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Ninepoint 2018 Flow-Through LP

Why Invest in Ninepoint 2018 Flow-Through LP

  • Expected to be 100% tax-deductible against 2018 taxable income.
  • Full liquidity on or about Feb 28, 2020, with tax deferral options: Tax-deferred rollover to Ninepoint Corporate Class Fund.
  • Effectively converts income into capital gains, allowing investors to take advantage of any capital loss carry-forwards. 

 

Fund Objective

Provide a tax-assisted investment of Resource Issuer Flow-Through Shares, with a view to achieving capital appreciation and significant tax benefits for Limited Partners.

Performance as of 1/1/0001 (Series )

MTD % YTD % 1 YR % 3 YR % 5 YR % 10 YR % Inception %
- - - - - - -

Tax Saving. Tax Deferral. Tax Efficiency.

What are flow-through shares?

The Federal Government allows Canadian resource companies that invest in the oil and gas, mining and renewable energy sectors to fully deduct certain exploration expenses, known as Canadian Exploration Expenses (CEE). To raise capital for exploration, those companies often issue flow-through shares and pass along the rights to claim the CEE to the purchasers of those shares. The shareholders are then able to deduct the CEE against their own income.

Who should invest in flow-through shares?

Flow-through investing is most suitable for investors taxed at the highest marginal tax rates and who can accept the risk of investing in small to mid-size resource companies.

Tax Form

 

Flow-Through Limited Partnerships

Investors can access the flow-through market by purchasing shares directly or by investing in a flowthrough limited partnership. Flow-through limited partnerships are investment vehicles that add three important benefits to the tax advantages of flow-through investing: 1) professional management, 2) access to a broad range of flow-through issues, 3) diversification.

The risk of investing in smaller resource companies may be reduced when experienced, professional investment managers select a well-diversified portfolio of companies.

How do flow-through limited partnerships work?

Flow-through limited partnerships provide the same tax benefits as investing in flow-through shares directly. The amounts invested are generally fully or almost fully deductible against taxable income in the year the investment is made.

The illustration below shows how flow-through limited partnerships work.

Diagram - How do flow-through limited partnerships work

Investors purchase units of a flow-through limited partnership and the net proceeds are used by the limited partnership to purchase the flow-through shares of resource companies. The resource companies relinquish their CEE rights to the limited partnership, which then allocates the CEE to its investors. The investors can then deduct the CEE against their income.

Most flow-through limited partnerships have a life span of one to two years, enough time to allocate most of the tax deductions to investors. The adjusted cost base of the units (ACB) is reduced by the tax deductions and increased by any capital gains from the investments sold within the limited partnership portfolio. Those capital gains are allocated to investors annually.

At termination, the flow-through limited partnership unitholders receive shares of a corporate class mutual fund and the rollover transaction is completed without triggering an immediate tax liability. This allows investors the option to defer their tax liability further, until they redeem the mutual fund.

Are You An Accredited Investor?

The minimum subscription amount is $150,000.00 in all jurisdictions, unless you meet the definition of "accredited investor" under National Instrument 45-106 Prospectus and Registration Exemptions.

If you meet the definition "accredited investor" (see below), you may invest a minimum of $25,000. Please consult the Offering Memorandum to determine your qualification status. Investment Advisors should consult their company's internal policies.

The Subscriber, or one or more beneficial purchasers for whom the Subscriber is acting, is (i) a resident of, or the purchase and sale of securities to the Subscriber is otherwise subject to the securities legislation of one of the following: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Newfoundland and Labrador, Nova Scotia, New Brunswick, Prince Edward Island, North West Territories, or Nunavut, and the Subscriber is (and will at the time of acceptance of the Subscription be) an accredited investor within the meaning of National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106") because the Subscriber is one of the following:

(a) a Canadian financial institution, or a Schedule III bank;
(b) the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
(c) a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
(d) a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);
(e) an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);
(f) the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;
(g) a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l'île de Montréal or an intermunicipal management board in Québec;
(h) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;
(i) a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction of Canada;
(j) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000;
(k) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
(Note: If individual accredited investors wish to purchase through wholly-owned holding companies or similar entities, such purchasing entities must qualify under section (t) below, which must be initialled.)
(l) an individual who, either alone or with a spouse, has net assets of at least $5,000,000;
(m) a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements;
(n) an investment fund that distributes or has distributed its securities only to:
  1. a person that is or was an accredited investor at the time of the distribution,
  2. a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] or 2.19 [Additional investment in investment funds] of NI 45- 106, or
  3. a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106;
(o) an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;
(p) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;
(q) a person acting on behalf of a fully managed account managed by that person, if that person:
  1. is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction; and
  2. Ontario, is purchasing a security that is not a security of an investment fund;
(r) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;
(s) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function;
(t) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;
(u) an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser, or;
(v) a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor.

 

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