Toronto, January 30, 2004 - VenGrowth today confirmed that the current RRSP season represents a final opportunity for Canadians to invest in the industry-leading retail venture capital fund - VenGrowth II. The Fund will close to new investors following the RRSP season which ends March 1, 2004, and once VenGrowth has receipt of the prospectus of the third in its series of flagship labour sponsored investment funds (“LSIFs”). The new fund, expected to be named VenGrowth III, will mirror the conservative, late stage investment strategy pioneered by VenGrowth’s first two flagship funds – VenGrowth I and II. VenGrowth is committed to maximizing shareholder returns by prudently managing assets in a series of finite pools with a substantial capital base. VenGrowth II, launched in January 2000, is Canada’s largest LSIF with net assets of CDN$487.4 million and over 100,000 existing investors as of December 31, 2003.

“Capping VenGrowth II after it has enjoyed a series of successful fundraising years, will allow the broad portfolio of companies to mature in unison, increasing return potential for investors,” said Deborah Gray, Senior Vice President Sales & Marketing, Managing General Partner of VenGrowth Capital Partners Inc. “This RRSP season represents a final chance for investors to buy into this existing pool of well-established companies - an excellent opportunity for investors looking to diversify and add some growth potential to their portfolio.”

Capping VenGrowth II – Key benefits to investors

•  Increased return potential from a portfolio of companies maturing collectively
• The achievement of "critical mass" enables the Fund to mitigate expenses, manage liquidity and provide crucial follow-on funding to portfolio companies
• Access to an exclusive pool of well-established companies not available through other investment funds
• Well positioned to benefit from recovery in private equity market as the most active LSIF in one of the lowest valuation periods in 10 years. 84% of the total money deployed by VenGrowth II was invested since the beginning of 2001.

“The decision to cap VenGrowth II was made based on our systematic evaluation of the optimal size and structure of a private equity pool,” explained Earl Storie, founder and Managing General Partner of VenGrowth Capital Partners Inc. ”Two decades of managing private equity funds on behalf of individuals and institutions tells us that you reach a stage where it is best practice to cap a fund to allow shareholders to benefit from a maturing portfolio. VenGrowth II, with close to $500 million in net assets and a rich portfolio of investee companies, has reached that stage. The fact that the average size of a closed venture pool from the top 20 U.S. venture capital firms is USD$484.95 million*, reinforces our strategy. This move is in the best interest of our investors and consistent with best practices for the venture capital industry.”

The Fund is invested in 60 predominantly later-stage companies with excellent growth prospects. The portfolio is spread across a broad range of industry sectors spanning Internet infrastructure, enterprise software, communications, semiconductors, traditional industries, life sciences and other special growth opportunities. Despite being one of the most active Canadian venture funds over the last three years, VenGrowth II remains liquid with 27% of the portfolio held in cash at December 31, 2003. That capital will be used to nurture portfolio companies with critical follow-on funding to enable them to fulfill their potential. The importance of follow-on funding was clearly illustrated last year, with 75% of all Canadian venture investments going to existing venture companies.

“A substantial 72 per cent of VenGrowth II holdings demonstrated improved bottom line performance over the last fiscal year,” said Earl Storie. ”This speaks to our hands on management style and ability to grow businesses through any economic cycle. It’s crucial that these companies are now afforded the attention, funding and time to break through to the next level with a successful exit event to generate returns for the Fund’s investors.”

How private equity pools generate returns for investors

The primary way for venture capitalists to make money for investors in their funds is to “exit” portfolio holdings by taking a company public through an initial public offering (“IPO”) or selling the company to a larger strategic buyer. This process typically takes four to seven years after funding. If a private equity fund continues to raise new capital and make venture investments throughout its lifespan, return potential will always be diluted by newer, younger investments and inflows of low-yield assets such as cash. Conversely, capping a fund once it has reached a critical mass allows its holdings to collectively mature towards a stage that they can be exited, significantly increasing return potential for the portfolio as a whole.

*Source: VentureSource

VenGrowth II Top Holdings

About VenGrowth Capital Partners Inc.

With over $1 billion in assets under management, VenGrowth is Canada’s largest private equity and venture capital firm managing both retail and institutional assets. Since 1982, VenGrowth’s accomplished team of seasoned private equity managers has invested over $1 billion in 169 companies, building a strong track record of successful portfolio transactions. These investments have been made on behalf of over 160,000 individual investors as well as leading pension funds, insurance companies and family foundations. Portfolio companies benefit from VenGrowth’s substantial experience, resources, and hands-on investment style. VenGrowth is 100% independently owned by employees that are dedicated to generating superior returns for shareholders in its funds. VenGrowth’s offices are located in Toronto (Corporate Headquarters) and Ottawa. For more information, please visit www.vengrowth.com.

About Labour Sponsored Investment Funds (“LSIFs”)

For Canadian investors, LSIFs provide important portfolio diversification and a tax-efficient method of accessing the long-term return potential of the private equity asset class. The VenGrowth II Investment Fund Inc., The VenGrowth Advanced Life Sciences Fund Inc. and The VenGrowth Traditional Industries Fund Inc. are accompanied by a federal tax credit of 15% on the first $5,000 invested per investor, per taxation year. Ontario investors are eligible for additional provincial tax credits of up to 15% for investing in VenGrowth II Investment Fund Inc. and VenGrowth Traditional Industries Fund Inc. and up to 20% for investing in VenGrowth Advanced Life Sciences Fund Inc., per taxation year. Investments in these VenGrowth funds are 100% RRSP eligible. The VenGrowth Investment Fund Inc. is closed.

For further information:

Ed Dermit,
Vice President, Marketing
VenGrowth Capital Partners Inc.,
(416) 967-2392
ed@vengrowth.com