1. Small Business Venture Capital Act: 2003 Legislative Amendments Accelerating Access to Venture Capital Ministry of Competition, Science & Enterprise Investment Capital Branch – April 2003

2. Small Business Venture Capital Act Amendments: Presentation Outline  Overview of venture capital programs  Eligible Business Corporation amendments – the direct investment model  Eligible Business Corporation illustration– how does it work?  Venture Capital Corporation amendments – portfolio investing  Venture Capital Corporation illustration – how does it work?  ‘New Media’ Sector Tax credits – 2003 budget announcement  How to Get Started

3. Program History & Background:  Provides a 30% fully refundable tax credit to resident investors who invest in small businesses through a holding company  Since 1985, raised over $400M for investment in 575 small businesses throughout British Columbia including: A.L.I. Technologies Inc. (Richmond) The Wickininnish Inn Ltd., (Tofino) and Blue Mountain Vineyards Ltd. (Oliver)  Annual program capital investment: up to $67M per year Problems with existing legislation:  An un-level playing field with Labour-Sponsored Funds for raising and investing capital  Too much program red tape for raising seed capital (<$1M) related to incorporation costs and program filings. How do these amendments respond to the demand for change? Small Business Venture Capital Act Amendments: Program Overview

4. For investors this means: Can invest and earn tax credits in a small business without setting up a holding company Can invest directly through an RSP and obtain prior year tax credits for investments made during RSP season For small businesses this means: Fewer corporate and program filings and cost savings from not having to incorporate a holding company. A viable alternative to raising seed capital in the $0M to $1M range The ability to offer voting or non-voting common or preferred shares to investors (debt is not permitted) How does this new model work? Eligible Business Corporation Amendments : Direct investment - More seed capital…..less red tape

5. The ‘Eligible Business Corporation’ Model - Direct Investment Eligible Business Corp. (EBC) $ Province of B.C. 30% Tax Credit Investors The Investors:  Arms-length from the owners of the Eligible Business Corporation  Shares may not be transferred, redeemed, acquired or cancelled for 5 years. The Eligible Business Corporation:  Less than 100 employees  Pays at least 50% of wages to BC residents  Engaged in one of the following: Manufacturing & Processing Destination tourism Research & Development of technology Community Diversification or, Development of digital new media Shares

6. For Venture Capital Corporation investors this means: Tax credit for direct RSP investment and prior year tax credits when purchases are made during RSP season More choices for investment in professionally managed funds For managers of Venture Capital Corporations this means: No capital raising limits (subject to annual tax credit budget) Investments can now be made through Limited Partnerships and holdcos (much more flexibility) Program discretion that no longer forces business divestment For small businesses this means: Can now receive up to $5M in program capital (up from $3M) May issue voting or non-voting shares, warrants, options and, on a temporary basis, convertible debt to VCC How does this investment model work? Venture Capital Corporations - Legislative Changes Leveling the playing field for venture capital in B.C.

7. The ‘Venture Capital Corporation’ Model – Portfolio Investing Venture Capital Corp. (VCC) B.C. Investors Eligible Small Business (ESB) $ Shares Province of B.C. 30% Tax Credit Investors $ Shares The Venture Capital Corporation:  Common shares (multiple classes)  Shares Redeemable after holding ESB investments for at least 5 years. The Eligible Small Business:  Less than 100 employees  Pays at least 50% of wages to BC residents  Engaged in one of the following: Manufacturing & Processing Destination tourism Research & Development of technology Community Diversification or, Development of digital new media

8. Summary  Reserves $5M of tax credits for the thriving new media sector (up to $17M in capital annually available for investment)  Small businesses in this sector have the choice of using either investment model (VCC or EBC)  More competitive than expenditure credits in other jurisdictions in that the tax credit is fully refundable and capital is provided up front from investors  To qualify, a small business must be substantially engaged in the development of interactive digital media product that: oeducates, informs or entertains using at least 2 of the mediums of text, sound or visual images, and oIs not developed for internal corporate promotion How does a small business & investors get started? ‘ New Media’ Sector Tax Credits: 2003 Budget Announcement

9. 3 Step Process:  Determine what type of investment model suits your business plan ( Direct Investment or Venture Capital Corporation)  Download registration forms from branch website and submit: A copy of your most recent business plan; Copies of your most recent financial statements; and Incorporation documents and share capital registers.  Within three weeks an eligibility ruling and registration certificate will be issued that will allow your business to: Raise capital from investors; Issue tax credits certificates; and Grow your business with patient capital. Note: Program capital is required to remain invested for 5 years. Failure to do so may lead to the repayment of tax credits. Interested in leaning more about the programs? Venture Capital Programs: How to Get Started

10. Venture Capital Programs Contact Information Direct enquiries to: Todd Tessier, Portfolio Manger Investment Capital Branch PO Box 9800, Stn Prov Govt 7 th floor, 1810 Blanshard Street Victoria, British Columbia V8W 9W1 Phone: (800) 665-6597 Internet: http://www.equitycapital.gov.bc.ca Email: ecp@gems3.gov.bc.caecp@gems3.gov.bc.ca