VenGrowth Asset Management Inc.

VenGrowth Asset Management Inc.

November 24, 2010 22:16 ET

VenGrowth Funds Confirm Payments to Managers

TORONTO, ONTARIO--(Marketwire - Nov. 24, 2010) - On October 12, 2010, each of the five VenGrowth labour sponsored funds (The VenGrowth Investment Fund Inc., The VenGrowth II Investment Fund Inc., The VenGrowth III Investment Fund Inc., The VenGrowth Advanced Life Sciences Fund Inc. and The VenGrowth Traditional Industries Fund Inc. (the "VenGrowth Funds')) announced a proposed sale of assets to the Covington Fund II Inc. ("Covington II") (the "Covington Transaction"). As part of the Covington Transaction, each of the individual VenGrowth Funds is required to terminate its management and administration contracts with its managers (together, the "VenGrowth Managers").

Several press articles have reported on the total amount payable to the VenGrowth Managers. The amount of termination payments to be paid to the VenGrowth Managers, assuming all of the VenGrowth Funds are acquired by Covington II, is $19.8 million. Covington Capital Corporation (the manager of Covington Fund II Inc.) has agreed to pay $5 million towards the termination payments by the five VenGrowth Funds, thereby reducing the impact on shareholders of the VenGrowth Funds, and the remaining approximately $14.8 million will be paid by the VenGrowth Funds. Although there are five separate entities to which payments will be made from five separate VenGrowth Funds, these entities are affiliates. As described to shareholders in the Management Information Circular, the amount payable by The VenGrowth Investment Fund Inc. to its VenGrowth Manager is $812,106, the amount payable by The VenGrowth II Investment Fund Inc. to its VenGrowth Manager is $4,169,879 for the management agreement and $3,114,969 for the administration agreement, the amount payable by The VenGrowth III Investment Fund Inc. to its VenGrowth Manager is $465,760, the amount payable by The VenGrowth Advanced Life Sciences Fund Inc. to its VenGrowth Manager is $5,841,709 for the management agreement and $3,179,640 for the administration agreement and the amount payable by The VenGrowth Traditional Industries Fund Inc. to its VenGrowth Manager is $2,215,936 for the management agreement. These amounts total $19.8 million. The $5 million to be paid by Covington will be pro rated amongst the amounts owing by each of the VenGrowth Funds based upon their respective termination fees.

If any of the VenGrowth Funds is not acquired in the Covington Transaction, the total termination fee will be reduced accordingly. The VenGrowth Managers will provide releases in respect of all obligations of the VenGrowth Funds under each of the contracts terminated on receipt of the termination payments, which will be paid in full on closing of the Covington Transaction.

As described to shareholders in the Management Information Circular, the VenGrowth Funds have also agreed that they will prepay all capital maintenance fees owing to the VenGrowth Managers as compensation for the payment of sales commissions financed by and originally paid to advisors by VenGrowth Managers on the sale of Class A shares by VenGrowth Funds (the "Capital Maintenance Fees"). The Capital Maintenance Fees payable by the VenGrowth Funds are: The VenGrowth Investment Fund Inc. - $921,499, The VenGrowth II Investment Fund Inc. - $517,250, The VenGrowth III Investment Fund Inc. - $674,039, The VenGrowth Advanced Life Sciences Fund Inc. - $3,885,477 and The VenGrowth Traditional Industries Fund Inc. - $2,573,165.

The arrangements with the VenGrowth Managers were reviewed by the Independent Review Committees of each of the VenGrowth Funds. None of the members of the Independent Review Committees have any financial interest or are engaged by any of the parties having a financial interest in the Covington Transaction. Shareholders are being asked to approve all of the payments to the VenGrowth Managers as part of the resolutions to approve the Covington Transaction.

About VenGrowth Asset Management Inc.

A premier Canadian private equity investment group, VenGrowth Asset Management builds innovative companies into global successes. Since 1982, we have invested over $1.3 billion in more than 200 North American companies, working alongside business owners to maximize potential. For more information, visit www.vengrowth.com.

This document is for information purposes only and should not be relied upon as investment advice. Information contained herein is subject to change without notice and VenGrowth Asset Management is not responsible for any inaccuracies or to update this information. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Contact Information

  • Media Inquiries:
    VenGrowth Asset Management Inc.
    Wesley Ollson
    Director, Product Management and Communications
    (416) 628-9263
    wollson@vengrowth.com