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December 14, 1993 Heritage Savings Trust Fund Act 47 Title: Tuesday, December 14, 1993 hs there were many reasons for building a fund of that size. I think one was that certainly we wanted to establish a large enough fund that Standing Committee on the Alberta Heritage Savings Trust Fund Act could cover a cross section of business activity throughout the province of Alberta. Secondly, we wanted to ensure that we could 10:00 a.m. complete the investment cycle in the venture capital industry S and [Chairman: Mr. Dunford] that investment cycle spans somewhere between seven and 10 years S the idea being that we would invest probably on average $20 MR. CHAIRMAN: I'd like to call the meeting to order. I see it's a million per year. Over a 10-year period, that would be roughly $200 half after 10. Just for the sake of the members, now is the normal million. time that we will be dealing with this: does anyone have a recom- Another concept at that particular time was that we wanted to mendation they wish to read into the record at this point? create a fund large enough that could be considered to be a player in Seeing no hands waving, the next item that I want to mention is the venture capital industry in North America. We wanted to ensure our infamous, carved-in-stone schedule. Thursday has been that we could attract the attention of other venture capital funds that canceled. The Alberta Heritage Foundation for Medical Research operate throughout North America. The process of venture capital will now be appearing before us on January 24, 1994, from 2 p.m. is that venture capital companies work together. Very seldom are to 4 p.m. We will be proceeding with Friday, and we will be you the only investor in a particular company. You try to attract proceeding with next Monday as is on your schedule. Any discus- coventures; you try to attract capital from other sources. In order to sion? attract that capital, you had to be seen as a player in the industry. When we were first formed, back in 1983, we were certainly the DR. MASSEY: You'll send out a new notice, the hourly report? largest venture capital fund in Canada, and we were one of the five or six largest funds in North America. Now, that has changed MRS. SHUMYLA: Yes. somewhat since. We are, I would suggest, the second largest fund in Canada, the largest being the solidarity fund based in Quebec. MR. CHAIRMAN: Diane will be circulating the hourly report to all I'm sure you are aware, but I'll just discuss very briefly the terms members, and I'll take the responsibility of phoning Lance at his of the loan with the heritage trust fund. It is a loan that does not home. I'll phone him in the middle of the night when I'm getting have a specific interest rate associated with it. The interest rate is home. basically equivalent to 50 percent of our pretax profits for any given Now I would like to introduce to the members Mr. Sandy Slator, year. There are ostensibly no principal payments for the first who is the S is it president, sir, of Vencap? number of years of the loan, the first 20 years of the loan as a matter of fact: $1,000 a year until the year 2003. Then in the year 2003 the MR. SLATOR: President and chief executive officer. loan starts to be repaid at the rate of $15 million a year, and there's a balloon payment in 2013 of approximately $50 million. MR. CHAIRMAN: President and chief executive, then, of Vencap With that background and overview let me summarize what our Equities Alberta Ltd. We're pleased, sir, that you are able to be here venture investing activities have accomplished during the first 10 before us today. I would ask the members to question thoroughly S years, because we are now just slightly more than 10 years old. that is our purpose S but also to keep in mind that this is a privately More than $245 million has been invested in 70 companies, held company, with shares, I guess S is it the Toronto Stock companies at all stages and in a broad range of industries. Contrary Exchange or the Alberta? to some perceptions, Vencap can invest in more than high-tech start- ups. Our large capitalization at the outset was to enable us to invest MR. SLATOR: It's a publicly traded corporation. in any opportunity that we believed could be built into a successful enterprise. I'll emphasize that aspect: our business is building MR. CHAIRMAN: I'm sorry. A publicly traded corporation. We successful businesses. might want to keep that in mind and of course understand that the In addition to doing start-up investments, we've also done preseed responses to your questions might have a sensitivity, then, toward and seed capital investments. I'll mention specifically the seed that. capital activity for the early stage or start-up activity. Out of the 70 Mr. Slator, we would invite you to perhaps provide us with an investments that we have made since inception, 33 of those have overview. We look forward to your comments. been pure start-ups or at a very early stage of the investment cycle. What is even more interesting is that 22 out of these 33 companies, MR. SLATOR: Great. Thank you very much, Mr. Chairman. As or 67 percent, are still in existence as companies. I think that's a I say, this is the first time that I have attended a session such as this, very remarkable statistic when you consider that in the start-up so I'm somewhat a little unfamiliar with the process. What I would activity, the success ratio throughout North America is really in the like to do is perhaps provide a five-to-seven-minute overview of 5 to 10 percent range. So 67 percent of our start-ups are still in Vencap and then open it to questions from you and provide answers existence. I think perhaps we've been quite lucky. I don't think the best I can. As the chairman indicated, we are a publicly traded there's any question about that, but I also know that we have chosen corporation, and I may have to be somewhat cautious in some of the our investments well and we have managed our investments well. answers that I do provide, keeping in mind that I can't say anything At the other end of the spectrum we have a number of investments that will dramatically affect either positively or negatively the share that are at the expansion stage, where we've invested in existing price of our company. We trade on a daily basis, as you're aware. companies that have significant opportunity for growth and are A brief overview. Vencap was established back on October 12, seeking capital to finance that growth. Our venture capital portfolio 1983, primarily as a publicly traded, privately managed venture runs the gamut from companies in the industrial manufacturing capital company. On October 12, 1983, we raised $44 million on the sectors to consumer products and retail and obviously to technology public markets, and coincident with that we secured a $200 million situations as well. Our portfolio is roughly one-half call it in the loan ostensibly from the heritage trust fund in order to provide us an industrial manufacturing sector, one-quarter in consumer products initial capitalization of approximately $244 million. At that time and retail, and one-quarter in technology. We cut a wide swath 48 Heritage Savings Trust Fund Act December 14, 1993 through the economic landscape of Alberta over the past 10 years. on a rotation with them. We'll be going back and forth between both Keep in mind that we have disposed of some companies; five the opposition and government members. I've been provided with companies out of the 70 have gone bankrupt. But our current a rotation list for the opposition members. We'll start with Mike portfolio of 38 companies and the Alberta segment of that portfolio Percy. employs in Alberta in excess of 10,000 people and accounts for somewhere in the neighbourhood of 2 and half to 3 percent of the DR. PERCY: Thank you, Mr. Chairman. Mr. Slator, in 1992 the private-sector labour force in this province. Our Alberta companies then minister of economic development and trade, Peter Elzinga, had alone have combined sales of $2.3 billion, representing approxi- requested to bring forward the Vencap Equities amendment Act. mately 4 percent of the gross provincial product. Put another way, This was a consequence of discussions between Vencap and the if we consolidated our financial statements S and we don't consoli- government relative to the mandate and repayment schedule. Can date our financial statements S Vencap would rank as the 52nd you tell me: are there discussions ongoing now with regards to largest publicly traded company in Canada. When you consider that legislation that might be brought forward? we do not invest and cannot invest in oil and gas exploration, real estate development, and banking and financial institutions, I think MR. SLATOR: I have not had any direct discussion with the that statistic is even more remarkable. government in power at the present time. Actually, discussions I 10:10 guess started back in approximately 1988, so I think there have been ongoing discussions, but I have not had any direct communication The geographic makeup of our investment portfolio, as I indicated with the government at present.

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