GrowthWorks Commercialization Fund Ltd.

GrowthWorks Commercialization Fund Ltd.

November 29, 2013 23:59 ET

GrowthWorks Commercialization Fund Reports on Ontario Ministry of Finance Preliminary Audit Findings and Dividend Payments

TORONTO, ONTARIO--(Marketwired - Nov. 29, 2013) - GrowthWorks Commercialization Fund Ltd. ("Fund") announced an update with respect to the previously announced preliminary findings from the audit by the Ontario Ministry of Finance ("Ministry") of the Fund's compliance with the investment requirements under the Community Small Business Investment Funds Act (Ontario) (the "Ontario Act") for 2005 through 2009. The Fund also announced that Board of Directors of the Fund intends to monitor the Fund's cash available for dividends on its outstanding Class A Shares based on the levels of exit activity within the Fund's investment portfolio and the levels of redemption requests in respect of the Fund's outstanding Class A Shares. As a result, if cash inflows from divestment activity within the Fund's venture portfolio are lower than estimated or if levels of Class A Share redemption requests are higher than estimated and/or if the Fund incurs significant penalties as a result of the audit by the Ministry, the Fund may not have sufficient cash available to pay dividends in accordance with the Fund's dividend policies for previously offered Series of Class A Shares of the Fund.

The Fund received a preliminary audit report on August 23, 2012 from the Ministry of Finance (Ontario) presenting preliminary findings from the Ministry's review of the Fund's compliance with the investment requirements under the Community Small Business Investment Funds Act (Ontario) (the "Ontario Act") for 2005 through 2009 and indicating that the Fund was not in compliance with such requirements during this period. The Manager on behalf of the Fund disagrees with a number of the preliminary audit findings. Submissions were made to the Ministry in November of 2012 in support of the Manager's position on behalf of the Fund. As at August 31, 2013, the Ministry had not responded to the Manager's submissions. After the year end, the Ministry confirmed that it had not changed its preliminary findings and invited the Manager on behalf of the Fund to make further submissions in support of the Manager's position on behalf of the Fund on or before November 15, 2013. The Manager on behalf of the Fund made further submissions to the Ministry on November 15, 2013. The Ministry has not issued final audit findings.

Based on the Manager's current assessment of the preliminary audit findings, and in particular dialogue with the Ministry and the advisors to the Fund after the year end, the Fund recognized a $1.32 million liability for penalties that may be imposed as a result of the findings. The recorded balance includes $178,858 of accrued interest. The liability has been allocated to the 05 Series of Class A Shares because the 05 Series represents a consolidation of the Series that were issued and participating in the Fund's venture portfolio during the period under review. The liability does not affect the net asset value per share of other Series, namely the 10 Series, 11 Series, 12 Series, 13 Series or the currently offered 14 Series. Based on the Ministry's findings to date, an additional amount of $0.93 million, plus interest, may be recognized in the future. At present, the final outcome of the review and any associated objection and appeal proceedings, and the quantum of penalties that may ultimately be imposed, is not determinable. While the determination to recognize a $1.32 million liability was made following an assessment of written feedback from the Ministry received after the year end and further submissions filed with the Ministry on November 15, 2013, the liability has been recognized in the Fund's financial statements effective as at August 31, 2013, because the determination was made before completion of the preparation of the Fund's financial statements. For purposes of determining net asset value for share transactions, the liability was recognized effective as at November 29, 2013. This resulted in the 05 Series net asset value per share on the Statement of Net Assets being $0.88 cents less than the share price published on August 31, 2013, with the difference representing the liability recognized for penalties that may be imposed under the Ontario Act.

The Fund's liquidity is largely dependent upon its ability to successfully dispose of its investments by way of IPOs and M&A transactions which can be adversely affected by market volatility If cash inflows from divestment activity within the Fund's venture portfolio are lower than estimated or if levels of Class A Share redemption requests are higher than estimated and/or if the Fund incurs significant penalties as a result of the audit by the Ministry, the Fund may not have sufficient cash available to process redemption requests in the ordinary course, pay dividends in accordance with the Fund's dividend policies for previously offered Series of Class A Shares or make new venture investments.

Forward Looking Statements: This press release contains forward looking statements about future Ministry audit findings and potential associated objection and appeal proceedings, and a final determination of penalties and interest owed, if any, and the Fund's liquidity, including dividend payments, investment activity and levels of Class A Share redemptions. These statements are based on beliefs and assumptions of management of the Fund at the time the statements are made, including beliefs and assumptions about the Ontario Act, the Ministry's application of the Ontario Act, and the legal remedies available to the Fund and M&A and IPO market conditions generally and within the sectors in which portfolio companies operate, timing and levels of Class A Share redemption requests, investment activity and expectations for divesting from investments in the Fund's venture portfolio. These beliefs and assumptions are subject to known and unknown risks and uncertainties, including risks and uncertainties associated with interpreting legislation that has not been litigated, the application of legislative discretion by the Minister of the Ministry, and potential judgments by applicable administrative bodies and courts, economic and market conditions, including M&A and IPO market conditions, investment activity and divestment activity and timing and levels of Class A Share redemption requests. These risks and uncertainties may cause actual results, events or developments to be materially different from those expressed or implied by such forward-looking statements. Unless required by law, neither the Fund nor its manager assumes any obligation to update any forward-looking statements or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results or other factors. Dividends are not guaranteed.

Contact Information

  • GrowthWorks Commercialization Fund Ltd.
    David Levi
    Chief Executive Officer
    (416) 934-7700