Private Placement Memorandum for Film - Investment Considerations & Risk Factors

Sample of considerations and risk factors for potential investors in private placement for film production.

See Instructions for Subscription Documents for links to other required documents here: PPM for Film - Instructions for Subscription Documents

INVESTMENT CONSIDERATIONS AND RISK FACTORS

An investment in the Class A Units is subject to a high degree of risk and is suitable only for sophisticated investors that fully understand that risk and are prepared to bear that risk for an indefinite period of time and are able to withstand a total loss of their investment. The investment considerations and risk factors described below summarize some of the material risks inherent in the offering of the Class A Units. These Investment Considerations and Risk Factors are not presented in any particular order of significance. Prospective investors should carefully consider the following factors, among others, in making their investment decision.

Forward-Looking Statements

The documents and materials provided by the Company in connection with the sale and issuance of the Class A Units, including, but not limited to, the Company’s business plan and projections, contain certain forward-looking statements that involve risks and uncertainties. These statements relate to the Company’s future plans, objectives, expectations, forecasts and inventions, and the assumptions underlying or relating to any of these statements. These statements may be identified by the use of the words such as “expects,” “anticipates,” “intends,” “estimates,” “believes,” “projects” and “plans” and similar expressions. The Company’s actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed in these Investment Considerations and Risk Factors.

Risks Related to the Offering of Class A Units

The lack of a minimum offering amount and multiple closings in the offering will increase the risk that investors, especially earlier investors, will lose their entire investment.

The Company was recently formed for the purpose of developing, producing and distributing a film to be entitled “Your Company.” (the “Film”). The initial closing of the offering (the “Initial Closing”) will occur upon the Company’s acceptance of a subscription for Class A Units. Thereafter, the Company plans to conduct additional closings as Class A Units are sold in the offering until the Company has accepted subscriptions for Class A Units in the aggregate amount of $80,000 (the “Initial Offering Amount”). Subscriptions received after the sale of the Initial Offering Amount will be held in a segregated account and released to the Company on the date the Company has received subscriptions in the aggregate amount of $245,000 (the “Final Closing”). The Company believes that the Initial Offering Amount will only be sufficient to cover certain administrative expenses of the Company and development costs of the Film.The Company estimates that it will require at least an additional $245,000 for production of the Film and to cover expenses in connection with making arrangements for the distribution of the Film with a third party. Therefore, the Initial Offering Amount is not sufficient to fully implement the Company’s business plan. No assurance can be given that any additional proceeds from the offering of Class A Units will be raised after the Initial Offering Amount is raised to keep the Company and its business plan from failing. If adequate funds are not raised after closing of the Initial Offering Amount, the Company will not be able to implement its business planand investors who have purchased Class A Units could lose their entire investment.

The Company has limited capitalization and will require additional financing after the offering of Class A Units, which may not be available.

The Company requires the net proceeds from the sale of the maximum number of Class A Units offered to fund development, production Film costs, and fund costs in connection with identifying a third party distributor to distribute the Film. The Company believes, based on the Company’s currently proposed plans and assumptions relating to its operations, that the maximum proceeds from the offering will be sufficient to satisfy the Company’s contemplated cash requirements for development and production of the Film. However, no assurance can be given that the Company will not require additional cash in the near future. If the Company’s plans change or the assumptions upon which management’s belief is based change or prove to be inaccurate, or if the proceeds of the offering ofClass A Units are insufficient to fund the Company’s business plans (due to unanticipated expenses or difficulties), the Company may be required to seek additional financing. If the Company is unable to obtain sufficient additional financing on satisfactory terms and conditions, the Company may be forced to curtail its plans or operations. The Company’s ability to obtain such additional financing will depend upon a number of factors, many of which are beyond its control. The Company has no current arrangements with respect to, or sources of, financing other than the proposed sale of Class A Units. Should the Company be unable to raise additional financing investors could lose their entire investment.

The Company’s assumptions concerning future operations may not be realized.

Any operating and financial information contained in the projected financial data have been prepared by management of the Company based upon its goals and objectives for the future performance and various assumptions concerning future phenomena. In addition, the Company’s projected results are dependent on the successful implementation of the Company’s business plan and strategies and are based on hypothetical assumptions and events over which the Company has only partial or no control. While management believes that its goals and objectives are reasonable and achievable, no assurance can be given that they will be realized. The Company does not currently have any contractual agreements that can provide assurances with respect to projected revenues. The selection of assumptions underlying the projected information required the exercise of judgment by, and represent the opinions and beliefs of, the Company’s management. Others may have different opinions and beliefs. In addition, the projections and underlying assumptions have not been compiled, reviewed or examined by any independent public accountants and were not prepared with a view to public disclosure or compliance with published guidelines of the Securities and Exchange Commission or with the guidelines established by the American Institute of Certified Public Accountants regarding projections. Such a review could result in changes to the assumptions underlying the projected financial data. Moreover, the Company’s projections are subject to uncertainty due to the effects that economic, legislative, political or other changes may have on future events. Changes in the facts or circumstances underlying such assumptions could materially and adversely affect the projections. To the extent assumed events do not materialize, actual results may vary substantially from the projected results. As a result, no assurance can be given that the Company will achieve the operating or financial results set forth in its financial projections and, accordingly, investors are cautioned about placing undue reliance thereon.

There is no private or public market for the Class A Units and the transferability of such Class A Units is restricted.

The Class A Units have no private or public market, and the Company cannot be sure that one will develop in the foreseeable future, or if one develops, that it will be maintained. The Class A Units are offered and sold pursuant to one or more exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”), and without qualification or registration under the securities laws of the various states. Consequently, the Class A Units are subject to significant restrictions on transferability.

There are restrictions on the transfer of the Class A Units and investors may have to hold their Class A Units for an indefinite period of time.

The Class A Units have not been and will not be registered with the Securities and Exchange Commission under the Securities Act or registered or qualified with any state or territorial securities regulatory agency. If the Company does not register the securities, investors will not be able to sell, transfer or otherwise dispose of these securities, even if a public market develops for the securities, unless the disposition is exempt from registration under federal and any applicable state securities laws. The Company cannot guarantee that any exemption from registration or qualification will be available subsequent to the offeringof Class A Units.

Rule 144 (“Rule 144”) adopted by the Securities and Exchange Commission, promulgated under the Securities Act permits certain limited public resales of securities acquired in a nonpublic offering, subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the issuer, the sale being through a broker in an unsolicited “broker’s transaction” and the amount of securities being sold during any three month period not exceeding specified limitations. Rule 144 is not presently available and may never be available to exempt the sale of the Class A Units from the registration requirements of the Securities Act. Therefore, at the time investors may wish to sell the Class A Units there will likely be no public market upon which to make such a sale, and that, even if such a public market exists for the Company’s Class A Units, the Company may not be satisfying the current public information requirement of Rule 144 or other conditions under Rule 144 which are required of the Company. As result, investors will be precluded from selling the securities under Rule 144 and may have to hold the securities for an indefinite period.

Management will have broad discretion as to the use of the proceeds from the offering of Class A Units and may not use the proceeds effectively.

The Company’s management will have broad discretion as to the use of the net proceeds from the offering of Class A Units. Investors will be relying on the judgment of the Company’s management regarding the application of the proceeds, and the Company may not be able to invest the proceeds to yield a significant return. The Company’s management has made only preliminary determinations as to the amount of net proceeds to be used based on its current expectations regarding the Company’s financial performance and business needs over the foreseeable future. These expectations may prove to be inaccurate, as the Company’s financial performance may differ from management’s current expectations or the Company’s business needs may change as its business and the industry its addresses evolve. As a result, the proceeds received by the Company in the offering of Class A Units may be used in a manner significantly different from the Company’s current plans.

Your Company LLC, the holder of all of the Company’s outstanding Class B units of limited liability company membership interest, will own a majority of the Company’s equity following the offering and the concentration of ownership will allow such member to determine all matters requiring member approval.

Your Company LLC, a California limited liability company (“Your Company”) and the holder of all of the Class B units of limited liability company membership interest in the Company, currently owns 100% of the Company’s outstanding membership interests. If the maximum offering amount of $325,000 of Class A Units is raised, Your Company will own approximately 57% of the Company’s membership interests. If less than the maximum number of Class A Units is sold, Your Company will own more than 57% of the voting control of the Company following the offering. Under the Company’s Operating Agreement, the affirmative vote or written consent of a majority in interest of the Company’s members is required for approval of matters submitted to a vote of the Company’s members. Accordingly, Your Company will be able to determine all matters requiring approval of the members of the Company. The manager of Jeanie Productions LLC is Your Name.

The price of the Class A Units was determined by the Company and may not be indicative of the value of the Company or such Class A Units.

The price of the Class A Units was determined by the Company and does not necessarily bear any relationship to the assets, book value, net worth, current or anticipated revenue, cash flow, earnings or equity of the Company, or any other recognized criteria of market value, and may not be indicative of the value of the Class A Units or the price that may be realized upon disposition of the Class A Units.

The Company does not initially intend to make cash distributionsand the Company may never distribute cash from operations.

Initially, except for mandatory distributions to cover the estimated tax liability of members related to allocation of items of profits, losses, gains, deductions and credits, it is expected that the Company will retain virtually all cash to fund its business plans. Future distributions of cash will be made at the discretion of the Company’s Manager and will depend on, among other things, the capital needed to satisfy current and projected business obligations and opportunities, as well as any applicable contractual and regulatory requirements. No assurance can be given that the operations of the Company will generate sufficient revenues to enable the Company to operate at profitable levels or to generate positive cash flow sufficient to enable the Company’s Manager to distribute cash from operations to members.

Risks Related to the Company’s Business and Financial Condition

The Company is a newly formed company and has a limited operating history upon which investors can evaluate the Company.

The Company was recently formed for the purpose of developing, producing and distributing the Film and has not yet commenced operations. Accordingly, the Company has a no operating history on which prospective investors may evaluate the Company’s business and prospects. The Company has no revenues and requires the net proceeds from the sale of Class A Units to fund certain development and production Film costs, and to fund costs in connection with identifying a third party distributor to distribute the Film. Until the sale or other disposition of the Company’s rights in theFilm, the sale of sponsorships or the commencement of the Film’s distribution, the Company will derive no revenues. The Company is unable to predict the timing or amount of receipts, if any, to be derived by the Company from licensing the Film. If and whenproduction of the Film commences, no assurance can be given that the Film will receive market acceptance if and when produced, or that the amount raised through the offering of Class A Units or any subsequent financings will be sufficient to develop, produce and distribute the Film. The Company faces all of the risks inherent in a new business, including the expenses, difficulties, complications and delays frequently encountered in connection with the formation and commencement of operations, the production and distribution of afilm, and the competitive environment in which the Company intends to operate. The Company may not address successfully any of these risks. If the Company does not address successfully these risks, the Company’s business would be seriously harmed.

The Company’s success depends on the successful production and distribution of a single film and the Company is unable to diversify its investment to reduce its risk of failure.

The Film will be the only film that the Company produces. No assurance can be given that the Company’s management team will be able to successfully develop, produce and make arrangements for the distribution of the Film. Because the Company will have only one asset, theFilm, the Company is more vulnerable to unanticipated occurrences than a more diversified business. The development, production, completion and distribution of the Film is subject to numerous uncertainties, including financing requirements, personnel availability and the release schedule of competing films. There may be additional problems which could adversely affect the Company’s profitability, including (without limitation) public taste, which is unpredictable and susceptible to change; competition for theaters; competition with otherfilms, motion pictures and other leisure activities; advertising costs; uncertainty with respect to release dates; and the failure of other parties to fulfill their contractual obligations and other contingencies. No assurance can be given that the Company will be able to successfully develop, produce, distribute, or realize any revenue from the Film. Failure to develop, produce, distribute or realize any such revenues will have a material adverse effect on the Company’s business, operating results and financial condition.

The Company has no operating experience in the film industry.

Although the Company plans to hire personnel that have experience in the production of films, past experience is no indication of future success or the possible success of the Film. Furthermore, the Company has not yet entered into employment or consulting arrangements with any of the persons to be associated with theFilm. The failure to retain one or more of the key persons needed to produce theFilm may have an adverse effect on the development and production of the Film and on the business and financial condition of the Company.

The Company may not obtain a completion bond for the Film.

Because the Film’s production budget is expected to be significantly smaller than that of a typical film, the Company may not obtain a completion bond for the Film. If the Company does not obtain a completion bond, the Company will be at risk that theFilm, once begun, may not be completed. Without a completion bond, if the Film goes over budget, no assurance can be given that the Company will be able to procure sufficient funds to complete the Film or if it does procure such funds, that it will be able to do so on terms that are advantageous to the Company. If the Film is not completed, it will have virtually no monetary value.

Because the film business is highly speculative, the Company may never achieve profitability.

The film industry is highly speculative and involves a substantial degree of risk. No assurance can be given of the economic success of any film since the revenues derived from the production and distribution of a film primarily depend on its acceptance by the public, which cannot be predicted. The commercial success of a film also depends on the quality and acceptance of competing films released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, all of which can change and cannot be predicted with certainty. No assurance can be given that the Film will appeal to the public or that other films and motion pictures may not be more appealing and therefore reduce the demand to view the Film. Accordingly, there is a substantial risk that theFilm will not be commercially successful, in which case the Company may be unable to recoup costs associated with the production of the Film or realize revenues or profits from the sale of the Film.

If the Film is produced, the Company may enter into distribution agreements, which may decrease profits.

The Company may enter into distribution agreements with third parties to distribute the Film domestically and internationally. These agreements generally provide that the distributor pay a fee up?front, and then are entitled to share in the profits of the Film. Such an arrangement would reduce the amount of profits to the Company from theFilm.

Because the industry in which the Company will operate is highly competitive and the Company lacks the name recognition and resources of the Company’s competitors, the Company may never become profitable.

The film industry is highly competitive. The competition comes from both companies within the same business and companies in other entertainment media which create alternative forms of leisure entertainment. The Company’s competition includes several “major” film producers, such as Fox Entertainment Group, Paramount Motion Pictures Group, Sony Pictures Entertainment, MGM Holdings, LLC, NBC Universal, Time Warner, Buena Vista Motion Pictures Group, Lions Gate Entertainment and The Weinstein Company, which are dominant in the production and distribution of films, as well as numerous independent motion picture and television production companies, television networks and pay television systems. Many of these organizations with which the Company intends to compete have significantly greater financial and other resources than the Company. Additionally, the Film will compete for audience acceptance and exhibition outlets with films produced and distributed by other companies. As a result, the success of the Film is dependent not only on the quality and acceptance of the Film, but also on the quality and acceptance of other films.

The Film may not succeed if it receives unfavorable reviews.

The financial success of a film, in large measure, depends on the reaction of the public, which is often influenced by professional reviewers or critics for newspapers, television and other media. It is impossible to judge in advance what the reaction of these reviewers and critics will be to the Film. To the extent that theFilm receives unfavorable reviews from these reviewers and critics, its chances of success may be substantially diminished.

The Film will be subject to the risks associated with distributionof films.

The success of any distribution activities will depend on a number of factors over which the Company will have little or no control. Even if the Film is sold in all territories (both domestic and foreign), there can still be no assurance that the Film will succeed on an economic level. If the total production costs exceed the total worldwide minimum guarantees or minimum advances, there may not be sufficient funds to repay to the investors the amount of their investment in the Company. Distribution agreements generally give a distributor significant flexibility in determining how a film will be exhibited. No assurance can be given that a distributor will not limit the Film’s run, limit the territories in which the Film is exhibited or otherwise fail to actively promote the Film. Any such action by the distributor could have a material adverse effect on the economic success of theFilm and revenues received by the Company.

The Company may become subject to the risks inherent in international sales.

The Company may sell the Film to foreign distributors for exhibition in their respective territories. Consequently, the value of the Film’s rights as determined by such distributors would be dependent upon many factors, including the economic conditions in such distributor’s territory. Economic downturns, changes in the currency exchange rates and changes in economic forecasts of any or all of the individual territories may materially and adversely affect the Company. Even if distribution agreements are obtained for certain territories, economic changes in any territory could have a material adverse effect on the ability to complete any transaction.

If the Film is distributed in foreign countries, some or all of the revenues derived from such distribution may be subject to currency controls and other restrictions which would restrict availability of the funds. Additionally, some foreign countries may impose government regulations on the distribution of films that may delay the release, if any, or substantially reduce the distribution of the Film in such countries.

The Company may not be able to attract distributors to distribute the Film which could significantly harm the Company’s business.

The Film has not yet been produced and, accordingly, the Company has not yet made any arrangements for the Film’s distribution. Even if the Film is produced, no assurance can be given that an agreement with any distributor will ever be entered into or, if entered into, it will be on terms advantageous to the Company. If the Company is unable to attract distributors to distribute the Film the Company may distribute the Film through the Internet. If the Company is not able to attract distributors for its Film or successfully distribute the Film through the Internet, the Company may not derive significant, if any, revenues from the Film, which would adversely affect the Company’s businessand results of operations.

The Company will rely on the management capabilities and expertise of its Manager and key personnel selected by the Manager.

All decisions concerning the Company’s management will be made exclusively by the Manager, Your Name. The Company’s success will depend, to acertain extent, on the quality of the management of the Manager and others retained by the Manager. The Manager has limited experience in the film industryand film production. Although the Companyintends to retain experienced professionals and hire additional personnel with experience in the film industry, past experience is no indication of future success or the possible success of the Company’s business. The Company has not yet entered into employment or consulting arrangements with any professionals with experience in the film industry. The failure to retain one or more of the professionals needed for production of the Film and operation of the Company’s business may have an adverse effect on the business and financial condition of the Company.

The Company will have to rely on the services of professionals and other key personnel who may be difficult to replaceand the loss of any such persons could adversely affect the Company’s business.

The Company’s success will largely depend on the personal efforts of the professionals the Company intends to hire for the Film. If the Company is able to retain the needed professionals and key personnel, the loss of the services of any such professionals and key personnel hired by the Company will have a material adverse effect on the Company. If any one of these individuals becomes incapacitated or otherwise becomes unavailable, a qualified successor would have to be engaged. The Company intends to offer interests in the Film’s profits to key production personnel (such as writers, actors, stunt coordinators and unit production managers) as a means of obtaining the best possible crew at the lowest up-front cost. The Film’s production and completion may be adversely affected if new personnel must be engaged, or if such personnel demand more favorable compensation. No assurance can be given that a qualified successor could be engaged. The Company may not obtain “key man” life insurance on the life of any of the Company’s key personnel. These professionals and key personnel also may be involved in other projects that may take them away from the production of the Film and cause delays, all of which may increase the cost of production of the Film and decrease the likelihood of being able to complete the Film, which would have an adverse affect on the Company’s business and prospects.

The Company may abandon prematurely the Film’s development, production or distribution.

The Film’s development, production or distribution may be abandoned by the Company at any stage if further expenditures do not appear commercially feasible. This would result in a loss of some or all of the funds previously expended on the development, production and/or distribution of the Film, as the case may be, including funds expended in connection with the development of the screenplay and production of the Film. Abandonment of the Film at any stage would have a material adverse impact on the Company and would likely cause investors in Class A Units to lose their entire investment in the Company.

The Film may infringe the intellectual property rights of others, and resulting claims against the Company could be costly and require the Company to enter into disadvantageous license or royalty agreements.

Although the Company expects the Film be an original work, third parties may claim that the Film infringe their intellectual property rights. Any claims relating to the infringement of third-party proprietary rights, even if not successful or meritorious, could be time-consuming, result in costly litigation, divert resources and management’s attention, cause production delays or require the Company to enter into royalty or license agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to the Company, if at all. In the event of a successful claim of infringement against the Company and the Company’s failure or inability to license the infringed rights, the Company’s business, operating results and financial condition would be materially and adversely affected. Even if a claim of infringement against the Company is unsuccessful, legal fees incurred in defending the infringement claim likely would cause material harm to the Company and the Company’s financial condition, and reduce the amount of net proceeds and cash available for distribution to investors.

Certain Federal Income Tax Matters

Circular 230 Notice: The tax information contained herein has been prepared to support the marketing of the interests in the Company. Nothing herein may be used by any taxpayer for the purpose of avoiding any penalties that may be imposed under the Code. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

Investors should consult with their own tax advisor regarding the impact an investment in the Company will have on their own individual tax situation.

Each prospective investor is strongly encouraged to consult his, her or its own tax advisor with respect to an investment in the Company and the federal, state and local tax consequences thereof in such investor’s own individual tax situation.

Future changes in the tax laws could adversely affect the tax consequences of an investment in the Company.

In considering the tax consequences of an investment in the Company with their tax advisors, prospective investors should also take into account that the federal income tax treatment of an investment may be modified at any time by legislative, judicial or administrative action. Any such changes may have retroactive effect and may modify any statements or advice the investor receives from the investor’s tax advisor.

Classification of the Company as a Partnership.

A domestic limited liability company such as the Company which is not required to be classified as a corporation will generally be treated as a partnership for federal income tax purposes, unless such entity elects to be treated as a corporation. The Manager has not made and does not currently anticipate making any such election and, accordingly, anticipates that the Company should be treated as a partnership for federal income tax purposes. If it were determined that the Company should be classified as an association taxable as a corporation or were considered a publicly traded partnership, the taxable income of the Company would be subject to corporate income taxation and distributions could (in whole or part) be treated as dividends to investors, which could negatively impact the Company and an investor’s interest in the Company.

The Company may not distribute sufficient cash to permit its members to satisfy their income tax liability attributable to the ownership of Class A Units.

For any year in which the Company is taxed as a partnership, each holder of Class A Units will be required to report his or her allocable share of each item of income, gain, loss, deduction and credit of the Company on his or her federal and state tax returns, substantially as if such holder had earned such share of income his or herself. Holders of Class A Units will be required to include taxable income or gain of the Company in their income (and may be required to pay quarterly estimated taxes on such income) whether or not any distributionof cash is made to such holder. As a result, holders of Class A Units may become liable for federal and state income taxes on the their share of income and gain of the Company even though they have received no distributions of cash from the Company with which to pay such taxes.

The Company will not obtain a ruling from the Internal Revenue Service or an Opinion of Counsel on any tax matter.

The tax consequences of an investment in the Company are complex and subject to uncertainties. The Company has not requested, and does not intend to request, any tax rulings from the Internal Revenue Service (the “Service”) or an opinion of counsel with respect to any of the tax aspects of an investment in the Company.

Deductions claimed by the Company may be challenged or disallowed by the Service and allocations made by the Company may not be respected by the Service.

The Service may challenge or disallow deductions claimed by the Company and assert that the deductions must either be capitalized and amortized over time or even that the deductions are simply unreasonable in amount and, therefore, nondeductible. In addition, the Service may assert lengthened depreciation periods for the Company’s depreciable property which may cause a disallowance of certain depreciation deductions in a particular year.

Deductions allocable to certain investors may also be subject to certain limits for United States federal income tax purposes. The “passive activity” rules of Section 469 may limit the ability of individuals, certain closely-held corporations and certain other persons to deduct passive losses. The ability of a non-corporate Limited Partner to utilize its distributive share of losses from the Company also may be limited by the “at risk” rules of Section 465 and certain other provisions of the Code.

The Service may also challenge the allocations of taxable income, gain, loss, deduction and credit of the Company that will be set forth in the Company’s limited liability company operating agreement. If the Service successfully challenged such allocations, an investor could be allocated different amounts of taxable income, gain, loss, deductions or credit than initially reported. The resulting allocation could be less favorable to an investor than that provided for in the limited liability company operating agreement of the Company.

Any disallowance of deductions or reallocation of items of income, gain, loss, deduction or credit could have a material adverse impact upon the tax aspects of an investment in the Company.

Tax-exempt investors are likely to experience “unrelated business taxable income” in connection with an investment in the Company.

The Company’s income is likely to constitute “unrelated business taxable income.” A tax-exempt investor, including an individual retirement account, may be required to treat its share of the Company’s income as “unrelated business taxable income” or “UBTI” and pay income tax on such amounts, notwithstanding its otherwise tax-exempt status. In certain situations, an investors’ tax exempt status may be placed at risk by virtue of its receipt of too much “UBTI.” The presence of tax-exempt investors in the Company also increases the risk of triggering excise taxes for tax-exempt investors due to the possible impact of the so-called “Plan Asset Guidelines” promulgated by the Department of Labor under the Employment Retirement Income Security Act of 1974, as amended. Tax-exempt investors are strongly urged to consult with their own tax advisor before investing in Class A Units.

The Company is not expected to generate significant losses which investors could use to offset taxable income from other sources.

It is not anticipated that the Company will generate tax losses which would be available to offset income from other sources. Even if such tax losses are generated by the Company, numerous limitations exist to severely limit a member’s ability to use such losses, including but not limited to the passive loss, basis and at-risk limitations.

Tax elections; audit procedures.

The Company may make various elections for federal income tax purposes that could result in certain items of income, gain, loss and deduction being treated differently for tax and accounting purposes. Elections permitted under the Code that may effect the determination of the Company’s income, the deductibility of expenses, accounting methods and the like must be made by the Company and not by the members, and these elections will be binding in most cases on all the members. Certain elections may have adverse consequences to one or more investors, depending on their particular circumstance.

The Code contains special procedures for partnership audits and proceedings. All such auditsand proceedings will be at the Company level. TheCompany’s limited liability company operating agreement designates Your Company LLC as the Company’s “tax matters partner,” who has considerable authority to make decisions affecting the tax treatment and procedural rights of all members with respect to any such matters. An audit of the Fund’s federal returns may result in its income and loss, and therefore items of income, gain, loss and deduction allocated to each Limited Partner, being adjusted. Any such adjustment may require an investor to file an amended federal income tax return for each year involved, which may in turn result in an audit of such investor.

State, Local and Foreign Taxes

In addition to the federal income tax consequences of an investment therein, the Company, as well as its Members, may be subject to various state, local and foreign taxes. An investor’s allocable share of the Company’s income or loss may be included in determining the investor’s income for state or local tax purposes. Taxation of income from the Company’s activities in such jurisdictions may differ from the treatment for federal income tax purposes. Prospective investors are urged to consult their own tax advisers with respect to the state, local and foreign tax consequences of an investment in the Company.

Holders of Class A Units may be subject to withholding tax under certain circumstances.

In general, the holder of a Class A Unit may be subject to backup withholding tax at the applicable rate (currently 28%) with respect to certain reportable payments if the holder fails to provide an accurate taxpayer identification number to the Company or fails to properly certify that it is not subject to backup withholding. Certain holders of Class A Units (including, among others, U.S. corporations) are not subject to backup withholding, but may still need to establish an exemption with the Service. Any amount withheld from a payment to a holder under the backup withholding rules is creditable against the holder’s federal income tax liability, provided that the required information is furnished to the Service. Each holder of a Class A Unit should consult such holder’s personal tax advisors as to their qualifications for exemption from backup withholding and the procedure for obtaining the exemption.

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