Securities Law & Instruments


Exemption granted to labour sponsored investment fund corporation to permit it to pay certain specified distribution costs out of fund assets contrary to section 2.1 of National Instrument 81-105 Mutual Fund Sales Practices. Exemption granted on the condition that the distribution costs so paid are permitted by, and otherwise paid in accordance with the National Instrument, and that the Exemption expires on November 30, 2004.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as amended.

Rules Cited

National Instrument 81-105 Mutual Fund Sales Practices.













(Section 9.1)

WHEREAS the Capital First Venture Fund Inc. (the Fund) has made an application (the Application) to the Ontario Securities Commission (the Commission) for an exemption pursuant to section 9.1 of National Instrument 81-105 - Mutual Fund Sales Practices (NI 81-105) from section 2.1 of NI 81-105 to permit the Fund to make certain payments to registered dealers;

AND WHEREAS the Commission has considered the Application and the recommendation of staff of the Commission;

AND WHEREAS the Fund and Triax-Covington Corporation (the Manager), the manager of the Fund, have represented to the Commission, through its counsel, Gowling Lafleur Henderson LLP, as follows:

1. The Fund is a corporation incorporated under the Business Corporations Act (Ontario). The Fund has applied for registration as a labour sponsored investment fund corporation under the Community Small Business Investment Funds Act (Ontario).

2. The Fund is a mutual fund as defined in the Securities Act (Ontario). The Fund has filed a preliminary prospectus dated December 8, 2003 (the Preliminary Prospectus) in the Province of Ontario in connection with the proposed offering to the public of Class A shares in the capital of the Fund (the Class A Shares).

3. The authorized capital of the Fund consists of an unlimited number of Class A Shares, of which none are issued and outstanding as of the date hereof, and an unlimited number of Class B shares (the Class B Shares), all of which issued and outstanding Class B Shares are owned by the Canadian Federal Pilots Association (the Sponsor) as of the date hereof.

4. The Manager and the Sponsor formed and organized the Fund.

5. The Manager will pay the following distribution costs to registered dealers for selling Class A Shares:

i) a total initial commission of 6% of the original issue price for each Class A Shares subscribed for, and

ii) a service fee equal to 0.5% annually of the net asset value of the Class A Shares of the Fund held by clients of the sales representatives of the dealers.

6. The Fund proposes to pay for the reimbursement of certain co-operative marketing expenses (the Co-op Expenses) incurred by registered dealers in promoting sales of the Class A Shares, pursuant to co-operative marketing agreements the Fund may enter into with such dealers.

7. For accounting purposes, the Fund will, as applicable, expense the Co-op Expenses in the fiscal period when incurred and will not defer and amortize any Co-op Expenses.

8. Due to the structure of the Fund, the most tax efficient way for the Co-op Expenses to be financed is for the Fund to pay such expenses directly.

9. The Manager, or its affiliate, are the only members of the organization of the Fund, other than the Fund itself, available to pay the Co-op Expenses. Without the requested discretionary relief, the Manager would be obliged to finance the Co-op Expenses through borrowing.

10. Requiring the Manager to pay the Co-op Expenses while granting an exemption to other labour funds and permitting such funds to pay similar Co-op Expenses directly, would put the Fund at a permanent and serious competitive disadvantage with its competitors resulting from increased management fees above those contemplated in the Preliminary Prospectus.

11. The Fund undertakes to comply with all other provisions of NI 81-105. In particular, the Fund undertakes that all Co-op Expenses paid by it will be compensation permitted to be paid to participating dealers under NI 81-105.

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 NI 81-105, the Commission hereby exempts the Fund from section 2.1 of NI 81-105 to permit the Fund to pay the Co-op Expenses, provided that:

1. the Co-op Expenses are otherwise permitted by, and paid in accordance with, NI 81-105;

2. the Co-op Expenses are accounted for in the Fund's financial statements in the manner described in paragraph 7 above; and

3. this Exemption, unless renewed by the Commission, shall cease to be operative on November 30, 2004

January 13, 2004.

"Paul M. Moore"
"H. Lorne Morphy"