SOF III - 1081 Southern Financial LLC Section 10: Certain Legal, ERISA and Tax Considerations Secondary Opportunities Fund III. LP relation to such payments. Capital gains. Each Investor will generally be treated for the purposes of UK tax on chargeable gains as having a share in each of the assets of the Fund. The share of each Investor should be its interest in the assets determined in accordance with the provisions of the Fund Partnership Agreement. Upon the Fund disposing of an asset to a third party, each Investor will be treated as disposing of its share in that asset. Subject to the offshore fund rules outlined below, any gain or loss arising on that disposal should be treated for UK tax purposes as a capital gain or loss and each Investor's share of any disposal proceeds realised on such disposal should be determined in accordance with the provisions of the Fund Partnership Agreement. On a pro rata distribution in specie of Fund assets amongst the Investors, there will be no immediate charge to UK tax. Instead, the capital gains tax base cost of each Investor in each of the assets will, for the purposes of computing any gain or loss on a subsequent disposal or part-disposal of the asset, be the market value of the asset at the date of distribution, reduced by the notional gain which would have arisen if the asset had been disposed of to a third party at its market value at the date of distribution. The same principles will be applied where the computation results in a loss. If the distribution in specie is not done on a pro rata basis, different considerations and tax treatments may apply. The Taxation (International and Other Provisions) Act 2010 and the Offshore Funds (Tax) Regulations 2009 ( together the 'Offshore Fund Rules') may apply to an investment made by the Fund in an 'offshore fund". The Fund itself will not constitute an offshore fund for these purposes, although it is possible that the Fund may hold or acquire investments wh