KROTON EDUCACIONAL S/A

Financing For Post-Secondary Education Students - FIES

S U M M A R Y

About the FIES

What is the FIES? 1

What is the legal framework of the FIES? 1

Loan Conditions 2

Who can apply for FIES funding? 2

Who is not eligible for FIES financing? 2

Does FIES finance all courses? 3

Must post-secondary institutions have batches ready in order to offer FIES

financing? 3

What is the FIES interest rate? 3

How do students apply for the FIES? 4

Does the FIES set a minimum financing percentage? 4

Does the FIES set a maximum financing percentage? 4

How is the income commitment percentage calculated? 4

Can students who have already paid the tuition fees for the semester be

reimbursed if they subsequently receive FIES? 5

Are students required to present a guarantor to obtain financing? 5

What is conventional guarantor? 5

What are joint guarantee? 5

What is the Guarantee Fund for Financing for Higher Education Students? 5

Do students have to take the ENEM to apply for the FIES? 6

Should the financing agreement be periodically renewed? 6

Where do FIES funds come from? 6

Who manages the FIES? 7

Who is the financial agent of the FIES? 7

What are the benefits of the FIES for Post-Secondary Educational Institutions? 8

How can a post-secondary educational institution participate in the FIES? 8

How are the loan payments made to post-secondary educational institutions? 8

How can the Certificates be used? 8

Can the Certificates be freely traded? 9

What conditions govern the repurchase of the Certificates by the FIES

Operating Agent? 9

Who assumes the FIES credit risks? 9

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FIES and Post-Secondary Educational Institutions

FIES NUMBERS

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ABOUT THE FIES

What is the FIES?

The Financing for Higher Education Students (FIES) is a program of the Ministry of Education

whose purpose is to finance the post-secondary education of students enrolled at private

institutions (Higher Educational Institutions). The FIES was created in 1999, and in 2010 it

underwent major changes that further facilitated access of students to educational funding.

What is the legal framework of the FIES?

It is grounded in Law 10,260 of July 12, 2001, which established the program and Law 12,202

of January 14, 2010, which amended it, as well as other legislation, specifically:

NORMATIVE REGULATION 10 OF APRIL 30, 2010 - Establishes the procedures for enrollment

and the contracting of student loans granted by the FIES.

NORMATIVE REGULATION 1 OF JANUARY 22, 2010 - Establishes the regulations for FIES,

regulates the participation of the supporting entities of tuition-charging educational

institutions and sets forth other measures.

RESOLUTION 3,842 OF MARCH 10, 2010 – Establishes the effective interest rate for the FIES.

RESOLUTION 3,777 OF AUGUST 26, 2009, - Regulates item 2 of Art. 5 of Law 10,260 of July 12,

2001, which deals with the FIES.

NORMATIVE REGULATION 3 OF FEBRUARY 13, 2009 – Sets forth the procedures for

institutional participation, student registration and the concession of financing by the FIES to

recipients of partial ProUni (Programa Universidade para Todos – College for Everyone

Program) scholarships and to recipients of supplementary scholarships during the first

semester of 2009.

NORMATIVE REGULATION 2 OF FEBRUARY 13, 2009 – Establishes the procedures for

institutional participation, as well as the registration, selection and designation of candidates

for the FIES selection process for the first semester of 2009.

RESOLUTION 2,647 – Regulates the provisions of Provisional Presidential Decree 1,865-4 of

1999, which deals with the FIES.

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Loan Conditions

Utilization phase: During the term of the course, the student will pay a maximum of R$ 50.00

as interest on the loan, once every three months.

Grace period phase: After conclusion of the course, the student is granted an 18-month grace

period to reorganize his or budget. During this period, the student will pay a maximum of R$

50.00 as interest on the loan, once every three months.

Amortization phase: Upon completion of the grace period, the balance of the loan will be

repaid in a maximum duration of up to three times the original financing term plus 12 months.

Example:

For a student who took out a loan for a 4-year course:

During the course: Quarterly payments of up to R$ 50.00.

Grace period: In the 18 months following the course completion, the student will pay a

maximum of R$ 50.00 every three months.

Amortization: After the grace period ends, the loan balance will be payable in up to 13

years [3 x 4 years (financed term of the course) + 12 months].

Who can apply for FIES funding?

Students duly enrolled in paid undergraduate courses that have received positive evaluation

from the National Higher Education Evaluation System (SINAES) may apply for FIES financing

from higher educational institutions participating in the course.

A student may only apply for funding for a single post-secondary course in which he or she is

duly enrolled. Students whose academic enrollment is classified under general leave of

absence during the FIES registration period will not be considered duly registered.

Who is not eligible for FIES financing?

Application for FIES funding is prohibited of students:

whose academic enrollment status is classified under general leave of absence during

the FIES registration period;

who have previously benefitted from FIES financing;

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who are in default with respect to the Educational Credit Program (PCE/CREDUC);

whose percentage commitment to monthly gross per capita family income is lower than

20% (twenty percent).

Does FIES finance all courses?

Financing is granted to students enrolled in on-campus courses that have received a positive

evaluation from the Ministry of Education.

Undergraduate courses considered to have positive evaluations are those that have received a

score of 3 (three) or higher on the National Higher Education Evaluation System (SINAES), as

established by Law 10,861 of April 14, 2004.

Assessment criteria used to evaluate the courses consist of the following:

the Course Score (CC);

the Preliminary Course Score (CPC), if no CC exists;

the score achieved by the course on the National Student Performance Exam (ENADE),

in the absence of CC and CPC.

The most-recently published scores will be considered.

Courses Without Score (SC) and Not Evaluated (NA) by ENADE may only receive FIES financing

if the Institutional Score (CI) of the higher institution is 3 (three) or higher or, in the absence of

CI, if its General Course Index (IGC) is 3 (three) or higher.

Must higher institutions have batches ready in order to offer FIES financing?

Not necessarily. First, the course scores (ENADE, CPC, etc.) are analyzed, but if no batch has

been formed for the group (meaning there is no ENADE exit score) institutional scores (the

IGC, for example) may be used, or a visit by the Ministry of Education and Culture (MEC) can

be requested in order to obtain a course score, as long as those results are satisfactory

(minimal score of 3).

What is the FIES interest rate?

The FIES interest rate is 3.4% p.a. for all courses.

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How do students apply for the FIES?

The New FIES will offer ongoing registration, meaning that students may apply for financing

during any period of the year, depending on their needs. Applications are submitted via the

FIES’s Computerized System.

Does the FIES set a minimum financing percentage?

The minimum financing requirement for the FIES at the time of registration is 50% (fifty

percent) of the educational charges billed to the student by the institution.

Does the FIES set a maximum financing percentage?

Up to 100% (one hundred percent) of the educational charges billed to the student by

the institution in cases where the commitment percentage of the monthly gross per

capita family income relative to those charges is 60% (sixty percent) or higher;

Up to 75% (seventy-five percent) of the educational charges billed to the student by the

institution in cases where the commitment percentage of the monthly gross per capita

family income relative to those charges is 40% (forty percent) or higher but less than

60% (sixty percent);

50% (fifty percent) of the educational charges billed to the student by the institution in

cases where the commitment percentage of the monthly gross per capita family income

relative to those charges is 20% (20 percent) or higher but less than 40% (forty percent).

How is the income commitment percentage calculated?

In order to calculate the income commitment percentage, first divide the semester tuition fees

by 6 to get the monthly tuition fees including discount. Dividing this amount by the gross per

capita monthly family income and multiplying the result by 100 gives the commitment

percentage.

Example:

Discounted semester tuition fees: R$ 3,600.00

Monthly tuition fees including discount: R$ 600.00 (R$ 3,600,00 ÷ 6)

Gross per capita monthly income: R$ 1,000.00

Commitment percentage: 60% [(R$ 600.00 ÷ R$ 1,000.00) X 100]

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Can students who have already paid the tuition fees for the semester be reimbursed if they

subsequently receive FIES?

Yes, if the financing is contracted during the course of the semester, the educational institution

must reimburse the funded students the tuition fees paid by them for the semester.

Are students required to present a guarantor to obtain financing?

In order to receive funding, students must present a guarantor (conventional guarantor or

joint guarantee) or join the Guarantee Fund for Financing for Higher Education Students.

What is conventional guarantor?

Conventional guarantor is that provided by up to two guarantors presented by the student to

the financial institution, in accordance with the following conditions: in the case of recipients

of a partial ProUni scholarship, the guarantor must have combined monthly gross income at

least equal to the monthly installment of the semester tuition fee, as adjusted by regular and

collective discounts offered by the educational institution, including those granted on the basis

of timely payment. In other cases, the guarantor must have combined gross monthly income

equal to at least twice the monthly installment of semester fees.

What are joint guarantee?

Joint guarantee are guarantee constituted on a shared basis by groups of between three and

five students receiving FIES funding, in which each student assumes joint responsibility for the

totality of the individual amounts owed by the others.

The group of joint guarantee must be constituted at the financial institution (bank) when the

students contract the financing. Each student may participate in only one group of joint

guarantee, and group members are prohibited from offering any other kind of guarantor to

any other student financed by the FIES.

Proof of income of group members is not required in order to establish a joint guarantor

group. Members of the joint guarantor group must be students at the same educational

institution and enrolled at the same campus.

What is the Guarantee Fund for Financing for Higher Education Students?

The Guarantee Fund for Financing for Higher Education was announced on October 20, 2010.

Educational institutions are free to join the Guarantee Fund and a guarantor will be required

for students in institutions that do not join the Guarantee Fund. Educational institutions may

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join the Guarantee Fund starting from October 21, 2010 through the FIES Computerized

System (SisFies). In order to be eligible for financing, students must inform their choice at the

time of enrollment after checking if the educational institution has joined FIES.

The Guarantee Fund will be funded by the National Treasury and its own financing mechanism.

The Fund will count on 7% of the bonds issued by FIES in favor of the institution for students

without guarantors. At the end of the semester, 2% of these bonds may be reverted to the

university according to the default level. The other 5% will go to the Fund. Only students with

per capita family income of up to one and a half minimum wages, and teacher certification

program students that do not need guarantor can apply for financing. Beneficiaries of partial

ProUni (Programa Universidade para Todos – College for Everyone Program) scholarships who

wish to finance the remainder of their tuition fees also may request exemption from guarantor

and join the fund.

Do students have to take the ENEM to apply for the FIES?

It is not required of students applying this year. Beginning in the 2011 academic year, students

applying for FIES funding must have taken the National Secondary Education Exam (ENEM).

Should the financing agreement be periodically renewed?

Yes, through agreement extension. The extension is the semester renewal of the financing

agreement that occurs during the time the student re-enrolls in the course. In other words,

after joining the FIES, the financing of subsequent semesters is done via extension of the initial

agreement, regardless of the course regime (annual or semester). The extension is not done

automatically – students must appear in person at their educational institution within the

period it designates for renewal of the FIES.

The extension is made each semester, during the enrollment renewal period, at times

designated by the educational institutions themselves and announced through the FIES.

Where do FIES funds come from?

In accordance with applicable legislation, FIES funds come from:

Budgetary allocations assigned to the MEC;

30% of the net income from the lotteries administered by the Caixa Econômica Federal, and the total prize amount not claimed by the winners within the prescription deadline;

Contractually charged penalties and charges on loans granted by the FIES;

Fees and emoluments charged from participants in the financing selection processes;

Contractually charged penalties and charges on loans granted in connection with the Educational Credit Program, regulated by Law 8,436 of June 25, 1992;

Yields on financial investments on the available cash;

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Revenue from property;

Other revenues. Who manages the FIES? Management of the FIES is the responsibility of:

the MEC, which formulates the financing policy and supervises the Fund’s operations; and

the National Education Development Fund (FNDE), which acts as the operator and administrator of the assets and liabilities. (Provisional Presidential Decree 487 of 2010.)

Who is the financial agent of the FIES? Through April 30, 2011, Banco do Brasil S.A. and Caixa Econômica Federal will be the exclusive financial agents of the FIES. (Provisional Presidential Decree 487 of 2010.)

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FIES and Post-Secondary Educational Institutions

What are the benefits of the FIES for Higher Educational Institutions?

Reduction in Provision for Doubtful Accounts: Sharing the risk associated with student borrowers tends to lower the provision.

Lower dropout rates. FIES can lead to lower dropout rates due to the commitment of the student.

Increase in average ticket: Students who previously registered for cheaper courses are now able to enroll in more expensive ones.

Increase in enrollment numbers: Students who would not have had access to courses at private universities due to financial limitations may now access them, thanks to the more affordable rates.

How can a Higher educational institution participate in the FIES?

Tuition-charging higher educational institutions offering courses that have received a score of

3 (three) or better on the SINAES are eligible to participate in the FIES program.

How are the loan payments made to higher educational institutions?

FIES pays the institutions through the E Series Treasury Financial Certificates (CFT-Es), a federal

bond remunerated by the IGP-M inflation index. CFT-Es associated with the FIES program can

be used to pay off dues to Brazil’s Federal Revenue Service.

How can the Certificates be used? (Art. 10, Item 3 of Law 10,260/2001, amended by Law

12,202/2010).

Said provision mentions the possibility of paying off any federal tax administered by the

Federal Revenue Service (SRF), including that has been suspended, provided the educational

institution does not have pending social security obligations.

“Possibility of using the CFT-Es to pay any taxes administered by the SRF, and respective dues, whether constituted or not, registered or not as active debt, subject to judgment or not, payable or whose levy has been suspended, as well as fines, interest and other incidental legal expenses, provided the Supporting Entity does not have any outstanding social security obligations.” Art. 10

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Can the Certificates be freely traded?

The CFT-Es may no longer be freely traded through private sector initiative. (Art. 10, Item 2 of

Law 10,260/2001, amended by Law 12,202/2010)

From now on, the CFT-Es may only be used by the higher educational institutions to:

Pay off social security contributions and federal taxes administered by the SRF;

To cover risks related to the loans themselves within the established legal bounds: o 30% for higher education institution in default with the SRF; o 15% for higher education institution current with SRF obligations;

What conditions govern the repurchase of the Certificates by the FIES Operating Agent?

The mismatch between the volume of certificates received and their use for payment of INSS

obligations generates an excess of securities for the Supporting Entities, which results in a

surplus of certificates.

The conditions governing repurchase, as stipulated in the law and in the Ministerial Decree are

that the operation:

must be carried out by the FIES itself on a quarterly basis;

must use resources comprising the Fund itself;

must be carried out by the operating agent in the event that the supporting entity does not have pending obligations with the Federal Revenue Service, pursuant to law and the rules governing the FIES;

the amount due must be deposited in a bank account opened by the Fund’s operating agent in the name of the educational institution.

Art. 13. At least once per quarter, the FIES will repurchase, at par value, the certificates referred to in Art. 9, using the funds referred to in Art. 2, except the amounts set forth in Art. 16, in the custody of the institutions that meet the provisions established in Art. 12. ( Law No. 12,202 of 2010)

Who assumes the FIES credit risks?

The higher educational institutions will share the financing risk as joint debtors, up to the

following percentage limits: (Law No. 12,202 of 2010)

30% (thirty percent) for higher educational institutions in default on federal tax

obligations;

15% (fifteen percent) for higher educational institutions that do not have any pending

federal tax obligations.

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FIES NUMBERS

Since 1999, the FIES has allowed students who otherwise would not be able to afford the costs

of their education to obtain the much desired university degree. The program currently

benefits more than 560 thousand students and serves 800 accredited higher educational

institutions.

Visit the FIES website and simulate a financing: www.novofies.com.br