Pender Growth Fund : Q3 2023 – Quarterly MD&A

MANAGEMENT'S DISCUSSION & ANALYSIS

PENDER GROWTH FUND INC.

Three months and nine months ended September 30, 2023

PENDER GROWTH FUND INC.	September 30, 2023

TABLE OF CONTENTS
	Page
INTRODUCTION	1
Caution Regarding Forward-Looking Statements	1
Business Strategy	2
Non-IFRS Measures	3
Risk Factors	4
Recent Developments	6
Outlook	7
Portfolio of Investments	8
OVERALL PERFORMANCE AND DISCUSSION OF OPERATIONS	14
SELECTED FINANCIAL INFORMATION	15
Financial Highlights	23
Financial Condition	24
Cash Flows	26
Shareholder Activity	26
SUMMARY OF QUARTERLY RESULTS	27
PAST PERFORMANCE	29
SUMMARY OF INVESTMENT PORTFOLIO	30
DIVIDEND POLICY	31
OUTSTANDING SHARE DATA	31
TRANSACTIONS BETWEEN RELATED PARTIES	31
LIQUIDITY AND CAPITAL RESOURCES	33
COMMITMENTS AND CONTINGENCIES	33
OFF-BALANCE SHEET ARRANGEMENTS	33
CRITICAL ACCOUNTING ESTIMATES	33
CHANGES IN ACCOUNTING POLICIES	34
FUTURE CHANGES IN ACCOUNTING POLICIES	34

PENDER GROWTH FUND INC.	September 30, 2023

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") dated November 22, 2023 presents a review of the unaudited financial results for Pender Growth Fund Inc. ("Pender" or the "Company" or "PTF") for the three months and nine months ended September 30, 2023 and assesses factors that may affect future results. The financial condition and results of operations are analyzed and significant factors that affected Pender's statements of financial position, statements of comprehensive income, statements of changes in equity and statements of cash flows are discussed.

The MD&A is supplementary information and should be read in conjunction with Pender's unaudited condensed interim financial statements and the notes thereto for the three months and nine months ended September 30, 2023 (the "Condensed Interim Financial Statements") and Pender's audited financial statements and the notes thereto for the year ended December 31, 2022 (the "Annual Audited Financial Statements"). All amounts shown in this MD&A are presented in Canadian dollars unless otherwise specified.

The MD&A has been prepared by PenderFund Capital Management Ltd. (the "Manager") and is the responsibility of management. The Board of Directors carries out its responsibility for the review of this disclosure through its Audit Committee, which is made up of three directors, a majority of whom are independent directors. The Audit Committee has reviewed and recommended approval of the MD&A by the Board of Directors. The Board of Directors has approved this disclosure.

Additional information about Pender is available on the SEDAR+ website at www.sedarplus.ca.

Caution Regarding Forward-Looking Statements

This MD&A may contain forward-looking statements about the Company, including its strategy, prospects and further actions. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or negative versions thereof and similar expressions.

In addition, any statement made concerning future performance, strategies or prospects and possible future Company action is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to risks, uncertainties and assumptions about the Company and external factors including economic factors, among other things. Forward-looking statements in this MD&A include, without limitation: statements with respect to the future performance of the Company and the companies in which it invests (each a "Portfolio Company"); the future impact on markets and economies of measures taken by central banks to control inflation, changes in those measures as inflation slows and general market expectations for an earnings recession; the future impact of geopolitical events, global health pandemics and other global events; concentration of the investment portfolio, future economic and market conditions, including mergers and acquisitions ("M&A") and initial public offering ("IPO") market conditions, future orderly realization of value of and/or transactions involving its existing Portfolio Companies (including public listing or third-party acquisitions of such Portfolio Companies) or potential future Portfolio Companies or other future transactions, and/or proposed transactions; achieving returns for shareholders; the Company's investment approach, objectives and strategies, including its focus on specific sectors; the structuring of its investments and its expectations regarding the performance of certain sectors.

Forward-looking statements are not guarantees of future performance and actual events and results could

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PENDER GROWTH FUND INC.	September 30, 2023

differ materially from those expressed or implied in any forward-looking statements. While the Manager considers its expectations, assumptions and projections to be reasonable based on information currently available to it, no assurance can be given that its beliefs and assumptions will prove to be correct. Any number of important factors could contribute to these differences, including but not limited to: the ability of the Company to source additional investments; risks related to the technology sector, including early-stage companies, industry concentration and the high proportion of companies from this sector in the portfolio; the risk inherent in small companies, startups, resource companies and companies in emerging sectors; the risks inherent in a concentrated portfolio, including the risk of having the portfolio value concentrated in one particular issuer, the risk inherent in large holdings relative to the size of the market for those holdings; the ability to dispose of investments in public or private Portfolio Companies rapidly or at favourable prices; and the risk inherent in investing in a fund with a lock up period that may be as long as 10 years and for which a failure to make a capital call could result in the forfeiture of the entire investment; the risk of the use of leverage; the availability of an active trading market for the Company's Class C Shares; general economic, political and public market factors in North America and internationally; interest and foreign exchange rates; global equity and capital markets; business competition; technological change; changes in government regulations; unexpected judicial or regulatory proceedings; and the impact of inflation, measures taken by central banks, increased interest rates, bank failures, geopolitical events, global pandemics and other catastrophic events.

We stress that the above-mentioned list of important factors is not exhaustive. We encourage you to consider these and other factors carefully before making any investment decisions and we urge you to avoid placing undue reliance on forward-looking statements. Further, except as may be required under applicable law, the Manager has no specific intention of updating any forward-looking statements, whether as a result of new information or future events, or otherwise, prior to the release of the next MD&A.

Business Strategy

Pender is an investment entity that trades on the TSX Venture Exchange (the "TSXV"). Its objective is to provide its investors with long-term capital appreciation. Pender invests opportunistically in a concentrated portfolio of securities of both public and private companies (each a "Portfolio Company"). In its quest for long-term capital appreciation, the Manager thoroughly evaluates the long-term business prospects of each potential Portfolio Company and works to understand its current value as well as its value over the long- term investment horizon. This long-term focus is a primary factor in Pender's investment strategy, regardless of whether a Portfolio Company is publicly listed or private. Pender may also invest in special situations, for example, using available cash to take advantage of opportunities with attractive internal rates of return. Pender's strategy is to buy securities that it believes are mispriced and that have the potential to compound capital, either through the convergence from current market price to intrinsic value or through the growth of intrinsic value over time, or through a combination of both.

Pender's mandate provides it with the flexibility to invest in securities that it believes to have the highest potential risk-adjusted returns at the time of investment. It is important to note that Pender defines risk as a permanent loss of capital, which differs from volatility risk. This flexible mandate allows Pender to take advantage of market cycles and different security types that it believes may have the potential to benefit its shareholders. Market cycles can provide opportunity as, from time-to-time, different industries, company stages or security types may become out of favour and attractively priced. Pender may invest in both newly established and later-stage businesses across a wide array of industries and security types, depending on the opportunity. Common and preferred equities will make up the majority of Pender's investments, (whether direct investments or indirect investments through investment entities or limited partnership

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PENDER GROWTH FUND INC.	September 30, 2023

funds). The Company may also make smaller allocations to convertible debt, corporate debt or other securities.

Non-IFRS Measures

The Company prepares and releases Condensed Interim Financial Statements and Annual Audited Financial Statements in accordance with IFRS. In this MD&A, we complement those IFRS disclosures with a number of the key indicators that we use to evaluate the performance and condition of our business. These supplementary key performance indicators include Net Assets, Net Assets per Share, Management Expense Ratio and Trading Expense Ratio. These are not recognized under IFRS nor do they have a standard meaning prescribed by IFRS. We present them to enhance the reader's ability to evaluate the Company. They may not be directly comparable to similar measures used by other companies and readers are cautioned not to view the non-IFRS measures as alternatives to IFRS measures.

Net Assets

The Company uses two financial measures that are individually recognized under IFRS, assets and liabilities, to calculate Net Assets, which is a non-IFRS measure. The calculation of Net Assets as at September 30, 2023 and December 31, 2022 is presented in the following table:

Net Assets	September 30, 2023	December 31, 2022
Assets	$	70,932,900	$	76,464,010
LESS: Liabilities		4,360,026		6,224,755
EQUALS Net Assets	$	66,572,874	$	70,239,255

Net Assets per Share

The Company uses three financial measures that are individually recognized under IFRS, assets, liabilities and number of shares outstanding, to calculate Net Assets per Share, which is a non-IFRS measure. The Company reports net asset value ("NAV") per share monthly. The calculation of Net Assets per Share, as at September 30, 2023 and December 31, 2022 is presented in the following table:

Net Assets per Share	September 30, 2023	December 31, 2022
Assets	$	70,932,900	$	76,464,010
LESS: Liabilities		4,360,026		6,224,755
EQUALS Net Assets	$	66,572,874	$	70,239,255
DIVIDED BY Number of Shares
Outstanding		7,524,629		7,569,929
EQUALS Net Assets per Share		$ 8.85		$ 9.28

Management Expense Ratio

The Company uses Management Expense Ratio ("MER"), a non-IFRS measure, to represent the total amount of operating expenses, including management fees, sales taxes and interest but excluding performance fees, net of fees waived and/or expenses absorbed by the Manager, contingent payments, corporate taxes, commission and other portfolio transaction costs (together, the "MER Costs") that is borne by the Class C shareholders. The MER is an annualized percentage calculated by dividing total MER Costs by the average Net Assets.

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PENDER GROWTH FUND INC.	September 30, 2023

Trading Expense Ratio

The Company uses Trading Expense Ratio ("TER"), a non-IFRS measure, to represent the total amount of commissions and other portfolio transaction costs (the "TER Costs") borne by the Class C shareholders. The TER is an annualized percentage calculated by dividing total TER Costs by the average Net Assets.

Risk Factors

An investment in Pender is suitable for investors that have a high tolerance for risk and a long-term investment horizon.

Global Events

Investment results may be affected by future developments and new information that may emerge about inflation and the impact of central bank measures and geopolitical and other global events, factors that are beyond the Company's control.

During the third quarter, overall market sentiment was more challenging, with equities and risk assets broadly lower over the period. With the peak in inflation nearing or behind us and central banks slowing and, in some cases, pausing, their interest rate raising campaigns, the focus has turned to apprehension about future economic growth and the lag effect of tighter financial monetary conditions brought about by higher interest rates. We think this will remain in focus with concern from investors that tighter financial conditions will impact spending habits and that a recession is on the horizon.

Future developments could impact the Company's results and the full extent of the impact of evolving financial conditions remains unknown. Developing reliable estimates and applying judgment continue to be key to our process to understand the impact of a wide range of economic scenarios on our portfolio companies in periods of elevated uncertainty. Actual results may differ from those estimates and assumptions.

The Company will continue to support its Portfolio Companies, monitor the impacts of global events and reflect the consequences as appropriate in its accounting and reporting.

Investments

The Company's portfolio is materially concentrated in the shares of one publicly listed Portfolio Company, Copperleaf Technologies Inc. ("Copperleaf"). As at September 30, 2023, considering both its direct investment and its indirect investment through its holding of shares of Pender Private Investments Inc. ("PPI"), the Company held 6,889,883 shares of Copperleaf with a value of $38,927,839, which was 58.5% of the Company's total shareholders' equity of $66,572,874 (December 31, 2022 - 6,762,065 shares with a value of $38,814,252 which was 55.3% of the Company's total shareholders' equity). During the nine months ended September 30, 2023, the closing price of Copperleaf was $5.65, down $0.09 per share from its December 31, 2022 closing price of $5.74 per share. There can be no assurance that the Company will be able to realize the value of this investment.

Historically, Pender's investment focus was on early-stage technology companies. The prospects for success of emerging technology companies are critically dependent on numerous factors that may be difficult to evaluate, especially when they have limited operating histories. Investments in emerging technology companies are inherently risky, and in the case of failed businesses, may result in the total loss of the capital invested by Pender in a Portfolio Company. The technology companies in which Pender

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PENDER GROWTH FUND INC.	September 30, 2023

invests will typically require additional capital, which Pender may not be able to provide, or which may not be available from other sources.

As at September 30, 2023, approximately 14.1% of Pender's portfolio was comprised of investments in public companies. However, taken together with Pender's indirect exposure to public companies through its investment in PPI, public companies make up 68.8% of Pender's holdings. Public company securities prices are influenced by particular companies' performance outlook, market activity and the larger economic picture. When the economy is expanding, the outlook for many companies will generally be good and the value of their stocks may rise. The opposite may also be true. Usually, the greater the potential reward, the greater the risk.

Where the size of the Company's holding of a particular security is large relative to the market, an orderly realization of value may be relatively difficult for the Company to achieve. Consequently, the sale of such investments may be subject to delay and may only be possible at substantial discounts.

For smaller companies, start-ups, resource companies and companies in emerging sectors, both the risks and potential rewards of investment may be greater than those of larger, more established companies. Likewise, the share prices of such companies may be more volatile than those of larger, more established companies. Further, the products and services offered by technology companies, for example, may become obsolete as science and technology advance. Certain convertible securities may also be subject to interest rate risk.

Private companies, by their nature, will generally lack liquidity and involve a longer-than-usual investment time horizon. The sale of such investments may also be subject to delays and additional costs and may only be possible at substantial discounts. As at September 30, 2023, private companies comprised 85.9% of Pender's investment portfolio. This includes Pender's investment in PPI and Pender Technology Inflection Fund II Limited Partnership ("PTIF II"), private entities that hold public and/or private company securities. Looking through the underlying holdings of PPI and PTIF II, Pender's exposure to private companies is 31.2% of its holdings. It may be relatively difficult for Pender to dispose of its investment in any private company rapidly at favourable prices due to weak M&A markets, adverse market developments or other factors. The sale of such investments may also be subject to delays and additional costs and may only be possible at substantial discounts. Losses are typically realized before gains, and Pender may be required to dispose of Portfolio Companies before any returns are realized.

Further, Pender's investment in PTIF II has a minimum ten year term that, with the consent of the LP Advisory Committee, may be extended by up to two additional one-year periods. In the event that the Company does not provide the amount required to be contributed under a capital call, becomes a defaulting partner, and fails to remedy the default within 20 business days, it could forfeit its entire investment in PTIF II.

Pender faces competition from many other capital providers and there can be no assurance that suitable investments will be found. Despite the number of sources of private capital, financing for early-stage technology companies remains limited and is subject to pricing and terms that are based on the performance of the investee company and other factors, and what capital is available may be on terms unfavourable to the existing shareholders of these companies.

During the quarter, the Company fully repaid its three-year credit facility with a Canadian chartered bank, dated May 28, 2021, which had been secured against the Company's interest in the investments held by its investee, PPI (the "Term Loan"). As at September 30, 2023, the balance owing under the Term Loan

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PENDER GROWTH FUND INC.	September 30, 2023

was $Nil. See additional information in the "Financial Condition" section of this MD&A.

The use of leverage can magnify gains on investments, but it can also magnify losses. Interest expense and other costs may not be recovered if gains on investments are insufficient. The use of leverage may require the Company to liquidate portfolio positions, when it may not be advantageous to do so.

Other risks include the high proportion of technology company investments in the portfolio, industry concentration and the relatively small number of investments in the portfolio.

There can be no assurance that the Company will be able to complete divestments of individual Portfolio Companies and/or complete an orderly realization of value, at current values or otherwise. Indirect investments in public and private securities are inherently subject to the risks and uncertainties described above for direct holdings.

WOF Transaction

Effective May 28, 2021, the Company completed a transaction (the "WOF Transaction") pursuant to which it acquired 100% of the Commercialization Series shares and 97% of the Venture Series shares of the Working Opportunities Fund (EVCC) Ltd. ("WOF"), an entity with an investment portfolio comprised of public and private companies, and WOF was renamed Pender Private Investments Inc. ("PPI"). As the result of various transactions further described in the "Pender Private Investments Inc. and the WOF Transaction" in the "Pender Private Investments" section under "Portfolio of Investments" of this MD&A, as at September 30, 2023 the Company's ownership of PPI reached 100% and PPI represented 67.2% of the Company's aggregate investment portfolio.

Class C Shares

The Company's Class C Shares are not redeemable. The Class C Shares trade on the TSXV under the ticker "PTF". An active trading market for the Class C Shares may not be available, which may significantly impact the liquidity of those shares. The Net Assets per Share of the Class C Shares fluctuates with the Net Assets per Share of the Company. Even if an active trading market for Class C Shares is available, the market price of such shares may not enable shareholders to dispose of their shares at a reasonable price relative to the Net Assets per Share of the shares.

The risks associated with an investment in Pender are more fully described in its Annual Information Form dated May 26, 2022, under the heading "Risk Factors". Reference should also be made to the "Caution Regarding Forward-Looking Statements" section at the beginning of this document.

Recent Developments

Investments

The market backdrop was mixed in the third quarter, with equity markets broadly lower over the period. The S&P/TSX Composite Index declined by 3.1% and the S&P 500 shed 3.7%, while small caps also declined by 1.5% in Canada as measured by the S&P/TSX Small Cap Index and by 5.4% in the US as measured by the S&P 600 Index.

Performance in Canadian equities was driven by gains in the Energy sector, with Energy-related companies supported by oil prices rising 29% through the quarter and closing above $90 per barrel at the end of September. These rising crude prices also contributed to a recalibration of inflation expectations and comments from US Federal Reserve officials indicating higher for longer interest rates in the face of declining, but still elevated inflation rates. The bond market digested these shifting expectations as the US

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PENDER GROWTH FUND INC.	September 30, 2023

10 year Treasury yield rose 73 bps during the quarter to close at 4.57% at the end of the quarter, the highest level since 2007.

With elevated inflation and higher interest rates continuing to be top of mind for investors, the outlook for economic growth going forward remained cloudy.

Canadian venture capital ("VC") investment activity1 during the second quarter of 2023 saw $2.8 billion invested across 170 deals, as activity rebounded in the quarter to make H1 2023 the third highest first half on record in both deal count and total deal value, just behind 2021 and 2022. In terms of deal count, second quarter activity rose modestly quarter-over-quarter, while the dollar value invested rose sharply by 140%. This is in contrast to US data which has shown a consistent decline in private market activity levels since Q1 2022, resulting in Q2 2023 having the lowest quarterly investment amount since Q1 2020. Companies continue to adjust to the evolving macroeconomic environment, which included higher interest rates and elevated inflation, as well as the public market slowdown. Exit activity remained subdued in the quarter due to the ongoing market uncertainties that impacted exit multiples.

During the quarter, we continued to work closely with our private Portfolio Companies with the aim of helping them grow and compound their intrinsic value. Where necessary, we also supported them in optimizing their business in connection with the changing market environment, as well as the challenges and opportunities brought on by global events.

Normal Course Issuer Bid

On February 14, 2023, the Company renewed its NCIB on the TSXV. Upon renewal, the Company had 7,568,921 shares issued, of which 6,630,459 shares represented its public float. The Company is entitled to purchase up to a maximum of 663,045 shares, representing 10% of its public float, over the one-year period of this NCIB. The NCIB will continue until February 13, 2024, unless terminated earlier in accordance with its terms. The Company intends to continue to repurchase its shares under the NCIB where the shares are trading at a price that is less than what we see as their intrinsic value, in order to enhance shareholder value.

Outlook

With peak inflation likely behind us and central banks slowing and in some cases pausing their interest rate raising campaigns, the focus has turned to concerns about future economic growth and the lag effect of tighter monetary conditions brought about by higher interest rates. We think this will remain in focus with concern from investors that tighter financial conditions will impact spending habits and that a recession is on the horizon. We will continue to monitor these macro events and assess their impacts on the Company and our Portfolio Companies to help ensure the businesses we own have the durability and balance sheet strength to withstand a challenging economic environment.

For VC activity, we expect a continuation of weak market conditions, particularly at the later and growth stages, as tougher market conditions make it more difficult for companies to grow and seek exit opportunities. The sluggish IPO market is an indication of this trend, as buyers and sellers are still somewhat disconnected on company pricing. We believe that this will resolve itself eventually, but not without some additional time for these transaction multiples to find a new equilibrium.

We have evaluated the potential impact of current global events on each of our Portfolio Companies as part of an ongoing review within our investment process. As part of this analysis, we evaluate each private Portfolio Company under various fundamental scenarios to better understand the key drivers of business

1 Canadian Venture Capital & Private Equity Association: Q2 2023 Canadian Venture Capital Market Overview 7

PENDER GROWTH FUND INC.	September 30, 2023

value creation and their sensitivities in different market environments. We will remain diligent as more information continues to become available and as these companies continue to respond to the challenges and opportunities in the current market.

We are steadfast investors and continue to work closely with certain private Portfolio Companies with the aim of helping them grow their intrinsic value, while seeking an orderly realization of that value to achieve returns for our shareholders.

Portfolio of Investments

Our portfolio of investments reflects the fact that we are long-term,high-conviction investors while we also try to take advantage of short-term"close-the-discount" opportunities where it makes sense to do so.

During the nine months ended September 30, 2023, we added two new public securities to the portfolio, Pinetree Capital Ltd., and Tiny Ltd. In April, a private holding, Tiny Capital Ltd., merged with WeCommerce Holdings Ltd. and became publicly traded as Tiny Ltd.. We also added securities of two existing publicly listed holdings, ProntoForms Corporation and Tantalus Systems Holding Inc. and bought convertible debentures of two private Portfolio Companies in March and July 2023. The debenture we bought in March 2023 was converted to preferred shares upon a merger transaction in June 2023. In August, the Company purchased the remaining 2% of PPI Legacy shares as described in "The PPI Transaction" in the "Pender Private Investments" section below. During the period, the Company divested its holdings of D-Wave Quantum Inc., and partially sold shares of Tiny Ltd. and shares of one private Portfolio Company as result of a merger transaction in June 2023.

As at September 30, 2023, our Portfolio Company holdings represented 103.3% of Net Asset Value, an increase of 8.9% from 94.4% as at December 31, 2022.

Pender's Net Assets as at September 30, 2023 were comprised of securities of publicly listed companies (14.5%) and private unlisted companies (88.8%), with cash and other assets net of liabilities making up the remainder (-3.3%). Looking through the underlying holdings of PPI and PTIF II, two private investees which themselves hold securities of public and/or private companies, the makeup of the portfolio at September 30, 2023 was 68.8% publicly listed company securities and 31.2% private company securities.

The table below presents the fair value of investments as at September 30, 2023 and December 31, 2022.

Investments	September 30, 2023	December 31, 2022
Total Investments	$	72,563,542	$	71,443,724
LESS: Deferred gain		3,782,289		5,144,185
Net investments	$	68,781,253	$	66,299,539

During the nine months ended September 30, 2023, the Company recognized $1,361,896 of the deferred gain and as a result, the balance of the deferred gain was $3,782,289 at the end of the period.

The significant trends and events for Pender's Portfolio Companies during the nine months ended September 30, 2023, are described in the following sections.

Significant Equity Investments

In accordance with National Instrument 51-102 of the Canadian Securities Administrators, the Company has determined that it is a significant equity investee in PPI and in Copperleaf, considering its direct and indirect holdings. Accordingly, we are required to disclose the following summary financial information. The

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