Pender Growth Fund : Q1 2024 – Quarterly MD&A

MANAGEMENT'S DISCUSSION & ANALYSIS

PENDER GROWTH FUND INC.

Three months ended March 31, 2024

PENDER GROWTH FUND INC.	March 31, 2024

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	7
OVERALL PERFORMANCE AND DISCUSSION OF OPERATIONS	11
SELECTED FINANCIAL INFORMATION	12
Financial Highlights	17
Financial Condition	17
Cash Flows	19
Shareholder Activity	19
SUMMARY OF QUARTERLY RESULTS	20
PAST PERFORMANCE	22
SUMMARY OF INVESTMENT PORTFOLIO	23
DIVIDEND POLICY	24
OUTSTANDING SHARE DATA	24
TRANSACTIONS BETWEEN RELATED PARTIES	24
LIQUIDITY AND CAPITAL RESOURCES	26
COMMITMENTS AND CONTINGENCIES	26
OFF-BALANCE SHEET ARRANGEMENTS	26
CRITICAL ACCOUNTING ESTIMATES	26
CHANGES IN ACCOUNTING POLICIES	27
FUTURE CHANGES IN ACCOUNTING POLICIES	27

PENDER GROWTH FUND INC.	March 31, 2024

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") dated May 27, 2024 presents a review of the unaudited financial results for Pender Growth Fund Inc. ("Pender" or the "Company") for the three months ended March 31, 2024 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 ended March 31, 2024 (the "Condensed Interim Financial Statements") and Pender's audited financial statements and the notes thereto for the year ended December 31, 2023 (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"). 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 impact of inflation, the impact of central bank measures on the economy, the state of M&A markets, geopolitical 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 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, 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 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

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PENDER GROWTH FUND INC.	March 31, 2024

number of important factors could contribute to these differences, including but not limited to: the risk related to the impact of inflation, the impact of central bank measures on the economy, the state of M&A markets, geopolitical and other global events; the risks of investing in private and publicly traded securities; 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; 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 ability of the Company to source additional investments; the risk inherent in small companies, startups, resource companies and companies in emerging sectors; 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 10 years or longer, and for which a failure to make a capital call may result in the forfeiture of the entire investment; 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.

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

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PENDER GROWTH FUND INC.	March 31, 2024

Non-IFRS Measures

The Company prepares and releases Condensed Interim Financial Statements and Annual Audited Financial Statements in accordance with IFRS Accounting Standards (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 March 31, 2024 and December 31, 2023 is presented in the following table:

Net Assets		March 31, 2024	December 31, 2023
Assets	$	88,292,160	$	74,683,833
LESS: Liabilities		6,326,252		4,797,655
EQUALS Net Assets	$	81,965,908	$	69,886,178

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 March 31, 2024 and December 31, 2023 is presented in the following table:

Net Assets per Share		March 31, 2024 December 31, 2023
Assets	$	88,292,160	$	74,683,833
LESS: Liabilities		6,326,252		4,797,655
EQUALS Net Assets	$	81,965,908	$	69,886,178
DIVIDED BY Number of Shares
Outstanding		7,343,129		7,368,229
EQUALS Net Assets per Share		$ 11.16		$ 9.48

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.	March 31, 2024

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 and External Factors

The nature of the Company's investing activities exposes it to various risks, including but not limited to inflation and the impact of central bank measures on the economy, general economic factors, the state of securities' and M&A markets in North America and globally, interest and foreign exchange rates, changes in government regulations, unexpected judicial or regulatory proceedings, business competition, geopolitical and other global events, factors that are beyond the Company's control.

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 March 31, 2024, the Company held 6,739,883 shares of Copperleaf with a value of $48,190,163, which was 58.8% of the Company's total shareholders' equity of $81,965,908 (December 31, 2023 - 6,889,883 shares with a value of $41,614,893 which was 59.5% of the Company's total shareholders' equity). 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 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 March 31, 2024, approximately 80.7% of Pender's portfolio was comprised of investments in public companies. 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.

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PENDER GROWTH FUND INC.	March 31, 2024

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 March 31, 2024, private companies comprised 19.3% of Pender's investment portfolio. This includes Pender's investment in Pender Technology Inflection Fund II Limited Partnership ("PTIF II"), a limited partnership that invests in a concentrated portfolio of private business to business and health-focused technology companies at their inflection point. 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.

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.

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.

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

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PENDER GROWTH FUND INC.	March 31, 2024

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 most recent Annual Information Form, 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 positive in the first quarter, with equity markets higher in a broad-based rally over the period and continuing the rally in risk assets from 2023. The S&P/TSX Composite Index advanced by 6.6%% and the S&P 500 (CAD) gained 13.0%, while small caps also participated with the S&P/TSX Small Cap Index adding 7.9% as a measure of Canadian small caps and the Russell 2000 Index (CAD) gaining 7.5% in the US.

Interest rate policy from the US Federal Reserve remained in focus during the quarter, with central bank officials signaling an end to interest rate hikes and investor expectations shifting to interest rate cuts in 2024. Although the timing and magnitude of interest rate cuts in 2024 remained elusive and has been pushed out to later in 2024, risk assets have responded positively in anticipation of interest rate cuts.

Canadian venture capital ("VC") investment activity1 during the fourth quarter of 2023 saw nearly $1.4 billion invested across 142 deals, as activity remained muted and slowed year-over-year against the backdrop of higher interest rates and macro concerns about an eventual recession, despite signals of easing toward year end. Deal activity remained well below the record levels of 2021. In terms of deal count, fourth quarter activity fell quarter-over-quarter, although the dollar value invested rose slightly from the prior quarter. In terms of both deal count and dollar value invested, however, both down significantly from the record levels in Q2 2021. The US data showed a consistent decline in private market activity levels, resulting in Q4 2023 having the lowest quarterly deal activity in five years. Deal value remains subdued compared to 2021 time period, but is more inline with 2019/2020 levels. Companies continue to adjust to higher interest rates and company valuations that have compressed against this backdrop. Exit activity also remained subdued in the quarter due to the ongoing market uncertainties and similar phenomenon that have impacted exit multiples. There are, however, some green shoots and signs that buyers and sellers are coming together on price, with 2 acquisitions valued at a combined $6.2b and $8b of total exit value. During the quarter, we continued to work closely with certain of our private Portfolio Companies with the aim of helping them grow and compound their intrinsic value, while supporting them in continuing to optimize their businesses as market conditions evolve. During the first quarter, overall market sentiment in public markets turned positive, with equities and risk assets broadly performing well over the period. With inflation continuing to normalize and central banks signaling interest rate cuts later in 2024 we will remain focused on the fundamentals of the specific companies we own that can withstand a range of economic conditions.

1 Canadian Venture Capital & Private Equity Association: Q4 2023 Canadian Venture Capital Market Overview 6

PENDER GROWTH FUND INC.	March 31, 2024

Normal Course Issuer Bid

On February 15, 2024, following the expiry of its Normal Course Issuer Bid ("NCIB")1, the Company renewed its NCIB on the TSXV. Upon renewal, the Company had 7,362,121 shares issued, of which 6,301,883 shares represented its public float. The Company is entitled to purchase up to a maximum of 630,188 shares, representing 10% of its public float, over the one-year period of this NCIB. The NCIB will continue in effect until February 14, 2025, 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, to enhance shareholder value.

Outlook

With the general trend in inflation continuing to slow, central banks are taking the opportunity to pause their rate increase campaigns and signal that the next rate move is likely to be lower. The timing of any interest rate cuts, however remains elusive. With the potential for volatility as the market adjusts to new incoming data, we will continue to monitor these macro events and assess their impact on the Company and our Portfolio Companies. Our goal remains to target businesses with the durability and balance sheet strength to weather a variety of economic environments.

For Venture Capital activity, we expect a continuation of weak market conditions, particularly at the later and growth stages. The slow IPO market and M&A environment are indications of this trend, as buyers and sellers are still somewhat disconnected on company valuation. The rally in equities through the first quarter has helped close the gap, as public market valuations expanded although still well off 2021 levels.

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 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 three months ended March 31, 2024, we added to our holdings of existing publicly listed company Kraken Robotics Inc., Tantalus Systems Holding Inc. and Dye & Durham Limited. During the period, we also divested our holding of BuildDirect.com Technologies Inc., and divested a part of our Copperleaf Technologies Inc., and Zillow Group, Inc. holdings.

As at March 31, 2024, our Portfolio Company holdings represented 106.4% of Net Asset Value, an increase of 2.2% from 104.2% as at December 31, 2023.

Pender's Net Assets as at March 31, 2024 were made up of securities of publicly listed companies (85.8%),

1Further information about the NCIB that expired on February 13, 2024 is available in the Company's MD&A reports for 2023 available on SEDAR+.

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PENDER GROWTH FUND INC.	March 31, 2024

private unlisted companies (20.6%), and cash and other assets net of liabilities (-6.4%).

The table below presents the fair value of investments as at March 31, 2024 and December 31, 2023.

Investments	March 31, 2024	December 31, 2023
Total Investments	$	91,042,319	$	76,608,425
Less: Deferred gain		3,782,289		3,782,289
Net investments	$	87,260,030	$	72,826,136

After recognizing $29,016,504 of the deferred gain in 2023, the Company recognized $Nil in the three months ended March 31, 2024 and the quarter-end balance of the deferred gain was $3,782,289 as shown in the table above.

The significant trends and events for Pender's Portfolio Companies during the three months ended March 31, 2024, 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 Copperleaf. Accordingly, we are required to disclose the following summary financial information. The summarized financial information provided is for the comparative financial years.

Copperleaf Technologies Inc.

Copperleaf provides decision analytics to companies managing critical infrastructure. The company's enterprise software solutions leverage operational and financial data to help its clients make strategic investment decisions about how best to sustain and expand this infrastructure to deliver the highest business value. Copperleaf is based in Vancouver and its solutions are distributed and supported by regional staff and partners worldwide.

In the second quarter of 2024, the company announced impressive Q1 operating results, reporting 32% growth in annual recurring revenue in the quarter, complemented by subscription revenue also growing 32% year-over-year. The company ended the quarter with a record revenue backlog of $145.5 million, up 32% year over year. They continued to execute their growth strategy, with their strategic go-to-market investments accelerating lead generation and adoption in new industries and geographies. As evidence of these investments have gained traction, we are encouraged to the results beginning to show. The company continued to expand in its core sectors, making additional progress in the Transportation, Upstream Oil & Gas, and the globalization of Copperleaf Water sector platform. The company continues to maintain a strong balance sheet, finishing the quarter with cash and short-term investments of $111 million (compared to $116.4 million as at December 31, 2023).We continue to own Copperleaf and believe the shares are significantly undervalued.

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