Fund Tax Disclosure on PFIC and CFC Rules

stock annually on a “mark-to-market” basis so that the Fund may treat any resulting gain or loss as ordinary income or loss to avoid the PFIC tax. As noted above, the PFIC rules (including the rules pertaining to QEF elections) generally should not affect tax-exempt U.S. Partners. The Fund cannot predict with any certainty at this time whether any non-U.S. portfolio company in which the Fund invests may be subject to the PFIC regime, whether a timely QEF election can or will be made, or the effect or availability of any applicable elections made by the Fund. The rules applicable to PFICs are complex, and the foregoing summary of U.S. federal income taxation of U.S. Partners indirectly owning an interest in a PFIC is general in nature. It is possible that U.S. Partners may be subject to tax currently under the PFIC regime on their proportionate shares of certain earnings of a non-U.S. corporation in which the Fund holds an interest and/or may incur nondeductible interest-like charges on tax liability deferred under the PFIC regime without receiving from the Fund distributions sufficient to satisfy any such obligations. In addition to the PFIC rules discussed above, a U.S. person that is a shareholder of a PFIC may be required to file an annual information report and/or applicable tax forms with the IRS. Controlled Foreign Corporations - Under Sections 951 through 957 of the Code, special rules apply to U.S. persons who own, directly or indirectly and applying certain attribution rules, 10% or more of the total combined voting power of all classes of stock of a non-U.S. corporation (each, a “United States Shareholder”) that is a “controlled foreign corporation” (“CFC”). For this purpose, the Fund will be treated as a United States Shareholder of any foreign corporation in which the Fund’s share ownership reaches this 10% threshold. A non-U.S. corporation generally will be a CFC for a taxable year if United States Shareholders collectively own more than 50% of the total combined voting power or total value of the corporation’s stock on any day during such taxable year. United States Shareholders of a CFC generally must include in their gross income for U.S. federal income tax purposes their pro rata shares of certain earnings and profits of the CFC. Further, under Section 1248 of the Code, if a U.S. person sells or exchanges stock of a non-U.S. corporation and that person is or was a United States Shareholder at any time during the five-year period ending on the date of such sale or exchange during which that non-U.S. corporation was a CFC, that U.S. person generally will be required to treat a portion of the gain recognized upon such sale or exchange as a dividend to the extent of the earnings and profits of the CFC attributable to such stock. Under U.S. federal income tax rules, the Fund itself is a U.S. person and, if the Fund becomes a United States Shareholder of a CFC, taxable U.S. Partners (i) will be required to report and pay tax currently on their shares of the CFC’s earnings and profits attributable to the Fund that are taxable to its United States Shareholders under the CFC rules, and (ii) will be subject to the Section 1248 recharacterization rule described above. In addition, if the Fund is a United States Shareholder of a CFC and a U.S. Partner disposes of its Limited Partner Interest, that Partner generally will recognize income under Section 751 of the Code equal to its distributive share of the Section 1248 income that would have been triggered if the Fund had sold its interest in the CFC at fair market value. The maximum rate of tax imposed on certain dividend income and certain long-term capital gains attributable to dispositions of securities generally is 20%, so that a recharacterization of gain under Section 1248 might not increase that U.S. Partner’s U.S. federal income tax liability. In addition, income of a CFC subject to income tax in a country other than the U.S. at an 77 CONTROL NUMBER 257 - CONFIDENTIAL HOUSE_OVERSIGHT_024088