MARFRIG GLOBAL FOODS S.A.

Transcription

1 (Convenience translation into English from the original previously issued in Portuguese) MARFRIG GLOBAL FOODS S.A. Individual and consolidated interim financial statements for the three and six month-periods ended June 30, 2015 and independent auditors review report on the interim financial statements EO/GP/LP BDOi/15

2 Individual and consolidated interim financial statements for the three and six month-periods ended June 30, 2015 and independent auditors review report Contents Independent auditors review report on the interim financial statements Balance sheets Statements of income Statements of comprehensive income Statements of changes in shareholders equity Statements of cash flows Statements of added value Notes to the individual and consolidated interim financial statements 2

3 Tel.: Rua Major Quedinho, 90 Fax: Consolação São Paulo, SP - Brasil (Convenience translation into English from the original previously issued in Portuguese) INDEPENDENT AUDITORS REVIEW REPORT ON THE INTERIM FINANCIAL STATEMENTS To the Shareholders, Board Members and Management of Marfrig Global Foods S.A. São Paulo - SP Introduction We have reviewed the individual and consolidated interim financial statements of Marfrig Global Foods S.A. (the Company ) contained in the quarterly information form for the quarter ended June 30, 2015, which comprises the balance sheet as of June 30, 2015 and the related statements of income and comprehensive income for the three and six month-periods then ended, and of changes in shareholders equity and cash flows for the six-month period then ended, including a summary of the significant accounting practices and other notes. Management is responsible for the preparation of the individual and consolidated interim financial statements in accordance with CPC Technical Pronouncement 21 (R1) - Interim Financial Reporting and with International Accounting Standard (IAS) 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), and for the presentation of this information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the Quarterly Information. Our responsibility is to express a conclusion on the interim information based on our review. Scope of the review We conducted our review in accordance with Brazilian and international standards for reviewing interim financial information (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). An interim review consists principally of applying analytical and other review procedures, and making enquiries of and having discussions with persons responsible for financial and accounting matters. An interim review is substantially less in scope than an audit conducted in accordance with auditing standards. An interim review does not provide assurance that we would become aware of any or all significant matters that might be identified in an audit. Accordingly, we do not express such an audit opinion. 3

4 Conclusion about the interim financial statements Based on our review, we are not aware of any fact that leads us to believe that the individual and consolidated interim financial statements included in the quarterly information form referred to above have not been prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to Quarterly Information and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission. Other matters Interim statements of value added We have also reviewed the individual and consolidated interim statements of added value for the quarter and six month-periods ended June 30, 2015, prepared by the Company s Management, which disclosure in the interim financial statements is required in accordance with the standards issued by CVM applicable to the preparation of the Quarterly Information and considered as supplemental information by IFRS, which do not require the disclosure of the statement of value added. These statements were submitted to the same review procedures previously described and, based on our review, we are not aware of any fact that would lead us to believe that they have not been fairly stated, in all material respects, in relation to the interim financial statements, individual and consolidated, taken as a whole. The accompanying individual and consolidated interim financial statements have been translated into English for the convenience of readers outside Brazil. São Paulo, August 10, BDO RCS Auditores Independentes SS CRC 2 SP /O-11 Esmir de Oliveira Accountant CRC 1SP /O-0 4

5 Balance sheet At June 30, 2015 and December 31, 2014 (In thousands of Brazilian reais R$) Assets Parent Company Liabilities and Shareholders' Equity Consolidated Parent Company Consolidated Note 6/30/ /31/2014 6/30/ /31/2014 Note 6/30/ /31/2014 6/30/ /31/2014 Current assets Current liabilities Cash and cash equivalents Trade accounts payable Marketable securities Accrued payroll and related charges Trade accounts receivable - domestic Taxes payable Trade accounts receivable - foreign Loans and financing Inventories of goods and merchandise Notes payable Biological assets Lease payable Recoverable taxes Interest on debentures Prepaid expenses Advances from customers Notes receivable Liabilities held for sale Advances to suppliers Other payables Assets held or sale Other receivables Non-current liabilities Loans and financing Taxes payable Non-current assets Deferred income and social contribution taxes Marketable securities Provisions for contingencies Court deposits Lease payable Notes receivable Debentures payable Deferred income and social contribution taxes Notes payable Recoverable taxes Mandatory deed convertible into shares Other receivables Other Investments Equity Property, plant and equipment Share Capital Biological assets (-) Share issue expenses 25.1 ( ) ( ) ( ) ( ) Intangible assets Capital reserve Issue of common shares Acquisition of shares in subsidiaries (158) (158) (158) (158) Profit reserves Legal reserve Retained earnings Treasury shares (3.121) (3.685) (3.121) (3.685) Treasury shares canceled (11.690) (11.690) (11.690) (11.690) Other comprehensive income 25.3 ( ) ( ) ( ) ( ) Asset valuation adjustment ( ) ( ) ( ) ( ) Cumulative translation adjustment Equity amounts related to assets held for sale ( ) - ( ) - Accumulated losses ( ) ( ) ( ) ( ) Controlling shareholders' equity Non-controlling interest Total assets Total liabilities and shareholders' equity The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements. 5

6 Statement of income (In thousands of Brazilian reais R$) Parent Company Consolidated Reclassified Reclassified Reclassified Reclassified 2nd Quarter YTD 2nd Quarter YTD 2nd Quarter YTD 2nd Quarter YTD Note Net Sales Cost of Goods Sold 27 ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Gross profit Operating income (expenses) (62.095) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Selling expenses 27 (68.351) ( ) (94.552) ( ) ( ) ( ) ( ) ( ) General and administrative expenses 27 (21.471) (36.715) (32.886) (47.059) ( ) ( ) (93.119) ( ) Equity in earnings (losses) of subsidiaries (35.702) ( ) (8.843) (23.803) (2.792) (7.084) (2.970) (8.940) Other operating income (expenses) (8.549) (8.332) (17.220) (27.872) Net income before net financial income (expenses) Financial income (expenses) 28 ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Financial income Exchange gain Financial expenses ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Exchange Loss ( ) ( ) (65.773) ( ) ( ) ( ) (96.537) ( ) Loss before tax effects (70.990) ( ) ( ) ( ) (30.701) ( ) ( ) ( ) Provision for income and social contribution taxes Current and deferred income tax (313) Current and deferred social contribution Net income (loss) in the period from continuing operations (28.200) ( ) (75.490) ( ) (18.878) ( ) (70.853) ( ) Net income (loss) in the period from discontinued operations Net income (loss) in the period before interest (6.148) ( ) (55.089) ( ) ( ) (50.452) ( ) Attributable to: Marfrig Global Foods - controlling interest - continuing operations (28.200) ( ) (75.490) ( ) (28.200) ( ) (75.490) ( ) Marfrig Global Foods - controlling interest - discontinued operations Total controlling interest (6.148) ( ) (55.089) ( ) (6.148) ( ) (55.089) ( ) Non-controlling interest - continuing operations Non-controlling interest - discontinued operations Total non-controlling interest (6.148) ( ) (55.089) ( ) ( ) (50.452) ( ) Basic and diluted losses per common share - continuing operations 30 (0,0118) (1,1089) (0,1059) (0,2912) (0,0541) (1,1761) (0,1451) (0,3820) Basic and diluted losses per common share - discontinued operations ,0424 0,0672 0,0393 0,0908 Total basic and diluted losses per common share 30 (0,0118) (1,1089) (0,1059) (0,2912) (0,0118) (1,1089) (0,1059) (0,2912) The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements. 6

7 Statement of comprehensive income (In thousands of Brazilian reais R$) Parent Company Consolidated Reclassified Reclassified Reclassified Reclassified 2nd Quarter YTD 2nd Quarter YTD 2nd Quarter YTD 2nd Quarter YTD Net loss in the period (6.148) ( ) (55.089) ( ) ( ) (50.452) ( ) Exchange variation on net investments ( ) ( ) Exchange variation on balance sheet translation (64.274) (51.431) (64.274) (51.431) ( ) ( ) Total comprehensive income (loss) for the period ( ) (881) (96.631) ( ) (87.353) Attributable to: Marfrig Global Foods - controlling interest - continuing operations ( ) (21.282) ( ) ( ) (21.282) ( ) Marfrig Global Foods - controlling interest - discontinued operations Marfrig Global Foods - Total controlling interest ( ) (881) (96.631) ( ) (881) (96.631) Non-controlling interest - continuing operations Non-controlling interest - discontinued operations Total non-controlling interest The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements. 7

8 Statement of changes in shareholders equity (In thousands of Brazilian reais R$) Attributable to controlling shareholders Profit reserves Other comprehensive income Share capital Share issue expenses Capital reserve Legal reserve Profit retention Treasury Shares Treasury shares canceled Equity valuation adjustment Cumulative translation adjustments Accumulated losses Total Total controlling interest Total noncontrolling interest Total shareholders' equity At December 31, ( ) (4.361) (11.690) ( ) ( ) Exchange variation on net investments (6.680) Exchange variation - balance sheet translation (51.431) - (51.431) (51.431) - (51.431) Acquisition of shares in subsidiaries - - (158) (158) (158) - (158) Realization of Deemed Cost (3.552) - Interest rate hedge - Parent company and reflecting from Subsidiaries (212) - - (212) (212) - (212) Write-off (acquisition) of treasury shares Net loss in the period ( ) ( ) ( ) ( ) At June 30, ( ) (4.360) (11.690) ( ) ( ) Attributable to controlling shareholders Profit reserves Other comprehensive income Share capital Share issue expenses Capital reserve Legal reserve Profit retention Treasury Shares Treasury shares canceled Equity valuation adjustment Cumulative translation adjustments Equity amounts related to assets held for sale Accumulated losses Total Total controlling interest Total noncontrolling interest Total shareholders' equity At December 31, ( ) (3.685) (11.690) ( ) ( ) Exchange variation on net investments ( ) ( ) ( ) ( ) Exchange variation - balance sheet translation ( ) Realization of Deemed Cost (4.264) Interest rate hedge - Parent company and reflecting from Subsidiaries Write-off (acquisition) of treasury shares Net loss in the period ( ) ( ) ( ) ( ) At June 30, ( ) (3.121) (11.690) ( ) ( ) ( ) OK OK OK OK OK OK OK OK OK VERIFICAR OK OK OK OK The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements. 8

9 Statements of cash flow (In thousands of Brazilian reais R$) Parent Company Consolidated Reclassified Reclassified YTD YTD YTD YTD Net loss in the period in the continued operation ( ) ( ) ( ) ( ) Items not affecting cash Depreciation Amortization Non-controlling interest Provision for contingencies Deferred taxes ( ) ( ) ( ) ( ) Equity in earnings (losses) of subsidiaries Exchange variation on financing (78.825) (87.527) Exchange variation on other assets and liabilities Interest expenses on financial debt Interest expenses on financial leasing Interest expenses on debentures Cost with issue of financial operations Leasing adjustment to present value (75) 124 (75) 124 Estimated non-realization of inventories Estimated losses with doubtful accounts (856) Estimated losses with non-realization of recoverable taxes Bargain purchase (75.193) - (75.193) Fixed asset write-off Equity changes Trade accounts receivable Current inventory and biological assets (65.234) (42.617) Court deposits (1.412) Accrued payroll and related charges Trade accounts payable (364) Current and deferred taxes (53.781) (65.064) (91.360) ( ) Notes receivable and payable (2.394) (27.698) Other assets and liabilities (13.715) (19.729) Cash flow from (used in) operating activities Investing activities Investments (33.804) (59.423) (9.406) 5 Acquisition of subsidiary Investments in fixed and non-current biological assets ( ) (69.134) ( ) ( ) Investments in intangible assets (1.214) (3.714) (2.313) (7.207) Cash flow from investing activities ( ) ( ) ( ) ( ) Financing activities Interest settled debentures / Bonds ( ) ( ) ( ) ( ) Loans and financing ( ) (91.067) ( ) Loans granted Loans settled ( ) ( ) ( ) ( ) Leasing payable (464) (795) (12.250) (13.599) Leasing granted Leasing settled (1.805) (2.058) (13.591) (14.862) Mandatory deed convertible into shares (9.651) (4.743) (9.651) (4.743) Treasury shares Cash flow from (used in) financing activities ( ) ( ) ( ) ( ) Exchange variation on cash and equivalents (5.597) (86.203) Discontinued operations net of cash (NE 36) - - ( ) Cash flow in the period (94.454) Cash and cash equivalents Balance at end of period Balance at start of period Changes in the period (94.454) The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements. 9

10 Statement of added value (In thousands of Brazilian reais R$) Parent Company Consolidated Reclassified Reclassified YTD YTD YTD YTD Revenue Sales of goods and services Other revenues Estimated losses with doubtful accounts (Accrual) (228) (2.933) (3.371) Inputs purchased from other firms (including taxes - ICMS, IPI, PIS and Cofins) Cost of goods sold and services rendered Material, energy, outsourced services and other Loss / Recovery of assets Gross value added Depreciation and amortization Net value created by company Value added received through transfer Equity In Earnings (Losses) of Subsidiaries ( ) (23.803) (7.084) (8.940) Financial income and exchange rate gains Other (including Discontinued Operations) (20.658) Total value added to be distributed Value added distribution Employees Direct compensation Benefits FGTS (severance pay fund) Taxes payable ( ) (88.224) Federal ( ) ( ) ( ) ( ) State Municipal Value distributed to providers of capital Interest Rentals Other (including Discontinued Operations) Value distributed to shareholders ( ) ( ) ( ) ( ) Operational loss in the period ( ) ( ) ( ) ( ) Non-controlling interest in retained earnings (losses) The accompanying notes are an integral part of the parent company and interim individual and consolidated financial statements. 10

11 1. Operations Marfrig Global Foods S.A. is a multinational company operating in the food and food service industries in Brazil and around the world. It has a diversified and comprehensive portfolio of products and its operations are founded on its commitment to excellence and quality, which has assured its products presence in the world s largest restaurant chains and supermarkets, as well as homes in over 110 countries. The Corporation s activities include the production, processing, further processing, sale and distribution of animal proteins (beef, lamb and poultry, including chicken and turkey) and a variety of other food products, such as breaded products, ready-to-eat meals, fish, frozen vegetables and desserts, among others. Marfrig Global Foods S.A. was incorporated on June 6, 2000 and became a corporation on March 26, The Corporation was registered with the Brazilian Securities and Exchange Commission (CVM) under No on June 18, 2007 and carried out its initial public offering (IPO) on June 29, Its shares were listed on the Novo Mercado listing segment of the BM&FBovespa S.A. - Securities, Commodities and Futures Exchange (Brazilian Stock Exchange) under the stock symbol MRFG3. On January 22, 2014, the Annual and Extraordinary Shareholders' Meeting held at the Corporation s headquarters amended Article 1 of the Corporation s Bylaws, altering the Corporation s name to Marfrig Global Foods (formerly Marfrig Alimentos S.A.). On June 30, 2015, its subscribed and paid-in Share Capital was represented by 520,747,405 common shares, of which, as of June 30, 2015, 159,578,621, or 30.64% of the Share Capital, was controlled by MMS Participações Ltda. and its partners, individually. On the same date, the free float was 360,448,046 shares, or 69.22% of the Share Capital of the Corporation, which held 330,074 shares in treasury, representing 0.06% of the total capital, while its Board of Directors and Executive Board held 390,664 shares, representing 0.08% of the capital. MMS Participações Ltda. is controlled by Marcos Antonio Molina dos Santos and Marcia Aparecida Pascoal Marçal dos Santos, each holding a 50% ownership interest. Because it is listed on the Novo Mercado special corporate governance segment of the Brazilian Stock Exchange, the Corporation is subject to arbitration under the Market Arbitration Chamber, pursuant to the arbitration clause in its by-laws. The Corporation s stock is also a component of the main performance indicators of Brazil s Capital Markets, such as the Bovespa Index (Ibovespa, the most important indicator of the average performance of Brazilian stocks). Marfrig stock is also a component of the stock indexes of the Brazilian Stock Exchange: Broad Brazil Index (IBRA); Brazil Index (IBrX); Consumption Sector Index (ICON); Corporate Governance Trade Index (IGCT); Special Corporate Governance Stock Index (IGCX); Novo Mercado Corporate Governance Index (IGNM); Industrial Sector Index (INDX); Special Tag-Along Stock Index (ITAG); Small Cap Index (SMLL); BM&FBovespa Value Index (IVBX). The Corporation established an integrated and geographically diversified business model, which consists of production units located in strategic places, combined with a broad distribution network with access to the world s main channels and consumer markets. Marfrig currently operates 59 processing unit, distribution centers and offices in Brazil and in 11 other countries in South America, North America, Europe, Oceania and Asia. 11

12 The Corporation believes that continuous improvement in its internal processes will enable it to further improve efficiency and cut costs, which, coupled with a result-driven management that is committed to profitable growth, will drive profitability and cash generation. The Corporation s ownership structure, financial and equity position should be considered within the context of the integrated activities of the following segments, which are organized as used by the Management to take decisions, each with their own structures and segmented into: Marfrig Beef The Marfrig Beef business unit is a pioneer in the sale and promotion of beef, with the focus on serving the domestic market in Brazil, especially the food service industry, as well as the export market, with clients from all over the world. Marfrig Beef is renowned in many countries for the quality of its premium products, having taken advantage of the favorable scenario in Brazil s cattle industry and foreign exchange to strengthen its position in international markets. Its international operations in South America are concentrated in exporting premium beef cuts and leveraging its strategic geographic position in Uruguay, which ensures access to the world s main consumer markets. Keystone - The Keystone business unit is a supplier of food made from animal protein to major global restaurant chains, with strong presence in the United States and Asia. Committed to innovation and the highest food safety and quality standards, it combines vast expertise ertise in the food industry with a strong focus on clients to offer a complete mix of fresh and frozen products. 12

13 Summary of the equity interests held by the Corporation: Equity interests Business Segment -Beef, Lamb and Leather MARFRIG BEEF Parent Company Core Activity Country Marfrig Global Foods S.A. Subsidiaries MFB Marfrig Frigoríficos do Brasil S.A. Processing and marketing of product (formed by nine cattle slaughter and beef processing facilities, one of which is also used for slaughtering lamb, two tanneries, one plant producing cleaning and hygiene products and one pet animal feed plant, located in the States of São Paulo, Rio Grande do Sul, Goiás, Mato Grosso do Sul, Mato Grosso and Rondônia, in addition to three Distribution Centers in the State of São Paulo). Core Activity Processing and marketing of product (composed of 13 cattle slaughter and beef processing facilities, one of which is also used for slaughtering lamb and two for processing beef), and two distribution centers. Brazil Interest % Country 6/30/ /31/2014 Brazil 100% 100% Masplen Ltd Holding company Jersey Island 100% 100% Pampeano Alimentos S.A. Producer of canned meat and other processed products Brazil 100% 100% Marfrig Overseas Ltd Specific Purpose Entity - SPEs Cayman Island 100% 100% Marfood USA Inc Processing and marketing of products USA 100% 100% (owner of trademark Pemmican) MFG Agropecuária Ltda Agricultural activities Brazil 99.99% 99.99% (composed of 6 feedlots) MFG Comercializadora de Energia Ltda Energy trading and associated services Brazil 99.99% 99.99% Marfrig Argentina S.A. Processing and marketing of products Argentina 99.92% 99.91% Frigorífico Tacuarembó S.A. Processing and marketing of products Uruguay 97.91% 97.91% Inaler S.A. Processing and marketing of products Uruguay 100% 100% Mercomar Empreendimentos e Processing and marketing of products Brazil 100% - Participações Ltda (composed of 5 primary and further processing units) Marfrig Chile S.A. Processing and marketing of products Chile 99.50% 99.50% Frigorífico Patagônia S.A. Processing and marketing of products (lamb meatpacker in from December to May, fish, clam and king crab processing in other months) Chile 100% 100% Prestcott International S.A. Holding company Uruguay 100% 100% Cledinor S.A. Processing and marketing of products: beef and lamb Uruguay 100% 100% Establecimientos Colonia S.A. Processing and marketing of products Uruguay 100% 100% Weston Importers Ltd Trading company United Kingdom 100% 100% CDB Meats Ltd Processing of products United Kingdom 100% 100% Marfrig Peru S.A.C. Marketing, poultry, beef, fish and seafood Peru 100% 100% 13

14 Subsidiaries Core Activity Country Interest % 6/30/ /31/2014 Holding company whose purpose is to obtain funding and hold Marfrig Holdings (Europe) B.V ownership of the companies Keystone and Moy Park Netherland 100% 100% KEYSTONE Keystone International S.a.r.l Holding Luxembourg 100% 100% Mckey Luxembourg Holdings S.a.r.l Holding of the companies Keystone with operations focused on Asia Luxembourg 100% 100% MFG (USA) Holdings Inc Holding of the companies Keystone with operations focused on the USA USA 100% 100% (Keystone companies jointly are composed of 4 poultry slaughter plants 13 further processing plants) MOY PARK - Discontinued Operation Moy Park Ltd Processing and marketing products Northern Ireland 100% 100% (composed of 4 poultry slaughter plants, 14 further processing units) Kitchen Range Foods Ltd Processing and marketing products England 100% 100% Moy Park (BondCo) Plc Holding company incorporated to conduct the first issue of Senior Notes in GBP Northern Ireland 100% 100% 14

15 2. Presentation and preparation of the parent company and consolidated financial statements 2.1. Statement of compliance (with IFRS and CPC accounting standards) Consolidated financial statements The Corporation s consolidated financial statements were prepared and are presented in accordance with accounting practices adopted in Brazil and with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The separate financial statements of the parent company were prepared in accordance with the accounting practices adopted in Brazil and are disclosed jointly with the consolidated financial statements. The accounting practices adopted in Brazil include those provided for in Brazilian corporations law and the Pronouncements, Guidelines and Interpretations of the Accounting Pronouncement Committee (CPC), as approved by the Securities and Exchange Commission of Brazil (CVM). Until December 31, 2013, these practices differed from IFRS, in relation to the separate financial statements, as they required the valuation of investments in subsidiaries, associates and joint ventures through the equity method, as opposed to valuation at cost or fair value under IFRS. With the revision of IAS 27 (Separate Financial Statements) revised by IASB in 2014, the separate financial statements in IFRS now allow the use of the equity method to recognize investments in subsidiaries, associates and joint ventures. In December 2014, CVM issued Resolution 733/2014, which approved the Document of Revision of Technical Pronouncements no. 07 addressing Pronouncements CPC 18, CPC 35 and CPC 37, issued by the Accounting Pronouncements Committee, accepting said revision of IAS 27. The individual and consolidated Statement of Added Value (DVA) is required under Brazilian corporations law and the accounting practices adopted in Brazil applicable to public companies. IFRS standards do not require said statement. As a result, under IFRS, this statement is being presented as supplementary information, without prejudice to the complete set of financial statements. 15

16 Parent company interim financial statements The financial statements were prepared based on the accounting practices adopted in Brazil and resolutions issued by CFC, observing the accounting guidelines based on Brazilian Corporation Law (Federal Law 6,404/76), which include the provisions introduced, amended and revoked by Law 11,638 of December 28, 2007 and Law 11,941 of May 27, 2009 (former Provisional Presidential Decree 449 of December 3, 2008). There is no difference between the Group s shareholders equity and consolidated income (loss) and the parent company s shareholders equity and income (loss) disclosed in the parent company interim financial statements. Thus, the Group s consolidated/individual interim financial statements are being presented in the same document. The Management of the Corporation approved the issue of these individual and consolidated financial statements on August 10, Basis of presentation The parent company and consolidated interim financial statements are denominated in Brazilian real, which is the reporting currency, and all amounts are rounded to thousands of Brazilian real, unless otherwise stated. The consolidated financial statements were prepared on the historical cost basis, unless otherwise stated, such as certain assets and financial instruments, which may be stated at fair value. The preparation of parent company and consolidated interim financial statements in accordance with IFRS and CPCs requires Management to make certain accounting estimates. The areas involving considerable judgment or use of estimates for the parent company and consolidated financial statements are stated in note to the financial statements for the fiscal year ended December 31, Foreign currency translation Functional and reporting currency The financial statements of each consolidated subsidiary and those used as a basis for accounting for investments under the equity method are prepared using the functional currency of each entity. Under CVM Resolution 640/10 (CPC 02 (R2) effect of changes in exchange rates and translation of financial statements), functional currency is the currency of the primary economic environment in which the entity operates. To define the functional currency of each subsidiary, Management considered which currency significantly influences the sale price of their goods and services and the currency in which most of their production input costs are paid or incurred. The consolidated financial statements are expressed in Brazilian real (R$), which is the functional and reporting currency of Marfrig Global Foods S.A.. 16

17 Transactions and balances Foreign currency transactions are translated into the functional currency of the Corporation using the exchange rate at the transaction date. Gains and losses resulting from the difference between the monetary asset and liability balance translation at the year-end and the translation of the transaction balances are recognized in the income statement. Non-monetary assets and liabilities in foreign currency measured at fair value are translated at the exchange rate on the date on which their fair value is determined and the differences resulting from such translation will be recognized under other comprehensive income on the closing date of each period or fiscal year. Group companies The results of operations and the financial position of all consolidated subsidiaries and investments accounted for under the equity method, whose functional currency differs from the reporting currency, are translated from the reporting currency, as follows: i. Asset and liability balances are translated using the exchange rate in effect at the date of the consolidated interim financial statements; ii. Statement of operation accounts are translated using the monthly average exchange rate; and iii. All differences arising from the foreign currency translation are recognized in shareholders equity and in consolidated comprehensive income (loss) under Cumulative translation adjustment. 17

18 3. Summary of significant accounting practices 3.1. Significant accounting practices The quarterly information was prepared in accordance with CVM Resolution 673/11, which sets forth the minimum interim accounting information to be reported and the principles of recognition and measurement for complete or condensed interim statements. Thus, the quarterly information presented here was prepared based on the accounting policies and estimate calculation methods used while preparing the annual financial statements for the fiscal year ended December 31, There has been no change in said policies and estimate calculation methods. As allowed by CVM Resolution 673/11, and based on the recommendations contained in Official Letter CVM/SNC/SEP/No. 003/2011, management chose to not report once again the details presented in Note 3. Summary of significant accounting practices, in order to avoid repeating the information already disclosed in its latest annual financial statements. Hence, users must read this quarterly information together with the annual financial statements for the fiscal year ended December 31, 2014, to have a better understanding Discontinued operations and assets held for sale An operation is classified as discontinued upon the earlier of its sale or when it meets the criteria for classification as held-for-sale. When an operation is classified as discontinued, the comparative statements of income and of cash flow are presented as if the operation had been discontinued since the beginning of the comparison period, and therefore include the caption Reclassified for the June 30, 2014 statements. These assets are measured by the lower between their book value and fair value less selling expenses. Once they are classified as held-for-sale, intangible and fixed assets can no longer be amortized or depreciated. Results from discontinued operations are presented as a single entry in the income statement, at their net amount after Income and Social Contribution Taxes paid by these operations, less any impairment losses, and are presented in Notes 3.3 and Reclassification in the statements of income and of cash flow in the period ended June 30, 2014 On June 21, 2015, the Company disclosed through a Material Fact notice the Final Agreement for the Purchase and Sale of Ownership Interest and Other Covenants with JBS S/A, which laid out the terms and conditions for the sale to JBS S.A. of all ownership interests held by Marfrig in Moy Park Holdings Europe Ltd., parent company of the companies operating the Moy Park business unit. As a result, in compliance with the provisions of CPC 31 and for comparison purposes, the Corporation and its subsidiaries restated their statements of income, of cash flow, of comprehensive income and notes to the financial statements for the period ended June 30,

19 4. Cash and cash equivalents Cash and cash equivalents consist of cash, banks and cash equivalents, as shown below: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Cash and banks 170, , ,707 1,023,213 Cash equivalents ,779 9,445 68, , , ,152 1,091,685 The subsidiaries cash and cash equivalents are consolidated as follows: Brazil Abroad 6/30/15 12/31/14 6/30/15 12/31/14 Cash and banks 106,867 48, , ,201 Cash equivalents - - 9,020 47, ,867 48, , ,894 The Corporation adopts the policy of presenting the following items within the cash and cash equivalents group: Cash on hand; Demand deposits. 19

20 4.1 Cash and banks by currency Cash by currency are as follows: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Cash and banks: Brazilian real 54, ,650 58, ,366 US dollar 86, , , ,481 Euro 29, ,564 35,430 Pound sterling , ,895 M alaysian ringgit ,834 16,850 Chinese Yuan , ,539 Australian dollar ,038 18,671 Thai Baht (Thailand) ,755 19,358 South Korean Won ,044 20,429 Honk Kong dollar ,301 9,824 Uruguayan peso ,568 7,772 Chilean peso - - 5,609 3,427 Other , , ,707 1,023, Cash equivalents Cash equivalents by type are as follows: Maturities PMPV (1) Currency Parent Average interest rate p.a.% 6/30/15 12/31/14 CDB Automatic savings account (2) Immediate - BRL ,039 Interest-bearing account (2) Immediate - USD ,654 Other (2) - - BRL Total ,779 Maturities PMPV (1) Currency Consolidated Average interest rate p.a.% 6/30/15 12/31/14 CDB Automatic savings account (2) Immediate - BRL ,039 Interest-bearing account (2) 9/30/ USD ,240 60,347 Other (2) - - BRL Total 9,445 68,472 (1) Weighted average maturity in years. 20

21 (2) Transactions have daily liquidity and can be redeemed at any time. Said maturity refers to the corresponding instrument CDB Automatic savings account The remaining balances in checking accounts, in Brazilian real, are automatically transferred to a savings account, which bears interest at financial market rates Interest-bearing account The interest-bearing account consists of amounts received in U.S. dollar from exports and financial transactions, kept in accounts abroad. It bears interest at a fixed rate. 5. Marketable Securities Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Marketable securities 993, ,589 1,726,131 1,568, , ,589 1,726,131 1,568,082 The Corporation s financial investments by type are as follows: Held-for-trading: Maturities PMPV (1) Currency Parent Average interest rate p.a.% 6/30/15 12/31/14 Bank deposit certificates - CDB (2) Immediate - BRL , ,451 Repurchase and reverse repurchase agreements Immediate - BRL ,272 - Interest-bearing deposit 09/18/ USD , ,083 Brazilian prize-draw investment bonds Immediate - BRL Credit-linked note - CLN (2) 07/17/ USD ,174 79,762 FIDC 06/13/ BRL ,052 17,194 Total 993, ,589 Total current 993, ,589 21

22 Consolidated Maturities PMPV (1) Currency Average interest rate p.a.% 6/30/15 12/31/14 Held-for-trading Bank deposit certificates - CDB (2) Immediate - BRL , ,664 Repurchase and reverse repurchase agreements Immediate - BRL ,272 - Interest-bearing deposits 03/31/ BRL Interest-bearing deposits 09/18/ USD , ,215 Circular Letter USD - - 1,723 Brazilian prize-draw investment bonds Immediate - BRL Brazilian prize-draw investment bonds - - USD - - 3,540 Credit-linked note - CLN (2) 07/17/ USD , ,989 FIDC 06/13/ BRL ,052 17,194 Fixed income bonds 09/30/ BRL , ,414 Total 1,726,131 1,568,082 Total current 1,725,191 1,567,112 Total non-current (1) Weighted average maturity in years. (2) Transactions have daily liquidity and can be redeemed at any time. Said maturity is the maturity of the operation. The Corporation maintains the following types of financial investments: 5.1 Bank Certificate of Deposit (CDB) Bank certificates of deposit are investments made at prime financial institutions at variable rates and yield on average 96% to 100% of the variation in the Interbank Deposit Rate (CDI). 5.2 Repurchase and reverse repurchase agreements Transactions based on outstanding daily cash denominated in Brazilian real that bear interest at the CDI (Interbank Deposit Rate), which ranges from 80% to 100%. This operation has immediate liquidity, for it can be early redeemed without yield loss. 5.3 Interest-bearing deposits The investments of this type are made in Brazilian real and U.S. dollar and bear interest at fixed rates and measured by the amortized cost. 5.4 Circular Letter 1456 The investments of this type consist of exports denominated in U.S. dollar with the Central Bank of Uruguay that bear interest at fixed rates, and are made between 180 and 360 days before the export. 22

23 5.5 Brazilian prize-draw investment bonds The investments of this type are made in Brazilian real and bear interest at the benchmark rate (TR). 5.6 Credit linked note (CLN) The Credit Linked Notes CLN comprise a financial instrument exclusively used to generate resources among the Group s companies and correspond to a credit note used to mitigate the Corporation s credit risk, as presented in Note The resources applied in these instruments derive from funds raised in the international capital markets issued by Marfrig Group s foreign subsidiaries, which due to cash management and liquidity strategy are maintained at the issuing foreign subsidiaries. The average yield rate is 6.16% p.a. and they are measured by the amortized cost per annum. 5.7 FIDC Fundos de Investimentos em Direitos Creditórios (Receivables Backed Investment Funds) These are shares of an investment fund that invests in receivables rights. 5.8 Fixed Income Bonds These are investments in fixed income securities issued by top tier financial institutions at fixed rates. 23

24 6. Trade accounts receivable domestic and foreign customers Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Trade accounts receivable - domestic 192, , , ,048 (-) Discount to present value (5,351) (5,789) (9,144) (10,771) 187, , , ,277 Trade accounts receivable - foreign 517, , ,063 1,152,249 (-) Advances on export contracts (ACEs) (399,360) (447,020) (399,360) (447,020) (-) Discount to present value (13,192) (14,593) (23,490) (27,746) 105,049 77, , , , ,936 1,024,523 1,618,760 Amounts not yet due 612, , ,469 1,634,272 Amounts overdue From 1 to 30 days 35,026 20, , ,951 From 31 to 60 days 56,434 11, ,904 98,046 From 61 to 90 days 5,704 5,276 46,033 78,028 More than 90 days 7,633 7,405 23,410 35,146 (-) Advances on export contracts (ACEs) (399,360) (447,020) (399,360) (447,020) (-) Discount to present value (18,543) (20,382) (32,634) (38,517) (-) Estimated losses with doubtful accounts (7,633) (7,405) (23,410) (35,146) 292, ,936 1,024,523 1,618,760 The estimated loss with doubtful accounts was set up in an amount deemed sufficient by Management to cover possible losses on the realization of receivables. Aiming to achieve the best estimate possible, concerning the realization of such credits, and therefore duly set up an allowance for estimated losses with doubtful accounts as at June 30, 2015, the Corporation's Management analyzed particular aspects about its customers, such as business activity, general credit situation, the market s economic situation and notes due for more than 90 days and whose settlement is not considered as possible. The Corporation does not have a history of relevant problems with collection, and the Accounts Receivable Department rates each customer upon acceptance and credit granting. Changes in estimated losses for credit risks are as follows: 24

25 Parent Consolidated Balance on December 31, 2014 (7,405) (35,146) Estimate accrued in the period (11,321) (14,394) Estimate reversed in the period 11,093 15,948 Written-off credits - 14 Exchange rate variation - (1,371) Discontinued operation - 11,539 Balance on June 30, 2015 (7,633) (23,410) A receivables backed investment fund (Fundo de Investimento de Direitos Creditórios - FIDC) was created in June 2014 to sell a portion of the receivables from the installment sale of products in the domestic market, up to the limit of R$160 million (principal), of which R$ 24 million consists of subordinated shares. On June 30, 2015, the amount of bills traded with the fund was R$118,349. For sales paid in installments, the Corporation uses working capital financing lines available in financial markets. Receivables were discounted to present value in accordance with CPC Technical Pronouncement No. 12, approved by CVM Resolution No. 564/08 (CPC 12 present value adjustment), as described in note to the financial statements for the fiscal year ended December 31,

26 7. Inventories of products and merchandise In the years ended June 30, 2015 and 2014, inventories of finished products were carried at average purchase and/or production cost, as explained in note to the financial statements for the fiscal year ended December 31, 2014: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Finished products 495, ,276 1,105,882 1,567,978 Raw materials , ,245 Packaging material and storeroom supplies 22,816 28, , ,843 (-) Estimated losses (19,567) (13,566) (21,777) (57,147) 498, ,091 1,406,514 2,027,919 The Corporation grounds its estimates on historical losses, as follows: Parent Consolidated Balance on December 31, 2014 (13,566) (57,147) Reversal of estimates - 1,621 Recognition of estimates (6,001) (5,948) Translation gains (losses) Discontinued operation - 38,841 Balance on June 30, 2015 (19,567) (21,777) 8. Biological assets Parent Consolidated Current 6/30/15 12/31/14 6/30/15 12/31/14 Biological assets - cattle , ,535 Biological assets - poultry , ,688 Translation gains (losses) ,646 19,977 Total current biological assets , ,200 Non-current Biological assets - poultry , ,735 Translation gains (losses) - - 4,537 11,405 Total non-current biological assets , ,140 Total biological assets , ,340 The Corporation's current biological assets are composed of live animals segregated among the categories: poultry and cattle. Animals classified in this group are those intended for slaughtering for production of fresh meat and/or processed products in the next 12 months. 26

27 Due to the short formation period of poultry, as well as not having a quotation to poultry and pigs market, the Corporation evaluated these biological assets and identified no material adjustments in relation to acquisition cost. In this case, the Corporation believes that the fair value of biological assets is substantially represented by the formation cost, given the short life cycle of the animals. With respect to beef cattle, these are animals kept in feedlots for fattening and slaughter, and the balance presented in this item is available for use over the next 12 months. The Corporation valued these animals at fair value, based on the "Marked to Market - MtM concept, considering the market prices of the arroba 1 of cattle, and recognized the effects of these valuations directly in the statement of operations. The Corporation s non-current biological assets are composed of live poultry, classified as breeding stock and intended for reproduction. These assets are amortized on a straight-line basis over the useful life of the animals. Poultry for reproduction have an average useful life of up to 60 weeks. The changes in biological assets are as follows: Current biological assets: Parent Consolidated Balance on December 31, ,200 Increase due to purchases - 49,813 (-) Write-off for slaughter - (646,584) Costs of input for fattening - 703,018 (-) Decrease due to sales - (134,047) Net increase (decrease) due to births (deaths) - (753) Change in fair value less estimated sale expenses (*) - 1,992 Balance sheet translation - 21,646 Discontinued operation - (114,490) Balance on June 30, ,795 (*) Only applies to cattle. Non-current biological assets: Parent Consolidated Balance on December 31, ,140 Increase due to purchases - 14,032 (-) Write-off for slaughter - (1,953) Costs of input for fattening - 17,451 Amortization - (29,990) Balance sheet translation - 4,537 Discontinued operation - (99,278) Balance on June 30, ,939 1 Arroba = A unit of weight equivalent to 15 Kg. 27

28 Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 ICMS (State VAT) 664, , , ,541 PIS (tax on sales) credit 311, , , ,647 Cofins (tax on sales) credit 1,520,803 1,586,581 2,157,282 2,192,059 Income tax 79,578 47, ,532 64,101 Social contribution tax 16,457 15,001 18,206 16,793 IRRF (Withholding Income Tax) 18,748 17,037 19,829 17,958 IVA (value-added tax) ,495 92,073 Export certificates - - 6,954 6,526 Reintegra tax credit 50,524 28,223 79,285 46,981 Other ,252 7,510 (-) Estimated losses from non-realization (451,389) (451,389) (676,385) (676,385) 2,210,657 2,153,474 2,983,644 2,870,804 Current assets 928, ,476 1,453,621 1,361,635 Non-current assets 1,282,593 1,274,998 1,530,023 1,509, Recoverable taxes 9.1 ICMS (State VAT) The balance of recoverable ICMS derives from credits taken for ICMS paid on the purchase of raw, packaging and other materials, in amounts higher than the debts generated from domestic sales, since foreign market sales are free from this tax. Credit realization is made through offsetting against debts generated in domestic sales or through transfers to third parties. 9.2 PIS and COFINS taxes Pursuant to Laws No /02 and /03, this line item consists of noncumulative PIS and COFINS credits on the acquisition of raw, packaging, and other materials used in the goods sold in foreign markets. The Corporation is engaged in registering its rights before the Federal Revenue Service. 9.3 Income and Social Contribution Taxes This line item consists of income and social contribution taxes prepaid in the period ended June 30,

29 9.4 Withholding income tax (IRRF) Withholding income tax consists of income tax withheld on yields from marketable securities held by the Corporation. 9.5 IVA Value Added Tax This caption refers to balances of recoverable value added tax of foreign subsidiaries resulting from the tax difference between purchases and sales, given that the difference in the food rate is lower than most transactions. 9.6 Export certificates Export certificates are certificates issued by the government of Uruguay as return of a percentage of income tax paid by exporters. 9.7 Reintegra Credit It refers to the Reintegra tax refund program for exporters, characterized as a tax incentive by MP 540 of August 2, 2011 and converted into Law 12,546 of December 14, 2011, and regulated by Decree 7,633 of December 1, 2011, reintroduced through Articles 21 to 29 of Provisional Decree (MP) 651 of July 9, 2014, converted into Law 13,043 of November 13, 2014 and regulated by Decree 8,304 of September 12, 2014 and Ordinance 428 of September 30, 2014, published in the Brazilian Federal Government Gazette (DOU) on October 1, 2014, by which a part of federal taxes on production chains used for the export of products covered by the law is refunded. 9.8 Estimated losses from non-realization of tax credits The estimated losses for non-realization of tax credits were calculated based on the best expectation of realization of the Corporation s recoverable taxes balances, in which main credits are mainly from PIS/COFINS. In the period ended June 30, 2015, there were no changes in the estimates for non-realization of tax credits. 10. Notes receivable Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Related-party transactions 2,922,947 2,521, Market transactions receivable 1,846 14, , ,261 Other notes receivable 54,743 88,214 85, ,664 Total 2,979,536 2,624, , ,925 Current assets 859, ,268 55,882 58,261 Non-current assets 2,120,297 1,782, , ,664 The Parent Company s notes receivable mostly consist of balances resulting from transactions with its subsidiaries (related parties), as described in Note

30 30

31 10.1 Related-party transactions The following tables, except for transactions with Mr. Marcos Antonio Molina dos Santos and Mrs. Márcia Aparecida Pascoal Marçal dos Santos, sole partners of MMS Participações Ltda., show the transactions between the Corporation and its wholly-owned subsidiaries as at June 30, 2015: Parent 6/30/ Accounts Accounts Notes Notes June 30, 2015 receivable payable receivable payable Purchases Sales Cledinor S.A. - 38, ,905 - Establecimientos Colonia S.A. - 15, ,109 - Frigorífico Tacuarembó S.A. - 25,591 3, ,449 5,131 - Inaler S.A. - 19, ,847 - Marfood USA Inc Marfrig Argentina S.A - 2, ,409-7,560 - Marfrig Chile S.A. 20, ,606 Marfrig Holdings (Europe) BV 5,830-16,300 6,654, Marfrig Overseas Ltd , , MFB Marfrig Frigorificos Brasil S.A 80,706 63,836 2,224, , ,485 MFG Agropecuária Ltda. 4,249 23, , ,271 4,861 MFG Comercializadora de Energia Ltda ,014 5,198 - Pampeano Alimentos S.A. 21, , ,221 Marcos Antonio Molina dos Santos - 2, ,909 - Marcia Aparecida Pascoal Marçal dos Santos - 1, , , ,280 2,922,947 7,306, , ,848 31

32 Parent 12/31/ Accounts Accounts Notes Notes December 31, 2014 receivable payable receivable payable Purchases Sales Cledinor S.A. - 27, ,465 - Establecimientos Colonia S.A. - 12, ,967 - Frigorífico Tacuarembó S.A. - 17, ,901 9,140 - Inaler S.A. - 13, ,106 - Marfood USA Inc. 1, ,007 Marfrig Argentina S.A - 3, ,154-12,892 - Marfrig Chile S.A. 49, ,376 Marfrig Holdings (Europe) BV - - 1,627 4,910,364-9,232 Marfrig Overseas Ltd , , MFB Marfrig Frigorificos Brasil S.A 22,287 59,658 1,778, , ,790 MFG Agropecuária Ltda , , ,596 12,754 MFG Comercializadora de Energia Ltda , Pampeano Alimentos S.A. 7, , ,407 Weston Importers Ltd. 23, ,160 Marcos Antonio Molina dos Santos - 1, ,176 - Marcia Aparecida Pascoal Marçal dos Santos , , ,348 2,521,877 5,441,394 1,152, ,726 Consolidated Total purchases in the Receivables Accounts Payable period 6/30/15 12/31/14 6/30/15 12/31/14 6/30/15 6/30/14 Marcos Antonio Molina dos Santos 23,914 33,479 2,572 2,189 9,561 1,644 Marcia Aparecida Pascoal Marçal dos Santos - - 1,546 8,537 5,677 12,419 23,914 33,479 4,118 10,726 15,238 14,063 On June 30, 2014, the Corporation signed an Agreement for the Purchase and Sale of Cattle and Equipment and the Hiring of employees, through its wholly owned subsidiary MFG Agropecuária Ltda., with the current controlling shareholder of the Grupo Marfrig Global Foods S/A, Mr. Marcos Antonio Molina dos Santos, by which the Corporation undertakes to sell said assets and liabilities to the controlling shareholder in an irrevocable manner. The transaction was duly approved by the Audit Committee the Marfrig Group, led by an independent director. 32

33 These assets are being sold at the market value and, as for the purchase and sale of cattle, and purchase of equipment, they are duly registered in the results as of the second quarter of 2014, without causing any losses to the Corporation. The balance presented in this note, as Receivables, refers to the net effect of the sale of cattle, acquisition of equipment, less costs of transfer of labor, less the amounts paid by the controlling shareholder through the second quarter of This thus materializes all transfers of assets and liabilities so that all the underlying items of said agreement have been transferred to the buyer. The Corporation and the controlling shareholder agreed as consideration for said transaction, the payment of the balance, in cash, in 9 consecutive quarterly installments starting from the third quarter of By June 30, 2015, the controlling shareholder had settled four installments of said agreement, in the amount of R$19,131, according to the payment schedule envisaged in the agreement. The Corporation s controlling shareholder, MMS Participações Ltda., and its sole partners, have endorsed some financial agreements of the Corporation. In case of default, creditors can demand payment directly from the controlling shareholder and from its partners and, if they make the payment, they will be entitled to reimbursement from the Corporation. The Corporation did not pay any commissions or other amounts to the appraisers. In a meeting held on June 24, 2015, the Board of Directors of the Corporation established new limits of authority for its Management Bodies. The Management Committee is now responsible for authorizing a series of acts, with powers over amounts corresponding to between R$300 million and R$400 million. For acts whose required powers exceed those determined for the Management Committee, approval is required from the Board of Directors of the Corporation. No relations are maintained with other officers and shareholders of Marfrig Group. The nature of related-party transactions between Marfrig Group companies is represented by commercial transactions (purchases and sales) and sending of cash for payment of such transactions, as well as for working capital. Intercompany loans (instruments receivable and payable) in Brazil (parent company and subsidiaries) are managed by checking accounts held between the companies based on the centralized cash system managed by the parent company. For transactions with subsidiaries abroad, the loan rate is 3% plus 6-month LIBOR (London Interbank Offered Rate). Purchases and sales of products are made at market values. No guarantees or estimated losses with doubtful accounts are required. These transactions involve purchase and sale of fresh meat and cattle, poultry and lamb processed products. Transactions between subsidiaries do not have an impact on consolidated financial statements, given that they are eliminated in consolidation. 33

34 11. Assets and Liabilities Held for Sale Certain ownership interests in group companies that hold the poultry and beef processed food products business unit in the United Kingdom and Continental Europe are presented as a held-for-sale assets and liabilities, following the criteria for classification of such assets, since there is a firm sale commitment signed with JBS S.A., as per the Material Fact notice of June 21, Note 1 presents said ownership interests as business segments of discontinued operations. The transaction is subject to the authorizations by applicable authorities typical to transactions of this nature, including the anti-trust authorities of the European Union. The transaction is expected to be consummated between the third and fourth quarters of this year. On June 30, 2015, the assets and liabilities held for sale were as follows: Consolidated Consolidated Assets 6/30/2015 Liabilities 6/30/2015 Current assets Current liabilities Cash and cash equivalents 592,488 Trade payables 871,249 Domestic and foreign trade accounts receivable 315,532 Loans and financing 1,507,876 Property, plant and equipment and Biological Assets 1,341,414 Deferred taxes 269,057 Intangible assets 1,096,044 Other liabilities 338,436 Other assets 1,509,739 Total liabilities 2,986,618 Shareholders' Equity Amounts related to assets held for sale (751,773) (751,773) Total assets 4,855,217 Total liabilities and shareholders equity held for sale 2,234, Deferred Income and Social Contribution Taxes - Assets Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Income tax 1,192, ,923 1,593,797 1,328,587 Social contribution tax 431, , , ,850 Non-current assets 1,623,724 1,318,082 2,056,549 1,708,437 34

35 Tax credits consist of deferred Income and Social Contribution Taxes, calculated on temporary add-backs/exclusions that were added/excluded to the taxable income and the social contribution tax basis in prior and current years and calculated on tax losses, temporary add-backs and future utilization for tax purposes of goodwill paid due to future profitability, which will be realized from 2015 onwards. Tax credits recognized for income and social contribution tax losses are supported by taxable income projections based on feasibility studies that are annually reviewed by the Corporation's Management. Other tax credits, which are based on temporary differences, especially tax provisions and estimated losses, were recognized according to the expected realization. Below are the changes in deferred taxes in the period ended June 30, 2015: June 30, 2015 Parent Consolidated Description Income Tax Social contribution tax Income Tax Social contribution tax Closing balance on December 31, , ,159 1,328, ,850 (-) Realization of taxes on tax losses (158,223) - (173,418) - Deferred taxes on tax losses 635, ,158 - Deferred taxes on social contribution tax loss carryforwards - 228, ,077 (-) Realization of deferred taxes on social contribution tax loss carryforwards - (56,960) - (62,431) Deferred taxes on temporary add-backs/deductions 179,480 64, ,714 68,995 (-) Realization of deferred taxes on temporary add-backs/deductions (431,840) (155,463) (448,316) (159,739) Translation gain or loss ,890 - Other - - 1,229 - Discontinued operation - - (1,047) - Closing balance on June 30, ,192, ,064 1,593, ,752 The expectations for recoverability of the Corporation's and its subsidiaries' deferred tax asset balances is based on an appraisal reports and internal analyses prepared by skilled professionals. The value in use for credits is estimated based on the future estimated taxable income, which results from the Corporation's estimates for future generations of taxable income, through stress tests, based on the Corporation s Focus to Win strategic plan, announced to the market in October 2013 and implemented soon after, and whose targets were completely met by the end of The Focus to Win plan has the following pillars: a) specific agenda of productivity gains in the Beef Brazil business; b) margins under control; c) acceleration of organic growth in/across regions/key accounts; d) focus on more profitable distribution channels; e) higher integration of business platforms at the global level. 35

36 Note that the projections considered the changes in the economy involving the Corporation's business markets, as well as assumptions for expected results and history of profitability for each segment. For 2015, the Corporation will reinforce its strategic commitments already adopted and will expand actions both in the productivity agenda (Beef Brazil and Keystone) and in the active management of the Corporation s debt. The expected realization of "Deferred Tax Assets, based on a technical feasibility study as per CVM Instruction 371 of June 27, 2002 is as follows: Year Parent Consolidated , , ,983 49, , , , , , , to ,208,738 1,423,298 1,623,724 2,056, Investments Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Interest in subsidiaries 4,194,111 3,405, Other investments ,837 36,934 4,194,246 3,405,345 35,837 36,934 36

37 13.1 Investments (Parent) Investments in subsidiaries on June 30, 2015: No. of units of interest/shares Ownership percentage in voting capital Trading on the stock exchange Share capital Equity Net income (loss) for the period Equity value according to % interest MFB Marfrig Frigorificos do Brasil S.A. 78,573, No 78, ,752 (9,069) 103,752 Marfrig Chile S.A. 9, No 77,183 91,491 11,474 90,990 Inaler S.A 66,247, No 4,552 66,455 (1,067) 66,446 Frigorífico Tacuarembó S.A 163,442, No 20, ,284 44, ,768 Weston Importers Ltd 8,101, No 39,530 (22,925) (1,252) (22,926) Masplen Ltd 5, No 11,453 19,577 (12,014) 18,392 Prestcott International S.A 79,638, No 9,066 98,545 4,305 98,545 Establecimientos Colonia S.A 403,237, No 81,447 52,986 (4,511) 52,660 Marfood USA, Inc 50, No 76,629 (10,190) (2,430) (10,190) Marfrig Overseas Ltd No - (462,100) (63,041) (462,100) MFG Agropecuária Ltda. 9, No - (4,198) 620 (4,197) Marfrig Argentina S.A. 854,320, No 442,411 64,566 (32,307) 64,514 MFG Comercializadora de Energia Ltda 149, No - 1,388 (393) 1,389 Marfrig Holdings(Europe) BV 2,403, No 3,001,249 3,373,004 (40,977) 3,373,004 Marfrig Peru S.A.C. 5, No 6 (287) (53) (287) Mercomar Emp. E Participações Ltda. 441,824, No 441, , ,351 Total 4,284,194 4,204,699 (106,006) 4,194,111 37

38 The following table presents a summary of the financial information of the subsidiaries: Total assets Total liabilities Non-controlling interest Net revenue Group's profit/loss sharing MFB Marfrig Frigorificos do Brasil S.A. 2,885,775 2,782,022-1,417,025 (9,069) Marfrig Chile S.A. 172,277 80, ,634 11,417 Inaler S.A 181, , ,801 (1,067) Frigorífico Tacuarembó S.A 535, ,539 6, ,860 43,775 Weston Importers Ltd 35,428 58, (1,252) Masplen Ltd 322, , ,837 (12,014) Prestcott International S.A 202, , ,352 4,305 Establecimientos Colonia S.A 267, , ,156 (4,511) Marfood USA, Inc 153, ,068-97,843 (2,430) Marfrig Overseas Ltd 3,428,651 3,890, (63,041) MFG Agropecuária Ltda. 249, , , Marfrig Argentina S.A. 497, , ,145 (32,282) MFG Comercializadora de Energia Ltda 8,631 7,243-30,901 (393) Marfrig Holdings(Europe) BV 16,000,851 12,479,564-4,054,984 (40,977) Marfrig Peru S.A.C , (53) Mercomar Emp. E Participações Ltda. 535,046 31, Total 25,477,939 21,124,947 7,391 7,428,488 (106,972) 38

39 13.2 Breakdown of investments (parent) Effect of reverse equity interest in the equity accounts of subsidiaries. Book balance on 12/31/2014 Asset valuation adjustment Acquisition/ Write-off Capital increase/ (reduction) Total investment in the period Equity in earnings (losses) of subsidiaries (1) Discontinued operation Balance sheet translation effect Book balance on 6/30/2015 MFB Marfrig Frigorificos do Brasil S.A 115,449 (2,628) (9,069) ,752 Marfrig Chile S.A. 69, ,391-9,663 90,990 Inaler S.A. 57, (1,030) - 9,803 66,446 Frigorífico Tacuarembó S.A. 234, ,690-41, ,768 Weston Importers Ltd. (18,949) (1,253) - (3,703) (22,926) Masplen Ltd 35, (12,587) - (4,176) 18,392 Prestcott International S.A. 79, ,405-14,374 98,545 Establecimientos Colonia S.A 48, (4,486) - 8,615 52,660 Marfood USA, Inc (6,392) (355) (2,430) - (1,013) (10,190) Marfrig Overseas Ltd (339,384) (63,041) - (59,675) (462,100) MFG Agropecuaria Ltda (4,817) (4,197) Marfrig Argentina S.A. 75,447 (14,114) - 24,499 24,499 (32,219) - 10,901 64,514 MFG Comercializadora de Energia Ltda 1, (393) - - 1,389 Marfrig Holdings(Europe) BV 3,056,659 (142,001) (75,953) 34, ,323 3,373,004 Marfrig Peru S.A.C. (219) (53) - (15) (287) Mercomar Emp. e Participações Ltda , , ,351 Total 3,405,210 (158,048) 503,351 24, ,850 (141,408) 34, ,531 4,194,111 (1) The balance corresponds to the Corporation s ownership interest in its subsidiaries. 39

40 13.3 Acquisition of ownership interest 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 in cash. 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. On the acquisition date, in accordance with CPC 15 (R1) Business Combination, the Corporation measured the assets acquired and liabilities assumed at fair value, based on appraisal reports prepared by external experts engaged by the Corporation, observing fair and consistent criteria, assumptions and projection methodologies for transactions of this nature. Initially, no liabilities or provisions for contingencies were identified that should be recognized on the acquisition date, as the acquired company was incorporated recently and does not have a history of activities that could generate liabilities of this nature. The fair value of these assets and liabilities were measured at R$503.4 million, and any fair value gains associated with said assets were adequately recognized under property, plant and equipment and intangible assets. The Management of the Corporation revised the adopted assumptions and criteria and considered that the value of these assets was fairly measured on the acquisition date. Furthermore, all deferred tax effects on the fair value gain were duly recognized. Assets of the company M ercomar e Empreendimentos e Participações Ltda (a) 441,825 Cash and equivalents 2 Property, plant and equipment 441,823 Book value of acquired assets and assumed liabilities 441,825 Fair value of property, plant and equipment according to expert appraisal report (b) 186,516 Fair value of intangible assets according to expert appraisal report (c) 348,528 Deferred taxes (31,693) Fair value 503,351 Acquisition value 428,158 (=) Bargain purchase - Gain in the operation (d) 75,193 Income and social contribution tax rate 34% Income and Social Contribution taxes 25,566 (a) Mercomar Empreendimentos e Participações Ltda., company that received the assets held by Frigorífico Mercosul S/A and its affiliates were established in April 27, These assets are formed by all goods and rights related to the five (5) units located in: Capão do Leao/RS; Tucumã/PA; Mato Leitão/RS; Nova Londrina/PR and Pirenópolis /GO. 40

41 (b) The acquired amount is included in the Additions column of the Summary of Changes, in accordance with the note on property, plant and equipment (Note 14). (c) The acquired amount is included in the Additions column of the Summary of Changes, in accordance with the note on intangible assets (Note 15). (d) The acquisition resulted in a bargain purchase, the effect of which gain was recorded in the income statement under Other operating income (expenses). Tax effects were also recognized. The Management of the Corporation monitors the effects from acquisition, observing the deadlines for measurement, which may not exceed one year from the acquisition date, in accordance with CPC 15 (R1) Business Combination. 14. Property, plant and equipment The following tables show the weighted average annual depreciation rate determined using the straight-line method and based on the economic useful life of the assets and their balances: Changes in acquisition cost of the parent company Description Average annual depreciation rates Cost Additions Writeoffs Parent 6/30/15 Transfers Accumulated depreciation Cost Plots of land - 28, ,210 Constructions and buildings 3.06% 797, (128,437) 669,503 Machinery and equipment 13.85% 398,993 56,307 (52) 355 (184,834) 270,769 Furniture and fixtures 10.05% 15, (18) 128 (6,833) 8,959 Facilities 4.53% 877,357 - (1) 19,566 (159,421) 737,501 Vehicles 18.20% 32, (493) 3 (11,268) 20,584 IT equipment 20.33% 12, (44) (361) (7,186) 4,806 Aircraft 20.00% (382) - Leasehold improvements 14.62% 9, ,436 (1,907) 59,135 Lease - vehicles 20.00% 19, (3) (18,976) 274 Lease - computer hardware 20.00% 16,943 1,319-8 (13,586) 4,684 Lease - machinery 10.00% 12, (130) (9,761) 2,271 Lease - facilities - 18, (18,240) - Lease - buildings - 6, (6,314) - Construction in progress - 8,811 80,974 - (71,002) - 18,783 Other (118) 200 2,254, ,183 (608) - (567,263) 1,825,679 41

42 Changes in net balance of the parent company: Parent 12/31/14 6/30/15 annual Description depreciation rates Net Additions Writeoffs Transfers Depreciation Net Plots of land - 28, ,210 Constructions and buildings 3.06% 679, (9,689) 669,503 Machinery and equipment 13.85% 236,087 56,307 (40) 355 (21,940) 270,769 Furniture and fixtures 10.05% 9, (12) 128 (630) 8,959 Facilities 4.53% 737, ,566 (19,328) 737,501 Vehicles 18.20% 20, (54) ,584 IT equipment 20.33% 5, (43) (361) (332) 4,806 Leasehold improvements 14.62% 9, ,436 (1,382) 59,135 Lease - vehicles 20.00% (3) (116) 274 Lease - computer hardware 20.00% 3,882 1,319-8 (525) 4,684 Lease - machinery 10.00% 2, (130) (87) 2,271 Construction in progress - 8,811 80,974 - (71,002) - 18,783 Other ,740, ,183 (149) - (53,820) 1,825,679 Changes in consolidated acquisition cost: Description Average annual depreciatio n rates Acquisition Cost Additions Write-offs Consolidated 6/30/2015 Assets Held for Sale Transfers Translation Accumulated Depreciation Net Cost Plots of land - 93,628 12, , ,992 Constructions and buildings 2.38% 2,680, ,901 (17,567) (655,231) 6, ,698 (648,568) 1,650,078 Machinery and equipment 7.01% 2,392,123 95,778 (10,168) (460,239) 49,655 96,472 (1,322,786) 840,835 Furniture and fixtures 7.32% 142,072 3,993 (984) (42,556) 3,805 3,370 (80,662) 29,038 Facilities 4.59% 1,073,568 27,449 (11) - 27,629 2,176 (218,731) 912,080 Vehicles 13.04% 92,428 1,184 (2,393) (5,620) 269 2,351 (51,248) 36,971 IT equipment 20.32% 68, (4,990) (9,816) 3,547 (1,250) (50,138) 6,133 Aircraft 20.00% (382) - Advance for acquisition of Leasehold improvements 5.51% 560, (7,398) - 71,754 2,223 (74,806) 553,270 Lease - vehicles 20.00% 20,476 1 (25) - (35) - (19,997) 420 Lease - computer hardware 20.00% 17,409 1, (14,053) 4,683 Lease - machinery 0.75% 130, (738) 5,840 (100,005) 35,408 Lease - facilities - 18, (18,790) - Lease - buildings - 11, (11,577) - Construction in progress - 146, ,722 (3) (68,674) (162,018) 57,781-93,569 Other 0.90% 2, (38) - (18) (3) - (1,941) 1,044 7,452, ,671 (43,577) (1,242,136) - 355,022 (2,613,684) 4,279,590 42

43 Changes in consolidated net balance: Description Consolidated 12/31/14 6/30/2015 Average annual depreciation rates Net Additions Write-offs Assets Held for Sale Transfers Translation Depreciation Net Plots of land - 93,628 12, , ,992 Constructions and buildings 2.38% 2,050, ,901 (3,331) (655,231) 6, ,698 (32,347) 1,650,078 Machinery and equipment 7.01% 1,132,413 95,778 (1,154) (460,239) 49,655 96,472 (72,090) 840,835 Furniture and fixtures 7.32% 63,424 3,993 (58) (42,556) 3,805 3,370 (2,940) 29,038 Facilities 4.59% 878,640 27, ,629 2,176 (23,814) 912,080 Vehicles 13.04% 41,870 1,184 (280) (5,620) 269 2,351 (2,803) 36,971 IT equipment 20.32% 14, (13) (9,816) 3,547 (1,250) (1,067) 6,133 Advance for acquisition of Leasehold improvements 5.51% 493, ,754 2,223 (15,304) 553,270 Lease - vehicles 20.00% (5) - (35) - (198) 420 Lease - computer hardware 20.00% 3,883 1, (527) 4,683 Lease - machinery 0.75% 40, (738) 5,840 (10,608) 35,408 Construction in progress - 146, ,722 (1) (68,674) (162,018) 57,781-93,569 Other 0.90% (38) - (18) (3) (12) 1,044 4,961, ,671 (4,880) (1,242,136) - 355,022 (161,710) 4,279,590 According to CVM Resolution 645/10 (CPC 6(R1) lease operations), the assets acquired by the Corporation under a finance lease started to be recorded as property, plant and equipment, including their respective depreciation, as mentioned above, with an offsetting entry to lease payable, shown in note 20. Pursuant to CVM Resolution 639/10 (CPC 01 (R1)- reduction to recoverable value of assets), an asset is tested for impairment on an annual basis. The asset s value must be estimated only if there is any indication of impairment. If any indication of impairment is found, recoverability analysis comprises projecting the profitability and future cash of the Corporation s business units, which are discounted to present value to identify the degree of recoverability of the asset. During the period ended June 30, 2015, the book values of the Corporation s assets were not higher than the amounts which could be obtained by use or sale. Our assessment also included temporarily idle assets. The Corporation and its subsidiaries recorded property, plant and equipment that are fully depreciated and still in operation, as well as temporarily idle items, as follows: 43

44 Description Parent 6/30/15 Temporarily idle property, plant and equipment Property, plant and equipment fully depreciated and still in operation Constructions and buildings 4, Machinery and equipment - 36,460 Furniture and fixtures - 1,116 Facilities 6, Vehicles - 36,657 IT equipment - 20,829 Aircraft ,987 96,289 Consolidated 6/30/2015 Description Temporarily idle property, plant and equipment Property, plant and equipment fully depreciated and still in operation Constructions and buildings 4, Machinery and equipment 8,233 42,466 Furniture and fixtures 208 1,407 Facilities 6, Vehicles ,657 IT equipment 41 21,401 Aircraft Leasehold improvements 130, , ,158 44

45 15. Intangible assets The Corporation has the subgroup intangible assets, composed of non-current assets, presented pursuant to CVM Resolution 644/10 (CPC 4 (R1) intangible assets), as shown in the summary below: Amortization rate Useful life Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Goodwill , , ,320 1,061,568 Trademark and patents 9.24% ,883 22, , ,572 Software 18.50% ,027 33,717 35,993 38,300 Client relationship 9.09% , ,113 Client relationship - Indefinite - - 1,045, ,381 Sales channels 5.50% ,586 - Other intangible assets 23.90% ,573 35, , ,391 2,530,376 3,004,709 Consolidated breakdown of intangible assets Parent Consolidated Balance on December 31, ,391 3,004,709 (+) Addition 1, ,601 (-) Write-off - (8,777) (-) Amortization (3,904) (7,033) (+/-) Exchange variation - 278,920 (-) Discontinued operation - (1,096,044) Balance on June 30, ,701 2,530,376 Goodwill from the acquisition of businesses by September 30, 2008 (last acquisition previous to transition date as of January 1, 2009, referring to complete adoption of CPCs) was calculated based on the accounting standards previous to CVM Resolution 665/11 (CPC 15 - business combination). According to IFRS Optional Exemptions, the Corporation decided to adopt IFRS in all business acquisitions as from September 30, These goodwill amounts were based on expected future profitability, and supported by valuation reports from experts. The trademarks acquired from third parties, prior to December 31, 2009, were measured at the paid amount, while trademarks and list of clients acquired as part of business combination after September 30, 2008 were calculated at fair value pursuant to CVM Resolution 665/11 (CPC 15 (R1) business combination). 45

46 According to CVM Resolution 639/10 (CPC 1 (R1) reduction to recoverable value of assets), the impairment test of goodwill and intangible assets with indefinite useful lives is conducted annually, and other intangible assets with finite useful lives are tested whenever there is evidence of non-realization of those items. Intangible assets represented by patents and a list of clients are amortized at their respective useful lives, if applicable. Certain intangible assets of the Corporation have undefined useful lives, according to the experts' valuation, and are annually tested for impairment. Such analysis comprised projecting the profitability and future cash of the Corporation s business units, which are discounted to present value to identify the degree of recoverability of the asset. Discounted cash flows to assess asset impairment were prepared for a period close to 10 years. This cash flow is in line with the Corporation s strategic plan and growth projections based on past information and market projections prepared by nongovernmental agencies and entities. In the period ended June 30, 2015, the Corporation did not identify any indications of asset recorded at an amount higher than that recoverable through use or sale Changes in intangible assets (parent) Changes in the Intangible assets accounts of parent company and subsidiaries for the period ended June 30, 2015 are as follows Balance on December 31, 2014 Acquisition/ write-off Held for sale Reclassification / amortization Balance on June 30, 2015 Inaler S.A. - Goodwill 38, ,379 Frigorífico Tacuarembó S.A. - Goodwill 58, ,496 Masplen Ltd - Goodwill 17, ,258 Prescott International S.A. -Goodwill 22, ,922 Establecimientos Colonia S.A - Goodwill 114, ,479 Marfood USA Inc. -Goodwill Keystone International -Goodwill 274, ,949 Software and systems 33,717 1,214 - (3,904) 31,027 Trademarks and patents 22, ,883 Total 583,391 1,214 - (3,904) 580,701 The goodwill generated in the business acquisitions concluded before the adoption of all CPCs is expressed in the Corporation s functional currency. 46

47 15.2 Changes in intangible assets (subsidiaries) Book balance on December 31, 2014 Acquisitions Exchange variation on translation Amortization Write-off Assets Held for Sale Book balance on June 30, 2015 Marfrig Chile S.A. 21,369-3,589 (46) ,912 Goodwill 21,112-3, ,660 Trademarks and patents/software/other (46) Weston Importers Ltd. 14,159-2,480 - (7,760) - 8,879 Goodwill 14,159-2,480 - (7,760) - 8,879 Masplen Limited (22) Trademarks and patents/software/other (22) Prestcott International S.A 12,292-2,064 (51) ,305 Goodwill 11,678-1, ,641 Trademarks and patents/software/other (51) Marfood USA 73,307-12,296 (502) ,101 Goodwill 53,842-9, ,890 Client relationship 3, (502) - - 3,533 Trademarks and patents/software/other 15,991-2, ,678 Frigoríficos Tacuarembó S.A (56) - - 1,038 Trademarks and patents/software/other (56) - - 1,038 Inaler S.A (43) Trademarks and patents/software/other (43) Establecimientos Colonia S.A (60) Trademarks and patents/software/other (60) Marfrig Argentina 109, ,597 (13) ,759 Goodwill 108,902-16, ,459 Trademarks and patents/software/other (13) MFB - Marfrig Frig. BR S.A (76) Trademarks and patents/software/other (76) MFG Agropecuária Ltda (2) Trademarks and patents/software/other (2) Mercomar - 348, ,528 Sales Channel - 295, ,586 Client relationship/right to use - 52, ,942 Marfrig Holdings (Europe)BV 2,187,970 8, ,535 (2,258) (1,017) (1,096,044) 1,338,979 Goodwill 325,084-34, (359,337) - Client relationship 1,411,019 7, ,838 (2,068) - (499,699) 1,070,850 Trademarks and patents/software/other 451,867 1,033 53,444 (190) (1,017) (237,008) 268,129 Total 2,421, , ,920 (3,129) (8,777) (1,096,044) 1,949,675 47

48 16. Accrued payroll and related charges Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 INSS (social security contribution) payable 3,545 2,236 14,608 11,558 Salaries and payroll obligations 70,165 52, , ,805 Other social charges and benefits payable 2,528 4, , ,616 76,238 59, , ,979 On November 21, 2005, Law No was enacted allowing the offsetting of INSS debts against federal tax credits. This procedure was regulated by Interministerial Ordinance No. 23 dated February 2, In addition, article 2 of Law /07 establishes responsibility to the Brazilian Federal Revenue Service concerning the employees social security contributions levied on their contribution salaries, according to item c, sole paragraph, Article 11 of Law 8.212/91 and Article 104 of Law /05. The Corporation currently has a favorable court decision that determines that the Federal Revenue Service of Brazil should analyze the requests for Reimbursement filed by the Corporation and also establishes the recognition of the possibility to offset credits related to PIS and COFINS taxes with social security contributions, upon use of tax credits to pay the dues. The Corporation believes it holds sufficient credits to settle its debits and therefore, based on the opinion of its legal counsel, is carrying out the offset of social security debts with PIS/COFINS tax credits. An Interlocutory Appeal was filed by the National Treasury against said court decision, which was judged and the decision maintained with regard to the requirement of analysis by the Federal Revenue Service of Brazil of the requests for Reimbursement filed by the Corporation. However, the decision was altered regarding the right to suspend the enforceability of the dues. As a result, the Corporation requested the court to recognize the possibility of offsetting the PIS and COFINS credits with social security contributions using the tax credits to pay the debts, to be undertaken by the Federal Revenue Service of Brazil. To formalize said credits, the Corporation filed Requests for Reimbursement with the Federal Revenue Service of Brazil. These requests indicate the existence of sufficient credits to settle the Corporation s debts, at the occasion of occurrence of the facts and events, using the tax credits to pay such debts. However, given the start of the period to include dues settled with PIS and COFINS credits, which has been challenged by Brazil s Federal Revenue Service, in order to improve its positioning and relationship with the Federal Revenue Service, the Corporation chose to 48

49 include the dues settled until December 2013 in the World Cup REFIS. Consequently, the credits settled were once again included in the balance sheet. This does not mean that the Corporation has withdrawn or changed its opinion, as mentioned above, and therefore for dues after December 31, 2013, use of tax credits to pay dues will continue to be requested. In the period ended June 30, 2015, the Corporation does sponsor post-employment benefit plans with actuarial liability characteristics. 17. Taxes payable Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 ICMS (State VAT) payable Special tax debt installment payment plan - Refis (1) 527, , , ,751 Income tax payable ,433 72,958 Social contribution tax payable - - 5,792 5,177 Tax payable - PGFN (2) 45,482 43,092 45,482 43,092 Other taxes payable 2,972 4,467 42,547 65, , , , ,857 Current liabilities 43,976 43, , ,312 Non-current liabilities 531, , , ,545 (1) Laws 11,941/09, 12,865/13 and 12,996/14, which reopened the period for adhesion. (2) Office of the General Counsel to the National Treasury Special Tax Debt Installment Payment Plan Law 11,941/09 On September 30, 2009, the Corporation joined the Special Tax Debt Installment Payment Plan (New REFIS), established by Law No. 11,941, of May 27, It provides for the payment in installments of debts due to the Brazilian Federal Revenue Service (SRF), the Office of the National Treasury Attorney-General (PGNF), and the Brazilian Social Security Institute (INSS). The Corporation declared debts with those agencies and transferred to the plan debts included in other payment plans (Special Tax Debt Installment Payment Plan - Law No. 10,684/03 PAES and Extraordinary Tax Debt Installment Payment Plan Executive Act No. 303/06 PAEX), to be settled within 180 months. During the consolidation process of the abovementioned program, the Corporation decided not to include the lawsuit / , totaling originally R$29,844, which was reclassified to taxes payable, under non-current liabilities. In view of the waiver of the installment payment program, debits were adjusted in accordance with law in effect on the date of the taxable event, resulting in additional fine, interest and restatement amounting to R$15,638 and a total debit of R$45,482, as presented below: 49

50 Debits reclassified to taxes payable 6/30/15 12/31/14 Social contribution payable- PGFN 10,161 9,627 Income tax payable - PGFN 27,526 26,080 Withholding income tax payable - PGFN 7,795 7,385 45,482 43,092 Reopening of the Period for joining the program Law 12,865/2013 and Law 12,996/2014 On December 20, 2013 and August 25, 2014, the Corporation joined the Reopening of Law 11,941 of 2009, which governs the payment in installments of dues with the Federal Revenue Service of Brazil (SRF), the Attorney General of the National Treasury (PGFN) and the National Social Security Institute (INSS), stating its outstanding dues with these organs, to be settled within 180 months, as shown below: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Opening balance 524, , , ,299 (+) Adhesion to installment payment - 464, ,717 (+) Interest rates 24,428 44,501 35,573 50,057 (-) Payments made / tax credits (21,922) (140,281) (29,361) (179,322) Debt balance 527, , , ,751 Current liabilities 41,004 39,089 59,916 56,557 Non-current liabilities 486, , , ,194 50

51 18. Loans and financing Credit facility Charges (% p.a.) Parent Weighted average interest rate (p.a.) Weighted average maturity (years) Balance on 6/30/15 Balance on 12/31/14 Local currency FINAME TJLP + Fixed Rate 5.99% FINEP TJLP + 1% 7.06% ,780 7,648 NCE Fixed Rate+%CDI 16.03% , ,148 Working Capital CDI + Fixed Rate 20.39% , ,633 CDCAS CDI + 1.5% p.a 15.34% ,001 - Total local currency 16.81% 892, ,723 Foreign currency: Prepayment (US$) Libor+Fixed Rate+FX 5.67% ,808 84,213 NCE (US$) / ACC Fixed Rate+ FX (US$) + Libor 6.58% , ,323 Total foreign currency 6.48% 1,026, ,536 Total indebtedness 11.29% 1,919,267 1,612,259 Current liabilities 1,535,305 1,147,462 Non-current liabilities 383, ,797 51

52 Consolidated Local currency Credit facility Charges (% p.a.) Weighted average interest rate (p.a.) Weighted average maturity (years) Balance on 6/30/15 Balance on 12/31/14 FINAME TJLP + Fixed Rate 5.99% FINEP TJLP + 1% 4.45% ,445 38,283 NCE Fixed Rate+%CDI 16.03% , ,148 Working capital (R$) Fixed Rate+%CDI 20.39% , ,633 CDCAS CDI + 1.5% p.a 15.34% ,001 - Total local currency 16.43% 920, ,358 Foreign currency Prepayment (US$) Libor+Fixed Rate + FX 5.67% ,808 84,213 Bonds (US$) Fixed Rate + FX 8.52% ,163,424 7,749,702 NCE (US$) / ACC %CDI+Fixed Rate+FX (US$)+Libor 6.58% , ,768 Bank loan (US$) Fixed Rate + FX 3.99% , ,760 Revolving credit facility Libor % , ,781 PAE (US$) Fixed Rate + FX 1.88% ,175 26,160 Tradable liabilities Fixed Rate 6.50% ,227 21,601 Total foreign currency 7.48% 10,917,890 10,135,985 Total indebtedness 8.18% 11,838,122 10,870,343 Current liabilities 1,860,458 1,470,237 Non-current liabilities 9,977,664 9,400,106 The Corporation s types of loans and financing can be described as follows: 18.1 Senior Notes BONDS 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 Corporation, through its subsidiaries, has conducted seven 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 Corporation, 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 Corporation of business units in Argentina and Uruguay. 52

53 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 Corporation 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.; 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 Corporation ( Second Issue ). 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 Corporation and to strengthen its working capital ( 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 Corporation and to strengthen its working capital ( Fourth Issue ). 53

54 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 Corporation and to strengthen its working capital ( Fifth Issue ). Also in connection with the Fifth Issue, the Corporation carried out a consent solicitation and tender offer to acquire the Bonds of the First Issue, which mature in Based on the conclusion of this offering, the Corporation repurchased Bonds in the approximate amount of US$191 million, or approximately 50.97% of the outstanding bonds 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 March 2014, the Corporation 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. In connection with the Additional Notes, the Corporation carried out a tender offer to acquire the Bonds of the 2017 Bonds of the Fourth Issue and the 2021 Bonds of the Fifth Issue. Based on the conclusion of this offering, the Corporation repurchased Bonds in the approximate amount of (i) US$72.8 million, or 12.14% of the outstanding Bonds of the Fourth Issue; and (ii) US$57.1 million or 14.28% of the outstanding Bonds of the Fifth Issue. The sixth operation was concluded in May 2014 and comprised the issue by Moy Park (Bondco) Plc of the first issue of Senior Notes in pound sterling, in the total amount of GBP 200 million, with a coupon of 6.25% p.a., semiannual interest payments starting in November 2014 and maturity of the principal in 7 years (May 2021), which were assigned foreign currency risk ratings of B1 by Moody s and B+ by Standard & Poor s. This operation was guaranteed by Moy Park Holdings Europe Ltd., Moy Park Ltd. and some of its affiliates, with no guarantee provided by the Corporation to the Notes. The proceeds were allocated to the Corporation and used to repay existing debt ( Sixth Issue ); 54

55 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 ). In connection with the Seventh Issue, the Corporation carried out a tender offer together with a consent solicitation, for 2017 Bonds of the Fourth Issue and 2021 Bonds of the Fifth Issue. Based on the conclusion of these offers, the Corporation repurchased a total principal amount of about (i) US$291.5 million, or 85.03% of the outstanding Notes of the Fifth Issue; and (ii) US$371.8 million or 70.54% of the outstanding Notes of the Fourth Issue. As a result of the early tender offer, the Fourth and Fifth Issues were amended through a complementary indenture that set forth, among other things, the elimination of virtually all the covenants in the Indenture. In April 2015, the Corporation, through its subsidiary Moy Park (Bondco) Plc, concluded the re-tap of Senior Notes connected to the Sixth Issues, in Sterling pounds, maturing in 2021, in the overall amount of GBP 100 million ( Notes Re-tap ) at the fixed rate of 6.25% p.a. (yield of 6.55% p.a. for the issue). The operation was assigned a B1 rating by Moddy s and a B+ rating by S&P. S&P also assigned Moy Park the rating of BB-. The Notes Re-tap is guaranteed by Moy Park Holdings Europe Ltd., by Moy Park Ltd. and by some of its affiliates, with no guarantee provided by the Corporation to the Notes. The proceeds allocated to Marfrig were used to repay existing debt. Due to the sale of the Moy Park business unit, in accordance with Note 11, and in compliance with CVM Resolution 598/09 (CPC 31 Non-Current Assets Held for Sale and Discontinued Operations), the Sixth Issue and the Senior Notes Re-tap by the business unit were reclassified to the group of held-for-sale liabilities. Considering that the Senior Notes issued in 2006, 2010, 2011, January 2013, September 2013, May 2014 and June 2014 represent 68.96% of the Corporation s consolidated debt as of June 30, 2015 (and represented 71.29% of the Company s debt on December 31, 2014), the obligation of maintaining a ratio of adjusted net debt to EBITDA in the last 12 months serves as a guide for the other outstanding loans and financing of the Corporation at the end of the period. Regarding the ratio of adjusted net debt to EBITDA, note that the (i) The Second Issue, Third Issue and Seventh Issue establish a maximum ratio of 4.75x (excluding the effects of exchange variation); and (ii) the Sixth Issue establishes a maximum ratio of 3.5x, applicable only to the Moy Park conglomerate and not related to the ratio of adjusted net debt to EBITDA applicable to the Corporation s consolidated results at December 31,

56 18.2 Guarantees for loans and financing: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Balance of financing 1,919,267 1,612,259 11,838,122 10,870,343 Guarantees: Promissory notes 397, , , ,024 Trade notes 66,305 84,878 66, ,083 Bank guarantee ,506 30,167 Surety 276, , ,697 1,306,624 Leased asset ,368 Export document ,841 57,603 Facilities 4,780 7,648 83,520 80,312 Marketable securities 60,819 60, , ,744 Mortgage - - 5,500 - No guarantees 1,112, ,662 10,311,713 8,333, Covenants The loan agreements are ruled by covenant of 4.75 times, in its most restrictive form, in relation to consolidated indebtedness level, as maximum quotient of Net Debt/annualized (last 12 months) EBITDA ratio. The schedule of maturities is presented in Note 19. 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: 6/30/15 Consolidated gross debt 11,936,277 (-) Consolidated cash and equivalents 2,564,343 Consolidated net debt 9,371,934 LTM EBITDA in the year ended June 30, ,963,080 EBITDA ratio 4.77x Consolidated net debt 9,371,934 (-) Effect from exchange variation (carve-out) 3,930,631 Consolidated adjusted net debt 5,441,303 Leverage ratio 2.77x 56

57 In accordance with Note 33.6 Capital Management, 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 Corporation clarifies that based on this methodology, the current leverage ratio (net debt/ebitda LTM) stood at 2.77x. 19. Debentures payable and interest on debentures Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Debentures payable 570, , (-) Cost with debenture issue (154) (184) - - Interest on convertible and non-convertible debentures 159, , , ,228 (-) Withholding income tax on debenture interest (21,546) (47,646) (21,546) (47,646) 707, ,776 98, ,582 Current Liabilities - Interest on debentures 137, ,960 98, ,582 Non-Current Liabilities - Debentures payable 569, , The Corporation, with assistance from its financial advisors, structured during the second quarter of 2013, an issue of non-convertible debentures maturing on January 22, 2019 in the amount of R$570,000. This operation formalized the process of internalizing a portion of the financial resources derived from the Senior Notes issued by its subsidiary Marfrig Holding Europe BV in January The operation was structured in such a way as to not affect the Corporation s consolidated statements. The Corporation does not have a renegotiation clause for the debentures, and therefore it does not believe on the need to report the information required under item of Circular Letter/CVM/SNC/SEP no. 01/07 in the notes to the interim financial statements. Interest due on mandatorily convertible debentures was also accrued as per Note

58 Debt, debentures and interest on debentures were as follows: Local currency Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Loans and financing 892, , , ,358 Interest on debentures 137, ,960 98, ,582 Debentures payable 569, , Foreign currency 1,600,093 1,506,499 1,018, ,940 Loans and financing 1,026, ,536 10,917,890 10,135,985 1,026, ,536 10,917,890 10,135,985 2,626,793 2,415,035 11,936,277 11,060,925 Loans and financing fall due and pay interest as follows: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Local currency 1Q15-321, ,145 2Q15-203, ,264 3Q15 199,832 10, ,833 12,140 4Q15 492, , , ,328 1Q16 191, ,963-2Q16 9,895-11, ,838 72,061 21,797 77, ,488 68,488 74,407 74, ,827 48,827 54,745 54, , ,829 5,932 5, ,600,093 1,506,499 1,018, ,940 58

59 Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Foreign currency 1Q15-126, ,050 2Q15-119, ,029 3Q15 88,207 82, , ,863 4Q15 474, , , ,000 1Q16 39,901-53,524-2Q16 176, , , , , , , , , , ,959,303 2,471, ,385,814 2,008, ,991,676 2,551, , ,452 1,026, ,536 10,917,890 10,135,985 Total 2,626,793 2,415,035 11,936,277 11,060, Lease payable The Corporation is a lessee in various agreements, classified as operating or finance leases Finance lease According to CVM Resolution No. 645/10 (CPC 06 (R1) commercial leasing), finance lease operations are now recognized under the Corporation s current and non-current liabilities, with an offsetting entry of the leased asset recorded in property, plant and equipment, according to note 14, while financial leasing operations are guaranteed by the leased assets themselves: 59

60 Parent Credit facility Charges (% p.a.) Weighted average interest rate (p.a.) Weighted average maturity (years) Balance on 6/30/15 Future payments 6/30/15 Balance on 12/31/14 Domestic currency Finance lease of vehicles CDI + Rate 14.78% Finance lease of IT equipment CDI + Rate 10.63% 2.1 3,531 3,049 2,993 Finance lease of machinery and equipment CDI + Rate 14.02% 1.2 1,680 1,530 2,167 Interest payable (1,123) - (967) Finance lease - discount to present value (658) - (583) Total domestic currency 3,840 4,962 4,119 Total Parent Company 3,840 4,962 4,119 Current liabilities 2,143 2,365 Non-current liabilities 1,697 1,754 Consolidated Credit facility Charges (% p.a.) Weighted average interest rate (p.a.) Weighted average maturity (years) Balance on 6/30/15 Future payments 6/30/15 Balance on 12/31/14 Domestic currency Finance lease of vehicles CDI + Rate 14.89% Finance lease of IT equipment CDI + Rate 10.63% 2.1 3,531 3,049 2,993 Finance lease of machinery and equipment CDI + Rate 14.13% 1.2 1,895 1,733 2,527 Interest payable (1,236) - (1,172) Finance lease - discount to present value (658) - (583) Total domestic currency 4,094 5,310 4,567 Foreign currency Finance lease of vehicles Rate ,935 Finance lease of machinery and equipment Rate 4.64% ,786 51, ,472 Total foreign currency 48,786 51, ,407 Total Consolidated 52,880 57, ,974 Current liabilities 32,236 69,229 Non-current liabilities 20,644 70,745 According to CVM Resolution 564/08 (CPC 12 present value adjustment), finance lease payable was discounted to present value, at the initial recognition date, as described in note to the financial statements for the fiscal year ended December 31,

61 Lease contracts fall due as follows: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Domestic currency Up to one year 2,143 2,365 2,358 2,661 From one to five years 1,697 1,754 1,736 1,906 Total domestic currency 3,840 4,119 4,094 4,567 Foreign currency Up to one year ,878 66,568 From one to five years ,908 68,839 Total foreign currency , ,407 Total 3,840 4,119 52, ,974 The schedule for future payments of the finance lease is as follows: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Domestic currency Up to one year 2,754 2,899 3,061 3,304 From one to five years 2,208 2,189 2,249 2,388 Total domestic currency 4,962 5,088 5,310 5,692 Foreign currency Up to one year ,856 72,035 From one to five years ,920 74,898 Total foreign currency , ,933 Total 4,962 5,088 57, ,625 61

62 20.2 Operating lease Operating lease as at June 30, 2015 is as follows: Parent Financial institution Leased asset Start date Weighted average interest rate (p.a) Weighted average maturity (years) Total amount financed Expense at 6/30/15 BANCO IBM S.A IT Equip. 08/09/ % BRASIL FOOD SERV. GROUP.SA BFG Meatpacking plant 10/01/14 IGP-M year ,848 8,250 Total Local currency 71,467 8,326 Foreign currency AVN AIR LLC Aircraft 12/01/ % ,631 1,587 Total Foreign currency 24,631 1,587 Total local and foreign currency 96,098 9,913 Financial institution Leased asset Start date Local currency Weighted average interest rate (p.a) Weighted average maturity (years) Total amount financed Expense at 6/30/15 BANCO IBM S.A IT Equip. 08/09/ % BRASIL FOOD SERV. GROUP.SA BFGMeatpacking plant 10/01/14 IGP-M year ,848 8,250 LEONI EMPREENDIMENTOS IMOB. Meatpacking plant 01/01/14 IGP-M year 4.5 2, Total local currency 73,987 8,564 Foreign currency Consolidated AVN AIR LLC Aircraft 12/01/ % ,631 1,587 Bank of America Aircraft 04/15/ % ,181 3,513 Ford Motor Credit CO. Vehicles 06/02/ % Sundry leasers Property 06/15/14 Fixed Installment ,236 12,038 Sundry leasers Machinery and Equipment 03/24/15 Fixed Installment ,538 9,367 Sundry leasers Integrated 12/12/12 Fixed Installment Sundry leasers Vehicles 01/09/15 Fixed Installment ,884 1,174 Total foreign currency 388,206 27,933 Total local and foreign currency 462,193 36,497 62

63 The balance of the operating lease payable falls due as follows: Parent Consolidated 6/30/15 6/30/15 (at present value) (at present value) Domestic currency Up to one year 9,855 10,241 From one to five years 29,508 30,669 Total domestic currency 39,363 40,910 Foreign currency Up to one year ,443 From one to five years ,761 Total foreign currency 1, ,204 Total 40, ,114 The operating leases the Corporation enters into have no restrictions or contingencies, follow market practices and include, in some cases, price adjustment clauses during their effective term. The value of the leased assets is calculated at total definitive cost, which includes costs of transportation, taxes and documentation. Finance lease obligations are calculated on the total definitive cost, by applying a predefined percentage for each agreement. In the event of termination, the lessor will have the option of cumulatively: (i) unilaterally cancelling all rights arising from the lease agreement; (ii) claiming the return of the leased goods; and (iii) accelerating the maturity of the lease agreement. In that case, the lessee undertakes to pay unsettled debts, including installments overdue and falling due, besides possible outstanding expenses, taxes and charges, plus a fine of 10% on the debt balance. The lessee, without prejudice to the lessor, may file a claim for damages. In relation to the renewal option, the lessee should previously communicate their intention to renew the lease agreement, otherwise the renewal is automatic, the conditions of which should be agreed upon between the parties. In the event the parties do not reach an agreement, the lessee should opt for purchasing the goods at market value or returning them. 63

64 21. Notes payable Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Notes payable for investments in Brazil (a) 427,948 3, ,948 3,790 Notes payable - Sponsorships (b) 40,882 65,598 40,882 65,598 Market transactions payable (c) 475, , , ,320 Related parties (d) 7,306,101 5,441, Other 32,788-33,622 2,757 8,283,526 5,886,980 1,009, ,465 Current liabilities 164, , , ,895 Non-current liabilities 8,118,678 5,752, , ,570 (a) On May 25, 2015, Marfrig acquired all shares of the company Mercomar Empreendimentos e Participações Ltda., as described in Note (b) On March 8, 2010, the Corporation signed a sponsorship agreement with the Brazilian Football Confederation (CBF) to sponsor the Brazilian football teams, including men s and women s national association football teams administered by the CBF ( Teams ). The agreement allowed the disclosure of the sponsorship of the Teams through display and associations of various brands owned by MARFRIG. Said contract was terminated early and the parties are discussing in court the terms of said termination. On March 29, 2010, the Corporation signed a sponsorship agreement with FIFA (Fédération Internationale de Football Association) to sponsor the 2010 FIFA World Cup, FIFA Confederations Cup 2013 and 2014 FIFA World Cup. The agreement permits the use of Marfrig Group brands, such as: MOY PARK AND PEMMICAN, and also the use of the tournament logo in advertisements and products and its distribution. (c) In Note 33, we break down financial instrument operations practiced by the Corporation. The Corporation and its subsidiaries are subject to market risks related to foreign exchange variations, interest rates fluctuations and commodities prices variations. These represent the amount of derivatives payable. (d) The breakdown of balance can be seen in Note

65 22. Mandatory deed convertible into shares Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Convertible mandatory deed 2,150,000 2,150,000 2,150,000 2,150,000 Cancelation of shares (450) (450) (450) (450) Issue expenses (50,832) (41,180) (50,832) (41,180) Amortization of issue expenses 21,850 13,100 21,850 13,100 2,120,568 2,121,470 2,120,568 2,121,470 According to the Indenture for the Second Issue of Debentures Convertible into Shares of (Mandatory Deed) Marfrig Global Foods S.A., the Corporation 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. All two hundred and fifty thousand (250,000) debentures were subscribed on various dates during, 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 Corporation, 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 Corporation 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 does not affect any terms and conditions of the Mandatory Deed and there is no effect on the financial indebtedness of the Corporation, on the servicing of its debt or on its financial covenants, since, unlike others items under the liabilities of the Corporation, the Mandatory Deed may not be liquidated into cash or cash equivalents, but only into common shares issued by the Corporation. 65

66 The Corporation 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, These expenses were also reclassified under non-current liabilities, as a deduction from the account Mandatory Deed Convertible into Shares. As determined by the Corporation, 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 Corporation conducted a capital increase, within the authorized limit due to the conversion of thirty-five thousand (35,000) debentures from the 2 nd Issue of Convertible Debentures of the Corporation that were held by BNDES Participações S.A. BNDESPAR into forty-three million, seven hundred and fifty thousand (43,750) common shares issued by the Corporation, in accordance with Item III 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 Corporation and Planner Trustee DTVM Ltda. on July 22, 2010, and as per the Material Fact published on October 24, 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 Corporation. 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 Corporation. On January 6, 2014, the Board of Directors of the Corporation approved the submission to the Meeting of Shareholders of the proposal for Fifth (5 th ) Issue of Unsecured Convertible Debentures in a Single Series in the aggregate amount of R$2,150,000 (5 th Issue of Convertible Debentures of the Corporation). On January 22, 2014, the shareholders of the Corporation, assembled in an Extraordinary Shareholders' Meeting, approved said Firth Issue of Convertible Debentures of the Corporation 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, 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 Corporation. 66

67 Likewise, the debentures of the Fifth Issue of Convertible Debentures of the Corporation are mandatorily convertible into shares of the Corporation 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 Corporation released a Notice to the Market announcing the conclusion of the issue and subscription of its Fifth Issue of Convertible Debentures, with the subscription of 214,955 Debentures, with unit face value of R$10, as per the information received from the agent bank Itaú Unibanco S.A., and that 45 unsubscribed debentures were canceled by the Corporation. Lastly, on March 28, 2014, the Corporation 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 Corporation, 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 Corporation; 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 Corporation and the consequent conclusion of said Second Issue of Debentures. 23. Tax, labor and civil contingencies 23.1 Provisions The Corporation and its subsidiaries are involved in several civil, administrative, tax, social security and tax proceedings, in the ordinary course of business, for which provisions based on legal counsel s estimates have been set up. The principal information about these proceedings is presented below: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Labor and social security 30,422 32,400 31,302 32,684 Tax 1,758 3,531 1,758 3,531 Civil 13,109 4,184 13,159 4,233 45,289 40,115 46,219 40,448 The following table shows the changes in provisions in the period ended June 30, 2015: 67

68 Parent Consolidated Labor and social security Tax Civil Total Labor and social security Tax Civil Total Balance on December 31, ,400 3,531 4,184 40,115 32,684 3,531 4,233 40,448 Addition 6, ,964 7, ,561 Reversal - (1,790) - (1,790) - (1,790) - (1,790) Reclassification (8,683) - 8,683 - (8,683) - 8,683 - Balance on June 30, ,422 1,758 13,109 45,289 31,302 1,758 13,159 46, Labor and social security As at June 30, 2015, the Corporation and its subsidiaries are parties to various labor claims. Based on the Corporation s and its subsidiaries payment history, a provision of R$31,302 was set up. In the opinion of the Management and legal counsel, this provision is sufficient to face probable losses. Most of the labor claims filed against the Corporation and its subsidiaries refer to matters usually questioned in this industry, such as dismissal for just cause, preparation time, breaks for personnel who work in refrigerated environments, commuting time and ergonomic risk, among others. The Management of the Corporation believes no individual labor claim is relevant Tax According to the Management and its legal counsel, the tax contingencies of the Corporation are rated as having a probable unfavorable outcome, totaling R$1,758. They refer to ICMS in the State of Mato Grosso and arise from the issuance of electronic invoices. 68

69 Civil Based on the opinion of legal advisors, the Management recognized on June 30, 2015 a provision for the amount of shares considered to be of probable risk, totaling R$13,159. The civil suits of the Corporation and its subsidiaries involve disputes typically related to business agreements and indemnities. None of those proceedings is individually material Contingent Liabilities Contingent liabilities, which are not recorded in the books of account, according to prevailing legislation, are shown below: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Labor and social security 97, , , ,313 Tax 820, , , ,419 Civil 2, , , ,477 1,000, , Labor and social security The labor and social security lawsuits in which the Corporation and its subsidiaries are parties typically involve issues usually claimed in the segment, such as dismissal without cause, preparation time, breaks for persons working in refrigerated environments, overtime, ergonomic hazards and others, which are individually insignificant Tax The main tax matters discussed at court that in the opinion of the Management and legal counsel are rated as possible losses for the Corporation and its subsidiaries is presented below. 69

70 a) Federal Taxes and Contributions As at June 30, 2015, the Corporation was a party to administrative proceedings and court claims filed by the Federal Government at the total historical value of R$409,806, claiming: (i) (ii) Deduction of ICMS from PIS and COFINS tax bases. This last lawsuit refers to a refund request at the historical value of R$68,552, for which a provision was not accrued, given that according to the opinion of the legal counsel, they are considered only possible losses. The Corporation has filed administrative defenses that are pending final judgments and allege non-enforceability due to miscalculation of their tax bases, and that inspectors estimated the amounts according to assumptions; Income and Social Contribution Taxes due to measurement of profits of foreign subsidiaries at the historical amount of R$37,279, which is the subject-matter of the administrative defense under the allegation of failure to comply with the accrual basis principle, the non-constitutionality of law provision (Article 74 of Provisional Measure /2011) and infringement of dual taxation treaties signed by Brazil, where also no provision was recorded in view of the possible chance of loss; (iii) Income and Social Contribution Taxes - Failure to accrue in net income when determining the taxable base, as well as in the CSLL calculation base, the income from branches, subsidiaries or affiliated companies determined for fiscal year 2008 in the historical amount of R$38,094. An administrative defense was presented. It is important to note that because this does not involve a tax credit, but rather the disallowance of a tax loss and negative calculation base for CSLL, the effect on deferred assets is the amount indicated in the proceeding; (iv) No increase in taxable income and CSLL base for profits earned abroad in calendar year 2009, disallowance of goodwill amortization and non-subjection to tax of interest from loan agreements in force with subsidiaries abroad, in the historical amount of R$83,910. An administrative defense was submitted. (v) Disallowance of the negative balance of income tax (IRPJ) for 2008, with partial approval of the offsets made, due to the non-recognition of a portion of the credit a debit was created in the historical amount of R$24,980, against said disallowance a statement of nonconformance was presented so that the entire credits of the Corporation could be recognized; (vi) Disallowance of the negative balance of income tax (IRPJ) for 2007, whose disallowances of offsets make up a debit in the historical amount of R$ 8,087, which arose from the supposed utilization of improper credit to settle the monthly estimates of the elements that cause the negative balance; (vii) The Corporation has a tax deficiency notice related to the requirement of additional contribution to SENAI in the historical amount of R$330. Said action is awaiting analysis of the appeal and export report presented by the company; 70

71 (viii) The Corporation and its subsidiary MFB have a tax deficiency notice related to the requirement of additional contribution to SENAI in the historical amount of R$2,015, for alleged error in taxing the activities of its establishments; (ix) MFB has a tax deficiency notice in the amount of R$1,487 filed due to alleged insufficient non-cumulative credits of PIS/Cofins taxes in domestic and export markets (first quarter of 2010 to second quarter of 2011), to cancel the PIS/Cofins dues declared in Dacon. The objection submitted required the suspension of judgment of the objection until the final analysis of each of the reimbursement requests, which will prove the existence of credits; (x) The Corporation and its subsidiary MFB have administrative proceedings associated with federal tax credits offset against social security debts, in the amounts of R$7,144 and R$3,495, respectively. The companies are party to a court action discussing their right to the offset; (xi) The Corporation and its subsidiaries MFB and Pampeano have federal tax debts, whose collection suits are individually immaterial, totaling R$134,434; The Corporation joined the tax installment payment program envisaged by Law 12,996/14, which reopened the period for joining the tax installment payment program provided for by Law 11,941/09, granting the prerogative to taxpayers that pay their overdue debits in installments by December 31, 2013 World Cup REFIS. The following debits were subject to such installment payments: i) social security contributions, ii) arising from settlements not ratified; and iii) Import PIS/COFINS, whose amounts are mentioned in Note 17 Taxes, rates and contributions. Said adhesion was made effective with tax credits approved and available, which were duly backed by a court ruling on September 30, The subsidiaries MFB, MFG and Pampeano also adhered to the installment payments program provided for by Law 12,966/14, which reopened the period for joining the tax installment payment program provided for by Law 11,941/09, granting the prerogative to taxpayers who pay their overdue debits in installments by December 31, 2013 World Cup REFIS. Debits subject to the adhesion refer to social security contributions, whose amounts are mentioned in Note 17 Taxes payable. 71

72 b) State VAT ICMS On June 30, 2015, the Corporation had administrative proceedings, and court claims in the historical amount of R$468,103, claiming the following: (i) (ii) The discussions on ICMS involving the Corporation in administrative proceedings filed by the Finance Departments of the States of São Paulo, Goiás, Bahia, Rio Grande do Sul, Rondônia and Ceará that question the credits from the transfer of goods, the allocation of presumed tax credit arising from slaughtering activities, non-fulfillment of ancillary obligations, wrong issuance of invoices, credit granted and non-payment of ICMS ST, claimed credit of ICMS in the acquisition of beef cattle from another state, which amount to the historical value of R$55,226. Of this amount, R$13,226 was the subject of a court claim related to the credit granted by the State Government of São Paulo, praying for interlocutory relief against its enforceability; The Corporation is challenging the collection imposed for the lack of supporting documentation to prove the entrance of goods through the Free-Trade Zone of Manaus, at the historical value of R$969. (iii) In the State of Mato Grosso, the actions refer to the disregard of the tax regimen established with the State, the absence of issuance of electronic invoice, irregular issue of tax document and export evidence corresponding to R$3,931. (iv) The most significant proceedings regarding ICMS were filed by the Finance Department of the State of São Paulo claiming amounts related to deemed credit taken on transfer invoices of goods sent by the branch located in the states of Mato Grosso do Sul and Goiás to the branches in the State of São Paulo, that is, a "Tax War. The assessed amounts correspond to the difference between the amount separately identified in the goods receiving documents at the distribution center and that paid to the State of origin. The total historical amount claimed in these proceedings is R$378,261. (v) (vi) The Corporation has a tax foreclosure action related to the payment of ICMS tax as a result of an alleged undue credit Presumed Credit under the Regime AGREGAR/RS, in the historical amount of R$24,993. The Corporation filed a motion to stay execution of said foreclosure actions demonstrating the legitimacy of the credits; The subsidiary MFB has a Tax Deficiency Notice regarding the charge of ICMS debits, issued by the Tax Authority of the State of São Paulo for alleged non-payment of ICMS-ST for inbound goods acquired from rural agricultural producers, submission of GIA with incorrect information, alleged undue credits granted in a higher amount than that established by law, failure to reverse ICMS credits arising from exempt shipments and non-payment of ICMS for exports outside the period set by law, in the historical amount of R$4,326; 72

73 (vii) Subsidiary MFB also received Tax Deficiency Notices discussing the collection of ICMS debts filed by the Finance Departments of the states of Rondônia and Goiás related to the disallowance of ICMS credits in view of breach of an ancillary obligation, error in determining the ICMS calculation base, not including freight in the ICMS calculation base the amount paid for transport services, circulation of goods with invoice considered questionable, non-compliance with the minimum price in the state and omission of the ICMS declaration in the Periodic Tax Statement (DIP), all of which led to the tax collection notice for the historical amount of R$328; (viii) The subsidiary MFG received a Tax Deficiency Notice involving the collection of ICMS debts filed by the Finance Department of the State of São Paulo related to the payment of ICMS, alleging that the Corporation did not record in the specific field of the GIA the tax amount including the rate differential related to the interstate acquisition of material for use and consumption, undue booking of ICMS credit, in the historical amount of R$57; (ix) The subsidiary Pampeano has a Tax Deficiency Notice involving the collection of ICMS debts filed by the Finance Department the State of Rio Grande do Sul, related to the collection of ICMS debts for the alleged issue of invoice without declaring the ICMS in the outflow of goods from that state, in the historical amount of R$12. c) Taxes on Services of Any Nature (ISSQN) On June 30, 2015, the Corporation had a tax deficiency notice related to the collection of ISSQN is related to the alleged retention and nonpayment of the respective tax credit levied on the provision of services received in the periods of 10/2005, 04, 06, 10 and 12/2006, 04, 08, 09 and 10/2007, 01 and 04/2008, 04, 09 and 12/2009, 04 and 06/2010, in the historical amount of R$ Civil The civil suits of the Corporation and its subsidiaries involve disputes typically related to business agreements and indemnities, which are not individually relevant Additional Information on Contingent Liabilities On June 30, 2015 the Corporation, based on the opinion of its Management and legal advisors, classified the amount of R$225,772 as Remote Risk, not including it in the balance informed in Note 23.2 Contingent Liabilities Tax. (i) Contributions destined to Social Security (FUNRURAL), three deficiency notices, the first related to 2006 and 2007, the second related to 2008 and the third related to 2009 and 2010, at the historical amount of R$225,772, all of which already were the subject of an administrative defense alleging the non-constitutionality of said contribution based on the Federal Supreme Court s decision, the application of which at the administrative level is supported by Article 26 A of Decree 70,235/72; 73

74 (ii) With regard to federal administrative and judicial proceedings deemed as remote risk, as described earlier in Note 22.3 for the period ended June 30, 2014, the Corporation and its subsidiaries MFB and MFG joined the tax installment payment program instituted by Law 12,966/14, which reopened the period for joining the tax installment payment program provided for by Law 11,941/09, granting the prerogative to taxpayers that pay their overdue debits in installments by December 31, 2013 World Cup REFIS. The debits subject to adhesion refer to social security contributions and Import PIS/COFINS, whose amounts are mentioned in Note 17 - Taxes, rates and contributions. 24. Deferred Income and Social Contribution Taxes - Liabilities Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Income Tax 68,214 70, , ,676 Social Contribution 24,557 25,357 31,051 29,082 92,771 95, , ,758 Refer to (i) deferred taxes recorded when property, plant and equipment items adopted deemed cost as of January 1, 2009 in accordance with CVM Resolution 583/09 (CPC 27 property, plant and equipment) and CVM Resolution 619/09 (ICPC 10), which will be settled as revalue assets are sold, written off, depreciated or amortized, according to their respective useful lives established in the appraisal report, and (ii) the effect of deferred federal taxes calculated on the effects of CVM Resolution 665/11 (CPC 15 (R1) business combination). Below are the changes in deferred taxes in the period ended June 30, 2015: Parent Consolidated Description IRPJ CSL IRPJ CSL Balance on December 31, ,438 25, ,676 29,082 Realization of revaluation reserve (827) (298) (839) (302) Realization of deemed cost (1,397) (502) (3,626) (582) Deferred taxes on temporary differences - - 3,811 - Reversal of deferred taxes on temporary differences ,326 - Other ,613 2,853 Translation gains/losses ,013 - Discontinued operation - - (269,057) - Balance on June 30, ,214 24, ,917 31,051 74

75 25. Shareholders equity 25.1 Share capital Subscribed and paid-in share capital as at June 30, 2015 totals R$5,276,678 and is represented by 520,747,405 common shares without par value (R$5,276,678 as of December 31, 2014, represented by 520,747,405 shares). Under the scope of the primary public offering of common shares of the Corporation in December 2012, a total of 131,250,000 common shares were issued at the aggregate subscription price of R$1,050,000, as per the minutes of the meeting of the Board of Directors held on December 10 and 21, As per the Minutes of the Board of Directors Meeting held on July 30, 2012, a total of 1,236,549 registered common shares, previously held in treasury, were canceled. Based on CVM Resolution 649/10 (CPC 08 (R1) transaction costs and premium on issue of securities), the Corporation recorded under shareholders equity the costs incurred with the processes of funding (R$108,210) through public share offering and private share issue. On February 5, 2013, the Corporation carried out a capital increase, within the authorized limit, in a Meeting of the Board of directors, due to the conversion of thirty-five thousand (35,000) debentures from the 2 nd Issue of Convertible Debentures of the Corporation that were held by BNDES Participações S.A. (BNDESPAR) into 43,750 million common shares ( Shares ) issued by the Corporation, as explained in Note 22. Pursuant to the Corporation s by-laws, at the discretion of the Board of Directors, Share Capital can be composed of up to 630 million common shares, including share capital, regardless of amendments to the by-laws. Also at discretion of the Board of Directors, the Corporation can issue shares and debentures convertible into shares or subscription warrants without pre-emptive rights or with the period reduction provided for in paragraph 4 of article 171 of Law No /76. Their placement should be made through sale on stock exchange or public subscription, or by means of exchange for shares in a public offering for control acquisition, under the terms of the law and within the limit of authorized capital. The Board of Directors defines issuance conditions (prices and periods). The call option of shares, the conditions under which shareholders will have pre-emptive rights to subscription, or the inexistence of such right in relation to Management, employees, or individuals who render services to the Corporation or other companies under its control are presented in Note Income reserves Legal reserve It is 5% (five per cent) of the Corporation s net income, as defined in its by-laws and current legislation. In 2014, the Corporation did not recognize legal reserve given that it recorded loss. Accordingly, the balance as of June 30, 2015 remained at R$44,476 (same amount as in 2013). 75

76 Treasury shares Share buyback program Shares repurchased were held in treasury for exercise of stock options by the beneficiaries of the Corporation's Stock option Plan and/or subsequent cancellation or sale. In the period ended June 30, 2015, there was no ongoing share buyback program and Marfrig did not acquire any shares. Treasury shares On June 30, 2015, Marfrig held three hundred thirty thousand, seventy-four (330,074) common shares in treasury, representing 0.06% of the Corporation s total shares, which were booked at the amount of R$3,121, which corresponds to an average cost of nine reais and forty-five centavos (R$9.45) per share. Changes in treasury shares are shown in the table below: Held in Treasury Number of Shares Value (R$ '000) Balance as at 12/31/ ,729 3,685 (-) Disposal - Stock options (59,655) (564) Balance as at 6/30/ ,074 3, Other comprehensive income Asset and liability valuation adjustment These account records exchange rate gains (losses) on investments in subsidiaries abroad directly and indirectly held by the Corporation. Such accumulated effect will be transferred to the statement of operations for the year as gain or loss only upon the disposal or write-off of the investment. This account also recognized the effects of adoption of deemed cost Cumulative translation adjustment This account records exchange rate gains (losses) resulting from the translation of the foreign subsidiaries interim financial statements. The investee s functional currency is different from that of the Corporation. 76

77 Amounts under Shareholders Equity related to assets held for sale In compliance CVM Resolution 598/09 (CPC 31 Non-Current Assets Held for Sale and Discontinued Operation), the Corporation segregated from the balance of other comprehensive income recorded in its shareholders equity the amounts related to assets held for sale Dividends payable The Corporation s mandatory dividend is at least 25% of the adjusted net income determined in the Corporation s financial statements, pursuant to Brazilian Corporate Law and the Corporation s by-laws. The annual statement of dividends, including their payment, in addition to mandatory minimum dividends, are approved at an Annual Shareholders Meeting by majority voting of Marfrig s shareholders and will depend on various factors. Among these factors are the Corporation s operating results, financial conditions, cash needs, future prospects and others which Marfrig s Board of Directors and shareholders deem relevant. At a meeting held on February 27, 2015, in view of the net loss recorded in the period, the Board of Directors did not submit to the Annual Shareholders Meeting the proposal for distribution of dividends for Interest on equity capital The Corporation did not recognize interest on shareholders equity for the fiscal years ended December 31, 2014 and Non-controlling interest Refers to the interest of non-controlling shareholders in the Corporation s equity. 77

78 26. Net sales Revenue from sales of products Reclassified 6/30/15 6/30/14 6/30/15 6/30/14 Domestic sales 1,682,936 1,431,755 6,619,066 5,234,514 Foreign sales 1,219,559 1,182,874 2,698,607 2,342,184 Deductions from gross sales Parent Consolidated 2,902,495 2,614,629 9,317,673 7,576,698 Taxes on sales (50,753) (63,860) (102,113) (127,860) Returns and discounts (77,742) (116,715) (116,418) (184,315) (128,495) (180,575) (218,531) (312,175) Net sales 2,774,000 2,434,054 9,099,142 7,264, Costs and expenses by nature The Corporation has decided to present the statements of income by function. The breakdown by nature is below: 78

79 Cost of sales Reclassified 6/30/15 6/30/14 6/30/15 6/30/14 Inventory costs 2,157,924 1,874,106 7,063,611 5,527,347 Depreciation 49,955 37, , ,560 Amortization 3,904 3,930 35,750 28,219 Employee salaries and benefits 137, , , ,492 Administrative expenses 2,349,369 2,031,936 8,062,001 6,318,618 Depreciation 3,722 5,965 5,948 9,235 Amortization 40,457-1, Employee salaries and benefits (7,464) 37, , ,525 Other - 3,965 71,746 79,511 Selling expenses Parent Consolidated 36,715 47, , ,720 Depreciation Employee salaries and benefits 13,848 13,613 31,382 31,321 Other 124, , , , , , , ,264 79

80 28. Net financial result The Corporation s net financial income (expenses) is as follows: Parent Consolidated Reclassified 6/30/15 6/30/14 6/30/15 6/30/14 Financial income Financial results with market transactions 84,082 28, ,871 44,562 Interest received, earnings from marketable securities 13,341 5,846 38,421 49,979 Discounts, other 2,422 1,626 10,433 10,232 Total financial income 99,845 36, , ,773 Exchange rate gains 667, , , ,096 Financial expense Provisioned interest, debentures and leasing with financial institutions (467,970) (375,334) (619,563) (514,932) Market transactions (248,591) (41,214) (282,418) (73,318) Bank expenses, commissions, fees, other (96,331) (53,088) (281,544) (178,971) Total financial expense (812,892) (469,636) (1,183,525) (767,221) Exchange rate losses (1,039,201) (270,037) (1,401,226) (396,009) Net financial result (1,084,967) (434,180) (1,415,845) (680,361) 29. Management compensation The compensation policy is designed to establish the criteria, responsibilities and directions for the short and long-term compensation program of Marfrig Group s Management (Bonus and Stock Option). The purpose of this policy is to motivate the Corporation s executive officers to grow and develop to achieve maximum performance, in line with the business objectives, through a short and long-term reward pay-out. The Compensation, Corporate Governance and Human Resources Committee is the advisory body to the Board of Directors in assessing management compensation. The committee is composed solely of members of the Corporation s Board of Directors and one of them is the Committee Coordinator. The parameters used to determine Management s compensation are based on market practices. 80

81 29.1 Board of directors The Board of Directors compensation consists of a fixed and variable portion. Fixed portion An annual amount is set for each member and paid on a monthly basis. Variable portion Short-term bonus or stock option-based payment. The board members compensation is determined through market research with the major companies in the industry whereby a compensation base is defined and submitted to Marfrig Global Foods s Compensation, Corporate Governance and Human Resources Committee for validation Officers appointed as per Bylaws The Board of Executive Officers compensation consists of a fixed and variable portion. Fixed portion An annual amount is set for each member and paid on a monthly basis. Variable portion Consists of short-term (bonus) and long-term (stock option) compensation. In general the goals set by the Corporation for Management evaluation refer to economic objectives and individual goals. The gain on the Stock Option Plan is tied to the appreciation of the market price of the share, i.e. the value added to the Corporation by the performance of the individual and the Management as a whole will reflect on the gain on the stock option plan. At the same time the employees interests are aligned with the Corporation s interests in the long term. The exercise price of the stock options related to share-based compensation under Specific Programs is the average of the last 20 trading sessions prior to the first business day of March of each year and the grant price with a 50% discount starting with the grants in The vesting period follows these criteria: 25% after 12 months of the grant; 25% after 24 months of the grant; 25% after 36 months of the grant; 25% after 48 months of the grant. The officers compensation is determined through market research with the major companies in the industry whereby measurement criteria are established according to the significance of the position within the organization. The macro policies are approved by the Compensation, Corporate Governance and Human Resources Committee. 81

82 29.3 Audit Board The Corporation s Audit Board was set up after approval at the Annual Shareholders Meeting held on April 30, In the by-laws amended by the Special Shareholders Meeting held on March 11, 2011, the Audit Board became a permanent body. The Audit Board s is fixed on an annual basis and paid on a monthly basis. There is no variable portion Consolidated compensation Management and Board members compensation is made up of the compensation of six members of the Board of Directors (the other three opted for not receiving compensation as board members, one of whom is also a member of the Statutory Board of Executive Officers and receives compensation from that body), six members of the Audit Board (there of whom are alternate members) and six officers appointed as per the Corporation s bylaws. The added value of the compensation received by the Corporation s Management and Board members for their services is defined through market practices, with the participation of the Compensation, Corporate Governance and Human Resources Committee, made up exclusively of members of the Board of Directors of the Company, one of whom acts as Coordinator of the Committee. Key management compensation 6/30/15 6/30/14 Consolidated Management compensation 14,739 15,805 Total 14,739 15, Stock option plan On May 29, 2009, the Annual Shareholders Meeting approved the amendment and restatement of the Stock Option Plan (Plan), with the purpose of: (i) promoting value generation to the Corporation s shareholders, through alignment of their interests with those of the Management, employees and outsourced employees of Marfrig or its subsidiaries and (ii) enabling a higher level of attraction, retention and motivation of strategic employees. The Plan is managed by the Board of Directors, within the limits established in the general guidelines and applicable legislation. The general guidelines of the plan are disclosed in detail in the Corporation s Reference Form. The Board of Directors may create stock option programs with specific conditions regarding the participants, the number of options to be granted, performance targets to be achieved, exercise price discounts and other conditions ( Specific Programs ). Specific Programs were created in which the exercise price of the Stock Option is equivalent to the average stock quote in the last 20 trading sessions of the BM&FBOVESPA S.A. prior to the reference date of the first business day of March each year, over which a 50% discount shall apply. 82

83 During the period ended June 30, 2015, 59,655 shares were transferred to the Management of the Corporation under the stock option plans. The changes in options exercised throughout the period are shown in the tables below: Total options exerc ised by month Number of shares exerc ised Average Market Pric e¹ (R$ per share) January/ February/ March/15 11, April/15 28, May/15 9, June/15 9, Options exerc ised ,655 ¹ Average monthly quote disclosed by BM&FBOVESPA Bolsa de Valores, Mercadorias e Futuros S.A., related to Marfrig's common shares, traded under ticker MRFG3. (Options) Consolidated Changes Opening balance 3,405,169 1,493,501 Options granted 1,581,017 2,499,640 Options exercised (59,655) (71,494) Options canceled and expired - (516,478) Closing balanc e 4,926,531 3,405,169 The expected dilution of ownership interest of current shareholders, when stock options are exercised at the vesting date, up to the limit of shares held in the treasury for this purpose, is 0.95% of all shares at June 30, 2015, as detailed in the table below: Percentage of Dilution Plano ESP V LP Plano ESP VI LP Plano ESP VII LP Plano ESP VIII LP Plano ESP IX LP Total Granting date 4/20/2011 4/24/2012 4/5/2013 4/30/2014 6/24/2015 Unexercised 142, , ,716 2,444,033 1,581,017 4,926,531 Treasury stock (330,074) Total outstanding shares except treasury stock 520,417,331 Percentage of dilution 0.03% 0.10% 0.05% 0.47% 0.30% 0.95% 83

84 The Corporation did recognize expenses relating to granting of plans in effect for the period ended June 30, 2015, as detailed in the table below: Effects from the exercise of options (R$ '000) Amount received from sale of shares - Exercised options (-) Cost of treasury shares disposed of (564.0) (675.9) Effect on disposal of shares (436.1) (325.2) Due to the exercise of stock options, the Corporation incurred costs with the sale of treasury shares of R$564. At June 30, 2015, the book value of treasury shares was recorded under the Corporation s shareholders' equity in the amount of R$3,121 (R$3,685 at December 31, 2014). The fair value of the options was measured on an indirect basis, according to the Black- Scholes pricing method, based on the following assumptions: Standard deviation: 55.04%. Volatility is measured taking into consideration the daily prices of the Corporation s shares traded on the Brazilian stock exchange (BM&FBOVESPA) under the ticker MRFG3, from January 1, 2015 to June 30, 2015; Risk-free interest rate: 6.00% p.a. The Corporation uses as risk-free interest rate the Long Term Interest Rate (TJLP) annualized on calculation date and available on the federal revenue service website The fair value of options as of June 30, 2015 ranged between a minimum of R$0 and a maximum of R$4.13 per share for SPECIAL plans. 84

85 Changes to the stock option programs are presented below: Plans Granting Date Performanc e (vesting) period Option expiration date Options granted Vested options Options exercised in the period Options cancelled and/or expired in the period Options exercised and/or Unexercised cancelled in agreements prior periods Options exercised / canceled in previous periods 5,620,658 2,215,214 2,215,214 3,405,169 Option exercise price ESP V LP /20/2011 3/3/2015 9/2/ , , ,495 R$ , , ,495 ESP VI LP /24/2012 3/3/2015 9/2/ , ,447 2, ,823 R$ ESP VI LP /24/2012 3/3/2016 9/2/ , ,447 R$ , ,447 2, ,270 ESP VII LP /5/2013 3/3/2015 9/2/ ,380 87,380 1, ,956 R$ ESP VII LP /5/2013 3/3/2016 9/2/ , ,380 R$ ESP VII LP /5/2013 3/3/2017 9/2/ , ,380 R$ ,140 87,380 1, ,716 ESP VIII LP /30/2014 3/3/2015 9/2/ , ,910 55, ,303 R$ ESP VIII LP /30/2014 3/3/2016 9/2/ , ,910 R$ ESP VIII LP /30/2014 3/3/2017 9/2/ , ,910 R$ ESP VIII LP /30/2014 3/3/2018 9/2/ , ,910 R$ ,499, ,910 55, ,444,033 ESP IX LP /24/2015 3/3/2016 9/2/ , ,316 R$ ESP IX LP /24/2015 3/3/2017 9/2/ , ,316 R$ ESP IX LP /24/2015 3/3/2018 9/2/ , ,316 R$ ESP IX LP /24/2015 3/3/2019 9/2/ , ,069 R$ ,581, ,581,017 Total at 6/30/2015 7,201,675 3,320,721 59, ,215,489 4,926,531 Plans Granting Date Market value of unvested options at the end of the period Market value of outstanding vested options at the end of the period Effects in the future result of the Corporation - does not require immediate accounting ESP V LP /20/ ESP VI LP /24/ ,161.3 ESP VI LP /24/ ,392.2 ESP VII LP /5/ ESP VII LP /5/ ESP VII LP /5/ ESP VIII LP /30/ , ,273.7 ESP VIII LP /30/2014 2, ,339.0 ESP VIII LP /30/2014 2, ,339.0 ESP VIII LP /30/2014 2, , , , ,290.7 ESP IX LP /24/2015 1, ,311.7 ESP IX LP /24/2015 1, ,311.7 ESP IX LP /24/2015 1, ,311.7 ESP IX LP /24/2015 1, , , ,245.9 Total at 6/30/ , , ,

86 30. Earnings (loss) per share The following table shows the calculation of earnings (loss) per share for the years ended June 30, 2015 and 2014 (in thousands, unless otherwise stated): Reclassified 6/30/2015 6/30/2014 Profit (loss) attributable to shareholders of continuing operations (612,030) (198,724) Profit (loss) attributable to shareholders of discontinued operations 34,976 47,220 Profit (loss) attributable to shareholders of the Corporation (577,054) (151,504) Weighted average number of shares in the period (units) 520,747, ,747,405 Weighted average number of shares held in treasury, including stock option (units) (368,185) (461,219) Weighted average number of outstanding common shares (units) 520,379, ,286,186 Basic and Diluted Earnings (Losses) (in R$) from continuing operations (1.1761) (0.3820) Basic and Diluted Earnings (Losses) (in R$) from discontinued operations Earnings or losses attributed to shareholders of the Company (1.1089) (0.2912) The Corporation has debentures mandatorily convertible into common shares, which are not added to the calculation of diluted earnings per share. 31. Segment reporting Marfrig Global Foods S.A. is a multinational Brazilian-originated company dedicated to the production, processing and sale in domestic and foreign markets of diversified food products, focusing on products of animal protein. The Corporation has built an integrated business model, geographically diverse, consisting of production bases located in places with significant competitive advantages in cost and a distribution network with access to major consumer markets in the world. The Corporation is strategically organized into two main reporting segments: 86

87 Marfrig Beef A pioneer in the Brazilian market in the marketing and promotion of beef and lamb, Marfrig maintains a strong presence in the food service segment and a significant presence in export markets. Its international operations in South America are concentrated in exporting premium beef cuts and leveraging its strategic position in Uruguay, Argentina, Chile, two trading companies in Europe and Peru and a beef jerky processing plant in the United States, with access to the world s main consumer markets. Keystone A global company focused on producing and developing multi-protein foods to serve major global restaurant chains, with a strong presence in Asia and the United States. The group s global platform is present in four continents, with 59 industrial complexes and offices in the Americas, Asia, Europe and Oceania, with a distribution system that allows us to export to over 99 countries. The Corporation provides information to the market, combined by segment of activity similar to that considered by its managers when taking strategic decisions. 87

88 The consolidated balance sheet and statement of operations summarized by information segment are as follows: Assets Marfrig Beef Holding BV Keystone 6/30/ /31/2014 Discontinued Segment Total Marfrig Beef Holding BV Keystone Discontinued Segment Current assets 5,353,956 82,002 1,494,213 4,855,217 11,785,388 5,475, ,315 1,206,822 1,115,670 8,368,517 Non-current assets 3,538, , ,265-4,082,134 3,236, , , ,671,985 Investments ,667-35, ,764-36,934 Property, plant and equipment 3,219,361-1,060,229-4,279,590 2,889, ,307 1,096,393 4,961,623 Biological assets ,939-46, , , ,140 Intangible assets 1,191,396-1,338,980-2,530, ,739-1,153,833 1,034,137 3,004,709 13,303, ,744 4,270,293 4,855,217 22,760,264 12,419, ,519 3,593,269 3,348,582 20,185,908 Total Current liabilities 3,523,681 33, ,861 2,986,618 7,501,325 2,737,736 43, ,857 1,026,668 4,662,465 Non-current liabilities 7,306,841 5,172,164 1,895,682-14,374,687 6,383,363 4,386,845 1,546,458 1,135,052 13,451,718 10,830,522 5,205,329 2,853,543 2,986,618 21,876,012 9,121,099 4,430,049 2,401,315 2,161,720 18,114,183 06/30/ /30/2014 Discontinued Reclassified Reclassified Reclassified Discontinued Marfrig Beef Holding BV Keystone Segment Total Marfrig Beef Holding BV Keystone Segment Total Net Revenue 5,044,158-4,054,984-9,099,142 4,459,441-2,805,082-7,264,523 COGS (4,301,176) - (3,760,825) - (8,062,001) (3,705,232) - (2,613,386) - (6,318,618) Equity income (loss) - - (7,084) - (7,084) - - (8,940) - (8,940) Net financial income (loss) (1,106,012) (281,417) (28,416) - (1,415,845) (472,437) (215,706) 7,782 - (680,361) Income and social contribution taxes 287,365 - (45,925) - 241, ,202 - (17,396) - 91,806 Controlling interest in net income (loss) - continuing operations Controlling interest in net income (loss) - discontinued operations Non-controlling interest in net income (loss) - continuing operations (429,705) (282,025) 99,700 - (612,030) (78,259) (233,396) 112,931 - (198,724) ,976 34, ,220 47, ,379-18, ,702-9,278 (i) This segment reporting reflects the Corporation s fiduciary structure; (ii) The Corporation believes that Marfrig Holding (Europe) BV, with its business of raising funds and holding ownership interest in other subsidiaries of the Group, should be segregated from this information in order to better report the Keystone business segments. (iii) Discontinued operations refer to the sale of the Moy Park group to JBS. For more information, see Note

89 32. Insurance coverage The Corporation s policy is to insure its property, plant and equipment and inventories subject to risk, at amounts deemed sufficient to cover possible losses, taking into consideration the nature of its activities and the insurance advisors opinion. The risk assumptions adopted, given their nature, are not part of the scope of an audit of financial statements and, accordingly, were not reviewed by the Corporation's independent auditors. Below is a summary of the amounts insured by the Corporation: Parent Consolidated Description 6/30/15 12/31/14 6/30/15 12/31/14 Buildings and meatpacking plants 2,114,604 2,270,800 4,743,048 8,293,987 Inventories and loss of profit 156, , ,636 3,541,264 Third-party warehouse 26,825 13,700 33,928 24,410 Vehicles 18,426 17,826 33,792 30,850 Transportation of goods 62,052 53, , ,650 Officers' guarantees 93,078 79, , ,581 Civil liability 20,000 20, , ,081 Aircraft 501, ,262 - Other 463, , , ,572 3,455,761 2,937,649 7,422,529 13,754, Financial instruments - derivatives and risk management - consolidated 33.1 Overview The Corporation and its subsidiaries are exposed to market risks related to exchange rate gains (losses), interest rate and commodities price fluctuations of a nature considered normal to their business. In order to minimize these risks, the Corporation has policies and procedures to minimize these exposures and may use hedging instruments, as long as previously approved by the Board of Directors. Among the Corporation s policies we highlight: Monitoring levels of exposure to each market risk; measuring these risks; setting limits for making decisions and using hedging mechanisms, always aiming at minimizing the foreign exchange exposure of its debts, cash flows and interest rates. In a meeting held on June 24, 2015, the Board of Directors of the Corporation established new limits of authority for the Corporation s Management Bodies. The Management Committee is now responsible for authorizing a series of acts, with authority for between R$300 million and R$400 million. For acts whose required authority exceeds that defined for the Management Committee, approval is required from the Corporation s Board of Directors. 89

90 The Corporation only enters into transactions with derivatives or similar instruments that offer a minimum protection against: foreign currencies, interest rates and commodity prices, and also adopts a conservative policy of not entering into transactions that could affect its financial position. The Corporation does not enter into leveraged transactions with derivatives or similar instruments The Corporation also has a sound financial policy, maintaining a high level of cash balance, cash equivalents and short-term financial investments. At the same time, the maturity of the Corporation s long-term indebtedness is such that it does not impact a single year Financial instruments by category The Corporation s financial assets and liabilities are classified as below: Parent Financ ial assets Financ ial assets Held for and rec eivables trading 6/30/15 12/31/14 6/30/15 12/31/14 Cash and cash equivalents 170, , ,779 Marketable Securities 93,175 79, , ,827 Trade accounts receivable 292, , Notes receivable - derivatives - - 1,846 14,376 Related parties 2,922,947 2,521, Total financial assets 3,479,148 3,241, , ,982 Financ ial liabilities Financ ial liabilities at amortized c ost Held for trading 6/30/15 12/31/14 6/30/15 12/31/14 Trade accounts payable 523, , Loans, financing and debentures 2,489,113 2,182, Financial lease 3,840 4, Notes payable - derivatives , ,198 Notes payable - investments Brazil 427,948 3, Notes payable - sponsorship 40,882 65, Interest on debentures 137, , Related parties 7,306,101 5,441, Total financial liabilities 10,929,213 8,407, , ,198 90

91 Consolidated Financ ial assets Financial assets Held for and rec eivables trading 6/30/15 12/31/14 6/30/15 12/31/14 Cash and cash equivalents 829,707 1,023,213 9,445 68,472 Marketable Securities 731, , , ,093 Trade accounts receivable 1,024,523 1,618, Notes receivable - derivatives , ,261 Total financ ial assets 2,585,434 3,267,962 1,391,727 1,285,826 Financ ial liabilities Financial liabilities at Held for amortized c ost trading 6/30/15 12/31/14 6/30/15 12/31/14 Trade accounts payable 1,495,530 2,028, Loans, financing and debentures 11,838,122 10,870, Financial lease 52, , Notes payable - derivatives , ,320 Notes payable - investments Brazil 427,948 3, Notes payable - sponsorship 40,882 65, Interest on debentures 98, , Total financ ial liabilities 13,953,517 13,298, , ,320 Details of the accounting policies and methods used (including criteria for recognition, measurement bases and criteria for recognition of gains and losses) for each class of financial instruments and equity are presented in Note to the financial statements for the fiscal year ended December 31, Comparison of market value and respective fair values Market values for the financial instruments are shown in the following: 91

92 6/30/15 Consolidated 12/31/14 Book value Market value Book value Market value Cash and cash equivalents 839, ,152 1,091,685 1,091,685 M arketable Securities 1,726,131 1,726,131 1,568,082 1,568,082 Trade accounts receivable 1,024,523 1,024,523 1,618,760 1,618,760 Notes receivable - derivatives 387, , , ,261 Trade accounts payable 1,495,530 1,495,530 2,028,303 2,028,303 Loans and financing 11,838,122 11,838,122 10,870,343 10,870,343 Financial lease 52,880 52, , ,974 Payables - derivatives 507, , , ,320 Interest on debentures 98,155 98, , ,582 The fair value of financial instruments is similar to the book value and largely reflects the values that would be obtained if they were traded in the market Breakdown of Derivative Financial Instruments The breakdown of Marfrig Group s derivative financial instruments follows: 92

93 Consolidated Instrument Hedged Item Exchange Maturity Assets Liabilities Notional USD Notional R$ MTM R$ Transactions designated as Hedge Accounting Swap Interest Rate CETIP 2015 LIBOR USD 42, ,309 (1,427) Swap Interest Rate CETIP 2016 LIBOR USD 68, ,977 (1,263) Swap Interest Rate OTC 2018 LIBOR USD 132, ,095 (2,481) Swap Interest Rate OTC 2019 LIBOR USD 187, ,738 (17,672) Transactions not designated as Hedge Accounting Swap Interest Rate CETIP 2016 LIBOR USD 38, ,331 (3,740) Swap Interest Rate CETIP 2017 BRL USD 288, ,000 (362,959) Swap Interest Rate OTC 2017 USD BRL 288, , ,067 Swap Interest Rate CETIP 2018 CDI USD 59,827 97,440 (106,418) (134,893) NDF Exchange Rate OTC 2015 USD MYR 47, , NDF Exchange Rate OTC 2016 USD MYR 14,040 43, NDF Exchange Rate OTC 2015 USD THB 26,088 80,942 (883) NDF Exchange Rate OTC 2015 USD THB 18,823 58,399 (1,513) NDF Exchange Rate OTC 2015 AUD USD NDF Exchange Rate OTC 2015 MYR USD 10,582 32,833 (3,029) NDF Exchange Rate OTC 2015 MYR SGD 6,267 19,444 (978) NDF Exchange Rate OTC 2015 THB MYR 1,871 5,804 (10) NDF Exchange Rate OTC 2015 KRW USD 12,119 37,599 (2,474) NDF Exchange Rate OTC 2015 KRW USD 11,269 34,962 (1,268) NDF Exchange Rate OTC 2015 GBP THB 10,403 32,276 (1,429) NDF Exchange Rate OTC 2015 JPY THB 530 1,644 1 NDF Exchange Rate OTC 2015 USD CLP 9,690 30, (9,958) Options Soy meal CBOT 2015 USD USD 953 2,958 1,758 Options Soy meal CBOT 2016 USD USD 4,138 12,839 4,357 Options Corn CBOT 2015 USD USD 13,204 40,966 6,339 Options Corn CBOT 2016 USD USD 23,357 72,466 8,346 SWAP Corn CBOT 2015 USD USD 7,653 23,744 1,170 Options Fed cattle BM&F 2015 BRL BRL 7,695 23, Futures Fed cattle BM&F 2015 BRL BRL 18,839 58,449 1,787 (1) Does not include the available cash balance of R$875 related to the margin adjustment. 23,815 (121,036) Assets and liabilities presented on the balance sheet under securities receivable and trade accounts payable regarding derivative transactions, which are intended for equity hedging, are shown below: Consolidated 6/30/15 12/31/14 Notes receivable - derivatives (note 10) 387, ,261 Notes payable - derivatives (note 21) (507,516) (411,320) Total, net (120,161) (136,059) 93

94 In the period ended June 30, 2015, a consolidated net financial loss of R$89,547 was recorded from market transactions, of which R$282,418 corresponded to expenses and R$192,871 to income Derivative Financial Instruments subject to Cash Flow Hedge Accounting In November 2013, the Marfrig group adopted hedge accounting policies for financial instruments exposed to cash flow changes. As a result, the variations in fair value of derivatives designated as hedge are recognized directly in shareholders' equity, under 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. The Corporation documents, at the start of the operation, the relation between the hedge instruments and the underlying hedged items, as well as the objectives of the risk management and the strategy to carry out various hedge operations. The documentation for operations designated as hedge accounting evidences control of the effectiveness and the operation, and includes: Hedged item; Financial instrument; Strategy for managing the risk to be hedged; Effectiveness of the hedge instrument, reliably measured; Evaluation of the hedge on an ongoing basis throughout the duration of the contract. The Corporation also documents its assessment, both at the start of the hedge as well as periodically, that the derivatives used in the hedge operations are highly effective in offsetting the variations in the fair value of the underlying hedge items. Therefore, all instruments designated as hedge accounting are effective, highly probable and neutralize the exposure to variations in the cash flow that could affect results. 94

95 The effectiveness of the operations is periodically controlled in a reliable and documented manner throughout the duration of the contract, through statistical correlation between the fair value or cash flows of the hedged position and the hedging instrument, or by comparing previous changes in the fair value or cash flows of the hedged position attributable to the hedged risk with previous changes in the fair value or in the cash flows of the hedging instrument. Consolidated Gain / Loss Instrument Asset (Hedged Item) Libor (Risk Exposure) Maturity Notional USD Notional R$ Balance (MTM) R$ Equity Result Swap Libor USD , ,309 (1,427) (1,427) - Swap Libor USD , ,977 (1,263) (1,263) - Swap Libor USD , ,095 (2,481) (2,323) (158) Swap Libor USD , ,738 (17,672) (17,215) (458) (22,843) (22,228) (616) 33.5 Market risk The Corporation is exposed to market risks arising from commodity prices, interest rates and exchange rates. For each risk, the Corporation conducts a continuous management and sensitivity studies presented in this note Commodity price risk management During its activities, the Corporation and its subsidiaries purchase some commodities, such as: cattle, grains and energy, which are the biggest individual components of the production cost and are subject to certain variables. The price of cattle acquired from third parties is directly related to market conditions, and is influenced by domestic availability and foreign market demand. Maize and soya bean meal ( grains ) are subject to volatility resulting from weather conditions, crop yield, transport costs, warehousing costs, agricultural policy, exchange rates, international prices, among others, which is not under Management s control. So as to reduce the impact over commodities, the Corporation and its subsidiaries manage inventory levels, keep cattle in feedlots and trade derivative financial instruments in the futures market. The Corporation and its subsidiaries purchase financial instruments to reduce the price risk related to the needs for commodities within 12 months. A substantial part of these hedge instruments come from the futures market at the Chicago Board of Trade (CBOT). 95

96 The position of derivatives related to commodity risks is shown below: Consolidated Exchange Instrument Futures contract Maturity Notional USD Notional R$ MTM R$ Result on 6/30/2015 CBOT Options Soy meal ,958 1,758 1,758 CBOT Options Soy meal ,138 12,839 4,357 4,357 CBOT Options Corn ,204 40,966 6,339 6,339 CBOT Options Corn ,357 72,466 8,346 8,346 CBOT SWAP Corn ,653 23,744 1,170 1,170 BM&F Options Fed cattle ,695 23, BM&F Futures Fed cattle ,838 58,449 1,787 1,787 75, ,295 23,815 23, Sensitivity analysis of commodity price risk To provide information about the behavior of market risks that the Corporation and its subsidiaries were exposed to as at June 30, 2015, three scenarios are considered and the probable scenario is the fair value as at June 30, 2015 and two more scenarios with deterioration of 25% and 50% of the risk variable taken into account, denominated as Possible and Remote, respectively. The base prices for commodity futures are referenced to the prices quoted on the Chicago Board of Trade (CBOT) for contracts maturing on June 30, With regard to commodity risk, following are the sensitivity scenarios: 96

97 Stress scenario - Derivatives Commodities Consolidated Probable Scenario Possible Scenario Remote Scenario MTM (1) Result MTM (1) Result MTM (1) Result 23,815 23,815 17,861 17,861 11,907 11,907 Stress scenario - Derivatives Commodities Soy Meal Probable Scenario Possible Scenario Remote Scenario MTM (1) Result MTM (1) Result MTM (1) Result 6,115 6,115 4,586 4,586 3,058 3,058 Stress scenario - Derivatives Commodities Corn Probable Scenario Possible Scenario Remote Scenario MTM (1) Result MTM (1) Result MTM (1) Result 15,854 15,854 11,890 11,890 7,927 7,927 Probable Scenario Stress scenario - Derivatives Commodities Cattle Possible Scenario Remote Scenario MTM (1) Result MTM (1) Result MTM (1) Result 1,846 1,846 1,384 1, Interest rate risk management Interest rate risk refers to the Corporation s risk of incurring economic losses due to negative changes in interest rates. This exposure basically refers to changes in market interest rates which affect the Corporation s assets and liabilities indexed to the TJLP (long-term interest rate), LIBOR (London Interbank Offered Rate) or CDI (interbank deposit rate). In order to reduce debt service costs, the Corporation and its subsidiaries continually monitor market interest rates to assess the need to enter into new derivative contracts to hedge its operations against the risk of fluctuations of these rates. 97

98 The risk of exposure to interest rate for the Corporation and its subsidiaries as at June 30, 2015 and December 31, 2014 is as follows: Consolidated 6/30/15 12/31/14 Exposure to CDI rate: NCE / Working capital (R$) 1,755,004 1,521,548 (-) CDB-DI (R$) (179,211) (185,664) Subtotal 1,575,793 1,335,884 Exposure to LIBOR rate: Prepayment (US$) 110,808 84,213 Financing of industrial complex - (US$) / Revolving credit facility (US$) 701, ,781 Subtotal 812, ,994 Exposure to TJLP rate: FINAME / FINEM / FINEP 32,564 38,577 Subtotal 32,564 38,577 TOTAL 2,421,156 2,015,455 The Corporation entered into non-speculative swap contracts to minimize the effects of exchange rates fluctuations on the settlement of its loans and financing, as below: Consolidated 6/30/15 12/31/14 Instrument Register Assets Liabilities Notional US$ Notional R$ MTM MTM Interest Rate Swap CETIP CDI USD 59,827 97,440 (106,418) (104,941) Interest Rate Swap CETIP LIBOR USD 148, ,617 (6,430) (11,531) Interest Rate Swap OTC LIBOR USD 320, ,832 (20,153) (14,577) Interest Rate Swap CETIP BRL USD 288, ,000 (362,959) (241,659) Interest Rate Swap OTC USD BRL 288, , , ,699 1,105,383 2,690,889 (134,893) (133,009) 98

99 Consolidated Instrument Register Maturity Assets Liabilities Notional US$ Notional R$ MTM 6/30/15 Interest Rate Swap CETIP 2015 LIBOR USD 42, ,308 (1,427) Interest Rate Swap CETIP 2016 LIBOR USD 68, ,977 (1,263) Interest Rate Swap OTC 2018 LIBOR USD 132, ,095 (2,481) Interest Rate Swap OTC 2019 LIBOR USD 187, ,738 (17,672) Interest Rate Swap CETIP 2016 LIBOR USD 38, ,331 (3,740) Interest Rate Swap CETIP 2017 BRL USD 288, ,000 (362,959) Interest Rate Swap OTC 2017 USD BRL 288, , ,067 Interest Rate Swap CETIP 2018 CDI USD 59,827 97,440 (106,418) 1,105,383 2,690,889 (134,893) Interest rate risk sensitivity Analysis To provide information about the behavior of market risks that the Corporation and its subsidiaries are exposed to as at June 30, 2015, three scenarios are considered and the probable scenario is the fair value as at June 30, 2015 and two more scenarios with deterioration of 25% and 50% of the risk variable taken into account, denominated as Possible and Remote, respectively. Sensitivity scenarios for interest rate risk are below: 99

100 Stress scenario - Swap Int Rate - Consolidated Probable Scenario Possible Scenario Remote Scenario MTM Result MTM Result MTM Result (134,893) (134,893) (128,508) (128,508) (136,867) (136,867) Stress scenario - Swap Int Rate CDI vs. USD Probable Scenario Possible Scenario Remote Scenario MTM Result MTM Result MTM Result (106,418) (106,418) (106,418) (106,418) (106,418) (106,418) Stress scenario - Swap Int Rate Libor vs. USD Probable Scenario Possible Scenario Remote Scenario MTM Result MTM Result MTM Result (26,583) (26,583) (20,198) (20,198) (28,557) (28,557) Stress scenario - Swap Int Rate BRL vs. USD / USD vs. BRL Probable Scenario Possible Scenario Remote Scenario MTM Result MTM Result MTM Result (1,892) (1,892) (1,892) (1,892) (1,892) (1,892) Exchange rate risk management Exchange rate risk consists of the risk of foreign exchange fluctuations leading the Corporation and its subsidiaries to incur losses and causing a reduction in the values of assets or an increase in the values of liabilities. The Corporation s main current exchange rate exposure relates to the US dollar fluctuation against the Brazilian real. Given that approximately 77.7% of the Corporation s revenues are denominated in currencies other than the Brazilian real, the Corporation has a natural hedge against the maturities of future obligations in foreign currency. The Corporation also has a sound financial policy, maintaining a high level of cash balance and short-term financial investments with solid financial institutions. We believe that the Corporation s and its subsidiaries' consistent financial policy, grounded in a well-distributed capital structure, allows it to consolidate synergies achieved through the acquisitions made. Outstanding foreign currency and derivatives position Assets and liabilities in foreign currency are presented as follows: 100

101 Parent Exposure Effects of exchange Description 6/30/15 12/31/14 rate gains (losses) 2015 Operating Trade accounts receivable 517, ,202 (8,276) ACE (advance on export contracts) (399,360) (447,020) 72 Imports payable (7,568) (19,536) (20,765) Subtotal 110, ,646 (28,969) Financial Loans and financing (1,026,700) (908,536) (361,947) Balance of banks and marketable securities (*) 212, ,906 18,996 Subtotal (814,071) (596,630) (342,951) Total (703,398) (449,984) (371,920) Exchange rate gains 667,281 Exchange rate losses (1,039,201) Exchange rate gains (losses), net (371,920) (*) Refers only to banks and marketable securities that generated exchange rate gains (losses). 101

102 Consolidated Exposure Effects of exchange rate gains (losses) Description 6/30/15 12/31/ Operating Trade accounts receivable 841,063 1,152,249 (24,668) ACE (advance on export contracts) (399,360) (447,020) 72 Imports payable (66,135) (128,322) (18,534) Other (37,855) (33,559) 4,537 Subtotal 337, ,348 (38,593) Financial Loans and financing (10,917,890) (10,135,985) (362,304) Notes payable 59,152 - (34) Balance of banks and marketable securities (*) 392, ,365 (73,076) Other (283,119) (104,752) (38) Subtotal (10,749,604) (9,702,372) (435,452) Total (10,411,891) (9,159,024) (474,045) Exchange rate gains 927,181 Exchange rate losses (1,401,226) Exchange rate gains (losses), net (474,045) (*) Refers only to banks and marketable securities that generated exchange rate gains (losses). Over the course of 2015, the Corporation contracted NDFs and futures contracts, all of them non-speculative in nature, to minimize the effects of the foreign exchange variation on its overseas subsidiaries, as per the breakdown shown in Note 33.4, the results of which are accounted for under the items "Exchange Rate Gains and Exchange Rate Losses Exchange rate risk sensitivity Analysis To provide information about the behavior of market risks that the Corporation and its subsidiaries were exposed to as at June 30, 2015, three scenarios are considered and the probable scenario is the fair value as at June 30, 2015 and two more scenarios with deterioration of 25% and 50% of the risk variable taken into account, denominated as Possible and Remote, respectively. The market future curve of June 30, 2015 was applied for currencies, with notional value of R$/US$

103 As for exchange rate risk, following are the sensitivity scenarios: Stress Scenario - balance sheet exposure to foreign exchange Probable Possible Remote 6/30/2015 scenario scenario scenario Parent (371,920) (175,850) (351,699) Subsidiaries (102,125) (2,427,123) (4,854,246) (474,045) (2,602,973) (5,205,945) 33.6 Liquidity risk and capital management Liquidity risk arises from the Corporation s and its subsidiaries working capital management and the amortization of the principal and finance charges of debt instruments. This is the risk that the Corporation and its subsidiaries will find to settle its falling due payables. The Corporation and its subsidiaries manage their capital based on parameters to optimize the shareholding structure focused on liquidity and leverage metrics that enable a return to shareholders over the medium term, consistent with the risks assumed in the transaction. The purpose of capital management is to define the best financing structure for the Corporation and its subsidiaries. The main indicator for monitoring such management is the modified immediate liquidity ratio, which is the ratio between cash and cash equivalents and the leverage ratio - current indebtedness (short term). Consolidated 6/30/15 12/31/14 Short-term cash, cash equivalents and marketable securities 2,564,343 2,658,797 Short-term loans and financings 1,860,458 1,470,237 Interest on debentures 98, ,582 Modified liquidity ratio The main indicators for monitoring such management is the modified immediate liquidity The leverage ratio - monitoring the ratio of net debt (total debt indebtedness less cash and cash equivalents) to LTM EBITDA at levels considered to be manageable for continuity of operations, in accordance with the following calculation method: 103

104 6/30/15 Consolidated gross debt 11,936,277 (-) Consolidated cash and equivalents 2,564,343 Consolidated net debt 9,371,934 (-) Effect from exchange variation (carve-out (1)) 3,930,631 Consolidated adjusted net debt 5,441,303 LTM EBITDA for the period ended June 30, ,963,080 Leverage ratio 2.77x (1) In this case, contractual provisions refer to exchange variation on loans, which allow these effects to be excluded while calculating the leverage ratio; Based on the analysis of these indices, the management of working capital is defined so as to keep Corporation s and its subsidiaries natural leverage at levels equal or lower than the leverage ratio deemed adequate. The following table presents contractual terms (representing undiscounted contractual cash flows) of financial liabilities: Consolidated December 31, After Total Trade accounts payable 2,028, ,028,303 Loans, financing and debentures 1,470, , ,247 2,526,727 5,499,778 10,870,343 Interest on debentures 190, ,582 Derivative financial liabilities 16,911 8, , ,437 14, ,320 Total 3,706, , ,697 2,627,164 5,513,882 13,500,548 June 30, After Total Trade accounts payable 1,495, ,495,530 Loans, financing and debentures 1,515,680 1,022, ,521 3,014,048 5,529,760 11,838,122 Interest on debentures - 98, ,155 Derivative financial liabilities 9,501 7, , ,741 18, ,516 Total 3,020,711 1,128,052 1,119,480 3,122,789 5,548,291 13,939,

105 33.7 Credit risk The Corporation and its subsidiaries are subject to credit risk. Credit risk deals with group s financial losses if a client or counterpart in a financial instrument fails to comply with contractual obligations, which arise from most receivables. The Corporation and its subsidiaries limit their exposure by analyzing credit and managing client s portfolio, seeking to minimize the economic exposure to a certain client and/or market that may represent significant losses. The Global Credit Risk Policy determines the guideline for financial credit risk management based on the following: Limit of counterparty s credit risk concentration to 15% of total current assets; Investments in solid and prime financial institutions, based on their financial rating; Balance between assets and liabilities. Conducted evaluations are based on information flows and follow-up of the volume of purchases in the market. The internal controls cover the assignment of credit limits. The maximum exposure to credit risk for the Corporation and its subsidiaries are the trade accounts receivable shown in Note 6, where the value of the effective risk of possible losses is presented as provision for credit risk is also shown. Values subject to credit risk: Parent Consolidated 6/30/15 12/31/14 6/30/15 12/31/14 Cash and cash equivalents 171, , ,152 1,091,685 Marketable securities 993, ,589 1,726,131 1,568,082 Receivables from Brazilian clients 187, , , ,277 Receivables from foreign clients 105,049 77, , ,483 Other receivables 6,838 9, , ,484 Total 1,463,657 1,125,844 3,695,889 4,388, Fair value of financial instruments The method used by the Corporation to determine market value consists in calculating the future value based on contracted conditions and determining the present value based on market curves obtain from Bloomberg s database, except for futures market derivatives whose fair values are calculated based on the on daily adjustments of variations in market prices of commodities and futures acting as consideration. 105

106 According to IFRS 7, the Corporation and its subsidiaries classify the measurement of fair value according to hierarchical levels which reflect the importance of indices used in such measurement, as follows: Level 1: Prices quoted in (non-adjusted) active market for identical assets and liabilities; Level 2: Other available information, except those of Level 1, where quoted prices relate to similar assets and liabilities, whether directly, by obtaining prices in active markets, or indirectly, such as evaluation techniques using active market data. Level 3: Indices used for the calculation do not derive from an active market. The Corporation and its subsidiaries do not have instruments at this measurement level. Currently, the fair value of all the financial instruments of the Marfrig Group is reliably measured and hence these are classified as level 1 and 2, as shown below: Consolidated Level 1 Level 2 Level 3 Current assets Cash and cash equivalents Marketable securities - held for trading - 994,926 - Notes receivable - derivatives 26, ,067 - Non-current liabilities Notes payable - derivatives (11,611) (495,960) - Total 14, ,033 - Management understands that the results obtained with derivative transactions are in line with the risk management strategy adopted by the Corporation and its subsidiaries. 34. Income and social contribution taxes Income and Social Contribution Taxes were calculated according to prevailing legislation and the Transition Tax System, provided for in Executive Act No. 449/08 (converted into law 11,941/09). Income and Social Contribution Tax calculations and returns, when required, are open to review by tax authorities for varying statutory years in relation to the payment or filing date. Calculation and reconciliation of income and social contribution taxes in the income statements for the period: 106

107 Continued Continued Parent Consolidated Tax 6/30/15 6/30/14 6/30/15 6/30/14 Income (loss) before tax effects (920,696) (294,891) (835,125) (281,252) Add-backs Add-backs of corporate income tax (IRPJ) 841, ,886 1,081, ,975 Add-backs of social contribution tax (CSLL) 841, ,886 1,065, ,767 (-) Deductions (-) Deductions from IRPJ (1,783,711) (289,986) (1,858,475) (334,992) (-) Deductions from CSLL (1,783,711) (289,986) (1,858,475) (348,571) Tax base Income tax base (1,863,375) (72,991) (1,612,016) 3,731 Social contribution tax base (1,863,375) (72,991) (1,628,514) (56) Companies with income tax loss - - (10,313) (18,789) Companies with social contribution tax loss carryforwards Calculation base after carry forwards of IRPJ (1,863,375) (72,991) (1,622,329) (15,058) CSLL (1,863,375) (72,991) (1,628,514) (56) (-) Tax loss carryforwards - (6,435) - (6,918) (-) Social contribution tax loss carryforwards - (6,435) - (7,003) Calculation base after carry forwards Calculation base after carry forwards of IRPJ (1,863,375) (79,426) (1,622,329) (21,976) CSLL (1,863,375) (79,426) (1,628,514) (7,059) Income tax (15%) - 2,252 (73,496) (24,380) Surtax (10%) - 1,489-2,934 (-) PAT - (90) - (178) Total income tax - 3,651 (73,496) (21,624) Social contribution tax (9%) - 1,351-2,673-5,002 (73,496) (18,951) Rate difference on foreign results ,307 34,389 Total taxes - 5,002 49,811 15,438 Effect on Statement of Operations - Current Taxes (2) - 5,002 49,811 15,438 Tax Group 6/30/15 6/30/14 6/30/15 6/30/14 (-) Income tax - current Current liabilities (2) - (3,651) (49,811) (12,765) Tax paid abroad Current liabilities (966) Deferred income tax - Assets (1) Non-current assets 224,737 71, ,137 76,537 Deferred income tax - Liabilities (1) Non-current liabilities 2,223 2,392 (10,672) 1,970 Net Income (loss) 226,960 70, ,654 64,776 (-) Social contribution tax - current Current liabilities (2) - (1,351) - (2,673) Deferred social contribution tax - Assets (1) Non-current assets 80,905 25,919 82,902 28,497 Deferred social contribution tax - Liabilities (1) Non-current liabilities ,206 Net Income (loss) 81,706 25,429 83,786 27,030 (1) Refer to deferred Income and Social Contribution Taxes calculated on: taxes whose payment has been suspended (estimates), and which were added to the calculation of the taxable income and the social contribution tax basis; utilization for tax purposes of the goodwill paid on future profitability and income and social contribution tax losses, which are stated in Notes 12 and 24. (2) Corresponds to Income Tax and Social Contribution due on the current results of the year and effectively paid/offset during the year and/or to be paid/offset in subsequent years. 107

108 35. Sustainable Development Sustainability is one of the pillars of Marfrig Global Foods corporate strategy and permeates all of its activities and divisions. The Corporation is committed to continuing to balance the economic, social and environmental aspects of its business in order to contribute to the development of society and help preserve the planet. Marfrig is a reference in sustainability in its operating segments. By respecting the cultural aspects and practices of the local business community, it adopts a strategy of continuous improvement and technological innovation, combined with high levels of transparency and robust corporate governance practices. Promoting sustainable activities and engaging the entire supply chain is essential to the success of our strategy. Such effort helped Marfrig Global Foods rank as the Leading Corporation for Packaged Food and Meat Products for its commitment to the best environmental risk practices disclosed in the 2012 Annual Report of the Forest Footprint Disclosure (new CDP Forest), deemed the most complete global study on the impacts of production activities for tropical forests. The Corporations efforts also include promoting sustainable agricultural and cattle raising practices. Through programs like the Marfrig Club, the Corporation acknowledges and awards conscientious producers, instructing them on how to achieve the most modern property certifications for food production and also awarding animals from farms with good agricultural and management practices. Through a professional relationship with suppliers, Marfrig is able to track animal origins, which guarantees, for example, that there are no further deforestations and invasions of indigenous land in its supply chain. As result of such efforts, in June 2012, Marfrig Global Foods became the world s first food company in the animal protein segment to track its complete beef production cycle in accordance with the standards developed by the Agriculture and Forest Management and Certification Institute (Imaflora), which entitled the Corporation to use the Rainforest Alliance seal. This seal authorizes four units of Marfrig Beef (Tangará da Serra MT; Pampeano Hulha Negra and Bagé, RS and Promissão I and II SP) to produce and sell products with the green cattle farm seal in the international market. The Corporation also entered into, in 2013, a partnership with The Nature Conservancy (TNC), one of the world s largest environmental organizations, and Walmart, the world s leading retailer, to foster sustainable cattle production in the southeastern region of the state of Pará, which will help preserve the Amazon biome and promote the adoption of good social and environmental practices. For the second consecutive time, the Corporation published a report based on an audit by DNV-GL (consulting firm hired to independently evaluate the company s information and processes) that attested to the its good sustainability practices in cattle sourcing at its units in the Amazon biome, in accordance with the criteria established in the public commitment signed with Greenpeace in 2009 and the 2015 Reference Terms. 108

109 The audit was conducted from March 5 to April 8, 2014 and stated that, in 2014, no cattle sourcing transactions by Marfrig violated the provisions of the public commitment undertaken by the Corporation with the non-governmental organization Greenpeace for responsible production in the Amazon Biome in its supply chain. Marfrig Global Foods is one of the world s seven best companies in terms of animal welfare practices, according to The Business Benchmark on Farm Animal Welfare (BBFAW), a leading global report on the subject, prepared by the World Society for the Protection of Animals (WSPA) and by Compassion in World Farming. In 2013, for the second consecutive year, Marfrig Global Foods was the only Brazilian company to be cited in the report, reaching the status Integral and being classified as Integrated to the Business. To create opportunities for educational development and recreation for children, adolescents and the elderly in socially and economically vulnerable communities in the cities where the Corporation s industrial plants are located, Marfrig create the Marfrig Institute Fazer e Ser Feliz. The Institute currently offers after-school activities in the fields of education, sports, culture, health and food, benefiting some 100 children in its units located in the cities of Promissão (SP) and Bataguassu (MS). More information on the Marfrig Global Foods s sustainability strategy and its results can be found at Result from discontinued operations According to the material fact notice released to the market on June 21, 2015, the Corporation entered into, on June 19, 2015, an Agreement for the Purchase and Sale of Ownership Interest and Other Covenants, which laid out the terms and conditions for the sale to JBS S.A. of certain ownership interests in the companies of the Group operating the Moy Park business unit. The Moy Park segment was not previously classified as a discontinued operation or held-forsale asset in accordance with CPC 31, and the results and cash flow of discontinued operations for the six-month periods ended June 30, 2015 and 2014 are presented as follows: Result from discontinued operations 6/30/2015 (*) 6/30/2014 (**) Net Revenue 3,245,990 2,640,626 Cost of Goods Sold (2,899,668) (2,342,746) Gross Profit 346, ,880 Operating income (expenses) (295,921) (230,164) Net operating income (loss) 50,401 67,716 Provision for income and social contribution taxes (15,425) (20,496) Net income from discontinued operations 34,976 47,

110 Cash flow of the Discontinued Operation 30/06/2015 (*) 30/06/2014 (**) Net income (loss) in the period 34,976 47,220 Items not affecting cash 215, ,803 Generated by Equity changes (280,846) (570,152) From (used in) operating activities (110,934) (206,590) From (used in) financing activities 428, ,072 Exchange variation on cash and cash equivalents 12,979 (13,163) Derecognition of Cash from discontinued operation (592,488) Discontinued operation net of cash (292,489) 121,190 (*) Operations of the Moy Park segment; (**) Operations of the Moy Park segment and of the companies in France that, prior to March 31, 2014, were included in the Keystone segment. 37. Events after the reporting period On August 2, 2015, the Corporation executed the Second Amendment to the Shareholders' Agreement of the Corporation entered into between MMS Participações LTDA. and BNDES Participações S.A., which entitles MMS Participações LTDA. to unbind up to 20% of its shares bound to the Shareholders' Agreement, and excludes Clause V of the Shareholders' Agreement, which set forth call options and preemptive rights. * * * 110

111 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE MARFRIG ENCERRA POSITIVE O ANO FREE COM CASH ENTREGA FLOW OF DE GUIDANCE E R$136 MILLION IN THE QUARTER São Paulo, August 12, 2015 Marfrig Global Foods S.A. Marfrig (BM&FBOVESPA NOVO MERCADO: MRFG3 and Level 1 ADR: MRTTY) announces today its results for the second quarter of 2015 (2Q15). Except where stated otherwise, the following operating and financial information is presented in nominal Brazilian real, in accordance with International Financial Reporting Standards (IFRS), and should be read together with the financial information (ITR) for the period ended June 30, 2015 filed at the Securities and Exchange Commission of Brazil (CVM). Total capital 520,747,405 shares Share price R5.75 (08/11/15) Market Cap (R$ '000) R2,994,000 (Aug. 11, 2015) Conference call with Webcast and Presentation 12/08/15 9:30 a.m. (Brasília) - Portuguese 11:30 a.m. (Brasília) - English Dial-in from Brazil: +55 (11) (11) Dial-in from other countries: +1 (786) HIGHLIGHTS Strong growth in Net Revenue (+26%) and Adjusted EBITDA (+41%) from 2Q14¹. EBITDA Margin growth at all business units, with combined 1 Adjusted EBITDA of 8.7%. Positive free cash flow of R$136 million in the quarter and R$48 million year to date. Keystone s Adjusted EBITDA grew 65% (20% in USD) on 2Q14, to US$54 million. The result was driven by strong growth in Asia and continued growth in Key Accounts. Marfrig Beef s Adjusted EBITDA Margin stood at 9.7%, expanding 140 bps on 1Q15, due to a better sales mix and higher operating efficiency. Exports accounted for 48% of the division s revenue and SG&A expenses fell 220 bps on 2Q14. During the quarter, approval was given to open up the Chinese and U.S. markets to Brazilian beef imports, representing an important opportunity for Marfrig Beef's exports. On June 21, Marfrig signed an agreement to sell Moy Park for approximately US$1.5 billion. On a pro-forma basis (considering the Moy Park divestment), financial leverage ended 2Q15 at 3.8x. Investor Relations +55 (11) ri@marfrig.com.br ¹Includes Moy Park for comparison purposes, non audited. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 1

112 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE GUIDANCE Target Range (1) 1H15 Actual (4) Net Revenue R$23 to R$25 billion R$12.3 billion Adjusted EBITDA Margin (2) 8.0% - 9.0% 8.3% Capital Expenditure R$650 million R$339 million Free Cash Flow (3) R$100 to R$200 million R$48 million (1) Assumptions based on the exchange rates of R$2.70/US$1.00 and R$4.30/ (2) Excludes non-recurring items. (3) Operating cash flow after capital expenditure, interest expenses and income tax. (4) Includes Moy Park for comparison purposes. The results in the year to June are in line with the achievement of all guidance targets for The Company will revise its 2015 guidance to reflect the effects from the Moy Park divestment after the closing of the transaction, which is expected in early 4Q15. 2Q15 Highlights Net Revenue incl. Moy Park (R$ MM) 6,462 Adjusted EBITDA incl. Moy Park (R$ MM) 560 Net Debt (R$ MM) 9,372 Leverage Ratio 4.8x Net Revenue Continuing Operations (R$ MM) 4,728 Adjusted EBITDA Continuing Operations (R$ MM) 415 Pro-forma Net Debt (R$ MM) 5,619 Pro-Forma Leverage Ratio 3.8x IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 2

113 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE COMBINED RESULTS INCLUDING MOY PARK* * non audited Net Revenue (R$ million) Gross Profit and Gross Margin (R$ million and %) 12, % 11.6% 12.6% 11.2% 9,905 1,384 5,118 6,462 26% 25% ,244 11% 20% 2Q14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1H15 SG&A and SG&A/NOR (R$ million and %) Adjusted EBITDA and Margin (R$ million and %) 7.2% 7.3% 5.8% 5.8% 7.8% 8.7% 8.1% 8.3% % -1% % % 2Q14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1H15 Strong performance of Net Revenue and Adjusted EBITDA in 2Q15, with growth of 26% and 41%, respectively, compared to 2Q14. The ongoing efforts to capture operating efficiency gains via the strategic plan Focus to Win led to a reduction in SG&A/NOR from 7.2% to 5.8% in 2Q15. Despite the steep currency depreciation and inflation in Brazil, SG&A registered a nominal increase of only 2% compared to the prior year. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 3

114 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Statement of Income Including Moy Park 2Q15 2Q14 Change 1H15 1H14 Change R$ % NOR R$ % NOR Chg. R$ Chg. % R$ % NOR R$ % NOR Chg. R$ Chg. % Net Revenue 6, % 5, % 1, % 12, % 9, % 2, % COGS -5, % -4, % -1, % -10, % -8, % -2, % Gross Profit % % % 1, % 1, % % SG&A % % % % % % Selling % % % % % % Administrative % % % % % % ADJUSTED EBITDA* % % % 1, % % % Other Income/Expenses % % % % % % EBITDA % % % 1, % % % P&L - USD / BRL % % P&L - GBP / BRL % % (*) Excludes effects from other operating income/expenses. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 4

115 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE SALE OF MOY PARK A STRATEGIC DECISION After the changes in management during the 1Q15, the Company opted to conduct a strategic review of its entire business. It became clear to the officers and directors that the Company should strengthen its focus on the global food service industry. Although a good business, the Moy Park unit did not fit perfectly with this strategic direction, given its greater focus on the retail channel and the lack of significant operational and commercial synergies with the rest of the group. Furthermore, it became clear that the option of carrying out an IPO that had been pursued since March 2014 would not maximize value for shareholders and would increase the complexity of the group's governance. Therefore, on June 21, 2015, Marfrig signed an agreement to divest the business unit, at the price of approximately US$1.5 billion, as follows: cash payment of US$1.19 billion to Marfrig upon closing of the transaction; assumption of net debt at Moy Park of 200 million; any variations in working capital (1) or net debt above or below 200 million will be reflected by adjusting the amount to be paid upon the closing of the transaction. The proceeds will be used to reduce the Group s debt, thereby improving our capital structure and significantly accelerating the planned reduction in our financial leverage. The Transaction is expected to be consummated in early 4Q15, subject to the authorizations by the competent authorities typical to transactions of this type, including the anti-trust authorities of the European Union. (1) Based on the estimated Moy Park balance sheet at the end of June/2015. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 5

116 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE CONTINUING OPERATIONS Marfrig remains a global company after the Moy Park transaction in 2Q15: 58% of net revenue will continue to come from its international operations, 78% of the revenue will be pegged to currencies other than the BRL. Revenue Breakdown Business Currency Product 45% 42% 13% 59% 22% 19% 51% 41% 8% KEYSTONE BEEF BRASIL BEEF OP. INTERNACIONAIS USD BRL OTHER PROCESSED FRESH OTHER Profile of Continued Operations Approximately employees 46 Comercial, production and distribution units Operational Presence in 11 countries in the Americas, Asia and Oceania Serving customers with our products in approximately 100 countries Net Revenue (R$ million) 9,099 14,029 15,565 17,419 24% 3,789 4,728 7,265 25% 25% LTM 2Q14 2Q15 1H14 1H15 Adjusted EBITDA and Margin (R$ million and %) 8.1% 8.8% 8.7% 7.8% 8.8% 8.2% 8.3% 759 1,137 1,375 1,522 34% % % LTM 2Q14 2Q15 Note: Annual and LTM figures presented on a pro-forma basis, non-audited. 1H14 1H15 IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 6

117 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Statement of Income for the Period 2Q15 2Q14 Change 1H15 1H14 Change R$ %NOR R$ %NOR Var. $ Var. % R$ %NOR R$ %NOR Var. $ Var. % Net Revenues 4, % 3, % % 9, % 7, % 1, % COGS -4, % -3, % % -8, % -6, % -1, % Gross Profit % % % 1, % % % SG&A % % % % % % Commercial % % % % % % Administrative % % % % % % Adj. EBTIDA* % % % % % % Others revenues/expenses % % % % % % EBITDA % % % % % % D&A + Equity Account % % % % % % EBIT % % % % % % Financial Results % % % -1, % % % Financial revenues/expenses % % % % % % Exchange rate variation % % % % % ,546.4% Minority Stake % % % % % % EBT % % % % % % Taxes % % % % % % Controlling Shareholder Net Profit % % % % % % Minority Stake % % % % % % Cont. Result. Before Controlling Shareholder % % % % % % Discontinued Operations % % % % % % Net Income before Controlling Shareholder % % % % % % Minority Stake % % % % % % Net Income % % % % % % P&L - USD x BRL % % P&L - GBP x BRL % % BS - USD x BRL % % BS - GBP x BRL % % Note: this quarter. the financial information for Moy Park is presented under Discontinued Operations. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 7

118 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Financial Result The financial result. excluding currency translation effects, was an expense of R$418 million in 2Q15, down 20% compared to R$524 million in 1Q15. Exchange variation generated a gain of R$25 million in the period, influenced by the effect from the appreciation in the BRL against the USD in the quarter. FINANCIAL INCOME AND EXPENSES (R$ million) 2Q15 1Q15 2Q14 FINANCIAL INCOME Interest income. income from marketable securities Market transactions Other Income 13.2 (2.8) 4.6 FINANCIAL EXPENSES (577.0) (606.5) (367.5) - Interest provisioned. debentures and lease (366.1) (336.5) (273.6) - Market transactions (111.3) (171.1) (15.0) - Bank fees. commissions. financ. disc. and other (99.7) (98.9) (79.0) EXCHANGE VARIATION 25.4 (499.4) 12.8 NET FINANCIAL RESULT (392.2) ( ) (296.1) Net Income (Loss) The capture of operating efficiency gains and the effect of the appreciation of the Real on the financial result contributed to reductions in the net loss of 99% compared to 1Q15 and 89% compared to 2Q14. Net Income (Loss) (R$ mm) 2Q14 2Q15 1H14 1H15 (6) (55) (152) - 1.5% - 0.1% - 2.1% (577) - 6.3% IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 8

119 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Indebtedness and Debt Profile Net debt ended the period at R$9.4 billion. On a pro-forma basis. i.e., considering the Moy Park divestment. net debt will decrease to R$5.6 billion. Gross Debt (R$ million) Net Debt (R$ million) 13,400 13,444 11,936 9, ,508 5,619 4,668 1Q15 1T15 2T15 2Q15 Div. Moy Bruta Park 2T15 2Q15 Op. Continued 2T15 2Q15 Op. Continued Cont. Div. Moy Liq. Park Moy Transaction Transação 2T152Q15 Proforma Gross Debt Moy Park Ops. Cont. Ops. Net Park Debt Pro-forma Short-term debt as a ratio of total debt was kept at the planned level of 16%. Debt in other currencies accounts for 92%, and we consider this profile adequate given the high foreign-currency exposure in our operations. Curto Short Term Prazo Longo Term Prazo Em In R$ R$ Outras Other Currencies Moedas 16% 8% 84% 92% IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 9

120 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Debt Maturity Schedule. excluding Moy Park (R$ million) The payment schedule is highly adequate, considering the cash position of R$2.6 billion. 3,014 2,993 2,564 2,392 Short Term R$ 2.0 bn 450 1, Cash Caixa 3Q15 3T15 4Q15 4T15 1T16 1Q16 2T16 2Q Leverage Ratios Net Debt/ Net Debt / Net Debt Pro-forma / Net Debt Pro-forma / EBITDA LTM... EBITDA LTM ex. FX. EBITDA LTM... Annualized Adj. EBITDA 4.8x 2.8x 3.8x 3.4x The operating result began to capture the steady weakening of the BRL over recent quarters. The average exchange rate in 2Q15 was R$3.07/US$. in line with the end-ofperiod rate of R$3.10/US$. The leverage ratio (Net Debt/EBITDA LTM) ended the period at 4.8x in nominal value. The USD/BRL exchange rate ended 2Q15 at R$3.10/US$, compared to R$3.21/US$ at the end of 1Q15, which represents local-currency appreciation of 3.4%, with an impact mainly on the net debt component of the indicator. Meanwhile. EBITDA in the last 12 months (LTM) was translated at an average exchange rate of R$2.69/US$, a level that has yet to accurately reflect exchange variation in the period. Including the Moy Park transaction, the leverage ratio would be 3.8x. Annualizing the EBITDA, the leverage ratio ended the quarter on a pro-forma basis at 3.4x. It is important to note that the bond agreements and market financing transactions include provisions that allow for the exclusion of exchange variation effects from the leverage ratio calculation. This adjusted ratio ended 2Q15 at 2.8x. down from 3.4x at the end of 1Q15. For more information, see Note 33.6 to the financial statements. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 10

121 DRAFT %INVESTOR RELATIONS The average cost of debt without Moy Park is 8.2% with duration of 43 months. Average Cost (% p.a.) Duration (months) Current Liquidity Net Debt / Total Assets 2Q15 EARNINGS RELEASE Cash & Equiv. / ST Debt 8.2% x 1.4x Cash Flow The Company generated positive free cash flow of R$136.1 million in 2Q15, mainly due to the actions to improve key account lines: accounts receivable from clients, suppliers and inventories. Free Cash Flow Bridge (R$ million) (54) (127) 317 (302) (19) (254) Capital Expenditure Capital expenditure from continuing operations remained in line with Management's initial expectations. R$ million 2Q14 1Q15 2Q15 Investments in Fixed Assets Fixed Assets Breeding Stock Investments in Intangible Assets TOTAL IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 11

122 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE KEYSTONE OPERATING HIGHLIGHTS Net Revenue (R$ mm) Net Revenue (USD mm) 4,055 1,223 1,359 1,414 2,147 52% 2,805 45% % 11% 2Q14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1H15 Gross Income and Gross Margin (R$ mm and %) 7.6% 6.8% 7.3% 5.7% % % Gross Income and Gross Margin (USD mm and %) 7.6% 6.8% 7.3% 5.7% % 47% 2Q14 2Q15 1H14 1H15 2Q14 2T15 1H14 1H15 SG&A and SG&A/NOR (R$ mm and %) 2.4% 1.3% 2.1% 2.4% 95 SG&A and SG&A/NOR (USD mm and %) 1.3% 2.4% 2.1% 2.4% % 60 58% % % 2Q14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1H15 Adjusted EBITDA and Margin (R$ mm and %) 7.1% 7.7% 7,5% 7.5% % 44% Adjusted EBITDA and Margin (USD mm and %) 7.1% 7.7% 7.5% 7.5% % 20% 2T14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1H15 IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 12

123 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Net Revenue Keystone recorded net revenue of R$2,147 million (US$698 million) in 2Q15, an increase of 52% from R$1,414 million (US$634 million) in 2Q14. Excluding the exchange variation effect from the BRL depreciation against the USD, 2Q15 revenue grew by 10% on 2Q14. Compared to 2Q14, the 52% growth in net revenue in BRL was driven by: (1) the exchange variation gain from the BRL depreciation of 38%; (2) the strong sales volume growth of 25% in APMEA, with particular strength in China, Thailand and South Korea; (3) the sales volume growth of 7% in the United States; (4) higher fresh beef costs, which translated into higher sales prices in the QSR channel; and (5) continued double-digit growth in sales to Key Accounts, with a strong performance in the retail and QSR channels. In 1H15, net revenue was R$4.055 million (US$1.359 million), growing 45% from R$2,805 million (US$1,223 million) in 1H14. Excluding the BRL depreciation against the USD, 1H15 revenue grew 11% year over year. Revenue Profile in 2Q15 2Q15 vs. 2Q14 72% 28% 52% % Revenue US EUA APMEA 10% % Volume 38% % Avg. Price Gross Profit and Gross Margin Gross Profit was R$164 million (US$53 million and 7.6% margin) in 2Q15, an increase of 102% on the R$81 million (US$36 million and 5.7% margin) reported in 2Q14. Excluding the exchange variation effect, 2Q15 gross profit rose 47% against 2Q14. The gross margin expansion of 190 bps was due to the following factors: (1) lower outside meat costs (21% drop in cost per ton) and feed costs (14% drop in per-ton cost) in the United States; (2) an unrealized mark-to-market (MTM) gain of US$450,000 in 2Q15, compared to the unrealized loss of US$3.0 million in 2Q14, representing a positive yearon-year variation of US$3.5 million; and (3) sales volume growth in the APMEA region. In 1H15, gross profit was R$294 million (US$98 million and 7.3% margin), increasing 53% from the R$192 million (US$83 million and 6.8% margin) reported in the same period last year. Excluding the exchange variation effect, gross profit increased 18% on 1H14. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 13

124 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Selling, General and Administrative Expenses SG&A Expenses as a ratio of net revenues stood at 2.4% in 2Q15, compared to 1.3% in 2Q14 and 2.3% in 1Q15. SG&A Expenses in 2Q14 benefitted from a non-recurring saving that reduced the SG&A/NOR ratio. In 2Q15, the expense ratio remained well within the historical average. In 1H15, SG&A Expenses as a ratio of NOR stood at 2.4%, in line with 2.1% in the same period of Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA amounted to R$165 million (US$54 million and 7.7% margin), representing a 65% increase on the R$100 million (US$45 million and 7.1% margin) in 2Q14, with margin expansion of 60 bps. Excluding the exchange variation effect, 2Q15 Adjusted EBITDA increased 20% over 2Q14. In 1H15 compared to 1H14, Adjusted EBITDA grew 44% in BRL and 11% in USD. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 14

125 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Income Statement (R$ million) 2Q15 2Q14 Change 1H15 1H14 Change R$ % NOR R$ % NOR Chg. R$ Chg. % R$ % NOR R$ % NOR Chg. R$ Chg. % Net Revenue 2, % 1, % % 4, % 2, % 1, % COGS -1, % -1, % % -3, % -2, % -1, % Gross Profit % % % % % % SG&A % % % % % % Selling % % % % % % Administrative % % % % % % ADJUSTED EBITDA* % % % % % % Other Income/Expenses % % % % % % EBITDA % % % % % % USD / BRL % % Income Statement (US$ million) 2Q15 2Q14 Change 1H15 1H14 Change US$ % NOR US$ % NOR Chg. US$ Chg. % US$ % NOR US$ % NOR Chg. US$ Chg. % Net Revenue % % % 1, % 1, % % COGS % % % -1, % -1, % % Gross Profit % % % % % % SG&A % % % % % % Selling % % % % % % Administrative % % % % % % ADJUSTED EBITDA* % % % % % % Other Income/Expenses % % % % % % EBITDA % % % % % % USD / BRL % % (*) Excludes the effects from other operating income/expenses. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 15

126 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Revenue, Volume and Average Price Revenue (R$ million) 2Q15 2Q14 Chg.% 2Q15 x 2Q14 1H15 1H14 Chg.% 1h15 x 1h14 USA 1, % 2, % ASIA % 1, % TOTAL KEYSTONE % 4, , % VOLUME ( 000 TONS) 2Q15 2Q14 Chg.% 2Q15 x 2Q14 1H15 1H14 Chg.% 1h15 x 1h14 USA % % ASIA % % TOTAL KEYSTONE % % AVERAGE PRICE (R$/KG) 2Q15 2Q14 Chg.% 2Q15 x 2Q14 1H15 1H14 Chg.% 1h15 x 1h14 USA % % ASIA % % TOTAL KEYSTONE % % Revenue, Volume and Average Price (USD) Revenue (R$ million) 2Q15 2Q14 Chg.% 2Q15 x 2Q14 1H15 1H14 Chg.% 1h15 x 1h14 USA % % ASIA % % TOTAL KEYSTONE % % VOLUME ( 000 TONS) 2Q15 2Q14 Chg.% 2Q15 x 2Q14 1H15 1H14 Chg.% 1h15 x 1h14 USA % % ASIA % % TOTAL KEYSTONE % % AVERAGE PRICE (R$/KG) 2Q15 2Q14 Chg.% 2Q15 x 2Q14 1H15 1H14 Chg.% 1h15 x 1h14 USA % % ASIA % % TOTAL KEYSTONE % % IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 16

127 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE MARFRIG BEEF OPERATING HIGHLIGHTS Net Revenue (R$ mm) Gross Income and Gross Margin (R$ mm and %) 4,459 5, % 15.4% 16.9% 14.7% 2,375 2,581 9% 13% % % % 2Q14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1S15 SG&A and SG&A/NOR (R$ mm and %) Adjusted EBITDA and Margin (R$ mm and %) 10.0% 10.1% 9.7% 7.6% 8.1% 7.6% 8.6% 9.0% % % % 18% 2Q14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1H15 IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 17

128 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Cattle slaughtering volume at Marfrig Beef in the first six months of the year was practically stable at 1.6 million heads, decreasing 7,700 heads from the same period of The decline is due entirely to the lower cattle slaughtering volume in Brazil, which decreased by 14,000 heads, or 1% of the volume in the Brazilian operation, of 1.2 million heads. Based on the current level of available finished cattle, which we expect to remain stable over the coming quarters, we made a strategic decision to adjust our production capacity to this new situation. Therefore, we closed temporarily 5 units in Brazil, which effectively reduced the number of processing plants to 10 and eliminated approximately 29% of authorized slaughtering capacity. This adjustment in capacity will support: increase in the capacity utilization rate: which in turn should, over the coming quarters, reduce fixed production costs and consequently improve margins. Capacity utilization in 2Q15 stood at 83% of authorized capacity. The objective is to achieve capacity utilization rates above 90% while maintaining current slaughter levels. shift in the sales mix towards more profitable channels: we will focus on rebalancing sales between the domestic and international markets due to (1) the opening up of the Chinese and U.S. markets, which should increase international demand for Brazilian beef; and (2) the BRL depreciation against the U.S. dollar, which increases the profitability of exports. In the domestic market, we are reducing sales to distributors, a channel that traditionally has a lower contribution margin, and working to grow sales in the food service and small/midsized retailer channels by optimizing the use of our sales team and distribution network. In 2Q15, Brazilian exports accounted for 46% of the revenue of Marfrig Beef Brazil, compared to 41% in 1Q15 and 41% in 2Q14. The contribution from the food service and small retailer channel to the domestic revenue of Marfrig Beef Brazil increased to 35.4% in 2Q15, from 31.2% in 2Q14. NET REVENUE Marfrig Beef recorded net revenue of R$2,581 million in 2Q15, up 9% from R$2,375 million in 2Q14. Net revenue from the Brazil operation came to R$1,956 million in the quarter, representing 76% of consolidated revenue and growth of 5% year over year. The international operations accounted for 24%, or R$625 million (US$204 million), up 22% on 2Q14. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 18

129 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE The period highlights were the performance in the domestic market of the international units, which posted growth of 41% on 2Q14, and the exports by the Brazil operation, which, after facing a difficult scenario in 1Q15, posted a recovery in sales volume of 20% sequentially. In 1H15, net revenue amounted to R$5,044 million, up 13% on 1H14. BRAZIL DOMESTIC MARKET In line with the strategy to rebalance sales and despite Brazil's domestic market remaining highly challenging due to the economic downturn, as demonstrated by the country's weak household spending and low consumer confidence, the Brazil operation posted net revenue from domestic sales of R$1,055 million, down 4% from R$1,099 million in 2Q14. The drop in domestic revenue was basically due to lower revenue from Lamb, Leather and Other. Excluding this effect, net revenue from fresh meat and processed products combined grew 1% to R$872 million. This 1% increase was exclusively due to the higher average prices in the period, with domestic sales volumes, for both fresh and processed meat, decreasing 11% and 17%. respectively, in comparison with the same quarter last year. The higher average prices demonstrate the success of our strategy to redirect volumes to the food service and small retailer channels, where we are able to mitigate the impact of the adverse domestic scenario. In 1H15, net revenue in Brazil's domestic market was R$2,121 million, a 4% increase on the R$2,045 million reported in 1H14. BRAZIL EXPORT MARKET Exports in the quarter benefitted from the recovery in exports to the Middle East and the weaker BRL against the USD. Net revenue from exports from Brazil was R$901 million (US$293 million), advancing 18% over R$766 million (US$343 million) in 2Q14. In USD, net revenue from exports fell 14%, compared to the 21% downturn in the overall export market, according to Secex. In Brazil's fresh beef exports, Marfrig continues to capture market share gains in terms of both sales revenue and volume. In terms of sales revenue, Marfrig's market share in 2Q15 stood at 20.5%, expanding 172 bps on 1Q15. In terms of sales volume, Marfrig's market share gained 185 bps to 21.5%. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 19

130 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE The following chart presents the main export destinations of Marfrig Beef Brazil, which clearly shows the growing share of exports to the Middle East. % revenues % volume 2Q15 2T15 31% 15% 7% 31% 7% 10% 2Q15 2T15 24% 15% 14% 31% 7% 8% 1Q15 1T15 40% 17% 8% 23% 7% 5% 1Q15 1T15 31% 18% 14% 24% 7% 7% 2Q14 2T14 29% 18% 20% 13% 16% 4% 2Q14 2T14 25% 21% 24% 14% 13% 4% Europa Europe Ásia Asia América South America/ Central/Sul Central Oriente Middle Médio East Rússia Russia Outros Other The lower volume of exports to Central/South America in the first half of the year is explained by the suspension of exports to Venezuela, as the Company is not comfortable with the country s credit risk. In 1H15, net revenue from beef exports from Brazil came to R$1,649 million (US$555 million), up 12% on the R$1,474 million (US$643 million) reported in 1H14. INTERNATIONAL UNITS The international units posted net revenue of R$625 million (US$204 million), up 22% on the R$511 million reported in 2Q14 (US$229 million). Excluding the BRL depreciation against the USD, net revenue fell 11% on 2Q14. Despite the positive impact of the 38% local-currency depreciation versus 2Q14, export volumes from Uruguay fell 29% in the quarter, which was partially offset by the 7% increase in domestic sales volume at the international units. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 20

131 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE The following chart presents the main export destinations of Marfrig Beef Uruguay, evidencing the volume stability in key destinations, with an increase in Others (especially the USA): % revenues % volume 2Q15 2T15 24% 34% 6% 2% 2% 32% 2Q15 2T15 15% 48% 8% 2% 4% 23% 1Q15 1T15 24% 32% 5% 15% 1% 23% 1Q15 1T15 14% 48% 5% 13% 2% 17% 2Q14 2T14 28% 28% 8% 8% 11% 19% 2Q14 2T14 14% 42% 7% 7% 14% 16% In 1H15, the international units posted net revenue of R$1,274 million (US$411 million), up 35% from R$941 million (US$428 million) in 1H14. Gross Profit and Gross Margin Gross Profit in the quarter was R$398 million (gross margin of 15.4%), up 2% from R$391 million (gross margin of 16.5%) in 2Q14. The 110 bps gross margin compression from 2Q14 is basically explained by higher raw material costs (fed cattle) in Brazil. According to ESALQ, the average fed cattle price in Brazil in 2Q15 rose 20% from a year earlier, which were partially offset by the decline in production costs due to the many initiatives implemented at Brazilian production units since 2Q14 under the Productivity Project. In 1H15, gross margin decreased 220 bps to 14.7%, from 16.9% in 1H14, reflecting the higher raw material costs in the period. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 21

132 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Selling, General and Administrative Expenses SG&A Expenses as a ratio of net revenues stood at 7.6% in 2Q15, compared to 10.0% in 2Q14. The decrease of 240 bps from 2Q14 reflects the ongoing process to better manage expenses and costs launched in mid-2q14 (Productivity Agenda Project) that involves implementing a series of initiatives at the units in Brazil. The productivity project yielded savings in costs and expenses of R$23 million in 2Q15, in addition to the savings of R$14 million in 1Q15. The Company's efforts on this front are ongoing, and the expectation is to capture additional savings in costs and expenses in the second half of Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA amounted to R$250 million in 2Q15 (9.7% margin), up 29% from R$193 million (8.1% margin) in 2Q14. The margin expansion of 160 bps was due to higher revenue and lower SG&A Expenses. In 1H15, adjusted EBITDA margin stood at 9.0%, stable in comparison with 1H14. Statement of Income 2Q15 2Q14 Change 1H15 1H14 Change R$ % NOR R$ % NOR Chg. R$ Chg. % R$ % NOR R$ % NOR Chg. R$ Chg. % Net Revenue 2, % 2, % % 5, % 4, % % COGS -2, % -1, % % -4, % -3, % % Gross Profit % % % % % % SG&A % % % % % % Selling % % % % % % Administrative % % % % % % ADJUSTED EBITDA* % % % % % % Other Income/Expenses % % % % % % EBITDA % % % % % % (*) Excludes the effects from other operating income/expenses. IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 22

133 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE Revenue, Volume and Average Price Revenue (R$ million) 2Q15 2Q14 Chg. % 2Q15 / 2Q14 1H15 1H14 Chg. % 1H15 / 1H14 MARFRIG BEEF - BRAZIL 1, , % 3, , % Domestic Market 1, , % 2, , % FRESH BEEF % 1, , % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % Exports % 1, , % FRESH BEEF % 1, , % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % MARFRIG BEEF - INTERNATIONAL OPERATIONS R % 1, % Domestic Market % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % Exports % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % TOTAL MARFRIG BEEF 2, , % 5, , % FRESH BEEF 1, , % 3, , % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % VOLUME ( 000 TONS) 2Q15 2Q14 Chg. % 2Q15 / 2Q14 1H15 1H14 Chg. % 1H15 / 1H14 MARFRIG BEEF - BRAZIL % % Domestic Market % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % Exports % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % MARFRIG BEEF - INTERNATIONAL OPERATIONS % % Domestic Market % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % Exports % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % TOTAL MARFRIG BEEF % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 23

134 DRAFT %INVESTOR RELATIONS 2Q15 EARNINGS RELEASE AVERAGE PRICE (R$ / KG) 2Q15 2Q14 Chg. % 2Q15 / 2Q14 1H15 1H14 Chg. % 1H15 / 1H14 MARFRIG BEEF - BRAZIL % % Domestic Market % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % Exports % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % MARFRIG BEEF - INTERNATIONAL OPERATIONS % % Domestic Market % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % Exports % % FRESH BEEF % % FURTHER PROCESSING % % LAMB. LEATHER AND OTHER % % TOTAL MARFRIG BEEF % % FRESH BEEF % % FURTHER PROCESSING % % LAMB, LEATHER AND OTHER % % e IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 24

135 DRAFT %INVESTOR RELATIONS MOYPARK OPERATING HIGHLIGHTS DISCONTINUED OPERATIONS 2Q15 EARNINGS RELEASE Net Revenue (R$ mm) Gross Income and Gross Margin (R$ mm and %) 1,328 1, % 2,641 3,246 23% 11.5% % % 11.3% 10.7% % 2Q14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1H15 SG&A and SG&A/NOR (R$ mm and %) Adjusted EBITDA and Margin (R$ mm and %) 8.2% 7.5% % % 8.2% % %% 7.6% % % 7.7% % % 2Q14 2Q15 1H14 1H15 2Q14 2Q15 1H14 1H15 IR CONTACTS Av. Chedid Jafet, 222 Bloco A - 5º andar - Vila Olímpia - São Paulo - SP CEP: Tel: (11) ri@marfrig.com.br 25