Tarpon Investimentos S.A.

Transcription

1 (Convenience Translation into English from the Original Previously Issued in Portuguese) Tarpon Investimentos S.A. Individual and Consolidated Financial Statements For the Year Ended December 31, 2016 and Independent Auditor's Report Deloitte Touche Tohmatsu Auditores Independentes

2

3

4

5

6 (Convenience Translation into English from the Original Previously Issued in Portuguese) Tarpon Investimentos S.A. Individual and consolidated balance sheets Year Ended December 31, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Consolidated Company Consolidated Company Assets Notes 12/31/ /31/ /31/ /31/2015 Liabilities Notes 12/31/ /31/ /31/ /31/2015 Current Assets Current liabilities Cash and cash equivalents 4 25,742 34, ,207 Trade payables ,437 9,541 9,514 Financial assets measured at Derivatives 6c 456 3, ' fair value through profit or loss 5 18,982 23, Dividends 11c 1,576 1,979 1,576 1,979 Receivables Taxes payable 22 2,152 2, Recoverable taxes 17a 3,867 7,801 1,354 1,426 Payroll and related taxes 23 1,600 1, Other assets 20 5,200 5, Total 6,432 11,266 11,550 11,844 Total 54,186 72,474 2,203 5,873 Noncurrent assets Noncurrent liabilities Investments ,539 68,285 deferred tax Property, plant and equipment Intangible Total 625 1,106 57,539 68,285 Total Stockholder's Equity Capital 11a 7,085 7,016 7,085 7,016 Capital reserve 11e 1, , Legal reserve 11b 1,415 1,401 1,415 1,401 Profit reserve 11.f 1,268 14,391 1,268 14,391 Stock option plan 20,758 19,935 20,758 19,935 Cumulative translation adjustments ,236 18,586 12,236 18,586 Additional Dividends Proposed 11c 3,462-3,462 - Equity attributable to Company s owners 48,192 62,314 48,192 62,314 Total assets 54,811 73,580 59,742 74,158 Total liabilities and equity 54,811 73,580 59,742 74,158 The accompanying notes are an integral part of this individual and consolidated financial statements 5

7 (Convenience Translation into English from the Original Previously Issued in Portuguese) Tarpon Investimentos S.A. Individual and consolidated income statements Year Ended December 31, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Consolidated Company Ended at December Ended at December Notes Management Fee 55,025 75, Net operating revenue 13 55,025 75, Operating income (expenses) Personnel expenses 23 (29,248) (29,831) (129) (136) Stock option plan 16 (1,786) (3,164) - - Administrative expenses 15 (10,728) (11,025) (960) (706) Income from financial assets at fair value through profit or loss 14 (2,008) (3,653) Share of profit of subsidiaries ,641 20,071 Other operating income (expenses) 26 (511) (438) (68) Total (43,744) (48,184) 6,320 19,193 Operating profit (loss) 11,281 27,067 6,320 19,193 Income tax and social contribution 17 (4,962) (7,874) - - Net profit for the year 12 6,320 19,193 6,320 19,193 Attributable to Company's owners 6,320 19,193 6,320 19,193 Number of outstanding shares at end of year 12a 44,115 46,040 44,115 46,040 Basic earnings per share 12a Diluted earnings per share 12b The accompanying notes are an integral part of this individual and consolidated financial statements 6

8 (Convenience Translation into English from the Original Previously Issued in Portuguese) Tarpon Investimentos S.A. Individual and consolidated statements of comprehensive income Year Ended December 31, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Consolidated Company Net profit for the year Notes 6,320 19,193 6,320 19,193 Comprehensive income Cumulative translation adjustments 8 (6,350) 12,696 (6,350) 12,696 Total comprehensive income (30) 31,889 (30) 31,889 Comprehensive income atributable to Company's owners (30) 31,889 (30) 31,889 The accompanying notes are an integral part of this individual and consolidated financial statements 7

9 (Convenience Translation into English from the Original Previously Issued in Portuguese) Tarpon Investimentos S.A. - Consolidated statements of changes in equity Year Ended December 31, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Cumulative Additional Retained earning Capital Capital Profit Legal Treasury Stock Translation Dividends (Accumulated Total Reserve Reserve Reserve Shares Option Plan Adjustments Proposed losses) Equity Balances as at December 31, 2015 Notes 7, ,391 1,401-19,935 18, ,314 Capital increase 11a & 11e Repurchase shares 11g (15,010) (15,010) Stock option plan , ,787 Reversal of options exercised 11e & (964) Cancellation of Shares 11a & 11e - (619) (14,391) - 15, Cumulative translation adjustments (6,350) - - (6,350) Net profit for the year ,320 6,320 Constitution of reserve 11b & 11f - - 1, (1,282) - Distribution of mandatory dividends 11c (1,576) (1,576) Distribution of aditional proposed dividends 11c ,462 (3,462) - - Balances as at December 31, ,085 1,968 1,268 1,415-20,758 12,236 3,462-48,192 Cumulative Additional Retained earning Capital Capital Profit legal Treasury Stock Translation Dividends (Accumulated Total Reserve Reserve Reserve Shares Option Plan Adjustments Proposed losses) Equity Balances as at December 31, ,988 5,926-1,396-17,149 5,890 10,268-47,617 Capital increase 11a Stock option plan , ,163 Reversal of options exercised (377) Cancellation of Shares 11a - (5,570) (5,570) Cumulative translation adjustments , ,696 Net profit for the year ,193 19,193 Constitution of reserve 11b e 11f , (14,396) - Distribution of mandatory dividends 11c (10,268) (1,964) (12,232) Distribution of aditional proposed dividends 11c (2,833) (2,833) Balances as at December 31, , ,391 1,401-19,935 18, ,314 The accompanying notes are an integral part of this individual and consolidated financial statements 8

10 (Convenience Translation into English from the Original Previously Issued in Portuguese) Tarpon Investimentos S.A. Individual and consolidated statements of cash flows Year Ended December 31, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Consolidated Ended at December Company Ended at December Notes Operating activities Net profit for the year 6,320 19,193 6,320 19,193 Adjustments: Depreciation and amortization 9 & Share of profits of subsidiaries (7,641) (20,071) Increase / decrease in stock option plan 16 1,785 3, Cumulative translation adjustments Mark-to-market derivative financial assets 456 5,378 Deferred Tax Provision for Income tax and social contribution 17 4,775 7, Adjusted profit 14,017 36,208 (1,321) (878) Changes in assets and liabilities: (Increase) decrease in receivables (742) 1, (Increase)/ decrease in other assets 771 (1,926) (357) 314 (Increase)/ decrease in recoverable taxes 3,934 10, ,833 Increase/ (decrease) in trade payables (789) Increase/ (decrease) in taxes payable 525 (16,574) 63 6,078 Increase/ (decrease) in payroll and related taxes (312) (1,870) Increase/ (decrease) in other payables Changes in assets (liabilities) derivatives (3,057) (4,367) Income tax and social contribution paid (6,253) (6,036) - - Cash flow from/(to) operating activities 8,094 20,384 (1,497) 5,477 Investing activities Dividends received 8-13,822 17,045 Disposal of financial assets at fair value through income 5 4,241-7, (Acquisitions) / write-off in Property, plant and equipment (Acquisitions) / write-off in intangible assets 10 (53) (129) - - Cash flow from/(to) investing activities 4,188 (7,714) 13,822 18,023 Financing activities Repurchase treasury shares 11g (15,010) (5,570) (15,010) (5,570) Dividends paid 11c (1,979) (14,020) (1,979) (14,020) Capital increase through exercise of stock options 11a & 11e Cash flow from/(to) financing activities (16,282) (19,310) (16,282) (19,310) Total cash flows (4,000) (6,640) (3,957) 4,190 Increase /(decrease) in cash and cash equivalents, net (4,000) (6,640) (3,957) 4,190 Cash and cash equivalents at the beginning of the year 34,740 32,309 4, Exchange rate changes on cash and cash equivalents 2.4 (4,998) 9, Cash and cash equivalents at the end of the year 25,742 34, ,207 The accompanying notes are an integral part of this individual and consolidated financial statements 9

11 (Convenience Translation into English from the Original Previously Issued in Portuguese) Tarpon Investimentos S.A. Individual and consolidated statements of value added Year Ended December 31, 2016 and December 31, 2015 (In thousands of Brazilian reais - R$) Consolidated Company Ended at December Ended at December Notes Revenues 56,252 76, Performance and management fees 13 56,252 76, Inputs acquired from third parties (11,806) (10,673) (1,398) (774) Materials, power, outside services and other (11,806) (10,673) (1,398) (774) Gross value added 44,446 66,249 (1,398) (774) Retentions (494) (600) - - Depreciation and amortization 15 (494) (600) - - Net value added 43,952 65,649 (1,398) (774) Value added received in transfer (2,008) (3,653) 7,847 20,103 Share of profit of subsidiaries ,641 20,071 Finance income (costs) 14 (2,008) (3,653) Total value added to be distributed 41,944 61,995 6,449 19,329 Distribution of value added 41,944 61,995 6,449 19,329 Personnel 29,248 32, Payroll and related taxes 23 29,248 32, Taxes, rates and contributions 6,376 9, Federal 5,379 8, The amunicipal 997 1, Equity remuneration 6,320 19,193 6,320 19,193 Mandatory dividends 11c 1,576 1,964 1,576 1,964 Retained income for the year 11b & 11f 1,282 14,396 1,282 14,396 Proposed dividends 11c 3,462 2,833 3,462 2,833 The accompanying notes are an integral part of this individual and consolidated financial statements 10

12 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 Notes to the individual and consolidated financial statements (Amounts in thousands of Brazilian reais - R$) 1 General Information Tarpon Investimentos S.A. ( Company or Tarpon ) was established in June 2002, initially organized as a limited liability company, with head office at Av. Brigadeiro Faria Lima Avenue, 3,355-23o. andar, São Paulo/SP, to engage in securities portfolio and asset management, through investment funds, managed portfolios and other investment vehicles ( Tarpon Funds ). In December 2003, the Company was changed into publicly-held company. On July 31, 2011, was incorporated the Company s subsidiary in New York (TISA NY, Inc.), which is engaged in the provision of financial advisory services. On March 28, 2012, shares issued by Tarpon All Equities (Cayman), Ltd. and TSOP Ltd. were transferred from TIG Holding NY LLC to Tarpon Investimentos S.A. Finally, on April 25, 2012, the Company established Tarpon Gestora de Recursos S.A. ( Tarpon Gestora ), which is engaged in operating as portfolio and asset manager of funds, portfolios and other investment vehicles in Brazil and abroad. 2 Presentation of financial statements 2.1 Presentation of individual and consolidated financial statements The individual and consolidated financial statements were prepared and are been presented in accordance with accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS) issued by the International Standards Board (IASB). There is no difference between consolidated and individual equity and profit or loss reported due to these accounting policies have been applied consistently. Accordingly, the individual and consolidated financial statements are presented as a single set, on a side-by-side basis. All relevant information in the financial statements, and only such information, is being disclosed and corresponds to the information used in managing the Company. Management understands that there are no uncertainties that affect Tarpon s continuity as a going concern. These financial statements and the related independent auditor s report were approved and authorized for issue by the Board of Directors on February 23, Functional and reporting currency The financial statements have been prepared in Brazilian reais (R$), which is the Company s functional and reporting currency. Subsidiaries Tarpon Gestora and TISA NY have as functional currency Reais (R$) and US Dollar (US$), respectively. 11

13 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, Use of estimates and judgment The preparation of financial statements requires Management to make judgments and estimates that affect the application of accounting principles, as well as the reported amounts of assets, liabilities, income and expenses, including the determination of the fair value of securities and the stock option plan and also contingent liabilities, provisions and legal obligations. Actual results may differ from these estimates. Estimates and assumptions are reviewed on a quarterly basis. 2.4 Basis of consolidation The consolidated financial statements include Tarpon Gestora de Recursos S.A., TISA NY, Inc., Tarpon All Equities (Cayman), Ltd. and TSOP Ltd. Tarpon Gestora de Recursos S.A. On April 25, 2012, Tarpon Investimentos S.A. started to hold all shares issued by Tarpon Gestora, totaling 500 shares at the unit value of R$1.00. TISA NY, Inc. TISA NY is the Company s wholly-owned subsidiary. The results of operations of TISA NY and respective investment are measured under the equity method (financial statements), whose functional currency (US$) is different from the Parent s functional currency. Tarpon All Equities (Cayman), Ltd. e TSOP Ltd. On March 28, 2012, the Company started to hold all shares issued by Tarpon All Equities (Cayman), Ltd. and TSOP Ltd. These companies operate as general partner of certain foreign investment funds and their functional currency (US$) differs from the Parent s functional currency. Investments in foreign subsidiaries are translated into the reporting currency, as follows: The balances of assets and liabilities are translated at the exchange rate prevailing at the consolidated balance sheet date; Profit or loss is translated at the exchange rate prevailing on each transaction date; and All differences arising from the translation of exchange rates are recognized in equity and in the consolidated statement of comprehensive income, in line item Cumulative Translation Adjustments, the effect of the translation adjustments in the consolidated statements are presented separately on the statements of cash flow. The amount of investments in subsidiaries and all intercompany balances were eliminated upon consolidation. 2.5 Adoption of standards and technical pronouncements The accounting standards and pronouncements effective for reporting periods beginning on or after January 1, 2016, when applicable, were adopted by Tarpon. 12

14 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, Standards and interpretations issued and adopted beginning January 1, 2016 Pronouncement IFRS 10 / CPC 36 and IAS 28 / CPC 18 IFRS 11/CPC 19 (R2) Description of Amendment Sale or Contribution of Assets Between an Investor and its Associate or Joint Venture. The amendments to IFRS 10 and IAS 28 address situations involving the sale or contribution of assets between an investor and its associate or joint venture. Specifically, gains and losses arising from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method, are recognized in the parent s profit or loss only to the extent of the unrelated investors interests in that associate or joint venture. Similarly, gains and losses arising from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) at fair value are recognized in the former parent s profit or loss only to the extent of the unrelated investors interests in the new associate or joint venture. The amendments to IFRS 11/CPC 19 (R2) provide guidance on how to account for the acquisition of a joint operation that constitutes a business, as defined in IFRS 3/CPC 15 (R1) Business Combination. The amendments to IFRS 11/CPC 19 (R2) apply prospectively for annual periods beginning on or after January 1, Impact on the Financial Statements Management has assessed that the compliance with such standards had no impact for the Company for the period ended December 31, 2016 and the same period in the prior period as the Company has not conducted any transaction involving the sale of assets or acquisition of business. Management assessed that the application of such standard had no impact on the Company s activities for 2016 and the same period in the prior period as the Company has not conducted any transaction involving the sale of assets or acquisition of business. IAS 1 / CPC 26 (R1) Disclosure Initiative - The amendments to IAS 1/CPC26 provide guidance on how the concept of materiality is applied in practice. Management assessed that the concepts of materality for disclosure are already being applied in the presentation of Tarpon s financial statements. IAS 16/CPC 27 and IAS 38/CPC 04 (R1) IAS 41 / CPC 29 (Agriculture) The standard precludes entities from using the depreciation method based on revenue for property, plant and equipment items. The amendments to IAS 38 (CPC 04 R1) introduce the presumption that revenues do not constitute an appropriate basis for purposes of amortization of an intangible asset, except for the cases outlined in the standard. The revised standard defines Bearer Plant and requires the biological asset to meet the definitions of Bearer Plant to be recorded in the accounting books as property, plant and equipment, in accordance with IAS 16 (CPC 27) and IAS 41 (CPC 29). Pursuant to Note 3f) and 3g), property, plant and equipment items and intangible assets are measured based on the estimated useful life; pursuant to such principle, depreciation and amortization are realized. Not applicable to Tarpon s activities. IAS 27 / (CPC 36 (R2) This standard describes the circumstances during which the entity must consolidate the financial statements of another entity (subsidiary), the accounting effects of changes in the Parent s interest and loss of control on the subsidiary and the information that must be disclosed so as to enable the users of the financial statements to determine the nature of the relationship between the entity and its subsidiaries. Tarpon s management assesses that the provisions set out in the standard are being complied with, in accordance with Note 2.4 (Basis of consolidation) and Note 3 e). IFRS 10 / CPC 36 IFRS 12 / CPC 45 and IAS 28 / CPC 18 The amendments clarify that the exemption from preparing consolidated financial statements is available for a parent entity that is a subsidiary of an investment entity, even if the investment entity assesses all subsidiaries at fair value in accordance with IFRS 10 (CPC 36). IAS 28 (CPC 18) were also amended so as to clarify that the exemption from applying the equity method is also applicable to an investor, associate or join venture if such investor is a subsidiary of an investment entity that measures all subsidiaries at fair value. The amendment also clarifies that the requirement that an investment entity must consolidate a subsidiary that provides services related to past investment activities only applies to subsidiaries that are not own investment entities. The amendment also clarified that, when applying the equity method to an associate or joint venture that is an investment entity, an investor can retain fair value measurements used by the associate or joint venture for its subsidiaries. The Company s Management does not believe that the application of these amendments to IFRS 10, IFRS 12, and IAS 28 will have a material impact on the Group consolidated financial statements as the Group is not an investment entity and does not have a holding company, a subsidiary, an associate, or a joint venture that qualifies as an investment entity. 13

15 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, Standards and interpretations issued and not yet adopted IFRS 9 - Financial Instruments: Classification and Measurement - introduces new requirements for classifying and measuring financial assets and financial liabilities. This standard needs to be effective for the fiscal years beginning on or after July 1, 2018 with earlier application permitted.. Management is assessing the impacts of adopting this standard on its financial statements. IFRS 15 / CPC 47 - Revenue from Contracts with Customers - established a simple and clear model to companies to use in accounting for revenue from customer contracts. This standard will be effective for annual periods beginning on or after July 1, 2018, with earlier application permitted. Management assesses that this standard is being met as Tarpon s only revenue comprises the management and performance fees relating to the investment funds managed. Revenue is recognized based on the terms and criteria set out in the fund bylaws IFRS 16 / CPC Leases Establishes a comprehension model to identify lease transactions and their appropriate treatment in the financial statements for the lessor and lessee. Management assessed that such standard will not impact the Company s financial statements as the Company does not conduct any transactions that meet the lease criteria set out in such standard. IFRS 2 / CPC 10 Classification and Measurement of Share-based Payments Establishes grace/grant conditions in measuring plans upon financial settlement, classification of share-based payment transactions with withholding tax settlement component and accounting for amendment to the sharebased payment terms and conditions that change the transaction classification from financial settlement to share-based settlement. Management assessed that option payments based on Tarpon s shares already meet the criteria set out in such standard. IAS 7 / CPC 03- The revised standard requires the entity to disclose in its financial statements the variations in liabilities arising from financing activities, including variations in cash flows and changes in non-cash transactions. These amendments to the standard will be prospectively applied. Management assesses that the accrual for payment of dividends, treasury share buyback and capital increase through exercise of stock options is only applicable in the reporting year, all of which show variations in the statement of cash flows of the balances impacting cash, that is cash flow. IAS 12 Recognition of deferred tax asset and unrealized losses The revised standard clarifies the recognition of deferred tax assets on unrealized losses. As shown in Note 3 l), Tarpon Gestora has adopted the deemed income regime. Therefore, Management assesses that the impacts relating to the adoption of such amendments to the standard are not applicable in detriment to the tax regime of its subsidiary. 3 Significant accounting policies The significant accounting policies below were consistently applied by the Company and its subsidiaries and foreign subsidiaries in the year ended December 31, a. Revenues Revenues refer to the compensation payable in consideration for portfolio management services relating to Tarpon Funds, consisting of management and performance fees. Management fees are determined based on a percentage rate on the equity amount of funds and are recognized as services are provided. Performance fees are generated when the performance of funds exceeds a given parameter or hurdle rate, as set out in the related bylaws, and are recognized when their amount and receipt are certain. 14

16 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 b. Financial instruments Financial assets measured at fair value through profit or loss Financial assets measured at fair value through profit or loss are held for trading and consist of the Company s short-term investments and repurchase transactions. Interest, gains and losses arising from the adjustment to fair value were recognized in the statement of operations in line item Gain (loss) on financial assets measured at value through profit or loss. The fair value of these assets is determined based on the amount adjusted by the interbank deposit (DI) rate, as disclosed by the bank responsible for the repurchase transaction at the end of each month, which approximates the carrying amount because of daily liquidity and indexation to daily CDI rate. Derivatives Derivatives are classified on acquisition date, according to Management s intent to use them as a hedging instrument or not. Derivatives are accounted for at fair value, including the consideration on the credit risk on realized and unrealized gains and losses, which are directly recognized in the statement of operations. c. Cash and cash equivalents Cash and cash equivalents include cash and short-term investments with maturities of no more than three months at contracting date, which are subject to an insignificant risk of change in fair value, and are used by the Company when managing short-term obligations. d. Impairment The Company s assets are tested for impairment at every balance sheet date. If such indication exists, the recoverable value of the asset is estimated. An impairment loss is recognized if the carrying amount of the asset exceeds its recoverable value. In the year ended December 31, 2016, no impairment loss was recognized in the Company s financial statements. e. Investments in subsidiaries and foreign subsidiary Investments in foreign subsidiaries are stated at costs and measured under the equity method of accounting in the individual financial statements. f. Property, plant and equipment Property, plant and equipment is stated at acquisition cost, less accumulated depreciation, calculated on a straight-line basis, which takes into consideration the estimated useful life of the assets and the respective residual values. Annual depreciation and amortization rates are as follows: furniture and fixtures and machinery and equipment (10%), facilities (10%), data processing systems (20%), communication and security systems (20%) and software licenses (25%). Leasehold improvements are amortized over the term of the lease agreement (five years), at an annual rate of 20%. g. Intangible assets Intangible assets with finite useful lives acquired separately are carried at cost less amortization. Amortization is recognized on a straight-line basis based on the estimated useful lives of the assets. The estimated useful life and amortization method are reviewed at the end of each year and the effect of any changes in estimates are recorded prospectively. 15

17 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 h. Escrow deposits Represented by escrow deposits made by the Company relating to appeals filed and discussion on the levy of service tax (ISS) on revenues from abroad (note 18a). As applicable, it will be presented in financial statements, with the reduction of the corresponding provisions for tax risks. i. Employee and management short-term benefits Employees and management are entitled to receive fixed and variable compensation and profit sharing, where applicable. The accrual of the estimated amount payable as profit sharing or variable compensation is recognized or established when the Company meets legal conditions (conditions set out in the plan), as applicable, of paying such amount and when the obligation can be reliably estimated. Employees and management are not eligible to any postemployment benefits, other long-term benefits and severance benefits. j. Contingent liabilities, provisions and legal obligations Contingent assets and contingent liabilities and legal obligations are recognized, measured and disclosed in conformity with the criteria set forth in CPC 25 - Provisions, Contingent Liabilities and Contingent Assets, as follows (note 18): Provision for risks - assessed by the legal counsel and Management taking into consideration the likelihood of loss of a lawsuit or administrative proceeding that could result in disbursements that can be reliably measured. Provisions are recognized for lawsuits and proceedings whose likelihood of loss is assessed as probable by the legal counsel and disclosed in explanatory notes. Contingent liabilities - are uncertain and contingent on future events to determine the likelihood of disbursements; however, they are not accrued but disclosed if assessed as possible losses, and are neither accrued nor disclosed if assessed as remote losses. k. Stock option plan The effects of the stock option plan are calculated based on the fair value on the option grant date and recognized in the balance sheet and statement of operations on a pro rata basis, over the vesting period of each grant. l. Income tax, social contribution, and other taxes For the year ended, Tarpon Investimentos S.A. adopts the taxable income regime. Therefore, the provision for income tax is calculated at the rate of 15% of taxable income, plus a 10% surtax on taxable income exceeding specific limits. The provision for social contribution is calculated at the rate of 9% before income tax. Prepaid income tax and social contribution are accounted for in assets as recoverable taxes (note 17 a). For the period ended, Tarpon Gestora de Recursos S.A., adopted the tax regime for the estimated income. For companies subject to the taxable income regime, PIS and COFINS tax rates are 1.65% and 7.60%, respectively, levied only on management and performance fees arising from the management of Brazilian funds, less creditable expenses. For companies adopted the tax regime for the estimated income, PIS and COFINS tax rates are 0.65% e 3% respectively. The ISS tax rate levied on portfolio management revenues, including the management of Brazilian funds and management of foreign funds and portfolios, is 2%. 16

18 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 The amounts payable as PIS, COFINS and ISS are accounted for as expenses on taxes on revenue. Deferred income tax and social contribution assets, arising from the tax recoverable on earnings abroad, were recognized considering expected probable realization. m. Other assets and liabilities Other assets are stated at their realizable values, including, where applicable, earnings, inflation adjustments (on a daily pro rata basis) and allowance for losses, when necessary. Other liabilities include known and estimated amounts, plus financial charges and inflation adjustment losses (calculated on a daily pro rata basis). n. Receivables Receivables are stated at realizable values, including allowance for doubtful debts, when applicable. o. Segment reporting A segment is the Company s component dedicated to supply products or provide services (business segment), or to supply products or provide services in a particular economic environment (geographic segment), which is subject to risks and rewards different from those in other segments. The Company, through its subsidiaries, carries out only of type of business (provision of portfolio management services) in the various markets where it operates and, consequently, no secondary segment division by type of business or geographic segment is presented. p. Comprehensive Income Comprehensive income derives from the exchange rate differences from the consolidation of foreign subsidiaries. q. Statements of value added The Company has prepared individual and consolidated statements of value added (DVA) in accordance with CPC 9 - Statement of Value Added, which are presented as an integral part of the financial statements according to the BRGAAP applicable to publicly-held companies, whereas they represent additional financial information for IFRSs. r. Earnings per share (basic and diluted) Basic earnings per share are calculated based on profit or loss for the year ended December 31, 2016 and 2015 attributable to the Company s controlling shareholders and the weighted average number of outstanding common shares in the related period. Diluted earnings (loss) per share is calculated based on the aforementioned average of outstanding shares, adjusted by the possible exercise of call options, with dilutive effect for the year ended December 31, 2016 and 2015, as set forth in CPC 41 - Earnings per Share and IAS

19 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, Cash and cash equivalents Cash and cash equivalents, Company and consolidated, consist of cash and banks and short-term investments maturing within up to 90 days from the investment date as at December 31, 2016 and December 31, Consolidated Company December December December December Cash and cash equivalents 25,742 34, ,207 25,742 34, ,207 5 Financial assets measured at fair value through profit or loss Consolidated Financial assets measured at fair value through profit or loss December 2016 December 2015 Repurchase agreements 18,982 23,223 18,982 23,223 Transactions indexed to DI fluctuation, carried out with prime banks. Their fair value is classified as level 2, considering the existence of daily liquidity and indexation to the interbank deposit rate (CDI), the daily adjustments being informed by the bank responsible for the aforementioned repurchase transaction at the end of each month. The carrying amount approximates the fair value on the balance sheet date. Operations (with Banco Itaú) are pegged to Debentures, maturing in July and November 2018, but the possibility of daily settlement of the repurchase agreement justifies the classification in current assets. 6 Financial instruments a. Risk management The Company is basically exposed to risks arising from the use of financial instruments, as follows: Credit Risk Refers to the possibility of the Company and its subsidiaries incurring losses as a result of default by their counterparties or financial institutions that are depositaries of funds or financial investments. The Company s policy is to minimize its exposure to credit risk. Management reviews and approves all investment decisions to ensure that investments are made only in highly-liquid assets issued by prime financial institutions. The maximum exposure to credit risk is shown in notes 4, 5 and 7. 18

20 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 Market Risk Refers to the risk that changes in market prices, such as interest rate and stock exchange quotations, affect the revenues or the amount of its financial instruments. The Company s policy is to minimize its exposure to market risk, seeking to diversify the investment of its funds at floating interest rates. Currency Risk Except for the interest in foreign subsidiary, whose functional currency is different from the Company s functional and reporting currency, we are not subject to a significant exposure to currency risk. b. Financial assets and liabilities measured at fair value through profit Valuation method December/ 2016 and December 2015 Exposure to fair value risk? Repurchase agreements Adjusted by DI rate No Short Position: TRPN3 shares Yes Derivative financial instruments Long Position: CDI + 1.3%p.y. c. Derivatives The Company has entered into an agreement for swap of gain (loss) on future financial flows (swap agreement) with Banco Itaú BBA S.A., where the Company holds a long position in the fluctuation of the price of its common shares and a short position in the fluctuation of 100% of the CDI, plus a fixed rate, settlement term of up to 12 months counted from each negotiation. The result of operations will be financially settled on maturity. On December 31, 2016 and 2015, the Company (through its subsidiary) had the following outstanding transactions, which are classified as level 2: Consolidated Financial Instrument Transaction date Maturity date Notional value Asset Position Fair value 12/31/2016 Fair value 12/31/15 SWAP 05/25/ /22/2017 1,492 Shares - - SWAP 12/01/ /30/2016 (**) 2,024 Shares - - SWAP 06/01/ /27/2016 (*) 9,326 Shares - - SWAP 06/02/ /27/2016 (*) 3,478 Shares - - SWAP 06/05/ /27/2016 (*) 2,623 Shares - - SWAP 08/21/ /19/2016 (*) 3,775 Shares - - Liabilitie Position 1,492 CDI + 1.3%p.y. (456) - 9,326 CDI + 0.5%p.y. - (1,529) 3,478 CDI + 0.5%p.y. - (561) 2,623 CDI + 0.5%p.y. - (420) 3,775 CDI + 0.5%p.y. - (391) 2,024 CDI + 0.5%p.y. (156) (456) (3,057) Total Saldo à Liquidar (456) (3,057) (*) Swap agreements were early settled upon a Company s management s decision made on March 9, (**) Swap agreements were early settled upon a Company s management s decision made on June 23, The effects on income of derivative financial instruments are stated in note 14. d. Sensitivity analysis - Effect on the changes in fair value As determined by CVM Instruction 475/08, the Company prepared three sensitivity analysis scenarios, considering the accumulated variation of the share price. Scenario I considers the mark-to-market adjustment of the swap on the financial statement sheet date and scenarios II and III consider a fluctuation by 25% and 50% in the risk variable considered, respectively. 19

21 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 Quotation Scenario I Scenario II Scenario III Quantity Notional 12/31/2016 Fair Value 1% -25% -50% Swap 195 1,492 6,00 (456) (445) (749) (1,041) e. Other financial assets and financial liabilities The financial assets and liabilities measured at amortized cost such as receivables, other assets, accounts payable, statutory obligations, have fair values equal to their carrying values. 7 Accounts receivable Management fees payable by Tarpon Funds are calculated on a monthly basis and paid at the beginning of the subsequent period, according to the respective bylaws. Performance fees are calculated on a semiannual, annual or biannual and paid on March 31, June 30, September 30 and December 31 of each year, according to the respective Bylaws. Consolidated December 2016 December 2015 Management fees (i) (i) All receivables recognized as at December 31, 2016 have already been settled up to the date of approval of these financial statements. 8 Investiments Below are the changes in TISA NY balances: TISA NY - in R$ thousands - Changes in investments Balance as at December 31, ,985 Share of profit of subsidiaries (2,406) Contribution to the subsidiary relating to the stock option plan 17 Exchange gain (losses) (6,350) Balance as at December 31, ,246 20

22 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 TISA NY in R$ thousands - Accumulated TISA NY - in USD thousands TISA NY - in R$ thousands Equity - beginning of the period Profit/loss as at December 31, 2016 Equity - beginning of the period Profit/loss as at December 31, 2016 Accumulated exchange variation Ownership interest % Share of profit of subsidiaries Contribution to the subsidiary relating to the stock option plan Book value of investment 10,163 (657) 39,985 (2,406) (6,350) 100% (2,406) 17 31,246 Investment in subsidiaries Tarpon All Equities (Cayman), Ltd. and TSOP Ltd. Correspond to R$101 as at December 31, 2016 and December 30, Tarpon Gestora de Recursos S.A. - in R$ thousands - Changes in investments Balance as at December 31, ,199 Dividends paid to the Parent (13,822) Share of profits of subsidiaries 10,047 Contribution to the subsidiary relating to the stock option plan 1,768 Balance as at December 31, ,192 Tarpon Gestora - in R$ thousands - Accumulated Equity - beginning of the period Profit as at December 31, 2016 Equity interest - % Share of profits of subsidiaries Contribution to the subsidiary relating to the stock option plan Dividends paid Book value of investment 28,199 10, % 10,047 1,768 (13,822) 26,192 9 Property, plant and equipment The Company s property, plant and equipment is comprised of: Consolidated Facilities Machinery and equipment Computers Furniture and fixtures Telephone equipment Leasehold improvements Total Balance as at December 31, Additions Depreciation and amortization (1) (175) (242) (73) (10) (33) (534) Balance as at December 31, As at December 31, 2016 and December 31, 2015, only subsidiaries had property, plant and equipment recorded in their balance sheets. 21

23 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, Intangible assets Refers to an application under development in the amount of R$188, com vida útil estimada em 20 anos. At December 31, 2016 o saldo do ativo intangível é de R$ 182 (a amortização deste software foi de R$ 6 (nota 15) no ano de 2016). 11 Equity a. Share Capital The Board of Directors meeting held on March 4, 2015 approved the issuance, within the limit of authorized capital, of 25 thousand Company s shares, based on the exercise of call options by the Plan s beneficiaries. Of the total subscription price, in the amount of R$88, the amount of R$80 was allocated to capital reserve and R$8 to the Company s capital. On May 6, 2015, was approved by the Board of Directors the cancellation of all 580 thousand Company's common shares in the amount of R$5,570, acquired under the share repurchase program approved on April 7, Therefore, social capital is now divided into 45,999 thousand shares. The Board of Directors meeting held on November 9, 2015 approved the issuance, within the limit of authorized capital, of 41 thousand Company s shares, based on the exercise of call options by the Plan s beneficiaries. Of the total subscription price, in the amount of R$192, the amount of R$172 was allocated to capital reserve and R$20 to the Company s capital. The Board of Directors meeting held on March 7, 2016 approved the issuance, within the limit of authorized capital, of 157 thousand Company s shares, based on the exercise of call options by the Plan s beneficiaries. Of the total subscription price, in the amount of R$707, the amount of R$638 was allocated to capital reserve and R$69 to the Company s capital. On August 2, 2016, the Company approved the cancellation of all common shares issued by the Company and held in treasury (note 11 g). As at December 31, 2016, the Company s capital amounts to R$7,085 (R$7,016 as at December 31, 2015), represented by 44,115 thousand (46,040 thousand as at December 31, 2015) registered common shares issued, without par value. b. Legal reserve The legal reserve is calculated at 5% of profit for the year, as set forth in art 193 of Law 6404/76, which cannot exceed 20% of capital. The objective of the legal reserve is to ensure the integrity of capital and it can only be utilized to offset losses or increase capital. Legal reserve will no longer be recognized when the balance of this reserve, plus the capital reserves prescribed by article 182, paragraph 1, of Law 6404/76, exceeds 30% of capital. As at December 31, 2016, the balance of legal reserve is R$1,415 (R$1,401 as at December 31, 2015). c. Dividends The Company s bylaws provide for the distribution of mandatory minimum dividends of 25% on profit for the year, adjusted pursuant to the Bylaws. On March 12, 2015, the Board of Directors approved the distribution of dividends in the amount of R$11,203, relating to dividends, which was paid on March 23, 2015, being R$10,268, of additional dividends of exercise from 2014 and R$935 of mandatory minimum that was provisioned as at December 31,

24 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 The Board of Directors meeting held on August 10, 2015 approved the distribution of interim dividends; the Company paid the amount of R$2,833, which will be allocated as mandatory minimum dividends for As at December 31, 2015, the Company allocated to mandatory minimum dividends the amount of R$4,797; R$2,833 was prepaid, according to the meeting of the Board of Directors held on August 10, 2015, and the remaining balance of R$1,979 was allocated as at December 31, 2015, was paid on March 18, 2016 Float (market) and March 21, As at December 31, 2016, the Company allocated to mandatory minimum dividends the amount of R$1,576 and the remaining balance of R$3,462 will be proposed by Management for distribution of additional dividends. d. Bylaws reserve The Company s bylaws set forth that up to 10% of profit, as adjusted pursuant to the Bylaws, less the mandatory minimum dividend paid, can be allocated to the bylaws reserve called as investment reserve, for purposes of redemption, buyback or acquisition of shares issued by the Company, or the performance of the Company s activities, limited to the Company s capital. e. Capital reserve The balance of capital reserve derives from the issuance of new shares, transfer of the balance of options exercised from Stock Option Plan and cancellation of shares held in treasury, as shown below: Capital Capital reserve Total Capital Reserve Balance as at December 31, , Cancellation of treasury shares - (619) (619) Exercise of Company s stock options, pursuant to the Stock Option Plan Transfer of the amounts under the stock option plan to capital reserve for options exercised in the year Balance as at December 31, ,085 1,968 1,968 f. Earnings reserve On August 2, 2016, all shares held in treasury were cancelled by the Company, and the total earnings reserve balance was used to absorb such shares. At December 31, 2016, the amount of R$1,268 was allocated to the earnings reserve. After allocation to the legal reserve, dividends and capital reserve, the balance of retained earnings was allocated to the earnings reserve, for future resolution by the Board of Directors, according to the capital budget. As at December 31, 2016, the balance was R$1,268. g. Repurchase of shares On April 07, 2015, the Company approved the repurchase of up to 600,000 shares representing 3.2% of the total outstanding shares. For variances resulting from the repurchase program in note 11 a. As at December 31, 2015, the Company does not have common shares held in treasury. On March 07, 2016, the Company approved the buyback of up to 1,699 (thousand) shares representing 10% of the total outstanding shares. As at March 31, 2016, due to the repurchase program, it was was incorporated in treasury the amount of R$10,444, representing 1,382 common shares. 23

25 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 On April 1, 2016 the Company approved the cancellation of 700 thousand shares, held in treasury, purchased under the share repurchase program. On April 6, 2016, by the above share repurchase program, were incorporated into the treasury the amount equivalent to R $ 1,681, equivalent to 300 thousand shares. On May 25, 2016, the Company approved a share repurchase program of up to 400 thousand shares, representing 2.46% of total outstanding shares. On May 27, 2016, by the above share repurchase program, were incorporated into the treasury the amount equivalent to R $ 2,206, equivalent to 300 thousand shares. On June 23, 2016, by the above share repurchase program, were incorporated into the treasury the amount equivalent to R $ 679, equivalent to 100 thousand shares, totaling the amount of R $ 9,720. On August 2, 2016, all shares held in treasury were cancelled, corresponding to 2,082 thousand shares in the amunt of R$15, Earnings per share a. Basic earnings per share Earning per share were calculated based on the Company s profit/loss attributable to controlling shareholders and the weighted average number of common shares, as shown below: Consolidated and Company December de 2016 December de 2015 Profit attributable to shareholders 6,320 19,193 Weighted average number of common shares Consolidated and Company December 2016 December 2015 Outstanding common shares at the beginning 46,040 46,554 Total outstanding share 46,040 46,554 Issued shares (note 11a) Canceled shares (note 11a) (2,082) (580) Total outstanding share 44,115 46,040 Weighted average number of common shares of the Company outstanding 45,144 46,202 Basic earning per share

26 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 b. Diluted earning per share In calculating the diluted earnings per share, we assumed the exercise of the stock options already granted. We assume the exercise of stock options already granted to calculate diluted loss per share: Consolidated and Company December, 2016 December, 2015 Profit attributable to shareholders 6,320 19,193 Weighted average number of shares into common shares of the Company outstanding 45,144 46,202 Adjustment due to stock option (note 16) 2,275 2,472 Weighted average number of common shares outstanding for diluted earnings per share. 47,419 48,674 Diluted earnings per share - R$ Net operating revenue Consolidated December, 2016 December, 2015 Revenue related to management fee 56,252 76,922 Taxes on revenues (i) (1,227) (1,671) 55,025 75,251 (i) Balance comprised of taxes on gross revenue (ISS, PIS and COFINS). Tarpon Funds follow the high water mark concept. Therefore, only the performance fee of Tarpon Funds is charged if the unit price on calculation date exceeds the unit price at the collection date if the last performance fee, i.e. the last high water mark, adjusted by profitability parameter. Consequently, the amount of revenues related to performance fees can significantly change on an annual basis based on: (i) fluctuations in the amount of the net assets of the portfolios of Tarpon Funds, (ii) the performance of portfolios compared to hurdle rates for each fund and (iii) performance of illiquid investments (since performance fees relating to these investments are charged only when the investment is made). No performance fee was recognized in 2016 and Gain or loss on financial assets measured at value through profit or Loss December 2016 Consolidated December 2015 December 2016 Company December 2015 Repurchase transactions 2,796 1, Gain (loss) on financial and derivatives instruments (a) (5,355) (5,378) - - Finance income on the monetary variation of judicial deposits (2,008) (3,653) (a) Refer to the net adjustment of the mark-to-market of swap contract made by the Company in the period. 25

27 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, Administrative expenses December 2016 Consolidated December 2015 December 2016 Company December 2015 Office maintenance 3,519 2, Outside services 4,028 3, Representation expenses 523 1, Depreciation and amortization Expenses on IT systems 1, 118 1, Expenses on fees and other contributions Other 598 1, ,728 11, Stok option plan The Company s shareholders approved a stock option plan on February 16, This Plan authorizes the grant of 13,724 thousand shares, whose terms, vesting conditions, maximum term of options granted and settlement method are described below. The Plan is designed to enable certain Company s management personnel and employees, as well as parties related to portfolio companies of Tarpon Funds or providing services to the Company, as decided by the Board of Directors, to acquire the Company s common shares, corresponding to up to 25% of the shares issued by the Company. Each option granted confers upon the participant the right to subscribe one Company s share. Of the total options granted under the Plan (a) up to 70% can be granted as from the Plan s effective date, (b) an additional volume of up to 7.5% can be granted as from July 1, 2009, (c) an additional volume of up to 7.5% can be granted as from July 1, 2010, (d) an additional volume of up to 7.5% can be granted as from July 1, 2011, and (e) an additional volume of up to 7.5% can be granted as from July 1, Options not granted on any grant date described above can be granted on subsequent grant dates. Options granted are exercisable, as follows: First portion of options granted on March 10, 2009, exercisable at the percentage rate of 20% on March 10, 2009, 20% on July 1, 2009 and 20% on each one of the three annual anniversaries subsequent to July 1, 2009; Second portion of options granted on March 10, 2009, exercisable at the percentage rate of 20% on July 1, 2009 and 20% on each one of the four annual anniversaries subsequent to July 1, 2009; and Options granted as from July 1, 2009, exercisable at the percentage rate of 20% on every July 1 of the five fiscal years subsequent to the respective grant date, except for those returned. The same rule is applicable to options granted as from July 1, 2010, July 1, 2011 and July 1, July 1,

28 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 Options granted and not exercised that are available for grant in case of termination of the respective holder can be granted again on any date through July 1, 2017, and these options will become exercisable at the percentage rate of 20% on each one of the five fiscal years subsequent to the respective grant date. If the current controlling shareholders case to collectively hold at least 30% of total shares on any time, all options granted under the plan will become immediately exercisable, among other events. Each portion of the plan options will expire on the fifth anniversary of the respective date in which it becomes exercisable. The exercise of the plan options is subject to the satisfaction of certain requirements by the option beneficiary on the respective option exercise date, which includes the requirement of maintenance of the beneficiary's employment relationship with the Company. In case of voluntary termination of the beneficiary's relationship with the Company, or termination without cause by the Company, any such beneficiary can exercise only that portion of exercisable options held by it, within a period of 30 days from such termination, and the options not exercised or exercisable will be again available for grant under the stock option plan. In case of termination of relationship with the Company by the Company, with cause, any such beneficiary will not be entitled to exercise any of the options received. In this case, all options not exercised or exercisable will be again available for grant under the stock option plan. The exercise price of each option grant corresponds to the higher of (i) R$5.60 per share (adjusted by dividends paid by the Company since the date of the Plan's initial approval up to the grant date of the respective option) and (ii) 75% of the share price on the trading session prior to the grant date. The option exercise price will be reduced by dividends paid by the Company up to the limit of the higher of R$2.53 per share or 45% of the share price on the date prior to the grant of the respective option. The option exercise price should be paid in full by the participant in cash. No participant can sell the shares acquired over a period of 12 months counted from the exercise date of the respective option. Each grant (consolidated) made is described below: Grant Date Quantity Granted Returned Exercised Fair value on grant date Cost grant Quantity Value Quantity Average price Value Outstanding as of December 31, 2016 Quantity Exercise Price 1º 10/03/2009 6,894 0,39 2,668 (132) (51) (6,762) 2,59 (17,534) º 10/03/ , (106) (41) (662) 2,59 (1,716) º 30/11/2009 2,493 4,08 10,180 (384) (1,568) (1,923) 3,06 (5,884) 186 3, º 19/02/ ,62 2,449 (184) (850) (325) 3,38 (1,098) 21 3, º 18/08/2010 1,115 6,72 7,491 (299) (2,009) (684) 5,55 (3,797) 132 5, º 05/08/ ,07 7,745 (326) (2,630) (257) 8,73 (2,245) 377 8,75 3,300 7º 09/08/ ,51 3,645 (312) (2,031) (78) 8,99 (701) 170 7,02 1,193 8º 20/09/ , , º 10/10/2013 1,192 8,15 9, ,192 10,22 12,179 10º 03/03/ , ,57 1,112 Total 14,709 45,385 (1,743) (9,180) (10,691) (32,975) 2,275 19,495 Value 27

29 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 With respect to the balances recognized in line item stock option plan, both in equity and profit or loss (consolidated): In R$ thousands Consolidated and Company December December Stock option plan - Profit or loss 1,786 3,164 Exercised - Transfer from reserve account (964) (118) Exercised - Amount paid by exercise The Stock Option Plan is analyzed using a binomial tree model, which was applied on each grant date considering market parameters. The following assumptions have been adopted on each grant date: March 10, 2009 (*) November 30, 2009 February 19, 2010 August 19, 2010 August 8, 2011 August 9, 2012 September 20, 2012 October 10, 2013 March 3, 2015 Annual average volatility 70% 34% 28% 23% 20% 24% 20% 19% 27% Stock price Exercise price of plan options under the program Risk-free interest rate 13.00% 8.75% 8.63% 10.75% 11.90% 10.15% 9.10% 11.78% 13.00% Expected dividends % 6% 6% 6% 6% (*) As of the date hereof, the shares issued by Tarpon Investimentos S.A were not traded on BM&FBovespa. Ibovespa indices and the Tarpon stock trading price (TRPN3), during the periods in which options were granted, were used to determine expected volatility, among other parameters. 17 Statement of income tax and social contribution calculation Reconciliation of tax rate Taxable income regime Consolidated Company Calculation basis December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Profit before income tax and social contribution 11,282 27,067 6,320 19,193 Income tax and social contribution based on prevailing tax rates (3,836) (9,203) (2,149) (6,526) Share of profits of subsidiaries - - 2,598 6,824 Nondeductional provision Stock option (607) (1,076) - - Nondeductional provision bonus (2,123) (2,801) - - Difference of mark-to-market of derivative instruments (1,446) (1,830) - - Effect from estimated income tax regime Tarpon Gestora 3,385 7, Other addition (deductions) (148) (425) (449) (298) Total (4,775) (7,874) - - Deferred tax (187) Income tax and social contribution expenses of the year (4,962) (7,874)

30 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 a. Recoverable taxes Recoverable taxes are comprised of the Company s and subsidiaries offsettable tax credits, as follows: December 2016 Consolidated December 2015 December 2016 Company December 2015 Income tax and social contribution retained PIS/COFINS retained IRRF levied on financial asset 1,180 1,161 1,128 1,150 Foreign tax credit Advance current Income tax and social contribution 2,252 6, Other ,867 7,801 1,354 1, Provision for Tax, Civil, Labor and escrow deposits a) Escrow deposits The Company recognizes on a monthly basis ISS amounts due which have been paid through escrow deposits. Nature of litigation Provision for ISS payable - R$ Escrow Deposit - R$ Appeal filed for non-collection of ISS 3,510 3,510 b) Contingent Taxes The table below shows the variation in contingent liabilities assessed as probable loss: Opening balance - December ,916 Recognition of provision 1,043 Adjustment 551 Balance as of December 31, ,510 (i) No lawsuit assessed as probable loss was started in the year ended December 31, Risks assessed as possible losses In June 2010, the Company offset PIS/COFINS (taxes on revenues) which had beed overpaid. However, the Federal Revenue Service disallowed such offset and the Company currently claims its authorization. Based on the Company s legal counsel s opinion, the likelihood of loss is assessed as possible, in the amount of R$208 (R$275, adjusted for inflation through December 31, 2016). Additionally, the Company is exposed to certain contingent liabilities of tax nature, related to tax deficiency notices issued by the Federal Revenue Service in April 2014, whose likelihood of loss, based on the opinion of the Company s legal counsel, is assessed as possible: Stock option plan: tax deficiency notice in the amount of R$13,692 (R$16,321 updated until December 31, 2016) relating to social security contributions allegedly levied on the Company s stock option plan. The tax authorities considered that the plan would have a partially compensatory nature, thus giving rise to the levy of social security contributions. 29

31 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, 2016 Profit sharing program (PLR): tax deficiency notices in the amounts of R$11,725 and R$9,061 (R$13,973 and R$10,871 updated until December 31, 2016), relating to alleged social security debts and IRPJ, respectively, concerning the payment of profit sharing to certain Company s employees in calendar years 2009 to The tax deficiency notices established that some of the payments made under the PLR would have compensatory nature and, therefore, would not be entitled to the exemption from social security contributions and should have been added to the Company s taxable income calculation basis. The Company s management are challenging these tax deficiency notices. Since the likelihood of loss is assessed as possible, no provision was recognized by the Company. 19 Related parties The main asset and liability balances as at December 31, 2016 and December 31, 2015, as well as intercompany transactions that impacted profit or loss for the year then ended, arise from transactions between the Company and its key management personnel Consolidated and Company Assets/(Liabilities/ Income (expense) Equity) December 2016 December 2015 December 2016 December 2015 Dividends paid (1,314) (2,817) - - Mandatory dividends (1,576) (4,796) - - Proposed additional dividends (3,462) Short-term benefits to Management (*) - - (13,349) (12,744) Stock option plan to Management (**) (12,374) (9,269) (1,104) (1,497) (*) Key management personnel are not entitled to any postemployment benefits, other long-term benefits and severance benefits. (**) Includes executive officers, amounting to R$811 and controlling shareholders amounting to R$293. See stock option plan in note 16. There is a balance of R$9,400 (note 21), Company, relating to loans between the Company and its subsidiary Tarpon Gestora de Recursos S.A., without interested and maturity of up to two years. 20 Other Assets The breakdown of this line item is as follows: Consolidated Company December 2016 December 2015 December 2016 December 2015 Advances to suppliers / employees Amounts refundable by the Funds 4,213 5, Other ,200 5, Accounts payable As at December 31, 2016, accounts payable are comprised of the following: Consolidated Company December 2016 December 2015 December 2016 December 2015 Intragroup loans (a) - - 9,400 9,400 Suppliers and leases Services provided Other ,437 9,541 9,514 (a) see note 19 30

32 Tarpon Investimentos S.A. f and consolidated financial statements ended December 31, Taxes payable Taxes payable are comprised of Company s and third partie s taxes. Consolidated Company December 2016 December 2015 December 2016 December 2015 Income tax and social contribution 1,638 2, PIS/COFINS (taxes on revenue) Service tax (ISS)/Tax on financial transactions (IOF) Taxes withheld on third partie s payments Foreign taxes ,152 2, Payroll and related taxes Payroll and related taxes are comprised of taxes on salaries, accrued vacation, 13 th salary, profit sharing, and bonuses. As at December 31, 2016, the balances were: R$1,600, consolidated (at December 31, 2015, R$1,912, consolidated) and individual as at December 31, 2016, the balances were R$19 (at December 31, 2015, R$0). As at December 31, 2016 and 2015, personnel expenses, in the amounts of R$ consolidated and R$129 individual (December 31, 2016 R$ consolidated and R$136 individual), are comprised of compensation, payroll taxes, profit sharing, and bonuses. * * * Executive Board Chief Executive Officer José Carlos Reis de Magalhães Neto Accountant Ricardo Gusmão de Rezende CRC 1SP SPO-0731-Notas.docx 31

33 Management Report São Paulo - SP, As of February 23, Tarpon Investimentos S.A. ( Tarpon or the Company ), through its subsidiaries, conducts public and private equity investment activity through funds and managed accounts under its management ( Tarpon Funds ). The release was issued in accordance with accounting practices adopted in Brazil and with the IFRS. 4Q16 Highlights STOCK MARKET Ticker: TRPN3 O/S: stocks Stock Price (22/02/2016): R$ 5.09 Market Cap: R$ million Daily Volume LTM: 19.7k stocks Assets under management: R$ 5.8 billion in the portfolio funds strategies and R$ 2.4 billion in the co-investment strategy, amounting R$ 8.1 billion of assets under management. Portfolio Funds performance: Strategy 4Q16 12 Months Long Only Equity (R$) -13.0% -18.4% Long Only Equity (US$) -13.1% -4.6% Hybrid Equity (R$) -7.1% -10.1% Hybrid Equity (US$) -5.0% 9.2% Ibovespa (R$) 3.2% 38.9% IBrX (R$) 2.5% 36.7% Subscription and Redemptions: Funds registered net redemptions of R$ 197 million in the portfolio strategy during the quarter. There was no subscription or redemption in the co investment funds. IR contact Phone: +55 (11) ri@tarpon.com.br Visit our IR website: Performance: Negative performance of R$ 421 million in the portfolio funds and negative performance of R$ 180 million in the co-investment funds. Gross Revenue: Management fee amounted to R$ 14.0 million in 4Q16 and R$ 56.3 in Net Income: R$ 5.5 million in 4Q16 and R$ 6.3 million in Tarpon Investimentos S.A. Page 1 of 14

34 Management Report About Tarpon Investimentos Through its subsidiaries, Tarpon carries out the management of funds dedicated to investments in public and private companies, with the objective of achieving absolute longterm returns above the market. Our business model is focused on generating value in the companies in the long term, and our main investments involve controlling interests or as a relevant shareholder of such companies, with participation in their management. Within this model, we highlight our investments in BRF, Somos Educação, Omega Energia Renovável and Cremer. In addition, we manage a portfolio dedicated to investments in the stock exchange, focusing on opportunities whose market value is substantially lower than our perception of intrinsic value. Market Overview The investment funds under our management invest in public and private companies. In the domestic scenario, the most important event in 2016 was the vote in the congress and in the federal senate of the impeachment of former President Dilma resulting in the permanent removal of the President and the start of the Vice President Michel Temer s government. The market reacted positively to the new government and its economic team, which presented projects to reform the country, including the cuts in expenses program and social security. During the last quarter of 2016, the Central Bank of Brazil evaluated that the economic indicators are still below expectations and that the recovery of growth should be slow. On the other hand, inflation was more favorable than expected, indicating a lower persistence in the inflationary process. The Brazilian inflation index (IPCA) reached 6.3% in 2016, below the target ceiling of 6.5%. In this context, the monetary policy committee decided to reduce the interest rate in November to 13.75% per annum and later in January to 13% per annum. In the external scenario, there is great uncertainty, mainly due to the changes in the policies of the United States, provided by the new elected President Donald Trump. In 2016, the Ibovespa, the main performance indicator of Brazilian stocks, increased %. In the same period, the US S&P 500 and Dow Jones indexes rose +9.54% and %, respectively, and the European Stoxx 600 index rose +1.20%. In the case of the Tarpon invested companies listed on BM&F Bovespa, we observed negative performance of BRF (-10.47%), Somos Educação (-42.49%) and Cremer (-50.86%) and Marisa had a positive performance during the period (+22.89%). Tarpon Investimentos S.A. Page 2 of 14

35 Management Report Investment strategy We conduct our asset management activities through two main investment strategies: Portfolio Funds, divided in Long-Only Equity and Hybrid Equity and Co Investment Fund. In the chart below we present the AuM breakdown between strategies: AuM Investment Strategy (%) Long-Only 2% 29% Co-Investment Hybrid 69% Portfolio Funds The investment strategy at portfolio funds comprises fund that invest only in public company shares listed on stock exchange (Long-Only Equity) and funds held concurrently stock market investments and illiquid investments/private equity (Hybrid Equity). As of December 31 st 2016, the AuM allocated to this strategy amounted R$ 5.8 billion. Approximately 84% of assets portfolio funds belong to the family funds Tarpon Partners, whose terms of liquidity are more restrictive than the other portfolio funds. The investor Tarpon Partner can redeem quarterly to 1/12 of the balance of net investments, so that period of payment of a full redemption will be in three years. The illiquid investments may be held by the fund for an indefinite period, obligating Tarpon to do a public offering or transfer each illiquid investment/private equity to the stock investment account until the 8 th anniversary (with extensions) of the respective investment. Co-Investment Strategies The co-investment strategy consists of funds with the purpose to invest in specific opportunities along other Tarpon Funds, either in the stock market, or in private equity. The strategy of these funds is to invest in companies in which the portfolio funds already have exposure considered ideal, allowing us to increase the participation in certain invested Companies. As of December 31 st 2016, the AuM allocated to the co-investment strategy amounted to R$ 2.4 billion. From that amount, 81% is not subject to management fees. Performance fees are payable only on divestment. Tarpon Investimentos S.A. Page 3 of 14

36 Management Report Investment performance In 4Q16, the Portfolio Funds Long-Only Equity strategy posted net returns of -13.0% in R$ and -13.1% in US$. The accumulated annualized returns of this strategy, net of taxes and expenses, is 19.1% in R$ and 14.0% in US$. The Portfolio Funds Hybrid-Equity (Stock Exchange and Illiquid Investments) strategy posted net returns of -7.1% in R$ and -5.0% in US$ during the year. Net annualized performance is -1.0% in R$ and 5.6% in US$ since launch. For illustrative purposes, during the year, Ibovespa and IBrX Indexes posted returns of 3.2% and 2.5%, respectively (both in R$). Returns in US$ were 2.8% and 2.1% for Ibovespa and IBrX, respectively: Performance¹ Strategy Launch 4Q16 YTD LTM 2 years 5 years Since Launch (annualized) Long Only Equity (R$) may % -18.4% -18.4% -29.7% -13.3% 19.1% Long Only Equity (US$) may % -4.6% -4.6% -43.8% -51.5% 14.0% Hybrid Equity (R$) Sept % -10.1% -10.1% -20.8% -5.7% -1.0% Hybrid Equity (US$) Oct % 9.2% 9.2% -37.3% -48.2% 5.6% Stock Market Index 4Q16 YTD LTM 2 years 5 years Since Launch (annualized) Ibovespa (R$) 3.2% 38.9% 38.9% 20.4% 6.1% 11.2% IBrX (R$) 2.5% 36.7% 36.7% 19.7% 25.8% 14.6% Ibovespa (US$) 2.8% 66.5% 66.5% -1.8% -38.9% 9.2% IBrX (US$) 2.1% 63.8% 63.8% -2.4% -27.6% 12.6% (1) Performance net of fees. Tarpon Investimentos S.A. Page 4 of 14

37 Management Report Assets under management Our assets under management ( AuM ) amounted to R$ 8.1 billion as of December 31 st, 2016, a decrease of 15.9% when compared to the same period of the prior year due, mainly, to the negative performance of Tarpon funds. AuM Evolution - Annual (R$ MM) AuM Evolution - Quarter (R$ MM) 8, ,564 1,954 9,688 2,831 8,147 2,389 9,688 2,831 8,000 2,265 8,945 2,569 8,147 2, % 8,248 8,610 6,857 5,757 6,857 5,735 6,376 5, Q15 2Q16 3Q16 4Q16 Co Invest Portfolio On December 31 st, 2016, the AuM amount allocated on public stock investment/illiquid represented 58.5% of the total invested capital. Investment in private equity/illiquid, at market value, amounted 41.5% of the total assets. Find below the AuM evolution for the Portfolio Funds and the Co-Investment Funds. The Portfolio Funds, for 4Q16, registered net redemptions of R$ million and gross negative performance of R$ million. AuM Evolution Portfolio - Quarter (R$ MM) 6,857 (49) (639) 6,169 (69) (365) 5,735 (135) 776 6,376 (197) (421) 5,757 4Q15 Net Performance Subscription 1Q16 Net Performance Subscription 2Q16 Net Performance Subscription 3Q16 Net Performance Subscription 4Q16 Tarpon Investimentos S.A. Page 5 of 14

38 Management Report There was no redemption or subscription in the Co-Investment Fund s during 4Q16. The funds registered gross negative performance of R$ 180 million during the quarter. AuM Evolution Co Investment - Quarter (R$ MM) 2,831 (13) (434) 2,384 (3) (116) 2,265 (11) 315 2,569 0 (180) 2,389 4Q15 Net Performance Subscription 1Q16 Net Performance 2Q16 Net Performance 3Q16 Net Performance 4Q16 Subscription Subscription Subscription Investor base As of December 31 st 2016, institutional investors, mainly endowments, foundations, pension funds and sovereign wealth funds, accounted for 80.0% of total AuM. The invested proprietary capital represented 8.4% of total assets. AuM by Region (%) AuM Investor Type (%) 27% 12% 8% 6% 13% 55% 18% 62% Americas (exbr) BR Europe Asia & Middle East Sovereign Welth Funds & Pension Plans Endownments Non Institutional Funds Proprietary Capital Tarpon Investimentos S.A. Page 6 of 14

39 Management Report Financial Highlights Operating revenues Operating revenues are composed of revenues related to management fees recurring income flow based on the Tarpon Funds net asset value and revenues related to performance fees income flow with higher volatility based on the performance of the Tarpon Funds. During the 4Q16, total operating revenues amounted R$ 14.0 million and R$ 56.3 million 2016, a decrease of 23.6% when compared to 4Q15 and a decrease of 26.7% when compared to Operating Revenues (R$ MM) % % Q15 3Q16 4Q Performance Management Performance Management Revenues related to management fees Management fees are charged on the Tarpon Funds based on the amount of invested capital. Gross revenues related to management fees amounted to R$ 14.0 million in 4Q16 and R$56.3 million in 2016, equivalent to 100% of the operating revenues of the period. Revenues related to performance fees Performance fees are payable when the Tarpon Funds performance exceeds certain hurdle rates. The hurdles primarily are inflation index plus 6.0% per year. The performance fees are subject to a high water mark, which means that such fees are charged only if the net asset value (NAV) of the fund exceeds the NAV of the previous performance fee collection date, adjusted by the hurdle rate. Tarpon Investimentos S.A. Page 7 of 14

40 Management Report The Tarpon funds are entitled to collect performance fees on distinct dates. Below is the current distribution of our AuM by performance collection period: Distribution of the performance fee collection (% AuM) Bi Anual 4Q Upon Divestment Annual 4Q Annual 2Q Every two years 2Q Semiannual 1Q and 3Q Semiannual 2Q and 4Q Every two years 3Q There was no performance fee during Operating expenses Operating expenses is comprised of general and administrative expenses, payroll, and other expenses related to depreciation, travel expenses, provisions for profit sharing program, stock option plans (with no cash effect) and variable remuneration. In 4Q16, operating expenses totaled R$ 7.7 million, a decrease of 10% when compared to the same period of Operating expenses totaled R$ 41.8 million in Operating Expenses % Q15 Recurring 3Q16 4Q16 Tarpon Investimentos S.A. Page 8 of 14

41 Management Report Taxes Income taxes and social contribution amounted to R$ 1.4 million in 4Q16 and to R$ 5.0 million in Net Income Tarpon registered a net income of R$ 5.5 million in the 4Q16 and R$ 6.3 million in Net Income (R$ MM) Q15 3Q16 4Q Tarpon Investimentos S.A. Page 9 of 14

42 Management Report Corporate Governance Our shares are traded on the Novo Mercado segment of BM&FBOVESPA under the ticker TRPN3. Tarpon has Fiscal Counsel and Audit Committee. Considering the publication date price of R$ 5.09, the company s market value is R$ million IBOV 50.0 TRPN Feb-16 Apr-16 Jun-16 Jul-16 Sep-16 Oct-16 Dec-16 Feb-17 Tarpon Investimentos S.A. Page 10 of 14

43 Management Report Attachments - Reports Consolidated Income Statement Financial highlights - R$ million Income Statement 4Q16 4Q15 Var.% Var.% Gross revenues % % Management fees % % Net revenues % % Operating Expenses General administration, payroll & others (7.7) (8.6) -10% (41.8) (44.5) -6% Net Income after Operating Expenses % % Gross margin 44% 52% 24% 41% Finance Income 0.9 (2.9) -129% (2.0) (3.7) -45% Income tax and social contribution (1.4) (1.9) -26% (5.0) (7.9) -37% Net Income % % Net margin 40% 25% 11% 26% Earnings per share (R$/share) % % O/S 44,115 46,040-4% 44,115 46,040-4% AuM (end of period) 8,147 9,688-16% 8,147 9,688-16% Tarpon Investimentos S.A. Page 11 of 14

44 Management Report Consolidated Balance Sheet Financial highlights - R$ thousands Assets Cash and cash equivalents 25,742 34,740 Financial assets measured at fair value through profit and loss 18,982 23,223 Receivables Recoverable taxes 3,867 7,801 Other assets 5,200 5,971 Current assets 54,186 72,474 Fixed Assets Intangible Assets Non-current assets 625 1,106 Total assets 54,811 73,580 Liabilities Accounts payable 648 1,437 Financial assets derivatives 456 3,057 Current tax liabilities 2,152 2,881 Payroll accruals and Dividends payable 3,176 3,891 Current liabilities 6,432 11,266 Deferred Tax Non-current liabilities Share capital 7,085 7,016 Capital reserve 1, Legal reserve 1,415 1,401 Profit reserve 1,268 14,391 Cumulative translation adjustment 12,236 18,586 Stock options 20,758 19,935 Additional dividends proposed 3,462 - Equity 48,192 62,314 Total liabilities and equity 54,811 73,580 Tarpon Investimentos S.A. Page 12 of 14

45 Consolidated Cash Flow Management Report Financial highlights - R$ thousands Cash Flow Net income / (Loss) 6,320 19,193 Depreciation Stock Options 1,785 3,163 Deffered Tax Derivatives 456 5,378 Income Tax and Social Contribution Provision 4,775 7,874 Adjusted net income 14,017 36,208 Receivables (742) 1,452 Other Assets and Liabilities 771 (1,926) Taxes 4,459 (5,898) Accounts Payable (789) 731 Payroll Accruals and Dividends payable (312) 219 Derivative Financial Instrument (3,057) (4,367) Income tax and social contribution paid (6,253) (6,036) Cash used/provided by operating activities 8,094 20,384 Disposal of financial assets at fair value through income 4,241 (7,585) (Acquisitions)/write-off in intangible assets (53) (129) Cash provided by investing activities 4,188 (7,714) Dividends paid (1,979) (14,020) Capital Raise/Exercise of stock option plan Purchase of treasure shares (15,010) (5,570) Cash used in financing activities (16,282) (19,310) Net decrease in cash and cash equivalents (4,000) (6,640) - Cash and cash equivalents at the beginning of period 34,740 32,309 Exchange rate changes on cash and cash equivalents (4,998) 9,071 Cash and cash equivalents at the end of period 25,742 34,740 Tarpon Investimentos S.A. Page 13 of 14

46 Management Report Contact: Tarpon Investimentos S.A. Phone.: +55 (11) Disclaimer This document may contain forward-looking statements. Such forward-looking statements are and will be subject to many risks and uncertainties relating to factors that are beyond the Company s ability to control or estimate precisely, such as future market conditions, competitive environment, currency and inflation fluctuations, changes in governmental and regulatory policies and other factors relating to the operations of the Company, which may cause actual future results of the Company to differ materially from those expressed or implied in such forward-looking statements. The readers are advised not to make decisions exclusively on the basis of these projections and estimates. The projections and estimates do not represent and should not be interpreted as guarantees of future performance. The Company does not undertake to publish any revisions and does not undertake to update the projections and estimates with regards to any future events or circumstances that may occur after the date of this document. This document may contain operational information and other information that are not derived from the financial reporting of the Company. Such data has not been subject to any revision by the independent auditors of the Company and may involve management s estimates and assumptions. This document does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Tarpon Investimentos S.A. Page 14 of 14