PFIC
IMPORTANT TAX NOTICE TO U.S. SHAREHOLDERS RELATED TO YOUR INVESTMENT IN FRANCO-NEVADA CORPORATION
This information is provided for shareholders who are U.S. taxpayers. It may not be relevant for other persons.
Each of Franco-Nevada Corporation and its non-U.S. subsidiaries, Franco-Nevada Canada Corporation and Franco-Nevada Australia Pty Ltd (collectively the "Franco-Nevada Entities") expects to be a passive foreign investment company ("PFIC") for its taxable year ended December 31, 2007. It is also expected that each of the Franco-Nevada Entities may be a PFIC in subsequent years.
THE U.S. TAX RULES REGARDING PFICS ARE VERY COMPLEX AND INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISOR REGARDING THE U.S. TAX CONSEQUENCES OF THE PFIC RULES TO YOUR INVESTMENT IN FRANCO-NEVADA CORPORATION.
THIS NOTICE DOES NOT CONSTITUTE TAX ADVICE AND STATEMENTS CONTAINED HEREIN ARE MERELY PROVIDED AS A GUIDE TO COMPETENT ADVISERS. INVESTORS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISERS REGARDING ANY ELECTIONS.
The attached PFIC Annual Information Statement is being provided pursuant to the requirements of Treasury Regulations Section 1.1295-1(g) (1). This PFIC Annual Information Statement contains information to enable you, should you so choose based on the advice of your tax adviser in light of your personal tax circumstances, to elect to treat any of the Franco-Nevada Entities as qualified electing funds ("QEF").
A U.S. shareholder who makes a QEF election with respect to a Franco-Nevada Entity is required to annually include in his or her income his or her pro rata share of the ordinary earnings and net capital gains of that Franco-Nevada Entity, whether or not that Franco-Nevada Entity distributes any amounts to its shareholders.
None of the Franco-Nevada Entities have ordinary earnings or net capital gains for its taxable year ended December 31, 2007.
If you do not elect to treat a Franco-Nevada Entity as a QEF, then if the Franco-Nevada Entity is a PFIC for any year during your holding period, adverse tax consequences could result to you. For example, if you were considered to receive a distribution that is considered to be an "excess distribution" under the PFIC rules or if you were considered to sell your Franco-Nevada Corporation stock at a gain, you could be required to allocate the distribution or gain, as the case may be, ratably over the time period during which you held your stock while Franco-Nevada Corporation was a PFIC, and pay U.S. taxes at the highest rate plus an interest charge to reflect the deemed deferral value.
The QEF election is generally made on Form 8621 on or before the due date, including extensions, for the income tax return with respect to the tax year to which the election relates.