Management Message. São Paulo, September 1 st, Dear Shareholder,

Transcription

1 Management Message São Paulo, September 1 st, Dear Shareholder, In the light of the Call Notice published on the date hereof, in reference to the Ordinary and Extraordinary Shareholders Meeting, we would like to underscore the importance of your participation in said meetings, which will be held on October 2 nd, It is extremely important that we are able to decide the following at the aforementioned Ordinary and Extraordinary Shareholders Meeting: (1) at the Annual Ordinary Meeting: (1.1.) to examine the management accounts, analyze, discuss and vote on the Company s Financial Statements related to the fiscal year ended on June 30 th, 2017, including the Independent Auditors opinion and the Fiscal Council Report; (1.2.) to resolve on the allocation of the financial result of the fiscal year ended on June 30 th, 2017 and the distribution of dividends; (1.3.) the determination of the number of the members to comprise the Company s Board of Directors, as well as (i) the reelection of Messrs. Eduardo S. Elsztain, Alejandro G. Elsztain, Saul Zang, João de Almeida Sampaio Filho, Isaac Selim Sutton, Fabio Schuler de Medeiros and Ricardo de Santos Freitas for sitting members of the Company s Board of Directors; (ii) election of Messrs. Carlos Blousson and Alejandro Casaretto to the positions of sitting members of the Board of Directors; and (iii) the election of Messrs. Carolina Zang and Gastón Armando Lernoud to the positions of first and second alternate members of the Board of Directors, respectively; (1.4) the reelection of Messrs. Fabiano Nunes Ferrari, Ivan Luvisotto Alexandre and Débora de Souza Morsch for sitting members of the Company s Fiscal Council, as well as the reelection of Mrs. Daniela Gadben and the election of Messrs. Marcos Paulo Passoni and Luciana Terezinha Simão Villela for alternate members of the Company s Fiscal Council; (1.5) to establish the Company s management annual overall compensation for the fiscal year initiated on July 1 st, 2017; and, (2) at the Extraordinary Meeting: (2.1.) to resolve on the Company s proposal for Long-term Incentive Plan in Shares ( LTI Plan ), as provided for in article 20, item X, of the Company s Bylaws, in substitution to the Stock Option Plan approved at the Extraordinary General Meeting held on November 14, 2008, which shall be canceled upon approval of the LTI Plan. Precisely for this purpose, and by means hereof, we hereby provide you with following supplemental and clarificatory information regarding the matters on the agendas for the Ordinary and Extraordinary Meeting to be held on October 2 nd, 2017, as follows: 1. At Annual Ordinary Meeting: (1.1) Financial Statements. The Management of Brasilagro recommends that you vote in favor of approving the Management Report and the Financial Statements along with the independent auditors and the Fiscal Council s reports for the year ended June 30, 2017, which are available on the websites of the Company ( the São Paulo Stock Securities, Commodities and Futures Exchange BM&FBOVESPA ( and the Brazilian Securities and Exchange Commission CVM ( (1.2) Allocation of the financial result for the fiscal year ended June 30, The Management of BrasilAgro recommends that you vote to approve the proposal to allocate the net income booked for the fiscal year ended June 30, 2017, as follows: Net Profit at Year-End (after IR and CSLL deductions): R$ 27,309,809.81

2 (-) Accumulated losses: Net Income for the Year: R$ 27,309, (-) Legal Reserve (5%): (R$ 1,365,490.49) Adjusted Net Income: R$ 25,944, Compulsory Dividends (25%): Proposed Additional Dividends (25%) (R$ 6,486,079.83) (R$ 6,486,079.83) Reserve for Investment and Expansion (50%): (R$ 12,972,159.66) LEGAL RESERVE: Pursuant to article 193 of Law 6,404/76, five per cent (5%) of Net Income, in the amount of one million, three hundred and sixty-five thousand, four hundred and ninety Brazilian Reais and forty-nine cents (R$ 1,365,490.49) shall be allocated to the constitution of Legal Reserve. DIVIDENDS: Pursuant to article 36 of the Company s Bylaws and to Article 202 of Law 6,404/76, the shareholders holding common shares issued by the Company, shall be paid dividends in the total amount of twelve million, nine hundred seventy-two thousand, one hundred and fifty-nine Brazilian Reais and sixty-six cents (R$ 12,972,159.66), corresponding to twenty-four cents (R$0.24) per share on The payment of dividends shall be carried out in up to thirty (30) days counted as of the date of their statement. The dividends shall be paid to those holding shareholding position at the Company at the end of the date on which the Annual Shareholders' Ordinary Meeting approving the financial statements for the fiscal year ended on is held, it being understood that, as of the following day, the Company s shares shall be traded ex dividends. RESERVE FOR INVESTMENT AND EXPANSION: The outstanding balance of the Adjusted Net Income, pursuant to article 36, subparagraph (c), of the Company s By Laws, in the amount of twelve million, nine hundred seventy-two thousand, one hundred and fifty-nine Brazilian Reais and sixty-six cents (R$ 12,972,159.66), shall be allocated to the Reserve for Investment and Expansion, whose purpose is the carrying out of investments for development of the Company s activities, investments in properties and in the acquisition of new properties aiming at the expansion of the Company s activities, in addition to investments in infrastructure for expansion of the Company s production capacity. The Reserve for Investment and Expansion may be used to back the acquisition by the Company the shares of its own issuance, subject to the terms and conditions of the repurchase program of shares approved by the Board of Directors. We would also like to mention that the currently proposed allocation is clearly reflected in the Financial Statements drafted by the Company s management, which have already been widely disclosed as required by applicable legislation Determination of the number of members to comprise the Company s Board of Directors, and the election of respective sitting members and alternate members of the Board of Directors.The Management of Brasilagro recommends that the Board of Directors shall consist of nine (9) members, as well as its shareholders vote in favor of (i) the reelection of Messrs. Eduardo S. Elsztain, Alejandro G. Elsztain, Saul Zang, João de Almeida Sampaio Filho, Isaac Selim Sutton, Fabio Schuler de Medeiros and Ricardo de Santos Freitas, to the positions of sitting members of the Board of Directors; (ii) election of Messrs. Carlos Blousson and Alejandro Casaretto to the positions of sitting members of the Board of Directors; and (iii) the election of Messrs. Carolina Zang and Gastón Armando Lernoud to the positions of first and second alternate members of the Board of Directors, respectively, as originally proposed, for unified mandates to end at the Annual Ordinary General Meeting that approves the financial statements related to the Fiscal year ending June 30, 2019.

3 1.4. Reelection of the sitting members and alternate members of the Company's Fiscal Council, as well as the annual global compensation of the elected members. The Management of Brasilagro recommends that its shareholders vote in favor of the re-election of Messrs Fabiano Nunes Ferrari, Ivan Luvisotto Alexandre and Débora de Souza Morsch for the positions of sitting members of the Fiscal Council, as well as Marcos Paulo Passoni, Daniela Gadben and Luciana Terezinha Simão Villela for the positions of alternate members of the Fiscal Council, for unified mandates that shall end at the Annual Ordinary General Meeting that approves the financial statements related to the fiscal year ending June 30, The Management of Brasilagro further recommends that the compensation of the sitting members of the Fiscal Council of the Company is equivalent to ten percent (10%) of that which, on average, is ascribed to each director, not including benefits, representation fees and profit sharing, besides mandatory reimbursement of travel and accommodation expenses required for the performance of their duties, as set forth in Law 6.404/ Management s Compensation. The Management of BrasilAgro recommends that the annual global compensation of the Company s managers for the fiscal year started on July 1, 2017, is established at up to eleven million Brazilian Reais (R$11,000,000.00), including all benefits and any amounts for representation, with Board of Directors having authority to subsequently set the individual amounts to be paid to each director, taking into consideration their duties, abilities, professional reputation and the market value of their services. 2. At Extraordinary Meeting: 2.1. Long-term Incentive Plan in Shares ( LTI Plan ). The Management of Brasilagro recommends the approval, by the Shareholders, of the Company's proposed Long-Term Incentive Plan ( LTI Plan ) presented by the Company at the meeting of the Board of Directors held on August 29, 2017, in substitution to the Stock Option Plan approved at the Company's Extraordinary General Meeting held on November 14, 2008, to be canceled in the same act of approval by the Shareholders of the LTI Plan. A version of the aforementioned Plan is available at the Company website ( The Meeting Call Notice in reference to the Ordinary and Extraordinary General Meeting to be held on October 2 nd, 2017, can also be viewed on the websites of the Company ( the São Paulo Stock Securities, Commodities and Futures Exchange BM&FBOVESPA ( and the Brazilian Securities and Exchange Commission CVM ( As a shareholder, you may exercise your right to vote at the above-mentioned General Ordinary and Extraordinary Shareholders Meeting by appearing in person at the headquarters of BrasilAgro Companhia Brasileira de Propriedades Agrícolas, located at Avenida Faria Lima No 1.309, fifth floor, São Paulo, at 2.30 p.m. on October 2 nd, 2017, or by means of a duly designated legal proxy.

4 If you have any questions or concerns, please contact us by phone at (55-11) or by at André Guillaumon Chief Executive Officer Gustavo Javier Lopez Investor Relations Officer Eduardo S. Elsztain Chairman of the Board of Directors

5 Supplementary Documents We present below the supplementary documents for the analysis of matters included in the agenda of the Meeting to be held on October 02, Annex I Management Comments on the Company s Financial Position, pursuant to item 10 of the Reference Form. Annex II Information pointed out in item 13 of the Reference Form, due to the proposal on the determination of the Company s management compensation. Annex III Information pointed out in annex 9-1-II to CVM Instruction 481, due to the proposal on the allocation of net income for the year ended June 30, 2017 and the distribution of dividends. Annex IV Information pointed out in items 12.5 to of the Reference Form, due to the proposal on the election of the members (members and alternate members) of the Board of Directors and Fiscal Council of the Company. Annex V Possible scenarios for electing members to the Board of Directors. Annex VI - Copy of the Company's proposed Long-Term Incentive Plan ("ILPA Plan") presented by the Company at the meeting of the Board of Directors held on August 29, It is available at the Company s site ( and at CVM site ( the Form of Standardized Financial Statements, comprising: Management Report Financial Statements Independent Auditors Report Fiscal Council Opinion

6 Annex I Management s Analysis and Discussion on the Financial Condition and Operating Results 10.1 General financial and equity positions The assessment and opinions herein reflect our Officers vision and perception regarding our activities, business and performance. The values included in this section 10.1 have been extracted from our consolidated financial statements relating to fiscal years ended June 30, 2017, 2016 and a. General financial and equity positions In the year ended June 30, 2017, of R$193.5 million, Net Income of R$27.3 million and Adjusted EBITDA of R$42.5 million, reflecting the period sale of 81,400 tons of grain (soybean and corn) and 1.0 million tons of sugarcane, and the financial result, which came to R$38.4 million. We reached significant achievements in the year. We acquired a property with 17,600 hectares in the state of Maranhão for R$100.0 million and sold more than R$40.3 million in farmland. In addition, we were able to achieve a strong operating performance, delivering results above previously budgeted estimates. The search for opportunities to increase the value of our properties is the main element of our strategy. We acquire rural properties that we believe have significant potential for generating value and the land transformation is the main mean of increasing the value of the properties. Since the beginning of operations in 2006, we have invested more than R$717.0 million in the acquisition and development of the portfolio and have carried out sales totaling R$540.0 million. This year, we hired the independent consulting firm Deloitte Touche Tohmatsu Consultores Ltda. to conduct an appraisal of our portfolio and on June 30, 2017, our properties were valued at R$1.4 billion (Brazil and Paraguay). Cost plus investments less accrued depreciation, on the same date, was R$491.2 million, including the investment in the Paraguayan property. On a broader analysis, we see the continuous growth of the Company s efficiency, under a solid management model, with a highly-qualified team that is committed to deliver results and seize opportunities to create value in order to continue to growth in a consistent manner. Main Financial Indicators Statement of Income ( thousands R$ ) Net Revenue 182, , ,744 Gross profit (loss) 47, ,076 Selling expenses (6,676) (2,732) (9,006) General and Administrative (30,921) (28,944) (29,360) Other operating income (expenses) (6,019) 2,812 (3,422) Financial income (loss) net 32,444 38,374 32,638 Equity pick-up (4,425) (511) (4,355) Profit (loss) before income and social contribution taxes 33,259 9, ,571 Income and social contribution taxes (5,949) (1,451) (9,761) Net income (loss) for the year 27,310 7, ,810

7 Adjusted EBITDA ( R$ mil ) Gross profit (loss) 47, ,076 Elimination of gains on biological assets (grains and sugarcane planted) 7, ,336 Selling expenses (6,676) (2,732) (9,006) General and Administrative (30,941) (28,944) (29,360) Other operating income (expenses) (6,019) 2,812 (3,422) Derivatives Results 10,882 (574) 6,080 Adjusted Depreciations (1) 20,421 22,333 22,909 EBITDA Cresca (2) 2,539 2,539 (705) Adjusted EBITDA 42,538 (3,868) 3,679 Main Operating Indicators Activity Harvest-Year 16/17 15/16 14/15 Total transformed area 5,117 6,600 9,400 Total harvested area 88,873 65,209 79,061 b. Capital structure and possibility of redemption of shares or quotas, indicating: Our Directors believe that our capital structure is appropriate to supply our needs, since our net equity was R$667.5 million at June 30, 2017, R$687.5 million at June 30, 2016 and R$752.1 million at June 30, At June 30, 2017, our capital structure comprised basically loans and financing with development banks and immediate liquidity financial investments, keeping the same capital structure for the year ended June 30, 2016 and The table below shows the development of our capital structure, separating into two essential elements (i) third party capital ; and (ii) own capital. As a consequence, we have an analysis of payment capacity of the long and short term liabilities, as well as it identifies the main capital source of our Company. Year ended (in thousands of R$) 06/30/ /30/ /30/2015 Third party capital (Current and long term liabilities) 215, , ,734 Own capital (Equity) 667, , ,106 Total Capital 883, ,002 1,017,840 Third party capital / Total capital 24% 20% 26% Own capital/total capital 76% 80% 74% i. Events of redemption and ii. Calculation formula of redemption amount There is no event of redemption of our shares issued, in addition to the ones legally forecast and, therefore, there is no calculation formula of the redemption amount c. Payment capacity in relation to the financial commitments assumed Our directors believe that we have payment capacity of our financial commitments for the next 12 months. We are in a comfortable position regarding our sources of financing for working capital and investments in expansion, mainly due to our ability to generate cash; the possibility to obtain funding from third parties and our financial debt profile.

8 At June 30, 2017, our cash and cash equivalents amounted to R$ 50.7 million and in the years ended June 30, 2016 and 2015, was, respectively, R$167.8 million and R$348.9 million. At the same dates, our short and long term loans and financing, corresponded to R$112.2 million, R$99.8 million and R$110.0 million, respectively. d. Financing sources for working capital and investments in non-current assets Our financial sources for working capital are basically our own cash generation and, possibly, funding from third parties. Regarding financing sources for investments in non-current assets, our Officers have considered the best alternatives to analyze the feasibility of third-party funding and own capital use. The decision was made based on the correlation between market rates and capital profitability. e. Financing sources for working capital and investments in non-current assets intended to use to cover liquidity deficiencies We intend to keep our debt profile preferring short and long term financing, with development banks and/or governmental development bodies, which provide costs more attractive than those practiced in the market as was kept in the years ended June 30, 2017, 2016 and In case of need, we may conduct other financial operations with Market financial institutions to strengthen our cash position. f. Indebtedness levels and their characteristics i. significant loans and financing contracts The table below shows our short and long term loans and financing in the years ended June 30, 2017, 2016 and Loans and Financing (R$ thousand) Short term Expiration Annual tax and charges - % 06/30/ /30/ /30/ /30/2015 Financing of Agricultural Cost nov-17 9,5 a 12, Bahia Project Financing dez-17 TJLP + 3,45 e 4,45 / SELIC + 3,45 / Pre 4,00 a 8, Working Capital jul-17 2,30% + 100% do CDI Working Capital (USD) ago-17 3,49% Financing of Machinery and Equipment jul-18 TJLP + 8, Financing of Sugarcane ago-17 TJLP + 2,70 e 12, Sugarcane Leasing - Parceria III nov-17 6,92% Long term Longo Prazo Financing of Sugarcane fev-20 TJLP + 2, Financing of Machinery and Equipment mai-22 TJLP + 3,73% Bahia Project Financing out-20 TJLP + 3,45 e 4,45 / SELIC + 3,45 / Pre 4,00 a 8, Sugarcane Leasing- Parceria III nov-18 6,92% Sugarcane Leasing- Parceria IV jan-32 R$/kg 0, Total ii. other long term relationships with financial institutions In the years ended June 30, 2017, 2016 and 2015,we had no other long term relationships with financial institutions, other than the ones already mentioned above.

9 iii. subordination degree between debts There is no contractual subordination degree between our unsecured liabilities. The debts guaranteed with real guarantee count on the preferences and prerogatives established in law. iv. possible restrictions imposed to the issuer, particularly, in relation to indebtedness limits and contracting of new debts, to the dividends distribution, to the disposal of assets, to the issue of new marketable securities and to the sale of corporate control. All loans and financing contracts above are in Reais and have specific terms and conditions defined in the respective contracts with governmental economic and development agencies that directly or indirectly grant those loans. At June 30, 2017, 2016 and 2015 the Company s financing had no financial covenants, but rather only operating clauses, on which the Company is not in default.

10 g. Limits for the use of already contracted financing In the years ended June 30, 2017, 2016 and 2015, once all the events forecast in the mentioned financial chronograms occurred, we used 100% of the resources available in the contracted loans and financing. h. Significant changes in each item of the financial statements The summary of our financial statements for the years ended June 30, 2017, 2016 and 2015, was extracted from our financial statements prepared under our management s responsibility, in accordance with the accounting practices adopted in Brazil. This financial information properly reflects the result of our operations and our financial and equity position in the related period and which have been audited by independent auditors, in accordance with the auditing standards applicable in Brazil. INCOME STATEMENT Consolidated Income Statement comparison of years ended June 30, 2017 and 2016 Income Statement (R$ thousand) 2017 AV 2017 (%) 2016 AV 2016 (%) AH 2016/2017 (%) Revenues from farm sale ,7% - 0,0% n.a Revenues from grains ,0% ,4% 13,3% Revenues from sugarcane ,5% ,0% -11,6% Revenues from leasing ,5% ,2% 24,8% Other revenues ,2% ,4% -48,8% Deductions from gross revenue (5.394) -2,9% (8.273) -4,5% -34,8% Net Sales Revenue ,0% ,0% 24,3% Change in fair value of biological assets and agricultural products ,7% (12.632) -6,9% n.a Impairment (1.655) -0,9% 659 0,4% n.a Net Revenue ,8% ,9% 43,2% Cost of farm sale (9.300) -5,1% - 0,0% n.a Cost of agricultural products sale ( ) -74,5% ( ) -73,6% 1,2% Gross Profit ,2% 441 0,2% 10756,2% Selling expenses (6.676) -3,6% (2.732) -1,5% 144,4% General and administrative expenses (30.941) -16,9% (28.944) -15,8% 6,9% Other operating income/expenses, net (6.019) -3,3% ,5% n.a Financial result, net ,3% ,0% -12,8% Financial income ,2% ,3% -42,9% Financial expenses (76.646) -41,9% ( ) -84,3% -50,3% Equity pick up (4.425) -2,4% (511) -0,3% 765,9% Profit (loss) before income and social contribution taxes ,2% ,2% 252,3% Income and social contribution taxes (5.949) -3,3% (1.451) -0,8% 310,0% Profit (loss) for the period ,9% ,4% 241,8% In the comments below, the percentage variations were computed based on balances expressed in millions of reais. The gross revenue increase 35.8 million, from R$147.1 million in the year ended June 30, 2016 to R$182.9 million in the year ended June 30, This decrease was mainly due to: i. Revenue from sale of soybean: the revenue from sale of soybean increased R$21.5 million, from R$41.7 million during the year ended June 30, 2016 (reflecting sales of 81,410 tons) to R$63.3 million in the year ended June 30, 2017 (reflecting sales of tons). This increase in the revenue from sale of grains is mainly due to the increase in the volume billed in the period; and ii. Revenue from sale of farm: for the year ended June 30, 2017, due to the sale of Araucária and Jatobá Farm in the amount of R $ 36.0 million.

11 Planted area Productivity Revenue (hectare) (tons) (thousands of R$ ) Grains 30,139 54,906 62,997 81,409 70,391 61,590 Sugarcane 29,698 10, ,384 1,075,183 73,658 83,628 Change in the fair value of biological assets and agricultural products The change in the fair value of biological assets and agricultural products decreased from a loss of R$12.6 million in the year ended June 30, 2016 to a profit of R$12.3 million in the year ended June 30, Gains or losses from the variation in the fair value of biological assets are determined by the difference between their fair value and their book value. Book value includes investments and costs effectively incurred until the moment of appraisal, as well as write-offs arising from the harvesting of the agricultural products. Harvested agricultural products are measured at their value at the time of harvest considering the market price of the area of each farm. Gains or losses from the variation in the fair value of agricultural products are determined by the difference between their harvested volume at market value (net of selling expenses and taxes) and the production costs incurred (direct and indirect costs, leasing and depreciation). (Impairment) reversal of impairment of net realizable value of post-harvest agricultural products Impairment to net realizable value of post-harvest agricultural products decreased from a gain of R$659 thousand in the year ended June 30, 2015 to a profit of R$1.7 million in the year ended June 30, Such variations result from the difference in the price of grains inventories at the harvest time until the closing of the related accounting period. Cost of sales The costs of sales increased R$1.7 million, to R$134.7 million in the year ended June 30, 2016, from R$136.4 million in the year ended June 30, 2017, mainly due to: i. Cost of grains sold: our average cost per ton of soybean sold increased by 46.9% year-over-year, from R$36.2 million, from the sale of 38,100 tons at R$948.5 per ton, to R$53.1 million, from the sale of 51,300 tons at R$1,036.6per ton. Our average cost per corn decreased by 65.4% year-over-year, from R$16.5 million, from the sale of 43,300 tons at R$382.0 per ton, to R$5.7 million from the sale of 11,700 tons at R$488.3 per ton. iii. Cost of sugarcane sold: our average cost per ton of sugarcane sold was R$70.3 per ton, from the sale of 1,075,183 tons at R$75.6 per ton in year ended in June 30, 2016 to R$86.1 million, from the sale of tons at R$74.5 per ton in year ended in June 30, Gross profit For the above mentioned reasons, in the year ended June 30, 2017 our gross profit was R$47.9 million, representing an increase of R$47.4 million when compared to R$441 thousand in the year ended June 30, 2017.

12 The change in gross profit is mainly attributed to: i. increase of 51.5% in the billing of soybean, which generated revenue of R$51.3 million and ii. Farm. increase of R$36.0 million in revenues from sales farm, referring to the sale of Araucária and Jatobá Selling expenses Selling expenses increased R$3.9 million, from R$2.7 million in the year ended June 30, 2016 to R$6.6 million in the year ended June 30,2017, mainly as a consequence of decrease of expenses with of freight, storage and processing reflects the decrease in the amount of grain sold in the period. General and administrative expenses General and administrative expenses increased R$1.9 million, from R$28.9 million in the year ended June 30, 2016 to R$30.9 million in the year ended June 30, (R$ thousand) 2017 AV 2017 (%) 2016 AV 2016 (%) AH 2016/2017 (%) General and administrative (30.941) -16,9% (28.944) -19,7% 6,9% Depreciations and amortizations (701) -0,4% (746) -0,4% -6,0% Personnel expenses (21.199) -11,6% (19.135) -10,5% 10,8% Expenses with services provider (3.772) -2,1% (2.975) -1,6% 26,8% Leases and Rents (728) -0,4% (788) -0,4% -7,6% Others sales (4.541) -2,5% (5.300) -2,9% -14,3% The increase of 6.9% in general and administrative expense is largely a result of expenses regarding the operation in Paraguay, which from 3Q17 have been consolidated to BrasilAgro. The 26.8% increase in expenses with service provision is mainly due to expenses with the independent appraisal report completed in 4Q17. Other expenses primarily refer to expenses with travel, telephone, building maintenance and systems, among others. Other Operating Revenue (Expenses), Net In FY16, we recognized other operating income of R$2.8 million, mainly referring to the discount obtained in the balance payable of the Alto Taquari Farm and lawsuits. In FY17, we recorded other operating expenses of R$6.0 million, mainly due to the management fee reversal of Cresca, totaling R$3.3 million and other expenses refer primarily to costs with termination incurred in the period, referring to the resignation of the CEO and payment of a fine of ICMS on undue credit in operations of use and consumption, fixed assets, diesel oil and agricultural inputs. Equity pick-up we recognized a loss of R$4.4 million in the year ended June 30, 2017 related to expenses for the closing process of the joint venture with Cresca S.A. Financial Income and Expenses The consolidated financial income/expenses corresponds to the composition of the following elements: (i) interest on financing, (ii) monetary variation on the amount payable for the purchase of Alto Taquari and Nova Buriti farms, (iii) foreign Exchange variation on off shore account, (iv) present value of receivables from sale of Cremaq, Araucária and São Pedro farms, established in bags of soybean, (v) result from hedge transactions and (vi) bank expenses and charges and yields from financial investments of cash and cash equivalents. Our net financial income/expenses presented a decrease of R$5.0 million from a profit of R$38.4 million in the year ended June 30, 2016 for a profit to R$33.4 million in the year ended June 30, Monetary variations refer to the amount payable for the acquisition of the Nova Buriti Farm, which is adjusted by the IGPM general market price index.

13 The foreign exchange variations refer to margin deposits in guarantee for transactions with derivatives at off shore houses and Cresca s receivables. The annual variation was due to the smaller exchange variation in the period. The reduction in the gain (loss) line was mainly due to the reduction in the balance receivable by farms denominated in bags of soybean. The derivatives result reflects the commodities hedge operations result and the impact of the exchange variation on cash, which was partially dollarized in order to maintain purchasing power in regard to inputs, investments and new acquisitions, which have a positive correlation with the U.S. currency. In FY17, the result of derivative transactions was R$17.4 million, R$15.9 million from operations and R$1.5 million from unrealized operations. Income tax and social contribution we assessed an income tax and social contribution of R$5.9 million in the year ended June 30, 2017, in comparison a gain related to income tax and social contribution of R$1.5 million for the same Net Income (loss) for the year as exposed above, our result for the period changed from a profit of R$7.9 million in the year ended June 30, 2016 to a profit of R$27.3 million in the year ended June 30, This result reflects the good performance of the Company's operating and real estate activities during the year. Consolidated Income Statement comparison of years ended June 30, 2016 and 2015 Income Statement (R$ thousand) 2016 AV 2016 (%) 2015 AV 2015 (%) AH 2015/2016 (%) Revenues from farm sale - 0,0% ,0% -100,0% Revenues from grains ,7% ,0% 15,6% Revenues from sugarcane ,4% ,2% 2581,5% Revenues from leasing ,5% ,8% -98,1% Other revenues ,0% ,9% 3,1% Deductions from gross revenue (8.273) -5,6% (9.414) -6,4% -12,1% Net Sales Revenue ,0% ,0% -66,6% Change in fair value of biological assets and agricultural products (12.632) -8,6% ,7% n.a Impairment 659 0,4% (3.038) -2,1% n.a Net Revenue ,9% ,2% -69,8% Cost of farm sale - 0,0% (72.929) -49,6% -100,0% Cost of agricultural products sale ( ) -91,6% ( ) -115,9% -21,0% Gross Profit 441 0,3% ,7% -99,8% Selling expenses (2.732) -1,9% (9.006) -6,1% -69,7% General and administrative expenses (28.944) -19,7% (29.360) -20,0% -1,4% Other operating income/expenses, net ,9% (3.422) -2,3% n.a Financial result, net ,1% ,2% 17,6% Financial income ,9% ,3% 57,2% Financial expenses ( ) -104,9% (89.914) -61,1% 71,6% Equity pick up (511) -0,3% (4.355) -3,0% -88,3% Profit (loss) before income and social contribution taxes ,4% ,5% -95,0% Income and social contribution taxes (1.451) -1,0% (9.761) -6,6% -85,1% Profit (loss) for the period ,4% ,9% -95,6% In the comments below, the percentage variations were computed based on balances expressed in millions of reais. The gross revenue decrease million, from R$440.7 million in the year ended June 30, 2015 to R$147.1 million in the year ended June 30, This decrease was mainly due to: i. Revenue from sale of grains: the revenue from sale of grains decreased R$58.9 million, from R$121.8 million during the year ended June 30, 2015 (reflecting sales of 160,386 tons) to R$62.9 million in the year ended June 30, 2016 (reflecting sales of 81,410 tons). This decrease in the revenue from sale of grains is mainly due to the decrease in the quantity produced in relation to the prior year; and

14 ii. Revenue from sale of farms: For the year ended June 30, 2016, there was no sale of farms, while in the previous year, the gain on sale of farms was R $ million in the year ended June 30, 2015 due to the sale of Cremaq Farm in June 2015 in the amount of R $ million. Planted area Productivity Revenue (hectare) (tons) (thousands of R$ ) Grains 54,906 61,376 82, ,623 61, ,406 Sugarcane 10,303 8,466 1,075, ,204 83,628 52,925 Change in the fair value of biological assets and agricultural products The change in the fair value of biological assets and agricultural products decreased from a profit of R$9.8 million in the year ended June 30, 2015 to a loss of R$12.6 million in the year ended June 30, Gains or losses from the variation in the fair value of biological assets are determined by the difference between their fair value and their book value. Book value includes investments and costs effectively incurred until the moment of appraisal, as well as write-offs arising from the harvesting of the agricultural products. Harvested agricultural products are measured at their value at the time of harvest considering the market price of the area of each farm. Gains or losses from the variation in the fair value of agricultural products are determined by the difference between their harvested volume at market value (net of selling expenses and taxes) and the production costs incurred (direct and indirect costs, leasing and depreciation). (Impairment) reversal of impairment of net realizable value of post-harvest agricultural products Impairment to net realizable value of post-harvest agricultural products decreased from a profit of R$3.0 million in the year ended June 30, 2015 to a gain of R$659 thousand in the year ended June 30, Such variations result from the difference in the price of grains inventories at the harvest time until the closing of the related accounting period. Cost of sales The costs of sales decreased R$35.7 million, to R$170.4 million in the year ended June 30, 2015, from R$134.7 million in the year ended June 30, 2016, mainly due to: i. Cost of grains sold: our average cost per ton of soybean sold decreased by 163.6% year-over-year, from R$99.2 million, from the sale of 113,100 tons at R$ per ton, to R$36.2 million, from the sale of 43,300 tons at R$ per ton. Our average cost per corn increased by 22.7% year-over-year, from R$13.5 million, from the sale of 47,200 tons at R$ per ton, to R$16.5 million from the sale of 43,300 tons at R$ per ton. ii. Cost of sugarcane sold: our average cost per ton of sugarcane sold was R$63.6 per ton, from the sale of 830,204 tons at R$52.8 per ton in year ended in June 30, 2015 to R$75.6 million, from the sale of 1,075,183 tons at R$70.3 per ton in year ended in June 30, 2016.

15 Gross profit For the above mentioned reasons, in the year ended June 30, 2016 our gross profit was R$441 thousand, representing a decrease of R$203.6 million when compared to R$204.0 million in the year ended June 30, The change in gross profit is mainly attributed to a gain from sale farm in the amount of R$193,6 million in year ended June 30,2015 which did not occur in the year ended June 30, Selling expenses Selling expenses decreased R$6.3 million, from R$9.0 million in the year ended June 30, 2015 to R$2.7 million in the year ended June 30,2016, mainly as a consequence of decrease of expenses with of freight, storage and processing reflects the decrease in the amount of grain sold in the period. General and administrative expenses General and administrative expenses decreased R$0.4 million, from R$28.9 million in the year ended June 30, 2016 to R$29.3 million in the year ended June 30, (R$ thousand) 2016 AV 2016 (%) 2016 AV 2015 (%) AH 2016/2015 (%) General and administrative (28.944) 100,0% (29.360) 100,0% -1,4% Depreciations and amortizations (746) 2,6% (1.249) 4,3% -40,3% Personnel expenses (19.135) 66,1% (19.543) 66,6% -2,1% Expenses with services provider (2.975) 10,3% (4.077) 13,9% -27,0% Leases and Rents (788) 2,7% (713) 2,4% 10,5% Others sales (5.300) 18,3% (3.778) 12,9% 40,3% The 1.4% reduction in general and administrative expenses was mainly due to the renegotiation of service contracts. The 27.0% reduction in expenses from services provided was mainly due to the renegotiation of service provision contracts. Other expenses primarily refer to expenses with travel, telephone, building maintenance and systems, among others. The 40.3% increase in FY16 over FY15 was mainly due to ITR (rural property tax) and expenses with the leasing of servers, now located in the cloud, partially offset by reduced depreciation and amortization. In addition, in FY15 there was a reversal of R$0.5 million related to the termination of the leasing agreement for the Parceria I Farm, in Bahia. Other Operating Revenue (Expenses), Net In FY16, we recognized other operating income of R$2.8 million, mainly referring to the discount obtained in the balance payable of the Alto Taquari Farm, totaling R$2.3 million, and R$2.2 million. In FY15, we recorded other operating expenses of R$3.4 million, mainly due to: (i) the rescission of the agricultural partnership contract in Bahia (terminated in June 2014); (ii) the partial write-off of intangible assets from the sale of 24,624 hectares related to the Cresca land exploration rights contract; and (iii) the provision for losses on compensatory corporate income tax credits related to calendar year Equity pick-up we recognized a loss of R$511 thousand in the year ended June 30, 2016 related to result of the joint venture with Cresca S.A.. Financial Income and Expenses The consolidated financial income/expenses corresponds to the composition of the following elements: (i) interest on financing, (ii) monetary variation on the amount payable for the purchase of Alto Taquari and Nova Buriti farms, (iii) foreign Exchange variation on off shore account, (iv) present value of receivables from sale of Cremaq, Araucária and São Pedro farms, established in bags of soybean, (v) result from hedge transactions and (vi) bank expenses and charges and yields from financial investments of cash and cash equivalents.

16 Our net financial income/expenses presented an increase of R$5.8 million from a profit of R$32.6 million in the year ended June 30, 2015 for a profit to R$38.4 million in the year ended June 30, Monetary variations refer to the amount payable for the acquisition of the Nova Buriti Farm, which is adjusted by the IGPM general market price index, and the reduction in the balance payable of the Alto Taquari Farm. The foreign exchange variations refer to margin deposits in guarantee for transactions with derivatives at off shore houses and Cresca s receivables. The annual variation was due to the smaller exchange variation in the period. The reduction in the gain (loss) line was mainly due to the reduction in the balance receivable by farms denominated in bags of soybean. The derivatives result reflects the commodities hedge operations result and the impact of the exchange variation on cash, which was partially dollarized in order to maintain purchasing power in regard to inputs, investments and new acquisitions, which have a positive correlation with the U.S. currency. In FY16, the result of derivative transactions was R$6.0 million, R$4.8 million from operations and R$1.2 million from unrealized operations. Income tax and social contribution we assessed an income tax and social contribution of R$2.8 million in the year ended June 30, 2016, in comparison a gain related to income tax and social contribution of R$9.7 million for the same Net Income (loss) for the year as exposed above, our result for the period changed from a profit of R$180.8 million in the year ended June 30, 2015 to a profit of R$10.6 million in the year ended June 30, Financial and operating result a. Results from the issuer s operations, particularly: i. description of any important components of revenue Our sales and services revenue arises from (i) sale of rural properties; (ii) sale of sugarcane production; (iii) sale of grains production, namely, soybean and corn; (iv) as well as from leasing of land. The tables below show the breakdown of our gross revenue, in the years ended June 30, 2016 and 2017: Demonstração do Resultado ( R$ mil ) 2017 AV 2017 (%) 2016 AV 2016 (%) AH 2017/2016 (%) Receita de Venda de Fazenda ,7% - 0,0% n.a Receitas de Grãos ,0% ,4% 13,3% Receitas de Cana-de-açúcar ,5% ,0% -11,6% Receitas de Arrendamento ,5% ,2% 24,8% Outras Receitas ,2% ,4% -48,8% Deduções de Vendas (5.394) -2,9% (8.273) -4,5% -34,8% Receita Líquida de Vendas ,0% ,0% 24,3% ii. factors significantly affecting the operating results We reached significant achievements in the year. We acquired a property with 17,600 hectares in the state of Maranhão for R$100.0 million and sold more than R$40.3 million in farmland. In addition, we were able to achieve a strong operating performance, delivering results above previously budgeted estimates. Regarding the operating activities, we finalized the harvest for the 16/17 soybean and corn crops with yields above expectations, reflecting the good rainfall during the development of the crops. At the sugarcane farms, we harvested more than 1 million tons in the year.

17 At the cattle-raising operations, we ended the fiscal year achieving the goal for the first year of implementation, with more than 10,500 head of cattle in the farms in Bahia and Paraguay, distributed across 13,400 hectares of already active pasture. b. Changes in revenues attributed to changes in prices, foreign Exchange rate, inflation, changes in volumes and introduction of new products and services Our main products are exposed to changes in the price of commodities, foreign Exchange rate, in addition to other indices linked to our debts. Part of the volume of receivables is linked to the US dollar quotation, and, as a consequence, our revenues are impacted by the foreign exchange variation. The production of some agricultural commodities as soybean, corn and others may be priced in reais or in US dollars by unit of weight. The exposure to the US dollar only occurs when the agricultural commodity has its price established in American currency by unit of weight. In this case, it is necessary the monitoring of the foreign exchange rate exposure. To reduce these impacts on the cash flow, we establish limits for foreign exchange rate exposure, which cannot be above 5% (both exchange purchase and exchange sales) of the revenue expected for those commodities which are typically sold in US dollars. The inflation, on the other hand, does not impact directly on the variation of our revenues, since our products are agricultural commodities internationally traded, with quotations traded in the stock exchange, whose prices follow the local and global offer and demand. c. Impact of inflation, of changes in prices of the main inputs and products, of foreign exchange rate and interest rate on the issuer s operating and financial result Some of the inputs necessary for the agricultural production as chemical pesticides, fertilizers among others may have their prices linked to the US dollar. In these cases, the foreign Exchange exposure is generated from the date of definition of the input price (when in US dollars) and the date of its payment. To reduce these impacts on the cash flow, we establish limits for foreign exchange exposure, which cannot be above 5% (both exchange purchase and exchange sales) of the revenue expected for those commodities which are typically sold in US dollars. Other costs, such as Manpower and general costs, are influenced by the inflation rates and may result in increase of costs and expenditure with personnel, directly impacting on our financial result Events with significant effects, occurred and expected, on the financial statements a. Introduction or sale of operating segment There was no introduction or sale of operating segment which have significantly affected our financial statements during the last three years. b. Constitution, acquisition or sale of corporate interest During the last three years, the following acquisitions or sales of corporate interest occurred: On April 27, 2016, Autonomy Capital (Jersey) LP, decreased its position and held 8,705,900 shares, or 14.95% of the shares issued by the Company. On February 18, 2016, JP Morgan Whitefriars Inc, decreased its position and held zero shares, or 0.0% of the shares issued by the Company. On February 10, 2016, Autonomy Capital (jersey) LP, increased its position and held 8,785,300 shares, or 15.09% of the shares issued by the Company.

18 On December 16, 2015, Hedge Alternative Investments S.A., decreased its position and held 2,041,000 shares, or 3.5% of the shares issued by the Company. On November 13, 2015, Autonomy Capital (Jersey) LP., decreased its position and held 3,900,300 shares, or 6.7% of the shares issued by the Company. On October 27, 2014, Credit Suisse Hedging-Griffo Corretora de Valores S.A., increased its position and held 2,997,400 shares, or 5.13% of the shares issued by the Company. c. Unusual events or operations There were no unusual events or operations resulting in significant effects on our financial statements in the last three years Significant changes in the accounting practices Exceptions and emphasis in the auditor s opinion a. Significant changes in the accounting practices The Company decided against the early adoption of any other standard, interpretation or alteration that has been issued but has not become effective yet. The nature and effectiveness of each of the new standards and alterations are described below: Pronouncement Description With effect from CPC 48 Financial Instruments CPC 47 Revenues from agreements with clients IFRS 16 Leases Correlation with international accounting standards IFRS 9 Financial Instruments: Classification, measurement, impairment and hedge accounting. Correlation with international accounting standards IFRS 15 on recognition of revenue from transactions of agreements with clients. Refers to the definition and guidelines of the lease agreement envisaged in IAS17. Fiscal years beginning on and as of January 1, 2018 (equivalent to July 1, 2018 for the Company). Fiscal years beginning on and as of January 1, 2018 (equivalent to July 1, 2018 for the Company). Fiscal years beginning on and as of January 1, 2019 (equivalent to July 1, 2019 for the Company). Moreover, the Company does not expect the following new standards or alterations to have a significant impact on its financial statements: - Alterations to CPC 10 (IFRS 2) Share-based payment with regard to classification and measurement of certain share-based payment transactions. - Alterations to CPC 36 Consolidated Statements (IFRS 10) and CPC 18 Investment in Associates and Joint Ventures (IAS 28) with regard to sales or contributions of assets between an investor and its associate or joint venture. With regard to IFRS 16, the Management is awaiting the issue of the corresponding normative instruction in Brazil by CPC to analyze the possible impacts on its financial statements. The early adoption of these new accounting standards is not allowed for listed companies, according to practices adopted in Brazil. b. Significant effects from the changes in accounting practices There were no effects from changes in the accounting practices for c. Exceptions and emphasis on the auditor s opinion

19 The opinion on the financial statements for the year ended June 30, 2017, presented emphasis, that, as mentioned in Note , as a result of the change in the accounting policy introduced by CPC 29 - Biological Assets and Agricultural Produce and CPC 27 - Property, Plant and Equipment, equivalent to IAS 41 - Agriculture and IAS 16 - Property, Plant and Equipment, respectively, the corresponding individual and consolidated amounts relating to the statement of financial position as of June 30, 2016 and July 1, 2015, and to the statements of profit or loss, of comprehensive income, of changes in equity, of cash flows and of value added for the year ended June 30, 2016, presented for comparison purposes, have been adjusted and are being restated as provided for in CPC 23 - Accounting Policies, Changes in Accounting Estimates and Errors and CPC 26 (R1) - Presentation of Financial Statements, equivalent to IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors and to IAS 1 - Presentation of Financial Statements, respectively. Additionally, as mentioned in Note , the Company reclassified certain individual and consolidated statement of financial position accounts for better comparability with the data as of June 30, Our opinion has not been modified in respect of this matter. The opinion on the financial statements for the year ended June 30, 2016, no presented emphasis. The opinion on the financial statements for the year ended June 30, 2015, no presented emphasis Critical accounting policies Accounting estimates and judgments are continuously assessed and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Based on the assumptions the Company estimates its future. The resulting accounting estimates will, by definition, seldom equal the related actual amounts. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year are addressed below. a) Residual value and useful life of property, plant and equipment The values and useful life of assets are assessed by specialists and adjusted at each year end, if necessary. The carrying amount of an asset is immediately reduced to its recoverable value if the carrying amount exceeds its estimated value recoverable. b) Contingencies The Company is a party to various judicial and administrative lawsuits. Provisions are set up for all the contingencies related to judicial lawsuits that are estimated to represent probable losses (present obligations resulting from past events and probable outflow of resources that incorporate economic benefits to settle the obligation, with reliable estimate of value). The evaluation of the probability of loss includes the opinion of external legal advisors. Management believes that these contingencies are properly recorded and presented in the financial statements. c) Biological assets The fair value of biological assets recorded in the balance sheet was determined using valuation techniques, including the discounted cash flow method. The inputs for these methods are based on those observable in the market, whenever possible, and when not feasible, a certain level of judgment is required to estimate the fair value. Judgment includes considerations on data e.g. price, productivity, crop cost and production cost. Changes in the assumptions on these factors might affect the fair value recognized for biological assets. An increase or decrease by 1% in the expected productivity of sugarcane and grains would result in an increase or decrease in biological asset by R$624 and an increase or decrease by 1% in the price of sugarcane and grains would result in an increase or decrease in biological asset by R$941.