OCI Euro Fund I B.V. - Irish Stock Exchange

provide that the Selling Institution may not vote in favour of any amendment, modification or waiver that
forgives principal or interest, reduces principal or interest that is payable, postpones any payment of
principal (other than a mandatory pre-payment) or interest or release substantially all of the collateral
without the consent of the participant at least to the extent the participant would be affected by any such
amendment, modification or waiver. A Selling Institution voting in connection with a potential waiver of a
restrictive covenant may have interests which are different from those of the Issuer and such Selling
Institutions may not be required to consider the interests of the Issuer in connection with the exercise of
its votes.
Additional risks are therefore associated with the purchase of Participations by the Issuer as opposed to
Assignments. The Portfolio Profile Tests specify certain individual and aggregate third party credit
exposure limits for Selling Institutions determined by reference to their Moody’s and/or S&P Ratings.
Assignments and Participations are sold strictly without recourse to the Selling Institutions and the
Selling Institution will generally make no representations or warranties about the underlying loan, the
borrowers, the documentation of the loans or any collateral securing the loans. In addition, the Issuer
will be bound by provisions of the underlying loan agreements, if any, that require the preservation of the
confidentiality of information provided by the borrower.
3.9 Synthetic Securities
In the event that Collateral Debt Obligations acquired by or on behalf of the Issuer from time to time are
Synthetic Securities, in addition to the credit risks associated with loans and/or securities which are
Reference Obligations under Synthetic Securities, the Issuer will also be subject to the credit risk of the
applicable Synthetic Counterparty. The Issuer will have a contractual relationship with the relevant
Synthetic Counterparty only and not with the Reference Entity of the Reference Obligation (in each case
as defined in the relevant Synthetic Security). The Issuer generally will have no right directly to enforce
compliance by the Reference Entity with the terms of the Reference Obligation nor any rights of set-off
against the Reference Entity, nor have any voting rights with respect to the Reference Obligation. The
Issuer will not directly benefit from any collateral supporting the Reference Obligation and will not have
the benefit of the remedies that would normally be available to a holder of such Reference Obligation.
In addition to the risks described above, in the event of the insolvency of the Synthetic Counterparty, the
Issuer will be treated as a general unsecured creditor of such Synthetic Counterparty, and will not have
any claim with respect to the Reference Obligation. Consequently, the Issuer will be subject to the
credit risk of the Synthetic Counterparty as well as that of the Reference Entity. As a result,
concentrations of Synthetic Securities in any one Synthetic Counterparty subject the Notes to an
additional degree of risk with respect to defaults by such Synthetic Counterparty as well as by the
Reference Entity. Although the Investment Manager will not perform independent credit analyses of the
Synthetic Counterparties on behalf of the Issuer, any such Synthetic Counterparty, or an entity
guaranteeing such Synthetic Counterparty, individually and in the aggregate will be required to satisfy
the applicable Rating Requirement thereto.
The Portfolio Profile Tests provide that the Aggregate Principal Balance of Collateral Debt Obligation
that are Synthetic Securities may not exceed €52,500,000 and also specify certain individual and
aggregate third party credit exposure limits for Synthetic Counterparties determined by reference to their
Moody’s and/or S&P Ratings.
Whilst the returns on a Synthetic Security will generally reflect those of the related Reference Obligation
or the unlevered exposure to a portfolio of Reference Obligations, as a result of the terms of the
Synthetic Security and the assumption of the credit risk of the applicable Synthetic Counterparty, a
Synthetic Security may have a different expected return, a different (and potentially greater) probability
of default, a different (and potentially greater) expected loss characteristic following a default and a
different (and potentially lower) expected recovery following default. Additionally, the terms of a
Synthetic Security may provide for different maturities, payment dates, interest rates, interest rate
references and credit exposures and non-credit related exposures to obligations of the Issuer other than
the Reference Obligation relating thereto.
Generally, upon the occurrence of certain specified credit events under a Synthetic Security relating
generally to the credit of the applicable Reference Entity, the relevant Synthetic Security will become
repayable and its terms will permit or require the Synthetic Counterparty to satisfy its repayment
obligations under the Synthetic Security in such circumstances by delivering to the Issuer a principal
amount of Reference Obligations or other Deliverable Obligations of the applicable Reference Entity or
cash in an amount equal to the current market value of a principal amount of the Reference Obligations
or such Deliverable Obligations of the Reference Entity equal to the original principal amount of the
applicable Synthetic Security. Such amounts may be significantly less than the original principal amount
of such Synthetic Security or, in certain circumstances, zero.
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