Business Development Bank of Canada (BDC)

Business Development Bank of Canada (BDC)

July 17, 2008 23:59 ET

BDC tables its 2008 annual report - Market conditions lead to increased demand for BDC's business financing solutions

MONTREAL, July 17 - The Business Development Bank of Canada
(BDC) made public its annual report yesterday which contains its financial
statements for the year ended March 31, 2008. The results revealed a growth of
$865 million or 9% in its loan and investment portfolio to reach a total
portfolio of $10.6 billion. This enabled BDC to generate a net income of
$84.6 million for the year. In fiscal 2008, dividends totalling $21.5 million
were declared to BDC's shareholder, the Government of Canada. Since 1997, BDC
has declared $156.7 million in dividends to its sole shareholder.
"This year's record increase of our loan and investment portfolio shows
that BDC plays a key role in supporting entrepreneurs, even when uncertainty
in the marketplace reduces the credit supply for Canadian business owners,"
said Jean-René Halde, President and Chief Executive Officer. "BDC remained
committed to helping entrepreneurs thrive by providing them with highly
tailored financing solutions, by sharing their willingness to take risk, and
by being a partner they can count on long-term."

Highlights

BDC Financing clients accepted $2.9 billion new loans through some
9,100 transactions. Income totalled $160.9 million in fiscal 2008, compared to
$168.0 million in fiscal 2007. The closing portfolio, before allowance for
credit losses, rose from $9.1 billion to $10.0 billion, an increase of
$886 million, or 9.7% over 2007. At $10.0 billion, the financing portfolio was
the driving force behind BDC's financial results. BDC believes this year's
growth was due in part to uncertainty in the marketplace, which reduced the
credit supply for Canadian entrepreneurs.

BDC Subordinate Financing clients accepted $97.4 million through
107 transactions executed by way of a limited partnership with the Caisse de
dépôt et placement du Québec. BDC's share of the transactions accounted for
$48.7 million in fiscal 2008. Income totalled $11.0 million in fiscal 2008,
compared to $7.9 million in fiscal 2007. As of March 31, 2008, BDC's
Subordinate Financing portfolio stands at a fair value of $156.2 million, a
5.3% increase over last year.

BDC Venture Capital authorized 85 direct investments for a total of
$105.5 million versus 68 investments for $105.7 million in fiscal 2007. It
also authorized investments of $25 million in two funds. However, the
depressed state of Canada's venture capital market and the increased time
horizon for exits in seed and early-stage companies has severely limited the
number of possible exit opportunities and dramatically reduced valuation for
new investors. In fiscal 2008, BDC Venture Capital, on a fair value basis,
recorded a loss of $82.8 million of which $50 million was unrealized.

BDC Consulting revenues increased 5.4% over last year and reached
$24.8 million. This year, 2,770 mandates were started, an increase of 13% over
fiscal 2007. While revenues and number of mandates increased over fiscal 2007,
BDC Consulting experienced a loss of $4.5 million, slightly higher than the
4.3 million loss in fiscal 2007. The revenues do not fully offset the
operating and administrative expenses as a result of our strategy to maintain
prices at an affordable level for SMEs. BDC Consulting offers entrepreneurs
tailored, affordable, high-quality services to help them become more
competitive.

Consolidated net income totalled $84.6 million, compared to
$138.0 million reported in fiscal 2007. Total assets increased by $619 million
from a year ago and reached $11.4 billion at year end. Client satisfaction
continued to be strong with an overall satisfaction rating of 93%.
"Ambitious, risk-taking entrepreneurs are the basis of a vital, healthy
economy. Today they are faced with a changing and tough environment. The
fierce competition of emerging countries, the economic slowdown in the United
States, and high energy costs are just a few examples of the kind of
challenges they are facing," added Jean-René Halde. "BDC is dedicated to
helping business owners tackle these challenges and exploit the opportunities
that will accelerate their success, both globally and locally. We will do so
by relentlessly offering financing, investments and consulting solutions that
are driven by their needs as entrepreneurs."

Leading as a development bank

- BDC provides highly tailored loans, investment and consulting services
to business owners across the country. From 94 locations, 1,700 BDC
employees support a record 28,000 Canadian entrepreneurs across the
country. BDC is commercially viable and does not receive an annual
subsidy from Parliament.
- BDC pays special attention to start-ups, innovators, fast growth
companies, manufacturers and exporters who face lower financing
approval rates. BDC also pays special attention to entrepreneurs who
are working to commercialize the fruits of research and development -
university or lab discoveries - to create innovative products and
globally successful companies in sectors such as life sciences and
information technology.
- Over the past six years, about 14% of BDC authorizations went to
clients in the start-up phase. Market data shows that approximately 5%
of Canadian business are start-ups. This suggests that BDC is
supporting more than twice as many start-ups as the market.
Furthermore, survival rates of BDC start-up clients surpass industry
benchmarks. Looking at the five-year survival threshold, BDC finds that
after five years, 67% of the start-up businesses it supported survive,
compared to the Statistics Canada industry benchmark of 36%.
- BDC Venture Capital is a Canadian leader in the critically important
early-stage (including seed) investment phase. In fiscal 2008, BDC made
75% of the dollar value of its direct investments in early-stage firms.
That figure compares with the industry average of 33%. This past year,
direct seed investments in Canada totalled $56.7 million. BDC
contributed $9.3 million of this total in eleven seed ventures.
- Each dollar BDC lends or invests leverages private sector sources of
financing. Fiscal 2008 operational data indicate that including fund
investments BDC Venture Capital leveraged $6.50 from other venture
capitalists for every dollar it invested.
- BDC offers subordinate financing, a hybrid financing that combines debt
and equity features, to entrepreneurs who need working capital to grow
their businesses but do not have the tangible security that
conventional lenders require, or who do not want to dilute their
ownership of the firm. BDC anchors this service in a partnership with
the Caisse de dépôt et placement du Québec. This year, BDC Subordinate
Financing received $97 million acceptances, including the Caisse's
portion.
- At 22 Entrepreneurship Centers across Canada, BDC offers specialized
lending, consulting and resources dedicated to meeting the needs of
younger, smaller businesses. In fiscal 2008, the Centers received
$202 million acceptances in loans.
- Women entrepreneurs lead businesses of all sizes in all sectors. They
also enter the small business marketplace at twice the rate men do.
Over the past two decades, their number has grown by over 200%. BDC has
more than 7,000 women clients, almost twice as many as it did a decade
ago. Women represent about one quarter of BDC's client roster.
- Young entrepreneurs lead about 9% of Canadian small businesses. Many of
them find it hard to secure financing because they have limited net
worth, little or no managerial experience, and have no proven track
record. Over the past five years, BDC authorized over $780 million in
financing to young entrepreneurs across the country.
- BDC maintains formal partnerships with more than 200 Community Futures
Development Corporations, a cross-country network of contact points
located mostly in rural areas. These partnerships enable BDC to reach
entrepreneurs who live near these centres. Using this network, BDC
supported more than 800 entrepreneurs in fiscal 2008.
- BDC helps promote economic development in Aboriginal communities
through a grassroots approach called the Circle of Entrepreneurial
Success. This strategy delivers management training, ongoing mentorship
and loans of $5,000 to $20,000, with terms that vary depending on the
cash flow expectations for the project.

About BDC

BDC is Canada's business development bank. From 94 branches across the
country, BDC promotes entrepreneurship by providing highly tailored financing,
venture capital and consulting services to entrepreneurs. BDC works with
entrepreneurs in all industries, through all economic cycles and focuses on
helping small and medium sized businesses in their development projects, both
local and global. BDC manages a $10.6 billion loan and investment portfolio
and serves over 28,000 clients. Small and medium sized businesses make up
99.7% of all employer businesses in Canada. Visit www.bdc.ca for more
information.

BDC's annual report can be viewed at: www.bdc.ca/annualreport.

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