A Flow-Through Share is a type of share in a Canadian resource company.

These shares allow the company to “flow-through” its expenses (known as Canadian Exploration Expenses, or CEE) to the investor, who then uses this as a deduction of their income for tax purposes. In addition to this, investors may be eligible for an additional 15% tax credit, known as the Mineral Exploration Tax Credit (METC) or a possible 30% tax credit known as the Critical Mineral Exploration Tax Credit (CMETC).

In return, the company then uses the money to continue exploration/development, helping grow the economy.

Some benefits provided by Flow-Through shares:

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• Helps diversify your portfolio into Canadian natural resources.

• Converts income taxes payable today at the highest marginal tax rate into a future capital gain, taxed at half as much as income would be.

• Old Age Security (OAS) clawback is reduced or eliminated.

• The amounts invested are generally fully or almost fully deductible against taxable income in the year the investment is made.

A Flow-Through Limited Partnership (LP) is a legal entity comprised of multiple investors that pool their money and invest it in flow-through shares across a diverse list of resource companies.

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Investors receive the same tax benefits from the flow-through shares in the partnership in the same way they would as an individual investor.

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Some benefits provided by Flow-Through LPs:

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• Helps further diversify your portfolio, reducing risk.

• Provides professional portfolio management.

• Simplifies the investment process and improves communications, compared to investing in multiple companies individually.

Due to the volatile nature of junior companies in the resources sector, share values may swing largely in either direction in a short period of time.

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How Portfolio / Fund Managers Can Help:

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A solution to manage this volatility is to work with experienced fund managers and firms to scout for any potential pitfalls and to continually oversee investors’ portfolios, to best optimize for their investments.

The Portfolio/Fund Manager, Accilent Capital Management, has been helping investors save on taxes, while growing capital, through 23 different Pavilion funds over 17 years through some of the most volatile markets.

The Pavilion Flow-Through Ladder® is an exclusive investment strategy structured in a similar fashion to a bond ladder, and can generate a steady stream of money through taxes saved, and distribution proceeds.

To start a flow-through ladder, an investor purchases units of a new Pavilion Flow-Through Fund each year, for three to five years. Each new flow-through fund purchase creates savings against existing tax liabilities.

As each successive flow-through fund provides additional tax savings, those savings can be used to purchase a new flow-through fund in the following year, thereby adding another 'rung' and more tax savings to the investor's flow-through ladder.

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Some benefits provided by the Pavilion Flow-Through Ladder® :​

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• Use the tax credits (refund) to partially fund next year’s purchase

• At year 3, your new investment may be fully funded from previous tax benefits

• Investing annually will diversify your portfolio into multiple funds and resource companies

• Stronger returns on some funds can negate weaker returns from others, for an overall better performance

You may be interested in this article about Flow-Through Laddering by Pavilion Portfolio Manager and Accilent Capital's Founder and CEO, Dan Pembleton MBA, CFA.