British Columbia Discovery Fund (VCC) Inc.

British Columbia Discovery Fund (VCC) Inc.

July 05, 2011 11:00 ET

British Columbia Discovery Fund Announces $8 Million Offering of New Class B Shares-Sales Launch July 5, 2011

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 5, 2011) -

British Columbia Discovery Fund (VCC) Inc. is pleased to announce that, on July 5, 2011, it is launching the sale of a new class of redeemable common shares (the "Class B Shares"), which are available in a limited allotment of 800,000 Class B Shares at a price of $10.00 per share, for total gross offering proceeds of $8 million. Effective that date, the Fund will also re-commence sales of the redeemable common shares eligible for a 30% tax credit that it has offered since inception (re-designated "Class A Shares").

Net proceeds from the issuance of Class B shares will be held in a segregated account and used only to make eligible investments in accordance with the British Columbia Small Business Venture Capital Act ("SBVCA"). Further, the Manager of the Fund, Discovery Capital Management Corp., will not earn any management fees on the net proceeds outstanding from time to time from the issuance of Class B Shares.

Background to the Offering

The Class B Shares are not eligible for tax credits but have been designed to offer to investors certain rights and privileges, as more fully described below under "Terms of Class B Shares":

  • a redemption priority over the Class A Shares;

  • a minimum Class B redemption price equal to the Class B issue price of $10.00 per Class B Share plus 6% per annum;

  • the opportunity to participate, at the time of redemption, in increases in the Pricing Net Asset Value of the Fund (being the basis upon which the Class A Shares are valued each week);

  • the prospect of early redemption upon the occurrence of a "qualified liquidity event".

Net proceeds raised from the sale of Class B Shares will be used to accelerate the Fund's investment activity in eligible investments under the SBVCA, both in new opportunities and in follow-on investments in its existing portfolio companies. In recent years, the Fund has fallen behind in its minimum investment requirements under the SBVCA. This has occurred partly due to the slow rate at which the Fund has been able to realize on its investments. The Fund's current investment portfolio is heavily weighted to later stage investments in revenue generating technology companies, which in aggregate generated over $250 million of revenues in 2010. However, market conditions generally have been such that exit opportunities for the junior technology companies in which the Fund and other venture capital firms invest have been slower to develop and have been occurring less frequently. With certain of the Fund's portfolio companies on track to exceed $30 million each in revenues in 2011, the Fund Manager believes that several of these companies are poised for a liquidity event (either an IPO or divestiture transaction) in the near term at potentially attractive returns.

Net proceeds raised through the sale of Class B Shares will assist the Fund to expeditiously achieve its outstanding minimum investment requirements without requiring the Fund to prematurely divest of existing portfolio investments at lower values than are otherwise projected and, as the Class B Shares are not eligible for tax credits, without attracting further investment pacing obligations under the SBVCA.

In summary, the limited offering of Class B Shares is intended to accelerate the Fund's investment activity and assist in achieving its outstanding minimum investment obligations, which in turn would enable the Fund to resume both active sales and redemptions of Class A Shares.

Terms of Class B Shares

The rights and restrictions of the Class B Shares have been established by the Board of Directors of the Fund and have the following attributes:

  • A fixed issue price of $10.00 per share.

  • No minimum hold period prior to redemption entitlement and a priority of redemption in advance of the Class A Shares.

  • Mandatory redemption by the Fund when net cash proceeds to the Fund from investment realizations or dispositions exceed $4 million in a rolling six-month period and the Class B Shares have been outstanding for at least 18 months; and upon the election of the holders of Class B Shares if such realization or disposition occurs within the first 18 months, in each case subject to SBVCA compliance. Redemptions at the election of the Fund after 18 months.

  • The redemption amount per Class B Share will be the greater of:

    1. $10.00 plus an amount equal to the percentage increase in the Pricing Net Asset Value per Class A Share from the date of issue of the Class B Share to the date of redemption of that share; and

    2. $10.00 plus 6% per annum calculated from the date of issue of the Class B Share to the date of redemption of that share.

  • No tax credit eligibility (unlike the Class A Shares that will continue to be eligible for a 30% tax credit pursuant to the SBVCA).

Advance Offer to Existing Shareholders and Other Offering Particulars

The Fund will ask registered representatives representing existing holders of Class A Shares to use their best efforts to offer Class B Shares to these existing investors within a two-week period following the July 5, 2011 launch date, the intent being to give existing holders of Class A Shares the opportunity to purchase Class B Shares in advance of other investors.

The offering of both Class B Shares and Class A shares is being made pursuant to the Amended and Restated continuous offering Prospectus of the Fund dated June 17, 2011 ("Amended Prospectus") and only through registered investment dealers.

This announcement is not an offering of securities of the Fund. Any offering or sale of securities of the Fund may be made only pursuant to the Amended Prospectus. Investors should refer to the Amended Prospectus for a fuller discussion of the background to the offering, the rights and restrictions of the Class B Shares, and the risk factors associated with an investment in any securities of the Fund.

About British Columbia Discovery Fund (VCC) Inc.

British Columbia Discovery Fund (VCC) Inc. was established to make venture capital investments in a portfolio of small businesses in British Columbia that qualify under the Small Business Venture Capital Act, focusing on all of B.C.'s top internationally recognized technology clusters; information technology (software and hardware), mobile technology (wireless and networking solutions), clean technology (alternative energy and energy-saving technology solutions), new media and health and life sciences.

Established in 2002 and managed by Discovery Capital Management Corp., the Fund is focussed on making diversified investments in British Columbia with the objectives of achieving long-term capital appreciation for its shareholders and contributing to the growth in value and employment of the technology industry in British Columbia. In addition to offering a means of participating in the potential of British Columbia's newest technology ventures, the Fund offers significant tax savings to eligible British Columbia individual and corporate investors. The Fund, which offers its shares on a continuous basis, has raised approximately $69 million to date and has investments in twelve developing technology companies. B.C. resident investors are entitled to receive a tax credit equal to 30% of the amount invested in Class A Shares of the Fund; Class B Shares of the Fund are not eligible for tax credits. To obtain further information about the Fund, please contact a registered advisor or visit www.sedar.com or www.bcdiscoveryfund.com.

John McEwen Harry Jaako
CEO, B.C. Discovery Fund (VCC) Inc. President, B.C. Discovery Fund (VCC) Inc.

This press release is not an offer to sell or a solicitation of an offer to buy common shares. This press release may include statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. Specifically, there are no assurances that the Fund's offering of Class B Shares will be successful or that there will be any capital appreciation from the portfolio companies of the Fund. The issuer cautions that actual performance, including the ability of the Fund to redeem securities, will be affected by a number of factors, many of which are beyond its control. Future events and results may vary substantially from what the issuer currently foresees.

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