AMEC / President Letter No. 11/2018. São Paulo, August 15, 2018

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1 AMEC / President Letter No. 11/2018 São Paulo, August 15, 2018 To the Honorable Attorney General Mr. Anselmo Henrique Cordeiro Lopes 4 th Federal Attorney General s Anticorruption Office in the Federal District SGAS 604, Lote 23 Avenida L2 Sul Brasília/DF CEP: atendimento.cidadao@mpf.mp.br Re: RENEGOTIATION OF J&F S LENIENCY AGREEMENT Dear Sir, The Association of Capital Market Investors Amec is a non-profit association established in 2006 that gathers, among its members, 60 institutional investors, third-party fund managers, either affiliated to financial institutions or independent, based in Brazil or abroad, in addition to pension funds and development banks with more than BRL 600 billion in assets under management. As part of its activities, Amec works on the defense of minority shareholder rights in publicly-held companies and seeks to interact with governmental authorities and regulatory and self-regulatory agencies in a diligent and participative manner with a view to improving the standards, rules of conduct and procedures applicable to the capital markets. With this objective in mind, Amec, through its Technical Commission, has fostered debates about a topic of utmost importance for the capital market, brought to your knowledge in this document: the award of damages to capital market s investors resulting from corruption cases involving controlling shareholders and officers of listed companies traded both in Brazil and abroad. The J&F Group, the reason for this letter, currently controls or has already controlled several companies that are relevant to the Brazilian market, among which JBS S.A., Vigor, Alpargatas, Banco Original, Âmbar, and Flora. We would like to call your attention to JBS S.A, maybe the most important company of the J&F Group: after going public (in 2007), the company conducted a primary offer 2010, at which time it raised BRL 1.84 billion at Bovespa, that is, funds from the savings from the public.

2 The company s corporate profile, published in its official website 1, says: With six decades of history, JBS is currently the largest protein processor and the second largest food company in the world¹. The Company operates in the processing of beef, pork, lamb, chicken and also produces value added and convenience food products. It also sells leather products, toiletries and cleaning, collagen, metal packaging, biodiesel, among others. Currently, JBS has more than 400 production units, 230 of them strictly related to production of meat and convenience and value-added products worldwide. JBS has over 235,000 employees and capacity to process 80 thousand heads of cattle per day, more than 14 million birds per day, 115 thousand hogs per day and 100 thousand leather items per day. In addition, the Company has a diversified product portfolio, with dozens of recognized brands in Brazil and abroad, such as Swift, Friboi, Seara, Maturatta, Plumrose, Pilgrim's Pride, Gold'n Plump, Gold Kist Farms, Pierce, 1855, Primo and Beehive. This variety of products and a presence in 22 countries on five continents (from production platforms and offices) serve more than 350,000 customers in over 150 nations. Based on the description of JBS background, we can state that, for at least the past 10 (ten) years, it has counted on the funds of local and foreign shareholders that decided to invest in it based on its importance in the capital market. Accordingly, part of its history was only feasible because of the capital injected by thousands of shareholders in the company (JBS S/A has almost 10,000 shareholders, among which individuals, corporations and institutional investors 2 ). JBS S.A. s stock is also listed on the Bovespa Index (Ibovespa), Brazil s main stock market index. Created in 1968 and a reference for investors from all over the world, it is the most important indicator of the average performance of the most traded and representative securities of the Brazilian capital market. On the other hand, when it comes to the capital market, we should bear in mind that investors usually deal with high expectations and projections and, given that, are very sensitive to the environment surrounding them, especially with respect to the risks taken and expected returns, what means that any damage to a company s credibility and its unfolding effects, whether realized or not, impacts the entire capital markets

3 Within this context, the work developed by the Public Prosecutor s Office, in the several aspects related to the exercise of its constitutional duties, is of utmost importance. By analyzing such duties through the prism of the protection of the legal order and the defense of social and individual interests, we understand that the Public Prosecutor s Office has authority to/the responsibility of seek/seeking ways to prevent a specific group (in this case, investors) from suffering losses and ensure/ensuring that both security holders and market s investors are awarded damages, as set forth in the Article 1 of the Law 7913/1989, which establishes that: Article. 1 Without prejudice of the lawsuit for damages, the Public Prosecutor s Office, on its own motion or whenever requested by the Brazilian Securities and Exchange Commission CVM, shall take the necessary legal action to avoid losses or ensure that securities holders and market investors are indemnified when losses result from: I fraudulent operations, non-equitable practices, manipulation of prices or clear evidence of artificial conditions of demand, offer or prices of securities; II acquisition or sale of securities by the listed company s officers or controlling shareholders based on material information not yet disclosed to the market or acquisition or sale of securities by an individual who has access to such information because of his/her job or function, or by an individual who had access to such information by means of those who have access to it; III omission of material information by an individual who has the duty to disclose it or who has disclosed incomplete, untrue or biased information. The above-mentioned legal provision was used as the legal basis of the TECHNICAL COOPERATION AGREEMENT signed on May 8, 2008 and recently renewed by and between the Brazilian Securities Commission CVM and the Federal Public Prosecutor s Office MPF, which deals with the joint work developed by the two entities to prevent, investigate and suppress practices that are harmful to the capital markets and that establishes that the MPF is responsible for defending the interests of the securities market and its respective investors in the administrative, civil and criminal spheres. Further to the above considerations, it is important to point out that it is public knowledge that the fine - BRL 10.3 billions - established in the leniency agreement signed with the holding J&F Investimentos S.A., JBS S.A. s controlling company, on June, 2017, was divided without observing any recovery to the investors of the companies controlled by the holding, as shown below: BRL 1.75 billion to the BNDES (the Brazilian Social Bank for Social and Economic Development); BRL 1.75 billion to the Federal Government through the payment of the Brazilian Federal Revenue Payment Form (GRU);

4 BRL 1.75 billion to FUNCEF ( The Government Owned Bank Federal Employees Foundation); BRL 1,75 billion to PETROS (Petrobras Social Security Foundation); BRL 500 millions to the Federal Savings Bank; BRL 500 millions to the FGTS (Guarantee Fund for Length of Service); BRL 2,3 billions through social projects to be carried out in thematic areas as set forth in the agreement. In other words, almost two thirds (BRL 6,8 billions) out of the total amount to be paid by J&F (BRL 10,3 billions) will be directly or indirectly allocated to the Federal Government (GRU BRL 1,75 billion), to official government-owned banks (FUNCEF and BNDES BRL 2,25 billions), to the FGTS (BRL 500 millions) and to the MPF (R$ 2,3 billions social projects). On the other hand, only some institutional investors and pension funds (FUNCEF and Petros) were compensated, yet partially, for the damages suffered, while thousands of JBS S.A. s shareholders and investors were not included in the leniency deal. If we also consider the acts of corruption admitted in the plea agreement and that JBS, a listed company, is by far the one that generates the most cash for the group, it is evident that many of these undue payments were debited from the company, directly inflicting heavy losses on shareholders who had confidence in the Brazilian capital market. Such procedure, with due respect, is contrary to the spirt of the law (Law 7,913/1989), which unequivocally establishes, in its Article 2, that: Article 2 The fines resulting from the proceeding for damages referred to in this Law shall be reverted to the damaged investors in an amount proportional to their losses. Based on the mentioned facts and considering that the terms of the leniency agreement previously signed by the Public Prosecutor s Office and J&F Investimentos S.A. are currently being revised, Amec would like to urge that all future agreements include the payment of damages to the shareholders that are not part of the control block of shares of the companies involved, regardless their category or quality, in accordance to the principles of equality and lawfulness that characterizes the work developed by your Office. Finally, we would like to highlight that Amec s members have thoroughly debated recent cases in which domestic listed companies were pressed by foreign authorities (the US Department of Justice and Law Courts, for example) to sign agreements involving bulky amounts to pay damages to the holders of American Depositary Receipts (ADRs), while domestic investors, in addition to receiving no damages, were forced to involuntarily collaborate with the payment of those fines as the profits made by these companies in the domestic market were ultimately used to fulfill the mentioned agreements.

5 We thank you for your attention to this matter and hope your Office, which in our opinion plays an essential role in the development of the Brazilian capital markets, welcomes our comments. Respectfully submitted, THE ASSOCIATION OF CAPITAL MARKET INVESTORS AMEC Mauro Rodrigues da Cunha CEO