TORONTO, June 22, 2020 (GLOBE NEWSWIRE) — Evolve Funds Group Inc. (“Evolve”), on behalf of Gold Miners Split Corp. (the “Company”), is pleased to announce that it proposes to convert the Company into an exchange traded fund (the “Restructuring”). The proposed Restructuring will involve certain amendments to the Company’s articles of incorporation which will be subject to approval by shareholders of the Company at a special meeting of shareholders expected to be held in the coming months (the “Meeting”). Evolve is also pleased to announce that is has entered into a support agreement (the “Support Agreement”) with the Company, GIC Merchant Bank Corporation (“GIC”) and a shareholder of the Company (the “Lead Investor”) holding more than 80% of the outstanding Class A shares of the Company (the “Class A Shares”) as of the date hereof. Pursuant to the Support Agreement, the Lead Investor has requested that Evolve pursue the Restructuring (subject to Evolve’s duty to act honestly, in good faith and in the best interests of the shareholders of the Company), and has agreed to vote in favour of the proposed Restructuring at the Meeting.
In light of the proposed Restructuring and the Support Agreement, Evolve has determined that it is in the best interests of the Company and shareholders to reconstitute the portfolio of the Company to be invested primarily in cash and cash equivalents until the Meeting. Given equity market volatility, Evolve believes a cash portfolio is in the best interest of holders of preferred shares in the capital of the Company (the “Preferred Shares”), to ensure the coverage ratio and ability for the Company to pay the remaining distributions on those securities. Similarly, Evolve believes a cash portfolio is in the best interests of the holders of the Class A Shares, to crystalize the approximate 90% gain in the net asset value (“NAV”) of the Class A Shares since the launch of the Company (less the expenses of the Restructuring, which will be borne by the Company and reduce the NAV of the Class A Shares).
The proposed Restructuring is also subject to the receipt of regulatory approvals and other customary conditions for transactions of this nature, including the approval of the Neo Exchange Inc. (the “Exchange”). Full details regarding the proposed Restructuring and its anticipated impact on shareholders, including tax impact, will be outlined in a management information circular (the “Circular”) which will be mailed to shareholders of the Company in advance of the Meeting.
Overview of Proposed Restructuring
Evolve anticipates that the proposed Restructuring will involve the following (among other things):
- the outstanding Preferred Shares will be redeemed by the Company at a price equal to the anticipated redemption price holders would have received on the originally anticipated termination date of the Company of May 31, 2022 plus the sum of any unpaid distributions that would have been received up to that point (the “Preferred Redemption Price”);
- the outstanding Class A Shares will be amended to become, or will be exchanged for, non-cumulative, redeemable, non-voting (other than voting as required by applicable securities laws) shares of an exchange traded fund series of the Company (the “Continuing ETF”), each such share representing an equal, undivided interest in the net assets of the Continuing ETF. It is anticipated that any holders of Class A Shares who do not wish to participate in the Restructuring will be entitled to submit such Class A Shares for redemption by the Company prior to the completion of the Restructuring at a redemption price (the “Class A Redemption Price”) equal to the NAV per unit consisting of one Preferred Share and one Class A Share (each, a “Unit”) minus the Preferred Redemption Price;
- the Class A Shares will continue to be listed on the facilities of the Exchange, subject to the requirements of the Exchange;
- the investment objectives and Strategies of the Class A Shares are anticipated to be changed to reflect Continuing ETF, as will be more particularly described in the Circular;
- the management agreement between the Company and Evolve (the “Management Agreement”) will be amended to reflect the Restructuring and to provide that Evolve will no longer be entitled to a Performance Bonus (as defined below). It is anticipated that following the Restructuring, the management fee payable to Evolve will remain the same at 0.70% per annum of the NAV of the Continuing ETF;
- it is anticipated that the board of directors of the Company following the Restructuring will be comprised of three members, including Raj Lala, Elliot Johnson and Michael Simonetta; and
- it is anticipated that the executive officers of the Company will remain unchanged.
The Restructuring, including certain of the actions described above, will be subject to the approval of not less than two-thirds of the votes cast by the holders of the Class A Shares and the Preferred Shares, each voting separately as a class, present in person or represented by proxy and entitled to vote at the Meeting.
Pursuant to the Management Agreement, Evolve is entitled to a performance bonus (the “Performance Bonus”), calculated as of the termination date of the Company equal to 15% of the amount by which (i) the NAV per Unit, exceeds (ii) the applicable hurdle NAV per Unit as described in the Management Agreement. It is anticipated that upon completion of the Restructuring, Evolve will be paid the Performance Bonus accrued as of such date, being 15% of the amount by which (i) the NAV per Unit, exceeds (ii) the initial issuance price per Unit of $25.00 multiplied by an annual non-compounded 10% rate of return as of such date (pro-rated based on any fractional year periods).
Pursuant to the Support Agreement, as partial consideration for Evolve pursuing the Restructuring, GIC has agreed to pay Evolve (i) a work fee of $200,000 plus all applicable taxes thereon (the “Work Fee”); and (ii) if the Restructuring is completed, a fee of $267,614.76, plus all applicable taxes thereon, being 70 basis points (bps) of the total net assets of the Company as of May 31, 2020 (the “Foregone Management Fee”).
Evolve will refer the proposed Restructuring to the Company’s Independent Review Committee (the “IRC”), which acts in an advisory capacity representing the interests of the Company and securityholders with respect to conflict of interest matters. The IRC will be asked to review the proposed Restructuring and determine that, if implemented, the proposed Restructuring would achieve a fair and reasonable result for the Company.
Anticipated Benefits of the Proposed Restructuring
Evolve believes that the Restructuring is in the best interest of the Company and shareholders, as it will provide:
- holders of Preferred Shares with a redemption price per share that they otherwise would not have received until May 31, 2022 at the earliest;
- holders of Class A Shares with the ability to choose to participate in the Restructuring or to submit their shares for redemption by the Company at the Class A Redemption Price;
- increased liquidity as shares of the Continuing ETF will be redeemable on a daily basis and allow for intra-day liquidity;
- the elimination of material trading discounts to NAV;
- enhanced ability to grow, as shares of the Continuing ETF will be continuously offered at NAV;
- decreased leverage costs for the Continuing ETF; and
- the ability to maintain leverage as the NAV of the Continuing ETF increases, so that strong performance does not dilute future returns for the Continuing ETF.
The Restructuring will be subject to the receipt of all necessary regulatory, stock exchange and shareholder approval, as well as obtaining any necessary exemptive relief under applicable securities laws in order to effect the proposed Restructuring and the receipt of a final prospectus for the Continuing ETF. The Restructuring cannot be completed until the required approvals are received, and there can be no assurance that the Restructuring will be completed as proposed or at all. Full details regarding the proposed Restructuring will be outlined in the Circular to be mailed to shareholders of the Company in advance of the Meeting.
Evolve is one of Canada’s fastest growing ETF providers since launching its first suite of ETFs via the Toronto Stock Exchange in September 2017. Evolve is a leader in thematic ETFs and specializes in bringing innovative ETFs to Canadian investors. Evolve’s suite of ETFs provide investors with access to: (i) long term investment themes; (ii) index-based income strategies; and (iii) some of the world’s leading investment managers. Established by a team of industry veterans with a proven track record of success, Evolve creates investment products that make a difference. For more information, please visit www.evolveetfs.com.
There are ongoing fees and expenses associated with owning shares of an investment fund. An investment fund must prepare disclosure documents that contain key information about the Company. You can find more detailed information about the Company in the public filings available at www.sedar.com. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.
Certain statements contained in this news release constitute forward-looking information within the meaning of Canadian securities laws, including statements regarding the structure of the proposed Restructuring and the Continuing ETF, the holding of the Meeting, the reconstitution of the Company’s portfolio to be invested primarily in cash and cash equivalents, the redemption price of the Preferred Shares, the redemption rights of the holders of the Class A Shares, the listing of the shares of the Continuing ETF on the Exchange, the investment objectives and strategies of the Continuing ETF, the fees and amendments to the Management Agreement in respect of the Continuing ETF, Evolve’s entitlement to the accrued Performance Bonus, the change in the name of the Company following the Restructuring, the composition of management and the board of directors of the Company following the Restructuring, any anticipated benefits of the proposed Restructuring listed herein, any necessary exemptive relief under applicable securities laws in order to effect the proposed Restructuring and the receipt of a final prospectus for the Continuing ETF, and the receipt of all necessary regulatory, stock exchange, shareholder and IRC approval, if at all. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. These forward-looking statements are made of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances. Such statements and information are based on assumptions, estimates, opinions and analysis made by management in light of its experience, current conditions and its expectations of future developments as well as other factors which it believes to be reasonable and relevant. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied in the forward-looking statements and information and accordingly, readers should not place undue reliance on such statements and information. Although each of Evolve and the Company believes, in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate, that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because neither Evolve nor the Company can give any assurances that they will prove to be correct. In evaluating forward-looking statements and information, readers should carefully consider the various factors which could cause actual results or events to differ materially from those expressed or implied in the forward-looking statements and forward-looking information. The statements in this press release are made as of the date of this release.