laws, United States federal or state
bankruptcy laws, or similar laws having the same effect on the Issuer, institute against, or join any other person in
instituting against, either the Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or
liquidation proceedings under Irish bankruptcy laws, United States federal or state bankruptcy laws, or similar laws
having the same effect on the Issuer.
21.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
22.
THE PURCHASER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS LETTER OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
A-B-6
23.
The respective representations, warranties, other statements, covenants, agreements and
indemnities made by the Purchaser herein shall remain in full force and effect and shall survive the Closing Date and
sale and purchase of, and the tender and delivery of payment for, the Notes, notwithstanding any investigation (or
any statement as to the results thereof) made by or on behalf of the Issuer, the Trustee, the Custodian, the Account
Bank, the Registrar, the Transfer Agent, the Paying Agent, the Collateral Administrator or the Investment Manager,
any of their respective Affiliates, or any of their or such Affiliates' controlling persons, directors, officers or
partners.
A-B-7
IN WITNESS WHEREOF, the undersigned Purchaser has executed this letter as of the date first above written.
PARTNERSHIP, CORPORATION, TRUST, CUSTODIAL ACCOUNT, OTHER ENTITY:
__________________________
(Print Name of Purchaser)
By: _______________________
(Signature)
__________________________
(Print Name and Title)
INDIVIDUAL INVESTOR:
__________________________
(Print Name of Entity)
By: _______________________
(Signature)
Investor's Address:
Attention:
Telephone Number:
If the Purchaser is a
qualified institutional
buyer, wire/payment
instructions:
Dated: ______________, _____
A-B-8
N5
Form of Majority
Approval Notice:
Pantheon Master Fund plc
Deutsche International Corporate Series (Ireland) Limited
5 Harbourmaster Place, IFSC
Dublin 1
Ireland
Prytania Investment Advisors LLP
6th Floor, Plantation Place South
60 Great Tower Street
London EC3R 5AZ
United Kingdom
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: CDO Services
Fax: (646) 808-3990
Wilmington Trust Conduit Services LLC
591 Broadway, 2nd Floor
New York, New York 10012
Attention: Sergio Godinho
Fax: (212) 941-4434
Re:
[describe proposed action]
Ladies and Gentlemen:
The undersigned hereby certifies that it is the beneficial owner of Athena Series 2008-1 Notes in the
Aggregate Outstanding Amount of U.S. $______________ and hereby (choose one):
_____ consents to [describe proposed action]
_____ does not consent to [describe proposed action]
Please return form via facsimile to the Investment Manager at [
].
IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed this _____ day
of ______________________
[NAME OF SECURITY OWNER]
By:
Authorized Signatory
Print Name Here
Address:
43
ANNEX B – BASE OFFERING CIRCULAR DATED AUGUST 18, 2006
B-1
Offering Circular
Pantheon Master Fund plc
(a public company with limited liability incorporated under the laws of Ireland)
____________________
Application may be made to list Notes of any Series described in this Offering Circular on such stock
exchanges as may be agreed with the Issuer.
The date of this Offering Circular is August 18, 2006.
B-2
TABLE OF CONTENTS
Page
NOTICE TO PURCHASERS.....................................................................................................................................6
DOCUMENTS INCORPORATED BY REFERENCE............................................................................................9
SUMMARY OF TERMS ..........................................................................................................................................10
RISK FACTORS .......................................................................................................................................................23
Relating to the Notes ............................................................................................................................................23
Relating to the Investment Manager.....................................................................................................................28
Relating to the Portfolio Investments ...................................................................................................................29
Relating to Certain Conflicts of Interest...............................................................................................................44
THE ISSUER .............................................................................................................................................................46
TERMS AND CONDITIONS OF THE NOTES ....................................................................................................48
1.
Introduction ...................................................................................................................................................48
2.
Interpretation .................................................................................................................................................49
3.
Investment Manager ......................................................................................................................................74
4.
Portfolio Investments ....................................................................................................................................75
5.
Portfolio Management...................................................................................................................................78
6.
Form, Denomination and Title of Notes........................................................................................................80
7.
Status of Notes ..............................................................................................................................................88
8.
Security for the Notes....................................................................................................................................89
9.
Accounts........................................................................................................................................................90
10. Negative Pledge.............................................................................................................................................92
11. Fixed Rate Note Provisions...........................................................................................................................92
12. Floating Rate Note and Index-Linked Interest Note Provisions....................................................................94
13. Zero Coupon Note Provisions .......................................................................................................................96
14. Dual Currency Note Provisions.....................................................................................................................96
15. Redemption ...................................................................................................................................................96
16. Payments .......................................................................................................................................................97
17. Hedge Agreements ........................................................................................................................................99
B-3
18. Taxation 99
19. Events of Default...........................................................................................................................................99
20. Non Petition and Limited-Recourse ............................................................................................................100
21. Prescription .................................................................................................................................................101
22. Replacement of Notes .................................................................................................................................101
23. Agents 101
24. Modification ................................................................................................................................................102
25. Further Issues ..............................................................................................................................................102
26. Notices ......................................................................................................................................................102
27. Rounding .....................................................................................................................................................102
28. Redenomination, Renominalisation and Reconventioning..........................................................................103
29. Governing Law and Jurisdiction .................................................................................................................104
TAXATION..............................................................................................................................................................105
General ...............................................................................................................................................................105
U.S. Federal Income Tax Consequences ............................................................................................................105
Introduction ........................................................................................................................................................105
U.S. Federal Income Tax Consequences to the Issuer........................................................................................106
U.S. Federal Income Tax Treatment of the Notes ..............................................................................................107
Taxation of Non-U.S. Holders............................................................................................................................109
Transfer and Other Reporting Requirements......................................................................................................109
Tax-Exempt Investors ........................................................................................................................................110
Irish Taxation .....................................................................................................................................................110
CERTAIN ERISA CONSIDERATIONS ..............................................................................................................112
CERTAIN LEGAL INVESTMENT CONSIDERATIONS .................................................................................114
SUBSCRIPTION AND SALE ................................................................................................................................115
LISTING AND GENERAL INFORMATION......................................................................................................117
THE MANAGEMENT AGREEMENT.................................................................................................................119
THE INVESTMENT MANAGER .........................................................................................................................123
ANNEX A .................................................................................................................................................................127
B-4
SCHEDULE A ...................................................................................................................................................... S-A-1
SCHEDULE B ..................................................................................................................................................... S-B-1
SCHEDULE C ..................................................................................................................................................... S-C-1
SCHEDULE D ..................................................................................................................................................... S-D-1
Index of Defined Terms.............................................................................................................................................. I-1
Appendix A ...............................................................................................................................................................A-1
B-5
NOTICE TO PURCHASERS
THIS DOCUMENT MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY
NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE
TRANSMITTED INTO OR DISTRIBUTED WITHIN THE UNITED STATES TO A U.S. PERSON OR TO OR
FOR THE ACCOUNT OF OR BENEFIT OF U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") EXCEPT PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. ACCORDINGLY THIS DOCUMENT MAY NOT BE
TRANSMITTED TO PERSONS IN THE UNITED STATES, UNLESS SUCH PERSONS ARE (I) BOTH
"QUALIFIED INSTITUTIONAL BUYERS" ("QIBS") (AS DEFINED IN RULE 144A UNDER THE U.S.
SECURITIES ACT) IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT AND (II) "QUALIFIED
PURCHASERS" ("QPS") FOR THE PURPOSES OF SECTION 3(C)(7) OF THE INVESTMENT COMPANY ACT
OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT") OR TO CERTAIN NON-US PERSONS
OUTSIDE THE UNITED STATES IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT.
THE ATTACHED OFFERING CIRCULAR IS IN PRELIMINARY FORM ONLY. THE TERMS OF THE
TRANSACTION AND ISSUE OF THE NOTES ("NOTES") DESCRIBED IN THE ATTACHED OFFERING
CIRCULAR ARE NOT YET FINAL AND ARE SUBJECT TO UPDATING, FURTHER NEGOTIATION,
AMENDMENT, VERIFICATION AND COMPLETION. THE ATTACHED OFFERING CIRCULAR HAS NOT
BEEN APPROVED BY ANY RATING AGENCY, NOR HAS IT BEEN APPROVED BY ANY STOCK
EXCHANGE ON WHICH THE NOTES MAY BE LISTED UPON ISSUE. THERE WILL BE MATERIAL
DIFFERENCES BETWEEN THIS DOCUMENT AND THE FINAL OFFERING CIRCULAR, WHICH
DIFFERENCES MAY BE MATERIALLY ADVERSE TO THE INTEREST OF INVESTORS IN ANY SERIES OF
NOTES. YOU MUST BASE ANY DECISION TO INVEST IN THE NOTES SOLELY ON THE BASIS OF
INFORMATION CONTAINED IN THE FINAL OFFERING CIRCULAR.
__________
Pantheon Master Fund plc (the "Issuer") accepts responsibility for the information contained in this document (save
for the information contained in the sections of this document headed "The Investment Manager") and to the best of
the knowledge and belief of the Issuer, the information contained in this document is in accordance with the facts
and does not omit anything likely to affect the import of such information. The Investment Manager accepts
responsibility for the information contained in the section of this document headed "The Investment Manager". To
the best of the knowledge and belief of the Investment Manager, such information is in accordance with the facts
and does not omit anything likely to affect the import of such information.
This Offering Circular should be read and construed together with any amendments or supplements hereto and with
any other documents incorporated by reference herein and, in relation to any Series (as defined herein) of Notes,
should be read and construed together with the relevant Series Supplement (as defined herein).
Except with respect to the sections of this document headed "The Investment Manager", the Issuer represents that
this Offering Circular (including for this purpose, each relevant Series Supplement) contains all information which
is (in the context of the issue, offering and sale of each Series of Notes) material; that such information is true and
accurate in all material respects and is not misleading in any material respect; that any opinions, predictions or
intentions expressed herein are honestly held or made and are not misleading in any material respect; that this
Offering Circular does not omit to state any material fact necessary to make such information, opinions, predictions
or intentions (in the context of the issue, offering and sale of each Series of Notes) not misleading in any material
respect; and that all proper inquiries have been made to verify the foregoing.
No person has been authorized to give any information or to make any representation not contained in or not
consistent with this Offering Circular or any other document entered or any information supplied by the Issuer or
such other information as is in the public domain and, if given or made, such information or representation should
not be relied upon as having been authorized by the Issuer or any Placement Agent.
No representation or warranty is made or implied by the Indenture Trustee, the Investment Manager (except with
respect to the section headed "The Investment Manager"), any Agent or any of their respective affiliates, and none of
B-6
the Indenture Trustee, the Investment Manager, any Agent or any of their respective affiliates (save as specified
above) makes any representation or warranty, express or implied, or accepts any responsibility or liability as to the
accuracy, adequacy, reasonableness or completeness of the information contained in this Offering Circular. Neither
the delivery of this Offering Circular or any Series Supplement nor the offering, sale or delivery of any Note of any
Series shall, in any circumstances, create any implication that the information contained in this Offering Circular is
true subsequent to the date hereof or the date upon which this Offering Circular has been most recently amended or
supplemented or that there has been no adverse change, or any event reasonably likely to involve any adverse
change, in the condition (financial or otherwise) of the Issuer since the date thereof or, if later, the date upon which
this Offering Circular has been most recently amended or supplemented or that any other information supplied in
connection with the issuance of a Series of Notes is correct at any time subsequent to the date on which it is supplied
or, if different, the date indicated in the document containing the same.
The distribution of this Offering Circular and any Series Supplement and the offering, sale and delivery of the Notes
in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular or any Series
Supplement comes are required by the Issuer and Placement Agents to inform themselves about and to observe any
such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on the
distribution of this Offering Circular or any Series Supplement and other offering material relating to the Notes, see
"Subscription and Sale". In particular, Notes have not been and will not be registered under the Securities Act and
the Issuer has not registered under the Investment Company Act. Subject to certain exceptions, Notes may not be
offered, sold or delivered within the United States or to U.S. Persons.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH, OR
APPROVED BY, ANY UNITED STATES FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
This Offering Circular may not be communicated in the United Kingdom other than to persons authorized
under the Financial Services and Markets Act 2000 or otherwise having professional experience in matters
relating to investments and qualifying as investment professionals under Article 19, or persons qualifying as
high net worth persons under Article 49, of the Financial Services and Markets Act 2000 (financial
promotion) order 2001, as amended.
Neither this Offering Circular nor any Series Supplement constitutes an offer or an invitation to subscribe for or
purchase any Notes and should not be considered as a recommendation by the Issuer, the Indenture Trustee, the
Custodian, the Collateral Administrator, any Paying Agent or any Placement Agent that any recipient of this
Offering Circular or any Series Supplement should subscribe for or purchase any Notes. Each recipient of this
Offering Circular or any Series Supplement shall be taken to have made its own investigation and appraisal of the
condition (financial or otherwise) of the Issuer, any Hedge Counterparty related to such Series of Notes, and the
Applicable Collateral (each as defined herein) securing the relevant Series of Notes.
Irish Regulatory Position
If a Series of Notes are to be admitted to the Official List and to trading on the Irish Stock Exchange, copies of this
Prospectus will be filed for approval with the Financial Regulator as required by the Irish Prospectus (Directive
2003/71/EC) Regulations 2005 (the "Prospectus Regulations"). Upon approval of this Prospectus by the Financial
Regulator, this Prospectus will be filed with the Irish Companies Registration Office in accordance with Regulation
38(1)(b) of the Prospectus Regulations.
The Issuer is not and will not be regulated by the Financial Regulator as a result of issuing the Notes. Any
investment in Notes does not have the status of a bank deposit and is not within the scope of the deposit protection
scheme operated by the Financial Regulator.
In this Offering Circular, unless otherwise specified, references to "USD" and "dollars" are to the lawful currency of
the United States, references to "GBP," "Sterling" and "₤" are to the lawful currency of the United Kingdom and
references to "EUR" and "euro" are to the single currency introduced at the start of the third stage of European
Economic and Monetary Union pursuant to the Treaty establishing the European Communities, as amended by the
Treaty on European Union.
B-7
A Series of Notes issued may be rated or unrated. Where a Series of Notes is rated, such rating will not necessarily
be the same as the rating assigned to another Series of Notes. A security rating is not a recommendation to buy, sell
or hold securities and may be subject to suspension, reduction or withdrawal at any time by the rating agency
assigning such rating. If a Series of Notes is unrated, the Series Supplement for that Series of Notes will state that
the Series of Notes is unrated.
In connection with the issue of any Series of Notes, the Placement Agent (if any) which is specified in the
relevant Series Supplement as the stabilizing institution may over-allot or effect transactions which stabilize
or maintain the market price of the Notes of the Series at a level which might not otherwise prevail. Such
stabilizing, if commenced, may be discontinued at any time. Such stabilizing shall be in compliance with all
applicable laws, regulations and rules.
EACH PROSPECTIVE INVESTOR (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER
AGENT OF SUCH PROSPECTIVE INVESTOR) MAY DISCLOSE TO ANY AND ALL PERSONS,
WITHOUT LIMITATIONS OF ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF THE
TRANSACTION AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX
ANALYSES) THAT ARE PROVIDED TO THE PROSPECTIVE INVESTOR RELATING TO SUCH TAX
TREATMENT AND TAX STRUCTURE. HOWEVER, ANY SUCH INFORMATION RELATING TO
SUCH TAX TREATMENT OR TAX STRUCTURE IS REQUIRED TO BE KEPT CONFIDENTIAL TO
THE EXTENT REASONABLY NECESSARY TO COMPLY WITH APPLICABLE FEDERAL OR STATE
SECURITIES LAWS. FOR PURPOSES OF THIS PARAGRAPH, THE TERMS "TAX TREATMENT"
AND "TAX STRUCTURE" HAVE THE MEANING GIVEN TO SUCH TERMS UNDER UNITED STATES
TREASURY REGULATION SECTION 1.6011-4(C).
B-8
DOCUMENTS INCORPORATED BY REFERENCE
All amendments and supplements to this Offering Circular circulated by the Issuer from time to time shall be
deemed to be incorporated in, and to form part of, this Offering Circular, save that any statement contained in this
Offering Circular or in any of the documents incorporated by reference in, and forming part of, this Offering
Circular shall be deemed to be modified or superseded for the purpose of this Offering Circular to the extent that a
statement contained in any document subsequently incorporated by reference modifies or supersedes such statement
(whether expressly, by implication or otherwise).
The Issuer will, at the Specified Offices of the Indenture Trustee, make available free of charge, a copy of this
Offering Circular (or any document incorporated by reference in this Offering Circular).
As described under the heading "The Issuer", the Issuer has been incorporated as a public company with limited
liability under the laws of Ireland and will have no substantial assets other than the assets pledged to secure each
Series of Notes. Each Series of Notes will only have recourse to the Applicable Collateral (as defined herein)
relating to such Series of Notes and the Applicable Collateral pledged to the payment of one Series of Notes will not
be available to make payments with respect to any other Series of Notes. The Applicable Collateral will be the sole
source of funds to meet the obligations of the Issuer to the holders of such Series of Notes, and all other obligations
of the Issuer attributable to such Series of Notes. If amounts received from the Applicable Collateral are insufficient
to make payment of all amounts due in respect of such Series and all other obligations attributable to such Series of
Notes, no other assets of the Issuer will be available to meet that shortfall and all further claims of the holders in
respect of such Series of Notes will be extinguished. No such party will be able to petition for the winding-up of the
Issuer and as a consequence of any such shortfall.
Supplemental Offering Circular
The Issuer will, in the case of each Series of Notes to be listed on the Irish Stock Exchange, give an undertaking to
the Irish Stock Exchange that if at any time there is a significant change affecting any matter contained in this
Offering Circular whose inclusion would reasonably be required by investors and their professional advisers, and
would reasonably be expected by them to be found in this Offering Circular, for the purpose of making an informed
assessment of its assets and liabilities, financial position, profits and losses and prospects of the Issuer, and the rights
attaching to the Notes, it shall prepare an amendment or supplement to this Offering Circular or publish a
replacement Offering Circular for use in connection with any subsequent offering of the Notes and shall supply to
the Irish Stock Exchange such number of copies of such supplement hereto as the Irish Stock Exchange may
reasonably request. The Issuer shall comply with any similar undertakings required by any other stock exchange
upon with any Series of Notes is listed.
B-9
SUMMARY OF TERMS
The following summary does not purport to be complete and is qualified in its entirety by the remainder of this
Offering Circular. It is important that all investors and potential investors in the Notes of any Series recognize and
understand that the following information is not complete, cannot be read in isolation and is qualified in its entirety
by the detailed information appearing elsewhere in this Offering Circular and the other documents referred to
therein. In addition, the terms described below in so far as they relate to Series of Notes may be amended and/or
supplemented by the Series Supplement relating thereto. Details of any such amendments will be set out in the
Series Supplement issued in respect of such Series of Notes. Potential investors in the Notes should also ensure that
they read and consider the risk factors related to an investment in the Notes set out under "Risk Factors" in this
Offering Circular and in the Series Supplement before investing therein.
Words and expressions defined in "Forms of the Notes" or "Terms and Conditions of the Notes" below shall have
the same meanings in this summary or are defined elsewhere in this Offering Circular. An index of defined terms
appears at the back of this Offering Circular. References to a "Condition" or "Conditions" are to the specified
condition or conditions in the "Terms and Conditions of the Notes" below.
Issuer:
Pantheon Master Fund plc (the "Issuer") is a public company with limited liability
incorporated under the laws of Ireland pursuant to its Memorandum of Association
(together with the Articles of Association of the Issuer, the "Issuer Charter").
The Master Indenture and the Issuer Charter will provide that the activities of the
Issuer are limited to (i) acquiring and disposing of, and investing and reinvesting in,
Portfolio Investments (including, where specified in the applicable Series Supplement,
Synthetic Securities or Defeased Synthetic Securities) and Eligible Investments, (ii)
entering into and performing its obligations under the Master Indenture, the
Administration Agreement, the Management Agreement, the Collateral Administration
Agreement, any Hedge Agreements and other documentation entered into in
connection with an Asset Pool (including, without limitation, Securities Lending
Agreements, Synthetic Securities and Short Positions), (iii) issuing and selling one or
more Series of Notes, (iv) entering into and performing its obligations under each
Series Supplement, any other documentation entered into a connection with a Series of
Notes (including, without limitation, Series specific Hedge Agreements) and the
Notes, (v) pledging a portion of its assets as security for its obligations in respect of
each such Series of Notes and otherwise for the benefit of the Secured Parties, and (vi)
other activities incidental to the foregoing.
The Issuer will not have any material assets other than the Portfolio Investments,
Eligible Investments and rights under certain other agreements entered into as
described herein.
Placement Agent:
The entity, if any, specified in the relevant Series Supplement with respect to a Series
of Notes.
Indenture Trustee:
Deutsche Bank Trust Company Americas
Custodian:
Deutsche Bank Trust Company Americas
Account Bank:
Deutsche Bank Trust Company Americas
Registrar, Transfer
Agent and U.S.
Paying Agent:
Deutsche Bank Trust Company Americas
Collateral
Administrator and
Paying Agent:
Deutsche Bank AG, London Branch
B-10
Administrator:
Deutsche International Corporate Services (Ireland) Limited
Paying Agent:
The entity, if any, so designated in a Series Supplement with respect to a Series of
Notes.
Listing Agent:
The entity, if any, so designated in a Series Supplement with respect to a Series of
Notes.
Listing:
Application may be made, if specified in the relevant Series Supplement, to admit the
Notes of any Series to the Official List and to trading the Irish Stock Exchange, the
Luxembourg Stock Exchange or any other exchange specified in the relevant Series
Supplement. There can be no assurances, however, that such listing will be granted.
The Notes of any Series may also be unlisted.
Clearing Systems:
In relation to any Series of Notes, the Depository Trust Company ("DTC"), Euroclear
Bank S.A./N.V., as operator of the Euroclear System ("Euroclear") and/or
Clearstream Banking, société anonyme, Luxembourg ("Clearstream Banking")
and/or any other clearing system as may be specified in the relevant Series
Supplement.
Issuance in Series:
The Notes will be issued from time to time in Series (each, a "Series") as shall be
specified in the applicable Series Supplement, subject, for so long as any Series of
Notes is outstanding that is rated by Standard & Poor's (or any notes rated by Standard
& Poor's issued by a Series Special Purpose Vehicle and secured primarily by such
Series of Notes) to the Standard & Poor's Rating Agency Condition. The specific terms
of each Series of Notes issued will be as set out in the Series Supplement relating to
such Series of Notes and may be different from any other Series of Notes issued by the
Issuer. The relevant Series Supplement for a Series of Notes may provide for the
issuance of additional Notes of the same Series in accordance with the terms and
conditions specified in such Series Supplement. Notes of a single Series will rank pari
passu with all other Notes of the same Series. Except as provided in the Transaction
Documents, the Issuer will not incur any other indebtedness.
Series Supplements:
Each Series will be the subject of a Series Supplement which, for the purposes of that
Series only, supplements the Terms and Conditions of the Notes and this Offering
Circular and must be read in conjunction with this Offering Circular. The terms and
conditions applicable to any particular Series of Notes are the Terms and Conditions of
the Notes as supplemented, amended and/or replaced by the relevant Series
Supplement. With respect to any Series of Notes to be listed on the Irish Stock
Exchange, a Prospectus relating thereto must be approved by the Irish Stock Exchange
prior to listing.
Status of the Notes:
Each Series of Notes will be limited-recourse debt obligations of the Issuer which are
payable solely out of amounts received by or on behalf of the Issuer in respect of the
Applicable Collateral (as defined below) pledged by the Issuer to the Indenture Trustee
pursuant to the Master Indenture for the benefit of the Holders of such Series of Notes
and the other Secured Parties. The Applicable Collateral that secures a particular
Series of Notes will not be available to make payments on any other Series of Notes. If
the Applicable Collateral that secures a Series of Notes is insufficient to pay all
amounts due on such Series of Notes (including, without limitation, any Interest
Amount or Redemption Amount), the Noteholders of such Series will not have a claim
against any other assets of the Issuer, including, without limitation, the Collateral that
secures any other Series of Notes. Any amounts due to such Noteholders which remain
outstanding but unpaid shall be extinguished.
Investment
Manager:
Prytania Investment Advisors, LLP, a limited liability partnership based in the United
Kingdom (together with its successors and assigns, the "Investment Manager"), will
manage the Collateral under an investment management agreement entered into
B-11
between the Issuer and the Investment Manager (the "Management Agreement").
Pursuant to the Management Agreement and in accordance with the Master Indenture
and the relevant Series Supplements, the Investment Manager will manage the
selection, acquisition, monitoring and disposition of the Portfolio Investments
(including exercising rights and remedies associated with the Portfolio Investments
and managing funds on deposit in various Pool Accounts and Series Accounts) based
on the
restrictions set forth in the Master Indenture, the relevant Series Supplements and the
Management Agreement.
If so specified in the relevant Series Supplement, the Investment Manager will be paid
a Base Management Fee and an Incentive Management Fee for its services as
Investment Manager with respect to the related Series of Notes. Such fees shall be
allocated to such Series of Notes as specified in the relevant Series Supplement and
shall be subject to the Priority of Payments applicable to such Series of Notes as set
forth herein and in the relevant Series Supplement.
For a summary of the provisions of the Management Agreement and certain other
information concerning the Investment Manager, see Condition 3, (Investment
Manager).
Upon receipt of a removal notice from the required percentage of the holders of a
Series of Notes by the Indenture Trustee, and in some cases subject to conditions
specified in the Series Supplement, as well as the completion of a Segregation with
respect to such Series, the Holders of the Notes of such Series shall be entitled to
replace the Investment Manager with respect to such Series, it being understood that
the replacement Investment Manager shall only be entitled to instruct the Indenture
Trustee with respect to each Segregated Pool in which such Series has a Series
Allocation Percentage greater than zero and, in the case where a Static Asset Pool is to
be liquidated in whole or in part, by giving assent to such liquidation. See The
Management Agreement
Use of Proceeds:
The net proceeds from the issuance and sale of each Series of Notes, after payment of
fees and expenses of the Issuer related thereto (including fees and expenses related to
the structuring, offering and sale of such Series of Notes and any Existing Series
Reimbursement), will be deposited into the Series Investment Account for the
Specified Currency of such net proceeds and transferred from time to time in
connection with a Portfolio Change Proposal to specified Pool Investment Accounts to
be used by the Issuer to purchase Portfolio Investments, as directed by the Investment
Manager in accordance with the guidelines, including the Investment Guidelines, set
forth in the Master Indenture, the relevant Series Supplements and the Management
Agreement.
Portfolio
Investments:
Portfolio Investments are assets held in the Asset Pools (each, a "Portfolio
Investment") and may consist of any or all of the types of investments described in
Annex A, provided, however, that each Series may restrict the types of investments
allocable to a Series, and thus restrict the types of investments capable of being held in
specific Asset Pools, through the application of the Investment Guidelines for such
Series. All Portfolio Investments shall be subject to the Investment Guidelines for all
Series described in Condition 4.2 unless otherwise provided in the relevant Series
Supplement.
The Issuer may also, without consent of the holders of any Series of Notes, add
additional types of investments to Annex A, provided that no such additional
investment will be applicable to any Series of Notes unless the relevant Series
Supplement for such Series of Notes provides for it or the Holders of any Series of
Notes then outstanding approves its inclusion as collateral for such Series of Notes and
B-12
any applicable Rating Agency Condition is met.
Synthetic Securities:
If each applicable Series Supplement so permits, the Issuer may acquire Synthetic
Securities. For so long as any Series of Notes is outstanding that are rated by Standard
& Poor's (or any notes are rated by Standard & Poor's that are issued by a Series
Special Purpose Vehicle and secured by such Series of Notes), such Synthetic
Securities shall meet the requirements of clauses (v) and (vi) of the definition of
Synthetic Securities. If and to the extent that any counterparty to a Synthetic Security
requires the Issuer to secure its obligations to the counterparty, the Investment Adviser
shall direct the Indenture Trustee to do one or more of the following (each a
"Collateral Arrangement") (x) either establish a segregated trust account in respect
of each such Synthetic Security (each such account, a "Synthetic Security
Counterparty Account") which shall be held in trust for the benefit of the related
Synthetic Security Counterparty, (y) cause the establishment by the Account Bank of a
segregated trust account in respect of any Synthetic Security at an organization or
entity (other than the Custodian) permitted pursuant to the terms of the Series
Supplement or (z) provide Cash or Synthetic Security Collateral to the Synthetic
Security Counterparty to be held and distributed in accordance with the applicable
Synthetic Security. To the extent that the Synthetic Security Counterparty does not
require that the Issuer's obligations to such counterparty be secured by separate
collateral, the Issuer's obligations to such counterparty shall be secured by the
Portfolio Investments in the related Asset Pool (other than Portfolio Investments that
constitute Synthetic Securities).
Where the Investment Manager requires that exposure for such Synthetic Security be
fully collateralized, such Synthetic Security shall be a "Defeased Synthetic Security."
If the terms of any Synthetic Security require the Synthetic Security Counterparty to
secure its obligations with respect to such Synthetic Security, the Account Bank shall
establish a single, segregated Securities Account in respect of such Synthetic Security
(each such account, a "Synthetic Security Issuer Account"). The Account Bank will
deposit into any such Synthetic Security Issuer Account all amounts that are received
from the applicable Synthetic Security Counterparty to secure the obligations of such
Synthetic Security Counterparty in accordance with the terms of such Synthetic
Security.
Amounts contained in any Synthetic Security Counterparty Account or in any
Synthetic Security Issuer Account or provided to a Synthetic Security Counterparty
shall not be considered to be an asset of the Issuer for purposes of any of the
Investment Guidelines but the Synthetic Security which relates to such Synthetic
Security Counterparty Account or such Synthetic Security Issuer Account shall be an
asset of the Issuer for such purposes.
Asset Pools and Pool
Accounts:
Portfolio Investments purchased by the Issuer, at the direction of the Investment
Manager, will be held by the Custodian in one or more pools (each, an "Asset Pool")
having certain defining characteristics such as: currency designation, asset description,
composite rating range, product specificity, etc. and the Account Bank will open
certain related accounts (each, a "Pool Account") for the holding of Cash and Eligible
Investments. Pursuant to the Management Agreement, the Investment Manager may
direct the Custodian in writing to create new Asset Pools, to add new characteristics to
an existing Asset Pool or to further subdivide any existing Asset Pool. The Custodian
shall keep a schedule of the Asset Pools and a schedule of pool characteristics for each
such Asset Pool. Pursuant to the Management Agreement, the Investment Manager
may direct the Custodian in writing to further subdivide any existing Asset Pool,
including, without limitation, to segregate certain Portfolio Investments into one or
more Segregated Asset Pools or to Segregate a Series. Further, the Investment
Manager may direct the Custodian to declare any empty Asset Pool as inactive and
B-13
close the related Pool Accounts.
The Collateral Administrator will at all times maintain current records describing each
Asset Pool, the pool characteristics related thereto and the Series Allocation
Percentage (as defined below) for each Series of Notes with respect thereto which shall
be updated from time to time where necessary to reflect any changes thereto and made
available to the Indenture Trustee at all times.
Pool Accounts:
With respect to each Asset Pool, the Investment Manager will instruct the Indenture
Trustee to establish with the Account Bank any necessary accounts in the Indenture
Trustee's name in each of the currencies in which the Portfolio Investments held in
such Asset Pool are denominated, including the following:
(i)
the Pool Principal Collection Account, where Principal Proceeds
received on Portfolio Investments held in such Asset Pool or otherwise
allocable to such Asset Pool will be deposited;
(ii) the Pool Interest Collection Account, where Interest Proceeds received
on Portfolio Investments held in such Asset Pool or otherwise allocable
to such Asset Pool will be deposited;
(iii) the Pool Sales Proceeds Account, where Sales Proceeds received upon
sale of Portfolio Investments held in such Asset Pool or otherwise
allocable to such Asset Pool will be deposited; and
(iv) the Pool Investment Account, where funds allocated for investment in
Portfolio Investments will be deposited.
Pending investment or distribution, as applicable, funds in any of the above-mentioned
accounts will be invested in Eligible Investments. Distributions from the Pool
Accounts to the related Series Accounts (e.g. from a Pool Interest Collection Account
to a Series Interest Collection Account) shall occur on a monthly basis, as agreed
between the Investment Manager and the Collateral Administrator, unless the Account
Bank is otherwise instructed by the Investment Manager.
Series Accounts:
Upon the issuance of a Series of Notes, the Investment Manager will instruct the
Indenture Trustee to establish with the Account Bank the following accounts in the
Indenture Trustee's name relating to such Series in each of the relevant currencies for
such Series of Notes (each, a "Series Account"): the Series Principal Collection
Account, the Series Interest Collection Account and the Series Sales Proceeds
Account, for each of the currencies in which the Asset Pools securing such Series of
Notes are denominated, and the Series Investment Account, the Series Distribution
Account and the Series Expense Reserve Account for each of the Specified Currencies
in which such Notes are denominated. The net proceeds from the issuance of a Series
of Notes after payment of fees and expenses of the Issuer related thereto (including
fees and expenses related to the structuring, offering and sale of such Series of Notes
and any Existing Series Reimbursement) will be deposited into the Series Expense
Reserve Account in the currency of such net proceeds pending investment of such
proceeds in Portfolio Investments, as directed by the Investment Manager. In addition,
any funds allocated for distribution to a Series of Notes, pending such distribution,
shall be deposited into the Series Distribution Account, as applicable, for the Specified
Currency for such Series of Notes.
Security for the
Notes:
Pursuant to the Master Indenture, the Issuer will grant to the Indenture Trustee a
security interest in all of the assets of the Issuer, including without limitation, the Asset
Pools and the related Pool Accounts, the Series Accounts, the rights of the Issuer under
various agreements (including any Hedge Agreements), all accounts, chattel paper,
deposit accounts, financial assets, general intangibles, instruments, investment
B-14
property, letter-of-credit rights and other supporting obligations of the Issuer related to
the foregoing and all proceeds of the foregoing (collectively, the "Collateral") to be
held on behalf of the Holders of Notes in each Series issued from time and the other
Secured Parties. The Holders of Notes of each Series of Notes will have a beneficial
interest in such security interest with respect to (i) all Series Accounts relating to such
Series of Notes, Cash and other Eligible Investments held in each such Series Account
and all income from investment of funds therein and any agreements entered into
solely in connection with such Series of Notes, including without limitation, any Series
specific Hedge Agreements, (ii) to the extent that funds from the Series Accounts
related to such Series of Notes shall have been invested in an Asset Pool (or
transferred to the related Pool Accounts), the Portfolio Investments, Cash and other
Eligible Investments held in each such Asset Pool and the related Pool Accounts and
all income from investment of funds therein and any agreements entered into in
connection with such Asset Pool (including, without limitation, all Asset Pool specific
Hedge Agreements) and all proceeds of the foregoing, in each case only to the extent
of the Series Allocation Percentage for such Series of Notes in such Asset Pool and
(iii) all agreements entered into and other rights and interests acquired by the Issuer
with respect to the transaction in general and not with respect to a specific Series or a
specific Asset Pool (collectively, the "Applicable Collateral").
Series Allocation
Percentage:
Each Series of Notes shall have a "Series Allocation Percentage" in each existing
Asset Pool (and the related Pool Accounts), which Series Allocation Percentage will
be zero until such time as funds or other assets attributable to a Series of Notes have
been invested in or other assets attributable to such Series of Notes have been
transferred to such Asset Pool and will at no time be less then zero or exceed 100%.
When only one Series of Notes has a Series Allocation Percentage greater than zero in
an Asset Pool, such Series Allocation Percentage shall be equal to 100%. At the
creation of an Asset Pool and prior to the transfer of any funds or of any Portfolio
Investment into an Asset Pool, the Series Allocation Percentages for all Series of
Notes with respect to such Asset Pool will be equal to zero, and on the Issue Date with
respect to a Series of Notes, prior to the transfer of any proceeds from such issuance,
the Series Allocation Percentages for such Series of Notes for all Asset Pools will be
equal to zero.
The Series Allocation Percentages for an Asset Pool are recomputed by the Collateral
Administrator and notified to the Indenture Trustee and the Investment Manager each
time that (i) the Issuer (or the Investment Manager acting on behalf of the Issuer)
transfers Cash or other Eligible Investments from a Series Account into the Pool
Investment Account, (ii) the Issuer (or the Investment Manager acting on behalf of the
Issuer) transfers a Portfolio Investment withdrawn by a Series directly into the Asset
Pool, (iii) the Issuer (or the Investment Manager acting on behalf of the Issuer) makes
a withdrawal in Cash for payment to one or more Series (a "Cash Withdrawal") and
(iv) the Issuer (or the Investment Manager acting on behalf of the Issuer) makes a
withdrawal of a Portfolio Investment (other than a withdrawal on a pro rata basis
according to the existing Series Allocation Percentages of the relevant Series) (a
"Portfolio Investment Withdrawal") from an Asset Pool for transfer to Asset Pools
allocable to one or more Series.
For an Asset Pool, the Series Allocation Percentage for each Series on any date is
calculated based on the following formula:
=
Current _ Series _ Alllocation _ Percentage ∗ Current _ Asset _ Pool _ NAV + Series _ New _ IV − Series _ New _ Withdrawal
Current _ Asset _ Pool _ NAV + Total _ New _ IV − Total _ New _ Withdrawal
Where:
Current_Series_Allocation_Percent
age
B-15
The Series Allocation Percentage for such
Series with respect to such Asset Pool prior
to the any of the events in (i) through (iv)
above.
Current_Asset_Pool_NAV
The most-recent Asset Pool Net Asset Value
prior to the any of the events in (i) through
(iv) above.
Series_New_IV
The Valuation of the Cash and/or Portfolio
Investments transferred on such date into
such Asset Pool by such Series.
Series_New_Withdrawal
For a Cash Withdrawal or a Portfolio
Investment Withdrawal to or on behalf of a
Series that is part of a Portfolio Change
Proposal (including a Cash Withdrawal or
Portfolio Investment Withdrawal not
according to the Series Allocation
Percentage), the Valuation of the Cash
and/or Portfolio Investments withdrawn on
such date from such Asset Pool to or on
behalf of such Series.
Total_New_IV
The sum, for all Series, of the Valuation of
the Cash and/or Portfolio Investments
transferred on such date into such Asset
Pool.
Total_New_Withdrawal
For Cash Withdrawals or Portfolio
Investment Withdrawals to or on behalf of
one or more Series that that is part of a
Portfolio Change Proposal (including a Cash
Withdrawals or Portfolio Investment
Withdrawals not according to the Series
Allocation Percentage), the sum, for all
Series, of the Valuation of the Cash and/or
Portfolio Investments withdrawn on such
date from such Asset Pool.
Investment
Guidelines:
The relevant Series Supplement will provide the investment guidelines (together with
the Investment Guidelines set forth in this Offering Circular and applicable to all
Series) (the "Investment Guidelines") relating to a Series of Notes issued pursuant to
such Series Supplement. Such guidelines may include, but not be limited to, rules
governing the types of investments, the balance between types of investments,
currencies of investments, domicile of obligors, maturity of investments, any taxrelated restrictions upon the Issuer in making such investments, and whether the
investments will be Cash or synthetic.
Portfolio
Management and
Portfolio Change
Proposal:
The Investment Manager, acting according to the Management Agreement, will
deliver to the Collateral Administrator the Investment Manager's proposed changes to
the Portfolio Investments in one or more Asset Pools and to the other characteristics of
one or more Series through the submission, in writing, of a Portfolio Change Proposal
identifying a sequence of one or more steps that will accomplish such changes (a
"Portfolio Change Proposal"). A Portfolio Change Proposal is an ordered list of one
or more changes the Investment Manager proposes to make, including, without
limitation, the following, with each category being capable of being used more than
once:
a)
a Drawdown under existing Notes of Cash in a Specified Currency with
respect to a Series or the issuance of additional Notes in connection with an
B-16
existing Series;
b)
a Cash Withdrawal or a Portfolio Investment Withdrawal from an Asset Pool,
identifying the Asset Pool, the relevant Series and the Valuation of the Cash
or Portfolio Investment to be withdrawn, provided that the total Valuation of
such Withdrawal is not greater than the Series Value;
c)
the transfer of Cash from a Series Account into the Pool Investment Account
of one or more Asset Pools;
d)
the withdrawal of a Portfolio Investment, and moving such investment from
one Asset Pool to another Asset Pool;
e)
a purchase or sale of a security, including a Synthetic Security, in an Asset
Pool, including the anticipated purchase or sale price;
f)
the entering into, reduction in the notional of or termination of a Hedge
Agreement or if part of a sequence of steps in connection with a Portfolio
Change Proposal, a Secondary Hedge Agreement; and
g)
a distribution of Cash from an Pool Account or from a Series Account,
including, in the case of a Series Account, a distribution to a specific
Noteholder in accordance with the Series Supplement for such Series,
occurring on a date other than the scheduled date for such distribution.
Upon receipt of a Portfolio Change Proposal, the Collateral Administrator will prepare
the Pro-forma Transaction Characteristics for each of the affected Series and the
Collateral Administrator, based on the information provided by the Investment
Manager and in conjunction with the Investment Manager (as modified by the Series
Supplement), will confirm that such set of changes are in compliance with the
Investment Guidelines (including all tests that are a component of such Investment
Guidelines) applicable to each affected Series in accordance with the terms of the
relevant Series Supplement. Only if all Investment Guidelines for all affected Series
are met, will the Collateral Administrator notify the Investment Manager to implement
the Portfolio Change Proposal on behalf of the Holders of the Notes of the Series
affected by such Portfolio Change Proposal.
Purchases and Sales
of Portfolio
Investments:
Upon written direction from the Investment Manager, the Account Bank will transfer
funds from a Series Investment Account related to a Series of Notes to a specified Pool
Investment Account for such funds to be used to purchase Portfolio Investments for
inclusion in the related Asset Pool in compliance with the Investment Guidelines for
such Series of Notes, provided, however, that such purchase shall also be in
compliance with the Investment Guidelines for any other Series of Notes with respect
to which the Series Allocation Percentage in such Asset Pool is greater than zero, as
described in such Portfolio Change Proposal. Upon such transfer of funds from a
Series Investment Account to a specified Pool Investment Account, the Series
Allocation Percentage for such Series of Notes and for any other Series of Notes for
which the Series Allocation Percentage is greater than zero with respect to the related
Asset Pool shall be adjusted accordingly.
The Investment Manager may, in accordance with restrictions contained in the Master
Indenture, the Management Agreement and the relevant Series Supplements, direct the
Custodian in writing to facilitate the sale of any Portfolio Investment held in an Asset
Pool and to credit the sale proceeds thereof into the related Pool Sales Proceeds
Account. The Investment Manager may instruct the Account Bank to facilitate the
allocation of funds in a Pool Sales Proceeds Account either (i) on a pro-rata basis into
the Series Accounts of each Series of Notes with a Series Allocation Percentage
greater than zero in such Asset Pool, based on the Series Allocation Percentage for
B-17
each of such Series or (ii) with respect to a Cash Withdrawal, to the Series Accounts
for one or more Series of Notes in an amount determined by the Investment Manager,
provided that the total amount so withdrawn by and allocated to a Series of Notes does
not exceed such Series' Series Value. Upon such allocation of funds from a Pool Sales
Proceeds Account into a Series Account, the Series Allocation Percentage for such
Series of Notes and for any other Series of Notes for which the Series Allocation
Percentage is greater than zero with respect to the related Asset Pool shall be adjusted
accordingly.
Priority of Payments
for a Series of Notes:
Except as modified pursuant to the relevant Series Supplement, amounts shall be
applied by the Indenture Trustee to make payments relating to each Asset Pool and
each Series of Notes in the following order of priority:
(a) Priority of Payments for each Asset Pool. Except as modified for a particular
Asset Pool pursuant to the relevant Series Supplement, on the 25th day of each month
(each, an "Asset Pool Payment Date"), or at such other time as the Collateral
Administrator is directed by the Investment Manager, amounts in the Pool Accounts
for such Asset Pool shall be applied by the Account Bank to make payments in the
following order of priority to the Series Accounts for or the Noteholders of each Series
pro rata according to the Series Allocation Percentages for such Asset Pool:
(i) from the Pool Accounts in the order of Pool Interest Collection Account, Pool
Principal Collection Account, Pool Sales Proceeds Account and Pool Investment
Account, only if directed by the Investment Adviser because of expected shortfalls in
item (i) (Administrative Expenses) in the Priority of Payments for any Series for
which such Asset Pool has a Series Allocation Percentage greater than zero, to the
Series Distribution Accounts in amounts to cover such shortfalls; provided that for the
purposes of projecting costs in each currency, Administrative Expenses shall be
assumed to be allocated, regardless of their actual currency, pro rata to each currency
according to the equivalent, in EUR, of the aggregate Series Allocated Investments for
each currency;
(ii) from the Pool Principal Collection Account, the Pool Interest Collection Account,
the Pool Sales Proceeds Account and the Pool Investment Account, as appropriate
according to the nature of the obligation to be paid as reasonably determined by the
Investment Manager, and in the absence of such determination from the Pool Accounts
in the order of Pool Principal Collection Account, Pool Interest Collection Account,
Pool Sales Proceeds Account and Pool Investment Account, to pay any amounts
payable pursuant to any Hedge Agreement, Synthetic Security, Securities Lending
Agreement or Short Position, if any, entered into with respect to the related Asset
Pool;
(iii) from the Pool Sales Proceeds Account to the Series Sales Proceeds Accounts,
unless directed otherwise by the Investment Manager.
(iv) from the Pool Interest Collection Account to the Series Interest Collection
Accounts; and
(v) from the Pool Principal Collection Account to the Series Principal Collection
Accounts.
(b) Priority of Payments for a Series of Notes: Except as modified pursuant to the
relevant Series Supplement, on each Payment Date, amounts shall be applied by the
Account Bank to make payments relating to each Series of Notes in the following
order of priority. To the extent possible, payments shall be made from the account in
the same currency as the payment being made. If not possible, the Investment
Manager shall instruct the Account Bank to make the necessary currency transactions
B-18
in order to make the necessary payments.
(i) from the Series Interest Collection Accounts, the Series Principal Collection
Accounts, the Series Sales Proceeds Accounts and the Series Investment Accounts, in
that order, to the payment first of such Series' Series Share of accrued and unpaid
taxes, second to the payment of accrued and unpaid Pantheon Adminstrative Expenses,
third to the payment of accrued and unpaid Series Administrative Expenses and fourth
to the payment of accrued and unpaid Allocated Asset Pool Administrative Expenses,
in each case allocable to such Series of Notes as set forth in the related definitions;
(ii) from the Series Interest Collection Accounts, the Series Principal Collection
Accounts, the Series Sales Proceeds Accounts and the Series Investment Accounts, in
that order, to the payment of the Base Management Fee to the Investment Manager as
specified in the relevant Series Supplement;
(iii) from the Series Interest Collection Accounts, the Series Principal Collection
Accounts, the Series Sales Proceeds Accounts and the Series Investment Accounts, in
that order, to the payment of any amounts payable pursuant to any Hedge Agreements
entered into with respect to such Series of Notes;
(iv) from the Series Interest Collection Accounts, the Series Principal Collection
Accounts, the Series Sales Proceeds Accounts and the Series Investment Accounts, in
that order, to the payment of the Incentive Management Fee to the Investment
Manager, in such manner and in such amounts as specified in the relevant Series
Supplement, with any required currency conversions to be performed by the Collateral
Administrator at the direction of the Investment Manager;
(v) from the Series Sales Proceeds Accounts and the Series Investment Accounts to
the Series Distribution Accounts, if directed by the Investment Manager, with any
required currency conversions to be performed by the Collateral Administrator at the
direction of the Investment Manager. Amounts so distributed shall be identified
appropriately for Noteholders; and
(vi) from the Series Interest Collection Accounts and the Series Principal Collection
Accounts to the Series Distribution Accounts for distribution to Noteholders of such
Series, with any required currency conversions to be performed at the direction of the
Investment Manager. Amounts so distributed shall be identified as principal or interest
as the case may be.
Payment Dates:
Payments will be made on a Series of Notes on such dates as are specified in the
relevant Series Supplement.
Specified
Currencies:
Notes may be denominated in any currency or currencies specified in the relevant
Series Supplement subject to compliance with all applicable legal and/or regulatory
and/or central bank requirements.
Issue Price:
Notes may be issued at any price and either on a fully or partly paid basis, as specified
in the relevant Series Supplement.
Optional
Redemption:
Notes may be redeemed before their stated maturity at the option of the Issuer (either
in whole or in part) and/or the Noteholders to the extent (if at all) specified in the
relevant Series Supplement. In connection with a redemption at the option of the
Noteholder, the relevant Series Supplement will specify the Minimum Holding Period,
if any, and any "black-out" periods applicable to the relevant Series of Notes. See
Condition 15(c) (Redemption at the option of the Issuer) and Condition 15(e)
(Optional Redemption at the option of Noteholders).
B-19
Additional
Redemption
Provisions:
Early redemption will be permitted as described in Condition 15(b) (Redemption for
tax reasons). Any additional redemption provisions will be set forth in the relevant
Series Supplement.
Hedge Agreements:
If the Series Supplement so provides with respect to each Series of Notes with respect
to which the Series Allocation Percentage in the relevant Asset Pool is greater than
zero, the Issuer may enter into Hedge Agreements with Hedge Counterparties meeting
the Hedge Counterparty Ratings Requirement in order to manage interest rate or
currency risks relating to Portfolio Investments in an Asset Pool. Such Hedge
Agreements shall be pool specific, and the Issuer's obligations to the Hedge
Counterparty under such Hedge Agreement will be secured by one or more specific
Asset Pools. Amounts payable to such Hedge Counterparty shall be paid out of
proceeds from the Portfolio Investments held in such Asset Pool prior to distribution of
any amounts to the holders of the Notes of any Series which has a Series Allocation
Percentage greater than zero in such Asset Pool unless required otherwise by the
Indenture Trustee to first make distributions from Asset Pools to the relevant Series in
order to pay administrative expense amounts due under the Priority of Payments. If a
Series Supplement so provides with respect to a Series of Notes, the Issuer may also
enter into Hedge Agreements with Hedge Counterparties meeting the Hedge
Counterparty Ratings Requirement in order to manage interest rate or currency risks
with respect payments to be made to the Holders of a specific Series of Notes in which
case such Hedge Agreements shall be secured only by the relevant Series Accounts
and shall be entitled to payments as set forth in the relevant Series Supplement.
Securities Lending
Agreements:
If a Series Supplement so provides with respect to each Series of Notes, with respect to
which the Series Allocation Percentage in the relevant Asset Pool is greater than zero,
the Issuer will be permitted to lend Portfolio Investments pursuant to one or more
Securities Lending Agreements and in such cases the Series will be secured by the
Issuer's rights under the related Securities Lending Agreement and not by the Portfolio
Investments loaned pursuant to such Securities Lending Agreement.
Short Positions:
If a Series Supplement so provides with respect to each Series of Notes with respect to
which the Series Allocation Percentage in the relevant Asset Pool is greater than zero,
the Issuer may from time to time enter into a credit default swap transaction with a
counterparty having a stated notional amount under which the Issuer is the purchaser
of credit protection and with a term no longer than five years; provided, that (i) the
terms thereof provide for Cash settlement and may only provide for physical
settlement at the option of the Issuer, (ii) the obligor of the Reference Obligation is
organized in a Qualifying Country and (iii) any other conditions in the relevant Series
Supplement have been met (a "Short Position").
Interest:
Notes may be interest-bearing or non-interest bearing, as specified in the relevant
Series Supplement. Interest (if any) may accrue at a fixed rate or a floating rate or
other variable rate or be index-linked or may be passed through based on collections
on the Portfolio Investments and the method of calculating interest may vary between
the Issue Date and the Maturity Date of the relevant Series.
Minimum
Denominations:
The Notes will be issued in such minimum denominations of one currency unit in each
of the Specified Currencies and in integral multiples of one currency unit in excess
thereof, or such other minimum denominations as may be specified in the relevant
Series Supplement, subject to compliance with all applicable legal and/or regulatory
and/or central bank requirements.
Maturities:
The maturity of each Series of Notes will be as indicated in the applicable Series
Supplement. Each Note will be redeemed in accordance with its terms on the Maturity
Date specified on the face of such Note and in the applicable Series Supplement for
such Series.
B-20
Placement:
The Notes may be offered and sold by the Issuer directly or through one or more
placement agents outside the United States to non-U.S. Persons (as defined in
Regulation S under the Securities Act) in offshore transactions in reliance on
Regulation S and in accordance with any applicable securities laws of any relevant
jurisdiction. If permitted by the relevant Series Supplement, the Notes may be offered
for sale to U.S. Persons pursuant to Rule 144A. See "Subscription and Sale".
Negative Pledge:
The Notes will have the benefit of a negative pledge as described in Condition 10
(Negative Pledge).
No Cross Default
between Series:
A default on a particular Series of Notes will not give rise to a default on another
Series of Notes.
Tax Matters:
See "Certain Tax Considerations".
ERISA
See "Certain ERISA Considerations"
Redenomination:
In respect of any Series of Notes, if the country of the Specified Currency becomes or,
announces its intention to become, a Participating Member State, the Notes may be
redenominated in euro in accordance with Condition 28 (Redenomination,
Renominalisation and Reconventioning) if so specified in the relevant Series
Supplement.
Governing Law:
The Notes, the Master Indenture, each Series Supplement, the Management
Agreement, and the Collateral Administration Agreement (collectively, the
"Transaction Documents") will be governed by, and construed in accordance with,
the law of the State of New York. The Administration Agreement will be governed by
Irish law.
Form, Registration,
and Transfer of
Notes:
Each Series of Notes will be issued in registered form. Unless otherwise provided in
the relevant Series Supplement, each Series of Notes will be in the form of a global
note (the "Global Note"), without interest coupons, as specified in the relevant Series
Supplement. Each Global Note will be deposited on or around the Issue date of the
relevant Series of the Notes with a depository for DTC or a common depository for
Euroclear and/or Clearstream Banking and/or any other relevant clearing system.
The Notes that are to be offered and sold to non-U.S. Persons in offshore transactions
(within the meaning of Regulation S under the Securities Act) in reliance on
Regulation S will be represented by interests in one or more global notes (the
"Regulation S Global Notes") in fully registered form without interest coupons
deposited with a custodian for, and registered in the name of, DTC (or its nominee),
for the accounts of Euroclear, and/or Clearstream Banking or registered in the name of
a nominee for, and deposited with a common depositary on behalf of Euroclear and
Clearstream Banking, as set forth in the related Series Supplement.
Interests in the Regulation S Global Notes will be shown on, and transfers thereof will
be effected only through, records maintained either by DTC and its direct and indirect
participants (including Euroclear and Clearstream Banking) or directly by Euroclear
and Clearstream Banking.
If the Notes of a Series are to be offered in the United States in reliance on Rule 144A
under the Securities Act, such Notes will be represented by one or more global notes
(the "Rule 144A Global Notes") in fully registered form without interest coupons
deposited with a custodian for, and registered in the name of, DTC (or its nominee).
Interests in Rule 144A Global Notes will be shown on, and transfers thereof will be
effected only through, records maintained by DTC.
Each Note will be allocated a Series number as specified in the relevant Series
B-21
Supplement.
Under certain limited circumstances described herein, definitive registered Notes may
be issued in exchange for Global Notes.
Ratings:
If specified in the relevant Series Supplement, a rating may be obtained for a Series of
Notes from one or more of following rating agencies: Moody's, Standard & Poor's,
Fitch or such other rating agency as specified in the relevant Series Supplement.
Reporting:
Pursuant to the relevant Series Supplement, the Collateral Administrator, in
consultation with the Investment Manager, shall deliver to the holders of a Series of
Notes a report setting forth, among other things, information relating to the Asset
Pools (including the Asset Pool Net Asset Value, the identity of the Portfolio
Investments, the Series Allocation Percentage of such Series of Notes, sales of
Portfolio Investments, etc.), the results of all applicable tests and payment information
relating to such Series of Notes.
Selling Restrictions:
For a description of certain restrictions on offers, sales, transfers and deliveries of
Notes and on the distribution of offering material in the Ireland, the United States of
America and the United Kingdom, see "Subscription and Sale" below.
B-22
RISK FACTORS
An investment in the Notes of any Series involves certain risks, including risks relating to the Applicable
Collateral securing such Series of Notes and the risks relating to the rights of such Series of Notes. 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 Notes.
Relating to the Notes
Investor Suitability
An investment in the Notes of a Series will not be appropriate for all investors. Structured investment
products, like such Notes, are complex instruments, and typically involve a high degree of risk and are intended for
sale only to sophisticated investors who are capable of understanding and assuming the risks involved. Any investor
interested in purchasing Notes should conduct its own investigation and analysis of the product and consult its own
professional advisers as to the risks involved in making such a purchase.
The Notes of each Series Will Have Limited Liquidity; The Notes will be Subject to Substantial Transfer
Restrictions
Currently, no market exists for the Notes of any Series. The Placement Agent for each Series of Notes, if
any, will be under no obligation to make a market for the Notes of such Series. There can be no assurance that any
secondary market for any of the Notes of any Series will develop, or if a secondary market does develop, that it will
provide the Holders of the Notes of such Series with liquidity of investment or will continue for the life of such
Notes. Consequently, a purchaser must be prepared to hold such Notes until their Maturity Date. In addition, no
sale, assignment, participation, pledge or transfer of the Notes may be effected if, among other things, it would
require the Issuer or any of its officers or directors to register under, or otherwise be subject to the provisions of, the
Investment Company Act or any other similar legislation or regulatory action. The Notes of each Series will not be
registered under the Securities Act or any state securities laws, and the Issuer has no plans, and is under no
obligation, to register the Notes of any Series under the Securities Act. The Notes of each Series will be subject to
certain transfer restrictions and will only be transferable to certain transferees as described in the related Series
Supplement under "Transfer Restrictions." Such restrictions on the transfer of the Notes may further limit their
liquidity.
The Placement Agent Will Have No Ongoing Responsibility for the Applicable Collateral or the Actions of
the Investment Manager or the Issuer
In the case of a Series of Notes placed by a Placement Agent, such Placement Agent will have no
obligation to monitor the performance of the Applicable Collateral or the actions of the Investment Manager or the
Issuer and will have no authority to advise the Investment Manager or the Issuer or to direct their actions, which will
be solely the responsibility of the Investment Manager and/or the Issuer, as the case may be. If such Placement
Agent acts as Hedge Counterparty, Synthetic Security Counterparty or Securities Lending Counterparty with respect
to such Series or owns Notes of such Series, it will have no responsibility to consider the interests of any holders of
Notes of such Series in actions it takes in such capacities. While the Placement Agent may own Notes of a Series at
any time, it has no obligation to make any investment in any Notes of such Series and may sell at any time any
Notes that it does purchase.
The Notes of each Series Are Limited Recourse Obligations; Investors Must Rely on Available Collections
from the Applicable Collateral and Will Have No Other Source for Payment
The Notes of each Series are limited recourse obligations of the Issuer and are payable solely from amounts
received in respect of the Applicable Collateral securing that Series of Notes. None of the Indenture Trustee, the
Investment Manager, any Agent or any of their respective affiliates or the Issuer's affiliates or any other person or
entity will be obligated to make payments on the Notes of any Series. Consequently, holders of the Notes must rely
solely on distributions from the Applicable Collateral securing such Series of Notes for payments on such Notes. If
distributions on the Applicable Collateral are insufficient to make payments on the Notes of the Series, no other
assets (in particular, no assets of the Investment Manager, the holders of the Notes, any Agent, the Indenture Trustee
or any affiliates of any of the foregoing) will be available for payment of the deficiency and all obligations of the
B-23
Issuer and any claims against the Issuer in respect of the Notes of such Series will be extinguished and will not
revive. None of the holders of the Notes of such Series may take any further actions to recover such amounts.
None of the Holders of a Series of Notes, the Indenture Trustee, the Investment Manager or any other
Secured Party (nor any other person acting on behalf of any of them) shall be entitled at any time to institute against
the Issuer, or join in any institution against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency,
winding-up, examinership or liquidation proceedings or any proceedings for the appointment of a liquidator, an
examiner or administrator or a similar official, or other proceedings under any applicable bankruptcy or similar law
in connection with any obligations of the Issuer relating to the Notes of any Series, the Master Indenture or
otherwise owed to the Noteholders of any Series, save for lodging a claim in the liquidation of the Issuer which is
initiated by another party or taking proceedings to obtain a declaration or judgment as to the obligations of the Issuer
nor shall any of them have a claim arising in respect of the share capital of the Issuer.
The Applicable Collateral May Be Insufficient to Redeem the Notes in an Event of Default
It is anticipated that the proceeds received by the Issuer on the Issue Date for each Series of Notes from the
issuance of the Notes of such Series, net of certain fees and expenses, will be less than the aggregate principal
amount of Notes of such Series. Consequently, it is anticipated that on the Issue Date the Applicable Collateral
would be insufficient to redeem such Notes in the event of an Event of Default under the Indenture.
The Weighted Average Lives of the Notes of each Series May Vary
The average life of each Series of Notes is expected to be shorter than the number of years until its
respective Maturity Date. Each such average life may vary due to various factors affecting the early retirement of
Portfolio Investments, the timing and amount of sales of such Portfolio Investments, the ability of the Investment
Manager to invest collections and proceeds in additional Portfolio Investments, and the occurrence of any
mandatory redemption or optional redemption with respect to such Series of Notes. Retirement of the Portfolio
Investments prior to their respective final maturities will depend, among other things, on the financial condition of
the issuers of the underlying Portfolio Investments and the respective characteristics of such Portfolio Investments,
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 Investments and the frequency of tender or exchange offers for such
Portfolio Investments. The ability of the Issuer to reinvest proceeds in securities with comparable interest rates that
satisfy the reinvestment criteria specified in the related Series Supplement may affect the timing and amount of
payments received by the holders of Notes of such Series and the yield to maturity of the Notes of such Series.
Changes in Tax Law Could Result in the Imposition of Withholding Taxes with Respect to Interest and
Other Payments on the Portfolio Investments
The Issuer expects to conduct its affairs so that its net income will not be subject to United States federal
income tax. There can be no assurance, however, that its net income will not become subject to United States
federal income tax as the result of activities by the Issuer, changes in law, contrary conclusions by United States tax
authorities or other causes.
Payments on the Portfolio Investments (other than commitment fees facility fees or other similar fees) are
required not to be subject to withholding tax when the Portfolio Investments are acquired by the Issuer unless the
obligor thereof is required to make "gross-up" payments that cover the full amount of such withholding tax on an
after-tax basis. In the case of debt obligations issued by U.S. obligors after July 18, 1984, interest payments thereon
are generally exempt under current United States tax law from the imposition of United States federal income
withholding tax.
With respect to Portfolio Investments that are not subject to withholding tax at the time of acquisition by
the Issuer, however, there can be no assurance that the payments on such Portfolio Investments will not become
subject to U.S. or other withholding tax as a result of a change in any applicable law, treaty, rule or regulation or
interpretation thereof or other causes, possibly with retroactive effect. If any withholding tax is or becomes
applicable to payments on the Portfolio Investments and such tax is not fully offset by "gross-up" payments, such
withholding tax will reduce the amounts available to make payments on the Notes of each Series. There can be no
B-24
assurance that the remaining payments on the Portfolio Investments would be sufficient to make payments on the
Notes of a Series.
The Issuer is Recently Formed, Has No Significant Operating History, Has No Collateral Other Than the
Collateral and is Limited in its Permitted Activities
The Issuer is a recently incorporated or organized entity and has no prior operating history or track record.
Accordingly, the Issuer does not have a performance history for a prospective investor to consider in making its
decision to invest in the Notes of a Series.
The Notes of each Series Are Not Guaranteed by the Issuers, the Placement Agent, the Investment
Manager, any Hedge Counterparty or the Indenture Trustee
None of the Issuer, any Agent, the Investment Manager, any Hedge Counterparty, or the Indenture Trustee
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 Notes of any Series 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 of such Series . Each purchaser of any Notes of a Series represented by a Global Note, by
its acceptance thereof, will be deemed and each purchaser of any Notes of a Series represented by a certificated
registered note will be required, to represent to the Issuer and the Placement Agent, among other things, that such
purchaser has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors
regarding investment in the Notes of such Series as such purchaser has deemed necessary and that the investment by
such purchaser is 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.
Withholding Tax on the Notes
There is a general obligation to withhold Irish tax, at a rate of 20 percent., from interest payments made by
Irish companies (as described in more detail under "Irish Taxation" below). It is expected that, upon issue of any
Series of Notes on the Initial Issue Date applicable to such Series, payments of interest by the Issuer in respect of
such Notes will be exempt from this obligation to withhold tax on the basis that on such Initial Issue Date either:
(a)
such Notes will qualify as "quoted Eurobonds", which are expressly exempted from Irish interest
withholding tax; or
(b)
payments of interest by the Issuer in respect of such Notes are being made to another "qualifying
company" (within the meaning of Section 110 of the 1997 Act); or
(c)
the Issuer is a "qualifying company" (within the meaning of Section 110 of the 1997 Act) and the
interest is paid to a person resident in a "relevant territory" (i.e. a member state of the European Union (other than
Ireland) or in a country with which Ireland has a double taxation agreement).
In the event that the Notes of any Series no longer qualified under (a), (b) or (c) above or there is a change
in law in Ireland, withholding tax may be imposed on payments of interest on the Notes of any Series. In such
circumstances, the Issuer is not required to "gross up" any payments made to the applicable Noteholders to
compensate for any such withholding and any such non-payment would not be an Event of Default under Condition
19 in and of itself. However, if the relevant Series Supplement so provides, in such circumstances the Series may be
redeemed (in whole but not in part) at the option of the Noteholders. See Condition 15 (Redemption).
Non-Compliance with Restrictions on Ownership of the Notes and the United States Investment Company
Act of 1940 Could Adversely Affect the Issuer
The Issuer has not 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
B-25
only by "qualified purchasers" and certain transferees thereof identified in Rule 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 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: (i) the SEC could apply to a district court to enjoin the violation; (ii) investors in
the Issuer could sue the Issuer and recover any damages caused by the violation; and (iii) any contract to which the
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 with respect to each Series of Notes under the Indenture. Should the Issuer be subjected to any or
all of the foregoing, the Issuer would be materially and adversely affected.
Book-Entry Holders Are Not Considered Holders Under the Indenture
Holders of beneficial interests in any Notes of a Series held in global form will not be considered holders of
such Notes under the Indenture. After payment of any interest, principal or other amount to DTC, Euroclear or
Clearstream, as the case may be, the Issuer will not have any responsibility or liability for the payment of such
amount by such Clearing House or to any holder of a beneficial interest in a Note. Such Clearing House or its
nominee will be the sole holder for any Notes of any Series held in global form, and therefore each person owning a
beneficial interest in a Note held in global form must rely on the procedures of such Clearing House (and if such
person is not a participant in such Clearing House, 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 of a Series under the Indenture.
Master Fund Structure
The existence of multiple Series of Notes being issued by the Issuer presents certain risks to investors in
each Series of Notes. One Series of Notes may be issued on terms different from the terms of another Series of
Notes. To the extent that such first Series of Notes has interests in the same Asset Pools as the other Series of Notes,
the Investment Guidelines with respect to such other Series may adversely affect the investments that the Investment
Manager would otherwise be able to make on behalf of the Notes of the first Series. Early redemption on another
Series of Notes and other events may also effect, at least temporarily, the Asset Pools in which a Series of Notes will
be invested. As further described herein, in the event of an Event of Default under the Notes of one Series or an
"Event of Default" under another Series, minimum denominations may prevent Segregation with respect to certain
Portfolio Investments between the first Series and such other Series, with adverse effect on the first Series. There
can be no assurance that the Issuer will issue such other Series of Notes, in which event there will be no reduction in
the allocated costs of the initial establishment of the Issuer and the initial Series of Notes will bear such expense.
Preferred Creditors under Irish Law and Fixed Charges
Under Irish law, upon an insolvency of an Irish company such as the Issuer, when applying the proceeds of
assets subject to fixed security which may have been realised in the course of a liquidation or receivership, the
claims of a limited category of preferential creditors will take priority over the claims of creditors holding the
relevant fixed security. These preferred claims include the remuneration, costs and expenses properly incurred by
any examiner of the company (which may include any borrowings made by an examiner to fund the company's
requirements for the duration of his appointment) which have been approved by the Irish courts (for further
information as to which, see "Examination" below).
The holder of a fixed security over the book debts of an Irish tax resident company (which would include
the Issuer) may be required by the Irish Revenue Commissioners, by notice in writing from the Irish Revenue
Commissioners, to pay to them sums equivalent to those which the holder received in payment of debts due to it by
the company. Where the holder of the security has given notice to the Irish Revenue Commissions of the creation of
the security within 21 days of its creation, the holder's liability is limited to the amount of certain outstanding Irish
tax liabilities of the company (including liabilities in respect of value added tax) arising after the issuance of the
Irish Revenue Commissions' notice to the holder of fixed security.
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The Irish Revenue Commissioners may also attach any debt due to an Irish tax resident company by
another person in order to discharge any liabilities of the company in respect of outstanding tax whether the
liabilities are due on its own account or as an agent or trustee. The scope of this right of the Irish Revenue
Commissioners has not yet been considered by the Irish courts and it may override the rights of holders of security
(whether fixed or floating) over the debt in question.
In relation to the disposal of assets of any Irish tax resident company which are subject to security, a person
entitled to the benefit of the security may be liable for tax in relation to any capital gains made by the company on a
disposal of those assets on exercise of the security.
Furthermore, when applying the proceeds of assets subject to floating security which may have been
realised in the course of a liquidation or receivership, the claims of a wider category of preferential creditors will
take priority over the claims of creditors holding floating security and over unsecured creditors. In this case,
preferred claims include taxes, such as income tax and corporation tax payable before the date of appointment of the
liquidator or receiver and arrears of VAT, together with accrued interest thereon and claims of employees.
It is of the essence of a fixed charge that the person creating the charge does not have liberty to deal with
the assets which are the subject matter of the security in the sense of disposing of such assets or expending or
appropriating the monies or claims constituting such assets and accordingly, if and to the extent that such liberty is
given to the Issuer, a charge constituted by the Master Indenture may operate as a floating, rather than a fixed
charge.
In particular, the Irish courts have held that in order to created a fixed charge on receivables it is necessary
to oblige the chargor to pay the proceeds of collection of the receivables into a designated bank account and to
prohibit the chargor from withdrawing or otherwise dealing with the monies standing to the credit of such account
without the consent of the chargee.
Floating charges have certain weaknesses, including the following:
(a)
they have weak priority against purchases (who are not on notice of any negative pledge contained
in the floating charge) and chargees of the assets concerned and against lien holders, execution creditors and
creditors with rights of set-off;
(b)
as discussed above, they rank after certain preferential creditors, such as claims of employees and
certain taxes on winding-up;
(c)
(d)
charge; and
(e)
they rank after certain insolvency remuneration expenses and liabilities;
the examiner of a company has certain rights to deal with the property covered by the floating
they rank after fixed charges.
Examination under Irish Law
Examination is a court procedure available under the Irish Companies (Amendment) Act, 1990, as
amended, to facilitate the survival of Irish companies in financial difficulties.
The company, the directors of the company, a contingent, prospective or actual creditor of the company, or
shareholders of the company holding, at the date of presentation of the petition, not less than 1/10th of the voting
share capital of the company are each entitled to petition the court for the appointment of an examiner. The
examiner, once appointed, has the power to set aside contracts and arrangements entered into by the company after
his appointment and, in certain circumstances, can avoid a negative pledge given by the company prior to his
appointment. Furthermore, the examiner may sell assets the subject of a fixed charge for the amount realised and
discharge the amount due to them out of the proceeds of sale.
During the period of protection, the examiner will compile proposals for a compromise or scheme of
arrangement to assist the survival of the company or the whole or any part of its undertaking as a going concern. A
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scheme of arrangement may be approved by the Irish High Court when at least one class of creditors has voted in
favour of the proposals and the Irish High Court is satisfied that such proposals are fair and equitable in relation to
any class of members or creditors who have not accepted the proposals and whose interests would be impaired by
implementation of the scheme of arrangement. In considering proposals by the examiner, it is likely that secured
and unsecured creditors would form separate classes of creditors. In the case of the Issuer, if the Indenture Trustee
represented the majority in number and value of claims within the secured creditor class (which would be likely
given the restrictions agreed to by the Issuer in the Conditions), the Indenture Trustee would be in a position to
reject any proposal not in favour of the Noteholders. The Indenture Trustee would also be entitled to argue at the
Irish High Court hearing at which the proposed scheme of arrangement is considered that proposals are unfair and
inequitable in relation to the Noteholders, especially if such proposals included a writing down to the value of
amounts due by the Issuer to the Noteholders. The primary risks to the Noteholders if an examiner were to be
appointed to the Issuer are as follows:
(a)
the potential for a scheme of arrangement being approved involving the writing down of the debt
due by the Issuer to the Noteholders as secured by the Indenture;
(b)
the potential for the examiner to seek to set aside any negative pledge in the Conditions or the
Master Indenture prohibiting the creation of security or the incurrence of borrowings by the Issuer to enable the
examiner to borrow to fund the Issuer during the protection period; and
(c)
in the event that a scheme of arrangement is not approved and the Issuer subsequently goes into
liquidation, the examiner's remuneration and expenses (including certain borrowings incurred by the examiner on
behalf of the Issuer and approved by the Irish High Court) will take priority over any amounts owed to the
Noteholders.
Relating to the Investment Manager
Performance History of the Principals of the Investment Manager May Not Be Indicative of Future Results
The past performance of the principals of the Investment Manager in other portfolios or investment
vehicles may not be indicative of the results that the Investment Manager may be able to achieve with the Portfolio
Investments. Similarly, the past performance of the principals of the Investment Manager over a particular period
may not necessarily be indicative of the results that may be expected in future periods. Furthermore, the nature of,
and risks associated with, the Issuer's investments may differ substantially from those investments and strategies
undertaken historically by the principals of the Investment Manager. There can be no assurance that the Issuer's
investments will perform as well as past investments of such principals, that the Issuer will be able to avoid losses or
that the Issuer will be able to make investments similar to the past investments managed by the principals or any
other person described herein. In addition, such past investments may have been made utilizing a leveraged capital
structure, an asset mix and fee arrangements that are different from the anticipated capital structure, asset mix and
fee arrangements of the Issuer. Moreover, because the investment criteria that govern investments in the Issuer's
portfolio will not govern the principals' investments and investment strategies generally, such investments conducted
in accordance with such criteria, and the results they yield, are not directly comparable with, and may differ
substantially from other investments undertaken by the principals of the Investment Manager.
Certain Contingent Management Fee May Create Different Incentives for the Investment Manager
To the extent that the Investment Manager is entitled to certain contingent management fees with respect to
a Series of Notes in addition to the Base Management Fee, the existence of the such contingent fees may create an
incentive for the Investment Manager to approve or cause the Issuer to make investments in more speculative
Portfolio Investments than it would otherwise make in the absence of such performance-based compensation.
The Issuer Will Depend on the Managerial Expertise Available to the Investment Manager and its
personnel
The performance of the Issuer's portfolio depends heavily on the skills of the Investment Manager in
analyzing, selecting and managing the Portfolio Investments. As a result, the Issuer will be highly dependent on the
financial and managerial experience of certain investment professionals associated with the Investment Manager,
none of whom is under any contractual obligation to the Issuer to continue to be associated with the Investment
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Manager for the term of this transaction. The loss of one or more of these individuals could have a material adverse
effect on the performance of the Issuer. Furthermore, the Investment Manager has informed the Issuer that these
investment professionals may also be actively involved from time to time in other investment activities and will not
be able to devote all of their time to the Issuer's business and affairs. In addition, individuals not currently
associated with the Investment Manager may become associated with the Investment Manager and the performance
of the Portfolio Investments may also depend on the financial and managerial experience of such individuals.
Relating to the Portfolio Investments
Nature of Portfolio Investments
It is expected that a significant portion of the Portfolio Investments will generally be subordinated to one or
more other classes of securities of the same series for purposes of, among other things, offsetting losses and other
shortfalls with respect to the related underlying assets.
The Collateral is subject to credit, liquidity, interest rate, market, operations, fraud and structural risks.
Prices of the Collateral may be volatile, and will generally fluctuate due to a variety of factors that are inherently
difficult to predict, including but not limited to changes in interest rates, prevailing credit spreads, general economic
conditions, financial market conditions, domestic and international economic or political events, developments or
trends in any particular industry, and the financial condition of the obligors of the Collateral. In addition, a
significant portion of the Collateral will be acquired by the Issuer after the Issue Date for each Series of Notes, and,
accordingly, the financial performance of the Issuer may be affected by the price and availability of Collateral to be
acquired. The amount and nature of the Applicable Collateral securing each Series of Notes will be established to
withstand certain assumed deficiencies in payment occasioned by defaults in respect of the related Portfolio
Investments and a certain assumed number and frequency of Credit Events under the Synthetic Securities in the
form of credit default swaps. If any deficiencies and Credit Events exceed such assumed levels, however, payment
of the distributions on the Notes of the Series could be adversely affected. To the extent that a default occurs with
respect to any Portfolio Investment securing a Series of Notes and the Issuer (upon the advice of the Investment
Manager) sells or otherwise disposes of such Portfolio Investment, it is not likely that the proceeds of such sale or
disposition will be equal to the amount of principal and interest owing to the Issuer in respect of such Portfolio
Investment.
There is Limited Disclosure About the Portfolio Investments in this Offering Circular
The Issuer and the Investment Manager will not be required to provide the holders of the Notes of any
Series or the Indenture Trustee with financial or other information (which may include material non-public
information) it receives pursuant to the Portfolio Investments and related documents. The Investment Manager also
will not disclose to any of these parties the contents of any notice it receives pursuant to the Portfolio Investments or
related documents. In particular, the Investment Manager will not have any obligation to keep any of these parties
informed as to matters arising in relation to any Portfolio Investments, except with respect to: (i) the Asset Pools and
related Pool Accounts in which the Series Allocation Percentage of the Holders of such Notes is greater than zero
(ii) the Series Allocation Percentage for each of such Asset Pools, (iii) the receipt or non-receipt, on an aggregate
basis, of principal, interest, or other amounts of collections or recoveries with respect to such Asset Pools; (iv) the
cancellation of any Portfolio Investment held in such Asset Pools; (v) default amounts in respect of the Portfolio
Investment held in such Asset Pools; and (vi) certain other information required to be reported under the
Management Agreement and the Indenture.
The holders of the Notes of any Series and the Indenture Trustee (other than with respect to the allocation
among Asset Pools and the Series Allocation Percentage of each Series therein) will not have any right to inspect
any records relating to the Portfolio Investments held in the related Asset Pools, and the Investment Manager will
not be obligated to disclose any further information or evidence regarding the existence or terms of, or the identity
of any obligor on, such Portfolio Investments, unless specifically required by the Management Agreement.
Furthermore, the Investment Manager and the Indenture Trustee may demand that any persons requesting that
information execute confidentiality agreements before being provided with the information.
Default Rates of Below Investment Grade Securities
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The Issuer may purchase securities which are publicly rated below investment grade by at least one Rating
Agency. While there are varying sources of statistical default rate data for investment grade securities and numerous
methods for measuring default rates, the Issuer is not aware of a central source for relevant data or standardized
method for measuring default rates of below investment grade securities. Furthermore, the historical performance of
the below investment grade market is not necessarily indicative of its future performance. Should increases in
default rates occur with respect to the type of collateral comprising the Applicable Collateral, the actual default rates
of the Applicable Collateral may exceed historical or anticipated default rates.
Lender Liability Considerations and Equitable Subordination Can Affect the Issuer's Rights with Respect to
Portfolio Investments
A number of judicial decisions have upheld judgments of borrowers against lending institutions on the
basis of various evolving legal theories, collectively termed "lender liability" Generally, lender liability is founded
on the premise that a lender has violated a duty (whether implied or contractual) of good faith, commercial
reasonableness and fair dealing, or a similar duty owed to the borrower or has assumed an excessive degree of
control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or
shareholders. Because of the potential nature of some of the Collateral, the Issuer may be subject to allegations of
lender liability.
In addition, under common law principles that in some cases form the basis for lender liability claims, if a
lender or bondholder (a) intentionally takes an action that results in the undercapitalization of a borrower to the
detriment of other creditors of such borrower, (b) engages in other inequitable conduct to the detriment of such other
creditors, (c) engages in fraud with respect to, or makes misrepresentations to, such other creditors or (d) uses its
influence as a stockholder to dominate or control a borrower to the detriment of other creditors of such borrower, a
court may elect to subordinate the claim of the offending lender or bondholder to the claims of the disadvantaged
creditor or creditors, a remedy called "equitable subordination." Because of the nature of the Collateral, the
Collateral may be subject to claims of equitable subordination.
Because affiliates of, or persons related to, the Investment Manager may hold equity or other interests in
obligors of Portfolio Investments, the Issuer could be exposed to claims for equitable subordination or lender
liability or both based on such equity or other holdings.
The preceding discussion is based upon principles of United States federal and state laws. Insofar as
Portfolio Investments that are obligations of non-United States obligors are concerned, the laws of certain foreign
jurisdictions may impose liability upon lenders or bondholders under factual circumstances similar to those
described above, with consequences that may or may not be analogous to those described above under United States
federal and state laws.
The Issuer May Not Be Able to Acquire Portfolio Investments That Satisfy the Investment Criteria
The ability of the Issuer to acquire Portfolio Investments that satisfies the investment criteria set forth in
each Series Supplement at the projected prices, ratings, rates of interest and any other applicable characteristics will
be subject to market conditions and availability of such Portfolio Investments. Any inability of the Issuer to acquire
Portfolio Investments that satisfy such investment criteria may adversely affect the timing and amount of the
payments received by the holders of Notes of the related Series. There is no assurance that the Issuer will be able to
acquire Portfolio Investments that satisfy the investment criteria for any given Series of Notes.
Where the Issuer invests in Structured Finance Obligations, such Investments Involve Particular Risks
Where the Series Supplement for a Series of Notes so permits, a portion of the Portfolio Investments may
consist of structured finance obligations. Structured finance obligations may present risks similar to those of the
other types of Portfolio Investments in which the Issuer may invest and, in fact, the risks may be of greater
significance in the case of Structured Finance Obligations. Moreover, investing in Structured Finance Obligations
may entail a variety of unique risks. Among other risks, Structured Finance Obligations may be subject to
prepayment risk, credit risk, liquidity risk, market risk, structural risk, legal risk and interest rate risk (which may be
exacerbated if the interest rate payable on a Structured Finance Obligation changes based on multiples of changes in
interest rates or inversely to changes in interest rates). In addition, certain Structured Finance Obligations
(particularly subordinated collateralized bond obligations) may provide that non-payment of interest is not an event
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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 Structured
Finance Obligation will be affected by a variety of factors, including its priority in the capital structure of its issuer,
the availability of any credit enhancement, the level and timing of payments and recoveries on and the
characteristics of the underlying receivables, loans, or other assets that are being securitized, bankruptcy remoteness
of those assets from the originator or transferor, the adequacy of and ability to realize on any related collateral, and
the skill of the manager of the Structured Finance Obligation in managing securitized assets. The price of a
Structured Finance Obligation, if required to be sold, may be subject to certain market and liquidity risks for
securities of its type at the time of sale. In addition, Structured Finance Obligations may involve initial and ongoing
expenses above the costs associated with the related direct investments.
Where the Issuer Invests in Synthetic Securities, Such Investments Involve Particular Risks
Where the Series Supplement for a Series of Notes so permits, a portion of the Portfolio Investments for a
Series of Notes may consist of Synthetic Securities the Reference Obligations of which may be leveraged loans,
high-yield debt securities or similar securities. Investments in such types of assets through the purchase of Synthetic
Securities present risks in addition to those resulting from direct purchases of such Portfolio Investments. With
respect to each Synthetic Security, the Issuer will usually have a contractual relationship only with the counterparty
of such Synthetic Security, and not the reference obligor on the Reference Obligation. The Issuer generally will
have no right directly to enforce compliance by the reference obligor with the terms of the Reference Obligation nor
any rights of set-off against the reference obligor, may be subject to set-off rights exercised by the reference obligor
against the counterparty or another person or entity, and generally will not have any voting or other contractual
rights of ownership with respect to the Reference Obligation. The Issuer will not directly benefit from any collateral
supporting the Reference Obligation and will not have the benefit of the remedies that would normally be available
to a holder of such Reference Obligation. In addition, in the event of the insolvency of the counterparty, the Issuer
will be treated as a general creditor of such counterparty, and will not have any claim with respect to the Reference
Obligation. Consequently, the Issuer will be subject to the credit risk of the counterparty as well as that of the
reference obligor. As a result, concentrations of Synthetic Securities entered into with any one counterparty will
subject the Notes of the Series exposed to such Portfolio Investments to an additional degree of risk with respect to
defaults by such counterparty as well as by the reference obligor.
Additionally, while the Issuer expects that the returns on a Synthetic Security will generally reflect those of
the related Reference Obligation, as a result of the terms of the Synthetic Security and the assumption of the credit
risk of the Synthetic Security Counterparty, a Synthetic Security 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. Additionally, when compared to the Reference Obligation, the terms of a
Synthetic Security 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 the Synthetic
Security, the terms of the Synthetic Security may permit or require the issuer of such Synthetic Security to satisfy its
obligations under the Synthetic Security by delivering to the Issuer securities other than the Reference Obligation or
an amount different than the then current market value of the Reference Obligation.
If a Series Supplement with respect to a Series of Notes permits the Issuer to purchase credit protection
through Synthetic Securities that are Short Positions, such investments involve certain risks not generally implicated
by acquiring other Synthetic Securities, as described in the next paragraph.
Where the Issuer Has the Right to Acquire Short Positions, Such Investment Involves Counterparty Risks
and Other Risks
If the Series Supplement with respect to a Series of Notes so permits, the Issuer may from time to time
acquire Short Positions pursuant to which the applicable counterparty assumes credit risk in respect of a specified
Reference Obligation (including where the Issuer has no exposure to such Reference Obligation) in the event of the
occurrence of specified credit events in respect thereof, in return for payment of a periodic payment by the Issuer to
such counterparty. The acquisition by the Issuer of a Short Position will be subject to certain conditions set forth in
such Series Supplement. No assurance can be given that the acquisition of such Short Positions will result in any
return to the Issuer and the periodic premiums payable by the Issuer under Short Positions will reduce the amount of
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proceeds that would otherwise be available to invest in other Portfolio Investments or make payments in respect of
the Notes of such Series.
Where the Issuer Has the Right to Engage in Securities Lending, Such Transactions Involve Counterparty
Risks and Other Risks
If the Series Supplement with respect to a Series of Notes so permits, the Portfolio Investments may be
loaned to banks, broker-dealers or other financial institutions that have, or are guaranteed by entities that have, the
required ratings set forth in such Series Supplement. Although such loans may be required to be secured by
collateral, in the event that a borrower of loaned Portfolio Investments defaults in its obligation to return such loaned
Portfolio Investments, whether because of insolvency or otherwise, the Issuer could experience delays and costs in
gaining access to the collateral posted by the borrower (and in extreme circumstances could be restricted from
selling the collateral). Additionally, in such an event the holders of the Notes of such Series could suffer a loss to
the extent the realized value of the cash or securities securing the obligation of the borrower to return the loaned
Portfolio Investment (less expenses) is less than the amount required to purchase such Portfolio Investment in the
open market. This shortfall could be due to, among other things, discrepancies between the mark-to-market and
actual transaction prices for the loaned Portfolio Investments arising from limited liquidity or availability of the
loaned Portfolio Investments, and in extreme circumstances, the loaned Portfolio Investments being unavailable at
any price. Generally, the Issuer will have no right to directly enforce compliance by the obligor of a loaned
Portfolio Investment with the terms of such Portfolio Investment, will not have any voting or other contractual rights
of ownership with respect to such Portfolio Investment and will not have the benefit of the remedies that would
normally be available to a holder of such Portfolio Investment. The Placement Agent and/or one or more of its
affiliates may borrow Portfolio Investments, which may create certain conflicts of interest.
Asset-Backed Securities
If the Series Supplement with respect to a Series of Notes so permits, the Issuer may from time to time
acquire Asset-Backed Securities or Synthetic Securities with respect to which the Reference Obligations are AssetBacked Securities. Asset-Backed Securities are debt obligations or debt securities that entitle the holders thereof to
receive payments that depend primarily on the cash flow from (a) a specified pool of financial assets, either static 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 (b) real estate
mortgages, either static 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 clause (b), such Asset-Backed
Securities do not entitle the holders to a right to share in the appreciation in value of or the profits generated by the
related real estate assets.
Asset-Backed Securities include but are not limited to securities for which the underlying collateral consists
of assets such as home equity loans, leases, residential mortgage loans, commercial mortgage loans, auto finance
receivables, credit card receivables and other debt obligations. Sponsors of issuers of Asset-Backed Securities are
primarily banks and finance companies, captive finance subsidiaries of non financial corporations or specialized
originators such as credit card lenders.
Asset-Backed Securities carry coupons that can be fixed or floating. 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 assets.
Holders of Asset-Backed Securities bear various risks, including credit risk, liquidity risk, interest rate risk,
market risk, operations risk, structural risk and legal risk. The structure of an Asset-Backed 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 Asset-Backed 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
Asset-Backed 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
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that is the actual source of the collateral assets is obligated to provide support to the issuing vehicle or to the
investors in such Asset-Backed Securities.
Holders of Asset-Backed Securities bear various risks, including credit risks, liquidity risks, interest rate
risks, market risks, operations risks, structural risks and legal risks. Credit risk is an important issue in AssetBacked Securities because of the significant credit risks inherent in the underlying collateral and because issuers are
primarily private entities. Credit risk arises from losses due to defaults by the borrowers or obligors in the
underlying collateral or the issuer's or the servicer's failure to perform. These two elements can overlap as, for
example, in the case of a servicer who does not provide adequate credit-review scrutiny to the serviced portfolio,
leading to a higher incidence of defaults. Market risk arises from the cash-flow characteristics of the security, which
for many Asset-Backed Securities 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 if 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. Liquidity
risk can arise from increased perceived credit risk, such as 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 significant
problem if concerns about credit quality, for example, lead investors to avoid the securities issued by the relevant
special-purpose entity. Some securitization transactions may include a "liquidity facility," which requires the
facility provider to advance funds to the relevant special-purpose entity should liquidity problems arise. However,
where the originator is also the provider of the liquidity facility, the originator may experience similar market
concerns if the assets it originates deteriorate and the ultimate practical value of the liquidity facility to the
transaction may be questionable. Operations risk arises through the potential for misrepresentation of asset 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.
In addition, concentrations of Asset-Backed Securities of a particular type, as well as concentrations of
Asset-Backed Securities issued or guaranteed by affiliated obligors, serviced by the same servicer or backed by
underlying collateral located in a specific geographic region, may subject the Notes of each Series to additional risk.
Further issues may arise based on discretionary behavior of the issuer within the terms of the securitization
agreements, 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 two or more of originator of underlying collateral, 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 Asset Backed 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.
Prepayment risk on Asset-Backed Securities, including the Portfolio Investments, arises from the
uncertainty of the timing of payments of principal on the underlying securitized assets. The assets underlying a
particular Portfolio Investment may be paid more quickly than anticipated, resulting in payments of principal on the
related Portfolio Investment sooner than expected. Alternatively, amortization may take place more slowly than
anticipated, resulting in payments of principal on the related Portfolio Investment later than expected. In addition, a
particular Portfolio Investment may, by its terms, be subject to redemption prior to its maturity, resulting in a full or
partial payment of principal in respect of such Portfolio Investment. Similarly, defaults on the underlying securitized
assets may lead to sales or liquidations and result in a prepayment of such Portfolio Investment.
If the Issuer purchases a Portfolio Investment at a premium, a prepayment rate that is faster than expected
may result in a lower than expected yield to maturity on such security. Alternatively, if the Issuer purchases a
Portfolio Investment at a discount, slower than expected prepayments may result in a lower than expected yield to
maturity on such security.
Often Asset-Backed 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 Asset-Backed 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 allocated to the senior portion. Because the senior
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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 satisfied will the cash flows be directed to service the
subordinated class. If the Series Supplement so provides, the Applicable Collateral for a Series of Notes may
consist of Asset-Backed Securities that are (or Synthetic Securities with respect to which the Reference Obligations
are Asset-Backed Securities that are) subordinate in right of payment and rank junior to other securities that are
secured by or represent an ownership interest in the same pool of assets. In addition, many of the Asset-Backed
Securities included in the Applicable Collateral may have been issued in transactions that have structural features
that divert payments of interest and/or principal to more senior classes when the delinquency or loss experience of
the pool exceeds certain levels. As a result, such securities have a higher risk of loss as a result of delinquencies or
losses on the underlying assets. In certain circumstances, payments of interest may be reduced or eliminated for one
or more payment dates. Additionally, as a result of cash flow being diverted to payments of principal on more
senior classes, the average life of such securities may lengthen. For example, in the case of certain ABS Type
Residential Securities, no distributions of principal will generally be made with respect to any class until the
aggregate principal balances of the more senior classes of securities have been reduced to zero. Subordinate AssetBacked Securities generally do not have the right to call a default or vote on remedies following a default unless
more senior securities have been paid in full. As a result, a shortfall in payments to subordinate investors in AssetBacked Securities will generally not result in a default being declared on the transaction and the transaction will not
be restructured or unwound. Furthermore, because subordinate Asset-Backed Securities may represent a relatively
small percentage of the size of the asset pool being securitized, the impact of a relatively small loss on the overall
pool may disproportionately affect the holders of such subordinate security.
CDO Securities
If the Series Supplement with respect to a Series of Notes so permits, a portion of the Portfolio Investments
acquired by the Issuer will consist of CDO Securities. In addition, a portion of the Reference Obligations under the
Synthetic Securities may consist of CDO Securities.
"CDO Securities" are 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 (each such portfolio, an "Underlying
Portfolio") of commercial and industrial bank loans, other Asset-Backed Securities or corporate debt securities or
any combination of the foregoing, generally having the following characteristics: (1) the bank loans and debt
securities have varying contractual maturities; (2) repayment thereof can vary substantially from the contractual
payment schedule (if any), with early prepayment of individual bank loans or debt 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; and (3) proceeds from
such repayments can for a limited period and subject to compliance with certain eligibility criteria be reinvested in
additional bank loans and/or debt securities.
CDO Securities generally have underlying risks similar to many of the risks set forth in these Risk Factors,
such as interest rate mismatches, trading and reinvestment risk and tax considerations. Each CDO Security,
however, will involve risks specific to the particular CDO Security and its Underlying Portfolio. The value of the
CDO Securities generally will fluctuate with, among other things, the financial condition of the obligors on or
issuers of the Underlying Portfolio, general economic conditions, the condition of certain financial markets, political
events, developments or trends in any particular industry and changes in prevailing interest rates.
CDO Securities are usually limited-recourse obligations of the issuer thereof payable solely from the
Underlying Portfolios of such issuer or proceeds thereof. Consequently, holders of CDO Securities must rely solely
on distributions on the Underlying Portfolio or proceeds thereof for payment in respect thereof. If distributions on
the Underlying Portfolio are insufficient to make payments on the CDO Security, no other assets will be available
for payment of the deficiency and following realization of the underlying assets, the obligation of such issuer to pay
such deficiency shall be extinguished. As a result, the amount and timing of interest and principal payments will
depend on the performance and characteristics of the related Underlying Portfolios.
Some of the CDO Securities included in the Applicable Collateral for a Series of Notes may have
Underlying Portfolios that hold or invest in some of the same assets as the Applicable Collateral pledged to secure
such Notes or held in the Underlying Portfolios of other CDO Securities pledged as Applicable Collateral. The
concentration in any particular asset may adversely affect the Issuer's ability to make payments on the Notes of such
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Series. In addition, the Underlying Portfolios of the CDO Securities may be actively traded. As a result, investors
in the Notes of such Series are exposed to the risk of loss on such Portfolio Investments both directly and indirectly
through the CDO Securities acquired by the Issuer. If an investor in the Notes of such Series is also an investor in
any CDO Security which the Issuer acquires (or in other tranches of securities sold by the same CDO), the exposure
of such investor to the risk of loss on such CDO Security will increase as a result of its investment in the Notes of
such Series.
CDO Securities are subject to interest rate risk. The Underlying Portfolio of an issue of CDO Securities
will include assets that bear interest at a fixed or floating rate of interest, and while the CDO Securities issued by
such issuer also may bear interest at a floating or fixed rate, the proportions of a CDO Security issuer's assets
bearing interest at fixed and floating rates will typically not match the proportions to which such CDO Security
issuer's liabilities bear interest at fixed and floating rates. As a result, there could be a floating/fixed rate or basis
mismatch between such CDO Securities and Underlying Portfolios which bear interest at a fixed rate, and there may
be a timing or basis mismatch between the CDO Securities and Underlying Portfolios that bear interest at a floating
rate as the interest rate on such floating rate Underlying Portfolios 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.
The CDO Securities may be subordinated to other classes of securities issued by each respective issuer
thereof. CDO Securities that are not part of the most senior tranche(s) of the securities issued by the issuer thereof
may allow for the deferral of the payment of interest on such CDO Securities. The deferral of interest by the issuer
of CDO Securities forming part of the Collateral could result in a reduction in the amounts available to distribute to
the holders of the Notes of such Series. The CDO Securities may include both senior and mezzanine debt issued by
the related CDO Security issuers. The CDO Securities that are mezzanine debt will have payments of interest and
principal that are subordinated to one or more classes of notes that are more senior in the related issuer's capital
structure, and generally will allow for the deferral of interest subject to the related issuer's priority of payments. To
the extent that any losses are incurred by the issuer thereof in respect of its CDO Securities, such losses will be
borne by holders of the mezzanine tranches before any losses are borne by the holders of senior tranches. In
addition, if an event of default occurs under the applicable indenture, as long as any senior tranche of CDO
Securities is outstanding, the holders of the senior tranche thereof generally will be entitled to determine the
remedies to be exercised under the indenture, which could be adverse to the interests of the holders of the mezzanine
tranches (including the Issuer).
In order to acquire and hold CDO Securities, the Issuer must satisfy at all times the investor qualifications
in the applicable Underlying Instruments and applicable securities laws. Such Underlying Instruments generally
require that the Issuer either be a Qualified Institutional Buyer that is also a Qualified Purchaser or a non-U.S.
Person, and may require that other criteria be satisfied. In the event that the Issuer does not satisfy the requirements
applicable to investors in a CDO Security, it will not be able to purchase such CDO Security. In addition, if it does
not satisfy such requirements at any time after it purchases such CDO Security, the applicable Underlying
Instruments may permit the issuer of such CDO Security to force the Issuer to sell such CDO Security, which sale
by the Issuer could be made at a loss.
The risks associated with investing in CDO Securities may in addition depend on the skill and experience
of the Investment Manager managing the Underlying Portfolio, in particular, if the Underlying Instruments provide
for active trading in securities comprising the Underlying Portfolio. This risk is greater if the Underlying Portfolio
itself consists of collateralized debt obligations that rely on the skill and experience of the Investment Manager.
Commercial Mortgage-Backed Securities
If the Series Supplement so permits with respect to a Series of Notes, a portion of the Asset-Backed
Securities acquired by the Issuer may consist of commercial mortgage-backed securities. In addition, if the Series
Supplement so permits, a portion of the Reference Obligations under the Synthetic Securities may consist of
commercial mortgage-backed securities.
Commercial mortgage loans underlying commercial mortgage backed securities are generally secured by
income producing property, such as multi-family housing or commercial property, and may entail risks of
delinquency and foreclosure, and risks of loss in the event thereof, that are greater than similar risks associated with
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loans secured by one- to four family residential property. The ability of a borrower to repay a loan secured by an
income producing property typically is dependent primarily upon the successful operation of such property rather
than upon the existence of independent income or assets of the borrower. If the net operating income of the property
is reduced (for example, if rental or occupancy rates decline or real estate tax rates or other operating expenses
increase), the borrower's ability to repay the loan may be impaired. Net operating income of an income-producing
property can be affected by, among other things, tenant mix, success of tenant businesses, property management
decisions (including responding to changing market conditions, planning and implementing rental or pricing
structures and causing maintenance and capital improvements to be carried out in a timely fashion), property
location and condition, competition from comparable types of properties, changes in laws that increase operating
expense or limit rents that may be charged, any need to address environmental contamination at the property and the
occurrence of any uninsured casualty at the property. In general, incremental risks of delinquency, foreclosure and
loss with respect to an underlying commercial mortgage loan pool may be greater than those associated with
residential mortgage loan pools. In part, this is caused by lack of diversity.
RMBS Securities are typically backed by mortgage loan pools consisting of hundreds of mortgage loans
and related mortgaged properties. Each residential mortgage loan represents a small percentage of the entire
underlying collateral pool, the borrowers and mortgaged properties of which are geographically dispersed. Risk of
delinquency, foreclosure and loss with respect to a residential mortgage loan pool can be analyzed statistically. By
contrast, CMBS Securities may be backed by an underlying mortgage pool of only a few mortgage loans. As a
result, each commercial mortgage loan in the underlying mortgage pool represents a large percentage of the
principal amount of CMBS Securities backed by such underlying mortgage pool. A failure in performance of any
one commercial mortgage loan in the underlying mortgage pool will have a much greater impact on the performance
of the related CMBS Securities. Credit risk relating to commercial mortgage-backed transactions is, as a result,
property specific. In this respect, commercial mortgage-backed transactions resemble traditional non-recourse
secured loans. The collateral must be analyzed and transaction structured to address issues specific to an individual
commercial property and its business.
Commercial mortgage loans are obligations of the borrowers thereunder only and are not typically insured
or guaranteed by any other person or entity. Distributions on the CMBS Securities will depend solely upon the
amount and timing of payments and other collections on the related underlying mortgage loans. The value of an
income producing property is directly related to the net operating income derived from such property. Furthermore,
rates of defaults and losses on commercial mortgage loans, and the value of any commercial property, may be
adversely affected by risks generally incident to interests in real property, including various events which the related
borrower and/or manager of the commercial property, the issuer, the depositor, the indenture trustee, the master
servicer or the special servicer may be unable to predict or control, such as: changes in general or local economic
conditions and/or specific industry segments; declines in real estate values; declines in rental or occupancy rates;
increases in interest rates, real estate tax rates and other operating expenses; changes in governmental rules,
regulations and fiscal policies, including environmental legislation; acts of God; environmental hazards; and social
unrest and civil disturbances. If a commercial mortgage loan is in default, foreclosure of such commercial mortgage
loan may be a lengthy and difficult process, and may involve significant expenses. Furthermore, the market for
defaulted commercial mortgage loans or foreclosed properties may be very limited.
At any one time, a portfolio of CMBS Securities may be backed by mortgage loans with disproportionately
large aggregate principal amounts secured by properties in only a few states or regions. As a result, the mortgage
loans may be more susceptible to geographic risks relating to such areas, such as adverse economic conditions,
adverse events affecting industries located in such areas and natural hazards affecting such areas, than would be the
case for a pool of mortgage loans having more diverse property locations.
Each underlying commercial mortgage loan in an issue of CMBS Securities may have a balloon payment
due on its maturity date. Balloon mortgage loans involve a greater risk to a lender than fully-amortizing loans,
because the ability of a borrower to pay such amount will normally depend on its ability to obtain refinancing of the
related mortgage loan or sell the related mortgaged property at a price sufficient to permit the borrower to make the
balloon payment, which will depend on a number of factors prevailing at the time such refinancing or sale is
required, including, without limitation, the strength of the commercial real estate markets, tax laws, the financial
situation and operating history of the underlying property, interest rates and general economic conditions. If the
borrower is unable to make such balloon payment, the related issue of CMBS Securities may experience losses.
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Prepayments on the underlying commercial mortgage loans in an issue of CMBS Securities will be
influenced by the prepayment provisions of the related mortgage notes and may also be affected by a variety of
economic, geographic and other factors, including the difference between the interest rates on the underlying
mortgage loans (giving consideration to the cost of refinancing) and prevailing mortgage rates and the availability of
refinancing. In general, if prevailing interest rates fall significantly below the interest rates on the related mortgage
loans, the rate of prepayment on the underlying mortgage loans would be expected to increase. Conversely, if
prevailing interest rates rise to a level significantly above the interest rates on the related mortgages, the rate of
prepayment would be expected to decrease. Prepayments could reduce the yield received on the related issue of
CMBS Securities.
Additional risks may be presented by the type and use of a particular commercial property. For instance,
commercial properties that operate as hospitals and nursing homes may present special risks to lenders due to the
significant governmental regulation of the ownership, operation, maintenance and financing of health care
institutions. Hotel and motel properties are often operated pursuant to franchise, management or operating
agreements which may be terminable by the franchisor or operator; and the transferability of a hotel's operating,
liquor and other licenses upon a transfer of the hotel, whether through purchase or foreclosure, is subject to local law
requirements.
Furthermore, a commercial property may not readily be converted to an alternative use in the event that the
operation of such commercial property for its original purpose becomes unprofitable for any reason. In such cases,
the conversion of the commercial property to an alternative use would generally require substantial capital
expenditures. Thus, if the borrower becomes unable to meet its obligations under the related commercial mortgage
loan, the liquidation value of any such commercial property may be substantially less, relative to the amount
outstanding on the related commercial mortgage loan, than would be the case if such commercial property were
readily adaptable to other uses.
In addition, structural and legal risks of CMBS Securities include the possibility that, in a bankruptcy or
similar proceeding involving the originator or the servicer (often the same entity or affiliates), the assets of the issuer
could be treated as never having been truly sold by the originator to the issuer and could be substantively
consolidated with those of the originator, or the transfer of such assets to the issuer could be voided as a fraudulent
transfer. Challenges based on such doctrines could result in cash flow delays and losses on the related issue of
CMBS Securities.
It is expected that some of the CMBS Securities owned by the Issuer will be subordinated to one or more
other senior classes of securities of the same series for purposes of, among other things, offsetting losses and other
shortfalls with respect to the related underlying mortgage loans. In addition, in the case of certain CMBS Securities,
no distributions of principal will generally be made with respect to any class until the aggregate principal balances
of the corresponding senior classes of securities have been reduced to zero. As a result, the subordinate classes are
more sensitive to risk of loss and writedowns than senior classes of such securities.
Successful management and operation of the related business (including property management decisions
such as pricing, maintenance and capital improvements) will have a significant impact on performance of
commercial mortgage loans. Issues such as tenant mix, success of tenant business, property location and condition,
competition, taxes and other operational expenses, general economic conditions, governmental rules, regulations and
fiscal policies, environmental issues and insurance coverage are among the factors that may impact both
performance and market value.
CMBS Securities may have structural characteristics that distinguish them from other Asset-Backed
Securities. The rate of interest payable on CMBS Securities may be set or effectively capped at the weighted
average net coupon of the underlying mortgage loans themselves, often referred to as an "available funds cap." As a
result of this cap, the return to investors is dependent on the relative timing and rate of delinquencies and
prepayments of mortgage loans bearing a higher rate of interest. In general, early prepayments will have a greater
impact on the yield to investors. Federal and state law may also affect the return to investors by capping the interest
rates payable by certain mortgagors. Many of the CMBS Securities which the Issuer may purchase are subject to
available funds caps or other caps on the interest rate payable to holders of such securities. The effect of such caps is
to reduce the rate at which interest is paid to the holders of such securities (including the Issuer), which would have
an adverse effect on the Issuer's ability to pay interest or to make distributions on the Notes.
B-37
Residential Mortgage-Backed Securities
If a Series Supplement so permits with respect to a series of Notes, a portion of the asset-backed securities
acquired by the Issuer may consist of residential mortgage-backed securities. Holders of RMBS Securities bear
various risks, including credit, market, interest rate, structural and legal risks. RMBS Securities are, generally,
ownership or participation interests in pools of residential mortgage loans secured by one- to four- family residential
properties. Such loans may be prepaid at any time. RMBS Securities are subject to various risks. Credit risk arises
from losses due to defaults by the borrowers in the underlying collateral and the servicer's failure to perform.
Residential mortgage loans are obligations of the borrowers thereunder only and are not typically insured or
guaranteed by any other person or entity. Distributions on the RMBS Securities will depend solely upon the amount
and timing of payments and other collections on the related underlying mortgage loans. The rate of defaults and
losses on residential mortgage loans will be affected by a number of factors, including general economic conditions,
particularly those in the area where the related mortgaged property is located, the borrower's equity in the mortgaged
property and the financial circumstances of the borrower. If a residential mortgage loan is in default, foreclosure of
such residential mortgage loan may be a lengthy and difficult process, and may involve significant expenses.
Furthermore, the market for defaulted residential mortgage loans or foreclosed properties may be very limited. At
any one time, a portfolio of RMBS Securities may be backed by residential mortgage loans with disproportionately
large aggregate principal amounts secured by properties in only a few states or regions. As a result, the residential
mortgage loans may be more susceptible to geographic risks relating to such areas, such as adverse economic
conditions, adverse events affecting industries located in such areas and natural hazards affecting such areas, than
would be the case for a pool of mortgage loans having more diverse property locations. In addition, the residential
mortgage loans may include so-called "jumbo" mortgage loans, having original principal balances that are higher
than the Fannie Mae and Freddie Mac loan balance limitations. As a result, such portfolio of RMBS Securities may
experience increased losses.
Each underlying residential mortgage loan in an issue of RMBS Securities may have a balloon payment
due on its maturity date. Balloon residential mortgage loans involve a greater risk to a lender than fully-amortizing
loans, because the ability of a borrower to pay such amount will normally depend on its ability to obtain refinancing
of the related mortgage loan or sell the related mortgaged property at a price sufficient to permit the borrower to
make the balloon payment, which will depend on a number of factors prevailing at the time such refinancing or sale
is required, including, without limitation, the strength of the residential real estate markets, tax laws, the financial
situation and operating history of the underlying property, interest rates and general economic conditions. If the
borrower is unable to make such balloon payment, the related issue of RMBS Securities may experience losses.
RMBS Securities are susceptible to prepayment risks as they generally do not contain prepayment penalties
and a reduction in interest rates will increase the prepayments on the RMBS Securities resulting in a reduction in
yield to maturity for holders of such securities. Prepayments on the underlying residential mortgage loans in an
issue of RMBS Securities will be influenced by the prepayment provisions of the related mortgage notes and may
also be affected by a variety of economic, geographic and other factors, including the difference between the interest
rates on the underlying residential mortgage loans (giving consideration to the cost of refinancing) and prevailing
mortgage rates and the availability of refinancing. In general, if prevailing interest rates fall significantly below the
interest rates on the related residential mortgage loans, the rate of prepayment on the underlying residential
mortgage loans would be expected to increase. Conversely, if prevailing interest rates rise to a level significantly
above the interest rates on the related mortgages, the rate of prepayment would be expected to decrease.
Prepayments could reduce the yield received on the related issue of RMBS Securities.
In addition, structural and legal risks of RMBS Securities include the possibility that, in a bankruptcy or
similar proceeding involving the originator or the servicer (often the same entity or affiliates), the assets of the issuer
could be treated as never having been truly sold by the originator to the issuer and could be substantively
consolidated with those of the originator, or the transfer of such assets to the issuer could be voided as a fraudulent
transfer. Challenges based on such doctrines could result in cash flow delays and losses on the related issue of
RMBS Securities.
RMBS Securities may have structural characteristics that distinguish them from other Asset-Backed
Securities. The rate of interest payable on RMBS Securities directly or synthetically held by the Issuer may be set or
effectively capped at the weighted average net coupon of the underlying mortgage loans themselves, often referred
to as an "available funds cap." As a result of this cap, the return to the Issuer on such RMBS Securities is dependent
on the relative timing and rate of delinquencies and prepayments of mortgage loans bearing a higher rate of interest.
B-38
In general, early prepayments will have a greater negative impact on the yield to the Issuer on such RMBS
Securities. Federal and state law may also affect the return to investors by capping the interest rates payable by
certain mortgagors (including hard caps and lifetime caps). Many of the RMBS Securities which the Issuer may
purchase are subject to such available funds caps or other caps on the interest rate payable to holders of such
securities. The effect of such caps is to reduce the rate at which interest is paid to the holders of such securities
(including the Issuer), which would have an adverse effect on the Issuer's ability to pay interest or to make
distributions on the Notes. Furthermore, RMBS Securities often are in the form of certificates of beneficial
ownership of the underlying mortgage loan pool. These securities are entitled to payments provided for in the
underlying agreement only when and if funds are generated by the underlying mortgage loan pool. The likelihood
of the return of interest and principal may be assessed as a credit matter. However, securityholders do not have the
legal status of secured creditors, and cannot accelerate a claim for payment on their securities, or force a sale of the
mortgage loan pool in the event that insufficient funds exist to pay such amounts on any date designated for such
payment. The sole remedy available to such securityholders would be removal of the servicer of the mortgage
loans.
RMBS Securities may be subordinated to one or more other senior classes of securities of the same series
for purposes of, among other things, offsetting losses and other shortfalls with respect to the related underlying
mortgage loans. In addition, in the case of certain RMBS Securities, no distributions of principal will generally be
made with respect to any class until the aggregate principal balances of the corresponding senior classes of securities
have been reduced to zero. As a result, the subordinate classes are more sensitive to risk of loss and writedowns
than senior classes of such securities.
Residential mortgage loans in an issue of RMBS Securities may be subject to various Federal and state
laws, public policies and principles of equity that protect consumers, which among other things may regulate interest
rates and other charges, require certain disclosures, require licensing of originators, prohibit discriminatory lending
practices, regulate the use of consumer credit information and regulate debt collection practices. Violation of certain
provisions of these laws, public policies and principles may limit the servicer's ability to collect all or part of the
principal of or interest on a mortgage loan, entitle the borrower to a refund of amounts previously paid by it, or
subject the servicer to damages and sanctions. Any such violation could result also in cash flow delays and losses on
the related issue of RMBS Securities. Federal and state law may also affect the return to investors by capping the
interest rates payable by certain mortgagors. The Servicemembers Civil Relief Act of 2003 provides relief for
soldiers and members of the reserve called to active duty by capping the interest rates on their mortgage loans at 6%
per annum.
Legal risks can arise as a result of the procedures followed in connection with the origination of the
mortgage loans or the servicing thereof which may be subject to various Federal and state laws, public policies and
principles of equity that protect consumers, which among other things may regulate interest rates and other charges,
require certain disclosures, require licensing of originators, prohibit discriminatory lending practices, regulate the
use of consumer credit information and debt collection practices and may limit the servicer's ability to collect all or
part of the principal of or interest on a residential mortgage loan, entitle the borrower to a refund of amounts
previously paid by it or subject the servicer to damages and sanctions. Any such violation could also result in cash
flow delays and losses on the related issue of RMBS Securities. In addition, structural and legal risks of RMBS
Securities include the possibility that, in a bankruptcy or similar proceeding involving the originator or the servicer
(often the same entity or affiliates), the assets of the issuer could be treated as never having been truly sold by the
originator to the issuer and could be substantively consolidated with those of the originator, or the transfer of such
assets to the issuer could be voided as a fraudulent transfer. Challenges based on such doctrines could result also in
cash flow delays and losses on the related issue of RMBS Securities.
In some cases, liability of a lender under a mortgage loan may affect subsequent assignees of such
obligations, including the issuer of an RMBS Security. In particular in the case of RMBS Securities originated in
the United States, a lender's failure to comply with the Truth in Lending Act could subject such lender and its
assignees to monetary penalties and could result in rescission. Numerous class action lawsuits have been filed in
multiple states alleging violations of these statutes and seeking damages, rescission and other remedies. These suits
have named the originators and current and former holders, including the issuers of related RMBS Securities. If an
issuer of RMBS Securities included in the Collateral were to be named as a defendant in a class action lawsuit, the
costs of defending or settling such lawsuit or a judgment could reduce the amount available for distribution on the
related RMBS Security. In such event, the Issuer, as holder of such RMBS Security, could suffer a loss.
B-39
Some of the RMBS Securities originated in the United States may be backed by non-conforming mortgage
loans, mortgage loans that do not qualify for purchase by government-sponsored agencies such as Fannie Mae and
Freddie Mac due to credit characteristics that do not satisfy Fannie Mae and Freddie Mac guidelines, including loans
to mortgagors whose creditworthiness and repayment ability do not satisfy Fannie Mae and Freddie Mac
underwriting guidelines and loans to mortgagors who may have a record of credit write-offs, outstanding judgments,
prior bankruptcies and other negative credit events. Accordingly, non-conforming mortgage loans are likely to
experience rates of delinquency, foreclosure and loss that are higher, and that may be substantially higher, than
mortgage loans originated in accordance with Fannie Mae or Freddie Mac underwriting guidelines. The majority of
mortgage loans made in the United States qualify for purchase by government-sponsored agencies. The principal
differences between conforming mortgage loans and non-conforming mortgage loans include the applicable loan-tovalue ratios, the credit and income histories of the related mortgagors, the documentation required for approval of
the related mortgage loans, the types of properties securing the mortgage loans, the loan sizes and the mortgagors'
occupancy status with respect to the mortgaged properties. As a result of these and other factors, the interest rates
charged on non-conforming mortgage loans are often higher than those charged for conforming mortgage loans. The
combination of different underwriting criteria and higher rates of interest may also lead to higher delinquency,
foreclosure and losses on non-conforming mortgage loans as compared to conforming mortgage loans.
Violations of Consumer Protection Laws May Result in Losses on Consumer Protected Securities
Applicable state laws generally regulate interest rates and other charges require licensing of originators and
require specific disclosures. In addition, other state laws, public policy and general principles of equity relating to
the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the
origination, servicing and collection of the loans backing Home Equity Loan Securities, Residential A Mortgage
Securities, Residential B/C Mortgage Securities and Manufactured Housing Securities (collectively, "Consumer
Protected Securities"). Depending on the provisions of the applicable law and the specific facts and circumstances
involved, violations of these laws, policies and principles may limit the ability of the issuer of a Consumer Protected
Security to collect all or part of the principal of or interest on the underlying loans, may entitle a borrower to a
refund of amounts previously paid and, in addition, could subject the owner of a mortgage loan to damages and
administrative enforcement.
The mortgage loans originated in the United States are also subject to Federal laws, including:
(1)
the Federal Truth in Lending Act and Regulation Z promulgated under the Truth in Lending Act,
which require particular disclosures to the borrowers regarding the terms of the loans;
(2)
the Equal Credit Opportunity Act and Regulation B promulgated under the Equal Credit
Opportunity Act, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national
origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the
extension of credit;
(3)
the Americans with Disabilities Act, which, among other things, prohibits discrimination on the
basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or
accommodations of any place of public accommodation;
(4)
the Fair Credit Reporting Act, which regulates the use and reporting of information related to the
borrower's credit experience;
(5)
cost loans;
the Home Ownership and Equity Protection Act of 1994, which regulates the origination of high
(6)
the Depository Institutions Deregulation and Monetary Control Act of 1980, which preempts
certain state usury laws; and
(7)
the Alternative Mortgage Transaction Parity Act of 1982, which preempts certain state lending
laws which regulate alternative mortgage transactions.
In addition to the laws described above in the United States, a number of legislative proposals have been
introduced at both the Federal, state and municipal level that are designed to discourage predatory lending practices.
B-40
Some states have enacted, or may enact, laws or regulations that prohibit inclusion of some provisions in mortgage
loans that have mortgage rates or origination costs in excess of prescribed levels, and require that borrowers be
given certain disclosures prior to the consummation of such mortgage loans. In some cases, state law may impose
requirements and restrictions greater than those in the Home Ownership and Equity Protection Act of 1994. An
originator's failure to comply with these laws could subject the issuer of a consumer protected security to monetary
penalties and could result in the borrowers rescinding the loans underlying such consumer protected security.
Violations of particular provisions of these Federal laws may limit the ability of the issuer of a consumer
protected security to collect all or part of the principal of or interest on the loans and in addition could subject such
issuer to damages and administrative enforcement. In this event, the Issuer, as a holder of the consumer protected
security, may suffer a loss.
In some cases, liability of a lender under a mortgage loan may affect subsequent assignees of such
obligations, including the issuer of a consumer protected security. In particular, a lender's failure to comply with the
Federal Truth in Lending Act could subject such lender and its assignees to monetary penalties and could result in
rescission. Numerous class action lawsuits have been filed in multiple states alleging violations of these statutes and
seeking damages, rescission and other remedies. These suits have named the originators and current and former
holders, including the issuers of related consumer protected securities. If an issuer of a consumer protected security
included in the applicable Collateral were to be named as a defendant in a class action lawsuit, the costs of
defending or settling such lawsuit or a judgment could reduce the amount available for distribution on the related
Consumer Protected Security. In such event, the Issuer, as holder of such Consumer Protected Security, could suffer
a loss.
Some of the mortgages loans backing a Consumer Protected Security may have been underwritten with,
and finance the cost of, credit insurance. From time to time, originators of mortgage loans that finance the cost of
credit insurance have been named in legal actions brought by Federal and state regulatory authorities alleging that
certain practices employed relating to the sale of credit insurance constitute violations of law. If such an action were
brought against such issuer with respect to mortgage loans backing such Consumer Protected Security and were
successful, it is possible that the borrower could be entitled to refunds of amounts previously paid or that such issuer
could be subject to damages and administrative enforcement.
In addition, numerous Federal and state statutory provisions, including the Federal bankruptcy laws, the
Servicemembers' Civil Relief Act of 2003, as amended and state debtor relief laws, may also adversely affect the
ability of an issuer of a Consumer Protected Security to collect the principal of or interest on the loans, and holders
of the affected consumer protected securities may suffer a loss if the applicable laws result in these loans becoming
uncollectible.
REIT Debt Securities
If the Series Supplement so permits with respect to a Series of Notes,, a portion of the Portfolio
Investments may consist of REIT Debt Securities or Synthetic Securities the Reference Obligations of which are
REIT Debt Securities. REIT Debt Securities will consist of obligations of real estate investment trusts ("REITs"), or
qualified REIT subsidiaries meeting the eligibility criteria described herein. The Issuer may invest in additional
types of REIT Debt Securities, provided that the Rating Agency Condition is satisfied with respect to such
investment.
Investments in REIT Debt Securities involve special risks. In particular, REITs and qualified REIT
subsidiaries (all discussion concerning the risks relating to REITs herein being generally applicable to such
subsidiaries) generally are permitted to invest solely in real estate or real estate related assets and are subject to the
inherent risks associated with such investments. Consequently, the financial condition of any REIT may be affected
by the risks described above with respect to commercial mortgage loans and mortgage-backed securities and similar
risks, including (i) risks of delinquency and foreclosure and risks of loss in the event thereof, (ii) the dependence
upon the successful operation of and net income from real property, (iii) risks generally incident to interests in real
property, including those described above, (iv) risks that may be presented by the type and use of a particular
commercial property and (v) the difficulty of converting certain property to an alternative use in the event that the
operation of such commercial property for its original purpose becomes unprofitable for any reason. Moreover,
REITs must continue to satisfy certain U.S. Federal income tax requirements related to real estate investment trust
qualifications. Failure of an underlying issuer in any taxable year to qualify as such will render such underlying
B-41
issuer subject to tax on its taxable income at regular corporate rates. The additional tax liability of an underlying
issuer for the year or years involved would reduce the net earnings of such underlying issuer and would adversely
affect its ability to make payments on the REIT Debt Securities of which it is an issuer.
In addition, risks of REIT Debt Securities may include (among other risks) (i) limited liquidity and
secondary market support, (ii) substantial market price volatility resulting from changes in prevailing interest rates,
(iii) subordination to the prior claims of banks and other senior lenders, (iv) the operation of mandatory sinking fund
or call/redemption provisions during periods of declining interest rates that could cause the Issuer to reinvest
premature redemption proceeds in lower yielding Portfolio Investments, (v) the possibility that earnings of the REIT
Debt Security issuer may be insufficient to meet its debt service and (vi) the declining creditworthiness and potential
for insolvency of the issuer of such REIT Debt Securities during periods of rising interest rates and economic
downturn. An economic downturn or an increase in interest rates could severely disrupt the market for REIT Debt
Securities and adversely affect the value of outstanding REIT Debt Securities and the ability of the issuers thereof to
repay principal and interest.
Issuers of REIT Debt Securities may be highly leveraged and may not have available to them more
traditional methods of financing. The risk associated with acquiring the securities of such issuers generally is greater
than is the case with highly rated securities. For example, during an economic downturn or a sustained period of
rising interest rates, issuers of REIT Debt Securities may be more likely to experience financial stress, especially if
such issuers are highly leveraged. During such periods, timely service of debt obligations may also be adversely
affected by specific issuer developments, or the unavailability of additional financing. The risk of loss due to default
by the issuer may be significant for the holders of REIT Debt Securities because such securities may be unsecured
and may be subordinated to other creditors of the issuer of such securities.
Downward movements in interest rates could also adversely affect the performance of REIT Debt Securities.
REIT Debt Securities may have call or redemption features that would permit the issuer thereof to repurchase the
securities from the Issuer. If a call were exercised by the issuer of REIT Debt Securities during a period of declining
interest rates, it is likely that the Issuer would have to replace such called REIT Debt Securities with lower yielding
Portfolio Investments.
As a result of the limited liquidity of REIT Debt Securities, their prices have at times experienced significant
and rapid decline when a substantial number of holders have decided to sell. In addition, the Issuer may have
difficulty disposing of certain REIT Debt Securities because there may be a thin trading market for such securities.
Reduced secondary market liquidity may have an adverse impact on market price and the Issuer's ability to dispose
of particular issues when necessary to meet the Issuer's liquidity needs or in response to a specific economic event
such as a deterioration in the creditworthiness of the issuer of such securities. Reduced secondary market liquidity
for certain REIT Debt Securities also may make it more difficult for the Issuer to obtain accurate market quotations
for purposes of valuing the Issuer's portfolio. Market quotations are generally available on many REIT Debt
Securities only from a limited number of dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales.
Insolvency Considerations With Respect to Issuers of Portfolio Investments May Affect the Issuer's Rights
Various laws enacted for the protection of creditors may apply to the Portfolio Investments. The
information in this and the following paragraph is applicable with respect to U.S. issuers. Insolvency considerations
will differ with respect to non-U.S. Issuers. If a court in a lawsuit brought by an unpaid creditor or representative of
creditors of an issuer of a Portfolio Investment, such as a Indenture Trustee in bankruptcy, were to find that the
issuer did not receive fair consideration or reasonably equivalent value for incurring the indebtedness constituting
such Portfolio Investment and, after giving effect to such indebtedness, the issuer (i) was insolvent, (ii) was engaged
in a business for which the remaining assets of such issuer constituted unreasonably small capital or (iii) intended to
incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, such court could
determine to invalidate, in whole or in part, such indebtedness as a fraudulent conveyance, to subordinate such
indebtedness to existing or future creditors of the issuer or to recover amounts previously paid by the issuer in
satisfaction of such indebtedness. The measure of insolvency for purposes of the foregoing will vary. Generally, an
issuer would be considered insolvent at a particular time if the sum of its debts were then greater than all of its
property at a fair valuation or if the present fair salable value of its assets were then less than the amount that would
be required to pay its probable liabilities on its existing debts as they became absolute and matured. There can be no
assurance as to what standard a court would apply in order to determine whether the issuer was "insolvent" after
B-42
giving effect to the incurrence of the indebtedness constituting the Portfolio Investments or that, regardless of the
method of valuation, a court would not determine that the issuer was "insolvent" upon giving effect to such
incurrence. In addition, in the event of the insolvency of an issuer of a Portfolio Investment, payments made on
such Portfolio Investments could be subject to avoidance as a "preference" if made within a certain period of time
(which may be as long as one year under Federal bankruptcy law or even longer under state laws) before insolvency.
In general, if payments on Portfolio Investments are avoidable, whether as fraudulent conveyances or
preferences, such payments can be recaptured either from the initial recipient (such as the Issuer) or from subsequent
transferees of such payments (such as the Holders of the Notes ). To the extent that any such payments are
recaptured from the Issuer, the resulting loss will be borne by the Holders of the Notes. However, a court in a
bankruptcy or insolvency proceeding would be able to direct the recapture of any such payment from a holder of
Notes only to the extent that such court has jurisdiction over such holder or its assets. Moreover, it is likely that
avoidable payments could not be recaptured directly from a holder that has given value in exchange for its Offered
Security, in good faith and without knowledge that the payments were avoidable. Nevertheless, since there is no
judicial precedent relating to a structured transaction such as the Notes, there can be no assurance that a holder of
Notes will be able to avoid recapture on this or any other basis.
International Investing
A portion of the Portfolio Investments may consist of obligations of an issuer located in a Special Purpose
Vehicle Jurisdiction or obligations of a Qualifying Foreign Obligor. Moreover, subject to compliance with certain
of the Investment Guidelines for each Series of Notes, collateral securing Asset-Backed Securities may consist of
obligations of issuers or borrowers organized under the laws of various jurisdictions other than the United States.
Investing outside the United States may involve greater risks than investing in the United States. These risks may
include: (i) less publicly available information; (ii) varying levels of governmental regulation and supervision; (iii)
the difficulty of enforcing legal rights in a foreign jurisdiction and uncertainties as to the status, interpretation and
application of laws therein; (iv) risks of economic dislocations in such other country and (v) less data on historic
default and recovery rates for the Portfolio Investments. 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. Delays in settlement could result in periods when assets of the Issuer are uninvested
and no return is earned thereon. The inability of the Issuer to make intended Portfolio Investment acquisitions due
to settlement problems or the risk of intermediary counterparty failures could cause the Issuer to miss investment
opportunities. The inability to dispose of a Portfolio Investment due to settlement problems could result either in
losses to the Issuer due to subsequent declines in the value of such Portfolio Investment or, if the Issuer has entered
into a contract to sell the security, could result in possible liability to the purchaser. Transaction costs of buying and
selling foreign securities, including brokerage, tax and custody costs, also are generally higher than those involved
in domestic transactions. Furthermore, foreign financial markets, while generally growing in volume, have, for the
most part, substantially less volume than U.S. markets, and securities of many foreign companies are less liquid and
their prices more volatile than securities of comparable domestic companies.
In 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.
B-43
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
Investment Manager, its clients and its affiliates and the Placement Agent 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 Issuer Will Be Subject to Various Conflicts of Interest Involving the Investment Manager
The Investment Manager, its partners, its members, its managers, its employees, its affiliates and its clients
may buy Notes from which the Investment Manager or such other persons may derive revenues and profits in
addition to the fees disclosed herein.
The Issuer Will Be Subject to Various Conflicts of Interest Involving the Investment Manager and the
Master Fund
The Investment Manager, its partners, its members, its managers, its employees, its affiliates and/or its
clients have invested and may continue to invest in debt obligations that would also be appropriate as Portfolio
Investments. The investment policies, fee arrangements and other circumstances applicable to such other parties
may vary from those applicable to the Issuer. The Investment Manager, its clients, its employees and its affiliates
may also have or establish relationships with companies whose debt obligations are Portfolio Investments and may
now or in the future own or seek to acquire equity securities or debt obligations issued by issuers of Portfolio
Investments, and such debt obligations may have interests different from or adverse to the securities that are
Portfolio Investments. The Investment Manager or its affiliates may serve as Investment Managers of other CDOs
and other investment vehicles. In addition, the Investment Manager, its clients, its employees or its affiliates may
serve as a general partner and/or manager of limited partnerships or other entities organized to issue notes or
certificates, similar to the Notes, which are secured by collateral similar to the collateral securing one or more Series
of Notes, or may manage third party accounts which invest in similar collateral. The Investment Manager will have
duties to the Series Special Purpose Vehicle that is the holder of the first Series of Notes and may have duties to
subsequent Series Special Purpose Vehicles, as well as to the Issuer. The Investment Manager may take actions on
behalf of one Series Special Purpose Vehicle that is not in the best interests of another Series Special Purpose
Vehicle. The Investment Manager and/or its affiliates may often be seeking simultaneously to purchase investments
for one or more Pool Accounts of the Issuer or for such affiliates and similar entities or other investment accounts
for which the Investment Manager or an affiliate serves as Investment Manager or for its clients or affiliates, and the
Investment Manager will have the discretion to apportion such investments among such Asset Pools and such
entities. The Investment Manager cannot assure equal treatment across the Asset Pools or across its investment
clients. The Investment Manager may also provide investment banking services or other advisory services for a
customary fee to issuers whose debt obligations or other securities are Portfolio Investments and neither the holders
of Notes nor the Issuer shall have any right to such fees. In connection with the foregoing activities the Investment
Manager and its affiliates may from time to time come into possession of material nonpublic information that limits
the ability of the Investment Manager to effect a transaction for the Issuer, and the Issuer's investments may be
constrained as a consequence of the Investment Manager's inability to use such information for advisory purposes or
otherwise to effect transactions that otherwise may have been initiated on behalf of its clients, including the Issuer.
See "The Investment Manager."
The Investment Manager and its affiliates may from time to time incur expenses on behalf of the Issuer and
its or their other clients or accounts. There can be no assurance that such expenses will in all cases be allocated
ratably.
The Investment Manager and its affiliates may have economic interests in or other relationships with
issuers in whose obligations or securities the Issuer may invest. In particular, such persons may make and/or hold an
investment in an issuer's securities that may be pari passu, senior or junior in ranking to an investment in such
issuer's securities made and/or held by the Issuer or in which partners, security holders, officers, directors, agents or
employees of such persons serve on boards of directors or otherwise have ongoing relationships. Each of such
ownership and other relationships may result in securities laws restrictions on transactions in such securities by the
Issuer and otherwise create conflicts of interest for the Issuer. In such instances, the Investment Manager and its
B-44
affiliates may in their discretion make investment recommendations and decisions that may be the same as or
different from those made with respect to the Issuer's investments.
The Investment Manager may from time to time cause the Issuer to acquire Portfolio Investments from or
sell Portfolio Investments to the Investment Manager as principal, any affiliate of the Investment Manager or
accounts or portfolios for which the Investment Manager or its affiliate serves as investment advisor. However, the
Management Agreement provides that the Investment Manager shall not direct the Indenture Trustee (a) to acquire
an obligation to be included in the Portfolio Investments from the Investment Manager as principal, any affiliate of
the Investment Manager or any account or portfolio for which the Investment Manager or any of its affiliates serves
as investment advisor or (b) to sell an obligation to the Investment Manager as principal, any affiliate of the
Investment Manager or any account or portfolio for which the Investment Manager or any of its affiliates serves as
investment advisor, unless (i) the terms and conditions thereof are no less favorable to the Issuer as the terms it
would obtain in a comparable arm's length transaction with a non-affiliate, (ii) the transactions are effected in
accordance with all applicable laws (including, without limitation, the Investment Advisers Act of 1940, as
amended) and (iii) the transactions are exempt from the prohibited transaction rules of ERISA and the Code.
B-45
THE ISSUER
The Issuer was incorporated under the Companies Acts 1963 to 2005 of Ireland (the "Companies Acts") as a public
limited company on 25 May 2006, registered number 42065. The registered office of the Issuer is 5 Harbourmaster
Place, IFSC, Dublin 1, Ireland and the phone number is 353-1-680 6000. The Issuer was established as a special
purpose vehicle.
The principal objects of the Issuer are set forth in clause 3 of its Memorandum of Association and include, inter alia,
the power to issue securities and to raise or borrow money, to grant security over its assets for such purposes, to lend
with or without security and to enter into derivative transactions. Although Clause 3 of the Issuer's Memorandum of
Association does not restrict the Issuer's activities, the Issuer will covenant in the Master Indenture not to undertake
any business other than the issuance of Notes from time to time, the purchase and holding of the Portfolio
Investments and Eligible Investments, the entry into Hedge Agreements and related transactions. The Master
Indenture will provide that the activities of the Issuer are limited to (i) acquiring and disposing of, and investing and
reinvesting in, Portfolio Investments (including, where specified in the applicable Series Supplement, Synthetic
Securities or Defeased Synthetic Securities) and Eligible Investments, (ii) entering into and performing its
obligations under the Master Indenture, the Administration Agreement, the Management Agreement, the Collateral
Administration Agreement, any Hedge Agreements and other documentation entered into in connection with an
Asset Pool, (iii) issuing and selling one or more Series of Notes, (iv) entering into and performing its obligations
under each Series Supplement, any other documentation entered into a connection with a Series of Notes (including,
without limitation, Series specific Hedge Agreements) and the Notes (v) pledging a portion of its assets as security
for its obligations in respect of each such Series of Notes and otherwise for the benefit of the Secured Parties, and
(vi) other activities incidental to the foregoing.
On or after the Issue Date for each Series of Notes, the Issuer will purchase, or cause to be purchased, additional
Collateral to be held in one or more Asset Pools by the Custodian. Such purchase will be made with the proceeds
from the sale of the Notes. The Issuer will have no substantial assets other than the Portfolio Investments (as
defined herein), the Eligible Investments (as defined herein), if any, the Hedge Agreements, if any and any proceeds
thereof and payments received with respect thereto. The Issuer will not undertake any business other than the
issuance of Notes from time to time, the purchase and holding of the Portfolio Investments and Eligible Investments,
the entry into the Hedge Agreements and related transactions.
The registered office of the Issuer is 5 Harbourmaster Place, IFSC, Dublin 1, Ireland. The directors of the Issuer are
Jennifer Coyne and Michael Whelan, who are all officers and/or employees of Deutsche International Corporate
Services (Ireland) Limited and may be contacted at, the registered office of the Issuer.
The authorised share capital of the Issuer is EUR 40,000 divided into 40,000 ordinary shares of par value EUR 1
each (the "Shares"). The Issuer has issued 40,000 Shares, all of which are issued, seven of which are fully paid and
39,993 of which are partly paid up to € 0.25 each, which Shares are held on trust by Deutsche International Finance
(Ireland) Limited (the "Share Trustee") under the terms of a declaration of trust (the "Declaration of Trust") dated
August 18, 2006, under which the Share Trustee holds the Shares on trust for charity. The Share Trustee has no
beneficial interest in and derives no benefit (other than any fees for acting as Share Trustee) from its holding of the
Shares. The Share Trustee will apply any income derived from the Issuer solely for the above purposes.
Deutsche International Corporate Services (Ireland) Limited (the "Administrator"), an Irish company, acts as the
administrator for the Issuer. The office of the Administrator serves as the general business office of the Issuer.
Through the office and pursuant to the terms of the corporate services agreement entered into on August 18, 2006
between the Issuer, and the Administrator (the "Administration Agreement"), the Administrator performs various
management functions on behalf of the Issuer, including the provision of certain clerical, reporting, accounting,
administrative and other services until termination of the Administration Agreement. In consideration of the
foregoing, the Administrator receives various fees and other charges payable by the Issuer at rates agreed upon from
time to time plus expenses. The terms of the Administration Agreement provide that either party may terminate the
Administration Agreement upon the occurrence of certain stated events, including any material breach by the other
party of its obligations under the Administration Agreement which is either incapable of remedy or which is not
cured within 30 days from the date on which it was notified of such breach. In addition, either party may terminate
the Administration Agreement at any time by giving at least 90 days written notice to the other party. The
Administrator's principal office is 5 Harbourmaster Place, IFSC, Dublin 1, Ireland.
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The Notes are obligations of the Issuer and not of the shareholder(s) of the Issuer, the Share Trustee, the Indenture
Trustee, any Agent, the Administrator, any Hedge Counterparty or any of their respective affiliates or any obligor in
respect of the Collateral.
Save as disclosed herein, there has been no material adverse change in the financial position or prospects of the
Issuer since the date of its incorporation. Save for the issues of Notes described above and their related
arrangements, the Issuer has no borrowings or indebtedness in the nature of borrowings (including loan capital
issued or created but unissued), term loans, liabilities under acceptances or acceptance credits, mortgages, charges or
guarantees or other contingent liabilities.
Since its date of incorporation, the Issuer has not commenced operations and no financial statements of the Issuer
have been prepared as at the date of this Offering Circular. The Issuer intends to publish its first financial statements
in respect of the period ending on September 30, 2007. The Issuer will not prepare interim financial statements. The
financial year of the Issuer ends on September 30 in each year.
The profit and loss account and balance sheet can be obtained free of charge from the registered office of the Issuer.
The Issuer must hold its first annual general meeting within 18 months of the date of its incorporation (and no more
than 9 months after the financial year end). Thereafter it must hold an annual meeting in each year and the gap
between its annual general meetings must not exceed 15 months.
The auditors of the Issuer are Deloitte & Touche Ireland who are chartered accountants and are members of the
Institute of Chartered Accountants and registered auditors qualified to practice in Ireland.
B-47
TERMS AND CONDITIONS OF THE NOTES
The following is the text of the terms and conditions which, as supplemented, amended and/or replaced by the
relevant Series Supplement, will be endorsed or incorporated by reference on each Note.
The Issuer may, from time to time, issue (i) further additional notes which shall be consolidated and form a single
series with the Notes and be secured by the same Applicable Collateral, and (ii) further series of notes (each a
"Series") which will not be secured by the same Applicable Collateral and which may have different terms from any
other Series of Notes issued by the Issuer.
These terms and conditions ("Conditions") may be supplemented and/or amended and/or made inapplicable in
respect of the Notes to the extent specified in the Series Supplement relating to the Notes.
1.
Introduction
1.1
Master Fund: Pantheon Master Fund plc (the "Issuer") has been established to issue
from time to time series (each a "Series") of secured Notes (the "Notes"). The Issuer will issue
each Series of Notes as well as additional Notes with respect to a Series at the direction of the
Investment Manager.
1.2
Series Supplement: Each Series is the subject of a series supplement (the "Series Supplement")
which supplements these terms and conditions (the "Conditions"). The Series Supplement in respect of each Series
of Notes will be substantially in the form set forth in Appendix B.
The terms and conditions applicable to any particular Series of Notes are these Conditions as
supplemented, amended and/or replaced by the relevant Series Supplement. In the event of any
inconsistency between these Conditions and the relevant Series Supplement, the relevant Series
Supplement shall prevail.
1.3
Master Indenture: The Notes of each Series will be issued pursuant to the terms of a Master
Indenture dated August 18, 2006 (the "Master Indenture") among the Issuer, and Deutsche Bank Trust Company
Americas, as trustee (the "Indenture Trustee" or the "Trustee", which expression includes any successor Indenture
Trustee appointed from time to time in connection with the Notes), Account Bank, Custodian, Registrar, Transfer
Agent and U. S. Paying Agent and Deutsche Bank AG, London Branch, as Paying Agent and Collateral
Administrator and the Series Supplement thereto, dated on or about the Issue Date (as specified in the Series
Supplement) of the particular Series of Notes (the "Series Supplement" and together with the Master Indenture, the
"Indenture" which term shall, where the context admits, include any other security documents securing the Notes of
a Series from time to time).
1.4
Applicable Collateral: Pursuant to the Indenture, the Notes of each Series, together with the
Issuer's obligations to the other Secured Parties with respect to such Series, will be secured by, subject to the
immediately following provisos, a security interest in all of the assets of the Issuer, including without limitation, the
Asset Pools and the related Pool Accounts, the Series Accounts, the rights of the Issuer under various agreements
(including any Hedge Agreements) and all proceeds of the foregoing (collectively, the "Collateral"); provided that,
the Holders of Notes in each Series of Notes shall only have a security interest in (i) all Series Accounts relating to
such Series of Notes, any Cash and other Eligible Investments held in such Series Account and all income from
investment of funds therein and any agreements entered into solely in connection with such Series of Notes,
including, without limitation, Series specific Hedge Agreements, (ii) to the extent that funds from the Series
Accounts related to such Series of Notes shall have been invested in an Asset Pool (or transferred to the related Pool
Accounts), the Portfolio Investments, Cash and other Eligible Investments held in each Asset Pool and the related
Pool Accounts and all income from investment of funds therein and any agreements entered into and in connection
with such Asset Pool (including, without limitation, all Asset Pool specific Hedge Agreement) and all proceeds of
the foregoing, in each case only to the extent of the Series Allocation Percentage for such Series of Notes in such
Asset Pool, and (iii) all agreements entered into and other rights and interests acquired by the Issuer with respect to
the transaction in general and not with respect to a specific Series or Asset Pool (collectively, the "Applicable
Collateral").
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1.5
Limited Recourse: The Indenture will specify that the Holders of each Series of Notes will agree
and acknowledge that they will have recourse only to the Applicable Collateral which in the case of the Asset Pools
will be determined based on the Series Allocation Percentage for each Asset Pool for such Series of Notes and will
not have any claims against other assets pledged to secure any other Series of Notes, including, without limitation,
the Series Accounts relating to such other Series of Notes.
1.6
The Notes: All references in these Conditions to "Notes" are to the Notes of a Series which are the
subject of the relevant Series Supplement. Copies of the relevant Series Supplement are available during normal
business hours at the Specified Offices of the Indenture Trustee, the initial Specified Offices of which are set forth in
Condition 26 (Notices).
1.7
Summaries: Certain provisions of these Conditions are summaries of the Master Indenture and are
subject to its detailed provisions. Investors in the Notes are bound by, and are deemed to have notice of, all the
provisions of the Master Indenture applicable to them. Copies of the Master Indenture are available for inspection
during normal business hours at the Specified Offices of the Indenture Trustee, the initial Specified Offices of which
are set forth in Condition 26 (Notices).
2.
Interpretation
2.1
Definitions: In these Conditions and/or in the Series Supplements the following expressions have
the following meanings:
"Accounts" means with respect to each Series of Notes:
(a)
(b)
(c)
in the case of the Series Accounts,:
(i)
the Series Principal Collection Account (in each of the currencies in which the Asset
Pools securing such Series of Notes are denominated);
(ii)
the Series Interest Collection Account(in each of the currencies in which the Asset Pools
securing such Series of Notes are denominated);
(iii)
the Series Sales Proceeds Account(in each of the currencies in which the Asset Pools
securing such Series of Notes are denominated);
(iv)
the Series Investment Account (in each of the Specified Currencies applicable to such
Series of Notes);
(v)
the Series Distribution Account (in each of the Specified Currencies applicable to such
Series of Notes); and
(vi)
the Series Expense Reserve Account (in each of the Specified Currencies applicable to
such Series of Notes).
in the case of Pool Accounts in the currency of such Asset Pool:
(i)
the Pool Principal Collection Account;
(ii)
the Pool Interest Collection Account;
(iii)
the Pool Sales Proceeds Account; and
(iv)
the Pool Investment Account.
and any other Accounts as specified in the Series Supplement for such Series of Notes.
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"Accrual Yield" with respect to a Series of Notes has the meaning given in the relevant Series Supplement.
"Additional Business Center(s)" in relation to any Series of Notes means the city or cities specified as
such in the relevant Series Supplement.
"Additional Financial Center(s)" in relation to any Series of Notes means the city or cities specified as
such in the relevant Series Supplement.
"Adjusted Allocated Investment" means, with respect to a Portfolio Investment in an Asset Pool in which
the Series Allocation Percentage of such Series is greater than zero, the portion of the Adjusted Principal
Balance of each such Portfolio Investment that is allocable to such Series of Notes based on the Series
Allocation Percentage of such Series in such Asset Pool.
"Adjusted Principal Balance" means, with respect to a Series of Notes and a Portfolio Investment, the
Principal Balance of such Portfolio Investment unless defined otherwise in the related Series Supplement.
"Administrative Expense Cap" means, with respect to a Series of Notes, the administrative expense cap,
if any, set forth in the related Series Supplement.
"Administrative Expenses" means, with respect to a Series of Notes, (i) the Series Share of the Pantheon
Administrative Expenses for such Series, (ii) the Series Administrative Expenses and (iii) the Allocated
Asset Pool Administrative Expenses for such Series. The allocation of the Pantheon Administrative
Expenses shall take into account changes in the Series Share over the period for which any such expenses
were incurred in order to ensure fair allocation of such expenses.
"Affiliate" or "Affiliated": With respect to a Person, means (i) any other Person who, directly or
indirectly, is in control of, or controlled by, or is under common control with, such Person or (ii) any other
Person who is a director, officer or employee (a) of such Person, (b) of any subsidiary or parent company of
such Person or (c) of any Person described in clause (i) above. For the purposes of this definition, control
of a Person shall mean the power, direct or indirect, (i) to vote more than 50% of the securities having
ordinary voting power for the election of directors of such Persons, or (ii) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise. For purposes of this
definition, the management of an account by one Person for the benefit of any other Person shall not
constitute "control" of such other Person and no entity shall be deemed an Affiliate of the Issuer solely
because the Administrator or its Affiliates serve as administrator or share Indenture Trustee for such entity.
"Agent" means each of the Custodian, Account Bank, Registrar, Transfer Agent, the Paying Agent, U.S.
Paying Agent and Collateral Administrator and, with respect to a Series of Notes, each Paying Agent,
Transfer Agent, Authenticating Agent, Calculation Agent, Placement Agent and Irish Listing Agent, if any,
appointed by the Issuer in the relevant Series Supplement, and, in each case, their respective successors.
"Aggregate Outstanding Amount" means, with respect to a Series of Notes, the Primary Currency
Equivalent of the aggregate unpaid principal amount of such Notes Outstanding (including any deferred
interest previously added to the principal amount of any Notes that remains unpaid) on such date.
"Aggregate Principal Balance" means, when used with respect to any Pledged Securities as of any date of
determination, the sum of the Principal Balances on such date of determination of all such Pledged
Securities and when used with respect to Allocated Investments as of any date of determination, the sum of
the portions of the Principal Balance of each Portfolio Investment that are allocable to a Series of Notes
based on the Series Allocation Percentage of such Series.
"Allocated Investment" means, with respect to a Series of Notes and each Portfolio Investment in an Asset
Pool in which the Series Allocation Percentage of such Series is greater than zero, the portion of the
Principal Balance of each such Portfolio Investment that is allocable to such Series of Notes based on the
Series Allocation Percentage of such Series in such Asset Pool.
"Allocated Asset Pool Administrative Expenses" means, with respect to a Series of Notes and each Asset
Pool in which the Series Allocation Percentage of such Series is greater than zero, the portion of fees,
B-50
expenses and other amounts due or accrued that is allocable to such Series of Notes based on the Series
Allocation Percentage of such Series in such Asset Pool, including, without limitation, out-of-pocket
expenses of the Investment Manager (including fees for its accountants, agents and counsel) incurred in
connection with the purchase or sale of any Portfolio Investments in such Asset Pool. The allocation of the
such expenses shall take into account changes in the Series Allocation Percentage over the period for which
any such expenses were incurred in order to ensure fair allocation of such expenses.
"Asset Pool Net Asset Value" means, with respect to an Asset Pool, as of any date, the sum of the
Valuations for each Portfolio Investment held in such Asset Pool and for the Cash and Eligible Investments
held in the related Pool Accounts.
"Balance" means, at any time, with respect to Cash or Eligible Investments in any Account at such time,
the aggregate of the (i) current balance of Cash, demand deposits, time deposits, certificates of deposit and
federal funds; (ii) principal amount of interest-bearing corporate and government securities, money market
accounts, repurchase obligations and Reinvestment Agreements; and (iii) purchase price (but not greater
than the face amount) of non-interest-bearing government and corporate securities and commercial paper.
"Bankruptcy Code" means the United States Bankruptcy Code, Title 11 of the United States Code, as
amended or where the context requires, the applicable insolvency provisions of the laws of Ireland.
"Base Management Fee" means, with respect to a Payment Date and a Series of Notes, a fee calculated
pursuant to the relevant Series Supplement and payable to the Investment Manager on such Payment Date
pursuant to the Priority of Payments for such Series of Notes.
"Business Day" means:
(i) in relation to any sum payable in USD, any day other than a Saturday, Sunday or
a day on which banking institutions in New York, New York and Santa Clara, California are
authorized or obligated by law, executive order or governmental decree to be closed;
(ii) in relation to any sum payable in euro, a TARGET Settlement Day and a day on
which commercial banks and foreign exchange markets settle payments generally in London,
England and each (if any) Additional Business Center; and
(iii) in relation to any sum payable in a currency other than euro, a day on which
commercial banks and foreign exchange markets settle payments generally in London, in the
Principal Financial Center of the relevant currency and in each (if any) Additional Business
Center;
"Business Day Convention", in relation to any particular date, has the meaning given in the relevant Series
Supplement and, if so specified in the relevant Series Supplement, may have different meanings in relation
to different dates and, in this context, the following expressions shall have the following meanings:
a.
"Following Business Day Convention" means that the relevant date shall be
postponed to the first following day that is a Business Day;
(ii) "Modified Following Business Day Convention" or "Modified Business Day
Convention" means that the relevant date shall be postponed to the first following day that is a
Business Day unless that day falls in the next calendar month in which case that date will be the
first preceding day that is a Business Day;
(iii) "Preceding Business Day Convention" means that the relevant date shall be
brought forward to the first preceding day that is a Business Day;
(iv) "FRN Convention", "Floating Rate Convention" or "Eurodollar
Convention" means that each relevant date shall be the date which numerically corresponds to the
preceding such date in the calendar month which is the number of months specified in the relevant
B-51
Series Supplement as the Specified Period after the calendar month in which the preceding such
date occurred; provided, however, that :
(a)
if there is no such numerically corresponding day in the calendar month
in which any such date should occur, then such date will be the last day which is a
Business Day in that calendar month;
(b)
if any such date would otherwise fall on a day which is not a Business
Day, then such date will be the first following day which is a Business Day unless that
day falls in the next calendar month, in which case it will be the first preceding day which
is a Business Day; and
(c)
if the preceding such date occurred on the last day in a calendar month
which was a Business Day, then all subsequent such dates will be the last day which is a
Business Day in the calendar month which is the specified number of months after the
calendar month in which the preceding such date occurred; and
(v) "No Adjustment" means that the relevant date shall not be adjusted in
accordance with any Business Day Convention.
"Calculation Agent" means the Collateral Administrator or the Person specified in the relevant Series
Supplement as the party responsible for calculating the Rate(s) of Interest and Interest Amount(s) and/or
such other amount(s) as may be specified in the relevant Series Supplement.
"Cash" means such funds denominated with currency of an Eligible Currency as at the time shall be legal
tender for payment of all public and private debts in the related country, including funds credited to a
deposit account or a Securities Account.
"Cash Withdrawal" means the transfer of Cash from an Asset Pool and the related Pool Account to a
Series Account of a Series of Notes as a result of the decision by the Investment Manager to reduce the
investment of such Series in such Asset Pool.
"Cause" means the occurrence of any one of the following events: (i) a willful breach or violation by the
Investment Manager of the Management Agreement or the Master Indenture; (ii) a breach by the
Investment Manager of the Management Agreement or the Master Indenture that is not cured within 30
Business Days; (iii) certain bankruptcy events of the Investment Manager; (iv) criminal offenses of the
Investment Manager or its senior officers; or (v) any additional event as specified in the relevant Series
Supplement.
"Collateral" means all of the assets of the Issuer pledged to the outstanding Series of Notes from time to
time.
"Current Portfolio" means the portfolio--- prior to the implementation of the sequence of changes the
subject to a Portfolio Change Proposal.
"Day Count Fraction" means (subject as provided in Condition 11 (Fixed Rate Note Provisions), in
respect of the calculation of an amount for any period of time (the "Calculation Period"), such day count
fraction as may be specified in these Conditions or the relevant Series Supplement and:
f.
if "Actual/365" or "Actual/Actual-ISDA" is so specified, means the actual
number of days in the Calculation Period divided by 365 (or, if any portion of the Calculation
Period falls in a leap year, the sum of (A) the actual number of days in that portion of the
Calculation Period falling in a leap year divided by 366 and (B) the actual number of days in that
portion of the Calculation Period falling in a non-leap year divided by 365);
(vii) if "Actual/365 (Fixed)" is so specified, means the actual number of days in the
Calculation Period divided by 365;
B-52
(viii) if "Actua1/360" is so specified, means the actual number of days in the
Calculation Period divided by 360;
(ix) if "30/360" is so specified, means the number of days in the Calculation Period
divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30day months (unless (i) the last day of the Calculation Period is the 31st day of a month but the first
day of the Calculation Period is a day other than the 30th or 31st day of a month, in which case the
month that includes that last day shall not be considered to be shortened to a 30-day month, or (ii)
the last day of the Calculation Period is the last day of the month of February, in which case the
month of February shall not be considered to be lengthened to a 30-day month)); and
(x) if "30E/360" or "Eurobond Basis" is so specified means, the number of days in
the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year
of 360 days with 12 30-day months, without regard to the date of the first day or last day of the
Calculation Period unless, in the case of the final Calculation Period, the date of final maturity is
the last day of the month of February, in which case the month of February shall not be considered
to be lengthened to a 30-day month).
"Defaulted Portfolio Investment" means with respect to a Series of Notes, any Portfolio Investment with
respect to which:
(a) the issuer thereof has defaulted in the payment of principal and/or interest and such default is
continuing with respect to such debt obligation (without giving effect to any applicable grace period or
waiver) provided that a Defaulted Portfolio Investment will not be classified as a "Defaulted Portfolio
Investment" under this clause (a) if the Investment Manager certifies in writing to the Indenture Trustee and
the Collateral Administrator, in its reasonable business judgment, that such payment default is due to noncredit and non-fraud related reasons and such default does not continue for more than five Business Days;
(b) pursuant to its Underlying Instruments, there has occurred any default or event of default (other than a
payment default) which entitles the holders thereof, or the holders of any securities of the obligor that are
pari passu or senior in priority to the Portfolio Investment, to accelerate the maturity (whether by
mandatory prepayment, mandatory redemption or otherwise) of all or a portion of the outstanding principal
amount of such security, unless such rights of acceleration have been waived or such default is cured;
(c) as to which the Investment Manager knows the issuer thereof is in default (without giving effect to any
applicable grace period or waiver) as to payment (if, in the Investment Manager's reasonable business
judgment, such default is due to non-credit related reasons, beyond five Business Days) of principal and/or
interest on another obligation (and such payment default has not been cured through the payment in Cash of
principal and interest then due and payable or waived by all of the holders of such security) which is senior
or pari passu in right of payment to such Portfolio Investment and which obligation and such Portfolio
Investment are secured by common collateral; provided that a Portfolio Investment shall not constitute a
"Defaulted Portfolio Investment" under this clause (c) if (A) the Investment Manager has notified the
Indenture Trustee and the Collateral Administrator and the Rating Agency, if any, in writing of its decision
not to treat such Portfolio Investment as a Defaulted Portfolio Investment and (B) if applicable, such
decision satisfies the Rating Agency Condition;
(d) as to which any bankruptcy, insolvency or receivership proceeding has been initiated in connection
with the issuer thereof, or there has been proposed or effected any distressed exchange or other debt
restructuring pursuant to which the issuer thereof has offered the holders thereof a new security or package
of securities that, in the reasonable business judgment of the Investment Manager, amounts to a diminished
financial obligation or is intended solely to enable the relevant obligor to avoid defaulting in the
performance of its payment obligations under such Portfolio Investment; provided that a Portfolio
Investment shall not constitute a "Defaulted Portfolio Investment" under this clause (d) if such Portfolio
Investment was acquired in a distressed exchange or other debt restructuring, complies with the
requirements of the definition of "Portfolio Investment" and that satisfies the Rating Agency Condition, if
applicable; and
(e) such other events as shall be specified in the relevant Series Supplement.
B-53
"Defaulted Synthetic Security" means a Synthetic Security referencing a Reference Obligation that
would, if such Reference Obligation were a Portfolio Investment, constitute a "Defaulted Portfolio
Investment" under the definition thereof.
"Defeased Synthetic Security" means a Synthetic Security entered into by the Issuer which is an unfunded
credit default swap under which the Issuer is required to provide Synthetic Security Collateral for its
contingent obligations to the Synthetic Security Counterparty thereunder.
"Deliverable Obligations" means a debt obligation that may be or is delivered to the Issuer upon the
occurrence of a "credit event" under a Synthetic Security that satisfies the Single Security Tests at the time
such debt obligation is delivered or, if such debt obligation does not satisfy such criteria, the treatment of
such debt obligation as a Portfolio Investment would satisfy the Rating Agency Condition.
"Distribution" means any payment of principal or interest or any dividend or premium or other amount
(including any proceeds of sale) or asset paid or delivered on or in respect of any Portfolio Investment or
any Eligible Investment, or under or in respect of any Hedge Transaction, as applicable.
"DTC" means The Depository Trust Issuer, its nominee, and their respective successors.
'Due Date" means each date on which a Distribution is due on a Pledged Security.
"Eligible Currency" means any currency in which Portfolio Investments may be denominated in
accordance with the terms of the relevant Series Supplement.
"Eligible Investments" means any investment denominated in the currency of a Qualifying Country and in
the same currency as any Account from which funds are invested in Eligible Investments that, in the event
that it is an obligation of a company incorporated in, or a sovereign issuer of, the United States, is in
registered form at the time it is acquired, and is one or more of the following obligations or securities,
including, without limitation, any Eligible Investments for which the Custodian, the Indenture Trustee or
the Investment Manager or an Affiliate of any of them provides services:
(a)
Cash;
(b)
direct obligations of, and obligations the timely payment of principal of and interest under which
is fully and expressly guaranteed by, a Qualifying Country or any agency or instrumentality of a Qualifying
Country, the obligations of which are fully and expressly guaranteed by a Qualifying Country, provided
that such Qualifying Country meets, for each relevant Series, the Qualifying Country Rating Floor, if any,
as may be specified in the relevant Series Supplement;
(c)
demand and time deposits in, certificates of deposit of and bankers' acceptances issued by any
depository institution (including the Account Bank) or trust company incorporated under the laws of a
Qualifying Country with, in each case, a maturity of no more than 183 days and subject to supervision and
examination by governmental 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
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 Standard & Poor's 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+" by Standard & Poor's 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 "Aa2" by Moody's (and, if such rating is "Aa2", 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, the issuer thereof must also have at the time of such
investment a long-term credit rating of not less than "AA+" by Standard & Poor's;
(d)
unleveraged repurchase obligations with respect to:
B-54
(i)
any obligation described in paragraph (a) above; or
(ii)
any other security issued or guaranteed by an agency or instrumentality of a Qualifying
Country, in either case entered into with a depository institution or trust company (acting as
principal) described in paragraph (b) above or entered into with a corporation (acting as principal)
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 Standard &
Poor's 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 Standard & Poor's at the time of such investment;
provided that (i) in each case, the issuer thereof must have at the time of such investment a longterm 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 Standard & Poor's;
(e)
securities bearing interest or sold at a discount to the face amount thereof issued by any
corporation incorporated under the laws of a Qualifying Country 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 Standard & Poor's;
(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 Standard & Poor's;
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
Standard & Poor's;
(g)
Reinvestment Agreements 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 Standard & Poor's; 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 Standard & Poor's; and
(h)
interests in any money market fund or similar investment vehicle having at the time of investment
therein the highest credit rating assigned by Moody's and a rating of "AAAm" or "AAAm/G" by Standard
& Poor's; provided that such fund or vehicle is formed and has its principal office outside the United States;
And in each case (other than (a), (g) or (h)) with a Stated Maturity, or in the case of clause (g) a withdrawal
date (in each case after giving effect to any applicable grace period) no later than the Business Day
immediately preceding the Payment Date in the case of an Eligible Investment in a Series Account, for the
related Series of Notes and in the case of an Eligible Investment in a Pool Account, for all Series of Notes
with a Series Allocation Percentage greater than zero in the related Pool Account; provided, however, that
Eligible Investments may not include (a) any mortgaged-backed security, (b) any security that does not
provide for payment or repayment of a stated principal amount in one or more installments, (c) any security
purchased at a price in excess of 100% of the par value thereof, (d) any investment the income from or
proceeds of disposition of which is or will be subject to reduction for or on account of any withholding or
similar tax, (e) any security the acquisition (including the manner of acquisition), ownership, enforcement
or disposition of which will subject the Issuer to net income tax in any jurisdiction or any security which, at
the time is subject to stamp duty or stamp duty reserve tax or issue or transfer tax, (f) any security that
constitutes a United States real property interest within the meaning of Section 897 of the United States
Internal Revenue Code of 1986, as amended (the "Code") (g) any Floating Rate Security (other than the
time deposits described in paragraph (c) above) whose interest rate is inversely or otherwise not
B-55
proportionately related to an interest rate index or is calculated as other than the sum of an interest rate
index plus or minus a spread, (h) any security whose rating by Standard & Poor's includes the subscript "r,"
"t," "p," "pi" or "q," (i) any security that is subject to an Offer, (j) any investments that are not "qualifying
assets" for the purposes of Section 110 of the Taxes Consolidation Act 1997 of Ireland, (k) any security
that the Investment Manager determines to be subject to substantial non-credit-related risk or (l) any
Interest-Only Securities; provided that, notwithstanding the foregoing, when used in relation to a Synthetic
Security Counterparty Account, Eligible Investments shall include any investments approved in writing by
the related Synthetic Security Counterparty. Eligible Investments may be obligations of, and may be
purchased from, the Indenture Trustee and its Affiliates, and may include obligations for which the
Indenture Trustee or an Affiliate thereof receives compensation for providing services.
"Encumbrance" means any mortgage, pledge, lien (other than any lien arising by operation of law),
charge, assignment by way of security or hypothecation (other than any encumbrance arising out of any
title retention provision contained in any contract for the sale or purchase of goods entered into in the
ordinary course of business.
"Emerging Market Countries" means jurisdictions with a long term foreign currency rating equal to or
less than "Aa3" from Moody's or with a foreign currency issuer credit rating less than "AA" by S&P.
"Entitlement Holder" has the meaning specified in Section 8-102(a)(7) of the UCC.
"Entitlement Order" has the meaning specified in Section 8-102(a)(8) of the UCC.
'Equity Security" means any equity security (or any other security that is not eligible for purchase by the
Issuer) that is acquired by the Issuer as a result of the exercise or conversion of a Portfolio Investment or in
exchange for a Defaulted Portfolio Investment.
"ERISA" means the United States Employee Retirement Income Security Act of 1974, as amended.
"ERISA Plan" means an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA, a "plan" within the meaning of Section 4975(e)(1) of the Code that is subject to Section
4975 of the Code and any entity whose underlying assets include the "plan assets" by reason of such plan's
investment in the entity.
"Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear System.
"Excepted Property" means the bank account in which the proceeds of the issuance of the shares of the
Issuer are deposited.
"Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
"Existing Series Reimbursement" means, with respect to the issuance of a new Series, an amount of
expenses reasonably determined by the Investment Manager at the time of such issuance and required to be
paid from the proceeds of issuance of Notes of the newly issued Series but distributed to the Noteholders of
each other Series pro rata according to each such Series' Series Share at such time.
"Final Redemption Amount" means, in respect of a pass through Note of a Series, its pro-rata share of
the Series Allocated Balance remaining after liquidation of all Applicable Collateral and in respect of any
other Note of a Series, its principal amount or such other amount as may be specified in, or determined in
accordance with, the relevant Series Supplement.
"Financial Asset" has the meaning specified in Section 8-102(a)(9) of the UCC.
"Financing Statement" means a financing statement relating to the Collateral naming the Issuer as debtor
and the Indenture Trustee on behalf of the Secured Parties as secured party.
"Fitch" means Fitch, Inc. and any successor or successors thereto.
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"Fixed Coupon Amount" has the meaning given in the relevant Series Supplement.
"Fixed Rate Security" means any Portfolio Investment other than a Floating Rate Security.
"Floating Rate Security" means (i) any Portfolio Investment or Eligible Investment that is expressly stated
to bear interest based upon a floating rate index for obligations denominated in such Eligible Currency
commonly used as a reference rate in the related country, (ii) any Portfolio Investment or Eligible
Investment the interest payments on which are derived primarily from underlying assets that bear interest
based on a floating rate index, (iii) any Cash held in any Issuer Account or (iv) any Hybrid Security with
respect to which, on any applicable date of determination, more than 50% of the assets from which
Cashflows are dependent bear, or have borne at any time prior to such date of determination, interest at a
floating or adjustable rate.
"Form-Approved Synthetic Security" means, for each Series and each Rating Agency, a Synthetic
Security (a)(i) the Reference Obligation of which, if it were a Portfolio Investment, could be purchased by
the Issuer without satisfaction of the Rating Agency Condition, if any or with respect to which the Rating
Agency Condition, if any, has been satisfied or (ii) the Reference Obligation of which would satisfy clause
(i) but for (x) the currency in which it is payable, and such Synthetic Security is payable in any Eligible
Currency and does not expose the Issuer to currency risk or (y) the frequency of the scheduled periodic
payments of interest on such Reference Obligation, (b) the documentation of which conforms (but for the
amount and timing of period payments, the name of the Reference Obligation, the notional amount, the
effective date, the termination date and other similarly necessary changes) to a form previously approved in
writing by the Rating Agency for use in this transaction and (c) for which the Issuer has provided to the
Rating Agency notice of the purchase of such Synthetic Security within five days after such purchase, and
the Rating Agency has responded within 10 days from the date of such notice, which response shall include
the recovery rate and Rating assigned by such Rating Agency, if applicable, to such Synthetic Security.
"Hedge Agreement" means any interest rate cap, currency or interest rate swap agreement entered into
under a 1992 ISDA Master Agreement (Multicurrency-Cross Border Currency) or 2002 ISDA Master
Agreement (or such other ISDA pro forma master agreement as may be published by ISDA from time to
time) (together with the schedule and confirmation relating thereto, including any guarantee thereof and
any credit support annex entered into pursuant to the terms thereof, and each as amended or supplemented
from time to time, a "Hedge Agreement") entered into by the Issuer with an Hedge Counterparty in
connection with a Portfolio Investment, as amended from time to time, and any replacement agreement
entered into in connection therewith.
"Hedge Counterparty" means any means each financial institution with which the Issuer enters into an
Hedge Agreement or any permitted assignee or successor thereto under the terms of the related Hedge
Agreement and in each case which satisfies the applicable Hedge Counterparty Ratings Requirement
(taking into account any guarantor thereof).
"Hedge Counterparty Ratings Requirement" means, with respect to any Hedge Counterparty or any
permitted transferee thereof, the rating requirement, if any, set forth in the applicable Series Supplements.
"Holder" or "holder" means a Noteholder.
"Incentive Management Fee" means, with respect to a Payment Date and a Series of Notes, a fee
calculated pursuant to the relevant Series Supplement and payable to the Investment Manager on such
Payment Date pursuant to the Priority of Payments for such Series of Notes as specified in such Series
Supplement.
"Indenture Supplement" means a supplement to the Indenture pursuant to which the terms set forth in a
Series Supplement for a Series of Notes are incorporated into the Master Indenture in connection with such
Series of Notes.
"Initial Issue Date" means the issue date upon which the first Series of Notes is issued by the Issuer.
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"Interest Amount" means, with respect to an interest bearing Series of Notes, in relation to a Note and an
Interest Period, the amount of interest payable in respect of that Note for that Interest Period.
"Interest Commencement Date" with respect to an interest bearing Series of Notes, means the Issue Date
of the Notes or such other date as may be specified as the Interest Commencement Date in the relevant
Series Supplement.
"Interest Determination Date" with respect to an interest bearing Series of Notes, has the meaning given
in the relevant Series Supplement.
"Interest Only Security" means any Portfolio Investment that does not provide for payment or repayment
of a stated principal amount in one or more installments on or prior to the date two Business Days prior to
the Maturity Date of the applicable Series Notes.
"Interest Payment Date" with respect to an interest bearing Series of Notes, means the date or dates
specified as such in, or determined in accordance with the provisions of, the relevant Series Supplement
and, if a Business Day Convention is specified in the relevant Series Supplement:
1.
as the same may be adjusted in accordance with the relevant Business Day
Convention; or
2.
if the Business Day Convention is the FRN Convention, Floating Rate
Convention or Eurodollar Convention and an interval of a number of calendar months is specified
in the relevant Series Supplement as being the Specified Period, each of such dates as may occur
in accordance with the FRN Convention, Floating Rate Convention or Eurodollar Convention at
such Specified Period of calendar months following the Interest Commencement Date (in the case
of the first Interest Payment Date) or the previous Interest Payment Date (in any other case).
"Interest Period" with respect to an interest bearing Series of Notes, means each period beginning on (and
including) the Interest Commencement Date or any Interest Payment Date and ending on (but excluding)
the next Interest Payment Date.
"Interest Proceeds" with respect to any Relevant Period and with respect to any Asset Pool, the sum
(without duplication) of:
(1)
all payments of interest on the Portfolio Investments held in such Asset Pool received in
Cash by the Issuer during such Relevant Period (in each case excluding (x) payments in respect of accrued
interest included in Principal Proceeds and (y) payments of interest in respect of Defaulted Portfolio
Investments and Written-Down Portfolio Investments (but only so long as the aggregate amount of
payments received by the Issuer in respect of any such Defaulted Portfolio Investment or Written-Down
Portfolio Investment does not exceed the original principal amount of such Defaulted Portfolio Investment
or Written-Down Portfolio Investment));
(2)
all accrued interest received in Cash by the Issuer with respect to Portfolio Investments in
such Asset Pool sold by the Issuer (excluding (x) payments in respect of accrued and unpaid interest on any
Portfolio Investments sold and reinvested at the option of the Investment Manager in any substitute
Portfolio Investment (unless, for the avoidance of doubt, such accrued and unpaid interest is used to
purchase accrued interest with respect to another Portfolio Investment at the direction of the Investment
Manager), (y) any accrued and unpaid interest included in Sales Proceeds received in respect of Defaulted
Portfolio Investments and Written Down Portfolio Investments (but only so long as the aggregate amount
of payments received by the Issuer in respect of any such Defaulted Portfolio Investment or Written-Down
Portfolio Investment does not exceed the original principal amount of such Defaulted Portfolio Investment
or Written-Down Portfolio Investment) and (z) payments in respect of purchased accrued interest included
in Principal Proceeds pursuant to clause (f) of the definition of Principal Proceeds);
(3)
all payments of interest (including any amount representing the accreted portion of a
discount from the face amount of an Eligible Investment) on Eligible Investments in the related Pool
Accounts received in Cash by the Issuer during such Relevant Period and to which the Issuer is entitled and
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all payments of principal, including repayments, on Eligible Investments purchased with amounts from the
Series Interest Collection Account or the related Pool Interest Collection Account received by the Issuer
during such Relevant Period;
(4)
all amendment and waiver fees, all late payment fees, and all other fees and commissions
received in Cash by the Issuer during such Relevant Period in connection with such Portfolio Investments,
Eligible Investments (other than (x) fees and commissions received in respect of Defaulted Portfolio
Investments (but only so long as the aggregate amount of payments received by the Issuer in respect of any
such Defaulted Portfolio Investment does not exceed the original principal amount of such Defaulted
Portfolio Investment) and (y) yield maintenance payments included in Principal Proceeds pursuant to
clause (g) of the definition thereof); and
(5)
all payments to be received pursuant to any Hedge Agreement entered into in connection
with such Asset Pool (excluding any payments to be received by the Issuer by reason of an event of default
or termination event (as defined in the Hedge Agreement) that are required to be used for the purchase of a
replacement Hedge Agreement) on the related Payment Date less any deferred premium payments payable
by the Issuer under such Hedge Agreement on the related Payment Date; provided that Interest Proceeds
shall in no event include (i) any payment or proceeds that constitute "Principal Proceeds" pursuant to the
definition thereof or (ii) any Excepted Property; provided further that if the presence of a legal or business
holiday causes a Scheduled Distribution on any Portfolio Investment or other security held as Collateral to
be received in the period between the end of the Relevant 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 Relevant Period.
"Investment Manager" means Prytania Investment Advisors, LLP, a limited liability partnership based in
the United Kingdom together with its successors and assignees.
"Investment Guidelines" means the guidelines in Section 4.2 applicable to all Series of Notes and, for
each Series of Notes, the section so named in the relevant Series Supplement in which any number of
requirements or restrictions on the Applicable Collateral for, and on any other characteristics of, such
Series must be tested in connection with a Portfolio Change Proposal in which such Series is affected.
"Issue Date" with respect to each Series of Notes, has the meaning given in the relevant Series
Supplement.
"Issue Price" with respect to a Series of Notes, has the meaning given in the relevant Series Supplement.
"Issuer Order and Issuer Request" means, respectively, a written order or a written request, in each case
dated and signed in the name of the Issuer by an Authorized Officer of the Issuer or by an Authorized
Officer of the Investment Manager where permitted pursuant to this Indenture or the Management
Agreement, as the context may require or permit.
"Margin" has the meaning given in the relevant Series Supplement.
"Margin Stock" means "margin stock" as defined under Regulation U.
"Maturity Date" has the meaning given in the relevant Series Supplement.
"Maximum Principal Amount" with respect to a Series of Notes, shall have the meaning given in the
relevant Series Supplement.
"Maximum Redemption Amount" has the meaning given in the relevant Series Supplement.
"Minimum Denomination" has the meaning given in the relevant Series Supplement.
"Minimum Redemption Amount" has the meaning given in the relevant Series Supplement.
"Moody's" means Moody's Investor Service, Inc. and any successor or successors thereto.
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"Moody's Recovery Rate" has the meaning set forth on Schedule A Part I.
"Net Outstanding Series Applicable Collateral Balance" means, with respect to a Series of Notes, as of
any date of determination, an amount equal to (and in the case of a Series in multiple currencies, the
Primary Currency Equivalent of) (a) the aggregate Series Adjusted Allocated Investments plus (b) such
Series' Series Allocation Percentage of the aggregate amount of all Principal Proceeds and Uninvested
Proceeds held as Cash in Pool Accounts and of the Aggregate Principal Balance of all Eligible Investments
in such Pool Accounts purchased with Principal Proceeds or Uninvested Proceeds and such Series' Series
Allocation Percentage of any amount on deposit at such time in a Pool Principal Collection Account or a
Pool Investment Account (without duplication), plus (c) the aggregate amount of all Principal Proceeds and
Uninvested Proceeds held as Cash in such Series' Series Accounts and the Aggregate Principal Balance of
all Eligible Investments in the related Series Account purchased with Principal Proceeds or Uninvested
Proceeds and any amount on deposit at such time in the related Series Principal Collection Account or the
related Series Investment Account (without duplication).
"Non-Permitted ERISA Holder" means a Holder or a Beneficial Owner of a Combination Note that is an
ERISA Plan.
"Non-Permitted Holder" means a Holder or a Beneficial Owner that is a U.S. Person that is not both (i) a
Qualified Institutional Buyer (or, in the case of Subordinated Notes, either a Qualified Institutional Buyer
or an Accredited Investor) and, in each case, (ii) a Qualified Purchaser or a company beneficially owned
exclusively by one or more Qualified Purchasers and/or Knowledgeable Employees.
"Noteholder" means the Person in whose name the Note is registered, which, for so long as the registered
Note is held by a depository or common depository for DTC, Euroclear or Clearstream Banking and/or any
other relevant clearing system, as custodian, means that depository or common depository or custodian.
"Obligor" means, in respect of a Portfolio Investment, the borrower thereunder or issuer thereof or, in
either case, the guarantor thereof (as determined by the Investment Manager on behalf of the Issuer)
including, where the context requires the Reference Entity under any Synthetic Security.
"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 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.
"Officer" means (a) with respect to the Issuer and any corporation, the Chairman of the Board of Directors
(or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer of such entity; and (b) with respect to any bank or trust
company acting as trustee of an express trust or as Securities Intermediary, the Trust Officer.
"Opinion of Counsel" means a written opinion addressed to the Indenture Trustee and each relevant Rating
Agency (each, a "Recipient"), in form and substance reasonably satisfactory to each Recipient, of an
attorney at law admitted to practice in any state of the United States or the District of Columbia (or Ireland,
in the case of an opinion relating to the laws of Ireland), which attorney may, except as otherwise expressly
provided in the Master Indenture, be counsel for the Issuer, and which attorney shall be reasonably
satisfactory to the Indenture Trustee. Whenever an Opinion of Counsel is required under the Master
indenture, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so
satisfactory which opinions of other counsel shall accompany such opinion of Counsel and shall either be
addressed to each recipient or shall state that each recipient shall be entitled to rely thereon.
"Optional Redemption Amount (Call)" means, in respect of any Note, its principal amount or such other
amount as may be specified in, or determined in accordance with, the relevant Series Supplement.
"Optional Redemption Amount (Put)" means, in respect of any Note, its principal amount or such other
amount as may be specified in, or determined in accordance with, the relevant Series Supplement.
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"Optional Redemption Date (Call)" has the meaning given in the relevant Series Supplement.
"Optional Redemption Date (Put)" has the meaning given in the relevant Series Supplement.
"Outstanding" means, with respect to the Notes of a Series, as of any date of determination, all of the
Notes of such Series theretofore authenticated and delivered under the Indenture, except:
cancellation;
(i)
Notes theretofore canceled by the Registrar or delivered to the Registrar for
(ii)
Notes or portions thereof for whose payment or redemption funds in the
necessary amount have been theretofore irrevocably deposited with the Indenture Trustee or any Paying
Agent in trust for the Holders of such Notes; provided, that if such Notes or portions thereof are to be
redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor
satisfactory to the Indenture Trustee has been made;
(iii) Notes in exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to the Indenture, unless proof satisfactory to the Indenture Trustee is presented that
any such Notes are held by a "protected purchaser" (within the meaning of Section 8-303 of the UCC); and
(iv)
Notes alleged to have been mutilated, destroyed, lost or stolen for which
replacement Notes have been issued;
provided, that in determining whether the Holders of the requisite Aggregate Outstanding Amount have
given any request, demand, authorization, direction, notice, consent or waiver hereunder, (I) Notes owned
by the Issuer or (only in the case of a vote to remove the Investment Manager, approve an Affiliate of the
Investment Manager as a successor Investment Manager or consent to an assignment of the Management
Agreement) the Investment Manager, its employees or any Affiliate of the Investment Manager, 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 Indenture Trustee shall be fully protected in relying
upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a trust
officer of the Indenture Trustee actually knows to be so owned shall be so disregarded and (II) Notes so
owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to
the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, the Investment Manager, its employees or any Affiliate of the Investment
Manager, or any other obligor upon the Notes or any Affiliate of the Issuer, the Investment Manager, its
employees or any Affiliate of the Investment Manager or such other obligor.
"Pantheon Administrative Expenses" means fees, expenses (including indemnities) and other amounts
due or accrued with respect to any Payment Date and in the following order of priority, first to the payment
of any fees and indemnities or other amounts owed by the Issuer to the Indenture Trustee or any Agent
under the Transaction Documents and then pro-rata to the payment of:
(i)
to the Investment Manger with respect to any indemnities owed to the Investment Manager under
the Transaction Documents;
(ii)
to the independent certified public accountants, agents (other than the Indenture Trustee, the
Investment Manager and the Agents) and counsel of the Issuer for fees, including retainers, and
expenses;
(iii)
to any other Person in respect of any governmental fee or charge (for the avoidance of doubt
excluding any taxes) or any statutory indemnity, including all filing, registration and annual return
fees payable to the Irish government and registered office fees, or
(iv)
to any other person in respect of any other reasonable fees and expenses of the Issuer not
prohibited under the Master Indenture (including, without limitation, any monies owed to the
Administrator under the Administration Agreement);
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(v)
the payment of any applicable value added tax required to be paid by the Issuer in connection with
the foregoing.
"Participating Member State" means a Member State of the European Communities which adopts the
euro as its lawful currency in accordance with the Treaty.
"Payment Business Day" means:
3.
4.
5.
if the currency of payment is USD, any day which is:
(a)
a day on which banks in the relevant place of presentation are open for presentation and
payment of debt securities and for dealings in foreign currencies; and
(b)
in the case of payment by transfer to an account, a day on which dealings in foreign
currencies may be carried on in each (if any) Additional Financial Center; or
if the currency of payment is euro, any day which is:
(a)
a day on which banks in the relevant place of presentation are open for presentation and
payment of debt securities and for dealings in foreign currencies; and
(b)
in the case of payment by transfer to an account, a TARGET Settlement Day and a day
on which dealings in foreign currencies may be carried on in each (if any) Additional
Financial Center; or
if the currency of payment is not USD or euro, any day which is:
(a)
a day on which banks in the relevant place of presentation are open for presentation and
payment of bearer debt securities and for dealings in foreign currencies; and
(b)
in the case of payment by transfer to an account, a day on which dealings in foreign
currencies may be carried on in the Principal Financial Center of the currency of payment
and in each (if any) Additional Financial Center;
provided that, with respect to distribution on Notes of a Series where there is more than on Specified
Currency, Payment Business Day shall mean the day first occurring on which there is a Payment Business
Day for payments in all Specified Currencies.
"Paying Agent" means the Deutsche Bank AG, London Branch, the U.S. Paying Agent and, with respect to
a Series of Notes, any Person authorized by the Issuer to pay the principal amount of or interest or any
other amount on such Notes on behalf of the Issuer.
"Payment Date" with respect to a Series, has the meaning set forth in the Series Supplement with respect
to such Series.
"Permitted Reference Obligation" means, in relation to any Series, any Portfolio Investment which
satisfies the Single Security Tests set forth in Section 4.2 hereof and in the relevant Series Supplement.
"Permitted Synthetic Security" means any Synthetic Security, provided that (i) for U.S. federal income
tax purposes it is either treated as debt, as a notional principal contract or as an option, and not as insurance,
reinsurance or a guarantee, (ii) the agreements relating to such Synthetic Security contain "non-petition",
"limited recourse" and "payee tax representation" provisions with respect to the Issuer in a form
satisfactory, in the case that there exists any Rating Agency Condition applicable to any Series, to all such
Rating Agencies and (iii) if one or more Series of Notes with a Series Allocation Percentage greater than
zero in the Asset Pool in which such Synthetic Security is held are rated (or any notes issued by a Series
Special Purpose Vehicle and secured primarily by such Series of Notes are rated) and a Rating Agency
Condition is applicable to such Series, unless such Synthetic Security is not a Form-Approved Synthetic
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Security acceptable to all such Rating Agencies, the Rating Agency Condition for each such Series must be
satisfied.
"Permitted Synthetic Security Counterparty" means any Synthetic Security Counterparty unless
otherwise specified in the relevant Series Supplement.
"Person" means an individual, corporation (including a business trust), partnership, limited liability
company, joint venture, association, joint stock company, trust (including any beneficiary thereof),
unincorporated association or government or any agency or political subdivision thereof.
"PIK Bond" means any Portfolio Investment that, 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.
"Placement Agent" means, with respect to a Series of Notes, the placement agent or the placement agents,
if any, specified in the relevant Series Supplement.
"Plan Asset Regulation" means the regulation issued by the United States Department of Labor that, under
specified circumstances, requires plan fiduciaries, and entities with certain specified relationships to an
ERISA Plan, to "look through" investment vehicles (such as the Issuer) and treat as an "asset" of the plan
each underlying investment made by such investment vehicle.
"Pledged Securities" means on any date of determination, (a) the Portfolio Investments, Equity Securities
and the Eligible Investments (other than Cash) that have been granted to the Indenture Trustee pursuant to
the terms of the Master Indenture and the Series Supplement and (b) all non-Cash proceeds thereof, in each
case, to the extent not released from the lien of the Master Indenture pursuant to the terms thereof.
"Portfolio Investments" means investment assets of the types (including, without limitation, Synthetic
Securities the Reference Obligations of which constitute such type of investments) set forth on Annex A
hereto as amended and supplemented from time to time and the other investments made by the Issuer in
accordance with the requirements of each Series Supplement.
"Portfolio Investment Withdrawal" means the transfer of all or a portion of one or more Portfolio
Investments from one Asset Pool to another Asset Pool on behalf of a Series.
"Primary Currency " means, with a respect to a Series the Notes of which are issued in more than one
currency, the currency set forth in a Series Supplement as the base currency for the calculations in
connection with the Investment Guidelines.
"Primary Currency Equivalent" means the equivalent of any amount as expressed in such Primary
Currency, using the Spot FX Rate.
"Principal Balance" or "par" with respect to any Portfolio Investment, shall be equal to (a) with respect to
a Synthetic Security, (i) the principal amount of a Synthetic Security which is in the form of a note, (ii) if
the Issuer paid the notional amount of any swap to the Synthetic Security Counterparty when it entered into
such Synthetic Security, the aggregate amount of the repayment obligations of the Synthetic Security
Counterparty payable to the Issuer through the maturity of such Synthetic Security or (iii) if the Issuer
established a Synthetic Security Counterparty Account for such Synthetic Security, the balance of the
Synthetic Security Collateral therein (b) with respect to any Eligible Investment that does not pay Cash
interest on a current basis, the lesser of the outstanding principal amount or the original purchase price
thereof, (c) with respect to any security (other than a Synthetic Security referred to in clause (a)(i) above or
an Equity Security) having a principal amount, the outstanding principal amount of such Portfolio
Investment, and (d) with respect to any other instrument, the most recent Valuation of such instrument
(less any portion of such Valuation attributable to accrued interest).
"Principal Financial Center" means, in relation to any currency, the principal financial center for that
currency; provided, however, that:
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6.
in relation to euro, it means the principal financial center of such Member State of the European
Communities as is selected (in the case of a payment) by the payee or (in the case of a calculation)
by the Calculation Agent; and
7.
in relation to Australian dollars, it means either Sydney or Melbourne and, in relation to New
Zealand dollars, it means either Wellington or Auckland; in each case as is selected (in the case of
a payment) by the payee or (in the case of a calculation) by the Calculation Agent.
"Principal Only Security" means any security (other than a Zero Coupon Bond) that does not provide for
the periodic payment of interest.
"Principal Proceeds" means, with respect to any Relevant Period, and with respect to any Asset Pool, the
sum (without duplication) of:
(a) all payments of principal on the Portfolio Investments held in such Asset Pool and Eligible
Investments held in the related Pool Accounts (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
Relevant Period including prepayments or mandatory sinking fund payments, or payments in respect of
optional redemptions, exchange offers, tender offers, interest and recoveries on Defaulted Portfolio
Investments (other than payments of principal of Eligible Investments acquired with Interest Proceeds),
including the proceeds of a sale of any Equity Security and any amounts received as a result of optional
redemptions, exchange offers, tender offers for any Equity Security received in Cash by the Issuer during
such Relevant Period;
(b) Sales Proceeds received by the Issuer with respect to Portfolio Investments held in such Asset
Pool during such Relevant Period (excluding those included in Interest Proceeds as defined above);
(c) all amendment, waiver, late payment fees and other fees and commissions, received in Cash by
the Issuer during the related Relevant Period in respect of Defaulted Portfolio Investments and WrittenDown Portfolio Investments held in such Asset Pool;
(d) any proceeds resulting from the termination and liquidation of any Hedge Agreement entered
into in connection with such Asset Pool, to the extent such proceeds exceed the cost of entering into a
replacement Hedge Agreement;
(e) all payments received in Cash by the Issuer during such Relevant Period that represent call or
prepayment with respect to assets in such Asset Pool;
(f) all payments of interest on Portfolio Investments received in Cash by the Issuer to the extent
that they represent accrued interest purchased with Principal Proceeds or funds in the related Pool
Investment Account;
(g) all yield maintenance payments received in Cash by the Issuer during such Relevant Period;
and
(h) all other payments received in connection with the Portfolio Investments and Eligible
Investments that are not included in Interest Proceeds; provided that in no event shall Principal Proceeds
include any Excepted Property; provided, further, that if the presence of a legal or business holiday causes a
Scheduled Distribution on any Portfolio Investment or other security held in an Asset Pool to be received in
the period between the end of the Relevant 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
Relevant Period.
"Proceeding" means any suit in equity, action at law or other judicial or administrative proceeding.
"Pro-Forma Transaction Characteristics" means the Series Specific Transaction Characteristics for a
Series, but using instead of the actual facts concerning a Series at the time of determination, the pro forma
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assumptions for such Series that would be in effect if all changes proposed to the portfolio of Series
Allocated Investments or to other characteristics of a Series in a Portfolio Change Proposal had occurred.
"Pure Private Portfolio Investment" means any Portfolio Investment other than (a) a Portfolio Investment
that was issued pursuant to an effective registration statement under the Securities Act or (b) a privately
placed Portfolio Investment that is eligible for resale under Rule 144A or Regulation S.
"Put Option Notice" means a notice which must be delivered to the Indenture Trustee or a Paying Agent
by any Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder.
"Put Option Receipt" means a receipt issued by the Indenture Trustee or a Paying Agent to a depositing
Noteholder upon deposit of a Note with the Indenture Trustee or such Paying Agent by any Noteholder
wanting to exercise a right to redeem a Note at the option of the Noteholder.
"Qualified Institutional Buyer" means a Person who is a qualified institutional buyer as defined in Rule
144A.
"Qualified Purchaser" means a "qualified purchaser" as defined in the Investment Company Act.
"Qualifying Country" means any of Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom,
Bermuda, the United States, Canada, any other EU Member State and any other country which the Rating
Agencies have confirmed is a Qualifying Country and any other country specified in the relevant Series
Supplement.
"Qualifying Country Rating Floor" with respect to a Series of Notes, the rating, if any, set forth in the
relevant Series Supplement.
"Qualifying Foreign Obligor" means a corporation, partnership, trust or other entity organized in any of
Austria, Belgium, Denmark, Finland, France, Germany, the Republic of Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, Bermuda, the United
States, Canada, any other EU Member State and any other country which the Rating Agencies have
confirmed is a Qualifying Country and any other country specified in the relevant Series Supplement.
"Rate of Interest" means the rate or rates (expressed as a percentage per annum) of interest payable in
respect of the Notes specified in the relevant Series Supplement or calculated or determined in accordance
with the provisions of these Conditions and/or the relevant Series Supplement.
"Rating" in relation to any Series shall have the meaning set forth in the relevant Series Supplement.
"Rating Agency" or "Rating Agencies" means the rating agency or rating agencies, if any, set forth in the
Series Supplement, provided that if at any time such Rating Agency ceases to provide rating services, such
term shall mean any other nationally recognised investment rating agency or rating agencies (as applicable)
selected by the Issuer with respect to such Series (or in the case of a rating of notes issued by a Series
Special Vehicle and secured by such Series of Notes, by the issuer with respect to such notes) (a
"Replacement Rating Agency"). In the event that at any time a Rating Agency is replaced by a
Replacement Rating Agency, references to rating categories of the original Rating Agency in these
Conditions and the Transaction Documents shall be deemed instead to be references to the equivalent
categories of the relevant Replacement Rating Agency as of the most recent date on which such other rating
agency published ratings for the type of security in respect of which such Replacement Rating Agency is
used and all references herein to "Rating Agencies" shall be construed accordingly.
"Rating Agency Condition" means, if applicable, with respect to a Series of Notes and with respect to any
specified action or determination, receipt by the Issuer and the Indenture Trustee of written confirmation by
each Rating Agency (or, if only one Rating Agency is specified in the related Series Supplement, the
Rating Agency specified) that such specified action, determination or appointment will not result in the
reduction or withdrawal of any of the ratings currently assigned to the Series of Notes or any notes secured
by such Series of Notes issued by a Series Special Purpose Vehicle, provided, however, that such written
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confirmation shall be required only for so long as such Series of Notes are Outstanding (or the notes
secured by such Series of Notes are Outstanding).
"Rating Requirement", if any, means, with respect to a Series of Notes, in the case of the Account Bank
and the Custodian, any Asset Swap Counterparty, any Interest Rate Hedge Counterparty, and any Synthetic
Security Counterparty, the long-term debt rating from the Rating Agency for such entity set forth in the
Series Supplement for such Series of Notes.
"Record Date" means the Business Day before the due date for the applicable payment, unless the relevant
Series Supplement provides otherwise.
"Redemption Amount" means, as appropriate, the Final Redemption Amount, the Optional Redemption
Amount (Call), the Optional Redemption Amount (Put) or such other amount in the nature of a redemption
amount as may be specified in, or determined in accordance with the provisions of, the relevant Series
Supplement.
"Reference Banks" has the meaning given in the relevant Series Supplement or, if none, four (or if the
Principal Financial Center is Helsinki, five) major banks selected by the Calculation Agent, in consultation
with the Investment Manager in the market that is most closely connected with the Reference Rate.
"Reference Entity" means with respect to a Synthetic Security, the Obligor to whose credit such Synthetic
Security is linked and the Obligor under any Reference Obligation specified in such Synthetic Security.
"Reference Obligor" means the obligor on a Reference Obligation.
"Reference Obligation" means a Permitted Reference Obligation in respect of which the Issuer has
obtained a Synthetic Security.
"Reference Price" has the meaning given in the relevant Series Supplement.
"Reference Rate" has the meaning given in the relevant Series Supplement.
"Registered" means in registered form for U.S. Federal 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 tax purposes shall not be
treated as Registered unless each of the obligations or securities held by the trust were issued after that date.
"Registered Form": has the meaning specified in Section 8-102(a)(13) of the UCC.
"Regulation S": means Regulation S under the Securities Act.
"Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R.
§ 221, or any successor regulation.
"Reinvestment Agreement" means a guaranteed reinvestment agreement from a bank, insurance company
or other corporation or entity organized under the laws of the United States or any state thereof or any
Qualifying Country under which no payments are subject to any withholding tax; provided that such
agreement provides that it is terminable by the purchaser, without premium or penalty, in the event that the
rating assigned to such agreement by the Rating Agency is at any time lower than the rating required
pursuant to the terms of this Indenture to be assigned to such agreement in order to permit the purchase
thereof.
"Relevant Date" means, in relation to any payment, whichever is the later of (a) the date on which the
payment in question first becomes due and (b) if the full amount payable has not been received in the
Principal Financial Center of the currency of payment by the Indenture Trustee on or prior to such due date,
the date on which (the full amount having been so received) notice to that effect has been given to the
Noteholders.
"Relevant Financial Center" has the meaning given in the relevant Series Supplement.
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"Relevant Jurisdiction" means, as to any obligor on any Portfolio Investment, any jurisdiction (a) in
which the obligor is incorporated, organized, managed and controlled or considered to have its seat, (b)
where an office through which the obligor is acting for purposes of the relevant Portfolio Investment is
located, (c) in which the obligor executes Underlying Instruments or (d) in relation to any payment, from or
through which such payment is made. With respect to any Portfolio Investment that is a Synthetic Security,
each reference in this definition to (i) the "obligor" shall include reference to the relevant Reference
Obligor and Synthetic Security Counterparty and (ii) the Underlying Instruments shall also include
reference to the documents evidencing or otherwise governing such Reference Obligation.
"Relevant Period" means, with respect to any Series of Notes, the period during which principal and
interest collections are received in the relevant Asset Pool Interest Collection Accounts and the Asset Pool
Principal Collection Accounts on the Series Allocated Investments held in each such Asset Pool prior to
being swept to the Series Interest Collection Account and the Series Principal Account for such Series.
"Relevant Screen Page" means the page, section or other part of a particular information service
(including, without limitation, Reuters Markets 3000 and Bridge Telerate) specified as the Relevant Screen
Page in the relevant Series Supplement, or such other page, section or other part as may replace it on that
information service or such other information service, in each case, as may be nominated by the Person
providing or sponsoring the information appearing there for the purpose of displaying rates or prices
comparable to the Reference Rate.
"Relevant Time" has the meaning given in the relevant Series Supplement.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Information" means such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto).
"Rule 144A Notes" means Notes offered for sale within the United States or to U.S. Persons in reliance on
Rule 144A.
"Rule 144A Transfer Certificate" has the meaning specified in Condition 6.6(m).
"S&P Recovery Rate" has the meaning set forth on Schedule A Part II.
"Sales Proceeds" means all proceeds received as a result of sales of Pledged Securities or an Auction, net
of any reasonable out-of-pocket expenses of the Investment Manager or the Indenture Trustee in
connection with any such sale.
"Scheduled Distribution" means, with respect to any Pledged Security, for each Due Date, the scheduled
payment in Cash of principal and/or interest and/or fee due on such Due Date with respect to such Pledged
Security, determined in accordance with the assumptions specified in paragraph (b) of Section 1.01 of the
Master Indenture.
"Scheduled Principal Proceeds" means:
(a)
in the case of any Portfolio Investment, save for any Non-Euro Obligation, scheduled principal
repayments received by the Issuer (including scheduled amortisation, installment or sinking fund
payments);
(b)
in the case of any Asset Swap Obligation, scheduled final and interim payments in the nature of
principal exchanges payable to the Issuer by the applicable Asset Swap Counterparty under the related
Asset Swap Transaction; and
(c)
in the case of any Synthetic Security, any Synthetic Security Collateral relating thereto (or any
amount received upon liquidation thereof) to which the Issuer is entitled upon expiration or termination of
such Synthetic Security at its scheduled maturity.
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"Secondary Hedge Agreement" means any interest rate cap, currency or interest rate swap agreement
entered into under a 1992 ISDA Master Agreement (Multicurrency-Cross Border Currency) or 2002 ISDA
Master Agreement (or such other ISDA pro forma master agreement as may be published by ISDA from
time to time) (together with the schedule and confirmation relating thereto, including any guarantee thereof
and any credit support annex entered into pursuant to the terms thereof, and each as amended or
supplemented from time to time) entered into by the Holder of Notes of a Series in connection with notes
issued by such Holder that are secured by the Series issued by the Issuer.
"Secured Parties" means (i) the Indenture Trustee, (ii) any Agent, (iii) the Investment Manager, (iv) with
respect to any Asset Pool, any Hedge Counterparty that has entered into a Hedge Agreement with respect to
one or more Portfolio Investments held in such Asset Pool and (v) with respect to the Applicable Collateral
for any Series, the Holders of the Notes of that Series and any Hedge Counterparty that has entered into a
Hedge Agreement with respect to such Series.
"Securities Lending Counterparty" means, with respect to a Series of Notes, any bank, broker-dealer or
other financial institution that has a short-term senior unsecured debt rating or a guarantor with the rating
from the Rating Agency specified in the relevant Series Supplement.
"Securities Account" has the meaning specified in Section 8-501(a) of the UCC.
"Securities Account Control Agreement" means the Securities Account Control Agreement dated as of
August 18, 2006, among the Issuer, the Indenture Trustee and the Securities Intermediary.
"Securities Act" means the United States Securities Act of 1933, as amended.
"Securities Intermediary" has the meaning specified in Article 8 of the UCC.
"Securities Mark" shall mean, for a Portfolio Investment that is a security, the clean price expressed in
percentage terms for such Portfolio Investment as provided by a securities dealer or third-party pricing
service acceptable to the Investment Manager and provided to the Collateral Administrator.
"Security" has the meaning specified in Section 8-102(a)(15) of the UCC.
"Security Entitlement" has the meaning specified in Section 8-102(a)(17) of the UCC.
"Segregated Pool" means, at any time, an Asset Pool that has been denoted by the Investment Manager as
being Series specific in its characteristics and for which only one Series has Series Allocation Percentage
equal to 100% or which is the result of a Segregation.
"Series Adjusted Allocated Investment" means, with respect to a Series of Notes and all Portfolio
Investments held in Asset Pools in which the Series Allocation of such Series is greater than zero, the
portion of the Adjusted Principal Balance of each Portfolio Investment held in each such Asset Pool based
on the Series Allocation Percentage of such Series in such Asset Pool.
"Series Allocated Balance" means with respect to each Series of Notes, the Balance held in each Series
Account relating to such Series and the portion of the Balance held in each Pool Account attributable to
such Series based on the Series Allocation Percentage of such Series of Notes in the related Asset Pool.
"Series Allocated Investment" means, with respect to a Series of Notes and all Portfolio Investments held
in Asset Pools in which the Series Allocation of such Series is greater than zero, the portion of the Principal
Balance of each Portfolio Investment held in each such Asset Pool based on the Series Allocation
Percentage of such Series in such Asset Pool.
"Series Allocation Percentage" means, with respect to each Series of Notes and the applicable Asset Pool
(including each Portfolio Investment held therein and the related Pool Accounts), the percentage calculated
based on the following formula and will at no time be less then zero or exceed 100%. When only one Series
of Notes has a Series Allocation Percentage greater than zero in an Asset Pool, such Series Allocation
Percentage shall be equal to 100%. At the creation of an Asset Pool and prior to the transfer of any funds
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or of any Portfolio Investment into an Asset Pool, the Series Allocation Percentages for all Series of Notes
with respect to such Asset Pool will be equal to zero, and on the Issue Date with respect to a Series of
Notes, prior to the transfer of any proceeds from such issuance, the Series Allocation Percentages for such
Series of Notes for all Asset Pools will be equal to zero.
The Series Allocation Percentages for an Asset Pool are recomputed by the Collateral Administrator and
notified to the Indenture Trustee each time that (i) the Issuer (or the Investment Manager acting on behalf
of the Issuer) transfers Cash or other Eligible Investments from a Series Account into the Pool Investment
Account, (ii) the Issuer (or the Investment Manager acting on behalf of the Issuer) transfers a Portfolio
Investment withdrawn by a Series directly into the Asset Pool, (iii) the Issuer (or the Investment Manager
acting on behalf of the Issuer) makes a Cash Withdrawal for payment of one or more Series and (iv) the
Issuer (or the Investment Manager acting on behalf of the Issuer) makes a withdrawal of a Portfolio
Investment (other than a withdrawal on a pro rata basis according to the existing Series Allocation
Percentages of the relevant Series) (a "Portfolio Investment Withdrawal") from an Asset Pool for transfer
to Asset Pools allocable to one or more Series.
=
Current _ Series _ Alllocation _ Percentage ∗ Current _ Asset _ Pool _ NAV + Series _ New _ IV − Series _ New _ Withdrawal
Current _ Asset _ Pool _ NAV + Total _ New _ IV − Total _ New _ Withdrawal
Where:
Current_Series_Allocation_Percentage
The Series Allocation Percentage for such Series
with respect to such Asset Pool prior to the any
of the events in (i) through (iv) above.
Current_Asset_Pool_NAV
The most-recent Asset Pool Net Asset Value for
such Asset Pool prior to the any of the events in
(i) through (iv) above.
Series_New_IV
The Valuation of the Cash and/or Portfolio
Investments transferred on such date into such
Asset Pool by such Series.
Series_New_Withdrawal
For a Cash Withdrawal or a Portfolio Investment
Withdrawal to or on behalf of a Series that is part
of a Portfolio Change Proposal (including a Cash
Withdrawal or Portfolio Investment Withdrawal
not according to the Series Allocation
Percentage), the Valuation of the Cash and/or
Portfolio Investments withdrawn on such date
from such Asset Pool to or on behalf of such
Series.
Total_New_IV
The sum, for all Series, of the Valuation of the
Cash and/or Portfolio Investments transferred on
such date into such Asset Pool.
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Total_New_Withdrawal
For Cash Withdrawals or Portfolio Investment
Withdrawals to or on behalf of one or more
Series that is part of a Portfolio Change Proposal
(including Cash Withdrawals or Portfolio
Investment Withdrawals not according to the
Series Allocation Percentage), the sum, for all
Series, of the Valuation of the Cash and/or
Portfolio Investments withdrawn on such date
from such Asset Pool.
"Series Administrative Expenses" means with respect to a Series of Notes, amounts (including
indemnities) due and payable by the Issuer, in connection with such Series, as set forth in the Series
Supplement.
"Series Collateral Quality Tests" means a list of Investment Guidelines and has the meaning given in the
relevant Series Supplement.
"Series Share" means a percentage the numerator of which is the Aggregate Outstanding Amount of the
Notes of such Series and the denominator is the Aggregate Outstanding Amount of the Notes of all of the
Series.
"Series Special Purpose Vehicle " means, with respect to a Series, a special or limited purpose vehicle that
issues obligations or securities that entitle the holders thereof to receive payments that depend primarily on
the cash flow from the Notes of such Series.
"Series Specific Transaction Characteristics" means, with respect to a Series of Notes, a set of actual
facts or, in the case in which one or more changes are proposed to the portfolio of Series Allocated
Investments in a Portfolio Change Proposal, or to other aspects of the transaction as specified in a Series
Supplement, pro forma assumptions, concerning the following:
(a)
Characteristics of each Series Allocated Investment, including face amount or notional amount,
Adjusted Allocated Balance, legal final maturity, weighted average maturity, index, spread, currency,
payment frequency, asset type, assumed recovery rate, country;
(b)
The Series Adjusted Allocated Investment and the Balance in any other account specified in the
Series Supplement with respect to such Series; and
(c)
Any other characteristics set forth in the relevant Series Supplement.
"Series Value" means, with respect to a Series and a single Asset Pool at any time, the Series Allocation
Percentage for such Series multiplied by the Asset Pool Net Asset Value of such Asset Pool.
"Short Position" means a credit default swap transaction with a counterparty having a stated notional
amount under which the Issuer is the purchaser of credit protection and with a term ending no later than the
earlier of the Stated Maturity and longer than five years (unless otherwise permitted in the relevant Series
Supplements); provided, that (i) the terms thereof provide for cash settlement and may only provide for
physical settlement at the option of the Issuer, (ii) the obligor of the Reference Obligation is organized in
Qualifying Country and (iii) the Rating Agency Condition, if any, has been satisfied or the Short Position
shall be in a form approved by the Rating Agency and the Issuer provides a copy of the documentation to
the Rating Agency.
"Special Purpose Vehicle Jurisdiction" means (x) The Cayman Islands, the Bahamas, Bermuda, the
Netherlands Antilles, the Channel Islands and any other jurisdiction that is commonly used as the place of
organization of special or limited purpose vehicles that issue Asset-Backed Securities (y) that generally
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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 Agency Condition.
"Specified Currency" means the currency or currencies of the Notes of a Series and has the meaning given
in the relevant Series Supplement.
"Specified Denomination(s)" has the meaning given in the relevant Series Supplement.
"Specified Office" means the office designated in writing by the Indenture Trustee or other Person, as the
context requires, which unless otherwise specified means the offices set forth in Condition 26 (Notices).
"Specified Period" has the meaning given in the relevant Series Supplement.
"Spot FX Rate" means a rate of exchange from one currency to another determined on any date by the
Investment Manager as the prevailing rate of exchange (expressed as a number rounded to four decimal
places) between the two currencies in an indicated direction of conversion.
"Standard & Poor's" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and any
successor or successors thereto.
"Standard & Poor's Rating" or "S&P Rating" means, with respect to any Portfolio Investment, for
determining the Standard & Poor's Rating as of any date of determination:
(a)
if such Portfolio Investment is an Asset-Backed Security:
(i)
if Standard & Poor's has assigned a rating to such Portfolio Investment either
publicly or privately (in the case of a private rating not requested by the Issuer, subject to the
receipt by the Investment Manager and Standard & Poor's of the appropriate consents from the
related obligor to the use of such private rating), the Standard & Poor's Rating shall be the rating
assigned thereto by Standard & Poor's (or, in the case of an ABS REIT Debt Security, the issuer
credit rating assigned by Standard & Poor's);
(ii)
if such Portfolio Investment is not rated by Standard & Poor's but the Issuer, or
the Investment Manager on behalf of the Issuer, has requested that Standard & Poor's assign a
credit estimate to such Portfolio Investment, the Standard & Poor's Rating shall be the rating so
assigned by Standard & Poor's; provided that pending receipt from Standard & Poor's of such
rating, (x) if such Portfolio Investment is of a type listed on Schedule C hereto or is not eligible for
notching in accordance with Schedule D hereto, such Portfolio Investment shall have a Standard &
Poor's Rating of "CCC-" and (y) if such Portfolio Investment is not of a type listed on Schedule C
hereto and is eligible for notching in accordance with Schedule D hereto, the Standard & Poor's
Rating of such Portfolio Investment shall be the rating assigned in accordance with Schedule D
hereto until such time as Standard & Poor's shall have assigned a rating thereto, provided that for
credit estimates for which Standard & Poor's does not perform surveillance, the Investment
Manager on behalf of the Issuer, shall request that Standard & Poor's (on or prior to each one-year
anniversary of the acquisition of any such Portfolio Investment) performs a credit estimate on such
Portfolio Investment, and shall provide all information reasonably required by Standard & Poor's
to perform such estimate; and
(iii)
if such Portfolio Investment is a Portfolio Investment that has not been assigned
a rating by Standard & Poor's pursuant to clause (i) or (ii) above, and is not of a type listed on
Schedule C hereto and is eligible for notching in accordance with Schedule D hereto, the Standard
& Poor's Rating of such Portfolio Investment shall be the rating determined in accordance with
Schedule D hereto;
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(b)
if such Portfolio Investment does not have a Standard & Poor's rating and is a Corporate
Guaranteed Security:
(i)
if there is an issuer credit rating of the guarantor that unconditionally and
irrevocably guarantees (with such form of guarantee satisfying Standard & Poor's then-published
criteria with respect to guarantees) the full payment of principal and interest on such Portfolio
Investment, then the Standard & Poor's Rating of such Corporate Guaranteed Security shall be the
issuer credit rating of such guarantor assigned by Standard & Poor's (regardless of whether there is
a published rating by Standard & Poor's on the Portfolio Investment held by the Issuer);
(ii)
if there is no issuer credit rating of a guarantor of such Corporate Guaranteed
Security, but a security or obligation of a guarantor of such Portfolio Investment is rated by
Standard & Poor's, then the Standard & Poor's Rating of such Corporate Guaranteed Security shall
be determined as follows: (A) if there is a rating by Standard & Poor's on a senior secured
obligation of the guarantor, then the Standard & Poor's Rating of such Corporate Guaranteed
Security shall be one subcategory below such rating, (B) if there is a rating on a senior unsecured
obligation of such guarantor by Standard & Poor's, then the Standard & Poor's rating of such
Corporate Guaranteed Security shall equal such rating; and (C) if there is a rating on a
subordinated obligation of the guarantor by Standard & Poor's, then the Standard & Poor's Rating
of such Corporate Guaranteed Security shall be two subcategories above such rating if such
obligation is below investment grade, and, if such rating is above investment grade, one subcategory above such rating until such time as Standard & Poor's shall have assigned a rating
thereto, provided that for credit estimates for which Standard & Poor's does not perform
surveillance, the Investment Manager on behalf of the Issuer, shall request that Standard & Poor's
(on or prior to each one-year anniversary of the acquisition of any such Portfolio Investment)
performs a credit estimate on such Portfolio Investment, and shall provide all information
reasonably required by Standard & Poor's to perform such estimate;
(iii)
if there is no issuer credit rating for the guarantor published by Standard &
Poor's and such Corporate Guaranteed Security is not rated by Standard & Poor's, and no other
security or obligation of the guarantor is rated by Standard & Poor's, if such Corporate Guaranteed
Security is publicly rated by Moody's, then the Standard & Poor's Rating of such Corporate
Guaranteed Security will be (1) one subcategory below the Standard & Poor's equivalent of the
rating assigned by Moody's if such Corporate Guaranteed Security is rated "Baa3" or higher by
Moody's and (2) two subcategories below the Standard & Poor's equivalent of the rating assigned
by Moody's if such Corporate Guaranteed Security is rated "Ba1" or lower by Moody's;
(iv)
if no Standard & Poor's rating with respect to such Corporate Guaranteed
Security may be obtained using the methodology specified in clauses (i), (ii) or (iii) above, then
the Issuer or the Investment Manager on behalf of the Issuer shall apply to Standard & Poor's for a
credit estimate, which shall be the Standard & Poor's Rating of such Corporate Guaranteed
Security; provided that pending receipt from Standard & Poor's of such estimate, such Portfolio
Investment shall have a Standard & Poor's Rating of "CCC-" if the Investment Manager believes
that such estimate will be at least "CCC-";
(v)
if a debt security or obligation of the guarantor of such Corporate Guaranteed
Security has been in default during the past two years, the Standard & Poor's Rating of such
Corporate Guaranteed Security will be "D"; and
(vi)
with respect to any Synthetic Security the Reference Obligation of which is a
Corporate Guaranteed Security, the Standard & Poor's Rating of such Synthetic Security shall be
the rating assigned thereto by Standard & Poor's in connection with the acquisition thereof by the
Issuer upon the request of the Issuer or the Investment Manager.
"Stated Maturity" means, with respect to (a) any security (other than a Note of any Series), the date
specified in such security as the fixed date on which the final payment of principal of such security is due
and payable and (b) any repurchase obligation, the repurchase date thereunder on which the final
repurchase obligation thereunder is due and payable.
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"Swap Mark" shall mean, for a Portfolio Investment that is a Hedge Agreement or a Synthetic Security,
the valuation provided by the calculation agent that is designated as such in such Hedge Agreement or
Synthetic Security.
"Synthetic Security" means any repurchase agreement or any credit default swaps, total return swap, credit
linked note, derivative instrument, structured note or trust certificate acquired by the Issuer with or from a
Synthetic Security Counterparty that provides for payments closely correlated to the default, recovery upon
default and other expected loss characteristics of a Reference Obligation (other than the risk of default of
the related Synthetic Security Counterparty), but that may provide for payments based on a maturity shorter
than or a principal amount, interest rate, currency, premium, payment terms or other noncredit terms
different from that of the related Reference Obligation, provided that a currency swap agreement entered
into by the Issuer with respect to a Portfolio Investment held by the Issuer shall not constitute a "Synthetic
Security" for purposes of this definition.
"Synthetic Security Collateral" means Eligible Investments except that the restriction with respect to the
Stated Maturity thereof shall not apply.
"Synthetic Security Counterparty" means any entity that is required to make payments on a Synthetic
Security (or to the Trust that issued the Synthetic Security) to the extent that a Reference Obligor makes
payments on a related Reference Obligation.
"TARGET Settlement Day" means any day on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer (TARGET) System is open.
"Transaction Documents" means with respect to a Series of Notes, such Notes, the Master Indenture, the
Series Supplement, the Management Agreement and the Collateral Administration Agreement, any note
purchase agreement with respect to such Notes, and any other agreement designated as such, collectively.
"Transfer Agent" means Deutsche Bank Trust Company Americas and, with respect to a Series of Notes,
any additional transfer agent or agents if any, specified in the relevant Series Supplement.
"Treaty" means the Treaty establishing the European Communities, as amended by the Treaty on European
Union.
"U.S. Person" has the meaning given in Regulation S.
"Underlying Instrument" means the indenture or other agreement pursuant to which a Portfolio
Investment has been issued or created and each other agreement that governs the terms of or secures the
obligations represented by such Portfolio Investment or of which the holders of such Portfolio Investment
are the beneficiaries.
"Uninvested Proceeds" means, at any time, the net proceeds received by the Issuer on an Issue Date with
respect to a Series of Notes from (x) the initial issuance of such Series Notes and (y) any premium payable
by any Hedge Counterparty to the Issuer pursuant to any Hedge Agreement entered into in connection with
such Series of Notes, to the extent such proceeds are deposited in a Series Investment Account or have been
transferred from such Series Investment Account to a Pool Investment Account.
"Valid" with respect to a Securities Mark or Swap Mark shall mean that such Securities Mark or Swap
Mark is being applied during that period which extends from the date of such Securities Mark or Swap
Mark to the date that is five days thereafter provided that the Investment Manager has not notified the
Indenture Trustee that market events have caused such mark to be invalid.
"Valuation" shall mean, for a Portfolio Investment or Eligible Investment, the value, in currency terms and
not percentage, including accrued interest where applicable, of such Portfolio Investment or Eligible
Investment using the most recent Securities Mark or Swap Mark, as applicable, provided that such
Securities Mark or Swap Mark is Valid and provided, further, the Valuation for a Portfolio Investment
purchased is equal to the purchase price at the time of such purchase, and provided, further, that Cash
equivalents will be treated as having a Valuation equal to their notional amount. If the Series Mark or the
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Swap Mark is not Valid then the Valuation will not be computed and any action that requires Series
Allocation Percentages to be recomputed will not be permitted to occur.
"Withdrawal" means a Cash Withdrawal and/or a Portfolio Investment Withdrawal.
"Written-Down Portfolio Investments" means any Portfolio Investment other than a Defaulted Portfolio
Investment as to which the aggregate par amount of such Portfolio Investment and all other securities
secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such
Portfolio Investment, 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 Note" means a Note specified as such in the relevant Series Supplement.
3.
2.2
Interpretation: In these Conditions:
1.
any reference to principal shall be deemed to include the Redemption Amount, any additional
amounts in respect of principal which may be payable under Condition 18 (Taxation), any
premium payable in respect of a Note and any other amount in the nature of principal payable
pursuant to these Conditions;
2.
any reference to interest shall be deemed to include any additional amounts in respect of interest
which may be payable under Condition 18 (Taxation) and any other amount in the nature of
interest payable pursuant to these Conditions;
3.
references to Notes being "outstanding" shall be construed in accordance with the Trust Indenture;
and
4.
if an expression is stated in Condition 2.1 to have the meaning given in the relevant Series
Supplement, but the relevant Series Supplement gives no such meaning or specifies that such
expression is "not applicable" then such expression is not applicable to the Notes of such Series.
Investment Manager
Prytania Investment Advisors LLP, a limited liability partnership based in the United Kingdom (the
"Investment Manager"), will manage the Collateral under an investment management agreement entered
into between the Issuer and the Investment Manager (the "Management Agreement"). Pursuant to the
Management Agreement as supplemented by the relevant Series Supplement, the Investment Manager will
manage the selection, acquisition and disposition of the Portfolio Investments (including exercising rights
and remedies associated with the Portfolio Investments and managing funds on deposit in various Pool
Accounts and Series Accounts) based on the restrictions set forth in the Master Indenture and the relevant
Series Supplements, including, without limitation, compliance with the Investment Guidelines with respect
to each Series of Notes.
If so specified in the relevant Series Supplement, the Investment Manager will be paid a Base Management
Fee and an Incentive Management Fee for its services as Investment Manager. Such fees shall be allocated
to a Series of Notes outstanding as specified in the relevant Series Supplement and shall be subject to the
Priority of Payments applicable to such Series of Notes as set forth in the relevant Series Supplement.
The costs and expenses of the Investment Manager that the Issuer is responsible for reimbursing will be
allocated to the Asset Pool with respect to which they have been incurred and included in the Allocated
Asset Pool Administrative Expenses for such Asset Pool to be further allocated among the relevant Series
based on the Series Allocation Percentage of each Series, taking into account changes in such percentages
over the period for which such expenses were incurred in order to ensure fair allocation of such expenses,
unless such costs and expenses are incurred with respect to a specific Series (in which case such costs and
expenses will be included in the Series Administrative Expenses) or with respect to the Pledged Securities
in general (in which case such costs and expenses will be included in the Pantheon Administrative
Expenses).
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The Investment Manager shall perform its duties and functions under the Management Agreement (i) using
a degree of skill and attention no less than that which the Investment Manager exercises with respect to
comparable assets that it manages for itself and for others and (ii) in a manner consistent with the practices
followed by prudent, similar institutional Investment Managers of national standing investing in assets of
the nature and character of the Collateral managed in substantially similar types of transactions.
Under the Management Agreement, and, in some cases subject to the conditions specified in the relevant
Series Supplement, with respect to each Series of Notes and the Applicable Collateral, the Investment
Manager may be removed for Cause at any time, upon ten Business Days' prior written notice by the Issuer
or Indenture Trustee, once an adequate replacement has been found, at the written direction of the holders
of at least 75% of the Aggregate Outstanding Amount of such Series of Notes and subject to the Rating
Agency Condition, if any. Upon receipt of a removal notice from the requisite percentage of the holders of
a Series of Notes, the Indenture Trustee shall execute a Segregation with respect to such Series.
Notwithstanding anything to the contrary contained herein, the removal of the Investment Manager with
respect to a Series of Notes and the Segregated Asset Pools applicable to such Series shall not affect the
rights, duties and obligations of the Investment Manager with respect to other Series of Notes (and the
Applicable Collateral allocable to such other Series of Notes) that have not voted for the removal of the
Investment Manager, except in the case of Static Asset Pools where any changes must be approved by all
affected Series, including a Series that may have a replacement Investment Manager.
4.
Portfolio Investments
4.1
Portfolio Investments: Portfolio Investments securing a particular Series of Notes may consist of
the types of investments as defined in Annex A and shall be subject to the Investment Guidelines
for all Series described herein, unless otherwise provided in the relevant Series Supplement and
specified in the relevant Series Supplement. The Issuer may, without consent of the holders of
any Series of Notes, add additional types of investments to Annex A, provided that no such
additional investment will be applicable to any Series of Notes unless the Series Supplement of
such Series of Notes provides for it or unless the requisite percentage of Holders of Notes of an
existing Series approves its inclusion as Collateral for such Series of Notes and any applicable
Rating Agency Condition is met.
If each applicable Series Supplement so permits with respect to any Asset Pool, the Issuer may
acquire Synthetic Securities in such Asset Pool.
For purposes of determining the principal balance of a Synthetic Security at any time, the principal
balance of such Synthetic Security shall be equal to the aggregate amount of the repayment
obligation of the Synthetic Security Counterparty payable to the Issuer through the maturity of
such Synthetic Security (in the case of a credit linked note) or the notional amount of the swap
agreement comprising such Synthetic Security (in the case of a credit default swap). In connection
with (or after) the acquisition of a Synthetic Security, the related Synthetic Security Counterparty
may grant to the Issuer a first priority security interest in cash and Eligible Investments (and the
proceeds thereof) designated by the related Synthetic Security Counterparty and deposited in a
Synthetic Security Issuer Account, which may be invested in accordance with the terms of such
Synthetic Security, and the proceeds of which may be applied to make periodic payments to the
Issuer under such Synthetic Security. Withdrawals from such Synthetic Security Issuer Account
shall be made in accordance with the terms of the related Synthetic Security.
Investments in Synthetic Securities present risks in addition to those associated with other types of
Single Security Tests. See "Risk Factors—Nature of Collateral" and "—Synthetic Securities".
If and to the extent that any counterparty to a Synthetic Security requires the Issuer to secure its
obligations to the counterparty, the Issuer (or the Investment Manager on its behalf) shall direct
the Account Bank or the Custodian to do one or more of the following (each a "Collateral
Arrangement") (x) either establish a segregated trust account in respect of each such Synthetic
Security (each such account, a "Synthetic Security Counterparty Account") which shall be held
in trust for the benefit of the related Synthetic Security Counterparty, (y) cause the establishment
of a segregated trust account in respect of any Synthetic Security at an organization or entity (other
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than the Custodian) permitted pursuant to the terms of the Series Supplement or (z) provide Cash
from a designated account or Synthetic Security Collateral to the Synthetic Security Counterparty
to be held and distributed in accordance with the applicable Synthetic Security. If the terms of any
Synthetic Security require the Synthetic Security Counterparty to secure its obligations with
respect to such Synthetic Security, the Issuer shall direct the Account Bank to establish a single,
segregated Securities Account in respect of such Synthetic Security (each such account, a
"Synthetic Security Issuer Account"). The Account Bank will deposit into any such Synthetic
Security Issuer Account all amounts that are received from the applicable Synthetic Security
Counterparty to secure the obligations of such Synthetic Security Counterparty in accordance with
the terms of such Synthetic Security.
.To the extent that the Synthetic Security Counterparty does not require that the Issuer's
obligations to such counterparty be secured by separate collateral, the Issuer's obligations to such
counterparty shall be secured by the Portfolio Investments in the related Asset Pool (other than
Portfolio Investments that constitute Synthetic Securities). Where the Investment Manager
requires that exposure to such Security be full collateralized, such Synthetic Security shall be a
"Defeased Synthetic Security"
Amounts contained in any Synthetic Security Counterparty Account or in any Synthetic Security
Issuer Account or provided to a Synthetic Security Counterparty shall not be considered to be an
asset of the Issuer for purposes of any of the Investment Guidelines but the Synthetic Security
which relates to such Synthetic Security Counterparty Account or such Synthetic Security Issuer
Account shall be an asset of the Issuer for such purposes.
4.2
Investment Guidelines for all Series: A security (including a Synthetic Security), will be eligible
for acquisition into an Asset Pool (and the Issuer will be entitled to enter into a commitment to
acquire such security for inclusion in such Asset Pool) only if the following criteria (the "Single
Security Tests") are satisfied with respect to such security on the date of such acquisition and
after giving effect thereto
Eligible for ownership
(1)
such Security is not a security (or the Reference
Obligation under a Synthetic Security) that is not eligible
under its Underlying Instruments to be purchased by the
Issuer and granted to the
Indenture Trustee and is not prohibited from inclusion as
a Portfolio Investment by any applicable law;
Assignable
(2)
the Underlying Instrument pursuant to which
such security was issued permits the Issuer to purchase it
and pledge it to the Indenture Trustee and such security
is a type subject to Article 8 or Article 9 of the UCC;
Registered
(3)
such security is Registered; provided that an
interest in a trust treated as a grantor trust for U.S.
Federal income tax purposes will not be treated as
Registered unless each of the obligations or securities
held by such trust was issued after July 18, 1984; and
either each asset of the trust is Registered or there are at
least three securities in the trust, none of which has
nominal value and provided, further, that a Synthetic
Security or a Reference Obligation need not be
Registered unless, in either case, failure to be so
Registered would cause such security to be subject to
withholding tax or be subject to the loss disallowance
rule of the Code
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4.3
No withholding
(4)
the Issuer will receive payments (other than
with respect to commitment fees, facility fees and other
similar fees due under the terms of such security) 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;
Does not subject Issuer to tax on
a net income basis
(5)
the Issuer will not (i) be treated as engaged in a
U.S. trade or business for U.S. Federal income tax
purposes or otherwise be subject to tax on a net income
basis in any jurisdiction outside the Issuer's jurisdiction
of incorporation as a result of the acquisition (including
the manner of acquisition), ownership, enforcement or
disposition of such security or (ii) upon disposition of
such security, be subject to U.S. Federal income or
withholding tax under Section 897 or Section 1445 of
the Code and the Treasury Regulations promulgated
thereunder on any gain realized on such disposition;
Limitation on maturity
(6)
unless the minimum denomination with respect
to such security is not greater than EUR 100 or its
equivalent in the currency of such security or unless such
security is to be held by a Segregated Pool, such security
does not mature later than the Maturity Date of the Notes
of such Series;
No margin stock
(7)
such security and any Equity Security acquired
in connection with such security is not Margin Stock;
Investment Company Act
(8)
the acquisition of such security would not cause
the Issuer or the pool of Collateral or the Applicable
Collateral to be required to register as an investment
company under the Investment Company Act; and if the
issuer of such security 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 security does not constitute a "voting security" for
purposes of the Investment Company Act or (y) the
aggregate principal amount of such security is less than
10.0% of the entire issue of which such security is a part;
Permitted Synthetic Security
(9)
a Synthetic Security may be acquired only if it
is a Permitted Synthetic Security for which the Synthetic
Security Counterparty is a Permitted Synthetic Security
Counterparty.
Investment Guidelines for Specific Series: The relevant Series Supplement will provide the
Investment Guidelines relating to a Series of Notes issued pursuant to such Series Supplement.
Such guidelines may include, but not be limited to, rules governing upon types of investments, the
balance between types of investments, currencies, domicile, maturity, any tax-related restrictions
upon the Issuer making such investments, and whether investments should be cash or synthetic.
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5.
Portfolio Management
5.1
Portfolio Change Proposal: The Investment Manager, acting according to the Management
Agreement, will deliver to the Collateral Administrator the Investment Manager's proposed
changes to Portfolio Investments in one or more Asset Pools and to other characteristics of one or
more Series through the submission, in writing, of a Portfolio Change Proposal identifying a
sequence of one or more steps that will accomplish such changes (a "Portfolio Change
Proposal"). A Portfolio Change Proposal is an ordered list of one or more changes the Investment
Manager proposes to make, including, without limitation, the following, with each category being
capable of being used more than once:
(i)
a Drawdown under existing Notes of Cash in a Specified Currency with respect to a
Series or the issuance of additional Notes in connection with an existing Series;
(ii)
the Withdrawal of Cash from an Asset Pool and the related Pool Accounts, identifying
the Asset Pool, the relevant Series and the amount, provided that such amount is not
greater than the Series Value;
(iii)
the transfer of Cash from a Series Account into the Investment Account of one or
more Asset Pools;
(iv)
a Portfolio Investment Withdrawal, and moving the Portfolio Investment from one
Asset Pool to another Asset Pool;
(v)
a purchase or sale of a security, including a Synthetic Security in an Asset Pool,
including the anticipated purchase or sale price;
(vi)
the entering into, reduction in the notional of or termination of a Hedge Agreement or
to a Secondary Hedge Agreement;
(vii)
the payment of any expenses related to the issuance of a Series or to the issuance of
Notes of a Series; and
(viii) a distribution of Cash from a Pool Account or from a Series Account, including, in the
case of a Series Account, a distribution to a specific Noteholder in accordance with the
Series Supplement for such Series, occurring on a date other than the scheduled date
for such distribution.
Upon receipt of a Portfolio Change Proposal, the Collateral Administrator will prepare the Proforma Transaction Characteristics for each of the affected Series and the Collateral Administrator,
based on the information provided by the Investment Manager and in conjunction with the
Investment Manager (as modified by the Series Supplement), will confirm that such set of changes
are in compliance with the Investment Guidelines (including all tests that are a component of such
Investment Guidelines) applicable to each affected Series in accordance with the terms of the
relevant Series Supplement. Only if all Investment Guidelines for all affected Series are met, will
the Collateral Administrator notify the Investment Manager to implement the Portfolio Change
Proposal on behalf of the Holders of the Notes of the Series affected by such Portfolio Change
Proposal.
Only if all Investment Guidelines for all affected Series are complied with, will the Indenture
Trustee notify the Investment Manager to implement the Portfolio Change Proposal on behalf of
the Holders of the Notes of such Series affected by such Portfolio Change Proposal.
5.2
Purchases and Sales of Portfolio Investments: Upon written direction from the Investment
Manager, the Account Bank will transfer funds from a Series Investment Account to a specified
Pool Investment Account for such funds to be used to purchase Portfolio Investments for inclusion
in the related Asset Pool in compliance with the Investment Guidelines and series–specific
characteristics set forth in the relevant Series Supplement for a Series of Notes provided, however,
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that such transfer of funds and such purchase shall also be in compliance with the Investment
Guidelines for such Series and for any other Series of Notes with respect to which the Series
Allocation Percentage in such Asset Pool is greater than zero, as described in Portfolio Change
Proposal above. Upon such transfer of funds from a Series Investment Account to a specified Pool
Investment Account, the Series Allocation Percentage for such Series of Notes and for any other
Series of Notes for which the Series Allocation Percentage is greater than zero with respect to the
related Asset Pool shall be adjusted accordingly.
The Investment Manager may, in accordance with restrictions contained in the Master Indenture,
the Management Agreement and the relevant Series Supplements, direct the Collateral
Administrator in writing to sell any Portfolio Investment held in and Asset Pool and to credit the
sale proceeds thereof into the related Pool Sales Proceeds Account. The Investment Manager may
instruct the Collateral Administrator to allocate funds in a Pool Sales Proceeds Account into a
Series Account for a Series of Notes. Upon such allocation of funds from a Pool Sales Proceeds
Account into a Series Account, if such allocation is not pro rata according to the Series Allocation
Percentage for all Series, the Series Allocation Percentage for all Series of Notes for which the
Series Allocation Percentage is greater than zero with respect to the related Asset Pool shall be
adjusted accordingly. In the event that the Issuer acquires any Margin Stock, the Investment
Manager will instruct Custodian to dispose of such Margin Stock within 30 days of such
acquisition.
The Collateral Administrator on behalf of the Indenture Trustee will at all times maintain current
records describing each Asset Pool, the pool characteristics related thereto and the Series
Allocation Percentage (as defined below) for each Series of Notes with respect thereto which shall
be updated from time to time where necessary to reflect any changes thereto and made available to
the Indenture Trustee at all times.
5.3
Segregation: A segregation may be executed either as a result of a redemption request, a
replacement of the Investment Manager by a Series or the assignment by the Investment Manager
of its rights and obligations under the Management Agreement with respect to a Series, in each
case with respect to the Applicable Collateral for such Series or an Event of Default with respect
to a Series (a "Segregation") in which case the Portfolio Investments for such Series shall be, to
the extent possible, moved into segregated Asset Pools (the "Segregated Asset Pools") and all
Cash and Eligible Investments held in the related Pool Accounts shall be transferred, based on
each Series' Series Allocation Percentage, to segregated Pool Accounts ("Segregated Pool
Accounts") and, for the avoidance of doubt, the Asset Pools in which such Series has a Series
Allocation Percentage greater than zero will become static until the Segregation is complete. (i)
When an Asset Pool is to be Segregated with respect to two or more Series of Notes, each
Portfolio Investment held in such Asset Pool that can be exchanged for securities in lesser
denominations (corresponding to the amount of the Allocated Investment for each of such Series)
will be transferred in its entirety to a new Asset Pool prior to proceeding with the Segregation. (ii)
To the extent that the minimum denomination requirements with respect to one or more Portfolio
Investments do not permit such an exchange, such non-exchangeable Portfolio Investments will be
retained in the original Asset Pool and such Asset Pool (a "Static Asset Pool") shall remain static
until such Portfolio Investments are liquidated. (iii) The Allocated Investments for each Series
being Segregated in the new Asset Pool created in (i) above shall be exchanged by the Custodian
against Portfolio Investments of like terms in the amount of the Allocated Investments.
In the case of an Event of Default with respect to a Series of Notes, unless the requisite majority of
the Holders of the Notes of such Series waive such Event of Default, the Indenture Trustee shall
begin to implement a Segregation promptly after acceleration of the Notes by the requisite number
of Holders under such Series. The Segregation shall occur automatically without instruction from
any other party. The exercise of remedies with respect to the Segregated Asset Pool shall be at the
instruction of a majority of the Holders of the Notes of such Series unless otherwise specified in
the Series Supplement. The Indenture Trust shall also cause a Segregation of the Applicable
Collateral for a Series of Notes to occur automatically any time that the requisite Holders of a
Series of Notes replace the Investment Manager with respect to such Applicable Collateral.
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5.4
Net Asset Value: On a monthly basis, or as otherwise requested by the Investment Manager, the
Collateral Administrator, in conjunction with the Investment Manager, shall compute a Valuation
with respect to each Portfolio Investment.
5.5
Cash account instructions: The Investment Manager may, at any time, instruct the Account Bank
to move Cash within an Asset Pool from one Pool Account to another Pool Account, provided,
however, that such transfer must be done in accordance with the relevant Series Supplements for
the Series the Series Allocation Percentage of which is greater than zero with respect to such Asset
Pool, and provided, further, that distributions of cash received into the Pool Interest Collection
Account may only be distributed to Series according to the Series Allocation Percentages. Except
to correct a misallocation, it is not permitted for transfers to occur from a Pool Interest Collection
Account to any other Pool Account nor permitted for transfers to occur from a Pool Principal
Collection Account to the Pool Interest Account unless provided for in the relevant Series
Supplements.
The Investment Manager may, at any time, instruct the Account Bank to move cash within a
Series from one Series Account to another Series Account, provided, however, that such
movement must be done in accordance with the relevant Series Supplement, and provided, further,
that distributions of cash received into the Series Interest Collection Account and Series Principal
Collection Account may only be distributed to Noteholders in accordance with the relevant Series
Supplement.
5.6
6.
Static Asset Pools: Any liquidations of Portfolio Investments from a Static Asset Pool must not
only comply with any applicable Investment Guidelines for Series having a Series Allocation
Percentage greater than zero with respect to such Static Asset Pool but also have the written
approval of any replacement Investment Manager with respect to any such Series.
Form, Denomination and Title of Notes
6.1
Form Generally: The Notes of each Series will be in registered definitive certificated form or in
global registered form in the Specified Currencies and the minimum authorized denominations, in
each case as specified in the relevant Series Supplement. Title to the Notes shall pass by
registration of transfers in the register of the Registrar and the registered holder of any Note shall
(except as otherwise provided by law) be treated as its absolute owner for all purposes. Transfer
of registered Notes may be made at the offices of a Paying Agent or the Registrar. With respect to
any Series of Notes listed on a stock exchange, the Issuer shall maintain a Paying Agent or
Registrar with an office in a particular place if so required by the rules of such stock exchange.
(a)
Regulation S Notes. Unless otherwise specified in the Series Supplement, the Notes offered and
sold to non- "U.S. Persons" (as defined in Regulation S under the Securities Act) in off-shore
transactions in reliance upon Regulation S under the Securities Act will be represented by one or
more permanent global notes (the "Regulation S Global Notes") and with the legend substantially
in the form set forth under "Notice to Investors" in the related Series Supplement, in definitive
fully registered form without interest coupons which shall be deposited on behalf of the
subscribers for the Notes represented thereby with a depository as custodian for, and shall be
registered in the name of, The Depository Trust Company ("DTC") (or its nominee), for the
accounts of Euroclear Bank S.A./N.V., as operator of the Euroclear system ("Euroclear"), and/or
Clearstream Banking, société anonyme ("Clearstream") or registered in the name of a nominee
for, and deposited with a common depositary on behalf of Euroclear and Clearstream, as set forth
in the relevant Series Supplement (the "Regulation S Depositary").
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) or by Euroclear and Clearstream directly.
(b)
Rule 144A Notes. Unless otherwise specified in the Series Supplement, the Notes offered in the
United States to Qualified Institutional Buyers ("Qualified Institutional Buyers") (as defined
under Rule 144A under the Securities Act) in reliance on Rule 144A (as defined under the
B-80
Securities Act) that are Qualified Purchasers ("Qualified Purchasers) (for purposes of the Section
3(c)7 under the Investment Company Act) will be represented by one or more definitive global
notes (the "Rule 144A Global Notes") and with the legend substantially in the form set forth
under "Notice to Investors" in the related Series Supplement, in fully registered form without
interest coupons deposited with a depository (the "Rule 144A Depositary"), as custodian for, and
registered in the name of, DTC (or its nominee). Interests in Rule 144A Global Notes will be
shown on, and transfers thereof will be effected only through, records maintained by DTC and its
direct and indirect participants. The Rule 144A Global Notes and the Regulation S Global Notes
are referred to herein collectively as the "Global Notes" and are referred to in the Master
Indenture as "Registered Global Notes". The term "Registered Global Notes" in the Master
Indenture may refer to Rule 144A Global Notes, Regulations S Global Notes or both, as the
context requires.
6.2
Denominations. The Notes will be issued in such denominations as may be specified in the
relevant Series Supplement, subject to compliance with all applicable legal and/or regulatory
and/or central bank requirements, and will be offered only in such minimum denomination and
integral multiples of U.S. $1.00, 1 Euro or 1 pound in excess thereof.
6.3
Global Notes:
(a)
This Condition 6.3 shall apply only to Global Notes deposited with or on behalf of a Depository.
The Issuer shall execute and the Paying Agent shall, in accordance with this Condition 6.3,
authenticate and deliver initially one or more Global Notes that (i) shall be registered in the name
of the nominee of the applicable Depository for such Global Note or Global Notes and (ii) shall be
delivered by the Paying Agent to such Depository or pursuant to such Depository's instructions or
held by the Paying Agent as custodian for such Depository. The aggregate principal amount of
Global Notes may from time to time be increased or decreased by adjustments made on the
records of the Paying Agent and the Depository (or its nominee), as the case may be, as hereinafter
provided.
(b)
Owners of beneficial interests in Global Notes will only be able to receive physical delivery of
Definitive Notes if (i) the Issuer advises the Indenture Trustee in writing that the applicable
Depository is no longer willing or able to discharge properly its responsibilities as clearing agency
with respect to the relevant class of Notes and the Issuer is unable to locate a qualified successor
or (ii) the Issuer, at its option, elects to terminate the book-entry system through the applicable
Depository. Upon the occurrence of any event described in clauses (i) or (ii) above, the Issuer is
required to notify all Participants of the availability of Definitive Notes. Upon surrender by the
applicable Depository of the definitive certificates representing the relevant class of Notes, the
Issuer will reissue such Notes as Definitive Notes issued in the respective principal amounts
owned by the individual Holders of such class of Notes, and thereafter the Indenture Trustee and
the Paying Agent will recognize the Holders of such Definitive Notes as Noteholders under the
Indenture.
6.4
Execution, Authentication, Delivery and Dating:
(a)
The Notes shall be authorized by the Issuer pursuant to an authentication order (the
"Authentication Order") executed on behalf of the Issuer by one or more duly authorized officers
of the Issuer, with a copy of the related Series Supplement attached to the Authentication Order.
(b)
The Authentication Order shall be delivered to the Indenture Trustee, the Registrar or any other
applicable Authenticating Agent, and copies thereof shall be held on file and made available for
inspection at the corporate trust office of the Indenture Trustee, the Registrar or any other
applicable Authenticating Agent, and at the offices of the Paying Agents for the Notes.
(c)
The Notes shall be executed on behalf of the Issuer by one of its directors or officers or a duly
authorized attorney-in-fact, whose signature thereon may be manual or facsimile. Any Note
bearing the manual or facsimile signature of any Person who was, at the time the signature was
affixed, a director or officer or a duly authorized attorney-in-fact of the Issuer shall bind the Issuer,
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notwithstanding that such Person has ceased to hold office or to be so authorized prior to the
authentication and delivery of those Notes or did not hold the relevant office or was not so
authorized at the date of delivery of such Note.
(d)
The Issuer shall deliver the Notes executed by the Issuer in accordance with the Indenture to, or to
the order of, the Indenture Trustee or any other Authenticating Agent for authentication and
delivery of such Notes. The Indenture Trustee or other Authenticating Agent, in accordance with
such instructions, shall authenticate and deliver the Notes as provided in this Indenture and not
otherwise. Each Note shall be dated the date of its authentication.
(e)
Notes issued upon transfer, exchange or replacement of other Notes shall be issued in authorized
denominations reflecting the original aggregate principal amount of the Notes so transferred,
exchanged, or replaced, but shall represent only the current outstanding principal amount of the
Notes so transferred, exchanged or replaced. In the event that any Note is divided into more than
one Note upon such transfer, exchange or replacement, the original principal amount of such Note
shall be proportionately divided among the Notes delivered in exchange therefor and shall be
deemed to be the original aggregate principal amount of such subsequently issued Notes.
(f)
No Note shall be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose unless there appears on such Note a certificate of authentication substantially in the form
set forth in the respective exhibit executed by the Indenture Trustee, the Paying Agent or any other
applicable Authenticating Agent by manual signature, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
(g)
The Issuer shall (a) require any holder or beneficial owner of any Rule 144A Global Note who is
determined not to be both a Qualified Institutional Buyer and a Qualified Purchaser to sell its
Notes to a person which is both a Qualified Institutional Buyer and a Qualified Purchaser and (b)
to refuse to honor a transfer of any such Note (or interest therein) to a person who is not both a
Qualified Institutional Buyer and a Qualified Purchaser.
6.5
Registration, Registration of Transfer and Exchange:
(a)
For each Series of Notes the Issuer shall cause to be kept a register (the "Note Register") at the
registered office of the Issuer or another location outside of the United States (provided that the
Issuer may keep a duplicate copy inside the United States) in which, subject to such reasonable
regulations as it may prescribe, the Issuer shall provide for the registration of, and the registration
of transfers of, such Notes. The Indenture Trustee is hereby initially appointed "Note Registrar".
Upon any resignation or removal of the Note Registrar, the Issuer shall promptly appoint a
successor or, in the absence of such appointment, assume the duties of Note Registrar.
(b)
If a Person other than the Paying Agent is appointed by the Issuer as Note Registrar, the Issuer
will give the Indenture Trustee prompt written notice of the appointment of such Note Registrar
and of the location, and any change in the location, of the Note Registrar, and the Indenture
Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain
copies thereof and the Indenture Trustee shall have the right to rely upon a certificate executed on
behalf of the Note Registrar by an authorized officer thereof as to the names and addresses of the
Holders of the Notes and the principal amounts and numbers of such Notes.
(c)
Subject to this Condition 6.5 and Condition 6.6, upon surrender for registration of transfer of any
Note at the offices of the Issuer or designated by any Transfer Agent and compliance with the
restrictions set forth in any legend appearing on any Note, the Issuer shall execute and the
Indenture Trustee shall authenticate and deliver (or cause an Authenticating Agent to authenticate
and deliver), in the name of the designated transferee or transferees, one or more new Notes of the
same class of any authorized denomination and of like terms and a like aggregate outstanding
principal amount.
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(d)
Subject to this Condition 6.5 and Condition 6.6, at the option of the Holder, Notes may be
exchanged for one or more Notes of the same class, of any authorized denomination and of like
terms and a like aggregate principal amount, upon surrender of the Notes to be exchanged at the
office as the Indenture Trustee or the Transfer Agent may designate for such purposes. Whenever
any Note is surrendered for exchange, the Issuer shall execute and the Indenture Trustee shall
authenticate and deliver (or cause an Authenticating Agent to authenticate and deliver) the Notes
that the Holder making the exchange is entitled to receive.
(e)
All Notes issued and authenticated upon any registration of transfer or exchange of Notes shall be
the valid obligations of the Issuer evidencing the same debt (to the extent they evidence debt), and
entitled to the same benefits under the Indenture, as the Notes surrendered upon such registration
of transfer or exchange.
(f)
Each Note presented or surrendered for registration of transfer or exchange shall be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the
Note Registrar duly executed by the Holder thereof or its attorney duly authorized in writing.
(g)
No service charge shall be made to a Holder for any registration of transfer or exchange of Notes,
but the Indenture Trustee or Transfer Agent may require payment of a sum sufficient to cover the
expenses of delivery (if any) not made by regular mail or any tax or other governmental charge
payable in connection therewith.
(h)
The Issuer shall not be required (i) to issue, register the transfer of or exchange any Note during a
period beginning at the opening of business 15 days before any selection of Notes to be redeemed
or paid and ending at the close of business on the day the Indenture Trustee sends notice of any
redemption in full to the Holders, or (ii) to register the transfer of or exchange of any Note
selected for redemption.
(i)
The Issuer, the Indenture Trustee, the Paying Agent and any of their respective agents may treat
the Person in whose name any Note is registered on the Note Register as the owner of such Note
on the applicable Record Date for the purpose of receiving payments of principal of and interest
on such Note and on any other date for all other purposes whatsoever (whether or not such
payment is overdue), and neither the Issuer nor the Indenture Trustee, nor any agent of the Issuer
or the Indenture Trustee shall be affected by notice to the contrary; provided, however, that the
Depository, or its nominee, shall be deemed the owner of Global Notes, and owners of beneficial
interests in Global Notes will not be considered the owners of any Notes for the purpose of
receiving notices.
6.6
Purchase, Transfer and Exchange of Notes:
(a)
No holder of a beneficial interest in a Note may, in any transaction or series of transactions,
directly or indirectly (each of the following a "transfer"), (i) sell, assign or otherwise in any
manner dispose of all or part of its beneficial interest in any Note, whether by act, deed, merger or
otherwise, or (ii) mortgage, pledge or create a lien or security interest in such beneficial interest
unless such transfer satisfies the conditions set forth in this Condition 6.6 and Condition 6.5. No
purported transfer of any beneficial interest in any Note or any portion thereof which is not made
in accordance with this Condition 6.6 and Condition 6.5 or that would have the effect of causing
the Issuer to be required to register as an investment company under the Investment Company Act
shall be given effect by or be binding upon the Issuer, the Indenture Trustee or any other Agent
and any such purported transfer shall be null and void ab initio and vest in the transferee no rights
against the Issuer Collateral, the Issuer, the Indenture Trustee, any Hedge Counterparty or any
other Agent.
(b)
No beneficial interest in a Note may be sold or transferred (including without limitation, by pledge
or hypothecation) except pursuant to an exemption from or in a transaction not subject to the
registration requirements of the Securities Act and exempt under applicable state securities laws or
the applicable laws of any other jurisdiction.
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(c)
No Note may be offered, sold or delivered or transferred (including, without limitation, by pledge
or hypothecation) except to (i)(A) a non-U.S. Person (as defined under Regulation S) in
accordance with the requirements of Regulation S or (B) a QIB/QP and (ii) in accordance with any
other applicable law.
No Note may be offered, sold or delivered (i) as part of the distribution by the Placement Agent at
any time or (ii) otherwise until 40 days after the issuance date with respect to such Series, within
the United States or to, or for the benefit of, U.S. persons (as defined in Regulation S) except in
accordance with Rule 144A to Persons purchasing for their own account or for the accounts of one
or more QIBs/QPs for which the purchaser is acting as a fiduciary or agent or in accordance with
an exemption from the registration requirements of the Securities Act. The Notes may be sold or
resold, as the case may be, in offshore transactions to non-U.S. persons (as defined in Regulation
S) in reliance on Regulation S. No Rule 144A Global Note may at any time be held by or on
behalf of any U.S. person (as defined in Regulation S) that is not a QIB/QP, and no Regulation S
Global Note may be held at any time by or on behalf of any U.S. person. Transfers of interests in
a Regulation S Global Note to U.S. persons (as defined in Regulation S) shall be limited to
transfers made pursuant to the provisions of Condition 6.6(e)(ii). Except upon the issuance of
Definitive Notes pursuant to the Indenture, transfers of a Global Note shall be limited to transfers
thereof in whole, but not in part, to nominees of the Depository, to a successor of the Depository
or such successor's nominee appointed pursuant to the Indenture. None of the Issuer, the
Indenture Trustee or any other Person may register the Securities under the Securities Act or any
state securities laws or the applicable laws of any other jurisdiction.
(d)
So long as a Global Note remains Outstanding and is held by or on behalf of the Depository,
transfers of a Global Note, in whole or in part, shall only be made in accordance with this
Condition 6.6. So long as a Definitive Note remains Outstanding, transfers and exchanges of
Definitive Notes, in whole or in part, shall only be made in accordance with this Condition 6.6.
(e)
(i)
Exchange or Transfer of a Beneficial Interest in a Rule 144A Global Note to a Beneficial
Interest in a Regulation S Global Note. If a holder of a beneficial interest in a Rule 144A Global Note
wishes at any time to exchange such interest for, or transfer its interest in such Rule 144A Global Note to a
Person who wishes to take delivery in the form of, an interest in a Regulation S Global Note, such holder
may, subject to the rules and procedures of the Rule 144A Depository, exchange or transfer or cause the
exchange or transfer of such interest for an equivalent beneficial interest in the Regulation S Global Note of
the same class, but only upon delivery of the documents set forth in the following sentence; provided that
such holder (in the case of an exchange) or the transferee (in the case of a transfer) is not a U.S. person (as
defined in Regulation S). Upon receipt by the Note Registrar and Transfer Agent of:
(A)
instructions given in accordance with the procedures of the applicable Reg S Depository
directing the Note Registrar to cause to be credited a beneficial interest in the applicable
Regulation S Global Note in an amount equal to the beneficial interest in such Rule 144A Global
Note being exchanged or transferred, but not less than the minimum authorized denomination
applicable to Notes of such class, and a written order given in accordance with the procedures of
the applicable Reg S Depository containing information regarding the participant account of such
Depository to be so credited; and
(B)
a duly executed certificate that (i) in the case of an exchange, is the Holder's certification
that the applicable exchange of Notes is in accordance with the exchange restrictions set forth in
the Indenture and in accordance with any applicable securities laws of any state of the United
States or any other jurisdiction and there has been no change in beneficial ownership of the Notes
being exchanged or (ii) in the case of a transfer, meets the requirements of a Reg S Transfer
Certificate set forth in Condition 6.6(m);
the Note Registrar shall, if necessary, instruct the Rule 144A Depository to reduce the principal amount of
the Rule 144A Global Note and instruct the applicable Reg S Depository to increase the principal amount
of the Regulation S Global Note by the aggregate principal amount of the beneficial interest in such Rule
144A Global Note to be exchanged or transferred, and to credit or cause to be credited to the securities
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account of the Person specified in such instructions a beneficial interest in the applicable Regulation S
Global Note in the amount of the transfer or exchange.
(ii)
Exchange or Transfer of a Beneficial Interest in a Regulation S Global Note to a Beneficial
Interest in a Rule 144A Global Note. If a holder of a beneficial interest in a Regulation S Global Note
wishes at any time to exchange such interest for, or transfer its interest in such Regulation S Global Note to
a Person who wishes to take delivery in the form of, an interest in a Rule 144A Global Note, such holder
may, subject to the rules and procedures of the applicable Reg S Depository, exchange or transfer or cause
the exchange or transfer of such interest for an equivalent beneficial interest in the Rule 144A Global Note
of the same class, but only upon delivery of the documents set forth in the following sentence, provided
that such holder (in the case of an exchange) or the transferee (in the case of a transfer) is a QIB/QP. Upon
receipt by the Note Registrar and Transfer Agent of:
(A)
instructions given in accordance with the procedures of the Rule 144A Depository
directing the Note Registrar to cause to be credited a beneficial interest in the applicable Rule
144A Global Note, in an amount equal to the beneficial interest in such Regulation S Global Note
being exchanged or transferred, but not less than the minimum authorized denomination
applicable to Notes of such class, and a written order given in accordance with the Rule 144A's
procedures containing information regarding the participant account of such Depository to be
credited; and
(B)
a duly executed certificate that (i) in the case of an exchange, is the Holders certification
that the applicable exchange of Notes is in accordance with the exchange restrictions set forth in
the Indenture and in accordance with any applicable securities laws of any state of the United
States or any other jurisdiction and there has been no change in beneficial ownership of such
Notes or (ii) in the case of a transfer, meets the requirements of a Rule 144A Transfer Certificate
set forth in Condition 6.6(n);
the Note Registrar shall, if necessary, instruct the applicable Depository to reduce the principal amount of
the applicable Regulation S Global Note and to increase the principal amount of the applicable Rule 144A
Global Note by the aggregate principal amount of the beneficial interest in such Regulation S Global Note
to be exchanged or transferred, and to credit or cause to be credited to the securities account of the Person
specified in such instructions a beneficial interest in the applicable Rule 144A Global Note in the amount of
the transfer or exchange.
(f)
Any purchase or transfer of Notes or beneficial interests therein may only be effected in
accordance with the provisions set forth in "Notice to Investors" in the Series Supplement relating to the
Notes and each purchaser or transferee by its acquisition of a Note or an ownership interest therein shall be
deemed to represent or acknowledge that it will only transfer Notes in compliance therewith and agrees
with the provisions set forth therein.
(g)
No Person may hold a beneficial interest in any Note except in a denomination authorized for the
Notes of such Series. No transfer of a Note may be made to a U.S. person (as defined in Regulation S) (i)
that was organized or reorganized for the specific purpose of acquiring such Note, (ii) if additional capital
or similar contributions were specifically solicited from any Person owning an equity or similar interest in
the transferee for the purpose of enabling the transferee to purchase such Note or (iii) if any Person owning
any equity or similar interest in the transferee has the ability to control any investment decision of the
transferee or to determine, on an investment-by-investment basis, the amount of such Person's contribution
to any investment made by the transferee.
(h)
Any Note issued upon the transfer, exchange or replacement of Notes shall bear a legend
substantially in the form set forth in "Notices to Investors" in the Series Supplement unless there is
delivered to the Issuer and the Indenture Trustee an Opinion of Counsel to the effect that neither such
applicable legend nor the restrictions on transfer set forth therein are required to ensure that transfers
thereof comply with the provisions of Rule 144A under Section 4(2) of, or Regulation S under, the
Securities Act, as applicable, and to ensure that neither the Issuer, the Portfolio Investments held in the
Asset Pools nor the Eligible Investments becomes an investment company required to be registered under
the Investment Company Act. Upon provision of such Opinion of Counsel, the Indenture Trustee, at the
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direction of the Issuer, shall authenticate and deliver (or cause an authenticating agent to authenticate and
deliver) Notes that do not bear such applicable legend.
(i)
Registration of the transfer of a Note by the Note Registrar shall be deemed to be the
acknowledgment of such transfer on behalf of the Issuer.
(j)
The Issuer will not purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the Notes except upon the redemption of the Notes in accordance with the terms of the Series Supplement
and the Notes. The Issuer will promptly cancel all Notes acquired by them pursuant to any payment,
purchase, redemption, prepayment or other acquisition of Notes pursuant to the Indenture, and no Notes
may be issued in substitution or exchange for any such Notes.
Notwithstanding anything contained herein to the contrary, neither the Indenture Trustee, the Transfer
Agent nor the Note Registrar shall be responsible for ascertaining whether any transfer complies with the
registration provisions of or any exemptions from the Securities Act, applicable state securities laws or the
applicable laws of any other jurisdiction, ERISA, the Code or the Investment Company Act; provided, that
if a certificate is specifically required by the express terms of this Condition 6.6 to be delivered to the
Indenture Trustee, the Note Registrar or the Transfer Agent by a holder or transferee of a Note, the
Indenture Trustee shall be under a duty to receive and examine the same to determine whether the transfer
contemplated thereby is permitted under the express terms of the Indenture and shall promptly notify the
party delivering the same if such transfer does not comply with such terms.
(k)
If so specified in the relevant Series Supplement, each purchaser and subsequent transferee of a
beneficial interest in any Note will be deemed to make certain ERISA related representations from the date
on which it acquires its interest in the Notes through and including the date on which such purchaser or
transferee disposes of its interest in the Notes as set forth in such Series Supplement.
(l)
A "Reg S Transfer Certificate" shall contain each of the following provisions:
(i)
the transferor hereby certifies that the applicable Notes are being transferred in
accordance with the applicable transfer restrictions set forth in the Indenture and in the Offering Document;
(ii)
the offer of such Notes was not made to a Person in the United States;
(iii)
at the time the buy order was originated, the transferee was outside the United States or
the transferor and any Person acting on its behalf reasonably believed that the transferee was outside the
United States;
(iv)
no directed selling efforts have been made in contravention of the requirements of Rule
903(b) or 904(b) of Regulation S, as applicable;
(v)
the transaction is not part of a plan or scheme to evade the registration requirements of
the Securities Act;
(vi)
the transferee (and any account on behalf of which the transferee is purchasing the Notes)
is not a U.S. person (as defined in Regulation S);
(vii)
the transferee is not, and is not being acquired with the assets of, any ERISA Plan;
(viii)
if the sale is made during a restricted period and the provisions of Rule 903(c)(2) or (3) or
rule 904(c)(1) of Regulation S are applicable thereto, the transferor confirms that such sale has been made
in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be;
and
(ix)
the transferor (A) confirms that it has made the transferee aware of the transfer
restrictions and representations set forth in Condition 6.5 and this Condition 6.6 of the Indenture and (B)
confirms that it has informed the Transferee that as a condition to the payment of principal of and interest
on any Note without U.S. Federal withholding, the Issuer shall require the delivery of properly completed
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and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service
Form W-9, or applicable successor form, in the case of a person that is a "United States person" (within the
meaning of the Code) or an applicable Internal Revenue Form W-8, or applicable successor form, or other
appropriate documentation in the case of a person that is not a "United States person" (within the meaning
of the Code)).
(m)
A "Rule 144A Transfer Certificate" shall contain each of the following provisions:
(i)
the transferor hereby certifies that the applicable Notes are being transferred in
accordance with the applicable transfer restrictions set forth in the Master Indenture and in the Offering
Circular and the related Series Supplement, and Rule 144A under the Securities Act, to a transferee that the
transferor reasonably believes is purchasing the Notes for its own account or an account with respect to
which the transferee exercises sole investment discretion, the transferee and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the Securities Act, in a transaction
that meets the requirements of Rule 144A and in accordance with any applicable securities laws of any
state of the United States or any other jurisdiction, and the transferee and any such account is a qualified
purchaser for purposes of the Investment Company Act;
(ii)
the transferor believes that the transferee is not, and is not acquiring the Notes with the
assets of, an ERISA Plan; and
(iii)
the transferor (A) confirms that it has made the transferee aware of the transfer
restrictions and representations set forth in Condition 6.5 and this Condition 6.6 of the Indenture and (B)
confirms that it has informed the transferee that as a condition to the payment of principal of and interest on
any Note without U.S. Federal back-up withholding, the Issuer may require the delivery of properly
completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue
Service Form W-9, or applicable successor form, in the case of a person that is a "United States person"
(within the meaning of the Code) or an appropriate Internal Revenue Form W-8, or applicable successor
form, or other appropriate documentation in the case of a person that is not a "United States person" (within
the meaning of the Code)).
(n)
Each initial investor and each subsequent transferee of an Note may be required to provide
appropriate documentation establishing such person's status for purposes of the U.S. withholding and
backup withholding rules. Each Holder of an Note will also be required, as a condition to the continued
holding of such Notes and the transfer of such Notes to such holder, to agree to provide a properly
completed, newly executed U.S. tax form (e.g., an IRS Form W-9 or an appropriate IRS Form W-8 (or an
applicable successor form)) to the Issuer, the Transfer Agent or Indenture Trustee in each of the following
circumstances: (i) no later than 120 days prior to the expiration (if applicable) of the last previously
provided U.S. tax form, (ii) upon a request by the Issuer, the Transfer Agent or the Indenture Trustee, and
(iii) upon any change of circumstance that would cause the last previously provided U.S. tax form to be
incorrect. Each Holder of a Note will also be required, as a condition to the transfer of such Note, to agree
that if such Holder fails to provide a properly completed, newly executed U.S. tax form no later than 120
days prior to the expiration of the last previously provided U.S. tax form or, if earlier, within the time
specified in any request by the Issuer (which shall not be less than 30 days) or upon any change in
circumstances that would cause the last previously provided U.S. tax from to be incorrect, the Issuer may
make no further payments to such holder and the Issuer will have the unconditional right (which it can
choose to exercise in its sole discretion) to cause the Holder to sell any and all Notes to the Issuer or to a
person chosen by the Issuer or the Issuer's agent on such terms as the Issuer may choose (which price can
reflect the need to dispense of the security with haste). For this purpose, an IRS Form W-8IMY (or any
successor form thereto) will be deemed to expire upon the expiration of any withholding statement or U.S.
tax forms associated with such IRS Form W-8IMY.
6.7
Notes Beneficially Owned by Persons Not QIB/QPs or Qualified Purchasers:
(a)
Notwithstanding any other provision in the Indenture, any transfer of a beneficial interest in any
Rule 144A Global Notes to a U.S. person (as defined in Regulation S) that is not a QIB/QP or of a
Regulation S Global Note to a U.S. person shall be null and void ab initio and any such purported
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transfer of which the Issuer or the Indenture Trustee shall have notice may be disregarded by the
Issuer and the Indenture Trustee for all purposes.
(b)
7.
If any U.S. person (as defined in Regulation S) that is not a QIB/QP shall become the beneficial
owner of any Note (any such Person an "Ineligible Holder"), the Issuer shall, promptly after
discovery; it being understood that there is no obligation of investigation or inquiry on the
Indenture Trustee, that such Person is an Ineligible Holder by the Issuer or the Indenture Trustee
(and notice by the Indenture Trustee to the Issuer, if the Indenture Trustee makes the discovery),
send notice to such Ineligible Holder demanding that such Ineligible Holder transfer its interest to
a Person that is not an Ineligible Holder within 30 days of the date of such notice. If such
Ineligible Holder fails to so transfer its Notes, the Issuer shall have the right, without further notice
to the Ineligible Holder, to sell such Notes or interest in Notes to a purchaser selected by the Issuer
that is not an Ineligible 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 Notes and selling such 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 Note, the Ineligible Holder and each other Person in the chain of
title from the Holder to the Ineligible Holder, by its acceptance of an interest in the Note, agrees to
cooperate with the Issuer and the Indenture Trustee 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 Ineligible Holder. The terms and conditions of any sale under this subsection shall
be determined in the sole discretion of the Issuer, and neither the Issuer nor the Indenture Trustee
shall 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.
Status of Notes
Notes may be issued from time to time in Series (each, a "Series") as shall be specified in the applicable
Series Supplement. The specific terms of each Series of Notes issued will be set out in the Series
Supplement relating to such Series of Notes.
The relevant Series Supplement for a Series of Notes may provide for the issuance of additional Notes of
the same Series or for increases in the outstanding principal amount of the existing Notes of Series as a
result of additional payments to the Issuer by the Holders of such Notes (each such payment being a
"Drawdown"), in each case, in accordance with the terms and conditions specified in such Series
Supplement. Notes of a single Series will rank pari passu with all other Notes of the same Series except to
the extent that Notes in different Specified Currencies are held by the same Noteholder. Each additional
issuance and each additional drawdown must be specified as part of a Portfolio Change Proposal.
Where the relevant Series Supplement for a Series of Notes provides for additional Drawdowns with
respect to the Notes issued on the initial Issue Date, unless otherwise specified in the relevant Series
Supplement:
1.
No drawdown shall cause the aggregate principal amount (as set forth in the
Series Supplement) of all of the Notes issued in connection with such Series (converted to a
currency equivalent in the case of Notes of a Series issued in more than one Specified Currency)
to exceed the Maximum Principal Amount as specified in the relevant Series Supplement.
2.
The Issuer shall send a written notice of the proposed Drawdown to all holders
of the Notes of such Series identifying the date and amount of the proposed Drawdown for each
such Holder no later that the number of days prior to date of the proposed Drawdown specified in
the relevant Series Supplement, together with any other information required by the relevant
Series Supplement in connection with such Drawdown.
3.
The net proceeds from each Drawdown, after payment of fees and expenses of
the Issuer related thereto, if any, (including fees and expenses related to the structuring, offering
and sale of such Series of Notes and any Existing Series Reimbursement) , will be deposited into
the Series Investment Account in the Specified Currency of such Drawdown.
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4.
Unless the Series Supplement provides otherwise, the Issuer shall be entitled to
prepay without penalty the principal amount of the Notes (each such prepayment, a
"Redemption") and to re borrow such amounts in the form of future Drawdowns.
5.
The Indenture Trustee shall record such Drawdowns and Redemptions on the
Schedule attached to the Series Supplement which shall be incorporated into the Master Indenture
through the Series Supplement
6.
The Series Supplement may impose conditions on the transfer of the Notes
while Drawdowns may occur and also may impose consequences for the non-payment under any
Drawdown.
The Issuer shall issue such additional Series of Notes as the Investment Manager shall advise,
upon the terms and conditions set forth in the related Series Supplement pursuant to the terms of a Series
Supplement entered into among the Indenture Trustee, the Custodian, the Account Bank and the other
parties to the Master Indenture. No such Series Supplement shall amend the terms of the security for the
Notes set forth below, modify the limited recourse of each Series of Notes to the Applicable Collateral or
affect the rights of the existing Holders of the Notes in any way. Such issuance shall be subject to the
delivery of such documents and such legal opinions as the Investment Manager shall advise. No consent of
the existing Holders of any Series of Notes shall be required in connection with any such issuance of Notes.
On the Issue Date with respect to a Series of Notes, prior to the transfer of any proceeds from such
issuance, the Series Allocation Percentages for such Series of Notes for all Asset Pools will be equal to
zero.
8.
Security for the Notes
Pursuant to the Master Indenture, the Issuer will grant to the Indenture Trustee a security interest in all of
the assets of the Issuer, including without limitation, the Asset Pools and the related Pool Accounts, the
Series Accounts, the rights of the Issuer under various agreements (including any Hedge Agreements), all
accounts, chattel paper, deposit accounts, financial assets, general intangibles, instruments, investment
property, letter-of-credit rights and other supporting obligations of the Issuer related to the foregoing and
all proceeds of the foregoing (collectively, the "Collateral") to be held on behalf of the Holders of Notes in
each Series issued from time and the other Secured Parties. The Holders of Notes of each Series of Notes
have a beneficial interest in such security interest with respect to (i) all Series Accounts relating to such
Series of Notes, all Cash and other Eligible Investments held in such Series Accounts and all income from
investment of funds therein and any agreements entered into solely in connection with such Series of Notes,
including without limitation, any Series specific Hedge Agreements, (ii) to the extent that funds from the
Series Accounts related to such Series of Notes shall have been invested in an Asset Pool (or transferred to
the related Pool Accounts), the Portfolio Investments, Cash and other Eligible Investments held in each
such Asset Pool and the related Pool Accounts and all income from investment of funds therein and any
agreements entered into in connection with such Asset Pool (including, without limitation, all Asset Pool
specific Hedge Agreements) and all proceeds of the foregoing, in each case only to the extent of the Series
Allocation Percentage for such Series of Notes in such Asset Pool and (iii) in all agreements entered into
and other rights and interests acquired by the Issuer with respect to the transactions in general and not with
respect to a specific Series or a specific Asset Pool (collectively, the "Applicable Collateral").
The Notes will be limited recourse obligations of the Issuer. Each Series of Notes will only have
recourse to the Applicable Collateral for such Series of Notes. The Applicable Collateral that secures a
particular Series of Notes will not be available to make payments on any other Series of Notes. If the
Applicable Collateral that secure a Series of Notes is not sufficient to make all scheduled payments on such
Notes (including, without limitation, any Interest Amount or Redemption Amount), Noteholders of such
Series will not have a claim against any other assets of the Issuer, including, without limitation, the
Collateral that secures any other Series of Notes, and any outstanding obligations of, or claims against, the
Issuer in respect thereof will be extinguished and shall not revive. The supplement to the Master Indenture
incorporating the terms of the Series Supplement will specify that the holders of each Series of Notes will
agree and acknowledge that they will have recourse only to the Applicable Collateral and will not have any
claims against other assets pledged to secure any other Series of Notes.
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9.
Accounts
(a)
Asset Pools and Pool Accounts:
Portfolio Investments purchased by the Issuer, at the direction of the Investment Manager, will be
held by the Custodian either directly or through a sub-custodian in one or more pools (each, an
"Asset Pool") having certain defining characteristics designated by the Investment Manager such
as: currency designation, asset description, composite rating range, product specificity, etc. No
Asset Pool will contain Portfolio Investments in more than one currency. Pursuant to the
Management Agreement, the Investment Manager may direct the Custodian in writing to create
new Asset Pools or to add new characteristics to an existing Asset Pool. At the creation of an
Asset Pool and prior to the transfer of any Cash or of any Portfolio Investment into an Asset Pool,
the Series Allocation Percentages for all Series of Notes with respect to such Asset Pool will be
equal to zero. Pursuant to the Management Agreement, the Investment Manager may direct the
Custodian in writing to further subdivide any existing Asset Pool, including, without limitation, to
Segregate the portion of the Portfolio Investments representing all or a portion of the Series
Allocation Percentage of a Series of Notes in order to, among other reasons identified by the
Investment Manager, permit total or partial early redemption of such Series. Further, the
Investment Manager may direct the Custodian to declare any empty Asset Pool as inactive and
close the related Pool Accounts.
In accordance with the terms of the Master Indenture and the Securities Account Control
Agreement, the Investment Manager will instruct the Indenture Trustee to establish with the
Custodian a custodial account for each Asset Pool created on the Initial Issue Date in the name of
the Indenture Trustee which shall be held in trust by the Custodian in accordance with the terms of
the Securities Account Control Agreement The only permitted withdrawals from each Asset Pool
shall be in accordance with the provisions of these Terms and Conditions. Upon the creation of
additional Asset Pools by the Investment Manager as set forth above, the Investment Manager will
instruct the Indenture Trustee to establish with the Custodian in the name of the Indenture Trustee
additional segregated accounts corresponding to such Asset Pools. The Custodian shall identify
such accounts in accordance with the instructions of the Investment Manager. The Custodian shall
keep a schedule of the Assets Pools and a schedule of pool characteristics for each such Asset
Pool.
Holders of Notes of any Series shall have no right to direct any purchases or sales of the
Applicable Collateral or direct the Custodian to create or modify any Asset Pools; instead, they
must rely on the Investment Manager to make such decisions relating to sale and purchases of
Applicable Collateral, as well as the management of the Asset Pools and to direct the Indenture
Trustee and the Custodian in connection therewith.
With respect to each Asset Pool, in accordance with the terms of the Master Indenture and the
Securities Account Control Agreement, the Issuer (or the Investment Manager on its behalf) will
instruct the Account Bank to establish in each of the currencies in which the Portfolio Investments
are denominated all necessary segregated trust accounts (each, a "Pool Account") in the name of
the Indenture Trustee on behalf of the Secured Parties with respect to such Asset Pool, including
the following:
(i) the Pool Principal Collection Account, where Principal Proceeds received on Portfolio
Investments held in such Asset Pool will be deposited;
(ii) the Pool Interest Collection Account, where Interest Proceeds received on Portfolio
Investments held in such Asset Pool will be deposited;
(iii) the Pool Sales Proceeds Account, where Sales Proceeds received upon sale of
Portfolio Investments held in such Asset Pool will be deposited; and
(iv) the Pool Investment Account, where funds allocated for investment in Portfolio
Investments will be deposited.
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Pending investment or distribution, as applicable, funds in any of the above-mentioned accounts
will be invested in Eligible Investments. Distributions from the Pool Accounts (other than the
Pool Investment Account) to the related Series Accounts (e.g. from a Pool Interest Collection
Account to a Series Interest Collection Account) shall occur on a monthly basis, as agreed
between the Investment Manager and the Collateral Administrator, unless, in the case of the Pool
Sales Proceeds Account or Pool Principal Collection Account, the Account Bank is otherwise
instructed by the Investment Manager, provided, however, that prior to any transfer of Cash,
Eligible Investments or Portfolio Investments into an Asset Pool or the related Pool Account and
prior to any Cash Withdrawal or Portfolio Investment Withdrawal, the Account Bank will
distribute any amounts in the Pool Interest Collection Account and the Pool Principal Collection
Account to the relevant Series Accounts according to the Series Allocation Percentages in effect at
such time, and prior to such transfer or withdrawal.
(b)
Series Accounts: Upon the issuance of a Series of Notes, in accordance with the terms of the
Master Indenture and the Securities Account Control Agreement, the Issuer (or the Investment
Manager on its behalf) will establish at the Account Bank the following segregated trust accounts
in the name of the Indenture Trustee for the benefit of the Holders and the other Secured Parties
with respect to such Series of Notes and which shall be designated as Pantheon Series-[ ] 200[ ]
and identify the relevant Series of Notes (each, a "Series Account"):
(i) a Series Principal Collection Account (for each of the currencies in which the Asset
Pools securing such Series of Notes are denominated) into which the Series Allocation
Percentage of all Principal Proceeds that are not being reinvested pursuant to the
instructions of the Investment Manager will be transferred from the related Pool Principal
Collection Account on a monthly basis, or more frequently if instructed by the
Investment Manager,
(ii) a Series Interest Collection Account (for each of the currencies in which the Asset
Pools securing such Series of Notes are denominated) into which the Series Allocation
Percentage of all Interest Proceeds that are not being reinvested pursuant to the
instructions of the Investment Manager will transferred from the related Pool Interest
Collection Account on a monthly basis, or more frequently if instructed by the
Investment Manager;
(iii) a Series Sales Proceeds Account (for each of the currencies in which the Asset Pools
securing such Series of Notes are denominated) into which the Series Allocation
Percentage of all Sale Proceeds that are not being reinvested pursuant to the instructions
of the Investment Manager will transferred from the related Pool Sales Proceeds Account
on a monthly basis, or more frequently if instructed by the Investment Manager;
(iv) a Series Investment Account (for each of the Specified Currencies in which the Notes
are denominated) into which the net proceeds from the issuance of a Series of Notes in
each Specified Currency will be deposited pending investment of such proceeds in
Portfolio Investments, as directed by the Investment Manager;
(v) a Series Distribution Account (for each of the Specified Currencies in which the
Notes are denominated) into which any funds allocated for distribution to a Series of
Notes, pending such distribution, shall be deposited; and
(vi) a Series Expense Reserve Account (for each of the Specified Currencies in which the
Notes are denominated) into which the amount specified by the Investment Manager shall
be deposited on the Issue Date for such Series of Notes.
On any Business Day from the Initial Issuance Date to and including the Payment Date at
the end of the third Relevant Period, the Account Bank shall apply funds from the Expense
Reserve Account, as directed in writing by the Investment Manager, to pay expenses of the Issuer
incurred in connection with the structuring and consummation of the issue of such Series of Notes
and the establishment of the Issuer (in the case of the Series issued on the Initial Issue Date) or the
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amount of such Series' Existing Series Reimbursement with respect to such establishment (in the
case of Series issued after the Initial Issue Date). On the third Payment Date following the Issue
Date for such Series of Notes, all funds in the Series Expense Reserve Account (after deducting
any expenses paid on such Payment Date) will be deposited in the Series Interest Collection
Account or the Series Principal Collection Account (in the respective amounts directed by the
Portfolio Manager in its discretion) and the Series Expense Reserve Account will be closed. Any
income earned on amounts deposited in the Series Expense Reserve Account will be deposited in
the Series Interest Collection Account as Interest Proceeds as it is paid.
On the second Business Day prior to each Payment Date, the Issuer shall transfer all
amounts standing to the credit of the Series Interest Collection Account in each Specified
Currency to the Series Distribution Account for such Specified Currency for distribution to the
Noteholder on such Payment Date. Once such payments have been made, no further amounts of
interest shall accrue or be payable in respect of the Notes on such Payment Date.
The relevant Series Supplement will specify that the holders of each Series of Notes will agree and
acknowledge that, with respect to any Series Accounts (including funds on deposit therein)
relating to a particular Series of Notes and the rights under any Hedge Agreements entered into
solely in connection therewith, only such Series of Notes (and no other Series of Notes) shall be
secured by, or have an interest in, such Series Accounts (including funds on deposit therein).
10.
Negative Pledge
So long as a Series of the Notes remains outstanding, the Issuer will not create or permit to be outstanding
any Encumbrance upon the whole or any part of its undertaking or the Applicable Collateral which secure
such Series of Notes other than the Encumbrance created by the Master Indenture and Series Supplement
for such Series of Notes.
11.
Fixed Rate Note Provisions
a.
Application: This Condition 11 (Fixed Rate Note Provisions) is applicable to the Notes of a Series
only if the Fixed Rate Note Provisions are specified in the relevant Series Supplement as being
applicable.
b.
Accrual of interest: The Notes of such Series bear interest from the Interest Commencement Date
at the Rate of Interest payable in arrear on each Interest Payment Date, subject to the conditions
provided in Condition 16 (Payments). Each Note will cease to bear interest from the due date for
final redemption unless, upon due presentation, payment of the Redemption Amount is improperly
withheld or refused, in which case it will continue to bear interest in accordance with this
Condition 11 (as well after as before judgment) until whichever is the earlier of (i) the day on
which all sums due in respect of such Note up to that day are received by or on behalf of the
relevant Noteholder and (ii) the day which is seven days after the Indenture Trustee has notified
the Noteholders that it has received all sums due in respect of the Notes up to such seventh day
(except to the extent that there is any subsequent default in payment).
c.
Fixed Coupon Amount: The amount of interest payable in respect of each Note of such Series for
any Interest Period will be the relevant Fixed Coupon Amount and, if the Notes are in more than
one Specified Denomination, will be the relevant Fixed Coupon Amount in respect of the relevant
Specified Denomination.
d.
Regular Interest Periods: If all of the Interest Payment Dates for such Series of Notes fall at
regular intervals between the Issue Date and the Maturity Date, then:
i.
the Notes of such Series shall for the purposes of this Condition 11 be "Regular Interest
Period Notes";
ii.
the day and month (but not the year) on which any Interest Payment Date falls shall for
the purposes of this Condition 11 be a "Regular Date"; and
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iii.
e.
each period from and including a Regular Date falling in any year to but excluding the
next succeeding Regular Date shall for the purposes of this Condition 11 be a "Regular
Period".
Irregular first or last Interest Periods: If the Notes of a Series would be Regular Interest Period
Notes but for the fact that either or both of:
i.
the interval between the Issue Date and the first Interest Payment Date; and
ii.
the interval between the Maturity Date and the immediately preceding Interest Payment
Date is longer or shorter than a Regular Period, then such Notes shall nevertheless be
deemed to be Regular Interest Period Notes; provided, however, that if the interval
between the Maturity Date and the immediately preceding Interest Payment Date is
longer or shorter than a Regular Period, the day and month on which the Maturity Date
falls shall not be a "Regular Date".
f.
Irregular interest amount: If the Notes of a Series are Regular Interest Period Notes, the amount
of interest payable in respect of each Note for any period which is not a Regular Period shall be
calculated by applying the Rate of Interest to the principal amount of such Note, multiplying the
product by the relevant Day Count Fraction as determined pursuant to clause (g)(ii) below and
rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit
being rounded upwards). For this purpose a "sub-unit" means, in the case of any currency other
than euro, the lowest amount of such currency that is available as legal tender in the country of
such currency and, in the case of euro, means one cent.
g.
Day Count Fraction: In respect of any period which is not a Regular Period the relevant day
count fraction (the "Day Count Fraction") shall be determined in accordance with the following
provisions:
h.
i.
if the Day Count Fraction is specified in the relevant Series Supplement as being 30/360,
the relevant Day Count Fraction will be the number of days in the relevant period
(calculated on the basis of a year of 360 days consisting of 12 months of 30 days each
and, in the case of an incomplete month, the actual number of days elapsed) divided by
360;
ii.
if the Day Count Fraction is specified in the relevant Series Supplement as being
Actual/Actual (Bond) and the relevant period falls during a Regular Period, the relevant
Day Count Fraction will be the number of days in the relevant period divided by the
product of (A) the number of days in the Regular Period in which the relevant period falls
and (B) the number of Regular Periods in any period of one year; and
iii.
if the Day Count Fraction is specified in the relevant Series Supplement as being
Actual/Actual (Bond) and the relevant period begins in one Regular Period and ends in
the next succeeding Regular Period, interest will be calculated on the basis of the sum of:
(A)
the number of days in the relevant period falling within the first such Regular
Period divided by the product of (1) the number of days in the first such Regular
Period and (2) the number of Regular Periods in any period of one year; and
(B)
the number of days in the relevant period falling within the second such Regular
Period divided by the product of (1) the number of days in the second such
Regular Period and (2) the number of Regular Periods in any period of one year.
Number of days: For the purposes of this Condition 11, unless the Day Count Fraction is specified
in the relevant Series Supplement as being 30/360 (in which case the provisions of
paragraph (g)(i) above shall apply), the number of days in any period shall be calculated on the
basis of actual calendar days from and including the first day of the relevant period to but
excluding the last day of the relevant period.
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i.
12.
Irregular Interest Periods: If the Notes are not Regular Interest Period Notes and interest is
required to be calculated for any period other than an Interest Period, interest shall be calculated
on such basis as is described in the relevant Series Supplement.
Floating Rate Note and Index-Linked Interest Note Provisions
a.
Application: This Condition 12 (Floating Rate Note and Index-Linked Interest Note Provisions) is
applicable to the Notes of a Series only if the Floating Rate Note Provisions or the Index Linked
Interest Note Provisions are specified in the relevant Series Supplement as being applicable.
b.
Accrual of interest: The Notes of such Series bear interest from the Interest Commencement Date
at the Rate of Interest payable in arrear on each Interest Payment Date, subject as provided in
Condition 16 (Payments). Each Note will cease to bear interest from the due date for final
redemption unless, upon due presentation, payment of the Redemption Amount is improperly
withheld or refused, in which case it will continue to bear interest in accordance with this
Condition (as well after as before judgment) until whichever is the earlier of (i) the day on which
all sums due in respect of such Note up to that day are received by or on behalf of the relevant
Noteholder and (ii) the day which is seven days after the Indenture Trustee has notified the
Noteholders that it has received all sums due in respect of the Notes up to such seventh day
(except to the extent that there is any subsequent default in payment).
c.
Screen Rate Determination: If Screen Rate Determination is specified in the relevant Series
Supplement as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of
Interest applicable to the Notes of such Series for each Interest Period will be determined by the
Calculation Agent on the following basis:
1.
if the Reference Rate is a composite quotation or customarily supplied by one entity, the
Calculation Agent will determine the Reference Rate which appears on the Relevant Screen Page
as of the Relevant Time on the relevant Interest Determination Date;
2.
in any other case, the Calculation Agent will determine the arithmetic mean of the
Reference Rates which appear on the Relevant Screen Page as of the Relevant Time on the
relevant Interest Determination Date;
3.
if, in the case of (i) above, such rate does not appear on that page or, in the case of
(ii) above, fewer than two such rates appear on that page or if, in either case, the Relevant Screen
Page is unavailable, the Calculation Agent will:
(A)
request the principal Relevant Financial Center office of each of the Reference
Banks to provide a quotation of the Reference Rate at approximately the Relevant Time
on the Interest Determination Date to prime banks in the Relevant Financial Center
interbank market in an amount that is representative for a single transaction in that market
at that time; and
(B)
determine the arithmetic mean of such quotations; and
4.
if fewer than two such quotations are provided as requested, the Calculation Agent will
determine the arithmetic mean of the rates (being the nearest to the Reference Rate, as determined
by the Calculation Agent) quoted by major banks in the Principal Financial Center of the Specified
Currency, selected by the Calculation Agent, at approximately 11:00 a.m. (local time in the
Principal Financial Center of the Specified Currency) on the first day of the relevant Interest
Period for loans in the Specified Currency to leading European banks for a period equal to the
relevant Interest Period and in an amount that is representative for a single transaction in that
market at that time,
and the Rate of Interest for such Interest Period shall be the sum of the Margin and the rate or (as the case
may be) the arithmetic mean so determined; provided, however, that if the Calculation Agent is unable to
determine a rate or (as the case may be) an arithmetic mean in accordance with the above provisions in
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relation to any Interest Period, the Rate of Interest applicable to the Notes during such Interest Period will
be the sum of the Margin and the rate (or as the case may be) the arithmetic mean last determined in
relation to the Notes in respect of a preceding Interest Period.
d.
ISDA Determination: If ISDA Determination is specified in the relevant Series Supplement as the
manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to
the Notes of such Series for each Interest Period will be the sum of the Margin and the relevant
ISDA Rate where "ISDA Rate" in relation to any Interest Period means a rate equal to the Floating
Rate (as defined in the ISDA Definitions) that would be determined by the Calculation Agent
under an interest rate swap transaction if the Calculation Agent were acting as Calculation Agent
for that interest rate swap transaction under the terms of an agreement incorporating the ISDA
Definitions and under which:
i.
the Floating Rate Option (as defined in the ISDA Definitions) is as specified in the
relevant Series Supplement;
ii.
the Designated Maturity (as defined in the ISDA Definitions) is a period specified in the
relevant Series Supplement; and
iii.
the relevant Reset Date (as defined in the ISDA Definitions) is either (A) if the relevant
Floating Rate Option is based on the London inter-bank offered rate (LIBOR) for a
currency, the first day of that Interest Period or (B) in any other case, as specified in the
relevant Series Supplement.
e.
Index-Linked Interest: If the Index Linked Interest Note Provisions are specified in the relevant
Series Supplement as being applicable, the Rate(s) of Interest applicable to the Notes for each
Interest Period will be determined in the manner specified in the relevant Series Supplement.
f.
Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest or Minimum Rate of
Interest is specified in the relevant Series Supplement, then the Rate of Interest shall in no event be
greater than the maximum or be less than the minimum so specified.
g.
Calculation of Interest Amount: The Calculation Agent will, as soon as practicable after the time
at which the Rate of Interest is to be determined in relation to each Interest Period, calculate the
Interest Amount payable in respect of each Note for such Interest Period. The Interest Amount
will be calculated by applying the Rate of Interest for such Interest Period to the principal amount
of such Note during such Interest Period and multiplying the product by the relevant Day Count
Fraction.
h.
Calculation of other amounts: If the relevant Series Supplement specifies that any other amount is
to be calculated by the Calculation Agent, the Calculation Agent will, as soon as practicable after
the time or times at which any such amount is to be determined, calculate the relevant amount.
The relevant amount will be calculated by the Calculation Agent in the manner specified in the
relevant Series Supplement.
i.
Publication: To the extent provided for in a Series Supplement, the Calculation Agent will cause
each Rate of Interest and Interest Amount determined by it, together with the relevant Interest
Payment Date, and any other amount(s) required to be determined by it together with any relevant
payment date(s) to be notified to the Paying Agents and each stock exchange (if any) on which the
Notes are then listed as soon as practicable after such determination but (in the case of each Rate
of Interest, Interest Amount and Interest Payment Date) in any event not later than the first day of
the relevant Interest Period. Notice thereof shall also promptly be given to the Noteholders. The
Calculation Agent will be entitled to recalculate any Interest Amount (on the basis of the
foregoing provisions) without notice in the event of an extension or shortening of the relevant
Interest Period.
j.
Notifications etc: All notifications, opinions, determinations, certificates, calculations, quotations
and decisions given, expressed, made or obtained for the purposes of this Condition by the
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Calculation Agent will (in the absence of manifest error) be binding on the Issuer, the Paying
Agents, the Noteholders and the Couponholders and (subject as aforesaid) no liability to any such
Person will attach to the Calculation Agent in connection with the exercise or non-exercise by it of
its powers, duties and discretions for such purposes.
13.
14.
15.
Zero Coupon Note Provisions
a.
Application: This Condition 13 (Zero Coupon Note Provisions) is applicable to the Notes of a
Series only if the Zero Coupon Note Provisions are specified in the relevant Series Supplement as
being applicable.
b.
Late payment on Zero Coupon Notes: If the Redemption Amount payable in respect of any Zero
Coupon Note is improperly withheld or refused, the Redemption Amount shall thereafter be an
amount equal to the sum of:
i.
the Reference Price; and
ii.
the product of the Accrual Yield (compounded annually) being applied to the Reference
Price from (and including) the Issue Date to (but excluding) whichever is the earlier of
(i) the day on which all sums due in respect of such Note up to that day are received by or
on behalf of the relevant Noteholder and (ii) the day which is seven days after the
Indenture Trustee has notified the Noteholders that it has received all sums due in respect
of the Notes up to such seventh day (except to the extent that there is any subsequent
default in payment).
Dual Currency Note Provisions
a.
Application: This Condition 14 (Dual Currency Note Provisions) is applicable to the Notes of a
Series only if the Dual Currency Note Provisions are specified in the relevant Series Supplement
as being applicable.
b.
Rate of interest: If the rate or amount of interest fails to be determined by reference to an
exchange rate, the rate or amount of interest payable shall be determined in the manner specified
in the relevant Series Supplement.
Redemption
a.
Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes of
each Series will be redeemed at their Final Redemption Amount on the Maturity Date, subject as
provided in Condition 16 (Payments). Exchangeable Notes may be convertible into or
exchangeable or exercisable for or payable in, among other things, other securities, notes,
contracts, currencies, commodities or other forms of property, rights or interests or any
combination thereof ("Deliverable Collateral"). Specific terms relating to the exchangeable
Notes, including with respect to the Final Redemption Amount thereof, will be described in the
applicable Series Supplement. In this regard the term "payment" as used in these Conditions shall
include the delivery of the Deliverable Collateral required or permitted to be delivered pursuant to
these Conditions, and the term "principal" shall mean or include any Deliverable Collateral;
provided that, in the event delivery of the Deliverable Collateral cannot be made in accordance
with terms of the Hedge Agreement, "payment" shall mean a Cash payment in an amount and on
the dates set forth in the relevant Series Supplement.
b.
Redemption for tax reasons: A Series of Notes may be redeemed at the option of the Issuer in
whole, but not in part as set forth in the Series Supplement;
c.
Redemption at the option of the Issuer: If the Call Option is specified in the relevant Series
Supplement as being applicable, the Notes of a Series may be redeemed at the option of the Issuer
in whole or, in part, as specified in the relevant Series Supplement on any Optional Redemption
Date (Call) at the relevant Optional Redemption Amount (Call) on the Issuer's giving not less than
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30 nor more than 60 days' notice or the requisite number of days' notice to the Noteholders as
specified in the relevant Series Supplement (which notice shall be irrevocable and shall oblige the
Issuer to redeem the Notes or, as the case may be, the Notes specified in such notice on the
relevant Optional Redemption Date (Call) at the Optional Redemption Amount (Call)).
d.
Partial redemption: If the Notes of a Series are to be redeemed in part only on any date in
accordance with Condition 15(c) (Redemption at the option of the Issuer), the Notes shall be
redeemed on a pro-rata basis, unless otherwise specified in the relevant Series Supplement. If any
Maximum Redemption Amount or Minimum Redemption Amount is specified in the relevant
Series Supplement, then the Optional Redemption Amount (Call) shall in no event be greater than
the maximum or be less than the minimum so specified.
e.
Optional Redemption at the option of Noteholders: The Series Supplement shall specify whether
redemption at the option of the Noteholder is applicable and if so, shall set forth the redemption
procedures, including the period of time ("Minimum Holding Period") during which the Issuer
shall not be obligated to honor any redemption requests.
If so specified in the relevant Series Supplement, "black-out" periods may apply to a Series of
Notes, during which no redemptions of any Notes of such Series may be made.
f.
No other redemption: Unless specified in the relevant Series Supplement, the Issuer shall not be
entitled to redeem the Notes of a Series otherwise than as provided in paragraphs (a) to (e) above
(and in the case of paragraph (c) to (e) above only to the extent permitted under the relevant Series
Supplement).
g.
Cancellation: All Notes of any Series so redeemed, otherwise than in the ordinary course of
business of dealing in securities, by the Issuer shall be cancelled and may not be reissued or
resold.
16.
Payments
(a)
Priority of Payments for each Asset Pool. Except as modified for a particular Asset Pool, on the 25th day of
each month, beginning on September 25, 2006 (each, an "Asset Pool Payment Date"), or at such other
time as the Collateral Administrator and the Account Bank are directed by the Investment Manager,
amounts in the Pool Accounts for such Asset Pool shall be applied by the Account Bank to make payments
in the following order of priority to each Series pro rata according to the Series Allocation Percentages for
such Asset Pool:
i.
(b)
from the Pool Accounts in the order of Pool Interest Collection Account, Pool Principal Collection
Account, Pool Sales Proceeds Account and Pool Investment Account, only if directed by the
Investment Adviser because of expected shortfalls in item (i) in the Priority of Payments for any
Series for which such Asset Pool has a Series Allocation Percentage greater than zero, to the
Series Distribution Accounts in amounts to cover such shortfalls;
ii.
from the Pool Accounts in the order of Pool Principal Collection Account, Pool Interest Collection
Account, Pool Sales Proceeds Account and Pool Investment Account, as appropriate according to
the nature of the obligation to be paid as reasonably determined by the Investment Manager, and
in the absence of such determination from the Pool Accounts in the order of Pool Principal
Collection Account, Pool Interest Collection Account, Pool Sales Proceeds Account and Pool
Investment Account, to pay any amounts payable pursuant to any Hedge Agreement, Synthetic
Security, Securities Lending Agreement or Short Position, if any, entered into with respect to the
related Asset Pool;
iii.
from the Pool Sales Proceeds Account to the Series Sales Proceeds Accounts, unless directed
otherwise by the Investment Manager.
iv.
from the Pool Interest Collection Account to the Series Interest Collection Accounts; and
v.
from the Pool Principal Collection Account to the Series Principal Collection Accounts.
Priority of Payments for a Series of Notes: Except as modified pursuant to the relevant Series Supplement,
on each Payment Date, amounts shall be applied by the Account Bank to make payments relating to each
Series of Notes in the following order of priority. To the extent possible, payments shall be made from the
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account in the same currency as the payment being made. If not possible, the Investment Manager shall
instruct the Account Bank to make the necessary currency transactions in order to make the necessary
payments.
i.
(c)
(d)
from the Series Interest Collection Accounts, the Series Principal Collection Accounts, the Series
Sales Proceeds Accounts and the Series Investment Accounts, in that order, to the payment first of
such Series' Series Share of accrued and unpaid taxes, second to the payment of accrued and
unpaid Pantheon Administrative Expenses, third to the payment of accrued and unpaid Series
Administrative Expenses and fourth to the payment of accrued and unpaid Allocated Asset Pool
Administrative Expenses, in each case allocable to such Series of Notes as set forth in the related
definitions;
ii.
from the Series Interest Collection Accounts, the Series Principal Collection Accounts, the Series
Sales Proceeds Accounts and the Series Investment Accounts, in that order, to the payment of the
Base Management Fee to the Investment Manager as specified in the relevant Series Supplement;
iii.
from the Series Interest Collection Accounts, the Series Principal Collection Accounts, the Series
Sales Proceeds Accounts and the Series Investment Accounts, in that order, unless directed
otherwise at the reasonable determination of the Investment Manager, to the payment of any
amounts payable pursuant to any Hedge Agreements entered into with respect to such Series of
Notes;
iv.
from the Series Interest Collection Accounts, the Series Principal Collection Accounts, the Series
Sales Proceeds Accounts and the Series Investment Accounts, in that order, to the payment of the
Incentive Management Fee to the Investment Manager, in such manner and in such amounts as
specified in the relevant Series Supplement, with any required currency conversions to be
performed at the direction of the Investment Manager;
v.
from the Series Sales Proceeds Accounts and the Series Investment Accounts to the Series
Distribution Accounts, if directed by the Investment Manager, for distribution to Noteholders of
such Series in accordance with (c) below, with any required currency conversions to be performed
at the direction of the Investment Manager. Amounts so distributed shall be identified
appropriately for Noteholders; and
vi.
from the Series Interest Collection Accounts and the Series Principal Collection Accounts to the
Series Distribution Accounts for distribution to Noteholders of such Series in accordance with (c)
below, with any required currency conversions to be performed at the direction of the Investment
Manager. Amounts so distributed shall be identified as principal or interest as the case may be.
Distributions on the Notes: As specified in the relevant Series Supplement, the Indenture Trustee shall
make payments of interest, principal and/or additional amounts to a Series of Notes from funds in the
Specified Currency available in the applicable Series Account related to such Series of Notes.
Payments of Principal and Interest: Payments in respect of principal of and interest on a Note of a Series
will be made to the person in whose name such Note is registered fifteen days prior to the applicable
Payment Date (the "Record Date"). Payments on each Note will be payable by wire transfer in
immediately available funds to an account denominated in that currency (or, if that currency is the euro,
any other account to which euro may be credited or transferred) and maintained by the holder thereof with,
a bank in the Principal Financial Center of that currency (in the case of a sterling check, a town clearing
branch of a bank in the City of London) in accordance with wire transfer instructions received by any
Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Paying
Agent in respect of such Note, by a check drawn in the currency in which the payment is due and mailed to
the address of the holder of such Note as it appears on the Register at the close of business on the Record
Date for such payment. Final payments in respect of principal of a Note will be made against surrender of
such Notes at the Specified Office of the Paying Agent. If any payment on the Notes is due on a day that is
not a Business Day, then payment will be made on the next succeeding Business Day with the same force
and effect as if made on the date for payment.
For so long as any Series of Notes is listed on the Irish Stock Exchange and the rules of such exchange
shall so require, the Issuer will maintain a listing agent and a Paying Agent with respect to such Notes with
an office located in Dublin, Ireland.
Except as otherwise required by applicable law, any money deposited with the Indenture Trustee or any
Paying Agent in trust for the payment of principal of or interest on any Note of any Series and remaining
unclaimed for two years after such principal or interest has become due and payable shall be paid to the
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Issuer upon request by the Issuer therefor, and the holder of such Note shall thereafter, as an unsecured
general creditor, look to the Issuer for payment of such amounts and all liability of the Indenture Trustee or
such Paying Agent with respect to such trust money (but only to the extent of the amounts so paid to the
Issuer) shall thereupon cease. The Indenture Trustee or the Paying Agent, before being required to make
any such release of payment may, but shall not be required to, adopt and employ, at the expense of the
Issuer, any reasonable means of notification of such release of payment, including mailing notice of such
release to holders whose Notes have been called but have not been surrendered for redemption or whose
right to or interest in monies due and payable but not claimed is determinable from the records of any
Paying Agent, at the last address of record of each such holder.
(f)
Payments in New York City: Payments of principal or interest with respect to a Series of Notes may be
made at the Specified Office of a Paying Agent in New York City if (i) the Issuer has appointed Paying
Agents outside the United States with the reasonable expectation that such Paying Agents will be able to
make payment of the full amount of the interest on the Notes in the currency in which the payment is due
when due, (ii) payment of the full amount of such interest at the offices of all such Paying Agents is illegal
or effectively precluded by exchange controls or other similar restrictions and (iii) payment is permitted by
applicable United States law.
(g)
Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to any
applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the
provisions of Condition 18 (Taxation). No commissions or expenses shall be charged to the Holders of
such Notes in respect of such payments.
17.
Hedge Agreements
If the Series Supplement applicable to each Series that has a Series Allocation Percentage greater than zero
with respect to such Asset Pool so permits, the Issuer may enter into Hedge Agreements with Hedge
Counterparties meeting any applicable Hedge Counterparty Ratings Requirement in order to manage
interest rate or currency risks relating to Portfolio Investments in an Asset Pool. Such Hedge Agreements
may be pool specific, in which case the Issuer's obligations to the Hedge Counterparty under such Hedge
Agreement will be secured by a single Asset Pool. Amounts payable to such Hedge Counterparty shall be
paid out of proceeds from the Portfolio Investments held in such Asset Pool prior to distribution of any
amounts to the holders of the Notes of any Series which has a Series Allocation Percentage greater than
zero in such Asset Pool unless required otherwise by the Indenture Trustee to first make distributions from
Asset Pools to the relevant Series in order to pay administrative expense amounts due under the Priority of
Payments. The Issuer may also enter into Hedge Agreements with Hedge Counterparties meeting the
applicable Hedge Counterparty Ratings Requirement in order to manage interest rate or currency risks with
respect to payments to be made to the Holders of a specific Series of Notes in which case such Hedge
Agreements shall be secured only by the relevant Series Accounts and shall be entitled to payments as set
forth in the relevant Series Supplement.
18.
Taxation
No Gross Up: Payments of principal and interest in respect of the Notes of each Series by or on behalf of
the Issuer shall be made free and clear of, and without withholding or deduction for, any taxes, duties,
assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed
by any taxing authority, unless such withholding or deduction is required by law. In that event, the Issuer
shall have no obligation to, and shall not, pay any additional amounts (the "Additional Amounts") to
compensate the Noteholders for any withholding or deduction.
19.
Events of Default
(a)
Events of Default. With respect to a Series of Notes, each of the following events will constitute an "Event
of Default" with respect to such Series of Notes:
(i) failure on any Payment Date to disburse amounts available to the Indenture Trustee or the
applicable Paying Agent in accordance with the Priority of Payments for such Series of Notes,
which failure continues for a period of seven Business Days); or
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(ii) failure to distribute all remaining amounts in the Series Accounts to such Series of Notes on
its Maturity Date; or
(iii) Proceedings are initiated against the Issuer under any applicable liquidation, insolvency,
bankruptcy, composition, examination, reorganisation or other similar laws ("Insolvency Law") or
a receiver, trustee, administrator, examiner, custodian, conservator, liquidator or other similar
official (a "Receiver") is appointed in relation to the Issuer or in relation to the whole or any
substantial part of the undertaking or assets thereof; or the Issuer is, or initiates or consents to
judicial proceedings relating to itself under any applicable Insolvency Law or seeks the
appointment of a Receiver or the Issuer is unable to pay its debts as such debts become due, or
makes a conveyance or assignment for the benefit of its creditors generally or otherwise becomes
subject to any reorganization or amalgamation; or
(iv)
the Issuer or the Collateral becomes an investment company required to be registered
under the Investment Company Act; or
(v)
a default in the performance, or breach, of any other covenant or other agreement (it
being understood, without limiting the generality of the foregoing, that any failure to meet any
Series Collateral Quality Test is not an Event of Default) of the Issuer applicable to such Series of
Notes under the Indenture as supplemented by each applicable Series Supplement or any
representation or warranty of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant thereto or in connection therewith proves to be incorrect in any material respect
when made, and the continuation of such default or breach for a period of 60 days (or such other
period of days as may be specified in the applicable Series Supplement) after any of the Issuer or
the Investment Manager has actual knowledge thereof or after notice thereof to the Issuer and the
Investment Manager by the Indenture Trustee or to the Issuer and the Investment Manager or
otherwise, by the holders of a majority of the Holders of the Notes of such Series; or
(vii) any additional events as specified in the relevant Series Supplement.
(b)
Acceleration. Upon the occurrence and continuation of an Event of Default with respect to a Series of
Notes (other than an Event of Default specified in paragraph (a)(iii) above), the Indenture Trustee may, and
at the direction of the Holders of the majority of such Series of Notes shall, give notice to the Issuer that all
Notes are to be immediately due and payable and upon such declaration the Notes of such Series shall
become immediately due and payable, together with all other amounts payable in connection with such
Series of Notes. If an Event of Default specified in paragraph (a) clause (iii) above occurs and is
continuing, acceleration will occur automatically and will not require any further action by the Noteholders
or the Indenture Trustee. Upon the notice being given to the Issuer or, in the case of an Event of Default
specified in paragraph (a) clause (iii), all of the Notes of such Series shall immediately become due and
payable.
(c)
Enforcement of Security. Upon the acceleration of the Notes of a Series, the Indenture Trustee shall
immediately begin to implement a Segregation (or shall cause any sub-custodians or agents to implement
such Segregation) and shall foreclose on and liquidate the Applicable Collateral in accordance with the
terms of the Master Indenture as supplemented by the Series Supplement; provided that, if the portion of a
Portfolio Investment securing such Series of Notes is not capable of being sold in part due to minimum
denomination restrictions applicable to such Portfolio Investment, the Indenture Trustee shall not liquidate
such Portfolio Investment or portion thereof unless such sale is approved by the holders of the majority of
the Notes of each Series that are secured by such Portfolio Investment; provided, further, that, if no such
approval has been obtained, the Indenture Trustee shall segregate in a separate account such Portfolio
Investment and hold it solely for the benefit of all Series of Notes that had a Series Allocation Percentage
greater than zero in such Portfolio Investment until such time as such Portfolio Investment may be sold in
accordance with its terms set forth in the underlying documents relating to such Portfolio Investment.
20.
Non Petition and Limited-Recourse
Each Holder agrees, by the purchase of Notes, that it will not, until the date which is two years and one day
(or if longer, the applicable preference period then in effect) after the Maturity Date with respect to the
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latest maturing Series of Notes, acquiesce, petition or otherwise join in any proceeding for the purpose of
winding up, liquidation, examination, insolvency or similar process or for the appointment of a receiver,
liquidator, examiner, assignee, Indenture Trustee, custodian, sequestrator or other similar official of the
Issuer or all or any part of the property or assets of the Issuer.
Each Series of Notes will only have recourse to the Applicable Collateral (as defined herein) relating to
such Series of Notes and the Applicable Collateral pledged to the payment of one Series of Notes will not
be available to make payments with respect to any other Series of Notes. The Applicable Collateral will be
the sole source of funds to meet the obligations of the Issuer to the holders of such Series of Notes, and all
other obligations of the Issuer attributable to such Series of Notes. If amounts received from the
Applicable Collateral are insufficient to make payment of all amounts due in respect of such Series and all
other obligations attributable to such Series of Notes, no other assets of the Issuer will be available to meet
that shortfall and all further claims of the holders in respect of such Series of Notes will be extinguished.
No such party will be able to petition for the winding-up of the Issuer and as a consequence of any such
shortfall.
21.
Prescription
Claims for principal shall become void unless the relevant Notes are presented for payment within ten years
of the appropriate Relevant Date. Claims for interest shall become void unless the relevant coupons, if any,
are presented for payment within five years of the date of maturity.
22.
Replacement of Notes
If any Note is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the
Indenture Trustee (and, if the Notes are then listed on any stock exchange the rules of which require the
appointment of a Paying Agent in any particular place, the Paying Agent having its Specified Office in the
place required by the rules of such stock exchange), subject to all applicable laws and stock exchange
requirements, upon payment by the claimant of the expenses (including the expenses of the Indenture
Trustee and its counsel) incurred in connection with such replacement and on such terms as to evidence,
security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes must
be surrendered before replacements will be issued.
23.
Agents
In acting under the Master Indenture as supplemented by the Series Supplements and in connection with
the Notes, the Agents act solely as agents of the Issuer and do not assume any obligations towards or
relationship of agency or trust for or with any of the Noteholders of any Series.
The Issuer reserves the right at any time to vary or terminate the appointment of any Agent and to appoint a
successor indenture trustee and additional or successor Agents; provided, however, that:
ARTICLE I-Athe Issuer shall at all times maintain an Indenture Trustee;
ARTICLE II-Aif a Calculation Agent is specified in the relevant Series Supplement,
the Issuer shall at all times maintain a Calculation Agent; and
ARTICLE III-Aif and for so long as the Notes are listed on any stock exchange the
rules of which require the appointment of a Paying Agent in any particular place, the
Issuer shall maintain a Paying Agent having its Specified Office in the place required by
the rules of such stock exchange.
Notice of any change in any of the Paying Agents or in their Specified Offices shall promptly be given to
the Noteholders in accordance with Condition 26 (Notices).
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24.
Modification
The Master Indenture, the Notes and these Conditions may be modified or amended without the consent of
the Noteholders (a) to correct a manifest error, (b) in a manner that will not adversely affect the interests of
any Noteholders or (c) in a manner that is of a formal, minor or technical nature. No such modification or
amendment shall become effective, however, unless the Rating Agency Condition, if any, shall have been
m et.
25.
Further Issues
The Issuer may from time to time, without the consent of the Noteholders, create and issue further Series of
Notes; provided that such further Series of Notes shall be payable solely out of amounts received by or on
behalf of the Issuer in respect of the Applicable Collateral pledged by the Issuer to the Indenture Trustee
pursuant to the Master Indenture for the benefit of the Holders of such Series of Notes and the other
Secured Parties.
26.
Notices
Notices to Holders of Registered Notes of a Series shall be valid if mailed to their registered addresses
appearing on the Register. Any such notice shall be deemed to have been given on the fourth day after the
day on which it is mailed.
Until such time as any Definitive Notes are issued, there may (provided that, in the case of Notes listed on a
stock exchange, such stock exchange permits), so long as the Notes for a Series are held in their entirety in
global form on behalf of Euroclear and/or Clearstream, or any other relevant clearing system, be substituted
for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or
Clearstream, or any other relevant clearing system for communication by them to the holders of the Notes,
and such notices shall be deemed to have been given to the Noteholders in accordance with this
Condition 26 (Notices) on the date of delivery to such organization, as the case may be.
Neither the failure to give notice nor any defect in any notice given to any particular Noteholder shall affect
the sufficiency of any notice with respect to other Noteholders.
Indenture Trustee, Custodian, Account Bank, Registrar, Transfer Agent and U.S. Paying Agent
Deutsche Bank Trust Company Americas
1761 East St. Andrew Place
Santa Ana, California 92705
Attention:
CDO Business Unit – Pantheon
Facsimile:
(714) 247-2568
With a copy to:
Collateral Administrator and Paying Agent
Deutsche Bank AG, London Branch
Winchester House
1 Great Winchester Street
London EC2N 2DB
Attention: TSS-SFS
(CDO Group)
Telephone:
+44 (0) 207 545 8000
Facsimile:
+44 (0) 207 545 3686
27.
Rounding
For the purposes of any calculations referred to in these Conditions (unless otherwise specified in these
Conditions or the relevant Series Supplement), (a) all percentages resulting from such calculations will be
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rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with 0.000005 per cent.
being rounded up to 0.00001 per cent.), (b) all United States dollar amounts used in or resulting from such
calculations will be rounded to the nearest cent (with one half cent being rounded up), (c) all Japanese Yen
amounts used in or resulting from such calculations will be rounded downwards to the next lower whole
Japanese Yen amount, and (d) all amounts denominated in any other currency used in or resulting from
such calculations will be rounded to the nearest two decimal places in such currency, with 0.005 being
rounded upwards.
28.
Redenomination, Renominalisation and Reconventioning
a.
Application: This Condition 28 (Redenomination, Renominalisation and Reconventioning) is
applicable to the Notes only if it is specified in the relevant Series Supplement as being applicable.
b.
Notice of redenomination: If the country of the Specified Currency becomes or, announces its
intention to become, a Participating Member State, the Issuer may, without the consent of the
Noteholders, on giving at least 30 days' prior notice, in accordance with Condition 26 (Notices), to
the Noteholders and the Paying Agents, designate a date (the "Redenomination Date"), being an
Interest Payment Date under the Notes falling on or after the date on which such country becomes
a Participating Member State.
c.
Redenomination: Notwithstanding the other provisions of these Conditions, with effect from the
Redenomination Date:
i.
the Notes shall be deemed to be redenominated into euro in the denomination of
euro 0.01 with a principal amount for each Note equal to the principal amount of that Note in the
Specified Currency, converted into euro at the rate for conversion of such currency into Euro
established by the Council of the European Union pursuant to the Treaty (including compliance
with rules relating to rounding in accordance with European Community regulations); provided,
however, that, if the Issuer determines, with the agreement of the Indenture Trustee then market
practice in respect of the redenomination into euro 0.01 of internationally Notes is different from
that specified above, such provisions shall be deemed to be amended so as to comply with such
market practice and the Issuer shall promptly notify the Noteholders, each stock exchange (if any)
on which the Notes are then listed and the Paying Agents of such deemed amendments;
ii.
if Notes have been issued in definitive form:
(A)
the payment obligations contained in all Notes denominated in the Specified
Currency will become void on the date (the "Euro Exchange Date") on which the Issuer
gives notice (the "Euro Exchange Notice") to the Noteholders that replacement Notes
denominated in euro are available for exchange, but all other obligations of the Issuer
thereunder (including the obligation to exchange such Notes in accordance with this
Condition 28) shall remain in full force and effect; and
(B)
new Notes denominated in euro will be issued in exchange for Notes
denominated in the Specified Currency in such manner as the Indenture Trustee may
specify and as shall be notified to the Noteholders in the Euro Exchange Notice;
iii.
all payments in respect of the Notes (other than, unless the Redenomination Date is on or
after such date as the Specified Currency ceases to be a sub-division of the euro, payments of
interest in respect of periods commencing before the Redenomination Date) will be made solely in
euro by cheque drawn on, or by credit or transfer to a euro account (or any other account to which
euro may be credited or transferred) maintained by the payee with, a bank in the principal
financial center of any Member State of the European Communities; and
iv.
if Definitive Notes are required to be issued, they shall be issued at the expense of the
Issuer in the denominations of euro 0.01, euro 1,000, euro 10,000, euro 100,000 and such other
denominations as the Indenture Trustee shall determine and notify to the Noteholders.
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29.
d.
Interest: Following redenomination of the Notes pursuant to this Condition 28, (i) where Notes
have been issued in definitive form, the amount of interest due in respect of the Notes will be
calculated by reference to the aggregate principal amount of the Notes presented for payment by
the relevant holder, and (ii) where the Notes are in global form, the amount of interest due in
respect of Notes represented by a Global Note will be calculated by reference to the aggregate
principal amount of such Notes and the amount of such payment shall be rounded down to the
nearest euro 0.01.
e.
Interest Determination Date: If the Floating Rate Note Provisions are specified in the relevant
Series Supplement as being applicable and Screen Rate Determination is specified in the relevant
Series Supplement as the manner in which the Rate(s) of Interest is/are to be determined, with
effect from the Redenomination Date the Interest Determination date shall be deemed to be the
second TARGET Settlement Day before the first day of the relevant Interest Period.
Governing Law and Jurisdiction
a.
Governing law: The Notes, the Master Indenture, the Series Supplement, the Management
Agreement, the Hedge Agreements and the Collateral Administration Agreement (collectively, the
"Transaction Documents") are governed by, and shall be construed in accordance with, New
York law.
b.
Jurisdiction: The Issuer agrees for the benefit of the Noteholders that the courts of the State of
New York and the United States District Court for the Southern District of New York shall have
jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which
may arise out of or in connection with the Notes (respectively, "Proceedings" and "Disputes")
and, for such purposes, irrevocably submits to the jurisdiction of such courts.
c.
Appropriate forum: The Issuer irrevocably waives any objection which it might now or hereafter
have to the courts of the State of New York and the United States District Court for the Southern
District of New York being nominated as the forum to hear and determine any Proceedings and to
settle any Disputes, and agrees not to claim that any such court is not a convenient or appropriate
forum.
d.
Process agent: The Issuer appoints CT Corporation System, 111 Eighth Avenue, 13th Floor, New
York, New York 10011, as its agent to receive service of process. Nothing in this paragraph shall
affect the right of any Noteholder to serve process in any other manner permitted by law.
e.
Non-exclusivity: The submission to the jurisdiction of the courts of the State of New York and the
United States District Court for the Southern District of New York shall not (and shall not be
construed so as to) limit the right of any Noteholder to take Proceedings in any other court of
competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions
preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to
the extent permitted by law.
B-104
TAXATION
General
The following summary describes the principal Irish tax and limited United States tax consequences of the purchase,
ownership and disposition of the Notes of any Series to investors that acquire such Notes in the original offering of
such Notes. This summary does not purport to be a comprehensive description of all the tax considerations that may
be relevant to a particular investor's decision to purchase the Notes of a Series. In addition, this summary does not
describe any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than Ireland
and the United States. In addition, no representation is made as to the manner in which payments under the Notes
would be characterized by any relevant taxing authority. Potential investors should be aware that the relevant fiscal
rules or their interpretation may change, possibly with retrospective effect, and that this summary is limited and not
and exhaustive. This summary does not constitute legal or tax advice or a guarantee to any potential investor of the
tax consequences of investing in the Notes.
This summary is based on Irish and United States tax laws, regulations (final, temporary and proposed),
administrative rulings and practice and judicial decisions in effect or available on the date of this Offering Circular.
All of the foregoing are subject to change or differing interpretation at any time, which change or interpretation may
apply retroactively and could affect the continued validity of this summary.
Purchasers of Notes may be required to pay stamp taxes and other charges, in accordance with the laws and
practices of the country of purchase, in addition to the Issue Price of each Note.
Potential purchasers should consult with their own tax advisors with respect to the tax consequences of
purchasing owning or transferring any Note.
Circular 230
Under 31 C.F.R. part 10, the regulations governing practice before the Internal Revenue Service (Circular 230), we
and our tax advisors are (or may be) required to inform you that:
•
Any advice contained herein, including any opinions of counsel referred to herein, is not intended or
written to be used, and cannot be used by any taxpayer, for the purpose of avoiding U.S. tax penalties that
may be imposed on the taxpayer;
•
Any such advice is written to support the promotion or marketing of the Notes and the transactions
described herein (or in such opinion or other advice); and
•
Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax
advisor.
U.S. Federal Income Tax Consequences
Introduction
The following is a summary of certain of the United States federal income tax consequences of an
investment in the Notes of a Series by purchasers that acquire their Notes upon the issuance of such Series. The
discussion and the opinions referenced below are based upon laws, regulations, rulings, and decisions currently in
effect, all of which are subject to change, possibly with retroactive effect. Prospective investors should note that no
rulings have been, or are expected to be, sought from the United States Internal Revenue Service (the "IRS") with
respect to any of the United States federal income tax consequences discussed below, and no assurance can be given
that the IRS will not take contrary positions. Further, the following summary does not address all United States
federal income tax consequences applicable to any given investor, nor does it address the United States federal
income tax considerations (except, in some circumstances, in very general terms) applicable to all categories of
investors, some of which may be subject to special rules, such as Non-U.S. Holders (as such term is defined below),
banks, REITs, RICs, insurance companies, tax-exempt organizations, dealers in securities or currencies, electing
large partnerships, natural persons, cash method taxpayers, S corporations, estates and trusts, investors that hold
their Notes as part of a hedge, straddle, or an integrated or conversion transaction, or investors whose "functional
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currency" is not the U.S. dollar. Furthermore, it does not address alternative minimum tax consequences, or the
indirect effects on investors of equity interests in either a U.S. Holder (as such term is defined below) or a Non-U.S.
Holder. In addition, this summary is generally limited to investors that will hold their Notes as "capital assets"
within the meaning of Section 1221 of the Code. Investors should consult their own tax advisors to determine the
Irish, United States federal, state, local, and other tax consequences of the purchase, ownership, and disposition of
the Notes.
As used herein, "U.S. Holder" or "Holder" means a beneficial holder of a Note (that is denominated in
U.S. currency) that is an individual citizen or resident of the United States for United States federal income tax
purposes, a corporation or other entity taxable as a corporation created or organized in, or under the laws of, the
United States or any state thereof (including the District of Columbia), an estate, the income of which is subject to
United States federal income taxation regardless of its source, or a trust for which a court within the United States is
able to exercise primary supervision over its administration and for which one or more United States persons (as
defined in the Code) have the authority to control all of its substantial decisions or a trust that has made a valid
election under U.S. Treasury Regulations to be treated as a domestic trust. If a partnership (or other pass-through
entity) holds Notes, the tax treatment of a partner (or other equity holder) will generally depend upon the status of
the partner (or other equity holder) and upon the activities of the partnership (or other pass-through entity). Partners
of partnerships (or equity holders of other pass-thru entities) holding Notes should consult their own tax advisors.
"Non-U.S. Holder" means any holder (or beneficial holder) of an Note that is not a U.S. Holder.
U.S. Federal Income Tax Consequences to the Issuer
Upon the issuance of the Notes, McKee Nelson LLP, special U.S. tax counsel to the Issuer, will deliver an
opinion generally to the effect that, under current law, and assuming compliance with the Indenture (and certain
other documents), and based on certain factual representations made by the Issuer and/or the Investment Manager,
and without regard to actions of the Issuer based on opinions of counsel other than special U.S. tax counsel,
although the matter is not free from doubt, the Issuer will not be engaged in the conduct of a trade or business in the
United States. Accordingly, the Issuer does not expect to be subject to net income taxation in the United States.
Prospective investors should be aware that opinions of counsel are not binding on the IRS and there can be no
absolute assurance that the IRS will not seek to treat the Issuer as engaged in a U.S. trade or business. Further, it is
possible that the Issuer may acquire an equity security pursuant to a distressed exchange or other debt restructuring
by an issuer of a defaulted security, and the holding of an equity security could cause the Issuer to be engaged in a
U.S. trade or business for the period from the acquisition until such security is sold. It is also possible that the IRS
could treat the Issuer as engaged in a trade or business in the United States by reason of the Issuer's selling credit
protection under a synthetic security if the Issuer were deemed to be guaranteeing obligations from within the
United States or insuring risks from within the United States.
If the IRS were to successfully characterize the Issuer as engaged in a United States trade or business,
among other consequences, the Issuer would be subject to net income taxation in the United States on its income
that was effectively connected with such business (as well as the branch profits tax). The levying of such taxes
could materially affect the Issuer's financial ability to make payments on the Notes.
The Issuer intends to acquire the Collateral, the interest on which, and any gain from the sale or disposition
thereof, is expected not to be subject to United States federal withholding tax or withholding tax imposed by other
countries (unless subject to being "grossed up"). The Issuer will not, however, make any independent investigation
of the circumstances surrounding the issuance of the individual assets comprising the Collateral and, thus, there can
be no absolute assurance that in every case, payments will be received free of withholding tax. If the Issuer is a
CFC (as such term is defined below), the Issuer would incur United States withholding tax on interest received from
a related U.S. person. In addition, distributions on equity securities will likely, and distributions on defaulted
securities and securities rated below investment grade could possibly, be subject to withholding. It is not expected,
however, that the Issuer will derive material amounts of any other items of income that will be subject to United
States or foreign withholding taxes.
If withholding or deduction of any taxes from payments is required by law in any jurisdiction, the Issuer
will be under no obligation to make any additional payments to any holder in respect of such withholding or
deduction.
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Notwithstanding any of the foregoing, any commitment fee, facility fee or similar fee that the Issuer earns
may be subject to a 30% withholding tax and any lending fees received under a securities lending agreement may
also be subject to withholding tax.
U.S. Federal Income Tax Treatment of the Notes
General: Prospective investors should not rely on this summary and should consult their own tax advisors
regarding alternative characterizations of the Notes and the consequences of their acquiring, holding or disposing of
the Notes.
Although the Notes are in the form of debt, they likely will be characterized as equity (which would likely
be considered voting equity) of the Issuer for U.S. federal income tax purposes. The Issuer and, by its acceptance of
a Note, each Noteholder, agrees to treat, for United Stated federal income tax purposes, the Notes as equity in the
Issuer, and not to take any position inconsistent with such treatment, unless otherwise required by appropriate taxing
authorities.
Distributions on the Notes: Subject to the anti-deferral rules discussed below, any payment on the Notes of
a Series that is distributed by the Issuer to a U.S. Holder that is subject to United States federal income tax will be
taxable to such U.S. Holder as a dividend to the extent of the current and accumulated earnings and profits
(determined under United States federal income tax principles) of the Issuer. Such payments will not be eligible for
the dividends received deduction allowable to corporations and likely will not be eligible for the preferential income
tax rate on qualified dividend income. Distributions in excess of earnings and profits will be non-taxable to the
extent of, and will be applied against and reduce, the U.S. Holder's adjusted tax basis in the Notes. Distributions in
excess of earnings and profits and basis will be taxable as gain from the sale or exchange of property, as described
below.
Sale, Exchange or Other Disposition of the Notes: In general, a U.S. Holder of the Notes will recognize
gain or loss upon the sale, exchange or other disposition of the Notes in an amount equal to the difference between
the amount realized and such U.S. Holder's adjusted tax basis in the Notes. The character of such gain or loss (as
ordinary or capital) generally will depend on whether the U.S. Holder either has made a QEF election or is subject to
the CFC rules (as each is described below). Initially, the tax basis of a U.S. Holder should equal the amount paid for
the Notes. Such basis will be (i) increased by amounts taxable to such U.S. Holders by virtue of a QEF election or
by virtue of the CFC rules, and (ii) decreased by actual distributions from the Issuer that are deemed to consist of
previously taxed amounts or to represent the return of capital.
Anti-Deferral Rules: Prospective investors should be aware that certain of the procedural rules for "PFICs"
and "QEF" elections (as both of such terms are defined below) are complex and should consult their own tax
advisors regarding such rules.
The tax consequences discussed above are likely to be materially modified by the anti-deferral rules
discussed below. In general, each U.S. Holder's investment in the Issuer will be taxed as an investment in a "passive
foreign investment company" ("PFIC") or a controlled foreign corporation ("CFC"), depending (in part) upon the
percentage of the Issuer's equity that is acquired and held by certain U.S. Holders. If applicable, the rules pertaining
to CFCs generally override those pertaining to PFICs (although, in certain circumstances, more than one set of rules
may be applicable simultaneously).
Prospective investors should be aware that in determining what percentage of the equity of the Issuer is
held by various categories of investors (for example, for purposes of the CFC and information reporting rules
described below), the Notes will likely be treated as equity (and likely voting equity) and the Investment Manager's
interest in certain portions of its fee and certain other classes of Notes may be considered equity (and might be
considered voting equity).
Prospective investors should be aware that the Issuer's income that is allocated to holders (under the QEF
rules as well as under the CFC rules discussed below) will not necessarily bear any particular relationship in any
year to the amount of cash that is distributed on the Notes and, in any given year, may be substantially greater. Such
an excess will arise, among other circumstances, when interest or other income on the Portfolio Collateral (which is
included in gross income) is used to acquire other items of Portfolio Collateral. In addition, such an excess could
arise due to the amortization of the upfront payment (if any) on the Hedge Agreements, since any such payment may
B-107
have to be taken into income over the term of the applicable Hedge Agreement in a manner that reflects the
economic substance of the contract.
To the extent that the Issuer is treated as having more than one class of equity, the amount of income taken
into account under both the QEF and CFC rules would (in very general terms), approximate the amount of income
that each such Class would be distributed if the Issuer's earnings and profits were all distributed.
Status of the Issuer as a PFIC: The Issuer will be treated as a "PFIC" for U.S. federal income tax purposes.
U.S. Holders in PFICs (and U.S. Holders of indirect interests in PFICs), other than U.S. Holders that make a timely
"qualified electing fund" or "QEF" election described below, are subject to special rules for the taxation of "excess
distributions" (which include both certain distributions by a PFIC and any gain recognized on a disposition of PFIC
stock). In general, Section 1291 of the Code provides that the amount of any "excess distribution" will be allocated
to each day of the U.S. Holder's holding period for its PFIC stock. The amount allocated to the current year will be
included in the U.S. Holder's gross income for the current year as ordinary income. With respect to amounts
allocated to prior years, the tax imposed for the current year will be increased by the "deferred tax amount" (an
amount calculated with respect to each prior year by multiplying the amount allocated to such year by the highest
rate of tax in effect for such year, together with an interest charge, as though the amounts of tax were overdue).
An excess distribution is the amount by which distributions for a taxable year exceed 125% of the average
distribution in respect of the Notes during the three preceding taxable years (or, if shorter, the investor's holding
period for the Notes). As indicated above, any gain recognized upon disposition (or deemed disposition) of the
Notes will be treated as an excess distribution and taxed as described above (i.e., not be taxable as capital gain). For
this purpose, a U.S. Holder that uses a Note as security for an obligation will be treated as having disposed of the
Note.
If a U.S. Holder does not properly make a QEF election (described below), as a general matter, the U.S.
Holder would be subject to the adverse consequences described above under "—Status of the Issuer as a PFIC" with
respect to any excess distributions made (or deemed made), any gain 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 Notes. Thus, U.S. Holders are urged to consider making a QEF election for their interest in the
Issuer.
Special rules apply to certain regulated investment companies that own interests in PFICs and any such
investor should consult with its own tax advisors regarding the consequences to it of acquiring Notes.
QEF Election: If a U.S. Holder (including certain U.S. Holders indirectly owning Notes) makes (with
respect to the Issuer) the qualified electing fund election (the "QEF election") provided in Section 1295 of the Code,
the U.S. Holder will be required to include its pro rata share (unreduced by any prior year losses) of the Issuer's
ordinary income and net capital gains (as ordinary income and long term capital gain, respectively) for each taxable
year and pay tax thereon even if such income and gain is not distributed to the U.S. Holder by the Issuer. In
addition, any losses of the Issuer will not be deductible by such U.S. Holder. Rather, any tax benefit from such
losses is effectively only available when a U.S. Holder sells or disposes of its shares.
A U.S. Holder that makes the QEF election may (in general) elect to defer the payment of tax on
undistributed income (until such income is distributed or the Note is transferred); provided that it agrees to pay
interest on such deferred tax liability. For this purpose, a U.S. Holder that uses a Note as security for an obligation
will be treated as having disposed of the Note. If the Issuer later distributes the income or gain on which the U.S.
Holder has already paid taxes, amounts so distributed to the U.S. Holder will not be further taxable to the U.S.
Holder. A U.S. Holder's tax basis in the Notes will be increased by the amount included in such U.S. Holder's
income and decreased by the amount of nontaxable distributions. In general, a U.S. Holder making the QEF
Election will recognize, on the disposition of the Notes, capital gain or loss equal to the difference, if any, between
the amount realized upon such disposition (including redemption or retirement) and its adjusted tax basis in such
Notes. Such gain or loss generally will be long term capital gain or loss if the U.S. Holder held the Note for more
than one year at the time of disposition. In certain circumstances, U.S. Holders that are individuals may be entitled
to preferential treatment for net long term capital gains. However, the ability of U.S. Holders to offset capital losses
against ordinary income is limited.
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In general, a QEF election should be made on or before the due date for filing a U.S. Holder's federal
income tax return for the first taxable year for which it held a Note. The QEF election is effective only if certain
required information is made available by the Issuer to the IRS. The Issuer will undertake to comply with the IRS
information requirements necessary to be a QEF, which will permit U.S. Holders to make the QEF election.
Nonetheless, there can be no absolute assurance that such information will always be available or presented.
Where a QEF election is not timely made by a U.S. Holder for the year in which it acquired its Notes, but is
made for a later year, the excess distribution rules can be avoided by making an election to recognize gain from a
deemed sale of the Notes at the time when the QEF election becomes effective.
A U.S. Holder should consult its own tax advisors regarding whether it should make a QEF election (and, if
it failed to make an initial election, whether it should make an election in a subsequent taxable year).
Status of the Issuer as a CFC: U.S. tax law also contains special provisions dealing with CFCs. A U.S.
Holder (or any other holder of an interest treated as voting equity in a foreign corporation that would meet the
definition of U.S. Holder but for the fact that such holder does not hold Notes) that owns (directly or indirectly) at
least 10% of the voting stock of a foreign corporation, is considered a "U.S. Shareholder" with respect to the foreign
corporation. If U.S. Shareholders in the aggregate own (directly or indirectly) more than 50% of the voting power
or value of the stock of such corporation, the foreign corporation will be classified as a CFC. Complex attribution
rules apply for purposes of determining ownership of stock in a foreign corporation such as the Issuer.
If the Issuer is classified as a CFC, a U.S. Shareholder (and possibly any U.S. Holder that is a direct or
indirect holder of a grantor trust that is considered to be a U.S. Shareholder) that is a shareholder of the Issuer as of
the end of the Issuer's taxable year generally would be subject to current U.S. tax on the income of the Issuer
regardless of cash distributions from the Issuer. Earnings subject to tax generally will not be taxed again when they
are distributed to the U.S. Holder. In addition, income that would otherwise be characterized as capital gain and
gain on the sale of the CFC's stock by a U.S. Shareholder (during the period that the corporation is a CFC and
thereafter for a five-year period) would be classified in whole or in part as dividend income.
Certain income generated by a corporation conducting a banking, financing, insurance, or other similar
business would not be includible in a holder's income under the CFC rules. However, each U.S. Holder of a Note
will agree not to take the position that the Issuer is engaged in such a business. Accordingly, if the CFC rules apply,
a U.S. Shareholder would generally be subject to tax on its share of all of the Issuer's income.
Taxation of Non-U.S. Holders
Payments on, and gain from the sale, exchange or redemption of, Notes generally should not be subject to
United States federal income tax in the hands of a Non-U.S. Holder that has no connection with the United States
other than the holding of the Notes. The Issuer may, however, require Non-U.S. holders to certify to their Non-U.S.
status in order to receive payments free of withholding and backupwithholding.
Transfer and Other Reporting Requirements
In general, U.S. Holders who acquire any Notes for cash may be required to file a Form 926 with the IRS
and to supply certain additional information to the IRS if (i) such U.S. Holder owns (directly or indirectly)
immediately after the transfer, at least 10% by vote or value of the Issuer or (ii) the transfer when aggregated with
all related transfers under applicable regulations, exceeds U.S. $100,000. In the event a U.S. Holder that is required
to file such form, fails to file such form, the U.S. Holder could be subject to a penalty of up to U.S. $100,000
(computed as 10% of the gross amount paid for the Notes) or more if the failure to file was due to intentional
disregard of its obligation. Other important information reporting requirements apply to persons that acquire 10% or
more of a foreign corporation's equity (here, the Notes and possibly any other notes issued by the Issuer or portion
of the Investment Manager's fee that is recharacterized as equity).
Prospective investors of Notes should consult with their own tax advisors regarding whether they are
required to file IRS Form 8886 in respect of this transaction. Such filing would generally be required if such
investors recognized a loss in excess of a specified threshold, and significant penalties would be imposed on
taxpayers that fail to properly file the form.
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Tax-Exempt Investors
Special considerations apply to pension plans and other investors ("Tax-Exempt Investors") that are
subject to tax only on their "unrelated business taxable income" ("UBTI"). A Tax-Exempt Investor's income from
an investment in the Issuer generally should not be treated as resulting in UBTI under current law, so long as such
investor's acquisition of the Notes is not debt-financed, and such investor does not own more than 50% of the
Issuer's equity (here, the Notes and possibly any other Notes issued by the Issuer or portion of the Investment
Manager's fee that is recharacterized as equity).
Tax-Exempt Investors should consult their own tax advisors regarding an investment in the Issuer.
Irish Taxation
Introduction: The following is a summary based on the laws and practices currently in force in Ireland regarding the
tax position of investors beneficially owning their Notes and should be treated with appropriate caution. Particular
rules may apply to certain classes of taxpayers holding Notes. The summary does not constitute tax or legal advice
and the comments below are of a general nature only. Prospective investors in the Notes should consult their
professional advisers on the tax implications of the purchase, holding, redemption or sale of the Notes and the
receipt of interest thereon under the laws of their country of residence, citizenship or domicile.
Withholding Tax: In general, tax at the standard rate of income tax (currently 20 per cent), is required to be withheld
from payments of Irish source interest. However, an exemption from withholding on interest payments exists under
Section 64 of the Taxes Consolidation Act, 1997 (the 1997 Act) for certain interest bearing securities (quoted
Eurobonds) issued by a body corporate (such as the Issuer) which are quoted on a recognised stock exchange (which
would include the Irish Stock Exchange).
Any interest paid on such quoted Eurobonds can be paid free of withholding tax provided:
(a)
the person by or through whom the payment is made is not in Ireland; or
(b)
the payment is made by or through a person in Ireland, and either:
(i)
the quoted Eurobond is held in a clearing system recognised by the Irish Revenue Commissioners
(DTC, Euroclear and Clearstream, Luxembourg are so recognised), or
(ii)
the person who is the beneficial owner of the quoted Eurobond and who is beneficially entitled to
the interest is not resident in Ireland and has made a declaration to a relevant person (such as an Irish
paying agent) in the prescribed form.
So long as the Notes are quoted on a recognised stock exchange and are held in DTC Euroclear and/or Clearstream,
Luxembourg, interest on the Notes can be paid by the Issuer and any paying agent acting on behalf of the Issuer
without any withholding or deduction for or on account of Irish income tax. Note: this subsection will not apply if
the Notes are not being listed.
If, for any reason, the quoted Eurobond exemption referred to above does not or ceases to apply, the Issuer can still
pay interest on the Notes free of withholding tax provided either it is to another "qualifying company" (within the
meaning of Section 110 of the 1997 Act) or the Issuer is a "qualifying company" (within the meaning of Section 110
of the 1997 Act) and the interest is paid to a person resident in a "relevant territory" (i.e. a member state of the
European Union (other than Ireland) or in a country with which Ireland has a double taxation agreement). For this
purpose, residence is determined by reference to the law of the country in which the recipient claims to be resident.
This exemption from withholding tax will not apply, however, if the interest is paid to a company in connection with
a trade or business carried on by it through a branch or agency located in Ireland.
In certain circumstances, Irish tax will be required to be withheld at the standard rate from interest on any quoted
Eurobond, where such interest is collected by a bank in Ireland on behalf of any Noteholder who is Irish resident.
Taxation of Noteholders: Notwithstanding that a Noteholder may receive interest on the Notes free of withholding
tax, the Noteholder may still be liable to pay Irish income tax. Interest paid on the Notes may have an Irish source
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and therefore be within the charge to Irish income tax and levies. Ireland operates a self assessment system in
respect of income tax and any person, including a person who is neither resident nor ordinarily resident in Ireland,
with Irish source income comes within its scope.
However, interest on the Notes will be exempt from Irish income tax if the recipient of the interest is resident in a
relevant territory provided either (i) the Notes are quoted Eurobonds and are exempt from withholding tax as set out
above (ii) in the event of the Notes not being or ceasing to be quoted Eurobonds exempt from withholding tax, if the
Issuer is a qualifying company within the meaning of Section 110 of the 1997 Act, or (iii) if the Issuer has ceased to
be a qualifying company, if the interest is paid by it in the ordinary course of its trade or business and the recipient
of the interest is a company resident in a relevant territory.
Notwithstanding these exemptions from income tax, a corporate recipient that carries on a trade in Ireland through a
branch or agency in respect of which the Notes are held or attributed, may have a liability to Irish corporation tax on
the interest.
Interest on the Notes which does not fall within the above exemptions may be within the charge to Irish income tax.
Capital Gains Tax: A holder of Notes will be subject to Irish tax on capital gains on a disposal of Notes unless such
holder is neither resident nor ordinarily resident in Ireland and does not carry on a trade in Ireland through a branch
or agency in respect of which the Notes are used or held.
Capital Acquisitions Tax: A gift or inheritance comprising of Notes will be within the charge to capital acquisitions
tax if either (i) the disponer or the donee/successor in relation to the gift or inheritance is resident or ordinarily
resident in Ireland (or, in certain circumstances, if the disponer is domiciled in Ireland irrespective of his residence
or that of the donee/successor) or (ii) if the Notes are regarded as property situate in Ireland. Bearer notes are
generally regarded as situated where they are physically located at any particular time. Registered notes are
generally regarded as situated where the principal register of noteholders is maintained or is required to be
maintained, but the Notes may be regarded as situated in Ireland regardless of their physical location or the location
of the register as they secure a debt due by an Irish resident debtor and they may be secured over Irish property.
Accordingly, if such Notes are comprised in a gift or inheritance, the gift or inheritance may be within the charge to
tax regardless of the residence status of the disponer or the donee/successor.
Stamp Duty: No stamp duty or similar tax will be imposed in Ireland on the issue or transfer of the Notes provided
the Issuer is a qualifying company for the purpose of Section 110 of the 1997 Act and provided the money raised on
the issue of the Notes is made in the course of the Issuer's business (on the basis of an exemption provided for in
Section 85(2)(c) to the Stamp Duties Consolidation Act, 1999).
EU Savings Directive: The Council of the European Union has adopted a directive regarding the taxation of interest
income known as the "European Union Directive on the Taxation of Savings Income (Directive 2003/48/EC)".
Ireland has implemented the directive into national law. Any Irish paying agent making an interest payment on
behalf of the Issuer to an individual, and certain residual entities defined in the 1997 Act, resident in another EU
Member State and certain associated and dependent territories of a Member State will have to provide details of the
payment to the Irish Revenue Commissioners who in turn will provide such information to the competent authorities
of the state or territory of residence of the individual or residual entity concerned.
Also with effect from 1 July 2005, a number of non-EU countries, and certain dependent or associated territories of
certain Member States, adopted similar measures (either provision of information or transitional withholding) in
relation to payments made by a person within its jurisdiction to, or collected by such a person for, an individual
resident in a Member State. In addition, the Member States have entered into reciprocal provisions of information or
transitional withholding arrangements with certain of those dependent or associated territories in relation to
payments made by a person in a Member State to, or collected by such a person for, an individual resident in one of
those territories.
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CERTAIN ERISA 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 language is intended to satisfy the requirements under the new regulations in Section 10.35 of
Circular 230.
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
and on those persons who are fiduciaries with respect to such plans. Investments by plans are subject to ERISA's
general fiduciary requirements, including the requirement of investment prudence and diversification and the
requirement that the plan's investments be made in accordance with the documents governing the plan. The
prudence of a particular investment must be determined by the responsible plan fiduciary by taking into account the
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
employee benefit plan subject to ERISA (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 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.
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 an employee benefit plan to which they are applicable with respect to which the
Issuer, any Placement Agent, Collateral Administrator, the Indenture Trustee, the Investment Manager, any seller of
Collateral 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 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 a "qualified professional asset manager"), 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 in-house asset managers) ("Investor-Based
Exemptions"). There is also a statutory exemption that may be available under Section 408(b)(17) of ERISA and
Section 4975(d)(20) of the Code to a party in interest that is a service provider to a plan investing in the Securities,
provided such service provider is not (i) the fiduciary with respect to the plan's assets used to acquire the Securities
or an affiliate of such fiduciary or (ii) an affiliate of the employer sponsoring the plan.
Governmental plans and certain church plans, while not subject to the fiduciary responsibility provisions of ERISA
or the provisions of Section 4975 of the Code, may nevertheless be subject to state, local or other federal laws that
are substantially similar to the foregoing provisions of ERISA and the Code. Fiduciaries of any such plans should
consult with their counsel before purchasing any Notes.
The U.S. Department of Labor has promulgated regulations, 29 C.F.R. Section 2510.3-101 (the "Plan Asset
Regulations"), describing what constitutes the assets of an employee benefit 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 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, that equity participation in the entity by "benefit plan investors" is not
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"significant." Equity participation in an entity by "benefit plan investors" is "significant" if 25% or more of the
value of any class of equity interest in the entity is held by "benefit plan investors". Recently, the Pension
Protection Act of 2006 effectively amended, by statute, the definition of "benefit plan investors" in the Plan Asset
Regulation. Employee benefit plans that are not subject to Title I of ERISA and plans that are not subject to Section
4975 of the Code, such as U.S. governmental and church plans or foreign plans, are no longer considered 'benefit
plan investors". Accordingly, only employee benefit plans subject to Title I of ERISA or Section 4975 of the Code
or an entity whose underlying assets include plan assets by reason of such plan’s investment in the entity are
considered in determining whether investment by "benefit plan investors" represent 25% or more of any class of
equity of the Issuer. Therefore, the term "Benefit Plan Investor" includes (a) an employee benefit plan (as defined
in Section 3(3) of ERISA (that is subject to the provisions of Title I of ERISA), (b) a plan that is subject to Section
4975 of the Code, or (c) any entity whose underlying assets include "plan assets" by reason of any such employee
benefit plan's or plan's investment in the entity (hereinafter ("ERISA Plan"). A Series of Notes would likely be
considered to have substantial equity features under the Plan Asset Regulations, and the Issuer does not intend to
limit the value of the interests held by employee benefit plans in any Series of Notes to below 25%. However, as no
ERISA Plans shall be permitted to acquire Notes in the initial offering or thereafter, the fiduciary responsibility and
prohibited transaction provisions of ERISA and Section 4975 of the Code will not be applicable to the Issuer or to
any other employee benefit plans who invest in such Notes. Therefore, provided no ERISA Plans acquire the Notes,
even if other types of employee benefit plans hold 25% or more of the value of one or more Series of the Notes, the
assets of the Issuer will not be deemed plan assets under the Plan Asset Regulations for purposes of ERISA or
Section 4975 of the Code.
There can be no assurance that, despite the transfer restrictions relating to purchases by ERISA Plans and the
procedures to be employed by the Placement Agent, ERISA Plans will not in actuality own Notes of any Series.
This could cause the assets of the Issuer to be deemed "plan assets" for ERISA purposes if 25% or more of the value
of the outstanding Notes of any Series is held by ERISA Plans.
If for any reason the assets of the Issuer are deemed to be "plan assets" of an ERISA Plan subject to ERISA or
Section 4975 of the Code because one or more ERISA Plans is an owner of a Series of Notes, certain transactions
that the Investment Manager might enter into, or may have entered into, on behalf of the Issuer in the ordinary
course of its business might constitute non-exempt "prohibited transactions" under Section 406 of ERISA or Section
4975 of the Code and might have to be rescinded at significant cost to the Issuer. The Investment Manager could
possibly be deemed to be an ERISA fiduciary and may be prevented from engaging in certain investments (as not
being deemed consistent with the ERISA prudent investment standards) or engaging in certain transactions or fee
arrangements because they might be deemed to cause non-exempt prohibited transactions. It also is not clear that
Section 403(a) of ERISA, which generally requires that all of the assets of an ERISA Plan be held in trust and limits
delegation of investment management responsibilities by fiduciaries of ERISA Plans, would be satisfied. In
addition, it is unclear whether Section 404(b) of ERISA, which generally provides that no fiduciary may maintain
the indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United States,
would be satisfied or any of the exceptions to the requirement set forth in 29 C.F.R. Section 2550.404b-1 would be
available.
BY ITS PURCHASE OR HOLDING OF A NOTE OR ANY INTEREST THEREIN, EACH PURCHASER
AND/OR HOLDER THEREOF WHO OBTAINS SUCH NOTE FROM A PLACEMENT AGENT OR FROM
THE ISSUER, AS APPLICABLE, SHALL REPRESENT AND WARRANT, AND EACH TRANSFEREE WILL
BE DEEMED TO HAVE REPRESENTED AND WARRANTED, THAT, AT THE TIME OF ITS ACQUISITION,
AND THROUGHOUT THE PERIOD THAT IT HOLDS SUCH NOTE OR INTEREST THEREIN, THAT (1) IT
IS NOT AN ERISA PLAN; AND IF AFTER ITS INITIAL ACQUISITION OF A NOTE OR ANY INTEREST
THEREIN, THE INVESTOR DETERMINES, OR IT IS DETERMINED BY ANOTHER PARTY, THAT SUCH
INVESTOR IS AN ERISA PLAN, THE INVESTOR WILL DISPOSE OF ALL OF ITS NOTES IN A MANNER
CONSISTENT WITH THE RESTRICTIONS SET FORTH IN THE MASTER INDENTURE, AND (2) IF IT IS
AN EMPLOYEE BENEFIT PLAN OTHER THAN AN ERISA PLAN, ITS PURCHASE, HOLDING AND
DISPOSITION OF THE NOTES WILL NOT CAUSE A NON-EXEMPT VIOLATION OF ANY U.S. FEDERAL,
STATE OR LOCAL LAW OR ANY NON-U.S. LAW WHICH IS SUBSTANTIALLY SIMILAR TO ERISA OR
SECTION 4975 OF THE CODE AS A RESULT OF THE TRANSACTIONS CONTEMPLATED HEREIN AND
(3) IT WILL NOT SELL OR OTHERWISE TRANSFER ANY SUCH NOTE OR INTEREST THEREIN TO ANY
PERSON WHO IS UNABLE TO SATISFY THE SAME FOREGOING REPRESENTATIONS AND
WARRANTIES.
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CERTAIN LEGAL INVESTMENT CONSIDERATIONS
None of the Issuer, the Investment Manager, any initial purchaser and any Placement Agent make any representation
as to the proper characterization of the Notes for legal investment or other purposes, as to the ability of particular
investors to purchase the Notes for legal investment or other purposes or as to the ability of particular investors to
purchase 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 determining whether and to what extent the Notes are subject to investment, capital or
other restrictions. Without limiting the generality of the foregoing, none of the Issuer, the Investment Manager, any
initial purchaser any Placement Agent makes any representation as to the characterization of the Notes of any Series
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. The uncertainties described above
(and any unfavorable future determinations concerning legal investment or financial institution regulatory
characteristics of the Notes) may affect the liquidity of the Notes of any Series.
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SUBSCRIPTION AND SALE
Notes may be sold from time to time by the Issuer to the investors directly or through one or more Placement
Agents. Any agreement to sell will, inter alia, make provision for the form and terms and conditions of the relevant
Notes, the price at which such Notes will be purchased and the commissions or other agreed deductibles (if any)
payable or allowable by the Issuer in respect of such purchase. Any agreement to sell will make provision for the
resignation or termination of appointment of existing Placement Agents and for the appointment of additional or
other Placement Agents either generally or in relation to a particular Series of Notes.
The Issuer has not been and will not be registered under the Investment Company Act and the Notes have not been
and will not be registered under the Securities Act and the Notes may not be offered, sold, resold, delivered or
transferred within the United States or to, or for the account or benefit of, "U.S. Persons" (as such term is defined in
Regulation S under the Securities Act) except in transactions exempt from the registration requirements of the
Securities Act.
The Series Supplement applicable to any Series of Notes to be offered in the United States or to or for the benefit of
U.S. persons (each, a "U.S. Series") will specify that the Issuer is relying on the exception from the Investment
Company Act set forth in Section 3(c)(7) thereof and will contain additional placement and transfer restrictions with
respect to such Notes.
Each Placement Agent will agree that it will not offer, sell or deliver Notes, (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the completion of the distribution of the Notes comprising the relevant
Series, as certified to the Indenture Trustee or the Issuer by such Placement Agent (or, in the case of a sale of a
Series of Notes to or through more than one Placement Agent, by each of such Placement Agent as to the Notes of
such Series purchased by or through it, in which case the Indenture Trustee or the Issuer shall notify each such
Placement Agent when all such Placement Agents have so certified) within the United States or to, or for the
account or benefit of, U.S. persons, and such Placement Agent will have sent to each Placement Agent to which it
sells Notes during the distribution compliance period relating thereto a confirmation or other notice setting forth the
restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S.
persons.
In addition, until 40 days after the commencement of the offering of Notes comprising any Series, any offer or sale
of Notes within the United States by any Placement Agent (whether or not participating in the offering) may violate
the registration requirements of the Securities Act.
United Kingdom: Each Placement Agent will represent and agree that:
(a)
No offer to public: It has not offered or sold and, prior to the expiry of a period of six months from the
issue date of such Notes, will not offer or sell any such Notes to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments
(as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 as amended from time to time
(b)
Investment Communications: it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to engage in investment activity
(within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any
Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and
(c)
General Compliance: it has complied and will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to such Notes in, from or otherwise involving the United
Kingdom.
Ireland
Any Placement Agent with respect to a Series of Notes has confirmed that:
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(i)
that it will not underwrite the issue of, or place, the Notes of any Series otherwise than in
conformity with the provisions of the Irish Investment Intermediaries Act 1995, as amended,
including without limitation, Sections 9 and 23 thereof and any codes of conduct rules made under
Section 37 thereof and the provisions of the Investor Compensation Act 1998;
(ii)
that it will not underwrite the issue of, or place, or offer, or sell the Notes of any Series that are
listed with the Irish Stock Exchange except in conformity with the provisions of EC Directive
2003/ 71/ EC, the Irish Prospectus (Directive 2003/ 71/ EC) Regulations 2005 and the provisions
of the Irish Companies Acts 1963 – 2005; and
(iii)
that it has not and will not underwrite the issue of, or place, or offer, or sell the Notes of any Series
otherwise than in conformity with the provisions of the Irish Market Abuse (Directive 2003/ 6/
EC) Regulations 2005.
The Issuer is not regulated by the Irish Central Bank and Financial Services Regulatory Authority (IFSRA) by virtue
of the issue of the Notes. The Notes do not have the status of a deposit and are not subject to the deposit protection
scheme operated by IFSRA.
General
Other than with respect to the listing of the Notes on such stock exchange as may be specified in the relevant Series
Supplement, no action has been or will be taken in any country or jurisdiction by the Issuer or any Placement Agent
that would permit a public offering of Notes, or possession or distribution of any offering material in relation
thereto, in any country or jurisdiction where action for that purpose is required. Persons into whose hands the
Offering Circular or any Series Supplement comes are required by the Issuer and the Placement Agent to comply
with all applicable laws and regulations in each country or jurisdiction in or from which they purchase, offer, sell or
deliver Notes or have in their possession or distribute such offering material, in all cases at their own expense.
The Placement Agents shall not be bound by any of the restrictions relating to any specific jurisdiction (set out
above) to the extent that such restrictions shall, as a result of change(s) or change(s) in official interpretation, after
the date hereof, of applicable laws and regulations, no longer be applicable but without prejudice to the obligations
of any Placement Agent described in the paragraph headed "General" above.
Selling restrictions may be supplemented or modified with the agreement of the Issuer. Any such supplement or
modification will be set out in the relevant Series Supplement (in the case of a supplement or modification relevant
only to a particular Series of Notes) or (in any other case) in a supplement to this document.
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LISTING AND GENERAL INFORMATION
Reporting
Pursuant to the relevant Series Supplement, the Indenture Trustee shall deliver to the holders of a Series of Notes a
report setting forth, among other things, information relating to the Asset Pools (including the net asset value of such
Asset Pools, identity of the Portfolio Investments, sales of Portfolio Investments etc.) and payment information
relating to such Series of Notes.
Listing
Application may be made, if specified in the relevant Series Supplement, to admit the Notes of any Series to the
Official List and to trading on the Irish Stock Exchange, Luxembourg Stock Exchange or any other exchange
specified in the relevant Series Supplement. There can be no assurances, however, that such listing will be granted.
Either the Issuer or the Indenture Trustee may upon 30 days' written notice terminate the Indenture Trustee's
appointment, in which case a replacement Indenture Trustee will be appointed. The termination of the Indenture
Trustee's appointment shall not become effective until the appointment of a successor Indenture Trustee has taken
effect.
The Issuer will provide the Indenture 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 or Default or other matter
required to be brought to the Indenture Trustee's attention has occurred or, if one has, specifying the same.
In the case of a Series of Notes to be listed on the Irish Stock Exchange, a copy of the Offering Circular and the
related Series Supplement, which together comprise a Prospectus with regard to the Issuer and the Notes in
accordance with the requirements of the Prospectus Directive 2003/71/EC Regulations 2005 (the "Prospectus
Regulations"), will be delivered to the Registrar of Companies in Ireland in accordance with the Prospectus
Regulations.
Authorizations
The Issuer has obtained or will obtain from time to time all necessary consents, approvals and authorizations in
connection with the issue and performance of the Notes and the giving of the guarantee relating to them.
Clearing of the Notes
The Notes are expected to be accepted for clearance through DTC, Euroclear and Clearstream Banking. The
appropriate common code and the International Securities Identification Number in relation to the Notes of each
Series will be specified in the relevant Series Supplement relating thereto. The relevant Series Supplement shall
specify any other clearing system as shall have accepted the relevant Notes for clearance together with any further
appropriate information.
Use of proceeds
The net proceeds from the issuance and sale of each Series of Notes, after payment of fees and expenses of the
Issuer related thereto (including fees and expenses related to the structuring, offering and sale of such Series of
Notes and any Existing Series Reimbursement), will be deposited into the Series Investment Accounts for such
Series of Notes and transferred from time to time to a specified Pool Investment Account to be used by the Issuer to
purchase Portfolio Investments, as directed by the Investment Manager in accordance with the investment guidelines
set forth in the Master Indenture, the relevant Series Supplement and the Management Agreement.
Litigation
Except as disclosed in this Offering Circular, there are no litigation, governmental or arbitration
proceedings against or affecting the Issuer or any of its assets or revenues, nor is the Issuer aware of any pending or
threatened proceedings of such kind, which are or might be material to the issue of the Notes.
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No significant change
Since the date of its incorporation, there has been no adverse change, or any development reasonably likely
to involve an adverse change, in the condition (financial or otherwise) or general affairs of the Issuer that is material
to the issue of the Notes. Since the date of its incorporation, the Issuer has not commenced trading, established any
accounts or declared any dividends, except for the transactions described herein relating to the issuance of the
Securities.
Documents available for inspection
Copies of the following documents will be available for 14 days from the date of this Offering Circular in
physical and/or electronic form at the registered office of the Issuer which is expected to be located at 5
Harbourmaster Place, IFSC, Dublin 1, Ireland and, where such Series of Notes have been placed through a
Placement Agent, the Specified Office of the Placement Agent.
For so long as any Notes of a Series shall be outstanding, copies and, where appropriate, English
translations of the following documents may be inspected during normal business hours at the Specified Office of
the Indenture Trustee and, in the case of Notes to be admitted to the Official List and to trading on the Irish Stock
Exchange, the Paying Agent in Ireland, as set forth in the related Series Supplement.
(a)
the Master Indenture;
(b)
the Series Supplement relating to each Series of Notes;
(c)
the Memorandum and Articles of Association of the Issuer;
(d)
the Administration Agreement;
(e)
any related Hedge Agreements;
(f)
a copy of the Offering Circular, any future Supplements thereto, and the Series Supplements; and
(g)
the audited financial statements of the Issuer.
In addition, all documents incorporated by reference into the Offering Circular are available free of charge
from the above mentioned office. However, for the purposes of any application to list the Notes on the Irish Stock
Exchange, the documents and websites incorporated by reference in the Offering Circular and any future
Supplement or Series Supplement are not expected to form part of the listing particulars.
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THE MANAGEMENT AGREEMENT
The Issuer and the Investment Manager will enter into the Management Agreement pursuant to which the
Investment Manager will perform certain administrative and advisory functions with respect to the Pledged
Securities as described in Condition 3. The Investment Manager will, among other things, have the right, on behalf
of the Issuer, to exercise any rights (including, but not limited to, voting rights) or remedies with respect thereto
consistent with the terms of the Indenture.
Pursuant to the terms of a collateral administration agreement (the "Collateral Administration
Agreement") among the Issuer, the Investment Manager and Deutsche Bank AG, London Branch, the Issuer will
retain the Collateral Administrator to prepare certain reports and perform certain other administrative duties with
respect to the Portfolio Investments. The compensation paid to the Collateral Administrator by the Issuer for such
services will be in addition to the fees paid to the Investment Manager and to Deutsche Bank Trust Company
Americas, in its capacity as Indenture Trustee, and will be allocated to each Series of Notes as set forth in the related
Series Supplement and treated as a Series Administrative Expense for purposes of the Priority of Payments.
As compensation for the performance of its obligations as Investment Manager, the Investment Manager
will be entitled to receive in connection with each Series of Notes, the Base Management Fee and Incentive
Management Fee set forth in the related Series Supplement.
The Investment Manager will (without reimbursement from by the Issuer) pay all expenses and costs
incurred by it in the course of performing its obligations under the Management Agreement; provided that the Issuer
will be responsible for the reimbursement of (i) out of pocket expenses of the Investment Manager incurred in the
performance of its obligations (including reasonable expenses and costs of outside legal advisors, independent
accountants, consultants and other professionals retained by the Issuer or by the Investment Manager on behalf of
the Issuer in connection with services provided by the Investment Manager), (ii) amounts payable to the Collateral
Administrator pursuant to the Collateral Administration Agreement and expenses and costs incurred in effecting
purchases and sales and (iii) reasonable travel expenses (e.g. airfare, meals, lodging and other transportation)
undertaken in connection with the performance by the Investment Manager of its duties pursuant to the Management
Agreement or the Indenture. Unless incurred with respect to a specific Series (in which case such costs and
expenses will be included in the Series Administrative Expenses) or with respect to the Pledged Securities in general
(in which case such costs and expenses will be included in the Pantheon Administrative Expenses), such costs and
expenses will be allocated to the Asset Pool with respect to which they have been incurred and included in the
Allocated Asset Pool Administrative Expenses for such Asset Pool to be further allocated among the relevant Series
based on the Series Allocation Percentage of each Series, taking into account changes in such percentages over the
period for which such expenses were incurred in order to ensure fair allocation of such expenses.
The Investment Manager shall render its services pursuant to the Management Agreement and the Master
Indenture, exercising that degree of skill and care consistent with industry standards for the management of a
portfolio of investments similar to the Portfolio Investments, and no less than that which the Investment Manager
customarily exercises with respect to assets similar in nature and character that it manages for itself and others in
accordance with its existing practices and procedures relating to assets of the nature and character of such assets,
and, in any event, will act in a prudent and commercially reasonable manner and in good faith in discharging its
duties under the Management Agreement. The Investment Manager will have no liability to the holders of the Notes,
the Indenture Trustee, any Agent, the Issuer, any of the Issuer's creditors or any of their respective affiliates,
partners, shareholders, officers, directors, employees, agents, accountants and attorneys, for any losses, damages,
claims, liabilities, costs or expenses (including attorneys' fees) arising out of any action taken or recommended by or
on behalf of the Investment Manager pursuant to the terms of the Management Agreement or the Indenture, except
(a) by reason of its willful misconduct, bad faith or gross negligence in the performance of or reckless disregard of
its obligations thereunder or (b) with respect to the information concerning the Investment Manager included under
the headings "Risk Factors—Relating to Certain Conflicts of Interest—The Issuer Will Be Subject to Various
Conflicts of Interest Involving the Investment Manager" and "The Investment Manager" (other than information
under the subsection entitled "General") that contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements therein, in light of the circumstances they were made, not
misleading ("Investment Manager Breaches"). The Investment Manager will not be liable for any special,
indirect, consequential, punitive, exemplary or treble damages or lost profits. Except to the extent resulting from
Investment Manager Breaches, the Investment Manager, its directors, managers, officers, stockholders, members,
agents and employees and any affiliate of the Investment Manager and its directors, managers, officers,
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stockholders, members, agents and employees will be entitled to indemnification by the Issuer for any and all
expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including reasonable
attorneys' fees and expenses), relating to the transactions contemplated by the Indenture or the performance of the
Investment Manager's obligations under the Management Agreement, which will be payable as Administrative
Expenses and allocated as a Series Administrative Expense among the Series based on the Series Share to the extent
that such claims relate to all of the Series or among the affected Series as described in the preceding paragraph to the
extent that such changes related to one or more Asset Pools.
The Investment Manager may assign its rights or responsibilities under the Management Agreement if such
assignment is consented to in writing by the Issuer (at the direction of a majority of the Holders of the Notes of each
Series, or such other percentage as may be set forth in the Series Supplement for each Series, and with notice to the
Indenture Trustee and any Rating Agencies then rating a Series or notes secured by a Series) and approved by the
Collateral Administrator (such approval not to be unreasonably withheld or delayed) and if such assignment is made
to a successor which (i) has demonstrated an ability to professionally and competently perform duties similar to
those imposed upon the Investment Manager under the Management Agreement and the Indenture, (ii) is legally
qualified and has the capacity to act as Investment Manager under the Management Agreement and the Indenture,
(iii) will not cause the Issuer or the Collateral to become required to register as an "investment company" under the
provisions of the Investment Company Act, (iv) will not cause the Issuer or the Collateral to become subject to net
income or withholding tax that would not have been imposed but for such appointment and (v) if applicable under a
Series Supplement, with respect to the appointment of which the Rating Agency Condition has been satisfied (the
preceding clauses (i) to (v) of this sentence referred to as the "Successor Investment Manager Conditions");
except that the Investment Manager may assign all of its rights and responsibilities hereunder to an affiliate without
the consent of the Issuer or any Holders of Notes of any Series and without satisfaction of the Rating Agency
Condition, if any, unless otherwise specified in the Series Supplement, so long as (i) such assignment would not
constitute an "assignment" not permitted under the Adviser's Act, (ii) such assignment would not cause the Issuer or
the Collateral to be subject to net income or withholding tax that would not have been imposed except for such
assignment, any (iii) the Investment Manager gives notice to each Rating Agency then rating the Notes of any Series
(or the notes secured by any Notes of any Series) that such assignment has been made. Any such assignment shall be
subject to delivery of (i) either (x) a management agreement between the Issuer and the successor Investment
Manager on terms and conditions substantially similar to the Management Agreement or (y) a legal, valid and
binding assignment and assumption agreement and (ii) of Opinion(s) of Counsel substantially similar in form and
scope to the opinion(s) delivered on the Initial Issue Date in connection with the execution of the Management
Agreement. In the event that (i) the majority of the Holders of one or more Series do not consent to an assignment to
a third party that is not an affiliate of the Investment Manager or (ii) the Rating Agency Condition has not been
satisfied with respect to one or more Series, the Issuer may nonetheless consent to such assignment with respect to
the Applicable Collateral of the remaining Series and the Applicable Collateral of each of the non-consenting Series
shall be Segregated and continue to be managed by the Investment Manager under the Management Agreement.
The Investment Manager may delegate to third parties (including its affiliates), which it shall select with
reasonable care, and employ third parties to execute any or all of the duties or liabilities assigned to the Investment
Manager under the Management Agreement; provided that (i) the Investment Manager will not be relieved of any of
its duties or liabilities under the Management Agreement as a result of such delegation to or employment of third
parties, (ii) the Investment Manager shall be solely responsible for the fees and expenses payable to any such third
party, except as otherwise provided in the Management Agreement, (iii) such delegation does not constitute an
"assignment" under the Investment Advisers Act of 1940, as amended (the "Advisers Act") and (iv) decisions
regarding the purchase and sale of any Portfolio Investment shall not be delegated to any third party that is not an
affiliate.
The Investment Manager may resign and terminate the Management Agreement without cause upon 90
days' (or such shorter period as agreed by the Investment Manager and the Issuer) prior written notice to the Issuer,
the Indenture Trustee and each Rating Agency then rating any Series of Notes; provided, however, that no such
termination will become effective until the appointment of a successor portfolio manager in accordance with the
process described below and approved by the Collateral Administrator (such approval not to be unreasonably
withheld or delayed).
Under the Management Agreement, and, in some cases subject to the conditions specified in the relevant
Series Supplement, with respect to each Series of Notes and the Applicable Collateral for such Series of Notes, the
Investment Manager may be removed for Cause at any time, upon ten Business Days' prior written notice by the
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Issuer or Indenture Trustee, once an adequate replacement has been found, by the Issuer or at the written direction of
the holders of at least 75% of such Series of Notes outstanding and subject to the Rating Agency Condition, if any
with respect to such Series of Notes. Upon receipt of a removal notice from the requisite percentage of the holders of
a Series of Notes, the Indenture Trustee shall execute a Segregation with respect to such Series. Notwithstanding
anything to the contrary contained herein, the removal of the Investment Manager with respect to a Series of Notes
and the Segregated Asset Pools applicable to such Series shall not affect the rights, duties and obligations of the
Investment Manager with respect to other Series of Notes (and the Applicable Collateral allocable to such other
Series of Notes) that have not voted for the removal of the Investment Manager, except in the case of Static Asset
Pools where any changes must be approved by all affected Series, including a Series that may have a replacement
Investment Manager.
For purposes of the Management Agreement, "cause" will mean: with respect to each Series of Notes:
(a)
the Investment Manager willfully breaches, or takes any action that it actually knows violates, any
provision of the Management Agreement (including, without limitation, any representation contained therein) or any
term of the Indenture or the relevant Series Supplement applicable to it;
(b)
the Investment Manager breaches any provision of the Management Agreement (including,
without limitation, any representation contained therein) or the Master Indenture or the relevant Series Supplement
applicable to it (except for any such breach that has not had, and could not reasonably be expected to have, a
material adverse effect on the Pledged Securities, the holders of such Series of Notes or the Issuer) and fails to cure
such breach within 30 days of becoming aware of, or receiving notice of, such breach, unless, if such failure is not
capable of being cured within 30 days but is capable of being cured within 60 days, the Investment Manager has
taken action that the Investment Manager in good faith believes will remedy, and that does in fact remedy, such
failure within 60 days after notice of such failure is given to the Investment Manager;
(c)
certain events of bankruptcy, insolvency, conservatorship, or receivership in respect of the
Investment Manager;
(d)
the occurrence of an act by the Investment Manager that is judicially determined to constitute
fraud or criminal activity in the performance of its obligations under the Management Agreement or the Investment
Manager, or any executive officer of the Investment Manager who is responsible for the administration of the
Collateral, being indicted for a criminal felony offense materially related to its advisory services; and
(e)
the occurrence of an Event of Default described in clause (i) or (ii) of Condition 19.
If the Investment Manager is removed or resigns for any reason, except with respect to those Series where
the majority of the Holders have agreed upon the choice of a successor Investment Manager and have chosen not to
Segregate, the Applicable Collateral for each Series of Notes shall be Segregated and each such Series shall appoint
a successor Investment Manager in accordance with the requirements applicable to such Series of Notes as set forth
in the Series Supplement.
Notwithstanding anything to the contrary set forth above, no resignation or termination of the Management
Agreement with respect to the Applicable Collateral for a Series of Notes shall become effective unless (i) a
successor portfolio manager that satisfies any conditions set forth in the Series Supplement has agreed in writing to
assume all of the Investment Manager's duties and obligations pursuant to the Management Agreement with respect
to such Series, (ii) if applicable, the Rating Agencies have each approved such successor portfolio manager, and (iii)
if applicable, the Rating Agency Condition is met with respect to the appointment of such successor portfolio
manager.
Under the Management Agreement, the Investment Manager is permitted to recommend or effect direct
trades between the Issuer and the Investment Manager or an affiliate (or an account advised by the Investment
Manager or any of its affiliates), acting as principal or agent, or trades between the Issuer and any account or
portfolio for which the Investment Manager serves as investment advisor, subject to applicable legal requirements, if
the Issuer has received from the Investment Manager such information relating to such transaction as it may
reasonably require and if such transaction is effected at arm's length in accordance with the Indenture. The
Investment Manager and its affiliates or any officers or directors of the Investment Manager may, to the extent
permitted by law and not prohibited by the Indenture and subject to its duties under the Management Agreement,
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engage in other businesses and render services of any kind to the Issuer and its affiliates, the Indenture Trustee, the
holders of Notes or any others, including those which may have investment policies similar to those followed by the
Investment Manager with respect to the Pledged Securities and which may own loans or securities of the same class,
or of the same type, as those included in the Pledged Securities or other securities of the issuers or underlying
obligors of any Pledged Securities. As a result, certain employees of the Investment Manager and its affiliates may
possess information relating to particular issuers or underlying obligors of obligations included in the Pledged
Securities, which information is not known to employees of the Investment Manager responsible for monitoring the
Pledged Securities and performing the other obligations under the Management Agreement. Under the Management
Agreement, the Investment Manager will be required to act with respect to any information within its possession
only if such information was known to those employees of the Investment Manager responsible for performing the
obligations of the Investment Manager thereunder. The Investment Manager is not obligated to invest, for the
benefit of the Issuer, in any particular investment opportunity known or made known to the Investment Manager by
any person. The Investment Manager will be free, in its sole discretion, to make recommendations to others, or
effect transactions on behalf of itself or for others, which may be the same or different from those it recommends
that the Issuer effect with respect to the Pledged Securities. Except as otherwise provided in the Management
Agreement, the Investment Manager shall cause any purchase or sale of any Pledged Security from, to or on behalf
of the Issuer, and all other transactions relating to any of the Pledged Securities, to be effected at an arms' length
basis for fair market value in accordance with the Indenture. The Investment Manager has no obligation to solicit
competitive bids for any transaction or to seek out the lowest available commission cost to the Issuer, provided that
it reasonably believes the broker or dealer selected by it can be expected to obtain a competitive market price on the
particular transaction and the Investment Manager determines in good faith that the commission cost is reasonable in
relation to the value of the brokerage and research services provided by such broker or dealer to the Investment
Manager. The Investment Manager may aggregate sales and purchase orders of securities with similar orders being
made simultaneously for other accounts if the Investment Manager, in its sole judgment, determines that such
aggregation will not be economically detrimental to the Issuer, and the objective shall be to allocate the executions
among the accounts in a fair and equitable manner over time and generally to seek to allocate securities available for
investment to all such accounts pro rata in proportion to the optimum amount sought by the Investment Manager for
each respective account. Investment opportunities and the purchases or sales of securities shall be allocated in a
manner believed by the Investment Manager to be fair and equitable, taking into consideration, among other relevant
factors, the different investment objectives of the Issuer and the Investment Manager's other clients.
There is no limitation or restriction on the Investment Manager or any of its affiliates with regard to
engaging in any other businesses or providing investment management, advisory or other types of services to other
parties or persons. This and other future activities of the Investment Manager and/or their affiliates may give rise to
additional conflicts of interest. The Investment Manager and its affiliates expect to serve as Investment Manager for,
invest in or be affiliated with, other entities organized to issue collateralized debt obligations secured by high yield
loans and bonds in the future.
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THE INVESTMENT MANAGER
The information appearing in this section has been prepared by Prytania Investment Advisors LLP, and has
not been independently verified by the Issuer or the Agent. Accordingly, notwithstanding anything to the contrary
herein, neither the Issuer nor the Agent assume any responsibility for the accuracy, completeness or applicability of
such information.
General
Certain advisory and administrative functions with respect to the Issuer will be performed by the
Investment Manager under the Management Agreement, dated as of the Initial Issue Date, between the Issuer and
the Investment Manager relating to the Notes and the Assets (the "Management Agreement"). Pursuant to the terms
of the Management Agreement, the Investment Manager will select the portfolio of Portfolio Investments, instruct
the Indenture Trustee with respect to any acquisition, disposition or tender of a Portfolio Investment or Eligible
Investment and monitor the Portfolio Investments and will provide the Issuer with certain information with respect
to the composition and characteristics of the Portfolio Investments, any disposition of Portfolio Investments and
with respect to the retention of the proceeds of any such disposition or the application thereof toward the purchase of
additional Portfolio Investments.
Prytania Investment Advisors LLP
The Prytania Group consists of three Limited Liability Partnerships formed in England and Wales (the
"Prytania Group"). Within the group there are two principal operating entities, Prytania Investment Advisors LLP,
which was set up to perform asset management and investment advisory activities, and Prytania Services LLP which
was set up to create and provide technology-related products and services including providing analytics and
technology support for Prytania Investment Advisors LLP. Prytania Investment Advisors' sole focus is related to
investment management of structured finance assets (CDOs and ABS). Substantially all of the membership interests
of both Prytania Investment Advisors LLP and Prytania Services LLP are held by Prytania Holdings LLP. Prytania
Holdings LLP was formed in late 2003 with an anchor investment by a major global investment bank.
The executive members of Prytania are as follows: Mr. Charles Pardue, who is Managing Partner for each
of the three LLPs; Mr. Mark Hale, who is the Chief Investment Officer for Prytania Investment Advisors LLP; Mr.
Matthew Papas, who is the Chief Technology Officer for Prytania Services LLP; and Mr. Ulrik J Walther, who is
Head of Client Advisory at Prytania Investment Advisors LLP. The four executive members form an informal
Executive Committee under the direction of the Managing Partner, responsible for the day-to-day activities of the
group. Prytania currently has 14 people working full-time across the group with a significant resource dedicated to
IT and the development and maintenance of its proprietary analytics and technology.
Prytania Holdings LLP is managed by a committee of members (the "Committee"). The Committee is
composed of three non-executive members, each with long experience at senior levels in finance, and two executive
members, Mr. Charles Pardue and Mr. Mark Hale.
Mr. Pardue and Mr. Hale lead the Investment Committee responsible for any investment portfolios
managed by Prytania Investment Advisors LLP. The Investment Committee also has, as a member, one or two of
the five investment analysts who have prepared the analysis for each deal being considered by the committee.
Prytania's investment philosophy is primarily focused on delivering compelling risk adjusted returns.
Prytania seeks to achieve these target returns by building an investment process on three distinct pillars of
evaluation. These are:
1.
A fundamental evaluation of the suitability of the underlying collateral for inclusion in portfolios
given Prytania's outlook for future underlying performance.
2.
An evaluation of the manager, originator and servicer responsible for the underwriting and
maintenance of the assets. Prytania uses proprietary numeric ratings to assist in creating a consistency of evaluation
both between entities and across time.
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3.
A quantitative evaluation of the soundness of the structure and its underlying risks. Frequently,
Prytania uses proprietary analytics, a portion of which has been developed exclusively for Prytania by Professor
Doctor Philipp Schönbucher of ETH Zürich in Switzerland.
Prytania Investment Advisors LLP is regulated and authorized by the Financial Services Authority ("FSA")
in the United Kingdom and is registered as a limited liability partnership (OC305343) in England and Wales.
Prytania Services LLP (OC305344) and Prytania Holdings LLP (OC305342) are limited liability partnerships
incorporated in England and Wales and are not regulated by the FSA. Each of the Prytania LLPs are located in the
City of London at Warwick Court, 5 Paternoster Square, London EC4M 7BP, United Kingdom.
Biographies of Certain Key Individuals
Below are biographies of selected key individuals of Prytania:
Charles Pardue, Managing Partner, Committee Director. Charles is Managing Partner of each LLP in the
Prytania Group, sits on the Committee of Prytania Holdings as an executive director, heads the Executive
Committee and is a member of the Investment Committee. Charles is the founder of Prytania and is a member of
Prytania Holdings LLP, Prytania Investment Advisors LLP and Prytania Services LLP.
Before leaving to found Prytania, Charles spent 11 years at J.P. Morgan and, at the time of his departure,
was Co-head of Structured Finance Distribution for J.P. Morgan Securities Limited in Europe. During his seven
years in the bank's structured finance businesses, Charles helped pioneer J.P. Morgan's market-leading credit
derivative, CDO and synthetic securitisation businesses. Charles began his career at J.P. Morgan in lending, both
real estate and corporate. Charles also worked in interest rate derivatives, creating and trading interest rate
structured notes in the mid-90s.
Having participated in the evolution of the structured finance market since 1995, Charles has strong market
and product knowledge in structured finance. From being a part of the team that built J.P. Morgan's credit
derivatives business starting in 1995, he has been involved in the structuring, execution and distribution of many
types of structured product. Charles and his team initiated JP Morgan's CDO effort in 1997, and then in mid-1997,
in the context of developing solutions for Japanese banks at a time when they had poor capital ratios and high
funding costs, Charles was instrumental in developing and extending synthetic securitization.
Charles earned his MPPM from Yale University's School of Organization and Management, his BA in
Electrical Engineering from Georgia Institute of Technology and his BA in Political Science from Princeton
University.
Mark Hale, Chief Investment Officer, Committee Director. Mark joined Prytania as Chief Investment
Officer in 2003. He is a Committee Director, member of the Executive Committee, Chairman of the Investment
Committee and a member of the Prytania Holdings LLP and Prytania Investment Advisors LLP.
Mark brings to Prytania seven years of previous investment management experience at Ansbacher & Co.
Mark was responsible for managing an investment portfolio for the bank and its clients in excess of $1 billion with a
substantial portion of the portfolio invested in structured finance securities. From the start of 1998, Mark invested
widely across the structured finance asset class, from AAA assets down to equity and from the US to the UK,
Europe and Japan. He was also responsible for managing portfolios of corporate bonds, emerging market debt, bank
debt securities, structured notes and money market funds and for managing interest and foreign exchange risk.
Given the importance to the structured finance asset class of macro- and micro-economic trends, Mark's
background as an economist and investment strategist also brings substantial value to Prytania. During eight years
spent with several international financial institutions, he predicted business cycles and interest rates, analysed global
capital flows and advised investors in debt and equity market strategies. Mark began his career at the Bank of
England as a financial analyst, before becoming the country economist for Japan.
Mark earned his MA degree in Economics from the University of Cambridge.
Matthew Papas, Chief Technology Officer. Matthew joined Prytania as Chief Technology Officer in 2003.
He is a member of Prytania Holdings LLP and Prytania Services LLP and sits on the Executive Committee. In his
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capacity as Chief Technology Officer, Matthew is responsible for all the systems and IT related activities, personnel
and infrastructure of the Prytania Group.
Matthew is responsible for designing the architecture and managing the development of Prytania's
analytics, which are based on the concepts of automation, scalability and integration. Matthew oversaw the
implementation of the original outline of Prytania's analytics, integration of third-party software applications and
multiple external data feeds and the in-house development of software tools. Matthew is also responsible for
managing the IT and systems development staff of Prytania Services LLP.
Before joining Prytania, Matthew worked as a consultant for J.P. Morgan from 1999 to 2002 where he was
engaged in developing IT infrastructure for the bank. Matthew developed prototypes for bond trading systems,
portfolio analysis software, researched knowledge management strategies for the bank and helped to implement a
structured finance information management system. Before joining the bank, he worked on projects in the
pharmaceutical and pharmaceutical publishing fields.
Matthew studied Computer Science at City University of New York.
Ulrik Walther, C.F.A , Head of Client Advisory. Ulrik joined Prytania in 2004 to assume responsibility for
the firm's client advisory and marketing functions. He is a member of the Executive Committee and a member of
the Prytania Holdings LLP and Prytania Investment Advisors LLP. During his time at Prytania, Ulrik has been
instrumental in introducing Prytania to a wide client base in Scandinavia, Germany and the Middle East. Ulrik is
responsible for managing the firm's client service.
Ulrik brings experience to Prytania built up over twenty years servicing clients for both asset management
and investment banking firms. Prior to joining Prytania, Ulrik spent more than 10 years at J.P. Morgan where he
was responsible for numerous marketing assignments covering clients in Scandinavia, Southern and Eastern Europe
and the Middle East. In his most recent role at J.P. Morgan Asset Management he was a senior client manager on
mandates in aggregate value in excess of $5 billion from central banks, supra-national institutions, pension funds
and life insurers. In his former capacity at JP Morgan Securities Ltd. Ulrik worked in fixed income sales with
primary responsibility for institutional investors in Scandinavia. Before joining J.P. Morgan, Ulrik spent five years
with Merrill Lynch and Deutsche Bank and a further five years with Copenhagen Handelsbank and Carnegie & Co
in Copenhagen.
Ulrik studied Economics at the University of Aarhus, the University of Copenhagen, and at New York
University's Stern School of Business. He is also a Chartered Financial Analyst.
Philipp Schönbucher, Analytics Consultant. Philipp joined Prytania as an analytics consultant in 2004 and
became a member of Prytania Holdings LLP in 2005. Philipp is responsible for developing the firm's proprietary
analytics, working together with individuals at Prytania to develop and extend simulation-based models which are
important for the firm's portfolio management capabilities. At Prytania, Philipp has developed sophisticated models
for cash and synthetic CDOs.
Philipp brings excellent analytical insights to Prytania from his role as an assistant professor for
quantitative methods of risk management in the department of mathematics at ETH-Zurich. His research has
related, among other areas, to developing simulation-based credit analytics, to establishing methodologies to price
credit derivatives and other forms of credit risk and to extending and creating concepts related to default correlation
Philipp has been widely recognized as a distinguished academic in his field. He was named "Quant of the
Year 2005" by Risk Magazine and his book Credit Derivatives was named "Quant Book of the Year 2003" by
Wilmott Magazine. He has presented at over 40 conferences in Europe, the UK and the United States on topics
including CDS options pricing, default dependency models, default contagion and dynamic portfolio credit risk. He
has published over 15 articles on topics ranging from loan loss distributions to default correlation. He is a member
of the Editorial Board of The Journal of Credit Risk, the Editorial Board of Finance and Stochastics and the Editorial
Board of Applied Mathematical Finance. He is also a member of the European Academic Advisory Panel of
Standard & Poor's.
Philipp earned his BA and his PhD in Economics from Bonn University. He also earned an M.Sc. in
Mathematics from the University of Oxford.
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Joe MacHale, Non-Executive Committee Director, Chairman of the Committee. Joe is a member of
Prytania Holdings LLP and is the Chairman of the Committee. Appointed as Chairman in October 2003, Joe also
chairs the Compensation Subcommittee.
Joe's previous role was at J.P. Morgan & Co. where he was most recently Chief Executive Europe, Middle
East and Africa from 1997-2001. In that capacity Joe was responsible for a business with over 5,500 employees
across 10 countries which generated in excess of $3.5 billion in revenues and pre-tax net income of $1.4 billion.
Under his tenure as Chief Executive, the European business of J.P. Morgan was the largest contributor to global pretax net income of J.P. Morgan globally, producing pre-tax net income CAGR of 34%. Joe reported directly to the
Chairman and CEO and was a member of the firm's Executive Management Board from 1993-2001 before leaving
J.P. Morgan to pursue other interests. In addition to serving as a non-executive director of the Prytania Group, Joe is
also a non-executive director of Royal Bank of Scotland PLC.
Joe is a fellow of the Institute of Chartered Accountants. He received his BA degree in Politics, Philosophy
and Economics from the University of Oxford (Hons).
Joe Cook, Non-Executive Committee Director. Joe Cook is a member of Prytania Holdings LLP and is a
Committee Director, appointed in December 2003. He sits on the Compensation Subcommittee.
During his 15 years at J.P. Morgan & Co., he held a number of management roles in the bank, both in
London and New York, including that of Head of Global Capital Markets. In that role he was responsible for
overseeing the firm's credit markets origination and underwriting businesses. In addition to his deep experience in
the financial markets, Joe brings broad experience in business and personnel management. On the basis of his
experience in the European markets, Joe was one of the key individuals who led the drive to bring J.P. Morgan &
Co. into the securities business in 1989 following repeal of the ban on US commercial banks from underwriting
securities. Prior to joining J.P. Morgan, Joe was with Orion Royal Bank for 15 years in a number of corporate
finance, capital markets and securities underwriting roles.
Gareth Jones, Non-Executive Committee Director. Gareth is a member of Prytania Holdings LLP and is a
Committee Director, appointed in May 2005. He sits on the Compensation Subcommittee.
Gareth brings a breadth of market knowledge built up after years of experience in the European ABS and
credit markets. During his time at Abbey National, Gareth was exposed to transactions covering the whole range of
the asset backed market including the following sectors: mortgages, credit cards, leasing assets, mobile homes,
trains, receivables and time shares. In addition Gareth to his market knowledge Gareth brings a breadth of financial
and management experience from his roles as Treasurer of Conoco and Redland.
Gareth is a Fellow of the Institute of Chartered Accountants and a Fellow of the Association of Corporate
Treasurers.
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ANNEX A
GLOSSARY OF CERTAIN DEFINED TERMS
This Glossary of Certain Defined Terms shall be part of the Terms and Conditions.
ABS CDO Security means any 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) primarily on the credit exposure to, or cash flow from, a portfolio consisting of Asset-Backed
Securities ; provided that ABS CDO Securities shall also include CDO Securities that entitle the holders thereof to
receive payments that depend on the cash flow from a credit swap linked to a notional portfolio of Asset-Backed
Securities and from the cash flow from a repurchase agreement, interest rate swap, investment contract, sovereign
debt or other highly rated securities purchased with the proceeds of such Asset-Backed Securities.
ABS REIT Debt Securities means (1) REIT Debt Securities – Diversified, (2) REIT Debt Securities – Health Care,
(3) REIT Debt Securities – Hotel, (4) REIT Debt Securities – Industrial, (5) REIT Debt Securities – Mortgage, (6)
REIT Debt Securities – Multi Family, (7) REIT Debt Securities – Office, (8) REIT Debt Securities – Residential, (9)
REIT Debt Securities – Retail and (10) REIT Debt Securities – Storage.
ABS Type Diversified Securities means (1) Automobile Securities; (2) Credit Card Securities; and (3) Student Loan
Securities.
ABS Type Residential Securities or RMBS means (1) Home Equity Loan Securities; (2) Residential A Mortgage
Securities; and (3) Residential B/C Mortgage Securities.
ABS Type Undiversified Securities means those securities defined as such in the relevant Series Supplement.
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: (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 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 Lease 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
lessors or sublessors 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.
Asset-Backed Security means obligations or securities that entitle the holders thereof to receive payments that
depend primarily on the cash flow from a specified pool of (i) financial assets, either static or revolving, that by their
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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 (ii) real estate mortgages, either static 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 clause (ii), such Asset-Backed Securities do not entitle the
holders 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 (other than Recreational Vehicle 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 prime installment
sale loans made to finance the acquisition of, or from leases of, automobiles, 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 lessees 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 vehicle; and (5) 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 Asset-Backed Securities 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 the United States or under the
law of any Qualifying Country 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 (1) 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), (2) provides that payment thereunder is independent
of the performance by the obligor on the relevant Asset-Backed Security and (3) 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 AssetBacked Security falling within this definition shall be excluded from the definition of each other type of AssetBacked Security.
Bank Trust Preferred CDO Securities means CDO 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 CDO Securities) on the cash flow from a pool of trust preferred securities issued by a
wholly-owned trust subsidiary of a financial institution which uses the proceeds of such issuance to purchase a
portfolio of debt securities issued by its parent.
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: (1) the leases and subleases have varying contractual maturities; (2) the subleases are
obligations of numerous franchisees and accordingly represent a very diversified 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 or third
party of the underlying vehicle; and (4) 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, contingent upon amounts being available for such payments
following payments by the related issuer to a counterparty that are predicated on the occurrence of specified natural
events generally having the following characteristics: (1) 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,
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earthquakes and other events; and (2) payments on such Asset-Backed Security depend primarily upon the
occurrence and/or severity of such events.
CDO of CDO Securities means CDO 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
CDO Securities) primarily on the market value of, credit exposure to, or cash flow from, a portfolio of securities or
other obligations with respect to which the aggregate principal balance of other CDO Securities permitted to be
included therein under the terms thereof is greater than 35% of the aggregate principal balance of such portfolio. For
the avoidance of doubt, CDO of CDO Securities includes Synthetic CDO of 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) primarily on the cash flow from a portfolio of commercial and industrial bank loans, other
asset-backed securities or corporate debt securities or any combination of the foregoing, or credit default swaps or
total return swaps which reference such loans or securities (or the obligors thereon) generally having the following
characteristics: (1) the bank loans and debt securities have varying contractual maturities; (2) repayment thereof can
vary substantially from the contractual payment schedule (if any), with early prepayment of individual bank loans or
debt 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; and (3) proceeds from such repayments can for a limited period and subject to compliance with certain
eligibility criteria be reinvested in additional bank loans and/or debt securities.
CDO Security means a High-Diversity CDO Security or a Low-Diversity CDO Security. A CDO Security includes,
without limitation, ABS CDO Securities, Corporate CDO Securities, CDO of CDO Securities, CLO Securities, High
Yield CDO Securities, Investment Grade CDO Securities, Synthetic ABS CDO Securities and Trust Preferred CDO
Securities.
CFO Security means a Market Value CDO Security whose underlying assets are predominantly investments in
hedge fund shares.
Chassis Leasing Securities means Asset-Backed Securities (other than Aircraft Leasing 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.
CLO of Distressed Debt means collateralized bond obligations the underlying collateral of which is distressed debt.
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 credit exposure to, or cash flow from, a portfolio of collateral consisting of commercial loans.
CMBS Conduit Securities means Asset-Backed Securities (i) (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-Backed Securities) on the cash flow from a pool of commercial
mortgage loans generally having the following characteristics: (1) the commercial mortgage loans have varying
contractual maturities; (2) 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); (3) 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 and Credit Tenant Lease Securities) and
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accordingly represent a relatively undiversified pool of obligor credit risk; (4) upon original issuance of such AssetBacked Securities no 10 commercial mortgage loans account for more than 75% of the aggregate principal balance
of the entire pool of commercial mortgage loans supporting payments on such securities and such pool contains at
least 50 such loans; and (5) 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 or (ii) backed by a pool of securities consisting of securities described in (i) above.
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: (1) the commercial mortgage loans or leases have
varying contractual maturities; (2) 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); (3) the
leases are secured by leasehold interests; (4) 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; (5)
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 (6) the creditworthiness of such corporate tenants is the primary factor in any decision to invest in
these securities.
CMBS Large Loan Securities means Asset-Backed Securities (other than CMBS Conduit Securities, CMBS Credit
Tenant Lease Securities and CMBS Single Property 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. They generally have the following characteristics: (1)
the commercial mortgage loans have varying contractual maturities; (2) 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); (3) the commercial mortgage loans are obligations of a relatively limited number of obligors
and accordingly represent a relatively undiversified pool of obligor credit risk; (4) 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; and (5) the valuation of individual
properties securing the commercial mortgage loans is the primary factor in any decision to invest in these securities.
CMBS Securities means 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 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: (1) the commercial mortgage loans have varying contractual maturities; (2) 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); (3) 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; and (4) 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.
Commercial ABS Securities means Chassis Leasing Securities, Container Leasing Securities, Natural Resource
Receivable ABS Securities, Equipment Leasing Securities, Floorplan Receivable Securities, and Shipping
Securities.
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Consumer ABS Securities means Automobile Securities, Car Rental Receivable Securities, Credit Card Securities,
Healthcare Securities, Recreational Vehicle Securities, Student Loan Securities, Subprime Automobile Securities,
and Subprime Credit Card Securities.
Container Leasing Securities means Asset-Backed Securities (other than Aircraft Leasing 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.
Corporate CDO Security means any CDO Security that entitles the holder 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 market value of, credit exposure to, or cash flow from, a portfolio of securities or other
obligations with respect to which the aggregate principal balance of corporate debt obligations, other Corporate
CDO Securities, or any combination of the foregoing (achieved either via cash or synthetically), permitted to be
included therein under the terms thereof is greater than 80% of the aggregate principal balance of such portfolio.
Corporate Debt Security means any outstanding debt security, whether secured or unsecured, that on the date of
Acquisition thereof by the Issuer, (i) if subordinated by its terms, is subordinated only to indebtedness for borrowed
money, trade claims, capitalized leases or other similar obligations, (ii) is publicly issued or privately placed, (iii) is
issued by an issuer incorporated or organized under the laws of the United States or any state thereof or by a
Qualifying Foreign Obligor and (iv) is not a CDO Security or Asset-Backed Security.
Corporate 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 thereof, is unconditionally guaranteed by a
corporation organized in a Qualifying Country pursuant to a corporate guarantee or other similar instrument, but
only if such guarantee or instrument (a) expires no earlier than such stated or actual legal maturity, (b) provides that
payment thereunder is independent of the performance by the obligor on such Asset-Backed Security and (c) is
issued by an issuer having a credit rating assigned by each nationally recognized statistical rating organization that
currently rates such Asset-Backed Security higher than the rating assigned to such Asset-Backed Security
determined without giving effect to such corporate guarantee or similar instrument.
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 prime revolving consumer
or corporate credit card accounts, generally having the following characteristics: (1) the accounts have standardized
payment terms and require minimum monthly payments; (2) the balances are obligations of numerous borrowers and
accordingly represent a very diversified pool of obligor credit risk; and (3) 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.
DIP Portfolio Investment means a loan made to a debtor-in-possession pursuant to Section 364 of the U.S.
Bankruptcy Code having the priority allowed by either Section 364(c) or 364(d) of the U.S. Bankruptcy Code and
secured by senior liens.
Emerging Markets CDO Securities means CDO Securities that permit more than 30% of the assets in the reference
pool to be issued by obligors in Emerging Market Countries.
Equipment Leasing Securities means Asset-Backed Securities (other than Aircraft Leasing Securities, Healthcare
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
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automobiles, trucks or buses) 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 equipment; and (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.
FHLMC/FNMA 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 fully and unconditionally
guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association but only
if such guarantee (x) expires no earlier than such stated maturity and (y) is independent of the performance by the
obligor on the relevant Asset-Backed Security; provided that any Asset-Backed Security falling within this
definition shall be excluded from the definition of each other type of Asset-Backed Security.
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 lightduty 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 (1) Oil and Gas Securities and (2) Restaurant and Food Services Securities, to the
extent that such Oil and Gas Securities or Restaurant and Food Services Securities 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 securities) 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,
franchise royalties, structured litigation settlements or ticket receivables.
Guaranteed Asset-Backed Security means an Insurance Company Guaranteed Security, a Bank Guaranteed Security
or any security the rating of which is based upon an unconditional and irrevocable guarantee as to ultimate or timely
payment of principal or interest.
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 (i) leases and subleases of equipment to hospitals,
non-hospital medical facilities, physicians and physician groups for use in the provision of healthcare services or (ii)
Medicare, Medicaid or any other third-party payor receivables related to medical, hospital or other health care
related expenses, charges or fees.
High-Diversity 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 of commercial and industrial loans, assetbacked securities (including collateralized debt obligations), trust preferred and similar securities or corporate debt
securities (or any combination of the foregoing), or from one or more credit default swaps which reference such
securities or loans and/or the obligors thereon, generally having the following characteristics: (1) such loans and
securities have varying contractual maturities; (2) such loans and securities are obligations of issuers that represent a
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relatively diversified pool of credit risk having a Moody's diversity score higher than 20 or a Moody's Asset
Correlation of less than 15%; (3) repayment thereof can vary substantially from the contractual payment schedule (if
any), with early prepayment of individual loans or 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; and (4) in some cases, proceeds from such repayments
can for a limited period and subject to compliance with certain eligibility criteria be reinvested in additional loans,
asset-backed securities and/or corporate debt securities.
High Yield Bond means a debt security which, on acquisition by the Issuer, is either rated below investment grade
by at least one internationally recognized credit rating agency (provided that, if such debt security is, at any time
following acquisition by the Issuer, no longer rated by at least one internationally recognized rating agency as below
investment grade it will not, as a result of such change in rating, fall outside this definition) or which is a high
yielding debt security, in each case as determined by the Investment Manager, excluding any debt security which is
secured directly on, or represents the ownership of a pool of consumer receivables, auto loans, auto leases,
equipment leases, home or commercial mortgages, corporate debt or sovereign debt obligations or similar assets,
including, without limitation, collateralized bond obligations, collateralized loan obligations or any similar security.
High-Yield CDO Securities means CDO Securities (other than CLO Securities) which entitle the holders thereof to
receive payments that depend primarily on the cash flow from a portfolio of corporate bond securities and/or
leverage loans that are obligations of issuers rated below investment grade.
Hybrid Securities means any Portfolio Investments (including, without limitation, any Asset-Backed Securities the
payments on which depend on the cash flow from adjustable-rate mortgages) that, pursuant to their Underlying
Instruments, pass through to the holders thereof all interest proceeds received in respect of the underlying collateral
with respect to such Portfolio Investments, which underlying collateral may consist of assets that bear interest at a
fixed rate for a limited period of time (generally greater than 12 months at the time of issuance of the security on a
weighted average basis), after which such assets bear interest based upon a floating rate index for obligations in such
Eligible Currency commonly used as a reference rate in the related country.
Hybrid Trust Preferred CDO Securities means CDO Securities that entitle the holders thereof to receive payments
that depend primarily (except for rights or other assets designed to assure the servicing and timely distribution of
proceeds to the holders of the securities) on the cash flow from a pool of trust preferred securities issued by whollyowned trust subsidiaries of insurance holding companies and U.S. financial institutions, which use the proceeds of
such issuance to purchase portfolios of debt securities issued by their parent, and capital notes issued by an
insurance company or insurance holding company.
Insurance Company 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
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
(i) expires no earlier than such stated maturity, (ii) provides that payment thereunder is independent of the
performance by the obligor on the relevant Asset-Backed Security and (iii) 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 or (b) in
the judgment of the Investment Manager (exercised in accordance with the standard of care set forth in the
Management Agreement), dependent upon an insurance policy, guarantee or other similar instrument issued by an
insurance company organized under the laws of a state of the United States, provided that any Asset-Backed
Security falling within this definition shall be excluded from the definition of each other type of Asset-Backed
Security.
Insurance Receivables Securities means Asset-Backed Securities that entitle the holders thereof to receive
payments that depend on the future cash flows from commissions, servicing receivables, reinsurance receivables and
all other revenue that arise from the sale of life insurance policies or other insurance products.
Insurance Trust Preferred CDO Securities means CDO 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 CDO Securities) primarily on credit exposure to or cash flow from a pool of trust
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preferred securities issued by insurance companies or by wholly-owned trust subsidiaries of insurance holding
companies which use the proceeds of such issuance to purchase a portfolio of debt securities issued by its parent.
Interest Only Security means any Portfolio Investment that does not provide for payment or repayment of a stated
principal amount in one or more installments on or prior to the date two Business Days prior to the applicable
Maturity Date of the Notes.
Investment Grade CDO Securities means CDO Securities with respect to which at least 80% of the assets in the
underlying pool are corporate bonds and/or leveraged loans rated "Baa3" or higher by Moody's and "BBB-" or
higher by Standard & Poor's (in each case, if rated by such rating agency). For the avoidance of doubt, Investment
Grade CDO Securities do not include Synthetic ABS CDO Securities.
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 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 of asset-backed securities (including
collateralized debt obligations), commercial and industrial loans, trust preferred and similar securities or corporate
debt securities (or any combination of the foregoing), or from one or more credit default swaps which reference such
securities or loans and/or the obligors thereon, generally having the following characteristics: (1) the loans and
securities have varying contractual maturities; (2) the loans and securities are obligations of a pool of obligors or
issuers that represent a relatively undiversified pool of credit risk having a Moody's diversity score of 20 or lower or
a Moody's Asset Correlation of 15% or more; (3) repayment thereof can vary substantially from the contractual
payment schedule (if any), with early prepayment of individual securities and loans depending on numerous factors
specific to the particular issuers and upon whether, in the case of loans or debt securities bearing interest at a fixed
rate, such loans or securities include an effective prepayment premium; and (4) in some cases, proceeds from such
repayments can for a limited period and subject to compliance with certain eligibility criteria be reinvested in
additional loans and/or debt securities.
Manufactured Housing 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 manufactured housing (also known as
mobile homes and prefabricated homes) installment sales contracts and installment loan agreements, generally
having the following characteristics: (1) the contracts and loan agreements have varying, but typically lengthy,
contractual maturities; (2) 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; (3) the contracts and/or loans are obligations of a large number of obligors and accordingly
represent a relatively diversified pool of obligor credit risk; (4) 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 (5) in some cases, obligations are fully or partially guaranteed by a
governmental agency or instrumentality.
Market Value CDO Security means a CDO Security whose overcollateralization is measured by reference to the
market value of the Underlying Portfolio securing such CDO Security.
Mezzanine Obligation means a second secured mezzanine loan obligation, second lien loan or other comparable
debt obligation, including any such loan obligation with attached warrants or other options to acquire a share or
other equity interest and whether cash pay or non cash pay and any such obligation which is evidenced by an issue
of notes or similar instruments, (other than notes which are High Yield Bonds), as determined by the Investment
Manager in its reasonable business judgment, or a Participation therein.
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Mutual Fund Fees 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: (1) the brokerage arrangements have standardized
payment terms and require minimum payments; (2) the brokerage fees and costs arise out of numerous mutual funds
and accordingly represent a very diversified pool of credit risk; and (3) 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.
Natural Resource Receivable ABS 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.
Negative Amortization Security means an RMBS Security which (a) permits the related mortgage loan or mortgage
loan obligor for a specified period of time to make no repayments of principal and payments of interest in amounts
that are less than the interest payments that would otherwise be payable thereon based upon the stated rate of interest
thereon, (b) to the extent that interest proceeds received in respect of the related underlying collateral are insufficient
to pay interest that is due and payable thereon, permits principal proceeds received in respect of the related
underlying collateral to be applied to pay such interest shortfall and (c) to the extent that the aggregate amount of
interest proceeds and principal proceeds received in respect of the related underlying collateral are insufficient to
pay interest that is due and payable thereon, permits such unpaid interest to be capitalized as principal and itself
commence accruing interest at the applicable interest rate, in each case pursuant to the related Underlying
Instruments.
NIM Securities means Asset-Backed Securities that entitle the holder to receive payments that depend (except for
the rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the AssetBacked Securities) on the cash flow from interest spreads from mortgage securitizations.
Non-performing Loans means Asset-Backed Securities that entitle the holder to receive payments that depend
(except for the 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 financial assets or real estate mortgages that are not
contractually current and for which the reimbursement by the obligors of such assets or mortgages is unlikely.
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 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: (1) the loans, leases or subleases have varying contractual maturities; (2) 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); (3) 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; (4) 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; (5)
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; (6) 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; (7) 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 (8) 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.
Other Real Estate Securities means Real Estate CDO Securities.
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Prime Residential Mortgage Securities or Residential A Mortgage Securities means Asset-Backed Securities
(other than Subprime Residential Mortgage 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 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: (1) if originated in the
United States, 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); (2)
the mortgage loans have standardized payment terms and require minimum monthly payments; (3) the mortgage
loans are obligations of numerous borrowers and accordingly represent a very diversified pool of obligor credit risk;
and (4) 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.
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 (1) 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 (2) 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).
Real Estate CDO Securities means CDO Securities 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) primarily on the credit exposure to, or cash flow from, a portfolio consisting of real estate
obligations.
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: (1) proceeds from the security are invested in a collateral
account; (2) such collateral account is subject to claims from the reinsurance policies; and (3) the repayment of
principal on the security is dependent on the exercise of the reinsurance policies.
REIT Debt Securities means REIT Debt Securities—Diversified, REIT Debt Securities—Health Care, REIT Debt
Securities—Hotel, REIT Debt Securities—Industrial, REIT Debt Securities—Mortgage, REIT Debt Securities—
Multi-Family, REIT Debt Securities—Office, REIT Debt Securities—Residential, REIT Debt Securities—Retail
and REIT Debt Securities—Storage.
REIT Debt Securities-Diversified means Asset-Backed Securities issued by a real estate investment trust (as defined
in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of
mortgages on a portfolio of diverse real property interests; provided that (a) any Asset-Backed Security falling
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within this definition shall be excluded from the definition of each other type of Asset-Backed Security and (b) any
Asset-Backed Security falling within any other ABS REIT Debt Security description set forth herein shall be
excluded from this definition.
REIT Debt Securities-Health Care means Asset-Backed Securities issued by a real estate investment trust (as
defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed 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 Asset-Backed Security falling within this
definition shall be excluded from the definition of each other type of Asset-Backed Security.
REIT Debt Securities-Hotel means Asset-Backed Securities issued by a real estate investment trust (as defined in
Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed
to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of mortgages on
hotels, motels, youth hostels, bed and breakfasts and other similar real property interests used in one or more similar
businesses; provided that any Asset-Backed Security falling within this definition shall be excluded from the
definition of each other type of Asset-Backed Security.
REIT Debt Securities-Industrial means Asset-Backed Securities issued by a real estate investment trust (as defined
in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of
mortgages on factories, refinery plants, breweries and other similar real property interests used in one or more
similar businesses; provided that any Asset-Backed Security falling within this definition shall be excluded from the
definition of each other type of Asset-Backed Security.
REIT Debt Securities–Mortgage means Asset-Backed Securities issued by a real estate investment trust (as defined
in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of
mortgages, commercial mortgage-backed securities, collateralized mortgage obligations and other similar mortgagerelated securities (including Asset-Backed Securities issued by a hybrid form of such trust that invests in both
commercial real estate and commercial mortgages); provided that any Asset-Backed Security falling within this
definition shall be excluded from the definition of each other type of Asset-Backed Security.
REIT Debt Securities-Multi-Family means Asset-Backed Securities issued by a real estate investment trust (as
defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of
residential mortgages on multi-family dwellings such as apartment blocks, condominiums and co operative owned
buildings; provided that any Asset-Backed Security falling within this definition shall be excluded from the
definition of each other type of Asset-Backed Security.
REIT Debt Securities-Office means Asset-Backed Securities issued by a real estate investment trust (as defined in
Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed
to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of mortgages on
office buildings, conference facilities and other similar real property interests used in the commercial real estate
business; provided that any Asset-Backed Security falling within this definition shall be excluded from the definition
of each other type of Asset-Backed Security.
REIT Debt Securities-Residential means Asset-Backed Securities issued by a real estate investment trust (as
defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of
residential mortgages (other than multi-family dwellings) and other similar real property interests; provided that any
Asset-Backed Security falling within this definition shall be excluded from the definition of each other type of
Asset-Backed Security.
REIT Debt Securities-Retail means Asset-Backed Securities issued by a real estate investment trust (as defined in
Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed
to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of mortgages on
retail stores, restaurants, bookstores, clothing stores and other similar real property interests used in one or more
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similar businesses; provided that any Asset-Backed Security falling within this definition shall be excluded from the
definition of each other type of Asset-Backed Security.
REIT Debt Securities-Storage means Asset-Backed Securities issued by a real estate investment trust (as defined in
Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed
to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) of mortgages on
storage facilities and other similar real property interests used in one or more similar businesses; provided that any
Asset-Backed Security falling within this definition shall be excluded from the definition of each other type of
Asset-Backed Security.
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: (1) the loans, leases or subleases have varying contractual maturities;
(2) 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); (3) 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; (4) 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; (5) 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; (6) 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; (7) 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 (8) 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.
RMBS CDO Securities means (i) any CDO 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 CDO Securities) primarily on the credit exposure to, or cash flow from, a portfolio consisting of
RMBS Securities, and (ii) any securities issued by an investment vehicle whose assets (or substantially all of its
assets) consist of CDO Securities meeting the requirements set forth in clause (i) above.
Second Lien RMBS or 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 secured by 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: (1) the balances have standardized
payment terms and require minimum monthly payments; (2) the balances are obligations of numerous borrowers and
accordingly represent a diversified pool of obligor credit risk; (3) early repayment depends primarily on interest
rates, availability of credit against a maximum line of credit and general economic matters; and (4) 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.
Shipping Securities means Asset-Backed Securities that entitle 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 cashflows from ship financing and shipping industry related loans.
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 to "small business
concerns" (if originated in the United State, generally within the meaning given to such term by regulations of the
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United States Small Business Administration) and in the case of such loans originated in the United States, including
but not limited to those (a) made pursuant to Section 7(a) of the United States Small Business Act, as amended, and
(b) not guaranteed or partially guaranteed by the United States Small Business Administration. Small Business Loan
Securities generally have the following characteristics: (1) the case of such loans originated in the United States, the
loans have payment terms that comply with any applicable requirements of the Small Business Act, as amended; (2)
the loans are obligations of a relatively limited number of borrowers and accordingly represent an undiversified pool
of obligor credit risk; and (3) 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.
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: (1) the loans have standardized terms; (2) the
loans are obligations of numerous borrowers and accordingly represent a very diversified pool of obligor credit risk;
(3) 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 (4) if originated in the United States, such loans may be fully or partially
insured or reinsured by the United States Department of Education.
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 subprime installment sale loans made to finance the
acquisition of, or from leases of, automobiles, 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 lessors under the loans
or leases 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 vehicle; and (5) 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.
Subprime 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 subprime revolving
consumer or corporate credit card or charge card accounts (other than subprime credit card or charge card accounts),
generally having the following characteristics: (1) the accounts have standardized payment terms and require
minimum monthly payments; (2) the balances are obligations of numerous borrowers that generally have a poor
credit rating and accordingly represent a diversified pool of obligor credit risk; and (3) 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, individual choice and general economic matters.
Subprime Residential Mortgage Securities or Residential B/C Mortgages 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
subprime residential mortgage loans secured 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: (1) if originated in the United
States, 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); (2) the
mortgage loans have standardized payment terms and require minimum monthly payments of interest and minimum
monthly payments of principal each month; (3) the mortgage loans are obligations of numerous borrowers and
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accordingly represent a very diversified pool of obligor credit risk; and (4) 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.
Synthetic ABS CDO Securities means any CDO Obligation 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 Asset-Backed Securities) on the market value of and cash flow from underlying assets of which greater
than 50% of the aggregate principal balance (or notional balance) consists of one or more credit default swaps that
reference in the aggregate a portfolio of Reference Obligations (based upon the aggregate notional amount or
"Floating Rate Payer Calculation Amount" of such credit default swaps as such term is used in the underlying credit
default swaps); provided that (i) the characteristics of such portfolio of Reference Obligations including, without
limitation, its portfolio characteristics, investment and reinvestment criteria, and credit profile (e.g., probability of
default, recovery upon default and expected loss characteristics) shall be those normally associated with the current
market practice for CDO Obligations; and (ii) the issuer secures the issuer's obligations under such credit default
swap(s) by holding eligible investments the characteristics of which are substantially similar to (or more
conservative than) the investments described in the definition of "Eligible Investments" or "Synthetic Security
Collateral" including the type, quality and tenor of such investments or other investments permitted by the related
indenture or other similar document of the issuer that are market standard for Synthetic ABS CDO Securities.
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 individuals to state
and municipal governmental taxing authorities, generally having the following characteristics: (1) the obligations
have standardized payment terms and require minimum payments; (2) the tax obligations are obligations of
numerous borrowers and accordingly represent a very diversified pool of obligor credit risk; and (3) 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 Prime Residential Mortgage Securities, Subprime
Residential Mortgage Securities and Second Lien RMBS) that entitle the holders thereof to receive payments that
depend primarily 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 the proceeds of which were used to
purchase fee simple interests in timeshare estates in units in a condominium, generally having the following
characteristics: (1) the mortgage loans have standardized payment terms and require minimum monthly payments;
(2) the mortgage loans are obligations of numerous borrowers and accordingly represent a diversified pool of
obligor credit risk; (3) 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 (4) 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 Litigation 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 lawyer fee awards and state awards as a result of the
settlement of litigation between the states and certain tobacco companies.
Trust Preferred CDO Securities means any Bank Trust Preferred CDO Securities, Hybrid Trust Preferred CDO
Securities, Insurance Trust Preferred CDO Securities or REIT Trust Preferred Securities.
U.S. Agency 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 (a) fully and unconditionally
guaranteed by a U.S. Federal agency the obligations of which are backed by the full faith and credit of the United
States, but only if such guarantee (x) expires no earlier than such stated maturity and (y) is independent of the
performance by the obligor on the relevant Asset-Backed Security or (b) in the judgment of the Investment Manager
(exercised in accordance with the standard of care set forth in the Management Agreement), dependent upon the
B-140
credit of a U.S. Federal agency backed by the full faith and credit of the United States; provided that any AssetBacked Security falling within this definition shall be excluded from the definition of each other type of AssetBacked Security.
B-141
SCHEDULE A
Part I
Moody's Recovery Rate Matrix
A. ABS Type Diversified Securities
Percentage of Total
Capitalization
Moody's Rating*
Aaa
Aa
A
Baa
Ba
B
Greater than 70%
85%
80%
70%
60%
50%
40%
Less than or equal
to 70%, but greater
than 10%
75%
70%
60%
50%
40%
30%
Less than or equal
to 10%
70%
65%
55%
45%
35%
25%
B. ABS Type Residential Securities
Percentage of Total
Capitalization
Moody's Rating*
Aaa
Aa
A
Baa
Ba
B
Greater than 70%
85%
80%
65%
55%
45%
30%
Less than or equal
to 70%, but greater
than 10%
75%
70%
55%
45%
35%
25%
Less than or equal
to 10%, but greater
than 5%
65%
55%
45%
40%
30%
20%
Less than or equal
to 5%, but greater
than 2%
55%
45%
40%
35%
25%
15%
Less than or equal
to 2%
45%
35%
30%
25%
15%
10%
B-S-A-1
C. ABS Type Undiversified Securities
Percentage of Total
Capitalization
Moody's Rating*
Aaa
Aa
A
Baa
Ba
B
Greater than 70%
85%
80%
65%
55%
45%
30%
Less than or equal
to 70%, but greater
than 10%
75%
70%
55%
45%
35%
25%
Less than or equal
to 10%, but greater
than 5%
65%
55%
45%
35%
25%
15%
Less than or equal
to 5%, but greater
than 2%
55%
45%
35%
30%
20%
10%
Less than or equal
to 2%
45%
35%
25%
20%
10%
5%
D. Low-Diversity CDO Securities and CDO Obligations with a Moody's Asset Correlation of 15% or
more
Moody's Rating*
Percentage of Total
Capitalization
Aaa
Aa
A
Baa
Ba
B
Greater than 70%
80%
75%
60%
50%
45%
30%
Less than or equal
to 70%, but greater
than 10%
70%
60%
55%
45%
35%
25%
Less than or equal
to 10%, but greater
than 5%
60%
50%
45%
35%
25%
15%
Less than or equal
to 5%, but greater
than 2%
50%
40%
35%
30%
20%
10%
Less than or equal
to 2%
30%
25%
20%
15%
7%
6%
B-S-A-2
E. High-Diversity CDO Securities and CDO Obligations with a Moody's Asset Correlation less than
15%
Percentage of Total
Capitalization
Moody's Rating*
Aaa
Aa
A
Baa
Ba
B
Greater than 70%
85%
80%
65%
55%
45%
30%
Less than or equal
to 70%, but greater
than 10%
75%
70%
60%
50%
40%
25%
Less than or equal
to 10%, but greater
than 5%
65%
55%
50%
40%
30%
20%
Less than or equal
to 5%, but greater
than 2%
55%
45%
40%
35%
25%
10%
Less than or equal
to 2%
45%
35%
30%
25%
10%
5%
*The rating assigned by Moody's on the date of issuance for such Portfolio Investment.
B-S-A-3
Part II
Standard & Poor's Recovery Rate Matrix
A.
If the Portfolio Investment (other than a Synthetic Security, a CMBS Security, an ABS
REIT Debt Security, a Project Finance Security, a future flow security, a market value CDO
Obligation, a Form-Approved Synthetic Security or a Corporate Guaranteed Security) is the
senior-most tranche of securities issued by the issuer of such Portfolio Investment the
recovery rate is as follows:*
Standard & Poor's
Rating of Portfolio
Investment
B.
Recovery Rate by Ratings of Notes
AAA
AA
A
BBB
BB
B
CCC
"AAA"
80.0%
85.0%
90.0%
90.0%
90.0%
90.0%
90.0%
"AA-," "AA" or "AA+"
70.0%
75.0%
85.0%
90.0%
90.0%
90.0%
90.0%
"A-," "A" or "A+"
60.0%
65.0%
75.0%
85.0%
90.0%
90.0%
90.0%
"BBB-," "BBB" or
"BBB+"
50.0%
55.0%
65.0%
75.0%
85.0%
85.0%
85.0%
If the Portfolio Investment (other than a Synthetic Security, a CMBS Security, an ABS
REIT Debt Security, a Project Finance Security, a future flow security, a market value CDO
Obligation, a Form-Approved Synthetic Security or a Corporate Guaranteed Security) is not
the senior-most tranche of securities issued by the issuer of such Portfolio Investment the
recovery rate is as follows:*
Standard
&
Poor's
Rating
of
Portfolio
Investment
Recovery Rate by Ratings of Notes
AAA
AA
A
BBB
BB
B
CCC
"AAA"
65.0%
70.0%
80.0%
85.0%
85.0%
85.0%
85.0%
"AA-," "AA" or "AA+"
55.0%
65.0%
75.0%
80.0%
80.0%
80.0%
80.0%
"A-," "A" or "A+"
40.0%
45.0%
55.0%
65.0%
80.0%
80.0%
80.0%
"BBB-," "BBB" or
"BBB+"
30.0%
35.0%
40.0%
45.0%
50.0%
60.0%
70.0%
"BB-," "BB" or "BB+"
10.0%
10.0%
10.0%
25.0%
35.0%
40.0%
50.0%
"B-," "B" or "B+"
2.5%
5.0%
5.0%
10.0%
10.0%
20.0%
25.0%
"CCC+" and below
0.0%
0.0%
0.0%
0.0%
2.5%
5.0%
5.0%
B-S-A-4
C.
If the Portfolio Investment is a CMBS, the recovery rate is as follows:*
Standard & Poor's
Rating of Collateral Debt
Security
Recovery Rate by Rating of Notes
AAA
AA
A
BBB
BB
B
CCC
"AAA"
80.0%
85.0%
90.0%
90.0%
90.0%
90.0%
90.0%
"AA-," "AA" or "AA+"
70.0%
75.0%
85.0%
90.0%
90.0%
90.0%
90.0%
"A-," "A" or "A+"
60.0%
65.0%
75.0%
85.0%
90.0%
90.0%
90.0%
"BBB-," "BBB" or "BBB+"
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
"BB-," "BB" or "BB+"
35.0%
40.0%
45.0%
45.0%
50.0%
50.0%
50.0%
"B-," "B" or "B+"
20.0%
25.0%
30.0%
35.0%
35.0%
40.0%
40.0%
"CCC+" and below
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
NR
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
D.
If the Portfolio Investment is a Project Finance Security, a future flow security, a Market
Value CDO Security or a Synthetic Security (other than a Form-Approved Synthetic
Security), the recovery rate will be assigned by Standard & Poor's upon the acquisition of
such Security by the Issuer. A Form-Approved Synthetic Security that is a Single Obligation
Synthetic Security will have the recovery rate applicable to the related Reference Obligation,
except in the case of an Asset―Backed Security, 50% of the recovery rate applicable to the
related Reference Obligation.
E.
If the Portfolio Investment (other than a Corporate Guaranteed Security) is an ABS REIT
Debt Security, the recovery rate for senior debt will be 40% and, for subordinated debt,
assigned by Standard & Poor's upon the acquisition of such security by the Issuer.
*If the Portfolio Investment is a Corporate Guaranteed Security, the recovery rate will be
(a) if such Corporate Guaranteed Security is secured and not by its terms subordinate in right of
payment, 47.5%, (b) if such Corporate Guaranteed Security is not secured and is not by its terms
subordinate in right of payment, 37% and (c) otherwise, 21.5%.
B-S-A-5
SCHEDULE B
STANDARD & POOR'S ASSET CLASSES
Part A
1. Consumer ABS
Automobile Loan Receivable Securities
Automobile Lease Receivable Securities
Car Rental Receivable Securities
Credit Card Securities
Healthcare Securities
Student Loan Securities
2. Commercial ABS
Cargo Securities
Equipment Leasing Securities
Aircraft Leasing Securities
Small Business Loan Securities
Restaurant and Food Services Securities
Tobacco Litigation Securities
3. Non-RE-REMIC RMBS
Manufactured Housing Loan Securities
4. Non-RE-REMIC CMBS
CMBS – Conduit
CMBS – Credit Tenant Lease
CMBS – Large Loan
CMBS – Single Borrower
CMBS – Single Property
5. CBO/CLO Cashflow Securities
Cash Flow CBO – at least 80% High Yield Corporate
Cash Flow CBO – at least 80% Investment Grade Corporate
Cash Flow CLO – at least 80% High Yield Corporate
Cash Flow CLO – at least 80% Investment Grade Corporate
B-S-B-1
6. REITs
REIT – Multifamily & Mobile Home Park
REIT – Retail
REIT – Hospitality
REIT – Office
REIT – Industrial
REIT – Healthcare
REIT – Warehouse
REIT – Self Storage
REIT – Mixed Use
7. Real Estate Operating Companies
Part B
Residential Mortgages
Residential "A"
Residential "B/C"
Home equity loans
Part C
Specialty Structured
Stadium Financings
Project Finance
Future flows
B-S-B-2
SCHEDULE C
STANDARD & POOR'S TYPES OF ASSET-BACKED SECURITIES INELIGIBLE FOR
NOTCHING
The following types of Asset-Backed Securities are not eligible to be notched in accordance with Schedule
D unless otherwise agreed to by Standard & Poor's. Accordingly, the Standard & Poor's Rating of such
Asset-Backed Securities must be determined pursuant to clause (i) or (ii) of paragraph (b) of the definition
of "Rating" in the Terms and Conditions of the Notes of the Indenture. This Schedule may be modified
from time to time by Standard & Poor's and its applicability should be confirmed with Standard & Poor's
prior to use.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Non-U.S. Structured Finance Securities
Guaranteed Securities
CDOs of Structured Finance and Real Estate Securities
CBOs of CDOs
CLOs of Distressed Debt
Mutual Fund Fee Securities
Catastrophe Bonds
First Loss Tranches of any Securitization
Synthetics other than Form-Approved Synthetic Securities
Synthetic CBOs
Combination securities
Re-REMICs
Market Value CDOs
Net Interest Margin Securities (NIMs)
Cash Flow CDOs
Any asset class not listed on Schedule D
B-S-C-1
SCHEDULE D
STANDARD & POOR'S NOTCHING OF ASSET-BACKED SECURITIES
The Standard & Poor's Rating of an Portfolio Investment that is not of a type specified on Schedule D and
that has not been assigned a rating by Standard & Poor's may be determined as set forth below.
A.
If such Portfolio Investment is rated by Moody's, the Standard & Poor's Rating of such
Portfolio Investment shall be the Standard & Poor's equivalent of the rating that is the number of
subcategories specified in Table A below the rating assigned by Moody's.
B.
If the Portfolio Investment is rated by Moody's, the Standard & Poor's Rating of such
Portfolio Investment shall be the Standard & Poor's equivalent of the rating that is one subcategory
below the rating that is the number of subcategories specified in Table A below the rating assigned
by Moody's.
This Schedule may be modified from time to time by Standard & Poor's and its applicability should be
confirmed with Standard & Poor's prior to use.
TABLE A
1. Consumer ABS
Automobile Loan Receivable Securities
Automobile Lease Receivable Securities
Car Rental Receivable Securities
Credit Card Securities
Healthcare Securities
Student Loan Securities
2. Commercial ABS
Cargo Securities
Equipment Leasing Securities
Aircraft Leasing Securities
Small Business Loan Securities
Restaurant and Food Services Securities
Tobacco Litigation Securities
3. Non-Re-REMIC RMBS
Manufactured Housing Loan Securities
4. Non-Re-REMIC CMBS
CMBS – Conduit
CMBS - Credit Tenant Lease
CMBS – Large Loan
CMBS – Single Borrower
Asset-Backed Securities
issued prior to August 1,
2001
Asset-Backed Securities
issued on or after
August 1, 2001
(Lowest)
current rating is:
(Lowest)
current rating is:
"BBB-" or
"BBB-" or its
Below
Below "BBB-"
its
equivalent or "BBB-" or its equivalent
or its
higher
equivalent
equivalent
or higher
-1
-2
-2
-3
-1
-2
-2
-3
-1
-2
-2
-3
-1
-2
-2
-3
B-S-D-1
Asset-Backed Securities
issued prior to August 1,
2001
Asset-Backed Securities
issued on or after
August 1, 2001
(Lowest)
current rating is:
(Lowest)
current rating is:
"BBB-" or
"BBB-" or its
Below
Below "BBB-"
its
equivalent or "BBB-" or its equivalent
or its
higher
equivalent
or higher
equivalent
CMBS – Single Property
5. REITs
REIT – Multifamily & Mobile Home Park
REIT – Retail
REIT – Hospitality
REIT – Office
REIT – Industrial
REIT – Healthcare
REIT – Warehouse
REIT – Self Storage
REIT – Mixed Use
6. Specialty Structured
Stadium Financings
Project Finance
Future flows
7. Residential Mortgages
Residential "A"
Residential "B/C"
Home equity loans
8. Real Estate Operating Companies
-1
-2
-2
-3
-3
-4
-3
-4
-1
-2
-2
-3
-1
-2
-2
-3
With respect to any Portfolio Investment that is in the reasonable opinion of the Investment Manager
primarily backed by European assets, the following notching provisions apply (provided that if the
Portfolio Investment is rated by only one rating agency, such Portfolio Investment shall be notched down in
accordance with the following table and then further notched down one more S&P rating sub-category).:
(A) with respect to any Portfolio Investments which are in the following asset classes and are publicly rated
by either Moody's or Fitch:
ASSET CLASS
Lower of Public
Rating by Moody's or
Fitch AAA to BBB/Baa3
Lower of Public
Rating by Moody's
or Fitch below BBB/Baa3
Auto-Prime
1
2
Consumer Loans
1
2
Credit Card
1
2
Leases other than Italian Leases
1
2
Italian Leases
1
2
SME Loan Portfolio Investments
1
2
B-S-D-2
Cash Flow Residential Mortgages – prime
1
2
Cash Flow Residential Mortgages – non prime
2
3
CMBS
2
3
Cashflow CBO/CLO backed by pool of corporate
loans
1
2
(B) with respect to any Portfolio Investments which are in the following asset classes:
Lower of Public
Rating by Moody's
and Fitch AAA to
AA-/Aa3
ASSET CLASS
Lower of Public Rating
by Moody's and Fitch
below AA-/Aa3 and
above A-/A3
Operating Company Securitization Security rated
by Moody's and Fitch
2
3
Non-Performing Loans
1
n/a
provided that
a.
in the case of Italian Leases the highest S&P Rating for a Portfolio Investment that is an Italian
Lease determined pursuant to this provision shall be AA- unless the originator of such Portfolio
Investment is publicly rated Baa3 or higher by Moody's or publicly rated BBB- or higher by Fitch
b.
a Portfolio Investment which is a Synthetic Security and is publicly rated Aaa by Moody's and
publicly rated AAA by Fitch shall be AA+;
(A)
a German Residential Mortgage Security that is not rated Aaa by Moody's and
AAA by Fitch may not be determined by notching; and
(B)
European Residential Mortgage Securities with multi-family properties and/or
construction dwellings may not be determined by notching,
c.
with respect to any Portfolio Investment in respect of which the relevant obligor is organized in
the Netherlands, the relevant rating of Moody's and/or Fitch for the purposes of the foregoing shall
be the lower of the public ratings assigned by such rating agency to such obligor and any
insurance company that guarantees payments in respect of such European Residential Mortgage
Security.
d.
Operating company securitizations from a single obligor will not constitute more than 2.5 per cent
of the Aggregate Principal Balance of Portfolio Investments
e.
Portfolio Investments may only be notched in accordance with the above provisions to the extent
that the underlying assets of the Portfolio Investments that are notched belong to jurisdictions such
as Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland and United Kingdom and
f.
The total principal amount of Portfolio Investments not rated by S&P, but notched utilizing the
aforementioned notching provisions will comprise no more than 15 per cent. of the Aggregate
Principal Balance of the Portfolio Investments and further provided that no more than 10% of the
B-S-D-3
Aggregate Principal Balance may be rated based on a public rating by only one of either Moody's
or Fitch.
B-S-D-4
INDEX OF DEFINED TERMS
CDO Security ........................................................128
CFC .......................................................................106
Chassis Leasing Securities.....................................128
Clearstream..............................................................79
Clearstream Banking ...............................................11
CLO of Distressed Debt ........................................128
CLO Security.........................................................128
CMBS Conduit Securities .....................................128
CMBS Credit Tenant Lease Securities ..................129
CMBS Large Loan Securities................................129
CMBS Securities ...................................................129
CMBS Single Property Securities .........................129
Code.........................................................................54
Collateral .....................................................14, 47, 51
Collateral Administration Agreement....................118
Collateral Arrangement .....................................13, 74
Commercial ABS Securities ..................................129
Committee .............................................................122
Companies Acts.......................................................45
Conditions................................................................47
Consumer ABS Securities .....................................129
Consumer Protected Securities ................................40
Container Leasing Securities .................................130
Corporate CDO Security .......................................130
Corporate Debt Security ........................................130
Corporate Guaranteed Security..............................130
Credit Card Securities............................................130
Current Portfolio......................................................51
Day Count Fraction ...........................................51, 92
Declaration of Trust.................................................45
Defaulted Portfolio Investment................................52
Defaulted Synthetic Security ...................................53
Defeased Synthetic Security ........................13, 53, 75
Deliverable Collateral..............................................95
Deliverable Obligations...........................................53
DIP Portfolio Investment.......................................130
Disputes .................................................................103
Distribution..............................................................53
Drawdown ...............................................................87
DTC .............................................................11, 53, 79
Due Date..................................................................53
Eligible Currency.....................................................53
Eligible Investments ................................................53
Emerging Market Countries ....................................55
Emerging Markets CDO Securities .......................130
Encumbrance ...........................................................55
Entitlement Holder ..................................................55
Entitlement Order ....................................................55
Equipment Leasing Securities ...............................130
Equity Security ........................................................55
ERISA .............................................................55, 111
ERISA Plan .....................................................55, 112
Euro Exchange Date ..............................................102
30/360......................................................................52
30E/360 ...................................................................52
ABS CDO Security................................................126
ABS REIT Debt Securities ....................................126
ABS Type Diversified Securities...........................126
ABS Type Residential Securities...........................126
ABS Type Undiversified Securities.......................126
Accounts ..................................................................48
Accrual Yield...........................................................49
Actua1/360 ..............................................................52
Actual/365 ...............................................................51
Actual/365 (Fixed)...................................................51
Actual/Actual-ISDA ................................................51
Additional Amounts ................................................98
Additional Business Center(s) .................................49
Additional Financial Center(s) ................................49
Adjusted Allocated Investment................................49
Adjusted Principal Balance......................................49
Administration Agreement ......................................45
Administrative Expenses .........................................49
Administrator...........................................................45
Advisers Act ..........................................................119
Aerospace and Defense Securities.........................126
Affiliate ...................................................................49
Affiliated..................................................................49
Aggregate Outstanding Amount ..............................49
Aircraft Lease Securities........................................126
Allocated Asset Pool Administrative Expenses.......49
Allocated Investment...............................................49
Applicable Collateral...................................14, 47, 88
Asset Pool..........................................................13, 88
Asset Pool Net Asset Value.....................................50
Asset Pool Payment Date ..................................18, 96
Asset-Backed Security...........................................126
Authentication Order ...............................................80
Automobile Securities ...........................................127
Balance ....................................................................50
Bank Guaranteed Securities...................................127
Bank Trust Preferred CDO Securities ...................127
Bankruptcy Code .....................................................50
Base Management Fee.............................................50
Benefit Plan Investor .............................................112
Business Day ...........................................................50
Business Day Convention........................................50
Calculation Agent ....................................................51
Calculation Period ...................................................51
Car Rental Receivable Securities...........................127
Cash .........................................................................51
Cash Withdrawal ...............................................15, 51
Catastrophe Bonds.................................................127
Cause .......................................................................51
CDO of CDO Securities ........................................128
CDO Securities ......................................................128
I-1
Investment Guidelines .......................................16, 58
Investment Manager ....................................11, 58, 73
Investment Manager Breaches...............................118
Investor-Based Exemptions ...................................111
IRS 104
ISDA Rate ...............................................................93
Issue Date ................................................................58
Issue Price................................................................58
Issuer .............................................................6, 10, 47
Issuer Charter...........................................................10
Issuer Order and Issuer Request ..............................58
Lottery Receivable Security ..................................133
Low-Diversity CDO Securities..............................133
Management Agreement....................................11, 73
Manufactured Housing Securities..........................133
Margin .....................................................................58
Margin Stock ...........................................................58
Market Value CDO Security .................................133
Master Indenture......................................................47
Maturity Date...........................................................58
Maximum Principal Amount ...................................58
Maximum Redemption Amount ..............................58
Mezzanine Obligation............................................133
Minimum Denomination .........................................58
Minimum Holding Period........................................95
Minimum Redemption Amount...............................58
Modified Business Day Convention ........................50
Modified Following Business Day Convention.......50
Moody's ...................................................................58
Mutual Fund Fees Securities .................................133
Natural Resource Receivable ABS Securities .......134
Negative Amortization Security ............................134
Net Outstanding Series Applicable Collateral Balance
..........................................................................59
NIM Securities.......................................................134
No Adjustment.........................................................51
Non-performing Loans ..........................................134
Non-Permitted ERISA Holder.................................59
Non-Permitted Holder .............................................59
Non-U.S. Holder....................................................105
Note Register ...........................................................81
Note Registrar..........................................................81
Noteholder ...............................................................59
Notes..............................................................6, 47, 48
Obligor.....................................................................59
Offer ........................................................................59
Officer .....................................................................59
Oil and Gas Securities ...........................................134
Opinion of Counsel..................................................59
Optional Redemption Amount (Call) ......................59
Optional Redemption Amount (Put)........................59
Optional Redemption Date (Call) ............................59
Optional Redemption Date (Put) .............................60
Other Real Estate Securities ..................................134
Outstanding..............................................................60
Pantheon Administrative Expenses .........................60
Euro Exchange Notice ...........................................102
Eurobond Basis........................................................52
Euroclear......................................................11, 55, 79
Eurodollar Convention ............................................50
Excepted Property....................................................55
Exchange Act.......................................................1, 55
Existing Series Reimbursement...............................55
FHLMC/FNMA Guaranteed Securities.................131
Final Redemption Amount ......................................55
Financial Asset ........................................................55
Financing Statement ................................................55
Fitch.........................................................................55
Fixed Coupon Amount ............................................55
Fixed Rate Security .................................................56
Floating Rate Convention ........................................50
Floating Rate Security .............................................56
Floorplan Receivable Securities ............................131
Following Business Day Convention ......................50
Form-Approved Synthetic Security .........................56
Franchise Securities...............................................131
FRN Convention......................................................50
FSA........................................................................123
Future Flow Securities...........................................131
Global Note .............................................................21
Global Notes............................................................79
Guaranteed Asset-Backed Security .......................131
Healthcare Securities .............................................131
Hedge Agreement ....................................................56
Hedge Counterparty.................................................56
Hedge Counterparty Ratings Requirement ..............56
High Yield Bond....................................................132
High-Diversity CDO Securities.............................131
High-Yield CDO Securities...................................132
holder.......................................................................56
Holder..............................................................56, 105
Home Equity Loan Securities................................137
Hybrid Securities ...................................................132
Hybrid Trust Preferred CDO Securities.................132
Incentive Management Fee......................................56
Indenture..................................................................47
Indenture Supplement..............................................56
Indenture Trustee.....................................................47
Ineligible Holder......................................................86
Initial Issue Date......................................................56
Insurance Company Guaranteed Securities ...........132
Insurance Receivables Securities...........................132
Insurance Trust Preferred CDO Securities ............132
Interest Amount .......................................................56
Interest Commencement Date..................................57
Interest Determination Date.....................................57
Interest Only Security......................................57, 132
Interest Payment Date..............................................57
Interest Period..........................................................57
Interest Proceeds......................................................57
Investment Company Act ..........................................6
Investment Grade CDO Securities.........................133
I-2
Recipient..................................................................59
Record Date .......................................................65, 97
Recreational Vehicle Securities .............................135
Redemption..............................................................87
Redemption Amount................................................65
Redenomination Date ............................................102
Reference Banks ......................................................65
Reference Entity ......................................................65
Reference Obligation...............................................65
Reference Obligor....................................................65
Reference Price........................................................65
Reference Rate.........................................................65
Reg S Transfer Certificate .......................................85
Registered.................................................................65
Registered Form .......................................................65
Registered Global Notes ..........................................79
Regular Date............................................................91
Regular Interest Period Notes..................................91
Regular Period .........................................................91
Regulation S .............................................................65
Regulation S Depositary..........................................79
Regulation S Global Notes ................................21, 79
Regulation U............................................................65
Reinsurance Securities...........................................135
Reinvestment Agreement.........................................65
REIT Debt Securities.............................................135
REIT Debt Securities-Diversified..........................135
REIT Debt Securities-Health Care ........................135
REIT Debt Securities-Hotel...................................136
REIT Debt Securities-Industrial ............................136
REIT Debt Securities–Mortgage ...........................136
REIT Debt Securities-Multi-Family ......................136
REIT Debt Securities-Office .................................136
REIT Debt Securities-Residential..........................136
REIT Debt Securities-Retail ..................................136
REIT Debt Securities-Storage ...............................136
Relevant Date ..........................................................65
Relevant Financial Center........................................65
Relevant Jurisdiction ...............................................65
Relevant Period .......................................................66
Relevant Screen Page ..............................................66
Relevant Time .........................................................66
Replacement Rating Agency ...................................64
Residential A Mortgage Securities ........................134
Residential B/C Mortgages....................................138
Restaurant and Food Services Securities ...............136
RMBS ....................................................................126
RMBS CDO Securities..........................................137
Rule 144A................................................................66
Rule 144A Depositary .............................................79
Rule 144A Global Notes....................................21, 79
Rule 144A Information............................................66
Rule 144A Notes .....................................................66
Rule 144A Transfer Certificate .........................66, 85
S&P Rating..............................................................70
S&P Recovery Rate .................................................66
par 62
Participating Member State .....................................61
payment ...................................................................95
Payment Business Day ............................................61
Payment Date...........................................................61
Permitted Reference Obligation ..............................61
Permitted Synthetic Security ...................................61
Permitted Synthetic Security Counterparty .............62
Person ......................................................................62
PFIC.......................................................................106
PIK Bond .................................................................62
Placement Agent......................................................62
Plan Asset Regulation..............................................62
Plan Asset Regulations ..........................................111
Pledged Securities....................................................62
Pool Account .....................................................13, 89
Portfolio Change Proposal.................................16, 76
Portfolio Investment ................................................12
Portfolio Investment Withdrawal ................15, 62, 68
Portfolio Investments...............................................62
Portfolio Management Agreement.........................122
Preceding Business Day Convention.......................50
Primary Currency ....................................................62
Primary Currency Equivalent ..................................62
Prime Residential Mortgage Securities..................134
principal...................................................................95
Principal Balance.....................................................62
Principal Financial Center .......................................62
Principal Only Security ...........................................63
Principal Proceeds ...................................................63
Proceeding ...............................................................63
Proceedings............................................................103
Pro-forma Transaction Characteristics ....................63
Project Finance Securities......................................135
Prospectus Regulations......................................7, 116
Prytania Group.......................................................122
PTCE .....................................................................111
Pure Private Portfolio Investment............................64
Put Option Notice ....................................................64
Put Option Receipt...................................................64
QEF election..........................................................107
QIBS ..........................................................................6
QPs 6
Qualified Institutional Buyer ...................................64
Qualified Institutional Buyers..................................79
Qualified Purchaser .................................................64
Qualified Purchasers................................................79
Qualifying Country..................................................64
Qualifying Country Rating Floor.............................64
Qualifying Foreign Obligor .....................................64
Rate of Interest ........................................................64
Rating Agencies.......................................................64
Rating Agency .........................................................64
Rating Agency Condition ........................................64
Rating Requirement.................................................65
Real Estate CDO Securities ...................................135
I-3
Spot FX Rate ...........................................................70
Standard & Poor's ....................................................70
Standard & Poor's Rating ........................................70
Stated Maturity ........................................................71
Static Asset Pool......................................................78
Structured Settlement Securities............................137
Student Loan Securities .........................................138
Subprime Automobile Securities ...........................138
Subprime Credit Card Securities ...........................138
Subprime Residential Mortgage Securities............138
sub-unit....................................................................92
Successor Investment Manager Conditions ...........119
Swap Mark...............................................................71
Synthetic ABS CDO Securities .............................138
Synthetic Security....................................................71
Synthetic Security Collateral ...................................72
Synthetic Security Counterparty..............................72
Synthetic Security Counterparty Account .........13, 74
Synthetic Security Issuer Account.....................13, 74
TARGET Settlement Day........................................72
Tax Lien Securities................................................139
Tax-Exempt Investors............................................109
Time Share Securities............................................139
Tobacco Litigation Securities ................................139
Transaction Documents .............................21, 72, 103
Treaty.......................................................................72
Trust Preferred CDO Securities.............................139
Trustee .....................................................................47
U.S. Agency Guaranteed Security .........................139
U.S. Holder............................................................105
U.S. Person ..............................................................72
U.S. Persons.............................................................79
U.S. Series .............................................................114
UBTI......................................................................109
Underlying Instrument.............................................72
Underlying Portfolio................................................34
Uninvested Proceeds................................................72
Valid ........................................................................72
Valuation .................................................................72
Withdrawal ..............................................................72
Written-Down Portfolio Investments.......................72
Zero Coupon Note ...................................................73
Sales Proceeds .........................................................66
Scheduled Distribution ............................................66
Scheduled Principal Proceeds..................................66
SEC..........................................................................25
Second Lien RMBS ...............................................137
Secondary Hedge Agreement ..................................66
Secured Parties ........................................................67
Securities Account...................................................67
Securities Account Control Agreement ...................67
Securities Act.......................................................6, 67
Securities Intermediary............................................67
Securities Lending Counterparty .............................67
Securities Mark........................................................67
Security....................................................................67
Security Entitlement ................................................67
Segregated Asset Pools............................................78
Segregated Pool .......................................................67
Segregated Pool Accounts .......................................78
Segregation ..............................................................78
Series ...........................................................11, 47, 87
Series Account...................................................14, 89
Series Adjusted Allocated Investment.....................67
Series Administrative Expenses ..............................69
Series Allocated Balance .........................................67
Series Allocated Investment ....................................67
Series Allocation Percentage .............................15, 67
Series Collateral Quality Tests ................................69
Series Share .............................................................69
Series Special Purpose Vehicle ...............................69
Series Specific Transaction Characteristics .............69
Series Supplement ...................................................47
Series Value.............................................................69
Share Trustee ...........................................................45
Shares ......................................................................45
Shipping Securities ................................................137
Short Position ....................................................20, 69
Single Security Tests ...............................................75
Small Business Loan Securities.............................137
Special Purpose Vehicle Jurisdiction.......................69
Specified Currency ..................................................70
Specified Denomination(s) ......................................70
Specified Office.......................................................70
Specified Period.......................................................70
I-4
Appendix A
Pantheon Master Fund plc
Issue of Danube Delta Series [
]
This section constitutes the Series Supplement relating to the issue of the Notes described herein, the detailed terms
of which are not set out in the Terms and Conditions set forth in the Offering Circular dated 18 August 2006 (the
"Terms and Conditions"). In addition, this Series Supplement may vary the terms of the Terms and Conditions to the
extent that they relate to the Series of Notes described herein. To the extent that the terms of any additional Notes in
a Series issued after the initial issue date vary from the terms set forth in this Series Supplement, a Note Series
Supplement with respect to such Additional Note shall further supplement the terms hereof.
Terms used herein shall be deemed to be used herein as defined in the Terms and Conditions, except as otherwise
defined herein. This Series Supplement must be read in conjunction with such Terms and Conditions.
A.
SERIES DESCRIPTIVE TERMS AND GENERAL DESCRIPTION
A1
Issuer
A2
Noteholder
A3
Series Number:
A4
(i)
Series Name:
(ii)
General description
A5
Specified Currency or
Currencies:
A6
Primary Currency
A7
Issue Date
A8
Further Issuance of Notes
after initial issuance
A9
Paying Agent
A10
Rating
A11
Other
B-A-1
B.
TERMS OF NOTES
B1
Initial Principal Amount
B2
Principal Amount:
B3
Maximum Principal
Amount
B4
Maturity Date:
B5
Details regarding
Drawdowns
(i)
Notice Period
(ii)
Consequences of Failure
to Fund
(iii)
Minimum Amounts for
Each Drawdown
(iv)
Information provided in
connection with a
Drawdown request
B6
Form of Note Upon
Issuance:
B7
Listing:
B8
Listing Agent
B9
Identifiers
B10
Rated
B11
Other
C.
DEFINITIONS
C1
C2
D.
Incorporation by reference
(i)
Terms and Conditions
(ii)
[Other Documents]
Additional Definitions
SERIES FEES
D1
Base Management Fee
D2
Incentive Management
B-A-2
Fee
D3
Limitation on Issuance
Costs
D4
Series Administrative
Expenses
D5
Other
E.
INVESTMENT GUIDELINES
E1
Additions to Series
Specific Transaction
Characteristics
(i)
Description
(ii)
Additions to clause (i)
Series Allocated
Investment Characteristics
(iii)
Additions to clause (ii)
Account Information
(iv)
Other Additions to Series
Specific Transaction
Characteristics
(v)
Additional Provisions
E2
Tests required to be run
based on actions proposed
to be made in connection
with Portfolio Change
Proposal
(i)
Movement of cash from
Series Sales Proceeds
Account to one or more
Series Investment
Accounts or Pool
Investment Accounts or
the movement of cash
from a Pool Sales
Proceeds Account to the
Pool Investment Account
of the same Asset Pool
(ii)
Purchase of Portfolio
Investments or a
withdrawal
(iii)
Sale of Portfolio
B-A-3
Investments
(iv)
Transfer of an asset from
one Asset Pool to another
Asset Pool
(v)
Prepayment of the Series
Note
(vi)
Additional Provisions
E3
Tests
(i)
Portfolio Percentage Tests
(ii)
Collateral Quality Test
(iii)
Single Security Tests
(iv)
Capital Model Test
(v)
Coverage Tests
(vi)
Drawdown Availability
Test
(vii)
Rating Agency Condition
Test
E4
Hedge Agreements
(i)
Hedge Agreements for
Series
(ii)
Hedge Agreements for
Asset Pool
(iii)
Hedge Counterparty
Ratings Requirement
E5
Short Positions
E6
Other
F.
PAYMENTS / REDEMPTION
F1
Additional Financial
Center(s) or other special
provisions relating to
Payment Dates:
F2
Interest Commencement
Date if different from
B-A-4
Issue Date
F3
Distribution Dates
F4
Interest Payments
F5
Principal Payments
F6
Partial Redemption
F7
Notification of Optional
Redemption in Whole and
Segregation
F8
Optional Redemption in
whole (other than
Auction)
F9
Redemption in Whole
(Auction)
F10
Final Redemption
Amount
F11
Change of Interest or
Redemption/Payment
Basis:
G.
EVENTS OF DEFAULT
G1
Additional Events of
Default
G2
Additional Actions upon
Event of Default (if
different from Terms and
Conditions)
G3
Other
H.
PRIORITY OF PAYMENTS
H1
Override
H2
(i)
(ii)
H3
I.
I1
Asset Pool Priority of
Payments
DISTRIBUTION AND TRANSFER
Manager(s) (if syndicated)
B-A-5
I2
Placement Agent(s) (if
non-syndicated)
I3
Selling Restrictions
I4
Transfer Restrictions
I5
Method of Delivery
I6
Other
J.
NOTE ISSUANCE EXPENSES
J1
Placement or Syndication
Fees
J2
Issuance Costs
J3
Other
K.
OTHER
K1
Supplemental provisions
to Investment
Management Agreement
K2
Synthetic Security
Counterparty Account
K3
Synthetic Security Issuer
Account
K4
Reporting
K5
Amendments
K6
Redenomination,
renominalisation
reconventioning
provisions
and
K7
Consolidation provisions
K8
Calculation Agent
L.
SERIES RISK FACTORS
M.
ISSUANCE OF ADDITIONAL NOTES OF THE SERIES
M1
Issuance of Additional
Notes
B-A-6
M2
Specified Denominations
M3
Issue Price
M4
Details relating to Partly
Paid Notes:
M5
Schedule of Payments
M6
Other
N.
SCHEDULES AND APPENDICES
B-A-7
REGISTERED OFFICE OF THE ISSUER
Pantheon Master Fund plc
5 Harbourmaster Place
IFSC,
Dublin 1, Ireland
INDENTURE TRUSTEE
Deutsche Bank Trust Company Americas
1761 East St. Andrew Place
Santa Ana, California 92705
COLLATERAL ADMINISTRATOR AND PAYING AGENT
Deutsche Bank AG, London Branch
Winchester House
1 Great Winchester Street
London EC2N 2DB
LEGAL ADVISERS
To the Issuer, Investment Manager
as to U.S. Law
McKee Nelson LLP
1 Battery Park Plaza, 34th Floor
New York, NY 10004
To the Issuer
as to Irish Law
A&L Goodbody
International Financial Services Centre
North Wall Quay,
Dublin 1