U.S. Reporting by U.S. Partners That Are Owners of Non-US. Entities - U.S. tax rules impose information reporting requirements on U.S. persons that own, either directly or indirectly under stock attribution rules, more than certain threshold amounts of stock in a foreign corporation; these persons must disclose, among other things, various transactions between themselves and those foreign corporations. For purposes of these information reporting requirements, stock ownership is determined with regard to certain stock attribution rules, and each U.S. Partner is treated as owning part or all of the stock owned directly or indirectly by the Fund. Similar reporting requirements apply to United States persons that (i) own, directly or indirectly, more than certain threshold amounts of certain foreign financial assets including, but not limited to stocks, securities and partnership interests in non-US. entities or (ii) contribute, in their capacity as Partners, more than a certain threshold amount to a non-U.S. partnership during a 12-month period. In certain circumstances, these rules may require U.S. Partners to file reports annually. U.S. Partners generally will be responsible for satisfying these information reporting requirements.
Non-U.S. Partners
U.S. Trade or Business Issues - Under the terms of the principal agreements relating to the Fund, the General Partner will be required to use commercially reasonable efforts to conduct the affairs of the Fund in a manner that limits the Fund’s operations to investing and other related activities which, in the aggregate, would not cause the Fund to be treated as engaged in the conduct of a trade or business in the U.S. The General Partner’s undertaking will be deemed satisfied with respect to the making, holding or disposing of any portfolio investment if the Non-U.S. Partners are given the opportunity to (or if all Limited Partners are otherwise required to) hold their proportionate shares of such portfolio investment directly or indirectly through an alternative investment vehicle treated as a corporation for U.S. federal income tax purposes. Notwithstanding this undertaking, it is possible that the activities of the Fund and the contractual arrangements into which it enters could cause the Fund to be treated as engaged in the conduct of a trade or business in the U.S.
Provided that the Fund is not engaged in the conduct of a U.S. trade or business, the U.S. federal income tax liability of a Non-U.S. Partner with respect to that Partner’s Limited Partner Interest generally will be limited to withholding tax on certain gross income from U.S. sources generated by the Fund as long as the Non-U.S. Partner undertakes no activities in the U.S. (determined without regard to its investment in the Fund) that would cause that Partner to be engaged in the conduct of a U.S. trade or business, and, unless otherwise indicated, the following discussion of the U.S. federal income tax treatment of Non-U.S. Partners is based on that assumption.
Further, if the Fund withholds and remits the proper amounts to the U.S. government, Non-U.S. Partners that are individuals or corporations will not be required to file U.S. federal income tax returns or pay additional U.S. federal income taxes solely as a result of their investment in the Fund (though Non-U.S. Partners treated as trusts for U.S. federal income tax purposes are subject to special rules). If the Fund is not engaged in the conduct of a U.S. trade or business, Non-U.S. Partners’ shares of income and gains from sources other than the U.S. (e.g., interest or dividends paid by non-U.S. portfolio companies and gains realized on the disposition of securities of those companies) will not be subject to U.S. federal income tax.
79 CONTROL NUMBER 257 - CONFIDENTIAL
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