Frequently Asked Questions
Need more information? Browse our FAQs below.
Preserving your wealth by saving you taxes.
A Terra LP invests in a portfolio of primarily publicly traded oil & gas and mining firms. The fund aims to produce attractive returns and provide favourable tax benefits for reducing income taxes.
A Terra LP is a tax planning tool for reducing income taxes and building wealth. Specific attributes of a Terra LP include:
Terra LPs bring everyday investors a legitimate way of reducing taxes previously only available to wealthy or sophisticated investors. We do this by providing smaller, more affordable investment minimums (as low as $1,000) through a fund offering expert portfolio management, low fees and early redemption.
Our portfolio management team from Cypress Capital Management has extensive experience in managing flow-through limited partnerships and other tax-efficient funds. Terra Fund Management has been managing FTLPs since 2005.
Low costs and fees are among the most important factors for a successful investment. Our no-load F class unit does not charge a sales commission, trailer/service fee or redemption fee.
Our platform is designed to be easy to use and accessible on both the web and mobile. We make it simple for you to see your tax savings before you invest and how you can maximize those savings. The ability to acquire even more tax savings through a reinvestment, transfer to an RRSP or donation make Terra an even better choice for reducing taxes. See our Tax Savings Calculator.
Early maturity next year means you have more options sooner. Investors can also hold the investment for a longer period to participate in the upside potential of any rebound in the resource sector.
Terra provides all investors an offering memorandum, which is a disclosure document that gives interested investors the material facts and information about the investment before they decide whether or not to invest. Copies of the offering memorandum will be accessible to you by contacting us. Investors may also obtain a copy from their advisor.
Tax Saving Benefits
Investors in a Terra LP are funding a resource company’s costs for finding and developing oil & gas and mining resources in Canada. These costs are not claimed by the resource company but are “flowed-through” to investors in the form of tax deductions and tax credits, which are used by investors for legitimately reducing their income taxes.
Canada is a resource exporting nation. The cost for finding and developing resources is expensive. The federal government supports the discovery and development of resources by allowing companies to issue “flow-through” shares to fund their Canadian exploration and development activities and relieves the government of the need to “pick winners” and determine where expenditures are made. The program has been available to individual investors for over 30 years and has succeeded in creating jobs, increasing exports and providing governments additional tax revenues.
A capital gain refers to the gain you make from selling a capital asset such as a Terra LP. The gain is the market value less the adjusted cost base (ACB).
A key benefit for investors is that capital gains are taxed at a lower rate than income (salary, bonus, rental income). Compared to income, only half the gain is taxed at an investor’s marginal tax rate.
Another benefit of a capital gain is it allows taxpayers to choose when they pay the tax. A capital gain from a Terra LP is not taxable until you sell, transfer or donate the investment and "realize" the gain. This means you control what year you will pay the capital gains tax. You can also use capital losses from other investments to offset a capital gain from a Terra LP so no capital gains tax is owing.
Resource investments have long been of interest to investors due to two important benefits: diversification and inflation protection. With resource sector valuations at cyclical lows there is also the potential for significant investment gains through commodity price appreciation.
RRSP Transfers & Donations
Yes, on maturity in the 2nd calendar year your investment may be transferred to your RRSP or donated to charity for additional tax savings. See our Tax Savings Calculator.
Yes, the investment can be donated to any Canadian registered charity including a private or public foundation or donor-advised account.
Yes, investors can easily donate their investment in a Terra LP by establishing an account with TerraTundra Foundation, which provides donation tax receipting, tax-free growth and directs donations to their favourite charities. TerraTundra Foundation is attractive to investors who
- want a simple and cost effective way to give;
- do not wish to establish their own foundation; or
- plan on setting up their own foundation at a later date.
For more information, see Giving.
Donations may be converted to shares in the TerraTundra Dividend Growth Fund (“Giving Fund”) for tax-free growth so more can be given at a later date.
The 2011 Federal Budget reduced the tax benefits of a gift of flow-through investments so that they are generally no more attractive an option than any other gift of shares or cash. However, the capital gains tax only applies to the original cost of the flow-through investment and any portion over the original cost is exempt from capital gains tax.
Yes, if you have capital losses to utilize. Any capital losses available can be applied to reduce or eliminate capital gains tax owing, which increases the tax savings received and further reduces the net cash outlay. For more information, see our Tax Savings Calculator.
Track Record & Performance
Since inception in 2005 Terra LPs have provided investors over $250 million in tax benefits; made over 490 investments in oil & gas and mining companies and matured in less than 10 months.
A $1,000 no-load investment provided the following market values, tax savings and profits.
Tax savings assume a 50% tax rate; actual tax savings will vary by province. Figures are based on rollover/maturity dates. Past performance does not guarantee future results.
A $1,000 no-load investment provided the following profits.
Tax savings assume a 50% tax rate. Capital gains can be eliminated if capital losses are available. Past performance does not guarantee future results.
A $1,000 no-load investment provided even more tax savings if the investment was reinvested, transferred to an RRSP or donated upon maturity.
Tax savings assume a 50% tax rate. On donation, the market value above $1,000 is exempt from capital gains tax. Past performance does not guarantee future results.
For more information, see our Tax Savings Calculator.
Fees & Costs
No load Class F units, charge 0% sales commission. Class F units are available for direct purchase or through advisors offering “managed”, “wrap” or “fee only” accounts.
Class A units pay a sales commission of up to 5.75% and compensate advisors for providing tax and investment advice related to a Terra LP investment. The commission is paid by the partnership and is tax deductible.
No, Terra LPs do not pay trailer or service fees (i.e. ongoing embedded commissions) for either Class F or Class A units.
No, Terra does not earn a sales commission or service or trailer fees.
The management fee is $20 per $1,000 invested and includes the evaluation, selection and management of flow-through investments. Building a flow-through portfolio requires a skillful manager with resource-specific expertise as selection cannot be automated as with ETFs. Because the management fee is paid by the partnership it is a tax-deductible expense to investors which substantially lowers the cost to $10 per $1,000 (assuming a 50% marginal tax rate). See the offering memorandum for more details.
All costs related to the management and operation are paid indirectly by investors through the Terra LP. These costs are then “flowed through” to investors as a tax deduction, which investors use for reducing their income taxes.
Yes, because partnerships are a “pass-through entity" the management fee and costs for creating and operating the partnership are a tax-deductible expense. By being able to claim these expenses their actual cost to investors is lowered.
There are always some underlying costs for creating and operating a partnership. The partnership, on behalf of the investor, pays up to $20 per $1,000 invested, which includes start-up costs of $13 for legal, regulatory, audit and accounting expenses and $7 for operating and administration expenses. These costs are also a tax-deductible expense claimed by investors.
Purchasing no-load F Class units directly or through your advisor provides you attractive tax savings at lower cost. Terra non-load F Class units charge zero (0%) sales commission which compares favourably with competing offerings that charge the industry standard commission of 5.75%. See more at How We Compare.
Flow-through partnerships hold significantly fewer assets than ETF’s so expenses expressed as a percentage are higher. For example, a $200,000 set-up cost represents 2% of a $10 million partnership versus 0.2% of a $100 million ETF.
Management fees are higher than an ETF because the evaluation, selection and management of flow-through shares cannot be automated. Unlike an ETF (which tracks a stock, sector, commodity or bond index), there is no index for flow-through shares. To build and manage a portfolio of flow-through shares requires a skillful manager with resource specific expertise.
Fees, operating costs and expenses are paid by the partnership on your initial investment and in the 2nd calendar year.
The partnership will pay any ongoing management fee and operating costs and expenses from either its working capital reserve or proceeds received on the sale of securities held by the partnership. Costs are automatically paid and there's no extra payment made by investors.
Risk is managed in several ways including:
- the portfolio is diversified and invested in approximately 20 public companies. To learn more about the investment portfolio, see How We Build Portfolios;
- the investments are managed by an expert investment team who actively manage the portfolio. For more information, see Investment Team; and
- investor’s receive attractive tax savings which typically lowers their cash outlay by approximately 50% and provides a “cushion” against losses. In other words, the investment can decline substantially before a loss is incurred. For more information about cash outlay, see our Tax Savings Calculator.
Investors are at risk for only the amount they invest.
In the event a company in which a Terra LP is invested in declares bankruptcy, the fund will bear the risk of loss of its investment and potentially any associated tax deductions or tax credits provided by that company. To the extent the fund suffers such losses, the value of the investor’s holdings may decline. Because a Terra LP is typically invested in 20 or more companies, any loss should be mitigated through diversification in the remaining investments.
In the unlikely scenario that Terra closes, your account will remain safe and be largely unaffected. Your money is held by our custodian, National Bank Independent Network (formerly NBCN), which is owned by National Bank of Canada. All investments are registered in your name or nominee account (an account in which an investment advisor holds your investment) and if we close our operations you can choose to transfer your Terra investment to an existing or new advisor.
There is no guarantee that an investment will earn a specified rate of return or any return in the short- or long-term. There are a number of other risks and uncertainties which include changes in the global economy, general economic and business conditions, existing governmental regulations and commodity prices due to fluctuations in supply and demand. Investors should read the offering memorandum, especially the risk factors, before making an investment decision.
Becoming A Client & Your Account
Canadian residents who are individuals and are of the age of majority in their province or territory can invest in a Terra LP, so long as they meet certain suitability requirements and qualify as an accredited investor (all provinces) or eligible investor (AB, SK, MB, NS) or reside in BC.
Yes, corporations, partnerships, trusts and certain other organizations may invest in a Terra LP if they qualify as an accredited investor or eligible investor or invest $150,000 or more.
Contact your investment advisor or Invest with Us online.
The price is $100.00 per LP Unit and remains the same during the period we are raising funds. Once the LP has finished raising funds and is closed to all purchasers, month-end market pricing is available on our website or third party reporting websites, including globefund.com.
There are no investment limits for accredited investors in any province. Eligible investors in the provinces of AB, SK and NS can invest up to $30,000, or up to $100,000 if they receive suitability advice. There are no investment limits for BC investors or eligible investors in MB.
Investors receive a T5013 federal tax receipt (or RL 15 tax receipt for Québec residents) on or about March 31 of the following year. This tax receipt shows the tax deductions, tax credits and other expenses that may be claimed by the investor on their tax return for reducing taxes.
The average term to maturity for a Terra LP is 10 months after the 1st calendar year-end.
Maturity automatically occurs without requiring any action on the part of the investor. Investors receive corporate class fund shares, which can be sold, reinvested, transferred to an RRSP or donated.
Any sale, transfer, donation or redemption will trigger a capital gain. The resulting capital gain is equal to the difference between the proceeds received and the adjusted cost base (ACB) and this difference is taxed at the investors’ capital gains tax rate. To properly calculate the capital gains tax, the ACB must be obtained from Terra or a registered dealer.
Yes, on maturity in the 2nd calendar year your investment may be transferred to a regular investment account or TFSA for diversification. Oil & gas and mining investments can have a low correlation with other equities.
Yes. Audits occur annually and all investors have access to audited financial statements. In addition, tax filing forms, quarterly updates and investor statements will also be sent directly to investors by Terra or their registered dealer.
Yes, you have two business days to cancel your purchase. You must send a notice that you want to cancel your purchase before midnight on the 2nd business day after you sign the agreement to purchase the partnership. You can send the notice by fax or email or deliver it in person to Terra Flow-Through Limited Partnership at its business address. Keep a copy of the notice for your records.
Safety and security are very important to our business and we use several procedural controls to protect your account including:
- Bank-level encryption protects your data. Our 128-bit SSL certificate encrypts all information transmitted between your computer and our web servers, protecting your password and account details.
- We use a third-party custodian to hold your assets. Terra can't access your funds other than to provide trade instructions or charge our management fee. Our custodian, National Bank Independent Network (formerly NBCN) is backed by the financial strength and ongoing support of National Bank of Canada.