GrowthWorks Canadian Fund Ltd. and GrowthWorks Ltd.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief to permit dissident investment fund to solicit proxies by broadcast, speech or publication provided that the dissident complies with the applicable requirements of National Instrument 51-102 Continuous Disclosure Obligations -- relief required in context of a proxy contest related to a proposed reorganization of certain mutual funds -- relief limited to soliciting proxies to oppose transaction put forward by management.

Applicable Legislative Provisions

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 12.2(2)(b), 17.1.

July 15, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

GROWTHWORKS CANADIAN FUND LTD.

AND GROWTHWORKS LTD.

(the "Filers")

DECISION

Background

The securities regulatory authority or regulator in the Jurisdiction (the "Principal Regulator") has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the "Legislation") of the Principal Regulator for a decision (the "Exemption Sought") that pursuant to Part 17 of National Instrument 81-106 Investment Fund Continuous Disclosure ("NI 81-106") the Filers be exempted from the requirements of section 12.2(2)(b) of NI 81-106 with respect to the solicitation of proxies by the Filers in connection with shareholder meetings, including any adjournment(s) or postponement(s) thereof, of The VenGrowth Investment Fund Inc. ("VG I"), The VenGrowth II Investment Fund Inc. ("VG II"), The VenGrowth III Investment Fund Inc. ("VG III"), The VenGrowth Traditional Industries Fund Inc. ("VG TI") and The VenGrowth Advanced Life Sciences Fund Inc. ("VG ALS" and, collectively with VG I, VG II, VG III and VG TI, the "VenGrowth Funds") to consider the Covington Proposal (as defined below).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the Principal Regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of the Non-Principal Jurisdictions.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

1. GrowthWorks Canadian Fund Ltd. ("Canadian Fund") is a reporting issuer in each of the provinces and territories of Canada and is an investment fund for the purposes of Canadian securities laws. GrowthWorks Ltd. is not a reporting issuer in any province or territory of Canada. The head office of each of GrowthWorks Ltd. and the manager of Canadian Fund is located in Vancouver, British Columbia. The Filers are not in default of the securities legislation in any of those jurisdictions.

2. The VenGrowth Funds are labour-sponsored venture capital corporations ("LSVCCs"). VG I and VG II are corporations governed by the Business Corporations Act (British Columbia) (the "BCBCA"). VG III, VG TI and VG ALS are corporations governed by the Canada Business Corporations Act (the "CBCA"). The VenGrowth Funds are reporting issuers in the Principal Jurisdiction and some or all of the other provinces and territories of Canada and are investment funds for the purposes of Canadian securities laws. The head office of each of the managers of the VenGrowth Funds is located in Toronto, Ontario.

3. VG III, VG TI and VG ALS each have three classes of shares: Class A shares held by the public, Class B shares held by the manager of the fund and Class C shares held by the fund sponsor. VG I and VG II have two classes of shares: Class A shares held by the public and Class B shares held by the manager of the fund. There are in aggregate over 130,000 Class A shareholders of the VenGrowth Funds ("Class A Shareholders").

4. On July 7, 2011, the VenGrowth Funds announced that they had entered into a definitive agreement with Covington Capital Fund II Inc. regarding a merger proposal (the "Covington Proposal") and have called shareholder meetings to be held on August 25, 2011 (the "August Meetings") to consider that proposal.

5. The Filers wish to communicate with the Class A Shareholders in advance of the August Meetings, including any adjournment(s) or postponement(s) thereof, to solicit proxies from Class A Shareholders voting against the Covington Proposal (the "Solicitations").

6. The Filers wish to conduct the Solicitations by public broadcast, speech or publication, but without sending a physical copy of a dissident's proxy circular and form of proxy to each of the Class A Shareholders.

7. If any Solicitation refers to an alternative proposal to be made by the Filers to the Class A Shareholders (an "Alternative Proposal") the Filers will produce an information circular or other document (an "Alternative Proposal Disclosure") that will be posted to the Filers' website and filed on SEDAR and which will provide full disclosure of all material terms of the Alternative Proposal and prominently and clearly describe all known risks to such Alternative Proposal not being completed and any material all conditions to its completion.

8. Any Solicitation which refers to an Alternative Proposal will indicate that the Alternative Proposal is subject to risks and conditions to its completion and will disclose that the Alternative Proposal Disclosure is available on the Filers' website and on SEDAR.

9. Section 12.2(2)(b) of NI 81-106 provides that no person shall solicit proxies from registered holders of an investment fund that is a reporting issuer unless a dissident's proxy circular and form of proxy are provided to each holder whose proxy is solicited (the "Circular Requirement"). Section 12.3 of NI 81-106 provides exemptions from the Circular Requirement for solicitations only in respect of securities of which the person making the solicitation is the beneficial owner (the "Beneficial Owner Exemption") and solicitations where the total number of securityholders whose proxies are solicited is not more than 15 (the "15 Securityholder Exemption").

10. The BCBCA does not contain any restrictions on the solicitation of proxies in respect of reporting issuers. Section 150(1)(b) of the CBCA contains the Circular Requirement and Section 150(1.1) of the CBCA contains the 15 Securityholder Exemption. In 2001, the CBCA restrictions on proxy solicitation were further relaxed, pursuant to Section 150(1.2), to permit a person other than management of a corporation to solicit proxies without preparing and sending an information circular to shareholders if the solicitation is conveyed by public broadcast, speech or publication that includes certain prescribed information (the "CBCA Broadcast Exemption").

11. Prior to 2008, Sections 9.1 and 9.2 of National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102"), which applies to all reporting issuers other than investment funds, contained the same proxy solicitation regime as Sections 12.2 and 12.3 of NI 81-106, including the Circular Requirement, the Beneficial Owner Exemption and the 15 Securityholder Exemption. In July 2008, Section 9.2 of NI 51-102 was amended by adding subsections (4), (5) and (6), which provided for an exemption similar to the CBCA Broadcast Exemption, subject to certain additional disclosure requirements where the solicitation was in connection with a proposed significant acquisition or restructuring transaction or where the soliciting person is nominating or proposing to nominate a person for election as a director of the corporation (the "Enhanced Broadcast Exemption").

12. The Enhanced Broadcast Exemption was not added to NI 81-106; however, Part 17 of NI 81-106 provides that the Principal Regulator may make an order on any terms it considers appropriate exempting GrowthWorks from the application of any part of NI 81-106, including the Circular Requirement.

13. The Filers would be entitled to rely on the Enhanced Broadcast Exemption but for the fact that the VenGrowth Funds are investment funds.

Decision

The Principal Regulator is satisfied that the decision meets the test set out in the Legislation for the Principal Regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) the Solicitations are made to the Class A Shareholders by broadcast, speech or publication and the Filers comply with the requirements of subsections 9.2(4), 9.2(5) and 9.2(6) of NI 51-102 as if those subsections applied to proxy solicitations in respect of the VenGrowth Funds; and

(b) a copy of this order is provided to the VenGrowth Funds.