Working Opportunity Fund (EVCC) Ltd.

Working Opportunity Fund (EVCC) Ltd.
GrowthWorks Capital Ltd.

GrowthWorks Capital Ltd.

October 30, 2014 19:24 ET

Working Opportunity Fund Venture Series Adopts a Cash Dividend Distribution Policy

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Oct. 30, 2014) - Working Opportunity Fund (EVCC) Ltd. (the "Fund") announced today that it has adopted a cash dividend distribution policy for the Venture Series to distribute available cash through an orderly realization of value from dispositions in the Venture Series' portfolio.

The cash dividend distribution policy only applies to the Fund's Venture Series shares and will not impact previously adopted dividend policies in respect of the Fund's Commercialization Series shares or redemptions of Commercialization Series shares as the Fund manages liquidity separately for Venture Series shares and the Commercialization Series shares.

Background - Strategic Review of Venture Series

In January 2014, the board of directors of the Fund (the "Board") announced a full review of strategic options directed towards realizing on the potential value of the Venture Series portfolio and providing liquidity to Venture Series shareholders. This review was commenced in light of a range of factors, including the Venture Series' cash position, actual and projected levels and timing of divestment activity, the prospects for generating exit values in excess of carrying values and the prospects for the Venture Series resuming weekly redemption processing and capital raising.

The Board formed a Special Committee of directors independent of the Fund's manager which examined a number of alternatives, including maintaining the status quo of distributions by way of redeeming shares on a first in basis as significant exits occur. During the course of its review, the Special Committee also assessed the long term impact of the federal government's announcement in 2013 to phase out the 15% federal labour-sponsored venture capital corporation tax credit on future capital raising.

Cash Dividend Distribution Policy for Venture Series Only

In accepting the unanimous recommendation of the Special Committee, the Board of the Fund determined that the manner in which the Fund distributes available cash to Venture Series shareholders should be changed from distributions by way of redemptions to distributions by way of cash dividends. The Board also concluded that the Venture Series should seek an orderly realization of its portfolio and adopt a cash dividend distribution policy based on net gains from dispositions of holdings in the Venture Series' portfolio while maintaining funds for strategic follow-on investments (within the existing portfolio only), liabilities and anticipated operating expenses of the Venture Series.

The key objectives of the cash dividend distribution policy for Venture Series will be to:

  • allow time to realize the potential value of the Venture Series' portfolio by providing for an orderly realization through dispositions in the venture portfolio;
  • provide a meaningful level of liquidity to all Venture Series shareholders by distributing net gains from dispositions in the venture portfolio;
  • ensure fairness by having all Venture Series shareholders share in realizations of the potential value in the Venture Series' established venture portfolio; and
  • maintain capital for strategic follow-on investing in the Venture Series' most promising portfolio companies so that high value exits can be pursued.

The Special Committee reached its recommendation for a number of reasons. The current distribution method of providing cash by way of redemptions on a first in basis has significant risk of having some shareholders receive liquidity to the exclusion of others. This risk arises because of the fixed number of potential exit opportunities within the Venture Series' established venture portfolio and, as exits are realized, the portfolio and possible future number of exits decreases. Accordingly, a system of redemptions on a first in basis has the real risk of having some shareholders being left with little or no liquidity. This risk is amplified in a system where individual shareholders have to request redemption and some shareholders are not proactive for a variety of reasons, some of which are not within their control. In contrast, the Board, in accepting the Special Committee's recommendation, believes that distributions by way of dividends ensure all Venture Series shareholders are treated equally.

Commenting on the Board's determinations, Cindy Stewart, Chair of the Board stated: "The Board believes the potential upside from the sale of certain Venture Series' portfolio companies is substantial and our manager is continuing to work with the portfolio companies and positioning them for exit. The Board believes the cash dividend distribution policy will allow for realizing on the potential value in the Venture Series portfolio and provide meaningful liquidity to Venture Series shareholders by distributing available cash from portfolio company exits to all Venture Series shareholders."

Redemption requests for Venture Series received by the Fund will continue to be placed in a queue for processing in the order they are received; however, the Board currently intends that available cash from the sale of the Venture Series portfolio companies will be distributed to shareholders through the cash dividend distribution policy and does not expect to open redemptions of the Venture Series. The Fund expects to only process Venture Series shares redemptions in the very limited circumstances of hardship dispositions provided there are available funds to do so.

The Board remains confident in the overall potential of the Venture Series portfolio to provide value and meaningful liquidity through exit transactions and believes many of the Venture Series' portfolio companies are continuing to grow and mature, improving the prospects for cash-generating exits. The amount and timing of cash dividends to Venture Series shareholders under this policy will depend on the timing and realizations of exits. Unfortunately, the timing of exit transactions are largely beyond the control of the Fund and, therefore, difficult to predict. As such, no assurance can be given as to the timing or amount of any cash dividends to Venture Series shareholders or that the Venture Series will be able to complete an orderly realization of value.

The cash dividend distribution policy of declaring dividends of available cash from dispositions as they occur will be administered with the current expectation that it will likely require a time period of 3-5 years to maximize the potential value of the existing Venture Series' portfolio and distribute available cash to Venture Series shareholders as part of an orderly realization of value. After that time, it is expected that the Board will consider the next steps regarding the Venture Series which may include termination and/or a secondary sale of any remaining holdings.

In connection with the cash dividend distribution policy, holders of GIC Series shares will be converted into Balanced Series shares after receiving a separate dividend of the GIC portion attributable to their shares.

A Letter to Shareholders with further information and FAQ's (frequently asked questions) is available at www.growthworks.ca and is being mailed to all Fund shareholders.

Venture Series' Portfolio Update

WOF's Venture Series investments are primarily minority interests in BC based private companies. Typically, the most common exit mechanism is a merger & acquisition transaction ("M&A") of a portfolio company and a strategic buyer. The other key exit mechanism is an initial public offering or IPO. The timing of exit transactions are largely beyond the control of the Fund because it depends heavily on the M & A and IPO markets and the Fund has minority positions in its investee companies. Over the previous three years, M&A divestments occurred for each of Layer 7 Technologies Inc., Bycast Inc. and QuIC Financial Technologies Inc., among others.

As at October 15, 2014, the Ventures Series Pricing Net Asset Value (Pricing NAV) was$123.3 million composed of $112.2 million of venture assets and includes $3.9 million in cash and other liquid assets and $7.2 million in other assets. Strategic follow-on investments may need to be made for the Venture Series portfolio. While no assurance can be made with respect to the amount of future strategic follow-ons in the Venture Series' portfolio, an average of $0.8 million was made in each of the last 2 years. The top holding of the Venture Series is Teradici Corp., currently valued at $28.3 million and comprising 23.0% of Pricing NAV. The top five holdings of the Venture Series are investments in Teradici, D-Wave, BuildDirect, ResponseTek and Mixpo which total $82.6 million, or 67.0% of Pricing NAV. The most widely held Venture Series shares, Balanced Series 2, have increased in value by 11.92% for the year to date period ending October 30, 2014.

Commercialization Series Portfolio Update

The cash dividend distribution policy announced in this press release only applies to the Fund's Venture Series shares and will not impact previously adopted dividend policies in respect of the Fund's Commercialization Series shares or redemptions of Commercialization Series shares as the Fund manages liquidity separately for Venture Series shares and the Commercialization Series shares.

Our manager believes that the value of the underlying investments in the Commercialization Series venture investment portfolio will remain strong, and the current income component of the Commercialization Series' investments will support the previously adopted dividend policies. As the portfolio matures, some of the additional features in our investment holdings focused on capital appreciation, such as conversion rights and warrants to purchase shares in the companies to whom loans were made, have the potential to result in increases in value for the venture investment portfolio. The Commercialization Series is not currently offered.

The Fund and its manager report that the Commercialization Series continues to have a strong liquidity profile at this time. As at October 15, 2014 the Commercialization Series Pricing Net Asset Value (NAV) was $35.4 million composed of $17.8 million of venture assets, $16.1 million in cash and other liquid assets and $1.5 million of other assets. In addition, the Commercialization Series was launched in 2005 and therefore less than 6% of shares are eligible for redemption. Debt investments represent 72.5% of the Commercialization Series venture investment portfolio. The top five venture holdings in the Commercialization Series total $13.4 million, or 37.9% of Pricing NAV. The Fund and its manager believe that the Commercialization Series venture investment portfolio will generate sufficient income to satisfy future dividend payments in accordance with all adopted dividend policies on previously offered series. Dividends are not guaranteed and there can be no assurance that the portfolio will generate the cash flow needed to pay dividends in accordance with all adopted dividend policies. The most widely held Commercialization Series shares, Commercialization 05 Series, have increased in value by 2.51% for the year to date period ending October 30, 2014.

Forward Looking Statements : This press release contains forward looking statements which primarily relate to assessments of the liquidity position of the Venture Series, implementation of the cash dividend distribution policy, the targeted timing of exits (also referred to as divestments) from the Venture Series venture investment portfolio, future economic and market conditions, including M&A and IPO market conditions, the Venture Series ability to make follow-on investments, redemptions of Commercialization Series shares and statements regarding the Fund's dividends policies. All forward looking statements are based on management's current beliefs and assumptions which are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others assessments of the targeted timing of exits (also referred to as divestments) from the Fund's venture investment portfolio, general economic and business conditions, including changing market conditions, changing governmental regulations, unforeseen developments, and other factors referenced in the Fund's filings with the Canadian securities regulators. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Neither the Fund nor its manager assumes any obligation to update any forward-looking statements made in this letter. Returns: The returns for Balanced Series 2 to October 30, 2014 are: year to date: 11.92%; one year: 10.72%; three years: 6.71%; five years: 2.37%; and ten years: -1.24%. The returns for Commercialization 05 Series to October 30, 2014 are: year to date: 2.51%; one year: 0.85%; three years: 3.95%; five years: 2.86%; and since inception: 4.57%. Past performance does not necessarily indicate how a series will perform in the future.

Contact Information

  • Working Opportunity Fund (EVCC) Ltd.
    David Levi
    President & CEO
    (604) 895-7253

    Working Opportunity Fund (EVCC) Ltd.
    Suite 2600, Royal Centre
    1055 West Georgia Street
    Vancouver, BC V6E 3R5