Grendene S.A. Reference Form 2016 Version: 8static.grendene.aatb.com.br/form_referencia/1149_007 -...

Grendene S.A. – Reference Form – 2016 Version: 8 (A free translation of the original in Portuguese)

Contents

1. Persons responsible for the form

1.1 – Statement and identification of persons responsible 1

1.1 – Statement by the CEO 2

1.2 – Statement by the Investor Relations Director 3

2. External auditors

2.1/2.2 – Identification and remuneration of the auditors 4

2.3 – Other material information 5

3. Selected financial information

3.1 – Financial information 6

3.2 – Non-accounting measures 7

3.3 – Events subsequent to the last financial statements 8

3.4 – Policy for allocation of profits 9

3.5 – Distribution of dividends and retention of net profit 12

3.6 – Declaration of dividends to the account of Retained earnings or Reserves 13

3.7 – Level of debt 14

3.8 – Obligations by type and maturity 15


4. Risk factors

4.1 – Description of the risk factors 17

4.2 – Description of the principal market risks 25

4.3 – Material non-confidential legal, administrative or other proceedings 28

4.4 – Non-confidential court, administrative or arbitration proceedings in which the adversary parties are managers, former managers, controlling shareholders, former controlling shareholders or investors

30

4.5 – Material confidential proceedings 31

4.6 – Non-confidential court, administrative or arbitration proceedings that are repetitive or connected, and significant in aggregate

32

4.7 – Other material contingencies 33

4.8 – Rules of the origin country and of the country in which the securities are maintained in custody 34


Contents

5. Risk management and internal controls

5.1 – Risk management policy 35

5.2 – Market risks management policy 36

5.3 – Description of the internal controls 39

5.4 – Significant alterations 41

5.5 – Other material information – management of risks and internal controls 42

6. Issuer's history

6.1 / 6.2 / 6.4 – Details of constitution of the Issuer, period of duration and date of CVM registry 43

6.3 – Brief history 44

6.5 – Information of any petition for bankruptcy founded on a significant amount, or for judicial recovery or out-of-

court reorganization. 45


7. Issuer's activities

7.1 – Description of the activities of the Issuer and its subsidiaries 47

7.2 – Information about operational segments 48

7.3 – Information on products and services related to the operational segments 49

7.4 - Clients responsible for more than 10% of total net revenue 53

7.5 - Material effects of state regulation on the activities 54

7.6 – Significant revenues coming from outside Brazil 56

7.7 – Effects of foreign regulation on the Company's activities 57

7.8 – Social and environmental policies 58


8. Extraordinary transactions and business

8.1 – Extraordinary transactions 60

8.2 – Significant alterations in the Issuer’s manner of doing business 61

8.3 – Significant contracts entered into by Issuer and its subsidiaries not directly related to its operational activities 62

8.4 – Other material information – extraordinary transactions 63


Contents

9. Material announcements

9.1 – Material non-current assets - Other 64

9.1 – Material non-current assets / 9.1.a – Fixed assets 65

9.1 – Material non-current assets / 9.1.b – Intangible assets 66

9.1 – Material non-current assets / 9.1.c – Interests in companies 69


10. Comments by the chief officers

10.1 – General conditions of finances, assets and liabilities 77

10.2 - Operational profit and Financial revenue (expenses) 83

10.3 – Events with material effects taking place or expected, in the financial statements 88

10.4 – Significant changes in accounting practices – Qualifications or emphases in Auditors' Opinion 89

10.5 – Critical accounting policies 90

10.6 – Material items not evidenced in the financial statements 91

10.7 – Comments on the items not evidenced in the financial statements 92

10.8 – Business plan 93

10.9 – Other factors with material influence 95

11. Forecasts

11.1 – Guidance forecasts and assumptions 96

11.2 - Monitoring of and changes to the forecasts published 98

12. Meetings and management

12.1 – Description of the management structure 101

12.2 – Rules, policies and practices in relation to the General Meetings of Stockholders. 104

12.3 – Rules, policies and practices relating to the Board of Directors 105

12.4 – Description of the commitment clause for resolution of disputes through arbitration. 106

12.5/6 – Composition and professional experience of the management and the Audit Board 107

12.7/8 – Composition of the committees 114

12.9 – Existence of any conjugal relationship, stable union or family relationship up to second degree in relation to managers of the Issuer, subsidiaries and parent companies.

115


Contents

12.10 – Relationships of subordination, provision of service or control between managers and subsidiaries, parent companies or others

117

12.11 – Agreements, including insurance policies, for payment or reimbursement of expenses borne by the managers.

130

12.12 – Corporate governance practices 131


13. Management compensation

13.1 – Description of the remuneration policy or practice, including of the non-statutory directors 134

13.2 – Total of the remuneration of the Board of Directors, the statutory directors and the Audit Board 137

13.3 – Variable remuneration of the Board of Directors, the statutory directors and the Audit Board 141

13.4 – Share-based remuneration plan for the Board of Directors and the statutory directors 142

13.5 – Share-based remuneration of the Board of Directors and the statutory directors 146

13.6 – Information on the open options held by the Board of Directors and the statutory directors 153

13.7 – Options exercised and shares delivered in relation to the share-based remuneration of the Board of Directors and the statutory directors

154

13.8 – Information necessary for understanding of the data disclosed in items 13.5 to 13.7 – Method of pricing of the value of the shares and the options

155

13.9 – Holdings in shares, unit shares and other securities that are convertible, held by managers and members of the Audit Board – listed by body

157

13.10 – Information on the pension plans granted to the members of the Board of Directors and statutory directors 158

13.11 - Maximum, minimum and average individual remuneration of the Board of Directors, the statutory directors and the Audit Board

159

13.12 – Mechanisms of remuneration or indemnity for managers in the event of being removed from office, or retirement

160

13.13 – Remuneration of managers and members of the Audit Board who are related parties of the controlling stockholders, as a percentage of total remuneration of all managers and members of the Audit Board

161

13.14 – Remuneration of managers and members of the Audit Board, grouped by body, received for any reason other than the function they hold

162

13.15 - Remuneration of management or the Audit Board recognized in the Profit and loss account of companies that are direct or indirect controlling stockholders, or companies under common control, or subsidiaries of, the Issuer

163

13.16 - Other material information 164

14. Human resources

14.1 - Description of human resources 167

14.2 – Material changes - Human resources 168


Contents

14.3 – Description of the policy for employees' remuneration 169

14.4 – Description of relations between the Issuer and the unions 171


15. Control and economic group

15.1 / 15.2 – Stockholding position 173

15.3 – Distribution of capital 178

15.4 – Organization diagram of the Stockholding ownership and of the economic group 179

15.5 – Stockholders' Agreement filed at the Issuer's head office, or in which the controlling stockholder is a party 182

15.6 – Significant changes in the interests of the members of the controlling group and managers of the Issuer 183

15.7 – Main corporate transactions 187


16. Transactions with related parties

16.1 – Description of the rules, policies and practices of the Issuer in relation to transactions with related parties 189

16.2 – Information on transactions with related parties 190

16.3 – Identification of the measures taken to deal with conflicts of interest - proof of the strictly commutative nature of terms agreed, and/or that compensatory payment is appropriate

211


17. Share capital

17.1 – Information on the share capital 213

17.2 – Increases in the share capital 214

17.3 – Information on share splits, reverse splits or stock bonuses 215

17.4 – Information on reduction of the share capital 216


18. Securities

18.1 – Rights of the shares 218

18.2 – Description of any rules in the By-laws that limit the right to vote held by significant stockholders or which oblige them to make a public offering

219


Contents

18.3 – Description of the exceptions and suspensive clauses relating to property or political rights specified in the By-laws

220

18.4 – Trading volume and highest and lowest share prices of the securities traded 221

18.5 – Description of other securities issued 222

18.6 – Brazilian markets in which the securities are admitted for trading 223

18.7 – Information on the class and type of security admitted for trading on foreign markets 224

18.8 – Securities issued abroad 225

18.9 – Public offerings for distribution made by the Issuer or third parties, including controlling stockholders and affiliated and subsidiary companies, in relation to the securities of the Issuer

226

18.10 – Allocation of the proceeds of public offerings for distribution, and any divergences 227

18.11 – Description of the public offerings for acquisition made by the Issuer in relation to the shares issued by third parties

228


19. Buyback plans / Treasury shares

19.1 – Information on buyback plans for shares of the Issuer 230

19.2 – Movement in treasury shares 232

19.3 – Other material information – Buyback plans / Treasury shares 234

20. Trading policy

20.1 – Information on the securities trading policy 235


21. Disclosure policy

21.1 – Description of the internal rules, regulations or procedures relating to disclosure of information 239

21.2 – Description of the policy for disclosure of a material act or fact and of the procedures relating to maintaining secrecy on material information not disclosed

240

21. 3 – Members of management who are responsible for implementation, maintenance, evaluation, monitoring and inspection of the information disclosure policy

242



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1.1 – Statement and identification of persons responsible

Name of person responsible for content of the Form Rudimar Dall Onder

Position of the person responsible Chief Executive Officer

Name of person responsible for content of the Form Francisco Olinto Velo Schmitt

Position of the person responsible Chief Investor Relations Officer

The above statutory officers warrant that: a. They have reviewed the Reference Form. b. All the information contained in the Form complies with CVM Instruction 480, in particular with Articles 14 to 19. c. The information contained in it, as a whole, gives a true, exact and complete picture of the economic and financial situation of the Issuer and the risks inherent to its activities and the securities issued by it.


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1.1 –Statement of the Chief Executive Officer

Name of person responsible Rudimar Dall Onder

Position of the person responsible Chief Executive Officer

The above statutory officer warrants that: a. He has reviewed the Reference Form. b. All the information contained in the Form complies with CVM Instruction 480, in particular with Articles 14 to 19. c. The information contained in it, as a whole, gives a true, exact and complete picture of the economic and financial situation of the Issuer and the risks inherent to its activities and the securities issued by it.


Page 3 of 243

1.2 – Statement of the Chief Investor Relations Officer

Name of person responsible Francisco Olinto Velo Schmitt

Position of the person responsible Chief Investor Relations Officer

The above statutory officer warrant that: a. They have reviewed the Reference Form. b. All the information contained in the Form complies with CVM Instruction 480, in particular with Articles 14 to 19. c. The information contained in it, as a whole, gives a true, exact and complete picture of the economic and financial situation of the Issuer and the risks inherent to its activities and the securities issued by it.


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2.1 / 2.2 – Identification and remuneration of the Auditors

Does the company have an auditor? Yes

CVM Code 287-9

Type of auditor Brazilian

Name / formal name Pricewaterhousecoopers Auditores Independentes

Tax number (CPF / CNPJ) 61.562.112/0006-35

Period of provision of service Jan. 1, 2012

Description of the service contracted Review of the ITRs (Holding company and Consolidated) and audit of the financial statements (Holding company and Consolidated)

Total amount of the remuneration of the external auditors, separated by type of service

For the business year ended December 31, 2005: R$ 439,789.00 for auditing services provided, and R$ 141,181.00 for other services related to Bloco K, e-social and SPED, corresponding to 32.1% of the total of the external auditing services.

Justification for the change in auditors Appointment in substitution of Ernst & Young Terco Auditores Independentes S.S., to comply with CVM Instruction 308/99 (Article 31), which makes change in the auditors on a rotation basis obligatory.

Reason presented by the auditor, in the event of disagreement with the justification given by the Issuer

There was no disagreement

Name of the personal with technical responsibility Period of provision of service

Personal tax number (CPF)

Address

Emerson Lima de Macedo Jan. 1, 2012 to Oct. 23, 2014 497.470.295-53 Avenida Mostardeiro, 800, 8º e 9º andar, Independência, Porto Alegre, RS, Brasil, CEP 90430-000, Tel. (51) 33781700, Fax (51) 33281609, e-mail: [email protected]

Fábio Abreu de Paula Oct. 24, 2014 935.194.436-00 Avenida Mostardeiro, 800, 8º e 9º andar, Independência, Porto Alegre, RS, Brasil, CEP 90430-000, Tel. (51) 33781700, Fax (51) 33281609, e-mail: [email protected]


Page 5 of 243

2.3 - Other material information There is no other material information


Page 6 of 243

3.1 – Financial information – Consolidated

(R$ ) Business year to Dec. 31, 2015 Business year to Dec. 31, 2014 Business year to Dec. 31, 2013

Stockholders’ equity 2,616,759.684.80 2,327,934,316.72 2,067,960,954.13

Total assets 3,045,641,601.24 2,682,013,358.19 2,369,342,354.14

Net revenue / Rev. from Financial Intermediation / Revenue from insurance premiums

2,202,795,788.22 2,233,297,736.47 2,187,264,222.32

Gross profit 1,067,883,222.74 1,025,918,289.99 993,702,121.00

Net profit 551,223,335.75 490,243,531.09 433,540,109.38

No of shares, excluding Treasury shares 300,654,974 300,060,000 300,173,000

Book value per share (R$ ) 8.703530 7.753339 6.889230

Net profit per share 1.834200 1.632788 1.442104

Diluted earnings per share 1.83 1.63 1.44


Page 7 of 243

3.2 – Non-accounting measures

Reconciliation of Ebit and Ebitda * (R$ '000) 2013 2014 2015

Net profit for the year 433,540 490,244 551,223

Minority interests 465 (4,985) (11,912)

Taxes on profit 68,805 39,678 43,768

Net financial revenue (expenses) (103,577) (135,524) (182,347)

EBIT 399,233 389,413 400,732

Non-recurring effect - 10,454 53,977

Adjusted EBIT 399,233 399,867 454,709

Depreciation and amortization 36,648 47,461 53,652

EBITDA 435,881 436,874 454,384

Non-recurring effect - 10,418 52,580

Adjusted EBITDA 435,881 447,292 506,964

EBIT Margin 18.3% 17.4% 18,2%

Adjusted EBIT margin 18.3% 17.9% 20,7%

EBITDA Margin 19,9% 19.6% 20.6%

Adjusted EBITDA margin 19,9% 20.0% 23.0%

* Presented in accordance with CVM Instruction 527 of Oct. 4, 2012. Since its listing, Grendene has published its Ebitda. Ebitda is not a measure under Brazilian accounting practices (‘BR GAAP’); it does not represent cash flow for the periods presented; and it should not be considered as a substitute for net profit, nor as an indicator of operational performance of the company, nor as a substitute for cash flow as an indicator of liquidity. Ebitda does not have a standardized meaning, and the definition of Ebitda used by the Company may be not comparable to those used by other companies. According to market consensus practice, Ebitda is an indication of the potential for recurring operational cash flow, before the effects of taxes, and financing decisions, thus excluding financial revenue (expenses) and investment decisions (depreciation expenses). Up to September 2008 we published Adjusted Ebitda (calculated from the accounting data, adding the adjustments for tax incentives, including the federal income tax reduction incentive). With the accounting changes made by Law 11638/07, especially the accounting of the investment tax incentives (subsidies given by the states of Ceará and Bahia) in the Profit and loss account (as from December 2008) - they were previously reported directly in Stockholders’ equity - it became necessary to make adjustments in the calculation of Ebitda. We also made the judgment that the exclusion of the corporate income tax incentive amount in the calculation of Ebitda, which we previously included in Adjusted Ebitda, better reflects its purpose. On the same aspect, we believe that the financial discounts given to clients who make punctual payments, considered as operational financial expenses, should be deducted from revenue (presented as items reducing revenue), for the purposes of calculation of Ebitda. With this, we believe that we incorporate into the calculation of Ebitda presented by Grendene the principal adjustments which were already made by analysts and investors in relation to the method that we adopted previously, thus adapting our procedure better to market practices, and allowing improved comparability with other companies. Because Grendene has low capital-intensiveness, the difference between operational profit before financial effects - also known as Ebit - and Ebitda, is very small, corresponding to the value of depreciation. For this reason Grendene believes that Ebit better reflects the Company’s operational performance, and it is Ebit that management uses internally as its measure of performance. We also call attention to the fact that, with the adoption of the new accounting practice, both Ebitda and Ebit are considered at present value, since revenues have been adjusted to present value, and we now publish the statement in accordance with CVM instruction 527, of October 4, 2012.


Page 8 of 243

3.3 – Events subsequent to the last financial statements

There have been no subsequent events that might substantially change the accounting statements for December 31, 2015.


Page 9 of 243

3.4 – Policy for allocation of profits

a. Rule on retention of profits

Dec. 31, 2013 It is the function of the Board of Directors to propose the allocation of the net profit for each business year (Clause 21, Sub-clause g, of the By-laws), except for the constitution of the Legal reserve.



b. Rules on distribution of dividends

Dec. 31, 2013

Under the By-laws, the Company may raise Statements of financial position (balance sheets), at intervals of six months, three months, or more frequently, and declare, by decision of the Board of Directors, dividends on account of the profit ascertained in these Statements of financial position, on account of the total to be distributed at the end of the business year, subject to the limitations specified by law. Dividends thus declared constitute advance payments of the obligatory dividend.

Shareholders have the right to an annual obligatory dividend equivalent to at least 25% (twenty five per cent) of the net profit for the year, less, or plus, the following amounts: (a) 5% (five per cent) for constitution of the Legal Reserve, until that reserve reaches the limit set by law; and (b) an amount for formation of reserves for contingencies, and reversal of any such reserves that were formed in previous business years in accordance with Article 195 of the Corporate Law: §1 - The payment of dividends referred to by this Article is limited to the amount of the net profit of the business year that has been realized, and the difference is reported as Future earnings reserve as specified by Article 197 of the Corporate Law. Profits recorded in the Future earnings reserve, when realized, if they have not been absorbed by losses in subsequent business years, are to be added to the first dividend declared after the realization. §2 The General Meeting of Shareholders may, upon proposal by the management bodies, allocate a portion of the net profit to the constitution and/or maintenance of the Reserve specified in the By-laws named ‘Reserve for acquisition of shares’, the purpose of which shall be redemption, repurchase or acquisition of shares issued by the Company itself, including for the purpose of compliance with its obligations to deliver shares to the participants in the Company’s Stock Options Purchase Plan, approved by the Company, when they exercise their options. The Reserve for acquisition of shares may be formed with up to 100% of the net profit that remains after the deductions required by law and by the By-laws, and the balance of which shall have a maximum limit of 20% of the registered Share capital. At the end of the business year, any balance remaining not used of this reserve may be used, for the same purpose, for the following business year if the management believes this to be necessary, upon approval by the General Meeting of Shareholders, and, if not used in whole or in part, said balance shall be reversed to the payment of dividends. In the manner specified in Article 198 of the Corporate Law, the allocation of the profits for constitution of the Reserve for acquisition of shares may not be approved to the detriment of distribution of the obligatory dividend. §3 The remaining profit shall be allocated in such a manner as is approved by the General Meeting of Shareholders, in accordance with the proposal formulated by the Executive Board, subject to the applicable precepts of law, notably Article 202, §6, of Law 6404/76.

Dec. 31, 2014


Shareholders have the right to an annual obligatory dividend equivalent to at least 25% (twenty five per cent) of the net profit for the year, less, or plus, the following amounts: (a) 5% (five per cent) for constitution of the Legal Reserve, until that reserve reaches the limit set by law; and (b) an amount for formation of reserves for contingencies, and reversal of any such reserves that were formed in previous business years in accordance with Article 195 of the Corporate Law: §1 - The payment of dividends referred to by this Article is limited to the amount of the net profit of the business year that has been realized, and the difference is reported as Future earnings reserve as specified by Article 197 of the Corporate Law. Profits recorded in the Future earnings reserve, when realized, if they have not been absorbed by losses in subsequent business years, are to be added to the first dividend declared after the realization. §2 The General Meeting of Shareholders may, upon


Page 10 of 243


proposal by the management bodies, allocate a portion of the net profit to the constitution and/or maintenance of the Reserve specified in the By-laws named ‘Reserve for acquisition of shares’, the purpose of which shall be redemption, repurchase or acquisition of shares issued by the Company itself, including for the purpose of compliance with its obligations to deliver shares to the participants in the Company’s Stock Options Purchase Plan, approved by the Company, when they exercise their options. The Reserve for acquisition of shares may be formed with up to 100% of the net profit that remains after the deductions required by law and by the By-laws, and the balance of which shall have a maximum limit of 20% of the registered Share capital. At the end of the business year, any balance remaining not used of this reserve may be used, for the same purpose, for the following business year if the management believes this to be necessary, upon approval by the General Meeting of Shareholders, and, if not used in whole or in part, said balance shall be reversed to the payment of dividends. In the manner specified in Article 198 of the Corporate Law, the allocation of the profits for constitution of the Reserve for acquisition of shares may not be approved to the detriment of distribution of the obligatory dividend. §3 The remaining profit shall be allocated in such a manner as is approved by the General Meeting of Shareholders, in accordance with the proposal formulated by the Executive Board, subject to the applicable precepts of law, notably Article 202, §6, of Law 6404/76.

Dec. 31, 2015


Shareholders have the right to an annual obligatory dividend equivalent to at least 25% (twenty five per cent) of the net profit for the year, less, or plus, the following amounts: (a) 5% (five per cent) for constitution of the Legal Reserve, until that reserve reaches the limit set by law; and (b) an amount for formation of reserves for contingencies, and reversal of any such reserves that were formed in previous business years in accordance with Article 195 of the Corporate Law: §1 - The payment of dividends referred to by this Article is limited to the amount of the net profit of the business year that has been realized, and the difference is reported as Future earnings reserve as specified by Article 197 of the Corporate Law. Profits recorded in the Future earnings reserve, when realized, if they have not been absorbed by losses in subsequent business years, are to be added to the first dividend declared after the realization. §2 The General Meeting of Shareholders may, upon proposal by the management bodies, allocate a portion of the net profit to the constitution and/or maintenance of the Reserve specified in the By-laws named ‘Reserve for acquisition of shares’, the purpose of which shall be redemption, repurchase or acquisition of shares issued by the Company itself, including for the purpose of compliance with its obligations to deliver shares to the participants in the Company’s Stock Options Purchase Plan, approved by the Company, when they exercise their options. The Reserve for acquisition of shares may be formed with up to 100% of the net profit that remains after the deductions required by law and by the By-laws, and the balance of which shall have a maximum limit of 20% of the registered Share capital. At the end of the business year, any balance remaining not used of this reserve may be used, for the same purpose, for the following business year if the management believes this to be necessary, upon approval by the General Meeting of Shareholders, and, if not used in whole or in part, said balance shall be reversed to the payment of dividends. In the manner specified in Article 198 of the Corporate Law, the allocation of the profits for constitution of the Reserve for acquisition of shares may not be approved to the detriment of distribution of the obligatory dividend. §3 The remaining profit shall be allocated in such a manner as is approved by the General Meeting of Shareholders, in accordance with the proposal formulated by the Executive Board, subject to the applicable precepts of law, notably Article 202, §6, of Law 6404/76.

c. Frequency of distribution of dividends

Dec. 31, 2013 Quarterly, as per decision by the Board of Directors ‘ad referendum’ the Annual General Meeting that considers the Statement of financial position and the Financial statements of the business year.




Page 11 of 243


d. Restrictions on distribution of dividends

Dec. 31, 2013 There are no restrictions on distributions of dividends.




Page 12 of 243

3.5 – Distribution of dividends and retention of net profit

(R$ ) Business year to Dec. 31, 2015 Business year to Dec. 31, 2014 Business year to Dec. 31, 2013 Business year to Dec. 31, 2012 Business year to Dec. 31, 2011

Adjusted net profit 551,223,335.75 490,243,531.09 433,540,109.38 429,002,548.01 305,445,697.15

Dividend distributed as a % of adjusted net profit 48.200000 41.500000 68.200000 68.400000 71.900000

Return on Issuer's Stockholders’ equity, % 23,700000 23.700000 22.200000 23.800000 18.200000

Total dividend distributed 265,608,922.49 203,641,453.24 300,057,180.00 293,502,720.00 219,525,600.00

Net profit retained 285,614,413.26 286,602,077.85 133,482,929.38 135,499,828.01 85,920,097.15

Date of approval of the retention 04/11/2016 04/06/2015 04/07/2014 04/08/2013 04/02/2012

Net profit retained Amount Date of payment Amount Date of payment Amount Date of payment

Gross Interest on Equity Common

100,000,000.00

04/27/2016

Obligatory dividend

Common 67,384,476.90 05/13/2015 42,063,777.28 05/14/2014 41,499,360.00 08/14/2013

Common 43,889,275.91 08/12/2015 29,865,909.18 08/13/2014 83,839,500.00 11/14/2013

Common 53,757,753.05 11/11/2015 53,427,238.14 11/12/2014 110,664,960.00 04/23/2014

Common 577,416.63 04/27/2016 78,284,528.64 04/23/2015 64,053,360.00 05/22/2013


Page 13 of 243

3.6 – Declaration of dividends to the account of Retained earnings or Reserves

R$ ’000 Dec. 31, 2013 Dec. 31, 2014 Dec. 31, 2015

a. Retained earnings 19,072,706.38 - -

b. Reserves constituted - 17,000,000.00 -

c. Mirror reversal of reserve (precisely equal to reserve made in subsidiary – approved at AGM of April 11, 2016.

- - 10,316,725.47


Page 14 of 243

3.7 – Level of debt

Business year Total amount of all debt, of any type

Type of index Indebtedness index

Description and reason for use of different index

Dec. 31, 2015 428,881,916.44 Indebtedness index 0.16389809


Page 15 of 243

3.8 – Obligations

Business year to Dec. 31, 2015

Type of Obligation Type of guarantee Other guarantees

or privileges Less than one year One to three years Three to five years Over five years Total

Loans With collateral 10,478,872.53 31,224,901.79 19,946,731.05 0.00 61,650,505.37

Financings Unsecured 344,020,578.03 22,194,458.46 1,016,374.58 0.00 367,231,411.07

Total 354,499,450.56 53,419,360.25 20,963,105.63 0.00 428,881,916.44

Remarks


Page 16 of 243

3.9 – Other material information To assist in optimum understanding of Item 3.5 – Distribution of dividends and retention of net profit As from its initial public offering in 2004, the Company adopted as a Dividend Policy distribution of 100% of the accounting profit. Until 2007, the amounts of the tax incentive benefits that the Company receives were not included as part of this net profit: until that time they were reported directly in the Company’s Shareholders’ equity, until the advent of Law 11638/2007. From then on, as was made optional by Provisional Measure 449/08, which became Law 11941/09, the Company then began to exclude these amounts, which refer to the tax incentives, from the base amount for calculation of dividends, and also adopted their exclusion from the Real Profit Calculation Account Book (Livro de Apuração do Lucro Real, or Lalur), in full compliance at all times with those provisions of law. On May 14, 2009 Grendene disclosed, through a Material Announcement, the decision adopted by the Company’s Board of Directors in a meeting held on that date, that as from that date the advances against dividends would be distributed and paid to stockholders quarterly. From the profits ascertained in the year 2010, the Company deducted, from the amount adopted as the basis of dividends, the amount of the tax incentives as specified by Law 11638/2007, Article 195-A of Law 6404/76*, and Article 18 of Law 11941 of May 27, 2009, as informed in Item 3.5 (Net profit retained), and accounted in Reserves for tax incentives; and, based on Sub-item II (exclusion from the Real Profit Calculation Account Book) of the amount arising from government donations or subventions for investments, recognized in the business year, for the purposes of calculation of the Real profit), did not offer them to taxation. *Law 11638/2007, which amends Article 195-A of Law 6404/76, states: Reserve for tax incentives - Article 195-A - the General Meeting of Shareholders may, upon a proposal by the management bodies, allocate to the Tax incentives reserve the portion of the net profit arising from governmental donations or subventions for investments, which may be excluded from the basis of calculation of the obligatory dividend (Sub-item I of the head paragraph of Article 202 of this Law). At the meeting of the Board of Directors of February 24, 2011, a change in the policy for distribution of dividends was approved, applicable to the results of the business year 2011 and subsequent years. After very detailed analysis of the legal issues arising from the changes in the legislation, the Company decided that, starting in 2011, while continuing to comply completely with all the commitments relating to the concession of tax benefits, and after analyzing its investment needs, it will increase the distribution of dividends, even if this results in part of the funds allocated to this payment becoming subject to taxation, as specified by the Law. With the start of the New Dividend Policy, the percentage level of dividends will be analyzed and decided by management annually, in accordance with the need for funds for capital expenditure, or business opportunities, or to fund other commitments of the Company, and it may be changed in any year if the Company’s management believes this to be appropriate. In 2011 the intended percentage of total distribution of dividends – the dividend payout – will be approximately 75% of the Net profit for the year, after the allocations to reserves, etc., required by law. The New Dividend Policy was widely disclosed in a Material Announcement published on February 24, 2011. The Company has maintained the policy of distributing dividends quarterly. In 2012 the percentage decided of total distribution of dividends – the dividend payout – was approximately 75% of the Net profit for the year, after the allocations to reserves required by law, in the same way as adopted in 2011. For the 2013 business year, due to investment additional to the habitual level (capex), the Company decided the percentage of distribution of dividends - the payout - at approximately 65% of the Net profit for the year after constitution of the legal reserves, as published in a Material Announcement of February 28, 2013. For the business years 2014, 2015 and 2016, as stated in the Material Announcement published on February 13, 2014, in view of the enactment of Provisional Measure 627 of November 11, 2013, converted into Law 12973 on May 13, 2014, the Company decided to alter its Dividend Policy, in that it no longer made a separate allocation of amounts arising from tax incentives for the purposes of inclusion in the basis for calculation of dividends – as it had previously being doing – and adopted the policy of distributing as dividends the totality of the amounts of Profit that do not originate from tax incentive arrangements (after constitution of the Legal Reserve and the Reserve under the By-laws). (There is no longer a pre-determined value for payout.) Grendene maintains the policy of quarterly distribution of dividends. Additionally, the Company has a Stock Purchase Options Grant Plan (‘the Stock Options Plan’). This was instituted, and its Regulations were approved, by the Extraordinary General Meeting of Shareholders on April 14, 2008. To enable the participants of the plan to exercise their options, the Company acquires its own shares in the market and subsequently delivers them to the participants at the exercise price. For this specific purpose, the Company has constituted a Profit reserve comprising amounts approved based on the capital budget by the Board of Directors and by the Annual (Ordinary) General Meeting of Shareholders.


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4.1 – Description of the risk factors Grendene is a company of large scale in its market – development, manufacture and sale of footwear – and is among the largest footwear companies in the world, manufacturing approximately 1% of world footwear consumption, and 19% of Brazilian footwear consumption. It operates in all the states of Brazil, where it is present in approximately 65,000 points of sale, and it exports to more than 100 countries. In 2015 Grendene’s products were sold to 135 million consumers in Brazil and 46 million consumers in the various countries to which we export. Thus, the majority of the risks that we face are of a macroeconomic nature, linked to the general level of economic activity, and particularly the performance of the consumer goods sector; and we have limited capacity for protection in relation to these risks. Our business, our financial situation and the results of our operation might be adversely and significantly affected by any of the risks set out here, and also as a result of other risks that we are not at present able to foresee. The market price of the shares of Grendene might fall due to any one of these risks, and there is the possibility of loss of part or all of the capital invested in it. Additional risks, which are at present unknown or insignificant, might also have an adverse effect on our business and on investment in our shares. a) Factors relating to the Issuer: We may be unsuccessful in implementing our growth strategy. In the domestic market, our principal area of activity, we already have a significant market share, while at the same time we face strong competitors who make it difficult to win an even larger share of the total of footwear consumed in the country. Further, the growth of the population is small (below 1% p.a.), and growth of consumption in the future is in our view likely to be associated with higher average disposable income of the consumer. In the international market, we face intense competition, various effects on the exchange rate between the currencies of the countries where competing manufacturers are located and the currencies where the largest markets are located, and customs or non-tariff barriers imposed by countries to protect their local consumer markets against suppliers located in other countries. As part of our growth strategy, we seek to position our own brands, expand our sales in the local and international markets and increase our operational performance, including by means of obtaining further, new, tax-incentive advantages. We intend to maintain our strategy of growth, with the use of marketing actions and promotion efforts, continuous launches of new products, growth of our sales in the domestic market, and expansion of our production and exports. There is the possibility that we might not be capable of satisfactorily implementing our growth strategies, including as a result of tariff and/or non-tariff barriers in the countries to which we export our products. If we fail to implement them, our rate of growth might diminish, or our operational result might be reduced, which could have an adverse effect for Grendene. We may be unsuccessful in managing our growth. Our future performance will depend on our capacity to manage the growth of our domestic and international operations, through identification of fashion trends and launch of desirable products at accessible cost, jointly with the improvement in our systems of financial and operational controls, our infrastructure and our information system, and also the contracting of qualified marketing, design and production personnel, and increase of our productive capacity. We cannot guarantee that our capacity to manage our growth will be successful or that it will not adversely interfere in the existing structure. If we are not able to manage our growth in a satisfactory manner, there is a possibility that we could lose market share, which could have an adverse effect for Grendene. Our sales and profitability might be adversely affected if our investments in advertising and marketing, including our licensings, do not produce the intended effects for acceptance and consumption of our products. Considering that our consumers' demand for footwear is highly influenced by the image of our brands, our businesses need substantial investments in advertising and marketing, including the licensing of brands and names of Brazilian and international celebrities and children’s media personalities known domestically and internationally. If such investments do not achieve the effects that we intend for them in terms of increasing the acceptance and consumption of our products, or, further, if we are not capable of maintaining and contracting our licensings, there is the possibility of our sales and profitability being adversely affected. If strategic people leave the company or we lose their services this could adversely affect our business. Our performance depends, to a great extent, on efforts and the skills of the principle executives, who occupy strategic position in our structure and orient various aspects of the conduct of our business. The loss of their services, or the death of any one of these executives, could have an adverse effect for Grendene. Our success in future growth depend, also, on our skill in identifying, attracting and maintaining on our staff other qualified employees and managers. The market in which we work is competitive, and we cannot guarantee that we will be successful in attracting and maintaining such employees and managers.


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4.1 – Description of the risk factors If our brands are used by our competitors without authorization, or if we are prevented from using our brands, there would be a possibility of our profits being adversely affected. Our brands and the design of our products are constantly subject to undue use and violation of our intellectual property rights by third parties. There are falsified products, and products that infringe our intellectual property rights, in the markets in which we operate and in other markets. We are not always successful, especially in other countries, at combating falsification of our products and the infringement of our intellectual property rights. Falsification of our products, and the undue use of our brands, not only can cause adverse effects for our sales, but can also affect the integrity of our own brands as a result of their association with products of lower quality. Also, although we have registry for the great majority of our brands and patents, we cannot guarantee that in the future our competitors may not allege that we are violating their intellectual property rights. In this were to happen, and if as a result we are prevented from manufacturing a given product or using a given brand, this could have an adverse effect for Grendene. Disconnection or loss of services of systems may adversely affect our business. For efficient operation, the Company depends on its information technology and telecommunication systems, and malfunction or loss of operationally of these systems, even if temporary, could have a negative effect on our business. The Company’s systems and those of its subsidiaries all operate digitally, and to prevent problems we maintain a contingency plan which allows for recovery of the entire database and return to normal operation in a period of less than 48 hours (disaster recovery). The database is replicated and automatically updated in two facilities, which are located in different physical environments. All the environments are implemented and operated with the concepts of high availability and virtualization. The whole of the data communication network between the units is, at minimum, redundant, and served by two operators. The internal network at each location is also redundant, with fiber ring links, guaranteeing high availability and performance. Notwithstanding the care taken with these methods and facilities, there is the possibility that situations might occur in which we are unable to restore the services with the speed and quality which has been established for efficient operation of our activities. Our operations might be adversely affected by problems in our manufacturing plants, facilities or means of transport. Grendene develops a large quantity of new products basically through its own design team located in the municipality of Farroupilha in Rio Grande do Sul, and for this it uses advanced computerized systems and collaboration tools. The molds for the injection of the footwear are manufactured in the municipality of Carlos Barbosa in Rio Grande do Sul and from there are sent to our various manufacturing plants located in the municipalities of Fortaleza, Sobral and Crato in the state of Ceará and Teixeira de Freitas in Bahia. The raw materials are acquired by a team also located in the municipality of Farroupilha in Rio Grande do Sul, and delivered directly at our manufacturing plants by independent transport companies. Once the products have been manufactured they are dispatched to consumption centers all over Brazil, but with a significant volume concentrated in the Brazilian Southeast. Inside Brazil, products ready for use, and raw materials, are transported by highway. Exports and imports of raw materials are transported by sea freight, principally through the port of Pecém in the state of Ceará. Adverse events such as fires or other accidents could cause damages to facilities and inventories, interrupting production and distribution of products. Shortages of energy, water or fuel in the public service concession holders and the distributors, and also strikes, pickets and logistics blockages, could also adversely affect the manufacture of products. For all the possible types of adverse event, the Company has insurances contracted and/or contingency plans that minimize the risks referred to. Even so, we cannot be sure that in the future there will be no adverse that might cause stoppage of a manufacturing plant or a means of transport, preventing receipt of raw material and/or dispatch of products to our clients. We have entitlements to federal and state tax benefits, and any cancellation or non-renewal of such benefits could adversely affect our profits. The footwear industry worldwide enjoys various tax incentives and government stimuli which are important for companies’ capacity to compete efficaciously and for their decisions of location of manufacturing plants. These incentives also exist in Brazil, especially for plants located in the Northeastern Region, where the majority of Brazilian manufacturers are located. According to our strategy, we manufacture 100% of our products in Brazil in states of the Northeastern Region, and since the end of the 1990s the company has been the recipient of tax incentives from individual states. Today eleven (11) of its manufacturing units benefit from tax incentive arrangements granted by the states of Ceará (10 plants) and Bahia (one plant). We are holders of federal and state-level tax benefits that give us exemption from or reduction of income tax, and


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4.1 – Description of the risk factors also restitution of part of the amount that we have paid to the State of Ceará as ICMS tax; and we also have presumed credits of ICMS in the state of Bahia and also credits on the export value of our products. All these plants are in the Northeast of Brazil, benefiting from incentives given by the Northeastern Region Development Authority (Sudene). These incentives are given by the federal government and the state governments, and consist of the transfer of funds as matching contributions for the Company’s investments in construction, installation and modernization of new industrial units in the state or region concerned. These incentives are granted only after the Company has proven realization of the investments specified in projects approved by the respective governments, in accordance with the laws that authorize the respective governments to give subsidies for realization of such investments. Even though these are tax incentives given as a result of complying with certain conditions and certain time periods - which, under Brazilian legislation, may not be unilaterally suppressed by the granting governments before completion of the period of the concession – there is the possibility that the Company might suffer the suspension, or even cancellation, of a right or of receipt of a benefit, if the company becomes non-compliant with certain requirements that must be obeyed during their period of fruition, such as: (i) use of the incentive funds in the implementation or modernization that is the subject of the investment; (ii) keeping its operations compliant with all fiscal requirements, especially paying the taxes without arrears; and (iii) annual presentation of certain documents and reports to the competent authorities. Non-compliance with such obligations could result in suspension or cancellation of such tax incentives, and could even oblige the Company and its subsidiaries to pay back the amounts of the incentives received, plus charges, which could have a material adverse effect for the Company. The Tax benefits at the state level, from the state of Ceará, also offer a financing mechanism. Granting of these financings depends on there being a balance in the Industrial Development Fund (FDI) of Ceará. We cannot guarantee that the FDI will have funds available to be passed through to us. In the event of there being no balance of funds in the FDI, this could have an adverse effect for Grendene. Further, we cannot guarantee that the state-level tax benefits will be maintained in practice up to the end of their periods, nor, in the case of state and federal tax benefits, that we will be able to renew them, on favorable terms, after expiry of their present period, nor to obtain new tax benefits when the periods of present benefits come to an end. If the state tax benefits that we hold are challenged in the courts by third parties, for example the Public Attorneys’ Office, or other States, or future governors or other empowered officials of the State of Ceará, and the decision in the courts is unfavorable to us, there is the possibility that we might have the tax benefits cancelled and/or we might even be charged the amount that is the subject of the exemption, reduction and/or financing granted up to the date of such decision (subject to the periods of expiry by limitation of time, etc.), depending on the individual case, which could have an adverse effect for Grendene. Also, we cannot guarantee that the procedure at present adopted by the Company in working with Bradesco S.A. in relation to the payment of the ICMS tax will be maintained in the future, nor that, in the event that it is altered, a procedure will be adopted that includes conditions that are favorable to the Company. There are draft laws before the Brazilian Congress which seek to carry out a wide-ranging reform of the tax system in Brazil. In these draft laws there are proposals for total abolition of tax incentives given by individual states, even if they preserve the incentives currently given up to the end of their period of validity. If such projects are transformed into a change in the Brazilian Constitution or the tax laws, the opportunities for obtaining new state-level tax incentive benefits will disappear, at least in the form of those currently enjoyed by the Company. In this eventuality, there is the possibility of our cash flow suffering a material adverse effect. Further, we cannot guarantee that the tax changes that are approved in such a reform will not be unfavorable to the Company’s business, nor that the proposals for maintaining the tax incentives currently granted up to the end of the period of their current grant will be incorporated into the legislation, nor that the proposals for reduction of the inter-state tax rates will be adopted in accordance with the proposals that are being debated. There is the possibility that all or any of these proposals and draft laws that are currently in discussion in Congress may be altered before they are transformed into Law and may become unfavorable to Grendene’s business. The prices of our raw materials are volatile and an unexpected sharp change in the prices of our raw materials could have an adverse effect. Our principal raw materials are PVC resin and plastifying oils. These raw materials are regarded as commodities, and their prices when sold in Brazil are fixed on the basis of international market prices and in accordance with variations in supply and demand. Historically, the international markets for petrochemical products have alternately undergone periods of limited supply, causing increase in prices, and expansion in production capacity, resulting in excess of supply and reduction of prices. We do not have and will not have control over the factors that affect the variations in the prices of the commodities referred to, and sharp and unexpected variations in the prices of the commodities and in the price of pulp, and also variations in supply and demand in those products, may have a direct impact on the prices of our raw materials and inputs, and could have an adverse effect for Grendene.


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4.1 – Description of the risk factors b) Factors relating to the direct or indirect controlling stockholder or controlling group: We continue to be controlled by the controlling stockholder, and there is always the possibility that his interests might differ from those of the other stockholders. The controlling stockholders hold, directly or indirectly, shares representing an aggregate of approximately 73% of the Company’s voting stock. The other shares directly or indirectly held by the stockholders Alexandre G. Bartelle Participações S.A., Verona Negócios e Participações S.A. and Grendene Negócios S.A. are subject to a stockholders’ agreement dated October 6, 2004, and amendments. For as long as our stockholder Alexandre Grendene Bartelle controls the company, directly or indirectly, he will have the right, without the consent of the other stockholders being necessary, to:

elect the majority of our Board of Directors and dismiss members of the Board;

control our management and our policies;

determine the outcome of the major part of our corporate operations and transactions, and other matters submitted to the stockholders' consideration, including mergers, consolidations and the sale of all or a substantial part of our assets; and/or

decide policies for distribution of dividends, subject to the minimum obligatory dividend specified by law. The interests of the stockholder Alexandre Grendene Bartelle could differ from the interests of the other stockholders of the Company. c) Factors relating to the stockholders: We cannot guarantee the existence of an active and liquid market for our Shares, and there may be limitations on the possibility of sale and purchase of our Shares. In recent years the liquidity of our shares has improved greatly. Our free float is 27%, and we are classified as a mid-cap company, with market value of approximately R$ 5 billion in 2015. We cannot predict to what extent an adverse situation in the Brazilian and international markets, with possible capital flight from the Brazilian equities market, might affect the liquidity of our shares in the future, nor to what extent such a factor might cause a fall in the value of our shares. To minimize this risk, Grendene maintains a very active program of Investor Relations which, among other actions, includes holding 'non-deal roadshows' with local and international investors for the purpose of keeping them well informed about the sector in which the Company operates and, in the case of international investors, about the Brazilian economic context. Also to mitigate this risk, Grendene contracted BTG Corretora to act as market maker for its shares.

R$ 2013 2014 2015

Average daily total volume (ADTV) 8,655,689 5,735,573 5,355,928

The sale of a significant number of our shares by the controlling stockholders would have the possibility of adversely affecting their price. If there were a sale by our stockholders of a significant quantity of shares, or the perception that this might be about to happen, the market price of our shares could be adversely affected. d) Factors relating to the Company’s subsidiaries and affiliated companies: The subsidiaries and affiliated companies operate in the same sector (Consumption: Footwear), and are thus subject to the same risks as Grendene. Note, however, that their operations are very small in relation to the size of Grendene. e) Factors relating to the Company’s suppliers: Our supply chain is made up of various Brazilian and international suppliers of raw materials and other merchandise, importantly including machines and equipment used in our production lines. In general we concentrate our supply in few suppliers for each type of raw material, (i) aiming to increase our significance as a proportion of the supplier's total revenue, thus achieving competitive prices, and (ii) to obtain products and materials developed tailor-made with specific characteristics. In view of the fact that our principal raw materials are considered to be commodities produced in various regions of the world, we believe that although our supply would be adversely affected in the event of an interruption in one of our local suppliers we would be able to mitigate these effects by having recourse to international supply. Grendene has sufficient scale and experience to adopt this solution.


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4.1 – Description of the risk factors f) Factors in relation to the Company’s clients: Default by clients, or non-receipt by the Company, could have a negative effect on the Company’s revenues. This risk arises from the possibility of the Company not receiving amounts arising from sales operations. To attenuate this risk the Company adopts the practice of detailed analysis of the equity and financial situation of its clients, establishment of a credit limit and permanent monitoring debtor balances. There are no clients which individually represent more than 5% of the total of accounts receivable from clients, or of the Company’s revenues. Deficient performance by commercial representatives could have a negative effect on our sales All the sales made in Brazil are made through commercial representatives, including the sales made to large retail chains and specialized stores. We maintain strictly commercial relations with our representatives, who are legal entities whose sales people are not our employees. They operate in specific areas, set by contract, and for the provision of such services they receive commissions based on the total of sales made in their area of operation. Our commercial representatives are not subject to control of time of work during the day, and pay all the costs inherent to their activities. These representatives play a fundamental role in our process of sales, and deficient operation by them could adversely affect our revenues. When there is a need to replace them due to unsatisfactory performance, there is the possibility of litigation taking place that could generate costs for Grendene. In the external market, the sales of our products are made through subsidiaries in the United States, the United Kingdom and Italy, which act as agents or as distributors of our products, depending on the case. In the other countries, usually the sale of our products is made through distributors. In this case, also, when there is a need to replace them due to unsatisfactory performance, litigation and demands for indemnity could occur, that might generate costs for Grendene. The Company is subject to complaints from consumers and to recall of products, which could negatively affect its image, and also could have a material impact on its costs, business, and profits, resulting in an adverse effect for the Company. The Company and its Subsidiaries produce and sell consumer goods, and this makes them subject to the Brazilian Consumer Law. If the Company or its Subsidiaries is held liable in any litigation for civil liability related to its products, or if it should in the future make any recall of its products, this could have a negative impact on the profitability for a period, depending on: (i) the volume of the product in the market; (ii) the reaction of competitors; and (iii) the reaction of its consumers, and there could be significant resulting costs of recall, explanations in the media and with lawyers, and possible payments of indemnities. Even if they are not made liable in a court action, the negative publicity that could take place and be generated in relation to their products and their quality could adversely affect their reputation with present and future consumers, and also their corporate image and that of their brands, which could lead to an adverse effect for the Company, its business, and profitability. g) Risk factors relating to the sectors of the economy in which the issue operates: The footwear industry is sensitive to fall in purchasing power of consumers, and adverse economic cycles. If economic conditions in Brazil and in the other countries that import our products deteriorate, there is the possibility that many of our clients might significantly reduce their purchases and not be able to pay in a timely manner for the products that they acquire. Historically, the footwear market has been subject to cyclical variations and fall in performance when there is a reduction in consumers’ spending. Many factors affect the level of our consumers’ spending in the footwear market, including:

General business conditions;

Interest rates;

Consumer's income, and to a lesser extent the availability of consumer credit;

Taxes; and

consumers’ confidence in future economic conditions. There is the possibility that the purchase of our products might suffer a reduction during periods of recession, and in other circumstances in which the consumer’s income is for any reason lower. Adverse economic conditions in the markets in which we operate could reduce our sales and have an adverse effect for Grendene. (See item 4.2 of this form – Variations in our activities and results vs. indicators of inflation, exchange rate variation and economic growth.) The footwear industry is highly competitive, and there is the possibility that we might lose our position in the market in certain circumstances. The footwear industry is highly competitive and has low entry barriers for new competitors. The principal factors that


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4.1 – Description of the risk factors influence competition in this industry include price, the quality of the product, the design of the product, the image and the prestige of the brand, and the capacity to serve clients in good time. We compete with various Brazilian and international competitors, some of them having access to significant financial resources, and whose brands are recognized by consumers. If one of our competitors achieves a great success in marketing, or a major promotional campaign or a major technological innovation, this could negatively affect our market position. We are unable to guarantee that in such a circumstance we will be capable of reacting in time, and satisfactorily, or that the pressures generated by the competition will not have an adverse effect for Grendene. Unforeseen alterations in consumers’ preferences, which are customary in the footwear industry, might have an adverse effect for Grendene. The footwear industry is subject to rapid alterations in the preferences of our consumers. Consumers’ demand for our products is significantly influenced by the image of the brands, consumers’ receptivity, and, on occasion, by climatic conditions. Our initiatives to strengthen our brands, which include carrying out of market research, launches of new and innovative products, our partners for licensings, use of accessories and active planning of marketing might be unsuccessful. Also we cannot guarantee that consumers will continue to have good receptivity towards our products or that we will respond rapidly enough to the changes in consumer preferences. If we are unsuccessful in introducing products into the market that have good acceptance among consumers, our sales could diminish, which would have an adverse effect for Grendene. Grendene has operated for more than 40 years in the footwear sector and has demonstrated wide experience in the successive launch of successful products and brands. However, occasionally one or other collection of products is not successful, because we have no way of precisely foreseeing consumers' taste, whether the fashion trends that we incorporate into our products will be winners with clients, the economic conditions that will prevail when the new products arrive on the market, and what products the competitors will launch to dispute the same clients that our products seek to serve. When our collections of a given season of the year do not perform well in relation to the competitors Grendene's results are negatively affected. Inflation and the actions of the government to combat it may also contribute significantly to economic uncertainty in Brazil and negatively affect the Company's business. Brazil has in the past gone through periods of high inflation. Since the Real Plan was put in place in 1994, annual inflation, as measured by the Amplified National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA), has fallen significantly. If Brazil were to suffer high levels of inflation again, the country's rate of economic growth could fall, which would lead to lower demand for the Company's products in Brazil. Probably, inflation would also increase some of the Company's costs and expenses, especially those of labor, linked to the adjustment in the minimum wage, and there is the possibility that it might not be possible to pass these through to consumers, resulting in reduction of our profit margins and net revenue. Further, high inflation reduces consumer's available income for discretionary consumption, negatively affecting the demand for footwear, and usually leads to higher domestic interest rates, which could further reduce that revenue of the consumer in the present context of higher total indebtedness of the Brazilian population. Inflation can also reduce investors' interest in the capital markets, which could reduce the price of shares in general, including those of Grendene. Inflationary pressures can also lead to the adoption of government policies to combat inflation, with possible adverse effects for the Company's business. (Quantitative aspects of these risks are described in item 4.2 of this form.) Variations in the exchange rate between the US dollar and the Brazilian currency could reduce Grendene's export capacity. Grendene's operational results are impacted by variations between the Real and the US dollar: They are benefited when the Real depreciates against the US dollar and are harmed when the Real appreciates against the dollar. Basically appreciation of the Real against the dollar reduces the competitiveness of our products in international markets and reduces our margins on exports. In recent years, approximately 22% of our revenues have come from exports. h) Factors relating to regulation of the sectors in which the Issuer operates: Changes in environmental laws and regulations could have an adverse effect on the business of the footwear industry. The companies of the footwear industry, including Grendene, are subject to a rigorous environmental legislation in the federal, state and municipal spheres in relation, among other factors, to the elimination of solid wastes and disposal of liquid, industrial and sanitary effluents. Companies in these industries need authorizations from government agencies for


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4.1 – Description of the risk factors some of their activities. In the event of violation of or non-compliance with such laws, regulations, licenses or authorizations, industrial companies can be subject to administrative sanctions, such as penalties or repeal of authorizations, or they (including their senior managers) may be subject to criminal sanctions. They may, also, be obliged to pay substantial costs of environmental correction. The governmental agencies or other authorities may also issue new more rigorous rules or seek more restrictive interpretations of the existing laws and regulations, and such developments could oblige industrial companies in the footwear sector, including the Company, to make additional expenditure on environmental adaptation. Any action of this type by the governmental agencies could negatively affect the business of the footwear industry, and have an adverse effect for Grendene. We could be adversely affected: (i) if any applications for renewal of environmental licenses are made out of time; or (ii) by absence of insurance for coverage of environmental damage.

All our operations are characterized as having average pollution potential, under Conama Resolution 237/1997 and Law 10165 of December 27, 2000. However, our industrial plants are required to obtain and maintain environmental licenses, to operate. Failure to obtain these licenses or to keep them updated could subject us to administrative penalties and in extreme cases could even result in our activities being stopped if we do not cure any deficiencies indicated by the regulatory bodies. Since, in management’s assessment, the industrial processes of Grendene’s units have environmental aspects of low risk – the most significant aspects have the necessary operational controls, and the raw material is 100% recyclable (PVC offcuts are re-used in their entirety in the productive process) – and since all the manufacturing units have processes for control of emission of effluents and emissions into the atmosphere and reduction of solid wastes, we do not contract insurance for coverage of environmental damages that might be caused by the operation of each one of our industrial plants. In the event of claim events involving environmental damage, there is the possibility we might be obliged to make substantial expenditure to apply corrective environmental measures, and also suffer penalties in the administrative and judicial sphere, which could have an adverse effect for Grendene. List of licenses maintained:

Unit Number of license or certificate Issuing body Type of license or certificate Valid until

Fortaleza, CE Operational License (LO) Nº 631/2013 Semace, CE Environmental Operational License Oct. 10, 2017

Fortaleza, CE Federal Technical Certificate – Registry Nº 339782 Ibama Ibama Compliance Certificate Mar. 31, 2017

Sobral, CE Operational License (LO) Nº 295/2016 Semace, CE Environmental Operational License May 11, 2018

Sobral, CE Federal Technical Certificate – Registry Nº 69684 Ibama Ibama Compliance Certificate Mar. 31, 2017

Crato, CE Operational License (LO) Nº 987/2014 Semace, CE Environmental Operational License Dec. 10, 2017

Crato, CE Federal Technical Certificate – Registry Nº 339795 Ibama Ibama Compliance Certificate Mar. 31, 2017

Farroupilha, RS Operational License (LO) Nº 07207 / 2012-DL Semace, CE Environmental Operational License Nov. 21, 2016

Farroupilha, RS Federal Technical Certificate – Registry Nº 71447 Ibama Ibama Compliance Certificate Mar. 31, 2017

Teixeira de Freitas, BA Operational License (LO) Nº 5992/2013 Semace, CE Environmental Operational License Sep. 26, 2018

Teixeira de Freitas, BA Federal Technical Certificate – Registry Nº 2455989 Ibama Ibama Compliance Certificate Mar. 31, 2017

Changes in the tax laws could adversely affect the business of the footwear industry. All our products are manufactured in Brazil in our plants located in the Northeast, mainly in the state of Ceará. In Brazil we maintain approximately 24,000 employees, and we are thus subject to Brazilian employment legislation, which is complex. This region has serious climatic problems that make primary activity difficult, which has, historically, caused major social problems. To reduce these problems the federal government and the governments of the states have tax incentive policies to encourage industrialization of the region and Grendene fulfills the requirements for receiving these incentives, which are important for its profit. A large portion of our revenue (approximately 78%) is from the Brazilian market, and is thus subject to the Brazilian tax legislation, which is no less complex; and finally, the greater part of the consumption of footwear in Brazil takes place in the Southeast region (broadly centered on Rio de Janeiro, São Paulo and Minas Gerais), and the products shipped to other states (different states from those where the products are manufactured) are subject to legislations that regulate inter-state taxation. Changes in the rules and legislation governing tax, employment relationships, social security and tax incentives could negatively affect demand, and the costs in the footwear sector, and those of Grendene's business.


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4.1 – Description of the risk factors i) Factors relating to the foreign countries where the Issuer operates: Restrictive measures imposed by importer countries to reduce trade in footwear could affect the Company's business, increasing the cost of its products or reducing its capacity for exportation. The Company is a producer of footwear that supplies the Brazilian domestic market and various foreign markets. The Company's exports face the competition of other footwear producers and the restrictions imposed by importing countries in the form of quotas, taxes on merchandise, tariffs or increases in import taxes. Any one of these factors could increase the costs of the products and make them less competitive or prevent the Company from selling them in those markets. There is no guarantee that the importer countries will not impose quotas, taxes on merchandise, or tariffs, not that they will not increase import taxes. Grendene maintains the leading position in the exports of Brazilian footwear for the 13th year running – 37% of Brazilian footwear exports (in terms of number of pairs) in 2015 (40.3% in 2014 and 41.1% in 2013), and its products are sold in more than 100 countries in the five continents. Any material change in the political/economic environment of one of those countries, or of the region where they are located, could affect sales in those locations.


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4.2 – Description of the principal market risks

In the normal course of our business, we are exposed to various general risks that inherent to our activities, which can influence our operational results, our financial situation or our future outlook, since changes in the economic situation of Brazil, such as fiscal, exchange rate, monetary or other policies, adopted by the present or future federal government administrations, could adversely affect our activities through, for example, economic slowdown, increase in interest rates, increase of inflation and increase of risk perception in other countries. The business model adopted by Grendene envisages operation in markets affected by fashion where the Company, as a competitive differential, regularly presents a large quantity of new models for each period. Each model offered by the Company is part of a collection the average life of which is approximately 90 to 180 days. Thus, each quarter, Grendene presents new collections, proposing to the market a new basis for prices (for each new collection), which mitigates the effect of inflation. In this business model, any alterations of costs are passed through to the final prices whenever the demand for these products and consumers’ purchasing power permits. Thus, inflation affects our result, affecting the income that the consumer has available for consumption of our products. Our principal inputs are commodities the prices of which are expressed in United States dollars in the international market. The exchange rate influences our costs to the extent that it affects the prices of these commodities in Reais, when their prices are converted into Reais. However, this is not a linear relationship, since the price of commodities in dollars itself varies in accordance with supply and demand in the international market (when the Real appreciates, the price of commodities in Reais is cheaper, but in these cases there is also usually a variation in the prices of commodities in dollars compensating a part of this effect). At the same time, the exchange rate affects our exports, since the great majority of our costs are in Reais. Interest rates do not directly affect the Company’s operational result, only the final value of Financial Revenue (expenses). The Company maintains a significant balance in cash and cash equivalents and cash investments (short-term and long-term), which on December 31, 2015 was R$ 1.282 billion. These funds are basically invested in the financial market, yielding interest at close to the Selic rate. Any variations in interest rate practiced in the market will affect the remuneration of these funds. This table gives the variations for a list of items:

Year-on-year change 2013 2014 2015

Change in Net sales revenue, % 16.2% 2.1% (1.4%)

Change in operational profit (Ebit), % 10.0% 0.2% 13.7%

Change in Net profit, % 1.1% 13.9% 22.1%

Change in average price per pair in the domestic market (1.9%) 4.9% 3.8%

Change in average price (in Reais) per pair in export market 5.8% 10.0% 29.5%

Change in average price (in USD) per pair in export market (4.1%) 0.8% (8.4%)

Change in average price per pair (in Reais) – all sales (0.2%) 5.8% 9.9%

Change in average COGS (in Reais) – all sales 2.2% 6.7% 6.8%

Exchange variation (end-of-period rates – December 31) 14.6% 13.4% 47.0%

Exchange variation (average rate for the year) 10.4% 9.1% 41.5%

IGP-M inflation index 5.5% 3.7% 10.5%

IPCA inflation index 5.9% 6.4% 10.7%

Real GDP growth (Brazil) 3.0% 0.1% (3.8%)

Non GDP growth (Brazil) 10.6% 7.0% 3.8%

Total number of pairs sold (thousands) 216,195 204,944 180,400

Change in total number of pairs sold 16.8% (5.2%) (12%)

Number of pairs sold in domestic market 165,667 152,751 134,474

Change of number of pairs sold in domestic market 18.6% (7.8%) (12.0%)

Number of pairs exported 50,528 52,193 45,926

Change in number of pairs exported 11.4% 3.3% (12.0%)

Sources: Brazilian Central Bank, FGV, IBGE, Grendene.


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Financial instruments The principal financial instruments are: Cash and cash equivalents: These are classified in the category ‘Loans and receivables’ and are presented at their market value, which is equivalent to their book value on the reporting date. Cash investments: These include the categories: ‘Investments held to maturity’ - which are measured at amortized cost by the effective interest method; and ‘Financial assets at fair value through profit or loss’ - which are measured at their fair value. Loans and financings: These are classified in the category ‘Financial liabilities measured at amortized cost’ by the effective interest method, and accounted for at their contractual values. The market values of these loans and financings are close to their book value on the reporting date. On December 31, 2012, 2013, and 2014, the values of the principal financial instruments of the Company and its subsidiaries were as follows:

R$ '000 Valuation (Book value, Fair value)

2013 2014 2015

Financial assets

Cash and cash equivalents 39,360 26,324 21,285

Cash investments (*) 694,605 969,654 1,260,595

Derivatives - 3,067 -

Financial liabilities

Loans and financings 117,736 171,357 212,825

Derivatives 860 - 4,142

(*) The Company measures its financial instruments at fair value through profit or loss, as required by Technical Pronouncement CPC 40–R1 (IFRS 7) – Instrumentos Financeiros: Evidenciação (Financial instruments: Disclosures), as items of Level 1 in the Fair Value Hierarchy (Quoted prices – Unadjusted – In active markets for identical assets or liabilities).

Derivative financial instruments The Company and its subsidiaries maintain transactions in the following derivative instruments: Transactions with derivative foreign exchange instruments Short or long positions of USD contracts on the BM&F. This table shows the positions at December 31, 2012, 2013 and 2014, with the nominal and market values.

Item Reference value (notional) Reference value (R$ )

Balance receivable (payable) / Fair value

Currency 2013 2014 2015 Currency 2013 2014 2015 Currency 2013 2014 2015

Futures contracts:

Short position

Foreign currency US$ 50,000 55,000 54,000 R$ 119,071 146,739 216,128 R$ (860) 3,067 (4,142)

Total US$ 50,000 55,000 54,000 R$ 119,071 146,739 216,128 R$ (860) 3,067 (4,142)

The objective of the strategy of contracting these transactions is protection of the Company’s sales revenue and financial assets, and those of its subsidiaries that are subject to exchange rate exposure. These instruments are used for the specific purposes of protection, and their portfolio consists of future sales of US Dollars, through financial instrument for the purpose, such as: sale contracts on the BM&F, contracts for ACC (Advances on exchange contracts) and ACEs (Advances on Delivered Shipping Documents).


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In the sales transactions on the BM&F the impact on the cash flow of the Company and its subsidiaries occurs through the adjustments for the value of the US dollar exchange rate up to the date of settlement of the contracts. Sensitivity analysis for variations in interest rates To ascertain the sensitivity of the indexors of the cash investments and loans to which the Company had exposure on base-date December 31, 2015, three different scenarios were defined, and a sensitivity analysis to variations in the indicators of these instruments was prepared. Based on the projection of the indexor of each contract for the year 2015 (‘probable’ scenario), the results of decreasing variations of 25% and 50% were calculated for financial investments – and of increasing variations of 25% and 50%, respectively, for loans. The scenarios were prepared leaving out of account the probable flow of cash in payments of loans and redemption of investments. The yields arising from the financial investments, and the financial expenses arising from the loans and financings of the Company, are affected by variations in interest rates, such as the TJLP, and indexors such as the IPCA, IGP-M and the CDI. The table below shows the open positions on December 31, 2015, with nominal values and interest of each instrument contracted:

REDUCTION IN FINANCIAL REVENUES INCREASE IN FINANCIAL EXPENSES

References for financial revenues

Interest on financial investments

References for financial liabilities Rates charged on Proapi and

Provin financings

CDI % IPCA TJLP

Probable scenario (Book value) 14.14% 10.48% 150,671 7.00% 1,652 Possible scenario – 25% 10.61% 7.86% 120,013 8.75% 2,065 Remote scenario – 50% 7.07% 5.24% 89,295 10.50% 2,477

This table shows the impact on each projected scenario, for a position with maturity on January 31, 2016. Reference values Short position in US$ R$ /US$ exchange rate Value – R$ Impact – R$

Probable scenario (Book value) 54,000 4.0024 216,128 (4,142) Possible scenario – 25% 54,000 5.0030 270,162 (54,034) Remote scenario – 50% 54,000 6.0036 324,194 (108,066)

We observe that the objective of these transactions is to hedge assets, and that this sensitivity analysis has the objective of showing only the effect on the variations of the exchange rate on the derivatives transactions, and the variations of these transactions shown here are compensated in whole or in part by equivalent variations in the assets that the hedge seeks to protect and the final net effect will be very small.


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4.3 - Material non-confidential legal, administrative or other proceedings The Company has no legal, administrative or arbitration proceedings that are not secret and which represent risk or which are material for the Company's business or that of its subsidiaries, and also does not have any subjects of a tax or civil nature that require disclosure. The Company does have legal actions of an employment-law, tax or civil nature, involving a risk of loss classified by management as 'possible', based on the assessment of its legal advisors, for which no provision has been made. This table shows a breakdown of them with estimated figures:

R$ ’000 Dec. 31, 2013 Dec. 31, 2014 Dec. 31, 2015

Tax

Social security (INSS) 383 383 383

PIS and Cofins taxes 672 672 672

ICMS tax 10,765 10,765 -

Employment-law cases 2,476 3,176 7,057

Civil cases 192 3,634 11,362

Environmental cases - - 500

Total 14,488 18,630 19,974

On December 31, 2015, the Company was a party in the following actions relating to tax:

Case No 0001648-57.2012.4.05.8103 (INSS)

a) Court 18th Federal Court – Ceará State

b) Instance 2nd instance

c) Date of filing August 10, 2012

d) Parties in the case Plaintiff Grendene S.A. / Defendant: Federal government

e) Amounts, goods or rights involved

R$ 534,161.42 on August 10, 2012

f) Principal facts

Ordinary action claiming nullity and return of the amounts paid by the tax posting subject of NFLD Notice 35.612.86-4 in the amount of R$ 383,122.47. Posting grounded on the fact that the amount paid for medical assistance services to employees should be included in the 'contribution salary'. Judgment given in favor, but subject to re-examination by the 5th regional Federal Appeal Court (TRF5). Appeal has been presented.

g) Chances of loss, assessed

Remote.

h) Analysis of the effect in the event of losing the case

No impact. The amount disputed in the action has already been paid to the federal government, which will repay the amount paid in the event of the actions being successful. However, there is the possibility of losers' fees being ordered.

i) Amount provisioned No provision.


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4.3 - Material non-confidential legal, administrative or other proceedings

Case No. 13312.000366/2009-53 (PIS and Cofins)

a) Court Administrative / 4th Panel of the delegate office of the Brazilian Federal Revenue Service for Judgment in Fortaleza - Ceará

b) Instance 2nd instance – Administrative Tax Appeals Council (CARF / Federal District)

c) Date of filing June 16, 2009

d) Parties in the case Brazilian Federal Revenue Service and Grendene S.A.

e) Amounts, goods or rights involved

R$ 9,281,137.03 on January 28, 2013

f) Main facts

This administrative proceeding refers to the challenge filed on June 16, 2009 to a tax infringement notice for supposed non-payment of PIS and Cofins Taxes on import tax payable on various payments made in the period May 1, 2004 to June 30, 2006. In November 2012 judgment was given partly in favor, reducing the amount of the infringement notice to R$ 671,813.57. This decision is to be reviewed by the Tax Appeal Administrative Council. Voluntary Appeal presented.

g) Chances of loss, assessed

Remote, in relation to the categories 'rights of authorship', 'brands and patents' and 'software', which correspond to approximately 70% of the value of the infringement notice. Possible, in relation to approximately 30% of the amount of the infringement notice in relation to the other headings (fairs and exhibitions, consultancy, research and development, technical services).

h) Analysis of the impact in the event of losing the action

The economic impact of the case is limited to approximately 7.2% of the value attributed to the infringement notice, without losers' fees, because this is an administrative case.

i) Amount provisioned No provision has been made.


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4.4 – Non-confidential court, administrative or arbitration proceedings in which the adversary parties are managers, former managers, controlling shareholders, former controlling shareholders or investors There are no court, administrative or arbitration proceedings in which the adversary parties are present or former members of the Board of Directors or of the Executive Board, present or former controlling stockholders, or investors of the Company or of its subsidiaries.


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4.5 – Material confidential proceedings There are no material proceedings being held in secret in which the Company, or any of its subsidiaries, is a party.


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4.6 – Non-confidential court, administrative or arbitration proceedings that are repetitive or connected, and significant in aggregate There are no non-secret court, administrative or arbitration proceedings that are repetitive or connected and material in aggregate, either of the Company or of its subsidiaries.


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4.7 – Other material contingencies There are no other material contingencies, neither of the Company, nor of its subsidiaries.


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4.8 – Rules of the origin country and of the country in which the securities are maintained in custody Not applicable to the Company.


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5.1 – Risk management policy a. If the issuer has a formalized risk management policy, state the body which approved it and the date of its approval, and, if not, the reasons why the issuer did not adopt a policy Management considers the risks described in items 4.1 largely to be risks inherent to its business model, for which it does not have a formal management policy. The management of these risks probably would result in very high costs in the form of restrictions on being able to take opportunities of investment in the sector and in the country. However, for some of these risks mitigation measures are adopted already described in item 4.1, when applicable. b. State the risk management policy objectives and strategies, if any, including:

i. The risks against which protection is sought Not applicable to the risks described in 4.1. ii. The instruments used for protection Not applicable to the risks described in 4.1. iii. The organizational structure of management of risks Not applicable to the risks described in 4.1. c. Appropriateness of the operational structure and the structure of internal controls for verifying the effectiveness of the policy adopted. Not applicable to the risks described in 4.1. We additionally state that the Company does not have a specific organizational structure for management of risks. It does not have committees of any type (neither an audit committee, nor a risk committee, nor a remuneration committee, nor does it have the post of Compliance Director nor an independent internal auditing body). It also does not formally adopt the principles recommended by the COSO, and because it is listed only in Brazil, on the Novo Mercado of the BM&F, it is not subject to the rules of the Sarbanes-Oxley Law. Notwithstanding the non-existence of a formal policy of management of these risks, they were initially amply identified in 2004 when the Company was listed in the Novo Mercado segment of the Bovespa, and published in the listing prospectus. As from 2008 when it adopted IFRS rules, and when CVM Instruction 480 of December 7, 2009 instituted the Reference Form, this identification of risks and management procedures began to be used manually in the Reference Form itself, which is reviewed by the Executive Board and submitted for consideration by the Board of Directors and the Audit Board. Further, the Company presents jointly with its financial statements its Explanatory Note 19 as determined by CVM Normative Instruction 475/08, which is reviewed by the independent auditors and the Executive Board and approved by the Board of Directors, jointly with the financial statements, and is then submitted for approval to the AGM.


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5.2 – Description of the market risks management policy a. If the Issuer has a formalized market risks management policy, state the body that approved it and the date of its approval, and, if it does not, the reasons why the Issuer has not adopted a policy. The Company does not have a formalized market risks management policy because it believes that the identification of the risks to which its businesses are exposed, the reflection on them by the management bodies (including the Executive Board, the Board of Directors and the Audit Board) and the description of these risks, and also the practices adopted in their management in the Reference Form and in an Explanatory Note (Note 19) which is an integral part of the financial statements (and thus is evaluated by the external auditors), are together sufficient and meet the same requirements as a formal policy. As stated in item 5.1 c, the Prospectus for the listing of the Company, published in 2004, was the first map of risks systematically identified by the Company, and this has since then updated as its business evolved. b. Objectives and strategies of the market risks management policy: The Company is very conservative with risks not inherent to its principal business, for which reason market risks are identified and eliminated or significantly reduced. a) Risks from which protection is sought The Company is exposed to credit risk and market risk relating to adverse changes in interest rates, foreign exchange rates and commodities price risk. We seek protection against such risks, as described in item ‘ii’. b) Hedging strategy The Company maintains transactions in financial instruments, the risks of which are managed through strategies of financial positions and systems to limit their exposure. Credit risk: Among the procedures adopted to minimize potential financial and commercial risks, we highlight: Selectiveness in choosing financial institutions; analysis of the credits granted to clients; and establishment of limits on sales. On December 31, 2013, 2014 and 2015 no client individually represented more than 5% of the total of the Company’s receivables. The risk management criteria of the Company and its subsidiaries, for the financial investments, establish that the financial resources available must be kept, substantially, in first-tier banks (considered in this case to be the 10 largest banks in Brazil by assets), in a manner that is diversified in financial instruments linked to a basket of indicators comprising the CDI, fixed rates or inflation-adjusted. Cash and cash equivalents, and cash investments – The Company’s exposure to counterparty risk in financial institutions is as follows:

R$ '000 Consolidated

2013 2014 2015

Cash and cash equivalents

Cash balances 25,531 13,778 6,777

Cash investments 13,829 12,546 14,508


Cash investments

Securities at fair value through profit or loss 119,548 379,572 390,004

Securities held to maturity 575,057 590,082 870,591

Total, cash investments 694,605 969,654 1,260,595

Total 733,965 995,978 1,281,880

The cash balances are, substantially, bank deposits. Cash investments classified as cash equivalents are short-term investments, with maturities of three months or less as from the acquisition date. Cash investments are classified as ‘securities available for sale’, ‘securities at fair value through profit or loss’, and ‘securities held to maturity’, in accordance with the Company’s investment strategy, and they have immediate liquidity.


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5.2 – Description of the market risks management policy Accounts receivable: These arise directly from the Company’s trading operations. They are recorded at their original values, subject to foreign exchange and monetary updating, estimated losses for doubtful settlement, discount for punctual payment, and adjustment to present value. The exposure to credit risk with clients is as follows:

R$ '000 Book value / Fair value

2013 2014 2015

Accounts receivable from clients 900,048 907,344 854,991


2013 2014 2015

Receivables not yet due 921,907 919,348 853,508

Receivables more than 30 days past due 22,319 17,525 18,963

Receivables from 31 to 60 days past due 3,372 4,345 3,475

Receivables from 61 to 90 days past due 708 4,454 4,085

Receivables more than 91 days past due 7,493 10,562 19,848

Sum 955,799 956,234 899,879

Provision for doubtful receivables (3,489) (5,755) (6,444)

Provision for discounts for punctual payment (39,013) (27,054) (24,373)

Adjustments to present value (13,249) (16,071) (14,071)

Total 900,048 907,344 854,991

For more details see Note 7 (Accounts receivable from clients) of the financial statements. Interest rate risk: This risk arises from the possibility of the Company suffering losses as a result of any fluctuations in interest rates that reduce the gain on its investments in the financial market, since these investments are much higher than the amount of the Company’s debts. The Company continually monitors the volatility of market interest rates. Aiming to reduce the possible impacts arising from variations in interest rates, the Company and its subsidiaries adopt the policy of keeping their funds invested in instruments linked to a basket of indicators such as the CDI rate, fixed rates and inflation correction. Exchange rate risk: This risk relates to the possibility of changes in exchange rates, affecting the financial expense (or revenue) and the debtor (or creditor) balance of contracts that have a foreign currency as indexor. Two types of position constitute a natural hedge, protecting the company from exchange rate variations: accounts receivable originating from exports from Brazil, and cash investments, and investments in general, outside Brazil. For the balance between assets and liabilities subject to the risk of exchange rate variation, the Company and its subsidiaries evaluate their foreign exchange exposure and contract an additional derivative financial instrument as a form of protection if necessary. On December 31, 2015 the Company had advances on export contracts of US$ 23,315 (US$ 17,725,000 in 2014 and US$11,627,000 in 2013), compatible with the external market sales programmed under contracts becoming due. There are no other financings or loans contracted in or indexed to any foreign currency. Commodity price risk: This risk is related to the possibility of variation in the price of raw materials and other inputs used in the process of production. As a result of its using commodities as a raw material, there is a risk of the Company's cost of goods sold being affected by changes in international prices of these materials. To minimize this risk, the Company permanently monitors the oscillations of price in the Brazilian and international markets and when appropriate uses formation of strategic inventories to maintain its commercial activities. There are no liquid markets allowing for hedge transactions for these raw materials. The maximum limits of net exchange rate exposure consist of the sum of: (i) bank balances in foreign currency held outside Brazil; (ii) financial investments held outside Brazil; (iii) balances of accounts receivable on foreign exchange transactions to be contracted; (iv) up to 25% of the forecast of exports (orders in the order book not yet shipped), equivalent to approximately 90 days of forecast exports, less (i) balances of supplies held in foreign currency, (ii) imports in progress and (iii) ACCs (Advances against exchange contracts). These risks are monitored daily and administered through internal controls which aim to demonstrate the limits of exposure and adjust them to be appropriate to the Company’s risks management policy. The use of other forms of exchange rate protection is not permitted without express authorization of the Company’s managers. Up to the present moment, the Company has not authorized the use of other forms of exchange rate protection that are different from those listed in the previous paragraph.


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5.2 – Description of the market risks management policy The exchange rate protection transactions are usually made on the BM&F through specialized brokers, carried out without imposition or acceptance of margins. The amount of the guarantee on December 31, 2015 is R$ 64,982 (R$ 35,010 at end-2014 and R$ 33,223 at end-2013), normally comprising financial investments of the Company in public securities, obeying limits and exposures to exchange rate risk, as defined in the risk management policy of its counterparties. It is important to highlight that these transactions are associated with sales receipts and financial assets in foreign currency, which are, similarly, related to the variation in the exchange rate, compensating or offsetting any gains or losses found. The fair value balances payable presented on December 31, 2015, in the amount of R$ 4,142, and on December 31, 2013, of R$ 860, are classified in Other Accounts Payable and the amount receivable of R$ 3,067 on December 31, 2014 is classified in Securities Receivable. iii) Instruments used for protection of value (hedge instruments) The instruments used for hedging of value consist of sales of future United States dollars, through financial instruments made for the purpose, such as: Short contracts on the BM&FBovespa, ACC (Advances against exchange contracts) and ACEs (Advances on delivered shipping documents). The foreign exchange hedge transactions are usually made on the BM&FBovespa through specialized brokers, without the use of margins. The guarantee usually consists of cash investments belonging to the Company, in public securities, subject to limits and exposures to exchange rate risk, as defined in its counterparties' risk management policies. iv. Parameters used for management of these risks To reduce the net effects of exposure of its business the managers may negotiate future contracts for sale of USD on the BM&F up to the maximum limit defined by the sum of the following items: (i) bank balances in foreign currency held outside Brazil; (ii) financial investments held outside Brazil; (iii) balances of accounts receivable (denominated in USD) of exchange transactions to be contracted; (iv) up to 25% of the forecasts of annual exports equivalent to approximately 90 days of forecast exports (normally corresponding to orders in the order book and negotiations for sales in progress), less: (i) balances of suppliers held in foreign currency; (ii) imports in progress; and (iii) ACCs (Advances against exchange contract). These risks are monitored daily and administered through internal controls that aim to demonstrate the limits of exposure and adapt them to the Company’s risk management policy. v. Does the Issuer operate financial instruments with objectives other than hedging, and if so what are those objectives We do not use financial instruments for any other purpose than hedging (protection of value). vi. Organizational structure of control of risk management The activities of management of risks constitute a continuous activity that follow the Company’s management practices, under the administration of its Chief Officers. The administration of these risks is carried out based on the reports of internal controls prepared by the financial management. The financial investments and transactions in sales of future USD contracts on the BM&F are approved by the CEO of the Company. A report of financial investments by type of instrument, of FX exposure and of contracts on the BM&F is submitted quarterly to the Board of Directors and the Audit Board. c) Appropriateness of the operational structure and internal controls for verifying the effectiveness of the policy

adopted Management believes that the environment of internal controls that the Company maintains has a high degree of confidence for its type of activity and volume of operations, and is properly prepared to prevent frauds and errors. The level of automation and integration of the systems ensures efficiency and safety of the processes. However, efforts are constantly being made to improve the processes and controls, always with a view to security and mitigation of risks in the execution of the routines and gains in competitiveness.


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5.3 – Description of the internal controls. In relation to the controls adopted by the issuer to ensure preparation of reliable financial statements, indicate: a. Principal internal control practices and degree of efficiency of those controls, indicating any imperfections and the measures taken to correct them. The Company has integrated management systems (management software) which since they are parameterized ensure a reasonable standardization in its transactions and in the records of them. To ensure integrity for its systems the Company maintains a rigid control of accesses to them and of traceability of transactions. The control of access passwords and of user profiles is systematically evaluated by the managers and submitted to tests by the external audit. The internal management reports and the systematic accompaniment of indicators and results by the managers responsible, accompanied by the chief officers, provide a reasonably secure controlled environment. Management is responsible for establishing and maintaining internal controls that are adequate in relation to the Company’s financial reports. In management’s assessment the Company maintains adequate and appropriate internal controls on the financial reports and seeks their continuous improvement. b. The organizational structures involved. The Company’s Executive Board, composed of the CEO, the deputy CEO and the Chief Finance and Investor Relations Officer jointly with the non-statutory directors, jointly with the managers subordinated to them, are the persons responsible for accompaniment of the indicators and results of the Company’s principal business processes. The Financial Directorate – the principal area responsible for the financial statements – comprises: the Controller’s Office for the South; credit and legal management; treasury management; and the Controller’s Office for the Northeast, and comprise the principal officers responsible for preparing the financial statements, and for adoption of good internal control practices and obedience to the applicable accounting rules. The Statutory Directors, coordinated by the chair, are responsible for the establishment, review and maintenance of the Company’s internal control policies, and also for the management of material risks and execution of the annual auditing plan, including any aspects related to appropriation and review of the financial statements, reporting to the Board of Directors. c. Is the efficiency of the internal controls supervised by Issuer’s management, and how? Please indicate the job positions of the persons responsible for said accompaniment. The systematic accompaniment of the business indicators and financial reports is carried out by the Executive Board. The chief officers take part in the meetings of the Board of Directors and are questioned by them about the results. The Chief Finance and Investor Relations Officer takes part in the meetings of the Audit Board answering their questions and following up with the suggestions and recommendations received. He also takes part regularly in meetings with the external auditors for evaluation of their work. Managers receive regular reports (daily, weekly, monthly and quarterly) on the indicators and business results. Monthly, the results are analyzed for comparison with expectations and the results obtained in the same period of the previous year and presented in meetings between managers and directors for discussion. The result of all the works planned for the business year is reported through reports to the Board of Directors, Chief Officers and the Managers involved and is accompanied on a monthly basis. d. Deficiencies and recommendations on the internal controls presented in the detailed report prepared and submitted to the issuer by the external auditor, in accordance with the regulations issued by the CVM dealing with reporting of an exercise of the external auditing activity. The independent auditors carried out the work of auditing and evaluating the accounting system and internal control system of the Company in connection with the audit of the financial statements of the business years ended December 31, 2015 and 2014, with the objective of determining the nature, appropriateness and scale of the application of the audit procedures, but not for the purposes of expressing a specific opinion on those internal controls. In its detailed report related to this work at December 31, 2015 the auditors identify what in their opinion constitutes a significant deficiency of internal controls, related to the recognition of sales revenue out of accordance with the accrual principle of accounting. This situation arises from sales carried out at the end of the business year on the CIF basis (cost, insurance and freight borne by the Company), the effective delivery of which took place at the beginning of 2016. The external auditors suggest that management should adopt controls that make it possible to identify the date on which the transfer of the sales risk to the clients took place, and carry out recognition in accordance with Brazilian accounting practices.


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5.3 – Description of the internal controls. e. Comments by the directors on the deficiencies indicated in the detailed report prepared by the external auditor and on the corrective measures adopted. In the meeting for assessment of the report, management made the following comments:

1) All of the Company’s production is made after receipt of orders for the products, that is to say, the company adopts the system of production by purchase order.

2) The Company produces daily and ships a large quantity of products already ordered by its clients, and is capable of exceeding dispatch of more than one million pairs of shoes in a single day.

3) These products are grouped according to the orders and transported by hundreds of trucks of independent transportation companies which deliver them in all the regions of the country to approximately 15,000 different clients and approximately 65,000 points of sale.

4) There are no concentrations of orders in specific clients, and as already stated no client represents more than 5% of the Company’s revenue; individual orders represent even less.

5) Individually, each order or even each item of cargo transported by a truck represents an insignificant value compared to the total of the Company’s revenues and thus, the risk of any adverse event or state of affairs that might prevent the delivery of the products affecting this revenue is equally insignificant. In management’s assessment the probability of some significant part of revenue recognized not becoming a reality is insignificant. Also, all cargos are insured.

6) As demonstrated to the auditors, all the orders were in existence on the date of shipment, the products were shipped and there were no significant returns or refusal of receipt of them on the part of the clients.

7) The invoices corresponding to the orders were settled by the clients within the due dates without occurrence of default or abnormal delays.

8) All the taxes on these revenues have been recognized and paid. Since these characteristics and the impacts that these amounts would have on the Company’s result are very small, the Company has assessed that the costs in terms of internal controls necessary to control these effects would not be advantageous and would add nothing to the quality of the information. However, the Company will seek to improve its control system to provide better evidence of all the points highlighted and obtain even further confirmation of the realization of the revenue that has been recognized. In Management’s assessment, the other deficiencies reported by the auditors do not present probability or magnitude in relation to the distortions that could arise in the financial statements. In the last business year there were no significant alterations in the principal market risks to which we are exposed, nor in the monitoring of the risks adopted by the Company.


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5.4 – Significant alterations In the last business year there have been no significant alterations in the principal market risks to which we are exposed, nor in the monitoring of the risks adopted by the Company.


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5.5 – Significant alterations Capital management The principal objective of capital management is to ensure continuity of the Company’s business, maintaining a policy of low level of leverage, thus protecting its capital from oscillations in the economic policy of the government, maximizing value for the shareholder. In its capital management, the Company both manages its capital structure and adjusts it in response to changes in the economic conditions of the country. To maintain or adjust the capital structure, the Company may adapt the policy of payment of dividends to the shareholders. The Company’s dividend policy may include the tax incentives related to the Provin and Proapi programs in the basis for calculation of dividends, provided that there is no impact on the objectives, policies or processes of the Company’s capital management. For 2016 the dividends policy is referred to in item 3.9. There were no events causing change to it in the business years ended December 31, 2013, 2014, and 2015.


2013 2014 2015


Cash investments 694,605 969,654 1,260,585

(–) Loans and financings, short and long term (117,736) (171,357) (212,825)

Net financial position 616,229 824,621 1,069,045

We now present the Company’s exposure to credit risk and liquidity risk: b) Liquidity risk: The Company maintains balances in cash investments that can be redeemed at any moment to cover any mismatches between its cash flow and the maturity date of its contractual obligations. In management's opinion, this makes the risks of liquidity insignificant. This table will help the reader assess the risk of shortage of funds for payment of debts (substantially, loans and financings):

R$ ’000 2013 2014 2015

Up to 1 year

1 to 9 years

Total Up to 1

year 1 to 9 years

Total Up to 1

year 1 to 9 years

Total

Financing of fixed assets 474 2,241 2,715 500 49,981 50,481 10,479 51,172 61,651

Working capital 97,122 - 97,122 95,800 - 95,800 126,580 - 126,580

Financings – Proapi and Provin 4,313 13,586 17,899 3,267 21,809 25,076 4,593 20,001 24,594

101,909 15,827 117,736 99,567 71,790 171,357 141,652 71,173 212,825

R$ ’000

2013 2014 2015

Projection including future interest Projection including future interest Projection including future interest

Up to 1 year

1 to 9 years

Total Up to 1

year 1 to 9 years

Total Up to 1

year 1 to 9 years

Total

Financing of fixed assets 585 2,486 3,071 2,547 56,666 59,213 12,822 56,612 69,434

Working capital 102,172 - 102,172 96,881 - 96,881 128,172 - 128,172

Financings – Proapi and Provin 4,433 16,074 20,507 3,414 26,160 29,574 4,824 23,752 28,576

107,190 18,560 125,750 102,842 82,826 185,668 145,818 80,364 226,182

Accounts payable: These arise directly from the Company’s trading. They are recorded at their original values, subject to foreign exchange and monetary updating, when applicable.

R$ '000 Book value

2013 2014 2015

Suppliers 39,792 36,287 44,903

The position of net assets and amounts receivable from clients has been set out in the item ‘Credit risk’, above.


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6.1 / 6.2 / 6.4 – Details of incorporation of the Issuer, period of duration and date of CVM registry

Date of constitution of the Issuer February 25, 1971

Form of constitution of the Issuer Constituted as a limited business company; transformed into a corporation with shares on November 26, 1979

Country of constitution Brazil

Period of duration Indeterminate

Date of CVM registry October 26, 2004


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6.3 – Brief history Plásticos Grendene Ltda was constituted on February 25, 1971, originally as a private limited company with shares, to operate as an industrial company dealing with plastics in general. At the time of its constitution, its activities centered on manufacture of plastic packagings for wine flasks, an innovation in the market which until then produced those packagings only made out of wicker. In 1976 the Company expanded its activities, beginning to manufacture plastic parts for agricultural machinery and equipment, and soon afterward became a supplier of components for footwear, such as soles and heels. It had a pioneering position in the use of polyamide (nylon) as a raw material for manufacture of such components. In 1979, now called Grendene S.A., it launched the first sandals with the Nuar brand, and in the same year, sandals with the Melissa brand.

Seeking more competitive conditions in terms of cost of labor and the advantages arising from tax incentives, Grendene migrated production from the mountain region (Serra Gaúcha) of Rio Grande do Sul, initially to the capital of Ceará, Fortaleza (1990). Then, gradually, plants were built in the more wild, harsh regions of the interior of the State (the ‘Agreste’), at Sobral (1993), which became the head office, and at Crato (1997). These were locations with very different conditions in terms of culture; adverse in terms of climate; with minimal infrastructure at the time; and with local labor not specialized in the footwear industry and even less specialized in the specific manufacture of injected footwear, which uses sophisticated, automated equipment. In 2007 one more new plant began production, in the south of Bahia, at Teixeira de Freitas: MHL Calçados Ltda. Over the years the Company developed its own successful brands, such as: Melissa, Rider, Grendha, Ipanema, Ilhabela, Zaxy, Cartago, Pega Forte, Zizou and Grendene Kids. Also, it uses the brands of third parties and licenses from celebrities, and characters from the universe of infant and child entertainment: characters such as Gisele Bündchen, Shakira, Ivete Sangalo, Paula Fernandes, Xuxa, Guga Kuerten, Mormaii, Senninha, Hot Wheels, Barbie, Hello Kitty, Homem Aranha (Spiderman) and the leading licenses of Disney contributed to Grendene’s good results. Grendene is totally integrated, with installed production capacity for 250 million pairs per year in its six industrial plants, comprising 11 footwear plants, a mold manufacturing, one CD (Distribution Center) and a plant producing PVC for its own consumption. In line with the Company’s strategy of expanding and strengthening the relationship of the brand with its clients and consumers, the Melissa brand has three ‘Galeria Melissa’ concept stores, one in São Paulo, one in New York and one in London; a showroom, in Milan, which has taken over management and distribution of the products of the brand in Italy; and a network of more than 200 Clube Melissa franchised stores in Brazil. In Rio de Janeiro, Casa Ipanema was established in February 2014 as a specific space for the Ipanema brand and its clients.


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6.5– Information of any petition for bankruptcy founded on a significant amount, or for judicial recovery or out-of-court reorganization. There has been no petition for bankruptcy founded on a significant amount, nor any application for judicial recovery or out-of-court reorganization of the Company.


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6.6 – Other material information Stock split On September 21, 2009, the Extraordinary General Meeting approved a split of the Company’s common shares, in which each common share became three shares – the total number of the Company’s shares (all nominal, common) thus increasing from 100,000,000 to 300,000,000 – all shares being without prior value. Corporate stockholding events The principal corporate events involving Grendene S.A. in the period 2013 to 2015 are as follows: Grendene UK Limited This company was formed on April 16, 2013, in the United Kingdom, its principal activity being retail and wholesale sales of products of Grendene and other companies. Grendene owns 100% of the share capital. Grendene Italy S.R.L. Constituted on September 13, 2013, in Italy. The principal activity is distribution of Melissa products in that country. Grendene UK Limited owns 100% of the share capital. A3NP Indústria e Comércio de Móveis S.A. (A3NP) This company was constituted in Brazil on May 15, 2013. Its principal objects are industrial production, sale, import and export of furniture, parts and assemblies in acrylic, polypropylene, polycarbonate, polyethylene thermoplastic copolymer, aluminum alloys, solid wood and other materials, for domestic, industrial and commercial use, and also decorative items, utensils in general and clothing. Grendene owns 42.5% of the total capital and 50.1% of the voting stock. Z Plus Eur Company S.R.L. This company was acquired by A3NP Indústria e Comércio de Móveis S.A. on July 29, 2013. Its activity is production and wholesale sales of decoration products and items, planning and development of prototypes, coordination of production, provision of quality control-system-related services, and coordination between project and production activities. A3NP owns 100% of the shares. There is no other information that is considered to be material.


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7.1 – Description of the activities of the Issuer and its subsidiaries Grendene is one of the world’s largest producers of footwear. It has proprietary and exclusive technology in the production of footwear for the feminine, masculine and children's publics. It is totally integrated, with installed capacity for 250 million pairs/year (800,000 pairs/day) in its industrial units at six locations. These comprise: 11 footwear factories; CD (Distribution Center); a mold-producing facility; a factory making PVC for its own consumption in production of footwear. Its logistics distribution includes traditional and non-traditional distributors and retailers throughout Brazil and in the rest of the world. The Company sells its products through commercial representatives, distributors, direct exports and through subsidiaries outside Brazil - Grendene USA Inc. (USA), Grendene Argentina S.A. (Argentina), Grendene UK Limited (United Kingdom) and Grendene Italy S.R.L. (Italy) - reaching a total of 60,000 points of sale outside Brazil and 65,000 in the Brazilian market, as well as a separate sales area and selective distribution for the Melissa brand. Revenues are obtained principally from sale of products in the domestic market (approximately 78% of gross revenue). The remaining approximately 22% of gross revenue is from exports, to more than 100 countries. In line with the Company's strategy of expanding and strengthening the relationship of the brand with its clients and consumers, the Melissa brand has two Galeria Melissa concept stores, one in São Paulo, one in New York and one in London, a showroom in Milan, which has assumed the management and distribution of the products of the brand in Italy, and a franchising network of more than 200 Clube Melissa stores in Brazil. In February 2014, the Ipanema brand opened the doors of its space for relationship with clients in Rio de Janeiro.


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7.2 – Information on operational segments a. Products and services sold: Footwear b. Revenue from the segment and its share in the net revenue of the Issuer

R$ '000 2013 % of Net revenue

2014 % of Net revenue


Domestic market 1,640,068 75.0% 1,610,979 72.1% 1,479,455 67,2%

Export market 547,196 25.0% 622,319 27.9% 723,341 32,8%

Net sales revenue 2,187,264 100.0% 2,233,298 100.0% 2,202,796 100.0%

c. Profit or loss resulting from the segments and its share of the Company's net profit

R$ '000 2013 % of Net profit

2014 % of Net profit

2015 % of Net profit

Domestic market 325,745 74.1% 349,128 71.2% 320,692 58,2%

Export market 107,795 24.9% 141,116 28.8% 230,531 41,8%

Net profit for the year 433,540 100.0% 490,244 100.0% 551,223 100.0%


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7.3 – Information on products and services related to the operational segments a. Characteristics of the production process The production process is very specific, with an up-to-date group of factories, and large-scale verticalized production. This provides a competitive differential in the market. The Company has always made its footwear by the process of injection of thermoplastics. It is a proprietary technology, developed over more than 30 years of experience, which includes the development of its own molds, manufacture of PVC in its own factory, and automated production, with the upper and lower parts of the shoe being melted together during the process of injection. The Company's production in its own factory of all of the PVC, its principal raw material, that it uses, enables specific formulations to be made for each type of component and each type of footwear item, with more flexibility, and without depending on outside parties. It also makes it possible to correct any problems that are found in relation to the raw material rapidly during the production process. The machines and equipment, acquired from suppliers, are adapted and assembled by Grendene's team to its own specifications, which are kept as an industrial secret. These factors make production more economical, faster, distinctive and of better quality, producing a high volume in a short space of time, while the majority of the competitors use manufactured production (assembly) - the traditional way of producing footwear. Thus, in Grendene's case, it is possible to create new, differentiated models rapidly or to take models out of the market, responding to fashion trends and to the acceptance of the products by consumers. The result of this production structure is footwear of high quality that is highly cost-competitive, generating attractive return for the Company and its partners. Annual production and installed capacity

Grendene (millions of pairs) 2013 2014 2015

Annual production 216 205 180

Installed capacity 250 250 250

b. Characteristics of the distribution process Grendene has a logistics system that enables national and international distribution through a range of different sales channels. It serves the Brazilian market through commercial representatives, and the external market both through subsidies outside Brazil - Grendene USA, Inc. (United States), Grendene UK Limited (United Kingdom), Grendene Italy S.R.L. (Italy) and Grendene Argentina S.A. (Argentina) - and also through distributors and direct exports to large clients. Distribution of the products is carried out by outsourced transportation companies. Grendene operates in more than 100 countries, with a base of more than 65,000 points of sale in Brazil and 60,000 outside Brazil. c. Characteristics of the markets of operation Brazil was once the world's largest manufacturer of footwear, in the 1970s - it has been operating in the sector for over 150 years - based on small companies (an estimated 8,000 manufacturers) that were labor-intensive. Today Brazil is third-placed in the world ranking of producers, with a significant market share in the footwear segment that allies quality and design with competitive prices.

General data on the industry

More than 8,000 footwear producing companies

Direct generation of more than 340,000 jobs

Brazil is the world's 3rd largest producer

Exports: 124 million pairs, to more than 140 countries, in 2015 (5.4% higher than in 2014 – 130 million pairs)

Sources: IEMI, RAIS, Abicalçados, Secex. (*) Figures estimated by Grendene.

The way the economic scenario developed in 2015 was very adverse – with the economy slowing down, pressure on costs, interest rates rising and consumption falling. Higher interest rates will continue to affect consumption negatively in 2016, but their effect will be felt most strongly in the higher-ticket items, which are supported by credit (white line, household appliances, automobiles, etc.), and should have less effect on lower-ticket products such as those of Grendene – although, as we have seen in 2015, we have our share of suffering. We expect the Brazilian currency to continue to depreciate against the US currency, favoring exports. We expect the impact of unemployment, which affected the disposition of consumption in 2015, to become worse with increasing dismissals of employees all over the country. Indeed, we can report that the start of 2016 was worse than the same period of 2015 in terms of demand in the market, underlining our beliefs that 2016 will be another difficult year. In our assessment, the increase in the minimum wage, rapidly swallowed by inflation, will not be sufficient to offset the increase in unemployment, and we feel it very unlikely that we will see an improvement in domestic consumption. Unfortunately we have to admit that the government will continue to try to increase the already high tax burden in the country. In 2015 we saw: the reduction of the Reintegra benefit from 3% to 1%, in March, and further, to 0.1% in December; the introduction


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7.3 – Information on products and services related to the operational segments of PIS/Cofins tax at 4.65% on financial revenues, in June; and increase in the Social Contribution on revenue from 1% to 1.5% (the so-called re-burdening of payroll, in December). We have also seen ICMS tax being increased in several states. Discussion of various measures to increase taxes such as the return of the CPMF are already on the agenda of the legislature. Internationally, we highlight the accentuated fall in the prices of commodities in general and of oil in particular, but we would remind you that this price has little direct influence on the international price of our main raw material – PVC resin, which is more influenced by the price of natural gas. Usually the exchange rate tends to have a negative effect on the price of resins converted into Reais, but simultaneously when the US dollar strengthens, the prices of commodities fall, compensating a good part of the effects. (See item 4 – Risk factors that affect the footwear business). Brazilian production of footwear, and apparent consumption (millions of pairs)

Brazil 2013 2014 2015

Production 900 877 810*

Imports 39 37 33

Exports 123 130 124

Apparent consumption 816 784 719*

Consumption per capita (pairs) 4.2 4,0 3,5*

Sources: IEMI, Secex, Abicalçados. *Numbers estimated by Grendene.

Country 2014 production (millions of pairs)

The five leading countries produced 16,378 million pairs, equivalent to 81.4% of world production.

China 11,353

India 2,579

Brazil 877

Vietnam 854

Indonesia 715

Others 3,740

Total 20,118

I. Share in each of the markets The Company and its subsidiaries have a single market business segment: production and sale of footwear for the domestic and export markets. Since it produces only footwear, for purposes of both accounting and internal control the Company is organized into one single business unit. The Company's products, although they serve different publics (men, women, children, and mass) are not managed as independent segments; the Company's results are assessed, monitored and evaluated as an integrated whole. Consolidated sales in the domestic and external markets can be summarized as follows:

82,2%

6,2%

4,6% 3,9% 1,8% 1,3%

0,00%

Footwear sales by continent, 2014

Asia South America Europe Africa North & Central America Middle East Oceania


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7.3 – Information on products and services related to the operational segments

2013 2014 2015

Gross sales (thousands of Reais) Domestic market 2,146,918 2,077,737 1,899,834 Exports 564,445 642,563 732,016

2,711,363 2,720,300 2,631,850

The information on gross sales in the external market, by geographical segment, had been prepared on the basis of the country that is the origin of the revenue, that is to say, based on the sales made by the holding company in Brazil and by the subsidies outside Brazil (Grendene USA in the USA and Grendene Argentina in Argentina), and can be presented as follows:

2013 2014 2015

Gross sales in the export market from: (thousands of Reais) Brazil 452,116 515,213 638,462 United States 23,674 31,947 34,663 Argentina 88,349 88,553 48,314 Italy 306 6,486 8,268 United Kingdom - 364 732,016

564,445 564,445 564,445

Sales are very widely spread out and distributed in a balanced fashion between our markets: Brazilian and international. The Brazilian market represents between 75% and 80% of revenues. No client individually represents more than 5% of sales.

Millions of pairs 2013 2014 2015

Total world apparent consumption of footwear (pairs) 17,455 17,782 n/d

Grendene’s total sales (pairs) 216 205 180

Grendene’s share (%) in global consumption 1.2% 1.2% n/d

Apparent consumption of footwear in Brazil (pairs) 816 784 719*

Domestic market sales (pairs) 166 153 134

Grendene share (%) in domestic market 20.3% 19.5% 18.7%*

World apparent consumption of footwear (excluding Brazil) 16,639 16,998 n/d

Sales in the external market (pairs) 50 52 46

Grendene’s share (%) in the export market 0.3% 0.3% n/d

Exports of footwear from Brazil (pairs) 123 130 124

Grendene’s share (%) in Brazilian footwear exports 41.1% 40.3% 37.0%

Source: World Shoe Review 2015, MDIC (Trade Ministry), Grendene. * Number estimated by Grendene. n/a – information not available. II. Conditions of competition in the markets The majority of the competitors in the international market are in Asia, especially China, the world’s largest producer of footwear and the world’s largest exporter. Brazil is the third largest producer of footwear, imports a relatively small proportion of its consumption and has been losing ranking in exports – it is currently in fifth place by the latest estimates. The largest competitors in the domestic market are local – some half a dozen large and medium sized companies (referring to the footwear sector), and many small competitors. Brazil is the principal market of Grendene’s products, providing 72% of its gross revenue and 70% of the footwear sold in 2015.


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7.3 – Information on products and services related to the operational segments Grendene is in all the States of Brazil and is correctly positioned in the markets which it operates. The competitive differences of Grendene are in the strength of its brands (Melissa, Rider, Grendha, Ipanema, Zaxy, Cartago, Pega Forte, Zizou and Grendene Kids), licensings, its capacity for innovation and marketing, a differentiated productive process, a solid capital structure and strong cash generation. d. Seasonal factors if any The Company has greater demand in September through December, coinciding with sales related to the end-of-year holiday period. In the period May through July we have lower demand for our products since it is winter in the South and Southeast regions of Brazil. e. Principal inputs and raw materials Our principal raw materials and inputs are PVC resin and plastifying oils. I. Describe relationships maintained with suppliers including whether subject to governmental control or regulation. At Grendene we obey rigorous specifications for the choice of our suppliers, based not only on quality and price but also on reputation and financial situation. The thermoplastics and plastifying oils, our principal raw materials, are regulated by various legislations and/or technical rules. The Brazilian, North-American and European markets require compliance with their respective legislations on restricted chemical substances. The bodies and legislations in these markets are:

Brazil: IPT

United States: CPSIA – Consumer Product Safety Improvement Act

European community: REACH – Registration, Evaluation, Authorization and Restriction of Chemicals Acquisition of other inputs and raw materials is not subject to governmental control or regulation. II. Possible dependence on few suppliers. Although Grendene acquires a large proportion of its thermoplastic resin needs from Braskem S.A., in our analysis we do not have a relationship of dependence with this or any other supplier. Grendene’s scale of production makes it possible for us to research raw materials worldwide, buy them in large quantities and negotiate a competitive price. (See: Item 4 – Risk Factors). However, Braskem is the only Brazilian company capable of meeting Grendene’s needs for resins; if there were simultaneous difficulties at that company and also difficulties in importation of raw material, this could affect our productive capacity. III. Any volatility in their prices. The basic raw material acquired in the market is PVC resin, the price of which arises in the international market as a result of the balance between supply and demand. (See Item 4 of Risk Factors)


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7.4 - Clients responsible for more than 10% of total net revenue We do not have concentration of sales, and no client in isolation is responsible for more than 10% of net revenue.


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7.5 - Material effects of state regulation on the activities

a. Need for governmental authorizations to carry out the activities, and history of relationship with the public administration for obtaining such authorizations

Manufacture of footwear does not require any specific governmental authorization, except the licenses related to environmental factors and location (municipal zoning laws, operating licenses, etc.).

The Company has licenses for the functioning of all its units.

b. Environmental policy and costs incurred for compliance with the environmental regulation

Grendene does not have an Environmental Policy, but adopts, as principles: compliance in full with the laws and all the regulations to which it is subject; and parsimonious use of all resources and inputs.

It has valid environmental licenses for all its units, has the certificates of compliance from Ibama for all its operations, and rigorously complies with the conditions of the granting bodies. (See item 4 – Risk Factors).

We meet all the conditions referring to the monitoring of environmental controls, such as: self-monitoring of the parameters of sanitary and industrial effluents; self-monitoring on generation and final disposal of waste; and self-monitoring of the parameters of atmospheric emissions; and we periodically carry out audits on the receptors of industrial wastes.

In 2015 Grendene was awarded the 22nd

Expressão de Ecologia award in the Environmental Management – Green Wave Trophy (Troféu Onda Verde) category, with the project Water Management – Treatment and Re-use in Operations. The award, given by Editora Expressão, is certified by the Environmental Ministry as the largest environmental award of the South of the country and has the objective of disseminating actions of companies and institutions for reduction of the impact of pollution on the environment, contributing to conservation of natural resources and evolution of consciousness of sustainable development.

Grendene has Suppliers’ Certification from ABVTEX (Brazilian Textile Retail Association – Associação Brasileira do Varejo Têxtil), and became the first footwear company to receive this certificate. The aim of the certificate is to enable the retail sector to certify and monitor its suppliers in terms of practices of Environmental, Social and Employee Relations responsibility.

Grendene’s products are constantly submitted to laboratory tests for control of formulation, the results of which can be shared when requested by its clients.

Grendene products are conceived, in their essence and design, with a concern for minimization of wastes, and manufacturability at lowest cost. Another point to be highlighted is that the PVC produced by Grendene complies with the most rigorous worldwide legislations on chemical substances used in footwear manufacture.

Grendene’s focus in relation to sustainable development is on: reduction of wastes, optimization of resources (raw materials, equipment, energy and water), recyclability of products, quality of the processes and any interaction of the employee with this context. In 2015 we highlight the following actions:

- Reduced water consumption: We invested in new faucets, wastewater discharge tanks, change in the irrigation system, and implementation of reuse of effluents in all units. We re-used 40% of our treated effluent for sanitary and irrigation needs.

We expect to achieve a ratio of 60% reuse of effluent, by the end of 2016. For re-use of effluent we use the process of Ultrafiltration. At Grendene, only approximately 20% of the consumption of water is used in industrial processes, and 80% for human use.

We maintain special attention to consumption of water, consumption of energy and generation of wastes. The actions taken have reduced costs and operational risks, and resulted in lower environmental impact.

We can highlight some results, in the comparison with 2014, with the following reductions:

1) Water consumption per pair produced – down 26%; 2) Energy consumption per pair produced – down 3%; 3) Generation of wastes per pair produced – down 9 %;

To achieve these results we carried out various actions of raising awareness to employees on consumption of energy, water, paper, selective garbage collection and reduction of wastes in general.

The expenditure (investments and expenses) on environmental management was as follows:

R$ mn 2013 2014 2015

Environmental management: investments and expenses 5.3 2.2 1.8


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7.5 - Material effects of state regulation on the activities

c. Patents, brands, licenses, concessions, franchises, and significant royalties contracts for the Company's activities

At the end of 2015, the Company had the definitive registry of 425 brand names in Brazil (and a further 160 applications for registry), and 822 registrations of brand names outside Brazil, in 117 countries (376 applications in progress).

Brands Total Brazil Outside Brazil Number of countries

outside Brazil*

Application for registry 536 160 376 123

Registered 1,247 425 822 117

Patents – total Total Brazil Outside Brazil Countries*

Applications for registry 873 736 137 36

Registry 899 758 141 40

Industrial designs Total Brazil Outside Brazil Countries*


Registry 871 730 141 40

Utility models Total Brazil Outside Brazil Countries*


Registry 18 18 0 0

Industrial patents Total Brazil Outside Brazil Countries*


Registry 10 10 0 0

* Excluding Brazil


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7.6 – Significant revenues coming from outside Brazil a. Revenue from clients attributed to the home country of the Issuer and its share in the Issuer's total net revenue Grendene manufactures 100% of its products in Brazil, and thus all the revenues obtained from other countries are via exports. There are no revenues from exportation attributed to clients with head office in Brazil. Our clients in these various countries are distributors who resell the products to the retail sector in the local markets. These distributors are independent companies that usually have their head office in the countries in which they operate. Sales in the domestic market are made through commercial representatives, with a base of more than 60,000 points of sale. No client individually represents more than 5% of sales.




Domestic market 1,640,068 75.0% 1,610,979 72.1% 1,479,455 67,2%

Net sales revenue 2,187,264 100.0% 2,233,298 100.0% 2,202,796 100,0%

b. Revenue from clients attributed to each foreign country and their share in the total net revenue of the Issuer

Products are exported to more than 100 countries and are very highly spread out, with a base of more than 60,000 points of sale, and there is no dependence on any client, country or currency. No client individually represents more than 5% of sales. c. Total revenue from foreign countries and its share in the total net revenue of the Issuer




Exports 547,196 25.0% 622,319 27.9% 723,341 32.8%

Net sales revenue 2,187,264 100.0% 2,233,298 100.0% 2,202,796 100.0%


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7.7 – Effects of foreign regulation on the Company's activities Grendene is subject to the customs rules and laws of approximately 100 countries to which it exports. The imposition of quotas or tariffs on imports by those countries could affect our exports to those markets.

Since our products use mainly resins as principal raw materials - PVC resins and plastifying oils - we are also subject to the local rules for importation of products that use chemical compounds as inputs.

The international rules with the widest reach are:

United States: CPSIA – Consumer Product Safety Improvement Act.

European Community: REACH – Registration, Evaluation, Authorization and Restriction of Chemicals.


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7.8 – Social-environmental policies a. Issuer discloses social and environmental information

Grendene does not have a social-environmental policy, but publishes such social and environmental information as it deems to be material on its Investor Relations site, in the Financial Statements, in the Report of Management and in the Reference Form (item 7.5 – b)

b. Methodology followed in preparation of the information

Grendene does not use any methodology for preparation of the information.

c. Information is audited or reviewed by an independent entity

The social and environmental information that the company deems relevant to disclose is not audited by an independent entity.

d. Webpage where the information can be found

The information can be found on the Company’s Investor Relations site http://ri.grendene.com.br: in the Report of Management and the Financial Statements, at http://ri.grendene.com.br/PT/Informacoes-Financeiras/Relatorio-da-Administracao; and in the Reference Form, at http://ri.grendene.com.br/PT/Informacoes-Financeiras/Arquivos-CVM.

http://ri.grendene.com.br/

http://ri.grendene.com.br/PT/Informacoes-Financeiras/Relatorio-da-Administracao

http://ri.grendene.com.br/PT/Informacoes-Financeiras/Arquivos-CVM


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7.9 – Other material information Tax incentives Grendene enjoys fiscal and state tax incentives relating to its activities located in the state of Ceará (see Item 4.1 – a). The maturities and amounts of the financings connected to the Provin and Proapi programs can be seen in Item 10.1.

Tax incentive system Period

PROVIN Until April 2025

PROAPI Until March 2017

Income tax Until 2022

All the other information that is material and pertinent to this subject has been disclosed in the previous items.


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8.1 – Extraordinary transactions There was no acquisition or disposal of any material asset that is not part of the normal business operation of the Company and which has not been mentioned in item 15.7 of this Form.


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8.2 – Significant alterations in the issuer’s manner of conducting its business

There have been no significant alterations in the Company’s manner of conducting its business.


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8.3 – Material contracts entered into by the issuer and its subsidiaries not directly related to its operational activities

Since the constitution of the Company no material contract has been entered into with its subsidiaries that was not directly related to its operational activities.


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8.4 - Other material information All material information relevant to this topic has been disclosed in the items above.


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9.1 - Significant non-current assets - others Grendene has 11 footwear plants, in the States of Ceará – in the cities of Sobral (6), Fortaleza (2), Crato (1); in the State of Rio Grande do Sul, in the city of Farroupilha (1); and in the State of Bahia, in the city of Teixeira de Freitas (1); a PVC manufacturing plant and a Distribution Center in Sobral (Ceará); and a mold-making plant in Farroupilha, Rio Grande do Sul.

As well as the industrial plants, we have three flagship Galeria Melissa concept stores of the Melissa brand in São Paulo, New York and London (the London store was opened on October 9, 2014). Their aim is to further strengthen the brand. We also have a Melissa showroom in Milan, which handles the management and distribution of products of the brand in Italy through the subsidiary Grendene Italy S.R.L., and a franchise network of more than 2000 Clube Melissa stores in Brazil.

In the city of Rio de Janeiro, in February 2014, we inaugurated a space called Casa Ipanema, which aims to approximate the brand of that name to its clients. This strategy is the fruit of the growth in its principal markets, and also the importance of the brand in the Company’s business.

It is important to point out that the Company’s most significant investments are in working capital and that the totality of its non-current assets corresponds to a relatively small proportion of the total assets. Further, individually, the largest non-current asset consists of long-term financial investments (securities held to maturity).


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9.1 - Material non-current assets / 9.1.a - Fixed assets

Description of the fixed asset Location: Country Location: State Location: Municipality Type of property

Buildings and facilities Brazil Ceará Sobral Owned

Buildings and facilities Brazil Ceará Fortaleza Owned

Buildings and facilities Brazil Ceará Crato Owned

Buildings and facilities Brazil Rio Grande do Sul Farroupilha Owned

Buildings and facilities Brazil BA Teixeira de Freitas Owned

Machinery and equipment Brazil Ceará Sobral Owned

Machinery and equipment Brazil Ceará Fortaleza Owned

Machinery and equipment Brazil Ceará Crato Owned

Machinery and equipment Brazil Rio Grande do Sul Farroupilha Owned

Machinery and equipment Brazil BA Teixeira de Freitas Owned

IT equipment Brazil Ceará Sobral Owned

IT equipment Brazil Ceará Fortaleza Owned

IT equipment Brazil Ceará Crato Owned

IT equipment Brazil Rio Grande do Sul Farroupilha Owned

IT equipment Brazil BA Teixeira de Freitas Owned

Buildings and facilities - Galeria Melissa Brazil São Paulo State Sao Paulo Rented

Buildings and facilities - Casa Ipanema Brazil Rio de Janeiro State Rio de Janeiro, RJ Rented

Buildings and facilities - Galeria Melissa United States NY New York Rented

Buildings and facilities - Galeria Melissa England London Rented

Buildings and facilities - Showroom Melissa Italy Milan Rented


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9.1 – Material non-current assets / 9.1.b - Patents, brands, licenses, concessions, franchises and technology transfer agreements

Type of asset Description of the asset Duration Events that could cause loss of the rights Consequence of loss of the rights

Brands Mel Until 2020 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.

A loss of the rights would result in economic losses due to: (a) loss of the investment made by the Company to consolidate the brand name; (b) loss of the right to use of the brand name; (c) loss of the relationship and of the link established between the brand, the company and products.

Brands Nuar Until 2020 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.


Brands Pega Forte Until 2020 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.


Brands Galeria Melissa Until 2018 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.


Brands Grendene Kids Until 2022 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.


Brands Grendha Until 2018 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.


Brands Ilhabela Until 2024 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.



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Brands Ipanema Until 2021 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.


Brands Melissa Until 2020 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name


Brands Cartago Until 2025 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.


Brands Rider Until 2023 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name


Brands Grendene Until 2029 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name.


Brands Zaxy Until 2017 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name


Brands Zizou Until 2024 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name



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Brands Marsalla Until 2022 The principal events that can lead to loss of rights to use a brand name: (a) non-renewal of the rights every ten years; (b) opposition from outside parties; (c) not using the brand name



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9.1 - Material non-current assets / 9.1.c - Interests in companies

Full company name CNPJ (Corporate Tax Nº) CVM Code Type of company Country of head office

State of head office Municipality of head office

Description of activities Issuer's interest, %

Business year Book value - change, % Market value –

change, %

Amount of dividends received (Reais)

Date Amount (Reais)

A3NP Indústria e Comércio de Móveis S.A.

15.761.916/0001-31 - Subsidiary Brazil São Paulo State Sao Paulo Manufacture, sale, import and export of furniture and complementary items based on plastic.

42.500000

Market value

Dec. 31, 2015 0.000000 0.000000 0.00 Book value Dec. 31, 2014 8,497,000.00

Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00

Reasons for acquisition and continued holding of this interest

To participate in a new business segment. To produce items made in plastic with sophisticated design and accessible cost for the middle income groups on an industrial scale.


15.761.916/0001-31 - Subsidiary Brazil São Paulo State Sao Paulo Manufacture, sale, import and export of furniture and complementary items based on plastic

42.500000

Market value

Dec. 31, 2015 0.000000 0.000000 0.00 Book value Dec. 31, 2015 49,000.00

Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00




15.761.916/0001-31 - Subsidiary Brazil São Paulo State Sao Paulo Manufacture, sale, import and export of furniture and complementary items based on plastic

42.500000

Market value

Dec. 31, 2015 0.000000 0.000000 0.00 Book value Dec. 31, 2013 4,523,,000.00

Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00



Grendene Argentina S.A.

00.000.000/0000-00 - Subsidiary Argentina Buenos Aires Manufacture, sale, export and import of footwear and clothing items in general.

95.000000

Market value


Page 70 of 243






change, %


Date Amount (Reais)


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00


Grendene Argentina S.A. (formerly Saddle Calzados S.A.) is a company constituted and organized under the laws of Argentina and functions as distributor of our products in the Argentinean market.



95.000000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00





95.000000

Market value


Dec. 31, 2013 0.000000 0.000000 0.00

Dec. 31, 2012 0.000000 0.000000 0.00



Grendene UK Limited 00.000.000/0000-00 - Subsidiary England London Export, import and retail and wholesale sales in England of Grendene and other companies' products.

100.000000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00


Page 71 of 243






change, %


Date Amount (Reais)


Grendene UK Limited is a company constituted and organized under the laws of the United Kingdom and functions as sales agent and distributor of our products.

Grendene UK Limited 00.000.000/0000-00 - Subsidiary England London Export, import and retail and wholesale sales in England of Grendene and other companies' products.

100.000000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00



00.000.000/0000-00 - Subsidiary England London Export, import and retail and wholesale sales in England of Grendene and other companies' products.

100.000000

Grendene UK Limited 00.000.000/0000-00 - Subsidiary England London Export, import and retail and wholesale

sales in England of Grendene and other companies' products.

100.000000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00



Market value



Grendene USA, Inc. 00.000.000/0000-00 - Subsidiary United States Orlando Distribution of footwear to the largest retail chains and other retail operators in the USA; sales representative in the USA for manufacturers of footwear.

100.000000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00


Page 72 of 243






change, %


Date Amount (Reais)


Grendene USA, Inc. (Formerly Grendha Shoes Corp) is a company constituted and organized under the laws of the State of Delaware, United States, and functions as sales agent and distributor of our products in the US market.

Grendene USA, Inc. 00.000.000/0000-00 - Subsidiary United States Orlando Distribution of footwear to the largest retail chains and other retail operators in the USA, sales representative in the USA for manufacturers of footwear.

100.000000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00



Grendene USA, Inc. 00.000.000/0000-00 - Subsidiary United States Orlando Distribution of footwear to the largest retail chains and other retail operators in the USA, sales representative in the USA for manufacturers of footwear.

100.000000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00




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change, %


Date Amount (Reais)

MHL Calçados Ltda 07.512.861/0001-06 - Subsidiary Brazil BA Teixeira de Freitas Manufacture, sale, exportation and importation of:

(i) (a) footwear and apparel items in general;

(b) components and parts for footwear, and apparel items in general;

(c) matrices and molds for the footwear industry, apparel items and plastic items of any type; PVC, resins, plastifying oils, EVA and other raw materials and inputs used for the manufacture of footwear and apparel items in general; accessories, gifts, and promotional materials associated with the products produced by the company.

(ii) Provision of services in areas including

information technology, for data processing, including for third parties.

(iii) Importation of industrial machines and their accessories, equipment, special tools and devices related to the company's objects.

(iv) Holdings of equity interests in shares or share units in other companies in Brazil or elsewhere, including by means of investment of own funds or of proceeds of tax incentives.

99.990000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00


This company was formed with the same objects as the parent company Grendene S.A. The aim of the investment in this company is to increase the competitiveness of products, especially those for which the freight has a significant effect on cost. For reasons of logistics, it is producing footwear in a region that is much closer to the major centers of consumption.


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change, %


Date Amount (Reais)

MHL Calçados Ltda 07.512.861/0001-06 - Subsidiary Brazil BA Teixeira de Freitas Manufacture, sale, export and import of:


(b)Components and parts for footwear, and apparel items in general.

(c) Matrices and molds for the footwear industry, apparel items and plastic items of any type; PVC, resins, plastifying oils, EVA and other raw materials and inputs used for the manufacture of footwear and apparel items in general; accessories, gifts, and promotional materials associated with the products produced by the company.

(ii) Provision of services in areas including information technology, for data processing, including for third parties.



99.990000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00




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change, %


Date Amount (Reais)

MHL Calçados Ltda 07.512.861/0001-06 - Subsidiary Brazil BA Teixeira de Freitas Manufacture, sale, export and import of:


(b) Components and parts for footwear, and apparel items in general.

(c) Matrices and molds for the footwear industry, apparel items and plastic items of any type; PVC, resins, plastifying oils, EVA and other raw materials and inputs used for the manufacture of footwear and apparel items in general; accessories, gifts, and promotional materials associated with the products produced by the company.

(ii) Provision of services in areas including information technology, for data processing, including for third parties.



99.990000

Market value


Dec. 31, 2014 0.000000 0.000000 0.00

Dec. 31, 2013 0.000000 0.000000 0.00




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9.2 - Other material information Our brands and the design of our products are constantly subject to undue use and violation by third parties of our intellectual property rights. There are falsified products, and products that infringe our intellectual property rights, in the markets in which we operate and in other markets. We are not always successful, especially in other countries, at combating falsification of our products and the infringement of our intellectual property rights. Falsification of our products, and the undue use of our brands, not only can cause adverse effects for our sales, but can also affect the integrity of our own brands as a result of their association with products of lower quality.

Also, although we have registry for the great majority of our brands and patents, we cannot guarantee that in the future our competitors may not allege that we are violating their intellectual property rights. In this were to happen, and if as a result we are prevented from manufacturing a given product or using a given brand, this could have an adverse effect for Grendene.

Our principal intellectual property consists of our brand names. These include: Melissa, Rider, Grendha, Ipanema, Ilhabela, Zaxy, Cartago, Pega Forte, Zizou, Grendene Kids and Grendene Baby.

As well as our own brands, we have licenses for use of names and brands of Brazilian and international celebrities, and children's-market characters that are known in Brazil and internationally.

The Company owns the definitive registry of the patents that are more important for our production process, and we still have some patents, models of use and industrial designs at the registration stage. We also had registries outside Brazil relating to industrial patents and industrial designs (see Item 7.5.c).

We are also owners of domain names in Brazil and in the United States in relation to a great part of our principal products.

The subsidiary companies mentioned in Item 9.1.c. are unlisted and are valued by the equity method.


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10.1 - General conditions of finances, assets and liabilities a. General conditions of finances, assets and liabilities

In management’s opinion the company is in a solid economic and financial situation.

Financial situation: The balances held in cash, cash equivalents and/or financial investments provide tranquility that the Company is in full condition to honor all of its short-term and long-term financial commitments.

Economic aspect: The Company has shown capacity to earn profit even in adverse scenarios, remunerating invested capital in a manner that we consider to be adequate and distributing dividends that exceed the obligatory dividends, in the last 10 years.

This table below shows the general equity and financial conditions of Grendene for the years 2012, 2013, and 2014. These figures are complemented by items 10.1.b, 10.1.c, 10.1.d, 10.1.e, 10.1.f, 10.1.g, 10.1.h and 10.2 of this proposal.

Year R$ ’000

Initial Stockholders’

equity1

Net profit Dividends Reinvestment Return on

Stockholders’ equity

Final Stockholders’

equity1

2013 1,848,309 433,540 300,057 133,483 23.5% 1,957,295

2014 1,957,295 490,244 220,814 269,430 25.0% 2,232,649

2015 2,232,649 551,223 275,925 275,298 24.7% 2,520,866

1) Stockholders’ equity adjusted by exclusion of the balance of dividends payable.

Liquidity 2013 2014 2015

General liquidity ratio 6.6 6.3 6.0

Current liquidity ratio 5.9 6.8 5.4

Quick ratio 5.2 6.0 4.6

Profitability 2013 2014* 2015*

Net margin % 19.8% 22.0% 27.4%

Gross margin 45.4% 45.9% 48.4%

Ebit margin 18.3% 17.4% 20.7%

R$ ’000 2013 2014 2015

Loans and financings (Short term and Long term) 117,736 171,357 212,825

Cash and cash equivalents and cash investments (ST and LT) 733,965 995,978 1,281,880

Assets

12/31/2013

12/31/2014

12/31/2015

Cash and cash equivalents plus cash investments

Working capital (excluding Cash and cash equivalents and cash investments)

Non-current assets

35.2%

46.9%

17.9%

41.5%

40.2%

18.3%

47.6%

34.8%

17.6%


Page 78 of 243

10.1 - General conditions of finances, assets and liabilities b. Capital structure and possibility of redemption of shares, indicating:

The Company has a capital structure that does not depend on outside capital for conduct of its business. Grendene makes both its fixed investments and its working capital investments with its own funds.

Liabilities: Current and non-current

12/31/2013

12/31/2014

12/31/2015

Liabilities – Financial

Liabilities – Operational

Consolidated stockholders’ equity

All the shares issued by Grendene are common, nominal, non-redeemable book-entry shares with no par value.

i. Situations of redemption

Not applicable, because Grendene does not have any redeemable shares issued.

ii. Formula for calculation of the redemption value

Not applicable, because Grendene does not have any redeemable shares issued.

c. Payment capacity in relation to financial commitments assumed

Grendene has a comfortable and solid financial situation with full conditions for honoring all of its commitments.

R$ ’000 2013 2014 2015

Current assets 1,694,062 1,906,527 1.908.661

Non-current assets 675,280 775,486 1.136.981

Current liabilities 285,066 282,003 354.500

Non-current liabilities 16,316 72,076 74.382

Consolidated Stockholders’ equity 2,067,960 2,327,934 2.616.760

5.0% 7.7%

87.3%

6.4% 6.8%

86.8%

7.0% 7.1%

85.9%

734 996 1,282

(118) (171) (213)

616 825

1,069

(400)

0

400

800

1.200

12/31/13 12/31/14 12/31/15

R$ m

illi

on

Loans and financings (ST and LT)

Cash and cash equivalents and financial investments (ST and LT)

Net cash


Page 79 of 243

10.1 - General conditions of finances, assets and liabilities As can be seen from the Company’s Statement of financial condition (Balance sheet) and shown in the table above, the Company’s cash position (cash, cash equivalents and financial investments) is greater than the total of Short- and Long-term liabilities.

d. Sources used for financing for working capital and investments in non-current assets

Grendene has a significant net cash position (balance of cash, cash equivalents and financial investments less short and long-term loans) and has the capacity to finance its present operations and investments with its own funds. However, the Company may have recourse to financing sources whenever the costs of those funds are sufficiently low in the management’s opinion, to generate value for its stockholders.

e. Sources of financing for working capital and for investments in non-current assets that the company intends to use to cover deficiencies in liquidity

Grendene does not have deficiencies in liquidity, has not had such deficiencies in the past and does not expect that this situation could occur. Its working capital investments are financed with its own funds.

f. Levels of indebtedness, and characteristics of such debt

i. Significant loan and financing contracts

The loans and financings are shown at their contracted values, plus agreed charges, which include interest and monetary updating or foreign-exchange adjustment incurred. After initial recognition they are measured at amortized cost by the effective rates method.

On December 31, 2015 the bank indebtedness was as follows:

Indexor Interest rate (p.a.) 2015 2014 2013

Local Currency Fixed assets Fixed rate 4.31, 4.31 e 4.50% 61,651 50,481 2,715 Proapi and Provin TJLP - 24,594 25,076 17,899

86,245 75,557 20,614 Foreign Currency Working capital Argentinean pesos 26.88, 26.33 e 22.50% 35,414 45,447 69,891 Working capital Euro + 2.00% - 3,227 - Working capital - ACEs USD + 2.24, 0.99 e 0.97% 91,166 47,126 27,231

126,580 95,800 97,122

Total of loans and financings 212,825 171,357 117,736 ( – ) Total, current liabilities (141,652) (99,567) (101,909)

Total, non-current liabilities 71,173 71,790 15,827

This table shows the timetable of maturities of long-term loans and financings on December 31, 2015:

Portions of long-term indebtedness

Maturities 2017 2018 2019 2020 2021 Total

Bank financing 10,442 10,442 10,341 9,974 9,973 51,172

Proapi 1,139 3,636 9,715 - - 14,490

Provin 1,681 1,690 1,124 1,016 - 5,511

Total 13,262 15,768 21,180 10,990 9,973 71,173

Financing – Fixed assets

In 2014 the Company contracted a financing with Banco do Nordeste do Brasil S.A. through the FNE (Constitutional Fund of the Northeast – Fundo Constitucional do Nordeste), for acquisition of goods and services for construction of an industrial plant. Part of the funds were paid in installments during the business years 2014 and 2015 (balance of R$ 59.9 million in 2015 and R$ 48.2 million in 2014). Maturity of the transaction is December 26, 2021.

The other financings for fixed assets were contracted for acquisition of industrial equipment (R$ 1.83 million in 2015, R$ 2.3 million in 2014 and R$ 2.7 million in 2013).


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10.1 - General conditions of finances, assets and liabilities Financing – Working capital – Argentinean pesos Our subsidiary Grendene Argentina S.A. has contracted loans in Argentinean pesos, for its working capital.

Financing – Working capital – ACCs and ACEs The Company has contracted loans for its export operations in the modality ACE (Advances on Delivered Shipping Documents). These transactions consist of an advance of the corresponding amount in Reais of exports, respectively, shipped and not yet shipped.

Financing – Proapi and Provin The Company enjoys tax incentive benefits in relation to its activities located in the State of Ceará, through obtaining of financing from the FDI - Industrial Development Fund of Ceará, through a financial agent as intermediary, established by that fund. These financings are based on the ICMS tax payable (Provin) and products exported (Proapi), measured monthly. The financings are to be settled within 36 to 60 months after their disbursement.

It is the Company’s Management’s understanding that recording of the benefit of the reduction of amounts payable takes place at the moment of obtaining of the financings, so as to be able to reflect most appropriately the accrual method of reporting, since the costs of the ICMS tax and of the exports, relating to the transactions that enjoy the incentives, are also registered at the same time as the benefits.

On December 31, 2015, the non-incentive bearing parts of these financings are recorded in Current and Non-current assets, in the amount of R$ 24,594 (R$ 25,076 in 2014 and R$ 17,899 in 2013).

Under the Proapi program, financings are given in the amount of 11% of the FOB value exported, payable in 60 months, attracting interest at the TJLP (long-term interest rate). At maturity the Company pays 10% of the amount of the debtor balance of the financing, and the remaining 90% is exempted from payment, representing a net incentive of 9.9% of the FOB value exported.

Guarantees

The guarantees linked to the loans and financings are: a) chattel mortgage on machines and equipment acquired; b) land sites and buildings; and c) surety guarantee given by the managers of the Company. The existing guarantees are for the amounts financed.

ii. Other long-term relationships with financial institutions

The Company does not have long-term relationships with financial institutions other than the obligations related to the transactions reported above.

iii. Degree of subordination between the debts

There is no degree of subordination between the debts.

iv. Any restrictions imposed on the issuer, especially in relation to limits of indebtedness and contracting of new debt, distribution of dividends, disposal of assets, issuance of new securities and/or disposal of stockholding control

There are no restrictions imposed on the Company in relation to the limits of indebtedness and contracting of new debts, distribution of dividends, disposal of assets, issuance of new securities or disposal of stockholding control.

g. Limits of use of the financings already contracted

There are no financings that have been contracted and not been used.


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10.1 - General conditions of finances, assets and liabilities

h. Significant alterations in each item of the financial statements

The Consolidated financial statements for the business years ended December 31, 2013, 2014 and 2015 of the Company were prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and also based on accounting practices adopted in Brazil and the rules of the Brazilian Securities Commission (Comissão de Valores Mobiliários, or CVM).

There are no significant alterations in the Company’s consolidated financial statements, in the opinion of management, for the years 2013, 2014 and 2015.

Description of the principal accounts of the consolidated Balance Sheet

Remarks on the main accounts of Assets

Cash, cash equivalents and cash investments

Short and long-term cash, cash equivalents and cash investments totaled R$ 734.0 million on December 31, 2013, R$ 996.0 million on December 31, 2014, and R$ 1.282 billion on December 31, 2015. Cash investments included in cash equivalents,

mostly, are classified in Financial assets at fair value through profit or loss.

Cash investments are classified as ‘Securities available for sale’, ‘Securities at fair value through profit or loss’, or ‘Securities held to maturity’, depending on the Company’s investment strategy.

This table shows the Company’s cash situation on the following dates:

R$ '000 Dec. 31, 2013 Dec. 31, 2014 Dec. 31, 2015

Net cash from operations (a) 303,305 484,959 442.718

Net cash from investment activities (b) 89,596 (297.554) (198.585)

Net cash generated (invested) in redemption (making) of financial investments 243,632 (178,464) (125.360)

Funds allocated to Investments in fixed assets (154,036) (116,090) (73.225)

Net cash used in financing activities (c) (368,030) (200,441) (249.172)

Reduction / increase in cash and cash equivalents (a+b+c) 24,871 (13,036) (5.039)

On December 31, 2015, Cash and cash equivalents and Cash investments (Short and long term) were 42.1% of Total assets (37.2% in 2014, and 31.0% in 2013).

Accounts receivables from clients and Inventories

The account lines Accounts receivable from clients and Inventories totaled R$ 1.106 billion on December 31, 2013, R$ 1.121 billion on December 31, 2014 and R$ 1.117 billion on December 31, 2015.

On December 31, 2015, 2014 and 2013, the average periods for receipt in practice in the domestic market are 96, 97 and 97 days, respectively and for the export market, 84, 85 and 73 days, respectively.

Stockholders’ equity

Consolidated stockholders’ equity totaled R$ 2.617 billion on December 31, 2015, R$ 2.328 billion on December 31, 2014 and R$ 2.068 billion on December 31, 2013. The chart below shows the changes in Stockholders’ equity.


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10.1 - General conditions of finances, assets and liabilities

R$ '000 Change in Stockholders’ equity

Balances at December 31, 2012 1,953,562

Net profit for the year 434,005

Exchange differences on subsidiaries outside Brazil (254)

Increase in interests of non-controlling stockholders 5,752

Acquisition of treasury shares (57,751)

Sale of treasury shares for exercise of stock purchase option 22,799

Expenses on stock options purchase and subscription plan 4,492

Dividends distributed (294,645)



Exchange differences on subsidiaries outside Brazil 1,974

Increase in interests of non-controlling stockholders 10,469


Gains from sale of treasury shares 384






Exchange differences on subsidiaries outside Brazil 16,479





Interest on Equity included as part of dividends (15,000)


Working capital

This table shows working capital:

R$ '000 Dec. 31, 2013 Dec. 31, 2014 Dec. 31, 2015

Working capital (Current assets – Current liabilities) 1,408,966 1,624,524 1,554,161

Working capital / Total capital 59.5% 60.6% 51.0%

Working capital / Net sales revenue 64.4% 72.7% 70.6%

Description of the principal accounts of the consolidated income Profit and loss account

See item 10.2, Sub-clause 'a'.


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10.2 - Operational profit and Financial revenue (expenses) a. Results of operations of the Issuer, especially:

i. Description of any important components of revenue

Gross revenue from sales

The year-on-year reduction of 3.3% in gross revenue in 2015 (from 2014) reduced the compound average growth rate over the period 2008-2015 from 9.5% p.a. in the period 2008-2014, to 7.6% p.a. – below the lower limit of the expected growth band of between 8% and 12% for the period 2008-2018.

R$ million 2013 2014 2015 Change, 2014 to 2015

Consolidated gross revenue 2,711.4 2,720.3 2,631,8 (3.3%)

Domestic market 2,146.9 2,077.7 1,899,8 (8.6%)

Footwear 2,146.9 2,077.7 1,899,2 (8.6%)

Furniture - - 0,6 -

Exports 564.5 642.6 732,0 13.9%

Footwear 564.5 641.7 730,8 13.9%

Footwear in U.S. dollars 261.6 272.6 219,3 (19.5%)

Furniture - 0.9 1,2 46.4%

Millions of pairs 2013 2014 2015 Change, 2014 to 2015

Volumes 216.2 204.9 180,4 (12.0%)

Domestic market 165.7 152.7 134,5 (12.0%)

Exports 50.5 52.2 45,9 (12.0%)

R$ 2013 2014 2015 Change, 2014 to 2015

Average price (Footwear) 12.54 13.27 14,58 9.9%

Domestic market 12.96 13.60 14,12 3.8%

Exports 11.17 12.29 15,91 29.5%

Exports in U.S. dollars 5.18 5.22 4,78 (8.4%)

Net sales revenue


Gross sales revenue 2,711.4 2,720.3 2,631,8 (3.3%)

Domestic market 2,146.9 2,077.7 1,899,8 (8.6%)

Exports 564.5 642.6 732,0 13.9%

Sales deductions (524.1) (487.0) (429,1) (11.9%)

Returns and taxes on sales (393.3) (383.0) (336,4) (12.2%)

Discounts granted to customers (130.8) (104.0) (92,7) (10.9%)

Net sales revenue 2,187.3 2,233.3 2,202,8 (1.4%)

Cost of goods sold (COGS)

Cost of goods sold

In recent years with continuing exchange rate volatility, increases in the minimum wage and inflationary pressures in Brazil, our unit cost has grown at a CAGR of 6.7% p.a. from 2013 to 2015, which is lower than the rates of inflation in the period. It is true that we have the benefit of the ‘payroll relief’, partially reversed in December 2015. Over the whole of this period (the accumulated figure) COGS fell in line with the fall in net revenue (CAGR from 2013 to 2015 of –2.5% p.a.).

Discipline in costs has played a fundamental role in our results.


Cost of goods sold 1,193.6 1,207.4 1,134,9 (6.0%)

R$ per pair 2013 2014 2015 Change, 2014 to 2015

Cost of goods sold/pair 5.52 5.89 6.29 6.8%


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10.2 - Operational profit and Financial revenue (expenses) Gross profit

In absolute terms, cost of goods sold fell by 6.0% from 2014 to 2015, 4.6 percentage points higher than the fall in net revenue (1.4%). This was due to changes in the mix, adjustments made in the portfolio of products and/or increases in prices, which resulted in an increase of 4.1% in Gross profit, and 2.6 p.p. in Gross margin.


Gross profit 993.7 1,025.9 1,067.9 4.1%

Gross margin 45.4% 45.9% 48.5% 2.6 p.p.

Excluding non-recurring effect – R$ million 2013 2014 2015 Change, 2014 to

2015

Gross profit – adjusted 993.7 1,025.6 1,066.0 3,9%

Gross margin – adjusted 45.4% 45.9% 48.4% 2.5 p.p.

Operating expenses (SG&A)

Selling expenses

The Company's commercial expenses are primarily related to freights, licensing, commissions and advertising, representing over time approximately 24% of the Company's net revenue.


Selling expenses 521.2 543.7 523.7 (3.7%)

% of net revenue 23.8% 24.3% 23.8% (0.5 p.p.)

Excluding non-recurring effect – R$ million 2013 2014 2015 Var. 15/14

Selling expenses – adjusted 521.2 538.0 517.8 (3.8%)

% of net revenue – adjusted 23.8% 24.1% 23.5% (0.6 p.p.)

Advertising and marketing expenses

The total of advertising and marketing expenses in 2015 was lower than in 2014, and was 6.8% of net revenue – which is a lower percentage than we usually invest in advertising and marketing. However we carried out other strategic activities and projects of positioning of brands which, although they are not classified in accounting terms as advertising and marketing expenses, are internally considered in our management analysis as efforts in marketing. These activities are, principally, events carried out in the Galerias Melissa in São Paulo, New York and London, and regional events which in 2015 comprised a total expenditure of R$ 6.7 million. In prior years there was spending of this type, but not in significant amounts.

If we add these expenses (all of which were classified and recognized as selling expenses in the year 2015) to the advertising and marketing expenditures the percentage of net revenue rises to 7.1%, which in our opinion better represents the Company’s effort in construction of brands.


Advertising expenses 163.7 169.2 148.9 (12.0%)

% of net revenue 7.5% 7.6% 6.8% (0.8 p.p.)

General and administrative expenses (G&A)

General and administrative expenses considered as a total were 12.4% higher year-on-year, and were 4.7% of net revenue, higher than the ratio we have sought to achieve. However, when we adjust these expenses by excluding the effects of A3NP in the consolidation of our results – corresponding to R$ 13.1 million in 2015 – general and administrative expenses, adjusted, reduce to R$ 89.5 mn, corresponding to 4.1% of 2015 net revenue (vs. 3.9% in 2014, also adjusted). Even so this is a growth that we will watch with close attention in 2016.


General and administrative expenses 79.0 91.3 102.6 12.4%

% of net revenue 3.6% 4.1% 4.7% 0.6 p.p.


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10.2 - Operational profit and Financial revenue (expenses)

Excluding non-recurring effect – R$ million 2013 2014 2015 Change, 2014 to

2015

General and administrative expenses – adjusted 79.0 86.2 89.5 3.8%

% of net revenue – adjusted 3.6% 3.9% 4.1% 0.2 p.p.

Finance results, net

Grendene has a solid cash position, and its financial results are an important part of its profit. The purpose of the transactions carried out with foreign exchange rates is to serve as hedge mainly for receivables from exports. Grendene sells U.S. dollars in these transactions, whose long-term results are expected to be nearly zero. Accordingly, the finance result is basically influenced by the interest rate (Special System for Custody and Settlement (SELIC)) and the average cash held by the Company.

In 2015, the finance income totaled R$ 182.3 million, 34.5% more than in 2014, as shown below:


Finance income 183.1 220.4 421,3 91.2%

Interest received from customers 1.9 1.9 2.9 53.3%

Income from foreign exchange hedge - BM&FBOVESPA 18.2 16.6 66.3 298.9%

Income from financial investments 81.9 100.1 168.2 68.1%

Foreign exchange gains 40.2 41.9 118.8 183.5%

Adjustment to present value 38.7 54.7 61.0 11.5%

Other finance income 2.2 5.3 4.1 (21.3%)

Finance costs (79.5) (84.9) (239.0) 181.5%

Expenses of foreign exchange hedge - BM&FBOVESPA (26.2) (24.0) (123.6) 414.1%

Financing expenses (19.6) (21.8) (20.5) (6.1%)

Foreign exchange losses (28.5) (33.5) (80.3) 140.2%

Cofins and PIS tax on financial revenues (5.0) -

Other finance costs (5.1) (5.6) (9.6) 70.8%

Finance result, net 103.6 135.5 18.,3 34.5%

Discounts granted to customers are recorded in sales deductions in the consolidated financial statements.

Profit for the year

In recent years adjusted net profit (2014 and 2015) has risen by 17.9% p.a. (CAGR for the period 2013-15), with growth in all the Company’s margins: gross margin, operational margin and net margin.

In 2015 adjusted net margin improved by 5.3 p.p. from the previous year.


Profit for the year 433.5 490.2 551.2 12.4%

Net margin 19.8% 22.0% 25.0% 3.0 p.p.


Profit for the year - Adjusted 433.5 493.7 603.0 22.1%

Net margin - Adjusted 19.8% 22.1% 27.4% 5.3 p.p.

b. Changes in revenues attributable to changes in prices, exchange rates, inflation, changes in volumes and introduction of new products and services

Footwear

Our operational revenues are affected by changes in volumes of pairs sold, average prices, and, for exports, the exchange rate. The impacts of these items are shown in these tables:


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Gross revenue (R$ ’000)

2013 R$

2014 R$

Change, 2013 to 2014 2015 R$

Change, 2014 to 2015

R$ % R$ %

Domestic market R$ 2,146,918 2,077,729 (69,189) (3.2%) 1,899,226 (178,503) (8.6%)

Exports R$ 564,445 641,706 77,261 13.7% 730,761 89.055 13.9%

Exports US$ 261,604 272,649 11,045 4.2% 219,349 (53.300) (19.5%)

Total 2,711,363 2,719,435 8,072 17.5% 2,629,927 (88.450) (3.3%)

Sales volume (Thousands of pairs)

2013 R$

2014 R$

Change, 2013 to 2014 2015 R$


R$ % R$ %

Domestic market (DM) 165,667 152,751 (12,916) (7.8%) 134,474 (18,277) (12.0%)

Exports (EXP) 50,528 52,193 1,665 3.3% 45,926 (6,267) (12.0%)

Total 216,195 204,944 (11,251) (5.2%) 180,400 (24,544) (12.0%)

Average price (R$ )

2013 R$

2014 R$

Change, 2013 to 2014 2015 R$


R$ % R$ %

Domestic market R$ 12.96 13.60 0.64 4.9% 14.12 0.52 3.8%

Exports R$ 11.17 12.29 1.12 10.0% 15.91 3.62 29.5%

Exports US$ 5.18 5.22 0.04 0.8% 4.78 (0.44) (8.4%)

Total 12.54 13.27 0.73 5.8% 14.58 1.31 9.9%

Changes, in Reais, in total gross revenue from sales in the domestic and export markets, resulting from changes in volumes and average prices

2013 – 2014 2014 – 2015

DM Volume – (12,916 x R$ 12.96) (R$ 167,382) DM Volume – (18,277 x R$ 13.60) (R$ 248,605)

EXP Volume – (1,665 x R$ 11.17) R$ 18,600 EXP Volume – (6,267 x R$ 12.29) (R$ 77,052)

Change in revenue at 2013 prices (R$ 148,782) Change in revenue at 2014 prices (R$ 325,657)

DM – (R$ 0.64 x 152,751) R$ 98,193 DM – (R$ 0.52 x 134,474) R$ 70,102

EXP – (R$ 1.12 x 52,193) R$ 58,661 EXP – (R$ 3.62 x 45,926) R$ 166,107

Change in revenue at 2014 volumes R$ 156,854 Change in revenue at 2015 volumes R$ 236,209

Total R$ 8,072 Total R$ (89,448)

Changes, in US$, in total gross revenue from sales in the domestic and export markets, resulting from changes in volumes and average prices

2013 – 2014 2014 – 2015

EXP Volume – (1,665 x US$5.18) US$8,620 EXP Volume – (6,267 x US$5.22) (US$32,738)

Change in revenue at 2013 prices US$8,620 Change in revenue at 2014 prices (US$32,738)

EXP – (US$0.04 x 52,193) US$2,425 EXP – (US$0.44 x 45,926) (US$20,562)

Change in revenue at 2014 volumes US$2,425 Change in revenue at 2015 volumes (US$20,562)

Total US$11,045 Total (US$53,300)

Grendene’s business model is: operation in markets affected by fashion, where the Company, as a competitive distinction, regularly presents a large quantity of new models in each period. Each model offered by the Company is part of a collection which has an average life of approximately 90–180 days. Thus, in a typical year, between 95 and 98% of revenue comes from new products.


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c. Impact of inflation, of the variation in prices of principal inputs and products, of the exchange rate and of interest rates, on the issuer’s operational result and financial result

Each quarter Grendene presents new collections, proposing to the market a new base of prices (for each new collection). In this business model, any alterations of costs are passed through to final prices whenever there is demand for these products and the purchasing power of consumers so permits. Thus, inflation affects our result, affecting the income that the consumer has available for consumption of our products. Our principal inputs are commodities, prices of which are quoted in dollars on the international market.

The exchange rate influences our costs because it affects the prices in Reais of these commodity products when their prices are translated into Reais. However this is not a linear relationship, since the price of commodity products in dollars fluctuates in accordance with supply and demand in the international market; and also when the Brazilian Real appreciates, the price of commodity products in Reais becomes cheaper – although in these cases there is usually also a change in the price of the commodity products in dollars compensating a part of this effect. At the same time, the exchange rate affects our exports, since the great majority of our costs are in Reais. Interest rates do not affect the Company’s operational result: they only affect the line Financial revenue (expenses). The Company keeps a significant balance in cash and cash equivalents and financial investments (short- and long term) – that on December 31, 2015 was R $ 1,281.9 million (R $ 996.0 million in 2014). These funds, basically, are invested in the financial markets, yielding interest at rates close to the Selic rate. Any changes in interest rates in the market will affect the remuneration of these funds. Indirectly raising the interest rate may affect the purchasing power of our customers. This table shows the changes for the items listed:

2013 2014 Change % 2013–2014

2015 Change % 2014–2015

Average price per pair – DM – R$ R$ 12.96 R$ 13.60 4.9% R$ 14,12 3.8%

Average price per pair – EXP – R$ R$ 11.17 R$ 12.29 10.0% R$ 15,91 29.5%

Average price per pair – EXP – US$ US$5.18 US$5.22 0.8% US$4,78 (8.4%)

Overall average price – R$ R$ 12.54 R$ 13.27 5.8% R$ 14,58 9.9%

COGS per pair – R$ R$ 5.52 R$ 5.89 6.7% R$ 6,29 6.8%

FX rate – R$ / US$, end of period R$ 2.3426 R$ 2.6562 13.4% R$ 3,9048 47.0%

FX rate – R$ / US$, average of period R$ 2.1576 R$ 2.3536 9.1% R$ 3,3315 41.5%

IGP-M inflation index 3.6749% 10.5443%

IPCA inflation index 6.4076% 10.6735%


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10.3 - Events with material effects that have occurred or are expected, in the financial statements

a. Introduction or disposal of an operational segment

in 2013, 2014 and 2015 there was no introduction or disposal of an operational segment in our activities that caused, or is expected to cause in the future, a material effect on the Company’s financial statements or results.

b. Constitution, acquisition or disposal of a stockholding interest

in 2013 we formed a subsidiary company A3NP Indústria e Comércio de Móveis S.A., to operate in the furniture market. The investment in the company up to December 31, 2013 was approximately R$ 7.0 million, and by December 31, 2014 a further R$ 14.0 million had been spent, resulting in a total of R$ 21.0 million. In 2015 we provisioned the total of our investments in this company as a loss.

Also in 2013, Grendene UK Limited was formed, a 100% subsidiary of Grendene, whose corporate objects are commercial representation and distribution of the Company’s products in the United Kingdome.

In 2014 and 2015 we did not constitute, acquire or dispose of a material stockholding interest that caused a material effect on the Company’s financial statements or results.

c. Non-usual events, transactions or operations

In 2015 we provisioned the total of our investments in the subsidiary A3NP as a loss, with an accounting effect of R$ 52 million in the year 2015 – since we could not guarantee that there would be investors interested in our stockholding interest. This loss has no effect on our generation of cash in the year or in the future, and is non-recurring.

In 2014 there were no non-usual events or transactions in relation to the Company and/or its activities that caused a material effect on the Company’s financial statements or results.

In 2013 we made investments of approximately R$ 64 million adding annual production capacity of approximately 50 million pairs of shoes – which enabled us to reach installed production capacity for approximately 250 million pairs/year.


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10.4 - Significant changes in accounting practices – Qualifications or emphases in Auditors' Opinion

a. Significant changes in accounting practices

Accounting policies and measurement methods adopted in the preparation of the parent company and consolidated financial statements have not changed in relation to the financial statements at December 31, 2014. The individual and consolidated financial statements of the Company were prepared based on accounting practices adopted in Brazil and the rules of the Brazilian Securities Commission (Comissão de Valores Mobiliários – CVM), obeying the accounting rules arising from the Brazilian Corporate Law (Law 6404/76), and also in accordance with IFRS the International Financial Reporting Standards issued by the International Accounting Standards Board (IASB). These statements show all the material information of the financial statements, and only that information – which is consistent with the information used by management in its practice of managing the Company.

The Company has adopted all standards, revisions of standards and interpretations issued by IASB and that are effective for the financial statements at December 31, 2015. There are no non-current assets held for sale or discontinued operations at December 31, 2015 and 2014. Standards and interpretations of standards not yet in effect The standards that will be in effect for the year beginning January 1, 2016 are the following:

IFRS 11 – Joint Arrangements – Guidelines concerning the criteria related to the accounting treatment for the acquisition of interest in joint arrangements in accordance with the concepts comprised in IFRS 3 (Business combinations). The Company will evaluate this new rule, but it does not expect any impact from this rule on its financial statements.

IAS 16 and IAS 38 – Clarification of depreciation and amortization methods – The amendments provide additional guidelines on how depreciation or amortization of property, plant and equipment and intangible assets must be recorded. The amendments also clarify that the use of methods based on formulas to calculate depreciation of assets is not appropriate and limits their utilization to the amortization calculation. The Company will evaluate this new rule, but it does not expect any impact from this rule on its financial statements. The standard that will be in effect for the year beginning January 1, 2018 is the following:

IFRS 9 – Financial Instruments – IFRS 9 Financial Instruments completes the first part of the project to replace "IAS 39 Financial Instruments: Recognition and Measurement". Recognition and Measurement". IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value. The new approach is based on the manner in which an entity manages its financial instruments (its business model) and the contractual cash flow characteristic of financial assets. The standard also requires the adoption of only one method for determining losses on impairment of assets. The Company is evaluating this new rule, but it does not expect any impact from this rule on its financial statements.

IFRS 15 – Revenues from contracts with clients: IFRS 15 will replace practically all the rules for recognition of revenue. This single model aims to provide greater consistency and comparability of the practices for recognition of revenues between sectors, including new estimates and judgments, as well as new disclosure requirements. The Company is evaluating the impacts of adoption of this rule in its financial statements.

There are no other rules or interpretations issued and not yet adopted by the Company which could, in the opinion of Management, have a material effect on the Company’s result or on its disclosed stockholders’ equity.

b. Significant effects of the changes in accounting practices

In the opinion of Management, there are no other rules or interpretations issued and not yet adopted that might have a significant impact on the Company’s published net profit or equity position. c. Qualifications or emphases in the Auditor’s Opinion

There are no qualifications in the Auditor’s Opinion.


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10.5 - Critical accounting policies The main assumptions related to sources of uncertainty in future estimates and other important sources of uncertainty in estimates at the end of the reporting period, involving a significant risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year, are presented below. Loss on impairment of non-financial assets: An impairment exists when the book value of an asset or cash-generating unit exceeds its recoverable value, which is the defined as the greater of: (i) fair value less costs of sale, and (ii) value in use. The calculation of fair value less costs of sale is based on available information for transactions of sale of similar assets or market prices less the costs incurred for carrying out the sale. The calculation of value in use is based on discounted cash flow. The cash flow is derived from the estimates of profit for the next five years and does not include activities of reorganization to which the Company has not yet committed or material future investments which will improve the asset base of the cash generating unit that is the subject of the test. Recoverable value is sensitive to the discount used in the discounted cash flow method, to expected receipts of future cash, and to the growth rate used for the purposes of extrapolation. Taxes: Tax regulations in Brazil are complex, which raises uncertainties as to their interpretation and to the amount and timing of future taxable profits. Accordingly, any differences between actual results and assumptions adopted, or future changes in these assumptions, could require future adjustments to the tax credits and expenses already recognized. The Company did not recognize a provision in this respect based on several factors, such as experience of past tax audits, diverging interpretations of tax regulations, and systematic assessments carried out jointly by the Company's management and its tax advisors. Fair value of financial instruments: When the fair value of financial assets and liabilities stated in the balance sheet cannot be obtained from active markets, it is determined using valuation techniques, including the discounted cash flow method. The data for these methods is based on those practiced in the market, whenever possible. However, when this is not possible, a certain level of judgment is required to establish the fair value. Judgment includes considerations on data utilized, such as liquidity risk, credit risk and volatility. Changes in assumptions concerning these factors could affect the reported fair value of the financial instruments. Provisions for labor, tax and civil risks: The assessment of the likelihood of loss includes the evaluation of available evidence, the hierarchy of laws, available case law, recent court decisions and their importance in the legal system, as well as the opinion of outside legal advisors. Provisions are reviewed and adjusted to take into consideration changes in circumstances, such as applicable statute of limitation periods, conclusions arising from tax audits or additional exposures identified based on new issues or court decisions. Other significant items subject to estimates include: selection of the useful lives of property, plant and equipment assets and intangible assets; estimated losses for doubtful receivables; estimated losses for punctuality discounts; estimated losses of inventories; deferred income tax and Social Contribution Tax; the rates and periods applied in determination of adjustments to present value of certain assets and liabilities; fair value of share-based remuneration; and the sensitivity analysis of financial instruments. In general the losses recorded in these items have been insignificant in relation to the Company’s scale. The PP&E assets whose useful life could vary have low individual value and even in aggregate do not represent significant portion of all the assets held by the Company. Credits receivable from clients represent a significant value in aggregate, but since sales are extremely spread out, no individual client represents a very large risk and historically the provisions for losses have been sufficient.


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10.6 – Material items not evidenced in the financial statements a. Assets and liabilities held by the Issuer, directly or indirectly, that do not appear in its balance sheet (off-balance

sheet items), such as:

i) Operational leasing transactions, as lessor or lessee

Not applicable

ii) Portfolios of receivables written off on which the entity maintains risks and responsibilities, including respective liabilities

Not applicable

iii) Contracts for future purchase and sale of products or services

Not applicable

iv) Construction contracts that have not been terminated

Not applicable

v) Contracts for future receipts of financings

Not applicable

b. Other items not evidenced in the financial statements

The Company does not maintain any operations, transactions, contracts, obligations or other types of commitments with subsidiaries that are not consolidated or other transactions capable of generating a significant effect, in the present or the future, on its financial situation, and/or changes in its financial situation, revenues or expenses, operational results, liquidity, capital expenditure or capital resources that are not recorded in its Statement of financial position (Balance sheet).


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10.7 - Comments on the items not evidenced in the financial statements There are no other material items that are not evidenced in our financial statements.

a. How such items changed or could change the revenue, expenses, operational result, financial expenses or other items of the financial statements of the Issuer

Not applicable

b. The nature and purpose of the transaction

Not applicable

c. The nature and amount of the obligations assumed and of the rights generated in favor of the Issuer as a result of the transaction

Not applicable


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10.8 - Business plan a. Capital expenditure, including:

i) Quantitative and qualitative description of the investments in progress, and of the investments foreseen In 2013 there was an increase in expenses as a result of the expansion of production capacity by 25%, with expansion of the facilities and acquisition of machines and equipment. In 2014 investments were in maintenance of industrial buildings and facilities, replacement of fixed assets, acquisition of new equipment for modernization of the industrial plant and better efficiency of production, and a complement of the investment in A3NP Indústria e Comércio de Móveis S.A.

On December 31, 2015 the largest investments were in maintenance of industrial buildings, replacement of fixed assets, and acquisition of new equipment for modernization of the manufacturing plant and better efficiency of production. This table shows the investments in the respective years:

R$ ’000 2013 2014 2015 Change, %, 2014 to 2015

Investments 154,036 119,090 73,225 (38.5%)

In 2016 our forecast is investment of R$ 80 and R$ 90 million in maintenance of our production capacity.

The quantitative and qualitative descriptions of the investments in progress and of the investments planned are given in items 10.8.b and 10.8.c.

ii) Sources of financing of the investments

The Company is in a position to finance all the investments with its own funds.

iii) Significant disinvestments in progress, and disinvestments planned

At the end of 3Q15 we reaffirmed that the results of A3NP, an investment made by Grendene in a company in the furniture sector, were not satisfactory. We found that due to the substantial change in the economic scenario between the initial plan in 2012, and 2015, the speed of growth of this business would be much lower, with substantial additional needs for capital to make it viable. Thus new inputs of capital would be necessary to make the business plan viable, taking into account the substantial changes in the economic scenario and the development of the Company to a level of activity compatible with the interest of Grendene. However, there was not an agreement between the partners of A3NP for capitalization, and Grendene’s management decided to invest in the business only the small amounts that would be necessary to make sale of its equity interest possible, or some other alternative for termination of the activities.

b. Provided they have been published, indicate the acquisition of plants, equipment, patents or other assets that are expected to materially influence the issuer’s productive capacity

We do not have any plans for acquisition of industrial plant, equipment, patents or other assets that are likely materially to influence our productive capacity.

c. New products and services, indicating:

Grendene operates in the sector of footwear, with strong components of fashion, and its business model is similar to that which is known in the market as ‘fast fashion’, which consists of launch of many products in a year, comprising various collections. Thus, Grendene’s portfolio of products is entirely renewed with each successive period of 90 to 180 days.

To guarantee the success and acceptance of these collections Grendene continually accompanies the market, keeping close communication with the points of sale, and carries out market research with the target consumers on its proposals for launches. Participation in many Brazilian and international fairs, where the reactions of purchasers in relation to the products can be observed and tested, is also a part of this effort.


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10.8 - Business plan

i) Description of research in progress already published

Grendene does not disclose work in progress, due to the characteristics of its business, but shows the result in the form of products in its launches, which usually take place during participations in fairs and events.

ii) Total amounts spent by the issuer in research for development of new products or services

R$ mn 2013 2014 2015 Change, 2014 to 2015

Investment in research and development of new products 49.9 45.4 49.5 (9.0%)

iii) Projects in development already disclosed

See items 10.8.b and 10.8.c.

iv) Total amounts spent by the issuer in development of new products or services

We do not distinguish these expenses from those presented in item 10.8.c.ii.


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10.9 – Other factors with material influence

The expenses on advertising are described in item 10.2.a.i. The company has a policy of investing between 8% and 10% of annual net revenue in advertising and marketing.

There are no other factors that significantly influenced the operational performance and which have not been identified or commented on in the other items of this section.


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11.1 – Guidance forecasts and assumptions

Grendene publishes its long-term expectations to the market. In 2008 it established targets to be achieved by 2013, subsequently extended to 2015, and later further extended to 2018 – thus referring to the period 2008 to 2018, as follows: Targets maintained for the 2008–2015 period and extended up to 2018:

Growth of gross revenue at a compound annual growth rate (CAGR) between 8% and 12% (2008-2018).

Growth of profit at a compound annual growth rate (CAGR) between 12% and 15% (2008-2018).

In this period Grendene aims at keeping advertising expenses at an average of 8% to 10% of net revenue. We understand that during this period some years may present a higher growth rate and others a lower growth rate, but on average we intend to achieve these targets. Based on our experience, gross revenue in the ten-year period (CAGR) from 2008 to 2018 will grow from 8% to 12% p.a. and profit will increase by 12% to 15% p.a. Reasons for maintaining the targets announced – and why the risk of not achieving them has increased: Since 2011 the Brazilian economic situation has been deteriorating, with very low levels of growth and, in 2015, an accentuated reduction in GDP, which many analysts expect to be repeated in 2016. If this scenario is confirmed, we will have a total contraction of GDP in two years of approximately 8%. At the same time, Grendene continues to seek, with great effort and creativity, to adapt itself to the conditions of the market, and has shown great flexibility in obtaining growing results even while dealing with this adverse economic context. However, we cannot guarantee that we will obtain the same level of growth in results if this deterioration continues to deepen in 2017 and 2018. Naturally, when making our guidance forecasts we admit, the possibility that we may have some bad years in the economy, in Grendene, or in both. But in 2008, when we set these targets, we certainly did not foresee so many years, in succession, of deterioration in the economy. What has prevented the situation being more serious is that in this period we have had many good years in Grendene, offsetting the negative effects of the market and delivering results within the band that we forecast. As we have noted on other occasions, clearly we cannot guarantee that we will always outperform even if the economy continues to deteriorate. On the positive side, we call attention to the concept that Grendene is Brazil’s largest exporter of footwear, and the exchange rate has favored margins on exports. We continue to break records of productivity and to control our costs and expenses very well. We have succeeded in passing cost increases through to prices, even though not immediately, and we continue to attract consumers in Brazil and the rest of the world. These characteristics can be seen as evidenced by our increasing margins even with reductions in volume. It is also worth noting that while a fall in volume causes an effect in terms of increase of costs, this only does not appear because we have compensated with productivity, price and efficiency. For these reasons, although we are aware of the greater risk, we maintain our guidance targets. As always, we will position ourselves for this economic environment, and we expect to obtain better results in 2016 than in 2015, probably with lower volumes. Gaining market share will be a challenge in this context, and the gains in margin will have to come from prices, innovative products, and efficiency. Based on this outlook, and having made these comments, it is our judgement that Grendene has a reasonable expectation of being able to achieve the targets announced for the period 2008–2018. Comparison of performance with targets: Although the growth in gross revenue was slightly lower than the range of expectations, Net profit (adjusted, in both cases – 2014 and 2015) was close to the top of our range of expectation.

Performance – compound average growth rate (CAGR) in 2008–2015:

R$ million 2008 2009 2010 2011 2012 2013 2014* 2015* CAGR

Gross revenue R$ 1,576.0 R$ 1,819.4 R$ 1,998.6 R$ 1,831.6 R$ 2,324.5 R$ 2,711.4 R$ 2,719.4 R$ 2,630.0 7.6%

Change, YoY 15.4% 9.9% (8.4%) 26.9% 16.6% 0.3% (3.3%)

Net profit R$ 239.4 R$ 272.2 R$ 312.4 R$ 305.4 R$ 429.0 R$ 433.5 R$ 490.2 R$ 603.0 14.1%

Change, YoY 13.7% 14.8% (2.2%) 40.5% 1.1% 13.1% 22.1%

* Figures adjusted to exclude non-recurring effect in A3NP.


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11.1 – Guidance forecasts and assumptions

R$ million 2008 2009 2010 2011 2012 2013 2014 2015 CAGR

Advertising expenses R$ 107.6 R$ 116.1 R$ 127.1 R$ 138.7 R$ 147.0 R$ 163.7 R$ 169.2 R$ 148.9 4.7%

% of Net revenue 8.6% 8.0% 7.9% 9.4% 7.8% 7.5% 7.6% 6.8%

As shown, net profit in 2015 was the largest in the last eight years (both adjusted and non-adjusted), in spite of the seriously adverse situation of Brazil’s economy.


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11.2 - Monitoring of and changes to the forecasts published

Updated on October 20, 2016

Comparison of performance with targets

Although the growth of the accumulated gross revenue (9M16) was lower than the range of our guidance for the long term (8 years), net profit was at the lower end of the range of our guidance.

Performance: CAGR, in the third quarters of the years 2008 – 2016:

R$ million 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 CAGR

Gross revenue 457.9 475.5 546.4 511.3 613.0 739.0 730.1 733.9 654.0 4.6%

YoY change 3.9% 14.9% (6.4%) 19.9% 20.6% (1.2%) 0.5% (10.9%)

Net profit 73.3 65.6 104.8 83.5 119.4 122.1 126.6 136.3 150.9 9.5%

YoY change (10.5%) 59.7% (20.3%) 43.0% 2.2% 3.7% 7.7% 10.7%


Advertising expenses 32.3 33.9 44.4 46.3 42.9 45.7 53.4 54.9 35.6 1.2%

% of Net revenue 9.0% 9.0% 10.2% 11.2% 8.6% 7.6% 8.9% 8.9% 6.6%

Performance: CAGR, in first nine months of the years 2008 – 2016:

R$ million 9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 CAGR

Gross revenue 1.076.1 1.218.7 1.394.0 1.210.6 1.521.1 1.847.3 1.834.2 1.833.8 1.719.8 6.0%

YoY change 13.2% 14.4% (13.2%) 25.6% 21.4% (0.7%) (0.02%) (6.2%)

Net profit 156.7 187.2 189.7 183.9 261.0 290.6 297.8 362.7 387.5 12.0%

YoY change 19.2% 1.4% (3.1%) 41.9% 11.4% 2.5% 21.8% 6.8%

R$ million 9M08 9M09 9M10 9M11 9M12 9M13 9M14 9M15 9M16 CAGR


% of Net revenue 8.2% 7.4% 7.4% 8.7% 8.3% 7.1% 7.1% 6.6% 5.8%

With these results, and for the reasons that we set out below, we maintain the projection of our targets for the long term, as previously published, for the period 2008-2018, and we now repeat them here: Targets for the period 2008–2018 are maintained:

Compound average growth rate (CAGR) of gross revenue between 8% and 12%.

CAGR of net profit between 12 % and 15%.

Objective of maintaining advertising expenses at an average of 8% to 10% of net revenue over this period.

Reasons for maintaining the targets announced – and why the risk of not achieving them has increased:

From February this year, when we published 2015 results and reaffirmed our long-term guidance, to the present moment nothing has changed significantly, except that we have been successful in maintaining the growth of our results in spite of all the risks that we warned of, and the real difficulties that we faced.

With the major political issues that had immobilized the country now resolved, we are beginning to see, if not an improvement, a reduction in the deterioration, of the level of economic activity. We certainly still have major challenges ahead. Unemployment, indebtedness and reduction of individuals’ income will still affect consumption for some time, in our view, exactly how much time being difficult to predict. However, we do not risk forecasting significant improvements for this year, or even for the start of next year. As we have alerted before, in this economic scenario our capacity to forecast results is lower.

However, we can guarantee that when the recovery comes – and it will come – Grendene will be prepared with its financial and operational capacities intact, in spite of the period of pressure that we have been through.

As always, we will position ourselves for this economic environment, although it is difficult to establish an expectation for our profit in 2016, and we do not yet know whether or not our results will be better than in 2015. In the first 9 months, our results have been higher, but in the present economic environment this is not a guarantee for the rest of the year. In comparison to the end of June, we continue to increase our medium-term expectations, but we maintain caution on our forecasts. Very probably, volumes this year will be lower. Gaining market share continues to be a challenge, and the results of export will depend on how the exchange rate develops. We should make it clear that we are profitable at the present exchange rate, but we will be even more profitable if the Real depreciates again, in the fourth quarter when the volume of exports is higher.

Our policy will continue to be to preserve margins, and whenever possible obtain results that are higher in absolute terms.


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Updated on July 28, 2016


Although the year-on-year growth of gross revenue from 1H15 to 1H16 was lower than the range of expectations, net profit was close to the top of our range of expectations.

2Q Performance: CAGR, in second quarter of year, 2008 – 2016:


Gross revenue 286.9 371.7 391.0 307.2 412.6 504.7 488.7 462.0 499.2 7.2%

YoY change 29.6% 5.2% (21.4%) 34.3% 22.3% (3.2%) (5.5%) 8.1%

Net profit 42.4 57.3 38.0 36.9 59.5 66.2 73.7 88.7 93.0 10.3%

YoY change 35.2% (33.7%) (3.1%) 61.4% 11.2% 11.4% 20.2% 4.9%



% of Net revenue 9.1% 6.7% 6.5% 8.2% 8.6% 6.6% 6.6% 5.6% 5.9%

1H Performance: CAGR, in first half of year, 2008 - 2016:

R$ million 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 CAGR

Gross revenue 618.2 743.2 847.6 699.3 908.1 1,108.3 1,104.1 1,099.9 1,065.8 7.0%

YoY change 20.2% 14.1% (17.5%) 29.8% 22.0% (0.4%) (0.4%) (3.1%)

Net profit 83.4 121.6 84.9 100.4 141.5 168.5 171.2 226.4 236.6 13.9%

YoY change 45.8% (30.1%) 18.2% 41.0% 19.1% 1.6% 32.3% 4.5%

R$ million 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 CAGR


% of Net revenue 7.7% 6.4% 5.6% 6.9% 8.0% 6.7% 5.9% 5.0% 5.2%

With these results, and for the reasons that we set out below, we maintain the projection of our targets for the long term, as previously published, for the period 2008–2018, and we now repeat them here:

Targets for the period 2008–2018 are maintained:

Compound average growth rate (CAGR) of gross revenue between 8% and 12%.

CAGR of net profit between 12 % and 15%.

Aim to keep average advertising expenses between 8% and 10% of net revenue over the period.

Reasons for keeping our targets – and why the risk of not achieving them has increased:

From February of this year, when we published our 2015 results – reaffirming our long-term targets – to the present moment, nothing has changed significantly.

The economic environment bottomed out after a major deterioration, and has begun to stabilize. However, we are still living a moment of political uncertainty, due to the lack of clarity on the process of impeachment, and the weight for solutions on the public debt – which, as we have mentioned before, indicates increase in the tax burden. Thus, the risk of our expectations materializing or not is in our view unchanged – in other words, our capacity for foreseeing results and outcomes is less than it was. We will continue to pursue the results that we aim to achieve through our continuous adaptation to the economic situation – which was clearly in evidence both in 1H16, as in so many previous situations – but clearly we cannot foresee how much the Brazilian economy may yet deteriorate, or when some kind of solid and continuous recovery may begin. At the same time we have some very positive factors for dealing with this harsh reality: our financial solidity and complete independence, our position in the international markets, and our skills and capacity for adaptation. For these reasons, although we are aware of the greater risk, we maintain our guidance targets.

As always, we will position ourselves for this economic environment, although it is difficult to establish an expectation for the bottom line for 2016, and we do not know whether or not our results will be better than in 2015. Compared to the end of 1Q16 we are now more optimistic, but we continue to be cautious in our forecasts. Very probably, volumes will be lower. Gaining market share will be a challenge, and the results of exportations will depend on how the exchange rate develops. We should make clear that we are profitable with the present exchange rate; but we will be even more profitable if the exchange rate raises, especially in 4Q when the volume of exports is higher.

The central aim of our policy will continue to be to preserve margins, and whenever possible obtain results that are higher in absolute terms.


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Updated on April 28, 2016


Although the growth in Net revenue was lower than the range of expectations, Net profit was above the top of the range of our expectation:

Performance: CAGR in the first quarters of the years 1Q08–1Q16:

R$ mn 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 CAGR

Gross revenue 331.4 371.5 456.6 392.1 495.4 603.6 615.4 637.9 566.6 6.9%

YoY change 12.1% 22.9% (14.1%) 26.3% 21.8% 2.0% 3.7% (11.2%)

Net profit 41.0 64.3 46.9 63.5 82.1 102.3 97.5 137.8 143.6 17.0%

YoY change 56.8% (27.0%) 35.5% 29.1% 24.7% (4.8%) 41.4% 4.2%

R$ Mn 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 CAGR


% of Net Sales Revenue 6.6% 6.1% 4.9% 5.9% 7.6% 6.8% 5.3% 4.5% 4.7%

With these results in, and for the reasons set out below, we maintain the projection of our targets for the long term as previously published, for the period 2008-2018. We repeat them here: Targets for the period 2008–2018 – maintained:

CAGR (Compound average growth rate) of gross revenue: between 8% and 12%.

CAGR of net profit: between 12 % and 15%.

Advertising expenses: average, from 8% to 10% of net revenue over this period.

Reasons for maintaining the targets – and why the risk of not meeting them has increased

Nothing has changed significantly since February – when we published our 2015 results, and reaffirmed that we were maintaining our long-term targets.

The economic environment continues its path of deterioration. This of course contaminates all sectors of the economy, and for us means that we still see no outlook for improvement in the domestic market. The actions at the macro level that are necessary for a possible reversal of this situation are not even being thought about in Brazil’s current situation of political paralysis – which indeed, in our view, offers no chance for predicting when the deterioration might stop. The result is that, in our perception, the risk of our expectations not materializing has – as we warned previously – increased: in other words, our capacity for foreseeing results and outcomes is less than it was. We will continue to pursue the results that we aim to achieve, through our continuous adaptation to the economic situation, but we cannot foresee how much the Brazilian economy may yet deteriorate. At the same time we do have some very positive factors for dealing with this harsh reality: our financial solidity and complete financial independence; our position in the international markets; and our skills and capacity for adaptation. For these reasons, although we are aware of the greater risk, we maintain our guidance targets.

As always, we will position ourselves for this economic environment, although it is difficult to establish an expectation for the bottom line for 2016; and we do not know whether or not our results will be better than in 2015. Very probably, volumes will be lower. Gaining market share will be a challenge, and the results of exports will depend on how the exchange rate develops. It is already clear that we are profitable with the exchange rate at R$ 3.50/US$, but we will be even more profitable if the exchange rate goes above R$ 4/US$, especially in 4Q when the exports volume are higher.

The central tenet of our policy will continue to be: to preserve margins; and whenever possible obtain results that are higher in absolute terms.


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12.1 - Description of the administrative structure

a. Attributions of each body The Company is managed by the Board of Directors and by the Executive Board in accordance with the law and the By-laws. The members of the Board of Directors are elected by the General Meeting of Stockholders, and the members of the Executive Board are elected by the Board of Directors. The Board of Directors has the following attributions under Clause 21 of the By-laws: a. To elect, and to dismiss, the members of the Executive Board and to set their attributions, including the Chief Investor

Relations Officer. b. To approve the internal regulations of the Company, if any. c. To set the general orientation of the business of the Company and of any company controlled by the Company (“Subsidiary”); d. To approve a Business Plan for the Company and its Subsidiaries and any capital investment and any investment or capital

expenditure that is not included in such Plan. e. To monitor and inspect the management by the Chief Officers, examining, at any time, the minutes, books and papers of the

Company and of its Subsidiaries, requesting information on contracts entered into, or in the process of being entered into, and any other acts.

f. To call the General Meeting of Stockholders, in accordance with Clause 9 above, whenever necessary, or whenever required

by law, and in accordance with these By-laws. g. To make statement of opinion on the report of management and the accounts presented by the Executive Board and the

annual and/or interim financial statements and to propose application of the net profit for each year. h. To decide on the issuance of shares or warrants within the limit of the authorized capital. i. To authorize acquisition by the Company of shares issued by the Company to be held in treasury and/or for subsequent

disposal. j. To decide on issuance of debentures not convertible into shares and without real guarantee, and of promissory notes for

public distribution in the terms of CVM Instruction 134. k. To appoint and dismiss the Company’s external auditors. l. To authorize the raising of any loans or financings, by the Company or by any Subsidiary, the amounts of which, when

considered jointly with all such amounts over the period of 3 (three) months prior to the transaction, result in an aggregate amount greater than R$ 300,000,000.00 (three hundred million Reais).

m. To authorize disposal of, or placement of a lien or charge upon, any of the permanent assets of the Company or of any

Subsidiary, the amount of which, when considered jointly with all such amounts over the period of 3 (three) months prior to the transaction, results in an aggregate amount greater than R$ 360,000,000.00 (three hundred sixty million Reais).

n. To authorize the provision of real or personal guarantees of any nature by the Company or by any Subsidiary the amounts of

which, when considered jointly with all such amounts over the period of 3 (three) months prior to the transaction, result in an aggregate amount greater than R$ 360,000,000.00 (three hundred sixty million Reais).

o. To authorize carrying out of acts that result in waiver of rights by the Company or by any subsidiary the amounts of which,

when considered jointly with all such amounts over the period of 3 (three) months prior to the transaction, result in an aggregate amount greater than R$ 45,000,000.00 (forty five million Reais).

p. To set the general conditions of, and to authorize the Company to enter into, contracts of any nature between the Company

and any Subsidiary or Affiliated company or any of their managers or controlling stockholders, or between the Company and any company controlled by or affiliated with the managers or the controlling stockholders, and also with any other companies which are, by law or de facto, part of a single group with any such parties, when the individual values of any such contracts amount, individually or jointly, over a period of one year, to 1% or more of the Company’s stockholders’ equity.


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q. To make statement of position on such subjects as the Executive Board presents to it for its consideration or to be submitted

to the General Meeting of Stockholders. r. To decide on the suspension of the activities of the Company or of any subsidiary. s. To take upon itself, at any time, examination of any subject relating to the business of the Company and its Subsidiaries that is

not in the private sphere of competence of the General Meeting of Stockholders. t. To decide the list of three companies specialized in economic valuation of companies, for the preparation of the Valuation

Opinion on the Company’s shares, in the event of cancellation of the Company’s registry with the CVM, or its leaving the Novo Mercado.

u. To approve the contracting of the depositary institution to provide the book-entry share services. v. To state a position in favor of or contrary to any public offer for acquisition of shares in the Company, through a prior Opinion

Statement, expressed with grounds, which must be published no later than 15 (fifteen) days after publication of the announcement of the public offer for acquisition of shares, and such Opinion Statement must deal with at least the following subjects: (i) whether the public offer for acquisition of shares is convenient and opportune in relation to the interests of the

stockholders as a group, and in relation to the liquidity of the securities they hold; (ii) the repercussions of the public offer for acquisition of shares on the interests of the Company; (iii) the strategic plans published by the offering party in relation to the Company; (iv) any other points that the Board of Directors considers to be relevant, and the information required by the applicable rules

established by the CVM. §1 The amounts mentioned in items 'l', 'm', 'n' and 'o' above shall be adjusted annually as from April 7, 2014, by the IGP-M index of the Getúlio Vargas Foundation or such index as may in the future substitute it. The Executive Board has the function of representing the Company in court or otherwise in the plaintiff or defendant role. Under Clause 26 of the By-laws, except as provided in Clause 27, active and passive representation of the Company, in Court or otherwise, shall be exercised individually by the Chief Executive Officer or by the Deputy Chief Executive Officer, or: (a) by 2 (two) members of the Executive Board jointly, (b) by one member of the Executive Board jointly with a person holding a power of attorney with special and specific powers, or (c) by two persons holding powers of attorney with such powers. Powers of attorney granted by the Company shall be signed individually by the Chief Executive Officer or by the Deputy Chief Executive Officer, or by 2 (two) members of the Executive Board jointly, or by one member of the Executive Board jointly with a person holding power of attorney, and must contain specific powers and period of validity not greater than 2 (two) years (except in the case of a grant of such powers ad judicia et extra as the Executive Board may from time to time authorize). Also, under Clause 27 of the By-laws, without prejudice to the provisions of Clause 26, the Company may be represented by 1 (one) member of the Executive Board or, further, by 1 (one) person holding a power of attorney with specific and special powers, including for grant of power of attorney, in the terms of Clause 26 above, acting in isolation, in the following circumstances: a. In routine matters before federal, state and municipal public bodies, independent authorities and mixed public-private sector

companies, including but not limited to the following: the National Social Security Institute (INSS), the Workers’ Time of Service Guarantee Fund (FGTS) administered by the Federal Savings Bank (CEF), the Federal Tax Revenue Department, including Inspectors’ Offices, Federal Revenue Department Delegations and Agencies, State and/or Municipal Tax Authorities, State Commercial Boards, the National Industrial Property Institute, the Brazilian Central Bank, Secex, Banco do Brasil S.A., the Securities Commission (CVM), Ibama or other environmental bodies, the Civil Aviation Department (DAC) and Infraero, securities and commodities exchanges, Sudene/Adene, Sudam/Adam, state banks, development banks, and lending and investment financial institutions.

b. In collection and receipt of credits in favor of the Company. c. In signature of correspondence on routine matters.


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d. In representation of the Company in General Meetings of Stockholders of its Subsidiaries. Audit Board The Company’s Audit Board, with the attributions and powers that the law confers upon it, comprises 3 (three) sitting members and an equal number of substitute members, who may be stockholders, elected by the General Meeting of Stockholders, from among persons resident in Brazil, provided that they meet the legal requirements for the position. §1 The Audit Board functions in a non-permanent manner, being brought into being only when the General Meeting of

Stockholders so decides, in obedience at all times to the provisions of Law and these By-laws. §2 The Audit Board elects its Chairman in the first Meeting and functions in accordance with the internal regulations approved

by the General Meeting of Stockholders that decides on its installation, if any. §3 The decisions of the Audit Board shall be taken at all times by absolute majority of votes and shall be written, in the form of

Minutes, in the specific book for the purpose, and signed by all those present. §4 The General Meeting of Stockholders shall set the fees of the Audit Board, when functioning, subject always to the

provisions of Law. §5 Members of the Audit Board may take office only after signing the 'Term of Consent by Members of the Audit Board'

referred to in the Novo Mercado Listing Regulations. b. Date of the Audit Board being installed, and if it is not permanent, the date of creation of the committees. The Audit Board was installed on April 11, 2016. The Company has had the Audit Board in place in the last three business years (2013, 2014 and 2015). c. Mechanisms for assessment of the performance of each body or committee The Company does not have committees. We believe that the assessment of the Board of Directors and the Audit Board should be made by the stockholders who elected them. We are not aware whether this assessment is made, nor in the event that it is made, what criteria or mechanisms are adopted. d. In relation to the members of the Executive Board, their individual attributions and powers: See item 'a' - The Executive Board. e. Mechanisms for assessment of the performance of the members of the Board of Directors, the committees and the Executive Board. - Board of Directors See item 10 c. - Executive Board Assessment of the performance of the Chief Officers are made by the Board of Directors of the Company, based on the overall result of the Company and on their accompaniment of the activities of the Chief Officers over the course of the year. - Audit Board See item 10 c.


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12.2 – Rules, policies and practices in relation to the General Meetings of Stockholders.

a. Convocation period The first convocation must be made at least 15 (fifteen) days in advance of the date set for the General Meeting of Stockholders, counted from the publication of the first convocation announcement, which must contain the location, date and time of the meeting, and the agenda. If the General Meeting of Stockholders does not take place after first convocation, a further advertisement shall be published, of second convocation, with minimum prior notice of 8 (eight) days. b. Competencies A General Meeting of Stockholders that is called and opened in accordance with the applicable legislation and the provisions of the By-laws has powers to decide all the matters relating to the objects of the Company and to take all such resolutions as it sees fit for the Company's defense and development. c. Addresses (physical or web) at which the documents relating to the General Meeting will be at the disposal of the Stockholders - Physical address: Avenida Pimentel Gomes, 214, CEP 62040-125, Sobral, Ceará, Brazil. - Web address: http://ri.grendene.com.br d. Identification and management of conflict of interests In the event of an interest conflicting with the matter on the agenda, under Brazilian legislation the stockholder is prohibited from giving his or her vote. The Company applies this as an overall rule: No stockholder with a conflict of interest may vote on a matter on the agenda. e. Request for powers of attorney to exercise the right to vote. The request for powers of attorney follows the legal and regulatory requirements. f. Formalities necessary for acceptance of powers of attorney granted by stockholders, indicating whether the issuer requires or dispenses the need for recognition of signature, notarization, consularization and sworn translation and whether the issuer allows powers of attorney granted by stockholders by electronic means The Company does not allow powers of attorney by electronic means. g. Formalities necessary for remote acceptance of a voting paper when sent directly to the Company, indicating whether the issuer requires or dispenses with requirement of recognition of signature, notarization and consularization The Company has not implemented remote voting. h. Whether the Company makes an electronic system available for receipt of a remote voting notice or remote participation The Company has not implemented the electronic system for receipt of a remote voting or participation notice. i. Instructions for the stockholder or group of stockholders to include in a remote voting notice any proposals for decision, groups of candidates, or candidates to membership of the Board of Directors and/or the Audit Board The Company has not implemented the electronic system for receipt of a remote voting or participation notice. j. Whether the Company makes web forums or web pages available to receive and share stockholders’ comments on the agendas of general meetings The Company has not implemented the electronic system for receipt of a remote voting or participation notice. k. Other information necessary for remote participation and exercise of remote voting The Company has not implemented the electronic system for receipt of a remote voting or participation notice.

http://ri.grendene.com.br/


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12.3 – Rules, policies and practices relating to the Board of Directors

The Board of Directors shall consist of at least five and a maximum of seven sitting members, all stockholders, of which at least 20% (twenty per cent) must be Independent Members as defined in the Listing Regulations of the Novo Mercado. The periods of office of the members of the Board of Directors shall run concurrently, being a maximum of 2 (two) years, re-election being permitted. The following are the present members of the Board of Directors:

Member Position Date of election:

Alexandre Grendene Bartelle Chair April 11, 2014

Pedro Grendene Bartelle Vice-Chair April 11, 2014

Maílson Ferreira da Nóbrega Board Member April 11, 2014

Oswaldo de Assis Filho Board Member April 11, 2014

Renato Ochman Board Member April 11, 2014

Walter Jansen Neto Independent board member April 11, 2014

a. Frequency of meetings

The Board of Directors shall meet, ordinarily, 4 (four) times a year, and, extraordinarily, whenever called by the Chair or by the Vice-Chair or by decision of the majority of the members, or by request of the Executive Board.

In 2015, the meetings of the Board of Directors of the Company were held on the dates shown below:

2015

02/12/2015

04/23/2015

07/232015

10/22/2015

b. Please state, if any, the provisions of the Stockholders' Agreement that restrict or bind Board Members' right to vote

There is no restraint on the exercise of the right to vote nor is it bound in any way.

c. Rules for identification and management of conflicts of interest

In accordance with the Corporate Law, any member of the Board of Directors is prohibited from voting in any Meeting or meeting of the Board, or to operate in any transaction or business, in which he or she has interests conflicting with those of the Company.


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12.4 – Description of the commitment clause for resolution of disputes through arbitration.

The Company, its stockholders, its managers and the members of its Audit Board undertake to resolve by means of arbitration, before the Market Arbitration Chamber, all and any dispute or controversy that may arise between them, relating to or arising from, in particular, the application, validity, efficacy, interpretation, violation, or their effects, of the provisions contained in the Corporate Law, the Company’s by-laws, the rules issued by the National Monetary Council, by the Brazilian Central Bank or by the Brazilian Securities Commission, or in the other rules applicable to the functioning of the capital market in general, as well as those contained in the Listing Regulations of the Novo Mercado, the Arbitration Regulations, the Sanctions Regulations and the Novo Mercado participation agreement.


Page 107 of 243

12.5 / 6 - Composition and professional experience of the management. Name Birth date Management body Date of election Period of office Number of

Consecutive Mandates

Personal tax number (CPF) Profession Elected position held Date of swearing-in

Was elected by the controlling stockholder

Percentage of participation in meetings

Other positions and functions held in the Issuer

Francisco Olinto Velo Schmitt 10/16/1955 Is a member only of the Executive Board 02/25/2016 3 years 4

263.637.980-00 Electrical engineer 12 - Investor Relations Director 02/25/2016 Yes 0.00%

Chief Administrative and Financial Officer

Rudimar Dall Onder 08/14/1956 Is a member only of the Executive Board 02/25/2016 3 years 5

254.626.870-87 Mechanical Engineer 10 - CEO / General Manager 02/25/2016 Yes 0.00%

Does not hold other positions in the Issuer

Gelson Luis Rostirolla 02/14/1953 Is a member only of the Executive Board 02/25/2016 3 years 5

148.411.429-91 Company manager 11 - Deputy CEO / General Manager 02/25/2016 Yes 0.00%


Maílson Ferreira da Nóbrega 14/05/1942 Is a member only of the Board of Directors 04/11/2016 2 years 6

043.025.837-20 Economist 22 - Board of Directors (Sitting member) 04/11/2016 Yes 75.00%


Oswaldo de Assis Filho 11/02/1950 Is a member only of the Board of Directors 04/11/2016 2 years 6

761.798.778-15 Business manager and Economist

22 - Board of Directors (Sitting member) 04/11/2016 Yes 100.00%


Pedro Grendene Bartelle 01/23/1950 Is a member only of the Board of Directors 04/11/2016 2 years 6

098.647.840-72 Industrial 21 - Vice-Chair of the Board of Directors 04/11/2016 Yes 100.00%


Renato Ochman 02/21/1960 Is a member only of the Board of Directors 04/11/2016 2 years 6

375.739.690-15 Lawyer 22 - Board of Directors (Sitting member) 04/11/2016 Yes 100.00%


Walter Janssen Neto 04/04/1956 Is a member only of the Board of Directors 04/11/2016 2 years 6

248.808.509-00 Board Member 27 - Independent sitting members of the Board of Directors

04/11/2016 Yes 100.00%


Alexandre Grendene Bartelle

04/04/1956 Is a member only of the Board of Directors 04/11/2016 2 years 6


Page 108 of 243

12.5 / 6 - Composition and professional experience of the management. Name Birth date Management body Date of election Period of office Number of

Consecutive Mandates

Personal tax number (CPF) Profession Elected position held Date of swearing-in

Was elected by the controlling stockholder

Percentage of participation in meetings

Other positions and functions held in the Issuer

098.675.970-87 Industrial 20 - Chair of the Board of Directors 04/11/2016 Yes 75.00%


Valter Bianchi 10/23/1945 Audit Board 04/11/2016 1 year 6

006.571.230-72 Lawyer 46 - Substitute Member of Audit Board elected by controlling stockholder

04/11/2016 Yes 0.00%


João Carlos Sfreddo 09/23/1946 Audit Board 04/11/2015 1 year 3

008.936.920-34 Accountant 43 - Sitting Member of the Audit Board elected by the controlling stockholder

04/11/2015 Yes 100.00%


Eduardo Cozza Magrisso 09/14/1965 Audit Board 04/11/2015 1 year 3

456.261.620-20 Lawyer 43 - Sitting Member of the Audit Board elected by the controlling stockholder

04/11/2015 Yes 100.00%


Edivaldo Rogério de Brito 07/31/1955 Audit Board 04/11/2015 1 year 3

763.520.488-20 Accountant 46 - Substitute Member of Audit Board elected by controlling stockholder

04/11/2015 Yes 100.00%


Herculano Aníbal Alves 02/27/1953 Audit Board 04/11/2015 1 year 2

463.163.178-49 Economist 45 - Sitting member of the Audit Board elected by minority holders of common shares

04/11/2015 No 100.00%


Marcello Joaquim Pacheco 01/15/1968 Audit Board 04/11/2015 1 year 2

112.459.108-76 Lawyer 48 - Substitute Member of Audit Board elected by minority holders of common shares

04/11/2015 No 0.00%


Professional experience / Statement of any convictions / Criteria for independence

Francisco Olinto Velo Schmitt - 263.637.980-00


Page 109 of 243

Academic qualifications: Degree in electrical engineering from the Federal University of Rio Grande do Sul in 1978; specialization and Master's degree in management with emphasis on finances from the Federal University of Rio Grande do Sul, with specialization in Controller's Operations from the Getúlio Vargas Foundation; doctorate in Management from São Paulo University (USP), 2004.

Joined the Company in 2007 as Chief Investor Relations Officer.

On April 25, 2013 was re-elected Chief Investor Relations Officer and elected Chief Financial Officer, and Chief Officer for Administration and Controller's Department. He carried out these functions until the changes to the Company's By-laws on April 7, 2014, which united the positions of Chief Administrative Officer and Chief Financial Officer and abolished the position of Chief Officer for the Controller's Department.

Mr. Francisco Olinto Velo Schmitt warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Rudimar Dall Onder - 254.626.870-87

Academic qualifications: Degree in mechanical engineering from the University of Caxias do Sul (UCS), 1981. Joined the Company in 1979, holding several positions until becoming Chief Industrial and Trading Officer in 1987.

On August 18, 2004 he was elected a Statutory Director, as Chief Industrial and Trading Officer, and on April 25, 2013 was elected Chief Executive Officer. He also held the post of Chief Industrial and Trading Officer until April 7, 2014, when the By-laws were changed and the statutory position of Chief Industrial and Trading Officer ceased to exist.

Mr. Rudimar Dall Onder warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Gelson Luis Rostirolla - 148.411.429-91

Academic qualifications: University qualification in Business Administration completed in 1977, and in Accounting, completed in 1979 from the University of Western Santa Catarina (Unoesc), Chapecó, Santa Catarina State.

Joined Grendene S.A. in 1980 and in recent years has held several positions on the Company's Executive Board: Chief Financial and Administrative Officer and Investor Relations Director, from August 18, 2004 to April 28, 2005; Chief Officer for Administration and the Controller’s Department from April 29, 2005 to April 25, 2013, and Chief Financial Officer from May 10, 2007 to April 25, 2013.

On April 25, 2013 Mr. Gelson Luis Rostirolla was elected Deputy Chief Executive Officer.

Mr. Gelson Luis Rostirolla warrants that he has not been guilty of any offense which would prevent him from carrying out the activities of the position for which he has been designated, and that he does not occupy positions in companies that could be considered the Company's competitors in the market, and that he has no conflict of interest with the Company.

Maílson Ferreira da Nóbrega - 043.025.837-20


Page 110 of 243

Member of the Board of Directors – since August 18, 2004 Academic qualifications: Degree in economics from the Centro Universitário de Brasília (CEUB). He began his career in Banco do Brasil S.A., where he headed the rural and industrial lending area of the Paraíba branch. After 14 years with Banco do Brasil, he was appointed head of Coordination of Economic Affairs at the Ministry of Trade and Industry, in 1977, and subsequently of Coordination of Economic Affairs at the Finance Ministry (1979). He was twice Secretary-General of the Finance Ministry and, from 1988 to 1990, Finance Minister, in which capacity he chaired various bodies including the National Monetary Council (CMN), the National Private Insurance Industry Council (CNSP) and the Tax Policy Council (Confaz).

He is currently a partner of Tendências Consultoria Integrada, and takes part in various social and entrepreneurial organizations: he is a member of the Board of Directors of several companies in Brazil and outside Brazil. He has also acted as the representative of the Brazilian government and several international events and bodies. He has written several books and articles on the Brazilian economy published in Brazil and the rest of the world.

Mr. Maílson Ferreira warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Oswaldo de Assis Filho - 761.798.778-15

Member of the Board of Directors – since August 18, 2004 Academic qualifications: Degree in electronic engineering from the Aeronautical Technological Institute (ITA), 1973. He has a Master’s degree in economics from the Economics and Management School (FEA) of São Paulo University. From 1978 to 1983 he was a director of Banco Mercantil de São Paulo. In the period 1984 to 1991, he was a partner of Planibanc Corretora de Valores, and from 1992 until 1994, a partner in Convenção Corretora de Valores. In 1994 he became vice president of Banco Itamarati, until 1996.

In 1996 and 1997, he was vice president of Banco de Crédito Nacional (BCN) and from 1998 to 2006 was a partner in Banco Pactual S.A. He was Vice-Chair of UBS Pactual from 2006 to 2009. Is currently a partner and executive director of Banco BTGPactual.

Mr. Oswaldo de Assis Filho warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Pedro Grendene Bartelle - 098.647.840-72

Founder of the Company. Vice-Chair of the Board of Directors since August 18, 2004. Academic qualifications: Degree in law from the University of Caxias do Sul, Rio Grande do Sul.

Mr. Pedro Grendene Bartelle was one of the people responsible for the growth of the Company, with the development of innovative concepts, technology, products and design. He held the post of Deputy CEO until April 25, 2013.

Mr. Pedro Grendene Bartelle warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Renato Ochman - 375.739.690-15


Page 111 of 243

Member of the Board of Directors since August 18, 2004. Academic qualifications: Law degree from PUC University of Rio Grande do Sul. Master's degree, and Post-graduate degree in Commercial Law from PUC University of Sao Paulo. Partner of the Ochman, Real Amadeo Advogados Associados law firm with offices in São Paulo, SP and Porto Alegre, RS, specialized in stockholding law and the capital markets; consultancy, and corporate and civil litigation; initial public offerings by companies; issues of securities; family succession structuring; and other matters. Visiting Lecturer at the Law faculty of the Getúlio Vargas Foundation law school, São Paulo. Member of the Board of the São Paulo Graded School, and of the São Paulo and Rio Grande do Sul chapters of the Brazilian Bar Association. Member of the Board of Directors of Ultrapar Participações S.A. (São Paulo, SP) and Unicasa Indústria de Móveis S.A. (Bento Gonçalves, RS).

Mr. Renato Ochman warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Walter Janssen Neto - 248.808.509-00

Member of the Board of Directors – since December 18, 2006 Academic qualifications: Economics and accounting; Post-graduate degree in industrial economics from the Federal University of Santa Catarina; Executive MBA from the Wharton School of the University of Pennsylvania. He has Professional Board Member certification from NACD (National Association of Corporate Directors) of the USA; specialization in Corporate Governance from the University of Stanford Law0 School, Chicago Business School and Wharton School; and is a member of the Brazilian Corporate Governance Institute (Instituto Brasileiro de Governança Corporativa, or IBGC).

He was an executive of the Weg group of Santa Catarina for 31 years, where he had the opportunity of holding various executive positions in the areas of Supplies, Finances and Sales. He was Business Unit Superintendent Director, Director for HR and Corporate Marketing, and more recently President of Weg's operations in the USA. He is also a member of the Board of Directors of several Brazilian companies.

Mr. Walter Janssen Neto warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Alexandre Grendene Bartelle - 098.675.970-87

Founder of the Company, and Chair of the Board of Directors since August 18, 2004. Academic qualifications: Degree in law from the University of Caxias do Sul, Rio Grande do Sul.

Mr. Alexandre Grendene Bartelle was one of the people responsible for the growth of the Company, with the development of innovative concepts, technology, products and design. He held the post of Chief Executive Officer until April 25, 2013.

Mr. Alexandre Grendene Bartelle warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Valter Bianchi - 006.571.230-72


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Substitute Member of the Audit Board. Academic qualifications: Law degree from the University of Caxias do Sul (UCS), 1971. Technical course in accounting - Nossa Senhora Aparecida Technical School (1965), Bento Gonçalves, Rio Grande do Sul. Has practiced law and corporate consultancy since 1972. He is a director of the law firm Bianchi Advocacia S/S. Since 1994 he has held the position of accountant at the accountancy company Agescon Contabilidade e Assessoria Empresarial Ltda. From 1966 to 1994 he was an accountant with the accounting company Contasa Contabilidade e Assessoria Empresarial Ltda.

Mr. Valter Bianchi warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

João Carlos Sfreddo - 008.936.920-34

Sitting Member of the Audit Board. Academic qualifications: Mr. Sfreddo has a degree in accounting from PUC University of Rio Grande do Sul, with Post-graduate courses in external auditing from the Federal University of Rio Grande do Sul, given in collaboration with IAIB and Ibmec. He has more than 30 years' experience in tax and auditing, at clients in a range of sectors including retailing, chemicals and petrochemicals, electricity, financial institutions and manufacturing. From 1982 to 2009 he was a tax consulting partner at Ernst & Young. He is a member of Junior Chamber International, a founding member of IBEF - the Institute of Brazilian Financial Executives (Instituto Brasileiro de Executivos de Finanças). He was Vice-President of ADVB - the Brazilian Sales Managers' Association (Associação de Dirigentes de Vendas do Brasil) for two periods of office.

Mr. João Carlos Sfreddo warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Eduardo Cozza Magrisso - 456.261.620-20

Sitting Member of the Audit Board. Mr. Magrisso has a law degree from the Federal University of Rio Grande do Sul, and a Post-graduate degree in Tax Law from the University of Vale do Rio dos Sinos (Unisinos - RS). He has also completed the Certificate Course for Members of Boards of Directors, from IBGC. He works in Corporate Law, with a focus on tax, stockholding and commercial law. Since 1990 he has been the partner responsible for tax and stockholding consulting at Renck & Magrisso Advogados Associados. Since 2010 he has been a member of the Board of Sersat do Brasil Ltda. He has served on the Board of Directors of Meta Agrícola (since 2008), and in 2014 he joined the Board of Districomp Distribuidora de Produtos de Informática. He is a working member of FESDT (Fundação Escola Superior de Direito Tributário - Higher Tax Law College Foundation).

Mr. Eduardo Cozza Magrisso warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Edivaldo Rogério de Brito - 763.520.488-20

Substitute Member of the Audit Board. Mr. de Brito has a degree in accounting from Cruzeiro do Sul University (Unicsul) of São Paulo, with Post-graduation and specialization in finances from the Federal University of Rio Grande do Sul (UFRGS). He has also completed the Certificate Course for Members of Boards of Directors, from IBGC. He has more than 30 years' experience in finance, accounting, Controller's Department, budgeting, costs, taxes, tax incentives, legal, implementation of financial systems, and the capital markets. He has held executive positions at director level in financial administration, and investor relations, and in General Management in large-scale and medium-sized industrial companies, listed and unlisted.

Mr. Edivaldo Rogério warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Herculano Aníbal Alves - 463.463.178-49


Page 113 of 243

Member of the Audit Board (sitting member, elected by the minority stockholders). Education: Degree in economics from the PUC University of São Paulo; postgraduate studies in financial administration from the São Paulo Business Management School of the Getúlio Vargas Foundation (EAESP/FGV); Master’s degree in finance and investment from EAESP/FGV. He is a Chartered Financial Analyst (CFA); holder of the Anbima Management Certificate (CGA); and a Portfolio Manager accredited by the CVM.

He has been equities consultant to BRAM – Bradesco Asset Management S.A. DTVM – since May 2014, and was director of BRAM US from September 2011. He was also Equities Director of BRAM – Bradesco Asset Management S.A. DTVM from July 2001 to April 2014, Equities Administrator of Bradesco Templeton Ltda. from June 1998 to June 2001, Equities Director of Banco ABN Amro S.A. from February to June 1998, and Portfolio Manager for Banco Unibanco S.A. from October 1992 to January 1995.

Mr. Herculano Aníbal Alves warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.

Marcello Joaquim Pacheco – 112.459.108-76

Member of the Audit Board (Substitute member). Education: Degree in law from São Francisco University. Specialization in Controllership, Financial Administration and Stockholding Law at the Getúlio Vargas Foundation.

He has been Executive Director of Marpache Serviços Especializados em Administração since 2009, and also practices law, specializing in stockholding law. He has experience in all aspects of accounting, auditing and financial administration. In recent years he has been a member of the Audit Board of several companies.

Mr. Marcello Joaquim Pacheco warrants that he is not guilty of any offense that could prevent him from exercising the activities of the position for which he has been designated, and that he does not occupy any positions in companies that could be considered to be the Company's competitors in the market, and that he has no interest conflicting with those of the Company.


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12.7/8 - Composition of the committees Justification for not filling in the table: The Company does not have statutory committees, nor audit, risk, finance or remuneration committees.


Page 115 of 243

12.9 - Existence of any conjugal relationship, stable union or family relationship up to second degree in relation to managers of the Issuer, subsidiaries and parent companies.

Name Personal tax

number (CPF) Formal name of the Issuer, subsidiary or parent company.

CNPJ (Corporate Tax Nº)

Type of family relationship with manager of the Issuer or subsidiary

Position

Manager of the Issuer or subsidiary

Alexandre Grendene Bartelle 098.675.970-87 Grendene S.A. 89.850.341/0001-60 Brother or sister (first degree family relationship)

Chair of the Board of Directors

Related party

Pedro Grendene Bartelle 098.647.840-72 Grendene S.A. 89.850.341/0001-60

Vice-Chair of the Board of Directors

Remarks


Alexandre Grendene Bartelle 098.675.970-87 MHL Calçados Ltda 07.512.861/0001-06 Brother or sister (first degree family relationship)

Chief Executive Officer

Related party

Pedro Grendene Bartelle 098.647.840-72 MHL Calçados Ltda 07.512.861/0001-06

Deputy CEO

Remarks


Pedro Grendene Bartelle 098.647.840-72 Grendene S.A. 89.850.341/0001-60 Brother or sister (first degree family relationship)


Related party

Alexandre Grendene Bartelle 098.675.970-87 Grendene S.A. 89.850.341/0001-60


Remarks


Page 116 of 243

12.9 - Existence of any conjugal relationship, stable union or family relationship up to second degree in relation to managers of the Issuer, subsidiaries and parent companies.

Name Personal tax

number (CPF) Formal name of the Issuer, subsidiary or parent company.

CNPJ (Corporate Tax Nº)

Type of family relationship with manager of the Issuer or subsidiary

Position


Pedro Grendene Bartelle 098.647.840-72 MHL Calçados Ltda 07.512.861/0001-06 Brother or sister (first degree family relationship)

Deputy CEO

Related party

Alexandre Grendene Bartelle 098.675.970-87 MHL Calçados Ltda 07.512.861/0001-06


Remarks


Pedro Grendene Bartelle 098.647.840-72 Grendene S.A. 89.850.341/0001-60 Son or daughter (first degree family relationship)


Related party

Pedro Bartelle 685.957.430-53 Grendene S.A. 89.850.341/0001-60

Stockholder

Remarks


Pedro Grendene Bartelle 098.647.840-72 Grendene S.A. 89.850.341/0001-60 Son or daughter (first degree family relationship)


Related party

Giovana Bartelle Velloso 685.957.780-00 Grendene S.A. 89.850.341/0001-60

Stockholder

Remarks


Page 117 of 243

12.10 - Relationships of subordination, provision of service or control between managers and subsidiaries, parent companies or others

Identification Tax number (CPF / CNPJ)

Type of relationship between the Manager and the related party

Type of related person

Position / Function

Business year ending Dec. 31, 2015

Manager of the Issuer

Pedro Grendene Bartelle 098.647.840-72 Control Client


Related party

Vulcabras|Azaleia CE Calçados e Artigos Esportivos S.A. 00.954.394/0001-17

Controller Stockholder

Remarks

The transactions refer to sales of input materials used in the production of footwear. The average period of receipt is approximately 85 days.


Pedro Grendene Bartelle 098.647.840-72 Control Supplier


Related party

Vulcabras|Azaléia CE Calçados e Artigos Esportivos S.A. 00.954.394/0001-17


Remarks

The transactions refer to purchases of input materials used in the production of footwear. The average period of payment is approximately 31 days. / Trademark use license. The average period of payment is approximately 75 days. / Purchases of services and referred to commissions. The average period of payment is approximately 15 days.




Related party

Vulcabras|Azaleia BA Calçados e Artigos Esportivos S.A. 00.733.658/0001-02


Remarks



Page 118 of 243





Position / Function




Related party

Vulcabras|Azaleia RS Calçados e Artigos Esportivos S.A. 98.408.073/0001-11


Remarks





Related party

Vulcabras|Azaleia Argentina S.A.


Remarks





Related party

Vulcabras|Azaleia Argentina S.A.


Remarks

The transactions refer to purchases of input materials used in the production of footwear. The average period of payment is approximately 1 day.





Page 119 of 243





Position / Function

Related party

Vulcabras Distribuidora de Artigos Esportivos Ltda 08.193.994/0001-11


Remarks

The transactions refer to sales of shoes. The average period of receipt is approximately 70 days.




Related party

Distribuidora de Calçados e Artigos Esportivos Cruzeiro do Sul Ltda 12.760.928/0001-53


Remarks





Related party

Calzados Azaleia Colômbia Ltda


Remarks





Related party

Calzados Azaleia Peru S.A.



Page 120 of 243





Position / Function

Remarks



Alexandre Grendene Bartelle 098.675.970-87 Control Client


Related party

Lagoa Clara Agrícola Ltda 12.599.553/0001-91

Chai of the Board of Directors

Remarks

Recovery of expenses – average period of receipt 31 days

Business year ending Dec. 31, 2014 Manager of the Issuer



Related party

Vulcabras|Azaléia CE Calçados e Artigos Esportivos S.A. 00.954.394/0001-17


Remarks

The transactions refer to sales of input materials used in the production of footwear. The average period for receipt is approximately 29 days.




Related party




Page 121 of 243





Position / Function

Remarks

The transactions refer to purchases of input materials used in the production of footwear. The average period of payment is approximately 31 days. / Trademark use license. The average period of payment is approximately 149 days. / Purchases of services and referred to commissions. The average period of payment is approximately 11 days.




Related party

Vulcabras|Azaléia BA Calçados e Artigos Esportivos S.A. 00.733.658/0001-02


Remarks





Related party

Vulcabras|Azaléia RS Calçados e Artigos Esportivos S.A. 98.408.073/0001-11


Remarks

The transactions refer to sale of input materials used in the production of footwear. The average period for receipt is approximately 105 days.




Related party

Vulcabras|Azaléia Argentina S.A.



Page 122 of 243





Position / Function

Remarks

The transactions refer to sale of input materials used in the production of footwear. The average period for receipt is approximately 118 days.




Related party

Vulcabras|Azaléia Argentina S.A.


Remarks

Purchase of products and services with the subsidiary Grendene Argentina S.A. Average payment period 1 day.




Related party

Vulcabras Distribuidora de Artigos Esportivos S.A. 08.193.994/0001-11


Remarks

The transactions refer to sales of shoes. The average period of receipt is approximately 69 days




Related party

Distribuidora de Calçados e Artigos Esportivos Cruzeiro do Sul Ltda 12.760.928/0001-53

Chairman of the Board of Directors

Remarks



Page 123 of 243





Position / Function




Related party

Calçados Azaleia Colômbia Ltda


Remarks





Related party

Calçados Azaleia Peru Ltda


Remarks





Related party

Agropecuária Grendene Ltda 52.589.017/0001-20

Chief Executive Board

Remarks

Sale of fixed assets. Average period for receipt of payment 30 days.





Page 124 of 243





Position / Function

Related party



Remarks

The transactions refer to reimbursement to the Company for recovery of expenses. The average period for receipt is approximately 29 days.


Rudimar Dall Onder 254.626.870-87 Control Direct subsidiary


Related party


It does not occupy any position in the related party

Remarks





Related party

MHL Calçados Ltda 07.512.861/0001-06

Industrial and Commercial Officer

Remarks

The transactions refer to sales of input materials used in the production of footwear. The average period of receipt is approximately 109 days. / The transactions refer to purchase of input materials used in the production of footwear. The average period of payment is approximately 178 days.





Page 125 of 243





Position / Function

Related party

Grendene USA, Inc.


Remarks



Rudimar Dall Onder 254.626.870-87 Control Indirect subsidiary


Related party

Grendene Italy SRL

Director

Remarks





Related party

A3NP Indústria e Comércio de Móveis S.A. 15.761.916/0001-31


Remarks

The transactions refer to reimbursement to the Company for recovery of expenses. The average period for receipt is approximately 10 days.



Alexandre Grendene Bartelle 098.675.970-87 Control Supplier



Page 126 of 243





Position / Function

Related party

Telasul S.A. 87.846.796/0001-86

Deputy Chief Executive Officer

Remarks

The transactions made with Telasul S.A. refer to purchases of exhibition equipment used to publicize the Company’s products. The average period for payment is approximately 15 days.




Related party



Remarks

The transactions refer to sales of input materials used in the production of footwear. The average period of payment is approximately 32 days.




Related party

Vulcabras|Azaleia BA Calçados e Artigos Esportivos S.A. 00.733.658/0001-02


Remarks





Related party




Page 127 of 243





Position / Function

Remarks

Purchase of inputs used in manufacture of footwear. Average payment period 30 days.




Related party

Agropecuária Grendene Ltda 52.589.017/0001-20


Remarks

Sale of fixed assets. Average period for receipt of payment 30 days.




Related party


Chairman of the Board of Directors

Remarks

Reimbursement to the Company for recovery of expenses. Average period for receipt of payment 30 days.


Rudimar Dall’Onder 254.626.870-87 Control Direct subsidiary


Related party

Grendene Argentina S.A. It does not occupy any position in the related party

12.599.553/0001-91

Remarks



Page 128 of 243





Position / Function


Rudimar Dall’ Onder 254.626.870-87 Control Direct subsidiary


Related party

MHL Calçados Ltda 07.512.861/0001-06

Industrial and Commercial Officer

Remarks

The transactions refer to sales of input materials used in the production of footwear. The average period for receipt is approximately 243 days. The transactions refer to purchases of input materials used in the production of footwear. The average period of payment is approximately 268 days.


Rudimar Dall’Ónder 254.626.870-87 Control Direct subsidiary


Related party

Grendene USA, Inc.


Remarks





Related party

Grendene Italy SRL

Director

Remarks



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Position / Function




Related party

A3NP Indústria e Comércio de Móveis S.A. 15.761.916/0001-31


Remarks

Recovery of expenses. Average period for receipt of payment 22 days.


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12.11 - Agreements, including insurance policies, for payment or reimbursement of expenses borne by the

managers.

There are no agreements, including insurance policies, that provide for the payment or reimbursement of expenses borne by the managers, arising from reparation of damages caused to third parties or to the Company, from penalties imposed by agents of the state, or arising from agreements for the purpose of terminating administrative or court proceedings, in the exercise of their functions.


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12.12 – Corporate governance practices

The Company is listed for trading in the ‘Novo Mercado’, the listing category of the BM&FBovespa with the highest level of requirements in terms of corporate governance, since it was originally listed on October 28, 2004, adopting all the rules specified by this listing category and also those demanded by the Brazilian legislation.

Here are some of the rules of the Novo Mercado that the Company complies with:

The share capital comprises exclusively voting, common shares;

The ‘tag-along’ entitlement is 100%;

The Board of Directors comprises six members, of which 20% are independent members, with a maximum period of office of two years;

The Company commits to maintain a free float of at least 25%;

Financial data published in accordance with IFRS, including quarterly reports with statement of cash flows and consolidated reports revised by independent auditors;

Trading in the Company’s securities by directors, executives and controlling stockholders is published monthly.

The Company has not subscribed to other codes of corporate governance. The Company believes that its disclosures of information are based on the most rigorous current corporate governance practices and that it maintains a track record of excellent communication and transparency with investors.


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12.13 – Other material information

Information relating to the General Meetings held in 2013, 2014 and 2015:

Date held Type Manner of installation Quorum

Apr 04, 2013

Ordinary and Extraordinary

General Meetings of Stockholders

1st convocation Stockholders representing more than the quorum of 81.8% legally required for installation of the Meeting.

Jun 04, 2014 Annual General

Meeting 1st convocation

Stockholders representing more than the 84.7% quorum legally required for the Meeting to be in session.

Apr 06, 2015

Ordinary and Extraordinary

General Meetings of Stockholders

1st convocation Stockholders representing more than the 81.5% quorum legally necessary for the Meeting to be in session.

Apr 11, 2015 Annual General

Meeting 1st convocation

Stockholders representing more than the required legal quorum of 84.2% for installation of the General Meeting

Positions held by the members of the Board of Directors of Grendene S.A. in other companies or entities, in compliance with GAE 1186/11. Alexandre Grendene Bartelle AGP Negócios e Participações S.A. – CEO AGB San Marino Agropecuária Ltda – Managing Partner AGP Negócios e Participações S.A. – CEO Agropecuária Jacarezinho Ltda – CEO Alexandre G. Bartelle Participações S.A. – CEO Alexandre G. Bartelle Participações S.A. – CEO Grendene Negócios S.A. – CEO Jazz Participações Imobiliárias Ltda – Manager Karina Empreendimentos Imobiliários Ltda – Manager Lagoa Clara Agrícola S.A. – Chief Administrative Officer MHL Calçados Ltda. – CEO Monza Negócios e Participações Ltda - CEO Nova Milano Investimentos Ltda – CEO Nova Trento Negócios e Participações Ltda – Manager Nova Vicenza Negócios e Participações S.A. – CEO Telasul S.A. – Deputy CEO Unicasa Indústria de Móveis S.A. – Board Member Veneza Negócios e Participações S.A. – CEO Vulcabrás|Azaléia S.A. – Deputy Chairman of the Board of Directors Pedro Grendene Bartelle AGP Negócios e Participações S.A. – Deputy CEO Agropecuária Grendene Ltda – CEO Alexandre G. Bartelle Participações S.A. – Deputy CEO Gianpega Negócios e Participações S.A. – CEO Gold Negócios e Participações S.A. – CEO Grendene Negócios S.A. – Deputy CEO Manacá Negócios e Participações Ltda – Manager Nova Milano Investimentos Ltda – Deputy CEO Nova Trento Negócios e Participações Ltda – Manager Nova Vicenza Negócios e Participações S.A. – Deputy CEO Veneza Negócios e Participações S.A. – Deputy CEO Verona Negócios e Participações S.A. – CEO Vulcabrás|Azaléia S.A. – Chairman of the Board of Directors Vulcabrás|Azaléia - BA, Calçados e Artigos Esportivos S.A. – CEO Vulcabrás|Azaléia - CE, Calçados e Artigos Esportivos S.A. – CEO Vulcabrás|Azaléia - RS, Calçados e Artigos Esportivos S.A. – CEO Vulcabrás|Azaléia – SE, Calçados e Artigos Esportivos S.A. – CEO


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Maílson Ferreira da Nóbrega Cosan S.A. – Member of the Board of Directors Rodobens Negócios Imobiliários S.A. – Member of the Board of Directors Banco Pine S.A. – Member of the Board of Directors Fertilizantes Heringer S.A. – Member of the Board of Directors Oswaldo de Assis Filho Banco BTG Pactual S.A. – Executive Director Febraban – Brazilian Banks' Federation (Federação Brasileira de Bancos) – Director CNF – Brazilian Federation of Financial Institutions (Confederação Nacional das Instituições Financeiras) – Director Walter Janssen Neto Intelbrás S.A. – Member of the Board of Directors Jornal O Correio do Povo de Jaraguá do Sul, SC – Partner


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13.1 - Description of the remuneration policy or practice, including that of non-statutory directors a. Objectives of the remuneration policy or practice

The objective of each element of the managers’ remuneration is to encourage alignment of the interests of the managers with the targets of the Company, so as to stimulate their commitment and also to attract and maintain highly qualified professionals.

The Company has no statutory committee. On 12 February 2015 the Board of Directors in its minute of meeting nº 59, established a committee composed of three members, all belonging to the Board of Directors to meet the provisions of items 2.1 and 2.2 of the Regulation of the Stock Option Plan Purchase or the Company's Share Subscription which provides that the plan administration can be delegated to a committee specially created for both.

The members of this committee do not receive any remuneration due to this activity. The only compensation received is as Board member as is shown in items 13.1.b.ii, 13.2 and 11.13 of this form.

b. Composition of the remuneration, indicating:

i. Description of the elements of the remuneration and the objectives of each one of them

The members of the Board of Directors receive only a fixed monthly remuneration for performance of their functions, thus, other than the fixed monthly remuneration referred to, there are no other elements in the remuneration of the members of the Board of Directors.

The members of the Audit Board receive only a fixed monthly remuneration for performance of their functions, thus, other than the fixed monthly remuneration referred to, there are no other elements in the remuneration of the members of the Audit Board.

As to the remuneration of the statutory and non statutory officers, the elements of their remuneration are: the fixed monthly salary; and remuneration based on shares in the Company.

There is no other direct and indirect benefits to the members of the Board of Directors, Audit Board and Executive Board.

The fixed remuneration seeks to remunerate the executives on attractive terms in comparison to the market with a view to attracting and retaining good professionals.

The share-based remuneration seeks an alignment with the stockholders, including the performance of the shares in the market among the factors that affect the executive's income. This remuneration takes the form of grant of options to purchase shares in the Company, with a period of acquisition of right (vesting) divided into three years (1/3 may be exercised in one year, 2/3 in two years and 3/3 in three years) so as to discourage excessive focus on the short term.

ii. What is the proportion of each element in the total remuneration?

2015

Board of Directors Committee Audit Board Executive Board

Fixed remuneration 100% - 100% 75%

Remuneration based on shares - - - 25%

2014




2013





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13.1 - Description of the remuneration policy or practice, including that of non-statutory directors

iii. Methodology of calculation and adjustment of each one of the elements of the remuneration

The remuneration of the Board Members is fixed annually by the Annual General Meeting based on market amounts and the Company’s economic and financial situation. The remuneration of the Chief Officers is set annually by the Board of Directors using the same criteria of: the market, and the situation of the Company. The market amounts are obtained from research, information in newspapers and magazines specialized in business, and research carried out by the IBGC on remuneration of managers. The number of Options granted to the executives is decided annually by the Committee specified in Item 2.2 of the Regulations of the Stock Option Purchase and Subscription Plan, taking as a basis the performance of the Company in the previous year and accordance with the said Regulations (approved by the Ordinary and Extraordinary General Meeting of Stockholders of April 14, 2008 as amended by the meetings of the Board of Directors of March 1 2012 and February 12, 2015).

iv. Reasons for the composition of the remuneration

The main reasons that justify the composition of the remuneration are:

To help attract and retain professionals.

To ensure remuneration appropriate to the market.

The Company’s economic and financial situation.

Long-term incentive; and

Alignment of interests with those of the stockholders. c. Principal indicators of performance that are taken into consideration in the determination of each element of the

remuneration The principal indicators are the change in the Company's Ebit in comparison with the evolution of the market as a whole; Grendene's share of the total of Brazilian footwear exports; Grendene's share in Brazilian apparent footwear consumption; and a qualitative evaluation of the products launched and the satisfaction of the 'trade'. The fixed remuneration takes market parameters into account comparing the Company's practices with those of companies of an equal size for functions of the same complexity and responsibility, and also inflation in the previous year. The share-based remuneration is in accordance with the Regulations of the Stock Options Purchase and Subscription Plan approved by the Annual General Meeting held on April 14, 2008, and amendments approved by the meeting of the Board of Directors of March 1, 2012 and February 12, 2015. The quantity of options granted is decided in a Meeting of the Board of Directors, which takes into account basically the profit obtained by the Company in the previous business year, and the indicators described above. The options are granted with an exercise price based on the price of the share in the market, and this remuneration only becomes effective if during the period of the Plan the market value of the shares grows faster than monetary adjustment by the IPCA inflation index, which is applied to the exercise price of the grant up to the date of exercise of the option. According to the plan, annually, during the period of the Plan, the Company’s Board of Directors, taking into account the premises for grant, will decide the Beneficiaries, in the form specified in Clause I of the Plan, and also the number of shares that may be acquired with the exercise of each option, the price of exercise of each option and the conditions of its payment, the periods and conditions of exercise of each option and any other conditions relating to them. The Options, as specified in the said Plan, shall have a total vesting period of 3 years, being able to be exercised as follows: (i) Up to 1/3 after one (1) year from the date of grant; (ii) a further 1/3 after 2 years from the date of the grant, making a total limit of 2/3; and (iii) the remaining 1/3 after 3 years from the date of the grant. The options shall have a period of validity of six (6) years, from the date of grant. The grant of options for purchase of shares under the said Regulations is made through signing of Subscription Contracts between the Company and the Beneficiaries. These contracts must specify, without prejudice to other conditions determined by the Board of Directors or Committee (as the case may be): (a) the quantity of shares subject of the grant; (b) the conditions for acquisition of the right to exercise of the option; (c) the final period for exercise of the share purchase option; and (d) the period of exercise and conditions of payment. The Board of Directors or Committee (as the case may be) may impose terms and/or prior conditions for the exercise of the option and impose restrictions on the transfer of the shares acquired with the exercise of the Option, and may also reserve to the Company options of repurchase or rights of preference in the case of sale by the Beneficiary of the same shares, up to the termination of the period and/or compliance with the conditions set. The Subscription Contracts shall be prepared individually for each Beneficiary, and the Board of Directors or the Committee (as the case may be) may establish differentiated terms and conditions for each Subscription Contract, without the need for application of any rule of equality of rights or of analogy between the Beneficiaries, even if they are in similar or identical situations. The purchase options granted under the said Regulations, and also their exercise by the Beneficiaries, have no relationship with, nor


Page 136 of 243

13.1 - Description of the remuneration policy or practice, including that of non-statutory directors are they linked to, their fixed remuneration, or any shares in the profits. Without prejudice to any provision to the contrary specified in the said Regulations or in the Subscription Contract, the options granted shall be extinguished automatically, all their effects ceasing for all purposes of law, in the following events: (a) their full exercise; (b) expiry of the period of validity of the option; (c) agreement to dissolve the Subscription Contract; or (d) if the Company is dissolved, liquidated or declared bankrupt. Signing of the Subscription Contract will mean acceptance, by the Beneficiary, of all the conditions established in the Plan and the said Regulations. d. How the remuneration is structured to reflect changes in the performance indicators The fixed remuneration is compared with the amounts practiced in other companies of equal scale. The share-based remuneration reflects the value of the Company, which is the result of the valuation by the market of the Company's performance; and an evaluation by the Committee, submitted to the Board of Directors, of the change in the indicators. e. How the remuneration policy or practice aligns with the short-, medium- and long-term interests of the Issuer See Share-based remuneration, in items 13.4 – sub-items 'c', 'd' and 'e'. f. Existence of remuneration paid by subsidiaries or controlling stockholders, whether direct or indirect There is no form of remuneration of Chief Officers or members of the Board of Directors paid by any direct or indirect subsidiary, jointly-controlled subsidiary or parent company. g. Existence of any remuneration or benefit linked to the occurrence of any corporate event, such as disposal of

stockholding control of the Issuer There is no remuneration or benefit linked to the occurrence of corporate events, however, in the event of dissolution, merger, absorption, split or liquidation of the Company, the Beneficiaries of the Stock Options Purchase and Subscription Plan may exercise such options as they have that may already be exercised (that is to say, for which the vesting period has been completed) in the period between the date of convocation of the General Meeting of Stockholders whose object is to decide on the dissolution, merger, absorption, split or liquidation of the Company and the date of its being held. To the contrary, the Options will be extinguished, as will also the Regulations of the Plan of Grant and the respective Subscription Contracts.


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13.2. - Total of the remuneration of the Board of Directors, the Executive Board and the Audit Board Total remuneration for the current business year to December 31, 2016 – Annual amounts

Board of Directors Executive Board Audit Board Total

No. of members 6.00 3.00 3.00 12.00

No. of remunerated members 6.00 3.00 3.00 12.00

Annual fixed remuneration

Salary or 'pro-labore' payment 1,150,000.00 4,500,000.00 450,000.00 6,100,000.00

Direct and indirect benefits 0.00 0.00 0.00 0.00

Attendance at committees 0.00 0.00 0.00 0.00

Others 0.00 0.00 0.00 0.00

Description of other fixed

remunerations

Variable remuneration

Bonus 0.00 0.00 0.00 0.00

Profit shares 0.00 0.00 0.00 0.00

Attendance at meetings 0.00 0.00 0.00 0.00

Commissions 0.00 0.00 0.00 0.00

Others 0.00 0.00 0.00 0.00

Description of other variable

remunerations

Post-employment 0.00 0.00 0.00 0.00

Leaving of post 0.00 0.00 0.00 0.00

Share-based 0.00 2,000,000.00 0.00 2,000,000.00

Remarks

There is no other direct

and indirect benefits.





Total of the remuneration 1,150,000.00 6,500,000.00 450,000.00 8,100,000.00

Total remuneration for the business year to Dec. 31, 2015 – Annual amounts


No. of members 6.00 3.00 3.00 12.00



Salary or 'pro-labore' payment 984,000.00 3,576,000.00 356,400.00 4,916,400.00



Others 0.00 0.00 0.00 0.00


Page 138 of 243

13.2. - Total of the remuneration of the Board of Directors, the Executive Board and the Audit Board Description of other fixed

remunerations


Bonus 0.00 0.00 0.00 0.00

Profit shares 0.00 0.00 0.00 0.00


Commissions 0.00 0.00 0.00 0.00

Others 0.00 0.00 0.00 0.00


remunerations


Leaving of post 0.00 0.00 0.00 0.00

Share-based 0.00 1,185,070.38 0.00 1,185,070.38

Remarks







Total of the remuneration 984,000.00 4,761,070.38 356,400.00 6,101,470.38



No. of members 6.00 3.00 3.00 12.00






Others 0.00 0.00 0.00 0.00


remunerations


Bonus 0.00 0.00 0.00 0.00

Profit shares 0.00 0.00 0.00 0.00


Commissions 0.00 0.00 0.00 0.00

Others 0.00 0.00 0.00 0.00


Page 139 of 243

13.2. - Total of the remuneration of the Board of Directors, the Executive Board and the Audit Board Description of other variable

remunerations


Leaving of post 0.00 0.00 0.00 0.00

Share-based 0.00 709,299.60 0.00 709,299.60

Remarks










No. of members 6.00 3,67 3.00 12.67






Others 0.00 0.00 0.00 0.00


remunerations


Bonus 0.00 0.00 0.00 0.00

Profit shares 0.00 0.00 0.00 0.00


Commissions 0.00 0.00 0.00 0.00

Others 0.00 0.00 0.00 0.00


remunerations


Leaving of post 0.00 0.00 0.00 0.00

Share-based 0.00 2,194,470.60 0.00 2,194,470.60


Page 140 of 243

13.2. - Total of the remuneration of the Board of Directors, the Executive Board and the Audit Board Remarks









Page 141 of 243

13.3 - Variable remuneration of the Board of Directors, Executive Board and the Audit Board The remuneration policy of Grendene S.A. does not include programs of remuneration in the form of cash payments during or in respect of the business year for the members of the Board of Directors, Audit Board and Executive Board.


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13.4 - Share-based remuneration plan for the Board of Directors and the Executive Board a. General terms and conditions The Regulations of the Program establish the rules relating to the Program of Options for Purchase or Subscription of Shares of Grendene S.A. and its subsidiaries ('the Company'), instituted under the Stock Options Purchase and Subscription Plan ('the Plan'), submitted to decision of the Extraordinary General Meeting of stockholders of the Company on April 14, 2008. The Plan and Regulations currently in force were recommended by the Board of Directors in a meeting held on March 13, 2008, and alterations were approved in the meeting of the Board of Directors of March 1, 2012 and February 12, 2015. Definitions established in the Plan:

For the purposes of the Regulations governing Grant of Options for Purchase or Subscription of Shares currently in effect, the terms employed below have the following definitions: i) Stockholder: Individual or legal entity owning a share in the Company. ii) Shares: Nominal common shares that will be or have been issued by the Company. iii) Beneficiary: The Eligible Employee to whom the Option is in fact granted. iv) Eligible Employees: Executives at the levels of Members of the Board of Directors, Executive Board and Management,

except those who are part of the Controlling Stockholding Group, who are able to take part in the Stock Options Purchase and Subscription Plan, in the form of the indications specified in the said Regulations.

v) Company: The company Grendene S.A. and its subsidiary companies. vi) Subscription Contract: The Private Instrument of Grant of Option to Purchase or Subscribe Shares, entered into between

the Company and the Eligible Employee, through which the latter becomes a participant in the Stock Options Purchase and Subscription Plan.

vii) Date of Grant: The date of signature of the Subscription Contract, which will formalize the grant of the Options to the Beneficiaries.

viii) Separation: This means any act or event which, whether or not with just cause, puts an end to the legal relationship between the Beneficiary and the Company, except in cases of retirement, permanent invalidity or death. Separation also covers the cases of dismissal, replacement or non-reelection of a Beneficiary from a position as member of the Board of Directors or of the Executive Board, and rescission of the employment contract.

ix) Exercise of the Options: Actual purchase or subscription, by the Beneficiary, of shares relating to the Options granted to him by the Subscription Contract.

x) Option or Options: Possession by a Beneficiary of the right to acquire or subscribe shares in the Company for a previously fixed price, during a specified period of time, when the conditions established in the Regulations have been met.

xi) Exercisable Option(s): Such option(s) as have met the conditions specified for the exercise of the right of purchase or subscription of the Shares (vesting), and hence are able to be exercised.

xii) Non-exercisable Option(s): Such option(s) as has (have) not met the conditions specified for the exercise of the right of purchase or subscription of the Shares.

xiii) Option Exercise Period: Period between the date on which it is possible to buy or subscribe the shares and the limit date for the purchase or subscription.

xiv) Regulations: The Regulations of the Plan duly approved by the Board of Directors and the General Meeting of Stockholders of the Company.

xv) Option Exercise Price: Amount determined to be paid by the Beneficiary for the purchase or subscription of the shares that are subject of the option granted to him.

xvi) Vesting Period: The period established by the Company before the period for exercise of the option for purchase or subscription of shares by the Beneficiary.

b. Principal objectives of the plan The objective of the Stock Options Purchase and Subscription Plan, governed by the Regulations, is to establish rules for certain executives of the Company to be able to acquire shares issued by the company, aiming to strengthen the levels of attraction, retention and motivation of talents, and also to align the interests of executives with those of stockholders in the generation of profits and sustainable creation of value. The aim is to create a long-term incentive, based on the concept of stock options, which consists of concession of a right – and not an obligation – to buy shares in the Company for predetermined prices and in predetermined periods. The Beneficiary’s potential gain will be the result of the Purchase and Sale of the shares, that is to say, any increase in the value of the share over the exercise price. c. How the plan contributes to these objectives As a result of the plan, part of the remuneration of the executives (the part that is based on shares) depends on the value of the shares in the market, which in turn reflects the value of the stockholders' investment. The fact that the options have a period for vesting (1/3 of the total, each year, as from the date of grant) and a period of 6 years for exercise, creates an incentive for pursuing the long-term targets and penalizes the taking of actions whose aim is only short-term benefit.


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13.4 - Share-based remuneration plan for the Board of Directors and the Executive Board d. How the plan fits into the Issuer’s remuneration policy The Share-based remuneration is the Company’s only form of variable remuneration, and is the element that links the remuneration of the executives to the remuneration of the stockholders in the form of increase in value of their shares. e. How the plan aligns the interests of the managers and of the Company in the short, medium and long term

When the vesting period specified in the regulations has ended, the Beneficiary may exercise his or her option to purchase shares. The exercise of the option consists of purchase of the shares for the exercise price established, after the vesting period has expired. For this purpose, the Beneficiary must formally state the exercise of the option to the company, through an Exercise Notice, within fifteen (15) days following the meeting of the Board of Directors which approved the financial statements of the previous business year, subject to the limits specified by the vesting period. Further, at its exclusive option the Board of Directors may authorize the exercise of any options to which right has been acquired, within up to fifteen (15) days following the publication of the quarterly results, subject to the limits specified by the vesting period. The options may be exercised in their totality or in part, subject to the periods and conditions established by the Board of Directors, by the Committee (as the case may be), by these regulations (especially, but not limited to the limits specified by the vesting period), and/or by the Adhesion Contracts. The portion of the Option that has not been exercised by the date specified in the regulation shall be considered automatically to have been extinguished, without any right to indemnity. The exercise of the Option may only take place provided there has been continuity of the Beneficiary’s employment relationship with the Company or with its subsidiaries, up to the actual date of exercise of the option. The Exercise Notice may only be issued by the Beneficiary, after publication of the annual and/or quarterly results as per decision of the Board of Directors. In the Exercise Notice, the Beneficiary must indicate the quantity of shares that he/she wishes to acquire, in the form of notice to be published by the Board of Directors or by the Committee, as the case may be. With the continuity of the plan and if the executive remains in the company he/she will be the holder of options which may be exercised in the short, medium or long term, and the value of which depends on the difference between the exercise price of the options and the price of the shares traded in the market – the greater the difference, the greater the value. Thus, it is in the interest of the executives that the price of the shares of the Company should increase in a continuous and sustainable manner, and this is also in the interests of the Company’s stockholders. f. Maximum number of shares covered The share purchase options granted under the Stock Options Purchase and Subscription Plan and the Regulations in effect shall be limited to a total of 5% (five per cent) of the Company’s registered capital. The shares resulting from the exercise of the option will be issued as a result of a decision by the Board of Directors to increase the capital, within the authorized limit of the Company’s capital, or with use of shares in treasury, within the legal limits. The present shareholders will not have preference in the grant or in the exercise of the share purchase options specified in the said Regulations, as per the provisions of Article 171, § 3 of Law 6404/76. In the event that the number, type and/or class of the shares issued by the Company is changed as a result of share splits, bonuses, reverse splits or conversions, the Board of Directors shall make the corresponding adjustment in the number, type and/or class of the shares that are the subject of each Option in effect and their respective price of acquisition or subscription, as the case may be, informing the Beneficiaries in writing. g. Maximum number of options to be granted The criteria are the same as for the previous item. The company expects always to make any grant of an option to purchase a share in accordance with criteria defined in the Plan. h. Conditions for acquisition of shares When the vesting period specified in the regulations has ended, the Beneficiary may exercise his or her option to purchase shares. The exercise of the option consists of purchase of the shares for the exercise price established, after the vesting period has expired. For this purpose, the Beneficiary must formally state the exercise of the option to the Company, through an Exercise Notice, within fifteen (15) days following the meeting of the Board of Directors which approved the financial statements of the previous business year, subject to the limits specified by the vesting period. Further, at its exclusive option the Board of Directors may authorize the exercise of any options to which right has been acquired, within up to fifteen (15) days following the publication of the quarterly results, subject to the limits specified by the vesting period. The options may be exercised in their totality or in part, subject to the periods and conditions established by the Board of Directors, by the Committee (as the case may be), by these regulations (especially, but not limited to the limits specified by the vesting period), and/or by the Adhesion Contracts. The portion of the Option that has not been exercised by the date specified in the regulation shall be considered automatically to have been extinguished, without any right to indemnity. The exercise of the Option may only take place provided there has been continuity of the Beneficiary’s employment relationship with the Company or with its subsidiaries, up to the actual date of exercise of the option. The Exercise Notice may only be issued by the Beneficiary, after publication of the annual and/or quarterly results as per decision of the Board of Directors. In the Exercise Notice, the Beneficiary must indicate the quantity of shares that he/she wishes to acquire, in the form of notice to be published by the Board of Directors or by the Committee, as the case may be.


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13.4 - Share-based remuneration plan for the Board of Directors and the Executive Board When the issuance of the shares or transfer of the shares in treasury has been approved, according to the case and the decision of the Board of Directors, the shares resulting from the Exercises of Option will be transferred to or posted in the name of the respective Beneficiary, who must pay the Issue Price to the Company within five (5) days after the registry or transfer. i. Criteria for setting the price of acquisition or exercise The Exercise Price of the option will be based on the volume-weighted average of the market price of the share in the month prior to the grant and adjusted by inflation (IPCA) up to the Exercise of Option, thus establishing Article 170, § 1, III, of Law 6404/76 as the criterion for setting the issue price. The Board of Directors, at its exclusive option, but without disobeying the legal limits referred to above, may apply a discount of up to 50% on the result of the average referred to in this item. Application of the said discount will not create an acquired right, in favor of the same or of other Beneficiaries, to similar discounts in other issues of shares. j. Criteria for setting of the exercise price As specified in the Plan: The Options shall have a total vesting period of three years, being able to be exercised as follows: up to 1/3 after one year from the date of the grant; a further 1/3 after two years from the date of the grant, making up a total limit of 2/3; and the remaining 1/3 after three years from the date of the grant. The options shall have a period of validity of six (6) years, from the date of grant. The periods have been established to generate long-term incentives. k. Form of settlement The exercise price of the option shall be paid on the date determined by the Company, in Brazilian currency, by: (i) nominal check to the Company; (ii) bank transfer to an account indicated by the Company; or (iii) any other form of payment expressly permitted by the Company and previously advised to the Beneficiary in writing. l. Restrictions on transfer of shares The shares acquired by the Beneficiaries under this plan do not have any restrictions on transfer, however, as is specified in the Regulations, the Board of Directors or the Committee (as the case may be), may impose terms and/or prior conditions for the exercise of the option, and impose restrictions on the transfer of shares acquired with the exercise of the Option, and may also reserve for the Company options to repurchase, or rights of first refusal, in the event of sale by the Beneficiary of those shares, up to the termination of the period and/or compliance with the conditions set. The Subscription Contracts will be prepared individually for each Beneficiary, and the Board of Directors or the Committee (as the case may be) may establish differentiated terms and conditions for each Subscription Contract, without the need for application of any rule of equality of rights or of analogy between the Beneficiaries, even if they are in similar or identical situations. m. Criteria and events which, when present, will result in suspension, alteration or extinction of the plan The 'Plan' and the Regulations come into effect on the date of their approval by the General Meeting of Stockholders of the Company and may be extinguished at any time by decision of the General Meeting of Stockholders. The termination of the period of validity shall not affect acquired rights - thus not affecting the efficacy of the Options that are still in effect, and granted under it. Without prejudice to any provision to the contrary specified in the Regulations or in the Subscription Contract, the options granted shall be automatically extinguished, all their effects ceasing for all purposes of law, in the following events: (a) their full exercise; (b) expiry of the period of validity of the option; (c) agreement to dissolve the Subscription Contract; or (d) if the Company is dissolved, liquidated or declared bankrupt. However, in the event of dissolution, merger, absorption, split or liquidation of the Company, the Beneficiaries of the Stock Options Purchase and Subscription Plan may exercise such of their Options as are already able to be exercised (that is to say, for which the vesting period has elapsed) in the period between the date of convocation of the general meeting of stockholders for the purpose of deciding on the dissolution, merger, incorporation, split or liquidation of the Company and the date of it being held. To the contrary, the Options will be extinguished, as will also the Regulations of the Plan of Grant and the respective Subscription Contracts. The Regulations will not prevent the realization of any operations of stockholding reorganization, such as transformation, absorption, merger or split. The Board of Directors of the Company and the Companies involved in such transactions may, at their option, decide, without prejudice to other measures which they decide for the purposes of being equitable: (a) to substitute for the shares that are subject of the Options shares in the company that is successor to the Company; (b) to bring forward the acquisition of the right to exercise the option for acquisition of shares, so as to ensure inclusion of the corresponding shares in the transaction in question; and/or (c) to pay in money the amount to which the Beneficiary would be entitled under the Plan. n. Effects on a Manager’s rights under the share-based remuneration plan caused by his leaving the corporate

bodies of the Company In the event of the Beneficiary separating from the Company by dismissal or rescission of the respective contract, if any, with or without just cause, or by resignation or by destitution from the position, or by retirement, or due to permanent disablement, or death, the rights conferred on him under these Regulations may be extinguished or modified, as specified in item 6.2 of the


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13.4 - Share-based remuneration plan for the Board of Directors and the Executive Board Regulations, transcribed below. 6.2. If, at any time during the period of the Plan being in effect, the Beneficiary: a) separates from the Company of his/her own volition, resigning from the employment, rescinding the respective contract, if any, or resigns his/her position as member of the Board of Directors or Executive Board. (i) the Non-exercisable options on the date of his/her separation will be automatically extinguished, for the full purposes of law, independently of prior notice or indemnity; and (ii) the Exercisable Options may be exercised within up to thirty (30) days, after which they will be automatically extinguished, independent of advice or service of notice; b) is separated from the company at the initiative of the Company, by dismissal or rescission of the respective contract, if any, for just cause, or by destitution from his/her position due to violating the rights and attributions of a member of the Board of Directors or Executive Board, all the rights already exercisable or not yet exercisable in accordance with the respective Subscription Contract, on the date of his/her separation from the Company, will automatically be extinguished, for full purposes of law, independently of prior notice or indemnity; c) is separated from the Company at the Company’s initiative, through dismissal or rescission of the respective contract, if any, without just cause, or by destitution from his/her position without violation of the duties and attributions of members of the Board of Directors or Executive Board: (i) the Non-exercisable Options under the respective Subscription Contract, on the date of separation, will be automatically cancelled, independently of prior advice, notice or indemnity; (ii) the Exercisable Options will be extended by up to thirty (30) calendar days from the announcement of the separation – no further extension being possible – after which they will automatically be cancelled, independently of prior advice, notice or indemnity; d) separates himself from the Company by retirement or permanent disablement: (i) the Non-exercisable Options under the Subscription Contract, on the date of his separation, will become automatically exercisable, the ending of the vesting period being brought forward; and (ii) the Exercisable Options under the Subscription Contract on the date of his separation will remain unchanged, being able to be exercised normally under the Contract; e) is separated from the Company by death: (i) the Non-exercisable Options in accordance with the Subscription Contract, on the date of his death, will automatically be exercisable, the ending of the vesting period being brought forward, and the Beneficiary’s heirs and legal successors may exercise the respective option within up to twelve (12) months from the date of death, after which such rights shall be automatically extinguished, for full purposes of law, independently of prior advice or indemnity; and (ii) the Exercisable Options under the respective Subscription Contract, on the day of his death may be exercised by the heirs and legal successors of the Beneficiary, provided that they do so within up to twelve (12) months from the date of death, after which the rights shall be automatically extinguished, for full purposes of law, independently of prior advice, notice or indemnity. Items 6.3 and 6.4 of the Regulations state: 6.3. In the case of dismissals without just cause that take place in the period of 12 months after a change of control, in accordance with the law, all the options become exercisable. 6.4. The Board of Directors shall have freedom and autonomy to decide on exceptional cases and/or change the rules specified above, without prejudice to rights already exercised and/or acquired prior to their decision.


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13.5 - Share-based remuneration of the Board of Directors and the statutory directors Up to February 25, 2016 the Company has made several grants of shares: in 2008 (Plan I), 2009 (Plan II), 2010 (Plan III), 2011 (Plan IV), 2012 (Plan V), 2013 (Plan VI), 2014 (Plan VII), 2015 (Plan VIII) and 2016 (Plan IX).The Beneficiaries of the plans are Chief Officers and Managers of the Company (excluding any that are also Controlling Stockholders), as specified by the Board of Directors. The members of the Board of Directors and Audit Board are not part of the program.

Share-based remuneration –

Forecast for the business year ended on December 31, 2016 Board of Directors

Executive Board (Statutory)

Number of members 6 3

Number of remunerated members 0 3

Weighted average price of exercise:

(a) Options – open at the beginning of the business year - 9.00

(b) Options – lost during the business year - -

(c) Options – Exercised during the business year - 9.23

(d) Options – Expired during the business year - -

Potential dilution in the event of exercise of all options granted - 0.15%


Business year ended on December 31, 2015 Board of Directors






















Page 147 of 243

13.5 - Share-based remuneration of the Board of Directors and the statutory directors




Number of members 6 3.67








Grants recognized in the business year ended on December 31, 2016

Board of Directors


Grant of stock options No Plan 6 Plan 7 Plan 8 Plan 9

Date of grant - 02/28/13 02/13/14 02/12/15 02/25/16

Quantity of options granted - 261,870 119,010 195,234 278,802

Period for the options to become exercisable

-

As specified in the Plan: The Options shall have a total vesting period of three years, being able to be exercised as follows: up to 1/3 after one year from the date of the grant; a further 1/3 after two years from the date of the grant, making up a total limit of 2/3; and the remaining

1/3 after three years from the date of the grant.

Maximum period for exercise of the options - 02/27/19 02/12/20 02/11/21 02/24/22

Period ot restriction on transfer of the shares - There is no restriction

Fair value of the options on the date of grant - R$8.38 R$5.96 R$6.07 R$7.73


Board of Directors



Date of grant - 03/01/12 02/28/13 02/13/14 02/12/15



-







Page 148 of 243



Board of Directors



Date of grant - 02/24/11 03/01/12 02/28/13 02/13/14



-







Board of Directors



Date of grant - 03/04/10 02/24/11 03/01/12 02/28/13



-







Page 149 of 243


The information below refers only to the Statutory Board, the members of the Board of Directors and Audit Board are not part of the program.

Share-based remuneration forecast for the current business year (2016)

a) Body Executive Board (Statutory)

b) Nr. of members 3 (three)

c) Nr. of remunerated members 3 (three)

d) In relation to each grant of options to purchase shares

Plan 6 (2013) Plan 7 (2014) Plan 8 (2015) Plan 9 (2016)

i. Date of grant 02/28/13 02/13/14 02/12/15 02/25/16

ii. Quantity of options granted 261,870 119,010 195,234 278,802

iii. Period for the options to become exercisable

As specified in the Plan: The Options shall have a total vesting period of three years, being able to be exercised as follows: up to 1/3 after one year from the date of the

grant; a further 1/3 after two years from the date of the grant, making up a total limit of 2/3; and the remaining 1/3 after three years from the date of the grant.

iv. Maximum period for exercise of the options

02/27/19 02/12/20 02/11/21 02/24/22

v. Period of restriction on transfer of the shares

There is no restriction

vi. Weighted average price of exercise

(a) Options – open at the beginning of the business year

R$9.55 R$9.84 R$8.42 R$8.88

(b) Options – lost during the business year

- - - -

(c) Options – Exercised during the business year

R$9.55 R$9.84 R$8.42 R$8.88

(d) Options – Expired during the business year

- - - -

e) Fair value of the options on the date of grant

R$8.38 R$5.96 R$6.07 R$7.73

f) Potential dilution in the event of exercise of all options granted

0.09% 0.04% 0.06% 0.30%


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Share-based remuneration for the business year ended on December 31, 2015






i. Date of grant 03/01/12 02/28/13 02/13/14 02/12/15






02/28/18 02/27/19 02/12/20 02/11/21





R$4.33 R$9.55 R$9.84 R$8.42


- - - -


R$4.33 R$9.55 R$9.84 R$8.42


- - - -


R$4.21 R$8.38 R$5.96 R$6.07


0.03% 0.09% 0.04% 0.06%


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i. Date of grant 02/24/11 03/01/12 02/28/13 02/13/14






02/23/17 02/28/18 02/27/19 02/12/20





R$10.80 R$4.33 R$9.55 R$9.84


- - - -


R$10.80 R$4.33 R$9.55 R$9.84


- - - -


R$1.20 R$4.21 R$8.38 R$5.96


0.17% 0.03% 0.09% 0.04%


Page 152 of 243




b) Nr. of members 3.67 (three point sixty seven)




i. Date of grant 03/04/10 02/24/11 03/01/12 02/28/13






03/03/16 02/23/17 02/28/18 02/27/19





R$10.08 R$10.80 R$4.33 R$9.55


- - - -


R$10.08 R$10.80 R$4.33 R$9.55


- - - -


R$2.28 R$1.20 R$4.21 R$8.38


0.06% 0.17% 0.03% 0.09%


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13.6 – Information on the open options held by the Board of Directors and the statutory directors Amounts relating to the 2015 business year

Body Executive Board (Statutory)

Number of members 3 (three)

Number of remunerated members 3 (three)

In relation to options not yet exercised

Plan 6 (2013) Plan 7 (2014) Plan 8 (2015)

I. Quantity 361,864

II. Date when they will become exercisable

02/27/16 – 87,290 02/12/16 – 39,670 02/12/17 – 39,670

02/11/16 – 65,078

02/11/17 – 65,078

02/11/18 – 65,078

III. Maximum period for exercise of the options

02/27/19 02/12/20 02/11/21

IV. Period of restriction on transfer of the shares


V. Weighted average price of exercise

R$9.00

VI. Fair value of the options on the last day of the business year

R$6.60

In relation to the exercisable options

There is no exercisable options on December 31, 2015

I. Quantity -

II. Date when they will become exercisable

-

III. Maximum period for exercise of the options

-

IV. Period of restriction on transfer of the shares

-

V. Weighted average price of exercise

-

VI. Fair value of the options on the last day of the business year

-


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13.7 - Options exercised and shares delivered in relation to the share-based remuneration of the Board of Directors and the statutory directors

a. Body Executive Board

b. Number of members 3 (three)

c. In relation to options not yet exercised Plan I (2008)

Plan II (2009)

Plan III (2010)

Plan IV (2011)

Plan V (20112)

Plan VI (2013)

Plan VII (2014)

Plano VIII

(2015)

i. Number of shares 2009 – 107,100 2010 – 107,166 2011 – 222,543 2013 – 107,151

2010 – 54,984 2011 – 96,495 2012 – 75,491

2013 – 247

2013 – 179,308

2013 – 334,832

2014 – 46,907 2015 – 120,509

2013 – 30,236 2014 – 30,236 2015 – 30,236

2014 – 87,290 2015 – 87,290

2015 –39,670

-

ii. Weighted average price in the business year

2009 – R$7.05 2010 – R$7.29 2011 – R$6.64 2013 – R$10.15

2010 – R$4.12 2011 – R$6.64 2012 – R$3.92 2013 –

R$10.15

2013 – R$10.15

2013 – R$10.15 2014 – R$8.87 2015 – R$10.34

2013 – R$10.15

2014 – R$8.87 2015 –

R$10.34

2014 – R$8,87 2015 – R$10.34

2015 – R$10.34

–

iii. Total value of the difference between the exercise value and the market value of the shares for the options exercised

R$ 1,443,261,36

R$ 185,012.35

R$ 1,956,250.28

R$ 4,806,829.93

R$ 797,020.96

R$ 1,348,630.50

R$ 231,276.10

–

d. In relation to the shares delivered, state:

i. Number of shares 543,960 227,217 179,308 502,248 60,472 87,290 69,670 -

ii. Weighted average acquisition price

2009 – R$8.26

2010 – R$7.29

2011 – R$7.29

2013 – R$21.06

2010 – R$6.31

2011 – R$6.64

2012 – R$4.74

2013 – R$21.06

2013 – R$21.06

2013 – R$21.06 2014 – R$18.49 2015 – R$16.17

2013 – R$21.06 2014 – R$18.49 2015 – R$16.17

2014 – R$18.49 2015 – R$16.17

2015 – R$16.17

–

iii. Total value of the difference between the acquisition value and the market value of the shares acquired

R$ 1,443,261.36

R$ 185,012.35

R$ 1,956,250.28

R$ 4,806,829.93

R$ 797,020.96

R$ 1,348,630.50

R$ 231,276.10

–


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13.8 - Information necessary for understanding of the data disclosed in items 13.5 to 13.7 - Method of pricing of the value of the shares and the options

a. The pricing model

Plan IV (2011)

Black and Scholles

Plan V (2012)

Plan VI (2013)

Plan VII (2014)

Plan VIII (2015)

b. Data and assumptions used in the pricing model, including the weighted average price of the shares, exercise price, expected

volatility, period of life of the option, expected dividends and risk-free interest rate

Plan III (2010)

1) Grant on March 4, 2010 1.1) Total number of purchase options granted: 179,308 1.2) Exercise price: R$ 10.08. 1.3) Estimated volatility: 32.8% 1.4) * Continuous dividend expected on the shares: 4% 1.5) ** Weighted average risk-free interest rate: 11.25% 1.6) Maximum maturity: 6 years 1.7) Value of option premium (Fair value on date of grant, less exercise price): R$ 12.36 – R$ 10.08 = R$ 2.28 * The expected dividends were obtained based on the average of payments of dividends per share in relation to market price in the last 12 months. ** For the risk-free interest rate, the Company uses the average forecast for the Selic rate, available from the Brazilian Central Bank.

Plan IV (2011)

1) Grant on February 24, 2011 1.1) Total purchase options granted: 502,248 1.2) Exercise price: R$ 10.80. 1.3) Estimated volatility: 27.6% 1.4) * Continuous dividend expected on the shares: 4% 1.5) ** Weighted average risk-free interest rate: 12.50% 1.6) Maximum maturity: 6 years 1.7) Value of option premium (Fair value on date of grant, less exercise price): R$ 12.00 – R$ 10.80 = R$ 1.20 * The expected dividends were obtained based on the average of payments of dividends per share in relation to market price in the last 12 months. ** For the risk-free interest rate, we use the average forecast for the Selic rate (from Brazilian Central Bank)).

Plan V (2012)

1) Grant on March 1, 2012 1.1) Total number of purchase options granted: 90,708 1.2) Exercise price: R$ 4.33. 1.3) Estimated volatility: 14.07% 1.4) * Continuous dividend expected on the shares: 7% 1.5) ** Weighted average risk-free interest rate: 9.50% 1.6) Maximum maturity: 6 years 1.7) Value of option premium (Fair value on date of grant, less exercise price): R$ 8.54 – R$ 4.33 = R$ 4.21 * The expected dividends were obtained based on the average of payments of dividends per share in relation to market price in the last 12 months. ** For the risk-free interest rate, we use the average forecast for the Selic rate (from Brazilian Central Bank)).

Plan VI (2013)

1) Grant on February 28, 2013 1.1) Total number of purchase options granted: 261,870 1.2) Exercise price: R$ 9.55. 1.3) Estimated volatility: 25.51% 1.4) * Continuous dividend expected on the shares: 5% 1.5) ** Weighted average risk-free interest rate: 7.25% 1.6) Maximum maturity: 6 years 1.7) Value of option premium (Fair value on date of grant, less exercise price): R$ 17.93 – R$ 9.55 = R$ 8.38 * The expected dividends were obtained based on the average of payments of dividends per share in relation to market price in the last 12 months. ** For the risk-free interest rate, we use the average forecast for the Selic rate (from Brazilian Central Bank).


Page 156 of 243

13.8 - Information necessary for understanding of the data disclosed in items 13.5 to 13.7 - Method of pricing of the value of the shares and the options

b. Data and assumptions used in the pricing model, including the weighted average price of the shares, exercise price, expected volatility, period of life of the option, expected dividends and risk-free interest rate

Plan VII (2014)

1) Grant on February 13, 2014 1.1) Total number of purchase options granted: 119,010 1.2) Exercise price: R$ 9.84 1.3) Estimated volatility: 26.35% 1.4) * Continuous dividend expected on the shares: 6% 1.5) ** Weighted average risk-free interest rate: 11.25% 1.6) Maximum maturity: 6 years 1.7) Value of option premium (Fair value on date of grant, less exercise price): R$ 15.80 – R$ 9.84 = R$ 5.96 * The expected dividends were obtained based on the average of payments of dividends per share in relation to market price in the last 12 months. ** For the risk-free interest rate, we use the average forecast for the Selic rate (from Brazilian Central Bank).

Plan VIII (2015)

1) Grant on February 12, 2015 1.1) Total number of purchase options granted: 195,234 1.2) Exercise price: R$ 8.42 1.3) Estimated volatility: 26.51% 1.4) * Continuous dividend expected on the shares: 5% 1.5) ** Weighted average risk-free interest rate: 12.75% 1.6) Maximum maturity: 6 years 1.7) Value of option premium (Fair value on date of grant, less exercise price): R$ 14,49 – R$ 8,42 = R$ 6,07

* The expected dividends were obtained based on the average of payments of dividends per share in relation to market price in the last 12 months. ** For the risk-free interest rate, we use the average forecast for the Selic rate (from Brazilian Central Bank).

c. Method and assumptions used to incorporate the expected effects of the expected exercise

Plan IV (2011)

In the calculation of the fair value of the options, we use the value for the expected life of the options. We did not take into consideration the turnover, because it is expected to be insignificant at the level of the Executive Board of Grendene S.A.

Plan V (2012)

Plan VI (2013)

Plan VII (2014)

Plan VIII (2015)

d. Manner of determining expected volatility

Plan IV (2011)

The volatility was calculated based on the daily variation in the closing price of the share on the BM&FBovespa for the 18 months prior to the date of the grant.

Plan V (2012)

Plan VI (2013)

Plan VII (2014)

Plan VIII (2015)

e. Was any other characteristic of the option incorporated into the measurement of its fair value?

Plan IV (2011)

None.

Plan V (2012)

Plan VI (2013)

Plan VII (2014)

Plan VIII (2015)


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13.9 - Holdings in shares, unit shares and other securities that are convertible, held by managers and members of the Audit Board – by body Number of shares or share units issued by the Company or its direct or indirect controlling stockholders, or its subsidiaries or jointly-controlled subsidiaries, and any other securities convertible into such shares or share units, that were directly or indirectly held, in Brazil or outside Brazil, by members of the Board of Directors, by the statutory directors, or by members of the Audit Board, grouped by body, on the closing date of the last business year. Notes: (*) This includes shares owned by the controlling stockholders Alexandre Grendene Bartelle and Pedro Grendene Bartelle and by the other stockholders bound by the Company's stockholders' agreement.

Stockholders Dec. 31, 2015

Number of shares % holding in the total share capital

Members of the Board of Directors (*) 217,061,757 72.180685%

Members of the Executive Board 659,268 0.219230%

Members of the Audit Board - -

Total number of shares 217,725,052 72.401254%














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13.10 – Information on the pension plans granted to the members of the Board of Directors and statutory directors The company does not maintain Private Pension Plans for the members of its Board of Directors, Executive Board and managers


Page 159 of 243

13.11 - Maximum, minimum and average individual remuneration of the Board of Directors, the statutory directors and the Audit Board Annual amounts

Executive Board Board of Directors Audit Board

Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013

No. of members 3.00 3.00 3.67 6 6 6 3 3 3

No. of remunerated members

3.00 3.00 3.67 6 6 6 3 3 3

Amount of the largest individual remuneration (Reais)

2,051,021.46 1,673,329.44 2,403,218.76 164,000,00 152,000.00 140,000.00 118,800.00 109,800.00 94,600.00

Amount of the lowest individual remuneration (Reais)

1,164,538.19 1,027,305.14 60,000.00 164,000,00 152,000.00 140,000.00 118,800.00 109,800.00 94,600.00

Average remuneration (Reais)

1,587,023.46 1,335,099.87 1,427,582.89 164,000,00 152,000.00 140,000.00 118,800.00 109,800.00 94,600.00

Remarks

Executive Board

Board of Directors

Audit Board


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13.12 – Mechanisms of remuneration or indemnity for managers in the event of being removed from office or retirement There are no mechanisms of remuneration or indemnity for managers in the event of dismissal from their position, or retirement.


Page 161 of 243

13.13 – Remuneration of managers and members of the Audit Board who are related parties of the controlling stockholders, as a percentage of total remuneration of all managers and members of the Audit Board Grendene does not make payments to members of the Board of Directors, the Statutory Directors or the Audit Board who are related parties of the Controlling stockholders, whether direct or indirect. The only payment made is to the controlling stockholders themselves (Mr. Alexandre Grendene Bartelle, who serves as Chairman of the Board of Directors, and Mr. Pedro Grendene Bartelle, who serves as Vice-Chairman of the Board of Directors).

Business year ended on Board of Directors Audit Board Executive Board (Statutory Board)

December 31, 2015 33% 0% 0%

December 31, 2014 33% 0% 0%

December 31, 2013 33% 0% 2%


Page 162 of 243

13.14 – Remuneration of managers and members of the Audit Board, grouped by body, received for any reason other than the function they hold

Amounts recognized for any reason other than the post they hold.

R$ 2013 2014 2015

Board of Directors R$ 122,270.84 R$ 72,000.00 R$ 72,000.00

The other members of the Board of Directors, Executive Board and Audit Board did not receive any remuneration other than by reason of the post they hold in the Company.


Page 163 of 243

13.15 - Remuneration of management or the Audit Board recognized in the Profit and loss account of companies that are direct or indirect controlling stockholders, or companies under common control, or subsidiaries, the Issuer The Company has no amounts recognized in the Profit and loss of any company that is a direct or indirect controlling stockholder, nor any company under common control or subsidiary of the Issuer, as remuneration of members of the Board of Directors or the statutory directors.


Page 164 of 243

13.16 - Other material information The full Regulations of the Stock Options Purchase and Subscription Plan, approved by the Extraordinary General Meeting of April 14, 2008, and the alterations approved by the Meeting of the Board of Directors of March 1, 2012 and February 12, 2015, is available for consultation on the sites of the CVM and of the BM&FBovespa, and on the Company’s Investor Relations site. Comissão de Valores Mobiliários – http://www.cvm.gov.br BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros – http://www.bmfbovespa.com.br Grendene – Investor Relations – http://ri.grendene.com.br/PT/Governanca-Corporativa/Stock-Options Stock Options Plan

Information contained in the previous items refers only to the members of the Executive Board. However, it is necessary to make clear that the stock options plan, administered by the Board of Directors, envisages as Beneficiaries the management level executives of the Company: as well as the Chief Officers referred to above, it also includes the principal managers. For greater transparency, we transcribe below Explanatory Note 21 to the financial statements. 21. Stock option or subscription plan At the Extraordinary General Meeting held on April 14, 2008, the Company's stockholders approved the "Stock Option or Share Subscription Plan", to be effective as from April 14, 2008, for the Company's directors and managers, except for directors nominated by the controlling stockholders. The plan is administered by the Company's Board of Directors, which may delegate this function, within the restrictions established by law to the committee created on February 12, 2015, by the 59th meeting of the Board of Directors. At February 12, 2015 the 59th meeting of the Board of Directors approved changes in the Regulations of the Company’s stock Options Plan in the following items: (i) 1.1 and 1.3: The party responsible for appointment of employees eligible for the Plan – formerly the Chief Executive Officer – is now the Committee referred to in Item 2.2 of the Regulations; (ii) 4.1 and 4.2: The frequency with which beneficiaries may exercise their options, formerly annually, may, if so decided by the Board of Directors, be quarterly.

The share purchase options granted under the Stock Option Plan are limited to 5% of the Company's capital. The shares to be delivered as a result from the exercise of options will be issued through a resolution to increase capital, by the Board of Directors, within the Company's authorized capital, or using treasury shares, within legal limits. The Stock Option or Share Subscription Plan beneficiaries may exercise their options within 6 years from the grant date. The vesting period will be of up to 3 years, with releases of 33% after one year, 66% after two years and 100% after three years.

At December 31, 2015 the company recognized an expense of R$ 3,543 (R$ 3,266 in 2014) in Personnel expenses, for stock options, based on the fair value of the transactions on the date of their being granted. On December 31, 2015, the Company has five plans in effect:

The fourth plan, granted on February 24, 2011; The fifth plan, granted on March 1, 2012; The sixth plan, granted on February 28, 2013; The seventh plan, granted on February 13, 2014; and

The eighth plan, granted on February 12, 2015. a) Summary of grants of share purchase options or subscriptions The options granted and the related changes were as follows:

http://www.cvm.gov.br/

http://www.bmfbovespa.com.br/

http://ri.grendene.com.br/PT/Governanca-Corporativa/Stock-Options


Page 165 of 243

13.16 - Other material information

2015

Grant date Option

exercise price

Vesting period as from grant

date

Maximum number of

shares

Opening balance

Granted Exercised Canceled Closing balance

02/24/2011 10,80 02/24/2012 580,544 5,956 - - - 5,956 02/24/2011 10,80 02/24/2013 1,161,088 5,956 - - - 5,956 02/24/2011 10,80 02/24/2014 1,741,632 357,020 - (303,906) - 53,114 03/01/2012 4,33 03/01/2013 108,949 - - - - - 03/01/2012 4,33 03/01/2014 217,898 4,654 - (4,654) - - 03/01/2012 4,33 03/01/2015 326,847 96,452 - (96,452) - - 02/28/2013 9,55 02/28/2014 265,183 26,414 - (26,414) - - 02/28/2013 9,55 02/28/2015 530,366 243,074 - (243,074) - - 02/28/2013 9,55 02/28/2016 795,549 243,074 - - (2,513) 240,561 02/13/2014 9,84 02/13/2015 123,386 118,570 - (118,570) - - 02/13/2014 9,84 02/13/2016 246,772 118,570 - (1,199) 117,371 02/13/2014 9,84 02/13/2017 370,158 118,570 - (1,199) 117,371

12/02/2015 8,42 02/12/2016 215,518 - 215,518 - (5,220) 210,298

12/02/2015 8,42 02/12/2017 431,036 - 215,518 - (5,220) 210,298

12/02/2015 8,42 02/12/2018 646,554 - 215,518 - (5,220) 210,298

1,338,310 646,554 (793,070) (20,571) 1,171,223

2014

Grant date Option

exercise price

Vesting period as from grant

date

Maximum number of

shares

Opening balance

Granted Exercised Canceled Closing balance

2/24/2011 10.80 2/24/2012 580,544 5,956 - - - 5,956 2/24/2011 10.80 2/24/2013 1,161,088 5,956 - - - 5,956 2/24/2011 10.80 2/24/2014 1,741,632 498,983 - (141,963) - 357,020 3/1/2012 4.33 3/1/2013 108,949 - - - - - 3/1/2012 4.33 3/1/2014 217,898 99,620 - (94,966) - 4,654 3/1/2012 4.33 3/1/2015 326,847 99,620 - - (3,168) 96.452 2/28/2013 9.55 2/28/2014 265,183 253,267 - (226,853) - 26,414 2/28/2013 9.55 2/28/2015 530,366 253,267 - - (10,193) 243,074 2/28/2013 9,55 2/28/2016 795,549 253,267 - - (10,193) 243,074 2/13/2014 9.84 2/13/2015 123,386 - 123,386 - (4,816) 118,570 2/13/2014 9.84 2/13/2016 246,772 - 123,386 - (4,816) 118,570 2/13/2014 9.84 2/13/2017 370,158 - 123,386 - (4,816) 118,570

1,469,936 370,158 (463,782) (38,002) 1,338,310

2013

Date of grant Exercise

price Vesting period as from grant

Maximum number of

shares Initial balance Granted Exercised Canceled Final balance

4/25/2008 7.30 4/25/2009 679,967 60,494 - (60,494) - - 4/25/2008 7.30 4/25/2010 1,359,934 164,737 - (164,737) - - 4/25/2008 7.30 4/25/2011 2,039,901 228,494 - (228,494) - - 3/5/2009 4.26 3/5/2010 300,000 - - - - - 3/5/2009 4.26 3/5/2011 600,000 - - - - - 3/5/2009 4.26 3/5/2012 900,000 247 - (247) - - 3/4/2010 10.08 3/4/2011 233,333 209,327 - (209,327) - - 3/4/2010 10.08 3/4/2012 466,666 209,327 - (209,327) - - 3/4/2010 10.08 3/4/2013 700,000 209,328 - (209,328) - - 2/24/2011 10.80 2/24/2012 580,544 534,400 - (528,444) - 5,956 2/24/2011 10.80 2/24/2013 1,161,088 534,400 - (528,444) - 5,956 2/24/2011 10.80 2/24/2014 1,741,632 534,400 - - (35,417) 498,983 3/1/2012 4.33 3/1/2013 108,949 106,727 - (106,727) - - 3/1/2012 4.33 3/1/2014 217,898 106,727 - - (7,107) 99,620 3/1/2012 4.33 3/1/2015 326,847 106,727 - - (7,107) 99,620

2/28/2013 9.55 2/28/2014 265,183 - 265,183 - (11,916) 253,267

2/28/2013 9.55 2/28/2015 530,366 - 265,183 - (11,916) 253,267

2/28/2013 9.55 2/28/2016 795,549 - 265,183 - (11,916) 253,267

3,005,335 795,549 (2,245,569) (85,379) 1,469,936

The fair value of options is calculated at the grant date of the plans, and is not subsequently remeasured since the settlement of the plan is made through equity instruments, as described in technical pronouncement CPC10 - R1 (IFRS 2) - Share-based Payment. Therefore, the Company is subject to variation of the share price in the market when the option is exercised by the Beneficiaries of the plans. In 2015, the Company acquired, for the fulfillment of the plans for exercise of options of share purchase, 198,096 shares, at an average price of R$ 15.31, totaling R$ 3,034. In the first quarter, 793.070 shares were exercised at an average price of R$ 16.17, totaling R$ 12.823. The Company recognized the difference between the average exercise price of the options and the shares acquired for the fulfillment of these exercises, in the amount of R$ 882, directly in equity, since the settlement of options plans occurs through


Page 166 of 243

13.16 - Other material information equity instruments, as described in technical pronouncement CPC 10 – R1 (IFRS 2) – Share-based payment. b) Changes of the operations with stock option Changes involving issuance, exercise and cancellation of share purchase options in the year were as follows:

Plan Changes Grace period from

grant Number of shares Movement in shares Value of the

premium

Expense realized through stock

options exercised and canceled

Fourth Balance at start of period - 368,932 - - - (-)Exercise of share purchase options 02/24/2014 - (303,906) 1.74 (529) Balance at end of period - 65,026 - - -

Fifth Balance at start of period - 101,106 - - - (-)Exercise of share purchase options 03/01/2014 - (4,654) 4.21 (19) (-)Exercise of share purchase options 03/01/2015 - (96,452) 4.00 (386) Balance at end of period - - - - -

Sixth Balance at start of period - 512,562 - - - (-)Exercise of share purchase options 02/28/2014 - (26,414) 8.57 (226) (-)Exercise of share purchase options 02/28/2015 - (243,074) 8.37 (2,035) (-) Canceled 02/28/2016 - (2,513) 8.19 (15) Balance at end of period - 240,561 - - -

Seventh Balance at start of period - 355,710 - - - (-)Exercise of share purchase options 02/13/2015 - (118,570) 5.83 (691) (-) Canceled 02/13/2016 - (1,199) 5.98 (4) (-) Canceled 02/13/2017 - (1,199) 6.07 (3) Balance at end of period - 234,742 - - -

Eighth Balance at start of period - - - - - Option to buy shares issued - 646,554 - - - (-) Canceled 02/12/2016 - (1,996) 5.82 (2) (-) Canceled 02/12/2017 - (1,996) 6.10 (1) (-) Canceled 02/12/2018 - (1,996) 6.29 (1) (-) Canceled 02/12/2016 - (1,788) 5.82 (3) (-) Canceled 02/12/2017 - (1,788) 6.10 (1) (-) Canceled 02/12/2018 - (1,788) 6.29 (1) (-) Canceled 02/12/2016 - (1,436) 5.82 (4) (-) Canceled 02/12/2017 - (1,436) 6.10 (2) (-) Canceled 02/12/2018 - (1,436) 6.29 (2) Balance at end of period - 630,894 - - -

Changes in shares in equity (3,925)

c) Economic assumptions adopted for recognition of employee remuneration expenses The Company recognizes expenses for the variable remuneration of employees based on the fair value of the options granted, which was estimated using the Black-Scholes option pricing model. The Company utilized the following economic assumptions to determine this weighted average fair value:

4th Plan 5th Plan 6th Plan 7th Plan 8th

Plan

Grant date 2/24/2011 3/1/2012 2/28/2013 2/13/2014 02/12/2015 Total purchase options granted 1,741,632 326,847 795,549 370,158 646.554 Exercise price 10.80 4.33 9.55 9.84 8,42 Estimated volatility 27.60% 14.07% 25.51% 26.35% 26,51% Expected dividends 4% 7% 5% 6% 5% Weighted average risk-free interest rate 12.50% 9.50% 7.25% 11.25% 12,75% Maximum maturity 6 years 6 years 6 years 6 years 6 years Average maturity 2.5 years 2.5 years 2.5 years 2.5 years 2,5 years Option premium 1.20 4.21 8.38 5.96 6,07 Fair value at grant date 12.00 8.54 17.93 15.80 14,49

Volatility was determined based on the average historical fluctuation of the share price over the 18 months prior to the grant date. The expected dividends were based on the average dividend payment per share in relation to the market value of the share over the last 12 months. The Company utilizes as the risk-free interest rate the average projected Special System for Settlement and Custody (SELIC) rate published by the Central Bank of Brazil (BACEN). The fair value of options is calculated at the grant date and recorded as an expense, on a straight-line basis, during the vesting period. The Company is not committed to repurchase shares that were purchased by the Beneficiaries.


Page 167 of 243

14.1 - Description of human resources

a. Number of employees (total, by groups based on activity carried out, and by geographic location)

Northeastern Region Workforce*

Year Direct Indirect Total Turnover, %

2013 16,947 8,986 25,933 1.92%

2014 16,100 8,251 24,351 1.68%

2015 14,591 7,442 22,033 1.78%

Southern Region Workforce*


2013 - 2,161 2,161 2.21%

2014 11 2,181 2,192 2.65%

2015 12 2,131 2,143 1.81%

Total Workforce*


2013 16,947 11,147 28,094 1.94%

2014 16,111 10,432 26,543 1.76%

2015 14,603 9,573 24,176 1.71%

* Annual average number of employees. b. Number of outsourced workers (total, by group based on activity carried out, and by geographic location)

Northeastern Region Workforce

Direct Indirect Total

2013 - 360 360

2014 - 369 369

2015 - 337 337

Southern Region Workforce


2013 - 64 64

2014 - 48 48

2015 - 34 34

Total Workforce


2013 - 424 424

2014 - 417 417

2015 - 371 371

c. Turnover, % See tables in item 'a'” above. d. Issuer's exposure to employment-law liabilities and contingencies

Date Total, consolidated

Dec. 31, 2013 R$ 2,327,000.00

Dec. 31, 2014 R$ 2,159,000.00

Dec. 31, 2015 R$ 2,883,000.00

The above exposure refers to the provision for employment-law risks of Grendene S.A. and subsidiary companies.


Page 168 of 243

14.2 - Material changes - Human resources There have been no material changes in relation to item 14.1


Page 169 of 243

14.3 – Description of the policy for employees' remuneration Grendene has career development and remuneration policies aligned with recognized market practices. The People Management model is based on the principles of Management by Results, sustained by a Competencies model. As well as career and remuneration, this model also connects to actions of recruiting, selection and corporate education. a. Salaries and variable remuneration policy Salaries policy

The Company’s remuneration policy aims to recognize the value of human capital, based on the needs of the business, the results delivered by individuals, and their impact on the collective result, and the organizational and market economic context, in accordance with the current employment-law legislation. The remuneration policy covers all the areas and units of Grendene, and is applied on the following basic assumptions: Development and career The career of each employee is a personal attribution – it is up to the Company to show the opportunities for growth and indicate the paths for development and self-development. Professional growth can take place in two ways: *Vertical growth – transition of the employee to another position with greater responsibilities and a higher salary level. *Horizontal growth – increase of the employee’s remuneration, in the same job, according to the level of maturity of the performance and results delivered. Readiness Assessment To support development of the careers of its employees, Grendene practices an individual accompaniment through the Readiness Assessment, in which the immediate manager assesses the degree of the person’s adherence to the profile of the position he or she occupies. This analysis provides input for a consistent feedback on the opportunities for development, self-development and recognition of individual achievements. Based on this process, an individual action plan can be built between the Manager and the employee, providing a means of monitoring development over the year. The Assessment process is also a tool making it possible to ensure the competencies that the Company needs for achieving the results that are essential for maintenance of the business. Salaries Grendene’s salary policy is in line with market practices. For this, every two years it carries out a research survey aiming to compare its salary base with significant and large scale companies of the region. The salary base of the Company comprises six levels (A to F), where the average market remuneration is at the intermediary levels between levels C and D of Grendene’s table. Salaries are adjusted annually, on the base dates of the collective agreements of each locality. The adjustment percentage is up to 100% of the INPC inflation index. The same index is used for updating the salary reference tables, maintaining competiveness, vis-à-vis the market. General or collective salary increases These adjustments apply to the amounts of the salaries of all the employees. Annual Collective Negotiated Agreements: On the base-dates of collective employment agreements, salaries are adjusted in accordance with the negotiations at each location, and the tables are adjusted. Compulsory Advance Payments: These are made in accordance with the legislation, and with negotiated annual or other collective agreements, and offset on the base-date of the employee category and/or as the legislation determines. Individual salary adjustments These are specific adjustments for specific employees, on the occasion of promotion to a position with a higher salary (vertical growth), or for merit (horizontal growth) or for adaptation of the position to market values. For individual adjustments, the dates established in the policy, and the limits of the salary bands in the salary table are taken into account. Variable remuneration policy On April 14, 2008 the Board approved the Company's Stock Options and Subscription Plan, which benefits eligible executives based on the recommendations by the Committee to the Board of Directors for approval. (See item 13.16 - Regulations of the Stock Options Plan).


Page 170 of 243

14.3 – Description of the policy for employees' remuneration b. Benefits policy The objective of the Benefits Policy is to offer Grendene employees a package of benefits designed to meet their basic needs and their physical and social wellbeing, helping them to continue to be healthy and productive professionals. Among these points we highlight:

Subsidies for food.

Agreements with pharmacies and eyewear providers.

Medical, dental and social assistance in the factory itself.

Day-care centers for the children of our employees up to the age of seven.

Distribution of food 'baskets'.

Life insurance.

Basket of chocolates at Easter and poultry at Christmas.

Christmas Party and delivery of toys for children of age up to 11 years and 11 months. In addition, Grendene takes part in various social projects, such as assistance programs, participation in blood donor campaigns, programs combating drugs and violence, and programs supporting sporting associations. c. Characteristics of the share-based remuneration of the non-management-level employees: See item 13.16 – Other material information. The full text of the stock options and subscriptions plan is available for consultation on the sites of the CVM, and of the BM&FBovespa, and on the Company’s Investor Relations site. CVM – Comissão de Valores Mobiliários – http://www.cvm.gov.br BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros – http://www.bmfbovespa.com.br Grendene – Investor Relations – http://ri.grendene.com.br/PT/Governanca-Corporativa/Stock-Options

http://www.cvm.gov.br/

http://www.bmfbovespa.com.br/

http://ri.grendene.com.br/PT/Governanca-Corporativa/Stock-Options


Page 171 of 243

14.4 - Description of relations between the Issuer and the union Grendene respects and allows free union association, strengthening legitimate representation of the employees through their unions, and has among its staff a very significant number of employees associated with these entities. The Company participates actively in the federations of business owners in the regions where it operates, encouraging responsibly-conducted collective negotiations, complying in full in all the clauses established in an Agreement, and retaining a friendly and respectful relationship with the members of the executive committees of the unions. In all units, wall space is made available for the workers’ union to post information about its activities, and the main items of the Collective Agreement are published through internal communication channels (‘murals’ and emails), aiming to reach every one of the employees. In the last 3 years there has been no work stoppage or strike.


Page 172 of 243

14.5 – Other material information All the other information that is material and pertinent to this subject has been disclosed in the previous items.


Page 173 of 243

15.1 / 15.2 – Stockholding position Stockholder

Stockholder's Tax number (CPF or CNPJ) Nationality and State Signatory of Stockholders' Agreement Controlling stockholder Most recent alteration

Stockholder resident outside Brazil Name of legal representative or holder of Power of Attorney

Type of person CPF/CNPJ

No of common shares Common shares, % Number of preferred shares Preferred shares, % Total number of shares Total shares, %

Listed by type of share

Share type Number of shares Shares, %

Pedro Bartelle

685.957.430-53 Brazilian - Rio Grande do Sul Yes Yes September 30, 2016

No

2,720,640 0.904709% 0 0.000000% 2,720,640 0.904709%

Maria Cristina Nunes de Camargo


No

5,856,280 1.947420% 0 0.000000% 5,856,280 1.947420%

Verona Negócios e Participações S.A.

60.096.153/0001-06 Brazilian - Rio Grande do Sul Yes Yes September 30, 2016

No

77,199,988 25.671717% 0 0.000000% 77,199,988 25.671717%

Giovana Bartelle Veloso


No

2,743,040 0.912157% 0 0.000000% 2,743,040 0.912157%

Alexandre Grendene Bartelle Participações S.A.

04.819.746/0001-82 Brazilian - Rio Grande do Sul Yes Yes September 30, 2016

No

93,300,012 31.025542% 0 0.000000% 93,300,012 31.025542%


Page 174 of 243

15.1 / 15.2 – Stockholding position Stockholder







Pedro Grendene Bartelle


No

5,507,340 1.831385% 0 0.000000% 5,507,340 1.831385%



No

30,149,457 10.025757% 0 0.000000% 30,149,457 10.025757%

Other

83,243,243 27.681313% 0 0.000000% 83,243,243 27.681313%

SHARES IN TREASURY – Date of most recent change: September 30, 2016

0 0.000000% 0 0.000000% 0 0.000000%

TOTAL

300,720,000 100.000000% 0 0.000000% 300,720,000 100.000000


Page 175 of 243

15.1 / 15.2 – Stockholding position Details of a controlling stockholder / investor

Stockholder






Controlling stockholder / Investor Stockholder's Tax number (CPF or CNPJ)

Composition of share capital

Alexandre G. Bartelle Participações S.A. 04.819.746/0001-82


098.675.970-87 Brazilian - Rio Grande do Sul Yes Yes

3,285,059 99.999909 0 0.000000 3,285,059 99.999909


TOTAL 0 0.000000

OTHERS

3 0.000091 0 0% 3 0.000091

TOTAL

3,285,062 100.000000 0 0% 3,285,062 100.000000


Page 176 of 243


Stockholder








Verona Negócios e Participações S.A. 60.096.153/0001-06

André de Camargo Bartelle

354.047.748-94 Brazilian – São Paulo Yes Yes

No

674,114 12.479997 0 0.000000 674,114 12.479997


TOTAL 0 0.000000

Gabriella de Camargo Bartelle

370.718.138-33 Brazilian – São Paulo Yes Yes

No

674,114 12.479997 0 0.000000 674,114 12.479997


TOTAL 0 0.000000

Giovana Bartelle Velloso


No

674,114 12.479997 0 0.000000 674,114 12.479997


TOTAL 0 0.000000

OTHERS

0 0.000000 0 0.000000 0 0.000000


Page 177 of 243


Stockholder








Verona Negócios e Participações S.A. 60.096.153/0001-06

Pedro Bartelle


No

674,114 12.479997 0 0.000000 674,114 12.479997


TOTAL 0 0.000000



No

2,705,100 50.080012 0 0.000000 2,705,100 50.080012


TOTAL 0 0.000000

TOTAL

5,401,556 100.000000% 0 0% 5,401,556 100.000000%


Page 178 of 243

15.3 – Distribution of capital

Date of the last general meeting / date of last change April 11, 2016

Number of individual stockholders 10,129

Number of corporate stockholders 127

Number of institutional investors 392

Free float (shares in circulation) We define the free float as all the Issuer's shares except those owned by the controlling stockholder, parties related to the controlling stockholder, the managers of the Issuer, and the shares held in treasury.

Number of common shares 82,506,158 27.436204%

Number of preferred shares 0 0.000000%

Total 82,506,158 27.436204%


Page 179 of 243

15.4 – Stockholding ownership diagram

Position on September 30, 2016

Alexandre G. Bartelle Participações S.A.

31.025543%


25.671717%


10.025757%

Grendene S.A.

100.0%


1.831385%

Maria Cristina Nunes de Camargo

1.947420%


0.912157%

Pedro Bartelle

0.904709%

Others

27.681312%

Shares in treasury

0.0%


Page 180 of 243

15.4 – Stockholding ownership diagram

Position on September 30, 2016


99.999909%

Alexandre G. Bartelle Participações S.A.

100.0%

Others

0.000091%


50.080012%


12.479997%


100.0%

Pedro Bartelle

12.479997%

André de Camargo Bartelle

12.479997%

Gabriella de Camargo Bartelle

12.479997%


Page 181 of 243

15.4 – Organization diagram of the economic group

ORGANIZATION DIAGRAM OF THE ECONOMIC GROUP

Position on September 30, 2016.

Controlling Shareholders Free Float

72.3% 27.7%

Grendene S.A.

(Brazil)

99.998% 95.0% 100.0% 100.0% 98.7%

MHL Calçados Ltda (Brazil)

Grendene Argentina

S.A. (Argentina)

Grendene USA Corp. (United

States)

Grendene UK Limited (United

Kingdom)

A3NP Indústria de Móveis Ltda (Brazil)

100.0% 100.0% 100.0%

Grendene New York LLC (United States)

Grendene Italy

S.R.L. (Italy)

Z Plus Eur Company S.R.L. (Italy)


Page 182 of 243

15.5 – Stockholders' Agreement filed at the Issuer's head office, or in which the controlling stockholder is a party a. Parties Alexandre G. Bartelle Participações S.A., Verona Negócios e Participações S.A., Alexandre Grendene Bartelle, Pedro Grendene Bartelle, Maria Cristina Nunes de Camargo, Pedro Bartelle and Giovana Bartelle Velloso. b. Date of signature October 6, 2004 and amendments on June 15, 2011, July 30, 2013 and July 29, 2016. c. Period of validity

October 17, 2023 d. Exercise of the right to vote and of the power of control The stockholders Alexandre G. Bartelle Participações S.A. and Verona Negócios e Participações S.A. agree to vote and cause their representatives to vote in all and every General Meeting of Stockholders of Grendene S.A. in accordance with whatever decision is approved by the Prior Meeting. The power of control shall be exercised by Alexandre G. Bartelle Participações S.A. and, if a loss of legal capacity, or death, of Mr. Alexandre Grendene Bartelle takes place and provided that Mr. Pedro Grendene Bartelle is fully capable and has the power of control of Verona Negócios e Participações S.A., during the first 5 (five) years that follow the death or loss of legal capacity of Mr. Alexandre Grendene Bartelle, the stockholders of Alexandre G. Bartelle Participações S.A. shall exercise his their right of vote in accordance with the votes to be given by Verona Negócios e Participações S.A. in the General Meetings of Stockholders, and Prior Meetings, of the Company. e. Description of the clauses relating to appointment of managers Appointment of members of the Board of Directors shall be the attribution of the Prior Meeting of the stockholders. f. Description of the clauses relating to transfer of shares and preference for acquiring them There is no clause relating to transfer of shares and the preference for acquiring them. g. Description of the clauses that restrain or bind the right of vote of members of the Board of Directors There is no restraint on the exercise of the right to vote nor is it bound in any way.


Page 183 of 243

15.6 - Significant changes in the interests of the members of the controlling group and managers of the Issuer Compliance with Free Float requirement On November 27, 2007 the stockholders Alexandre Grendene Bartelle and Pedro Grendene Bartelle, controlling stockholders of Grendene S.A., sold 15,600,000 common shares (1) in the company, representing 5.2% of the voting and total capital, in a transaction on the São Paulo Stock Exchange (Bovespa). Following that transaction the vendors then held, directly and indirectly, an aggregate 224,699,964 common shares (1), representing 74.9% of the Company's voting stock and total stock. The purpose of the transaction was to comply with the commitment assumed with the BM&FBovespa, for the percentage of the Company's total shares in circulation in the market, to meet the percentage level required by the Listing Regulations of the Novo Mercado. The transaction did not result in any change in the composition of the control of the Company, nor in its administrative structure. (1) Number of shares, after the split carried out on September 23, 2009.

Restructuring of the controlling group (Year: 2013) On July 30, 2013 there was a stockholding restructuring of the controlling group of the Company: Due to the transfers of shares in the Company owned by Alexandre G. Bartelle Participações S.A. ('AGBPar') to Alexandre Grendene Bartelle ('Alexandre'), and from Verona Negócios Participações S.A. ('Verona') to Pedro Grendene Bartelle ('Pedro'), Maria Cristina Nunes de Camargo ('Maria Cristina'), Pedro Bartelle ('Pedro Filho') and Giovana Bartelle Velloso ('Giovana'), through reduction of capital of AGBPar and of Verona, as set out in detail in the Market Announcement published on July 30, 2013, a private instrument of amendment to the Company's Stockholders' Agreement, entered into on October 6, 2004 was signed and filed at the head office of the Company, with the consent of the Company, and of Alexandre, Pedro, Maria Cristina, Pedro Filho and Giovana, its purpose being only to effect the said transfers of shares, including the individual persons as full parties to the Stockholders' Agreement, in spite of the fact that they already were previously consenting parties to that agreement, and all the terms and conditions originally established were ratified and maintained, the controlling group remaining unaltered, holding in aggregate 74.05370% of the Company's share capital, and the same administrative structure of the Company being maintained. Below is the table of the Company's stockholders, before and after the stockholding restructuring carried out by the controlling stockholders. Stockholdings - Before the stockholding restructuring of the control group.

Stockholders 06/30/2013

Number of ON shares % interest

Alexandre G. Bartelle Participações S.A. (*) 90,000,000 29.928172%

Verona Negócios e Participações S.A. (*) 72,000,000 23.942538%

Grendene Negócios e Participações S.A. (*) 60,300,000 20.051875%

Pedro Grendene Bartelle (*) (**) 222,300 0.073923%

Alexandre Grendene Bartelle (*) (**) 149,457 0.049700%

Giovana Bartelle Veloso (*) 22,400 0.007449%

Management (other than controlling stockholders) 797,246 0.265112%

Free float (shares in circulation) 77,228,597 25.681231%

Total shares issued 300,720,000 100.000000%

The Company has only common shares. (*) A party to the Stockholders’ Agreement. (**) Members of the Board of Directors.


Page 184 of 243

15.6 - Significant changes in the interests of the members of the controlling group and managers of the Issuer Stockholdings - After the stockholding restructuring of the control group.






Alexandre Grendene Bartelle (*) (**) 30,149,457 10.025757%

Pedro Grendene Bartelle (*) (**) 11,139,740 3.704356%

Maria Cristina Nunes de Camargo (*) 5,441,280 1.809417%

Giovana Bartelle Veloso (*) 2,743,040 0.912157%

Pedro Bartelle (*) 2.720,640 0.904709%




The Company has only common shares. (*) A party to the Stockholders’ Agreement. (**) Members of the Board of Directors. Restructuring of the controlling group (Year: July/2016) On 29 July 2016, the Company was informed about the restructuring of the controlling group as a result of transfers of shares of Grendene Negócios S.A. ("Grendene Negócios") to Alexandre G. Bartelle Participações S.A. ("AGBPar") and to Verona Negócios e Participações S.A. ( "Verona"), through the split-off of capital of the Grendene Negócios, as detailed in the Notice to the Market, and Material Fact on the same date. Below is the table of the Company's stockholders, before and after the stockholding restructuring carried out by the controlling stockholders. Stockholdings - Before the stockholding restructuring of the control group.

Stockholders Number of ON shares % interest








Pedro Bartelle (*) 2,720,640 0.904709%






Page 185 of 243

15.6 - Significant changes in the interests of the members of the controlling group and managers of the Issuer Stockholdings - After the stockholding restructuring of the control group.

Stockholders Number of ON shares % interest


Verona Negócios e Participações S.A. (*) 77.199.988 25.671717%





Pedro Bartelle (*) 2,720,640 0.904709%




The Company has only common shares. (*) A party to the Stockholders’ Agreement. (**) Members of the Board of Directors. Restructuring of the controlling group (Year: August/2016) On August 16, 2016 Grendene S.A. has received from it stockholder Maria Cristina Nunes de Camargo (“Maria Cristina”), statements of acquisition/disposal of stockholding interest, through which the stockholder has advised the Company of the transfer its indirect interests, by through donation of all shares held issued by Verona Negócios e Participações S.A., which owns 25.6717% of the Grendene's capital, for her sons, André de Camargo Bartelle and Gabriella de Camargo Bartelle at the rate of 50% (fifty percent) for André and 50% (fifty percent) for Gabriella. Thus, as a consequence of the donation and the above-mentioned transfers:

Maria Cristina, indirect owner of 6.4077% of the Company's capital stock through Verona, no longer has an indirect interest in the Company, but remaining direct holder of the same 5,441,280 (five million, four hundred and forty one thousand two hundred and eighty) common shares issued by the Company, representing 1.8094% of the Company's capital stock;

André, previously direct holder of 99,200 (ninety-nine thousand, two hundred) common shares issued by the Company representing 0.0330% of the share capital, now indirectly owns 3.2038% of the share capital through Verona; and

Gabriella, previously direct holder of 3,000 (three thousand) common shares issued by the Company representing 0.0010% of the share capital, now indirectly owns 3.2038% of the share capital through Verona.


Page 186 of 243

15.6 - Significant changes in the interests of the members of the controlling group and managers of the Issuer Stockholdings on Dec. 30, 2015










Pedro Bartelle (*) 2,720,640 0.904709%


Shares in treasury 65,026 0.021623%





Page 187 of 243

15.7 – Main stockholding transactions There was no stockholding transaction with material effect on the Company, nor on its subsidiaries or affiliates.


Page 188 of 243

15.8 – Other material information All material information relevant to this topic has been disclosed in the items above.


Page 189 of 243

16.1 – Description of the rules, policies and practices of the Issuer in relation to transactions with related parties The Company does not have a formal policy for transactions with related parties, since the transactions carried out are usually sporadic transactions of low value (except those carried out with 100%-controlled subsidiaries).


Page 190 of 243

16.2 – Information on transactions with related parties

Related party Transaction date

Amount involved (Reais) Present balance Amount (Reais) Duration

Loan or other type of debt

Interest rate charged

Distribuidora de Calçados e Artigos Esportivos Cruzeiro do Sul Ltda

12/31/2015 5,000.00 R$ 0.00 R$ 0.00 Indeterminate period No 0.000000

Relationship with the Issuer Company controlled by a stockholder of Grendene S.A.

Subject of the contract Client - sale of footwear

Guarantee and insurance Not applicable

Rescission or cancellation If activities are closed down

Nature of and reason for the transaction

Contractual position of the Issuer Creditor

Specify

Grendene Argentina S.A. 12/31/2015 23,848,000.00 R$ 7,426,000.00 R$ 7,426,000.00 Indeterminate period No 0.000000

Relationship with the Issuer Subsidiary

Subject of the contract Client - sale of footwear for supply to the market where it is located





Specify

Grendene Argentina S.A. 12/31/2014 26,156,000.00 R$ 21,669,000.00 R$ 21,669,000.00 Indeterminate period No 0.000000






Page 191 of 243








Specify

Grendene Argentina S.A. 12/31/2013 29,558,000.00 R$ 29,000.00 R$ 29,000.00 Indeterminate period No 0.000000







Specify

MHL Calçados Ltda

12/31/2015 1,675,000.00 R$ 16,000.00 R$ 16,000.00 Indeterminate period No 0.000000


Subject of the contract Client - sale of input materials





Specify

MHL Calçados Ltda

12/31/2014 3,480,000.00 R$ 449,000.00 R$ 449,000.00 Indeterminate period No 0.000000



Page 192 of 243











Specify

MHL Calçados Ltda 12/31/2013 15,485,000.00 R$ 3,465,000.00 R$ 3,465,000.00 Indeterminate period No 0.000000







Specify

Grendene UK Limited 12/31/2015 625,000.00 R$ 648,000.00 R$ 648,000.00

Indeterminate period No 0.000000







Specify


Page 193 of 243






Grendene Italy S.R.L. 12/31/2015 3,337,000.00 R$ 4,178,000.00 R$ 4,178,000.00 Indeterminate period No 0.000000

Relationship with the Issuer Indirectly controlled subsidiary






Specify

Grendene Italy S.R.L.

12/31/2014 2,983,000.00 R$ 2,350,000.00 R$ 2,350,000.00 Indeterminate period No 0.000000







Specify

Grendene Italy S.R.L. 12/31/2013 1,596,000,00 R$ 1,607,000.00 R$ 1,607,000.00


Relationship with the Issuer Indirectly controlled subsidiary





Page 194 of 243








Specify

Grendene USA, Inc. 12/31/2015 22,358,000.00 R$ 18,103,000.00 R$ 18,103,000.00 Indeterminate period No 0.000000







Specify

Grendene USA, Inc. 12/31/2014 14,815,000.00 R$ 10,350,000.00 R$ 10,350,000.00








Specify

Grendene USA, Inc. 12/31/2013 14,142,000.00 R$ 10,497,000.00 R$ 10,497,000.00




Page 195 of 243











Specify

Dall’Onder Viagens & Turismo Ltda


Relationship with the Issuer Company controlled by manager

Subject of the contract Supplier - air travel support and agency sales




Contractual position of the Issuer Debtor

Specify

Dall’Onder Viagens & Turismo Ltda 12/31/2014 607,000.00 R$ 0.00 R$ 0.00 Indeterminate period No 0.000000







Specify


Page 196 of 243






Dall’Onder Viagens & Turismo Ltda








Specify

Vulcabrás|Azaléia – CE, Calçados e Artigos Esportivos S.A.

12/31/2015 490,000.00 R$ 46,000.00 R$ 46,000.00 Indeterminate period No 0.000000


Subject of the contract Supplier - purchase of input materials





Specify


12/31/2014 715,000.00 R$ 709,000.00 R$ 709,000.00






Page 197 of 243









Specify


12/31/2013 156,000.00 R$ 156,000.00 R$ 156,000.00








Specify

Vulcabrás|Azaléia Argentina S.A. 12/31/2015 6,637,000.00 R$ 200,000.00 R$ 200,000.00



Subject of the contract Supplier - purchase of products and services by the subsidiary Grendene Argentina S.A.





Specify

Vulcabrás|Azaléia Argentina S.A. 12/31/2014 8,431,000.00 R$ 381,000.00 R$ 381,000.00 Indeterminate period No 0.000000


Page 198 of 243







Subject of the contract Supplier - purchase of products and services by the subsidiary Grendene Argentina S.A.





Specify

Vulcabrás|Azaléia Argentina S.A.

12/31/2013 6,982,000.00 R$ 0.00 R$ 0.00



Subject of the contract Supplier - services of commercial representation for clients with head office in Argentina





Specify

Telasul S.A. 12/31/2013 581,000.00 R$ 0.00 R$ 0.00 Indeterminate period No 0.000000


Subject of the contract Supplier - purchase of exhibition material






Page 199 of 243






Specify

Distribuidora de Calçados e Artigos Esportivos Cruzeiro do Sul Ltda








Specify

Lagoa Clara Agrícola S.A.



Subject of the contract Reimbursement for recovery of expenses





Specify

Lagoa Clara Agrícola S.A. 12/31/2014 271,000.00 R$ 23,000.00 R$ 23,000.00 Indeterminate period No 0.000000





Page 200 of 243









Specify

Lagoa Clara Agrícola S.A.








Specify









Specify

A3NP Indústria e Comércio de Móveis S.A. 12/31/2014 261,000.00 R$ 0.00 R$ 0.00 Indeterminate period No 0.000000


Page 201 of 243












Specify









Specify

Vulcabrás|Azaléia – BA, Calçados e Artigos Esportivos S.A.

12/31/2015 10,000.00 R$ 0.00 R$ 0.00 Indeterminate No 0.000000







Page 202 of 243







Specify


12/31/2014 19,000.00 R$ 7,000.00 R$ 7,000.00

Indeterminate No 0.000000







Specify


12/31/2015 6,000.00 R$ 0.00 R$ 0.00








Specify





Page 203 of 243











Specify


12/31/2014 1,101,000.00 R$ 381,000.00 R$ 381,000.00 Indeterminate No 0.000000







Specify

Vulcabrás|Azáleia Argentina S.A. 12/31/2013 1,859,000.00 R$ 668,000.00 R$ 668,000.00 Indeterminate No 0.000000







Specify


Page 204 of 243







12/31/2015 10,000.00 R$ 0.00 R$ 0.00








Specify


12/31/2014 245,000.00 R$ 0.00 R$ 0.00








Specify

Vulcabrás|Azaléia – RS, Calçados e Artigos Esportivos S.A.

12/31/2014 57,000.00 R$ 12,000.00 R$ 12,000.00






Page 205 of 243









Specify

Agropecuária Grendene Ltda 12/31/2013 34,000.00 R$ 0.00 R$ 0.00



Subject of the contract Client - sale of property, plant and equipment





Specify

Vulcabrás Distribuidora de Artigos Esportivos Ltda

12/31/2015 1,000.00 R$ 1,000.00 R$ 1,000.00 Indeterminate No 0.000000







Specify

Vulcabrás Distribuidora de Artigos Esportivos Ltda 12/31/2014 10,000.00 R$ 5,000.00 R$ 5,000.00 Indeterminate No 0.000000


Page 206 of 243












Specify

Calzados Azaléia Colômbia Ltda








Specify

Calzados Azaléia Colômbia Ltda








Page 207 of 243







Specify

Calzados Azaléia Peru SA








Specify

Calzados Azaléia Peru SA








Specify

Grendene USA, Inc. 12/31/2015 1,433,000.00 R$ 573,000.00 R$ 573,000.00 Indeterminate No 0.000000


Subject of the contract Supplier - services of commercial representation for clients with head office in the USA


Page 208 of 243










Specify

Grendene USA, Inc. 12/31/2014 791,000.00 R$ 121,000.00 R$ 121,000.00 Indeterminate No 0.000000







Specify

Grendene USA, Inc.








Specify

MHL Calçados Ltda 12/31/2015 98,000.00 R$ 4,000.00 R$ 4,000.00 Indeterminate No 0.000000


Page 209 of 243







Subject of the contract Supplier – purchase of inputs





Specify

MHL Calçados Ltda 12/31/2014 71,000.00 R$ 87,000.00 R$ 87,000.00 Indeterminate No 0.000000


Subject of the contract Supplier – purchase of inputs





Specify


MHL Calçados Ltda








Page 210 of 243







Specify

Vulcabrás|Azaléia – RS, Calçados e Artigos Esportivos S.A. 12/31/2013 200,000.00 R$ 0.00 R$ 0.00 Indeterminate No 0.000000







Specify

Vulcabrás|Azaléia – RS, Calçados e Artigos Esportivos S.A. 12/31/2015 25,000.00 R$ 3,000.00 R$ 3,000.00 Indeterminate No 0.000000







Specify


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16.3 - Identification of the measures taken to deal with conflicts of interest - proof of the strictly commutative nature of terms agreed, and/or that compensatory payment is appropriate The Company adopts best corporate governance practices and those recommended and required by rules and legislation, including the rules of the Novo Mercado Regulations. Decision on all the Company's operations is submitted to the Board of Directors and the Executive Board, in accordance with the competencies described in the By-laws. Thus, all the Company's transactions, especially those with related parties, have been duly submitted to those decision bodies of the Company to which they were subordinated, in accordance with rules in force. Also, in accordance with the Corporate Law, any member of the Board of Directors of the Company is prohibited from voting in any General Meeting or meeting of the Board, or to take part in any transaction or business, in which he has interests conflicting with those of the Company. Our transactions and business with related parties follow the market standards and are supported by the appropriate prior evaluations of their terms and the strict interest of the Company in carrying them out.


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16.4 – Other material information There is no other information that is considered to be material.


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17.1 – Information on the share capital

Date of authorization or approval

Amount of the share capital (Reais)

Period for paying-up

Number of common shares

Number of preferred shares

Total number of shares

Type of capital Paid-up capital

April 19, 2010 1,231,301,604.46 300,720,000 0 300,720,000


Page 214 of 243

17.2 – Increases in the share capital Justification for not filling in the table: The Company has not carried out any increase in the share capital in the last 3 (three) business years.


Page 215 of 243

17.3 – Information on share splits, reverse splits or stock bonuses Justification for not filling in the table: The Company has not carried out any share split, reverse split or stock bonus in the last 3 (three) business years.


Page 216 of 243

17.4 – Information on reduction of the share capital Justification for not filling in the table: The Company has not carried out any reduction of the share capital in the last 3 (three) business years.


Page 217 of 243


Table showing the share capital and the number of common shares issued by Grendene S.A.

Date of decision / issue

Body which decided the

increase

Amount of the increase

Number of shares issued and paid up in

funds / split

Total number of shares

Average issue price

Percentage increase in

share capital Final share capital

4/16/2007 (1) AGM/EGM R$ 121,137,297.32 - 100,000,000 - 14.4% R$ 964,584,197.90

4/14/2008 (1) AGM/EGM R$ 132,615,023.39 - 100,000,000 - 13.7% R$ 1,097,199,221.29

4/6/2009 (1) AGM/EGM R$ 129,560,889.42 - 100,000,000 - 11.8% R$ 1,226,760,110.71

9/21/2009 (2) EGM - 200,000,000 300,000,000 - - R$ 1,226,760,110.71

4/19/2010 (3) AGM/EGM R$ 4,541,493.75 720,000 300,720,000 R$ 6.31 0.4% R$ 1,231,301,604.46

(1) Increase in the share capital arising from incorporation of the Tax Incentive Reserves. (2) Share split: Two new shares issued for each share held on September 22, 2009 (3 for 1). (3) The Ordinary and Extraordinary General Meetings of Stockholders held on April 19, 2010 ratified the increase in the share

capital approved on March 22, 2010 in a meeting of the Board of Directors. This increase arose from the exercise of the option to subscribe 720,000 shares by the participants in the Stock Options and Subscription Plan.

The Ordinary and Extraordinary General Meeting of Stockholders of April 16, 2007 approved incorporation into the Company's share capital of the following items and amounts: The Tax Incentives Reserve relating to income tax for the business year ended December 31, 2006, in the amount of R$ 32,533,108.79; the subsidy for investments relating to the benefits (Proapi and Provin) granted by the State of Ceará, in the amount of R$ 88,604,188.53, thus making a total of R$ 121,137,297.32; and the consequent change in the drafting of Clause 5 of the By-laws relating to the amount of the share capital which was R$ 843,446,900.58 and was increased to R$ 964,584,197.90, without change in the number of shares, as permitted by Article 169, §1 of the Corporate Law. The Ordinary and Extraordinary General Meeting of Stockholders of April 14, 2008 approved incorporation into the share capital of the following: The Tax Incentives Reserve relating to income tax for the business year ended December 31, 2007, in the amount of R$ 30,843,234.88; and the subsidy for investments relating to the benefits (Proapi and Provin) granted by the State of Ceará, in the amount of R$ 101,771,788.51, thus making a total of R$ 132,615,023.39, and consequent change in Clause 5 of the By-laws, relating to the amount of the share capital, which was R$ 964,584,197.90 and was increased to R$ 1,097,199,221.29 without change in the number of shares, as allowed by Article 169, §1 of the Corporate Law. The Ordinary and Extraordinary General Meeting of Stockholders of April 6, 2009 approved incorporation into the share capital of the Tax Incentives Reserve relating to income tax for the business year ended December 31, 2008, in the amount of R$ 24,151,215.37; and the subsidy for investment relating to the benefits (Proapi and Provin) granted by the State of Ceará, in the amount of R$ 105,409,674.05, thus making a total of R$ 129,560,889.42, and the consequent change in Clause 5 of the By-laws, relating to the amount of the share capital, which was R$ 1,097,199,221.29 and became R$ 1,226,760,110.71 without change in the number of shares, as allowed by Article 169, §1 of the Corporate Law. The Extraordinary General Meeting of Stockholders held on September 21, 2009 approved a split in the Company shares, bringing into existence 2 (two) new common shares for each share, which resulted in the number of shares (the Company has only common shares) being increased from 100,000,000 to 300,000,000. The Ordinary and Extraordinary General Meetings of Stockholders held on April 19, 2010 approved new drafting of the head paragraph of Clause 5 of the By-laws, relating to the share capital and the quantity of nominal common shares, without par value, subscribed and paid up, arising from a private issue of 720,000 (seven hundred and twenty thousand) new common shares, without par value, to meet the requirements of the Company's Stock Options Plan, to provide for exercise of such options by eligible executives of the Company, comprising 496,875 (four hundred ninety six thousand eight hundred seventy five) nominal common shares without par value at the issue price of R$ 7.29 (seven Reais and twenty nine centavos), totaling R$ 3,622,218.75 (three million six hundred twenty two thousand two hundred and eighteen Reais and seventy five centavos), authorized in the first program, and 223,125 (two hundred twenty three thousand one hundred twenty five) nominal common shares, without par value, at the price of R$ 4.12 (four Reais and twelve centavos), totaling R$ 919,275.00 (nine hundred nineteen two hundred seventy five Reais), authorized in the second program, as specified by the terms of the Stock Options Plan.


Page 218 of 243

18.1 – Rights of the shares

Type of share or Depositary receipts Common shares

Tag-along 100.000000 %

Right to dividends Under Clause 32 of the Company's By-laws, stockholders are entitled to an annual obligatory dividend equivalent to at least 25% (twenty five per cent) of the net profit for the year, after the deductions specified in law and in the Company's By-laws.

Right to vote Full

Convertibility No

Right to reimbursement of capital Yes

Description of the characteristics of the reimbursement of capital

In the event of liquidation of the Company, under Article 46 of its By-laws, the Company cannot be dissolved or go into liquidation except in the circumstances prescribed by law, and it is for the General Meeting of Stockholders to establish the manner of liquidation and to elect, as well as the liquidator(s), the members of the Audit Board, which shall function in the period of liquidation, and to set their powers and remuneration.

Restriction on circulation Redeemable Conditions for redemption, and formula for calculation of the amount of the redemption

No

Conditions required for changes to the rights carried by the securities

Under the Corporate Law, neither the By-laws of the Company nor any decision adopted by the stockholders in General Meetings can deprive the stockholders of the following rights: (i) the right to distribution of the profits; (ii) the right to participate, in proportion to their interest, in the distribution of any assets remaining in the event of liquidation of the Company; (iii) the right to monitor and inspect the management of the Company, in the terms provided for in the Corporate Law; (iv) preference in subscription of future capital increases, except in certain circumstances specified in the Corporate Law; and (v) the right to withdraw from the Company in the circumstances specified in the Corporate Law.

Other material characteristics There are no additional material characteristics.


Page 219 of 243

18.2 – Description of any rules in the By-laws that limit the right to vote held by significant stockholders or which oblige them to make a public offering Below we set out Clauses 36 to 40 of the Company's By-laws, which provide for the limit circumstances for voting, and circumstances in which a public offering for acquisition of shares is obligatory: Clause 36. Any disposal of shares that give one stockholder, or a group of stockholders which are linked by any type of voting agreement, whether directly or through subsidiaries, holding companies or companies under joint control, or between which there is a relationship of control or which are under joint control, the effective power to direct the company’s activities and orient the functioning of the Company’s bodies, directly or indirectly, in fact or in law, independently of the actual stockholding interest owned ('Power of Control'), either by means of a single transaction or by means of successive transactions, shall be contracted on the suspensive or canceling condition that the acquiring party undertakes to make a public offer to acquire the shares of the other stockholders of the Company, complying with the conditions and period specified in the legislation from time to time in force and in the Novo Mercado Listing Regulations, in such a way as to ensure that they receive equal treatment to that given to the disposing party.

§1 There is a relative presumption of ownership of the Power of Control in relation to the person or group of stockholders that

holds shares which have secured for it the absolute majority of the votes of stockholders present in the three most recent prior General Meetings of Stockholders of the Company, even if it is not holder of shares representing the absolute majority of the Company’s voting stock

Clause 37. The public offering for acquisition of shares referred to by the head paragraph of Clause 36 shall also be required when there is assignment, for consideration, of rights to subscribe shares or other securities or rights relating to securities convertible into shares, such as may result in disposal of shares that ensure the Power of Control of the Company. Clause 38. The public offer for acquisition of shares referred to in Clause 36 will also be required in the event of disposal of the Power of Control over a company or companies that hold/s the Power of Control over the Company. In this case, the stockholder disposing of the Power of Control of the company or companies shall be obliged to declare to the BM&FBovespa the value attributed to the Company in this disposal, and attach documentation that proves this amount. Clause 39. Any party that acquires the Power of Control of the Company by reason of a private contract to purchase shares entered into with the stockholder or group of stockholders that represents the Power of Control of the Company, shall be obliged to:

a. Make the public offer referred to in the head paragraph of Clause 36; and

b. Pay, in the terms set out below, an amount equivalent to the difference between the price of the public offer and the amount paid per share for any acquisition of shares on a securities exchange in the six months prior to the date of acquisition of such shares as ensure for it the Power of Control over the Company, duly updated until the date of payment. This amount shall be distributed between all the parties that sold shares in the Company in the trading sessions in which the Acquiring Party made the acquisitions, in proportion to the net daily vendor balance of each one, it being for the BM&FBovespa to effect the operation of this distribution, in accordance with its regulations.

Clause 40. Without prejudice to the provisions of law and regulations, cancellation of the Company’s registry for listing shall be preceded by a public offer to acquire shares, to be made by the stockholder holding the Power of Control or by the Company (in either case, 'the Offering Party'), having as obligatory minimum price the economic value ascertained in a Valuation Opinion.


Page 220 of 243

18.3 – Description of exceptions or suspensive clauses relating to property or political rights specified in the By-laws There are no exceptions or suspensive clauses provided for in the Company's By-laws.


Page 221 of 243

18.4 – Trading volume and highest and lowest share prices of the securities traded Business year

12/31/2015

Quarter Security Type Class Market Administrative entity Financial volume

traded (Reais) Highest market price

(Reais) Lowest market price

(Reais) Price Unit

Medium market price (Reais)

03/31/2015 Shares Common Exchange BM&FBovespa S.A. – Securities, Commodities and Futures Exchange

393,844,737 18.01 13.66 R$ per share 15.32


361,393,185 18.78 16.25 R$ per share 17.53


297,633,969 18.41 14.93 R$ per share 17.27


264,686,509 18.91 1610 R$ per share 17.49

Business year

12/31/2014




(Reais) Factor price



396,926,765 18.95 13.02 R$ per share 15.28


371,837,077 15.98 13.35 R$ per share 14.58


343,210,925 17.00 13.04 R$ per share 14.72


310,447,407 17.83 14.93 R$ per share 16.44

Business year

12/31/2013




(Reais) Factor price



473,937,280 21.84 15.61 R$ per share 18.93


764,425,528 23.73 18.21 R$ per share 21.27


498,229,492 22.00 18.46 R$ per share 20.40


410,018,463 21.47 17.16 R$ per share 19.38


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18.5 – Description of other securities issued Justification for not filling in the table: The Company does not have other securities issued.


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18.6 – Brazilian markets in which the securities are admitted for trading The Company's shares are traded on the BM&FBovespa – Bolsa de Valores Mercadorias e Futuros (Securities, Commodities and Futures Exchange) under the ticker GRND3.


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18.7 – Information on the class and type of security admitted for trading on foreign markets There are no securities traded on foreign markets.


Page 225 of 243

18.8 – Justification for not filling in the table: The Company has no securities issues outside Brazil.


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18.9 – Public offerings for distribution made by the issuer or by third parties, including controlling stockholders and affiliated or subsidiary companies, in relation to securities of the Issuer The Company has not made any public offering for distribution in the last three business years.


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18.10 – Allocation of the proceeds of public offerings for distribution, and any divergences The Company has not made any public offering for distribution in the last three business years.


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18.11 – Description of the public offers for acquisition made by the issuer in relation to shares issued by third parties The Company has not made any public offering for acquisition of shares issued by third parties in the last three business years.


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19.1 – Information on buyback plans for shares of the Issuer

Date decided

Buyback period

Reserves and profits available (R$ )

Type Class Amount expected (Units)

% of free float.

Of no. approved, how many acquired

Weighted average acquisition price

Price unit % acquired

Other characteristics.

Feb. 25, 2015 Feb. 26, 2016 to Aug.24, 2017

16,117,226.79 Common 1,500,000 1.820000 542,928 17.40 R$ per share 36.200000

A meeting of the Board of Directors held on February 25, 2016 approved a new share buyback program for the Company's nominal shares without par value, to be held in treasury and subsequently sold, without reduction of the share capital, to comply with the exercise of future options granted and exercisable to its executives of the 4

th, 5

th, 6

th, 7

th, 8

th and 9

th Stock Options Plans, subject to the conditions established in the Regulations of

the Stock Options and Subscription Program. The Board believes that acquisition of common shares in the market is the best way to fulfill this requirement. On this date the Company has 65,026 nominal common shares in treasury, permitted in the Minutes of the Meeting of the Board of Directors of February 12, 2015 for subsequent sale, in compliance with the exercise of options exercisable up to and including 2015. The new program will have the following characteristics: a) limit of acquisition, subject to Articles 8 and 5 of CVM Instruction 527/2016, the provisions of CVM Instruction 268/97 and the stockholding structure at February 25, 2016: up to 1,500,000 (one million five hundred thousand) nominal common shares without par value corresponding to 1.82% of the total shares in circulation. The total number of common shares, comprising the share capital of the Company, is 300,720,000 (three hundred million seven hundred twenty thousand), as follows: 82,515,922 shares in circulation; 65.026 shares in treasury; and 218,139,052 common shares owned by the controlling stockholders and managers of the Company. b) Period of acquisition: 545 days. Start February 26, 2016. Termination: August 24, 2017. c) Acquisition price: market price.

Feb. 12, 2015 Feb. 13, 2015 to Feb. 13, 2016

17,000,000.00 Common 1,500,000 1.910000 0 0.00 R$ per share 0.000000


th, 5

th, 6

th, 7

th and 8

th Stock Options Plans, subject to the conditions established in the Regulations of the

Stock Options and Subscription Program. The Board believes that acquisition of common shares in the market is the best way to fulfill this requirement. On this date the Company has 660,000 nominal common shares in treasury, permitted in the Minutes of the Meeting of the Board of Directors of February 13, 2014 for subsequent sale, in compliance with the exercise of options exercisable up to and including 2015. The new program will have the following characteristics: a) limit of acquisition, subject to Articles 3 and 5 of CVM Instruction 10/80, the provisions of CVM Instruction 268/97 and the stockholding structure at February 12, 2015: up to 1,500,000 (one million five hundred thousand) nominal common shares without par value corresponding to 1.91% of the total shares in circulation. The total number of common shares, comprising the share capital of the Company, is 300,720,000 (three hundred million seven hundred twenty thousand), as follows: 78,492,166 shares in circulation; 660,000 shares in treasury; and 221,567,834 common shares owned by the controlling stockholders and managers of the Company. b) Period of acquisition: 365 days. Start February 13, 2015. Termination: February 12, 2016. c) Acquisition price: market price.

Feb. 13, 2014 Feb. 14, 2014 to Feb. 13, 2015

19,072,706.38 Common 1,500,000 1.950000 487,096 14.38 R$ per share 32.473067


th, 5

th, 6

th and 7

th Stock Options Plans, subject to the conditions established in the Regulations of

the Stock Options and Subscription Program. The Board believes that acquisition of common shares in the market is the best way to fulfill this requirement. On this date the Company has 863,782 nominal common shares in treasury, permitted in the Minutes of the Meeting of the Board of Directors of February 28, 2013 for subsequent sale, in compliance with the exercise of options exercisable up to and including 2014. The new program will have the following characteristics: a) limit of acquisition, subject to Articles 3 and 5 of CVM Instruction 10/80, the provisions of CVM Instruction 268/97 and the stockholding structure at February 13, 2014: up to 1,500,000 (one million five hundred thousand) nominal common shares without par value corresponding to 1.95% of the total shares in circulation. The total number of common shares, comprising the share capital of the Company, is 300,720,000 (three hundred million seven hundred twenty thousand), as follows: 76,675,080 shares in circulation; 863,782 shares in treasury; and 223,181,138 common shares owned by the controlling stockholders and managers of the Company. b) Period of acquisition: 365 days. Start February 14, 2014. Termination: February 13, 2015. c) Acquisition price: market price.


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19.1 – Information on buyback plans for shares of the Issuer

Date decided

Buyback period

Reserves and profits available (R$ )

Type Class Amount expected (Units)

% of free float.

Of no. approved, how many acquired

Weighted average acquisition price

Price unit % acquired

Other characteristics.

Feb. 28, 2012 Mar. 2, 2013 to Feb. 28, 2014

39,716,105.72 Common 3,500,000 4.630000 3,120,151 20.34 R$ per share 89.147171

The meeting of the Board of Directors held on February 28, 2013 approved the acquisition of up to 3,500,000 of the Company's nominal common shares to remain in Treasury for subsequent disposal for future compliance with the exercise of options granted and exercisable to its executives of the 1st, 2nd, 3rd, 4th and 5th Stock Options Plans - granted by the Meetings of the Board of Directors of April 25, 2008 (1st program), March 5, 2009 (2nd program), March 4, 2010 (3rd program), March 1, 2012 (4th program) and February 28, 2013 (5th program), with the following characteristics: a. Limit to acquisition, in accordance with Articles 3 and 5 of the said CVM Instruction 10/80, the provisions of CVM Instruction 268/97, and the stockholding structure on February 27, 2013: Up to 3,500,000 (three million five hundred thousand) nominal common shares, without par value, corresponding to 4.63% of the shares in circulation. Total common shares in circulation: 75,532,071 common shares and 225,187,929 common shares held by the controlling stockholders, of the total of 300,720,000 (three hundred million seven hundred twenty thousand) common shares comprising the Company's share capital. b. Period for acquisition: 365 days. Start: March 1, 2013. Termination: February 28, 2014 c. Acquisition price: market price.


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19.2 – Information on plans to repurchase shares of the Issuer


Shares

Type of share Class of share if preferred Description of the securities Market price factor

Common R$ per unit

Movement Quantity Weighted average price of

acquisition / disposal (Reais)

Initial balance 660,000

Acquisition 198,096 15.31

Disposal 793,070 16.17

Canceled 0

Final balance 65,025

Ratio – Securities in circulation 0.710465%


Shares


Common R$ per unit



Initial balance 547,000

Acquisition 605,782 15.63

Disposal 492,782 18.47

Canceled 0




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19.2 – Information on plans to repurchase shares of the Issuer


Shares


Common R$ per unit



Initial balance 0

Acquisition 2,792,569 20.68

Disposal 2,245,569 21.06

Canceled 0




Page 234 of 243

19.3 – Other material information – Buyback plans / Treasury shares

Security Shares

Type of share Class Description of securities

Number of shares

Weighted average

acquisition price Price unit Date of

acquisition % of free float

Common 547,000 20.68 R$ per unit 12/31/2013 0.710465

Common 660,000 15.63 R$ per unit 12/31/2014 0.838494

Common 65,026 15.31 R$ per unit 12/31/2015 0.078805


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20.1 – Information on the securities trading policy

Date approved January 28, 2005

Position and/or function Members of the Audit Board Persons with post, function or position in the Company giving them knowledge of material information The complete list of persons blocked from trading is available in item 20.2 Direct and indirect controlling stockholders Executive Board and senior management

Members of the Board of Directors

Main features

The securities trading policy of Grendene S.A. aims to establish guidelines and procedures to be obeyed by the Company and parties linked to it, for trading of securities issued by the Company, or referenced to it, and based on the provisions of CVM Instruction 358, of January 3, 2002, ensuring, for all interested parties, without any being privileged to the detriment of any other, the adoption of mechanisms that ensure control and transparency of trading in the securities issued by Grendene S.A.

Prohibited trading periods and description of inspection procedures

In the 15 (fifteen) days prior to the disclosure or publication of: a) any material event or fact; b) the Company's Quarterly Information; c) the Company's annual information; and d) the Company's financial statements. The prohibited parties must sign adherence to the Trading Policy, by signing the Term of Commitment. Monitoring inspection of compliance with the Policy for Trading in Securities of Grendene S.A. is carried out by the Chief Investor Relations Officer by monitoring the movement of shares of related parties.


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20.2 – Other material information The Policy for Trading in Securities issued by Grendene S.A. is reproduced in full below.

POLICY FOR TRADING IN SECURITIES OF GRENDENE S.A.

I – INTRODUCTION

GRENDENE S.A. became a listed company with shares traded on the Novo Mercado of the São Paulo Stock Exchange (Bovespa) under the ticker GRND3, on October 29, 2004. Participation in this listing segment shows a degree of commitment to the highest standards of corporate governance. For this reason the Company has decided to establish and publish its Policy for Trading in Securities issued by the Company.

The objective of policy for trading in the securities of Grendene S.A. is to establish guidelines and procedures to be obeyed by the Company and people connected to it, for the trading of securities issued by the Company, or referenced to the Company, based on the provisions of CVM Instruction 358 of January 3, 2002, designed to guarantee adoption of mechanisms that ensure control and transparency of trading in securities issued by Grendene S.A., for all interested parties, without privileging any one over others. In view of the registry with the Novo Mercado of the Bovespa, we are also adapting the present policy to the regulations of that Exchange.

The Board of Directors of Grendene S.A., using their powers, decided, as reported in the minutes of January 28, 2005, to approve the Policy for Trading in Securities issued by Grendene, assigning to the Investor Relations Director the responsibility for general implementation of the procedures necessary for obedience to the rules and for the general administration of the Trading Policy.

II – ACCEPTANCE AND COMMITMENT

Persons prohibited from trading must sign acceptance of and commitment to this Trading Policy by signature of the Term of Commitment, as per Appendix A, including related parties, and at the Company's option, such others as it considers to be necessary or convenient, who shall sign in the status of Related Parties. The Term of Commitment must also be signed, at the moment of contracting, election, promotion or transfer, by which the party concerned recognizes the terms of the policy and undertakes to obey them.

III – PERSONS PROHIBITED FROM TRADING

The following persons are prohibited from trading, as from the moment that they become aware of any material event or fact that has not yet been published:

a) Direct and indirect controlling stockholders;

b) Members of the Executive Board and senior management;

c) Members of the Board of Directors;

d) Members of the Audit Board or of any consultative or technical councils or bodies;

e) Any person who by reason of job, function or position in the Company, its parent company, or any of its subsidiaries or affiliated companies, becomes aware of material information;

f) Related parties: Spouse, domestic partner, sons or daughters of the persons indicated in sub-items 'a', 'b', 'c', 'd' and 'e' above.

The following have the same status as people prevented from trading:

a) Their portfolio managers and the investment funds, companies or other institutions or entities in which the persons prohibited from trading are the sole unit holders or stockholders or in which they can influence trading decisions;

b) Any legal entity directly or indirectly controlled by the persons prohibited from trading;

c) Any person who has had access to information relating to a material event or fact through any of the persons prohibited from trading as intermediary.


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IV – PROHIBITION ON TRADING

The Company, Members of its Board of Directors and Executive Board, Controlling Stockholders (direct and indirect), members of its Audit Board, its Employees and Executives that have access to Material Information, and members of the other bodies with technical or consultative functions of the Company, and, further, any person who by reason of his or her job, function or position in the holding company or any subsidiary or affiliated company, becomes aware of information relating to a Material Event or Fact about the Company, and who has signed the Term of Commitment, may not trade Securities of the Company in the period of 15 (fifteen) days prior to the disclosure or publication, as the case may be, of:

(i) the Company's quarterly information (ITR);

(ii) the Company's annual information (DFP, and IAN); or

(iii) the Company's financial statements;

nor in the period between the decision of the competent corporate bodies and the notifications given to the market, in relation to any increase or reduction of capital, distribution of dividends, stock bonus, reverse split, issuance of securities and related Notices and Advertisements.

Individual Investment Programs must strictly obey this restriction.

The Authorized Brokers will be instructed by the Company, and shall issue acceptance of such instruction in writing, that they may not carry out transactions of the persons mentioned above in the 15 (fifteen) days prior to the disclosure or publication of the said periodic information or financial statements of the Company.

Prohibition on decision in relation to acquisition or disposal of the Company's own shares

(CVM Instruction 358/02, Article 14)

The Company's Board of Directors may not make any decide to acquire shares in the Company itself as long as information relating to any of the following has not been made public through publication of a Material Announcement:

(i) signature of any agreement or contract for transfer of the stockholding control of the company; or

(ii) grant of an option or mandate for the purpose of transfer of stockholding control of the Company; or

(iii) existence of an intention to carry out an absorption, partial or total split, merger, transformation or stockholding reorganization.

If, after approval of a buyback program, any event takes place within the three descriptions above, the Company shall immediately suspend all transactions in its own shares until the publication of the related Material Announcement.

Concluding rules on indirect and direct trading

The prohibitions and the trading governed by this Manual apply to trading carried out, directly or indirectly, by:

(i) Members of the Board of Directors, Members of the Executive Board, Controlling Stockholders, Members of the Audit Board, Employees and Executives with access to material information and members of the other bodies of the Company that have technical or consultative functions, and also:

(ii) any person who, by reason of their job, function or position in the holding company or any subsidiary or affiliated company, becomes aware of information relating to a material event or fact about the Company, and who has signed the Term of Commitment - even in cases in which the trading carried out by such persons takes place through any of the following as intermediary:

(i) a company under said person's control; or

(ii) third parties with whom such person has maintained a fiduciary contract or contract for administration of a portfolio or shares.

Transactions carried out by investment funds in which the above persons are unit holders shall not be considered to be indirect trading if:

(i) the investment funds are not exclusive; and

(ii) the trading decisions of the manager of the investment fund cannot be influenced by the unit holders.


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V. OBLIGATION TO INDEMNIFY

The Prohibited Persons and the Related Parties responsible for non-compliance with any provision of this Trading Policy undertake to reimburse the Company and/or other Related Parties in full and without limitation for any losses that the Company and/or other Related Parties may suffer arising directly or indirectly from such non-compliance.

GRENDENE S.A.

POLICY ON TRADING OF THE COMPANY'S SECURITIES

TERM OF ACCEPTANCE AND COMMITMENT

I, [name and description], [function or job], declare that I have become aware of the terms and conditions of the Policy on Trading in Securities issued by Grendene S.A., arising from obedience to CVM Instruction 358/2002, and approved by its Board of Directors on January 28, 2005. I hereby formalize my adherence to the said Policy, and I undertake to comply with all its terms and conditions.

I further declare that I am aware that non-compliance with the provisions of the Trading Policy on Securities issued by the Company is a Serious Violation, for the purposes specified in § 3 of Article 11 of Law 6385/76.

[Place of signature, date]

___________________________

[Name]


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21.1 – Description of the internal rules, regulations or procedures relating to disclosure of information In accordance with CVM Instruction 358/02, we have a policy for disclosure of material events or facts, which was approved by the Company's stockholders in a General Meeting of Stockholders held on August 18, 2004, described in Item 21.2. It governs disclosure of material information and also the exceptions to immediate disclosure of information and the procedures relating to maintenance of secrecy about material information not disclosed to the market.


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21.2 – Describe the policy for publication of a material event or fact, indicating the channel or channels of communication used for its dissemination and the procedures in relation to maintaining secrecy about undisclosed material information

The Policy for Disclosure of Material Events or Facts of Grendene S.A. was approved by its stockholders at an Extraordinary General Meeting held on August 18, 2004. Its aim is to establish the rules and procedures to be obeyed in disclosure, by the Company, of material events or facts, as per definition contained in Article 2 of CVM Instruction 358, of January 3, 2002 ('CVM Instruction 358/02'); the exceptions to immediate disclosure of information; and the procedures relating to maintenance of secrecy about material information not disclosed to the market.

Persons subject to the Disclosure Policy

The following persons are subject to the rules and procedures of this Manual: Direct or indirect controlling stockholders, members of the Board of Directors, members of the Executive Board, members of the Audit Board and any bodies with technical or consultative functions, created by the By-laws, or any party who by reason of his or her job, function or position in the Company, or its parent company, or subsidiaries or affiliates, becomes aware of information relating to the material event or fact.

These persons must formally adhere to the Policy on Disclosure of Information, signing a Term of Commitment.

As well as these persons, any person who comes to have information about material events or facts not yet disclosed by the Company (in aggregate, 'Bound Persons') becomes subject to the rules and procedures of this Manual.

Whenever such a person becomes aware of an event or fact that could be considered material for the Company, such person must formally communicate it to the Chief Investor Relations Officer.

Whenever a material event or fact of the type mentioned in the sole sub-paragraph of Article 2 of CVM Instruction 358 occurs that relates to the Company, or its occurrence is imminent, any Bound Person who is aware of it must formally communicate to the Chief Investor Relations Officer so that the said Officer may decide, in accordance with Section 3, on its characterization as a material event or fact and, consequently, on the need for publication of a Material Announcement.

Any Bound Person who holds a position in a statutory body of the Company (Board of Directors, Executive Board, Audit Board, technical or consultative bodies), and also the controlling stockholder, if personally aware of a material event or fact, and if finding omission by the Chief Investor Relations Officer in compliance with his duty of communication and publication, shall only exempt himself from responsibilities if he or she immediately advises the CVM of the material event or fact. For these purposes, before communicating to the CVM, the Bound Person should check with the Chief Investor Relations Officer to see that there has not been a decision by the Board of Directors of the Company not to disclose the material event or fact. If such decision has occurred, the obligation to disclose to the CVM shall exist only if there is an atypical oscillation in the price, quotation or volume of trading of the securities issued by the Company.

Duties and responsibilities in disclosure of a material event or fact

It is the function of the Chief Investor Relations Officer to disclose to and advise the CVM and the stock exchange on which the securities issued by the Company are traded of any material event or fact that occurs or is related to its business, and to make best efforts for its wide and immediate dissemination to the market.

In the event of doubt, it shall be for the Chief Investor Relations Officer to decide on characterization of any given event or fact as material and, for such a purpose, he/she should consult the members of the Board of Directors.

It is a function of the Chief Investor Relations Officer, without prejudice to the other attributions specified in CVM Instruction 358, to arrange for correction, amendment or republication of a material announcement whenever requested to do so by the CVM.

The controlling stockholders, members of the Board of Directors, members of the Executive Board, members of the Audit Board and of any bodies with technical or consultative functions, created by the By-laws, or any person who by virtue of his job, function or position in the Company, or its parent company or any subsidiary or affiliated company, becomes aware of information relating to the material event or fact must immediately advise the CVM of such event or fact, if there is omission by the Chief Investor Relations Officer in compliance with his/her duty of communication and disclosure.

Form of disclosure of a material event or fact

The communication of Relevant Act or Fact to the CVM and to the Stock Exchange where the securities of the Company are traded, it should happen immediately after the deliberation, occurrence or knowledge of it, as the case may be, in a clear, precise and summarize form, showing at least, the information demanded by the Regulation.


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21.2 – Describe the policy for publication of a material event or fact, indicating the channel or channels of communication used for its dissemination and the procedures in relation to maintaining secrecy about undisclosed material information The disclosure of a Relevant Act or Fact shall be disclosed through a public announcement or advertisement published in at least one of the following channels of communication: a) newspapers with large circulation habitually used by the Company; or b) at least 1 (one) news portal with a page on the Internet that makes the information available in its entirety, in a section with public access free of charge, and content identical to that sent by the CVM to the securities exchange on which the securities issued by the Company are admitted for trading. The disclosure of a Relevant Act or Fact shall be made, whenever it is possible, prior to the beginning or after the closing hours of trading in the Stock Exchange where the securities of the Company are negotiated.

Exception to immediate disclosure of a material event or fact

Material events or facts may, exceptionally, not be disclosed if it is the view of the controlling stockholders or the members of the Board of Directors or of the Executive Board that their disclosure would put legitimate interests of the company at risk. This option may only be exercised by the Company upon decision by the Board of Directors and advice of such decision to the Chief Investor Relations Officer.

In this event, it shall be for the Chief Investor Relations Officer to monitor the quoted price, and prices and volumes of trading in the securities issued by the Company and, if an atypical variation is found in those elements, he/she must immediately disclose the material event or fact that the Company decided previously not to disclose.

Duty to maintain secrecy

It is the duty of the controlling stockholders, members of the Board of Directors, members of the Executive Board, members of the Audit Board and of any bodies with technical or consultative functions created by the By-laws, and of the employees of the Company, to maintain secrecy on information relating to a material event or fact to which they have privileged access by reason of the job or position that they occupy, until its disclosure to the market, and also to make best efforts to arrange for the same to be done by subordinates and third parties with whom they rely on a relationship of trust, and shall be jointly responsible with the latter in the event of non-compliance.

In the case of any contacts with third parties in relation to subjects that might be considered material, the Company shall require that such parties sign a Confidentiality Undertaking.


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21.3 – Members of management who are responsible for implementation, maintenance, evaluation, monitoring and inspection of the policy on disclosure of information The person responsible for the implementation, maintenance, evaluation and inspection of the Policy on Disclosure of Information is the Chief Investor Relations Officer, Mr. Francisco Olinto Velo Schmitt.


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