GrowthWorks Canadian Fund Ltd.

GrowthWorks Canadian Fund Ltd.

March 26, 2011 18:59 ET

GrowthWorks Remains Committed to Getting Best Deal for VenGrowth Shareholders, Despite Continued VenGrowth Tactics

TORONTO, ONTARIO--(Marketwire - March 26, 2011) - On March 25th, the special committee of the VenGrowth Board (the "VenGrowth Special Committee") issued a press release alleging that the solicitation by GrowthWorks Canadian Fund Ltd. ("GrowthWorks" or "GrowthWorks Canadian Fund") of support for its proposed merger of the VenGrowth Funds into GrowthWorks Canadian Fund (as amended/improved from time to time, the "GrowthWorks Proposal") is "abusive". GrowthWorks sees this tactic by the VenGrowth Special Committee as yet another attempt to silence GrowthWorks, limit VenGrowth shareholder choice and retain absolute control of a review process that from the start has been tainted by conflicts of interest and divided loyalties. VenGrowth's allegation that GrowthWorks' solicitation is abusive and its reference to a complaint it has filed with the OSC are clearly aimed at creating confusion and stemming the wave of shareholder action that GrowthWorks' solicitation has empowered.

VenGrowth Board Failed its Class A Shareholders

Last year, the VenGrowth Board failed to properly look out for the interests of VenGrowth Fund Class A shareholders ("VenGrowth Shareholders") in recommending the Covington Proposal. Through GrowthWorks Ltd.'s involvement, deeply troubling aspects of the Covington Proposal and the VenGrowth Board's actions came to light and the Covington Proposal was ultimately terminated. Without GrowthWorks Ltd.'s involvement, the Covington Proposal would have completed, generating a significant ongoing revenue stream for the VenGrowth sponsor and millions of dollars a year in undisclosed "consulting" fees (the "Undisclosed Consulting Fees") for 4 of the 10 VenGrowth Fund directors, individuals who have presided over poor results for VenGrowth Shareholders. GrowthWorks Ltd.'s involvement has generated significant benefits to date by shifting the focus to the interests of VenGrowth Shareholders and delivering better value for them.

VenGrowth Board's Latest Round of Tactics

When GrowthWorks Ltd. challenged the Covington Proposal last fall, the VenGrowth Board filed complaints with the OSC in an attempt to silence GrowthWorks, just as they are doing now. Now, as before, the VenGrowth Board's real objective is to deny VenGrowth Shareholders the opportunity to consider GrowthWorks' competing proposal.

David Levi, President and CEO of GrowthWorks, responded to the VenGrowth Special Committee's latest allegations with the following statement "We stand by the disclosure in our Information Circular and the process we designed to get the best deal for VenGrowth Fund Class A shareholders. These tactics by the VenGrowth Special Committee are predictable given the past conduct of the VenGrowth Board in connection with the Covington Proposal and only strengthen our doubts about the ability of this group of directors to do what's best for Class A shareholders. We remain deeply concerned that their review process is being influenced by the financial interests of the VenGrowth managers and sponsor."

Support Agreement Empowers Shareholders and will Fall Away if there's a Superior Proposal

Support agreements are commonly used in acquisition transactions and often provide a power of attorney to ensure shares covered by the support agreements are voted in favour of the proposed transaction. GrowthWorks has simply taken concepts familiar in acquisition transactions and applied them in the context of the GrowthWorks Proposal to present VenGrowth Shareholders with an opportunity to engage directly with GrowthWorks and not leave their fate solely in the hands of the VenGrowth Board and the "opaque" review process being presided over by the VenGrowth Special Committee. The GrowthWorks' Support Agreement creates a "two horse race" process by putting the GrowthWorks Proposal up against any proposal recommended by the VenGrowth Board. A Class A Shareholder Committee made up of experienced businesspeople who are independent of both VenGrowth and GrowthWorks will compare the financial aspects of the proposals to determine which is "superior". If a proposal recommended by the VenGrowth Board is judged by the Class A Shareholder Committee to be "superior" to the GrowthWorks Proposal, the power of attorney set out in the Support Agreement will fall away and the shareholder will be free to vote for the "superior" proposal. The VenGrowth Special Committee's release is misleading on this matter.

GrowthWorks' Position on the VenGrowth Special Committee Process

GrowthWorks submitted its merger proposal to the VenGrowth Board in December 2010 and again on March 14, 2011. Given the past conduct of the VenGrowth Board and GrowthWorks' role in exposing that conduct, GrowthWorks was not willing to sign their legal agreement that would tightly restrict its ability to communicate with VenGrowth Fund Class A shareholders. GrowthWorks believes that its only viable option is to engage directly with VenGrowth Shareholders.

David Levi commented further "We are hearing from many shareholders and investment advisors who are angry and fed-up with the VenGrowth Board and want an immediate resolution. We've provided VenGrowth Fund Class A shareholders with detailed disclosure about our proposal, about the terms of the Support Agreements and about GrowthWorks Canadian Fund. The VenGrowth Board wants shareholders to leave the matter solely in their hands again – despite what happened last time. GrowthWorks is giving shareholders another option."

GrowthWorks Canadian Fund: (i) is one of Canada's oldest and largest retail venture capital funds, (ii) has completed more merger transactions than any other RVC fund in Canada, (iii) has skillfully managed liquidity through its peak redemption years and avoided going "off-redemption" – like many other RVC funds, including 3 of the 5 VenGrowth Funds, and (iv) has a manager with the largest venture capital investment team in Canada (outside of Quebec). GrowthWorks is here for the long term and is committed to improving the situation for VenGrowth Shareholders.

GrowthWorks Canadian Fund urges VenGrowth Shareholders to act now to protect their own interests by signing and returning the Support Agreement mailed to them and also available at www.sedar.com and www.growthworks.ca. VenGrowth Shareholders have a choice. Do nothing and leave matters with the VenGrowth Board to carry forward again – knowing what happened last time. Or give your support to GrowthWorks and get the better "two horse race" process and better deal by signing and returning the Support Agreement. GrowthWorks encourages VenGrowth Shareholders to review the Information Circular and Support Agreement and to contact their investment advisors with any questions.

The information in this press release is fully qualified by, and is subject to, the more detailed information contained in the Information Circular and Support Agreement sent to VenGrowth shareholders. This press release contains forward looking statements. See "Forward Looking Statements" in the Information Circular. There can be no assurance that the merger contemplated by the GrowthWorks Proposal will be completed on the basis proposed or at all. 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.

Contact Information

  • GrowthWorks Canadian Fund Ltd.
    David Levi
    President & Chief Executive Officer
    (416) 934-7700