OFFERING CIRCULAR ACA ABS 2006-1, LIMITED ACA ABS 2006-1, LLC

U.S.$450,000,000 Class A-1LA Floating Rate Notes Due June 2041 U.S.$105,000,000 Class A-1LB Floating Rate Notes Due June 2041 U.S.$80,000,000 Class A-2L Floating Rate Notes Due June 2041 U.S.$40,000,000 Class A-3L Deferrable Floating Rate Notes Due June 2041 U.S.$33,000,000 Class B-1L Floating Rate Notes Due June 2041 42,000,000 Preference Securities, Par Value U.S.$0.001 Per Share

The Notes, consisting of the Class A-1LA Floating Rate Notes Due June 2041 (the "Class A-1LA Notes") in the aggregate principal amount of U.S.$450,000,000, the Class A-1LB Floating Rate Notes Due June 2041 (the "Class A-1LB Notes" and, together with the Class A-1LA Notes, the "Class A-1 Notes") in the aggregate principal amount of U.S.$105,000,000, the Class A-2L Floating Rate Notes Due June 2041 (the "Class A-2L Notes" and, together with the Class A-1 Notes, the "Senior Class A Notes") in the aggregate principal amount of U.S.$80,000,000, the Class A-3L Deferrable Floating Rate Notes Due June 2041 (the "Class A-3L Notes" and, together with the Senior Class A Notes, the "Class A Notes") in the aggregate principal amount of U.S.$40,000,000 and the Class B-1L Floating Rate Notes Due June 2041 (the "Class B-1L Notes" and, together with the Class A Notes, the "Notes") in the aggregate principal amount of U.S.$33,000,000 will be issued by ACA ABS 2006-1, Limited (the "Issuer"), a recently formed exempted company incorporated under the laws of the Cayman Islands, and will be co-issued by ACA ABS 2006-1, LLC, a recently formed Delaware corporation (the "Co-Issuer" and, together with the Issuer, the "Issuers"), on a limited recourse basis as described herein. The 42,000,000 Preference Securities, par value U.S.$0.001 per share (the "Preference Securities" and, together with the Notes, the "Securities") will be issued by the Issuer. (Continued on next page) It is a condition of issuance that each of the Class A-1LA Notes and the Class A-1LB Notes be rated "AAA" by Standard & Poor's Ratings Services, a division of the McGraw Hill Companies ("S&P"), and "Aaa" by Moody's Investors Service, Inc. ("Moody's"), that the Class A-2L Notes be rated at least "AA" by S&P and at least "Aa2" by Moody's, that the Class A-3L Notes be rated at least "A" by S&P and at least "A2" by Moody's, and that the Class B-1L Notes be rated at least "BBB" by S&P and at least "Baa2" by Moody's. The Preference Securities will not be rated by any Rating Agency. See "Ratings of the Notes." This Offering Circular constitutes a prospectus (the "Prospectus") for the purposes of Directive 2003/17/EC (the "Prospectus Directive"). References throughout this document to the "Offering Circular" shall be taken to read "Prospectus" for such purpose. Application has been made to the Irish Financial Services Regulatory Authority (the "Financial Regulator in Ireland"), as compentent authority under the Prospectus Directive, for the Prospectus to be approved. Such approval relates only to the Notes which are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of Directive 93/22/EEC or which are to be offered to the public in any Member State of the European Economic Area. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to trading on its regulated market. There can be no assurance that any such admission will be granted or maintained. This Offering Circular constitutes the listing particulars (the "Listing Particulars") for the purposes of the application of the Preference Securities to the Official List and the unregulated market of the Irish Stock Exchange. Application has been made to the Irish Stock Exchange for the Preference Securities to be admitted to the Official List and to trading on its unregulated market. There can be no assurance that any such admission will be granted or maintained. For certain factors to be considered in connection with an investment in the Notes, see "Risk Factors" and "Notices to Purchasers." No.: ____________________________ Recipient: ___________________________ This Offering Circular is intended for the exclusive use of the recipient whose name appears above and such recipient's advisors, and may not be reproduced or used for any other purpose or furnished to any other party. The Securities are being offered in registered form (i) to "qualified institutional buyers" within the meaning of Rule l44A ("Rule 144A") under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, in the case of the Preference Securities, to "accredited investors" within the meaning of Rule 501(a) under the Securities Act, all of whom are also "qualified purchasers" within the meaning of Section 3(c)(7) of the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act"), which includes, without limitation, "knowledgeable employees" as defined in Rule 3c-5 under the Investment Company Act, with respect to the Issuer and (ii) to certain persons in transactions outside the United States in reliance on Regulation S under the Securities Act. ________________________________ THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, AND NEITHER OF THE ISSUERS HAS BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT. THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT TO "QUALIFIED INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND, IN THE CASE OF THE PREFERENCE SECURITIES, TO "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT). THE SECURITIES MAY ALSO BE OFFERED OR SOLD TO CERTAIN PERSONS IN TRANSACTIONS OUTSIDE THE UNITED STATES IN RELIANCE ON REGULATION S. THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO U.S. PERSONS EXCEPT TO "QUALIFIED PURCHASERS" (WITHIN THE MEANING OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT), WHICH INCLUDES "KNOWLEDGEABLE EMPLOYEES" (AS DEFINED IN RULE 3c-5 UNDER THE INVESTMENT COMPANY ACT) WITH RESPECT TO THE ISSUER, IN A TRANSACTION THAT DOES NOT CAUSE EITHER OF THE ISSUERS OR THE POOL OF COLLATERAL (AS DEFINED HEREIN) TO BE REQUIRED TO REGISTER UNDER THE INVESTMENT COMPANY ACT. FOR CERTAIN RESTRICTIONS ON RESALE SEE "TRANSFER RESTRICTIONS." ________________________________ The Securities are offered by the Issuers through Bear, Stearns & Co., Inc. (the "Initial Purchaser") to prospective purchasers from time to time in negotiated transactions at varying prices to be determined in each case at the time of sale. The Securities are offered when, as and if issued by the Issuers, subject to prior sale or withdrawal, cancellation or modification of the offer without notice and subject to approval of certain legal matters by counsel and certain other conditions. The Initial Purchaser reserves the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Securities will be made on or about April 27, 2006 (the "Closing Date"), against payment in immediately available funds. See "Plan of Distribution." ________________________________ It is expected that the Securities sold to Non-U.S. Persons, if any, will be represented on the Closing Date by global securities, which will be deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company ("DTC") for the accounts of Euroclear Bank S.A./N.V., as operator of the

Euroclear System ("Euroclear") and Clearstream Banking socit anonyme ("Clearstream") registered in the nominee name of the depository bank. It is expected that the Notes sold to U.S. Persons, if any, will be delivered in book-entry form only through the facilities of The Depository Trust Company and that the Preference Securities sold to U.S. Persons will be represented by definitive Preference Security certificates in fully registered form registered in the name of the beneficial owner thereof.

Bear, Stearns & Co. Inc.

This Offering Circular is dated May 31, 2006

(continued from previous page) ACA Management, L.L.C., a Delaware limited liability company ("ACA Management" or the "Collateral Manager"), will perform certain administrative and management services for the Issuer, including the selection of the Collateral Debt Securities (as defined herein). The Issuers have no significant operating history, and the activities of the Issuer will be limited as described herein. The Issuer will receive all of the net proceeds of the offering of the Securities, which will be used by the Issuer to purchase the Collateral Debt Securities, to pay organizational expenses, fees and expenses of the issuance of the Securities and other permitted fees and expenses described herein. The Class A-1LA Notes, the Class A-1LB Notes, the Class A-2L Notes, the Class A-3L Notes and the Class B-1L Notes will provide for the payment of periodic interest (to the extent of funds available therefor as described herein) for each Interest Period (as defined herein) at the rate of 0.31%, 0.44%, 0.57%, 1.55% and 3.25% per annum, respectively, above the London interbank offered rate for threemonth (or an interpolated rate, in the case of the initial Interest Period) U.S. dollar deposits ("LIBOR") (determined as described herein). Such payments are to be made in each case at the times and subject to the priority of payments described herein. Principal of the Notes will be payable at the times, in the amounts, and subject to the priority of payments described herein. The Notes are subject to redemption at the times and under the circumstances described herein, including, without limitation, Optional Redemption, Tax Redemption, Auction Call Redemption, Coverage Failure Redemption and Rating Confirmation Failure Redemption as described herein. The Co-Issuers accept responsibility for the information contained in this document (except with respect to the information contained in the section entitled "The Collateral Manager" for which the Collateral Manager takes sole responsibility). To the best knowledge and belief of the Co-Issuers, having taken all reasonable care to ensure that such is the case, 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. To the best knowledge and belief of the Collateral Manager, having taken all reasonable care to ensure that such is the case, the information contained in the section entitled "The Collateral Manager" is in accordance with the facts and does not omit anything likely to affect the import of such information. The Notes are limited recourse obligations of the Issuers, payable solely from the proceeds of the Collateral described herein. Payments on the Class B-1L Notes are subordinated to payments on the Class A Notes, payments on the Class A-3L Notes are subordinated to payments on the Senior Class A Notes, payments on the Class A-2L Notes are subordinated to payments on the Class A-1 Notes, payments of principal on the Class A-1LB Notes are subordinated to payments of principal on the Class A-1LA Notes, and payments of interest on the Class A-1LB Notes are pari passu with payments of interest on the Class A-1LA Notes, in each case to the extent described herein. Notwithstanding such subordination, until the occurrence of a Sequential Payment Triggering Event, principal of the Notes will be paid pro rata in certain circumstances as described herein under "Risk FactorsPro Rata Payment of Notes Prior to a Sequential Payment Triggering Event." To the extent that proceeds of the Collateral are insufficient to pay in full all amounts due on the Notes, the Issuers shall have no further obligations in respect of the Notes and any sums outstanding and unpaid shall be extinguished. The Preference Securities represent equity interests in the Issuer and do not constitute obligations of either of the Issuers. The Preference Securities do not represent interests in or obligations of, and are not guaranteed or secured by the assets of, the Collateral Manager, the Trustee, the Administrator, the Security Trustee, the Preference Security Paying Agent, the Initial Purchaser or any of their respective Affiliates. Payments with respect to the Preference Securities will be payable only to the extent that funds are available in accordance with the Priority of Payments. Payment of interest on the Notes will be senior to payments of any Excess Interest Proceeds (as defined herein) in respect of the Preference Securities,

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and payments of principal on the Notes will be senior to payment of any Excess Total Proceeds (as defined herein) in respect of the Preference Securities.

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NOTICES TO PURCHASERS THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES, OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS, UNLESS A REGISTRATION STATEMENT WITH RESPECT THERETO IS THEN EFFECTIVE UNDER THE SECURITIES ACT OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. THE ISSUERS HAVE NO OBLIGATION OR CURRENT INTENTION TO EFFECT SUCH REGISTRATION. THE ISSUERS ARE RELYING ON AN EXCLUSION FROM REGISTRATION UNDER THE INVESTMENT COMPANY ACT, AND NO TRANSFER OF A SECURITY MAY BE MADE THAT WOULD CAUSE EITHER OF THE ISSUERS OR THE POOL OF COLLATERAL TO BECOME SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE INVESTMENT COMPANY ACT. THE SECURITIES ARE ALSO SUBJECT TO CERTAIN OTHER RESTRICTIONS ON TRANSFER DESCRIBED HEREIN. PROSPECTIVE PURCHASERS OF THE SECURITIES SHOULD PROCEED ON THE ASSUMPTION THAT THEY MUST HOLD THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE PURCHASER OF A SECURITY, BY ITS ACCEPTANCE THEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES THAT IT WILL NOT RESELL, PLEDGE OR OTHERWISE TRANSFER SUCH SECURITY, EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND EXCEPT (A) IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE l44A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, WHOM THE SELLER HAS INFORMED, IN EACH CASE, THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, PROVIDED THAT SUCH PURCHASER DELIVERS ALL DOCUMENTS AND CERTIFICATIONS AS THE ISSUERS OR THE TRUSTEE MAY REASONABLY REQUEST; (B) IN THE CASE OF THE PREFERENCE SECURITIES, TO AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND, IF REQUESTED BY THE ISSUER, UPON DELIVERY OF AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE ISSUER AND SUCH OTHER DOCUMENTS AND CERTIFICATIONS AS THE ISSUER OR THE PREFERENCE SECURITY PAYING AGENT MAY REASONABLY REQUEST); (C) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, PROVIDED THAT SUCH PURCHASER DELIVERS ALL DOCUMENTS AND CERTIFICATIONS AS THE ISSUERS OR THE TRUSTEE MAY REASONABLY REQUEST; OR (D) TO THE ISSUERS OR THEIR AFFILIATES; IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES AND ANY OTHER JURISDICTION. IN ADDITION, THE PURCHASER OF A SECURITY, BY ITS ACCEPTANCE THEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES THAT IT WILL NOT RESELL, PLEDGE OR OTHERWISE TRANSFER SUCH SECURITY (OTHER THAN TO A NON-U.S. PERSON IN AN "OFFSHORE TRANSACTION" IN COMPLIANCE WITH REGULATION S), EXCEPT TO A "QUALIFIED PURCHASER" WITHIN THE MEANING OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT WHICH INCLUDES A "KNOWLEDGEABLE EMPLOYEE" AS DEFINED IN RULE 3c-5 UNDER THE INVESTMENT COMPANY ACT WITH RESPECT TO THE ISSUER, IN EACH CASE, IN A TRANSACTION THAT DOES NOT CAUSE EITHER OF THE ISSUERS OR THE POOL OF COLLATERAL TO BE REQUIRED TO REGISTER UNDER THE INVESTMENT COMPANY ACT AND WILL ALSO BE DEEMED TO HAVE MADE THE

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REPRESENTATIONS SET FORTH UNDER "TRANSFER RESTRICTIONS." FURTHER, THE NOTES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). THE PREFERENCE SECURITIES MAY NOT BE SOLD OR TRANSFERRED TO ANY BENEFIT PLAN INVESTOR (AS DEFINED HEREIN) EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH HEREIN UNDER "ERISA CONSIDERATIONS". THE NOTES ARE LIMITED RECOURSE OBLIGATIONS OF THE ISSUERS. THE PREFERENCE SECURITIES REPRESENT EQUITY INTERESTS IN THE ISSUER AND DO NOT CONSTITUTE OBLIGATIONS OF EITHER OF THE ISSUERS. PRINCIPAL OF AND INTEREST ON THE NOTES AND DISTRIBUTIONS IN RESPECT OF THE PREFERENCE SECURITIES WILL BE PAID SOLELY FROM AND TO THE EXTENT OF THE AVAILABLE PROCEEDS FROM THE DISTRIBUTIONS ON THE COLLATERAL DEBT SECURITIES (AS DEFINED HEREIN) AND AMOUNTS ON DEPOSIT IN THE ACCOUNTS, WHICH ARE THE ONLY SOURCE OF PAYMENT OF PRINCIPAL OF, INTEREST ON AND OTHER AMOUNTS PAYABLE IN RESPECT OF THE SECURITIES. TO THE EXTENT SUCH SOURCES OF PAYMENT ARE INSUFFICIENT TO PAY IN FULL ALL AMOUNTS DUE ON THE NOTES, THE ISSUERS SHALL HAVE NO FURTHER OBLIGATIONS IN RESPECT OF THE SECURITIES AND ANY SUMS OUTSTANDING AND UNPAID SHALL BE EXTINGUISHED. FOR THESE REASONS, AMONG OTHERS, AN INVESTMENT IN THE SECURITIES IS NOT SUITABLE FOR ALL INVESTORS AND IS APPROPRIATE ONLY FOR AN INVESTOR CAPABLE OF (A) ANALYZING AND ASSESSING THE RISKS ASSOCIATED WITH DEFAULTS, LOSSES AND RECOVERIES ON, REINVESTMENT OF PROCEEDS OF AND OTHER CHARACTERISTICS OF, DEBT SECURITIES SUCH AS THE COLLATERAL DEBT SECURITIES, AND (B) BEARING SUCH RISKS AND FINANCIAL CONSEQUENCES THEREOF AS THEY RELATE TO AN INVESTMENT IN THE SECURITIES. EACH PURCHASER OF A SECURITY BY ITS ACCEPTANCE THEREOF ACKNOWLEDGES THAT IT IS USING ITS INDEPENDENT JUDGMENT IN ASSESSING THE OPPORTUNITIES AND RISKS PRESENTED BY THE SECURITIES FOR ITS INVESTMENT PORTFOLIO AND IN DETERMINING WHETHER THE ACQUISITION IS SUITABLE AND COMPLIES WITH SUCH PURCHASER'S INVESTMENT OBJECTIVES AND POLICIES. EXCEPT AS SET FORTH IN THIS OFFERING CIRCULAR, NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFERING CIRCULAR AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION OR TO ANY PERSON WHO HAS NOT RECEIVED A COPY OF EACH CURRENT AMENDMENT OR SUPPLEMENT HERETO, IF ANY. THIS OFFERING CIRCULAR IS FURNISHED ON A CONFIDENTIAL BASIS SOLELY FOR THE PURPOSE OF EVALUATING THE INVESTMENT OFFERED HEREBY. THE INFORMATION CONTAINED HEREIN MAY NOT BE REPRODUCED OR USED IN WHOLE OR IN PART FOR ANY OTHER PURPOSE.

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NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EFFECTIVE FROM THE DATE OF COMMENCEMENT OF DISCUSSIONS, RECIPIENTS OF THIS OFFERING CIRCULAR AND EACH EMPLOYEE, REPRESENTATIVE OR OTHER AGENT OF ANY SUCH RECIPIENT MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION OF ANY KIND, THE U.S. TAX TREATMENT AND TAX STRUCTURE OF THIS OFFERING AND ALL MATERIALS OF ANY KIND, INCLUDING OPINIONS OR OTHER TAX ANALYSES, THAT ARE PROVIDED TO THE RECIPIENTS RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE. HOWEVER, ANY SUCH INFORMATION RELATING TO THE TAX TREATMENT OR TAX STRUCTURE IS REQUIRED TO BE KEPT CONFIDENTIAL TO THE EXTENT NECESSARY TO COMPLY WITH ANY APPLICABLE FEDERAL OR STATE SECURITIES LAWS. FURTHERMORE, THIS AUTHORIZATION TO DISCLOSE SUCH TAX TREATMENT AND TAX STRUCTURE DOES NOT PERMIT DISCLOSURE OF INFORMATION IDENTIFYING THE ISSUERS, THE COLLATERAL MANAGER OR ANY OTHER PARTY TO THE TRANSACTION, THIS OFFERING OR THE PRICING (EXCEPT TO THE EXTENT PRICING IS RELEVANT TO TAX STRUCTURE OR TAX TREATMENT) OF THIS OFFERING. THE SECURITIES ARE BEING OFFERED ONLY TO A LIMITED NUMBER OF INVESTORS THAT ARE WILLING AND ABLE TO CONDUCT AN INDEPENDENT INVESTIGATION OF THE CHARACTERISTICS OF THE SECURITIES AND RISKS OF OWNERSHIP OF THE SECURITIES. IT IS EXPECTED THAT PROSPECTIVE INVESTORS INTERESTED IN PARTICIPATING IN THIS OFFERING WILL CONDUCT AN INDEPENDENT INVESTIGATION OF THE RISKS POSED BY AN INVESTMENT IN THE SECURITIES. OFFICERS AND OTHER REPRESENTATIVES OF THE ISSUERS AND THE INITIAL PURCHASER WILL BE AVAILABLE TO ANSWER QUESTIONS CONCERNING THE ISSUERS, THE SECURITIES AND THE COLLATERAL AND WILL, UPON REQUEST, MAKE AVAILABLE SUCH OTHER INFORMATION AS INVESTORS MAY REASONABLY REQUEST. THIS OFFERING CIRCULAR IS NOT INTENDED TO FURNISH LEGAL, REGULATORY, TAX, ACCOUNTING, INVESTMENT OR OTHER ADVICE TO ANY PROSPECTIVE PURCHASER OF THE SECURITIES. THIS OFFERING CIRCULAR SHOULD BE REVIEWED BY EACH PROSPECTIVE PURCHASER AND ITS LEGAL, REGULATORY, TAX, ACCOUNTING, INVESTMENT AND OTHER ADVISORS. INVESTORS WHOSE INVESTMENT AUTHORITY IS SUBJECT TO LEGAL RESTRICTIONS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT THE SECURITIES CONSTITUTE LEGAL INVESTMENTS FOR THEM. NO INVITATION MAY BE MADE TO THE PUBLIC IN THE CAYMAN ISLANDS TO SUBSCRIBE FOR THE SECURITIES. THE INITIAL PURCHASER AND THE ISSUERS: (A) HAVE 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 FINANCIAL SERVICES AND MARKETS ACT 2000 ("FSMA")) RECEIVED BY THEM IN CONNECTION WITH THE ISSUE OR SALE OF ANY OFFERED SECURITIES IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO THE ISSUER; AND (B) HAVE COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA WITH RESPECT TO ANYTHING DONE BY THEM IN RELATION TO THE OFFERED SECURITIES IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.

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NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. THE DISTRIBUTION OF THIS OFFERING CIRCULAR AND THE OFFER OR SALE OF SECURITIES MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. NONE OF THE ISSUER, THE CO-ISSUER, THE COLLATERAL MANAGER OR THE INITIAL PURCHASER REPRESENTS THAT THIS DOCUMENT MAY BE LAWFULLY DISTRIBUTED, OR THAT ANY SECURITIES 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 ASSUMES ANY RESPONSIBILITY FOR FACILITATING ANY SUCH DISTRIBUTION OR OFFERING. IN PARTICULAR, NO ACTION HAS BEEN TAKEN BY THE ISSUER, THE CO-ISSUER, THE COLLATERAL MANAGER OR THE INITIAL PURCHASER THAT WOULD PERMIT A PUBLIC OFFERING OF ANY SECURITIES OR DISTRIBUTION OF THIS DOCUMENT IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED. ACCORDINGLY, NO SECURITIES MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, AND NEITHER THIS OFFERING CIRCULAR NOR ANY ADVERTISEMENT OR OTHER OFFERING MATERIAL MAY BE DISTRIBUTED OR PUBLISHED IN ANY JURISDICTION, EXCEPT UNDER CIRCUMSTANCES THAT WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS. PERSONS INTO WHOSE POSSESSION THIS OFFERING CIRCULAR OR ANY SECURITIES COME MUST INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH RESTRICTIONS. THE TRUSTEE AND ITS AFFILIATES HAVE NOT PARTICIPATED IN THE PREPARATION OF THIS OFFERING CIRCULAR AND DO NOT ASSUME ANY RESPONSIBILITY FOR ITS CONTENTS. _________________ AVAILABLE INFORMATION This Offering Circular contains summaries of certain documents. The summaries do not purport to be complete and are qualified in their entirety by reference to such documents, copies of which will be made available to offerees upon request. Requests and inquiries regarding this Offering Circular and such documents should be directed to Bear, Stearns & Co. Inc., 383 Madison Avenue, 7th Floor, New York, New York 10179, Attention: CDO Group. To permit compliance with Rule 144A in connection with resales of the Securities, the Issuers under the Indenture, and the Issuer under the Preference Security Paying Agency Agreement, as the case may be, will be required to furnish upon request of a holder of a Security to such holder and a prospective purchaser designated by such holder, the information required to be delivered under Rule 144A(d)(4)

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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 Securities Exchange Act of 1934, as amended (the "Exchange Act"), or is not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. Such information may be obtained from (a) in the case of the Notes, the Trustee or (b) in the case of the Preference Securities, the Preference Security Paying Agent. It is not contemplated that either of the Issuers will be such a reporting company or so exempt. _________________ FORWARD LOOKING STATEMENTS Any projections, forecasts and estimates contained herein are forward looking statements and are based upon certain assumptions specified herein. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. Accordingly, the projections are only an estimate. Actual results may vary from the projections, and the variations may be material. Some important factors that could cause actual results to differ materially from those in any forward looking statements include changes in interest rates, market, financial or legal uncertainties, differences in the actual allocation of the Collateral Debt Securities among asset categories from those assumed, the timing of acquisitions of the Collateral Debt Securities, the timing and frequency of defaults on the Collateral Debt Securities, mismatches between the timing of accrual and receipt of Interest Proceeds and Principal Proceeds from the Collateral Debt Securities and defaults under Collateral Debt Securities, among others. Consequently, the inclusion of projections herein should not be regarded as a representation by the Issuers, the Collateral Manager, the Collateral Administrator, the Preference Security Paying Agent, the Trustee, the Initial Purchaser or any of their respective affiliates or any other Person of the results that will actually be achieved by the Issuer. None of the Issuer, the Co-Issuer, the Collateral Manager, the Collateral Administrator, the Preference Security Paying Agent, the Initial Purchaser, the Trustee and any of their respective affiliates has any obligation to update or otherwise revise any projections, including any revisions to reflect changes in economic conditions or other circumstances arising after the date hereof or to reflect the occurrence of unanticipated events, even if the underlying assumptions do not come to fruition. _________________ DEFINED TERMS A glossary and index of defined terms used in this Offering Circular may be found in Annex 1 and Annex 2 hereof.

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SUMMARY OF TERMS The following summary is qualified in its entirety by, and is subject to, the detailed information contained elsewhere in this Offering Circular (this "Offering Circular"). See "Risk Factors" for a discussion of certain factors that should be considered in connection with an investment in the Securities. A glossary of defined terms and an index of defined terms appear at the end of this Offering Circular. The Securities The Notes. The Issuers will issue notes with an aggregate initial principal balance of U.S.$708,000,000 consisting of the following classes (each, a "Class"): (i) U.S.$450,000,000 Class A-1LA Floating Rate Notes due June 2041 (the "Class A-1LA Notes"); (ii) U.S.$105,000,000 Class A-1LB Floating Rate Notes due June 2041 (the "Class A-1LB Notes" and, together with the Class A-1LA Notes, the "Class A-1 Notes"); (iii) U.S.$80,000,000 Class A-2L Floating Rate Notes due June 2041 (the "Class A-2L Notes" and, together with the Class A-1 Notes, the "Senior Class A Notes"); (iv) U.S.$40,000,000 Class A-3L Deferrable Floating Rate Notes due June 2041 (the "Class A-3L Notes" and, together with the Senior Class A Notes, the "Class A Notes"); and (v) U.S.$33,000,000 Class B-1L Floating Rate Notes due June 2041 (the "Class B-1L Notes" and, together with the Class A Notes, the "Notes"). The entire principal amount of each Class of Notes will be issued on the Closing Date. The Issuers will issue the Notes pursuant to an indenture (the "Indenture"), dated as of April 27, 2006, among the Issuers and Wells Fargo Bank, National Association, as trustee (the "Trustee"). The Notes will be limited recourse debt obligations of the Issuers, and all amounts payable in respect of the Notes will be paid solely from and to the extent of the available proceeds from the Collateral. To the extent the available proceeds from the Collateral are insufficient to pay all amounts due on the Notes, the Issuers will have no further obligations in respect of the Notes, and any amounts outstanding and unpaid will be extinguished. The Preference Securities. The Issuer will also issue 42,000,000 Preference Securities, par value U.S. $0.001 per share (the "Preference Securities" and, together with the Notes, the "Securities") on the Closing Date. The Issuer will issue the Preference Securities pursuant to its Amended and Restated Memorandum and Articles of Association (the "Issuer Charter") and in accordance with certain resolutions of the board of directors of the Issuer passed on or before the issuance of the Preference Securities as memorialized in the board minutes relating thereto (the "Resolutions") and will enter into the Preference Security Paying Agency Agreement, dated as of April 27, 2006 (the "Preference Security Paying Agency Agreement" and, together with the Issuer Charter and the Resolutions, the "Preference Security Documents"), among the Issuer, Wells Fargo Bank,

National Association, as Preference Security paying agent (in such capacity, the "Preference Security Paying Agent") and Maples Finance Limited, as Security Registrar (in such capacity, the "Security Registrar"). The Preference Securities are equity interests in the Issuer and are not obligations of the Issuer. Although the Preference Securities will not be secured by the Collateral, all amounts payable in respect of the Preference Securities will be paid solely from and to the extent of the available proceeds from the Collateral. Holders of the Preference Securities will not be entitled to payments upon redemption or winding up of the Issuer until all of the Notes have been paid in full and all of the other obligations of the Issuer have been satisfied. The Issuer ACA ABS 2006-1, Limited (the "Issuer") is a recently formed exempted company with limited liability incorporated under the laws of the Cayman Islands. The activities of the Issuer will be limited to (i) acquiring and disposing of, and investing in, Collateral Debt Securities and certain other assets pledged by the Issuer under the Indenture, (ii) entering into and performing its obligations under the Indenture and the other transaction documents referred to therein to which it is a party, (iii) issuing and selling the Securities, (iv) pledging the Collateral as security for its obligations in respect of the Notes and otherwise for the benefit and security of the holders of the Notes (the "Noteholders"), the Collateral Manager and the Trustee (the "Secured Parties"), (v) owning the shares of the Co-Issuer and (vi) engaging in certain related transactions. The Issuer will not have any substantial assets other than the Collateral Debt Securities, Eligible Investments and its rights under the Collateral Management Agreement, the Closing Date Interest Rate Cap Agreement and certain other agreements described herein. ACA ABS 2006-1, LLC is a recently formed Delaware limited liability company (the "Co-Issuer" and, together with the Issuer, the "Issuers"), which was organized for the sole purpose of coissuing the Notes. The Co-Issuer, which is a wholly-owned subsidiary of the Issuer, will not have any substantial assets and will not pledge any assets to secure the Notes. ACA Management, L.L.C., a Delaware limited liability company ("ACA Management"), will enter into a Collateral Management Agreement with the Issuer (the "Collateral Management Agreement"), pursuant to which the Collateral Manager will manage the selection, acquisition and disposition of, and the investment in, the Collateral Debt Securities (including exercising rights and remedies associated with the Collateral Debt Securities) in accordance with the terms of the Indenture and the Collateral Management Agreement and based on the Collateral Manager's research, credit analysis and judgment. The Collateral Manager will also monitor the

The Co-Issuer

The Collateral Manager

Closing Date Interest Rate Cap Agreement and the Collateral Debt Securities. See "The Collateral Manager" and "The Collateral Management Agreement." The Collateral Manager has indicated that it and/or its Affiliates are expected to acquire approximately 5% of the Preference Securities issued on the Closing Date; provided that the Collateral Manager and such Affiliates will be under no obligation to continue to hold or refrain from pledging such Preference Securities. Closing Date Stated Maturity of the Notes The Securities are expected to be issued on April 27, 2006 (the "Closing Date"). Each Class of Notes will mature at par on the Payment Date in June 2041 (the "Stated Maturity"), unless such Notes are redeemed or otherwise paid in full prior thereto. The average life of each Class of the Notes is expected to be shorter than the number of years to the Stated Maturity. See "Risk Factors Average Life, Prepayment Considerations and Early Redemption" and "Maturity and Prepayment Considerations." General. Each Class of Notes will bear interest calculated on its aggregate outstanding principal amount, at a per annum floating rate, equal to the sum of LIBOR (calculated as described herein "LIBOR") for the relevant period and the applicable margin specified below: Margin Class A-1LA Notes ............. 0.31% Class A-1LB Notes.............. 0.44% Class A-2L Notes ................ 0.57% Class A-3L Notes ................ 1.55% Class B-1L Notes ................ 3.25% See "Description of the NotesInterest" and "Calculation of LIBOR." The Notes will accrue interest from the Closing Date. Interest on the Notes will be payable quarterly in arrears on March 10, June 10, September 10 and December 10 of each year commencing in September, 2006 (each such date, a "Payment Date") if and to the extent that funds are available on such Payment Date in accordance with the Priority of Payments set forth herein, provided that if any such date is not a Business Day, the relevant Payment Date will be the next succeeding Business Day. The period from (and including) the Closing Date to (but excluding) the September 2006 Payment Date, and each successive period from (and including) the Payment Date immediately following the last day of the immediately preceding Interest Period to (but

Interest Payments on the Notes

excluding) the next succeeding Payment Date, is an "Interest Period." Interest on the Notes will be calculated on the basis of the actual number of days elapsed in the applicable Interest Period divided by 360. Senior Class A Notes. Interest on the Class A-1 Notes will be payable pari passu between the Class A-1LA Notes and the Class A-1LB Notes as described herein. No interest will be payable in respect of the Class A-2L Notes on any Payment Date unless the Holders of the Class A-1 Notes have been paid all accrued and unpaid interest due to them on such Payment Date in accordance with the Priority of Payments. See "Description of the NotesPriority of PaymentsInterest Proceeds" herein. Class A-3L Notes. No interest will be payable in respect of the Class A-3L Notes on any Payment Date unless (i) the Holders of the Senior Class A Notes have been paid all accrued and unpaid interest due to them on such Payment Date in accordance with the Priority of Payments and (ii) the Overcollateralization Test with respect to the Senior Class A Notes has been satisfied. See "Description of the NotesPriority of PaymentsInterest Proceeds" herein. So long as any Senior Class A Notes are outstanding, the failure on any Payment Date to make payment in respect of interest on the Class A-3L Notes by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Any interest on the Class A-3L Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as "Class A-3L Deferred Interest"). Any Class A-3L Deferred Interest will be added to the aggregate outstanding principal amount of the Class A-3L Notes, and thereafter interest will accrue at the Class A-3L Note Interest Rate on the aggregate outstanding principal amount of the Class A-3L Notes, as so increased. Unless otherwise specified herein, any reference to the principal amount of a Class A-3L Note includes any Class A-3L Deferred Interest added thereto. Notwithstanding the foregoing, Class A-3L Deferred Interest will not be included in the principal amount of the Class A-3L Notes for purposes of calculating the Overcollateralization Tests. Class B-1L Notes. No interest will be payable in respect of the Class B-1L Notes on any Payment Date unless (i) the Holders of the Class A Notes have been paid all accrued and unpaid interest due to them on such Payment Date in accordance with the Priority of Payments and (ii) the Overcollateralization Tests with respect to the Senior Class A Notes and the Class A Notes and the Class A Interest Coverage Test have been satisfied. See "Description of the NotesPriority of PaymentsInterest

Proceeds" herein. So long as any Class A Notes are outstanding, the failure on any Payment Date to make payment in respect of interest on the Class B-1L Notes by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Any interest on the Class B-1L Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as "Class B-1L Deferred Interest" and, together with the Class A-3L Deferred Interest, the "Deferred Interest"). Any Class B-1L Deferred Interest will be added to the aggregate outstanding principal amount of the Class B-1L Notes, and thereafter interest will accrue at the Class B-1L Note Interest Rate on the aggregate outstanding principal amount of the Class B-1L Notes, as so increased. Unless otherwise specified herein, any reference to the principal amount of a Class B-1L Note includes any Class B1L Deferred Interest added thereto. Notwithstanding the foregoing, Class B-1L, Deferred Interest will not be included in the principal amount of the Class B-1L Notes for purposes of calculating the Overcollateralization Tests. Payments of Principal General. On each Payment Date until a Sequential Payment Triggering Event occurs and except as otherwise described herein, principal of each Class of Notes will be payable (to the extent funds are available therefor in accordance with the Priority of Payments) on a pro rata basis (based on the aggregate outstanding principal amount of each Class of Notes, excluding Deferred Interest, as of the last day of the applicable Due Period) until the aggregate principal amount of the Notes has been paid in full. However, upon the occurrence of a Sequential Payment Triggering Event or in connection with a Mandatory Redemption, principal of the Notes will be payable (to the extent funds are available therefor in accordance with the Priority of Payments) first, to the Class A-1LA Notes, second, to the Class A-1LB Notes, third, to the Class A-2L Notes, fourth, to the Class A-3L Notes and fifth, to the Class B-1L Notes, in that order, until the aggregate principal amount of each such Class of Notes is paid in full, or in the case of a Mandatory Redemption, to the extent necessary to satisfy the Overcollateralization Tests and Interest Coverage Tests or to receive a Rating Confirmation, as applicable. All outstanding principal of each Class of Notes, together with the other amounts described herein, will be due and payable on the Final Payment Date. See "Description of the NotesPriority of PaymentsPrincipal Proceeds" and " Payments upon Redemption or Following an Acceleration" herein. Class B-1L Turbo Payment. On each Payment Date on or after the Payment Date occurring in December, 2006 the Class B-1L Notes will be entitled to receive a payment (to the extent funds are available therefor in accordance with the Priority of 5

Payments) in an amount equal to 55% of the Remaining Interest Proceeds (the "Class B-1L Turbo Payment"). See "Description of the NotesPriority of PaymentsInterest Proceeds" herein. Principal Terms of the Preference Securities Distributions of Interest Proceeds. The Preference Securities will not bear interest, but holders of the Preference Securities will be entitled (to the extent legally permitted under Cayman Islands law) to receive distributions in an amount equal to the Interest Proceeds, if any, distributable to them in accordance with the Priority of Payments under "Description of the NotesPriority of Payments" and "Description of the Preference Securities Distributions." No distributions of Interest Proceeds will be made in respect of the Preference Securities on any Payment Date unless Holders of the Notes have been paid all accrued and unpaid interest due to them on such Payment Date and certain expenses of the Issuers are paid in full. Any Interest Proceeds remaining after such payments will, to the extent available to pay such amounts in accordance with the Priority of Payments, be distributed to pay the Current Target Return Payment to Holders of the Preference Securities, the Class B-1L Turbo Payment (if applicable on such date) and any remaining unpaid Administrative Expenses (including indemnities), in that order, and then will be distributed to Holders of the Preference Securities (i) on each Payment Date after the first Payment Date until the Class B-1L Notes have been paid in full, in an amount up to 35% of the Remaining Interest Proceeds and (ii) on the first Payment Date and on each Payment Date after the Class B-1L Notes have been paid in full, (a) in an amount equal to 90% of any undistributed Interest Proceeds if the IRR Test is not satisfied on such Payment Date or (b) in an amount equal to 80% of any undistributed Interest Proceeds if the IRR Test is satisfied on such Payment Date. Any such remaining Interest Proceeds not so distributed to Holders of the Preference Securities will be paid to the Collateral Manager as part of the Collateral Manager Incentive Allocation. See "Description of the NotesPriority of Payments" and "Description of the Preference Securities Distributions". Distributions of Principal Proceeds; Total Proceeds. Holders of the Preference Securities will not be entitled to receive Principal Proceeds by way of dividend and/or payment upon redemption until all of the Notes have been redeemed or otherwise repaid in full, and all fees and expenses have been paid. On any Redemption Date, the Final Payment Date, an Accelerated Payment Date or any Post-Acceleration Payment Date, 100% of the Total Proceeds remaining after payment in full of the Notes and any accrued and unpaid fees and expenses of the Issuer will be released from the lien of the Indenture for distribution by the Preference Security Paying Agent to Holders of the Preference Securities (to the extent legally permitted by Cayman Islands law) until the IRR Test is satisfied. After the IRR Test is satisfied, an amount equal to 80% of such remaining Total

Proceeds will be distributed to the Holders of the Preference Securities, and the balance of any such remaining Interest Proceeds not so distributed to Holders of the Preference Securities will be paid to the Collateral Manager as part of the Collateral Manager Incentive Allocation. See "Description of the Preference SecuritiesDistributions" and "Description of the NotesPriority of Payments." Scheduled Redemption. The Preference Securities will be redeemed (the "Scheduled Redemption") by the Issuer at the Preference Security Redemption Price (if any) on the Payment Date in June 2041 (the "Scheduled Preference Security Redemption Date"), unless redeemed prior thereto. The average life of the Preference Securities, however, is expected to be shorter than the number of years until the Scheduled Preference Security Redemption Date. See "Risk FactorsAverage Life, Prepayment Considerations and Early Redemption" and "Maturity and Prepayment Considerations." Mandatory Redemption Coverage Failure Redemption. Each Class of Notes will, on any Payment Date, to the extent that any Coverage Test applicable to any Class of Notes is not satisfied on the immediately preceding Determination Date, be subject to mandatory redemption (a "Coverage Failure Redemption") from, first, Interest Proceeds and, second (to the extent that the application of Interest Proceeds pursuant to the Priority of Payments is not sufficient to cause such tests to be satisfied), from Principal Proceeds available in accordance with the Priority of Payments, in each case, to the extent necessary to cause each applicable Coverage Test to be satisfied. Pursuant to any such Coverage Failure Redemption, each outstanding Class of Notes will be redeemed in the order of its relative seniority as described below under "Description of the NotesPriority of Payments." Rating Confirmation Failure Redemption. If a Rating Confirmation Failure occurs, then each Class of Notes will be subject to mandatory redemption (a "Rating Confirmation Failure Redemption") on each Payment Date thereafter, first, from Unused Proceeds, if any, second, from Interest Proceeds (to the extent available for such purpose in accordance with the Priority of Payments), and, third, from Principal Proceeds (to the extent available for such purpose in accordance with the Priority of Payments), in each case to the extent necessary to obtain a Rating Confirmation from each Rating Agency. See "Security for the NotesRamp-Up Period." Pursuant to any such Rating Confirmation Failure Redemption, each outstanding Class of Notes will be redeemed in the order of its relative seniority as described below under "Description of the NotesPriority of Payments." A redemption of any Notes pursuant to a Rating Confirmation Failure Redemption or a Coverage Failure Redemption is

sometimes referred to herein as a "Mandatory Redemption." Optional Redemption Subject to certain conditions described herein, on any Payment Date on or after the Payment Date occurring in December 2009, the Issuer may redeem the Notes (such redemption, an "Optional Redemption"), in whole but not in part, at the applicable Redemption Price therefor at the direction of a Majority-inInterest of Preference Securityholders. See "Description of the NotesOptional Redemption and Tax Redemption." Upon the occurrence of a Tax Event, the Issuer may redeem the Notes (such redemption, a "Tax Redemption"), in whole but not in part, on any Payment Date at the applicable Redemption Price therefor at (i) the direction of the holders of a majority in aggregate outstanding principal amount of any Class of Notes (an "Affected Class") that, as a result of the occurrence of a Tax Event, has not received 100% of the aggregate amount of principal and interest otherwise payable to such Class on any Payment Date or (ii) the direction of a Majority-in-Interest of Preference Securityholders. No Tax Redemption may be effected unless funds are available to pay the Minimum Redemption Amount in accordance with the procedures set forth in the Indenture and (ii) the Tax Materiality Condition is satisfied. See "Description of the NotesOptional Redemption and Tax Redemption." The redemption price of each Note will be (i) the outstanding principal amount of such Note plus (ii) accrued and unpaid interest thereon (including Defaulted Interest, if any, and interest on Defaulted Interest) to (but excluding) the Redemption Date plus (iii) in the case of a Class A-3L Note or a Class B-1L Note, respectively, the Class A-3L Deferred Interest or the Class B-1L Deferred Interest, if any, and accrued and unpaid interest thereon, to (but excluding) the Redemption Date, or, with respect to any particular Class of Notes, such lesser amount as 100% of the Holders of such Class elect to receive (the "Redemption Price"). The Preference Security Redemption Price will be equal to the Excess Total Proceeds distributable in respect of such Preference Securities pursuant to the Priority of Payments on the relevant Redemption Date. Such amount may be less than 100% of the notional amount of the Preference Securities. In addition, if the Notes have not been redeemed in full prior to the Payment Date in June 2013 (the "Auction Call Redemption Date"), then an auction of the Collateral Debt Securities will be conducted by the Collateral Manager on behalf of the Issuer and, provided that certain conditions are satisfied, the Collateral Debt Securities will be sold by the Trustee and the Notes will be redeemed on the Auction Call Redemption Date. If such conditions are not satisfied and the auction is not successfully conducted with respect to the Auction Call Redemption Date, the Collateral Manager will conduct auctions prior to each Payment Date thereafter until the applicable conditions are satisfied and

Tax Redemption

Redemption Price

Auction Call Redemption

the Notes are redeemed in full. Under the auction, the Collateral Debt Securities will only be sold for an amount that is at least equal to the Minimum Redemption Amount. See "Description of the NotesAuction Call Redemption." Security for the Notes Pursuant to the Indenture, the Notes will be secured by: (i) the Collateral Debt Securities; (ii) the rights of the Issuer under the Closing Date Interest Rate Cap Agreement; (iii) amounts on deposit in the Payment Account, the Interest Collection Account, the Principal Collection Account, the Unused Proceeds Account, the Expense Account and the Ramp-Up Principal Proceeds Account and Eligible Investments purchased with funds on deposit in such accounts; (iv) the rights of the Issuer, if any, to amounts in the Hedge Counterparty Collateral Account (subject to the rights of the Hedge Counterparty); (v) the rights of the Issuer under the Collateral Management Agreement, the Collateral Administration Agreement, the Securities Purchase Agreement and the Subscription Agreements; (vi) all cash delivered to the Trustee (directly or through a securities intermediary); and (vii) all proceeds, accessions, profits, income benefits, substitutions and replacements, whether voluntary or involuntary, of and to any of the assets of the Issuer described in the foregoing (collectively, the "Collateral"). In the event of any realization on the Collateral, proceeds will be allocated to the payment of each Class of Notes in accordance with the respective priorities established by the Priority of Payments. The Collateral does not include the Excepted Property. The "Excepted Property" consists of (i) the Preference Security Payment Account and all amounts from time to time on deposit in the Preference Security Payment Account and the proceeds thereof, (ii) the U.S.$250 share capital of the Co-Issuer and U.S.$250 representing a profit fee to the Issuer, together with (in each case) any interest or income accruing thereon, and the bank account in which such funds are held and (iii) the limited liability company interests in the Co-Issuer and any assets of the Co-Issuer. The Preference Securities constitute part of the share capital of the Issuer and are not secured obligations of the Issuer. Collateral Debt Securities On the Closing Date, the Issuer expects to have purchased (or entered into agreements to purchase for settlement following the Closing Date) Collateral Debt Securities having an aggregate principal balance of not less than U.S.$725,000,000. The Issuer expects that, no later than the 90th day following the Closing Date the Issuer will have purchased Collateral Debt Securities (together with (i) the aggregate amount of accrued and unpaid interest on all Collateral Debt Securities purchased on the Closing Date or during the Ramp-Up Period if such accrued interest was purchased with Unused Proceeds, (ii) the aggregate principal balance of all Eligible Investments purchased with Principal Proceeds on deposit in the Collection Account or the Ramp-Up Principal Proceeds Account and (iii) the aggregate

amount of all Principal Proceeds distributed on any Payment Date occurring prior to the Effective Date) having an aggregate principal balance of at least U.S.$750,000,000. However, in certain circumstances described herein, this period may extend beyond 90 days (but no later than 120 days following the Closing Date). See "Security for the NotesRamp-Up Period." All Collateral Debt Securities purchased by the Issuer will, on the date of purchase, have the characteristics and satisfy the criteria set forth herein under "Security for the NotesCollateral Debt Securities" and "Concentration Limitations". Although the Issuer expects that the Collateral Debt Securities purchased by it will, on the Effective Date, satisfy the Collateral Quality Tests and Coverage Tests described herein, there can be no assurance that such tests will be satisfied on such date. Failure to satisfy the Coverage Tests following the Closing Date may result in the repayment or redemption of a portion of the Notes (according to the priority specified in the Priority of Payments). See "Description of the NotesMandatory Redemption." Schedule A to this Offering Circular identifies the Collateral Debt Securities that the Issuer, as of the date of this Offering Circular, expects to purchase (or commit to purchase) on the Closing Date. Such list of Collateral Debt Securities is subject to change on or prior to the Closing Date. An investor in the Securities may request from the Collateral Manager the list of Collateral Debt Securities owned by the Issuer as of the date of such request. The Collateral Debt Securities may be retired prior to their respective final maturities due to, among other things, the existence and frequency of exercise of any optional or mandatory redemption features of such Collateral Debt Securities. In addition, pursuant to the Indenture, the Collateral Manager may direct the Trustee to sell at any time (i) any Defaulted Security, (ii) any Equity Security, (iii) any Deferred Interest PIK Bond, (iv) any Written-Down Security, (v) any Credit Risk Security and (vi) any Credit Improved Security; provided that the Collateral Manager's ability to direct the Trustee to sell a Credit Improved Security is restricted so long as a Sale Restriction Condition exists. See "Security for the NotesDispositions of Collateral Debt Securities." In addition, during the Ramp-Up Period the Collateral Manager, on behalf of the Issuer, may also direct the Trustee to apply Principal Proceeds to purchase Collateral Debt Securities designated by the Collateral Manager for inclusion in the Collateral. The Offering The Securities are being offered for sale (i) in the United States, in reliance on an exemption from registration provided under the Securities Act of 1933, as amended (the "Securities Act"), to investors who are both (a) (1) "Qualified Institutional Buyers"

10

(as defined in Rule 144A under the Securities Act ("Rule 144A")) or (2) in the case of the Preference Securities only, Accredited Investors, and (b) Qualified Purchasers, acquiring the Securities for their own account for investment purposes and not with a view to the distribution thereof (except in accordance with Rule 144A), (ii) outside the United States to investors who are not "U.S. Persons" (as defined in Regulation S) in offshore transactions in reliance on Regulation S and (iii) in each case, in accordance with any applicable securities laws of any State of the United States and any other relevant jurisdiction. Securities offered for sale to a U.S. Person will be offered only to Qualified Purchasers. An "Accredited Investor" is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act. A "Qualified Purchaser" is (i) a "qualified purchaser" as defined in the United States Investment Company Act of 1940, as amended (the "Investment Company Act"), (ii) a "knowledgeable employee" (as defined in Rule 3c-5 under the Investment Company Act) with respect to the Issuer or (iii) a company each of whose beneficial owners is a "qualified purchaser" or "knowledgeable employee". See "Plan of Distribution" and "Transfer Restrictions." Denominations of the Notes The Notes will be issuable in a minimum denomination of U.S.$200,000 principal amount and will be offered only in such minimum denomination or an integral multiple of U.S.$1.00 principal amount in excess thereof. After issuance, a Note may fail to be in compliance with the minimum denomination requirement stated above as a result of the repayment of principal thereof in accordance with the Priority of Payments. Form, Registration and Transfer of the Notes The Notes offered in reliance upon Regulation S ("Regulation S Notes") will be represented by one or more global notes ("Regulation S Global Notes") in fully registered form without interest coupons deposited with the Trustee as custodian for, and registered in the name of, The Depository Trust Company ("DTC") (or its nominee) initially for the accounts of Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear"), and/or Clearstream Banking, socit anonyme ("Clearstream, Luxembourg"). 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, which shall include Euroclear and Clearstream, Luxembourg. Beneficial interests in a Regulation S Global Note may be held only through Euroclear or Clearstream, Luxembourg. No Regulation S Note (or any interest therein) may be owned by a U.S. Person. The Notes offered in the United States pursuant to an exemption from the registration requirements of the Securities Act

11

("Restricted Notes") will be represented by one or more global notes ("Restricted Global Notes") in fully registered form without interest coupons deposited with the Trustee as custodian for, and registered in the name of, DTC (or its nominee). Interests in Restricted 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 Regulation S Global Notes and the Restricted Global Notes are collectively referred to herein as "Global Notes." Under certain limited circumstances described herein, definitive registered Notes may be issued in exchange for Global Notes. Minimum Number of Preference Securities The Issuer will issue 42,000,000 Preference Securities, par value U.S.$0.001 per share, on the Closing Date. Each Preference Security will have a notional amount of U.S.$1.00 per share for, among other things, clearing and voting purposes. The Preference Securities will be issued in minimum lots of 200,000 Preference Securities and integral multiples of one Preference Security in excess thereof. Preference Securities may not be transferred if, after giving effect to such transfer, the transferee (or, if the transferor retains any Preference Securities, the transferor) would own less than 200,000 Preference Securities. The Preference Securities offered by the Issuer in the United States in reliance upon an exemption from the registration requirements of the Securities Act (the "Restricted Preference Securities") will be represented by certificates in fully registered, definitive form registered in the name of the beneficial owner thereof. The Preference Securities offered to non-U.S. Persons outside the United States in reliance upon Regulation S (the "Regulation S Preference Securities") will be represented by one or more global Preference Securities in fully registered form deposited with, and registered in the name of, DTC (or its nominee) ("Regulation S Global Preference Securities"). Except in the limited circumstances described herein, certificated Preference Securities will not be issued in exchange for beneficial interests in a Regulation S Global Preference Security. Each owner of a beneficial interest in a Regulation S Global Preference Security will be required to execute and deliver to the Issuer and the Preference Security Paying Agent a letter in the form attached as Exhibit A to this Offering Circular to the effect that such owner (i) will not transfer such interest except in compliance with the transfer restrictions set forth in the Preference Security Paying Agency Agreement (including the requirement that any subsequent transferee execute and deliver such letter as a condition to any subsequent transfer) and (ii) is not a Benefit Plan Investor or Controlling Person. Governing Law The Notes, the Indenture, the Subscription Agreements, the Collateral Management Agreement, the Closing Date Interest

Form, Registration and Transfer of the Preference Securities

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Rate Cap Agreement, the Collateral Administration Agreement, the Preference Security Paying Agency Agreement and the Securities Purchase Agreement will be governed by, and construed in accordance with, the law of the State of New York. The Issuer Charter and the Preference Securities will be governed by, and construed in accordance with, the law of the Cayman Islands. Tax Status Investors in the Securities should review carefully the tax considerations set forth under "Income Tax Considerations" herein. Investors in the Securities should review carefully the ERISA considerations set forth under "ERISA Considerations" herein. Wells Fargo Bank, National Association, as Trustee under the Indenture and as Preference Security Paying Agent under the Preference Security Paying Agency Agreement, maintains its principal corporate trust offices at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attention: CDO Trust Services ACA ABS 2006-1, Limited. Maples Finance Limited (the "Administrator") will act as administrator for the Issuer in the Cayman Islands and will perform certain management, administrative and related services for the Issuer. Maples Finance Limited will also act as Security Registrar for the Preference Securities. The Administrator and Security Registrar maintains its offices at P.O. Box 1093GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands. Deloitte & Touche LLP, or any successor accounting firm selected pursuant to the Indenture, will periodically perform certain procedures with respect to the Collateral Debt Securities and compliance with the Overcollateralization Tests and the Interest Coverage Tests as required by the Indenture. It is a condition to the issuance of the Notes and the Preference Securities that each Class of Notes be assigned the applicable ratings indicated in the table below by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's" and, together with Moody's, the "Rating Agencies"): Moody's Rating Class A-1LA Notes Class A-1LB Notes Class A-2L Notes Class A-3L Notes Class B-1L Notes "Aaa" "Aaa" "Aa2" "A2" "Baa2" Standard & Poor's Rating "AAA" "AAA" "AA" "A" "BBB"

ERISA Considerations Trustee and Preference Security Paying Agent

Administrator and Security Registrar

Independent Accountants

Ratings of Notes

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A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time. In the event that any rating initially assigned to the Notes is subsequently lowered for any reason, no Person is obligated to provide any additional support or credit enhancement with respect to the Notes. There can be no assurance that, if a rating is assigned to the Notes by any other rating agency, such rating will be as high as that assigned by Standard & Poor's or Moody's. The failure of Standard & Poor's or Moody's to review or confirm a rating or the withdrawal of a rating will not constitute an Event of Default under the Indenture. The Preference Securities will not be rated by any Rating Agency. See "Ratings of the Notes." Listing Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to trading on its regulated market. There can be no assurance that any such admission will be granted or maintained. Application has been made to the Irish Stock Exchange for the Preference Securities to be admitted to the Official List and to trading on its unregulated market. There can be no assurance that any such admission will be granted or maintained. See "Listing and General Information." McCann FitzGerald Listing Services Limited, with its address at 2 HarbourMaster Place, International Financial Services Centre, Dublin 1, Ireland Custom House Administration and Corporate Services Limited, with its address at 25 Eden Quay, Dublin 1, Ireland

Irish Listing Agent

Irish Paying Agent

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RISK FACTORS An investment in the Securities involves certain risks. Prospective investors should carefully consider the following investment considerations, in addition to the matters set forth elsewhere in this Offering Circular, prior to investing in the Securities. Limited Liquidity, Non-registration under the Securities Act and Restrictions on Transfer The Securities do not trade on any market or exchange. Although the Initial Purchaser may from time to time make a market in any Class of Notes or the Preference Securities, it is under no obligation to do so. In the event that the Initial Purchaser commences any such market-making, it may discontinue the same at any time. The Securities will be owned by a relatively small number of investors, and it is highly unlikely that an active secondary market for the Securities will develop. Even if a secondary market does develop, there can be no assurance that it will continue for the life of the Securities. Purchasers of the Securities may find it difficult or not economically beneficial to liquidate their investment in the Securities at any particular time. In addition, the Securities are subject to certain transfer restrictions as described herein under "Transfer Restrictions," which may further limit the liquidity of the Securities. See "Transfer Restrictions." Consequently, an investor in the Notes must be prepared to hold its Notes for an indefinite period of time or until the Stated Maturity of the Notes, and an investor in the Preference Securities must be prepared to hold its Preference Securities until the Scheduled Preference Security Redemption Date. The Securities have not been registered under the Securities Act or under any United States state securities or "Blue Sky" laws or the securities laws of any other jurisdiction and are being issued and sold in reliance upon exemptions from registration provided by such laws. The Issuers will not provide registration rights to any purchaser of the Securities. None of the Issuers, the Trustee, or any other Person may register the Securities under the Securities Act or any United States state or "Blue Sky" laws or take such action with respect to the Collateral. Limited Recourse Obligations The Notes are limited recourse debt obligations of the Issuers and the Preference Securities are equity interests in the Issuer. The Notes are payable solely from the Collateral Debt Securities and other Collateral pledged by the Issuer to secure the Notes. The Collateral Debt Securities comprise substantially all the assets of the Issuer. None of the Noteholders, the Collateral Manager, the Initial Purchaser, the Trustee, the Collateral Administrator, the Hedge Counterparty or any of their respective affiliates or any other Person will be obligated to make payments on the Notes or the Preference Securities. Consequently, the Noteholders and the Preference Securityholders must rely solely on distributions on the Collateral Debt Securities and other Collateral pledged to secure the Notes for the payment of principal, interest and distributions, as applicable, thereon. If distributions on such Collateral Debt Securities and Collateral are insufficient to make payments on the Notes and distributions on the Preference Securities, no other assets will be available for payment of the deficiency, and, following realization of the Collateral pledged to secure the Notes, none of the Issuers, the Collateral Manager, the Initial Purchaser, the Hedge Counterparty, the Trustee, the Collateral Administrator or any of their affiliates or any other Person will be obligated to pay any deficiency and all outstanding claims on the Notes will be extinguished. The Preference Securities will be part of the issued share capital of the Issuer. The Issuer's obligation to make distributions on the Preference Securities will therefore not be a secured obligation of the Issuer. Holders of the Preference Securities will only be entitled to receive amounts available for distributions after payment of all amounts payable prior thereto under the Priority of Payments and (except in the case of the payment of Excess Total Proceeds upon redemption of the Preference Securities) only to the extent of distributable profits of the Issuer and/or any balance in the

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Issuer's share premium account and (in each case) only to the extent that the Issuer is and will remain solvent following such distributions. Subordination The Notes. Payments of interest on the Class A-1LA Notes are pari passu with payments of interest on the Class A-1LB Notes, however, payments of principal of the Class A-1LB Notes are subordinated to payments of principal of the Class A-1LA Notes to the extent described herein; the Class A-2L Notes are subordinated to the Class A-1 Notes to the extent described herein; the Class A-3L Notes are subordinated to the Senior Class A Notes to the extent described herein; and the Class B-1L Notes are subordinated to the Class A Notes to the extent described herein. In addition, each Class of Notes is subordinated to the payment of certain fees and expenses as described herein. Payments of principal and interest on the Notes are subject to the Priority of Payments described herein under "Description of the NotesPriority of Payments. The failure to pay interest on the Class A-3L Notes will not constitute an Event of Default so long as any Senior Class A Notes remain outstanding. The failure to pay interest on the Class B-1L Notes will not constitute an Event of Default so long as any Class A Notes remain outstanding. In addition, in the case of a Default or an Event of Default, so long as any Senior Class A Notes (or, if the Senior Class A Notes are paid in full, the Class A-3L Notes) remain outstanding, the Holders of such Notes will generally be entitled to determine the remedies to be exercised under the Indenture. Remedies pursued by the Holders of the Senior Class A Notes could be adverse to the interests of the Holders of the Class A-3L Notes and the Class B-1L Notes, as the case may be, and, if the Senior Class A Notes have been paid in full, remedies pursued by the Holders of the Class A-3L Notes could be adverse to the interests of the Holders of the Class B-1L Notes. Once an Event of Default and acceleration have occurred, Holders of a Class of Notes are not entitled to be paid the outstanding principal or accrued and unpaid interest with respect to such Class of Notes, unless all of the outstanding principal and accrued and unpaid interest on each more senior Class or Classes of Notes (including Defaulted Interest, Deferred Interest and interest thereon) has been paid in full in cash. Notwithstanding such subordination, until a Sequential Payment Triggering Event occurs, the Holders of the Notes will be entitled to payments of principal pro rata on any Payment Date. See "Pro Rata Payment of Notes Prior to a Sequential Payment Triggering Event" herein. In addition, the Holders of the Class B-1L Notes will be entitled to receive the Class B-1L Turbo Payment from Interest Proceeds (to the extent available for such purpose in accordance with the Priority of Payments) as a payment of principal, before the Notes senior thereto receive any payments of principal. The Preference Securities. Payments on the Preference Securities are subordinated on each Payment Date to payments on the Notes. The Issuer, pursuant to the Indenture, has pledged substantially all of its assets to secure the Notes and certain other obligations of the Issuer. The Preference Securities are not secured by the Collateral securing the Notes. There can be no assurance that the distributions on the Collateral pledged to secure the Notes will be available to make payments on the Preference Securities after making payments that rank senior to the distributions in respect of the Preference Securities. No distributions of Interest Proceeds will be made in respect of the Preference Securities on any Payment Date unless Holders of the Notes have been paid all accrued and unpaid interest due to them on such Payment Date and certain expenses of the Issuers are paid in full. Any Interest Proceeds remaining after such payments will, to the extent available to pay such amounts in accordance with the Priority of Payments, be distributed to pay the Current Target Return Payment to Holders of the Preference Securities, the Class B-1L Turbo Payment (if applicable on such date) and any unpaid Administrative Expenses (including indemnities), in that order, and then will be distributed to Holders of the Preference Securities, (i) on each Payment Date after the first Payment Date until the Class B-1L Notes have been paid in full, in an amount up to 35% of the Remaining Interest Proceeds and (ii) on the first Payment Date and on each Payment Date after the Class B-1L Notes have been paid in full, (a) in an amount equal to 90% of any undistributed Interest Proceeds if the IRR Test is not satisfied on such Payment Date or (b) in an amount equal to 80% of any undistributed Interest Proceeds if the IRR Test is satisfied on such

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Payment Date. Any such remaining Interest Proceeds not so distributed to Holders of the Preference Securities will be paid to the Collateral Manager as part of the Collateral Manager Incentive Allocation. Holders of the Preference Securities will not be entitled to receive Principal Proceeds by way of dividend and/or payment upon redemption until all of the Notes have been redeemed or otherwise repaid in full, and all fees and expenses have been paid. On any Redemption Date, the Final Payment Date, an Accelerated Payment Date or any Post-Acceleration Payment Date, 100% of the Total Proceeds remaining after payment in full of the Notes and any accrued and unpaid fees and expenses of the Issuer will be released from the lien of the Indenture for distribution by the Preference Security Paying Agent to Holders of the Preference Securities (to the extent legally permitted by Cayman Islands law) until the IRR Test is satisfied. After the IRR Test is satisfied, an amount equal to 80% of the remaining Total Proceeds will be distributed to the Holders of the Preference Securities, and the balance of any such remaining Interest Proceeds not so distributed will be paid to the Collateral Manager as part of the Collateral Manager Incentive Allocation. To the extent that any losses are suffered by any of the holders of any Securities, such losses will be borne in the first instance by holders of the Preference Securities and then by the holders of the Notes. Also, if an Event of Default occurs, so long as any Notes remain outstanding, the Requisite Noteholders will be entitled to determine the remedies to be exercised under the Indenture. See "Description of the NotesEvents of Default." Remedies pursued by the Requisite Noteholders will likely be favorable to the interests of the Requisite Noteholders, and therefore may be adverse to the interests of the Preference Securities. Furthermore, on a winding up of the Issuer, holders of the Preference Securities will rank after all creditors, secured and unsecured, of the Issuer and the holders of ordinary shares. See "Description of the NotesPriority of Payments" and "Description of the Preference SecuritiesDistributions." Any amounts that are released from the lien of the Indenture for distribution to the Preference Securityholders in accordance with the Priority of Payments on any Payment Date will not be available to make payments in respect of the Notes on any subsequent Payment Date. Pro Rata Payment of Notes Prior to a Sequential Payment Triggering Event On any Payment Date prior to the occurrence of a Sequential Payment Triggering Event under the Indenture, Principal Proceeds will be applied to pay principal of all Classes of Notes on a pro rata basis (based on the aggregate outstanding principal amounts of each Class of Notes but excluding any Deferred Interest with respect to such Class of Notes, as of the last day of the applicable Due Period) and not sequentially. As a result, junior classes of Notes will be paid principal prior to the payment in whole of the principal amount of more senior Classes of Notes, if the applicable conditions are satisfied. A Sequential Payment Triggering Event will occur if (a) the Issuer fails to meet any Overcollateralization Test on the applicable Determination Date or any prior Determination Date, (b) an Event of Default has occurred and is continuing, (c) the rating assigned by either Rating Agency to any Class of Notes on the Closing Date either (i) has been withdrawn or (ii) has been reduced by one or more subcategories, and such rating has not been restored to the rating assigned by such Rating Agency on the Closing Date, (d) the Net Outstanding Portfolio Collateral Balance is less than or equal to U.S.$375,000,000, or (e) the applicable Payment Date is a Redemption Date or the Final Payment Date. Equity Status of the Preference Securities The Preference Securities are equity in the Issuer and are not secured by the Collateral securing the Notes. The Preference Securities are subordinated to the Notes as described above under "SubordinationThe Preference Securities." On a winding up of the Issuer, the Preference Securities will rank in priority of payments behind all of the creditors, whether secured or unsecured and known or unknown, of the Issuer, including the Holders of the Notes and any judgment creditors. Except with respect to the obligations of the Issuer to make payments pursuant to the Priority of Payments, the Issuer does not expect to have any

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creditors. In addition, payments in respect of the Preference Securities are subject to certain requirements imposed by Cayman Islands law. Any amounts paid by the Preference Security Paying Agent as distributions by way of dividend on the Preference Securities pursuant to the Preference Security Paying Agency Agreement will be payable only if the Issuer has sufficient distributable profits and/or share premium. In addition, such distributions and the payment of Excess Total Proceeds upon redemption of the Preference Securities will be payable only to the extent that the Issuer is and remains solvent after such distributions are paid. Under Cayman Islands law, a company is generally deemed solvent if it is able to pay its debts as they come due. To the extent the requirements under Cayman Islands law described in the preceding paragraph are not met, amounts otherwise payable to the holders of the Preference Securities will be retained in the Preference Security Payment Account until next succeeding Payment Date (or, in the case of any such payment which would otherwise be payable on a redemption date of the Preference Securities, the next succeeding Business Day) on which the Issuer notifies the Preference Security Paying Agent that such requirements are met. Amounts on deposit in the Preference Security Payment Account will not be available to pay amounts due to the Holders of the Notes, the Trustee, the Collateral Manager, the Collateral Administrator or any other creditor of the Issuer whose claim is limited in recourse to the Collateral. However, amounts on deposit in the Preference Security Payment Account may be subject to the claims of creditors of the Issuer that have not contractually limited their recourse to the Collateral. Volatility of the Preference Securities and Class B-1L Notes The Preference Securities (and to a lesser extent, the Class B-1L Notes) represent a leveraged investment in the underlying Collateral. Therefore, it is expected that changes in the value of the Preference Securities and the Class B-1L Notes will be greater than the change in the value of the underlying Collateral Debt Securities, which themselves are subject to credit, liquidity, interest rate and other risks. Utilization of leverage is a speculative investment technique and involves certain risks to investors, particularly to investors that bear the first risk of loss. The indebtedness of the Issuer under the Notes will result in interest expense and other costs incurred in connection with such indebtedness that may not be covered by proceeds received from the Collateral. The use of leverage generally magnifies the Issuer's opportunities for gain and risk of loss. Diversion of Interest Proceeds Under the Indenture, Interest Proceeds will be used to pay principal of the Notes (i) in the case of the failure of a Coverage Test, pursuant to a Coverage Failure Redemption, (ii) in the case of a Rating Confirmation Failure Redemption, (iii) in the case of payments of Deferred Interest on the Class A-3L Notes and the Class B-1L Notes, until the Class A-3L Notes and the Class B-1L Notes, as applicable, are paid in full, and (iv) in the case of the Class B-1L Notes, pursuant to a Class B-1L Turbo Payment. As a result of these payments, Interest Proceeds that would otherwise be used to pay amounts that are junior in right of payment to such payments as described under "Description of the NotesPriority of Payments Interest Proceeds" will be applied to pay principal of the Notes. On any Payment Date after the Payment Date in September 2006 on which the Preference Security Interest Proceeds Target Return on such Payment Date equals 12% (after giving effect to distributions of Interest Proceeds made to the Preference Security Paying Agent on such Payment Date for deposit into the Preference Security Payment Account), any remaining Interest Proceeds which would otherwise be available for distribution in respect of the Preference Securities will be reduced (and therefore the average annual return on the Preference Securities will be reduced) by payments in respect of the Class B-1L Turbo Payment (until the Class B-1L Notes have been paid in full), additional administrative expenses

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(including indemnities) and the Collateral Manager Incentive Allocation. See "Description of the NotesPrincipal," "Mandatory Redemption" and "Priority of PaymentsInterest Proceeds." Modification of the Indenture Pursuant to the terms of the Indenture, the Trustee and the Issuers may, from time to time, execute one or more supplemental indentures that add to, change, modify or eliminate provisions of the Indenture. Approval for entering into such supplemental indentures does not in all cases require the consent of all of the Holders of the outstanding Notes. Accordingly, supplemental indentures that result in material and adverse changes to the interests of Noteholders, and in some cases Preference Securityholders, may be approved without the consent of all of the Noteholders and Preference Securityholders materially and adversely affected. See "Description of the NotesThe IndentureModification of the Indenture." Nature of Collateral The Collateral is subject to credit, liquidity, interest rate, market, operations, fraud and structural risk. In addition, a significant portion of the Collateral will be acquired by the Issuer after the Closing Date, and, accordingly, the financial performance of the Issuer may be affected by the price and availability of Collateral to be purchased. The amount and nature of the collateral securing the Notes have been established to withstand certain assumed deficiencies in payment occasioned by defaults in respect of the Collateral Debt Securities. If any deficiencies exceed such assumed levels, however, payments in respect of the Notes and the distributions on the Preference Securities could be adversely affected. To the extent that a default occurs with respect to any Collateral Debt Security securing the Notes and the Issuer (upon the advice of the Collateral Manager) sells or otherwise disposes of such Collateral Debt Security, 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 Collateral Debt Security. Prospective purchasers of the Securities should consider and determine for themselves the likely levels of defaults and the likely level of recoveries on the Collateral Debt Securities. See "Security for the NotesCollateral Debt Securities", ""The Collateral Quality Tests" and "Concentration Limitations." Up to 20.0% of the Net Outstanding Portfolio Collateral Balance may consist of Collateral Debt Securities rated below investment grade. Such Collateral Debt Securities will have greater credit, insolvency and liquidity risk than investment grade obligations and, therefore, a greater risk of loss. In addition to credit and liquidity risk, obligations rated below investment grade have greater volatility than investment grade obligations. Future periods of uncertainty in the United States economy and the possibility of increased volatility and default rates in the below investment grade sector may further adversely affect the price and liquidity of below investment grade obligations in this market. Consequently, purchasers of the Preference Securities will bear a higher risk of losing all or part of their principal investment than they would if the Issuer was permitted to purchase only investment grade obligations. The portfolio will consist of U.S. dollar-denominated RMBS, CMBS, Collateralized Debt Obligation Securities and other Asset-Backed Securities of issuers incorporated or organized under the laws of the United States. The issuers of RMBS, CMBS, Collateralized Debt Obligation Securities and other AssetBacked Securities also may be organized under the laws of Bermuda, Luxembourg, the British Virgin Islands, the Cayman Islands, the Channel Islands, Guernsey, Jersey or the Netherlands Antilles. Returns on the Securities are dependent on the credit performance of the underlying Collateral Debt Securities, which will be subject to credit, liquidity and interest rate risks. In addition, some of the Collateral Debt Securities will be subject to timing risk with respect to payment of principal. Defaults that lead to losses on the Collateral Debt Securities and deferral of interest on the Collateral Debt Securities could have adverse effects on the yield of the Securities.

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The market value of the Collateral Debt Securities generally will fluctuate with, among other things, the financial condition of the obligors on or issuers of the Collateral Debt Securities, general economic conditions, the condition of certain financial markets, political events, developments or trends in any particular industry and changes in prevailing interest rates. In the event that interest rate spreads widen after the Closing Date, the market value of the Collateral Debt Securities is likely to decline and, in the case of a substantial spread widening, could decline by a substantial amount. Although the Issuer is permitted to invest in Asset-Backed Securities (including RMBS, CMBS, Collateralized Debt Obligation Securities and other Asset-Backed Securities), the Issuer may find that, as a practical matter, these investment opportunities are not available to it during the Ramp-Up Period for a variety of reasons, such as the limitations imposed by the Concentration Limitations and the Eligibility Criteria. See "Security for the NotesCollateral Debt Securities" and "The Collateral Quality Tests" and "Concentration Limitations." At any time there may be a limited universe of investments that would satisfy the Concentration Limitations and the Eligibility Criteria given the other investments in the Issuer's portfolio. As a result, the Issuer may find it difficult to purchase suitable investments during the Ramp-Up Period, in which case a Rating Confirmation Failure may occur. In the event of a Rating Confirmation Failure, principal of all or a portion of the Notes may be repaid on each Payment Date thereafter (if Unused Proceeds, Interest Proceeds or Principal Proceeds are available for such purpose) to the extent necessary to obtain a Rating Confirmation from each Rating Agency. See "Description of the NotesMandatory Redemption." Under the Indenture, the Collateral Manager may only direct the acquisition and disposition of Collateral Debt Securities under certain limited circumstances. Notwithstanding such restrictions and satisfaction of the conditions set forth in the Indenture, sales and purchases of Collateral Debt Securities could result in losses by the Issuer, which losses could affect the timing and amount of payments in respect of the Securities or result in the reduction in or withdrawal of the rating of any or all of the Notes by one or more of the Rating Agencies. On the other hand, circumstances may exist under which the Collateral Manager may believe that it is in the best interests of the Issuer to dispose of Collateral but will not be permitted to do so under the restrictions and conditions of the Indenture. Although the Issuer expects that the Collateral Debt Securities purchased by it will, on the Effective Date, satisfy the Collateral Quality Tests and the Coverage Tests described herein, there can be no assurance that such tests will be satisfied on such date. Failure to satisfy such tests on the Effective Date may result in the repayment or redemption of all or a portion of the Notes (according to the priority specified in the Priority of Payments). See "Description of the NotesMandatory Redemption." Asset-Backed Securities and Mortgage-Backed Securities. The Collateral Debt Securities will include Asset-Backed Securities. Asset-Backed Securities are securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from, or market value of, a specified pool of financial assets, either fixed or revolving, that generally (other than with respect to automobile lease securitizations with residual values and car rental receivable securities) by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities. Holders of Asset-Backed Securities bear various risks, including credit risks, liquidity risks, interest rate risks, market risks, operations risks, fraud risks, structural risks and legal risks. See "Security for the NotesAsset-Backed Securities." Credit risk is an important issue in Asset-Backed Securities because of the significant credit risks inherent in the underlying collateral. 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

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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 or service the underlying 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. Investors in Asset-Backed Securities bear various risks, including credit risks, liquidity risks, interest rate risks, market risks, operations risks, structural risks and legal risks. One variability in cash flows comes from credit performance, including the presence of wind-down or acceleration features designed to protect the investor in the event that credit losses in the portfolio rise well above expected levels. Interest-rate risk arises for the issuer from the relationship between the pricing terms on the underlying assets and the terms of the rate paid to security holders. For the holder of the security, interest-rate risk depends on the expected life or repricing of the Asset-Backed Securities, with some risk arising from embedded options. Liquidity can become a significant problem, if for example, concerns about credit quality 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. Liquidity risk can arise from increased perceived credit risk. Operations risk arises through the potential for misrepresentation of asset quality or terms by the originator, misrepresentation of the nature and current value of the assets by the servicer and inadequate controls over disbursements and receipts by the servicer. Legal risk can arise as a result of the procedures followed in connection with the origination of the underlying assets or the servicing thereof. A list of all Collateral Debt Securities that, as of the date of this Offering Circular, the Issuer expects to be acquired (or committed to be acquired) by the Issuer on the Closing Date is set forth in Schedule A attached to this Offering Circular. Such list of Collateral Debt Securities is subject to change on or prior to the Closing Date. See "Security for the NotesAsset-Backed Securities." 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 Securities to additional risk. A significant portion of the Collateral will consist of 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 transactions 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, (a) the average life of such senior classes may shorten and (b) the average life of securities subordinate to such senior classes may lengthen. 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

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the asset pool being securitized, the impact of a relatively small loss on the overall pool may have a substantial impact on the holders of such subordinate security. See "Security for the NotesAssetBacked Securities." Some or all of the loans underlying the RMBS or other Asset-Backed Securities (including loans underlying RMBS or Asset-Backed Securities securing Collateralized Debt Obligation Securities included in the Collateral) may be prepaid at any time and the commercial mortgage loans underlying the CMBS may also be subject to prepayment (although certain of such commercial mortgage loans may have "lockout" periods, defeasance provisions, prepayment penalties or other disincentives to prepayment). Defaults on and liquidations of the loans underlying the RMBS, Asset-Backed Securities or the CMBS may also lead to early repayment thereof. Prepayments on loans are affected by a number of factors. If prevailing rates for similar loans fall below the interest rates on such loans, prepayment rates would generally be expected to increase. Conversely, if prevailing rates for similar loans rise above the interest rates on such loans, prepayment rates would generally be expected to decrease. The existence and frequency of such prepayments, optional redemptions, defaults and liquidations will affect the average lives of, and credit support for, the Notes and the Preference Securities. Residential Mortgage-Backed Securities (RMBS). Most of the Issuer's portfolio of Asset-Backed Securities will consist of RMBS, including Prime RMBS Securities, Mid-Prime RMBS Securities and Sub-Prime RMBS Securities. RMBS are subject to various risks, including credit, market, interest rate, structural and legal risks. RMBS represent ownership or participation interests in pools of mortgage loans secured by one-to four-family residential properties. Such loans may be prepaid at any time. 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. 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. An 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.

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RMBS are susceptible to prepayment risks as they often 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. RMBS are particularly susceptible to prepayment risks as they generally do not contain prepayment penalties and a reduction in interest rates typically will increase the prepayments on the RMBS, resulting in a reduction in yield to maturity for holders of such securities. The rate of interest payable on RMBS held by the Issuer may be set or effectively capped at the weighted average net coupon of the underlying mortgage loans. 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. 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 on the Notes and to make distributions on the Preference Securities. Furthermore, RMBS often are in the form of certificates of beneficial ownership of the underlying mortgage loan pool. As a result, security holders 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 security holders may be removal of the servicer of the mortgage loans. A large percentage of the RMBS purchased by the Issuer will be Mid-Prime RMBS Securities and SubPrime RMBS Securities, which are secured primarily by mid-prime and sub-prime mortgages. MidPrime RMBS Securities and Sub-Prime RMBS Securities are subject to a greater risk of loss in the event of foreclosures on the underlying mortgages and a greater likelihood of default on the underlying mortgage loans than Prime RMBS Securities. 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. Violations 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 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 cashflow 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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Commercial Mortgage-Backed Securities (CMBS). A portion of the Collateral Debt Securities will consist of CMBS. CMBS represent interests in (or are secured by) commercial mortgage loans. Consequently, CMBS included in the Collateral will be affected by payments, defaults and losses on the underlying mortgage loans. Commercial mortgage loans are generally secured by multi-family or commercial property and may entail risks of delinquency and foreclosure, and risks of loss in the event thereof, which are greater than similar risks associated with loans made on the security of single-family residential property. In addition, commercial mortgage loans are generally non-recourse loans and in the event of a default there will generally only be recourse against the specific properties and other assets that have been pledged to secure such mortgage loans. Even if a commercial mortgage loan provides for recourse to a mortgagor or its affiliates, the Issuer is unlikely to ultimately recover any amounts not covered by the mortgaged property. Therefore, 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 which 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 addition, CMBS may present greater risks associated with larger loans and greater individual borrower and property concentrations. The value of an income-producing property is directly related to the net operating income derived from such property. Furthermore, the value of any commercial property may be adversely affected by risks generally incident to interests in real property, including 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. 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 that may be terminable by the franchisor or operator; 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.

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Collateralized Debt Obligation Securities. A portion of the Collateral may consist of Collateralized Debt Obligation Securities. Collateralized Debt Obligation Securities generally are limited recourse obligations of the issuer thereof payable solely from the underlying assets of the issuer ("CDO Collateral") or proceeds (a "CDO") thereof. Consequently, holders of Collateralized Debt Obligation Securities must rely solely on distributions on the underlying CDO Collateral or proceeds thereof for payment in respect thereof. If distributions on the underlying CDO Collateral are insufficient to make payments on the Collateralized Debt Obligation Securities, no other assets will be available for payment of the deficiency and following realization of the underlying assets, the obligations of the 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 CDO Collateral. Collateralized Debt Obligation Securities generally have underlying risks similar to many of the risks set forth in these Risk Factors for the Securities, such as interest rate mismatches, trading and reinvestment risk and tax considerations. Each Collateralized Debt Obligation Security, however, will involve risks specific to the particular Collateralized Debt Obligation Security and its CDO Collateral. The market value of the Collateralized Debt Obligation Securities generally will fluctuate with, among other things, the financial condition of the obligors on or issuers of the CDO Collateral, general economic conditions, the condition of certain financial markets, political events, developments or trends in any particular industry and changes in prevailing interest rates. The Collateralized Debt Obligation Securities included in the Collateral will have CDO Collateral that consist of some of the same assets as the Collateral pledged to secure the Notes or held in the CDO Collateral of other Collateralized Debt Obligation Securities pledged as Collateral. The concentration in any particular asset may adversely affect the Issuer's ability to make payments on the Securities. In addition, the CDO Collateral of the Collateralized Debt Obligation Securities may be traded. As a result, investors in the Securities are exposed to the risk of loss on such Collateral Debt Securities both directly and indirectly through the Collateralized Debt Obligation Securities purchased by the Issuer. If an investor in the Securities is also an investor in any Collateralized Debt Obligation Security which the Issuer purchases (or in other tranches of securities sold by the same CDO), the exposure of such investor to the risk of loss on such Collateralized Debt Obligation Security will increase as a result of its investment in the Securities. The Initial Purchaser may have acted as the placement agent for some of the Collateralized Debt Obligation Securities purchased by the Issuer, and earned fees from each such CDO as a result of the Issuer's purchase. The Collateralized Debt Obligation Securities that the Issuer will purchase will be subordinated to other classes of securities issued by the issuer thereof. Collateralized Debt Obligation 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 Collateralized Debt Obligation Securities. The Collateralized Debt Obligation Securities that the Collateral Manager anticipates will form part of the Collateral are expected to be mezzanine debt issued by the related Collateralized Debt Obligation Security issuers. To the extent that any losses are incurred by the issuer thereof in respect of its Collateralized Debt Obligation 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 Collateralized Debt Obligation Securities is outstanding, the holders of the senior tranche thereof 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). The deferral of interest by the issuer of Collateralized Debt Obligation Securities forming part of the Collateral could result in a reduction in the amounts available to make payments to the holders of the Notes or in the deferral of interest on the Class A-3L Notes and the Class B-1L Notes.

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Although none of the Collateral Debt Securities securing the Notes will consist of Corporate Debt Securities, a portion of the obligations in the CDO Collateral of the Collateralized Debt Obligation Securities will consist of commercial or industrial loans or obligations, corporate debt securities or trust preferred securities (or any combination of the foregoing). As a result, these Collateralized Debt Obligation Securities will be exposed to the credit risks relating to the obligors of these loans or securities. Collateralized Debt Obligation Securities are subject to interest rate risk. The CDO Collateral of an issue of Collateralized Debt Obligation Securities often will include assets that bear interest at a fixed or floating rate of interest, and while the Collateralized Debt Obligation Securities issued by such issuer also may bear interest at fixed or floating rates, the proportions to which such issuer's assets bear interest at fixed and floating rates will typically not match the proportions to which such 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 Collateralized Debt Obligation Securities and CDO Collateral which bear interest at a fixed rate, and there may be a timing or basis mismatch between the Collateralized Debt Obligation Securities and CDO Collateral that bear interest at a floating rate as the interest rate on such floating rate CDO Collateral may adjust more frequently or less frequently, on different dates and based on different indices, than the interest rates on the Collateralized Debt Obligation 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 Collateralized Debt Obligation Securities. The risks associated with investing in Collateralized Debt Obligation Securities may in addition depend on the skill and experience of the collateral manager managing the CDO Collateral, in particular if the Underlying Instruments provide for trading in securities comprising the CDO Collateral. This risk is greater if the CDO Collateral itself consists of Collateralized Debt Obligation Securities that rely on the skill and experience of the collateral manager. Default Rates and Recovery Rates on Collateral Debt Securities Reliable sources of statistical information do not exist with respect to the default rates and recovery rates for the type of securities represented by the Collateral Debt Securities. The historical performance of a market is not necessarily indicative of its future performance. Should increases in default rates or decreases in recovery rates occur with respect to the type of assets underlying the Collateral Debt Securities, the actual default rates of the Collateral Debt Securities may exceed (and may significantly exceed) or the actual recovery rates may be significantly less than the hypothetical default rates and recovery rates used in the scenario described under "Maturity and Prepayment Considerations." PROSPECTIVE PURCHASERS OF THE SECURITIES SHOULD CONSIDER AND DETERMINE FOR THEMSELVES THE LIKELY LEVEL OF DEFAULTS AND THE LIKELY LEVEL OF RECOVERIES ON THE COLLATERAL DEBT SECURITIES DURING THE TERM OF THE TRANSACTION. Ramp-Up Period Purchases The amount of Collateral Debt Securities purchased on the Closing Date, and the amount and timing of the purchase of additional Collateral Debt Securities prior to the Effective Date, will affect the cash flows available to make payments on, the Securities. Reduced liquidity and lower volumes of trading in certain Collateral Debt Securities, in addition to restrictions on investment contained in the Eligibility Criteria, could make it difficult for the Issuer to be fully invested in Collateral Debt Securities by the end of the Ramp-Up Period and could result in an extension of the Ramp-Up Period beyond 90 days (but no later than 120 days) following the Closing Date. During the Ramp-Up Period, excess cash is expected to be invested in Eligible Investments. Because of the short-term nature and credit quality of Eligible

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Investments, the interest rates payable on Eligible Investments tend to be significantly lower than the rates the Issuer would expect to earn on Collateral Debt Securities. The longer the period before investment in Collateral Debt Securities, the greater the adverse impact may be on aggregate Interest Proceeds collected and distributed by the Issuer, resulting in a lower yield to the Issuer than could have been obtained if the net proceeds associated with the offering of the Securities were invested at all times in Collateral Debt Securities. In addition, the timing of the purchase of Collateral Debt Securities prior to the Effective Date, the amount of any purchased accrued interest, the scheduled interest payment dates of the Collateral Debt Securities and the amount invested in lower-yielding Eligible Investments until invested in Collateral Debt Securities, may have an impact on the amount of Interest Proceeds collected during the first Due Period, which could adversely affect interest payments on Notes and distributions on Preference Securities. Disposition of Collateral Debt Securities Under the Indenture, the Collateral Manager may only direct the disposition of Collateral Debt Securities under certain limited circumstances. More specifically, the Collateral Manager may direct the disposition of Collateral Debt Securities that meet the definition of Defaulted Securities, Equity Securities, Deferred Interest PIK Bonds, Written-Down Securities, Credit Risk Securities and, subject to the satisfaction of certain conditions set forth herein if a Sale Restriction Condition exists, Credit Improved Securities. See "Security for the NotesDispositions of Collateral Debt Securities." Notwithstanding such restrictions and satisfaction of the conditions set forth in the Indenture, sales and purchases by the Collateral Manager of Collateral Debt Securities could result in losses by the Issuer, which losses may result in the reduction or withdrawal of the rating of any or all of the Notes by any of the Rating Agencies. On the other hand, circumstances may exist under which the Collateral Manager may believe that it is in the best interests of the Issuer to dispose of a Collateral Debt Security, but the Issuer will not be permitted to do so under the restrictions and conditions of the Indenture. See "Description of the NotesDispositions of Collateral Debt Securities." Insolvency Considerations with Respect to Issuers of Collateral Debt Securities Various laws enacted for the protection of creditors may apply to the issuers of the Collateral Debt Securities. The information in this and the following paragraph is applicable with respect to U.S. issuers. These or similar insolvency risks may be applicable to non-U.S. issuers. If a court were to find that the issuer of a Collateral Debt Security did not receive fair consideration or reasonably equivalent value for incurring the indebtedness constituting the Collateral Debt Security 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 invalidate, in whole or in part, such indebtedness as a fraudulent conveyance, subordinate such indebtedness to existing or future creditors of such issuer or recover amounts previously paid by such 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 such issuer's property at a fair valuation or if the present fair saleable value of such issuer's assets were then less than the amount that would be required to pay such issuer's 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 Collateral Debt Security 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 Collateral Debt Security, payments made to the

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Issuer on such Collateral Debt Security could be subject to avoidance as a "preference" if made within a certain period of time (which may be as long as one year) before insolvency. In general, if payments on a Collateral Debt Security 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 Securities). To the extent that any such payments are recaptured from the Issuer, the resulting loss will be borne in the first instance by the holders of the Preference Securities, then by the holders of the Class B-1L Notes, then by the holders of the Class A-3L Notes, then by the holders of the Class A-2L Notes, then by the holders of the Class A1LB Notes and finally by the holders of the Class A-1LA 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 Securities 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 Security, in good faith and without knowledge that the payments were avoidable. Nevertheless, since there is no judicial precedent relating to structured securities such as the Securities, there can be no assurance that a holder of the Securities will be able to avoid recapture on this or any other basis. Violations of Consumer Protection Laws by Issuers of Collateral Debt Securities Applicable state laws generally regulate interest rates and other charges, requiring 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 from unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of the loans backing Manufactured Housing Securities, Prime RMBS Securities, Mid-Prime RMBS Securities and Sub-Prime RMBS 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 Manufactured Housing Security, Prime RMBS Security, Mid-Prime RMBS Security and Sub-Prime RMBS 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. Consequently, any such violation by an issuer of Collateral Debt Securities included in the Collateral could adversely affect the payments which the Issuer expects to receive with respect to such Collateral Debt Securities. Lender Liability Considerations; Equitable Subordination 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 an institutional 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. Because of the nature of the Collateral Debt Securities, the Issuer may be subject to allegations of lender liability. The risk of a successful lender liability action may be increased to the extent the Collateral Manager and its Affiliates own equity securities of an issuer of or obligor on a Collateral Debt Security. 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

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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. Environmental Risks Real property pledged as security with respect to any Collateral Debt Security included in the Collateral may be subject to potential environmental risks. Of particular concern may be those mortgaged properties that are, or have been, the site of manufacturing, industrial or disposal activity. Such environmental risks may give rise to a diminution in the value of property securing Collateral Debt Security or liability for cleanup costs or other remedial actions, and such liability could exceed the value of such property or the principal balance of the related Collateral Debt Security. In certain circumstances, a lender may choose not to foreclose on contaminated property rather than risk incurring liability for remedial actions. Illiquidity of Collateral Debt Securities Some of the Collateral Debt Securities purchased by the Issuer will have no, or only a limited, trading market. The Issuer's investment in illiquid Collateral Debt Securities may restrict the Issuer's ability to dispose of investments in a timely fashion or for a fair price as well as the Issuer's ability to take advantage of market opportunities, although the Issuer is generally prohibited by the Indenture from selling Collateral Debt Securities except under certain limited circumstances described under "Security for the NotesDispositions of Collateral Debt Securities." Illiquid Collateral Debt Securities may trade at a discount from comparable, more liquid investments. In addition, the Issuer may invest in privately placed Collateral Debt Securities that may or may not be freely transferable under the laws of the applicable jurisdiction or due to contractual restrictions on resale; moreover, even if such privately placed Collateral Debt Securities are transferable, the prices realized from their sale could be less than those originally paid by the Issuer or less than what may be considered the fair value of such securities. Credit Ratings Credit ratings of debt securities, including the Notes, represent the rating agencies' opinions regarding their credit quality of such debt securities and are not a guarantee of quality. Rating agencies attempt to evaluate the safety of principal and interest payments and do not evaluate the risks of fluctuations in market value; therefore, ratings may not fully reflect the true risks of an investment. In addition, rating agencies may fail to make timely changes in credit ratings in response to subsequent events, so that an issuer's current financial condition may be better or worse than a rating indicates. Consequently, credit ratings of the Collateral Debt Securities will be used by the Collateral Manager only as a preliminary indicator of investment quality. Up to 20.0% of the Net Outstanding Portfolio Collateral Balance may consist of Collateral Debt Securities rated below investment grade. Investments in non-investment grade and comparable unrated obligations will be more dependent on the Collateral Manager's credit analysis than would be the case with investments in investment-grade debt obligations. International Investing The Issuer will acquire Collateral Debt Securities of issuers organized in Eligible SPV Jurisdictions. Moreover, collateral securing Collateral Debt Securities may consist of obligations of issuers 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

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enforcing legal rights in a foreign jurisdiction and uncertainties as to the status, interpretation and application of laws, (iv) risks of economic dislocations in the host country and (v) less data on historic default and recovery rates for the Collateral Debt Securities. Moreover, foreign companies may not be subject to accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies. 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 no 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 Collateral Debt Security purchases 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 Collateral Debt Security due to settlement problems could result either in losses to the Issuer due to subsequent declines in the value of such Collateral Debt Security 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. Certain Conflicts of Interest The activities of the Collateral Manager, the Initial Purchaser and their respective affiliates may result in certain conflicts of interest. Conflicts of Interest Involving the Collateral Manager The Collateral Manager and its Affiliates may invest, for their own account or for accounts for which they have investment discretion, in securities that would be appropriate investments for the Issuer. Such investments may be the same as or different from those made on behalf of the Issuer. The Collateral Manager and its Affiliates may also have equity and other investments in, may be lenders to, and may have other ongoing relationships with, the issuers of the Collateral Debt Securities. In addition, Affiliates and clients of the Collateral Manager may invest in securities, sell credit protection under a credit default swap referencing securities or issue financial guaranty insurance policies covering securities (or make loans) that are senior to, or have interests different from or adverse to, the Collateral Debt Securities. The Collateral Manager may at certain times be simultaneously seeking to purchase or sell investments for the Issuer and any similar entity for which the Collateral Manager serves as manager in the future, or its clients or Affiliates.

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Various potential and actual conflicts of interest may arise from the overall investment activity of the Collateral Manager and its Affiliates. No provision in the Collateral Management Agreement prevents the Collateral Manager or any of its Affiliates from rendering services of any kind to the issuer of any obligation included in the Collateral and its affiliates, the Trustee, the security holders, the Hedge Counterparty or any other Person. Without prejudice to the generality of the foregoing, the Collateral Manager, its Affiliates and the directors, officers, employees and agents of the Collateral Manager and its Affiliates may, among other things: (a) serve as directors, partners, officers, employees, agents, nominees or signatories for any issuer of any obligation included in the Collateral; (b) receive fees for services rendered to the issuer of any obligation included in the Collateral or any affiliate thereof; (c) be retained to provide services unrelated to the Collateral Management Agreement, to the Issuer or its Affiliates, and be paid therefor; (d) be a secured or unsecured creditor of, or hold an equity interest in, any issuer of any obligation included in the Collateral; (e) sell any Collateral Debt Security or Eligible Investment to, or purchase any Collateral Debt Security from, the Issuer while acting in the capacity of principal or agent; (f) underwrite, act as a distributor of or make a market in any Collateral Debt Security or Eligible Investment; and (g) serve as a member of any "creditors' board" with respect to any obligation included in the Collateral which has become or may become a Defaulted Security. The Collateral Manager and its Affiliates currently provide and, in the future, will continue to provide advisory and other services to clients that include issuers of securities similar to or the same as the Collateral Debt Securities and affiliates of such issuers. In the course of managing the Collateral Debt Securities held by the Issuers, the Collateral Manager may consider its relationships with other clients (including companies the securities of which are pledged to secure the Notes) and its Affiliates. In providing services to other clients, the Collateral Manager and its Affiliates may recommend activities that would compete with or otherwise adversely affect the Issuer. The Collateral Manager and any of its Affiliates may engage in any other business and furnish investment management and advisory services to others which may include serving as collateral manager for, investing in, lending to, or being affiliated with, other entities organized to issue collateralized bond obligations secured by securities such as the Collateral Debt Securities and other trusts and pooled investments vehicles that acquire interests in, provide financing to, or otherwise deal with securities issued by, issuers that would be suitable investments for the Issuer. The Collateral Manager will be free, in its sole discretion, to make recommendations to others, or effect transactions on behalf of itself or for others, that may be the same as or different from those effected on behalf of the Issuer, and the Collateral Manager may furnish investment management and advisory services to others that may have investment policies similar to those followed by the Collateral Manager with respect to the Issuer and that may own securities of the same class, or which are the same type, as the Collateral Debt Securities. The Collateral Manager may also, at certain times, be seeking to effect sales of assets on behalf of the Issuer and on behalf of other clients for whom the Collateral Manager serves as collateral manager or for any other clients or Affiliates. The Collateral Manager may aggregate sales of securities placed with respect to the Collateral with similar sales being made simultaneously for other clients or other accounts managed by the Collateral Manager or with accounts of the Affiliates of the Collateral Manager, if, in the Collateral Manager's reasonable business judgment, such aggregation will result in an overall economic benefit to the Collateral, taking into consideration the advantageous selling price, brokerage commission and other expenses. However, no provision of the Collateral Management Agreement requires the Collateral Manager or its Affiliates to execute orders as part of concurrent authorizations or to aggregate sales. Nevertheless, the Collateral Manager may, in the allocation of business, take into consideration research and other brokerage services furnished to the Collateral Manager or its Affiliates by brokers and dealers. Such services may be used by the Collateral Manager in connection with the Collateral Manager's other advisory services or investment operations.

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Unless the Collateral Manager determines in its sole judgment that such sale is appropriate, the Collateral Manager may refrain from directing the sale pursuant to the Collateral Management Agreement of securities issued by (i) Persons of which the Collateral Manager, its Affiliates or any of its or their officers, directors or employees are directors or officers, (ii) Persons for which the Collateral Manager or its Affiliates act as financial adviser or underwriter or (iii) Persons about which the Collateral Manager or any of its Affiliates have information that the Collateral Manager deems confidential or non-public or otherwise might prohibit it from trading such securities in accordance with applicable law. An Affiliate of the Collateral Manager is expected to acquire approximately 5% of the Preference Securities on the Closing Date. The Collateral Manager, its Affiliates and client accounts for which the Collateral Manager or its Affiliates act as investment adviser may also at times own Notes of one or more Classes. At any given time, the Collateral Manager and its Affiliates will not be entitled to vote the Securities held by the Collateral Manager, its Affiliates and accounts or funds for which the Collateral Manager or any Affiliate thereof acts as investment adviser (and for which the Collateral Manager or such Affiliate has discretionary authority) during the time that the Collateral Manager is serving as the Collateral Manager for the Issuer (such Securities, the "Collateral Manager Securities") with respect to any assignment or termination of, any of the express rights or obligations of the Collateral Manager under the Collateral Management Agreement or the Indenture (including the exercise of any rights to remove the Collateral Manager or terminate the Collateral Management Agreement), or any amendment or other modification of the Collateral Management Agreement or the Indenture increasing the rights or decreasing the obligations of the Collateral Manager (it being understood that any such action would require the consent of the Collateral Manager itself). However, at any given time the Collateral Manager and its Affiliates will be entitled to vote Securities held by them and by such accounts with respect to all other matters, including the exercise of remedies after an Event of Default or the approval of or objection to a replacement Collateral Manager, and as a result an Affiliate of the Collateral Manager may be able to exercise the rights of the Requisite Noteholders. The ownership of Preference Securities by one or more of the Collateral Manager and its Affiliates may give the Collateral Manager an incentive to take actions that vary from the interests of the holders of the Notes. Notwithstanding anything to the contrary herein, the Collateral Manager or any Affiliate thereof, in its capacity as holder of, or an advisor to a holder of, the Preference Securities, may, in such capacity, act in the manner which it determines to be in the best interests of a holder of the Preference Securities, without regard to the effect on the interests of the Noteholders. Although the Collateral Manager currently expects to continue to hold all or part of the Preference Securities directly or indirectly through its Affiliates or funds or accounts for which the Collateral Manager or its Affiliates act as investment adviser until the redemption in full of the Notes, none of the Collateral Manager, its Affiliates and such funds and accounts, is contractually restricted under the Indenture, the Collateral Management Agreement or otherwise from selling or otherwise disposing of all or part of the Preference Securities. The Collateral Manager is entitled to receive a Collateral Manager Incentive Allocation which is dependent in large part on the performance of the securities purchased by the Collateral Manager on behalf of the Issuer. Accordingly, the Collateral Manager may have an incentive to manage the Issuer's investments in such a manner as to seek to maximize the return on such securities. This could result in increasing the volatility of the Collateral Debt Securities and could contribute to a decline in the aggregate value of the Collateral Debt Securities. In addition, ACA Service L.L.C. ("ACA Services"), a Delaware limited liability company and an Affiliate of the Collateral Manager, will receive a structuring fee from the Issuer on the Closing Date as compensation for its services to the Issuer performed prior to the Closing Date.

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"Affiliate" with respect to the Collateral Manager means (i) any other Person who, directly or indirectly, is in control of, or controlled by, or is under common control with, the Collateral Manager or (ii) any other Person who is a director, member, officer, employee or general partner of (a) the Collateral Manager or (b) any such other Person described in clause (i) above. For the purposes of the foregoing definition, "control" of a Person shall mean the power, direct or indirect, (x) to vote more than 50% of the securities having ordinary voting power for the election of directors of such Person or (y) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Except with respect to Collateral Debt Securities purchased by the Issuer on the Closing Date (see " Purchase of Collateral Debt Securities"), the Collateral Manager will be limited in its ability under the Indenture and under the Collateral Management Agreement to acquire an obligation on behalf of the Issuer to be included in the Collateral from the Collateral Manager or any of its Affiliates as principal or to sell an obligation to the Collateral Manager or any of its Affiliates as principal. In certain circumstances, the Collateral Manager or the Trustee or their affiliates or both may receive compensation in connection with the Trustee's or the Collateral Manager's (or such affiliate's) investment in certain Eligible Investments from the managers of such Eligible Investments. An affiliate of Bear Stearns Merchant Banking, which is an affiliate of the Initial Purchaser, is the largest institutional shareholder of ACA Capital Holdings, Inc., the ultimate parent of the Collateral Manager, and holds three out of ten seats on the board of directors of ACA Capital Holdings, Inc. See "The Collateral Manager" and "The Collateral Management Agreement" for further information on the role of the Collateral Manager and ACA Services. Conflicts of Interest Involving the Initial Purchaser It is expected that the Issuer will acquire all of the Collateral Debt Securities to be acquired on the Closing Date from Bear Stearns, at prices agreed upon by the Issuer with the advice of the Collateral Manager. Certain of such securities will be securities of issuers for which Bear Stearns has acted as underwriter, agent, placement agent or principal or of which Bear Stearns is an equity owner. The price to be paid by the Issuer for such securities may be higher or lower, based on market conditions at the time of purchase from such seller, than the prices the Issuer would have paid had such securities all been purchased from such seller on the date such securities were sold to the Issuer. After the Closing Date, the Issuer with the advice of the Collateral Manager may acquire from or through Bear Stearns or other sources Collateral Debt Securities at current market prices which will be negotiated by or on behalf of the Issuer at such time. In addition, from time to time the Collateral Manager may purchase or sell Collateral Debt Securities through Bear Stearns and/or any of its affiliates. Bear Stearns will also receive compensation for the sale of the Notes and the Preference Securities. See "Use of Proceeds" and "Plan of Distribution" herein. Bear Stearns has also entered into certain indemnification agreements with the Collateral Manager relating to, among other things, the acquisition of the Collateral Debt Securities. An affiliate of Bear Stearns Merchant Banking, which is an affiliate of the Initial Purchaser, is the largest institutional shareholder of ACA Capital Holdings, Inc., the ultimate parent of the Collateral Manager, and holds three out of ten seats on the board of directors of ACA Capital Holdings, Inc. The Issuers The Issuer is a recently incorporated company and has no significant prior operating history. The Issuer has no significant assets other than the Collateral. The Issuer will not engage in any business activity other than the co-issuance of the Notes and the issuance of the Preference Securities and the ordinary

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shares as described herein, the acquisition of and investment and reinvestment in the Collateral Debt Securities as described herein, certain activities conducted in connection with the payment of amounts in respect of the Notes and the Preference Securities and the management of the Collateral and other activities incidental to the foregoing. Income derived from the Collateral will be the Issuer's principal source of cash. The Issuer is an exempted company incorporated under the laws of the Cayman Islands. Because the Issuer is a Cayman Islands company and its directors reside in the Cayman Islands, it may not be possible for investors to effect service of process within the United States on such persons or to enforce against them or against the Issuer in United States courts judgments predicated upon the civil liability provisions of the United States securities laws. The Co-Issuer is a newly formed entity and has no prior operating history. The Co-Issuer has no substantial assets. The Co-Issuer will not engage in any business activity other than the co-issuance of the Notes. Dependence on the Collateral Manager The Issuer has no employees and is dependent on the employees of the Collateral Manager and its Affiliates to make decisions on the Issuer's behalf in accordance with the terms of the Indenture and the Collateral Management Agreement. The performance of the Collateral Debt Securities depends on the skills of the Collateral Manager and its Affiliates in analyzing, selecting and managing the Collateral Debt Securities. As a result, the success of the Issuer will be highly dependent on the financial and managerial experience of the Collateral Manager and the individuals to whom the task of managing the Collateral has been assigned. The individuals performing these functions for the Collateral Manager are employed by ACA Financial Guaranty Corporation, an affiliate of the Collateral Manager ("ACA Guaranty"). Certain employment arrangements between ACA Guaranty (or its affiliates) and these individuals may exist, but the Issuer is not, and will not be, a direct beneficiary of such arrangements, and these arrangements are in any event subject to change without the consent of the Issuer. Consequently, the loss of one or more of the individuals employed by the Collateral Manager, through ACA Guaranty, and its affiliates to manage the Issuer's investment program could have a significant adverse effect on the performance of the Issuer. See "The Collateral Manager." Removal of the Collateral Manager The Collateral Manager may be removed at any time with cause and replaced with a replacement collateral manager under the circumstances described under "The Collateral Management Agreement Termination of the Collateral Management Agreement." Such termination may become effective without the approval of Holders of all of the Notes and Preference Securities. Relation to Prior Investment Results The prior investment results of Persons associated with the Collateral Manager or any other entity or Person described herein are not indicative of the Issuer's future investment results. The nature of, and risks associated with, the Issuer's future investments may differ substantially from those investments and strategies undertaken historically by such Persons and entities. There can be no assurance that the Issuer's investments will perform as well as the past investments of any such Persons or entities. Projections, Forecasts and Estimates Estimates of the weighted average lives of the Notes and the expected duration of the Preference Securities included herein, together with any other projections, forecasts and estimates provided to prospective purchasers of the Securities, are forward looking statements. Projections are necessarily

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speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. Accordingly, the projections are only an estimate. Actual results will vary from the projections, and the variations may be material. See "Default and Recovery Rates on Collateral Debt Securities." Some important factors that could cause actual results to differ materially from those in any forward looking statements include changes in interest rates, market, financial or legal uncertainties, differences in the actual allocation of the Collateral Debt Securities among asset categories from those identified on Schedule A to this Offering Circular, prepayments, the timing of acquisitions of the Collateral Debt Securities, mismatches between the timing of accrual and receipt of Interest Proceeds and Principal Proceeds from the Collateral Debt Securities (particularly during the Ramp-Up Period), defaults under the Collateral Debt Securities and the Closing Date Interest Rate Cap Agreement, the ability to enter into the Closing Date Interest Rate Cap Agreement upon acceptable terms and the effectiveness of the Closing Date Interest Rate Cap Agreement, among others. Consequently, the inclusion of projections herein should not be regarded as a representation by the Issuer, the Co-Issuer, the Collateral Manager, the Trustee, the Collateral Administrator, the Initial Purchaser or any of their respective affiliates or any other Person of the results that will actually be achieved by the Issuer. None of the Issuer, the Co-Issuer, the Collateral Manager, the Collateral Administrator, the Preference Security Paying Agent, the Initial Purchaser, the Trustee or any of their respective affiliates or any other Person has any obligation to update or otherwise revise any projections, including any revisions to reflect changes in economic conditions or other circumstances arising after the date hereof or to reflect the occurrence of unanticipated events, even if the underlying assumptions do not come to fruition. In addition, a prospective investor may have received a prospective investor presentation or other similar materials from an Initial Purchaser. Such a presentation may have contained a summary of certain proposed terms of a hypothetical offering of Securities as contemplated at the time of preparation of such presentation in connection with preliminary discussions with prospective investors in the Securities. However, as indicated therein, no such presentation was an offering of securities for sale, and any offering is being made only pursuant to this Offering Circular. Given the foregoing and the fact that information contained in any such presentation was preliminary in nature and has been superseded and may no longer be accurate, neither any such presentation nor any information contained therein may be relied upon in connection with a prospective investment in the Securities. In addition, the Initial Purchaser or the Issuer may make available to prospective investors certain information concerning the economic benefits and risks resulting from ownership of the Securities derived from modeling the cash flows expected to be received by, and the expected obligations of, the Issuer under various hypothetical assumptions provided to the Initial Purchaser or potential investors. Any such information may constitute projections that depend on the assumptions supplied and are otherwise limited in the manner indicated above. Investment Company Act Neither of the Issuers nor the pool of Collateral has been registered with the United States Securities and Exchange Commission (the "SEC") as an investment company pursuant to the Investment Company Act. The Issuers have not so registered in reliance on Section 3(c)(7) of the Investment Company Act. Section 3(c)(7) provides for an exemption from registration for issuers (a) whose outstanding securities are beneficially owned by Qualified Purchasers and (b) which do not make a public offering of their securities in the United States. No opinion or no-action position has been requested of the SEC. To rely on Section 3(c)(7), the Issuers must have a "reasonable belief" that all purchasers of the Securities (including original purchasers and subsequent transferees but excluding those purchasing pursuant to

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Regulation S) are Qualified Purchasers. Because transfers of beneficial interests in the Notes will generally be effected only through DTC and its participants and indirect participants without delivery of written transferee certifications to the Issuers, the Issuers will establish the existence of such a reasonable belief by means of the deemed representations, warranties and agreements described under "Transfer Restrictions," the agreement of the Initial Purchaser referred to under "Plan of Distribution" and by taking the other actions described under "Description of the NotesForm, Denomination, Registration and Transfer." Although the SEC has stated that it is possible for an issuer of securities to satisfy the reasonable belief standard referred to above by establishing procedures to provide a means by which such issuer can make a reasonable determination as to status of its security holders as Qualified Purchasers, the SEC has not approved and has stated that it will not approve any particular set of procedures including the Section 3(c)(7) procedures described herein. Accordingly, there can be no assurance that the Issuers will have satisfied the reasonable belief standard referred to above. If the SEC or a court of competent jurisdiction were to find that the Issuer, the Co-Issuer or the pool of Collateral 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 or the Co-Issuer could sue the Issuer or the Co-Issuer and recover any damages caused by the violation; and (iii) any contract to which the Issuer is a party which is made in, or the performance of which involves a, violation of the Investment Company Act 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 nonenforcement and would not be inconsistent with the purposes of the Investment Company Act. Should the Issuer or the Co-Issuer be subjected to any or all of the foregoing, the Issuer or the Co-Issuer would be materially and adversely affected. Issuer May Cause a Transfer of Securities Each transferee of a Restricted Note or a Restricted Preference Security (or beneficial interest therein) will be deemed to represent at the time of transfer that: (i) the transferee is a Qualified Institutional Buyer (or in the case of a Restricted Preference Security only, an Accredited Investor) and also a Qualified Purchaser; (ii) the transferee is not a dealer described in paragraph (a)(1)(ii) of Rule 144A unless such transferee owns and invests on a discretionary basis at least U.S.$25,000,000 in securities of issuers that are not affiliated persons of such dealer; (iii) the transferee is not a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, unless investment decisions with respect to the plan are made solely by the fiduciary, trustee or sponsor of such plan; and (iv) the transferee will provide written notice of the foregoing, and of any applicable restrictions on transfer, to any subsequent transferee. The Indenture and the Preference Security Paying Agency Agreement provide that if, notwithstanding the restrictions on transfer contained therein, either of the Issuers determine that (i) any beneficial owner of a Restricted Note (or any interest therein) or a Restricted Preference Security is not both (a) (1) a Qualified Institutional Buyer or (2) in the case of a Restricted Preference Security, an Accredited Investor, and (b) a Qualified Purchaser or (ii) any beneficial owner of a Regulation S Note or a Regulation S Preference Security is a U.S. Person (within the meaning of Regulation S), then the Issuers shall require, by notice to such holder, that such holder sell all of its right, title and interest to such Restricted Note, Restricted Preference Security, Regulation S Note or Regulation S Preference Security, as the case may be. A holder of a Regulation S Global Preference Security that is a Benefit Plan Investor or a Controlling Person, or any holder of a Preference Security that represented that it was not a Benefit Plan Investor or a Controlling Person but actually is or has become a Benefit Plan Investor or a Controlling Person, also shall be required to sell its interest in the Preference Securities. See "Transfer Restrictions." See "Description of the NotesForm, Denomination, Registration and TransferTransfer and Exchange of

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Notes." See "Description of the Preference SecuritiesForm, Registration and TransferTransfer and Exchange of Preference Securities." Purchase of Collateral Debt Securities The Collateral Debt Securities purchased by the Issuer on the Closing Date will be purchased from a portfolio of Collateral Debt Securities held by an affiliate of the Initial Purchaser (the "Seller"), pursuant to a warehousing agreement between the Seller and the Collateral Manager. Some of the Collateral Debt Securities subject to such warehousing agreement may have originally been acquired by the Seller in connection with its underwriting or placement thereof upon issuance thereof or from the Collateral Manager or one of its Affiliates. The Issuer will purchase Collateral Debt Securities from the Initial Purchaser or its affiliates (including, without limitation, the Seller) only to the extent the Collateral Manager determines that such purchases are consistent with the investment guidelines and objectives of the Issuer, the restrictions contained in the Indenture and the Collateral Management Agreement and applicable law. In any event, all purchases of Collateral Debt Securities from the Seller will be at their original cost of purchase by the Seller under such warehousing agreement plus accrued but unpaid interest from the date of such original purchase, adjusted for interest rate hedging losses or gains with respect thereto. No representation is made with respect to the market value of such Collateral Debt Securities at the time of acquisition or as of the Closing Date. Accordingly, the Issuer may be obligated to pay a higher (or lower) purchase price for eligible Collateral Debt Securities than it would have had it purchased such assets in the market on the Closing Date. There can be no assurance that the market value of the Collateral Debt Securities will be equal to the aggregate outstanding principal amount of the Notes plus the aggregate issue price of the Preference Securities at any time. If the Seller were to become the subject of a case or proceeding under the United States Bankruptcy Code, the Bankruptcy Law (1997 Revision) of the Cayman Islands, the Companies Law (2004 Revision) of the Cayman Islands or another applicable insolvency law, the trustee in bankruptcy or other liquidator could assert that Collateral Debt Securities acquired from the Seller are property of the insolvency estate of the Seller. Property that the Seller has pledged or assigned, or in which the Seller has granted a security interest, as collateral security for the payment or performance of an obligation, would be property of the estate of the Seller. Property that the Seller has sold or absolutely assigned and transferred to another party, however, is not property of the estate of the Seller. The Issuer does not expect that the purchase by the Issuer of Collateral Debt Securities, under the circumstances contemplated by this Offering Circular, will be deemed to be a pledge or collateral assignment (as opposed to the sale or other absolute transfer of such Collateral Debt Securities to the Issuer). Limited Remedies after an Event of Default If an Event of Default occurs, the remedies available to Noteholders are limited and for the most part may be exercised only by the Trustee acting at the direction of the Requisite Noteholders. On any Payment Date following the occurrence of an Event of Default and the acceleration of the maturity of the Notes (each such Payment Date, unless such Event of Default is no longer continuing or such acceleration of the Notes has been rescinded, a "Post Acceleration Payment Date"), no payments of interest or principal on any Class of Notes will be made until all principal and all accrued and unpaid interest on each Class of Notes that is senior to such Class of Notes has been paid in full. Subsequent to an Event of Default and acceleration, the Collateral will not be liquidated unless one of the two conditions described under "Description of the NotesThe IndentureEvents of Default" is satisfied. If any such condition is satisfied and the Collateral is liquidated, the proceeds of the Collateral will be applied to pay interest and principal on the Notes in accordance with the Priority of Payments. However, there can be no assurance that the conditions to liquidation of the Collateral will be met or that a direction to liquidate the Collateral will be given to the Trustee.

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Limited Source of Funds to Pay Expenses of the Issuer The funds available to the Issuer to pay certain fees and expenses of the Trustee, the Collateral Administrator, the Preference Security Paying Agent and the Administrator and for payment of the Issuer's other accrued and unpaid Administrative Expenses are limited as described in the proviso to clause (2) under "Description of the NotesPriority of PaymentsInterest Proceeds." Payment of any taxes and filing and registration fees (including annual return fees owed by the Issuer) will be payable prior to any of the amounts owed by the Issuer and are not subject to any limitations. Any Interest Proceeds remaining after the payments described in clauses (1) through (14) under "Description of the NotesPriority of PaymentsInterest Proceeds" and any Total Proceeds remaining after the payments described in clauses (1) through (10) under "Description of the NotesPriority of PaymentsPayments upon Redemption or Following an Acceleration" and the payment of the Subordinated Collateral Management Fee will also be available for the payment of expenses. In the event that such funds are not sufficient to pay the expenses incurred by the Issuer, the ability of the Issuer to operate effectively may be impaired, and it may not be able to defend or prosecute legal proceedings brought against it or that it might otherwise bring to protect the interests of the Issuer. Interest Rate Risk All Securities are subject to the risk that Interest Proceeds (after paying amounts senior in the Priority of Payments to interest on such Securities) may from time to time be less than the interest due on the Notes and the distributions payable on the Preference Securities. The portfolio of Collateral Debt Securities will include investments that bear interest at a variety of fixed rates and floating rates that are different than the interest rates on the Notes. For example, the Notes will bear interest at floating rates based on threemonth LIBOR, as determined on each LIBOR Determination Date, whereas most of the Collateral Debt Securities (other than Collateralized Debt Obligation Securities) will bear interest at floating rates based on one-month LIBOR (which will be fixed on dates other than the LIBOR Determination Date), most of the Collateralized Debt Obligation Securities will bear interest at floating rates based on three-month LIBOR (which will be fixed on dates other than the LIBOR Determination Date), and some Collateral Debt Securities will bear interest at a fixed rate. The Collateral Debt Securities that bear interest at a floating rate may not be indexed to LIBOR and/or payments of interests on such Collateral Debt Securities may not be payable quarterly. In addition, certain Collateral Debt Securities that are generally RMBS have coupons that may fluctuate due to changes in the weighted average interest rate of the respective underlying mortgage loan portfolio. The timing and magnitude of these changes are subject to various parameters including the interest rate reset features of the underlying mortgages, the interest rate index or basis used to calculate the mortgage rate and the prepayment rate of the mortgage pool. In addition, the Unused Proceeds and any payments of principal or interest on Collateral Debt Securities received during a Due Period will be invested temporarily in Eligible Investments, which may bear interest at a fixed rate or a floating rate not necessarily indexed to LIBOR. On the Closing Date the Issuer will enter into the Closing Date Interest Rate Cap Agreement, which is intended to protect against increases in the floating rate of interest (LIBOR) payable on the Notes and to reduce in part the Issuer's exposure to such interest rate risk. However the Closing Date Interest Rate Cap Agreement will not mitigate the risk of an interest rate mismatch between the floating rate at which interest accrues on the Notes and the rates at which interest accrues on the Collateral Debt Securities, and the Issuer will not be permitted to enter into any interest rate hedge agreements to mitigate such risks after the Closing Date. There can be no assurance that the Collateral Debt Securities and Eligible Investments will in all circumstances generate sufficient Interest Proceeds to make timely payments of interest on the Notes.

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Average Life, Prepayment Considerations and Early Redemption The "Stated Maturity" of the Notes is the Payment Date in June 2041. However, the average life of each Class of Notes is expected to be shorter than the number of years until the Stated Maturity. The "Scheduled Preference Security Redemption Date" is the Payment Date in June 2041; however, the expected duration of the Preference Securities is expected to be shorter than the number of years until the Scheduled Preference Security Redemption Date. Average life, however, is a statistical estimate based on numerous assumptions, any one of which may not materialize. Accordingly, prospective investors should not rely on this estimate in assessing future performance. Certain types of Collateral Debt Securities are subject to prepayment at greater or lesser rates than current rates, subjecting the Issuer to "call" and "extension" risk that could have adverse effects on the yield realized on such investments. In addition, average lives will be affected by the financial condition of the obligors on or issuers of the Collateral Debt Securities and the characteristics of the Collateral Debt Securities, including the existence and frequency of exercise of any prepayment, optional redemption or sinking fund features, the prevailing level of interest rates, the redemption price, the actual default rate and the actual level of recoveries on any Defaulted Securities, the frequency of tender or exchange offers for the Collateral Debt Securities and any sales of Collateral Debt Securities and any dividends or other distributions received in respect of Equity Securities, as well as the risks unique to investments in obligations of foreign issuers. Furthermore, because of subordination, the financial consequences of these risks are magnified with respect to the Preference Securities and, to a lesser extent, the Class B-1L Notes, the Class A-3L Notes and the Class A-2L Notes. The average lives of the Notes and the duration of the Preference Securities may also vary due to the early redemption of the Notes, pursuant to an Auction Call Redemption, a Tax Redemption, an Optional Redemption, a Coverage Failure Redemption and a Rating Confirmation Failure Redemption. See "Description of the NotesAuction Call Redemption,"Optional Redemption and Tax Redemption," and "Mandatory RedemptionCoverage Failure Redemption" and "Mandatory Redemption Rating Confirmation Failure Redemption." Distributions on the Preference Securities; Investment Term; Non-Petition Agreement Prior to the payment in full of the Notes and all other amounts owing under the Indenture, Preference Securityholders will be entitled to receive distributions only to the extent permissible under the Indenture, the Preference Security Documents and Cayman Islands law (as described herein). The timing and amount of distributions payable to Preference Securityholders and the duration of the Preference Securityholders' investment in the Issuer therefore will be affected by the average life of the Notes. See "Average Life, Prepayment Considerations and Early Redemption." Each original purchaser of Preference Securities from the Initial Purchaser will be required to covenant in a Subscription Agreement (and each transferee of Preference Securities will be required to covenant in a transfer certificate) that it will not cause the filing of a petition in bankruptcy against the Issuer before one year and one day have elapsed since the payment in full of the Notes or, if longer, the applicable preference period (plus one day) then in effect. If such provision failed to be effective to preclude the filing of a petition under applicable bankruptcy laws, then the filing of such a petition could result in one or more payments on the Notes made during the period prior to such filing being deemed to be preferential transfers subject to avoidance by the bankruptcy trustee or similar official exercising authority with respect to the Issuer's bankruptcy estate.

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Income Tax Considerations Investors in the Notes and the Preference Securities should review carefully the income tax considerations set forth in "Income Tax Considerations" herein. ERISA Considerations Investors in the Notes and the Preference Securities should review carefully the ERISA considerations set forth in "ERISA Considerations" herein. Money Laundering Prevention On October 26, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001) (the "USA PATRIOT Act"), was enacted into law, aimed at giving the government new powers in the war on terrorism. The USA PATRIOT Act also imposed significant new anti-money laundering requirements on covered financial institutions. Specifically, broker-dealers registered with the United States Securities and Exchange Commission and the National Association of Securities Dealers, Inc. (the "NASD"), such as the Initial Purchaser, are required to establish and maintain anti-money laundering programs, which include, at a minimum, developing internal policies, procedures and controls; designating a compliance officer; establishing an ongoing employee training program; and establishing an independent audit function to test the efficacy of the anti-money laundering policies and procedures. The Initial Purchaser may disclose information regarding investors to such parties (e.g., affiliates, attorneys, auditors, administrators or regulators) as it deems necessary or advisable to facilitate the transfer of the Notes, including, but not limited to, in connection with anti-money laundering and similar laws. The Issuers, the Collateral Manager or other service providers may also release information if directed to do so by the investors in the Notes, if compelled to do so by law or in connection with any government or self-regulatory organization request or investigation. On February 24, 2003, the money laundering provisions of the Proceeds of Crime Act 2002 (the "Act") were enacted into UK law aimed at consolidating the UK primary legislation (which created separate offences in relation to the laundering of money from drugs and the money laundering of other proceeds of crime) by creating a set of general offences relating to dealings with proceeds of all crimes. Both the Act and the primary legislation impose significant anti-money laundering requirements on all UK financial institutions. Specifically, firms authorized and regulated by the Financial Services Authority, such as the Initial Purchaser, are required to establish and maintain anti-money laundering programs, which include, at a minimum, developing internal policies, procedures and controls; designating a Money Laundering Reporting Officer; establishing an ongoing employee training program; and establishing an independent audit function to test programs. The Initial Purchaser may disclose information regarding investors to such parties (e.g., affiliates, attorneys, auditors, administrators or regulators) as it deems necessary or advisable to facilitate the transfer of the Notes, including, but not limited to, in connection with antimoney laundering and similar laws. The Issuers, the Collateral Manager or other service providers may also release information if directed to do so by the investors in the Notes, if compelled to do so by law or in connection with any government or self-regulatory organization request or investigation. The Issuer reserves the right to request such information as is necessary to verify the identity of the holder of a Security and the source of the payment of subscription monies, or as is necessary to comply with any customer identification programs required by the Treasury Department or by any other governmental or self-regulatory agency. In connection with the establishment of anti-money laundering procedures, the Issuer may implement additional restrictions on the transfer of Notes. In the event of delay or failure by

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the applicant to produce any information required for verification purposes, an application for or transfer of the Securities and the subscription monies relating thereto may be refused. Certain Legal Investment Considerations None of the Issuer, the Co-Issuer, the Collateral Manager and the Initial Purchaser makes any representation as to the proper characterization of the Securities for legal investment or other purposes, as to the ability of particular investors to purchase the Securities for legal investment or other purposes or as to the ability of particular investors to purchase 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 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 Manager and the Initial Purchaser makes any representation as to the characterization of the 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 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 Securities) may affect the liquidity of the Securities. Implementation of Securities Regulation in Europe As part of a coordinated action plan for harmonization of securities markets in Europe, the European Parliament and the Council of the European Union have adopted a series of directives, including the Prospectus Directive (2003/71/EC), the Transparency Directive (2004/109/EC) and the Market Abuse Directive (2003/6/EC), which aim to ensure investor protection and market efficiency in accordance with high regulatory standards across the European community. Pursuant to these directives, member states have introduced, or are in the process of introducing, legislation into their domestic markets to implement the requirements of these directives. The introduction of this legislation has effected and will effect the regulation of issuers of securities that are offered to the public or admitted to trading on a European Union regulated market and the nature and content of disclosure required to be made in respect of these issuers and their related securities. The listing of the Notes or the Preference Securities on any European Union stock exchange would subject the Issuer to regulation under these directives, although the requirements applicable to the Issuer are not yet fully clarified. The Indenture will not require the Issuer to apply for, list or maintain a listing for any Class of Notes or the Preference Securities on a European Union stock exchange if compliance with these directives (or other requirements adopted by the European Parliament and the Council of the European Union or a relevant member state) becomes burdensome. Should the Notes or Preference Securities be delisted from any exchange, the ability of the holders of the Securities to sell the Securities in the secondary market may be negatively affected. Document Repository Pursuant to the Indenture, the Issuer will consent to the posting of this Offering Circular, the Indenture and certain periodic reports required to be delivered pursuant to the Indenture, together with any amendments or modifications thereto, to the internet-based password protected electronic repository of transaction documents relating to privately offered and sold collateralized debt obligation securities located at "www.cdolibrary.com."

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DESCRIPTION OF THE NOTES The Notes will be issued pursuant to the Indenture. The following summary describes certain provisions of the Notes and the Indenture. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture. Copies of the Indenture may be obtained in electronic format by Noteholders and Preference Securityholders upon request in writing to the Trustee at Wells Fargo Bank, National Association, 9062 Old Annapolis Road, Columbia, Maryland 21045, Attention: CDO Trust Services ACA ABS 2006-1, Limited. Status and Security The Notes are limited recourse debt obligations of the Issuers. The Notes are not obligations of the Trustee, the Security Trustee, the Administrator, the Collateral Administrator, the Preference Security Paying Agent, the Collateral Manager, the Hedge Counterparty, the Initial Purchaser, any of their respective directors, officers or affiliates or any director, officer or member of either of the Issuers. Except as otherwise described in the Priority of Payments, the relative order of seniority of payment of principal of each Class of Notes is as follows: first, Class A-1LA Notes, second, Class A-1LB Notes, third, Class A-2L Notes, fourth, Class A-3L Notes and, fifth, Class B-1L Notes, with (a) each Class of Notes (other than the Class B-1L Notes) in such order of priority being "Senior" or in "Seniority" to each other Class of Notes that follows such Class of Notes in such order of priority and (b) each Class of Notes (other than the Class A-1LA Notes) in such order of priority being "Subordinate" to each other Class of Notes that precedes such Class of Notes in such order of priority; provided that if a Sequential Payment Triggering Event has not occurred, Principal Proceeds will be applied on each Payment Date to pay principal of all Classes of Notes on a pro rata basis (based on the aggregate outstanding principal amount of each Class of Notes, excluding Deferred Interest, as of the last day of the applicable Due Period). During a Sequential Pay Period, no payment of principal of any Class of Notes will be made until all principal of, and all accrued and unpaid interest on, the Notes of each Class that is Senior to such Class and that remain outstanding have been paid in full, except for (i) the payment of Class A-3L Deferred Interest and Class B-1L Deferred Interest from Interest Proceeds and (ii) the payment of the Class B-1L Turbo Payment. See "Priority of Payments." "Sequential Pay Period" means any Payment Date on which a Sequential Payment Triggering Event has occurred or is continuing. With respect to each Class of Notes, the Final Payment Date is the Payment Date in June 2041 or such earlier date on which the aggregate outstanding principal amount of each Class of Notes is paid in full, including in connection with an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Interest will be paid on the Notes as described under "Interest" below. Under the terms of the Indenture, the Issuer will grant to the Trustee for the benefit of the Secured Parties a perfected first priority security interest in the Collateral described herein to secure the Issuer's obligations under the Indenture and the Notes. The Excepted Property will not form part of the Collateral. Payments of principal of and interest on the Notes will be made solely from the proceeds of the Collateral, in accordance with the priorities described under "Priority of Payments." If the amounts received in respect of the Collateral (net of certain expenses) are insufficient to make payments on the Notes, no other assets will be available for payment of the deficiency and, following liquidation of all the Collateral, the obligations of the Issuers to pay any such deficiency will be extinguished.

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Interest The Class A-1LA Notes will bear interest at a floating rate per annum equal to LIBOR (determined as described below) plus 0.31% (the "Class A-1LA Note Interest Rate"). The Class A-1LB Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.44% (the "Class A-1LB Note Interest Rate"). The Class A-2L Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.57% (the "Class A-2L Note Interest Rate"). The Class A-3L Notes will bear interest at a floating rate per annum equal to LIBOR plus 1.55% (the "Class A-3L Note Interest Rate"). The Class B-1L Notes will bear interest at a floating rate per annum equal to LIBOR plus 3.25% (the "Class B-1L Note Interest Rate"). Interest on the Notes will be calculated on the basis of a 360-day year and the actual number of days elapsed in the applicable Interest Period. Interest will accrue on the outstanding principal amount of each Class of Notes (determined as of the first day of each Interest Period and after giving effect to any redemption or other payment of principal occurring on such day) from the Closing Date. Payments of interest on the Notes will be payable in U.S. dollars quarterly in arrears on March 10, June 10, September 10 and December 10 of each year, commencing in September, 2006 (each, a "Payment Date"), or, if any such date is not a Business Day, then on the next succeeding Business Day. Interest will cease to accrue on each Note or, in the case of a partial repayment, on such part, from the date of repayment or the Stated Maturity unless payment of principal is improperly withheld or unless default is otherwise made with respect to such payments. To the extent lawful and enforceable, interest on any Defaulted Interest on any Note will accrue at the interest rate applicable to such Note until paid. "Defaulted Interest" means any interest due and payable in respect of any Note which is not punctually paid or duly provided for on the applicable Payment Date or at the Stated Maturity and which remains unpaid. Defaulted Interest will not include Class A-3L Deferred Interest or Class B-1L Deferred Interest. Senior Class A Notes. Interest on the Class A-1 Notes will be payable pari passu between the Class A-1LA Notes and the Class A-1LB Notes as described herein. No interest will be payable in respect of the Class A-2L Notes on any Payment Date unless the Holders of the Class A-1 Notes have been paid all accrued and unpaid interest due to them on such Payment Date in accordance with the Priority of Payments. See "Priority of PaymentsInterest Proceeds" herein. Class A-3L Notes. No interest will be payable in respect of the Class A-3L Notes on any Payment Date unless (i) the Holders of the Senior Class A Notes have been paid all accrued and unpaid interest due to them on such Payment Date in accordance with the Priority of Payments and (ii) the Overcollateralization Test with respect to the Senior Class A Notes has been satisfied. See "Description of the NotesPriority of PaymentsInterest Proceeds" herein. So long as any Senior Class A Notes are outstanding, the failure on any Payment Date to make payment in respect of interest on the Class A-3L Notes by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Any interest on the Class A-3L Notes which is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as the "Class A-3L Deferred Interest"). Any Class A-3L Deferred Interest will be added to the aggregate outstanding principal amount of the Class A-3L Notes, and thereafter interest will accrue at the Class A-3L Note Interest Rate on the aggregate outstanding principal amount of the Class A-3L Notes, as so increased. Unless otherwise specified herein, any reference to the principal amount of a Class A-3L Note includes any Class A-3L Deferred Interest added thereto. Notwithstanding the foregoing, Class A3L Deferred Interest will not be included in the principal amount of the Class A-3L Notes for purposes of calculating the Overcollateralization Tests. Upon the payment of Class A-3L Deferred Interest previously

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capitalized as additional principal, the aggregate outstanding principal amount of the Class A-3L Notes will be reduced by the amount of such payment. Class B-1L Notes. No interest will be payable in respect of the Class B-1L Notes on any Payment Date unless (i) the Holders of the Class A Notes have been paid all accrued and unpaid interest due to them on such Payment Date in accordance with the Priority of Payments and (ii) the Overcollateralization Tests with respect to the Senior Class A Notes and the Class A Notes and the Class A Interest Coverage Test have been satisfied. See "Priority of PaymentsInterest Proceeds" herein. So long as any Class A Notes are outstanding, the failure on any Payment Date to make payment in respect of interest on the Class B-1L Notes by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Any interest on the Class B-1L Notes which is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as the "Class B-1L Deferred Interest" and, together with the Class A-3L Deferred Interest, the "Deferred Interest). Any Class B-1L Deferred Interest will be added to the aggregate outstanding principal amount of the Class B-1L Notes, and thereafter interest will accrue at the Class B-1L Note Interest Rate on the aggregate outstanding principal amount of the Class B-1L Notes, as so increased. Unless otherwise specified herein, any reference to the principal amount of a Class B-1L Note includes any Class B-1L Deferred Interest added thereto. Notwithstanding the foregoing, Class B-1L Deferred Interest will not be included in the principal amount of the Class B-1L Notes for purposes of calculating the Overcollateralization Tests. Upon the payment of Class B-1L Deferred Interest previously capitalized as additional principal, the aggregate outstanding principal amount of the Class B-1L Notes will be reduced by the amount of such payment. Calculation of LIBOR With respect to each Interest Period, the London interbank offered rate (calculated as described below, "LIBOR") for purposes of calculating the interest rate for each Class of Notes for such Interest Period will be determined by the Trustee, as calculation agent (the "Calculation Agent"), in accordance with the following provisions: (i) On the second London Banking Day prior to the commencement of an Interest Period (each such day, a "LIBOR Determination Date"), LIBOR will be determined for such Interest Period as the rate, as obtained by the Calculation Agent, for three-month Dollar deposits (or in the case of the Interest Periods described in subparagraph (iii) below and for the Payment Date in September 2006, an interpolated rate) based on the rates which appear on Telerate Page 3750 (as defined in the 2002 ISDA Definitions published by the International Swaps and Derivatives Association, Inc.) as reported by Bloomberg Financial Markets Commodities News or which appears in such other page as may replace Telerate Page 3750, in each case as of 11:00 a.m. (London time) on such LIBOR Determination Date. If, on any LIBOR Determination Date, such rate does not appear on Telerate Page 3750 or such page as may replace Telerate Page 3750, the Calculation Agent will determine the arithmetic mean of the offered quotations of the Reference Banks to leading banks in the London interbank market for three month Dollar deposits (or such other deposits, as applicable) in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR will equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR will be deemed to be the arithmetic mean of the offered quotations that leading banks in

(ii)

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The City of New York selected by the Calculation Agent (after consultation with the Collateral Manager) are quoting on the relevant LIBOR Determination Date for three month Dollar deposits (or such other deposits specified above, as applicable) in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided, however, that if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR will be LIBOR as determined on the previous LIBOR Determination Date that relates to an Interest Period of similar length. As used herein, "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent. (iii) In respect of any Interest Period (other than the first Interest Period) having a Designated Maturity other than three months, LIBOR shall be determined through the use of straight-line interpolation by reference to two rates calculated in accordance with clauses (i) and (ii) above, one of which shall be determined as if the maturity of the Dollar deposits referred to therein were the period of time for which rates are available next shorter than the Interest Period and the other of which shall be determined as if such maturity were the period of time for which rates are available next longer than the Interest Period; provided that, if an Interest Period is less than or equal to seven days, then LIBOR shall be determined by reference to a rate calculated in accordance with clauses (i) and (ii) above as if the maturity of the Dollar deposits referred to therein were a period of time equal to seven days. If the Calculation Agent is required but is unable to determine a rate in accordance with either procedure described in clauses (i) and (ii) above, LIBOR with respect to such Interest Period shall be the arithmetic mean of the offered quotations of the Reference Dealers as of 10:00 a.m. (New York time) on the first day of such Interest Period for negotiable U.S. Dollar certificates of deposit of major U.S. money market banks having a remaining maturity closest to the Designated Maturity. If the Calculation Agent is required but is unable to determine a rate in accordance with any of the procedures described in clauses (i), (ii) or (iv) above, LIBOR with respect to such Interest Period shall be the arithmetic mean of the Base Rate for each day during such Interest Period.

(iv)

(v)

For purposes of clauses (i), (iii), (iv) and (v) above, all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point. For the purposes of clause (ii) above, all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one thirty-second of a percentage point. For so long as any Note remains outstanding, the Issuers will at all times maintain an agent appointed to calculate LIBOR in respect of each Interest Period. As soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date, but in no event later than 11:00 a.m. (New York time) on the Business Day immediately following each LIBOR Determination Date, the Calculation Agent will calculate the interest rate for the Notes for the related Interest Period and the amount of interest for such Interest Period payable in respect of each U.S.$1,000 in principal amount of each Class of Notes (in each case rounded to the nearest cent, with half a cent being rounded upward) on the related Payment Date and will communicate such rates and amounts and the related Payment Date to the Issuers, the Trustee, the Hedge Counterparty, each Paying Agent and DTC. The Calculation Agent may be removed by the Issuers at any time. If the Calculation Agent is unable or unwilling to act in such capacity, is removed by the Issuers or fails to determine the interest rate for any Class of Notes or the amount of interest payable in respect of any Class of Notes for any Interest Period, the Issuers will promptly appoint as a replacement Calculation Agent a leading bank that is engaged in

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transactions in U.S. Dollar deposits in the international Eurodollar market and that does not control and is not controlled by or under common control with either of the Issuers or any affiliate thereof. The Calculation Agent may not resign its duties without a successor having been duly appointed. The determination of the interest rate for the Notes for each Interest Period by the Calculation Agent will (in the absence of manifest error) be final and binding upon all parties. Principal The "Stated Maturity" of the Notes is the Payment Date in June 2041. Each Class of Notes is scheduled to mature at the Stated Maturity. However, the Notes may be redeemed or otherwise paid in full prior to their Stated Maturity. See "Risk FactorsAverage Life and Prepayment Considerations" and "Maturity and Prepayment Considerations." Any payment of principal with respect to any Class of Notes (including any payment of principal made in connection with an Optional Redemption, Auction Call Redemption or a Tax Redemption) will be made by the Trustee on a pro rata basis on each Payment Date among the Notes of such Class according to the respective unpaid principal amounts thereof outstanding immediately prior to such payment. Principal Proceeds will be applied on each Payment Date that does not occur during a Sequential Pay Period in accordance with the Priority of Payments to pay principal of each Class of Notes, pro rata, based on the aggregate principal amount of each Class of Notes on the last day of the applicable Due Period, except as otherwise described under "Priority of Payments." During a Sequential Pay Period, Principal Proceeds will be applied on each Payment Date to pay principal of the most senior Class of Notes then outstanding until the entire principal amount of such Class has been paid in full. Payments of principal will also be made on the Notes in the following circumstances (subject, in each case, to the Priority of Payments): (a) upon the failure of the Issuer to meet any Coverage Test applicable to any Class of Notes, (b) in the event of a Rating Confirmation Failure, (c) in connection with an Optional Redemption, a Tax Redemption or an Auction Call Redemption, (d) the payment of Class A-3L Deferred Interest in accordance with the Priority of Payments, (e) the payment of Class B-1L Deferred Interest in accordance with the Priority of Payments and (f) the payment of the Class B-1L Turbo Payment in accordance with the Priority of Payments. Mandatory Redemption Coverage Failure Redemption. Each Class of Notes will, on any Payment Date, be subject to mandatory redemption (a "Coverage Failure Redemption") in the event that any Coverage Test applicable to such Class of Notes is not satisfied on the related Determination Date. Any such redemption will be effected, first, from Interest Proceeds and, second (to the extent that the application of Interest Proceeds pursuant to the Priority of Payments is not sufficient to cause such tests to be satisfied), from Principal Proceeds, in each case, to the extent necessary to cause each applicable Coverage Test to be satisfied. Any such redemption will be applied to each outstanding Class of Notes sequentially in direct order of seniority and will otherwise be effected as described below under "Priority of Payments." Rating Confirmation Failure Redemption. The Issuer will notify each Rating Agency in writing (each notice, an "Effective Date Notice"), within seven days after the occurrence of the date that is the earlier of (a) 90 days following the Closing Date, or such later date (no later than 120 days following the Closing Date) as to which the Collateral Manager may, in a written notice to the Trustee and the Issuer and subject to satisfaction of the Rating Condition, defer such date and (b) the date on which the Collateral Manager, on behalf of the Issuer, notifies the Trustee that the Issuer has purchased or entered into binding commitments to purchase Collateral Debt Securities with an aggregate principal balance, together with (i) the aggregate amount of accrued and unpaid interest on all Collateral Debt Securities purchased on the Closing Date or during the Ramp-Up Period if such accrued interest was purchased with Unused

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Proceeds, (ii) the aggregate principal balance of all Eligible Investments purchased with Principal Proceeds on deposit in the Collection Account or the Ramp-Up Principal Proceeds Account and (iii) the aggregate amount of all Principal Proceeds distributed on any Payment Date occurring prior to the Effective Date, of at least U.S.$750,000,000 (such date, the "Effective Date") and will request confirmation from each Rating Agency that such Rating Agency has not reduced or withdrawn the rating assigned by such Rating Agency on the Closing Date to any Class of Notes; provided that if the Effective Date occurs on the Closing Date (as shall be evidenced by the accountants' report delivered on the Closing Date under the Indenture), then no further action by the Issuer shall be required in connection with the Effective Date under the Indenture. The Collateral Manager, on behalf of the Issuer, is required to certify to the Trustee and each Rating Agency that on the Effective Date the Collateral Quality Tests, the Concentration Limitations and the Coverage Tests are satisfied. If the Collateral Manager determines that on the Effective Date any of the applicable tests will not be satisfied, (i) the Collateral Manager, on behalf of the Issuer, may provide Moody's and Standard & Poor's with a plan (a "Compliance Plan") for achieving compliance with such tests, and (ii) the Issuer will be prohibited from purchasing additional Collateral Debt Securities (unless each such test subsequently is satisfied, or such Compliance Plan satisfies the Rating Condition with respect to Moody's and Standard & Poor's, or the Collateral Manager, on behalf of the Issuer, subsequently takes such other action to satisfy the Rating Condition with respect to Moody's or Standard & Poor's with respect to purchasing additional Collateral Debt Securities). In such event, the Issuer will not be able to use Unused Proceeds to purchase, and shall not be permitted to commit to purchase, additional Collateral Debt Securities (other than pursuant to commitments made prior to such prohibition), and a Rating Confirmation Failure is likely to occur. See "Security for the NotesRampUp Period." In the event of a Rating Confirmation Failure, the Issuer will be required to apply, first, Unused Proceeds (other than those required to meet commitments made prior to the Effective Date to purchase Collateral Debt Securities), if any, second, Interest Proceeds (to the extent available for such purpose in accordance with the Priority of Payments) and third, Principal Proceeds (to the extent available for such purpose in accordance with the Priority of Payments) to the mandatory redemption (a "Rating Confirmation Failure Redemption") of the Notes as described under "Priority of Payments" below on each Payment Date thereafter to the extent necessary to obtain a Rating Confirmation from each Rating Agency. Optional Redemption and Tax Redemption Subject to certain conditions described below under "Redemption Procedures," on any Payment Date on or after the Payment Date occurring in December, 2009, the Issuer may redeem the Notes (such redemption, an "Optional Redemption"), in whole but not in part, at the applicable Redemption Price therefor at the direction of a Majority-in-Interest of Preference Securityholders on any Payment Date. In addition, upon the occurrence of a Tax Event, the Notes will be redeemable (such redemption, a "Tax Redemption"), in whole but not in part, by the Issuer at the applicable Redemption Price therefor (i) at the direction of the holders of a majority, by aggregate outstanding principal amount, of any Class of Notes (each such Class, an "Affected Class") that, as a result of the occurrence of a Tax Event, has not received 100% of the aggregate amount of principal and interest otherwise payable to such Class on any Payment Date or (ii) at the direction of a Majority-in-Interest of Preference Securityholders. No Optional Redemption or Tax Redemption may be effected, however, unless funds are available to pay the Minimum Redemption Amount in accordance with the procedures set forth in the Indenture and (ii) in the case of a Tax Redemption, the Tax Materiality Condition is satisfied.

47

Notwithstanding the immediately preceding paragraph, in connection with any Tax Redemption holders of at least 662/3% of the aggregate outstanding principal amount of any Class of Notes may elect to have all of the holders of such Class receive less than 100% of the portion of the Total Senior Redemption Amount which would otherwise be payable to holders of such Class (and the minimum funding requirements specified in the immediately preceding paragraph will be reduced accordingly). Auction Call Redemption In accordance with the procedures set forth in the Indenture (the "Auction Procedures"), the Collateral Manager on behalf of the Issuer will, at the expense of the Issuer, conduct an auction (an "Auction") of the Collateral Debt Securities if, prior to the Payment Date in June 2013 (the "Auction Call Redemption Date"), the Notes have not been redeemed in full, and provided that certain conditions set forth in the Indenture are satisfied, the Collateral Debt Securities will be sold by the Trustee and the Notes and the Preference Securities will be redeemed (such redemption, an "Auction Call Redemption") on the Payment Date immediately following such Auction. The Auction will be conducted on a date (each such date, an "Auction Date") not later than 10 Business Days prior to (1) the Auction Call Redemption Date and (2) if the Notes are not redeemed in full on the Auction Call Redemption Date, each Payment Date thereafter until the Notes have been redeemed in full. Notwithstanding the foregoing, the Collateral Manager will not conduct an Auction on an Auction Date if an Auction was conducted on the preceding Auction Date and the Collateral Manager notifies the Trustee in writing that, due to market conditions, an Auction on such Auction Date is unlikely to be successful. Any of the Collateral Manager, the Preference Securityholders, the Trustee or their respective affiliates may, but will not be required to, bid at the Auction. The Trustee will sell and transfer the Collateral Debt Securities (which may be divided into subpools) to the highest bidder therefor (or the highest bidder for each subpool) at the Auction, as identified by the Collateral Manager, provided that: (i) the Auction has been conducted in accordance with the Auction Procedures;

(ii) (A) the Collateral Manager has received bids for the Collateral Debt Securities from at least one prospective purchaser that is a qualified bidder (each such bidder, an "Eligible Bidder") under the terms of the Indenture; and (B) the highest bidder(s) enter(s) into a written agreement with the Issuer in a form provided by the Collateral Manager that obligates the highest bidder (or the highest bidder for each subpool) to purchase all of the Collateral Debt Securities (or the relevant subpool) and provides for payment in full (in cash) of the purchase price to the Trustee on or prior to the sixth Business Day prior to the proposed Redemption Date; and (iii) the Collateral Manager certifies that (I) the aggregate purchase price that would be received pursuant to the highest bid(s) obtained with respect to the Collateral Debt Securities pursuant to clause (ii) above plus (II) the balance of all Eligible Investments and cash held by the Issuer in the Accounts (other than in any Hedge Counterparty Collateral Account) would be at least equal to the Minimum Redemption Amount; provided that holders of 100% of the aggregate outstanding principal amount of any Class of Notes may elect, in connection with any Auction Call Redemption, to receive less than 100% of the Redemption Price that would otherwise be payable to holders of such Class, without affecting the amounts payable to the holders of the Preference Securities, in which case the Minimum Redemption Amount shall be reduced accordingly.

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If all of the conditions set forth in clauses (i) through (iii) of the last sentence of the preceding paragraph have been met, the Trustee will sell and transfer the Collateral Debt Securities (or the related subpool), without representation, warranty or recourse, to the highest bidder (or the highest bidder for each subpool, as the case may be), in accordance with and upon completion of the Auction Procedures. Notwithstanding the foregoing, but subject to the satisfaction of the conditions set forth in clauses (i) through (iii) of the last sentence of the preceding paragraph, the Collateral Manager, although it may not have been the highest bidder, will have the option to purchase the Collateral Debt Securities (or any subpool) for a purchase price equal to the highest bid therefor. If the Collateral Manager desires to exercise such option, it shall notify the Trustee in writing prior to the execution of a written agreement for such sale. If (x) any of the foregoing conditions is not met with respect to any Auction, or (y) the highest bidder (or the highest bidder for any subpool) or the Collateral Manager, as the case may be, fails to pay the purchase price for any Collateral Debt Security before the sixth Business Day prior to the proposed Redemption Date (and, in the case of a failure by the highest bidder with respect to a subpool to pay for such Subpool, the aggregate purchase price received with respect to the remaining subpools, together with the amounts specified in subclause (II) of clause (iii) above, is less than the Minimum Redemption Amount), (a) the Auction Call Redemption will not occur on the proposed Redemption Date, (b) the Trustee will give notice of the withdrawal of the redemption notice on such sixth Business Day, (c) subject to clause (e) below, the Trustee will decline to consummate such sale and no further bids will be solicited and no negotiations for any further sale of Collateral Debt Securities will occur in relation to such Auction and (d) unless the Notes are redeemed in full prior to the next succeeding Auction Date, or the Collateral Manager notifies the Trustee in writing that market conditions are such that such Auction would not likely be successful, the Collateral Manager will conduct another Auction on the next succeeding Auction Date. For purposes of the foregoing: "Minimum Redemption Amount" means the sum (which, in connection with an Auction Call Redemption, may be reduced by any amount by which 100% of the holders of any Class of Notes agrees to reduce the amount that would otherwise be payable to such Class in connection with such Auction Call Redemption) of the Total Senior Redemption Amount plus, in the case of an Auction Call Redemption or a Tax Redemption, the lesser of (i) the Preference Security Balance, and (ii) such amount as Holders of 100% of the Preference Securities may specify in writing to the Trustee. "Preference Security Balance" means (i) as of any Auction Date, the amount, if any, required to be distributed to the Preference Security Paying Agent for payment to the Preference Securityholders in order to cause the IRR on the Preference Securities to equal (x) 10% in the case of any Auction Date occurring on or prior to the Payment Date in June 2015 or (y) 0% as of any Auction Date occurring after the Payment Date in June 2015 and (ii) in the case of a Tax Redemption, the amount required to be distributed to the Preference Security Paying Agent for payment to the Preference Securityholders in order to cause the IRR on the Preference Securities to equal 0% on the applicable Redemption Date. Redemption Procedures Notice of redemption will be given by first-class mail, postage prepaid, or by overnight courier guaranteeing next day delivery (or electronically, with respect to holders who provide e-mail addresses), mailed not less than 10 Business Days (in the case of first class mail) or three Business Days (in the case of overnight courier) prior to the date scheduled for redemption (with respect to an Optional Redemption, Auction Call Redemption or Tax Redemption, the "Redemption Date"), to each holder of Notes to be redeemed at such holder's address (or, if applicable, e-mail address) in the register maintained by the

49

registrar under the Indenture, to the Hedge Counterparty, each Rating Agency and, if the Preference Securities are to be redeemed on the related scheduled Redemption Date, the Preference Security Paying Agent. Notes must be surrendered at the offices of any Paying Agent under the Indenture in order to receive the applicable Redemption Price, unless the holder provides (i) an undertaking to surrender such Note thereafter and (ii) such security or indemnity as may be required by the Issuers or the Trustee. Any such notice of redemption may be withdrawn by the Issuer up to the fourth Business Day prior to the scheduled Redemption Date by written notice (sent both by facsimile and overnight courier or, if applicable, e-mail) to the Trustee and the Collateral Manager only if the Collateral Manager is unable to deliver the sale agreement or agreements or certifications referred to in the immediately succeeding paragraph in form satisfactory to the Trustee. Notice of any such withdrawal will be given by the Trustee to each holder of Notes at such holder's address (or, if applicable, e-mail address) in the Note Register maintained by the Note Registrar under the Indenture and the Hedge Counterparty by overnight courier guaranteeing next day delivery (or, if applicable, by e-mail), sent not later than the third Business Day prior to the scheduled Redemption Date. In the case of an Optional Redemption or Tax Redemption, the Closing Date Interest Rate Cap Agreement shall remain outstanding until the notice of redemption may no longer be withdrawn. The Notes may not be redeemed pursuant to an Optional Redemption or Tax Redemption unless, at least six Business Days before the scheduled Redemption Date, the Collateral Manager shall have furnished to the Trustee evidence, in form satisfactory to the Trustee, that the Collateral Manager on behalf of the Issuer has entered into a binding agreement or agreements with (or the obligations under such agreements are guaranteed by) one or more entities the long-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such entity) of which have a credit rating from each Rating Agency at least equal to the rating of the most senior Class of Notes outstanding at such time or the short-term unsecured debt obligations of which have credit ratings of "P1" by Moody's and at least "A-1" by Standard & Poor's (or which otherwise satisfy the Rating Condition with respect to any Rating Agency for which such rating requirement is not satisfied) to sell, not later than the second Business Day immediately preceding the scheduled Redemption Date, all or part of the Collateral Debt Securities at a sale price (including in such price the sale of accrued interest) at least equal to an amount sufficient, together with the Eligible Investments maturing on or prior to the scheduled Redemption Date and all cash in the Interest Collection Account, the Principal Collection Account, the Unused Proceeds Account, the Expense Account and the Payment Account, in each case, on the relevant Payment Date and termination payments, if any, which the Issuer will receive upon termination of the Closing Date Interest Rate Cap Agreement on or prior to the scheduled Redemption Date, to pay (without regard to any limitations or caps included therein) amounts payable under the Priority of Payments prior to distributions on the Preference Securities, fees and expenses incurred by the Trustee and the Collateral Manager in connection with such sale of Collateral Debt Securities and the applicable Redemption Price for the Notes (the aggregate amount required to make all such payments, the "Total Senior Redemption Amount"). The Issuer and the Trustee may amend the Indenture to change the procedures for implementing a redemption discussed under "Optional Redemption and Tax Redemption," "Auction Call Redemption" and "Redemption Procedures" (but without changing the Redemption Price or the earliest date on which any redemption may occur), including deadlines, without obtaining the consent of the holder of any Note. Redemption Price The amount payable in connection with an Optional Redemption, Auction Call Redemption or a Tax Redemption of any Note (with respect to each Class of Notes, the "Redemption Price") will be (i) an

50

amount (determined without duplication) equal to (a) the outstanding principal amount of such Note being redeemed plus (b) accrued and unpaid interest thereon (including Defaulted Interest and Deferred Interest, if any, and interest thereon) to (but excluding) the Redemption Date or (ii) with respect to any particular Class of Notes, such lesser amount as 100% of the holders of such Class elect to receive. Cancellation All Notes that are redeemed or paid and surrendered for cancellation as described herein will forthwith be canceled and may not be reissued or resold. Payments The record date (the "Record Date") for each Payment Date (including the Final Payment Date) is the Business Day immediately preceding such Payment Date; provided, however, that if Definitive Notes are issued, the Record Date for such Definitive Notes shall be the fifteenth day (whether or not a Business Day) prior to the Payment Date. Payments of interest and principal or any other amount payable on or in respect of each Note will be made on each Payment Date by wire transfer in immediately available funds to registered Holders of the Notes on the Record Date applicable to such Payment Date to a Dollar account maintained by the holder thereof in accordance with wire transfer instructions received by any paying agent appointed under the Indenture (each, a "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 Dollar check drawn on a bank in the United States mailed to the address of the holder of such Note as such address appears on the Note Register at the close of business on the Record Date for such payment. Final payments in respect of principal of the Notes will be made against surrender of such Notes at the office of the Paying Agent designated for such purpose. 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. Except as otherwise required by applicable law, (a) any money deposited with the Trustee or any Paying Agent in trust for the payment of principal of or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable will be paid to the Issuer upon request by the Issuer therefor, (b) the holder of such Note will thereafter, as an unsecured general creditor, look to the Issuer or the Co-Issuer for payment of such amounts and (c) all liability of the Trustee or such Paying Agent with respect to such trust money (but only to the extent of the amounts so paid to the Issuer) will thereupon cease. The Trustee or the Paying Agent, before being required to make any such release of payment, may, but will 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. Priority of Payments With respect to any Payment Date, collections received on the Collateral during each Due Period in respect of the Collateral will be divided into Interest Proceeds and Principal Proceeds and applied in the priority set forth below under "Interest Proceeds," "Principal Proceeds" and "Payments upon Redemption or Following an Acceleration," as the case may be (collectively, the "Priority of Payments").

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Interest Proceeds On each Payment Date other than an Accelerated Payment Date, any Post-Acceleration Payment Date or the Redemption Date or the Final Payment Date, Interest Proceeds with respect to the related Due Period will be distributed in the order of priority set forth under clauses (1) to (17) below: (1) (2) to the payment of taxes and filing and registration fees (including annual return fees) owed by the Issuers, if any; (a) first, to the payment of (i) first, in the following order, to the Trustee, the Preference Security Paying Agent, the Collateral Administrator, the Security Registrar and the Administrator of accrued and unpaid fees; provided that all payments made pursuant to this clause (a) (i) on such Payment Date do not exceed the greater of (x) 0.015% per annum of the Quarterly Asset Amount with respect to such Payment Date and (y) $60,000 per annum, (ii) second, expenses (other than Administrative Indemnities) owing to them under the Indenture, the Collateral Administration Agreement, the Preference Security Paying Agency Agreement and the Administration Agreement, as applicable, and (iii) third, to the Rating Agencies of accrued and unpaid fees of the Rating Agencies; (b) second, in the following order, (i) to the payment, in the following order, to the Trustee, the Preference Security Paying Agent and the Collateral Administrator of accrued and unpaid Administrative Indemnities owing to them under the Indenture, the Preference Security Paying Agency Agreement and the Collateral Administration Agreement, as applicable, (ii) to the payment of other accrued and unpaid Administrative Expenses (excluding fees, expenses and Administrative Indemnities paid under subclauses (a) and (b)(i) above) and (iii) to the payment, pro rata, to any Persons entitled thereto, of accrued and unpaid Administrative Indemnities; and (c) third, after application of the amounts under subclauses (a) and (b) of this clause (2), if the balance of all Eligible Investments and cash in the Expense Account on the related Determination Date is less than U.S.$100,000, for deposit to the Expense Account of an amount equal to the lesser of (i) the amount by which U.S.$100,000 exceeds the aggregate amount of payments made under subclauses (a) and (b) of this clause (2) on such Payment Date or (ii) such amount as would have caused the balance of all Eligible Investments and cash in the Expense Account, immediately after such deposit, to equal U.S.$100,000; provided that all payments and deposits made pursuant to subclauses (a), (b) and (c) of this clause (2) on such Payment Date do not exceed the sum of (x) 0.02% per annum of the Quarterly Asset Amount with respect to such Payment Date plus (y) the greater of (i) 0.04% per annum of the Quarterly Asset Amount with respect to such Payment Date or (ii) $200,000 less the sum of payments and deposits made pursuant to this clause (2) on the prior three Payment Dates; (a) first, to the payment to the Collateral Manager of any accrued and unpaid Senior Collateral Management Fee and (b) second, to the payment of any accrued and unpaid Senior Collateral Management Fee (and interest thereon) owed on prior Payment Dates; to pay, on a pro rata basis based upon the amount of accrued and unpaid interest due and payable for each such Class of Notes, (a) accrued and unpaid interest on the Class A-1LA Notes (including Defaulted Interest and any interest thereon) and (b) accrued and unpaid interest on the Class A-1LB Notes (including Defaulted Interest and any interest thereon); to the payment of accrued and unpaid interest on the Class A-2L Notes (including any Defaulted Interest and any interest thereon); if (for so long as any Senior Class A Notes remain outstanding) the Senior Class A Overcollateralization Test is not satisfied as of the related Determination Date, (a) first, to pay

(3)

(4)

(5) (6)

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principal of the Class A-1LA Notes then outstanding until the Class A-1LA Notes are paid in full, (b) second to pay principal of the Class A-1LB Notes then outstanding until the Class A-1LB Notes are paid in full and (c) third, to pay principal of the Class A-2L Notes then outstanding until the Class A-2L Notes are paid in full, in each case in the amounts necessary to satisfy the Senior Class A Overcollateralization Test as of such Determination Date; (7) to pay (a) first, accrued and unpaid interest on the Class A-3L Notes (excluding any Class A-3L Deferred Interest but including Defaulted Interest, interest on Defaulted Interest and interest on Class A-3L Deferred Interest) and (b) second, Class A-3L Deferred Interest, if any (in reduction of the principal amount of the Class A-3L Notes); if (for so long as any Class A-3L Notes remain outstanding) either the Class A-3L Overcollateralization Test or the Class A Interest Coverage Test is not satisfied as of the related Determination Date, (a) first, to pay principal of the Class A-1LA Notes then outstanding until the Class A-1LA Notes are paid in full, (b) second, to pay principal of the Class A-1LB Notes then outstanding until the Class A-1LB Notes are paid in full, (c) third, to pay principal of the Class A-2L Notes then outstanding until the Class A-2L Notes are paid in full and (d) fourth, to pay principal of the Class A-3L Notes then outstanding until the Class A-3L Notes are paid in full, in each case in the amounts necessary to satisfy the Class A-3L Overcollateralization Test and the Class A Interest Coverage Test as of such Determination Date; to pay accrued and unpaid interest on the Class B-1L Notes (excluding any Class B-1L Deferred Interest and interest thereon, but including Defaulted Interest and interest on Defaulted Interest); (a) first, if (for so long as any Class B-1L Notes remain outstanding) the Class B-1L Overcollateralization Test or the Class B Interest Coverage Test is not satisfied as of the related Determination Date, (i) first, to pay principal of the Class A-1LA Notes then outstanding until the Class A-1LA Notes are paid in full, (ii) second, to pay principal of the Class A-1LB Notes then outstanding until the Class A-1LB Notes are paid in full, (iii) third, to pay principal of the Class A-2L Notes then outstanding until the Class A-2L Notes are paid in full, (iv) fourth, to pay principal of the Class A-3L Notes then outstanding until the Class A-3L Notes are paid in full and (v) fifth, to pay principal of the Class B-1L Notes then outstanding until the Class B-1L Notes are paid in full, in each case, in the amounts necessary to satisfy the Class B-1L Overcollateralization Test and the Class B Interest Coverage Test as of such Determination Date; and (b) then if a Rating Confirmation Failure has occurred (i) first, to pay principal of the Class A-1LA Notes then outstanding until the Class A-1LA Notes have been paid in full, (ii) second, to pay principal of the Class A-1LB Notes then outstanding until the Class A-1LB Notes have been paid in full, (iii) third, to pay principal of the Class A-2L Notes then outstanding until the Class A-2L Notes have been paid in full, (iv) fourth, to pay principal of the Class A-3L Notes then outstanding until the Class A-3L Notes have been paid in full and (v) fifth, to pay principal of the Class B-1L Notes then outstanding until the Class B-1L Notes have been paid in full, in each case, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until such confirmation is received; to pay Class B-1L Deferred Interest, if any (in reduction of the principal amount of the Class B1L Notes), including interest thereon; (a) first, to the payment to the Collateral Manager of any accrued and unpaid Subordinated Collateral Management Fee and (b) second, on a pro rata basis, to the payment of (i) any accrued and unpaid Subordinated Collateral Management Fee owed on prior Payment Dates (including

(8)

(9) (10)

(11) (12)

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interest thereon) and (ii) any other amounts payable to the Collateral Manager under the Collateral Management Agreement; (13) to pay an amount (the "Current Target Return Payment") sufficient to achieve a Preference Security Interest Proceeds Target Return on such Payment Date of 12% to the Preference Security Paying Agent for deposit into the Preference Security Payment Account, for payment (subject to the following paragraph) to the Holders of the Preference Securities as a distribution by way of dividend thereon; on each Payment Date on or after the December 2006 Payment Date, to the payment of an amount equal to 55% of the Interest Proceeds, if any, remaining after application of the amounts described in clauses (1) through (13) above (the "Remaining Interest Proceeds"), to pay principal of the Class B-1L Notes, until the Class B-1L Notes have been paid in full; (a) first, to the payment of all other accrued and unpaid Administrative Expenses and Administrative Indemnities not paid pursuant to clause (2) above (whether as the result of the limitations on amounts set forth therein or otherwise) in the same order of priority as specified in clause (2) above, and (b) second, to the Expense Account until the amount on deposit therein is equal to U.S.$100,000; on each Payment Date on or after the December 2006 Payment Date until the Class B-1L Notes have been paid in full, (i) first, to the payment of an amount up to 35% of the Remaining Interest Proceeds, to the Preference Security Paying Agent for deposit into the Preference Security Payment Account for payment (subject to the following paragraph) to the Holders of the Preference Securities as a distribution by way of dividend thereon; and (ii) then, to the payment of all undistributed Remaining Interest Proceeds to the Collateral Manager, as part of the Collateral Manager Incentive Allocation; and on the first Payment Date and on each Payment Date after the Class B-1L Notes have been paid in full, after giving effect to the distributions through clause (16) above, (i) if the IRR Test has not been satisfied on such Payment Date, to the payment on a pro rata basis of (a) 90% of the undistributed Interest Proceeds, to the Preference Security Paying Agent for deposit into the Preference Security Payment Account for payment (subject to the following paragraph) to the holders of the Preference Securities as a distribution by way of dividend thereon, and (b) 10% of the undistributed Interest Proceeds, to the Collateral Manager as part of the Collateral Manager Incentive Allocation; or (ii) if the IRR Test has been satisfied on such Payment Date, to the payment on a pro rata basis, of (a) 80% of the undistributed Interest Proceeds, to the Preference Security Paying Agent for deposit into the Preference Security Payment Account for payment (subject to the following paragraph) to the holders of the Preference Securities as a distribution by way of dividend thereon, and (b) 20% of the undistributed Interest Proceeds, to the Collateral Manager as part of the Collateral Manager Incentive Allocation;

(14)

(15)

(16)

(17)

The amounts paid to the Preference Security Paying Agent pursuant to clauses (13), (16) and (17) above are referred to herein as the "Excess Interest" and the amounts available to be paid from Total Proceeds in respect of the Preference Securities pursuant to clause (12) under "Payments upon Redemption or Following an Acceleration " below are referred to herein as the "Excess Total Proceeds" and, together with the Excess Interest, the "Excess Amounts." In the event the amounts distributable to the holders of the Preference Securities under clauses (13), (16) and (17) above cannot be distributed to such holders due to restrictions on such distributions under the laws of the Cayman Islands, the Issuer will notify the Trustee and the Preference Security Paying Agent and all amounts so payable will be held in the Preference Security Payment Account until the first Payment Date or (in the case of a payment by way of

54

redemption) the first Business Day on which the Issuer notifies the Trustee and the Preference Security Paying Agent that such distribution can be made to the holders of the Preference Securities (subject to the availability of such amounts under Cayman Islands law to pay any liability of the Issuer not limited in recourse to the Collateral).

Principal Proceeds
On each Payment Date other than an Accelerated Payment Date any Post-Acceleration Payment Date or the Redemption Date or the Final Payment Date, Principal Proceeds with respect to the related Due Period will be distributed in the order of priority set forth under clauses (1) and (2) below: (1) to the payment of the amounts referred to in clauses (1) through (10) under "Interest Proceeds" above in the same order of priority specified therein, but only to the extent not paid in full thereunder; and (a) if such Payment Date occurs at any time other than during a Sequential Pay Period, then on a pro rata basis (i) to the payment of principal of the Class A-1LA Notes, (ii) to the payment of principal of the Class A-1LB Notes, (iii) to the payment of principal of the Class A-2L Notes, (iv) to the payment of principal of the Class A-3L Notes and (v) to the payment of principal (excluding Class B-1L Deferred Interest) of the Class B-1L Notes, until such Notes have been paid in full or (b) if such Payment Date occurs during a Sequential Pay Period, then (i) first, to the payment of principal of the Class A-1LA Notes, (ii) then, if no Class A-1LA Notes remain outstanding, to the payment of principal of the Class A-1LB Notes, (iii) then, if no Class A-1 Notes remain outstanding, to the payment of principal of the Class A-2L Notes, (iv) then, if no Senior Class A Notes remain outstanding, to the payment of principal of the Class A-3L Notes and (v) then, if no Class A Notes remain outstanding, (A) first, to the payment of Class B-1L Deferred Interest (in reduction of the principal amount of the Class B-1L Notes), including interest thereon and (B) then, if no Class B-1L Deferred Interest remains outstanding, to the payment of principal of the Class B-1L Notes.

(2)

Payments upon Redemption or Following an Acceleration

On the Redemption Date, the Final Payment Date, an Accelerated Payment Date or Post Acceleration Payment Date, all available Interest Proceeds and Principal Proceeds (collectively, the "Total Proceeds") will be applied by the Trustee to pay each of the following in the order of priority set forth below: (1) (2) to the payment of the amounts referred to in clauses (1) through (3) under "Interest Proceeds" above, in the same order of priority specified therein; to the payment, on a pro rata basis based upon the amount of accrued and unpaid interest due and payable on such Notes, of accrued and unpaid interest on the Class A-1LA Notes (including Defaulted Interest and any interest thereon) and accrued and unpaid interest on the Class A-1LB Notes (including Defaulted Interest and any interest thereon); to pay the outstanding principal of the Class A-1LA Notes until the Class A-1LA Notes have been paid in full; to pay the outstanding principal of the Class A-1LB Notes until the Class A-1LB Notes have been paid in full;

(3) (4)

55

(5) (6) (7)

to the payment of accrued and unpaid interest on the Class A-2L Notes (including Defaulted Interest and any interest thereon); to pay the outstanding principal of the Class A-2L Notes until the Class A-2L Notes have been paid in full; to the payment of accrued and unpaid interest on the Class A-3L Notes (including Class A-3L Deferred Interest, Defaulted Interest and any interest on Class A-3L Deferred Interest or Defaulted Interest); to pay the outstanding principal of the Class A-3L Notes until the Class A-3L Notes have been paid in full; to the payment of accrued and unpaid interest on the Class B-1L Notes (including Class B-1L Deferred Interest, Defaulted Interest and any interest on Class B-1L Deferred Interest or Defaulted Interest); to pay the outstanding principal of the Class B-1L Notes until the Class B-1L Notes have been paid in full; to the payment of amounts referred to in clauses (12) and (15) under "Interest Proceeds'' above, in the same order of priority specified therein; and (i) if the IRR Test has not been satisfied on such Payment Date, to the payment of 100% of the undistributed remaining Total Proceeds, to the Preference Security Paying Agent for deposit into the Preference Security Payment Account for payment (subject to the following paragraph) to the Holders of the Preference Securities as a distribution by way of dividend thereon until the IRR Test is satisfied and (ii) if the IRR Test has been satisfied on such Payment Date, to the payment of (a) 80% of the undistributed remaining Total Proceeds, to the Preference Security Paying Agent for deposit into the Preference Security Payment Account for payment (subject to the following paragraph) to the holders of the Preference Securities as a distribution by way of dividend thereon, and (b) 20% of the undistributed remaining Total Proceeds, to the Collateral Manager as part of the Collateral Manager Incentive Allocation;

(8) (9)

(10) (11) (12)

In the event that amounts distributable to the holders of the Preference Securities under clause (12) above cannot be distributed to such holders due to restrictions on such distributions under the laws of the Cayman Islands, all amounts payable under clause (12) above will be held in the Preference Security Payment Account until the first Payment Date or (in the case of a payment by way of redemption) the first Business Day on which the Issuer notifies the Preference Security Paying Agent such distributions can be made to the holders of the Preference Securities (subject to the availability of such amounts under Cayman Islands law to pay any liability of the Issuer not limited in recourse to the Collateral). For purposes of the pro rata distributions of Principal Proceeds to the payment of principal of the Notes pursuant to paragraph (2) of "Principal Proceeds" above on any Payment Date, the Issuer will calculate the amounts payable to each Class of Notes based upon the aggregate outstanding principal amounts (excluding any Class A-3L Deferred Interest or Class B-1L Deferred Interest) of each Class of Notes as of the last day of the applicable Due Period and will not take into account principal paid on the Notes on such Payment Date. If a Rating Confirmation Failure has occurred, Unused Proceeds (other than those required to meet commitments made prior to the Effective Date to purchase Collateral Debt Securities), if any, will be

56

applied, prior to the application of Interest Proceeds and Principal Proceeds (in each case to the extent available for such purpose), to the payment of principal of, first, the Class A-1LA Notes (until the Class A-1LA Notes have been paid in full), second the Class A-1LB Notes (until the Class A-1LB Notes have been paid in full), third, the Class A-2L Notes (until the Class A-2L Notes have been paid in full), fourth, the Class A-3L Notes (until the Class A-3L Notes have been paid in full) and, fifth, the Class B-1L Notes (until the Class B-1L Notes have been paid in full), to the extent necessary to obtain a Rating Confirmation. For the purpose of determining any payment to be made on any Payment Date pursuant to any applicable clause of "Priority of PaymentsInterest Proceeds," any Coverage Test referred to in such clause shall be calculated as of the relevant Payment Date after giving effect to all payments to be made on such Payment Date prior to such payment in accordance with "Priority of PaymentsInterest Proceeds." Except as otherwise expressly provided in the Priority of Payments, if, on any Payment Date, the amount available in the Payment Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by any clause in this section to different Persons, the Trustee will make the disbursements called for by each such clause ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor. Any amounts to be paid to the Preference Security Paying Agent pursuant to clauses (13), (16) and (17) under "Interest Proceeds" and clause (12) under "Payments upon Redemption or Following an Acceleration" will be released from the lien of the Indenture. If a payment due to the Issuer from the Hedge Counterparty is not timely received by the Trustee on the applicable Payment Date when it was due, but is received after such Payment Date, the Trustee shall promptly distribute the proceeds of such late payment to the parties that would have received such amounts in accordance with "Interest Proceeds" as if such amounts actually were available on the applicable Payment Date. If the Notes and the Preference Securities have not been redeemed prior to the Scheduled Preference Security Redemption Date, it is expected that the Issuer (or the Collateral Manager acting pursuant to the Collateral Management Agreement on behalf of the Issuer) will sell or liquidate all of the Collateral. All net proceeds from such liquidation and all available cash will be applied to the payment (in the order of priorities set forth above) of all (i) fees, (ii) expenses and (iii) principal of and interest (including any Defaulted Interest, interest on Defaulted Interest, interest on any Class A-3L Deferred Interest and interest on any Class B-1L Deferred Interest) on the Notes. Net proceeds from such liquidation and available cash remaining after all payments required pursuant to the Indenture, and the payment of the costs and expenses of such liquidation and the payment of all other creditors of the Issuer, will be distributed to the Preference Securityholders in accordance with the Issuer Charter. The Coverage Tests The "Coverage Tests" will consist of the Senior Class A Overcollateralization Test, the Class A-3L Overcollateralization Test, the Class B-1L Overcollateralization Test, the Class A Interest Coverage Test and the Class B Interest Coverage Test. The Senior Class A Overcollateralization Test, the Class A-3L Overcollateralization Test and the Class B-1L Overcollateralization Test are collectively referred to as the "Overcollateralization Tests." The Senior Class A Overcollateralization Ratio, the Class A-3L Overcollateralization Ratio and the Class B-1L Overcollateralization Ratio are collectively referred to as the "Overcollateralization Ratios." The Class A Interest Coverage Test and the Class B Interest Coverage Test are collectively referred to as the "Interest Coverage Tests." The Class A Interest

57

Coverage Ratio and the Class B Interest Coverage Ratio are collectively referred to as the "Interest Coverage Ratios."

The Senior Class A Overcollateralization Test

The "Senior Class A Overcollateralization Test" will be satisfied on any Measurement Date if the Senior Class A Overcollateralization Ratio on such Measurement Date is equal to or greater than 110.0%. The "Senior Class A Overcollateralization Ratio" is, as of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the aggregate outstanding principal amount of the Class A-1LA Notes plus the aggregate outstanding principal amount of the Class A-1LB Notes plus the aggregate outstanding principal amount of the Class A-2L Notes, in each case as of such Measurement Date.

The Class A-3L Overcollateralization Test

The "Class A-3L Overcollateralization Test" will be satisfied on any Measurement Date if the Class A3L Overcollateralization Ratio on such Measurement Date is equal to or greater than 106.0%. The "Class A-3L Overcollateralization Ratio" is, as of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the aggregate outstanding principal amount of the Class A-1LA Notes plus the aggregate outstanding principal amount of the Class A-1LB Notes plus the aggregate outstanding principal amount of the Class A-2L Notes plus the aggregate outstanding principal amount of the Class A-3L Notes (excluding any Class A-3L Deferred Interest), in each case as of such Measurement Date.

The Class B-1L Overcollateralization Test

The "Class B-1L Overcollateralization Test" will be satisfied on any Measurement Date if the Class B1L Overcollateralization Ratio on such Measurement Date is equal to or greater than 104.0%. The "Class B-1L Overcollateralization Ratio" is, as of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the aggregate outstanding principal amount of the Class A-1LA Notes plus the aggregate outstanding principal amount of the Class A-1LB Notes plus the aggregate outstanding principal amount of the Class A-2L Notes plus the aggregate outstanding principal amount of the Class A-3L Notes (excluding any Class A-3L Deferred Interest) plus the aggregate outstanding principal amount of the Class B-1L Notes (excluding any Class B-1L Deferred Interest), in each case as of such Measurement Date.

Calculation of Coverage Tests

The Issuer may change the criteria for discounting the aggregate principal balance of particular categories of Collateral Debt Securities included in the Moody's Haircut Amount and the Standard & Poor's Haircut Amount when calculating the Net Outstanding Portfolio Collateral Balance for purposes of the Overcollateralization Tests, with the consent of the Holders of a majority, by aggregate outstanding principal amount, of the Class A-1LA Notes but without amending the Indenture and without the consent of any other Classes of Notes (whether or not any Class A-1LA Notes remain outstanding) or Holders of the Preference Securities (i) if the Rating Condition with respect to Moody's (in the case of the components that constitute the Moody's Haircut Amount) and Standard & Poor's (in the case of the components that constitute the Standard & Poor's Haircut Amount) is satisfied and (ii) if notice of such

58

change is delivered by the Collateral Manager to the Trustee and to the holders of the Notes and Preference Securities.

The Interest Coverage Tests

The "Class A Interest Coverage Test" will be satisfied on any Measurement Date after the Payment Date in December 2006 if the Class A Interest Coverage Ratio as of such Measurement Date is equal to or greater than 1.15%. The "Class A Interest Coverage Ratio" means, as of any Measurement Date, a number (expressed as a percentage) calculated by dividing (a) an amount equal to (i) four times (ii) the amount by which (A) the Expected Available Interest Amount during the Due Period in which such Measurement Date occurs exceeds (B) the Periodic Reserve Amount as of such Measurement Date, by (b) the aggregate principal amount of the Class A Notes (including Class A-3L Deferred Interest, if any) with respect to such Measurement Date, as adjusted, if calculated with respect to any Payment Date, to take into account any Coverage Failure Redemption to occur on the Payment Date related to such Due Period pursuant to the Indenture. The "Class B Interest Coverage Test" means a test satisfied on any Measurement Date after the Payment Date in December 2006 if the Class B Interest Coverage Ratio as of such Measurement Date is equal to or greater than 0.65%. The "Class B Interest Coverage Ratio" means, as of any Measurement Date, a number (expressed as a percentage) calculated by dividing (a) an amount equal to (i) four times (ii) the amount by which (A) the Expected Available Interest Amount during the Due Period in which such Measurement Date occurs exceeds (B) the Periodic Reserve Amount as of such Measurement Date, by (b) the sum of the aggregate principal amount of the Class A Notes (including Class A-3L Deferred Interest) and the aggregate principal amount of the Class B-1L Notes (including Class B-1L Deferred Interest) with respect to such Measurement Date, as adjusted, if calculated with respect to any Payment Date, to take into account any Coverage Failure Redemption to occur on the Payment Date related to such Due Period pursuant to the Indenture. At any time after the first Payment Date that any of the Notes are outstanding, if the Interest Coverage Tests are not satisfied on any Determination Date related to a Payment Date, amounts that would otherwise be used to satisfy obligations that are junior in right of payment to the amounts required to be paid to satisfy the Interest Coverage Tests as described under "Priority of PaymentsInterest Proceeds," will be applied to the payment of principal of each Class of Notes in the order described under "Priority of PaymentsInterest Proceeds," in a Coverage Failure Redemption to the extent necessary to satisfy the Interest Coverage Tests (recalculated on such Payment Date, but as of such Measurement Date, after taking into account such Coverage Failure Redemption) in accordance with the provisions described herein. For the purpose of determining the amount pursuant to clause (a) of the definitions of the Interest Coverage Ratios and compliance with the Coverage Tests, except as otherwise specified in the Coverage Tests, there will be excluded all scheduled payments of interest or principal on Defaulted Securities and Deferred Interest PIK Bonds that will not be made in cash or received when due, as determined by the Collateral Manager in its reasonable business judgment. For purposes of calculating the Interest Coverage Ratios, (i) the expected interest payments on floating rate Collateral Debt Securities and Eligible Investments, the expected amounts available under the Closing Date Interest Rate Cap Agreement and the expected interest payable on the Notes will be calculated using the interest rates applicable thereto on the applicable Measurement Date, (ii) accrued original issue discount on an Eligible

59

Investment will be deemed to be a scheduled interest payment thereon due on the date such original issue discount is scheduled to be paid, (iii) it will be assumed that no principal payments are made on the Notes during the applicable periods. Form, Denomination, Registration and Transfer The following relates to the form, denomination, registration and transfer of the Notes.

General
(i) The Notes which will be sold to Persons that are not U.S. Persons in offshore transactions in reliance on Regulation S (the "Regulation S Notes") will be represented by a global Class A1LA Note, a global Class A-1LB Note, a global Class A-2L Note, a global Class A-3L Note and a global Class B-1L Note (a "Regulation S Global Class A-1LA Note," a "Regulation S Global Class A-1LB Note," a "Regulation S Global Class A-2L Note," a "Regulation S Global Class A-3L Note" and a "Regulation S Global Class B-1L Note," respectively, and, collectively, the "Regulation S Global Notes"), in each case in fully registered form without interest coupons, and deposited with the Trustee as custodian for, and registered in the name of, The Depository Trust Company ("DTC") or its nominee, initially for the accounts of Euroclear and Clearstream, Luxembourg. By acquisition of a beneficial interest in a Regulation S Global Note, any purchaser thereof will be deemed to represent that it is not a U.S. Person and that, if in the future it decides to transfer such beneficial interest, it will transfer such interest only in an offshore transaction in accordance with Regulation S or to a Person who takes delivery in the form of a Restricted Note. Beneficial interests in each Regulation S Note will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its direct and indirect participants, including Euroclear and Clearstream, Luxembourg. The Notes sold to investors in the United States or to U.S. Persons ("Restricted Notes"), in each case, that are (i) Qualified Institutional Buyers and (ii) Qualified Purchasers will be represented by a global Class A-1LA Note, a global Class A-1LB Note, a global Class A-2L Note, a global Class A-3L Note and a global Class B-1L Note (a "Restricted Global Class A-1LA Note," a "Restricted Global Class A-1LB Note," a "Restricted Global Class A-2L Note," a "Restricted Global Class A-3L Note" and a "Restricted Global Class B-1L Note," respectively, and, collectively, the "Restricted Global Notes"), as applicable, in each case in fully registered form, without interest coupons attached, and deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee. Interests in Restricted 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 Notes are subject to the restrictions on transfer and other provisions set forth herein under "Transfer Restrictions." Owners of beneficial interests in Regulation S Global Notes and Restricted Global Notes will be entitled or required, as the case may be, under certain limited circumstances described below, to receive physical delivery of certificated Notes ("Definitive Notes") in fully registered, definitive form. No owner of an interest in a Regulation S Global Note will be entitled to receive a Definitive Note unless, for a Person other than a distributor (as defined in Regulation S under the Securities Act ("Regulation S")), such Person provides certification that the Definitive Note is beneficially owned by a Person that is not a U.S. Person (as defined in Regulation S). The Notes are not issuable in bearer form.

(ii)

(iii) (iv)

60

(v)

Pursuant to the Indenture, Wells Fargo Bank, National Association, has been appointed and will serve as the registrar with respect to the Notes (in such capacity, the "Note Registrar") and will provide for the registration of Notes and the registration of transfers of Notes in the register maintained by the Note Registrar (the "Note Register"). Wells Fargo Bank, National Association, has also been appointed as a transfer agent with respect to the Notes (in such capacity, the "Transfer Agent"). The Notes will be issuable in a minimum denomination of U.S.$200,000 and will be offered only in such minimum denomination or an integral multiple of U.S.$1.00 in excess thereof. After issuance, a Note may fail to be in compliance with the minimum denomination or integral multiple requirements stated above as a result of the repayment of principal thereof in accordance with the Priority of Payments. The Issuer may impose additional restrictions in order for the Issuer to comply with the USA PATRIOT Act to the extent that it is applicable to the Issuer, and each Noteholder by acceptance of its Note is deemed to have agreed that it will comply with such transfer restrictions. The Issuer shall notify the Trustee and the Note Registrar of the imposition of any such transfer restrictions.

(vi) (vii)

(viii)

Global Notes
(i) So long as the depositary for a Global Note, or its nominee, is the registered holder of such Global Note, such depositary or such nominee, as the case may be, will be considered the absolute owner or holder of such Regulation S Note or Restricted Note, as the case may be, represented by such Global Note for all purposes under the Indenture and the Notes and members of, or participants in, the depositary (the "Participants") as well as any other Persons on whose behalf Participants may act (including Euroclear and Clearstream, Luxembourg and account holders and participants therein) will have no rights under the Indenture or under a Note. Owners of beneficial interests in a Global Note will not be considered to be the owners or holders of any Note under the Indenture or the Notes. In addition, no beneficial owner of an interest in a Global Note will be able to exchange or transfer that interest, except in accordance with the applicable procedures of the depositary and (in the case of a Regulation S Global Note) Euroclear or Clearstream, Luxembourg (in addition to those under the Indenture), in each case to the extent applicable (the "Applicable Procedures"). DTC shall be the initial depositary for the Notes. Investors may hold their interests in a Regulation S Global Note directly through Euroclear or Clearstream, Luxembourg, if they are participants in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream, Luxembourg will hold interests in Regulation S Global Notes on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositaries, which in turn will hold such interests in such Regulation S Note in customers' securities accounts in the depositaries' names on the books of DTC. Investors may hold their interests in a Restricted Global Note directly through DTC, if they are participants in such system, or indirectly through organizations that are participants in such system. Payments of the principal of, and interest on, an individual Global Note registered in the name of a depositary or its nominee will be made to the depositary or its nominee, as the case may be, as the registered owner of the Global Note. None of the Issuer, the Trustee, the Note Registrar and any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

(ii)

(iii)

61

(iv)

With respect to the Global Notes, the Issuer expects that the depositary for any Global Note or such depositary's nominee, upon receipt of any payment of principal of or interest on such Global Note, will immediately credit the accounts of Participants with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of the depositary or its nominee. The Issuer also expects that payments by Participants to owners of beneficial interests in such Global Note held through such Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the name of nominees for such customers. Such payments will be the responsibility of such Participants.

Definitive Notes Issued in Exchange for Global Notes

Interests in a Regulation S Note or a Restricted Note represented by a Global Note will be exchangeable or transferable, as the case may be, for a Regulation S Note or a Restricted Note, respectively, that is a Definitive Note if (a) DTC notifies the Issuer that it is unwilling or unable to continue as depositary for such Note, (b) DTC ceases to be a "Clearing Agency" registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and a successor depositary is not appointed by the Issuer within 90 days, (c) the transferee of an interest in such Global Note is required by law to take physical delivery of securities in definitive form or (d) the transferee is otherwise unable to pledge its interest in a Global Note. Upon the occurrence of any of the events described in the preceding sentence, the Issuer will cause Definitive Notes bearing an appropriate legend (a "Legend") regarding restrictions on transfer to be delivered. Upon the transfer, exchange or replacement of Definitive Notes bearing a Legend, or upon specific request for removal of a Legend on a Note, the Issuers will deliver through the Trustee or any Paying Agent (other than the Preference Security Paying Agent) to the holder and the transferee, as applicable, one or more Definitive Notes in certificated form corresponding to the principal amount of Definitive Notes surrendered for transfer, exchange or replacement that bear such Legend, or will refuse to remove such Legend, as the case may be, unless there is delivered to the Issuer such satisfactory evidence, which may include an opinion of U.S. counsel, as may reasonably be required by any of the Trustee, the Note Registrar, the Collateral Manager or the Issuer to the effect that neither the Legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act or the Investment Company Act. Definitive Notes will be exchangeable or transferable for interests in other Definitive Notes as described below.

Transfer and Exchange of Notes

(i) Transfers by a holder of a beneficial interest in a Regulation S Global Note to a transferee that takes delivery of such interest through a Restricted Global Note will be made only in accordance with the Applicable Procedures and upon receipt by the Note Registrar of written certifications from the transferor of the beneficial interest in the form provided in the Indenture to the effect that, among other things, such transfer is being made (a) to a Person that the transferor reasonably believes is a Qualified Institutional Buyer to whom notice is given that the transfer is being made in reliance on the exemption of the registration requirements of the Securities Act provided by Rule 144A, (b) to a Qualified Purchaser and (c) in accordance with any applicable securities laws of any state of the United States or any other jurisdiction and from the transferee in the form provided for in the Indenture. Exchanges or transfers by a holder of a Note represented by a Definitive Note to a transferee that takes delivery of such Note through a Restricted Global Note will be made within 10 days after the receipt by the Note Registrar or Transfer Agent, as the case may be, of the Definitive Notes to be so exchanged or transferred only in accordance with the Applicable Procedures, and, if applicable, upon receipt by the Note Registrar of a written certification from the transferor in the form provided in the Indenture.

62

An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note without the provision of written certification, provided that such transfer is not made to a U.S. Person or for the account or benefit of a U.S. Person and is effected through Euroclear or Clearstream, Luxembourg in an offshore transaction as required by Regulation S and only in accordance with the Applicable Procedures. (ii) Transfers by a holder of a beneficial interest in a Restricted Global Note to a transferee that takes delivery of such interest through a Regulation S Global Note will be made only in accordance with the Applicable Procedures and upon receipt by the Note Registrar of written certification from the transferor in the form provided in the Indenture to the effect that such transfer is being made in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S. Exchanges or transfers by a holder of a Note represented by a Definitive Note to a transferee that takes delivery of such Note through a Regulation S Global Note will be made within 5 to 10 days after the receipt by the Note Registrar or Transfer Agent, as the case may be, of the Definitive Notes to be so exchanged or transferred, only in accordance with the Applicable Procedures, and, if applicable, upon receipt by the Note Registrar of a written certification from the transferor in the form provided in the Indenture. An owner of a beneficial interest in a Restricted Global Note may transfer such interest in the form of a beneficial interest in such Restricted Global Note without the provision of written certification if the transferee is a Qualified Institutional Buyer and a Qualified Purchaser. (iii) The Indenture provides that if, notwithstanding the restrictions on transfer contained therein, either of the Issuers determines that (i) any beneficial owner of a Restricted Note (or any interest therein) is not both a Qualified Institutional Buyer and a Qualified Purchaser or (ii) any beneficial owner of a Regulation S Note is a U.S. Person (within the meaning of Regulation S), then the Issuers shall require, by notice to such holder, that such holder sell all of its right, title and interest to such Restricted Note or Regulation S Note, as the case may be. See "Risk FactorsIssuer May Cause a Transfer of Securities" and "Transfer RestrictionsCertain Transfers Void." Transfers between Participants in DTC will be effected in the ordinary way in accordance with the Applicable Procedures and will be settled in immediately available funds. Transfers between participants in Euroclear and Clearstream, Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating procedures. Notes in the form of Definitive Notes are issued in the limited circumstances described above under "Definitive Notes Issued in Exchange for Global Notes" may be exchanged or transferred in whole or in part in the principal amount of authorized denominations by surrendering such Definitive Notes at the designated office of the Note Registrar or any Transfer Agent with a written instrument of transfer as provided in the Indenture. In addition, if the Definitive Notes being exchanged or transferred contain a Legend, additional certifications to the effect that such exchange or transfer is in compliance with the restrictions contained in such Legend may be required. With respect to any transfer of a portion of a Definitive Note, the transferor will be entitled to receive, at any aforesaid office, a new Definitive Note representing the principal amount retained by the transferor after giving effect to such transfer. Definitive Notes issued upon any such exchange or transfer (whether in whole or in part) will be made available at the office of the applicable Transfer Agent designated for such purpose. No service charge will be made for exchange or registration of transfer of any Note, but the Trustee may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith and expenses of delivery (if any) not made by regular mail.

(iv)

(v)

(vi)

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(vii)

Definitive Notes issued upon any exchange or registration of transfer of securities will be valid obligations of the Issuers, evidencing the same debt, and entitled to the same benefits, as the Definitive Notes surrendered upon exchange or registration of transfer. The Note Registrar will effect transfers of Global Notes and, along with the Transfer Agent, will effect exchanges and transfers of Definitive Notes. In addition, the Note Registrar will keep in the Note Register records of the ownership, exchange and transfer of any Note in definitive form. The laws of some jurisdictions require that certain Persons take physical delivery of securities in definitive form. Consequently, any transfer of beneficial interests in a Note represented by a Global Note to such Persons may require that such interests in a Global Note be exchanged for Definitive Notes. Because DTC can only act on behalf of Participants, which in turn act on behalf of indirect participants and certain banks, the ability of a Person having a beneficial interest in a Global Note to pledge such interest to Persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may require that such interest in a Global Note be exchanged for Definitive Notes. Interests in a Global Note will be exchangeable for Definitive Notes only as described above. Subject to compliance with the transfer restrictions applicable to the Notes described above and under "Transfer Restrictions," cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream, Luxembourg participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in a Regulation S Global Note in DTC and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream, Luxembourg participants and Euroclear participants may not deliver instructions directly to the depositaries of Euroclear or Clearstream, Luxembourg. Because of time zone differences, cash received in Euroclear or Clearstream, Luxembourg as a result of sales of interests in a Regulation S Global Note by or through a Euroclear or Clearstream, Luxembourg participant to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account only as of the business day following settlement in DTC. DTC has advised the Issuers that it will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described above) only at the direction of one or more Participants to the accounts with DTC of which interests in the Global Notes are credited and only in respect of such portion of the aggregate outstanding principal amount of the Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC will exchange the Global Notes for Definitive Notes, legended as appropriate, which it will distribute to its Participants. DTC has advised the Issuers as follows: DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered

(viii)

(ix)

(x)

(xi)

(xii)

(xiii)

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pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its Participants and facilitate the clearance and settlement of securities transactions between Participants through electronic book-entry changes in accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("indirect participants"). (xiv) Although DTC, Euroclear and Clearstream, Luxembourg have agreed to the foregoing procedures in order to facilitate transfers of interests in Global Notes among participants of DTC, Euroclear and Clearstream, Luxembourg, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Issuer, the Co-Issuer and the Trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream, Luxembourg or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

No Gross-Up All payments made by the Issuer under the Notes will be made without any deduction or withholding for or on the account of any tax unless such deduction or withholding is required by applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If the Issuer is so required to deduct or withhold, then the Issuer will not be obligated to pay any additional amounts in respect of such withholding or deduction. The Indenture The following summary describes certain provisions of the Indenture. The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture. A copy of the Indenture may be obtained by prospective purchasers upon request in writing to the Initial Purchaser at Bear, Stearns & Co. Inc., 383 Madison Avenue, 7th Floor, New York, New York 10179, Attention: CDO Group; prospective purchasers of the Securities also should read the detailed information set out elsewhere in this Offering Circular. The Preference Securities constitute equity interests in the Issuer and are governed by and issued pursuant to the Preference Security Documents. Only the Notes are issued pursuant to the Indenture. The Preference Securities will not be secured by the Collateral securing the Notes and generally will not be entitled to the benefits of the Indenture, and the Trustee generally will have no obligation to act on behalf of the holders of Preference Securities.

Events of Default
An "Event of Default" is defined in the Indenture as: (i) a default in the payment of any interest (A) on any Class A-1LA Note, Class A-1LB Note or Class A-2L Note when the same becomes due and payable, in each case which default continues for a period of four Business Days (or, in the case of a payment default resulting solely from an administrative error or omission by the Trustee, the Administrator, a Paying Agent (other than the Preference Security Paying Agent) or the Note Registrar, seven Business Days), (B) if there are no Class A-1LA Notes, Class A-1LB Notes or Class A-2L Notes outstanding, on any Class A-3L Note when the same becomes due and payable, in each case which default continues for a period of four Business Days (or, in the case of a payment default resulting solely from an administrative error or omission by the Trustee, the Administrator, a Paying Agent (other than the Preference

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Security Paying Agent) or the Note Registrar, seven Business Days) or (C) if there are no Class A-1LA Notes, Class A-1LB Notes, Class A-2L Notes or Class A-3L Notes outstanding, on any Class B-1L Note when the same becomes due and payable, in each case which default continues for a period of four Business Days (or, in the case of a payment default resulting solely from an administrative error or omission by the Trustee, the Administrator, a Paying Agent (other than the Preference Security Paying Agent) or the Note Registrar, seven Business Days); (ii) a default in the payment of principal of any Note when the same becomes due at the Stated Maturity (if, in the case of a payment default resulting solely from an administrative error or omission by the Trustee, the Administrator, a Paying Agent (other than the Preference Security Paying Agent) or the Note Registrar, if such default continues for a period of seven Business Days); the failure on any Payment Date (including any Redemption Date) to disburse amounts available in the Interest Collection Account or Principal Collection Account in accordance with the order of priority set forth above under "Priority of Payments" (other than a default in payment described in clause (i) or (ii) above), which failure continues for a period of four Business Days (or, in the case of a payment default resulting solely from an administrative error or omission by the Trustee, the Administrator, a Paying Agent (other than the Preference Security Paying Agent) or the Note Registrar, seven Business Days) after any of the Issuer, the Co-Issuer or the Collateral Manager has actual knowledge thereof or after notice thereof to the Issuer and the Collateral Manager by the Trustee or to the Issuer, the Collateral Manager and the Trustee by any Holder of the Notes; either of the Issuers or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act and such condition continues for a period of 90 days after the Regulatory Determination Date; a default in the performance, or breach, of any other covenant or other agreement (other than the covenant to meet the Collateral Quality Tests or the Coverage Tests) of the Issuer or the CoIssuer under the Indenture or any representation or warranty of the Issuer or the Co-Issuer made in the Indenture or in any certificate or other writing delivered pursuant thereto or in connection therewith proves to be incorrect in any material respect when made, in any such case which materially and adversely affects the rights of any Class of Notes, and the continuation of such default or breach for a period of 30 days (or, if such default, breach or failure has an adverse effect on the validity, perfection or priority of the security interest granted under the Indenture, 15 days) after any of the Issuer, the Co-Issuer or the Collateral Manager has actual knowledge thereof or after notice thereof to the Issuer and the Collateral Manager by the Trustee or to the Issuer, the Collateral Manager and the Trustee by at least a majority in principal amount of the Notes; certain events of bankruptcy, insolvency, receivership or reorganization of either of the Issuers (as set forth in the Indenture); and a failure by the Issuer to maintain the Senior Class A Overcollateralization Ratio at an amount greater than or equal to 100% on any Measurement Date.

(iii)

(iv)

(v)

(vi) (vii)

If the Trustee has actual knowledge that an Event of Default has occurred and is continuing, the Trustee shall, within three Business Days after obtaining such knowledge, notify the Issuers, the Preference Security Paying Agent, the Collateral Manager, the Noteholders, the Hedge Counterparty and each Rating Agency in writing. If either of the Issuers shall obtain knowledge, or shall have reason to believe, that an

66

Event of Default has occurred and is continuing, such Issuer shall promptly notify the Trustee, the Preference Security Paying Agent, the Collateral Manager, the Noteholders, the Hedge Counterparty and each Rating Agency in writing of such an Event of Default. The "Regulatory Determination Date" is the date on which the Issuer, the Trustee or the Collateral Manager has been advised in writing by counsel or by the SEC that either of the Issuers or the pool of Collateral is required to register under the Investment Company Act. If an Event of Default occurs and is continuing (other than an Event of Default described in clause (vi) above), the Trustee shall, at the written direction of the Requisite Noteholders, or the Requisite Noteholders by notice to the Issuers and the Trustee may, declare the principal of and accrued and unpaid interest on all of the Notes to be immediately due and payable. If an Event of Default described in clause (vi) above occurs, such an acceleration will occur automatically and without any further action, and all Principal Proceeds standing to the credit of the Principal Collection Account will be transferred to the Payment Account for application in accordance with the Priority of Payments. Such declaration may under certain circumstances be rescinded by the Trustee with the consent of the Requisite Noteholders or at the written direction of the Requisite Noteholders. If an Event of Default should occur and be continuing when any of the Notes are outstanding, the Trustee will retain the Collateral intact and collect all payments in respect of the Collateral and continue making payments in the manner described above under "Priority of Payments" unless either (i) the Requisite Noteholders have directed the Trustee to sell or liquidate the Collateral or any portion thereof in the case of (A) an Event of Default resulting from failure to pay interest or principal on a Note or (B) a sale or liquidation of all or a portion of the Collateral at or above the aggregate par value of all Collateral so liquidated or sold (and Defaulted Securities may be liquidated or sold without reference to, or inclusion in the calculation of, such limitation), or (ii) 100% of the Noteholders have otherwise directed the Trustee to sell or liquidate the Collateral or any portion thereof. In either such event, the Collateral (or the applicable portion thereof) will be so sold and liquidated, and the proceeds of such liquidation will be distributed in accordance with the Priority of Payments on the sixth Business Day following the Business Day on which the Issuer (or the Collateral Manager) notifies the Trustee that such liquidation is completed and all liquidation proceeds have been received by the Trustee (the "Accelerated Payment Date"). The Requisite Noteholders will have the right to direct the Trustee in the conduct of any proceedings for any remedy available to the Trustee, provided that (i) such direction will not conflict with any rule of law or the Indenture; (ii) the Trustee may take any other action not inconsistent with such direction (and the Trustee need not take any action that the Trustee determines might involve it in liability unless it has received such indemnity against such liability as set forth below); (iii) the Trustee has been provided with indemnity satisfactory to the Trustee; and (iv) any direction to undertake a sale of the Collateral may be made only as described in the preceding paragraph. The Requisite Noteholders will have the right to waive any default with respect to such Notes, except a default in payment of any amount payable in respect of any Note or a default in respect of a covenant or provision of the Indenture that cannot be modified without the waiver or consent of the Holder of each outstanding Note affected thereby. Pursuant to the Indenture, as security for the payment by the Issuer of the compensation and expenses of the Trustee and any sums the Trustee may be entitled to receive as indemnification by the Issuer, the Issuer will grant the Trustee a lien on the Collateral, which lien is senior to the lien of the Secured Parties. The Trustee's lien will be exercisable by the Trustee only if the Notes have been declared due and payable following an Event of Default and such acceleration has not been rescinded or annulled.

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Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request of any holders of any of the Notes, unless such holders have offered to the Trustee security or indemnity reasonably satisfactory to it. The Requisite Noteholders may, prior to the time a judgment or decree for the payment of money due has been obtained by the Trustee, waive any past default on behalf of the holders of all the Notes and its consequences, except a default in the payment of the principal of any Note or in the payment of interest (including any Defaulted Interest or interest thereon) on the Senior Class A Notes or, after the Senior Class A Notes have been paid in full, the Class A-3L Notes (including Class A-3L Deferred Interest, interest on Class A-3L Deferred Interest, Defaulted Interest and interest on Defaulted Interest, if any) or, after the Class A-3L Notes have been paid in full, the Class B-1L Notes (including Class B-1L Deferred Interest, interest on Class B-1L Deferred Interest, Defaulted Interest and interest on Defaulted Interest, if any), or in respect of a provision of the Indenture that cannot be modified or amended without the waiver or consent of the holder of each outstanding Note affected thereby, or arising as a result of an Event of Default described in clause (vi) of the definition of "Event of Default." No holder of a Note will have the right to institute any proceeding with respect to the Indenture unless (i) such holder previously has given to the Trustee written notice of an Event of Default, (ii) the Requisite Noteholders have made a written request upon the Trustee to institute such proceedings in its own name as Trustee, (iii) such Holders have offered the Trustee indemnity reasonably satisfactory to it as provided in the Indenture, (iv) the Trustee has for 30 days failed to institute any such proceeding and (v) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Requisite Noteholders. In determining whether the holders of the requisite percentage of Notes have given any direction, notice or consent, (i) Notes owned by the Issuer, the Co-Issuer or any affiliate thereof will be disregarded and deemed not to be outstanding, and (ii) in relation to any assignment or termination of any of the express rights or obligations of the Collateral Manager under the Collateral Management Agreement or the Indenture (including the exercise of any right to remove the Collateral Manager or terminate the Collateral Management Agreement), or any amendment or other modification of the Collateral Management Agreement or the Indenture increasing the rights or decreasing the obligations of the Collateral Manager, Notes owned by the Collateral Manager or any of its Affiliates, or by any accounts managed by them, will be disregarded and deemed not to be outstanding. The Collateral Manager and its Affiliates will be entitled to vote Notes held by them, and by accounts managed by them, with respect to all matters other than those described in the foregoing clause (ii). The term "Collateral Manager" for purposes of this paragraph includes any successor or successors to ACA Management.

Notices
Notices to the Noteholders will be given by first-class mail, postage prepaid (or electronically, with respect to Holders who provide e-mail addresses), to the registered holders of the Notes at their respective addresses (or, if applicable, e-mail address) appearing in the Note Register.

Modification of the Indenture

With the consent of the holders of a majority in aggregate outstanding principal amount of the Notes of each Class materially and adversely affected thereby and a Majority-in-Interest of Preference Securityholders (if the Preference Securities are materially and adversely affected thereby), the Trustee and the Issuers may enter into one or more supplemental indentures to add provisions to, or change in any manner or eliminate any provisions of, the Indenture or modify in any manner the rights of the holders of

68

the Notes of such Class or the Preference Securities, as the case may be, under the Indenture. Unless notified by holders of a majority in aggregate outstanding principal amount of any Class of Notes, or a Majority-in-Interest of Preference Securityholders that such Class of Notes or the Preference Securities will be materially and adversely affected, the Trustee may, based upon the written advice of counsel or a certificate of the Issuer or the Collateral Manager, determine whether or not such Class of Notes, or the Preference Securities would be materially and adversely affected (after giving notice of such change to the holders of such Class of Notes and the Preference Securityholders). Such determination will be conclusive and binding on all present and future holders of the Notes and the Preference Securityholders. Notwithstanding the foregoing, the Trustee may not enter into any supplemental indenture without the consent of each holder of each outstanding Note of each Class adversely affected thereby and each Preference Securityholder adversely affected thereby if such supplemental indenture (i) changes the Stated Maturity of a Note or the definition of Scheduled Preference Security Redemption Date or the due date of any installment of interest on any Note or the due date for the payment of Excess Interest in respect of a Preference Security, reduces the principal amount of a Note, the note interest rate thereon, the amount of Excess Interest or Excess Total Proceeds payable in respect of a Preference Security, or the redemption price with respect to any of the Securities, changes the date on which the Non-Call Period expires, changes the order of the clauses in the Priority of Payments, changes any place where, or the coin or currency in which, any Note or any Preference Security, or the principal thereof or interest thereon or any Excess Amount in respect thereof, respectively, is payable, or impairs the right to institute suit for the enforcement of any such payment on or after the Stated Maturity or the Scheduled Preference Security Redemption Date, as the case may be (or, in the case of redemption, on or after the applicable Redemption Date), (ii) reduces the percentage in aggregate outstanding principal amount of holders of Notes of each Class or the number of Preference Securities the consent of which is required for the authorization of any supplemental indenture or for any waiver of compliance with certain provisions of the Indenture or certain defaults thereunder or their consequences, (iii) impairs or adversely affects the Collateral pledged under the Indenture except as otherwise permitted by the Indenture, (iv) permits the creation of any lien ranking prior to or on a parity with the lien created by the Indenture with respect to any part of the Collateral or terminates such lien on any property at any time subject thereto (other than in connection with a sale thereof in accordance with the Indenture) or deprives the holder of any Note of the security afforded by the lien created by the Indenture except as permitted by the Indenture, (v) reduces the percentage of the aggregate outstanding principal amount of holders of Notes of each Class the consent of which is required to request that the Trustee preserve the Collateral pledged under the Indenture or rescind the Trustee's election to preserve the Collateral or to sell or liquidate the Collateral pursuant to the Indenture, (vi) modifies any of the provisions of the Indenture with respect to supplemental indentures except to increase the percentage of outstanding Notes (or percentage of Preference Securities) the consent of holders of which is required for any such action or to provide that other provisions of the Indenture cannot be modified or waived without the consent of the holder of each outstanding Note or Preference Security affected thereby, (vii) modifies the definitions of the terms "Outstanding," "Event of Default" or the subordination provisions of the Indenture, (viii) changes the permitted minimum denominations of any Class of Notes, (ix) modifies any of the provisions of the Indenture to change directly the calculation of the amount of any payment of interest on or principal of any Note or the calculation of the amount of any Excess Amount with respect to any Preference Security on any Payment Date or to change the rights of the holders of Notes or Preference Securities to cause the redemption of such Notes or Preference Securities or (x) amends the "non-petition" or "limited recourse" provisions of the Indenture or the Notes. The Trustee may not enter into any such supplemental indenture unless the Rating Condition with respect to Standard & Poor's shall have been satisfied with respect to such supplemental indenture, unless consent from each affected holder of Notes is obtained. Not later than 10 days prior to the execution (such period, the "Review Period") of any supplemental indenture to be made pursuant to either of the two immediately preceding paragraphs, (except to the

69

extent that a Review Period shorter than such 10 day Review Period shall have been consented to by all the holders of Securities whose consent is required for such supplemental indenture, and not objected to by Standard & Poor's), at the expense of the Issuer, the Trustee will provide to the Noteholders, the Hedge Counterparty, the Initial Purchaser and, for so long as any Class of Notes shall remain outstanding and have a rating, each Rating Agency rating such Class, a copy (or a summary) of such supplemental indenture and will request that Standard & Poor's (so long as it maintains a rating on any Class of Notes) provide written confirmation that the Rating Condition with respect to Standard & Poor's is satisfied with respect to such supplemental indenture. The Issuers and the Trustee may also enter into supplemental indentures, without obtaining the consent of holders of any Notes or the Preference Securityholders, except to the extent such Class of Notes or the Preference Securityholders would be materially and adversely affected by such supplemental indenture or as otherwise set forth below, in order to (i) evidence the succession of any Person to the Issuer or the CoIssuer and the assumption by such successor of the covenants in the Indenture and the Notes, (ii) add to the covenants of the Issuers or the Trustee for the benefit of the holders of all of the Notes or to surrender any right or power conferred upon the Issuers, (iii) convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit of the Secured Parties, (iv) evidence and provide for the acceptance of appointment by a successor trustee, collateral manager (subject to the Collateral Management Agreement), listing agent, calculation agent, custodian, securities intermediary, note registrar, paying agent and/or collateral administrator and the compensation thereof and to add to or change any of the provisions of the Indenture as shall be necessary to facilitate the administration of the trusts under the Indenture by more than one trustee, (v) with the consent of the Holders of 100% of the Preference Securities (including Collateral Manager Securities), to accommodate the issuance of additional Preference Securities and to extend to such Preference Securities the benefits and provisions applicable to the Preference Securities, (vi) correct or amplify the description of any property at any time subject to the lien created by the Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subject to the lien created by the Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien created by the Indenture any additional property, (vii) modify the restrictions on and procedures for resales and other transfers of the Notes to reflect any changes in applicable law or regulation (or the interpretation thereof) or to enable the Issuers to rely upon any less restrictive exemption from registration under the Securities Act or the Investment Company Act or to remove restrictions on resale and transfer to the extent not required thereunder, (viii) correct any inconsistency, defect or ambiguity in the Indenture, (ix) obtain ratings on one or more Classes of the Notes from any rating agency, (x) accommodate (A) the issuance of Preference Securities to be held through the facilities of DTC or otherwise, (B) the listing of the Preference Securities on, or delisting of the Preference Securities from, any exchange, or (C) the refinancing of the Preference Securities through the issuance by the Issuer of unsecured debt securities that by their terms are subordinated in all respects to the Notes, (xi) avoid the imposition of tax on the net income of the Issuer or the Co-Issuer or of withholding tax on any payment to the Issuer or the Co-Issuer or to avoid the Issuer or the Co-Issuer or the pool of Collateral being required to register as an investment company under the Investment Company Act, (xii) accommodate the issuance of any Class of Notes as Definitive Notes, (xiii) correct any manifest error in any provision of the Indenture upon receipt by the Trustee of a written directive from the Issuers (as to which the Trustee may rely) describing in reasonable detail such error and the modification necessary to correct such error, (xiv) impose additional transfer restrictions in order for the Issuer to comply with the USA PATRIOT Act or any similar applicable laws, to the extent it is applicable to the Issuer, (xv) enter into any amendment or modification of, or waiver under, the Indenture if the Issuer determines that such amendment, modification or waiver would not, upon or after becoming effective, materially and adversely affect the rights or interests of any Class of the Notes or holders of the Preference Securities, provided that notice of such amendment, modification or waiver has been delivered to the Holders of the Class A-1LA Notes no less than 10 days prior to the effective date of such amendment, modification or waiver, and a majority by aggregate outstanding

70

principal amount of the Class A-1LA Notes have not provided written notice to the Trustee of their determination that the Class A-1LA Notes would be materially and adversely affected by such amendment, modification or waiver (which notice describes a reasonable basis for such determination) prior to the effective date thereof; (xvi) amend or otherwise to modify (A) if the Rating Condition with respect to Moody's is satisfied, the Moody's recovery rates specified in the Indenture, and, with the consent of Holders of a majority by aggregate outstanding principal amount of the Class A-1LA Notes, the Moody's Minimum Weighted Average Recovery Rate Test, the Moody's Maximum Rating Distribution Test and the Moody's Asset Correlation Test or (B) if the Rating Condition with respect to Standard & Poor's is satisfied, the Standard & Poor's recovery rates specified in the Indenture and, with the consent of Holders of a majority by aggregate outstanding principal amount of the Class A-1LA Notes (with written notice of such amendment or modification to be delivered to the Holders of the Class A1LA Notes at least 10 days prior to the effective date of such amendment or modification), the Standard & Poor's Minimum Recovery Rate Test; (xvii) conform the Indenture to the provisions set forth in this Offering Circular; (xviii) comply with the requirements of any Compliance Plan; (xix) conform to any requirement for listing the Notes or Preference Securities on any stock exchange in Ireland, Luxembourg, Jersey (Channel Islands) or the Cayman Islands or (xx) change the procedures for implementing an Optional Redemption, Tax Redemption or Auction Call Redemption (but without changing the calculation of the Redemption Price, the earliest date on which an Optional Redemption or Auction Call Redemption may occur, the definition of Affected Class or the percentage of Preference Securityholders required to vote to direct an Optional Redemption), including deadlines; provided that, in each such case, such supplemental indenture (other than pursuant to clause (xiii) or (xvii) of this paragraph) would not materially and adversely affect any holder of Notes or any Preference Securityholder. The Trustee may rely upon an opinion of counsel or a certificate of the Issuer or the Collateral Manager as to whether the interests of any holder of Notes would be materially and adversely affected or whether any Preference Securityholders would be materially and adversely affected. The Trustee may not enter into any supplemental indenture described in clause (vii) or (viii) of this paragraph without the written consent of the Collateral Manager. In addition, the Trustee may not enter into any supplemental indenture without the written consent of the Collateral Manager if such supplemental indenture alters the rights or obligations of the Collateral Manager in any respect, and the Collateral Manager will not be bound by any such supplemental indenture unless the Collateral Manager has consented thereto. The Trustee shall be entitled to rely upon any opinion of counsel or a certificate of the Collateral Manager as to whether such supplemental indenture alters the rights or obligations of the Collateral Manager. The Trustee will not enter into any such supplemental indenture if, with respect to such supplemental indenture, the Rating Condition has not been satisfied; provided that the Trustee may, with the consent of the holders of 100% of the aggregate outstanding principal amount of Notes of each Class, enter into any such supplemental indenture notwithstanding any such reduction or withdrawal of the ratings of any outstanding Class of Notes, if the Trustee notifies the holders of the Notes that the Rating Condition has not been satisfied. Notwithstanding anything to the contrary in this section, (a) if either Rating Agency changes the method of calculating any of its respective Collateral Quality Tests (a "Collateral Quality Test Modification") or any of the respective Coverage Tests (a "Coverage Test Modification") or (b) if the Collateral Manager certifies to the Trustee that a modification to the method of calculating a Collateral Quality Test (also a "Collateral Quality Test Modification") or a Coverage Test (also a "Coverage Test Modification") should be made and that such modification will not have a material adverse effect on the Preference Securityholders or on the holders of any Class of Notes, then the Issuer may, at the direction of the Collateral Manager, incorporate corresponding changes into the Indenture with the consent of the Holders of a majority, by aggregate outstanding principal amount, of the Class A-1LA Notes but without amending the Indenture and without the consent of any other Classes of Notes (whether or not any Class A-1LA Notes remain outstanding) or Holders of Preference Securities (i) (A) in the case of a Collateral Quality Test Modification, if the Rating Condition is satisfied with respect to the applicable Rating Agency (which shall be (1) Moody's in the case of the Moody's Asset Correlation Test, the Moody's

71

Maximum Rating Distribution Test and the Moody's Minimum Weighted Average Recovery Rate Test, (2) Standard & Poor's in the case of the Standard & Poor's Minimum Weighted Average Recovery Rate Test, and (3) both Rating Agencies in the case of the Weighted Average Coupon Test, Weighted Average Spread Test and Weighted Average Life Test), or (B) in the case of a Coverage Test Modification, if the Rating Condition is satisfied with respect to each Rating Agency then rating the Notes, and (ii) if notice of such change is delivered by the Collateral Manager to the Trustee and to the holders of the Notes and the Preference Securities (which notice may be included in the next regular report to Noteholders and Preference Securityholders). Any such modification shall be effected without execution of a supplemental indenture. As soon as reasonably practicable after the execution by the Trustee and the Issuers of any such supplemental indenture, at the expense of the Issuer, the Trustee or the Issuer will provide a copy (or a summary) of the executed supplemental indenture to the Noteholders, the Preference Security Paying Agent, the Hedge Counterparty, the Collateral Manager, the Initial Purchaser and, for so long as any Class of Notes shall remain outstanding and have a Rating, each Rating Agency rating such Class.

Modification of Certain Other Documents

Prior to entering into any amendment to the Collateral Management Agreement, the Collateral Administration Agreement, the Administration Agreement or the Closing Date Interest Rate Cap Agreement, the Issuer is required by the Indenture to obtain the written confirmation of each Rating Agency that the entry by the Issuer into such amendment satisfies the Rating Condition. Prior to entering into any waiver in respect of any of the foregoing agreements, the Issuer is required to provide written notice of such waiver to each Rating Agency and the Trustee (and the Trustee shall promptly forward such notice to each Noteholder). The amendment to and waiver of provisions of the Collateral Management Agreement are also subject to additional restrictions as described herein under "The Collateral Management Agreement."

Consolidation, Merger or Transfer of Assets

Except under the limited circumstances set forth in the Indenture, the Issuers may not consolidate with, merge into, or transfer or convey all or substantially all of their assets to, any other corporation, partnership, trust or other person or entity (except for sales or exchanges of Collateral Debt Securities as contemplated by the Indenture). In addition, the Issuers may not incur any indebtedness other than the Notes and trade debt incidental to the performance of their obligations under the Indenture or engage in any business or activity other than the issuance of the Notes, the Preference Securities, the ordinary shares and the other transactions and activities contemplated herein. Pursuant to the Indenture and the Issuer's organizational documents, the Issuers may also not, without the consent of the Requisite Noteholders, amend their organizational documents if such amendment would have a material adverse effect on the rights of the Noteholders.

Petitions for Bankruptcy

The Indenture provides that the holders of the Notes and the Trustee agree not to cause the filing of a petition for the winding up or bankruptcy of the Issuer or the Co-Issuer before a period of one year and one day or, if longer, the applicable preference period (plus one day) then in effect has elapsed since payment in full of all of the Notes.

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Satisfaction and Discharge of Indenture

The Indenture will be discharged with respect to the Collateral upon delivery to the Trustee for cancellation of all of the Notes or, subject to certain limitations, upon deposit with the Trustee of funds sufficient for the payment or redemption of the Notes and the Preference Securities and the payment by the Issuers of all other amounts due under the Notes, the Preference Securities, the Indenture, the Collateral Administration Agreement, the Administration Agreement or the Collateral Management Agreement.

Trustee
Wells Fargo Bank, National Association will be the Trustee under the Indenture. The Issuers, the Collateral Manager and their respective affiliates may maintain other banking relationships in the ordinary course of business with the Trustee. The payment of the fees and expenses of the Trustee is solely the obligation of the Issuers. Eligible Investments may include investments for which the Trustee and/or its affiliates provide services. The Indenture contains provisions for the indemnification of the Trustee for any loss, liability or expense incurred without negligence, willful misconduct or bad faith on the Trustee's part, arising out of or in connection with the acceptance or administration of the Indenture. Pursuant to the Indenture, the Issuer has granted to the Trustee a lien senior to that of the Noteholders to secure payment by the Issuer of the compensation and expenses of the Trustee and any sums the Trustee may be entitled to receive as indemnification by the Issuer under the Indenture (subject to the Dollar limitations set forth in the Priority of Payments with respect to any Payment Date), which lien the Trustee is entitled to exercise only under certain circumstances. In the Indenture, the Trustee will agree not to cause the filing of a petition for the winding up or bankruptcy of the Issuers for nonpayment to the Trustee of amounts payable thereunder until at least one year and one day or, if longer, the applicable preference period (plus one day) then in effect, after the payment in full of all of the Notes. The Trustee may resign at any time by giving written notice thereof to the Issuers, the Noteholders, the Collateral Manager, the Hedge Counterparty, each Rating Agency and the Preference Security Paying Agent. Upon receiving such notice of resignation, the Issuers shall promptly appoint a successor trustee. If no successor trustee has been appointed and an instrument of acceptance by a successor trustee has not been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or any holder of a Note, on behalf of itself and all others similarly situated, may petition any court of competent jurisdiction for the appointment of a successor trustee. The Trustee may be removed at any time by the Holders of a majority in aggregate outstanding principal amount of the Notes (voting as a single class) or, at any time when an Event of Default has occurred and is continuing, by the Requisite Noteholders. The Issuers may remove the Trustee, or any holder of a Note may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee, if (a) the Trustee ceases to be eligible to act in such capacity under the Indenture and fails to resign after written request therefor by the Issuers or by any holder, (b) the Trustee becomes incapable of acting, is adjudged as bankrupt or insolvent, a receiver or liquidator of the Trustee or of its property is appointed or any public officer takes charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation or (c) the Trustee commences a voluntary case in connection with a bankruptcy, liquidation or similar proceeding, consents to the appointment of a liquidator or receiver for itself or any substantial portion of its property, makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts as they come due. No resignation or removal of the Trustee will become effective (a) until the acceptance of the appointment of a successor trustee, (b) unless the Rating Condition shall have been satisfied or (c) if Requisite Noteholders object to such appointment. Any resignation or removal of Wells Fargo Bank, National Association as Trustee shall also be deemed to be a resignation or removal, as applicable, of it as Collateral Administrator, Calculation Agent, Note Registrar, Transfer Agent and Preference Security Paying Agent.

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Tax Characterization of the Notes

The Issuer intends to treat the Notes as debt instruments of the Issuer for U.S. Federal, state and local income tax purposes. The Indenture will provide that each holder, by purchasing a Note, agrees to such treatment and agrees to report all income (or loss) in accordance with such characterization unless required otherwise by any taxing authority under applicable law.

Rights of the Holders of the Preference Securities

The holders of the Preference Securities will be third party beneficiaries of the Indenture to the extent, and only to the extent, that holders of Preference Securities are granted rights thereunder. The holders of the Preference Securities will also be bound by certain provisions of the Indenture as specified therein, and each transferee of Preference Securities will be required to so agree. The holders of the Preference Securities will have the right to vote with respect to certain matters under the Indenture (including the right to direct an Optional Redemption or a Tax Redemption). However, the holders of the Preference Securities will have no right to vote in connection with the acceleration of the Notes, realization of the Collateral or certain other matters under the Indenture.

Governing Law
The Indenture, the Subscription Agreements, the Notes, the Preference Security Paying Agency Agreement, the Collateral Administration Agreement, the Closing Date Interest Rate Cap Agreement and the Collateral Management Agreement will be governed by, and interpreted, construed and enforced in accordance with, the laws of the State of New York. The Issuer Charter and the Preference Securities will be governed by, and interpreted, construed and enforced in accordance with, the laws of the Cayman Islands.

Trustee Reports
The Indenture provides that, upon receipt from the Issuer, the Trustee shall make available via the Trustee's internet website, upon a written request therefor in the form attached to the Indenture, including a certification that the Person making such request is the owner of a beneficial interest in any Note, to any Noteholder (or its designee) any monthly report, note valuation report and any notices and other information to be sent to the Noteholders. The Trustee's internet website shall initially be located at www.cdolink.com. The Trustee shall have the right to change the way such information is distributed to the Noteholders in order to make such distribution more convenient or accessible to the above recipients, and the Trustee will provide timely and adequate notification to all recipients regarding any such changes.

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DESCRIPTION OF THE PREFERENCE SECURITIES The Preference Securities will be issued pursuant to the Issuer Charter, certain resolutions of the board of Directors of the Issuer passed on or before the issue of the Preference Securities as memorialized in the board minutes relating thereto (the "Resolutions") and will be administered in accordance with a Preference Security Paying Agency Agreement (the "Preference Security Paying Agency Agreement," together with the Issuer Charter and the Resolutions, the "Preference Security Documents") among Wells Fargo Bank, National Association, as Preference Security Paying Agent, Maples Finance Limited, as Security Registrar, and the Issuer. Investors in the Preference Securities will subscribe subject to the terms of the Subscription Agreements. The following summary describes certain provisions of the Preference Securities, the Issuer Charter, the Preference Security Paying Agency Agreement and the Subscription Agreements. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Issuer Charter, the Preference Security Paying Agency Agreement and the Subscription Agreements. Copies of the Issuer Charter, the Preference Security Paying Agency Agreement and the form of Subscription Agreement may be obtained by prospective investors upon request in writing to the Preference Security Paying Agent at Wells Fargo Bank, National Association, 9062 Old Annapolis Road, Columbia, Maryland 21045, Attention: CDO Trust Services ACA ABS 2006-1, Limited. Status The Issuer is authorized to issue 42,000,000 Preference Securities, par value U.S.$0.001 per share, each of which will have a notional amount of U.S.$1.00 for, among other things, clearing and voting purposes, and all of which will be issued on the Closing Date. The Preference Securities will be issued in minimum lots of 200,000 Preference Securities and integral multiples of one Preference Security in excess thereof. Each Preference Security will rank pari passu with each other Preference Security. No additional Preference Securities may be issued. The Preference Securities are equity in the Issuer and are not obligations of the Issuer. The Preference Securities are not interests in or obligations of the Trustee, the Security Trustee, the Administrator, the Collateral Administrator, the Preference Security Paying Agent, the Collateral Manager, the Hedge Counterparty, the Initial Purchaser, any of their respective directors, officers or affiliates or any director, officer or member of either of the Issuers. As equity interests in the Issuer, the Preference Securities are not secured by the Collateral securing the Notes. However, the Issuer will not have any substantial assets other than the Collateral. See "The IssuersCapitalization." Consequently, all amounts payable by the Issuer in respect of the Preference Securities will be paid solely from and to the extent of the available proceeds from the Collateral. As holders of equity interests in the Issuer, the Preference Securityholders will, on a winding up of the Issuer, rank behind all of the creditors, whether secured or unsecured and known or unknown, of the Issuer, including the Trustee, the Administrator, the Noteholders, the Collateral Manager, the Collateral Administrator, the Preference Security Paying Agent and any judgment creditors. Consequently, Holders of the Preference Securities will not be entitled to payments upon redemption or winding up of the Issuer until all of the Notes have been paid in full and all of the other obligations of the Issuer have been satisfied. Distributions Interest Proceeds. On each Payment Date, if and to the extent funds are available therefor in accordance with the Priority of Payments, Interest Proceeds will (subject as provided below) be released from the lien of the Indenture for payment to the Preference Security Paying Agent for deposit to the Preference

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Security Payment Account; such release will occur only after the payment of interest on the Notes and, in certain circumstances, principal due in respect of the Notes and the payment of certain other amounts in accordance with the Priority of Payments. No distributions of Interest Proceeds will be made in respect of the Preference Securities on any Payment Date unless Holders of the Notes have been paid all accrued and unpaid interest due to them on such Payment Date and certain expenses of the Issuers are paid in full. Any Interest Proceeds remaining after such payments will, to the extent available to pay such amounts in accordance with the Priority of Payments, be distributed to pay the Current Target Return Payment, the Class B-1L Turbo Payment (if applicable on such date) and any unpaid Administrative Expenses (including indemnities), in that order, and then will be distributed to Holders of the Preference Securities (i) on each Payment Date after the first Payment Date until the Class B-1L Notes have been paid in full, in an amount up to 35% of the Remaining Interest Proceeds or (ii) on the first Payment Date and on each Payment Date after the Class B-1L Notes have been paid in full, (a) in an amount equal to 90% of any undistributed Interest Proceeds if the IRR Test is not satisfied on such Payment Date or (b) in an amount equal to 80% of any undistributed Interest Proceeds if the IRR Test is satisfied on such Payment Date. Any such remaining Interest Proceeds not so distributed will be paid to the Collateral Manager as part of the Collateral Manager Incentive Allocation. Any Interest Proceeds permitted to be released from the lien of the Indenture and paid to the Preference Security Paying Agent will be distributed to the Preference Securityholders on the applicable Payment Date. Principal Proceeds; Total Proceeds. Until the Notes and certain other amounts have been paid in full, Principal Proceeds are not permitted to be released from the lien of the Indenture and will not be available to make distributions in respect of the Preference Securities. On any Redemption Date, the Final Payment Date, an Accelerated Payment Date or any Post-Acceleration Payment Date, any Total Proceeds remaining after payment in full of the Notes and any accrued and unpaid fees and expenses of the Issuer will be released from the lien of the Indenture for distribution by the Preference Security Paying Agent to Holders of the Preference Securities (to the extent legally permitted by Cayman Islands law) until the IRR Test is satisfied, and after the IRR Test is satisfied, an amount equal to 80% of the remaining Total Proceeds will be distributed to the Holders of the Preference Securities, and the balance of any such remaining Interest Proceeds not so distributed to Holders of the Preference Securities will be paid to the Collateral Manager as part of the Collateral Manager Incentive Allocation. See "Description of the NotesPriority of PaymentsInterest Proceeds," "Principal Proceeds," "Payments upon Redemption or Following an Acceleration" and "Security for the Notes." Legal Requirements. Payments in respect of the Preference Securities are subject to certain requirements imposed by Cayman Islands law. Any amounts paid by the Preference Security Paying Agent as distributions by way of dividend on the Preference Securities will be payable only if the Issuer has sufficient distributable profits and/or share premium. In addition, such distributions and the payment of Excess Amounts upon redemption of the Preference Securities will be payable only to the extent that the Issuer is and remains solvent after such distributions are paid. Under Cayman Islands law, a company is generally deemed solvent if it is able to pay its debts as they come due. To the extent the requirements under Cayman Islands law described in the preceding paragraph are not met, amounts otherwise payable to the Preference Securityholders will be retained in the Preference Security Payment Account until, in the case of any payment by way of dividend which would otherwise be payable other than on a redemption date of the Preference Securities, the next succeeding Payment Date, or, in the case of any payment that would otherwise be payable on a redemption date of the Preference Securities, the next succeeding Business Day, in each case on which the Issuer notifies the Preference Security Paying Agent that such requirements are met. Amounts on deposit in the Preference Security Payment Account will not be available to pay the amounts due to the Noteholders, the Trustee, the Administrator, the Collateral Manager, the Collateral Administrator, the Preference Security Paying Agent or any other creditors of the Issuer the claims of which are limited in recourse to the Collateral.

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However, amounts on deposit in the Preference Security Payment Account may be subject to the claims of creditors of the Issuer which have not contractually limited their recourse to the Collateral. General. The record date (the "Record Date") for each Payment Date, including the Final Payment Date is the Business Day immediately preceding such Payment Date; provided, however, that the Record Date for such Definitive Preference Securities will be the fifteenth calendar day (whether or not a Business Day) preceding such Payment Date. Payments with respect to the Preference Securities will be made by wire transfer in immediately available funds to registered Holders of Preference Securities on the Record Date applicable to such Payment Date to a Dollar account maintained by the holder thereof appearing in the Security Register in accordance with wire transfer instructions received from such holder by the Preference Security Paying Agent on or before the Record Date or, if no wire transfer instructions are received by the Preference Security Paying Agent, by a Dollar check drawn on a bank in the United States. Final distributions or payments made in the course of a winding up will be made only against surrender of the certificate representing such Preference Securities at the office of the Security Registrar. Upon liquidation of the Issuer, distributions of property other than cash may be made under certain circumstances specified in the Issuer Charter. The amount of such non-cash distributions will be accounted for at the fair market value, as determined in good faith by the liquidator of the Issuer, of the property distributed. See "The Issuer Charter." If any of the Coverage Tests is not satisfied on the Determination Date related to any Payment Date, funds that would otherwise be distributed to Preference Securityholders (subject to the payment of certain other amounts prior thereto) will be used instead to repay principal of the Notes sequentially in direct order of seniority, to the extent and as described herein. There can be no assurance that funds will be available on any Payment Date to make any distributions to the Preference Security Paying Agent for distribution to holders of the Preference Securities. The failure to make distributions to the Preference Security Paying Agent for deposit into the Preference Security Payment Account for payment to the holders of the Preference Securities on any Payment Date will not be an Event of Default under the Indenture. See "Description of the NotesPriority of Payments." Preference Security Redemption Price The redemption price for the Preference Securities (the "Preference Security Redemption Price"), whether upon the Scheduled Preference Security Redemption Date, an Optional Redemption, a Tax Redemption or a redemption at the direction of a Majority-in-Interest of Preference Securityholders after the Notes have been paid in full, will be equal to the Excess Total Proceeds distributable in respect of such Preference Securities pursuant to the Priority of Payments on the relevant redemption date (after deducting (i) the amount required to establish adequate reserves to meet all contingent, unliquidated liabilities or obligations of the Issuer and (ii) a payment to the holders of the ordinary shares of the Issuer an amount equal to U.S.$1.00 per share). Such redemption price could be less than 100% of the notional amount of the Preference Securities. Scheduled Preference Security Redemption Date The Scheduled Preference Security Redemption Date is the Payment Date in June 2041. However, the duration of the Preference Securities is expected to be shorter than the period until the Scheduled Preference Security Redemption Date.

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Optional Redemption On any Payment Date on or after the Payment Date on which the Notes have been paid in full, the Preference Securities may be redeemed (in whole but not in part) at the direction of a Majority-in-Interest of Preference Securityholders given not less than 45 days prior to such Payment Date at the Preference Security Redemption Price. The Issuer Charter The following summary describes certain provisions of the Issuer Charter. The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Issuer Charter.

Rights
Set forth below is a summary of certain matters with respect to which the consent of holders of the Preference Securities (the "Preference Securityholders") is required or in respect of which Preference Securityholders may give directions or are entitled to vote. This summary is not meant to be an exhaustive list and, subject to covenants made by each Preference Securityholder in the Subscription Agreements (in the case of original purchasers of the Preference Securities) and in the transfer certificates (in the case of transferees of the Preference Securities), the Issuer Charter and the Companies Law (2004 Revision) of the Cayman Islands afford Preference Securityholders the right to vote on matters in addition to those mentioned below. Redemption of the Notes. On any Payment Date occurring on or after the Non-Call Period, the Notes may, subject to satisfaction of certain conditions described herein, be redeemed (in whole or in part) at the direction of a Majority-in-Interest of Preference Securityholders, as described under "Description of the NotesOptional Redemption and Tax Redemption." Redemption of the Preference Securities. On any Payment Date on or after the Payment Date on which the Notes have been paid in full, the Preference Securities may be redeemed (in whole but not in part) at the direction of a Majority-in-Interest of Preference Securityholders. The Collateral Management Agreement. For a description of certain of the provisions of the Issuer Charter and the Collateral Management Agreement relating to the termination of the Collateral Management Agreement by the Issuer at the direction of the Preference Securityholders, and the objection to the appointment of a replacement Collateral Manager, see "The Collateral Management Agreement." The Indenture. Except as described under "Description of the NotesThe IndentureModification of the Indenture," the Issuer is not permitted to enter into a supplemental indenture which materially and adversely affects the Preference Securityholders without the consent of holders of the Preference Securities. In certain circumstances the consent of holders of a majority of the Preference Securities, and in certain other circumstances the consent of each Preference Securityholder adversely affected thereby, will be required for modifications to the Indenture, each as further described under "Description of the NotesThe IndentureModification of the Indenture." Preference Security Paying Agency Agreement. The Preference Security Paying Agency Agreement may be amended by the Preference Security Paying Agent and the Security Registrar (each, an "Agent" and, collectively, the "Agents") and the Issuer, without the consent of any of the Preference Securityholders, to (i) cure any ambiguity, (ii) correct or supplement any provision in the Preference Security Paying Agency Agreement which may be defective or inconsistent with any other provision therein, (iii) add to the

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covenants, restrictions or obligations of the Issuer or the Agents, (iv) evidence and provide for the acceptance of the appointment of a successor to any Agent and add to or change any provisions as shall be necessary to facilitate the administration of the arrangement contemplated by the Preference Security Paying Agency Agreement, (v) amend the terms of the Preference Security Paying Agency Agreement for the purpose of facilitating compliance by the Issuer with any other applicable exemption under the Investment Company Act and (vi) add, change or eliminate any other provision of the Preference Security Paying Agency Agreement in any manner that will not adversely affect in any material respect the interests of the Preference Securityholders evidenced by an opinion of counsel addressed to the Issuer and the Preference Security Paying Agent; provided, however, that no such amendment will (based on advice of the counsel to the Issuer) increase the risk that the Issuer will be considered to be engaged in a trade or business in the United States. The Preference Security Paying Agency Agreement may also be amended from time to time by the Issuer and the Agents, with the consent of a Majority-in-Interest of Preference Securityholders, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions relating to the Preference Securities, or of modifying in any manner the rights of the Preference Securityholders; provided, however, that no such amendment may (i) reduce the Excess Amounts and Preference Security Redemption Price that are required to be paid, or delay the timing of any such payment to be made, in respect of any Preference Security or (ii) reduce the aforesaid percentage required to consent to any such amendment, provided, in either case, that such amendment does not (based on advice of counsel to the Issuer) (a) constitute a sale or exchange for U.S. Federal income tax purposes or (b) increase the risk that the Issuer will be considered to be engaged in a trade or business in the United States. Issuer Charter. The Issuer Charter may be amended at any time by the holders of the Ordinary Shares of the Issuer, without the consent of the Preference Securityholders except as provided below. Other than as provided below, only the holders of the Ordinary Shares in the capital of the Issuer will have the right to receive notice of, attend and vote as a shareholder of the Issuer at any general meeting of the Issuer. Every holder of an Ordinary Share present in Person or by proxy at any meeting shall, on a show of hands, be entitled to one vote and, on a poll, be entitled to one vote per Ordinary Share held by such holder. The Preference Securityholders will have the right to receive notice of, attend and vote as shareholders of the Issuer at any general meeting of the Issuer in respect of a resolution that relates to any circumstance or matter that under the Indenture or any of the other Transaction Agreements (as defined in the Indenture) can take place or occur only with the consent of or at the direction of holders of the Preference Securities (a "Preference Security Vote"). Every holder of Preference Securities present will, on a show of hands, be entitled to one vote and, on a poll, be entitled to one vote per Preference Security held by such holder, except that, in relation to a Preference Security Vote relating to certain matters (as set out in the Indenture or any of the other Transaction Agreements) Preference Securities held by certain holders (as set out in the Indenture or such other Transaction Agreement) will be disregarded.

Liquidation
In the event of any voluntary or involuntary liquidation or winding up of the Issuer, subject to the terms of the Indenture and Cayman Islands law, the assets of the Issuer will be applied in the following order of priority: (1) (2) first, to pay the costs and expenses of the winding up, liquidation and termination of the Issuer; second, to creditors of the Issuer, in the order of priority provided by law, including fees payable to the Collateral Manager or its affiliates;

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(3) (4)

third, to pay the holders of the Ordinary Shares as at the date of commencement of the winding up an amount equal to U.S.$2.00 in respect of each Ordinary Share held by such holders; and fourth, to pay to the Preference Securityholders the balance remaining, pro rata according to the number of Preference Securities held by them.

Consolidation, Merger or Transfer of Assets

Except under the limited circumstances set forth in the Indenture, the Issuer may not consolidate with, merge into, or transfer or convey all or substantially all of its assets to, any other corporation, partnership, trust or other Person. Petitions for Bankruptcy Each original purchaser (from the Initial Purchaser) of Preference Securities will be required to covenant in a Subscription Agreement (and each transferee of Preference Securities will be required to covenant in a transfer certificate) that it will not cause the filing of a petition for the winding up or bankruptcy of the Issuer before one year and one day have elapsed since the payment in full of the Notes or, if longer, the applicable preference period (plus one day) then in effect. Preference Security Paying Agent Pursuant to the Preference Security Paying Agency Agreement, the Preference Security Paying Agent will perform various fiscal services with respect to the Preference Securities on behalf of the Issuer, including the maintenance of the Preference Security Payment Account and the making of distributions on the Preference Securities, and the Security Registrar will maintain the Security Register. The payment of the fees and expenses of the Preference Security Paying Agent and the Security Registrar is solely the obligation of the Issuer. The Preference Security Paying Agency Agreement contains provisions for the indemnification of the Preference Security Paying Agent for any loss, liability or expense incurred without gross negligence, willful misconduct or bad faith on the Preference Security Paying Agent's part, arising out of or in connection with the acceptance or administration of the Preference Security Paying Agency Agreement. Accounts On each Payment Date the Trustee, in accordance with the Priority of Payments, will transfer to the Preference Security Paying Agent the Excess Amounts (if any) for deposit to a segregated trust account (the "Preference Security Payment Account") established and maintained by the Preference Security Paying Agent pursuant to the Preference Security Paying Agency Agreement. The Preference Security Payment Account and any sums standing to the credit thereof will not form part of the Collateral. Governing Law The Preference Security Paying Agency Agreement and the Subscription Agreements will be governed by, interpreted, construed and enforced in accordance with, the laws of the State of New York. The Issuer Charter and the Preference Securities will be governed by, and construed in accordance with, the laws of the Cayman Islands. Form, Registration and Transfer The following relates to the form, minimum number, registration and transfer of the Preference Securities.

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General
(i) The Preference Securities offered in the U.S. in reliance on an exemption from the registration requirements of the Securities Act ("Restricted Preference Securities") will be issued in definitive, fully registered, certificated form without interest coupons, registered in the name of the beneficial owner thereof. Each original purchaser (from the Initial Purchaser) of a Restricted Preference Security offered by the Issuer in the United States will be required to represent in a Subscription Agreement that it is both (x) a Qualified Institutional Buyer and (y) a Qualified Purchaser acquiring Restricted Preference Securities for its own account for investment purposes and not with a view to the distribution thereof (except in accordance with Rule 144A). (a) Preference Securities offered by the Issuer to Persons that are not U.S. Persons outside the United States in reliance upon Regulation S ("Regulation S Preference Securities") will be represented by one or more permanent global certificates in definitive, fully registered form ("Regulation S Global Preference Securities"), and deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee. By acquisition of a beneficial interest in Regulation S Global Preference Securities, any purchaser thereof will be deemed to represent that it is not a U.S. Person and that, if in the future it decides to transfer such beneficial interest, it will transfer such interest only to a person that is not a U.S. Person in an offshore transaction in accordance with Regulation S or to a person who takes delivery in the form of a Restricted Preference Security. Beneficial interests in each Regulation S Global Preference Security 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, Luxembourg. (b) Owners of beneficial interests in Regulation S Global Preference Securities will be entitled or required under certain limited circumstances described below, to receive physical delivery of certificated Preference Securities ("Definitive Preference Securities") in fully registered, definitive form. No owner of an interest in a Regulation S Global Preference Security will be entitled to receive a Definitive Preference Security unless for a person other than a distributor (as defined in Regulation S), such person provides certification that the Definitive Preference Security is beneficially owned by a person that is not a U.S. Person (as defined in Regulation S). (c) So long as the depositary for Regulation S Global Preference Securities, or its nominee, is the registered holder of such Regulation S Global Preference Securities, such depositary or such nominee, as the case may be, will be considered the absolute owner or holder of such Regulation S Global Preference Securities for all purposes under the Issuer Charter and the Regulation S Global Preference Securities and members of, or participants in, the depositary (the "Participants") as well as any other persons on whose behalf Participants may act (including Euroclear and Clearstream, Luxembourg and account holders and participants therein) will have no rights under the Issuer Charter or under a Regulation S Global Preference Security. Owners of beneficial interests in a Regulation S Global Preference Security will not be considered to be the owners or holders of any Preference Security under the Issuer Charter or the Preference Securities. In addition, no beneficial owner of an interest in a Regulation S Global Preference Security will be able to exchange or transfer that interest, except in accordance with the applicable procedures of the depositary (in addition to those under the Preference Security Paying Agency Agreement), in each case to the extent applicable (the "Applicable Procedures"). (d) Investors may hold their interests in a Regulation S Global Preference Security directly through DTC, if they are participants in such system, or indirectly through organizations which are participants in such system (including Euroclear and Clearstream, Luxembourg).

(ii)

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(e) Distributions on a Regulation S Global Preference Security registered in the name of a depositary or its nominee will be made to the depositary or its nominee as the registered owner of the Regulation S Global Preference Security. None of the Issuer, the Trustee, the Note Registrar, the Preference Security Paying Agent, the Security Registrar and any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in Regulation S Global Preference Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. (f) With respect to the Regulation S Global Preference Securities, the Issuer expects that the depositary for any Regulation S Global Preference Security or its nominee, upon receipt of any distribution on such Regulation S Global Preference Security, will immediately credit the accounts of Participants with payments in amounts proportionate to their respective beneficial interests in the number of such Regulation S Global Preference Security as shown on the records of the depositary or its nominee. The Issuer also expects that payments by Participants to owners of beneficial interests in such Regulation S Global Preference Security held through such Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the name of nominees for such customers. Such payments will be the responsibility of such Participants. (iii) (iv) (v) The Preference Securities are subject to the restrictions on transfer and other provisions set forth herein under "Transfer Restrictions." The Preference Securities are not issuable in bearer form. Pursuant to the Preference Security Paying Agency Agreement, Maples Finance Limited (on behalf of the Issuer) will be appointed and will serve as the Security Registrar with respect to the Ordinary Shares and Preference Securities and will provide for the registration of Ordinary Shares and Preference Securities and the registration of transfers of Ordinary Shares and Preference Securities in the register maintained by it (the "Security Register"). Written instruments of transfer are available at the office of the Security Registrar. The Issuer is authorized to issue 42,000,000 Preference Securities, all of which will be issued on the Closing Date. The minimum number of Preference Securities that may be held or transferred by a Holder is 200,000 Preference Securities. Preference Securities may not be transferred if, after giving effect to such transfer, the transferee (or, if the transferor retains any Preference Securities, the transferor) would own less than 200,000 Preference Securities.

(vi) (vii)

Definitive Preference Securities

Interests in a Regulation S Global Preference Security will be exchangeable or transferable, as the case may be, for a Definitive Preference Security if (a) DTC notifies the Issuer that it is unwilling or unable to continue as depositary for such Preference Security, (b) DTC ceases to be a "Clearing Agency" registered under the Exchange Act, and a successor depositary is not appointed by the Issuer within 90 days, (c) the transferee of an interest in such Regulation S Preference Security is required by law to take physical delivery of securities in definitive form, (d) the transferee is otherwise unable to pledge its interest in a Regulation S Preference Security or (e) the Issuer otherwise consents to such transfer. Upon the occurrence of any of the events described in the preceding sentence, the Issuer will cause Definitive Preference Securities bearing an appropriate legend (a "Legend") regarding restrictions on transfer to be

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delivered. Definitive Preference Securities will be exchangeable or transferable for interests in other Definitive Preference Securities as described below.

Transfer and Exchange of Preference Securities

(i) (a) Transfers by a holder of a beneficial interest in a Regulation S Global Preference Security to a transferee who takes delivery of such interest through a Restricted Preference Security will be made only in accordance with the Applicable Procedures and upon receipt by the Security Registrar of written certifications (1) from the transferor of such beneficial interest in the form provided in the Preference Security Paying Agency Agreement to the effect that, among other things, such transfer is being made to a person (A)(I) that the transferor reasonably believes is a Qualified Institutional Buyer, purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A or (II) that is an Accredited Investor in a transaction exempt from the registration requirements of the Securities Act (and, if requested by the Issuer, upon delivery of an opinion of counsel in a form satisfactory to the Issuer and such certifications and other information as the Issuer may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act) and (B) in either case, that is a Qualified Purchaser and, in each case, in accordance with any applicable securities laws of any State of the United States or any other jurisdiction and (2) from the transferee of such beneficial interest in the form provided for in the Preference Security Paying Agency Agreement to the effect that, among other things, the transferee (I) is a Qualified Institutional Buyer or an Accredited Investor, (II) is a Qualified Purchaser and (III) is not a Flow-Through Investment Vehicle (other than a Qualifying Investment Vehicle). Transfers by a holder of a beneficial interest in a Regulation S Global Preference Security to a transferee who takes delivery of such interest through a Regulation S Global Preference Security will be made only to a transferee that is acquiring such interest in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S and only in accordance with the Applicable Procedures. In addition, No Regulation S Global Preference Security or an interest therein may be acquired by or transferred to a Benefit Plan Investor or a Controlling Person. See "Risk FactorsIssuer May Cause a Transfer of Securities" and "Transfer Restrictions." Each transferee acquiring an interest in Regulation S Global Preference Securities will be required to execute and deliver to the Issuer and the Preference Security Paying Agent a letter in the form attached as an exhibit to the Preference Security Paying Agency Agreement to the effect that such transferee (i) will not transfer such interest except in compliance with the transfer restrictions set forth in the Preference Security Paying Agency Agreement (including the requirement that any subsequent transferee execute and deliver such letter as a condition to any subsequent transfer) and (ii) is not a Benefit Plan Investor or Controlling Person. (b) Transfers by a holder of a Restricted Preference Security to a transferee who takes delivery of such interest through an interest in a Regulation S Global Preference Security will be made only upon receipt by the Security Registrar of written certification from the transferor in the form provided in the Preference Security Paying Agency Agreement to the effect that such transfer is being made in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S. If such transfer is not made in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S, such transfer may be made only upon receipt by the Security Registrar of written certification from the transferee to the effect that the transferee is not a U.S. Person. Exchanges or transfers by a holder

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of a Definitive Preference Security to a transferee who takes delivery of such Preference Security through a Regulation S Global Preference Security will be made no later than 60 days after the receipt by the Security Registrar or Transfer Agent, as the case may be, of the Definitive Preference Securities to be so exchanged or transferred only in accordance with the Applicable Procedures, and, if applicable, upon receipt by the Security Registrar of a written certification from the transferor in the form provided in the Preference Security Paying Agency Agreement. In addition, no Regulation S Global Preference Security or an interest therein may be acquired by or transferred to a Benefit Plan Investor or a Controlling Person. See "Risk FactorsIssuer May Cause a Transfer of Securities" and "Transfer Restrictions." Each transferee acquiring an interest in Regulation S Global Preference Securities will be required to execute and deliver to the Issuer and the Preference Security Paying Agent a letter in the form attached as an exhibit to the Preference Security Paying Agency Agreement to the effect that such transferee (i) will not transfer such interest except in compliance with the transfer restrictions set forth in the Preference Security Paying Agency Agreement (including the requirement that any subsequent transferee execute and deliver such letter as a condition to any subsequent transfer) and (ii) is not a Benefit Plan Investor or Controlling Person. Transfers by a holder of a Restricted Preference Security to a transferee who takes delivery of a Restricted Preference Security will be made only upon receipt by the Security Registrar of written certifications from (1) the transferor in the form provided in the Preference Security Paying Agency Agreement to the effect that, among other things, such transfer is being made to a person (A)(I) that the transferor reasonably believes is a Qualified Institutional Buyer, purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A or (II) that is an Accredited Investor in a transaction exempt from the registration requirements of the Securities Act (and, if requested by the Issuer, upon delivery of an opinion of counsel in a form satisfactory to the Issuer and such certifications and other information as the Issuer may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act) and (B) in either case, that is a Qualified Purchaser and, in each case, in accordance with any applicable securities laws of any State of the United States or any other jurisdiction and (2) the transferee in the form provided for in the Preference Security Paying Agency Agreement to the effect that, among other things, the transferee (I) is a Qualified Institutional Buyer or an Accredited Investor, (II) is a Qualified Purchaser and (III) is not a Flow-Through Investment Vehicle (other than a Qualifying Investment Vehicle). (c) Transfers between Participants in DTC will be effected in the ordinary way in accordance with the Applicable Procedures and will be settled in immediately available funds. Transfers between participants in Euroclear and Clearstream, Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating procedures. (d) The laws of some States require that certain persons take physical delivery of securities in definitive form. Consequently, any transfer of beneficial interests in Regulation S Global Preference Securities to such persons may require that such interests in Regulation S Global Preference Securities be exchanged for Definitive Preference Securities. Because DTC can only act on behalf of Participants, which in turn act on behalf of indirect Participants and certain banks, the ability of a person having a beneficial interest in Regulation S Global Preference Securities to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may require that such interest in a Regulation S Global Preference Securities be exchanged for Definitive Preference Securities. Interests in a

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Regulation S Global Preference Security will be exchangeable for Definitive Preference Securities only as described above. (e) Subject to compliance with the transfer restrictions applicable to the Preference Securities described above and under "Transfer Restrictions," cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream, Luxembourg participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, by its respective depositary; however, such crossmarket transactions will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in Regulation S Global Preference Securities in DTC and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream, Luxembourg participants and Euroclear participants may not deliver instructions directly to the depositaries of Clearstream, Luxembourg or Euroclear. (f) Because of time zone differences, cash received in Euroclear or Clearstream, Luxembourg as a result of sales of interests in Regulation S Global Preference Securities by or through a Euroclear or Clearstream, Luxembourg participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account only as of the business day following settlement in DTC. (g) DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Preference Securities (including, without limitation, the presentation of Preference Securities for exchange as described above) only at the direction of one or more Participants to whose account with DTC interests in the Regulation S Global Preference Securities are credited and only in respect of the number of Preference Securities as to which such Participant or Participants has or have given such direction. (h) Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of interests in a Regulation S Global Preference Security among participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Issuer, the Trustee and the Preference Security Paying Agent will have any responsibility for the performance by DTC, Clearstream, Luxembourg or Euroclear or their respective Participants or indirect participants of their respective obligations under the rules and procedures governing their operations. (i) Transfers by a holder of a Restricted Preference Security or a Regulation S Definitive Preference Security to a transferee that takes delivery of a Restricted Preference Security or a Regulation S Definitive Preference Security will be made only upon receipt by the Issuer, the Collateral Manager and the Preference Security Paying Agent of written certifications from the transferor in the form provided in the Preference Security Paying Agency Agreement to the effect that, among other things, such transfer is being made (i) to a Person (A)(I) whom the transferor reasonably believes is a Qualified Institutional Buyer (in the case of a transferee acquiring Restricted Preference Securities), purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A or (II) that is an Accredited Investor in a transaction exempt from the registration requirements of the Securities Act (and, if requested by the Issuer, upon

85

delivery of an opinion of counsel in a form satisfactory to the Issuer and such certifications and other information as the Issuer may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act) and (B) in either case, that is a Qualified Purchaser or (ii) to a Person that is not a U.S. Person acquiring Regulation S Definitive Preference Securities in an offshore transaction (within the meaning of Regulation S) pursuant to Regulation S, and, in each case, in accordance with any applicable securities laws of any state of the United States or any other jurisdiction and from the transferee in the form provided for in the Preference Security Paying Agency Agreement to the effect that, among other things, the transferee (a) in the case of a transferee acquiring Restricted Preference Securities, (1) is a Qualified Institutional Buyer or an Accredited Investor, (2) is a Qualified Purchaser and (3) is not a Flow-Through Investment Vehicle (other than a Qualifying Investment Vehicle) and (b) in the case of a transferee acquiring Regulation S Definitive Preference Securities, is not a U.S. Person. (j) Definitive Preference Securities and Restricted Preference Securities may be exchanged or transferred in whole or in part so long as the transferor (if the transferor is not transferring all of it Preference Securities) and the transferee will each hold the required minimum number of Preference Securities by surrendering such Definitive Preference Securities or Restricted Preference Securities, as the case may be, at the office of the Preference Security Paying Agent with a written instrument of transfer (in the case of a transfer) or a written request for exchange (in the case of an exchange) as provided in the Preference Security Paying Agency Agreement. With respect to any transfer of a portion of Definitive Preference Securities or Restricted Preference Securities, the transferor will be entitled to receive, at any aforesaid office, new Definitive Preference Securities or Restricted Preference Securities, as the case may be, representing the number of Preference Securities retained by the transferor after giving effect to such transfer. Definitive Preference Securities and Restricted Preference Securities issued upon any such exchange or transfer will be made available at the office of the Preference Security Paying Agent. (ii) The Preference Security Paying Agency Agreement provides that if, notwithstanding the restrictions on transfer contained therein, the Issuer determines that (i) any registered holder of a Restricted Preference Security is not both (a) a Qualified Institutional Buyer or an Accredited Investor and (b) a Qualified Purchaser or (ii) any beneficial owner of a Regulation S Preference Security is a U.S. Person (within the meaning of Regulation S), then the Issuer shall require, by notice to such holder, that such holder sell all of its right, title and interest to such Restricted Preference Security or Regulation S Preference Security. A holder of a Regulation S Global Preference Security that is a Benefit Plan Investor or a Controlling Person, or any holder of a Preference Security that represented that it was not a Benefit Plan Investor or a Controlling Person but actually is or has become a Benefit Plan Investor or a Controlling Person, also shall be required to sell its interest in the Preference Securities. See "Risk FactorsIssuer May Cause a Transfer of Securities" and "Transfer RestrictionsCertain Transfers Void." No transfer of Preference Securities will be effective, and neither the Issuer nor the Security Registrar will recognize any such transfer if, after giving effect to such transfer, 25% or more of the Preference Securities would be held by Benefit Plan Investors as defined in the Plan Asset Regulations of the United States Department of Labor, 29 C.F.R. Section 2510.3-101(f) (disregarding Preference Securities held by Persons other than Benefit Plan Investors who have discretionary authority or control with respect to the assets of the Issuer, or who provide investment advice for a fee, direct or indirect, with respect to such assets, or any affiliates of such Persons). In addition, each owner of a beneficial interest in a Regulation S Global Preference Security will be required to execute and deliver to the Issuer and the Preference Security Paying

(iii)

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Agent a letter in the form attached as Exhibit A hereto to the effect that such owner (i) will not transfer such interest except in compliance with the transfer restrictions set forth in the Preference Security Paying Agency Agreement (including the requirement that any subsequent transferee execute and deliver such letter as a condition to any subsequent transfer) and (ii) is not a Benefit Plan Investor or Controlling Person. (iv) The Security Registrar will effect exchanges and transfers of Preference Securities. In addition, the Security Registrar will keep in the Security Register records of the ownership, exchange and transfer of the Preference Securities. The Preference Securities will bear the applicable legends regarding the restrictions set forth herein under "Transfer Restrictions." No service charge will be made for exchange or registration of transfer of any Preference Security, but the Preference Security Paying Agent on behalf of the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and expenses of delivery (if any) not made by regular mail. See "Transfer Restrictions." To the extent applicable to the Issuer, the Issuer, together with the Preference Security Paying Agent, may impose additional transfer restrictions to comply with the USA PATRIOT Act and other similar laws and regulations, and each owner of a Preference Security agrees to comply with such transfer restrictions.

(v) (vi)

(vii)

No Gross-Up
All distributions of dividends and return of capital on the Preference Securities will be made without any deduction or withholding for or on account of any tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If the Issuer is so required to deduct or withhold, then the Issuer will instruct the Preference Security Paying Agent to make such deduction or withholding and will pay any such withholding taxes in the country of origin, but will not be obligated to pay any additional amounts in respect of such withholding or deduction.

Additional Issuance of Preference Securities

No additional Preference Securities may be issued without the consent of all of the holders of Preference Securities (including for this purpose Preference Securities held by the Collateral Manager).

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USE OF PROCEEDS The net proceeds from the issuance and sale of the Securities on the Closing Date are expected to be approximately U.S.$722,600,000, which reflects the payment from the gross proceeds of organizational and structuring fees and expenses of the Issuers (including the legal fees and expenses of counsel to the Issuers, the Initial Purchaser, the Hedge Counterparty, the Collateral Manager and the Trustee and the fees of the Rating Agencies), the expenses of offering the Securities (including fees payable to the Initial Purchaser in connection with the sale of the Securities), any initial payment by the Issuer under the Closing Date Interest Rate Cap Agreement, and the initial deposit into the Expense Account. Such net proceeds will be used by the Issuer on and after the Closing Date to purchase a diversified portfolio of Collateral Debt Securities, including RMBS, CMBS, Collateralized Debt Obligation Securities and other Asset-Backed Securities, that, in each case, satisfy the investment criteria described herein. On the Closing Date, the Issuer will have purchased (or entered into agreements to purchase for settlement following the Closing Date) Collateral Debt Securities having an aggregate principal balance of not less than U.S.$725,000,000. The Issuer expects that, no later than the Effective Date, the Issuer will have purchased or entered into agreements to purchase Collateral Debt Securities having an aggregate principal balance (together with (i) the aggregate amount of accrued and unpaid interest on all Collateral Debt Securities purchased on the Closing Date or during the Ramp-Up Period with Unused Proceeds, (ii) the aggregate principal balance of all Eligible Investments purchased with Principal Proceeds on deposit in the Collection Account or the Ramp-Up Principal Proceeds Account and (iii) the aggregate amount of all Principal Proceeds distributed on any Payment Date occurring prior to the Effective Date) equal to the Minimum Ramp-Up Amount. Any such proceeds not invested in Collateral Debt Securities or deposited into the Expense Account will be deposited by the Trustee in the Unused Proceeds Account and invested in Eligible Investments pending the use of such proceeds for the purchase of Collateral Debt Securities prior to the Effective Date, as described herein, and, in certain limited circumstances described herein, for the payment of the Notes. See "Security for the Notes."

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RATINGS OF THE NOTES Rating of the Notes It is a condition to the issuance of the Securities that (a) the Class A-1LA Notes be rated "Aaa" by Moody's Investors Service, Inc. ("Moody's") and "AAA" by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's" and, together with Moody's, the "Rating Agencies"), (b) the Class A-1LB Notes be rated "Aaa" by Moody's and "AAA" by Standard & Poor's, (c) the Class A-2L Notes be rated at least "Aa2" by Moody's and at least "AA" by Standard & Poor's, (d) the Class A-3L Notes be rated at least "A2" by Moody's and at least "A" by Standard & Poor's and (e) the Class B-1L Notes be rated at least "Baa2" by Moody's and at least "BBB" by Standard & Poor's. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. In the event that any rating initially assigned to the Notes is subsequently lowered for any reason, no Person is obligated to provide any additional support or credit enhancement with respect to the Notes. There can be no assurance that, if a rating is assigned to the Notes by any other rating agency, such rating will be as high as that assigned by Standard & Poor's and Moody's. The Indenture provides that the Issuer will obtain an annual review of the ratings assigned to each Class of Notes. The failure of Standard & Poor's and Moody's to review or confirm a rating or the withdrawal of a rating does not constitute an Event of Default under the Indenture. To the extent required by applicable stock exchange rules, the Issuer will inform any such exchange on which any of the Notes are listed if any rating assigned by Moody's and Standard & Poor's to such Notes is reduced or withdrawn. The Preference Securities will not be rated by any Rating Agency.

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MATURITY AND PREPAYMENT CONSIDERATIONS The Stated Maturity of each Class of Notes is June 10, 2041, subject to prior redemption under the circumstances described herein. The average life of each Class of Notes is expected to be shorter than the number of years until the Stated Maturity, and the average lives may vary due to various factors. The average life of each Class of Notes, refers to the weighted amount of time that will elapse from the date of delivery of the Notes until each dollar of the principal of such securities will be paid to the investor. The average life of each Class of Notes will be determined by the amount and frequency of principal payments, which in turn are dependent upon, among other things, the amount of sinking fund payments and other payments received at or in advance of the scheduled maturity of the Collateral Debt Securities (whether through sale, maturity, redemption, prepayment, default or other liquidation or disposition). The actual average life and final maturity of each Class of Notes will be affected by the financial condition of the issuers of the underlying Collateral Debt Securities and the characteristics of such securities, including the existence and frequency of exercise of any optional or mandatory redemption features, the prevailing level of interest rates, the redemption price, the actual default rate and the actual level and timing of recoveries on any Defaulted Securities, the frequency of tender or exchange offers for any Collateral Debt Securities. It is expected that a substantial amount (by principal balance) of the Collateral Debt Securities will be subject to mandatory redemption or optional redemption or prepayment by the issuer thereof or obligor thereunder. Any disposition of Collateral Debt Securities will likely change the composition and characteristics of the Collateral Debt Securities included in the Collateral and the rate of payment thereon, and, accordingly, may affect the actual average life of the Notes. See "Security for the Notes Dispositions of Collateral Debt Securities." In addition, the Notes are subject to redemption at the times and under the circumstances described herein, including Optional Redemption, Tax Redemption, Auction Call Redemption, Coverage Failure Redemption and Rating Confirmation Failure Redemption, as described herein. Any such redemption will affect the average lives of the Notes. Under the assumptions identified below, the Class A-1LA Notes are expected to have an average life of approximately 3.74 years and an expected final payment occurring on the Payment Date in December 2011, the Class A-1LB Notes are expected to have an average life of approximately 4.26 years and an expected final payment occurring on the Payment Date in March 2012, the Class A-2L Notes are expected to have an average life of approximately 4.41 years and an expected final payment occurring on the Payment Date in September 2012, the Class A-3L Notes are expected to have an average life of approximately 4.5 years and an expected final payment occurring on the Payment Date in September 2012 and the Class B-1L Notes are expected to have an average life of approximately 3.82 years and an expected final payment occurring on the Payment Date in September 2012. There can be no assurance that the average lives and expected final payment of any Class of Notes will be as set forth above. Prospective investors should make their own determinations of the payments expected to be made in respect of the Notes. The hypothetical scenario used to determine the average lives of the Notes is as follows: (i) approximately U.S.$750,000,000 in aggregate principal amount of various assumed Collateral Debt Securities would be purchased on the Closing Date, and all funds available on the Closing Date would be used for the purchase of Collateral Debt Securities; (ii) 98.73% of the Collateral Debt Securities (by aggregate principal amount) will consist of floating rate securities that will have an initial weighted average margin of approximately 1.78% and 1.27% of the Collateral Debt Securities (by aggregate principal amount) will consist of fixed rate securities that will have a weighted average coupon of approximately 5.0%; (iii) LIBOR (interpolated using a Designated Maturity between four and five months) is assumed to be approximately 5.128% from the Closing Date to the first Payment Date, and LIBOR is assumed to be 3 Month Forward LIBOR thereafter; (iv) from the Closing Date to the first

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Payment Date (to adjust for not being fully invested in Collateral Debt Securities) the weighted average margin is approximately 0.686% over LIBOR; (v) the Collateral Debt Securities have scheduled maturity dates ranging from December 2007 to September 2015, with a weighted average maturity date of June 2012; (vi) no Rating Confirmation Failure Redemption of the Notes is made; (vii) an Optional Redemption occurs on the Payment Date occurring in September 2012, (viii) all Collateral Debt Securities in the portfolio become callable or prepayable on the payment date immediately following the purchase date and are callable at their respective call price; and (ix) all Eligible Investments will bear interest at a rate of LIBOR minus 0.25% per annum. Further, the hypothetical scenario assumes that there are no losses. It is also assumed that the scheduled distributions on the Collateral Debt Securities are timely received and that such distributions are invested at the indicated reinvestment rates until the next Payment Date without compounding. It is assumed that during any period when any of the Coverage Tests are not satisfied, principal payments (or, in the case of the Class A-3L Notes and the Class B-1L Notes, payments of accrued and unpaid interest and then principal) will be made in respect of the Notes to the extent necessary to satisfy the applicable Coverage Test (to the extent funds are available therefor). The Senior Collateral Management Fee and the Subordinated Collateral Management Fee are assumed to be 0.35% per annum in aggregate. Administrative Expenses are assumed to be 0.04% per annum, as a percentage of the Quarterly Asset Amount, subject to a minimum of $200,000 per annum, and the Trustee's fee is assumed to be 0.02% per annum of the Quarterly Asset Amount with respect to each Payment Date. For purposes of calculating the Administrative Expenses, the Trustee fee, the Senior Collateral Management Fee and the Subordinated Collateral Management Fee, the Quarterly Asset Amount on the first calculation date is assumed to be U.S.$750,000,000. It is further assumed that the Closing Date is April 27, 2006. Cash received on or before a Calculation Date is assumed to be available on the following Payment Date. Cash collected after the Calculation Date but before the immediately following Payment Date is assumed to be reinvested in Eligible Investments until the second succeeding Payment Date. With respect to Floating Rate Securities, the accrual date on Collateral Debt Securities is assumed to be the full quarterly period before the Payment Date subsequent to the Closing Date, With respect to any Fixed Rate Securities, the accrual date thereon is assumed to be the full quarterly period before the Payment Date subsequent to the Closing Date. The weighted average lives and expected final payment dates described above are included only for illustrative purposes. The usefulness of these scenarios is limited by, among other things, the predictive value of the underlying assumptions, the uncertain relevance of the assumptions as compared to other factors that have not been identified or taken into account, and assumptions incorporated with respect to the timing of cash flows, prepayments, defaults and recoveries on the Collateral Debt Securities and reinvestment rates. The assumptions are inherently subject to significant economic uncertainties, all of which are impossible to predict and beyond the control of the Issuers. There can be no assurance that any particular performance scenario will be realized, and the performance of the Notes may be materially different from that shown. This scenario is not a projection or forecast and was not prepared with a view to complying with published guidelines of the United States Securities and Exchange Commission or the American Institute of Certified Public Accountants regarding projections or forecasts. Under no circumstances should the inclusion of this information be regarded as a representation, warranty or prediction that this information is accurate, that the underlying assumptions are accurate or appropriate or that the Notes will achieve or are likely to achieve any particular results. There can be no assurance that the actual performance of the Notes will not vary materially from the scenario and assumptions set

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forth herein or otherwise used by a prospective investor. Moreover, to the extent that the individual characteristics of the assumed Collateral Debt Securities used for such purposes differ from the individual characteristics of the actual Collateral Debt Securities purchased on the Closing Date and thereafter, the actual performance of the Notes may differ. Prospective investors should conduct such financial analysis as they deem prudent, which may include the preparation of their own performance scenarios under a range of economic and other assumptions chosen by such prospective investors or their advisers. Each prospective investor must make its own evaluation of the merits and risks of investment in the Notes. See "Risk Factors Nature of Collateral," "Risk FactorsDisposition of Collateral Debt Securities" and "Risk FactorsDefault and Recovery Rates on Collateral Debt Securities."

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THE ISSUERS General The Issuer. The Issuer is a recently formed special purpose vehicle incorporated as an exempted company with limited liability and registered on March 15, 2006 in the Cayman Islands with the registration number 164260. The registered office of the Issuer is at the offices of Maples Finance Limited, P.O. Box 1093 GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands, telephone number 1 (345) 945-7099. The Issuer has no prior operating experience other than in connection with the acquisition of certain Collateral Debt Securities prior to the issuance of the Securities and the engagement of the Collateral Manager and the entering into of arrangements with respect thereto. The Issuer will not have any substantial assets other than the Collateral. As of the Closing Date, the authorized share capital of the Issuer will consist of (a) 250 Ordinary Shares, par value U.S.$1.00 per share (all of which will be issued to, and held in trust for charitable purposes by, Maples Finance Limited, a licensed trust company incorporated in the Cayman Islands (in such capacity, the "Share Trustee"), under the terms of a declaration of trust) and (b) 42,000,000 Preference Securities, par value U.S.$0.001 per share (all of which will be issued on the Closing Date). Clause 3 of The Memorandum of Association of the Issuer sets out the objects of the Issuer, which include the business to be carried out by the Issuer in connection with the Securities. The Co-Issuer. The Co-Issuer is a special purpose vehicle organized as a limited liability company on April 11, 2006 under the laws of the State of Delaware with the registered number 4140431. The registered office of the Co-Issuer is located at c/o National Corporate Research, Ltd., 615 South DuPont Highway, Dover, Delaware 19901, telephone number (800) 483-1140. The independent manager of the Co-Issuer is Donald J. Puglisi and he may be contacted at Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711. The Co-Issuer has no prior operating experience. The Co-Issuer will not have any substantial assets and will not pledge any assets to secure the Notes. The Co-Issuer will not have any interest in the Collateral Debt Securities or other assets held by the Issuer and will have no claim against the Issuer with respect to the Collateral Debt Securities or otherwise. The Notes are obligations of the Issuers, and the Preference Securities are equity in the Issuer. The Notes and the Preference Securities are not obligations of the Trustee, the Share Trustee, the Administrator, the Collateral Administrator, the Preference Security Paying Agent, the Collateral Manager, the Hedge Counterparty, the Initial Purchaser, any of their respective affiliates or any directors or officers of the Issuers. Capitalization The Issuer. The capitalization of the Issuer as of the Closing Date, after giving effect to the issuance of the Securities and the Ordinary Shares of the Issuer (the "Ordinary Shares") but before deducting expenses of the Offering and organizational expenses of the Issuers, is expected to be as set forth in the following table: Class A-1LA Notes Class A-1LB Notes Class A-2L Notes Class A-3L Notes Class B-1L Notes Total Debt U.S.$ 450,000,000 U.S.$ 105,000,000 U.S.$ 80,000,000 U.S.$ 40,000,000 U.S.$ 33,000,000 U.S.$ 708,000,000

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Ordinary Shares Preference Securities Total Equity Total Capitalization

(i)

U.S.$ 250 U.S.$ 42,000,000 (i) U.S.$ 42,000,250 U.S.$ 750,000,250

Aggregate notional amount, which may exceed the proceeds to the Issuer from the sale of the Preference Securities.

The Issuer will not have any material assets other than the Collateral. The Co-Issuer. The Co-Issuer will be capitalized only to the extent of its U.S.$250 undivided limited liability company interest, will have no assets other than the proceeds from the sale of its interests to the Issuer, it will not pledge any assets to secure the Notes, and it will have no debt other than as Co-Issuer of the Notes. As of the Closing Date and after giving effect to the issuance of the undivided limited liability company interest to the Issuer, the Co-Issuer will have authorized and issued an undivided limited liability company interest of U.S.$250. The Issuer will have a capital account of U.S.$250 in the CoIssuer representing all of the capital of the Co-Issuer. The Co-Issuer has agreed to co-issue the Notes as an accommodation to the Issuer, and the Co-Issuer is receiving no remuneration for so acting. Because the Co-Issuer will have no assets and no rights in the proceeds of this Offering or the Collateral, the holders of the Notes will not be able to enforce the Notes against any assets of the Co-Issuer. The holders of the Notes must rely on the Collateral held by the Issuer and pledged to the Trustee for payment of such Notes, in accordance with the Priority of Payments. Business The Issuer. The Issuer Charter sets out the objects of the Issuer. The Indenture provides that the activities of the Issuer are limited to (1) acquisition and disposition of, and investment in, Collateral Debt Securities, Equity Securities and Eligible Investments, (2) the entering into of, and the performance of its obligations under, the Indenture, the Closing Date Interest Rate Cap Agreement, the Collateral Management Agreement, the Collateral Administration Agreement, the Securities Purchase Agreement and the Preference Security Paying Agency Agreement, (3) the issuance and sale of the Securities, (4) the pledge of the Collateral as security for the Issuer's obligations in respect of the Notes and otherwise for the benefit of the Secured Parties, (5) ownership and management of the Co-Issuer and (6) other activities incidental to the foregoing. The Issuer has no employees and no subsidiaries other than the Co-Issuer. The Co-Issuer will not undertake any business other than the issuance of the Notes. Maples Finance Limited will act as the administrator (in such capacity, the "Administrator") of the Issuer. The office of the Administrator will serve as the general business office of the Issuer. Through this office and pursuant to the terms of an agreement by and between the Administrator and the Issuer, as modified and supplemented and in effect from time to time (the "Administration Agreement"), the Administrator will perform various management and administrative functions on behalf of the Issuer, including communications with the general public and the provision of certain clerical, administrative and other services until termination of the Administration Agreement. In consideration of the foregoing, the Administrator will receive various fees and other charges payable by the Issuer at rates provided for in the Administration Agreement and will be reimbursed for expenses. The Issuer will also provide certain indemnities to the Administrator in connection with the performance of such services. The activities of the Administrator under the Administration Agreement will be subject to the overview of the Board of Directors of the Issuer. The directors of the Issuer are Guy Major and Carlos Farjallah, each

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of whom is an officer of the Administrator and each of whose offices are at Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands. The Administration Agreement may be terminated by either the Issuer or the Administrator upon 3 months' written notice (or 14 days' written notice upon the occurrence of certain events), in which case a replacement Administrator would be appointed. The Issuer will be entitled to change its jurisdiction of incorporation from the Cayman Islands to any other jurisdiction reasonably selected by the Issuer, and the Co-Issuer will be entitled to change its jurisdiction of organization from Delaware to any other jurisdiction reasonably selected by the Co-Issuer, so long as the conditions set forth in the Indenture are satisfied, including that (i) such change is not disadvantageous in any material respect to the holders of the Securities and (ii) written notice of such change will have been given by the Issuer or the Co-Issuer, as applicable, to the Trustee, the holders of the Securities, the Rating Agencies, and the Collateral Manager. The Issuer is not required by Cayman Islands law, and the Issuer does not intend, to prepare or publish annual reports and accounts. The Co-Issuer is not required by Delaware State law, and the Co-Issuer does not intend, to prepare or publish annual reports and accounts. The Indenture, however, requires the Issuer to provide the Trustee with written confirmation, on an annual basis, that to the best of the Issuer's knowledge following review of the activities for the prior year, no Default, as such term is defined in the Indenture, or other matter required to be brought to the Trustee's attention has occurred or, if one has, specifying the same. The Co-Issuer. The Co-Issuer has no employees and no subsidiaries. The Co-Issuer will not undertake any business other than the issuance of the Notes. The Co-Issuer will not have any interest in the Collateral Debt Securities or other assets held by the Issuer and will not have any claim against the Issuer in respect of the Collateral Debt Securities or otherwise. The Co-Issuer will be entitled to change its jurisdiction of organization from Delaware to any other jurisdiction reasonably selected by the Co-Issuer, so long as the conditions set forth in the Indenture are satisfied, including that (i) such change is not disadvantageous in any material respect to the holders of the Securities and (ii) written notice of such change will have been given by the Co-Issuer to the Trustee, the holders of the Securities, the Rating Agencies, and the Collateral Manager. The Co-Issuer is not required by Delaware State law, and the Co-Issuer does not intend, to prepare or publish annual reports and accounts.

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SECURITY FOR THE NOTES General The Collateral securing the Notes will consist of: (i) the Collateral Debt Securities and Equity Securities; (ii) the rights of the Issuer under the Closing Date Interest Rate Cap Agreement; (iii) amounts on deposit in the Payment Account, the Interest Collection Account, the Principal Collection Account, the Unused Proceeds Account, the Expense Account and the Ramp-Up Principal Proceeds Account and Eligible Investments purchased with funds on deposit in such accounts; (iv) the rights of the Issuer, if any, to amounts in the Hedge Counterparty Collateral Account (subject to the right of the Hedge Counterparty); (v) the rights of the Issuer under the Collateral Management Agreement, the Collateral Administration Agreement, the Securities Purchase Agreement and the Subscription Agreements; (vi) all cash delivered to the Trustee (directly or through a securities intermediary); and (vii) all proceeds, accessions, profits, income benefits, substitutions and replacements, whether voluntary or involuntary, of and to any of the assets of the Issuer described in the foregoing (collectively, the "Collateral"). The Collateral Debt Securities purchased by the Issuer on the Closing Date will be purchased from a portfolio of Collateral Debt Securities held by the Seller, pursuant to a warehousing agreement between the Seller and the Collateral Manager. Some of the Collateral Debt Securities subject to such warehousing agreement may have been originally acquired by the Seller in connection with its underwriting or placement thereof upon issuance thereof or from the Collateral Manager or one of its Affiliates. The Issuer will purchase Collateral Debt Securities from the Initial Purchaser or its affiliates (including, without limitation, the Seller) only to the extent that the Collateral Manager determines that such purchases are consistent with the objectives of the Issuer and the restrictions contained in the Indenture, the Collateral Management Agreement and applicable law. In any event, the purchases of Collateral Debt Securities from the Seller on the Closing Date will be at their original cost of purchase by the Seller under such warehousing agreement plus accrued but unpaid interest from the date of such original purchase, adjusted for interest rate hedging losses or gains with respect thereto. Neither the Collateral Manager nor the Seller obtained bids from other dealers on each such Collateral Debt Security in order to confirm that such purchase price is equal to the market value of such Collateral Debt Securities. Ramp-Up Period The Issuer expects that, on the Closing Date, the Issuer will purchase with the net proceeds of the Securities (or enter into binding commitments to purchase) Collateral Debt Securities with an aggregate principal balance of at least U.S.$725,000,000. An investor in the Securities may request (subsequent to the Effective Date) from the Collateral Manager, the list of Collateral Debt Securities which the Issuer has purchased as of the Effective Date and which the Issuer has committed to purchase as of the Effective Date. A list of Collateral Debt Securities that the Issuer expects to acquire (or has committed to acquire) on the Closing Date is attached as Schedule A to this Offering Circular. The Issuer also expects that, on or before the Closing Date, the Issuer will enter into the Closing Date Interest Rate Cap Agreement. Any net proceeds of the offering of the Securities not applied to the purchase of Collateral Debt Securities or the Closing Date Interest Rate Cap Agreement will be deposited in the Unused Proceeds Account and invested in Eligible Investments at the written direction of the Collateral Manager pending investment in Collateral Debt Securities. During the Ramp-Up Period, the Issuer will purchase or enter into agreements to purchase the remainder of the Collateral Debt Securities, subject to certain restrictions set forth in the Indenture. Cash on deposit in the Unused Proceeds Account and in the Ramp-Up Principal Proceeds Account may be used during the Ramp-Up Period to purchase Collateral Debt Securities on behalf of the Issuer. While purchasing

96

Collateral Debt Securities during the Ramp-Up Period, the Collateral Manager will use reasonable commercial efforts in making such purchases such that the Concentration Limitations and the Collateral Quality Tests will be satisfied on the Effective Date. The failure to satisfy the Concentration Limitations or the Collateral Quality Tests on the Effective Date will not result in an event of default under the Indenture but will adversely affect the Issuer's ability to obtain a Rating Confirmation. The "Ramp-Up Period" will be the period from (and including) the Closing Date to (but excluding) the date (such date, the "Effective Date") which is the earlier to occur of (a) 90 days following the Closing Date, or such later date (no later than 120 days following the Closing Date) as to which the Collateral Manager may, in a written notice to the Trustee and the Issuer and subject to satisfaction of the Rating Condition, defer such date and (b) the date on which the Collateral Manager, on behalf of the Issuer, notifies the Trustee that the Issuer has purchased or entered into binding commitments to purchase Collateral Debt Securities with an aggregate principal balance, together with (i) the aggregate amount of accrued and unpaid interest on all Collateral Debt Securities purchased on the Closing Date or during the Ramp-Up Period if such accrued interest was purchased with Unused Proceeds, (ii) the aggregate principal balance of all Eligible Investments purchased with Principal Proceeds on deposit in the Collection Account or the Ramp-Up Principal Proceeds Account and (iii) the aggregate amount of all Principal Proceeds distributed on any Payment Date occurring prior to the Effective Date, of at least U.S.$750,000,000 (the "Minimum RampUp Amount"). The Issuer will notify each Rating Agency in writing of the occurrence of the Effective Date within seven Business Days after the Effective Date occurs and request confirmation that such Rating Agency has not reduced or withdrawn the ratings assigned by it on the Closing Date to the Notes; provided that if the Effective Date occurs on the Closing Date, no further action by the Issuer shall be required in connection with the Effective Date under the Indenture. The Collateral Manager, on behalf of the Issuer, is required to certify to the Trustee and each Rating Agency that, on the Effective Date, the Collateral Quality Tests, the Coverage Tests and the Concentration Limitations are satisfied. If the Collateral Manager determines that on the Effective Date any of the Collateral Quality Tests, the Coverage Tests or the Concentration Limitations will not be satisfied, (i) the Collateral Manager, on behalf of the Issuer, will provide Moody's and Standard & Poor's with a Compliance Plan for the Issuer to comply with such tests or limitations and (ii) the Issuer will be prohibited from purchasing (or committing to purchase) additional Collateral Debt Securities (unless each such test subsequently is satisfied, or such Compliance Plan satisfies the Rating Condition with respect to Moody's and Standard & Poor's, or the Collateral Manager, on behalf of the Issuer, subsequently takes such other action to satisfy the Rating Condition with respect to Moody's and Standard & Poor's, with respect to satisfying such tests and limitations). Such prohibition will not restrict the Issuer's purchase of Collateral Debt Securities which the Issuer had committed to purchase prior to such prohibition. In such event, the Collateral Manager will give written notice to the Trustee, the Preference Securityholders, the Initial Purchaser and the Noteholders that the Issuer is prohibited from purchasing additional Collateral Debt Securities. In the event of a Rating Confirmation Failure, the Issuer will be required to effect a Rating Confirmation Failure Redemption of the Notes as described under "Description of the NotesMandatory Redemption" and "Priority of Payments." Any amount on deposit in the Unused Proceeds Account on the first Determination Date after a Rating Confirmation has been obtained (other than investment earnings treated as Interest Proceeds and amounts required to satisfy commitments to purchase Collateral Debt Securities made during the Ramp-Up Period or to be used pursuant to a Compliance Plan) will be transferred to the Payment Account and treated as Principal Proceeds on the first Payment Date thereafter.

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Notwithstanding the foregoing provisions, if an Event of Default shall have occurred and be continuing, no Collateral Debt Security may be acquired unless it was the subject of a commitment entered into by the Issuer prior to the occurrence of such Event of Default. See "Risk FactorsPurchase of Collateral Debt Securities." No Reinvestment After the Ramp-Up Period After the Ramp-Up Period, the Issuer will not invest Unused Proceeds or reinvest Principal Proceeds, except in accordance with a Compliance Plan or to complete purchases which the Issuer committed to make during the Ramp-Up Period. Principal Proceeds received after the Ramp-up Period will be distributed in accordance with the priorities described herein under "Description of the NotesPriority of PaymentsPrincipal Proceeds" and "Payments upon Redemption or Following an Acceleration". Collateral Debt Securities A security or other obligation will be eligible for purchase by the Issuer (each such security, a "Collateral Debt Security") if, at the time the Issuer committed to purchase such security or obligation, such security or obligation is an Asset-Backed Security which also satisfies the criteria in the Indenture, including, among other things, each of the following criteria: Jurisdiction of Issuer Dollar denominated Fixed principal amount (1) it is an Asset-Backed Security issued by an obligor or issuer organized or incorporated under the laws of the United States or a state thereof or an Eligible SPV Jurisdiction; such security is denominated and payable only in U.S. Dollars and is not convertible into, or payable in, any currency other than U.S. Dollars; such security requires the payment of a fixed amount of principal in cash no later than such security's stated maturity or termination date (subject to earlier amortization or sinking fund payments) and its terms do not permit amortization prior to the stated maturity or termination date at an amount less than par; (A) such security has a Moody's Rating of at least "Baa3" and a Standard & Poor's Rating of at least "BBB-"; provided that up to 20.0% of the Net Outstanding Portfolio Collateral Balance may be comprised of Collateral Debt Securities that have a Moody's Rating below "Baa3" or a Standard & Poor's Rating below "BBB-" but which did not have (on the date on which the Issuer committed to purchase the security) a Moody's Rating below "Ba2" or a Standard & Poor's Rating below "BB" and (B) the Standard & Poor's Rating does not include the subscript "p," "pi," "q," "r" or "t" unless the Rating Condition is satisfied with respect to Standard & Poor's; such security is not a Defaulted Security or a Credit Risk Security;

(2) (3)

Rating

(4)

No Defaulted Securities or Credit Risk Securities

(5)

98

Not subject to an Offer Margin stock

(6) (7)

such security is not the subject of an Offer and has not been called for redemption; such security is not, and any Equity Security acquired in connection with such security is not, and does not provide for conversion into, margin stock; it is not a security that by the terms of its Underlying Instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity; it is not a loan, a loan participation or a participation interest or an interest in a lease agreement that has the general characteristics of a loan for withholding tax purposes and under which the obligor has the right of setoff and it is not a security that is subject to a securities lending arrangement; it is not a security pursuant to which the Issuer is required by the Underlying Instruments to make any payment or advance after such acquisition by the Issuer to the issuer thereof; if such security is a PIK Bond, such security is not a Deferred Interest PIK Bond and at the time of its purchase by the Issuer, interest is not being deferred or capitalized thereon; such security is not a REIT Debt Security, a Manufactured Housing Security, an Aircraft Lease Security, an Aerospace and Defense Security, a Car Rental Receivable Security, an Equipment Leasing Security, a Home Improvement Loan Security, a Monoline Guaranteed Security, a Multiline Guaranteed Security, a Subprime Automobile Security, a Timeshare Security, a Structured Settlement Security secured with future legal fees, a Catastrophe Bond, a Tobacco Settlement Security, a Money Management Security, an Inverse Floating Rate Security, an Equipment Trust Certificate Security, an Entertainment Security, a Franchise Loan, a Net Interest Margin Security, an Oil and Gas Security, a Project Finance Security, a Range Floating Rate Security, a Stadium Receivables Security, a Future Flow Security, a CMBS Credit Tenant Lease Security, a CMBS Single Property Security, a Mutual Fund Security, a Chassis Leasing Security, a Container Leasing Security, a Corporate Guaranteed Security, a Floorplan Receivable Security, a Natural Resource Security, a Recreational Vehicle Security, a Healthcare Security, a Lottery Receivable Security, a Restaurant and Food Services Security, or a Tax Lien Security (each such security, an "Excluded ABS Type"); such security is not issued by an entity the affairs or investments of which are managed by the Collateral Manager or an Affiliate thereof;

No conversion

(8)

Loans

(9)

No future advances PIK Bond

(10)

(11)

Excluded ABS Types

(12)

Not Managed by the Collateral Manager

(13)

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No Foreign Exchange Controls; No Substantial NonCredit-Related Risk; No Debtorin-Possession Financings; No Corporate Debt Securities Investment Company Act Principal Only Securities and Zero Coupon Bonds Pledge to Trustee Subject to UCC

(14)

such security is not (A) a security issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of Dollars to make when due the scheduled payments of principal of and interest on such security; (B) a security whose timely repayment is subject to substantial non-credit-related risk as reasonably determined by the Collateral Manager; (C) a financing by a debtor-inpossession in any insolvency proceeding (except for a financing by a bankruptcy remote vehicle established by a debtor-in-possession which issues Asset-Backed Securities which would otherwise satisfy the definition of a Collateral Debt Security); or (D) a Corporate Debt Security; the ownership of such security will not require either of the Issuers or the pool of Collateral to register or to be registered as an "investment company" under the Investment Company Act; such security is not a Principal Only Security or a Zero Coupon Bond;

(15)

(16)

(17) (18)

the Underlying Instruments pursuant to which such security was issued permit the Issuer to purchase it and pledge it to the Trustee; such security is of a type subject to Article 8 or 9 of the Uniform Commercial Code as in effect in the state of New York, as amended from time to time; it is not an obligation that (i) was incurred in connection with a merger, acquisition, consolidation or sale of all or substantially all of the assets of a Person or similar transaction and (ii) by its terms is required to be repaid within one year of the incurrence thereof with proceeds from additional borrowings or other refinancing; it is not an Equity Security; it is Registered; the Issuer will receive payments 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; the acquisition (including the manner of acquisition), ownership, enforcement and disposition of such security will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. Federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer's jurisdiction of incorporation;

Mergers, Acquisitions, Consolidations; Short-Term Debt Equity Securities Registration No Withholding

(19)

(20) (21) (22)

Does Not Subject Issuer to Tax on a Net Income Basis

(23)

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ERISA

(24)

such security is not a security that, pursuant to 29 C.F.R. Section 2510.3 101, (x) would be treated as an equity interest in an entity and (y) if held by an employee benefit plan subject to ERISA, would cause such employee benefit plan to be treated as owning an undivided interest in each of the underlying assets of such entity for purposes of ERISA; such security provides for periodic payments of interest in cash no less frequently than annually;

Interest Payments Not Less Frequently than Annually Specified Type No Interest Only Securities No Synthetic Securities Interest Payments Not Less Frequently than Semiannually No Downgrades

(25)

(26) (27) (28) (29)

such security is a Specified Type; such security is not an Interest Only Security; such security is not a Synthetic Security; such security provides for periodic payments of interest in cash no less frequently than semiannually; and

(30)

such security has not been downgraded by either Moody's or Standard & Poor's prior to its acquisition by the Issuer; and at the time of its acquisition by the Issuer such security has not been placed on credit watch with negative implications by Moody's or Standard & Poor's.

Asset-Backed Securities Most of the Collateral Debt Securities will consist of Asset-Backed Securities of the following specified types (each a "Specified Type"): Automobile Securities, Collateralized Debt Obligation Securities, CMBS Conduit Securities, CMBS Large Loan Securities (other than CMBS Single Property Securities), Credit Card Securities, Prime RMBS Securities, Mid-Prime RMBS Securities, Small Business Loan Securities, Student Loan Securities, Sub-Prime RMBS Securities and any other type of Asset-Backed Security that is not an Excluded ABS Type. There are many different varieties of Asset-Backed Securities, often customized to the terms and characteristics of the underlying collateral. The term "Asset-Backed Securities" is generally used to refer to structured securities in which repayment relies upon the cash flow stream generated by the underlying collateral which consists of assets such as credit card receivables, home equity loans, leases or commercial mortgage loans originated by banks, credit card companies or other providers of credit or other financial assets. Asset-Backed Securities generally include one or more credit enhancements, which are designed to raise the overall credit quality of the security above that of the underlying collateral. Asset-Backed Securities carry coupons that can be fixed or floating. Pricing is typically designed to mirror the coupon characteristics of the loans being securitized. The spread will vary depending on the credit quality of the underlying collateral, the degree and nature of credit enhancement and the degree of variability in the cash flows emanating from the securitized loans.

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An Asset-Backed Security is created by the sale of assets or collateral to a conduit or other issuer, which becomes the legal issuer of the Asset-Backed Securities. The issuer may be located in the United States or any Eligible SPV Jurisdiction. The securitization conduit or issuer is generally a bankruptcy-remote vehicle such as a grantor trust or a special-purpose entity. The sponsor or originator of the collateral usually establishes the issuer. Each Asset-Backed Security has a servicer or similar Person (often the originator of the collateral) that is responsible for collecting the cash flows generated by the securitized assetsprincipal, interest and fees net of losses and any servicing costs as well as other expensesand for passing them along to the investors in accordance with the terms of the securities. The servicer or similar Person processes the payments and administers the borrower accounts in the pool. 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. 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 AssetBacked Securities are issued, with the senior class having a priority claim on the cash flows from the underlying pool of assets. The subordinated class must absorb credit losses on the collateral before losses can be charged to the senior portion. Because the senior class has this priority claim, cash flows from the underlying pool of assets must first satisfy the requirements of the senior class. Only after these requirements have been met will the cash flows be directed to service the subordinated class. Asset-Backed Securities also use various forms of credit enhancements, including third-party credit enhancements, recourse provisions, overcollateralization and various covenants. Third-party credit enhancements include standby letters of credit, collateral or pool insurance, or surety bonds from third parties. Recourse provisions are guarantees that require the originator or other party to cover any losses up to a contractually agreed-upon amount. Overcollateralization is another form of credit enhancement that covers a predetermined amount of potential credit losses. It occurs when the value of the underlying assets exceeds the face value of the securities. A similar form of credit enhancement is the cash-collateral account, which is established when a third party deposits cash into a pledged account. An investment banking firm or other organization generally serves as an underwriter or placement agent for AssetBacked Securities. In addition, for some asset-backed issues, a credit-rating agency will analyze the policies and operations of the originator and servicer, as well as the structure, underlying pool of assets, expected cash flows and other attributes of the securities. Before assigning a rating to the issue, the rating agency will also assess the extent of loss protection provided to investors by the credit enhancements associated with the issue. Although the basic elements of all 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 paid to investors, how credit losses affect the issuer and the return to investors, whether collateral represents a fixed set of specific assets or accounts, whether the underlying loans are revolving or closed-end, under what terms (including maturity of the asset-backed instrument) any remaining balance in the accounts may revert to the issuing company and the extent to which the issuing company (the actual source of the collateral assets) is obligated to provide support to the trust/conduit or to the investors. Further issues may arise based on discretionary behavior of the sponsor within the terms of the securitization agreement, such as voluntary buybacks from, or contributions to, the underlying pool of loans when credit losses rise. A bank or other issuer may play more than one role in the securitization process. A sponsor and/or its affiliates can simultaneously serve as originator of loans, servicer, administrator, underwriter, provider of liquidity and credit enhancer. Sponsors or their affiliates typically receive a fee for each element of the transaction they undertake. Institutions acquiring Asset-Backed Securities should recognize that the

102

multiplicity of roles that may be played by a single firmwithin a single securitization or across a number of themmeans that credit and operational risk can accumulate into significant concentrations with respect to one or a small number of firms. The loans that form the pool of collateral for the Asset-Backed Securities may have varying contractual maturities and may or may not represent a heterogeneous pool of borrowers. Unlike a mortgage passthrough instrument, the trustee does not need to take physical possession of any account documents to perfect a security interest in the receivables under the Uniform Commercial Code. The repayment stream on installment loans is fairly predictable, since it is primarily determined by a contractual amortization schedule. Early repayment on these instruments can occur for a number of reasons, with most tied to the disposition of the underlying collateral (for example, in the case of Asset-Backed Securities backed by automobile loans, the sale of the vehicles). Interest is typically passed through to security holders at a rate that is slightly below the weighted average coupon of the loan pool, allowing for servicing and other expenses as well as credit losses. Unlike closed-end installment loans, revolving credit receivables, such as credit card loans, involve greater uncertainty about future cash flows. Accounts included in the securitization pool may have balances that grow or decline over the life of the Asset-Backed Securities. Accordingly, at maturity of the Asset-Backed Securities, any remaining balances generally revert to the originator. During the term of the Asset-Backed Securities, the originator may be required to sell additional receivables to the pool to maintain a minimum dollar amount of collateral if accountholders pay down their balances in advance of predetermined rates. Credit card securitizations are typically structured to incorporate two phases in the life cycle of the collateral: an initial phase during which the principal amount of the securities remains constant and an amortization phase during which investors are paid off. A specific period of time is assigned to each phase. Typically, a specific pool of accounts is identified in the securitization documents, and these specifications may include not only the initial pool of loans but a portfolio from which new accounts may be selected. Typically, a specific pool of accounts is identified in the securitization documents, and these specifications may include not only the initial pool of loans but also a portfolio from which new accounts may be contributed. The spread on Asset-Backed Securities will vary depending on the credit quality of the underlying collateral, the degree and nature of credit enhancement and the degree of variability in the cash flows emanating from the securitized loans. RMBS. Most of the Collateral Debt Securities acquired by the Issuer are expected to consist of Prime RMBS Securities, Mid-Prime RMBS Securities and Sub-Prime RMBS Securities ("RMBS") meeting the eligibility criteria described herein. The collateral underlying RMBS generally consists of a large, diversified pool of mortgage loans secured by one- to four-family residential properties. The residential mortgage loans themselves may earn interest at fixed, floating or hybrid rates, and provide for full amortization, negative amortization or partial amortization of principal with a balloon payment at maturity. RMBS may have structural characteristics that distinguish them from other Asset-Backed Securities. The rate of interest payable on RMBS 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.

103

RMBS transactions may provide that the resulting interest shortfalls be applied to reduce the entitlement of security holders to payment of such amounts. Furthermore, such reduction in entitlement to interest payments may be allocated on a pro rata basis among all classes of securities, irrespective of their relative seniority. A number of transactions are structured without overcollateralization. If the interest rate payable on the securities is capped at the coupon on the mortgage loan pool, there will not be any excess spread available to cover losses. The sole source of credit support available to a class of security holders is provided by subordination of more junior classes of securities. Principal on the securities will be written down by losses on the mortgage loan pool, in inverse order of priority. Writedown of the principal balance of a class of securities reduces the amount of interest that would otherwise have been payable to such class at the applicable coupon. In addition, underlying mortgage loans may be segregated into two or more mortgage loan subpools, each of which provides funds for payment of one or more designated classes of securities. These classes may not be fully cross-collateralized. As a result, higher losses and delinquencies experienced by a mortgage loan subpool may have a disproportionate effect on certain classes of securities, although the total underlying mortgage loan pool may be performing within expectations. RMBS may be 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 return of interest and principal may be assessed as a credit matter. However, security holders 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 security holders may be removal of the servicer of the mortgage loans. Local and national economic and demographic factors will impact prepayment rates on residential mortgage loans. Declining interest rates, job transfers and changes in housing needs may result in increased prepayments resulting from loan refinancing or from sale of the underlying mortgaged property. Increased interest rates and unemployment may increase default rates. Decreases in real estate values will result in increases in losses realized on foreclosure on the mortgaged properties following such defaults. Uninsurable natural disasters, such as earthquakes, hurricanes, and floods may also increase delinquencies and defaults and, ultimately, losses realized on foreclosure on the underlying mortgaged property. Residential mortgage loan pools with high concentrations in areas impacted by demographic shifts, economic changes and natural disasters will be disproportionately affected by resulting delinquencies, prepayments and losses. The subprime mortgage pools backing Sub-Prime RMBS Securities are more likely to be affected by such delinquencies, prepayments and losses. Political events can also affect the performance of a residential mortgage loan pool. Military action by the United States in Iraq and other regions will affect the impact of the Relief Act on interest payable on a pool of residential mortgage loans. Terrorist attacks in the United States may result in Federal agencies and servicers deferring, reducing or forgiving payments or delaying foreclosure proceedings with respect to mortgagors adversely affected by possible future events. Certain interest rate features of many mortgage loans may increase credit, liquidity and interest rate risk with respect to RMBS transactions. Mortgage loans may be structured with balloon payments, which increase the likelihood of default by the borrower at maturity. A number of mortgage loans convert from fixed to floating rates after a fixed period of time or may, at the option of the borrower, be converted to another rate. In addition, floating rate mortgage loans may be priced off of a wide variety of interest rates, which make it difficult to predict expected future interest on a mortgage loan portfolio. Certain

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mortgage loans contain negative amortization provisions which result in capitalization of interest. In certain RMBS transactions, negative amortization of mortgage loans in the underlying mortgage pool will result in an equivalent increase in the principal balance of the RMBS themselves, effectively resulting in capitalization of interest on the RMBS. Some subprime residential mortgage loan transactions include mortgage loans with high loan-to-value ratios and/or junior lien positions, which will affect loss severity on the occurrence of a default. Consumer laws pose additional risks to transactions backed by mortgage loans to borrowers with poor credit ratings. These mortgage loans typically carry higher rates of interest and may be classified as "high cost loans." High cost loans may be subject to certain rules, disclosure requirements and other provisions added to the Federal Truth-in Lending Act by the Home Ownership and Equity Protection Act of 1994 and similar state laws. Other Federal and state laws also regulate disclosure and lending practices with respect to residential mortgage loans. See "Risk FactorsNature of the CollateralAsset-Backed Securities and Mortgage-Backed Securities." Purchasers of high-cost loans, including the issuer of a RMBS, could be liable for all claims and subject to all defenses that the borrower could assert against the originator of the mortgage loan. It is not expected that the RMBS will be guaranteed or insured by any governmental agency or instrumentality or by any other person. Distributions on the RMBS will depend solely upon the amount and timing of payments and other collections on the related underlying mortgage loans. For additional information about RMBS, see "Risk FactorsNature of the CollateralAsset-Backed Securities and Mortgages Backed SecuritiesResidential Mortgage Backed Securities." CMBS. The collateral underlying CMBS generally consists of mortgage loans secured by income producing property, such as multi-family housing or commercial 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 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 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 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. Credit risk relating to commercial mortgagebacked 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. Performance of a commercial mortgage loan depends primarily on the net income generated by the underlying mortgaged property. The market value of a commercial property similarly depends on its income-generating ability. As a result, income generation will affect both the likelihood of default and the severity of losses with respect to a commercial mortgage loan. 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

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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. Property specific issues with respect to the underlying mortgaged property, such as significant government regulation of a particular industry, reliance on franchise, management or operating agreements, transferability on purchase or foreclosure of related valuable assets such as liquor and other licenses and ease of conversion of a commercial property to an alternative use will impact both risk of loss and loss severity with respect to the underlying mortgage loan pool and the CMBS. See "Risk FactorsNature of the CollateralAsset-Backed Securities and Mortgage-Backed Securities Commercial Mortgage-Backed Securities." Collateralized Debt Obligation Securities For information about Collateralized Debt Obligation Securities, see "Risk FactorsNature of the CollateralCollateralized Debt Obligation Securities." The Collateral Quality Tests The Collateral Quality Tests and Concentration Limitations will be used as criteria for purchasing Collateral Debt Securities prior to the Effective Date. The Issuer's failure to satisfy the Collateral Quality Tests and Concentration Limitations will not be a default or Event of Default under the Indenture. Neither the Issuer nor the Collateral Manager will be required to comply with the Collateral Quality Tests and Concentration Limitations after the Effective Date. See "Dispositions of Collateral Debt Securities." The "Collateral Quality Tests" will consist of the Moody's Asset Correlation Test, the Moody's Maximum Rating Distribution Test, the Moody's Minimum Weighted Average Recovery Rate Test, the Weighted Average Coupon Test, the Weighted Average Spread Test, the Weighted Average Life Test and the Standard & Poor's Minimum Weighted Average Recovery Rate Test described below.

Moody's Asset Correlation Test

The "Moody's Asset Correlation Test" will be satisfied on the Effective Date if the Moody's Asset Correlation Factor of the Collateral Debt Securities on such date is equal to or less than 22.50%. The "Moody's Asset Correlation Factor" is a percentage determined in accordance with any of the one or more asset correlation methodologies provided from time to time to the Collateral Manager and the Collateral Administrator by Moody's as selected by the Collateral Manager in its sole discretion.

Moody's Maximum Rating Distribution Test

The "Moody's Maximum Rating Distribution Test" will be satisfied on the Effective Date if the Moody's Rating Distribution of the Collateral Debt Securities as of the Effective Date is equal to or less than 540. The "Moody's Rating Distribution" on the Effective Date will be the number determined by dividing (i) the summation of the series of products obtained for any Collateral Debt Security that is not a Defaulted Security, Equity Security or Deferred Interest PIK Bond, by multiplying (a) the principal balance on the Effective Date of each such Collateral Debt Security by (b) its respective Moody's Rating Factor (determined in accordance with the procedures specified by and available from Moody's and more

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specifically described in the Indenture) on the Effective Date by (ii) the sum of the aggregate principal balance on the Effective Date of all Collateral Debt Securities that are not Defaulted Securities, Equity Securities or Deferred Interest PIK Bonds and rounding the result up to the nearest whole number.

Moody's Minimum Weighted Average Recovery Rate Test

The "Moody's Minimum Weighted Average Recovery Rate Test" will be satisfied on the Effective Date if the Moody's Weighted Average Recovery Rate is greater than or equal to 22.75% on such date. The "Moody's Weighted Average Recovery Rate" is the number obtained, as of the Effective Date, by summing the products obtained by multiplying the principal balance of each Collateral Debt Security, other than a Defaulted Security or a Deferred Interest PIK Bond, by its Applicable Recovery Rate (determined for purposes of this definition pursuant to clause (a) of the definition of "Applicable Recovery Rate"), dividing such sum by the aggregate principal balance of all such Collateral Debt Securities, multiplying the result by 100 and rounding up to the first decimal place. For purposes of the Moody's Weighted Average Recovery Rate, the principal balance of a Defaulted Security or a Deferred Interest PIK Bond will be deemed to be equal to its outstanding principal amount (excluding, with respect to any Deferred Interest PIK Bond, any deferred and capitalized interest thereon).

Weighted Average Coupon Test

The "Weighted Average Coupon Test" will be satisfied on the Effective Date if the Weighted Average Coupon is equal to or greater than 5.00% on such date. The "Weighted Average Coupon" means, as of the Effective Date, the sum (rounded up to the next 0.001%) of (a) the number obtained by (i) summing the products obtained by multiplying (x) the current interest rate on each Collateral Debt Security that is a fixed rate security (other than a Defaulted Security, a Deferred Interest PIK Bond or an Interest-Only Security) by (y) the principal balance of such Collateral Debt Security and (ii) dividing such sum by the aggregate principal balance of all Collateral Debt Securities that are fixed rate securities (excluding all Defaulted Securities and Deferred Interest PIK Bonds) plus (b) if such sum of the numbers obtained pursuant to clause (a) is less than 5.00%, the Spread Excess, if any, as of the Effective Date minus (c) if the Fixed Rate Excess is applied to the calculation of Weighted Average Spread on the Effective Date, the excess of the Weighted Average Coupon (without giving effect to this clause (c)) over 5.00%. For purposes of this definition, (1) a PIK Bond shall be deemed to be a Deferred Interest PIK Bond so long as all interest thereon has been deferred and capitalized for at least one payment date (until payment of interest on such PIK Bond has resumed) and (2) no contingent payment of interest will be included in such calculation.

Weighted Average Spread Test

The "Weighted Average Spread Test" will be satisfied on the Effective Date if the Weighted Average Spread is equal to or greater than 1.70% on such date. The "Weighted Average Spread" is the sum, as of the Effective Date (rounded up to the next 0.001%), of (a) the number obtained by (i) summing the products obtained by multiplying (x) the stated spread above LIBOR at which interest accrues on each Collateral Debt Security that is a floating rate security (other than a Defaulted Security, a Deferred Interest PIK Bond or an Interest-Only Security) as of such date by (y) the principal balance of such Collateral Debt Security as of such date, and (ii) dividing such sum by the aggregate principal balance of all Collateral Debt Securities that are floating rate securities (excluding all Defaulted Securities, Deferred Interest PIK Bonds and Interest-Only Securities) plus (b) if such sum of the numbers obtained pursuant to clause (a) is less than 1.70%, the Fixed Rate Excess, if any,

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as of the Effective Date minus (c) if the Spread Excess is applied to the calculation of Weighted Average Coupon on the Effective Date, the excess of the Weighted Average Spread (without giving effect to this clause (c)) over 1.70%. For purposes of this definition, (1) a PIK Bond shall be deemed to be a Deferred Interest PIK Bond so long as any interest thereon has been deferred and capitalized for at least one payment date (until payment of interest on such PIK Bond has resumed and all capitalized and deferred interest has been paid in accordance with the terms of the Underlying Instruments) and (2) no contingent payment of interest will be included in such calculation.

Weighted Average Life Test

The "Weighted Average Life Test" will be satisfied on the Effective Date if the Weighted Average Life of all Collateral Debt Securities as of the Effective Date is less than or equal to 5.0 years. On the Effective Date with respect to any Collateral Debt Security that is not a Defaulted Security or a Deferred Interest PIK Bond, the "Weighted Average Life" will be the number obtained by (i) summing the products obtained by multiplying (a) the Average Life at such time of each Collateral Debt Security that is not a Defaulted Security or a Deferred Interest PIK Bond by (b) the outstanding principal balance of such Collateral Debt Security and (ii) dividing such sum by the aggregate principal balance at such time of all Collateral Debt Securities that are not Defaulted Securities or Deferred Interest PIK Bonds. On the Effective Date with respect to any Collateral Debt Security, the "Average Life" is the quotient obtained by the Collateral Manager by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from the Effective Date to the respective dates of each successive scheduled or (if not scheduled) expected distribution of principal of such Collateral Debt Security and (b) the respective amounts of principal of such scheduled or expected distributions by (ii) the sum of all successive scheduled and/or expected distributions of principal on such Collateral Debt Security. All calculations with respect to scheduled or expected distributions of principal on the Collateral Debt Securities held by the Issuer, any determination of the Average Life of any Collateral Debt Security, and any determination of the rate at which interest accrues on any Collateral Debt Security, shall be made by the Collateral Manager using the assumptions that (i) no Collateral Debt Security defaults or is sold, (ii) prepayment of any Collateral Debt Security during any month occurs at a rate equal to the average rate of prepayment during the period of six consecutive months immediately preceding the current month (or, with respect to any Collateral Debt Security that has not been outstanding for at least six consecutive calendar months or has been subject to a pre-funding period during any part of the period of six consecutive calendar months immediately preceding the current calendar month, at the rate of prepayment assumed at the time of issuance of such Collateral Debt Security), (iii) any clean-up call with respect to a Collateral Debt Security will be exercised when economic (as determined by the Collateral Manager on behalf of the Issuer) to the person(s) or entity(ies) entitled to exercise such call and (iv) no other optional redemption of any Collateral Debt Security will occur except for those that have actually occurred or as to which irrevocable notice thereof shall have been given. To the extent they are not manifestly in error, any information or report received by the Collateral Manager (other than those prepared by the Collateral Manager) or the Trustee with respect to a Collateral Debt Security may be conclusively relied upon in making such calculations.

Standard & Poor's Minimum Weighted Average Recovery Rate Test

The "Standard & Poor's Minimum Weighted Average Recovery Rate Test" will be satisfied on the Effective Date if the Standard & Poor's Weighted Average Recovery Rate as of such date is greater than or equal to (a) with respect to the Class A-1LA Notes, 30.46%, (b) with respect to the Class A-1LB

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Notes, 30.46%, (c) with respect to the Class A-2L Notes, 35.15%, (d) with respect to the Class A-3L Notes, 40.70% and (e) with respect to the Class B-1L Notes, 47.20%. The "Standard & Poor's Weighted Average Recovery Rate" means, as of the Effective Date, a rate expressed as a percentage equal to the number obtained by (a) summing the products obtained by multiplying the principal balance of each Collateral Debt Security by its Applicable Recovery Rate (determined for purposes of this definition pursuant to clause (b) of the definition of "Applicable Recovery Rate"), (b) dividing such sum by the aggregate principal balance of all such Collateral Debt Securities, (c) multiplying the result by 100 and (d) rounding up to the first decimal place. For this purpose, the principal balance of a Defaulted Security or a Deferred Interest PIK Bond will be deemed to be equal to its Calculation Amount.

Amendments to Collateral Quality Tests

If any of the Rating Agencies changes the method of calculating any of its respective Collateral Quality Tests or if the Collateral Manager reasonably determines that a modification to the method of calculating a Collateral Quality Test should be made, then subject to certain conditions described herein under "Description of the Notes The Indenture Modification of the Indenture," the Issuer may incorporate such changes into the Indenture without the consent of the holders of the Securities (other than the Holders of a majority, by aggregate outstanding principal amount, of the Class A-1LA Notes) and without amending the Indenture. Concentration Limitations The Concentration Limitations will be used primarily as criteria for determining the permitted composition of the portfolio on and prior to the Effective Date and will be considered as one of the criteria for determining whether the Issuer will be able to obtain a Rating Confirmation. The Issuer's failure to satisfy the Concentration Limitations will not be a default or an Event of Default under the Indenture. Neither the Issuer nor the Collateral Manager will be required to comply with the Concentration Limitations after the Effective Date. See "Dispositions of Collateral Debt Securities." The "Concentration Limitations" shall consist of the following: Single Servicer (1) with respect to the Servicer of the security being acquired, (A) the aggregate principal balance of all Collateral Debt Securities serviced by any one Servicer other than Wells Fargo does not exceed 15.0% of the Net Outstanding Portfolio Collateral Balance, (B) the aggregate principal balance of all Collateral Debt Securities serviced by Wells Fargo does not exceed 20.0% of the Net Outstanding Portfolio Collateral Balance and (C) the aggregate principal balance of all Collateral Debt Securities serviced by Servicers ranked as "Weak" by Standard & Poor's or which do not have a servicer ranking from Standard & Poor's does not exceed 7.5%; if such security is a PIK Bond, the aggregate principal balance of all such Collateral Debt Securities does not exceed 5.0% of the Net Outstanding Portfolio Collateral Balance;

PIK Bonds

(2)

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Maximum NonInvestment Grade

(3)

if such Collateral Debt Security has a Moody's Rating below "Baa3" or a Standard & Poor's Rating below "BBB-", the aggregate principal balance of all such Collateral Debt Securities does not exceed 20.0% of the Net Outstanding Portfolio Collateral Balance; if such Collateral Debt Security accrues interest at a fixed rate per annum, the aggregate principal balance of all such Collateral Debt Securities does not exceed 3.0% of the Net Outstanding Portfolio Collateral Balance; the aggregate principal balance of Collateral Debt Securities which accrue interest at a floating rate per annum is equal to at least 97.0% of the Net Outstanding Portfolio Collateral Balance; if the stated final maturity of such Collateral Debt Security occurs later than the date two Business Days prior to the Stated Maturity, (A) the aggregate principal balance of all such Collateral Debt Securities does not exceed 5.0% of the Net Outstanding Portfolio Collateral Balance; provided that no such Collateral Debt Securities have a stated final maturity occurring more than five years after the Stated Maturity of the Notes and (B) the expected maturity of such Collateral Debt Security (based on information available to the Collateral Manager at the time of the commitment to purchase such security) will occur prior to the Stated Maturity of the Notes; (A) if such security is rated from "AAA" to "A-" by Standard & Poor's or has a Moody's Rating from "Aaa" to "A3", not more than 2.0% of the Net Outstanding Portfolio Collateral Balance may consist of securities issued by the issuer thereof, (B) if such security has a Moody's Rating of "Baa1" or "Baa2" or is rated "BBB+" or "BBB" by Standard & Poor's, not more than 1.5% of the Net Outstanding Portfolio Collateral Balance may consist of securities issued by such issuer, (C) if such security has a Moody's Rating of "Baa3" or is rated "BBB-" by Standard & Poor's, not more than 1.3% of the Net Outstanding Portfolio Collateral Balance may consist of securities issued by such issuer and (D) if such security has a Moody's Rating of "Ba1" or lower or is rated "BB+" or lower by Standard & Poor's, not more than 0.90% of the Net Outstanding Portfolio Collateral Balance may consist of securities issued by such issuer; provided that, if the Issuer purchases more than one tranche of Collateral Debt Securities issued by the same issuer and having more than one of the ratings described in clauses (A) through (D) above, then the concentration limit that shall be applicable to that single issuer shall be the highest concentration limit permitted by clauses (A) through (D) above for Collateral Debt Securities of such issuer; provided further that the aggregate of such tranches of Collateral Debt Securities issued by the same issuer having ratings described in each of clauses (A) through (D) above does not exceed the individual concentration limit permitted for securities with the corresponding ratings described in each of clauses (A) through (D) above;

Fixed Rate Securities Floating Rate Securities Maturity Beyond Stated Maturity

(4)

(5)

(6)

Single Issuer

(7)

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Prime RMBS Securities Mid-Prime RMBS Securities Sub-Prime RMBS Securities CMBS; Collateralized Debt Obligation Securities Other ABS Securities Minimum Number of Obligors Payments Less Than Quarterly

(8)

if such Collateral Debt Security is a Prime RMBS Security, the aggregate principal balance of all such Collateral Debt Securities does not exceed 30.0% of the Net Outstanding Portfolio Collateral Balance; if such Collateral Debt Security is a Mid-Prime RMBS Security, the aggregate principal balance of all such Collateral Debt Securities does not exceed 65.0% of the Net Outstanding Portfolio Collateral Balance; if such security is a Sub-Prime RMBS Security, the aggregate principal balance of all such Collateral Debt Securities does not exceed 45.0% of the Net Outstanding Portfolio Collateral Balance; if such security is a CMBS or a Collateralized Debt Obligation Security, the aggregate principal balance of all such Collateral Debt Securities does not exceed 5.0% of the Net Outstanding Portfolio Collateral Balance; if such Collateral Debt Security is an Other ABS Security, the aggregate principal balance of all such Collateral Debt Securities does not exceed 5.0% of the Net Outstanding Portfolio Collateral Balance; the number of obligors with obligations constituting part of the Collateral Debt Securities will not be less than 130 on the Effective Date; and if such Collateral Debt Security provides for periodic payment of interest in cash less frequently than quarterly, the aggregate principal balance of all such Collateral Debt Securities does not exceed 5.0% of the Net Outstanding Portfolio Collateral Balance.

(9)

(10)

(11)

(12)

(13) (14)

Dispositions of Collateral Debt Securities The Collateral Debt Securities may be retired prior to their respective final maturities as a result of, among other things, the existence and frequency of exercise of any optional or mandatory redemption features of such securities. Subject to the terms of the Collateral Management Agreement and the Indenture, the Collateral Manager is also permitted to direct the Trustee to sell at any time (i) Defaulted Securities, (ii) any Equity Securities, (iii) Deferred Interest PIK Bonds and (iv) Written-Down Securities. In addition, subject to the terms of the Collateral Management Agreement and the Indenture, including the restrictions described herein, the Collateral Manager may, at any time, direct the Trustee to dispose of one or more Collateral Debt Securities in cases where (i) a Collateral Debt Security (other than a Defaulted Security), in the Collateral Manager's reasonable business judgment (which judgment shall not be questioned as a result of subsequent events), (a) is likely to decline in credit quality and, with the passage of time, become a Defaulted Security or (b) satisfies the Credit Risk Criteria (a "Credit Risk Security") or (ii) a Collateral Debt Security has, in the Collateral Manager's reasonable business judgment (which shall not be questioned as a result of subsequent events), significantly improved in credit quality at any time since such Collateral Debt Security was acquired by the Issuer or otherwise satisfies the Credit Improved Criteria (a "Credit Improved Security"). In determining whether any Collateral Debt Security is likely to decline in credit quality and, with the passage of time become a Defaulted Security, the Collateral Manager may, in its reasonable business judgment, consider any relevant factor, including (without limitation) whether any Credit Risk Criteria

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exist. Notwithstanding the foregoing, the existence or absence of any of such factors shall not require or prevent the Collateral Manager's determination that any Collateral Debt Security is likely to decline in credit quality and, with the passage of time, become a Defaulted Security. In determining whether any Collateral Debt Security meets the definition of Credit Improved Security, the Collateral Manager may, in its reasonable business judgment, consider any relevant factor, including (without limitation) whether any of the Credit Improved Criteria exist. Notwithstanding the foregoing, the existence or absence of any of such factors shall not require or prevent the Collateral Manager's determination that any Collateral Debt Security has a market price that is greater than the price that is warranted by its terms and credit characteristics. In addition, any Collateral Debt Security may also be sold upon the advice of an opinion of counsel that such Collateral Debt Security is, or may become, subject to a withholding or other similar tax. During any period after the first Due Period, if (i) the rating of the Class A-1L Notes or the Class A-2L Notes has been downgraded by at least one rating sub-category by Moody's (and has not been restored) or (ii) the rating of the Class A-3L Notes or the Class B-1L Notes has been downgraded by at least two rating sub-categories by Moody's (and has not been restored to a rating no more than one rating sub-category below the original rating of such Class of Notes) (each such condition, a "Sale Restriction Condition"), then the Collateral Manager, on behalf of the Issuer, is required to send a notice to the Trustee who shall forward such notice to the Holders of the Notes to the effect that, for so long as the applicable Sale Restriction Condition exists, unless the Holders of at least 50% in aggregate principal amount of the Notes elect to retain the guidelines in effect on the Closing Date for sales of Credit Improved Securities, no Credit Improved Security may be sold unless (A) such security satisfies the Credit Improved Criteria or such other objective criteria as may be agreed upon by the Issuer, the Collateral Manager and Moody's or (B) the Holders of more than 60% in aggregate principal amount of the Notes do not object to the sale of such security within thirty (30) days of the date of such notice. In the event of an Optional Redemption, an Auction Call Redemption or a Tax Redemption of the Notes, the Collateral Manager may direct the Trustee in writing to sell Collateral Debt Securities without regard to the foregoing limitations; provided that (i) the proceeds therefrom will be at least sufficient to pay certain expenses and other amounts and redeem in whole but not in part all Notes to be redeemed simultaneously; and (ii) such proceeds are used to make such a redemption. See "Description of Notes Optional Redemption and Tax Redemption" and "Auction Call Redemption." The Closing Date Interest Rate Cap Agreement The Issuer will on the Closing Date enter into an interest rate protection agreement in the form of an interest rate cap (a "Cap") (such agreement, and any replacement therefor entered into in accordance with the Indenture, the "Closing Date Interest Rate Cap Agreement" with Bear Stearns Capital Markets Inc. (the "Hedge Counterparty"), located at 383 Madison Avenue, New York, N.Y. Pursuant to the Closing Date Interest Rate Cap Agreement, the Issuer will be obligated to make a payment to the Hedge Counterparty on the Closing Date, and the Hedge Counterparty will, beginning on the Payment Date in September 2016, if the Notes have not been redeemed, and continuing until the Payment Date in June, 2021, be obligated to make a floating rate payment to the Issuer equal to the excess of three month LIBOR (as defined in the Closing Date Interest Rate Cap Agreement) over a "strike rate" of 10.0%, with such payment to be calculated based on a notional amount of U.S.$25,000,000. The Closing Date Interest Rate Cap Agreement is intended to protect against increases to the floating rate of interest (LIBOR) payable on the Notes and to reduce in part the Issuer's exposure to such interest rate risk. The Closing Date Interest Rate Cap Agreement will be governed by New York law.

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The Closing Date Interest Rate Cap Agreement will provide that, if the Hedge Rating Determining Party fails to satisfy the Minimum Hedge Counterparty Ratings, then the Issuer shall take such action as is permitted under the Closing Date Interest Rate Cap Agreement to cause such Hedge Counterparty (at its own expense), within 30 days, either (i) to enter into an agreement with the Issuer providing for the posting of collateral, which agreement satisfies the Rating Condition, (ii) to deliver a guarantee of such Hedge Counterparty's obligations under the Closing Date Interest Rate Cap Agreement, (iii) to assign its rights and obligations in and under the Closing Date Interest Rate Cap Agreement to another Hedge Counterparty that has ratings (or for which the Hedge Rating Determining Party has ratings) at least equal to the Minimum Hedge Counterparty Ratings or (iv) to enter into any other arrangement for the benefit of the Issuer that satisfies the Rating Condition. The Closing Date Interest Rate Cap Agreement is expected to provide that, if the ratings of the Hedge Rating Determining Party fail to satisfy the Ratings Maintenance Requirement, then the Issuer shall take such action as is required under the Closing Date Interest Rate Cap Agreement to cause such Hedge Counterparty to assign its rights and obligations in and under the Closing Date Interest Rate Cap Agreement (at the Hedge Counterparty's own expense) to another Hedge Counterparty for which the Hedge Rating Determining Party has ratings at least equal to the Minimum Hedge Counterparty Ratings or enter into such other arrangement with or agreement on behalf of the Issuer that is sufficient to cause the Rating Condition to be satisfied. The Trustee shall deposit all collateral received from the Hedge Counterparty under the Closing Date Interest Rate Cap Agreement in a trust account (each, a "Hedge Counterparty Collateral Account") in the name of the Trustee that will be designated a "Hedge Counterparty Collateral Account," which account will be maintained for the benefit of the Secured Parties; provided that the Hedge Counterparty Collateral Accounts may be sub-accounts of one single Hedge Counterparty Collateral Account. The Closing Date Interest Rate Cap Agreement will be subject to termination by the Hedge Counterparty if certain events described in the Closing Date Interest Rate Cap Agreement occur or upon the earlier to occur of (a) an Event of Default followed by the liquidation of the Collateral in accordance with the Indenture and (b) any Optional Redemption, Auction Call Redemption or Tax Redemption. In addition, subject to the satisfaction of the Rating Condition and with the consent of the Hedge Counterparty, the Collateral Manager (on behalf of the Issuer) may assign all or a portion of the notional amount of the Closing Date Interest Rate Cap Agreement to a third party, and the proceeds of such assignment will be treated as Interest Proceeds. The obligations of the Issuer under the Closing Date Interest Rate Cap Agreement are limited recourse obligations payable solely from the Collateral pursuant to the Priority of Payments. The Issuer may not enter into additional hedge agreements after the Closing Date. The Accounts

Collection Accounts
All distributions on the Collateral Debt Securities and, after the termination of the Ramp-Up Period, any proceeds received from the disposition of any such Collateral Debt Securities, to the extent such distributions or proceeds constitute Interest Proceeds, and any amounts payable to the Issuer by a Hedge Counterparty under the Closing Date Interest Rate Cap Agreement (other than amounts received by the Issuer by reason of an event of default or termination event under the Closing Date Interest Rate Cap Agreement or other comparable event that are required to enter into a replacement therefor) will be remitted to a trust account established and maintained under the Indenture by the Trustee (the "Interest

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Collection Account"). After the termination of the Ramp-Up Period, all distributions on the Collateral Debt Securities and any proceeds received from the disposition of any such Collateral Debt Securities to the extent such distributions or proceeds constitute Principal Proceeds (unless simultaneously applied to the purchase of Eligible Investments) will be remitted to a trust account established and maintained under the Indenture by the Trustee (the "Principal Collection Account" and, together with the Interest Collection Account, the "Collection Accounts"). The Collection Accounts will be maintained for the benefit of the Secured Parties and amounts on deposit therein will be available, together with reinvestment earnings thereon, for application in the order of priority set forth under "Description of the NotesPriority of Payments" and for the acquisition of Collateral Debt Securities under the circumstances and pursuant to the requirements described herein and in the Indenture. The Collection Accounts may contain any number of sub-accounts for the administrative convenience of the Trustee. Amounts received in the Collection Accounts during a Due Period and amounts received in prior Due Periods and retained in the Collection Accounts under the circumstances set forth under "Description of the NotesPriority of Payments" will be invested in Eligible Investments with stated maturities no later than the Business Day immediately preceding the next Payment Date. Each Collection Account is required to remain at all times with a financial institution organized and doing business under the laws of the United States or any State thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by Federal or state authority and having a long-term debt rating of at least "Baa1" by Moody's (and, if rated "Baa1," not be on watch for possible downgrade by Moody's) and at least "BBB+" by Standard & Poor's and a combined capital and surplus in excess of U.S.$ 250,000,000.

Payment Account
On or prior to the Business Day prior to each Payment Date, the Trustee will deposit into a trust account (which may be a sub-account of a single account) established and maintained by the Trustee under the Indenture (the "Payment Account") for the benefit of the Secured Parties all funds in the Collection Accounts required for payments to Noteholders, to deposit Excess Amounts to the Preference Security Payment Account and payments of fees and expenses in accordance with the priority described under "Description of the NotesPriority of Payments." The Payment Account is required to remain at all times with a financial institution organized and doing business under the laws of the United States or any State thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by Federal or state authority and having a long-term debt rating of at least "Baa1" by Moody's (and, if rated "Baa1," not be on watch for possible downgrade by Moody's) and at least "BBB+" by Standard & Poor's and a combined capital and surplus in excess of U.S.$250,000,000.

Unused Proceeds Account

On the Closing Date, the Trustee will deposit into a single, segregated trust account established and maintained by the Trustee under the Indenture (the "Unused Proceeds Account") all Unused Proceeds (other than the organizational and structuring fees and expenses of the Issuers, the expenses of offering the Securities, any payment to the Hedge Counterparty on the Closing Date, and amounts deposited in the Expense Account on such date). The Collateral Manager on behalf of the Issuer may direct the Trustee in writing to invest funds in the Unused Proceeds Account (other than investment earnings treated as Interest Proceeds) in Collateral Debt Securities or Eligible Investments. The Trustee will apply any Unused Proceeds remaining in the Unused Proceeds Account on the first Payment Date following a Rating Confirmation Failure to cure the Rating Confirmation Failure (prior to the application of Interest Proceeds

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and/or Principal Proceeds for such purpose) and will transfer any Unused Proceeds (other than investment earnings treated as Interest Proceeds and amounts required to satisfy commitments to purchase Collateral Debt Securities) remaining in the Unused Proceeds Account after a Rating Confirmation is obtained to the Principal Collection Account for treatment as Principal Proceeds. Interest and other income from such investments will be deposited in the Unused Proceeds Account, any gain realized from such investments will be credited to the Unused Proceeds Account, and any loss resulting from such investments will be charged to the Unused Proceeds Account. Investment earnings on Eligible Investments in the Unused Proceeds Account will be transferred to the Interest Collection Account and treated as Interest Proceeds on each Payment Date. The Unused Proceeds Account is required to remain at all times with a financial institution organized and doing business under the laws of the United States or any State thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by Federal or state authority and having a long-term debt rating of at least "Baa1" by Moody's (and, if rated "Baa1," not be on watch for possible downgrade by Moody's) and at least "BBB+" by Standard & Poor's and a combined capital and surplus in excess of U.S.$250,000,000.

Expense Account
On the Closing Date, after payment of the organizational and structuring fees and expenses of the Issuers (including the legal fees and expenses of counsel to the Issuers, the Initial Purchaser and the Collateral Manager) and the expenses of offering the Securities, approximately U.S.$100,000 from the proceeds of the offering of the Securities will be deposited by the Trustee into a trust account which may be a subaccount of a single account established and maintained by the Trustee under the Indenture (the "Expense Account"). All funds on deposit in the Expense Account will be invested in Eligible Investments as directed in writing by the Collateral Manager. Amounts standing to the credit of the Expense Account may be used to pay administrative expenses and organization fees of the Issuers on any day other than a Payment Date (excluding the Collateral Management Fee, but including other amounts payable by the Issuer to the Collateral Manager under the Collateral Management Agreement or the Indenture). After the Closing Date, additional amounts may be credited to the Expense Account on any Payment Date as described under "Description of the NotesPriority of Payments." The Expense Account is required to remain at all times with a financial institution organized and doing business under the laws of the United States or any State thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by Federal or state authority and having a long-term debt rating of at least "Baa1" by Moody's (and, if rated "Baa1," not be on watch for possible downgrade by Moody's) and at least "BBB+" by Standard & Poor's and a combined capital and surplus in excess of U.S.$ 250,000,000.

Ramp-Up Principal Proceeds Account

On and after the Closing Date and before the termination of the Ramp-Up Period, the Trustee will deposit any Principal Proceeds received during the Ramp-Up Period into a trust account (which may be a subaccount of a single account) established and maintained by the Trustee under the Indenture (which will be designated as the "Ramp-Up Principal Proceeds Account"). Any and all funds at any time on deposit in, or otherwise to the credit of, the Ramp-Up Principal Proceeds Account will be held in trust by the Trustee for the benefit of the Secured Parties. Funds on deposit in the Ramp-Up Principal Proceeds Account will be invested in Eligible Investments that mature on a daily basis. The Collateral Manager on behalf of the Issuer may apply funds in the Ramp-Up Principal Proceeds Account to purchase Collateral Debt Securities designated by the Collateral Manager. All interest and other income from such investments will be deposited in the Ramp-Up Principal Proceeds Account, any gain realized from such

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investments will be credited to the Ramp-Up Principal Proceeds Account, and any loss resulting from such investments will be charged to the Ramp-Up Principal Proceeds Account. Investment earnings on Eligible Investments in the Ramp-Up Principal Proceeds Account as of any Determination Date will be transferred to the Interest Collection Account and treated as Interest Proceeds on the related Payment Date. Any Principal Proceeds on deposit in the Ramp-Up Principal Proceeds Account on the termination of the Ramp-Up Period will be transferred to the Payment Account and treated as Principal Proceeds on the following Payment Date and distributed in accordance with the Indenture. The Ramp-Up Principal Proceeds Account is required to remain at all times with a financial institution organized and doing business under the laws of the United States or any State thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by Federal or state authority and having a long-term debt rating of at least "Baa1" by Moody's (and, if rated "Baa1," not be on watch for possible downgrade by Moody's) and at least "BBB+" by Standard & Poor's and a combined capital and surplus in excess of U.S.$250,000,000.

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THE COLLATERAL MANAGER The information appearing in this section (other than the information contained under the subheading "General") has been prepared by the Collateral Manager and has not been independently verified by the Issuers, the Initial Purchaser, the Trustee or any other Person. Accordingly, the Collateral Manager assumes the responsibility for the accuracy, completeness or applicability of such information. General Certain administrative and advisory functions with respect to the Collateral will be performed by the Collateral Manager under the Collateral Management Agreement to be entered into between the Issuer and the Collateral Manager (the "Collateral Management Agreement"). In accordance with the Collateral Quality Tests and the Coverage Tests and other requirements set forth in the Indenture, and in accordance with restrictions and guidelines in the Collateral Management Agreement, the Collateral Manager will select the portfolio of Collateral Debt Securities and Eligible Investments, and the Collateral Manager will instruct the Trustee with respect to any disposition or tender of a Collateral Debt Security and investment in Eligible Investments. Neither the Initial Purchaser nor any of its affiliates will select any of the Collateral Debt Securities or Eligible Investments to be purchased by the Issuer. Pursuant to the terms of the Collateral Management Agreement, the Collateral Manager will monitor the Collateral Debt Securities and provide the Issuer with certain information, as described below, with respect to the composition of the Collateral Debt Securities and any disposition or tender of a Collateral Debt Security. In addition, pursuant to the terms of the Collateral Administration Agreement (the "Collateral Administration Agreement") among the Issuer, the Collateral Manager and Wells Fargo Bank, National Association, as Collateral Administrator (the "Collateral Administrator"), the Issuer will retain the Collateral Administrator to prepare certain reports with respect to the Collateral Debt Securities. The compensation paid to the Collateral Administrator by the Issuer for such services will be in addition to the fees paid to the Collateral Manager and shall be included in the fees paid to Wells Fargo Bank, National Association, in its capacity as Trustee, and will be treated as an expense of the Issuer under the Indenture and will be subject to the priorities set forth under "Description of the NotesPriority of Payments." The Indenture and the Collateral Management Agreement place significant restrictions on the Collateral Manager's ability to advise the Issuer to buy securities for inclusion in the Collateral and to sell securities from the Collateral, and the Collateral Manager is subject to compliance with such restrictions. Accordingly, during certain periods or in certain specified circumstances, the Issuer may be unable to buy or sell securities or to take other actions that the Collateral Manager might consider in the best interests of the Issuer and the Noteholders. The Collateral Manager and its Affiliates may engage in other business and furnish investment management, advisory and other types of services to other clients the investment policies of which differ from those followed by the Collateral Manager on behalf of the Issuer, as required by the Indenture. The Collateral Manager may make recommendations to or effect transactions for such other clients which may differ from those effected with respect to the Collateral Debt Securities. In addition, the Collateral Manager may, from time to time, cause or direct other funds or accounts managed by the Collateral Manager to buy or sell, or recommend to the account the buying or selling of, securities of the same or a different kind or class of the same issuer, as the Collateral Manager directs be sold or purchased on behalf of the Issuer. See "Risk FactorsCertain Conflicts of InterestConflicts of Interest Involving the Collateral Manager."

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The duties and obligations of the Collateral Manager are solely those of the Collateral Manager and are not guaranteed by any Affiliate of the Collateral Manager. The Securities do not represent an interest in or obligations of, and are not insured or guaranteed by the Collateral Manager or any of its Affiliates. The Collateral Manager and/or certain Affiliates of the Collateral Manager will acquire a portion of the Preference Securities on the Closing Date. The total aggregate amount of such investment is expected to equal approximately 5% of the Preference Securities issued on the Closing Date. Neither the Collateral Manager nor any of its Affiliates is under any obligation to continue to hold or refrain from pledging such Preference Securities. In addition, the Collateral Manager, its Affiliates and accounts for which the Collateral Manager or any Affiliate thereof acts as investment adviser may at times own Notes of one or more Classes. At any given time, the Collateral Manager and its Affiliates will not be entitled to vote the Securities held by any of the Collateral Manager, its Affiliates and accounts or funds for which the Collateral Manager or any Affiliate thereof acts as investment adviser (and for which the Collateral Manager or such Affiliate has discretionary authority) with respect to any assignment or termination of, any of the express rights or obligations of the Collateral Manager under the Collateral Management Agreement or the Indenture (including the exercise of any rights to remove such Collateral Manager or terminate the Collateral Management Agreement), or any amendment or other modification of the Collateral Management Agreement or the Indenture increasing the rights or decreasing the obligations of the Collateral Manager. However, at any given time the Collateral Manager and its Affiliates will be entitled to vote Securities held by them and by such accounts with respect to all other matters. See "Risk FactorsCertain Conflicts of InterestConflicts of Interest Involving the Collateral Manager." ACA Management, L.L.C., ACA Capital Holdings, Inc., ACA Service L.L.C. and Affiliates ACA Management, L.L.C. ("ACA Management"), a Delaware limited liability company formed on May 4, 2001 to provide asset management services to affiliated and non-affiliated investors, will act as collateral manager to the Issuer (in such capacity, together with any successor, the "Collateral Manager"). ACA Management is a wholly-owned subsidiary of ACA Risk Solutions, L.L.C. ("Risk Solutions"), and Risk Solutions is wholly owned by ACA Service L.L.C. ("ACA Services") the holding company for the structured finance businesses of ACA Capital Holdings, Inc. ("ACA Capital Holdings"). ACA Services is wholly-owned by ACA Financial Guaranty Corporation ("ACA Guaranty"), and ACA Guaranty is wholly owned by ACA Holding, L.L.C., a wholly owned subsidiary of ACA Capital Holdings. As Collateral Manager, ACA Management will be responsible for certain investment advisory and administrative functions relating to the Collateral Debt Securities, the Closing Date Interest Rate Cap Agreement, Eligible Investments and other assets included in the Collateral. The offices of ACA Management are located at 140 Broadway, 47th Floor, New York, New York 10005. ACA Services will receive a structuring fee from the Issuer on the Closing Date as compensation for its services to the Issuer performed prior to the Closing Date. The Collateral Manager is registered as an "investment adviser" under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act"). ACA Capital Holdings' investors include Bear Stearns Merchant Banking, AEGON USA, Inc., BankAmerica Investment Corporation, GCC Investments, Inc., Insurance Partners, L.P., Keystone, Inc., Stephens Group, Inc., and Third Avenue Value Fund. ACA Services will assist the Collateral Manager in providing investment advisory and administrative functions relating to the Collateral Debt Securities, the Closing Date Interest Rate Cap Agreement, Eligible Investments and other assets included in the Collateral. The offices of ACA Services are located at 140 Broadway, 47th Floor, New York, New York 10005.

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ACA Guaranty commenced operations in October 1997. ACA Guaranty is licensed to provide financial guaranty insurance in all 50 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico. As of December 31, 2005, ACA Guaranty had, on an unaudited basis, admitted assets of approximately U.S.$595.4 million, total liabilities of approximately U.S.$329.3 million and total statutory capital of approximately U.S.$340.5 million, as determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. Statutory capital consists of policyholders' surplus and statutory contingency reserve. Standard & Poor's has issued financial strength and financial enhancement ratings of "A" for ACA Guaranty. The Standard & Poor's rating reflects Standard & Poor's' current assessment of the creditworthiness of ACA Guaranty and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the Standard & Poor's rating may be obtained only from Standard & Poor's. The Standard & Poor's rating is not a recommendation to buy, sell or hold any securities, and such rating may be subject to revision or withdrawal at any time by Standard & Poor's. ACA Assurance, Ltd. and ACA Solutions, Ltd., each additional wholly-owned subsidiaries of ACA Holding, L.L.C., are Bermuda entities which hold class 3 insurance licenses in Bermuda and are regulated by the Bermuda Monetary Authority. ACA Capital Holdings and its subsidiaries are collectively referred to herein as "ACA Capital." Biographies Set forth below are the professional experiences of certain officers and employees of ACA Capital which are providing services to the Collateral Manager. Such persons may also serve as officers of the Collateral Manager and will provide services to the Collateral Manager in such capacities. Such persons may not necessarily continue to be so employed during the entire term of the Collateral Management Agreement or may not continue to perform services for the Collateral Manager under the Collateral Management Agreement. Bill Tomljanovic is an Executive Vice President and Head of Credit for ACA Capital and President of ACA Management. From 2000 to 2004, Mr. Tomljanovic served as head of Customized Solutions, a previously constructed line of business which included Structured Credit and certain other products, and from April 2004 to February 2006, Mr. Tomljanovic served as head of Structured Finance. Prior to joining ACA Capital, Mr. Tomljanovic was Director for Prudential Securities responsible for originating and structuring CDOs, focusing on various asset classes including credit derivatives, high yield bonds and loans, asset-backed securities and new products. Before joining Prudential Securities, Mr. Tomljanovic worked as an independent consultant to Greenwich Street Capital Partners and Salomon Smith Barney for the creation of a $500 million financial insurance company. From 1990-1999, Mr. Tomljanovic was with Capital Re Corporation holding various senior management positions, including as a Senior Vice President of Mortgage and Financial Lines and Vice President Global Underwriting and Special Projects. He joined Capital Re Corporation as an Assistant Vice President where he developed, constructed and analyzed structured finance transactions and new financial products. Mr. Tomljanovic also served as a Vice President and the Treasurer of Capital Re Corporation responsible for directing corporate finance activities and advising the CEO on strategic investment opportunities and potential acquisitions. Mr. Tomljanovic began his career at Chase Manhattan Bank as a Second Vice President, Corporate Accounting and Analysis/International Department. Mr. Tomljanovic received his Bachelor's degree from Duquesne University and his MBA from Fordham University.

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Joseph M. Pimbley is Executive Vice President for Institutional Risk Management at ACA Capital. Prior to joining ACA Capital, Dr. Pimbley was Senior Vice President, Credit Derivative Product Manager, for the capital markets subsidiary of the Sumitomo Mitsui Banking Corporation. His duties included business development, the construction of models for pricing and risk management, creation of necessary trading and operational systems, and trade execution. Prior to joining Sumitomo Dr. Pimbley served as Senior Risk Manager for GE Capital (at the Financial Guaranty Insurance Company subsidiary) where he was responsible for risk management in the firm's financial services for municipalities. In 1994 he was a senior analyst at Moody's Investors Service responsible for rating and rating research in structured notes, credit derivatives, collateralized loan obligations, special purpose vehicles, and similar "exotic" instruments and structured finance initiatives. From 1993 to 1994 he held the title of assistant vice president at Citibank where he was primarily responsible for computing the credit risk of all types of derivative transactions. Dr. Pimbley began his career as a physicist and electrical engineer at the GE Research & Development Laboratory from 1980 to 1987. In the period spanning 1987 to 1993, Dr. Pimbley served as an assistant professor of (applied) mathematics at Rensselaer Polytechnic Institute (RPI). Dr. Pimbley earned the BS, MS and Ph.D. degrees in theoretical physics from the Rensselaer Polytechnic Institute (RPI). Laura Schwartz is a Senior Managing Director of ACA Capital, responsible for the company's CDO asset management business participating in a variety of asset classes, including ABS, CMBS, RMBS, CDOs, corporate credits and leveraged loans. Ms. Schwartz is also the Chief Operating Officer of ACA Management. Prior to joining ACA Capital, Ms. Schwartz was a director in the Asset Backed Finance Group at Merrill Lynch, where she was responsible for the origination and execution of U.S. sub-prime residential mortgage backed securities and whole loan mortgage pool purchases. Her clients included specialty finance companies, national and regional banks, international mortgage originators, money managers, and internet originators. Ms. Schwartz was previously a director in Merrill Lynch's Global Real Estate Finance Group, where she was responsible for origination and execution of commercial mortgage backed and residential mortgage backed securities outside of the United States with primary focus on Canada and Latin America. Transactions included single property, large loan securitization and seasoned loan portfolio securitizations including the use of derivative contracts such as interest rate, prepayment and credit default swaps. Ms. Schwartz began her career at New York Life Insurance Company as a senior analyst in the Commercial Mortgage Loans Group before becoming real estate vice president in the Mortgage Finance Group. Her last position there was as managing director in the Structured Finance Group, where she was responsible for managing the public and private asset-backed and commercial mortgage backed securities portfolios of New York Life Insurance Company and its managed accounts. Ms. Schwartz received her BA, cum laude, in Political Science from the University of Michigan and her MBA from New York University. She holds a CFA designation. James Rothman is a Senior Managing Director in ACA Capital's Structured Finance Group, heading ACA Capital's structured credit products activities. Prior to his current role, Mr. Rothman developed ACA Capital's senior structured credit business and also served as a credit analyst, covering mortgage and asset-backed securities and corporate credit. From 2000-2001, Mr. Rothman was a Vice President at GE Capital Commercial Finance, responsible for the origination of trade accounts receivable securitization transactions. From 1998-2000, Mr. Rothman was a Director in the ABS Group of Deutsche Bank Securities, responsible for managing key customers and executing securitization transactions in the home equity and recreational vehicle sectors. From 1996-1998, he was a Vice President in PaineWebber's Asset Finance Group, responsible for managing securitized and whole loan transactions in multiple asset classes, including mortgages, home equity loans, subprime auto loans and trade accounts receivable. Prior to joining PaineWebber, Mr. Rothman was Vice President for Chase Manhattan Mortgage Corporation, responsible for managing a variety of structured mortgage transactions involving performing and non-performing residential mortgages. A graduate of the University of Pennsylvania's Wharton

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School with a Bachelor of Science in Economics, Mr. Rothman holds a Masters degree in Public and Private Management from the Yale School of Management. Nora J. Dahlman is a Managing Director and General Counsel for ACA Capital. Prior to joining ACA Capital, Ms. Dahlman was First Vice President and Assistant General Counsel at Ambac providing legal representation with regards to structuring and negotiating asset backed transactions, synthetic lease transactions, MBS transactions and other structured transactions. Prior to joining Ambac, she was a Vice President and Attorney with Credit Lyonnais representing the brokerdealer in high-yield debt offerings, note programs and equity offerings, in addition to representing the commercial bank in securitization transactions, secured and unsecured lending transactions and other financing arrangements. Ms Dahlman has also worked in the capacity of Associate in the finance department of Haythe & Curley and in a similar capacity at Shearman and Stearling and Winthrop, Stimson, Putnam and Roberts where she began her career. Ms. Dahlman is admitted to the bars of the states of New York and Connecticut. Ms. Dahlman received her B.A., cum laude, in Political Science from Gonzaga University, and received her J.D. from Vanderbilt Law School. Hao Wu is Managing Director and Head of Structured Finance Risk and Modeling for ACA Capital. Dr. Wu is responsible for portfolio and credit risk management issues for ACA's proprietary CDO business and the structured credit business. Prior to joining ACA, Dr. Wu was Senior Vice President, Managing Director and Head of Global Structured Product Financial Products for Radian Asset Assurance Inc. At Radian, his mandate was to develop and grow the firm's credit derivatives and synthetic products business. He was instrumental in building a book of business of single tranche CDOs, CDO^2, ABS CDOs and other Credit Default Swap products and developing new products, such as Options on Single Tranche CDOs and First to Default Basket of ABS. He also helped in establishing a U.K broker-dealer subsidiary based in London. Prior to working at Radian, Dr. Wu was senior financial analyst for American International Group, where he was responsible for structuring and executing derivative transactions and analyzing portfolio risk and devising hedging strategies. He was a member of AIG's Derivatives Committee. Dr. Wu received both a Ph.D. in Electrical Engineering and an MBA in Finance from University of Southern California, Los Angeles. He also attended Executive Education Programs at Harvard Business School. Mr. Wu holds CFA designation. Keith Gorman is a Director in the Structured Finance Group of ACA Capital. He is responsible for assisting in residential analysis and portfolio management. Previously, Mr. Gorman was an analyst with Fitch Ratings, working on asset-backed securities including sub-prime mortgage, manufactured housing, and net interest margin transactions. He began his career as an analyst with Lewtan Technologies. Mr. Gorman holds a B.S. as well as an M.A. in Economics from the University of Delaware. Ava Regal is a Vice President and Credit Analyst. She is responsible for student loan and CDO asset classes as well as analysis and credit approval for ACA Capital's asset management activities. Previously, Ms. Regal worked in the Credit Structured Products Group at Gen Re Securities working to expand Gen Re's capabilities into structured finance through proprietary and third party CDOs. Before joining Gen Re, she was an Investment Banking Analyst with Prudential Securities in the CDO Group where her responsibilities included marketing presentations to clients as well as assistance in deal execution.

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Ms. Regal received her Bachelor's degree in Finance from Boston University. Jeffrey Wyner is a Vice President in the Structured Finance Group of ACA Capital. As ACA Capital's commercial real estate specialist, he is responsible for assessment and investment in CMBS, REIT and other real estate related securities for ACA Capital financial products. Prior to joining ACA Capital, Mr. Wyner advised companies acquiring and financing real estate assets and securities. Before forming his advisory firm, Mr. Wyner was a Vice President at Lehman Brothers, Inc. where he provided CMBS deal management for the securitization of more than $15 billion of high yield and large loans. Prior to Lehman Brothers, he was a commercial real estate asset manager with GE Capital and a Senior Financial Analyst for a company of real estate joint venture partnerships held by Olympia & York, Inc. (USA). Mr. Wyner began his career working in architecture/ engineering firms providing urban planning and land development services for projects in the US and overseas. Mr. Wyner received his Bachelors degree in Natural Resources from the University of Michigan and an MBA from the Wharton School, University of Pennsylvania. Barbara Johnston is Operations Manager for the Structured Finance Group of ACA Capital. Ms. Johnston has 24 years of experience as an operations specialist and has recently been assigned as ACA Capital's Compliance Officer where she oversees registration of ACA Capital personnel and monitors all record keeping procedures. Prior to joining ACA Capital, Ms. Johnston was an Operations Manager with REFCO Securities, LLC where she managed over 200 accounts for the S&D Division. Among her duties were ensuring timely settlement of all trades done for the division's clients as well as monitoring all of the cash and securities transactions in the clients' portfolios and ensuring that the accounts were in compliance with all NASD and SEC regulations. Before joining REFCO, Ms. Johnston was an Assistant Vice President with Sandler O'Neill and Partners, LP in the Fixed Income Division where she served as a liaison between the Investment Bank's client base and the firm's Correspondent Clearing agents. Prior to being hired by Sandler O'Neill and Partners, Ms. Johnston was a Correspondent Clearing Administrator with Mabon Securities and an Assistant Manager of Fixed Income Operations with Security Pacific National Trust Company. Tracy Van Voorhis is an Associate in the Structured Finance and Asset Backed Securities Credit Department of ACA Capital. Prior to joining ACA Capital, Ms. Van Voorhis worked at JPMorgan in CDO investor relations and more recently in U.S. asset-backed research covering Home Equity, Autos, Student Loans, and Credit Cards. Ms. Van Voorhis completed her B.S. at Cornell University in April in Applied Resource Managerial Economics. Lucas Westreich is responsible for Execution and Operation functions within the ABS and Corporate areas. Prior to joining ACA Capital, Mr. Westreich was an Economics Research Assistant at Boston University responsible for collecting data on international markets. Before joining the economics department. Mr. Westreich held an internship with a division of Carlin Equities. He was a trading floor assistant where his responsibilities included tracking equity positions and analyzing market trends. Mr. Westreich received both his Bachelor's and Master's degree in Economics from Boston University. He graduated from the combined BA/MA program in four years.

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Thomas Latronica is a Trading Floor Analyst in the Structured Finance and Asset Backed Securities Credit Department of ACA Capital. Prior to joining ACA Capital, Mr. Latronica held an internship with a Connecticut based brokerage firm. Mr. Latronica graduated from Sacred Heart University where he earned his B.S. in Business Administration. Tamika Henderson is a Trading Floor Analyst in the Structured Finance and Asset Backed Securities Credit Department of ACA Capital. Prior to joining ACA Capital, Ms. Henderson held an internship with Prudential and EquiServe. Ms. Henderson graduated with honors from New York University where she earned her B.A. in Business Administration.

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THE COLLATERAL MANAGEMENT AGREEMENT The following is a summary of the Collateral Management Agreement and is qualified in its entirety by reference to the Collateral Management Agreement. A copy of the Collateral Management Agreement may be obtained by prospective purchasers upon request in writing to the Initial Purchaser at the address set forth under "Available Information." ACA Management will act as the Collateral Manager pursuant to the Collateral Management Agreement. All orders for investment transactions on behalf of the Issuer will be placed by ACA Management with broker-dealers and other financial intermediaries that it selects. The Collateral Manager is not obligated to pursue any particular investment strategy or opportunity with respect to the Collateral. The Issuer will not invest in obligations for which ACA Management or any of its affiliates is the ultimate obligor. The Issuer may, however, invest in the obligations of correspondents or customers of ACA Management and its affiliates. The Issuer may also invest in the obligations of the Initial Purchaser, its affiliates or its correspondents and customers. Compensation, Indemnification and Expenses As compensation for its services performed prior to the Closing Date, the Collateral Manager will receive an upfront fee on the Closing Date. Thereafter, as compensation for the performance of its obligations as Collateral Manager under the Collateral Management Agreement, the Collateral Manager will receive a fee, payable in arrears on each Payment Date, equal to 0.20% per annum of the Quarterly Asset Amount (the "Senior Collateral Management Fee"). The Collateral Manager will receive an additional fee, payable in arrears on each Payment Date, equal to 0.15% per annum of the Quarterly Asset Amount (the "Subordinated Collateral Management Fee" and, together with the Senior Collateral Management Fee, the "Collateral Management Fee"). See "Description of the NotesPriority of Payments." In addition, on each Payment Date, the Collateral Manager will be entitled to receive, subject to the Priority of Payments and to the extent of funds available for such purpose, an incentive allocation of (i) on each Payment Date after the first Payment Date until the Class B-1L Notes have been paid in full, up to 10% of Remaining Interest Proceeds pursuant to clause (16) under "Description of the NotesPriority of Payments", (ii) on the first Payment Date and each Payment Date after the Class B-1L Notes have been paid in full (x) 10%, if the IRR Test is not satisfied on such Payment Date or (y) 20%, if the IRR Test is satisfied on such Payment Date, in each case, of the Interest Proceeds remaining after payment of the Current Target Return Payment and any unpaid administrative expenses (including indemnities), and (iii) 20%, if the IRR Test is satisfied on such Payment Date, of any undistributed Total Proceeds remaining after payment in full of the Notes and any accrued and unpaid fees and expenses of the Issuer, in each case as further described herein under "Description of the NotesPriority of Payments" (the "Collateral Manager Incentive Allocation"). The Collateral Management Fee will be payable only to the extent that funds are available for such purpose in accordance with the Priority of Payments. The Collateral Management Fee will be calculated based on the Quarterly Asset Amount as of the beginning of the Due Period preceding the applicable Payment Date. The Senior Collateral Management Fee will be payable from Interest Proceeds prior to any payments on the Securities and, if such amounts are insufficient, from Principal Proceeds prior to any payments on the Securities. The Subordinated Collateral Management Fee will be payable from Interest Proceeds and, if such amounts are insufficient, from Principal Proceeds in accordance with the Priority of Payments. To the extent not paid on any Payment Date when due, any accrued Senior Collateral Management Fee or Subordinated Collateral Management Fee will be deferred and will be payable on subsequent Payment Dates. Any accrued and unpaid Senior Collateral Management Fee or Subordinated Collateral Management Fee that is deferred due to the operation of the Priority of Payments (or at the

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election of the Collateral Manager) will accrue interest for each Interest Period at a rate per annum equal to LIBOR as in effect for such Interest Period. The Collateral Manager may in its sole discretion, three Business Days prior to any Payment Date, waive payment of all or a portion of the Collateral Management Fees payable to it on such Payment Date and direct that such amounts be paid as a distribution of Interest Proceeds on the Preference Securities owned by it or one of its Affiliates. Any Collateral Management Fees so redirected will be paid to the Preference Security Paying Agent for payment of dividends on such Preference Securities at the same priority as such Collateral Management Fees so waived and will not be available for any other purpose. Any Collateral Management Fees so redirected will be deemed paid in full upon application as described above. The Collateral Manager may in its sole discretion three Business Days prior to any Payment Date direct the Issuer and the Trustee that all or a portion of the Collateral Management Fees payable to it on such Payment Date be deferred and be paid as dividends to the other holders of the Preference Securities. Any such deferred Collateral Management Fees shall be paid on the next succeeding Payment Date to the extent funds are available in accordance with the Priority of Payments and shall accrue no interest. In the event that ACA Management resigns or is terminated as Collateral Manager and a successor Collateral Manager is appointed pursuant to the Collateral Management Agreement, ACA Management nonetheless will be entitled to receive payment of all unpaid Collateral Management Fees, including the Senior Collateral Management Fee and the Subordinated Collateral Management Fee, accrued through the effective date of the termination or resignation, to the extent that funds are available for that purpose in accordance with the Priority of Payments and such payments will rank pari passu with the Collateral Management Fees due to the successor Collateral Manager. The Collateral Manager Incentive Allocation will continue to be paid to ACA Management (and not to any successor Collateral Manager) on each Payment Date notwithstanding its termination or resignation as Collateral Manager. The Collateral Manager will be responsible for its own overhead and expenses incurred in the course of performing its obligations under the Collateral Management Agreement; provided that the Collateral Manager will be entitled to reimbursement for certain out-of-pocket expenses (including reasonable attorneys' fees), including expenses and costs incurred in effecting or directing purchases and sales of Collateral Debt Securities and Eligible Investments, negotiating with issuers of Collateral Debt Securities as to proposed modifications or waivers, taking action or advising the Trustee with respect to the Issuer's exercise of any rights or remedies in connection with the Collateral Debt Securities and Eligible Investments, including in connection with an Offer or a default, participating in committees or other groups formed by creditors of an issuer of Collateral Debt Securities, purchasing and maintaining systems to analyze Collateral Debt Securities, including analyzing whether Collateral Debt Securities meet the requirements of the Indenture, preparation of summary reports with respect to meeting the requirements of the Indenture and consulting with and providing any Rating Agency with any information in connection with such Rating Agency's maintenance of the ratings of the Notes. Such expenses will constitute Administrative Expenses and will be paid or reimbursed by the Issuer in accordance with the Priority of Payments. The Collateral Manager will assume no responsibility under the Collateral Management Agreement other than to render the services called for from the Collateral Manager thereunder. The Collateral Manager will exercise the degree of skill and care consistent with industry standards for the management of a portfolio of investments similar to the investments described in this Offering Circular, and no less than that which the Collateral Manager customarily exercises with respect to assets similar in nature and character to assets 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 will agree, in any event, to act

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in a prudent and commercially reasonable manner and in good faith in discharging its duties under the Collateral Management Agreement. The Collateral Manager and its affiliates will not be liable to the Issuers, the Trustee, the Preference Security Paying Agent, the Noteholders, the Preference Securityholders, the Hedge Counterparty, the Initial Purchaser or any of their respective affiliates, partners, shareholders, officers, directors, employees, agents, accountants and attorneys for any losses incurred as a result of the actions taken or recommended by the Collateral Manager under the Collateral Management Agreement or the Indenture, except for losses resulting from the Collateral Manager's bad faith, willful misconduct, fraud or gross negligence. The Collateral Manager and its affiliates and each of their respective employees, agents, accountants and attorneys will be entitled to indemnification by the Issuer for all expenses, losses, damages, liabilities, damages, charges and claims (including attorneys' fees) arising from the Collateral Manager's acts or omissions in the performance of the Collateral Manager's duties except for losses resulting from its bad faith, willful misconduct, fraud or gross negligence in the performance of, or reckless disregard with respect to, the Collateral Manager's obligations. Termination of the Collateral Management Agreement The Collateral Management Agreement may be terminated, and the Collateral Manager may be removed, for cause upon 15 days prior written notice by a vote of the Requisite Noteholders or, except with respect to a termination pursuant to clause (v) below, the holders of 662/3% of the Preference Securities. Collateral Manager Securities will be disregarded and deemed to be not outstanding for this purpose. For purposes of the Collateral Management Agreement, "cause" means any of the following events: (i) the Collateral Manager willfully breaches, or takes any action that it actually knows violates, any provision of the Collateral Management Agreement or any provision of the Indenture applicable to it (not including a willful breach or knowing violation that results from a good faith dispute regarding alternative courses of action or interpretation of instructions); except as provided in clause (i), the Collateral Manager breaches in any material respect any provision of the Collateral Management Agreement or any provision of the Indenture applicable to it and fails to cure such breach within 30 days of becoming aware of, or received notice from the Issuer or the Trustee of such breach, unless, if such failure is not capable of being cured within 30 days but is capable of being cured within 90 days, the Collateral Manager has taken action that the Collateral Manager in good faith believes will remedy, and that does in fact remedy, such failure within 90 days after notice of such failure is given to the Collateral Manager; the Collateral Manager (A) ceases to be able to, or admits in writing its inability to, pay its debts when and as they become due, (B) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or takes advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (C) makes an assignment for the benefit of its creditors, (D) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property or (E) is adjudicated as insolvent or to be liquidated; the occurrence of an act by the Collateral Manager that is determined by a judicial, regulatory or administrative body or arbitrator to constitute fraud or criminal activity in the performance of its obligations under the Collateral Management Agreement or the

(ii)

(iii)

(iv)

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Collateral Manager, or any executive officer of the Collateral Manager who is primarily responsible for the administration of the Collateral, being indicted for a criminal felony offense materially related to the Collateral Manager's advisory services; (v) the occurrence of (i) an Event of Default under the Indenture that results from the breach by the Collateral Manager of its duties under the Collateral Management Agreement or the Indenture other than an Event of Default under the Indenture referred to in clause (v) or clause (vii) of the definition thereof or (ii) an Event of Default under the Indenture referred to in clauses (i) and (ii) of the definition thereof; a failure by the Issuer to maintain the Senior Class A Overcollateralization Ratio on any Measurement Date at an amount greater than or equal to 90% of the amount required to satisfy the Senior Class A Overcollateralization Test; any representation or warranty made by the Collateral Manager in the Collateral Management Agreement or the Indenture is found to be incorrect in any material respect when made and the Collateral Manager fails to cause such representation or warranty to be correct in all material respects within 30 days after either (A) notice of such failure is given to the Collateral Manager or (B) the Collateral Manager notified the Trustee and the Issuer (pursuant to the Collateral Management Agreement) that such representation or warranty is not correct in all material respects; or the Collateral Manager consolidates or amalgamates with, or merges into, or transfers all or substantially all of its assets to, another Person and either (A) at the time of such consolidation, amalgamation, merger or transfer, the resulting, surviving or transferee Person fails to or cannot assume all the obligations of the Collateral Manager under the Collateral Management Agreement or (B) the resulting, surviving or transferee Person lacks the legal capacity to perform the obligations of the Collateral Manager under the Collateral Management Agreement and under the Indenture.

(vi)

(vii)

(viii)

The Collateral Manager shall notify the Issuer and the Trustee promptly upon the Collateral Manager's becoming aware of the occurrence of such event and the Trustee will in turn deliver such notice to the holders of all outstanding Notes and Preference Securities. The Collateral Manager shall have the right to resign and terminate the Collateral Management Agreement upon 90 days' (or such shorter period as agreed by the Collateral Manager and the Issuer) prior written notice to the Issuer and the Trustee. If any change in applicable law or regulation renders the performance by the Collateral Manager of its duties under the Indenture or the Collateral Management Agreement to be a violation of such law or regulation, then the Collateral Manager may resign upon 10 Business Days' notice to the Issuer. The Collateral Management Agreement shall terminate automatically in the event of its assignment by the Collateral Manager in violation of the terms of the Collateral Management Agreement. No termination or resignation of the Collateral Manager will be effective unless a successor has assumed (by execution of a written instrument) all of the Collateral Manager's duties and obligations pursuant to the Collateral Management Agreement. If the Collateral Manager is terminated for "cause" as described in clause (v) of the definition of "cause", then the Requisite Noteholders (excluding Holders of Collateral Manager Securities), within 20 days after notice of termination is given by the Issuer, may designate a successor Collateral Manager, which successor shall be appointed by the Issuer; provided that if no such designation has been made by such 20th day, the successor Collateral Manager shall be appointed pursuant to the next paragraph.

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If the Collateral Manager is terminated for any other reason, or resigns as Collateral Manager (provided that such resignation occurs prior to receipt by the Issuer of a direction to remove the Collateral Manager for "cause" as described in clause (v) of the definition of "cause"), then the Collateral Manager shall be entitled to designate (within 20 days after it receives notice of termination or delivers notice of resignation, or within 10 days after the expiration of the deadline in the prior sentence, whichever is applicable) a successor Collateral Manager in a written notice to the Issuer and the Trustee (which shall promptly deliver a copy of such notice to the holders of each Class of Notes and Preference Securities). Any successor Collateral Manager so designated shall be appointed by the Issuer unless the Requisite Noteholders or a Majority-in-Interest of Preference Securityholders (including Collateral Manager Securities) object in writing within 20 days after notice is given by the Trustee to the Noteholders of the designation of a successor Collateral Manager. If the successor Collateral Manager proposed by the current Collateral Manager is rejected by the Requisite Noteholders or a Majority-in-Interest of Preference Securityholders in accordance with the foregoing (or if the Collateral Manager has not designated a proposed successor by the deadline in the preceding paragraph or has resigned after the Issuer received a direction to terminate the Collateral Manager for cause as described in clause (v) of the definition of "cause"), then the Requisite Noteholders (including Holders of Collateral Manager Securities), may designate a successor Collateral Manager in a written notice to the Issuer and the Trustee (which shall promptly deliver a copy of such notice to the holders of the Securities). Any successor Collateral Manager so designated shall be appointed by the Issuer if the Holders of at least a majority of the aggregate outstanding amount of each Class of Notes and a Majority-in-Interest of Preference Securityholders including, in each case, Collateral Manager Securities, consent to the appointment of such successor Collateral Manager. Any successor Collateral Manager must be ready and able to assume the duties of the Collateral Manager within 50 days of the date of such notice of resignation or removal of the Collateral Manager. If no successor Collateral Manager has been appointed within 50 days of the date of notice of such resignation or removal or an instrument of acceptance by a successor Collateral Manager has not been delivered to the Collateral Manager within 50 days after appointment by the Issuer of the successor Collateral Manager and the notice of such appointment to the holders of the Securities, any of the resigning or removed Collateral Manager, the Issuer or the Requisite Noteholders may petition any court of competent jurisdiction for the appointment of a successor Collateral Manager without the approval of any holder of any Security. Subject to the preceding paragraph, upon any resignation or removal of the Collateral Manager, any successor to the Collateral Manager appointed by the Issuer shall be an institution (i) that has demonstrated an ability to professionally and competently perform duties similar to those imposed upon the Collateral Manager, (ii) that is legally qualified and has the capacity to act as Collateral Manager, (iii) that will not cause the Issuer or the pool of Collateral to become required to register as an "investment company" under the provisions of the Investment Company Act, (iv) that will not cause the Issuer or the Co-Issuer or the pool of Collateral to become subject to net income or withholding tax that would not have been imposed but for such appointment and (v) with respect to the appointment of which the Rating Condition has been satisfied. No compensation payable to a successor from payments on the Collateral will be greater than the compensation which would have been paid to ACA Management under the Collateral Management Agreement (excluding for this purpose the Collateral Manager Incentive Allocation) unless the Requisite Noteholders (in the case of any increase to the Senior Collateral Management Fee only) and a Majority-in-Interest of Preference Securityholders (including, in each case, Collateral Manager Securities) consent to such compensation and unless the Rating Condition is satisfied. Upon expiration of the applicable notice period with respect to termination specified in the Collateral Management Agreement, all authority and power of the Collateral Manager under the Collateral Management Agreement, whether with respect to the Collateral Debt Securities or otherwise, will

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automatically and without further action by any Person pass to and be vested in the successor Collateral Manager. Notwithstanding the foregoing, the outgoing Collateral Manager shall be entitled to any accrued and unpaid Collateral Management Fees earned by it prior to termination or resignation, and ACA Management shall continue to be (and the successor Collateral Manager will not be) entitled to receive the Collateral Manager Incentive Allocation regardless of whether it is terminated or resigns as Collateral Manager. Pursuant to the Indenture, the Trustee is entitled to exercise the rights and remedies of the Issuer under the Collateral Management Agreement (a) upon the occurrence of an Event of Default until such time, if any, as such Event of Default is cured or waived, (b) upon the termination of the Collateral Manager pursuant to the Collateral Management Agreement, or (c) upon a default in the performance, or breach, of any covenant, representation, warranty or other agreement of the Collateral Manager under the Collateral Management Agreement or in any certificate or writing delivered pursuant thereto if (i) Holders of at least 25% in aggregate outstanding principal amount of the Notes of any Class or 25% of the aggregate notional amount of the Preference Securities give notice of such default or breach to the Trustee and the Collateral Manager and (ii) such default or breach (if remediable) continues for a period of 30 days.

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INCOME TAX CONSIDERATIONS CIRCULAR 230 NOTICE. THE FOLLOWING NOTICE IS BASED ON U.S. TREASURY REGULATIONS GOVERNING PRACTICE BEFORE THE INTERNAL REVENUE SERVICE: (1) ANY U.S. FEDERAL TAX ADVICE CONTAINED HEREIN, INCLUDING ANY OPINION 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. FEDERAL TAX PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER; (2) ANY SUCH ADVICE IS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS DESCRIBED HEREIN (OR IN ANY SUCH OPINION OF COUNSEL); AND (3) EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYER'S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. In General The following summary describes the principal U.S. Federal income tax and Cayman Islands tax consequences of the purchase at initial issuance of the Securities and the ownership and disposition of the Securities to holders that hold such Securities, as applicable, as capital assets. For purposes of this section, with respect to each Class of Notes, the first price at which a substantial amount of Notes of such Class is sold to investors is referred to herein as the "Issue Price." The summary does not purport to be a comprehensive description of all tax considerations that may be relevant to a decision to purchase the Securities. In particular, the summary does not address special tax considerations that may apply to certain types of taxpayers, including securities dealers, securities traders who account for their securities on a mark-to-market basis for tax purposes, financial institutions (including banks), tax-exempt investors, insurance companies, regulated investment companies, real estate investment trusts, subsequent purchasers of Securities, persons that own (directly or indirectly) equity interests in holders of Securities and holders that purchase the Notes for prices other than the respective Issue Prices of the Notes. In addition, this summary does not describe any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than the U.S. Federal government and the Cayman Islands. In general, this summary assumes that a holder acquires Securities at original issuance (and in case of the Notes, at the applicable Issue Price) and holds such Securities as a capital asset and not as part of a hedge, a straddle, or a conversion transaction within the meaning of Section 1258 of the Internal Revenue Code of 1986, as amended (the "Code"), a constructive sale transaction within the meaning of Section 1259 of the Code or an integrated transaction. The summary also assumes that the holder uses the U.S. dollar as its functional currency. Moreover, this description does not address the U.S. Federal estate and gift tax or alternative minimum tax consequences of the acquisition, ownership, disposition or retirement of the Securities. The summary is based on United States and Cayman Islands tax laws, regulations, rulings and decisions in effect or available on the date of this Offering Circular. All of the foregoing are subject to change, which change may apply retroactively and could affect the continued validity of this summary. There can be no assurance that the tax consequences of an investment in the Securities will be favorable or that such consequences to a particular investor will be as described herein. As used in this section, the term "U.S. holder" means a beneficial owner of a Security who is (i) a citizen or resident of the United States, (ii) an entity taxable as a corporation for U.S. Federal income tax purposes, which is created or organized in or under the laws of the United States, any state therein or the District of Columbia, (iii) an estate (other than a foreign estate defined in Section 7701(a)(31)(A) of the Code) or (iv) a trust if a court within the United States is able to exercise primary supervision over such trust's administration and one or more U.S. persons have the authority to control all substantial decisions of such trust and certain other trusts that were in existence on August 20, 1996 and that elect to continue

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to be treated as U.S. persons. The term "non-U.S. holder" means a beneficial owner (that is not a passthrough entity) of a Security who is not a U.S. holder (that is not a pass-through entity). U.S. persons and non-U.S. persons who own an interest in a holder which is treated as a pass-through entity under the Code will generally receive the same tax treatment, with respect to the material tax consequences of their indirect ownership of the Securities, as is described herein for direct U.S. holders and non-U.S. holders, respectively. Nonetheless, such persons should consult their tax advisors with respect to their particular circumstances, including for issues related to tax elections and information reporting requirements. THIS SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY, PROSPECTIVE PURCHASERS OF THE SECURITIES SHOULD CONSULT THEIR TAX ADVISORS AS TO THE U.S. FEDERAL INCOME TAX AND CAYMAN ISLANDS TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SECURITIES AND THE POSSIBLE APPLICATION OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS. U.S. Federal Tax Considerations For U.S. Federal income tax purposes, the Issuer, and not the Co-Issuer, will be treated as the issuer of the Notes. Tax Treatment of the Issuer It is intended that the Issuer will be treated as a corporation for U.S. Federal income tax purposes. Schulte Roth & Zabel LLP, special U.S. Federal income tax counsel to the Issuer, will provide the Issuer with an opinion of counsel to the effect that, although there is no direct authority, the Issuer will not be engaged in a trade or business within the United States for Federal income tax purposes, and accordingly, the Issuer will not be subject to Federal income tax in the United States on its net income or to the branch profits tax. This opinion will be based on certain assumptions regarding the Issuer, including the Issuer's and the Collateral Manager's compliance with the Indenture and the Collateral Management Agreement. Prospective investors should be aware that an opinion of counsel is not binding on the U.S. Internal Revenue Service ("IRS") or the courts, and that no ruling will be sought from the IRS regarding the U.S. Federal income tax treatment of the Issuer. Accordingly, there can be no assurance that the IRS or a court will agree with the opinion of Schulte Roth & Zabel LLP, or that there will not be a change in law which may adversely affect the Issuer. If the Issuer should be treated as engaged in a trade or business in the United States, the Issuer would be potentially subject to substantial U.S. Federal income taxes. The imposition of such taxes would materially affect the Issuer's financial ability to make payments of principal of and interest on the Notes or distributions on the Preference Securities. Thus, it is intended that the Issuer will operate in a manner such that it will not be subject to U.S. Federal income tax on its net income and that the Issuer's contemplated activities generally are structured to minimize the risk that it would be found to be engaged in a trade or business in the United States. Although the Issuer is generally not intended to be subject to U.S. Federal income tax on its net income, certain income derived by the Issuer may be subject to withholding taxes imposed by the United States or other countries. It is not expected that the Issuer will derive material amounts of income that would be subject to such withholding taxes. However, payments to the Issuer might become subject to U.S. or other withholding tax due to a change in law or other causes. Payments with respect to Equity Securities (if held by the Issuer) likely will be subject to withholding taxes imposed by the United States or other countries from which such payments are sourced. The imposition of unanticipated withholding taxes or

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tax on the Issuer's net income could materially impair the Issuer's ability to pay principal of and interest on the Notes and dividends or return of capital on the Preference Securities. Tax Treatment of U.S. Holders of the Notes Status of the Notes. Upon the issuance of the Notes, Schulte Roth & Zabel LLP will deliver an opinion that, although there is no direct authority, the Class A-1LA Notes, the Class A-1LB Notes, the Class A-2L Notes, the Class A-3L Notes and the Class B-1L Notes will be characterized as debt for U.S. Federal income tax purposes. Such opinion will assume compliance with the Indenture and other related documents. Investors should be aware that such opinion of counsel is not binding on the IRS or the courts and if any Class of Notes were treated as equity interests in the Issuer, the discussion below (other than making a "qualified electing fund" election and the consequences thereof) with respect to a holder of Preference Securities would generally apply. A U.S. holder of Notes should consult its own tax advisor regarding the possibility of such alternative characterization and the consequences thereof. The Issuer will agree and, by their purchase of the Notes, holders and beneficial owners of the Notes will be deemed to have agreed, to treat the Notes as debt for U.S. Federal income tax purposes. Interest, Discount or Premium on the Notes. In general, a U.S. holder of a debt instrument is required to include payments of qualified stated interest (i.e., interest which is unconditionally payable at least annually at a single fixed rate or at a floating rate that meets certain requirements) received thereon, in accordance with such holder's method of accounting, as ordinary interest income generally from sources outside the United States. If, however, the Issue Price of the debt instrument is less than the "Stated Redemption Price at Maturity" (as defined below) of such debt instrument by more than a de minimis amount, a U.S. holder will be considered to have purchased such debt instrument with original issue discount ("OID"). The "Stated Redemption Price at Maturity" is the sum of all payments to be received on the debt instrument other than payments of qualified stated interest. If a U.S. holder acquires a debt instrument with OID, then, regardless of such holder's method of accounting, the holder will be required to accrue OID on a constant yield basis and include such accruals in gross income without regard to the timing of actual payments. It is not anticipated that the Class A-1LA Notes, the Class A-1LB Notes and the Class A-2L Notes will be issued with OID. Therefore, U.S. holders of the Class A-1LA Notes, the Class A-1LB Notes or the Class A-2L Notes will include stated interest thereon as ordinary interest income generally from sources outside the United States, in accordance with their method of accounting. In the case of the Class A-3L Notes or the Class B-1L Notes, if there is more than a remote likelihood that interest payments will be deferred and not be paid currently on such Class of Notes, all interest payable on such Class of Notes and any discount attributable to the difference between the Issue Price and the stated principal amount of such Notes would be treated as OID and a U.S. holder would be required to include OID in ordinary income on the basis of a constant yield to maturity, whether or not such holder receives a cash payment on any payment date and regardless of such holder's regular method of accounting. The Issuer has not been able to determine that the likelihood of interest deferral on the Class A-3L Notes or the Class B-1L Notes is for this purpose remote. Therefore, if deferral of interest payments on the Class A-3L Notes or the Class B-1L Notes is remote, U.S. holders of such Notes should include stated interest thereon as ordinary interest income generally from sources outside the United States, in accordance with each such holder's method of accounting. If the Issuer in fact does not make a current interest payment on a Class A-3L Note or a Class B-1L Note, the holder must thereafter accrue OID on the principal amount, including any unpaid interest, and on any accrued OID on such Note as ordinary income generally from sources outside the U.S. However, if deferral of interest payments on the Class A-3L Notes or the Class B-1L Notes is not remote, stated interest on those Notes would not be treated as qualified stated interest and therefore would be treated as OID. Because interest payments on a Class A-3L Note or a Class B-1L Note are determined at a floating rate, accrual of any OID would be determined as though stated interest accrued at a

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hypothetical fixed rate equal to the value of the floating rate on the issue date, and OID for each accrual period would be determined on such hypothetical fixed rate debt instrument. A U.S. holder of a Class A3L Note or a Class B-1L Note would then make adjustments to the OID recognized each accrual period if the interest actually payable for the period differs from the interest payable at the hypothetical rate. Accrual of OID, if any, on the Notes may be subject to special rules that require use of a prepayment assumption and apply to debt instruments, the payments on which may be accelerated by reason of prepayments of other obligations securing those instruments. As a result of the complexity of the OID rules, each U.S. holder of a Class A-3L Note or a Class B-1L Note should consult its own tax advisor regarding the impact of the OID rules, if any, on its investment in such Note. In general, if the Issue Price of a Note exceeds the Stated Redemption Price at Maturity of such Note, a U.S. holder will be considered to have purchased such Note at a premium. In this event, a U.S. holder may elect to amortize the amount of such premium, using a constant rate, as an offset to interest income. It is not anticipated that the Notes will be issued at a premium. Sale, Exchange and Retirement of the Notes. In general, a U.S. holder of a Note will have a basis in such Note equal to the cost of such Note to such holder increased by the amount of accrued OID, if any, and reduced by (i) any amortized premium applied to reduce, or allowed as a deduction against, interest on such Note and (ii) any payments other than payments of qualified stated interest on such Note. Upon a sale, exchange or retirement of a Note, a U.S. holder will generally recognize gain or loss equal to the difference between the amount realized on the sale, exchange or retirement (less any accrued interest, which would be taxable as such) and the holder's adjusted tax basis in such Note. Generally, such gain or loss 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. Gain recognized by a U.S. holder on the sale, exchange or retirement of a Note generally will be treated as from sources within the United States. Tax Treatment of U.S. Holders of Preference Securities The following discussion regarding the tax treatment of an investment in Preference Securities is intended to apply to U.S. holders of such Preference Securities. Investment in a Passive Foreign Investment Company. The Preference Securities will constitute equity interests in the Issuer for U.S. Federal income tax purposes. In addition, the Issuer will constitute a "passive foreign investment company" (a "PFIC"). Accordingly, U.S. holders of Preference Securities will be considered U.S. shareholders in a PFIC. In general, to avoid certain adverse tax rules (described below) that apply to deferred income from a PFIC, a U.S. holder may desire to make an election to treat the Issuer as a "qualified electing fund" (a "QEF") with respect to such holder. Generally, a QEF election should be made on or before the due date for filing a U.S. holder's U.S. Federal income tax return for the first taxable year for which such U.S. holder held Preference Securities by filing IRS Form 8621 together with the U.S. holder's U.S. Federal income tax return. An electing U.S. holder will be required to include in gross income such holder's pro rata share of the Issuer's ordinary earnings and to include as long-term capital gain such holder's pro rata share of the Issuer's net capital gain (including gains from sales of securities), whether or not distributed, assuming that the Issuer does not constitute a "controlled foreign corporation" in which the shareholder is a "U.S. Shareholder" (as defined below), as discussed below. A U.S. holder will not be eligible for the preferential income tax rate on qualified dividend income or the dividends received deduction in respect of such income or gain. In addition, any losses of the Issuer in a taxable year will not be available to such U.S. holder. In certain cases in which a QEF does not distribute all of its earnings in a taxable year, U.S. holders of Preference Securities may also be

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permitted to elect generally to defer payment of the taxes on the QEF's undistributed earnings until such amounts are distributed or the Preference Securities are disposed of, subject to an interest charge on the deferred amount. Prospective purchasers of Preference Securities should be aware that some of the Collateral Debt Securities may be purchased by the Issuer with substantial original issue discount. As a result, the Issuer may recognize significant ordinary income from such instruments but the receipt of cash attributable to such income may be deferred, perhaps for a substantial period of time. Thus, absent an election to defer payment of taxes, U.S. holders of Preference Securities that make a QEF election may owe tax on significant amounts of "phantom" income. Moreover, some or all of the income received by the Issuer will be used to pay principal on the Notes and will not be available for distribution to holders of the Preference Securities. Upon request, the Issuer will provide all information that a U.S. holder of Preference Securities making a QEF election with respect to the Issuer is required to obtain for U.S. Federal income tax purposes (e.g., the U.S. holder's pro rata share of ordinary income and net capital gain) and will provide a "PFIC Annual Information Statement" as described in U.S. Treasury Regulations, including all representations and statements required by such statement, and will take other reasonable steps to facilitate such election. If the Issuer invests in the equity of other PFICs, a U.S. holder of Preference Securities would have to make a separate QEF election with respect to any such other PFIC. In such case, the Issuer will provide, to the extent it receives, the information needed for U.S. holders to make such a QEF election. U.S. holders should consult their own tax advisors with respect to the tax consequences of such a situation. If a U.S. holder of Preference Securities does not make a timely QEF election and the PFIC rules are otherwise applicable, a U.S. holder (other than certain U.S. holders that are subject to the rules relating to a "controlled foreign corporation" described below) would be required to report any gain on disposition of any Preference Securities as ordinary income and to compute the tax liability on such gain and certain "excess distributions" as if the items had been earned ratably over each day in the U.S. holder's holding period for the Preference Securities and would be subject to the highest ordinary income tax rate for each prior taxable year in which the items were treated as having been earned, regardless of the rate otherwise applicable to the U.S. holder. Such U.S. holder would also be liable for an additional tax equal to interest on the tax liability attributable to such income allocated to prior years as if such liability had been due with respect to each such prior year. For purposes of these rules, gifts, bequests or exchanges pursuant to corporate reorganizations and use of the Preference Securities as security for a loan may be treated as a taxable disposition. An "excess distribution" is the amount by which distributions during a taxable year in respect of a Preference Security exceed 125 percent of the average amount of distributions in respect thereof during the three preceding taxable years (or, if shorter, the U.S. holder's holding period for the Preference Security). A U.S. holder will not be eligible for the preferential income tax rate on qualified dividend income or the dividend received deduction with respect to distributions made by the Issuer. In addition, a stepped-up basis in the Preference Securities upon the death of an individual U.S. holder may not be available. U.S. HOLDERS OF PREFERENCE SECURITIES SHOULD CONSIDER CAREFULLY WHETHER TO MAKE A QEF ELECTION WITH RESPECT TO THE PREFERENCE SECURITIES AND THE CONSEQUENCES OF NOT MAKING SUCH AN ELECTION. Investment in a Controlled Foreign Corporation. Depending on the degree of ownership of the equity interests in the Issuer by "U.S. Shareholders" (as defined below), the Issuer may constitute a controlled foreign corporation (a "CFC"). In general, a foreign corporation will constitute a CFC if more than 50% of the shares of the corporation, measured by reference to combined voting power or value, are held,

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directly or indirectly, by U.S. Shareholders. A "U.S. Shareholder," for this purpose, is any person that is a U.S. person for U.S. Federal income tax purposes that possesses (actually or constructively) 10% or more of the combined voting power of all classes of shares of a corporation (persons who own interests in a U.S. pass-through entity which is a U.S. Shareholder will also be subject to the CFC rules described below). It is possible that the IRS would assert that the Preference Securities are voting Securities and that U.S. holders possessing 10% or more of the combined voting power of the Preference Securities are U.S. Shareholders for purposes of the CFC rules. If this argument were successful and more than 50% of such interests were held by such U.S. Shareholders, the Issuer would be treated as a CFC. In addition, if any Class of Notes is treated as equity for U.S. Federal income tax purposes, U.S. holders of such Class of Notes could be considered U.S. Shareholders for purposes of this subsection. If the Issuer should constitute a CFC, each U.S. Shareholder of the Issuer would be treated, subject to certain exceptions, as receiving ordinary income at the end of the taxable year of the Issuer in an amount equal to that person's pro rata share of the "subpart F income" and certain other income of the Issuer. Among other items, and subject to certain exceptions, "subpart F income" includes dividends, interest, annuities, gains from the sale of shares and Securities, certain gains from commodities transactions, certain types of insurance income, income from certain notional principal contracts (e.g., swaps and caps) and income from certain transactions with related parties. It is likely that predominantly all of the Issuer's income would be subpart F income. If more than 70% of the Issuer's gross income is subpart F income in any year, 100% of its income in such year would be treated as subpart F income. Prospective purchasers of the Preference Securities should be aware that such income of the Issuer may significantly exceed the Issuer's distributions on the Preference Securities for one or more periods, and that a U.S. Shareholder may owe tax on significant amounts of "phantom income." If the Issuer should be treated as a CFC, a U.S. Shareholder of the Issuer would be taxable on the subpart F income of the Issuer under the rules applicable to a CFC described in the preceding paragraph and not under the PFIC rules previously described. As a result, to the extent subpart F income of the Issuer includes net capital gains, such gains will be treated as ordinary income of the U.S. Shareholder under the CFC rules, notwithstanding the fact that the character of such gains generally would otherwise be preserved under the PFIC rules if a QEF election had been made. Also, the PFIC rule permitting the deferral of tax on undistributed earnings would not apply. Distributions on Preference Securities. The treatment of actual distributions of cash on the Preference Securities, in very general terms, will vary depending on whether a U.S. holder has made a timely QEF election as described above. See "Investment in a Passive Foreign Investment Company." If a timely QEF election has been made, distributions should be allocated first to amounts previously taxed pursuant to the QEF election (or pursuant to the CFC rules, if applicable) and to this extent would not be taxable to U.S. holders. Distributions in excess of such previously taxed amounts and any remaining amounts of earnings and profits will generally be treated first as a nontaxable return of capital to the extent of the holder's tax basis in the Preference Securities and then as capital gain. In the event that a U.S. holder does not make a timely QEF election, then, except to the extent that distributions may be attributable to amounts previously taxed pursuant to the CFC rules, some or all of any distributions with respect to the Preference Securities may constitute excess distributions, taxable as previously described. See "Investment in a Passive Foreign Investment Company." Distributions on the Preference Securities will not constitute "qualified dividend income" eligible, in the case of individuals, for a reduced rate of tax and will not be eligible for the dividends received deduction allowed to corporations.

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Sale, Redemption or Other Disposition of Preference Securities. In general, a U.S. holder of a Preference Security will recognize gain or loss upon the sale or other disposition of a Preference Security equal to the difference between the amount realized and such holder's adjusted tax basis in the Preference Security. If a U.S. holder has made a timely QEF election as described above, such gain or loss will be long-term capital gain or loss if the U.S. holder held the Preference Securities for more than 12 months at the time of the disposition. Initially, the tax basis of a U.S. holder should equal the amount paid for a Preference Security. Such basis will be increased by amounts taxable to such holder by virtue of a QEF election or the CFC rules and decreased by actual distributions from the Issuer that are deemed to consist of such previously taxed amounts or are treated as nontaxable returns of capital (as described above). If a U.S. holder does not make a timely QEF election as described above, any gain realized on the sale or other disposition of a Preference Security will be subject to an interest charge and taxed as ordinary income under the special tax rules described above. See "Investment in a Passive Foreign Investment Company." If the Issuer is treated as a CFC and a U.S. holder is treated as a "U.S. Shareholder" therein, then any gain realized by such holder upon the disposition of Preference Securities will be treated as ordinary income to the extent of such U.S. Shareholder's share of the current and accumulated earnings and profits of the Issuer. In this respect, earnings and profits would not include any amounts previously taxed pursuant to a timely QEF election or pursuant to the CFC rules. Transfer and Other Reporting Requirements. U.S. holders of the Preference Securities (or other equity for U.S. Federal income tax purposes) will generally be required to report to the IRS on Form 926 certain information relating to such holders' purchase of the Preference Securities at initial issuance. In the event a U.S. holder fails to file any such required form, the U.S. holder could be subject to a penalty equal to 10% of the gross amount paid for the Preference Securities subject to a maximum penalty equal to $100,000 (except in cases of intentional disregard). U.S. holders of Preference Securities are urged to consult with their own tax advisers regarding these reporting requirements and any other reporting requirements, such as an IRS Form 5471, which may apply to such holders. 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 TaxExempt Investor's income from an investment in the Securities generally will not be treated as resulting in UBTI, so long as such investor's acquisition of Securities is not debt-financed. A Tax-Exempt Investor that owns more than 50% of the equity (for U.S. Federal income tax purposes) of the Issuer and also owns Notes treated as debt should consider the application of the special UBTI rules for interest received from controlled entities. Tax-Exempt Investors should consult their own tax advisers regarding an investment in the Securities. Tax Treatment of Non-U.S. Holders of Notes or Preference Securities Subject to the discussion below regarding "backup withholding," a non-U.S. holder of the Securities will be exempt from any U.S. Federal income or withholding taxes with respect to gain derived from the sale, exchange, or redemption of, or any distributions received in respect of, Securities of the Issuer, unless such gain or distributions are effectively connected with a U.S. trade or business of such holder, or, in the case of a gain, such holder is a nonresident alien individual who holds the Securities as a capital asset and who is present in the United States for 183 days or more in the taxable year of the disposition, and certain other conditions are satisfied.

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Information Reporting and Backup Withholding Under certain circumstances, the Code requires information reporting annually to the IRS and to each holder, and "backup withholding" with respect to certain payments made on or with respect to the Securities. These requirements generally do not apply with respect to certain holders, including corporations, tax-exempt organizations, qualified pension and profit sharing trusts, and individual retirement accounts. Backup withholding will apply to a U.S. holder only if the U.S. holder (i) fails to furnish its Taxpayer Identification Number ("TIN"), which for an individual would be his or her Social Security Number, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that it has failed to properly report payments of interest and dividends or (iv) under certain circumstances, fails to certify, under penalty of perjury, that it has furnished a correct TIN and has not been notified by the IRS that it is subject to backup withholding for failure to report interest and dividend payments. The application for exemption is available by providing a properly completed IRS Form W-9. Each U.S. holder agrees that by such holder's or beneficial owner's acceptance of a Security or an interest therein that such holder or beneficial owner will provide (or cause to be provided) to the Issuer (or the Trustee on behalf of the Issuer) or other applicable withholding agent a properly completed IRS Form W-9 signed under penalties of perjury. A non-U.S. holder that provides the applicable IRS Form W-8BEN, IRS Form W-8IMY or other applicable form, together with all appropriate attachments, signed under penalties of perjury, identifying the non-U.S. holder and stating that the non-U.S. holder is not a United States person will not be subject to the IRS reporting requirements relating to U.S. withholding and backup withholding. In addition, IRS Form W-8BEN or other applicable form will be required from the beneficial owners of interests in a nonU.S. holder that is treated as a partnership (or as a trust of certain types) for U.S. Federal income tax purposes. Each non-U.S. holder agrees that by such holder's or beneficial owner's acceptance of a Security or an interest therein that such holder or beneficial owner will provide (or cause to be provided) to the Issuer (or the Trustee on behalf of the Issuer) or other applicable withholding agent a properly completed IRS Form W-8BEN, IRS Form W-8IMY or other applicable form signed under penalties of perjury. The payment of the proceeds on the disposition of a Security by a holder to or through the U.S. office of a broker generally will be subject to information reporting and backup withholding unless the holder either certifies its status as a non-U.S. holder under penalties of perjury on the applicable IRS Form W-8BEN, IRS Form W-8IMY or other applicable form (as described above) or otherwise establishes an exemption. The payment of the proceeds on the disposition of a Security by a non-U.S. holder to or through a nonU.S. office of a non-U.S. broker will not be subject to backup withholding or information reporting unless the non-U.S. broker is a "U.S. Related Person." The payment of proceeds on the disposition of a Security by a non-U.S. holder to or through a non-U.S. office of a U.S. broker or a U.S. Related Person generally will not be subject to backup withholding but will be subject to information reporting unless the holder certifies its status as a non-U.S. holder under penalties of perjury or the broker has certain documentary evidence in its files as to the non-U.S. holder's foreign status and the broker has no actual knowledge to the contrary. For this purpose, a "U.S. Related Person" includes (i) a "controlled foreign corporation" for U.S. Federal income tax purposes, (ii) a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment (or for such part of the period that the broker has been in existence) is derived from activities that are effectively connected with the conduct of a U.S. trade or business or (iii) a foreign partnership if at any time during its tax year one or more of its partners are United States persons who, in the aggregate, hold more than 50% of the income or capital interest of the partnership or if, at any time during its taxable year, the partnership is engaged in the conduct of a U.S. trade or business.

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Backup withholding is not an additional tax and may be refunded (or credited against the holder's U.S. Federal income tax liability, if any); provided that certain required information is furnished. The information reporting requirements may apply regardless of whether withholding is required. Copies of the information returns reporting such interest and withholding also may be made available to the tax authorities in the country in which a non-U.S. holder is a resident under the provisions of an applicable income tax treaty or agreement. Tax Shelter Reporting Requirements Pursuant to Treasury Regulations directed at tax shelter activity, taxpayers are required to disclose to the IRS certain information on IRS Form 8886 if they participate in a "reportable transaction." A transaction may be a "reportable transaction" based upon any of several indicia with respect to a holder, including the existence of significant book-tax differences or the recognition of a loss. A significant penalty will be imposed on taxpayers who participate in a "reportable transaction" and fail to make the required disclosure in tax returns and statements due after October 22, 2004. The penalty is generally $10,000 for natural persons and $50,000 for other persons (increased to $100,000 and $200,000, respectively, if the reportable transaction is a "listed" transaction). Investors should consult their own tax advisors concerning any possible disclosure obligation with respect to their investment in the Issuer and the penalty discussed above. Cayman Islands Tax Considerations This discussion is a general summary of present law, which is subject to prospective and retroactive changes. It is not intended as tax advice, does not consider any investor's particular circumstances and does not consider tax consequences other than those arising under Cayman Islands law. Under existing Cayman Islands laws: (i) Payments in respect of the Securities will not be subject to taxation in the Cayman Islands, no withholding will be required on such payments to any holder of a Security, and gains derived from the sale of Securities will not be subject to Cayman Islands income, capital gains or corporation tax. The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax; No stamp duty is payable in respect of the transfer of the Notes or Preference Securities. However, a stamp duty may be payable if Notes are executed in or brought into the Cayman Islands; and Certificates evidencing the Notes, in registered form, to which title is not transferable by delivery, should not attract Cayman Islands stamp duty. However, an instrument transferring title to a Note, if brought to or executed in the Cayman Islands, would be subject to Cayman Islands stamp duty.

(ii)

(iii)

The Issuer has been incorporated under the laws of the Cayman Islands as an exempted company and, as such, has applied for, and obtained, an undertaking from the Governor In Cabinet of the Cayman Islands substantially in the following form:

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"The Tax Concessions Law (1999 Revision) Undertaking as to Tax Concessions In accordance with Section 6 of The Tax Concessions Law (1999 Revision), the Governor in Cabinet undertakes with: ACA ABS 2006-1, Limited, "the Company" (a) that no Law which is hereafter enacted in the Islands imposing any tax to be levied on profits or income or gains or appreciations shall apply to the Company or its operations; in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable: (i) (ii) on or in respect of the shares, debentures or other obligations of the Company; or by way of the withholding in whole or in part of any relevant payment as defined in Section 6(3) of the Tax Concessions Law (1999 Revision).

(b)

These concessions shall be for a period of TWENTY years from the 28th day of March, 2006. Governor In Cabinet" In the event that Cayman Islands law were to change so that the Issuer were required to withhold tax from payments on the Notes, the Issuer would be responsible for withholding such tax, but would not be responsible to make "gross up" payments to holders of the Notes. The Cayman Islands does not have a double tax treaty arrangement with the U.S. or any other country. All payments in respect of the Notes will be made without withholding or deduction for, or on account of, any present or future taxes, duties or charges of whatever nature unless the Issuer or a Paying Agent is required by applicable law to make any payment in respect of the Notes subject to any withholding or deduction for, or on account of, any present or future taxes, duties or charges of whatever nature. In that event the Issuer or the Paying Agent (as the case may be) shall make such payment after such withholding or deduction has been made and shall account to the relevant authorities for the amount so required to be withheld or deducted. Neither the Issuer nor the Paying Agent will be obliged to make any additional payments to holders of Notes in respect of such withholding or deduction. THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX IMPLICATIONS OF AN INVESTMENT IN NOTES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX IMPLICATIONS OF SUCH INVESTMENT IN LIGHT OF SUCH INVESTOR'S CIRCUMSTANCES.

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ERISA CONSIDERATIONS CIRCULAR 230 NOTICE. THE FOLLOWING NOTICE IS BASED ON U.S. TREASURY REGULATIONS GOVERNING PRACTICE BEFORE THE INTERNAL REVENUE SERVICE: (1) ANY U.S. FEDERAL TAX ADVICE CONTAINED HEREIN, INCLUDING ANY OPINION 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. FEDERAL TAX PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER; (2) ANY SUCH ADVICE IS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS DESCRIBED HEREIN (OR IN ANY SUCH OPINION OF COUNSEL); AND (3) EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYER'S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. The United States Employee Retirement Income Security Act of 1974, as amended ("ERISA") imposes certain duties on persons who are fiduciaries of employee benefit plans (as defined in Section 3(3) of ERISA) and of entities whose underlying assets include assets of employee benefit plans subject to ERISA by reason of such a plan's investment in such entities. These duties include investment prudence and diversification and the requirement that an ERISA covered plan's investments be made in accordance with the documents governing such plan. The prudence of a particular investment must be determined by the responsible fiduciary of an ERISA Plan by taking into account the plan's particular circumstances and liquidity needs and all of the facts and circumstances of the investment, including the availability of a public market for the investment. In addition, certain U.S. Federal, state and local laws impose similar duties on fiduciaries of governmental and/or church plans that are not subject to ERISA. Any fiduciary of an ERISA covered plan, of an entity whose underlying assets include assets of ERISA covered plans by reason of such plan's investment in such entity, or of a governmental or church plan that is subject to fiduciary standards similar to those of ERISA ("plan fiduciary"), that proposes to cause such a plan or entity to purchase Securities should determine whether, under the general fiduciary standards of ERISA or other applicable law, an investment in the Securities is appropriate for such plan or entity. In determining whether a particular investment is appropriate for an ERISA covered plan, U.S. Department of Labor regulations provide that the fiduciaries of an ERISA covered plan must give appropriate consideration to, among other things, the role that the investment plays in the plan's portfolio, taking into consideration whether the investment is designed reasonably to further the plan's purposes, an examination of the risk and return factors, the portfolio's composition with regard to diversification, the liquidity and current return of the total portfolio relative to the anticipated cash flow needs of the ERISA covered plan and the projected return of the total portfolio relative to the plan's funding objectives. Before investing the assets of an ERISA covered plan in Securities, a fiduciary should determine whether such an investment is consistent with the foregoing regulations and its fiduciary responsibilities, including any specific restrictions to which such fiduciary may be subject. ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), impose certain restrictions on (a) employee benefit plans (as defined in Section 3(3) of ERISA) that are subject to Title I of ERISA, (b) plans described in Section 4975(e)(1) of the Code which are subject to the prohibited transaction provisions of Section 4975 of the Code, including individual retirement accounts and certain Keogh plans, (c) any entities whose underlying assets include plan assets by reason of such plan's investment in such entities (each of (a), (b) and (c), a "Plan") and (d) Persons that have certain specified relationships to such Plans ("Parties in Interest" under ERISA and "Disqualified Persons" under the Code). ERISA also imposes certain duties on Persons that are fiduciaries of Plans subject to ERISA, and ERISA and the Code prohibit certain transactions between a Plan and Parties in Interest or Disqualified Persons with respect to such Plan. Violation of these rules may result in the imposition of excise taxes and other penalties and liabilities under ERISA and the Code.

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Governmental plans and certain church plans are generally not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code. However, such plans may be subject to similar rules under state or other Federal law and may also be subject to the prohibited transaction rules of Section 503 of the Code. The Initial Purchaser, the Collateral Manager, the Trustee, the Hedge Counterparty or their respective affiliates may be the sponsor of or investment adviser with respect to one or more Plans. Because such parties may receive certain benefits in connection with the sale of the Securities, the purchase of Securities using the assets of a plan over which any of such parties has investment authority might be deemed to be a violation of the prohibited transaction rules of ERISA and Section 4975 of the Code for which no exemption may be available. Accordingly, the Securities may not be purchased using the assets of any Plan if any of the Initial Purchaser, the Collateral Manager, the Trustee, the Hedge Counterparty or their respective affiliates has investment authority with respect to such assets. If the Notes are acquired by a Plan with respect to which the Initial Purchaser, the Collateral Manager, the Trustee, any holder of Preference Securities or Ordinary Shares or any of their respective affiliates is a Party in Interest or Disqualified Person, such transaction could be deemed to be a direct or indirect violation of the prohibited transaction rules of ERISA and Section 4975 of the Code unless such transaction were subject to one or more statutory or administrative exemptions such as Prohibited Transaction Class Exemption ("PTCE") 90-1, which exempts certain transactions involving insurance company pooled separate accounts; PTCE 95-60, which exempts certain transactions involving insurance company general accounts; PTCE 91-38, which exempts certain transactions involving bank collective investment funds; PTCE 84-14, which exempts certain transactions effected on behalf of a Plan by independent "qualified professional asset managers"; or PTCE 96-23, which exempts certain transactions effected on behalf of a Plan by certain "in-house" asset managers. It should be noted, however, that, even if the conditions specified in one or more of these exemptions are met, the scope of relief provided by these exemptions may not necessarily cover all acts that might be construed as prohibited transactions. The United States Department of Labor, the government agency primarily responsible for administering the ERISA fiduciary rules and the prohibited transaction rules under ERISA and the Code, has issued a regulation (the "Plan Asset Regulation") codified at 29 C.F.R. 2510.3-101, that, under specified circumstances, "looks through" certain types of investment vehicles (such as the Issuer) in which a Plan invests and treats as an "asset" of the Plan each underlying investment made by such investment vehicle. The Plan Asset Regulation provides, however, that if equity participation in any entity by "Benefit Plan Investors" is not significant then the "look-through" rule will not apply to such entity. "Benefit Plan Investors" are defined in the Plan Asset Regulation to include (1) any employee benefit plan (as defined in Section 3(3) of ERISA), whether or not subject to Title I of ERISA, (2) any plan described in Section 4975(e)(1) of the Code, and (3) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity. Equity participation by Benefit Plan Investors in an entity is significant if, immediately after the most recent acquisition of any equity interest in the entity, 25% or more of the value of any class of equity interests in the entity (excluding the value of any interests held by certain persons, other than Benefit Plan Investors, exercising control over the assets of the entity or providing investment advice to the entity for a fee, direct or indirect (such as the Collateral Manager), or any affiliates of such persons (any such person, a "Controlling Person")) is held by Benefit Plan Investors (the "25% Threshold"). For these purposes, an "Equity Interest" is defined as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and that has no substantial equity features. There is little pertinent authority in this area. However, it is not anticipated that the Notes will constitute "equity interests" in the Issuers. However, there can be no assurance that each Class of Notes would be characterized by the United States Department of Labor or others as indebtedness and not as equity

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interests on the date of issuance or at any given time thereafter. In addition, the status of any Class of Notes as indebtedness could be affected, subsequent to their issuance, by certain changes in the structure or financial condition of the Issuer. With respect to the Preference Securities, they are not likely to be treated as indebtedness and are likely to be treated as equity for purposes of the Plan Asset Regulation. Accordingly, for purposes of this offering, the Preference Securities will be treated as equity for purposes of the Plan Asset Regulation. The Issuer intends to restrict the acquisition of Preference Securities by "benefit plan investors" (as defined in 29 C.F.R. Section 2510.3-101(f)(2)), such as a Plan or a governmental or church plan, or an entity whose underlying assets include plan assets of such a plan because of investment by the plan in the entity (each, a "Benefit Plan Investor") to less than 25% of all Preference Securities (excluding from the denominator in such calculation all Preference Securities held by Persons, other than Benefit Plan Investors, who have discretionary authority or control over the Issuer's assets or who provide investment advice to the Issuer for a fee, or any affiliates thereof (a "Controlling Person"), such as any Preference Securities held by affiliates of the Collateral Manager). Each investor in a Preference Security will be required to make certain representations and provide certain information to the Issuer to permit the Issuer to enforce this limitation. Each investor in a Regulation S Global Preference Security will be required to execute and deliver to the Issuer and the Preference Security Paying Agent a letter in the form attached as Exhibit A hereto to the effect that such investor (i) will not transfer such interest except in compliance with the transfer restrictions set forth in the Preference Security Paying Agency Agreement (including the requirement that any subsequent transferee execute and deliver such letter) and (ii) is not a Benefit Plan Investor or Controlling Person. An investor that is, or is acting on behalf of, an employee benefit plan subject to ERISA and/or Section 4975 of the Code will be required to represent and warrant that its investment in the Preference Securities will not result in a non-exempt prohibited transaction under ERISA and/or Section 4975 of the Code (or, in the case of a governmental or church plan, a non-exempt violation of any Similar Law). If for any reason the assets of the Issuer are deemed to be "plan assets" of a Plan subject to Title I of ERISA or Section 4975 of the Code because one or more such Plans is an owner of Preference Securities, certain transactions that either of the Issuers might enter into, or may have entered into, 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. In addition, if the assets of the Issuer are deemed to be "plan assets" of a Plan subject to Title I of ERISA or Section 4975 of the Code, the payment of certain of the fees payable to the Collateral Manager might be considered to be a non-exempt "prohibited transaction" under Section 406 of ERISA or Section 4975 of the Code. Moreover, if the underlying assets of the Issuer were deemed to be assets constituting plan assets, (i) the assets of the Issuer could be subject to ERISA's reporting and disclosure requirements, (ii) a fiduciary causing a Benefit Plan Investor to make an investment in the equity of the Issuer could be deemed to have delegated its responsibility to manage the assets of the Benefit Plan Investor, (iii) various providers of fiduciary or other services to the Issuer, and any other parties with authority or control with respect to the Issuer, could be deemed to be Plan fiduciaries or otherwise Parties in Interest or Disqualified Persons by virtue of their provision of such services, and (iv) it is not clear that Section 404(b) of ERISA, which generally prohibits plan fiduciaries from maintaining the indicia of ownership of assets of plans subject to Title I of ERISA outside the jurisdiction of the district courts of the United States, would be satisfied in all instances. Based on the reasoning of the United States Supreme Court in John Hancock Mutual Life Ins. Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), funds allocated to the general account of an insurance company pursuant to a contract with an employee benefit plan that vary with the investment experience of the insurance company may under certain circumstances be treated as "plan assets." Any insurance company proposing to invest assets of its general account in the Securities should consider the extent to which such investment would be subject to the requirements of ERISA in light of the John

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Hancock decision and the 1996 enactment of section 401(c) of ERISA. In particular, such an insurance company should consider the retroactive and prospective exemptive relief granted by the Department of Labor for transactions involving insurance company general accounts in Prohibited Transaction Class Exemption ("PTCE") 95-60 (60 Fed. Reg. 35925; Jul. 12, 1995) and the regulations issued by the Department of Labor, 29 C.F.R. section 2550.401-c (Jan. 5, 2000). Prior to making an investment in the Securities, prospective investors should consult with their legal advisors concerning the impact of ERISA and the potential consequences of such investment with respect to their specific circumstances. Moreover, each Plan fiduciary should take into account, among other considerations, whether the fiduciary has the authority to make the investment; whether the investment constitutes a direct or indirect transaction with a Party in Interest or Disqualified Person; the composition of the Plan's portfolio with respect to diversification by type of asset; the Plan's funding objectives; the tax effects of the investment; and whether, under the general fiduciary standards of investment prudence and diversification, an investment in the Securities is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plan's investment portfolio. In addition, it should be noted that, if the Notes are acquired by a Plan with respect to which a holder of a Preference Security is a Party in Interest or Disqualified Person, such transaction could be deemed to be a direct or indirect violation of the prohibited transaction rules of ERISA and Section 4975 of the Code unless such Plan's purchase and holding of Notes were subject to one or more statutory, regulatory, or administrative exemptions from the prohibited transaction rules. In this regard, each Plan, and each Person investing plan assets, that purchases Notes will be deemed to represent and warrant that its purchase of the Notes is subject to an exemption from the prohibited transaction rules. EACH INITIAL PURCHASER AND EACH TRANSFEREE OF A NOTE WILL BE DEEMED TO REPRESENT AND WARRANT (OR, IN CERTAIN CIRCUMSTANCES, REQUIRED TO CERTIFY) EITHER THAT (A) IT IS NOT (AND, FOR SO LONG AS IT HOLDS SUCH NOTE, WILL NOT BE), AND IS NOT INVESTING THE ASSETS OF (AND, FOR SO LONG AS IT HOLDS SUCH NOTE, WILL NOT BE INVESTING THE ASSETS OF), AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE UNITED STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO TITLE I OF ERISA, A PLAN (AS DEFINED IN SECTION 4975(e)(1) OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")), THAT IS SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 4975 OF THE CODE OR A GOVERNMENTAL OR CHURCH PLAN THAT IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SIMILAR TO THE FOREGOING PROVISIONS OF ERISA AND THE CODE (A "SIMILAR LAW"), OR (B) ITS PURCHASE AND OWNERSHIP 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 NON-EXEMPT VIOLATION OF ANY SIMILAR LAW). EACH PURCHASER AND EACH TRANSFEREE OF A PREFERENCE SECURITY WILL BE REQUIRED TO CERTIFY WHETHER OR NOT IT IS A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON (EACH, AS DEFINED BELOW). NO TRANSFER OF PREFERENCE SECURITIES WILL BE EFFECTIVE, AND NEITHER THE ISSUER NOR THE SECURITY REGISTRAR WILL RECOGNIZE ANY SUCH TRANSFER IF, AFTER GIVING EFFECT TO SUCH TRANSFER, 25% OR MORE OF THE PREFERENCE SECURITIES WOULD BE HELD BY BENEFIT PLAN INVESTORS (DISREGARDING PREFERENCE SECURITIES HELD BY PERSONS OTHER THAN BENEFIT PLAN INVESTORS WHO HAVE DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE ASSETS OF THE ISSUER, OR WHO PROVIDE INVESTMENT ADVICE FOR A FEE, DIRECT OR INDIRECT, WITH RESPECT TO SUCH ASSETS,

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OR ANY AFFILIATES OF SUCH PERSONS (EACH, A "CONTROLLING PERSON")). A "BENEFIT PLAN INVESTOR" INCLUDES AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF ERISA), WHETHER OR NOT IT IS SUBJECT TO TITLE I OF ERISA, A "PLAN" (AS DEFINED IN SECTION 4975(e)(1) OF THE CODE), AND ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF AN EMPLOYEE BENEFIT PLAN'S OR PLAN'S INVESTMENT IN THE ENTITY. AN INVESTOR THAT IS A BENEFIT PLAN INVESTOR SUBJECT TO TITLE I OF ERISA, SECTION 4975 OF THE CODE OR ANY SIMILAR LAW WILL BE REQUIRED TO CERTIFY THAT ITS INVESTMENT IN PREFERENCE SECURITIES 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 NON-EXEMPT VIOLATION OF ANY SIMILAR LAW). NO REGULATION S GLOBAL PREFERENCE SECURITY OR AN INTEREST THEREIN MAY BE ACQUIRED BY OR TRANSFERRED TO A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON. THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT REQUIRES THE ISSUER TO DEMAND THAT ANY PERSON HOLDING ANY INTEREST IN A REGULATION S GLOBAL PREFERENCE SECURITY WHO IS DETERMINED TO BE A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON OR THE HOLDER OF ANY RESTRICTED PREFERENCE SECURITY THAT REPRESENTED IN A SUBSCRIPTION AGREEMENT OR TRANSFER CERTIFICATE THAT IT WAS NOT A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON BUT ACTUALLY IS OR HAS BECOME A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON SELL SUCH INTEREST TO A PERSON WHO IS NOT A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON AND WHO MEETS ALL OTHER APPLICABLE TRANSFER RESTRICTIONS AND, IF SUCH HOLDER DOES NOT COMPLY WITH SUCH DEMAND WITHIN 30 DAYS THEREOF, THE ISSUER MAY SELL SUCH HOLDER'S INTEREST IN SUCH PREFERENCE SECURITY. EACH OWNER OF A BENEFICIAL INTEREST IN A REGULATION S GLOBAL PREFERENCE SECURITY WILL BE REQUIRED TO EXECUTE AND DELIVER TO THE ISSUER AND THE PREFERENCE SECURITY PAYING AGENT A LETTER IN THE FORM ATTACHED AS AN EXHIBIT TO THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT (AND INCLUDED AS EXHIBIT A TO THIS OFFERING CIRCULAR) TO THE EFFECT THAT SUCH OWNER (I) IS NOT A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON AND (II) WILL NOT TRANSFER SUCH INTEREST EXCEPT IN COMPLIANCE WITH THE TRANSFER RESTRICTIONS SET FORTH IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT (INCLUDING THE REQUIREMENT THAT ANY SUBSEQUENT TRANSFEREE EXECUTE AND DELIVER SUCH LETTER AS A CONDITION TO ANY SUBSEQUENT TRANSFER). SEE "TRANSFER RESTRICTIONSCERTAIN TRANSFERS VOID." The sale of Securities to a Plan will not be deemed a representation by the Issuers, the Initial Purchaser or the Collateral Manager that such an investment meets all relevant legal requirements with respect to Plans generally or any particular Plan, as applicable, or that such an investment is appropriate for a Plan generally or any particular Plan. THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE ERISA IMPLICATIONS OF AN INVESTMENT IN SECURITIES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN LEGAL ADVISERS PRIOR TO INVESTING TO DETERMINE THE ERISA IMPLICATIONS OF SUCH INVESTMENTS IN LIGHT OF SUCH INVESTOR'S CIRCUMSTANCES.

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PLAN OF DISTRIBUTION The Initial Purchaser has advised the Issuers that it proposes to offer the Securities to prospective purchasers from time to time in individually negotiated transactions at varying prices to be determined in each case at the time of sale. The price(s) paid by the Initial Purchaser for the Securities may be less than those paid by other purchasers of the Securities. The Initial Purchaser may offer or sell Securities to purchasers at negotiated prices, which may vary among different purchasers of Securities. In addition to the structuring and placement fees paid to the Initial Purchaser, the Initial Purchaser may be deemed to receive compensation for the sale of Securities to the extent that the price(s) paid by it for Securities are less than the price(s) at which the Securities are resold. The Securities are offered when, as and if issued by the Issuers, subject to prior sale or withdrawal, cancellation or modification of the offer without notice and subject to approval of certain legal matters by counsel and certain other conditions. It is expected that delivery of the Securities will be made on or about the Closing Date, against payment in immediately available funds. The Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, United States persons except to (i) Qualified Institutional Buyers in reliance on Rule 144A under the Securities Act and, in the case of the Preference Securities, Accredited Investors in reliance on Section 4(2) the Securities Act and (ii) other persons or entities pursuant to other valid exemptions from the registration requirements of the Securities Act. Without limiting the foregoing, no transfer of Securities may be made except to a Non-U.S. Person in an offshore transaction in compliance with Regulation S or to a Qualified Purchaser or if such transfer would not require the Issuer or the Co-Issuer to become subject to the registration requirements of the Investment Company Act. Each of the Issuers and the Initial Purchaser represents and agrees that it (i) 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 Financial Services and Markets Act of 2000 ("FSMA")) received by it in connection with the issue or sale of any offered securities in circumstances in which Section 21(a) of the FSMA does not apply to the Issuer; and (ii) has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the offered securities, in, from or otherwise involving the United Kingdom. No invitation may be made to the public in the Cayman Islands to subscribe for the Securities. Purchasers of Securities sold outside the United States 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 price charged to investors for the Securities. The Securities are new securities for which there currently is no market. Accordingly, no assurance can be given as to the development or liquidity of any market for the Securities.

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TRANSFER RESTRICTIONS Because of the following restrictions, purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of Notes or Preference Securities. Investor Representations on Initial Purchase. Each original purchaser of the Notes (or any beneficial interest therein) will be deemed to acknowledge, represent to and agree with the Initial Purchaser, and each original purchaser of a Preference Security will be required in a Subscription Agreement to acknowledge, represent to and agree with the Issuer and the Initial Purchaser substantially as follows: (1) No Governmental Approval The purchaser understands that the Securities have not been approved or disapproved by the SEC or any other governmental authority or agency of any jurisdiction, nor has the SEC or any other governmental authority or agency passed upon the accuracy or adequacy of this Offering Circular. The purchaser further understands that any representation to the contrary is a criminal offense. (2) Certification upon Transfer Each purchaser of a Note (if required by the Indenture) and each purchaser of Preference Securities will, prior to any sale, pledge or other transfer by such purchaser of any such Security (or any interest therein), obtain from the transferee and deliver to the Issuer and the Note Registrar (in the case of a Note) or the Security Registrar (in the case of a Preference Security), a duly executed transferee certificate in the form of the relevant exhibit attached to the Indenture or the Preference Security Paying Agency Agreement, as the case may be, and such other certificates, legal opinions and other information as the Issuer, the Trustee (in the case of the Notes) or the Security Registrar (in the case of the Preference Securities) may reasonably require to confirm that the proposed transfer complies with the transfer restrictions contained in this Offering Circular and the Indenture, the Issuer Charter or the Preference Security Paying Agency Agreement, as applicable. Each purchaser of an interest in a Regulation S Global Preference Security will be required to execute and deliver to the Issuer and the Preference Security Paying Agent a letter in the form attached as Exhibit A hereto to the effect that such purchaser (i) will not transfer such interest except in compliance with the transfer restrictions set forth in the Preference Security Paying Agency Agreement (including the requirement that any subsequent transferee execute and deliver such letter) and (ii) is not a Benefit Plan Investor or Controlling Person. (3) Minimum Denominations; Form of Preference Securities The purchaser agrees that no Security (or any interest therein) may be sold, pledged or otherwise transferred in a denomination of less than the applicable minimum denomination set forth in the Indenture (in the case of the Notes) or the Issuer Charter (in the case of the Preference Securities). In addition, each purchaser of Preference Securities understands that the Preference Securities will be issued in fully registered, definitive form without interest coupons and will be transferable only upon registration of the transferee in the Security Register following delivery to the Security Registrar of a duly executed share transfer form, together with the share certificate relating to such Preference Securities and the transfer certificate (if applicable), and any other certificates, legal opinions and other information, required by the Preference Security Documents.

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(4)

Securities Law Limitations on Resale The purchaser understands that the Securities have not been registered under the Securities Act and, therefore, cannot be offered or sold in the United States or to U.S. Persons unless they are registered under the Securities Act or unless an exemption from registration is available. Accordingly, the certificates representing the Securities will bear a legend stating that the Securities have not been registered under the Securities Act and setting forth certain of the restrictions on transfer of the Securities described herein. The purchaser understands that neither the Issuer nor the Co-Issuer has any obligation to register any of the Securities under the Securities Act or to comply with the requirements for any exemption from the registration requirements of the Securities Act (other than to supply information specified in Rule 144A(d)(4) of the Securities Act as required by the Indenture and the Securities Purchase Agreement).

(5)

Qualified Institutional Buyer, Accredited Investor or Non-U.S. Person Status; Investment Intent In the case of a purchaser that takes delivery of the Securities in the form of a Restricted Global Note (or interest therein) or a Restricted Preference Security, such purchaser is a Qualified Institutional Buyer (or in the case of the Preference Securities, an Accredited Investor), and is acquiring the Securities for such purchaser's own account for investment purposes and not with a view to the distribution thereof (except in accordance with Rule 144A). In the case of a purchaser that takes delivery of Regulation S Notes, such purchaser is not a U.S. Person and is purchasing such Note in an offshore transaction as required by Regulation S for such purchaser's own account and not for the account or benefit of a U.S. Person. In the case of a purchaser that takes delivery of Regulation S Preference Securities, (i) such purchaser is not a U.S. Person and is purchasing such Preference Securities in an offshore transaction as required by Regulation S for such purchaser's own account and not for the account or benefit of a U.S. Person, and, in the case of a Regulation S Global Preference Security, (ii) (A) it understands that delivery may be made only in accordance with the certification requirements set forth in the Issuer Charter and the Preference Security Paying Agency Agreement and (B) it is not a Benefit Plan Investor or Controlling Person. The purchaser, if not a "United States person" (as defined in Section 7701(a)(30) of the Code), has not purchased the Securities in whole or in part to avoid any U.S. Federal tax liability (including, without limitation, any U.S. withholding tax that would be imposed on the Securities with respect to the Collateral Debt Securities if held directly by the purchaser).

(6)

Purchaser Sophistication; Non-Reliance; Suitability; Access to Information The purchaser (a) has such knowledge and experience in financial and business matters that the purchaser is capable of evaluating the merits and risks (including for tax, legal, regulatory, accounting and other financial purposes) of such purchaser's prospective investment in Securities, (b) is financially able to bear such risk, (c) in making such investment is not relying on the advice or recommendations of any of the Initial Purchaser, the Issuer, the Co-Issuer or any of their respective affiliates (or any representative of any of the foregoing) and (d) has determined that an investment in Securities is suitable and appropriate for such purchaser. The purchaser has received, and has had an adequate opportunity to review the contents of, this Offering Circular. The purchaser has had access to such financial and other information concerning the Issuer and the Securities as such purchaser has deemed necessary to make its own independent decision to purchase Securities, including the opportunity, at a reasonable time prior to such purchaser's purchase of Securities, to ask questions and receive answers concerning the Issuer and the terms and conditions of the offering of the Securities.

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(7)

Certain Resale Limitations The purchaser is aware that no Securities (or any interest therein) may be offered, sold, pledged or otherwise transferred to (a) a transferee acquiring a Restricted Global Note (or interest therein) or a Restricted Preference Security except (i) to a transferee that (A) (1) the seller reasonably believes is a Qualified Institutional Buyer purchasing such Note or Preference Security, as applicable, for such transferee's own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A or (2) in the case of the Preference Securities only, is an Accredited Investor in a transaction exempt from the registration requirements of the Securities Act (and, if requested by the Issuer, upon delivery of an opinion of counsel in a form satisfactory to the Issuer and such certifications and other information as the Issuer may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act), and (B) is a Qualified Purchaser, (ii) to a transferee that, if a U.S. Person, is not a Flow-Through Investment Vehicle (other than a Qualifying Investment Vehicle), (iii) in compliance with the certification (if any) and other requirements set forth in the Indenture, the Issuer Charter or the Preference Security Paying Agency Agreement, as applicable, (iv) in the case of any transfer of a Restricted Preference Security, if after giving effect to such transfer less than 25% of the Preference Securities (excluding Preference Securities held by Controlling Persons), would be held by Benefit Plan Investors and (v) in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction or (b) a transferee acquiring an interest in a Regulation S Note or a Regulation S Preference Security except (i) to a non-U.S. Person that is acquiring such interest in an offshore transaction in accordance with Regulation S, (ii) in the case of any transfer of a Regulation S Preference Security, to a transferee that is not a Benefit Plan Investor or a Controlling Person, (iii) in compliance with the certification (if any) and other requirements set forth in the Indenture, the Issuer Charter or the Preference Security Paying Agency Agreement as applicable, (iv) in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction and (v) with respect to any Regulation S Preference Security, to a transferee that will not engage in hedging transactions with regard to such Regulation S Preference Security unless in compliance with the Securities Act. Without limiting the foregoing, each holder of an interest in a Regulation S Global Preference Security will be required to execute and deliver to the Issuer and the Preference Security Paying Agent a letter in the form attached as Exhibit A hereto to the effect that such holder (i) is not a Benefit Plan Investor or a Controlling Person and (ii) will not transfer such interest except in compliance with the transfer restrictions set forth in the Preference Security Paying Agency Agreement (including the requirement that any subsequent transferee execute and deliver such letter).

(8)

Limited Liquidity The purchaser understands that there is no market for any Class of Securities and that no assurance can be given as to the liquidity of any trading market for such Class of Securities or that a trading market for such Class of Securities will develop. The purchaser further understands that, although the Initial Purchaser may from time to time make a market in a Class of Securities, the Initial Purchaser is not under any obligation to do so and, following the commencement of any market-making, may discontinue the same at any time. Accordingly, the purchaser must be prepared to hold such Securities for an indefinite period of time or until their maturity (or in the case of the Preference Securities, until the liquidation of the Issuer).

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(9)

Investment Company Act The purchaser either (a) is not a U.S. Person or (b) is a Qualified Purchaser. The purchaser agrees that no sale, pledge or other transfer of a Note or Preference Security (or any interest therein) may be made (a) to a transferee acquiring Restricted Notes or Restricted Preference Securities except to a transferee that is a Qualified Purchaser, (b) to a transferee acquiring an interest in a Regulation S Note or a Regulation S Preference Security, except to a transferee that is not a U.S. Person or (c) if such transfer would have the effect of requiring either of the Issuers or the pool of Collateral to register as an investment company under the Investment Company Act. If the purchaser is a U.S. Person that is an entity that would be an investment company but for the exception provided for in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act (any such entity, an "excepted investment company"): (x) all of the beneficial owners of outstanding securities (other than short-term paper) of such entity (such beneficial owners determined in accordance with Section 3(c)(1)(A) of the Investment Company Act) that acquired such securities on or before April 30, 1996 ("pre-amendment beneficial owners"); and (y) all pre-amendment beneficial owners of the outstanding securities (other than short-term paper) of any excepted investment company that, directly or indirectly, owns any outstanding securities of such entity, have consented to such entity's treatment as a Qualified Purchaser in accordance with the Investment Company Act.

(10)

Limitations on Flow-Through Status In the case of a purchaser that is a U.S. Person, it is either (a) not a Flow-Through Investment Vehicle or (b) a Qualifying Investment Vehicle. A purchaser is a "Flow-Through Investment Vehicle" if (i) the purchaser would be an investment company but for the exception in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act, the amount of the purchaser's investment in the Securities (including the purchaser's investment in all Classes of Notes and the Preference Securities) exceeds 40% of the total assets (determined on a consolidated basis with its subsidiaries) of the purchaser; (ii) any Person owning any equity or similar interest in the purchaser has the ability to control any investment decision of such purchaser to determine, on an investment-by-investment basis, the amount of such Person's contribution to any investment made by the purchaser; (iii) the purchaser was organized or reorganized for the specific purpose of acquiring any Securities; or (iv) additional capital or similar contributions were specifically solicited from any Person owning an equity or similar interest in the purchaser for the purpose of enabling the purchaser to purchase Securities. A "Qualifying Investment Vehicle" is a FlowThrough Investment Vehicle as to which all of the beneficial owners of any securities issued by such Flow-Through Investment Vehicle have made, and as to which (in accordance with the document pursuant to which such Flow-Through Investment Vehicle was organized or the agreement or other document governing such securities) each such beneficial owner must require any transferee of any such security to make, to the Issuer or the Issuers, as the case may be, and the Note Registrar (in the case of the Notes) or the Security Registrar (in the case of the Preference Securities) each of the representations set forth herein, in the Indenture or the Preference Security Paying Agency Agreement (as applicable) and in the Issuer Charter required to be made upon transfer of any of the relevant Class of Notes or Preference Securities (with modifications to such representations satisfactory to the Collateral Manager and the Issuer to reflect the indirect nature of the interests of such beneficial owners in such Notes or Preference Securities). If the purchaser is a U.S. Person that is a Qualifying Investment Vehicle, (a) either (i) none of the beneficial owners of its securities is a U.S. Person or (ii) some or all of the beneficial owners of its securities are U.S. Persons and each such beneficial owner has certified to the purchaser that

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such owner is a Qualified Purchaser and (b) the purchaser has only one class of securities outstanding (other than any nominal share capital the distributions in respect of which are not correlated to or dependent upon distributions on, or the performance of, the Securities). (11) ERISA In the case of any purchaser of a Note either (a) it is not (and, for so long as it holds such Note or any interest therein, will not be), and is not investing the assets of (and, for so long as it holds such Note or any interest therein, will not be investing the assets of), an employee benefit plan (within the meaning of Section 3(3) of ERISA) that 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 or a governmental or church plan that is subject to any Federal, state or local law that is similar to the foregoing provisions of ERISA or the Code (a "Similar Law") or (b) its purchase and ownership 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 non-exempt violation of any Similar Law). In the case of a purchaser of a Restricted Preference Security, except as otherwise disclosed in the Subscription Agreement (or, in the case of a transfer, the transferee certificate), the purchaser is not and is not acting on behalf of (i) a Benefit Plan Investor or (ii) a Controlling Person. In the case of a purchaser of a Regulation S Preference Security, the purchaser is not and is not acting on behalf of a (i) a Benefit Plan Investor or (ii) a Controlling Person. If a purchaser of a Restricted Preference Security is a Benefit Plan Investor that is subject to Title I of ERISA, Section 4975 of the Code or any Similar Law, such purchaser represents and warrants that its investment in the Preference Securities 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 non-exempt violation of any similar Federal, state or local law). Each purchaser of a Preference Security understands and agrees that no interest in a Regulation S Global Preference Security may be acquired by or sold, pledged or otherwise transferred to a Benefit Plan Investor or a Controlling Person. Each purchaser of a Preference Security also understands and agrees that no sale, pledge or other transfer of a Preference Security (or any interest therein) may be made (and neither the Issuer nor the Security Registrar will recognize any such transfer) if (i) after giving effect to such transfer, 25% or more (as determined under the Plan Asset Regulation of the U.S. Department of Labor, 29 C.F.R. Section 2510.3-101(f)) of the Preference Securities would be held by Benefit Plan Investors (excluding Preference Securities held by Controlling Persons) or (ii) in the case of a transferee that acquires an interest in a Regulation S Global Preference Security, unless such transferee executes and delivers to the Preference Security Paying Agent, the Issuer and the Collateral Manager a letter in the form attached as an exhibit to the Preference Security Paying Agency Agreement (and included as Exhibit A to this Offering Circular) to the effect that, inter alia, such transferee (a) is not and is not acting on behalf of a Benefit Plan Investor or a Controlling Person and (b) will not transfer such interest except in compliance with the transfer restrictions set forth in the Preference Security Paying Agency Agreement (including the requirement that any subsequent transferee of an interest in Regulation S Global Preference Securities execute and deliver such a letter as a condition to any subsequent transfer). Each purchaser of a Preference Security further understands and agrees that the information supplied above will be utilized to determine whether Benefit Plan Investors own less than 25% of the Preference Securities and upon any subsequent transfer of any equity interest in the Issuer, including any Preference Securities for any reason. In addition, if a purchaser of Securities is, or is acting on behalf of, a Plan subject to Title I of ERISA or an employee benefit plan that is not subject to Title I of ERISA but is subject to

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provisions of a Similar Law, the fiduciaries of such Plan or such employee benefit plan, as applicable, represent and warrant that they have been informed of and understand the Issuer's investment objectives, policies and strategies and that the decision to invest such Plan's assets or such employee benefit plan's assets, as the case may be, in Securities was made with appropriate consideration of relevant investment factors with regard to such Plan or such employee benefit plan, as the case may be, and is consistent with the duties and responsibilities imposed upon fiduciaries with regard to their investment decisions under Title I of ERISA or such Similar Law. (12) Certain Transfers Void The purchaser agrees that (a) any sale, pledge or other transfer of a Security (or any interest therein) made in violation of the transfer restrictions contained in this Offering Circular and in the Indenture, the Issuer Charter or the Preference Security Paying Agency Agreement, or made based upon any false or inaccurate representation made by the purchaser or a transferee to the Issuer, will be void and of no force or effect and (b) none of the Issuer, the Trustee, the Note Registrar (in the case of the Notes) and the Preference Security Paying Agent (in the case of the Preference Securities) has any obligation to recognize any sale, pledge or other transfer of a Security (or any interest therein) made in violation of any such transfer restriction or made based upon any such false or inaccurate representation. The purchaser understands and agrees that the Indenture provides that if, notwithstanding the restrictions on transfer contained therein, either of the Issuers determines that any beneficial owner of a Restricted Note (or any interest therein) is not both a Qualified Institutional Buyer and a Qualified Purchaser, then the Issuers shall require, by notice to such holder, that such holder sell all of its right, title and interest to such Note (or interest therein) to a Person that is both a Qualified Institutional Buyer and a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (i) upon written direction from the Collateral Manager or the Issuer, the Trustee, on behalf of and at the expense of the Issuer, shall cause such beneficial owner's interest in such Note to be transferred in a commercially reasonable sale arranged by the Collateral Manager (and conducted by the Trustee or an investment bank selected by the Trustee in accordance with Section 9-610(b) of the Uniform Commercial Code as in effect in the State of New York as applied to securities that are sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, the Issuers and the Collateral Manager, in connection with such transfer, that such Person is both a Qualified Institutional Buyer and a Qualified Purchaser and (ii) pending such transfer, no further payments shall be made in respect of such Note held by such beneficial owner, and such Note shall be deemed not to be outstanding for the purpose of any vote or consent of Noteholders. The purchaser understands and agrees that the Indenture provides that if, notwithstanding the restrictions on transfer contained therein, the Issuers determine that any beneficial owner a Regulation S Note is a U.S. Person, the Issuers shall require, by notice to such holder that such holder sell all of its right, title and interest to such Note (or interest therein) to a Person that is not a U.S. Person (or to a Person that will acquire such Notes in the form of Restricted Notes and certifies that it is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser) with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (i) upon written direction from the Collateral Manager or the Issuer, the Trustee, on behalf of and at the expense of the Issuer, shall cause such beneficial owner's interest in such Note to be transferred in a commercially reasonable sale arranged by the Collateral Manager (and conducted by the Trustee or an investment bank selected by the Trustee in accordance with Section 9-610(b) of the

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Uniform Commercial Code as in effect in the State of New York as applied to securities that are sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, the Issuers and the Collateral Manager, in connection with such transfer, that such Person is not a U.S. Person (or to a Person that will acquire such Notes in the form of Restricted Notes and certifies that it is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser) and (ii) pending such transfer, no further payments shall be made in respect of such Note (or beneficial interest therein) held by such beneficial owner, and such Note shall be deemed not to be Outstanding for the purpose of any vote or consent of the Noteholders. The purchaser understands and agrees that the Preference Security Paying Agency Agreement provides that if, notwithstanding the restrictions on transfer contained therein, the Issuer determines that any registered holder of Restricted Preference Securities is not both (A) a Qualified Institutional Buyer or an Accredited Investor and (B) a Qualified Purchaser, then the Issuer shall require, by notice to such holder, that such holder sell all of its right, title and interest to such Restricted Preference Securities (1) to a Person that is both (a) a Qualified Institutional Buyer or an Accredited Investor and (b) a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given or (2) to a Person that (a) is not a U.S. Person and (b) will acquire such Preference Securities in the form of Regulation S Preference Securities in an offshore transaction in reliance on Regulation S. If such holder fails to effect the transfer required within such 30-day period, (i) upon direction from the Issuer (or the Collateral Manager on its behalf), the Preference Security Paying Agent, on behalf of and at the expense of the Issuer, shall cause such holder's Preference Securities to be transferred in a commercially reasonable sale arranged by the Collateral Manager (and conducted by the Preference Security Paying Agent or an investment bank selected by the Preference Security Paying Agent in accordance with Section 9-610(b) of the Uniform Commercial Code as in effect in the State of New York as applied to securities that are sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Preference Security Paying Agent, the Issuer and the Collateral Manager, in connection with such transfer, (A) that such Person is both (1) a Qualified Institutional Buyer or an Accredited Investor and (2) a Qualified Purchaser or (B) that such Person (1) is not a U.S. Person and (2) is acquiring such Preference Securities in the form of Regulation S Preference Securities in an offshore transaction in reliance on Regulation S, and (ii) pending such transfer, no further payments will be made in respect of the Preference Securities held by such holder, such Preference Securities shall be deemed not to be outstanding for the purposes of any vote, consent or direction of the holders of the Preference Securities and shall not be taken into account for the purposes of calculating any quorum or majority requirements relating thereto, and such holder shall not be entitled to exercise any voting, consent or direction rights in respect of such Preference Securities. The purchaser understands and agrees that the Preference Security Paying Agency Agreement provides that if, notwithstanding the restrictions on transfer contained therein, the Issuer determines that any registered holder of Regulation S Preference Securities is a U.S. Person (within the meaning of Regulation S), then the Issuer shall require, by notice to such holder, that such holder sell all of its right, title and interest to such Regulation S Preference Securities (A) to a Person that (1) is not a U.S. Person and (2) will acquire such Preference Securities in an offshore transaction in reliance on Regulation S or (B) to a Person that (1) is both (a) a Qualified Institutional Buyer or an Accredited Investor and (b) a Qualified Purchaser and (2) will acquire such Preference Securities in the form of Restricted Preference Securities, with such sale to be effected within 30 days after notice of such sale requirement is given. If such holder fails to effect the transfer required within such 30-day period, (i) upon direction from the Issuer (or the Collateral Manager on its behalf), the Preference Security Paying Agent, on behalf of and at the expense of the Issuer, shall cause such holder's Preference Securities to be transferred in a

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commercially reasonable sale arranged by the Collateral Manager (and conducted by the Preference Security Paying Agent or an investment bank selected by the Preference Security Paying Agent in accordance with Section 9-610(b) of the Uniform Commercial Code as in effect in the State of New York as applied to securities that are sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Preference Security Paying Agent, the Issuer and the Collateral Manager, in connection with such transfer, (A) that such Person (1) is not a U.S. Person and (2) is acquiring such Preference Securities in an offshore transaction in reliance on Regulation S or (B) that such Person (1) is both (a) a Qualified Institutional Buyer or an Accredited Investor and (b) a Qualified Purchaser and (2) is acquiring such Preference Securities in the form of Restricted Preference Securities and (ii) pending such transfer, no further payments shall be made in respect of the Preference Securities held by such holder, such Preference Securities shall be deemed not to be outstanding for the purposes of any vote, consent or direction of the holders of the Preference Securities and shall not be taken into account for the purposes of calculating any quorum or majority requirements relating thereto, and such holder shall not be entitled to exercise any voting, consent or direction rights in respect of such Preference Securities. The purchaser understands and agrees that the Preference Security Paying Agency Agreement provides that if, notwithstanding the restrictions on transfer contained therein, the Issuer (or the Collateral Manager on its behalf) determines that (i) a Benefit Plan Investor or a Controlling Person has acquired Regulation S Global Preference Securities, whether directly from the Issuer or as a transferee in violation of the restrictions set forth in the legends on the Preference Securities, the Preference Security Paying Agency Agreement and the exhibits thereto, or (ii) the holder of any Regulation S Definitive Preference Security or Restricted Preference Security that represented in a subscription agreement, investor letter or transfer certificate that it was not a Benefit Plan Investor or a Controlling Person but actually is or has become a Benefit Plan Investor or Controlling Person, then the Issuer shall require, by notice to such Benefit Plan Investor or Controlling Person, that such Benefit Plan Investor or Controlling Person sell all of its right, title and interest in or to such Preference Securities in accordance with the Preference Security Paying Agency Agreement, with such sale to be effected within 30 days after notice of such sale requirement is given. If such Benefit Plan Investor or Controlling Person fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer or the Collateral Manager (on behalf of the Issuer), the Preference Security Paying Agent shall cause its interest in such Preference Securities to be transferred in a commercially reasonable sale arranged by the Collateral Manager (and conducted by the Preference Security Paying Agent or by an investment bank selected by the Preference Security Paying Agent (the fees of which firm are to be paid exclusively from the proceeds of such sale) in accordance with Section 9-610(b) of the UCC as in effect in the State of New York as applied to securities that are sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Preference Security Paying Agent, the Issuer and the Collateral Manager, in connection with such transfer, that such Person qualifies as a purchaser of such Preference Securities pursuant to this Agreement, and (y) pending such transfer, no further payments shall be made in respect of such Preference Securities held by such Benefit Plan Investor or Controlling Person, such Preference Securities shall be deemed not to be outstanding for the purposes of any vote, consent or direction of the Preference Securityholders and shall not be taken into account for the purposes of calculating any quorum or majority requirements relating thereto, and such Benefit Plan Investor or Controlling Person shall not be entitled to exercise any voting, consent or direction rights in respect of such Preference Securities. The purchaser understands and agrees that no transfer of the Securities may be made (and none of the Issuer, the Trustee (in the case of the Notes), the Preference Security Paying Agent (in the

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case of the Preference Securities), the Note Registrar (in the case of the Notes) or the Security Registrar (in the case of the Preference Securities) will recognize any such transfer) if such transfer would be made to a transferee that is a U.S. resident and is (i) a dealer described in paragraph (a)(1)(ii) of Rule 144A that owns and invests on a discretionary basis less than U.S.$25,000,000 in securities of issuers that are not affiliated persons of the dealer or (ii) a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, unless investment decisions with respect to the plan are made solely by the fiduciary, trustee or sponsor of such plan. (13) Reliance on Representations, etc. The purchaser acknowledges that the Issuers, the Initial Purchaser, the Trustee and the Preference Security Paying Agent will rely upon the truth and accuracy of the acknowledgments, representations and agreements set forth herein and agrees that, if any of the acknowledgments, representations or warranties made or deemed to have been made by the purchaser in connection with the purchaser's purchase of the Securities are no longer accurate, the purchaser will promptly notify the Issuer, the Initial Purchaser, the Trustee and the Preference Security Paying Agent. (14) Cayman Islands The purchaser is not a member of the public in the Cayman Islands. (15) USA PATRIOT Act The Issuer may impose additional transfer restrictions in order for the Issuer to comply with The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001), to the extent that it is applicable to the Issuer, and each Noteholder and each Preference Securityholder by acceptance of its Notes or Preference Securities, as the case may be, is deemed to have agreed that it will comply with such transfer restrictions. The Issuer shall notify the Trustee, the Note Registrar and the Preference Security Paying Agent of the imposition of any such transfer restrictions. (16) Legend for Notes The purchaser understands and agrees that a legend in substantially the following form will be placed on each certificate representing any Regulation S Global Note: THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION, AND MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) (1) TO A PERSON THAT TAKES DELIVERY OF THIS NOTE (OR AN INTEREST HEREIN) IN THE FORM OF A RESTRICTED NOTE AND THAT THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), PURCHASING FOR ITS OWN ACCOUNT, TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON THE EXEMPTION FROM SECURITIES ACT REGISTRATION PROVIDED BY RULE 144A OR (2) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (B) IN

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COMPLIANCE WITH THE CERTIFICATION AND OTHER REQUIREMENTS SPECIFIED IN THE INDENTURE REFERRED TO HEREIN AND (C) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND ANY OTHER RELEVANT JURISDICTION. NEITHER OF THE ISSUERS NOR THE POOL OF COLLATERAL HAS BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"). NO TRANSFER OF THIS NOTE (OR AN INTEREST HEREIN) MAY BE MADE (AND NONE OF THE ISSUERS, THE TRUSTEE OR THE NOTE REGISTRAR WILL RECOGNIZE ANY SUCH TRANSFER) IF (A) SUCH TRANSFER WOULD BE MADE TO A TRANSFEREE THAT IS A U.S. PERSON (WITHIN THE MEANING OF REGULATION S) BUT IS NOT (1) A "QUALIFIED PURCHASER" AS DEFINED IN SECTION 2(a)(51)(A) OF THE INVESTMENT COMPANY ACT AND RELATED RULES, (2) A "KNOWLEDGEABLE EMPLOYEE", AS DEFINED IN RULE 3c-5 UNDER THE INVESTMENT COMPANY ACT, WITH RESPECT TO THE ISSUER OR (3) A COMPANY EACH OF WHOSE BENEFICIAL OWNERS IS A QUALIFIED PURCHASER OR KNOWLEDGEABLE EMPLOYEE WITH RESPECT TO THE ISSUER (COLLECTIVELY, A "QUALIFIED PURCHASER") TAKING DELIVERY OF THIS NOTE (OR AN INTEREST HEREIN) IN THE FORM OF A RESTRICTED NOTE, (B) SUCH TRANSFER WOULD HAVE THE EFFECT OF REQUIRING EITHER OF THE ISSUERS OR THE POOL OF COLLATERAL TO REGISTER AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OR (C) SUCH TRANSFER WOULD BE MADE TO A TRANSFEREE THAT IS A U.S. PERSON AND A FLOW-THROUGH INVESTMENT VEHICLE OTHER THAN A QUALIFYING INVESTMENT VEHICLE (EACH AS DEFINED IN THE INDENTURE) THAT TAKES DELIVERY OF THIS NOTE (OR AN INTEREST HEREIN) IN THE FORM OF A RESTRICTED NOTE. [THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE, AMOUNT OF OID, ISSUE DATE AND YIELD TO MATURITY OF THIS NOTE MAY BE OBTAINED BY WRITING TO THE ISSUER AT ACA ABS 2006-1, LIMITED, C/O MAPLES FINANCE LIMITED, P.O. BOX 1093GT, GRAND CAYMAN, CAYMAN ISLANDS.]1 BY ACCEPTING THIS NOTE, EACH HOLDER HEREOF IS DEEMED TO REPRESENT AND WARRANT (OR IN CERTAIN CIRCUMSTANCES REQUIRED TO CERTIFY) EITHER THAT (A) IT IS NOT (AND, FOR SO LONG AS IT HOLDS THIS NOTE OR ANY INTEREST THEREIN, WILL NOT BE), AND IS NOT INVESTING THE ASSETS OF (AND, FOR SO LONG AS IT HOLDS THIS NOTE OR ANY INTEREST THEREIN, WILL NOT BE INVESTING THE ASSETS OF), AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE UNITED STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO TITLE I OF ERISA, A PLAN (AS DEFINED IN SECTION 4975(e)(1) OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")), THAT IS SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 4975 OF THE CODE OR A GOVERNMENTAL OR CHURCH PLAN THAT IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SIMILAR TO THE FOREGOING PROVISIONS OF ERISA AND THE CODE (A "SIMILAR LAW"), OR (B) ITS PURCHASE AND OWNERSHIP OF THIS NOTE WILL BE COVERED BY A PROHIBITED TRANSACTION CLASS EXEMPTION
1

For the Class A-3L Notes and Class B-1L Notes only.

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ISSUED BY THE UNITED STATES DEPARTMENT OF LABOR (OR, IN THE CASE OF A GOVERNMENTAL OR CHURCH PLAN, WILL NOT RESULT IN A NON-EXEMPT VIOLATION OF ANY SIMILAR LAW). THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN MAY NOT BE HELD BY A U.S. PERSON AT ANY TIME. THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED TO A PERSON THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A RESTRICTED NOTE OR (IN CERTAIN LIMITED CIRCUMSTANCES) A DEFINITIVE NOTE ONLY (IN THE CASE OF AN INTEREST IN A RESTRICTED GLOBAL NOTE) IN ACCORDANCE WITH APPLICABLE PROCEDURES (AS SPECIFIED IN THE INDENTURE) AND UPON RECEIPT BY THE NOTE REGISTRAR OF A TRANSFER CERTIFICATE BY THE TRANSFEROR AND THE TRANSFEREE SUBSTANTIALLY IN THE FORM SPECIFIED IN THE INDENTURE. THIS NOTE (OR AN INTEREST HEREIN) MAY NOT BE TRANSFERRED UNLESS, AFTER GIVING EFFECT TO THE TRANSFER, THE TRANSFEREE (AND IF THE TRANSFEROR RETAINS AN INTEREST HEREIN, THE TRANSFEROR) IS HOLDING A PRINCIPAL AMOUNT THAT IS EQUAL TO U.S.$200,000 OR INTEGRAL MULTIPLES OF U.S.$1.00 IN EXCESS THEREOF. THE PURCHASER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN WILL BE DEEMED TO UNDERSTAND AND AGREE THAT, IF ANY PURPORTED TRANSFER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN TO A PURCHASER DOES NOT COMPLY WITH THE REQUIREMENTS SET FORTH IN THIS NOTE OR THE INDENTURE, THEN THE PURPORTED TRANSFEROR OF THIS NOTE OR BENEFICIAL INTEREST HEREIN WILL BE REQUIRED TO CAUSE THE PURPORTED TRANSFEREE TO SURRENDER THE TRANSFERRED NOTE OR ANY BENEFICIAL INTEREST THEREIN IN RETURN FOR A REFUND OF THE CONSIDERATION PAID THEREFOR BY SUCH TRANSFEREE (TOGETHER WITH INTEREST THEREON) OR TO CAUSE THE PURPORTED TRANSFEREE TO DISPOSE OF SUCH NOTE OR BENEFICIAL INTEREST PROMPTLY IN ONE OR MORE OPEN MARKET SALES TO ONE OR MORE PERSONS EACH OF WHICH SATISFIES THE REQUIREMENTS OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS SET FORTH IN SECTION 2.4 OF THE INDENTURE, AND SUCH PURPORTED TRANSFEROR WILL TAKE, AND WILL CAUSE SUCH TRANSFEREE TO TAKE, ALL FURTHER ACTION NECESSARY OR DESIRABLE, IN THE JUDGMENT OF THE ISSUER, TO ENSURE THAT SUCH NOTE OR ANY BENEFICIAL INTEREST THEREIN IS HELD BY PERSONS IN COMPLIANCE THEREWITH. ANY TRANSFER IN VIOLATION OF THE FOREGOING PROVISIONS OF THIS NOTE OR THE INDENTURE 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 ISSUERS, THE TRUSTEE OR ANY INTERMEDIARY. IF, NOTWITHSTANDING THE RESTRICTIONS SET FORTH IN THIS NOTE OR THE INDENTURE, EITHER OF THE ISSUERS DETERMINES THAT ANY HOLDER OF THIS NOTE OR AN INTEREST HEREIN IS A U.S. PERSON, THE ISSUERS WILL REQUIRE, BY NOTICE TO SUCH HOLDER THAT SUCH HOLDER SELL ALL OF ITS RIGHT, TITLE AND INTEREST TO THIS NOTE (OR AN INTEREST HEREIN) TO A PERSON THAT IS NOT A U.S. PERSON (OR TO A PERSON THAT WILL ACQUIRE SUCH NOTES IN THE FORM OF RESTRICTED NOTES AND CERTIFIES THAT IT IS BOTH (1) A QUALIFIED INSTITUTIONAL BUYER AND (2) A QUALIFIED PURCHASER), WITH SUCH SALE TO

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BE EFFECTED WITHIN 30 DAYS AFTER NOTICE OF SUCH SALE REQUIREMENT IS GIVEN. IF SUCH HOLDER FAILS TO EFFECT THE TRANSFER REQUIRED WITHIN SUCH 30-DAY PERIOD, (A) UPON WRITTEN DIRECTION FROM THE COLLATERAL MANAGER OR THE ISSUER, THE TRUSTEE WILL, AND IS HEREBY IRREVOCABLY AUTHORIZED BY SUCH HOLDER TO, CAUSE ITS INTEREST IN THIS NOTE TO BE TRANSFERRED IN A COMMERCIALLY REASONABLE SALE ARRANGED BY THE COLLATERAL MANAGER (AND CONDUCTED BY THE TRUSTEE OR AN INVESTMENT BANK SELECTED BY THE TRUSTEE IN ACCORDANCE WITH SECTION 9-610(b) OF THE UCC AS APPLIED TO SECURITIES THAT ARE SOLD ON A RECOGNIZED MARKET OR THAT MAY DECLINE SPEEDILY IN VALUE) TO A PERSON THAT CERTIFIES TO THE TRUSTEE, THE ISSUERS AND THE COLLATERAL MANAGER, IN CONNECTION WITH SUCH TRANSFER, THAT SUCH PERSON IS NOT A U.S. PERSON (OR TO A PERSON THAT WILL ACQUIRE SUCH NOTES IN THE FORM OF RESTRICTED NOTES AND CERTIFIES THAT IT IS BOTH (1) A QUALIFIED INSTITUTIONAL BUYER AND (2) A QUALIFIED PURCHASER), AND (Y) PENDING SUCH TRANSFER, NO FURTHER PAYMENTS WILL BE MADE IN RESPECT OF SUCH HOLDER'S INTEREST IN THIS NOTE, AND SUCH HOLDER'S INTEREST IN THIS NOTE WILL BE DEEMED NOT TO BE OUTSTANDING FOR THE PURPOSE OF ANY VOTE OR CONSENT OF THE NOTEHOLDERS. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE NOTE REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TO THE EXTENT APPLICABLE TO THE ISSUERS, THE ISSUERS, TOGETHER WITH THE TRUSTEE, MAY IMPOSE ADDITIONAL TRANSFER RESTRICTIONS TO COMPLY WITH THE USA PATRIOT ACT AND OTHER SIMILAR LAWS AND REGULATIONS, AND EACH BENEFICIAL OWNER OF THIS NOTE AGREES TO COMPLY WITH SUCH TRANSFER RESTRICTIONS. The purchaser understands and agrees that a legend in substantially the following form will be placed on each certificate representing any Restricted Global Note: THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION, AND MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) (1) TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), PURCHASING FOR ITS OWN ACCOUNT, TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON THE EXEMPTION FROM SECURITIES ACT REGISTRATION PROVIDED BY RULE 144A OR (2) TO A NON-U.S. PERSON THAT TAKES DELIVERY OF THIS NOTE (OR AN INTEREST HEREIN) IN THE FORM OF A REGULATION S NOTE IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH

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REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (B) IN COMPLIANCE WITH THE CERTIFICATION AND OTHER REQUIREMENTS SPECIFIED IN THE INDENTURE REFERRED TO HEREIN AND (C) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND ANY OTHER RELEVANT JURISDICTION. NEITHER OF THE ISSUERS NOR THE POOL OF COLLATERAL HAS BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"). NO TRANSFER OF THIS NOTE (OR AN INTEREST HEREIN) MAY BE MADE (AND NONE OF THE ISSUERS, THE TRUSTEE OR THE NOTE REGISTRAR WILL RECOGNIZE ANY SUCH TRANSFER) IF (A) SUCH TRANSFER WOULD BE MADE TO A TRANSFEREE THAT IS A U.S. PERSON (WITHIN THE MEANING OF REGULATION S) BUT IS NOT A "QUALIFIED PURCHASER" AS DEFINED IN SECTION 2(a)(51)(A) OF THE INVESTMENT COMPANY ACT AND RELATED RULES , (2) A "KNOWLEDGEABLE EMPLOYEE", AS DEFINED IN RULE 3c-5 UNDER THE INVESTMENT COMPANY ACT, WITH RESPECT TO THE ISSUER OR (3) A COMPANY EACH OF WHOSE BENEFICIAL OWNERS IS A QUALIFIED PURCHASER OR KNOWLEDGEABLE EMPLOYEE WITH RESPECT TO THE ISSUER (COLLECTIVELY, A "QUALIFIED PURCHASER") TAKING DELIVERY OF THIS NOTE (OR AN INTEREST HEREIN) IN THE FORM OF A RESTRICTED NOTE, (B) SUCH TRANSFER WOULD HAVE THE EFFECT OF REQUIRING EITHER OF THE ISSUERS OR THE POOL OF COLLATERAL TO REGISTER AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OR (C) SUCH TRANSFER WOULD BE MADE TO A TRANSFEREE THAT IS A U.S. PERSON AND A FLOW-THROUGH INVESTMENT VEHICLE OTHER THAN A QUALIFYING INVESTMENT VEHICLE (EACH AS DEFINED IN THE INDENTURE) THAT TAKES DELIVERY OF THIS NOTE (OR AN INTEREST HEREIN) IN THE FORM OF A RESTRICTED NOTE. [THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE, AMOUNT OF OID, ISSUE DATE AND YIELD TO MATURITY OF THIS NOTE MAY BE OBTAINED BY WRITING TO THE ISSUER AT ACA ABS 2006-1, LIMITED, C/O MAPLES FINANCE LIMITED, P.O. BOX 1093GT, GRAND CAYMAN, CAYMAN ISLANDS.]2 BY ACCEPTING THIS NOTE, EACH HOLDER HEREOF IS DEEMED TO REPRESENT AND WARRANT (OR IN CERTAIN CIRCUMSTANCES REQUIRED TO CERTIFY) EITHER THAT (A) IT IS NOT (AND, FOR SO LONG AS IT HOLDS THIS NOTE OR ANY INTEREST THEREIN, WILL NOT BE), AND IS NOT INVESTING THE ASSETS OF (AND, FOR SO LONG AS IT HOLDS THIS NOTE OR ANY INTEREST THEREIN, WILL NOT BE INVESTING THE ASSETS OF), AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE UNITED STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO TITLE I OF ERISA, A PLAN (AS DEFINED IN SECTION 4975(e)(1) OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")), THAT IS SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 4975 OF THE CODE OR A GOVERNMENTAL OR CHURCH PLAN THAT IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SIMILAR TO THE FOREGOING PROVISIONS OF ERISA AND THE CODE (A "SIMILAR LAW"), OR (B) ITS PURCHASE AND OWNERSHIP OF THIS
2

For the Class A-3L Notes and Class B-1L Notes only.

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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 NON-EXEMPT VIOLATION OF ANY SIMILAR LAW). THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED TO A PERSON THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S NOTE OR (IN CERTAIN LIMITED CIRCUMSTANCES) A DEFINITIVE NOTE ONLY (IN THE CASE OF AN INTEREST IN A REGULATION S NOTE) IN ACCORDANCE WITH APPLICABLE PROCEDURES (AS SPECIFIED IN THE INDENTURE) AND UPON RECEIPT BY THE NOTE REGISTRAR OF (A) A TRANSFER CERTIFICATE FROM THE TRANSFEROR SUBSTANTIALLY IN THE FORM SPECIFIED IN THE INDENTURE AND (B) A WRITTEN ORDER GIVEN IN ACCORDANCE WITH THE APPLICABLE PROCEDURES UTILIZED OR IMPOSED FROM TIME TO TIME BY DTC, EUROCLEAR AND/OR CLEARSTREAM (IN THE CASE OF A REGULATION S NOTE). THIS NOTE (OR AN INTEREST HEREIN) MAY NOT BE TRANSFERRED UNLESS, AFTER GIVING EFFECT TO THE TRANSFER, THE TRANSFEREE (AND IF THE TRANSFEROR RETAINS AN INTEREST HEREIN, THE TRANSFEROR) IS HOLDING A PRINCIPAL AMOUNT THAT IS EQUAL TO U.S.$200,000 OR INTEGRAL MULTIPLES OF U.S.$1.00 IN EXCESS THEREOF. THE PURCHASER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN WILL BE DEEMED TO UNDERSTAND AND AGREE THAT, IF ANY PURPORTED TRANSFER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN TO A PURCHASER DOES NOT COMPLY WITH THE REQUIREMENTS SET FORTH IN THE INDENTURE OR THIS NOTE, THEN THE PURPORTED TRANSFEROR OF THIS NOTE OR BENEFICIAL INTEREST HEREIN WILL BE REQUIRED TO CAUSE THE PURPORTED TRANSFEREE TO SURRENDER THE TRANSFERRED NOTE OR ANY BENEFICIAL INTEREST THEREIN IN RETURN FOR A REFUND OF THE CONSIDERATION PAID THEREFOR BY SUCH TRANSFEREE (TOGETHER WITH INTEREST THEREON) OR TO CAUSE THE PURPORTED TRANSFEREE TO DISPOSE OF SUCH NOTE OR BENEFICIAL INTEREST PROMPTLY IN ONE OR MORE OPEN MARKET SALES TO ONE OR MORE PERSONS EACH OF WHICH SATISFIES THE REQUIREMENTS OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS SET FORTH IN SECTION 2.4 OF THE INDENTURE, AND SUCH PURPORTED TRANSFEROR WILL TAKE, AND WILL CAUSE SUCH TRANSFEREE TO TAKE, ALL FURTHER ACTION NECESSARY OR DESIRABLE, IN THE JUDGMENT OF THE ISSUER, TO ENSURE THAT SUCH NOTE OR ANY BENEFICIAL INTEREST THEREIN IS HELD BY PERSONS IN COMPLIANCE THEREWITH. ANY TRANSFER IN VIOLATION OF THE FOREGOING PROVISIONS OF THIS NOTE OR THE INDENTURE 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 ISSUERS, THE TRUSTEE OR ANY INTERMEDIARY. IF, NOTWITHSTANDING THE RESTRICTIONS SET FORTH IN THIS NOTE OR THE INDENTURE, EITHER OF THE ISSUERS DETERMINES THAT ANY HOLDER OF THIS NOTE OR AN INTEREST HEREIN IS NOT BOTH A QUALIFIED INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER, THE ISSUERS WILL REQUIRE, BY NOTICE TO SUCH HOLDER THAT SUCH HOLDER SELL ALL OF ITS RIGHT, TITLE AND INTEREST TO THIS NOTE (OR INTEREST HEREIN) TO A PERSON THAT IS BOTH (1) A

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QUALIFIED INSTITUTIONAL BUYER AND (2) A QUALIFIED PURCHASER, WITH SUCH SALE TO BE EFFECTED WITHIN 30 DAYS AFTER NOTICE OF SUCH SALE REQUIREMENT IS GIVEN. IF SUCH HOLDER FAILS TO EFFECT THE TRANSFER REQUIRED WITHIN SUCH 30-DAY PERIOD, (X) UPON WRITTEN DIRECTION FROM THE COLLATERAL MANAGER OR THE ISSUER, THE TRUSTEE WILL, AND IS HEREBY IRREVOCABLY AUTHORIZED BY SUCH HOLDER TO, CAUSE ITS INTEREST IN THIS NOTE TO BE TRANSFERRED IN A COMMERCIALLY REASONABLE SALE ARRANGED BY THE COLLATERAL MANAGER (AND CONDUCTED BY THE TRUSTEE OR AN INVESTMENT BANK SELECTED BY THE TRUSTEE IN ACCORDANCE WITH SECTION 9-610(b) OF THE UCC AS APPLIED TO SECURITIES THAT ARE SOLD ON A RECOGNIZED MARKET OR THAT MAY DECLINE SPEEDILY IN VALUE) TO A PERSON THAT CERTIFIES TO THE TRUSTEE, THE ISSUERS AND THE COLLATERAL MANAGER, IN CONNECTION WITH SUCH TRANSFER, THAT SUCH PERSON IS BOTH (1) A QUALIFIED INSTITUTIONAL BUYER AND (2) A QUALIFIED PURCHASER, AND (Y) PENDING SUCH TRANSFER, NO FURTHER PAYMENTS WILL BE MADE IN RESPECT OF SUCH HOLDER'S INTEREST IN THIS NOTE, AND SUCH HOLDER'S INTEREST IN THIS NOTE WILL BE DEEMED NOT TO BE OUTSTANDING FOR THE PURPOSE OF ANY VOTE OR CONSENT OF THE NOTEHOLDERS. IN ADDITION, NO TRANSFER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN MAY BE MADE (AND NONE OF THE ISSUER, THE TRUSTEE OR THE NOTE REGISTRAR WILL RECOGNIZE ANY SUCH TRANSFER) IF SUCH TRANSFER WOULD BE MADE TO A TRANSFEREE THAT IS A U.S. RESIDENT AND IS (A) A DEALER DESCRIBED IN PARAGRAPH (a)(1)(ii) OF RULE 144A THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN U.S.$25,000,000 IN SECURITIES OF ISSUERS THAT ARE NOT AFFILIATED PERSONS OF THE DEALER OR (B) A PLAN REFERRED TO IN PARAGRAPH (a)(1)(i)(D) OR (a)(1)(i)(E) OF RULE 144A OR A TRUST FUND REFERRED TO IN PARAGRAPH (a)(1)(i)(F) OF RULE 144A THAT HOLDS THE ASSETS OF SUCH A PLAN, UNLESS INVESTMENT DECISIONS WITH RESPECT TO THE PLAN ARE MADE SOLELY BY THE FIDUCIARY, TRUSTEE OR SPONSOR OF SUCH PLAN. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE NOTE REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAMES AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION THAT IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT. TO THE EXTENT APPLICABLE TO THE ISSUERS, THE ISSUERS, TOGETHER WITH THE TRUSTEE, MAY IMPOSE ADDITIONAL TRANSFER RESTRICTIONS TO COMPLY WITH THE USA PATRIOT ACT AND OTHER SIMILAR LAWS AND REGULATIONS,

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AND EACH BENEFICIAL OWNER OF THIS NOTE AGREES TO COMPLY WITH SUCH TRANSFER RESTRICTIONS. (17) Legends for Preference Securities The purchaser understands and agrees that a legend in substantially the following form will be placed on each certificate representing any Preference Securities: THE PREFERENCE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION, AND MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A)(1) TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), PURCHASING FOR ITS OWN ACCOUNT, TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON THE EXEMPTION FROM SECURITIES ACT REGISTRATION PROVIDED BY RULE 144A, (2) TO AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE SECURITIES ACT IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE ISSUER MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT), OR (3) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (B) IN COMPLIANCE WITH THE CERTIFICATION AND OTHER REQUIREMENTS SPECIFIED IN THE ISSUER CHARTER AND THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT REFERRED TO HEREIN AND (C) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION. NEITHER THE ISSUER NOR THE POOL OF COLLATERAL HAS BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"). NO TRANSFER OF A PREFERENCE SECURITY (OR ANY INTEREST THEREIN) MAY BE MADE (AND NEITHER THE ISSUER NOR THE SECURITY REGISTRAR WILL RECOGNIZE ANY SUCH TRANSFER) IF (A) SUCH TRANSFER WOULD BE MADE TO A TRANSFEREE THAT IS A U.S. PERSON THAT IS NOT (1) A "QUALIFIED PURCHASER" AS DEFINED IN SECTION 2(a)(51)(A) OF THE INVESTMENT COMPANY ACT AND RELATED RULES, (2) A "KNOWLEDGEABLE EMPLOYEE", AS DEFINED IN RULE 3c-5 UNDER THE INVESTMENT COMPANY ACT, WITH RESPECT TO THE ISSUER OR (3) A COMPANY EACH OF WHOSE BENEFICIAL OWNERS IS A "QUALIFIED PURCHASER" OR "KNOWLEDGEABLE EMPLOYEE" WITH RESPECT TO THE ISSUER (COLLECTIVELY, A "QUALIFIED PURCHASER"), (B) SUCH TRANSFER WOULD HAVE THE EFFECT OF REQUIRING THE ISSUER OR THE POOL OF COLLATERAL TO REGISTER AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT, (C) SUCH TRANSFER WOULD BE MADE TO A TRANSFEREE THAT IS A U.S. PERSON THAT IS A FLOW-THROUGH INVESTMENT VEHICLE OTHER THAN A QUALIFYING INVESTMENT VEHICLE (EACH AS DEFINED IN THE TRANSFER CERTIFICATE ATTACHED TO THE PREFERENCE SECURITY

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PAYING AGENCY AGREEMENT) OR (D) EXCEPT IN THE CASE OF A TRANSFER OF AN INTEREST IN A REGULATION S GLOBAL PREFERENCE SECURITY TO A TRANSFEREE THAT IS ACQUIRING AN INTEREST IN A REGULATION S GLOBAL PREFERENCE SECURITY, SUCH TRANSFER WOULD BE MADE TO A PERSON THAT IS OTHERWISE UNABLE TO MAKE THE CERTIFICATIONS AND REPRESENTATIONS REQUIRED BY THE APPLICABLE TRANSFER CERTIFICATE ATTACHED AS AN EXHIBIT TO THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT REFERRED TO HEREIN. EACH ORIGINAL PURCHASER AND EACH TRANSFEREE OF THE PREFERENCE SECURITIES REPRESENTED HEREBY OR AN INTEREST HEREIN WILL BE REQUIRED TO CERTIFY (OR IN CERTAIN CIRCUMSTANCES WILL BE DEEMED TO REPRESENT AND WARRANT) AS TO WHETHER OR NOT IT IS A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON. A "BENEFIT PLAN INVESTOR" INCLUDES AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF ERISA), WHETHER OR NOT IT IS SUBJECT TO TITLE I OF ERISA, A "PLAN" (AS DEFINED IN SECTION 4975(e)(1) OF THE CODE), ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF AN EMPLOYEE BENEFIT PLAN'S OR PLAN'S INVESTMENT IN THE ENTITY, AND AN INSURANCE COMPANY GENERAL ACCOUNT ANY OF THE UNDERLYING ASSETS OF WHICH CONSTITUTE "PLAN ASSETS" UNDER SECTION 401(c) OF ERISA (AND A WHOLLY OWNED SUBSIDIARY OF SUCH GENERAL ACCOUNT). A "CONTROLLING PERSON" IS A PERSON OTHER THAN A BENEFIT PLAN INVESTOR THAT HAS DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE ASSETS OF THE ISSUER, OR THAT PROVIDES INVESTMENT ADVICE FOR A FEE, DIRECT OR INDIRECT, WITH RESPECT TO SUCH ASSETS, OR THAT IS AN AFFILIATE OF ANY SUCH PERSON. NO REGULATION S GLOBAL PREFERENCE SECURITY MAY BE ACQUIRED BY OR TRANSFERRED TO A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON. NO TRANSFER OF A PREFERENCE SECURITY MAY BE MADE (AND NEITHER THE ISSUER NOR THE SECURITY REGISTRAR WILL RECOGNIZE ANY SUCH TRANSFER) IF (A) AFTER GIVING EFFECT TO SUCH TRANSFER, 25% OR MORE (AS DETERMINED UNDER THE PLAN ASSET REGULATION OF THE U.S. DEPARTMENT OF LABOR, 29 C.F.R. SECTION 2510.3-101(f)) OF THE PREFERENCE SECURITIES WOULD BE HELD BY BENEFIT PLAN INVESTORS, DISREGARDING PREFERENCE SECURITIES HELD BY CONTROLLING PERSONS OR (B) IN THE CASE OF A TRANSFEREE THAT ACQUIRES AN INTEREST IN A REGULATION S GLOBAL PREFERENCE SECURITY, UNLESS THE TRANSFEREE EXECUTES AND DELIVERS TO THE PREFERENCE SECURITY PAYING AGENT, THE ISSUER AND THE COLLATERAL MANAGER A LETTER IN THE FORM ATTACHED AS A SEPARATE EXHIBIT TO THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT TO THE EFFECT THAT, INTER ALIA, SUCH TRANSFEREE (1) IS NOT A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON AND (2) WILL NOT TRANSFER SUCH INTEREST EXCEPT IN COMPLIANCE WITH THE TRANSFER RESTRICTIONS SET FORTH IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT (INCLUDING THE REQUIREMENT THAT ANY SUBSEQUENT TRANSFEREE OF AN INTEREST IN REGULATION S GLOBAL PREFERENCE SECURITIES EXECUTE AND DELIVER SUCH LETTER AS A CONDITION TO ANY SUBSEQUENT TRANSFER). NEITHER THE PREFERENCE SECURITIES REPRESENTED HEREBY NOR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED UNLESS, AFTER GIVING

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EFFECT TO THE TRANSFER, THE TRANSFEREE (AND IF THE TRANSFEROR RETAINS AN INTEREST HEREIN, THE TRANSFEROR) IS HOLDING 200,000 PREFERENCE SECURITIES OR INTEGRAL MULTIPLES OF ONE PREFERENCE SECURITY IN EXCESS THEREOF. THE PREFERENCE SECURITIES REPRESENTED HEREBY OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED TO A PERSON THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A RESTRICTED PREFERENCE SECURITY ONLY UPON RECEIPT BY THE PREFERENCE SECURITY PAYING AGENT OF A TRANSFER CERTIFICATE BY THE TRANSFEROR AND THE TRANSFEREE SUBSTANTIALLY IN THE FORM SPECIFIED IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT. THE PREFERENCE SECURITIES REPRESENTED HEREBY OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED TO A PERSON THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S PREFERENCE SECURITY ONLY UPON RECEIPT BY THE PREFERENCE SECURITY PAYING AGENT OF (A) A TRANSFER CERTIFICATE (IF APPLICABLE) BY THE TRANSFEROR AND THE TRANSFEREE SUBSTANTIALLY IN THE FORM SPECIFIED IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT OR (B) A LETTER FROM THE TRANSFEREE IN THE FORM ATTACHED AS A SEPARATE EXHIBIT TO THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT TO THE EFFECT THAT, INTER ALIA, SUCH TRANSFEREE (1) IS NOT A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON AND (2) WILL NOT TRANSFER SUCH INTEREST EXCEPT IN COMPLIANCE WITH THE TRANSFER RESTRICTIONS SET FORTH IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT (INCLUDING THE REQUIREMENT THAT ANY SUBSEQUENT TRANSFEREE OF AN INTEREST IN REGULATION S GLOBAL PREFERENCE SECURITIES EXECUTE AND DELIVER SUCH LETTER AS A CONDITION TO ANY SUBSEQUENT TRANSFER). ACCORDINGLY, AN INVESTOR IN THE PREFERENCE SECURITIES MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. The following shall also be inserted in the case of Restricted Preference Securities: BY ACCEPTING THE PREFERENCE SECURITIES REPRESENTED HEREBY, EACH HOLDER HEREOF THAT IS A BENEFIT PLAN INVESTOR SUBJECT TO TITLE I OF ERISA, THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 4975 OF THE CODE OR ANY SIMILAR LAW WILL BE REQUIRED TO CERTIFY THAT ITS INVESTMENT IN PREFERENCE SECURITIES 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 NON-EXEMPT VIOLATION OF ANY SIMILAR LAW). IF, NOTWITHSTANDING THE RESTRICTIONS SET FORTH IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, THE ISSUER DETERMINES THAT THE HOLDER OF THE PREFERENCE SECURITIES REPRESENTED HEREBY REPRESENTED IN A SUBSCRIPTION AGREEMENT, INVESTOR LETTER OR TRANSFER CERTIFICATE THAT IT WAS NOT A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON BUT ACTUALLY IS OR HAS BECOME A BENEFIT PLAN INVESTOR OR CONTROLLING PERSON, THE ISSUER WILL REQUIRE, BY NOTICE TO SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON, THAT SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON SELL ALL OF ITS RIGHT, TITLE AND INTEREST IN OR TO THE PREFERENCE SECURITIES REPRESENTED HEREBY IN ACCORDANCE WITH THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, WITH SUCH SALE TO BE EFFECTED WITHIN 30 DAYS AFTER NOTICE OF SUCH SALE REQUIREMENT IS

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GIVEN. IF SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON FAILS TO EFFECT THE TRANSFER REQUIRED WITHIN SUCH 30-DAY PERIOD, (X) UPON WRITTEN DIRECTION FROM THE ISSUER (OR THE COLLATERAL MANAGER ON ITS BEHALF), THE PREFERENCE SECURITY PAYING AGENT WILL, AND IS HEREBY IRREVOCABLY AUTHORIZED BY SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON TO, CAUSE THE PREFERENCE SECURITIES REPRESENTED HEREBY TO BE TRANSFERRED IN A COMMERCIALLY REASONABLE SALE ARRANGED BY THE COLLATERAL MANAGER (AND CONDUCTED BY THE PREFERENCE SECURITY PAYING AGENT OR AN INVESTMENT BANK SELECTED BY THE PREFERENCE SECURITY PAYING AGENT (THE FEES OF WHICH FIRM ARE TO BE PAID EXCLUSIVELY FROM THE PROCEEDS OF SUCH SALE) IN ACCORDANCE WITH SECTION 9-610(B) OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK AS APPLIED TO SECURITIES THAT ARE SOLD ON A RECOGNIZED MARKET OR THAT MAY DECLINE SPEEDILY IN VALUE) TO A PERSON THAT CERTIFIES TO THE PREFERENCE SECURITY PAYING AGENT, THE ISSUER AND THE COLLATERAL MANAGER, IN CONNECTION WITH SUCH TRANSFER, THAT SUCH PERSON QUALIFIES AS A PURCHASER OF SUCH PREFERENCE SECURITIES PURSUANT TO THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, AND (Y) PENDING SUCH TRANSFER, NO FURTHER PAYMENTS WILL BE MADE IN RESPECT OF THE PREFERENCE SECURITIES REPRESENTED HEREBY, AND THE PREFERENCE SECURITIES REPRESENTED HEREBY WILL BE DEEMED NOT TO BE OUTSTANDING FOR THE PURPOSES OF ANY VOTE, CONSENT OR DIRECTION OF THE HOLDERS OF THE PREFERENCE SECURITIES AND WILL NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF CALCULATING ANY QUORUM OR MAJORITY REQUIREMENTS RELATING THERETO, AND SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON WILL NOT BE ENTITLED TO EXERCISE ANY VOTING, CONSENT OR DIRECTION RIGHTS IN RESPECT OF SUCH PREFERENCE SECURITIES. IF, NOTWITHSTANDING THE RESTRICTIONS SET FORTH IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, THE ISSUER DETERMINES THAT ANY HOLDER OF THE PREFERENCE SECURITIES REPRESENTED HEREBY IS NOT BOTH (A) A QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INVESTOR AND (B) A QUALIFIED PURCHASER, THE ISSUER WILL REQUIRE, BY NOTICE TO SUCH HOLDER THAT SUCH HOLDER SELL ALL OF ITS RIGHT, TITLE AND INTEREST TO THE PREFERENCE SECURITIES REPRESENTED HEREBY (1) TO A PERSON THAT IS BOTH (a) A QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INVESTOR AND (b) A QUALIFIED PURCHASER OR (2) TO A PERSON THAT (A) IS NOT A U.S. PERSON AND (B) WILL ACQUIRE SUCH PREFERENCE SECURITIES IN THE FORM OF REGULATION S PREFERENCE SECURITIES IN AN OFFSHORE TRANSACTION IN RELIANCE ON REGULATION S, WITH SUCH SALE TO BE EFFECTED WITHIN 30 DAYS AFTER NOTICE OF SUCH SALE REQUIREMENT IS GIVEN. IF SUCH HOLDER FAILS TO EFFECT THE TRANSFER REQUIRED WITHIN SUCH 30-DAY PERIOD, (X) UPON WRITTEN DIRECTION FROM THE ISSUER (OR THE COLLATERAL MANAGER ON ITS BEHALF), THE PREFERENCE SECURITY PAYING AGENT WILL, AND IS HEREBY IRREVOCABLY AUTHORIZED BY SUCH HOLDER TO, CAUSE THE PREFERENCE SECURITIES REPRESENTED HEREBY TO BE TRANSFERRED IN A COMMERCIALLY REASONABLE SALE ARRANGED BY THE COLLATERAL MANAGER (AND CONDUCTED BY THE PREFERENCE SECURITY PAYING AGENT OR AN INVESTMENT BANK SELECTED BY THE PREFERENCE SECURITY PAYING AGENT IN ACCORDANCE WITH SECTION 9-610(b) OF THE UNIFORM COMMERCIAL

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CODE AS IN EFFECT IN THE STATE OF NEW YORK AS APPLIED TO SECURITIES THAT ARE SOLD ON A RECOGNIZED MARKET OR THAT MAY DECLINE SPEEDILY IN VALUE) TO A PERSON THAT CERTIFIES TO THE PREFERENCE SECURITY PAYING AGENT, THE ISSUER AND THE COLLATERAL MANAGER, IN CONNECTION WITH SUCH TRANSFER, (A) THAT SUCH PERSON IS BOTH (1) A QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INVESTOR AND (2) A QUALIFIED PURCHASER OR (B) THAT SUCH PERSON (1) IS NOT A U.S. PERSON AND (2) IS ACQUIRING SUCH PREFERENCE SECURITIES IN THE FORM OF REGULATION S PREFERENCE SECURITIES IN AN OFFSHORE TRANSACTION IN RELIANCE ON REGULATION S, AND (Y) PENDING SUCH TRANSFER, NO FURTHER PAYMENTS WILL BE MADE IN RESPECT OF THE PREFERENCE SECURITIES REPRESENTED HEREBY, AND THE PREFERENCE SECURITIES REPRESENTED HEREBY WILL BE DEEMED NOT TO BE OUTSTANDING FOR THE PURPOSE OF ANY VOTE, CONSENT OR DIRECTION OF THE HOLDERS OF THE PREFERENCE SECURITIES AND WILL NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF CALCULATING ANY QUORUM OR MAJORITY REQUIREMENTS RELATING THERETO, AND SUCH HOLDER WILL NOT BE ENTITLED TO EXERCISE ANY VOTING, CONSENT OR DIRECTION RIGHTS IN RESPECT OF SUCH PREFERENCE SECURITIES. IN ADDITION, NO TRANSFER OF THE PREFERENCE SECURITIES REPRESENTED HEREBY MAY BE MADE (AND NONE OF THE ISSUER, THE PREFERENCE SECURITY PAYING AGENT OR THE SECURITY REGISTRAR WILL RECOGNIZE ANY SUCH TRANSFER) IF SUCH TRANSFER WOULD BE MADE TO A TRANSFEREE THAT IS A U.S. RESIDENT AND IS (A) A DEALER DESCRIBED IN PARAGRAPH (a)(1)(ii) OF RULE 144A THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN U.S.$25,000,000 IN SECURITIES OF ISSUERS THAT ARE NOT AFFILIATED PERSONS OF THE DEALER OR (B) A PLAN REFERRED TO IN PARAGRAPH (a)(1)(i)(D) OR (a)(1)(i)(E) OF RULE 144A OR A TRUST FUND REFERRED TO IN PARAGRAPH (a)(1)(i)(F) OF RULE 144A THAT HOLDS THE ASSETS OF SUCH A PLAN, UNLESS INVESTMENT DECISIONS WITH RESPECT TO THE PLAN ARE MADE SOLELY BY THE FIDUCIARY, TRUSTEE OR SPONSOR OF SUCH PLAN. The following shall also be inserted in the case of Regulation S Global Preference Securities: IF, NOTWITHSTANDING THE RESTRICTIONS SET FORTH IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, THE ISSUER DETERMINES THAT A BENEFIT PLAN INVESTOR OR A CONTROLLING PERSON HAS ACQUIRED AN INTEREST IN THE PREFERENCE SECURITIES REPRESENTED HEREBY, WHETHER DIRECTLY FROM THE ISSUER OR AS A TRANSFEREE IN VIOLATION OF THE RESTRICTIONS SET FORTH HEREIN AND IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT AND THE EXHIBITS THERETO, THE ISSUER WILL REQUIRE, BY NOTICE TO SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON, THAT SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON SELL ALL OF ITS RIGHT, TITLE AND INTEREST IN OR TO THE PREFERENCE SECURITIES REPRESENTED HEREBY IN ACCORDANCE WITH THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, WITH SUCH SALE TO BE EFFECTED WITHIN 30 DAYS AFTER NOTICE OF SUCH SALE REQUIREMENT IS GIVEN. IF SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON FAILS TO EFFECT THE TRANSFER REQUIRED WITHIN SUCH 30-DAY PERIOD, (X) UPON WRITTEN DIRECTION FROM THE ISSUER (OR THE COLLATERAL MANAGER ON ITS BEHALF), THE PREFERENCE SECURITY PAYING AGENT WILL, AND IS HEREBY IRREVOCABLY AUTHORIZED BY

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SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON TO, CAUSE ITS INTEREST IN THE PREFERENCE SECURITIES REPRESENTED HEREBY TO BE TRANSFERRED IN A COMMERCIALLY REASONABLE SALE ARRANGED BY THE COLLATERAL MANAGER (AND CONDUCTED BY THE PREFERENCE SECURITY PAYING AGENT OR AN INVESTMENT BANK SELECTED BY THE PREFERENCE SECURITY PAYING AGENT (THE FEES OF WHICH FIRM ARE TO BE PAID EXCLUSIVELY FROM THE PROCEEDS OF SUCH SALE) IN ACCORDANCE WITH SECTION 9-610(B) OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK AS APPLIED TO SECURITIES THAT ARE SOLD ON A RECOGNIZED MARKET OR THAT MAY DECLINE SPEEDILY IN VALUE) TO A PERSON THAT CERTIFIES TO THE PREFERENCE SECURITY PAYING AGENT, THE ISSUER AND THE COLLATERAL MANAGER, IN CONNECTION WITH SUCH TRANSFER, THAT SUCH PERSON QUALIFIES AS A PURCHASER OF SUCH PREFERENCE SECURITIES PURSUANT TO THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, AND (Y) PENDING SUCH TRANSFER, NO FURTHER PAYMENTS WILL BE MADE IN RESPECT OF THE INTEREST IN THE PREFERENCE SECURITIES REPRESENTED HEREBY HELD BY SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON, AND SUCH INTEREST IN THE PREFERENCE SECURITIES REPRESENTED HEREBY WILL BE DEEMED NOT TO BE OUTSTANDING FOR THE PURPOSES OF ANY VOTE, CONSENT OR DIRECTION OF THE HOLDERS OF THE PREFERENCE SECURITIES AND WILL NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF CALCULATING ANY QUORUM OR MAJORITY REQUIREMENTS RELATING THERETO, AND SUCH BENEFIT PLAN INVESTOR OR CONTROLLING PERSON WILL NOT BE ENTITLED TO EXERCISE ANY VOTING, CONSENT OR DIRECTION RIGHTS IN RESPECT OF SUCH PREFERENCE SECURITIES. IF, NOTWITHSTANDING THE RESTRICTIONS SET FORTH IN THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, THE ISSUER DETERMINES THAT ANY HOLDER OF THE PREFERENCE SECURITIES REPRESENTED HEREBY OR AN INTEREST HEREIN IS A U.S. PERSON (WITHIN THE MEANING OF REGULATION S), THE ISSUER WILL REQUIRE, BY NOTICE TO SUCH HOLDER, THAT SUCH HOLDER SELL ALL OF ITS RIGHT, TITLE AND INTEREST TO THE PREFERENCE SECURITIES REPRESENTED HEREBY (OR INTEREST HEREIN) (A) TO A PERSON THAT (1) IS NOT A U.S. PERSON AND (2) WILL ACQUIRE SUCH PREFERENCE SECURITIES IN AN OFFSHORE TRANSACTION IN RELIANCE ON REGULATION S OR (B) TO A PERSON THAT (1) IS BOTH (a) A QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INVESTOR AND (b) A QUALIFIED PURCHASER AND (2) WILL ACQUIRE SUCH PREFERENCE SECURITIES IN THE FORM OF RESTRICTED PREFERENCE SECURITIES, WITH SUCH SALE TO BE EFFECTED WITHIN 30 DAYS AFTER NOTICE OF SUCH SALE REQUIREMENT IS GIVEN. IF SUCH HOLDER FAILS TO EFFECT THE TRANSFER REQUIRED WITHIN SUCH 30-DAY PERIOD, (X) UPON WRITTEN DIRECTION FROM THE ISSUER (OR THE COLLATERAL MANAGER ON ITS BEHALF), THE PREFERENCE SECURITY PAYING AGENT WILL, AND IS HEREBY IRREVOCABLY AUTHORIZED BY SUCH HOLDER TO, CAUSE SUCH HOLDER'S INTEREST IN THE PREFERENCE SECURITIES REPRESENTED HEREBY TO BE TRANSFERRED IN A COMMERCIALLY REASONABLE SALE ARRANGED BY THE COLLATERAL MANAGER (AND CONDUCTED BY THE PREFERENCE SECURITY PAYING AGENT OR AN INVESTMENT BANK SELECTED BY THE PREFERENCE SECURITY PAYING AGENT IN ACCORDANCE WITH SECTION 9-610(b) OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK AS APPLIED TO SECURITIES THAT ARE SOLD ON A RECOGNIZED MARKET OR THAT

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MAY DECLINE SPEEDILY IN VALUE) TO A PERSON THAT CERTIFIES TO THE PREFERENCE SECURITY PAYING AGENT, THE ISSUER AND THE COLLATERAL MANAGER, IN CONNECTION WITH SUCH TRANSFER, (A) THAT SUCH PERSON (1) IS NOT A U.S. PERSON AND (2) IS ACQUIRING SUCH PREFERENCE SECURITIES IN AN OFFSHORE TRANSACTION IN RELIANCE ON REGULATION S OR (B) THAT SUCH PERSON (1) IS BOTH (a) A QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INVESTOR AND (b) A QUALIFIED PURCHASER AND (2) IS ACQUIRING SUCH PREFERENCE SECURITIES IN THE FORM OF RESTRICTED PREFERENCE SECURITIES, AND (Y) PENDING SUCH TRANSFER, NO FURTHER PAYMENTS WILL BE MADE IN RESPECT OF THE INTEREST IN THE PREFERENCE SECURITIES REPRESENTED HEREBY HELD BY SUCH HOLDER, AND SUCH INTEREST IN THE PREFERENCE SECURITIES REPRESENTED HEREBY WILL BE DEEMED NOT TO BE OUTSTANDING FOR THE PURPOSE OF ANY VOTE, CONSENT OR DIRECTION OF THE HOLDERS OF THE PREFERENCE SECURITIES AND WILL NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF CALCULATING ANY QUORUM OR MAJORITY REQUIREMENTS RELATING THERETO, AND SUCH HOLDER WILL NOT BE ENTITLED TO EXERCISE ANY VOTING, CONSENT OR DIRECTION RIGHTS IN RESPECT OF SUCH PREFERENCE SECURITIES. UNLESS THIS PREFERENCE SECURITY CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE SECURITY REGISTRAR FOR REGISTRATION OF TRANSFER OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS PREFERENCE SECURITY CERTIFICATE REPRESENTS GLOBAL PREFERENCE SECURITIES DEPOSITED WITH DTC ACTING AS DEPOSITARY, AND REGISTERED IN THE NAME OF CEDE & CO., A NOMINEE OF DTC, AND CEDE & CO., AS HOLDER OF RECORD, SHALL BE ENTITLED TO RECEIVE ALL DISTRIBUTIONS, OTHER THAN THE FINAL REDEMPTION AMOUNTS, BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS. THE STATEMENTS IN THE LEGEND RELATING TO DTC SET FORTH ABOVE ARE AN INTEGRAL PART OF THE TERMS OF THESE PREFERENCE SECURITIES AND BY ACCEPTANCE THEREOF EACH HOLDER AGREES TO BE SUBJECT TO AND BOUND BY THE TERMS AND PROVISIONS SET FORTH IN SUCH LEGEND. UPON ANY SUCH EXCHANGE OR TRANSFER OF A BENEFICIAL INTEREST IN THIS PREFERENCE SECURITY CERTIFICATE FOR A REGULATION S DEFINITIVE PREFERENCE SECURITY CERTIFICATE OR FOR A RESTRICTED PREFERENCE SECURITY CERTIFICATE OR UPON ANY EXCHANGE OR TRANSFER OF A REGULATION S DEFINITIVE PREFERENCE SECURITY CERTIFICATE OR A RESTRICTED PREFERENCE SECURITY CERTIFICATE FOR AN INTEREST IN THIS PREFERENCE SECURITY CERTIFICATE IN ACCORDANCE WITH THE PREFERENCE SECURITY PAYING AGENCY AGREEMENT, THIS REGULATION S GLOBAL PREFERENCE SECURITY CERTIFICATE SHALL BE CANCELLED AND THE ISSUER SHALL ISSUE A NEW REGULATION S GLOBAL PREFERENCE CERTIFICATE (TO THE

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EXTENT REGULATION S GLOBAL PREFERENCE SECURITIES CONTINUE TO REMAIN OUTSTANDING) FOR THE AGGREGATE NUMBER OF PREFERENCE SECURITIES REPRESENTED BY THE REGULATION S GLOBAL PREFERENCE SECURITY CERTIFICATE. AN INTEREST IN THE PREFERENCE SECURITIES REPRESENTED BY THIS REGULATION S GLOBAL PREFERENCE SECURITY CERTIFICATE MAY NOT BE HELD BY A U.S. PERSON AT ANY TIME. (18) Tax The purchaser acknowledges that it is its intent and that it understands it is the intent of the Issuer that for all U.S. Federal, state and local income tax purposes, the Issuer will be treated as a corporation, the Notes will be treated as debt of the Issuer only and not of the Co-Issuer, and the Preference Securities will be treated as equity of the Issuer; it agrees to such treatment, to report all income (or loss) in accordance with such treatment and to take no action inconsistent with such treatment unless required otherwise by any taxing authority under applicable law. The purchaser is not purchasing the Securities in order to reduce its federal income tax liability or pursuant to a tax avoidance plan. (19) Book-Entry Depositaries The purchaser understands that the Issuer may receive a list of participants holding positions in the Securities from one or more book-entry depositaries, including DTC, Euroclear and Clearstream, Luxembourg. (20) Bankruptcy The purchaser will not cause the filing of a petition in bankruptcy against the Issuer before one year and one day have elapsed since the payment in full of the Notes or, if longer, the applicable preference period then in effect. (21) Regulation S Global Preference Securities If the Transferee is acquiring Regulation S Global Preference Securities, the Transferee has executed and delivered to the Issuer, the Preference Security Paying Agent and the Collateral Manager a letter in the form of an exhibit to the Preference Security Paying Agency Agreement (and included as Exhibit A to this Offering Circular). Investor Representations on Resale. Except as provided below, each transferee of a Security will be required to deliver to the Issuer or the Preference Security Paying Agent, as the case may be, a duly executed transferee certificate in the form of the relevant exhibit attached to the Indenture or the Preference Security Paying Agency Agreement, as the case may be, and such other certificates and other information as the Issuer, the Co-Issuer, the Trustee or the Preference Security Paying Agent may reasonably require to confirm that the proposed transfer complies with the transfer restrictions contained in this Offering Circular. An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note without the provision of written certification, provided that such transfer is not made to a U.S. Person or for the account or benefit of a U.S. Person and such transfer is effected through Euroclear or Clearstream, Luxembourg in an offshore transaction as required by Regulation S and only in accordance with the Applicable Procedures. An owner of a beneficial interest in a Restricted Global Note may transfer such interest in the form of a

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beneficial interest in such Restricted Global Note without the provision of written certification. Each transferee of a beneficial interest in a Regulation S Global Note or Restricted Global Note will be deemed to make the same representations and warranties at the time of purchase that a transferee of a Note subject to equivalent transfer restrictions that is required to deliver a transfer certificate would be required to make pursuant to such transferee certificate. Each transferee of a Security that is required to deliver a transfer certificate will be required, pursuant to such transferee certificate, and each transferee that is not required to deliver a certificate will be deemed, (a) to acknowledge, represent to and agree with the Issuer and the Trustee as to the matters set forth in each of paragraphs (1) through (21) above as if each reference therein to "the purchaser" were instead a reference to the transferee and (b) to represent to and agree with the Issuer and the Trustee (in the case of a Note) or the Preference Security Paying Agent (in the case of a Preference Security) as follows: (1) In the case of a transferee that takes delivery of a beneficial interest in a Restricted Global Note, such transferee (i) is a Qualified Institutional Buyer and also a Qualified Purchaser; (ii) will provide written notice of the foregoing, and of any applicable restrictions on transfer, to any transferee; (iii) is aware that the sale to such transferee is being made in reliance on Rule 144A; and (iv) is acquiring such Notes for such transferee's own account. In the case of a transferee that takes delivery of a Restricted Note that is a Definitive Note or a Restricted Preference Security, it is a Qualified Institutional Buyer (or, in the case of a Restricted Preference Security, an Accredited Investor) purchasing for its own account. In the case of a transferee that takes delivery of Regulation S Notes or Regulation S Preference Securities, it (i) is not a U.S. Person (within the meaning of Regulation S), (ii) is acquiring such Securities in an offshore transaction in accordance with Regulation S, (iii) is acquiring such Securities for such transferee's own account, (iv) is not acquiring, and has not entered into any discussions regarding its acquisition of, such Securities while such transferee is in the United States or any of its territories or possessions, (v) understands that such Securities are being sold without registration under the Securities Act by reason of an exemption that depends, in part, on the accuracy of these representations, (vi) understands that such Securities may not, absent an applicable exemption, be transferred without registration and/or qualification under the Securities Act, applicable state securities laws and the laws of any other applicable jurisdiction and (vii) in the case of a transferee of a Regulation S Note, understands that interests in a Regulation S Global Note may only be held through Euroclear or Clearstream, Luxembourg. (2) It acknowledges that the foregoing acknowledgments, representations and agreements will be relied upon by the Issuer and the Trustee (in the case of a Note) or the Preference Security Paying Agent (in the case of a Preference Security) for the purpose of determining such transferee's eligibility to purchase Securities. Such transferee agrees to provide, if requested, any additional information that may be required (i) to substantiate such transferee's status (a) as a Qualified Institutional Buyer (or, in the case of the Preference Securities, as an Accredited Investor) or as not a U.S. Person (within the meaning of Regulation S) or (b) under the exception provided pursuant to Section 3(c)(7) of the Investment Company Act or Rule 3c-5 thereunder, (ii) to determine compliance with ERISA and/or Section 4975 of the Code or (iii) otherwise to determine such transferee's eligibility to purchase Securities.

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LISTING AND GENERAL INFORMATION 1. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to trading on its regulated market. There can be no assurance that any such admission will be granted or maintained. Application has been made to the Irish Stock Exchange for the Preference Securities to be admitted to the Official List and to trading on its unregulated market. There can be no assurance that any such admission will be granted or maintained. For so long as the Securities are listed on the Irish Stock Exchange, copies of the Issuer Charter, the Certificate of Formation and Limited Liability Company Agreement of the Co-Issuer, the Administration Agreement, the Indenture, the Collateral Management Agreement and the Closing Date Interest Rate Cap Agreement will be available for inspection, in electronic or physical form, at the registered office of the Issuer or the Co-Issuer, as applicable. No financial statements will be prepared by, or on behalf of, either of the Issuers. Copies of the monthly reports and quarterly valuation reports of the Issuer described in item 4 below and the transfer certificates will be available for inspection, in electronic or physical form, at the registered office of the Issuer and Co-Issuer, as applicable. Copies of the Issuer Charter, the Certificate of Formation and Limited Liability Company Agreement of the Co-Issuer, the Administration Agreement, the resolutions of the Board of Directors of the Issuer authorizing the issuance of the Notes and the execution of the Indenture, the Collateral Management Agreement and the Closing Date Interest Rate Cap Agreement and the resolutions of the Board of Directors of the Co-Issuer authorizing the issuance of the Notes and the Indenture will be available for inspection during the term of the Notes in the city of Columbia, Maryland at the office of the Trustee. Copies of the monthly reports and quarterly note valuation reports with respect to the Securities and the Collateral Debt Securities will be prepared by the Issuer in accordance with the Indenture and will be obtainable free of charge upon request to the Trustee. The monthly reports will be prepared each month (excluding any month in which a quarterly noteholder report is prepared), beginning with the monthly report for June 2006 and the quarterly note valuation reports will be prepared in March, June, September and December of each year, beginning in September 2006. Each of the Issuers represents that there has been no material adverse change in its financial position since its date of creation. Other than as described herein under "The Issuers," since their respective dates of organization, the Issuers have not commenced operations and no annual accounts or reports have been prepared as of the date of this document. Since their respective dates of organization, neither of the Issuers has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuers are aware) which may have, or have had in the recent past, significant effects on the Issuers or their financial position or profitability. The issuance of the Securities is expected to be authorized by the Board of Directors of the Issuer on April 26, 2006. The issuance of the Notes is expected to be authorized by the independent manager of the Co-Issuer on April 26, 2006. Any website mentioned herein does not form part of this document.

2.

3.

4.

5.

6.

7.

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9.

Securities sold in offshore transactions in reliance on Regulation S and represented by Regulation S Global Notes or Regulation S Global Preference Securities have been accepted for clearance through Euroclear and Clearstream, Luxembourg. It is expected that the total expenses relating to the application for admission of the Securities to the Official List of the Irish Stock Exchange and to trading on its regulated market will be approximately 20,000.

10.

Restricted Securities CUSIP Numbers

Regulation S Securities CUSIP Numbers

Restricted Securities International Securities Identification Numbers USG0063CAA83 USG0063CAB66 USG0063CAC40 USG0063CAD23 USG0063CAE06 KYG0063A1040

Regulation S Securities International Securities Identification Numbers USG0063CAA83 USG0063CAB66 USG0063CAC40 USG0063CAD23 USG0063CAE06 KYG0063A1040

Class A1LA Notes Class A1LB Notes Class A-2L Notes Class A-3L Notes Class B-1L Notes Preference Shares

00082W AA 8 00082W AB 6 00082W AC 4 00082W AD 2 00082W AE 0 00082T 20 6

G0063C AA 8 G0063C AB 6 G0063C AC 4 G0063C AD 2 G0063C AE 0 G0063A 10 4

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LEGAL MATTERS Certain legal matters with respect to the Securities will be passed upon for the Issuer by Schulte Roth & Zabel LLP. Certain matters with respect to Cayman Islands corporate law and tax law will be passed upon for the Issuer by Maples and Calder. Certain legal matters with respect to the Collateral Manager will be passed upon by internal counsel to the Collateral Manager. Certain legal matters with respect to the Initial Purchaser will be passed upon by Orrick, Herrington & Sutcliffe LLP.

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ANNEX 1 GLOSSARY OF CERTAIN DEFINED TERMS "ABS Franchise 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 franchise loans, generally having the following characteristics: (1) the loans represent obligations of franchisees to franchisors; (2) the loan is secured by franchisees' assets; (3) 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 (4) the loans represent obligations from a limited number of obligors and accordingly represent an undiversified pool of obligor credit risk. "ABS Residential Securities" means (1) Manufactured Housing Securities; (2) Prime RMBS Securities, (3) Mid-Prime RMBS Securities, (4) Sub-Prime RMBS Securities; and (5) Timeshare Securities. "Administrative Expenses" means amounts due or accrued with respect to any Payment Date and payable by the Issuer or the Co-Issuer to (i) the Trustee pursuant to the Indenture or any co-trustee appointed pursuant to the Indenture, (ii) the Collateral Administrator under the Collateral Administration Agreement, (iii) the Preference Security Paying Agent or the Security Registrar under the Preference Security Paying Agency Agreement, (iv) the Administrator under the Administration Agreement and to provide for the costs of liquidating the Issuers following redemption of the Notes, (v) the independent accountants, agents and counsel of the Issuer for reasonable fees and expenses (including amounts payable in connection with the preparation of tax forms on behalf of the Issuers) and any registered office fees, (vi) the Rating Agencies for fees and expenses in connection with any rating (including the annual fee payable with respect to the monitoring of any rating) of the Notes, including fees and expenses due or accrued in connection with any rating of or credit estimate of (including surveillance of such credit estimates) the Collateral Debt Securities, (vii) the Collateral Manager under the Indenture or the Collateral Management Agreement, (viii) any other Person in respect of any governmental fee, charge or tax in relation to the Issuer or the Co-Issuer (in each case as certified by an authorized officer of the Issuer or the Co-Issuer to the Trustee) and (ix) any other Person in respect of any other fees or expenses permitted under the Indenture and the Preference Security Documents and the documents delivered pursuant to or in connection with the Indenture and the Securities; provided that Administrative Expenses shall not include (a) amounts payable in respect of the Securities, (b) any amounts payable under the Closing Date Interest Rate Cap Agreement, (c) any Collateral Management Fee payable pursuant to the Collateral Management Agreement, or the Collateral Manager Incentive Allocation and (d) amounts payable in respect of Administrative Indemnities. "Administrative Indemnities" means amounts due or accrued with respect to any Payment Date and payable by the Issuer or the Co-Issuer to (i) the Trustee (or any co-trustee) in respect of any indemnification payments (including expenses relating to indemnification obligations) owed to it pursuant to the Indenture, (ii) the Collateral Administrator in respect of any indemnification payments (including expenses relating to indemnification obligations) owed to it pursuant to the Collateral Administration Agreement, (iii) the Collateral Manager in respect of any indemnification payments (including expenses relating to indemnification obligations) owed to it pursuant to the Collateral Management Agreement, (iv) the Preference Security Paying Agent or the Security Registrar in respect of any indemnification payments (including expenses relating to indemnification obligations) owed to any of them pursuant to the Preference Security Paying Agency Agreement, (v) the Initial Purchaser in respect of any indemnification payments (including expenses relating to indemnification obligations) owed to it pursuant to the Securities Purchase Agreement and (vi) any other Person in respect of any indemnification payments (including expenses relating to indemnification obligations owed to it) to the extent specifically permitted under the Indenture or the transaction agreements. Fees and expenses of counsel with respect to indemnification obligations shall be Administrative Indemnities.

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"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 or sublessee or guarantees granted by third parties. For purposes of this definition, Aerospace and Defense Securities shall include Enhanced Equipment Trust Certificates and Equipment Trust Certificates. "affiliate" or "affiliated" means, with respect to a specified Person, (a) any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or (b) any other Person who is a director, officer, employee, member or general partner of (x) such Person or (y) any such other Person described in clause (a) above. For the purposes of this definition, "control" of a Person shall mean the power, direct or indirect, (i) to vote more than 50% of the securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; provided that no other special purpose company to which the Administrator provides directors and acts as share trustee shall be an affiliate of the Issuer. "Aggregate Amortized Cost" means, with respect to any Principal Only Security or Interest Only Security, (a) on the date of acquisition thereof by the Issuer, the cost of purchase thereof and (b) on any date thereafter, the present value of all remaining payments on such security discounted to such date of determination as of each subsequent Payment Date at a discount rate per annum equal to the internal rate of return on such security as calculated in good faith and in the exercise of its reasonable business judgment by the Collateral Manager at the time of acquisition thereof by the Issuer. "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 Lease Securities shall include Enhanced Equipment Trust Certificates with respect to aircraft.

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"Applicable Recovery Rate" means, with respect to any Collateral Debt Security on any Measurement Date, the lesser of: (a) an amount equal to (i) 100% minus (ii) the percentage for such Collateral Debt Security set forth in the Moody's Loss Scenario Matrix incorporated into the Indenture in (x) the table corresponding to the relevant Specified Type of Asset-Backed Security, (y) the column in such table setting forth the Moody's Rating of such Collateral Debt Security as of the date of issuance of such Collateral Debt Security and (z) the row in such table opposite the percentage of the Issue of which such Collateral Debt Security is a part relative to the total capitalization of (including both debt and equity securities issued by) the relevant issuer of or obligor on such Collateral Debt Security determined on the original issue date of such Collateral Debt Security, provided that if the timely payment of principal of and interest on such Collateral Debt Security is guaranteed by another Person (and such guarantee ranks at least equally and ratably with the guarantor's senior unsecured long-term debt) by another Person, such amount shall be 30%; and (b) for each Class of Notes, an amount equal to the percentage for such Collateral Debt Security set forth in the Standard & Poor's Recovery Rate Matrix incorporated into the Indenture in (x) the applicable table set forth therein, (y) the row in such table opposite the Standard & Poor's Rating of the Collateral Debt Security at the time of acquisition determined in accordance with procedures prescribed by Standard & Poor's for such Collateral Debt Security on such Measurement Date, and (z) in the column in such table below the applicable Standard & Poor's rating at issuance for each Class of Notes that is outstanding, provided, that if the timely payment of principal of and interest on such Collateral Debt Security is guaranteed by a corporate guarantor that complies with Standard & Poor's then-current published criteria with respect to guarantees (and such guarantee ranks at least equally and ratably with such guarantor's senior unsecured long-term debt), such amount shall be 50%, in the case of a Monoline Guaranteed Security, or 40% in the case of a Collateral Debt Security guaranteed by a guarantor other than a Monoline Insurer. "Approved Index" means the U.S. dollar prime rate, the federal funds rate or any other interest rate generally accepted as the basis for alternate base rate loans, the London interbank offered rate or similar interbank offered rate, commercial deposit rate or any other index with respect to which Rating Confirmation has been received. "Asset-Backed CDO Securities" means Collateralized Debt Obligation 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 Collateralized Debt Obligation Securities) on the market value of, credit exposure to, or cash flow from, a portfolio consisting primarily of Asset-Backed Securities. "Asset-Backed Securities" means securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from a pool of specified financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the securities. "Automobile Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from installment sale loans made to finance the purchase of (either as part of a dealer's inventory or for end users), or from leases of, automobiles, generally having the following characteristics: (1) the loans or leases may have varying contractual maturities; (2) except in the case of inventory financing, the loans or leases are obligations of numerous borrowers or lessors and accordingly represent a very diversified pool of obligor

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credit risk; (3) 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 (4) such leases typically provide for the right of the lessee to purchase the vehicle for its stated residual value, subject to payments at the end of lease term for excess mileage or use. "Bank Guaranteed Securities" means any Asset-Backed Security as to which, if interest thereon is not timely paid when due, or the principal thereof is not timely paid at stated legal maturity, a national banking association organized under United States law or banking corporation organized under the laws of a state of the United States has undertaken in an irrevocable letter of credit or other similar instrument to make such payment against the presentation of documents, but only if such letter of credit or similar instrument (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 the underlying security that is the subject of such guarantee (a) complies with the requirements of the definition of Collateral Debt Security (except clause (4) and clause (17)) and (b) if acquired by the Issuer on the date of acquisition of the related Bank Guaranteed Security, would comply with the Concentration Limitations. "Bank Trust Preferred CDO Securities" means Collateralized Debt Obligation 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 Collateralized Debt Obligation Securities) on the cash flow from a pool of trust preferred securities issued by a wholly-owned trust subsidiary of a U.S. financial institution which uses the proceeds of such issuance to purchase a portfolio of debt securities issued by its parent. They generally have the following characteristics: (1) the trust securities are non-amortizing preferred stock securities; (2) the trust securities have a 30-year maturity with a 5 or 10 year non-call period; (3) the trust securities have an Average Life at the time of the acquisition thereof by the Issuer not exceeding 20 years; and (4) the trust securities are subordinated debt. "Base Rate" means a fluctuating rate of interest determined by the Calculation Agent as being the rate of interest most recently announced by the Base Rate Reference Bank at its New York office as its base rate, prime rate, reference rate or similar rate for Dollar loans. Changes in the Base Rate will take effect simultaneously with each change in the underlying rate. "Base Rate Reference Bank" means JPMorgan Chase Bank, National Association or, if such bank ceases to exist or is not quoting a base rate, prime rate reference rate or similar rate for Dollar loans, such other major money center commercial bank in New York City as is selected by the Calculation Agent (after consultation with the Collateral Manager). "Business Day" means any day other than Saturday, Sunday or a day on which banking institutions are authorized or obligated by law, regulation or executive order to close in New York City, London or any city in which a Corporate Trust Office of the Trustee is located or, in the case of the final payment of principal of a Note, the place of presentation of such Note. To the extent action is required of the Issuer that has not been delegated to the Trustee, the Collateral Manager or any agent of the Issuer located outside of the Cayman Islands, the Cayman Islands shall be considered in determining "Business Day" for purposes of determining when such Issuer action is required. If any Class of Notes is listed on the Irish Stock Exchange, then to the extent action is required of the Irish Paying Agent, Ireland shall be

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considered in determining the "Business Day" for purposes of determining when such Irish Paying Agent action is required. "Calculation Amount" means, with respect to any Defaulted Security or Deferred Interest PIK Bond at any time, the lesser of (a) the fair market value of such Defaulted Security or Deferred Interest PIK Bond and (b) the Applicable Recovery Rate multiplied by the principal balance of such Defaulted Security or Deferred Interest PIK Bond. "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 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, generally having the following characteristics: (1) the issuer of such Asset-Backed Securities has entered into an insurance contract or similar arrangement with a counterparty pursuant to which such issuer agrees to pay amounts to the counterparty upon the occurrence of certain specified events, including but not limited to: hurricanes, earthquakes and other events; and (2) payments on such Asset-Backed Securities depend primarily upon the occurrence and/or severity of such events. "CDO-Backed CDO Securities" means Collateralized Debt Obligation 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 Collateralized Debt Obligation Securities) on the credit exposure to, or cash flow from, a portfolio consisting primarily of Collateralized Debt Obligation Securities. "Chassis Leasing Securities" means Asset-Backed Securities (other than Aircraft Lease Securities, Natural Resource 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 for 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 Security" means a Collateralized Debt Obligation 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 Collateralized Debt Obligation Securities) on the credit exposure

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to, or cash flow from, a portfolio of collateral of which at least 70% consists of commercial loans (including eligible synthetic securities whose reference obligations consist of commercial loans); provided that not more than 15% of the aggregate principal balance of the portfolio of any CLO Security may be comprised of synthetic securities. "CMBS" means any CMBS Conduit Security, CMBS Credit Tenant Lease Security or CMBS Large Loan Security. "CMBS CDO Securities" means (i) any Collateralized Debt Obligation 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 Collateralized Debt Obligation Securities) primarily on the credit exposure to, or cash flow from, a portfolio consisting of CMBS and/or commercial real estate loans, and (ii) any security issued by an investment vehicle whose assets (or substantially all of its assets) consist of notes issued by any CDO, the collateral for the payment obligations of which consists of CMBS and/or commercial real estate loans. "CMBS Conduit Securities" means Asset-Backed Securities (other than CMBS Credit Tenant Lease Securities and CMBS Large Loan Securities) (A) issued by a single-seller or multi-seller conduit under which the holders of such Asset-Backed Securities have recourse to a specified pool of assets (but not other assets held by the conduit which 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 generally being less material than for CMBS Large Loan Securities and CMBS Credit Tenant Lease Securities) and accordingly represent a relatively undiversified pool of obligor credit risk; and (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. "CMBS Credit Tenant Lease Securities" means Asset-Backed Securities (other than CMBS Large Loan 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 commercial tenants (or on the cash flow from such leases), generally having 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 commercial tenants is the primary factor in any decision to invest in these securities.

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"CMBS Large Loan Securities" means Asset-Backed Securities (other than CMBS Conduit Securities and CMBS Credit Tenant Lease Securities) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties, 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 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 Single Property Securities" means CMBS Large Loan Securities that entitle the holder thereof to receive payments that depend on the cash flow from a single commercial mortgage property. "Collateralized Debt Obligation Securities" means Collateral Debt Securities (including Asset-Backed CDO Securities, CDO-Backed CDO Securities, Investment Grade CDO Securities and Bank Trust Preferred CDO Securities) that entitle the holders thereof to receive payments that depend on the cash flow either from a portfolio of commercial and industrial bank loans, debt securities, trust preferred securities or asset-backed securities (which may include Collateralized Debt Obligation Securities) or any combination of the foregoing, or from one or more credit default swaps which reference obligors on commercial and industrial bank loans, debt securities, trust preferred securities or asset-backed securities (which may include Collateralized Debt Obligation Securities) or any combination of the foregoing ("CDS Reference Obligations"), generally having the following characteristics: (1) the bank loans, debt securities, trust preferred securities and asset-backed securities (or CDS Reference Obligations) have varying contractual maturities; (2) the bank loans, debt securities, trust preferred securities and assetbacked securities (or CDS Reference Obligations) are obligations of a relatively limited number of obligors or issuers and accordingly represent a relatively undiversified pool of obligor credit risk; (3) repayment thereof can vary substantially from the contractual payment schedule (if any), with early prepayment of individual bank loans, debt securities and asset-backed securities depending on numerous factors specific to the particular issuers or obligors and upon whether, in the case of bank loans, debt securities and asset-backed 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 or sales (or reductions in the notional amount of CDS Reference Obligations) can for a limited period and subject to compliance with certain eligibility criteria be reinvested in additional bank loans, debt securities and/or asset-backed securities (or CDS Reference Obligations). "Container Leasing Securities" means Asset-Backed Securities (other than Aircraft Lease Securities, Natural Resource 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)

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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 Debt Security" means a Dollar-denominated debt security issued or guaranteed by a corporation which is not an Asset-Backed Security, a Corporate Guaranteed Security or a REIT Debt Security. "Corporate Guaranteed Security" means any Asset-Backed Security with respect to which the current rating thereof from each Rating Agency is primarily dependent upon a guarantee of such security by any entity other than a Monoline Insurer or a Multiline Insurer; provided that the underlying security that is the subject of such guarantee (a) complies with the requirements of the definition of Collateral Debt Security (except clause (4) and clause (17)) and (b) if acquired by the Issuer on the date of acquisition of the related Corporate Guaranteed Security, would comply with the Concentration Limitations. "Credit Card Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from balances outstanding under revolving consumer 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. "Credit Improved Criteria" means with respect to any Collateral Debt Security, such Collateral Debt Security has, in the Collateral Manager's reasonable business judgment (which shall not be called into question solely as a result of subsequent events), significantly improved in credit quality and for which there has been either: (a) a decrease in the spread over the yield on the applicable U.S. Treasury benchmark by an amount exceeding 0.50% or an increase in price to 101% or more of the purchase price (exclusive of accrued interest) paid by the Issuer, in each case since the date on which such Collateral Debt Security was acquired by the Issuer or (b) an upgrade or placement on a watch list for possible upgrade by any Rating Agency by one or more subcategories since it was acquired by the Issuer. "Credit Improved Security" means any Collateral Debt Security that, in the Collateral Manager's reasonable business judgment (which shall not be questioned as a result of subsequent events), has significantly improved in credit quality at any time since such Collateral Debt Security was purchased by the Issuer or otherwise satisfies the Credit Improved Criteria. "Credit Risk Criteria" means, with respect to any Collateral Debt Security, (a) placement by any Rating Agency of such Collateral Debt Security on its credit watch list with potential negative or developing credit implications or deterioration of the rating of the Collateral Debt Security by one or more sub-categories from the rating in effect on the date such obligation was acquired; (b) an increase in the spread over the yield on the applicable U.S. Treasury benchmark by an amount exceeding 0.50% since the date on which such Collateral Debt Security was acquired; or (c) a decline in the par amount of underlying collateral such that the aggregate par amount of the entire class of securities to which such Collateral Debt Security belongs and all other securities secured by the same pool of collateral and that rank senior in priority of payment to such class of securities exceeds the aggregate par amount of all collateral (excluding defaulted collateral) securing such securities. "Credit Risk Security" means any Collateral Debt Security (other than a Defaulted Security) that, in the Collateral Manager's reasonable business judgment (which judgment shall not be questioned as a result of

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subsequent events), (i) is likely to decline in credit quality and, with the passage of time, become a Defaulted Security or (ii) satisfies the Credit Risk Criteria. "Cumulative Interest Amount" means, with respect to a Payment Date and a Class of Notes, the cumulative amount of all accrued and unpaid interest with respect to such Class of Notes with respect to such Payment Date, including (without duplication), (i) all accrued and unpaid interest with respect to such Class of Notes due and payable on such Payment Date, (ii) all Defaulted Interest with respect to such Class of Notes with respect to any preceding Payment Date or Payment Dates, net of all amounts paid with respect thereto prior to such Payment Date, (iii) in the case of the Class A-3L Notes and the Class B1L Notes, all Deferred Interest with respect to such Class of Notes with respect to any preceding Payment Date or Payment Dates, net of all amounts paid with respect thereto prior to such Payment Date, and (iv) all accrued and unpaid interest on Defaulted Interest and/or Deferred Interest with respect to such Class of Notes, net of all amounts paid with respect thereto prior to such Payment Date. "Defaulted Security" means any Collateral Debt Security, or any other security, included in the Collateral: (i) with respect to which, or with respect to which other indebtedness that ranks pari passu with or subordinate to any other material indebtedness for borrowed money owing by the issuer of such security as to which there has occurred and is continuing a payment default thereunder (without giving effect to any applicable grace period or waiver); provided that a payment default of up to three (3) Business Days (or, if shorter, the applicable grace period) with respect to which the Collateral Manager certifies to the Trustee in writing that, in its reasonable business judgment, is due to non-credit and non-fraud related reasons shall not cause a Collateral Debt Security to be classified as a Defaulted Security; provided further that a security shall no longer be considered a "Defaulted Security" pursuant to this paragraph (i) if such security has paid in full any past due interest and has resumed full current payments of interest and scheduled principal in cash (whether or not any waiver or restructuring has been effected); (ii) with respect to which there has occurred a default (other than any payment default) which entitles the holders thereof, with the giving of notice or passage of time or both, to accelerate the maturity of all or a portion of the principal amount of such obligation, and such default has not been cured or waived; (iii) as to which a bankruptcy, insolvency, or receivership proceeding has been initiated and is continuing with respect to the issuer of such Collateral Debt Security, or there has been proposed or effected any distressed exchange or other debt restructuring where the issuer of such Collateral Debt Security has offered the holders thereof a new security or package of securities that, in the reasonable business judgment of the Collateral Manager, either (x) amounts to a diminished financial obligation or (y) has the purpose of helping the borrower to avoid default, except that a Collateral Debt Security shall not constitute a "Defaulted Security" under this clause (iii) if such Collateral Debt Security was acquired in a distressed exchange or other debt restructuring and satisfies the requirements of a Collateral Debt Security; (iv) as to which the Collateral Manager knows the issuer thereof is (or is reasonably expected by the Collateral Manager to be, as of the next scheduled payment date) in default (without giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such Collateral Debt Security; or (v) (a) that is rated "D" or "SD" or "CC" by Standard & Poor's or, after having been assigned such a rating by Standard & Poor's, Standard & Poor's withdraws its rating with respect

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to such Collateral Debt Security, provided that if the Rating Condition is satisfied as to Standard & Poor's, this subclause (a) may be changed by written notice from the Collateral Manager to the Issuer and to the Trustee or (b) that has a Moody's Rating of "C" or "Ca" or, in the case of securities publicly rated by Moody's, after having been assigned such a rating by Moody's, Moody's withdraws its rating with respect to such Collateral Debt Security, provided that if the Rating Condition is satisfied as to Moody's, this subclause (b) may be changed by written notice from the Collateral Manager to the Issuer and to the Trustee. The Collateral Manager may, but is not required to, declare any Collateral Debt Security to be a Defaulted Security upon notice to the Issuer and the Trustee if, in the Collateral Manager's reasonable business judgment, the credit quality of the issuer of such Collateral Debt Security has significantly deteriorated such that there is a reasonable expectation of a payment default with respect to such Collateral Debt Security. "Deferred Interest PIK Bond" means a PIK Bond with respect to which payment of interest thereon either in whole or in part has been deferred or capitalized for (i) in the case of any Collateral Debt Security with a Moody's Rating of "Baa3" or higher for the purpose of the Overcollateralization Tests only, the shorter of (x) two payment periods of such PIK Bond and (y) one year and (ii) in all other cases, the shorter of (x) one payment period and (y) six months, but in each case only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest has been paid in accordance with the terms of the related Underlying Instruments, including interest on deferred interest. "Designated Maturity" means, with respect to any Class of Notes, (i) for the first Interest Period, the number of calendar days from, and including, the Closing Date to, but excluding, the first Payment Date, (ii) for each Interest Period thereafter (except as provided in clause (iii) below), three months and (iii) for the Interest Period ending in June 2041, the number of calendar days from, and including, the first day of such Interest Period to, but excluding, the final Payment Date. "Determination Date" means the last day of a Due Period. "Discount Haircut Amount" means, with respect to any Discount Security, an amount equal to the greater of (a) zero and (b)(i) the principal balance of such Collateral Debt Security minus (ii) the purchase price of such Discount Security minus (iii) an amount equal to (A) all principal payments received by the Issuer with respect to such Discount Security multiplied by (B) a fraction the numerator of which is such purchase price and the denominator of which is the principal balance of such Discount Security at the time of the purchase thereof by the Issuer. "Discount Security" means a Collateral Debt Security purchased at a cost to the Issuer (exclusive of accrued interest) of (x) if such Collateral Debt Security is a Floating Rate Security and is publicly rated "Aa3" or higher by Moody's at the time it is acquired by the Issuer, less than 92.0% of the principal amount thereof; provided that a Collateral Debt Security shall cease to constitute a "Discount Security" for purposes of this clause (x) if the fair market value thereof equals or exceeds 95.0% of its outstanding principal amount for 60 consecutive days following the initial valuation date on which such percentage was equaled or exceeded; (y) if such Collateral Debt Security is a Fixed Rate Security and is publicly rated "Aa3" or higher by Moody's at the time it is acquired by the Issuer, less than 85.0% of the principal amount thereof; provided that a Collateral Debt Security shall cease to constitute a "Discount Security" for purposes of this clause (y) if the Fair Market Value thereof equals or exceeds 90.0% of its outstanding principal amount for 60 consecutive days following the initial valuation date on which such percentage was equaled or exceeded; and (z) for any Collateral Debt Security not described in clauses (x) and (y), less than 75.0% of the principal amount thereof; provided that a Collateral Debt Security shall cease to constitute a "Discount Security" for purposes of this clause (z) if the fair market value thereof equals or

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exceeds 85.0% of its outstanding principal amount for 60 consecutive days following the initial valuation date on which such percentage was equaled or exceeded. "Due Date" means each date on which a Scheduled Distribution is due on a Collateral Debt Security. "Due Period" means, with respect to any Payment Date, the period commencing on the day immediately following the fifth Business Day prior to the preceding Payment Date (or on the Closing Date, in the case of the Due Period relating to the first Payment Date) and ending on the fifth Business Day prior to such Payment Date, except that, in the case of the Due Period that is applicable to the Payment Date relating to the Stated Maturity of the Notes, such Due Period shall end on the day preceding the Stated Maturity. Payments received by the Issuer under the Closing Date Interest Rate Cap Agreement on or prior to the Payment Date shall be deemed to have been received during the related Due Period; provided that, with respect to the payments on and proceeds from an Eligible Investment, "Due Period" shall mean the Eligible Investment Due Period. "Eligible Country" means (i) Australia, Canada, the Netherlands, the United Kingdom Germany, Ireland, Sweden and Switzerland; provided that such country has a foreign currency issuer credit rating of at least "AA" by Standard & Poor's (and, if rated "AA," has not been placed on a watch list for possible downgrade) and at least "Aa2" by Moody's, and (ii) any other jurisdiction for which the Rating Condition has been satisfied. "Eligible Investment Due Period" means, with respect to any Payment Date and an Eligible Investment, the period from (and including) the immediately preceding Payment Date (or, with respect to the first Payment Date, from and including the Closing Date) to (and excluding) such Payment Date. "Eligible Investments" include any Dollar-denominated investment that is one or more of the following (and may include (x) obligations of (and may be purchased from) the Trustee, the Collateral Manager, the Initial Purchaser and their respective Affiliates and (y) investments for which the Trustee and/or its affiliates or the Collateral Manager, the Initial Purchaser or an affiliate thereof receives compensation for providing services): (a) (b) cash; direct Registered obligations of, and Registered obligations the timely payment of principal and interest on which is fully and expressly guaranteed by, the United States or any agency or instrumentality of the United States the obligations of which are expressly backed by the full faith and credit of the United States and which have a rating of "AAA" by Moody's; demand and time deposits in, certificates of deposit of, bankers' acceptances payable within 91 days of issuance issued by, or Federal funds sold by, any depository institution or trust company incorporated under the laws of the United States or any state thereof and subject to supervision and examination by Federal and/or state banking authorities so long as the commercial paper and/or the debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of not less than "A1" by Moody's (and 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 not on watch for possible downgrade by Moody's) and "A-1+" by Standard & Poor's (or, in the case of commercial paper and short-term obligations with maturities of 30 days or less, 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

(c)

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case, the issuer thereof must have at the time of such investment a long-term credit rating of not less than "A1" by Moody's (and 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; provided, further, that the aggregate principal balance of all investments entered into with a depository institution or trust company described in this clause (c) whose short-term debt rating is "A-1" (instead of "A-1+") by Standard & Poor's standing to the credit of each account of the Issuer shall not exceed 20% of the aggregate outstanding principal amount of all Classes of Notes, and each such investment shall not have a maturity of longer than 30 days; (d) unleveraged repurchase obligations with respect to (i) any security described in clause (b) above or (ii) any other registered Security issued or guaranteed by an agency or instrumentality of the United States (in each case without regard to the stated maturity of such security), in either case entered into with a U.S. Federal or state depository institution or trust company (acting as principal) described in clause (c) above or entered into with a corporation (acting as principal) the long-term rating of which is not less than "Aa2" by Moody's and not less than "AA+" by Standard & Poor's or the short-term credit rating of which is "P-1" by Moody's (and 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 long-term credit rating of not less than "Aa2" by Moody's (and 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; Registered debt securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any state thereof which have a credit rating of not less than "Aa2" by Moody's (and not on watch for possible downgrade by Moody's) and not less than "AA+" by Standard & Poor's; commercial paper or other short-term obligations (other than those described in clause (c) above) 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 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 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; Registered reinvestment agreements issued or guaranteed by any bank, or a Registered reinvestment agreement issued or guaranteed by any insurance company or other corporation or entity organized under the laws of the United States or any state thereof; provided that (i) in each case, the issuer or guarantor thereof must have at the time of such investment a long-term credit rating of not less than "Aa2" by Moody's (and not on watch for possible downgrade by Moody's) and (ii) if such security has a maturity of longer than 91 days, the issuer or guarantor 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 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" by Standard & Poor's; provided that (i) such fund or vehicle is formed and has its principal office outside the United

(e)

(f)

(g)

(h)

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States and (ii) the ownership of any interest in such fund or vehicle will not subject the Issuer to net income tax in any jurisdiction; and, in each case, other than clause (a) or (h), with a stated maturity or, in the case of clause (g), a withdrawal date (in each case giving effect to any applicable grace period) no later than the Business Day immediately preceding the Payment Date next following the Due Period in which the date of investment occurs; provided that Eligible Investments may not include (i) any Interest-Only Security, (ii) any security purchased at a price in excess of 100% of the par value thereof, (iii) any investment the income from which is or will be subject to deduction or withholding for or on account of any withholding or similar tax, (iv) any investment the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation, (v) any security the repayment of which is subject to substantial non-credit-related risk as determined in the reasonable business judgment of the Collateral Manager, (vi) except with respect to investments described in clause (c) above, any floating rate security the interest rate of which is inversely or otherwise not proportionately related to an interest rate index or is calculated as other than the sum of an interest rate index plus a spread, (vii) any mortgage-backed security, (viii) any security or obligation the rating of which from Standard & Poor's includes the subscript "p," "pi," "q," "r" or "t" or (ix) any security subject to an Offer. "Eligible SPV Jurisdiction" means the British Virgin Islands, the Cayman Islands, Bermuda, Luxembourg, Netherlands Antilles, the Channel Islands, Jersey, Guernsey or (subject to satisfaction of the Rating Condition) any similar jurisdiction, provided that the related obligor or issuer is a special purpose entity. "Emerging Market Security" is any security with respect to which the assets in the related underlying portfolio are (and, pursuant to the related underlying instruments, are required to be) primarily issued by issuers organized in Emerging Market Countries. "Emerging Market Country" is any jurisdiction that is not the United States, an Eligible Country or an Eligible SPV Jurisdiction. "Enhanced Equipment Trust Certificate" means the senior tranche of an Equipment Trust Certificate, the subordinated tranche of which forms the equity of the ETC Issuer. "Entertainment 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 finance the production of films, television programs and other media products distributed by the film and entertainment industry, generally having the following characteristics: (1) the loans may have varying contractual maturities; (2) the loans are obligations of numerous borrowers and accordingly represent a very diversified pool of obligor credit risk; (3) the borrowers under the loans generally do not have a poor credit rating and (4) the repayment stream on such loans is primarily determined by a contractual payment schedule. "Equipment Leasing Securities" means Asset-Backed Securities (other than Aerospace and Defense Securities, Healthcare Securities, Restaurant and Food Services Securities, Small Business Loan Securities and Oil and Gas 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, leases and subleases of equipment (other than automobiles, trucks, buses and planes) to commercial and industrial customers, generally having the following characteristics: (1) the loans, leases and subleases have varying contractual maturities; (2) the loans, 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 loans,

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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) in the case of leases or subleases, 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. "Equipment Trust Certificates" means Asset-Backed Securities in the form of equipment trust certificates, including Enhanced Equipment Trust Certificates and pass-through equipment trust certificates, issued by, or supported by obligations of, issuers that are subject, or are wholly-owned subsidiaries of parent companies that are subject (in which case such parent companies have fully and unconditionally guaranteed such obligations on a subordinate or non-subordinate basis), to the informational requirements of the Exchange Act and, in accordance therewith, file reports and other information with the SEC. Equipment Trust Certificates are generally issued, in one or more classes, by a trust or other special purpose legal entity that owns equipment or by an owner/operator of the equipment, including airlines (an "ETC Issuer"). Such obligations of the ETC Issuers are secured by mortgages of the equipment and, in the case of special purpose ETC Issuers, typically are supported by assignments of lease payments on equipment under leases to operators of the equipment. Pass-through Equipment Trust Certificates are issued by a trust or other special purpose legal entity that holds Equipment Trust Certificates of other ETC Issuers. "Equity Security" means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal and is acquired by the Issuer as a result of the exercise or conversion of Collateral Debt Securities or in exchange for a Defaulted Security. "Expected Available Interest Amount" means, with respect to any Due Period, the sum, without duplication, of (i) the Scheduled Distributions of interest due (in each case regardless of whether the applicable Due Date has yet occurred) in the Due Period (or, with respect to Eligible Investments, the Eligible Investment Due Period) in which the relevant Measurement Date occurs on (x) the Issuer's portfolio of Collateral Debt Securities (other than (a) Defaulted Securities and (b) Deferred Interest PIK Bonds) and (y) all Eligible Investments held in the Collection Accounts, the Unused Proceeds Account, the Expense Account, the Ramp-Up Principal Proceeds Account and the Payment Account (regardless of whether such Eligible Investments were purchased with Interest Proceeds or Principal Proceeds) plus any principal payments, including repayments, of Eligible Investments purchased with amounts from the Interest Collection Account expected to be received by the Issuer during the applicable Eligible Investment Due Period plus (ii) any fees actually received by the Issuer during such Due Period which constitute Interest Proceeds plus (iii) the amount, if any, paid or (so long as there is no Hedge Counterparty payment default) scheduled to be paid to the Issuer by the Hedge Counterparty under the Closing Date Interest Rate Cap Agreement on or about the Payment Date relating to such Due Period. Scheduled Distributions of interest which the Collateral Manager has determined in its reasonable business judgment will not be received when due will be excluded from the Expected Available Interest Amount for purposes of determining compliance with the Interest Coverage Tests. "Final Payment Date" means, with respect to each Class of Notes, the Payment Date in June, 2041 or such earlier date on which the aggregate outstanding principal amount of each Class of Notes is paid in full, including in connection with an Optional Redemption, Auction Call Redemption or a Tax Redemption. "Fixed Rate Excess" means, as of the Effective Date, a fraction (expressed as a percentage) the numerator of which is equal to the product of (a) the greater of zero and the excess, if any, of the Weighted Average Coupon over 5.00% and (b) the aggregate principal balance of all fixed rate securities (excluding Defaulted Securities and Deferred Interest PIK Bonds) and the denominator of which is the

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aggregate principal balance of all floating rate securities (excluding Defaulted Securities and Deferred Interest PIK Bonds). In computing the Fixed Rate Excess, the Weighted Average Coupon will be computed as if the Spread Excess were equal to zero. "Floorplan Receivable Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) upon assets that will consist of a revolving pool of receivables arising from the purchase and financing by domestic retail motor vehicle dealers for their new and used automobile and light-duty truck inventory. The receivables are comprised of principal receivables and interest receivables. In addition to receivables arising in connection with designated accounts, the trust assets may include interests in other floorplan assets, such as: (1) participation interests in pools of assets existing outside the trust and consisting primarily of receivables arising in connection with dealer floorplan financing arrangements originated by a manufacturer or one of its affiliates; (2) participation interests in receivables arising under dealer floorplan financing arrangements originated by a third party and participated to a manufacturer; (3) receivables originated by a manufacturer under syndicated floorplan financing arrangements between a motor vehicle dealer and a group of lenders; or (4) receivables representing dealer payment obligations arising from purchases of vehicles. "Franchise Loans" means franchise loans made to operators of franchises that provide goods and/or services related thereto They generally have the following characteristics: (1) the loans 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 loans are obligations of a relatively limited number of obligors and accordingly represent a relatively undiversified pool of obligor credit risk; (4) 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; and (5) 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 make the franchise loans. "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) upon the receipt of accounts receivable generated by ongoing business of the issuer. The proceeds from the Future Flow Securities are typically used to improve or increase business capacity for which all or a portion of the future cash generated from the business is pledged. "Healthcare, Education and Childcare Equipment Securities" means Asset-Backed Securities (other than Small Business Loan 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 to hospitals, non-hospital medical facilities, physicians and physician groups, educational facilities and facilities providing childcare services for use in the provision of healthcare, educational or childcare services, 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

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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. "Healthcare Securities" means Asset-Backed Securities that are either (i) Healthcare, Education and Childcare Equipment Securities or (ii) Hospital Receivable Securities. "Hedge Rating Determining Party" means, with respect to the Closing Date Interest Rate Cap Agreement, (a) the related Hedge Counterparty or any transferee thereof or (b) any affiliate of the related Hedge Counterparty or any transferee thereof or such other party as specified in the Closing Date Interest Rate Cap Agreement that guarantees (with such form of guarantee satisfying Standard & Poor's thenpublished criteria with respect to guarantees) the obligations of such Hedge Counterparty or such transferee, as the case may be, under such Closing Date Interest Rate Cap Agreement. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of such Hedge Counterparty or any such transferee (or against any person in control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of the Hedge Counterparty or any such transferee. "Holder" means, as the context requires, a registered holder of Notes and/or a registered holder of Preference Securities. "Home Improvement 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 balances outstanding under loans secured by (first lien, junior lien and unsecured) residential real estate (single, multi-family, condominium and manufactured housing properties) the proceeds of which loans or lines of credit are generally used to purchase real estate, perform home improvements, refinance debt, or consolidate debt, 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 very diversified pool of obligor credit risk; (3) the repayment stream on such balances does not depend upon a contractual payment schedule, with early repayment depending primarily on interest rates and general economic matters; and (4) the loan may or not 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 than the original proceeds of such loan. "Hospital Receivable Securities" means Asset-Backed Securities (other than Healthcare, Education and Childcare Equipment 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 contracts entitling health care providers to receive payments from third party insurance programs for medical services (and any ancillary services and sales) provided, generally having the following characteristics: (1) the contracts have standardized payment terms; and (2) the contract balances are obligations of third party insurers and accordingly represent a very diversified pool of obligor credit risk. "Insurance Company Guaranteed Security" means any Monoline Guaranteed Security or Multiline Guaranteed Security; provided that the underlying security that is the subject of such guarantee (a) complies with the requirements of the definition of Collateral Debt Security (except clause (4) and clause (17)) and (b) if acquired by the Issuer on the date of acquisition of the related Insurance Company Guaranteed Security, would comply with the Concentration Limitations.

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"Interest-Only Security" means any security that does not provide for the repayment of a stated principal amount in one or more installments on or prior to the date two Business Days prior to the Stated Maturity of the Notes. "Interest Period" means (i) in the case of the initial Interest Period, the period from, and including, the Closing Date to, but excluding, the September 2006 Payment Date, and (ii) thereafter, the period from, and including, the Payment Date immediately following the last day of the immediately preceding Interest Period to, but excluding, the next succeeding Payment Date. "Interest Proceeds" means, with respect to any Due Period (or, with respect to Eligible Investments, any Eligible Investment Due Period), the sum (without duplication) of: (1) all payments of interest on the Collateral Debt Securities received in cash by the Issuer during such Due Period (excluding (x) payments in respect of accrued interest included in Principal Proceeds, and (y) payments in respect of deferred interest on Deferred Interest PIK Bonds previously capitalized and treated as "Principal Proceeds" pursuant to clause (7) of the definition thereof; (2) all accrued interest received in cash by the Issuer with respect to Collateral Debt Securities sold by the Issuer (excluding (x) sale proceeds received in respect of Defaulted Securities and Deferred Interest PIK Bonds, in each case to the extent that the principal balance thereof has not been paid in full, and (y) payments in respect of accrued interest included in Principal Proceeds pursuant to clause (6) 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 Collection Accounts, the Ramp-Up Principal Proceeds Account and the Unused Proceeds Account received in cash by the Issuer during the applicable Eligible Investment Due Period and all payments of principal, including repayments, on Eligible Investments purchased with amounts from the Interest Collection Account received by the Issuer during the applicable Eligible Investment Due 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 Due Period (or, with respect to Eligible Investments, such Eligible Investment Due Period) in connection with such Collateral Debt Securities and Eligible Investments (other than any fees and commissions received in respect of Defaulted Securities and Deferred Interest PIK Bonds to the extent that the principal balance thereof has not been paid in full and yield maintenance payments included in Principal Proceeds); (5) (x) all payments received in cash by the Issuer pursuant to the Closing Date Interest Rate Cap Agreement on or prior to the Payment Date (excluding any payments received by the Issuer on or prior to the preceding Payment Date), (y) any proceeds resulting from an assignment by the Issuer of the Closing Date Interest Rate Cap Agreement, and (z) any proceeds resulting from the termination and liquidation of the Closing Date Interest Rate Cap Agreement to the extent such proceeds exceed the cost of entering into a replacement therefor in accordance with the requirements set forth in the Indenture; and (6) all amounts on deposit in the Expense Account which are transferred to the Payment Account for application as Interest Proceeds as described under "Security for the NotesThe AccountsExpense Account"; provided that Interest Proceeds shall in no event include (i) any payment or proceeds that constitutes "Principal Proceeds" in the definition thereof or (ii) any Excepted Property. "Inverse Floating Rate Security" means any floating rate security whose interest rate is inversely proportional to an interest rate index. "Investment Grade CDO Securities" means Collateralized Debt Obligation 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). "IRR" will, as of any date, be a rate equal to the per annum discount rate at which the sum of the discounted present value of the following cashflows is equal to zero (assuming discounting on a bond-

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equivalent yield basis as of each Payment Date on the basis of a 360 day year comprised of twelve 30-day months), calculated from the Closing Date: (1) the original aggregate notional amount of the Preference Securities issued on the Closing Date (which will be deemed to be negative for purposes of this calculation) and (2) the amount of each distribution, if any, on the Preference Securities on each Payment Date (which will be deemed to be positive for such purposes). For purposes of calculating the internal rate of return on the Preference Securities, amounts distributed to the Preference Security Paying Agent for payment to the Preference Securityholders will be included in calculating such internal rate of return notwithstanding that such amounts may not have been distributed by the Preference Security Paying Agent to the Preference Securityholders because of restrictions imposed on the payment thereof under Cayman Islands law or otherwise. See "Description of Preference Securities." "IRR Test" means that the Preference Securities have received (or will on the Payment Date in question receive) cumulative distributions in an amount sufficient for an investor that purchased a Preference Security for $0.6869 on the Closing Date to have achieved an IRR on such Payment Date of at least 12.0% (where such internal rate of return is a rate equal to the per annum discount rate at which the sum of the discounted present value of the following cashflows is equal to zero (assuming discounting on a bond-equivalent yield basis as of each Payment Date on the basis of a 360 day year comprised of twelve 30-day months), calculated from the Closing Date: (1) the aggregate purchase price of the Preference Securities issued on the Closing Date (which will be deemed to be negative for purposes of this calculation) and (2) the amount of each distribution, if any, on the Preference Securities on each Payment Date (which will be deemed to be positive for such purposes)). If the IRR Test is not satisfied prior to making the distributions on a Payment Date but will be satisfied after making such distributions, the portion of such distributions on such Payment Date required to satisfy the IRR Test, will be made on the basis that the IRR Test has not been satisfied and the remainder of the distributions made on such Payment Date shall be made on the basis that the IRR Test has been satisfied. "Issue" means Collateral Debt Securities issued by (a) the same issuer, secured by the same collateral pool and having the same terms and conditions (as to, among other things, coupon, maturity, security and subordination) or (b) two issuers in a tiering arrangement with respect to the same collateral pool. "LIBOR Business Day" means a day on which commercial banks and foreign exchange markets settle payments in Dollars in New York and London. "LIBOR Determination Date" means, with respect to any Interest Period, the second London Banking Day prior to the first day of such Interest Period. "London Banking Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London. "Lottery 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 an arrangement which 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. Therefore, Lottery Receivable Securities are 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. "Majority-in-Interest of Preference Securityholders" means holders of a majority of the aggregate notional amount of the Preference Securities.

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"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. "Measurement Date" means any of the following: (i) the Closing Date; (ii) the Effective Date; (iii) any date after the Effective Date upon which the Issuer disposes of any Collateral Debt Security; (iv) any date after the Effective Date on which a Collateral Debt Security becomes a Defaulted Security; (v) each Determination Date; (vi) the last Business Day of any calendar month (other than any calendar month in which a Determination Date occurs and any calendar month ending prior to the Effective Date); and (vii) with reasonable notice to the Issuer and the Trustee, any other Business Day that any Rating Agency, the Collateral Manager or the holders of more than 50% of the aggregate outstanding principal amount of any Class of Notes requests be a "Measurement Date"; provided that, if any such date would otherwise fall on a day that is not a Business Day, the relevant Measurement Date will be the next succeeding day that is a Business Day. "Mid-Prime RMBS Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that primarily 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 or balances (including revolving balances) outstanding under lines of credit secured by residential real estate (single or multi-family properties) that generally have the following characteristics: (I) 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 very diversified pool of obligor credit risk; and (3) the mortgage loans have a weighted average FICO Score between 625 and 700. "Minimum Hedge Counterparty Ratings" means, with respect to a Hedge Rating Determining Party or any transferee thereof, (a) either (i) if such entity has a short-term rating by Standard & Poor's, the rating of the short-term senior unsecured, unguaranteed and otherwise unsupported debt obligations of such entity of at least "A-1" by Standard & Poor's, or (ii) if such entity does not have a short-term rating by Standard & Poor's, the rating of the long-term senior unsecured, unguaranteed and otherwise unsupported debt obligations of such entity of at least "A+" by Standard & Poor's and (b) (i) if such entity has both a long-term and a short-term rating by Moody's, (x) the rating of the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such entity of at least "A1" (which rating of A1 is not on credit watch for possible downgrade) by Moody's and (y) the rating of the unsecured, unguaranteed and otherwise unsupported short-term senior debt obligations of such entity of "P-1" (which rating of P-1 is not on credit watch for possible downgrade) by Moody's or (ii) if such entity has a longterm rating (but no short-term debt rating) by Moody's, the rating of the long-term senior unsecured, unguaranteed and otherwise unsupported debt obligations of such entity of at least "Aa3" (and is not on credit watch for possible downgrade) by Moody's. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of a Hedge Rating Determining Party (or against any Person in

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control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of such Hedge Rating Determining Party. "Money Management 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 fees and costs relating to various money management activities, provided that no Asset-Backed Securities with cash flows tied to an index or from 12b-1 fees or mutual fund fees shall be considered "Money Management Securities" under the Indenture. "Monoline Guaranteed Securities" means any Asset-Backed Security of a Specified Type as to which the timely payment of interest when due, and the payment of principal no later than stated legal maturity, is unconditionally guaranteed pursuant to an insurance policy, guarantee or other similar instrument issued by a Monoline Insurer organized under the laws of a state of the United States, but only if such insurance policy, guarantee or other similar instrument (1) expires no earlier than such stated maturity, (2) provides that payment thereunder is independent of the performance by the obligor on the relevant AssetBacked Security and (3) is issued by a Monoline Insurer having a credit rating assigned by a nationally recognized statistical rating organization that currently rates such Asset-Backed Security which is higher than the credit rating assigned by such rating organization to such Asset-Backed Security determined without giving effect to such insurance policy, guarantee or other similar instrument; provided that the underlying security that is the subject of such guarantee (a) complies with the requirements of the definition of Collateral Debt Security (except clause (4) and clause (17)) and (b) if acquired by the Issuer on the date of acquisition of the related Monoline Guaranteed Security, would comply with the Concentration Limitations. "Monoline Insurer" means a financial guaranty insurance company that guarantees scheduled interest and principal payments on bonds and writes no other line or type of insurance. "Moody's Below B3 Haircut Amount" means, as of any Measurement Date, 50.0% of the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds) that have a Moody's Rating of below "B3." "Moody's Below Ba3 Haircut Amount" means, as of any Measurement Date, 30.0% of the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds) that have a Moody's Rating of below "Ba3" but have a Moody's Rating of at least "B3." "Moody's Below Baa3 Haircut Amount" means, as of any Measurement Date, 10.0% of the excess (if any) of (a) the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds) that have a Moody's Rating of below "Baa3" but have a Moody's Rating of at least "Ba3" over (b) 25.0% of the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds). "Moody's Haircut Amount" means, as of any Measurement Date, the sum (without duplication) of (i) the Moody's Below Baa3 Haircut Amount plus (ii) the Moody's Below Ba3 Haircut Amount plus (iii) the Moody's Below B3 Haircut Amount plus (iv) the aggregate Discount Haircut Amount for all Discount Securities; provided, however, that a Collateral Debt Security shall only be included in one of clauses (i) through (iv), which shall be the clause that results in the greatest Moody's Haircut Amount. "Moody's Rating" means, if a Collateral Debt Security is rated (publicly or privately) by Moody's, such Collateral Debt Security's Moody's Rating and, otherwise, a rating determined in accordance with the methodology more fully described in the Indenture.

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"Multiline Guaranteed Securities" means any Asset-Backed Security of a Specified Type as to which the timely payment of interest when due, and the payment of principal no later than stated legal maturity, is unconditionally guaranteed pursuant to an insurance policy, guarantee or other similar instrument issued by a Multiline Insurer organized under the laws of a state of the United States, but only if such insurance policy, guarantee or other similar instrument (1) expires no earlier than such stated maturity, (2) provides that payment thereunder is independent of the performance by the obligor on the relevant AssetBacked Security and (3) is issued by a Multiline Insurer having a credit rating assigned by a nationally recognized statistical rating organization that currently rates such Asset-Backed Security which is higher than the credit rating assigned by such rating organization to such Asset-Backed Security determined without giving effect to such insurance policy, guarantee or other similar instrument; provided that the underlying security that is the subject of such guarantee (a) complies with the requirements of the definition of Collateral Debt Security (except clause (4)) and (b) if acquired by the Issuer on the date of acquisition of the related Multiline Guaranteed Security, would comply with the Concentration Limitations. "Multiline Insurer" means an insurance company that writes more than one line or type of insurance. "Mutual Fund Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from a pool of brokerage fees and costs relating to various mutual funds, generally having the following characteristics: (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 Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from the sale of products 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: (1) the contracts have standardized payment terms; (2) the contracts are the obligations of a few consumers of natural resources and accordingly represent an undiversified pool of credit risk; and (3) the repayment stream on such contracts is primarily determined by a contractual payment schedule. "Net Interest Margin Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from the excess interest payments from Asset-Backed Securities collateralized by a pool of mortgage loans, following any realized losses on, and satisfaction of the required overcollateralization levels in, such underlying AssetBacked Securities. "Net Outstanding Portfolio Collateral Balance" means, on any Measurement Date, an amount equal to (a) the aggregate principal balance on such Measurement Date of all Collateral Debt Securities plus (b) the aggregate principal balance of all Principal Proceeds and Unused Proceeds held as cash and Eligible Investments purchased with Principal Proceeds or Unused Proceeds (exclusive of any amounts standing to the credit of the Expense Account on such Measurement Date) and any amount on deposit at such time in the Principal Collection Account or the Unused Proceeds Account (without duplication) minus (c) the aggregate principal balance on such Measurement Date of all Collateral Debt Securities that are (i) Defaulted Securities, (ii) Deferred Interest PIK Bonds or (iii) Equity Securities plus (d) for each

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Defaulted Security or Deferred Interest PIK Bond, the Calculation Amount with respect to such Defaulted Security or Deferred Interest PIK Bond; provided that solely for the purpose of calculating the Net Outstanding Portfolio Collateral Balance in connection with the Overcollateralization Tests, the "Net Outstanding Portfolio Collateral Balance" means (A) the amount determined pursuant to the preceding clauses of this definition minus (B) the greater of (1) the Moody's Haircut Amount and (2) the Standard & Poor's Haircut Amount. "Non-Call Period" means the period from the Closing Date to and including the Business Day immediately preceding the Payment Date occurring in December 2009. "Offer" means, with respect to any security, (i) 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 (ii) 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. "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, generally having 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 ABS Security" means an Asset-Backed Security that is (i) an Automobile Security, a Credit Card Security, a Small Business Loan Security or a Student Loan Security and (ii) not an Excluded ABS Type. "Periodic Reserve Amount" means, as of any date of determination, an amount equal to the sum of (a) the taxes and other amounts payable on the next succeeding Payment Date pursuant to clause (1) under Priority of PaymentsInterest Proceeds, (b) the Administrative Expenses payable on the next succeeding Payment Date pursuant to clause (2) under Priority of PaymentsInterest Proceeds, (c) the Senior Collateral Management Fee payable on the next succeeding Payment Date and (d) (i) for purposes of calculating the Class A Interest Coverage Ratio, the Cumulative Interest Amount for the Class A Notes due on the next succeeding Payment Date and (ii) for purposes of calculating the Class B Interest Coverage Ratio, the Cumulative Interest Amount for the Class A Notes and the Class B Notes due on the next succeeding Payment Date.

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"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 security that, pursuant to the terms of its Underlying Instruments, defers interest without resulting in a default, including (i) a security that permits the payment of interest thereon, which interest is due on or after the date on which the security is purchased by the Issuer, to be deferred and capitalized as additional principal thereof or (ii) a security that issues identical securities in place of payments of interest in cash, which interest is due on or after the date on which the security is purchased by the Issuer, in each case either (a) without the consent of 100% of the holder or holders of such security or (b) at the option of holders of securities that are senior or pari passu to such security and are secured by the same collateral pool following a default or event of default with respect to such senior or pari passu securities. "Preference Security Interest Proceeds Target Return" means, as of any Payment Date, the per annum rate (expressed as a percentage) determined by multiplying (a) the amount obtained by dividing (i) the aggregate amount distributed to the holders of the Preference Securities on such Payment Date under clause (13) under "Description of the NotesPriority of PaymentsInterest Proceeds" by (ii) the original aggregate notional amount of all Preference Securities issued on the Closing Date, and (b) the number obtained by dividing (i) 360 by (ii) the number of days during the related Interest Period (calculated on the basis of a year of 360 days and twelve 30-day months). "Prime RMBS Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that primarily 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 or balances (including revolving balances) outstanding under lines of credit secured by residential real estate (single or multi-family properties) that generally have 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 very diversified pool of obligor credit risk; and (3) the mortgage loans have a weighted average FICO Score greater than 700. "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 Due Period (or, with respect to Eligible Investments, any Eligible Investment Due Period), the sum (without duplication) of: (1) any Unused Proceeds transferred from the Unused Proceeds Account to the Principal Collection Account on the first Payment Date after a Rating Confirmation has occurred (after application of funds on such Payment Date in accordance with the Priority of Payments); (2) all payments of principal on the Collateral Debt Securities and Eligible Investments (excluding any amount representing the accreted portion of a discount from the face amount of an Eligible Investment) received in cash by the Issuer during such Due Period (or, with respect to Eligible Investments, any Eligible Investment Due Period), including prepayments or mandatory sinking fund payments, or payments in respect of optional redemptions, exchange offers, tender offers, recoveries on Defaulted Securities and Deferred Interest PIK Bonds up to the par amount thereof (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, and tender offers for any Equity Security received in cash by the Issuer during such Due Period; (3) sale proceeds received in cash in respect of Collateral Debt Securities sold by the Issuer during such Due Period (excluding those included in Interest Proceeds as defined above); (4) all amendment, waiver, late payment fees and other fees and commissions, received in cash by the Issuer

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during the related Due Period in respect of Defaulted Securities and Deferred Interest PIK Bonds; (5) all payments received in cash by the Issuer during such Due Period which represent call, prepayment or redemption premiums; (6) all payments of interest on Collateral Debt Securities received in cash by the Issuer during such Due Period to the extent that such payments represent accrued interest purchased with Principal Proceeds or Unused Proceeds; (7) all payments received in cash by the Issuer during such Due Period in respect of deferred interest on Deferred Interest PIK Bonds previously capitalized; (8) all yield maintenance payments received in cash by the Issuer during such Due Period; and (9) all other payments received in connection with the Collateral Debt Securities and Eligible Investments which are not specifically included in Interest Proceeds; provided that in no event shall Principal Proceeds include the U.S.$250 of capital contributed by the owners of the Ordinary Shares of the Issuer in accordance with the Issuer Charter or U.S.$250 representing a profit fee to the owner of the Issuer's Ordinary Shares. "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 projects, 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). "Quarterly Asset Amount" means, with respect to any Payment Date, the Net Outstanding Portfolio Collateral Balance on the first day of the related Due Period or, in the case of the first Due Period, on the Closing Date. For the purpose of calculating the Senior Collateral Management Fee, the Subordinated Collateral Management Fee, the Quarterly Asset Amount will be calculated as if the principal of each Interest-Only Security were equal to the Aggregate Amortized Cost thereof. "Range Floating Rate Security" means any floating rate security which does not pay interest if the applicable floating rate index upon which the stated interest rate thereon is based moves outside of a range set forth in the related Underlying Instruments. "Rating Condition" means, with respect to any action taken or to be taken under the Indenture, a condition that is satisfied when (i) each Rating Agency (or, if only one Rating Agency is specified, such Rating Agency) has confirmed in writing to the Issuer, the Trustee, the Hedge Counterparty and the Collateral Manager that such action, at that time, will not result in the withdrawal, reduction or other adverse action with respect to such Rating Agency's then-current rating of any Class of Notes or (ii) with respect to any single Class of Notes, holders of 100% of the outstanding principal amount of such Class of Notes inform the Trustee that the Rating Condition is not required to be satisfied with respect to such Class; provided that notice of such Noteholder waiver is provided to Standard & Poor's. "Rating Confirmation" means (i) with respect to Standard & Poor's, that Standard & Poor's has confirmed in writing to the Issuer within 30 days after receipt of an Effective Date Notice each of the ratings assigned by Standard & Poor's to the Notes on the Closing Date, and (ii) with respect to Moody's, that (A) the Issuer (or the Collateral Manager on behalf of the Issuer) has determined that the Collateral Quality Tests (other than the Standard & Poor's Minimum Weighted Average Recovery Rate Test), the Coverage Tests and the Concentration Limitations were each satisfied as of the Effective Date, (B) an accountant's report has been delivered to Moody's pursuant to the Indenture in support of the

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determination by the Issuer (or the Collateral Manager on behalf of the Issuer) that such tests and limitations were satisfied on the Effective Date and (C) Moody's has not notified the Issuer in writing within 30 days after receipt of the Effective Date Notice that the ratings assigned by Moody's to the Notes on the Closing Date will be reduced or withdrawn; provided, in each case, that if the Effective Date occurs on the Closing Date (as shall be evidenced by the accountants' report delivered on the Closing Date), then the initial assignment by Moody's and Standard & Poor's of their ratings to the Notes on the Closing Date shall constitute a Rating Confirmation for purposes of this definition and no further action by the Issuer shall be required in connection with the Effective Date under the Indenture. "Rating Confirmation Failure" means (i) with respect to Standard & Poor's, that Standard & Poor's has not confirmed in writing to the Issuer within 30 days after receiving the Effective Date Notice each of the ratings assigned by Standard & Poor's to the Notes on the Closing Date and (ii) with respect to Moody's, that (A) the Issuer failed to satisfy any of the Collateral Quality Tests, Coverage Tests and Concentration Limitations on the Effective Date and (B) Moody's has not notified the Issuer in writing within 30 days after receipt of the Effective Date Notice that the ratings assigned by Moody's to the Notes on the Closing Date will not be reduced or withdrawn; provided that, with respect to each of Standard & Poor's and Moody's, the 30 day period referred to in clauses (i) and (ii)(B) of this definition may be extended pursuant to a Compliance Plan that satisfies the Rating Condition. "Ratings Maintenance Requirement" means, with respect to a Hedge Rating Determining Party, (a) either (i) the rating of the short-term, unsecured, unguaranteed and otherwise unsupported debt obligations of such entity of at least "A-3" by Standard & Poor's (which rating of A-3 is not on credit watch for possible downgrade) or (ii) the rating of the long-term senior unsecured, unguaranteed and otherwise unsupported debt obligations of such entity of at least "BBB-" by Standard & Poor's (which rating of BBB- is not on credit watch for possible downgrade) and (b)(i) if such entity has a long-term rating (but no short-term debt rating) by Moody's, the rating of the long-term senior unsecured, unguaranteed and otherwise unsupported debt obligations of such entity of at least "A2" by Moody's or (ii) if such entity has both a long-term and a short-term rating by Moody's, (x) the rating of the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such entity of at least "A3" by Moody's and (y) the rating of the unsecured, unguaranteed and otherwise unsupported short-term senior debt obligations of such entity of at least "P-2" by Moody's. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of a Hedge Rating Determining Party shall be deemed to constitute a guarantee, security or support of the obligations of such Hedge Rating Determining Party. "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 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 recreational vehicle for its stated residual value, subject to payments at the end of lease term for excess mileage or use. "Reference Banks" means four major banks in the London interbank market, selected by the Calculation Agent (after consultation with the Collateral Manager).

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"Reference Dealers" means three major dealers in the secondary market for U.S. Dollar certificates of deposit, selected by the Calculation Agent (after consultation with the Collateral Manager). "Registered" means in registered form for purposes of the Code and issued after July 18, 1984, provided, that a certificate of interest in a trust that is treated as a grantor trust for U.S. Federal income tax purposes shall not be treated as Registered unless each of the obligations or securities held by the trust was issued after July 18, 1984. "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. "REIT Debt Security" means a debt security issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision). "Requisite Noteholders" means the Holders of at least 662/3% of the aggregate principal amount of the outstanding Notes (voting together as a single Class); provided that (1) following the occurrence of a Default or an Event of Default under the Indenture and (2) for purposes of voting to consent to an assignment of the Collateral Management Agreement, to remove the Collateral Manager for "cause" under "Termination of the Collateral Management Agreement", to approve a successor Collateral Manager, to petition a court for the appointment of a successor Collateral Manager pursuant to the terms of the Collateral Management Agreement if a successor to the Collateral Manager has not been appointed within 50 days after the applicable notice of resignation or removal (or, if a successor Collateral Manager has been appointed, if such successor has not assumed in writing the Collateral Manager's obligations within 50 days of its appointment) or to approve an increase in the Senior Collateral Management Fee payable to a successor Collateral Manager: (x) for so long as any Senior Class A Notes remain outstanding, "Requisite Noteholders" shall mean the Holders of at least a majority of the aggregate principal amount of the outstanding Senior Class A Notes, voting together as a single Class, (y) when the Senior Class A Notes are paid in full, "Requisite Noteholders" shall mean the Holders of at least 662/3% of the aggregate principal amount of the Class A-3L Notes (if outstanding), voting together as a single Class, (z) when the Class A-3L Notes are paid in full, "Requisite Noteholders" shall mean the Holders of at least 662/3% of the aggregate principal amount of the Class B-1L Notes (if outstanding), voting together as a single Class. If the Person that is acting as Trustee under the Indenture is a Holder of any Note for its own account, such Person shall be excluded as a Holder for purposes of this definition in connection with the consent or approval by Noteholders of any supplemental indenture affecting the provisions thereof relating to the Trustee. "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 may be 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 by 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

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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 a 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" means a residential mortgage-backed security (including Prime RMBS Securities, Mid-Prime RMBS Securities and Sub-Prime RMBS Securities). "Scheduled Distribution" means, with respect to any 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 security, determined in accordance with the assumptions specified in the Indenture. "Securities Purchase Agreement" means the Securities Purchase Agreement among the Issuers and the Initial Purchaser relating to the offering and sale of the Notes and Preference Securities. "Sequential Pay Test" means, for so long as any Class B-1L Notes remain outstanding, a test satisfied on any Determination Date if the Class B-1L Overcollateralization Ratio on such Determination Date is equal to or greater than 103.25% provided that, if the Issuer failed to satisfy the Sequential Pay Test on any prior Determination Date, the Sequential Pay Test will be satisfied on such Determination Date only if the Class B-1L Overcollateralization Ratio on such Determination Date is equal to or greater than the Class B-1L Overcollateralization Ratio on the Effective Date. For purposes of calculating the Sequential Pay Test, when calculating the Net Outstanding Portfolio Collateral Balance for purposes of determining the Class B-1L Overcollateralization Ratio, clause (b) of the defined term Standard & Poor's Below BBBExcess Amount shall be modified so that the amount determined pursuant to such clause is 20.0% of the Aggregate Principal Balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds). "Sequential Payment Triggering Event" means the occurrence of any of the following events: (a) the Issuer has failed to satisfy any Overcollateralization Test on the applicable Determination Date or any prior Determination Date, (b) the Issuer has failed to satisfy the Sequential Pay Test on the applicable Determination Date and such failure is continuing, (c) an Event of Default has occurred and is continuing, (d) the rating assigned by either Rating Agency to any Class of Notes on the Closing Date (i) has been withdrawn or (ii) has been reduced by one or more subcategories, and such rating has not been restored to the rating assigned by such Rating Agency on the Closing Date, (e) the Net Outstanding Portfolio Collateral Balance is less than or equal to U.S.$375,000,000, or (f) the applicable Payment Date is a Redemption Date or the Final Payment Date. "Servicer" means, with respect to any Collateral Debt Security, the entity (howsoever described in the applicable Underlying Instruments) that, absent any default, event of default or similar condition (however described), is primarily responsible for managing, servicing, monitoring and otherwise administering the cash flows from which payments to investors in such Collateral Debt Security are made. "SIV" means a structured investment vehicle or limited-purpose operating company that undertakes arbitrage activities by purchasing predominantly highly rated medium- and long-term, fixed-income assets and funding itself with predominantly short-term, highly rated commercial paper and medium term notes.

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"Small Business Loan Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from general purpose corporate loans made to "small business concerns" (generally within the meaning given to such term by regulations of the United States Small Business Administration), including those (a) made pursuant to Section 7(a) of the United States Small Business Act, as amended, and (b) partially guaranteed by the United States Small Business Administration. Small Business Loan Securities generally have the following characteristics: (1) 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. "Special-Majority-in-Interest of Preference Securityholders" means, at any time, Preference Securityholders who in the aggregate own more than 662/3% of the Preference Securities outstanding at such time. "Spread Excess" means, as of the Effective Date, a fraction (expressed as a percentage), the numerator of which is equal to the product of (a) the excess, if any, of the Weighted Average Spread for the Effective Date over 1.70% and (b) the aggregate principal balance of all floating rate securities (excluding Defaulted Securities and Deferred Interest PIK Bonds) and the denominator of which is the aggregate principal balance of all fixed rate securities (excluding Defaulted Securities and Deferred Interest PIK Bonds). In computing the Spread Excess, the Weighted Average Spread will be computed as if the Fixed Rate Excess were equal to zero. "Stadium Receivables 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 generated by one or more sports and entertainment stadiums collected by a special purpose entity formed to own one or more such stadiums 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). "Standard & Poor's Below B- Amount" means, as of any Measurement Date, the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds) that have a Standard & Poor's rating of below "B-." "Standard & Poor's Below B- Haircut Amount" means, as of any Measurement Date, 50.0% of the lesser of (a) the Standard & Poor's Below B- Amount and (b) the Standard & Poor's Below BBB- Excess Amount. "Standard & Poor's Below BB- Amount" means, as of any Measurement Date, the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds) that have a Standard & Poor's rating of below "BB-" but above "CCC+." "Standard & Poor's Below BB- Haircut Amount" means, as of any Measurement Date, 30.0% of the lesser of (a) the Standard & Poor's Below BB- Amount and (b) the excess (if any) of (i) the Standard & Poor's Below BBB- Excess Amount over (ii) the Standard & Poor's Below B- Amount.

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"Standard & Poor's Below BBB- Amount" means, as of any Measurement Date, the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds) that have a Standard & Poor's rating of below "BBB-" but above "B+." "Standard & Poor's Below BBB- Excess Amount" means, as of any Measurement Date, the excess (if any) of (a) the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds) that have a Standard & Poor's rating of below "BBB-" over (b) 25.0% of the aggregate principal balance of all Collateral Debt Securities (other than Defaulted Securities or Deferred Interest PIK Bonds). "Standard & Poor's Below BBB- Haircut Amount" means, as of any Measurement Date, 10.0% of the lesser of (a) the Standard & Poor's Below BBB- Amount and (b) the excess (if any) of (i) the Standard & Poor's Below BBB- Excess Amount over (ii) the sum of (A) the Standard & Poor's Below BB- Amount and (B) the Standard & Poor's Below B- Amount. "Standard & Poor's Haircut Amount" means, as of any Measurement Date, (a) the sum of (i) the Standard & Poor's Below B- Haircut Amount plus (ii) the Standard & Poor's Below BB- Haircut Amount plus (iii) the Standard & Poor's Below BBB- Haircut Amount or (b) such other amount which satisfies the Rating Condition with respect to Standard & Poor's; provided, however, that a Collateral Debt Security shall only be included in one of clauses (i) through (iii), which shall be the clause that results in the greatest Standard & Poor's Haircut Amount. "Standard & Poor's Rating" means, if a Collateral Debt Security is rated (publicly or privately) by Standard & Poor's, such Collateral Debt Security's Standard & Poor's rating and, otherwise, a rating determined in accordance with the methodology more fully described in the Indenture. "Step-Down Bond" means a security that by the terms of the related Underlying Instrument provides for a decrease, in the case of a fixed rate security, in the per annum interest rate on such security or, in the case of a floating rate security, in the spread over the applicable index or benchmark rate, solely as a function of the passage of time; provided that a Step-Down Bond shall not include any such security providing for payment of a constant rate of interest at all times after the date of acquisition by the Issuer. In calculating any Coverage Test or Collateral Quality Test by reference to the spread (in the case of a floating rate Step-Down Bond) or coupon (in the case of a fixed rate Step-Down Bond) of a Step-Down Bond, the spread or coupon on any date shall be deemed to be the lowest spread or coupon, respectively, scheduled to apply to such Step-Down Bond on or after such date. "Step-Up Bond" means a security that by the terms of the related Underlying Instrument provides for an increase, in the case of a fixed rate security, in the per annum interest rate on such security or, in the case of a floating rate security, in the spread over the applicable index or benchmark rate, solely as a function of the passage of time; provided that a Step-Up Bond shall not include any such security providing for payment of a constant rate of interest at all times after the date of acquisition by the Issuer. In calculating any Coverage Test or Collateral Quality Test by reference to the spread (in the case of a floating rate Step-Up Bond) or coupon (in the case of a fixed rate Step-Up Bond) of a Step-Up Bond, the spread or coupon on any date shall be deemed to be the spread or coupon stated to be payable in cash and in effect on such date. "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) upon structured settlements. A structured settlement ("structured settlement") describes an arrangement, which compensates a claimant (a former plaintiff that has settled a lawsuit (the "claimant")) over time, rather than with a current lump

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sum payment. Under the terms of an agreement (the "settlement agreement") between the claimant, and the payor of the claim, either the former defendant or the defendant's property and casualty insurer (collectively, the "liable parties"), the liable parties, are obligated to, pay either jointly or severally to the claimant one or more future payments (the "scheduled payments") in satisfaction of damages suffered by the claimant. The casualty insurer may elect to remove the payment obligations under a settlement agreement from its balance sheet by entering into an arrangement (a "qualified assignment") whereby the casualty insurer assigns its liability under the settlement agreement to an assignee (the "assignee" or "obligor") that assumes the casualty insurer's liability in exchange for a payment to such assignee by such casualty insurer. The assignee, or the casualty insurer, if such casualty insurer has not elected to make an assignment of its liability to an assignee, then purchases an annuity contract (the "annuity contract") from a life insurance company (the "annuity provider") naming the assignee (or casualty insurer, where applicable) as the owner of such annuity contract and providing for the payment of the scheduled payments as set forth in the related settlement agreement directly to the claimant (or pursuant to the claimant's instructions). The qualified assignment transfers the periodic payment obligation and default risk under the settlement agreement from the liable parties to the assignee. Frequently, an assignee is a wholly-owned subsidiary of either the annuity provider or the casualty insurer, created for the sole purpose of accepting such qualified assignments, assuming the payment liability under structured settlements and purchasing and owning annuity contracts and other assets to fund such structured settlements. The originator of the structured settlements purchases, among other things, all or a portion of the claimant's rights to receive future scheduled payments (or specified portions of any such payments) under settlement agreements, thereby providing liquidity to claimants whose structured settlements no longer meet their particular life circumstances. Typically, the portfolio of receivables is supported by annuities which are obligations of highly rated annuity providers or are owed by obligors that, in either case, have an investment grade credit rating by either Moody's or Standard & Poor's. "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) 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. "Sub-Prime RMBS Securities" means Asset-Backed Securities that entitle the holders thereof to receive payments that primarily depend (except for rights or other assets designed to assure the servicing or

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timely distribution of proceeds to holders of the Asset-Backed Securities) on the cash flow from residential mortgage loans or balances (including revolving balances) outstanding under lines of credit secured by residential real estate (single or multi-family properties) that generally have 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 very diversified pool of obligor credit risk; and (3) the mortgage loans have a weighted average FICO Score less than 625. "Subscription Agreement" means each of the subscription agreements and/or representation letters, each dated on or prior to the Closing Date, delivered to the Initial Purchaser or the Issuer by the respective initial purchaser of Preference Securities named on the signature page thereof, as modified and supplemented and in effect from time to time. "Synthetic Security" means any swap transaction, credit linked note, credit derivative, structured bond investment or other investment purchased from, or entered into by, the Issuer with a counterparty which investment contains a probability of default, recovery upon default (of a specific percentage of par not less than the principal balance thereof multiplied by the recovery rate therefor) and expected loss characteristics closely correlated to a reference obligation, but which may provide for a different maturity, interest rate or other non-credit characteristics than such reference obligation. "Tax Event" means an event that will occur if, whether or not as a result of any change in applicable law or regulation or interpretation thereof, (i) any obligor is, or on the next scheduled payment date under any Collateral Debt Security any obligor will be, required to deduct or withhold from any payment under any Collateral Debt Security to the Issuer an amount for or on account of any tax, and such obligor is not, or will not be, required to pay to the Issuer such additional amount as is necessary to ensure that the net amount actually received by the Issuer (free and clear of taxes, whether assessed against such obligor or the Issuer) will equal the full amount that the Issuer would have received had no such deduction or withholding occurred, (ii) the Issuer or a Hedge Counterparty is required to deduct or withhold from any payment under the Closing Date Interest Rate Cap Agreement an amount for or on account of any tax (without regard to whether the Issuer or such Hedge Counterparty is obligated to make a gross-up payment) or (iii) any net-basis tax measured by or based on the income of the Issuer or the Co-Issuer is imposed on the Issuer or the Co-Issuer by any jurisdiction. "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 obligors 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. "Tax Materiality Condition" means a condition that will be satisfied with respect to any Due Period if the Issuer, the Collateral Manager or (i) the holders of a majority of the aggregate outstanding principal amount of the Affected Class or (ii) a Majority-in-Interest of Preference Securityholders, certify (or deliver an opinion of counsel) to the Trustee that, as a result of all Tax Events that have occurred in such Due Period, the aggregate amounts deducted or withheld for or on account of any tax by all obligors from any payments under the Collateral Debt Securities, from all Hedge Counterparties (net of any gross-up payments made by them to the Issuer), gross up payments made by the Issuer, and tax paid by the Issuer

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on its net income equals or exceeds three percent or more of the aggregate interest payments on all of the Collateral Debt Securities during the related Due Period. "Timeshare Securities" means Asset-Backed Securities (other than Prime RMBS Securities, Mid-Prime RMBS Securities and Sub-Prime RMBS Securities) 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 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) upon initial payments, annual payments and strategic contribution payments by tobacco manufacturers, such as Philip Morris Inc., R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp. and Lorillard Tobacco Co. (the original participating manufacturers), generally under a master settlement agreement (MSA) entered into with the attorneys general of 46 states, Washington, D.C., the U.S. Virgin Islands, the Northern Mariana Islands, American Samoa and Guam. The MSA is based on the relative market share of the domestic tobacco manufacturers; therefore, the payment obligation can be considered an industry obligation. "Underlying Instruments" means the indenture, pooling agreement, servicing agreement or other agreement (howsoever described) pursuant to which a Collateral Debt Security, Eligible Investment or Equity Security has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Collateral Debt Security, Eligible Investment or Equity Security or of which holders of such Collateral Debt Security, Eligible Investment or Equity Security are the beneficiaries. "United States Government Securities" means direct obligations of, and obligations fully guaranteed by, the United States of America, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, or any agency or instrumentality of the United States of America, the obligations of which are backed by the full faith and credit of the United States of America. "Unused Proceeds" means, at any time, the net proceeds received by the Issuer on the Closing Date from the initial issuance of the Securities, to the extent such proceeds have not been deposited in the Expense Account or invested in Collateral Debt Securities. "Written-Down Security" means any Collateral Debt Security as to which the aggregate par amount of such Collateral Debt Security and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Collateral Debt Security exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral which has been charged off) as determined by the Collateral Manager using customary procedures and information available in the servicer reports received

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by the Trustee relating to such Written-Down Security; provided that, for purposes of the Overcollateralization Tests, in the event the Moody's Rating of any Written-Down Security has been reduced below "Caa3" or the Standard & Poor's rating of any Written-Down Security has been reduced below "CCC-", such Written-Down Security will instead be treated as a "Defaulted Security" unless the Collateral Manager elects not to treat such Written-Down Security as a Defaulted Security and the Rating Condition is satisfied with respect to such treatment. "Zero Coupon Bond" means a security (other than a Step-Up Bond) that, pursuant to the terms of its Underlying Instruments, on the date on which it is purchased by the Issuer does not provide for periodic payment of interest or provides that all payments of interest will be deferred until the final maturity thereof.

205

ANNEX 2 INDEX OF DEFINED TERMS Following is an index of defined terms used in this Offering Circular and the page number where each definition appears. 25% Threshold ...................................................141 ABS Franchise Securities ..................................173 ABS Residential Securities................................173 ACA Capital Holdings.......................................118 ACA Guaranty .................................... 34, 118, 119 ACA Management .........................................2, 118 ACA Services...............................................32, 118 Accelerated Payment Date...................................67 Accredited Investor..............................................11 Act.........................................................................40 Administration Agreement ..................................94 Administrative Expenses ...................................173 Administrative Indemnities ...............................173 Administrator .................................................13, 94 Advisers Act.......................................................118 Aerospace and Defense Securities ....................174 Affected Class ..................................................8, 47 affiliate................................................................174 Affiliate.................................................................33 affiliated..............................................................174 Agent ....................................................................78 Agents...................................................................78 Aggregate Amortized Cost ................................174 Aircraft Lease Securities....................................174 Applicable Procedures ...................................61, 81 Applicable Recovery Rate .................................175 Approved Index..................................................175 Asset-Backed CDO Security .............................175 Asset-Backed Securities ....................................175 Auction .................................................................48 Auction Call Redemption ....................................48 Auction Call Redemption Date .......................8, 48 Auction Date ........................................................48 Auction Procedures..............................................48 Automobile Securities........................................175 Average Life.......................................................108 Bank Guaranteed Securities...............................176 Bank Trust Preferred CDO Securities...............176 Base Rate............................................................176 Base Rate Reference Bank ................................176 Benefit Plan Investor..........................................142 Business Day ......................................................176 Calculation Agent ................................................44 Calculation Amount...........................................177 Cap......................................................................112 Car Rental Receivable Securities ......................177 Catastrophe Bonds............................................. 177 CDO ..................................................................... 25 CDO Collateral.................................................... 25 CDO-Backed CDO Securities .......................... 177 CDS Reference Obligations.............................. 179 CFC .................................................................... 134 Chassis Leasing Securities................................ 177 Class........................................................................1 Class A Interest Coverage Ratio......................... 59 Class A Interest Coverage Test........................... 59 Class A Notes .........................................................1 Class A-1 Notes......................................................1 Class A-1LA Note Interest Rate......................... 43 Class A-1LA Notes ................................................1 Class A-1LB Note Interest Rate ......................... 43 Class A-1LB Notes.................................................1 Class A-2L Note Interest Rate ............................ 43 Class A-2L Notes ...................................................1 Class A-3L Deferred Interest.......................... 4, 43 Class A-3L Note Interest Rate ............................ 43 Class A-3L Notes ...................................................1 Class A-3L Overcollateralization Ratio ............. 58 Class A-3L Overcollateralization Test ............... 58 Class B Interest Coverage Ratio ......................... 59 Class B Interest Coverage Test........................... 59 Class B-1L Deferred Interest .......................... 5, 44 Class B-1L Note Interest Rate ............................ 43 Class B-1L Notes....................................................1 Class B-1L Overcollateralization Ratio ............. 58 Class B-1L Overcollateralization Test ............... 58 Class B-1L Turbo Payment....................................5 Clearstream, Luxembourg................................... 11 CLO Security..................................................... 177 Closing Date ...........................................................3 Closing Date Interest Rate Cap Agreement ..................................................... 112 CMBS ................................................................ 178 CMBS CDO Securities ..................................... 178 CMBS Conduit Securities................................. 178 CMBS Credit Tenant Lease Securities............. 178 CMBS Large Loan Securities........................... 179 CMBS Single Property Securities .................... 179 Code ........................................................... 130, 140 Co-Issuer.................................................................2 Collateral.......................................................... 9, 96 Collateral Administration Agreement .............. 117

206

Collateral Administrator ....................................117 Collateral Debt Security.......................................98 Collateral Management Agreement ..............2, 117 Collateral Management Fee...............................124 Collateral Manager.............................................118 Collateral Manager Incentive Allocation..........124 Collateral Manager Securities .............................32 Collateral Quality Test Modification ..................71 Collateral Quality Tests .....................................106 Collateralized Debt Obligation Securities.........179 Collection Accounts...........................................114 Compliance Plan ..................................................47 Concentration Limitations .................................109 Container Leasing Securities.............................179 Controlling Person .............................................141 Corporate Debt Security ....................................180 Corporate Guaranteed Security .........................180 Coverage Failure Redemption.........................7, 46 Coverage Test Modification ................................71 Coverage Tests .....................................................57 Credit Card Securities ........................................180 Credit Improved Criteria....................................180 Credit Improved Security ..........................111, 180 Credit Risk Criteria ............................................180 Credit Risk Security...................................111, 180 Cumulative Interest Amount .............................181 Current Target Return Payment ..........................54 Defaulted Interest.................................................43 Defaulted Security..............................................181 Deferred Interest...............................................5, 44 Deferred Interest PIK Bond...............................182 Definitive Notes ...................................................60 Definitive Preference Securities ..........................81 Designated Maturity...........................................182 Determination Date............................................182 Discount Haircut Amount..................................182 Discount Security...............................................182 Disqualified Persons ..........................................140 DTC ................................................................11, 60 Due Date.............................................................183 Due Period..........................................................183 Effective Date.................................................47, 97 Effective Date Notice...........................................46 Eligible Bidder .....................................................48 Eligible Country .................................................183 Eligible Investment Due Period ........................183 Eligible Investments...........................................183 Eligible SPV Jurisdiction...................................185 Emerging Market Country.................................185 Emerging Market Security.................................185 Enhanced Equipment Trust Certificate .............185

Entertainment Securities ................................... 185 Equipment Leasing Securities .......................... 185 Equipment Trust Certificates ............................ 186 Equity Interest.................................................... 141 Equity Security .................................................. 186 ERISA........................................140, 143, 155, 158 ETC Issuer ......................................................... 186 Euroclear.............................................................. 11 Event of Default .................................................. 65 excepted investment company.......................... 149 Excepted Property ..................................................9 Excess Amounts .................................................. 54 Excess Interest ..................................................... 54 Excess Total Proceeds......................................... 54 Exchange Act....................................................... 62 Excluded ABS Type............................................ 99 Expected Available Interest Amount................ 186 Expense Account............................................... 115 Final Payment Date ........................................... 186 Fixed Rate Excess ............................................. 186 Floorplan Receivable Securities ....................... 187 Flow-Through Investment Vehicle................... 149 Franchise Loans................................................. 187 Future Flow Securities ...................................... 187 Global Notes ........................................................ 12 Healthcare Securities......................................... 188 Healthcare, Education and Childcare Equipment Securities .................................... 187 Hedge Counterparty .......................................... 112 Hedge Counterparty Collateral Account .......... 113 Hedge Rating Determining Party ..................... 188 Holder ................................................................ 188 Home Improvement Loan Securities................ 188 Hospital Receivable Securities ......................... 188 Indenture .................................................................1 indirect participants ............................................. 65 Insurance Company Guaranteed Security........ 188 Interest Collection Account .............................. 114 Interest Coverage Ratios ..................................... 58 Interest Coverage Tests ....................................... 57 Interest Period................................................ 3, 189 Interest Proceeds................................................ 189 Interest-Only Security ....................................... 189 Inverse Floating Rate Security.......................... 189 Investment Company Act ................................... 11 Investment Grade CDO Securities ................... 189 IRR ..................................................................... 189 IRR Test............................................................. 190 IRS ..................................................................... 131 Issue ................................................................... 190 Issuer .......................................................................2

207

Issuer Charter .........................................................1 Issuers .....................................................................2 Legend ............................................................62, 82 LIBOR ....................................................................3 LIBOR Business Day ........................................190 LIBOR Determination Date ........................44, 190 London Banking Day.........................................190 Lottery Receivable Securities............................190 Majority-in-Interest of Preference Securityholders ..............................................190 Mandatory Redemption .........................................7 Manufactured Housing Securities .....................191 Measurement Date .............................................191 Mid-Prime RMBS Securities.............................191 Minimum Hedge Counterparty Ratings............191 Minimum Ramp-Up Amount..............................97 Minimum Redemption Amount ..........................49 Money Management Securities.........................192 Monoline Guaranteed Securities .......................192 Monoline Insurer................................................192 Moody's ..........................................................13, 89 Moody's Asset Correlation Factor.....................106 Moody's Asset Correlation Test ........................106 Moody's Below B3 Haircut Amount.................192 Moody's Below Ba3 Haircut Amount...............192 Moody's Below Baa3 Haircut Amount.............192 Moody's Haircut Amount ..................................192 Moody's Maximum Rating Distribution Test .................................................................106 Moody's Minimum Weighted Average Recovery Rate Test........................................107 Moody's Rating ..................................................192 Moody's Rating Distribution .............................106 Moody's Weighted Average Recovery Rate.................................................................107 Multiline Guaranteed Securities........................193 Multiline Insurer.................................................193 Mutual Fund Securities......................................193 NASD ...................................................................40 Natural Resource Securities...............................193 Net Interest Margin Securities...........................193 Net Outstanding Portfolio Collateral Balance ...........................................................193 Non-Call Period .................................................194 Note Register........................................................61 Note Registrar ......................................................61 Noteholders ............................................................2 Notes.......................................................................1 Offer....................................................................194 Offering Circular....................................................1 OID .....................................................................132

Oil and Gas Securities....................................... 194 Optional Redemption ...................................... 8, 47 Ordinary Shares................................................... 93 Other ABS Security........................................... 194 Overcollateralization Ratios................................ 57 Overcollateralization Tests ................................. 57 Participants .................................................... 61, 81 Parties in Interest ............................................... 140 Paying Agent ....................................................... 51 Payment Account .............................................. 114 Payment Date................................................... 3, 43 Periodic Reserve Amount ................................. 194 Person................................................................. 195 PFIC ................................................................... 133 PIK Bond ........................................................... 195 Plan..................................................................... 140 Plan Asset Regulation ....................................... 141 plan fiduciary..................................................... 140 Post Acceleration Payment Date ........................ 37 pre-amendment beneficial owners.................... 149 Preference Securities ..............................................1 Preference Security Balance ............................... 49 Preference Security Documents...................... 1, 75 Preference Security Interest Proceeds Target Return................................................. 195 Preference Security Paying Agency Agreement ................................................... 1, 75 Preference Security Paying Agent.........................1 Preference Security Payment Account ............... 80 Preference Security Redemption Price............... 77 Preference Security Vote .................................... 79 Preference Securityholders ................................. 78 Prime RMBS Securities .................................... 195 Principal Collection Account............................ 114 Principal Only Security ..................................... 195 Principal Proceeds ............................................. 195 Priority of Payments............................................ 51 Project Finance Securities................................. 196 PTCE.................................................................. 141 QEF .................................................................... 133 Qualified Institutional Buyers............................. 10 Qualified Purchaser ............................................. 11 Qualifying Investment Vehicle......................... 149 Quarterly Asset Amount ................................... 196 Ramp-Up Period.................................................. 97 Ramp-Up Principal Proceeds Account............. 115 Range Floating Rate Security ........................... 196 Rating Agencies............................................. 13, 89 Rating Condition ............................................... 196 Rating Confirmation.......................................... 196 Rating Confirmation Failure............................. 197

208

Rating Confirmation Failure Redemption ......7, 47 Ratings Maintenance Requirement ...................197 Record Date....................................................51, 77 Recreational Vehicle Securities.........................197 Redemption Date..................................................49 Redemption Price.............................................8, 50 Reference Banks ..........................................45, 197 Reference Dealers ..............................................198 Registered...........................................................198 Regulation S .........................................................60 Regulation S Global Class A-1LA Note.............60 Regulation S Global Class A-1LB Note .............60 Regulation S Global Class A-2L Note................60 Regulation S Global Class A-3L Note................60 Regulation S Global Class B-1L Note ................60 Regulation S Global Notes ............................11, 60 Regulation S Global Preference Securities ...12, 81 Regulation S Notes ........................................11, 60 Regulation S Preference Securities ...............12, 81 Regulatory Determination Date...........................67 Reinsurance Securities.......................................198 REIT Debt Security............................................198 Remaining Interest Proceeds ...............................54 Requisite Noteholders........................................198 Resolutions .......................................................1, 75 Restaurant and Food Services Securities ..........198 Restricted Global Class A-1LA Note..................60 Restricted Global Class A-1LB Note..................60 Restricted Global Class A-2L Note.....................60 Restricted Global Class A-3L Note.....................60 Restricted Global Class B-1L Note.....................60 Restricted Global Notes.................................11, 60 Restricted Notes .............................................11, 60 Restricted Preference Securities ....................12, 81 Review Period ......................................................69 Risk Solutions ....................................................118 RMBS.........................................................103, 199 Rule 144A.............................................................10 Sale Restriction Condition.................................112 Scheduled Distribution ......................................199 Scheduled Preference Security Redemption Date .........................................7, 39 Scheduled Redemption ..........................................7 SEC.......................................................................35 Secured Parties .......................................................2 Securities ................................................................1 Securities Act .......................................................10 Securities Purchase Agreement .........................199 Security Register ..................................................82 Security Registrar...................................................1 Seller .....................................................................37

Senior ................................................................... 42 Senior Class A Notes..............................................1 Senior Class A Overcollateralization Ratio................................................................. 58 Senior Class A Overcollateralization Test ......... 58 Senior Collateral Management Fee .................. 124 Seniority............................................................... 42 Sequential Pay Period ......................................... 42 Sequential Pay Test ........................................... 199 Sequential Payment Triggering Event.............. 199 Servicer .............................................................. 199 Share Trustee ....................................................... 93 Similar Law .......................................150, 155, 158 SIV ..................................................................... 199 Small Business Loan Securities........................ 200 Special-Majority-in-Interest of Preference Securityholders.............................................. 200 Specified Type................................................... 101 Spread Excess.................................................... 200 Stadium Receivables Securities........................ 200 Standard & Poor's.......................................... 13, 89 Standard & Poor's Below B- Amount .............. 200 Standard & Poor's Below B- Haircut Amount .......................................................... 200 Standard & Poor's Below BB- Amount ........... 200 Standard & Poor's Below BB- Haircut Amount .......................................................... 200 Standard & Poor's Below BBB- Amount......... 201 Standard & Poor's Below BBB- Excess Amount .......................................................... 201 Standard & Poor's Below BBB- Haircut Amount .......................................................... 201 Standard & Poor's Haircut Amount.................. 201 Standard & Poor's Minimum Weighted Average Recovery Rate Test ........................ 108 Standard & Poor's Rating.................................. 201 Standard & Poor's Weighted Average Recovery Rate ............................................... 109 Stated Maturity .......................................... 3, 39, 46 Stated Redemption Price at Maturity ............... 132 Step-Down Bond ............................................... 201 Step-Up Bond .................................................... 201 Structured Settlement Securities....................... 201 Student Loan Securities..................................... 202 Subordinate.......................................................... 42 Subordinated Collateral Management Fee....... 124 Subprime Automobile Securities...................... 202 Sub-Prime RMBS Securities ............................ 202 Subscription Agreement.................................... 203 Synthetic Security.............................................. 203 Tax Event........................................................... 203

209

Tax Exempt Investors ........................................136 Tax Lien Securities ............................................203 Tax Materiality Condition .................................203 Tax Redemption...............................................8, 47 Timeshare Securities..........................................204 TIN......................................................................137 Tobacco Settlement Securities ..........................204 Total Proceeds......................................................55 Total Senior Redemption Amount ......................50 Transfer Agent .....................................................61 Trustee ....................................................................1 U.S. Persons .........................................................10 UBTI...................................................................136

Underlying Instruments..................................... 204 United States Government Securities............... 204 Unused Proceeds ............................................... 204 Unused Proceeds Account ................................ 114 USA PATRIOT Act............................................ 40 Weighted Average Coupon............................... 107 Weighted Average Coupon Test....................... 107 Weighted Average Life..................................... 108 Weighted Average Life Test............................. 108 Weighted Average Spread ................................ 107 Weighted Average Spread Test ........................ 107 Written-Down Security ..................................... 204 Zero Coupon Bond............................................ 205

210

EXHIBIT A Form of Global Preference Security Purchaser Representation Letter [Date] ACA ABS 2006-1, Limited c/o Maples Finance Limited P.O. Box 1093 GT, Queensgate House South Church Street, George Town Grand Cayman, Cayman Islands Attention: The Directors Wells Fargo Bank, National Association Wells Fargo Center Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 Attention: Corporate Trust Services ACA ABS 2006-1, Limited ACA Management, L.L.C. 140 Broadway, 47th Floor, New York, New York 10005 Attention: ACA ABS 2006-1, Limited Ladies and Gentlemen: Reference is made to the Offering Circular (the "Offering Circular") relating to (i) the offering by ACA ABS 2006-1, Limited (the "Issuer") and ACA ABS 2006-1, LLC (the "Co-Issuer") of Notes and (ii) the offering by the Issuer of Preference Securities. Terms used but not defined herein have the respective meanings given to such terms in the Offering Circular. The Offering Circular provides that Preference Securities offered and sold outside the United States may be offered to non-U.S. Persons which are not Benefit Plan Investors or Controlling Persons in reliance upon Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), and may be issued in the form of one or more Regulation S Global Preference Securities ("Regulation S Global Preference Securities"). The Regulation S Global Preference Securities shall be deposited with, and registered in the name of, DTC (or its nominee). The Preference Securities that we purchase (the "Purchased Preference Securities") will be represented by an interest in a Regulation S Global Preference Security. We acknowledge that this letter must be delivered to the Issuer, the Preference Security Paying Agent and the Collateral Manager as a condition to the transfer of the Purchased Preference Securities. In consideration of the foregoing, we agree with the Issuer, the Preference Security Paying Agent and the Security Registrar that prior to any sale, assignment, pledge or other transfer of any of the Purchased Preference Securities (or any interest therein) to any transferee, we will: (i) cause the transferee to, if required by the Preference Security Paying Agency Agreement, make the certifications to the Issuer, the Preference Security Paying Agent and the Security Registrar set forth in the applicable Transfer Certificate included as an exhibit to the Preference Security Paying Agency Agreement; and 211

(ii) cause the transferee to deliver a letter to the Issuer, the Preference Security Paying Agent and the Security Registrar to the effect that (A) such transferee will, prior to any sale, assignment, pledge or other transfer of any of the Purchased Preference Securities (or any interest therein) to any subsequent transferee, cause such subsequent transferee to take the actions specified in this and the immediately preceding clause (i) (as if each reference to the word "transferee" were a reference to such subsequent transferee); and (B) it is neither a benefit plan investor as defined in United States Department of Labor Regulations at 29 C.F.R. 2510.3-101(f) (a "Benefit Plan Investor") nor a person or entity (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer or that provides investment advice for a fee with respect to such assets or their affiliates (a "Controlling Person") and will not transfer its interest in the Preference Securities to a Benefit Plan Investor or Controlling Person. We represent and warrant to the Issuer, the Preference Security Paying Agent and the Security Registrar that we are not a Benefit Plan Investor or Controlling Person and will not transfer our interest in the Purchased Preference Securities to a Benefit Plan Investor or Controlling Person. We understand that this letter will be relied upon by the Issuer, the Initial Purchaser, the Preference Security Paying Agent, the Security Registrar and the Collateral Manager for the purpose of ensuring that subsequent transferees have notice of, and are subject to, the transfer restrictions applicable to the Purchased Preference Securities and described in the Offering Circular. We agree to indemnify and hold harmless the Issuer, the Initial Purchaser, Preference Security Paying Agent, the Security Registrar and the Collateral Manager and each of their respective affiliates from and against any loss, damage or liability to the extent due to or arising out of a breach of any representation, warranty or agreement made by us in this letter. This letter agreement shall be governed by and construed in accordance with the law of the State of New York. Very truly yours, [NAME OF HOLDER] By: Name: Title:

A signed copy of this letter agreement must be faxed to Wells Fargo Bank, National Association, facsimile number (410) 715-3748, Attention: CDO Trust Services -- ACA ABS 2006-1, Limited.

212

Schedule A List of Collateral Debt Securities As of April 19, 2006 The following list represents only the Collateral Debt Securities which the Issuer expects to purchase on the Closing Date as of the date of this Offering Circular. There is no assurance that the Issuer will purchase all of the Collateral Debt Securities listed on this schedule, including, without limitation, because a Collateral Debt Security does not satisfy the Eligibility Criteria on the Closing Date, or because the Issuer has determined that purchasing such security would cause the Issuer not to satisfy one or more Collateral Quality Tests on the Effective Date. In addition, the Issuer may on the Closing Date purchase Collateral Debt Securities that are not listed on this schedule. As indicated by the code "NR", certain securities listed on this schedule may not have received a rating from a particular rating agency, or the rating may be pending. As indicated by the code "N/A", certain securities listed on this schedule may not yet have a CUSIP assigned to them. Stated Maturity
12/25/2035 7/25/2035 6/25/2035

Issuer
AABST 2005-5 B1 ABFC 2005-OPT1 M9 ABFC 2005-WMC1 M12 ABSHE 2006-HE3 M6 ACE 2005-HE6 M9 ACE 2006-NC1 M7 AMSI 2005-R10 M7 AMSI 2005-R11 M9 ARSI 06W3 M7 ARSI 2005-W2 M11 ARSI 2005-W3 M11 ARSI 2005-W4 M8 ARSI 2005-W5 M7 ARSI 2006-W1 M7 BALL 2006-LAQ K BALTA 2005-8 1B1 BALTA 2005-9 1B2 BALTA 2006-2 1B1 BSABS 06HE3 M7 BSABS 2005-AQ2 M6 BSABS 2006-HE4 M7 BSABS 2006-IM1 M7 CARR 2005-FRE1 M9 CARR 6OPT1 M7 CARR 6OPT1 M8 CMLTI 2006-WMC1 M10 COMM 2005-FL11 J CWL 2005-12 M7 CWL 2005-14 B CWL 2005-AB4 B CWL 2006-3 M7 FBRSI 2005-3 M9

CUSIP
00764MHL4 04542BQJ4 04542BPQ9 04541GXJ6 004421SV6 004421VA8 03072ST47 03072SV93 040104SZ5 040104NP2 040104PN5 040104QB0 040104QW4 040104RP8 N/A 07386HWX5 07386HXT3 07386HH87 07387UHY0 0738793A4 N/A 07387UFM1 144531EP1 144531FU9 144531FV7 17307G2E7 126164BG6 126670ER5 126670LX4 126670KX5 126670WJ3 30246QBL6

Moody's
Baa1 NR NR Baa1 Baa3 Baa1 Baa1 Baa3 Baa1 NR Ba2 NR Baa1 Baa1 Baa3 Baa2 Baa3 Baa2 Baa1 Baa1 Baa1 Baa1 Baa3 Baa1 Baa2 Ba1 Baa3 Baa1 Baa3 Baa3 Baa1 Baa3

S&P
A+ BBBBBBBBB+ BBB+ A ABBB+ ABBB BBB BBB A A BBBBBB BBBBBB BBB+ BBB+ BBB+ BBB+ BBB A ABB+ BBB BBB+ BBBBBB+ BBB+ BBB-

Current Face
5,000,000.00 3,714,000.00 5,000,000.00 4,500,000.00 8,124,000.00 2,000,000.00 7,084,000.00 3,500,000.00 5,734,000.00 5,000,000.00 5,600,000.00 5,625,000.00 10,000,000.00 8,000,000.00 9,000,000.00 7,236,000.00 1,392,000.00 10,000,000.00 3,694,000.00 8,947,000.00 2,000,000.00 8,452,000.00 5,530,000.00 5,000,000.00 3,000,000.00 5,625,000.00 2,999,317.81 500,000.00 7,000,000.00 5,000,000.00 5,700,000.00 8,190,000.00

3/25/2036
10/25/2035 12/25/2035 12/25/2035 1/25/2036 4/25/2036 10/25/2035 11/25/2035 2/25/2036 1/25/2036 3/25/2036 2/9/2021 10/25/2035 11/25/2035 4/25/2036 4/25/2036 9/25/2035 5/25/2036 2/25/2036 12/25/2035 2/25/2036 2/25/2036 12/25/2035 11/15/2017 2/25/2036 4/25/2036 3/25/2036 6/25/2036 10/25/2035

A-1

Issuer
FFML 2005-FF11 M6 FFML 2005-FF12 B3 FFML 2005-FF7 M7 FFML 2005-FF8 B2 FFML 2005-FF8 B3 FFML 2005-FFH4 M7 FFML 2006-FF3 M7 FFML 2006-FFH1 M8 FHLT 2005-D M9 FHLT 2005-E B1 FHLT 2005-E M9 FHLT 2006-1 M6 FHLT 2006-2 M7 FNLC 2005-3 M6 GEWMC 2005-2 B2 GSAA 2005-11 B3 GSAA 2005-15 B1 GSAA 2006-2 B2 GSAA 2006-5 B1 GSAMP 2005-AHL2 M5 GSAMP 2005-WMC3 M6 GSAMP 2006-FM1 B1 GSR 2005-HEL1 M4 GSR 2005-HEL1 M5 HASC 2006-OPT1 M10 HASC 2006-OPT2 M10 HASC 2006-OPT2 M9 HASC 2006-OPT3 M7 HEAT 2005-9 B1 HEAT 2006-1 B2 HEAT 2006-2 B2 HEAT 2006-3 B2 HEAT 2006-4 M7 HEMT 2005-HF1 M7 HEMT 2006-2 M7 IMM 2005-7 B IXIS 2005-HE4 B1 IXIS 2005-HE4 B3 JPMAC 06FL1 K JPMAC 2005-FRE1 M8 JPMAC 2005-WMC1 M11 JPMAC 2006-FRE2 M7 JPMAC 2006-NC1 M8 LBMLT 0602 M10 LBMLT 2005-WL3 B1 LBMLT 2006-WL1 M10 LBMLT 2006-WL1 M9 LBMLT 2006-WL2 M7

CUSIP
362341YL7 32027NYE5 32027NUS8 362341QW2 362341QX0 32027NXK2 362334BC7 32027NZU8 35729PMP2 35729PNN6 35729PNM8 35729PPH7 35729PQF0 32113JBZ7 367910BC9 362341PH6 362341E70 3623416A2 362334GZ1 362341D22 362341M30 362334PT5 362341N96 362341P29 40430HDP0 40430HEK0 40430HEJ3 40430HFU7 437084RG3 437084SG2 437084TV8 437084VB9 437084VX1 2254W0LP8 N/A 45254NRF6 45071KCU6 45071KCW2 46625YK28 46626LCK4 46626LBT6 46626LHH6 46626LJY7 542514UE2 542514QG2 542514RF3 542514RE6 542514SL9

Stated Maturity
11/25/2035 11/25/2036 7/25/2035 9/25/2035 9/25/2035 12/25/2035 2/25/2036 1/25/2036 11/25/2035 1/25/2036 1/25/2036 4/25/2036 2/25/2036 12/25/2035 12/25/2035 10/25/2035 1/25/2036 12/25/2035 3/25/2036 12/25/2035 12/25/2035

Moody's
Baa2 Baa3 Baa1 Baa2 Baa3 A3 Baa1 Baa1 Baa3 Ba1 Baa3 Baa1 Baa2 Baa3 Baa2 Baa3 Baa1 Baa2 Baa1 Baa1 Baa2 Baa2 Baa1 Baa2 Ba1 Ba1 Baa3 Baa1 Baa3 Ba1 Ba1 Ba1 Baa1 Baa1 Baa1 Baa2 Baa1 Baa3 Baa3 Baa2 Ba2 Baa1 Baa2 Ba1 Ba1 Ba1 Baa3 Baa1

S&P
A BBB AA ABBB+ A BBB BBB+ BBB BBB+ ABBB+ BBB ABBBABBB+ BBB AABBB+ ABBB+ BBB BBBBBBAABBB BBB BBB ABBB+ BBB+ BBB ABBB BBBBBB BB BBB+ BBB BBBBB+ BBBBBB BBB+

Current Face
3,401,000.00 8,000,000.00 3,069,000.00 639,000.00 3,553,000.00 10,000,000.00 2,500,000.00 2,500,000.00 5,000,000.00 5,000,000.00 5,000,000.00 6,160,000.00 7,272,000.00 5,812,000.00 4,000,000.00 3,051,000.00 1,000,000.00 2,271,000.00 1,000,000.00 6,415,000.00 3,296,000.00 5,000,000.00 7,000,000.00 2,511,000.00 5,255,000.00 5,465,000.00 5,000,000.00 5,000,000.00 3,750,000.00 5,000,000.00 3,200,000.00 3,500,000.00 11,100,000.00 2,540,000.00 2,500,000.00 2,291,835.44 6,000,000.00 2,000,000.00 5,000,000.00 5,037,000.00 5,600,000.00 5,377,000.00 5,701,000.00 2,500,000.00 5,600,000.00 4,600,000.00 4,500,000.00 5,000,000.00

4/25/2036
11/25/2030 11/25/2030 12/25/2035 1/25/2036 1/25/2036

2/25/2036
4/25/2036 4/25/2036 5/25/2036 7/25/2036

8/25/2036
2/25/2036 7/25/2036 11/25/2035 2/25/2036 2/25/2036 2/15/2020 10/25/2035 9/25/2035 2/25/2036

4/25/2036
3/25/2036 11/25/2035 1/25/2036 1/25/2036 1/25/2036

A-2

Issuer
LBMLT 2006-WL3 M7 MABS 06WMC M7 MABS 2005-NC2 M7 MABS 2005-NC2 M8 MABS 2006-NC1 M8 MASD 2005-3 M2 MLMI 2005-AR1 B3 MLMI 2006-HE1 B2A MLMI 2006-HE1 B3A MLMI 2006-HE2 B1 MLMI 2006-SL1 B2 MLMI 2006-WMC1 B2A MLMI 2006-WMC1 B3 MSAC 2005-HE5 B3 MSAC 2005-HE7 B3 MSAC 2006-NC1 B1 MSAC 2006-WMC1 B1 MSAC 2006-WMC1 B3 MSC 2006-HE1 B1 MSC 2006-NC2 B1 MSHEL 2005-4 B3 MSHEL 2006-1 B1 NAA 2006-S1 B1 NCHET 2005-B M9 NCHET 2005-C M9 NHEL 2005-3 M10 NHELI 2006-FM1 B1 NHELI 2006-FM1 M8 NHELI 2006-HE1 M7 OOMLT 2005-5 M11 OOMLT 2006-1 M11 OOMLT 2006-1 M9 PCHLT 2005-3 M9 PCHLT 2005-4 M10 PCHLT 2005-4 M9 POPLR 2006-B M4 SABR 2005-FR4 B4 SABR 2005-FR5 B4 SABR 2005-HE1 B4 SABR 2006-FR1 B2 SABR 2006-FR1 B3 SABR 2006-WM1 B1 SABR 2006-WM1 B2 SACO 2005-10 1B4 SACO 2005-8 B1 SACO 2005-9 B2 SACO 2005-WM3 B1 SACO 2006-2 2B4

CUSIP
542514TD6 57643LRT5 57643LMW3 57643LMX1 57643LNP7 576436CQ0 59020UG66 59020U3N3 59020U3Q6 59020VAL7 59020U2S3 59020U4H5 59020U4K8 61744CVA1 61744CWU6 61744CYH3 61744CXU5 61744CXW1 617451DY2 617451EN5 61744CVS2 61744CXE1 65535VTY4 64352VNT4 64352VPH8 66987XHG3 65536HCH9 65536HCF3 65536HCY2 68389FKJ2 68389FLB8 68389FKZ6 71085PCZ4 71085PDR1 71085PDQ3 73316PKM1 81375WFP6 81375WGA8 81375WGQ3 81375WJY3 81375WJZ0 81375WKH8 81375WKJ4 785778NW7 785778LJ8 785778MV0 785778MA6 785778PW5

Stated Maturity
1/25/2036

Moody's
Baa1 Baa1 Baa1 Baa2 Baa2 NR Baa3 Baa2 Baa3 Baa1 Baa2 Baa2 Baa3 Baa3 Baa3 Baa1 Baa1 Baa3 Baa1 Baa1 Baa3 Baa1 A3 Baa3 Baa3 NR Ba1 Baa2 Baa1 Ba2 NR Baa3 Baa3 Ba1 Baa3 Baa1 Ba1 Ba1 Ba1 Baa2 Baa3 Baa1 Baa2 Ba1 Baa1 Baa2 Baa1 Ba1

S&P
BBB+ A A+ A+ BBB+ A BBB+ BBB+ BBB+ ABBB BBB+ BBB BBB BBB AA BBB+ A BBB+ BBB A BBB+ BBB BBB BBB+ BBBBBB+ BBB+ BB BBB A BBB BBB BBB+ ABB+ BBBBBBABBB+ BBB+ BBB BB+ BBB+ BBB BBB+ BB+

Current Face
5,000,000.00 8,998,000.00 2,500,000.00 8,576,000.00 5,517,000.00 3,000,000.00 6,082,000.00 6,251,000.00 4,579,000.00 3,650,000.00 5,624,000.00 2,000,000.00 5,000,000.00 5,366,000.00 5,000,000.00 3,750,000.00 4,286,000.00 6,500,000.00 4,000,000.00 7,000,000.00 2,600,000.00 2,500,000.00 1,502,000.00 9,000,000.00 6,654,000.00 750,000.00 5,600,000.00 5,500,000.00 10,653,000.00 5,447,000.00 4,000,000.00 6,000,000.00 3,500,000.00 5,600,000.00 2,701,000.00 2,367,000.00 4,000,000.00 4,125,000.00 5,500,000.00 7,343,000.00 3,000,000.00 3,104,000.00 6,522,000.00 5,418,000.00 500,000.00 3,327,000.00 7,802,000.00 4,665,000.00

2/25/2036
11/25/2035 11/25/2035 1/25/2036 11/25/2035 6/25/2036 12/25/2036 12/25/2036 3/25/2037 9/25/2036 1/25/2037 1/25/2037 9/25/2035 11/25/2035 12/25/2035 12/25/2035 12/25/2035 1/25/2036 2/25/2036 9/25/2035 12/25/2035 1/25/2036 10/25/2035 12/25/2035 1/25/2036 11/25/2035 11/25/2035 2/25/2036 12/25/2035 1/25/2036 1/25/2036 8/25/2035 12/25/2035 12/25/2035 5/25/2036 1/25/2036 8/25/2035 10/25/2035 11/25/2035 11/25/2035 12/25/2035 12/25/2035 6/25/2036 11/25/2035 12/25/2035 9/25/2035 7/25/2036

A-3

Issuer
SAIL 2005-10 B1 SAIL 2005-11 M7 SAIL 2005-4 M11 SAIL 2006-1 M8 SAIL 2006-1 M9 SAIL 2006-2 M6 SAIL 2006-BNC1 M6 SAIL 2006-BNC1 M7 SASC 2005-S6 M7 SASC 2005-S7 M9 SASC 2006-S1 M6 SASC 2006-S1 M7 SGMS 2005-OPT1 M11 SGMS 2006-FRE1 M10 SGMS 2006-FRE1 M7 SVHE 2005-4 M9 SVHE 2005-OPT3 M7 SVHE 2006-OPT3 M7 SVHE 6OPT1 10 SVHE 6OPT1 M7 SVHE 6OPT2 10 TMTS 0605 M7 TMTS 2005-11 1B2B TMTS 2005-11 1B3 TMTS 2005-13SL B3 TMTS 2006-1 1B2 TMTS 2006-1 1B4 TMTS 2006-1 2B4 TMTS 2006-3 1B1 TMTS 2006-3 1M9 TMTS 2006-3 2M3 WMLT 2005-WMC1 M11

CUSIP
86358EZH2 86358EA22 86358ESV9 86358EB96 86358EC20 86358EF50 86358ED78 86358ED86 86359DTX5 863576EC4 86359DXK8 86359DXL6 81879MAP4 81879MBG3 81879MBD0 83611MKN7 83611MHA9 N/A 83611MLU0 83611MMF2 83611MMW5 8815612P8 881561C28 881561YK4 881561D68 881561N26 881561N42 881561K29 881561V27 881561U93 881561W59 92977YBH3

Stated Maturity
12/25/2035 1/25/2036 5/25/2035 1/25/2036 1/25/2036 4/25/2036 3/25/2036 3/25/2036 11/25/2035 12/25/2035 3/25/2036 3/25/2036 10/25/2035 2/1/2036 2/1/2036 3/25/2036 11/25/2035 6/25/2036 3/25/2036 3/25/2036 5/25/2036 7/25/2037 11/25/2036 11/25/2036 12/25/2036 1/25/2037 1/25/2037 1/25/2037 4/25/2037 4/25/2037 4/25/2037 10/25/2035

Moody's
Ba1 Baa2 NR Baa2 Baa3 Baa1 Baa1 Baa2 Baa1 Baa3 Baa1 Baa2 Ba2 Ba1 Baa1 Baa3 NR Baa2 Ba2 Baa2 Ba2 Baa1 Baa1 Baa2 Baa2 Baa2 Ba1 Baa3 Ba1 Baa3 Baa2 Ba2

S&P
BBBBBB BBBBBB+ BBB BBB+ BBB+ BBB BBB+ BBBBBB+ BBB BBBBBBABBB BBB+ BBB BB+ BBB BB BBB+ BBB+ BBB BBB BBB+ BBBBBBBBB BBB BBB BBB-

Current Face
5,500,000.00 4,000,000.00 2,750,000.00 2,487,000.00 3,016,900.00 11,250,000.00 5,000,000.00 6,215,000.00 7,323,000.00 3,900,000.00 3,000,000.00 2,741,000.00 2,520,000.00 1,250,000.00 5,000,000.00 4,000,000.00 9,000,000.00 10,000,000.00 4,000,000.00 1,000,000.00 2,500,000.00 2,575,000.00 4,912,000.00 1,137,000.00 3,350,000.00 500,000.00 2,363,000.00 3,500,000.00 1,568,000.00 2,850,000.00 2,300,000.00 3,000,000.00

A-4

No securities dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this Offering Circular and, if given or made, such information or representation must not be relied upon as having been authorized by the Issuers or the Initial Purchaser. This Offering Circular does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Neither the delivery of this Offering Circular nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of the Issuers or the Collateral. TABLE OF CONTENTS Page Notices to Purchasers............................................iii Available Information........................................... vi Summary of Terms ................................................ 1 Risk Factors ......................................................... 15 Description of the Notes ...................................... 42 Description of the Preference Securities.............. 75 Use of Proceeds ................................................... 88 Ratings of the Notes ............................................ 89 Maturity and Prepayment Considerations............ 90 The Issuers........................................................... 93 Security for the Notes .......................................... 96 The Collateral Manager ..................................... 117 The Collateral Management Agreement............ 124 Income Tax Considerations ............................... 130 ERISA Considerations....................................... 140 Plan of Distribution ........................................... 145 Transfer Restrictions.......................................... 146 Listing and General Information ....................... 170 Legal Matters..................................................... 171 Annex 1 - Glossary of Certain Defined Terms .. 172 Annex 2 - Index of Defined Terms.................... 205 Exhibit A - Form of Preference Security Purchaser Representation Letter ..... 210 List of Collateral Debt Securities ......................A-1

ACA ABS 2006-1, LIMITED ACA ABS 2006-1, LLC U.S.$450,000,000 Class A-1LA Floating Rate Notes Due June 2041 U.S.$105,000,000 Class A-1LB Floating Rate Notes Due June 2041 U.S.$80,000,000 Class A-2L Floating Rate Notes Due June 2041 U.S.$40,000,000 Class A-3L Deferrable Floating Rate Notes Due June 2041 U.S. $33,000,000 Class B-1L Floating Rate Notes Due June 2041 42,000,000 Preference Securities

OFFERING CIRCULAR

Bear, Stearns & Co. Inc.

May 31, 2006