FEI CREDIT LINES PME Investe I & II FIN-EN -Sharing Methodologies on Financial Engineering for Enterprises

1. FEI CREDIT LINES PME Investe I & II FIN-EN -Sharing Methodologies on Financial Engineering for Enterprises Lisbon Meeting, 26 September 2013

2. CONTENTS Main factors which led to the launch of PME Investe I & II Description of this Financial Engineering Instrument Monitoring procedures Results

3. 2008 Economic Framework Economic context in 2008 is, necessarily, related to the crisis in the international financial markets. • Some relevant facts: • Sub-prime crisis in the USA which rapidly spread to other economies • Euribor Rates rose to historical high levels • Increase in the cost and shortage of lending to households and companies • Increase in the price of raw materials as a result of the rising cost of petroleum • Cooling down of the Economies

4. Financing Costs in 2008 Historical Evolution of the 3 month Euribor Rate Euribor Rates reached their peak in October 2008, reflecting liquidity problems and lack of confidence in the financial sector. On average, during 2008, Portuguese companies paid an interest rate of 7.64% on loans up to the amount of 1 M€, higher than the rates in Euro zone by approximately 170 basis points. Interest Rate on new operations up to 1 M€ (*) Source: Statistical Bulletin of July 2013 – Bank of Portugal

5. Main factors which led to the launch of PME Investe I & II Description of this Financial Engineering Instrument Monitoring procedures Results

6. Launching Credit Lines PME Investe I & II In a highly unstable macroeconomic environment, with strong constraints in accessing to credit, as well as high associated costs of financing, two Credit Lines were launched, co-financed by Structural Funds, to support Portuguese SMEs. • Amount of Credit: 750 M€ • Start: July/2008 • Closing: January/2009 • PME Investe II Credit Line • Amount of Credit : 1.000 M€ • Generalist Sub Line: 750 M€ • Trade Sub Line: 200 M€ • Restaurants Sub Line 50 M€ • Start: October/2008 • Closing: May/2011 PME Investe I Credit Line

7. Setting up the Financial Engineering Instrument The Portuguese Government invited Banks operating in Portugal to join this initiative, through the signature of an Agreement also subscribed to by the Managing Authorities of COMPETE and Regional Operational Programmes for Lisbon and Algarve, and the Mutual Guarantee Societies, establishing the conditions for these Credit Lines: • Eligible final recipients and eligible operations • Types of financing and loans conditions • Decision and contract process • Procedures of reporting and monitoring • Default and penalties Linha de Crédito PME Investe I

8. Operationalisation Banks are responsible for: • Validating eligibility conditions • Assuring front office services during the settlement of credit and mutual guarantee agreements • Monitoring the investments made by companies • Providing information to PME Investimentos on the credit loans (contract, disbursement, interest rates, early repayments) and defaults PME Investimentos, as the Credit Lines management entity, is responsible for: • Ensuring that the Credit Lines amounts set by the Managing Authorities are not exceeded. • Calculating the amount of public aid granted to companies and registering it in Central Register of de minimis Aid • Representing the Managing Authorities when communicating with Banks and MGS • Promoting verifications in order to check eligibility conditions and the investments made by companies

9. Funding Flow Managing Authorities State Funds Contribution of funds to FINOVA 1 Contributions to Mutual Counter Guarantee Fund Capital MCGF SME’s PME Investimentos 2 FINOVA Mutual Guarantee System 6 3 Counter guarantee of 80% of the guarantee Payment of subsidised interest and guarantee fees 4 Provide a guarantee for 50% of the financing Banks 5 The bank transfers the funds to the company and then the company repays the loan in accordance with the terms agreed

10. Advantages for the SMEs • Competitive Interest Rates • Lower than the market average rates • Benefiting from a Mutual Guarantee • Easier access to credit as a result of sharing risk between Banks and MGS • Subsidised Interest Rates • Interest is partially subsidized • Guarantee Fees are fully subsidized

11. Access Conditions • Micro, Small or Medium Enterprises • Location – company’s head office in Mainland Portugal • Company’s activity in line with SAFPRI (FEI national regulation) • No prior unjustified incidents or defaults with banks • All contributions to the Tax Administration or Social Security have been settled • Companies benefiting from PME Investe I Credit Line could not apply for Credit Line PME Investe II

12. Investments Eligible • Investment in new tangible or intangible fixed assets and investment in working capital related to the increase in activity Not eligible • Acquisition of land, real-estate, vehicles and second-hand goods • Financial restructuring and/or debt consolidation • Operations excluded by the SAFPRI (FEI national regulation)

13. PME Investimentos MGS SME’s 2 Approval of the guarantee Maximum 7 business days Banks 3 1 Application Credit Request Settlement of credit and guarantee agreements 4 5 Approval Maximum 3 business days Maximum 30 business days Application Process

14. Credit Line II Trade Funding conditions Maximum amount per company Interest rate to be paid by the company Maturity (2) Grace Period(2) Disbursement Period(2) Guarantee (2) PME Líder 5 years Others 4 years 18 Months 6 Months 50% Credit Line I PME Líder – 1,500,000 € Others – 1,000,000 € Euribor 3M – 1.25% (1) Credit Line II Generalist PME Líder – 1,000,000 € Others – 750,000 € Euribor 3M – 0.50%(1) Credit Line II Restaurants 200,000€ PME Leader – 300,000 € Others – 250,000 € • Minimum rate of 1.5% • Maximum Limits

15. Process to determine company ratings Company Rating Example Company from the Industrial Sector Equity Ratio 35% - Rating A Net Debt/ EBITDA: 4 years – Rating B Thus, the company is rated as having a B risk level. The risk level of the company takes into consideration the Equity ratio and the Net Debt/EBITDA ratio and classifies the company accordingly with the lowest rating observed for each of them. PME Líder ratinghas its own methodology and is a label issued by IAPMEI, under proposal of Banks, recognizing the quality of companies performance, growth and risk profile.

16. Interest Rates Spreads and Guarantee Fees The Credit Lines rates are quite attractive compared to the market, reflecting the impact of the subsidies granted and the effect of negotiating with Banks, which includes providing a mutual guarantee. Companies pay the 3 month Euribor rate, deducted by 1.25% and 0.5%, respectively, for Credit Lines I and II, with a floor, which at the end of January 2009, was reduced from 3% to 1.5%. Gap between interest rates (*) Source: Statistical Bulletin July 2013 - Bank of Portugal

17. Main factors which led to the launch of PME Investe I & II Description of this Financial Engineering Instrument Monitoring procedures Results

18. Monitoring Procedures Procedures for the reporting of information by Banks and MGS were established, allowing PME Investimentos, as managing entity of the Credit Lines, to undertake a number of control procedures during the life of the credit loans. • Regular Procedures • Validation of contract information • Validation of disbursements • Validation of interest grants • Validation of guarantee fees • Additional Procedures • Validate eligibility of final recipients • and investments made • Monitoring defaults • Monitoring counter guarantees issued • Monitoring called on guarantees

19. Main factors which led to the launch of PME Investe I & II Description of this Financial Engineering Instrument Monitoring procedures Results

20. 53% Small companies 44% Industrial Sector Average maturity 4.4 years Demand Profile 62% Investment in Fixed Assets 42% NorthernRegion Average number of employees 36 Average operation amount 340 k€ Credit Lines PME Investe I & II 1.535 M€ Total Credit Loans 4.508 Loans

21. Companies 4.443 Employment 160.000 Multiplier Effect Guarantees MGS 766 M€ Public Investment 138 M€ Multiplier Effect 11 X Credit Loans 1.535M€ Counter guarantees MCGF 612 M€ Investment 1.750M€ Leverage information is based on updated costs estimate.

22. Evolution of the Credit Lines 2008 2009 2010 2012 2013 PME Crescimento 2013 PME Investe I PME Investe II PME Investe III PME Investe IV PME Crescimento PME Investe V PME Investe VI QREN Investe PME Investe - Aditamento Since 2009, the Portuguese Government has launched new subsidised and guaranteed Credit Lines, under the management of PME Investimentos, exclusively financed through national funds. By the end of June 2013, these Credit Lines reached 62,000 companies, responsible for approximately 850,000 jobs. June 2013 10.583 M€ Total Credit Transaction

23. Contacts Contacts • Carlos de Castro • Vice-PresidentandCEO • adm@pmeinvestimentos.pt • Telephone numbers: • (+351) 21 799 42 74(+351) 21 799 42 75