BC Discovery Fund - Investors/Shareholders

BC Discovery Fund


Investor FAQ

 

Please note:

1) BC Discovery Fund has no deferred sales charge (DSC).  Commissions are paid by the Fund to investment dealers at the time of purchase by an investor and/or by trailer fee.

2) BC Discovery Fund suspended redemptions in December 2008 and it cannot predict when redemptions may re-commence.  The ability of the Fund to re-commence satisfying redemption requests is dependent upon a number of factors which are highly variable and difficult to predict.  Please refer to the Fund's annual prospectus where matters pertaining to redemptions are described in detail.

Topics

What is the purpose of the BC Discovery Fund?

BCDF was created to provide early-stage companies in the technology sector in British Columbia with a source of patient equity capital for the growth and expansion of their businesses and to provide British Columbia investors with an experienced and proven management team capable of maximizing shareholder returns from these investments.

What is the BC Discovery Fund?

BC Discovery Fund is registered as a venture capital corporation (“VCC”) under the Small Business Venture Capital Act (the “SBVCA”). Under the SBVCA, VCCs such as BCDF are established to make investments in Eligible Small Businesses in accordance with the provisions of the SBVCA, and to provide business and managerial advice to the Eligible Small Businesses in which they make investments. The SBVCA also regulates the kind of Eligible Small Businesses in which a VCC can invest.

When did the Fund start and how long has the manager been doing this?

The Fund was launched in November 2002 and started raising funds by prospectus in March of 2003. The founding managers of Discovery Capital have been managing VCC funds in BC for over 20 years.

Does the Fund only invest in private companies?

The Fund is not restricted to investing only in private companies. It can invest in public companies providing that it purchases treasury shares – the Fund cannot acquire shares in the open market.

If I dispose of shares of the Fund at a loss, do I realize a capital loss?

A redemption of a share is treated as a disposition for proceeds equal to the redemption price paid by the Fund.  Generally, an investor will realize a capital loss if the proceeds of disposition of shares of the Fund are less than the investor’s adjusted cost base of those shares and all reasonable costs of disposition.  However, any capital loss that arises must be reduced by the amount of tax credits received in respect of the shares.  A simple example – if an individual purchased shares at a price of $10.00 per share, held them for the minimum five years required by the Fund, and redeemed them at a price of $8.50 per share, the $1.50 per share capital loss is reduced (in this case, eliminated) due to the $3 tax credit received when the shares were originally purchased.  If a capital loss is realized by an RRSP or RRIF, the amount of any capital loss may not be deducted by the annuitant of the plan.

Refer to Income Tax Considerations in the Fund's prospectus and consult your own tax advisor.

When can I redeem my shares of the Fund?

Redemptions of shares are subject to the restrictions set out in the Articles of the Fund. Shares will not generally be redeemable until after five years from the date on which they were issued.  Shares may be redeemed during the one month period prior to the five-year anniversary date of their issuance provided that the shareholder is concurrently making a new subscription for shares on terms and conditions acceptable to the Fund.  The only other circumstance where shares may be redeemed prior to the five-year anniversary date of their issuance is in the case of the death of the original purchaser or where they have devolved to a holder as a consequence of the death of a registered owner and the Fund has received proper notice.  The Fund has the right to decline redemptions in a number of circumstances and you should refer to the prospectus of the Fund for full particulars and consult with your financial advisor.

If the Fund suspends redemptions, how do I get on a waiting list for future redemptions?

Shareholders who have held their shares for five years or longer may request redemptions at any time, even if the Fund has suspended redemptions. They must do so by having their financial advisors place a redemption order through the FundSERV network. Those orders will automatically reject and a rejection contract will be issued, however there will be a time and date stamp of the request to, in effect, establish a "waiting list" of redemption requests received by the Fund. Financial advisors must ensure that the rejection contract contains a FundSERV wire order number, otherwise the rejected order will not track through to the "waiting list".

When the Fund is in a position to re-commence satisfying redemption requests, the Fund will first process those requests on the waiting list, in the order in which they were received, and in priority to any redemption requests received on the date of re-commencement. It is contemplated that financial advisors of the shareholders on the "waiting list" will be contacted and given 10 business days to re-enter a valid order in the FundSERV network to complete the redemption, which will be processed on the next valuation date at the Pricing Net Asset Value per share on that date.













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