Working Ventures II Technology Fund Inc. - s. 9.1

IN THE MATTER OF

NATIONAL INSTRUMENT 81-105 – MUTUAL FUND SALES PRACTICES UNDER
THE SECURITIES ACT, R.S.O. 1990, c.S-5

AND

IN THE MATTER OF

WORKING VENTURES II TECHNOLOGY FUND INC.

O R D E R
(Section 9.1)

WHEREAS Working Ventures II Technology Fund Inc. (the "Fund") has made an application to the Ontario Securities Commission (the "Commission") for an order pursuant to Section 9.1 of National Instrument 81-105 – Mutual Fund Sales Practices (the "National Instrument") for an exemption from Section 2.1 of the National Instrument to permit the Fund to make certain payments to participating dealers or their representatives;

AND WHEREAS it was represented by the Fund that:

1.The Fund is a corporation incorporated under the laws of Canada on October 27, 2000.

2.The Fund was registered as a labour-sponsored investment fund corporation under the Community Small Business Investment Funds Act (Ontario) (the "CSBIF Act") on November 29, 2000, and as a result is prescribed as a labour-sponsored venture capital corporation under the Income Tax Act (Canada).

3.The Fund is a mutual fund as defined in Subsection 1(1) of the Securities Act, R.S.O. 1990, as amended (the "Act") and will distribute securities in Ontario under a prospectus. The Fund filed a preliminary prospectus dated October 31, 2000.

4.The Fund will invest in small and medium-sized Canadian technology companies with the objective of achieving long-term capital appreciation.

5.The sponsor of the Fund is the Canadian Federation of Labour, and the manager of the Fund is Working Ventures Investment Services Inc. (the "Manager").

6.The authorized capital of the Fund consists of an unlimited number of Class A Shares, 1,000 Class B Shares and an unlimited number of Class C Shares issuable in series.

7.As is disclosed in the preliminary prospectus, and as will be disclosed in the Fund’s prospectus, it is proposed that the Fund pay the costs of distributing its shares directly to dealers (such costs to include sales commissions, trailing commissions, co-operative marketing expenses and fees for sales and distributionservices and administrative services, including sub-distribution of the Class A Shares (collectively, the "Distribution Costs")).

8.It is proposed that the Fund pay a sales commission in an amount of up to 6% of the subscription price of Class A Shares sold by the dealer. Sales commissions payable by the Fund will be amortized to Retained Earnings over a period of eight years and are recoverable through redemption fees on a straight line basis at the rate of 0.75% per annum in the event that Class A Shares are redeemed by the holders thereof prior to the expiry of an eight-year period following the purchase thereof. Additionally, it is proposed that the Fund pay a trailing commission of up to 0.5% per annum to a dealer on the basis of the average daily net asset value of the Class A Shares issued and held by the customers of the sales representatives of such registered dealer. It is also proposed that 1% of the net asset value of the Fund be paid by the Fund to AGF Management Limited for sales and distribution services and administrative services, including sub-distribution of the Class A Shares.

9.The Fund may enter into co-operative marketing programs with participating dealers, from time to time, in compliance with the National Instrument.

10.The structural aspects of the Fund relating to the payment of commissions are consistent with the legislative requirements contemplated under the CSBIF Act. Gross investment amounts will be paid to the Fund in respect of a subscription as opposed to, for example, first deducting sales commissions and then remitting the net amount to the Fund. This is to ensure that the entire subscription price paid by the investor is counted for applicable federal and provincial tax credits in connection with the purchase of Class A Shares of the Fund. Subsection 25(4) of the CSBIF Act, for example, provides that the provincial tax credit is the lesser of $750 and "an amount equal to 15 per cent of the equity capital received by the corporation from the eligible investor".

11.The Manager does not earn profits from performing its services but receives reimbursement for the expenses it incurs on behalf of the Fund. As a result, the Manager itself has no resources from which to pay Distribution Costs.

12.The payment of commissions on the sale of Class A Shares by the Fund is an event contemplated uner the Income Tax Act (Canada) and the Community Small Business Investment Funds Act (Ontario).

13.Section 2.1 of the National Instrument prohibits the Fund, in connection with the distribution of securities, from making payments or providing benefits to participating dealers or representatives of such dealers, including the payment of commissions and other distribution costs to a participating dealer or a representative of such dealer.

14.Subsection 2.3(4) of Companion Policy 81-105CP to the National Instrument stipulates that applicable securities regulatory authorities will entertain applications by funds that are labour-sponsored venture capital corporations for relief from the provision of the National Instrument which proscribes the payment of distribution costs directly by such funds.

15.The prospectus of the Fund will disclose the payment by the Fund of the Distribution Costs to be paid by it and that the Fund is responsible for payment of such expenses.

16.The Fund desires to incur, directly, the Distribution Costs. The Fund and the Manager will comply with all of the relevant provisions of the National Instrument, other than the prohibitions in the National Instrument from which the Fund is applying for relief.

AND WHEREAS the Commission is satisfied that to do so would not be prejudicial to the public interest;

NOW THEREFORE, pursuant to section 9.1 of the National Instrument, the Commission hereby exempts the Fund from section 2.1 of the National Instrument to permit the Fund to pay the Distribution Costs.

December 22nd, 2000.

"J. A. Geller"R. Stephen Paddon"