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.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
Each of Franco-Nevada Corporation (“FNC”) and its non-U.S. subsidiaries, Franco-Nevada Australia Pty Ltd (“FNAPL”), and Franco-Nevada Mexico Corporation, S.A. DE C.V. (“FNMEX"), (FNC, FNAPL, and FNMEX, collectively, the "FNC Entities") believes that it would be classified as a passive foreign investment company ("PFIC") for its taxable year ended December 31, 2009 (“2009 Taxable Year”).
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.
The attached PFIC Annual Information Statements are being provided pursuant to the requirements of Treasury Regulation Section 1.1295-1(g) (1). These PFIC Annual Information Statements contain information to enable you, should you so choose based on the advice of your tax advisor in light of your personal tax circumstances, to elect to treat any of the Franco-Nevada Entities as a qualified electing fund ("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.
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 FNC 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 FNC 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 (“Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund”) on or before the due date, including extensions, for the income tax return with respect to the tax year to which the election relates.
During the 2009 Taxable Year, FNC held a share interest of less than 5 percent in several non-U.S. companies (the “Portfolio Investment Companies”). FNC will not be providing PFIC Annual Information Statements with respect to each of these investments because not sufficient information is available to ascertain whether these entities are in fact PFICs or if they are PFICs, the dollars involved are minimal. FNC believes that the total amount of ordinary earnings for each FNC share for these Portfolio Investment Companies that have declared themselves PFICs would not exceed $0.001 for the 2009 Taxable Year.