VALLAURIS II CLO PLC - Irish Stock Exchange

Prospective purchasers of the Notes are advised to consult their own tax advisers as to the tax consequences,
under German tax laws and the tax laws of the country of which they are residents, of purchasing, holding and
disposing of the Notes and receiving payments under the Notes.
German Investment Tax Act – General
There is currently legal uncertainty in the Federal Republic of Germany as to whether the
Investment Tax Act would apply to certain classes of CDO notes and similar instruments. In
particular, although the German Federal Ministry of Finance issued the Decree, which should largely
exclude CDO notes and similar instruments from the scope of the German Investment Tax Act
provided that the tests set out in the Decree are met, there is a risk as to the interpretation of such
tests. Such tax risk particularly applies with respect to the Subordinated Notes, the Mezzanine Notes
and any Structured Combination Notes comprised of, inter alia, any Subordinated Component. With
respect to the Senior Notes, however, there exists a remote risk that the German tax authorities take
a different view regarding the application of the Investment Tax Act.
Noteholders Subject to the Investment Tax Act
If the Investment Tax Act would apply to any Class of Notes, this could have an adverse
impact on the tax position of the relevant Noteholders if:
(a) such Noteholder is resident in Germany for German tax purposes; or
(b) such Noteholder is not resident in Germany for German tax purposes but holds such
Notes through a permanent establishment (or a permanent representative) in Germany; or
(c) such a Noteholder, either resident or nor resident in Germany for German tax purposes
(other than a foreign credit institution or a foreign financial services institution) physically
presents such Notes at the office of a ‘‘German Disbursing Agent‘‘, being a German credit
institution or a German financial services institution each as defined in the German
Banking Act (Kreditwesengesetz), including a German branch of a non-German credit
institution or a non-German financial services institution, but excluding a non-German
branch of a German credit institution or a German financial services institution (an ‘‘overthe-counter-transaction’’
(Tafelgeschäft))
(all such Noteholders falling within categories (a), (b) and (c) above and holding Notes to which the
Investment Tax Act is applicable, together, the ‘‘Noteholders Subject to the Investment Tax Act’’).
Such adverse impact on the tax position of such investors would, however, be mitigated if the
Issuer complies with the Investment Tax Act Reporting Requirements. The Issuer has made no
arrangements to comply with the Investment Tax Act Reporting Requirements. Consequently, any
Noteholders Subject to the Investment Tax Act holding such Notes will be subject to adverse lumpsum
taxation provisions of section 6 of the Investment Tax Act. In this case, the higher of (i)
distributions on such Notes and 70% of the annual increase in the market price of such Notes and
(ii) 6% of the market price at the end of every calendar year (‘‘Assumed Profits’’) would be taxed.
Furthermore, in such case, withholding tax may be levied not only on the gross amount of payments
received by the Noteholders holding Notes which are subject to the Investment Tax Act, but also on
the aggregate amount of Assumed Profits.
Capital gains on the sale or partial or final redemption of the Notes are subject to ‘‘Income
Tax’’ or corporate ‘‘Income Tax’’ and, as the case may be, trade tax in Germany.
If the Investment Tax Act applies, Noteholders will also be subject to tax in Germany on the
interim profit (Zwischengewinn) upon sale or Redemption of the Notes. The interim profit represents,
for example, interest accrued or received by an investment fund (within the meaning of the
Investment Tax Act) but not yet distributed or attributed to the investors in the fund. The Issuer will
not calculate and publish the interim profits. As a consequence, investors holding the Notes subject to
the Investment Tax Act will upon Redemption or sale of the Notes be subject to a special lump sum
taxation, i.e. 6% of the consideration for the Redemption or disposal of the Notes will be treated as
taxable deemed interim profits.
Where Notes to which the Investment Tax Act would apply are kept in a custodial account
maintained with a German Disbursing Agent, such German Disbursing Agent would be required to
withhold tax at a rate of 30% (plus solidarity charge thereon at a rate of 5.5%) not only of the gross
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