VALLAURIS II CLO PLC - Irish Stock Exchange

extent thereof), with payments attributed first to the earliest-accrued OID, and then as payments of
principal. Upon receipt of a payment attributable to OID (whether in connection with a payment of
interest or on the sale, exchange, redemption, retirement or other taxable disposition of a Note), a
U.S. Holder may recognize exchange gain or loss as described above with respect to accrued interest
income. Any such exchange gain or loss will be treated as ordinary income or loss, but generally will
not be treated as an adjustment to interest income, and will generally be treated as U.S. source
income or loss, respectively.
Receipt of Euro Euro received as payment on a Note or on a sale, exchange, redemption,
retirement or other taxable disposition of a Note will have a tax basis equal to its U.S. Dollar value
at the time such payment is received or at the time of such sale, exchange, redemption, retirement or
other taxable disposition, as the case may be. Euros that are purchased will generally have a tax basis
equal to the U.S. Dollar value of the Euro on the date of purchase. Any exchange gain or loss
recognized on a sale, exchange, redemption, retirement or other taxable disposition of the Euro
(including its use to purchase Notes or upon exchange for U.S. Dollars) will be ordinary income or
loss and will generally be treated as U.S. source income or loss, respectively.
Foreign Currency Gain or Loss on Purchase or Disposition A U.S. Holder that purchases the
Notes with Euro (as applicable) generally will recognize exchange gain or loss in an amount equal to
the difference (if any) between the U.S. Dollar fair market value of the Euro used to purchase the
Notes determined at the spot rate of exchange in effect on the date of purchase of the Notes and
such U.S. Holder’s tax basis in the Euro. If a U.S. Holder receives Euro on a sale, exchange,
redemption, retirement or other taxable disposition of a Note, the amount realized will be based on
the U.S. Dollar value of the Euro on the date the payment is received or the date of disposition of
the Note. Any gain or loss realized upon the sale, exchange, redemption, retirement or other taxable
disposition of the Note that is attributable to fluctuations in currency exchange rates will be exchange
gain or loss. Any gain or any loss attributable to fluctuations in exchange rates will equal the
difference between the U.S. Dollar value of the principal amount outstanding of the Note, determined
on the date such payment is received or such Note is disposed based on the U.S. Dollar spot rate for
the Euro (as applicable) on such date and the U.S. Dollar value of principal amount outstanding of
such Note, determined on the date the U.S. Holder acquired such Note based on the U.S. Dollar
spot rate for the Euro (as applicable) on such date. Such exchange gain or loss will be recognized
only to the extent of the total gain or loss realized by the U.S. Holder on the sale, exchange,
redemption, retirement or other taxable disposition of such Note. Any exchange gain or loss will be
treated as ordinary income or loss, but generally will not be treated as an adjustment to interest
income, and will generally be treated as U.S. source income or loss, respectively.
As a result of the uncertainty regarding the U.S. federal income tax consequences to U.S.
Holders with respect to the Notes and the complexity of the foregoing rules, each U.S. Holder of a
Note is urged to consult its own tax advisor regarding the U.S. federal income tax consequences to
the Holder of the purchase, ownership and disposition of such Note.
Tax Treatment of U.S. Holders of Subordinated Notes
Investment in a Passive Foreign Investment Company The Issuer will constitute a passive foreign
investment company (‘‘PFIC’’) and the Subordinated Notes will be treated as equity in the Issuer.
Accordingly, U.S. Holders of Subordinated Notes (other than certain U.S. Holders that are
subject to the rules pertaining to a controlled foreign corporation with respect to the Issuer, described
below) will be considered U.S. shareholders in a PFIC. In general, a U.S. Holder of a PFIC may
desire to make an election to treat the Issuer as a qualified electing fund (‘‘QEF’’) with respect to
such U.S. Holder. Generally, a QEF election should be made with the filing of a U.S. Holder’s
federal income tax return for the first taxable year for which it held the Subordinated Notes. If a
timely QEF election is made for the Issuer, an electing U.S. Holder will be required in each taxable
year to include in gross income (i) as ordinary income, such holder’s pro rata share of the Issuer’s
ordinary earnings and (ii) as long-term capital gain, such holder’s pro rata share of the Issuer’s net
capital gain, whether or not distributed and translated into U.S. Dollars using the average U.S.
Dollar exchange rate for the Euro for the Issuer’s taxable year. In determining the Issuer’s ordinary
earnings, the OID interest that accrues on the Notes may be expensed by the Issuer (whether or not
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