We have created the latest fund in the Pavilion Flow-Through Fund series [Pavilion Flow-Through L.P.  2 as being the latest version with high net worth investors in mind, to offer them a truly unique investment opportunity.
This tax-deductible investment vehicle focuses on private and public Natural Resource companies with relationship-driven investment opportunities not available to the average investor.
The fund highlights Accilent Capital’s strengths and experience in commodities, small and micro cap investing, as well as our ability to create high-caliber advisory teams, and greater diversification for our investors.
The Pavilion Flow-Through LP Fund has the significant advantage of providing investors with tax deductions for their annual returns. Each offering of the fund will invest in a portfolio of Flow-Through shares of resource companies, and pass the deductions through to the LP investors (the Limited Partners). This tax deductibility will reduce the amount of capital that investors actually have in the investment, which reduces risk and also helps boost potential returns. This is a good opportunity to let us illustrate why so many investors rely on the Flow-Through Limited Partnership as part of an ongoing investment program, to increase retirement savings and reduce taxable income, and even to create tax-effective charitable donations. Flow-Through Limited Partnerships have a variety of advantages and can be used to achieve many different objectives for both individuals and corporations. Talk to your advisor about how this investment can benefit you.
Please feel free to call us weekdays between 9:00am and 5:30pm [EST] toll-free at 1-877-429-9779, or locally at 416-429-9779; or email us anytime at: email@example.com.
The Partnership’s investment objective is to achieve capital appreciation and the benefits of diversification from its investments in a portfolio of Flow-Through Shares of Resource Issuers that is pro-actively managed either directly or through co-investment with elite investors, operators and managers with proven track records. It is the intention to invest all of the available proceeds in Flow-Through Shares to the greatest extent reasonably possible, however to the extent such investments are not possible or suitable, the Partnership may invest in each and high quality money market investments, equity or equity linked securities of Resource Issuers that are not Flow-Through Shares, although such securities will not enjoy the same tax benefits. By focusing on Flow-Through Shares, the Partnership will utilize available provisions of the Income Tax Act (Canada) (the “Tax Act”) to seek to maximize the tax benefits associated with its investments and to provide Subscribers with the potential for enhanced after-tax returns on the portfolio.
The General Partner and the Investment Manager will implement and apply the Investment Objective described in this Offering Memorandum by selecting and actively monitoring investments in Resource Issuers. The Partnership intends to focus primarily on a portfolio of junior Resource Issuers including both private and public companies
(i) who are being sponsored and controlled by an “elite” group of investors, managers, promoters and operators with superior long-term performance track-records across multiple Resource Issuers and who are known and accessible to the General Partner and the Investment Manager
(ii) where the General Partner has reserved future financing capacity and the ability to participate in successive rounds of financing;
(iii) where a pro-active investment style (i.e. access to management to provide strategy growth ideas) has the potential to drive value upside and liquidity;
(iv) where the companies have strong exploration and development potential based on their assets; and/or
(v) where the General Partner and Investment Manager believe the assets are being valued at a discount to intrinsic and realizable value and hence have the potential for exceptional growth.
The General Partner has retained Accilent as the investment manager (the “Investment Manager”) of the Partnership. Accilent is registered as a portfolio manager (PM), exempt market dealer (EMD), Investment Fund Manager (IFM) and commodities trading manager (CTM) regulated by the Ontario Securities Commission.
The Investment Manager’s role is to manage the Partnership’s investment portfolio and to manage the day to day operations of the partnership.
Accilent was formed in 2002 and in conjunction with other co-managers, manages multiple funds with aggregate assets under management of approximately $20 million, including funds in the areas of investment grade wines, global equities and micro-cap companies using a proactive private equity style.
Canadian resource companies operating in the Oil and Gas, Mining and Alternative Energy industries often incur significant expenses associated with their exploration and development activities. Often, these companies will issue Flow-Through shares to raise the capital necessary to conduct these activities. By issuing these Flow-Through shares the companies are able to renounce their Canadian Exploration Expenses (CEE), Canadian Development Expenses (CDE), or Canadian Renewal and Conservation Expenses (CRCE) to Flow-Through shareholders. Flow-Through shareholders can then claim tax deductions in proportion to these expenditures. (For the remainder of this brochure, CEE, CDE and CRCE will be referred to simply as “CEE”.)
In the case of a Flow-Through Limited Partnership (‘FTLP’) investing in resource companies, resource expenses are a discretionary deduction. This means that the taxpayer may claim any part or no part of the deduction allowed in a year. An investor may choose to use their deduction for past tax years (up to 3 years back) or may carry it forward indefinitely. This would make sense where the taxpayer has insufficient income or where the Alternative Minimum Tax (AMT) may be triggered and the CEE deduction can be used in future years. Investors who receive CEE deductions in a tax year are allowed to deduct this amount from any source of income. Amounts are claimed using Form T1229 on line 224 of the federal tax return.
Investors who purchase Flow-Through shares usually enjoy a tax deduction over time equal to their investment. Because CEE is allocated to the investor, who can then claim a deduction for these amounts, it is generally fully deductible against any source of income. The tax savings reduce the “at-risk” amount, meaning the amount of money an investor has in the investment is reduced because of the tax savings. Investors are likely to have a low or nil adjusted cost base in the Flow-Through shares because the cost base (what the investor paid for the shares) is reduced by the CEE deductions. Therefore, when the Flow-Through shares are sold, the full proceeds of the sale are taxed as capital gains instead of only the increase in value above the purchase price being taxed at this lower rate. Since capital gains are taxed at only one half the rate of ordinary income, this tax rate differential generates potential tax savings.
The following is intended as a summary of certain matters relating to the Partnership and is qualified in its entirety by the detailed information appearing elsewhere in the Offering Memorandum. To obtain complete offering documents please feel free to call us weekdays between 9:00am and 5:30pm [EST] toll-free at 1-877-429-9779, or locally at 416-429-9779; or email us anytime at firstname.lastname@example.org.
In addition to providing potentially attractive investment returns, Flow-Through shares offer direct tax benefits. The tax benefits to an investor are based on two factors:
The ability to defer the sale of Flow-Through shares to a subsequent tax year allows an investor to defer their tax liability. Investors benefit from the time value of money associated with deferral of the tax liability. This tax benefit is further enhanced where the taxpayer has:
A 15% Investment Tax Credit (ITC) is available for the portion of an individual’s CEE that relates to certain qualifying expenditures. An ITC received in a particular year may be deducted from an individual’s federal tax liability for that year. To the extent that the ITC cannot be fully utilized in a particular year, it may be carried back 3 years or forward indefinitely and applied against federal taxes owing in any of those years. An ITC cannot be applied to reduce liability for Alternative Minimum Tax.
As a result of federal legislation relating to the taxation of royalties and similar payments, the major Oil and Gas producing provinces (Alberta, Saskatchewan, and British Columbia) allow extra tax credits which represent a refund of extra provincial taxes (or a portion of these taxes).Please refer to provincial tax information in the relevant province.
Renounced expenditures deducted by an individual taxpayer may affect the ability of the taxpayer to claim the $500,000 capital gains exemption in respect of sales of qualified small business shares and certain farm assets, as the taxpayer’s CNIL (‘cumulative net investment loss’) requires an inclusion of 50% of the deductions taken by the taxpayer in respect of Flow-Through share renouncements. The capital gains exemption is negatively affected by a positive CNIL balance.
Flow-Through Limited Partnerships are excellent vehicles for investors who wish to receive all of the tax benefits of Flow-Through shares plus portfolio diversification, professional management, and reduced risk.
Limited Partners who invest in a Flow-Through Limited Partnership in a particular year will receive, by March 31 of the following year, information necessary for them to complete their tax reporting for the previous year. Investors will receive form T5013A.
Investing in Flow-Through Limited Partnerships can be an important tool in tax planning. The chief benefits of investing in Flow-Through Limited Partnership units are tax deferral and the ability to derive tax-advantaged returns in the form of capital gains. There are numerous ways to use Flow-Through investments to manage taxes or build an investment that is capable of enhancing cash flow year after year.
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