49 North Resource Flow -Through Funds have been established in each year since 2005 and it is expected that new 49 North Flow -Through Funds will continue to be established in the future. Each 49 North Flow-Through Fund is established as a separate limited partnership which raises funds through an initial public offerings (IPO) and/or private placements of "flow-through units". "Available Funds" raised in these flow-through unit offerings are then invested in "flow-through shares" under agreements with resource companies pursuant to which they agree to incur and renounce to the Flow-Through Fund, effective in the year the monies are raised and invested, Canadian exploration expenses (CEE).
By structuring the Flow-Through Funds as limited partnerships, the CEE renounced to the respective Funds (and other expenses incurred by the Fund) can then be allocated amongst the respective investors, pro rata, based on the number of flow-through units they purchased in Fund's IPO. Generally, investors may deduct this CEE in calculating their taxable income. Investor's may also be eligible to claim certain non-refundable investment tax credits (ITCs) associated with the investment of Available Funds in so called "super flow-through shares" that may be issued by certain mineral exploration companies. Depending on an investors personal marginal income tax rate and province of residence, these tax incentives can reduce the after tax cost of investing in a Flow-Through Fund to less than one-half the face cost of the investment.
Once a Flow-Through Fund has been established, successfully completed its IPO, invested its Available Funds in flow-through shares and allocated the associated CEE to its investors, a "Liquidity Transaction" is implemented pursuant to which investors exchange their unlisted units in the Flow -Through Fund for stock-exchange listed common shares of the Listed company, 49 North Resources Inc. In this way, investors receive both the tax benefits associated with resource flow-through investment and liquidity for their investment through their ability to trade their shares on the stock exchange. Once the Liquidity Transaction is completed, further tax benefits may then be obtained by the investor contributing his shares to an RRSP.
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