Gresham Capital CLO IV B.V. - Irish Stock Exchange

translated into U.S. dollars by reference to the average exchange rate for the taxable year of the Issuer. It is
likely that, if the Issuer were to constitute a CFC, all of its income would be subpart F income.
If the Issuer is treated as a CFC and a U.S. Holder is treated as a United States shareholder of the Issuer, the
Issuer would not be treated as a PFIC with respect to such U.S. Holder for the period during which the Issuer
remains a CFC and such U.S. Holder remains a United States shareholder of the Issuer (the “qualified portion”
of the U.S. Holder’s holding period for the Class N Notes). As a result, to the extent the Issuer’s subpart F
income includes net capital gains, such gains would be treated as ordinary income to the United States
shareholder under the CFC rules, notwithstanding the fact that the character of such gains generally would
otherwise be preserved under the QEF rules. If the qualified portion of such U.S. Holder’s holding period for
the Class N Notes subsequently ceases (either because the Issuer ceases to be a CFC or the U.S. Holder ceases
to be a United States shareholder), then solely for purposes of the PFIC rules, such U.S. Holder’s holding period
for the Class N Notes would be treated as beginning on the first day following the end of such qualified portion,
unless the U.S. Holder had owned any Class N Notes for any period of time prior to such qualified portion and
had not made a QEF election with respect to the Issuer. In that case, the Issuer would again be treated as a PFIC
which is not a QEF with respect to such U.S. Holder and the beginning of such U.S. Holder’s holding period for
the Class N Notes would continue to be the date upon which such U.S. Holder acquired the Class N Notes,
unless the U.S. Holder makes an election to recognise gain with respect to the Class N Notes and a QEF election
with respect to the Issuer.
Indirect Interests in PFICs and CFCs. The Issuer intends to purchase only Collateral Debt Obligations that
are treated by their issuers as indebtedness for U.S. federal income tax purposes. However, the treatment of
certain of the Collateral Debt Obligations purchased by the Issuer as indebtedness is uncertain. If the Issuer
owns an Collateral Debt Obligation issued by a foreign corporation that is treated as equity for federal income
tax purposes, U.S. Holders of Class N Notes and any other Note that is treated as equity in the Issuer could be
treated as owning an indirect equity interest in a PFIC or a CFC and could be subject to certain adverse tax
consequences.
In particular, a U.S. Holder of an indirect equity interest in a PFIC is treated as owning the PFIC directly.
The U.S. Holder, and not the Issuer, would be required to make a QEF election with respect to each indirect
interest in a PFIC. However, certain PFIC information statements are necessary for U.S. Holders that have made
QEF elections, and there can be no assurance that the Issuer can obtain such statements from a PFIC, and thus
there can be no assurance that a U.S. Holder will be able to make the election with respect to any indirectly held
PFIC. Accordingly, if the U.S. Holder has not made a QEF election with respect to the indirectly-held PFIC, the
U.S. Holder would be subject to the adverse consequences described above under “—Investment in a Passive
Foreign Investment Company” with respect to any excess inclusions of such indirectly-held PFIC, any gain
indirectly realised by such U.S. Holder on the sale by the Issuer of such PFIC, and any gain indirectly realised
by such U.S. Holder on the sale by the U.S. Holder of its Notes (which may arise even if the U.S. Holder
realises a loss on such sale). Moreover, if the U.S. Holder has made a QEF election with respect to the
indirectly-held PFIC, the U.S. Holder would be required to include in income the U.S. Holder’s pro rata share
of the indirectly-owned PFIC’s ordinary earnings and net capital gain, translated into U.S. dollars based on the
average exchange rate for the indirectly-owned PFIC’s taxable year, as if the indirectly-owned PFIC were
owned directly, and the U.S. Holder would not be permitted to use any losses or other expenses of the Issuer to
offset such ordinary earnings and/or net capital gains.
Accordingly, if any of the Collateral Debt Obligations are treated as equity interests in a PFIC, U.S. Holders
could experience significant amounts of phantom income with respect to such interests. Other adverse tax
consequences may arise for U.S. Holders that are treated as owning indirect interests in CFCs. U.S. Holders
should consult their own tax advisors regarding the tax issues associated with such investments in light of their
own individual circumstances.
Distributions on Class N Notes. The treatment of actual distributions on the Class N Notes, in very general
terms, will vary depending on whether a U.S. Holder has made a timely QEF election (as described above). See
“—Investment in a Passive Foreign Investment Company”. If a timely QEF election has been made,
distributions should be allocated first to amounts previously taxed pursuant to the QEF election (or pursuant to
the CFC rules, if applicable) and to this extent will not be taxable to U.S. Holders. A U.S. Holder will recognise
exchange gain or loss with respect to amounts previously taxed pursuant to the QEF election equal to the
difference, if any, between the U.S. dollar value of the payment in euros on the date received (based on the U.S.
dollar spot rate for euros on the date received) and the U.S. dollar value of the previously taxed amount. Any
exchange gain or loss will generally be treated as U.S. source ordinary income or loss. The U.S. dollar value of
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