What are Flow Through shares, and why do they comand a premium ?

Several companies offer FlowThrough funds (to acredited investors, such as Jov and Dynamic [Now part of Scotia]) and most of those do not make a large return, so why do people by them? Because of the tax writeoffs, even if you just get your money back, you are far better off than if you purchased regular shares at a lower price (up to a point of course)

Sources are taken from the following site, as well as my personal expereince in the Mutual fund industry: http://www.fasken.com/files/Publication/6838fcd9-f220-4e1c-bad5-67d693db4ffb/Presentation/PublicationAttachment/2edc997e-049e-49d5-9855-6c0336a89dba/FLOW_THROUGH_SHARES_AND_OTHERS_FEDERATED_PRESS_JOURNAL.pdf

What do Investors get ?

By Subscribing for Flow-Through Shares, the proceeds from the issuance of which are used to finance CEE carried out by the company, the investor can receive the benefit of the deduction of such CEE renounced by the corporation in favor of the holders of the Flow-Through Shares.

Federal tax credit
In addition to the deduction of CEE, investors may be entitled to a 15% nonrefundable
tax credit.

Québec additional deductions

In addition to the deduction of CEE, where some of the underlying expenditures
are made in Québec, these may entitle the holder of Flow-Through Shares to
additional deductions.

If the investor is an individual, in addition to the basic deduction of 100%;
• In the case of mining exploration expenses incurred in Québec:
• An initial additional deduction of 25%;
• A second additional deduction of 25% for surface expenses;

Where do these tax credits come from ?

As a general rule, a taxpayer is entitled to deduct 100% of its CEE expenses and up to
30% of its Canadian development expense (“CDE”) incurred in a year.6
A corporation can renounce CEE in favor of holders of Flow-Through Shares, thus
entitling the holder to a 100% deduction of the CEE so renounced. Generally, CDE,
however, would only be deductible at the rate of 30%.

There is more to these than few quotes above pulled formt he PDF file linked to above, but overall those are the big advanatges to a Flow Through, and why we probbaly wont be hitting that 53cents/share the flow though were purchased at with the regular shares (not saying we wont, but if we do it wont be because of this particular News Release)

Hope this helps to explain Flow Throughs to anyone on this board who might not be familiar with them !