Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Business and Economic Development, to which was referred S.B. No. 1696 entitled:

begs leave to report as follows:

The purpose of this measure is to allow fiduciaries to invest in Hawaii venture capital investments without incurring liability for violation of the prudent investor or person rule.

Your Committee heard testimony in favor of this measure from the Department of Business, Economic Development, and Tourism and one individual.

Your Committee finds that additional sources of venture capital are needed to develop a vibrant technology industry in the State. Your Committee further finds that local funds are not being invested locally because investment advisors are returns driven and that the returns on local investments are lower than other investments. Thus, fiduciaries avoid risking personal liability and invest in projects that have the highest return in order to satisfy the prudent investor rule. Your Committee views this measure as providing a safe harbor for fiduciaries who invest venture capital funds in Hawaii, and believes it will give local investors stronger rationales to consider Hawaii investments.

As affirmed by the record of votes of the members of your Committee on Business and Economic Development that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1696 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.