ICE GLOBAL CREDIT ALPHA MASTER FUND LIMITED

Transcription

1 ICE GLOBAL CREDIT ALPHA MASTER FUND LIMITED (a private company with limited liability incorporated under the Companies Acts 1963 to 2012 of Ireland under number ) USD 10,000,000,000 Asset-Backed Notes due June This document comprises a listing particulars (the "Listing Particulars") for the purposes of giving information with regard to ICE Global Credit Alpha Master Fund Limited (the Issuer ) which, according to the particular nature of the Issuer and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuer and of the rights attaching to the Notes. The USD 10,000,000,000 Asset-Backed Notes due 29 June 2041 (the Notes ) issued by the Issuer on 11 October Interest Payments (as defined below) (if any) on the Notes will be made annually or on such other dates as provided in this Listing Particulars. Payment of Interest (as defined below) and redemption amounts, at maturity or otherwise, with respect to the Notes will depend upon the receipt by the Issuer of a return on certain investments that it makes. (See Terms and Conditions of the Notes Interest Payments ). Payments on the Notes will be made without deduction for or on account of taxes unless such deduction is required by law. (See Terms and Conditions of the Notes - Taxation ). The Notes have been subscribed for by the initial purchaser of the Notes (the Initial Purchaser ) for an amount (the Subscription Amount ) that is less than the full Stated Amount (as defined below, being USD 10,000,000,000 in aggregate) thereof. The Issuer may from time to time require the holders of the Notes (the Note Holders ), or a Note Holder may so elect, to pay to the Issuer an amount up to the difference, if any, between (i) the Paid-Up Amount (as defined below) of such Note and (ii) the Stated Amount of such Note. (See Terms and Conditions of the Notes Form Denomination and Title ). The Notes mature on 29 June 2041 but may be redeemed prior thereto at the option of the Issuer. (See Terms and Conditions Redemption and Purchase ). Application has been made to the Irish Stock Exchange Limited (the Irish Stock Exchange ) for the Notes to be admitted to the Official List and to trade on the Global Exchange Market of the Irish Stock Exchange Limited (the GEM ). This Listing Particulars has been approved by the Irish Stock Exchange as listing particulars for the purposes of the "Listing and Admission to Trading Rules of the Global Exchange Market" of the Irish Stock Exchange. Such approval relates only to the Notes which are to be admitted to trading on the GEM. The Notes have not been registered under the United States Securities Act of 1933, as amended (the Securities Act ). The Notes will be offered only to accredited investors in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act. The Issuer will not be registered under the Investment Company Act of Interests in the Notes will be subject to certain restrictions on transfer (see Subscription ). For a description of certain matters that prospective investors should consider, see Risk Factors. This Listing Particulars is dated 14 November M (i)

2 The Issuer accepts responsibility for the information contained in this Listing Particulars. To the best of the knowledge and belief of the Issuer (having taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information. The Issuer accepts responsibility accordingly. ICE Canyon LLC (the Investment Manager ) accepts responsibility for the information contained in the sections entitled The Investment Manager and The Portfolio. To the best of the knowledge and belief of the Investment Manager (having taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information. The Investment Manager accepts responsibility accordingly. None of the Trustee (as defined below), the Paying Agent (as defined below) or the Corporate Services Provider (as defined below) make any representation, recommendation or warranty, express or implied, regarding the accuracy, adequacy, reasonableness or completeness of the information contained herein or in any further information, notice or other document which may at any time be supplied in connection with the Notes nor accept any responsibility or liability therefor. None of the Trustee, the Paying Agent or the Corporate Services Provider undertake to review the financial condition or affairs of the Issuer during the life of the arrangements contemplated by this Listing Particulars nor to advise any investor or potential investor in the Notes of any information coming to their attention with respect to the Issuer, the Portfolio (as defined below) or otherwise. None of the Trustee, the Paying Agent, the Corporate Services Provider or the Listing Agent represents that this Listing Particulars may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. The Notes may not be offered or sold directly or indirectly, and neither this Listing Particulars nor any listing particulars, prospectus, form of application, advertisement, other offering material or other information relating to the Issuer or the Notes may be issued, distributed or published in any country or jurisdiction (including the Republic of Ireland ( Ireland ) and United Kingdom), except in circumstances that will result in compliance with all applicable laws, orders, rules and regulations. The distribution of this Listing Particulars and the offering of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Listing Particulars comes are required by the Issuer to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers and sales of Notes and distribution of this Listing Particulars and other offering material relating to the Notes, see Subscription below. No person is authorised to give any information or to make any representation not contained in this Listing Particulars and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Issuer. The delivery of this Listing Particulars at any time does not imply that the information contained in it is correct as at any time subsequent to its date and neither the Issuer, the Trustee nor the Investment Manager undertakes to update the information contained in this document. Neither this Listing Particulars nor any part hereof constitutes an offer of, or an invitation by, or on behalf of the Issuer or any other party to subscribe for or purchase any of the Notes and neither this Listing Particulars, nor any part hereof, may be used for or in conjunction with an offer to, or solicitation by, (a) any person in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised or (b) any person to whom it is unlawful to make such offer or by whom such solicitation is unlawful. This Listing Particulars may only be communicated or caused to be communicated to persons (a) who are outside the United Kingdom and Ireland; or (b) who have professional experience in matters relating to investments; or (c) who are persons falling within Article 49(2)(a) to (e) of the Financial Services and Market Act 2000 (Financial M (ii)

3 Promotion) Order 2001 of the United Kingdom; or (d) to whom this Listing Particulars may otherwise be lawfully communicated in accordance with all applicable laws (all such persons together being referred to as relevant persons ). This Listing Particulars must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only by relevant persons. In this Listing Particulars, unless otherwise specified or the context otherwise requires, references to and euro are to the lawful currency for the time being of the member states of the European Union that adopt the single currency in accordance with the treaty establishing the European Communities signed in Rome on 25 March 1957 as amended from time to time and references to $ USD and U.S. Dollars are to the lawful currency for the time being of the United States of America. This offering is being made in reliance upon an exemption from registration under the Securities Act for an offer and sale of the Notes which does not involve a public offering. In making your purchase, you will be deemed to have made certain acknowledgments, representations and agreements. See Subscription below. The Notes described in this Listing Particulars have not been registered with, recommended by or approved by the US Securities and Exchange Commission (the SEC ), any state securities commission in the United States or any other securities commission or regulatory authority, nor has the SEC, any state securities commission in the United States or any such securities commission or authority passed upon the accuracy or adequacy of this Listing Particulars. Any representation to the contrary is a criminal offence. The Issuer is not, and will not be, regulated by the Central Bank of Ireland (the Central Bank ) by virtue of the issue of the Notes. Any investment in the Notes does not have the status of a bank deposit and is not subject to the deposit protection scheme operated by the Central Bank. The Notes are obligations solely of the Issuer and are not obligations of, guaranteed by or the responsibility of any other entity. Neither the Issuer nor the Notes are rated with any rating service. M (iii)

4 TABLE OF CONTENTS PAGE SUMMARY...2 RISK FACTORS...8 TERMS AND CONDITIONS OF THE NOTES...30 USE OF PROCEEDS...42 THE ISSUER...43 INVESTMENT MANAGER...45 THE PORTFOLIO...50 THE PORTFOLIO MANAGEMENT AGREEMENT...58 PRIME BROKER AND PRIME BROKERAGE AGREEMENT...62 THE PORTFOLIO ADMINISTRATOR AND THE PROFESSIONAL SERVICES AGREEMENT...63 CERTAIN TAX CONSIDERATIONS...65 SUBSCRIPTION...67 GENERAL INFORMATION...69 M

5 SUMMARY The following summary does not purport to be complete and is qualified in its entirety by reference to the detailed information appearing elsewhere in this Listing Particulars and related documents referred to herein. For a discussion of certain risk factors to be considered in connection with an investment in the Notes, see Risk Factors. The Issuer ICE Global Credit Alpha Master Fund Limited, a private company with limited liability having its registered office at 78 Sir John Rogerson s Quay, Dublin 2, Ireland and incorporated under the Companies Acts 1963 to 2012 of Ireland under number , for the purpose of acquiring certain Portfolio Assets (as defined below), managing the Portfolio (as defined below), issuing the Notes and engaging in certain related transactions as described in the Transaction Documents (as defined below). The Issuer will not have any assets other than the Portfolio, the balance standing to the credit of the Transaction Account and the Issuer Account (each as defined below) and its rights under the Transaction Documents and certain other incidental rights and assets. The Notes Status and Ranking of the Notes The Trustee The Investment Manager Portfolio Administrator Pursuant to the Trust Deed (as defined below) the Issuer issued the USD10,000,000,000 Notes on 11 October 2012 (the Issue Date ) in consideration for payment of the Subscription Amount and for deferred payment by way of Capital Amounts (each as defined below) in respect of the Notes. The Notes constitute direct, unsecured, unconditional and subordinated obligations of the Issuer, and will rank pari passu and rateably without any preference among themselves for all purposes. The Notes will rank, as to payment in respect of amounts due upon them, junior to all other present and future secured and unsecured obligations of the Issuer (the Senior Obligations ). The obligation of the Issuer to make payments in respect of the Notes will be limited to the value of the Net Recourse Assets (as defined in Condition 5.1 (Final Redemption), after payments in respect of the Senior Obligations. Wilmington Trust SP Services (Dublin) Limited (the Trustee ), acting through its office at 1 st Floor, 7 Exchange Place, IFSC, Dublin1, Ireland has been appointed as trustee of the Note Holders and the other creditors pursuant to a trust deed dated as of the 27 June 2012 (the Trust Deed ). The Trust Deed is governed by Irish law. The Issuer has engaged the services of ICE Canyon LLC (the Investment Manager ) to perform certain purchase, disposal and management functions with respect to the Portfolio (as defined below) in accordance with a portfolio management agreement dated 11 May 2012 between the Issuer and the Investment Manager (the Portfolio Management Agreement ). The Portfolio Management Agreement is governed by the laws of the State of California, United States of America. The Issuer has engaged Northern Trust Hedge Fund Services LLC (the Portfolio Administrator ) pursuant to a M

6 joinder to a professional services agreement effective 1 May 2012 to perform certain administrative functions with respect to the Portfolio and the Portfolio Assets (as defined below) on the same terms and conditions as set forth in the professional services agreement entered into by ICE Focus EM Credit Master Fund Limited (formerly known as ICE EM Special Situations Master Fund Limited) and Northern Trust House Fund Services LLC (formerly known as Citadel LLC and Omnium LLC) dated 23 May 2008 as if the Issuer was an original party to such agreement (the Professional Services Agreement ). The Professional Services Agreement is governed by the laws of the State of Delaware, United States of America. Prime Broker The Issuer has engaged Credit Suisse Securities (USA) LLC ( Credit Suisse ) as prime broker (the Prime Broker ), pursuant to a prime broker customer agreement (collectively the Prime Brokerage Agreement ) dated 17 May 2012 between the Issuer, the Prime Broker and the Investment Manager, to provide certain prime brokerage and custodial services in respect of Portfolio Assets constituting public securities. The Issuer will grant security to the Prime Broker over securities held in accounts with the Prime Broker or its affiliates and over its rights under derivative contracts with the Prime Broker and affiliates of the Prime Broker. See Prime Broker and Prime Brokerage Agreement. Use of Proceeds Portfolio and Portfolio Assets The Issuer will apply the Proceeds (as defined below) of the issue of the Notes (after payment of applicable fees and expenses) to the acquisition of the Portfolio Assets (or in the discharge of liability incurred to finance the acquisition of the Portfolio Assets) (see The Portfolio Description of the Portfolio Assets ). The Issuer (or the Investment Manager on behalf of the Issuer) will acquire a diversified portfolio of financial assets (the Portfolio Assets and each a Portfolio Asset ) selected and allocated by the Investment Manager as further described in the section entitled The Portfolio. The Portfolio Assets will include, high yield bonds and private placements, syndicated bank loans, special situation financings, sovereign and short credit positions. The Issuer s targeted investment opportunities will include: debt/equity conversions, rescue finance, restructuring/recapitalizations, special situations, distressed and hedging. The Portfolio Assets in aggregate are the Portfolio. The Issuer may purchase some of its Portfolio Assets through the use of term financing facilities provided by its brokerdealers or may borrow funds from other sources using other techniques to leverage its investments. The Issuer does not intend to leverage its investments more than one and a half times the aggregate net value of the Portfolio. Such leveraged financing increases both the possibility of higher returns and the risk of higher losses. (See The Portfolio Description of the Portfolio Assets ). Swap Agreements For the purpose of entering into credit and other derivatives, the Issuer has entered into: M

7 (i) (ii) an ISDA Master Agreement, Schedule and Credit Support Annex thereto, dated 17 May 2012 with Credit Suisse Securities (Europe) Limited (the CSS Europe Agreement ); and an ISDA Master Agreement, Schedule and Credit Support Annex thereto, dated 17 May 2012 with Credit Suisse International (the CSI Agreement ); each an ISDA Agreement, and collectively, the ISDA Agreements. The registered address of Credit Suisse Securities (Europe) Limited is One Cabot Square, London E14 4QJ. The registered address of Credit Suisse International is One Cabot Square, London E14 4QJ, England. Each derivative transaction entered into by the Issuer under any of the ISDA Agreements will be evidenced by a confirmation (a Confirmation ) which, together with the relevant ISDA agreement, will constitute a Swap Agreement. Each ISDA Agreement and form of Confirmation are, together, a Transaction Document (as defined below), and are available for inspection as described in General Information below. The Issuer will, from time to time, enter into swap agreements with counterparties, other than those listed above, on such terms as will be agreed upon by the Investment Manager. Under the terms of the credit support annex forming part of the relevant ISDA Agreement, a party posting collateral will grant security over such collateral to the other party. Interest Payments The return on a Note in respect of any Accrual Period (as defined below) (the Interest ) will be a proportion (being the proportion that the Paid-Up Amount (as defined below) of such Note bears to the aggregate Paid-Up Amount of all outstanding Notes (the Relevant Proportion ) of an amount equal to all income and gains (including deemed gains) earned by the Issuer from or in respect of the Portfolio Assets or related arrangements, for the Accrual Period, less any losses suffered by the Issuer from or in respect of the Portfolio Assets or related arrangements, for the Accrual Period or for prior Accrual Periods not previously taken into account in any computation of Interest, less the sum of (i) all operating expenses and costs (other than the accrual of Interest) of the Issuer accrued in that Accrual Period and (ii) the Profit Reserve Amount for that Accrual Period (as defined below). If, in respect of any Accrual Period, the amount of the Interest is zero or a negative number, the Issuer will not have an obligation to make a payment on the Notes in respect of that Accrual Period. Such Interest Payment will be regarded as accruing throughout the Accrual Period. The payment of the Interest (an Interest Payment ) (if any) on the Notes will be due and payable annually or on such other dates as the Issuer or, in certain cases the Note Holders, shall determine. See Terms and Conditions of the Notes Interest Payments. Accrual Period means each Financial Year (as defined below) or such shorter or longer period as the Issuer or the M

8 Note Holders may determine from time to time; Financial Year means the period from and including 1 January of each year to and including 31 December of the same year, provided that the Issuer s first Financial Year will be the period from and including 21 March 2012 to and including 31 December Notwithstanding the above, in order to ensure compliance by each Note Holder with all laws, regulations and rules applying to it which restrict its ability to participate in the income, gains and losses from certain Portfolio Assets, the Investment Manager may restrict a Note Holder from participating in such income, gains and losses to the extent necessary to comply with such laws, regulations and rules and shall adjust the Interest accrued on the Notes as it so determines. Profit Reserve Amount means 4,000 or such other amount as may be agreed between the Issuer and the Note Holders from time to time, for each Financial Year that a profit is made by the Issuer. Final Maturity Issuer Account Transaction Account The Notes will mature on 29 June 2041 or, if such day is not a Business Day (as defined below), the immediately following Business Day (the Maturity Date ). If, on such date the proceeds of the net assets of the Issuer available for distribution in accordance with the Conditions (as defined below) is less than the aggregate of the Paid-Up Amount of all the Notes together with all Interest accrued but unpaid thereon (the Final Redemption Amount ), the Final Redemption Amount of each Note shall be reduced to an amount equal to the Relevant Proportion of such amount of the net assets of the Issuer. Any remaining claims of the Note Holders in respect of the Notes will be extinguished. The Issuer has opened and will maintain an account (the Issuer Account ) with Bank of Ireland acting through its offices at Lower Baggot Street, Dublin 2, Ireland. The Proceeds (and any cash proceeds relating to, or return on, the Portfolio) will be credited to an account held with the Prime Broker. Stated Amount The Stated Amount of each Note is USD 5,000,000,000. The aggregate Stated Amount of the Notes is USD 10,000,000,000 See Terms and Conditions of the Notes Form, Denomination and Title. Capital Call Paid-Up Amount The Issuer may from time to time elect that any or all of the Note Holders be required, or a Note Holder may so elect, to pay the Issuer an amount not exceeding the Stated Amount of its respective Note less the Paid-Up Amount of such Note (a Capital Amount ). The Issuer or a Note Holder may make this election on more than one occasion and in a minimum amount of the USD equivalent of EUR 100,000 on the date that the Capital Call is made, whichever is the lesser amount, provided that, upon such election, the sum of (x) the aggregate of the Paid-Up Amounts with respect to the relevant Note and (y) the proposed aggregate Capital Amount, does not exceed the Stated Amount of such Note. On 11 October 2012 (the Closing Date ) the initial M

9 purchaser subscribed for an amount (the Subscription Amount ) that is less than the amount expressed as the Stated Amount of such Note (the Stated Amount ). The Issuer shall notify the Trustee and the Paying Agent of the amount of the Subscription Amount and, in accordance with the terms of the Paying Agency Agreement, the Paying Agent (each as defined below) shall, on receipt of such notification from the Issuer, record details of the Subscription Amount on the schedule to the relevant Note. The Paid-Up Amount of a Note at any time is (x), the sum of the Subscription Amount, all Capital Amounts from time to time paid on such Note and all Positive Adjustment Amounts (as defined in Condition 7 (Capital Call) below) in respect of such Note less (y) the sum of all Redeemed Amounts (as defined in Condition 5.2 (Optional Redemption) below) and all Negative Adjustment Amounts (as defined in Condition 7 (Capital Call) below) in respect of such Note. Withholding Tax The Offering Form of the Notes Further Issues Payments in respect of the Notes will be made without any deduction or withholding for or on account of any tax unless required by law. The Issuer will be under no obligation to gross-up such payments in the event it is so required to deduct or withhold. The Notes are only offered to persons who are accredited investors in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act. The Notes are in bearer form. The Issuer may from time to time without the consent of the Note Holders create and issue further notes either: A. having the same terms and conditions as the Notes in all respects so that such further issue shall be consolidated and form a single series of notes (a Series ) with the outstanding notes of any Series (including the Notes); or B. upon such terms as the Issuer may determine at the time of their issue. Such terms may provide that the proceeds of such notes shall be invested in, and the Interest payable in respect of such notes shall be calculated by reference solely to, the income and gains earned by the Issuer from or in respect of, certain investments or groups of investments which are initially or subsequently identified and designated as Designated Investments by the Investment Manager. Such further notes may be issued for cash or in exchange for the redemption of any existing note or part thereof. Upon the issuance of any such further notes, the Issuer shall make an announcement of such issuance to the Irish Stock Exchange. Rating Governing Law Listing Neither the Issuer nor the Notes will be rated. The Notes are governed by Irish law. Application has been made to have the Notes listed on the Global Exchange Market of the Irish Stock Exchange. See M

10 General Information. Listing Agent Tax Status Transaction Documents A&L Listing Limited. See Certain Tax Considerations. The Trust Deed, the Subscription Agreement, the Portfolio Management Agreement, the Professional Services Agreement, the Prime Brokerage Agreement, the Paying Agency Agreement, the Corporate Services Agreement, each Swap Agreement, each Capital Call Notice and all agreements incidental to the issue of the Notes (the Transaction Documents ). M

11 RISK FACTORS Prior to making an investment decision, prospective investors should carefully consider, in addition to the matters set forth elsewhere in this Listing Particulars, the following factors. General Investment Risks General An investment in the Notes is speculative because of a variety of risks and considerations. The Issuer may invest in loans, asset-backed notes and other financial assets with certain risk characteristics as described below and subject to the investment policies, restrictions and guidelines described in The Portfolio below. There can be no assurance that the Issuer's investments will be successful, that the Note Holders will receive the full amounts payable by the Issuer under the Notes or that they will receive any return on their investment in the Notes. Prospective investors are therefore advised to review this entire Listing Particulars carefully and should consider, among other things, the factors set out below before deciding whether to invest in the Notes. The Trustee does not undertake to review the financial conditions or affairs of the Issuer at any time during the life of the arrangements contemplated by this Listing Particulars nor to advise any investor or potential investor in the Notes of any information coming to the attention of the Trustee which is not included in this Listing Particulars. Prospective purchasers of the Notes should be particularly knowledgeable in investment matters and should ensure that they understand the nature of such Notes and the extent of their exposure to risk, that they have sufficient knowledge, experience and access to professional advisers to make their own legal, tax, accounting and financial evaluation of the merits and risks of investment in such Notes and that they consider the suitability of such Notes as an investment in the light of their own circumstances and financial condition. No Operating History The Issuer has no performance history. Note Holders may not have sufficient historical information to serve as a basis for making a more informed investment decision. Past Performance Past results of the Investment Manager are not necessarily indicative of future performance of the Issuer. The markets in which the Issuer operates have been severely disrupted in recent years, so results observed in earlier periods may have little relevance to the results observable in the current environment. Possibility of Losses An investment in the Notes is speculative. The Issuer may invest in distressed securities and in other assets and instruments that may facilitate taking control of distressed issuers. These securities, assets and instruments by their nature are issued by or relate to companies in unstable financial condition and entail substantial inherent risks. Although the Issuer, through the Investment Manager, will attempt to manage these risks, there can be no assurance that the Portfolio will increase in value or that the Portfolio will not incur significant losses. The Issuer anticipates that some of the Portfolio will incur losses. Therefore, investors may lose all or a portion of the amounts they have invested in the Notes if the Issuer s trading strategies are not successful. Limited Resources of the Issuer The Issuer's ability to meet its obligations in respect of the Notes, its operating expenses and its administrative expenses is wholly dependent upon the performance of the Portfolio. The Issuer will not have any other funds available to it to meet its obligations M

12 under the Notes or any other payments ranking in priority to, or pari passu with, the Notes. There is no assurance that there will be sufficient funds to enable the Issuer to pay the Interest Payments or the required amount on the Maturity Date. Illiquid Investments The Issuer is a closed-end fund designed primarily for long-term investment. Hence, an investment in the Issuer is an illiquid one. An investment in the Issuer should only be considered by persons financially able to maintain their investments for a substantial period of time and who can afford a loss of all or a substantial part of their investments. The Issuer has been organized as a closed-end fund due, among other reasons, to the illiquid nature of the Issuer s investments. Ability of the Issuer to Meet its Obligations under the Notes None of the Trustee, the Investment Manager, or any of their affiliates or any other person or entity (other than the Issuer) will be obligated to make payments on the Notes. Consequently, the Note Holders must rely solely upon distributions the Issuer receives in respect of the Portfolio for the payment of the Interest Payments and the other payments on the Maturity Date. There can be no assurance that the distributions on the Portfolio will be sufficient to make payments on the Notes. If, in respect of any Accrual Period, the amount of the Interest is zero or a negative number the Issuer will not have an obligation to make an Interest Payment to Note Holders in respect of that Accrual Period. Where amounts received in respect of the Portfolio are insufficient to make payments on the Notes, no other assets will be available for payment and, following realisation of the Issuer's assets and the application of the proceeds thereof, the obligations of the Issuer to pay such shortfall shall be extinguished. Market Disruptions; Governmental Intervention; Dodd-Frank Wall Street Reform and Consumer Protection Act The global financial markets have in the past few years gone through pervasive and fundamental disruptions that have led to extensive and unprecedented governmental intervention. Such intervention has in certain cases been implemented on an emergency basis, suddenly and substantially eliminating market participants ability to continue to implement certain strategies or manage the risk of their outstanding positions. In addition as one would expect given the complexities of the financial markets and the limited time frame within which governments have felt compelled to take action these interventions have typically been unclear in scope and application, resulting in confusion and uncertainty which in itself has been materially detrimental to the efficient functioning of the markets as well as previously successful investment strategies. The Issuer may incur major losses in the event of disrupted markets and other extraordinary events in which historical pricing relationships become materially distorted. The risk of loss from pricing distortions is compounded by the fact that in disrupted markets many positions become illiquid, making it difficult or impossible to close out positions against which the markets are moving. The financing available to the Issuer from its banks, dealers and other counterparties is typically reduced in disrupted markets. Such a reduction may result in substantial losses to the Issuer. Market disruptions may from time to time cause dramatic losses for the Issuer, and such events can result in otherwise historically low-risk strategies performing with unprecedented volatility and risk. In response to the recent financial crises, the Obama Administration and the U.S. Congress proposed sweeping reform of the U.S. financial regulatory system. After over a year of debate, the Dodd Frank Wall Street Reform and Consumer Protection Act (the Reform Act ) became law in July The Reform Act seeks to regulate markets, market participants and financial instruments that previously have been unregulated and substantially alters the regulation of many other markets, market participants and financial instruments. Because many provisions of the Reform Act require rulemaking by the applicable regulators before becoming fully effective and the Reform Act mandates multiple agency reports and studies (which could result in additional legislative or regulatory action), it is difficult to predict the impact of the Reform Act on the Issuer, the M

13 Investment Manager, and the markets in which they trade and invest. The Reform Act could result in certain investment strategies in which the Issuer engages or may have otherwise engaged becoming non-viable or non-economic to implement. The Reform Act and regulations adopted pursuant to the Reform Act could have a material adverse impact on the profit potential of the Issuer. See also Over-the-Counter Derivatives Markets below. Additional Government or Market Regulation Market disruptions and the dramatic increase in the capital allocated to alternative investment strategies during the past decade have led to increased governmental as well as self regulatory scrutiny of the hedge fund and financial services industry in general. Certain legislation proposing greater regulation of the industry, such as the recently enacted Reform Act, is considered periodically by the U.S. Congress, as well as the governing bodies of non-u.s. jurisdictions. It is impossible to predict what, if any, changes in the regulations applicable to the Issuer, the Investment Manager, the markets in which they trade and invest or the counterparties with which they do business may be instituted in the future. Any such laws or regulations could have a material adverse impact on the profit potential of the Issuer, as well as require increased transparency as to the identity of the Note holders. Possible Ineffectiveness of Risk Reduction Techniques The Investment Manager may employ various risk reduction strategies designed to minimize the risk of the Issuer s trading positions. A substantial risk remains, nonetheless, that such strategies will not always be possible to implement, and when possible will not always be effective in limiting losses. If the Investment Manager analyzes market conditions incorrectly, or employs a risk reduction strategy that does not correlate well with the Issuer s investments, such risk reduction techniques could increase rather than mitigate losses. These risk reduction techniques may also increase the volatility of the Issuer and/or result in a loss if the counterparty to the transaction does not perform as promised. Moreover, even though the Investment Manager may employ stop loss orders on individual positions, there is no assurance that any such order will be executed at or near the desired stop loss level. Financing Arrangements; Availability of Credit To the extent the Issuer utilizes leverage, the Issuer will depend on the availability of credit in order to finance its portfolio. There can be no assurance that the Issuer will be able to maintain adequate financing arrangements under all market circumstances. As a general matter, certain of the dealers that provide financing to the Issuer can apply essentially discretionary margin, haircut, financing, security and collateral valuation policies. Changes by dealers in such financing policies, or the imposition of other credit limitations or restrictions, whether due to market circumstances or governmental, regulatory or judicial action, may result in large margin calls, loss of financing, forced liquidation of positions at disadvantageous prices, termination of swap and repurchase agreements and cross-defaults to agreements with other dealers. Any such adverse effects may be exacerbated in the event that such limitations or restrictions are imposed suddenly and/or by multiple market participants at or about the same time. Investments in Restricted Securities The Issuer may be prevented from buying or selling certain publicly traded securities if the Investment Manager or the Issuer acquires non-public material information with respect to such securities. In addition, with respect to a publicly traded security that the Issuer already holds, such security will be placed on a restricted securities list maintained by the Investment Manager and will not be traded until the non-public material information becomes public or is no longer material. Counterparty Risk Institutions, such as brokerage firms, banks and broker dealers, generally have custody of the Issuer s portfolio assets and may hold such assets in street name. Bankruptcy or M

14 fraud at one of these institutions could impair the operational capabilities or the capital position of the Issuer. In addition, securities and other assets deposited with custodians or brokers may not be clearly identified as being assets of the Issuer, and hence the Issuer may be exposed to a credit risk with regard to such parties. In some jurisdictions, the Issuer may only be an unsecured creditor of its brokers in the event of bankruptcy or administration of such brokers. The Issuer attempts to limit its investment transactions to well capitalized and established banks and brokerage firms in an effort to mitigate such risks, but the collapse of the seemingly well capitalized and established Bear Stearns and Lehman Brothers demonstrates that complete and foolproof evaluation of the financial capabilities of counterparties is impossible. In addition, some of the markets in which the Issuer may effect transactions are over-thecounter or interdealer markets. The participants in such markets are typically not subject to the same level of credit evaluation and regulatory oversight as are members of exchange-based markets. This exposes the Issuer to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Issuer to suffer a loss. Such counterparty risk is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the Issuer has concentrated its transactions with a single or small group of counterparties. The Issuer is not restricted from dealing with any particular counterparty. The lack of a complete and foolproof evaluation of the financial capabilities of the Issuer s counterparties and the absence of a regulated market to facilitate settlement may increase the potential for losses by the Issuer. Due Diligence May Not Reveal All Relevant Facts Before the Issuer makes an investment, the Investment Manager will arrange for such due diligence to be conducted that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. The objective of the due diligence process will be to identify attractive investment opportunities based on the facts and circumstances surrounding an investment. When considering the due diligence, the Investment Manager will be expected to evaluate a number of important business, financial, tax, accounting, and legal issues in determining whether or not the Issuer should proceed with an investment. External consultants, legal advisers, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence, the Investment Manager and the Issuer will be required to rely on the resources available to it, including information provided by the target of the investment and, in some cases, third party investigations. The due diligence process may at times be subjective with respect to newly organized companies or other entities for which only limited information is available. Typically, potential investors in emerging markets have access to less reliable or less detailed fiscal and other information than investors in more developed markets. Accordingly, there can be no assurance that the due diligence process carried out with respect to any investment opportunity will reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. There can also be no assurance that such an investigation will result in an investment being successful. If a potential investee company is publicly quoted, due diligence may be limited to information in the public domain for the reason that access may not be granted to the potential investee company s records. Any warranties provided by the selling shareholders or indemnity cover given may be limited or unavailable because the investment is a primary investment, because of market practice or because the potential investee company is publicly quoted. As a result, the Issuers due diligence into a potential investee company may be the only comfort it receives before committing to a transaction and there is therefore the risk that, following the consummation of a transaction or the making of an investment, liabilities or other unforeseen matters of an adverse nature may come to light which had not been revealed by the due diligence carried out in respect of such transaction or investment. Were this to happen in relation to any of the investments made by the Issuer, it could have an adverse effect on the investment in question, the Portfolio s net asset value, its financial condition and/or results. Dilution M

15 Note Holders subscribing for the Notes after the Closing Date will participate in the existing investments of the Issuer, thereby diluting the indirect interest of existing Note Holders in such investments. Although such subsequent Note Holders will contribute their pro rata share of subscriptions, there can be no assurance that this contribution will reflect the fair value of the Issuer s existing investments at the time that such additional Note Holders make their subscription despite the Issuer s marking-to-market of such existing investments. Failure to Make Capital Calls If a Note Holder fails to make a Capital Call when due and the Capital Call made by nondefaulting Note Holders and short-term borrowings by the Issuer are inadequate to cover the defaulted Capital Call, the Issuer itself may be unable to pay its obligations when due. As a result, the Issuer may be subjected to significant penalties that could materially adversely affect the returns to the non-defaulting Note Holders. Investment Risks Emerging Markets The Issuer will trade in emerging markets. These markets tend to be inefficient and illiquid as well as subject to political and other factors which do not typically affect more developed economies. The Issuer may sustain losses as a result of market inefficiencies or interference in emerging markets which would not take place in more developed markets. The Issuer will invest in sovereign debt issues by emerging market countries as well as in debt and equity investments of companies and other entities in emerging markets. Many emerging markets are developing both economically and politically and may have relatively unstable governments and economies based on only a few commodities or industries. Many emerging market countries do not have firmly established product markets and companies may lack depth of management or may be sovereigns vulnerable to political or economic developments such as nationalization of key industries. Investments in companies and other entities in emerging markets involve a high degree of risk and are speculative. Risks include (i) greater risk of expropriation, confiscatory taxation, nationalization, social and political instability (including the risk of changes of government following elections or otherwise) and economic instability; (ii) the relatively small current size of some of the markets for securities and other investments in emerging markets issuers and the current relatively low volume of trading, resulting in lack of liquidity and in price volatility; (iii) certain national policies which may restrict the Issuer s investment opportunities including restrictions on investing in issuers or industries deemed sensitive to relevant national interests; (iv) the absence of developed legal structures governing private or foreign investment and private property; (v) the potential for higher rates of inflation or hyper-inflation; (vi) currency risk and the imposition, extension or continuation of foreign exchange controls; (vii) interest rate risk; (viii) credit risk; (ix) lower levels of democratic accountability; (x) differences in accounting standards and auditing practices which may result in unreliable financial information; and (xi) different corporate governance frameworks. In addition, custodians in these markets are not able to offer the level of service and safe-keeping, settlement and administration of securities that is customary in more developed markets and there is a risk that the Issuer will not be recognized as the owner of securities held on its behalf by a custodian or sub-custodian. The emerging markets risks described above increase counterparty risks for the Issuer investing in those markets. In addition, investor risk aversion to emerging markets can have a significant adverse effect on the value and/or liquidity of investments made in or exposed to such markets and can accentuate any downward movement in the actual or anticipated value of such investments which is caused by any of the factors described above. Emerging markets have market imperfections, analysis of which requires long experience in the market and a range of complementary specialist skills. These imperfections include (i) the effect of politics on sovereign risk and asset price dynamics; (ii) institutional imperfections in emerging markets, such as deficiencies in formal bureaucracies and historical or cultural norms of behavior at the level of individual economic factors; (iii) the M

16 fact that asset classes in emerging markets are still developing and the information driving markets is a small proportion of the available information, and underlying development and sovereign risk fundamentals may take days, months and sometimes years to impact asset prices; (iv) liquidity imperfections and the unpredictability of market concentration; and (v) information asymmetries, most typically the result of experience and local knowledge and the fact that some market participants have access to relevant market information that others do not. Whilst the Investment Manager will seek to take advantage of these market imperfections to achieve investment performance for the Issuer, it is not guaranteed that it will be able to do so. A failure to do so could have a material adverse affect on the Issuer s business, growth prospects, revenues, results of operations and/or financial condition. As the Issuer will be investing in emerging market investments, the performance of the Notes will be closely related to the condition of emerging markets. Note Holders should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Special Situations and Distressed Securities The Issuer may purchase securities and other obligations of companies that are experiencing significant financial or business distress, including companies involved in bankruptcy or other reorganisation and liquidation proceedings. Although such purchases may result in significant returns, they involve a substantial degree of risk and may not show any return for a considerable period of time. In fact, many of these instruments ordinarily remain unpaid unless and until such companies reorganize and/or emerge from bankruptcy proceedings, and as a result may have to be held for an extended period of time. The level of analytical sophistication, both financial and legal, necessary for successful investment in companies or sovereign issuers experiencing significant business and financial distress is unusually high. There is no assurance that the Investment Manager will correctly evaluate the nature and magnitude of the various factors that could affect the prospects for a successful reorganisation or similar action. The completion of debt and/or equity exchange offers, restructurings, reorganisations, mergers, takeover offers and other transactions can be prevented or delayed, or the terms changed, by a variety of factors. If a proposed transaction appears likely not to be completed or in fact is not completed or is delayed, the market price of the investments purchased by the Issuer may decline sharply and result in losses which could have a material adverse effect on the performance of the Issuer and returns to Note Holders. Moreover, the administrative costs in connection with a bankruptcy or restructuring proceeding are frequently high and will be paid out of the debtor s assets prior to any return to creditors (other than out of assets or proceeds thereof, which may be subject to valid and enforceable liens and other security interests) and equity holders. In addition, certain claims that have priority by law over the claims of certain creditors (for example, claims for taxes) may reduce any entitlement of the Issuer. In any reorganisation or liquidation proceeding relating to a company or sovereign issuance in which the Issuer invests, the Issuer may lose its entire investment or may be required to accept cash or securities with a value less than its original investment. Under such circumstances, the returns generated from such investments may not compensate investors adequately for the risks assumed, which could have a material adverse effect on the performance of the Issuer and returns to Note Holders. Additionally, it is frequently difficult to obtain accurate information as to the condition of such entities. Such investments also may be adversely affected by laws relating to, among other things, fraudulent transfers and other voidable transfers or payments, lender liability and the bankruptcy court s power to disallow, reduce, subordinate or disenfranchise particular claims. The market prices of such securities are also subject to abrupt and erratic market movements and above-average price volatility, and the spread between the bid and offer prices of such securities may be greater than those prevailing in other securities markets. It may take a number of years for the market price of such securities to reflect their intrinsic value. Securities issued by distressed companies or sovereign issuers may have a limited trading market, resulting in limited liquidity. As a result, the Issuer may have difficulties in valuing or liquidating positions, which could have a material adverse effect on the Issuer s performance and returns to Note Holders. Troubled company and other asset-based investments require active monitoring and M

17 may, at times, require participation in business strategy or reorganisation proceedings by the Investment Manager. To the extent that the Investment Manager becomes involved in such proceedings, the Issuer may have a more active participation in the affairs of such company than that assumed generally by an investor. Involvement by the Issuer in a company's reorganisation proceedings could result in the imposition of restrictions limiting the Issuer's ability to liquidate its position in that company. The Issuer will invest in debt, including, without limitation, higher yielding (and, therefore, higher risk) debt securities, when the Investment Manager believes that such debt securities offer opportunities for capital appreciation. In most cases, such debt will be rated below investment grade or will be unrated and face ongoing uncertainties due to exposure to adverse business, financial, or economic conditions and the relevant issuer s failure to make timely interest and principal payments. The market values of certain of these debt securities may reflect individual corporate developments. It is likely that a major economic recession could have a materially adverse impact on the value of such securities. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of these debt securities. Investments of the Issuer The Issuer may invest in a broad array of financial instruments. These may include the financial instruments of foreign entities, which may be both public and private. In addition to the risks associated with investments of this kind in general, such investments may also involve the risks associated with currency fluctuations and various political factors, as described below. The Issuer may also invest in treasury securities and other cash equivalents when attractive opportunities for capital appreciation appear to be limited. Liquidity of the Portfolio Assets The Issuer may invest in securities, loans or other types of financial assets (within the meaning of s.110 of the Irish Taxes Consolidation Act 1997) for which no (or only a limited) liquid market exists or that are subject to legal or other restrictions on transfer. The market prices, if any, for such assets may be volatile, and may 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 or international economic or political events, developments or trends in any particular industry, and the financing condition of the obligors on the Portfolio's assets. The Issuer may not be able to sell assets when it desires to do so or to realise what it perceives to be their fair value in the event of a sale. The sale of illiquid assets often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Investments in Undervalued Securities The identification of investment opportunities in undervalued securities is a difficult task, and there is no assurance that such opportunities will be successfully recognised or acquired. While investments in undervalued securities offer the opportunities for aboveaverage capital appreciation, these investments involve a high degree of financial risk and can result in substantial losses. Returns generated from the Issuer s investments may not adequately compensate for the business and financial risks assumed. The Issuer will make certain investments in securities which the Investment Manager believes to be undervalued. However, there are no assurances that the securities purchased will in fact be undervalued. In addition, the Issuer may be required to hold such securities for a substantial period of time before realizing their anticipated value. Issuer Borrowing The Issuer may use term financing facilities provided by its broker-dealers or may borrow M

18 funds from other sources using other techniques to leverage its securities, which increases both the possibility of realising higher returns and the risk of higher losses. The Issuer does not expect to incur leverage in excess of one and a half times its aggregate net capital. Hedging Transactions Hedging techniques involve one or more of the following risks: (i) imperfect correlation between the performance and value of the instrument and the value of the Issuer securities or other objective of the Investment Manager; (ii) possible lack of a secondary market for closing out a position in such instrument; (iii) losses resulting from interest rate, spread or other market movements not anticipated by the Investment Manager; (iv) the possible obligation to meet additional margin or other payment requirements, all of which could worsen the Issuer s position; and (v) default or refusal to perform on the part of the counterparty with which the Issuer trades. Furthermore, to the extent that any hedging strategy involves the use of over-the-counter ( OTC ) derivatives transactions, such a strategy would be affected by implementation of the various regulations adopted pursuant to the Reform Act. The Investment Manager will not, in general, attempt to hedge all market or other risks inherent in the Issuer s positions, and hedges certain risks, if at all, only partially. Specifically, the Investment Manager may choose not, or may determine that it is economically unattractive, to hedge certain risks either in respect of particular positions or in respect of the Issuer s overall portfolio. The Portfolio composition will commonly result in various directional market risks remaining unhedged. The Investment Manager may rely on diversification to control such risks to the extent that the Investment Manager believes it is desirable to do so; however, the Issuer is not subject to formal diversification policies. The ability of the Issuer to hedge successfully will depend on the ability of the Investment Manager to predict pertinent market movements, which cannot be assured. The Investment Manager is not required to hedge and there can be no assurance that hedging transactions will be available or, even if undertaken, will be effective. In addition, it is not possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-u.s. currencies because the value of those securities is likely to fluctuate as a result of independent factors not related to currency fluctuations. Moreover, it should be noted that the Portfolio will always be exposed to certain risks that cannot be hedged, such as counterparty credit risk. Furthermore, by hedging a particular position, any potential gain from an increase in the value of such position may be limited. Non-Investment Grade Investments The Issuer may purchase financial instruments of, and may make direct loans to, companies that are not of investment grade. The Issuer may purchase loans that may be in default or are from issuers in financial distress or bankruptcy proceedings. The Issuer may also purchase trade or other claims against credit impaired companies, which generally represent money owed by such companies to a supplier of goods and services. Loans or claims purchased by the Issuer may not have any maturity and may be secured or unsecured. As with other types of debt instruments, loans and trade claims involve the risk of loss in case of default or insolvency of the borrower, particularly if the borrowing is unsecured. In addition, trade claims may be subject to other defences such as warranty claims or failure to provide the related product or services. Such loans and trade claims are also less liquid than are the debt instruments of publicly traded companies. Bank Loans and Participations The Portfolio may include bank loans and participations, which may include significant amounts of such obligations. These obligations are subject to unique risks, including: (i) the possible invalidation of an investment transaction as a fraudulent conveyance under relevant creditors' rights laws; (ii) so-called lender liability claims by the issuer of the obligations; (iii) environmental liabilities that may arise with respect to collateral securing the obligations; and (iv) limitations on the ability of the Issuer to directly enforce its rights M

19 with respect to participations. In analyzing each bank loan or participation, the Investment Manager compares the relative significance of the risks involved against the benefits expected to accrue. Successful claims by third parties arising from these and other risks, absent fraud, wilful misconduct or gross negligence by the Investment Manager or affiliates will be borne by the Issuer. The Issuer may experience significant delays in the settlement of certain loan and/or bank debt transactions, particularly in the case of investments that are or become distressed. Until such transactions are settled, the Issuer is subject to counterparty insolvency risk. Pursuant to certain insolvency laws, a counterparty may have the ability to reject or terminate an unsettled loan transaction. If a counterparty rejects an unsettled transaction, the Issuer might lose any increase in value with respect to such loan that accrued while the transaction was unsettled. The Issuer may also invest in loan participations where it will be subject to certain additional risks as a result of having no direct contractual relationship with the borrower of the underlying loan. In such circumstances, the Issuer generally would depend on the lender to enforce its rights and obligations under the loan arrangements in the event of a default by the borrower on the underlying loan and will generally have no voting rights with respect to the borrower, as such rights are typically retained by the lender. Such investments are subject to the credit risk of the lender (as well as the borrower) since they will depend upon the lender forwarding payments of principal and interest received on the underlying loan. There can be no assurance that the lender will not default on its obligations under such arrangements, resulting in substantial losses to the Issuer. Prepayment Risk The frequency at which prepayments (including voluntary prepayments by the obligors and liquidations due to default and foreclosures) occur on loans and other debt underlying certain of the Issuer s investments will be affected by a variety of factors including the prevailing level of interest rates as well as economic, demographic, tax, social, legal and other factors. In general, premium financial instruments (financial instruments whose market values exceed their principal or par amounts) are adversely affected by faster than anticipated prepayments, and discount financial instruments (financial instruments whose principal or par amounts exceed their market values) are adversely affected by slower than anticipated prepayments. Since the Issuer s investments may include discount financial instruments when interest rates are high, and may include premium financial instruments when interest rates are low, such investments may be adversely affected by prepayments in any interest rate environment. Corporate Debt Obligations and High-Yield Securities The Issuer may invest in corporate debt obligations and high-yield securities. The market value of debt securities generally tends to decline as interest rates increase and, conversely, increase as interest rates decline. Debt obligations are subject to the risk of an issuer s inability to meet principal and interest payments on the obligations, i.e., credit risk. High yield bonds and securities, which are rated in the lower rating categories by the various credit rating agencies, are subject to greater risk of loss of principal and interest than higher-rated securities and are generally considered to be speculative. They are also generally considered to be subject to greater risk than securities with higher ratings because the yields and prices of such securities tend to fluctuate more than those for higher-rated instruments and the market for lower-rated securities is less liquid and less active. Leverage of Portfolio Companies Because the Issuer s investments may include securities of companies with leveraged capital structures, such investments will be subject to increased exposure to adverse economic factors such as an increase in interest rates, a downturn in the economy or further deterioration in the economic conditions of such company or its industry. Similarly, the Issuer may invest in entities that are unable to generate sufficient cash flow M

20 to meet principal and interest payments on their indebtedness. Accordingly, the value of the Issuer s investment in such an entity could be significantly reduced or even eliminated due to further credit deterioration. Event-Driven Analysis The success of strategies employing event-driven analysis depends on the successful prediction of whether various corporate events will occur or be consummated. The Issuer may invest in securities of issuers in weak financial condition, experiencing poor operating results, having substantial financial needs or negative net worth, facing special competitive or product obsolescence problems, or issuers that are involved in bankruptcy or reorganization proceedings. Investments of this type involve substantial financial business risks that can result in substantial or total losses. The market prices of such securities are also subject to abrupt and erratic market movements and above average price volatility and the spread between the bid and asked price of such securities may be greater than normally expected. Non-Performing Nature of Loans It is possible that certain of the loans purchased by the Issuer may be non-performing and possibly in default. Furthermore, the obligor and/or relevant guarantor may also be in bankruptcy or liquidation. There can be no assurance as to the amount and timing of payments, if any, with respect to the loans. Nature of Bankruptcy Proceedings There are a number of significant risks when investing in companies involved in bankruptcy proceedings, including the following: First, many events in a bankruptcy are the product of contested matters and adversary proceedings which are beyond the control of the creditors. Second, a bankruptcy filing may have adverse and permanent effects on a company. For instance, the company may lose its market position and key employees and otherwise become incapable of restoring itself as a viable entity. Further, if the proceeding is converted to a liquidation, the liquidation value of the company may not equal the liquidation value that was believed to exist at the time of the investment. Third, the duration of a bankruptcy proceeding is difficult to predict. A creditor s return on investment can be impacted adversely by delays while the plan of reorganisation is being negotiated, approved by the creditors and confirmed by the bankruptcy court, and until it ultimately becomes effective. Fourth, certain claims, such as claims for taxes, wages and certain trade claims, may have priority by law over the claims of certain creditors. Fifth, the administrative costs in connection with a bankruptcy proceeding are frequently high and will be paid out of the debtor s estate prior to any return to creditors. Sixth, creditors can lose their ranking and priority in a variety of circumstances, including if they exercise domination and control over a debtor and other creditors can demonstrate that they have been harmed by such actions. Finally, the Issuer may seek representation on creditors committees and as a member of a creditors committee it may owe certain obligations generally to all creditors similarly situated that the committee represents and may be exposed to liability to such other creditors who disagree with the Issuer's actions. There can be no assurance that the Issuer would be successful in obtaining results most favourable to it in such proceedings, although the Issuer may incur significant legal fees and other expenses in attempting to do so. The Issuer may also be subject to various trading or confidentiality restrictions. If the Investment Manager concludes that the Issuer s membership on a creditors committee entails obligations or restrictions that conflict with the duties the Issuer owes to Note Holders, the Issuer will not seek membership in, or will resign from, that committee. In addition, the Issuer and some of the Investment Manager s other clients may potentially hold conflicting positions in relation to investments in companies involved in bankruptcy proceedings. Investment in the debt of financially distressed companies domiciled outside the United States involves additional risks. Bankruptcy law and process may differ substantially across such countries, resulting in greater uncertainty as to the rights of creditors, the enforceability of such rights, reorganization timing, and the classification, seniority and treatment of claims. In certain developing countries, although bankruptcy laws have been enacted, the process for reorganization remains highly uncertain. M