PF Finans / Clarinova

Non-Compliance with Restrictions on Ownership of the Bonds and the United States Investment Company Act of 1940 Could Adversely Affect the Company The Issuer has not registered with the United States Securities and Exchange Commission (" SEC ") as an investment company pursuant to the Investment Company Act, in reliance on an exception under Section 3(c)(7) of the Investment Company Act and the rules and regulations thereunder for investment companies (a) whose outstanding securities are beneficially owned only by "qualified purchasers" and "knowledgeable employees" and certain transferees thereof identified in Rules 3c-5 and 3c-6 under the Investment Company Act and (b) which do not make a public offering of their securities in the United States. If the SEC or a court of competent jurisdiction were to find that the Company is required, but in violation of the Investment Company Act had failed, to register as an investment company, possible consequences include, but are not limited to, the following: (i) the SEC could apply to a district court to enjoin the violation; (ii) investors in the Company could sue the Company and recover any damages caused by the violation; and (iii) any contract to which the Company is party that is made in violation of the Investment Company Act or whose performance involves such violation would be unenforceable by any party to the contract unless a court were to find that under the circumstances enforcement would produce a more equitable result than non- enforcement and would not be inconsistent with the purposes of the Investment Company Act. In addition, such a finding would constitute an Event of Default under the Indenture. Should the Company be subjected to any or all of the foregoing, the Company would be materially and adversely affected. Additionally, there are a number of proposed changes of law in the United Stated which could potentially result in vehicles similar to the Company being required to register with the SEC. There can be no assurance as to whether any of the proposed changes in law will be enacted and, if enacted, what the change in law will require and/or its impact on the Company (which could potentially adversely affect the Comoany and the Bondholders). Below Investment-Grade Assets Involve Particular Risks A majority of the Assets may consist of non-investment grade interests, which are subject to liquidity, market value, credit and certain other risks. It is anticipated that the Assets generally will be subject to greater risks than investment grade corporate obligations. These risks could be exacerbated to the extent that the portfolio is devsified in a number of different SLS policies and secondly other types of Assets. Prices of the Assets may be volatile, and will generally fluctuate due to a variety of factors that are inherently difficult to predict, including but not limited to changes in interest rates, prevailing credit spreads, general economic conditions, financial market conditions, domestic and international economic or political events, developments or trends in any particular industry, and the financial condition of the obligors of the Assets. Additionally, SLS have no significant liquidity and market value risks since they are not generally traded in organized exchange markets but are traded by other investors. Because SLS portfolios are privately syndicated and privately negotiated and customized, SLS are not purchased or sold as easily as publicly traded securities. In addition, historically the trading volume in the SLS market has been small relative to the high-yield debt securities market.

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