N-Star Real Estate CDO IX, Ltd.

Transcription

1 OFFERING CIRCULAR N-Star Real Estate CDO IX, Ltd. Class Principal Amount Interest Rate Ratings (Moody's/Fitch/ S&P) Stated Maturity Date Class A-1... U.S.$512,000,000 Floating Aaa/AAA/AAA August 7, 2052 Class A-2... U.S.$96,000,000 Floating Aaa/AAA/AAA August 7, 2052 Class A-3... U.S.$48,000,000 Floating Aaa/AAA/AAA August 7, 2052 Class B... U.S.$37,280,000 Floating Aa2/AA/AA August 7, 2052 Class C... U.S.$12,800,000 Deferrable Fixed A1/A+/A+ August 7, 2052 Class D... U.S.$23,200,000 Deferrable Floating A2/A/A August 7, 2052 Class E... U.S.$4,800,000 Deferrable Floating A3/A-/A- August 7, 2052 Class F U.S.$3,600,000 Deferrable Floating Baa1/BBB+/BBB+ August 7, 2052 Class G... U.S.$14,080,000 Deferrable Floating Baa2/BBB/BBB August 7, 2052 Class H... U.S.$7,200,000 Deferrable Floating Baa3/BBB-/BBB- August 7, 2052 Class J... U.S.$7,040,000 Deferrable Fixed Ba1/BB+/ BB+ August 7, 2052 Class K... U.S.$6,000,000 Deferrable Fixed Ba2/BB/ BB August 7, 2052 U.S. $28,000,000 Income Notes Due August 7, 2052 The Secured Notes (as defined below) and the Income Notes (collectively, the "Notes") are being issued by N-Star Real Estate CDO IX, Ltd. (the "Issuer"), a newly formed exempted company incorporated with limited liability under the laws of the Cayman Islands. The Secured Notes will constitute secured limited recourse debt obligations of the Issuer. The Income Notes will constitute unsecured limited recourse debt obligations of the Issuer. Interest on the Secured Notes and distributions on the Income Notes are payable on the 7 th day of each calendar month as set forth herein, beginning in June The Notes are scheduled to mature in August The Notes are redeemable as described under the caption "Description of the Notes Secured Notes Early Redemption." The Secured Notes, and the Issuer's obligations under any Hedge Agreement, will be secured by a portfolio of collateral as described herein. NS Advisors, LLC will act as Collateral Manager (the "Collateral Manager") for the Issuer. The Class A Notes will be rated "Aaa" by Moody's Investors Service, Inc. ("Moody's"), "AAA" by Fitch Inc., Fitch Ratings, Ltd. and their subsidiaries including Derivative Fitch, Inc. and Derivative Fitch, Ltd. and any successor(s) thereto ("Fitch") and "AAA" by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), the Class B Notes will be rated at least "Aa2" by Moody's, at least "AA" by Fitch and at least "AA" by S&P, the Class C Notes will be rated at least "A1" by Moody's, at least "A+" by Fitch and at least "A+" by S&P, the Class D Notes will be rated at least "A2" by Moody's, at least "A" by Fitch and at least "A" by S&P, the Class E Notes will be rated at least "A3" by Moody's, at least "A-" by Fitch and at least "A-" by S&P, the Class F Notes will be rated at least "Baa1" by Moody's, at least "BBB+" by Fitch and at least "BBB+" by S&P, the Class G Notes will be rated at least "Baa2" by Moody's, at least "BBB" by Fitch and at least "BBB" by S&P, the Class H Notes will be rated at least "Baa3" by Moody's, at least "BBB-" by Fitch and at least "BBB-" by S&P, the Class J Notes will be rated at least "Ba1" by Moody's, at least "BB+" by Fitch and at least "BB+" by S&P and the Class K Notes will be rated at least "Ba2" by Moody's, at least "BB" by Fitch and at least "BB" by S&P. The Income Notes will not be rated. Application has been made to the Irish Financial Services Regulatory Authority (the "Irish Financial Services Regulatory Authority" or "IFSRA"), in its capacity as competent authority under Directive 2003/71/EC (the "Prospectus Directive"), for this Offering Circular to be approved. This Offering Circular constitutes a "Prospectus" for the purposes of the Prospectus (Directive 2003/71/EC) Regulations 2005 (the "Prospectus Regulations") which implement the Prospectus Directive in Ireland. Application has been made to the Irish Stock Exchange Limited (the "Irish Stock Exchange") for the Notes to be admitted to the official list of the Irish Stock Exchange (the "Official List") and trading on its regulated market. Investing in the Notes involves risks. See "Risk Factors" beginning on page 7. THE NOTES DO NOT REPRESENT AN INTEREST IN OR OBLIGATIONS OF, AND ARE NOT INSURED OR GUARANTEED BY, THE COLLATERAL MANAGER, THE TRUSTEE, THE INCOME NOTE PAYING AGENT, THE INITIAL PURCHASER, THE PLACEMENT AGENT OR ANY OF THEIR RESPECTIVE AFFILIATES (EACH AS DEFINED HEREIN). The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws, and the Issuer will not be registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"). In the United States, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes (collectively, the "Offered Notes") and the Class J Notes and the Class K Notes (collectively, the "Retained Notes" and, together with the Offered Notes, the "Secured Notes") and the Income Notes are being offered only to "Qualified Institutional Buyers" (as defined under Rule 144A under the Securities Act) or, solely in the case of the Retained Notes and the Income Notes, to any Institutional Accredited Investor (as defined herein) or any Permitted NS Purchaser (as defined herein). The Notes are also being offered outside the Act. For a description of United States in accordance with Regulation S under the Securities Act. Additionally, all U.S. investors are also required to be "Qualified Purchasers" (as defined herein) for purposes of Section 3(c)(7) of the Investment Company certain restrictions on transfers of the Notes, see "Purchase and Transfer Restrictions," "Plan of Distribution" and "Notice to Purchasers." All of the Offered Notes and any Retained Notes or Income Notes issued pursuant to Regulation S will be settled in book-entry form. The Retained Notes and the Income Notes sold in the United States will be physical notes registered in the names of their investors. Citigroup Global Markets Inc., as initial purchaser of the Offered Notes (the "Initial Purchaser") and placement agent for the Retained Notes and the Income Notes (the "Placement Agent"), expects to deliver the Notes to investors on or about February 28, 2007 (the "Closing Date") against payment therefor in same-day funds. Sole Lead and Sole Bookrunner March 20, 2007 Citigroup

2 Each prospective investor in the Notes should rely only on the information contained in this Offering Circular. The Issuer has not authorized anyone to provide any prospective investor with different information. Neither the Issuer nor the Initial Purchaser nor the Placement Agent is making an offer of these Notes in any jurisdiction where the offer is not permitted. Investors in the Notes should not assume that the information contained in this Offering Circular is accurate as of any date other than the date of this Offering Circular. TABLE OF CONTENTS NOTICE TO PURCHASERS...iii AVAILABLE INFORMATION...viii CERTAIN CONSIDERATIONS RELATING TO THE CAYMAN ISLANDS... ix SUMMARY... 1 RISK FACTORS... 7 THE ISSUER DESCRIPTION OF THE NOTES THE INDENTURE AND THE INCOME NOTE PAYING AGENCY AGREEMENT SECURITY FOR THE SECURED NOTES THE COLLATERAL MANAGER THE COLLATERAL MANAGEMENT AGREEMENT PURCHASE AND TRANSFER RESTRICTIONS CERTAIN INCOME TAX CONSIDERATIONS CERTAIN ERISA AND OTHER CONSIDERATIONS CERTAIN LEGAL INVESTMENT CONSIDERATIONS RATINGS OF THE NOTES PLAN OF DISTRIBUTION SETTLEMENT AND CLEARING LISTING AND GENERAL INFORMATION LEGAL MATTERS ANNEX A GLOSSARY... A-1 ANNEX B PORTFOLIO OF COLLATERAL DEBT SECURITIES... B-1 ANNEX C TEMPORARY RAMP-UP SECURITIES... C-1 INDEX OF DEFINED TERMS... i i

3 This Offering Circular has been prepared by the Issuer solely for use in connection with the proposed offering of the Notes described herein. This Offering Circular is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire the Notes. Distribution of this Offering Circular to any other person other than the offeree and any person retained to advise such offeree with respect to its purchase is unauthorized, and any disclosure of any of its contents, without the prior written consent of the Issuer, is prohibited. Each prospective investor, by accepting delivery of this Offering Circular, agrees to the foregoing and to make no photocopies of this Offering Circular or any documents referred to herein and, if received in any electronic format, agrees not to disclose or alter the contents of this Offering Circular or to forward a copy of all or any portion hereof by electronic mail or any other means to any person other than the person receiving electronic transmission hereof from the Initial Purchaser or the Placement Agent and any person retained to advise the person receiving such electronic transmission with respect to the offering contemplated herein. Notwithstanding any provision to the contrary, no participant in this transaction shall be limited from disclosing the U.S. federal income tax treatment or the U.S. federal income tax structure of this transaction. The Initial Purchaser, the Placement Agent and the Collateral Manager make no representation or warranty, express or implied, to any person as to the accuracy or completeness of the information contained in this Offering Circular and nothing contained in this Offering Circular is, or shall be relied upon as, a representation to any person by the Initial Purchaser, the Placement Agent or the Collateral Manager, except, in the case of the Collateral Manager, for the section entitled "The Collateral Manager" and the captions "Risk Factors Potential Conflicts of Interest with the Collateral Manager" and " Dependence on Collateral Manager and Key Personnel Thereof; Relationship to Prior Investment Results" (collectively, the "Collateral Manager Information"). The Initial Purchaser, the Placement Agent and the Collateral Manager have not independently verified any of the information contained herein (financial, legal or otherwise) and assume no responsibility for the accuracy or completeness of any such information, except, in the case of the Collateral Manager, for the Collateral Manager Information. The ratings assigned to the Secured Notes on the Closing Date by each Rating Agency (as defined herein) will have been assigned in accordance with such Rating Agency's published rating criteria and methodology. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning Rating Agency. In the event that a rating initially assigned to any class of the Secured Notes is subsequently lowered for any reason, no person or entity is obligated to provide any additional support or credit enhancement with respect to the Secured Notes. The Issuer will inform the Irish Stock Exchange, so long as any of the Notes are listed thereon, if the ratings assigned to such Notes as of the Closing Date are reduced or withdrawn. Each person receiving this Offering Circular acknowledges that such person has not relied on any of the Initial Purchaser, the Placement Agent, the Collateral Manager, the Trustee, the Income Note Paying Agent, the Administrator and their respective Affiliates, or on any Affiliate of the Issuer, in connection with the accuracy of such information or its investment decision. None of the Securities and Exchange Commission, any state securities commission and any other U.S. regulatory authority has approved or disapproved the Notes and none of the foregoing authorities has passed upon or endorsed the merits of this offering or the accuracy or adequacy of this Offering Circular. Any representation to the contrary is unlawful. In making an investment decision, each prospective investor must rely on its own examination of the Issuer and the terms of the offering, including the merits and risks involved. Prospective investors should not construe anything in this Offering Circular as legal, regulatory, business, accounting, investment or tax advice. Each prospective investor should consult its own advisors as needed to make its investment decision and to determine whether it is legally permitted to purchase the Notes under applicable legal investment or similar laws or regulations. Investors should be aware that they may be required to bear the financial risks of their investment for an indefinite period of time. This Offering Circular contains summaries believed to be accurate with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference. Copies of documents referred to herein will be made available to prospective investors upon request to the Issuer, the Initial Purchaser or the Placement Agent. ii

4 NOTICE TO PURCHASERS THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT, THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. THE ISSUER IS RELYING ON AN EXEMPTION FROM REGISTRATION UNDER THE INVESTMENT COMPANY ACT, AND NO TRANSFER OF A NOTE MAY BE MADE WHICH WOULD CAUSE THE ISSUER OR THE POOL OF COLLATERAL TO BECOME SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE INVESTMENT COMPANY ACT. THE NOTES ARE ALSO SUBJECT TO CERTAIN OTHER RESTRICTIONS ON TRANSFER DESCRIBED HEREIN. THE SECURED NOTES WILL BE LIMITED RECOURSE DEBT OBLIGATIONS OF THE ISSUER. PRINCIPAL OF AND INTEREST ON THE SECURED NOTES AND DISTRIBUTIONS ON THE INCOME NOTES WILL BE PAID, IN ACCORDANCE WITH THE PRIORITY OF PAYMENTS SET FORTH IN THE INDENTURE DESCRIBED HEREIN, SOLELY FROM AND TO THE EXTENT OF THE AVAILABLE PROCEEDS FROM THE DISTRIBUTIONS ON OR IN RESPECT OF COLLATERAL DEBT SECURITIES AND OTHER COLLATERAL PLEDGED BY THE ISSUER TO SECURE THE SECURED NOTES, WHICH WILL BE THE ONLY SOURCE OF PAYMENTS ON THE NOTES. FOR THESE REASONS, AMONG OTHERS, AN INVESTMENT IN THE NOTES IS NOT SUITABLE FOR ALL INVESTORS AND IS APPROPRIATE ONLY FOR AN INVESTOR CAPABLE OF (i) ANALYZING AND ASSESSING THE RISKS ASSOCIATED WITH DEFAULTS, LOSSES AND RECOVERIES ON, REINVESTMENT OF PROCEEDS OF AND OTHER CHARACTERISTICS OF ASSETS SUCH AS THOSE INCLUDED AMONG THE COLLATERAL DEBT SECURITIES AND (ii) BEARING SUCH RISKS AND THE FINANCIAL CONSEQUENCES THEREOF AS THEY RELATE TO AN INVESTMENT IN THE NOTES. EXCEPT AS SET FORTH IN THIS OFFERING CIRCULAR, NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFERING CIRCULAR AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE NOTES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION NOR TO ANY PERSON WHO HAS NOT RECEIVED A COPY OF THIS OFFERING CIRCULAR AND EACH CURRENT AMENDMENT OR SUPPLEMENT HERETO, IF ANY. AN INVESTOR OR POTENTIAL INVESTOR IN THE NOTES (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT OF SUCH PERSON OR ENTITY) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION, THE TAX TREATMENT AND TAX STRUCTURE OF THE TRANSACTION AND ALL RELATED MATERIALS OF ANY KIND, INCLUDING OPINIONS OR OTHER TAX ANALYSES, THAT ARE PROVIDED TO SUCH PERSON OR ENTITY. HOWEVER, SUCH PERSON OR ENTITY MAY NOT DISCLOSE ANY OTHER INFORMATION RELATING TO THIS TRANSACTION UNLESS SUCH INFORMATION IS RELATED TO SUCH TAX TREATMENT AND TAX STRUCTURE. THE ISSUER ACCEPTS RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR OTHER THAN THE COLLATERAL MANAGER INFORMATION. TO THE BEST KNOWLEDGE AND BELIEF OF THE ISSUER, THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION. THE DELIVERY OF THIS OFFERING CIRCULAR AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO ITS DATE. IT IS EXPECTED THAT PROSPECTIVE INVESTORS INTERESTED IN PARTICIPATING IN THIS OFFERING ARE WILLING AND ABLE TO CONDUCT AN INDEPENDENT INVESTIGATION OF THE iii

5 RISKS POSED BY AN INVESTMENT IN THE NOTES. REPRESENTATIVES OF THE INITIAL PURCHASER AND THE PLACEMENT AGENT WILL BE AVAILABLE TO ANSWER QUESTIONS CONCERNING THE ISSUER, THE NOTES, THE COLLATERAL MANAGER AND THE COLLATERAL AND WILL, UPON REQUEST, MAKE AVAILABLE SUCH OTHER INFORMATION AS INVESTORS MAY REASONABLY REQUEST. EACH PURCHASER OF THE NOTES OUTSIDE THE UNITED STATES WILL BE DEEMED TO HAVE MADE CERTAIN PURCHASER REPRESENTATIONS AS DESCRIBED UNDER "PURCHASE AND TRANSFER RESTRICTIONS" HEREIN. EACH PURCHASER OF THE NOTES OFFERED IN THE UNITED STATES IN RELIANCE ON RULE 144A (OR ANOTHER EXEMPTION FROM REGISTRATION) UNDER THE SECURITIES ACT WILL BE REQUIRED TO MAKE CERTAIN PURCHASER REPRESENTATIONS AS DESCRIBED UNDER "PURCHASE AND TRANSFER RESTRICTIONS" HEREIN. IN ADDITION, THE NOTES WILL BEAR RESTRICTIVE LEGENDS AND WILL BE SUBJECT TO RESTRICTIONS ON TRANSFER AS DESCRIBED HEREIN, INCLUDING THE REQUIREMENT THAT, WITH RESPECT TO THE RETAINED NOTES AND THE INCOME NOTES TRANSFERRED OR EXCHANGED IN THE UNITED STATES IN RELIANCE ON RULE 144A (OR ANOTHER EXEMPTION FROM REGISTRATION) UNDER THE SECURITIES ACT INCLUDING RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT), SUBSEQUENT TRANSFEREES FURNISH A REPRESENTATION LETTER IN THE FORM PRESCRIBED BY THE INDENTURE. ANY RESALE OR OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER ATTEMPTED TRANSFER, OF NOTES WHICH IS NOT MADE IN COMPLIANCE WITH THE APPLICABLE TRANSFER RESTRICTIONS WILL BE NULL AND VOID AB INITIO. SEE "PURCHASE AND TRANSFER RESTRICTIONS." THE NOTES MAY NOT BE OFFERED TO MEMBERS OF THE PUBLIC IN THE CAYMAN ISLANDS PURSUANT TO S.194 OF THE COMPANIES LAW (2004 REVISION) OF THE CAYMAN ISLANDS. FOR NEW HAMPSHIRE RESIDENTS ONLY: NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER NEW HAMPSHIRE REVISED STATUTES ANNOTATED CHAPTER 421-B ("RSA 421-B") WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. NOTICE TO RESIDENTS OF AUSTRIA THIS OFFERING CIRCULAR HAS BEEN CIRCULATED IN AUSTRIA FOR THE SOLE PURPOSE OF PROVIDING INFORMATION ABOUT THE NOTES TO A LIMITED NUMBER OF SOPHISTICATED INVESTORS IN AUSTRIA. THIS OFFERING CIRCULAR IS MADE AVAILABLE ON THE CONDITION THAT IT IS SOLELY FOR THE USE OF THE RECIPIENT AS A SOPHISTICATED, POTENTIAL AND INDIVIDUALLY SELECTED INVESTOR AND MAY NOT BE PASSED ON TO ANY OTHER PERSON OR REPRODUCED IN WHOLE OR IN PART. THIS OFFERING CIRCULAR DOES NOT CONSTITUTE A PUBLIC OFFER (ÖFFENTLICHES ANGEBOT) IN AUSTRIA AND MUST NOT BE USED IN CONJUNCTION iv

6 WITH A PUBLIC OFFERING IN AUSTRIA AND, THEREFORE, THE PROVISIONS OF THE INVESTMENT FUND ACT OF 1993 (INFESTMENTFONDSGESETZ 1993) DO NOT APPLY. CONSEQUENTLY, NO PUBLIC OFFERS OR PUBLIC SALES MAY BE MADE IN AUSTRIA IN RESPECT OF THE NOTES. THE NOTES ARE NOT REGISTERED IN AUSTRIA AND MAY NOT BENEFIT FROM TAX ADVANTAGES APPLICABLE TO REGISTERED SECURITIES. ALL PROSPECTIVE INVESTORS ARE URGED TO SEEK INDEPENDENT TAX ADVICE. THE INITIAL PURCHASER, THE PLACEMENT AGENT AND THEIR RESPECTIVE AFFILIATES DO NOT GIVE TAX ADVICE. NOTICE TO RESIDENTS OF AUSTRALIA ANY OFFER OF SECURITIES, INVITATION TO SUBSCRIBE FOR SECURITIES OR ISSUE OF THE SECURITIES IN AUSTRALIA THAT IS REGULATED BY THE CORPORATIONS LAW MUST CONSTITUTE AN EXCLUDED OFFER, EXCLUDED INVITATION, OR EXCLUDED ISSUE WITHIN THE MEANING GIVEN TO THOSE EXPRESSIONS IN THE CORPORATIONS LAW. NOTICE TO RESIDENTS OF BAHRAIN PURCHASE OF THE NOTES IS BY INVITATION ONLY AND NO OFFER WILL BE MADE IN BAHRAIN TO THE PUBLIC TO PURCHASE THE SAME. THIS OFFERING CIRCULAR IS INTENDED TO BE READ ONLY BY THE ADDRESSEE. NOTICE TO RESIDENTS OF DENMARK THIS OFFERING CIRCULAR HAS NOT BEEN FILED WITH OR APPROVED BY THE DANISH SECURITIES COUNCIL OR ANY OTHER REGULATORY AUTHORITY IN THE KINGDOM OF DENMARK. NOTICE TO RESIDENTS OF FINLAND THE NOTES MAY NOT BE OFFERED OR SOLD, OR THIS OFFERING CIRCULAR BE DISTRIBUTED, DIRECTLY OR INDIRECTLY, TO ANY RESIDENT OF THE REPUBLIC OF FINLAND OR IN THE REPUBLIC OF FINLAND, EXCEPT PURSUANT TO APPLICABLE FINNISH LAWS AND REGULATIONS. SPECIFICALLY, THE NOTES MAY NOT BE OFFERED OR SOLD, OR THIS OFFERING CIRCULAR BE DISTRIBUTED, DIRECTLY OR INDIRECTLY, TO ANY RESIDENT OF THE REPUBLIC OF FINLAND OR IN THE REPUBLIC OF FINLAND, OTHER THAN FOR A CONSIDERATION OF NOT LESS THAN EUR 50,000 PER INVESTOR OR IN DENOMINATIONS OF NOT LESS THAN EUR 50,000. NOTICE TO RESIDENTS OF FRANCE THE NOTES HAVE NOT BEEN OFFERED OR SOLD AND MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, TO THE PUBLIC IN THE REPUBLIC OF FRANCE. ANY OFFERS OF THE NOTES IN THE REPUBLIC OF FRANCE WILL BE MADE ONLY IN ACCORDANCE WITH ARTICLE 6 OF THE ORDINANCE DATED 28TH SEPTEMBER 1967, AS AMENDED, AND DECREE NO , DATED 1ST OCTOBER 1998, RELATING TO OFFERS TO A LIMITED NUMBER OF INVESTORS. NOTICE TO RESIDENTS OF HONG KONG THE NOTES MAY NOT BE OFFERED OR SOLD BY MEANS OF ANY DOCUMENT OTHER THAN (I) IN CIRCUMSTANCES WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THE COMPANIES ORDINANCE (CAP.32, LAWS OF HONG KONG), OR (II) TO "PROFESSIONAL INVESTORS" WITHIN THE MEANING OF THE SECURITIES AND FUTURES ORDINANCE (CAP.571, LAWS OF HONG KONG) AND ANY RULES MADE THEREUNDER, OR (III) IN OTHER CIRCUMSTANCES WHICH DO NOT RESULT IN THE DOCUMENT BEING A "PROSPECTUS" WITHIN THE MEANING OF THE COMPANIES ORDINANCE (CAP.32, LAWS OF HONG KONG), AND NO ADVERTISEMENT, INVITATION OR DOCUMENT RELATING TO THE NOTES MAY BE ISSUED OR MAY BE IN THE POSSESSION OF ANY PERSON FOR THE PURPOSE OF ISSUE (IN EACH CASE v

7 WHETHER IN HONG KONG OR ELSEWHERE), WHICH IS DIRECTED AT, OR THE CONTENTS OF WHICH ARE LIKELY TO BE ACCESSED OR READ BY, THE PUBLIC IN HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE LAWS OF HONG KONG) OTHER THAN WITH RESPECT TO NOTES WHICH ARE OR ARE INTENDED TO BE DISPOSED OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO "PROFESSIONAL INVESTORS" WITHIN THE MEANING OF THE SECURITIES AND FUTURES ORDINANCE (CAP. 571, LAWS OF HONG KONG) AND ANY RULES MADE THEREUNDER. NOTICE TO RESIDENTS OF IRELAND THE INITIAL PURCHASER AND THE PLACEMENT AGENT AGREE THAT IT HAS NOT AND WILL NOT DO ANYTHING IN IRELAND IN CONNECTION WITH THE NOTES WHICH MIGHT CONSTITUTE A BREACH OF SECTION 9(1), 23(1), 23(6) OR 23(7) OF THE INVESTMENT INTERMEDIARIES ACT NOTICE TO RESIDENTS OF JAPAN THE NOTES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES AND EXCHANGE LAW OF JAPAN. NEITHER THE NOTES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, RESOLD OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO OR FOR THE ACCOUNT OF ANY RESIDENT IN JAPAN (WHICH TERM AS USED HEREIN MEANS ANY PERSON RESIDENT IN JAPAN, INCLUDING ANY CORPORATION OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF JAPAN), OR TO OTHERS FOR RE-OFFERING OR SALE, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO A RESIDENT OF JAPAN EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF, AND OTHERWISE IN COMPLIANCE WITH, THE SECURITIES AND EXCHANGE LAW AND ANY OTHER APPLICABLE LAWS, REGULATIONS AND MINISTERIAL GUIDELINES OF JAPAN. NOTICE TO RESIDENTS OF KOREA THE ISSUER IS NOT MAKING ANY REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE QUALIFICATION OF THE RECIPIENTS OF THESE MATERIALS FOR THE PURPOSE OF INVESTING IN THE NOTES UNDER THE LAWS OF KOREA, INCLUDING AND WITHOUT LIMITATION THE FOREIGN EXCHANGE MANAGEMENT LAW AND REGULATIONS THEREUNDER. THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES AND EXCHANGE LAW OF KOREA AND NONE OF THE NOTES MAY BE OFFERED OR SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN KOREA OR TO ANY RESIDENT OF KOREA EXCEPT PURSUANT TO APPLICABLE LAWS AND REGULATIONS OF KOREA. NOTICE TO RESIDENTS OF THE NETHERLANDS THE INITIAL PURCHASER AND THE PLACEMENT AGENT HAVE REPRESENTED AND AGREED THAT THEY HAVE NOT, DIRECTLY OR INDIRECTLY, OFFERED, SOLD, TRANSFERRED OR DELIVERED AND WILL NOT, DIRECTLY OR INDIRECTLY, OFFER, SELL, TRANSFER OR DELIVER ANY NOTES OFFERED HEREBY (INCLUDING RIGHTS REPRESENTING AN INTEREST IN A GLOBAL NOTE) IN DENOMINATIONS LESS THAN 50,000 OR U.S.$50,000 (OR THE EQUIVALENT THEREOF IN OTHER CURRENCIES) TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO BANKS, INVESTMENT BANKS, PENSION FUNDS, INSURANCE COMPANIES, SECURITIES FIRMS, INVESTMENT INSTITUTIONS, CENTRAL GOVERNMENTS, LARGE INTERNATIONAL AND SUPRANATIONAL ORGANIZATIONS, TREASURIES AND FINANCE COMPANIES OF LARGE ENTERPRISES AND OTHER ENTITIES WHICH TRADE OR INVEST IN SECURITIES IN THE CONDUCT OF A BUSINESS OR PROFESSION. vi

8 NOTICE TO RESIDENTS OF NORWAY THE OFFERING OF THE NOTES WILL NOT BE A PUBLIC OFFER IN NORWAY AND THIS OFFERING CIRCULAR IS INTENDED TO BE READ BY THE ADDRESSEE ONLY. NOTICE TO RESIDENTS OF SINGAPORE THIS OFFERING CIRCULAR HAS NOT BEEN REGISTERED AS A PROSPECTUS WITH THE REGISTRAR OF COMPANIES IN SINGAPORE. ACCORDINGLY, THE NOTES MAY NOT BE OFFERED OR SOLD, NOR MAY THIS OFFERING CIRCULAR OR ANY OTHER OFFERING DOCUMENT OR MATERIAL RELATING TO THE SECURITIES BE CIRCULATED OR DISTRIBUTED, DIRECTLY OR INDIRECTLY, TO THE PUBLIC OR ANY MEMBER OF THE PUBLIC IN SINGAPORE OTHER THAN (i) TO INSTITUTIONAL INVESTORS OR OTHER PERSONS OF THE KIND SPECIFIED IN SECTION 106C OF THE COMPANIES ACT CHAPTER 50 OF SINGAPORE, (ii) TO A SOPHISTICATED INVESTOR, AND IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 106D OF THE COMPANIES ACT OR (iii) OTHERWISE PURSUANT TO, AND IN ACCORDANCE WITH, ANY OTHER APPLICABLE PROVISIONS OF THE COMPANIES ACT. NOTICE TO RESIDENTS OF SPAIN THIS OFFERING CIRCULAR HAS NOT BEEN AND WILL NOT BE REGISTERED WITH THE COMISSION NATIONAL DEL MERCADO DE VALORES OF SPAIN AND MAY NOT BE DISTRIBUTED IN SPAIN IN CONNECTION WITH THE OFFERING AND SALE OF THE NOTES WITHOUT COMPLYING WITH ALL LEGAL AND REGULATORY REQUIREMENTS IN RELATION THERETO. NOTICE TO RESIDENTS OF SWEDEN THIS OFFERING CIRCULAR IS FOR THE RECIPIENT ONLY AND MAY NOT IN ANY WAY BE FORWARDED TO ANY OTHER PERSON OR TO THE PUBLIC IN SWEDEN. NOTICE TO RESIDENTS IN THE UNITED ARAB EMIRATES (OUTSIDE THE DUBAI INTERNATIONAL FINANCIAL CENTRE) THE NOTES HAVE NOT BEEN, AND ARE NOT BEING, PUBLICLY OFFERED, SOLD, PROMOTED OR ADVERTISED IN THE UNITED ARAB EMIRATES OTHER THAN IN COMPLIANCE WITH THE LAWS OF THE UNITED ARAB EMIRATES. PROSPECTIVE INVESTORS IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE SHOULD HAVE REGARD TO THE SPECIFIC NOTICE TO PROSPECTIVE INVESTORS IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE SET OUT BELOW. THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR DOES NOT CONSTITUTE A PUBLIC OFFER OF DEBENTURES IN THE UNITED ARAB EMIRATES WITHIN THE MEANING OF THE COMMERCIAL COMPANIES LAW (FEDERAL LAW NO. 8 OF 1984 OF THE UAE, AS AMENDED) OR OTHERWISE AND IS NOT INTENDED TO BE A PUBLIC OFFER. THIS OFFERING CIRCULAR HAS NOT BEEN APPROVED BY OR FILED WITH THE CENTRAL BANK OF THE UNITED ARAB EMIRATES, THE EMIRATES SECURITIES AND COMMODITIES AUTHORITY OR THE DUBAI FINANCIAL SERVICES AUTHORITY. IF YOU DO NOT UNDERSTAND THE CONTENTS OF THIS OFFERING CIRCULAR YOU SHOULD CONSULT AN AUTHORISED FINANCIAL ADVISER. THIS OFFERING CIRCULAR IS PROVIDED FOR THE BENEFIT OF THE RECIPIENT ONLY, AND SHOULD NOT BE DELIVERED TO, OR RELIED ON BY, ANY OTHER PERSON. NOTICE TO RESIDENTS IN THE UNITED ARAB EMIRATES (INSIDE THE DUBAI INTERNATIONAL FINANCIAL CENTRE) THIS OFFERING CIRCULAR IS INTENDED FOR DISTRIBUTION ONLY TO PERSONS OF A TYPE SPECIFIED IN THE OFFERED SECURITIES RULES ("RULES") OF THE DUBAI FINANCIAL SERVICES AUTHORITY. IT MUST NOT BE DELIVERED TO, OR RELIED ON BY, ANY OTHER PERSON. THE AUTHORITY HAS NO RESPONSIBILITY FOR REVIEWING OR VERIFYING ANY DOCUMENTS IN CONNECTION WITH THE OFFER TO WHICH THIS OFFERING CIRCULAR RELATES. THE AUTHORITY HAS NOT APPROVED THIS OFFERING CIRCULAR NOR TAKEN STEPS TO VERIFY THE INFORMATION SET OUT IN IT, AND HAS NO RESPONSIBILITY FOR IT. THE NOTES TO WHICH THIS OFFERING CIRCULAR RELATES MAY BE ILLIQUID AND/OR SUBJECT TO RESTRICTIONS ON THEIR RESALE. vii

9 PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONDUCT THEIR OWN DUE DILIGENCE ON THE NOTES. IF YOU DO NOT UNDERSTAND THE CONTENTS OF THIS OFFERING CIRCULAR YOU SHOULD CONSULT AN AUTHORISED FINANCIAL ADVISER. NOTICE TO RESIDENTS OF THE UNITED KINGDOM PRIOR TO THE EXPIRY OF A PERIOD OF SIX MONTHS FROM THE ISSUE DATE THEREOF, THE NOTES WILL NOT BE OFFERED OR SOLD TO PERSONS IN THE UNITED KINGDOM EXCEPT TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES OR OTHERWISE IN CIRCUMSTANCES WHICH HAVE NOT RESULTED AND WILL NOT RESULT IN AN OFFER TO THE PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1995 (THE "UK REGULATIONS"). NO INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (THE "FSMA")) MAY BE COMMUNICATED IN CONNECTION WITH THE ISSUE OR SALE OF ANY NOTES EXCEPT IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO THE ISSUER, AND ALL APPLICABLE PROVISIONS OF THE UK REGULATIONS AND THE FSMA WITH RESPECT TO ANYTHING DONE IN RELATION TO THE NOTES IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM MUST BE COMPLIED WITH. The distribution of this Offering Circular and the offering of the Notes may also be restricted by law in certain jurisdictions. Consequently, nothing contained herein shall constitute an offer to sell, or a solicitation of an offer to buy, (i) any Securities other than the Notes or (ii) any Notes in any jurisdiction in which it is unlawful for such Person to make such an offer or solicitation. Persons into whose possession this Offering Circular comes are required by the Issuer, the Initial Purchaser and the Placement Agent to inform themselves about, and to observe, any such restrictions. In connection with the issuance of the Notes, Citigroup Global Markets, Inc. (the "Stabilizing Manager") (or persons acting on its behalf) may for a limited period over-allot Notes (provided that the aggregate principal amount of Notes allotted does not exceed 105% of the aggregate principal amount of the Notes) or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilizing Manager (or persons acting on its behalf) will undertake stabilization action. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. AVAILABLE INFORMATION To permit compliance with Rule 144A under the Securities Act in connection with a resale of the Notes, the Issuer will be required to furnish, upon request of a Holder of a Note, to such Holder and a prospective purchaser designated by such Holder, the information required to be delivered under Rule 144A(d)(4) under the Securities Act if at the time of the request the Issuer is not a reporting company under Section 13 or Section 15(d) of the Exchange Act or exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. Such information may be obtained from (i) in the case of the Secured Notes, the Trustee, (ii) in the case of the Income Notes, the Income Note Paying Agent, or (iii) if and for so long as any Notes are listed on the Irish Stock Exchange and the rules of the Irish viii

10 Stock Exchange so require, the Irish Paying Agent located in Dublin. It is not contemplated that the Issuer will be such a reporting company or so exempt. To the extent the Issuer delivers any annual or other periodic report to the Holders of the Notes, the Issuer will include in such report a reminder that (i) each Holder (other than those Holders who are not U.S. Persons and have purchased their Notes outside the United States pursuant to Regulation S) is required to be (a) a "qualified institutional buyer" as defined in Rule 144A under the Securities Act (a "Qualified Institutional Buyer") or, solely in the case of the Retained Notes and the Income Notes, an Institutional Accredited Investor or a Permitted NS Purchaser and (b) a "qualified purchaser" for purposes of the Investment Company Act (a "Qualified Purchaser") that can make all of the representations applicable pursuant to the Indenture for a Holder that is a U.S. Person, (ii) the Notes can only be transferred to a transferee that is (a) a Qualified Institutional Buyer (or, in the case of the Retained Notes and Income Notes, as otherwise provided above) and (b) a Qualified Purchaser and that can make all of the representations in the Indenture that are applicable pursuant to the Indenture for a Holder that is a U.S. Person; and (iii) the Issuer has the right to compel any Holder who does not meet the transfer restrictions to transfer its interest in the Notes to a person designated by the Issuer or sell such interests on behalf of the Holder. CERTAIN CONSIDERATIONS RELATING TO THE CAYMAN ISLANDS The Issuer is an exempted company incorporated under the laws of the Cayman Islands. As a result, it may not be possible for purchasers of the Notes to effect service of process upon the Issuer within the United States or to enforce against the Issuer in United States courts judgments predicated upon the civil liability provisions of the securities laws of the United States. The Issuer has been advised by Walkers, its legal advisor in the Cayman Islands, that the United States and the Cayman Islands do not currently have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in New York or other states in the United States, the courts of the Cayman Islands will recognize and enforce a foreign judgment of a court of competent jurisdiction, based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given, and provided such judgment is final, for a liquidated sum not in respect of taxes or a fine or penalty, and which was not obtained in a manner, and is not of a kind the enforcement of which is, contrary to the public policy of the Cayman Islands. A Cayman Islands court may also stay proceedings if concurrent proceedings are being brought elsewhere. The Issuer will appoint CT Corporation System as its agent in New York for service of process. ix

11 SUMMARY The following summary does not purport to be complete and is qualified in its entirety by reference to the detailed information appearing elsewhere in this Offering Circular and related documents referred to herein. Defined terms used herein may be defined elsewhere in this Offering Circular. An index of defined terms used herein indicating where the related definitions can be found appears at the end of this Offering Circular. Certain General Terms Issuer:... Initial Purchaser for the Offered Notes:... Placement Agent for the Retained Notes and the Income Notes:... Collateral Manager:... Trustee/Custodian/Income Note Paying Agent:... N-Star Real Estate CDO IX, Ltd. Citigroup Global Markets Inc. Citigroup Global Markets Inc. NS Advisors, LLC LaSalle Bank National Association Closing Date:... On or about February 28, 2007 Ramp-Up Period:... The Issuer will use reasonable efforts to purchase, or to enter into binding agreements to purchase, Collateral Debt Securities, each satisfying the Eligibility Criteria, such that the aggregate Principal Balance of all Collateral Debt Securities purchased by the Issuer by the end of the Ramp-Up Period will be at least U.S.$800,000,0000. The Issuer (or the Collateral Manager on behalf of the Issuer) must request each Rating Agency rating a Class of Notes to confirm in writing, within 30 Business Days after the Effective Date (or, in the case of any Rating Agency, any such later date (but in no event longer than 60 Business Days after the Effective Date) that is acceptable to such Rating Agency), that it has not reduced or withdrawn the rating, if any, it assigned to such Class of Notes on the Closing Date (a "Rating Confirmation"). In the event that the Issuer fails to obtain a Rating Confirmation within such time period (any such event, a "Rating Confirmation Failure"), on the next and succeeding Payment Dates, the Issuer will be required to pay principal, to the extent of Available Funds in the Collection Account and subject to the Priority of Payments, on the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes in that order, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full. See "Security for the Notes Ramp-Up Period." Payment Dates:... Notes:... The 7 th day of each calendar month beginning in June 2007; provided that if such a day is not a Business Day, the next succeeding Business Day. The final scheduled Payment Date will be in August U.S.$772,000,000 aggregate principal amount of Secured Notes and U.S.$28,000,000 aggregate principal amount of Income Notes. 1

12 Retained Notes:... Expected Net Proceeds:... Use of Proceeds:... The Collateral Manager has advised the Issuer that one or more of its Affiliates will purchase on the Closing Date 100% of the Retained Notes, the Income Notes and the Ordinary Shares issued on the Closing Date. Such affiliates may transfer such Retained Notes, Income Notes and Ordinary Shares subject to the restrictions on transfers applicable thereto described in this Offering Circular. Approximately U.S.$790,000,000, being gross proceeds reduced by certain Closing Date payments of organizational and structuring fees and expenses of the Issuer, including, without limitation (i) the legal fees and expenses of counsel to the Issuer, the Initial Purchaser, the Placement Agent and the Collateral Manager, (ii) the expenses, fees and commissions incurred in connection with the acquisition of the Collateral Debt Securities to be purchased by the Issuer on the Closing Date, (iii) the expenses of offering the Notes (including placement fees and structuring fees), (iv) the initial deposit into the Expense Reserve Account, and (v) fees and expenses associated with listing the Notes on the Irish Stock Exchange. The aggregate amount of fees and expenses attributable to listing on the Irish Stock Exchange is expected to equal approximately U.S.$45,300. Net proceeds will be used by the Issuer on the Closing Date to purchase the Collateral Debt Securities listed in Annex B hereto previously selected by the Collateral Manager and, after the Closing Date, to purchase additional Collateral Debt Securities in accordance with the investment criteria described herein. General Terms of the Secured Notes Note Principal Amount 1 Stated Maturity Date Applicable Periodic Interest Rate 2 Ratings (Moody's Fitch, S&P) Class A-1 Floating Rate Notes U.S.$ 512,000,000 August 2052 LIBOR % "Aaa", "AAA", "AAA" Class A-2 Floating Rate Notes U.S.$ 96,000,000 August 2052 LIBOR % "Aaa", "AAA", "AAA" Class A-3 Floating Rate Notes U.S.$ 48,000,000 August 2052 LIBOR % "Aaa", "AAA", "AAA" Class B Floating Rate Notes U.S.$ 37,280,000 August 2052 LIBOR % "Aa2", "AA", "AA" Class C Deferrable Fixed Rate Notes U.S.$ 12,800,000 August % 3 "A1", "A+", "A+" Class D Deferrable Floating Rate Notes U.S.$ 23,200,000 August 2052 LIBOR % 3 "A2", "A", "A" Class E Deferrable Floating Rate Notes U.S.$ 4,800,000 August 2052 LIBOR % 3 "A3", "A-", "A-" 2

13 Note Principal Amount 1 Stated Maturity Date Applicable Periodic Interest Rate 2 Ratings (Moody's Fitch, S&P) Class F Deferrable Floating Rate Notes U.S.$ 3,600,000 August 2052 LIBOR % 3 "Baa1", "BBB+", "BBB+" Class G Deferrable Floating Rate Notes U.S.$ 14,080,000 August 2052 LIBOR % 3 "Baa2", "BBB", "BBB" Class H Deferrable Floating Rate Notes U.S.$ 7,200,000 August 2052 LIBOR % 3 "Baa3", "BBB-", "BBB-" Class J Deferrable Fixed Rate Notes Class K Deferrable Fixed Rate Notes U.S.$ 7,040,000 U.S.$ 6,000,000 August 2052 August % 3 "Ba1", "BB+", "BB+" % 3 "Ba2", "BB", "BB" The balance of the Notes is approximate and may vary by up to 5%. Interest rate per annum; expressed to include a spread above one-month LIBOR with respect to each Class of Floating Rate Notes; based on a 360-day year and actual number of days elapsed in the case of the Floating Rate Notes, and a 360- day year of day months in the case of the Fixed Rates Notes; payable monthly (except with respect to the Initial Payment Date) in arrears on each Payment Date. So long as any Class of Notes remains Outstanding that is Senior to a Class of deferrable Notes, any interest on such deferrable Notes not paid when due will be deferred and capitalized. Minimum Denomination:... U.S.$250,000 and integral multiples of U.S.$1,000 in excess thereof. Seniority:... First, Class A-1 Notes, second, Class A-2 Notes, third, Class A-3 Notes, fourth, Class B Notes, fifth, Class C Notes, sixth, Class D Notes, seventh, Class E Notes, eighth, Class F Notes, ninth, Class G Notes, tenth, Class H Notes, eleventh, Class J Notes and twelfth, Class K Notes, subject to certain limited exceptions applicable to payment of principal of the Notes, all in accordance with the Priority of Payments. See "Description of the Notes Priority of Payments." Security for the Secured Notes:... Principal Repayment:... Mandatory Redemption:... The Secured Notes will be limited recourse debt obligations of the Issuer secured pursuant to the Indenture by, and payable to the extent of available funds solely from, the Collateral. On each Payment Date, to the extent that funds are available therefor, Collateral Principal Collections will be applied to pay principal of each Class of Secured Notes in accordance with the Priority of Payments. No principal is expected to be paid in respect of the Secured Notes prior to the end of the Reinvestment Period except in limited circumstances as described herein. If any Coverage Test applicable to a Class of Secured Notes is not satisfied as of any Calculation Date, funds that would otherwise be 3

14 used to make (i) interest payments on the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes (ii) distributions to the Holders of the Income Notes and (iii) certain other payments in accordance with the Priority of Payments on the related Payment Date, will instead be applied to pay principal of each Class of Secured Notes that is Senior to such Class in order of seniority until such test is satisfied. Early Redemption:... The Secured Notes will be subject to early redemption in connection with an Optional Redemption, Tax Redemption or Auction Call Redemption, each as described under "Description of the Notes Secured Notes Early Redemption" in accordance with the procedures, and subject to the satisfaction of the conditions, described under "Description of the Notes Secured Notes Redemption Procedures." General Terms of the Income Notes Aggregate Principal Amount:... Expected Rating:... Minimum Denomination:... Status:... Interest Payments:... Principal Payments:... Optional Redemption of the Income Notes:... U.S.$28,000,000 Not rated. U.S.$250,000 and integral multiples of U.S.$1,000 in excess thereof. The Income Notes will be unsecured limited recourse obligations of the Issuer issued in accordance with the Income Note Paying Agency Agreement and, as such, represent a residual interest in the assets of the Issuer. The Income Notes will not bear a stated rate of interest, but, on each Payment Date, to the extent funds are available therefor, distributions will be made on the Income Notes after the payments of interest on the Secured Notes and certain other amounts ranking senior in priority to such distributions as specified under the Priority of Payments. However, funds that would otherwise be paid to Income Noteholders on any Payment Date will be diverted to pay principal of the relevant Class or Classes of Secured Notes on such Payment Date if any Coverage Test applicable to a Class of Secured Notes is not satisfied as of the related Calculation Date as described under "Description of the Notes Secured Notes Mandatory Redemption" and " Priority of Payments." On each Payment Date, to the extent that funds are available therefor after payment in full of all principal of, and accrued and unpaid interest on, the Secured Notes, Collateral Principal Collections will be applied to make distributions to the Holders of the Income Notes in accordance with the Priority of Payments. No principal will be paid in respect of the Income Notes prior to the payment of all principal on the Secured Notes. Subject to certain conditions described herein, if the Income Notes are not otherwise redeemed in connection with a redemption of the Secured Notes on any Payment Date on or after the Payment Date on which the Secured Notes have been paid in full, Holders of not less than 66⅔% in aggregate principal amount of the Outstanding Income 4

15 Notes may direct the Issuer to liquidate any remaining assets and redeem the Income Notes (in whole but not in part), at the applicable redemption price therefor. See "Description of the Notes Income Notes Optional Redemption." Description of the Collateral Collateral:... Closing Date Portfolio:... Effective Date Portfolio:... Effective Date Tests:... The "Collateral" will consist of (i) the Collateral Debt Securities acquired by the Issuer on the Closing Date as listed in Annex B hereto, the Temporary Ramp-Up Securities acquired by the Issuer on the Closing Date as listed in Annex C hereto and the additional Collateral Debt Securities and Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date that are delivered to the Trustee after the Closing Date and, with respect to each of the foregoing, all payments thereon or with respect thereto, (ii) the Collection Account, the Discretionary Ramp-Up Interest Reserve Account, the Non-Monthly Pay Asset Interest Reserve Account, the Payment Account, the Expense Reserve Account, the Collateral Account, each Derivative Contract Issuer Account, the Uninvested Proceeds Account and all funds credited to such accounts, Eligible Investments purchased with funds credited to such accounts and all income from the investment of funds therein, (iii) the Issuer's rights under each of the Transaction Documents to which it is a party, (iv) all cash or other property delivered to the Trustee, and (v) all proceeds of the foregoing. It is anticipated that, on the Closing Date, the Issuer will have purchased or entered into agreements to purchase for settlement following the Closing Date, Collateral Debt Securities having an aggregate principal balance of not less than U.S.$600,000,000. The Issuer is required to use reasonable efforts to apply Uninvested Proceeds and proceeds from the sale of Temporary Ramp-Up Securities to the purchase of additional Collateral Debt Securities. It is anticipated that, no later than the end of the Ramp-Up Period, the Issuer will have purchased or entered into binding agreements to purchase for settlement following the end of the Ramp-Up Period, Collateral Debt Securities (including the Collateral Debt Securities acquired by the Issuer on the Closing Date) having an aggregate principal balance of not less than U.S.$800,000,000. The Issuer is required to satisfy the Coverage Tests, the Collateral Concentration Limitations and the Collateral Quality Tests (other than the S&P CDO Monitor Test) as of the Effective Date. A failure to satisfy any of the Coverage Tests, the Collateral Concentration Limitations or the Collateral Quality Tests as of the Effective Date shall not constitute an Event of Default but such failure may result in a Rating Confirmation Failure. See "Risk Factors Effective Date Tests; Rating Confirmation Failure; Mandatory Redemption" and "Description of the Notes Secured Notes Mandatory Redemption" and " Priority of Payments." 5

16 Limited Authority to Dispose of and Reinvest in Collateral Debt Securities:. During the Reinvestment Period, the Collateral Manager will, in the limited circumstances and subject to certain conditions set forth in the Indenture and discussed herein, be permitted to direct the Trustee to sell certain Collateral Debt Securities in Discretionary Sales and to purchase Substitute Collateral Debt Securities. The Collateral Manager may also direct the Issuer to sell or otherwise dispose of any Collateral Debt Security that becomes a Defaulted Security, Written Down Security, Withholding Tax Security, Credit Improved Security or Credit Risk Security in accordance with the provisions of the Indenture. Certain Collateral Debt Securities may also be required to be sold to the extent the seller thereof is required to repurchase them. See "Security for the Notes Collateral Debt Security Dispositions and Reinvestment Criteria." During the Reinvestment Period, the Issuer will use reasonable efforts to purchase additional Collateral Debt Securities in accordance with the provisions of the Indenture as described herein. To the extent directed by the Collateral Manager, the Trustee, on behalf of the Issuer, (i) will reinvest any Sale Proceeds and any Collateral Principal Payments received with respect to Temporary Ramp-up Securities in Fixed Rate Collateral Debt Securities (except as described herein), and (ii) will reinvest any other Sale Proceeds and any Collateral Principal Payments in Substitute Collateral Debt Securities, in accordance with the criteria and limitations described herein. 6