GrowthWorks Announces Improved Merger Proposal with Significant Advantages for VenGrowth Shareholders

TORONTO, ONTARIO--(Marketwire - July 26, 2011) - GrowthWorks Canadian Fund Ltd. ("GrowthWorks" or "GW") today announced a new proposal for merging the five VenGrowth Funds into GrowthWorks (the "GrowthWorks Proposal"). GrowthWorks believes that the GrowthWorks Proposal offers a number of significant advantages over the most recent merger proposal (the "Second Covington Proposal") negotiated by the board of directors and managers (the "VG Managers") of the VenGrowth Funds with Covington Fund II Inc. ("Covington II"). The terms of the GrowthWorks Proposal are set out in detail in GrowthWorks' dissident proxy circular dated July 26, 2011 (the "GrowthWorks Circular"), as filed on the SEDAR and GrowthWorks' website. GrowthWorks is soliciting proxies voting AGAINST the Second Covington Proposal in order to preserve the opportunity for Class A shareholders of the VenGrowth Funds ("VG Shareholders") to vote on the GrowthWorks Proposal.

"This is exactly what the 'two horse race' process was designed to achieve: the best deal for VenGrowth Class A shareholders. The VenGrowth Board recently recommended another proposal from Covington II. GrowthWorks has now improved on the terms of that proposal. VenGrowth shareholders have waited patiently for the VenGrowth Board to complete its lengthy process – which ended up selecting the same favoured bidder again. We look forward to progressing our proposal and letting VenGrowth Class A shareholders decide who they want to steward their investment going forward – after all it's their money," stated David Levi, CEO of GrowthWorks.

Mr. Levi further commented that "The reality is that almost 90% of VenGrowth Class A shareholders' money will remain invested in the merged fund after a merger takes place. Given GrowthWorks' manager's performance, track record and experience, GrowthWorks' projected post-merger cash flows and the terms of the GrowthWorks Proposal, we believe the GrowthWorks Proposal is superior. We'd also like to take this opportunity thank all VenGrowth Class A shareholders who have supported us to date and especially those shareholders who signed Support Agreements in the spring. As a reminder, even if you signed a Support Agreement, you must still submit a proxy or VIF to vote AGAINST the Second Covington Proposal."

The GrowthWorks Proposal

The following table summarizes some of the key terms of the GrowthWorks Proposal and advantages offered to VG Shareholders as compared with the Second Covington Proposal. It should be read in conjunction with, and is qualified by, the more detailed disclosure in the GrowthWorks Circular. Under the GrowthWorks Proposal, VG Shareholders will receive newly created series of GrowthWorks Class A shares ("VG Merger Shares").

Item		Second Covington Proposal1		Improved GrowthWorks Proposal
Discounted redemption "window" for Suspended VG Shareholders on closing2		Yes, at a 15% discount		Yes, at a 15% discount (match)
Second discounted redemption "window" for Suspended VG Shareholders2		No		Yes, at a much lower 7.5% discount 18 months after closing (better)
Discount-free redemptions for Suspended VG Shareholders		15% per year during the 4 years post-merger3		15% per year during the 4 years post-merger3 (match)
Incentive "IPA" payments to manager on particularly successful exits from former VenGrowth Fund investments		15% IPA (up to 50% of which is payable to outgoing VG Managers after July 2013 and 35% before then) No exempt gains		15% IPA But VG Shareholders exempt from IPA on first $7.5 million of eligible gains (none of which is payable to outgoing VG Managers) (better)
Faster Return of Cash via "Advantage" Dividends for former VG Shareholders		No dividend policy is contemplated		Excess cash from divestments at above merger values distributed to former VG Shareholders4 (better)
Estimated MER5 (Excluding performance related charges and income taxes)		4.98%, Covington II, Series I 6.43%, Covington II, Series II		4.86%, VG Merger Shares, Series I 6.31%, VG Merger Shares, Series II (better)
Estimated fund size and venture portfolio diversification on merger closing		~ $330 million ~ 51 investments		~ $485 million (47% larger) ~ 100 investments (better)
Cross-holdings of merging funds (% of venture NAV) 6		10%		19% (better)
Treatment of Capital Maintenance and Termination Fees paid to VG Managers under the Management and Administration Agreements		Capital Maintenance Fees paid by former VG Shareholders to VG Managers over time No Termination Fees paid by former VG Shareholders – but VG Managers to receive ongoing fees from Covington Fund II and "reset" carried interest sharing to terminate existing management agreements VG Managers may also receive yet to be disclosed termination amounts		No Termination Fees paid by former VG Shareholders GrowthWorks manager pays to VG Managers any net resulting liabilities for Capital Maintenance, Termination, redemption or other fees7 (match)
Manager's life sciences track record8		Covington II manager – Negative		GrowthWorks manager - Positive (better)
Sponsor fee charged to the fund (creating potential conflicts)		Covington II – Yes 0.16% of NAV annually, 0.11% of which will be paid to the VG Sponsor		GrowthWorks – No In lieu of sponsor fees, fund will pay a fee at a rate of 0.16% of the NAV of the VG Merger Shares for administrative support for the independent governance of the Fund. (better)
Record of taking funds "off-redemption"		Covington II manager - Yes		GrowthWorks manager - No (better)
Ongoing role of VG Managers		Ongoing fee payments, IPA participation and expected contractual vetoes for the VG Managers9		No ongoing role or vetoes for the VG Managers (better)

Notes:

1. Based on publicly available information in respect of the Second Covington Proposal, The VenGrowth Investment Fund Inc. ("VGI"), The VenGrowth II Investment Fund Inc.("VGII"), The VenGrowth III Investment Fund Inc., The VenGrowth Advanced Life Sciences Fund Inc. ("VGALS") and The VenGrowth Traditional Industries Fund Inc. (collectively, the "VenGrowth Funds") and Covington Fund II Inc. ("Covington II").
   
2. For shareholders of VGI, VGII and VGALS (collectively, the "Suspended VG Funds"), subject to limits, formulated to be $30 million (after redemption fees which give rise to a "discounted" price) for both Covington II and GrowthWorks. If requests for redemptions exceed this amount, redemptions will be processed on a proportionate basis among requesting shareholders by reference to the value of each individual redemption request relative to the value of all redemption requests for each redemption "window". If requests for redemptions on closing exceed the limit, no redemptions will be permitted in the second redemption "window" 18 months after closing.
   
3. Commencing after a back-office transition period of up to six months.
   
4. The GrowthWorks Board of Directors will adopt a dividend policy for the VG Merger Shares whereby these series' proportionate share of post-merger gains and income realized from divestments of former VenGrowth Fund venture investments will be distributed as dividends on the VG Merger Shares, provided that at the time of divestment both the investment that was divested and the overall portfolio of venture investments acquired from the VenGrowth Funds have generated positive performance compared to GrowthWorks merger-date values. There can be no assurance that any dividends will be paid.
   
5. Estimated post-merger MER (before income taxes and IPA, if any) for new series of Class A shares to be distributed by Covington II or GrowthWorks, as applicable, to shareholders of the VenGrowth Funds in connection with a completed merger transaction. The fee and cost structure of the VG Merger Shares is substantially the same as the proposed fee and cost structure for Covington Fund II, except that GrowthWorks' manager has agreed to contribute to the operating expenses allocated to the VG Merger Shares so as to reduce the MER of the VG Merger Shares by 0.12%. Capital maintenance fees are payable by former VG Shareholders to the GrowthWorks Manager on VG Merger Shares on the same basis as to the VG Managers under the Second Covington Proposal.
   
6. Estimated as of June 30, 2011 based on publicly available information.
   
7. The manager of GrowthWorks has agreed to indemnify GrowthWorks for all net amounts on account of capital maintenance and termination fees and other amounts, if any, determined to be payable by the VenGrowth Funds to the VG Managers (whether settled through negotiation or by court order) under the VenGrowth Funds' Management Agreements and Administration Agreements (as defined in the GrowthWorks Circular) as a result of the merger and litigation costs incurred in connection with any claims related to such fees and other amounts. See "Merger Terms and Conditions – Key Merger Terms - Manager Termination Fees and Related Liabilities" in the GrowthWorks Circular.
   
8. An estimated 40% (by value) of the VenGrowth Funds' combined venture investment portfolio is made up of life sciences investments. The statement regarding Covington II's manager is based on the poor performance of New Generation Biotech (Equity) Fund Inc. See Appendix "D" to the GrowthWorks Circular.
   
9. Based on the termination arrangements entered into in connection with the Original Covington Proposal. The VenGrowth Funds' joint management proxy circular dated July 6, 2011 (the "VenGrowth Circular") discloses that Covington II will enter into an agreement to implement the yet to be finalized contract termination arrangements between the VenGrowth Funds and the VG Managers. The VenGrowth Circular discloses some of the expected financial terms of such arrangements but does not provide any information with respect to whether Covington II must seek the consent of the VG Managers to complete future merger or other transactions that might affect ongoing payments to the VG Managers.
   

If VG Shareholders vote-down the Second Covington Proposal at the meetings of VenGrowth Fund shareholders called for August 25, 2011, GrowthWorks intends to take steps to requisition meetings of the Class A shareholders of each VenGrowth Fund (the "Requisitioned Meetings") to consider and vote on the GrowthWorks Proposal. Particulars of matters expected to be voted on at the Requisitioned Meetings are set out in the GrowthWorks Circular. As disclosed in the GrowthWorks Circular, if the Requisitioned Meetings are called, GrowthWorks intends to solicit proxies voting FOR the GrowthWorks Proposal and related matters. The GrowthWorks Proposal will not be pursued if the Second Covington Proposal is approved by the requisite majorities of the VenGrowth Funds shareholders and is completed. The completion of the GrowthWorks Proposal is subject to a number of risks and conditions which are disclosed in detail in the GrowthWorks Circular.

Post-merger, GrowthWorks expects to have a strong financial platform from which to conduct its business and service redemptions on an ongoing basis. GrowthWorks has a strong track record in this regard, having managed through its peak redemption years fully servicing all requested redemptions. Using publicly available data for the VenGrowth Funds, GrowthWorks has projected its post-merger financial flows through 2015. The results are summarized in the charts attached as Appendix A to this release. As illustrated in the charts, GrowthWorks expects to have financial resources in excess of its capital requirements over that period. GrowthWorks believes that the estimated excess should provide a more than adequate level of liquidity if divestments occur at a slower pace or redemptions occur at a higher level than assumed for purposes of the projection. See the notes to the charts for a description of the assumptions used in preparing this information and see "Forward Looking Statements" below and in the GrowthWorks Circular.

Commenting on the position of the VG Managers, David Levi stated, "Under the GrowthWorks Proposal, the VG Managers will receive whatever they are legally entitled to receive under their management and administration agreements. They will not receive ongoing fees running indefinitely into the future, a re-set carried interest in a portfolio they no longer manage or any say in transactions that might impact such ongoing entitlements. They have no ongoing role under our proposal. The VenGrowth Funds special committee's focus on the upside created for the VenGrowth managers and sponsors, which we believe is to the detriment of VenGrowth shareholders, made the committee review process unacceptable to GrowthWorks."

David Levi concluded, "We look forward to re-engaging with VenGrowth Class A shareholders and working together to vote-down this most recent deal struck by the VenGrowth board and managers with Covington."

A COPY OF THE GROWTHWORKS CIRCULAR HAS BEEN FILED AND IS AVAILABLE ON THE SEDAR WEBSITE AT www.sedar.com, TOGETHER WITH THE FORM OF PROXY BEING SOLICITED BY GROWTHWORKS. THE GROWTHWORKS CIRCULAR MAY ALSO BE ACCESSED AT www.growthworks.ca AND BY CALLING GROWTHWORKS AT 1-800-268-8244. VENGROWTH SHAREHOLDERS ARE ENCOURAGED TO READ THE GROWTHWORKS AND VENGROWTH CIRCULARS AND TO CONSULT WITH THEIR INVESTMENT ADVISORS ABOUT THE GROWTHWORKS AND COVINGTON MERGER PROPOSALS.

As disclosed in the GrowthWorks Circular, the GrowthWorks Proposal is subject to a number of conditions, including the Second Covington Proposal being voted down at the VenGrowth Funds shareholder meetings called for August 25, 2011 and the need to secure shareholder, regulatory and court approvals for the merger of the VenGrowth Funds into GrowthWorks. There can be no assurance that all of these conditions will be satisfied or that the GrowthWorks Proposal will completed on the terms proposed or at all. In addition, the completion of the GrowthWorks Proposal is subject to a number of risks.

Certain statements in this press release are forward-looking statements which are based on beliefs and assumptions of management of GrowthWorks as at the date of this press release and subject to known and unknown risks and uncertainties that may cause actual results to be materially different from future results expressed or implied by such forward-looking statements. Forward-looking statements include statements related to the payment of dividends to former VG Shareholders, statements related to the expected MER of the VG Merger Shares, statements related to other expected benefits of the merger, statements about the net asset value, financial flows, cash and financial position of GrowthWorks and statements about expected levels of redemptions of GrowthWorks Class A shares. These statements are based on a number of beliefs and assumptions, including with respect to economic and market conditions, levels of sales and redemptions of GrowthWorks Class A shares, levels of expenses incurred in operating GrowthWorks, levels and pace of investment and divestment activity within GrowthWorks' venture investment portfolio, value of investments and the ability of GrowthWorks to generate gains from which to pay dividends on the VG Merger Shares. These beliefs and assumptions are subject to risks and uncertainties, including risks and uncertainties associated with or affecting: forecasting general economic and business conditions and, in turn, the climate for investment and divestment activity; performance and value of portfolio companies; the ability of portfolio companies to secure needed financing; the ability of GrowthWorks to make follow-on investments in portfolio companies and complete divestments; market fluctuations and other factors affecting levels of redemptions of GrowthWorks Class A shares; the costs of operating GrowthWorks Canadian Fund and the risks disclosed in the GrowthWorks Circular, including Appendix A to the GrowthWorks Circular. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Neither GrowthWorks nor its manager assumes any obligation to update any forward-looking statements.

The content of this press release is qualified in its entirety by, and should be read in conjunction with, the more detailed disclosure set out in the GrowthWorks Circular. Statements in this press release are based in part on publicly available information published by third parties. GrowthWorks has no reason to believe such information is inaccurate, however neither GrowthWorks nor its manager has taken steps to verify the information nor do they assume any responsibility for the accuracy of such information.

Commissions, trailing commissions, management fees and expenses all may be associated with investment fund purchases. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

To view Appendix A, please visit the following link: http://media3.marketwire.com/docs/grwk726a.pdf.

Information in support of Public Broadcast Solicitation

GrowthWorks Canadian Fund Ltd. ("GrowthWorks Canadian Fund") is relying on an exemption granted by securities regulators to make this public broadcast solicitation of proxies. The following information is provided in accordance with such order and securities laws applicable to public broadcast solicitations.

This solicitation is being made by GrowthWorks Canadian Fund and not by or behalf of the management of The VenGrowth Investment Fund Inc., The VenGrowth II Investment Fund Inc., The VenGrowth III Investment Fund Inc., The VenGrowth Advanced Life Sciences Fund Inc. or The VenGrowth Traditional Industries Fund Inc. (together, the "VenGrowth Funds"). The address of the VenGrowth Funds is 105 Adelaide Street West, Suite 1000, Toronto, Ontario M5H 1P9, Canada.

GrowthWorks Canadian Fund has filed a Dissident Proxy Circular dated July 26, 2011 (the "GrowthWorks Circular") containing detailed information about the GrowthWorks merger proposal (the "GrowthWorks Proposal") which is available on www.growthworks.ca and SEDAR.com. You may call 1-800-268-8244 to request copies of the GrowthWorks Circular and proxy or voting instruction form ("VIF"). There can be no assurance that the GrowthWorks Proposal will be completed on the basis proposed or at all. The GrowthWorks Proposal is subject to a number of conditions including the need to secure shareholder, regulatory and court approvals for the merger, and is also subject to the condition that the proposed sale of assets of each of the VenGrowth Funds to Covington Fund II Inc. (the "Second Covington Proposal") be voted down at the meetings of the shareholders of the VenGrowth Funds called for August 25, 2011 (including any adjournments and postponements of those meetings (the "VenGrowth Meetings"). There can be no assurance that all of these conditions will be satisfied. In addition, the completion of the GrowthWorks Proposal is subject to a number of risks. The GrowthWorks Circular contains a detailed description of the terms and conditions of the GrowthWorks Proposal and the risks to completion of the merger.

Proxies for the VenGrowth Meetings may be solicited by or on behalf of GrowthWorks Canadian Fund by mail, telephone, telecopy, e-mail or other electronic means as well as by newspaper or other media advertising and in person by directors and officers of GrowthWorks Canadian Fund and directors, officers and employees of GrowthWorks WV Management Ltd. (the "Manager), the manager of GrowthWorks Canadian Fund, none of whom will be specifically remunerated therefor. Proxies will be solicited by or on behalf of GrowthWorks Canadian Fund from a VenGrowth Fund shareholder by means other than public broadcast, speech or press release only where a copy of the GrowthWorks Circular and form of proxy or VIF has been sent to such shareholder. GrowthWorks Canadian Fund may engage the services of one or more agents and authorize other persons to assist it in soliciting proxies on behalf of GrowthWorks Canadian Fund and may enlist certain investment advisors with clients that hold VenGrowth Fund shares to distribute the GrowthWorks Circular to their clients. These investment advisors will be offered a fee of $1.00 for each client the investment advisor contacts and sends the GrowthWorks Circular to and will be offered reimbursement for the time spent and expenses incurred in connection with the solicitation. Payment to such investment advisors will not be conditional on whether the client delivers a proxy or VIF for the VenGrowth Meetings or votes against the Second Covington Proposal.

All costs incurred for this solicitation will be borne by the Manager. Similarly, all costs incurred in connection with any solicitation of proxies by GrowthWorks Canadian Fund for any meetings of VenGrowth Fund shareholders requisitioned by GrowthWorks Canadian Fund (the "Requisitioned Meetings") will be borne by the Manager, to the extent not reimbursed by the VenGrowth Funds as required under applicable corporate laws. GrowthWorks Canadian Fund estimates that the total fees and costs paid to such soliciting agents in connection with the solicitations would not exceed $75,000, of which $nil has been paid to date.

To the knowledge of GrowthWorks Canadian Fund and its Manager, except as described below, none of GrowthWorks Canadian Fund, its officers and employees, the Independent Nominees named in the GrowthWorks Circular or any associate or affiliate or other "informed person" (within the meaning of Canadian securities laws) of GrowthWorks Canadian Fund or the Independent Nominees has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted on at the VenGrowth Meetings or the Requisitioned Meetings or in any other material transaction or proposed transaction of the VenGrowth Funds since the commencement of the funds' most recent fiscal year. David Levi, a director and the President and Chief Executive Officer of GrowthWorks Canadian Fund, is the director and an executive officer and indirect shareholder of the Manager and Clint Matthews, the Chief Financial Officer of GrowthWorks Canadian Fund, is an executive officer and indirect shareholder of the Manager. If the GrowthWorks Proposal is completed, the net asset value ("NAV") of GrowthWorks Canadian Fund will increase, which will increase the NAV-based management and administration fees paid by GrowthWorks Canadian Fund to the Manager.

You may revoke your YELLOW proxy with an instrument in writing (which can be another proxy with a later date) executed by you and delivered to (i) Equity Financial Trust Company. by no later than 5pm on August 22, 2011, (ii) Computershare Investor Services Inc. by no later than 5:00 p.m. (Toronto time) on August 24, 2011 (iii) the registered office of the VenGrowth Funds by no later than 5:00 p.m. (Toronto time) on August 24, 2011 or (iii) the individual chairing the applicable VenGrowth Meeting on the date of the VenGrowth Meeting or any adjournment of the VenGrowth Meeting or in any other manner permitted by law. You may revoke your YELLOW VIF with an instrument in writing (which can be another VIF with a later date) executed by you and delivered to (i) Equity Financial Trust Company by no later than 5pm on August 22, 2011, or to (ii) Computershare Investor Services Inc. by no later than 5:00 p.m. (Toronto time) on August 24, 2011.