TORONTO, Aug. 29 /CNW/ - VenGrowth Funds today responded to the Ontario government's announcement that it intends to phase out the Ontario provincial tax credits offered to labour sponsored investment fund ("LSIF") investors
following a transition period. This will not affect the Federal Tax Credit that will still be offered to Ontario investors.

"At a policy level we are extremely disappointed in the province's intention to phase out its support for a program which has created a $2.7 billion supply of venture capital to leading Ontario businesses," said David Ferguson, Managing General Partner, VenGrowth Private Equity Partners Inc. "While we regret this decision, it has no direct impact on the VenGrowth Funds or the way we conduct our business."

Today's announcement by the Ontario government included the following points:

•  A healthy venture capital market is important to promoting innovation and research, a priority of the McGuinty government.

VenGrowth response: It is difficult to see how reducing incentives  to a program that represents $2.7 billion in capital and between 30% and 40% of the province's venture capital investment activity, as well as being a primary catalyst for attracting foreign venture capital into the province, will ensure that a healthy market is maintained.

• A number of new initiatives to promote innovation and research were announced.

VenGrowth response: While these proposals are certainly welcome,  they do not address the need for a large and stable pool of expansion capital available for young Canadian companies. This is what the LSIF industry's venture capital supply provides.

• The province states that today's venture capital market has more  than 200 private sector venture capital funds, and close to 200  U.S. funds that have invested in Ontario companies over the last six years.

VenGrowth response: LSIFs invest significantly more than private sector funds. It is a fact that the vast majority U.S. investors do not invest in Canadian companies unless a domestic venture capitalist is involved. LSIFs have been a primary catalyst for attracting foreign venture capitalists to the province.

We sincerely hope that the government has a plan to ensure that the available supply of capital to the next generation of Canadian businesses doesn't contract," added Mr. Ferguson. "Our province has a critical need for capital to enable small and early-stage companies to become self-sufficient, globally competitive companies." Should this new legislation be passed, VenGrowth is committed to working with the government to ensure a smooth transition. After the completion of the transition period, VenGrowth Funds will still be available with the Federal Tax Credit.

 LSIF Program Highlights:

• The LSIF program is responsible for approximately 30% of all venture  capital invested in the province of Ontario as well as being the catalyst for attracting foreign venture capital into Ontario
• The LSIF program has invested a total of $2.7 billion in more than 600 Ontario companies to date and creating 27,000 jobs
• Leading Canadian companies, and significant employers, that were funded by LSIFs including Tundra Semiconductor, Genesis Microchip and Research in Motion.
• 42% of Canadian LSIF investee companies believe that their project would not have proceeded if LSIFs did not exist
• A cost effective program with a payback period of just a little over one year to the provincial government for the provision of tax credits

Source: LSIF Economic and Fiscal Impact Study, Don Allen, 2004

About VenGrowth Funds
A family of labour sponsored investment funds ("LSIFs"), the VenGrowth Funds invest in eligible small and medium sized Canadian companies in industry sectors that include technology, life sciences and traditional industries. Portfolio companies benefit from VenGrowth's substantial experience, resources, and hands-on investment style. The VenGrowth Funds had collective assets of over $1 billion and over 180,000 individual investors as of July 29, 2005.

About VenGrowth Private Equity Partners
With over $1.1 billion in assets under management, VenGrowth Private Equity Partners Inc. ("VenGrowth") is Canada's largest private equity and venture capital firm managing both retail and institutional assets. Since 1982, VenGrowth's accomplished private equity managers have invested over  $1.1 billion in 180 companies, building a strong track record of successful  portfolio transactions. These investments have been made on behalf of over 180,000 individual investors and leading pension funds, banks, insurance companies and family foundations. Portfolio companies benefit from VenGrowth's substantial experience, resources, and hands-on investment style. VenGrowth's offices are located in Toronto (Corporate Headquarters) and Ottawa. For more information, please visit www.vengrowth.com.

For further information:
Angus Fisher,
Media Relations,
VenGrowth Asset Management Inc.,
(416) 628-9255,
afisher@vengrowth.com