Growthworks Canadian Fund Ltd.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Labour-sponsored investment fund with same venture but different non-venture investment strategies among different series of Class A shares -- two proposed mergers of series of Class A shares referable to different sets of portfolio assets -- each set of two series a mutual fund under section 1.3 NI 81-102. Approval of mutual fund mergers under sections 5.5(1)(b) and 5.5(3) required because mergers do not meet the criteria for pre-approved reorganizations and transfers in section 5.6(1) of NI 81-102 -- different investment objectives, not a qualifying exchange, and current prospectus of continuing series inadvertently not included with meeting materials -- decision not a precedent with respect to non-inclusion of current prospectus with meeting materials.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.5(3), 5.6(1).

November 24, 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.

(the "Filer")

AND

IN THE MATTER OF THE FILER'S

VENTURE/INCOME COMMISSION I AND II

CLASS A SHARES ("Income Shares"),

VENTURE/DIVERSIFIED COMMISSION I AND II

CLASS A SHARES ("Diversified Shares"),

DECISION

Background

The principal regulator in the jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for approval (the "Approval") under paragraph 5.5(1)(b) of National Instrument 81-102 Mutual Funds ("NI 81-102") to merge its assets referable to its Income Shares with its assets referable to its Diversified Shares by converting its two series of Income Shares into the series of Diversified Shares with the corresponding commission structures (collectively, the "Conversions").

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

(a) Ontario 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 British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Northwest Territories, Nunavut, and Yukon Territory.

Interpretation

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

Representations

The decision is based on the following facts represented by the Filer:

The Manager

1. GrowthWorks WV Management Ltd. (the "Manager") is the manager of the Filer under a management contract. The Manager's administrative head office is in British Columbia, however capital raising and investing activities for the Filer are focussed in Ontario.

The Filer

2. The Filer is a corporation incorporated under the Canada Business Corporations Act (the "CBCA").

3. The Filer is a registered labour-sponsored investment fund corporation under the Community Small Business Investment Funds Act (Ontario), a registered labour-sponsored venture capital corporation ("LSVCC") under the Income Tax Act (Canada) (the "Tax Act") and The Labour-Sponsored Venture Capital Corporations Act (Manitoba) and an approved fund under the Labour-sponsored Venture Capital Corporations Act (Saskatchewan). The Filer's investing activities are governed by such legislation (the "LSIF Legislation").

4. The Filer primarily invests in small and medium sized businesses with the objective of obtaining long term capital appreciation and must make "eligible investments" in "eligible businesses" as prescribed under the LSIF Legislation.

5. The labour sponsor of the Filer is the Canadian Federation of Labour.

6. The authorized capital of the Filer is as follows:

(a) an unlimited number of Class A shares issuable in series, of which there are currently 23 series created (including two series of Income Shares and two series of Diversified Shares) and 8 series were offered under the Filer's current long form prospectus dated November 17, 2010, as amended (the "Prospectus");

(b) an unlimited number of Class B shares of which 1,000 Class B shares are held by the labour sponsor of the Filer; and

(c) an unlimited number of Class C shares issuable in series, of which there is one issued series designated as "IPA shares" and 100 of such shares are held by the Manager of the Filer to provide for a "participating" or "carried" interest in the venture investments of the Filer.

7. The Filer's shares are not listed on an exchange.

8. The Filer is a mutual fund as defined in the Securities Act (Ontario).

9. The Filer's investment objective is to achieve long-term capital appreciation by investing in a mix of venture and non-venture investments.

10. All outstanding series of Class A shares of the Filer participate in the same pool of venture investments pursuant to the same venture investment strategies. However, the Filer offers shareholders a different investment focus for non-venture investments.

11. Under the Prospectus, the Filer offered a "menu" of Class A shares (the "Menu Series") which consisted of eight series, as illustrated in the chart below: Venture/Diversified Commission I and II, Venture/Growth Commission I and II, Venture/Financial Services Commission I and II and Venture/GIC Commission I and II. The two series in each set of Menu Series, "Commission I" and "Commission II", reflect different commission structures, each corresponding to one of two dealer compensation options.

12. The Filer began offering its Menu Series in 2003.

13. As indicated by their names, the Menu Series are invested pursuant to different non-venture investment strategies with each set of two Menu Series therefore referable to a different portfolio of non-venture investments. Prior to the Filer closing sales of Class A shares on September 30, 2011, holders of Menu Series shares could generally switch from one Menu Series to another having the same commission structure.

14. The Menu Series were offered under the Prospectus until September 30, 2011, when the Filer closed sales of its Class A shares. The Filer previously offered two series of Income Shares which form part of the Menu Series. In connection with the Conversions, the Filer announced on October 7, 2010 that it will no longer offer Income Shares and that the other Menu Series may no longer switch into Income Shares. Consequently, Income Shares are not offered under the Prospectus. Historically, each prospectus of the Filer that qualified the distribution of Income Shares also qualified the distribution of Diversified Shares.

Menu Series proposed for conversion into series opposite its name	Commission Option	Menu Series Prospectus	Commission Option
Venture/Income Class A shares of the Filer	Commission I	Venture/Diversified Class A shares of the Filer	Commission I
	Commission II		Commission II
		Venture/Growth Class A shares of the Filer	Commission I
			Commission II
		Venture/Financial Services Class A shares of Filer	Commission I
			Commission II
		Venture/GIC Commission Class A shares of Filer	Commission I
			Commission II

Since the Filer commenced offering the Menu Series, (i) no material changes have been made to the investment objective or investment strategies of the Diversified Shares, and (ii) no changes to the fee and expense structure for Diversified Shares have been adopted, except for changes that were approved by shareholders in accordance with NI 81-102 and were also adopted on the same terms for Income Shares.

15. As at October 31, 2011, approximately 89% of the Fund's assets (by total value) was attributable to venture investments which are shared among all series of Class A shares and approximately 11% was attributable to non-venture investments, consisting primarily of divestment and other receivables, cash and short term investments all of which are shared among all series of Class A shares. Less than 5% of the non-venture investments held by the Income and Diversified Shares consist of investments specific to these Series' non-venture investment strategies. The Conversions will result in a merger of such series-specific non-venture investments, if any, held by the Income and Diversified Shares at the time of the Conversions.

16. Each series of the Filer's Class A shares that is referable to a separate portfolio of assets is treated as a separate mutual fund under section 1.3 of NI 81-102 and is treated as a separate investment fund for the purpose of reporting financial results under National Instrument 81-106 Investment Fund Continuous Disclosure ("NI 81-106"). At present, the Filer prepares and files six sets of financial statements and management reports of fund performance ("MRFPs") with respect to its 23 series of Class A shares. If two or more series are referable to the same portfolio of assets, the Filer files a single set of financial statements and MRFP for those series. Accordingly, the Filer is required to prepare and file fives sets of financial statements and MRFPs corresponding to each of the five sets of two Menu Series referred to above.

17. The net asset value ("NAV") of the Filer and the prices for each series of Class A shares of the Filer are calculated at least weekly, on the last business day of each week. The valuation policies and procedures for all series of Class A shares of the Filer are the same.

18. The management fees for the corresponding series of the Income Shares and Diversified Shares are the same.

19. The Filer is not in default of securities legislation in any jurisdiction.

The Conversions

20. A press release and material change report in respect of the Conversions were filed on SEDAR on October 7, 2011. Shares of the Income Shares ceased to be available for sale on that date. A subsequent press release and material change report were filed on SEDAR on September 30, 2011 and October 7, 2011, respectively, in each case disclosing the Filer's continuing intention to pursue the Conversions, subject to receipt of necessary regulatory and tax approvals.

21. The Conversions are intended to streamline the Filer's share capital structure by eliminating series that have overlapping non-venture investment strategies. The Filer believes that this will also create efficiencies with respect to the manner in which the Filer's financial results are tracked, compiled and reported for these different series of Class A Shares.

22. Shareholders of the Filer approved the Conversions at the Filer's annual and special meeting of shareholders held on June 28, 2011 (the "AGM") by way of a vote of all shareholders present or represented at the meeting and by way of separate series votes of holders of the Income Shares and Diversified Shares, in each case by way of a special resolution. In connection with the AGM, shareholders received an information circular dated May 30, 2011 (the "Circular") that contained details of the Conversions, including income tax considerations associated with the Conversions, and provided shareholders with information as to how to obtain copies of the Filer's Prospectus. This Prospectus qualifies the sale of the Diversified Shares along with other offered Menu Series as part of the Filer's continuous offering of Class A shares, discloses that the Income Shares are no longer offered under the Prospectus, and explains that the Income Shares are proposed to be converted into the Diversified Shares.

23. The Income Shares' non-venture investment strategies are to invest in high quality debt, high yield investments and investments linked to the performance of securities such as REITs, income trusts, royalty trusts, split share corporation securities, or preferred securities.

24. The current non-venture investment strategies of the Diversified Shares are to invest in high quality debt, high yield investments, investments linked to publicly traded equities and equity and debt securities of banks and other issuers in the financial services sector and issuers in the resource sectors. At the AGM, holders of Diversified Shares approved a change to the non-venture investment strategies of the Diversified Shares. The new non-venture investment strategies will be adopted prior to the effective date of the Conversions, and consist of investing in high quality debt, high yield investments and bank securities. The Circular explained that the Income Shares and Diversified Shares currently have overlapping non-venture investment mandates, and proposed the change to the non-venture investment strategies of the Diversified Shares mentioned above. The rights and restrictions attached to the Diversified Shares are the same as those attached to the Income Shares.

25. The Conversions are proposed to occur on or before November 29, 2011 and will be based on the NAV per share of the Income Shares relative to the NAV per share of the Diversified Shares. Accordingly, and as stated in the Circular, for a holder of Income Shares, the Conversions will result in a change in the number of the shares held but will not change the value of the shareholder's investment on conversion.

26. The Conversions will be effected by amendment to the Filer's Articles adding a conversion feature to each series of Income Shares that permits the Filer to convert the Income Shares into Diversified Shares.

27. The Filer has complied with Part 11 of NI 81-106 in connection with the Conversions.

28. While the Conversions will not represent "qualifying exchanges" under section 132.2 of the Tax Act or tax-deferred transactions under sections 85(1), 85.1(1), 86(1) or 87(1) of the Tax Act, they will qualify as tax-deferred transactions under other provisions of the Tax Act such that holders of Income Shares will not be liable for income tax as a result of the Conversions. A holder's adjusted cost base of Diversified Shares received on conversion of their Income Shares will be deemed to be equal to the average of the adjusted cost base of the converted Income Shares and the adjusted cost base of any other Diversified Shares held by the holder at the time of the conversion.

29. Holders of Income Shares and Diversified Shares were entitled to exercise dissent rights pursuant to and in the manner set forth in Section 190 of the CBCA with respect to the resolutions approving the Conversions. The Circular disclosed that shareholders who exercise dissent rights with respect to their shares will be subject to the requirement to repay federal and provincial tax credits. The Filer did not receive any dissent notices in connection with the Conversions.

30. Each Series of Class A shares of the Filer is priced weekly for purposes of effecting purchases of Series that are on sale and redemptions of all series. The proposed Conversions will not cause any interruption to an investor's ability to redeem his or her investment in Income Shares and Diversified Shares. Any such redemptions may be subject to tax withholdings under applicable LSIF Legislation. The Diversified Shares acquired by holders of the Income Shares upon the proposed Conversions are subject to the same redemption charges to which their Income Shares were subject prior to the Conversions.

31. Prior to September 30, 2011, Income Shares could switch into other Menu Series.

32. The portfolios and other assets of Income Shares to be converted into Diversified Shares as a result of the Conversions are currently, or will be, acceptable to the Manager of Diversified Shares prior to the effective date of the Conversions, and are or will also be consistent with the investment objectives of Diversified Shares.

33. The Circular referenced the recommendation of the Board of Directors of the Filer that shareholders vote in favour of the resolutions approving the Conversions.

34. Pursuant to National Instrument 81-107 Independent Review Committee for Investment Funds, the Independent Review Committee (the "IRC") of the Filer reviewed the potential conflict of interest matters related to the Conversions and, after reasonable inquiry, has determined that the Conversions would achieve a fair and reasonable result for the Income Shares and the Diversified Shares. The IRC recommended that the Filer proceed with the Conversions subject to shareholder and regulatory approval.

35. The costs of implementing the Conversions will be borne by the Manager of the Filer.

Approval of the Conversions

36. Approval of the Conversions is required because the Conversions do not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6(1) of NI 81-102 for the following reasons:

(a) A reasonable person might not consider the non-venture investment objectives of the Diversified Shares to be substantially similar to the non-venture investment objectives of the Income Shares, as required by section 5.6(1)(a)(ii) of NI 81-102;

(b) The Conversions will not represent "qualifying exchanges" within the meaning of section 132.2 of the Tax Act or be tax-deferred transactions under sections 85(1), 85.1(1), 86(1) or 87(1) of the Tax Act, as required by Section 5.6(1)(b) of NI 81-102;

(c) Through inadvertence, the materials sent to shareholders did not include copies of the Filer's Prospectus, as amended, as required by Section 5.6(1)(f)(ii) of NI 81-102. However:

(i) historically, each prospectus of the Filer that qualified the distribution of Income Shares also qualified the distribution of Diversified Shares;

(ii) since the Filer commenced offering the Menu Series, no material changes have been made to the investment objective or investment strategies of the Diversified Shares, and no changes to the fee and expense structure for Diversified Shares have been adopted, except for changes that were approved by shareholders in accordance with NI 81-102 which were also adopted on the same terms for the Income Shares; and

(iii) unlike a conventional merger of two separate investment funds, the Income Shares, Diversified Shares and other series of Class A Shares of the Fund participate in the same venture investment portfolio, which as at October 31, 2011 represented approximately 89% of the Filer's assets (by total value), with shared and series-specific non-venture investments representing approximately 11% of the Filer's assets. Less than 5% of the non-venture investments held by the Income and Diversified Shares consist of investments specific to these Series' non-venture investment strategies. The Conversions will result in a merger of such series- specific non-venture investments, if any, held by the Income and Diversified Shares at the time of the Conversions.

(d) The materials sent to shareholders also did not include a fund facts document of the Filer, as required by Section 5.6(1)(f)(ii) of NI 81-102, or a statement that an annual information form and fund facts document may be obtained from the Filer, as required by Section 5.6(1)(f)(iii) of NI 81-102 because the Filer is a LSVCC and, as such, does not have an annual information form or fund facts document.

(e) Notwithstanding paragraphs (c) and (d), the Circular sent to shareholders instead did:

(i) contain details of the Conversions, including income tax considerations associated with the Conversions, so as to allow holders of Income Shares to make an informed decision with respect to the Conversions;

(ii) disclose that shareholders may obtain a copy of the Filer's current prospectus, financial statements and MRFPs at no cost by accessing the SEDAR website at www.sedar.com, by accessing the Filer's website at www.growthworks.ca or by calling a toll-free telephone number (in which case the Manager would cause the requested material to be promptly mailed to the requesting shareholder); and

(iii) disclose that the Filer's current prospectus constitutes the Filer's business plan for the current year and that such prospectus describes the risks associated with making an investment in the Filer.

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 Approval is granted.