APRIL 26, 2012

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Canada’s Business Development Bank

In this presentation:>About the Business Development Bank of Canada

(BDC)

>The importance of innovation, growth and productivity for Canada

>How BDC is supporting innovation:

– Venture capital

– Subordinate Financing

– Information and Communication Technologies (ICTs) strategy

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BDC supports Canadian entrepreneurs

1,900EMPLOYEES

29,000SME CLIENTS

$3B+ANNUAL FINANCING

ACTIVITY

100BUSINESS

CENTRES ACROSS CANADA

$18BASSETS

$230MIN DIVIDENDS PAID TO SHAREHOLDER

SINCE 1997

MISSION – Help create and develop Canadian business through financing, venture capital and consulting services, with a focus on small and medium-size enterprises.

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BDC offers services for various needs

FINANCING SUBORDINATE FINANCING

VENTURECAPITAL CONSULTING SECURITIZATION

Term loans with flexible repaymentschedules

Hybrid instrument combining debt

and equity without

ownership dilution

Direct and indirect equity investments in

multiple technology

sectors

Business consulting,

planning and management

solutions

Debt financingthat relies on the pooling of illiquid

assets

$17Bcommitted1

2.9%of Canadian term financing market2

$500Mcommitted1

$737Mcommitted1

5% of reported VC

transactions ($) in Canada3

1,927mandates in F20121

$711MABS outstanding

under CSCF4

$440Mauthorized under

MSPSO4

1 As at March 31, 20122 Based on 2008 data from Statistics Canada’s survey of SME financing suppliers, 20093 Based on BDC authorizations (direct investments only) versus total industry authorizations taken from Thomson Reuters4 CSCF = Canadian Secured Credit Facility, outstanding as at February 29, 2012; MSPSO = Multi-Seller Platform for Small Originators, authorizations as at March 31, 2012

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BDC is a Crown corporation

> Single Shareholder – the Government of Canada

> Mandated to be financially sustainable

> Mandated to play a complementary role in the marketplace

> BDC supports entrepreneurs, and responds to specific Government requests

> The Government looks to BDC for “real-life” insights into the world of entrepreneurs

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Innovation is a Government priority

The Canadian Government wants to create value-added jobs by supporting innovation, with a focus on the ability of high-growth and knowledge-based firms to access capital.

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Capital is always needed for growth

> Revenue growth requires capital

> Growth firms often lack tangible security

> Some also lack management skills in marketing, HR

> High growth = high risk to many commercial financial institutions

When high-growth Canadian firms fail to seek or secure the financing needed to achieve a certain scale:

>They are often acquired by larger U.S. or international companies.

>Future domestic and international growth is cut short, as are many benefits to the Canadian economy.

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VC - More, but smaller, funds

Number of GPs per$1 trillion of GDP

Average GP fund sizeCA $ Millions

U.S. Canada

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1 Assumes exchange rate of 1.21 CAD/USD2 Average is inflated by larger funds, such as BDC, Growthworks, Vengrowth, and FonactionSource: McKinsey analysis based on data from Thomson Reuters, Thomson Financial, Funding Venture Capital Deals for High-Growth Companies in Canada

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VC - The jam is spread too thin

Average amount invested/companyCA $ millions

Source: VC Reporter, Investment Analytics

U.S. Canada

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VC - Less attractive exits

Canadian VC-backed companies exiting in the U.S. perform worse than U.S. companiesAverage exit price 2000-2009, CA $ millions

Canadian companies exiting in Canada

Canadian companies exiting in U.S.

U.S. companies exiting in U.S.

Many examples of exhausted

funds pushing for early exit

Source: McKinsey analysis based on data from Thomson Reuters, DatastreamAnalysis excludes impact of any Canadian companies not backed by VC

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BDC’s venture capital model supports innovation and growth

DIRECT INVESTMENT INDIRECT

INVESTMENT

Build and support

world-class Canadian venture

capitalists

STRATEGIC INITIATIVES

AND INVESTMENTS

Help stimulate VC and innovation

ecosystems

Build leading Canadian

technology businesses

Manage and grow

diversified portfolio

Attract, develop and retain high-potential investment professionals

Support objectives with a flexible and responsive organization and an entrepreneurial VC culture

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> Catalyze emergence of new tech firms

> Mentor entrepreneurs and improve their chances of commercialization success

> Bridge the seed/early stage gap

> Catalyze emerging start-up/innovation clusters

Strategic investment strategies to fill the innovation financing gap

> Support funds and projects that have compelling national, regional or strategic relevance

> Provide an institutional LP presence in the seed/early stage space

> Support high-quality teams capable of bridging the financing/mentoring gaps

> Identify, groom and grow new GPs in small funds

Accelerator Investments

Seed/early stage and small fund

StrategicFunds

This framework includes well-defined investment criteria within the context of a national framework with a regional approach. It is designed to ensure meaningful BDC impact, as well as a sustainable investment model over the long term.

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BDC Subordinate Financing also supports innovation and growth

BDC Subordinate Financing:

>An approach based on trust, full business partnership

>A pioneer in the field for over 10 years

>BDC offers experience:– Without dilution or conversion– Preset output– Less expensive– Non-interventionist

>Fast & effective process

>Flexible repayments schedule

>Variable return structure

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Flexible financing for growth firms

What we finance

> Company Transition– Inter-generations– Existing direction

(MBO)– New team (MBI)

> Growth– Cash flow funding– New markets– New product launch– Improving efficiency– Foreign development

> Acquisitions

What we offer

> Subordinate Debt

> Quasi-Equity

> Synthetic Equity

> Mezzanine

> Equity

> For an amount of 250k$ to 12M$

> Over 3 to 7 years

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What we look for

>Passionate entrepreneurs executing their plan

>Solid management

>Clear and defined market position

>Established line of credit

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Too few entrepreneurs use ICT

use software for enterprise resource planning or customer relationship management

use the Internet to sell their products and services online

Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed

17%

25%

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>Adoption rate of enterprise resource planning software packages in Canadian SMEs

Scale matters: the larger the SME, the more likely they are to adopt ICT

Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed

20-99 EMPLOYEES

100-499 EMPLOYEES

33.3%

51.9%

5-19 EMPLOYEES 19.4%

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Entrepreneurs are constrained by limited money, expertise and time

LACK OF COMPETENT OR SPECIALIZED PERSONNEL

LACK OF TIME

18.7%

10.4%

INADEQUATE ACCESS TO FUNDING 23.2%

Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed

> Barriers to ICT Adoption

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Entrepreneurs must adopt ICTs to improve productivity

> In support of the Government’s Digital Economy Strategy, BDC is helping SMEs to understand and implement ICT solutions.

25%-30%Labour productivity gap between Canada – U.S.,

increasing since 1984

15th

Canada’s rank among OECD countries, output per hour

60%Canadian ICT investment per

worker compared to U.S.

“A key ... fact that emerged from the diagnosis of Canada’s labour productivity gap with the U.S. is the much lower level of ICT investment and capital stock per worker in Canada relative to the U.S.”– Centre for the Study of Living Standards, February 2010

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BDC’s ICT strategy has three phases, supported by various tools

> Internet strategy

> System selection

> Social media− Presence− Coaching − Monitoring

> e-Marketing

> ICT financing

> Other solutions being considered

Consideration AdoptionAwareness

> Smart Tech site− e-Book− Ask a PRO− One pagers− Success stories/

testimonials− Website Assessment − ICT Assessment

> Marketing campaign

> External webinar

> Speaking engagements

> Website diagnostic

> Online sale

> ICT essentials

> ICT diagnostic

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The ICT strategy is seeing results

BDC’s ICT Financing:

> Up to $50,000 at preferential interest rates

> Reimbursed over 4 years

> Simplified and accelerated process

> Term financing to cover investments in ICT:

– Hardware

– Software

– Consulting Services

– Internet

Since the launch in October 2011:

381ICT loans approved

$40Mapproximate

value

33,700visitors to

Smart Tech

14,865Web

assessments

485ICT

assessments

551e-Books

downloaded

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1 888 INFO BDC www.bdc.ca

Theodore HomaSenior Partner, International Consulting Service 1 (514) 283-8742Theodore.homa@bdc.ca

Thank YouFor further information:

Jérôme NyczSVP Corporate Strategy & Subordinate Financing

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Back-up Slides

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Testimonial: Educator Supplies Limited

> A national retailer of educational toys and teaching materials for schools, daycares, teachers and parents with 25 retail stores across Canada and multiple catalogues and web sites

> Subordinate financing of $1M and term loan of $350K

> Financing needed to upgrade technology/web presence, including ICT hardware/software, to:– re-engineer its web sites and email generation capabilities– enhance ability to use social media in marketing – enable better marketing, customer communication and feedback– install computer kiosks in its stores for searching entire product catalogue

This client

anticipates

increased sales

and improved

ability to

communicate with

customers

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Testimonial: tappeques.com

“BDC provided me a web diagnostic that will really make a difference in improving my online bookstore and reaching more customers in the unique market I am targeting … the diagnostic provided a clear sense of direction as to where I should take my business and make it successful. The final report was also very well-structured. Overall, the online experience was amazing. It truly was a great solution for my website.”

– Celina Gutierrez, www.tappeques.com