Return On Innovation Fund Inc.

Transcription

1 Prospectus dated August 28, 2014 This Prospectus constitutes a public offering of these securities only in the Province of Ontario and therein only by persons permitted to sell such securities. No securities regulatory authority and no department or agency of the federal government or any provincial government in Canada has assessed the merits of an investment in the ROI Fund or expressed an opinion about these securities and it is an offence to claim otherwise. Continuous Offering Prospectus dated August 28, 2014 Return On Innovation Fund Inc. Class A Shares, Series I Class A Shares, Series II Class A Shares, Series III and Class A Shares, Series IV Private Placements Return On Innovation Fund Inc. (the ROI Fund or the Fund ) is registered as a labour-sponsored investment fund corporation under the Community Small Business Investment Funds Act (Ontario), as amended (the Ontario Act ) and is a registered labour-sponsored venture capital corporation under the Income Tax Act (Canada), as amended (the Federal Tax Act ). Four series of Class A Shares of the ROI Fund are offered separately hereunder. Each of Class A Shares, Series I, Class A Shares, Series II, Class A Shares, Series III and Class A Shares, Series IV Private Placements (collectively the Class A Shares ) is offered for sale at a price equal to the net asset value per Class A Share for the applicable series. There need not be any correlation between the number of shares of each series sold hereunder. The difference between the series of shares is the different sales commission structures and corresponding redemption features associated with the sale of each series and the time over which, and corresponding net asset value upon which, the series fees are calculated. In addition, the investment strategy of Class A Shares, Series IV Private Placements differs from that of the other series. See Plan of Distribution. Investment Objective: The ROI Fund s investment objective is to provide investors with yield as well as long-term capital gains by making debt and equity investments in a diversified portfolio of small- and medium-sized eligible businesses. The ROI Fund also invests a certain portion of its assets in reserves that has the meaning ascribed thereto in the Federal Tax Act and the Ontario Act, which for each series of shares includes Canadian dollars in cash or on deposit with qualified Canadian financial institutions, debt obligations of or guaranteed by the Canadian federal government, debt obligations of provincial and municipal governments, Crown corporations, corporations and trusts listed on prescribed stock exchanges, guaranteed investment certificates issued by Canadian trust companies, qualified investment contracts, and for Class A Shares, Series I, Class A Shares, Series II and Class A Shares, Series III securities listed on prescribed stock exchanges. See Investment Objective.

2 Investment Strategy: The ROI Fund will invest in a diversified portfolio of small- and medium-sized eligible businesses, and may focus on the manufacturing and financial services sectors, and on hospitality and other businesses with ancillary real estate exposure from time to time. The ROI Fund will seek to invest in mature, stable businesses with cash flow or near-term cash flow and established customer bases. In structuring its investments, the ROI Fund will primarily utilize subordinated repayable debt instruments, which may be supplemented by options to acquire equity securities of the borrower at nominal cost, convertible debt or cash flow sweeps. The ROI Fund has, in the past, co-invested through loan participation agreements in debt instruments with other investment funds managed by Return On Innovation Advisors Ltd. at different rates and with different security interests, in accordance with Return On Innovation Advisor Ltd. s investment trade allocation policy and subject to approval of the Independent Review Committee. The ROI Fund will typically not invest in speculative business models, early stage high-tech businesses or start-ups. The ROI Fund may declare dividends from time to time. However, when and how dividends will be paid are at the discretion of the Board of Directors and there is no guarantee that dividends will be paid. See Dividend Policy. CLASS A SHARES Continuous Offering Price Net Asset Value per Class A Share Minimum Subscription $500 initially and $50 subsequently Tax Benefits: Individuals (other than trusts) resident in Ontario who purchase Class A Shares are eligible in the year of purchase for a federal tax credit equal to 15% of the cost of purchase to a maximum credit of $750 (based on an investment of $5,000). The availability of these tax credits is subject to specific exceptions and requirements described under Income Tax Considerations. Investors who purchase Class A Shares on or prior to March 1, 2015, or any other date that is the last day for obtaining a federal tax credit for the preceding year (the Cut-Off Date ), may elect to have their federal tax credits apply in respect of the 2014 taxation year instead of the 2015 taxation year. The maximum federal credits apply in respect of an individual s aggregate purchases of Class A Shares issued by labour-sponsored venture capital corporations. See Income Tax Considerations - Federal Income Tax Considerations. While the Fund is registered as a labour-sponsored investment fund corporation under the Community Small Business Investment Funds Act (Ontario), the Ontario Government phased-out the Ontario provincial tax credit at the end of the 2011 tax year, meaning an Ontario provincial tax credit is not available for purchases of Class A Shares of the Fund. Generally, Class A Shares are qualified investments for trusts governed by registered retirement savings plans ( RRSPs ) and trusts governed by registered retirement income funds ( RRIFs ) and by Tax Free Savings Accounts ( TFSAs ). RRIFs are not permitted to subscribe directly for Class A Shares and may generally only acquire such shares from certain RRSPs or other RRIFs. See Prospectus Summary Eligibility for Investment and Income Tax Considerations - Federal Income Tax Considerations. Class A Shares may be subscribed for only by eligible investors. Eligible investors are, generally, individuals and trusts that are qualifying trusts for such individuals. An RRSP or TFSA may purchase Class A Shares directly in which case the annuitant or holder is entitled to the federal tax credit in respect of the Class A Shares. An individual may also purchase Class A Shares and sell or contribute the Class A Shares to an RRSP under which the individual or his or her spouse is the annuitant. Where the Class A Shares are contributed to an RRSP, the individual may generally claim a deduction from income in accordance with the contribution limits in the Federal Tax Act. On the transfer of the Class A Shares to an RRSP, the Shareholder will be deemed to have disposed of the Class A Shares and to have received proceeds of disposition equal to the fair market value of the Class A Shares at the date of transfer. This deduction from income is in addition to the federal tax credit referred to above. See Prospectus Summary - Eligibility for Investment and Income Tax Considerations - Federal Income Tax Considerations. Phase out of Federal Tax Credit: Bill C-4, passed into law on December 12, 2013, provided for the phase out of the 15% Federal Labour Sponsored Venture Capital Corporation ( LSVCC ) tax credit. The federal LSVCC credit will remain 15% for the 2014 taxation year but will be reduced from 15% to 10% for the 2015 taxation year, and reduced to 5% for the 2016 taxation year, with its elimination in 2017 and for all subsequent taxation years. The changes to the federal LSVCC rules will therefore not affect the federal 15% tax credit for purchases of Class A Shares of the Fund completed during 2014.

3 The Manager: Return On Innovation Advisors Ltd. ( ROI Advisors or the Manager ) is the manager and advisor of the ROI Fund. See Organization and Management Details of the Investment Fund - Manager. The Sponsor: The ROI Fund is sponsored by ACTRA Toronto Performers (the Sponsor ). The Sponsor holds all of the Class B Shares of the ROI Fund. See Organization and Management Details of the Investment Fund Sponsor. The Class A Shares are speculative in nature. An investment in Class A Shares is only appropriate for investors able to make a long-term commitment and with the capacity to absorb the loss of some or all of their investment. There is no guarantee that an investment in Class A Shares will earn a specified rate of return or any return in the short or the long term or that dividends will be paid. There is no assurance that sufficient suitable investments will be found to fulfill the ROI Fund s investment objective. There is no assurance that changes will not be introduced to federal and provincial legislation, which, if unfavourable, could impair the ROI Fund s investment performance and its ability to attract future investment capital. The Fund makes investments in small- and medium-sized private companies. The investments are likely to mature and generate returns at different times, which could create an irregular pattern in the net asset value per Class A Share. In addition to the tax benefits of investing in Class A Shares, prospective investors should fully assess the investment merits of the Class A Shares. Although the ROI Fund is a mutual fund, many of the rules normally applicable to mutual funds under relevant securities legislation and policies are not applicable to the ROI Fund as a labour-sponsored investment fund corporation. In particular, rules directed at ensuring liquidity and diversification of investments and certain other investment restrictions and practices normally applicable to mutual funds do not apply. See Risk Factors. For share transaction purposes, mutual funds generally value their investments at the closing market price at which they can be bought and sold. The ROI Fund has undertaken to the Minister of Finance (Ontario) that the value of its Class A Shares will be verified on an annual basis by means of a valuation carried out by an independent qualified person. The ROI Fund intends to satisfy this requirement by obtaining a confirmation from the Fund s auditor that the fair value of the venture investments at each fiscal year end of the Fund is reasonable in all material respects within the context of the financial statements taken as a whole. The daily, quarterly and annual valuations of the ROI Fund s investments may not reflect the prices at which the investments can actually be sold as of that date, particularly after taking into account associated selling costs such as sales commissions and legal fees. The existence of a daily valuation is designed to establish the issue price for the continuous offering of the Class A Shares and to allow investors to follow the performance of the ROI Fund but in no way modifies the restrictions on the transfer or redemption of the Class A Shares. See Calculation of Net Asset Value, Description of the Securities Distributed and Risk Factors. The ROI Fund may have liability for the repayment of tax credits in certain circumstances. In most cases investors must repay any tax credit received under the Federal Tax Act if their Class A Shares are redeemed within eight years of purchase. Generally, the aggregate repayment would be equal to 15% of the lesser of the amount originally paid for the shares and the redemption price. The ROI Fund is required to withhold such amount from any proceeds payable to the investor upon redemption in such cases. Investors holding Class A Shares, Series I or Class A Shares, Series II must also pay redemption fees to the ROI Fund if their Class A Shares are redeemed within eight years of purchase. Investors holding Class A Shares, Series IV Private Placements purchased under the Deferred Sales Charge Option I or the Deferred Sales Charge Option II must also pay redemption fees to the ROI Fund if their Class A Shares are redeemed within eight years of purchase. See Description of the Securities Distributed Class A Shares Redemption by Holders. There are certain circumstances in which the ROI Fund may be prohibited by law from redeeming Class A Shares and in certain circumstances the ROI Fund may suspend redemptions for substantial periods of time. Furthermore, in any given year the ROI Fund will not be required to redeem Class A Shares of any series, having an aggregate redemption price exceeding 20% of the net asset value of that series, calculated as of the last day of the preceding financial year. Investors may not be able to dispose of their Class A Shares other than by way of redemption as there is no formal market, such as a stock exchange, through which such shares may be sold. In addition, there are restrictions on the voting of Class A Shares. See Description of the Securities Distributed Class A Shares. The ROI Fund will offer Class A Shares for sale on a continuous basis at the net asset value per Class A Share of the applicable series as calculated on a daily basis by CIBC Mellon Trust Company. As a result, prices may vary from

4 purchaser to purchaser. Subscriptions will be received subject to rejection or allotment in whole or in part. Purchases of Securities. See Additional information about the Fund is available in the following documents: the most recently filed annual financial statements; any interim financial report filed after those annual financial statements; the most recently filed annual management report of fund performance; and any interim management report of fund performance filed after that annual management report of fund performance. These documents are incorporated by reference into this Prospectus, which means that they legally form part of this Prospectus. Please see the Documents Incorporated by Reference section for further details. In addition to the audited financial statements of the ROI Fund for its most recently completed financial year incorporated by reference in this Prospectus, investors will receive, once it is available, an unaudited semi-annual financial report for the current fiscal year of the ROI Fund. Investors should read this Prospectus and review the financial statements and report carefully before making an investment decision. See Documents Incorporated by Reference. Careful consideration should be given to the risk factors associated with making an investment in the ROI Fund. See Risk Factors. Investors should also consult with their professional advisors prior to making an investment in the ROI Fund.

5 TABLE OF CONTENTS PROSPECTUS SUMMARY... I The ROI Fund...i Organization and Management of Return On Innovation Fund Inc...ii Summary of Fees and Expenses...vi Eligibility for Investment...xiii Selected Definitions...xiii OVERVIEW OF THE LEGAL STRUCTURE OF THE FUND...1 INVESTMENT OBJECTIVE...1 INVESTMENT STRATEGY...1 OVERVIEW OF THE SECTORS THAT THE FUND INVESTS IN...1 INVESTMENT RESTRICTIONS...6 FEES AND EXPENSES...8 Fees and Expenses Payable by the Fund...8 Fees and Expenses Payable by Investors...10 Sales Commissions and Service Fees...11 ANNUAL RETURNS, MANAGEMENT EXPENSE RATIO AND TRADING EXPENSE RATIO...12 RISK FACTORS...13 DIVIDEND POLICY...16 PURCHASES OF SECURITIES...16 REDEMPTION OF SECURITIES...17 INCOME TAX CONSIDERATIONS...19 Federal Income Tax Considerations...19 Ontario Income Tax Considerations...25 ORGANIZATION AND MANAGEMENT DETAILS OF THE INVESTMENT FUND...26 Officers and Directors...26 Manager...29 Conflicts of Interest...31 Independent Review Committee...32 Custodian...33 Auditor...33 Administrator...33 Sponsor...33 CALCULATION OF NET ASSET VALUE...34 DESCRIPTION OF THE SECURITIES DISTRIBUTED...36 Class A Shares...36 Class B Shares...42 SECURITYHOLDER MATTERS...43 PLAN OF DISTRIBUTION...44 PRINCIPAL HOLDERS OF SECURITIES OF THE INVESTMENT FUND...44 The ROI Fund...44 The Manager...44 INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS...44

6 PROXY VOTING DISCLOSURE FOR SECURITIES HELD...44 MATERIAL CONTRACTS...45 LEGAL AND ADMINISTRATIVE PROCEEDINGS...46 EXPERTS...46 EXEMPTIONS AND APPROVALS...46 PURCHASERS STATUTORY RIGHTS OF WITHDRAWAL AND RECISSION...46 DOCUMENTS INCORPORATED BY REFERENCE...46 CERTIFICATES...47

7 PROSPECTUS SUMMARY The following is a summary of the principal features of this distribution and should be read together with the more detailed information and financial data and statements incorporated by reference in this Prospectus. The ROI Fund The ROI Fund was incorporated under the laws of Canada, is registered as a labour-sponsored investment fund corporation under the Ontario Act, and is registered as a labour-sponsored venture capital corporation under the Federal Tax Act. Investment Highlights An investment in the ROI Fund is designed to provide investors with the following benefits: Experienced Manager. The principals of the Manager have experience in investment structuring, operational management and restructuring. The principals are well known in the venture capital, private equity and banking industries, have a strong network for deal flow and collectively have more than 40 years of experience in a range of investment activities including private equity investing. Focus on Mature, Private Companies. Investors will gain exposure to a diversified portfolio of private investments in Canadian firms, including entities active in the manufacturing and financial services sectors, and in hospitality and other businesses with ancillary real estate exposure from time to time. The ROI Fund will seek to invest in mature companies with established products, markets, distribution channels and management teams that have demonstrated operating results evidenced by strong sales growth and cash flows or a clear ability to generate cash flow in the near-term. Focus on Debt. The ROI Fund will invest primarily in debt instruments, which may be supplemented by options to acquire equity securities of the borrower, convertible debt or cash flow sweeps. This structure generally allows for current yield and faster, more predictable investment liquidation than pure equity. Potential for Dividends. The ROI Fund may declare dividends from time to time. However, when and how dividends will be paid are at the discretion of the Board of Directors and there is no guarantee that dividends will be paid. Dividends will be automatically re-invested in Class A Shares of the ROI Fund or will be payable in cash at the written request of a shareholder. See Dividend Policy. Investment Objective The ROI Fund s investment objective is to provide investors with yield as well as long-term capital gains by making debt and equity investments in a diversified portfolio of small- and medium-sized eligible businesses. The ROI Fund also invests a certain portion of its assets in reserves that has the meaning ascribed thereto in the Federal Tax Act and the Ontario Act, which for each series of shares includes Canadian dollars in cash or on deposit with qualified Canadian financial institutions, debt obligations of or guaranteed by the Canadian federal government, debt obligations of provincial and municipal governments, Crown corporations, corporations and trusts listed on prescribed stock exchanges, guaranteed investment certificates issued by Canadian trust companies, qualified investment contracts, and for Class A Shares, Series I, Class A Shares, Series II and Class A Shares, Series III, securities listed on prescribed stock exchanges. Investment Strategy The ROI Fund will invest in a diversified portfolio of small- and medium-sized eligible businesses, and may focus on the manufacturing and financial services sectors, and on hospitality and other businesses with ancillary real estate exposure from time to time. The ROI Fund will seek to invest in mature, stable businesses with cash flow or near-term cash flow and established customer bases. In structuring its investments, the ROI Fund will primarily utilize subordinated repayable debt instruments, which may be supplemented by options to acquire equity securities of the borrower at nominal cost, convertible debt or cash flow sweeps. The ROI Fund has, in the past, co-invested through loan participation agreements in debt instruments with other investment funds managed by Return On Innovation Advisors Ltd. at different rates and with different security interests, in accordance with Return On Innovation Advisor Ltd. s investment trade allocation policy and subject to approval of the Independent Review i

8 Committee. The ROI Fund will typically not invest in speculative business models, early stage high-tech businesses or start-ups. Organization and Management of Return On Innovation Fund Inc. Manager and Portfolio Advisor: Return On Innovation Advisors Ltd. (the Manager ) 37 Front Street East, 4th Floor Toronto, Ontario M5E 1B3 Portfolio Subadvisors: Fiera Capital Corporation ( Fiera Capital ) Toronto, Ontario WHV Investment Management, Inc. ( WHV ) San Francisco, California, U.S.A. Hirayama Investments, LLC* ( Hirayama Investments ) San Francisco, California, U.S.A. Return On Innovation Advisors Ltd. is the manager and is responsible for the organization and creation of the ROI Fund and for developing and implementing all aspects of the ROI Fund s sales, marketing and communications strategies and has financed the start-up costs associated with the ROI Fund. The Manager also acts as an advisor to the ROI Fund and manages the ROI Fund s assets. The ROI Fund has retained the Manager to organize the engagement, retention and the supervision of service providers and to develop and refine the investment strategy for the ROI Fund. See Organization and Management Details of the Investment Fund - Manager. For Class A Shares, Series I, Class A Shares, Series II and Class A Shares, Series III, the Manager has retained Fiera Capital and WHV to manage the ROI Fund s Liquid Portfolio. Hirayama Investments provides advice to WHV. See Organization and Management Details of the Investment Fund Investment of Liquid Portfolio. * Hirayama Investments is resident outside Canada and advises the Fund in reliance upon an exemption from registration. The Manager has responsibility for the investment advice provided by Hirayama Investments. In some circumstances, it may be difficult to enforce any legal rights against Hirayama Investments as all or a substantial portion of its assets are situated outside Canada. Custodian: CIBC Mellon Trust Company (the Custodian ) Toronto, Ontario Administrator: Citigroup Fund Services Canada Inc. (the Administrator ) Toronto, Ontario The Custodian is responsible for the safekeeping of the assets of the ROI Fund. The Administrator has been retained to provide registrar, transfer agency, shareholder reporting, customer support and various other administration services. In addition to providing the registrar, transfer agency and other shareholder administration services to the ROI Fund, the Administrator performs similar services for outside clients including other labour-sponsored investment funds. See Securityholder Matters Reporting to Securityholders. ii

9 Sponsor: ACTRA Toronto Performers (the Sponsor ) Toronto, Ontario Auditor: PricewaterhouseCoopers LLP (the Auditor ) Toronto, Ontario The Sponsor represents workers in film, television and commercial productions, with membership exceeding 13,000 members. The Sponsor owns all of the Class B Shares in the capital of the ROI Fund. The Board of Directors of the ROI Fund is currently fixed at seven directors. The Sponsor is entitled to elect six of the seven directors of the ROI Fund. Of the six directors, the Sponsor has, pursuant to a sponsor agreement, as amended, agreed to elect one person to represent the Sponsor and five persons to be nominated by the Manager from time to time. Holders of Class A Shares, voting separately as a class, are entitled to elect one of seven directors of the ROI Fund. In addition to the right to elect directors specified above, the Sponsor, as holder of the Class B Shares, is entitled to one vote per share at meetings of the shareholders of the ROI Fund, but does not have any right to receive dividends. See Description of the Securities Distributed Class B Shares. While members of the Sponsor may subscribe for Class A Shares, neither the Sponsor nor its members will be required to make any investment in the ROI Fund other than the initial investment of the Sponsor in Class B Shares. Individuals investing in the ROI Fund need not be members of or have any connection to the Sponsor. The Auditor audits the annual financial statements of the ROI Fund. Offered Securities Purchase: Transfer: Redemption / Issue Price: Class A Shares, Series I, Class A Shares, Series II, Class A Shares, Series III and Class A Shares, Series IV Private Placements of the ROI Fund will be issued only to eligible investors (individuals and qualifying trusts) resident in Ontario. The differences between the series of shares are the different sales commission structures and corresponding redemption features associated with the sale of each series and the difference in the time over which, and corresponding net asset value upon which, the service fees are calculated. In addition, the investment strategy of Class A Shares, Series IV Private Placements differs from that of the other series. See Description of the Securities Distributed, Income Tax Considerations and Plan of Distribution. There are no restrictions on the transfer of Class A Shares. Class A Shares are issued at the net asset value per Class A Share, Series I, the net asset value per Class A Share, Series II, the net asset value per Class A Share, Series III or the net asset value per Class A Share, Series IV Private Placements, as applicable, determined on each business day on which a subscription is received except that subscriptions received after 4:00 p.m. (Eastern Time) will be priced at the net asset value per Class A Share, Series I, the net asset value per Class A Share, Series II, the net asset value per Class A Share, Series III or the net asset value per Class A Share, Series IV Private Placements, as applicable, for the following business day. Subject to redemption restrictions and the withholding of any amount required to be withheld and the deduction of the redemption fees each as described below, Class A Shares will be redeemed at the net asset value per share as at the close of business on the day on which the ROI Fund receives the request or on the following business day if received after 4:00 p.m. (Eastern Time). iii

10 Redemption: A holder of Class A Shares (the Shareholder ) may, subject to limited exceptions, require the ROI Fund to redeem Class A Shares, at the net asset value per Class A Share, Series I, the net asset value per Class A Share, Series II, the net asset value per Class A Share, Series III or the net asset value per Class A Share, Series IV Private Placements, as applicable. However, except in very limited circumstances, a Shareholder may not redeem such shares without repayment of the tax credit if the redemption occurs less than eight years after the date of issue of such shares. A Shareholder may require the ROI Fund to redeem such shares without having to repay the tax credit received on issue if the redemption occurs more than eight years after the date of issue of such shares. See Description of the Securities Distributed. Except for redemptions specifically permitted under the Federal Tax Act, Class A Shares may generally only be redeemed prior to eight years from the date of issue if amounts equal to 15% of the issue price or the redemption price of the Class A Shares, whichever is less, are withheld and paid to the Receiver General for Canada. For purposes of applying the above eight-year rule, Class A Shares issued in February or March of a year and that are redeemed in February or on March 1 of another year will be deemed to be redeemed on March 31 of that other year. Circumstances under which Class A Shares may be redeemed during the eight year period after their issue without penalty, except as referred to under Redemption Fee below, include, in general, if: (i) the Shareholder has requested the ROI Fund to redeem the Class A Shares within 60 days after the day on which the Class A Shares were issued to the Original Holder and any Information Return and Tax Credit Certificate issued to the Shareholder in respect of such Class A Shares, or Class A Shares have been returned to the ROI Fund; or (ii) the Original Holder has died and the shares have devolved on the individual requesting redemption as a consequence or the Original Holder has become disabled and permanently unfit for work or is terminally ill. See Description of the Securities Distributed Class A Shares - Redemption by Holders. Redemption Fees: Class A Shares, Series I: Holders of Class A Shares, Series I purchased under this Prospectus who request that the ROI Fund redeem shares before the 8 th anniversary of their date of issue will be charged a redemption fee payable to the Manager of 12% of the original issue price, which is reduced by 0.5% of the original issue price each year until the 8th anniversary of the date of issue. After the 8th anniversary of the date of issue, there is no redemption fee. Class A Shares, Series II: Holders of Class A Shares, Series II purchased under this Prospectus who request that the ROI Fund redeem shares before the 8 th anniversary of their date of issue will be charged a redemption fee payable to the Manager of 12% of the original issue price, which is reduced by 0.5% of the original issue price each year until the 8 th anniversary of the date of issue. After the 8 th anniversary of the date of issue, there is no redemption fee. Class A Shares, Series III: No redemption fee will be charged. Class A Shares, Series IV Private Placements: Holders of Class A Shares, Series IV Private Placements purchased under this Prospectus under the Deferred Sales Charge Option I who request that the ROI Fund redeem shares before the 8 th anniversary of their date of issue will be charged a redemption fee payable to the Manager of 12% of the original issue price, which is reduced by 0.5% of the original issue price each year until the 8 th anniversary of the date of issue. After the 8 th anniversary of the date of issue, there is no redemption fee. Class A Shares, Series IV Private Placements: Holders of Class A Shares, Series IV Private Placements purchased under this Prospectus under the Deferred Sales Charge Option II who request that the ROI Fund redeem shares before the 8 th anniversary of their date of issue will be charged a redemption fee payable to the Manager of 12% of the original issue price, which is reduced by 0.5% of the original issue price each year until the 8 th anniversary of the date of issue. After the 8 th anniversary of the date of issue, there is no redemption fee. Class A Shares, Series IV Private Placements: Under the Initial Sales Charge Option III, no iv

11 Dividend and Voting Rights: Valuation: Use of Proceeds: redemption fee will be charged. See Description of the Securities Distributed for more information and for redemption fee schedules applicable to purchases under this Prospectus. The ROI Fund may declare dividends from time to time. However, when and how dividends will be paid are at the discretion of the Board of Directors and there is no guarantee that dividends will be paid. Holders of Class A Shares are entitled to receive dividends at the discretion of the Board of Directors. See Dividend Policy. Each Class A Share entitles the Shareholder to one vote at meetings of the shareholders of the ROI Fund. Holders of Class A Shares, voting separately as a class, are entitled to elect one of seven directors of the ROI Fund. The Sponsor, as holder of the Class B Shares, is entitled to elect the remaining directors of the ROI Fund. The Sponsor has agreed to elect five nominees of the Manager. See Description of the Securities Distributed and Organization and Management Details of the Investment Fund - Sponsor. Valuations of the ROI Fund s assets will be carried out and the net asset value per Class A Share, Series I, the net asset value per Class A Share, Series II, the net asset value per Class A Share, Series III and the net asset value per Class A Share, Series IV Private Placements will be updated daily by the Custodian. The audit and valuation committee of the Board of Directors reviews and approves each valuation at the end of each financial quarter. Furthermore, the Auditor, as a part of its audit of the Fund s annual financial statements, performs certain procedures on the valuation of the Fund s venture investments as at the Fund s fiscal year end of December 31 to confirm that the fair value of the venture investments at each fiscal year end is reasonable in all material respects within the context of the financial statements taken as a whole. See Calculation of Net Asset Value. The proceeds of this continuous offering, after payments of applicable fees to the Manager and expenses not assumed by the Manager, will be invested by the ROI Fund in eligible businesses and reserves in accordance with the ROI Fund s investment objective and the Federal Tax Act. Operating expenses of the ROI Fund are paid out of the ROI Fund s working capital, which includes income earned on investments. Tax Credit, Deductions and Benefits Individuals (other than trusts) resident in Ontario who purchase Class A Shares are eligible in the year of purchase for a federal tax credit equal to 15% of the cost of purchase to a maximum credit of $750 (based on an investment of $5,000). The availability of this tax credit is subject to specific exceptions and requirements described under Income Tax Considerations. Investors who purchase Class A Shares on or prior to the Cut-Off Date may elect to have their federal tax credit apply in respect of the 2014 taxation year instead of the 2015 taxation year. The maximum federal tax credit applies in respect of an individual s aggregate purchases of Class A Shares issued by labour-sponsored venture capital corporations. While the Fund is registered as a labour-sponsored investment fund corporation under the Community Small Business Investment Funds Act (Ontario), the Ontario Government phased-out the Ontario provincial tax credit at the end of the 2011 tax year, meaning an Ontario provincial tax credit is not available for purchases of Class A Shares of the Fund. Generally, Class A Shares will be qualified investments for RRSPs, RRIFs and TFSAs. RRIFs are not permitted to subscribe directly for Class A Shares and may generally only acquire such shares from certain RRSPs or other RRIFs. See Prospectus Summary - Eligibility for Investment and Income Tax Considerations. Class A Shares may be subscribed for only by eligible investors. Eligible investors are, generally, individuals and trusts that are qualifying trusts for such individuals. An RRSP or a TFSA may purchase Class A Shares directly in which case the annuitant or holder is entitled to the federal tax credit in respect of the Class A Shares. An individual may also purchase Class A Shares and sell or contribute the Class A Shares to an RRSP under which the individual or his or her spouse is the annuitant. Where the Class A Shares are contributed to an RRSP, the individual may generally claim a deduction from income in accordance with the contribution limits in the Federal Tax Act. On the transfer of the Class A Shares to an RRSP, the Shareholder will be deemed to have disposed of the Class A Shares v

12 and to have received proceeds of disposition equal to the fair market value of the Class A Shares at the date of transfer. This deduction from income is in addition to the federal tax credit referred to above. See Income Tax Considerations Federal Income Tax Considerations. Phase out of Federal Tax Credit: Bill C-4, passed into law on December 12, 2013, provided for the phase out of the 15% Federal Labour Sponsored Venture Capital Corporation ( LSVCC ) tax credit. The federal LSVCC credit will remain 15% for the 2014 taxation year but will be reduced from 15% to 10% for the 2015 taxation year, and reduced to 5% for the 2016 taxation year, with its elimination in 2017 and for all subsequent taxation years. The changes to the federal LSVCC rules will therefore not affect the federal 15% tax credit for purchases of Class A Shares of the Fund completed during Risk Factors The Class A Shares are speculative in nature. An investment in Class A Shares is appropriate only for investors who are prepared to hold their investment in the ROI Fund for a long period of time and who have the capacity to absorb a loss of some or all of their investment. There is no guarantee that an investment in Class A Shares will earn a specified rate of return or any return in the short or long term or that dividends will be paid. Investors may not be able to dispose of their Class A Shares other than by way of redemption as there is no formal market such as a stock exchange through which shares may be sold. In addition, there are restrictions on the voting of Class A Shares. There is no assurance that changes will not be introduced to federal or provincial legislation which, if unfavourable, could impair the ROI Fund s investment performance and its ability to attract future investment capital. In addition to the tax benefits of investing in Class A Shares, prospective investors should fully assess the investment merits of the Class A Shares. Investors in Class A Shares will be relying on the business judgments, expertise and integrity of the Board of Directors of the ROI Fund and the Manager. The values the ROI Fund places on its investments may not reflect the amount for which they can actually be sold. There is no assurance that sufficient suitable investments in eligible businesses will be found in order to fulfill the ROI Fund s investment objective, and there is a risk that investments made may be considered to be ineligible for the purposes of applicable legislation. As a result, the ROI Fund may be subject to certain penalty taxes and if the ROI Fund s registrations are revoked, investors may be ineligible for the federal tax credit. Many of the rules normally applicable to mutual funds operating in Canada are not applicable to the ROI Fund. In particular rules directed at ensuring liquidity and diversification of investment and certain other investment restrictions and practices normally applicable to mutual funds do not apply. The ROI Fund will require a greater commitment to initial analysis and to monitoring and ongoing support of developmental activities relative to the amount of capital invested than is required by most mutual funds. See Risk Factors and Income Tax Considerations. The Ontario Government phased-out the Ontario provincial tax credit at the end of the 2011 tax year, meaning an Ontario provincial tax credit is not available for purchases of Class A Shares of the Fund. The announced phase out of the federal LSVCC tax credit commencing in the 2015 taxation year will further potentially affect the Fund s ability to raise capital. The Manager continues to be committed to professionally managing the Fund seeking to fulfill its fiduciary duty to investors. The Manager will continue to assess the impact of the phase out of the provincial and federal LSVCC tax credits on the Fund, including the Fund s offering of Class A Shares. Fees and Expenses Payable by the Fund Summary of Fees and Expenses This table lists the fees and expenses that you may have to pay if you invest in the ROI Fund. You may have to pay some of these fees and expenses directly. The Fund may have to pay some of these fees and expenses, which will therefore reduce the value of your investment in the Fund. Type and Amount of Fee Management Fee (Annually) 2.5% of net asset value for Class A Shares, Series I; Class A Shares, Series II; Class A Shares, Series III and 2.3% of net asset value for Class A Shares, Series IV Private Description The ROI Fund pays the Manager an annual management fee of 2.5% of the net asset value of Series I, II, III and 2.3% of the net asset value of Series IV Private Placements. vi

13 Type and Amount of Fee Placements. Financing Fees (Annually) 0.4% of net asset value plus 1.25% of the original purchase price of Class A Shares, Series I; 0.75% of the original purchase price of Class A Shares, Series II and 1.5% of the original purchase price of Class A Shares, Series IV Private Placements (in each case, for shares issued after January 1, 2004 that remain issued and unredeemed, provided that such fees cease for any such shares retained for more than eight years). Advisory Fee (Annually) 1.0% of net asset value for Class A Shares, Series I; Class A Shares, Series II; Class A Shares, Series III and Class A Shares, Series IV Private Placements. Description The ROI Fund pays the Manager an annual financing fee of 0.4% of the net asset value of the ROI Fund plus an annual base financing fee equal to the aggregate of 1.25% of the original purchase price of Class A Shares, Series I; 0.75% of the original purchase price of Class A Shares, Series II and 1.5% of the original purchase price of Class A Shares, Series IV Private Placements (in each case, for shares issued after January 1, 2004 that remain issued and unredeemed, provided that such fees cease for any such shares retained for more than eight years) for commission, financing and ancillary services. See Fees and Expenses. The ROI Fund pays an annual advisory fee of 1.0% of the net asset value of the Class A Shares, Series I; Class A Shares, Series II; Class A Shares, Series III and Class A Shares, Series IV Private Placements. The advisory fee is paid by the ROI Fund to the Manager. See Fees and Expenses. Sponsorship Fee (Annually) 0.25% of net asset value. The ROI Fund pays the Sponsor an annual sponsorship fee of 0.25% of the net asset value of the ROI Fund. See Fees and Expenses. Sales Commissions Class A Shares, Series I: None (10% of the original issue price is paid by the Manager). Class A Shares, Series II: None (6% of the original issue price is paid by the Manager). Class A Shares, Series III: None (Up to 2% of the original issue price may be paid by the investor). Class A Shares, Series IV Private Placements: None (Up to 10% of the original issue price is paid by the Manager for the Deferred Sales Charge Option I). The ROI Fund does not pay sales commissions. The Manager (on behalf of the ROI Fund) or an investor pays a sales commission to a dealer on the sale of Class A Shares, Series I, II, III and IV Private Placements. See Fees and Expenses. Class A Shares, Series IV Private Placements: None (Up to 6% of the original issue price is paid by the Manager for the Deferred Sales Charge Option II). Class A Shares, Series IV Private Placements: None (Up to 2% of the original issue price may be paid by the investor for the Initial Sales Charge Option III). vii

14 Type and Amount of Fee Service Fees (Annually) Class A Shares, Series I: Not paid to dealers until the 8 th anniversary of the date of issue of the Series I Shares. Thereafter, 0.75% annually of the net asset value of the Series I Shares held by the clients of the sales representatives of the dealers is paid by the Fund. Class A Shares, Series II: 0.75% annually of net asset value of the Series II Shares held by clients of the sales representatives of the dealers is paid by the Fund. Class A Shares, Series III: 1.25% annually of net asset value of the Series III Shares held by clients of the sales representatives of the dealers is paid by the Fund. Class A Shares, Series IV Private Placements purchased under the Deferred Sales Charge Option I: Not paid to dealers until the 8 th anniversary of the date of issue of the Series IV Shares. Thereafter, 0.75% annually of the net asset value of the Series IV Shares held by the clients of the sales representatives of the dealers is paid by the Fund. Class A Shares, Series IV Private Placements purchased under the Deferred Sales Charge Option II: 0.75% annually until the 8 th anniversary of the date of issue of the Series IV Shares of net asset value of the Series IV Shares held by the clients of the sales representatives of the dealers is paid by the Manager. Thereafter, 0.75% annually of the net asset value of the Series IV Shares held by the clients of the sales representatives of the dealers is paid by the Fund. Class A Shares, Series IV Private Placements purchased under the Class A Shares, Series IV Private Placements Initial Sales Charge Option III: 1.25% annually until the 8 th anniversary of the date of issue of the Series IV Shares of net asset value of the Series IV Shares held by the clients of the sales representatives of the dealers is paid by the Manager. Thereafter, 0.75% annually of the net asset value of the Series IV Shares held by the clients of the sales representatives of the dealers is paid by the Fund and 0.50% annually is paid by the Manager. Corporate Finance and Co-op Marketing Description The ROI Fund pays an annual service fee to dealers selling Class A Shares, Series I, II and III for so long as those shares are outstanding. The Manager pays an annual service fee to dealers selling Class A Shares, Series IV Private Placements until the 8 th anniversary of the date of issue of the Class A Shares, Series IV Private Placements, after which time, the Fund pays all or a portion of the service fee, as applicable. See Fees and Expenses. These service fees are intended to compensate dealers for expenses incurred by them in communicating on an ongoing basis with their clients who are also shareholders of the ROI Fund as to investments made by the ROI Fund, and about the investment strategies and investment performance of the ROI Fund. In addition, the service fees are paid to support the effective distribution of Class A Shares by such dealers. As and when deemed appropriate the Manager may reimburse dealers for a portion of the dealer s cost of producing and distributing sales communications and hosting seminars designed to provide investors with investment information, subject to compliance with applicable law. As and when deemed appropriate, the Manager may, subject to compliance with applicable laws, reimburse dealers for a portion of the dealer s cost of producing and distributing sales viii

15 Type and Amount of Fee Administration and Operating Expenses Description communications and hosting seminars designed to provide investors with investment information. The ROI Fund pays all of its administration expenses including expenses relating to the provision of registrar, transfer agency, trustee, shareholder reporting and other shareholder administration services being provided to the ROI Fund and all of its operating expenses including expenses relating to portfolio transactions, taxes, legal, audit, custodial and fund accounting fees, costs of qualifying the ROI Fund s securities for distribution (other than start-up costs), sales and marketing, security realization, directors fees and borrowing, as well as any expenses related to the implementation and on-going operation of the ROI Fund s Independent Review Committee under NI Fees and Expenses Payable Directly by You Type and Amount of Fee Sales Charge None, except that for Class A Shares, Series III and Class A Shares, Series IV Private Placements purchased under the Initial Sales Charge Option III, up to 2% of the original issue price may be paid by the investor. Description No sales charges are paid directly by the investor for the purchase of Class A Shares, Series I, Class A Shares, Series II or Class A Shares, Series IV - Private Placements purchased under Deferred Sales Charge Option I or Deferred Sales Charge Option II. Sales charges may be paid directly by the investor for the purchase of Class A Shares, Series III or Class A Shares, Series IV - Private Placements purchased under the Initial Sales Charge Option III. See Fees and Expenses. Transfer Fee Nil RRSP or TFSA Fee Nil Redemption Fees Class A Shares, Series I: 12% of original issue price, which is reduced incrementally by 0.5% on each anniversary of the date of issue. Class A Shares, Series II: 12% of original issue price, which is reduced incrementally by 0.5% on each anniversary of the date of issue. Laurentian Trust of Canada Inc. will, at a nominal fee, assist an investor who wishes to establish an RRSP or TFSA to acquire his or her Class A Shares or to establish a RRIF. See Purchases of Securities. RRIFs are not permitted to subscribe directly for Class A Shares and may generally only acquire such shares from certain RRSPs or other RRIFs. Class A Shares, Series I: Holders of Class A Shares, Series I purchased under this Prospectus who request that the ROI Fund redeem shares before the 8 th anniversary of their date of issue will be charged a redemption fee payable to the Manager of 12% of the original issue price, which is reduced by 0.5% of the original issue price each year until the 8 th anniversary of the date of issue. After the 8 th anniversary of the date of issue, there is no redemption fee. Class A Shares, Series II: Holders of Class A Shares, Series II purchased under this Prospectus who request that the ROI Fund redeem shares before the 8 th anniversary of their date of issue will be charged a redemption fee payable to the Manager ix

16 of 12% of the original issue price, which is reduced by 0.5% of the original issue price each year until the 8 th anniversary of the date of issue. After the 8 th anniversary of the date of issue, there is no redemption fee. Class A Shares, Series III: None. Class A Shares, Series IV Private Placements purchased under the Deferred Sales Charge Option I: 12% of original issue price, which is reduced incrementally by 0.5% on each anniversary of the date of issue. Class A Shares, Series IV Private Placements purchased under the Deferred Sales Charge Option II: 12% of original issue price, which is reduced incrementally by 0.5% on each anniversary of the date of issue. Class A Shares, Series IV Private Placements purchased under Initial Sales Charge Option III: None. Class A Shares, Series III: No redemption fee will be charged. Class A Shares, Series IV Private Placements: Holders of Class A Shares, Series IV Private Placements purchased under this Prospectus under the Deferred Sales Charge Option I who request that the ROI Fund redeem shares before the 8 th anniversary of their date of issue will be charged a redemption fee payable to the Manager of 12% of the original issue price, which is reduced by 0.5% of the original issue price each year until the 8 th anniversary of the date of issue. After the 8 th anniversary of the date of issue, there is no redemption fee. Class A Shares, Series IV Private Placements: Holders of Class A Shares, Series IV Private Placements purchased under this Prospectus under the Deferred Sales Charge Option II who request that the ROI Fund redeem shares before the 8 th anniversary of their date of issue will be charged a redemption fee payable to the Manager of 12% of the original issue price, which is reduced by 0.5% of the original issue price each year until the 8 th anniversary of the date of issue. After the 8 th anniversary of the date of issue, there is no redemption fee. Class A Shares, Series IV Private Placements purchased under the Initial Sales Charge Option III: No redemption fee will be charged. See Description of the Securities Distributed for more information and for redemption fee schedules applicable to purchases made prior to the date of this Prospectus. Short-Term Trading Fee 3% of redemption proceeds if redeemed within 365 days of purchase Account Administration Fee $25 per year if you hold Class A Shares with a book value of less than $500 Class A Shares purchased under this Prospectus are subject to a short-term trading fee payable to the ROI Fund equal to 3% of the redemption proceeds otherwise payable if a redemption occurs within 365 days of a purchase. To minimize the costs of administering small accounts, the ROI Fund charges an account administration fee to investors who hold Class A Shares purchased under this Prospectus where the original purchase price of such Class A Shares is less than $500. The account administration fee does not apply in respect of Class A Shares acquired by way of the reinvestment of dividends paid by the ROI Fund. Summary of Dealer Compensation Type and Amount of Fee Sales Commissions Description Class A Shares, Series I: A commission of 6% of the original issue price is paid by the Manager on behalf of the ROI Fund x