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

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  1. FINOVA – Support Fund to Finance Innovation FIN-EN -Sharing Methodologies on Financial Engineering for Enterprises Lisbon Meeting, 26 September 2013

  2. CONTENTS PME Investimentos FINOVA – Holding Fund Financial Engineering Instruments Results

  3. PME Investimentos - History 1989 – 2006 Venture Capital Firm 2007 - 2013 Management of Public Funds jan 2007 Strategic Guidelines for the 2007-2009 mandate New role for the Company Transformation into an Investment Company under the name PME Investimentos – Sociedade de Investimento, S.A. Relinquishing of retail operations by transferring the portfolio to Inovcapital Launch of the first PME Investe (I and II) Credit Lines under the scope of FINOVA Participation of FINOVA in the funding of the VCF and Business Angels Credit Lines Launch of the PME Growth Credit Line 2010 2008 1989 2003 2009 2013 2007 1998 2008 2010 2012 Launch of the PME Investe III and IV Credit Lines Creationofthe SAFPRI andthe FINOVA Fund - PMEI appointed as manager Company founded under the name SULPEDIP (SCR) CreationoftheVenture Capital SyndicationFundandtheGuaranteeFund for Securitisation – PMEI appointed as manager Launch of the PME Investe V, VI, VI Amendment and QREN Investe Credit Lines Launch of the PME Growth 2013 Credit Line and of the Revitalisation Funds

  4. Management of Public Funds Funding: previous EU Framework (ERDF) Characteristics and investment • Fund of funds, to refinance and share risk with venture • capital firms • Capital = 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 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 Guarantee Fund for Securitisation

  5. PME Investimentos – Manager of FINOVA • PME Investimentos: • A CreditInstitutionunderthesupervisionoftheBankof Portugal, majorityownedbyPublicEntities • Manager oftheFundsofFunds, originatingfromStateinitiatives • Refinancesthemarket, but does notintervenedirectlyinthecreditand capital markets • Provenexperienceinthemanagementofpublicinstruments for therefinancingandrisk sharing offinancinginnovation PME Investimentos’ characteristicsand its relevantexperiencemade its appointment as manager for FINOVA possible

  6. PME Investimentos FINOVA – Holding Fund Financial Engineering Instruments Results

  7. FINOVA - Creation Strategy / Objectives Governence Createdbynationallegislation (DL 175/2008 dated 26 August), underthescopeofSAFPRI (FEInationalregulation) • Centralisationandcoordinationofeffortsandresourcesrelated to publicinterventionsintended to supportthefundingofcompanies, namelySMEs • Encouragingcompetitivenessby: • Stimulatingtheparticipationofventure capital to supportSMEs, givingpreference to theearly-stagesoftheirlifecycleandinnovativeprojects; • Reinforcingthesystemof mutual guarantee; • Promotingthecontractualisationofsubsidisedcreditlines. • General Board (GB): • - MadeupbytheparticipatingpublicentitiesandtheManager • Competencies: • - To define thefund’sinvestmentpolicy, decidingonthecongruityofallinvestmentswithsaidpolicy • To deliberateontheregulationproposalsrelated to theconfigurationoftheinstrumentsand to theactivityof FINOVA • To deliberateontheincreaseorreductionof FINOVA capital • - To approve financial plansandannualbudgets, as well as theaccountsandimplementationreports Appointmentof PME Investimentos as manager FINOVA AdvisoryBoard: - MadeupbythemembersoftheGB andbyentitieswitheconomicrelevance Competencies: - To analyseandissueopinionsonFINOVA’sinvestmentstrategy - To analyseandissueopinionsonthebroaderguidelinesrelated to theproposedobjectives, suggestingnewareasofaction - To suggestmeasureswhichcould improve theadequacyof FINOVA to itsobjectivesand policies followed

  8. FINOVA - Conceptualisation Funding Managing Authorities State Funds Funders Participants IAPMEI Turismo de Portugal IEFP AICEP PublicEntities Holding Fund Participationinshare capital Financial Engineering Instruments FINOVA Subsidisedinterest GuaranteefeeSubsidy Grantingoffunds Participationinshare capital Participationinshare capital Funding Line for BAs Venture Capital Funds Revitalisation Funds Credit Lines Capitalisation Funding SME Final Recipients

  9. FINOVA - Capital 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€. Subscribed Capital 1.156 M€ CreditLines 965 M€ CreditInsurance 30 M€ Venture Capital 161 M€ 1 Amounts include all financial instruments created within the scope of FINOVA, including those that do not have ERDF funding 1

  10. PME Investimentos FINOVA – Holding Fund Financial Engineering Instruments Results

  11. Financial Engineering Instruments Subsidised and Guaranteed Credit Lines: Objectives Launchedin 2008, withinthescopeoftheanti-crisismeasures, theycorrespond to theconcernofthefundingpublicentitiesinfacilitatingandimprovingtheconditions for accessofcompanies to bankloans State Aid Stateaidintheformofgrantingsubsidisedinterest rates andguaranteefees, as wellastheissuingoftheactual mutual guarantee, byincreasingthe capital ofthe Mutual CounterGuaranteeFund (MCGF) Amounts (Credit Lines I and II) - CreditLine I: 750 M€ - CreditLine II: 1,000 M€(specificsub-linesaimedatthe General, Commercialand Catering Sectors)

  12. Financial Engineering Instruments Subsidised and Guaranteed Credit Lines: Advantages for SMEs - CompetitiveInterest Rates - Obtaining a mutual guarantee - SubsidisedInterest - Paymentinfulloftheguaranteefees Conditions for Access - Micro, SmallorMediumenterprises - Location – companyheadofficeinMainland Portugal - Companyactivityinlinewiththe SAFPRI - Withoutunjustifiedincidentsor defaults withbanks - Allcontributions to theTaxAuthorityand Social Securityhavebeensettled Eligible operations • Operationsaimedatinvestinginnewtangiblefixedassetsorintangibleassetsandtheincreaseofworking capital related to theincreaseofactivity

  13. Financial Engineering Instruments Venture Capital Funds: Objectives To fillmarketgaps, allowingenterprises, especiallysmallerones, toaccessventurecapital sothattheymaydevelopstrategies for innovation, growthandexpansion StateAid Stateaid(FINOVA) intheformofparticipationinshare capital (subscriptionofunitsofparticipation) ofVentureCapitalFunds, takinguppositionsofbetween 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. Financial Engineering Instruments Venture Capital Funds: Characteristics / Typology • Innovation / Internationalisation • To supportprojects for investmentininnovationorpromotedbySMEswhichwant to internationalise • Corporate Ventures • To supportprojects for thecreationofnewbusinessunits, basedonalreadyexistingtechnology-basedcompanies • - EarlyStages • To supportinvestmentprojectsintheEarlyStagephase • Pre-Seed • To supportinvestmentprojectsinthePre-Seedphaseinwhich, due to theircharacteristicsandthehighriskinvolved, isdifficultto getfunding • Innovation / Internationalisation: 132 M€ • Corporate Ventures: 9 M€ • EarlyStages: 32 M€ • Pre-Seed : 13 M€ Total capital amount of Funds / Typology

  15. Financial Engineering Instruments Venture Capital Funds: Advantages for SMEs • Greater access to fundingfor the development of investment projects • Access to privileged partners, with management, strategic and financial know-how, and more Conditions for Access - 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) • - Participation, perSME, limited to1.5M€/12 months, 70% ofwhich must bemadeinequityorquasi-equity • - InvestmentdecisionsbasedonsustainableBusinessPlansandwiththeprospectofprofitability • - Maynotbeoperations for consolidationor financial restructuring Eligible operations

  16. Financial Engineering Instruments Venture Capital Revitalisation Funds: Objectives 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 StateAid Stateaid(FINOVA) intheformofparticipationofshare capital (subscriptionofunitsofparticipation) oftheVentureCapitalRevitalisationFunds, takinguppositionsof 50% Tipology • Thetendersopenedin 2012 wereaimedatthecreationof Regional Venture Capital RevitalisationFunds(createdinAugust 2013 andyet to performoperations): • VCF for RevitalizationoftheNorthernRegion • VCF for Revitalisationofthe Central Region • VCF for RevitalisationoftheSouthernRegion

  17. Financial Engineering Instruments Venture Capital Revitalisation Funds: Characteristics 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 Total amount available for investment • VCF for RevitalizationoftheNorthernRegion: 80 M€ • VCF for Revitalisationofthe Central Region: 80 M€ • VCF for RevitalisationoftheSouthernRegion: 60 M€ • 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

  18. Financial Engineering Instruments Venture Capital Revitalisation Funds: Conditions for Access - Micro, SmallorMediumenterprises - Location-companyheadofficeintheNorthern, Central and Alentejo Regions - Companyactivityinlinewiththe SAFPRI (Industry, Energy, Construction, Commerce, Tourism, Transportation /LogisticsorServices) - Maynotbe“firmsindifficulty”, inaccordancewiththeCommunityconcept Eligible operations • - Participations, perSME, limitedto 1.5M€/12 months, 70% ofwhich must bemadeinequityorquasi-equity • - InvestmentdecisionsbasedonsustainableBusinessPlansandwiththeprospectofprofitability • - Maynotbeoperations for consolidationor financial restructuring

  19. Financial Engineering Instruments Financing Line for Business Angels (BAs): Objectives Fillgapsinthemarket: - Developthe financial marketthroughventure capital investors (BusinessAngels) - Facilitatetheaccessofenterprises, especiallysmalleronesandthosewhich are innovation-based, to venture capital sothattheymaydeveloptheirstrategies for innovation, growthandexpansion. Stateaid(FINOVA) intheformofgrantingfunding to VehicleEntities (VE) ownedbyBAs, withtheunderlyingventure capital investmentmadebytheBAs (fundingup to 65% oftheamountofeachoftheventure capital operations) StateAid VehicleEntities (51 VE) - MajorityownedandmanagedbyBAs - Minimumamountofshare capital paidinbyBAs to theVEsmaynotbelessthan 35% oftheamountofeachoftheventure capital operations

  20. Financial Engineering Instruments Financing Line for Business Angels (BAs): Funding characteristics - Medium-termfunding, granted to VEs, with a maximumamountof 500 k€, carriedoutinaccordancewithventure capital operations - Returnonfundingsetaccording to the performance oftheunderlyingventure capital operation - Repaymentoffundingwithasymmetricdistributionbetween FINOVA andBAs: - Distributionofrepayment 20% (FINOVA)/ 80% (BA), untilBAs are repaidthe total amounttheyinvested - Subsequentsymmetricdistribution (50%/50%), until FINOVA isreimbursedtheamountfunded - Distributionofremainingproceeds 20% (FINOVA)/ 80% (BA) Total amount available for investment 43 M€

  21. Financial Engineering Instruments Financing Line for Business Angels (BAs): 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 ConditionsofAccess - Micro, SmallorMediumenterprises - Location – companyheadofficeintheNorthern, Central and Alentejo Regions - SMEsactivityinlinewiththe SAFPRI (Industry, Energy, Construction, Commerce, Tourism, Transportation / LogisticsorServices) • - Participations, perSME, limitedto 1.5M€/12 months, 70% ofwhich must bemadeinequityorquasi-equity • - InvestmentdecisionsbasedonsustainableBusinessPlansandwiththeprospectofprofitability • - Maynotbeoperations for consolidationor financial restructuring EligibleOperations

  22. PME Investimentos FINOVA – Holding Fund Financial Engineering Instruments Results

  23. Average operation amount 340 k€ 53% Smallenterprises 44% Industrial Sector Average duration 4.4 years Results 62% Investment in Fixed Assets 42% Northern Region Average number of employees 36 Subsidised and Guaranteed Credit Lines: Credit Lines PME Investe I & II 1.535 M€ Total Credit Loans 4.508 Loans

  24. 72% Services Sector 37% Micro enterprises 33% Mediumenterprises Results 83% Central Region Number of employees 21 Average operation amount 744 k€ Venture Capital Funds1: 19 VCF 22 M€ InvestedinSMEs 29 operations 1 Information reported in June 2013

  25. 70% Services Sector >50% Micro enterprises Results 56% NorthernRegion Average number of employees 3 Average operation amount 180 k€ Financing Line for BAs1: 51 Vehicle Entities owned by BAs 109 Financing Operations granted to VEs 14 M€Invested 78 SMEssupported 1 Information reported in June 2013

  26. PME Investimentos Contact Information Additional Information • Carlos de Castro • Vice-PresidentandCEO • adm@pmeinvestimentos.pt • Telephonenumbers: • (+351) 21 799 42 74(+351) 21 799 42 75