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If a U.S. Holder makes for any tax year a timely election to treat the Company as a “qualifying electing fund” or
“QEF” (a “QEF election”) with respect to such U.S. Holder’s interest therein, the above-described rules regarding
excess distributions generally will not apply. Instead, the electing U.S. Holder would include annually in its gross
income its pro rata share of our ordinary earnings and any net capital gain regardless of whether such income or gain
was actually distributed. Special rules apply to U.S. Holders who own their interests in a PFIC through intermediate
entities or persons.
A U.S. Holder may make a QEF election only if the U.S. Holder receives certain information (known as a “PFIC
annual information statement”) from us annually. We will use commercially reasonable efforts to make available to
U.S. Holders, upon written request, an accurate PFIC annual information statement for each year in which the
Company is a PFIC. A QEF election is generally timely filed only if it is made on a timely filed federal income tax
return for the first year in the U.S. Holder’s holding period for our common shares in which we were a PFIC. A U.S.
Holder for whom a QEF election would otherwise be untimely may be able to make a special “deemed sale” election
pursuant to which the U.S. Holder recognizes any gain inherent in the U.S. Holder’s common shares and restarts the
U.S. Holder’s holding period in our common shares for purposes of making a QEF election. A deemed sale election
generally can be made only if the U.S. Holder owns common shares on the first day of our taxable year in which the
election is to be effective.
Alternatively, a U.S. Holder of common shares may elect to recognize any gain or loss on its common shares on a
mark-to-market basis at the end of each taxable year, so long as the common shares are regularly traded on a
qualifying exchange. We cannot provide assurance that our common shares will be regularly traded on a qualifying
exchange for years in which we may be a PFIC.
If a mark-to-market election is made, the excess distribution regime will not apply to amounts received with respect
to our common shares from and after the effective time of the election, and any mark-to-market gains or gains on
disposition will be treated as ordinary income. Mark-to-market losses and losses on disposition will be treated as
ordinary losses to the extent of the U.S. Holder’s unrecovered prior net mark-to-market gains. Losses in excess of
prior net mark-to-market gains will generally not be recognized. The mark-to-market election must be made by the
due date (as may be extended) for filing the U.S. Holder’s federal income tax return for the first year in which the
election is to take effect. A mark-to-market election applies to all future years of an electing U.S. Holder during
which the stock is regularly traded on a qualifying exchange, unless revoked with the IRS’s consent.
The QEF election and mark-to-market election rules are complex. U.S. Holders should consult their tax advisor
regarding the availability and procedure for making these elections.
Special adverse rules apply to U.S. Holders of our common shares for any year in which we are a PFIC and own or
dispose of shares in another corporation that is also a PFIC (a “lower-tier PFIC”). A U.S. Holder who owned our
common shares while we were a PFIC will be taxable under the excess distribution rules described above with
respect to any gain that we recognize from a disposition of shares in a lower-tier PFIC, or if the U.S. Holder
disposes of all or part of its common shares. Moreover, a QEF election or mark-to-market election that is made for
our common shares would not apply to a lower-tier PFIC. While a separate QEF election may be made for a lower-
tier PFIC, we may not be in possession of and thus may not be able to provide the financial information to U.S.
Holders that would allow them to make a QEF election for any lower-tier PFIC. A mark-to-market election
generally may not be made with respect to a lower-tier PFIC.
A U.S. Holder who makes a QEF election for our common shares will be taxable under the excess distribution
regime on gain that we recognize on the sale of shares of a lower-tier PFIC, but will not also be taxable on such gain
under the QEF rules. However, any U.S. Holder who makes a mark-to-market or deemed sale election for our
common shares could be subject to the PFIC rules with respect to income of the lower-tier PFIC, even though the
value of the lower-tier PFIC already was subject to tax via mark-to-market or deemed sale adjustments.
The IRS has issued proposed regulations that, subject to certain exceptions, would treat as taxable certain transfers
of PFIC stock by a U.S. Holder that has not made a timely QEF election or mark-to-market election that are
generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death.
Generally, in such cases, the basis of our common shares in the hands of the transferee and the basis of any property
received in the exchange for those shares would be increased by the amount of gain recognized. The specific tax
effect to the U.S. Holder and the transferee may vary based on the manner in which the common shares are
transferred. Each U.S. Holder should consult a tax advisor with respect to how the PFIC rules affect their tax
situation prior to transferring PFIC shares.
