GrowthWorks Receives Positive Response to its Improved Merger Proposal

TORONTO, ONTARIO--(Marketwire - Aug. 3, 2011) - GrowthWorks Canadian Fund Ltd. ("GrowthWorks") today highlighted some key benefits of its proposal for merging the five VenGrowth Funds into GrowthWorks (the "GrowthWorks Proposal"). 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 (www.sedar.com) and GrowthWorks' websites (www.growthworks.ca).

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 (the "VG Board") and managers (the "VG Managers") of the VenGrowth Funds with Covington Fund II Inc. ("Covington II"), to be voted on by Class A shareholders of the VenGrowth Funds ("VG Shareholders") on August 25, 2011. GrowthWorks is soliciting proxies from VG Shareholders voting AGAINST the Second Covington Proposal in order to preserve the opportunity for VG Shareholders to vote on the improved GrowthWorks Proposal described in the GrowthWorks Circular. If the Second Covington Proposal is voted down, GrowthWorks intends to take steps to requisition meetings of VG Shareholders to vote on the GrowthWorks Proposal.

Referring to GrowthWorks' improved proposal, David Levi, President and CEO of GrowthWorks, commented, "GrowthWorks made this a true auction process because we knew we could put together a better deal for VenGrowth shareholders that also offered significant benefits for GrowthWorks shareholders. Our intervention has generated much better deal terms than what the VenGrowth managers negotiated and the VenGrowth board recommended last fall. But the most important benefit that GrowthWorks brings to a merger is its large, mature, diversified venture portfolio, something Covington Fund II simply can't match. Post-merger, VenGrowth and GrowthWorks shareholders will benefit from a strong cash position and a mature, diversified venture portfolio that's well positioned to produce near-term divestments. In our view, this is a combination that offers the best prospects for generating shareholder value. We have received positive feedback from investment advisors about our improved proposal."

The GrowthWorks Solicitation

GrowthWorks is mailing the GrowthWorks Circular directly to the almost 11,000 VG Shareholders who signed support agreements in the spring backing GrowthWorks' "two horse race" process to secure a better deal for VG Shareholders. GrowthWorks is also publicly soliciting proxies from all VG Shareholders. David Levi commented, "The VenGrowth shareholders who signed GrowthWorks' support agreement represent a larger group of shareholders than was represented at the VenGrowth shareholder meetings held last fall to vote on the first Covington Fund II proposal. While we're mailing to this group, we urge all VenGrowth shareholders to download or request our dissident circular and vote against this latest proposal from Covington Fund II. Now that the details of both merger proposals are before VenGrowth shareholders, it's up to them to decide. This is shareholder democracy in action."

GrowthWorks believes that VG Shareholders should be given the option to choose who will manage their investment going forward and that the GrowthWorks Proposal is superior to the Second Covington Proposal in a number of key areas, including:

• Better redemption options
• Lower estimated MER
• A larger, more diversified venture portfolio
• Faster return of cash via "Advantage" Dividends
• A more experienced manager, and
• A better deal on the manager's carried interest or "IPA".

See the comparison table and accompanying notes on pages 11 – 13 of the GrowthWorks Circular.

Better Redemption Options

The GrowthWorks Proposal provides two redemption windows for suspended VG Shareholders: one window at merger closing with a 15% redemption fee and a second window 18 months later with a much lower 7.5% redemption fee. The Second Covington Proposal does not offer a second window at all. Also, under the GrowthWorks Proposal, the discounted redemption window and the value generated from the redemption fees benefit VG Shareholders only. Under the Second Covington Proposal, the single redemption window can be accessed by shareholders of New Generation Biotech Fund, which means the $30 million (net) cap on discounted redemptions is shared with another fund, and about 17% of the value generated by the discounts will accrue to shareholders of the two merging Covington funds, which dilutes the benefit for VG Shareholders.

Lower Estimated MER

The fee and cost structure for the newly created series of GrowthWorks Class A shares ("VG Merger Shares") is substantially the same as what's proposed under the Second Covington Proposal, 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%. Post-merger, GrowthWorks would be about 47% larger than Covington II. This significantly larger size also allows costs to be spread over a larger capital base and is expected to have favourable effects on MER going forward versus the much smaller Covington II.

A Larger, More Diversified Portfolio – A Key Part of a Strong Financial Position

GrowthWorks expects to be in a strong financial position post-merger due to (i) a projected cash position of over $60 million, and (ii) a large, mature, readily divestible venture portfolio. As illustrated in the projected financial flow charts and accompanying notes on pages 21 and 22 of the GrowthWorks Circular, GrowthWorks expects that after completion of a merger with the five VenGrowth Funds, GrowthWorks will have financial resources considerably in excess of its capital requirements. This excess capacity provides flexibility if divestments occur at a slower pace or redemptions occur at a higher level than assumed for purposes of the projections.

GrowthWorks' venture portfolio is much larger and more diversified than Covington II's venture portfolio. GrowthWorks believes that its large, mature, diversified and divestible venture portfolio will provide a stronger platform for generating more predictable cash flows and upside for shareholders. David Levi commented further that, "For these funds, upside comes from the venture portfolio. We believe that our proposal offers the best post-merger combination of liquidity and upside potential. After all, we bring about $140 million in 'mature' investments to the table, ready for sale over the next two years. This benefits all shareholders."

Faster Return of Cash via "Advantage" Dividends

To enhance the liquidity prospects for former VG shareholders, GrowthWorks' Board of Directors will adopt an "Advantage" dividend policy designed to distribute cash to former VG Shareholders faster if VenGrowth Fund assets perform well post-merger.

Stronger Manager Track Record

GrowthWorks' manager has a stronger track record than Covington II's manager in three key areas; life science experience, managing liquidity and returns.

• GrowthWorks' manager has extensive experience in the area of life sciences. This is very important given that about 40% of the combined VenGrowth Funds' venture portfolio is in the life sciences sector. Specialized knowledge and hands on experience is crucial to success in that sector. We believe that Covington II's manager has a poor life sciences track record, as evidenced by the poor performance of its New Generation Biotech (Equity) Fund.
• GrowthWorks' manager has never taken a managed fund "off-redemption". Covington II's manager has taken two funds off-redemption.
• The performance data set out in Appendix D to the GrowthWorks Circular illustrates that since 2002, GrowthWorks has outperformed Covington Fund II 70% of the time and also shows the poor performance of Covington Fund II's manager. Covington-managed New Generating Biotech (Equity) Fund is down by over 68% from January 2002 to date. GrowthWorks has a much stronger performance record in the area of life sciences.

Better Deal on IPA

Under the GrowthWorks Proposal, VG Shareholders will benefit from a full IPA exemption on the first $7.5 million of eligible gains on former VenGrowth Fund investments. Under the Second Covington Proposal, there is no exempt amount. Referring to this IPA exemption, David Levi commented, "We believe that VenGrowth shareholders should make up ground on the VenGrowth investments before GrowthWorks' manager earns performance payments on these investments."

How Much is Enough for the VenGrowth Managers and Sponsor?

The VG Board is dominated by representatives of the VG Managers and the sponsor of the VenGrowth Funds (the "VG Sponsor"). GrowthWorks believes this works to elevate their concern for the interests of the VG Managers and VG Sponsor and dilute their concern for the interests of VG Shareholders. Ordinarily, public shareholders can rely on the board to put their interests first. In this case, we believe that would be unwise. Statements about the VG Board "unanimously" supporting the Second Covington Proposal and statements from the VG Board about the GrowthWorks Proposal should be read in light of the significant conflicts of interest and divided loyalties affecting a majority of the VenGrowth directors. GrowthWorks believes that VG Shareholders should take action to protect their own interests.

The VG Board has once again recommended a merger proposal with Covington II that is highly favourable to the interests of the VG Managers and the VG Sponsor. The Second Covington Proposal provides for:

• The VG Sponsor to become "co-sponsor" to Covington II. There is no need for two sponsors. But this will entitle the VG Sponsor to be paid ongoing sponsor fees by Covington II. These fees are expected to total over one million dollars over the next 2.5 years. A very lucrative benefit for the VG Sponsor.
• More than 50% of the management fees that would be paid to the Covington II manager will instead be paid by Covington II to the VG Managers on an ongoing basis for little in the way of required effort. This is expected to be millions of dollars a year into the future. A very lucrative benefit for the VG Managers.
• In addition, the VG Managers will receive 50% of any incentive participation payments ("IPA") paid to the Covington II manager after July 2013 (and 35% until July 2013). These go forward "incentive" payments will be largely based on asset values "reset" as at the time of the merger for purposes of IPA return thresholds. So while the VG Managers delivered losses for most VG Shareholders over the past 10 years, they now stand to reap millions of dollars in reset "incentive" payments going forward.

"Under the original Covington deal that VenGrowth shareholders voted on last fall, the VenGrowth Managers were to be paid over $28 million in termination and other fees on closing. Under this latest Covington proposal, those fees are paid over time out of the net assets of Covington Fund II. The amount paid to the VenGrowth managers under this latest proposal could certainly exceed $28 million, especially given their ongoing, largely re-set carried interest," commented David Levi.

Under the VG Board-backed Second Covington Proposal, Covington II is acting, in large measure, as an accommodating party. The VG Managers will receive the majority of management fees that would otherwise be paid by Covington II to the Covington II manager and the VG Sponsor will receive the majority of fees paid to the sponsors of Covington II.

"We do not believe the VenGrowth managers deserve this lucrative upside going forward after charging tens of millions of dollars in management fees while presiding over significant losses and taking three of five VenGrowth funds off-redemption," commented David Levi. Under the GrowthWorks Proposal, the VG Managers will have no continuing role post-merger and GrowthWorks' manager will backstop any termination fees that become payable to the VG Managers as a result of the merger.

Voting on the GrowthWorks Proposal

If the Second Covington Proposal is voted down, GrowthWorks intends to take steps to requisition meetings of VenGrowth shareholders to vote on the GrowthWorks Proposal. The VenGrowth Board will be in a position to determine the timing of those meetings. GrowthWorks believes that meetings could take place by the end of October 2011. As is the case with the Second Covington Proposal, the GrowthWorks Proposal is subject to a number of conditions. Either deal could fail if conditions are not satisfied.

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. VG 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, tax 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 be 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 associated with the GrowthWorks Proposal and statements about the cash and financial position of GrowthWorks post-merger. 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.

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.