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TABLE OF CONTENTS
Management Proposal to the Annual Shareholders’ Meeting ........................................ 03
Appendix I – Section 10 of the Reference Form ............................................................ 06
Appendix II – Section 12.6 to 12.10 of the Reference Form ........................................... 40
Appendix III – Section 13 of the Reference Form .......................................................... 60
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MARFRIG GLOBAL FOODS S.A.
TAXPAYER ID (CNPJ/MF) 03.853.896/0001-40
STATE REGISTRY (NIRE) 35.300.341.031
PUBLIC CORPORATION
PROPOSAL OF THE MANAGEMENT OF MARFRIG GLOBAL FOODS S.A.
TO THE ANNUAL SHAREHOLDERS’ MEETING TO BE HELD ON APRIL 28, 2017.
Dear Shareholders,
We, the Management of Marfrig Global Foods S.A., submit for your consideration at the Annual
Shareholders’ Meeting called to convene at 10:00 a.m. on April 28, 2017, the following Management
Proposal (“Proposal”), as follows.
1. Receiving the Management Report and examining, discussing and voting on the
Financial Statements as of and for the year ended December 31, 2016.
The Management Report and the Financial Statements and related notes, as of and for the year
ended December 31, 2016, were prepared by the Executive Board and approved by the Board of
Directors in the meeting held on February 22, 2017, accompanied by the reports of the Independent
Auditors, the Fiscal Council and the Audit Committee. are available to shareholders at our registered
office and on our investor relations website (www.marfrig.com.br/ri) and on the websites of São Paulo
Stock Exchange - BM&FBOVESPA (www.bmfbovespa.com.br) and of the CVM (www.cvm.gov.br).
The Fiscal Council issued an opinion to the effect that the financial statements and related notes are
adequate to be submitted to a vote by the shareholders convened in the upcoming Annual
Shareholders’ Meeting.
Appendix I to this Proposal presents Management’s Discussion and Analysis of Financial Condition
and Results of Operations required by Section 10 of the Reference Form in accordance with
Instruction 480 issued by the Securities and Exchange Commission of Brazil (CVM) on December 7,
2009, as amended (“CVM Instruction 480”). The Financial Statements and related notes for the year
ended December 31, 2016, are available to shareholders at our registered office and on our investor
relations website (www.marfrig.com.br/ri) and on the websites of São Paulo Stock Exchange -
BM&FBOVESPA (www.bmfbovespa.com.br) and of the CVM (www.cvm.gov.br).
Given the net loss reported for the fiscal year ended December 31, 2015, we are not presenting a
proposal for the allocation of profits, as otherwise would be required in accordance with Appendix 9-
1-II of CVM Instruction 481 of December 17, 2009, as amended (“CVM Instruction 481”).
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2. Electing the members of the Board of Directors
The current members of the Management Council of Marfrig Global Foods S.A. were elected at the
Annual Shareholders’ Meeting held on April 24, 2015, for a unified term expiring on the date of the
Annual Shareholders Meeting held in 2017. Management proposes to the shareholders of the
Company the election of the following nominees to the Board of Directors:
Independent Nominees to the Board of Directors: Messrs. Antonio dos Santos Maciel Neto, Carlos
Geraldo Langoni, David G. McDonald, Marcelo Maia de Azevedo Correa, Roberto Faldini and Ernesto
Lozardo.
Nominees to the Board of Directors: Messrs. Marcos Antonio Molina dos Santos, Marcia Aparecida
Pascoal Marçal dos Santos, Alain Emile Henri Martinet, Rodrigo Marçal Filho and Ian David Hill.
Appendix II to this Practical Guide presents information on the nominees to the Board of Directors
proposed by the Management of the Company that is required by subsections 12.5 to 12.10 of the
Reference Form in accordance with CVM Instruction 480.
Consistent with the provision of article 3 of CVM Ruling No. 367 dated May 29, 2002 (“CVM Ruling
367”), Management reports having obtained from each of the nominated candidate directors
assurances that he or she meets the no-liability standards which qualify them as eligible for office
and, therefore, each fulfils the requirements of article 147 of Brazilian Corporate Law and CVM Ruling
367. Mr. Ian David Hill could potentially have a conflict of interest with us in the future, as he is part
of the management of Agropecuária Jacarezinho Ltda. which is controlled by Mr. Marcos Antonio
Molina dos Santos. In addition, as President, chief executive and member of the Board of Directors
of the OSI Group, LLC, Mr. David G. McDonald could potentially have a conflict of interest with us in
the future, as the Marfrig and OSI groups compete in certain international operations.
3. Electing the members of the Fiscal Council
The current members of the Fiscal Council of Marfrig Global Foods S.A. were elected at the Annual
Shareholders’ Meeting held on April 29, 2016, for a unified term expiring on the date of the Annual
Shareholders Meeting held in 2017. Management proposes to the shareholders of the Company the
election of the following nominees to the Fiscal Council:
Nominees for effective member of the Fiscal Council: Messrs. Eduardo Augusto Rocha Pocetti,
Carlos Roberto de Albuquerque Sá and Marcelo Silva.
Nominees for alternate member of the Fiscal Council: Messrs. Ely Carlos Perez, Roberto Perozzi
and Marcílio José da Silva.
Appendix II to this Practical Guide presents information on the nominees to the Fiscal Council
proposed by the Management of the Company that is required by subsections 12.5 to 12.10 of the
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Reference Form in accordance with CVM Instruction 480.
4. Proposal for the aggregate compensation of the Directors, Officers and Fiscal Council
Members for fiscal year 2016.
The compensation proposal put forward to you is for the Company to pay the directors, officers and
Fiscal Council members the aggregate annual amount in fiscal year 2017 of up to twenty-three
million, six hundred fourteen thousand, four hundred thirty two reais and ninety eight centavos
(R$23,614,432.98), which includes all benefits and related payroll charges. Of the proposed
aggregate compensation of R$23,614,432.98, R$15,302,304.00 is attributable to the Board of
Executive Officers, R$7,504,367.53 is attributable to the Board members and R$ 807,761.45 is
attributable to the Members of the Fiscal Council. This compensation proposal is for the period from
January to December 2017.
The following table provides detailed information on the compensation proposal for fiscal year 2017.
Consistent with the reporting requirements of Section 13 of the Reference Form provided for in
CVM Instruction 480, Appendix III to this Proposal presents detailed information on the executive
compensation proposal we are putting forward to you.
We remain at your disposal for any additional clarification you may require.
São Paulo, March 28, 2017.
MARFRIG GLOBAL FOODS S.A.
Marcos Antonio Molina dos Santos
Chairman of the Board
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APPENDIX I
OFFICER’S COMMENTS ON MARFRIG’S GLOBAL FOODS S.A.
FINANCIAL PERFORMANCE
Section 10 of the Reference Form
10.1 General financial and equity conditions
(a) Comments of Executive Officers on the general financial and equity conditions
According to Marfrig’s officers, the evolution in the Company’s main financial indicators reflects the commitment
to optimize its capital structure and the efforts to improve operating performance. The information on its
consolidated financial performance and position are for the fiscal years ended December 31, 2016, 2015 and
2014.
In 2016, due to the conclusion of the divestment of certain units in Argentina, the 2015 financial statements
were restated, with the operations recorded for comparison purposes.
However, for analyzing the data for 2015 and 2014, due to the divestment of Moy Park and the decision to
divest: (i) the beef jerky assets of Marfood in the United States, (ii) the assets in Argentina, and (iii) the company
MFG Agropecuária, the Executive Board believes the best analysis is to consider the financial statements for
2015, i.e. comparative data for 2015 and 2014 include the previously mentioned operations, which were
discontinued.
The following table presents the evolution in Marfrig’s key financial indicators:
2016 2015 2014
Net Debt / LTM EBITDA 3.73x 2.26x 4.98x
Current Liquidity 1.78x 1.82x 1.79x
Average Debt Term (in months) 47 50 49
Long-Term Debt (%) 87.0% 83.4% 85.0%
Debt in R$ (%) 6.0% 6.7% 8.4%
Debt in Other Currencies (%) 94.0% 93.3% 91.6%
The Company closed the fiscal year ended December 31, 2016 with consolidated gross debt of R$ 11.2 billion,
compared to R$12.1 billion on December 31, 2015 and R$11.1 billion on December 31, 2014.
This debt does not include the Private Instrument of Indenture of the 5th Issue of Convertible Debentures of the
Company (which replaced the 2nd issue), as amended (“Mandatory Convertible Deed”), since, unlike other items
in the Company’s liabilities, the Mandatory Convertible Deed cannot be settled through cash and equivalents,
but only through common shares issued by the Company.
At the end of 2016, of the total gross debt, which comprises loans and interest on convertible and non-
convertible debentures, only 13.0% represented maturities in the short term and 87.0% in the long term. In line
with the goal to lengthen the maturity profile and reduce the cost of its debt, the Company issued US$1 billion
in 2023 senior notes (bonds) in the year, whose proceeds were allocated primarily to repaying shorter-dated,
higher-cost bonds.
Of the total debt, 6.0% is denominated in Brazilian real and 94.0% in other currencies, while 21% of the Group’s
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revenues are generated in Brazilian real and 79% in foreign currencies. The weighted average cost of
consolidated debt was 7.3% p.a. The leverage ratio (net debt / LTM EBITDA) was 3.73, while the current
liquidity ratio was 1.78, considering the balance of cash and equivalents at December 31, 2016, of R$5.3
billion.
For the purpose of bank financing and market funding operations, the calculation of the leverage ratio, given
the clauses that exclude impacts from exchange variation, stood at 2.40 at December 31, 2016.
On December 31, 2015, the breakdown of gross debt (loans and interest on convertible and non-convertible
debentures) by currency was 6.7% in Brazilian real and 93.3% in other currencies. The weighted average cost
of our consolidated debt was 7.9% p.a. The leverage ratio (net debt/LTM EBITDA) stood at 2.26x, while the
current liquidity ratio stood at 1.82x, considering cash and cash equivalents at December 31, 2015 of R$5.0
billion. For the purpose of bank and market financing operations, the calculation of the leverage ratio, given the
clauses that exclude impacts from exchange variation, was 0.54 times at December 31, 2015.
On December 31, 2014, the breakdown of gross debt (loans and interest on convertible and non-convertible
debentures) by currency was 8.4% in Brazilian real and 91.6% in other currencies. The weighted average cost
of the Company’s consolidated debt at December 31, 2014 was 7.7% p.a. The leverage ratio (net debt / LTM
EBITDA) was 4.98 times, while the current liquidity ratio was 1.79 times, considering the balance of cash and
equivalents at December 31, 2014 of R$2.7 billion.
The Executive Officers inform that the Company does not contract leveraged operations involving derivatives
or similar instruments that do not have the objective of providing minimum protection against its exposure to
other currencies, and maintains a conservative policy of not contracting operations that could compromise its
financial position.
(b) Comments of the Executive Officers on the capital structure
Below is the capital structure of the Company in the periods indicated. In the opinion of the Executive Officers,
the capital structure of the Company currently represents an adequate balance between equity and debt:
On December 31, 2016, the capital structure of the Company consisted of 5.4% equity and 94.6% debt.
On December 31, 2015, the capital structure of the Company consisted of 4.1% equity and 95.9% debt.
On December 31, 2014, the capital structure of the Company consisted of 10.3% equity and 89.7%
debt.
The Executive Officers also inform that the Company has not issued any redeemable shares.
The capital structure was kept in line in 2016 and 2015, with small capital increase of 553.349 new shares,
representative of R$ 1.449.038, in face to the valid stock option program (“Stock Option”), as described in Note
27 of the December 31, 2016 Financial Report.
(c) Comments of the Executive Officers on the payment capacity regarding financial commitments
assumed
The Executive Officers believe that the Company’s capacity to pay its financial commitments is considered
comfortable, considering its level of cash and equivalents, debt profile, and expectation of future cash flow
generation.
At the end of 2016, of the total debt, only 13.0% matured in the short term, while 87.0% matured in the long
term. The cash position of R$5.3 million corresponds to a short-term liquidity ratio (Cash and Equivalents /
Short-Term Debt) of 3.63. Furthermore, the Officers inform that the Company is seeking to optimize its debt
maturity profile to prevent the concentration of payments in any given period.
Of the total gross debt at the end of 2015, only 16.6% matures in the short term, while 83.4% matures in the
long term. The cash position of R$5.0 billion corresponded to a short-term liquidity ratio (Cash and Equivalents
/ Short-Term Debt) of 2.49x.
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Of the total gross debt at the end of 2014, only 15.0% matured in the short term and 85.0% in the long term.
The cash position of R$2.7 billion corresponded to a short-term liquidity ratio (Cash and Equivalents / Short-
Term Debt) of 1.60x.
(d) Comments of the Executive Officers on sources of working capital and capital expenditure financing
The Executive Officers believe that in the last three fiscal years, the Company’s main sources of cash were: (i)
cash flow generated by our operating activities; (ii) short and long term bank debt; (iii) asset divestment; and
(iv) issuances of debt (bonds and debentures).
These financing sources are used by the Company mostly to cover costs, expenses and investments related
to: (i) operating its business, (ii) capital disbursements including investment in new plants, expansions and/or
modernizations of existing plants and (iii) reducing debt (deleveraging) and the corresponding interest rates.
The Executive Officers believe that these sources of financing are appropriate to the debt profile of the
Company, meeting the working capital and capex needs, while always preserving the long-term profile of
financial debt and, consequently, the payment capacity of the Company.
(e) Comments of the Executive Officers on sources of working capital and capital expenditure financing
that the Company plans to use to cover liquidity deficiencies
In the opinion of the Officers, the Company’s current levels of cash and equivalents and operating cash
generation reduce the need to take out new loans in the short term. However, the Officers inform that Marfrig
could carry out funding operations at more competitive costs and lengthen its debt maturity profile, in keeping
with the process to improve its capital structure and debt profile. As a result, the Company has been carrying
out operations to repurchase a portion of its debt or exchange it for new longer-term operations in the capital
markets or with financial institutions.
As mentioned in the previous item, the Executive Officers are of the opinion that the capital market is also an
important source of funding for future growth of the Company, either organically or through acquisitions.
In the next item 10.1(f) of this Reference Form, we describe the main financing lines taken out by the Company
and the characteristics of each.
(f) Comments of the Executive Officers on debt levels and characteristics of such debts, indicating:
i. Relevant loan and financing contracts;
The following table shows the consolidated debt as of December 31, 2016, 2015 and 2014, described by type,
with the respective weighted average rates and terms:
Credit Line Charges
Weighted
average
interest
rate
Weighted
average
maturity
Balance on December 31,
2016 2016 2016 2015 2014
(% p.a.) (p.a.) (years) (R$ ‘000) (R$ ‘000) (R$ ‘000)
Local Currency
FINAME / FINEP TJLP + Fixed Rate 4.01% 3.17 18,836 26,641 38,577
NCE / Working Capital /
CDCA’S Fixed Rate + %CDI 16.63% 1.31 388,348 547,965 695,781
Interest on debentures IPCA + CDI 256,563 236,807 190,582
Total Local Currency 16.04% 663,747 811,413 924,940
Foreign Currency
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Prepayment (US$) / NCE /
ACC (US$)
Libor + Fixed Rate
+ E.V. 6.38% 0.65 695,011 385,341 909,981
Bonds(US$) Fixed Rate + E.V. 8.10% 4.21 7,725,506 8,845,300 7,749,702
Bank Loan (US$) Fixed Rate + E.V. 2.90% 4.68 1,629,040 1,400,299 871,760
Revolving Credit Line Libor + 2.75 1.87% 3.22 411,331 605,515 556,781
PAE (US$) Fixed Rate + E.V. 2.14% 0.39 25,766 58,360 26,160
Negotiable Liabilities Fixed Rate - - - 15,879 21,601
Total Foreign Currency 6.92%
10,486,65
4 11,310,694 10,135,985
Total Debt 7.26%
11,150,40
1 12,122,107 11,060,925
Current Liabilities 1,454,602 2,009,218 1,660,819
Noncurrent Liabilities 9,695,799 10,112,889 9,400,106
Among the loans and financing shown above, the table below shows the individual contracts of the senior notes
in the consolidated balance sheet whose balance due as on December 31, 2016, exceeded R$ 100.0 million.
Counterparty Type of Contract Principal
Date of
Contract Annual Cost Balance
(million) (R$
million)
Senior Notes Senior Notes US$850.0 6/24/2014 6.9% 2,004.2
Senior Notes Senior Notes US$400.0 9/20/2013 11.3% 87.1
Senior Notes Senior Notes US$750.0 5/9/2011 8.4% 932.1
Senior Notes Senior Notes US$1,000.0 6/8/2016 8.0% 3,165.4
Senior Notes Senior Notes US$775.0 5/4/2010 9.5% 1,602.2
As officers of the Company, we believe the most relevant loan and financing operations were the following:
These are long-term funding operations denominated in foreign currencies involving the issue of debt
securities abroad (Bonds) exclusively to qualified institutional investors (Rule 144A/Reg S), not registered
at the Securities and Exchange Commission of Brazil (CVM), in accordance with the Securities Act of
1933, as amended.
The Company, through its subsidiaries, has conducted eight funding operations of this nature since 2006,
as detailed below:
The first bond operation was concluded in November 2006, upon the issue by Marfrig Overseas Ltd.,
a wholly-owned subsidiary of the Company, of US$375 million in Senior Notes, with a 9.625% p.a.
coupon, semi-annual interest payment beginning in May 2007 and maturity of principal in 10 years
(November 2016), which were assigned foreign currency risk ratings of B1 by Moody’s and B+ by
Standard & Poor’s and Fitch. The proceeds from the issue were used for the acquisition by the
Company of business units in Argentina and Uruguay.
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In March 2010, Senior Note holders approved the amendment of certain clauses included in the
Indenture that governs this issue, including the change in and/or omission of restrictions applicable
to the guarantees provided by the Company and its subsidiaries. Said amendment did not comprise
any change in the financial conditions of this debt, which maintained the same maturity term and
interest rate originally established (this addendum, jointly with the indenture, the “First Issue”). The
First Issue is guaranteed by Marfrig Global Foods S.A. and Marfrig Holdings (Europe) BV.
In September 2013, based on the conclusion of the fifth operation, the Company repurchased Bonds
in the approximate amount of US$191 million, corresponding to 50.97% of the outstanding Senior
Notes of the First Issue. As a result of the tender offer, the First Issue was amended through a
complementary indenture that sets forth, among other things, the elimination of virtually all the
restrictive covenants of the Indenture;
In May 2016, based on the conclusion of the eighth operation, the Company repurchased the principal amount
of approximately US$43.4 million, or 23.58% of remaining outstanding Notes of the First Issue.
In November 2016, the Company fully settled the principal of the outstanding Senior Notes from the First Issue,
in the aggregate amount of US$140.5 million, plus the respective interest of US$6.7 million, representing an
aggregate amount of US$147.2 million.
The second operation was conducted in April 2010, upon the issue by Marfrig Overseas Ltd. of
US$500 million in Senior Notes, with a coupon of 9.50% p.a., semiannual interest payments
beginning in November 2010 and maturity of principal in 10 years (November 2020), which were
assigned foreign currency risk ratings of B1 by Moody’s and B+ by Standard & Poor’s and Fitch.
This operation also was guaranteed by Marfrig Global Foods S.A. and Marfrig Holdings (Europe)
B.V. and its proceeds were used to lengthen the debt profile of the Company (“Second Issue”). In
March 2014, the Company concluded the re-tap of its Senior Notes linked to the Second Issue in
the aggregate amount of US$275 million (“Additional Notes”). The Additional Notes were
consolidated into a single series with the Senior Notes of the Second Issue, with coupon of 9.50%
p.a. (yield of 9.43% p.a. for the issue). The additional notes were assigned foreign currency risk
ratings of B2 by Moody’s and B by Standard & Poor’s and Fitch. The issue of Additional Notes issue
is guaranteed by Marfrig Global Foods. S.A. and its subsidiary Marfrig Holdings (Europe) B.V. On
October 28, 2015, Marfrig Global Foods S.A. announced the conclusion of a cash tender offer for
the Senior Notes issued by Marfrig Overseas Ltd., with the principal amount of US$94.5 million of
the 2020 Senior Notes, or approximately 12.20% of the notes outstanding, duly offered under the
terms of the Joint Tender Offer. The holders of the 2020 Senior Notes tendered received US$980.00
for each US$1,000.00 in principal of the notes, which includes the prepayment of US$30.00 plus any
accrued and unpaid interest through the settlement date;
In April 2016, the Company announced the repurchase and cancellation of notes in the aggregate
amount of US$10.7 million through purchases made in the market between October 2015 and
February 2016.
In May 2016, based on the conclusion of the eighth operation, the Company repurchased the
principal amount of approximately US$185.0 million, or 27.62% of the remaining outstanding Notes
of the Second Issue.
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The third operation was concluded in May 2011 and comprised the issue by Marfrig Holdings
(Europe) B.V. of US$750 million in Senior Notes, with a coupon of 8.375% p.a., semiannual interest
payment beginning in November 2011 and maturity of principal in 7 years (May 2018), which were
assigned foreign currency risk ratings of B1 by Moody’s and B+ by Standard & Poor’s and Fitch. The
operation was guaranteed by Marfrig Global Foods S.A. and Marfrig Overseas Limited and the
proceeds were used to lengthen the debt profile of the Company and to strengthen its working capital
(“Third Issue”). On October 28, 2015, Marfrig Global Foods S.A. announced the conclusion of a cash
tender offer for the Senior Notes issued by Marfrig Holdings (Europe) B.V, with the principal amount
of US$150.8 million of the 2018 Senior Notes, or approximately 20.81% of the notes outstanding,
duly offered under the terms of the Joint Tender Offer. The holders of the Senior Notes tendered
received US$937.50 for each US$1,000.00 in principal of the notes, which includes the prepayment
of US$30.00 plus any accrued and unpaid interest through the settlement date;
In April 2016, the Company announced the repurchase and cancellation of notes in the aggregate
amount of US$6.9 million through purchases made in the market between October 2015 and
February 2016.
In May 2016, based on the conclusion of the eighth operation, the Company repurchased the
principal amount of approximately US$285.2 million, or 50.29% of the remaining outstanding Notes
of the Third Issue.
The fourth operation was concluded in January 2013 and comprised the issue by Marfrig Holdings
(Europe) B.V. of US$600 million in Senior Notes, with a coupon of 9.875% p.a., semiannual interest
payments beginning in July 2013 and maturity of the principal in 4.5 years (July 2017), which were
assigned foreign currency risk ratings of B2 by Moody’s and B+ by Standard & Poor’s and Fitch.
This operation was guaranteed by Marfrig Global Foods S.A. and Marfrig Overseas Ltd. and the
proceeds were used to lengthen the debt profile of the Company and to strengthen its working capital
(“Fourth Issue”); In connection with the Additional Notes of the Second operation, the Company
carried out a tender offer to acquire the Bonds of the Fourth Issue maturing in 2017 and the Fifth
Issue maturing in 2021. Based on the conclusion of this offering, the Company repurchased Bonds
in the approximate amount of US$72.8 million, or 12.14% of the outstanding Notes of the Fourth
Issue.
Based on the conclusion of the seventh operation, the Company repurchased the principal in the approximate
amount of US$371.8 million, or 70.54% of the outstanding Notes of the Fourth Issue. Due to the results of the
early repurchase, the Fourth Issue was amended through an additional indenture, providing, among other
things, the elimination of practically all covenants from the Indentures;
In April 2016, the Company announced the repurchase and cancellation of notes in the aggregate amount of
US$2.1 million through purchases made in the market between October 2015 and February 2016.
In May 2016, based on the conclusion of the eighth operation, the Company repurchased the
principal amount of approximately US$57.5 million, or 37.58% of the remaining outstanding Notes
of the Fourth Issue.
In July 2016, the Company announced the full redemption of the remaining outstanding Senior Notes
arising from the Fourth Issue, in the aggregate outstanding amount of US$95.6 million. In August
2016, after the effective payments, the Notes were duly canceled by the Bank of New York Mellon
(“Trustee”).
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The fifth operation was concluded in September 2013 and comprised the issue by Marfrig Holdings
(Europe) B.V. of US$400 million in Senior Notes, with a coupon of 11.25% p.a., semiannual interest
payments beginning in March 2014 and maturity of the principal in 8 years (September 2021), which
were assigned foreign currency risk ratings of B2 by Moody’s and B by Standard & Poor’s and Fitch.
This operation was guaranteed by Marfrig Global Foods S.A. and Marfrig Overseas and the
proceeds were used to lengthen the debt profile of the Company and to strengthen its working capital
(“Fifth Issue”). Also in connection with the Fifth Issue, the Company carried out a consent solicitation
and tender offer to acquire the Bonds of the First Issue, which mature in 2016;
In March 2014, in connection with the Additional Notes of the Second operation, the Company
carried out a tender offer to acquire the Bonds of the Fifth Issue, maturing in 2021. Based on the
conclusion of this offering, the Company repurchased Bonds in the approximate amount of US$57.1
million or 14.28% of the outstanding Bonds of the Fifth Issue;
In June 2014, in connection with the Seventh Issue, the Company carried out a tender offer together
with a consent solicitation, for 2021 Bonds of the Fifth Issue. Based on the conclusion of these offers,
the Company repurchased a total principal amount of about (i) US$291.5 million, or 85.03% of the
outstanding Notes of the Fifth Issue. As a result of the early tender offer, the Fifth Issue was amended
through a complementary indenture that set forth, among other things, the elimination of virtually all
the covenants in the Indenture.
On September 29, 2015, Marfrig Holdings (Europe) B.V. announced the cash tender offer for Senior
Notes from the Fifth Issue, in the aggregate principal of US$51.3 million ("Offer I").
On October 28, 2015, Marfrig Global Foods S.A. announced the conclusion of a cash tender offer
for the Senior Notes issued by Marfrig Holdings (Europe) B.V, with the principal amount of US$22.2
million of the 2021 Senior Notes, or approximately 43.30% of the notes outstanding, duly offered
under the terms of the Joint Tender Offer. The holders of the 2021 Senior Notes tendered received
US$970.00 for each US$1,000.00 in principal of the notes, which includes the prepayment of
US$30.00 plus any accrued and unpaid interest through the settlement date;
In April 2016, the Company announced the repurchase and cancellation of notes in the aggregate
amount of US$1.3 million through purchases made in the market between October 2015 and
February 2016.
The sixth operation was carried out on September 28, 2015, due to the settlement of the transaction
governed by the Agreement for the Purchase and Sale of Ownership Interest and Other Covenants dated June
19, 2015, which formalized, among other things, the sale by the Company to JBS S.A. of certain rights and
ownership interest in companies in its group that owned the Moy Park business unit, the Sixth Issue,
together with Additional Notes linked thereto, are no longer recorded on the Company's consolidated
balance sheet;
The seventh operation was carried out in June 2014 and comprised the issue by Marfrig Holdings
(Europe) B.V. of US$850 million in Senior Notes, with a coupon of 6.875% p.a., semiannual interest
payments starting in December 2014 and maturity of the principal in 5 years (June 2019), which
were assigned foreign currency risk ratings of B2 by Moody’s and B by Standard & Poor’s. This
operation was guaranteed by Marfrig Global Foods S.A. and Marfrig Overseas Ltd., with the
proceeds used to reduce the cost and lengthen the profile of debt (“Seventh Issue”).
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On September 29, 2015, Marfrig Holdings (Europe) B.V. and Marfrig Overseas Limited also
announced the cash tender offer for Senior Notes from the Seventh Issue ("Offer II") and the Third
Issue (“Offer III”), both issued by Marfrig Holdings (Europe) B.V.; and by Marfrig Overseas, for the
Second Issue (“Offer IV”), Offer II, Offer III and Offer IV in the total amount of up to US$500 million,
with the possibility of increasing the offer by up to US$150 million. Offer I, Offer II, Offer III and Offer
IV, jointly referred to as “Offers;”
On October 28, 2015, the Company notified the market of the settlement of the Cash Tender Offers
for Senior Notes, and total principal amount of R$406.5 million was accepted for acquisition and paid
under the terms of the Tender Offers of September 29, 2015 and October 14, 2015. Of this amount,
the Company settled US$138.9 million maturing 2019, issued by the subsidiary Marfrig Holdings
(Europe) B.V.
In April 2016, the Company announced the repurchase and cancellation of notes in the aggregate
amount of US$50.7 million through purchases made in the market between October 2015 and
February 2016.
The eighth operation was concluded in May 2016 and comprised the issue by Marfrig Holdings
(Europe) B.V. of US$750 million in Senior Notes, with a coupon of 8.00% p.a. and yield of 8.25%
p.a., semiannual interest payments beginning in December 2016 and maturity of the principal in 7
years (June 2023), which were assigned foreign currency risk ratings of B2 by Moody’s and B+ by
Standard & Poor’s and Fitch. This operation was guaranteed by Marfrig Global Foods S.A. and
Marfrig Overseas and the proceeds were used to reduce costs and lengthen the debt profile of the
Company (“Eighth Issue”).
On June 29, 2016, Marfrig Global Foods S.A. announced an additional issue of Senior Notes in
connection with the Eighth Issue, in the aggregate amount of US$250 million. The Additional Notes
due on June 8, 2023 were issued with yield of 7.625% p.a. and were assigned foreign-currency
credit-risk ratings of “B2” by Moody’s and “B+” by Standard & Poor's (S&P) and Fitch, both with a
positive outlook. The transaction carried out in late June was settled in July 2016.
Maturity schedule of debt in any currencies (consolidated)
Balance (R$ thousands) Consolidated
31/12/2016 31/12/2015 31/12/2014
2015 1,660,819
2016 2,009,219 714,354
2017 1,454,602 1,011,436 659,247
2018 1,221,747 2,330,304 2,526,727
2019 2,131,263 2,591,132 2,014,335
2020 1,906,145 3,215,980 2,552,990
2021 84,608 104,330 932,453
2022 1,205,773 858,817
2023 3,146,263 890
2024 - -
Total Current and non Current 11,150,401 12,122,108 11,060,925
14/93
Mandatory Deed Convertibles into Shares
According to the “Indenture for the Second Issue of Debentures Convertible into Shares of (Mandatory Deed)
Marfrig Global Foods S.A.”, the Company issued two hundred and fifty thousand (250,000) debentures, mainly
convertible into shares, with unit par value of R$10, amounting to R$2,500,000. The Mandatory Deed was
issued on July 15, 2010 through private subscription, with maturity within 60 months, annually restated at the
interest rate at 100% of the accumulated variation of average interbank deposit rates of a day, plus spread of
one per cent (1%). Remuneration of the Mandatory Deed is recognized as current liabilities and collateralized
by a bank guarantee provided by Banco Itaú BBA S/A. The total amount of the two hundred and fifty thousand
(250,000) debentures was subscribed to, and the main debenture holder is BNDES Participações S.A.
As defined in said Indenture and except for the cases of voluntary conversion, the conversion price will be lower
than the following items: (i) R$21.50, plus the percentage of interest paid to debenture holders over the par
value of the issues, less earnings distributed to each share, both restated at CDI as from the actual payment,
in the case of interest on debentures, or the date of debentures less earnings, in the case of earnings, until the
conversion date; and (ii) the higher between the market price and R$24.50, the latter without adjustment for
earnings in cash or monetary restatement.
The Company, based on the essence of the operation (equity) and on the characteristics thereof, initially
recorded the Mandatory Deed (principal) as Capital Reserve, under Shareholders' Equity. However, the
Securities and Exchange Commission of Brazil (CVM), through Official Letter CVM/SEP/GEA-5/no. 329/2012
dated October 10, 2012, stated its opinion of this instrument and ordered: (i) the accounting reclassification of
the Mandatory Deed; and (ii) the re-filing of the 2011 financial statements with comparisons to the 2010 financial
instatements.
The Company abided by the order of the CVM, proceeding with the full reclassification of the Mandatory Deed
to the specific accounting line non-current liabilities. The previous method of accounting was based on
accounting and legal opinions issued specifically regarding this matter.
Said reclassification did not affect any terms and conditions of the Mandatory Deed and there is no effect on
the current financial indebtedness of the Company, on the servicing of its debt or on its financial covenants,
since, unlike others items under the liabilities of the Company, the Mandatory Deed may not be liquidated into
cash or cash equivalents, but only into common shares issued by the Company.
The Company spent R$12,328 to issue the Mandatory Deed, which was initially recorded as a valuation
allowance to the Capital Reserve account. The surety was renewed annually bringing the expenses with the
issue of the Mandatory Deed to R$41,180 on June 30, 2014. These expenses were 7also reclassified under
non-current liabilities, as a deduction from the account “Mandatory Deed Convertible into Shares.” As
determined by the Company, the value started to be amortized on a monthly basis.
Because of the paying in of such debentures made by BNDES Participações S/A, MMS Participações Ltda. and
BNDES Participações S.A. have entered into a Shareholders' Agreement with the purpose of regulating the
relationship between the parties as shareholders of Marfrig Global Foods S.A.
On February 5, 2013 the Company conducted a capital increase, within the authorized limit due to the
conversion of thirty-five thousand (35,000) debentures from the 2nd Issue of Convertible Debentures of the
Company that were held by BNDES Participações S.A. – BNDESPAR into forty-three million, seven hundred
and fifty thousand (43,750,000) common shares issued by the Company, in accordance with Item III.16.11 of
the “Private Deed of the 2nd Issue of Debentures Convertible Into Shares of Marfrig Global Foods S.A.” that
was entered into by the Company and Planner Trustee DTVM Ltda. on July 22, 2010, and as per the Material
Fact published on October 24, 2012.
15/93
The Shares resulting from the conversion have the same characteristics and conditions and enjoy all of the
same rights and advantages ascribed by law and by the bylaws that are attributed to the existing common
shares issued by the Company.
As a result of the abovementioned conversion of debentures, there was a material increase in the ownership
interest held by the shareholder BNDESPAR, which now holds common shares representing 19.63% of the
Share Capital of the Company.
On January 6, 2014, the Board of Directors of the Company approved the submission to the Meeting of
Shareholders of the proposal for Fifth (5th) Issue of Unsecured Convertible Debentures in a Single Series in the
aggregate amount of R$2,150,000 (5th Issue of Convertible Debentures of the Company).
On January 22, 2014, the shareholders of the Company, assembled in an Extraordinary Shareholders' Meeting,
approved said Firth Issue of Convertible Debentures of the Company in the aggregate amount of R$2,150,000,
in a single series, upon the issue of 215,000 thousand debentures at the unit face value of R$10, restated by
an interest rate corresponding to 100% of the cumulative variation in the average overnight rate for one day,
plus a spread of one percent (1%). The interest will be paid annually on the following dates: January 25, 2015,
January 25, 2016; with the last payment date coinciding with the maturity date, on January 25, 2017. The Fifth
Issue had the objective, within the limits of its indenture, of fully redeeming the debentures of the Second Issue
of Convertible Debentures of the Company.
Likewise, the debentures of the Fifth Issue of Convertible Debentures of the Company are mandatorily
convertible into shares of the Company on the Maturity Date, with the conversion price corresponding to the
lowest of the following amounts: (i) R$21.50, restated annually by an interest rate corresponding to the overnight
rate plus one percent (CDI+1%), less any and all payments received by shareholders (dividends or interest on
equity); or (ii) the highest between the market price, as defined in the indenture as the weighted average market
price of MRFG3 stock quoted in the spot market of the BM&FBovespa in the sixty (60) trading sessions
immediately prior to the conversion date, and R$21.50 (without adjustment for cash dividends or monetary
restatement).
On March 17, 2014, the Company released a Notice to the Market addressing the conclusion of the process of
issue and subscription of its 5th Issue of Convertible Debentures, in which 214,955 Debentures were subscribed
to, with unit face value of R$10, as per the information received from the agent bank Itaú Unibanco S.A., and
45 unsubscribed debentures were canceled by the Company.
On March 28, 2014, the Company published a Notice to the Market informing that, as decided in the Meeting of Debenture
Holders of the Second Issue of Convertible Debentures of the Company, held on January 22, 2014, of a total of 215,000
debentures of the Second Issue: a) 214,900 were used by the respective debenture holders to pay up the debentures of the
Fifth Issue of Convertible Debentures of the Company; and b) 100 outstanding debentures were fully redeemed, on the
date hereof, which resulted in the cancelation of all 215,000 debentures of the Second Issue of Convertible
Debentures of the Company and the consequent conclusion of said Second Issue of Debentures.
Lastly, on January 25, 2017, the mandatory deeds held by BNDES were fully converted, as per Note 39 of the Financial
Statements for the fiscal year ended December 31, 2016.
ii. Other long-term relationships with financial institutions
The Executive Officers confirm that the Company does not have any long-term relationship with financial institutions other
than those resulting from financing, loans and guarantees described above.
iii. Degree of debt subordination
“The Officers declare that the debts of the Company do not have a degree of subordination among them and
therefore have equal payment rights. Note, however, that the FINAME credit facilities contracted by the
Company from the Brazilian Development Bank (BNDES) feature security interests on the assets acquired using
the credit, and certain export prepayment credit facilities feature assignment of receivables. Marfrig further
16/93
clarifies that, during the last three fiscal years, no degree of subordination has existed among the unsecured
debts of the Company. Debts with security interest enjoy the preferences and prerogatives provided for by law.”
iv. Any restrictions imposed on the Company, especially those relating to limits on debt and the
contracting of new debt, the distribution of dividends, the disposal of assets, the issuance of new
securities and the transfer of control, as well as whether the issuer has been complying with such
restrictions.
According to the Executive Officers, the main restrictions imposed on the Company regarding the debt limits
and the contracting of new debts, disposal of assets, issue of fresh securities and the sale of shareholding
control, are:
Debt limits
Loans and financing agreements are ruled by covenant of 4.75x, in its most restrictive form, in relation to
consolidated indebtedness level, as maximum quotient of Net Debt/LTM EBITDA ratio (last twelve months).
The penalty for breach of this covenant is the same as generally applied in the financial markets, which is the
early maturity of the debt, which is then reclassified as current liabilities.
The leverage ratio is calculated as follows:
12/31/16
Consolidated gross debt 11,150,401
(-) Consolidated cash and cash equivalents 5,278,641
Consolidated net debt 5,871,760
LTM EBITDA in the year ended December 31, 2016 1,574,529
EBITDA ratio 3.73
Consolidated net debt 5,871,760
(-) Effect from exchange variation (carve-out) 2,094,275
Consolidated adjusted net debt 3,777,485
Leverage ratio 2.40
Due to the contractual provisions (carve-out) that allow the exclusion of foreign exchange variation effects from
the calculation of leverage ratio (net debt/EBITDA LTM), the Company clarifies that based on this methodology,
the current leverage ratio (net debt/EBITDA LTM) stood at 2.40 at December 31, 2016.
Disposal of assets
There are restrictions to the disposal of assets that may lead to default with the obligations under certain
instruments in certain Advances on Exchange Contracts (ACC).
In the case of FINAME of BNDES, there is a prohibition to placing encumbrance on the Company’s permanent
assets, after contracting the operation, without prior express authorization from BNDES, pursuant to clause XII,
article 34 of the Provisions Applicable to Agreements with BNDES.
The Second Issue, Third Issue and Seventh Issue of Senior Notes include a clause prohibiting the divestment
of assets, except: (1) at fair market value; (2) 75% of the price is paid in cash/liquid investments or
assets/properties related to the Company’s businesses; and (3) if within 360 days of receipt, such funds are
used to repay debts or acquire assets in businesses related to the Company’s activities.
Issue of securities
17/93
The agreements executed through the BNDES FINAME credit lines include a restriction on the issue of
debentures and beneficiaries by the borrower, after contracting the operation, without prior express
authorization from BNDES, pursuant to clause IX, article 34 of the Provisions Applicable to Agreements with
BNDES.
Sale of control
The agreements executed through the BNDES FINAME credit lines include a restriction on the alteration of
direct or indirect control, of the borrower, after contracting the operation, without prior express authorization from
BNDES, pursuant to clause III, article 39 of the Provisions Applicable to Agreements with BNDES.
There are restrictions also on the sale of control of the beneficiary of the credits in the financing from NCEs,
Finame, NPRs, CCBs and certain ACCs.
(g) Comments of the Executive Officers on financing line use limits already contracted
The Executive Officers inform that all the financing agreements were fully released after the respective approval
and formalization with the creditors.
(h) Comments of Executive Officers on Material changes in each item of the financial statements
The following sections present a summary of our financial and operational information for the periods indicated.
The following information should be read and analyzed in conjunction with the Company’s consolidated financial
statements and the consolidated interim quarterly financial information of the Company and accompanying
notes, which are available on the Company’s website (www.marfrig.com.br/ri) and on the website of the
Securities and Exchange Commission of Brazil - CVM (www.cvm.gov.br).
BALANCE SHEETS
12/31/2016 AV 12/31/2015 AV 12/31/2014 AV
2016 vs
2015
2015 vs
2014
(in R$ thousand, except %)
Current Assets
Cash and cash equivalents
3,291,70
5 125% 1,630,368 7.91%
1,091,68
5 5.41%
101.90
% 49.34%
Financial investments
1,986,93
6 9.81% 3,373,842 16.38%
1,567,11
2 7.76%
-
41.11
%
115.29
%
Trade accounts receivable – domestic
396,887 1.96% 528,010 2.56% 941,277 4.66%
-
24.83
%
-
43.90%
Trade accounts receivable – foreign
393,581 1.94% 475,707 2.31% 677,483 3.36%
-
17.26
%
-
29.78%
Inventories of goods and merchandise
1,257,61
6 6.21% 1,496,964 7.27%
2,027,91
9
10.05
%
-
15.99
%
-
26.18%
Biological assets
112,454 0.56% 160,174 0.78% 352,200 1.74%
-
29.79
%
-
54.52%
Recoverable taxes
1,240,32
8 6.12% 1,289,571 6.26%
1,361,63
5 6.75% -3.82% -5.29%
Prepaid expenses
132,242 0.65% 197,733 0.96% 167,030 0.83%
-
33.12
%
18.38%
18/93
12/31/2016 AV 12/31/2015 AV 12/31/2014 AV
2016 vs
2015
2015 vs
2014
Notes receivable
353,548 1.75% 48,034 0.23% 58,261 0.29%
636.04
%
-
17.55%
Advances to suppliers
23,988 0.12% 45,274 0.22% 57,204 0.28%
-
47.02
%
-
20.86%
Assets held for sale
- 0.00% 529,981 2.57% - 0.00%
-
100.00
%
0.00%
Other receivables 113,893 0.56% 66,797 0.32% 66,711 0.33%
70.51
% 0.13%
Total current assets
9,303,17
8
45.92
% 9,842,455 47.77%
8,368,51
7
41.46
% -5.48% 17.61%
Non-current Assets
Financial investments 851 0.00% 911 0.00% 970 0.00% -6.59% -6.08%
Court deposits 65,427 0.32% 50,834 0.25% 64,972 0.32%
28.71
%
-
21.76%
Notes receivable
96,768 0.48% 360,868 1.75% 345,664 1.71%
-
73.18
%
4.40%
Deferred income and social contribution
taxes
2,135,39
5
10.54
% 1,657,342 8.04%
1,708,43
7 8.46%
28.84
% -2.99%
Recoverable taxes
1,723,66
0 8.51% 1,595,672 7.74%
1,509,16
9 7.48% 8.02% 5.73%
Other receivables
41,493 0.20% 53,036 0.26% 42,773 0.21%
-
21.76
%
23.99%
Investments
16,268 0.08% 26,024 0.13% 36,934 0.18%
-
37.49
%
-
29.54%
Property, plant and equipment
4,009,39
7
19.79
% 4,311,263 20.92%
4,961,62
3
24.58
% -7.00%
-
13.11%
Biological assets
51,236 0.25% 59,804 0.29% 142,140 0.70%
-
14.33
%
-
57.93%
Intangible assets
2,815,13
0
13.90
% 2,645,270 12.84%
3,004,70
9
14.89
% 6.42%
-
11.96%
Total non-current assets
10,955,6
25
54.08
%
10,761,02
4 52.23%
11,817,3
91
58.54
% 1.81% -8.94%
Total assets
20,258,8
03
100.0
0%
20,603,47
9
100.00
%
20,185,9
08
100.0
0% -1.67% 2.07%
Current Liabilities
Trade accounts payable
1,853,42
6
9.15% 1,734,425
8.42% 2,028,30
3
10.05
% 6.86%
-
14.49%
Supply chain finance 149,331
0.74% 84,566
0.41% - -
76.59
% 0.00%
19/93
12/31/2016 AV 12/31/2015 AV 12/31/2014 AV
2016 vs
2015
2015 vs
2014
Payroll and related charges 346,837 1.71% 338,015 1.64% 341,979 1.69% 2.61,% -1.16%
Taxes 175,801 0.87% 182,961 0.89% 200,312 0.99% -3.91% -8.66%
Loans and financing
1,198,03
9
5.91%
1,772,411
8.60% 1,470,23
7 7.28%
-
32.41
%
20.55%
Notes payable 372,607
1.84% 323,645
1.57% 129,895 0.64%
15.13
%
149.16
%
Lease payable
11,936
0.06%
38,166
0.19%
69,229 0.34%
-
68.73
%
-
44.87%
Interest on debentures 256,563 1.27% 236,807 1.15% 190,582 0.94% 8.34% 24.25%
Advances from customers 695,046
3.43% 378,304
1.84% 72,645 0.36%
83.73
%
420.76
%
Mandatory convertible deed
2,147,39
2
10.60
% -
- - - 0.00% 0.00%
Liabilities related to assets held for sale -
0.00% 163,711
0.79% - -
100.00
% 0.00%
Other payables 175,991
0.87% 153,638
0.75% 159,283 0.79%
14.55
% -3.54%
Total current liabilities
7,382,96
9
36.44
% 5,406,649
26.24% 4,662,46
5
23.10
%
36.55
% 15.96%
Non-current Liabilities
Loans and financing
9,695,79
9
47.86
%
10,112,88
9
49.08% 9,400,10
6
46.57
% -4.12% 7.58%
Taxes 723,435 3.57% 699,116 3.39% 706,545 3.50% 3.48% -1.05%
Deferred income and social contribution
taxes 269,616
1.33% 294,683
1.43% 635,758 3.15% -8.51%
-
53.65%
Tax, labor and civil provisions 87,739
0.43% 46,219
0.22% 40,448 0.20%
89.83
% 14.27%
Lease payable 26,560
0.13% 23,520
0.11% 70,745 0.35%
12.93
%
-
66.75%
Advances from customers
-
0.00%
2,129,720
10.34% 2,121,47
0
10.51
%
-
100.00
%
0.39%
Mandatory convertible deed 375,448 1.85% - - - - 0.00% 0.00%
Notes payable
488,261
2.41%
931,474
4.52%
353,570 1.75%
-
47.58
%
163.45
%
Other 108,174 0.53% 115,577 0.56% 123,076 0.61% -6.41% -6.09%
Total non-current liabilities
11,775,0
32
58.12
% 14,353,19
8
69.66% 13,451,7
18
66.64
%
-
17.96
%
6.70%
Total Liabilities
19,158,0
01
94.57
%
19,759,84
7
95.91% 18,114,1
83
89.74
% -3.05% 9.08%
Shareholders' Equity
Share capital
5,278,12
7
26.05
% 5,276,678
25.61% 5,276,67
8
26.14
% 0.03% 0.00%
20/93
12/31/2016 AV 12/31/2015 AV 12/31/2014 AV
2016 vs
2015
2015 vs
2014
(-) Share issue expenses -108,210
-
0.53% -108,210
-0.53% -108,210
-
0.54% 0.00% 0.00%
Capital reserve 184,642 0.91% 184,642 0.90% 184,642 0.91% 0.00% 0.00%
Acquisition of shares in subsidiaries -158 0.00% -158 0.00% -158 0.00% 0.00% 0.00%
Issue of common shares 184,800 0.91% 184,800 0.90% 184,800 0.92% 0.00% 0.00%
Profit reserve 40,122 0.20% 39,580 0.19% 36,449 0.18% 1.37% 8.59%
Legal reserve 44,476 0.22% 44,476 0.22% 44,476 0.22% 0.00% 0.00%
Retained earnings 7,348 0.04% 7,348 0.04% 7,348 0.04% 0.00% 0.00%
Treasury shares
-12
0.00%
-554
-0.00%
-3,685 -
0.02%
-
97.83
%
-
84.97%
Canceled treasury shares -11,690
-
0.06% -11,690
-0.06% -11,690
-
0.06%
0.00% 0.00%
Other comprehensive income -241,972
-
1.19%
-
1,174,029
-5.70% -438,071
-
2.17%
79.39
%
168.00
%
Asset valuation adjustment
-
2,054,15
1
-
10.14
%
-
3,913,161
-
18.99%
-
1,713,19
8
-
8.49%
-
47.51
%
128.41
%
Cumulative translation adjustment
1,812,17
9
8.95%
2,830,019
13.74% 1,275,12
7 6.32%
-
35.97
%
121.94
%
Equity amounts related to assets held for
sale
-
-
0.00% -90.887
-0.44%
- -
-
100.00
%
-
Accumulated losses
-
4,246,09
3
-
20.96
%
-
3,575,403
-
17.35%
-
2,998,02
3
-
14.85
%
18.76
% 19.26%
Non-controlling interest 194,186 0.96% 200,374 0.97% 118,260 0.59% -3.09 69.44%
Total shareholders' equity
1,100,80
2 5.43% 843,632 4.09%
2,071,72
5
10.26
%
30.48
%
-
59.28%
Total liabilities and shareholders' equity
20,258,8
03
100.0
0%
20,603,47
9
100.00
%
20,185,9
08
100.0
0% -1.67% 2.07%
Comparative analysis of the Balance Sheets as of December 31, 2016 and 2015
Current Assets
Current assets amounted to R$9,303.2 million at December 31, 2016, compared to R$9,842.4 million at
December 31, 2015, which represents a decrease of 5.5%. As a percentage of total assets, current assets
represented 45.9% and 47.8% at December 31, 2016 and 2015, respectively.
Cash and cash equivalents. The Company’s cash and cash equivalents amounted to R$5,278.6 million at
December 31, 2016, increasing 5.5% from R$5,004.2 million at December 31, 2015. Cash and equivalents as
a percentage of total assets stood at 26.1% at December 31, 2016, compared to 24.3% at December 31, 2015.
The Company's Officers believe that the increase in cash and cash equivalents is due to the results generated
by the Keystone Division, the decline in interest expenses resulting from the Liability Management actions,
increased cost discipline and working capital improvements.
21/93
Trade Accounts Receivable. The Company’s trade accounts receivable amounted to R$790.4 million at
December 31, 2016, representing a decrease of 21.3% from R$1,003.7 million at December 31, 2015. As a
percentage of total assets, trade accounts receivable represented 3.9% at December 31, 2016, compared to
4.9% at December 31, 2015. The Company's officers believe that the 21.2% decrease in the line Trade Accounts
Receivable was driven by the better management of and negotiations with clients, which reduced the
receivables period and optimized the cash conversion cycle, and by the effects from exchange variation on
clients pegged to currencies other than the Brazilian real.
Inventory and Biological Assets. The Company’s inventory and biological assets amounted to R$1,370.0 million
at December 31, 2016, compared to R$1,657.1 million at December 31, 2015, representing a decrease of
17.3%. As a percentage of total assets, inventory and biological assets corresponded to 6.8% and 8.0% at
December 31, 2016 and 2015, respectively.
Non-Current Assets
Non-current assets amounted to R$10,955.6 million at December 31, 2016, representing an increase of 1.8%
from R$10,761.0 million at December 31, 2015. As a percentage of total assets, non-current assets
corresponded to 54.1% at December 31, 2016, compared to 52.2% at December 31, 2015. Property, Plant and
Equipment and Biological Assets. Property, plant and equipment and biological assets amounted to R$4,060.6
million at December 31, 2016, compared to R$4,371.0 million at December 31, 2015, representing a decrease
of 7.1%. As a percentage of total assets, property, plant and equipment and biological assets corresponded to
20.1% and 21.2% at December 31, 2016 and 2015, respectively. The Company's Officers believe that the 7.1%
decrease in the line Property, Plant and Equipment and Biological Assets was mainly explained by effects from
exchange variation on assets pegged to currencies other than the Brazilian real.
Intangible assets. The Company’s Intangible assets amounted to R$2,815.1 million at December 31, 2016,
compared to R$2,645.3 million at December 31, 2015, representing an increase of 6.4%. As a percentage of
total assets, intangible assets corresponded to 13.9% and 12.8% at December 31, 2016 and 2015, respectively.
The Officers of the Company believe the 6.4% increase in the line Intangible Assets is explained by effects from
exchange variation on the goodwill from the acquisitions of equity interests abroad, which are expressed in the
functional currency of the business unit and translated at the settlement rate, in accordance with accounting
standard NBC TH 02/R2 (CVM Resolution 540/10) – Effects of exchange rate variation and translation of
financial statements.
Current Liabilities
Current liabilities increased 36.4%, from R$5,406.6 million at December 31, 2015 to R$7,382.9 million at
December 31, 2016. As a percentage of total liabilities, current liabilities corresponded to 36.5% at December
31, 2016, compared to 26.2% at December 31, 2015.
Trade accounts payable. At December 31, 2016, trade accounts payable amounted to R$2,002.7 million,
increasing 10.1% from R$1,819.0 million at December 31, 2015. As a percentage of total liabilities, trade
accounts payable corresponded to 9.7% at December 31, 2016, compared to 8.8% at December 31, 2015.
According to the Officers of the Company, the 10.1% increase in the line Trade accounts payable reflects the
better management and negotiations of payment terms with suppliers, which optimized the cash conversion
cycle of the Company and is a practice that it will maintain in order to continue optimizing its cash conversion
cycle.
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Loans and Financing. At December 31, 2016, loans amounted to R$1,198.0 million, decreasing 32.4% from
R$1,772.4 million at December 31, 2015. From the total liabilities, the loans and financing line corresponded to
6.3% at December 31, 2016, and 9.0% at December 31, 2015. The Officers believe that the decrease is
explained by the US$1 billion issue of 2023 senior notes (bonds), whose proceeds were allocated primarily to
repaying shorter-dated, higher-cost bonds.
Interest on Debentures. At December 31, 2016, interest on debentures amounted to R$256.5 million,
representing an increase of 8.3% from R$236.8 million at December 31, 2015. As a percentage of total liabilities,
the cost of interest on debentures corresponded to 1.3% at December 31, 2016, compared to 1.2% at December
31, 2015.
Mandatory convertible deed. At December 31, 2016, the mandatory convertible deed amounted to R$2,147.4
million (classified as current liabilities), representing a decrease of 0.8% from R$2,129.7 million (classified as
non-current liabilities) at December 31, 2015. As a percentage of total liabilities, the cost of the mandatory
convertible deed corresponded to 10.3% at December 31, 2015, compared to 10.2% at December 31, 2015.
Note that, on January 25, 2017, the mandatory deeds held by BNDES were fully converted, as per Note 39 of
the Financial Statements for the fiscal year ended December 31, 2016.
Noncurrent Liabilities
Non-current liabilities amounted to R$11,775.0 million at December 31, 2016, representing a decrease of 17.9%
from R$14,353.2 million at December 31, 2015. As a percentage of total liabilities, noncurrent liabilities
corresponded to 58.2% at December 31, 2016, compared to 69.7% at December 31, 2015.
Loans and Financing. At December 31, 2016, loans amounted to R$9,695.8 million, representing a decrease of
4.12% from R$10,112.9 million at December 31, 2015. As a percentage of total liabilities, loans and financing
including debentures corresponded to 50.6% at December 31, 2016, compared to 51.2% at December 31, 2015.
The Officers believe the decrease is due to the effects from exchange variation on debt denominated in
currencies other than the Brazilian real and to the reduction in interest expenses resulting from the Liability
Management actions.
Shareholders' Equity
The shareholders’ equity of the Company increased 30.5%, from R$843.6 million at December 31, 2015 to
R$1,100.8 million on December 31, 2016.
Comparative analysis of the Balance Sheets as of December 31, 2015 and 2014
Current Assets
Current assets were R$9,842.5 million at December 31, 2015, compared to R$8,368.5 million at December 31,
2015, an increase of 17.6%. As a percentage of total assets, current assets represented 47.1% and 41.5% at
December 31, 2015 and 2014, respectively.
Cash and cash equivalents. The cash and cash equivalents of the Company amounted to R$5,004.2 million at
December 31, 2015, increasing 88.2% from R$2,658.8 million at December 31, 2014. Cash and equivalents as
a percentage of total assets came to 23.9% at December 31, 2015, compared to 13.2% at December 31, 2014.
The Company’s Officers believe the increase in cash and equivalents reflects the higher balance of cash and
marketable securities from the sale of the ownership interests, as explained in Note 13.3 to the Financial
Statements.
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Trade Accounts Receivable. The trade accounts receivable of the Company amounted to R$1,003.7 million at
December 31, 2015, a decrease of 38.0% from R$1,618.8 million at December 31, 2014. As a percentage of
total assets, trade accounts receivable represented 4.8% at December 31, 2015, compared to 8.0% at
December 31, 2014. The Officers of the Company believe this 38.0% decrease in Trade Accounts Receivable
was due to the sale of ownership interests, as per note 13.3 to the financial statements.
Inventory and Biological Assets. The inventory and biological assets of the Company amounted to R$1,657.1
million at December 31, 2015, compared to R$2,380.1 million at December 31, 2014, representing a decrease
of 30.4%. As a percentage of total assets, inventory and biological assets represented 7.9% and 11.8% at
December 31, 2015 and 2014, respectively.
Non-Current Assets
Non-current assets amounted to R$10,761.0 million at December 31, 2015, a decrease of 8.9% from
R$11,817.4 million at December 31, 2014. As a percentage of total assets, non-current assets represented
52.2% at December 31, 2015, compared to 58.5% at December 31, 2014.
Property, Plant and Equipment and Biological Assets. Property, plant and equipment and biological assets
amounted to R$4,371.0 million at December 31, 2015 compared to R$5,103.8 million at December 31, 2014,
representing a decrease of 14.4%. As a percentage of total assets, Property, Plant and Equipment and
Biological Assets represented 20.9% and 25.3% at December 31, 2015 and 2014, respectively. The Officers of
the Company believe that the 14.4% decrease in Property, Plant and Equipment and Biological Assets was due
to the sale of ownership interests, as per note 13.3 to the financial statements.
Intangible assets. The Intangible assets of the Company amounted to R$2,645.3 million at December 31, 2015
compared to R$3,004.7 million at December 31, 2014, representing a decrease of 12.0%. As a percentage of
total assets, intangible assets represented 12.8% and 14.9% at December 31, 2015 and 2014, respectively.
The Officers of the Company believe the 12.0% decrease in Intangible Assets was due to the sale of ownership
interests, as per note 13.3 to the financial statements.
Current Liabilities
Current liabilities increased 16.0%, from R$5,406.6 million on December 31, 2015 to R$4,662.5 million on
December 31, 2014. As a percentage of total liabilities, current liabilities represented 26.2% at December 31,
2015, compared to 23.1% at December 31, 2014.
Trade accounts payable. At December 31, 2015, trade accounts payable amounted to R$1,819.0 million, a
decrease of 10.3% from R$2,028.3 million at December 31, 2014. As a percentage of total liabilities, trade
accounts payable represented 8.8% at December 31, 2015, compared to 10.0% at December 31, 2014. The
O7fficers of the Company believe the decrease of 10.3% in Trade Accounts Payable was due to the sale of
ownership interests, as per note 13.3 to the financial statements.
Loans and Financing. At December 31, 2015, loans amounted to R$1,772.4 million, increasing 20.6% from
R$1,470.2 million at December 31, 2014. As a percentage of total liabilities, the loans and financing represented
9.0% at December 31, 2015, compared to 8.12% at December 31, 2014. The Officers believe the increase is
due to the effect from exchange variation on debt denominated in currencies other than the Brazilian real, the
increase in the portion of debt maturing in the short term.
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Interest on Debentures. At December 31, 2015, interest on debentures amounted to R$236.8 million, an
increase of 24.3% from R$190.6 million at December 31, 2014. As a percentage of total liabilities, the cost of
interest on debentures represented 1.2% at December 31, 2015, compared to 1.0% at December 31, 2014.
Noncurrent Liabilities
Non-current liabilities amounted to R$14,353.1 million at December 31, 2015, increasing 6.7% from R$13,451.7
million at December 31, 2014. As a percentage of total liabilities, noncurrent liabilities represented 69.7% at
December 31, 2015, compared to 66.6% at December 31, 2014.
Loans and Financing. At December 31, 2015, loans amounted to R$10,112.9 million, increasing 7.6% from
R$9,400.1 million at December 31, 2014. As a percentage of total liabilities, loans and financing including
debentures represented 51.2% at December 31, 2015, compared to 51.9% at December 31, 2014. The Officers
attribute this increase to the exchange variation of debt denominated in currencies other than the Brazilian real
(especially Bonds).
Mandatory convertible deed. At December 31, 2015, the amount of the mandatory convertible deeds amounted
to R$2,129.7 million, representing a decrease of 6.1% from R$2,121.5 million at December 31, 2014. As a
percentage of total liabilities, the cost of the mandatory convertible deed represented 10.2% at December 31,
2015, compared to 10.5% at December 31, 2014.
Shareholders' Equity
The shareholders’ equity of the Company decreased 59.3%, from R$2,071.7 million at December 31, 2014 to
R$843.6 thousand on December 31, 2015.
10.2 Comments of the Executive Officers on the operating and financial results
(a) Results of the operations of Marfrig Global Foods, particularly:
i. Description of any important revenue components; (ii) Factors that materially affect the operating
results
In the fiscal years ended December 31, 2016, 2015 and 2014, the main sources of revenue of Marfrig Global
Foods were sales of food products made from animal proteins, especially beef and poultry, and the distribution
of various food products, such as vegetables and desserts to the food service and retail segments and to food
producers.
Due to the Company’s decision to maintain a primary processing plant in Argentina, the financial statements for
2015 were restated in 2016 for comparison purposes.
However, for analyzing the data for 2015 and 2014, the Executive Board believes the best alternative is to
consider the financial statements for each fiscal year. In other words, comparative data for 2015and 2014 reflect
the asset divestments in Argentina, which were discontinued in 2015.
Marfrig has 48 production units, distribution centers and offices located in South America, North America,
Europe, Oceania and Asia. Therefore, the Company’s revenues come from both the domestic markets where it
operates and from exports to various countries, which the Company accesses through its distribution network.
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The main factors affecting the Company’s revenue were:
(a) variations in sales volume and average prices in the domestic and international markets, mainly
due to changes in the supply-demand balance and to taking advantage of opportunities in each of
the Company’s markets;
(b) variations in the prices of its main inputs;
(c) exchange variation, inflation and fluctuations in interest rates;
(d) capture of efficiency gains in the production process;
(e) performance of the world economy and of the local economies in the countries where the Company
maintains production units; and
(f) opening of new markets to imports, especially of Brazilian fresh beef.
More detailed comments on the aforementioned factors follow.
Supply and demand for our products
On the supply side, these factors include the availability and price of the raw materials to which we have
exposure, which include cattle and grains in the countries where we concentrate production operations. The
low availability of raw materials could increase our acquisition costs and subsequently compromise our margins
if we are unable to pass through these cost increases to the prices of our final products.
On the demand side, one example is a global economic crisis in which employment levels contract and
consequently impact the disposable income and consumption of households related to food, which could
significantly impact our operations. On the other hand, the opening of new markets to the Company’s products
could positively impact its results.
The Executive Officers inform that disease outbreaks in animals may lead to trade and sanitary barriers by other
countries and consequently our access to international markets and our sales.
Global GDP growth in countries where we have operations and the demand for our products
The Executive Officers believe that growth in foods and animal-protein consumption is directly linked to
population and income growth. The performance of GDP in the countries where we sell our products could
adversely affect our operating results.
Effects from fluctuations in the prices of raw materials
The Executive Officers believe that the main component of our production costs is the purchase of raw materials,
which includes the purchase of animals (especially cattle and poultry) and inputs for animal feed (grains). Any
fluctuations in grain, poultry and cattle prices in the domestic and export markets significantly affect our net
operating revenue and cost of goods sold. The Company does not control these prices, which fluctuate in
accordance with supply and demand.
Sales prices in domestic and export markets
According to the Executive Officers, the prices of our products in the domestic and exports markets where we
operate are generally established by the market conditions, over which we have no control. Our prices in the
domestic market are also affected by the prices we are able to charge our various wholesale and retail
customers that resell our products.
Impacts from foreign exchange volatility
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Our operating results and financial situation have been and will continue to be affected by volatility in the
currencies with which we operate. A good portion of our revenues are originated in currencies other than the
Brazilian real. Furthermore, we hold a part of our debt in U.S. dollar that requires us to pay principal and interest
in this currency.
The Executive Officers inform that Brazilian exports and the relevant international operations, which allow us to
generate receivables in foreign currency, tend to have approximately the same share of foreign currencies as
our debt, which gives us a so-called “cash flow hedge or natural hedge” on the significant portion of our dollar-
denominated debt-service obligations.
According to the Executive Officers, inflation and anti-inflation measures adopted by the governments of
countries where we operate could have considerable impacts on the economies of these countries and
consequently on our business. Inflationary pressures may lead to intervention by governments in the economy,
including the implementation of government policies that could have adverse impacts on us and our clients.
Additionally, if we face high inflation rates in the countries where we operate, we may not be able to sufficiently
increase our product prices to offset the inflationary impacts on our cost structure, which could adversely affect
our results.
(b) Revenue variations attributable to changes in prices, exchange rates, inflation, volumes and the
launch of new products and services
As mentioned above, according to the Executive Officers, several factors influenced the revenues of Marfrig. In
the period ended December 31, 2016, the Executive Officers opine that the revenues of the Company were
impacted mainly due to:
In the last twelve months ended in December 31, 2016, the Executive Officers understand the Company´s
consolidated net revenues were impacted by (i) the exchange variation, as a considerable Marfrig´s revenues
amount relates to foreign currency; (ii) the commodities prices in the international market; and (iii) the change
in the sales mix, with higher volumes from Keystone Division and lower volumes in Beef Division, due to limited
cattle availability for slaughtering.
In 2016, the performance from divisions were as follows:
I. Keystone posted sales volume growth of 5% in 2016. Net revenue amounted to US$2.7 billion
in 2016, in line with the previous year. The stability is explained by the lower costs with outside
meat and grains, which led to a lower average sales price (since most sales contracts are
pegged to commodity-price variation); which was partially offset by: (i) the continued successful
strategy to grow through Key Accounts, which posted growth of 17% at the global level; and (ii)
the recovery in leg quarter prices, following the reopening of the international market to U.S.
exports, which was affected by avian flu until mid-2015.
II. The Beef Division posted net revenue of R$9.9 billion in 2016, down 5.8% on the prior year to
account for 51% of the Company’s consolidated revenue. The lower sales volume in the year
was partially offset by the higher average price, which was influenced by the depreciation in the
Brazilian real against the U.S. dollar. In the year, exports accounted for 45% of the Beef
Division’s revenue, reflecting the Company’s competitive positioning in the global beef industry.
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Marfrig Global posted consolidated net revenue reached R$19 billion in 2016, down slightly (-1.1%) on the prior
year. Despite the positive impact from (i) the 4.8% appreciation in the U.S. dollar against the Brazilian real; and
(ii) the 5% growth in Keystone’s sales volume; revenue was adversely affected by (iii) the lower average price
at the Keystone Division, influenced by lower grain and fresh beef prices, given its pricing model, in which sales
prices are pegged to commodity prices; and (iv) the 8% drop in sales volume at the Beef Division.
Marfrig is still a highly globalized company, with the Keystone and International Beef operations accounting for
63% of total revenue in 2016. Considering the exports from the Brazilian operation, the international market
accounted for 78% of the Company’s total sales. Meanwhile, sales in Brazil’s domestic market accounted for
22% of the total.
In 2015, consolidated net operating revenue from continuing operations increased by 24.2%, from R$15,209
million in the fiscal year ended December 31, 2014 to R$18,892 million in the fiscal year ended December 31,
2015. The main factors supporting this performance were: (i) the 41.6% depreciation in the Brazilian real against
the U.S. dollar; (ii) the 7.6% increase in Keystone’s revenue in U.S. dollar, mainly due to the higher volume of
processed products; which were partially offset by (iii) the weaker sales volume at the Marfrig Beef Brazil
division.
In 2014, net operating revenue, including the operations discontinued in 2015, amounted to R$21,073 million,
increasing 12.4% from 2013. The highlights were: (i) the growth of 16.6% at Moy Park due to strong growth in
sales volume of fresh poultry and convenience coated products in the retail and food service channels in the
United Kingdom and Ireland; (ii) the growth of 11.7% at Marfrig Beef due to higher exports from Brazil and the
good performance of the Uruguayan operation; (iii) the growth of 9.7% at Keystone due to higher sales volume
at APMEA; and (iv) the depreciation in the Brazilian real against the U.S. dollar of 9%.
(c) Impact of inflation, variations in the main input and product prices and foreign exchange and interest
rates on the operational and financial results of the issuer
The Officers inform that the results of operations are influenced by various factors, such as variations in the
price of raw materials and labor costs.
Comparative analysis of the fiscal years ended December 31, 2016 and 2015
In 2016, cost of goods sold (COGS) amounted to R$17 billion, in line with the previous year, which is explained
by: (i) the 4.8% depreciation in the average price of the Brazilian real against the U.S. dollar; and (ii) higher fed
cattle prices in Brazil; which were offset by (iii) lower grain costs in the Keystone operation.
The item raw materials continued to be the main component of COGS, accounting for 74% of the total in 2016,
compared to 73% in 2015. Labor expenses accounted for 12% of the total cost in 2016, compared to 11% in
2015.
In 2016, gross profit amounted to R$2.2 billion, down 5.4% from 2015. One of the highlights was the 80 bps
expansion in the contribution by Keystone, which contributed R$873 million or 40% of consolidated gross profit.
Selling, general and administrative (SG&A) expenses from continuing operations amounted to R$1 billion,
increasing 5.6% on the prior year, reflecting the effects from the translation into Brazilian real of amounts from
the international operations. Note that the total increase in these expenses lagged the IPCA inflation in the year,
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of 6.3%.
Selling expenses increased by R$28 million, which is explained by higher logistics expenses with exports on
higher fuel prices, reflecting the rise in crude oil prices in international markets, and by the effects from the
weaker Brazilian real in the period.
General and administrative expenses increased 6.5% from 2015, mainly due to the effect from currency
translation on international expenses, which was partially offset by the decrease in personnel expenses at the
Beef Division, reflecting the efforts to increase productivity.
In 2016, consolidated adjusted EBITDA amounted to R$1.6 billion, down 8.5% on the prior year. In 2016,
Adjusted EBITDA margin was 8.2%, down 70 bps from the 8.9% margin in 2015. The main factors explaining
this performance were: (i) lower spreads in the Beef Division; and (ii) lower sales volume in the Beef Division;
with these factors partially offset by (iii) the 16% growth at the Keystone Division; and (iv) the depreciation in
the Brazilian real against the U.S. dollar.
Comparative analysis of the fiscal years ended December 31, 2015 and 2014
In 2015, cost of goods sold (“COGS”) from continuing operations amounted to R$17 billion, 25.4% more than
in 2014, which is explained by (i) sales volume growth at Keystone; (ii) the average depreciation in the Brazilian
real against the U.S. dollar; and (iii) the higher average price of fed cattle in Brazil, which rose 15%, according
to ESALQ; which were partially offset by (iv) lower fixed costs due to the closures of slaughtering capacity in
Brazil; and (v) lower grain costs in the international operations.
The item raw materials continued to be the main component of COGS, accounting for 72.8% of the total in 2015,
compared to 73.8% in 2014. Labor expenses accounted for 11.1% of the total cost in 2015, compared to 10.7%
in 2014.
Gross profit from continuing operations amounted to R$2.3 billion in the year, advancing 16.2% from 2014. Of
this amount, 42% came from the International Operations (Keystone and Marfrig Beef International). One of the
highlights was the expansion of 110 basis points in the contribution from Keystone, which accounted for R$732
million or 32% of consolidated gross profit.
Selling, general and administrative (SG&A) expenses from continuing operations amounted to R$944 million in
the year, down 1.3% from December 31, 2014.
Selling expenses from continuing operations decreased R$72 million, reflecting the reduction in marketing
expenses, which in 2014 were affected by the sponsorship of the World Cup.
General and administrative expenses from continuing operations increased 17.2% from 2014, mainly due to the
effects from the translation of amounts from the international units to Brazilian real, which is the Company’s
functional currency.
In 2015, consolidated adjusted EBITDA from continuing operations amounted to R$1.8 billion, growing 32.3%
on the prior year. In 2015, Adjusted EBITDA margin from continuing operations was 9.5%, expanding 60 basis
points from the margin of 8.9% in 2014. The main factors supporting this performance were: (i) the recovery in
beef spreads at the Brazil operation, combined with the reduction in selling, general and administrative
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expenses; (ii) the growth of 17.2% in EBITDA in U.S. dollar at Keystone; and (iii) the depreciation in the Brazilian
real against the U.S. dollar; which were partially offset by (iv) the lower sales volume at the Brazil operation;
and (v) the margin contraction in the Uruguay operation in the second half of 2015.
Comparative analysis of the fiscal years ended December 31, 2014 and 2013
In 2014, including COGS from the operations discontinued in 2015, COGS amounted to R$18 billion, increasing
12.0% compared to 2013, which was mainly due to: (i) the 9.1% increase in expenses related to raw materials
(finished and live cattle), with the fed cattle price increasing by almost 25%, according to the ESALQ index (index
that measures the fluctuation of cattle prices in the state of São Paulo, Brazil); (ii) the 8.3% increase in labor
costs; and (iii) the 9.7% increase in production costs, such as electricity, packaging and other indirect costs.
Gross profit increased 15.4%, from R$2.3 billion in 2013 to R$2.7 billion in 2014. Of the R$2.7 billion in gross
profit, 61.1% is attributed to Marfrig Beef, 23.3% to Moy Park and 15.6% to Keystone.
SG&A expenses amounted to R$1.5 billion, increasing 7.0% from the R$1.4 billion recorded in 2013, mainly
due to: (i) the depreciation in the Brazilian real against the U.S. dollar and pound sterling; and (ii) higher selling
expenses. Both effects were partially offset by the more rigorous control of the line administrative expenses.
SG&A expenses as a ratio of net revenue stood at 6.9%, down from 7.3% in 2013.
Consolidated adjusted EBITDA in 2014 came to R$1.8 billion, compared to R$1.4 billion in 2013. Adjusted
EBITDA Margin stood at 8.5%, compared to 7.7% in the previous year.
Considerations regarding the impact of the exchange rate on the financial result
At the end of 2016, 94% of the Company’s debt was denominated in currencies other than the Brazilian real
(mainly the U.S. dollar). On the other hand, revenue from international operations, including exports from Brazil,
corresponded to 78% of the Company’s sales. In 2016, Keystone, whose results are reported in U.S. dollar,
accounted for 55% of Adjusted EBITDA, compared to 42% in 2015.
In the fiscal year ended December 31, 2015, 93.3% of debt was pegged to currencies (mostly the U.S. dollar)
other than the Brazilian real. Consequently, the effect from the 47.0% depreciation in the Brazilian real against
the U.S. dollar on the consolidated net exposure had a negative impact of R$1.1 billion on the financial result,
leading the net financial result in 2015 to amount to an expense of R$3.1 billion, compared to an expense of
R$2.1 billion in 2014.
The net financial result in the fiscal year ended December 31, 2014 was a net expense of R$2.1 million,
compared to a net expense of R$2.0 million in the fiscal year ended December 31, 2013. The noncash impact
of exchange variation was a loss of R$451 million in the year, compared to R$590 million in 2013, which is
explained by the depreciation in the Brazilian real against the U.S. dollar.
10.3 - Actual or expected events with material effects on the financial statements
(a) Introduction or disposal of an operational segment
On April 6, 2016, Marfrig announced to the market, through a Material Fact notice, the execution of an
agreement for the divestment of certain units in Argentina to Black Bamboo Enterprises S.A. (Foresun Group –
People’s Republic of China). The units are located in a) Hughes (Santa Fé Province); b) Vivoratá (Buenos Aires
Province); c) Unquillo (Córdoba Province); and d) Monte Ralo (Córdoba Province).
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The total amount of the Transaction was around US$75 million and payment will be made gradually as the units
are transferred.
The Company decided to keep the meatpacking unit of Vila Mercedes in the Province of São Luís. The operation
was previously recognized, measured and evidenced in the financial statements as “Non-current assets held
for sale” and, due to the decision, it was reclassified as “Continuing operation” in the statements for the period
ended June 30, 2016 and 2015.
The Officers believe that the transaction helped improve the Company’s capital structure, as well as its future
results and cash generation.
(b) Constitution, acquisition or disposal of stockholdings
Second sale of ownership interests to JBS S.A.
The Officers inform that, on September 28, 2015, the Company concluded the sale of the ownership interest
held in Moy Park Holdings Europe Ltd., after compliance with all conditions precedent for closing the
Transaction, including by the antitrust agencies of the European Union, and thus the control of said entity was
transferred to JBS on said date. The Transaction was settled as follows: (i) a cash payment to Marfrig in the
amount of US$1.21 billion; and (ii) the assumption of the net debt of Moy Park by JBS in the amount of £193
million.
Acquisition of ownership interest in Mercomar Empreendimentos Ltda.
The Officers inform that, on May 25, 2015, Marfrig acquired a business formed by the following assets: (a)
acquisition of all shares of Mercomar Empreendimentos e Participações Ltda, including the previously leased
units of Capão do Leão (Rio Grande do Sul), Mato Leitão (Rio Grande do Sul), Pirenópolis (Goiás), Tucumã
(Pará) and Nova Londrina (Paraná). In consideration, Marfrig will pay the amount of R$428.2 million. The
payment of the amount of R$428.2 million will be divided in two phases: a down payment of R$4 million and the
remaining balance of R$424.2 million divided into 24 quarterly installments with a grace period of three years
for the payment of principal. Interests will be restated at the CDI overnight rate plus 1.5% per year and will be
paid in 36 quarterly installments.
(c) Atypical events or transactions
The Executive Officers inform that there were no atypical or unusual events or transactions involving the
Company or its activities during the fiscal years ended on December 31, 2014, 2015 and 2016, that caused or
are expected to cause material impacts on the financial statements or results of our Company.
10.4 Material changes in accounting practices – qualifications and emphasis of matter paragraphs in
the auditor’s report
(a) Material changes in accounting practices
The Officers inform that, in the fiscal years ended December 31, 2016, 2015 and 2014, there were no significant
changes in the accounting practices of the Company.
(b) Material effects of the changes in accounting practices
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The Officers inform that, in the fiscal years ended December 31, 2016, 2015 and 2014, there were no significant
changes in the accounting practices of the Company that affected or could affect its financial statements or
results.
(c) Qualifications and emphasis of matter paragraphs in the auditor's report
The reports issued by the independent auditors regarding the reviewed financial statements for the fiscal years
ended December 31, 2016, 2015 and 2014 did not contain any qualifications.
10.5 – Comments of our Officers on critical accounting policies adopted, particularly in relation to
Management estimates of uncertain and relevant events to describe the financial situation and results,
which require subjective or complex judgment, such as: provisions, contingencies, revenue
recognition, tax credits, long-lives assets, useful life of non-current assets, pension plans, adjustments
of balance sheet translation, environmental recovery costs, criteria for testing asset impairment and
financial instruments:
The Officers believe that the preparation of the financial statements in accordance with the accounting practices
adopted in Brazil includes the policies provided for by Brazilian Company Law, Brazilian Accounting Standards
(NBCs) and the decisions and instructions of the Securities and Exchange Commission of Brazil (CVM).
According to the Executive Officers, apart from the standard and usual accounting practices, considering the
agribusiness industry in which the Company operates, and the characteristics and diversity of the Company,
the following policies are of critical importance for the preparation of consolidated financial statements:
Revenue
Revenue arising from the sale of goods is recognized when the Group transfers all risks and benefits of
ownership of the asset to the buyer and it is probable that the Group will receive the agreed payment. The
property of risks and benefits is transferred when the products are shipped with the corresponding sales invoice,
taking into account the incoterms. These conditions are met when the goods are delivered to the buyer,
complying with main freights modalities used by the Company.
Revenue is shown net of taxes on returns, rebates and discounts and the consolidated financial statements are
also net of intercompany sales eliminations and unrealized profits on inventories.
Financial revenue and expenses
Revenue comprises gains on changes in the value of financial assets and liabilities measured at fair value
through profit or loss, as well as interest income obtained with the effective interest method.
They include interest income on invested amounts (including financial assets/liabilities available for sale), gains
on the disposal of financial assets available for sale and changes in the fair value of financial assets measured
at fair value through profit or loss. Interest income is recognized in the statement of operations using the effective
interest method.
Financial expenses basically comprise interest on loans. Loan costs directly attributable to acquisition,
construction or manufacture of a qualified asset are capitalized jointly with the investment.
Accounting estimates
The preparation of the parent company and consolidated financial statements in accordance with Brazilian
accounting practices and IFRS requires Management to make estimates and assumptions that, in its best
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judgment, affect the reported amounts of assets and liabilities. These estimates and assumptions include, when
applicable, the determination of the residual value of property, plant and equipment, allowance for estimated
doubtful accounts, estimated inventory losses, deferred Income and Social Contribution tax assets and
provisions for tax, labor and civil contingencies. Transaction settlement involving those estimates may result in
values different from estimates, due to the inherent inaccuracy of the process. The Company and its subsidiaries
review estimates and assumptions at least quarterly.
The issues requiring Company’s estimates are as follows:
Useful life of property, plant and equipment and intangible assets with finite useful lives;
Measurement of the fair value of biological assets;
Impairment of taxes;
Loss on impairment of intangible assets with undefined life, including goodwill;
Measurement of items arising from business combinations at fair value;
Fair value of financial instruments and derivatives;
Losses on doubtful accounts;
Estimated losses with inventory obsolescence;
Deferred Income and Social Contribution tax assets;
Provisions (legal, tax, labor and civil proceedings);
Stock option plan;
Present Value Adjustment (PVA).
Financial instruments
Non-derivative financial instruments include financial investments, debt and equity instruments, accounts
receivable and other receivables, cash and cash equivalents, loans and financing, as well as accounts payable
and other debts.
Non-derivative financial instruments are initially recognized at their fair values plus, for instruments which are
not recognized at fair value through profit or loss, any directly attributable transaction costs. Regarding financial
investments and instruments classified as cash and cash equivalents, after initial recognition, non-derivative
financial instruments are measured according to their respective classification, as follows:
Measured at fair value through profit or loss
An instrument is measured at fair value through profit or loss if it is held for trading, i.e. designated as such upon
initial recognition. Financial instruments are designated at fair value through profit or loss if the Company
manages these investments and makes decisions to buy and sell the investments based on the investment’s
fair value according to the Company’s investment and risk Management strategy. After initial recognition,
transaction costs that are attributable to the acquisition of the investment are recognized in the statement of
operations when incurred. Financial instruments stated at fair value through profit or loss are measured at fair
value and changes in fair value are recognized in the statement of operations.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market, initially recognized at fair value plus any associated transaction costs. After initial recognition, loans and
receivables are measured at amortized cost using the effective interest method, excluding any impairment loss.
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Financial liabilities
Financial liabilities are measured at amortized cost using the effective interest method, adjusted for any
reductions in the settlement value.
Derivative financial instruments and hedge accounting
Derivative financial instruments designed in hedge operations are initially recognized at their fair value on the
date of the derivative contract, and subsequently revaluated also at fair value. Derivatives are presented as
financial assets when the fair value of the instrument is positive and as financial liabilities when their fair value
is negative.
Any gains or losses arising from changes in the fair value of derivatives during the year are recorded directly in
the income statement, except for the effective portion of the cash flow hedges, which are recognized directly in
shareholders’ equity as other comprehensive income. The amounts booked under other comprehensive income
are immediately transferred to the income statement when the transaction underlying the hedge affects profit
or loss.
Foreign currency
Management defined the Brazilian real as the Company’s and its Brazilian subsidiaries’ functional currency,
according to the provisions of CVM Resolution 640/10 (CPC 02 (R2) – effects on changes in foreign exchange
rates and translation of financial statements, approved by CVM Resolution No. 640/10. The functional currency
of foreign companies is the legal tender of the country in which they operate, except for companies located in
the Netherlands and in Uruguay, whose functional currency is the US dollar. Translations into the reporting
currency are also in accordance with CVM Resolution 640/10 (CPC 02 (R2) – effects on changes in foreign
exchange rates and translation of financial statements).
Foreign currency transactions, i.e., all transactions not made in the functional currency, are translated using the
exchange rate on the transaction date. Monetary assets and liabilities denominated in foreign currency are
translated into the functional currency at the closing exchange rate. Non-monetary assets and liabilities acquired
or entered into in foreign currency are translated using the exchange rates on the transaction dates or the dates
at which they are stated at fair value when fair value is used. Exchange rate variation gains or losses on
monetary and non-monetary assets and liabilities are recognized in the statement of income.
Current and non-current assets
Biological assets
According to CVM Resolution 596/09 (CPC 29 – biological assets and agricultural products), agricultural activity
is the management of the biological transformation of assets (living animals and/or plants) for sale, into
agricultural products or into additional biological assets. The Company classifies living cattle and poultry as
biological assets.
The Company recognizes biological assets when it controls these assets as a result of past events and it is
probable that future economic benefits will flow to the Company and the fair value of the asset can be reliably
measured.
Under CVM Resolution 596/09 (CPC 29 – biological assets and agricultural products), biological assets should
be measured on initial recognition and at the end of each reporting period at fair value less costs to sell, unless
fair value cannot be reliably measured.
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The Company values cattle at its fair value based on market prices, while poultry is valued at the acquisition
cost since there is no market for poultry.
Impairment
Impairment tests on goodwill and other intangible assets with indefinite economic useful life are annually
conducted at the end of the year. Other non-financial assets, such as property, plant and equipment and
intangible assets are submitted to impairment tests whenever events or changes in circumstances indicate that
its book value may not be recoverable. Once the book value of an asset exceeds its recoverable value (i.e., the
highest between the use and fair value minus selling costs), a loss is recognized to bring the book value to its
recoverable value.
When it is not possible to estimate the impairment of an individual asset, the impairment test is conducted in its
cash generating unit (CGU): the smallest group of assets to which the asset belongs and for which there are
cash flows separately identifiable. The Company adopts as CGU for assessing the recoverable value of an
asset, its segmentation by business unit.
Goodwill recorded in the initial recording of an acquisition is allocated to each BU of the group that expects to
benefit from combination synergies that originated the goodwill, for purposes of impairment testing.
Impairment losses are included in the statement of operations. An impairment loss recorded as goodwill is not
reversed.
Provisions
Provisions are recorded in case of probable exit of future economic benefits resulting from past events and
these can be safely estimated.
Income and Social Contribution taxes
Income Tax is calculated on taxable income. Income and Social Contribution taxes are paid monthly on
estimated calculation bases, at the rates and in the manners provided for in prevailing legislation.
Deferred tax assets recognized for Income and Social Contribution tax losses and temporary differences are
recognized pursuant to tax legislation and CVM Resolution No. 599/09 (CPC 32 - income taxes). They take into
consideration the Company’s history of profitability and the expected future generation of taxable income
supported by an annually reviewed technical feasibility study.
The Company and its subsidiaries opted for the Transition Tax System (RTT) established by Executive Act No.
449/08, converted into Law No. 11,941 of May 27, 2009, declaring their irrevocable option for RTT in the
Corporate Income Tax Return of 2009.
Deferred tax assets and liabilities are recognized when the carrying amount of an asset or liability differs from
their tax base, except for the differences that arise from:
The initial recognition of goodwill;
The initial recognition of an asset or liability in a transaction that is not a business combination and at
the time of the transaction affects neither book income or taxable income; and
The investments in subsidiaries and joint ventures where the Group is able to control the timing of the
reversal of the difference and it is probable that the reversal will not occur in the foreseeable future.
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Deferred tax asset is recognized only if it is probable that taxable income will be available against which the
difference can be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when
the asset is realized and the liability is settled, based on tax rates and laws that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when the legally enforceable right to offset current tax assets and
liabilities exists and the deferred tax assets and liabilities relate to income taxes levied by the same taxing
authority on the following cases:
For the same entity of the taxable group;
For different entities of the group that intend to settle on a net basis or realize the asset and settle the
liability at the same time, in each future year in which significant amounts of deferred tax assets and
deferred tax liabilities are to be realized or settled.
Discount to present value (PVA)
In accordance with CVM Resolution 564/08 (CPC 12 – present value adjustment), non-current assets and
liabilities, as well as current assets and liabilities, when material, are recorded at present value, on the respective
transaction date, according to interest rates that reflect each transaction’s term, currency and risk. The offsetting
entry to discounts to present value is made to the accounts that originated the asset or the liability. The
difference between the present value of a transaction and the face value of an asset or liability is recorded in
the statement of operations during the assets or liabilities’ life according to the amortized cost and effective
interest method.
Discounts to present value were determined using the average between Selic (Central Bank overnight rate) and
the average rate at which funds are raised in financial markets (rate established as that of return on debt capital),
thus reaching the average rate of 11.99% p.a., as at December 31, 2016 (11.19% p.a. as at December 31,
2015).
The terms adopted for determining Discounts to Present Value (PVA) vary according to the operating activity
and correspond to the average expected period to settle it, for example: average sales collection term, average
payment term and others deemed necessary.
The established rates and periods in relation to the risk factors involved in the Company’s operations are
perfectly reflected on the discount to present value.
Business combination
Business combinations are recognized using the acquisition method. Cost of an acquisition is the sum of the
consideration transferred, measured at fair value on the acquisition date, and any non-controlling interest in the
acquiree. For each business combination, the acquirer should measure the non-controlling interest in the
acquiree at the fair value or based on the acquirer’s share in fair value of the acquiree’s identifiable net assets.
Costs that are directly attributable to the acquisition should be recorded as an expense when incurred.
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In a business acquisition, Management, based on expert reports, assesses the assets acquired and the liabilities
assumed with the objective of classifying and allocating them according to contractual provisions, economic
circumstances and relevant conditions on the acquisition date.
Goodwill is initially measured as the excess of the consideration transferred in the business combination over
the fair value of the net assets acquired (identifiable assets and liabilities assumed, net). If the consideration is
less than the fair value of the net assets acquired, the difference should be recognized as a gain in the statement
of operations.
Consolidation
Accounting practices are uniformly applied to all consolidated companies and are consistent with those applied
in previous periods.
Description of the main consolidation procedures:
Elimination of the balances of intercompany assets and liabilities;
Elimination of ownership interest, reserves and retained earnings of subsidiaries;
Elimination of the balances of intercompany revenues and expenses and unrealized profits resulting
from intercompany transactions.
Discontinued operations and assets held for sale
An operation is classified as discontinued operation when it is sold or it complies with criteria for classification
as held-for-sale, if it occurs first. When an operation is classified as a discontinued operation, the statements of
income and cash flows are presented as if the operation was discontinued since the beginning of comparative
period, for which reason the note “reclassified” was included in the statements of previous years.
These assets are measured by the lower between the book value and the fair value less selling expenses.
Once they are classified as held-for-sale, intangible and fixed assets can no longer be amortized or depreciated.
The result from discontinued operations is presented as a single amount in the statement of income, and
includes the total result after these operations’ Income Tax and Social Contribution less any impairment loss
and is presented in the notes to the financial statements.
10.6 Material items not stated in the financial statements
(a) The assets and liabilities directly or indirectly held by the issuer that are not stated on its balance
sheet (off-balance sheet items)
i. Operating leases, assets and liabilities
The Company, with the exception of operating leases, does not have assets or liabilities, directly or indirectly,
which are not stated in its financial statements of the fiscal years 2016, 2015 and 2014 and the respective notes
to the statements.
The operating leases contracted by the Company are not stated in the financial statements disclosed but only
in the notes. Such contracts do not represent any restrictions or contingencies and, in the opinion of the
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Executive Officers, were signed in accordance with the conventional market practices, with readjustment
clauses during the tenure of the contract in a few cases.
The amounts of the assets leased are calculated at a total definitive cost, which includes transport, tax and
documentation costs. The consideration is calculated on the total definitive cost at a percentage predefined for
each agreement.
In case of rescission, the lessor will have the option of cumulatively: (i) rescinding unilaterally the leasing
agreement; (ii) claiming the return of the assets leased; and (iii) declaring the early maturity of the leasing
agreement. In this case, the lessee undertakes to pay the balance amount due of the unpaid installments,
including matured and maturing amounts, apart from unpaid expenses, taxes and duties, plus a fine of 10% on
the balance due. The lessee, without prejudice to the lessor, can claim losses and damages.
The Executive Officers inform that in relation to the option for renewal, the lessee should first inform of their
intention, in the absence of which the leasing operation is renewed automatically under the conditions that
should be agreed to by the parties. If there is no agreement between the parties, the lessee should choose to
buy the assets at market value or return them.
ii. receivables portfolios written off for which the entity maintains risks and responsibilities, indicating
the respective liabilities
The Officers inform that, with regard to the receivables portfolios written off, there are no risks or responsibilities
of associated liabilities.
iii. contracts for the future purchase and sale of products or services;
The Officers inform that there are no contracts for the future purchase or sale of products or services.
iv. contracts for unfinished construction works
The Officers inform that there are no contracts for unfinished construction works.
v. contracts for the future receipt of financings
The Officers inform that there are no contracts for the future receipt of financings.
(b) Other items not stated in the financial statements
The Executive Officers inform that there are no other items not stated in the financial statements.
10.7 Comments of the Executive Officers on items not stated in the financial statements
(a) How such items change or may change the revenues, expenses, operating income, financial
expenses or other items on the issuer’s financial statement
According to the Executive Officers, as mentioned in item 10.6 of this Reference Form, the Company, with the
exception of operating leases, does not have assets or liabilities, directly or indirectly, which are not stated in
its financial statements of the fiscal years 2016, 2015 and 2014, and the respective notes to the statements.
The Executive Officers inform that the operating leases affect the operating result of the Company every month,
considering the booking of the leasing expense (installment payable).
(b) Nature and purpose of the transaction
The Executive Officers inform that the operating leases refer to agreements with characteristics similar to rent
agreements, and not fitting the criteria for being classified as financial leasing, as envisaged in the Technical
Accounting Pronouncement CPC6 (R1) – Leasing Operations.
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The Company has operating lease agreements for IT equipment, machinery and equipment, aircraft and
meatpacking plants, which are used for the operating activities of the Company during the validity of the
agreement. Said agreements may or may not be renewed and any options to buy may or may not be exercised.
(c) Nature and amount of the obligations undertaken and the rights generated on behalf of the issuer
arising from the transaction
The following chart presents operating leases as on December 31, 2016 (obligations assumed) and the main
contractual details:
Financial institution Leased asset Start date
Weighted average
interest rate (p.a)
Weighted average
maturity (years)
Total amount
leased
Expense at
12/31/16
Local currency
BRASIL FOOD SERV. GROUP .SA BFG Meatpacking plant 10/1/14 IGP-M year 3.0 70,848 13,906
URUPA IND E COM DE ALIM LTDA Meatpacking plant 10/1/15 IGP-M year 3.8 19,800 3,960
TOTAL S/A Meatpacking plant 7/1/16 IGP-M year 5.2 105,860 8,409
LEONI EMPREENDIMENTOS IMOB. Meatpacking plant 1/1/14 IGP-M year 3.0 2,520 528
Total local currency 199,028 26,803
Foreign currency
AVN AIR LLC Aircraft 12/1/07 3.04% 1.8 7,823 1,151
Bank of America Aircraft 4/15/11 6.61% 8.0 101,032 7,381
Ford Motor Credit CO. Vehicles 7/28/15 0.19% 0.5 213 204
Sundry leasers Property 11/5/16 Fixed term 9.4 42,182 20,467
Sundry leasers Machinery and Equipment 12/22/16 Fixed term 7.1 280,691 29,599
Sundry leasers Vehicles 12/25/16 Fixed term 6.0 45,438 6,064
Total foreign currency 477,379 64,866
Total local and foreign currency 676,407 91,669
Consolidated
10.8 The officers must inform and comment on the main elements of the business plan of the issuer,
exploring specifically the following topics:
(a) Investments including:
i. Quantitative and qualitative description of ongoing and projected investments:
According to the Officers, the investments reflect Marfrig’s strategy to grow organically in higher-value proteins,
with a focus on the food service channel, especially in the USA and APMEA region, through the Keystone
Division.
In addition to making strategic investments, the efforts to continually capture efficiency gains, economies of
scale, cost reductions and operational improvements require regular investments.
Furthermore, the Officers believe that Marfrig will continue to invest in projects aimed at continually enhancing
its practices in the areas of corporate sustainability, social responsibility (especially in local communities) and
environmental preservation.
The following chart reflects the Company’s investment standard:
Other* 7%
Growth Projects and Operating Improvements 37%
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Maintenance / Reposition** 56%
Total 100,0%
*mainly environmental projects
** includes biological assets
ii. Sources of investment financing
The main sources of financing for the Company’s investments are: (i) cash flow from operations; (ii) general
capital markets transactions.
iii. Relevant ongoing and projected divestments
The Company decided to keep an asset in Argentina in order to maintain its footprint in a traditional beef market.
Nevertheless, this is an asset that requires constant evaluation as the local economy and industry evolve.
According to the Executive Officers, there is no plan of material divestments to be made by the Company at this
moment.
(b) provided it has already been announced, indicate any acquisition of plants, equipment, patents or
other assets that could materially influence the Company’s production capacity
In the opinion of the Officers, there are no plans or projects involving the acquisition of plants, equipment,
patents or other assets that could materially influence Marfrig’s production capacity.
(c) new products and services, indicating:
i. description of ongoing research already disclosed; ii. total amounts expended by the Company on
research for the development of new products or services; iii. projects under development already
disclosed; iv. total amounts expended by the Company on the development of new products or services
There is no ongoing research that has already been disclosed to the market.
In the year, the highlights include the performance of our “no antibiotic ever” products, which generated strong
demand from our clients. These are processed chicken products with traceability with regard to the use of
antibiotics in the animals processed.
10.9 Comment on other factors that significantly affected operating performance and were not identified
or commented on in the other items of this section
In the opinion of the Officers, there were no extraordinary factors or factors outside of the natural course of
business. The Company’s results basically reflected market factors.
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APPENDIX II
INFORMATION ON THE NOMINEES TO THE FISCAL COUNCIL ON THE SLATE PROPOSED BY
MANAGEMENT
PER SUBSECTIONS 12.5 to 12.10 OF THE REFERENCE FORM
ITEM 12.5 - For each director, officer and Fiscal Council member of the issuer, indicate, in the form of a table:
BOARD OF DIRECTORS
Name: Age Profession/ Occupation
Taxpayer ID (CPF) –
Passport No. Position
Election date:
Investiture date
Term of office
Other positions Elected by controlling shareholder
Marcos Antonio Molina dos
Santos 47 Businessman 102.174.668-18
Chairman of the Board
April 28, 2017
April 28, 2017
Through to the date of the
2019 annual meeting
- Yes
Marcia Aparecida Pascoal Marçal
dos Santos 43 Businesswoman 182.070.698-21
Non-independent Director
April 28, 2017
April 28, 2017
Through to the date of the
2019 annual meeting
Audit Committee member
Yes
Rodrigo Marçal Filho
42 Businessman 184.346.398-90 Non-independent
Director April 28,
2017 April 28,
2017
Through to the date of the
2019 annual meeting
Executive Officer with no specific title
Yes
Alain Emilie Henry Martinet
74 Business
administrator 233.887.318-10
Non-independent Director
April 28, 2017
April 28, 2017
Through to the date of the
2019 annual meeting
- Yes
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BOARD OF DIRECTORS
Name: Age Profession/ Occupation
Taxpayer ID (CPF) –
Passport No. Position
Election date:
Investiture date
Term of office
Other positions Elected by controlling shareholder
David G. McDonald
52 Business
administrator 233.461.648-61 Independent Director
April 28, 2017
April 28, 2017
Through to the date of the
2019 annual meeting
- Yes
Carlos Geraldo Langoni
72 Economist 110.847.077-72 Independent Director April 28,
2017 April 28,
2017
Through to the date of the
2019 annual meeting
Member and Coordinator of the Finance and Risk Management
Committee; Member of the Compensation,
Corporate Governance and Human
Resources Committee
Yes
Marcelo Maia de Azevedo Correa
61 Civil Engineer 425.052.917-72 Independent Director April 28,
2017 April 28,
2017
Through to the date of the
2019 annual meeting
Member and Coordinator of the Audit Committee;
Member of the Management Committee
Yes
Antonio dos Santos Maciel
Neto 59
Mechanical Engineer
532.774.067-68 Independent Director April 28,
2017 April 28,
2017
Through to the date of the
2019 annual meeting
Member and Coordinator of the Compensation, Corporate Governance and Human Resources Committee
Member of the Finance and Risk Management Committee
Yes
Roberto Faldini 68 Business
administrator 070.206.438-68 Independent Director
April 28, 2017
April 28, 2017
Through to the date of the
2019 annual meeting
- No
Ernesto Lozardo 67 Business
administrator 232.398.838-72 Independent Director
April 28, 2017
April 28, 2017
Through to the date of the
2019 annual meeting
- No
Ian David Hill 64 Economics and
Rural Administration
922.234.278-04 Non-independent
Director April 28,
2017 April 28,
2017
Through to the date of the
2019 annual meeting
- Yes
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FISCAL COUNCIL MEMBERS:
Name Date of Birth Profession
Taxpayer ID
(CPF)
/ Passport No.
Position Election
date
Investiture
date Term of office
Other
positions
Elected by
controlling
shareholder
Consecutive
tenures
Eduardo Augusto
Rocha Pocetti 8/6/1954 Accountant 837.465.368-04
Effective Fiscal
Council member April 28,
2017
April 28,
2017
Until the date
of the 2018 annual
meeting
---- Yes 03
Carlos Roberto de
Albuquerque Sá 1/31/1950 Professor 212.107.217-91
Effective Fiscal
Council
member
April 28,
2017
April 28,
2017
Until the date
of the 2018 annual
meeting
---- Yes 01
Marcelo Silva 01/04/1972 Bachelor of
Laws 118.990.828-08
Effective Fiscal
Council member April 28,
2017
April 28,
2017
Until the date
of the 2018 annual
meeting
---- Yes 00
Ely Carlos Perez 6/1/1970 Accountant 140.264.678-05 Alternate Fiscal
Council member April 28,
2017
April 28,
2017
Until the date
of the 2018 annual
meeting
---- Yes 01
Roberto Perozzi 4/15/1960 Business
Admin. 008.417.618-09
Alternate Fiscal
Council member April 28,
2017
April 28,
2017
Until the date
of the 2018 annual
meeting
---- Yes 01
Marcílio José da Silva 12/30/1963 Accountant 329.564.871-91 Alternate Fiscal
Council member April 28,
2017
April 28,
2017
Until the date
of the 2018 annual
meeting
---- Yes 00
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ITEM 12.5 - For each director, officer and Fiscal Council member of the issuer, indicate, in the form of a table:
BOARD OF DIRECTORS
Marcos Antonio Molina dos Santos – Taxpayer ID 102.174.668-18
a. Mr. Molina dos Santos serves as Chairman of the Board of Directors of Marfrig Global Foods S.A. He has amassed over 20 years of experience in the
food industry since opening his first business, a food distribution company, at 16 years of age. Since first founding Marfrig years ago, Mr. Molina dos Santos
has actively worked towards maintaining strong and fruitful relationships with key customers in Brazil and elsewhere, thus boosting the Company’s ability to
grow and expand, while sustaining its drive to improve the quality of its industrial processes and tackle the challenges of the global economic landscape.
Additionally, Mr. Molina dos Santos is a shareholder and the chief executive officer of MMS Participações S.A, which is the controlling shareholder of Marfrig.
b. No judgment of guilty (final or otherwise) has been entered in the last five years against Mr. Molina dos Santos in any criminal proceedings or any
disciplinary proceedings processed before the CVM, or in any other court or administrative proceedings, whose effect could be that of having him banned or
barred from practicing or performing, or disqualified to practice or perform professional or business activities of any kind.
Marcia Aparecida Pascoal Marçal dos Santos - Taxpayer ID 182.070.698-21
a. Ms. Marçal dos Santos has been a member of the Board of Directors of Marfrig Global Foods S.A since March 2007. With long experience in the food
industry, she has been serving the Company for many years first as a management member and since 2007 as director. From 2000 to 2006, she served as
chief financial officer and chief audit executive. In addition, Ms. Marçal dos Santos is an active participant and Executive President of the Instituto Marfrig
Fazer and Ser Feliz de Responsabilidade Social, Marfrig’s social investing institute, and a shareholder and deputy chief executive of MMS Participações S.A.,
the controlling shareholder of the Company.
b. No judgment of guilty (final or otherwise) has been entered in the last five years against Ms. Marçal dos Santos in any criminal proceedings or any
disciplinary proceedings processed before the CVM, or in any other court or administrative proceedings, whose effect could be that of having her banned or
barred from practicing or performing, or disqualified to practice or perform professional or business activities of any kind.
Rodrigo Marçal Filho - Taxpayer ID 184.346.398-90
a. Mr. Marçal Filho has been a member of the Board of Directors of Marfrig Global Foods S.A since March 2007 and as executive officer of the Company
since January 2014 (elected on January 7, he took office on January 23, 2014). He started his career in the agribusiness sector and worked as farm
manager until joining the Company in May 2000, where he served in multiple roles, from livestock purchaser to director of con struction.
b. No judgment of guilty (final or otherwise) has been entered in the last five years against Mr. Marçal Filho in any criminal proceedings or any
disciplinary proceedings processed before the CVM, or in any other court or administrative proceedings, whose effect could be that of having him banned
or barred from practicing or performing, or disqualified to practice or perform professional or business activities of any kind.
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Alain Emilie Henry Martinet - Taxpayer ID 233.887.318-10
a. Mr. Martinet has been a member of the Board of Directors of Marfrig Global Foods S.A since December 2009. A French-Argentine business
administrator, Mr. Martinet has worked for over 30 years in the beef industry. He first joined Marfrig in October 2006 and has since performed various roles in
the Company, including as lead executive for the group’s operations in Argentina and the United States and chief executive of the group’s trading companies.
Previously, Mr. Martinet served as executive officer of Swift Argentina (2001-2005); as executive officer for trade affairs (1991 – 1992) and general manager
(1985 – 1991) of Frigorífico Rio - Platense; and as lead executive for the international beef operations of U.S.-based Louis Dreyfus Corporation (1978 - 1984).
b. No judgment of guilty (final or otherwise) has been entered in the last five years against Mr. Martinet in any criminal proceedings or any disciplinary
proceedings processed before the CVM, or in any other court or administrative proceedings, whose effect could be that of having him banned or barred
from practicing or performing, or disqualified to practice or perform professional or business activities of any kind.
David G. McDonald - Taxpayer ID 233.461.648-61
a. Mr. McDonald has been an independent member of the Board of Directors of Marfrig Global Foods S.A since December 2008, after the Company
acquired the OSI Group operations in Brazil and in Europe. He serves as President, chief operating officer and a member of the board of directors of the
OSI Group, LLC (OSI Industries), which he joined in 1987 as project manager, having served in various roles over time. The OSI Group, LLC, is a food
processing international conglomerate with over 70 manufacturing facilities and office premises located in 38 countries (www.osigroup.com). Mr. McDonald holds
a degree in Animal Science from the Iowa State University, United States. As President, chief executive and member of the Board of Directors of the OSI
Group, LLC, Mr. David G. McDonald could potentially have a conflict of interest with us in the future, as the Marfrig and OSI groups compete in certain
international operations.
b. No judgment of guilty (final or otherwise) has been entered in the last five years against Mr. McDonald in any criminal proceedings or any disciplinary
proceedings processed before the CVM, or in any other court or administrative proceedings, whose effect could be that of having him banned or barred from
practicing or performing, or disqualified to practice or perform professional or business activities of any kind.
Carlos Geraldo Langoni - Taxpayer ID 110.847.077-72
a. Mr. Langoni has been an independent member of the Board of Directors of Marfrig Global Foods S.A since May 2007. He currently serves as a
member of the board of directors of Souza Cruz (a subsidiary of British American Tobacco), member of the Advisory Board of th e Guardian Industries
group, President of Projeta Consultoria Economica Ltda. and Senior Adviser to Companhia Vale do Rio Doce. He also served as Chairman of the Board
of Governors of the Central Bank of Brazil between 1980 and 1983. Mr. Langoni holds a graduate degree in Economics (1968) from the Federal University
of Rio de Janeiro, Brazil, and a PhD degree in Economics (1970) from the University of Chicago, United States.
b. No judgment of guilty (final or otherwise) has been entered in the last five years against Mr. Langoni in any criminal proceedings or any disciplinary
proceedings processed before the CVM, or in any other court or administrative proceedings, whose effect could be that of having him banned or barred from
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practicing or performing, or disqualified to practice or perform professional or business activities of any kind.
Marcelo Maia de Azevedo Correa - Taxpayer ID 425.052.917-72
a. Mr. Correa has been an independent member of the Board of Directors of Marfrig Global Foods S.A since May 2007. He formerly served as chief
executive officer of Grupo Neoenergia S.A., as a member of the board of governors of ONS (Operador Nacional do Sistema Elétrico) the Brazilian
Electric Power System Operator, and as director of electric power utilities in the Brazilian states of Bahia (Coelba), Rio Gr ande do Norte (Cosern) and
Pernambuco (Celpe), and as director of local power utilities, thermal power stations and small hydropower plants (Itapebi , Termopernambuco, Bahia PCH I,
Afluente, Goiás Sul and Baguari I) operated by the Neoenergia group. Previously, he served as chairman of the board of CPFL – Piratininga (2001 – 2002),
chief executive officer of VBC Energia S.A. (1997 – 2004), member of the fiscal council of RGE – Rio Grande Energia (1997 – 1999) and of CPFL – Paulista
(2000). Mr. Correa holds a graduate degree in engineering (1982) from the Pontifical Catholic University of Rio de Janeiro and a master’s degree in
Finance (1992) from the IBMEC.
b. No judgment of guilty (final or otherwise) has been entered in the last five years against Mr. Correa in any criminal proceedings or any disciplinary
proceedings processed before the CVM, or in any other court or administrative proceedings, whose effect could be that of having him banned or barred from
practicing or performing, or disqualified to practice or perform professional or business activities of any kind.
Antonio dos Santos Maciel Neto - Taxpayer ID 532.774.067-68
a. Mr. Maciel Neto has been an independent member of the Board of Directors of Marfrig Global Foods S.A since May 2007. Additionally, he currently
serves as Chief Executive Officer of the CAOA Group and as a member of the board of directors of Archer Daniels Midland Company, a U.S. -based
global food processing and commodities trading corporation. Previously, he served as chief executive officer of Suzano Papel e Celulose S/A (pulp and
paper producer). In addition, from 1999 to May 2006, Mr. Maciel Neto held various executive positions with the Ford conglome rate, including as
corporate vice president of the Ford Motor Company (2004), President of Ford’s South America Operations (2003 – 2006) and chief executive officer
of Ford Brazil (1999 – 2003). He is a former Chairman of the Itamarati Group (sugarcane, renewable energy; from 1997 to 1999) and of CECRISA -
Revestimentos Cerâmicos (ceramic tiles, from 1993 to 1997). Between 1990 and 1993, he held various positions in the federal government of Brazil,
including as Adjunct Director of the Manufacturing and Commerce Department of the Ministry of Development Manufacturing and T rade, and National
Adjunct Secretary of Economics of the Ministry of Finance, and Vice Minister of the Ministry of Industry, Commerce and Touris m. In the same period
he was technical coordinator of the Brazilian Quality and Productivity Program (Programa Brasileiro de Qualidade e Produtividade) or PBQP. He began
his professional career at Petrobras in 1980, where he worked for ten years. Mr. Maciel Neto holds a graduate degree in Mech anical Engineering
(1979) from the Federal University of Rio de Janeiro.
b. No judgment of guilty (final or otherwise) has been entered in the last five years against Mr. Maciel Neto in any criminal proceedings or any disciplinary
proceedings processed before the CVM, or in any other court or administrative proceedings, whose effect could be that of having him banned or barred from
practicing or performing, or disqualified to practice or perform professional or business activities of any kind.
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Roberto Faldini – CPF/MF: 070.206.438-68
a. Mr. Roberto Faldini, 68, born on September 6, 1948, holds a bachelor’s degree in Business Administration from the School of Economics and
Business Administration at the Getúlio Vargas Foundation (EAESP-FGV) and completed a non-degree program in Advanced Management at the Dom
Cabral Foundation and at INSEAD – Fontainebleau, a non-degree program in Entrepreneurship at Babson College – Boston and a non-degree program
in Corporate Governance Board Leadership – TOT (Training of Trainers) at the IFC and Brazilian Corporate Governance Institute (IBGC). He is the co -
founder of the IBGC, an organization dedicated to promoting corporate governance in the country, and is an associate member of the Br azilian Institute
of Financial Executives (IBEF), an autarchy that promotes professional and social relationships among profession als in the financial industry. He is an
executive director, shareholder and board member at Metal Leve S.A., a producer of automotive components, where he served chi ef financial officer
and investor relations officer from 1980 to 1992 and as a board member from 1993 to 1996. He served as president of the Securities and Exchange
Commission of Brazil (CVM) in 1992. He also served as the director in São Paulo of the Family Business Center (PDA) at the Do m Cabral Foundation
(FDC). Over the course of his career, he has served on the board of directors or advisory boards of various companies, which include: a) Bovespa –
Bolsa de Valores de São Paulo; b) CPFL – Companhia Paulista de Força e Luz S.A.; c) KlickNet S.A.; d) Inpar S.A.; and e) Sadia S.A./ BRF S.A. He
is an arbiter on the Market Arbitration Chamber of the Brazilian Stock Exchange (BM&FBOVESPA), a member of the Content Develo pment Board of
FBN – Family Business Network in Brazil and a member of the Corporate Governance and Business committees of Amcham - SP. He is currently a
statutory board member of the following companies: a) VULCABRAS|AZALEIA S.A. (since 2011); b) Banco BMG S.A. (since 2013); c) Grupo Everest
de Hotéis (since 2013); d) Metalúrgica Golin SA since April 2016; and e) non-statutory board member of EMIBRA Indústria de Embalagens Gráficas
Ltda. (since 2008).
b. In the last five (5) years, Mr. Faldini has not been subject to (i) any criminal conviction, (ii) any administrative proceeding at the Securities and
Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibited him from practicing any
professional or commercial activity.
Ernesto Lozardo - CPF/MF: 232.398.838-72
a. Ernesto Lozardo, 67, has bachelor’s and master’s degrees in business administration from the New York University, and a bachelor’s degree in
economics from Columbia University, USA. He has been on the board of directors of Fibria Celulose S.A. since September 2016. Since June 2016, he
has been chairman of the Institute for Applied Economic Research (IPEA), a federal research foundation. From September 2011 t o June 2016, he
served as advisor to the chairman of the Brazilian Development Bank – BNDES (Brazilian federal government development bank). Earlier, he served
as Director of Planning at Caixa Seguros Seguradora (which operates in the insurance, pension plans, consortia and savings bo nds segments) from
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2000 to 2002, and as Chief Executive Officer of the São Paulo State Data Processing Company – PRODESP (an IT company of the São Paulo state
government), in 1994. From 1992 to 1994, he served as Secretary of Planning, Economy and Administration in the Government of the State of São
Paulo. He has also been Professor of International Economics, Macroeconomics, Brazilian Economy and Finances, Currencies and Banks at FGV –
School of Business Administration of São Paulo, since 1978. Mr. Ernesto Lozardo is considered a Politically Exposed Person, under the terms of the
applicable regulations, since he has held a relevant public function in the last 5 (five) years in the BNDES - National Bank for Economic Development,
as well as President of the Institute of Applied Economic Research - IPEA.
b. In the last five (5) years, Mr. Lozardo has not been subject to (i) any criminal conviction, (ii) any administrative proceeding at the Securities and
Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibited him from practicing any
professional or commercial activity
Ian David Hill – CPF/MF: 922.234.278-04
a. Mr. Ian David Hill, 64, holds a B.S. in Economics and Rural Administration from the Royal Berkshire College of Agriculture, E ngland, and holds
technical certification in bovine management and health, crop management, and administration and maintenance of tractors and agriculture ma chinery
from the City and Guilds, London. He served as Chairman of the Board of Usina Benalcool S/A Álcool e Açúcar (Bento de Abreu -SP) from 1992 to
2007. He was Director of the São Paulo State Cattle Raising Development Fund (FUNDEPEC SP) from 1996 to 2003. He was Secretar y-Director of the
Rural Employers Union of Valparaíso-SP from 1993 to 1995. He was Technical Director of the São Paulo Association of Nellore Cattle Farmers from
1995 to 1998. He was as member of the Board of Directors of Usina de Etanol e Açúcar GASA – Guanabara Agroindustrial S/A in Andradina-SP from
1996 to 2000. He was CEO of Grupo Delta-G (Norte) from 2000 to 2008. He currently is a director on the board of Genoa Biotecnologia S.A. (since
2004), an executive officer and director on the board of Da Mata S/A – Açúcar e Álcool in Valparaíso-SP (since 2006), director of the cattle farming
chamber of the Brazilian Rural Society (since 2009) and actively participates in the management of Agropecuária Jacarezinho LTDA. Board member
of the Nuffield Trust (Brazil) that fosters research abroad for young agribusiness professionals. Mr. Ian David Hill could potentially have a conflict of
interest with us in the future, as he is part of the management of Agropecuária Jacarezinho Ltda. which is controlled by Mr. Marcos Antonio Molina dos
Santos.
b. In the last five (5) years, Mr. Ian David Hill has not been subject to (i) any criminal conviction, (ii) any administrative proceeding at the Securities
and Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibi ted him from practicing
any professional or commercial activity
FISCAL COUNCIL
Eduardo Augusto Rocha Pocetti - Taxpayer ID 837.465.368-04
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a. Mr. Pocetti has been a member of the Fiscal Council of Marfrig Global Foods S.A. since April 2014. He holds a bachelor’s degree in Accounting
Sciences and an MBA from the Getúlio Vargas Foundation (FGV). He is currently Chairman of the Board of the Brazilian Institute of Independent Auditors
(IBRACON) and in February 2016 he was elected to hold a chair in the Brazilian Academy of Accounting Sciences. He is a partner at KPMG Auditores
Independentes and has 40 years of experience at audit firms. From 2004 to 2011, he was president of BDO Auditores Independentes, where he represented
BDO Brasil at all member firms of the international BDO network. He has vast experience in finance, accounting, external audits, economic and financial
planning and has coordinated the managerial and executive levels of various large Brazilian and multinational companies in the manufacturing and financial
industries. He served as lead partner on various IPO journeys as well as on special corporate finance projects for acquisitions and divestments. He is also a
member of the Fiscal Council of the publicly traded company Mahle Metal Leve S.A. and a member of the Fiscal Council of Centro de Integração Empresa
Escola (CIEE).
b. In the last five (5) years, Mr. Pocetti has not been subject to the effects of (i) any criminal conviction, (ii) any administrative proceeding at the Securities
and Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibited him from practicing any
professional or commercial activity.
Carlos Roberto de Albuquerque Sá - Taxpayer ID 212.107.217-91
a. Mr. Albuquerque Sá has been an alternate member of the Fiscal Council of Marfrig Global Foods S.A. since April 2013, having served in the same
position in 2011. He holds a bachelor’s degree in Accounting and Economics and a graduate degree in Finance from Pontifical Catholic University of Rio de
Janeiro (PUC-RJ). He was professor of Corporate Risk Management and Internal Controls in the MBA program of Armando Álvares Penteado Foundation
(FAAP) until 2012, and of Corporate Risk Management in the Director programs offered by the Brazilian Corporate Governance Institute (IBGC). Mr.
Albuquerque Sá has been a member of the Fiscal Council of J. Câmara de Goiânia since July 2011.
b. In the last five years, Mr. Sá has not been subject to the effects of (i) any criminal conviction, (ii) any administrative process at the Securities and
Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibited him from practicing any
professional or commercial activity.
Marcelo Silva - Taxpayer ID 118.990.828-08
a. Mr. Silva served as alternate member of the Fiscal Council of Marfrig Global Foods S.A. in 2011. He received a bachelor’s degree in Law from
Universidade Paulista (UNIP); a technical degree in Accounting from SENAC-SP; a graduate degree in Tax Law from the Brazilian Institute of Tax Studies
(IBET). He also completed graduate specialization programs at the São Paulo Association for Tax Studies (APET), the Corporate Education Center (IOB), the
FiscoSoft Continuing Education Center and other institutions. With over 18 years of experience in tax planning and team leadership, he provides consulting
services to midsized and large companies across a number of industries, with a focus on tax credit analysis and recovery.
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b. In the last five years, Mr. Silva has not been subject to the effects of (i) any criminal conviction, (ii) any administrative process at the Securities and
Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibited him from practicing any
professional or commercial activity.
Ely Carlos Perez – Taxpayer ID: 140.264.678-05
a. Mr. Perez received a B.S. in Accounting from Universidade São Marcos and an MBA from the Getúlio Vargas Foundation (FGV). His career has focused
on the Financial, Accounting and Process Management areas, with the last 17 years spent as a business and process consultant for implementing Enterprise
Resource Planning (ERP) systems. During this period, he has specialized in mapping processes, adapting processes to the system, implementing ERP and
training/accompanying post-implementation processes. He worked for more than 10 years at Datasul S.A.
b. In the last five years, Mr. Perez has not been subject to the effects of (i) any criminal conviction, (ii) any administrative process at the Securities and
Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibited him from practicing any
professional or commercial activity.
Roberto Perozzi – Taxpayer ID 008.417.618-09
a. Mr. Perozzi holds a bachelor’s degree in Business Administration from the Business School (ESAN) at the FEI University Center (1986) and an Executive
MBA from the University of São Paulo - USP (1993) and completed the Director Development Program (PDC) at the Dom Cabral Foundation - FDC (2011).
He has vast experience in the fields of Business Administration, Finance and Management, having served over the last 19 years in senior executive positions
at midsized and large Brazilian and multinational companies, where he actively participated in restructurings, acquisitions, divestments, joint ventures and
mergers of local and foreign multinationals. He coordinated the rebuilding of the valuation bases for the divestment of the logistics operations of the Philips
Group to Swiss-based Danzas Group, serving as the Interim Controller. Previously he served as CFO at Swatch Group do Brasil Ltda. (1999-2000) and as
CFO at Daruma Telecomunicações e Informática S.A. of Italian-based Urmet Group (2003-2008). He served as a member on the Fiscal Council of the publicly
traded company Lupatech S.A. from 2014 to 2015.
b. In the last five years, Mr. Perozzi has not been subject to the effects of (i) any criminal conviction, (ii) any administrative process at the Securities and
Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibited him from practicing any
professional or commercial activity.
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Marcílio José da Silva – Taxpayer ID 329.564.871-91
a. Mr. Silva holds a B.S. in Accounting from the Candido Rondon School of Economic and Accounting Sciences (FACEC). Previously he has served in various
positions in the accounting departments of meatpackers, including Quatro Marcos Ltda. (1996-2000) and Frigorífico Tangará Ltda. (2000-2003). He is an
accounting consultant and served as a member of the company’s Fiscal Council from April 2010 to April 2014.
b. In the last five years, Mr. Silva has not been subject to the effects of (i) any criminal conviction, (ii) any administrative process at the Securities and
Exchange Commission of Brazil (CVM) or (iii) any unappealable judicial or administrative ruling that suspended or prohibited him from practicing any
professional or commercial activity.
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ITEM 12.6 - For each person who served as director, officer and Fiscal Council member in the last fiscal year, indicate, in the form of a table, their
percentage participation in the meetings held by the respective body in said period after their investiture:
Board Of Directors Member Number of Boards of Directors
meetings since investiture
% participation in meetings held
after investiture
Marcos Antonio Molina Dos Santos Sixteen (16) meetings held
through March 28, 2017 100%
Marcia Aparecida Pascoal Marçal Dos
Santos
Sixteen (16) meetings held
through March 28, 2017 100%
Rodrigo Marçal Filho Sixteen (16) meetings held
through March 28, 2017 100%
Alain Emile Henri Martinet Sixteen (16) meetings held
through March 28, 2017 100%
David G. Mcdonald Sixteen (16) meetings held
through March 28, 2017 80%
Marcelo Maia De Azevedo Correa Sixteen (16) meetings held
through March 28, 2017 100%
Antonio Dos Santos Maciel Neto Sixteen (16) meetings held
through March 28, 2017 100%
Carlos Geraldo Langoni Sixteen (16) meetings held
through March 28, 2017 100%
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Roberto Faldini Five (5) meetings held
through March 28, 2017 100%
Fiscal Council Member Number of Fiscal Council
meetings since investiture
% participation in meetings held
after investiture
Eduardo Augusto Rocha Pocetti Six (6) meetings held
through March 28, 2017 100%
Carlos Roberto de Albuquerque Sá Six (6) meetings held
through March 28, 2017 100%
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ITEM 12.7. Provide the information mentioned in Subsection 12.5 for the members of the statutory committees and of the audit, risk,
financial and compensation committees, even if said committees or structures are not statutory:
- Name
- Taxpayer ID (CPF) / Passport
- Work performed for the issuer in any other capacity
- Committee type
- Description of
other Committees
- Position held
- Description of other
positions held
- Career background;
Liability statement, if any
- Profession or
occupation
- Birth
- Election date
- Investiture
date
- Term of
office
Elected by
controlling
shareholder
Consecuti
ve tenures
Marcelo Maia de Azevedo Correa
425.052.917-72
Audit Committee
Committee Coordinator
See item 12.5/8
Civil Engineer
2/3/1956
April 28, 2017
April 28, 2017
2019
Annual
Meeting
Yes 04
Independent Director
Marcia Aparecida Pascoal Marçal dos Santos
182.070.698-21 Audit Committee Committee member (sitting
member)
Vide item 12.5/8.
Businesswoman
3/28/1973
April 28, 2017
April 28, 2017
2019
Annual
Meeting
Yes 03
Non-Independent Director
Non-Independent Director
Antonio dos Santos Maciel Neto
532.774.067-68
Compensation,
Corporate
Governance and
Human Resources
Committee
Audit Committee
Committee Coordinator
See item 12.5/8
Mechanical
Engineer
10/11/1957
April 28, 2017
April 28, 2017
2019
Annual
Meeting
Yes 04
Independent Director
Member of the Finance and Risk Management Committee
Carlos Geraldo Langoni
110.847.077-72
Finance and
Risk Management
Committee Committee Coordinator
See item 12.5/8
Economist
7/23/1944
April 28, 2017
April 28, 2017
2019
Annual
Meeting
Yes 04
Independent Director
Member of the Compensation, Corporate Governance and Human Resources Committee
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ITEM 12.8 - For each person who served as a member of the statutory committees and of the audit, risk, financial and compensation committees,
even if said committees or structures are not statutory, indicate, in the form of a table, their percentage participation in the meetings held by the
respective body in said period after their investiture:
Audit Committee Member
Number of meetings of the
Committee since investiture on
4/29/2016
% participation in meetings held
after investiture
Marcelo Maia de Azevedo Correa Seven (7) meetings held
through March 28, 2017 100%
Antonio dos Santos Maciel Neto Seven (7) meetings held
through March 28, 2017 100%
Marcia Ap. Pascoal Marçal dos Santos Seven (7) meetings held
through March 28, 2017 100%
Financial and Risk Management Committee
Member
Number of meetings of the
Committee since investiture on
4/29/2016
% participation in meetings held
after investiture
Carlos Geraldo Langoni Two (2) meetings held
through March 28, 2017 100%
Antonio dos Santos Maciel Neto Two (2) meetings held
through March 28, 2017 100%
Marcelo Maia de Azevedo Correa Two (2) meetings held
through March 28, 2017 100%
José Eduardo de Oliveira Miron Two (2) meetings held
through March 28, 2017 100%
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12.9. Inform the existence of any marital, steady union or family relationship to the second degree between: a) the directors, officers of Fiscal
Council members of the issuer; b) i. the directors, officers of Fiscal Council members of the issuer and ii. the directors, officers of Fiscal Council
members of the direct or indirect subsidiaries of the issuer; c) i. the directors, officers of Fiscal Council members of the issuer or of its direct or
indirect
subsidiaries and ii. the direct or indirect controlling shareholders of the issuer; d) i. the directors, officers of Fiscal Council members of the issuer
and ii. the directors, officers of Fiscal Council members of the direct or indirect parent company of the issuer.
Name
Position
Taxpayer ID
(CPF)
Corporate name of the issuer,
or parent or subsidiary company Taxpayer ID (CNPJ)
Type of relationship with the director /
officer of the issuer or parent or subsidiary
company
Director/officer of the issuer or parent or subsidiary company
Marcos Antonio Molina dos Santos 102.174.668-18 Marfrig Global Foods S.A.
Chairman of the Board 03.853.896/0001-40 Spouse (1st degree relative)
Related person
Marcia Aparecida Pascoal Marçal dos Santos 182.070.698-21 Marfrig Global Foods S.A. 03.853.896/0001-40
Non-independent director
Note
Nihil
Compensation, Corporate Governance and
Human Resources Committee Member
Number of meetings of the
Committee since investiture on
4/29/2016
% participation in meetings held
after investiture
Antonio dos Santos Maciel Neto One meeting held
through March 28, 2017 100%
Carlos Geraldo Langoni One meeting held
through March 28, 2017 100%
Roberto Faldini One meeting held
through March 28, 2017 100%
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Director/officer of the issuer or parent or subsidiary
company
Marcos Antonio Molina dos Santos 102.174.668-18 Marfrig Global Foods S.A. 03.853.896/0001-40 Sibling-in-law (2nd degree relative)
Chairman of the Board
Related person
Rodrigo Marçal Filho 184.346.398-90 Marfrig Global Foods S.A. 03.853.896/0001-40
Non-independent director
Executive Officer (Board of Executive Officers)
Note
Mr. Rodrigo Marçal Filho is the brother of Ms. Marcia Aparecida Pascoal Marçal dos Santos, who in turn is married to Mr. Marcos Antonio Molina dos Santos, the
Chairman of our Board of Directors.
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12.10. Inform the existence of any relationships of subordination, provision of services or controls in the last three fiscal years
between the directors, officers of Fiscal Council members of the issuer and: a) the direct or indirect subsidiary of the issuer, with the
exception of those in which the issuer directly or indirectly holds all of its capital; b) the direct or indirect controlling shareholder; c)
if relevant, the suppliers, clients, debtors or creditors of the issuer, of its subsidiaries or of the controlling shareholders or subsidiaries
of any of these persons.
Identification
Position or function
Taxpayer ID
(CPF or CNPJ) Type of Relationship Type of related person
Year ended December 31, 2016
Director of the Issuer
Marcos Antonio Molina dos Santos 102.174.668-18 Controlling interest Direct controlling shareholder
Chairman of the Board of Directors
Related Person
MMS PARTICIPAÇÕES LTDA. 08.542.030/0001-31
Director of the Issuer
Marcia Aparecida Pascoal Marçal dos Santos 182.070.698-21 Controlling interest Direct controlling shareholder
Director
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Related Person
MMS PARTICIPAÇÕES LTDA. 08.542.030/0001-31
Note
MMS Participações is the controlling shareholder of Marfrig Global Foods S.A. Its only shareholders are Mr. Marcos Antonio Molina dos Santos and Ms. Marcia
Aparecida Pascoal Marçal dos Santos.
Year ended December 31, 2015
Director of the Issuer
Marcos Antonio Molina dos Santos 102.174.668-18 Controlling interest Direct controlling shareholder
Chairman of the Board of Directors
Related Person
MMS PARTICIPAÇÕES LTDA 08.542.030/0001-31
Director of the Issuer
Marcia Aparecida Pascoal Marçal dos Santos 182.070.698-21 Controlling interest Direct controlling shareholder
Director
Related Person
MMS PARTICIPAÇÕES LTDA 08.542.030/0001-31
Note
MMS Participações Ltda is the controlling shareholder of Marfrig Global Foods S.A. Its only partners are Mr. Marcos Antonio Molina dos Santos and Ms. Marcia
Aparecida Pascoal Marçal dos Santos.
Year ended December 31, 2014
Director of the Issuer
Marcos Antonio Molina dos Santos 102.174.668-18 Controlling interest Direct controlling shareholder
Chairman of the Board of Directors and Chief Executive Officer
Related Person
MMS PARTICIPAÇÕES S.A. 08.542.030/0001-31
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Director of the Issuer
Marcia Aparecida Pascoal Marçal dos Santos 182.070.698-21 Controlling interest Direct controlling shareholder
Director
Related Person
MMS PARTICIPAÇÕES S.A. 08.542.030/0001-31
Note
MMS Participações is the controlling shareholder of Marfrig Global Foods S.A. Its only shareholders are Mr. Marcos Antonio Molina dos Santos and Ms. Marcia
Aparecida Pascoal Marçal dos Santos.
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APPENDIX III
EXECUTIVE COMPENSATION
13.1 Compensation policy or practices, including executive officers not specified in the bylaws (a) Objectives of the compensation policy or practice The compensation policy of the Corporation attracts, retains and establishes the criteria, responsibilities and definitions for the compensation of its managers. The policy also aims to motivate executives of the Corporation to grow and develop to reach their maximum potential, to align their performance with the business objectives of the Corporation, recognizing their performance through the payment of incentives (short- and long-term). The Compensation, Corporate Governance and Human Resources Committee is the deliberative body charged with evaluating the managers of the Corporation and subsequent compensation owed to each one of them pursuant to the compensation policy. The committee is formed by members of the Board of Directors. The parameters used to determine the compensation of the managers are based on market practices. (b) composition of the compensation (i) description of compensation elements and their individual purposes
Board of Directors
The compensation of the members of the Board of Directors of the Corporation in 2015 is composed of
a monthly fixed compensation that is set annually for each of the members and specific benefits,
seeking to reward monetarily the members of the Board of Directors in accordance with their
responsibilities and professional experience with the Corporation. The Corporation’s stock option plan
also provides variable compensation for the Board of Directors. However, long-term incentives were
not granted for the Board of Directors for fiscal year 2016 and will not be granted for fiscal year 2017.
Executive Officers
The compensation of the Executive Officers Statutory and Non-Statutory of the Corporation is
composed of:
a fixed portion, which includes a monthly salary that is set annually for each of the members
and various benefits, seeking to reward monetarily the Executive Officers in accordance with
their responsibilities and professional experience with the Corporation; and
a variable portion, which includes (i) a share in the profits of the Corporation; and
(ii) compensation based on the stock option plan of the Corporation.
Fiscal Council
The compensation of the members of the Fiscal Council is composed of a fixed portion, which includes one monthly compensation established annually for each of its members and benefits, aiming to reward monetarily the members of the Fiscal Council in accordance with their responsibilities and professional experience with the Corporation.
61/89
Committees All participants in the various advisory committees to the Board of Directors, such as the Financial and Risk Management Committee, Audit Committee and Compensation, Corporate Governance and Human Resources Committee, may be remunerated for their participation in said committees. (ii) the proportion of each element in the total compensation
Fiscal year ended 12/31/2016
Fixed Portion - % Variable Portion- %
Board of Directors 100% -
Board of Executive Officers 58,5% 41.5%
Fiscal Council 100% -
Fiscal year ended 12/31/2015
Fixed Portion - % Variable Portion- %
Board of Directors 100% -
Board of Executive Officers 64.7% 35.3%
Fiscal Council 100% -
Fiscal year ended 12/31/2014
Fixed Portion - % Variable Portion- %
Board of Directors 51.3% 48.7%
Board of Executive Officers 57.0% 43.0%
Fiscal Council 100% -
(iii) the calculation and adjustment methodology used for each compensation element
The composition of the compensation of Managers is determined based on a salary survey conducted at least every 2 years with a select group of companies (peer group) in the food segment and of Brazilian publicly traded companies with a presence abroad, which analyzes the competitiveness of various components of the aggregate compensation of executives (base salary, short and long-term incentives and benefits).
Based on the results of the annual salary survey, a revision is made to the Marfrig Group’ Salary Table, which forms the structure of the Corporation's positions and salaries (fixed portion).
Meanwhile, the variable portion consists of short and long-term compensation calculated based on the achievement of financial and individual targets.
(iv) the reasons justifying the composition of the compensation
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The reasons justifying the composition of the compensation are: (i) to attract and retain the professionals of the Corporation and to recognize their performance; (ii) to align the compensation with market practices and governing law and regulations; (iii) to be economically viable; (iv) to recognize the performance of individuals and that of the organization; and (v) to encourage commitment to the results and alignment with the Corporation's objectives. (v) existence of unsalaried members by the issuer and the reasons for this fact The compensation of the Board of Directors is made up of the compensation of six members. The other three members opted for not receiving compensation as Board members, one of whom is also a member of the Executive Officers Board and receives compensation from that body. (c) Key performance indicators considered to determine each compensation element
Board of Directors
The Corporation’s stock option plan provides variable compensation for the Board of Directors.
However, long-term incentives were not granted for the Board of Directors for fiscal year 2016 and will
not be granted for fiscal year 2017.
Executive Officers The monthly compensation of each Executive Officer is associated to his program evaluation, as well
as his individual performance.
The short and long-term incentives, in turn, are conditioned to achievement of internal targets and
Corporation’s performance.
The indicators considered in determining the short-term variable compensation and long-term
incentives are:
Net revenue: Corporation’s revenue net of direct taxes, cancellations and discounts
EBITDA Margin: Percentage value obtained by dividing EBITDA by the net revenue of the
Corporation.
Free Cash Flow: The Corporation’s operating cash flow, less capex and financial expenses.
Capex deviation: It is the percentage attainment of the amount invested by the Corporation in
property, plant and equipment, as well as intangible and biological assets in the period.
Individual: up to five targets are proposed for the management of the executive’s area, which
focus on results that are aligned with the guidelines defined by the immediate leader, taking
into account, among other things, the budget, sales, revenue and productivity.
The indicators and targets of the Board of Executive Officers are in line with the Guidances announced
to the market in the materials facts notice of March 2, 2015 and February 29, 2016, and management
contracts are drafted that include function-specific factors and the indicators of the overall performance
of the Corporation.
Fiscal Council
Not applicable. (d) How the compensation is structured to reflect the evolution in performance indicators
Board of Directors
Not applicable for fiscal year 2016 and 2017.
Executive Officers
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The compensation is determined by the individual performance and by the achievement of established targets, as identified in item (c), which are compared at the end of the fiscal year to the proposed target.
Fiscal Council
Not applicable. e) How the compensation policy or practice is aligned with the short-, medium- and long-term interests of the issuer Since the Corporation adopts market practices to determine its compensation policy (both fixed and variable), the practices motivate and recognize the executives’ efforts towards achieving the business objectives, which further aligns the relationship between the Corporation and the manager. The sum of the compensations (fixed, variable and indirect/benefits) should be compatible with the peer group. The fixed remuneration (or base salary) aims to reward executives in accordance with the level of contribution of their positions within the position and wage structure of the Corporation. The wage table of the Corporation is reviewed at least every 2 years in accordance with the salary survey conducted of the peer group, as mentioned above. The short-term variable compensation aims to recognize the results obtained by the Corporation in the financial, operational and human dimensions, in accordance with the mix of annual corporate objectives, as indicated in item (c). The long-term incentive aims to retain executives and provide a deferred long-term reward through the annual assessment of targets, as indicated in item (c), and is granted on an annual basis through the specific stock option plan with 25% deferred each year. (f) existence of compensation borne by the subsidiaries or direct or indirect controlling shareholders
Board of Directors
Not applicable.
Executive Officers
There are portions of compensation received by a single manager, who is a member of the Board of
Executive Officers, due to his position in the issuer, which is supported by one of the subsidiaries of the
Group, Frigorifico Tacuarembo S.A. Such compensation is composed exclusively of a fixed portion,
which includes a monthly salary.
Fiscal Council
Not applicable.
(g) existence of any compensation or benefits linked to the occurrence of certain corporate events, such as the transfer of control of the issuer Not applicable, since no component of the compensation of the managers of the Corporation is linked to ownership events.
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13.2 Total compensation attributable to members of the board of directors, board of executive officers established by the bylaws and Fiscal Council
Total compensation estimated for the current fiscal year ending 12/31/2017 – Annual Amounts
Board of Directors Board of Executive
Officers
Fiscal Council Total
Number of members 11.00 5.00 6.00 22.00
Number of remunerated
members 8.00 5.00 6.00 19.00
Annual fixed compensation
Regular remuneration 4,377,825.29 7,786,928.80 669,274.04 12,834,028.13
Direct and indirect benefits 90,977.18 234,268.32 4,632.60 329,878.10
Participation in committees 1,800,000.00 - - 1,800,000.00
Other 1,235,565.06 1,937,285.25 133,854.81 3,306,705.12
Description of other fixed
compensation Charges (INSS)
Charges (INSS and FGTS)
Charges (INSS) -
Variable compensation
Bonuses - - - -
Profit sharing - 3,562,547.75 - 3,562,547.75
Attendance to meetings - - - -
Commissions - - - -
Other - - - -
Description of other variable
compensation - - - -
Post-employment benefits - - - -
Severance benefits - - - -
Share-based payments - 1,781,273.88 1,781,273.88
Notes - - - -
Total compensation 7,504,367.53 15,302,304.00 807,761.45 23,614,432.98
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Total compensation for the fiscal year ending 12/31/2016 – Annual Amounts
Board of Directors Board of Executive
Officers
Fiscal Council Total
Number of members 9.00 5.33 6.00 20.33
Number of remunerated
members 6.00 5.33 6.00 17.33
Annual fixed compensation
Regular remuneration 4,301,491.95 7,635,659.08 621,989.37 12,559,140.40
Direct and indirect benefits 78,349.68 230,686.30 3,274.00 312,309.98
Participation in committees 1,080,000.00 - - 1,080,000.00
Other 1,076,298.32 1,706,902.79 124,397.89 2,907,598.99
Description of other fixed
compensation Charges (INSS)
Charges (INSS and FGTS)
Charges (INSS) -
Variable compensation
Bonuses - - - -
Profit sharing - 4,951,287.12 - 4,951,287.12
Attendance to meetings - - - -
Commissions - - - -
Other - - - -
Description of other variable
compensation - - - -
Post-employment benefits - - - -
Severance benefits - 1,067,668.55 - 1,067,668.55
Share-based payments - 777,131.69 - 777,131.69
Notes
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
-
Total compensation 6,536,139.95 16,369,335.52 749,661.26 23,655.136.73
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Total compensation for the fiscal year ending 12/31/2015 – Annual Amounts
Board of Directors Board of Executive
Officers
Fiscal Council Total
Number of members 8.75 5.75 6.00 20.50
Number of remunerated
members 5.75 5.75 6.00 17.50
Annual fixed compensation
Regular remuneration 4,263,491.95 8,367,169.24 631,748.01 13,262,409.20
Direct and indirect benefits 76,937.40 616,031.92 3,173.88 696,143.20
Participation in committees 1,080,000.00 - - 1,080,000.00
Other 1,068,698.32 2,023,035.02 126,349.60 3,218,082.94
Description of other fixed
compensation Charges (INSS)
Charges (INSS and FGTS)
Charges (INSS) -
Variable compensation
Bonuses - - - -
Profit sharing - 5,248,542.35 - 5,248,542.35
Attendance to meetings - - - -
Commissions - - - -
Other - - - -
Description of other variable
compensation - - - -
Post-employment benefits - - - -
Severance benefits - - - -
Share-based payments - 750,005.69 - 750,005.69
Notes
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
-
Total compensation 6,489,127.67 17,004,784.21 761,271.49 24,255,183.37
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Total compensation for the fiscal year ending 12/31/2014 – Annual Amounts
Board of Directors Board of Executive
Officers
Fiscal Council Total
Number of members 8.08 4.75 6.00 18.33
Number of remunerated
members 5.00 4.75 6.00 15.75
Annual fixed compensation
Regular remuneration 5,245,825.30 5,114,702.80 609,541.19 10,970,069.29
Direct and indirect benefits 43,634.04 80,113.85 3,227.09 126,974.98
Participation in committees - - - -
Other 1,027,864.52 1,496,099.73 121,908.24 3,701,044.90
Description of other fixed
compensation Charges (INSS)
Charges (INSS and FGTS)
Charges (INSS) Charges (INSS)
Variable compensation
Bonuses 5,000,000.00 275,862.07 - 5,275,862.07
Profit sharing - 3,800,000.01 - 3,800,000.01
Attendance to meetings - - - -
Commissions - - -
Other 1,000,000.00 55,172.41 - 1.055,172.41
Description of other variable
compensation Charges (INSS) Charges (INSS) - Charges (INSS)
Post-employment benefits - - - -
Severance benefits - - - -
Share-based payments - 916,704.15 - 916,704.15
Notes
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
Number of members calculated pursuant to the criteria in Circular Letter CVM/SEP/Nº03/2012.
-
Total compensation 12,317,323.86 11,738,655.02 734,676.52 24,790,655.40
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13.3 Variable compensation of the members of the board of directors, board of executive officers established by the bylaws and Fiscal Council
Variable compensation estimated for fiscal year ended December 31, 2017
Board of Directors
Board of Executive Officers
Fiscal Council
Total
Number of members 11.00 5.00 6.00 22.00
Number of remunerated members - 5.00 - 5.00
Bonuses
Lowest amount foreseen in the compensation plan - - - -
Highest amount foreseen in the compensation plan - - - -
Amount foreseen in the compensation plan for goals attained
- - - -
Profit sharing
Lowest amount foreseen in the compensation plan - 3,206,292.98 - 3,206,292.98
Highest amount foreseen in the compensation plan - 4,275,057.30 - 4,275,057.30
Amount foreseen in the compensation plan for goals attained
- 3,562,547.75 - 3,562,547.75
Variable compensation for fiscal year ended December 31, 2016
Board of Directors
Board of Executive Officers
Fiscal Council
Total
Number of members 9.00 5.33 6.00 20.33
Number of remunerated members - 5.33 - 5.33
Bonuses
Lowest amount foreseen in the compensation plan - - - -
Highest amount foreseen in the compensation plan - - - -
Amount foreseen in the compensation plan for goals attained
- - - -
Amount effectively recognized as profit or loss in the fiscal year
- - - -
Profit sharing
Lowest amount foreseen in the compensation plan - 5,487,780.74 - 5,487,780.74
Highest amount foreseen in the compensation plan - 7,317,040.98 - 7,317,040.98
Amount foreseen in the compensation plan for goals attained
- 6,097,534.15 - 6,097,534.15
Amount effectively recognized as profit or loss in the fiscal year
- 4,951,287.12 - 4,951,287.12
Variable compensation for fiscal year ended December 31, 2015
Board of Directors
Board of Executive Officers
Fiscal Council
Total
Number of members 8.75 5.75 6.00 20.50
Number of remunerated members - 5.00 - 5.00
Bonuses
Lowest amount foreseen in the compensation plan - - - -
Highest amount foreseen in the compensation plan - - - -
Amount foreseen in the compensation plan for goals attained
- - - -
Amount effectively recognized as profit or loss in the fiscal year
- - - -
Profit sharing
Lowest amount foreseen in the compensation plan - 7,042,696.36 - 7,042,696.36
Highest amount foreseen in the compensation plan - 9,390,261.81 - 9,390,261.81
Amount foreseen in the compensation plan for goals attained
- 7,825,218.18 - 7,825,218.18
Amount effectively recognized as profit or loss in the fiscal year
- 5,248,542.35 - 5,248,542.35
Variable compensation for fiscal year ended December 31, 2014
Board of Directors
Board of Executive Officers
Fiscal Council
Total
Number of members 8.08 4.75 6.00 19.83
Number of remunerated members 1.00 5.00 - 6.00
Bonuses -
Lowest amount foreseen in the compensation plan 5,829,120.00 4,595,798.37 - 10,424,918.37
Highest amount foreseen in the compensation plan 7,772,160.00 6,127,731.15 - 13,899,891.15
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Variable compensation for fiscal year ended December 31, 2014
Board of Directors
Board of Executive Officers
Fiscal Council
Total
Amount foreseen in the compensation plan for goals attained
6,476,800.00 5,106,442.63 - 11,583,242.63
Amount effectively recognized as profit or loss in the fiscal year
5,000,000.00 275,862.07 - 5,275,862.07
Profit sharing
Lowest amount foreseen in the compensation plan - - - -
Highest amount foreseen in the compensation plan - - - -
Amount foreseen in the compensation plan for goals attained
- - - -
Amount effectively recognized as profit or loss in the fiscal year
- 3,800,000.01 - 3,800,000.01
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13.4 Share-based compensation plan attributable to directors and statutory officers, in force in the last fiscal year and estimated for the current fiscal year
Board of Directors
Not applicable. Executive Officers
a) General terms and conditions
On May 29, 2009, the shareholders convened in an Extraordinary Shareholders' Meeting approved the general guidelines of the stock option plan of the Corporation ("Stock Option Plan"). The specific terms of the Stock Option Plan are as follows:
Administration of the Stock Option Plan
The Stock Option Plan targets the managers, employees in leadership positions and outsourced service providers of the Corporation or its subsidiaries (“Beneficiaries”). The Plan is managed by the Board of Directors of the Corporation, which may delegate its functions, observing the restrictions provided for by law, to a committee especially created for such purpose (“Committee”).
If a Committee is created, it must be formed by at least three (3) members, one of whom must be a Director at the Corporation, while the other members must be elected by the Board of Directors. The members of the Board of Directors and of the Committee are not eligible to become beneficiaries of the Stock Option Plan.
If the general conditions of the Stock Option Plan and the guidelines established by the Shareholders’ Meeting of the Corporation have been fulfilled, the Board of Directors shall have broad powers to take all the necessary and appropriate measures to manage the Stock Option Plan, including:
(i) granting options under the terms of the Stock Option Plan, as well as drafting and applying the
specific rules for each grant;
(ii) defining goals for the performance of the managers, employees and service providers of the
Corporation or other legal entities under its control, with the aim of establishing objective criteria
for selecting the Beneficiaries;
(iii) selecting the Beneficiaries of the Stock Option Plan and authorizing the granting of stock
options to them, establishing all the conditions for the options to be granted and modifying such
conditions when required to align the options with governing law and regulations;
(iv) issuing new shares in the Corporation within the authorized capital limit in order to meet the
needs for exercising the options granted under the terms of the Stock Option Plan;
(v) creating Specific Programs (defined below) for granting the stock options.
In the exercise of its powers, the Board of Directors shall be subject only to the limits established by law and in the Stock Option Plan, with it clear that the Board of Directors may adopt different treatments for the managers, employees and service providers of the Corporation or the other legal entities under its control in similar situations, and that it is not obliged by any equal-treatment rule to extend to everyone conditions that it deems applicable only to certain individuals or groups of individuals.
Creation of Specific Programs
Periodically, the Board of Directors or Committee may create stock option grant programs with specific conditions concerning the members, the number of options granted, the performance goals to be met, the option exercise price and other conditions (“Specific Programs”), which may not have any relationship to the general conditions established by the Stock Option Plan.
As of the date hereof, ten Specific Programs have been created.
The Board of Directors of the Corporation will determine the Beneficiaries to whom stock options will be granted pursuant to the Stock Option Plan, the number of shares that may be acquired through the
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exercise of each option, the strike price of each option and payment conditions, the vesting period and conditions for exercise of each option and any other conditions related to such options.
The granting of stock options pursuant to the Stock Option Plan is effected by executing the stock option agreement between the Corporation and the Beneficiaries, which must specify, without harming the other conditions determined by the Board of Directors: (a) the number of shares being granted; (b) the vesting conditions; (c) the expiration of the stock options; and (d) the strike price and payment conditions (“Option Agreement”).
The Option Agreements will be individually prepared for each Beneficiary and the Board of Directors may establish specific terms and conditions for each Option Agreement, without the need to apply any rule of isonomy or analogy among Beneficiaries, regardless of the event of similar or identical conditions.
Duration of the Stock Option Plan
The Stock Option Plan shall be in force from the date of its approval by the Shareholder’s Meeting of the Corporation and may be terminated at any time by decision of the Shareholders’ Meeting. The termination of the Stock Option Plan does not affect the validity of the options still in force granted under the plan.
General Provisions
To satisfy the exercise of stock options granted under the terms of the Stock Option Plan, the Corporation may, at the discretion of the Board of Directors: (a) issue new shares within the limit of the capital authorized; or (b) sell shares held in treasury.
Shareholders will not be entitled to preemptive rights in the grant or exercise of stock options under the Stock Option Plan, in accordance with Article 171, Paragraph 3 of Brazilian Corporations Law.
The Shares acquired due to the exercise of options under the terms of the Stock Option Plan shall maintain all rights inherent to their type, except in the case of item 7.2.1. of the Stock Option Plan, as well as any provision to the contrary established by the Board of Directors.
No provision of the Stock Option Plan or option granted under the terms of the Stock Option Plan should entitle any Beneficiary to remain an manager and/or employee of the Corporation and should not interfere in any way in the right of the Corporation to, at any time and subject to the legal and contractual conditions, terminate the employment agreement of the employee and/or suspend their mandate as manager.
Each Beneficiary must explicitly comply with the terms of the Stock Option Plan and sign a written declaration without any qualifications and in accordance with the terms of the Stock Trading Policy of the Corporation.
In the interest of the Corporation and its shareholders, the Board of Directors may review the conditions of the Stock Option Plan, provided it does not change its basic principles.
(b) Main objectives of the plan
The objective of the Stock Option Plan is to allow the managers, employees and service providers of the Corporation and other legal entities under its control, subject to certain conditions, to acquire stock in the Corporation, in order to: (a) promote the expansion, success and execution of the corporate objectives; (b) align the interests of the Corporation’s shareholders with those of its directors, officers, employees and service provides or other companies under its control; and (c) enable the Corporation or its subsidiaries to contract and retain directors, officers, employees and service providers.
(c) How the plan contributes to these objectives
As mentioned in the previous item, the objectives of the Stock Option Plan are: (a) to promote the expansion, success and execution of the corporate objectives; (b) to align the interests of the Corporation’s shareholders with those of its directors, officers, employees and service provides; and (c) to enable the Corporation or its subsidiaries to contract and retain directors, officers, employees and service providers.
Therefore, by establishing the guidelines and rules, the Stock Option Plan motivates the executives of the Corporation to grow and develop in order to reach their maximum potential, consistent with the business objectives, and to recognize this performance through the payment of Incentives.
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(d) How the plan contributes as an element of the issuer’s compensation policy
The Stock Option Plan is aligned with the compensation policy of the Corporation, which aims to promote the professional growth of its managers, employees and service providers by valuing individual merit. In this sense, the options are granted in accordance with the achievement of pre-established targets, enabling the managers, employees and service providers of the Corporation to determine their variable compensation portion based on their individual performance.
(e) How the plan aligns the short-, medium- and long-term interests of the directors and officers and those of the issuer
The Stock Option Plan aligns the interest of managers, the Corporation and shareholders though benefits that are aligned with the performance of the stock of the Corporation traded on the Brazilian Stock Exchange (BM&FBOVESPA). Therefore, in order for executives to maintain their total compensation competitive and aligned with the market, they must generate results and ensure that the value of the Corporation continues to increase.
In addition, through a vesting period, the Beneficiaries of the Stock Option Plan commit to their individual performance and to the performance of the Corporation over the long term, effectively contributing to the creation of an environment marked by consistent growth and talent retention.
(f) Maximum number of shares involved
The Stock Option Plan that was approved by the Extraordinary Shareholders' Meeting on May 29, 2009 (“Stock Option Plan”) provides for, in its Item 6.1, an overall maximum limit on the granting of stock options corresponding to 5% of the total number of shares issued by the Corporation.
Meanwhile, Item 4 of the Stock Option Plan establishes that the Board of Directors has powers to establish Specific Programs ("Programs") to grant stock options at special conditions, including with regard to the exercise price. Under the scope of said Programs, the overall limit for granting stock options is 2%, with a grant limit for each individual Program of 0.5% of the total number of shares issued. Accordingly, the sum of the Specific Programs (limited to 0.5% each) may not exceed the overall limit of 2% of the total number of shares issued.
In short, of the 5% of shares issued by the Company allocated to the Stock Option Plan, only 2% may be used under the scope of the Specific Programs, with a maximum grant limit for each Program of 0.5%.
(g) Maximum number of options to be granted
As informed in item (f) above, stock options may be granted pursuant to the Stock Option Plan that assign subscription and/or acquisition rights over a number of shares that may not exceed 5% of all shares issued by the Corporation.
(h) conditions for acquiring shares
Beneficiaries wishing to exercise their stock options shall inform the Corporation in writing of their intent, in accordance with communication template to be disclosed by the Board of Directors.
The Corporation shall inform the Beneficiary, within three business days of the receipt of the abovementioned notice, the exercise price to be paid based on the number of shares informed by the Beneficiary, with the Corporation responsible for taking all measures necessary to formalize the acquisition of the underlying shares.
The stock options granted under the terms of the Plan may confer rights for the acquisition of a number of Shares that does not exceed five percent (5%) of the shares issued by the Corporation, provided that the total number of shares issued or to be issued under the terms of the Plan always remains within the limit of the authorized capital of the Corporation.
The Corporation may request the temporary suspension of the right to exercise an option in any situation that, pursuant to the law and to the regulations in force, restricts or prevents the trading of shares by the beneficiary. The exercise price of the option will be paid in cash by the beneficiary. No share will be delivered to the beneficiary as a result of the exercise of the option unless he/she has complied with all legal and regulatory requirements.
i) Criteria for determining the acquisition or exercise price
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The Board of Directors may create stock option programs with specific conditions and rules regarding the participants, the number of options to be granted, the performance targets to be achieved, the exercise price and other conditions.
The Board of Directors shall be responsible for setting the exercise price of the options granted under the terms of the Stock Option Plan, based on the average price weighted by volume of the Corporation’s stock observed in the last 20 trading sessions on the Brazilian Stock Exchange (BM&FBOVESPA) immediately prior to the option grant date, with a discount of up to 20% on the amount calculated. The exercise price of the Specific Programs is based on the last 20 trading sessions on the BM&FBOVESPA prior to the first business day of March of each year, with a discount of up to 50% on the amount calculated.
The exercise price shall be paid by the Beneficiaries in cash, in accordance with the methods and periods determined by the Board of Directors.
Until the exercise price is fully paid, the shares acquired through the exercise of options under the terms of the Stock Option Plan may not be sold to third parties, except with the prior authorization of the Board of Directors, in which case the proceeds from the sale will first be used to settle the debits of the Beneficiary owed to the Corporation.
j) Criteria for setting the vesting period
The options granted under the terms of the Stock Option Plan may be exercised: (i) 25% at the end of the first year; (ii) 25% at the end of the second year; (iii) 25% at the end of the third year; and (iv) 25% at the end of the fourth year; as of the execution of the corresponding Stock Option Agreement and also observing the terms and conditions stipulated by the Board of Directors and the terms and conditions provided for in the respective Grant Agreements.
The Beneficiary shall have 6 months to exercise the options as of the dates described above.
The portions of the option not exercised within the stipulated periods and conditions shall be considered automatically terminated, with no right to indemnification.
k) Payment method
The exercise of the option must be settled in cash, using the Beneficiary’s own funds, upon deposit in
an account provided by the Company. Within 3 business days after receipt of proof of payment, the
company will send to the depositary bank the request for transfer of the shares issued by the
Corporation, to be transferred on the records to the name of the beneficiary.
l) Restrictions on transferring the shares
The Board of Directors may impose precedent terms and/or conditions for the exercise of the options, observing the minimum clauses defined in the Stock Option Plan, impose restrictions on the transfer of the shares acquired from the exercise of the options and reserve for the Corporation the option to buy back the shares or preemptive rights in the event of the sale by the Beneficiary of these shares, until the expiration of the period and/or the fulfillment of the conditions established.
There are currently no restrictions by the Board of Directors on the transfer of shares acquired through the exercise of stock options.
m) Criteria and events that if verified cause the suspension, modification or termination of the plan
The granting of options under the terms of the Stock Option Plan does not prevent the Corporation from being involved in ownership reorganizations, such as conversions, mergers, consolidations and spin-offs. The Board of Directors of the Corporation and the legal entities involved in such operations may, at their discretion, decide, without prejudice to the other measures they decide based on fair treatment: (a) to substitute the shares that are the object of the option with shares in the Corporation’s successor company; (b) to move forward the acquisition of the right to exercise the stock option in order to ensure the inclusion of corresponding shares in the operation in question; and/or (c) to effect a payment in cash of the amount that the Beneficiary would be entitled to under the terms of the Stock Option Plan.
If the number, type and class of existing shares on the Stock Option Plan approval date are changed as a result of bonuses, stock splits, stock groupings or the conversion of shares from one type or class to another or the conversion into shares of other securities issued by the Corporation, the Board of Directors will be responsible for adjusting the corresponding number, type and class of shares that are
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the object of the options granted and their respective exercise price in order to prevent any distortions in the application of the Stock Option Plan.
Furthermore, the Board of Directors may determine the suspension of the right to exercise the options whenever situations are verified that, subject to governing law and regulations, restrict or prevent stock trading by the Beneficiaries.
n) Effects of the termination of the director and officer from the issuer’s entities on their rights under the share-based compensation plan
In the event of the termination of a Beneficiary due to voluntary or involuntary termination of the service agreement, with or without just cause, resignation or abandonment, retirement, permanent disability or death, the rights granted to them under the Stock Option Plan may be terminated or modified.
Moreover, if at any time during the validity of the Stock Option Plan the Beneficiary:
terminates their relationship with the Corporation on their own initiative, voluntarily terminating their relationship, or resigning their function as manager: (i) the rights not yet exercised under respective Option Agreement, on the date of their termination, shall automatically and lawfully expire, regardless of prior notice or indemnification; and (ii) the rights that may already be exercised on the date of their termination, may be exercised within 30 days from said date, after which such rights will automatically and lawfully expire, regardless of prior notice or indemnification. The Board of Directors of the Corporation is responsible, upon analysis of each specific case, for providing a different solution to the Beneficiary, if applicable;
if the termination is caused by the Corporation upon involuntary termination, with or without just cause, or the removal from office for violating his or her duties and attributions, all rights that may not yet be exercised under the respective Option Agreement, on the date of their termination, will become automatically and lawfully expire, regardless of prior notice or indemnification. The Board of Directors of the Corporation is responsible, upon analysis of each specific case, for providing a different solution to the Beneficiary, if applicable;
in the event of termination from the Corporation due to retirement or permanent disability: (i) the rights not yet exercised on the date of their termination, will automatically become exercisable for a period of up to six months after said termination, by moving forward the grace period; and (ii) the rights that may already be exercised on the date of their termination shall remain unchanged and may be exercised normally under the terms of each specific Program; and
in the event of death: (i) the rights that may not yet be exercised on the date of their death, will automatically become exercisable by anticipating the grace period, and the heirs and legal successors of the Beneficiary will be entitled to exercise the respective stock option, provided they do so within six (6) months from the date of death, after which period said rights automatically and lawfully expire, regardless of any prior notice or compensation or over the rightful extinction of said rights; and (ii) the rights that may already be exercised on the date of their death, may be exercised by the heirs and legal successors of the Beneficiary provided they do so within six months from the date of death, after which such rights will automatically and lawfully expire, regardless of prior notice or indemnification.
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13.5 Share-based compensation recognized in the results of the last 3 fiscal years and the estimated for the current fiscal year attributable to directors and executive officers
Share-based compensation estimated for fiscal year ended December 31, 2017
Board of Directors
Board of Executive Officers
Number of members 11.00 5.00
Number of remunerated members - 5.00
Grant of stock options
Grant date - -
Number of options granted - 530,266
Vesting period - 1 year
End of exercise period (Expiration) - 4 years
Holding period - None
Price-weighted average : -
a) for options outstanding at start of year - 2.87
b) for options forfeited over the period - -
c) for options exercised over the period - -
d) for options expired over the period - -
Fair value as of the grant date - 3.90
Potential dilution upon exercise of all outstanding stock option grants
- 0.10%
Share-based compensation for fiscal year ended December 31, 2016
Board of Directors
Board of Executive Officers
Number of members 9.00 5.33
Number of remunerated members - 4.00
Grant of stock options
Grant date - -
Number of options granted - 256,638
Vesting period - 1 year
End of exercise period (Expiration) - 4 years
Holding period - None
Price-weighted average : -
a) for options outstanding at start of year - 2.52
b) for options forfeited over the period - -
c) for options exercised over the period - 2.71
d) for options expired over the period - 2.41
Fair value as of the grant date - 3.95
Potential dilution upon exercise of all outstanding stock option grants
- 0.05%
Share-based compensation for the fiscal year ended December 31, 2015
Board of Directors
Board of Executive Officers
Number of members 8.75 5.75
Number of remunerated members - 4.00
Grant of stock options
Grant date - 6/24/2015
Number of options granted - 316,193
Vesting period - 1 year
End of exercise period (Expiration) - 4 years
Holding period - None
Price-weighted average : -
a) for options outstanding at start of year - 2.56
b) for options forfeited over the period - -
c) for options exercised over the period - 2.70
d) for options expired over the period - 3.78
Fair value as of the grant date - 3.56
Potential dilution upon exercise of all outstanding stock option grants
- 0.06%
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Share-based compensation for the fiscal year ended December 31, 2014
Board of Directors
Board of Executive Officers
Number of members 8.08 4.75
Number of remunerated members - 4.75
Grant of stock options
Grant date - 3/3/2014
Number of options granted - 470,829
Vesting period - 1 year
End of exercise period (Expiration) - 4 years
Holding period - None
Price-weighted average : -
a) for options outstanding at start of year - 2.56
b) for options forfeited over the period - 6.32
c) for options exercised over the period - 4.88
d) for options expired over the period - -
Fair value as of the grant date - 3.82
Potential dilution upon exercise of all outstanding stock option grants
- 0.09%
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13.6 Information on unexercised options held by the board of directors and by the officers established in the bylaws at the end of the last fiscal year
Unexercised options at the end of the fiscal year ended December 31, 2016
Board of Directors Board of Executive Officers
Number of members 9.00 5.33
Number of remunerated members - 4.00
Options not yet vested
Number - 744,163
Vesting date - 3/3/2017, 3/3/2018, 3/3/2019 and 3/3/2020
End of exercise period (expiration) - 9/2/2017, 9/2/2018, 9/2/2019 and 9/2/2020
Holding period - None
Price-weighted average - 2.52
Fair value of the options on the last day of the
fiscal year - 4.31
Vested options
Number - -
End of exercise period (expiration) - -
Holding period - -
Price-weighted average - -
Fair value of the options on the last day of the
fiscal year - -
Fair value of all options on the last day of the
fiscal year - -
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13.7 Options exercised and shares delivered relative to the share-based compensation of directors and executive officers, in the last 3 fiscal years
Exercised Options - fiscal year ended 12/31/2016
Board of Directors Board of Executive Officers
Number of members 9.00 5.33
Number of remunerated members - 4.00
Exercised options
Number of shares - 204,971
Average weighted acquisition price - 2.71
Difference between the acquisition price and price of the acquired shares
- 3.90
Delivered shares
Number of shares - -
Average weighted acquisition price - -
Difference between the acquisition price and price of the acquired shares - -
Exercised Options - fiscal year ended 12/31/2015
Board of Directors Board of Executive Officers
Number of members 8.75 5.75
Number of remunerated members - 4.00
Exercised options
Number of shares - 106,789
Average weighted acquisition price - 2.70
Difference between the acquisition price and price of the acquired shares
- 3.65
Delivered shares
Number of shares - -
Average weighted acquisition price - -
Difference between the acquisition price and price of the acquired shares - -
Exercised Options - fiscal year ended 12/31/2014
Board of Directors Board of Executive Officers
Number of members 8.08 4.75
Number of remunerated members - 4.00
Exercised options
Number of shares - 19,054
Average weighted acquisition price - 4.88
Difference between the acquisition price and price of the acquired shares
- 1.22
Delivered shares
Number of shares - -
Average weighted acquisition price - -
Difference between the acquisition price and price of the acquired shares - -
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13.8 Information for an understanding of data disclosed under items 13.5 through 13.7 – Method adopted for the pricing of shares and options (a) Pricing model:
Black Scholes model.
(b) Data and assumptions used in the pricing model, including the average weighted share price,
exercise price, expected volatility, option lifetime, expected dividends and risk-free interest rate
The fair value of the stock options was measured directly, based on the Black-Scholes pricing model
and the following premises:
Risk-free interest rate: 7% p.a. The Corporation uses as risk-free interest rate the Long Term Interest Rate (TJLP) annualized on the calculation date and available at the federal revenue service website - www.receita.fazenda.gov.br/pessoajuridica/refis/tjlp.htm.
Standard Deviation: 39.37%. Volatility is measured taking into consideration the daily prices of Corporation shares traded on The Brazilian Stock Exchange under the ticker MRFG3, from 7/1/2015 to 12/31/2015;
The fair value of the shares on 12/31/2015 was established from the minimum of R$1.42 to the maximum of R$4.68 per share for the SPECIAL plans.
The following criteria were adopted to date for the granting of stock options to executives at Marfrig:
In 2009:
SP LT 07-08: Average weighted price in the 20 trading sessions prior to 03/03/2008: R$15.097/share
SP ST 08-09: Average weighted price in the 20 trading sessions prior to 05/11/2009: R$10.3823/share
SP LT 08-09: Average weighted price in the 20 trading sessions prior to 03/03/2009: R$6.7783/share In 2010:
Specific Plan IV – Long Term 2009/2010: Average weighted price in the 20 trading sessions prior
to 03/03/2010: R$22.0520/share
In 2011:
Specific Plan V – Long Term 2010/2011: Average weighted price in the 20 trading sessions prior
to 03/03/2011: R$14.0502/share
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In 2012:
Specific Plan VI – Long Term 2011/2012: Average weighted price in the 20 trading sessions
prior to 03/03/2012: R$9.535904/share
In 2013:
Specific Plan VII - Long Term 2012/2013: Average weighted price in the 20 trading
sessions prior to March 3, 2013: R$10.016 per share
In 2014:
Specific Plan VIII - Long Term 2013/2014: Average weighted price in the 20 trading sessions
prior to March 3, 2014: R$3.894 per share
In 2015:
Specific Plan IX - Long Term 2014/2015: Average weighted price in the 20 trading sessions
prior to March 3, 2015: R$4.743975 per share
In 2016:
Specific Plan X - Long Term 2015/2016: Average weighted price in the 20 trading sessions
prior to March 1, 2016: R$6.056249 per share
The exercise prices will be:
a) R$1.03823 per share for ESP CP 08-09
b) R$0.67783 per share for ESP LP 08-09
c) R$11.02605 per share for ESP LP 09-10
d) R$7.0251 per share for ESP LP 10-11
e) R$ 4.767952 per share for ESP LP 11-12
f) R$ 5.008273 per share for ESP LP 12-13
g) R$ 1.9470 per share for ESP LP 13-14
h) R$ 2.371987 per share for ESP LP 14-15
i) R$ 3.028124 per share for ESP LP 15-16
Option lifetime: four years (for each Specific Plan)
All dividends and distributions, or their equivalent (whether in cash, stock or other form), on Restricted
Shares not exercised are rights to which participants are entitled and are credited by the Corporation in
their account and released on the expiration of the restrictions.
The Corporation has the option to pay such credits in accumulated dividends or distributions or their
cash equivalent, in stock in the Corporation in lieu of cash or by any other means. For payments made
in shares, the conversion is made by the average price in the last 20 trading sessions on the Brazilian
Stock Exchange prior to the payment date, adjusted for the net value of income tax levied on the credit
made.
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(c) Method and assumptions used to incorporate the expected effects from the anticipated
accounting period
The options granted under the terms of the Plan may be exercised: (i) 25% at the end of the first year;
(ii) 25% at the end of the second year; (iii) 25% at the end of the third year; and (iv) 25% at the end of
the fourth year; as of the execution of the corresponding Stock Option Agreement and also observing
the terms and conditions stipulated by the Board of Directors and the terms and conditions provided for
in the respective Stock Option Grant Agreements.
For each of the Plans mentioned above, the Corporation has stipulated a time interval in which the
beneficiary may exercise the option. This period is six months, from March 3 to September 2 of each
year. Beneficiaries may not exercise their options prior to this period.
(d) How to determine the expected volatility
Calculated using the standard deviation, taking into consideration the daily prices of the Corporation’s
shares traded on the Brazilian stock exchange (BM&FBOVESPA) under the ticker MRFG3 in the six-
month period.
(e) If any other characteristic of the option was incorporated when measuring its fair value
All characteristics of the option were mentioned in the previous items of this Reference Form.
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13.9 Interest held by the directors, statutory officers and members of the Fiscal Council, by body
Corporation Shares %
Board of Directors 42,989,126 8.25%
Statutory Officers 169,728 0.03%
Fiscal Council 0 0.0%
MMS Participações S.A. Shares %
Board of Directors 162,510,022 31.17%
Statutory Officers 0 0.0%
Fiscal Council 0 0.0%
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13.10 Pension schemes offered to directors and statutory officers
The Corporation does not have a pension plan.
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13.11 Maximum variable compensation of the Board of directors, officers established in the bylaws and the Fiscal Council for the last 3 fiscal years Annual amounts
Board of Executive Officers Board of Directors Fiscal Council
12/31/2016 12/31/2015 12/31/2014 12/31/2016 12/31/2015 12/31/2014 12/31/2016 12/31/2015 12/31/2014
No. of members 5.33 5.75 4.75 9.00 8.75 8.08 6.00 6.00 6.00
No. of remunerated members 5.33 5.75 4.75 6.00 5.75 5.00 6.00 6.00 6.00
Highest compensation (in Brazilian real) 5,148,778.97 4,575,773.15 5,043,942.98 3,737,246.91 3,738,040.79 9,578,242.04 177,439.00 181,534.76 177,374.64
Lowest compensation (in Brazilian real) 1,139,154.91 909,138.56 779,979.72 594,910.36 596,893.56 591,644.78 72,000.00 72,000.00 72,322.80
Average compensation (in Brazilian real) 3,071,169.89 2,957,353.78 2,471,295.79 1,089,356.66 1,128,543.94 2,424,670.05 124,943.54 126,878.58 122,446.09
,
Note Board of Executive Officers
12/31/2016 In the Board of Executive Officers, in 2016, the lowest individual compensation effectively received was taken into consideration, including only members who remained as such for 12 months and excluding those who remained in the position for a shorter period.
12/31/2015 In the Board of Executive Officers, in 2015, the lowest individual compensation effectively received was taken into consideration, including only members who remained as such for 12 months and excluding those who remained in the position for a shorter period.
Board of Directors
12/31/2016 In the Board of Directors, in 2016 two directors chose not to receive compensation and one director is also an Executive Officer, and therefore were not included in the amounts above. In the Board of Directors, in 2016, the lowest individual compensation effectively received was taken into consideration, including only members who remained as such for 12 months and excluding those who remained in the position for a shorter period.
12/31/2015 In the Board of Directors, in 2015 two directors chose not to receive compensation and one director is also an Executive Officer, and therefore were not included in the amounts above. In the Board of Directors, in 2015, the lowest individual compensation effectively received was taken into consideration, including only members who remained as such for 12 months and excluding those who remained in the position for a shorter period.
12/31/2014 In the Board of Directors, in 2014 two directors chose not to receive compensation and one director is also an Executive Officer, and therefore were not included in the amounts above.
Fiscal Council
12/31/2016 In the Fiscal Council, in 2016, the lowest individual compensation effectively received was taken into consideration, including only members who remained as members for 12 months and excluding those who remained in the position for a shorter period.
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12/31/2014 In the Fiscal Council, in 2014, the lowest individual compensation effectively received was taken into consideration, including only members who remained as members for 12 months and excluding those who remained in the position for a shorter period.
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13.12 Compensation mechanisms or indemnification for the directors and officers in the event of their termination or retirement We do not maintain contractual arrangements, insurance policies or other instruments that form
compensation or indemnification mechanisms for managers in the event of their termination or
retirement.
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13.13 Percentage of the total compensation received by directors and officers and members of the Fiscal Council who are parties related to the controlling shareholders
Year Board of Directors Board of Executive Officers
Fiscal Council
2016 19.47% 4.82% 0.00%
2015 18.96% 3.75% 0.00%
2014 42.13% 3.15% 0.00%
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13.14 Compensation of the directors and officers and members of the Fiscal Council, by body, received for any reason other than for the position they hold
The managers and the members of the Fiscal Council of the Corporation did not receive in the last three fiscal years compensation for purposes other than the position they occupy at the Corporation.
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13.15 Compensation of the directors and officers and the members of the Fiscal Council recognized in the results of the direct or indirect controlling shareholders of the companies under joint control and of the subsidiaries of the issuer
Fiscal year ended 12/31/2016 - Annual Amounts
Board of Directors Board of Executive Officers
Fiscal Council Total
Compensation received due to position held in the issuer
Direct and Indirect controlling shareholders - - - -
Subsidiaries of the issuer - 1,028,741.21 - 1,028,741.21
Companies under common control - - - -
Other compensation received
Direct and Indirect controlling shareholders - - - -
Subsidiaries of the issuer - - - -
Companies under common control - - - -
Fiscal year ended 12/31/2015 - Annual Amounts
Board of Directors Board of Executive Officers
Fiscal Council Total
Compensation received due to position held in the issuer
Direct and Indirect controlling shareholders - - - -
Subsidiaries of the issuer - 1,576,670.21 - 1,576,670.21
Companies under common control - - - -
Other compensation received
Direct and Indirect controlling shareholders - - - -
Subsidiaries of the issuer - - - -
Companies under common control - - - -
Fiscal year ended 12/31/2014 - Annual Amounts
Board of Directors Board of Executive Officers
Fiscal Council Total
Compensation received due to position held in the issuer
Direct and Indirect controlling shareholders - - - -
Subsidiaries of the issuer - - - -
Companies under common control - - - -
Other compensation received
Direct and Indirect controlling shareholders - - - -
Subsidiaries of the issuer - - - -
Companies under common control - - - -
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13.16 Other information deemed material
There is no other information the Corporation deems relevant in relation to item 13 that was disclosed in the other items of this Reference Form.