CDN Financial Semi 2010 Draft #8 Sedar Final_Man

GrowthWorks Canadian Fund Ltd. Financial Services – Commission I Financial Services – Commission II

Disclosure – This interim management report of fund performance contains financial highlights but does not contain the complete interim financial statements for these series of GrowthWorks Canadian Fund Ltd. (the “Fund”) Class A Shares. You can get a copy of the interim or annual financial statements at your request, and at no cost, by calling toll free 1-800-268-8244, by writing to us at 20 Queen Street West, Suite 3504, P.O. Box 35, Toronto, Ontario, M5H 3R3 or by visiting our website at www.growthworks.ca or SEDAR at www.sedar.com. Shareholders may also contact us using one of these methods to request a copy of the Fund’s proxy voting policies and procedures, or proxy voting disclosure record. Unless otherwise stated, all information in this report relates only to GrowthWorks Canadian Fund Ltd., Financial Services Commission I and Financial Services Commission II. These series are referred to collectively in this report as the “Financial Services Series” or “Series”. Where information is presented for all Series, individual Series information may vary slightly due to different cost and fee structures.

The Fund completed a merger with Capital Alliance Ventures Inc. (“CAVI”) and Canadian Science and Technology Growth Fund Inc. (“CSTGF”) on November 29, 2005, with First Ontario Labour Sponsored Investment Fund Ltd. (“FOF” or “First Ontario Fund”) on July 14, 2006, with ENSIS Growth Fund Inc. (“ENSIS”) on October 24, 2008 and with Canadian Medical Discoveries Fund Inc. (“CMDF”) on May 22, 2009 (the “Merged Funds”).

This report contains forward looking statements. These statements primarily relate to assessments of the future economic and market conditions for the Fund as well as the adoption of IFRS. Such information has been included to assist readers with assessing recent developments in the Fund's operating climate and possible future developments that may affect Fund performance. Events or circumstances may cause actual results to differ materially from those expressed or implied by such forward looking statements as a result of numerous known and unknown risks, including, but not limited to, economic and market conditions, changes to IFRS and the rules surrounding the adoption of IFRS and those referenced in the Fund’s filings with Canadian securities regulators. Most of these factors are beyond the control of the Fund and its manager. Neither the Fund nor its manager assumes any obligation to update any of the forward looking statements made in this report.

Our manager (the “Manager”) is GrowthWorks WV Management Ltd., a subsidiary of GrowthWorks Ltd., and our investment manager and principal distributor is GrowthWorks Capital Ltd. Our Manager and investment manager/principal distributor are related parties who manage several retail venture capital funds (“RVC”) across Canada. The Manager assumed management of the Fund as of November 29, 2002.

2010 Interim Management Report of Fund Performance For the period ended February 28, 2010

2010 Interim Management Report of Fund Performance February 28, 2010 Manitoba

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MANAGEMENT DISCUSSION OF FUND PERFORMANCE Results of Operations Net Asset Value (NAV) Total NAV for these Series closed at $4.47 million compared to $4.63 million at August 31, 2009. The decrease in total NAV was primarily the result of a realized loss on the sale of venture investments in the amount of $264,373, a realized loss on the sale of Index Notes in the amount of $4,366 and redemption activity of $9,795. These factors were partially offset by subscription activity of $136,539. See “Investment Portfolio” below. The following table provides comparative figures for NAV per share for each Series:

Net Asset Value per Share

Series February 28, 2010 August 31, 2009

Financial Services Commission I $8.31 $8.85 Financial Services Commission II $8.30 $8.84

The decrease in NAV per share was primarily the result of the factors noted above that caused the decrease in total NAV. Subscriptions and Redemptions Subscriptions during the period for Financial Services Series amounted to $136,539. Shareholders redeemed $9,795 in shares during the period compared to $9,215 during the same period in the prior fiscal year. Subscriptions and redemptions were in line with expectations given market and economic conditions. Revenue and Expenses Total investment income for the period was $31,116 (February 28, 2009: $49,168). This decrease was primarily the result of lower interest income earned on short-term investments as the size of the short-term investment portfolio decreased from $182,687 to $57,579 as a result of divestments required to fund ongoing operational commitments and redemptions of the Fund. Total operating expenses for the period were $140,795 (February 28, 2009: $139,934). The Fund’s primary expenses are management fees. As management fee expenses are based on fixed percentages as outlined in the management agreement between the Fund and its Manager, the expectation may be that expenses will increase or decrease relative to the increase or decrease in NAV for the period. However, the seasonal nature of the sales and redemption cycles of investment funds such as the Fund means that NAV may be lower for a significant portion of the period than the NAV at the end of the period. As a result, while NAV may increase by the end of a period the expenses incurred for the comparable periods may decrease or vice-versa. Additional expenses including trailer fees were also incurred by the Series. See “Management Fees” below. Liquidity We monitor and manage liquidity at the Fund level based on activities that draw on liquidity, capital raised and realized and unrealized appreciation or depreciation of investments. Activities that draw on liquidity are (1) new and follow-on venture investments, (2) management fees and other operating expenses, and (3) redemptions of Class A Shares, in particular shares that may be redeemed without repayment of tax credits or payment of an additional redemption fee. Current liquidity coverage at the Fund level is presently adequate to meet current and foreseeable contractually committed outlays. In accordance with the requirements of the Manitoba Labour-Sponsored Venture Capital Corporations Act, the Fund has adopted a Reserves Policy and is actively monitoring its liquidity position.


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Investment Portfolio The investment portfolio for these Series consists of current venture investments, short-term investments (including capital required to be invested in eligible venture investments over time referred to as “Venture Pending Funds”), and cash/cash equivalents. The Series also includes funds used to make non-venture investments which we call “Directed Funds”. The Directed Funds of the Financial Services Series may include S&P/TSX Capped Financial Total Return Index Notes which are linked to equity or debt securities of the financial services sector or sub-sectors (the “Index Notes”). The portfolio mix as a percentage of NAV at the end of the period and prior year end is summarized as follows:

Financial Services Series Portfolio Mix as % of Net Asset Value February 28, 2010 August 31, 2009

Venture Investments * 99% 77% Short-term Investments and Bonds (incl. Venture Pending) 1% 4%

Index Notes - 19%

* Including cash/cash equivalents and net of liabilities. All series of the Fund’s Class A shares share in the same venture investment portfolio. Initial and follow-on venture investments made during the period (excluding debt repayment restructuring) amounted to $12.62 million and based on cost, brings the total current value of this portfolio to $300.52 million. Total aggregate venture investments represented 92.86% of total aggregate Fund NAV at the end of the period. The following new and follow-on venture investments were made during the period:

CFN Precision Ltd. CanPro Ingredients Ltd. Ambit Biosciences (Canada) Corp.

Inocom Inc. Kibboko Inc. Gemin X Biotechnologies Inc.

BTI Photonic Systems Inc. Receptor Therapeutics Inc. Praxim SA.

Aizan Technologies Inc. Kraus Global Inc. Resonant Medical Technologies Inc.

Covarity Inc. Monteris Medical Inc. ViOptix Canada Inc.

Ascentify Learning Media Inc. Perspecsys Inc. Viron Therapeutics Inc.

AppZero Corp. Peerset Inc. Strida Pharma Inc.

Topigen Pharmaceuticals Inc.

In addition, the Fund fully or partially divested from the following venture investment holdings:

WGCC Holdings Inc. (Willows Golf & Country Club) MedTech Partners Inc. Semiconductor Insights Inc.

Greenarm Development Partners Inc. I-MMERSION Inc. International Datacasting Corp.

Objectworld Communications Corp. Ejust Systems Inc. TeraGo Networks Inc.

Info Tech Inc. Activplant Corp. Transition Therapeutics Inc.

Prairie Flour Mills Ltd. Biomedical Photometrics Inc. Waterloo Ventures Inc. The venture portfolio generated gross proceeds of $12.41 million from either fully or partially divested venture investment holdings resulting in a net realized loss of $21.71 million, which was shared proportionately among all series of the Fund’s Class A Shares. Following the investment and divestment activity during the period, the venture portfolio sector composition changed from the prior year end sector composition based on Fund NAV. See “Summary of Investment Portfolio”. The aggregate size of the Fund’s venture investment portfolio decreased by $19.59 million during the period, a net decrease of 6.12% from the prior year end, and was largely derived from exchange rate fluctuations and dispositions. While the value of the venture investment portfolio decreased during the period, reductions in the short-term investments and directed funds portfolios required for operational commitments, redemptions and to fund investments in the venture portfolio, resulted in a significant increase in the percentage of NAV held in venture investments.


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The Fund incurred net realized and unrealized losses for the period in both its private and public venture portfolios. The public venture portfolio was affected by continuing volatility in the market environment for small-cap public companies, and the value of one public-company holding, Transition Therapeutics Inc., was particularly impacted by test results from one of its drug development programs. The private venture portfolio was partially affected during the period by the strengthening of the Canadian dollar against the U.S. dollar, which adversely impacted certain investments denominated in U.S. dollars. The balance of the losses in the private venture portfolio was a result of realized losses from divestitures completed during the period and a number of unrealized losses caused by a number of companies that were completing financing transactions at reduced valuation levels relative to previous transactions. This was primarily due to the continuing low level of initial public offering (“IPO”) and merger and acquisition (“M&A”) activity and declining supply of venture capital. Consequently, the venture portfolio as a whole experienced disappointing performance over the period. The depressed state of venture capital supply and the continuing low levels of IPO and M&A activity for technology and life sciences based companies has affected the Fund’s ability to realize gains on a number of its investments. That said, the level of activity and valuations in technology acquisitions is improving on a year-on-year basis and a number of our investments are well-positioned to benefit from that trend. As a result, we remain confident that the long-term prospects of the Fund’s venture portfolio are positive and are cautiously optimistic that opportunities to realize on selected investments will arise in the medium term. Short-term investments are comprised of investments in bonds and deposits, which may include high quality debt instruments. Short-term investments for these Series (which includes Venture Pending Funds) decreased by $125,108 during the period due primarily to divestments of short-term investments to meet operational commitments, redemptions and to fund investments in the venture portfolio. Directed Funds investments held by a series will vary depending on the particular series of Class A shares purchased, and range from GICs to investments linked to Canadian market equities. The investment strategy for the Directed Funds of the Financial Services Series is generally to invest in reserves which offer participation in the securities of issuers whose business activities are in the financial services sector or sub-sectors such as banking, wealth management and insurance, including reserves whose returns are linked to the performance of equity or debt securities of such issuers. Some level of on-going cash balances may also be held as part of the Directed Funds of the Series. Our portfolio adviser may change the selection of non-venture investments within the area of focus for Directed Funds based on its investment outlook from time to time. In keeping with the Directed Funds investment strategy, these series may invest in Index Notes such as the S&P/TSX Capped Financial Total Return Index Notes. Notes of this nature contribute to the returns of the series through capital appreciation or depreciation of the notes based on market fluctuations. During the period, the Financial Services Series fully divested from the investment in Index Notes. These divestments resulted in realized losses of $4,366 for the Series and were primarily to meet operational commitments, redemptions and to fund investments in the venture portfolio. The Fund expects to re-invest in such Directed Funds as and when operating needs permit. Investment Pacing As at the end of the period, the Fund is current with its investment pacing requirements. Investment pacing requirements are described in detail in the Fund’s prospectus.

Recent Developments The Fund commenced offering the CMDF Reinvestment series of Class A Shares (Commission I and II) on November 10, 2009. Effective February 12, 2010, as approved by shareholders, the rights and restrictions attached to the Fund’s Class C shares (the “IPA Shares”) were amended to implement previously agreed upon reductions to the Manager’s entitlement to receive dividends on the IPA Shares in respect of investments acquired as a result of the Fund’s mergers with ENSIS and CMDF.


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The Ontario government has adopted legislation providing for the phase-out of the Ontario RVC tax credit. Ontario purchasers of the Fund’s Class A shares are eligible to receive a 10% tax credit for the 2010 taxation year and a 5% tax credit for the 2011 taxation year. After the 2011 taxation year, no RVC tax credit will be available. The maximum investment that qualifies for the RVC tax credit is $7,500. The maximum annual Ontario RVC tax credit for purchases of the Fund’s Class A shares is $750 for the 2010 taxation year and $375 for the 2011 taxation year. The federal tax credit remains at 15% subject to a maximum of $750.

Effective January 15, 2010, GrowthWorks Ltd. (parent company to the Fund’s investment manager), Matrix Asset Management Inc. (“Matrix”) and SEAMARK Asset Management Ltd. completed a business combination pursuant to which GrowthWorks Ltd. and SEAMARK Asset Management Ltd. became subsidiaries of Matrix, a TSX listed company (TSX: MTA). On the closing of the business combination, shareholders of GrowthWorks Ltd. received approximately 75% of Matrix’s issued and outstanding common shares. These Matrix common shares are subject to escrow arrangements with shares released over the course of four years following closing. Matrix is a diversified asset and wealth management company with offices across Canada and manages approximately $3.0 billion in assets through three operating divisions, including the Venture Capital Operating Division of which the Fund’s manager is a member.

The CICA Accounting Standards Board ratified a strategic plan in 2006 that will result in Canadian GAAP, as used by the Fund, converging with International Financial Reporting Standards (“IFRS”) over a transitional period to be completed by 2011. The International Accounting Standards Board also has projects currently underway that should result in new pronouncements which will be included in the convergence process. The Manager is continuing its detailed assessment of the requirements of IFRS, with the intention of identifying differences, if any, in accounting policies that may be adopted by the Fund, selecting the policies which are appropriate for the Fund, identifying the need for and formulating appropriate disclosure for the Fund’s financial statements prepared under IFRS and developing an implementation plan to complete the transition to IFRS by September 1, 2011. The Manager has identified and planned the key elements and timing for the transition. The key elements of the plan include disclosures of the qualitative impact, if any, in the August 31, 2009, 2010, and 2011 financial statements, disclosures of the quantitative impact, if any, in the August 31, 2011 financial statements and the preparation of the August 31, 2012 annual (and February 29, 2012 interim) financial statements including comparative balances for the preceding period, in accordance with IFRS. The plan also considers the impact and requirements of information technology, data systems, financial reporting, and risk management activities. Based on the Manager’s current evaluation of the differences between Canadian GAAP and IFRS, the Manager does not expect that Net Assets will be impacted significantly by the transition to IFRS. The Manager expects the impact of IFRS on the Fund’s financial statements will primarily be in presentation changes and additional note disclosure.

The six month period ending February 28, 2010 showed improved operating conditions over the previous reporting period. As a result of extensive fiscal and monetary stimulus efforts by governments and central banks around the world, the world economy grew after suffering through the worst economic contraction since the Great Depression. Economists have come to a general consensus about growth for the remainder of 2010, albeit at lower levels than past recoveries. However, some economists warn that a “double-dip” recession is still possible. These economists point to rising sovereign debt levels and declines in private consumption levels in the US. While the Fund’s operating environment was healthier, conditions were difficult compared to historical norms. The Fund exits its investments through two methods, either in a merger and acquisition (M&A) transaction or share sales after an investee company’s initial public offering (IPO). Limited IPO and M&A activity in North America since late 2008, due to poor economic and equity market conditions, has significantly limited the Fund’s ability to exit mature portfolio assets. While the IPO market remained slow during the six month period ended February 28, 2010, the M&A market showed improvement. During the period October 1 to December 31, 2009, only 4 venture-backed companies completed IPOs in the US and 12 were completed in calendar year 2009. To put these figures into context, the last healthy IPO market occurred in 2007 when 86 venture-backed IPOs were completed. Similar to the experience in the US, Canadian equity markets had a poor year as only one venture-backed IPO was completed in all of 2009, which matches the total for 2008. While the IPO market struggled, the US M&A market rebounded with US$7.8 billion in M&A transactions during the fourth quarter of 2009. M&A activity during the fourth quarter of 2009 exceeded the level of activity for the previous year, which is a positive sign that a vigorous M&A market has returned.


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The Fund’s manager continues to identify lack of funding partners as an issue to monitor for 2010. According to the Canadian Venture Capital Association, in 2009 Canadian venture capital investing hit its lowest level in 14 years. The Fund’s portfolio companies depend on multiple rounds of financing from multiple capital sources. The reduction in available capital sources increases the difficulty in raising future venture capital rounds, thereby hindering growth and milestone achievement and ultimately the timing of the Fund’s exit and the quantum of returns. The Fund’s manager and other industry participants highlighted this problem to both Provincial and Federal Governments and continue to work with both levels of government to find potential solutions. Subsequent to the end of the reporting period, the Federal Government repealed taxation legislation that impeded foreign venture capital firms from investing in Canada. Based on this action, the Fund’s manager believes that more foreign venture capital may become available to the Fund’s portfolio companies. The Fund’s manager is cautiously optimistic that 2010 will show stronger performance with projections of improved economic conditions and healthier public equity markets evident late in the reporting period. Healthier public markets should lead to increased IPO and M&A activity. In economic recessions, companies cut research and development budgets and cut product lines to maintain profitability. M&A activity is put on hold as acquisitions are rarely immediately accretive to earnings. Coming out of recessions, M&A activity tends to increase as the same companies have greater access to capital and look to M&A for accretive acquisitions and to expand product lines.

Related Party Transactions The Fund pays the Manager fees based on fixed percentages of NAV for management and administrative services provided to the Fund under a management agreement. See “Management Fees” below. Fees charged to these Series during the period were $122,685, including applicable GST. The Fund also reimburses the Manager or other related entities any interest expense incurred in the financing of sales commissions. Payments to the Manager by the Series during the period are detailed under “Management Fees”. The management agreement may be terminated by either party if the other party becomes bankrupt or insolvent or is in material breach of the agreement and does not remedy the breach within 60 days of notice from the other party. The Fund may also terminate the management agreement if the Manager does not maintain necessary securities registrations or by resolution of the Board if the resolution is ratified by a special resolution of the Fund’s shareholders. The termination would be effective five years after such ratification. The Manager may also terminate the management agreement if the Fund changes its fundamental investment objectives or policies. The Manager has engaged an affiliate, GrowthWorks Capital Ltd., at its own cost, to provide investment advice and principal distributor services to the Fund. The Manager owns Class C shares of the Fund, which entitle the Manager to receive dividends (“IPA dividends”) based on realized gains and income resulting from the Fund’s venture investments. No IPA dividends were paid during the period, however IPA dividends of $1,712 were accrued and allocated to the Financial Services Series during the period. In addition, contingent IPA of $2,298 was recorded for the period. Contingent IPA is not an amount that was actually paid or payable, but is an estimate of IPA dividends that would have been payable had the entire venture portfolio been disposed of at the estimated fair value as of the end of the period. The Manager has agreed to reduce its entitlement to receive IPA Dividends in respect of venture investments acquired under the CMDF Merger. For investments acquired from CMDF, the Manager agreed to apply a separate portfolio test to the portfolio of venture investments acquired from CMDF. Before an IPA Dividend is paid on an investment acquired from CMDF, the IPA portfolio test (5-year GIC return plus 2%) must be satisfied in respect of the overall venture portfolio and in respect of the portfolio of investments acquired from CMDF. The Fund’s assets and liabilities are allocated in the records of the Fund among all series of Class A Shares of the Fund in accordance with the particular investment policies and expenses and charges applicable to the particular series. Certain investments and other assets, including cash, are allocated among multiple series of Class A Shares of the Fund through the use of inter-series receivable and payable accounts. The Series also incur inter-series receivables and payables on the reallocation of the Fund’s various shared portfolios. All inter-series allocations occur at fair value. All inter-series balances are non-interest bearing, unsecured and have no specific repayment terms.


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FINANCIAL HIGHLIGHTS The following tables show selected key financial information about these Series and are intended to help you understand each Series’ financial performance for the most recent period and the past five years. This information is derived from the Fund’s interim financial statements.

Financial Services Commission I Net Assets per Share (1)

Feb 28, 2010 (3) 2009 (3) 2008 (3) 2007 (3) 2006 (3) 2005 (3)

Net assets per share, beginning of period (2) $8.85 $10.33 $11.04 $10.46 $9.83 $9.07 Increase (decrease) from operations:

Total revenue $0.06 $0.20 $0.23 $0.37 $0.25 $0.23

Total expenses and amortization ($0.26) ($0.55) ($0.64) ($0.62) ($0.63) ($0.59) Realized gains (losses) for the period ($0.51) ($0.47) $0.75 - $1.30 $0.15 Unrealized gains (losses) for the period $0.17 ($0.59) ($1.17) $0.75 ($0.32) $0.90 Total increase (decrease) from operations (2) ($0.54) ($1.41) ($0.83) $0.49 $0.60 $0.69

Distributions:

From income (excluding dividends) - - - - - -

From dividends / capital gains - - - - - -

Return of capital - - - - - -

Total annual distributions - - - - - -

Net assets per share at end of period (1) $8.31 $8.85 $10.33 $11.04 $10.46 $9.83

Ratios and Supplemental Data Total net asset value (000’s) (3) $1,705 $1,767 $1,881 $1,775 $1,174 $781 Number of shares outstanding (000’s) (3) 205 200 182 161 112 79

Management expense ratio before IPA 6.11% 5.95% 5.99% 5.31% 5.71% 6.07%

Total management expense ratio (MER) (4) Earned IPA Contingent IPA(5)

6.29% 0.08% 0.10%

6.22% 0.00% 0.27%

6.24% 2.71% -2.46%

7.74% 1.21% 1.22%

8.22% 2.26% 0.26%

8.40% 1.80% 0.53%

Total MER before waivers or absorptions 6.29% 6.26% 6.42% 7.92% 8.22% 8.40%

Trading expense ratio (6) 0.01% 0.00% 0.00% 0.02% 0.03% 0.07%

Portfolio turnover rate (7) 5% 31% 26% 23% 67% 57%

NAV per share at end of period $8.31 $8.85 $10.33 $11.04 $10.46 $9.83


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Financial Services Commission II

Net Assets per Share (1)

Feb 28, 2010 (3) 2009 (3) 2008 (3) 2007 (3) 2006 (3) 2005 (3) Net assets per share, beginning of period(2) $8.84 $10.33 $11.05 $10.46 $9.83 $9.07 Increase (decrease) from operations:

Total revenue $0.06 $0.20 $0.21 $0.37 $0.27 $0.24

Total expenses and amortization ($0.27) ($0.55) ($0.63) ($0.61) ($0.65) ($0.57) Realized gains (losses) for the period ($0.50) ($0.47) $0.67 $0.01 $1.12 $0.15 Unrealized gains (losses) for the period $0.17 ($0.61) ($1.06) $0.78 ($0.23) $0.87 Total increase (decrease) from operations (2) ($0.54) ($1.43) ($0.81) $0.54 $0.52 $0.69

Distributions:

From income (excluding dividends) - - - - - -

From dividends / capital gains - - - - - -

Return of capital - - - - - -

Total annual distributions - - - - - -

Net assets per share at end of period (1) $8.30 $8.84 $10.33 $11.05 $10.46 $9.83

Ratios and Supplemental Data Total net asset value (000’s) (3) $2,768 $2,864 $3,090 $2,611 $1,719 $788 Number of shares outstanding (000’s) (3) 333 324 299 236 164 80

Management expense ratio before IPA 6.24% 6.02% 5.97% 5.32% 5.52% 5.90%

Total management expense ratio (MER) (4) Earned IPA Contingent IPA(5)

6.42% 0.08% 0.10%

6.29% 0.00% 0.27%

6.23% 2.56% -2.30%

7.71% 1.18% 1.21%

7.92% 2.11% 0.29%

8.21% 1.80% 0.50%

Total MER before waivers or absorptions 6.42% 6.33% 6.41% 7.88% 7.92% 8.21%

Trading expense ratio (6) 0.01% 0.00% 0.00% 0.02% 0.03% 0.07%

Portfolio turnover rate (7) 5% 31% 26% 23% 67% 57%

NAV per share at end of period $8.30 $8.84 $10.33 $11.05 $10.46 $9.83

Notes: (1) This information is derived from the Series’ unaudited interim and audited annual financial statements. (2) Net assets and distributions are based on the actual number of shares outstanding at the relevant time. The increase/decrease from

operations is based on the weighted average number of shares outstanding over the financial period. (3) This information is presented as of August 31 of the year shown and February 28 for the interim period. (4) Total management expense ratio is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated

period and is expressed as an annualized percentage of average weekly NAV during the period. (5) Contingent IPA is not an amount that was actually paid or is payable and is currently not determinable. Rather it is an estimate of the

Earned IPA that would have been payable if the Fund’s entire venture portfolio had been disposed of at the estimated fair market value. See the Prospectus for further details.

(6) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of average weekly net assets during the period.

(7) A Series’ portfolio turnover rate indicates how actively that Series’ portfolio advisor manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Series buying and selling all of the securities in its portfolio once in the course of the period. The higher a Series’ portfolio turnover rate in a period, the greater the trading costs payable by the Series in the period, and the greater the chance of an investor receiving taxable capital gains in the period. There is not necessarily a relationship between a high turnover rate and the performance of a Series. This rate includes the turnover of venture and non-venture investments.

Management Fees

The Manager provides management services (including day-to-day management and investment management) and administrative services (including administration, sales and marketing) to the Fund under an amended and restated management agreement dated July 15, 2006. Under the terms of the agreement, the Manager is entitled to a management fee of 2.04% of average NAV and an annual base administration fee on a declining basis as follows: 1.95% of average NAV up to $300 million, 1.77% for the next $200 million and 1.58% beyond $500 million. The management and base administration fees are calculated and paid monthly on the average NAV of the Fund. There is also an annual capital retention administration fee of 0.75% of the original purchase price of Financial Services Commission I Series and 1.1625% of the original purchase price of Financial Services Commission II Series, in each case payable in respect of shares that remain issued and unredeemed. This fee is calculated and paid monthly for the Manager’s efforts to retain capital within the Fund. This fee ceases in respect of shares outstanding for more than 8 years.


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CAVI (Pre merger)

-4.04%

-19.72%

-6.11%

1.51%

-5.78%

65.14%

8.61%

-31.15%-40%

-20%

0%

20%

40%

60%

80%

1999 2000 2001 2002 2003 2004 2005 Periodending Nov29, 2005

CSTGF (Pre merger)

-9.30%

-38.48%

-25.95%

-0.23%-7.08%

44.35%

-1.95%

-22.86%

-60%

-40%

-20%

0%

20%

40%

60%

1999 2000 2001 2002 2003 2004 2005 Periodending Nov29, 2005

Financial Servies - Commission I

5.64%

-6.43%-5.13%

0.34%

-6.10%

-10.00%

5.49%

8.38%

2.37%0.87%

-12%

-2%

8%

2004 2005 PeriodendingNov 29,

2005

PeriodendingAug 31,

2006

2007 2008 PeriodendingOct 24,2008

PeriodendingMay 22,

2009

PeriodendingAug 31,

2009

PeriodendingFeb 28,2010

Financial Services - Commission II

-6.52%-5.13%

0.34%

-6.11%

-10.10%

5.60%

0.90%2.37%

8.38%

5.49%

-14%

-4%

6%

2004 2005 Periodending

Nov 29,2005

PeriodendingAug 31,

2006

2007 2008 PeriodendingOct 24,

2008

PeriodendingMay 22,

2009

PeriodendingAug 31,

2009

PeriodendingFeb 28,2010

For the period, the aggregate amount of fees charged to these Series was $122,685, including $5,842 in GST. The breakdown of those fees is as follows: management fees of $48,684 (including $2,318 in GST), representing 39.68% of fees paid to the Manager, annual base administration fees of $45,813 (including $2,182 in GST), representing 37.34% of fees paid to the Manager, and annual capital retention administration fees of $28,188 (including $1,342 in GST), representing 22.98% of fees paid to the Manager. Service fees of 0.5% per year amounted to $4,171 for the period and were paid directly by these Series to dealers. Directors fees of $2,572 for the period were paid by these Series. PAST PERFORMANCE The performance data provided assumes reinvestment of distributions, if any, and does not take into account redemption or other charges directly payable by any shareholder that would have reduced returns. Past performance does not necessarily indicate how a series will perform in the future. While it is assumed that distributions made by the Fund are reinvested, to date none of the Financial Services Series have made any distributions which could be re-invested. Return information may vary due to different cost and fee structures and different levels of share redemption activity among these Series. The Fund completed material merger transactions with CAVI and CSTGF in 2005, with ENSIS in 2008 and with CMDF in 2009. In accordance with securities law requirements, historical performance for each merged fund is provided up to the date of the applicable merger and historical performance for the Financial Services Series is provided before, between and after merger dates up to February 28, 2010. Year-by-Year Returns The bar charts below show each Series’ performance for each of the periods shown, and illustrates how each Series’ performance has changed from year to year and for the interim period. The bar charts show in percentage terms, how much an investment made on September 1 (or the applicable merger date) would have grown or decreased during the applicable year ended August 31, other financial period or next merger date within the same year, as applicable.


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ENSIS (Pre merger)

-2.91%

0.44%

-1.77%

-5.28%

-2.97%

-8.07%

1.60%

-1.97%

-0.31%-0.41%

-1.80%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 PeriodendingOct 24,2008

CMDF (Pre merger)

8.02%

-14.06%-10.25%

-13.44%

-36.64%-31.40%

-24.31%

-8.32%-13.15%

34.13%

-8.15%-16.22%

-11.17%

-25.40%

-50%

0%

50%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Periodending May

22, 2009

CMDF 201 CMDF 202

Annual Compound Returns The table below shows each Series’ annual compounded performance (or period performance for periods of less than one year) for the given periods, compared with the Globe Retail Venture Capital Peer Index (“Globe Peer Index”). The Globe Peer Index is a mutual fund sector specific index that combines data from similar funds, in this case RVCs, to provide sector average return information. As clarified by the Ontario Securities Commission, an investment fund is required to include comparative information for a broad-based market index. The Fund has selected the NASDAQ Composite Index denominated in Canadian dollars due to its significant exposure to technology and life sciences companies. As the chart reveals, the Financial Services Series has outperformed the NASDAQ Composite Index in all but the most recent periods. The unprecedented NASDAQ gains during the most

(1) CMDF 202 2007 returns are for the period from December 1, 2006 to August 31, 2007

(1)


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recent period reflect recovery from significant losses in the market during late 2008 and early 2009. The performance of the NASDAQ Composite Index can be an indicator of the M&A and IPO activity within the sectors represented by the Index, including the technology and life sciences sectors. To the extent that the Fund has investments within those sectors, changes in M&A and IPO activity can impact the value of the Fund’s venture investments, opportunities for the Fund to dispose of such investments and, potentially, Fund returns. For instance, increasing performance of the Index may increase the number of potential acquirers for the Fund’s venture investments since stock compensation is often the acquisition currency used in M&A transactions. This can positively influence the value of the Fund’s venture investments, thereby increasing returns. By contrast, declining performance of the Index may be an indicator of decreased M&A and IPO activity, which may in turn negatively impact the value of the Fund’s venture investments, thereby reducing returns.

Compound Returns (1)(2)

CMDF Merger to

February 28, 2010

ENSIS Merger to

CMDF Merger

Sept. 1, 2008 to ENSIS Merger

1 Year Pre August 31,

2008

CAVI/ CSTGF

Merger to ENSIS Merger

1 Year Pre CAVI/

CSTGF Merger

Inception to CAVI/

CSTGF Merger(3)

Financial Services Commission I

-5.78% -10.00% -5.13% -6.43% -1.93% 10.32% 9.28%

Financial Services Commission II

-5.79% -10.10% -5.13% -6.52% -1.93% 10.44% 9.28%

CAVI N/A N/A N/A N/A N/A -7.62% -1.22%

CSTGF N/A N/A N/A N/A N/A -22.10% -8.95%

ENSIS N/A N/A 1.60% -8.07% -3.88% -3.82% -1.97%

CMDF 201 (4) N/A -32.21% 1.19% -24.31% -17.20% -10.08% -2.29%

CMDF 202 (4) N/A -37.17% 0.85% -25.40% N/A N/A N/A

Benchmark – Globe Peer Index Return -2.77% -7.37% -6.86% -15.67% -3.87% -2.50% N/A

Benchmark – NASDAQ Composite Index Return (C$) - Financial Services Commission I Series (inception date) - Financial Services Commission II Series (inception date)

21.14%

-6.54%

-17.29%

-12.42%

-7.46%

4.43%

1.24%

1.24%

Notes:

(1) Returns for periods of less than one year are not annualized.

(2) The Fund completed a merger with CAVI and CSTGF on November 29, 2005, with ENSIS on October 24, 2008 and with CMDF on May 22, 2009.

(3) Since inception dates are as follows: Financial Services Series (Commission I and II) November 28, 2003; CAVI October 31, 1994; CSTGF November 29, 1996; ENSIS March 1, 1998; CMDF 201 December 19, 1994; CMDF 202 December 1, 2006.

(4) Prior to the CMDF Merger, there were two series with different NAV and different inception dates in CMDF. As a result, returns are shown for both of CMDF 201 and CMDF 202.

When comparing the performance of the Series with the Globe Peer Index Return, readers should be mindful of economic factors unique to venture capital investing. Venture capital funds employ a wide range of investment strategies. Some funds focus on businesses at earlier stages of development and others focus on later stage businesses that allow for shorter investment cycles. While the Fund has a diversified portfolio of investments, many venture investments made by the Fund are in earlier stage businesses that may take four to eight years or longer to mature. As a result, different investment portfolios may have vastly different investment cycles, and this can have a significant effect on relative performance. Venture capital funds also employ different non-venture


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investment strategies and are impacted in varying degrees by economic factors such as changing interest and foreign exchange rates. We believe these factors should be considered when comparing the returns of these Series with the Globe Peer Index Return. SUMMARY OF INVESTMENT PORTFOLIO These Series have the same investment strategies and share the same investment portfolio. As a result, unless otherwise indicated, all information in this section is the same for these Series. The investment portfolio profile may change due to ongoing portfolio transactions within the Series. See the Statement of Investment Portfolio in the Fund’s financial statements for additional investment details and “Results of Operations – Investment Portfolio” for portfolio composition as at the end of the period. Top 25 Investments Financial Services Series The following table represents the top 25 ranking of investments within the total investment portfolio based on fair value as a percentage of NAV.

1 Cytochroma Canada Inc. 14 AppZero Corp. (Formerly Trigence Corp.) 2 Targeted Growth Canada Inc. 15 Aegera Oncology Inc. 3 BTI Photonic Systems Inc. 16 Viron Therapeutics Inc. 4 Ambit Biosciences (Canada) Corp. 17 Morega Systems Inc. 5 Camilion Solutions Inc. 18 Digital Payment Technologies Inc. 6 ViOptix Canada Inc. 19 Blueprint Software Solutions Inc. 7 CFN Precision Ltd. 20 Trillium Therapeutics Inc. 8 LibreStream Technologies Inc. 21 Spectral Diagnostics Inc. 9 Kraus Global Inc. 22 Med-Eng Systems Inc.

10 Cengea Solutions Inc. 23 Ascentify Learning Media Inc 11 1281216 Ontario Inc. (Castlemore Country Club) 24 Bothwell Cheese Inc. 12 xkoto Inc. 25 Covarity Inc.

13 Natrix Seperations Inc. TOTAL % OF NAV 61.05% The following charts show the venture investment portfolio for the Series as represented by sector and type of investment holding based on cost of like investments as a percentage of the total cost of the venture portfolio. The Fund’s venture investments generally consist of equity and debt investments. Debt investments are generally subordinated and in most cases are structured to be converted into shares of the portfolio company.

Investment Holdings based on Cost of Venture Investments

Debentures and other debt

24%

Preferred shares53%

Common shares23%

Sector Composition based on Cost of Venture Investments

Value-Added Agriculture

3%

Consumer2%

Energy / Environmental

4%

Computer hardware4%

Computer Services13%

Medical health1%Industrial

Automation2%

Electronics4%

Manufacturing12%

Community Small Business

Investment Funds2%

Communications10%

Computer software12%

BioTechnology31%


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Top 25 Venture Investments Financial Services Series The following table represents the top 25 ranking of investments within the venture investment portfolio based on fair value as a percentage of NAV.

1 Cytochroma Canada Inc. 14 AppZero Corp. (Formerly Trigence Corp.) 2 Targeted Growth Canada Inc. 15 Aegera Oncology Inc. 3 BTI Photonic Systems Inc. 16 Viron Therapeutics Inc. 4 Ambit Biosciences (Canada) Corp. 17 Morega Systems Inc. 5 Camilion Solutions Inc. 18 Digital Payment Technologies Inc. 6 ViOptix Canada Inc. 19 Blueprint Software Solutions Inc. 7 CFN Precision Ltd. 20 Trillium Therapeutics Inc. 8 LibreStream Technologies Inc. 21 Spectral Diagnostics Inc. 9 Kraus Global Inc. 22 Med-Eng Systems Inc.

10 Cengea Solutions Inc. 23 Ascentify Learning Media Inc 11 1281216 Ontario Inc. (Castlemore Country Club) 24 Bothwell Cheese Inc. 12 xkoto Inc. 25 Covarity Inc.

13 Natrix Seperations Inc. TOTAL % OF NAV 61.05%

CDN Financial Semi 2010 Draft #8 Sedar Final_Man

Economy & Finance

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