FINOVA – Support Fund to Finance Innovation FIN-EN -Sharing Methodologies on Financial Engineering for Enterprises

1

FINOVA – Support Fund to Finance Innovation

FIN-EN -Sharing Methodologies on Financial Engineering for Enterprises

Lisbon Meeting, 26 September 2013

2

PME Investimentos

FINOVA – Holding Fund

Financial Engineering Instruments

Results

CONTENTS

3

PME Investimentos - History

Company founded under the name SULPEDIP (SCR)

Transformation into an Investment Company under the name PME

Investimentos – Sociedade de Investimento, S.A.

1989

1998

Participation of FINOVA in the funding of the VCF

and Business Angels Credit Lines

Launch of the PME Investe V,

VI, VI Amendment

and QREN Investe Credit

Lines

2009

2010

Launch of the first PME Investe (I and II)

Credit Lines under the scope of FINOVA

2008

2010

1989 – 2006Venture Capital Firm

2007 - 2013Management of Public Funds

2012

Launch of the PME Growth Credit Line

jan 2007Strategic Guidelines for the 2007-2009

mandate

New role for the Company

Relinquishing of retail operations by

transferring the portfolio to Inovcapital

2007

Creation of the SAFPRI and the FINOVA Fund -

PMEI appointed as manager

2008

Launch of the PME Growth 2013 Credit

Line and of the Revitalisation Funds

20132003

Creation of the Venture Capital Syndication Fund and the

Guarantee Fund for Securitisation – PMEI appointed

as manager

Launch of the PME Investe

III and IV Credit Lines

4

Management of Public Funds

Fund of funds, to refinance and share risk with venture capital firmsCapital = 45.5 M€

Investments:• Participation in 5 funds = 23.38 M€• Participation in 27 venture capital operations (syndicated) = 17.67 M€• Refinancing of venture capital operations = 2.88 M€

Venture Capital Syndication

Fund

PME Investimentos

Guarantee Fund for Securitisation

Manager

Fund with the aim of providing guarantees to securitisation operationsCapital = 25 M€

Participation:• As guarantor in a Securitisation Operation granted to Portuguese SMEs• European Investment Fund as an Adviser for the securitisation operation• Amount received from the Securitisation Operation (500 M€) went towards granting new loans to SMEs

Manager

Funding: previous EU Framework (ERDF)

Characteristics and investment

5

PME Investimentos – Manager of FINOVA

PME Investimentos’ characteristics and its relevant experience made its appointment as manager for FINOVA possible

PME Investimentos:

A Credit Institution under the supervision of the Bank of Portugal, majority

owned by Public Entities

Manager of the Funds of Funds, originating from State initiatives

Refinances the market, but does not intervene directly in the credit and

capital markets

Proven experience in the management of public instruments for the

refinancing and risk sharing of financing innovation

6

PME Investimentos



Results

7

FINOVA - Creation

FINOVA

Strategy / Objectives Governence

Centralisation and coordination of

efforts and resources related to

public interventions intended to

support the funding of companies,

namely SMEs

Encouraging competitiveness by:

Stimulating the participation of

venture capital to support SMEs,

giving preference to the early-

stages of their life cycle and

innovative projects;

Reinforcing the system of mutual

guarantee;

Promoting the contractualisation

of subsidised credit lines.

General Board (GB):- Made up by the participating public entities and the ManagerCompetencies:- To define the fund’s investment policy, deciding on the congruity of all investments with said policy- To deliberate on the regulation proposals related to

the configuration of the instruments and to the activity of FINOVA

- To deliberate on the increase or reduction of FINOVA capital

- To approve financial plans and annual budgets, as well as the accounts and implementation reports

Advisory Board:- Made up by the members of the GB and by entities with economic relevanceCompetencies:- To analyse and issue opinions on FINOVA’s investment strategy- To analyse and issue opinions on the broader guidelines related to the proposed objectives, suggesting new areas of action- To suggest measures which could improve the adequacy of FINOVA to its objectives and policies followed

Created by national legislation (DL 175/2008 dated 26 August), under the scope of SAFPRI (FEI national regulation)

Appointment of PME Investimentosas manager

8

FINOVA - Conceptualisation

Managing AuthoritiesFunders

Participants

Holding Fund


Final Recipients

Revitalisation Funds Funding Line for BAs Credit LinesVenture Capital

Funds

SME

FINOVA

State Funds

Public EntitiesIAPMEITurismo de PortugalIEFPAICEP

Subsidised interestGuarantee fee Subsidy

Granting of funds

Participation in share capital

Funding



CapitalisationFunding

9

FINOVA - Capital

Subscribed Capital 1.156 M€

Credit Lines965 M€

Since 2008, the year FINOVA was created, the public entities that subscribed its capital committed to

channel 1.156 M€ to the Fund, IAPMEI stands out for holding 89% of the share capital.

As of 30 June 2013, paid-in capital amounted to 953 M€ .

Credit Insurance

30 M€

Venture Capital161 M€

1

Amounts include all financial instruments created within the scope of FINOVA, including those that do not have ERDF funding1

10

PME Investimentos



Results

11


Launched in 2008, within the scope of the anti-crisis measures, they correspond to the concern of the funding public entities in facilitating and improving the conditions for access of companies to bank loans

Objectives

Subsidised and Guaranteed Credit Lines:

State Aid State aid in the form of granting subsidised interest rates and guarantee fees, as well as the issuing of the actual mutual guarantee, by increasing the capital of the Mutual Counter Guarantee Fund (MCGF)

Amounts (Credit Lines I and II) - Credit Line I: 750 M€- Credit Line II: 1,000 M€ (specific sub-lines aimed at the General, Commercial and Catering Sectors)

12


- Competitive Interest Rates- Obtaining a mutual guarantee- Subsidised Interest- Payment in full of the guarantee fees

Advantages for SMEs


Conditions for Access

Eligible operations Operations aimed at investing in new tangible fixed assets or intangible assets and the increase of working capital related to the increase of activity

- Micro, Small or Medium enterprises- Location – company head office in Mainland Portugal- Company activity in line with the SAFPRI- Without unjustified incidents or defaults with banks- All contributions to the Tax Authority and Social Security have been settled

13


To fill market gaps, allowing enterprises, especially smaller ones, to access venture capital so that they may develop strategies for innovation, growth and expansion

Objectives

Venture Capital Funds:

State Aid State aid (FINOVA) in the form of participation in share capital (subscription of units of participation) of Venture Capital Funds, taking up positions of between 50% and 70%

Tipology The tenders opened in 2009 were aimed at the creation or reinforcement of the following types of Venture Capital Funds:- Innovation / Internacionalisation (10 VCF)- Corporate Ventures (2 VCF)- Early Stages (4 VCF)- Pre-Seed (3 VCF)

14


- Innovation / InternationalisationTo support projects for investment in innovation or promoted by SMEs which want to internationalise- Corporate VenturesTo support projects for the creation of new business units, based on already existing technology-based companies - Early StagesTo support investment projects in the Early Stage phase- Pre-SeedTo support investment projects in the Pre-Seed phase in which, due to their characteristics and the high risk involved, is difficult to get funding

Characteristics / Typology


Total capital amount of Funds / Typology- Innovation / Internationalisation: 132 M€- Corporate Ventures: 9 M€- Early Stages: 32 M€- Pre-Seed : 13 M€

15


- Greater access to funding for the development of investment projects

- Access to privileged partners, with management, strategic and financial know-how, and more

Advantages for SMEs



Eligible operations - Participation, per SME, limited to 1.5M€/12 months, 70% of which must be made in equity or quasi-equity- Investment decisions based on sustainable Business Plans and with the prospect of profitability- May not be operations for consolidation or financial restructuring

- Micro, Small or Medium enterprises- Location – company head office in the Northern, Central and Alentejo Regions- Company activity in line with the SAFPRI (Industry, Energy, Construction, Commerce, Tourism, Transportation / Logistics or Services)

16


To fill gaps in the market, allowing access for companies who wish to develop strategies for expansion, contributing to the acceleration of economic growth and encouraging the renewal of the national business fabric

Objectives

Venture Capital Revitalisation Funds:

State Aid State aid (FINOVA) in the form of participation of share capital (subscription of units of participation) of the Venture Capital Revitalisation Funds, taking up positions of 50%

Tipology The tenders opened in 2012 were aimed at the creation of Regional Venture Capital Revitalisation Funds (created in August 2013 and yet to perform operations):- VCF for Revitalization of the Northern Region- VCF for Revitalisation of the Central Region- VCF for Revitalisation of the Southern Region

17


To support investment projects for expansion, innovation and/or modernisation promoted by SMEs and which are in accordance with the requirements foreseen in the regulatory framework of the ERDF. Projects that are starting off or which are in the process of being set up, promoted by SMEs, may also be eligible for funding

Characteristics


Total amount available for investment - VCF for Revitalization of the Northern Region : 80 M€- VCF for Revitalisation of the Central Region: 80 M€- VCF for Revitalisation of the Southern Region: 60 M€

Advantages for SMEs- Greater access to funding for the development of

investment projects- Access to privileged partners, with management,

strategic and financial know-how, and more

18




Eligible operations - Participations, per SME, limited to 1.5M€/12 months, 70% of which must be made in equity or quasi-equity- Investment decisions based on sustainable Business Plans and with the prospect of profitability- May not be operations for consolidation or financial restructuring

- Micro, Small or Medium enterprises- Location- company head office in the Northern, Central and Alentejo Regions- Company activity in line with the SAFPRI (Industry, Energy, Construction, Commerce, Tourism, Transportation /Logistics or Services)- May not be “firms in difficulty”, in accordance with the Community concept

19


Fill gaps in the market:- Develop the financial market through venture capital investors (Business Angels)- Facilitate the access of enterprises, especially smaller ones and those which are innovation-based, to venture capital so that they may develop their strategies for innovation, growth and expansion.

Objectives

Financing Line for Business Angels (BAs):

State Aid State aid (FINOVA) in the form of granting funding to Vehicle Entities (VE) owned by BAs, with the underlying venture capital investment made by the BAs (funding up to 65% of the amount of each of the venture capital operations)

Vehicle Entities (51 VE) - Majority owned and managed by BAs- Minimum amount of share capital paid in by BAs to the VEs may not be less than 35% of the amount of each of the venture capital operations

20


- Medium-term funding, granted to VEs, with a maximum amount of 500 k€, carried out in accordance with venture capital operations- Return on funding set according to the performance of the underlying venture capital operation- Repayment of funding with asymmetric distribution between FINOVA and BAs:- Distribution of repayment 20% (FINOVA)/ 80% (BA), until BAs are repaid the total amount they invested- Subsequent symmetric distribution (50%/50%), until FINOVA is reimbursed the amount funded- Distribution of remaining proceeds 20% (FINOVA)/ 80% (BA)

Funding characteristics


Total amount available for investment 43 M€

21


- Greater access to funding for the development of investment projects- Access to privileged partners, with management, strategic and financial know-how, and more

Advantages for SMEs


Conditions of Access

Eligible Operations - Participations, per SME, limited to 1.5M€/12 months, 70% of which must be made in equity or quasi-equity- Investment decisions based on sustainable Business Plans and with the prospect of profitability- May not be operations for consolidation or financial restructuring

- Micro, Small or Medium enterprises- Location – company head office in the Northern, Central and Alentejo Regions- SMEs activity in line with the SAFPRI (Industry, Energy, Construction, Commerce, Tourism, Transportation / Logistics or Services)

22

Results

PME Investimentos



23

Results

53% Small enterprises

Credit Lines PME Investe I & II

1.535 M€Total Credit Loans

4.508Loans

Average operation amount 340 k€

42% Northern Region

44% Industrial Sector

Average duration 4.4 years

62% Investment in Fixed Assets

Average number of employees 36


24

Results

37% Micro enterprises33% Medium enterprises

19 VCF

22 M€ Invested in SMEs

29 operationsAverage operation amount 744 k€

83% Central Region

72% Services Sector

Number of employees 21

Venture Capital Funds1:

1 Information reported in June 2013

25

Results

>50% Micro enterprises

51 Vehicle Entities

owned by BAs109 Financing

Operations granted to VEs

14 M€ Invested

78 SMEs supported

Average operation amount 180 k€

56% Northern Region

70% Services Sector

Average number of employees 3

Financing Line for BAs1:

1 Information reported in June 2013

26

PME Investimentos Contact Information

Carlos de CastroVice-President and CEO

[email protected]

Telephone numbers:(+351) 21 799 42 74(+351) 21 799 42 75

Additional Information

FINOVA – Support Fund to Finance Innovation FIN-EN -Sharing Methodologies on Financial Engineering for Enterprises

Documents

pme investimentosfinova

pme growth credit linejan

pme investimentos sociedade

credit institution

pme investe v

venture capital firm2007

venture capital firmscapital

participation of finova