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Letter to Shareowners

"Our core mission is to supplement other forms of financing with our own privately-raised financing for loans guaranteed by Ex-Im Bank."

THE OPERATING ENVIRONMENT FOR PEFCO DURING FISCAL YEAR 2017 WAS SIGNIFICANTLY IMPACTED BY THE PACE OF THE NOMINATION PROCESS FOR CONFIRMING NEW DIRECTORS TO THE BOARD OF THE EXPORTIMPORT BANK OF THE U.S. ("EXIM BANK"), AND A REDUCTION IN SUITABLE LOANS AVAILABLE FOR PURCHASE IN THE SECONDARY MARKET.

To: PEFCO Shareowners,

"Our core mission is to supplement other forms of financing with our own privately-raised financing for loans guaranteed by Ex-Im Bank."

While we welcome the recent progress on vetting of nominees by the U.S. Senate Committee on Banking, Housing, and Urban Affairs, the continued lack of a voting quorum at Ex-Im Bank has significantly limited the number of available new guaranteed loan transactions to only those facilities of $10 million or less, approved under existing delegated authority. We are aware of a number of viable transactions with financing requirements in excess of the $10 million awaiting review and approval and look forward to the opportunity to offer PEFCO funding for these transactions once the facilities are reviewed and approved by Ex-Im Bank.

Earnings for 2017 resulted in a net loss of $3.0 million, compared to a net loss in 2016 of $0.6 million. Due to the financial results, the Board did not declare a dividend for 2017. The reduced lending activity for 2017, as noted above, resulted in 26 new credit facilities for PEFCO, split between the purchase of one long-term guaranteed loan in the secondary market for $67 million, and the commitment to finance 25 medium-term guaranteed loan facilities for an aggregate amount of $98 million and an average facility size of approximately $4 million.

PEFCO experienced the second consecutive year with a low level of new loans, resulting in a reduction in loans held in PEFCO’s portfolio year over year. This reduction in the size of the loan portfolio has also led to an increase in lending capacity which will be available for the time when Ex-Im Bank is ready to approve new long-term guaranteed loan facilities.

In our forty-seventh year of operation, PEFCO continues to serve our constituents: the exporters who sell goods and services abroad, the foreign buyers of U.S. goods and services, the financial firms that arrange transactions involving PEFCO funding, and our partners at Ex-Im Bank. Our core mission is to supplement other forms of financing with our own privately-raised financing for loans guaranteed by Ex-Im Bank, and to a lesser extent loans guaranteed by other U.S. government agencies such as OPIC. This has been our policy role since the creation of PEFCO, and has evolved to meet the needs of our customers in new ways, while remaining true to our mission.

In September 2016, PEFCO adopted a new set of corporate governance guidelines that updated existing policies and created formal roles of Lead Director and, alternatively, Chairman in cases where the role is segregated from the President & CEO role. Richard S. Aldrich, Jr., a member of the PEFCO Board since 1997, was elected to the Lead Director role at the following PEFCO Board meeting in December 2016. In July 2017, the PEFCO Board elected Richard S. Aldrich, Jr. to the role of Executive Chairman.

PEFCO mourned the passing of Robert Carswell, who figured prominently throughout our history. As our counsel from Shearman & Sterling, Bob was instrumental in the foundational work that created PEFCO in the late 1960s and thereafter, led our legal representation through 1971. He served as a member of the PEFCO Board of Directors from 1972 to 1976, and again as a director from 1981 through 1992 after serving as Deputy Secretary of the U.S. Treasury. In 1993, Bob was elected as Chairman of PEFCO, serving in that role through 1996. In the years after serving in an official capacity at PEFCO, Bob continued to remain interested and engaged in developments at PEFCO, and we continued to benefit from his wise counsel.

In the challenging period of Fiscal Year 2017, and in preparing for the activities of Fiscal year 2018, we acknowledge the support and dedication of the PEFCO Team, the engagement and leadership of the PEFCO Board in guiding the Corporation, and the continuing support of our loyal shareowners. We look forward to working with our colleagues at Ex-Im Bank on new lending transactions for financing U.S. exports, and the opportunity over the coming fiscal years to serve our clients: the banks and trade finance firms that are our partners, the borrowers who acquire U.S. products, and the U.S. exporters who produce them.

Sincerely yours,

Timothy C. Dunne
President & Chief Executive Officer

Richard S. Aldrich, Jr
Executive Chairman