VALLAURIS II CLO PLC - Irish Stock Exchange

Collateral Debt Obligations is concentrated in any one issuer, industry, region or country as a result
of the increased potential for correlated defaults in respect of a single issuer or within a single
industry, region or country as a result of downturns relating generally to such industry, region or
country.
Disposal Risk
To the extent that a default occurs with respect to any Collateral Debt Obligation and the
Issuer or Trustee or any receiver sells or otherwise disposes of such Collateral Debt Obligation, the
proceeds of such sale or disposition are likely to be less than the unpaid principal and interest
thereon. In addition, the Issuer may incur additional expenses to the extent it seeks recoveries upon
the default of a Collateral Debt Obligation or participates in the restructuring of a Collateral Debt
Obligation. Even in the absence of a default with respect to any of the Collateral Debt Obligations,
the potential volatility and illiquidity of the sub-investment grade leveraged loan markets means that
the market value of such Collateral Debt Obligations at any time will vary, and may vary
substantially, from the price at which such Collateral Debt Obligations were initially purchased and
from the principal amount of such Collateral Debt Obligations. Accordingly, no assurance can be
given as to the amount of proceeds of any sale or disposition of such Collateral Debt Obligations at
any time, or that the proceeds of any such sale or disposition would be sufficient to repay a
corresponding par amount of principal of and interest on the Notes after, in each case, paying all
amounts payable prior thereto pursuant to the Priorities of Payment. Moreover, there can be no
assurance on the timing of any recovery.
Acquisition and Disposal Risk
The financial markets may experience substantial fluctuations in prices for senior secured loans,
senior unsecured loans, second lien loans and mezzanine obligations and limited liquidity for such
obligations. No assurance can be made that the conditions giving rise to such price fluctuations and
limited liquidity will not occur, subsist or become more acute following the Closing Date. During
periods of limited liquidity and higher price volatility, the Issuer’s ability to acquire or dispose of
Collateral Debt Obligations at a price and time that the Issuer deems advantageous may be impaired.
As a result, in periods of rising market prices, the Issuer may be unable to participate in price
increases fully to the extent that it is either unable to dispose of Collateral Debt Obligations whose
prices have risen or to acquire Collateral Debt Obligations whose prices are on the increase; the
Issuer’s inability to dispose fully and promptly of positions in declining markets will conversely cause
its net asset value to decline as the value of unsold positions is marked to lower prices. A decrease in
the market value of the Collateral Debt Obligations would also adversely affect the proceeds of sale
that could be obtained upon the sale of the Collateral Debt Obligations and could ultimately affect
the ability of the Issuer to pay in full or redeem the Notes.
Characteristics of Senior Secured Loans, Second Lien Loans and Mezzanine Obligations
The Portfolio Profile Tests provide that on and after the Final Effective Date (and thereafter, to
the extent required to do so under the Reinvestment Criteria), Collateral Debt Obligations with an
aggregate Principal Amount of at least A276,000,000 should consist of Collateral Debt Obligations
which constitute Senior Secured Loans and that Collateral Debt Obligations with an aggregate
Principal Amount of not more than A24,000,000 may consist of Second Lien Loans and Mezzanine
Obligations. Senior Secured Loans, Second Lien Loans and Mezzanine Obligations are of a type
generally incurred by the obligors thereunder in connection with highly leveraged transactions, often
(although not exclusively) to finance internal growth, acquisitions, mergers and/or stock purchases. As
a result of, among other things, the additional debt incurred by the obligor in the course of such a
transaction, the obligor’s creditworthiness is often judged by the rating agencies to be below
investment grade. Senior Secured Loans are typically at the most senior level of the capital structure
with Second Lien Loans and Mezzanine Obligations being subordinated thereto or to any other
senior debt of the obligor. Senior Secured Loans are often secured by specific collateral or guarantee,
including but not limited to, trademarks, patents, accounts receivable, inventory, equipment, buildings,
real estate, franchises and common and preferred stock of the obligor and its subsidiaries although
the security granted in respect of some Senior Secured Loans may be limited to share security over
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