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«IMPORTANT NOTICE Attached please find an electronic copy of the Offering Circular (the “Offering Circular”), dated September 22, 2006 relating to ...»

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ERISA Considerations. The Issuer intends to restrict ownership of the Preference Shares so that no assets of the Issuer will be deemed to be “plan assets” subject to Title I of ERISA and/or Section 4975 of the Code, as such term is defined in the Plan Asset Regulation issued by the United States Department of Labor. The Issuer intends to restrict the acquisition of Preference Shares by Benefit Plan Investors (which is defined in the Plan Asset Regulation to include all employee benefit plans (whether or not subject to Title I of ERISA), plans within the meaning of Section 4975 of the Code and entities whose underlying assets are deemed to include plan assets) on the Closing Date to less than 25% of all Preference Shares (excluding Preference Shares held by Controlling Persons (as defined herein)). The Issuer intends to restrict transfers of the Preference Shares so that after the Closing Date, no Preference Shares will be transferred to (x) Benefit Plan Investors or (y) to a Controlling Person, if in the case of a Controlling Person, such transfer would cause the ownership of Preference Shares by Benefit Plan Investors to exceed the 25% threshold established under the Plan Asset Regulation. In particular, each Original Purchaser of a Preference Share will be required to certify whether or not it is a Benefit Plan Investor or a Controlling Person. No transferee of a Preference Share acquiring such Preference Share after the Closing Date may be a Benefit Plan Investor and no transferee of a Preference Share acquiring such Preference Share after the Closing Date may be a Controlling Person if such transfer would cause the ownership of Preference Shares by Benefit Plan Investors to exceed the 25% threshold established under the Plan Asset Regulation. Each transferee will be required to make appropriate certifications and representations in a transfer certificate.

However, there can be no assurance that ownership of Preference Shares by Benefit Plan Investors will always remain below the 25% threshold established under the Plan Asset Regulation.

Although each such owner will be required to indemnify the Issuer for the consequences of any breach of such obligations, there is no assurance that an owner will not breach such obligations or that, if such breach occurs, such owner will have the financial capacity and willingness to indemnify the Issuer for any losses that the Issuer may suffer.

If the assets of either of the Co-Issuers were deemed to be plan assets, certain transactions that the Issuer might enter into, or may have entered into, in the ordinary course of business might constitute non-exempt prohibited transactions under ERISA and/or Section 4975 of the Code and might have to be rescinded. However, it is anticipated that such a result would be unlikely because (1) the Collateral Debt Securities acquired by the Issuer will be limited to securities as to which the assets of the issuers thereof will not be treated as “plan assets”, even if the underlying assets of the Issuer are so treated, and (2) the issuers of such securities will be special-purpose entities that are not likely to be Parties in Interest with respect to any Plans.

Each Original Purchaser and each transferee of a Note will be deemed to represent and (or, if required by the Indenture, a transferee will be required to certify) either that (a) it is not (and, for so long as it holds any Note, will not be), and is not acting on behalf of (and, for so long as it holds any Note or any interest therein, will not be acting on behalf of) an employee benefit plan subject to Title I of ERISA, a plan subject to Section 4975 of the Code, an entity that is deemed to hold the assets of any such employee benefit plan or plan pursuant to 29 C.F.R. Section 2510.3-101, which plan is subject to Title I of ERISA or Section 4975 of the Code, or a governmental or church plan subject to any Similar Law or (b) its acquisition and holding of such Note will be covered by a Prohibited Transaction Class Exemption issued by the United States Department of Labor (or, in the case of a governmental or church plan, will not result in a violation of any Similar Law).

See “ERISA Considerations” herein for a more detailed discussion of certain ERISA and related considerations with respect to an investment in the Notes and Preference Shares.

The Issuer. The Issuer is a Cayman Islands exempted company with limited liability and has no prior operating history other than in connection with the acquisition of certain Collateral Debt Securities prior to the issuance of the Offered Securities and the engagement of the Collateral Servicer and the entering into arrangements with respect thereto. The Issuer will have no significant assets other than the Collateral Debt Securities acquired by it, Equity Securities, U.S. Agency Securities, Eligible Investments, the Collection Accounts and its rights under the Collateral Servicing Agreement, the Hedge Agreement and certain other agreements entered into as described herein, all of which have been pledged to the Trustee to secure the Issuer’s obligations to the holders of the Notes, the Collateral Servicer and the Hedge Counterparty. The Issuer will not engage in any business activity other than the issuance and sale of the Offered Securities as described herein, the creation of the Preliminary Offering Circular, this final Offering Circular and any supplements thereto, the acquisition and disposition of, and investment in, Collateral Debt Securities, Equity Securities, U.S. Agency Securities and Eligible Investments for its own account as described herein, the entering into, and the performance of its obligations under the Indenture, the Offered Securities, the Purchase Agreement, the Investor Application Letters, the Preference Share Paying Agency Agreement, the Hedge Agreement, any collateral assignment of the Hedge Agreement, the Collateral Servicing Agreement, the Collateral Administration Agreement, the Administration Agreement and the Forward Sale Agreement, the pledge of the Collateral as security for its obligations in respect of the Notes for the benefit of the Secured Parties, the ownership of the Co-Issuer and other activities incidental to the foregoing. Income derived from the acquired Collateral Debt Securities and other Collateral will be the Issuer’s only source of cash.





The Co-Issuer. The Co-Issuer is a newly incorporated Delaware corporation and has no prior operating history. The Co-Issuer does not have and will not have any substantial assets and will not pledge any assets to secure the Class A-1 Notes, the Class A-2 Notes, the Class B-1 Notes, the Class BNotes or the Class C Notes. The Co-Issuer will not engage in any business activity other than the coissuance of the Class A-1 Notes, the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes and the Class C Notes and will not be an obligor on the Class D Notes or the Preference Shares.

Protection of Collateral. The Trustee has agreed in the Indenture to take such actions to preserve and protect its first priority security interest in the Collateral for the benefit of the Secured Parties. Such actions include the filing of any financing statement, continuation statement or other instrument as is necessary to perfect, and maintain perfection of, such security interest in the Collateral.

The Indenture provides that the Issuer retains ultimate responsibility for maintaining the perfection of the Collateral and any failure of the Trustee to file the necessary continuation statements to maintain such perfection will not result in any liability to the Trustee and the Trustee shall be entitled to indemnification with respect to any claim, loss, liability or expense incurred by the Trustee with respect to the filing of such continuation statements. Any failure by the Trustee to maintain such perfection may lead to the loss of such security interest in the Collateral to secure the Issuer’s obligations under the Indenture and the Notes.

Certain Considerations Relating to the Cayman Islands. The Issuer is an exempted company incorporated with limited liability under the laws of the Cayman Islands. As a result, it may not be possible for purchasers of the Offered Securities to effect service of process upon the Issuer within the United States or to enforce against the Issuer in United States courts judgments predicated upon the civil liability provisions of the securities laws of the United States. The Issuer has been advised by Walkers, its legal advisor in the Cayman Islands, that the United States and the Cayman Islands do not currently have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters and that a final judgment for the payment of money rendered by any Federal or state court in the United States based on civil liability, whether or not predicated solely upon United States securities laws, would, therefore, not be automatically enforceable in the Cayman Islands and there is doubt as to the enforceability in the Cayman Islands, in original actions or in actions for the enforcement of judgments of the United States courts, of liabilities predicated solely upon United States securities laws. The Issuer will appoint Corporation Service Company, 1133 Avenue of the Americas, Suite 3100, New York, NY 10036 as its agent in New York for service of process.

Significant Fees Reduce Proceeds Available for Acquisition of Collateral Debt Securities. On the Closing Date, the Co-Issuers will use a portion of the gross proceeds from the offering to fund the Preference Share Reserve Account and to pay various fees and expenses, including, without limitation, expenses, fees and commissions incurred in connection with the acquisition of the Collateral Debt Securities, structuring and placement agency fees payable to the Initial Purchaser and legal, accounting, rating agency and other fees. Closing fees and expenses reduce the amount of the gross proceeds of the offering available to acquire Collateral Debt Securities and, therefore, the return to purchasers of the Offered Securities. Rating Agencies will consider the amount of net proceeds available to acquire Collateral Debt Securities in determining any ratings assigned by them to the Offered Securities.

Certain Legal Investment Considerations. None of the Issuer, the Co-Issuer, the Collateral Servicer and the Initial Purchaser make any representation as to the proper characterization of the Offered Securities for legal investment or other purposes, as to the ability of particular investors to purchase Offered Securities for legal investment or other purposes or as to the ability of particular investors to purchase Offered Securities 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 Offered Securities are subject to investment, capital or other restrictions. Without limiting the generality of the foregoing, none of the Issuer, the Co-Issuer, the Collateral Servicer and the Initial Purchaser makes any representation as to the characterization of the Offered Securities as a U.S.

domestic or foreign (non-U.S.) investment under any state insurance code or related regulations, and they are not aware of any published precedent that addresses such characterization. Although they are not making any such representation, the Co-Issuers understand that the New York State Insurance Department, in response to a request for guidance, has been considering the characterization (as U.S.

domestic or foreign (non-U.S.)) of certain collateralized debt obligation securities co-issued by a non-U.S.

issuer and a U.S. co-issuer. There can be no assurance as to the nature of any advice or other action that may result from such consideration. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Offered Securities) may affect the liquidity of the Offered Securities.

Lender Liability Considerations; Equitable Subordination. In recent years, a number of judicial decisions in the United States have upheld the right of borrowers to sue lenders or bondholders on the basis of various evolving legal theories (collectively, termed “lender liability”). Generally, lender liability is founded upon the premise that a lender or bondholder has violated a duty (whether implied or contractual) of good faith and fair dealing owed to the borrower or issuer or has assumed a degree of control over the borrower or issuer resulting in the creation of a fiduciary duty owed to the borrower or issuer or its other creditors or shareholders. Although it would be a novel application of the lender liability theories, the Issuer may be subject to allegations of lender liability. However, the Issuer does not intend to engage in conduct that would form the basis for a successful cause of action based upon 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 Debt Securities, the Issuer may be subject to claims from creditors of an obligor that Collateral Debt Securities issued by such obligor that are held by the Issuer should be equitably subordinated. However, the Issuer does not intend to engage in conduct that would form the basis for a successful cause of action based upon the equitable subordination doctrine.

The preceding discussion is based upon principles of United States federal and state laws.

Insofar as Collateral Debt Securities 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.



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