Vengrowth Funds Close Merger With Convington Fund II

The VenGrowth Funds announced the closing of a merger of the VenGrowth Funds with Covington Fund II Inc. that resulted in over $300 million of assets of the VenGrowth Funds and of New Generation Biotech (Equity) Fund Inc. (“NGBE”) being transferred to Covington II. As part of the transaction, Covington Capital Corporation took over as manager of the merged funds.

The closing of the transaction was the culmination of a process commenced by the VenGrowth Funds in 2010. The process initially resulted in an original proposal to merge the VenGrowth Funds and NGBE with Covington II that was submitted to shareholders of the funds in November, 2010. The proposal was opposed by GrowthWorks Ltd. (“GrowthWorks”) and GrowthWorks Canadian Fund Ltd. made a competing proposal to merge with the VenGrowth Funds (the “GrowthWorks Proposal”). VenGrowth Fund shareholders approved the initial Covington II merger, however the merger failed to gain necessary court and Ontario Securities Commission approvals and the parties decided not to continue to pursue the approvals or the proposed merger.

Following the termination of the original Covington II merger proposal, in January, 2011, the VenGrowth Funds struck an independent special committee of the board of directors of each of the VenGrowth Funds to conduct a renewed independent strategic review process to improve liquidity and enhance shareholder value.

In March, 2011, GrowthWorks Canadian Fund began soliciting support agreements from shareholders of the VenGrowth Funds, which support agreements granted GrowthWorks Canadian Fund the authority to requisition shareholder meetings of the VenGrowth Funds to consider the GrowthWorks Proposal and the authority to vote supporting shareholders' shares in favour of the GrowthWorks Proposal and against any competing merger proposal that was not found to be superior to the GrowthWorks Proposal.

On May 2, 2011, the special committee applied to the OSC for an order prohibiting GrowthWorks Canadian Fund from using the support agreements.

On June 9, 2011, after a two-day hearing, the OSC ruled that while GrowthWorks Canadian Fund could use the support agreements to requisition meetings of the VenGrowth Funds to consider the GrowthWorks Proposal, GrowthWorks Canadian Fund could not use the support agreements to vote VenGrowth Fund shares in favour of the GrowthWorks Proposal or against any other competing proposal.

On May 31, 2011, as a result of the special committee process, the VenGrowth Funds announced a second proposal to merge with Covington II and NGBE which was submitted to shareholders for approval at meetings held on August 25, 2011.

GrowthWorks Canadian Fund solicited proxies in opposition to the second Covington II merger proposal. On August 25, 2011, shareholders of the VenGrowth Funds approved the merger with Covington II and the merger completed on September 2, 2011.

The special committee of the VenGrowth Funds was represented by Miller Thomson LLP, with a team that included Jay Hoffman, Robert Forbes, Ormonde Benson, Susan Han, Melissa Ghislanzoni, Marek Warshawski and Stephen Oh (business law); Lyne Gaulin (tax) and John Chapman, Emily Cole and Adam Stephens (litigation), and by Philip Anisman, Barrister and Solicitor, as co-counsel.

Covington II and NGBE were represented by Gowling Lafleur Henderson LLP with a team that included Iain Robb, Jonathan Behar, Alex Lalka and Steven Cutler (business law) and Gloria Geddes (tax).

The managers of the VenGrowth Funds were represented by Bennett Jones LLP with a team that included Gary Solway, Bernard Morris, Ranjeev Dhillon and Faran Umar-Khitab (corporate) and Robert Staley, Derek Bell and Jon Bell (litigation).

Jon Levin of Fasken Martineau DuMoulin LLP acted as independent chair at the August 25, 2011 special meeting of the VenGrowth Funds along with Daniel Batista who acted as his independent counsel.

GrowthWorks Ltd., an affiliate of the manager of GrowthWorks Canadian Fund Ltd., was represented by Irwin White & Jennings, with a team that included John McLeod, Monica Soares and Rosanna Tallarico, and by Davies Ward Phillips & Vineberg LLP, with a team that included Alex Moore and Kevin Greenspoon (corporate) and James Doris and Jim Bunting (litigation).

GrowthWorks Canadian Fund Ltd. was represented by McCarthy Tétrault LLP with a team that included Jonathan Grant and Danielle Traub (corporate) and Paul Steep and Andrew Matheson (litigation).