Proposed New Structure FAQs
Do I still get a 30% tax credit if I invest today?
Yes. Investors who purchase the Fund during this RRSP season up to March 1, 2010 will receive a 30% fully refundable British Columbia tax credit for 2009.
Will I lose my tax credit if I convert my Redemption Shares into Common Shares and sell before the five year period is up?
No. Investors can convert at any point and sell their shares in the market without having to repay the tax credit.
How am I able to sell early without repaying the tax credit?
Ownership of the shares may change hands without consequence. It is the responsibility of the Fund to invest the money raised into eligible small businesses. The VCC program is not compromised by a sale of shares.
Why are we changing the structure of the Fund?
Pender had been considering a change to the structure of Pender Growth Fund for some time. Very recently, the B.C. government advised us that, starting with money raised in the 2010-11 tax year, it will be requiring us to operate under a different set of rules with respect to the timing of our investments and redemptions.
This proved to be the catalyst to rethinking the entire product and to finding a structure that would achieve all of our goals. Pender believes that the proposed new structure offers the following advantages to its shareholders:
- shareholders will have full exposure to the mature portfolio of investments without dilution from new shareholders;
- the costs of running the Fund are expected to be lower as it will have lower transaction, sales and marketing, operating and regulatory costs;
- the Fund estimates it will have adequate capital to make further investments, including in its successful investee companies in order to help protect the valuation of the Fund’s investment; and
- to provide shareholders with additional liquidity options by way of the sale of Common Shares on the TSX-V.
Why choose a “split share” structure?
By providing a Redemption Share, approximately 80% of your investment will be held at a fixed value within your account and not be subject to fluctuating valuations. This provides predictability and stability. By providing a Common Share and a voluntary option to convert your Redemption Share into Common Shares, you are in control of how and when you wish to sell your investment.
How do the Redemption Shares work?
Five years from your original Pender purchase date, your Redemption Shares become eligible for redemption. Shares are redeemed by using 70% of the net proceeds from the sale of a portfolio investment.
What happens to the other 30% of the proceeds?
By reducing the amount required for redemptions, the Fund will have adequate working capital to make further investments in its successful investee companies. This will help to protect the valuation of the Fund’s investments and the Redemption Shares.
If I want to hold my Redemption Shares, will I be guaranteed to get them paid out on time and in full?
The source of funds to meet redemption requests comes from investment income, portfolio gains and the sale of “mature investments,” all in accordance with the rules of the British Columbia Small Business Venture Capital Act. Essentially this means that the redemption proceeds come primarily from the proceeds of the sale of portfolio investments that have been held by the Fund for a minimum of five years.
There may not be sufficient sales within the five year period to honour all redemption requests on time. Also, if the value of the portfolio assets decline significantly, there may not be sufficient proceeds to redeem all Redemption Shares in full.
A primary goal of the Fund has always been to provide liquidity to our shareholders and we will continue to work towards achieving the required liquidity events within the portfolio of investments to honour redemption requests in a timely manner.
Under the new structure, investors may convert Redemption Shares into Common Shares that may be sold at any time.
How do I convert my Redemption Shares into Common Shares?
Transaction details will be provided in the Information Circular to be issued in March, 2010.
Do I have to convert all of my Redemption Shares at the same time?
No, Redemption Shares may be converted to Common Shares at the investor’s discretion – in partial or complete amounts – at any time.
If I have owned the Fund for several years, do I now have to wait five years for my Redemption Shares to be eligible for redemption?
No. The five year maturity period will be based on the clients original purchase date of their corresponding Pender Growth Fund VCC shares.
How is pricing determined for converting Redemption Shares into Common Shares?
The Net Asset Value (“NAV”) of the Redemption Shares will be compared to the NAV of the Common Shares at the time of conversion, subject to a minimum conversion price of $0.50 per Common Share.
Will performance fees still be paid under the new structure?
No performance fees will be paid until after all Redemption Shares have been redeemed in full.