Report of the Board of Directors

Mission and strategy

Finnfund, formally Finnish Fund for Industrial Cooperation Ltd., is a development finance company in which the Finnish government has a majority holding; it belongs to the administrative sector of the Ministry for Foreign Affairs and has a special development policy mission. The mission of the company is to promote economic and social development in target countries by providing financing for private-sector projects involving Finnish interest. Finnfund provides long-term risk capital to complement funding obtained from the financial markets, and it operates on a self-supporting basis. The majority of Finnfund financing is directed at low-income and lower-middle-income developing countries, with the aim of building bridges between Finnish expertise and the needs of developing countries, and of augmenting the developmental impacts of Finnfund investments.

In 2012, the strategy of the company was revised: with the aid of the special risk funding approved in 2012, Finnfund will take a more active and risk-oriented role to provide a catalyst in projects with excellent development impact potential, but without compromising the requirement of being self-supporting.

Funding and investments

The general uncertainty in the economy dampened interest in investments especially for Finnish companies during 2012. This was reflected in Finnfund operations as a small number of projects and low project volumes. Nevertheless, the number of decisions taken was slightly higher than in the previous year, 18 in all (2011: 14), with a combined value of EUR 56 million (EUR 33 million).

The low volume of project production is explained not only by low demand but also by the fact that the projects that were completed almost without exception included elements that made them particularly laborious to prepare. Indeed, 72 per cent of the projects undertaken were ones where Finnfund participation was considered to provide substantial added value.

Of the decisions made, 61 per cent (2011: 100 per cent) concerned the least developed countries, low-income countries, or lower-middle-income countries. Specifically, joint projects with Finnish enterprises principally concerned upper-middle-income developing countries. The least developed and low-income countries accounted for 42 per cent (53 per cent) of the financing commitments by monetary value and 36 per cent (36 per cent) in terms of the number of commitments. The change in the distribution of target countries for investment decisions reflects funding demands on the one hand and the progress of projects long in preparation into the decision-making stage during the period under review on the other.

In 2012, 4 (2011: 4) commitments were made involving equity investment, of which two were additional investments in existing projects, the combined value of equity investment commitments being EUR 3.4 million (EUR 8 million); one of these projects was also granted an investment loan. A total of 10 (6) investment loan commitments were made, with a combined value of EUR 33.8 million (EUR 12 million); 1 (2) financing commitment that can be considered a mezzanine instrument was made, with a value of EUR 1.1 million (3 million); and 3 (2) fund investment commitments were made, with a combined value of EUR 17.6 million (EUR 10 million).

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Of the financing commitments, 6 (7) went to Asia. These commitments had a combined monetary value of EUR 13.4 million (EUR 13 million), amounting to 24 per cent (38 per cent) of the total monetary value of financing commitments. As in the previous year, only 4 commitments were made to Africa, with a combined monetary value of EUR 10.4 million (EUR 14 million), or 19 per cent (42 per cent) of the total. The percentage of commitments to Latin America increased by 35 per cent in monetary terms (0 per cent), to EUR 19.7 million (EUR 0 million). The number of projects, however, was only 3 (0). Of the remaining 5 decisions, 2 (0) were directed at Belarus, and 3 (2) were directed at companies or funds making investments on several continents. There were 2 (3) projects in China.

The volume of disbursements increased to EUR 59 million (2011: EUR 43 million). Of this amount, EUR 28 million (EUR 17 million) was allocated to low-income countries, EUR 9 million (EUR 23 million) to lower-middle-income countries, EUR 11 million (EUR 2 million) to upper-middle-income countries, and EUR 11 million (EUR 1 million) to Russia.

Finnfund is actively involved in European Financing Partners (EFP), founded in 2004 as a joint financing venture of European development finance institutions and the European Investment Bank (EIB), and in the Interact Climate Change Facility (ICCF) founded by the same actors and the French development funding provider AFD in 2011. ICCF invests in projects aimed at curbing climate change, such as renewable energy and energy efficiency. In 2012, EFP made 11 (2011: 4) positive clearances-in-principle for various projects. For 3 of these, a final investment decision was also made; one clearance-in-principle was cancelled. In 2012, Finnfund disbursements to EFP projects amounted to only EUR 0.04 million (EUR 1.1 million). During the year, the ICCF made 6 (2011: 3) positive clearances-in-principle for various projects, and 5 (1) final investment decisions were made. Finnfund disbursements to ICCF projects amounted to approximately EUR 1.1 million (EUR 0).

At the end of 2012, undisbursed commitments totalled EUR 86 million (2011: EUR 108 million). In addition, EUR 60 million (EUR 64 million) was tied up in investment commitments that had not yet progressed to the agreement stage.

Development and priorities

In autumn 2012, Finnfund published its first corporate social responsibility report, for 2011, in accordance with the Government Resolution on State Ownership Policy adopted on 3 November 2011. The report is available on the company’s website.

The developmental impact assessment tool developed in 2011 was introduced for testing in 2012 and used to assess all projects submitted to the Board of Directors. Testing of the tool was also continued with assessments of earlier projects, the aim being to calibrate the versions of the tool developed for various sectors to make them compatible. The purpose of the tool is to identify and to some extent quantify the principal developmental impacts of projects in a transparent way. The factors that the tool measures and its operating logic were demonstrated to the Board of Directors in late autumn, and its introduction into production use was approved. As a result, a developmental impact assessment appendix was included in the Board of Directors investment memoranda for the first time in December.

In 2012, a second questionnaire on developmental impacts was sent to Finnfund customers to gather data on how many employees the enterprises have, how much they pay in taxes and tax-like fees, and what the impact of their projects on the current account balance in 2011 had been. The questionnaire was returned by 97 per cent of current project enterprises. According to the data collected, in 2011 the responding Finnfund project enterprises directly employed 44,622 persons (of whom 5,493 were women) and indirectly employed 370,974 persons (of whom 37,414 were women). In 2011, these enterprises paid a net amount of EUR 922.5 million in taxes and tax-like fees in their respective countries of operation, and their combined impact on the current account balance was EUR 264.5 million.

The project for developing the operating methods and processes for environmental and social impact assessment and reporting was continued through 2012, and the project is continuing in the current year. The description of the Finnfund financing process was updated to reflect the situation after the reorganisation.

Contacts with Finnish companies were actively maintained. The aim is to make companies engaging in activities that would be useful for developing countries aware of their market potential and of Finnfund’s services in financing projects in developing countries.

Co-operation with other members of the European Development Finance Institutions (EDFI) continued as in earlier years, through both concrete projects and the sharing and harmonisation of operating methods. Examples of such co-operation include European Financing Partners (EFP); the joint financing venture of European development finance institutions and the European Investment Bank, the investment committee of which Finnfund chaired until autumn 2012; and Afrinord, a joint venture for hotel projects in Africa, whose majority owners are Nordic development finance institutions. Finnfund also co-operated on various significant individual projects.

The Finnpartnership programme

Finnfund administers a business partnership programme called Finnpartnership. Launched in June 2006, it is financed by the Ministry for Foreign Affairs. Following competitive tendering, Finnfund will continue to manage the programme at least until the end of 2013. The aim is to decide on the continuation of the programme during the year. The services offered through Finnpartnership are designed to increase commercial co-operation between companies in Finland and those in developing countries, to promote economic growth in those countries, to diversify their production and export structure, and to provide general support for development in the target countries.

Finnpartnership provides advisory services and business partnership support for the planning, development, and implementation of commercially viable projects carried out by Finnish companies and other Finnish actors targeting developing countries; for technology pilot projects; and for vocational education and support for local training.

Partnership support basically falls under the de minimis rule. Under the de minimis rule, government funding that, over a period of three years, does not exceed EUR 200,000 does not have to be declared or reported to the European Commission.

Finnpartnership provides a matchmaking service for companies in developing countries, helping them find Finnish business partners. The matchmaking service has also been used by Finnish customers looking for business partners in developing countries.

In 2012, Finnfund processed 97 applications for business partnership support, about 24 per cent fewer than in the previous year. The annual average in recent years has been 102 applications. Of these, 77 applications were approved (2011: 114). The support granted totalled EUR 2.4 million (EUR 3.9 million).

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Of the total support granted in 2012, 31 per cent in monetary terms was allocated to the least developed countries and low-income countries, and 35 per cent to lower-middle-income countries. The geographical distribution of the support was: Asia 66 per cent, Africa 18 per cent, Europe 5 per cent, and Latin America and the Caribbean 11 per cent.

In 2012, disbursements were made for support granted in 2010, 2011, and 2012. Business partnership support was paid out to 55 projects, totalling EUR 1.0 million. Of the projects that submitted their final reports in 2012, about 67 per cent led to the establishment of long-term business operations or a decision to launch a business; just over 19 per cent are still incomplete; and the remaining 14 per cent or so will never be implemented.

The 2009 recipients of partnership support submitted their last follow-up reports in 2012. A total of EUR 1.1 million in partnership support had been paid out in 2009–2011 to the 52 companies that submitted a report. The follow-up reporting indicates that three years later, about half of the enterprises set up are still in operation. These companies have invested a total of EUR 35.7 million in developing countries, which is more than 24 times the amount of the business partnership support paid out. The combined direct and indirect employment impact is roughly 1,672 employees.

In 2012, the matchmaking service received 129 business initiatives from companies in developing countries. Between 2006 and 2012, there have been 445 registered active applications in the service, of which about 23 per cent have established contact with a potential Finnish trade partner or similar enterprise through the service. Of these, 14 per cent have already proceeded to the concrete co-operation stage.

Risk management

The Finnfund Board of Directors confirms the company’s risk management principles and instruments. The company’s management is responsible for the practical implementation of risk management on the basis of the guidelines confirmed by the Board of Directors. The company guidelines on asset and risk management were updated during 2012, but no substantial changes were made to the risk management principles.

Owing to the nature of its activities, the company is exposed to greater than average risks. Risk management includes risk identification, hedging, and reporting to the company’s administrative bodies.

Finnfund’s business concept involves active risk-taking in projects. This is taken into consideration in the terms and conditions of financing and in the active monitoring and control exercised during the investment period. Taking risks also means that some investments inevitably lose money, but the aim is to price all investments so as to hedge against risks and to diversify them so as not to compromise the operation of the company. The risk classification system developed by Finnfund and in use since 2005 is a key instrument in the assessment and monitoring of project risks. A risk assessment is conducted on all projects in the Finnfund investment portfolio at least once a year, and more often if necessary, that is, if it is estimated that the risk level has changed.

On 8 October 2012, the Ministry for Foreign Affairs decided on the introduction of special risk finance to share investment risks between Finnfund and the Finnish government. The special risk finance is provided on the basis of a loss compensation commitment adopted by the Government on 20 September 2012, whereby the government undertakes to compensate Finnfund for a maximum of 60 per cent of credit losses and investment losses in projects covered by special risk finance during the validity of the commitment. The loss compensation commitment and the related Ministry for Foreign Affairs decision are valid until 31 December 2015.

The decision to enter a particular project under special risk finance is made by the Finnfund Board of Directors. In order to be eligible for special risk finance, a project must have extremely high developmental impact potential and be aimed at a low-income or lower-middle-income country; it must also be too risky to otherwise qualify for Finnfund financing.

In 2012, the Board of Directors decided to enter 2 projects under special risk funding. The aggregate value of the commitments is EUR 5.7 million. The loss compensation ceiling is EUR 50 million, and a maximum of EUR 5 million in compensation may be applied for in any given year.

The objective with regard to interest and exchange rate risks is to identify and hedge against any risks. Since the company’s investments target developing countries and are often made in the local currency, managing exchange rate risks is exceptionally challenging. The objective is to cover the interest and exchange rate risks associated with lending fully and over the entire investment period. Managing exchange rate risks associated with equity and fund investments is more complicated. The general rule, applied on a case-by-case basis, is to cover currency positions that are certain or at least likely and that can be hedged at a reasonable cost in relation to the benefits gained.

In order to manage its liquidity risk, Finnfund maintains liquidity that is adequate in view of the anticipated volume of disbursements. In addition to the liquidity on its balance sheet, Finnfund has credit facilities at Finnish banks and a EUR 100 million commercial paper programme set up in 2010. In June 2012, Finnfund signed a five-year agreement with Nordea Bank for a EUR 50 million committed credit facility.

The refinancing risk associated with borrowing is managed by maintaining a sufficiently extensive group of financiers and a versatile range of instruments. An additional aim is that at least half of the borrowing should be long-term financing. At the end of the year under review, the average time to maturity of interest-bearing debt was somewhat over 2 years.

During 2012, the company has taken action to improve its capacity for identifying, controlling, and combating data security risks.

Financial result and balance sheet

In 2012, Finnfund made a profit of approximately EUR 1.2 million (2011: approximately EUR 9.2 million). There were fewer profitable exits from projects than in the previous year. The result was encumbered by impairment losses that exceeded both those made in the previous year and the budget for the year under review. Interest rates have remained low, and as a result the revenue from investment loans and liquidity was modest. Administrative expenses came in under budget. While the financial result was not as good as in the previous year, it was on budget and satisfactory.

Income

Interest income from investment loans came to EUR 6.6 million (2011: EUR 6.8 million), and dividend income was EUR 3.1 million (EUR 1.5 million).

Capital gains came to EUR 2.2 million (EUR 10.0 million), and EUR 1.1 million was recognised as gains on fund investments (EUR 0). Other financial income, at EUR 1.0 million (1.4 million), consisted primarily of arrangement fees, commitment payments, and other financing income.

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Investment income totalled EUR 14.1 million, down 25 per cent on the previous year (EUR 18.7 million).

Interest income from liquid assets came to EUR 0.3 million, roughly the same as in the previous year (EUR 0.4 million). Foreign exchange gains amounted to EUR 5.7 million (EUR 9.8 million) and losses to EUR 5.5 million (EUR 10.0 million).

The ‘other income’ item, at EUR 1.2 million (EUR 1.4 million), mainly comprises fees received for the administration of the Finnpartnership programme.

Impairment losses

New recognised individual impairment losses amounted to EUR 6.9 million (2011: EUR 5.9 million), representing about 2.5 per cent (2.3 per cent) of the balance-sheet value of investment assets at the end of the year under review.

Reversals of previously recognised individual impairment losses amounted to EUR 1.2 million in 2012 (EUR 3.0 million).

In 2012, reversals of impairment losses recognised for specific asset categories allocated to investments with reimbursement before 2005 came to approximately EUR 0.5 million (EUR 1.2 million). From now on, only individual impairment losses and their reversals will be recognised for all investments; category-specific impairment losses will no longer be processed.

The net effect of impairments on financial performance was approximately EUR -5.1 million (EUR -1.8 million). Of this, EUR 1.8 million was due to the new bookkeeping practice, whereby the value of a fund investment in the Finnfund balance sheet after the end of the investment period may amount to no more than 90 per cent of the combined market value of the investments made by the fund, as assessed by the fund management company. Previously, fund investments were valued on the basis of market values as reported by fund managers, provided that it is no more than the original acquisition cost.

Expenses

Interest expenses came to EUR 1.1 million, slightly up on the previous year (2011: EUR 0.9 million). These interest expenses were primarily incurred through borrowing in US dollars, which is used to refinance Finnfund investment loans denominated in US dollars, and through euro-denominated commercial papers issued in 2012. The increase in interest expenses was caused by an increase in margins, among other things.

Management fees of EUR 0.3 million (EUR 0.2 million) associated with fund investments were recognised as expenses. These fees were incurred for funds whose investment period has ended.

Administrative expenses totalled EUR 7.0 million, roughly the same as in the previous year (EUR 7.1 million).

Taxes recorded in the profit and loss account, totalling EUR 0.4 million (EUR 1.2 million), mainly consist of those paid to the target countries on dividends received, and capital gains on investments sold.

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Balance sheet

The balance sheet total stood at EUR 312.4 million (EUR 277.9 million) as at the end of the year under review, an increase of 12.4 per cent on the end of 2011.

The balance sheet value of investment assets was EUR 274.1 million (EUR 252.3 million) as at the end of the year under review, an increase of 8.6 per cent on the end of 2011.

The breakdown of investment assets was as follows: loans (including subordinated loans and other mezzanine instruments) EUR 141.7 million (EUR 151.2 million) or 51.7 per cent (59.9 per cent); equity investments EUR 64.3 million (EUR 44.4 million) or 23.5 per cent (17.6 per cent); and fund investments EUR 68.1 million (EUR 56.7 million) or 24.8 per cent (22.5 per cent). The breakdown of investment assets by instrument changed slightly over the course of the year, with the percentage of equity and fund investments growing while that of loans decreased.

Liquidity stood at about EUR 33.4 million (EUR 19.0 million) at the end of the year, showing an increase of some 75.6 per cent on the previous year-end total. The liquid assets are invested in domestic money-market instruments in accordance with the asset and risk management guidelines.

At the end of the financial period, the company’s equity (share capital and retained earnings) totalled EUR 202.6 million (2011: EUR 186.3 million) or 65 per cent of the balance-sheet total (67 per cent). The equity ratio fell slightly from the previous year-end figure.

The company executed two share issues in 2012. In the first share issue, a maximum of 65,060 new shares were offered to existing shareholders, in proportion to their existing holdings, at the issue price of EUR 170 per share. The subscription period was 20 April to 8 June 2012. As a result of the first share issue, the share capital was increased by EUR 10,014,700.00, with the Finnish government accounting for EUR 9,999,910.00 and the Confederation of Finnish Industries EK for the remaining EUR 14,790.00; 58,910 new shares were issued pursuant to the issue decision. Finnvera plc did not subscribe to any of the new shares it was offered.

After the registration of the first share issue (17 September 2012), the company’s share capital was EUR 123,949,720.00, with 729,116 shares. After the first share issue and at the end of the financial period on 31 December 2012, the Finnish government owned 664,780 shares (91.2 per cent), Finnvera plc owned 63,349 shares (8.7 per cent) and the Confederation of Finnish Industries EK owned 987 shares (0.1 per cent).

In the second share issue, a maximum of 32,258 new shares were offered to existing shareholders, in proportion to their existing holdings, at the issue price of EUR 170 per share. The subscription period was 10 September to 16 November 2012. As a result of the second share issue, the company’s share capital was increased by EUR 4,999,870.00, consisting solely of subscription payments for new shares from the Finnish government. Pursuant to the issue decision, 29,411 new shares were issued. These were subscribed on 12 November 2012 but not registered until after the end of the financial period, on 3 January 2013. The Confederation of Finnish Industries EK and Finnvera plc did not subscribe to any of the new shares they were offered.

After the registration of the second share issue, the company’s share capital is EUR 128,949,590.00, with 758,527 shares. The Finnish government owns 694,191 shares (91.5 per cent), Finnvera plc owns 63,349 shares (8.4 per cent) and the Confederation of Finnish Industries EK owns 987 shares (0.1 per cent).

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The company’s shares have no nominal value. The equivalent value of a share in bookkeeping is EUR 170.

At the end of the year under review, the company’s long-term interest-bearing debt stood at EUR 45.0 million (2011: EUR 68.4 million) and short-term interest-bearing debt at EUR 63.0 million (EUR 21.5 million), totalling EUR 108.0 million (EUR 89.9 million). All of the long-term interest-bearing debt is in US dollars, used to refinance Finnfund investment loans denominated in US dollars. Short-term interest-bearing debt included EUR 25 million in euro-denominated commercial papers.

The long-term debt as a percentage of all financing debt decreased during the period under review, to about 41.7 per cent at the end of the year. Financing liabilities increased by some 20 per cent on the previous year.

Guarantee commitments totalled EUR 0.2 million (EUR 0.6 million) at the end of the year. 

Key figures

	2012	2011	2010
Financial income (EUR million)	20.0	30.0	23.2
Financial result (EUR million)	1.2	9.2	-1.3
Return on equity, %	0.6	5.3	-0.8
Equity ratio, %	64.8	67.0	58.6

Formulae:

Return on equity = Result before extraordinary items - taxes x 100 %
                              Equity

Equity ratio =  Equity                                                      x 100 %
                      Balance sheet total - advances received  

Administration and personnel

In 2012, the Supervisory Board met 5 times, the Board of Directors met 13 times, and the audit committee of the Board of Directors met 4 times.

The Annual General Meeting, held on 20 April 2012, addressed the matters listed in Article 11 of the Articles of Association and decided to increase the company’s share capital.

Members of the Supervisory Board at the Annual General Meeting were elected as follows: for the 2012–2015 period: Simo Karetie, Chief Policy Adviser, and Antti Lindtman, Pirkko Mattila and Aila Paloniemi, Members of Parliament; for the 2012–2014 period: Anne-Mari Virolainen, Member of Parliament; and for the 2012–2013 period: Seppo Toriseva, entrepreneur, and Tapani Tölli, Member of Parliament.

Members of the Board of Directors elected at the Annual General Meeting:

Arto Honkaniemi, Senior Financial Counsellor, Prime Minister’s Office, Chair
Kari Alanko, Ambassador, Development Policy Adviser, Ministry for Foreign Affairs, Deputy Chair
Tuukka Andersén, Director of Finance, Finnvera plc
Tuuli Juurikkala, Special Advisor, Ministry of Finance
Nora Kerppola, Managing Director, Nordic Investment Group Oy
Riikka Laatu, Director, Ministry for Foreign Affairs
Päivi Leiwo-Svensk, Chairman of the Board, Oilon International Oy
Markus Pietikäinen, Vice President, Wärtsilä Oyj

The members of the Board of Directors do not have deputy members.

An Extraordinary General Meeting held on 10 September 2012 decided to increase the company’s share capital.

On 28 February 2012, the Board of Directors appointed an audit committee with the following members:

Markus Pietikäinen, Vice President, Wärtsilä Oyj, Chair
Arto Honkaniemi, Senior Financial Counsellor, Prime Minister’s Office
Tuuli Juurikkala, Special Advisor, Ministry of Finance
Nora Kerppola, Managing Director, Nordic Investment Group Oy

The company’s auditors are PricewaterhouseCoopers Oy, authorised public accountants, with Juha Wahlroos APA as the principal auditor.

The company CEO is Jaakko Kangasniemi PhD (Agricultural Economics).

During the year under review, the company employed an average of 49 people (2011: 49). At year end, the number of employees in contractual employment was 52, of whom 46 worked full-time. Of the 52 employees, 37 were women and 15 were men.

Total wages and salaries paid to personnel in 2010–2012 were as follows:

	2012	2011	2010
Average number of personnel	49	49	46
Total wages and salaries (EUR 1,000)	3,572	3,276	3,150

 

Employees were not paid incentive bonuses on top of fixed monthly salaries, because as a result of a change in the incentive system, the payment of bonuses was postponed to 2013. The final accounts for 2012 include a provision for incentive bonuses earned in 2012, amounting to 5.89 per cent of payroll expenses (3.75 per cent). Incentives are partly based on performance at company and function level, and partly based on individual performance.

A reorganisation was implemented in 2012, with project preparation being separated from project evaluation and monitoring, and divided among three investment teams. The Forestry, Environment, and Renewable Energy investment team (EMY) started up in spring 2010; the new teams are Infrastructure (INFRA) and Manufacturing and Services (TEPA).

Project evaluation and investment assets monitoring were organised in a new portfolio and risk management function that was also assigned responsibility for the investment committee and for risk classification. The portfolio and risk management function was also made centrally responsible for financial project analysis, environmental and social impact assessment and management, and developmental impact assessment and monitoring, as well as for Finnfund’s own funding.

The new organisation entered into force in June 2012.

The company’s administration was thoroughly overhauled in 2012, for instance by increasing internal reporting on the company’s finances and operations. Administration is principally responsible for internal reporting and its development.

Outlook for 2013

In accordance with the development policy programme adopted by the Government in February 2012, and with the goals set for the company by the Ministry for Foreign Affairs, Finnfund aims to improve the positive developmental impacts of its financing and to focus primarily on low-income and lower-middle-income developing countries. Finnfund aims to continue to work in close co-operation with Finnish enterprises in these countries in particular. In the future, investments in upper-middle-income developing countries will only be made selectively, mostly in projects that are estimated to generate significant environmental and developmental impacts, and to the achievement of which Finnfund can contribute substantial added value. In accordance with its strategy as updated in autumn 2012, Finnfund is prepared to assume a more active role as a catalyst in its projects.

New financing commitments are expected to increase from the 2012 level (both in terms of the number of commitments and their monetary value). In disbursements, growth is estimated to show later; and with an anticipated clear increase in repayments from investments, the company’s investment assets will probably grow only slightly, if at all.

Liquidity will probably remain satisfactory. The central government budget for 2013 includes a EUR 10 million appropriation for an increase in the share capital of Finnfund. Terms for Finnfund borrowing are estimated to remain reasonable.

The special risk finance approved by the Ministry for Foreign Affairs in 2012 improves Finnfund’s chances of financing projects with a high level of financial risk but with significant developmental impacts if successful.

The financial performance for 2013 is difficult to predict. The strategy selected will mean more work and more expenses in the short term, but will not produce results until later. The company’s investments are generally rather high in risk, and almost half of them are equity investment instruments. The company’s financial performance will be crucially affected by how the valuation of its investment assets changes during the financial period and whether any profitable exits from projects occur. These are very difficult to anticipate.

New terms will be introduced for business partnership support in the Finnpartnership programme in the new year; these are expected to increase demand. New resources are also available for matchmaking efforts, and better results are anticipated.

Proposal of the Board of Directors for the distribution of profit

The company recorded a profit of EUR 1,240,505.11 in 2012. The Board of Directors proposes that the profit be transferred to the retained earnings account and set aside for disposal in accordance with Article 2 of the Articles of Association.