State Finance STATE Department General FINANCIAL REPORT | SUMMARY Accounting 2014 Offi ce

PROFILE Santa Catarina is located in the South region of and excels as one of the Brazilian states with the best econom- ic and social indicators. With 95.7 thousand square kilometers and 6.7 million inhabitants, it is the 20th state of Brazil in territory and the 11th in population. Paraná

Roraima Amapá

CANOINHAS Amazonas JOINVILLE Pará Maranhão R.G. do Norte SÃO FRANCISCO Piauí DO SUL Rondônia Mato Sergipe Grosso SÃO MIGUEL DO OESTE DF Santa Catarina BLUMENAU Goiás Santa Catarina ITAJAÍ Minas Mato Gerais Grosso Espírito CHAPECÓ do Sul Santo JOAÇABA São Paulo CONCÓRDIA BRAZIL Rio de Paraná Janeiro CURITIBANOS CAMPOS Santa NOVOS Rio Catarina Grande SÃO JOSÉ do Sul FLORIANÓPOLIS

LAGES

IMBITUBA Graph 1 | Evolution of GDP (in BRL billions) General aspects of the TUBARÃO State of Santa Catarina 177 169 Location: South Region of Brazil Territorial Area: 95,733.978 km2 (IBGE, 2014) 152 Estimated population: 6,727,148 (IBGE, 2014) 130 Number of : 295 123 Capital: Florianópolis 105 Demographic density: 65,27 inhabitants/km2 93 (IBGE, 2014) 85 Borders: North – State of Paraná 77 South – State of Rio Grande do Sul 67 56 West – Argentina 49 East – 43 38 Santa Catarina in first place 34 34 GDP 2012: 177.276 billion BRL 30 GREATEST EMPLOYMENT GENERATOR 2014 25 Human Development Index: 0.77% 1995 19961997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 53,887 new positions BEST TOURIST DESTINATION IN THE COUNTRY LONGEST LIFE EXPECTANCY HIGHLIGHTS 2014 78.1 years (74.7 years for men and 81.4 for women) LOWEST INFANT MORTALITY RATE n ICMS/VAT n COVENANT FOR SANTA CATARINA 10.1 (children under 1 year per thousand live births) LOWEST CHILDHOOD MORTALITY RATE 12.01% growth of gross Value Added Tax and on Services Evolution of actions by Covenant for Santa Catarina, 11.8 (per thousand live births) of Interstate and Intermunicipal Transportation and Com- a long-term program which projects investments of munication in comparison with the year of 2013. 10 billion BRL between 2013 and 2016. Actions LOWEST EXTREME POVERTY RATE 3.23% (households with per capita income unite works and acquisitions with the goal of satis- Gross Revenue with ICMS (in BRL billions) of up to 1/4 of minimum wage) 15,613 fying major demands of Santa Catarina society. By 13,940 GREATEST SENSE OF SECURITY 11,666 12,630 the end of 2014, the program had 18% of actions completed and 57% in progress, amounting to 1.5 Neighborhoods (79.1%) and cities (68.3%) billion BRL in investments. Among these actions, BRAZIL’S LARGEST PRODUCER works in schools, roads and penitentiaries, aside Pork, fish, apples, onions, oysters and mussels from acquisitions of vehicles and installation of a More detailed information about the geography, history, colonization, meteorological radar. the people, the culture and tourist attractions in Santa Catarina can be 2011 2012 2013 2014 CONTINUES ON THE NEXT PAGE> seen on the State’s website (www.sc.gov.br). 2014 | SANTA CATARINA STATE | FINANCIAL REPORT | SUMMARY

CONTINUED FROM THE PREVIOUS PAGE> n FUNDAM n SANTA CATARINA n PAYMENT CARD Intensification of actions according to State Support STATE UNIVERSITY Implementation of Santa Catarina State Payment Fund for Municipalities (FUNDAM), a program struc- State University of Santa Catarina ranked fourth best Card (CPESC), allowing for administrative units to tured by State Administration to share resources among state university in Brazil and the 18th in overall rank- adhere to State agencies and entities to, with higher municipalities in a thorough, objective and unbiased ing among 192 institutions evaluated by Ministry of efficiency and transparency, carry out procurements manner, providing important investment, particularly in Education, evidencing the quality of education, re- and contracts of extraordinary, urgent or lesser health care, education, sanitation, and infrastructure. search, and extension activities offered by tertiary amount expenses. education in Santa Catarina. The card was initially implemented in 1,070 state FUNDAM » BRL 605 million provided by schools. Later, other State unities adopted CPESC, the State Government to the catarinense town halls n INVESTMENTS such as the Foundation for the Environment and Ad- ministration, Strategic, National Coordination, Re- » 295 town halls submitted projects Increase of 121% of investments in 2014 in compar- gional Development (in Lages), and Justice and Citi- » BRL 505 million– agreed amounts ison with the year of 2011, amounting to BRL 2.266 zenship Secretaries. of concluded Agreements billion invested. Of this amount, BRL 882 million » 384 agreements were signed with arise from credit operations. 274 municipalities Investiments (in BRL billion) Efficiency 2.266 n TRANSPARENCY

The Transparency Portal of the State Executive, which is 1.496 a tool of social control that allows for the citizen to 1.025 monitor revenue from income and application of pub- 1.007 Control Transparency lic resources, gained four positions in comparison to the last assessment and occupied the fourth place in the country in the Transparency Index (evaluation car- ried out by NGO Contas Abertas (Open Accounts)). In 2011 2012 2013 2014 the year on 2014, the Portal had 1.4 million accesses, Autonomy in an average of 3,838 daily accesses. The most significant part of the investments in 2014 (36.23%) was almost entirely destined to extension Santa Catarina and renovation of the State road network, amounting Transparency Index to 821 million BRL. Contas Abertas (Open Accounts) Great investments were also granted to Education (BRL 200 million), Law Enforcement (BRL 152 million) and Health Care (BRL 143 million). The increase in invested amount is evidence that Santa Catarina State Administration has sought, over 2014 the years, to develop a public investment policy that th ensures regional development and promotes reduc- 2012 4 tion of inequalities, increase of workplaces and in- POSITION th come, enhancement of reach and quality of public 8 service offered to society. POSITION

SANTA CATARINA IN FIGURES n BUDGET 2014 n BALANCE SHEET (in BRL billions) (in BRL billions) 2014 Gross Revenue Net Revenue Expenses Assets Liabilities Preview 28.773 21.293 21.293 Current Assets 12.395 Current Liabilities 8.015 Execution 29.291 21.612 21.230 Fixed Assets 16.769 Fixed Liabilities 18.751 Equity 2.398 Total 29.164 Total 29.164

CONTINUES ON THE NEXT PAGE> SUMMARY | FINANCIAL REPORT | SANTA CATARINA STATE | 2014

CONTINUED FROM THE PREVIOUS PAGE >

n RATING HISTORY n GROSS COLLECTED REVENUE (in BRL billions) Long Term Date Long Term National Rating 29.291 27.279 (Foreign and Local Currency) 24.085 Dec. 11th, 2012 BBB- AA(bra) 21.292 18.290 Dec. 10th, 2013 BBB- AA(bra) Dec. 10th, 2014 BBB- AA-(bra) Source: Fitch

n PROPERTY EVALUATION (in BRL millions) 2010 2011 2012 2013 2014 Assets Dec. 31st, 2013 Dec. 31st, 2014 Increase (%) Movable 1,812 2,112 16.50 n EXPENSES MADE (in BRL billions) Immovable 3,920 9,277 136.67

21.230 Intangible 113 171 51.33 18.089 19.254 14.952 A significant part of the increase of balance in Immovable account refers to accounting for evaluation of market price 13.167 of immovable assets (BRL 3.889 billion) and of evaluation of infrastructure assets (BRL 622 million).

n SANTA CATARINA IN TAX FIGURES Index 2014 2013 2010 2011 2012 2013 2014 Nominal Result (BRL million) 516 1,370 Primary Result (BRL million) -556 296 n BUDGET RESULT (in BRL billions) Property Result (BRL million) 1,311 (277) Financial Result (BRL million) 1,064 1,508 21.612 21.230 Budget Result (BRL million) 382 396 Equity (BRL million) 2,398 (2,218) Net Current Revenue (BRL million) 17,836 15,893 Net Revenue Available (BRL million) 12,173 10,723 Net Tax Revenue (BRL million) 15,217 13,533 382 Investment in Education (%NIT1) 28.39 28.30 Minimum Investment (%NIT1) 25 2 Net Expenses Budget Collected Made Surplus Investment in Health Care (%NIT1) 12.11 12.02 Revenue Minimum Investment (%NIT1) 12 12 Expenses with Personnel – Overage Collective Amount (%NCI2) 57.55 56.2 n PAYMENT OF PUBLIC DEBT (in BRL billions) Prudential Limit 57 57 Maximum Limit 60 60 Expenses with Personnel – Executive Branch (%NCI2) 47.93 46.70 1,643 Prudential Limit 46.55 46.55 Maximum Limit 49 49 1 – Net Income from Taxes | 2 – Net Current Income 998 668 n BALANCE OF TRADE (USD thousands) 814 1,581 811 1,583 Balance of Trade 2014 2013 428 503 562 Import 16,019,844 14,779,464 2010 2011 2012 2013 2014 Export 8,987,359 8,688,839 Balance -7,032,485 -6,090,625 Amortization Interest and Fees

In 2013, amortization of debts of CELESC* is highlight- Major export products were chicken (15.36%), soy (9.26%), and pork (5.81%). Among the biggest destination markets, ed, as it represents a significant reduction in interest are the United States (12.86%), China (10.89%), Japan (5.86%), Russia (5.46%), and Argentina (4.86%). payment by the State. Import has amounted to USD 16.020 billion, being copper cathode (5.09%), automobiles (2.55%), polyethylene (1.73%) the major import products. China was the main import origin countries (32.56% of the total import), followed by Argen- * CELESC = State Power Agency tina (8.29%), United States (6.95%), Germany (6.37%), and Chile (6.34%). 2014 | SANTA CATARINA STATE | FINANCIAL REPORT | SUMMARY

PERFORMANCE IN 2014

GROSS REVENUE BRL 29.291 billions (In BRL millions) Intergovernmental Services Revenue 493 | 1.68% 4,123 – 14.08% Equity Revenue 621 | 2.12% Transfer Private Institution Revenue Contributions 630 | 2.15% 831 – 2.84% Other Revenue | 358 – 16.54% Transfers Loans 1,743 – 5.95% Active Debt Revenue | 75 – 3.46% Other Revenue Compensation and Restitutions | 81 – 3.76% 2,162 | 7.38% Loan Amortization | 20 – 0.92% Capital Transfers | 27 – 1.25% Pact Transfers | 108 – 4.98% Current Intrabudgetary Revenues Fines and Interest | 274 – 12.69% 1,219 – 56.40% Tax Revenue 18,687 63.80% Gross Revenue BRL billions % by Economic Class ICMS* | 15,613 – 83.55% Current Revenue 27.387 93.50

IPVA | 1,322 – 7.08% Capital Revenue 1.904 6.50 Total 29.291 100.00 IRRF | 1,054 – 5.64%

ITCMD | 164 – 0.88% Fees | 533 – 2.85%

*ICMS = VAT

EXPENSES BRL 21.230 billions (In BRL millions) Amortization of Debt | 562 – 2.65% Financial Inversions | 75– 0.35% Investments| 2,191– 10.32% Expense by BRL billions % Economic Class Other Current 5,339 – 25.15% Expenses Current Expenses 18.402 86.68 Capital Expenses 2.828 13.32 Total 21.230 100.00

Personnel and 12,252– 57.71% Social Charges Interest and 811 – 3.82% Debt Charges

n EXPENSES BY GOVERNMENT AREA

Public Other More administration, economic, social, and fi- Security Essential Functions nancial information about the State may be 6.80% 10.66% to Justice Administration obtained from Financial Report 2014, available 5.97% 22.12% in the Transparency Portal of the State Executive Health Branch (http://www.transparencia.sc.gov.br). 12.44% Legislative 6.44%

Other Functions 6.72% 42.41% Citizenship Special Education Rights Charges 14.74% 7.19% 16.84% Transport Social 11.49% Judiciary Security 16.41% 19.75%