VENGROWTH FUNDS

UPDATE

September 15, 2005

AGENDA

• Who is VenGrowth

• What is Venture Capital

• Building the Next Ottawa Tech Boom

• How VenGrowth plans to generate returns for shareholders

WHO IS VENGROWTH

• Founded in 1982

• Over $1.2 billion in assets – one of Canada’s largest managers of private equity

• 23 experienced private equity managers and analysts

• #1 selling LSIF for eight consecutive years

• Independently owned by employees

• Toronto-based, with an Ottawa investment office

What: Investments in privately owned companies

Size: $400 Billion

Who: Institutional (e.g. CPP) & High Net Worth

Why: Long-term return potential, Diversification

VENTURE CAPITAL INVESTING

Private Public

Research Process 3 to 6 months Varies

Information Access Private/ Proprietary Public Disclosure

No. of Companies/ Portfolio Manager

5 30 - 100+

Ownership Stake 10% - 49% < 10%

Portfolio Manager Influence

Board of Directors Passive

Time Horizon 3 to 5 years Short, mid & long term

Liquidity IPO or M&A Stock Exchange

UNIQUE INVESTMENT STRUCTURES

Introduction to the company

Invest in the company

3-6 months

3-5 years

Operating milestones

Strategic partnership agreements

IPO or M&A

Grow the business

THE VENTURE CAPITAL INVESTMENT CYCLE

Early Stage Investing Mid-Stage Investing Later-Stage Investing Mezzanine Financing

More Risk Less Risk

Most Companies require $20 - $50 million and 3 – 5 rounds of financing to go from start-up to exit

Industry

Tech. Life Sciences

60% 20%

Traditional Industries

20%

WHAT IS VENTURE CAPITAL?

THE J-CURVE EFFECT

• Venture capital fund performance typically takes on the shape of a “J”, declining in early years and rising substantially in the middle and later years of the fund’s life.

• Investing in later-stage companies helps lessen the J-Curve

The J-Curve

Time

Va

lue

VC RETURNS BEAT OTHER MARKETS – OVER THE LONG-TERM

Rolling 5 Year Returns for U.S. Venture Capital Funds 1980 - 2004

0

5

10

15

20

25

30

35

40

45

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

DOWN CYCLE:• IPO’s on hold• Few acquisitions• Public Companies “retrench”

UP CYCLE:• Renew demand for growth• Increased merger and

acquisition activity• More IPO’s

U.S. venture capital returns are near 20-year lows

STATE OF THE MARKET EXPLAINS SHORT-TERM PERFORMANCE

Opportunity

LSIF TAX CREDITS UNTIL 2010

• Intention to continue the Ontario provincial tax credit for NEW investments in LSIFs until 2011 RSP Season

• Does not impact existing shareholders

* Combined ON and federal tax credits

Tax Year

RSP Season

LSIF* ROIF*

2005 2006 30% 35%

2006 2007 30% 35%

2007 2008 30% 35%

2008 2009 30% 35%

2009 2010 25% TBD

2010 2011 20% TBD

TOP 10 VC DISCLOSED DEALS IN 2005

VenGrowth Captures 6 of Top 10 Deals in 2005

Source: Thomson Macdonald, Q2 2005 VC Report

Company City Province CDN $’000 Invested

Meriton Networks Inc. Kanata ON $67,380

Zelos Therapeutics Inc. Ottawa ON $53,030

Celator Technologies Inc. Vancouver BC $49,900

Tropic Networks Inc. Ottawa ON $41,180

Simpler Networks Inc. Dorval QC $31,200

Sandvine Inc. Waterloo ON $18,720

Liquid Computing Inc. Kanata ON $17,470

Cytochroma Inc. Markham ON $15,000

Positron Technologies Inc. Montreal QC $12,500

Nakina Systems Inc. Kanata ON $12,480

VENGROWTH FUND FAMILY

VENGROWTH TRADITIONAL

INDUSTRIES FUND

• 30% Tax credits (Ont)

• 100% RRSP eligible

• Traditional industry investments

(i.e. manufacturing & services)

VENGROWTH III DIVERSIFIED FUND

• 30% Tax credits (Ont)

• 100% RRSP eligible

• Technology, life sciences &

traditional industries

VENGROWTH ADVANCED LIFE SCIENCES FUND

• 35% Tax credits (Ont)

• 100% RRSP eligible

• Diversified life sciences(i.e. biotechnology,

medical devices, imagingand diagnostics)

Most Conservative Most DiversifiedMaximum

Return Potential

VENGROWTH MANDATE

Our Commitment to Advisors and Shareholders:

• We continue to attract the best investment opportunities in Canada

• Continue to adhere to a later-stage, conservative investment philosophy to control risk

• Will continue to work with existing portfolio companies to position them well for successful exits

• Our primary objective continues to be to generate shareholder returns

Customer’s Like it

10-30 EmployeesCustomer Traction

Spec/ early proto

Customer Trials

Beta ProductSuccessful trials

Mgmt team

Shipping Volume

Big Customers, Revenues

Complete Team

Got What It Takes

FoundersFull Biz Plan

Buzz

Idea /Opportunity

Definition Product‘Beta’

Volume‘Ship’

SeedSeed Round 1Round 1 Round 2Round 2 DebtDebt

Prototype‘Alpha’

CapitalCapital

Angel $Angel $

F&FF&F

SelfSelf

Ah-Ha!!Entrepreneur

IdeaEarly Biz Plan

Buzz

Liquidity ZoneLiquidity Zone

M&AM&A IPOIPO

THE OVERALL PROCESS

BroadbandInternetNetwork

Living/Working

Communication

Entertainment

Security

Growth

Needs/Wants

Products/Services

Companies

Cell Phone

Broadband

Home Network

PC

BBerry

MP3

PS2/Xbox

HDTV

Internet

Shopping

VoIP

Infrastructure

DigitalCamera

DigitalCable/S

HomeTheater

PC Software

Servers

IT Services

PCInternet Broadband

IPTV

EnterpriseNetwork

VoIP

MARKET OVERVIEW

Cab

leW

irel

ess

DSL

Compute ServersStorage Networks

Chips

Infrastructure

Software

Servers

IT Services Security

Sonet/Ethernet

BroadbandInternetNetwork

Optical Network

NetworkSoftware

AccessNetwork

CellularNetwork

EnterpriseNetwork

BroadbandInternetNetwork

MARKET OVERVIEW

BroadbandInternetNetwork

Products/Services

Companies

Cell Phone

Broadband

Home Network

BBerry

MP3

PS2/Xbox

HDTV

Internet

Shopping

Infrastructure

DigitalCamera

DigitalCable/S

HomeTheater

PC Software

Servers

IT Services

IPTV

EnterpriseNetwork

VoIP

$200B

$76B

$250B$220B $42B

$50B

$10B

$117B

$1B

$240B

$5B$7B

$6.25Bsw$5.1Bhw

$6B

$1B

MARKET STATS

Cab

leW

irel

ess

DSL

Compute ServersStorage Networks

Chips

Infrastructure

Software

Servers

IT Services Security

Sonet/Ethernet

BroadbandInternetNetwork

Optical Network

NetworkSoftware

AccessNetwork

CellularNetwork

EnterpriseNetwork

$42B$50B

$70B

$220B

$22B$2B

$.3B$.4B

$.7B

MARKET STATS

• Broadband

• Ethernet

• Mobility

• Gaming

• Shopping

• Talk-talk-talk or…- e-mail, v-mail, SMS- Chat, VoIP, skype, blog…

• Chips-chips-chips

HOT STUFF

BroadbandInternetNetwork

Products/Services

Companies

Cell Phone

Broadband

Home Network

PC

BBerry

MP3

PS2/Xbox

HDTV

Internet

Shopping

VoIP

Infrastructure

DigitalCamera

DigitalCable/S

HomeTheater

PC Software

Servers

IT Services

PCInternet Broadband

IPTV

EnterpriseNetwork

VoIPSiGe

Dreamcatcher

MARKET OVERVIEW

Cab

leW

irel

ess

DSL

Compute ServersStorage Networks

Chips

Infrastructure

Software

Servers

IT Services

Sonet/Ethernet

BroadbandInternetNetwork

Optical NetworkBTI, Meriton

NetworkSoftware

AccessNetwork

CellularNetwork

EnterpriseNetwork

SiGe ENQ

NewStepSyndesisNakina Critical

Tundra

MARKET OVERVIEW

3020

THE STARTUP PIPELINE

Shipping VolumeBig Customers

RevenuesComplete Team

Idea /Opportunity

Definition Product‘Beta’

Volume‘Ship’

Prototype‘Alpha’

Liquidity ZoneLiquidity Zone

M&AM&A IPOIPO

1 2 3 4 5

Class of

2001

Class of

2002

Class of

2003

Class of

2004

13 20

Year

INDUSTRY SPENDING IS KEY

• Capacity has been there to absorb demand over the past 5 years

• Traffic is beginning to ramp up…approaching the wall.

• This demand…cell phone, broadband, wireless, PDA, need for speed…will create need for more capacity.

What’s taking so long for the recovery?

Wi-Fi Adoption Number of users

2004 2009

75 mil 327 mil

Number of Wi-Fi Hotspot

2004 2009

84 k 308 k

Source: Pyramid Research. Data released March 2005

THE TECH RECOVERY WILL OCCUR BECAUSE OF RISING DEMAND

iPTV Subscribers

2005 2010

1.6 mil 39 mil

Source: The Diffusion Group as of Jan. 25, 2005

U.S. VoIP Subscribers

2004 2009

0.9 mil 27 milSource: IDC

Source: the Diffusion Group as of Jan. 25, 2005

Network capacity in the 1990’s

An aggressive build-out for computer network capacity occurred in the late 1990’s which resulted in massive IT spending. That capacity is now used up = more IT spending required.

IT SPENDING WILL RETURN DUE TO NETWORK BOTTLENECKS

Network capacity today

• Industry spending to grow from $720.5 billion in 2003 to $1 trillion in 2007. Telecommunications Market Review and Forecast.

Seeds of recovery are being planted in many sectors of the telecom industry

• Spending on broadband services in the U.S. expected to grow to $25 billion by 2007.

• Non-U.S. telecom spending will grow at a compounded rate of 10.6% between 2004 and 2008 to more than $2 trillion by 2008.

INDUSTRY SPENDING: TREND IS POSITIVE

• Wireless spending in the U.S. will rise from $134.5 billion in 2003 to $190.8 billion in 2007

SOME PROTFOLIO COMPANIES

1. Neterion

2. BelAir

3. SiGe Semiconductor

4. BTI Photonics

5. Nakina Systems

6. Sandvine

7. Symbium

8. Liquid Computing

VENGROWTH INVESTEES ARE GROWING THEIR BUSINESSES

“A few companies are quite mature, with IPOs possible in the next 12 months…several companies, such as SiGe Semiconductor (VG I, VGII), Quake Technologies

(VG I, VG II), and Neterion (VG II), could pursue public offerings…”

“Private Canadian Semiconductor Companies”, April 8, 2005 - Wellington West Capital Markets Inc.

Big Partners

Great Products

MAJOR THEMES DRIVING LIFE SCIENCES INVESTING

• Worldwide demographic trends: “28% of population will be above 60 years of age by 2025”

• Crucial need for better diagnostics and treatments for all major diseases AND on an outpatient basis

• Majority of treatments approved in the last 6 years originated from venture capital backed life sciences companies:

Biotech industry is well established as the industry of innovations

Biotech model is compatible with drug development trends aimed at targeting diseases with “smart drugs”

(i.e. cutting off the blood supply to cancerous cells attacking the lung)

LIFE CYCLE OF DRUG DEVELOPMENT

Concept and Proof-of-Principle

Pre-Clinical Phase 1 Phase 2 Phase 3 Market

4-5yrs 1yr 1.5yrs 2yrs 3-4yrs 1yr

NDA

DRUG DEVELOPMENT• Management in place• Right timing for strategic partnerships• Right timing for Acquisitions and IPO’s

DRUG DEVELOPMENT• No management• Pharma and Biotech

uninterested partners

100 5 1-2

Before human trials

Check safety - healthy volunteers

Small samplepatient testing - dosage

Large sample patient testing

LIFE CYCLE OF DRUG DEVELOPMENT

Concept and Proof-of-Principle

Pre-Clinical Phase 1 Phase 2 Phase 3 Market

4-5yrs 1yr 1.5yrs 2yrs 3-4yrs 1yr

NDA

DRUG DEVELOPMENTDRUG DISCOVERY

IPO/ M&A

100 5 1-2

Markets varied, but…

• Absolutely understand underlying tech themes

• Have deep expertise to pick and nurture winners

• Portfolio companies play in established and emerging markets

• Invest where companies have global, winning solutions

• Many companies in our portfolio have done it On the tech front Starting to see ramp on the sales side

• Must stay in the game to win

• Next 18 months will start to see exits in the portfolio and with them, increasing return potential

CONCLUSIONS

• Established Industry Leader # 1 in fund raising; # 1 most active national VC investor

• Later-Stage Venture Capital Focus Conservative investment style to control risk

• Most Experienced Management Team Two decades specializing in venture capital and private equity

• Strongest Proprietary Deal Flow Reputation, value-added and success attracts premium

opportunities

• Most Successful Track Record Over $300 million received from exit events

WHY VENGROWTH?

Thank You