1. October 30, 2001 Bruce Rothney Managing Director Is Everything Going to be OK? The new reality, and its implications for private equity

2. RBC Capital Markets Extensive Corporate Relationships 80 analysts covering over 800 companies 30 analysts covering technology and communications Ranked #1 Overall by Canadian Fund Managers - Reuters Survey 2000 Ranked #1 for ideas and #3 for quality by US investors - 2000 Greenwich Associates Survey 80 analysts covering over 800 companies 30 analysts covering technology and communications Ranked #1 Overall by Canadian Fund Managers - Reuters Survey 2000 Ranked #1 for ideas and #3 for quality by US investors - 2000 Greenwich Associates Survey Focused and Credible Research “RBC DS, the best domestic M&A house in Canada” - Euromoney 2000 Results in 2000: advised in 14 of the 20 largest transactions involving Canadian targets eighth ranked advisor in North American Technology and Communications M&A “RBC DS, the best domestic M&A house in Canada” - Euromoney 2000 Results in 2000: advised in 14 of the 20 largest transactions involving Canadian targets eighth ranked advisor in North American Technology and Communications M&A Top M&A Advisor One of North America’s leading growth investment banks

3. RBC Capital Markets Expanding North American Retail Distribution Capabilities Combined North American Retail Sales Force: Investment Advisors:3,772 Total Assets Under Management:US$168 Billion Combined North American Retail Sales Force: Investment Advisors:3,772 Total Assets Under Management:US$168 Billion Largest Canadian Retail Distribution Network

4. RBC Capital Markets Provide seed capital Start-up Provide venture capital & merchant banking Growth Place equity securities with institutional investors Expansion Manage entrance into public equity markets IPO Issue follow-on equity & debt securities Addl. Public Financings Provide comprehensive follow-on support Research & Trading Mergers & Acquisitions sell-side/ buy-side Advisory RBVIRBC Cap Partners EPPG RBC Capital Markets KBI Banking RBC Financial Group - Life cycle approach to financing

5. What a difference a year makes The Bubble has Burst - Then and Now Then  Real economy captivated by technology  Moving from bricks to clicks  Tremendous IPO & M&A returns  Public/private take-out “Bubble”  Virtually unlimited new VC capital formation  Billion dollar funds  New VC’s entering the game  Corporate investment arms established  Crossover funds played the quick flip  Thousands of VC funded technology and communications companies Now  Limited (or negative) growth in IT spending  Telecom spending at support levels  Exit opportunities are limited  Collapse of unrealistic growth expectations  Only experienced VC’s can raise capital  Some funds completely written off  Some VC’s are in survival mode  Corporate investment arms are reducing or eliminating their investment activity  Crossover funds are focused on public market opportunities, if anything at all  Investment levels have returned to pre- bubble levels

6. Then The Latin word for “close your eyes and open your mouth” is prospectus Dogbert Venture Capital

7. The picnic’s over Now Nortel Picnic

8. U.S. Investment Returns (as of June 30, 2001) Returns are down significantly Source: Venture Economics & National Venture Capital Association * Based on returns from venture capital funds with 60% and above concentration in a particular industry The New Reality

9. U.S. Exit Summary of VC-Backed Companies (as of June 30, 2001) M&A is currently the only available exit Source: Thomson Financial/Venture Economics & National Venture Capital Association * Value of IPO based on shares offered The New Reality

10. U.S. VC Fund Raising Experienced VC’s continue to raise capital Source: Thomson Financial/Venture Economics & National Venture Capital Assoc. * 2001 figures have been annualized based on six months figures to June 30, 2001 The New Reality

11. Canadian Investments (as of June 30, 2001) Canadian investing ahead of 2000 pace, for now Source: Macdonald & Associates Limited The New Reality

12. U.S. Investments by Quarter (as of June 30, 2001) The U.S. reverts to early 1999 levels Source: National Venture Capital Association The New Reality

13. Difficult times often produce opportunities  1972/73 - Intel  1985/86 - Microsoft, AOL, Apple  1990/91 - Oracle, Cisco Criteria for success  Cash, patient investors, great fundraising capability  Far easier to find “pile-on” money than lead investors  Partnerships / alliances  Management  Real markets / lead customers  Self evident value proposition  lower capital cost, reduce operating expenses, increase efficiency……… Reduced investor returns means competing for less capital What Does this Mean for Great Private Companies

14. Industries going “no-bid”  Anything “dot com”  Photonics  Travel related Industry Opportunities  Energy and power technology  Life sciences  Other leading edge technologies, like quantum computing and nanotechnology What was hot, is now not What Does this Mean for Great Private Companies

15. Terms of Investment The investor is clearly in the driver’s seat What Does this Mean for Great Private Companies

16. Definition for success  Same goals, different scale  Returns in line with historic levels  Emphasis on acquisitions  Private to private deals and roll-ups  Exiting an investment in years (rather than months) How should Angels and VCs behave?  Take their time - cash is KING  Handcrafting companies - less capital, more time  Low entry valuations  Conservative milestone phased funding structures  4 to 7 years to liquidity  Less deals started, more time to effect each one Everyone can’t be Barry Bonds Implications for Angels

17. Many VC’s are fully invested with no liquidity in sight  U.S. finds who gorged on dot coms are suffering  Canadian funds who filled up on photonics have limited options  Angels can play a more prominent role in building/funding promising management teams VC Firms are being very conservative with respect to investing in new names  Focused on existing portfolio - protecting their best companies  Increased emphasis on due diligence  With public markets all but shut down, a strong desire to “keep powder dry” with existing cash VC’s are facing the same challenges as their portfolio companies  Difficulty attracting new investment  Performance is not meeting previous expectations  Weaker players are disappearing The venture capital landscape is changing Implications for Angels

18. In Conclusion... The biggest risk we all face, is not being willing to continue taking risks Angels are more important than ever