VALLAURIS II CLO PLC - Irish Stock Exchange

of the Subordinated Notes could be treated as owning an indirect equity interest in a PFIC and could
be subject to certain adverse tax consequences.
In particular, if the Issuer owns equity interests in PFICs (‘‘Lower-Tier PFICs’’), a U.S. Holder
of the Subordinated Notes would be treated as owning directly the U.S. Holder’s proportionate
amount (by value) of the Issuer’s equity interests in the Lower-Tier PFICs. A U.S. Holder’s QEF
election with respect to the Issuer would not be effective with respect to such Lower-Tier PFICs.
However, a U.S. Holder would be able to make QEF elections with respect to such Lower-Tier
PFICs if the Lower-Tier PFICs provide certain information and documentation to the Issuer in
accordance with applicable Treasury regulations. However, there can be no assurance that the Issuer
would be able to obtain such information and documentation from any Lower-Tier PFIC, and thus
there can be no assurance that a U.S. Holder would be able to make or maintain a QEF election
with respect to any Lower-Tier PFIC. If a U.S. Holder does not have a QEF election in effect with
respect to a Lower-Tier PFIC, as a general matter, the U.S. Holder would be subject to the adverse
consequences described above under ‘‘Investment in a Passive Foreign Investment Company’’ with
respect to any excess distributions made by such Lower-Tier PFIC to the Issuer, any gain on the
disposition by the Issuer of its equity interest in such Lower-Tier PFIC treated as indirectly realized
by such U.S. Holder, and any gain treated as indirectly realized by such U.S. Holder on the
disposition of its equity in the Issuer (which may arise even if the U.S. Holder realizes a loss on such
disposition). Such amount would not be reduced by expenses or losses of the Issuer, but any income
recognized may increase a U.S. Holder’s tax basis in its Subordinated Notes. Moreover, if the U.S.
Holder has a QEF election in effect with respect to a Lower-Tier PFIC, the U.S. Holder would be
required to include in income the U.S. Holder’s pro rata share of the Lower-Tier PFIC’s ordinary
earnings and net capital gain as if the U.S. Holder’s indirect equity interest in the Lower-Tier PFIC
were directly owned, and it appears that the U.S. Holder would not be permitted to use any losses or
other expenses of the Issuer to offset such ordinary earnings and/or net capital gains, but recognition
of such income may increase a U.S. Holder’s tax basis in its Subordinated Notes.
Accordingly, if any of the Collateral Debt Obligations are treated as equity interests in a PFIC,
such U.S. Holders could experience significant amounts of phantom income with respect to such
interests. Other adverse tax consequences may arise for such U.S. Holders that are treated as owning
indirect interests in CFCs. U.S. Holders should consult their own tax advisors regarding the tax issues
associated with such investments in light of their own individual circumstances.
Distributions on the Subordinated Notes The treatment of actual distributions of cash on the
Subordinated Notes, in very general terms, will vary depending on whether a U.S. Holder has made a
timely QEF election as described above. See ‘‘Tax Considerations-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 will not be taxable to U.S. Holders. Distributions in excess of amounts
previously taxed pursuant to a QEF election (or pursuant to the CFC rules, if applicable) will be
taxable to U.S. Holders as ordinary income upon receipt to the extent of any remaining amounts of
untaxed current and accumulated earnings and profits of the Issuer. Distributions in excess of any
current and accumulated earnings and profits will be treated first as a non-taxable reduction to the
U.S. Holder’s tax basis for the Subordinated Notes to the extent thereof 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 Subordinated Notes may constitute excess distributions,
taxable as previously described. See ‘‘Tax Considerations-Investment in a Passive Foreign Investment
Company’’. In that event, except to the extent that distributions may be attributable to amounts
previously taxed to the U.S. Holder pursuant to the CFC rules or are treated as excess distributions,
distributions on the Subordinated Notes generally would be treated as dividends to the extent paid
out of the Issuer’s current or accumulated earnings and profits not allocated to any excess
distributions, then as a non-taxable reduction to the U.S. Holder’s tax basis for the Subordinated
Notes to the extent thereof and then as capital gain. Dividends received from a foreign corporation
generally will be treated as income from sources outside the United States for U.S. foreign tax credit
limitation purposes. However, if U.S. Holders collectively own (directly or constructively) 50 per cent.
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